BiggerPockets

I can't say how many times people have told me this once I tell them I work in real estate. I've done my research and I think I have a pretty good comeback especially when they throw articles from CNN like this at me:

http://money.cnn.com/galleries/2007/real_estate/0704/gallery.stocks_v_realestate.moneymag/index.html

Just wanted to see if anyone had a good answer they wanted to share! :D

If someone actually referenced that specific article, my comeback would be the fact that that article ONLY considered market appreciation levels in RE and not all the other factors that could contribute to a higher return.

For instance, in addition to market appreciation, you have forced appreciation, tax advantages, leverage advantages, and the fact that you can buy RE at a discount at acquisition and you can not with stocks. The price you pay for a stock is 100% retail market price that day whereas, in RE, I can buy something that is currently valuated at $100k in it's existing condition and only pay $60k for it. I just got a 40% return on day one - how much did the stock buyer gain that same day?

Lastly, buy and hold is not the only way to make money investing in RE. You can flip as I do and make 100% annual returns very easily if you know how. Show me any stock broker that can consistantly do that year in and year out.

The basis for the comparison seems a little silly...It's a bit like making the claim that overall athletes who compete in the summer Olympics are better athletes who compete in the winter Olympics. When you don't have head-to-head competition in the same sport, it's just really hard to make that type of comparison.

The article seems aimed more at reassuring the long-term buy and hold stock investor that they are indeed making a good decision with their resources. It's a little like watching a presidential debate. There is little attempt at an actual debate...mostly, they speak to their base trying a to paint a pretty picture for their side appearing all the while to unbiased.

However, I have serious misgivings about the relevance of this type of approach (i.e., if one were to focus on the stock market) for the average person. The average person doesn't have the discipline to just leave their money in an index fund and forget about it.

When I was investing in stock, I picked individual stock - and got absolutely slaughtered. My problem is that I didn't really understand what was going on for these companies.

I defy any average investor to claim they have a true understanding of the companies in which they invest their money. Even the employees of these companies have a hard time figuring out what's going on.

It's totally different when you are at the helm of your own company. Most people are not cut out to take that on...but I've gone from loosing money in just about very investment (stock market guessing) to understand how to put together a money making machine (real estate).

I'll never go back to stock guessing...thank you, real estate.

What a great discussion. i am always intrigued when I check out the magazine section of a book store and the only investing rags are those that focus on stocks and equities.

Don't get me wrong... we just lived through the lemmings reading about how great real estate investing was... and once all of the get-rich-quick crowd entered the market we saw how that worked out.

Yet... after reading this article, I am convinced that the authors just like the magazines are only pouring more koolaid for their thirsty readers...

Leaving the real estate investment field un-encumbered for those who are informed.

The stock market and the real estate industry are two different entities. One must invest in something he/she is more knowledgeable of and more inclined to. Besides, we've always considered real estate investing more challenging as it has more facets to it.

Christopher... your "contol" point is dead on. It is the primary reason my wife Vicky encouraged me to get involved with real estate vs. the stock market.

Also... please accept my appologies for double posting...

I think it is good to have a balanced, diversified portfolio no matter what you invest in.

If you are in shares, putting all of your eggs in one basket is just asking for trouble. For example, I remember seeing the news after the crash and investors crying saying they'd lost everything because all they owned bank shares. If that's all you owned you were a fool! Just my 0.02 anyway...

Hey guys, does anyone happen to know a resource/place to find the average returns of various investment alternatives? (i.e. stocks, bonds, mutual funds, bank interest, etc.)

I'd really appreciate your help, thanks!

Wow! Great discussion, guys.

@Jay-- That's a really good question, I'll ask my mutual fund/stock broker/financial planning friends and get back to you.

@djjk1-- I completely agree, we've seen the follies of the lemmings in both real estate recently and stocks in the late 90's. Having too many eggs in one basket will destroy you.

@Peter & Christopher-- Really good point about the control part, I didn't really think of that.

@Will--your posts are always great. What can I say.

I took a business statistics class in college, and one of the only thing I remember from it was my professor saying that they compared the average returns of some of the most brilliant stock analysts and a monkey throwing darts at stock listings from a newspaper spread across a wall. They found that the returns were on the whole the same. Go figure.

There are obviously pros and cons to any system. However there is one thing about the stock market that will always remain appealing in my eyes.

It's 100% liquid. If I have 60K in stocks that doubles to 120K in a trading day, I can sell it. Then and there.

Hard to do that with a house.

It's also hard to acquire 100K worth of stock with little to no money down. :)