What Would I Do – Buy Investment Property Or Invest In The Stock and Bond Markets?

What would I do? Buy investment property or invest in the stock and bond market?

80% of the time I would invest in the stock and bond markets.

Why?

• From time to time you'll hear people say that "owning real estate takes deep pockets". It does. Numerous things can go wrong with a property, and each time it will cost you money. Until you have a significant amount of liquid assets, I would choose to continue to invest in the stock and bond markets over buying investment property.
• From a diversity standpoint, you take on a large degree of risk when you purchase a single piece of investment property.
• It takes time to find renters and maintain a property. I'd rather use my time doing other things.

What About The Other 20%

• If I were in the real estate or property management industry I would consider buying investment property because I would have a greater degree of knowledge about how to do it.
• If I had sufficient liquid savings that I could make a down payment, have cash reserves just for that property, and maintain my normal emergency fund, then I would consider buying investment property.
• If I were in one of the highest tax brackets, I would consider buying investment property sooner than if I were in a lower tax bracket, as most investment properties generate a tax loss (due to depreciation) that can be used to offset other forms of income.

The nice thing about owning a rental property: essentially you are purchasing an asset with someone else's money. If you are in a high tax bracket, have sufficient liquid assets, and the time and energy to find the right property, than I think rental real estate can be a great addition to an investment portfolio. I just don't think those three criteria apply to most people.