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Income-Generating Real Estate return rates
| Type of Investment |
1-Year |
5-Year |
Since 1980 |
| RE Highest Appreciation (Massassuchets) (*) |
12% |
247% |
2,436% |
| South Florida Properties (*) |
27% |
390% |
1,430% |
| RE National Average Appreciation (*) |
13% |
191% |
1,354% |
| RE Lowest Appreciation (Texas/Okalahoma) (*) |
4% |
98% |
833% |
| Standard & Poor 500 Stocks (***) |
4% |
-17% |
823% |
| US Treasury Notes Fixed Income (***) |
5% |
34% |
281% |
Investment in Real Estate has many advantages such as
a) Good rate of return- Historically has produced a high rate of return compared with other types of investment
b) Hedge against inflation- As measured by the Consumer Price Index (CPI), real estate values have increased at a faster pace than inflation
c) Leverage- To increase yield (return) on equity (investor capital) by using borrowed funds
d) Equity buildup- As debt amortizes and property appreciates the investor's equity grows.
Calculation Criteria
1) Real Estate return rates based on Income-Generating Properties. Calculations include a) Property appreciation over period, b) Leverage Financing with 70% Loan-to-value ratio, c) Loan at 7.7% Fixed Rate, d) 30-year amortization, e) Rentals revenue at Triple-Net Capitalization Rate: 7% (****) and f) 10% Vacancy Rate (**)
2) SP500 is a total return index which includes all dividends, splits and distributions paid by securities
(*) Real Estate Price Appreciation computed using Office of Federal Housing Enterprise Oversight Index
(**) Coldwell Banker Commercial - 2004 Vacancy Rate - Retail (Strip mall) - USA average rates: 6% - Fort Lauderdale vacancy: 6.9%. - Only 5 Cities in USA had vacancies over 10% (Columbus, Dayton, Indianapolis, Memphis, Wichita).
(***) Vanguard Stock Funds Data and Moody's Triple-A Corporate Funds
(****) USA historical cap rates index: 10-14% (Source: RealtyTrac Investor Survey - 2005)
Data collected in June,2005
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Past performance is NOT an indicator of future results
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