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Real Estate vs Stock Investing
In this article we’ll discuss if you should invest more in real estate or into your stocks in 2021!
In short, investing in rental properties and in the stock market both have their advantages. However, rental investing is now more accessible than ever, and much more beginner-friendly than it ever has been. Rental investing is a great option to invest in 2021.
Now this is a heavily debated topic. I’ve seen this talked about a lot on Facebook group posts and on BiggerPockets forums. Thing is, there are a lot of factors involved in every person’s financial lives that could make either investing tool superior than the other.
Therefore, in this article you’ll learn multiple reasons why rental investing may, or may not, be a good option to invest in, in 2021!
How Personality Affects Your Investing Habits
You may be someone who is excited to throw all your savings into rental properties. Or, you may be very risk adverse and want to keep your extra savings in low cost index funds.
Thing is, there are so many sources out there that tell you to invest one way or another. Every investing method has it’s pros and cons, and every investing method is not best for everyone!
Below are some pros and cons about rental investing and stock investing:
Rental Investing:
- Beginner friendly
- Many options and opportunity for massive growth
- Takes significant prior research
- Opportunity for house hacking
Stock Investing:
- Potentially high risk, if in single stocks
- Can be very complex, or very beginner-friendly
- Long-term, proven history of index funds
- Market always goes up (even with dips and recessions)
Why You Should Invest in Real Estate in 2021
It’s important to realize that rental investing isn’t a better option than investing in the stock market. Instead, it’s a different option. It’s something that has its pros and cons investing in the stock market, or any other method of investing!
1. More Money Now
One reason why you may consider putting more money into rental properties is that you can get more money now, compared to later.
So, if you have a 401k or if you have a Roth IRA, that’s money that you put in now. You have to rely on compound interest (and have quite a bit of delayed gratification) to grow your wealth.
Yet, with rental investing, a benefit is that you can get money out of it right now. As in, if you choose your properties well and do your research effectively, then you can get monthly cash flow and have the opportunity to retire early or achieve financial freedom.
This is one huge reason as to why so many people are flooding into investing in rental properties! It has become a way that “average people” can retire early!
2. Avoid Stock Market Crashes
Another reason why rental investing is potentially a superior option to stock market investing is because, if the stock market crashes, it may not affect your investments at all!
Now, if you’re the devil’s advocate you may say, “Well the stock market always goes up”. Which, yes, if you look historically, it is a positive line that goes upward, despite the dips and crashes.
However, there is the potential to avoid losing your investments, especially if you’re nearing retirement age, with a big dip in the market.
3. Massive Long-Term Wealth Growth
Rental investing may be a really great option in 2021 because you can potentially create a massive portfolio in the long term.
As stated before, rental investing is now more accessible than ever before! It used to be a “rich man’s” investing tool. Now, I am seeing young adults in their early 20’s with dozens of properties, who already have grown enough wealth to not work.
Growing wealth to the point of financial freedom does take capital, a lot of time, and significant research and effort, but it is possible!
You can also potentially create a company and a big portfolio, being worth millions down the road.
4. Rentals Are More Liquid
If you invest in your RothIRA or 401k, you can get taxed heavily if you take out the money early.
This may be a big consideration for anyone who is very nervous about putting money away for the long-term.
However, if you simply invest through Robinhood, Acorns, or Webull, your money may be much more liquid than if you put it in traditional accounts!
5. House Hacking
I really advocate for rental investing because of the potential for house hacking!
If you are familiar with The House Hacking Strategy by Craig Curelop, or the book Set for Life by Scott Trench, these are books are amazing resources in the niche of house hacking.
This form of rental investing can actively be saving you hundreds of dollars every month. You can even earn hundreds of dollars every month through this easy method.
It’s a method that most beginners try out, who are new to rental investing. It is the most easy form of rental investing, and saves you a ton of cash, allowing you to focus on more investing options.
Being able to both save and make hundreds of dollars a month, without much effort at all, makes this opportunity very unique compared to stock market investing.
6. More Control Over Your Money
With rental investing, you potentially have much more control over your investments than with stock market investing.
Understandably, if you invest in index funds you can be more confident in an average rate of return, compared to investing in single stocks. This may be the only factor that is closest to a guarantee when it comes to investing.
Yet, with rental property investing, it allows you to have a lot of control over your cash flow and your money overall!
This is because the formulas and calculations with buying, selling, rehabbing, and profiting from real estate is, in reality, really understandable for the beginner.
There are also a ton of ways to invest and reap the rewards of investing in real estate!
You can invest in single-family units, multifamily properties, commercial units, land, you can house hack, perform buy-and-flips/short term rentals, you can earn recurring income from buy-and-holds, and even venture into vacation rentals!
There are lots of different methods of rental investing, with some ways that make you more passive income and others that give you a big payout at once. Others are very easy, while some take a lot of capital and experience.
However, because of these options and opportunities, you can have a lot of control over what you choose to do, and how your money is invested. This is a big benefit to many rental investors.
Should You Invest More In Real Estate or Stocks in 2021?
It is important to emphasize again that there is no perfect way to invest, but 2021 offers a unique time for growth!
I have heard on multiple podcasts that there is no better time to get into real estate than it is right now. It is becoming much more popular than ever, but competition is still low enough to get great deals.
This also offers the opportunity for you to diversify your investments, especially if you were hit hard in the 2020 dip of the stock market.
Additionally, considering real estate investing is a great way to continue working on delayed gratification (but you’ll be able to get paid from your investments much sooner than in traditional stock investment accounts!).
Now What?
Be sure to check out my FREE rental investing course to learn more! I am always adding videos and content to it, so be sure to check back regularly!
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