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Dividend Stocks vs. Real Estate: Which One Will Make You the Most Money?


For those who have the ability to invest wisely and semi-confidently, the questions about investment opportunities can vary from how to get started to which options will make the most money. Although there are lots of options when it comes to investments, most people consider dividend stocks and real estate superior to other choices.

But when it comes to choosing between the two, there are lots of questions. This is perhaps even truer now, during these times of economic uncertainties than ever before.

Making Money

When you invest in anything, the goal is to make money back — to make a profit. In some cases, you may expect to make a steady cash flow, such as in the case of investing in rental property, and in other instances, the goal may be to earn a substantial return on the sale of the investment (whether that is a piece of property, a home, or stocks).

Of course, in some instances, the investor may enjoy profiting in both ways. For example, rent may be collected on a house for a period of time. The rent should cover the mortgage plus provide extra income on a monthly basis. At the end of a given time period, the property may be sold. At this time, there is a huge financial gain.

Stocks work a little differently. Money can be made off dividends, or you can make money off the appreciation of the stock’s value. In other words, as time passes, your stock will likely accumulate increasing value, which can take the form of dividends or more shares.

When it comes to real estate, anything that is not offset with expenses is taxed (according to regular tax rates) as income. This includes the rent received on the property.

The cash flow related to stocks (from qualified dividends) is taxed as long term capital gains. A short-term capital gain applies to the sale of either asset if it is held for less than 12 months.

Foreclosures and Other Deals

Nowadays, there are lots of properties in foreclosure and others on the brink of becoming that way. Even so, acquiring these properties is not always as simple as one might expect. Crediting agencies have stiffened the requirements for loans and so unless your credit rating is squeaky clean, you may run into some hold-ups during the loan processing phase. Plus, a down payment and other fees may be required.

In addition, real estate can require a considerable investment of time, and the transaction costs can be quite significant. With these commitments, the risks associated with real estate include the fact that it can be difficult to diversify or branch out into other areas of investments.

Good Prices

Even with the risks and difficulties mentioned, it has to be noted that we are living in a very advantageous time for investments. For those interested in opportunities, this is a great time to invest in stocks as well as in real estate. The prices are still low in both markets.

Speed and Info Please

When it comes to making money via investments, you need to have access to reliable information, and you need that information fast. Plus, the quicker you can get into and out of the market, the better. This ensures you can quickly make a buy and then make a sell in order to make money.

Considering these things, it seems clear that dividend stocks are likely a better investment option than real estate. You can buy and sell stock for as little as $5. The stock market is considered liquid — it is constantly changing, and you can move in and out of a position within a matter of minutes.

Reporting requirements ensure that reliable information will be available about the stock market. The SEC (Securities and Exchange Commission), which is the primary regulating agency for the securities market, works to protect investors and ensure fair practices. This includes provisions for reporting.

Buying and selling a house is a different sort of beast. The process is slow and drawn out. Plus, getting detailed information — such as a report that describes real property income potentials, assets, cash flow, and other investment-related details — is next to impossible.

Wrapping Up

There really isn’t a clear winner in this battle. Although it seems that leverage is what makes the real estate market attractive, it should be remembered that the stock market also offers leverage.

But it is important to acknowledge the benefits of owning rental property. Besides enjoying supplemental income, several expenses are tax deductible. However, some of the drawbacks to being a landlord include being bothered with emergency repairs as well as ongoing maintenance.

There is a way to have the best of it all. That is, the average investor can choose to own property assets through REITs (real estate investment trusts). This is a way for investors to diversify their portfolio, and REIT operates under a unique set of tax rules. Ninety percent of the earnings are distributed back to the shareholders. This makes REITs a perfect option for typical investors.

The choice between dividend stocks and real estate is really up to the investor. Some people feel more confident with one type of investment over the other. Other investors enjoy the challenge and excitement of a new opportunity, and still others prefer the option of combining the investment opportunities.

Obviously, money can be made with both or either option. Take the time to read free tips and advice you can find online. Then choose the investment option you are most comfortable with and make some money!


Debbie Allen is a freelance writer, blogger, and online marketer. She likes to focus on information that is helpful to small business owners, such as tips about reputation management from Reputation.com and online marketing strategies.

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