Summary

Real estate is one of the three primary investments, alongside stocks and bonds. Real estate earns returns via property appreciation, rent, or royalties. Royalties include extracting minerals, oil or lumber from a property.

People purchase investment properties by themselves or in groups. Investment properties may include single family homes, duplexes, or apartments to name a few. An alternative is to hold smaller pieces of more properties by buying shares of real estate investment trusts, or REITs. REITs own and earn money from various properties, including apartments, offices, warehouses, data centers, hotels, and more. REITs pay 90 to 100% of their taxable income as dividends to shareholders. They offer a more diversified, hands-off option for real estate investing.

Real estate has historically provided returns comparable to stocks, as evidenced by the data below. This data is based on the Dow Jones Select Real Estate Securities Index, which measures equity REITs and REOCs traded in the US.

Historical mean annual return, 1978-present: 12.7%

Min / max annual return, 1978-present: -39.2% / 49.0%

Last 25 years mean annual return: 11.6%

Last 10 years mean annual return: 6.5%

Last 5 years mean annual return: 6.2%

Table of total annual returns of real estate

Year Return [%] 2024 8.0 2023 14.0 2022 -26.0 2021 45.9 2020 -11.2 2019 23.1 2018 -4.2 2017 3.8 2016 6.7 2015 4.5 2014 32.0 2013 1.2 2012 17.1 2011 9.4 2010 28.1 2009 28.5 2008 -39.2 2007 -17.6 2006 36.0 2005 13.8 2004 33.2 2003 36.2 2002 3.6 2001 12.3 2000 31.0 1999 -2.6 1998 -17.0 1997 19.7 1996 37.1 1995 12.2 1994 2.7 1993 15.1 1992 15.1 1991 23.8 1990 -23.4 1989 2.7 1988 17.5 1987 -6.6 1986 19.7 1985 6.5 1984 21.9 1983 32.2 1982 20.9 1981 17.9 1980 33.1 1979 49.0 1978 11.0

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