Dont Take my Word for it Pt.II – RRSP’s VS Real Estate

Who wins?

 

RRSP’s come out of your pocket and into an account that are expected to increase dramatically in value over time and in the end cover you in your golden years – is that about right? Portfolio mix and management will all come in to play here as well.

 

Real Estate investments make money in THREE ways. 1) Increase in Value over time, 2) Decrease in Principle over time (and inherent increase in Equity, and 3) Positive Cash Flows from rental income in excess of total operating costs.

 

Since there are so many variables to look at, let’s take a simple approach and look at straight VALUE increase over time.

 

Lets look at real results.

 

Heck, lets make it interesting and look at MY results!

 

Here is a recent statement of my RRSP performance:

 

 

Yes, that says NEGATIVE 27.02 percent!      Look familiar?

 

Look at the Annualized Return since Jan 16th 2004! NEGATIVE 5.54%

 

 

Here is a recent tax statement of the objective increase in value of one of my properties:

 

( the tax assessment was actually a large document, so Im only showing the relevant section).

 

Look familiar? If you own Real Estate I bet it does.

 

See the difference?

 

Now take into account the rental income resulting in positive cash flows, the decrease in principle over time (about 5% value per year), and not to mention the actual improvements to the property which have increased its value dramatically.

 

One takes my money, and doesn’t really perform too well ( my numbers are pretty average for this current economy), and the other is much more stable, passive and GENERATES cash (again – average for even this economy).

 

Hmmm….