Real Estate vs. Stock Market...Should You Borrow Money To Invest?

Our clients always ask us if they should invest in real estate or stocks. My response is always the same…they are too different to compare.

What do I mean by that? Well I want to dive into the fundamental difference between investing in real estate vs. stocks that nobody really talks about.

Leverage.

When we buy a stock, we are using money that we currently have. Sure, some of you have margin accounts where you borrow money beyond what you invest personally, but this is a small few. When you buy real estate, very rarely do you pay cash for the it. Other than the down payment between 10-30%, the rest is usually borrowed. This means that you have 4-10x your money with real estate.

So on the surface, if you 10x your initial investment when buying real estate, it’s likely going to net you a better profit.

So why are we all so quick to borrow money for a house, but so hesitant to borrow money to buy stocks?

A quick disclaimer...I do not recommend you borrow money to buy stocks. I'm bringing up this question to illustrate how we should think of the stock market and real estate as different asset classes. We can't compare apples to oranges.

Like I said previously, you'd think that because we leverage our money when buying real estate, it would net you a better return in the long run, but looking at historical data, that actually isn't the case.

If you compare Berkshire Hathaway stock to the average greater Vancouver home, you'll notice that dating back to March 1, 1980, the growth has been 133,675% for Berkshire Hathaway compared to 1,611% for the Vancouver area home. The 28-year growth...2,094% vs. 334%, and the 8-year growth...138% vs. 72%.

This is obviously just one example, but this is a trend you will see if you look deeper into the numbers.

The main point you need to take from this video is that you can't really compare the potential future growth of the stock market vs. real estate because you will be leveraging the house.

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DISCLAIMER: This presentation is for informational purposes only and should not be considered financial, investment, tax, or estate planning advice. All investments carry risk, and past performance does not guarantee future results. Any forward-looking statements are based on assumptions and may not reflect actual outcomes.

The content on this channel is for educational purposes only and does not provide specific investment or planning recommendations. Viewers should consult a qualified professional for retirement, tax, or estate planning guidance. Parallel Wealth and Adam Bornn are not responsible for any decisions made based on this content.