Should I Invest In Real Estate or Stocks for Better Returns?
As a hotly debated question, it's no wonder that many soon-to-be investors are asking themselves: should I invest in real estate or stocks?
While the answer indeed rests on some subjective factors, such as risk appetite and personal financial objectives, the multi-tenant commercial real estate industry has proven time and time again to be a haven for solid returns, appreciation, and inflation hedge.
This blog looks at the property vs. stock debate in the context of risk analysis and a leading investment group that self-manages its assets to success.
Stocks vs. Multi-tenant Commercial Real Estate Risk Analysis
All investments have associated risks. However, how different investment vehicles react to these risks can help discerning investors determine the best option for their portfolio.
Should you add real estate to your portfolio? Let's compare some of the leading risks and concerns to help answer the question.
Shifts In Consumer Behavior
Due to technological advances and the Covid-19 pandemic, consumer behavior is shifting at an unprecedented rate. How does this impact investment strategies?
- Stock Market: While some companies reached record gains during this challenging time, others were left behind, unable to adapt to the rapid shifts in the business landscape, losing money and investor confidence.
- Multi-tenant Commercial Real Estate: While the stock market is prone to swings influenced heavily by consumer behavior, commercial real estate offers a hedge against this uncertainty.
Brick-and-mortar businesses such as dentistry offices or nail salons will always need affordable, quality locations to conduct business operations.
What's the impact of the economy on stocks vs. real estate?
- Stock Market: Due to emotional sentiment and panic, stock prices tend to plummet during a recession. Although it's often put forward as a positive that stocks are a liquid investment during recessions, it's not uncommon for investors to pull their capital in flight mode. Therefore, the answer to the question should I keep investing in the stock market will depend on your appetite for risk and manage market fluctuations or possible crashes.
- Multi-tenant Commercial Real Estate: Multi-tenant real estate negotiations are often pre-negotiated with annual rent increases. Additionally, the resilience of the property and the longer-term investment strategy means a multi-tenant property can weather the storm no matter the market conditions.
How does market competition affect stocks compared to real estate?
- Stock Market: Each day, a new hot-shot VC-backed tech company is on the scene. Unfortunately, the nature of the market is very much competition based. As a result, it's challenging for everyday investors to determine the merits of individual companies without insights into tech developments and operations to predict successful stocks.
- Multi-tenant Commercial Real Estate. Multi-tenant real estate is a far more secure investment option. Due to the barriers to entry, such as high capital requirements and specialized knowledge, as well as limited locations and regulatory hurdles, it is much harder for competitors to enter the market. As a result, commercial multi-tenant is a more stable and less competitive landscape.
Control and Transparency
What's the level of control and transparency when considering multi-tenant properties vs. stocks as an investing strategy?
- Stock Market: While investors have autonomy over the types of stocks in their portfolio, dividends and all other corporate decisions are managed within the corporate structures from the top down. It's like you're a passenger on a ship. When it's smooth sailing, the share prices go up, and you might receive dividends depending on the stock; when things start to go wrong, you're alone at sea.
- Multi-tenant Commercial Real Estate: When you invest in a multi-tenant real estate deal, you're much closer to the syndicators or deal managers. This means the transfer of information is rapid and frequent.
For example, at Kenwood Management, we invest locally, self-manage properties, maintain unparalleled relationships with our tenants, and know the areas inside out. This means we can share investor insights and provide regular updates from a local and financial perspective.
The Kenwood Management Approach
Due to our strategic building purchases and deep research into class-B properties with solid upside, we ensure that investors have the confidence and security to back our investment decisions.
As a value-oriented private equity group, we offer a reliable and higher return (7-8% annualized) than stocks. In addition, our unique decision-making and unparalleled knowledge of our investment regions further allow us to take advantage of opportunities that may not be apparent to other investment groups, allowing investors to elect a dependable, unique, and traditionally strong asset for investment.
Multi-Tenant Real Estate Has the Upper Hand For Discerning Investors
There's no one size fits all investment strategy. However, due to black swan events, inflationary pressure, and instability, investors are looking for more secure and transparent investment strategies backed by industry leaders. As a result, more investors realize the stability and excellent returns available when choosing commercial real estate investments.
We invest capital into every deal and only recoup our investment once our investors have been paid in full. To learn more about how you can get started investing in multi-tenant commercial investment properties or learn more about our investment philosophy, reach out to the team today.
Learn more about why investors choose real estate to build wealth! Download a free copy of "Why Multi-Tenant Commercial Real Estate Is a Good Investment."