Published by REALTOR.com | August 8, 2025
Many experts still believe that real estate beats out other investment opportunities.
High mortgage rates are making it more expensive to buy a home right now—but many experts still believe that real estate beats out other investment opportunities.
And with President Donald Trump signing an executive order allowing alternative assets such as private equity, cryptocurrencies, and real estate into workplace retirement plans, the market is a better investment even still.
In fact, according to Gallup, 37% of Americans agree that real estate is the best long-term investment, with only 23% saying gold and 16% relying on stocks.
Despite that, many investors have been swept into the thrill of playing the markets or trying out new asset classes like art, cryptocurrency, classic cars, and even wine. Gold is also having a moment, given that tariffs have seen prices skyrocket due to most bars being imported from overseas.
If all of these options leave your head a bit scrambled about where to put your money, you’re not alone.
Some areas of investment, like art, require specialized knowledge, while others depend on how much risk you’re willing to take.
With real estate in particular, many homeowners are sitting on record-high equity, which can be used through a home equity loan or a HELOC to purchase an investment property, according to Hannah Jones, senior economic research analyst at Realtor.com®.
“However, investing in real estate is not a slam-dunk in all markets as high home prices and elevated mortgage rates squeeze potential earnings,” she points out. “Investors, or homeowners looking to branch out into buying an investment property, should fully understand expected cost and expected income from a property, as well as the time horizon to see a profit.”
Here’s how real estate stacks up against other investments.
Buying real estate
Pros: Real estate values have grown at a slower pace than the S&P 500 on a year-over-year basis, but according to a Realtor.com analysis, real estate saw an average five-year return of +26% since 1975 as of the end of 2024. That’s nothing to sneeze at.
Typical homeowners have also accumulated at least $147,000 in housing wealth in the past five years, according to the National Association of Realtors® in its fourth quarter of 2024 report.
“Traditional investments like 401(k)s, IRAs, and ETFs are great for passive growth, but real estate brings in a whole different level of wealth-building,” says Dan Reedy, a real estate investor and broker.
Real estate is also a much more hands-on investment.
“With real estate, you can actively influence your returns by making strategic upgrades or managing rental rates,” he adds. “Plus, real estate offers deductions—mortgage interest, depreciation—that can make a huge difference come tax season. It’s not just about growing wealth; it’s about growing wealth you can control.”
Sara Levy-Lambert, vice president of growth at real estate management company RedAwning, adds that although real estate is not without risks, its “blend of passive income potential, stability, and the chance to build equity over time make it a solid choice for those looking to diversify beyond paper assets.”
Cons: If you value liquidity and being able to access your funds at a moment’s notice, it’s probably not the right move for you. Buying and selling homes can take months—if not years—and can require a lot of upfront costs.
“The biggest problem I see is that people have record equity in their home right now, more than they’ve ever had before. But that’s just a number on paper,” says Ralph DiBugnara, founder of real estate resource site HomeQualified. “You can’t really do anything with it unless you’re willing to take [money] out of the house, unless you’re willing to leverage it.”
By that, DiBugnara means being able to leverage a home equity loan or home equity line of credit.
Investing in real estate directly “gives you full control—you decide on tenants, renovations, and how it’s managed. But you also take on the costs and responsibilities that come with ownership,” says Jace Graham, CEO of Rising Phoenix Capital.
Real estate investment trusts
Pros: When you think of real estate investing, you’re likely picturing putting a down payment on a home and negotiating the terms of a mortgage. But if you can’t afford to build a personal portfolio of investment properties, that shouldn’t discourage you from buying into the market.
Many do so by participating in real estate investment trusts, or REITs.
REITs allow investors to buy shares in a real estate company. Their portfolios typically include a mix of residential and commercial properties.
“You don’t own the property directly, so you’re hands-off, which is easier for most people,” Levy-Lambert says. “They’re also traded like stocks, making them more liquid. Just buy or sell whenever you want, without the management headaches.”
The IRS requires REITs to pay out at least 90% of their income as dividends to shareholders, so investors have a steady flow of funds coming in. It’s also taxed as regular income.
“In a nutshell, direct real estate gives you control and potential tax perks but requires more work and patience, while REITs offer easy, flexible access to real estate returns without the management hassle but are taxed a bit differently,” says Levy-Lambert.
A REIT also might be a great place to start if you haven’t saved up enough for a down payment but want to make a steady return on the market.
Cons: REIT dividends are generally taxed as ordinary income—not at the lower capital gains rate. The average annual dividend yield for publicly traded REITs currently hovers around 4%, though this can vary by sector and market conditions.
