If you haven't been living under a rock for the past few weeks, you are probably aware of many events affecting the world, and therefore the stock and crypto markets. The war in Ukraine, rising gas prices, and inflation to name a few. Meanwhile, the commercial real estate market is still on fire with very little indications of slowing down.
Here's 3 reasons why real estate is better to invest in than stocks.
1. You Can Understand It!
Most people that have gone out on their own, have rented an apartment or are familiar with how renting works. You have read through that long lease agreement and paid your rent each month. Know that you need renter's insurance, and how to submit maintenance requests. All that to say, you can understand how that works.
For the stock market, everyone has heard of it, but unless you are an active stock broker, or put in significant time in understanding the system, you probably don't know what a P/E ratio is, or maybe what a dividend is. How to determine if a stock price is worth buying or if it's on the way down. What companies the S&P index includes, or what causes the market to go up and down.
If it was me, real estate makes more sense to me in comparison!
2. You Get Cashflow And Appreciation!
When you buy a stock, you typically are playing the long game. Waiting for stocks to go up as the companies continue to improve and grow (hopefully). Outside of a select group of stocks and companies, you are not getting regular cashflow each month from them. You also can't personally affect a company like Apple to increase sales and generate better outcomes.
With real estate, and specifically multifamily real estate, the operator can directly impact the deal performance. They can improve units to increase value, reduce expenses, and provide alternative income streams by adding laundry, private storage, or parking spaces. As you increase the value, you increase the net operating income or NOI, which in turn increases the properties value. So when it comes time to sell, the value has appreciated even more so than if you just let the market run it's course.
3. Hedge Against Inflation
As you have seen, inflation is on the rise and continuing to be an issue for a majority of the population. With real estate however, prices and rent often increase along inflation. As costs go up, the market rent goes up to accommodate. As rents increase, this further increases the value of the property. This has been a big factor with current valuations and buying new properties. As a buyer, everything is so expensive. As a seller though, they are getting top dollar in year 1 and 2 that they were expecting in year 5 or 6 of the hold.
So if this concept resonates with you, let me know your thoughts! Would love to hear from you today!
Comments