You have heard it said: Invest in real estate. CNBC said in a report that millionaires believe that real estate is still the best investment that you can make today. In fact, billionaire Andrew Carnegie said that 90% of millionaires acquired their wealth because they invested in real estate.
As a potential investor, there are many options where you can set aside your hard-earned cash for the future. You may choose the more conservative options and save your money in a bank. However, you may be losing out on what little interest you may earn. Depending on your risk appetite, you may want to diversify your funds and look for more lucrative options that may give you a higher rate of return in the future.
Investopedia says that if you want to diversify your funds and are not afraid of the risks, you have two options to consider: invest in the stock market or invest in real estate. Both are well-known investment options that are favored by both millionaires and seasoned investors alike. But which of the two is worth your time and money?
It is always advisable to have some form of investment whatever your goals may be, whether it is saving up for your dream house or planning for your retirement. Under the right conditions, investing in the stock market can offer you better returns at a lower risk.
Which one is to your risk appetite?
Both are what investors would call aggressive types of investments because both stocks and real estate will bring about a different sort of risks that you cannot find when you simply open a savings account.
When you opt to invest in the stock market, think of yourself as owning a tiny piece of the pie that a certain company sells. With your tiny stock, you are what the company calls a “shareholder” and you are entitled to the company’s stock increases and dividends.
When you opt to invest in real estate, this is considered to be a big-ticket investment because you will have to put down a substantial amount of money in order to purchase the property. With that purchase, you can earn income either by becoming a landlord and collect rent from your tenants, or you can sell your acquired property when the real estate value goes up.
What are the advantages of investing in real estate?
1. The chance to earn a steady stream in income
Many investors jump at the chance to purchase real estate because they get to earn in the form of rental income. This can be a great source of passive income and you do not even have to quit your day job in order to do so. As a landlord, your responsibilities will include maintenance and upkeep of the rented property, but depending on the location you have acquired, you can certainly cover your expenses with the rental income you earn.
2. The Appreciation of Real Estate
Investing in real estate is not a short term plan. In fact, you are in it for the long goal. Your real estate’s capital appreciation will be worth more in the next 20 years than it is now, so that is something that is worth waiting for.
3. The freedom of being your own boss
Like any business venture, think of your real estate investment as your business that you have complete control over. You get to call the shots as to which property to invest in, which tenants to accept, and when it is time to sell your property once the value has appreciated. Like any business, you are responsible for your own successes and failures.
Here’s What you Need to Know About Investing in Real Estate
1. Pay in Cash
Many real estate investment groups will offer you this one piece of advice once you decide to make your investment: cash is king. As much as possible, seasoned investors warn against taking out a loan in order to purchase a property. However, if you cannot afford to shell out cash for the property, you should at least be able to pay for the mortgage payments religiously.
2. Always Start Small
Before you have aspirations of buying the big-ticket properties, start with something that is well within your income range such as a small duplex with a unit that you can rent out. This is a good way to test the waters if you can cover your mortgage payments while living in the same unit as your tenant.
3. Take Note of your Expenses
Let’s get real, investing in real estate will never come out cheap because the returns will not be cheap. There will be many expenses involved, including taxes, utilities, and repairs. When you are investing in something as hefty as real estate, you need to have a financially sound mind to be able to plan ahead for the future should anything unforeseeable happen.
Investing is tricky and it requires financial know-how in order to make sound decisions that you will not regret making. Deciding to invest in real estate or stocks remains a personal choice. Remember the old saying, do not put all of your eggs in one basket. It always helps to diversify. You will surely reap the benefits.