Real Estate Investments: Not Part of the Herd

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There are reasons why real estate investments (and real estate investments as a whole) are often considered to be in a class of their own., for instance, doesn’t even mention real estate in its current “Best low-risk investments in 2021,” despite listing every variety from Number One: “high-yield savings accounts,” to Number Ten: “fixed annuities.” Their list acknowledges drawbacks for each of the ten, ranging from #1’s investment return (last week, the best rate of return was half of one percent) to #10’s reputation of being “notoriously complex, so you may not be getting exactly what you expect.”

Financial commentators may be forgiven for neglecting to count “real estate” as an investment class when you consider that its peculiar characteristics would make it an oddball inclusion. From the financial manager’s point of view, the greatest failing might be that it requires so little financial management. In fact, when it comes to the hands-on for buying and selling real estate, you really don’t need a financial manager. You just need an experienced Realtor®.

Local homeowners may be tempted to think of their own real estate investment as the place their family lives in rather than as their preferred low-risk investment—but of course, it’s both. Last week, there came confirmation of another characteristic that tends to put it in a class of its own.

The source was Attom Data Solutions’ annual “2021 U.S. Home Sales Report,” which summarized, “In the first quarter, sellers generated an average profit of $70,050 on the sale of their home, up 26% compared to a year earlier.” Further details described an average “holding period” of 7.94 years per home that generated an average 34.2% return on investment. Attom’s percentage is for the nation as a whole—so any single real estate investment might be plus or minus that precise figure. But the typical homeowner/real estate investor also benefitted in another way—by being able to live in their investment. That could be another reason why real estate wasn’t included as one of the best low-risk investments in 2021. In addition to their being potential Family Headquarters, this season’s listings can certainly also be considered to be investments-in-waiting.