Deciding whether to invest in rental real estate vs stocks is a hot topic these days with all that is currently going on in the economy. The unexpected collapse of the economy has caused many individuals who have their funds tied up in stocks to seriously rethink their retirement savings strategy.
Regular everyday people who have been diligently building up a substantial retirement fund have been woken up to the fact that a huge portion of their money is now gone. This realization has led them to look for a better way to invest their money. To search for a way to recession proof their investment, and have more control over it. The answer they came up with is investing their funds in real estate.
Let’s take a look at specific investments that involve the stock market, as well as real estate investments such as rental properties:
Most Common Forms of Investments that Rely on the Stock Market
Stock-reliant retirement accounts come in many forms, but the most common are a 401k and a traditional or Roth IRA. Many people don’t think twice about how their hard-earned money is being invested within their 401k or IRA. This is because someone runs the show for them. This really doesn’t leave them with much control over their own money. All they can do is hope for the best that their account custodian knows what they are doing, and hope that there is never an economic downfall that will wipe out their funds. To understand what we are talking about, take a look at this article on why utilizing a 401k is not a good investment strategy.
Let’s learn more about how retirement funds can be negatively impacted when stuck in stock-reliant accounts:
Investing in Stocks can Cause You to Lose Your Life’s Savings
The money you have been saving almost your entire life, your comfortable retirement nest egg, can be taken away from you instantly, leaving you with not enough funds to retire on. This may cause you to continue to work when you planned on spending your golden years relaxing.
If you have already lost a considerable amount of money due to a stock market downturn, we suggest that instead of leaving your money in the same risky place and starting all over again, you may want to think about investing your funds in real estate. It’s clearly a smart alternative. To understand why let’s dive into the cons of investing in the stock market:
The Disadvantages of Investing in the Stock Market vs Rental Real Estate
Although there are many positive aspects of investing in the stock market, smart investors realize the negative aspects can far outweigh the good. How will it benefit or profit you when your 401k custodian has successfully built up your retirement funds over the years, only to lose 75 percent of it when an economic crisis occurs. It’s a risk not worth taking.
Let’s get into more detail of why investing in stocks may not be your best bet:
1. Your Funds are Vulnerable to Stock Market Crashes During Economic Downfalls
In recent days, due to the unforeseen crises of the Coronavirus that has basically placed the economy at a standstill. This has caused the stock market to plummet. This, in turn, reduced 401ks and IRAs balances drastically. One person, in particular, expressed that they lost $100,000 overall in their 401k that relied solely on the stock market. That’s a considerable amount of money. Why put yourself in the position to lose hundreds of thousands of dollars in the blink of an eye.
Your 401k or IRAs performance depends heavily on the state of the volatile stock market that you have absolutely no control over. This is why so many people are looking into investing in real estate vs stocks.
Find out what happens to your investments when the market collapses:
2. The Stock Market is Volatile Even When There is No Economic Crisis
The stock market is volatile; it’s just its nature. This means that your retirement funds are subjected to a whole host of factors that can bring about roller coaster highs and lows, even when the economy is doing well. A few things that can impact the state of the stock market are supply and demand, seasonality, war, panic, trader emotions, political factors, interest rates, inflation, and more. Why would anyone want to subject their precious nest egg to all that!
3. When Investing in Stocks Your Life’s Savings is in the Hands of People You Don’t Even Know
Investing in stocks was designed for Wall Street, professional investment companies, and day traders who know what they are doing, not for the average person. For this reason, 401ks and IRAs are managed by custodians who invest your money for you. In addition to this, they receive commissions from your investments. These individuals typically work for financial planning companies such as Fidelity and Vanguard, to name a few.
When you really think about it, are you 100 percent comfortable leaving them with total control of your retirement funds? Wouldn’t it be wiser to control that money yourself? This can be easily done by investing in real estate instead of the stock market.
4. Starting Later in Life Doesn’t Give You Much Time to Grow Your Funds in the Stock Market
What if you are getting a late start with your retirement plan for one reason or another, and you sign up for a 401k at age 50? This really does not give you enough time to build your retirement fund, does it? A better alternative is to invest in real estate. This will provide you with instant monthly cash flow and a rental property that you have total control over. Much better than having your money invested in risky paper assets that won’t grow fast enough for you to retire on.
Investing in Real Estate is a Safe and Reliable Wealth Building Strategy
The numbers, statistics, history, and many other factors have proven real estate to be a successful and reliable way to grow your retirement funds, as well as have total control over every aspect of it. Imagine not having a single fear that your retirement nest egg will be taken away from you. Or imagine knowing the money you invested is recession-proof and won’t be taken down during economic turmoil. You’re starting to see the big picture now, right? Let’s dive into why investing in rental real estate vs stocks could be the best financial move you could make:
The Top Advantages of Investing in Rental Real Estate vs the Stock Market
Many individuals have never even thought about investing in real estate instead of the typical retirement accounts that deal in stocks. One reason is that most of us have been taught from a young age – go to college, get a good job, and invest in a 401k to secure your retirement. During that speech, no one ever talked about how you can lose your savings instantly when the stock market crashes. With that said, if you are contemplating investing your money in real estate, here are a few things that will reassure you:
1. When You Invest in Rental Real Estate You’re Not Subjected to the Volatile Stock Market
You most likely now have a good understanding of how vulnerable your funds are to the ups and downs of the stock market. When your money is invested in rental property, you are disassociated from the stock market. Other investors will chance to lose their entire life’s savings at the temperament of the stock market, but you won’t. Your funds will be safe and sound in your rental real estate that has nothing to do with stocks.
2. Owning Real Estate Instead of Stocks Allows You to Recession-Proof Your Investment
When there is a decline in economic activity, a national or world crisis, a sudden drop in spending, and the like, a 401k or traditional IRA investment will be at great risk. This is because the stock market plays hand in hand with how the economy is doing. Nine times out of ten, if the economy is doing bad, so will your stocks that your 401k or traditional IRA are made of.
In contrast, when you place your money in rental real estate, you are recession proofing your investment. This means that even if the economy tanks and everyone has lost hundreds of thousands of dollars, your investment is safe, far from the downward spiral of the economy. That sounds reassuring, doesn’t it?
You see, a real estate investment does not rely on factors having to do with the economy. It can rely on stable factors such as the fact that a hospital or grocery store is just around the corner providing essential jobs that ensure a steady tenant. They can be labeled as recession-resistant places of employment. Or, your property relies on the fact that it’s located in a growing market, a certain class neighborhood, and the like.
All these things are researched and selected right from the start, giving you control over your investment strategy. So, you won’t have to hope that your money will be safe like you do with stock-related retirement accounts. Your money WILL be safe if invested in a piece of real estate.
Check out this video that goes into detail about recession proofing your investments:
3. You Have 100 Percent Control Over Your Real Estate Investments
As mentioned, when you place your money in typical retirement savings accounts, you’re investing in such a way that gives someone else control over what you’re investing in. You also have no control over the stock market’s ups and downs. The combination of the two results in you not having control of what you’re placing your money into. However, when you invest in real estate as opposed to stocks, you are in the driver’s seat. You have total control over your investment decisions – when you invest, how you invest, what you invest in, and everything in between.
4. Investing in Real Tangible Assets vs Paper Assets is a Smart Move
Paper assets such as stocks are highly volatile and subject to inflation. In contrast, investing in real estate will provide you with a real tangible asset that is not negatively impacted by inflation. In fact, when inflation occurs, real assets such as investment properties provide a great hedge against inflation, and typically grow or increase in value with inflation. Additionally, real estate investments will allow you to grow equity, causing your investment to be worth more than you originally paid for.
5. Rental Real Estate Produces a Steady Cash Flow Month After Month
Stocks can make you money over time, but there is always a possibility that your money can disappear overnight if an economic disaster were to occur. With rental properties, when the economy is having problems, you will still continue to get that rent check and cash flow you have been receiving month after month. The bottom line is, no matter what’s going on in the world, people still need a place to live, and you will still receive your rental checks each month. Having a steady cash flow makes investing in real estate vs stocks an attractive option.
6. Real Estate Investments Provide Amazing Tax advantages that Stocks Can’t
You have to admit when tax time rolls around, you feel that the IRS is after every penny it can get its hands on. That’s because they do take a significant amount of your hard-earned money. With that in mind, you will be happy to know that when you invest in real estate, it feels more like you are being rewarded than taken from. In a lot of cases, you can end up owing nothing, or get money back.
The government realizes that real estate investors help the economy. Therefore, they encourage them by providing deep property tax deductions, deferred taxes, and more. Learn about the various ways you will be able to lower your taxes by diving into our tax benefits of real estate investments post. It details first-year bonus depreciation/new cost segregation study savings, 20% pass-through deductions, 1031 exchange tax benefits, and more.
Unless you are well versed in real estate tax benefits, it would be wise to hire a professional. We recommend Tom Wheelwright of WealthAbility. If you would rather read up on how to save on your taxes, you can check out his book – Tax-Free Wealth.
Watch this video to get the inside scoop on lowering your taxes:
Already Invested in Stocks but Want to Invest in Real Estate – No Problem!
Now you’re starting to see the whole picture of why investing in real estate vs stocks is a smart strategy all around. So now what? If your money is currently locked into a 401k or IRA, you might feel it’s not possible to start investing in real estate. That can’t be further from the truth. If your investment funds are tied up in a retirement account, you can still use those funds to become a property investor. Here’s how:
1. First Step – Utilize Your Current 401k or IRA to Easily Invest in Real Estate
If you have a current 401k or traditional IRA, you are in luck. Having one of these retirement accounts puts you in a position to easily invest in real estate. There are a few strategies you can put in place to use these retirement funds to invest in a rental property. It may sound complicated, but it’s actually simple, and we have a dedicated team that can help make this happen. Here is some information to get the ball rolling:
Take out a loan from your 401k to move away from the stock market and invest in a rental property
401k Loan: Taking out a loan from your 401k to invest in real estate is a common practice. In doing so, you can increase your overall retirement savings and eliminate the risk of losing it all to the stock market and economy collapses. Additionally, when you make payments on the loan, there is interest, of course, but guess what, you are paying yourself back. This allows you to beef up your retirement savings even more. The team at Morris Invest can inform you on how to go about using your 401k to invest in rental properties. Watch this video to learn more about why a 401k is not a good retirement savings strategy.
Convert your traditional IRA to a self directed IRA and invest in real estate instead of stocks
Self Directed IRA: Many investors don’t even realize that self directed IRAs exist. It seems to be a secret among financial advisors, and for good reason. If you switch from a traditional IRA to a self directed IRA, your financial advisor won’t make commissions any longer. Regular IRAs are normally used to invest money in stocks, bonds, and the like. Self Directed IRAs are not as restricted, and allow you to invest in other items such as real estate, giving you total control over investment decisions. In sum, if you convert your traditional IRA to a self directed IRA, you will put yourself in the position to move forward on investing in a rental property. It’s that simple. Morris Invest assists investors in rolling over their IRAs all the time. We are experts on this topic and can walk you through the entire process. Read more about why switching from a traditional to a self directed IRA is a smart move.
2. Second Step – Let a Full Service Real Estate Company Set You Up with a Recession Proof Cash Flowing Investment
Morris Invest was founded to help those who would love to get involved in rental real estate, but are just not sure how to make it happen. If you are one of those people, our team of professionals can make it happen for you by taking care of every detail, so you don’t have to. Why? Because that’s just what we do. We make it easy for you to realize your dream of owning a recession proof investment. We can easily get you set up with a cash flowing rental property that will allow you to receive monthly rental checks like clockwork.
See what Morris Invest can do for those who would like to get out of the stock market and invest in real estate:
- We can get you set up with cash flowing single-family housing or multi-family duplexes.
- Assist you in taking out a loan from your 401k that can be used to invest in real estate.
- Help you convert your traditional IRA to a self directed IRA.
- We do market research to provide property locations with maximum cash flow.
- Inform and walk you through the incorporation process to allow for big tax breaks, and introduce you to Corporate Direct.
- Morris Invest provides existing renovated properties and new construction properties that we professionally build from the ground up. New construction projects come with a full cost segregation analysis that can save thousands of dollars in taxes.
- Morris Invest fills the rental properties with quality tenants.
- We assign excellent property managers to take care of your tenant’s needs.
- We take care of every step – large and small.
Resources for Those Interested in Investing in Rental Properties
- Read our Self Directed IRA Tips that Will Make You Rich post for more info
- Listen to how Jonny and Jenny left the stock market and invested in real estate
- Looking for other ways to obtain funds to invest? Check out our Fund&Grow review
- Here are a few real estate investing resources and tools that may come in handy
- See how much cash flow you’ll make with DealCheck’s analyzing software
- Find out what the 1% rule of real estate investing is all about
- Need property insurance – we recommend utilizing NREIG Insurance Services
Be sure to also check out these additional resources that can kickstart your investment journey:
- The Financial Freedom Academy
- Freedom Number Cheat Sheet
- 90-Day Financial Empowerment Bootcamp
- Morris Invest & SDIRA Program Overview
Invest in Rental Real Estate vs Stocks to Recession Proof Your Retirement Funds
Now that you have had an eye-opening experience as to what it really means to have your funds invested in the stock market, we’re guessing that you want out! We don’t blame you. Why would anyone want their life savings in a risky and volatile stock market? We are here for you and can help you get set up with a tangible, reliable, cash flowing rental property that will allow you to build great wealth.
If we have to leave you with one statement, it would be this – Always remember that it doesn’t matter if the stock market crashes or the economy collapses, a real estate investment will remain safe, and will continue to provide you with a monthly cash flow.
If you are tired of having your funds be at the mercy of the ups and downs of the stock market, book a free 30-minute call with a Morris Invest team member. We would love to speak with you.
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