In this case I’m referring to the fact that long term real estate follows the rate of inflation. There are periods where the returns are higher and periods where the returns are lower but they always return to the mean. In general I use the most commonly used, rates of returns e.g. Case Shiller index. Back to my original question, in researching this answer I came across this from MMM.
Person #4 may be the winner.. for now. In certain cities, US housing continues to be among the cheapest in the rich world when measured on a price-to-rent ratio. That’s why my own next investment will probably be in another rental house. But note that I’m not selling stocks to do it – for me, that would be putting too many eggs in one basket.
So that does answer my question, right now RE in the US is dirt cheap (which is a bad thing but that’s an issue for another post). The problem is in a global forum like this people begin to think that is the norm, for example this quote from another thread.
4% or 0.34% seems way too low to cover expenses and risks for the rental agency.
In the case the poster is concerned that the yield that his is expecting (post crash house prices) are too low, but he’s being influenced by the US situation.
So to rephrase my question.
If one is considering real estate (in America) what is a reasonable rate of return one should plan on?
Typically I’d say 3-5%*
Hope this helps
Rob
*4% with a 20% downpayment would be in the break even range