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Should You Invest In Stocks Or Real Estate?

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Okay, so you can bet I’m going to be a little biased 😉 Choosing which one is right for you is going to take a little thinking and will depend on your individual situation. Both have their Pros and Cons.

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Different Types Of Real Estate Investing

One thing I like most about RE investing is that to me it seems to be much more diverse. There are multiple ways that you can use your money to invest in real estate.

Here are a few from The Street

• REITs (Real Estate Investment Trusts), collective funds through which people can invest in real estate by purchasing shares of the trust;

• Joint/joint and several ownership, which involves buying a piece of property along with one or more other people as co-owners;

• Rental properties, through which you buy a piece of property and rent it to tenants as a revenue source;

• Direct revenue, when you buy a piece of property and use it yourself to generate revenue, such as a storefront, a tourist destination or a mining operation;

• Property flipping, when you buy a piece of property in order to increase its value then re-sell it.

From the Article “Real Estate vs. Stock Investing: Which Is a Better Investment?

That’s just a few of the ways you can make money in Real Estate.

Another option is actually lending money that you already have to an investor. This method can be very rewarding as well as very risky. When lending to an investor make sure you have strong contracts as well as make sure you are dealing with a reputable investor that has done a few deals already and have a good track record.

There are some firms that you can find locally (if you are in a big metropolitan area) that you can lend to a hard money lender and they will handle everything for you. They take your money and guarantee a certain return and they lend the money or pool it together to make loans to investors. This is a better option if you have only say 25k or so to invest. This brings me to my next point –

How Much Money Do You Have To Invest?

If you only have 5 to 10k or less to invest, then stocks may be a better play for you. If you are able to buy a second house besides your primary residence, there are costs that you have to consider that will mount up month after month, especially if you go the “landlord” route.

Real estate can cost you money every month if the property is unoccupied. You still have to pay taxes, maintenance, utilities, insurance, and more, meaning that if you find yourself with a higher-than-usual vacancy rate due to factors beyond your control, you could actually have to come up with money each month!

Read the article “Should You Invest in Real Estate or Stocks?

However, Investopedia makes a great point –

Purchasing property requires more initial capital than investing in stocks, mutual funds or even real estate investment trusts. However, when purchasing property, investors have more leverage over their money enabling them to buy a more valuable investment vehicle. Putting $25,000 into securities buys $25,000 in value. Conversely, the same investment in real estate could buy $125,000 in property with a mortgage and tax-deductible interest.

Read The Entire Article “Reasons to Invest in Real Estate vs. Stocks

That’s a really good point that I like, I can buy something and have a lot of equity right off the bat!

Draw Backs Of Real Estate Investing

Probably the biggest drawback of investing in real estate is the liquidity. Your money is going to be tied up. If you have an emergency and need to get your money out fast, well that’s just not going to happen with real estate. In the very best case scenario you can get your money out in 30 days, but probably more like 60 to 90, depending on how you sell. With stocks, well more than likely you can just make a phone call, sell your stocks and have your money in just a few days.

Conclusion

There is a lot to consider when investing your hard earned money. Probably the two biggest things are how much you have to invest and how liquid do you need your money to be.

I have to say I prefer Real Estate. Why? Because it’s something I can actually touch and is a physical asset, unlike stocks.

In the end, it’s up to you and your individual suggestion. Before just jumping into either one, it’d probably best to get advice from a professional financial planner.

 

 

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