Why Real Estate Over Stock Market?
Member since 2024 · 23 posts · 16 votes
Why Real Estate Over Stock Market?
Most Popular Reply
My thoughts for RE
- leverage amplifies appreciation
- largest RE expense (principle & interest) is typically fixed for long duration (often 30 years). This virtually guarantees increased cash flow.
- equity pay down is guaranteed. The equity pay down in many RE classes (residential, storage, hotel/motel, office space, industrial, etc) ispaidby the tenant.
- there are ways to never pay tax on gains (1031, owe until death, etc)
- cost segregation can in effect have RE acquired at no cost
- sweat equity can produce additional return. If part of BRRRR can acquire RE at no cost
My thoughts for stocks
- stocks are more passive than residential RE
- lots of diversification options in stocks
- more liquid with lower liquidation costs
Note owning both RE and stocks is a great option. I have made a lot of money in both. I have made more in RE, but it required more work.
Good luck
58 Replies
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes2y
RE is a lot more active and involved, even if you hire a PM and a GC which BTW eats up your returns. In my experience as an agent (and long before an investor) people who are ROI driven and don't come with a passion for brick and mortar do not succeed in REI.
Someone who has the necessary passion for REI is not even going to ask the question. We are nerds :-)
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
@Kyle Fitch ok, I will touch on (IMO) the top 4.
1st: When we talk about "investing" the vast majority of time were looking at a total time-line of decades, several or many decades, right, before were mulch. Are you aware that over 80% of Wall Street / Stock market companies DONT last that long? Think on that, a person has an 80%+ chance of there "pick" not just loosing, but possibly going to $0.....
Ok, now, conversely with real estate, that is simply not possible. '08' was the biggest hit to real estate in our life times, of EVERYONE alive at the time of it, right. And that showed that all one had to do to NOT loose a dime was, wait up-to 7yrs to sell. And you can do other things, rent, sell on terms, etc etc etc.. Point is, (a) it's all but impossible for the investment to go to $0 and (b) you have direct, impactful CONTROL of outcome.
2nd: Back to the CONTROL aspect. Sure, you can diversify on the stock market, but what does that mean? It means instead of having one or a few things that you have NO control of what so ever, you now have several things you have NO control of what so ever. Unless your Warren from Omaha you have zero control over how good or bad those companies are run. Kodak was a industry "beast", a definitive "safe" investment, until it wasn't, and it went to trash in a flash. Sears, same story, go back some years and ask a "stock expert" the risks of investing in Sears and they'd laugh at you for such a "dumb question"..... So in reality you are ALWAYS gambling in the stock market, yes, even with those big names that seem inconceivable to every drop and ESPECIALLY with those because most are so shocked and in disbelief when it occurs that it's only realized after your left with pennies on the dollar because you waited out a recovery that was never coming.
3rd: MATH and leverage. The maximum leverage I have ever seen in trading accounts is 50%, and that's very limited and select. This is known as "margin". So, in theory one could get a 2:1 leverage, earning the rewards on $2 for every $1 capital spent out of pocket.
BUT, and this is a very big but..... WHEN (yes I mean WHEN not if because over 30+yrs it happens many times) when the market has a drop for whatever reason be it a bad election, war tensions, someone sneezed on there terminal and HFT's went bazerk selling, whatever the cause, WHEN the market drops you get a "Margin CALL" and next thing ya know there not just selling off those leveraged positions BUT there selling em off in the drop, at the lowest price, amplifying losses, all those returns going out the window in moments.
Now, not to mention the interest rate on margin is always a lot more than a mortgage rate. So % vs % on borrowed funds for investing, trading on margin is much more expensive, WAY higher risk, AND now even MORE loss of control because when these things out of your control happen you have no control for the status of those "assets".
VS Real Estate, nobody controls or makes a forced sale of your assets because there "fearful" what may happen. The bank can not do a "precautionary foreclosure" on you. No, only after missing significant payments then you could suffer a forced sale. And back to '08', what do you do, DONT SELL, lease it instead. What happens in a market "crash" when people are loosing there homes? They become renters, MASS increase of renters. So, you just lease.
And the math, in real estate you can get 4:1 leverage ratio readily, earning on $4 for every $1 you invest. And that's the most conservative side of things, using many prevailing things out there such as house hacking or using FHA and annual/bi-annual move you can get a 20:1 leverage, earning on $20 for every $1 you invest. And, with other strategies 50:1, 100:1, 10,000:1 is all realistic.
4th and final: Tax advantages left right and center in real estate. In stock market, the best you can do is hopefully take some sting out of your tax bill.
In real estate, you can very realistically completely remove ANY bite, at least for a time, but also you get to make $ on what would be a tax payment (1031). You get to take depreciation on an appreciating asset, you can even get tax credits for various projects and actions which depending the level your at equals a pay-day.
In Summary:
Wall Street and the stock market is handing other people your money, hoping after you let them make a ton on it no matter which way it goes, that end of day you will be left with what you put in and profit to make it worth it's while. And why? Because Wall Street has told everyone that's what they should do, give them all your money and in the future they will give it back with a profit, maybe, possibly, for some, sometimes, maybe, we will see, if if if.
Real Estate is investing. You are invested, you are investing, you have control, direction, a say, impact, choices. In one of the 3 fundamental human needs (food, water, shelter). Which is also one of the 3 fundamental needs of a business most often (customers, product/service, place of operation).
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
What about TP? Is it better to flush, or place in a basket next to the toilet?
LOL I was going to comment on that thread.. BP is going into the crapper when that thread goes on for days and days.. holy cow.. is this what landlording has come to ?? and who wants to do that ? - 2yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesNot the same thing. Not the same advantage or impact.
Quote from @Mark S.:
@Joe Villeneuve I realize that. Just pointing out that you can leverage your stock holdings.
@Joe Villeneuve Jeez - give it a break. Yes, they are different asset types, and work differently with different benefits, and drawbacks. I was just pointing out that it’s incorrect to say that equities cannot be leveraged. 
There are two things about real estate as a class which advantages it compared to the stock market:
1. Favorable long term fixed rate debt without margin calls
2. Operational control, most importantly, the ability to perform value add work to increase your returns.For instance, if I want to buy microsoft which I think is a great investment (likely to net 15-20% for the forseeable future)--better than real estate (which I expect to unleveraged yield 8-10% (5-6% on rent 3-4% on appreciation).
If I want to borrow money to increase my returns either a mortgage for the house or a margin loan for stocks, I can borrow money at 6.5% at 5x leverage (20% down) on the home taking my returns from 8-10% to 14%-20%.
To borrow money for MSFT, I can only borrow at 2x leverage (50% down) but I pay prime+2% (or 10%), so my expected returns go from 15-20% to 20-25%.However, the loan for microsoft is a margin loan, so if we go into a recession and I end up underwater, the bank will force me to sell my google shares to pay off their loan. Contrary, as long as I can make my mortgage payment, I'll keep the house, even if it is underwater.
In this example (which is based on current market conditions), I like microsoft unleveraged better than real estate, but if rates go down to 4-5%, I find an underpriced house, or an area which I expect to have above average appreciation, real estate then looks better.The second reason to invest in real estate is there is a lot of value add propositions to increase returns (closer to running a business than investing). This could be adding a second bathroom, finishing basements, or updating kitchens. I am currently looking at buying a 800sq ft house for 225k. A 50k addition (adding an extra bath and bedroom) would likely add 75k of value to the house. Additionally, I can take the plot and subdivide into 5 or 6 different lots, with each lot worth 25k a piece. So if I take and sell those plots, do the addition, I probably end up with a house worth 250k and all of the money for closing and the addition can be recouped from splitting the lot and selling the parcels. Although I probably get killed on transaction fees which is part of why I am not pulling the trigger (along with lack of time to execute well).
There are games you can play for increasing your returns in the stock market (sector rotations, rebalancing, being a good company picker) but you lack operational control. Currently I am about 60% stocks and 40% real estate and am working (via saving mechanisms) to get that closer to 75% stocks and 25% real estate before putting more money back into real estate.
- Investor · Tacoma, WA · Member since 2021 · 97 posts · 28 votes2y
When I started investing, I found it appealing because it's a tangible asset you can see and manage. It usually appreciates over time, plus you can earn rental income. Compared to the stock market's wild swings, real estate often feels more stable.
- 2yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
Real estate is a superior investment due to its tangible assets, consistent cash flow, leverage, tax benefits, control over investment performance, appreciation, and diversification. It offers tax benefits, allows investors to control performance, and is a good hedge against inflation. However, it requires a long-term approach and more responsibilities than stocks, making it a more diversified portfolio.
Good luck!
NETWORTH BUILDERS5236 Reviews You can do both, not an either or, but focus on the one you like the most
RE and CRE are great if done carefully and methodically and with patience, but so is picking individual stocks.
I love researching good companies with good growth prospects and a long horizon to allow for compounding of value, much like finding a good property in a good area with good long term demographics in a friendly regulatory environment etc to allow for capital appreciation.
EG. I have been buying a small pharma company in the opthalmic space, Harrow, HROW since May at $10, with good growth prospects and in an area with long horizon of medical need for the diseases it treats, they keep announcing better earnings each quarter, and stock now $44 in just 3-4 months, I've bought other companies with good products in the past like NVidia back in 2009 as they made the best graphics chip, G-Force, for gaming. I've also had to sell some stocks that went no where or declined when their "great" product turned out to not be so great, like buying a good property to see the neighborhood change over the years.
Which is better? well that depends on you and your knowledge and your skill/luck etc and no one else.
with stocks and with RE, sometimes you get the turn-around projects too, which can suck up your money and be losers or end up as huge winners, when the community recognizes the value add or the company turns it around. This month I am buying heavily into a tech company that the street hates and is dumping for fears of an accounting scandal. So, a risky reclamation project, like many shopping centers bought in potentially gentrifying neighborhoods.
Academic studies both in Europe and US, show the average RE investor underperforms the public equity REITs by 3.5 to 4% per annum, but that's average, and that equity REITs have outperformed the SP500 by 2% over last 50/40/20 years (NAREIT data c1974 onwards) but not in the last 15 yrs, when SP500 has 15.1% annual return since 3/9/09 and has beaten most asset classes. longer term SP500 return is 8.4% nominal and 6.9% Real since 1801.
you can do both, but focus your time on the one you love the most if you have a preference as each stock or property requires 50-100 hours of research time typically before pulling the trigger for me,
best of luck Kyle
Quote from @Kyle Fitch:
Hello,
I’m new to real estate investing and was hoping some of you would share your thoughts on why it is better to invest in real estate over the stock market.
So far, I’ve only invested in stocks and the idea of investing in real estate seems somewhat risky to me.
I prefer to control my returns 15- 20% NET income on my rentals, plus tax advantages and appreciation IM in!!
Quote from @Suman Nandi:
My 2 cents. Don't do real estate over the Stock market. Instead, diversify. Instead of 100% stock may be put 20% in real estate.
As everyone correctly says Real estate is 4X leveraged return but you pay 5% per year to stay invested. (My market has 2.5% property tax and I am assuming 2.5% for maintenance) and a 6+% APY for an investment property. If you run the number most of the properties are not going to beat the S&P500 return in the next 30 years. Please run the numbers yourself before deciding to invest. If your estimated rent from a property pays off the Mortgage + Maintenance + Property Tax + Insurance. It is a good deal.If you have a cash neutral property, the tenant via the rent they pay is paying the property tax, insurance, mortgage (principle and interest), maintenance/cap ex, vacancy, PM, and misc. if it is cash flow positive, the rent covers more than the expenses.
therefore the leveraged appreciation should be profit and the equity pay down is profit (seeing the mortgage was paid via the tenant’s rent). If the mortgage payment is fixed (so large part of expenses is fixed cost), the cash flow will increase as the rents increase.
however, it is not as passive as stock or as liquid as stocks.
both have their place as investments, but leveraged RE appreciation historically has whooped unleveraged stock growth (due to the leverage, historically stock has done slightly better than unleveraged RE nationally). If you are not going to use leverage in RE, then stocks may outperform RE.
good luck.- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Dan H.:
Quote from @Suman Nandi:
My 2 cents. Don't do real estate over the Stock market. Instead, diversify. Instead of 100% stock may be put 20% in real estate.
As everyone correctly says Real estate is 4X leveraged return but you pay 5% per year to stay invested. (My market has 2.5% property tax and I am assuming 2.5% for maintenance) and a 6+% APY for an investment property. If you run the number most of the properties are not going to beat the S&P500 return in the next 30 years. Please run the numbers yourself before deciding to invest. If your estimated rent from a property pays off the Mortgage + Maintenance + Property Tax + Insurance. It is a good deal.If you have a cash neutral property, the tenant via the rent they pay is paying the property tax, insurance, mortgage (principle and interest), maintenance/cap ex, vacancy, PM, and misc. if it is cash flow positive, the rent covers more than the expenses.
therefore the leveraged appreciation should be profit and the equity pay down is profit (seeing the mortgage was paid via the tenant’s rent). If the mortgage payment is fixed (so large part of expenses is fixed cost), the cash flow will increase as the rents increase.
however, it is not as passive as stock or as liquid as stocks.
both have their place as investments, but leveraged RE appreciation historically has whooped unleveraged stock growth (due to the leverage, historically stock has done slightly better than unleveraged RE nationally). If you are not going to use leverage in RE, then stocks may outperform RE.
good luck.Suman, like the all too common vast majority, is using incomplete math, and as is said "garbage in - garbage out".
I ran my calculator to get a quick "what if" on a 30yr picture. Based on purchase TODAY, 7.5% mortgage rate, 25% down, normal rents, what would it come out end of day as. Ready for it......
With rental real estate, 30yr: 2,617.8% ROI. That's the math of it.
And this is not crazy, it's just math.
So many do NOT do correct math for projecting out investment real estate over such time spans. (a) market price appreciates at a compounding rate AND so does (b) rents appreciate at a compounding rate. If ya don't believe me, look back 30 years ago, what were rents?
So we have "profits" from (a) appreciation of market value (b) cash-flow on rents (c) mortgage paydown via tenants contribution's toward purchase price (hey, what else do you call it when you paid 25% down and tenants paid the other 75% of the purchase price? I call that a capital contribution from tenants). (d) retained earnings from depreciation use to lower tax burden.
The S&P 500 has that inflation adjusted "average" of 8% annual return, compounded WHEN drip back all dividends, and IF it performs as it has previous 30 years.
Now, with real estate all you put out was $25k for a $100k purchase, that you got the gains/monitization from $100k.
BUT with S&P, you got gains on $25k. So, 8% annual compounded over 30 years is $251,566.42. You 10x'd your investment and that's dang good, it is. BUT, that $25k into investment real estate, the math comes back $654,460.27 total return potential. That is averaged annual property value increase of 2.9395% and annual rent increase average of 3.89%.
Now, there is going to be some more costs over 30 years of leasing of course. Let's say you burned through $150,000 in appliances and "more costs", ya still have $500k vs $250k.
Math, math never lies.
When you put in the COMPLETE math there is no comparison between real estate and wall street, real estate blows the doors off wall street every time.
And before anyone argues what about options trading or other various ACTIVE inputs, ok, let's go there and what about other active inputs in REI, like doing a BRRR to get infinite returns......
Apples-2-apples REI blows the doors off WS.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Dan H.:
Quote from @Suman Nandi:
....leveraged RE appreciation historically has whooped unleveraged stock growth.....
I just wanted to correct this here because "leveraged stock" which is a margin account, and trading on margin, I have seen interest rates of 12%/14%+. So if your using margin at let's say 12% interest rate, to do the mentioned S&P gaining at 8% or heck let's say 10%.... congratulations you just found a neat way to go a couple hundred thousand into debt. Actually you'd never hit that because eventually the debt pushes you into a margin call and forced sell and you'd be at or near $0 in just handful of years at best.
Remember that averaged 8% annual is WITH dripping the div, not taking it. You take the div to pay on margin %, your sub 6%.
So, there is no argument for using margin account to try meet/beat REI returns because it would just nurf your WS returns down all the more, expanding the divide between the 2.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes2y
They are not alternatives for the same goal. If your goal is to be passive, real estate is a nonstarter. If you goal is to have control, the stock market is a nonstarter.
- 2yMarc RiceBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
Quote from @Kyle Fitch:
Hello,
I’m new to real estate investing and was hoping some of you would share your thoughts on why it is better to invest in real estate over the stock market.
So far, I’ve only invested in stocks and the idea of investing in real estate seems somewhat risky to me.
Tax benefits, use of leverage, and a physical asset that you can see and touch.
Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews Quote from @James Hamling:
Quote from @Dan H.:
Quote from @Suman Nandi:
....leveraged RE appreciation historically has whooped unleveraged stock growth.....
I just wanted to correct this here because "leveraged stock" which is a margin account, and trading on margin, I have seen interest rates of 12%/14%+. So if your using margin at let's say 12% interest rate, to do the mentioned S&P gaining at 8% or heck let's say 10%.... congratulations you just found a neat way to go a couple hundred thousand into debt. Actually you'd never hit that because eventually the debt pushes you into a margin call and forced sell and you'd be at or near $0 in just handful of years at best.
Remember that averaged 8% annual is WITH dripping the div, not taking it. You take the div to pay on margin %, your sub 6%.
So, there is no argument for using margin account to try meet/beat REI returns because it would just nurf your WS returns down all the more, expanding the divide between the 2.
I recognize not everyone gets this but my margin is wsj prime plus 0.5% which currently is a high 8.5% (8% + 0.5%) but fairly recently was competitive with mortgage rates. Aug 2021 wsj prime was 3.25% so my margin was 3.75%.
You are correct that it can be called but you are also usually given the option on either adding to the account or selecting what to sell. They only sell for you if you take no action. This would typically occur only if you are over extended. If you have the means to cover debt, you can avoid the accounts being liquidated.
Note I am not stating margin is as safe as mortgages. I am saying they can be beneficial at times (probably not at the current rates - there may be cheaper money available).Best wishes
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2yI suggest you double check the updates and fine print, there has been a LOT of changes on margin accounts, seemingly everywhere. And most are shocked to find out, in my experience.
Quote from @Dan H.:
Quote from @James Hamling:
Quote from @Dan H.:
Quote from @Suman Nandi:
....leveraged RE appreciation historically has whooped unleveraged stock growth.....
I just wanted to correct this here because "leveraged stock" which is a margin account, and trading on margin, I have seen interest rates of 12%/14%+. So if your using margin at let's say 12% interest rate, to do the mentioned S&P gaining at 8% or heck let's say 10%.... congratulations you just found a neat way to go a couple hundred thousand into debt. Actually you'd never hit that because eventually the debt pushes you into a margin call and forced sell and you'd be at or near $0 in just handful of years at best.
Remember that averaged 8% annual is WITH dripping the div, not taking it. You take the div to pay on margin %, your sub 6%.
So, there is no argument for using margin account to try meet/beat REI returns because it would just nurf your WS returns down all the more, expanding the divide between the 2.
I recognize not everyone gets this but my margin is wsj prime plus 0.5% which currently is a high 8.5% (8% + 0.5%) but fairly recently was competitive with mortgage rates. Aug 2021 wsj prime was 3.25% so my margin was 3.75%.
You are correct that it can be called but you are also usually given the option on either adding to the account or selecting what to sell. They only sell for you if you take no action. This would typically occur only if you are over extended. If you have the means to cover debt, you can avoid the accounts being liquidated.
Note I am not stating margin is as safe as mortgages. I am saying they can be beneficial at times (probably not at the current rates - there may be cheaper money available).Best wishes
For example, Schwab, massive changes including what I consider bonkers high interest rates. Depending on person it's in the teens. That per trading desk, and talking with them they gave me the link to see it and yup, there it was.
On the Schwab accounts I manage we don't pay that but, it's there. And as said, this was all in long discussion with trading desk on things with the change over as it was a lot of changes.
IBKR is my other one, and my "main" for any active trading. If you "know" then you'd know why, and if ya don't when I say IBKR, well then it's just too much to explain here. Even there it's gone way WAY up.
The vast majority of people will not have these accounts, and the % that comes with them. I have annual certifications and recertifications for them yada-yada. Most will have the public off the shelf, and those DO come with the actions that NO they do NOT have to give you ___ time notice, they may, but they also may take proactive measure to immediately act. Look it up, again, straight from trading desk and I saw it in print.
They have a rating for each position, and if it hits a certain one, and market moves in certain ways "pow" they can just dump.
Per trading desk they said "yeah, crazy right, a lot of people are gonna get caught sleeping on this one", as in when market has that cycle it will get "interesting" when the forced sells occur accelerating the drop, that those in the know have algorithms built and set to grab the bottom. I know because that's what we were discussing, setting some for myself.
It is EXCEPTIONALY dangerous for the average Joe/Jane to get a margin account and max it, or even get anywhere close to maxing it. And that's the talk here, if "used leverage ___" well that leverage in stocks ie margin, is insanely dangerous maxed out at 2:1. So maybe MAYBE a realistic is what, 1.25:1, and then what's the point, that's really not much amplification when were contrasting it vs 4:1 or 20:1.
So it's distortion of the truth to give people a sense that they can in any sane manner use 2:1 amplification of leverage with SM margin account. You can, but I can think of half a dozen times in past 4-6 quarters it would have gotten into margin call.
Say you grabbed position in Tesla for x-mas because, well, it's Tesla and all looked awesome at $250 about to ride to the moon..... until..... come march and your falling like a stone from $180 wondering where the bottom is.....
Thinking "WTF, it's TESLA!!!!"
Rare incident? O had ~30% swing last year, that's "the" div king.
And it get's worse from there, how about reverse splits? Yup, that'll open an artery real fast, I've seen a slew of those last few years and each time people posting "wtf is this???" all confused how all of a sudden there down so much and as things recover, well, there still down because there at 1:5 and it ain't coming back any time soon if ever.
The stock market is a mechanism of transferring wealth from the ignorant too the informed, and that is it. That's the reality of it.
It's not safe what so ever. Hence why WB said index fund, sure if ya got a few hundred mill - billion+ yeah, could you imagine trying to sort out deploying a billion dollars into real estate, yikes, what a headache.
But when you got $40k, $75k, $125k, you're not gonna become a financially free anything via buying index fund's and ETF's, your just not. And if you live too long, it would run out quicker then you can imagine.
BUT if you bought R.E. with that, down the road, it will kick out $ month after month after year after year.
So ya live "too long" oh well, it's gonna keep on going with ya be it 85, 95, 115, doesn't matter.
The reality is stocks are NOT "investing", there savings accounts with super charged interest earning potential, that comes with the risk of going to 0. "Risk comes from not knowing what you're doing" -- The Oracle of Omaha Warren Buffet himself. If you're having success with stocks and real estate seems risky, then it's probably best to stick with stocks until you know what you're doing with real estate. But it's not that complicated, just buy in good locations and your risk is very low. I've dabbled quite a bit with both and feel like real estate is less risky personally depending on how you do it. There are high risk and low risk strategies in both stocks and real estate. Long term buy and hold RE in good locations is probably one of the lowest risk investment vehicles IMO, similar to blue chip aristocrat stocks except even less risky because even long-established companies can go out of business but real estate very, very rarely ever goes to zero.
- 2yJohnny LynumPro MemberInvestor · Leesburg, VA · Member since 2018 · 233 posts · 92 votes
Hey Kyle! I totally get why real estate feels daunting compared to stocks. Here are some quick stats to consider:
- Tangible Asset: Real estate is a physical asset you can see and touch, which can provide peace of mind.
- Cash Flow: About 33% of homeowners rent out their properties, generating consistent income through rent.
- Appreciation: Real estate appreciates by about 3-5% per year, while the stock market averages around 10% but with more volatility.
- Tax Benefits: Investors enjoy deductions on mortgage interest, property taxes, and depreciation.
- Control: You can actively manage and improve your property to increase its value.
Just take it step by step, and you might find real estate is less risky than it seems. Education first, then execution.
- Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes2y
Do both. BUT do 80-90% RE!
- 2yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
shortest answer is the leverage available in RE (very cheap in comparison to other investing strategies) is always going to be the biggest point in RE's favor over stock market
Harpoon Capital515 Reviews - 2yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
This is an age-old question and topic and has been answered many times, which can be found with the magnifying glass lookup. Everyone above has told you why REI is better than the stock market.
Let's try a different approach. Do you or have your Gambled before? Basically, do you understand "Odds". And no, I am not a financial advisor.
Holistic view:
1. Go find the current Price/Earnings ratio P/E for the stock markets. Both as of today and at different time intervals going back to 1980.
2. Do the same for National Debt/National GDP. Also show fed interest rates at those times. Start with 1980's (18% fed rate) going forward.
3. Now track either housing shortages or for sale supply, or on market data for those same data Points.
When you do this, you will question why you are even thinking about the Stock market. At this moment in time for the next say 5 years from a risk adjusted standpoint there is no comparison. I do believe in investing in the stock market and have about 25% there but for long term investments beyond 15 years.
Personal View:
1. There are many REI strategies, figure out the one that matches your funds, personal involvement, etc. You can get 5% return, or you can get 10,000,000% or infinity return every year, (zero risk, Tax free). I'm no guru, you and I will never meet, will never get a penny from you or anyone else on BP. Although one person owes me a King Cake next Mardi Gra season. And another owes me the best BBQ in Central Texas, next time I'm near him, although he doesn't know that yet.
2. Would you allow me to give you $800 every month? Would you allow everyone on this post to give your $800 every month tax free? Thats possible in Real Estate.
BP:
Get up off the chair and start using AI. Your one user already showed on a post how effective it is. To me every generic question like this post, the first response should be an AI response, followed by individuals personal take and experience.
OP:
Start small and Make Your Big Mistakes Early. This is a saying I use a lot at the end of my posts. As a new investor, it is very hard for you to assess risk. So, start with deals where there is small downside, but more upside.
For example:
A. I would recommend doing a House Hack or duplex to 4plex hack. That way you take away the occupancy risk for your unit. If you get full, you can always move out and rent. Plus, it puts your personal residence cost into the financial mix. You as a first-time investor have far more Risk Adjusted favorable REI strategies than any guru or longtime investor.
B. Or if you want to do a new Condo, pick one you can do STR. Live there but have a place you can stay when you rent it out. You're near a lot of water rec areas. You could alternate renting both out or living in the other or stay at your ???? house. The lake front could be a Camper rental.
C. Fix Flip- only do surface style changes- flooring, landscape, roof, windows, etc. Don't do any Structural type flips.
Reduce the risk and start learning.
If the above are to labor intensive, either buy a hill or buy some swamp ground. Put a sign, Free Dirt, or Free Dirt wanted. There are many REI strategies and Risk/Reward scenarios.
Your will get far better responses if you give more detail about your investment and personal background. For example, it looks like your near Detroit. You shouldn't do this. But for me that tells me you're near a major port. Brand new 1 Trip cargo containers are going dirt cheap right now. Freight is the major cost issue, which since you're near a port that's a non-issue. We would do a Self-Storage location with containers subject to zoning.
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes2y
I'd recommended attending local RE meet ups in the Detroit area. You'll get to talk to investors and have conversations. If you decide to house hack or start off by buying a rental property you'll need to know different areas, which are Class A, B, C or D (definitely don't do Class D as new investor). Would also recommend talking to property management companies who know the neighborhoods, median rents, tenant base etc. even if you decide to self manage.
Right now, we're a bunch of strangers commenting on your post - we don't know your background, financial situation, W2 job, lifestyle (single, married, kids, etc), risk tolerance etc (not that you should share all that information on a public forum). Since this is a RE forum many of the responses will be tilted towards RE. Many of us started way before 2023 and 2024. The market isn't as forgiving buying in 2024 with high prices and higher interest rates as it was buying in 2008 (deals to be had back then), 2013 or 2020.
@Travis Biziorek has invested in Detroit. Maybe he can shed some light on this?
- Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes2y
If the stock market were real estate, you'd pay for 5 shares of Apple stock and get an additional 95 shares. The additional shares would be paid off by someone else over 15 or 30 years, and when you own the full 100 shares, you can sell it get all the equity that someone else paid for plus all the growth in value.
So yeah, I like real estate.
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