Investments always involve risk, however, historically speaking investing in either real estate or the stock market is generally the best option. Although with recent stock market plunges and real estate values still wavering, the decision to invest can be a tough one. Truly there is no easy answer. However, there are reasons why real estate investing is safer than the stock market; reasons that should be taken into consideration.
Less Money Out of Pocket
When investing you generally start out with a set amount of money that you plan on spending. If you choose to buy stock, the amount of money you spend is entirely used on paying for the price of each stock. Whereas when you purchase a home you only put down a percentage of the actual cost. In the end, you can actually gain more for the amount of money that you put into a house versus the amount you put into stock.
Yes, both real estate and stocks can both appreciates and depreciate but with real estate you have more control. Sweat equity is the proper term which simply means that a little bit of work can bring you equity. For example if you put $1,000 into remodeling an outdated bathroom and another $1,000 in painting, you could quite possibly reap $4,000 to $5,000 more in equity when you sell the property. On the other hand, there is no way you can control how much a stock’s value will increase which leaves you at the mercy of the market.
When have you ever been able to call up your broker and say “I’d like to pull some money out of my stock in order to buy more stock, and I want to keep the stock I have”? You haven’t and can’t because they would just laugh at you. With real estate once you have built some equity in your current property, generally you can refinance, pull money out to invest in another property, and retain ownership of the current property. This is a fantastic way to leverage your money and continue to build more future income.
Assuming you are able to purchase a piece of property and rent it at a price that is higher than your mortgage, you can count on a monthly income when you invest in real estate. Even if, you can’t rent it for more than your mortgage, but the rent covers your expense, you are still making an income. An income that you normally would not have. Not to mention the fact that using someone else’s money to pay off your investment and build equity. How often can you say someone else is buying your stock for you? Risk in investing is inevitable. But the amount of risk you take is up to you and with real estate you have much more control over the risk.