With ongoing stock market volatility showing no signs of slowing down, it’s easier than ever to make the case for diversifying with secure, proven income-producing assets like real estate investments, but most Americans still have a dizzying array of investment options to choose from, so how can the average investor decide? Between insurance, bonds, CDs, hard money lending, stocks and real estate, it can be a challenge to decide where to put your cash. Read on to see how real estate stacks up to the stock market and why more investors than ever are opting to include investment properties in their financial portfolios.
Stocks vs Real Estate Investing
Even the most casual investors are at least somewhat familiar with the stock market. From employer-sponsored plans like 401(k)s to IRAs and traditional investment accounts, anyone can put their money into an exchange traded fund (ETF) and enjoy minimal earnings that follow the movements of major stock exchanges.
In addition, mutual funds make it easy to evaluate performance and invest retirement savings and there are plenty of financial advisors ready and willing to give advice about what to do with your hard-earned money. But still, the average person still hasn’t become as comfortable with investing in real estate, even though it offers a more secure alternative and returns are proven to grow significantly over time.
“There’s a notion that real estate is an investment class reserved for the wealthy, but that’s just not true”, wrote Bigger Pockets. “There are dozens of real estate investment niches, strategies and techniques”.
Whether you have just a few thousand dollars or several million to invest, there are ample opportunities in real estate markets around the world. From single family homes to multi-family residences, vacation home rentals and condos, to quick house flips and major renovations, real estate investing truly offers something for every type of investor.
Real Estate or Stocks, Which Will Make You Richer?
Wondering why someone would choose real estate investing over more hands-off investments like mutual funds, stocks and bonds? Although these may seem safer and more mainstream on the surface, the reality is that stock market gains can be wiped out in mere moments due to factors beyond the control of investors, but brick-and-mortar assets like real estate is much more likely to hold its value, even as major recessions and global economic downturns come and go.
Here are four more reasons to balance your financial portfolio with smart, income producing real estate investments:
1. Real Estate Investments Have a Greater Upside.
Between 1970 and today, the average annual return on investment for real estate has been more than 11%, while the S&P 500 struggled to hit 10% during the same period (before inflation is factored into the mix!).
2. Investors Have More Control Over Real Estate Assets
With stocks, you don’t have much control of how the business is managed - and subsequently - how it performs financially, but with real estate investments you’re the CEO in charge of making improvements, cutting costs, raising rents, selling property, etc.
3. Investment Properties Offer Leverage
Property owners can leverage other people’s money to fund real estate transactions that offer greater return on investment, building wealth from scratch.
4. Real Estate Provides Greater Tax Advantages
Depending on the tax bracket you’re in and what kind of real estate investments you own and where they are located, there are ample opportunities to write off expenses, interest and more to lower your overall tax bills year after year.
Do you have questions about investing in real estate? Share them in the comments!