When you’re looking to invest your money, the main concern for most people is the ROI, or the return on investment, which gives you a percentage value of the money you invested relative to the money you generated (or lost). Two of the main ways people invest their money are in real estate and in stocks. Each method comes with its own pros and cons; the stock market is less stable but requires less capital to invest, and real estate investment is a tangible asset but requires a greater amount of time to see return.
If you do not do well in volatile situations concerning your money, would rather be in control of your own finances, and believe that wealth can be measured in tangible assets, then real estate investment is probably for you. Here are some of the advantages of investing in real estate over investing in stocks.
- You control your investment. With every property purchased, you essentially become the owner of a micro company who makes all the decisions regarding it. You can improve your investment (renovate), raise rents, cut costs (by refinancing your mortgage), and market your property accordingly. Unlike stocks where you are simply a minor investor at the mercy of the management, here you are the founder, owner, and CEO of your investment.
The investment is tangible. Unlike stocks which exist only through symbols and numbers in a computer, real estate is an investment that you can reach out and touch and stand on. While stock market money can be here one day and gone the next, property doesn’t vanish into a thin puff of smoke. If the global economy crashes tomorrow, you still have a patch of land that can’t just disappear. You can physically see your investment, so, as a result…
- It’s much more difficult to be defrauded in real estate than stocks. While this isn’t to say you can’t be scammed through real estate investment, it’s far more difficult to scam someone through an investment that they can actually visit, check up on, and ensure is actually there before they invest in it. With stocks, you place your money – and your faith – in the management and auditors.
You are literally constantly surrounded by real estate. Unless you’re floating on a boat in international waters, the land under your feet and all around you is real estate. If you’re an interested investor looking to purchase a property, odds are there is always someone who is willing to sell. Find a general location where you’d like to invest, and do your homework to find properties in the area that are for sale.
- You can increase the value of your real estate investment. If you were to buy a property below market value, you can take it into your own hands to add value to it. You can renovate, add bedrooms, redo bathrooms, finish the basement, and otherwise refurbish the property. While renovations like these will cost you upfront, they will drastically increase the price of the house in the long run, and no matter what you might think, you can’t add a bedroom to a stock.
There is no cut and dry answer for whether real estate or stock investment is the best way to invest your capital. The decision is in the hands of the investor and the method with which they feel most comfortable investing. Before you invest, do some research and consider consulting a financial advisor about which investment method is right for you.