Why Real Estate Over Stock Market?

Member since 2024 · 23 posts · 16 votes

Hello,

I’m new to real estate investing and was hoping some of you would share your thoughts on why it is better to invest in real estate over the stock market.

So far, I’ve only invested in stocks and the idea of investing in real estate seems somewhat risky to me.

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Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

My thoughts for RE

- leverage amplifies appreciation

- largest RE expense (principle & interest) is typically fixed for long duration (often 30 years). This virtually guarantees increased cash flow.

- equity pay down is guaranteed. The equity pay down in many RE classes (residential, storage, hotel/motel, office space, industrial, etc) ispaidby the tenant.

- there are ways to never pay tax on gains (1031, owe until death, etc)

- cost segregation can in effect have RE acquired at no cost

- sweat equity can produce additional return. If part of BRRRR can acquire RE at no cost

My thoughts for stocks

- stocks are more passive than residential RE

- lots of diversification options in stocks

- more liquid with lower liquidation costs

Note owning both RE and stocks is a great option. I have made a lot of money in both. I have made more in RE, but it required more work.

Good luck

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Otis Gathing
Investor · Detroit, MI · Member since 2019 · 38 posts · 7 votes
1y
I love the stock market. The key is to combine the two!
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Jonathan Chan
Lender · Clermont, FL · Member since 2020 · 168 posts · 87 votes
1y
Investing in real estate means your money is backed by tangible property....assuming you do it properly.
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Jonathan SmallPro Member
Investor · Suwanee, GA · Member since 2020 · 182 posts · 151 votes
1y
Real estate vs. stocks: a classic debate! Here's why some choose bricks and mortar:
- Tangible Asset: You own a physical property with potential for appreciation.
- Leverage: Use debt (mortgages) to magnify your returns (not possible with stocks).
- Passive Income: Rents provide a steady income stream (dividends are not guaranteed with stocks).
- @Nicholas L. points out the benefits of a BRRRR. I really love the idea of owning a cashflowing investment that does not have any of my own money in the deal.
- Tax Advantages: Deductible expenses and depreciation benefits can lower your tax burden (compared to stock market taxes). @Steve Vaughan I believe in DCA with stocks. I just don't like that there is not a tax advantage with stocks.
I am in both as @Chris Seveney recommends. I have a lot more in real estate than stock. I like the control of real estate that @Jonathan Greene points out. No control over stocks.

Of course, real estate has downsides too (maintenance, vacancy risks).

Ultimately, the best choice depends on your goals and risk tolerance! Have you considered a mix of both stocks and real estate for a diversified portfolio? Sharing your goals can help others weigh in!
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Ian IppolitoBusiness Member
Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
1y
Quote from @Kyle Fitch:

Hello,
I’m new to real estate investing and was hoping some of you would share your thoughts on why it is better to invest in real estate over the stock market.
So far, I’ve only invested in stocks and the idea of investing in real estate seems somewhat risky to me.

Kyle, A couple of years ago, the Federal Reserve Bank of San Francisco released a groundbreaking research paper called "The Rate of Return on Everything, 1870-2015".

And it found that over the long term, real estate trounced treasuries and bonds. And in the modern era, real estate and stocks returned practically the same amount (within 1%).

However, what the study didn't look at is the post tax return (and which is the bottom line and the most important thing).

And real estate typically has much better tax treatment than the stock market. For example, most real estate deals throw off significant depreciation which can provide a very nice short to medium-term tax shielding benefit. And if someone implements a " defer, defer and die" strategy they can avoid paying taxes on real estate indefinitely.

That's the quick summary. If you want more information on any of the above then PM me and I can send them to you.
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