Should you invest in real estate or the stock market? I believe you probably have contemplated this as well when deliberating investment options.
In this article we are going to compare and contrast, to help us identify the best investment vehicle to use when building our wealth.
The real estate business has been there for decades, most of the richest people in the world have part of their investment in it.
Investors who put their money in real estate always have a constant and sure monthly stream of incomes.
On the other hand, Stock investors don’t have a guaranteed income from their investments as their stake is always fluctuating. Sometimes when the market falls or goes bear, they will go at a loss.
It is for this reason that real estate is most preferred when considering retiring early. This is because rental income from the property is always sure.
Working Monday to Friday 8am-5pm can be so boring and the better way to invest your hard-earned money is through real estate. You can invest your savings till a time when rental income from the property exceeds your monthly income from your job.
Long Term Financial Security
With real estate, you are buying a physical property that is tangible and generating continuous income. There is no particular day that a tenant will occupy your property without paying rent. Unless the property has no tenants, which is often rare to happen.
Real estate has higher returns, low risk and offers diversified investments.
On the other hand, stocks are affected by volatility and the performance of the economy. This makes investing in stock an undesired element in your investment portfolio.
Mortgage Payments is Taken cared of
Mortgages or loans taken against your real estate property can be offset with rental income immediately after closing the deal.
In some cases, when you get a good property deal in an ideal location, you will tend to have full occupancy of tenants and you might get a surplus income after paying the mortgage. And this will go a long way to even paying your bills while repaying your loan.
When it comes to Stock, there is no bank that can lend you a loan to buy stocks, even stock of the same bank. This tells you that the stock market is full of uncertainty and future cash flows from its investment can’t be relied upon.
This market Real estate investing more reliable to off-setting future obligations than stock investing.
One of the greatest benefits of owning a real estate property is that it attracted tax reliefs every year. For instance, all expenses are tax-deductible, interest on the mortgage taken against the property is deductible. There is also the capital gains advantage on real estate flipped after 1 year of owning the property.
On the other hand, stocks only attracted favourable tax rates for divided made from owning the stocks. Government bonds are Tax-free.
Real Estate Appreciation
Real estate property is the only guaranteed asset to appreciate. This is because the land on which the property is built tends to appreciate with time.
The investing model of buy and hold works best in this kind of investment as compared to any other investments.
For instance, when I was starting real estate I considered plots for sale in Nairobi, which were then selling at a standard price of $5,000. Three years down the line, the property which now has built houses to rent is selling at over $50,000.
Contrary to this, stocks are not guaranteed to appreciate with time. This is because many factors influence price movement and sometimes when the economy is not performing well, stock tend to underperform and you will experience
Inflation in a country happens when the purchasing power of a currency starts declining over time. This means that when inflation in a country starts going up, prices of basic commodities start rising.
One good thing with real estate owners is that property value and rental income tend to rise as prices of basic goods and commodities rise. This makes real estate a good asset to protect yourself against inflations.
The correlations between inflation and stocks are complex and each stock should be accessed and analyzed based on its merits.
However, stocks tend to be used to hedge inflations.
There some assets that you have limited control and there are those that you can control. Every investor loves to have control over their investment properties and real estate completely offers the solution.
Stock investors have no control over their investments.
It is clear, from the above comparisons that real estate investment is the oldest and most preferred asset when developing an investment portfolio. It is because it has less risk, higher returns, and a tool for diversifications.
If you are starting out, you might have to consider a real estate company or agent that will act in good faith for your best interest. For my case, I started with Username Investment Limited which sells plots and land for real development. It is cheap to start off that way.