People Trust That Real Estate Is Key To Building Wealth

Americans are not always consistent when it comes to building wealth. While it is consistently voted as the best way to build wealth, fewer people actually take the step to purchase property

According to a Momentive survey, 23% of adults voted for investing in real property as the best way to build wealth. This makes it the most desired way to build a person’s net worth, after property investing in stocks, starting a business and obtaining a second job or side hustle follow.

However, this is not what people who wanted to increase their wealth did in the year. The No. According to 27% of respondents investing in the stock markets was the number one way Americans build wealth. Only 12% of respondents invested in real property.

Why Are Stocks More Popular Than Real Estate

What is stopping Americans from investing in the way they want? Financial experts agree that cost is the biggest obstacle to investing.

Cory Weikel, founder, and CEO of Airdeed says that “real estate isn’t cheap to get into” You can either pay cash or get a mortgage on the property. This requires a good chunk of cash. Even with a mortgage, you will need a good downpayment to not have an astronomical monthly mortgage amount.

On top of this initial investment, you also need to maintain the property and fix it up each year. Contrast this to stocks, which can be purchased for as little as less than a dollar. This is also why fractional real estate companies have begun to pop up for investing with as little as $100 but make sure you are fully aware of the fees that they charge.

Real Estate Isn’t Always The Best Investment

It is easy to see why real estate has been so popular with investors. You may not need to spend tens of millions of dollars to start, but just look at how much money people are making. The pandemic has caused real estate prices to skyrocket and investors have made a ton of money with that appreciation while at the same time, stocks have fallen in 2022.

For many investors who want to make long-term gains, however, the barriers to entry to the real estate market could prove to be a silver lining. Stocks have a long history of providing compounding wealth-building returns that exceed inflation rates over time.

However, the S&P 500 has had an annualized total return in excess of 9.5% which is great and big drops and dips over a couple of years can be meaningless if you are holding them for a long time.