5 Million in Rentals or 5 million in stocks

[Mark Weins]

If I was retiring with 5 million dollars in the bank, and I could only invest all my money into either stocks or a real estate portfolio, I fail to see how one would decide to invest the money into real estate. The S&P 500 index can average 10% returns per year on average with 0 work involved, while owning real estate/rentals is an active business.

Owning 5 million dollars of real estate from what i've researched, you can make 250k a year from rental income, unless you get 5% appreciation on property value per year (assuming you have 20% equity and a 25 million dollar portfolio) then you would earn 1.5 mill in yearly property value increase + 250k rentals.

Assuming I am retired and the RE rentals are my only source of income would the 4% yearly depreciation (1 mill for 25 mill portfolio) mean that I avoid getting taxed entirely if my rental earnings + selling properties is equal to under 1million dollars?

If this scenario is true then investing in stocks I would make 500k per year, but with real estate I would make 250k a year through rental income, 1.5 million each year in property appreciation, and have untaxed income for anything under 1 million dollars a year.

Is this true?

[Nathan Gesner]

I can't answer this in a two-paragraph response and you wouldn't know if my answer were correct anyway. You can do the research online or read a few books to see how real estate out-performs the stock market.

If you have $5 million cash, you can invest in $5 million worth of stock. If the stock increases 10% in value, you gain a 10% increase on your $5 million, or $500,000 profit.

If you invest $5 million in real estate by putting down 25%, you'll be invested in $20 million in real estate. If the real estate gains 10% value, you'll earn $2 million profit.

That's just one example of how real estate can out-perform stocks.