If you’ve ever asked a financial advisor whether stocks or real estate is a better investment, chances are good that the investment advisor told you real estate investing is less likely to provide a competitive return on investment, and/or that there are higher costs, less liquidity, etc. associated with investment properties. But I would ask, is your glass half full or half empty?
Who do you want to believe, the stock broker with volatile unsecured returns and huge commissions to gain. or a real estate investment advisor with solid, proven 8-14 percent returns that appear to be – on the surface at least – somewhat less liquid. Think about this; although a stock might technically be “liquid,” if it’s worth less than what you paid for it, is the investment really liquid? I mean, are you going to take a loss, or wait and hope it goes back to where it was?
While it’s true that not every real estate investment is a good one, the reality is that income producing property like vacation home rentals – when purchased in a great location – actually offer a much higher return on investment than traditional stocks, bonds and mutual funds, as well as protection from ongoing stock market volatility.
Read on to see our top seven reasons real estate investing is a better choice than stocks and learn how to protect your financial portfolio from market uncertainty!
1. Ongoing Investment Income
Even stocks that pay high dividends will only deliver around 4-5 percent after inflation is factored in, so don’t fall for the idea that you will get 10 percent return on investment from stocks, bonds and mutual funds. What’s more, many of these traditional investments don’t generate steady ongoing investment income at all, making them virtually useless for retirement income, etc. By contrast, investment properties like vacation home rentals in popular destinations such as Mexico’s Riviera Maya are producing secure, proven 8-14 percent return on investment that can also bolster retirement income when you buy with a self directed IRA account.
2. Physical Asset = Secure Investment
Real estate investing also comes with greater security than stocks because physical assets have real inherent value that is not subjective to intangible market whims. Income producing property goes even further and takes this idea to the next level, because it is about as “hard” of a real asset as you can find. In addition, it’s important to point out that real estate doesn’t have “red” days and “green” days, but instead will appreciate steadily over time, while the land itself – in addition to the structure – often has additional value.
3. Tax Benefits
Whether you take advantage of tax-deferred income by purchasing property with a self directed IRA account, or simply own investment properties outright, the tax code is written to benefit real estate investment. This comes in the form of mortgage interest deductions and depreciation accelerations to protect positive cash flow, as well as the ability to exchange funds into a similar instrument to defer taxable gains for a predetermined period of time. Either way, owning successful investment property will offer many more tax benefits than buying stocks, bonds and mutual funds.
4. Property Appreciation
Real estate will appreciate in value over time at a rate that meets or exceeds other investments and income producing property typically appreciates faster that other types of investment properties. Historically, rental properties increase in value along with the net operating income, which grows through standard rent increases and professional management. Also, keep in mind that buying real estate in a great location will also ensure faster appreciation, with popular vacation destinations like Mexico’s Riviera Maya proving that some property values will never depreciate.
5. Buying Below Market Value
Unlike most traditional investment vehicles, it is possible to buy real estate below market value thanks in part to the magic of pre-sale pricing on new developments. Some developers in popular areas like the Riviera Maya will offer luxury condos for sale at a substantial discount while the project is still in development, giving buyers the opportunity to cash in on immediate profits when the finished homes are delivered and the prices go up accordingly to reflect their real market value.
6. Added Value
Unlike stocks that give share owners virtually zero input after purchase, real estate offers the opportunity to add value to the investment by improving the property. Certain luxury upgrades – such as a gourmet kitchen, outdoor living area or spa-like master bath – can seriously add to the property value and increase rentability, giving owners even more control over the valuation of real estate investments than they could ever have over stocks, bonds or mutual funds.
7. Hedge Against Inflation
When deciding how to invest your hard-earned money, understanding inflation is key because it can mean the difference between enjoying strong return on investment and being left behind whenever stock market volatility rears its ugly head (and it always will). Simply put, inflation is a nasty reality that ensures your money doesn’t go as far as it looks like it will. Even when inflation is low, it can have a huge negative impact on your bottom line, but when inflation is high it can be absolutely devastating to your bottom line. Fortunately, real estate provides a strong hedge against inflation. Investment properties in particular have been historically proven to have the most power to defy inflation, because the property value either goes up equal to – or even outpaces – the rate of inflation.
Are you looking for smart ways to boost investment income? Let us know in the comments!
Read How to Beat the Stock Market with Investment Property in Tulum and learn how real estate investing can secure your financial future and provide retirement income!