Property vs stocks

Property vs Stocks

Which is better to invest your surplus cash in?

They are two different animals, both that need taming and require different skills.

Property

Property investment is often said, especially in bubbles, to be the easy way to riches. Some make it rich, though its best to know what you are doing at all times (and do well) than rely on the strength (or weakness) of an emerging bubble. So, with that in mind, lets look at the attraction of property.

One of the key attractions to property is the leverage that one can get. Returns from property can often be realized sooner than stocks. For example, the leverage involved in buying a 100k house in the UK might be 10 or 20%, but add value (organically through development, or artificially through overall price appreciation in the housing market) and you could sell it for 110k or 120k (or more), thus realizing a 100% or 200% gain. If you get good at this you can turnover property quickly, and get richer faster than flipping stocks. While it is possible to make big gains in stocks, its unusual to get gains in the hundreds of percent (certainly in the short term anyway).

Stocks

Also known as shares. A benefit of investing in shares is that there are low costs, no deposits needed, no lawyers etc. Returns can also be decent, though are better to mesure in the long term. Some stocks do return percentages measured in the hundreds of percent, though research is needed to analyze good investments.

What you put in

There is major differences with stocks vs property in terms of the effort required to see a return. Normally (not in the bubble times we've seen recently), you need to do something, upgrading or modernization to a property to see a return, especially if you are looking for a short term return. For that you'll have to either employ/sub contract the work or do it yourself (or with people you know). So- there's work involved.

Stocks, on the other hand, don't need much work at all. The occasional checking of the story, maybe once every 3/6 months, though if you've got a good company that you are confident in you don't even need to check it that regularly.

Consistent returns

Some stocks give you dividends, property you can rent out. The returns are similar though high yielding dividends and properties to rent can be found. Stocks, on this point, require no work- dividends will just roll in (though check if the company has a long history- you don't want them to cut it!), whereas with property there are tenants, contracts, worries etc. Though once again, it is a personal choice.

So what do I do?

At present I'm not in a position to want the hassle of property. I'm in stocks(adding every year) and plan to at least double my money in 5 years, hopefully triple.
That way, with my savings as they are I should have between 25-75k depending on how much I keep adding year by year. From there I will likely buy a property (or two) depending on the market. That's my plan anyway,... you'll need to work out what's best for you and your individual position..

Good Luck!