Investors that are looking for other options besides investing in the volatile stock market are looking to the rental property to grow their portfolios. It is true that stocks have the potential for unmatched growth. However, they bring with them inherent risks that can result in profound losses. As an alternative investment, rental properties provide investors a profitable option to stocks and bonds while keeping risks low. And unlike the traditional owner-landlord setup to rental properties, modern rental property investors are working smarter. They are making investments in single-family rental homes in Arlington Heights more profitable with the services of a team of property management professionals.
The argument as to which is the better investment, stocks or rental properties, will not be settled soon. There will always be people giving different opinions on the matter. The truth is, there really is no easy answer to it. The reason is because of what each person regards as “better”. What does “better” mean? Different investment options have different advantages as well as drawbacks. This means deciding the best option for anyone investor depends on things such as how much risk they are willing to take and how long they can wait for the payoff.
To really figure out the differences 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 noticed 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, with stock investors outnumbering those investing in rental properties.
This preference is there for a solid reason; 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 choose to purchase stocks because it is truly passive income – there is nothing you have to do beyond initializing stock transactions.
However, as recent history has shown, investing in stocks carries an inherent risk of disaster. An economic downturn can completely wipe out an entire stock portfolio, forcing an investor to lose everything. Plenty of investors are changing their minds about rental properties as an alternative investment so that they might be able to mitigate this risk.
There are countless perks when investing in residential rental properties as opposed to the stock market. On the strength of past research, rental properties are a considerably safer option for investors. 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 typically only increases in an economic downturn. What’s more, the right rental property can begin producing rental income almost immediately and keep on doing so until that same property is sold years later for a profit– a sum much higher than the original purchase price. While the greatest obstacle to new investors in the rental real estate market is the down payment, you can quickly recoup that money back plus a significant sum on top.
Real Property Management Northwest Chicago Suburbs is happy to come to your aid whether you’re considering signing up for an alternative investment to balance out a stock portfolio or you’re set to become your own boss as a rental property owner. We give residential property owners full-service property management support, with the mission of making real estate ownership into a truly passive income opportunity. We accomplish the day-to-day duties so that each rental property will operate for you, keeping you free to grow your wealth and realize true financial freedom. Please contact us online or call us at 847-892-4040 to learn more about how we can serve you.
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