Should You Buy a Rental Property? (Real Estate vs Stocks)
Philipp 12:30 Episode 1 of Ask a Banker
Should You Buy a Rental Property? (Real Estate vs Stocks)
Housing and stocks both returned about 7% a year over 145 years, and housing was the calmer one. So why do most people still do better with stocks? The first episode of Ask a Banker.
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Real Estate vs Stocks: Should You Buy a Rental or Invest?
For most people, stocks. Across 16 countries from 1870 to 2015, housing returned 7.06% a year after inflation on a simple average and equities 6.88%, and compounded, housing was ahead (6.62% against 4.66%) with less than half the volatility. But that is the return of an entire housing market, which nobody can buy; a single rental is one property, one tenant and usually a large mortgage. When researchers opened the actual property books of four Oxford and Cambridge colleges for 1901–1983, residential property returned 2.3% a year after inflation and costs, against 4.7% for the housing index over the same country and years. A cheap equity index fund delivers close to its index. A rental delivers what you earn by running it well.
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