ROI for real estate investors

By
Industry Observer

About a year and a half ago, I posed the question,  "Should you invest in residential real estate?"  In that post, I suggested that a reasonable rate of return would be around 8%, assuming that the investor has adequate skills in management, hands-on maintenance of real property, chooses the right property at the right price, and has some luck. 

The 8% assumption could be a little higher than what is realistic, and it would be interesting to hear any thoughts / opinions that real estate professionals and others may have.  Many of us feel that real estate is a good investment, but it needs to be compared to the alternatives.  How much more or less could one realize by, for instance, investing in a publicly traded real estate investment trust?  Given the increased liquidity, one would expect that there is a lower return on a REIT.  There are some fairly secure preferred stocks that pay close to 8% with no need to worry about tenants trashing the place or not paying the rent.  How would you advise a potential investor who is weighing the risks and rewards of residential real estate vs. the stock market?

 

 

 

Posted by

 Mike Carlier  Lakeville, MN

 

612-916-3033

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Real Estate General Information
Location:
Minnesota Dakota County Lakeville
Groups:
The Lounge at Active Rain
"Whacked"!!!
Minnesota Real Estate
Bartender, Make it a Double

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Ambassador
3,674,552
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Mike, the big question mark on the overall rate of return is appreciation, and who knows what that will be?

Jan 10, 2015 10:37 AM #1
Rainmaker
522,122
Mike Carlier
Lakeville, MN
More opinions than you want to hear about.

Pat, that is one of  the great unknowns in any investment.  While appreciation does affect the liquidation value of the investment (that explains the attractiveness of owning professional sports teams), there should also be an annual return.  Like individual investments in real estate, REIT's tend to appreciate/depreciate and have an annual ROI.

That brings me back to the big question.  How much is a reasonable expectation on a well-chosen real estate investment?  And, how does one go about advising an investor considering REIT's and other equities as an alternative to real estate?  My own answer is that I don't know.

 

Jan 13, 2015 01:54 AM #2
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
522,122

Mike Carlier

More opinions than you want to hear about.
Everyone has opinions -- what's yours?
*
*
*
*
Spam prevention