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 get a  decent 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 time.  Booms 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 stable,  then 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 in a  huge company like apple. You do not feel like you  

own something. I mean, of course, theoretically,  you 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 flow—this  

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 low.  Even 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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