Investing in gold VS Investing in real estate: Why is it profitable to invest in gold?

10.09.2021

Disputes about what is the most profitable way to invest money have been going on for decades. And as leaders in these disputes, frequently, there are two assets - gold and real estate. And indeed, both of these investments have many similar characteristics:

  • They are tangible, and this determines much of their popularity, because something that can be touched always evokes a more realistic sense of possession.
  • They do not lose value: people always need housing or commercial real estate, and gold is the eternal equivalent of wealth and success.
  • Both of these assets are long-term investments. They are suitable for the long term prospect of income. 
  • The value of both gold and real estate is high in any part of the world. In this sense, they are universal. 

And that sets gold and real estate apart from other investments. But if we have already talked about why gold is more profitable than cryptocurrency, then how to choose between gold and real estate? Let's explore this question in more detail.

Criteria for comparison: how do you compare gold and real estate?

To determine the leader in this informal competition, let's start by choosing the comparison standards. We will consider both assets by the following parameters:

  • Prices and their fluctuations;
  • The possibility of additional income;
  • Liquidity;
  • Supply;
  • The costs of holding the assets.

So, here we go.

Gold price vs. real estate price

Real estate is different from one another. And the matter is not only in the type, area, features of the property in which you want to invest money. It is also worth considering the location of the property (country, city, district), its condition and the need for additional investments. All this affects the price. In addition, the real estate market has its ups and downs, and they depend on both the demand and many economic and even geopolitical factors. For example, a villa bought a decade ago in an economically and politically unstable region will be a stone on your neck, rather than a source of profit. Gold has a stable price, regulated by the London Stock Exchange. By the way, it has been rising in recent years. Gold rarely falls substantially in value, and this is its another advantage as a long term asset.

The possibility of additional income

Real estate itself does not produce income. But it can be rented out, to take advantage of short-term price rises in the market, and sell for a profit. But to do this, you must put a lot of effort: to find clients, to pay for the services of realtors, to monitor the payment on time. Gold can bring passive income right away, because you can put it on deposit in the bank, and receive an interest every month without the slightest effort.

Liquidity

Those who are at least once faced with the procedure of selling real estate know that this process can turn into a real nightmare. And even the most experienced real estate agent is not always able to sell quickly. With gold, it is ten times easier: you can sell it, literally, at once. There are financial institutions for this, as well as stock exchanges.

Supply 

The real estate market is growing every year. And this trend is common throughout the world: new units are put into operation, and developers are constantly announcing new constructions. Gold, in contrast to real estate, is a finished resource. In recent years, its production is steadily declining, which also increases its price and importance.

Costs of storing assets

How much do you spend on gold storage? It's likely that the answer is nothing. But any piece of real estate will require expenses for its maintenance: utilities, if the property is used, management company fees, maintenance of residential or presentable condition - all these things should be considered and included in the cost line when planning your investment in real estate.

To summarize, real estate only appears to be a lucrative asset for long-term investment. In fact it is a rather difficult investment object to manage and operate. Gold is much more liquid, its price does not fluctuate as much, it does not depend on geolocation, and yet it always remains a significant value for the world.