Why all the hate on 8 - percent that is.
Hello fellow BPers. I've noticed alot of posts where people don't consider an 8% return to be worth a deal or feel it is taking on too much risk for an 8% return. Whether it's investing in a turnkey property or a rental - I've seen these comments.
I'm sure there are also those who are all for an 8% return (me included). However, let's put this into perspective compared to other investments.
(Granted, maybe my perspective is different. I began my career as a financial advisor and then day traded for many years.)
If you decide to pass on an 8% return in real estate, then where does one go to get that same return?
Mainly, this is a discussion point, but I'll throw in my 1/2 cent.........
First we can look at the stock market. Ok, you buy a bunch of index funds and hold on as the market returns roughly 8% historically.
That is assuming you retire and cash out at the correct time. All the folks that hit retirement in 2001 and 2007, did they end up with 8% on their money? I mean, atleast with real estate you can hold that property and rent it out for some cash flow (assuming you ran #s and bought correctly) as opposed to selling during a crash.
But wait you say - I'm not selling my stocks either because I only invest in dividend paying stocks. Ok, well let's see what stocks give us an 8% dividend yield.
Throw out all of the blue chip and consumer staples (safe stocks) as they are nowhere close. There are always the oil MLPs (I own some) however, that's a heck of alot more speculative. Most dividends have been cut by 50% or suspended outright due to the recent decline in oil. Bye bye my 8+% until the oil company reinstates (which is alot longer than a property will be vacant, believe me)
So, where else can one get 8% nowadays. Well, there are some high yield bonds that can get you close to that. Though the average rate on U.S. high yield is currently hovering just over 6%.
Maybe buy some bonds from Greece?
To sum up my hopefully humorous rant; when I find rental properties that will return 8% I'm good to go. Plus, we are not even factoring in the possibility of appreciation, that's just a possible cherry on top of the sundae that is an 8% return! :-)