There is no investment that is considered better than the other. If done right, all investments are profitable. It all depends on whether you want a long term of short-term investment and the purpose for investing. Real estate can offer you high returns if done the right way. There are extra benefits that come with investing in real estate such as, tax deductions. Real estate has lesser risks as compared to gold. It also has promising and consistent returns. It also enables you to earn a passive income. The most common part of the world where investing in gold is keenly done is in India. Indians prefer gold over real estate because they believe it leaves a legacy for the incoming generations. Real estate is believed to be an equity building asset and it offers security over gold.
Why invest in real estate?
There are a number of benefits that come with investing in real estate as discussed below:
1. Less volatile
Real estate is a dependable source of investment. Real estate can assure you of a better future because it appreciates over time, and thus your future is secured.
2. Liquidity
You can change a real estate into whatever you want and sell it at your desirable price. Renovating, repairing and proper maintenance of this asset can increase its value and thus high returns.
3. Renting
Real estate can earn you passive income by renting it out. The monthly rental income provides a consistent cash flow. With the right tenants, this investment will be worthwhile.
4. Appreciation
Real estate appreciates over time. With ongoing projects and holding your property, the more it appreciates.
5. Tax deductions
Real estate is advantageous when it comes to tax benefits. You get several tax deductions such as mortgage interests, legal expenses and land rates. Rental property is a promising investment in case you want to invest in it on your real estate because it will provide a consistent income. Real estate offers promising returns in the long run and increases your equity.
Disadvantages of investing in real estate
High transaction costs: apart from the buying price of real estate, there are extra costs that come with this purchase. These costs include; title deed transfer fees, land rates, surveyor’s fees and legal fees. This makes it much more expensive and harder to purchase this investment.
Illiquidity: in cases where you are in urgent need of funds, real estate may not help you out. This is because it takes time to sell and if you happen to come across a buyer, he may offer you lesser money than the usual market price and might cause a significant loss. This can be solved by saving up funds for emergencies in case of negative cash flow.
Why invest in gold?
Below are some of the advantages of investing in gold.
1. Maintains its value
Gold is mainly considered as a means of riches and wealth that if well maintained and looked after can be passed on to the next generation. Gold maintains its value over the years and its unchangeable.
2. No expenses
As we compare real estate and gold, the two vary in that gold does not require maintenance while real estate requires extra costs of maintenance and repairs. Since gold is of high value, it does not need to be carried around. Locking it simply makes it secure. You can lock in gold worth a lot of money to ensure its security.
3. Liquidity
You can sell gold in exchange for other essentials you need anywhere. It is portable because you can carry it along with you anywhere without fear and sell it instantly.
Disadvantages of investing in gold
- Unlike stocks and bonds, gold investment does not earn you a regular income. You are only guaranteed of income when you sell your gold which might be a tough journey because the market prices for gold are unpredictable.
- Storage: gold must be stored carefully and guarded at all times because it is a high value product. If you need a secure place for your bars, consider storing them in a bank locker which in return you have to pay maintenance fee.
- Unpredictable market prices: gold prices are unpredictable. Most investors rush to this investment when the prices are high. Unfortunately, if the prices fall just immediately, it would cause most investors to experience losses.
Comparing real estate and gold returns
1. Investment
Due to the high demand of land, the investment price of real state is a lot. Land keeps appreciating and thus you must invest a large sum of money in order to hit your goal of owning your own real estate. Contrary, gold enables you to invest in only the amount of money you have. You can invest in as little amount of gold as one gram depending on the money you have. However, you may prefer to invest in gold coins rather than jewelry because jewelry has extra made and processing costs
2. Investment period
If you are considering a long-term investment, then real estate is the ideal way to go. Whereas, for gold it can be both long term and short term. Long term investments on gold can assure you of high returns.
3. Appreciation and depreciation rate
Real estate appreciates over time and having the appropriate projects can earn you a good income. Rental property is one way that can provide proficient earnings in this field. Gold on the other hand, has different returns at different periods. Decrease in gold market price leads to a decrease in your investment whereas an increase in the market price leads to increase in your investment. Thus, it is very difficult to predict gold returns.
4. Liquidity
Real estate is a less liquid asset. It takes time to sell and involves long transferal procedures. Land documents and stamp duty are also necessary while selling real estate. Gold on the other hand is a very liquid asset.it can be sold with ease and at any given time and it does not involve long procedures as it is in real estate.
5. Tax benefits
Real estate offers a number of tax deductions such as mortgage deductions, legal fees and repair fees, whereas gold is taxed normally. Profits obtained from selling gold are also not taxed.
Conclusion
Draining your energy on an asset that will generate income is a good thing. Real estate is that investment. It appreciates and will definitely keep earning you income even in future. It retains its value with years by remodeling and renovating it. You will earn good profits and be able to pay of your mortgage in time if you decide to invest in rental property. Rental rates will gradually rise and therefore increasing your returns. Before you make a choice of investing in real estate, you will have to do a thorough research and obtain some knowledge from those who have been in this field before you.
Since it requires a large sum of investment, you should be well prepared to carry this burden. It should not worry you, however, because you will get maximum and good returns after a certain period of time. Gold does not require you to research anything. The key tip is to wait for the prices to rise and sell your gold. It won’t go bad staying locked up after all. If you are in a great position financially, you can invest in both real estate and gold.
FAQs
1. Why is investing in real estate better than investing in gold?
Real estate offers high returns and less risks. Its value rises over time and it offers stability. Gold on the other hand is unpredictable and is at a risk of being stolen with unsure returns because market trend keeps rising and falling.
2. How many pieces of land can I own?
You are not restricted to a certain number of pieces of land you can own. However, you may want to consider the tax laws before deciding how many pieces of land you can own.
3. How good is it to invest in both real estate and gold?
Both investments are good and can be worthwhile. This is because real estate is a long-term investment and offers regular monthly returns in cash whereas gold is both a long term and short-term investment depending on how soon you want your returns.
4. Is gold a good choice of investment?
Gold has both benefits and risks. It all depends on you and how you will take it. However, it is not advisable to trade gold as a short-term investment because the prices may fluctuate and cause it to lose its value. It however also has benefits such as volatility and you can store it for as long as you want until the market prices go up.
5. Which form of gold should I invest in?
Gold bars are the most advisable and cheap form of gold you can invest in even as a beginner. Buying them in bulk allows you to get a discounted price over purchasing gold coins.
6. How much gold can I own?
Financial experts advise you to own 5% to 20% investment on gold. If you have the ability to invest more than that, then you are not limited.