Which is a better investment: Real Estate vs. Stocks

What is a better investment, buying real estate or investing in stocks?  

I grew up in a family and culture where getting a house is the best thing you can do for yourself. I used to think that to until recently. I decided to crunch the numbers on this and share with you what I learned. I live in NY so I will be using NY real estate numbers. I used calculators from mortgagecalculator.org and bankrate.com (which I think are the best ones out there).  Lets start with the house.

House – $500,000

20% Down payment: 100,000

Interest rate:  4.25% (25 yr loan)

Loan: $400,000

Monthly Payment: $2,687.79

Total Interest Paid: $250,085.72

Total Tax Paid: $156,250.00 (1.25%)

Total cost after 25 yrs of owning a house: $806,335 + $100,000 (down payment) = $906,335

Remember this is just straight cost of the house with no maintenance, repairs, etc. Now you fully own your house and it just kept up with inflation or maybe not. You have to ask yourself house worth $906k after all of this time? Depends on the housing market at that time. Now lets take a look at putting your money in the S&P 500 index fund. I will be using the same numbers.

Vanguard S&P 500 index fund – $100,000

Compound interest rate: 11% (since 1976 this is what the fund has returned, on vanguard.com)

Total Expense ratio: .05% (very very low cost and low turnover)

Total fund value after 25 yrs: $1,342,666 

Now lets say that you start with $100,000 and put in only $600 a month. If you think 11% is too high I have showed you other %’s as well.

At 11%: you will have: $2,272,937

At 10%: you will have: $1,862,379

At 9%: you will have: $1,527,040

At 8%: you will have: $1,253,319

At 7%: you will have: $1,030,013

At 6%: you will have: $847,913

At 5%: you will have: $699,452.

This is how much cash you will have that is liquid at your disposal. There is a big difference here of about 400k and that is just stopping at 25 yrs. If you let your investment grow and live after 25 yrs without putting a dime into it it will skyrocket.  If you left it in for just another 5 years your total in the index fund will be $2,255,139. I highly doubt the house will be worth that much. That said, I do think buying a house at the right price is great since its yours forever and you can leverage it as well for a loan, etc. But as an investment it does not compare to the value of stocks at all. If you want to invest in real estate without being a landlord because you think its better than stocks you can just invest in a REIT index fund. Remember, all these numbers are just math not an opinion! 

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Manpreet Jassal

@mjassal

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Jordan Belfort’s best quote

I am watching Jordan Belfort’s (the real Wolf of Wall Street) straight line persuasion dvd’s just to be better at sales and marketing. I love reading and watching videos like this or anything that brings more value in my life. I came across this quote while watching his videos and I truly love it because it’s so TRUE and I had to share:

The only thing standing between you and your goal is the bullshit story you keep telling yourself as to why you can’t achieve it. – Jordan B

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Manpreet Jassal

@mjassal

How Vanguard does “social media” better than most companies @Vanguard_Group

I started investing last year after doing many months of research on where I should put my money. I ended up going with Vanguard and could not be happier. I am a big fan of indexing and fortunate enough to have Vanguard index funds in my 401k at work. (BTW, I recommended that everyone have index funds in their 401k – you can thank me after 25 yrs)

Being a marketer, I definitely follow Vanguard on Twitter and Facebook to see how a financial powerhouse like them use social media.  To my surprise, they are awesome. Social media is all about customer engagement but most companies use it as just another distribution channel. Social is all about engaging with your user base.  Getting feedback, answering questions and thanking your users from time to time is what its all about! Of course you want to push your content through social channels but it should only be about 20% of what you should do.  Vanguard has it all right.  I have asked questions through twitter, commented on Facebook, asked for some SWAG through these channels and received a response within 24 hours (and also my swag within a week). They always end the conversation with saying thank you to me for engaging with them.  They do A LOT more but I would encourage you to engage with them to find out for yourself.

The best surprise so far:  I received a thank you card from them for engaging on Facebook. Which is a great idea and was shocked to see it in the mail.  Even more shocking they gave me an extra blank thank you card with a note saying:

“Pay it forward! Use this extra note to thank someone who has inspired you to be a better investor!”

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How cool is that?  I would of never expected to get anything from them but it was cool to get a handwritten note mentioning my Facebook interaction signed by the person who I was connecting with at Vanguard. 

Vanguard my hat goes off to you for making me a better marketer. Keep on doing your thing.. I will always be a customer and a fan.

Thank you for doing social right! #Vanguarding

@MJASSAL

Why I dropped @optimum and how they lost out on my money

Since I am in the services industry I had to write this post..

Knock Knock… Hi I am from verizonFIOS and I want to make a deal. So this lady came to my house just cold door knocking trying to make me a better deal than my current cable company, Optimum. I took it. The price was nice but I was just disgusted on how optimum treated its best customers. (and I do mean best). 

Optimum did the same thing, door knock to me to get me out of VerizonFIOS.  The guy told me that he would be my personal contact at Optimum. If I have any problem I would call him and he was great the first 2 calls but a year later when I needed him he told me he got another job within the company.  Thanks for telling me Optimum! Not! I guess they do not do that service anymore and nobody told me. 

Next they raised the prices on me after 2 years.  First they raised it right after my contract ended and then they raised it a little more after a couple of months. I mean why are you raising prices on a person who pays on time?  When I called and asked the person on the phone told me they could not do anything for me in terms of price. I just went with it until VerizonFIOS showed up at my door. Then… 

I called to cancel Optimum and suddenly they were willing to do everything they can for me but I said it was too late.  Sorry! Whoever trained that person who said they could not do anything for me should be reprimanded.  They just lost out over $1800 a year from me. This is just bad service. Raise prices on the person that’s been with you for over 2 years and always pays on time. 

Let’s see how verizonFIOS treats me. 

Marketing advice for Optimum – If you have a twitter account you have to be more active with customers. It’s all about feedback and turning negatives around into positives. Your action is to engage us, not vice versa. Market and service your core customers a lot more and engage them so they can be loyal.  Word of mouth goes a long way.. just look at this post.

Manpreet

 

@mjassal 

First time visit was an education and scam from @PowerHRG

I will try to keep this as short as possible.  I wanted to see if I needed a new roof after Sandy, luckily Power HRG (based in Melville, NY) was door knocking trying to solicit business. They knocked on my door and I made an appt for someone to come that night. 

They came about 30 mins early which I didnt mind, sat down and asked me some questions about my house. I told them everything, the guy then showed me videos, educating me on how roofers work.  I really liked being educated. He took me outside and measured the roof himself. I also told him I am thinking of replacing some windows as well.  He went back into his car and got some window products to show me and make me realize why they have the best windows in the world. By the way, he was in my house for 4 hours. I gave hints that I was busy but he still did his thing.

Here comes the (marketing) scam.  He basically created the estimates for the roof and windows separately and then told me his First Time Visit price. If I sign up and do my roof right now it will cost me 15k, if he has to come back it will cost 17k. You gotta be kidding me!! I mean really, 2k more for calling you back to sign up.  Of course this was a MAJOR turn off. He then told me his UPS analogy and how if UPS has to come to the house several times to get a package signed it costs the company a lot of money, so if he had to do the same it costs money. Sounded like a bunch of BS to me. I mean, how am I suppose to compare prices with anyone else? Talk about high pressure sales in your own house. 

Now as a marketer I know the whole shtick but the analogy does not make sense to me since I am the buyer. If I order something and UPS ships it, if they have to come to my house several times, I do not care since I am the buyer.  It costs the same to me either way!  UPS is showing their exceptional customer service and commitment to getting the goods delivered.  After that I thought I am not doing business with Power HRG, I just didn’t like their attitude towards potential customers.  It wasn’t the sales guys fault, he was just doing what he was trained to do, but the training he received was disappointing. 

Moral: Get your marketing story right and give exceptional customer service because that is what will take your from good to great!