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Benefits of Investing in Real Estate
A struggling economy and sinking home values have cast real estate investments in a bad light for the past several years, but some analysts argue that private real estate investments can be a wise portfolio diversifier. One reason is because there is a low correlation between home values and stocks and bonds, meaning that if and when those investments start trending down the odds are good home values will rise, making for a good long-term investment. Another reason is because variations in style, quality, geography and local economy can provide opportunities for growth that other portfolio holdings don't offer. The longer term benefits of private real estate investment can therefore lower volatility in a portfolio..
"Over the past 10 and 15 years, private real estate returns have even outperformed the S&P 500, the Dow Jones Industrial Average, the Russell 2000, and the Barclays Capital Government Bond Indices. Moreover, private real estate has historically delivered high and steady annual income returns, with 6.9% average annual income returns for the period 2000-2010 and 7.7% for the period 1978-2010.
Private real estate has shown relatively low volatility, and has achieved among the highest risk-adjusted returns among the major asset classes over the past three decades (1978-2010). That means that for each unit of risk, it is estimated that private real estate has provided higher returns than stocks and public real estate, and has matched the bond index."
By: David Lynn, NREI Contributing Columnist
Aug. 1, 2011
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Chattels Real, LLC © 2011
