What Has Better Returns, The Stock Market Or Multifamily?

JUSTIN MOY

BACKGROUND

We hear this question a lot, and I’m sure since you’re reading this article, that it’s a question you’ve been looking for the answer to. 


Here’s the bottom line, the answer does really depend, and your answers to these questions will determine which method fits you best: 

  • Do you dedicate 4+ hours per week to keeping up with the companies you purchase through stocks?
  • Are you up to date (and want to stay up to date) on the most current business developments in the industry of your stock portfolio?
  • Are you willing to continuously look for the next big company or the next technological breakthrough that will result in the surge of high returns that bolster the best portfolios?

If you answered ‘YES’ to all 3 of these questions, then maybe your stocks could outperform multifamily…

But, if you’re not wanting to commit hours to your investments for only a small chance to outperform multifamily (and only by a small margin), then multifamily is most likely the best bet for your investments, and I’ll show you why.

From a returns perspective, on average (and we are assuming you’re reading this because you aren’t a top 5% superstar in the stock market game), multifamily beats the stock market by a mile. 

DISCLAIMER: Figures in this post are averages with average projections, please do not make any investment decisions based on this blog post alone. Please consult your financial professional of choice before making any financial decisions. This post does not act as a guarantee.


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THE NUMBERS

From 2005 until 2019, the average stock portfolio saw a return of 10.48% including dividend payouts, while average multifamily investments see a 15 - 19% average annual return over a 5-year period, meaning multifamily returns almost double stock market returns on average. 

Source: https://www.thebalance.com/stock-market-returns-by-year-2388543

Here’s 2 scenarios using the figures above, one scenario where you invest $100,000 in the stock market, and another where you invest in multifamily (where the average lifecycle is 5 years per asset):

Stocks

After fees and taxes, we’re left with an average annual return of 6.76% in the stock market; turning your initial investment of $100,000 into $266,182.06 after 15 years.

Multifamily

Now with multifamily, because we don’t charge you any fees (we’re partners, not brokers) and you have Tax Advantages with real estate (which if you factored these in would actually increase your Average Annual Return even more, but it’s complex and specific to the individual) you’re able to pocket all of our average investment of 18.37%. Turning your initial investment of $100,000 into $706,470.31 after 15 years.

Conclusion

To us, the answer is clear as to which product brings in the very best returns. Reach out to us today to see if multifamily investments fit into your investment goals and existing portfolio.

Get More In Depth

In this post, we covered a very surface level analysis of the returns of the stock market versus multifamily assets. To learn more, download our free ebook by clicking the button below.

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ABOUT THE AUTHOR

I connect smart investors like you to the very best multifamily investment opportunities available. I'm passionate about educating our investors in this space and helping you make the very best decision with your money.