Rental Property or Invest in Stocks Investing in rental properties is one of the most popular ways to invest because they are considered a great way to make passive income, which can lead to financial freedom. There are many different kinds of investment opportunities out there and you may be wondering if it’s better for you to buy a rental property or put your money into stocks instead.
The question on Rental Property or Investing in Stocks is common due to the investor’s dilemma of what will be a more profitable investment. Rental properties always stay as Rental Properties, while stocks can either turn out as great investments or as complete duds
1.Rental Property Vs Stocks
Buying a rental property is like buying an individual stock that you can rent to someone in exchange for money. The difference is in stocks, you can have more than one share in the same company while you only have one house/rental property at a time. You can build up your portfolio with various shares which will hopefully rise in value. Meanwhile, rental properties are tangible assets that you can use to generate cash flow while you hold it for the long term.
There is no right or wrong answer when it comes to deciding whether one should invest in stocks or real estate since both investments have their own pros and cons.
The argument of buying a rental property is that you have a property that will pay out money for as long as you hold it. And since it is your cash flow, you do not have to worry about the underlying value of the properties dropping. On the other hand, the argument for investing in stocks is that if well-managed, stocks can grow much faster than rental property investments.
2.Why Should You Buy Rental Property?
Rental property might be an easy way for you to create passive income, but it is imperative that you learn how to manage this kind of investment.
You should buy rental property if:
1) You don’t mind collecting the rent yourself (most properties will need upkeep and tenants may not pay on time).
2) You are a confident property manager and you have time for this extra task
3) You want a steady income that is ongoing
4) You are starting out to invest–this will provide you with a relatively safe investment in the beginning. If you see that investing in stocks is more your thing, then hold off on buying rental property just yet.
Analysis in Rental Property
Cash Flow is the difference in the amount of money that you have available for spending and saving after all your expenses. The rental property might give you an income, but only after the bills are paid. You should calculate your “cash flow” to see if you can cover your living expenses and not worry about the rent or whether you will have enough money for groceries.
Investing in Stocks
Stocks offer a long-term investment that works well if you want to buy and hold stocks, provided that the market is not tanking. You should calculate your risk tolerance before investing since the downside of owning stocks is that you have no control over what happens with the market whereas rental property investments are tangible assets.
To buy a share of a company is to become part-owner of that company. When you own a stock, you have the preemptive right to be paid before any other class of stockholders in the event the company liquidates or distributes its assets.
Risks and Rewards
Every investment has risk involved which should be well-understood before making the investment. The benefit of stocks is that you can make more money compared to rental property investments, but at the same time, there is always a chance that your stock’s value could decrease or even tank completely. Rental property investments are steady and also potentially profitable, but it might be difficult to find good tenants for your rental property and it is also harder to make money compared to investing in stocks.
Which one will you choose, a rental property or stocks? As we’ve discussed in this blog post, there are many factors to consider when making a decision. If you want help with your decision and need some advice on what investment might be best for you personally, please let me know below! I look forward to hearing from those of you who have decided which way to go so that we can compare notes and learn together.