When deciding to invest, many people choose to buy stocks in the hopes of making large profits. With stocks, however, you risk losing a lot of money with one bad deal. Real estate investing is much less risky than investing in stocks and can produce higher profits in many cases. Even with bad real estate investment deals, you’ll be able to make some money back as long as the property sells.
Table of Contents - Real Estate vs. the Stock Market: Is Real Estate a Safer Investment?
That said, investing in property does require more money upfront. This money is needed to purchase the property and take care of any maintenance issues. Finding a lender is usually quite easy, especially if you have good credit. Most lenders are used to seeing real estate investment loan requests, so leveraging your debt is usually easy as well. It won’t be hard to come up with a payment plan that works for both you and your lender.
If you’re a first-time investor, then you’ll probably see many more benefits to investing in real estate as opposed to stocks.
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Stocks are fickle
The stock market is unpredictable and can change almost every day, which is why investing in stocks is extremely risky. Some people invest a lot of their savings into stocks and end up breaking the bank when those stocks fail. If you don’t sell your stocks at the right time, you could end up losing a lot of money.
You have to put almost as much time into stock research as you do real estate research. You’ll want to be knowledgeable about any company you’re investing in, especially its growth potential. That said, no matter how much research you do, it’s hard to know when the perfect time to sell your stocks will be. You could spend a lot of time and energy doing research only to end up losing your investment.
Even if you end up making a lot of money with stock investments, all those profits could disappear in the blink of an eye.
There’s less risk with real estate investing
While a bit unpredictable as well, real estate markets are much easier to research than stocks. Look up information about real estate trends area in which you’re investing. This information will usually help you decide if it’s worth buying, then reselling a piece of property in that area. If property values in a certain neighbourhood have declined over time, you could easily move on to another area.
Investing in real estate also means that you could make passive income while waiting to sell. Many people purchase real estate properties with the intention of only using them as rentals. Renting out your property means that you’ll receive a monthly income, which could result in high profits over time.
If your property isn’t showing profits as you’d hoped, it’s easy to cut your losses. You can earn some of your investment back by finding a reputable local real estate agent to help sell your property. You might even end up making more money back than you’d hoped!
A diversity of options
You have plenty of options when it comes to real estate investing. There might be plenty of available single-family homes, apartment buildings or commercial properties, depending on where you live. First-time investors might see a single-family home as the right investment, while a more experienced investor might choose to invest in a commercial structure with plenty of different properties. Finding a good investment property is often fairly easy, no matter what your preferences.
There are also many different methods of investing that you can use to make money. If you’ve purchased a single-family home, for example, it could be more profitable to rent the property to tenants. This is especially true if you live in a more populated area with plenty of need for rental properties. Buy-and-hold is another great way to invest in real estate, then pounce when the market is right.
Another great example: fix-and-flips. Using this method of investing, you would buy a home to renovate, then sell at a higher price. Even if the market crashes, you’ll still have a tangible piece of property to sell later.
You’ll be in control
Buying and selling stocks comes with certain limitations that you don’t get with real estate investments. As mentioned above, there are many things you could do with your property after purchasing it. It’s usually easier to keep up with the real estate market and decide when the perfect time to sell will be. Predicating the perfect time to sell stocks, on the other hand, is nearly impossible.
Investing in real estate also means you’ll actually be able to see your investment in person. If your property isn’t making as much money as you’d hoped, a quick renovation could be all that’s needed. Something simple like better landscaping could make your property more appealing to potential renters and buyers. All these decisions will be yours to make, giving you more control over potential profits.
Investing in real estate helps with future investments
Investing in real estate means that your investment portfolio will grow—and thus look more appealing to lenders. If your first real estate investment is successful, you’ll likely want to put some of those profits into another investment. This shows lending companies that you know what you’re doing and will entice them to provide all the investment capital you’ll need in the future.
You’ll also gain a lot of experience from investing in your first piece of property. This experience can help you avoid mistakes during future investments, especially if they’re more complex. It’ll also be easier to rent or sell your property the next time around, as you’ll be more knowledgeable about what works in certain neighbourhoods.
No matter if you’re investing in real estate or stocks, it’s important to do plenty of research. Consider talking to other investors in your area or even taking a class on investing. Also, be sure to devise a plan and decide on your budget before getting started. With enough knowledge, you’ll be well prepared to invest your money intangible real estate.
Real Estate vs. Stock Market - Which One Will Make Me More Money?
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