Like Ali vs. Frazier, Marvel vs. DC, it’s a classic rivalry — real estate vs. the stock market.

Where should you invest your hard-earned money? Is one better than the other? Are they two sides of the same coin? Should you flip a coin to decide?

A financial advisor might tell you to put together a “diversified” portfolio that contains both, but big gains in wealth don’t come from the “Buy, Hold, and Pray” strategy. It comes from focus, education, and strategic capital allocation — that is, investing with a plan.  At a glance, stocks might be the clear winner. The S&P 500 has grown 8-10% annually over the past decade. Real estate, on the whole, has barely outpaced inflation. But for the average investor, multifamily real estate has several significant advantages over the stock market.

Here are seven reasons multifamily real estate is a better investment than the stock market.

1. Easy to Understand

To invest strategically, you first have to understand what you are investing in. Yes, you could buy AMZN … but what if you had to step into Jeff Bezos’ shoes and run Amazon? Most of us would fail at the help of a monster company like that. By contrast, multifamily real estate is relatively easy to understand. Most of us have rented an apartment at some point, so we understand leases and rent checks. Many of us have owned a home, so we understand insurance, code compliance, and routine maintenance. One in a million among us will take a company public. But just about anyone can learn to tell a good multifamily deal from a lemon in less than a year.

2. Cash-Flow and Appreciation

Stocks tend to have either cash flow (i.e. dividend stocks) or appreciation. If you buy TSLA and hang on for the ride, you won’t put any cash in your pocket unless you sell some of your position — which means you have a smaller position exposed to the next big market move. By contrast, multifamily real estate can produce cash flow (in the form of rent surpluses) which get paid out to the investors on a monthly or quarterly basis — without affecting the appreciation of the asset. The value of the asset stays intact until you reap the windfall through sale or refinance.

3. Opportunity to Add Value

As stockholders, most of us can’t add any value to the asset. As a minor shareholder in FB, what are we going to do to make it more valuable (besides posting more Instagram Reels?) The stock might go up in value, but not thanks to anything we did. Invested in the stock, our wealth is basically at the mercy of the market and corporate managers. With multifamily real estate, on the other hand, you can take proactive steps to add value to the property and force appreciation. Remember, the value of multifamily real estate is determined by its net operating income (NOI), not sales comps like a house. Increase the NOI, and you have made the property more valuable — and made yourself more wealthy!

You can increase NOI by increasing income (renovate and charge more rent, add amenities and charge more fees, etc.) or by decreasing operating expenses (bidding out contracts, energy-efficient upgrades, etc.).

4. Safe, Easy Leverage

The stock market usually does better than real estate as a whole, but real estate actually does better when it’s leveraged. How do you leverage real estate? With a mortgage, of course. In the case of multifamily real estate, it’s a commercial mortgage, but the principle is the same. Multifamily real estate is often eligible for favorable loan terms with high leverage — 75-80% loan-to-value (LTV) or more. With that much leverage, your wealth actually increases more quickly than with stocks. You can leverage stocks by buying on margin, but this is much riskier than buying real estate with a mortgage. If the stock value drops, you could end up owing the entire margin out-of-pocket, almost overnight. Real estate loans are much friendlier because lenders consider multifamily real estate to be low-risk compared to stocks.

5. You Can Insure It

This might seem like a silly distinction, but you can insure a real estate investment. You can’t insure a stock position. If the stock position goes to zero, no one will compensate you. But if you insure your real estate investment, the building could burn from the ground and insurance will make the investors whole again.

6. Hedge Against Inflation

Real estate tends to do particularly well in times of inflation. This is for several reasons. First of all, the value of real estate and the price of rent tend to go up along with every other cost as cash loses its buying power due to inflation. Second of all, remember that big mortgage? As the currency devalues, that loan becomes less valuable because the loan balance doesn’t change. See what just happened? The asset side of the balance sheet got bigger, while the liability side got devalued. The result — accelerated increases in asset value.

7. Tax Advantages

In the stock market, the only tax advantage you have is usually the lower tax rate you pay on your capital gains when you liquidate a position. You can do tax-lost harvesting to reduce your tax bill … but only on stock positions where you lost money. Multifamily real estate, on the other hand, has numerous tax benefits you can take advantage of every year, even if the property doesn’t operate at a loss.

Perhaps the most significant tax advantage is depreciation — writing off “wear-and-tear” on the building according to a schedule set by the IRS. This is essentially a tax deduction that takes no money out of your pocket. Depreciation on a multifamily property can wipe out the investor group’s entire tax liability for the year.


Of course, one of the disadvantages of multifamily real estate is finding the property in the first place, raising the money to buy it, and then managing the property once you close. By comparison, stocks are a much more “passive” investment.

Syndication solves that problem. By making a passive investment with a trusted private-placement real estate fund, you can get all seven advantages, without the effort of finding and managing the property yourself.

Want a better wealth-building alternative to the stock market? Reach out to us today to learn more about passive investing in multifamily real estate.