Why 8% in Real Estate Is Not 8% in Stocks.

“Why would I buy real estate for 8% when stocks do 10%?”

Heard this one a lot. Here's why the question is wrong.

The Deal

My strip mall in Texas. Purchase price: $1.64M. Mortgage: $800K at 6.75%.

8% cash-on-cash on day one.

But that number is hiding several layers underneath it.

The Layer Most People Miss

Tax treatment.

Year one bonus depreciation: $492,000.

My entire passive income portfolio pays effectively zero federal tax this year. Every dollar of rental income, shielded.

Unused losses roll forward into future years. People with large passive portfolios often pay single-digit effective tax rates. Now you know why.

The Compounding Layers

And that's before you count:

• 2% rent escalation clause in every lease. Income grows automatically, every year, without a conversation.
• Mortgage paydown. My tenants are building my net worth with every payment.
• Below-market rents on several units. When leases expire, rents go up. So does the appraised value of the property.

The Free Upside

The deal also came with a vacant lot next door.

I'm scoping a 4,000 sqft expansion to add new tenant spaces. That upside was not priced into the acquisition. It came along for free.

The Real Number

True year one yield on cash flow and tax benefits alone: north of 20%.

That excludes the rent escalations. The mortgage paydown. Any appreciation. The expansion lot.

An 8% return in real estate is not the same as 8% in stocks.

It is not close.