Property Is Better Than Shares
Property is tangible (i.e. you can touch it, see it, drive past it).
For that reason, it tends to be seen as a more stable and secure asset to invest in – but is it really though?
Here's the thing – what people don't understand are the following pitfalls that occur when you buy, hold and sell property:
- Over time, the building deteriorates and requires constant maintenance, which destroys cashflow. Whereas, a stock/corporation has an entire team of employees looking after it (without your input).
- You rely on having and keeping a good tenant who pays on time and at the same time doesn't set your house on fire. You also rely on your property manager to do the right thing by you. On the other hand, corporations, while still subject to similar issues, have a lot more regulations and governance in place.
- You rely on capital growth as your main source of paying back for the years of negative cashflow (negative gearing) – and if you are looking at positive cashflow properties, you tend to only find them in "woop-woop land".
- You're limited by geographic factors, whereas you can invest and trade in the best stocks from anywhere around the planet. A good example of this is you can do all your research online for stocks VS having to run around inspecting properties with slick sales agents.
- There are many more costs associated with buying, holding and selling properties (e.g. stamp duty, solicitor fees, property/strata inspections etc.) With stocks, you only need to consider brokerage fees.
- You require a big lump sum just to get started as a deposit – and not to mention the massive amount of debt (and stress) you'll take on board. With stocks, you can literally start with $100 and begin your journey like a savings plan.
- Property lacks liquidity and for that reason should be used as part of a well-diversified strategy – not the only asset class you own (i.e. you can't sell a bedroom or a garage if you need some cash. You'd have to sell the whole thing and that takes at least 3-6 months – if you're lucky).
- Tenants have more rights than property owners (in Australia at least) – what this means is they can't easily be removed if they don't pay their rent –you end up going to court, which costs you thousands. On top of that, COVID-19 has shown how just having property alone is detrimental to your cashflow once tenants can't pay their rent.
That's not to say that property investment is a complete no-go-zone — there are many advantages to property investment. Rather, it's important to make sure you understand the pros and cons of both strategies before deciding which method is the better fit for you.
Check out what our students have had to say below!
"We had lots of property, the property market has really taken a massive dive in WA and - actually other parts of Australia as well. Rental market’s gone down, property values have gone down, you’re holding lots of capital and principal in those properties, you can’t get out of them, you’re still paying big loans, there’s massive amounts of outgoing — not good investments at all. I would never do property again if you ask me. "
— Vicky Ho (Cosmetic Dentist)
"I had a big speed hump, I had a property investment that went pear shaped. We had a bad tenant, we had white ants that invited the house. Yeah, so it was a really bad process, we went through. But it was really like Terry, his community and all that they pull me back in."
— Wayne Palmer (State Emergency Services)
"We bought property at the end of the Perth property boom 2008-2009 so we had 3 properties. We hung on to those properties - we just kept paying the short fall on the investment, hoping at some point that it would go up and from 2008 to 2019 it certainly hasn't doubled. If anything, it's gone backwarrds. If you can't ride out that storm - and it's an expensive storm to ride out because you've got interest outgoings to hold those investments - that's a huge outgoing to sustain for 10 years. In the end we just couldn't hang on - we sold the properties at a loss."
— Chester Cutinha (Job Flow Supervisor)
"Real estate didn't really appeal to me. I could never see myself buying properties, flipping them and doing all that. I thought "Nah, too hard". I'm really good with the Internet, I'm really good with research — I love that sort of stuff. So numbers with the share market - that was my wheelhouse. I knew that's what I wanted to do."
— Sharon Crane (Professional Pet Minder)
"I chose shares because if I buy a house and get a $250,000 home loan, I know I pretty much pay that again in interest. I didn’t like the idea of that so with shares I trade and you can make them gain returns straight away so that really appealed to me."
— Terry Cook (Entrepreneur)
"…and then other than that I've done property. And again with property it's probably just a buy and hold strategy – you get good results in the long-term if you buy right but I find with share trading, it's dynamic. It's more involvement and you definitely see the results sooner."
— Paul Tarrant (Energy Markets Trader)
"I’ve invested in real estate and the stock market. Real estate is a very slow growth, stock market is a better investment – you can gain more because Terry has a safe way to make money out of the stock market without taking too much risk."
— Habib Al-Massi (Oil & Gas Mining Engineer)
"Buying into real estate didn't resonate with me whereas buying shares in the stock market using Terry's method resonated with me. Terry's method was very low risk. You can buy in a little bit, you can buy in for a few weeks, you can buy in for a few months or a few years if you want. The flexibility is up to you – you're in total control of it."
— Tony Carlisle (Biomedical Engineer)