Perhaps it's foolish to wade into this good, spirited discussion. But here are some notions I'd share as CPA who does a fair amount of work with real estate investors.
1. You can make the return calculations for stocks and real estate easily comparable. A stock's return is the sum of the dividend rate plus the growth in the value of the stock. E.g., if the dividend rate is 3% and the price grows by 3%, the return equals 6%. A real estate investments return is the sum of the capitalization rate (income divided by value) and the appreciation rate. E.g., if the cap rate equals 3% and the appreciation rate equals 3%, the return equals 6%.
2. Leverage amplifies returns: E.g., if you're investing in something that earns 6% and you use no debt, you earn 6%. If you're investing in something that earns 6% and you fund a chunk of the purchase price with debt that costs 4%, you jack your returns by picking up that extra 2% spread.
Note: We give away an Excel workbook which does the internal rate of return calculations (so you're including leverage, taxes, etc) here:
http://stephenlnelson.com/articles/multifamily-real-estate-investments/3. In the real world, price-earnings multiples expand and contract and capitalization rates rise and fall over time. That impacts returns mightily.
4. Some people who really dig into the history of these alternatives see real estate as returning something roughly between stock market returns and bond market returns--which makes sense theoretically at least because the fixed contracted lease or rental payment stream resembles a bond and the anticipated by unknown profits beyond that resemble a stock.
5. Developed stock market returns tightly bunch around a median, which many people say reflects lots of market efficiency... and also argues for passive investment.
6. Alternative assets like real estate tend not to tightly bunch around a median, which presumably reflects a lack of market efficiency... and also suggests that while on average investors may lose, the top investors make out like bandits.
Note: It's probably a book you'd only want to borrow from library but the Yale Endowment Fund manager David Swensen has a great book called "Pioneering Portfolio Management" which provides really insightful discussions of traditional asset classes like stocks and alternative asset classes like real estate. Spoiler Alert: Most people probably want to go passive...
BTW, I agree with the posted comments about leverage and management issues of real estate, possibility of leveraging stock investments, and the extra risk of having your eggs in a single basic.