Have you ever wondered which is better when it comes to Investing – stock market or real estate?
Many would-be real estate investors ask the same question.
Some people are concerned that investing in real estate will take all of their free time and that it will produce less return for their investment than they could get if they invested in stocks. Still, many smart investors are choosing real estate, but why? Of course, there’s the obvious benefit of being able to diversify their source of income. However, there are four other benefits to consider when investing in real estate, which stocks simply can’t match.
The income stream generated by real estate investments is a huge advantage over stock investments. The definition of income is the profit left over after expenses and other debts have been paid. This means, in the case of real estate, the income received would be what is left after taking care of general repairs as well as property updates and remodels that are needed in order to get the property ready for rental. The monthly cash flow or income generated by rental properties is typically more than one would get from stocks.
When investing in real estate, a loan or leverage is often used for the initial purchase, then the monthly payment for the mortgage goes to pay the interest as well as putting money towards equity in the property. If you own a home, this is probably familiar territory for you. However, with investment property, the mortgage payment doesn’t come from your own pocket, but instead, the tenant’s rental payment is buying the property for you. When you look at it like that, real estate investing seems like a great thing to do; after all, how often does someone offer to buy stocks for you?
Another great benefit is you’ll be able to also reap tax benefits. Owning rental property is a powerful tax benefit for an investor. In fact, even if you make money on your rental, you can claim a loss by depreciating the property. In other words, you get to make money while claiming a loss. Of course, over time, this benefit will start to fade, but when that time comes, you can find something else to help reduce your tax burden. When you’re ready to sell your real estate, you can take advantage of the 1031 exchange. Then, you’ll be able to buy a different property without owing any tax for capital gains. This allows you to start the same process over again. It’s certainly not recommended that you try and do all of this by yourself, you should seek the help of a qualified accountant.
Appreciation is an expression that is fairly common, it simply refers to being able to sell an asset for more than you initially paid for it. This is why people invest in the stock market. There are many people who don’t think that the same is not possible with real estate, but they’re wrong. Real estate can appreciate when the local real estate market goes up, this is especially true with the current real estate market in Sioux Falls. Obviously, you’ll need to keep an eye on the economy, but smart investors can make a good profit from learning how to buy and sell real estate investment properties.
But isn’t it a lot more effort to deal with real estate than with stocks? Not necessarily. If you are taking care of property payments as well as upkeep and maintenance, then yes, it can be more work. You’ll need to answer calls from every tenant as well as take care of routine repairs and maintenance. But there’s another, easier way to go. When you hire an experienced property manager, they’ll be able to take care of everything for you while also increasing the rate of return you’ll get from your investment. A property manager can be thought of as a stock broker for your real estate. Even after paying the fees for a professional property management company, you’ll still be able to enjoy a good income. This happens because a quality property management company knows how to keep tenants happy so they tend to stay longer, reducing vacancy times, but they can also resolve problems quickly and will even strive to ensure you get the best prices for property maintenance.
There are a lot of advantages with both stocks as well as rental properties. Whether it’s worth it or not will really come down to how you handle your investments and who you choose to provide the advice and guidance you need. At Real Property Management Express, your best interests are always our top concern and we are here to provide professional property management in Sioux Falls. Call us today and we’ll happily discuss your options with you.