How Investing in Real Estate Differs from Investing in Stocks

house flipping

Real estate and stocks are both strong investment opportunities. Most investors choose to go one route or the other based on their personalities, preferences and style. Real estate is popular because it’s a tangible investment that investors can touch and feel. On the other hand, some investors prefer stocks because they are quick and easy to sell.

Let’s look closer at how investing in real estate and stocks differs and which opportunity is right for you.

Real Estate Investing

When you invest in real estate, you purchase a physical piece of land or property. You may choose to rent out the property so that it generates cash each month, such as with a rental home or strip mall. You can also opt to buy a property and flip it for money, something called fix-and-flip. In this case, you will need cash out of pocket to pay for the renovations, taxes and maintenance.

The benefits of investing in real estate are:

Tangible investment
Tax deductions and depreciation
Less risk of being defrauded
Comfortable for lower and middle classes
Steady cash flow

Stock Investing

When you buy shares of stock, you are purchasing a part of that company. Whatever that company generates, you are entitled to some of the profit. When the company does well, you do well. During times of economic stress, you may see your profits diminish.

The advantages to buying stock include:

Less work than real estate
Quick and easy to sell
Flexible – can be allocated into a retirement account
Cash dividends increase along with profits

Real Estate vs Stock: Is There a Better Choice?

There is no “right” way to invest your money. It all has to do with your personality, interests and investment goals. Stocks tend to be easier and more upfront. Unfortunately, many investors are too emotional and inconsistent to earn profits through stock.

If you feel a sense of pride when thinking about driving past a home that you’ve renovated and own, investing in real estate may be the route you will enjoy most. This is a tangible investment that also provides you with the control you want.

To make real estate investing work for you, start by building a team that includes a hard money lender such as First Equity Funding. This way, you can have the funds you need to be competitive and turn properties over for a profit.