Investors are looking into investing in rental property to grow their portfolios. It’s an option they can choose instead of, or on top of, the volatile stock market. Although stocks have the potential for unmatched growth, they also have inherent risks that can result in profound losses.
As an alternative investment, rental properties present to investors a profitable option to stocks and bonds while keeping risks low. And unlike the traditional approach of owner-landlord, the rental property investors these days are going with a more modern setup. They are making single-family rental homes in Wrightsville Beach work smarter by engaging the services of a team of property management professionals.
The matter as to which is a better investment, stocks or rental properties, will always be a matter for debate. There really is no simple answer to it. 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 observed is that, on average, residential real estate had the best returns 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, with vastly more stock investors than those who invest in rental properties.
There is a reasonable basis for their preference. 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. Lastly, many investors choose to purchase stocks because it is truly passive income – there is nothing you have to do beyond initializing stock transactions.
However, as recent history shows us, investing in stocks carries an inherent risk of disaster. An economic downturn can completely wipe out an entire stock portfolio, leaving an investor high and dry. Plenty of investors are changing their minds about rental properties as an alternative investment so that they might be able to mitigate this risk.
There are a great number of benefits when investing in residential rental properties as opposed to the stock market. Rental properties are generally a safer option for investors because of past research. 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 normally only increases in an economic downturn. What’s more, the right rental property can begin producing rental income almost immediately and keep on doing so until that same property is sold years later for a profit– a sum much higher than the original purchase price. While the greatest obstacle to new investors in the rental real estate market is the down payment, you can quickly recoup that money back plus a significant sum on top.
In case you’re considering signing up for an alternative investment to counterbalance a stock portfolio or you’re set to live your dream as a rental property owner, Real Property Management Champion is happy to come to your aid. We offer residential property owners with full-service property management support, for the goal of making real estate ownership a truly passive income opportunity. We handle the daily tasks so that each rental property will work for you, giving you 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 910-782-4488.
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