Stock Vs. Real Estate Investing and How You Can Do Both

       One of the most popular questions in the world of investing is " Should I invest in real estate or the stock market?" my answer is always the same- why not both? Both investments have pros and cons and both can make a poor person wealthy if done right. They both take lots of due diligence and patients but are well worth the wait. So what are the pros and cons of each?

        Stock Investing

When you invest in the stock market you have the advantage of a low upfront cost. You can literally open a brokerage account for a few dollars. On average, the market gains about 8% in value a year. You can easily diversify your stock portfolio with an exchange-traded fund or just a large slew of different stocks.

You can form streams of passive income in the form of dividends.

But the largest benefit the stock market has is liquidity- even in the worse bear market you almost always find a buyer for your shares. You can turn your portfolio into liquid cash in just a few days.

Stock investing has been the single best wealth creator ever, in a recent study done by Fortune magazine, if you bought a single share of Johnson And Johnson during it's IPO in 1944 at the price of $37.50 and had reinvested the dividends, the share would now be worth $900,000.

        Real Estate Investing

There is no better feeling than buying your first house. Or maybe there is... How about your first investment property? There are a few different ways to invest in real estate... you can buy, restore and sell a property for a higher amount than you bought ... or you can buy a house, multifamily or apartment complex and rent it to tenants.

The real estate market has boomed since 1962. The average cost of a house has risen 1,760%. Yes, one thousand seven and sixty percent.

So yes, real estate has appreciated in value at a massive rate, but there is a risk that is involved that is not involved in the stock market. The liquidity issue- if the market is down, no one is buying houses. Your assets are sinking in value and there's nothing you can do except wait it out.

On top of that, the upfront cost could be massive, Generally, mortgages require a 10-20 percent down payment. A three-family house in Boston averages about $600,000- that, at a minimum, would require 30-60 thousand down.

However, a Boston apartment can run about $3,000 a month.

Multiply that by three apartments, then by 12 times a year, you could be making $108,000 a year before any deductions.

Multiple that by three or four investments, you could be making a pretty penny for not lifting a finger.

       Invest in them both?
There is a way you can invest in both at the same time, you can get the liquidity of the stock market, the passive income of the real estate and the growth of both. It's called a REIT, also known as a real estate investment trust.

It trades on the stock market like a regular stock, there is no huge upfront cost and is a great form of passive income.

REITs are required to pay out 90% of their net income in the form of dividends.

If you took the same $60,000 you used for a down payment on the three families and used it to buy some REITs, let's say EPR properties.. you would have yielded nearly 8% in dividends alone.

You would have made $9,000 in dividends and capital gains.


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