what's up Graham it's guys here and if you've ever wondered how much money I make here you go a few weeks ago Shelby Church posted this video about what does better 5 years in stocks versus 5 years in real estate honestly after watching her video and seeing some of her really shocking numbers I was inspired to look through my own portfolio to see exactly how much I've made in stocks versus Real Estate how they compare and what this means for the average person watching because I have a feeling it's probably not what you're expecting and if I could save a few people from making a really big mistake then this entire video is 100% worth it although before we start as usual if you appreciate videos like this all I ask for in return is that you hit the like button or subscribe plus I'm going to be linking to Shelby's video down below in the description for anyone who wants to follow along so thanks so much and also big thank you to public. com for sponsoring today's video but more on that later all right so first let's talk about how much money I've made from Real Estate I hate to say it but for most people this is going to be completely dependent on when and where you bought your home because as you're about to see you could either make a ton of money or you're going to be completely in my case the first property I purchased was back in 2012 as a bank-owned foreclosure in San Bernandino County for $59,500 yeah seriously I bought it outright in cash with money that I had saved up for four years working as a real estate agent I then spent another $112,000 fixing it up and it's currently worth about $400,000 while earning about $1500 in net rental income every single month from there there were two other properties that I bought and recently sold sold with nearly identical returns and over the years I just kept saving up my money until 2016 where I bought another property in West Los Angeles for $780,000 in terms of numbers I was able to buy it with about $150,000 down and I got a 30-year fixed rate mortgage at 3. 375% and then I spent another $60,000 fixing it up as a result of that I made about a 280% return on my money while also earning about $150,000 in rental income Over The Last 5 Years From There though the returns do get a little bit more difficult to calculate for instance in 2017 I purchased a duplex in Mid City Los Angeles for $585,000 I've spent a total of $220,000 fixing up both units and now I'd say it's currently worth about 1.
2 million but in 2018 I was able to do a Cash out refinance to pull out all of my initial investment while locking in a 30-year mortgage at 3. 75% this means I have none of my own money in the deal the upside is pure profit and I've made about $120,000 in rents since 2020 I also did something similar with another duplex that was located down the street I bought it for $815,000 I put 15% down and I later rented it out and now it's worth about $1,150,000 when you add all of this up purely from an investment standpoint with properties that were purchased to renovate and later rent out I have $643,000 of my own money invested for a total value increase of $1,843 which equates to a 281 return not including any rental income but keep in mind all of this was over the last 10 years so how have they done over the Last 5 Years well here's where things get interesting despite what you might think my home values in Los Angeles County did not see that much appreciation over the last few years I mean sure value certainly did go a bit higher but it's probably not as much as you would expect for instance my first home was worth roughly $300,000 before covid and now it's worth about $400,000 5 years later for a 33% total increase the second property was worth about $1. 2 million before Co and now it's worth about 1.
4 a 16% increase over 5 years the third property a duplex was worth about a million doar before Co and now it's worth about 1. 2 a 20% return and the last duplex was worth about $950,000 before covid and now it's worth a milli1 15 which is a similar 20% return over 5 years no sure I was able to collect rental income on top of this but I'm also very fortunate to have locked in record low mortgage rates at a record low property tax basis with low down payments and I'll be honest if I didn't have all of these factors working in my favor I just don't think it would have been sustainable I mean just consider this over the last few years my home insurance rates have gone up about 35 to 40% my property taxes have gone up about 15% my labor and material cost has gone up 50 to 100% And if I were to buy any of these properties today I would be losing a substantial amount of money like let's take the example of my first property if you bought that today at $380,000 you'd put1 15% down and get a 30-year fixed rate loan at 7% your monthly payment would be $2,148 a month which is already significantly higher than what I'm getting in rent but on top of that you would also have property taxes at $375 a month home insurance at $125 a month and repairs and maintenance at $150 a month all of a sudden you're spending $2,900 a month for a property that you could rent for $1,950 a month so even though real estate has been a really good investment at today's prices the numbers just don't pencil out although with stocks also at record highs how much would I have made how to just thrown it all in an index fund instead although before we go into that this is a perfect example of why it's so important to have as much information at your disposal as possible for example when it comes to Building Wealth studies show that lumpsum investing beats dollar cost averaging 68% of the time and holding cash under performance investing 69% of the time that's why our sponsor public wants to help you start the new year with your best foot forward for those una aware public. com is a platform that helps you build a multi-asset Investment Portfolio of stocks bonds options treasuries crypto ETFs and more all in one place with their seamlessly designed interface public also makes it extremely easy to research more information than you ever thought was possible while making decisions about your Investments personally I love their key moments feature that gives you specific insights into major news plans or earnings throughout various price movements this way you could understand why a stock is moving up or down and not just that it is you could also get quick access to earnings calls reports income statements and balance sheets on one page so you don't have to spend hours searching for them individually they also offer a feature where you could set a recurring buy to dollar cost average into the markets on a regular basis creating a seamless set it and forgeted approach to in or if you're the typee of person who likes watching dividends they have a dedicated income Hub where you could view a monthly breakdown of your earnings like dividends to give you an idea of how much you're actively earning from your Investments to me I absolutely love Simplicity and public makes it easy to see everything on one page it's intuitive to navigate their layout is seamless and with a wide variety of options to choose from it's not a surprise why they've gained such a significant market share over these last few years so if you're interested in checking them out for free go to public.
com or use the L L Down Below in the description to sign up and make an account today again you could sign up at public. com and fund your account in less than 5 minutes thank you so much and now let's get back to the video all right so in terms of how much money I made in stocks versus Real Estate here's what you came for overall on any deals that were purchased on or before 2018 the real estate Investments actually outperformed the stock market by about 20 to 50% not including rents normally I just go over each of these one by one but because I'm really worried it's going to be longwinded analysis and some people are going to get bored and click off I'm just going to put it on the screen here and you can pause the video if you want to break it down anyway for anything purchased on or after 2020 things are a bit mixed for example I bought a home in West Los Angeles that underperformed the stock market by about 35% but my purchase in Las Vegas overperformed the markets by about 100% basically the stock market has been on an absolute tear since covid and even when you account for low down payments and low mortgage rates stocks overall still did better although for anything purchased on or after 2021 the real estate winner effect tends to make a lot less sense look as someone who's worked full-time in real estate since 2008 I'm the type to carefully look over the numbers look at the risk of any deal and then compare that to every other investment that I could possibly make and even though real estate made a lot of sense when interest rates were low once prices started skyrocketing and interest rates Rose I started pulling back and invested my money in index funds in de the reality is nationally home prices have risen 47% since the start of the pandemic during a time when the stock market has risen 124% so is this then confirmed that stocks have been better well it really just depends on how you look at the data in this case most people aren't buying their homes outright in cash and instead they're getting a loan from the bank for the difference meaning for every $220,000 they put down they could get a loan for $80,000 this is why for the average person who bought their home in 2020 with 20% down their initial down payment has increased in value by 235% and if that sounds confusing just consider this let's just say you buy a $100,000 home with an $80,000 loan for $20,000 down now 5 years later the home is worth $147,000 this means your $20,000 investment is now worth $67,000 allowing you to have tripled your down payment of course there are other aspects to consider like the interest rate on the $80,000 loan property taxes insurance and repairs which probably amount to an additional 7 to 8% a year of total value but the point Still Remains leveraged real estate at a sub 4% interest rate purchased before 2020 has so far outperformed the stock market by a very wide margin in most areas however more recently things aren't looking as good for example if you bought a home in 2022 with the 65% interest rate the cost of borrowing money just becomes too high to offset the benefits of Leverage like just take this as an example you buy a $100,000 home $20,000 down with an $80,000 loan at 6. 5% even though the market has gone up by an average of 5% a year during that time frame you're paying 65% for the cost of keeping a mortgage completely wiping out nearly all of the benefit of Home appreciation so unless your area sees home appreciation above 8% a year your best case scenario is simply a break even from an investment standpoint now on the other side of the coin you have index funds over the last 100 years years the S&P 500 is averaged to 10.
6% annualized return with dividends reinvested which is pretty good for basically no work this means instead of putting 20% down on a property with a 65% mortgage rate that historically appreciates 4% a year you could potentially make an average of 10% with just a click of a button as an example of this let's just say you have $100,000 to invest and you want to know what's going to make you more money over 20 years housing or an index fund well an index fund is going to be really easy at a compound ual growth rate of 10. 6% after 20 years your $100,000 is going to be worth $750,000 with dividends reinvested but with real estate you could use that $100,000 as a down payment on a $500,000 property at a 6. 5% mortgage rate this means your overhead cost is going to be $2,550 a month for a mortgage $500 a month for property tax $200 a month for insurance and another $300 a month for miscellaneous repairs and maintenance for a total cost of $3,550 a month in my market home like this would probably rent for around $3,500 a month which means you're going to be losing about $50 a month in cash flow but you would be paying down the mortgage by an average of $375 a month in the first year giving you a total profit of $325 a month plus home appreciation but it doesn't quite end there according to the National Association of Realtors the median single family home appreciated by an average of 3.
