Investing in Stocks vs. Real Estate: 10 Reasons to Consider a Real Estate Investment Over the Stock Market
You’re considering whether to put your money into stocks or real estate.
Investing your money to ensure its safety and growth is important to you.
You’ve heard the greater Portland area real estate market is a safer investment than the stock market, but you wonder if that is still true in today’s real estate climate?
In this article, we will give you ten reasons to consider a real estate investment over the stock market.
Table of Contents
- Is It Better to Invest in Real Estate or Stocks? 10 Reasons Why Real Estate May Be the Most Profitable Option
- Peggy’s Personal Experience With Real Estate Investment
- PEGGY HOAG REAL ESTATE: The Experience and Know-How You Need to Successfully Grow Your Real Estate Portfolio
Is It Better to Invest in Real Estate or Stocks? 10 Reasons Why Real Estate May Be the Most Profitable Option
There is no one definitive answer to whether it is better to invest in stocks or real estate because it depends on:
- Your financial situation
- Your financial goals; and
- The current market conditions
However, real estate may be a better investment option for those who are looking for a stable investment that will provide regular income.
Let’s look at ten reasons investing in real estate may be a better choice than stocks for most people.
Then, when you are ready to look at some luxury properties in the greater Portland area real estate market, give the professional team at PEGGY HOAG REAL ESTATE a call at 503.906.1370.
#1: Use Other People’s Money to Make Money
If you don’t have enough money to buy a property outright, that’s where leverage comes in.
Leveraging simply means using other people’s money to invest in property, so you can:
- Partner with another investor; or
- Take out a loan from a lending institution
It is nearly impossible to use leverage to invest in stocks because you need to have liquid assets to purchase shares.
#2: More Control
As a real estate owner, you have a say in the decisions made about the property. For example, you can:
- Choose your tenants
- Improve the property
- Make financial decisions
- Raise prices on rental properties; and
- Decide how you market your vacancies
You’re subject to the ups and downs of the economic cycle when you invest in real estate, but overall you have more room to make wealth-optimizing decisions.
When you invest in a company with stocks, you’re putting your faith in someone else to manage it for you.
Nobody will care about your financial investments more than you do.
#3: Easier to Analyze and Quantify
The third reason investors may prefer to put their money into real estate rather than stocks is that real estate is easier to analyze and quantify.
With stocks, there is always the risk of companies going bankrupt, which can lead to a loss of investment.
In contrast, real estate is a physical asset that can be assessed for its quality and potential returns.
#4: Better Tax Advantages
When you invest in real estate, you get to take advantage of some significant tax benefits.
The interest on your mortgage is tax deductible, so you can save a lot of money on your taxes.
You can also write off depreciation expenses and other costs associated with owning property.
These tax benefits make real estate a more tax-advantageous investment than stocks because of the lower tax rates on capital gains.
#5: Tangible Assets
Real estate is a tangible asset.
That means you can:
- See real estate
- Touch real estate; and
- Know real estate exists
When you invest in stocks, you are investing in a company that may or may not be successful.
If the company goes bankrupt, your stock will be worth nothing.
With real estate, even if the property goes bankrupt, you can still sell it for something.
#6: Greater Source of Pride and Accomplishment
Real estate has historically been a great way to build wealth, and it can provide a greater sense of pride and satisfaction than investing in stocks in three specific ways:
- As we just mentioned, real estate is tangible. You can drive by a property and see the improvements that have been made. With stocks, you can only see how they are doing by looking at the stock price.
- Real estate provides a sense of accomplishment. When you buy a property and fix it up, you can see the results of your efforts.
- People feel a greater sense of connection with their real estate investments. They can tell their friends and family about them and show pictures.
#7: Less Visible Volatility
Real estate is less volatile than stocks.
One reason stocks are more volatile is that they are more visible.
Newspapers and financial TV shows report on stock prices every day, giving investors a sense of how their portfolio is performing at any given moment.
Real estate, on the other hand, is not as visible. In the greater Portland area real estate market, it’s unlikely that you’ll hear about how the housing market is doing daily.
Prices in the real estate market can go up and down, but they rarely experience the dramatic swings that stocks do.
If you’re looking for a relatively stable investment, and less visible volatility, real estate may be a better option than stocks for you.
#8: More Protection From External Variables
Real estate is generally more insulated from external variables than stocks are — making real estate a safer investment option.
Reasons that real estate is a more stable investment option than stocks include:
- The real estate market tends to be more stable than the prices of stocks because real estate is local and not as closely tied to the overall economy as stocks.
- Real estate is a more stable investment option that tends to be less cyclical and does not fluctuate as much as the demand for stocks.
- Real estate tends to be a longer-term investment than stocks, so investors are less likely to panic and sell during times of volatility.
#9: Option to Refinance
Like any investment, the cost of owning real estate can go up as well as down.
But, if you find yourself in a situation where …
- Your mortgage is more than your property is worth; or
- Your interest rates have gone up since you took out your loan
… you may be able to refinance for a lower rate.
Not so when you invest in stocks.
The best you can do if your stock is losing value is to sell at its current price or wait for it to recover.
Worst-case scenario, you can sell it for less than what you paid and invest the rest in more stable investments.
#10: Government Is on Your Side
It is no secret that the government is on the side of the real estate investor.
The government is doing everything in its power to help the market rebound and make it easier for investors to get into the market by:
- Reducing taxes on capital gains so investors can pay a lower tax rate on their profits; and
- Allowing investors to deduct interest payments from their taxable income, making it easier for investors to finance their purchases
On the other hand, the government has never provided stockholder incentives for investing, nor has it ever made it easier for these stock investors to get into the market.
The government also has regulations on how many individuals can invest and what types of investments they can make without having to worry about incurring full taxation.
Peggy’s Personal Experience With Real Estate Investment
Stocks are not my expertise.
My only experience in stocks is my own stock investment portfolio. That experience has been okay, but nothing like the financial upside I’ve experienced in my real estate purchases over the past 31 years.
I purchased my first piece of real estate in 1991, the same year I started my real estate career at 27 years old.
For $25K, I bought a distressed 720-square foot two-bedroom home on a large lot in Beaverton, Oregon. I remodeled it and moved in.
Then eleven months later, doing well as a real estate broker, I was ready to buy a larger home. I refinanced my remodeled little home and took out enough for the down payment on my new home on Montgomery Drive in Portland.
Thirty years later, that home is now worth more than $2 million.
I placed tenants in the little Beaverton house. Then, in 1997, I refinanced the little home again and took out enough money for a down payment to purchase my 420-acre ranch on the Columbia River with a mile of riverfront and a boat dock in front.
Fifteen years later, in 2012, my little Beaverton house was paid off by income from my tenants.
In 2019, I decided to develop the large lot the little house was on by hiring a development firm, as that was not my area of expertise. The firm developed the land, and the bank was willing to use the value of the lots as the down payment for four new homes.
That little house on the large lot I purchased in 1991 gave me the money for my current home in Portland Heights — my land on the river which is now a vineyard with two homes on it, plus the four new homes built on the large lot I use as rentals.
The story of my first little house is not over because that $25k real estate purchase is still producing.
As I grow older, the four new homes will be paid off by income from the tenants, and then they will provide me with additional monthly cash flow until I am ready to sell them.
For me, my real estate purchases over the past 30 years have exponentially outperformed my stock portfolio, as they have for many of my clients.
Call me at 503-906-1370 if you would like to start building your real estate portfolio in the greater Portland area.
PEGGY HOAG REAL ESTATE: The Experience and Know-How You Need to Successfully Grow Your Real Estate Portfolio
Portfolio growth is essential for anyone looking to create wealth with real estate.
But it’s not always easy to do on your own. That’s where PEGGY HOAG REAL ESTATE comes in.
With over 30 years of experience in the industry, PEGGY HOAG REAL ESTATE has the knowledge and expertise to help you grow your real estate portfolio in a way that is both profitable and sustainable.
Whether you’re just starting or you’re a seasoned investor, we can help you take your greater Portland area real estate portfolio to the next level.
Contact the professional team at PEGGY HOAG REAL ESTATE today at 503-906-1370.