Investing in Your 20s and 30s: Real Estate Returns - dummies

Investing in Your 20s and 30s: Real Estate Returns

By Eric Tyson

Just before, during, and for some time after the financial crisis of 2008 and associated severe recession, most types of real estate in most parts of the country declined in value. Thus, you may think that real estate isn’t a good investment, but you’d be wrong.

Real estate is a solid long-term investment. Real estate, as an investment, has produced returns comparable to those of investing in the stock market. Both stocks and real estate have down periods but have historically produced attractive long-term returns. Overall, real estate prices in most parts of the United States now have bounced back to record high levels.

Real estate does well in the long run because of growth in the economy, in jobs, and in population. Real estate prices in and near major metropolises and suburbs generally appreciate the most because people and businesses tend to cluster in those areas.

Your primary reason to buy and own a home should not be high expected investment returns, because you won’t be earning rental income if you live in your own home. That’s why you should thoroughly understand the effect that owning a home will have on your monthly spending and budget. (Investment real estate examples include a small apartment building and retail space.)