Thoughts on real estate vs stock market

When deciding between investing in real estate or the stock market with your $50k windfall, there are several factors to consider that can help guide your decision:

1. Investment Goals: Define what you are aiming to achieve with your investment. Are you looking for capital growth, income through dividends or rent, or perhaps a combination of both? Real estate often provides both income through rent and potential long-term capital gains, whereas stocks can offer dividends and capital growth, depending on the type of stocks you invest in.

2. Risk Tolerance: Real estate generally involves a lower risk compared to stocks, which can be volatile and fluctuate widely in the short term. However, real estate requires a larger initial capital and is less liquid than stocks, meaning it can take longer to sell and convert into cash.

3. Time Horizon: Consider how long you intend to hold your investment. Real estate typically requires a longer commitment to realize substantial gains, whereas stocks can be traded more quickly and easily, allowing for shorter-term strategies.

4. Market Conditions: Research current market trends in both the real estate and stock markets. For instance, factors such as interest rates, economic growth, and government policies can significantly impact both markets.

5. Diversification: Investing in stocks can offer more diversification, reducing risk by spreading investments across different sectors and geographies. Real estate investments are usually more concentrated, potentially increasing risk if the market in a specific area performs poorly.

6. Liquidity: Stocks are generally more liquid than real estate, meaning they can be sold and converted into cash much quicker. This is an important consideration if you anticipate needing access to your funds.

7. Tax Considerations: Understa

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Great question, and congrats on the business success!

Lots to consider… here’s a few thoughts…

— Can you afford to tip more money into holding the property each month? Most Aussie rental properties are negative cashflow after costs, so signing up to a mortgage + expenses is a long term commitment.

— Will banks see you as a safe borrower? If you’ve only just begun earning decent income, banks will want to see a longer history of this income to base your loan repayments off, just to make sure they think you can afford it.

— The benefits of leverage with property are pretty big, since you can potentially get decent gains by using the banks money rather than your own. But buying/selling costs are high, cashflow is often poor, and growth cycles are often unpredictable.

— The simplest option is shares, and something like an index fund. You don’t have to add anything extra to it if you don’t want to, but the option is always there if you keep having success with your online business.

— Are you able to leave the money invested for at least 5 years in the stock market? If so, it could make sense. Are you able to hold for 7-10 years with property? I say longer for property due to the extra costs involved + ongoing, which both impact the return needed to breakeven.

Both are excellent options, so if you don’t have any debt to repay and have an emergency fund in place, both of these places are likely to be fruitful places to invest your money.