Stock Market vs Real Estate?

Should you invest in stock market or in real estate?

It’s a tough one and a question many people ask but there are literally so many people on both sides of the argument.

Personally I think real estate is better.

Let’s take a figure of $1 million USD invested in the stock market and in real estate.

If you invest it in a bunch of good stocks, the best ones out there you might stand to receive 3-4% a year in dividends. That means you are going to be getting $30,000 to $40,000 a year from your $1 million investment.

But what happens when the market crashes which it inevitably will? Well your money goes down, so let’s say now you have $700,000 now you are only getting 3-4% on that which is $21,000 to $28,000. Big difference right?

Okay so let’s say you don’t even take the money out and you compound it. Okay this is where compounding comes into play and yes this is a good thing but you’ll see that real estate is better.

Why real estate wins hands down…

$1 million invested into real estate can potentially buy $3-4 million by using buy to let mortgages.

The figures are actually quite astounding in comparison.

Let’s say I buy an apartment complex for $4 million and that means I had to invest 25% (my $1 million and finance 75%). These are normal figures.

So my $4 million apartment complex brings in 7% a year in rents which is $280,000 a year (WOW) but of course I need to pay my buy to let mortgage.

Buy to let mortgage rate might be 4% so I have to pay 4% on the $3 million that I borrowed.

4% of $3 million = $120,000

That means I am making $160,000 a year.

Of course I will have some expenses in that like maintenance, managing fees and more but the return on investment is huge.

But what if the market crashes?

Sure the value of the property might go down to $3.5 million or less but I am not selling it and even in a crash rents usually remain the same. In fact a lot of the time people who are home owners end up renting in recessions.

If a crash happens it doesn’t matter as I am not looking to sell.

Plus I will gain from capital appreciation over time and real estate goes up in value much quicker than the stock market historically.

I hope you liked this article as you can see real estate is a clear winner!

Overall ROI from real estate = 16% vs the stock market at 4%