Why to invest in the real estate instead of the stock market?

Stocks VS House

To let your money work for you is what investing in any sector is about , but the good results are not in the class of all investors as many are still confused between the real estate market and the stock market without fully knowing the fundamentals of each investment. This is what billionaire Warren Buffett said :  “that the risk comes from not knowing what we are doing and that is why the loss accompanies investors in their investments “.

Many of the inquiries that our team reaches are focused on investment incentives in real estate rather than the other areas offered by some financial companies and investment in stocks is one of the most important of these alternatives provided by these companies, which use the illusion of quick profit to attract the attention of new investors. In this article we will explain many of the fallacies surrounding the investment in the stock market and we will highlight the real estate investment as one of the most rapidly growing sectors across the world.

Before we compare real estate investment with stock  investing, we can review the most important points:

  • Real Estate: When you invest in real estate, you are buying physical land or property. Some real estate costs you money every month you hold it — think of a vacant parcel of land that you hope to sell to a developer someday but have to come up with cash out-of-pocket for taxes and maintenance. Some real estate is cash generating — think of an apartment building, rental houses, or strip mall where the tenants are sending you checks each month, you pay the expenses and keep the difference as the profit.
  • Stocks: When you buy shares of stock, you are buying a piece of a company. Whether that company makes ice cream cones, sells furniture, manufacturers motorcycles, creates video games, or provides tax services, you are entitled to a cut of the profit, if any, for every share you own. If a company has 1,000,000 shares outstanding and you own 10,000 shares, you own 1% of the company.

7 reasons to invest in the real estate market rather than the stock market?

  • Real estate is often a more comfortable investment for the lower and middle classes because they grew up exposed to it (just as the upper classes often learned about stocks, bonds, and other securities during their childhood and teenage years). It’s likely most people heard their parents talking about the importance of “owning a home”. The result is that they are more open to buying land than many other investments.
  • When you invest in real estate, you invest in something tangible. You can look at it, feel it, drive by with your friends, point out the window, and say, “I own that”. For some people, that’s important psychologically.

Case in point: During the most recent collapse, the Credit Crisis of 2007-2009, well-known financial advisors were telling people to sell their stocks after the market had tanked 50%, at the very moment they should have been buying.

  • It’s more difficult to be defrauded in real estate compared to stocks if you do your homework because you can physically show up, inspect your property, run a background check on the tenants, make sure that the building is actually there before you buy it, do repairs yourself … with stocks, you have to trust the management and the auditors
  • The price of stocks can experience extreme fluctuations in the short-term. Your $40 stock may go to $10 or to $80. If you know why you own shares of a particular company, this shouldn’t bother you in the slightest. You can use the opportunity to buy more shares if you think they are too cheap or sell shares if you think they are too expensive. As Benjamin Graham said, “to get emotional about stock prices that you believe are wrong is to get upset by other peoples’ mistakes in judgment”.
  • In the field of real estate investment, you can review your return on investment through simple calculations that reduce the rate of high real estate prices in the area in which you invested in as prices always change in the positive trend for real estate investment. In the stock market, prices fluctuate constantly and can take years to return to the previous price after the decline. If you have invested in the stock market as it was peaking in 2000, it may take seven years to recover the lost capital on the decline. It took two years to recover the losses that occurred during the stock market crash of 1987. Individual stocks may recover faster or slower than the market average.
  • It’s safe (as houses)

There’s a reason why ‘safe as houses’ is a well-known phrase: it’s true. According to research by AMP, Australian property has increased in value at a rate comparable to that of the share market since 1926 – an average of 11.4% per annum – despite a succession of wars, disasters, recessions and crises. It’s done so without the volatility of the share market, too (more on this later), making it an all-round safer investment.

  • Investing in stocks requires a deep knowledge of the field and you need a great effort to move in it. Reviewing news and economic reports and changing currencies is not easy, but beginning with real estate investing does not require you to have specialized knowledge to start investing in property. Many real estate investors have only started to create their real estate through buying real estate. After discovering the value of their homes after a while, many investors are taking a leap towards investment.
  • When you decide to invest in real estate, the first thing you might think about is getting a mortgage. This is available to you. Mortgage loans have become a major part of any bank’s business model in recent decades .
  • If you invest in the sharemarket, you typically need to hire a broker to handle your trades for you, and the value of any shareholding is reliant on market conditions and the actions of the people running that company –introducing an element of uncertainty. This is much less the case in property: once you’ve settled, you directly own the asset and you have complete control over it . That’s a hugely powerful thing, as it means that you can influence both asset worth (by adding value) and cash flow (eg by raising the rent) directly – something that’s nigh-on impossible to do with shares in a company.
  • You can influence the value of your assets using many strategies. you can use to do so by  renovation and cosmetic maintenance – this can vary from just repainting and putting new things, new kitchens and / or bathrooms, gardens and certain decorations. It’s a tried and true way to increase property value – where you can spend a few thousand dollars from doubling property prices sometimes.

Some Real Estate Investors’ Statements:

“The best time to buy a property is five years ago”

That is because , the investor is always late to start investing in real estate. This is because the value of real estate is always rising and making profits for investors who take advantage of low-priced buying opportunities.

“Landowners become rich while  they sleep”

Many real estate investors are unaware of the opportunities that lie in the land, and the largest real estate investors rely on investment in land to raise their profits.

“Do not wait to buy a property, but buy a property and wait”

Resources :

yourinvestmentpropertymaginvestopediathebalance, michaelkummer.

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