Let’s Talk Stocks vs. Real Estate

I’ve been talking so much about stocks, options, and business that I almost forgot to mention why we love real estate.  REAL estate is something everybody has some sort of appreciation for.  We all need shelter, and we all have that picture of our ideal dream home.

Real estate has been a measure of wealth throughout history, with kings having dominion over their lands, and the peasants that work them.  Real estate will always have value, and that in itself helps provide some level of safety to a real estate backed investment.

Why real estate is still a smart investment option

As a whole, the stock market has appreciated faster than the real estate market.   But the beautiful thing about real estate is that it’s far less transparent, and values are far more reliant on local factors over nation-wide ones. What this means is many, many, many more opportunities to find discounted investments.

When I first was mentored on how to find outperforming stocks, it was all about buying a company for $.50 on the dollar.  That’s how Ben Graham taught Warren Buffet how to invest.  He taught the concept of buying stocks with a margin of safety.  It’s what would protect your investment if you weren’t as right as you thought you were.  What we’re really talking about is the distinction between price and value.

But Warren Buffet will often wait for years before he finds the right business at the right price. In today’s markets, there is so much readily available information about a company and the price that it’s trading at, it can be very challenging to find a company with great growth potential that’s also on sale.  You usually have to wait for a crash in the stock market, or for some temporary bad news about the industry to come out.

The real estate industry is always on the go

In real estate, there are always divorces, retirement, bankruptcy, back taxes, and of course the deaths in a family. There are pre-foreclosures, short sales, and even finding deals from bank owned properties.  There are countless reasons why a property can have huge potential for profit.  So if buying assets for $.50 on the dollar is the name of the game, real estate is where you’ll find an abundance of opportunities.

Where do I find real estate investment opportunities?

Of course, it’s much easier to buy a share of a stock than it is to buy, refurbish, and sell a property.  That’s where the lucrative opportunities exist to become a private money lender.  The way it works is that the investors spend their time finding properties at 40% to 70% below market value in order to secure their margin of safety.  But they’re limited on where they can get funding since banks are extremely adverse to lending out on investment properties. So they turn to private lenders to finance theses deals. And since they found a property at such a steep discount, they’re willing to pay 10% to 15% in interest annual.  Some times more than that if it’s for brief lending periods.

Even though we absolutely love the stock market for long-term growth of your wealth, we equally love the abundant lending opportunities that exist in the real estate investment industry.  And we see the best results when you combine the two.  In fact, the stock market strategies we teach our colleagues often has them sitting in cash waiting for the stock market to become a bargain, So why not put some of that cash to better use by making additional interest income?  For us it’s a win-win.

Thanks for following along.

P.S. If you’re not quite sure where to start your own journey towards investing, why not take a look at how we approach it?

About The Author

herbertkoehler

I am a college drop out who found my passion as an investor. I love the many facets of finance, investing, and business. But even more than that, I love sharing what I learn with others.

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