Although real estate investing requires taking on a small amount of risk, it’s definitely more profitable than most traditional investments. So what kind of rental property returns can you come to expect?
Average Rental Property Returns
According to research done by the real estate authority RealtyTrac, investors in the United States have been seeing average rental property returns (also known as return on investment, or ROI) of around 9%.
This means that investors are getting 9% of their money back from their rental properties each year. So the typical rental property pays itself off in just under a decade.
Also, that’s just what AVERAGE investors are seeing happen. If you’re good at renting out properties, you can expect to make a lot more than 9% of your money back each year.
Stocks Don’t Perform As Well
Although it’s difficult to calculate due to the complicated effect of things like inflation, most research data suggests that the average return you can expect from the stock market is only around 7%.
Here’s a quick example. If you consistently invested from the years 1950 to 2009 each year, you would have only made 7% returns each year.
And not only that, but the stock market has a bad habit of changing its mind. Shares you own today might be worthless tomorrow. There’s a lot of implied risk with not a lot of upside.
Bonds Do Even Worse
According to research data provided by Vanguard, historical analysis shows bonds perform even worse.
Bonds have provided average returns to investors only 5.3% each year for investors from the years 1926 through 2018.
Remember, we’re not saying that stocks and bonds are bad. It’s just that they simply don’t perform as well as real estate investments do.
Want To Learn More About Rental Properties?
If you want to learn more about setting rental properties, then please feel free browse some of our other guides and short articles.
Here at Rental Property Calculator, we make it our goal to explain real estate investments in short, basic terms that everyone can understand.