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Real Estate or Stocks: What Has Better Return on Investment?

01 June, 2017

Real Estate or Stocks: What Has Better Return on Investment?

When was the last time you stopped to carefully re-evaluate the performance of your investment portfolio, including brick-and-mortar assets like real estate? Sitting down for a typical annual review with your financial advisor to go over fund allocations and stocks is important, but it’s equally essential to talk about other types of portfolio diversification, including secure assets like real estate.



What is Real Estate Investing?

There are a wide variety of ways to invest in real estate – from buying REITs and FIBRAs to owning a private residence, vacation home rental, retail spot, office space or apartment building, the options seems endless. For our purposes, we’re going to look at real estate investing vs. the stock market as a whole, then later we’ll drill down and take a closer look at one of the most lucrative ways to invest in real estate that are available right now – income-producing, turnkey vacation home rentals.

But let’s not get ahead of ourselves… First, let’s take a look at how the traditional investment markets stand up to real estate over time:

Real Estate or Stocks: What Has Better Return on Investment?

S&P 500, DJIA Versus Real Estate Investing

At first glance, it might seem like the S&P 500 or Dow Jones Industrial Average would provide the better investment options when compared to real estate, but that’s only if you don’t include the right variables. For example, if you also take inflation into account, as well as the annual cash flow from the real estate investment property, you’re getting a much clearer reading. This also brings us to another important point: Why did you invest in real estate to begin with?

If you did your homework, you would probably not answer “appreciation”. Although the property should definitely appreciate – which means you are making money every year just for owning it – simple growth by appreciation should not be the only focus of most brick-and-mortar real estate investments, and is best left to buying land in the path of growth that is expected to appreciate rapidly and be purchased for development, also known as land banking. So unless that’s your goal, look for income-producing properties that provide strong return on investment, such as a turnkey vacation home rental or multi-unit property.

Also Read:

Why Real Estate Offers a Better Return on Investment

Vacation Homes Can Be Income-Producing Rental Properties

How to Use Your IRA to Buy Real Estate the Right Way

Compare the annual returns from the Dow and S&P 500 with real estate that provided a conservative 10% ROI over 10 years between 2005-2015: 

Annual Returns - Real Estate vs Down S&P 500

Here, real estate can be seen to provide a steady stream of growth for portfolios in the form of rental income, while the stock market displayed a high level of volatility.

Real Estate Investment Strategies That Work

Over the last 10-plus years, smart investors have done very well, thanks to proven real estate investment strategies, but regardless of where the housing cycle is at any moment in time, buyers can take comfort in the proven fact that it’s always possible to make money in real estate… If you know where to look!

Most financial advisors won’t tell you this because it doesn’t benefit them to do so, but brick-and-mortar real estate and land banking are two of the safest investments in the world, provided the location is carefully selected and in high demand. Still, finding the right property can be challenging, even for experienced real estate investment companies, especially since the rental market has become so competitive in recent years. Ideally, look for a property you can actually afford, with a maintenance plan that makes sense, that will provide ongoing ROI and strong rental income.

Real Estate or Stocks: What Has Better Return on Investment?

Why Vacation Home Rentals?

Buying a turnkey vacation home rental in a thriving destination is one of the best proven strategies for strong return on investment, offering all of the ingredients for real estate investment success. Consider investing in real estate in Mexico’s Riviera Maya, for example. New developments in Playa del Carmen, Puerto Aventuras and Tulum are opening up a world of possibility, offering 8-14% ROI and a signature “No Worries No Hassles Ownership” plan that ensures the best rental exposure, prompt maintenance responses, timely payments wired directly to owners’ bank accounts anywhere in the world and – best of all – your very own Caribbean vacation home.

Even better, it’s easy to buy real estate with a Self-Directed IRA account, which will help diversify your investment portfolios and provide a steady avenue of growth that is not tied to the whims of the traditional stock market, as well as an all-important hedge against inflation. Just make sure to work with an experienced real estate investment company that can help you understand all the rules of buying real estate with an IRA, as well as the guide you through the process of buying a vacation home abroad.

Are you considering buying an investment property? Tell us how we can help – leave a comment and let’s chat!

Click the link below to learn more about how investing in real estate can help you beat the stock market and realize greater return on investment!

Which is the Better Investment? Real Estate or Stock, Discover why real estate beats the stock market

Topics: Real Estate Alternative Investments