What should I target as a risk adjusted rate of return?

[Craig Shrimpton]

All,

I know this is a difficult question and depends on each investor's needs, but I'm looking for general guidelines for comparing REIT investments to actual real estate.

If I can get a nominal 7.7 ROR investing in a basket of REITs, what kind of risk premium should I target for the trouble of being a landlord?

I'm looking for the minimum cash on cash return I should demand for taking on the risk of being a landlord compared to the after tax REIT return of 5.5% which is almost effortless.

I'm thinking a minimum of 8% cash on cash with a goal of 10%. That would represent a 2% to 4% risk premium over the REIT after accounting for the move favorable tax treatment with direct ownership.

I'm looking at 2-4 unit multi-families and I'm not giving any weight to potential appreciation. I'm interested primarily in cash flow.

Thanks,

Craig