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Investing 101: Why Real Estate is Better Than Stocks

The stock market is often the first option that comes to mind for many people who are thinking about investing their money.  Many have no idea which investment will provide them with the best return. While the stock market is certainly viable and has a lower barrier to entry, real estate may be the best option for many.

Real estate can offer a number of benefits over the stock market. Consider the fact that according to Forbes Magazine, prior to the recession, two-thirds of American adults were investing in the stock market; that number fell to a little over 50 percent by 2016. In other words, the recession took a toll on the American willingness to invest in stocks. Instead, American investors between the ages of 18 and 34 have opted to invest in real estate or to save their money. Why? What makes real estate so attractive? Because of benefits like those below.

  • Better Returns

When weighing the value of one type of investment against another, the investor has to factor in the risk as compared to the expected returns. Real estate has earned its investors almost twice as much as the stock market has in the years since 2000. Rental properties are particularly profitable since along with the returns from the property’s appreciation, the investor can earn a return of as much as 12 percent from rental income.

Real estate is not as liquid as stocks in that it is not as easy to buy or sell real estate; however, it is also not as volatile as stocks. In addition to the lack of volatility, real estate investors can take advantage of tax benefits. Consider the fact that the interest on a mortgage is tax deductible. Landlords can also deduct operating expenses as well as property taxes and depreciation.

  • The Ability to Add Value 

An investor in real estate gets has the ability to add value to their investments. Popular ways to do this include kitchen or bathroom remodeling or the addition of rooms. Any of those upgrades can increase a property’s value considerably. This is not something that can be done with stocks. You have no control over it.

  • People Will Always Need Housing 

Shelter is a necessity, which guarantees perpetual demand for both rental properties and homes for sale. Predicted interest rate increases and other recent changes within the economy make renting a more desirable option than ownership for many people.

  • Hedge Against Inflation 

Both home prices and rental rates have historically risen with inflation. The means that real estate can serve as a hedge against inflation for the rental income and the property’s sale price. It offers a long-term benefit since mortgage payments will not increase as a result of inflation.

  • Fewer Risks 

There are fewer risks involved in real estate investment when you compare it to stocks, especially when it comes to long-term investment. Consider the fact that a real estate investor has more control over their asset than a stock market investor does. A stock market investor is a minority investor who must place a considerable amount of trust in a company’s management. Investors should consider the fact that the longer they hold on to investment property, the lower their risk since the property will appreciate and they will also build equity.

  • It is a Tangible Asset 

Real estate exists in the physical world,  unlike the abstract concept of stocks. This fact means that it can be occupied and used. While real estate can provide shelter, stocks are not tangible and have no innate, practical value.

If you would like to learn more property management as well as the benefits of investing in real estate, contact us at Property Management Pros today.

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Disclaimer: Property Management Pros is not intended to be marketed as a Property Management Franchise, but rather a License. Every state has different laws regarding real estate and brokerage laws dealing with Franchises and Licenses.