“Both the stock market and the real estate market have been so unpredictable. Do you mind if I ask you where you put your money, in stocks or real estate?”
***ANSWER:
You wont be surprised to hear that Im mainly invested in real estate. For me, thats because I know, live, and breathe the stuff.
Let me share with you 5 advantages that real estate has over stocks:
1. You can personally impact the value of your real estate. In other words, you can fix it up or raise the rents, and your value will go up. I dont care how often you shop at Wal-Mart, youre not going to increase the value of Wal-Mart stock.
2. Real estate isn’t an “efficient market” like stocks. Unless you’re a stock wiz or well-connected (Martha Stewart?), 99% of the info out there is already factored into stock prices. By the time you hear news that will impact a stock’s value, it already has. But luck, hard work, smart negotiation, &/or the right connections can get you a “better deal” on a piece of real estate.
3. To receive income from stocks (other than a small amount from dividends), you have to sell and pay taxes. But with real estate you can receive a positive cashflow. Even if your cashflow starts off negative, over time you can pay down the mortgage and raise the rents and get a positive cashflow.
4. You can “change horses” in real estate without paying taxes on your gain. Via a 1031 exchange, you can sell one property and buy another without paying a nickel in taxes. I’ve personally done them and hundreds of my clients have too. You can’t do that with stocks.
5. There are other creative ways to avoid taxes. Under current tax laws, you can move into your rental property for 2 years, converting it into your personal residence, and then sell it and likely pay very little taxes.
Remember, Im not a financial planner. Real estate is my focus and my passion. Many people have made a fortune in stocks. You need to invest in ways that fit your needs.
