If you’re like most working professionals, you probably have some money in your savings account and have been told to invest it, but chances are you don’t know whether to invest in real estate or the stock market.
If this sounds like you, you’re not alone. Many working professionals struggle with deciding whether to invest in real estate or the stock market because both offer advantages and come with their own inherent risks.
Like any investment, deciding what is the better choice often comes down to your personality, your financial situation, risk tolerance, timeline and financial goals.
To help you figure out which option is better suited for you, it’s important to first understand each type of investment. And, understand that both can be great investments, both can be scary investments, and you can invest in both at the same time. The key is to do your homework and understand what is a good investment choice for you.
Residential Real Estate Investing
Investing in real estate gives you the benefit of buying a tangible property that you can rent to generate passive income. In fact, investing in an income property can be one of the best investments you can make because it will generate income that you can use to pay off the mortgage while the house appreciates in value.
If this sounds enticing, but you don’t have access to enough capital to buy an investment property or don’t want to be a landlord, one of the best options is to enter into a real estate partnership.
One of the biggest benefits of a real estate partnership is that you can combine your financial resources with a partner to purchase a property. Not only does this help increase your purchasing power, it also reduces your risk because you are splitting the cost of the property. This can be a huge advantage for someone who doesn’t have the money to invest in an investment property or doesn’t want to carry all the risk and responsibility of such an investment.
On the flip side, one of the drawbacks with investing in real estate is that buying an investment property requires continued investment in time, effort and money. As well, a real estate investment is not liquid, meaning it is not fast or easy to get your money out of the deal.
Fortunately, a real estate partnership can help resolve these issues because depending on the terms of agreement you can share of the cost of maintenance and remove yourself from the day-to-day operations of the investment property. In fact, in many real estate partnerships it’s common that one partner is responsible for managing the investment property, while the other remains a silent partner.
Investing in the Stock Market
Unlike investing in real estate, stocks are a highly liquid investment that can build long-term wealth and some stocks may even provide income via dividends.
While this might sound advantageous, investing in the stock market can be risky because the stock market is volatile and subject to market, economic and inflationary risks.
On the upside, it doesn’t require a big cash injection to buy stocks like investing in real estate may. However most people are too busy or too intimidated to properly educate themselves to be able to evaluate the market and manage their stock investing on their own. For this reason, it can be difficult to pick the right companies to invest in. As a result, most people tend to hire a financial advisor to manage their money, which will cost money due to either a fee-only approach or via a percentage of your portfolio invested.
Want to learn more? Reach out to us with any real estate investment questions and to learn more about real estate investing opportunities in Durham.