Historical Returns on Real Estate Investments

Real estate ownership can be associated with many emotions. Are the historical returns of Real Estate investments worth the trust that many investors place in them?

Land ownership has always been a part of the human spirit. The only investment that is permanent and solid is the land. How does this change the American Dream? Are the historical returns of Real Estate Investment comparable to what they have received?

Yes, it is cautiously so. The annual average return on Real Estate was 11.1% between 1926 and 1996. The inflation rate was about 3% during the same time period. It was clearly a better investment than to invest in Real Estate. The rate of return for small stocks was around 12%, while the Dow Jones Industrial Average was slightly lower at 10%. These numbers would indicate that Real Estate investments are on par with Stock Market Investments.

What Is The Average Return On Real Estate Investment?

Real Estate Investors may want to claim that land ownership and its investment value predate the Stock Market by thousands. They will also point out the importance of land ownership in the Middle Ages for determining wealth and nobility. While this is true, it is often irrelevant to the discussion about historical returns on Real Estate investments. The new global economy has created new opportunities, and the return on investment must be evaluated within this context. While it is great to look back at the past in order to find clues for the future, investment does not offer any answers.

An analysis of the historical rates for return on Real Estate investments reveals that they are more stable and less likely to be affected by fluctuations in stock market prices. Many investment advisors recommend that every portfolio have at least 10% in Real Estate for market volatility hedges. On the other hand, real estate investments tend to have higher transaction costs and be located in larger units. Each property is unique and possesses its own potential and characteristics.

These factors have made it popular to invest in Real Estate through Real Estate Investment Trusts (REITs). REITs, a type of mutual fund of Real Estate, offer investors the opportunity to invest in Real Estate without worrying about high transaction costs and property uniqueness. The past performance of Real Estate investments should be a guide for you, whether you’re looking to invest on an individual basis or through REITs. Real Estate is an investment that offers high returns and has a track record of success.