Contrary Investing... "Despite the proliferation of actively managed real estate funds and claims of superior 'targeting' ability, evidence that real estate managers can pick 'winners' and 'losers' is largely non-existent."

That’s a quote from David Ling's A Random Walk Down Main Street: Can Experts Predict Returns on Institutional Quality Commercial Real Estate?, a forthcoming paper in the Journal of Real Estate Research.

Of course, lots of evidence points to the difficulty of trying to "beat" the stock market -- hence, the popularity of index funds. Could the same thing be true for real estate?

Ling, a professor of real estate at the University of Florida ("Go Gators"), used Real Estate Research Corporation's quarterly Investment Survey as a proxy for conventional wisdom (my words) and examined predicted "returns for nine property types and 15 to 19 metropolitan markets over a 13-year sample period."

He then compared these predictions "to actual returns earned by institutional investors in these property types and metropolitan areas as measured by the National Council of Real Estate Investment Fiduciaries (NCREIF).

As Ling bluntly concludes, "we find no evidence that the consensus opinions on investment conditions ... are useful in forecasting subsequent performance. In fact, contrarian investment strategies are at least as likely to produce superior returns..."

So how smart are you? Is real estate investing different than stock market investing? Do you think that you can you "beat" the real estate market?

Spread the Word... Many thanks to Mark McLaughlin at McLaughlin Ventures for sponsoring this week's Dispatch. If you would like to tell Dispatch readers about your services, call me at 415-461-4703 or send e-mail. Only seven more sponsorships are available this year.

--Peter Pike