A Special Kind of Real Estate

Rick wants to know how Dave feels about putting money into real estate shares in the stock market. Dave doesn't think they have a good rate of return.

QUESTION: Rick in Lincoln wants to know how Dave feels about putting money into real estate shares in the stock market. Dave doesn’t think they have a good rate of return.

ANSWER: I haven’t found any of those that have great track records. Most of them are sub-10 on their rates of return. If you find one that’s paying 7%, that’s not enough. It has to do with rents that are collected and the fees that are charged by the operating partners and so forth.

I think that’s been the problem, because real estate has returns of more than 7%, so somebody’s making money off of this. That’s why I’ve never been a big fan of them. What I have done instead is, if it’s money I’m willing to take a little risk with while I’m piling it up, I just go to balance funds and growth and income funds. They are more stable, and even on their worst day they’ll return more than what this will return.

I haven’t done detailed research on a certain growth and income fund over the last three years versus an investment like this over the last three years. This is not a research, sophisticated answer. This is what I have done personally. I’m not a big fan of the investment you’re talking about. I haven’t done them. If you want to put it in there and can see some stability in there, that’s certainly better than a money market. The money markets just suck for parking money.

I don’t disagree with you hunting an alternative. It’s just that overall I haven’t been a fan of this investment, so I haven’t done it. If you’ve done some good research, or if you are parking some money for two to five years while you are piling it up to buy some more property, it might be okay.

But in general, I’m probably going to lean more toward a balanced or a growth and income fund.