There are pros and cons to every industry, but in the case of investing in real estate instead of stocks, experts agree that these five reasons make real estate an excellent, and lucrative choice:
1. Positive cashflow on a monthly basis.
Investors can opt to rent their property to get instant monthly returns, unlike stocks, where gains are only realized if the investor chooses to sell his shares.
2. Real estate is tangible.
While stocks are a bunch of numbers, real estate exists in a tangible form. It's a house, office, rental, or industrial space that you can see, touch, and walk through. You can modify this asset and show it off to interested parties, and you can opt to use it for yourself, should the need arise. It's also easier to inspect property than it is to investigate a whole company.
3. You can leverage more money.
Investors can buy property with 20% downpayment and get a bank to loan the rest, often with a 10- or 20-year term. Leveraging money with stocks is also possible by buying on margin. However, these margins wouldn't lend up to 80% of the value of the stock, or provide a term of up to 20 years or more.
4. You have more control over your investment.
Investors are not decision-makers in the companies they have shares in. This may be convenient for those who prefer to have little to no say in their investment, but not if you want more control over your asset. Investing in real estate gives you the decision-making authority over the product and how it is marketed and managed. And you can also add value to your asset by upgrading it through repairs, renovation, and refurbishment.
5. Tax benefits.
Investing in real estate comes with tax benefits, which allow the investor to defer capital gains and other taxes to maximize their income. Depreciation, or cost recovery, is one such benefit. Because property depreciates over time, investors can deduct the the depreciated value of the property from his taxes every year.