REAL ESTATE IS BETTER THAN STOCKS!

86 Replies

My personal finance teacher is using the Dave Ramsey course and doesn't agree with me that real estate is a good investment. Instead he teaches that stocks will make you a millionaire no matter what even if you don't know what you're doing, there is never a good reason to go into debt, and because Dave Ramsey went broke trying to invest in RE (which what he was doing was very dumb by the way). But these stocks have been around for what 10-20 years? Who knows if they will even be existent in the next few years?!? Shelter has been number one priority for all people before us, and will be after us. And land can't be made anymore.

Remember though, Dave Ramsey is an "expert"...he is on TV all the time.  That means if he didn't make millions in RE, nobody can.

What I just said, is the logic of a fool. The fact that more wealth is created through REI than any other form of investing, is somehow bypassed by the Dave Ramsey "experts".

OK. Do you know why REI is a lot better than the Stock Market? [Hint: The main reason has something to do with the fact that using percentages instead of actual dollars to compare results, is just as foolish as the statement above. Percentages LIE]

You can make good money in both ~ if you know what your doing . Real estate wins in my eyes from the tax advantages , the overall control, and the stabile fluid returns 

Originally posted by @Isaac Johnson :

My personal finance teacher is using the Dave Ramsey course and doesn’t agree with me that real estate is a good investment. Instead he teaches that stocks will make you a millionaire no matter what even if you don’t know what you’re doing, there is never a good reason to go into debt, and because Dave Ramsey went broke trying to invest in RE (which what he was doing was very dumb by the way). But these stocks have been around for what 10-20 years? Who knows if they will even be existent in the next few years?!? Shelter has been number one priority for all people before us, and will be after us. And land can’t be made anymore.

What was Dave Ramsey doing in his REI that was dumb? I have listened to him a few times but never heard him go into detail about his past in regards to REI.

IMHO, this isn't a binary choice between stocks and real estate. I invest in both. Ask your teacher if he owns his own home, and does he hold a mortgage? I bought my first home, then rented it out and bought another, then bought another and rented out the second home. I'll be downsizing the current home next year and will most likely convert the current home into a short-term corporate housing rental. Rinse and repeat. I also invest heavily in my SEP-IRA and a taxable investment account. So I bifurcate my investments between stocks and real estate. Oh, and I shouldn't forget about my own business. It's all about multiple streams of income...this is what your teacher should be learning, and then teaching; multiple streams of income is where it's at.

This is a stupid argument because they are different. One uses leverage and the other doesn't. The unlevered returns on real estate over the past hundred years have been about 2-3% per year. (slightly more than inflation). The stock market averages about 10% a year. If you could put 3% down on stocks, your returns would be incredible, but the problem is that if stocks go down you have to put up more cash. The same is not true for real estate so you can ride out the ups and downs without going broke.

My first condo that I bought, the previous owner had owned it for 25 years and it appreciated about 1.9% a year compounded.  I bought it in 2000 and sold it in 2003 and tripled my money (a compounded return of 54% per year if it was unlevered, but much more since I only put 10% down).  So a lot of the super-normal returns are based on timing, not leverage. 

Like I said, it's totally different.  It's like saying, which would win in a fight, a lion or a shark?  

@Isaac Johnson most financial advisers caution their clients against investing directly in real estate for several reasons: One is that most financial advisers are actually just salespeople for investment products which don’t include real estate, but another reason (the one worth paying close attention to) is that a majority of new real estate investors will fail, lose money, and quit after they realize that it takes work and includes periods of major setbacks. Owning stocks probably is a safer investment plan for most people. Anyone can buy an ETF like SPDR or Vanguard that is diversified and low risk with very little effort and make consistent returns with much more liquidity and less risk than owning actual real estate, so that fits more people’s investment goals than starting a new career or at least putting work in to learn all the ins and outs of running a real estate investment business. Ever since the introduction of ETFs and mutual funds it’s very easy to buy stocks without needing to be an expert. You don’t even need to understand the businesses you’re buying shares of, just buy into a diversified holding that is professionally managed, set it and forget it and make solid returns with zero effort. Not sure what you mean by stocks have only been around 10-20 years? The NYSE started in 1792, and aristocrat stocks by definition have increased their dividend payouts every year consecutively for at least 25 years and many of them have been around for centuries. Most of the advantages people claim only exist in real estate (having control, being able to use leverage) also exist with stocks if one chooses to learn how to do it. I wouldn’t fall for the trap of believing there’s only one way to invest: just as financial advisors will steer you away from real estate in order to sell you investment products, if someone is steering you entirely towards real estate, look at their profile and it’s highly likely they are selling real estate, probably as a turnkey provider, syndicator, or selling books on how to invest in real estate, running a website for real estate investors, etc. It’s not an either/or scenario, I’d recommend not fully trusting anyone who steers you entirely towards one or the other and investing in both stocks and real estate as each has its advantages.

Updated 11 months ago

AdvisORS not advisers, doh!

I think you are just an exceptionally bright teenager who is probably bored in class. BUT there is no point in arguing with your teacher about this stuff so you should just let it go.  

Your classmates need to hear something simple. If you give people too much to consider they will usually shut down and keep doing what they already know.  The majority of them are not going to be big investors in anything,  but need Dave's basic principles of money management as they start their adult lives- which is basically don't buy things you can't afford and stay out of debt.  These kids aren't investing right now anyway so it didn't matter what the best investment is. 


@Stephen Flynt he was flipping houses mostly by using speculation and taking out 90 day loans to do so. When the market dropped and Dave's lender was acquired by a big bank, they decided that what he was doing was too risky and wanted him to pay them back in ninety days no extensions. But since the market dropped and he couldn't sell his property to pay them, he was screwed. Owning multi family properties by using a 30 year mortgage, and getting monthly positive cash flow is not bad debt. It's almost like Dave was traumatized and that's why he tells everyone that there is no such thing as good debt.

@Peter Sanchez yes I like stocks too, but if someone thinks that real estate investing is bad because of a mistake that shouldn't have been made by Dave Ramsey, they are wrong. Stocks and REI are both good, but REI is definitely the way to go.

@Steve K. I know the NYSE has been around for a long time, I actually studied it for an essay. But I mean the big stocks right now. I know there will probably always be stocks to invest in, but I was just saying. You have no control over these things, which I know you can make money in stocks, but overall I think REI is better.

@Isaac Johnson I'd like to give an honorable mention to the publicly traded REITs the best of both worlds real estate and stocks. If you invested in any of the cell tower/ infrastructure REIT's at the beginning of the year you would be up at least 50% and if you picked the top one you'd be up 90%

@Isaac Johnson if you want to learn the stock market don’t waste your time with technical analysis it’s like reading tea leaves and professional hedge funds don’t use it. Study fundamentals and the intrinsic value of a company.

@Isaac Johnson you don't seem do know Dave Ramsey very well.  I happen to be a big fan of the Dave Ramsey's baby steps.  The baby steps are just a plan (one plan) to get out of debt and build wealth.  Wealth can be and is commonly built by working people through investing in mutual funds.  A big first step to wealth building is to get rid of consumer debt including student loans.

Dave Ramsey is also a big fan of real estate.  He will tell you he owns a lot of real estate.  It's just that he pays cash for all of it today.  He talks about millionaires and how many of them have become so through real estate.

I have a stock and mutual fund portfolio that is doing very well this year.  I also have several real estate investments that I'm happy with.  It does not have to be one or the other.  It can very much be a combination of both.

We are all entitled to our opinions.  There is just no need to come on here to bash another person or their plan to build wealth.

I know many on BP love to use leverage and that's ok if they want to do that.  But it's also ok for others to avoid debt if they so desire.  I myself am in the ladder group.

Isaac I wish you the best and I am confident you will do well in what ever form of investing you choose to do. 

@Isaac Johnson

I agree with both of you. I use stocks to generate enough capital to fund my real estate deals. Use the best of both worlds. Even Robert kiyosaki okays stocks. The liquidity and volatility played correctly can yield quick returns. From January to September I was batting 48% YTD, special thanks to Blackstone.

Real estate is definitely a wealth builder! Leverage tenants pay the debt for you, and Jason Hartman teaches inflation kills the value of debt anyway. For example,A $1m mortgage is only worth $750k I’m future dollars!!! Not to mention the supply cap and tax benefits of owning real estate.

Best of both worlds why not take advantage of both of them!!!!

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