I wonder if this analysis takes into account investment expenses. Close to nil for equities but potentially quite large for real estate.
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We have an economy bloated with rents
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You are going to want to read the original paper cited here (from 2017). Data varies by country quite a bit. But combining implied rent w/ capital gains very interesting. Seems to conflict w/ other historical estimates though. https://www.frbsf.org/economic-research/files/wp2017-25.pdf …
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Also worth considering is that real estate investors tend to buy in their home market, whereas equity investors would find it silly to only buy stock of companies based in their hometown. Diversification of RE is harder but doable and in my opinion necessary to get these returns
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Rates on land are 2 or 3 times higher. When owners have a mortgage with 20% down, then the levered rate is another 5 times higher. Also, real estate usually pays huge dividends, which are never counted, whereas S&P returns assume you plow dividends back into the stock market.
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This would actually be a good society for you to write about. I haven't seen anyone investigate this issue well
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This ignores how debt (leverage) on real estate increases returns (tremendously). If $1 Mil RE investment (house, apt bldg, etc) goes up 10% a year (to 1.1 Mil) is financed with 80% debt (mortgage), it's a *50%* gain for investor/homeowner. It's 100% gain if 90% debt! Woo, woo!
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