Real Estate VS Stocks, and the Winner is…

We have a very evenly matched competition and we will take several factors into play to determine the winner.

Recently, I read an article on this topic from bigger pockets that looked at the pros and cons of each of these options from a strictly analytical and data-intense approach in an effort to answer this question.

You can find the article here:

However… before we go into the rest of the email let’s lay some ground rules for the face-off:

First off, if you just look at the past 45 years, it is important to understand that both the stock market and the real estate market have treated the patient investor VERY well.

Over the 45 years from January 1978 through December 2022, S&P 500 averaged an impressive 11.53% return. That includes both dividend income and price gains.

Residential real estate is much more difficult to measure because the data for rental properties is nowhere near as accurate as the stock market data…However in the past decade it has gotten much better. When factoring in appreciation and rental income, the returns over the same period of time are between 10.5 – 11.7% depending on several variables such as financing/leverage.

A team of economists from the University of California, Davis, the University of Bonn, and the German central bank set out to answer these questions by analyzing a stunning amount of data collected over a 145-year period of time.

“The Rate of Return on Everything, 1870-2015.” In it, researchers looked at 16 advanced economies over the past 145 years to find what offers the best return on investment.

The amount of time and effort invested in finding the answer to the best return on your investment had to be daunting but luckily for us, we can sum up their findings which basically said that residential real estate investments came out as the best investment with roughly 7.05% annual return vs stocks that were close behind at 6.89%.

If we just took the answer to that study, we would conclude that it doesn’t matter if you put your money in the stock market or real estate…It ends up being roughly the same return.

Oh if only life were that simple, right?

Let’s take a look at other factors that play into your decision to invest your hard-earned money:


High Risk / High Reward:

To quote the bigger pockets article:

Stock investments are high-risk, high-return. This one gets a little more interesting, but a quick look at how stock markets have gyrated for the last century — up 29 percent one year and down 18 percent the next — should disabuse anyone of the notion that stock investing doesn’t come with high volatility and risk.

Rental properties: low-risk, high-return:

Throughout modern history, residential real estate investors may actually boast the best return on investment, thanks to its extremely high rate of return with low risk. Take a look at volatility for real estate versus stock for the past 145 years:

Now, check this out…Compare the stability in home prices to the volatility of stock prices:

Low Risk / High Reward:

-Real Estate for the win

Volatility: Low volatility with constant appreciation every single decade:

-Real Estate once again for the win.

Liquidity: Here is another factor everyone must consider when investing their money. Real Estate is notoriously difficult to liquidate. Stocks on the other hand are on the opposite side of the spectrum.

-Stocks for the win

Barrier to entry: Anyone can set up a stock account in a few minutes and link their bank account and start investing immediately with $5 to start.

Real Estate, while it has come a very long way with so many new lending options available and crowdfunding on some platforms requires much more capital to begin investing. Typically 10% is the minimum for an investment property loan so for a $150,000 home, you would need a minimum of $15,000 to buy that property.

-Stocks for the win

Leverage: Without any question, real estate investing wipes the floor on stock investing when you factor in the ability to leverage sometimes up to 100% of the purchase price on an investment that could be worth hundreds of thousands of dollars or more.

We all understand that is is much more difficult to grow a portfolio of rentals by saving up ALL of the cash to buy ONE property vs buying 10 properties with that same amount of money. Leverage…when done correctly and with prudence can take you from $0 investment portfolio to an 8 figure portfolio in a couple years.

-Real Estate for the win

Control: How many of you know a CEO personally for a fortune 500 company? Of those that do, how many of you have the ability to impact the decisions that person is making for that company he is in charge of running? My guess is zero.

How many of you make the decision on which company will manage your rental properties or who you hire to handle repairs when necessary or which bank will lend you money on the property? YOU have control…And you have control over a tangible & real physical asset.

-Real Estate for the win

Diversification: Similar to the liquidity conversation, the edge clearly goes to stocks. It has never been easier to diversify your stock investment portfolio. Plus with mutual funds you can own fractional shares in thousands of stocks. This is a major advantage and is a big reason why it would be wise to always invest some of your money in mutual funds.

-Stocks for the win

TAXES: Let’s save the best differentiator for last shall we? If you want to know what the politicians love to invest in more than anything, read the tax codes…You will find a lot of goodies in there for people who decide to invest in real estate.

In fact, you may recall not so long ago a real estate mogul lived in the White House and one of the first thing he did in the first year of office was passing some laws that significantly reduced taxes on…You guessed it…Real Estate Investors!

What other investment out there allows you to take DEPRECIATION for tax purposes on an APPRECIATING asset? Sure it makes sense to depreciate farm equipment, vehicles, office supplies, etc…Those all have a short shelf life and are worth less as tech improves and they slowly break down…Real estate is different in that it is like a fine wine (I don’t drink wine but I have been told it gets better with age). Real Estate may not necessarily get better with age but rather it stays ahead of inflation each year and holds it value over time.

and the winner of this match goes to…


With Real Estate I am able to use leverage through creative finance structuring to acquire tens of millions of dollars worth of assets that are LOW RISK / HIGH REWARD, with annual double-digit returns that I have the ability to improve and control, all while enjoying the benefits of a significantly lower payment to send to the tax man all make real estate the greatest investment I can put my money into.

ad***@pr**********.com" title="">Email me what you think! Stocks or real estate, which is best for you?

I Need a 20% Downpayment to Buy a Rental Property, Right?? Benefits of investing in real estate over other investment strategies.

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