3 property stocks better than an investment property

These 3 property stocks would make a better investment than an investment property.

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The residential property market is one of the last places I'd want to be putting my money at the moment. Property prices in almost every capital city are going down, with Sydney seeing the biggest falls.

Price declines aren't terrible in the short-term if you're making money from rental income, but most people are losing money due to negative gearing. The huge loan required for the property and rising interest rates for investors mean that residential properties are a big drain on finances right now.

If you still want exposure to the property market I think there are better ways to do it. The below three shares are property related businesses:

REA Group Limited (ASX: REA)

REA Group is the owner of several leading Australian property websites such as realestate.com.au, realcommercial.com.au and flatmates.com.au.

I'd much rather get a slice of every single property sale through REA Group than have a huge amount of wealth tied to one location.

REA Group can increase prices at a good rate every so often due to its powerful market position. It attracts the most prospective buyers which, in turn, attracts the most property vendors who want to reach the widest audience. The cost of an advertisement is so small compared to the overall marketing budget it will always be worth it.

REA Group is currently trading at 37x FY18's estimated earnings.

DuluxGroup Limited (ASX: DLX)

DuluxGroup is Australia's leading home improvement product company. It may be obvious to readers that DuluxGroup is responsible for the Dulux paint range, but it sells many other brands.

It sells paint brand British Paints, coating products from Cabot's, Selleys sealants and adhesives, Parchem construction products, B&D garage doors and Yates garden care.

All of these brands are good ways to get diversified exposure to a property's renovation. All of the brands are quite defensive because they not big-ticket items so they should continue to be bought in downtimes.

DuluxGroup is currently trading at 20x FY18's estimated earnings.

Reece Ltd (ASX: REH)

Reece is Australia's largest bathroom and plumbing company. Bathrooms are always being updated and large numbers of new bathrooms are being installed with Australia's rising population.

I'm also interested in Reece due to its water management & irrigation segment as well as its civil works division.

It's currently trading at about 25x FY18's estimated earnings.

Foolish takeaway

I think all three shares will be much better options than buying an investment property at the current prices. REA Group is likely to deliver the biggest capital growth due to its international investments and DuluxGroup offers decent income with a grossed-up dividend yield of 4.95%.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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