Investment Real Estate vs. Stocks

By
Real Estate Agent with Keller Williams Realty Inc. TREC# 595370

Step-by-Step guide to buying an Investment Home in Austin Texas

This blog is the second part of a multi-part blog about buying an investment home in Austin. It is broken down into several different articles for ease of reading. This series is going to concentrate on investing in one-four family houses with an investment strategy of buy, hold, and rent. This is not a blog about flipping homes.

Why should I purchase an investment home in Austin?

Investment Real Estate vs Stocks

Which types of real estate make the best investments and why?

What is a property manager? Do I need one?

Which areas of Austin offer the best investments?

Learn the lingo of real estate investing

How to properly analyze if an investment home is a good investment

What is a 1031 Exchange, and how can it help me to succeed?

 


 

As an investor, you have a lot of options to increase your assets over time. Some people prefer dividend paying stocks as an investment vehicle, others prefer real estate. I firmly believe that real estate is a better investment choice than stocks for a number of reasons:

  1. There is always a chance that a stock, even the best-performing REIT, can go from being a stellar performer to a penny stock overnight. This not only is possible, it has happened several times. Even in a down market, real estate will never lose 99.9% of its value.

  2. Real estate is a tangible asset. It can be improved, renovated, repaired, etc. Often times a moderate improvement can result in substantial increases in tenant quality and rental income. A stock on the other hand is subject to the whims of the management and market conditions.

  3. Real estate can always be lived in. Obviously the entire point of real estate investing is to avoid this scenario, but it is always an option.

  4. You are in control. You are the one that selects the tenant criteria, whether or not make improvements, house to buy, etc. Buying real estate as an investment allows you to have maximum control over your investment strategy rather than relying on a money manager or CEO who may have nefarious goals.

There are unfortunately, some down sides of owning rental property.

  1. The cost of entry is substantially higher than a stock. In order to purchase a home for an investment, an investor must have a down payment of 25% of the purchase price. That is the bare-minimum requirement for an investment mortgage. For example on a home that costs $200,000, the investor would have to have at least $50,000 in order to obtain a mortgage.

  2. Obtaining a mortgage can be difficult. Generally for an investment mortgage, the investor needs to have excellent credit and low debt-to-income ratios.

  3. Tenants and repairs may become problems. We will talk about this in detail later, but there is always a chance of having bad tenants that cause damage.

  4. Lastly, owning a rental property is intrinsically tied to working with people. If an investor is someone that doesn’t like people, then buying a rental property is not a good idea.

About Jordan Gouger

Jordan Gouger is a buyer’s agent with Keller Williams Realty’s South West Austin Market Center. He specializes in working with first time home buyers and buyers of residential investment properties. Among his areas of expertise are South Austin, Gracywoods, Quail Creek, North Central Austin, and Scofield.

Jordan places customer service above anything else and always goes the extra mile to help his clients achieve their real estate goals. He has experience working with out of town buyers and is able to help coordinate everything locally to ease your peace of mind. For all of your buying needs, please contact him at 512-693-9297 or jordan.gouger@kw.com

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Home Buying
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Texas Travis County Austin
Tags:
investment real estate
stocks
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