You might be tempted to put all of your eggs in one basket and invest in stocks only, but what about investing in real estate? You might be missing out by not investing in real estate since the average newly listed home has increased by 36%! 

If you had to choose between real estate vs stocks which should you choose? This might feel overwhelming and you aren’t sure which is right for you.

The good news is that there’s hope. Read this complete guide on a comparison between real estate vs stocks to help you choose today. 

Investing in Real Estate

One of the top ways to invest in real estate is to become a property owner. If you’re interested in becoming a property owner, this guide can show you how to become one for extra cash. 

The real estate market can be broken down into commercial or residential properties. Whether you’d like to rent out a property for extra money every month or flip and sell it is up to you. 

The Benefits of Real Estate Investing

When you invest, it’s a safer option with real estate. You have your 20% down payment, and then finance the rest of the property. If you try to invest in stocks with debt, it’s a much more risky option. 

Another benefit is that you might receive a tax advantage for buying a property. The tax deduction could be for mortgage interest that you pay over time. 

If you sell your principal residence, you might receive a tax break. Selling commercial properties might offer you the opportunity to avoid capital gains through a 1031 exchange. 

Speak to your accountant about how you could write off wear and tear on the property over time. Tax breaks could also be through depreciation as well. 

Real Estate Cons

Real estate tends to be much more expensive than stocks. There are also high transaction costs.

You aren’t guaranteed appreciation either. Real estate is more work than buying stocks.

Investing in Stocks

When doing a comparison of investing in real estate vs stocks, you’ll see that it’s easier to diversify your portfolio with stocks. While you could purchase a broad range of real estate properties with enough money and time, many don’t have both. 

The Benefits of Investing in the Stock Market

You could build a diversified portfolio for less time and money than real estate investing. Some options include exchange-traded funds, index funds, and mutual funds. 

Stocks also allow you an opportunity to have tax advantages in your retirement accounts. Consider buying shares through your employer-sponsored retirement account (401K). This can help your investment grow tax-free or deferred. 

Stock Market Cons

You might be tempted to invest through emotion which could impact your profit. For years some stocks could move sideways.

As you sell stocks, it’ll lead to larger taxes. The stock market can be more volatile than real estate as well. 

A Comparison Between the Two Over Time

There are many variables involved in the investment of either. This makes it difficult to track total returns. 

A good way to understand real estate investing is to take a look at how real estate investment trusts perform over time. There are real estate stocks that tend to show interest rate fluctuations. 

These fluctuations can occur over a short period of time. As you have an increase in interest rates, this hurts real estate investment trusts. This is a cause for concern since the Federal Reserve continues to increase interest rates over the years. 

Fluctuations Over Time in Stocks

During the recession and other crises, both the stock and real estate market can suffer. The stock market can be negatively impacted by economic, market, and inflationary risks. 

It could be caused by the company or even geopolitical reasons. Risks could also be due to the actions that you take. Tax revisions and regulations can cause an impact as well. 

If you have dividend-paying stocks, while they can offer you reliable income, you would need to have a large amount in a high-yielding dividend stock. This would offer you enough income for retirement without needing to worry about other securities. If you only invest in these, you might miss out on other growth opportunities. 

Fluctuations Over Time in Real Estate

If you decide to tap into the real estate investment markets, it’s vital that you do plenty of research first. Real estate can’t be cashed in fast and it isn’t something that you can do with little time. 

Whether you choose rental properties or flipping homes, there’s still some risk involved. If you rent out properties, you’ll need to deal with the tenants who live there as well as the cost for repairs. 

If you’re an investor, you might consider hiring a property manager to oversee repairs and other issues. This will reduce the time that you’ll spend on the property, but it’ll also reduce your profit. 

Are REITs Worth It?

REITs (investing in real estate investment trusts) are companies that own real estate such as hotels, warehouses, apartments, etc. This is a way for you to place money into real estate with companies that have years of experience. 

Real Estate vs Stocks

After exploring this guide, you should have a better idea of the similarities and differences between investing in real estate vs stocks. No matter what you choose, do plenty of research first before you begin.

Are you searching for even more real estate content? Be sure to check out our other articles on our site today!