Which is better? Short-term v. long-term renter v. stock market
Most Popular Reply
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3yQuote from @Stacey H.:
Is there any data about what's the better investment route? Short-term rental, long-term renter, or just keeping money in the stock market. I'm seeing the average return in the stock market is about 10%, which beats the rental options, however, that's all market-dependent. I'm planning on retiring in about 15 years. Perhaps it's best to diversify and do a little of each?
Real estate will win every time when you consider all the factors: cash flow, appreciation, tax write-offs, etc.
My favorite book (if you can find it) is "The Unofficial Guide to Real Estate Investing" by Spencer Strauss. It hasn't been updated, so it uses numbers from 20+ years ago, but the math is still solid. He has clear examples of how real estate beats other investment methods, and I think he's conservative in his assessments.
The DIY Landlord Book4.7247 Reviews
3 Replies
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Stacey H.:
Is there any data about what's the better investment route? Short-term rental, long-term renter, or just keeping money in the stock market. I'm seeing the average return in the stock market is about 10%, which beats the rental options, however, that's all market-dependent. I'm planning on retiring in about 15 years. Perhaps it's best to diversify and do a little of each?
Real estate will win every time when you consider all the factors: cash flow, appreciation, tax write-offs, etc.
My favorite book (if you can find it) is "The Unofficial Guide to Real Estate Investing" by Spencer Strauss. It hasn't been updated, so it uses numbers from 20+ years ago, but the math is still solid. He has clear examples of how real estate beats other investment methods, and I think he's conservative in his assessments.
The DIY Landlord Book4.7247 Reviews - 3yJacob St. MartinPro MemberInvestor · Charlottesville Virginia · Member since 2021 · 348 posts · 346 votes
Hello Stacey, the answer to this question will 100% depend on your goals in investing. If you are purely looking at the highest return on investment it goes in this order STRs > LTRs > Stocks. However, it is a little more complicated than that. Owning real estate is less passive than owning stocks, you should also be considering your time as a resource.
With short term rentals it is very achievable to get returns in the 20-40% annually range, and this is without loan paydown, appreciation, or the tax savings that come with owning real estate. If you factor in those things you could easily get a 50%+ ROI. However, managing a short term rental is a lot more work than owning stocks and if you have a bunch of them it can turn into another job.
Long term rentals are considerably less work than STRs but offer a lower return. Returns for an LTR are typically in the 10-20% range, again this is excluding loan paydown, appreciation, and cashflow.
As you said, stocks give you about 10% a year, no headaches. There are downsides though, stocks fluctuate with the economy while rent does not. With stocks, you make money when you sell (other than with dividends but no one gets wealthy off of dividends), with real estate you are making money off of the asset the entire time you own it AND you make money off of it when you sell because you have been paying down the loan and the market has appreciated. Alternatively if you do a cash out refi to pull out your equity you won't be taxed because you are technically taking on debt not making money. On stocks you will pay capital gains tax. On real estate you claim depreciation which shelters some of your income from being taxed.
If you want the benefits of owning real estate without the headache you should consider partnerships, there are two types of partnerships I would recommend. One is commercial syndications. These will likely give you returns around 15% annually and a lump sum when they sell and are fully passive. If you are interested I know a commercial syndicator who is doing a capital raise and I would be glad to connect you. The other option is to partner with a person on long term or short term rentals. This could likely yield you returns closer to 20-30% and you could still have a passive role. I am currently looking for a partner on a short term rental deal where the investor should get returns in the 20-30% range, I would love to connect and chat about it if you are interested!
I hope this was helpful!
- Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
@Stacey H.:
Is there any data about what's the better investment route? Short-term rental, long-term renter, or just keeping money in the stock market. I'm seeing the average return in the stock market is about 10%, which beats the rental options, however, that's all market-dependent. I'm planning on retiring in about 15 years. Perhaps it's best to diversify and do a little of each?
You can't really compare if you are looking at these technically. Different investors have different levels of aversion for risk.
There are just too many different facets and investment strategies just in the stock market where some are in and out of a position in a matter of minutes, hours, days, weeks, months and if you are talking years, maybe you missed the whole point.
Many might suggest an average return of 12% per year if holding a stock long term but some make 10, 12% or more in a matter or hours, days or weeks depending on what exactly you are doing.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.