If you have money to invest, would you invest it as a down payment on a property and earn revenue and appreciation, or invest in the stock market to get positive results?
This is the dilemma many potential investors face. The stock market has been hitting new highs (especially in the US) and local property prices are rising. Both seem like win win situations, but in our opinion, investing in real estate is a better bet, and here is why:
Real estate investing is much less volatile than stock market investing.
It is easier to lose money on stocks than in real estate. The chances that you will lose 30%+ on your real estate investment in Canada is very low. On the other hand, there are laundry lists of stocks that have lost over 30% of their value within months, weeks and even days.
If you buy a property for investment purposes you will get revenue rental as well as a fair amount of capital appreciation, unless there is a significant flaw in the property which you were unaware of when purchasing. This makes real estate a relatively stress free and profitable form of investment.
There are plenty of expense write offs in real estate investing
Real estate investing allows you to write off a number of expenses to reduce taxes payable on the income you earn from the investment property. On the other hand, stock market investing has few if any expenses, which can be utilized to boost the bottom line.
Real estate is a physical asset
Investing in real estate allows you to “touch and feel” a physical, tangible asset. If you invest in a house or apartment building, you can visit it and see it visually. Whereas while a stock purchase does represent a piece of ownership of an underlying company, it is usually depicted as an entry on your screen grouped with a whole bunch of other stocks – not something you can physically touch – it’s just a number.
There is no stress about daily price movement in real estate investing
Real estate prices do not fluctuate on a daily basis as stocks do. If anything, there are monthly fluctuations, which may vary by 1-2%. With stock market investing, it is hard to ignore the changing ticker symbols. We all know that stock values can drastically change within hours, minutes or even seconds.
As an investor, you can sink hundreds of thousands of dollars into a stock, which may be down one month and recover in the following months and vice-versa. While a few of us may have the appetite to be able to withstand these fluctuations, most of us don’t, and the less volatile behavior of real estate would be the ideal investment.
Real estate investing is relatively much easier than stock market investing
If you want to be a successful stock investor, you need to understand technical analysis, how to gauge the fundamentals of the company, how the sector you are investing in compares with other sectors, etc. etc. The management of the company and worldwide events can also influence the stock. In other words, there are a lot of moving parts, so the specialized education, market awareness and knowledge is required.
With real estate investing, the task is easier. An adequate amount of research combined with local knowledge, and an experienced real estate advisor, can give you a head start in pretty much any real estate market.
Most real estate investors begin by putting a down payment on a property and rent it out. With time and confidence, another property is purchased using the equity appreciation from the first property, and this process is rinsed and repeated. Within a few years, the investor owns a portfolio of properties and has considerably increased his/her net wealth.
If you are thinking of real estate for investment purposes, talk to us. Over the years we have worked with many clients, who have successfully invested in properties throughout the Lower Mainland of Vancouver. We know the market well. Call us on 604 913 1000/ 604 695 1000 or contact us by email.