Bellingham Residential Real Estate vs The Dow Jones
Stocks or Real Estate
The last article featured annuities versus residential homes for sale in Bellingham WA. Today we are going to focus on Bellingham residential real estate versus the Down Jones Industrial Average over a 5 year period. The point of the article is to determine the better investment.
Bellingham Residential Real Estate 2010-2015
Let us assume a side by side comparison of entering into the stock market in 2010 and into the rental market in 2010 in the Bellingham Rental Market.
The DOW Jones was at 11,308 back in November or 2010. The DOW Jones has run up approximately 6,515 points to 17,523. This represents an astounding 37.1% increase. Let not get to hasty about giving our broker that money.
An average down payment to a house for a rental is 25%. The average home in Bellingham WA for rental purposes was $265k. This means that if we do apples for apples our investment is $66.25k. Assuming we put the same amount in both stocks and a rental, which is better? In the stock market, you would have realized gains of $24,578 before taxes.
Real Estate Gains
The average price now for real estate in Bellingham WA is $305,000 for rental properties. The gain would be 45k. With closing and realtor costs, your gain slips to about 25k. You have to remember the rental income as well. The average rental price averaged over a 5 year period for Bellingham WA is $1,350 a month. This means that after paying mortgage costs and insurance you wind up with approximately $375 in your pocket per month or $4,500. This $4,500 rental income over 5 years is $22,500. Add this number back to your appreciation and you have a total gain after dispossession costs of $48,000. Now, let’s talk risk.
Bellingham WA Rental Market Risk Assessment
Bellingham is a growing community with currently less than a 2% vacancy factor. This means from all the units in rentable condition only 2% have no tenant. For landlords, this is a great sign. You can easily find a tenant if your current one leaves. In essence you have a 2% factor or less that your unit may not be rented. I would say that is a winning bid.
Stock Market Risk
The stock market has a lot of inherent risk. You can’t control your investment once you place the trade. There are near infinite amount of variables controlling your stock price. Where as a rental, you can fix up, the stock price you are not in control. The variable swings in the stock market make it a risky proposition for that hard earned cash. I am not recommending to totally divest from the stock market. However, stability wise, the Bellingham residential real estate rental market is a much more stable environment.