Is It Better to Invest in Stocks or Real Estate?

Jul 3, 2021 4 MIN READ

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Why I chose to invest in real estate as opposed to stocks or many of the other options out there for investing my personal finances. Personally, I like the opportunity that’s involved in real estate. When we’re buying real estate, we’re not purchasing it at market value. Therefore, we’re initially walking into equity on the buy. We are getting paid on a monthly basis.

So ideally, these properties are cash flowing after taxes, insurance, debt, operating expenses, property management fees, etc. The rent is high enough to cover all these expenses, plus it pays us on a monthly basis. It’s also paying down our debt. So every time a tenant pays rent each month and every time we pay a mortgage with that rent, it’s going towards our mortgage that we have at our bank. Therefore, the tenant is paying down our debt while increasing our equity.

It’s not guaranteed. However, in Austin, Texas, our properties are increasing in value every year through appreciation. It seems like things are changing all the time. People are moving to Austin, new businesses are moving to Austin. Just recently, Tesla announced a new factory. They’re opening up down south. Apple is moving another campus in North Austin. More Amazon facilities are on the way as well. With all the businesses moving to the area, bringing more people, and more money moving to the area, it’s causing the value of our real estate to increase without doing anything on our part.

Another reason why I choose real estate over stocks is because I feel fairly secure in real estate. Even in something like the 2008 real estate crash. Our real estate never really decreased in value during the coronavirus, unlike the stock market which saw 30+%.  As a matter of fact, here in Austin, the residential housing market wasn’t affected too much at all, for an extended period of time. There were definitely some scares about what was going to happen in the future. As expected with any unknowns.  However, it recouped fairly quickly and there’s really about one month worth of inventory on the market right now.

So I feel secure with my real estate. It pays on a monthly basis. It’s always increasing in value. It’s not guaranteed, however, you know, history over time would show that it is. Tenants are paying down our mortgage. They’re paying down our debt while increasing our equity. We get paid on a monthly basis.

That’s just with the residential real estate. With commercial, commercial multifamily, it’s still the same thing. However, what I really enjoy about commercial multifamily is the fact that my real estate is not valued on the comparable sales around it.

The commercial real estate that we own is valued on the income that it’s bringing in on a monthly and annual basis, and that is what determines its value. We’re essentially in control of that. We can decrease operating expenses, we can improve the property to increase the value to renters, therefore increasing the rent, and we can choose who comes into our properties, who the tenants are. We’re essentially in control of that operation, therefore controlling the income that comes in and also in control of the value of the real estate.

Sure, I’ve invested in stocks before. I’ve lost a lot of money in stocks. I was not investing like your traditional, 30, 40-year investor to invest for retirement. And I like the idea of stocks. You know, stocks have been proven over time to increase in value as well.

There’s little dips here and there. However, if you’re looking at 20-year charts, 50-year charts, 100- year chart stocks are always increasing in value as well. At least the indexes are. Dow, S&P 500, and Nasdaq. However, for me personally, real estate is the better option. Also, one thing I really enjoy about real estate is the fact that I can’t log in to my real estate account and check my value on a daily basis! If you invest in stocks, you know this is a reality!

One thing that drove me crazy with stocks was seeing my money fluctuate up and down, up and down. I was invested in very volatile stocks. I was not invested in index funds or ETFs. I was investing in stocks that fluctuate 10 plus percent on a weekly basis. And it drove me crazy!!  But I lost a lot of money in stocks. With real estate, I can’t really just log into my account if I want to sell five hundred shares and pull my money out.

Therefore, if there ever is a scare like there was with Coronavirus in early March 2020, I wasn’t able to just log in, sell my stocks, and act irrationally.

These are the reasons why I prefer real estate. I feel very secure with real estate, it pays me on a monthly basis, tenants pay down my debt, appreciation helps increase my equity, and overall, I’m going into it with a winning strategy by buying into equity on the front end.

We’re here to help any way we can. Share this blog with someone who you may know who is looking to transfer from stocks to real estate or vice versa. Thank you for reading and catch you next week.

-Alex Coffman

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