Investors are thinking of investing in rental property to grow their portfolios. It’s another area they can grow instead of, or in addition to, the volatile stock market. While stocks have the potential for unmatched growth, they also bring with them 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 old setup of owner-landlord, today’s rental property investors are going with a more modern approach. They are making single-family rental homes in Grand Junction work smarter by working together with 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 for this is that people don’t have the same thing in mind when they say the word “better”. What does “better” mean? Different investment options have different advantages as well as drawbacks. So, arriving at the best decision for any investor depends on things such as how much risk they are willing to take and how long they can wait for the payoff.
To appreciate the real difference 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 say 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. The stock investors greatly outnumber those buying 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 go for stocks because it is truly passive income – there is no need to do anything beyond initializing stock transactions.
However, as recent events have shown, investing in stocks carries an inherent risk of disaster. An economic downturn can completely wipe out an entire stock portfolio, burdening an investor with immeasurable loss. Numerous investors are reconsidering rental properties as an alternative investment in order to to mitigate this risk.
There is a multitude of additional 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. Additionally, if you get the right rental property, you could start producing rental income almost immediately and keep producing income until the year comes when you decide to sell it for a sum much higher than the original purchase price. It’s true that the down payment is the usual barrier to new investors in the rental real estate market, but you will most definitely get 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 Now 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 work on the repetitive tasks so that each rental property will be producing profit for you, freeing your schedule so you can grow your wealth and realize true financial freedom. To know more about what we can do for you, please contact us online or give us a ring at 970-314-7123.
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