Real Estate vs Stocks: Which is a Better Investment?
The two most popular investment vehicles are real estate and stocks, both of which can offer lucrative profits. As an investor, you are looking to grow your future wealth and ideally, you should consider diversifying your portfolio and investing in both. But investing in both is sometimes not possible, especially with the current economic state, and there are strategic considerations such as the weighting of your allocations. So, why should you invest in real estate vs stocks? Here are just 4 reasons why:
Real Estate vs Stocks: The Rundown
Real Estate is More Stable than Stocks
Real estate is generally more stable and easier to predict than the rather volatile stock market. While it’s not immune to the market cycle, the value of real estate has historically appreciated. Since real estate profits steadily increase over time, they can act as a hedge against inflation. This is because housing is a constant need and is considered a consumer good, and inflation can increase the price of consumer goods. Cash flows usually keep pace with inflation: as the cost of living grows, so does the market price for rent.
In the stock market, dramatic fluctuations can take place daily and losses can be significant, making investing in real estate a lower risk than the stock market. Stock markets can be a struggle to predict, even for investment professionals. A significant drop in the market can reduce your principle and if it is significant enough it could take years to recover your original investment.
Return on Investment
Typically, in the stock market, you make money by buying low and selling high, but most investors can’t do this consistently. Real estate practically guarantees ROI if you invest with prudence. Commercial real estate offers continuous value because you are dealing with individual properties that vary in features, location, size, and more. By locating and acquiring properties at a discount versus their market value, creating additional value, and optimizing operations, real estate can be a terrific vehicle to create very attractive ROIs. Investing in real estate gives you more nuanced opportunities to build on your wealth.
Commerical Real Estate: Source of Income
Commercial real estate is the type of investment that you can live on. Revenue from commercial real estate can be used to pay down debt or cover expenses associated with the property including mortgages, taxes, insurance, maintenance, etc. Unlike stocks, commercial real estate can have a day-in, day-out value in the form of cash-flow income that stocks typically cannot match. Commercial real estate properties can increase your personal cash flow if selected well.
Real Estate is a Controllable Investment
Your investment is important to you, so why invest in an uncontrollable stock market? Trying to time the market is nearly impossible, even for experienced investors. But with real estate, timing the market is more likely due to the overall inefficiencies in the market. The real estate industry is historically more stable and predictable than the stock market. Real estate is not affected by a company making poor decisions or committing fraud. Though real estate doesn’t exactly protect you from the economic cycles, it gives you leeway to make more stable profits.
Real estate isn’t something where you can go into and expect immediate results and return. But with an experienced team, you can be sure that you are making the right investments. The current economy has investors concerned, however, our team at CF Capital leverages our expertise and is dedicated to helping our current and future real estate investor partners. Get in touch with us today and learn about how you can passively invest with our experienced team!
