{"id":19493,"date":"2023-05-17T11:30:00","date_gmt":"2023-05-17T18:30:00","guid":{"rendered":"https:\/\/www.rentecdirect.com\/blog\/?p=19493"},"modified":"2023-05-17T11:30:10","modified_gmt":"2023-05-17T18:30:10","slug":"8-benefits-of-investing-in-real-estate-vs-stocks-and-bonds","status":"publish","type":"post","link":"https:\/\/www.rentecdirect.com\/blog\/8-benefits-of-investing-in-real-estate-vs-stocks-and-bonds\/","title":{"rendered":"8 Benefits of Investing in Real Estate vs. Stocks and Bonds"},"content":{"rendered":"\n
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Investment properties have a good reputation, but they aren\u2019t the only investment strategy.<\/p>\n\n\n\n

Aside from real estate, many people invest by owning stocks and bonds. Stocks are an actual share of ownership in a company, which is typically publicly traded. Bonds are loans issued by governments and corporations. Companies and governments who issue bonds agree to pay back buyers over time with interest.<\/p>\n\n\n\n

So which should you pursue? Invest in a house or corporate stock? An apartment complex or a mutual fund that tracks the S&P 500? What about inflation and taxes?<\/p>\n\n\n\n

If you\u2019re deciding on an investment strategy<\/a>, here are the benefits you should keep in mind when it comes to investing in real estate.<\/p>\n\n\n\n

Maintaining an income-oriented investment and positive cash flow<\/h2>\n\n\n\n

Perhaps the most substantial benefit of investing in real estate compared to stocks is that many real estate investments are income-oriented and come with a positive cash flow.<\/p>\n\n\n\n

In theory, a rental property comes with consistent payment from tenants. Each month, you receive payment, so if your tenants are trustworthy, you can anticipate cash flow each month.<\/p>\n\n\n\n

Stocks come with more risk. The market has been wobbly in the past year, so $100 invested in an S&P 500-indexed fund in April 2022 was worth $92 by April 2023.<\/p>\n\n\n\n

Leverage and lower borrowing costs<\/h2>\n\n\n\n

Buying often means borrowing, and investing in real estate<\/a> offers the ability to borrow more for less.<\/p>\n\n\n\n

For example, investors often borrow close to 80% of a property\u2019s purchase price through a rental property loan. In time, you receive payment from tenants that pay off the property\u2019s mortgage and make it possible to pay back the loan.<\/p>\n\n\n\n

In comparison, stock investors are not given such an advantageous borrowing option. You may be able to borrow about half of a stock\u2019s cost in order to purchase, but brokerages have the right to force you to sell other stocks to recover the loan if the stock struggles.<\/p>\n\n\n\n

Building equity<\/h2>\n\n\n\n

As with all forms of property ownership, an advantage of investing in real estate compared to stocks or bonds is that you buy into equity.<\/p>\n\n\n\n

At its core, equity is the difference between how much a property is worth and how much you owe on your mortgage. As you generate rental income and pay your mortgage, those monthly payments and your down payment buy you greater ownership in your own property. Housing values generally rise over time<\/a>, so you will likely have full ownership of a property that is worth more than what you paid for it.<\/p>\n\n\n\n

Having somewhere to live if needed<\/h2>\n\n\n\n

Americans frequently report that the high cost of housing is a problem for their checkbook<\/a> and sense of security and well-being.<\/p>\n\n\n\n

Owners of investment properties are largely insulated from these concerns. After all, if you own an investment property, you have a place to call home if moving becomes necessary<\/a>. Housing, compared to stocks and bonds, is a real, physical commodity \u2014 you can use it if you need it, and if you invest in it, you\u2019ll be less likely to live without a roof over your head.<\/p>\n\n\n\n

Hedging against inflation<\/h2>\n\n\n\n

Inflation has remained high<\/a>, despite the Federal Reserve\u2019s actions to tamper it.<\/p>\n\n\n\n

For stock and bond investors, inflation is stressful. Interest rate raises have made for a volatile stock market<\/a>, and the real return on investment from bonds decreases when the value of the dollar falls.<\/p>\n\n\n\n

Real estate investors, however, are better off. After all, owning real estate has always been a hedge against inflation, as the cost of property rises alongside the cost of everything else.<\/a> And the rent payments that make up real estate investors\u2019 income can be raised when leases expire.<\/p>\n\n\n\n

Tax advantages<\/h2>\n\n\n\n

The tax man always gets paid, but real estate investors catch some breaks. That\u2019s because of tax breaks and deductions, including:<\/p>\n\n\n\n