REASONS WHY REAL ESTATE IS BETTER THAN STOCKS From Financial Samurai
1) You are more in control. Every physical real estate investment you make puts you in charge as CEO. As CEO, you are able to make improvements, cut costs (refinance your mortgage now that rates are back down), raise rents, find better tenants, and market accordingly. Of course you are still at the mercy of the economic cycle, but overall you have much more leeway in making wealth optimizing decisions. When you invest in a public or private company, you are a minority investor who puts his or her faith in management. Sometimes managers commit fraud or blow their companies to smithereens through unwise acquisitions. Nobody cares more about your investment than you.
In the Financial Markets you Can be A CEO By Filing for a Market To Market Corporation or LLC that could Lift the 3,000 yearly write of restriction, It Isnt physical so it has instant liquidity with either a stop loss or sale when it falls below a price or loss you may no longer be comfortable with, there are no overhead cost or improvement cost, just data fees usually 10-25 dollars a month, you can easily see the best stock movers, and you are not at the mercy of an economic cycle as you can short sale, set put options, so you make money in an up down and sideways market. if you don’t like a stocks CEO you can sell the stocks, or it may very well be irrelevant if you are a technical trader, furthermore in real estate, yes you have complete control with little or no oversight which may not always be a good thing, you are 100% responsible for your decisions without an advisory board so you pay for education or school of hard knocks.
2) Leverage with other people’s money. Leverage in a rising market is a wonderful thing. Even if real estate only tracks inflation over the long run, a 3% increase on a property where you put 20% down is a 15% cash-on-cash return. In five years you will have more than doubled your equity at this rate. Stocks, on the other hand, generate roughly 7% a year including dividends. Leverage also kills on the way down, so remember to always run the worst case numbers before purchase.
Trading Stocks may only provide 2:1 Leverage with accounts under 25K or 4:1 with accounts over 25K but the Futures Market can provide upwards of 150:1 leverage for example some futures brokers may let you control a NASDAQ contract with 500.00 USD to which the contract may be worth 90,000K so not only do you have dynamic leverage buy you can control your gains and losses without being in front of the computer by programming in Stop losses and Profit Takers. the Forex Market (Currency trading) in the US provides 50:1 leverage and options on stocks may provide 100:1 once you know your technical on one, you can more or less apply them to all, and you control your profits and losses as well as leverage almost down to the penny in those markets which are also much more liquid than Real Estate.
3) Tax advantageous. Not only can you deduct the interest on up to $1 million in mortgage indebtedness on your primary home, you can also sell your primary home for tax free profits up to $250,000 for singles and $500,000 for married couples if you live in the home for the last two of a five year period. If you are in the 28% or higher tax bracket, it behooves you to own property. All expenses associated with managing your rental properties are also deductible towards your income. Income limits do apply however, so make sure you don’t make much more than ~$166,000 a year total.
Similar advantages can be applied to a market to market trading account in the U.S. (more on this at a later time)
4) Tangible asset. Real estate is something you can see, feel, and utilize. Life is about living, and real estate can provide a higher quality of life. Stocks aren’t event pieces of paper anymore, but ticker symbols and numbers. When the world comes to an end, you can seek shelter in your property. Real estate is one of the three pillars for survival, the other two being food and shelter.
This is an opinion, I Am of the Philosophy of control everything and own nothing, unrestricted mobility and liquidity but I wouldn’t impose that point of view onto my readers. Furthermore there are stocks that follow different real estate indices. When the economy crashed after the housing bubble, there where plenty of homeless people and even more empty housed so in the regard to survivalship in America correlation did not lead to causation, the banks didn’t open up any empty houses for homeless people although good in theory.
5) Easier to analyze and quantify If you can calculate realistic expenses and rental income that’s all you really need when it comes down to valuing a piece of property. If you can borrow at 3% and rent out for a 6%+ yield, you’ve likely found yourself a winner. Real estate is immediately arbitrageable if you have the financial means to invest. There’s not only the cash flow component but the underlying equity component that helps investors build wealth. Stocks require you to trust what the company reports. There are countless ways for companies to massage their numbers to make things look better than they really are e.g. adjusting accounts receivables, adding one off gains, and using various amortization or depreciation strategies to name a few. Take a look at Zillow for the latest estimates, comparables, and sales history. It’s so easy to do research on real estate compared with researching stocks.
This is just absolutely not true, which is easier to analyze is again an option, Stocks analysis takes me 5 minutes in the morning, there are many indicators to satisfy your analyzing needs, as far as goal setting It is my option it is also much more simple, if your goal is to replace your income of 50,000 then divide that number by the months 12, 50k/12 is 4,166 divided by trading days (22) which equals 189.39 a day
Now lets say you have a 2,000 dollar Forex account X 50 applied leverage =100,000 at only 1% a week which is very achievable by most standards you are making 200 a day. so lets say you have 3:1 Reward to risk Ratio you may risk 150.00 a day to make 450.00 you loose 2 of 3 trades you make 300.00 and make 150.00 with a 33% success rate. point is you can customize those numbers to fit your goals usually with the help of a mentor or financial counselor. (you may contact me for such details to Dante@RubenDante.com) I do not personally offer 1 on 1 education or platform, service or money management but can point you in the right direction.)
In most of Furthermore the barrier to entry in the markets is in my opinion usually lower, there are few things you can do in RE with 2,000.
6) Less visible volatility. Your house value could be tanking and you would never know it since there isn’t a daily ticker symbol. During bad times, the utility of your home really helps soften the blow as you enjoy your home and create great memories. During the 2008-2009 downturn, I still got to enjoy my vacation property in Lake Tahoe 15-20 days a year even though its value was plunging. Meanwhile, looking at the TV or computer screen just made me mad. When your investment is less volatile, it’s much easier to stay the course and not sell at the bottom.
This is More or Less an opinion, I have never believed lack of visibility or transparency to be a good thing, and you can CAPITALIZE on volatility thru the use of stock Options during “bad times and good times” Many Billionaires were made short selling the housing bubble, .com bubble, Enron etc.
7) A source of pride. Making money for money’s sake is a pretty empty feeling after a while. Every time I drive by my rental properties I feel proud to have made the purchases years ago. I know that my money is working as hard as possible so I don’t have to. Real estate is a constant reminder that taking calculated risks over time pays off. There is an indescribable feeling nobody tells you once you’ve closed on your property. Even though the bank probably owns most of it in the beginning, you literally feel like the King or Queen of your castle. When you die, you can pass on your pride to your children or closest companions to let them create their own memories. Further, there is a “step-up” function where your heirs inherit the property based on the value of the property at the time of passing so that the cost basis is higher, which helps lower tax liability if the property is ever sold.
Again Complete opinion, although it It safe to say that Real Estate attracts a much more conspicuous crowd, I personally don’t need a house or rental properties to show for my personal validation, I will say mastering the psychological aspect of trading and evolving as a person with more discipline, more decisive and the humble gratification of mastering a skill that requires evolving as a person as you scale your position and make more money is priceless I have a well published quote “It’s not about the money, it is about becoming the person that can responsibly handle and maintain overwhelming an amount of money.”
8) More insulated. Real estate is local. If you’ve made a good decision to buy in an economically strong region, you will be more insulated from the national economy or the global economy. Spain blowing up is likely not going to affect the rent you can charge. Brexit actually helped drive mortgage rates lower as foreign investors bought safe US Treasury bonds. Look at prices in superstar cities such as NYC, Hong Kong, Singapore, London, Paris, and San Francisco. They fall the least, recover the soonest and gain the most. Of course, industries in your area could suddenly disappear and leave you broken as well.
Again, you can benefit from any market condition in the world of financial instruments, I think I’ve made that pretty clear by now. Trading and investing is a zero sum Game. for every dollar lost there is a dollar gained and shorting is a very profitable skill to have.”
9) The government is on your side. Not only do you get generous mortgage interest tax deductions and tax free profits, you get bailouts if you can’t pay your mortgage. The government also aggressively went after banks to force them to extend loan modifications to bad and good creditors. I even got a free loan mod recently to my surprise. Programs such as HARP 1.0 and HARP 2.0 are allowing folks without hefty down payments to get in on the action. There are plenty of non-recourse states such as California and Nevada which don’t go after your other assets if you decide to stop paying your mortgage and squat for months. When was the last time the government bailed individual investors out of their stock investments?
Uhm, this is case by case bases and I am an advocate of personal responsibility, there is a saying “plan your trade and trade your plan” or “If you Fail to plan you plan to fail” no one will bail you out if you blow your account, but you can always for the most part control your losses with stop losses, circuit breakers and margin calls, there are money people monitoring your actions, who are not the government, your direct access broker whos money you are using to leverage forex, options or futures is monitoring the exposure in your account, they will liquidate your position if it becomes too risky, and if you come with the thought of bankruptcy in mind getting into the financial markets I would advise you to stay away, you most likely wont fall into bankruptcy trading or investing but you have to have a pretty clear and methodical mindset and in trading and investing mindset is everything, you have to have your mindset right for your trading plan to be right, shouldn’t move your stop losses or take profit early or let losers run, you have to be disciplined you have to be decisive so yeah in this regard real estate may have more room for error, but bankruptcy is a much more likely possibility in my opinion.
thank you for reading and if you have any feedback please let me know I love other perspectives learning and evolving!
-Ruben Landon Dante