“Why being a rental property owner is wiser than being a stock market investor?” is a usual question raised by people interested in property investment.
Most people are against investing in real estate due to reasons that it will be time-consuming and will result to lesser net returns compared to investing in stocks. However, a lot of wise investors still have real estate investments. But why? It is because branching out your ways to generate income has its apparent perks. Aside from that, you gain four benefits if you invest in real estate. Whereas, if you invest in stocks, you only get a portion of those benefits.
Real estate investments have a huge advantage compared to stock investments when it comes to income. Income is considered as the profit that is left after paying the debts and other expenses like updates, renovations, or general adjustments before the property is ready for rent. With that, rental properties provide income per month or “cash flow” most stocks don’t do.
Investing in real estate makes use of a leverage in the form of a loan against the initial property acquisition. This leverage puts a fraction of the monthly mortgage to pay for the interest and to pay for the equity. For homeowners, this is a usual arrangement. But if you offer your property for rent, your tenant pays the monthly mortgage for you. In stock investment, has someone offered to buy a stock for you? I’m sure not.
The greatest advantage from real estate investing is the tax benefits it can offer. Having a rental property belongs to one of the most impressive tax benefits you can enjoy. Aside from earning income, property depreciation grants you to claim a loss. This means that you are gaining profit and can still claim a loss. Although this perk fades gradually in the long run, you can do other ways to manage your taxes. You can do this by using a 1031 exchange if you wish to sell your property. Once done, you can purchase a newer one without paying any tax on capital gains. After which, you can begin a new process once again. But you should not do these steps alone. You should seek appropriate guidance and ask for an accountant’s help.
Another common term is appreciation. This happens when you sell an asset and gain more income than what you paid for it. This is why people prefer investing in the stock market. However, most people have the idea that this will not happen in real estate, which is false. As the real estate market steadily inflates, real estate appreciates as well. Similar to stock investing, you also need to monitor the economy in real estate investing. But smart investors continue to believe that you earn handsome amounts of profit if you invest in real estate.
Does real estate require more effort as opposed to stocks?
That doesn’t have to be the case. If you pay and take care of your property at the same time, then it will require more work. Not only that, you do all the maintenance and answer tenant calls on your own. However, you don’t need to do those if you can seek professional help. Doing this also increases your rate of returns. Try considering your property manager as your stock broker. Although you pay for the professional fees, being handled by a trusted management firm guarantees you greater amounts of income. These property management firms will make sure you are satisfied with their services by staying longer, resolving issues quickly, cutting down vacancy time, and working hard to get you the best maintenance as possible.
At the end of the day, both rental properties and stocks offer a good deal of benefits. It heavily relies on how you handle the option you choose. The people who you seek guidance for also matter. At Real Property Management in Troy, Michigan, we are the right people for you as we offer our quality services as your professional property manager in Troy, Michigan. Contact us now!
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