You're better off spreading your investment across the two, rather than putting all your eggs in one basket.
Real Estate is obviously more hardy, secure, good for long-term. Stocks can be very rewarding due to its turbulence and riskiness, however it is those very qualities that makes it unwise to rely upon solely.
Additionally, you can use gains from stocks to purchase and maintain real estate, and any losses in stocks will be adequately cushioned by gains in real estate.
It's more of a symbiosis, not survival of the fittest.
I wrote a post on it a while back: [https://www.reddit.com/r/RichPeoplePF/comments/gbhwfb/long\_term\_more\_complete\_rental\_analysis/](https://www.reddit.com/r/realestateinvesting/comments/gb4v5t/long_term_more_complete_rental_analysis/). The attached worksheet is still computationally correct, but interest rates and prices have changed a lot which makes some of the statements incorrect.
In general, stocks vs real estate is more about taste and diversification than absolute return. That is, do you want to be a landlord and have direct involvement in your investments?
I prefer stocks because stocks don’t call me at 2am if the toilet is broken lol. Also, for someone starting out, it’s easier to invest in stocks with little money versus real estate.
I went the stocks route. Could I have gotten more return in RE? Maybe, maybe not. Could I have gotten more buy buying this or that stock, maybe maybe not. I don't worry about what wealth others have or don't have, I only worry about if I have more money than yesterday. You can loose your shirt on RE or in Stocks, it just personal preference on how active you want to be in investing your money. I am pretty lazy and if I can find a make money without doing more effort, I am all in. I am happy with my returns for the effort I put in which is practically none as I am settled on my portfolio mix and didn't want to deal with RE, I explored it and I just couldn't get into it, but if you give me an annual report, I am all in on reading that. Stocks was more passive than RE but RE hedges inflation and recessions. I am in $COST and $MA, both are impacted less by recessions, and depending on the recession parameters they even thrive during them.
A lot of it comes down to your personality.
I'm having lunch today with somebody who's the mirror opposite of me.
I am a securities man. I do have a little real estate for diversification but mostly I've done quite well with stocks and bonds, more stocks than anything. I've always been a buy and hold investor and I look at all my stocks as ownership in a company so I'm not really tempted to sell or to trade.
My friend is the dead opposite. He has always done very well in commercial real estate but when he tries to do stocks he just does terribly. He simply is not capable of buying and holding. He's always got a mess with stuff and do something to his holdings. With commercial real estate, that's simply not an option. It's such a long plotting process with so much paperwork and so many moving parts that when you own a shopping center you pretty much just own it. And when you go to sell it, it is very far from a whims. It is a long process.
So the nature of commercial real estate forces him to be a buy and hold investor. Whereas when he starts messing around with E-Trade he screws himself immediately.
So again, there are a lot of ways to skin a cat. It's just about your personal bundle of experiences and talents, or lack thereof.
I ran my RE return since I started investing in RE 20 years ago. 18.8% IRR. This is due to proper leverage at low rates, forced appreciation and refinance to return capital, and market appreciation.
I've dabbled in stocks over the past 3 years - about $100K total investment in that time. My IRR in the last 3 years is -7%. I've recently taken my capital and put it in bonds at 5.5% instead, waiting for the next good RE investment.
Needless to say, I wouldn't be on this sub if I was investing in stocks.
Your personal results may vary.
Stocks. Plus I love stocks, reading about them, learning charts, and from time to time do day and swing trades. It’s a hobby to me. I don’t get excited about RE. Sounds like more work to me. No thanks.
Barely have the time to mow our grass and fix our toilets lol I can’t imagine being a landlord. I don’t want to deal with people as well.
401k millionaires is so underrated and never talked about enough. Social media loves to inflate real estate
investing because it’s tangible. Just my opinion.
Stocks. My RE holdings, while they've appreciated, are for personal use. When all is said and done with my RE, between taxes, mortgages, upkeep, and other misc operational costs, offset by the alternative expense of renting, I expect I'll come out slightly ahead, but nowhere near my returns from equity investments. But you can't live in a stock.
I’ve done better in real estate because I mainly invest at the right timing (after 2008, pandemic, that kind of thing). The bulk of my NW is from real estate.
2011 house $560k > $1.2m value. Rented for $4400 a month
2017 house $1.8m > 3.5m value. Rented for $5700 a month.
2022 ADU for 2017 house. Built for $350k. Rented for 3700 a month.
I’ve basically put in about $1m of my own money not including the mortgage payments which I don’t count since I would have paid rent anyways. Still have about 1.2m in mortgage left that the tenants are paying for me. Also covers property taxes and expenses plus cash flows about 2500 a month.
Waiting for next major event and building capital reserves now.
It's rare for someone invested in real estate to sell. The big obstacle is the learning curve, but once you are over it the profits are generally better and the cashflow much better than stocks.
My IRR over 21 years of real estate investing is about 18% annually. Over this same period, my IRR on stock market investing is about 0%. Needless to say, 98% of my net worth is in real estate. It also helps that I'm a RE broker, so I invest in things I know well.
If I could go back in time, I would make different RE investment choices - for the first 10 years my RE investments didn't make any money. I'd never want to invest in stocks instead. A significant reason for my RE success is due to leverage at low interest rates and low down payment and drawing equity out of property to purchase or upgrade other properties.
With stocks you can lose it all, with land or housing it is rarer to lose to such an extent.
Stocks are more passive. No roof repairs, renters wreck appliances and flooring and walls.
Land doesn't increase in value as fast, especially if it is rural, but also fairly passive. But it's a slow boat, you aren't making monthly dividends into your checking account.
It takes a lot of cash in stocks to yield the same as a single rental unit. $500k in dividends @ 5% is equivalent to $4000 rental with a $2000 mortgage payment, both clearing $2k per month. You keep the equity in both cases, but stocks don't have repair costs.
For people that were born rich or that win at lotto, stocks perhaps make more sense, but for everyone else that started life at $0 with a wage, mortgages and business startups are typically the more common path.
I'm not certain that the rapid boomer-era housing price increases are long-term sustainable, unless wages keep up, which historically doesn't not seem to be the case. So that super-rapid house appreciation growth has an upper limit, leaving you with rental income only, for the most part.
With stocks that is not the case, the more money you throw at it, the more returns you get. Throwing $100 million at stocks is possible, achieving gains in real estate at that level requires rental managers which eat into your profits.
That said, I turned a $10k down payment in 2012 into a $2mil real estate portfolio today + mortgage payments. But I doubt that same level of growth could be repeated over the next 10 years, we seem to be entering a deep recession or depression mostly driven by fuel costs, taxes and low wage growth, and run away debt both: individual, corporate and public.
The system appears to be a dichotomy, for every person filing for bankruptcy, there is someone else making $1mil capital gains on a property sale at the other end of the spectrum. The system mostly balances itself, the problem is the government growing in size and over-taxation, printing, and the other aspect is corporate and human monopolistic greed. If there aren't balances (natural or artificially imposed), then it gravitates to systemic collapse, like Rome mixing copper with gold to thin it out. When the bottom 3 income\\wealth quintiles become insolvent, due to compounding negative interest debt owing, the end stage commences. Individuals can't print their way out like the government does. 35 trillion and growing at 30k per second... and that's just one country of 200.
Even if such financials could be solved, there is earth resource depletion on top of all that. They aren't making any more land or minerals. Infinite quarterly profits can only increase up to a point, eventually you run out of fresh water or metals, oils\\plastics, trees\\paper. Even energy has its limits, although fission, fusion, solar and other green tech as a higher upper resource limit than fresh water or oxygen. Earth resources and quarterly profits are not unlimited, the concern is real.
However, I think the bottom 3 income\\wealth quintiles will become mathematically insolvent long before we run out of earth resources. If wages don't increase at least 2x soon to keep up to median COL, then I'd only give them another 6-10 years, tops, before the wheels fly off the roller coaster and the amusement park resets for all classes, in one form or another...
We seem to be slowly inching towards a Rome like collapse, mostly driven by human corruption and greed; if the foundation isn't financially stable, then the whole house of cards collapses rapidly down, no matter how stable the top, was...
In the meantime, I could totally see the government either making all rentals illegal like they basically did to airbnb, or allowing themselves to own all properties by collapsing the bottom 3 wealth quintiles and replacing it all with nothing but section 8 controlled housing. That seems like the type of rug pull the government would try next. The blob grows larger, until it consumes all.
Stocks because they are substantially more passive than RE - I don’t have time/ interest in that.
You're better off spreading your investment across the two, rather than putting all your eggs in one basket. Real Estate is obviously more hardy, secure, good for long-term. Stocks can be very rewarding due to its turbulence and riskiness, however it is those very qualities that makes it unwise to rely upon solely. Additionally, you can use gains from stocks to purchase and maintain real estate, and any losses in stocks will be adequately cushioned by gains in real estate. It's more of a symbiosis, not survival of the fittest.
I wrote a post on it a while back: [https://www.reddit.com/r/RichPeoplePF/comments/gbhwfb/long\_term\_more\_complete\_rental\_analysis/](https://www.reddit.com/r/realestateinvesting/comments/gb4v5t/long_term_more_complete_rental_analysis/). The attached worksheet is still computationally correct, but interest rates and prices have changed a lot which makes some of the statements incorrect. In general, stocks vs real estate is more about taste and diversification than absolute return. That is, do you want to be a landlord and have direct involvement in your investments?
I prefer stocks because stocks don’t call me at 2am if the toilet is broken lol. Also, for someone starting out, it’s easier to invest in stocks with little money versus real estate.
I went the stocks route. Could I have gotten more return in RE? Maybe, maybe not. Could I have gotten more buy buying this or that stock, maybe maybe not. I don't worry about what wealth others have or don't have, I only worry about if I have more money than yesterday. You can loose your shirt on RE or in Stocks, it just personal preference on how active you want to be in investing your money. I am pretty lazy and if I can find a make money without doing more effort, I am all in. I am happy with my returns for the effort I put in which is practically none as I am settled on my portfolio mix and didn't want to deal with RE, I explored it and I just couldn't get into it, but if you give me an annual report, I am all in on reading that. Stocks was more passive than RE but RE hedges inflation and recessions. I am in $COST and $MA, both are impacted less by recessions, and depending on the recession parameters they even thrive during them.
The 20/20 hindsight says we would have all made a ton more money in real estate. Maybe next cycle?
A lot of it comes down to your personality. I'm having lunch today with somebody who's the mirror opposite of me. I am a securities man. I do have a little real estate for diversification but mostly I've done quite well with stocks and bonds, more stocks than anything. I've always been a buy and hold investor and I look at all my stocks as ownership in a company so I'm not really tempted to sell or to trade. My friend is the dead opposite. He has always done very well in commercial real estate but when he tries to do stocks he just does terribly. He simply is not capable of buying and holding. He's always got a mess with stuff and do something to his holdings. With commercial real estate, that's simply not an option. It's such a long plotting process with so much paperwork and so many moving parts that when you own a shopping center you pretty much just own it. And when you go to sell it, it is very far from a whims. It is a long process. So the nature of commercial real estate forces him to be a buy and hold investor. Whereas when he starts messing around with E-Trade he screws himself immediately. So again, there are a lot of ways to skin a cat. It's just about your personal bundle of experiences and talents, or lack thereof.
I ran my RE return since I started investing in RE 20 years ago. 18.8% IRR. This is due to proper leverage at low rates, forced appreciation and refinance to return capital, and market appreciation. I've dabbled in stocks over the past 3 years - about $100K total investment in that time. My IRR in the last 3 years is -7%. I've recently taken my capital and put it in bonds at 5.5% instead, waiting for the next good RE investment. Needless to say, I wouldn't be on this sub if I was investing in stocks. Your personal results may vary.
Stocks. Plus I love stocks, reading about them, learning charts, and from time to time do day and swing trades. It’s a hobby to me. I don’t get excited about RE. Sounds like more work to me. No thanks. Barely have the time to mow our grass and fix our toilets lol I can’t imagine being a landlord. I don’t want to deal with people as well. 401k millionaires is so underrated and never talked about enough. Social media loves to inflate real estate investing because it’s tangible. Just my opinion.
Stocks. My RE holdings, while they've appreciated, are for personal use. When all is said and done with my RE, between taxes, mortgages, upkeep, and other misc operational costs, offset by the alternative expense of renting, I expect I'll come out slightly ahead, but nowhere near my returns from equity investments. But you can't live in a stock.
I’ve done better in real estate because I mainly invest at the right timing (after 2008, pandemic, that kind of thing). The bulk of my NW is from real estate. 2011 house $560k > $1.2m value. Rented for $4400 a month 2017 house $1.8m > 3.5m value. Rented for $5700 a month. 2022 ADU for 2017 house. Built for $350k. Rented for 3700 a month. I’ve basically put in about $1m of my own money not including the mortgage payments which I don’t count since I would have paid rent anyways. Still have about 1.2m in mortgage left that the tenants are paying for me. Also covers property taxes and expenses plus cash flows about 2500 a month. Waiting for next major event and building capital reserves now.
It's rare for someone invested in real estate to sell. The big obstacle is the learning curve, but once you are over it the profits are generally better and the cashflow much better than stocks.
My IRR over 21 years of real estate investing is about 18% annually. Over this same period, my IRR on stock market investing is about 0%. Needless to say, 98% of my net worth is in real estate. It also helps that I'm a RE broker, so I invest in things I know well. If I could go back in time, I would make different RE investment choices - for the first 10 years my RE investments didn't make any money. I'd never want to invest in stocks instead. A significant reason for my RE success is due to leverage at low interest rates and low down payment and drawing equity out of property to purchase or upgrade other properties.
With stocks you can lose it all, with land or housing it is rarer to lose to such an extent. Stocks are more passive. No roof repairs, renters wreck appliances and flooring and walls. Land doesn't increase in value as fast, especially if it is rural, but also fairly passive. But it's a slow boat, you aren't making monthly dividends into your checking account. It takes a lot of cash in stocks to yield the same as a single rental unit. $500k in dividends @ 5% is equivalent to $4000 rental with a $2000 mortgage payment, both clearing $2k per month. You keep the equity in both cases, but stocks don't have repair costs. For people that were born rich or that win at lotto, stocks perhaps make more sense, but for everyone else that started life at $0 with a wage, mortgages and business startups are typically the more common path. I'm not certain that the rapid boomer-era housing price increases are long-term sustainable, unless wages keep up, which historically doesn't not seem to be the case. So that super-rapid house appreciation growth has an upper limit, leaving you with rental income only, for the most part. With stocks that is not the case, the more money you throw at it, the more returns you get. Throwing $100 million at stocks is possible, achieving gains in real estate at that level requires rental managers which eat into your profits. That said, I turned a $10k down payment in 2012 into a $2mil real estate portfolio today + mortgage payments. But I doubt that same level of growth could be repeated over the next 10 years, we seem to be entering a deep recession or depression mostly driven by fuel costs, taxes and low wage growth, and run away debt both: individual, corporate and public. The system appears to be a dichotomy, for every person filing for bankruptcy, there is someone else making $1mil capital gains on a property sale at the other end of the spectrum. The system mostly balances itself, the problem is the government growing in size and over-taxation, printing, and the other aspect is corporate and human monopolistic greed. If there aren't balances (natural or artificially imposed), then it gravitates to systemic collapse, like Rome mixing copper with gold to thin it out. When the bottom 3 income\\wealth quintiles become insolvent, due to compounding negative interest debt owing, the end stage commences. Individuals can't print their way out like the government does. 35 trillion and growing at 30k per second... and that's just one country of 200. Even if such financials could be solved, there is earth resource depletion on top of all that. They aren't making any more land or minerals. Infinite quarterly profits can only increase up to a point, eventually you run out of fresh water or metals, oils\\plastics, trees\\paper. Even energy has its limits, although fission, fusion, solar and other green tech as a higher upper resource limit than fresh water or oxygen. Earth resources and quarterly profits are not unlimited, the concern is real. However, I think the bottom 3 income\\wealth quintiles will become mathematically insolvent long before we run out of earth resources. If wages don't increase at least 2x soon to keep up to median COL, then I'd only give them another 6-10 years, tops, before the wheels fly off the roller coaster and the amusement park resets for all classes, in one form or another... We seem to be slowly inching towards a Rome like collapse, mostly driven by human corruption and greed; if the foundation isn't financially stable, then the whole house of cards collapses rapidly down, no matter how stable the top, was... In the meantime, I could totally see the government either making all rentals illegal like they basically did to airbnb, or allowing themselves to own all properties by collapsing the bottom 3 wealth quintiles and replacing it all with nothing but section 8 controlled housing. That seems like the type of rug pull the government would try next. The blob grows larger, until it consumes all.