- There is a debate as to what is the better return on investment (ROI), real estate or stocks. The stock market has more governmental regulations, such as insider trading than that of the housing or real estate investing market. Of course, the stock market and real estate market operate on different business principles and market forces.
But the risks are similar. Both the real estate investor and stock broker have to make assumptions based on market forces and trend. Stock brokers do not readily cross the line to insider trading to break even.
Neither does a real estate investor intentionally fail to disclose information that must be disclosed as a mater of law, to make a big sale. The risks are taken by the broker or real estate investors similar. Then the issues may come down how much risk you are willing to take
On the other hand, a real estate investor invests in something that is tangible, real property. Stocks, by their nature, are intangible personal property. If the value of your stock collapses, its actual value may be the paper itself.
While the ROI will not be overwhelming when you first invest in stocks, the stock market has a long history of wealth building. On the another hand, a real estate investment is hands on, and you have better control over your investment. Like stock, the value of real estate will increase, but if there is a downturn, you still have the property. In a downturn in the stock market, you have nothing, and there is no fallback position,
- Real estate has come a long way from "flipping" from a rehabbed property to a new sale. "Flipping" is a longer-term approach. One buys a single property and then resells after it is rehabilitated.
The key word in real estate investment is gentrification. Gentrification is the process of renovating a deteriorated urban neighborhoods to influence more affluent residents. This process has urban planning and political implications, Gentrification is controversial and has a black versus white or poor versus the wealthy.
Another common approach to real estate investing is to pay attention to the activities of the building and planning department of any locality and attend meetings of the city or town counsel and their mayor. You can find out information about the long-term development plan that would require rezoning ordinances or revisions of the traffic flow.
- Then you would take a risk and purchase property in the areas of the future planning such as a beautification development. There is a chance that the development will not go through and you would be holding property that was, for all practical purposes, below market value. It will still cost you property taxes and maintenance costs. Knowing the neighborhood where you would like to invest is critical. Go to meetings of the Chamber of Commerce and become familiar with the local politicians.
When politics are involved, there appears not to be any difference between investing in real estate or investing in stocks. There is no getting around it for the stock market is very volatile. The changes may occur from day to day. But when you balance the volatility with political changes that can destroy a real estate investment, there appears to be no difference in the risks of making either investment.