Help Needed: Single Family Rental Properties v.s. Stock Market Returns

[Hayden Kerns]

Real Estate or the Stock Market. For those that have ventured into either avenue of investing, what insights can you share? Have you found real estate to be more lucrative and stable over time, or do you believe that the stock market offers better returns and flexibility? 

I understand that residential rental properties can provide positive incentives through loan paydown, tax incentives, cash flow, and appreciation. Based on my research, it is possible to become financially free through real estate investing, but requires hard work and time. Why would I not just invest my hard earned money into an index fund that is generating a yearly return of 10% with no hassle of managing tenants, expensive CAPEX, etc.

I value the insight of everyone and would appreciate your perspectives on the matter. Thank you!

[Carlos Ptriawan]

Quote from @Mark Cotter:

Quote from @Marcus Auerbach:

Real estate offers by far greater returns, but is also by orders of magnitude more work. It is really not passive income. Leverage and the ability to force equity are two of the biggest tools.

The catch: you will only succeed in RE if you have the "bug". If you only care about your ROI and you don't have a passion for acquireing land and structures, a passion for renovations you won't last in REI.

"Historically, stocks have offered better returns than real estate investments. "Stocks have returned, on average, about 8% to 12% per year while real estate has generated returns of 2% to 4% per year," says Peter Earle, an economist at the American Institute for Economic Research. However, other variables like economic conditions and emotional purchasing decisions can result in subpar investments and lower returns."

The problem with asking this type of advice in a RE-centric forum is you will get a lot of bias baked into that advice. "Real estate offers by far greater returns, but is also by orders of magnitude more work". That's only true if you think stocks are simply a buy-and-hold asset but if you match your level of hard work and knowledge into stocks the returns can be far greater than RE. The richest people in the world hold most of their assets in stocks.

main difference between stock and residential real estate is that, for stock/index we invest along with the people in the world ; so price would go up and up as money is being printed ; while residential is very depend on local supply/demand.
 
if you have 500k and invest in palo alto in 1995, your return would be much more in residential RE than stock ; but if you invest in south dakota and well you know the answer lol

[Peter Woerner]

Google, Facebook and Microsoft has consistently returned 14-20% return on equity over the past ten years and I expect them to continue the trend. It will be hard to beat that in today’s real estate market. The average S&P company returns closer to 6-10%. In today’s market I am pencilling 10-15% as my expected return on single family homes. If I can refinance later at 5-6% we’ll get closer to 20%. My opinion is tech monopolies > real estate > non tech monopolies. Real estate is therefore a diversification and cash flow strategy more than my primary investment method. I am currently about 1/3 tech monopolies, 1/3 real estate and 1/3 index funds.

[Carlos Ptriawan]

Quote from @Peter Woerner:

Google, Facebook and Microsoft has consistently returned 14-20% return on equity over the past ten years and I expect them to continue the trend. It will be hard to beat that in today’s real estate market. The average S&P company returns closer to 6-10%. In today’s market I am pencilling 10-15% as my expected return on single family homes. If I can refinance later at 5-6% we’ll get closer to 20%. My opinion is tech monopolies > real estate > non tech monopolies. Real estate is therefore a diversification and cash flow strategy more than my primary investment method. I am currently about 1/3 tech monopolies, 1/3 real estate and 1/3 index funds.

correct analysis.... for tech we are really in super pivot point into AI and other crazy stuffs into 2040. Nvidia is just beginning. 

while residential is on 2-3% cap rate right now , it's almost near on 90th percentage.

I suggest for realtor that can't find lead to sell home to move to data center or AI industry ;-)

[Henry T.]

With real estate you're in control (except for Seattle maybe, ha ha). If you're willing to work, you'll get to your goal faster. Everyone needs a place to live. When I used to care and play with my numbers it was always in the 20+ percent range. Stocks and funds are nowhere near that, unless you're lucky.

[Devin Scott]

Quote from @Mark Cotter:

The richest people in the world hold most of their assets in stocks.

 Yea because they started those companies.  There's no person on that list that just invested in the stock market to get super rich.  Buffet is the closest but he has controlling positions much of the time and he is an operator.

[Devin Scott]

Quote from @Peter Woerner:

Google, Facebook and Microsoft has consistently returned 14-20% return on equity over the past ten years and I expect them to continue the trend. It will be hard to beat that in today’s real estate market. The average S&P company returns closer to 6-10%. In today’s market I am pencilling 10-15% as my expected return on single family homes. If I can refinance later at 5-6% we’ll get closer to 20%. My opinion is tech monopolies > real estate > non tech monopolies. Real estate is therefore a diversification and cash flow strategy more than my primary investment method. I am currently about 1/3 tech monopolies, 1/3 real estate and 1/3 index funds.

 This is a pretty solid take although at the scale those companies are now, 15-20% won't be sustainable long term anymore.  Next 10 years though?  Probably yea especially with AI.

[Jake Andronico]

Quote from @Hayden Kerns:

Real Estate or the Stock Market. For those that have ventured into either avenue of investing, what insights can you share? Have you found real estate to be more lucrative and stable over time, or do you believe that the stock market offers better returns and flexibility? 

I understand that residential rental properties can provide positive incentives through loan paydown, tax incentives, cash flow, and appreciation. Based on my research, it is possible to become financially free through real estate investing, but requires hard work and time. Why would I not just invest my hard earned money into an index fund that is generating a yearly return of 10% with no hassle of managing tenants, expensive CAPEX, etc.

I value the insight of everyone and would appreciate your perspectives on the matter. Thank you!

The beauty of investing is it's not an all or nothing thing. Why not do both? :)

Becoming financially free from anything takes a long time and a lot of work. 

I'm putting my cash flow into the stock market, and saving for reserves to improve my properties slowly simultaneously. Want to have paid off properties and a sizable dividend portfolio. 

[Mark Cotter]

Quote from @Devin Scott:

Quote from @Mark Cotter:

The richest people in the world hold most of their assets in stocks.

 Yea because they started those companies.  There's no person on that list that just invested in the stock market to get super rich.  Buffet is the closest but he has controlling positions much of the time and he is an operator.

Warren Buffet, Dan Loeb, Ray Dalio, Carl Icahn, John Paulson, I'm sure there is plenty more but you may have missed the point. If you sit back and let your money do all the heavy lifting then you are very likely to not do as well as someone who works hard to place your capital in the best positions to make money. To me, I own stocks for a very different reason than RE and to compare the two as alternatives may not be all that useful.

[Isaiah Tademy]

Real estate is the better option no question. But it's going to take work. 

The main reason (as many have commented on this chain as well): LEVERAGE

Let's say the stock market returns 10% annually. 
And real estate appreciates 5% annually (about national average). 

$100k in stocks earns $10k annually
VS
$100k in real estate can purchase a $500k property (assuming 20% down). What newbies don't understand is that the $500k appreciates 5% NOT the $100k down payment. 5% of $500k = $25k annually on your $100k invested dollars.

We haven't even talked about the tax benefits, debt pay down, monthly cash flow, and it being a physical asset that will always be in demand. 

[Devin Scott]

Quote from @Isaiah Tademy:

Real estate is the better option no question. But it's going to take work. 

The main reason (as many have commented on this chain as well): LEVERAGE

Let's say the stock market returns 10% annually. 
And real estate appreciates 5% annually (about national average). 

$100k in stocks earns $10k annually
VS
$100k in real estate can purchase a $500k property (assuming 20% down). What newbies don't understand is that the $500k appreciates 5% NOT the $100k down payment. 5% of $500k = $25k annually on your $100k invested dollars.

We haven't even talked about the tax benefits, debt pay down, monthly cash flow, and it being a physical asset that will always be in demand. 

 Stocks do pay dividends too.  Call it 2% on average.

[V.G Jason]

Quote from @Mark Cotter:

Quote from @Marcus Auerbach:

Real estate offers by far greater returns, but is also by orders of magnitude more work. It is really not passive income. Leverage and the ability to force equity are two of the biggest tools.

The catch: you will only succeed in RE if you have the "bug". If you only care about your ROI and you don't have a passion for acquireing land and structures, a passion for renovations you won't last in REI.

"Historically, stocks have offered better returns than real estate investments. "Stocks have returned, on average, about 8% to 12% per year while real estate has generated returns of 2% to 4% per year," says Peter Earle, an economist at the American Institute for Economic Research. However, other variables like economic conditions and emotional purchasing decisions can result in subpar investments and lower returns."

The problem with asking this type of advice in a RE-centric forum is you will get a lot of bias baked into that advice. "Real estate offers by far greater returns, but is also by orders of magnitude more work". That's only true if you think stocks are simply a buy-and-hold asset but if you match your level of hard work and knowledge into stocks the returns can be far greater than RE. The richest people in the world hold most of their assets in stocks.

They hold it via stock because the likely found the company, so it's really holding it via equity by default. They made the money via the business formation and the success of it.

They didn't make the money by buying the equity shares & seeing it grow, they were the equity.

That translates to all forms of investing and capitalization in really any field. I don't think there's really anyway to answer this without other questions like degree of activity, risk tolerance, holding period, etc. Ideally, invest in both. I'd wager most of this forum would be better off investing in equities then in real estate. 

[John Clark]

Quote from @Kevin Sobilo:

Buying stocks in an index fund is no work, but also NO CONTROL! When you make real estate deals, they are what YOU make out of them when you invest actively. So, you have some real control over how things go.

Control is wealth! The first thing a "wealthy" person typically does is buy back their time aka assert more control over their situation in life.

Lemme get this straight: I have no control when I have a highly liquid, fungible, instrument bottomed on hundreds, if not thousands, of assets across a continental or even global geography, and many asset classes, and I can buy or sell at a moment's notice.

I DO have lots of control, however,when I buy a single asset class in the form of an illiquid, unfungible, single asset class that is highly localized, and subject to the whim and caprice of economically ignorant people and those who cater to them.

No. Real estate is a tax law play and a local economy play. It is also a "this is mine and it's tangible" psychological play. It is not a "control" play.

[John Clark]

Quote from @Isaiah Tademy:

Real estate is the better option no question. But it's going to take work. 

The main reason (as many have commented on this chain as well): LEVERAGE

 In the stock market we call that buying on margin. When prices go down, leverage hammers people. With a mortgage, you MIGHT get hammered if real estate prices fall, but you WILL get hammered when some economically ignorant "tenants rights" advocate or politician encourages people to not pay their rents, and now you can't make your monthly nut.

[Dave Skow]

@Hayden Kerns- thanks .....no guarantees on  either  property appreciation or inndex  fund returns .....I would  recommend a combination of both ....if you had to choose one or the  other to maximize growth over  a long term - the index  fund is likely  a better bet  ...this is also very ddependent  on location or the property - 

[Henry Lazerow]

With real estate you get appreciation lets assume 5% of purchase price and downpayment 25% thats already a 25% return on down payment invested capital + 5-10% cashflow + small bit of mortgage paydown that grows. I made the mistakes early on of just looking at cashflow % and its still a very important part but definitely not the bulk of return.

[Kevin Sobilo]

Quote from @John Clark:

Quote from @Kevin Sobilo:

Buying stocks in an index fund is no work, but also NO CONTROL! When you make real estate deals, they are what YOU make out of them when you invest actively. So, you have some real control over how things go.

Control is wealth! The first thing a "wealthy" person typically does is buy back their time aka assert more control over their situation in life.

Lemme get this straight: I have no control when I have a highly liquid, fungible, instrument bottomed on hundreds, if not thousands, of assets across a continental or even global geography, and many asset classes, and I can buy or sell at a moment's notice.

I DO have lots of control, however,when I buy a single asset class in the form of an illiquid, unfungible, single asset class that is highly localized, and subject to the whim and caprice of economically ignorant people and those who cater to them.

No. Real estate is a tax law play and a local economy play. It is also a "this is mine and it's tangible" psychological play. It is not a "control" play.

Correct, when you buy a stock you only have control over whether you sell it but not control over how the investment performs. You ability to sell it does not make it perform better. When you sell it you have NO investment, so 0% ROI.

Liquidity is a good point, but muted by the fact that many real estate investors never intend to sell out entirely for estate planning reasons and that they can gain use of the equity by leveraging the asset if they need to.

[John Clark]

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Buying stocks in an index fund is no work, but also NO CONTROL! When you make real estate deals, they are what YOU make out of them when you invest actively. So, you have some real control over how things go.

Control is wealth! The first thing a "wealthy" person typically does is buy back their time aka assert more control over their situation in life.

Lemme get this straight: I have no control when I have a highly liquid, fungible, instrument bottomed on hundreds, if not thousands, of assets across a continental or even global geography, and many asset classes, and I can buy or sell at a moment's notice.

I DO have lots of control, however,when I buy a single asset class in the form of an illiquid, unfungible, single asset class that is highly localized, and subject to the whim and caprice of economically ignorant people and those who cater to them.

No. Real estate is a tax law play and a local economy play. It is also a "this is mine and it's tangible" psychological play. It is not a "control" play.

Correct, when you buy a stock you only have control over whether you sell it but not control over how the investment performs. You ability to sell it does not make it perform better. …

Wrong. My ability to sell a liquid index fund allows me to cut my losses very fast, at low cost. The illiquid nature of real estate investing means a slow sale at high cost. That affects ROI. You don't have to ride the stock market down.

You also conveniently forget the fact that many stock buyers are “buy and hold” buyers just as much as property buyers are. 

If one wants “control” the last thing one wants is real estate. It is nonsense to pretend otherwise.

[Kevin Sobilo]

Quote from @John Clark:

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Buying stocks in an index fund is no work, but also NO CONTROL! When you make real estate deals, they are what YOU make out of them when you invest actively. So, you have some real control over how things go.

Control is wealth! The first thing a "wealthy" person typically does is buy back their time aka assert more control over their situation in life.

Lemme get this straight: I have no control when I have a highly liquid, fungible, instrument bottomed on hundreds, if not thousands, of assets across a continental or even global geography, and many asset classes, and I can buy or sell at a moment's notice.

I DO have lots of control, however,when I buy a single asset class in the form of an illiquid, unfungible, single asset class that is highly localized, and subject to the whim and caprice of economically ignorant people and those who cater to them.

No. Real estate is a tax law play and a local economy play. It is also a "this is mine and it's tangible" psychological play. It is not a "control" play.

Correct, when you buy a stock you only have control over whether you sell it but not control over how the investment performs. You ability to sell it does not make it perform better. …

Wrong. My ability to sell a liquid index fund allows me to cut my losses very fast, at low cost. The illiquid nature of real estate investing means a slow sale at high cost. That affects ROI. You don't have to ride the stock market down.

You also conveniently forget the fact that many stock buyers are “buy and hold” buyers just as much as property buyers are. 

If one wants “control” the last thing one wants is real estate. It is nonsense to pretend otherwise.

You are right! and also WRONG! lol

Yes, you can cut your losses fast and then have a 0% ROI. Those are you options invest in an index fund or don't invest. If index funds are tanking they are all probably doing poorly and this post was ONLY about passive stock investing in index funds.

Real estate can "lose" value and still be a positive ROI because an income producing properties return isn't only based on market appreciation creating equity.

You're only control with the stock investment is to "not invest" aka sell. With real estate there are infinite options to increase your return. Simply reducing your expenses in real estate IMMEDIATELY makes your equity rise and also your net income. Shopping for insurance, appealing assessed values, shopping utility providers, making energy efficiency improvements, etc. All choices a real estate investor can make but your ONLY choice with stock ownership is to not own them.

Liquidity is NOT control over the investment itself. Sure it is one aspect of "control" over your personal investments but NOT nearly as important as you make it out to be. RARELY does a real estate investor worry about being caught unable to access equity

[John Clark]

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Buying stocks in an index fund is no work, but also NO CONTROL! When you make real estate deals, they are what YOU make out of them when you invest actively. So, you have some real control over how things go.

Control is wealth! The first thing a "wealthy" person typically does is buy back their time aka assert more control over their situation in life.

Lemme get this straight: I have no control when I have a highly liquid, fungible, instrument bottomed on hundreds, if not thousands, of assets across a continental or even global geography, and many asset classes, and I can buy or sell at a moment's notice.

I DO have lots of control, however,when I buy a single asset class in the form of an illiquid, unfungible, single asset class that is highly localized, and subject to the whim and caprice of economically ignorant people and those who cater to them.

No. Real estate is a tax law play and a local economy play. It is also a "this is mine and it's tangible" psychological play. It is not a "control" play.

Correct, when you buy a stock you only have control over whether you sell it but not control over how the investment performs. You ability to sell it does not make it perform better. …

Wrong. My ability to sell a liquid index fund allows me to cut my losses very fast, at low cost. The illiquid nature of real estate investing means a slow sale at high cost. That affects ROI. You don't have to ride the stock market down.

You also conveniently forget the fact that many stock buyers are “buy and hold” buyers just as much as property buyers are. 

If one wants “control” the last thing one wants is real estate. It is nonsense to pretend otherwise.

You are right! and also WRONG! lol

Yes, you can cut your losses fast and then have a 0% ROI. Those are you options invest in an index fund or don't invest. If index funds are tanking they are all probably doing poorly and this post was ONLY about passive stock investing in index funds.

Real estate can "lose" value and still be a positive ROI because an income producing properties return isn't only based on market appreciation creating equity.

You're only control with the stock investment is to "not invest" aka sell. With real estate there are infinite options to increase your return. Simply reducing your expenses in real estate IMMEDIATELY makes your equity rise and also your net income. Shopping for insurance, appealing assessed values, shopping utility providers, making energy efficiency improvements, etc. All choices a real estate investor can make but your ONLY choice with stock ownership is to not own them.

Liquidity is NOT control over the investment itself. Sure it is one aspect of "control" over your personal investments but NOT nearly as important as you make it out to be. RARELY does a real estate investor worry about being caught unable to access equity

I can choose to buy another stock far more was than I can choose to buy different real estate. This is particularly true given that money is finite and one sells the stock (or real estate) one has in order to buy the new. One can fine tune one’s stock characteristics far more easily than one can one’s real estate’s characteristics.


I noticed you ran right away from the fact that real estate traps you into a vulnerable position regarding economically ignorant people and those who cater to them. Why is that? 

Before you answer, make sure that you account for the fact that people could trade stocks throughout the pandemic, but landowners couldn’t evict nonpaying tenents, because I WILL ask you how much “control” you have over your property when you cannot evict or prevent others from freely using your property.

[Kevin Sobilo]

Quote from @John Clark:

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Buying stocks in an index fund is no work, but also NO CONTROL! When you make real estate deals, they are what YOU make out of them when you invest actively. So, you have some real control over how things go.

Control is wealth! The first thing a "wealthy" person typically does is buy back their time aka assert more control over their situation in life.

Lemme get this straight: I have no control when I have a highly liquid, fungible, instrument bottomed on hundreds, if not thousands, of assets across a continental or even global geography, and many asset classes, and I can buy or sell at a moment's notice.

I DO have lots of control, however,when I buy a single asset class in the form of an illiquid, unfungible, single asset class that is highly localized, and subject to the whim and caprice of economically ignorant people and those who cater to them.

No. Real estate is a tax law play and a local economy play. It is also a "this is mine and it's tangible" psychological play. It is not a "control" play.

Correct, when you buy a stock you only have control over whether you sell it but not control over how the investment performs. You ability to sell it does not make it perform better. …

Wrong. My ability to sell a liquid index fund allows me to cut my losses very fast, at low cost. The illiquid nature of real estate investing means a slow sale at high cost. That affects ROI. You don't have to ride the stock market down.

You also conveniently forget the fact that many stock buyers are “buy and hold” buyers just as much as property buyers are. 

If one wants “control” the last thing one wants is real estate. It is nonsense to pretend otherwise.

You are right! and also WRONG! lol

Yes, you can cut your losses fast and then have a 0% ROI. Those are you options invest in an index fund or don't invest. If index funds are tanking they are all probably doing poorly and this post was ONLY about passive stock investing in index funds.

Real estate can "lose" value and still be a positive ROI because an income producing properties return isn't only based on market appreciation creating equity.

You're only control with the stock investment is to "not invest" aka sell. With real estate there are infinite options to increase your return. Simply reducing your expenses in real estate IMMEDIATELY makes your equity rise and also your net income. Shopping for insurance, appealing assessed values, shopping utility providers, making energy efficiency improvements, etc. All choices a real estate investor can make but your ONLY choice with stock ownership is to not own them.

Liquidity is NOT control over the investment itself. Sure it is one aspect of "control" over your personal investments but NOT nearly as important as you make it out to be. RARELY does a real estate investor worry about being caught unable to access equity

I can choose to buy another stock far more was than I can choose to buy different real estate. This is particularly true given that money is finite and one sells the stock (or real estate) one has in order to buy the new. One can fine tune one’s stock characteristics far more easily than one can one’s real estate’s characteristics.


I noticed you ran right away from the fact that real estate traps you into a vulnerable position regarding economically ignorant people and those who cater to them. Why is that? 

Before you answer, make sure that you account for the fact that people could trade stocks throughout the pandemic, but landowners couldn’t evict nonpaying tenents, because I WILL ask you how much “control” you have over your property when you cannot evict or prevent others from freely using your property.

Untrue, because the question here was stock index funds to passively invest! In order for you to buy individual stocks you need to be an active investor researching and picking stocks which is outside the scope of this discussion.

So, no you can't pick a new stock and even if you want to talk active stock investing and picking individual stocks you're talking about lower on average returns because even most professional stock pickers don't beat index funds long term and have a greater risk of loss.

I collected OVER 100% of rent during the pandemic and had no issues with evicting anyone. So, apparently I had all the control I needed.

You do realize the market has stops in it to prevent trading in certain circumstances. So, of course you can't always sell. So, in that circumstance you have NO control over your stock investment because you can't even sell it. So, you have ZERO choices at that moment.

I didn't skip your statement about vulnerable position of real estate investment. Actually its much the opposite. Because real estate is so important there is LESS nonsense from these things. Much easier to pass laws that affect a publicly traded business. A simple example are the new $20/hour minimum wage laws coming online out west.

[John Clark]

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Buying stocks in an index fund is no work, but also NO CONTROL! When you make real estate deals, they are what YOU make out of them when you invest actively. So, you have some real control over how things go.

Control is wealth! The first thing a "wealthy" person typically does is buy back their time aka assert more control over their situation in life.

Lemme get this straight: I have no control when I have a highly liquid, fungible, instrument bottomed on hundreds, if not thousands, of assets across a continental or even global geography, and many asset classes, and I can buy or sell at a moment's notice.

I DO have lots of control, however,when I buy a single asset class in the form of an illiquid, unfungible, single asset class that is highly localized, and subject to the whim and caprice of economically ignorant people and those who cater to them.

No. Real estate is a tax law play and a local economy play. It is also a "this is mine and it's tangible" psychological play. It is not a "control" play.

Correct, when you buy a stock you only have control over whether you sell it but not control over how the investment performs. You ability to sell it does not make it perform better. …

Wrong. My ability to sell a liquid index fund allows me to cut my losses very fast, at low cost. The illiquid nature of real estate investing means a slow sale at high cost. That affects ROI. You don't have to ride the stock market down.

You also conveniently forget the fact that many stock buyers are “buy and hold” buyers just as much as property buyers are. 

If one wants “control” the last thing one wants is real estate. It is nonsense to pretend otherwise.

You are right! and also WRONG! lol

Yes, you can cut your losses fast and then have a 0% ROI. Those are you options invest in an index fund or don't invest. If index funds are tanking they are all probably doing poorly and this post was ONLY about passive stock investing in index funds.

Real estate can "lose" value and still be a positive ROI because an income producing properties return isn't only based on market appreciation creating equity.

You're only control with the stock investment is to "not invest" aka sell. With real estate there are infinite options to increase your return. Simply reducing your expenses in real estate IMMEDIATELY makes your equity rise and also your net income. Shopping for insurance, appealing assessed values, shopping utility providers, making energy efficiency improvements, etc. All choices a real estate investor can make but your ONLY choice with stock ownership is to not own them.

Liquidity is NOT control over the investment itself. Sure it is one aspect of "control" over your personal investments but NOT nearly as important as you make it out to be. RARELY does a real estate investor worry about being caught unable to access equity

I can choose to buy another stock far more was than I can choose to buy different real estate. This is particularly true given that money is finite and one sells the stock (or real estate) one has in order to buy the new. One can fine tune one’s stock characteristics far more easily than one can one’s real estate’s characteristics.


I noticed you ran right away from the fact that real estate traps you into a vulnerable position regarding economically ignorant people and those who cater to them. Why is that? 

Before you answer, make sure that you account for the fact that people could trade stocks throughout the pandemic, but landowners couldn’t evict nonpaying tenents, because I WILL ask you how much “control” you have over your property when you cannot evict or prevent others from freely using your property.

Untrue, because the question here was stock index funds to passively invest! In order for you to buy individual stocks you need to be an active investor researching and picking stocks which is outside the scope of this discussion.

So, no you can't pick a new stock and even if you want to talk active stock investing and picking individual stocks you're talking about lower on average returns because even most professional stock pickers don't beat index funds long term and have a greater risk of loss.

I collected OVER 100% of rent during the pandemic and had no issues with evicting anyone. So, apparently I had all the control I needed.

You do realize the market has stops in it to prevent trading in certain circumstances. So, of course you can't always sell. So, in that circumstance you have NO control over your stock investment because you can't even sell it. So, you have ZERO choices at that moment.

I didn't skip your statement about vulnerable position of real estate investment. Actually its much the opposite. Because real estate is so important there is LESS nonsense from these things. Much easier to pass laws that affect a publicly traded business. A simple example are the new $20/hour minimum wage laws coming online out west.

1. You can always pick a different index to invest in.

2. Less nonsense? Two words for you: Rent control.

3. Minimum wage is untoward control? Sorry, my friend, but prices are passing along costs. Rent control is price control, the stock economy doesn't have it.

4. Consider yourself lucky (as I was) that you collected all your rent and had no trouble collecting rents during the pandemic. Luck, however, has nothing to do with control. Toss a manhole cover around here and you'll hit BP posters who didn't have such "control."

[Kevin S.]

Quote from @Devin Scott:

Quote from @Mark Cotter:

The richest people in the world hold most of their assets in stocks.

 Yea because they started those companies.  There's no person on that list that just invested in the stock market to get super rich.  Buffet is the closest but he has controlling positions much of the time and he is an operator.

 I agree.  The super rich are the ones who founded their companies.  The rich are the ones who invested early in them.

I used to be under the impression that you make money investing in stocks and thru' compounding.  True.   That's what Warren Buffet tells everyone.  That's how he became a very high net worth person by age 50.  I believe his REAL high net came about not by compounding in stock market but by actually buying companies.

I once read that the wealthy people use stock market to beat inflation but real wealth is held in real estate.  I'll find out what's true in about 50 yrs! LOL.

[Mark Cotter]

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The richest people in the world hold most of their assets in stocks.

 Yea because they started those companies.  There's no person on that list that just invested in the stock market to get super rich.  Buffet is the closest but he has controlling positions much of the time and he is an operator.

 I agree.  The super rich are the ones who founded their companies.  The rich are the ones who invested early in them.

I used to be under the impression that you make money investing in stocks and thru' compounding.  True.   That's what Warren Buffet tells everyone.  That's how he became a very high net worth person by age 50.  I believe his REAL high net came about not by compounding in stock market but by actually buying companies.

I once read that the wealthy people use stock market to beat inflation but real wealth is held in real estate.  I'll find out what's true in about 50 yrs! LOL.

 "I once read that the wealthy people use the stock market to beat inflation but real wealth is held in real estate."

I don't know where you read that but it makes no sense. RE is a far better hedge against inflation since it's a real asset. Many companies are negatively affected by inflation and their stock price will fall.

If you read my entire post rather than the snippet that was pulled out of it you will see my point was in response to a post that claimed RE will make more money but takes more work. My point is that if you don't put the work in then of course stocks won't offer you the return. There is a lot more to investing in equities than index funds and buy and hold and it takes a lot of work. The other point I made in this thread was that IMO treating these 2 investing areas as alternatives to one another is the wrong way to look at it. I would first look at what you are trying to achieve, if it's personal wealth then stocks are likely best, if it's generational wealth then RE is likely the best. People should aim to do both.

[Kevin S.]

Quote from @Mark Cotter:

Quote from @Kevin S.:

Quote from @Devin Scott:

Quote from @Mark Cotter:

The richest people in the world hold most of their assets in stocks.

 Yea because they started those companies.  There's no person on that list that just invested in the stock market to get super rich.  Buffet is the closest but he has controlling positions much of the time and he is an operator.

 I agree.  The super rich are the ones who founded their companies.  The rich are the ones who invested early in them.

I used to be under the impression that you make money investing in stocks and thru' compounding.  True.   That's what Warren Buffet tells everyone.  That's how he became a very high net worth person by age 50.  I believe his REAL high net came about not by compounding in stock market but by actually buying companies.

I once read that the wealthy people use stock market to beat inflation but real wealth is held in real estate.  I'll find out what's true in about 50 yrs! LOL.

 "I once read that the wealthy people use the stock market to beat inflation but real wealth is held in real estate."

I don't know where you read that but it makes no sense. RE is a far better hedge against inflation since it's a real asset. Many companies are negatively affected by inflation and their stock price will fall.

If you read my entire post rather than the snippet that was pulled out of it you will see my point was in response to a post that claimed RE will make more money but takes more work. My point is that if you don't put the work in then of course stocks won't offer you the return. There is a lot more to investing in equities than index funds and buy and hold and it takes a lot of work. The other point I made in this thread was that IMO treating these 2 investing areas as alternatives to one another is the wrong way to look at it. I would first look at what you are trying to achieve, if it's personal wealth then stocks are likely best, if it's generational wealth then RE is likely the best. People should aim to do both.

 Mark, I don't disagree with you.  It's just something I once 'read' which doesn't make sense since inflation is (used to be) about 2% and stock market return is much more. 

I think the author was kinda over exaggerating to make a point to us ordinary folks that compounding makes us 'rich' but the real wealthy people did not become real wealthy via stock market but by founding their companies.  And supposedly the author researched that these super wealthy individuals after they founded their companies did not have their money in stock market anymore but rather parked their wealth in Real Estate. Stock market is for us ordinary folks to keep buying into for the 1%.

The few posts I read coming from you I hold it in high regards. As for me I am now getting involved in RE, albeit a little late.  Like I said, in about 50yrs I'll (or my kids) find out if that author was right. LOL.   

[Kevin Sobilo]

Quote from @John Clark:

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

Quote from @John Clark:

Quote from @Kevin Sobilo:

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Buying stocks in an index fund is no work, but also NO CONTROL! When you make real estate deals, they are what YOU make out of them when you invest actively. So, you have some real control over how things go.

Control is wealth! The first thing a "wealthy" person typically does is buy back their time aka assert more control over their situation in life.

Lemme get this straight: I have no control when I have a highly liquid, fungible, instrument bottomed on hundreds, if not thousands, of assets across a continental or even global geography, and many asset classes, and I can buy or sell at a moment's notice.

I DO have lots of control, however,when I buy a single asset class in the form of an illiquid, unfungible, single asset class that is highly localized, and subject to the whim and caprice of economically ignorant people and those who cater to them.

No. Real estate is a tax law play and a local economy play. It is also a "this is mine and it's tangible" psychological play. It is not a "control" play.

Correct, when you buy a stock you only have control over whether you sell it but not control over how the investment performs. You ability to sell it does not make it perform better. …

Wrong. My ability to sell a liquid index fund allows me to cut my losses very fast, at low cost. The illiquid nature of real estate investing means a slow sale at high cost. That affects ROI. You don't have to ride the stock market down.

You also conveniently forget the fact that many stock buyers are “buy and hold” buyers just as much as property buyers are. 

If one wants “control” the last thing one wants is real estate. It is nonsense to pretend otherwise.

You are right! and also WRONG! lol

Yes, you can cut your losses fast and then have a 0% ROI. Those are you options invest in an index fund or don't invest. If index funds are tanking they are all probably doing poorly and this post was ONLY about passive stock investing in index funds.

Real estate can "lose" value and still be a positive ROI because an income producing properties return isn't only based on market appreciation creating equity.

You're only control with the stock investment is to "not invest" aka sell. With real estate there are infinite options to increase your return. Simply reducing your expenses in real estate IMMEDIATELY makes your equity rise and also your net income. Shopping for insurance, appealing assessed values, shopping utility providers, making energy efficiency improvements, etc. All choices a real estate investor can make but your ONLY choice with stock ownership is to not own them.

Liquidity is NOT control over the investment itself. Sure it is one aspect of "control" over your personal investments but NOT nearly as important as you make it out to be. RARELY does a real estate investor worry about being caught unable to access equity

I can choose to buy another stock far more was than I can choose to buy different real estate. This is particularly true given that money is finite and one sells the stock (or real estate) one has in order to buy the new. One can fine tune one’s stock characteristics far more easily than one can one’s real estate’s characteristics.


I noticed you ran right away from the fact that real estate traps you into a vulnerable position regarding economically ignorant people and those who cater to them. Why is that? 

Before you answer, make sure that you account for the fact that people could trade stocks throughout the pandemic, but landowners couldn’t evict nonpaying tenents, because I WILL ask you how much “control” you have over your property when you cannot evict or prevent others from freely using your property.

Untrue, because the question here was stock index funds to passively invest! In order for you to buy individual stocks you need to be an active investor researching and picking stocks which is outside the scope of this discussion.

So, no you can't pick a new stock and even if you want to talk active stock investing and picking individual stocks you're talking about lower on average returns because even most professional stock pickers don't beat index funds long term and have a greater risk of loss.

I collected OVER 100% of rent during the pandemic and had no issues with evicting anyone. So, apparently I had all the control I needed.

You do realize the market has stops in it to prevent trading in certain circumstances. So, of course you can't always sell. So, in that circumstance you have NO control over your stock investment because you can't even sell it. So, you have ZERO choices at that moment.

I didn't skip your statement about vulnerable position of real estate investment. Actually its much the opposite. Because real estate is so important there is LESS nonsense from these things. Much easier to pass laws that affect a publicly traded business. A simple example are the new $20/hour minimum wage laws coming online out west.

1. You can always pick a different index to invest in.

2. Less nonsense? Two words for you: Rent control.

3. Minimum wage is untoward control? Sorry, my friend, but prices are passing along costs. Rent control is price control, the stock economy doesn't have it.

4. Consider yourself lucky (as I was) that you collected all your rent and had no trouble collecting rents during the pandemic. Luck, however, has nothing to do with control. Toss a manhole cover around here and you'll hit BP posters who didn't have such "control."

 1.  So, then the market tanks, you would sell one index fund that is falling to buy another that is falling? Yes, in some cases they don't all fall at the same time, but in many cycles they do.

2. Rent control?!? You do realize real estate investors have control over where they invest. Like any active investment/business evaluating the business environment is part of the CONTROL we have!

3. Prices are not passing along costs in all cases like that! Some businesses will pull out entirely. Some will change their approach and lay people off and implement new technology. Since all related businesses are not affected the same way, some will gain a competitive advantage. If some can implement technology well prices might NOT go up which will hurt businesses that cannot make those changes.

So, for #2 and #3, stocks have no control because you have no control over where the underlying business operates or how they do business, but for real estate the investor can choose where they invest after evaluating the environment for example the likelihood of rent control. So, again real estate investor has "control". Control is CHOICES over taking actions, NOT CHOICES IN THE RESULT.

4. It wasn't just luck. It was in part how one does business aka CONTROL! Because real estate investors have choices in how they operate in any given environment some will do better than others.

Also, MANY landlords did BETTER during COVID but people doing better don't complain! There was TONS of rental assistance money for ~3 years such that anyone who needed help could get it. So, while a landlord might get taken advantage of by a bad tenant, the tenants who honestly struggle had all the financial help they needed. There are a LOT more people who have honest struggles than there are dishonest people taking advantage.

Since, I operate a certain way, I didn't have those dishonest tenants only ones with honest struggles who could tap into all of that free money to help them! The fact that this was my tenant profile was because of my CHOICES aka "control" I had over the investments.