17- From $16K to $1.3M: The Incredible Appreciation of Real Estate
In this episode of Get Real Wealthy Season 4, Quentin D’Souza talks about how real estate has outperformed other investments over time and why it is a great way to build wealth.
Quentin shares an advertisement from 1973 for a fully detached home in the Toronto area, selling for $16,745. If you wanted carpeting or an attached garage, the cost would increase to $18,275 and $19,495, respectively. A similar home today would sell for $1.3 million, which is 76 times its value in 1973. While the outer shell of the home probably remained the same, the interior was likely updated with $5,000 to $10,000 spent over time.
He adds that the value of the home changed due to lower interest rates, high demand and limited supply, which were caused by governments adding rules, regulations and fees. When compared to other commodities, such as gold and oil, the value of housing has appreciated significantly over the years. Gold has appreciated around 20 times, oil has appreciated around three times, while the dollar itself has seen an appreciation of seven times.
Quentin shares that he prefers investing in real estate for its cash flow and long-term growth potential. Owning an asset base for decades can lead to significant appreciation in value and the creation of wealth. He says that owning an asset base worth a million dollars today, which grows to $2 million in ten years, allows the debt on that asset to go down and increases the equity tremendously. Longevity is key in owning an asset base for a decade or more because it grows in an appreciating market.
Quentin adds that he is growing his portfolio using multifamily apartment buildings, which have a larger asset base and grow over decades. Holding on to that asset base allows the debt to go down, just like the person who bought a house in 1973 for $17,000, whose dollar has gone down by 700% or seven times. That is why he prefers owning a hard asset in real estate to create wealth.
In conclusion, he adds that while it’s tempting to talk about real estate through financial freedom and income, which can be a byproduct of owning a great asset base, the main goal of investing in real estate should be growing your asset base over decades and cash flowing on it every month. By doing that, you can create enormous wealth for yourself and your family.
Important Links and Resources
About the Author Quentin DSouza
Quentin D’Souza is the Chief Education Officer of the Durham Real Estate Investor Club. Author of The Action Taker's Real Estate Investing Planner, The Property Management Toolbox: A How-To Guide for Ontario Real Estate Investors and Landlords, The Filling Vacancies Toolbox: A Step-By-Step Guide for Ontario Real Estate Investors and Landlords for Renting Out Residential Real Estate, and The Ultimate Wealth Strategy: Your Complete Guide to Buying, Fixing, Refinancing, and Renting Real Estate.
