Top 5 Reasons to Invest in Real Estate Instead of Stocks

Daniel Shodamola November 8, 2018

0 1,398 3 minutes read

If you are reading this article, you are probably considering investing in real estate, but you are not sure if investing in property really makes sense in the current economic situation. You may be also wondering if you should be investing your money in the stock market instead.

Well, we can tell you that in China, there is no confusion over this issue, which is why Chinese are the biggest buyers of overseas properties in the world – they buy properties across Europe, North America and Australia, and they are pretty clear headed about this. And they did, and still do, the right choice, since in 2015 there was a crash in the stock market in China which had, as a result, trillions of dollars worth stock market wealth wiped out.

Really, real estate investment is much safer than investment in the stock market – history bears this out. Read on for the top 5 reasons to invest in real estate instead of stocks.

Contents

Real estate investment generates cash flow straight away

If you have checked stocks that pay the highest dividend, they pay 4% or less annually. This is not a bad return, especially when you consider that banks give you a return of just 1% or less, but this is only a little over inflation. So, you won’t really make much money till you actually sell the stock. With real estate, you can rent out your property and earn an excellent cash flow from it, of anything from 5% to 10% of the price of the property. Also, you can earn a substantial profit over the sale of the property.

You can be an expert on real estate and will have access to special information

One significant drawback about stock market investment is that nothing can remain hidden. Any company listed on the stock market should make all information on its finances available to anyone who seeks it. So it is impossible to have any special knowledge of a stock which nobody else knows, and even harder to profit from it.

On the contrary, with real estate, you will have access to special information about the property market in your area that nobody else does. For example, if you own a property in a Victoria Island, you will know specific details about this Island’s property market, which will be known only to a few people, of whom only a few of them would be active investors. This allows you to set the right price and market to the right buyers. As a result, you will have to reckon with much less competition.

Real estate investments are easier to value

It is very easy to value a property. If you have seen a luxury property and don’t know if the price being asked for it is fair or not, you can always ask a trusted estate agent to value it for you. As a result, you will get an accurate estimate from them, since they have special knowledge of the area. However, when it comes to stock markets, the prices change every day and every minute. There’s no way to tell if you are paying too much for a stock. After all, it is not easy to evaluate a stock belonging to a company worth billions of dollars, unless you are Warren Buffett.

You can inspect your real estate investment closely

You can conduct a thorough inspection of the property, talk to the owner, discuss with your real estate agent, examine the neighbourhood and evaluate it before buying it. It is more difficult for an ordinary shareholder to inspect a company, talk to its representatives and evaluate the corporation.

You can always negotiate to buy the real estate below the market value

Typically, during negotiations, the property owner agrees to cut down the asking price of the property. Of course, this does not happen every time, and it depends on exactly how desperate the owner is to sell – he may not agree to sell it below market price if there is a lot of demand for the property. But, you can always try your luck. With investment in the stock market, on the other hand, there is no room for negotiation. You have to pay whatever the market price is at the time you buy the stock.

Conclusion

Whether you invest in real estate or in the stock market, what matters is your appetite for risk and personal knowledge. If you are an expert stock-picker, then investing in the stock market makes a lot of sense. But then not everybody can be like Warren Buffett. That’s the reason most people find it easier to make money from real estate than from the stock market.