Investing is all the rage these days. Thanks to the current economic climate, many are searching for safe ways to grow their wealth and protect their future. We figured we jump into the conversation with a basic overview of the two most popular investing paths. So let’s dive right into LandCentral’s Investing 101: Real Estate vs. Stocks:
Investing in real estate offers a few ways to see a return on your investment through: appreciation, rent collection, developing, and/or flipping. Many investors find real estate appealing because it’s a tangible asset. Check out the pros and cons to investing in real estate:
Appreciates over time – They aren’t making any more land. Thanks to economic development, the properties you hold can become more valuable over time. Maybe the area around your lot has new businesses bringing more jobs. Or a developer wants to purchase your land to build upscale housing. The possibilities are endless.
Generates cash flow – From monthly rental income to flipping a property and selling for more than you paid, there are several ways to generate cash flow from your real estate investing.
Passive Income – Collecting rent or flipping land offers passive income in your pocket monthly or annually depending on how quickly you turn over a property. There’s also plenty of other creative ways to collect passive income on real estate.
Tax benefits – There are several ways to save on taxes through real estate, including: tax deduction for mortgage interest, avoiding capital gains up to a certain amount or time frame, and write offs.
Hedges against inflation – Real estate value actually increases with inflation, meaning you make money when inflation strikes.
Potential vacation or retirement home – If you buy early and wait, your real estate investment may just turn into your mortgage-free retirement home. Or keep it in the family and create a vacation home for generations to come. Like we said, real estate is a tangible asset with endless possibilities.
Requires more time & money – Depending on what you do with your real estate, you’ll likely need a lot of upfront cash for the downpayment, then additional money if you plan to rent, develop, or flip your properties. Consider property management, repairs, zoning, etc.
Requires research before you buy – Not all land is created equal. You’ll need to do quite a bit of research on the location, zoning, easements, etc. before investing. This means the pressure is all on you to pick the right property to see high returns on your investment.
Can’t be cashed in quickly – Real estate can’t be liquidated, meaning you can’t cash in quickly when you need the money. This makes it a slightly riskier investment for those short on time.
Appreciation not guaranteed – Remember the 2008 housing crisis? Depending on the economy, location of your parcel, and timing, some land can depreciate in value. This means you may sell your lot at a loss. Because patience is key when investing in real estate, it’s not for everyone.
Investing in stocks has the potential for high returns. However, it’s essential to diversitfy your portfolio to get the most bang for your buck. Check out the pros and cons to investing in stocks:
Low cost to get started – Investing in stocks can be done in as little as a few dollars. Sure, the more you buy the bigger your ROI, but for those short on funds, investing in stocks is affordable and accessible to most.
Takes minimal time and effort – Thanks to investing apps and stock brokers, you don’t need to be an expert in stocks to invest. Simply move your money to the stock you like or trust a professional to do it for you.
Easy to see your worth – Because the stock market is instant, it’s easy to see how much your investment is worth at any given time. This means you know how much you’ve made minutes, days, and months after you invest.
Easy to diversify – For a fraction of the time and cost it takes to invest in other ventures, you can build a pretty healthy portfolio in stocks. Options to purchase shares in a wide array of companies can diversify your investments quickly.
Easily bought and sold – If you find yourself short on cash, you can easily pull your money out of your stocks. This makes investing in stocks seem less risky to some as this liquid investment can be back in your pocket in no time.
Tied to the economy and inflation – Stocks go up and down quickly based on what the economy is doing. This can make your investment feel the pressure of every business, political decision, and crisis in the market.
Tied to the global economy – Depending on the company you hold stock in, if it’s based in another country, your investment will fluctuate based on that other nation’s economy as well. This puts more pressure on the world at large to keep your investment secure.
Selling can equal big taxes – Selling stocks can result in capital gain taxes, meaning if you sell your stock for more than you paid you may have to pay taxes on your profit.
More stressful – If you sink a lot of money into the stock market, there’s the potential for a stressful ride. Due to things outside of your control like the economy, mergers, etc., you may find yourself panic selling at every turn. It’s for this stressful reason that seriously investing in stocks isn’t for the faint of heart.
So there you have it, LandCentral’s Investing 101: Real Estate vs. Stocks. Both offer risks and rewards. But since we’re in the real estate game, you can probably guess which one we’re partial to. Whether you’re planning your retirement or earning residual income, investing in real estate is the clear winner in our book. If you agree and you’re ready to get started today, check out our amazing properties, on sale now!