Investing in Gold vs. Real Estate: Which is Better?
When you hang around enough investors and entrepreneurs you get to know people who invest in a little bit of everything – single family houses, gold, oil, and raw land, to name a few.
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And lately, the investment that keeps popping up among my circle of friends is investing in gold. Also, it seems like “gold investing” commercials are everywhere these days. (Thanks Glen Beck).
So, it got me thinking . . .
As an investor, which is better for my money, gold or real estate?
Well… with the government printing money like it grows on trees, we're bound to have inflation, which will cause the price of gold to continue to increase. Plus, gold never goes out of "style." For the past 5,000 years it's been used as money and many people would rather receive payment in gold these days than a soon-to-be worthless dollar. I certainly expect the price of gold to increase in the next several years, but I have no idea how high.
But here’s the thing: Gold right now is priced at almost $1,400 an ounce. And to buy an ounce of gold you have to pay $1,400, plus a percentage over that. (Usually 5% or 6%, which is the dealer’s markup).
There are no discounts for gold. And once you buy it, the only way you make money off it, is when it increases in value and you sell it.
Now let’s get to real estate, specifically single family houses.
If you're a wholesaler, you don't have to put any money down except a $10 deposit and you can make $5,000 to $10,000 when you assign your contract to someone. (I like that leverage). You can also do lease options and subject-to's and get in for virtually no money down.
If you get a rental property, then you’ve got cash flow coming in. Unlike gold, which is “dead weight”, the property you own will generate a monthly income. It may only be a couple hundred bucks at first, but over time as you pay down your mortgage it can certainly add up.
Also, I mentioned inflation earlier. Real estate is just like gold in that it is a “hard asset.” Once inflation takes off, the price of real estate should enjoy a healthy gain.
The bottom-line is: If I were you, I'd stick to buying houses and worry about buying gold later on. If you're a multi-millionaire now, then sure, buy gold and diversify a little bit. But if you're a new investor starting out, save your money for a rainy day and begin by wholesaling and doing other transactions which don't require a lot of cash.