The Pros And Cons Of Investing In Real Estate Vs Stock

Choosing the perfect investment avenue for yourself can be a strenuous experience, if you are not aware of the various options available. According to most investment experts, real estate and stocks are the best bet, when looking for a new investment. While both have their advantages, you cannot overlook the negative aspects as well. Here is a comparative analysis of property investments and stock investments,

Real Estate

The Benefits

1. Middle-Class Friendly

Real estate includes houses, apartments, hospitals, and other tangible things that middle-income and even lower- income groups are familiar with. This is in stark contrast to stocks, as the general population knows minimal about the latter. Hence, they prefer investing in property over stocks.

2. Safer Investment

Compared to stocks, which have a higher risk factor involved, property investments are relatively safer. While both real estate markets and stock markets are quite turbulent, the former has a bigger safety net. The reason being that with property investments, not much is left to chance.

The Drawbacks

1. More Research Involved

Stock investments are pretty straight forward and don’t require excessive research on the investor’s part. However, real estate investments involve a lot of hard work. From deciding on the property type to finalising on the mode of payment, there are a lot of tough calls to make.

2. Eligible For Tax Payment

Property investments are eligible for tax payments, which is not the case with stock investments. So, unless you rent out your property, you will stand to lose due to tax payments.

Stocks

The Benefits

1. Greater Profits

Most market analysts have agreed that stocks provide more profits as compared to property investments. Also, holding a stock for a long period of time has been one of the greatest wealth creators that puts stocks ahead of real estate in terms of the profit earning capacity.

2. Easier To Diversify

When you invest in the real estate market, you can only choose one property type at a time. This is not the case with the stock market, due to the availability of mutual funds. Mutual fund is a type of professionally managed investment fund that pools money from many investors to purchase securities. This gives investors a wide basket of stocks to invest in.

The Drawbacks

1. Ever Changing Price Trends

The biggest challenge for stock investments is that the stock exchange is fickle, as there is no telling when stock prices may soar or fall. While there are constant changes in the property market as well, the effects of the change are not as substantial.

2. Psychological Factor

Stock investments share some attributes with gambling. Like gambling, stocks investment also invites investors to invest more money with every gain that they make. Inevitably, this can be psychologically unhealthy.

Deciding on the type of investment depends upon a lot of factors. So, before investing your money, you must measure the advantages and disadvantages of real estate and stocks very carefully.

The Incredible Importance of Networking for the Real Estate Investor

Networking is an important skill in any business if the goal is a profitable business. The same holds true for real estate investing, at least on behalf of those who are serious about pursuing real estate investing as a business rather than a part time hobby. Either way, in all honesty, the ability to network for potential business partners, investors, and join ventures along the way can be critical to providing the type of diversity your real estate portfolio needs in order to be solid in a market that is nothing short of volatile.

With the recent collapse of the sub prime lending market, networking has become more essential than ever before for real estate investors. Networking can not only lead you to potential properties that might prove profitable but also to people who need your specific specialty or may be looking for a property you have access to. Even if you share your profits, as long as you are also sharing the workload, you can find a very favorable working environment when you join someone else in a venture such as wholesaling properties, offering lease options, or even working together on a quick flip situation (though caution and clearly defined parameters are best in any of these situations it is critical when flipping a property).

Whenever you have the opportunity to network with other real estate investors it is in your best interest to do so. Dont limit yourself to only networking with those who engage in the same sort of investing you are most comfortable with as diversity is important to all real estate portfolios and you never know when an ideal flip will come across your desk that you can pass along, while making a bit of a profit from the transaction of course (to a flipper) or a perfect buy and hold unit will catch the eye of someone who generally purchases properties with the intent of flipping. Contacts work both ways and you can all stand to profit from the eyes and ears of others, whether as a joint venture, equity sharing project, or simply acting as business partners on specific projects for quicker results and an extra set of hands and eyes on the job.

If you arent a part of a real estate investors networking group in your area, take the time to find them and join. The contacts you will make are invaluable if you intend to make real estate investing your primary business now or hope to make it your primary source of income in the future. Join as many groups as possible today (locally and within a reasonable driving distance) and see what a difference they make in the volume and scope of your real estate investing business.