Silver vs Real Estate

Silver vs Real Estate

Silver, the white shiny metal which has caught attention with phenomenal rise over the past decades, has wormed into every investor’s mind. The merits and the phenomenal rise (and fall) the metal has potential to experience are well documented. However, the majority of public and the new investors are lacking in clear understanding about the working and the aspects that guide silver markets. And, it could be said that this widespread confusion has only fired public interest and has led to origin of many questions about silver’s position in today’s market and where it stands in comparison to other investment options. Here, we will discuss the difference in overall as well as component facets of silver investment and real estate investment.

Liquidity

The liquidity of an investment is how easily the asset can be sold or converted into cash. It can also be stated as the degree to which an asset or investment can be bought or sold in market without affecting the asset’s overall price. In this aspect, silver investment does score more than the real estate.

The investor in need of a cash or in dire situation in which he has to convert his investment quickly should opt for silver. The investment in silver can be liquidated by selling it back to a dealer or different prospective buyers by breaking it into smaller parts. For example, you have invested $100,000 in silver and you want to sell it quickly. In such situations, it is difficult to find someone immediately who has that kind of capital avilable However, you can break than investment into smaller saleable parts by dividing metal holdings, and sell it to different buyers. In this case, you will have to pay additional commission charges, but in the end you will have cash.

Now, consider you have a real estate investment say a house worth $100,000 and you have to sell it immediately and urgently. Unless, you have already been approached by a buyer in past, you will surely struggle in getting it off your hands. On finding a buyer who has that kind of capital, you may have to drop price (known as depreciation and discussed later). Unlike silver you can’t divide your real estate asset into smaller saleable parts. So, you will have to wait for the buyer to come and this might take days, months or even years in case demand in your neighborhood is low.

Tax benefits

Whenever, an investor looks for an appropriate investment opportunity, the tax benefits is very high on criteria list to make a decision. It can also be argued that some investments are made only to get tax benefits, to find an escape from taxation. And, in this regard real estate is perfect investment. The substantial savings offset by an ownership of property make it a great investment option.

The property taxes that are charged against the real estate and are paid to state or local governments can be deducted from the taxable income. The higher the tax paid, the greater the tax deductions you can achieve. Also, the insurance premiums paid for coverage of real estate investments are also deducted from taxable income.

Additionally, the maintenance expenses incurred for the real estate (not applicable for home owners) are fully deductible in calculating the tax liability for the investment. So, the expenses you incur in improving your investment and increasing its value, helps in reducing tax burden as well. The maintenance expenses can be huge for older properties.

Meanwhile, the silver investment doesn’t has any taxation advantages, which make it unattractive option for anyone looking for tax benefits.

Rental Advantage

This is another factor or criterion in which silver investment lags behind real estate investment. The investor along with acquiring an asset gets a steady cash flow as well. While, the investor can get profit after selling the property in the future, he can also earn additional income with monthly rent. As a landlord, the investor is eligible for number of tax benefits as well. The investor in case of long distance travel for their rental activity, can deduct your airfare, hotel bills, meals, and other expenses. The contractors and services hired to improve the rental property can be labeled as maintenance expenses and deducted for tax benefits.

Depreciation

Unless, there is a long term fall in the demand for silver, your silver investment is certainly safe from fall in value. Even if there is a fall in value due to market factors, it still can’t be termed as depreciation, thus silver investment is safe from it. On the other hand, the property if not maintained on regular basis, is bound to experience depreciation. However, the silver investment doesn’t need any kind of maintenance to guard against depreciation. And, the maintenance always comes at a monetary cost even if you are given tax benefits.

Discounts

The investor looking to invest in real estate can exploit an opportunity to strike a deal for the asset well below its market value. The opportunity could be urgency on seller’s part to dispose of property, environment concerns, neighborhood issues and/or law and regulation changes. However, this isn’t possible for silver investment. The investor has to pay the basic listed value of silver, whatsoever.

Other factors

The silver rate is prone to manipulation by the mining industry, the big corporates or even government. But, same can’t be said for the real estate. To be successful in real estate, the investor only need to have local knowledge and doesn’t has to worry about the factors that are well beyond his control.

However, the silver investor has to have a broad knowledge of the sector and decent experience to handle such a volatile investment. He/she has to worry about global factors that are beyond his control such as environmental legislation, the law litigations against mining company, and/or change in rules by the government watchdog.

Those looking to make safe investments should go for real estate, whereas those who have knowledge and diversity in their investment portfolio to cope with negative changes can go for silver which is forecasted to make positive move in 2015.