One of the most common things that investors around the world are doing right now is searching for information online about real estate vs. stocks.
This it’s to be expected because 2020 has been an up-and-down year for the stock market and with a potential new President of the United States starting in 2021, the stock market will likely continue to see further upheaval.
In this article, I will break down stocks vs. real estate and provide you with more information on which will be the best investment for you.
Before Making The Decision On Real Estate Vs. Stocks
Before I start on the benefits of investing in real estate, it’s important for me to state that investing in real estate isn’t for everyone.
Investing is always going to be about the personal choice, so regardless of the returns that you may have seen other investors enjoying from investing in real estate, the most important thing that you need to do is make sure that investing in real estate is right for you.
When analyzing real estate, you should take a look at your financial situation and make sure that real estate investment falls in line with your goals, investment style, and risk tolerance.
If you find properties that you think would be an excellent fit for your Investment portfolio, you shouldn’t hesitate to invest in real estate knowing that those properties will produce an excellent return on investment.
Why Invest In Real Estate?
Between 1967 and 2020: Housing experienced an average inflation rate of 4.19% per year. This rate of change indicates significant inflation. In other words, housing costing $100,000 in the year 1967 would cost $880,432.30 in 2020 for an equivalent purchase. Compared to the overall inflation rate of 3.94% during this same period, inflation for housing was higher. – Source – 123dollars.com
There’s no doubt that comparing the returns that come from investing in real estate vs. stocks is like comparing apples and oranges but the statistics don’t lie.
Real Estate has enjoyed continued appreciation over the last 50 years and it’s weathered the economic storms that our country has faced.
To get started with investing in real estate, the first thing that you want to do as a real estate investor is determine your purpose for investing in real estate. For example, do you want to flip, or rehab, distressed properties? Is your goal to invest in short term rentals? Or do you want to hold real estate as a landlord?
In my perspective, real estate has been especially beneficial for landlords over the last 30 years because the United States has developed into a nation of renters. This means that people from all generations are more interested in renting than buying properties than ever before.
Besides the fact that more people in the United States are renting versus buying properties, another excellent reason to invest in real estate is that it’s never been easier for anyone to get into real estate investing thanks to historically low mortgage interest rates.
Anyone has the opportunity in this day and age to purchase real estate for the first time, by utilizing the equity in their homes, getting a second mortgage loan, or choosing an affordable FHA loan.
With a greater demand for rental properties across the United States, especially multi-family rental properties, investors who invest in rental properties will enjoy a far higher long-term return on their investments compared to house flippers or other types of real estate investors.
What Are The Keys To Success In Real Estate Investing?
The key to success with investing in rental properties is to first assemble a team. This means that you should work with a licensed realtor to help you source properties in your chosen area.
Once you connect with a great real estate agent, you should also hire a contractor in that area who can assist you with any renovations that the property may need.
After the property has been renovated, and is rent ready, the next thing that you should do is hire a property management company to manage that property for you.
Your goal as an investor, who is interested in Real Estate Vs. Stocks, should be to have the income that comes in from your rental properties be as passive as possible.
This means that you’re not going to spend more than four hours per month managing that property by yourself because the property stops producing passive income, and starts being active income.
When you consider the tax benefits, revenue from renters, and appreciation of the property these are all things that should help you see that real estate should be something that you should add to your portfolio sooner rather than later.
Why Invest In Stocks?
Even though I am a long-time real estate investor, one thing I would never do is encourage other investors to forego investing in stocks.
Every investor should be invested in stock, at least to some degree, because investors should always diversify and have at least some money in stock, along with Bitcoin, precious metals, and other Investments.
Yes, the stock market has seen its share of ups and downs over the years but seasoned investors should know that if they’re going to be invested in the stock market, they should expect volatility to occur.
Sadly, some younger investors were not expecting the Bear Market to return since the Federal Government had largely kept the Bull Market alive for 10 years, but long-term investors know that the Bear market cannot continue forever.
We saw the Bull Market return with a vengeance over the last two years, especially this year in March when the stock market crashed by 7.79%.
Even though red days happen, the reality is that those investors who were able to go shopping during the stock market crash in March were able to pick up some excellent deals.
If you’re an investor who doesn’t like having to deal with the drama of the stock market, but you still want to have some money invested in stocks, the simple thing to do would be to hire a company like TD Ameritrade to manage your stock market portfolio for you.
Doing this would keep you from having to personally be involved with investing in the stock market and also give you confidence that your portfolio would be in the hands of a professional.
Stocks Vs. Real Estate – The Bottom Line
As I mentioned earlier in this article, your decision to invest in stocks vs Real Estate is ultimately up to you.
To be fair, investing in real estate vs. stocks does present an equal amount of risks vs rewards.
Before you invest in either, you should make sure that you’re prepared and can handle the risks, and plan for how you can leverage the rewards, because having a plan in place will help you to be a more successful investor.
If you’re looking for long-term economic stability, including consistent monthly cash flow, I would suggest investing in real estate, especially multifamily properties.
Contact Trier Capital
At Trier Capital, we do all the hard work to find and acquire ideal properties, and then oversee asset management after purchase, while our investors sit back, relax, and receive tax-advantaged passive cash flow.
To learn more about us, or to speak with me about investing in multifamily properties, contact me today by calling (630) 229-2383 or click here.