Where you decide to invest your money is one of the most important decisions of your life. It determines your current lifestyle; also, how comfortable you live in your retirement. The two main investments that most people make are rehabbing property and stock investing. Which one you choose is largely determined by your personality and financial goals. For most people, the lure of stock trading is that you can make quick money; however, the attraction of investment properties is the stability it offers.
Full disclosure: New Leaf Properties, LLC. specializes in buying homes for cash, so we definitely favor real estate investing.
Here are some of the main differences between rehabbing houses and investments in stocks to help you make the decision that is best for you:
Which Is a Safer Investment Stocks Or Real Estate?
If you’re just starting out in real estate investing, it’s always best to have proper guidance. When you partner with the right real estate investment team, or have guidance of a real estate investment pro., the risks of investing in real estate are greatly reduced. Sure, there’s risk involved, but it’s the risk that leads to the reward. When investing in real estate, there’s a feeling of pride and ownership. You can see your investment; it’s tangible. The benefits of investing in real estate can be endless, but let’s start with some of the most common:
- Tax Benefits
- Real Estate is “Real”
- Recurring Income Potential
- Your Value Goes Up Whilst Your Loan Balance Goes Down
- More Control Over the Entire Buying and Selling Process
Stock trading can be more financially risky. You only make money when you sell the stock, and you have no way to accurately predict how much profit you will make. You buy a stock at its current market value; therefore, the only way that you make a profit is if the stocks price rises or falls in the direction you predicted. When the stock price doesn’t move at all, you make no money; however, if the stock moves in the opposite direction of your bet, then you lose money. Thus, the uncertainty of earning a profit makes stock trading much riskier than rehabbing properties.
Profits From Investments
It is easy to calculate the profits from your stock trades. You simply need to subtract the price you paid for the stock from the price you sold the stock for. If you invested a $1,000 in a trade and sell it later for $2,000, then you doubled your money. You made a 100% return on your investment. 100% is a decent return on your investment; however, it might not look as good when compared to how much profit you could of made by rehabbing a house.
What makes rehabbing so profitable is that you can buy a property on leverage. If you put a down payment on a property, then you can use the bank’s money to put up the remainder of the purchase price. If you put $10,000 into a property and make a $50,000 profit when you sell, then you made a 500% return on your investment. Because of the ability to buy a property with borrowed money, it is rare that you will find a stock trade that can compare dollar-for-dollar to the returns you can get from rehabbing houses.
The Perfect Lifestyle Business For Investors
At first glance, it appears that trading in stocks is the ideal passive investment, but it is passive in theory only. Stock trading isn’t a simple matter of placing your order to buy shares of the stock and waiting for the price to increase. In actuality, you spend a great deal of time researching your next stock to buy, and if a trade goes bad, then you will be spending a lot of time watching the stock ticker waiting for a chance to get out at break even. Monitoring loosing trades is a full time job which is very stressful, and it probably is not what you signed up for when you started trading stocks.
Do More People Have Success With Property Investments Or Stock Investments?
More millionaires have been created from investing in real estate than in the stock market. The reason that I can make this statement is because of the way investors approach real estate investing versus stock investing. I see the same scenario repeated all the time. Someone receives a large amount of money from an inheritance or a nice bonus from their job, and suddenly they think that having money makes them masters of investing.
They open a stock account and invest it all, and in a short time they are broke. What went wrong? The problem is that the stock market has the lure of easy money. Many people will jump right in and start trading without any training. They believe that if they just start trading, then they will learn as they go along. Suddenly, they experience a losing trade, and they allow their emotions get the best of them. Before they know it, they are selling out at a loss. They will end up losing money almost 100% of the time.
With real estate investing, whether it is your home or another property, it is a completely different scenario. They see buying a house as a serious investment, and they take the necessary steps to get the training they need. First, they read books on the subject to get familiar with how money is made through real estate investing. Second, they will join investment groups to find mentors to help them through the learning curve. Lastly, they build a good team of attorneys, pros to find them good deals, and real estate brokers to help them sell their investments. Thus, because they do all the necessary groundwork, real estate rehabbers have a much higher success rate than stock speculators.
In conclusion, both forms of investing have their benefits and drawbacks. Although, I would lean toward real estate investments versus the stock market. Because of the numerous advantages of real estate rehabbing, most investors tend to have more success with real estate compared to stocks. Regardless, people are succeeding with both forms of investing, so decide which is the best for you and take action.