September 19, 2022

Better Together: Real Estate + Stocks

There’s a classic debate about which is better, investing in the stock market or investing in real estate. At Nada, we look at things a bit differently. Both real estate and stock investments have their strengths and by combining them, you can have the best of both worlds and become a better investor.

Combination/Hybrid Products

Not only do you not have to choose between stocks and real estate, but there are ways to sort of coming the two with creative hybrid products such as:

  • REITs - Real Estate Investment Trusts (REIT), are real estate investments wrapped up to look like stocks. They more commonly invest in commercial properties.
  • Cityfunds - This new product from Nada invests in residential real estate in popular cities, purchasing and managing residential properties. Cityfunds pool investment dollars and function similarly to a stock investment, allowing anyone to invest for as little as $250.

Leveraging Real Estate to Support Stocks

Use leverage to supercharge the growth of your portfolio. Here’s how it works:

  • Buy properties with the bank’s money.
  • Rent them out so that your tenants pay off the mortgage
  • Use some of the cash flow to purchase stocks.

Using this method, a real estate investor can control a huge portfolio of properties without starting off with very much cash, and as the value of the properties appreciates, so does the investor’s portfolio, in multiple ways.

Using Stocks to Support Real Estate

Having money in the stock market can help your real estate portfolio as well. Most brokerages will allow you to use your account as collateral on a cash loan as well as a margin loan. Here’s how that supports your real estate investments:

  • Take out a cash loan to buy real estate, with no underwriting needed.
  • Make a cash offer that is not contingent on bank financing and can close quickly.
  • Win the property, sometimes even at a lower price.
  • Get traditional bank financing after the fact to pay back the loan on your account, rinse and repeat.

This way a stock market investor can do the same thing, use leverage, to maximize their gains in the market.

Stay Diversified

Both real estate and the stock market have advantages, but the real reason to invest in both is simply diversification. The stock market and real estate tend to appreciate over time, but they often do so at different times. By keeping the assets in your overall portfolio diversified, you will almost always have something going up at any given time. and by rebalancing (adjusting the allocation proportion between the two), you are always going to be catching other assets at their bottom, and that’s how real wealth is accrued.

Investing in the stock market will make you a better real estate investor, and investing in real estate will make you better at investing in the stock market. The investor who does both will enjoy higher returns than the investor who chooses one or the other, regardless of which one. Visit nada.co and click on Cityfunds to learn more.

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