Are you looking to start investing? As the owner of a real estate investment, you have various options when it comes to growing your wealth. You can choose to invest in stocks, cryptocurrency, bonds, or the real estate market. While your reason for investing may vary, gaining steady earnings, stability, and financial security are the most important factors when choosing to investing.

In today’s age, many are interested in investing in real estate and the stock market. These are the two most popular options that have stood the test of time and have made people millionaires, if not billionaires. But which one should you choose?

To guide you, the team from Rockbridge Real Estate has put together this article on why you should choose to start investing in real estate.

Steady Rental Income

Investing on rental properties are known for providing consistent income. But those benefits rely on investing in the right property market and ensuring your investment is well-managed. When you manage your rental effectively, your tenants will feel appreciated. This will inspire them to take care of your investments, notify you of issues, and pay rent on time.

Common kinds of real estate investments include undeveloped lots, commercial buildings, and residential homes. While house flipping and buy-and-build investment strategies are popular and lucrative, most real estate owners opt for the steady income stream that comes from being a landlord.

a small toy house made of wood with a red roof sits on a black calculator on a white background

Compared to real estate, the stock market doesn’t have the same potential in terms of steady returns, cash flow, or risk tolerance. Stocks are considered a long-term investment option where the owner holds the stocks for long periods. While stockholders get monthly or quarterly dividends, the amount received from dividends is small compared to real estate income.

Outsourcing Management

Properties in real estate are physical assets that require hands-on work and on-site maintenance. Additionally, to maintain a steady income, landlords must handle rent collection, marketing, routine repairs, lease agreement administration, and even evictions when necessary.

If these tasks sound overwhelming, you can easily outsource your rental management to an experienced property management company. They will take care of the rental property and ensure that your tenants’ needs are taken care of for a reasonable rate.

Unlike a property manager, mutual fund managers and stock experts often charge higher fees that you’ll have to pay even if your stocks perform poorly.

Stability vs. Volatility

One advantage of real estate investing is its stability. The market is one of the most regulated in the economy. It is also relatively slow to respond to economic shocks and changes.

Real estate assets are hedged against inflation. As a response to inflation, landlords can make reasonable increases to their rent rates to counter inflation.
an investor compares real estate investments to the stock market
Conversely, stock's volatility has been well-documented for decades. Sudden fluctuations in stock prices are common compared to real estate prices. As a response to changes in market circumstances or breaking news, individuals can move thousands of stocks per day, reducing their worth exponentially in a matter of hours.

Appreciation in Value

Real estate appreciates over time for many reasons. Usually, properties near business districts, transportation hubs, or social and public amenities experience the most organic appreciation. You can also upgrade or renovate your rental to improve its value over time.

However, it’s important to note that properties can depreciate in value. One of the most notorious examples of this is with 2008 economic recession. That said, experienced investors and management experts are aware of the warning signs and can help you respond accordingly.

Tax Deductions

With the IRS breathing down your neck, the prudent investor would be looking for a chance to save extra coins with tax deductions.

When you become a real estate investor, there are several tax deductions you can take advantage of! For example, you can make deductions related to property management expenses, property taxes, mortgage interest, depreciation, management fees, and the costs of repairs/renovations.
a person holding several hundred dollars in us currency which is the money they saved through real estate investment tax deductions
You can also enjoy the benefits of 1031 exchanges. These exchanges are one way to invest in property, where you exchange one asset for another.

Unlike investment properties, stocks don’t offer you any tax advantages. If you sell any of your stocks, you will have to pay capital gains taxes. As a stock investor, you can only enjoy tax deductions when you sell stocks that are associated with charitable donations and retirement contributions.

Conclusion

Compared to the stock market, the housing market ensures you a consistent income, and appreciation in value. Do you need more information on the real estate market? Or are you looking for the ideal market to invest in?

The professionals from Rockbridge Real Estate are the experts you can rely on for real estate investing. We are members of Missouri Realtors and the Columbia Board of Realtors. Contact Rockbridge Real Estate today, and receive an affordable quote for our services!