While earning more income monthly from the positive cash flow on your investments is rewarding. In the long term, investing is ultimately about having an income source you can rely on in your retirement. The goal is to earn enough income to not merely survive but to be in control of your circumstances while enjoying your golden years in the style you wish. While all types of investments carry risks, the lower the risk, the lower your income on the investment is likely to be. However, there are significant differences between real estate and the stock market regarding risks and wealth building. Read on to explore these differences between investing in real estate vs. traditional savings vehicles.
Tangible assets have an absolute value and are generally physical, such as real property or real estate. Real estate is one type of tangible asset owned by the investor personally or through an entity, such as an LLC or a limited liability partnership. While real estate value can vary, meaning there is a risk of realizing less in returns than initially anticipated, there will always be an intrinsic value to the property itself on the real estate market. The stability of your portfolio, found by investing in real estate, reduces the overall risk that comes with investments in intangible assets.
A significant difference between real estate and investing in intangible assets or traditional savings vehicles such as stocks, bonds, and mutual funds, is their volatility. For instance, the value of a stock can be affected by outside influences, meaning it can suddenly soar to extraordinary heights and just as quickly become worthless. Your investment could have vanished into thin air overnight, leaving you holding nothing but a piece of valueless paper. While a well-balanced investment portfolio should include a portion of these more traditional methods, it should
Whether tangible or intangible, all of your investments should be very closely monitored for sudden changes or trends to make educated choices for buying or selling at the right time. This timing can be the key to success or absolute failure. When it comes to liquidity, investing in real estate vs. traditional savings vehicles differs in that real estate, in general, is seen as a long-term investment. However, successful real estate investment businesses that flip homes can tell you that the turnaround can be relatively quick. On the other hand, stocks are generally easy to cash out of, as long as everyone else is not trying to do so at the same time! In either case, it takes working out a plan that balances your portfolio with more reliable investments such as real property, while knowing when to make the right moves with intangible assets, such as stocks that require precise timing to sell for profit.
Suppose you are going into debt to begin investing in real estate. Most homeowners go into debt to purchase real estate, with only 20 percent of the value invested, and in some cases even less, you become the owner of 100 percent of the property. If you have bought your property wisely, you begin your ownership with instant equity. This undertaking is much less risky than traditional savings vehicles, such as stocks. Buying stocks with debt is known as margin trading and is best left to more experienced traders.
Typically, you have acquired a hedge against future inflation by investing in real estate vs. traditional savings vehicles because rent and property values tend to rise at the same pace as the cost of living. On the other hand, when inflation is on the upswing, income-oriented stock values tend to decline, as do high dividend-paying stocks.
You can realize more income by taking advantage of the tax benefits offered for investing in real estate vs. traditional savings vehicles. You can even take advantage of exclusions, which save you from taxes on any capital gains from the sale of your primary residence, with certain restrictions. You can write off the interest paid on your mortgage for a rental property as well as depreciation on the investment, leaving more of your monthly income, or cash flow, in your pocket.
Ready to learn more about benefiting from the differences between investing in real estate vs. traditional savings vehicles? At Modern Properties Solutions, our experts are ready to help make your dream of retiring in comfort through earning passive income a reality. Why not benefit from investing with Modern Properties Solutions at your side? We will walk you through each step of the way. Modern Properties Solutions makes it easy for you to build a substantial and diversified portfolio. At Modern Properties Solutions, our job is to provide you with peace of mind about your financial future. Send us a message or call Modern Properties Solutions at 844-978-0005 today!