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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....It's tangible
Compare returns.
This is more applicable to biggerpockets
True, this is for the Biggerpockets amateurs, but since we all are home right now with nothing to do, let's just be nice lol
good point. Kind of a dick move on my part. My bad OP!
Um....Yes
Often times, pre-tax stock/bond returns will look more attractive than pre-tax real estate returns, but tax implications make real estate more attractive, taxes considered.
What makes real estate so profitable, is the amount of leverage you have access to.
Hi, With stock markets crashing currently due to COVID-19, it is better to invest in real estate as the prices for investing is also low in some counties.
One word - diversification.
AND THE ANSWER ISSSSSS: IT DEPENDS!
Ppl really hate that answer lol
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.
Obv depending on your strategy, but the points mentioned above summarize it:
Leverage -- you can buy a lot more with a lot less. Thus your returns increase exponentially on paper. However, the minimum investments are usually quite high.
Diversification -- perhaps investing in industrial or medical offices at this time might be beneficial nowadays. However, I'd imagine it being more risky to invest instead of stocks (investing in a building that has 5 doctors offices vs. investing in J&J).
Tax Benefits -- the writeoffs are great, but really only work at their full scope if you're a Real Estate Professional (need to commit 750 hours a year to just real estate, physically impossible to do if you have a full time job). But even without this status, the reduction in taxable income and other tax incentives beats stocks.
I think the short answer is to determine if your real estate strategy will return an IRR or leveraged IRR better than what you expect the stock market to return over the target investment period. Lots of other variables to consider but I would start there.
"It won't disappear on the computer wires." ~Phil Robertson, Duck Dynasty Family Patriarch
best pitch for real estate investing ive ever seen
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