Planning to invest in a bond but not sure if real estate is the better option? You have arrived at the perfect place to find out which is the better choice and what pros and cons each option holds!

What is a bond and how is it different from Real Estate properties?

Bonds are done between an issuer and a bondholder wherein the investor makes a loan to the issuer. The issuer repays the amount along with an interest amount over a given period.

No matter how much the issuer grows, the bondholder will not benefit. As long as the issuer makes all the agreed payments, the relationship ends there.

On the other hand, Real Estate is any physical asset that can be used to generate an income. If played right, it can even help people increase their prices and enhance their income over time.

When you decide whether to invest in real estate or bonds, you must keep in mind three things:

• How long would you like to hold the investment?

• How much rate of return are you expecting to generate?

• How much risk are you willing to take?

Depending on these criteria, you can select any form of investment and gain results. You could take a government bond or invest in a rental property nearby.

Which option is better and safer?

If you would like to reduce your risks, go for bonds. But if you wish to enhance your return rate, bonds won’t get you much. If you pick government bonds, you might reduce risk as well your yields will also be below the rate. 

However, if you wish to generate higher rates, opt for corporate bonds that promise higher yields. If taxes are your concern and you don’t wish to be taxed at the federal level, go for municipal bonds or any government bonds.

Suppose you are hit with an inflation rate as well as an income tax burden at the same time, you might have an issue managing your bonds. Your purchasing power with a certain rate of interest will drop with inflation over a given time. This is owing to the fixed rate of interest set to be paid over the life of the investment. Even if you pick the safest bond in the market, you are bound to lose some returns sometimes.

On the other hand, if you pick real estate investments, you can gain double the returns and equity appreciation over some time. Rents are known to arrive at higher levels if you have settled a good level of monthly cash flow.

You do get some tax breaks that will work in your favour and your depreciation deduction will be above average. This means that annually you can deduct a bit of the property’s value against the produced income.

How does real estate deal with inflation? Why is it the better choice?

By now you must be aware that real estate and rental properties are the better options for several reasons. You can even utilize inflation periods to generate more rent. Your purchasing power does not reduce and the rent will keep increasing periodically.

You will notice a higher price in real estate during inflation. This means that you aren’t only enhancing your monthly cash flow but you are also gaining price appreciation!

The bottom line is that with bonds, you are safe and secure. But your returns are less if not nothing at all! On the other hand, real estate is tricky and might require a good initial investment. But over time, you will gain better returns and even use economic conditions to gain price appreciation.

Bonds have a fixed price but real estate can keep increasing or decreasing. Not only can you cover the material and labour costs through rental income, but you can also match more than the break-even point through depreciation deduction. You can sell the property thrice its initial value after a few years or months have passed.

Keep in mind that every investor is unique and your needs can be understood only by you. Keep your goals in mind. Do you want:

• Better returns as time passes
• Safety and Security
• Safety during inflation
• An enhanced holding time of the investment

If you are not worried about past performance affecting your present-day results - opt for real estate investments!