Is Real Estate a Better Investment than Stocks?

There are a lot of different ways you can invest your money - stocks, bonds, and mutual funds are some of the most popular. But building wealth isn’t limited to these options, and real estate has long been another avenue that investors use. While there are merits to each of these asset types, putting your money into tangible property can be a lucrative venture. But is it a better option than investing in stocks? That’s one of the questions we get asked most often, so let’s discuss.

More Control

With real estate, you have much more control over what you do with your investment. While economic fluctuations can still have an impact, you have more power over your situation than you would if you were investing in stocks. With stock investments, you’re just a small investor who is at the mercy of the company’s major players; with real estate, you are the major player. You get to decide what happens with your property, such as rent increases, improvements to the home to add value, or cutting costs to increase your cash-flow.

Less Volatile

Real estate also experiences less volatility than stocks. Stocks can fluctuate wildly depending on many different factors. Real estate is more stable. In the last thirty years or so, the lowest return on real estate was -5.6%; over that same time period, the S&P 500’s lowest return was -22%. In addition, because real estate is a tangible asset, there is always going to be value, either with the home or the land it’s on. Plus, if you invest in the right areas, you’re less susceptible to market downtowns, even if the economy isn’t performing well. People are always going to need places to live, and with real estate, you have the supply to meet that demand.

Tax Advantages

Real estate investors also receive certain tax advantages that stock investors do not. Rental properties depreciate over time, which works in the favor of the investor. The IRS allows you to deduct the depreciated value, along with any repairs or improvements that you make to the property, against your income. These deductions can equate to thousands of dollars in tax savings.

Cash-Flow

Cash-flow is another advantage that real estate has over stocks. When you rent your property, if you’re doing it right, you should come up with a profit each month after factoring in the rental rate minus your mortgage and operating expenses. This is money that goes into your pocket each month, which you won’t get with stocks. Yes, some stocks pay out dividends, but the return is nowhere near what you’ll get with real estate.

So, is real estate a better investment than stocks? We think so, when it’s done right. There are a lot of advantages to putting your money in real estate, both in the short- and long-term. While it’s always a good idea to diversify your investments by including different asset types, real estate remains a safe, solid option for seeing excellent returns.