You Should Be Investing in Real Estate

Many people would tell you that if you want to invest in something, you should invest in the stock market. I’m not most people. Personally, I think that real estate is a much better investment than stocks.

Let me explain.

Supply and demand
This is my own personal theory, and let me preface this by saying that I am not a professional economist and this is all just my opinion. If you want professional guidance, you should seek the help of an expert.

We will always need houses in America and if the population keeps growing the way it has been, especially here in Texas, we will always need more houses than are available. Because the supply is lower than the demand and the demand will only keep growing as the population grows, houses are only going to appreciate in value. There will never be a time when people are not looking for houses.

There is one counterargument to this that I have heard that actually holds some weight. Some people think that as the baby boomer generation starts to pass, there will be a large number of houses that become available which will flood the market and drive prices down for a time. This argument mentions that a lot of the baby boomers own houses that are undesirable to Millenials and, even if they did want them, millennials won’t be able to afford them. Once the baby boomers start to pass on, many of these houses will become available and the high number of newly available houses will drive the price down some, which may be good for you if you’re looking for a house.

I would point out that not every house will simultaneously hit the market, so the flooded demand may not be as intense as this counterargument makes it sound. Plus, many of these houses may be passed on to their children meaning that some won’t hit the market at all.

Even if the market does dip for a time, the general trend for houses in the long-term is that they increase in value. The stock market does the same thing. It may decrease for a time, but in general, the trend is positive. In this sense, investing in realty and investing in stocks is more or less the same.

The real distinguishing factor
To me, this is where realty distinguishes itself from the stock market: 1031 exchanges.

If you put $100,000 in the stock market, after 10 years at 10% growth with compounding interest, you will likely have around $264,000. If you were to take that money, buy a house or two, you should be ahead about $400,000. There are obviously many variables and this is assuming it cash-flows a little when you buy it, but this is where you will likely be.

When you sell a house, if you put that money back into real estate, you don’t have to pay taxes on it. This is the 1031 exchange. This means that you can defer your taxes on investments until you want to cash out of real estate, which can make a huge difference over time.

The only downsides to this are that you can’t own both properties at the same time and you have to put something under contract within 45 days in order to complete a 1031 exchange. This is very hard to do right now, especially in this area of Texas because it can be hard to find good deals on investments right now.

There are investment firms that specialize in 1031 exchanges because it can become very complicated. If you would like to do this or talk to an expert, we recommend contacting a firm that specializes in these exchanges.

Conclusion
I believe that the ability to defer taxes on investments in real estate, the increasing demand, and the appreciating values of homes makes investing in realty far more desirable than investing in the stock market.

If you would like to sell your house, reach out to us. We would love to sell your home and find you your next one.

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