The stock market is a well-known investment option to many and a large number of investors traditionally would look into the stock market to invest their funds. But recent events have proven that real estate is also a very good investment option which in most times is safer and not affected by inflation or a pandemic. Real estate investments also offer an option that can be lower risk, yield better returns, and offer greater diversification.
For you to be reading this article, you are probably considering investing in real estate and are stuck on deciding whether to invest in this present situation, wait till the whole pandemic is over, or move onto another investment option. Well, let’s share a few facts with you:
According to CNN Business In 2015 there was a crash in the stock market in China which had, as a result, trillions of dollars worth stock market wealth wiped out. The Chinese are the biggest buyers of overseas properties in the world – they buy properties across Europe, North America and Australia. This was the best decision made since the stock market crash.
When investing in the stock market, the purchase of a bite of the company is done usually tiny based on your investment. To sum it up, money is made in two ways: As the value of the company’s stock increases, the value of your investment goes up, too. And, depending on the company, you may receive regular dividends, which you can reinvest to grow your investment.
Investing in real estate is the acquisition of physical land or property. More often than not, real estate investors make money by collecting rents (which can provide a steady income stream) and through appreciation, as the property’s value goes up. Also, since real estate can be leveraged, it’s possible to expand your holdings even if you can’t afford to pay cash outright.
It is pivotal to note that stocks tend to be more volatile, leading to a more risky investment. While Overtime real estate investment has proven to be much safer than investing. Below are three reasons why:
1. Real estate investment generates cash flow straight away
Real estate investments provide you with diverse options, one of which is rental. You can rent out your property and keep a steady cash flow from ranging from 5% to 10% of the property price. Renting out investment properties is one of the best ways to earn passive income in real estate. On the sale of your property also, a significant profit can be realised as the cost of land and developed property in your location would have appreciated tremendously.
Stocks, on the other hand, can only provide you with a dividend of 4% or less annually. When you also consider that banks give you a return of just 1% or less, you won’t really make much money till you actually sell the stock at the actual value at as the time of sale.
2. You can closely inspect your real estate investment
Before investing in real estate your due diligence can be carried out; conduct a comprehensive inspection of the property, speak to the owner, discuss with your real estate agent, carry out an evaluation and examination of the neighbourhood before investing. With stocks, its tough for a shareholder to carry out an inspection on the company, review the corporation and talk to its representatives.
3. Real estate can be negotiated below the market value
During negotiations, the property owner can agree to cut down the asking price of the property depending on the demand for the property. Cases of such aren’t often but based on how desperate the owner is willing to let go of the property, you could get it at a good bargain. With stock market investments, there is no room for negotiations. You have to pay whatever the market price is at the time of purchase.
Real estate and the stock market both are rewarding investment opportunities but depends on your ability to weigh up your risk factors and profit margins. Both offer good returns on a long-term. It is, however, safe to say that real estate investments have more potential than the stock market when you combine inflation, a possible pandemic, or asset valuation with time.