Today, interest rates are so low that investors cannot earn sufficient income through bonds (VCLT) or Treasuries (IEF). Moreover, the stock market (SPY) has become extremely volatile, and increasingly many call it a bubble.
With this in mind, it's not surprising that increasingly many investors are making the decision to buy a rental property in 2020:
- High Income: Treasuries pay 0.6%. Corporate bonds pay 2%-3%. But most rentals earn anywhere from 5% to 10% in income each year. That’s a lot in a yield-less world!
- Low Volatility: Stocks are notoriously volatile, especially in the midst of today’s pandemic. Rentals are much more resilient. Their value does not change materially from one day to the next.
- Leveraged Appreciation: Interest rates are today at the lowest they have ever been. And this means that rental investors can boost their returns with cheap leverage.
- Inflation Protection: With the central bank’s printing presses going wild, many investors are concerned about accelerating inflation. Rental properties are among the best inflation hedges because shelter is a necessity that cannot be replaced.
- Control and Peace of Mind: You control your own investment and make your own decisions. You do not have to rely on a management team that could be conflicted.
As such, rental properties can be very desirable investments, and this is particularly true in today’s highly uncertain environment.
Bonds pay close to nothing. Stocks appear overpriced and risky.
Yet, rentals offer high income, leveraged appreciation, and lower risk.
Put in this light, it's a no brainer for many people. But before you make the final decision of buying a rental, we want you to consider another alternative, which is to buy publicly listed REITs (VNQ; IYR).
Rentals vs. REITs: Which is a Better Investment?
Before we dive into this
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