Even with a lower growth rate, we’ll explain how real estate could be your best bet for the future.
A stock broker will say you are best to buy stocks and a Real Estate Agent will say you are best to buy real estate. Which is better? It really depends on your goals and your comfort level. Kasteel Property Management can help discuss your goals and knows how to help you make informed decisions.
Real estate in Utah County is hot and has a lot of ways to propel a home owner towards their financial goals. Even though real estate is not for everyone, it’s still important to understand how it works so you can make the right decisions for yourself. When it comes to investing though, you can’t beat the appreciation of a few hundred thousand dollar asset (house) purchased with someone else’s money, that generates a monthly income to help cover the mortgage payment and maintenance costs along the way. It’s leverage combined with rental income that makes real estate out perform the stock market.
It’s not a complicated concept but many people, that think they are professionals, will give you bad advise because they have only ever thought one way and don’t fully understand what they are talking about.
Consider this scenario, simplified down to just the nuts and bolts to show the basic idea. Let’s say I have $40,000 to invest and lets say the stock market is growing at 10% and the real estate market is growing at only 5%. At face value one might think you could get twice the return in the stock market. Here is the game changer: $40,000 will by a $200,000 house while the same $40,000 will only buy $40,000 worths of stocks.
$200,000 house growing at 5% equals $10,000 of appreciation.
$40,000 of stocks growing at 10% equals $4,000 of growth.
Also, both stocks and real estate can go up and down in value but even in a down market you will always have the house. It’s a physical, tangible asset that doesn’t disappear into nothingness, while that is exactly what can happen to money that is in the stock market when it is down.
You might, rightly be asking, what about the mortgage payment? Interest on the loan, property taxes, property insurance, maintenance costs. Maybe you think that I am way over simplifying this. First, remember, I did state that I am purposely simplifying this down to the basic nuts and bolts to get the idea across. Although, these concepts are sound and accurate there are many details to consider. Second, I stated it is leverage combined with rental income. To counter the costs of the mortgage interest, property taxes and insurance, and maintenance on a house you rent the property out to generate extra income. It may not perfectly cover all the expenses for the first few years but eventually it will as rents go up.
The idea is to grow your wealth from the appreciation and the rent is to help you afford the asset (house) along the way. There are many more important details that can make or break your real estate investment but that is what you get a great property management company for. All you need is a firm grasp of the concepts of real estate investing then let the professionals take care of the rest for you.
At Kasteel Property Management we know how to take care of those details. We understand the rental market and we understand investors and their needs. If you want a successful real estate portfolio, whether it’s one property or several, you want Kasteel Property Management on your team. Check out the Owner’s Page on our website and give us a call. You’ll be glad you did.
