Which business is more profitable than real estate? If this is a question of yours, then I have to tell you that you cannot get the answer in one or two words as you are the one who will operate the business so it will depend on you how you can attract more profit.
But there are some options that you definitely can try if you are not that interested in real estate. But in order to find that, you need to develop some idea about the positives and negatives of real estate along with the other options you are having.
You also can have a read if you are searching for the best paying jobs in real estate investment trusts.
Which Business Is More Profitable Than Real Estate?
In recent days, apart from real estate, stocks and cryptocurrencies are really on the trend. Both of them offer excellent opportunities to earn an attractive amount. But that does not mean they will be the proper solution for you.
So, it is really vital to know the plus and minus of the opportunities that you have. Here I will tell you about the advantages and disadvantages of putting your money in real estate, stocks, and cryptocurrency.
The Real Estate Business
We can break down the traditional real estate investment or business into two categories, one of the residential properties and another is the commercial properties. Along with this, another question comes, “Is real estate investment trusts a good career path?”
Buying and reselling of your home, flipping homes, or rental properties fall under the category of residential properties. On the other hand, the category of commercial properties includes office buildings, apartment complexes, and strip malls.
- When it comes to investing in real estate, it is really easy to understand. Though the whole home buying journey is a bit complicated, the basics are simple. The process simply includes buying a property, managing upkeep, and then attempting to resell it for a higher value. Owning a tangible asset will always offer you more control over your investment in comparison to buying silvers of ownership in companies through the shares of stocks.
- With real estate, investing in debt is safer. You are able to invest in a new property with a down payment of only 20% or also less than that. And for the rest of the cost of the property, you can finance them. On the other hand, investing in stocks with debt is extremely risky. It is also known as margin trading, which is strictly for experienced traders.
- Against inflation, real estate investments are able to serve as a hedge. With inflations, the home values and rents typically increase; that is why we generally consider real estate ownership as the hedge.
- With property ownership, you also can get tax advantages. For mortgage interest payments, homeowners can qualify for a tax deduction that is paid on up to the very first $1 million in the specific mortgage debt.
- With real estate investment, you may need to do more work than investing in stocks. Owning a property is much more hectic than just putting your money in stock investment or stocks like mutual funds.
- Even when you are borrowing cash, investing in real estate requires a large upfront investment. Through reselling, getting your money from real estate is much more difficult than just the point-and-click case of selling and buying stocks.
- As of now, most brokers do not charge any fees for stock trades, so real estate has higher transaction costs. On top of the selling price, a seller may expect to pay a high closing cost, which can be around 6% to 10%.
- The return that you will get from your investment is not a sure thing. Over time, while the prices of property tend to rise, there is always a risk of selling a property at a loss.
Now is the time to discuss a little about stocks. Here I have the advantages and disadvantages of investing your money in stocks.
- Stocks are highly liquid.
- As I have mentioned earlier, there are very less or no transaction fees with stocks.
- It is much easier to broaden your investment in stocks than real estate.
- You can increase your investment in retirement accounts that have tax advantages.
- In comparison with real estate, stock prices are much more volatile.
- Selling stocks can result in a capital gains tax.
- Stocks can always trigger the decisions made emotionally.
Cryptocurrencies are another way of earning many returns in recent days. However, this concept is not so well-known among all kinds of investors. But the world is definitely thinking about this. Many big institutions are also adopting this new generation currency.
- It has really massive potential for returns.
- The liquidity of a cryptocurrency is the most.
- Here, you will get a clear direction for execution.
- With cryptocurrency, you are getting instant and 24 hours accessibility.
- Cryptocurrency is much more volatile than others.
- Cryptocurrencies are difficult to comprehend.
- Cryptocurrency does not offer any kind of security in case of loss.
- In many countries, cryptocurrency is still not legal.
The Most Profitable Business By Sector
Here is a chart of all the profitable businesses by sector. This will help you to get an idea about the businesses that can offer you more profit than real estate.
|Industry||Net Profit Margin|
|Medical and diagnostic laboratories||12.1%|
|Offices of other health practitioners||13%|
|Non-metallic mineral mining and quarrying||13.2%|
|Offices of real estate agents and brokers||14.3%|
|Offices of dentists||14.8%|
|Real estate-related activities||14.9%|
|Companies and enterprises managements||16%|
|Real estate lessors||17.9%|
|Tax preparation, accounting, bookkeeping, and payroll services||18.4%|
So, these are the things that you should know before you come to any conclusion about which business is more profitable than real estate. Profit is always not only the amount of money you are able to make but many more things. From the information, you can find out the answer yourself. Or you can go for tax preparation, accounting, bookkeeping, and payroll services, as it offers the most profit margin.