Personal Finance

The Big Advantage Real Estate Investing Has Over Stocks

Expertise: Real Estate Investing Basics, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Landlording & Rental Properties, Business Management, Personal Development, Flipping Houses, Commercial Real Estate
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If you’re an investor or simply researching investing options, you’ve probably heard the question debated: “Is investing in real estate better than the stock market?”

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We might be a bit biased, but today, we’re going to delve into the argument for why real estate is superior.

In this video, Matt Faircloth shares two big reasons that real estate makes a better investment and explains exactly why:

  • If you’re an active investor, you’re controlling your investment. You’re present for the day-to-day investing activities, which might include finding deals, rehabbing properties, and locating great tenants. In other words, you’re able to execute actions that can benefit how your investment makes money, unlike in the stock market, where you have little to do with actions that affect stock price.
  • If you’re a passive investor, you have collateral. That collateral may be in the form of owning property or owning a chunk of property. Or maybe you're a lender, meaning you have collateral in the form of a loan. If you're smart, you can use that to control your investment, unlike in the stock market.

Related: Real Estate vs. Stocks: Which Has Performed Better Over 145 Years?

The Big Advantage Real Estate Has Over Stocks

What do you think: Is real estate a better investment than stocks (or does the perfect portfolio combine both)?

Weigh in with a comment!

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, New Jersey, i...
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    The German
    Replied over 11 years ago
    I believe that the best real estate sales happen in the country side. It is a win-win situation and that is a market that can never slow down. In an area like rural Germany or France, the vistas are so beautiful that people can’t resist it. And the price is also pretty realistic. Nice article and all the 4 points make sense. Thanks 🙂
    Crystal Tost
    Replied over 9 years ago
    I find the advertising in other countries and in mediums that are not real estate related a waster of money and time. I think targeted advertising coupled with good pricing and proper presentation will get the house sold to a local buyer that is likely out there as we speak. Why focus on an audience that you are not even sure exists in mediums that are not targeted?
    David Grbich
    Replied about 9 years ago
    Setting a realistic list price at 10% below market may lead to a very lonely existence as a realtor – not many sellers in the California market have the equity to price 10% below market – but yes that should get the home sold. Great point overall – thanks.
    Rob Cook Real Estate Entrepreneur & Coach from Powell, Wyoming
    Replied about 1 year ago
    I agree Matt. A couple other advantages to RE investing, over the stock market. As you stated, and unlike almost all other potential assets which can be invested in real estate is the one which offers me the most control. You cannot buy distressed priced gold or silver. And you cannot influence the market value of it once you own it, unless your name is Hunt, or Rockefeller, etc. I can often buy real estate at nearly half market value, and double its value again by good management and renovation, etc. Note that real estate sellers are NOT a huge, collective market voice and as individuals, can be irrational, selling way below market price for a variety of reasons. Thus bargains abound, often not advertised like an ask price on stock shares. Valuation of real estate assets is not as exacting or simple to accomplish as in stocks, resulting in arbitrage opportunities for us – try that in stocks in today’s electronic traded world. I also can assess risks very confidently due to my knowledge and the transparency of RE investments. NOT REITS or FUNDS or any other phony baloney wall street BS, just actual brick and mortar properties I see myself and can personally understand completely before buying in. I generally go it alone, without any sort of partner beyond a lender occasionally, so ALL the risks of partner involvement are eliminated. As an aside, I was literally shocked to see all the comments regarding you previous post, stating their dissatisfaction that you provided the information via video, without a verbal translation for them to read. Not judging whether or not they are right or wrong about their preference, but I do feel they were generally offensive in their approach towards you. They obviously do not understand that you are not paid to produce ANY BP content, and do so 1) out of a sense of generosity to share and help, 2) to build your own brand so that someday you might make a couple of bucks for the hundreds and thousands of hours you put into providing FREE content for all of these over-demanding commentors’, and 3) that that is a stupid way to thank you for your effort and to encourage you to continue to give so they can take your info…for free. The internet is truly warping people’s social skills, and maybe even common sense and intellect. They apparently want you to not only give to them freely and at no charge, but to do so in a format they demand, instead of that you select to employ. Oh well, less competition for you and me brother! So keep it up, I love the videos (and I am a lawyer, so I do know how to read). Ignore the takers’/ingrates’ ugliness and press onward. Thanks Matt!
    Noel Felix III Specialist from Spencer, WI
    Replied about 1 year ago
    This is great! Thank you for providing this content. I feel like I am always trying to convince people to switch over from stocks. Anything I can share on social media to help convince them is really helpful.
    Rob Jafek from Mesa, Arizona
    Replied about 1 year ago
    I’d also consider the volatility, and real estate has been far less volatile than equities. In The Federal Reserve Bank of San Francisco’s Working Paper Series, there’s a paper called “The Rate of Return on Everything, 1870–2015” It’s substantial at 123 pages, but demonstrates that real estate returns are roughly equivalent to equity returns (out performs over 145 years, but has underperformed by a bit since the 1950s), but real estate is way less volatile, meaning that on a risk adjusted basis it is superior. In other words, if you want about the same returns, and to be able to sleep at night: real estate is the way to go. Here’s the link: It looks like someone else on BP may have done a write-up/summary, but to be honest the paper is very accessible, and IMO its worth the time to review. For example, @Noel Felix III, there’s some great charts to grab if you want to post to social, just don’t mention the whole thing is 123 pages – that might scare them off!
    Frank S. Specialist from Chicago, IL
    Replied about 1 year ago
    or… The Big Advantage [Stocks] have Over [Real Estate Investing] If you’re [a passive] investor, [focus on your career rather than getting another job.] If you’re a passive investor, [invest in broadly diversify index funds that closely track their respective benchmarks. Select an asset allocation according to your risk tolerance and only reblance afater a 5% deviation.] It works both ways, Frank
    Devin D. Rental Property Investor from Charleston, SC
    Replied about 1 year ago
    I agree 100% and experienced it first hand. I invested a rather hefty amount of capital several years back into a couple startups (fields I work in) that lead investors to believe they were much further along then they were. Over some time one of these companies was hit with several law suits as a ultimate result of poor management and oversight (these were NASDAQ tested and success proven execs) and I found myself with a 400k dollar loss. To say just a little that was devastating and I knew I could do better and I was pretty sure a monkey could do better. Enter my reentry into REI. I had little capital to start out with but cut living expenses and was fortunate to have a well paying W2. In short during the first 7 months of moving to REI investing rather than stocks I’ve doubled my new worth and added a steady stream of income to the point that I technically have reached Financial Independence. Control is the point and though I’ve taken an active investment approach I now have a system that can be replicated and I’m in full control to make the most out of every deal and to mitigate risks as the market evolves. Index funds will never deliver these kinds of returns or 20%+ annual dividends.