Stocks vs. Property Investment – Which One Is Right for You?

We get asked a lot which one makes for a better investment: stocks or property. And the answer is, well, it depends. Of course, as a property investment company, we are big proponents of investing in bricks and mortar, but at the end of the day, both options have their pros and cons. 

Today, we’ll help you find out which one is right for you by walking you through some of the most important things to keep in mind when planning your investment.

Barrier to entry

It’s no secret that you need a decent stack of cash to get started in property investment, with lenders typically looking for a deposit of at least 20% when considering a mortgage application from a buy-to-let investor. In contrast, you can get started with investing in stocks for less than £100. That being said, you can only expect decent returns when investing in UK stocks by going in with much more capital than that.

Additionally, getting started with property investment takes a decent amount of research. You need to find a location popular with renters and where you can expect property prices to keep rising as well as a property that suits your needs and doesn’t need major repairs beyond your means. Luckily, a property investment manager can help you with all of these things.

Long-term returns & risk to your capital

Even if you can get started in stocks investing with very little capital, when it comes to your long-term return on investment (ROI), property investment takes the crown, with property prices and rents steadily on the rise.

Of course, there’s no such thing as a fool-proof investment – your capital is always at risk when it comes to investing. That being said, stocks do tend to be the more volatile of the two investment options. In the UK, you have to go in with quite a bit of money and take risks to see decent returns, but this also means you could lose it all.

In contrast, the property market has historically been much more stable than the stock market. Additionally, property being a tangible asset provides a “hedge” against inflation: as the cost of living rises, so do property prices and rents. Additionally, your ability to leverage against property you already own means you could grow your property portfolio even if you can’t pay for this in cash outright.

What’s more, while your property naturally appreciates in value over time, it’ll also be a source of passive income in the form of rent, meaning you can start seeing returns from your investment quickly.

That being said, while your original investment is arguably safer tied to property than stocks, buy-to-let investment does come with its own risks. No matter how well you vet your tenants, something unexpected could always crop up that makes them unable to pay rent. If you depend on your rental income to pay your own bills, this could quickly become a problem. Additionally, you could find yourself in a position where you can’t find tenants, leading to vacancy periods in your property.

Time investment

Investing in stocks can be a very hands-off experience, leaving you with plenty of time to focus on your day job and enjoy your free time. In contrast, if you invest in property and decide to act as the landlord yourself, you’ll need to make yourself available 24/7 in case any emergencies crop up.

However, the fact that you’re the only one in charge of your investment property (perhaps with some guidance from a knowledgeable property manager) means that you have full say what happens with your investment. 

While with stocks you have no say over what happens with the company you’ve invested in unless you own a major share of it, you call the shots with buy-to-let property, from selecting the right property and investment areas to making decisions about tenants, repairs and maintenance, all the way to deciding how much you’ll sell your investment property for.

And the good news is that you don’t have to face the pressures of owning rental property alone: experienced property investment managers such as Cox & Co can handle your tenants on your behalf and be the go-to persons for repairs, meaning you can take advantage of their well-established tenant vetting processes and relationships with reliable tradespeople while you can focus on other things.

Ongoing costs & taxes

Once you’ve bought stocks, there’s not much in the way of ongoing fees for you to worry about. But with property being a tangible asset, there will always be things to fix and touch up, especially as the property ages and is lived in. Things like boilers and plumbing fixtures can break when you least expect it and can be costly to repair or replace. 

This is why we recommend putting a little money aside from your rental income each month to make sure you’re prepared if any time-sensitive issues arise.

However, it’s also worth noting that your ongoing investments into the upkeep of your rental property are tax-deductible. In Scotland, expenses such as general repairs and property management fees can be claimed and are subject to a basic rate tax reduction.

Ease of exit

If you ever find yourself strapped for cash or simply want to liquidate some of your assets, it’s very quick to sell some stocks to free up some money. In contrast, the process of selling a house can be a slow one – especially if you have tenants and you have to wait for their lease to be up. 

However, this ease of exit also makes stocks the riskier of the two investment routes as it’s easier to make impulsive, emotion-driven decisions, such as panic selling stocks, causing volatility in the stock market. Meanwhile, the fact that the buying and selling of property takes a while and the fact that property is always in demand means property markets are more stable in general. 

So in this way, the fact that liquidating property assets takes more time could actually work in your favour, getting you a better ROI at the time of liquidation as property prices tend to trend steadily upwards. 

It’s also worth noting that if you need to speed up the process of selling an investment property, an experienced property investment management company like Cox & Co can be helpful and make the whole process simpler for you as the investor.

The bottom line

At the end of the day, comparing stocks and property investment is a bit like comparing apples to oranges, and which one is right for you will depend on your goals. Not to mention that there’s nothing that says you can’t invest in both – after all, diversifying your portfolio is always a good idea when it comes to investment.

If you are interested in reaping the benefits of investing in bricks and mortar, you’ve come to the right place. Here at Cox & Co, we’ve made it our business to become a true one-stop-shop for both new and more established property investors, offering support for every step of the journey, from helping you find the right property and financing to acting as your letting agent and strategising the further growth of your portfolio. Get in touch with us to learn more about how we can help you to start building towards financial freedom through property investment.

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.