As we discussed in the previous blog, income properties can be excellent long-term investments thanks to their unique characteristics:
- Reduced volatility
- Returns comprising both immediate income and long-term capital gains
- Limited risk
- No operational requirements
- No need for active management
These characteristics beat most assets available in financial markets for investors with a 5/10-year perspective, such as stocks, stock ETFs, stock funds, bonds, bond ETFs, bond funds, mixed funds, commodities, Bitcoin, cryptocurrencies, and cryptocurrency ETFs. Income properties, as long-term investments, also outperform traditional safe havens like gold, platinum, silver, strong currencies, artworks, luxury watches, fine wines, etc., because they offer a gain independent of their potential appreciation, thus safeguarding against depreciation risk.
In the previous article, we didn’t delve into the specifics of capital gains, merely mentioning that “selling the property after 5/10 years often yields a gain comparable to the immediate income multiplied by the years of ownership”.
Duration, Values, Capital Gains, and Annual Effective Capital Gain of Opisas Clients
| Capital gain refers to the positive difference between the purchase price of an asset and its selling price. Capital Gain = Selling Price – Purchase Price If this difference is negative, it’s termed as a loss. |
It should be noted that no income is guaranteed, and capital gains depend on market conditions at the time of purchase and sale. Here, we provide some examples and data extracted from over 40 cases of Opisas clients who have sold their properties in the last 3 years.
| Example 1 The property at 1081 S. Hiawassee Rd #727 in Orlando, Florida. Purchased for $105,000 (77.67 mq) in April 2016 and sold for $166,500 in February 2022 (5.8 years), resulting in a capital gain of $61,500 (58.57%), $10,588.44/year (10.08%/year). |
The average investment duration, meaning the time between purchase and sale, was 5.1 years, ranging from a minimum of 115 days to nearly 11 years. The vast majority of Opisas clients fall within the 4 to 7-year range, aligning perfectly with the idea of long-term investment.
| Example 2 The property at 3957 Pensdale Dr in New Port Richey, Florida. Purchased for $138,000 (84.73 mq) in December 2018 and sold for $180,000 in April 2023 (4.3 years), resulting in a capital gain of $42,000 (30.43%), $9,795.53/year (7.10%/year). |
The average purchase value was $88,684.91, while the average selling value was $132,165.22, resulting in an average capital gain of $43,480.31, representing a +52.07% increase compared to the initial investment. The median annual capital gain stands at 10.32%. From this perspective, the majority of Opisas clients fall within the 8% to 12% range, a capital gain comparable to the immediate net income offered by properties currently available on the website, typically ranging from 8% to 10%. Remember that for a real estate investor the immediate net income and capital again add up.
| Example 3 The property at 17584 Patton St in Detroit, Michigan. Purchased for $78,000 (120.78 mq) in March 2020 and sold for $101,000 in October 2023 (3.6 years), resulting in a capital gain of $23,000 (29.49%), $6,384.03/year (8.18%/year). |
The state with the highest number of purchases and sales is Florida, with Orlando leading the list.
Make your long-term investments with Opisas
To learn more about immediate income, expected capital gains, and long-term investments currently available in the US real estate market, email contact@opisas.com and schedule an appointment with a consultant fluent in your language.
