Your Investment Options - Stocks VS Real Estate: Fight!
Stocks vs. real state: which is the better investment? That’s like asking whether chocolate is better than vanilla. It’s difficult to answer this question simply because it ultimately comes down to your own personal preferences and investing style. It’s also dependent on the individual investment. No stock can beat the return of beachfront property in California – especially if you invested during the 1970s. Similarly, you would be hard-pressed to find real estate that could bring the returns would have earned if you invested in shares of Johnson & Johnson, Microsoft, Berkshire Hathaway, and Walmart.
As with most things in life, the answer isn’t black and white. That said, there are arguments for both sides of the equation, and in many cases, real estate is the better long-term option.
In the great real estate vs stock debate, we’re going to play the devil’s advocate and look at both sides of the table. Ready…set…fight!
Round 1: Risk vs. Return
Like with any other investment, it’s important to assess the risk versus the expected return when deciding whether to invest in stocks or real estate.
Generally, it’s easier to analyze the risk vs. return with stocks because you have historical data and past performance to go off of. And although things can change, past performance is often indicative of future results. While investing in a single stock versus an index fund is a calculated risk, the right move could produce higher-than-expected returns.
It can be difficult to quantify the risks when purchasing real estate. Yes, there is data available, which can include comparable home prices and average rent costs, the changes in the market can be unpredictable and sometimes costly. Ultimately, you may wind up owing the bank more than the property is worth if the market experiences a serious downturn.
As a landlord, repairs and vacancy issues can also eat away your profits. That’s why it’s important, as an investor, to calculate not only your expected mortgage, but your taxes and maintenance, and your operating costs. This will help you determine how much you can expect to earn in rental income. The answer will be different for every investor, but if you find the right property, the risk will be well worth the effort and the return that owning real estate provides.
Round 2: Required Capital
Required capital can be a hurdle for investors looking to jump into the real estate market. Generally, anyone can invest in stocks, but it’s much harder – and more costly – to invest in real estate. In order to purchase property, you’ll need to either come up with a 20% down payment on your own, or find partners to invest with you. While there may be special programs in certain states to lower down payment requirements, there are very few options for investors.
The initial capital required to invest in real estate is often what prevents people from diving into this market. It’s not uncommon for properties to require thousands of dollars or more in down payment of costs. You’ll also need additional capital to maintain the property. Stocks only require one initial investment, and you can purchase additional shares later on at your own discretion.
Round 3: TaxesTaxes are another thing that needs to be considered when deciding whether to invest in stocks or real estate.
When investing in real estate, you will be required to pay property taxes quarterly based on the assessed value determined by the city. Property taxes are included in the mortgage payment, whether you decide to flip the property or rent out the structure, you’ll still be required to pay taxes on your rental income or on the sale of the property.
That said, real estate does have its own unique tax benefits. The interest that accrues on your mortgage is tax-deductible as is property taxes, operating expenses, depreciation, and insurance. The amount that you can deduct will depend on how much rental income you receive. But generally speaking, deductions that are higher than your rental income are prohibited.
Stocks also have tax consequences. You’ll be required to pay a capital gains tax if you generate profits from selling stock. Even if you choose to hold onto your stocks, you still need to pay taxes on the dividends you receive. Both real estate and stocks have tax consequences, but the tax benefits that real estate offers may offset these costs and add to your return.
Round 4: Security
When comparing stocks and real estate, real estate does have one major advantage: it’s a tangible investment. Real estate also offers security. It’s an investment that you can touch, see and use. It’s also more difficult to become defrauded in real estate because can actually inspect the property and the building itself, run a background check on any tenants you rent to, and complete any repairs using professionals of your choosing. When investing in stocks, you have to put your trust in the auditors in the management.
While stocks can offer tremendous returns, they can also be volatile. In the short term, stocks can double or triple in price, or they can sink. Unlike real estate, stocks are not tangible. If you invest in a company and it goes down in flames, you may wind up with nothing to show for it. There will always be demand for real estate and land, although the value of the property you invest in may fluctuate over the years.
The Bottom Line
Stocks and real estate are both smart investments, but the right one for you will depend on your own personal preferences. If you prefer a tangible investment that offers security and can potentially be used in the future, real estate is the best option. If you’re looking for quick high returns, stocks may be the better option for you.
Regardless of which one you choose, it’s crucial to ensure that you research the investment opportunity carefully. Real estate can offer great returns, but you need to choose the right property. The wrong property can lead you owing more than the property is actually worth. The same can be said for stocks. Invest in the wrong company, and you may see your investment go down the drain.
LandCentury.com specializes in selling wholesale real estate at the lowest prices. We believe that everyone should have the right and the opportunity to get a great deal on investment property All you have to do to get the property you’ve always wanted is follow these simple steps:
Step 1: Find the Perfect Property
Use LandCentury.com’s powerful network of real estate listings to find the property of your dreams. We have everything from move-in ready investment properties and cheap houses to rural land, buildable lots, and fixer-uppers. No matter what type of real estate you’re looking for, you can find it at LandCentury.com
Step 2: Click the Buy Button
This will start the purchase process. As one of America’s top online property listing sites, we leverage our unique business model of submitting an online payment to hold the listing to make transactions straightforward and secure. Our purchase process is designed for simplicity and security. Once you click the buy button, you will:
Use our secure site to submit your processing fee. We make every effort to protect your privacy. That’s one of the reasons why we offer a 24-hour money back guarantee on your processing fee, so you can feel confident in your transaction.
The seller will contact you within the next 24 hours procced to the next step and get the necessary info to prepare the contract.
Buyer Transaction & Privacy Protection
LandCentury.com stands behind our buyers, and we want you to know that your hard earned money is safe when doing business through us. That’s why we have a number of features to help protect buyers, including:
Symantec Secure Site SSL certificate, providing a $1,500,000 warranty on every transaction
Secure encryption and data protection
24 hour money back guarantee on processing fees
2 separate legal offices across the country to help you with any problems you encounter, anytime
Seller ratings so you can see what other people have to say about their experience with your seller
Still Have Questions?
We’d love to answer them. Check out our Help Center page or call us at 1-888-LAND-WEB (526-3932)
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If you feel that you have been a victim of real estate fraud, there are many resources available for you as the victim. Your first step is to contact the local District Attorney’s office and report the incident. Our office will stand by you and provide any relevant information to support your claim. Here are additional agencies that can assist you and provide more resources: