Today we're talking about the pros and cons of investing in real estate versus investing in stocks. Which one is for you? We talk about things like capital requirements, tax advantages, volatility, appreciation.
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Pros of the Stock Market:
1) It's a lot more liquid. When you're investing in stocks, you can get your money in and out within 3 business days usually - which is how long transactions take to settle.
2) You can transact on it every day if you want. For you investing junkies out there, it's really fun to buy and pick individual stocks, it's almost a fun hobby if you will, versus with real estate, unless you're a real estate magnate, it's going to be hard to invest in 100 different properties in a single day, versus if you're buying stocks on say, Robinhood, and you want to buy 100 different stocks in a day, you can.
3) It's less time consuming or less work
If you own a property, you'll likely have to hire a property manager, or manage it yourself. With stocks, you can literally buy ETFs or Index Funds that track the market and set it and forget it.
4) It's way easier to get into if you don't have capital.
Cons of Investing in Stock Market:
1) It can be much more volatile....
2) If you're overactive, you could do poorly in the market
The temptation to make a bunch of trades is always going to be there which makes it tough.
3) Its not super tax advantageous. You have to pay taxes on stocks in terms of short term and long term capital gains - which can vary anywhere from 0 to 15% to 37% based on your income bracket.
Pros of Real Estate:
1) Real estate is a great investment because you can get to intimately know the market really well, especially if you've grown up or have lived in your area for quite some time. In that way, the first pro is that if you know the market well, you can use this knowledge to gain an edge over outsiders.
2) Real Estate is typically less volatile. Real estate home prices tend to appreciate 3-4% a year.
3) is that you can literally live in your investment, which is a fun added feature, but there's no way you can live inside your Robinhood trading account.
4) owning real estate right now is better than ever with the average rate of a 30 year fixed mortgage being at all time lows, and by signing onto a mortgage, you get these tax advantages with the low rates.
5) owning real estate typically produces good cash flow if you have an investment property.
Cons of Real Estate:
1) It's hard to get into, requires a lot of capital → it takes a long time to build up enough money to put a down payment on
2) It's not a guaranteed return, you can get a rental property or a property yourself and something could end up happening to it, like a natural disaster, or a fire, or the foundation ends up failing after a few years of owning it.
3) It's much more hands on, which can be a bad thing. If you like a passive investment, real estate is not it unless you can hire a bunch of people to help you make it more passive.
4) It ties you down. Unlike stocks, where you can be wherever you are and your investment is growing, with real estate - you GENERALLY have to be close to your investment, in terms of proximity.
▶️ My name is Humphrey Yang, I've built multiple businesses and am passionate about Personal Finance. If you're trying to build a solid foundation of financial literacy, learn to invest, or become financially free - then I'm here for you! This channel cover topics like getting out of debt, managing money, building credit, multiple income sources, passive income, etc.
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Disclaimer: I am not a financial advisor, any investment commentary are my opinions only. Some of the products and services that appear on this channel are from companies that I have an affiliate relationship with, such as Robinhood, for which I recieve a small percentage made via those links, but it doesn’t cost you anything extra!
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0:00 Start Here
0:34 Current State of Affairs
1:53 Pros of Stocks
3:50 Cons of Stocks
4:47 Pros of Real Estate
7:14 Cons of Real Estate
8:47 What To Hold for Wealth? Stocks? RE? Both?