Real estate investing has become increasingly popular over the past few years.
With the rise of popular shows like “Flip or Flop” and “Property Brothers” and the best show on TV “Triple Digit Flip,” people are beginning to see real estate as a successful investment opportunity.
But how does it compare to traditional investing in the stock market?
Tangibility of real estate over stock market investing
One of the biggest differences between investing in real estate and investing in stocks is tangibility.
Real estate is a physical asset that you can see and touch, while stocks are just pieces of paper that represent ownership in a company. When you invest in real estate, you invest in something that has intrinsic value, like a piece of land or a building. This value is not subject to the whims of the stock market and is generally more stable.
The value of the property you gain is also not the same as the cost of the property. You should comp it to make sure you’re getting value out of it, but something that cashflows hundreds of dollars for months until the end of time does not equal the couple hundred thousand dollar price tag.
It’s infinitely more valuable.
Volatility in stocks versus the housing market
Stocks are also incredibly volatile.
They rise and fall within a day with no clear explanation.
This volatility is hard to manage and can become a full time career by just guarding your assets instead of a passive way to build wealth like through real estate investing. And when political and economic conditions change, the value of the stock can plummet.
That doesn’t really happen with real estate overnight like it does in the stock market.
Controlling outside factors in real estate investing
Real estate investing is more hands-on than stock investing.
With real estate, you can actively manage your investment by making improvements for your tenants that allow you to justify raising rents because of better working conditions. This hands-on approach can lead to better returns and a more satisfying investment experience.
Higher cash flow for real estate
Cash flow is another key difference between real estate and stock investing.
When you invest in stocks, you are typically looking for long-term growth in the value of the stock. You may receive dividends, but these are small and few between in their payouts.
Real estate, on the other hand, provides a steady stream of income in the form of rental payments, lease options or even wholesaling. Rental income can be a reliable source of cash flow for investors, especially if the property is managed well.
Tax benefits of real estate investing
This is one serious benefit of real estate investing that’s not offered to stock investors.
You can deduct mortgage interest and property taxes from your taxable income. This reduces your overall tax burden and can make real estate investing even more profitable.
And if you’re worried about a changing market, the government offers tax deductions on property value depreciation, even if the property is still cash flowing.
Every investment you make to better your life comes with risks, and real estate is no exception. But for those who are willing to put in the effort, real estate can be a great way to build long-term wealth and financial freedom and stability.
If you knew how to invest in real estate without risking your own cash or credit like we do in SubTo, you wouldn’t hesitate to join our community.
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