Why I’d Choose to Invest in Real Estate Over Stocks Any Day of the Week

by | BiggerPockets.com

Today I’m talking to you about investment strategies. Should you invest in stocks, or should you invest in real estate?

Around five years ago, I was given a book that absolutely changed my world. I’ll tell you the name of the book if you comment on this post below. What it did was motivate me to start looking into how I could invest my money to produce residual income and increase my cash flow instead of just slaving away in a nine to five.

I initially started investing in an Australian healthcare company because I believed that as Baby Boomers started aging and retiring, there would be a greater need for healthcare.

My first mistake was that I invested that money when I really couldn’t afford to spare it. So, it really wasn’t the right thing for me to do at that time. Additionally, at the time, I had an unfortunate car accident without insurance and had to sell off my stock portfolio to survive for six months while recuperating.

What I learned from my initial investing experience is that the stock market is very, very volatile. Sometimes there are big changes in a day, but most of the time, it varies month to month, or there could be a huge crash and it might fall to crap overnight. Even after my bad experience, I still believe you can make a lot of money in the stock market.

Related: Are You Still Picking Stocks? You Are Ridiculous. Here’s Why.

When you invest in stocks, you can do your due diligence online to get to know the company, but you are just one vote out of tens of thousands if not millions of other shareholders. So, you cannot choose what direction the company is going to take—what products they create, who they hire, and how much they’re going into debt.

Fast-forward five years, and I’ve done over 500 real estate deals and am running a multi-million dollar real estate investment company.

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Here’s Why I Think You Need to Invest in Real Estate

You are the CEO and board of directors of that property, venture, multifamily complex, or commercial building.

You get to choose:

  1. Where you buy
  2. How much you spend
  3. How much debt you get into
  4. What kind of renovations you are going to make
  5. Who the tenants are going to be
  6. Who your property manager is going to be
  7. Who your contractors are

You are entirely in control. You choose when to sell when to hold.

So, in my opinion, bricks and mortar are a much safer and better investment. You get to touch it, you get to feel it, and you are in control of it!

To all those trying to build wealth: What’s your preference—stocks, real estate, or a combination of the two? (Or something else entirely?)

Let me know with a comment!

About Author

Engelo Rumora

Engelo Rumora “The Real Estate Dingo" is a successful property investor, motivational speaker and serial entrepreneur that quit school at the age of 14 and played professional soccer at 18. He is also a soon to be published author along with becoming a TV personality in his very own real estate house flipping show. To find out more go to engelorumora.com . Engelo Rumora has been involved in over 400 real estate deals and founded five businesses in Ohio. The most successful is Ohio Cashflow, a company that specializes in providing turnkey properties in several Ohio markets. The newest venture is List’n Sell Realty, a real estate brokerage based in Toledo, Ohio and soon to be known as the #1 discount broker in the country.

57 Comments

  1. I like real estate for the same reasons that you mentioned. Where you discouraged when you lost your money in the health care industry? If so, how did you overcome that setback? Thanks for your story!

    • Engelo Rumora

      Thanks for your comment Hernan,

      I wasn’t discouraged but it was frustrating having to sell my stocks.

      I would definitely look at investing again if the right opportunity came up.

      Real estate is my bread and butter tho.

      Much success

  2. Great Post! The harsh reality is if the market tanks for any catastrophic reason, it effects your stock(s). I’ve known many (including myself), who sell stock to buy cash flowing properties. Marcus

    • Engelo Rumora

      Thanks Marcus,

      The stock market is pretty hot right now.

      Maybe it’s a good time to pull some money off the table lol

      I’m “stashing cash” now and waiting for the next bear.

      As soon we see another big big drop, I wouldn’t mind jumping in.

      Much success

  3. Corrie Jacob

    I’m almost 2 years of out college and starting to educate myself on real estate investment,as that seems to be the best route for combining my interests with income. It scary! Whats scarier though is living a life and toiling away at a job that you hate. I am choosing real estate rather than stock investments becasue it allows for creativity and tangible results. Anyways, real estate has been on my mind for a while now and its time I take action!

    • Engelo Rumora

      Thanks Corrie,

      Great way of thinking and the only thing you should be scared off is “regret”.

      Regret of not taking action.

      It seems like you’re on your way and just keep immersing yourself in everything and anything real estate related.

      I wish you much success

  4. Karen O.

    I’m glad you found what works for you. I believe in diversification. Having some RE, some stocks, some bonds and some cash helps me sleep better. The hope is that if one of them tanks, the others can hold the line through a recovery. The trick is getting the mix or the allocation right and adjusting periodically to maintain that allocation. If 2007-2008 taught me anything, it’s that nothing is full proof.

    • Engelo Rumora

      Thanks Karen,

      I’m not a big believe in diversification.

      I’m happy having 90% of my money if not more in real estate.

      It’s my bread and butter and as long as rents are coming in the price fluctuation doesn’t bother me.

      “Is cash is King, then cashflow is Queen”

      Thanks again and have a great day

  5. Hey Engelo!

    Right now our family is investing in stocks and funds simply because it’s a lower threshold to get into the investments, you can just put aside some money each month without any other cost than the fee the transaction cost.

    However, our intention is to save up enough to have money for a downpayment on some kind of real estate. Which kind we will go for first I don’t know yet. I’ve not done my research yet since we’ve got quite a bit left to save.

    I guess our choice to start with stocks was also in part influenced by what seems to be a common misconception, that the stock market yields a higher return than investing in real estate. Just a few days ago I read a good post on PTMoney that explained a bit more about how to analyze real estate in a deeper way, and how that impact the returns too. This was really important for me to see to understand better why we also should invest in real estate – if nothing else, just to diversify.

    Oh and Engelo, which book was it that you read? 🙂

    • I was “taught” that diversification is key by other people I knew when I did not have an opinion of my own. People like investment advisors, other people of similar financial background as me, who were diversified.
      Since then I’ve taken it upon myself to learn what the most successful people do. Not people “like me” but people “who I want to be like”. And I was shocked when I learned most of them do NOT diversify. They find a core competency, master it, go all in on that mastery, and maximize.
      So i’m currently all in cash or real estate. If you know the market, maybe you would be all in there. I know real estate and I’m all in!

  6. I absolutely prefer to trade/own stocks, then to invest in real estate. Stocks are 100% liquid. I can sell all my stocks in one second if catastrophe happens, where it would take me months to sell a piece of property. I have a rental sitting in the market for 4 months and I haven’t found a qualified renter yet, in the meantime, my holding costs are $1,000/ month. On the other hand, my stock portfolio has gained over 30% year to date in this “Trump Rally”. Goooooooo TRUMP! I also have another account where I trade stock options. That one is more volatile, but the gains can be potentially huge. It’s all about diversification, knowledge, experience and risk tolerance. But, I choose stocks over RE any day!

    • This is a great point and a big factor that wasn’t addressed. Real Estate investment requires a TON of time and energy that stocks simply do not. If you choose to have multiple investments in real estate, it WILL become a full time job sucking up hours and time from your life. Stocks require NOTHING from me once I buy them.

      • Engelo Rumora

        Not true Ed,

        All good things take time and effort.

        I have 14 full time staff and we do 5-10 flips per month.

        I also have other businesses that produce cashflow.

        I wouldn’t say it’s easy now but I hustled much harder at the start and now I’m working smarter.

        Even Warren Buffet pulls long hours.

        if you want to win the game you have to train and play long and hard no matter what the game is.

        Thanks

    • Engelo Rumora

      Thanks Frank,

      Your probably paying a fortune in transaction costs and taxes by trading stocks.

      Slow and steady wins the race.

      Long term buy and hold.

      $1,000 per month in holding costs is huge.

      Did you take on a lot of debt?

      Thanks

  7. Claire Piard

    What book was it that started your journey 5 years ago? My husband and i just finished with the “Rich dad Poor Dad” that really helped open our eyes on many options we had not a clue about and now we are trying to figure out what type of investments would match our temperament and schedule. Thank you for your article

  8. Jens Nielsen

    Brian,
    I’m coming to the same conclusions as you. I’ve moved a good chunk of my taxable savings into 3 small apartment buildings, and moved some of my IRA money into a note fund.
    Now I’m looking to move more IRA money into various real estate investments.
    There are a lot of opportunities out there, you just need to look!

    Jens

    • Engelo Rumora

      Thanks Jens,

      You are 100% correct.

      There are a tonne of ways to make money in real estate.

      The opportunities truly are endless

      The #1 thing to keep in mind is to always surround yourself with the right people.

      Have a great day.

  9. Christina G.

    Good post. We have most of our investments in real estate right now. I think for me, real estate is a more tangible asset. I like the idea of seeing it, going over to a rental property, making my own adjustments, repairs, as needed. It makes me feel like I am more in control of it.

    When the housing market crashed, we had just purchased our second property. The property went down about 50k from our purchase price in about a year. It made me feel like we made a horrible mistake, but then again, how can you time the real estate market? I don’t think it’s possible to time either real estate or stock market to be honest. With real estate, you can kind of see an ebb and flow with things, but we can be on the cusp of another bubble and not even realize it.

    Anyway, after that downturn, we kept the property and always had it rented. So we were able to float it until the market came back. We just recently sold it and it ended up averaging about 8% a year. That does not count the depreciation though, so maybe more. More than stock market, which was nice.

    As far as stocks over real estate, I kind of think either route is fine. Whatever you are comfortable with. Both go up and down and for investing, you need to be a buy and hold kind of person to see the fruits of your labor. For us, that was about 10 years of holding our properties.

    I tried picking individual stocks way back in the day when I thought I knew what I was doing lol, it was always a losing proposition. You take some advice from a “next hot stock tip guy” and low and behold, you realize he is more broke than you are! So as far as investing in the stock market, we like Vanguard Index funds. Lazy mans approach.

    • Eric Almonte

      Thanks Christina. There are 80 top companies in the World, best Balance Sheets, that I will invest in. Many many people don’t know this Common Sense strategy. Biggest and boldest companies are the ones to invest in. And there are other secrets too because I and my best friend studied under Billionaire Investors, as a side study!!…God bless!!!….

      • Engelo Rumora

        There are Eric and they are pretty safe investments.

        Best time to be investing in stocks again is when it all falls to S#$@.

        Seeing 2008 and the rock bottom prices, I wouldn’t touch stocks at these prices right now.

        Have a great day.

    • Engelo Rumora

      Thanks Christina and agreed.

      When investing in buy and hold and thinking long term, it’s hard to loose money.

      Over time, everything tends to appreciate in value.

      As for timing the market.

      It’s not impossible. You won’t be able to time the exact day but if you mingle with some of the “suits” as I like to call them.

      The Wall St guys and large heads of finance companies, etc…

      You will be able to get very close to when it will all collapse again.

      Much success

  10. Chad Simpson

    Thanks for the great article Engelo! One thing I also appreciate is that when it comes to retirement they always talk about the fact that your return needs to be enough to account for inflation. The great thing about real estate investing is the fact that if you have a property in a desirable the rents should continue to rise in relation to inflation. Also, the tax benefits and appreciation potential make it, in my opinion, superior to stock investments.

    • Engelo Rumora

      Thanks Chad,

      I love real estate and see it as a better and safer investment than stocks.

      I still see myself investing in stocks in the future.

      Waiting for another crash and will then throw some money into Vanguards S&P 500 Fund hehe

      Much success with your endeavors.

  11. km w

    In all investments or businesses, you gotta know your numbers.
    You cannot predict numbers ( Roi, risk) for stock investments- you can only predict oerfirnance based on past trends, and all it takes is one bad news day to reduce your portfolio value significantly. Not an issue if you are in for the long haul, but a problem if yiu need $ just when the market dives.
    In real estate, you control the numbers- or you should. If you are a newbie who doesn’t pay attention to the numbers in real estate, you can be burned just as badly in the stock market.
    The difference is with real estate, there is no excuse for you not knowing your numbers. Because ….
    You gotta know your numbers.

  12. Andrew Deveau

    Great Read, Early on I learn that with the stock market there is always some on the winning side of the trade and someone on the losing side of the trade. Sometimes and for a lot of different reasons you never know which side you are on until much later.

    I have really enjoyed and have benefited from being in full control of the real estate investments I have made, exactly to your point. When you buy stocks in a company you have no decision making powers and have to rely on the knowledge, skills and in some cases the luck of the organization and the people that are employed there.

    • Engelo Rumora

      Thanks Andrew,

      Even in real estate tho someone is on the “winning” side and the other person is on the “loosing” side.

      There are many distressed sellers out there that lost their A$$ as they didn’t know what they where doing.

      Well, I guess a happy first time homebuyer that loves the house thinks they are “winning”

      But in my opinion as I would never want to be bogged down in the same house for 30 years, they are actually loosing the freedom to move around freely.

      Control is very important to any investment. The more control you have the safer the investment is.

      As long as you know what you’re doing.

      Thanks again

  13. Tobias Madigan

    Also I currently live in California but I am from Toledo Ohio and have friends and family there, I currently am at the point where I want to invest in real estate and if you have any opportunities that would be good for me I am willing to listen . Would be fine with a place that breaks even or some cash flow after some repairs, but I am not in a position to buy with cash as I only have $40,000 saved.

  14. Tyler Chartrand

    yea i love the tangibility of real estate. when working as a cog for a global 50 company i saw people nearing retirement age who had 1/3 or more of their portfolios lost to the “great recession”. I do not trust the financial industry to do anything other than seek profits and serve big business

  15. Joel Galindo

    Hello Engelo,
    I am a real estate investor who currently has 5 rental properties and I am in the process of buying my first multi family unit (fourplex), I also have a day job, I work in a gold mine, I never knew much about investing in stocks until know, I am currently studying to become a stocks trader, I took a 3 day stocks seminar that change my whole perspective about investing in stocks, in the seminar I learned about many investing strategies but what I liked the most where the cash flowing strategies which you buy a stock and rented it out for monthly cashflow (covered call) and you can get between 3% and 5% monthly return, another strategy that I really like is called an iron condor and in the one you can make up to 15% monthly return and what I like most about those strategies is that they are conservative strategies where you have a high propability of success of up to 93%, I know that I will take me time to learn how to do all those strategies but I will keep learning and studying until I master them and I will also continue to invest in real estate and hopefully I can become financially free in one year.

  16. RAMON RODRIGUEZ on

    You make so easy to understand why I should invest in real estate instead of stocks. This is about results; tangible results. When running properly, with real estate I own the source of the investment. No one can take it from me, and it’s limiteless. It is like paving your own path and enjoying the fruit of your labors.

  17. Engelo,
    Please do not forget about stocks that invest in real estate REITs – Real Estate Investment Trust. I would argue that it is easier for a new investor to buy a stock REIT that invests in a particular area of the real estate where a fund manager with experience in real estate is picking the real estate to buy and sell. By following the chart of such stock, say for instance ARR (up over 19% in the last year) go to yahoo finance, type in the symbol and watch the daily price. If it is going up week after week and paying a good dividend, (ARR is yielding over 9% and pays the dividend monthly, this is like having rent payments) you bypass all the problems with real estate. Also you have instant liquidity to your money as you can sell and be out by selling the REIT, rather than hoping for a buyer of your property. Just another way to skin the cat.
    Thanks
    ckip

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