When deciding where to put your money, the debate between real estate vs. stocks is probably one of the oldest ones in investing. Both have made people wealthy over time, but they work in completely different ways. Some investors swear by rental properties and the stability of owning something physical, while others prefer the simplicity and growth potential of the stock market. 

So, should you invest in stocks or real estate? You’ll need to consider your financial goals, how much time you want to spend managing investments, and your tolerance for risk. Keep reading to compare investing in real estate vs. stocks.

Understanding the Basics

Before you can make an informed decision about investing in stocks vs. real estate, it helps to understand what each investment actually involves. 

What Is Real Estate Investing?

Real estate investment means buying physical property or investing in real estate investment trusts (REITs). Most people think of rental properties when they hear “real estate investing,” but there are several ways to get involved. You can buy single-family homes, multi-family properties, commercial buildings, or even land. REITs let you invest in real estate without actually buying the property yourself. 

The most common strategies include: 

  • Collecting rental income from tenants
  • Flipping properties for quick profits
  • Holding onto properties for long-term appreciation

Many investors use financing, like investment property loans or DSCR loans, to buy properties with more flexible qualification methods. 

What Is Stock Market Investing?

Stock market investing is when you buy equity in companies, essentially owning a small piece of a business. When companies grow and become more profitable, your shares typically increase in value. You can also earn money through dividends, which are regular payments some companies make to shareholders. 

Common strategies for stocks include: 

  • Dividend investing for steady income
  • Buying growth stocks for capital appreciation
  • Investing in index funds for broader market exposure

What makes investing in stocks so compelling is that you can start with very little money and build it up over time without needing to qualify for loans or manage physical assets. 

Comparing Real Estate vs Stock Market Returns

A young woman at a desk holds a small model home in each hand.

When you look at the numbers, both real estate and stocks have delivered solid returns historically. The S&P has averaged around 10% annual returns over the long term, while U.S. housing appreciation has averaged roughly 4-5% annually. At first glance, stocks seem like the clear winner. 

But that comparison misses a huge part of the story. Real estate investors typically use leverage, meaning they might put down 20% and borrow the rest. If a $500,000 property appreciates 5% in a year, that’s $25,000 in gains on a $100,000 down payment, which equals a 25% return on your actual cash invested. Stocks usually don’t give you that kind of leverage without taking on significant risk. 

Real estate also generates rental income along the way, which can provide steady cash flow while the property appreciates. Stocks can pay dividends, but dividend yields are generally lower than rental yields. When you factor in mortgage paydown from tenants, tax benefits like bonus depreciation, and the ability to calculate ROI in multiple ways, the real estate vs. stock market returns comparison becomes more complex. 

Over time, inflation-adjusted returns and compounding will influence overall gains. Stocks have the advantage of easy reinvestment through dividend reinvestment programs, which can accelerate compounding. Real estate compounds through appreciation, rental increases, and mortgage paydown, happening simultaneously. Both can build serious wealth, just through different mechanisms.

Risk and Volatility Comparison

Which is less risky — real estate or the stock market? Stocks and real estate differ dramatically when it comes to risk and volatility. The stock market can swing wildly in short periods. You might see your portfolio drop 20% in a recession, then bounce back 30% the next year. This volatility can be nerve-wracking, but it also means you can sell quickly if you need cash or want to cut losses. 

Real estate doesn’t show the same day-to-day price swings, which can feel more stable. However, this stability is partly an illusion because you can’t check your home’s value every day like you can with stocks. Real estate carries its own risks, including illiquidity (it can take months to sell a property), ongoing maintenance costs, potential vacancies, and local market shifts that can tank your property value. A factory closing in your town or a change in neighborhood dynamics can also seriously impact your investment. 

Luckily, diversification works for both asset classes to mitigate your risk. With stocks, you can easily spread money across hundreds of companies and sectors. With real estate, you can invest in different property types and locations, or use REITs to gain broader exposure. 

Economic cycles also affect each asset differently. Stocks tend to recover faster from recessions but can drop harder initially. Real estate often holds value better in the short term but can take longer to recover. The housing market tends to follow different patterns than the stock market, which is actually useful for diversification. During periods of high inflation, real estate often performs well because rents and property values rise, while stocks can struggle. 

Liquidity, Accessibility, and Management Effort

The ability to quickly convert your investment to cash is where stocks have a massive advantage. You can sell stocks in seconds during market hours and have cash in your account within a couple of days. Real estate is the opposite. Even in a hot market, selling property takes weeks or months between listing, finding a buyer, negotiating, and closing. If you need money fast, real estate won’t help you. 

You also need to manage both investments. Stock investing can be completely passive. You can buy index funds through an app and never think about it again, except to add more money. On the other hand, real estate investing involves active property management unless you hire someone. You’re dealing with tenant calls, maintenance issues, rent collection, and property upkeep. Even with a property manager handling the daily work, you still have to make big decisions about repairs, upgrades, and tenant selection. 

Sometimes it’s not a matter of which one you should choose; it’s which investment option you can choose based on your current situation. Getting started with stocks is incredibly easy, with fairly low barriers to entry. Anyone can open a brokerage account with no minimum and buy fractional shares of companies for as little as $1. 

Conversely, real estate requires significantly more capital up front. Even with financing, you’ll typically need a down payment of 15% to 25% for an investment property, plus closing costs and reserves. However, financing options make real estate accessible to many investors who can leverage their income and credit to control valuable assets. 

Tax Benefits and Income Potential

Real estate comes with substantial tax advantages that can dramatically improve your returns. The mortgage interest deduction lets you write off the interest you pay on investment property loans. Depreciation allows investors to deduct some of the property’s value every year, reducing their taxable income even while the property actually appreciates. Meanwhile, 1031 exchanges let you sell one property and buy another without immediately paying capital gains taxes, letting your wealth compound faster. 

Stocks have simpler tax treatment: You pay capital gains tax when you sell and make a profit. Long-term capital gains (for investments you’ve held over a year) are taxed at lower rates than short-term capital gains (for investments you’ve held for less than a year), which are taxed as ordinary income. Qualified dividends also get preferential tax treatment. However, stocks don’t offer the same depreciation benefits or tax-deferral strategies that real estate does. 

Which option offers better after-tax returns depends on your income level and strategy. For example, high-income earners often benefit more from real estate’s depreciation and deductions. Real estate investors can sometimes show paper losses due to depreciation while actually making money from cash flow and appreciation. For investors in lower tax brackets or those prioritizing simplicity, the tax benefits of real estate might not outweigh the hassle. Stocks may provide better after-tax returns when you factor in the time saved and stress avoided.

When Real Estate Might Be Better

A person writes on a tablet while sitting behind a model home next to stacks of coins. Real estate might be the better choice for you when: 

  • You want tangible assets you can see and touch: There’s psychological comfort in owning something physical rather than digital shares in a company. Real estate gives you control over an actual property that you can improve, manage, and watch appreciate over time. 
  • You’re seeking stable cash flow: Rental income provides monthly checks that stocks typically can’t match through dividends alone. This steady income can cover your mortgage and expenses while building equity. 
  • You’re investing during inflationary or low-rate periods: During inflation, property values and rents often rise with inflation, protecting your purchasing power. In low-interest-rate environments, borrowing costs are cheaper, making leveraged real estate investing more profitable and accessible.  

Griffin Funding offers personalized financing options for real estate investors, including programs designed specifically for rental properties. With the Griffin Gold app, you can explore investment opportunities and access resources to help you make informed decisions about property investing. 

When Stocks Might Be Better

Stocks might be the better choice for you when: 

  • You value liquidity and easy access to your money: You can sell stocks in seconds during market hours and have cash in your account within days. This flexibility is crucial if you might need funds quickly or want the freedom to adjust your portfolio without lengthy sales processes. 
  • You want scalability and broad diversification: Stocks let you invest any amount, from $100 to $100,000, with equal ease. You can own pieces of hundreds of companies across different industries and countries through a single index fund, spreading risk in ways that would be impossible with real estate alone.
  • You prefer passive investing with minimal management: The stock market has delivered impressive returns over long time horizons with basically zero effort required. You don’t deal with tenant complaints, broken appliances, or property management headaches — you just invest and let compounding work its magic.
  • You’re focused on long-term growth without hands-on involvement: Strong returns over decades come naturally with consistent stock investing. The compounding effect is powerful when you automatically reinvest dividends and add regular contributions without the transaction costs and complexity of buying additional properties.

Start Your Real Estate Investment Portfolio Today

So, should you invest in real estate or stocks? Whether you choose real estate or stocks, the most important step is getting started. Real estate offers unique advantages that stocks simply can’t replicate. They’re tangible assets that you can access through financing, and they offer significant tax benefits. For investors ready to build wealth through property, the current market presents opportunities worth exploring. 

Griffin Funding offers flexible financing options for real estate investors tailored to your situation. Whether you’re buying your first rental property or expanding an existing portfolio, having the right mortgage partner makes a huge difference. 

Get started online and connect with Griffin Funding to discuss how investment property financing can help you start or grow your real estate portfolio. 

Find the best loan for you. Reach out today!

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Frequently Asked Questions

What is the property multiplier effect (and how does it relate to the Velocity of Money)?

The property multiplier effect describes how leverage amplifies returns in real estate. When you use financing to acquire an investment property, you control a larger asset with a smaller amount of capital. As the property appreciates and generates rental income, your return on cash invested multiplies, because those gains are based on the property’s full value, not just your down payment.

This principle connects directly to The Velocity of Money, which measures how quickly capital moves through the economy - and, in your case, through your own portfolio. When investors refinance or complete a cash-out refinance DSCR loan to unlock equity from one property and reinvest it into another, they accelerate the movement of money. That recycled capital builds wealth faster by continually compounding across multiple assets.

At Griffin Funding, we help investors increase their personal Velocity of Money by providing flexible financing solutions, from DSCR loans to non-QM cash-out refinances, that allow you to leverage existing equity and expand your portfolio efficiently.

In short: the property multiplier effect shows how leverage magnifies wealth, while the Velocity of Money shows how reinvestment accelerates it, and Griffin Funding provides the tools to make both work in your favor.

Is it a good idea to invest in both real estate and stocks?

Yes, for most investors, holding both makes sense. Stocks provide liquidity and easy diversification, while real estate offers stable cash flow and tax benefits. Combining them balances your portfolio and reduces overall risk.

How do I start investing in real estate?

To build a real estate portfolio, educate yourself on your local market and different investment strategies. Save for a down payment based on the type of investment property loan you want, improve your credit score, and explore financing options. Consider starting with a single-family rental property before expanding to larger investments.

Can I use financing to invest in real estate instead of stocks?

Yes, one of the biggest advantages real estate has over stocks is that you can use leverage through mortgage financing. With an investment property loan or DSCR loan, you can buy income-producing real estate using a relatively small down payment while the property appreciates and tenants help pay down the mortgage.

This financing power means your returns are based on the property’s full value, not just your initial investment — something you can’t do in the stock market without taking on risky margin debt.

Griffin Funding offers flexible real estate investment financing for self-employed borrowers, investors, and those seeking alternative mortgage options. Learn how leveraging smart financing can amplify your returns and accelerate portfolio growth.

Is real estate a safer alternative investment than the stock market?

It depends on your goals and time horizon, but real estate often provides more stability and predictable cash flow than stocks, especially when financed strategically. Unlike the stock market, where prices can fluctuate daily, real estate offers tangible value, rental income, and long-term appreciation potential.

For many investors, real estate acts as a balanced alternative investment that can hedge against inflation and market volatility while offering significant tax advantages through depreciation and write-offs.

If you’re comparing alternative investments and want consistent returns, Griffin Funding’s mortgage specialists can help you explore non-traditional and DSCR loan options to make your next real estate investment more accessible and profitable.

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 24 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 12 years in business.