For Immediate Release
Crush Stock Returns
Scientist Uses 50 Years of Data
to Make Profit Predictions
A TYPICAL RENTAL HOME in the United States generates three to six times more profits than investing in an S&P 500 Index Fund, according to a long-term statistical analysis conducted by a social scientist-turned-real-estate consultant.
“One of the biggest myths in the investing community is that stocks and REITs (real estate investment trusts) outperform rental properties and homes,” said Dr. David Demers, a retired Washington State University tenured professor who began investing in rental properties at age 65 after he ghostwrote a best-selling real estate book for a wealthy entrepreneur.
Over a 10-year period, he said, a short-term rental home valued at $300,000 will generate profits of $531,074, compared to only $79,576 for a similar investment in the stock market, which has produced annualized returns of 7.5 percent since 1970. A long-term rental will produce $254,729, three times more than stocks. In all three scenarios, the initial investment was $75,000 (25% down to buy the home).
The statistical data to back up these findings are available at his website (DrDavidDemers.com) and are included in his forthcoming book, TAP YOUR A$$ETS: How to Achieve Financial Freedom in Two Years with One Rental Home.
The estimates assume that the real estate investors take on a 30-year 7-percent fixed mortgage. Inflationary cost estimates are built into the model for expenses and annual rental income. Estimated appreciation and stock market annualized rates of return were calculated over a 52-year period, from 1970 to 2022. Demers also found that even home ownership produces twice the returns as a stock investment -- a finding that contradicts recent claims by some wealthy real estate investors.
“Before you invest in anything, buy a home,” he said. “You’ll make a lot more in appreciation on your home than you will on your stocks and REITs.”
Leverage is the main reason real estate beats stocks. Over the last 52 years, homes have appreciated an average of 5.9 percent per year. This is less than the stock market, but when investors borrow money to buy a home, they earn appreciation not just on the down payment but on the borrowed money, too.
In the first year alone, a $300,000 home on average generates at least $15,000 in appreciation, compared to $5,625 for the stock investment. Since 1950, home values have declined more than 20 percent only once (in 2008), whereas the stock market has had more than a dozen plunges. “Homes are much safer and a more profitable investment,” Demers said.
The myth that stocks are more profitable is perpetuated by a bias in business news reporting that favors stock markets, corporations and the investment firms who benefit from the sale of equities. This bias is not surprising, said Demers, who is a mass media scholar and author of two dozen books, because power drives the information marketplace.
An electronic copy of this release is at <www.drdaviddemers.com/homes-beat-stocks.html>.
For more information, call 623-363-4668 or email DrDavidDemers@gmail.com
A Note from Dr. Dave
(excerpt from Tap Your A$$ETS)
I am not a real estate mogul, nor do I aspire to be one.
I purchased my first rental property when I was 65 (if I can do it, you can, too).
I’m a real estate investor with modest dreams — to maintain my financial independence in old age. Financial freedom doesn’t necessarily mean great wealth. Rather, it’s a state of mind where you never worry about the paying the next bill.
The advice I give in this book can’t make you wealthy overnight. But you can achieve financial independence in as little as a year or two, and you can generate more than $1 million in profits in 10 to 20 years with just one modest rental property (faster with two or a higher-priced property).
I hope so.
That’s the first sign of a wise investor.
The second sign is courage.
If you are the type of person who always plays it safe, you likely will not make a good investor. Risk is an element of all entrepreneurial ventures.
But investing in rental real estate is far less risky than the stock market and far more profitable. In fact, the average mortgaged short-term rental home in the United States produces six times more profits than the stock market, and a long-term rental produces three times more. And since 1950, the stock market has lost 20 percent or more of its value a dozen times, compared to only once for housing values.
A third sign that you are a good candidate to be an active real estate investor is a willingness to roll up your sleeves and do a little work. Passive investments like the stock market require little effort. Executives who sit at desks all day love the stock market (at least when its value is going up).
A rental property requires a little more of your time. But I spend no more than 15 hours a week (often less) on both of my rental properties. The biggest part of my job is cleaning between guests at my short-term rental home. Of course, you can hire someone to do that, but when you do it yourself, you know it’ll be done right, and there are big rewards for doing that. As of this writing, all 55 of the reviews I’ve received from Airbnb guests are 5 star.
For my efforts, I estimate that I earn about $62 an hour. If I were working full time, I would be earning a annual salary of $124,800. But unlike salaried workers, I pay no federal income tax on my rental income, and so I save about $30,000 in taxes (federal income tax, social security, and medicare), which means I actually earn about $74 an hour.
The purpose of this book is to help you obtain your first rental house or convert your current home and achieve financial freedom. It’s not as difficult as you might think.
If you already own a property, whether it’s mortgaged or not, you’re job is easy. All you need to do is find other living arrangements for at least six months. You can stay with a friend or family member, or, if you have the resources, rent a cheaper place. After that, you can use the income on your rental property to obtain another mortgage, such as a DSCR loan, to purchase another home for yourself or another rental. That’s what I did.
If you don’t own a property but have a steady income, a fair credit rating and not too much debt, you likely can qualify for a conventional mortgage loan or even a low-interest, low-down-payment mortgage loan through the Federal Housing Administration (FHA), the Veteran’s Administration (VA), or other government backed loan programs. Most require you to live in the house for at least a year, but after that you can rent it out.
Or you can forego real estate investing altogether and spend the rest of your life working for someone else. (Okay, maybe that isn’t as bad as I just implied.)
Either way, it can’t hurt to learn more about investing in rental properties, even if you don’t buy one. This knowledge can help you make better decisions when you buy a home for personal use as well.
So I hope you’ll join me in this learning process, and, please, don’t hesitate to contact me through my website (DrDavidDemers.com). I will respond to your messages.