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  • Real estate or the stock marketThe debate that will never end

  • The stock market investors will always  point out how great the stock market such  

  • as the unbelievable rate of return you  could have within a single year. While  

  • real estate investors will point out the  cash flow that the real state provides.

  • Each of these groups is right. Both real estate  and the stock market have their pros and cons,  

  • and the truth is somewhere  in the middle, as always

  • If you were a stock market investor in 2020,  it doesn't matter what stocks you invested in!  

  • You most probably made an incredible rate of  return. If you had invested in tech companies,  

  • you probably doubled or tripled your money within  a year, and if you were a real estate investor,  

  • you probably didn't do much.   

  • Property prices increased by around 12%.  

  • That's nothing compared to how much the stock  market rose but in the context of the real state,  

  • 12% is a lot because the real estate  market usually grows by two or 3% at best.

  • So let's try to find out where should you invest  your money this year? Is the stock market better  

  • than real state, or is the real state still  the greatest investment you can ever make

  • If you have $50,000 or $100,000 that you  saved up, where should you invest it? We  

  • will answer all of these questions  and many more but before we do that,  

  • make sure to give this video a thumbs up for the  YouTube algorithm, and let's get right into it

  • Real Estate vs. Stock market

  • When you buy a stock, it's just  a digital document on the screen  

  • of your smartphone. You almost have no  control over it since your single stock  

  • isn't going to give you much influence when  the company has another 5 or 10 billion stocks

  • While real estate gives you complete  control over your investment,  

  • even if you have taken a mortgage to purchase  it, you can touch it, feel, and control it.

  • What sets real estate apart from other types  of investments is leverage. With 50K dollars,  

  • you can control 50K dollars worth of stocks, but  when it comes to real estate, with 50K dollars,  

  • you can control 500K dollars worth of real  estate. I am a big fan of the stock market.  

  • I spend hours every day looking at charts  and numbers or reading reports to find  

  • a good investment, but you have very  little leverage for the stock market.

  • Of course, there is something  called margin investing,  

  • where you can borrow from your brokerage firm  to double or triple your income from the trade,  

  • but it's not as much as real estate. On top of that, margin accounts are usually  

  • used for trading and not investing since the  interest you have to pay on the borrowed money is  

  • pretty high, while in real estate, you can getdecent mortgage rate for 30 years, especially now

  • 
 4. We also have to consider the Cashflow 

  • Have you ever heard the term  - the king of dividends

  • These are the companies that are within the S&P  

  • 500 that have been increasing their  dividends for the past 50 years or more.

  • Think about it; 50 years is a long timeBooms and busts, inflation and deflation,  

  • high-interest rates, and low-interest  rates; these companies have survived and  

  • prospered through it all and kept raising  their dividend rates year after year

  • One such company is Johnson & Johnson. Guess how  much dividends does it pay? A little over 2.5  

  • percent. And besides, the stock price did not even  increase by 50 percent in the last five years.
 

  • While when it comes to real estate, you can  get 7, 8, or 10 percent. It all depends on  

  • the neighborhood and the property. So  if Cashflow is more important to you,  

  • then real estate is the option to go with.
 But The problem with real estate is,  

  • it's nearly impossible to have such a high  growth like you could have in the stock market  

  • unless it's a bubble. Sometimes a company enters  the game and revolutionizes the entire industry,  

  • and a 10 or 20K dollar investment in that company  could worth millions in less than a decade

  • Netflix is a great example, but it's just one  out of many. Netflix stock price since 2012  

  • rose by over 5730%. Which means, every thousand  dollars that were invested in Netflix back then  

  • now worth over 57300 dollars. In other words, if  you invested just 18K dollars in Netflix in 2012,  

  • without doing anything else, you would have  become a millionaire today. The stock market  

  • is filled with such examples. When it comes  to growth, the stock market undoubtedly wins

  • But if you are not emotionally stablethen the stock market isn't for you.  

  • The market jumps up and down every single  minute. Sometimes it's all over the roof,  

  • rising like there is no tomorrow, and if you can't  control yourself, you will start buying more when  

  • you shouldn't since that plunge will be followed  by a correction. And vice versa, when the stock  

  • is falling for a few days in a row, you have to  understand that is temporary and be patient.
 

  • But what I don't like the most about the stock  market is that when you invest in a certain  

  • company, especially if it's a safe investment inhuge company like apple. You do not feel like you  

  • own something. I mean, of course, theoreticallyyou are one of the owners of the company, but  

  • how much your 10K, 20K, or 100K dollar investment  in the company really worth. How much real wealth  

  • does it provides you when the company worth over  2 trillion dollars. While when it comes to real  

  • estate, you own the entire thing.   

  • What we also have to consider are taxes! If  you make a million dollars and the government  

  • takes half of that such as in the case of income  tax, then you are not making a million dollars.  

  • And that's where real estate  also wins over the stock market.

  • When your stocks rise in value, remember  that you are only getting wealthier on paper.  

  • If you want that wealth to turn into  real money that you can spend on yourself  

  • or buy another asset, then you have to sell  your stocks and pay a capital gain tax, which  

  • is 20 percent for long-term investments and can  go as high as 37 percent for short-term trades

  • With real estate, there are multiple ways to  avoid taxes and use that cash to grow your  

  • wealth. For instance, instead of paying for  the entire property upfront, you can deduct  

  • the portion of your mortgages attributable  to interest payments on your tax returns.  

  • You can recover the cost of income-producing  rental property through depreciation.

  • Depreciation expense often results  in a net loss on investment property  

  • even if the property actually  produces positive cash flowthis  

  • loss, as well as expenses, such as utilities  and insurance deducted from ordinary income.

  • Even if you end up selling the house, you can  avoid paying capital gain tax if you purchase  

  • another property that's bigger. Tax incentives  

  • in real estate are unbelievable. It seems like  real estate investors wrote the tax code

  • 2021 

  • Alright, now we know all the ups and downs  of both the real estate and the stock market,  

  • and in many ways, real estate looks  like a good deal. But the question is,  

  • what's the best investment now, this year?

  • Well, the answer is a bit complicated but let  me simplify it. Real estate a great investment,  

  • especially when mortgage rates are lowEven a single percentage is going to  

  • play a huge difference in the long run, so  with mortgage rates now around 3 percent.  

  • It's definitely one of the best times to  take a mortgage, and for the past year or so,  

  • everyone who saved up for the  downpayment did take a mortgage

  • The fed was so afraid that the pandemic will  stop people from buying houses that it lowered  

  • mortgage rates from almost 5 percent in  2018 to 2.6 percent by the end of 2020.

  • But that reaction in mortgage rates led many  people to take mortgages to the point where  

  • home prices rose significantly, as we have  discussed in one of the previous videos

  • Home prices usually rise by 2 or 3 percent  just to match with inflation, however in 2020,  

  • in the middle of a pandemic when most people  lost their jobs. Home prices rose by 12 percent

  • That's why many economists  predict a certain correction

  • But that's just a prediction because  we are not out of this pandemic yet,  

  • and the fed might keep mortgage rates low for  another few years. Everyone who couldn't take  

  • a mortgage in 2020 will do that this year and in  the next few years. So there is a very good chance  

  • that home prices will keep rising for another  few years as long as interest rates are low.

  • The same goes for the stock market. During the  2020 crash, the fed stepped in and flooded the  

  • market with cheap money. It started buying  junk bonds and even lent money to the largest  

  • corporation such as Apple or Microsoft. Most of  these companies should have suffered last year,  

  • but the fed chose to inflate the market to  prevent a deflation. Of course, that's great,  

  • but what happens when the Fed increases  interest rates or stops buying corporate bonds?  

  • Most of these companies will start  suffering, so the market could  

  • witness even a bigger correction compare to  what we have seen in the last few weeks

  • But according to the fed, it plans to keep the  interest rates at the bare minimum for a few years  

  • until the economy is back on its knees. That's  what the fed plans, but that doesn't mean it's  

  • gonna happen. Only time will tell. 
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Real estate or the stock marketThe debate that will never end

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Real Estate vs Stocks Market in 2021 - Where To Invest To Become a Millionaire?

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    Summer posted on 2021/03/24
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