Index Fund vs. Real Estate | Real World Example

In this video, I compare the performance of an index fund to a rental property. I use my personal real world example so you can see how each investment fared over the past 5 years.

Timecodes:

0:00 - Intro
0:57 - Index Fund Investing - Pros
4:44 - Index Fund Investing - Cons
6:15 - Real Estate Investing - Pros
8:51 - Real Estate Investing - Cons
11:38 - Tae’s Real World Example

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DISCLAIMER: I am not a financial adviser. These videos are for educational and entertainment purposes only. I am merely sharing my personal opinion. Please seek professional help when needed.

[Danielchirs]

Understanding personal finances and investing will most likely lead to greater financial independence. By being knowledgeable about money and investing, individuals can make informed decisions about how to save, spend, and invest their money. A trader made over $350k in this recession influenced market.

[anthonybruce]

I'm a CPA, investor, and tax advisor. I've spent over 30 years in business. Your content is very educational, but you have a gift for presenting it a fun, non-intimidating, but thorough manner. I share your content with my 22 and 25 year old children because, of course, they don't always listen to their Dad!!! LOL

[MrDANBOY]

I have had rentals in the past never again it not passive at all. People can’t destroy your index fund but they can and will destroy a house.

[rafaelrondon]

You can sum this video up in a single sentence: Real Estate can potentially be more profitable, but it’s a hell of a lot more work.

[shizue-wn]

As an lnvesting enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?.

[gregorywhem]

For now index and stocks might be better options until the housing market stabilizes. I'm putting off taking out a mortgage for now and just focus on the stock market until the economic storm subsides, and since there is a bull run, the 100k I might have used for a down payment could make more some money in the stock market, but I'm not very familiar with stocks.

[theviceinvirtue]

I'm a realtor, and am very glad you talked about the cons that come with the pros of being a real estate investor. A lot of people don't realize the active work required when it comes to a property!!

[jasonjosephlee]

Great channel!

I am a Real Estate investor myself, I recommend everyone to buy a couple of rentals and see how much their life changes. I have over 100 rental units and they will keep appreciating with time and renters pay down the mortgage. Nothing beats that.

[df]

Tae is correct as real estate property investments have a level of luck when going this direction.
To me the ultimate issue I had with investment property were the renters.
1) You need to keep it rented or you are out of pocket on a payment which will take down your income quickly
2) There is the cost of management/maintenance if out of state. Are they trustworthy and truly looking after your best interests or nickel and diming you for every silly thing that they deem needs repair?
3) Bad renters, I have had two houses (in good neighborhoods) that I had to completely redo the inside in a period of 3 years. Carpet, paint, tile, etc., not inexpensive repairs. That is not an immediate tax write off as some people think, and instantly kills any rental profit you made
On the other hand, my friend bought in the same area I did at the same time... he has had the same renters for twenty years with zero issues
As he said, there is a level of luck

[jdubincali]

Spot on content. I invest in both. Real estate investing described here is best case scenario. Dealing with rental properties can go side ways really fast with expensive property damage and being blind sided to lawsuits.

[santoniop]

What I got from this is to be one of those savvy real estate investors. For example I’ve learned a strategy to buy real estate at 10-30% of the market value. With that much equity going in, your returns far far outweigh index funds or any amount of headaches you can deal with in real estate. Remember the money is made on the Buy in real estate, appreciation is just a bonus. It took me years to understand that quote!

[TalkingMoneyWithNozi]

The reason why I prefer ETFs (South African equivalent to Index Funds) instead of real estate, is because I don't have to deal with people.

[butucpaul]

A small critique: you are comparing leveraged investment (rental) with cash investment (index).
I would love to see the end comparison jf you’d have invested 250k in index and 250k in a cash rental property (and include the asset appreciation)

[RyanContreras]

Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them. Well, at least my advisor does too, jokingly.

[imziminhas]

Single video packed with insane information, this is a course in itself. Thanks mate.

[NICASCOTT]

I'm not kidding when I say that the market crash and high inflation have me really stressed out and worried about retirement.
I've been in the red for a while now and although people say these crisis has it perks, I'm losing my mind but I get it, Investing is a long-term game, so I just focus on the long run.

[titusabraham]

Kudos to a very balanced and humble assessment. A great YouTube channel.

[kiditsmaug]

Finally!!!! An actual honest individual… I give you much respect in your candor for explaining that real estate is not at all passive income and there are tons of variables/hidden costs… Not to mention your modesty in saying that you got lucky with the massive appreciation in todays market (which is a rarity) and may not appreciate as much in the future.

[YaYousef]

Excellent video on the subject an love the example!
Time and effort is the reason I stick to index fund investing.
Index fund investing: 10-30 minutes and a handful of clicks.
Real estate investing: Finding a property (takes days/weeks), working with a real estate agent, getting a mortgage, working with the bank, government paperwork, getting into debt, maintenance, homeowners insurance, yearly taxes, finding a renter, maintaining the renter, repairing things the renter may mess up, etc. etc. etc. - So much more work and hundreds, if not thousands of hours.
If we took your example, is $2000 worth all that time and effort compared to a couple clicks on the computer? To me, it isn't.

[andriartayudianto]

Great content! My experience: I have index ETFs and a few rentals that pretty much give me unlimited returns because of cash out refinances. But I'm self-employed. I find it really hard getting a loan. So, the amount of work getting loans (if you can't get a loan after buying with cash, your return will be terrible with RE), paperwork on tax seasons, city regulations, and the risks of putting your blind trust in property managers who could steal your money easily, make index ETFs more attractive to me. I still own those properties. But I'm not buying more. I need a peaceful retirement. It's just me