Why is real estate a better investment?

[Ben Bartels]

I feel silly asking this question, but my wife and I have been struggling to compare our investment options. Obviously, BP forums/podcasts/blogs/etc. indicate that real estate is a good way to go. It sounds like a 15% annualized return is pretty realistic. Dave Ramsey suggests investing in high-performing growth-focused mutual funds. He suggests that a 12% annualized return is realistic.

At first glance, real estate seems like a no brainer. It's the higher percentage. However, when I try to figure out exactly how I hit that 15%, I'm stumped. I haven't found a good example to convince myself of how it works.

Suppose I invest $25K into mutual funds and get Dave's estimated 12% over 30 years. At the end, I'll theoretically have close to $900K.

Now, suppose I take that $25K and purchase an investment property worth $80K (with $5K for closing costs, loan fees, etc.). Let's assume it triples in value over 30 years, so at the end, I sell it for $200K. Let's also assume I cashflowed $300/month, so that's another $108K over 30 years. I know I'm missing rent increases, depreciation, tax benefits from paying loan interest. Is there other stuff I'm missing, and can those things really add up to an additional $600K to make real estate the better investment?

I'm sure there are resources out there to explain concrete examples, so it's absolutely fine to just link to something rather than coming up with your own example. I haven't found anything yet that actually goes through the numbers though, and without actually going through an example, I don't understand how those additional benefits from real estate can make it a better investment. Thanks in advance for helping me figure this out!