Like investing in the stock markets, investing in real estate is also a promising option. Many investors are keen to invest their dollars into real estate for high returns and long-term gains as the assets appreciate over time. There are many ways of monetizing any physical asset of real estate by renting, refinancing the property or selling regardless of the market conditions. Real estate investment can be an alternative to investing in the stock markets because circumstances are right. The experts of real estate investment are confident in making the right gains from investments. These experts are aware of the low risk in real estate investment that provides better diversification of the portfolio and yields encouraging returns.
The decision to invest in stocks or real estate is a personal choice that depends on your goals, financial situation, risk tolerance, as well as an investment style. Which investment option would be suitable for you will become clear through reading this article.
Having an investment strategy is a must
However, you must have an investment strategy to ensure that you get the return from investment at the right time, whether you plan for retirement, earning residual income, or saving for a college fund. It is imperative to ensure that your investment strategy fits with your budget and needs.
The investment traits and the type of returns from stocks and real estate
- Real estate investment is not everyone’s cup of tea, and most people prefer to invest in stocks because it does not take too much money and time to invest in the stock market. Real estate investment involves a large sum of money that you must arrange over a period by saving or otherwise.
- Return from your investment in stocks can happen in two ways – earning dividends and appreciation of the stocks while you own a fraction of the company according to the extent of stock holding.
- Investing in real estate involves buying physical property or land from which you can start earning a rental income that provides a steady flow of funds. At the same time, the asset appreciates over time, and the value of the property increases. Real estate allows you to leverage the assets so that you can expand your holding despite not being able to pay cash outright.
- Investing in real estate is appealing to prospective investors as they control the tangible asset, which even allows diversification.
Expectations about returns
Investing in the stock market as an individual is fraught with uncertainties due to the market’s unpredictable nature, and you must be ready to accept lower ROI (return on investment) than expected. However, if you can boost the returns by pairing it with a company matching the contributions in a 401(k), it can make good sense for investment.
There are risks in real estate investment, too, like the situation arising from the financial meltdown in 2008 that ruptured the housing bubble. Researching well is a pre-requisite for real estate investors, and they must manage the properties well to protect the returns.