“Housing” is subjected to large debates with regards to investing. The real estate sector is a much sought-after subject when it is put alongside multiple investing options like trading stocks. It is often considered to be the outlet having fewer strings attached. Meaning that real estate investing does not entail grave risks, unlike many different other options. The real estate sector is often compared to the stock market when it comes to income potential, risks, and opportunities.
Many stock trading enthusiasts have always upvoted the value of investing in the stock market and disregard the real estate sector. However, in the bygone years, the prevailing trends and facts have proven that real estate has a better prospect and it comes down a plethora of reasons. Stocks do bring you high returns but can easily let your investments down without giving you a warning ahead of time. One has to be very keen about the market conditions, remain up-to-date on an hourly basis because of the unpredictability of global events and the external factors which can likely plummet stocks at a given time.
Whereas real estate investing, it is actually considered “the best of both worlds”. Talking independently regarding the real estate sector, one can count many benefits attributed to investing in this sector. First and foremost is the cash flow; investors reap quick income streams when they rent out properties and this overall improves their financial position.
Here is what to keep in mind when comparing real estate sector with the stock market:
More consistency in real estate – Both markets reward investors in terms of profitable returns. However, the stock market is not as consistent in providing returns to investors as the real estate market is. In the real estate sector, there are different channels of income, they are properly streamlined and remain consistency. This consistency is a prominent reason why investors are likely to opt for real estate. Stocks do not guarantee returns because the business you buy a stake in can be put against crisis and market conditions where profit margins plummet, and hence, your returns do not arrive.
No hyper fluctuations like the stock market – The stock market is very vulnerable to external factors causing fluctuations in the market. Just take the example of Brexit; the panic of a historic political decision wiped out around $2 trillion off global markets. The British Pound had hit a new low in 31 years. Wall Street was disrupted, suffering its biggest fall in a long while. Investors always fear social and political circumstances which can disrupt a market on a large scale. However, the real estate market is not prone to changes and the value of the property does not decline when geopolitical conditions are shaking.
Real estate has more control – Having control of property is a convincing factor because you are free to make decisions. You have command over your investment, you pick a tenant by your choice as well as the property itself. In stocks, your stake is in the hand of other people. You have bought a stake in a company and its Board of Directors run and make the major decisions. Every business out there boasts off a track record of stable dividends which is sometimes only window dressing. However, the management of the company is not answerable when market conditions fluctuate and plummet the stock due to external factors having a strong impact. Geopolitical events build risk, markets fall and companies are forced to hold back dividends. Then, an investor has to wait for the market to recover and grow stable but in the short term, significant losses are born if one chooses to sell the low valued stocks in the aftermath of the stock market crash.
Real estate investing outgrows into many sub-sectors, encompassing different categories from single apartments, complete residential properties to commercial high rise office buildings. There is another category surging in popularity. It is a niche called “mobile home park investing”. It is another investment outlet provided in the catalog of real estate investing.
Mobile home park investing involves owning the area surrounding individual homes which include amenities like streets, parks, utility systems, etc. In this area of real estate, a homeowner only pays for the “right” to occupy and use the land and surrounding space, facilities and area where their property is located. In simple terms, mobile home park investing refers to investing in the area surrounding somebody’s home. Andrew Lanoie, Founder, CEO of Four Peaks Capital Partners and Park Place Communities and a former talent agent gives his vote of confidence to this particular niche as it is becoming popular among investors and there are different reasons for it.
Low costs: Investing in family homes involve greater costs, especially the cost per unit of the home is high. However, Mobile Home Park investing allows an individual to own more properties with a low cost per unit. Even Andrew Lanoie cites this factor to be supreme in all of the real estate investing. He says, “Mobile home parks offer the lowest cost investment per unit of any real estate asset class with potentially higher risk adjusted returns.” You do not own the complete, just the land in its surrounding, which is why your investment tends to be lower and with your capital, you can expect to own more units.
Higher returns: When you invest in a mobile home park, you get higher returns due to the fact your costs are minimized. It’s a one-off investment most of the time and does not usually involve much maintenance costs. As opposed to maintaining a complete family home, you can manage to maintain the land and its surrounding facilities which are fairly inexpensive. Plus, the need for maintaining these spots does not arrive very frequently. You are liberated of costs that occur due to the maintenance of a complete home involving buying new appliances, paint, repairing, etc.
Low competition: Mobile home park investing is still a juvenile concept in the real estate sector. Many people are not much familiar with it, which is why it rewards in a low competition for all the investors involved because some of them actually favor not many parties fighting for lands. In fact, there are certain barriers to entry into the market, it involves a lot of paperwork, licenses, and permits which discourages most people.
Growing demand: Demand for affordable housing options are ever-increasing in today’s era. It does not matter what the prevailing circumstances of the local economy are. Household incomes are gradually rising and people are looking to invest in smarter ways rather just throwing money extravagantly. Well managed parks are a favorable condition in this case and people looking to buy homes always prioritize maintained top-tier parks.
It can be asserted that the real-estate sector has much diversity in terms of investment options and niches, and it does not always require to move forward with a high, upfront capital to get your investment rolling.
William Lowry just acquired my bachelor’s degree in investment management. I love to read about all the latest happenings in the finance industry and want to share my knowledge with people.