The Power of A Long-Term Perspective

A long term perspective when investing is a crucial financial decision, and the environment in which we make these choices can significantly influence our success.

When attending a DurhamREI meeting, it’s common to feel overwhelmed, especially for those just getting started. You’ll find active investors in our meeting room, some owning one or two properties while others have built extensive portfolios of 20, 30, or more properties. This disparity can be daunting, but it’s important to remember that investing is not a competition.

Rather than comparing ourselves to others, we should focus on our individual investment journeys. One of the biggest misconceptions is that you must have a large real estate portfolio to achieve financial success. However, even a single rental property can significantly impact your long-term wealth accumulation.

Comparing Investment Strategies: Stock Market vs. Real Estate

To understand the potential of real estate investment, let’s compare it to another common investment avenue: the stock market.

Suppose you invest in the TSX (Toronto Stock Exchange) and assume an 8% annual return with a 3% inflation rate. This is using the historical returns from 2000 to present.

If you start with $12,000 in the first year and consistently contribute $1,000 per month, after 24 years, you would have invested $288,000, which would grow to approximately $596,000.

Extending this to 35 years, your portfolio could reach $1.14 million. This demonstrates the power of long-term investing in the stock market.

Now, let’s apply a similar time frame to real estate using actual average Toronto Real Estate Board data. Imagine purchasing a property in 1990 or 1991 for $255,000 with a 20% down payment. A decade later, in 2000, the property’s value might not have appreciated significantly and could be around $243,000—a challenging period for appreciation.

However, if you held onto the property until 2025, its value would have risen to approximately $1.126 million. Furthermore, if financed with a 25- or 30-year mortgage, the property would be fully paid off, meaning the entire amount would now be part of your net worth.

In our example, the stock market investments require consistent contributions over time; a real estate investment can grow significantly with just a single purchase and long-term holding. The initial down payment for this property, approximately $50,000 (20% down), would be far less than the cumulative contributions needed to reach similar stock market returns, with a lot less capital.

The Impact of Owning Just One Rental Property
For many Canadians, saving for retirement is a significant challenge. However, owning even one rental property can be the equivalent of accumulating substantial retirement savings. The long-term appreciation of real estate, combined with mortgage paydown and rental income, creates a powerful wealth-building effect.

Now, imagine scaling this strategy. If you purchased one rental property every year for three years and held onto them for 20 to 30 years, the financial impact would be immense. However, even without aggressive scaling, simply holding onto one rental property can be life-changing for a family.

The journey of investing is personal and should be approached with a long-term perspective. Whether through stocks or real estate, the key to financial success is patience and strategic decision-making.

Ultimately, the choice depends on individual preferences and financial goals, but for those willing to invest in real estate, even one property can make a world of difference.