Skip to Content

Real Estate vs. Stocks – Which Is the Better Investment

hand putting coin in jar

When thinking of ways to invest your money for wealth creation and a secure financial future, the two options you are presented with are usually real estate and stocks. Real estate and stocks have endured time to become the most trusted ways to invest money, according to Upkeep Media.

However, despite being widely accepted, real estate and stocks are very different investment forms. They do not function in the same way. As a result, seasoned investors often use them to meet very different investment objectives.

The question often gets asked is which is better: would you invest in real estate or stock? Opinions vary on this matter. But for us, the obvious choice is real estate. Here are reasons we would choose real estate over stocks any day.

Why Real Estate is Better Than Stocks

1. Real estate has intrinsic value

Real estate is an asset with its value rooted in actual human needs. It is necessary because it is tied to people’s and businesses’ shelter needs. Furthermore, the value of real estate is protected by the fact that land is a limited resource. While the supply of land is static, the population of people who need land grows constantly. This ensures that, unlike company stocks, which lose value with new technology or if a company goes broke, the value of real estate is stable. Real estate prices may fluctuate in the short term but always bounce back.

contract signing by a model house

2. Direct control of the investment

Unlike when you buy real estate, investors who invest in stocks do not have the means to control their investments directly. The assets are under the control of the company’s management, and if these managers are incompetent or dishonest, they can mismanage the business, causing the stock to lose value. That is not the case with real estate investments, where the investor is directly involved in the day-to-day decisions about their assets management. It gives real estate investors more power to determine the performance of their investments and control their financial destiny.

3. Ability to leverage

Real estate investing offers the kind of leverage not available when investing in stocks. While a mortgage lender may not loan you money to invest in its own stocks, it will happily lend you money to buy a property. That is a testimonial to the relatively low risk of investing in real estate versus stocks. With less than 20% of its market value, you can buy real estate and control the asset as if you owned it 100%. This is not possible when investing in the stock market; you must have 100% of the value of stocks to buy it.

4. Predictable flow of passive income

Real estate and stocks can both serve as sources of passive income. But real estate is superior to stocks in this regard. Unlike stocks, you don’t have to sell real estate to realize this income. Most stocks cannot produce income – dividends – on a steady basis like the rental income from a rental property. Besides, the property investor knows exactly how much income to expect from their property investments. That is not always possible with stocks. Lastly, an investor can increase their income by raising the rent on their property. You cannot do this with stocks.

5. Real estate always appreciates in value

Real estate prices always trend upward in the long term, even if they fall in the short term. The reason is simple. Housing is always in demand, and land is always in short supply. Moreover, real estate is versatile, and a property can be repurposed to serve new uses. As a result, you may expect the value of your property to appreciate over time. This increase in value can be because of market forces or forced appreciation. Investors can force an increase in the value of their property by renovating the building or repurposing it for more profitable uses.

business owner frustrated with inflation

6. Hedge against inflation

Because real estate prices move slowly in response to happenings in the economy, real estate doesn’t depreciate like stocks. The value of stocks can plummet in a few hours over news of events in a company or the nation. More importantly, the value of real estate moves in tandem with inflation. Where inflation erodes the value of stocks, it does not affect real estate prices or income from real estate. That’s because landlords can raise the rent on their income property to offset the general increase in the prices of goods and services.

7. Tax advantages

Property investors can benefit from a long list of tax advantages possible with rental properties. The government allows landlords to make tax deductions on several of the day-to-day expenses on their rental property. Property investors use these deductions to boost the profits from investment real estate. Smart property investors also use short/long-term capital gains to their advantage.

Lastly, building generational wealth with real estate is easier because, unlike company products, land and housing will remain valuable for the foreseeable future.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.

The Neighborly Done Right Promise

The Neighborly Done Right Promise ® delivered by Real Property Management, a proud Neighborly company

When it comes to finding the right property manager for your investment property, you want to know that they stand behind their work and get the job done right – the first time. At Real Property Management we have the expertise, technology, and systems to manage your property the right way. We work hard to optimize your return on investment while preserving your asset and giving you peace of mind. Our highly trained and skilled team works hard so you can be sure your property's management will be Done Right.

Canada excluded. Services performed by independently owned and operated franchises.

See Full Details