Bonds are a relatively secure investment option, but safe choices in the money market rarely produce an attractive return. In contrast, real estate often outperforms bonds by a significant margin, especially over the long term. This article compares bonds against real estate investing to determine which one will give you the best value.
Risk vs. Return
Rental property investing will often yield high single-digit returns and often result in double-digit returns when you hold for long enough.
Government bonds are not complex investments, making them relatively straightforward for new investors to start growing their money. However, the built-in security of government bonds means your investment can lag behind inflation, possibly producing a negative net return.
On the flip side, property investment delivers equity appreciation over time and rental income that increases over the years.
Bonds and Income Taxes
Bond returns increase your tax liability, and you will also be lumped with capital gains tax on the increased value of your bonds.
Property can also attract capital gains tax when you sell, but you have the advantage of offsetting your liability with depreciation. Claiming for depreciation means you can deduct a portion of the property’s value every year against its income, making it one of the most lucrative tax breaks of any investment strategy.
Real Estate is an Excellent Hedge Against Inflation
While real estate investments require more capital and time to get into, and your money is not as liquid as other assets, other advantages will more than offset these inconveniences.
Property values will tend to track inflation. So, as the price of goods and services creeps upwards, so too will the value of your property. You also get the advantage of an income stream that tends to follow the CPI (Consumer Price Index).
Eventually, your monthly rental income will outpace your mortgage and other expenses to produce a positive cash flow. Of course, you will need to pay tax on this income, but you can offset that burden by using your equity and improved cash flow to acquire more property.
Real estate investing is the way to go if you want to ensure your investment dollars are worth more than you paid for them when you retire. When you add the potential for capital gains on the passive income stream, real estate investing takes the lead over bonds by a wide margin. Yes, bonds are almost as safe as houses, but the meager returns are far from exciting.
As we mentioned, purchasing investment bonds is not difficult, making them an easy path to investing. However, if you want to make your money work harder for you so you can enjoy a more comfortable retirement with options, real estate investing could be the right vehicle for you. Unfortunately, locating the best properties in the best neighborhoods can be challenging for inexperienced property investors. Take the stress out of property selection and reduce your risk exposure by partnering with the experts. Contact us today to find out more.
Robb and Penny are owners of a real estate investment company Mountain View Investors. We have been actively involved in Albuquerque NM for our Fix and Flip projects. In Kansas City MO area for our Buy and Holds properties. We have been investing in Albuquerque NM for 10 years.
Our mission is to provide quality housing for first-time home buyers and owner-financed buyers, while at the same time providing an above-average return on investment (R.O.I) for our investor partners and ourselves. It is truly a win-win-win way of investing!
Robb and Penny offer their investor partners hands-free investment opportunities. If you are interested to learn how to earn an above-average return on your investment, backed by a solid asset, and without the hassle of being a landlord, please contact Robb and Penny.
For more information about Robb and Penny and their investment program,
please call (505) 404-1131, or visit https://robbkrautbauer.com/