In my younger days, my wife and I were left in charge of a country hotel in England for a few days while her mother and father went on vacation. Feeling very self important, we ran the Victorian stately home in a professional manner and took our responsibilities as seriously as any young couple would! There was, however, one moment I never have been very proud of! I took a phone call for Jackie’s father from a stock broker promoting some exciting new company with tremendous prospects in the biogenetic’s market. It was sure to be a high roller, lots of people were buying in and this thing was going to provide everybody with untold wealth, I was told! How could I resist? People do say that wisdom never comes alone, it is usually accompanied by age!

 

In all honesty, I did tell Jackie’s father about the opportunity but only after I had filled in my subscription form to make sure I could secure my piece of the action and retire his daughter early, before the limited number of investment slots disappeared. My investment in InFerGene actually did not go anywhere, in fact my $350 investment is worth less than $1 today. 

 

It did make me think though about how people secure their future wealth. Because of the industry I am in and the investments I have made subsequently I can confidently say that a well structured real estate investment plan can be very effective as a way to generate some security in future years. I can also say that unless you are investing in land in a developing country where real estate ownership cannot be guaranteed, you would be extremely unlikely to see a $350 investment dwindle to less than one dollar in value over 30 years!

 

With all of the doom and gloom in the global financial markets, it is interesting to look at the facts locally on what has been happening with prices and gains in the real estate sector.

 

Many people make investments purely on asset growth parameters. In other words will the value of the asset go up or down! The rule of 72’s plays an important role in this. For instance, if you want to stay ahead of other investments you divide the interest rate return into 72 to see how many years it would take for an asset value to double. From a very simple point of view, if you could invest your money at 7.2% then in 10 years your investment should at least double to be comparable.

 

Now lets take a look at various real estate categories from 2002 to 2012.

 

Single Family homes:

2002 median value $170,000

2012 median value $407,000 

Yield over 10 years: 9.1% 

 

Strata Apartments:

2002 median value $92,000

2012 median value $233,000 

Yield over 10 years: 9.7%

 

Strata Townhomes:

2002 median value $114,500

2012 median value $319,900 

Yield over 10 years: 10.8%

 

Vacant Lots:

2002 median value $73,900

2012 median value $171,200 

Yield over 10 years: 8.9%

 

These are pretty impressive numbers, particularly the fact that the apartment market has shown one of the strongest returns despite the heaviest discounts in the past few years. As an alternative, the TSX stock market index in 2002 was hovering around 8,000 and today is at 11,329 or a yield over 10 years of 3.6%

 

You take your pick. Even as a young entrepreneur, it did not take me long to realise that the two greatest things I could invest in for future security would be myself and real estate.

 

In case you were wondering, my father-in-law never did purchase any InFerGene stock and his piggy bank is larger than mine!