When it comes to smart investing and diversification, vacation home rentals offer a great way to beat Wall Street with income producing investments that are both safe and conservative. Nearly 10 years after the major recession of 2008, investors are left hoping they don’t ever have to endure another hit comparable to that, or worse, but there is always an inherent volatility that comes with the stock market that is simply not present in real estate investing.
“Real estate is something that you can physically touch and feel – it’s a tangible good”, wrote Investopedia. “For many decades, this investment has generated consistent wealth and long-term appreciation for millions of people”.
Real Estate Investing vs. Stocks
For starters, let’s do a quick rundown of exactly why real estate investment outperforms the stock market over time, despite what your investment advisor might say. It’s really quite simple: If you look at the average annualized long-term expected return on investment from the Dow Jones or S&P 500, the best-case scenario right now hovers between 4-10%, depending on whether or not inflation is factored into the equation.
Between 2005 and 2015, the Dow Jones Industrial Average (DJIA) had an actual return of just 4.61%, while the S&P 500 came in at 4.71% annual profit. If you look back 20 years instead and evaluate the period between 1987 and 2012, the DJIA only delivered mediocre growth of 7.55% - before inflation – and the compounded annual return for the Dow during the 91-year period of its existence before 1987? Right around 4.3%. The S&P 500 wasn’t much better, averaging around 10% returns over 20 years – again without factoring inflation into the equation – so the “real” return on investment is actually much lower.
Now, if you compare that to real estate investing – which provides a natural hedge against the negative effects of inflation – you will see steady returns of 10% or higher between 2005 and 2015. Also, compounding the 10% returns from real estate investing versus other investment options provides the added benefit of 50% more income.
What’s more, today’s vacation home rentals are functioning as income producing investments and producing annual returns of 8-14% in top vacation destinations like Mexico’s Riviera Maya. Not only does this type of alternative investment provide excellent return on investment and a hedge against inflation, but owners also get the added benefit of having a luxurious place to get away from it all that can be enjoyed by family and friends. What other investment can do that?
Have you seen great returns in your investment accounts? Let us know in the comments below!
Are you ready to learn more about making money with real estate investing? Click the link below to download our free guide 8 Secrets Why Real Estate is Better for your Retirement than Conventional Investments!