What are the pros and cons of each type of real estate investment, and which ones are the most profitable? “Over the generations, real estate has proven itself to be a pretty good, time-tested investment,” says Eric Tyson, co-author of
Real Estate Investing for Dummies. “Like investing in the stock market, people who follow some basic principles and buy and hold over long periods of time should do fairly well. But, of course, there’s no guarantee.”
Realtor.com® analyzed the five most common real estate investments and broke down the typical returns investors have received over the past five years. Here’s an overview:
1. Home Flips
- First half of 2017 gross returns: 48.6%
- 2014 gross returns: 45.8%
- 2012 gross returns: 44.8%
2. Rental Properties
- 2017 gross returns: 13%
- Three-year returns: 9.9%
- Five-year returns: 11.67%
3. REITs
- 2017 returns: 2.75%
- Three-year returns: 8.39%
- Five-year returns: 9.79%
4. Crowdfunding (pooling money to invest in apartment complexes, office buildings, or shopping centers)
- Year-to-date annualized returns: 8.72%
- Two-year returns: 8.89%
5. Home Appreciation
- One-year appreciation: 10%
- Three-year appreciation: 26.7%
- Five-year appreciation: 44.8%
Source: “Flip, Rent, or Hold: What’s the Best Path to Real Estate Riches?” realtor.com® (Sept. 25, 2017)
