Those Who Want Control Over Their Investments, Choose Real Estate
The debate about what is the best investment vehicle has been debated for hundreds of years and will probably continue for the next hundred years. The reason is quite simple. As everyone has different investing styles, interests and niches indeed it takes different investments to fulfill each of the different objectives. I have never quite understood why people continue to debate which investment vehicle is best. It is like arguing which automobile is best. The answer will be different for different people. It is all about personal preference.
Those who prefer controls prefer real estate
One thing that most investors do agree upon is when you are looking for the most control over our investment, you tend to choose real estate. Seasoned investors like real estate since you have many more controls over the performance of the investment.
Real estate markets tend to transition at a slower and more manageable pace than what stocks do. As an investor, this gives you time to make strategic moves that often allow you to control the outcome.
Real Estate Offers Controls
The method of how you structure the purchase can allow you to increase your cash flow or increase your equity build up depending on which is most important to you. When you increase the leverage with a larger loan, you can build the equity up quicker but this may reduce the cash flow. Perhaps you would rather increase the cash flow by using less leverage with a smaller loan.
Often investors will buy two properties with higher leverage, this reduces the cash flow but you now have cash flow on two properties essentially doubling it. Often two smaller cash flows are better than one larger cash flow. You certainly now have twice the equity growth being generated as well.
It is your decision based on your diligence to spend more money on things like tile floors vs carpet. Perhaps more out of pocket expense up front but the trade off typically results in less wear and tear meaning less frequent floor upgrades.
Control the properties you buy such as single family rentals which have tenants paying most expenses which reduces your fixed costs as well.
Items like componentizing deprecation increases annual deductions versus a slower deprecation schedule which will reduce annual deductions.
As you control the expenses this further allows you to control the income by managing the property yourself or hiring stellar property managers. Increasing the caliber of rent you charge by increasing the caliber of tenant, you can attract by increasing the desirability of your rental unit.
Typically controlled at acquisition. By buying the right property within the demographics of a faster growing and more economically sound location you will indeed provide for longer and more sustainable growth which, of course, increases your ability to gain stronger equity.
The list of course can go on and on
With alternative investments you are often forced to give up most or all your controls over the investment. Stock investing tends to be an act of what is going on in the national or global market. With little controls over the investment it can change in value very quickly without much if any warning.
Passive vs active investing
The nice part of stock investing is it tends to be much more of a passive investment and the investments tend to provide quick liquidity.
Real Estate tends to be more of an active investment with a slower liquidation process. Because you have controls during ownership and remain actively involved with the investment, you would better forecast the investment position and may not need a quick liquidation.
Mix of passive and active
Many investors like to buy investment property and let skilled property management manage it. They do not have to be involved in day to day operation but they can have a say in the important things essentially managing the management company. Giving them a small active roll but maintaining a great deal of passiveness. This is known as turnkey real estate investing.