Real estate vs stocks?

I inherited a sum of money in stocks and bonds. I currently have a mortgage of $75,000 on my house. I am looking at the possibility of turning in my stocks and purchasing a 10 acre plot of land (Full cash amount) and building a small house on the property, then renting out my current house for enough to cover the taxes and mortgage on the current house.

Eventually the 10 acres of prime real estate will have a couple of smaller houses for rentals. these small rentals will be built without mortgaging any of the land.

I just don't want to sell the original house in case I need it for a mortgage or to eventually sell, as well as having the extra income from it once the mortgage is paid off.

Is this a sound investment plan?

Going to college is an excellent investment. Owning your own home and paying a mortgage offers great tax advantages and is an excellent investment. Fully funding a Roth IRA with mutual funds and stocks offers great tax advantages and is an excellent investment.

Once you have all of these in place (including the home mortgage), then take a look at the money you have left, and make decisions about what to do with it.

Anything you do should have potential for immediate gains . . . buying land and holding for 10-years is a real crap shoot. You have to maintain it, holds liability insurance, and pay taxes on it. With a mutual fund or stock investment you can easily determine its value and have no maintenance costs.

No.

Stocks do better than Real Estate over long time periods. After inflation, long-term returns are about 7% for stocks and about 0% for RE. The RE gains of the last 5 years are unprecedented and definately not the norm, so don't base your decision on what you've been seeing the past couple years.

In your case, the decision is simplified by the fact that you would be paying cash for the land. This eliminates 1) The mortgage interest deduction you would have received and 2) the leverage RE offers. Basically, paying cash for property makes you lose out on the only two advantages it has going for it compared to stocks. So, your decision really boils down to whether to invest in a 7% return or a 0% return. Hmmm, tough choice.

There are of course lifestyle considerations, but these are the dollars and cents of the situation.

It sounds to me that your expertise is in real estate. If that's the case, go for it. There's no point investing in things you're not passionate about. Especially if you have little or knowledge at all about the investment. If, on the other hand, you are passionate about stocks as well, and possess adequate knowledge, you might want to reconsider your options. In any case, stick with invsetment you're most passionate about. That way, you will stand the bumps that will inevitably come with every investment.