Ultimately, when it comes to increasing your equity, the real estate and stock markets offer investors great potential along with risks. When deciding how to invest your money, consider all the factors. Investing in real estate tends to offer greater long-term stability with lower risk over time. Buying a property requires more initial capital than investing in stocks, mutual funds or even REITs.
However, when buying a property, investors have more influence over their money, allowing them to buy a more valuable investment vehicle. For most people, real estate will always be more desirable than stocks. Real estate is a tangible asset that provides income from housing, utilities and rents. Everyone can easily understand the fundamentals of real estate, so many prefer real estate to stocks.
Real estate investments can be more work than stocks. While buying a property is easy to understand, that doesn't mean that the work of maintaining properties, especially rental properties, is easy. Owning property requires much more capital than buying stocks or stock investments such as mutual funds. Under the right circumstances, real estate can be an alternative to equities, offering lower risk, yielding better returns and providing greater diversification.
Real estate as an asset class is also more stable than, say, cryptocurrencies, practically regardless of how you invest. For many potential investors, real estate is attractive because it is a tangible asset that can be controlled, with the added benefit of diversification. It is impossible to adequately compare the returns on individual private equity real estate investments with the broad-based stock market. When you die, you can transfer your real estate to your children using an increased cost base.
Some people speculate on real estate prices, but commercial and residential real estate serves tangible functions. Life is about living, and real estate can provide a better quality of life compared to a rent that is not properly maintained. In a bull market, the average person's daily income is likely to never reach their local housing market. Real estate capital gains can be deferred if another property is purchased after the sale, called exchange 1031 in the tax code.
CrowdStreet, is my favorite real estate platform that focuses on the secondary real estate market in the city. Real estate tax incentives definitely make real estate very attractive to people with higher incomes. Not only will you build your real estate portfolio, but you will also be able to provide your children with subsidized housing in the future if you wish. Even so, online homeowner software and services can help you automate the work of investing in real estate, but not eliminate it completely.
Real estate ownership is generally seen as a protection against inflation, as home values and rents often increase with inflation.