How can real estate out perform stocks?

Question

How can real estate out perform stocks or even be better when the stock market does around 8-10% or even someone who can beat the market and get 15%? I understand every deal is different just like every stock is different but what would be an average or a expected return with real estate?

Taylor L. · Answer

We have major tax advantages and cheap leverage. Stock investors straight up do not have those. We also have a much murkier, more complicated market than publicly traded securities. That leaves a lot of room for real estate investors to make a return from market inefficiencies.

Great real estate investors do way better than 15%. The best people in the game use other people's money to earn a return, while making a return for those other people. If you do a deal where you make $40k, but you didn't have a cent of your own money in that deal, then what % return did you make?

Russell Brazil · Answer

Leverage.

Quinton Huntley · Answer

@Taylor L.

Good points thank you

Joe Villeneuve · Answer

How can I vote 10 times for this answer?

Craig Jeppesen · Answer

Leverage is where real estate beats stocks. Stocks have 2 ways to make money: dividends and appreciation. Real estate has the same (cash flow instead of dividends), but also offers the mortgage pay down so three ways to make money.

Joe Villeneuve · Answer

...and the REI's "partner" (tenant) is the one paying down that debt.

Joe Villeneuve · Answer

OK.  If you put 10k in both, and the stock goes up 12%n but the REI goes up 5%, what are the resulting returns that year?

Mary M. · Answer

IMO, to make any kind of $$ using leverage you need to start with enough $$ to do big deals.  With stocks, at least EFTs, you can invest a small amount and benefit from the market.

I think that neither is better, but EFTs are easier for those with little $$$.

How can real estate out perform stocks?

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