Michael Stephenson, an entrepreneur when it comes to technology, is working on a new project inspired by a conversation with an employee at one of his companies. When asked about the finances of said project, Stephenson said that he invests in real estate developments as a limited partner. He told the employee that an investment like this could yield between 18 to 23 percent when it comes to an internal rate of return (IRR), and the employee wanted a piece of the pie, especially after finding out that a minimum amount a general partner could take is $250,000.
“And he goes, ‘Why is that?’” Stephenson recalls. “‘Why am I stuck investing in a GIC at 1 percent?’ It really galled me. I felt really guilty about that.”
Vancouver-based Stephenson and his business partner, Stephen Jagger, have been through seven companies over the past 18 years, he says. In 2013 the pair sold Ubertor, now Canada’s top provider of real estate websites. Their newest business, IMBY, aims to open the property market to people who don’t have the hundreds of thousands of dollars typically required to enter it in cities like Vancouver.
“What’s wrong with real estate is it hasn’t changed,” Stephenson says. “Current real estate is established to be binary: either you’re all in or you’re all out.”
That leaves the average person missing out on a key asset class, Stephenson notes, pointing to a 2018 paper by five economists at institutions including the University of California–Davis and Germany’s central bank. The authors found that from 1870 to 2015 in 16 now-wealthy countries, housing posted an average annual return of 7.05 percent, adjusted for inflation, versus 6.89 percent for equities.
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