3 ms·

1-2% returns on rentals is far too low (REITs return ~12% and require no headache) but even if that was true, housing is one of the few places where a "Regular

1-2% returns on rentals is far too low (REITs return ~12% and require no headache) but even if that was true, housing is one of the few places where a "Regular Joe" with just a little bit of research can actually gain a market advantage and "beat the market". I can link you properties right now that can be bought and instantly rented for 15+% returns with no work and >20% with some fix up work. This is possible because of 1. easy to access leverage vs. other asset types and 2. difficulty of scale, which prevents the Blackrocks of the world from just buying up all of the property that could actually return 20% and making the market efficient. If I had to guess, the reason you are seeing 1-2% returns is because you are looking at really "hot" markets where the prices reflect an assumption of future appreciation.

aianus 7y ago
> difficulty of scale, which prevents the Blackrocks of the world from just buying up all of the property that could actually return 20% and making the market efficient What exactly is stopping House Flipping BigCo from doing what you're proposing at scale?
- opportune 7y ago
  Housing asset management only scales linearly because you need several people to physically inspect/validate each property before purchase to make sure there are no serious issues. Also you need to assess the rental conditions for each property on a case by case basis, and contract everything out to property management. A lot of REITs invest in medium-large sized complexes to avoid the potential headaches. I’ve lived in a few of these and found them to be quite well managed.
brianmc21 7y ago
This guy knows real estate. It isn't an efficient market. Efficient markets have very little to no alpha. Real estate has been my best side job ever. Currently looking at a 40% annualized returns since 2015. All thanks to the same principals used to invest in public fixed income and equities.
thorwasdfasdf 7y ago
Look at average of all REITs, VNQ. It'll return about 3% dividends plus appreciation (roughly inflation over the long term ~ the last 10 years have been a bit of an anomoly). After tax 3% ends up as 2%. And these are the Pros they know what they're doing. If your using leverage then you're playing a very risky game and just as the upsides are very high, the downsides are equally higher if not more. Properties that rent 7%+ are very high risk areas where you could easily loose much of the principle. And, you need to look at the percentage return on the total investment after all expenses. After all that, you need to multiply it by .7 because it's considered income. There are people who this for a living, who know far more about it than anyone else. They run REITS. I mean, just look at the total returns for REITs. yes, there's some that have dividends as high as 5% up to even 10%, I even have some of them in retirement portfolio but I expect they'll loose some of their principle as any REIT with such a high dividend probably would. Just read any financial review and you'll see that anything with a dividend above 10% is highly suspicious or Risky.

aianus 7y ago

> difficulty of scale, which prevents the Blackrocks of the world from just buying up all of the property that could actually return 20% and making the market efficient What exactly is stopping House Flipping BigCo from doing what you're proposing at scale?

opportune 7y ago
Housing asset management only scales linearly because you need several people to physically inspect/validate each property before purchase to make sure there are no serious issues. Also you need to assess the rental conditions for each property on a case by case basis, and contract everything out to property management. A lot of REITs invest in medium-large sized complexes to avoid the potential headaches. I’ve lived in a few of these and found them to be quite well managed.

brianmc21 7y ago

This guy knows real estate. It isn't an efficient market. Efficient markets have very little to no alpha. Real estate has been my best side job ever. Currently looking at a 40% annualized returns since 2015. All thanks to the same principals used to invest in public fixed income and equities.

thorwasdfasdf 7y ago

Look at average of all REITs, VNQ. It'll return about 3% dividends plus appreciation (roughly inflation over the long term ~ the last 10 years have been a bit of an anomoly). After tax 3% ends up as 2%. And these are the Pros they know what they're doing. If your using leverage then you're playing a very risky game and just as the upsides are very high, the downsides are equally higher if not more. Properties that rent 7%+ are very high risk areas where you could easily loose much of the principle. And, you need to look at the percentage return on the total investment after all expenses. After all that, you need to multiply it by .7 because it's considered income. There are people who this for a living, who know far more about it than anyone else. They run REITS. I mean, just look at the total returns for REITs. yes, there's some that have dividends as high as 5% up to even 10%, I even have some of them in retirement portfolio but I expect they'll loose some of their principle as any REIT with such a high dividend probably would. Just read any financial review and you'll see that anything with a dividend above 10% is highly suspicious or Risky.