Why You Should Invest in Real Estate Over the Stock Market

Investing is a surefire way to grow your money and achieve your financial goals over the long term. Given that there are many different types of investments, it can be incredibly difficult to choose where to put your money.

Two of the most popular investment options available are stocks and real estate investments. Both options offer long-term wealth growth, but they couldn’t be more different.

While the stock market has the potential for rapid growth, the real estate market allows investors to grow their wealth over time through property appreciation rates. Ultimately, deciding whether to invest in real estate or the stock market will depend on your financial goals and risk tolerance.

To help you make an informed decision, the experts at Evolve Real Estate and Property Management have written this guide! Keep reading to discover the seven reasons to invest in real estate over stocks.

There Are Many Different Ways to Invest in Real Estate

Whether you work with a financial advisor, a robo-advisor, or by yourself, the process for investing in stocks is the same. You open a brokerage account, add money to it, and purchase any stocks or stock-based funds you want. If you’d rather take a more proactive approach to investing, the real estate market may be a better option for you.

A clipboard with some American money on top of it.

There are many different ways to invest in real estate, most of them requiring a proactive approach. Some of the most popular real estate investments include the following:

  • Buying Residential Properties. You can grow your wealth and equity over the long term simply by purchasing a property and living in it. Given that properties tend to appreciate significantly over time, you’re bound to get a great ROI the longer you hold onto a property. You can also earn a passive income by renting out your house.
  • Investing in Commercial properties. There is a growing need for commercial spaces in most cities. You can make a steady cash flow by renting office or retail spaces to businesses in your area.
  • House flipping. You can earn a high profit quickly by purchasing run-down properties at a low price, fixing them, and then selling them at a much higher cost.
  • Buying a Piece of Land. Land is a finite resource, so investing in it is always a good idea. Whether you use it to build your dream home, or you can sell it to a developer, you can earn a lot of money by investing in land.
  • Real estate investment trusts (REITs). If you don’t have the time or patience to manage a property, you should try investing in REITs instead. Similarly to mutual funds, real estate investment funds allow you to grow your wealth passively over the long term.

Real Estate Investments Allow You to Earn Passive Income

Stock investments only generate cash once they are sold, typically after long periods. While investors can get dividends on a monthly, quarterly, or even annual basis, this amount is not enough to live off. On the contrary, renting out a property is a great way to earn a steady passive income.

A row of suburban houses

Whether you decide to buy a rental property or turn your home into a vacation rental, you can earn a stable cash flow every month from rental rates alone. You can also generate a stable income by investing in commercial buildings such as strip malls.

The Real Estate Market Is Far More Stable Than the Stock Market

When you invest in stocks, you’re buying ownership in companies. Given that companies can lose big amounts of money in short periods, the stock market is incredibly volatile. This means that stocks have a high potential for rapid growth but they also have a high risk for big losses.

If you’re risk-averse or you’d rather invest your money in a much safer way, you should invest in the real estate market. Unlike the stock market, the real estate market is fairly stable, with property prices typically rising over time. By picking a good area to invest in, you can ensure a good return on your investment and protection against inflation over time.

Real Estate Investors Are Eligible for Several Tax Deductions

No matter how you invest your money, you’ll have to pay taxes for your earnings. If you sell or cash out your stocks, you’ll have to pay capital gain taxes, which can be up to 20% of your earnings. Likewise, you’ll have to pay taxes for selling or renting a property.

Rows of miniature houses.

In most cases, property owners can make deductions for mortgage interest, operational costs, repairs, property management fees, property taxes, and more. You can even defer the capital gains taxes of selling a property through a 1031 Exchange!

Many Aspects of Managing a Real Estate Investment Can Be Outsourced

Managing an investment property is no easy feat. After all, it involves a lot of tasks, such as property marketing, regular inspections, property upkeep, collecting rent, paying taxes, utilities, and insurance, and keeping track of the finances. While this requires more work than investing in stocks, the good news is that all of these tasks can be outsourced.

In fact, many successful investors choose to partner with property management companies. While these experts handle the day-to-day operations of their rentals, investors have more free time to focus on expanding their portfolios. Ultimately, this is a great investment because well-maintained properties tend to sell and be rented at higher prices.

Bottom Line

Investing is the best way to make your money grow and ensure a comfortable retirement. However, before making any investment, it’s important that you analyze your risk tolerance and long-term goals.

Are you considering investing in the Denver real estate market? Contact Evolve Real Estate and Property Management! Our team will help you find the perfect property for your long-term financial goals.