life TV the channel people come to to learn about finances investing taxes and

more! If someone was to ask you what type of income was better dividend income or

rental income what would you tell them how would you respond I can tell you one

thing I would want in this video we're gonna explore that question in great

detail and by the end of it you may find that you actually desire both we're

about to dive into the video but I have a quick favor to ask if you enjoy

today's video let me know by dropping a like leave a comment below and if you're

brand new to the channel please consider subscribing so you do not miss any of

our future uploads what we're talking about dividend income versus rental

income we're actually talking about two different types of asset classes how ok

let's see how do I explain this are you trying to say it's like trying to

compare bananas and oranges thanks schipper that's actually a really

good analogy don't you mean apples and oranges no apples I like bananas and

oranges okay fine chipper bananas and oranges it is it's a good analogy

because comparing dividend income versus rental income it's not a banana - banana

comparison it's very much a banana - orange comparison these are two very

different asset classes with very different attributes dividend income is

primarily generated through owning paper assets versus rental income that is

generated through owning real assets instead of thinking which one is better

I would encourage you to really think about which one is more suitable for the

lifestyle you're trying to build I think as we progress through this video that

answer is gonna become clearer and clearer as time progresses let's start

off by talking about a subject people love which is passive income both forms

of income are very passive meaning you receive money that you no longer have to

trade your time for but one is more passive than the other if you were to

ask me if you want to know my opinion in terms of which form of income is more

passive dividend income really takes the cake here in my opinion with dividends

you simply invest in the company stock or ETF or mutual fund or whatever and

wait for the money to be deposited into your bank account with ritalin come or

real estate or income from real estate you will eventually have a check hitting

your bank account but there's a little bit more to manage being a landlord is

not always fun you may get a call in the middle of the night saying that the

toilet is clogged you may have to evict someone who is damaging or not taking

care of your property a lot of times these are your own family members or

friends it really sucks worse yet you may have to deal with a renter who

doesn't want to pay you and always seems to have an excuse as to why they are

late on their rent for some reason they can't pay you because they're too busy

flossing their cat's teeth or whatever it is the hell they do now of course you

can get a property manager involved to help you manage the property but really

if you want to maximize your profits it's crucial that you're able to keep an

eye on the property itself every once in a while because no one is gonna care as

much about your profits as you not even the property manager just like anything

else there are good and bad property managers so unless you're monitoring the

situation a little bit yourself you're not gonna find out which one of the two

you have so real estate can be awesome rental income is great but a little more

legwork is involved now let's compare the two dividend income versus rental

income when it comes to yields where can you get the best yields for your money

if you're looking for a higher yield on your money this is where I think rental

income begins to shine with rentals depending on the type of property and

the deal you get you may find yourself with an average yield of anywhere from 5

even up to 10% or more on your money dividend yields the yields aren't quite

as attractive because the average dividend yield is roughly running 2 to 3

percent on average so it's not a lot now if you venture off into real estate

investment trusts which are as a way you can invest in the stock market into real

estate by purchasing things known as REITs a real estate investment trust you

can get higher yields such as 4 or 5 6 7 % but generally speaking dividend yields

are often lower than if you were to own the physical real estate outright and

renting it out to somebody in rural landlord of course there are a few other

ways to get higher dividend yields in the stock market which was publicly

traded partnerships and corporate this is a question I often find people

have this all right like if I if I choose to go the dividend income

investing route or the rental income or real estate investing route which one is

gonna make me the richest the fastest or how or which asset class is going to

allow me to to retire the soonest that's what I really want to know although both

asset classes can lead you to the same goal real estate has been the more

consistent victor in allowing people to retire sooner and building wealth from

what I have observed with the exception being if you found the next Amazon stock

of course if you were lucky enough to invest in the Microsoft when it began or

Amazon you could have made a killing really quickly so there are some

exceptions in terms of which one can make you richer faster but I think in

the long run just from what I've observed definitely real estate is the

way to go you may have seen the shows where people

quickly buy fix up and flip the properties for huge gains you've

probably heard of the stories of people who buy and hold real estate and rent it

out for a monthly cash flow and keep repeating this process until their

passive income exceeds their expenses so those are just some of the ways to

accumulate wealth with real estate like I said there's many different avenues

but those are just some of the ones I want to mention now let's talk about

dividend income now dividend income in my opinion it is easier to build a

passive income through dividends but it takes longer and it takes a lot more

capital money to invest so it's a slower way to get rich so oftentimes if I post

a video and dividend investing there's a lot of people saying hey I'm gonna

retire in the next five years well it's like if you're starting from zero that's

probably not going to happen dividend income is a slow way to get

rich it's very passive it's a great way to make money and build a nice

retirement income for you but it's not gonna happen overnight it could take 20

30 40 years depending on upon how much money you can invest each month or each

quarters now if you say Mike well I still really want to invest in the stock

market I'm really not too keen on real estate so is there is there any way to

get you know richer faster in the stock market besides dividends and I would say

yes if you if you really want to be efficient in terms of really swinging

for the fences then instead of just focusing on dividend income

I would actually focus on growth based and

and that's gonna allow you to get higher returns on your money now of course

that's not guaranteed and so growth you know you can grow your money you know 10

15 20 percent per year with the right investment using a growth strategy but

it's not guaranteed so there's definitely pros and cons with

investing for growth that many investors like yourself might not feel comfortable

with so it's it's finding the right balance of what works for you and what

you can stick with in the long run and be successful with if you were to ask me

at least with dividends you are getting a portion of your investment back each

year plus you still have a chance to receive capital appreciation on top of

that for example we're in what I'm filming this this is August of 2019 some

of my most successful investments this year in 2019 have been dividend paying

blue chip stocks even though some because the market's been a little tipsy

Turbie this year with all the trade wars going on these interest rate

fluctuations with the Fed getting involved but there's like Procter &

Gamble it's one of my best stocks this year and I'm up over 20% this year alone

whereas many of my tech stocks are tech based ETFs that would be more growth

focused aren't achieving or aren't performing as well now let's take a

moment to talk about taxes how is dividend income tax how is real estate

income taxed let's cover this real quick so you guys get a good feel for what

your tax situations can be from this kind of income starting with dividend

income it can be taxed at either the marginal tax rates or capital gain rates

depending on if it's a ordinary dividend or qualified dividend I have separate

videos on this I can link them below if you'd like to check them out

for most Americans their marginal tax rate falls between ten up to twenty four

percent that's where I find most Americans fall in terms of the income

scale whether they're single or whether they do married filing joint so what

this means from a tax perspective when it comes to dividend income depending on

their marginal tax rate for every dollar of dividend income they earn they're

either gonna pay ten cents up to twenty four cents of every dollar good news is

if those dividends are qualified dividends then they get the SPECIAL

capital gain rate treatment which is a lower tax rate

and for most Americans their capital gain rates are only 0 to 15% so in other

words they pay only out of every dollar that only pays zero up to 15 cents per

dollar on every tight R and every dollar of dividend income earned real quickly

how is rental income taxed I think you're gonna find it's pretty

straightforward you may have heard that rental income has numerous tax

advantages and it absolutely does but I'm not gonna go into a sense of detail

here we can save that for a whole nother video that's a whole another course ok

but your your rental income you're not taxed on your gross rental income your

tax on your net rental income which means it's your the rent income minus

all of your expenses so whatever that is so if you let's say you make ten

thousand dollars in rent you have six thousand dollars in expenses which means

your net profit or your net rental income is four thousand well then you

would pay taxes on four thousand dollars of rental income at whatever your

marginal tax rate is rental income does not have any special capital gain rate

treatment it's just taxed just like ordinary income ordinary income you pay

on the net rent you receive like which is easier to keep track of taxes I want

to know because the IRS Eagle in terms of which one is easier to track for tax

purposes hands down no questions asked dividend income is by far the easiest to

track for taxes and the reason it is is because the brokerage company you're

with whether it's Robin Hood whether it's Ameritrade M one finance

whatever maybe they're gonna send you a statement in February of each year that

totals all of your capital gain income your dividend income etc all on one tax

statement and that's you rental income a lot different you actually have to keep

track of all of your expenses associated with the property you might have

management fees depreciation you're gonna have maybe repair supplies

utilities there's all these different expenses that can go into it that you

want to keep track of having a property manager helps because they can summarize

a lot of those the income and expenses on one

but it doesn't mean it's going to encompass everything you need so there's

a lot more record-keeping involved with rental real estate because it's more

like running a business whereas with a stock or with dividend income it's more

like buying into a business and you're just collecting the check real quickly

let's talk about the risk associated with dividend income and some of the

risk associated with rental income with dividend income there is always the

potential that a company starts underperforming or begins struggling

financially when this occurs what usually follows is

a temporary reduction in dividend payments or possibly cutting the

dividends all together now Moore's most recently I think we saw this with

General Electric a lot of people held on to that company stock for a long time

just for the dividend but fundamentally the company started to underperform and

financially just started going south so now we have General Electric stock which

has plunged in value over the last few years and virtually pays little to no

dividend at this point so there's always the business risk that the business may

start failing financially and may need to either temporarily reduce the

dividend or completely cut it altogether that's the risk I think with dividend

income that's one of the risks and rental income has its own risk as well I

mean it's no cakewalk there's always the risk that a tenant the your renter could

leave and you might have trouble filling the vacancy also there's the risk that

that tenant could damage your property when they leave I actually knew I

actually knew a person whose property whose rental property wasn't in the best

area had very kind of shady renters not the best renters unfortunately well one

of the tenants when they had to go and evict them they actually burnt down the

entire house so real estate is definitely not without risks so beyond

you know just losing your tenant for the chances of potential damages there's

other expenses that might creep up as well that might increase over time such

as your insurance cost to insure your home

of course also property taxes can increase over time which cuts into your

net profits on your rental all right now let's talk about which investment

dividend income or rental income gives you more control with dividend income

unless you a major shareholder of that company that

owns more than a 50% stake you're basically at the mercy of the company so

you have no you virtually have no say and how that company conducts its

business with rental income there's a lot more control in terms of what you

can do to maximize your profitability you can raise rents you can be more

creative with improvements you make to the property to extract higher rents you

can manage your expenses or find ways creative ways to reduce expenses to to

you know to continually increase your profits you can decide whether you want

a property manager or don't want a property manager there's a lot more

control of what you have there you can also do a 1031 exchange into a different

property to avoid paying tax in the sell so like I said with rentals a lot more

legwork but also a lot more control in my opinion all right guys real quickly

just rapid fire mode now rapid fire time I want to cover a couple of their

factors with you guys regarding dividend income and rental income I think these

are just some other key takeaways or things to know before making your

decision of which one to invest in or both the first one I mentioned is both