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In the last 90 days, we’ve seen the DOW close at 29,000 in January with the promise of finally reaching the elusive 30,000 marks to crashing back down to 20,000. The instability of the stock market, thanks to Corona Virus, has led many investors to question real estate vs. stocks and evaluate which investment is better for them.

If you’ve been thinking about investing in real estate vs stocks but haven’t made the jump yet, this article will provide you information that you can use to decide to start investing in real estate.

passive real estate investing

Real Estate vs. Stocks Historical Returns

Over the last 50 years, the stock market has produced returns that are typically about 7% per year but those returns can be lost in as little as one day of trading. An easy example of this is what’s happened to the stock market recently where the gains that were made under the Trump Administration in 3 years were lost in just 3 weeks.

Real Estate investments typically do a bit better than stocks. According to Investopedia, the average turn from commercial real estate over 25 years was between 9.4% to 10.5% when investors had their money in a Real Estate Investment Trust (REIT).

The good news about real estate vs. stocks is that real estate is a stable investment that’s not affected by the stock market. When you invest in rental properties like multifamily, your investment is always going to be earning income simply because people will always need a place to live.

What’s even better about investing in real estate is that it has a much stronger potential for returns than stocks do because you can leverage it. This means that you can easily use a large amount of financing to buy more real estate for your portfolio while growing your income at the same time.

Rental properties like multifamily have a low risk and high return. You can easily get started with real estate investing even if you don’t know a lot about commercial real estate, learn “on the job” while building income at the same time.

Contrast this to the stock market where investors have lost trillions over the last 10 years. A good example of this is the losses that investors faced in 2008 when on September 29, 2008, the market fell by close to 800 points. This was the largest drop in history at that point until the recent crash of 2020.

Real Estate or Stocks – Which Will Make You Richer?

If you’re looking at real estate right now to build riches, the reality is building riches is a long game and something that you can’t expect to happen as quickly as you hope.

Investing in stocks may enable you to build a portfolio that looks great on paper but with real estate, especially multifamily properties, you can build a portfolio of investments that you can touch and depend on to create a stable income for you over time.

This is especially true when thoroughly research and do your due diligence before investing in a multifamily property. You can expect it to produce returns that you can depend on overtime instead of having to wonder if your investments will still have the same value if the economy or stock market collapses.

passive income through real estate investing

How to Get Started Investing in Real Estate

The good news about investing in real estate is that it’s easier than ever before to get started. You can get started as a real estate investor by investing in a Real Estate Investment Trust (REIT), partner with other investors in your area, crowdfunding or you can invest in your first rental property yourself.

Some of the best real estate crowdfunding websites include:

  • RealtyMogul
  • Fundrise
  • CrowdStreet
  • Groundfloor
  • RealCrowd
  • Patch of Land

Real Estate investors who want to start small and “get their feet wet” in real estate investing can get started in some areas with as little as 3% down with an FHA loan. New investors can also “house hack” by living in one of their rental units themselves to cut down on their housing costs and save money.

When considering which form of real estate is right for you, you may be looking at single-family homes, commercial properties or multifamily properties. Since this is a blog that’s dedicated to investing in multifamily properties, we encourage you to consider getting started with investing in multifamily property.

Why multifamily? The answer is simple. With a multifamily property, you’re going to have more doors under one roof and have the ability to earn more from the very beginning, compared to the income that you would earn if you were to invest a portfolio of single-family homes.

Also, since all of your units will be under one roof with multifamily properties, your expenses will be a lot lower as well since you’re only going to need one property manager and pay one water/sewer/trash bill for that location.

What Do Time Tested Investors Have to Say About Investing in Real Estate?

“If I had a way to buy a couple hundred thousand single-family homes and have a way of managing them, I would load upon them. I would take mortgages at very low rates… It is a very attractive asset class… If I was an investor who was a handy type, which I am not, I would buy a couple of them at distressed prices and find renters and again take a 30-year mortgage, it is a leveraged way to own a cheap asset. I think that is probably as attractive as an investment you can make.” – Warren Buffet

“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.” – Andrew Carnegie – Scottish businessman and philanthropist

“Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.” – Robert Kiyosaki

“Many people are in the dark when it comes to money, and I’m going to turn on the lights.” “Owning real estate is a keystone of wealth… both financial affluence and emotional security.” – Suze Orman

Get Started with Investing in Real Estate

Do you have questions about getting started with investing in real estate? Or are you an accredited investor who is ready to get started with investing in multifamily properties but you don’t have a lot of time to do it yourself?

To learn more about passive investment opportunities for accredited investors, or to learn more about working with me personally, please click here to connect with me online.

Erik Hatch

Erik is currently invested in projects in Florida, Texas and Kentucky totaling $79 Million. He is an accomplished leader who motivates and inspires action while at the same time, is grounded in business metrics and information that drives successful businesses.