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Investment rating for real estate
An investment rating of a real estate property measures the property’s risk-adjusted returns, relative to a completely risk-free asset. Mathematically, a property’s investment rating is the return a risk-free asset would have to yield to be termed as good an investment as the property whose rating is being calculated. The underlying drivers for property ratings are the dividends (net operating income) and capital gains over a certain holding period, and their associated risks or variances. Similar to other financial ratings developed for mutual funds and stocks, it can be assumed that investors have constant relative risk aversion over the wealth derived from other sources and from their investments. For simplicity, it can also be assumed that the investment return is not correlated with other sources of wealth but represents 100% of the investor's wealth. A property’s investment rating is then a transformation of the risk-adjusted averaged return to a single number that conveys the property’s long-term potential to yield profits.
==Home as an investment asset==
Adam Smith wrote in The Wealth of Nations over 200 years ago that "a dwelling-house, as such, contributes nothing to the revenue of its inhabitants". The (Economist ) has reported that most Americans were treating their homes as an investment till 2008. The traditional belief that home ownership is a necessary milestone to acquiring wealth still holds. Not everyone considers their home as a long-term Property investment asset (); some believe they can get better returns in other assets (). By owning a home to live in, the owner not only saves on rent but also benefits from any long-term price appreciation. And investors, those that buy a home to rent out, are in it primarily for financial gains, be it monthly cash flow income, long-term gain, or a combination of both. But, investors and live-in home owners alike should care for the net returns a home can yield, since it is, for most, the single largest investment they will ever make.
抄文引用元・出典: フリー百科事典『 ウィキペディア（Wikipedia）』
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