Rental property, on the other hand, is completely different. Buybacks that enrich investment bankers, hedge fund managers, and senior corporate executives are done at the expense of common stock shareholders and the company’s employees. The Harvard Business Review ( HBR) recently reported that the 465 companies in the S&P 500 Index in January 2019 that were publicly listed between 20 spent $4.3 trillion on stock buybacks during that 10 year period. Today, chief financial officers have mastered the art of buying back stock to increase share prices instead of investing in their businesses. In the old days, when the price of a stock went up, it was usually because of strong sales, higher net income, or a valuable acquisition. So, if you spend $30,000 to purchase 10 shares of Amazon, you own about 0.00000002% of the company. For example, Amazon has about 504,000,000 shares of outstanding shares. While there’s no simple answer to whether rental property is better than stocks, there are some fundamental differences between the two that every serious investor needs to know.īuying a share of stock is like buying a very small piece of a company. On the other hand, single-family rentals (SFRs) have generated consistent annual returns of 10% or more from a real asset that can be seen and touched.
Many investors today are concerned that stock prices are no longer driven by fundamentals, with nearly $100 billion projected to be pulled from hedge funds this year alone. But recently, the performance of these two asset classes is becoming increasingly disconnected. Both stocks and rental property have done extremely well over the last 10 years or so.