Residential Real Estate Investments and Investor Characteristics

Walter D’Lima () and Paul Schultz ()
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Walter D’Lima: Old Dominion University
Paul Schultz: University of Notre Dame

The Journal of Real Estate Finance and Economics, 2021, vol. 63, issue 3, No 2, 354-393

Abstract: Abstract We investigate the returns to individuals who invested in residential real estate over 1999–2015. Using purchase and sales prices, we measure returns on properties that were both bought and sold by an investor using annualized price appreciation. We find that investors outperform market indices. Real estate investors earn larger returns if they live near the investment property, buy without a mortgage, and have experience in real estate investing. These characteristics are associated with investors paying less, as a percentage of the assessed value, for the property. Investors earn smaller returns on houses that they live in than on other property. Since appreciation reflects expenditures on improvements, we study land and mobile home investments where returns are less likely to be affected by improvements and document similar results. Overall, we highlight the risk and returns of residential real estate investments by retail investors. In addition, this paper sheds light on the role of investors in the residential market.

Keywords: Real estate investors; Residential market; Characteristics; Investments; R0; R2 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11146-020-09771-8

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