Real Estate vs. Alternative Investments: Why Property Still Reigns Supreme
High mortgage rates might make buying a home more expensive today, but real estate continues to hold its ground as one of the best investment options. While buzzworthy alternatives like cryptocurrency, art, and even wine capture headlines, experts still highlight the unique advantages of property ownership.
If you’re grappling with where to invest your money, you’re not alone. Each asset class comes with its own set of risks, rewards, and learning curves. Let’s break down why real estate remains a compelling choice, even as other investment opportunities emerge.
Why Real Estate Outshines Other Investments
Real Estate’s Track Record
Over the long term, real estate has proven to be a stable and lucrative investment. According to a Realtor.com analysis, real estate has delivered an average five-year return of +26% since 1975. Moreover, homeowners have built substantial equity — $147,000 on average in just the past five years, per the National Association of Realtors®.
“While traditional investments like 401(k)s and ETFs are excellent for passive growth, real estate offers a unique combination of wealth-building and control,” says Dan Reedy, a real estate investor and broker.
Hands-On Wealth Building
Unlike stocks or gold, real estate allows investors to directly influence returns. Whether it’s strategic upgrades, managing rental rates, or leveraging tax advantages like mortgage interest deductions and depreciation, real estate gives you the tools to grow wealth actively.
Sara Levy-Lambert, vice president of growth at RedAwning, sums it up: “Real estate blends passive income, stability, and equity-building over time, making it a solid choice for diversifying beyond paper assets.”
Leveraging Equity for Growth
Homeowners today are sitting on record-high equity, which can be leveraged through tools like home equity loans or HELOCs to fund investment properties. However, investors must carefully evaluate costs, income potential, and their time horizon to see a profit.
Real Estate’s Limitations
Real estate isn’t perfect for every investor. The market’s illiquidity means that buying or selling property can take months or even years. Additionally, leveraging equity often requires taking on debt, which isn’t feasible for everyone.
“People have more equity than ever, but it’s just a number on paper unless they’re willing to access it,” explains Ralph DiBugnara, founder of HomeQualified.
Alternative Investments: A Closer Look
Real Estate Investment Trusts (REITs)
For those who can’t afford to buy a property outright, REITs provide an accessible entry point. By purchasing shares in a real estate company, investors can earn dividends without the headaches of property management.
“You don’t own the property directly, so you’re hands-off,” says Levy-Lambert. “REITs also offer liquidity since they’re traded like stocks, but their dividends are taxed as regular income.”
Cryptocurrency
Crypto’s meteoric rise — and fall — has made it one of the most volatile asset classes. While early Bitcoin adopters saw astronomical gains, the market’s unpredictability has left many burned.
“Crypto is for those with a high-risk tolerance and a deep understanding of its complex technology,” says Harry Turner, founder of Sovereign Investor. “Real estate, by contrast, offers stability and tangible value.”
Gold
Gold has long been a safe haven during economic uncertainty. Its stability and ability to hedge against market volatility are appealing. However, selling physical gold can be cumbersome, and higher capital gains taxes can eat into profits.
Niche Markets: Art, Cars, and Wine
For passionate collectors, alternative assets like art, classic cars, and wine offer excitement and the potential for profit. However, these markets often require specialized knowledge, high upfront costs, and patience.
“Alternative assets can pay off big, but they’re volatile and unpredictable,” warns Reedy. “Real estate, on the other hand, builds long-term wealth without the sleepless nights.”
Final Thoughts
Choosing the right investment depends on your goals, risk tolerance, and time horizon. While alternative assets might provide thrills, real estate stands out for its combination of stability, wealth-building potential, and control.
Before diving into any investment, consult a financial adviser to determine what aligns best with your objectives. But if you’re looking for an asset that offers both security and the potential for growth, real estate might just be your best bet.
What do you think?
How does real estate stack up against your favorite investments? Share your thoughts in the comments — let’s start the conversation!
