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.
Conclusion
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.
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Yah, of course real estate is a never ending needs. But we cannot put all egg in one basket, both of them either stocks and real estate is great investment. Its just an understanding of when getting into it.
I agree with what you said Zaldy. Diversification is a must. Thanks for sharing your thoughts.
Hi Jay,
Thank you for this very helpful info for interested people like me. I am very interested in investing in real property. I will attend the Sept. 1, 2012 seminar as a preparation for this endeavor. But I have one concern, I currently have a home loan with a bank with a 20-year term. My concern is if I can still apply for another loan with other banks if ever i find a foreclosed property that is within my budget.
Hope you can share me your thoughts on this. Thank you and more power!
Randy
Always bear in mind that your own resolution to succeed is more important than any one thing.
Hi Jay, thank you for the reply.
You’ve mentioned about having a broker can do wonders, I was thinking of being one so I can have a deeper understanding on real estate which I believe would be of big help on future endeavors. How can one be a broker? Is it advisable to us newbies to be one especially for me who is entirely new in this field?
Thanks. You’ve been a big help especially for us newbies. God bless.
Hi andresubayon, excellent question! A question like this has kept me awake lots of times before but thanks to my mentors, I now have answers for this. First of all, assuming that a property has remained vacant for a year or 2, one should first do a research on what are the going rates for nearby rentals, this would offer a clue as to what rental rates you should be offering, you might find out that you are overpricing your rentals. Once you determine this, offer the same rental of nearby rentals and proceed with marketing the property. Marketing is the key! You can market both online and offline (this deserves an entire blog post)be. Now if there are still no tenants after a month, the next step would be to undercut your rates by 5%, then proceed with marketing again for another month. It would also help if you can get feedback from would-be tenants why they chose not to rent the property. Other strategies like staging the property( furnishing it and showing how it would look like in a lived-in condition to prospective tenants), offering discounts and freebies, etc, would also be a big help. Having a broker would also do wonders, that’s what I did and my property already had a buyer even before renovation was finished.
Ideally, the research on the current rental rates should have been done before the property was bought, along with establishing if there really was a market(would anyone be really interested on renting the property in a particular area in the first place?).
Hi, im a newbie and very interested in venturing in real estate. Im just wondering and I worry what will happen if you have made a wrong choice of a foreclosed property (lets assume a worst case). Lets say you bought a 3-door apartment, financed with the bank and renovated it, thinking that it would be rented immediately and give you income. But after a year or two, it still hasnt been occupied. What is the best thing that you can do?
Hi, im a newbie and very interested in venturing in real estate. And Im glad you have a blog like this which is very helpful and informative. Im just wondering and I worry what will happen if you have made a wrong choice of a foreclosed property (lets assume a worst case). Lets say you bought a 3-door apartment, financed with the bank and renovated it, thinking that it would be rented immediately and give you income. But after a year or two, it still hasnt been occupied. What is the best thing that you can do?
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