Why I choose income producing real estate over stocks
Income producing real estate and stocks differ in many different ways.
When mainstream tv speaks on real estate, its usually from a national standpoint.
Thats not to mention, real estate is hyper local. And moves extremely slow.
What sells best on TV is stocks, because stocks have excitement attached to them that can keep a TV audience engaged.
So what’s easier to sell, a stock that’s literally moving by the second, or real estate that moves like a snail.
Stocks may move fast, but here’s why I choose real estate.
Real estate doesn’t plummet in value in 1 day unlike stocks
Stocks literally can lose major value in the course of a day. This bares major risk for me. A default rule as an investor is to mitigate risk at all cost.
Let’s take a look at 2 examples. The first is a little over a month ago. Facebook stock plummeted 20% in one day. I mentioned in a recent email blast to my subscribers that anything that loses value in that short of a time span, you should run from.
This shows how volatile stocks are.
The second example is about 2 weeks ago when Tesla’s CEO Elon Musk was filmed smoking weed. Guess what happened to its stock by the end of the day.
It fell 9%. Once again, the volatility bares major risk.
Stocks do not provide major tax advantages the way that real estate does
Real estate provide the best tax advantages in the country when it comes to investing. Stocks provide very little tax advantages.
Taxes is the number one expense to Americans. As an investor, lowering your taxes is part of the game. Here are a few from real estate.
Depreciation is the king of all tax advantages. This is being able to claim wear in tear on a property building and taking that loss (on paper) against your taxable income. Even though the building is going up in value. This is a major tax benefit.
First, if you haven’t heard my interview about the 1031 exchange I suggest you take a listen featuring Tom Gustafson, a 1031 exchange expert and qualified intermediary.
The 1031 exchange is the ability to exchange a like kind investment property for another while differing and using those same capital gains to buy another property.
Essentially helping you grow your assets and cash flow.
Stocks are manipulated to push prices; real estates value is based on income
In my opinion, most stocks are intentionally manipulated to push values of stocks up.
The value of most stocks does not reflect the value that actually exist within the company.
One way this is done is by using stock buybacks.
In a stock buyback, a company buys its shares and holds them, which makes fewer shares available on the market. The few shares that are available on the market drives the prices of those few shares up, which then increase the value of the shares the company bought back.
To me, this is manipulation. No real service or product created to justify the stock increase.
Another way manipulation is pushed is by using high frequency trading. High frequency trading allows high powered computers to seek out small anomalies in the market and carryout a large transaction in seconds, markup the price by a few pennies and sell back to the market in seconds.
There is no real value added to these companies such as a new service or product to increase income. Yet their stock price still manages to go up making the company “worth more”.
Income producing real estate is not easily manipulated. Thats because its a hard asset and the value can be identified through a thorough due diligence process identifying true income and expenses, and basing its value from the net operating income.
As you can see, real estate and stocks differ any many ways. I could have expanded heavily on the tax benefits of real estate investing alone.
And could have went on and on about other stock manipulation that goes on.
But I hope that after reading this, you have a better picture of the benefits of real estate and why I choose income producing real estate.