First and foremost, my main argument for investing in real estate is the simple fact that stocks have become a mood ring for investors. Stocks now more than ever have had more wild swings than in almost any point in modern history. After the debt ceiling debacle in August, prices went going down and up by 3, 4 and more 5% daily! Does that make most investors comfortable?? Knowing that within 24 hours their investment is worth 5% less, even if NOTHING has happened to the company that they own stock for?
Another reason for this is because information now is always at your fingertips…and the media news cycle is 24 hours. Investors can literally move their entire stock portfolio over their laptop or in some cases their phone! Not only that, but it is estimated that almost 70% of modern stock trades are done by computers – not people. These robo traders don’t take into account what’s actually happening in the market – it’s all done using math formulas an algorithms…how is a regular investor supposed to compete against a super computer a few blocks from the New York Stock Exchange?
Another reason I point out is regarding control. With real estate, you can have direct say over who your tenant’s are. And if you just want to be involved but you don’t want to have to manage it on a daily basis, you can hire a property management company for a small fee which usually will help give you feedback about the market conditions! Not only that, you get to play both the equity and debt side of the investment. Like bonds and dividend stocks, you get regular payments from rent. Then when the time is right you can sell the property for a large lump sum similar to how you would stocks.
One HUGE difference with real estate is taxes. The tax code is very real estate friendly, meaning you can write off practically EVERYTHING. Your mortgage interest, the fee for the mortgage, even the building itself!! Of course, you can always do a “1031 Exchange” or a “Deferred Sales Trust” as I discuss in my video and defer the payment of taxes altogether when you sell the property! And of course, there’s always the fact that real estate is a good hedge against inflation – meaning that if inflation starts to skyrocket, property values usually follow.
However, there are a FEW downsides to investing in real estate…the biggest one I find – especially with first time investors – is the lack of funds. Some first time investors don’t have tens or hundreds of thousands of dollars stacked away. One way to overcome this is by investing with a group as I discuss in my “Group Syndication” video. Another downside can also fall under the upside category…and that’s the fact that you can be as heavily involved as you wish. Although this may come at a cost some people aren’t willing to take…and that is the time to learn about real estate investment and their local market. Just the same as investing in some stocks. Of course, it’s also much easier to get your cash from selling stocks than it is to sell a property – making property a bit less liquid.
As one of my favorite sayings goes, “Buy land…they’re not making any more of it.”…Overall in my opinion, real estate is a smart growth strategy for any investment portfolio. Overall values go up, and in the meantime you get to collect the regular income from your investment. Throughout it all you can have as much or as little control of it as you wish…now that’s good to know. 🙂
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