I have a very simple case study here, the very first house we own, located in a very small town, we bought it in 1986, for $25,000, down payment was $2,500, closing cost $1,400. this property was amortized over 20 years, paid off at 2005. Rent for this house was $400 in 1986, $700 in 2005.
I estimated this house cash flow about $500 in 1986, with 5% increase in cash flow each year, which be $1263 in 2005.
the value of this property is worth about 90k in 2005, about 80k today.
the very simple calculation for this case, from 1986 to 2005, surplus cash flow is $16,532, while appreciation from 1986 to 2005, is $65,000. base on $3900 investment, we have a total gain of $81,532. so, that is a 2090% return, with annual return of 16.42%.
now if we look at 1986 to 2011, since this property has been paid off, we have an additional cash flow of $3,276 (273 x 12) each year, so total surplus cash flow is $40,243, appreciation is now less, since market came down to $80,000, thus total return for 1986 to 2011 is $95,243. which is a 2442% return on $3900 over 25 years, annual return of 13.63%.
this is the first house we own, very simple, bought it at retail price, nothing special about it, not comparing to later after I fully investing in RE, and buying properties at 50% discount and $0 down payment, and magnify this simple case by 30 houses, or 50, or 100...
what I am saying here is, real estate is in for long long long term, simply bashing it doesn't get anyone anywhere, when you show me a track record of 25 year avg above 10% return, I will shut...
we own real gold from the 80s, $273 was the lowest, we stop buying after it hit $450+; I day trade stock from 1992 to 2001; so tell me something new that I don't know of...
