make your case: Stocks vs Rentals

Andy Moses

Investor · Orlando · Member since 2021 · 2 posts · 5 votes

5y

You have good points. My two cents.

1. Stock market returns in the future may not be that good. Market is fairly valued if not over.

2. Picking stocks could be tough going forward. Picking the winners could be tough.

3. Leveraging money with a mortgage could give you a good return on your cash used.

4. 2000/2008 event could be a big downer for stocks. We live in strange times.

5 Reply

Michael Plante

Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes

5y

$1,000,000 invested today in stocks or rentals with ZERO loans and a property manager

Taking out $70,000/year to live on, increasing each year based upon rental increase

20 years from now based upon historic stock returns vs historic rental returns as well as appreciation of the rentals which one has more value?

11 Reply

Account Closed

Member since 2021 · 240 posts · 300 votes

5y

Waiting for my Blockbuster stock to bounce back then we'll talk!

20 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

5y

Stocks are no fun. I like stuff I can see, feel and touch. And remodel every few years....

And I admit I have a much higher comfort level with houses....

8 Reply

Ryan Olsen

Investor · Reno, NV · Member since 2021 · 23 posts · 47 votes

5y

Get rich or build wealth.

>> Control.

In REI you maintain a strong level of control and the house/property works for you in many ways.

In stocks, you have zero control of the company and stock. You are along for the ride. Your are investor with biggest risk and smallest reward.

>> Time.

In REI you can set a tangible and realistic plan to be financially free in 10-years or less.

In stocks, you are in for long game.

>> Focus.

In REI you can have a very focused game plan that is actionable.

In stocks, you diversify. You cover your ***.

>> Horses.

In REI there are millions of winning horses to choose from.

In stocks, there are a few top tier horses (eg Amazon you mentioned), a massive amount of next tier or two, and a ton of losers.

>> Size of fish.

In REI you decide which pool(s) you want to swim in. You can legitimately become an expert.

In stocks, your are a goldfish in the ocean. You are insignificant.

22 Reply

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

5y

They are not alternatives for the same set of goals. One vehicle is very active and the other very passive. If the goal is to invest passively, sourcing and buying rental properties is a non-starter. If the goal is to have control over the business, buying a stock is a non-starter. The answer to which is the better strategy depends on a person's goals.

18 Reply

Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
5y
Originally posted by @Mike Dymski:
They are not alternatives for the same set of goals. One vehicle is very active and the other very passive. If the goal is to invest passively, sourcing and buying rental properties is a non-starter. If the goal is to have control over the business, buying a stock is a non-starter. The answer to which is the better strategy depends on a person's goals.

This. It's about how actively you want to control the performance of the asset.
A stock has never called and offered me terms and a discount because it is in a pinch. Real estate has. Can't buy stocks below market value or get seller terms or value-add 5x-20x your improvement $.
A stock has also never called to tell me it's moving out, has a leak or a noisy neighbor.
They ain't the same. Index funds will improve your life, but hands-on RE can absolutely change it for 2 generations or more.
12 Reply

Shane Littrell

Member since 2018 · 7 posts · 21 votes

5y

Nearly every rental you pick up will be a winner in thirty years. Nearly every stock you pick up will be a loser in thirty years. Look back 30 years at who the top dogs where in the stock market and how that has changed.

You never know what can come out to impact other businesses, but someone will always need a place to live. The bonus is once you become a great investor you can keep stacking without using your own capital.

12 Reply

Curtis Mears

Property Manager · Raleigh, NC · Member since 2014 · 729 posts · 596 votes

5y

@Casey Mayton

Are you doing the stock research and picks? If not, then you are giving your money to someone to manage, who will tell you there are no guarantees and past performance....with real estate, assuming you self manage, you are responsible for the good and the bad. And if you make a mistake, hopefully you learn and improve. Back in 2008, after watching my stock portfolio plummet and lose a large portion of value (none of the money managers predicted the collapse, even though nonprofessional friends of mine did) I decided to diversify and take the responsibility for my future. Noone will be as careful and concerned about your assets than you.

4 Reply

Evan Zeigler

Lender · Dayton, OH · Member since 2021 · 46 posts · 20 votes

5y

@Casey Mayton I invest in the stock market right now because of the passiveness of it. I have extra money that I am not afraid of losing so I throw it in to some stocks based on speculation. I always say hindsight is 20/20; you mentioned Amazon, and yeah I’m sure we all wish we got a 10,000% return on investment. The problem is that stocks are just speculation while RE will give returns reliably.

6 Reply

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

5y

REI wins hands down.

The value of stocks can change on an hourly basis. REI nothing like that.
Stocks pay dividends based on that ever changing value. RE pays dividends (cash flow) based on a more steady set of parameters.
Stocks can be bought at a discount, but the difference must be made up by the end of the day...by the investor, with cash. RE can be bought at a discount AND at 20% of the PV at purchase...but the balance is paid over 30 years BY THE TENANT.

RE can grow, if planned right, on an exponential basis. Stocks...?

There's more, like the actual numbers, but I've posted those examples many times already.

8 Reply

Eric Bilderback

Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes

5y

Real estate is a pain in the ***. That’s why it makes you rich.

If you could buy a stock and make it do what you can with real estate go for it but I doubt your that lucky.

6 Reply

Maksu Ize

Investor · Vancouver · Member since 2021 · 165 posts · 137 votes

5y

Stonks vs real estate

1 Reply

David M.

Investor · Ballston Spa, NY · Member since 2016 · 2 posts · 5 votes

5y

“The Millionaire Real Estate Investor” by Gary Keller is a must read (or listen) if you haven’t already. The author makes a very strong case on this subject.

3 Reply

Account Closed

Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes

5y

Originally posted by @Casey Mayton:

Read through the forums but looking for current advice on a strong argument for choosing rentals over non-qualified stocks over the long term. The biggest differences I can see would be the rental 1031 to avoid taxes as you scale bigger, whereas NQ stocks would pay taxes each time they're sold. However, even with leveraging 75% money after the down payment, stock returns seem like they could make much higher returns. Of course it depends what stocks, but even some "high quality" stocks like Amazon can have 10,000% growth in just 20 years. I think both options provide a tax free step-up in cost basis at death, so they seem them being equally tax and legacy friendly that way.

The top benefits I see to both would be:

stocks- much simpler to manage and liquidate stocks vs rentals and higher ROI even without the leverage
rentals- income offset by taxes/depreciation and 1031 exchange for tax free liquidations

Would appreciate if someone could make a very strong case that I'm missing, for rentals beating the simplicity and returns of stocks. Thank you!!

Why do you have to choose? How about Stocks AND Rentals?

EDIT: Just read some of the responses and while I get this is a REI board the sheer nonsense posted about stocks is amazing. Like every stock will lose money over 30 years! Or stocks are speculation and REI is 100% sure profit. What total and utter CRAP.

Stocks via ETFs and Mutual funds allow you to literally own a piece of the entire market. What equivalent vehicle exists for rentals? Sure there are REITs and Syndications but these are tiny compared to an S&P 500 or global market fund. And stocks have close to ZERO transaction costs and second to second liquidity. You can buy with very little capital and add small amounts regularly. You can leverage (via margin) and you can borrow against your brokerage holdings. So not that different from real estate.

Dont get me wrong. I own real estate but also own index funds and stocks. There is a place for both in any diversified portfolio.

30 Reply

Maura I.

Rental Property Investor · Washington, DC · Member since 2020 · 20 posts · 35 votes

5y

@Anish Tolia

Agreed! Why choose?! Wealth has a buffet of financial options. Have your share! Go get what you want, and all you want. Make it all work together for your benefit.

3 Reply

John MorganPro Member

Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes

5y

I’m 50/50. I started buying RE 6 years ago to diversify my portfolio. I was 100% in stocks before. I like them both. I’ve put about 300k into RE buying 11 SFRs and my equity has turned into 1.3 million in 6 years. I like the power of leverage in RE too. I currently owe 1 million in loans on them, but they’re worth 2.3 mil combined. It’s nice to capture 100% of the appreciation gains off RE when you only put 20% down. Can’t beat that! Oh and the profits are tax free which doesn’t hurt.

7 Reply

Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

5y

Every time this topic comes up we hear the same silly comparisons here in the forums.

If you don't have a compelling reason to go into real estate, something you see as an edge, don't go into it. It's going to be nothing but one heartache after another for you. For me, I've always been a handy, capable person and I knew I could greatly expand this if I bought rental properties. I didn't know how much, which has been a nice surprise, but I knew I could do something.

I'm a child of immigrants from a culture where wealth goes into starting a business or owning property and not stocks. My wife is from a similar culture. This always made more sense to us. From an early age, I understood that doing this would be a good option for me. Everyone in my immediate and extended family understands what I do.

This is just how it was. There was never any case to be made.

Now if you're looking for ways to invest with minimum fuss it's hard to beat index funds.

13 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

5y

The best argument for RE over stocks, if you have to have an argument, is that you can have a significant influence over the performance of your real estate, whereas you are guaranteed to have no influence over the performance of your stock portfolio (not even the richest/most powerful investors avoid losing money sometimes in stock). This is not to say you have 100% control over your RE performance - building a mansion in a ghetto is unlikely to make any money - but the avenues available to you for making more or less profit & more or less work is staggering. You can do a high-end rehab. You can put in sweat equity. You can house-hack. You can leverage other people's money. You can cash-out refinance. ETC.

Personally, I think the most worthwhile approach is having some of each, but in my own personal life RE is what has made me wealthier.

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8 Reply

Ronald W.

Investor · Member since 2020 · 7 posts · 4 votes

5y

I think this is a great question. I look at buying stocks as buying a company where I have to trust the management team because I do not sit on the board of directors and only get an allocated amount of votes to choose the members. In addition I look at buying real estate as buying a business where I have control according to my interest in the controlling entity. For many of us, it is more secure feeling to have some or all control in a real estate endeavor than to place our money with Wall Street. It is for me anyway.

1 Reply

Tony Kim

Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes

5y

Originally posted by @Casey Mayton:

Read through the forums but looking for current advice on a strong argument for choosing rentals over non-qualified stocks over the long term. The biggest differences I can see would be the rental 1031 to avoid taxes as you scale bigger, whereas NQ stocks would pay taxes each time they're sold. However, even with leveraging 75% money after the down payment, stock returns seem like they could make much higher returns. Of course it depends what stocks, but even some "high quality" stocks like Amazon can have 10,000% growth in just 20 years. I think both options provide a tax free step-up in cost basis at death, so they seem them being equally tax and legacy friendly that way.

The top benefits I see to both would be:

stocks- much simpler to manage and liquidate stocks vs rentals and higher ROI even without the leverage
rentals- income offset by taxes/depreciation and 1031 exchange for tax free liquidations

Would appreciate if someone could make a very strong case that I'm missing, for rentals beating the simplicity and returns of stocks. Thank you!!

If passive returns are your goals, then I don't think there is any comparison...stocks are easily the winner. As someone who has spent much of his career working for a company that invested in stocks, I can say without hesitation that there is no easier way toward capital appreciation.

However, the appeal in Real Estate for me is that I'd like to set up passive income for retirement and my retirement funds will just supplementary. RE is perfect for this as it's not subject to the wild swings of the stock market and you can also borrow against it while maintaining very low amounts of risk (unlike trading on margin for equities). As you get older and older, your property values will continue growing as you use the revenue generated. But with stocks, you will always have to monitor your balance and make sure you don't dip too much into your savings. That doesn't appeal to me at all.

2 Reply

Donavan Mcdabb

New to Real Estate · Satellite beach · Member since 2021 · 5 posts · 0 votes

5y

Long term stock hold could be like mini rentals 60% growth. 40% dividends. It shouldn’t be scary, invest in companies you see and use on a daily basis. Apple, Microsoft, Starbucks, AMD verizon, AirBNB Iron mountain. Real estate is much simple dont over leverage, buy and hold

0 Reply

Justin Manges

Rental Property Investor · Owensville, IN · Member since 2021 · 33 posts · 14 votes

5y

@Casey Mayton BOTH because you can take a SBLOC out against your stocks to buy real estate at a low rate.

I just learned this recently and haven’t hammered out all of the details but the thought of leveraging stocks to buy real estate appeals to me, because you never actually sell the stocks.

2 Reply

Justin Manges

Rental Property Investor · Owensville, IN · Member since 2021 · 33 posts · 14 votes

5y

@Casey Mayton also when you say the ROI on stock is a lot better… are just counting cash flow on the real estate, or are you also including appreciation and debt pay down? I've personally averaged 18% in the stock market since I started (2010 was a great year to start :) ) but I don't think that beats what can be done when every dimension of real estate is examined.

Plus with real estate I feel like it’s much less volatile and can keep food on your table if your stocks crash… and if you’re lucky you can use your leftover cash flow to buy stocks at a market bottom!

0 Reply

Jeff S.

Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes

5y

@Casey Mayton they are similar in that there are loser and winner stocks just like rentals. The average stock investor earns around 1.5% per year because like me they sell when the market tanks. You can build a stock portfolio for 10 years and watch it get cut in half in a week.

In 1992 the Dow Jones was $3284. That year I bought a duplex for $48,000. I sold the duplex this year for $650,000. Granted there was work all along the way but I also earned around 3% on the value as it increased.

The BIG difference is I put down $2,000. There was no way I had $48,000 to buy stock or properties.

The way to do the stock market is to hold for 30 years. The biggest problem is many of the the darling stocks of yesteryear turn to...there are too many to list here.

5 Reply

Jordan Jones

Rental Property Investor · Temecula, CA · Member since 2018 · 36 posts · 21 votes

5y

This is a great question I think it's situational. Personally, right now, I want cashflow because I'm scaling down my law practice. So looking at money coming in every month, rentals have better cashflow (provided you buy and manage right) than stocks. You can get a stock dividend, but dividends are like, 5% on the higher side. And if you're properly diversified, you probably won't even seen 5% dividend yields.

You can get properties that COC return better than that. The tax advantages are great too.

The other side is you have a lot more liquidity with stocks, and it's not leveraged unless you borrow against it. Stock is probably easier too-- just pick an index fund and let it ride. There are plusses to both and I think it truly depends on the individual, like anything really.

2 Reply

make your case: Stocks vs Rentals

make your case: Stocks vs Rentals

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