Jetset Magazine is a Scottsdale, Arizona-based publication that caters to the very affluent. In Jetset Magazine, subscribers can read about the latest in luxury real estate, autos, living, travel, fashion, and private jets.
An article published in August 2019 discussed the benefits of choosing
real estate as an investment over the stock market. For many who aspire to accumulate a lot of wealth, real estate offers investors a number of advantages that allow them to hedge against risk in ways that are not found in the stock market.
Just in terms of cash flow, real estate generates more guaranteed cash flow in a given month than stock. In the stock market, a person earns money one of two ways: through the increased price of a share and through dividends (or company earnings given to investors), which is dependent on market trends and other external factors. However, monthly rents are a constant source of income that out-pace stock market earnings for a few reasons.
One reason is that property appreciation hedges against risk. Beginning in the 1940s, home prices have appreciated six percent. While stocks appreciate ten percent, real estate investments have the potential to still surpasses stocks. Using these figures, a person who invests $22,000 (at 10 percent) in the stock market might earn $2,190 after paying fees. However, a real estate investor will earn considerably more over time by investing $100,000 in rental property (with a $20,000 down payment and $2,000 closing costs) because a six percent increase (on average) in property value annually will net the person $6,000 (.06 x 100,000), significantly more than the real estate investment.
The gains do not stop there. Rental rates continue to rise, which increases the investor's cash flow, and the more the investor pays toward the principal, the more equity they have in the property. At year’s end, a person’s real estate investment could earn over $30,000 between cash flow, equity, and appreciation, compared to approximately $24,000 earned on the stock market.