Real Estate Investing Returns (Simply) Explained
00:00:00.000 | what kind of returns do you think people can expect in their real estate investing?
00:00:04.080 | So let's say that we assume that real estate is going to appreciate at an average of 3.4% per
00:00:08.960 | year. And if you lever that 5 to 1, at least in the early years, you're going to get an
00:00:13.600 | appreciation rate that multiplies 3.4 times 5. You're going to be amortizing your debt during
00:00:18.480 | that debt service on that for the 80% of the value that is levered. And then you're going to
00:00:22.800 | hopefully be producing some cash flow as well. Over the 30 year period, you're slowly deleveraging,
00:00:27.600 | assuming things go reasonably well, right? You're paying down the loan,
00:00:30.720 | the property is appreciating, so your equity balance grows. And once it's paid off,
00:00:34.800 | now you're getting the unlevered real estate return of like 3.4% plus maybe a 4% to 5% cap
00:00:40.400 | rate. You're probably looking at a 7.5% to 8.5% unlevered return at the end of that whole period,
00:00:45.440 | once you've paid off the debt, and you're looking at more than that in the early parts of it.