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Portfolio > Alternative Investments > Real Estate

What’s Best Investment Since 2000? Most Americans Guessed Wrong

By Michael S. Fischer

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The American public is generally unaware of the potential of real estate investing, still a real estate investing resurgence may be in the offing, according to a new survey, released Thursday.

Harris Poll conducted an online survey in mid-March among 2,198 U.S. adults on behalf of RealtyShares, an online marketplace for real estate investing.

The survey found that 40% of respondents were unsure what type of investment had performed the best since 2000.

(Related: Top 10 Cities for Millennial Homebuyers)

Asked to choose among stocks, real estate, commodities, bonds, cash equivalents such as oil, gold and cotton, and other, 25% thought that stocks had been the top-performing asset class since 2000, while 16% said it had been real estate.

Nine percent believed commodities had performed the best, 6% said cash equivalents and 3% picked bonds as the best performer.

RealtyShares said respondents’ perception had likely been fueled by the conditions around the recent economic recession, giving stocks the edge when the results had historically been mixed.

In the period Dec. 31, 2000, to Dec. 30, 2016, real estate outperformed the stock market approximately 2:1, returning 10.71% annually compared with the S&P 500 Index’s 5.43% annual total return.

It noted that although the S&P more recently had had the advantage, both markets had recovered well: the S&P’s annual return, end-2010 to end-2016, was 12.65% compared with an 11.37% annual return for real estate.

“Real estate returns have kept pace with or even exceeded certain investment options in the past and, yet, 85% of Americans aren’t taking advantage of the opportunity to invest in this asset class,” RealtyShares chief executive Nav Athwal said in a statement.

“Risks are inherent with all investments, so diversification is important for any investor’s portfolio. That the majority of Americans haven’t tapped into real estate can speak to the lack of access that has been inherent in the industry for a long time.”

Strong Appetite

The poll found that 48% of respondents would be more likely to invest in real estate if technology were available to make the process easier. Among millennials, that number rises to 63%.

RealtyShares said a common way for Americans to start investing in real estate was to invest or participate in a home flip, taking on the challenges of the residential market.

“Residential real estate as an asset class is a $29 trillion market, and the commercial sector adds another $10 trillion,” Athwal said.

One commercial real estate investor recently laid out four criteria for evaluating REIT opportunities.

According to the survey:

  • 68% of female respondents and 64% of males agreed that flipping a home was a good way to make money
  • Men were much likelier than women to think they would be able to complete a home flip
  • 77% of respondents 35 to 44 thought that home flipping was a good way to make money, compared with 60% of those 45 and older

However, several perceived barriers stand in the way of real estate investing for a majority of respondents, according to the poll results.

Seventy percent of the sample thought investing in real estate was more difficult than investing in other asset classes. At the same time, a majority of those 18 to 44 claimed they would be more likely to invest in real estate with facilitating technology.

In addition, some 70% of respondents said they were less likely to invest because it required more money than other investment options.

And respondents saw even house flipping as a more specialized investment choice, one that was impenetrable to those new to real estate. Only 38% believed they would have the necessary funding, skills and network needed to buy and fix up a home to resell.

“Over the last ten years, we’ve seen an application of technology to real estate to make it easier for homebuyers to research properties, and open up real estate investing to a much wider audience,” Athwal said.

He said the next wave of tech companies could make it easier for someone to raise capital, get a loan or efficiently put that capital to work as part of a larger investment portfolio.

“Our vision is to continue closing the gap between the way people invest in the stock market and the real estate market.”

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