the morgan stanley charts revealed - oh dear, page-67

You end up with an asset that you overpaid for that is giving sub par returns.

You seem to think that if the earnings pay for the asset it must have been a good investment.

If I take $1M out of term deposit to buy a house, without capital gain my pre tax gross return would be $40K (and that's being generous).

I have lost the pre tax $60K interest from the fixed deposit.

Take away:
- insurance
- repairs
- letting costs
- tax
- stamp duty
- conveyancing
- agents fees

from my gross rental yield you are getting less than inflation i.e. a real loss, going backwards.

That's why "the real return on residential property over the next decade is likely to be negative".

Of course you could argue that you do better than the market but 1) I don't think you can and 2) that's not the scenario we are discussing.

btw there are million dollar houses in my area returning gross rental yield of a lot less than $40K pa.