Good question that I don’t know the answer to. I know what ROI is and how to compute it but I am not a very sophisticated investor. I would think (again, depending on individual circumstances) that my present real estate investment circumstances provide an ROI north of 20% and much better than a REIT (which I have owned and can be great investments). If one does decide to go the rental route, I would advise keeping the investment local, (no out-of-town condos, timeshares or pooled money purchases etc), owning small houses in stable neighborhoods needing some cosmetic work but structurally sound. Local markets usually rise and fall more on local economic conditions but other investments are impacted by national and international conditions. You would be shocked at how many people would pass over a prospective rental due to a lack of imagination, skill or ability to turn a dog into a charming rental property. Biggest issue is not ownership its making sure to find good renters and compliance with sometime onerous federal and state fair housing laws.
Biggest issue is not ownership its making sure to find good renters
***************
That rings true from everything I’ve heard from friends who have real estate investments like yours.
The 20% return sounds about right, given that you need that kind of yield to justify your personal time, effort and financial commitment that is inherent in owning real properties. REITs are just passive investments but the yields can be fairly generous, and of course there is the possibility for additional capital gains if the total portfolio increases in value. Liquidity is another advantage of REITs — if the market cooperates. :)
When buying investment real estate, avoid detached houses unless the price far below historical averages. They require too much maintenance.
Also avoid condos, since fees are high.
Generally stick to townhouses and small apartment buildings.
Never own more than about ten units. You want to retire, not become a full-time landlord. I’d personally want to own only two small townhouses.
Remember the point is to live well.
Having fewer units means it is easier to keep your units filled with good tenants.
The lower the value of your property the harder it is to find good tenants. Low end tenant are terrible. The higher the rent the better.
The best tenants are recently separated men. They're usually traveling for business or staying with their new girlfriend so there's little wear and tear on the place. Sorry to say that but it's true.