What's better, stocks vs real estate investing

Stocks vs real estate

There’s not much information on stocks vs real estate. People either did one or the other. I’ve searched all over youtube and google and no straight answers. Well, I’ve done both and have been successful with both, earning over 100% returns over just a couple years. They both have good tax advantages compared to earned income.

With real estate, I got the properties by accident, due to family drama. The equity doubled in a very short amount of time, but it’s not straightforward to do a cash out refinance and get the money out. This is especially if you have a lot of student loans. They counted mine as 1% of the total loan per month as debt, which ends up being several thousand dollars. I don’t actually pay this amount, but this overestimation ruins my ability to take the equity out of the properties. Along with the slight negative cash flow when renting out the properties, I have yet to realize any of my real estate gains. I hope once more equity builds, I can feel better about these “investments.”

Expected long term gains in real estate: 25% annually using Refinance Forever (Refi till you die) method. If you have $1 million in properties with $200k down, you can expect $100k per year.

Real estate works better than stock investing for vast majority of people as the vast majority of people. There are far less variables. You can make money on any house if you hold long enough. You are less tempted to buy high (let's say after watching Tesla stock go up on the news every day for a whole year), then investing and seeing the stock plummet as others take profits. Then you get scared and sell the stock cheap, when you should have held onto it for the next run. In real estate, it's much harder to buy and sell. It's slow and expensive. Thus your impulses are under control due to these limitations. Real estate is much easier to evaluate than a stock. You can hire an appraiser or simply look at Zillow. You know the inherent value of the house and are unlikely to suddenly sell it if it goes down 2% on Zillow.

The advantage of stocks for me is liquidity. If you are a good stock picker, you can get the same 25% annual returns as in real estate, but you can use that money any time. You don’t even have to sell your stocks. You can also use borrowed money (on margin) for your living expenses, kind of like a HELOC. For me, if I add margin to stock investing, I can get 50% yearly (on average) returns in a bull market. Some of my stocks provide a small dividend which helps pay down the margin.

Final verdict. Stocks are better as they can earn the same returns but with way better liquidity. The caveat is that for most people, real estate gives better returns due to it being full proof and with high leverage with the typical 20% down mortgage. Most stock pickers are terrible and end up actually losing money. Even hedge funds have absolutely terrible returns. Stock investing requires a good temperament and having the right tendencies. You need to have a certain talent. Stocks have much more volatility and when your account goes down quickly you need to control your impulses.