Investments produce different results depending on your preferred line of business or asset to invest in. Your investment goals will also impact the type of investment you decide on.
Over time, many people have often preferred two assets in particular; the stock market and real estate. In this article, we will delve deeper into why investing in real estate is more advantageous than investing in the stock market.
Higher Potential for Consistent Cash Flow
There is potential steady cash flow since you are assured of rent money at the end of every month. But, this is provided that you have quality tenants on the premises and also that the management of the property is top-notch.
While it may be more expensive to finance a rental property, the consistent cash flow is worth it.
When thinking about rental properties, most investors only consider residential houses. The property market offers multiple options in the form of commercial and industrial options. Provided you have a vibrant market and a good renter demand, you should be able to reap the benefits of property leasing.
Also, while you invest in real estate, not all investments will yield instantly or periodically. One such example is land or purchasing auctioned houses for house flipping. You will need to create value to maximize your profit.
When it comes to investment in the stock market, you are not guaranteed a steady cash flow. This is because stock investment is considered a long-term investment. Returns from stocks are received in the form of dividends every month or quarter. While there is some form of regularity, it cannot be compared to the consistency of real estate.
Outsourcing Property Management
The burden of managing your real estate investment can be shared. Often rather than not, most investors don’t have the expertise and experience to manage properties. Property management requires one to be hands-on and can take up hours of your time every day.
This is where the services of a property management company come in. A reputable company, like Paramount Management and Realty , offers comprehensive services; marketing the property, collecting rent, and screening potential tenants. Apart from that, we maintain your property by handling all the repair and maintenance that comes with it.
While a management company has to be paid for its services, the consistency of rental cash flow allows for them to be paid from the rental income. The same cannot be said for the stock market.
Investing in the stock market can also be outsourced to a mutual fund manager. The manager will oversee the purchase and sale of the stocks as the prices fluctuate. Similarly, the fund manager must receive compensation for their services.
Due to the volatility and inconsistency of returns from stocks, an investor might be forced to pay them out of pocket.
Stocks Are Highly Volatile
The price of stocks is not always steady. They keep on fluctuating frequently depending on regional and global economics. Sometimes, the prices fall because the public has lost confidence in the company.
The fluctuation of prices can happen within a day’s notice. This easy fluctuation can be extremely frustrating to an investor. It also becomes a stumbling block since planning is difficult because of unpredictability.
Over the years, real estate has shown its characteristic as a stable investment. You can be assured of consistent income despite the economy. Even in times of inflation and rising living costs, you can increase your rental rates to counteract the effect of inflation on your return. This allows you to maintain your margin of profit.
Real Estate Values Appreciate Over Time
As a matter of fact, land and buildings appreciate in value over time. This is usually an added advantage to you as an investor in real estate since the value counters the effect of inflation.
Apart from the natural appreciation, you can ‘force’ the appreciation of your property by making the right renovations or repairs to your property.
The only thing you can’t change is the neighborhood. Once you find a suitable neighborhood that has the potential for growth and good demand in the long run, you will be able to improve the property to increase its value.
As the population increases and demand rises, you can be assured to enjoy the benefits of appreciation.
Tax Deductions With Real Estate
Owning rental property allows you to make tax deductions allowed for by the IRS. The expenses culminating in the managing of your rental property can be written off in your taxes. For instance, you get deductions for property taxes, property management fees, and the costs of maintaining and repairing your property.
On the other hand, when you buy stocks, it won't reduce your tax bill. The only few instances where stocks can be deducted are when they are associated with donations and retirement contributions.
The Bottom Line
Real estate investment has a higher potential for a steady cash flow compared to investing in the stock market. The tasks of managing a real investment can be outsourced to responsible professionals such as a reputable property management company. Besides that, stocks are extremely volatile as they react quickly to extreme fluctuations.
Real estate property values usually appreciate with time. Another added advantage of investing in real estate is that it makes you eligible for tax deductions such as property taxes.
When investing in real estate you will need advice from a veritable and professional expert. Real estate can be a tricky and technical asset to invest in. In the area, there is no better property partner than Paramount Management and Realty.
We have a team of experts that will guide you toward making smart investment choices. Over the years, our company has helped dozens of property investors with their next big investment. Get in touch with us today.