A question that most investors ponder about is “Should I buy a rental property or invest in stocks?” While both options have their good and bad, it is highly recommended for investors to buy a rental property for various reasons. Let us quickly discuss the benefits that come with buying rental property versus investing in stocks.
Why should I buy a rental property?
1. More control over the investment
Probably the main reason so many investors choose to invest in rental properties is that they have full control over their investments. They have control over how they want to finance their investment property and how much time they want to spend managing their property. Property owners also have full control over how much rent to charge and who their tenant will be and when the time comes to sell, they even have control over their property’s selling price.
The great thing about investing in real estate is its diversity and its flexibility. Before buying a rental property, real estate investors can search and find an array of investment properties and different rental strategies to match each property type. Plus, unlike stocks, real estate investors can physically check the rental property to make sure it is suitable for them before deciding or making any purchases.
Related: Buying Stocks or Real Estate for Investment Purposes: The Better Option
2. Guarantees cash flow and return on investment
Show me the money! Making a profit is the ultimate goal for any investor. Do not ask yourself should I buy a rental property or invest in stocks. Ask yourself which of the two gives me CASH! Your investment has to be paying you cash that you can either reinvest or save up. In real estate investing, rental properties provide investors with a guaranteed source of cash in the form of rental income. Additionally, investors can find many ways to boost their rental income to generate positive cash flow and a high return on investment.
The secret, of course, is buying the right type of property in the right location. Mashvisor has all the necessary real estate investment tools to help real estate investors find the best-performing properties in the best locations all over the US housing market.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Investing in stocks can make good returns but it’s all on paper. Investors who invest their money in stock shares will only see the real money when they sell their shares. Also, the unstable income from stocks makes managing your finances more difficult. Unlike stocks, rental properties provide a stable monthly income which makes it easier to operate your finances. It’s better to know what you’re making and when which is why you should stop asking yourself should I buy a rental property and go for it!
3. A hedge against Inflation
Real estate investing is known to be a hedge against inflation. What this means is that the market prices for investment properties typically increase as the cost of living increases. This is a great advantage for real estate investors since they can increase the amount of rent they charge as inflation increases. Plus the value of their investment property will rise meaning a good ROI when they choose to sell. Moreover, mortgage rates are not affected by inflation. So should I buy a rental property? Of course, you should! Unlike stocks, you have inflation on your side.
4. Fewer risks
Should I buy a rental property or invest in stocks? Generally speaking, rental properties have fewer risks than stocks. This is especially true for long-term investments. The longer you hold on to an investment property, the more your property will increase in value. You have fewer risks of loss since equity and homes prices rise over time. Additionally, the more rental properties an investor has, the fewer risks he/she faces.
Stocks tend to have an advantage of being more liquid. However, they are very unstable. Stock investors can’t predict their returns and have the tendency to buy and sell at wrong times. As for rental properties, a real estate investor can predict or estimate the rate of return on their investment and has flexibility when buying or selling investment property.
5. Building wealth through leverage
Real estate investors use leverage to build their real estate investment portfolio. Basically, when investors get a mortgage for buying an investment property, they have leverage that can be used to invest in more investment properties. This is great because they are able to invest in more rental properties with less of a cash investment.
Related: Real Estate Investments and Leverage- All You NEED to Know
Property investors who use a mortgage loan to finance their rental properties have the opportunity to buy more than one investment property with little money. They can increase their rental income and use it to pay off their mortgage, taxes or other property expenses. Stock investors don’t have this opportunity!
6. Buy low and sell high
In real estate investing, there are numerous investment strategies where property investors can buy at a low price and sell at a high one. This can be done by flipping homes. This is a strategy where investors buy properties in distressed situations that are sold below market value and fix them up and sell them for a much higher price. Another way to buy low and sell high is through foreclosed homes. It’s possible for property investors to repeat this process over the course of their real estate investing career and make big bucks. There are always cheap properties for sale that are waiting for someone to come and grab.
Read Also: Foreclosed Homes: A Good or Bad Investment?
It’s true that in the stock market money is also made by buying low and selling high. But the problem is that most stock investors don’t know everything about the company they’re investing in which can be a major issue.
7. And the glory of tax benefits
If you’re still wondering should I buy a rental property or invest in stocks, then you need to hear about the glory of tax benefits in real estate. When you buy a rental property, there are certain tax benefits that are only provided to property investors. For example, your cash flow is tax free! Plus your property taxes, mortgage interest, and insurance are all tax deductible. How much is deductible depends on the rental income that an investor makes from his/her property.
A final word
So should I buy a rental property? Of course you should! Do not hesitate or second guess anything. You can make money in real estate in various ways. It all comes down to finding the right type of rental property and in the right location. But no need to worry because Mashvisor can help you out! With our rental property calculator, we can help you locate the best properties all over the US housing market! Let your search begin today!
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