The impact of real estate allocation on investors’ ability to generate real income

IF 2.1 Q2 URBAN STUDIES

Journal of Property Research Pub Date : 2021-08-26 DOI:10.1080/09599916.2021.1968017

Randy I. Anderson, Eli Beracha, Spencer Propper

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Abstract

ABSTRACT Endowments, wealthy families and retired individuals are often concerned, first and foremost, about preserving their wealth or avoiding the possibility of depleted funds during their lifetime. This paper examines the extent to which a variety of real estate asset types, in addition to a traditional stocks and bonds allocation, can help preserve wealth or avoid a financial shortfall event subject to periodic withdrawals over an extended time period. Using a Monte Carlo Simulation technique, we analyse the resiliency of eight different real estate investment vehicles as a rule of thumb of a 4% annual withdrawal. Our results show that some – in most cases meaningful – portfolio allocation to each of these investment vehicles reduces the chance of a financial shortfall over long-term horizons of 30 or 50 years. Similarly, when wealth preservation is desired, allocation to each of these investment vehicles increases investors’ wealth preservation probability. Overall, it appears that equity REITs provide the greatest benefit to the portfolio compared with other real estate investment vehicles. These findings support portfolio allocation into real estate vehicles for investors that seek to preserve wealth or avoid financial ruin.

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房地产配置对投资者产生实际收入能力的影响

摘要捐赠、富裕家庭和退休人员通常首先关心的是保护他们的财富或避免他们一生中资金耗尽的可能性。本文研究了除了传统的股票和债券配置外，各种房地产资产类型在多大程度上有助于保存财富或避免长期定期提款的财务短缺事件。使用蒙特卡罗模拟技术，我们分析了八种不同房地产投资工具的弹性，作为每年4%提款的经验法则。我们的研究结果表明，在大多数情况下，对这些投资工具中的每一种进行一些有意义的投资组合分配，可以降低30年或50年内出现资金短缺的可能性。同样，当需要财富保值时，对每一种投资工具的配置都会增加投资者的财富保值概率。总体而言，与其他房地产投资工具相比，股权REITs似乎为投资组合带来了最大的利益。这些发现支持投资者将投资组合配置到房地产工具中，以保护财富或避免金融崩溃。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Property Research URBAN STUDIES-

CiteScore

3.80

自引率

5.30%

发文量

期刊介绍： The Journal of Property Research is an international journal. The title reflects the expansion of research, particularly applied research, into property investment and development. The Journal of Property Research publishes papers in any area of real estate investment and development. These may be theoretical, empirical, case studies or critical literature surveys.