Investment property has shown steady profitability in recent years. According to a property index compiled by the National Council of Real Estate Investment Fiduciaries (NCREIF), this asset class has had positive returns ever year since the overbuilding bust of 1991-92. For the 1994-2003 decade, total returns averaged a shade over 10 percent a year, NCREIF reports.
During this period, stocks did better: the Standard & Poor’s 500 Index returned over 11 percent annually. However, real estate had a smoother ride. While stocks fell sharply in 2000, 2001, and 2002, real estate had positive total returns in every one of those 10 years, with the NCREIF index showing gains between 6.38 percent and 16.25 percent per year. (Real estate returns may have been even greater, if leverage was used.)
Of course, investors don’t own “real estate;” they own specific properties. Last year, for example, retail properties in the Southwest returned nearly 21 percent while office buildings in that same region barely eked out a 3 percent gain. Nevertheless, if you buy carefully and keep your property in good condition, you’re likely to enjoy long-term success.
