4 Reasons Why Real Estate is Better than Stocks

After 15 years of investing, I have found the 4 reasons real estate is better than stocks for building wealth and I’ll show you why.

Investing in properties is a sure thing. Investing only in stocks gets you a piece of paper which is not guaranteed and here’s why:

Why REI dominates real estate vs. stocks

1. LEVERAGE

Because apartments provide dependable income, an investor can use $250,000 to buy $1,000,000 worth of cash positive real estate. Stock investors can’t and shouldn’t use leverage when buying stocks. Leverage is the ultimate way to create wealth and in the case of apartment debt, unlike homeowner or consumer (bad) debt, the tenants pay off the mortgage over time. 

2. DEPRECIATION

It’s no secret that real estate offers the last refuge for tax write-offs. In one year of employing bonus depreciation laws, we can often write off a certain percentage of the real property value against other investment income. This is a huge advantage over stocks for high earners and probably one of the main reasons why Donald Trump doesn’t want to show his income tax returns. 

3. DEPENDABLE CASH FLOW

With banks paying people with savings accounts just over zero interest (.18%) and dividend yields of the once-classic dividend stocks being terminated or cut to almost nothing (GE, Disney, etc.) real estate offers consistent cash flow at 5-7% annualized which is about 50 times what banks are paying on a savings account right now. 

4. DURABILITY

Technology is killing off companies. While the average company in North America used to have a lifespan of 60 years, these days it’s not uncommon to see a big player disappear in a flash.

Large apartment complexes can produce income for decades and are very difficult to replace. This is due to regulations and their cost to rebuild.  While the media pours attention on the high flyers, the reality is that the stock market has more losers than winners.

Meanwhile, apartments in cities across Canada continue to provide cash flow and appreciate in value through both good times and bad times. 

The negatives of apartments versus stocks 

You can’t just go buy an apartment deal. To find a property, get funding and manage it requires an experienced investor resume, liquidity, property management skills and more work. This reduces the buyer pool.

Also the real estate investment is not as liquid. While one stock can trade a million shares in a minute, an apartment with long-term debt won’t trade for years. 

Maybe that’s why they last longer. 

Be great and Happy Investing in Real Estate!