Investors are studying alternatives to the volatile stock market and want a different place for their investments. Many are thinking of investing in rental property to grow their portfolios. Stocks may have the potential for unmatched growth but they also bring inherent risks that can result in profound losses. Rental properties are an alternative investment that offer investors a profitable option to stocks and bonds while keeping risks low. And unlike the common owner-landlord approach to rental properties, the rental property investors these days are working smarter. They are turning investments in single-family rental homes in Bedford County into effective and efficient businesses by having a team of property management professionals work with them.
The topic of deciding between stocks or rental properties will always lead to varying views. Which one is the better investment? There really is no definite answer. The reason is plain: What does “better” mean? People don’t always agree on what “better” means. Different investment options have different advantages as well as drawbacks, and that means that getting to the best option for anyone investor depends on things such as how much risk they are willing to take and how long they can wait for the payoff.
To learn the differences between investing in rental properties and investing in stocks, equities, bonds, and so on, a team of economists analyzed over a century of global economic data. The study, The Rate of Return on Everything, 1870-2015, compares the returns on equities, residential real estate, short-term treasury bills, and longer-term Treasury bonds over this entire 145-year span across 16 advanced economies.
What they learned is that, on average, residential real estate had the best return of all investments, at just over 7 percent per year. Equities, or stocks, came in a close second. This contrasts with the number of investors who focus in one investment area (i.e. stocks) over another. Those that invest in rental properties are greatly outnumbered by stock investors.
There is a reason why this is their preference, because even though stocks are high risk, high return investments, noted for their high degree of volatility, there are relatively low barriers to entry in the stock market. Equities are also highly liquid, allowing an investor to sell quickly. Finally, many people choose to invest in stocks because it is truly passive income – there is no required action beyond initializing stock transactions.
However, as recent years show us, investing in stocks carries an inherent risk of disaster. An economic downturn can completely wipe out an entire stock portfolio, causing an investor to exhaust his or her resources. With that in mind and to mitigate this risk, multiple investors are taking another look at rental properties as an alternative investment.
There are a great number of benefits when investing in residential rental properties as opposed to the stock market. Because of prior study on the topic, rental properties are a significantly safer option for investors. But unlike treasury bills (another relatively safe option), real estate offers long-term returns that are comparable to or above the rate of return on equities.
Rental properties are not tied to the stock market, or even in some ways to the economy. The demand for rental homes generally only increases in an economic downturn. Furthermore, if you purchase the right rental property, you could begin producing rental income almost immediately. And that income stream would keep on coming until you decide to sell the property for a sum much higher than the original purchase price. However, it seems like the biggest hindrance for new investors in the rental real estate market is the down payment, but that investment can be quickly recovered. You’ll get that money back plus a significant sum on top.
Real Property Management Cairn is here to assist you if you’re contemplating an alternative investment so that you can even out a stock portfolio or you’re set to live your dream as a rental property owner. We supply residential property owners with full-service property management support, with a plan to make real estate ownership a truly passive income opportunity. We achieve the routine day-to-day goals so that each rental property will produce profits for you, reducing your workload so you can use your free time to grow your wealth and realize true financial freedom. If you want to know more about what we can do to serve you, don’t hesitate to contact us online or call us at 434-215-3028.
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