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Real Estate Investments vs Alternative Investments

Torbit - September 18, 2022 - - 0 |

The main motive of investing is to generate cash. People invest for various purposes. Some do it to make a living, while others invest to save money for retirement. For those unfamiliar with investing, It is mandatory to understand first where it is beneficial to park  their hard-earned capital . 

Every investor has a niche that S/He focuses on and understands. There are many different fields  which investors can use to make money like traditional/ alternative investments or real estate investments. The traditional/alternative investments include stocks and bonds, gold, art and collectibles, currencies, etc. and real estate investments include all types of investments like buying and selling of residential and commercial properties and  taking properties on lease, etc. 

The contrast between real estate and stock market investment is with regard to  the cash flow.
Rental properties put cash in the proprietor’s pocket every month while stocks possibly put cash in the proprietor’s hands when they are sold. Both are great ways of investing money for solid and consistent ROI if invested responsibly. For a greater output, the investors prefer asset-based investments like real estate. Because of the benefits that real estate investing offers, investors use real estate to grow and diversify their portfolios. 

Real Estate Investments VS Alternative Investments: Advantages and
disadvantages.
There are advantages and disadvantages of investing in these types of real
estate assets, and how to invest in them differs from traditional/alternative
investments.

Advantages of Real Estate Investments

* Tax Advantages: Real estate investors are highly favoured by tax laws.There are a lot of tax deductions available for real estate property owners including property tax, real estate interests, mortgage interests, repairs and maintenance, and upkeep. To combat inflation, one can even depreciate their rental properties over time. 

*.  Investment Leveraging : A distinguished aspect of investing in real estate is that one can  purchase an asset with only 20% of upfront  while the rest of the money can be raised from other sources. This is however  not possible in stock market where one has to fully invest one’s own funds. 

*. Fewer Fluctuations: Real estate investments generally do not fluctuate  as unlike stock market investments  they are usually not affected by market conditions. They are often considered a good way to diversify one’s portfolio. 

*. Portfolio Diversification :  Real Estate investments have a low correlation to the stock markets and as such  they help to diversify their portfolio. By investing in real estate funds one will have access to markets that one wouldn’t have  before. 

Disadvantages of Real Estate Investments 

 *. Bad Locations: The community and the comparable properties in that
area of your property have a huge impact on its value.
*. Maintenance and Upkeep: Some of the properties come with underlyingissues that could be expensive.
*. Potential Vacancies: Vacancies  of over one month or more, costi property owners to pay from their own  pockets.
*. Structural Risk: A property depends on the foundation to hold up.Structural damage can cost real estate investors. 

 

Risks of investing  in Alternative Investments  

*. Equity Risk: The market price of the stock fluctuates all the time depending on supply and demand. There is always a risk in this niche that applies to investing in shares.
*. Volatility: Higher stock price volatility often means higher risk .
*. Capital Gains Tax: Any profit or gain arising from stock market investments is known as a capital gain. Short-term capital gain tax is taxed at a 15% rate and long-term capital gain is taxed at a 10% rate respectively. 

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