The Nuts & Bolts of Real Estate Investing
Updated: Jun 23, 2020
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If you are deciding between investing in real estate or investing in stocks, the comparison is somewhat challenged as they are both very different. There is no straightforward answer to the question, it is really about individual preferences and choice.
Let us take a closer look at the two types of investment
Investing in real estate is the same as buying a property or physical land. Buying a piece of land would cost you money as you are holding onto a vacant piece of land, with some investors hoping to sell the land to another someday. However, buying a property could be cash generating as the difference between the rent and expenses is your profit.
Investing in stock is the same as buying a piece of the company, and you are entitled to a cut of the profit, after the board decides how much of the profits are to be reinvested and how much is to be paid in cash dividends.
The Pros & Cons
Investing in real estate
Real estate, more often than not, is deemed a more comfortable investment. This is because most grew up with their parents talking about the importance of owning a home. As such, most are more open towards investing in real estate than other forms of investments. Real estate is physical and tangible, you can touch it, look at it and show to your family and friends; and most importantly, ensures the property is actually there before you make your purchase.
However real estate investment takes a lot of hand on work unless you let a management company manages the property for you. This way, you will not have to deal with calls from tenants in the middle of the night since the management company has customers service to cater to your tenants’ call 24/7.
Investing in stocks
You can owe a part of the company and get a cut of the profits without actually having to do the hard work. You can invest in stocks, bonds or even mutual funds and these investments have high liquidity, so you are not locked in for months. However, stock prices may fluctuate in the short run and inexperienced investors may get nervous with the fluctuations.