If you’re looking to start investing, you’re making a smart move. Investing your money, rather than simply saving it, is a great way to grow your income and secure your financial future. But, what you invest in and how you do it can have a significant impact on the end result. Today, let’s take a look at some key reasons to invest in real estate over stocks or cryptocurrency. Then, you can decide for yourself which makes the most sense for you.
Why You Should Invest In Real Estate Over Stocks or Cryptocurrency
1. Real estate investments produce predictable cash flow.
One of the most beautiful things about real estate investing is the potential for significant passive income and positive cash flow. That means that any expenses you have related to owning a particular property, including property taxes and a mortgage, are completely covered by the rent that tenants pay. With money left over, you can count on a certain amount of cash flow month after month, year after year.
In contrast, you can receive dividends from some stocks but the amounts vary and the payout schedule can be quarterly or semiannually. Furthermore, you only receive dividends if the stock is actually increasing in value. With real estate, however, rental contracts with tenants guarantee a predictable cash flow every month regardless of the property’s current value.
2. Leverage someone else’s money to build your investments.
When you purchased your first home, you likely took out a mortgage in order to do so. You leveraged someone else’s money (the bank’s) to purchase something you needed right then but didn’t have the capital to purchase.
When you purchase a rental property or other real estate, you can follow the same process. Talk to potential lenders, get pre-qualified, and then purchase a property with the bank’s money. Can you do that with other investments like stocks, bonds, a 401k, or cryptocurrency? Absolutely not! This is one key reason to invest in real estate over stocks or cryptocurrency – you get to use someone else’s money to build your own wealth. How great is that?
3. Real estate investments give you tax benefits via depreciation.
Depreciation is a tax write-off that allows investors to recoup the cost of their real estate purchase or improvement over time. Each year, that deduction shows up on the investor’s tax return and effectively reduces their taxable income. This is a great way to legally pay less taxes, one of the biggest benefits of investing in real estate over stocks or cryptocurrency.
With stock investments, you only get a tax write-off if you lose money. Losing money should never be your investment strategy and certainly won’t lead you to creating a wealth-building real estate portfolio or achieving financial freedom.
4. Real estate appreciates.
This one is a biggie. Historically, real estate has a proven track record of appreciating over time. That means that the value of it goes UP as time goes on. In contrast, the value of products you own, such as your car, typically go DOWN as time passes.
But wait … don’t stocks also increase in value? Yes, they often do and in fact, the rate by which they increase in value may often be bigger than the rate at which real estate appreciates. However, the stock market typically exhibits larger and more frequent ups and downs, otherwise known as volatility.
Bonus Tip: Never invest in something you don’t understand.
Since the American stock market has been around since the late 1700s, most people have a general idea of what it is and how it functions. Not so much with cryptocurrency – it’s relatively new and for many, a little more abstract.
In both cases, however, stocks and cryptocurrency may be a little more difficult to understand since they’re not as ‘hands-on’. In contras, you can touch, feel, see, and even smell real estate! Regardless of whether you choose to invest in real estate over stocks and cryptocurrency, we recommend that you fully understand what you’re getting into and what will happen to your money once you invest it.
Does that mean you’ll know the answer to every single question before you start investing? Absolutely not! But, you should have a working knowledge of the ins and outs of a particular investment vehicle as well as its risks and benefits.
If you want to learn how to invest in real estate the right way, or if you can see yourself using real estate as a way to achieve financial freedom, I invite you to work with me. I’ll show you exactly how my wife and I went from owning $0 in real estate to owning $5 MILLION in real estate by the age of 30. I’ll even share some of the mistakes I’ve made with investing and why I now invest in real estate over stocks and cryptocurrency.
Let’s get started!
