In part 2 of this series, I had asked if there was anything an investor can do to affect the market value or returns of his or her stocks or real estate investments. I’ll do my best to answer this in this third and last part of this series.
Can I improve the value or returns of stocks?
If I had invested on the stocks of a certain company which we’ll call company ABC, is there anything I can do to affect the value of the stocks or the returns I can get through dividends?
The answer is nothing! At least there is nothing I can think of that is not illegal.
Well, I could pray but I also do that for anything I do.
The only people that could try to do something are the people in company ABC. Even if the owner or president of company ABC is my relative or friend, the most I can do is to give suggestions on how they should run their company.
Basically, my stocks’ value is at the mercy of how other people run the company, its performance, and market forces.
The same goes for the dividends as these are dictated by the company. The bottom line is, there really is nothing I can do for stocks.
How about real estate?
How about in real estate, is there anything I can do to raise the value of an investment property?
To begin with, I can clean up a property, make it look and smell fresh and brand new. Maybe I can apply a nice paint job.
I can also put up a fence or do some landscaping to increase curb appeal.
I can also update the exterior/interior of the house or restore it to its original grandeur.
I can install roofing for the parking slot, install crown mouldings, update the bathroom or kitchen, partition areas of the house to produce more rooms, or partition a property to convert it into a multi-door property.
I can also subdivide a property to create 2 entirely new properties that would be worth more than the original.
Necessary repairs of course would increase the value of a property as compared to its value without repairs.As you can see, the possibilities are endless, limited only by my budget and time.
These improvements can raise the value of the property if I decide to sell it.
However, I should also keep in mind that there is such a thing as over-improvement, which is basically adding improvements to a property where the cost of the improvement cannot be recovered by the projected increase in value, or the improvement is inappropriate to the property, the location, or neighborhood (like adding a luxurious jacuzzi in a row house).
Furthermore, appropriate improvements can also increase the income that the real estate investment can generate through rentals if I were to rent it out.
Mind you, I can even raise rental rates to a certain extent, especially now with the expiration of the Rent Control Act of 2005. In a nutshell, you have total control of your investment in real estate, which is non-existent when you invest in stocks.
I hope I have successfully imparted just some of the reasons why investing in real estate is so much better than investing in stocks, in my opinion.
Don’t get me wrong, I am not saying you should not invest in stocks. In fact, my wife and I also have stock investments.
Now if I were to ask you, where would you invest, what would be your answer? Let me know what you think, please leave a comment and let’s talk about it.
Note from the author: I wouldn’t consider this series as an exhaustive list of reasons why I prefer real estate over stocks. There are more things that can favor either, but I only wrote about what I believe are the most important.