Why Should I Invest in Real Estate?

Most of the 1990's, The Standard & Poors Index posted earning yields of 5% to 6% on average. At the same time, the dividend yields of the S & P were only around 2% or less. Since dividend paying stocks tend to be much less volatile, the gains on the appreciation side would not normally be a significant factor.

At the same time, bond yields taken as a composite, showed only around 5% returns. Better yields were riskier, while safer bonds returned lower yields.

Now let's look at some of the ways that a rental property investment can generate returns and throw off cash:

Start by only choosing properties with rental yields of 6% or better.

Rental properties normally appreciate in value with inflation.

Rents usually increase with inflation, while mortgage payments on the property remain stable.

Using leverage, while being careful to buy properties with good rental yields provides greater returns.

Amortization, or paying down the loan, frees up more investment resources to increase leverage.

Get rental yield calculations and spreadsheets here.

Get complete investment analysis spreadsheets here.