If you had $200,000 to invest in either Apple stock, gold or SF real estate on 1/1/12 and sold that investment on 5/2/14, which would be the better investment?
- Gold: -17% (bad timing)
- Apple stock: 44% return
- SF real estate: 114% return
By the way, the S&P 500 returned 48% over the same time period.
There are three big reasons why real estate dramatically outperformed the stock market, though both markets boomed:
- Leverage: 35% home-price appreciation equals 175% appreciation of your 20% cash down-payment (before closing costs)
- Big tax deductions subsidize home ownership costs
- The capital gains exclusion on the sale of a primary residence
What is the moral of the story: timing is everything in investing.