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Locks Or Stocks? Which Should I Buy?

November 30, 2011

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Given the roller coaster ride in the stock market recently, more and more investors are asking me whether they should place their capital in bricks and mortar rather than in stocks. The currently volatile environment breathes new life into an age old argument- “Stocks Or Locks, Which Should I Buy?”. The answer of course, is not as straightforward as the question, because as much weight lies in the investor and market circumstance as does the investment.

As far as I’m concerned, stocks and real estate are equal opportunity investment vehicles. One investment is basically words on a piece of paper, the other essentially a pile of bricks and mortar. Each have a value subject to change based on the market conditions at the time it is traded. The potential for profitability is very much linked to the law of averages, as well as to investor education and experience. How informed are you about your investments?

From my perspective, there is one fundamental distinction between real estate and stock. We all need and understand the value of shelter, as a fulfillment of a basic human need. So unlike stock, owning bricks and mortar provides a return on investment in addition to meeting this need, which I consider a pretty amazing ‘value added benefit’. Add the advantage of not having to pay capital gains on the sale of your principal residence, and that your real estate investment has inherent appeal to a target market that are genetically wired to buy makes real estate, in my opinion, a wise investment. But I’m no stock broker - I’m a realtor who knows bricks and mortar really, really well.

Should I Buy & Hold?

I have always been a proponent of the ‘Buy and Hold’ mentality of investing. Once a hallmark of the depression era generation, for successive generations since, the buy and hold approach to property ownership fell out of favour. As housing became its own fashion economy, home buyers bought, upgraded/renovated/staged, and then flipped their residence on to the next.

It’s still being done, but much like our current fashion forecasts, I believe this trend is changing. More and more buyers are looking to eschew the status buy-in, bypass the herculean eff ort and expense of property climbing, and instead find a suitably-sized functional modest residence that can serve as a long term buy and hold family dwelling. Instead, homeowners are investing more capital - personally and financially into their properties, through custom renovations. If you’re a boomer or a zoomer, there is an opportunity to diversify and to open access to liquidity, if you start thinking about cashing out of your over-sized house and splitting your capital into smaller properties you can buy and hold.

Are Changing Market Conditions Risky? In Closing

As you’re reading this a technology just got invented, a product just got improved, and an occupation once common has just become obsolete. Tomorrow these changes will begin impacting market conditions. What this guarantees is there will always be market conditions to be concerned with. But barring calamity, I believe if you as a real estate buyer or investor steer the course, navigate prudently, and hold for the long term, you’re pretty much assured a profit. Remember, the only people who ‘lose’ money on real estate are the ones who ‘have to sell’, not the ones who ‘choose to sell’.

In real estate, and in life, there are things we anticipate and that we can control - and then there are those that we cannot. There is bravery, and a sincere wisdom in drawing on business experience to say, “I don’t know.” While these are uncertain times, I do know that the fundamentals in Toronto provide the likelihood that the market will sustain itself in a positive, profitable manner. However, I can’t help but wonder about the forces that lurk beyond our borders. These are big betting days. Wouldn’t you agree?

At urbaneer.com, we make it our business to understand the dynamics of real estate, including how the volatilty of the stock market can impact the value and demand for real estate. With a multi-disciplinary education on housing, over twenty years in real estate sales, and a commitment to service, consider making urbaneer.com your realtor of choice! Specializing in renovated and restored character dwellings, low-maintenance living, revenue-producing properties and loft conversions, call Steven Fudge, Sales Representitive at Bosley Real Estate Ltd., Brokerage now at 1-416-322-8000.

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