You might not like to think about it much, but you know it’s possible to lose money on an investment, too. You’ve probably heard that (or experienced it for yourself!) more than a few times. Yet investors still head for stocks and shares in droves, hopeful of a few percent return which will enable us to either reinvest further in the stock market or head off into retirement with a yacht and a Mediterranean villa. Unfortunately, it doesn’t turn out that way for most of us.
Why do we still do it? We know that the stock market can crash at the most inopportune moments, at the split second we want to withdraw what we hope would be our profits, leaving us a smaller sum than we invested in the first place.
That’s one reason your colleagues, who are looking for passive income, are investing in real estate instead of stocks. The real estate market might fluctuate some, but it’s definitely not as volatile as the stock market.
Here are a few reasons investing in real estate could be smartest business decision you will ever make (and why your colleagues are choosing real estate instead of stocks—Hint: They might know something you don’t!):
Stocks and shares might be exciting as you’re watching a ticker move up and down on a screen, but unless you’re touring the companies you have invested in on a regular basis, your money is effectively a piece of paper. Real estate, on the other hand, is real—you can see it and touch it, not just file it away for your accountant to deal with later.
Any number of things can happen to a company that could alter the value of your investment, from the building falling down to product scandals and subsequent recalls. Should your real estate fall down, however, you would likely have insurance for your protection, something that is not available for stocks.
If you’re investing in a turnkey rental property, homes that are ready for tenants to move in to the second you take ownership, you’re looking at guaranteed rental income each month minus any necessary maintenance expenses. Even if the housing market is in one of the inevitable dips that happen from time to time, your rental income remains the same. That’s considerably more lucrative in the long run than a possible annual dividend on your share portfolio.
Not only is real estate more tax efficient than stocks and shares if you’re flipping properties quickly during a housing boom, but you can use the value of your real estate to obtain loans that will enable you to increase the size of your portfolio. Although you can leverage some stocks to obtain funds, should there be a dip in the market your broker may choose to tie up more of your money to cover any losses. Your rental properties will weather even the worst recessions.
Interested in getting into the real estate game? Make sure you do your research to find an experienced and reputable turnkey real estate company that specializes in that type of property. The most financially lucrative brick-and-mortar investments might be out-of-state where housing prices are generally cheaper, which makes it nearly impossible to hop on a plane to mow the lawn or handle other maintenance issues. If this is the case, you’ll want to work with a property management company that does everything from collecting the rent to weeding the flower beds so you can truly enjoy a passive income rather than worrying every time there’s a blip in the markets.