During a segment of "The Ramsey Show," the personal finance expert, Dave Ramsey, explained why real estate can outperform stocks in terms of returns, if investors are willing to deal with the added time, complexity and risk involved.
What Happened: On the show, a caller named Jason from Oklahoma asked Ramsey whether investing in real estate offers better value than the stock market, especially in the then-current economic environment where stock prices seem disconnected from company earnings.
"It just seems like the price of a lot of stocks is completely irrelevant to the company's earnings," the caller said. "If I buy a rental property, for example, it actually generates cash, whereas the only value you get from a stock is when you sell it."
See Also: ‘The Stock Market Is Shooting Through The Roof,’ Says Dave Ramsey. But Claims The Media’s Silent--’They Want You Addicted To Fear’
Ramsey acknowledged that well-managed real estate investments often yield higher internal rates of return (IRR), thanks to three income streams: appreciation, rental cash flow and tax benefits like depreciation.
However, he warned that higher returns don't come free. "It involves more hassle, more of your time--even if you hire a management company," he said.
He went on to note that real estate outperforms "mainly because it's an imperfect market," where buyers and sellers often don't have the same information, making it easier to find undervalued deals.
Ramsey contrasted this with the stock market, which he described as a more efficient and passive investment vehicle, especially when using mutual funds. "You have zero hassle factor … buying a mutual fund and throwing it in the drawer and forget it," he said.
Responding to the caller's concern that the stock market feels like a "casino," Ramsey pushed back, saying, "No, it's not a casino. A casino is a game of chance. With stocks, you can analyze growth, profit margins, management and trends."
Why It's Important: In January earlier this year, during a podcast, Ramsey predicted a "booming" real estate market in 2025 due to pent-up demand after a sluggish period. However, despite his optimistic views, Ramsey cautioned that 2025 might not be the best time to buy, as overheated markets could lead to overpaying.
According to Celebrity Net Worth, Ramsey currently has a net worth of $200 million. Of his $200 million net worth, $150 million comes from his real estate holdings.
Born in 1960 in Tennessee to real estate developer parents, Ramsey started selling property while studying finance and real estate at the University of Tennessee. By 1986, he had built a $4 million real estate portfolio but filed for bankruptcy in 1988 after new banking regulations led to his loans being recalled.
He began giving financial advice through his church. In 1992, Ramsey became a radio host, eventually creating "The Dave Ramsey Show" (now "The Ramsey Show").
Photo Courtesy: II.studio on Shutterstock.com
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
