Stocks and Real Estate

By | February 2, 2006
I recently found another great financial blog about real estate and the stock market, Smart Capitalist Investment Blog by Tyler. I’ve communicated with him several times over email and he seems to have a great site going. I’d like to post an article from him.

For more insight into real estate and stock markets, please visit his blog: Smart Capitalist Investment Blog.


Many people that read this blog have probably thought about the differences between stocks and real estate, and where they should put their money. There are many factors that go into determining the different avenues of investing, and I think that if done well, both will be profitable. Since they will both be profitable you will probably want to distribute your cash between real estate, stock, and savings.

What makes real estate a good investment? Leverage. You can use someone else’s money to build your wealth from both amortization and positive cash flows. Not only that, but your tenants are the ones that absorb interest from the loan. There is also the possibility to create capital by simple improvements. Another big advantage of real estate is that a lot of the times you make money or income on a monthly basis from your property.

What makes stock a good investment? Liquidity. If you do not want the liability of owning a piece of income property, then stocks are a good alternative. With a stock, you can have your money out by the end of the week if you decide you need it for another investment or something. Just like real estate, there are many additional benefits.

Now real estate and stocks are just two investment mediums, and there are many to be looking at. Things to keep in mind when looking at investments such as real estate, stocks, and others is how much money it will put in your pocket every month, and how much capital appreciation you expect in 5, 10, 15, and 30 years. After you start to figure this out, you can start to balance various investments in your portfolio.

4 thoughts on “Stocks and Real Estate

  1. Richard

    The great things about real estate is the ROI as a cash on cash return for your outlay. A $20,000 investment on a $100,000 property witj rental income of $8,0000 is a 40% return annually before tax advantages and appreciation

  2. Dave


    If you make a $20,000 on a $100,000 property, you must have needed to borrow $80,000. Assuming interest rates were 5% you owe $4,000 in interest every year plus some principal. Assuming the rent pays for that, whatever you have leftover divided by $20,000 is your return. That is IF the rent is enough to cover the mortgage payment at all.

  3. Dave

    Right, after financing costs. “Financing costs”=interest right? So richard, where do you get the 40% from? You meant:

    “A $20,000 investment on a $100,000 property witj rental income of $8,0000 is a 40% return annually before tax advantages and appreciation and financing costs”

    which make the 40% seem like a pretty useless figure of merit.


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