Real Estate vs Stocks

Real estate and stocks are two popular investment vehicles. It is always important to have a balanced portfolio; therefore it is worthwhile to invest in both. However, if you are trying to decide between the two, you might find that real estate provides the better returns more consistently.I believe that real estate serves as a better investment than the stock market for a number of reasons. Most importantly, real estate generally is not as volatile as the stock market. Stocks can plummet for any reason at any time, leaving investors at the mercy of things beyond their control. Global events, such as terrorist attacks, natural disasters, corporate bankruptcy, and high-profile white-collar crimes, can all negatively affect the value of stocks. The reality is that many things can determine the daily value of stocks, far beyond the fundamentals of a company’s financials.

Top 3 reasons real estate is a better investment than stocks

1).    Real Estate is a Tangible Asset - It is a physical investment that you can see and touch. Shares in a company are nothing more than a piece of paper giving you an interest in the underlying company.  A home’s value has never reached $0.Although a company’s shares can be valuable, because real estate is tangible it generally provides more value because people can use it in everyday life, and more importantly it is essential. People must have homes to live in. You can live in a house or an apartment, but you cannot live in a share of stock from Google.

2).   Real Estate allows for Leverage - Now leverage can be a double-edged sword, and over-leveraging a property can cause your asset to become a “money pit” faster than you can say “Bubble”. The over-leveraging of properties coupled with greed is the primary reason why we are experiencing the effects of the recent real estate market crash.However, responsible leveraging can allow an investor to put up 20% of the purchase price of a property and borrow the remaining 80% of the purchase price. This leverage will generally allow the investor to realize gains much higher than that of the stock market. For example if you have $100,000 dollars to invest in real estate, you can generally leverage that into a $500,000 property. So your $100,000 will serve as a 20% down payment on a $500,000 property and you will get a mortgage for the remaining $400,000.If the property appreciates at 5% ($25,000) over the course of a year, that is an unrealized gain of 25% on your invested capital of $100,000. In addition, if the property was generating a positive income, which is always advisable, then your returns would be greater.

Note: Mason Hill properties provide positive cash flow and are currently appreciating between 12 to 18% per year.Stocks can generally only be leveraged at a 50% – 100% ratio if you are trading on margin. So if you have $100,000 to invest, you can generally purchase $150,000 – $200,000 worth of stock. Assuming you purchased $200,000 worth of stock and it appreciated 5% ($10,000) over the course of a year that is an unrealized gain of only 10% on your invested capital of $100,000.

Acquiring Real Estate with Your Self-Directed IRA

It’s a little-known fact that Real Estate can be purchased with retirement account funds, leveraging your funds even further. When using a Self-Directed IRA for investments in real estate, your profits are tax-deferred back into your retirement account. In the case of a Self Directed Roth IRA, your gains are tax-free and you can take personal ownership of the property tax free at the age of 59½.Income from a rental property bought with a Self-Directed Roth IRA flows back into the retirement account tax-free (or tax-deferred with a traditional IRA). On a percentage basis, the income from real estate can be two to eight times higher than today’s fixed-income offerings - even after paying expenses such as property taxes and insurance. Meanwhile, the accountholder can eventually reap the potential appreciation of the underlying asset, tax-free. Proceeds from selling an investment property can also roll back into the IRA tax-free.

3).   Real Estate allows for more Control - When you invest in real estate, you generally have control in how that investment performs. You can implement strategies to operate the investment more efficiently in order to maximize returns. Unfortunately, with stocks you really don’t have any control in how the company operates in order to maximize your returns on your investment.

No interest in being a landlord?

Not to worry. Mason Hill offers Turnkey Wholesale Real Estate solutions designed to allow you to take advantage of the current housing market without the headache of being a landlord.  All properties are fully leased and managed. Our investors own the property and retain all the benefits including positive cash flow, 12-18% appreciation and of course the many tax advantages now available.