Property Management Blog

Why You Should Invest in Real Estate Over The Stock Market

KRS Holdings - Monday, October 28, 2024
Property Management Blog

Two common ways of gaining income are real estate investments and stock investments. Both will ask for a different level of dedication. You should pick the most suitable one that increases your wealth faster over time and provides more financial stability. Stocks and real estate are heavily promoted and new investors may find themselves confused over which to select.

Reasons to Invest in Real Estate Over Stocks

Deciding what to invest in can be a very hard decision, as there is so much to take into consideration. Here is why you should invest in real estate: 

Real Estate Investment Provides Consistent Income

If the real estate you invest in is in a popular area, you are bound to attract plenty of renters. Especially if it is near schools, a bustling business district, or a popular local attraction. Location is a prime factor when choosing a property to maximize your investment.

Avoid limiting yourself to residential units, and consider commercial structures as well. If you want stable earnings, then choose sought-after real estate to ensure your future income is protected.

Person counting money and writing on keyboard

Although it takes time for real estate investments to bear fruit, you can count on earning steadily if you take a long-term view. If you simply purchase land, you’ll need to build on the land since the empty lot cannot produce income. 

You should budget for housing or commercial buildings that you can rent out to earn monthly rental proceeds. Later when the land appreciates, you can sell it at a good price.

Speaking about investments, we can compare that future cash flow can be limited. If the stock prices climb higher over the long term then you may or may not earn from them. However, compared to rental income, it can still be a small amount. 

Hire a Property Management Company For Real Estate

As your property portfolio grows, so do your landlord’s responsibilities. You need to market vacant units, prepare them for new residents, keep up with property maintenance and repair, collect the monthly rent, perform property inspections, and organize your business records. With the choice to engage in third-party services, you gain peace of mind, while maximizing your return on investment.

If you work with an excellent property management company, you can make processes systematic, access outstanding resources and adopt the best industry practices. You will succeed in your rental business since you have professionals overseeing your property investment. 

Person looking at stocks on computer

KRS Holdings can assist you in this department. We have solid experience in managing rental homes. We also offer stellar services regarding advertising your vacant rentals, screening tenants, and maintaining your property in its peak state.

For stock investments, you may be able to hire mutual fund managers to handle your stocks. However, you can end up paying higher fees than what you will pay as property management charges.

Consider Stock Volatility

Stocks are unreliable and can fluctuate a lot, especially if you have a short-term horizon. You may only pay $50 for a stock but it has an equal chance of reducing by as much as $10 or soaring up to $100.

If you want to avoid the downward price spiral, you need to select the right stocks. It is harder to gain stock profits when you intend to invest for the short term.

Meanwhile, real estate can protect you from inflation since you can take advantage of property appreciation. The longer you hold your property, the more the value increases unlike stocks, which can be subject to inflation but won’t have the same appreciation factor available to real estate investments.

Real Estate Values Soar Over Time

As mentioned above, real estate offers more appreciation. The property values increase, which is why it pays to invest in real estate considering the historic growth in value over the years.

Property prices tend to also increase year on year. Notice that the property price ten years ago is lower compared to the present values. 

This is another great reason to pick real estate investment over stock investments, considering the potential for appreciation. In addition, you can also perform renovations that can further elevate your property value.

Take Advantage of Tax Deductions as a property investor.

The good news for rental property owners is that the IRS provides tax-deductible expenses. This means that you can deduct for property taxes, property management fees, and property maintenance and repair costs. In contrast to stocks, tax bills remain the same and you can avail them only through charitable donations.

You can defer real estate capital gains tax when you invest in real estate.

Selling off your stocks requires paying capital gains taxes. This is different for real estate. Upon selling your property, it is acceptable to defer paying the capital gains taxes as long as you buy a similar property when the sale is completed. This is referred to as a 1031 Exchange

You can do the following:

  • Exchange raw land with an apartment building

  • Swap a ranch for oil and gas royalties

  • Swap a real property for a residential or commercial rental space

Stocks, bonds, and trust certificates generally don’t meet the requirements for a 1031 Exchange.

Bottom line

Both stock and real estate investments offer benefits and drawbacks. Upon closer look, however, real estate investment offers more maximum returns, lower risks, and diverse options for your investment portfolio, making it a wiser choice than stock investments.

If you need a competent professional team to handle your real estate investments, contact KRS Holdings today for outstanding property management services. We have efficient systems and apply the best management practices to help you reach your real estate investment goals!