By Lance Thompson
The best known personal investments are real estate and stocks. There are pros and cons to both, but residential real estate provides six significant advantages over Wall Street.
1. You can live in it.
A home is an investment you can use, and using it doesn’t diminish its value. Both homes and stocks can increase in value, but you can’t live in your portfolio.
2. You can rent it to someone else.
A home is a rent-able asset. There are many other assets that can be rented–cars, skis, table saws, recreational vehicles, rug shampooers, wine presses–but these items all have down time during which they are not rented. When they are not rented, they are not producing income. Once rented, a rental property is in use and generating income 24/7.
3. You can add value.
Stock value reflects events and decisions beyond your control. Real estate value can be enhanced by you. New floor coverings and paint, lighting improvements, new windows and doors, remodeling, upgrades and landscaping are just a few of the ways the owner can raise the value of her real estate investment when she chooses.
4. Your home will always have value.
When a public company folds or declares bankruptcy, its stock can lose one hundred percent of its value. A house will never be worth nothing. Even if a tornado lifts it up and lands it in another county, or a fire destroys the entire structure, insurance will reimburse the owner and the land beneath it will still have value.
5. You control a large asset with a small down payment.
If you spend $100,000 on a stock portfolio, you will control an asset worth $100,000. If you use the same $100,000 as a down payment for a house worth half a million, you will control an asset worth $500,000–five times as large. If your stock portfolio increases in value by 20%, you will realize a gain of $20,000. If your home increases in value by the same 20%, you will realize a gain of $100,000–five times higher.
6. Your investment will grow in value.
Both the stock market and the real estate market fluctuate, but in the long term the value of residential real estate increases. If you have any doubt, check out the price history of any house on Zillow and ask yourself would you rather buy it at today’s price, or its price twenty years ago.
A balanced investment strategy includes both real estate and stocks as well as other investments. But the advantages of residential real estate hit you where you live.
About: Lance Thompson is a writer and actor who owns income property in Idaho and California. Questions or comments can be directed to [email protected].