What Real Estate has that Stocks Don’t!

Most people believe that investing in the stock market is the best way to build wealth. The idea is simple enough: You purchase stock in a company with the understanding that they will work to increase their profits, which in turn, increases the value of your stock. If you’re very lucky, they may even send you dividends based on the number of shares you hold (but don’t count in it—and if they do, it won’t be much).

As you can see, those who invest in stocks are at the mercy of the companies they’ve invested in to generate profits and increase stock value. Many investors find the lack of control in this arrangement to be very frustrating.

For those investors who prefer a more active, hands-on approach, real estate has proven to be an even more lucrative alternative. Once they have acquired a property, these investors have control over a variety of elements affecting the size of their returns, including property condition, rent charged and tenant screening. These decisions have a direct impact on creating a steady stream of cash flow while building equity, both of which will work to build wealth over time.

But it’s not just this control that makes real estate investing so attractive. In fact, the numbers are on the side of real estate investment. For instance, if you had invested $100,000 in the S&P 500 back in January 2000, your investment would be worth $115,190 in June 2013.That same investment in real estate would be worth $214,700 according to median sales price figures from the National Association of Realtors. That’s a 15.19 percent increase for the S&P 500 and a 53.8 percent increase for real estate. And, based on Census Bureau averages of rental pricingduring that time, cash flow from a rental property would generate $97,223.  When combined with the average appreciation over that time period, this investment’s returns would total $251,023—even after the worst housing crash in our generation. Any investor can see that a 151 percent increase is a more attractive proposition than a 15 percent gain.

Certainly, investment properties will have expenses associated with them, such as insurance and maintenance; however, working with a knowledgeable agent to find the right property and do the math ahead of time can help mitigate risk and help ensure cash flow. Partnering with a Certified Investor Agent Specialist^® (CIAS) is essential in identifying and negotiating your purchases to ensure a great investment from the outset. 

Considering all the great deals in today’s market, the still low interest rates, tax benefits, and proven stability over time, it’s easy to see that when compared to other asset classes, real estate is indeed the best avenue for building wealth. 

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