INVESTING 101: Stocks vs Real Estate

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”

     -Franklin D Roosevelt

While the word investment may often stir ideas of Wall Street, big banks, and stocks, the new age investor, along with 90% of proven millionaires around the world agree-investing through owning real estate is a reliable way to build wealth. While there is no guaranteed investment, with the right amount of planning and timely execution, an investment property can rise in value, allowing for the investor to capitalize on the sale.

Real estate appreciation involves the rise in a property to value, which can be due to many factors. Interestingly enough, you can personally increase the property value of a real estate investment with hard work and time. Conversely, simply putting hard work (work, falling under a variable definition) into a stock and expecting the value to rise isn’t as realistic. Unless you are a company chair, or own the majority of a certain company’s holdings, your hard work isn’t going to help the stock price grow. Stocks’ values depend on a variety of factors, including market conditions and company performance. In some cases, a simple news story can cause a stock’s value in the market to pitfall or balloon to unforeseeable, not to mention unstable, heights.

Some of the arguments against real estate investing include rising property taxes and general real estate depreciation, which may occur due to a housing market crash. While these realistic threats loom, at the end of the day, the investor is never left with an empty pocket.  An educated investor knows that with proper precautions, a good team and adequate insurance, they’re unlikely to “lose it all”. As proven with the stock market crashes of years past, individuals and companies relying on the stock market can certainly lose it all. Although it sounds like a scene from a horror movie, notorious dates in financial history (Black Monday, Black Thursday) have crippled companies to bankruptcy, and left countless honest, hardworking, individuals destitute.

Real estate investments aren’t foolproof, but they are tangible income producing vehicles, with a pretty basic exit strategy; find a realtor who can do the work of selling the property for you. Although the process of selling stock is much simpler than the process of selling a home, the personal control over profit in real estate sales greatly trumps that of stock trading. While the potential of a housing crash is often used to downplay the security in real estate investing, one only has to look at the rebound of such crashes for reassurance that it’s not all negative. Seasoned real estate investors have been known to take advantage of housing crashes, by buying homes in bulk, and holding onto them until the market bounces back, allowing them to sell homes for a profit. Some might say that there are “dangerous” times to buy real real estate, but with the right research and planning, real estate investments can be safe, reliable, and profitable for as long as you plan to stay in the market.