Return on Investments – Stocks vs. Real Estate

Return on Investments - Stocks vs. Real Estate

The above is a graph published in November, 2011 by MSN Money.

In case you didn’t already know, I love real estate. But why do I pick real estate over stocks? A number of reasons including:

    1. Leverage If you have $100,000, you can buy $100,000 worth of stocks. Or, in real estate, you can leverage your money meaning, if you have $100,000, you can put 10% down ($10,000) on ten $100,000 houses and have control over $1 million worth of real estate. You have mortgages on those properties, yes, but put in a tenant and they’re the ones who pay those mortgages over time for you.
    2. Discount – Real estate can be purchased at a discount, especially in our current economy. There are properties, in any economy, that can be purchased at significant discounts off true market value. Stocks cannot be purchased at less than their current market rate.

  1. Performing assets When you sell stocks, you are left with fewer performing assets diminishing your potential for creating a return or generating income. With real estate, rather than selling your asset, you can refinance or get a home equity loan. This allows you to take cash out of the property yet your asset remains giving you tax benefits, appreciation and realizing equity growth year after year.
  2. Control – When you own real estate, the decisions are yours – you control the asset.  You can do updates, upgrades, additions, landscaping, paint, a whole variety of things to increase the value. There are plenty of things in your control that directly influence the value. With stock, you have no control. You cannot vote on how the company is run; you can only pray that the people in charge make the right decisions. With stock, you’re completely at the mercy of the market and the company management as to what the value is.
  3. Appreciation – With real estate, in addition to market appreciation, you have forced appreciation (i.e. renovations), tax advantages, leverage advantages, and the fact that you can buy at a discount. We haven’t seen much market appreciation recently but, historically, real estate has gone up in value and it will again. The population continues to increase and no more real estate is being made.
  4. Tangible asset – When investing in stocks, do you really have a true understanding of the companies in which you’ve invested? Look at Enron as an example; even the employees didn’t know what was truly going on. With real estate, you have a fixed asset that you can see, touch and improve.
  5. Tax advantage – With stocks, you pay taxes on any profits when you sell. With real estate, there are tremendous tax advantages allowing enormous tax savings the entire time you own and, when structured properly, real estate can be passed onto heirs with no tax consequences.
  6. Income – Buying and holding for the long term is not the only way to make money in real estate. You can buy today, fix up and sell (flipping), all within a matter of months at a large profit if you know how. Those huge short term returns are rare with stocks, especially consistently year in and year out.

Where and how do you invest?

This post has 2 Comments | Would you like to leave a comment?


  1. Thank you for your comment!

  2. I would still conclude that bond investments as well as stock investments are somewhat dangerous right now. In fact at any given time, there is some level of risk associated with any investment. It’s the nature of investing. Risk is a funny thing. When the stock market is rip roaring, most everyone is willing to take a little more risk than they really should, and when the market is depressed, most are so fearful that little to no level of risk can be tolerated. Neither of these extremes makes for good investing. Thanks for the post.

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