Working your day-to-day job pays the bills, but if you’re hoping to generate additional income or are looking towards retirement in a few years, investing is an excellent way put your money to work for you and help you meet your goals faster. Over the years, a great debate has raged on: is it better to buy stocks or focus on turnkey real estate investment? It turns out that there are pros and cons to each.
Investing in the Stock Market
For many investors, the stock market is the way to go. They enjoy the fact that it’s easy for them to diversify their stock portfolios and buy stocks from different companies or even across various industries. Stock trades are also very affordable, as online fees are often less than $5 per transaction.
Another reason the stock market is popular among investors is that it’s easy to get immediate liquidity. If you need cash, all you have to do is sell your stocks — which in this digital age is as easy as clicking a mouse. If you find that the industry or companies you’re invested in are beginning to bottom out, it’s easy to protect yourself by selling and moving on.
The stock market has drawbacks, however, in terms of volatility and risk. World and political events can send individual stocks or entire industries into unexpected nosedives – something that many investors may be unwilling or unable to wait out. If a stock isn’t performing well, there’s simply no way to make money off of it until it turns around.
Turnkey Real Estate Investment
Other investors feel that their money is more secure in the real estate market. They enjoy the idea of investing in something concrete that they can actually see and touch. And unlike stock purchases, real estate investment doesn’t require you to use all of your cash to fund the entire purchase. Instead, financing a turnkey real estate investment frees you up to utilize the rest of your money elsewhere (perhaps in additional investment properties!).
By their nature, turnkey investment properties are rental-ready on the day you purchase them. This means that even if the real estate market is slow and you can’t currently sell a property, you can always generate passive income by renting it out. If you’ve done your due diligence before purchasing the property, this will be enough to cover all of the expenses (allowing the market time to recover). Many properties can generate income far beyond the cost of their expenses — money that can be put in the bank or utilized to expand your turnkey real estate portfolio.
Another plus of turnkey real estate investments is the tax benefits they provide. Changes to the tax code in 2017 made it easier than ever for investment property owners to take advantage of valuable tax deductions that can help you maximize your rental income.
One of the major disadvantages of a turnkey real estate investment is that unlike stocks, you can’t simply press a button and sell a house or an apartment building. If the real estate market goes into a slump, you’ll be forced to wait it out or sell at a lower price — a situation that won’t be as problematic if you are renting the property out in the meantime.
Many investors also feel that diversifying in real estate is more difficult than diversifying in the stock market. This is a misconception, however: like purchasing stocks, buying different types of real estate or purchasing in multiple cities or other states simply requires diligence and research.
Which investment strategy is best will depend on your specific plans and goals. One thing all investors can agree on, however, is that putting your money to work for you is the smartest way to work towards long-term wealth!