It’s an age-old discussion: whether it’s better to invest in real estate or stocks. At Snowball Equity, we address many of the risks typically associated with real estate, providing our investors with a clear understanding of why real estate must be included in any portfolio.
“A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.” Jeff Bezos.
Where Real Estate Beats Stocks:
- Tangible Assets: Real estate is a tangible asset, meaning that investments are secured by a physical asset: the property. Stocks, on the other hand, are paper assets, far removed from anything tangible.
- Cash Flow: Passive income investors can generate cash flow from rental properties, which can translate into encouraging profits in today’s environment. What’s more, cash flow from a properly established rental property can become entirely passive in the event the appropriate steps are taken. HOw does this compare to dividends?
- Control: One of the greatest benefits of investing in real estate is the amount of control one has over their exit strategy. As a real estate investor, your returns are directly correlated to your involvement. What you do has ramifications — good or bad. That said, a lot of investors like the control they can exercise in a real estate deal, and I agree with them. There’s a lot to be said for deciding your own fate and putting in hard work that translates to tangible success. No control in stocks.
- Leverage: Real estate investors do not have to use their own money to fund deals; they can leverage capital from other sources, which allows them to remain liquid. Leverage also allows real estate investors to invest in multiple properties at a time, as opposed to a single property.
- Appreciation: Though it’s not always guaranteed, history has taught us that homes appreciate more often than not. Real estate assets tend to go up in value more often than they go down, which builds equity and adds to one’s net worth.
- Taxes: In addition to encouraging profit margins, real estate coincides with some impressive tax benefits. Homeowners, for example, can reduce their taxable obligations each year by deducting the interest they pay on their mortgage. On top of that, rental property owners can capitalize on depreciation and several other tax breaks if they are using their home to collect rent. There are actually quite a few tax breaks that can contribute to making real estate an even more attractive investment.
- Volatility: The stock market has become synonymous with severe ups and downs, as it is at the mercy of a balanced U.S. economy. As a result, most stocks will go through several ups and down over the course of trading, which can grow frustrating over time.
Where Stocks Come Out on Top:
- Time Intensive: Investing in stocks takes little time. In order to invest with some level of success while mitigating as much risk as possible, real estate investors need to put in the time. Investing in real estate is time intensive – but through syndication, passive investors can benefit from the time put in by Snowball Equity, and instead remain entirely passive.
- Liquidity: Stocks are more liquid than real estate investments. Investors in real estate should be prepared to hold for the necessary hold period.
- Barrier To Entry: It’s easy to invest in stocks, and no special expertise or knowledge is required. However, in order to make smart acquisitions of real estate, at least some level of expertise, knowledge and experience is required. However, through real estate syndication, passive investors can benefit from the knowledge and experience of the Snowball Equity team without having to become an expert themselves.
- Up front Capital: Investors can invest in stocks with very little initial capital. However, to get in the real estate game, typically larger amounts of capital are needed, even more so when we’re speaking of multi-family properties. However, through real estate syndication, investors can come together with other investors to acquire interests in real estate without having huge initial capital amounts.
- Diversification: Stocks are easier to diversify your capital amongst different industries. However, multi-family properties diversify through a large number of “doors”, and investments in multiple real estate syndications with Snowball Equity can further diversify each investor’s portfolio.
All things considered, real estate syndication offers qualified investors an unequalled opportunity to enjoy all the benefits of real estate investment without compromising on many of the advantages of stock investing.
