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Invest for Control

One of the main benefits of real estate investing over stock market investing is control.  For example when you purchase a stock you or your financial adviser have no control over the performance of the company.  If the performance of the company deteriorates and the stock price goes down the only decision available to the average investor is to either sell or hold their shares. 

 

Meanwhile, if you have an under-performing real estate investment control allows to take actions such as:

 

  1. Raise rents where possible;

  2. Reduce rent rates to reduce vacancy;

  3. Trim discretionary expenditures;

  4. Renegotiate insure rates and supplier contracts;

  5. Reduce or eliminate indirect costs (automobile, office expenses, etc.);

  6. Refinance assets to reduce monthly mortgage payments;

  7. Sell the investment property and buy one with better cash flow; or

  8. Replace the property manager if they have been under-performing.

 

This is not to say that you cannot invest in the stock market for control, large investment firms like Berkshire Hathaway (i.e. Warren Buffet) invest solely to have a controlling interest.   Investing for control though is just not within the means of the majority of the population.  Additionally, having control should not be confused with physically doing the work.  Control can be achieved through managing people, legal contracts, or a combination of the two.

 

In conclusion, whether you’re investing in real estate, stocks, or a start-up company a key consideration is the amount of control you have over income, expenses, assets, liabilities, and management.  The more control you have the better.

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