Hello, genuinely curious - under what circumstances would it be more optimal to invest in real estate rather than the stock market? Does it make a difference whether you are living in the property vs. renting it out? Would be nice to know taking taxation, maintenance costs, etc. into account. Thanks.
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AND THE ANSWER ISSSSSS: IT DEPENDS!
I'll be nice to the fella and break it down easily: - Leverage, while you can take leverage with margin accounts it's easier and faster to lose it all. In real estate you can easily put 20% down and your returns on equity are already x5 when going up. In stocks you usually put 100% down so your returns are not multiplied. - Taxes, depending on which country etc.. But generally there are tax advantages especially if it's your main home. You won't have to pay capital gains tax or up to the first $250k of profit for single in the US. You can deduct interest on your mortgage from your taxes so fantastic - You can put some sweat equity in the investment, on this one I argue a lot with people. But you don't work 24 hours a day at your job, and will always have some time to dedicate to your investment in real estate. So instead of being paid nothing to watch TV, you get paid nothing to take care of your real estate - something you can't do with stocks - Now what are you in it for? I always invested for yield. I never bought if I had below a 6% gross yield. As I was doing a lot of my management myself my NET was only mainly affected by taxes. If you buy a low yielding product and outsource the whole management and end up paying to hold the asset, that's not a good investment. Unless of course you are lucky and markets rally and you catch the capital appreciation upside.
Stocks are completely different - I can start talking about them, but it's comparing apples to oranges. The initial question is such an open ended question that it pisses me off to have even answered it partially. Pointless to compare the two. I have stocks and I have real estate. If I was young and just starting out I would focus on buying a home for the tax breaks and not having to pay rent. Rates are stupidly low so you are just repaying your capital instead of paying rent. Then for my second investment once the house is in the pocket it depends.