Property Investing vs Stock Market Investing UK: Who Wins?
Hey I’m Ben from Motivation2Invest our mission is to help motivate you to invest for your financial freedom, whether that means escaping the 9-5 drudgery or just improving your life.
I’m here to help you by providing you with valuable investing tips & strategies.
The has been an Argument raging for decades between investors, which is a better to grow your wealth Stock Market investing or Property?
In this video I’m going to compare & contrast these two types of investment so you can decide which is best for you!
LETS DIVE IN!
1. Upfront Capital
Point 1.
Property requires a much higher amount of upfront capital to get started investing.
As you will require a 10-25% deposit for a mortgage. This will likely be at least £30k minimum for the cheaper houses in the U.K.
Whereas if you invest in stocks you can get started from just £1 and gradually increase your investments over time!
That’s 1 point for stock market investing!
2. Liquidity
Property is also not very liquid which means it cannot be easily bought or sold.
So if you need fast money, it can be difficult to achieve this.
You can put the property into an auction but this is still not as fast as the stock market.
When you wish to buy a property it also can take a long time to find the right deal.
–Whereas with the stock market you can buy & sell shares instantly! If your looking for a liquid asset then that is Another point for the stock market!
3. Leverage
When purchasing a property you can use the magic of Leverage to enhance your return on investment & allow you to purchase a much more expensive asset than you can actually afford.
Despite borrowing up to 75% of the properties value the properties entire returns are yours to keep! That includes rental profits & capital appreciation.
4. Return on Investment
This is a tricky one as your return on investment is highly dependent upon which property or stock you purchase & when!
The stock market has historically offered an average return of 7-8% after inflation.
Whereas with property you can achieve a return of 6-10%+ just from the rental income & another 10% from capital appreciation. This is approximately a 20% ROI.
Well it’s true that investing into individual stocks can offer even greater returns the added risk is much greater than property.
For example, If you invested £1,000 in 2009 in Amazon it would be worth Nearly £14,000 in 2019, this is a total return of around 1,232%,
However, if you invested in Toys R US, you would be left with nothing as it collapsed!
On balance I will call this one a draw!
5. Adding Value
Property gives you the incredible ability to add value. You can refurb the interior, create a loft conversion or even add an extension.
This amazing ability means two houses in the same street can fetch very different prices.
Whereas, two stocks of the same company will be worth the same value & there is nothing you can do about it!
Another point for property!
6. Fees & Taxes.
Purchasing a property requires you to pay a large amount of fees from Solicitor fees to Estate agents & management companies.
You also must pay stamp duty on property purchases are your 2nd home. This can range from 2-5% and can really make an impact on the sale, as you can’t borrow from the bank to pay this.
Property is also less tax efficient with the U.K seemingly hellbent on destroying landlords! They even brought in a rule called section 24 which requires landlords to pay tax on turnover not profit which defies the laws of business.
Whereas Stock Market investing can be very tax efficient. U.K residents can invest using an ISA account in which they can be protected from Capital Gains tax & you have a dividend allowance of £2000 per year.
There are also various government backed pensions & schemes such as the lifetime ISA in which the government will give you a 25% bonus on your investment. However, you can’t access this money till your 50.
7. Security
As the old saying goes “there is nothing safer than bricks & mortar” and if you have home insurance then this definitely is true.
Property provides a safe haven for your cash and still provides you with a steady rental income even during a recession.
Another point for property!
8. Diversification
With Index funds such as the Vanguard S&P 500 or the Vanguard world ETF you can diversify your investment internationally & across many industries from Oil, to tech and even property with REITs.
Property just does not allow this type of diversification to be achieved practically.
That’s another point for stock market investing!
9. Short Selling Stocks
Short selling allows you to bet against a stock or index and actually make money if the price falls! A unique point for stock market investing.
10. Cash Flow
The Incredible Rental income achieved by properties can help you to sustain a true financially free lifestyle!
That’s double points for property!
Final Thoughts:
Both Property & stock market investing are great places to invest. If your serious about growing your wealth & becoming financially free I would suggest you have some exposure to both asset classes.
If you don’t have much capital to start then starting with stocks is great. Then As you achieve a large pot of wealth you can start house hunting for buy to let investments!
To get started investing today be sure to check out the free trading apps such as Free share & Trading 212. I did a video comparing these and if you use the link below you will get a free share worth up to £100 when you sign up! WINNER! 😊
Which investment you think is better? property or stocks. Comment your thoughts below!
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See you next time!
