Real Estate vs Stocks

Let’s Run the Numbers... Which One Will Make You More Money?

Stocks

There are many ways to make money in the stock market. You can get lucky and have one stock explode and 10x your money in the stock market. However the possibility of that happening is extremely rare and even top financial advisors have trouble beating the average S&P 500. So for this argument were going to be looking at average return of the S&P 500 to see which asset is a better investment.

The average return of the S&P 500 over the past 10 years have provided a return of around 10%.

So if we invested $10,000, in ten years we can expect it to be worth $20,000.

Real Estate

Investing in Real Estate can generate three different types of income

Cash Flow - The profit you make from the difference in the rental income and the mortgage.

Appreciation - Over time the home will increase in value as surrounding homes go up in value.

Taxes- You can depreciate the home as a tax break against the rental income.

Now using the same $10,000 investment as before, we can buy a $300,000 home using an FHA loan. Live in it for one year and the rent it out.

You can then use what’s called a home equity line and use the money to invest into another property, generating you additional income and then continue to repeat the process and acquire more properties through a little investment.

 So in the same ten years Real Estate would exponentially out perform stocks. This makes real estate the clear winner in its ability to predictably generate wealth. One of the main reasons real estate is able to do this is because of its ability to utilize the power of leverage (using other peoples/banks money to make you money).

Verdict

Real Estate is the better asset choice when it comes to your return on your investment. However Real Estate comes with much more time and effort in order to achieve those results. While stocks are very straight forward and you easily can allocate a portion of your income towards it every month. The true answer is to invest in both to better diversify your portfolio.

Interested investing in Real Estate? We can Help

If you are interested in buying or selling a home you can submit your information below and we will provide you with a qualified real estate agent to guide you through the process.