Introduction
When it comes to building long-term wealth, most professionals are familiar with investing in the stock market. Stocks offer growth potential and liquidity, but they also come with daily volatility and limited control. Real estate, on the other hand, has historically provided stability, steady cash flow, and unique tax benefits. The strongest portfolios often blend both asset classes, creating a balance between growth and reliability.
Stability vs. Volatility
- Stocks: Prices rise and fall by the minute, influenced by market sentiment, economic headlines, and global events. This volatility can create stress, especially for professionals nearing retirement.
- Real Estate: Property values tend to move gradually. Income-producing properties, like multifamily housing and shopping centers, generate steady cash flow regardless of daily market swings. This makes real estate a stabilizer in an otherwise unpredictable portfolio.
Control vs. Passive Exposure
- Stocks: Investors are subject to the decisions of executives, boards, and market forces. Outside of choosing which company or fund to buy, there is little control.
- Real Estate: Investors can select asset classes, locations, and—through sponsors—business plans that align with their goals. For example, focusing on workforce housing in high-growth regions offers more strategic control than simply riding the stock market’s waves.
Cash Flow vs. Dividends
- Stocks: While some stocks pay dividends, they are often modest and can be cut during downturns. Many companies reinvest profits instead of distributing them to shareholders.
- Real Estate: Income-producing real estate provides regular rental income. Investors receive distributions, often quarterly, which can supplement other income sources and provide peace of mind.
Tax Treatment: A Major Advantage
- Stocks: Gains are realized when shares are sold, and those sales trigger taxable events—either short-term or long-term capital gains.
- Real Estate: Properties benefit from depreciation deductions, which can offset taxable income. In addition, strategies like 1031 exchanges can defer capital gains, and estate planning rules often reset cost basis for heirs. These advantages mean real estate income can be far more tax-efficient than stock gains.
Why Both Belong in a Portfolio
Stocks provide growth and liquidity, while real estate offers stability, cash flow, and tax efficiency. Together, they create a balanced investment portfolio that balances risks while improving long-term returns. For professionals nearing retirement, the combination provides growth potential without sacrificing the income and stability needed for financial security.
Closing Thought
The choice doesn’t have to be real estate or stocks. The real opportunity lies in using both to build a diversified portfolio that weathers market swings, generates steady cash flow, and maximizes after-tax wealth.
Win Coleman, CCIM, is a graduate of East Carolina University where he received his bachelor’s degree in finance. He holds both North Carolina and South Carolina Real Estate Licenses and was awarded the prestigious CCIM (Certified Commercial Investment Member) designation in 2008.
Win served on the board of directors of The Triangle Apartment Association (TAA) where he co-chaired The Independent Rental Owner’s Council (IROC). He is a member of the International Council of Shopping Centers (ICSC), the Triangle Commercial Association of Realtors (TCAR) and the Raleigh Kiwanis Club.
While a specialist in site identification, evaluation and acquisition for investors and businesses, he also has extensive experience in brokerage, leasing, property management and investment sales.
Win assists in managing The Coleman Group, LLC, which owns a portfolio of investment properties, and he is a member of our acquisitions committee. He has lifelong experience and love for historic properties including the one he restored and where he resides in Historic Oakwood in Downtown Raleigh.