How Does Real Estate Compare to Other Investments

With all the changes in the economy over the last 3-4 years and the values of real estate plummeting, it’s only natural to ask whether investing in real estate is still better or as good as other investments like stocks or even investing in your own or another’s small business. Let’s revisit some of the risks and returns and see if investing in real estate really makes sense.

From a standpoint of returns, this is still a major reason why people continue to looks towards real property investments. Real estate has and will most likely continue to generate the best returns on your money over the long term. And, unlike stocks and a business, real estate has the unique ability to produce rental income and even profits if run correctly. As always, selecting the best investment properties will always yield the highest returns so managing your properties as best you can and keeping them in areas that you really feel will appreciate over the long term is the best way to position your portfolio.

As with any investment, where there are rewards there will inevitably be risks. As we’ve seen over the past few years, property values will not always appreciate over the long run (and you can look at history to confirm this.) Property values are not normally as volatile as the stock market so you will not see huge 80-90% swings in value as you could see in the stock market. However, you need to be prepared for the long haul and build your portfolio of properties in areas that you’ve studied and can be as certain as possible will hold up better than others as time goes on. Doing your homework on location is by far one of the most important things you can do in order to avoid some of the huge risks that come with investing so make sure you know your target area well.

One of the biggest arguments against real estate investing has been that it’s not a very liquid investment, meaning the speed and ease at which you can sell your investment and recoup your money. I would say that not being very liquid is actually a plus for real estate investments as it keeps your mind focused on building long term value and not buying and selling at a frenzied pace much like the stock market does. Because you’re not tracking values on a daily basis and because it takes a lot of time, money and energy to sell an investment property, you’re much more likely to keep a property in your portfolio for the long term which is where you will build a lot of your wealth.

In addition there are many more tax advantages to owning real estate investments than there are the traditional stock portfolio (which I’ll go into more detail in future articles) which adds icing onto the cake. If you can afford the high capital investment it requires to get into the game, real estate is still the place to be for many more years to come. So, start studying your local market now and take that first step to making real estate a part of your portfolio for years to come.