pr, I haven’t seen studies with all of these factors included. I’m sure Jeremy Grantham has a bunch of them stored away in some folder on one of his servers at GMO that we’ll never see.
To get back to this 1.36% number for a second, the other issue is that this is a REAL annualized increase in property prices. If you add in inflation, that number becomes more like 4% (or more). So, if you lever 5 to 1, borrow at 7%, come anywhere close to breaking even on a cash flow basis, and your asset value increases at 4%/year, that’s a 20% return on equity. Assume some friction and you’re down to 15%. That doesn’t seem too bad to me. Now, you gotta buy the property right, of course, which you haven’t been able to do here in SD for five years or so. But I think you see my point. In a “normal” market, real estate can be a reasonably high return, moderate risk investment. It just hasn’t been that way in SoCal for several years now. But I suspect those days will return within a few years.
