If you are to believe everything you see on reality TV or hear from fellow investors, you would probably think that real estate shares the same prospects as gambling. Sure, there are risks associated with any form of investment, but there is a huge difference between speculating on the stock market and investing in real estate. By definition, the nature of investing puts something at risk with the hope that you can earn more from it tomorrow than what it is worth today. Real estate offers a myriad of advantages over other traditional forms of investment.
Much of your investing profile is based on your personality. Stock market investments are usually more speculative and have a shorter time frame. With real estate, even quick rehab deals will take at least a month or two. However, there are several reasons you may wish to choose real estate over the stock market, including: cash flow, flexibility and the power to decide your financial future. When you invest in real estate you are investing in a tangible, real asset that you can drive yourself. With stocks, all you get is a piece of paper and the hope that the market will drive up the price.
You will not see any returns from stocks until you sell. That requires day to day, and even hour to hour, monitoring of your specific asset and the ability to sell at the right price. With real estate, you can earn money without a closing transaction. Rental units award you the opportunity to collect limitless checks. This allows you to make interest on that money or to reinvest it into other properties and continue the cycle.
With real estate, you can not only dictate how much you spend, but you will have sole control over your asset. If you want to renovate your property with the goal to rent or sell, you have that option. If you want to rent for a year and then sell, you have that option as well. You are in control of what you spend and hopefully what you can return from your investment. With stocks, you are at the mercy of fickle investors, money market managers and stock gurus that can control your fate.
All it takes to make a successful real estate transaction is one buyer, one investor or one renter. If you put a good product out, you will not have to attract a consensus of people to like your property. It only takes one buyer to make a profit. You can like everything about a company or a stock, but if the market doesn’t agree, you can wait a long time for nothing to happen. A great stock can make you massive amounts of wealth, but so can hitting the lottery.
If you are looking at it from a pure investment point of view, investing in real estate offers tax and cash flow advantages that stocks do not. Both investments can make money given the right situation and personality. Real estate is something that has made money for years and will continue to do so for years to come.