Real Estate VS. Stock Market

[Omar Ruiz]

WHY I LIKE REAL ESTATE OVER THE STOCK MARKET

By Omar Ruiz

Lately I’ve been contacted by stock brokers in New York and other areas, soliciting my business and recommending stocks to buy. I do own a few stocks and I’m always interesting in learning something new. I consider real estate investing to be a superior investment than stocks due to several factors. The last broker call I received was different than the others and gave me the opportunity to express my opinions about real estate investing versus the stock market. After reading an interesting quote from Warren Buffet, I was compelled to write about it. Warren Buffet was quoted as saying, "Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway”. I thought it was funny because when I get the calls from those stock brokers, I think to myself, “I don’t know this guy calling me on the phone from some regular Joe walking down the street. Why should I trust what this guy is saying? These guys use hard-selling techniques and if they make enough phone calls, eventually they get someone to purchase a stock and make their commission.

The last guy that called me was following up on a previous call that I don’t remember receiving from all the other ones. He continued with his persuasion techniques, until I told him about my real estate investing activities. I told him most of my money is in real estate investments, because I control the investment and don’t have to worry about external forces affecting the performance of my apartments. If a mistake is made, I have only myself to blame and can make the necessary corrections immediately. I don’t have to worry about the economic fluctuations that affect the market indexes and overall sentiment from other stock market participants. I don’t have to worry about rumors affecting stock prices or high-frequency computers making automated trades that affect a sell-off. I don’t have to worry about the political disputing in the government over budgets or shutdowns, furloughs or elections. I don’t have to worry when the Federal Reserve announces an interest rate change because my financing is locked-in. In essence I don’t have to worry about outside forces out of my control affecting the performance of my investment. I know that as long as people need a place to live and roof over their heads there will always be renters to rent my units because I provide a basic human necessity – shelter. As long as I provide clean, safe, habitable housing, I don’t have to worry about slum lords, because their tenants wind up being my tenants and if similar competition becomes an issue, than it’s up to me to either adjust my rents or provide better amenities, but as long as I have that control, I don’t have to worry about outside forces affecting my operations, which brings up another great quote by Sir Isaac Newton after he lost money in the South Sea Bubble, “I can calculate the movement of the stars, but not the madness of men.”

The other reasons real estate is a superior investment is because I can get a loan from my banker to help me purchase real estate. Banks aren’t going to loan money on a stock; that alone says, a lot about the preference for real estate. I can also get insurance on my apartments in case of damage. I don’t know of anyone that will give you insurance if your stock loses value. There’s also tax benefits in the form of depreciation that gives me a credit to reduce my taxes and there’s also a mortgage interest deduction.

The stock broker started agreeing with some of my points, especially my point about external forces affecting the values of stocks. One stock I purchased because of advice from one of these phone calls was for an oil energy company that I researched afterwards. The stock was doing o.k. but when OPEC (Organization of Petroleum Exporting Countries) decided to flood the world with oil in order to put the oil fracking companies in the U.S. out of business, this was clearly something no one expected and caused all energy stocks to tumble. The stock broker couldn’t really say much after my reasoning in favor of real estate and the many reasons why it’s a superior investment to stocks. He actually agreed on some of my points but from the demoralized tone of his voice he knew that he wasn’t getting a sale on this call. It was soon thereafter that our conversation ended; however, I forgot to tell him to lose my number.