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Why Investment Properties Beat Stocks

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Despite the horrific performance of the stock market over the past decade for the average investor, many people still believe in the viability of equity investments.  Well, I’m here to tell you that the easy, sure-thing stock market of your grandfather’s era is gone forever.  It is no longer possible to blindly invest in stocks and realize a gain simply because the market as a whole is expanding.  Quite conversely, the market is not growing, it is trading sideways and I see no evidence that this trend will end anytime soon.  Sure, if you know what you are doing, you can make money from stocks, but less than 10% of stock investors have the time or knowledge necessary to make it work.

Conversely investment properties, when acquired as part of a long term investment strategy, have a myriad of benefits.  One is that you can finance real estate.  In other words, you can pay 20% or less of the property’s appraised value yet still gain 100% control over the asset.  This is known as financial leverage.  You can’t do this with stocks.

Another benefit is that your tenants will pay off your investment property mortgage every month, but YOU get to keep the accumulated equity in the property.  In other words, even though it’s your mortgage, you don’t have to make any of the mortgage payments yourself.  This is known as free equity.  You can’t do this with stocks.

Another benefit is that many of your expenses can be used as rental tax deductions, which can lower your tax liability and result in either a higher tax refund or a lower tax obligation.  Property costs like mileage, utilities, mortgage interest, landlord insurance, real property taxes, and anything else directly related to managing the property are all tax deductible.  And as an added bonus, you can also deduct property deprecation.  This type of “phantom deduction” is not available with stocks.

Those are the top 3 advantages that rental properties have over stocks, but there are many more as well.  For example: you can get monthly cash flow; you have more control over the results; demand will always exist because people will always need places to live; and values are guaranteed to appreciate in the long run.

As you can see, real estate investing crushes stocks in many ways.  Of course there are a few downsides as well – for example, no one really wants to be a landlord.  But the pros far outweigh the cons.  So, ditch the stock market and put on your landlord cap.  Ten years from now, you’ll be glad you did!

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