Real Estate vs Stocks: Which One Is the Better Investment?
Before we start talking about which one is the better investment, real estate investing or stock investing, let me introduce you to the principles of each of them.
To start with the first, real estate is a property, which includes land or anything standing forever on it, both natural and manmade. There can be different types of real estate, such as residential, commercial, industrial, raw land, and special use. You can directly buy it or indirectly through a real estate investment trust (REIT).
How Do I Invest in Real Estate?
There are different ways to invest in real estate, but let me point out three of them.
These are:
- Homeownership
- Rental properties
- House flipping
People usually think that real estate is a business only for salespersons and brokers, but that’s not actually true. In fact, there are many more professions that benefit from real estate, such as, builders, developers, advisers, etc. This business is one of the crucial drivers for the U.S economy.
In the stock market, shares of publicly-held companies are bought or sold. This is different from real estate investing. Stock market investing stands out due to the concept of fair price. For example, if there is only one seller of a particular product, this salesperson can indicate the price by themselves. But if there are several sellers, they will try to compete against each other to attract clients. The same happens in terms of the stock market. It provides a market price..
Both real estate investing and stock market investing offer passive income and cash flow, but there are still some differences.
Investing in the stock market gives you the potential for long-term growth. In addition, it is uncomplicated to get into stocks. You can start investing right after you create a brokerage account with only $100. Similarly, it’s easy to get out from the stock market and convert your investment into cash. You can collect income from investments by investing in dividend-paying stocks.
But take into account that there are some cons to investing in stocks. If you are a beginner and don’t know what to do, you can make beginner mistakes that can cause you to lose money. This is why it takes some time and effort to learn. If you are emotional, investing in stocks won’t work well for you. It’s always better to keep calm as there are some times when you win, but don’t forget that sometimes you can lose.
On the other hand, real estate investing depends on location and time as some properties grow very slowly in value. It seems to be an attractive way to make money, but keep in mind that some properties need some time to increase in value. Indeed, the properties you invest in most of the time rise in value and make you richer. Moreover, you can enjoy an income from collected rents.
But as with everything, it also has its downsides. First of all, sometimes it gets tough to get out of real estate as some properties don’t sell right away. Second, owning a property can charge you with taxes and sometimes you will need to repair them and pay for taxes and insurance, which are additional costs.
Last Several Words
Based on the topics discussed above, I can tell you that everything depends on you. Take into account your budget, time and character. If you have little money and want to invest, stocks are the best for you. If you have the time and knowledge, invest in real estate. Don’t forget, if you are too emotional, don’t take too many risks in the stock market.
If you are interested in real estate business, see one of our articles 10 Easy Steps on How To Start a Real Estate Business
Good luck!
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