Because it’s a math concept you must understand. We know that absolute return from housing is less than that from stock market. However, when we invest in housing, we usually borrow a large sum of money, many people borrowed more than a million dollar. Due to this nature, a smaller return on a large sum of money will also yield big absolute return. It’s the borrowing power from investing in housing that many people failed to see. On top of that, the borrowed money can be offset by rental incomes, thus, technically, it’s a fully leveraging concept with possibility of zero down from the investor and he is able to obtain all return in the future. Thus, the actually cash-on-cash return is huge over the years, much more than 8-9% from the stock market (without using margin or option)

Another benefit is tax deductability for investors which stock investors can’t enjoy. Rental income should be able to cover most of the other expenses such as HOA fee, property tax and rental house insurances. Therefore, once the cash flow is even, it’s almost an investment on a auto-pilot.

The most failed-to realized benefit of investing in housing is its long term income potential. Initially, investors may experience small negative cashflow or at best even cash flow. However, as time passes, the property is gradually transitioning into a pure income generator. Because the original mortgage interest rate and term is fixed. Principal is gradually and slowly paid down. Rental income is slowly and gradually rising, after many years, rental income may double, yet the equity is also rising and accelerating.

The real understanding investors in real estate tend not to focus on the capital appreciation aspect of the game, they are more focusing on the “income” aspect. Of course, capital gain helps tremendously, but without it, income aspect alone is good enough already.

If you work in financial industry, you’ll quickly discover that real estate investment is nothing different from Wall street’s Fixed Income Debt and LBO business. The concepts are the same.