more rentals or etfs?

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sharp1aarohead
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more rentals or etfs?

Post by sharp1aarohead » Thu Jul 30, 2020 7:07 am

Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...I have hustled to make more money flipping real estate and purchasing rentals so I'm at a place where I'm really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market. If you can leave aside the whole " I don't want to stress/clogged toilets/etc" with real estate, where have experienced folks found their sweet spot in how much to invest in the market versus real estate? Would love to hear some advice!

lakpr
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Re: more rentals or etfs?

Post by lakpr » Thu Jul 30, 2020 8:05 am

With the Covid-19 situation and the government decree'ing that landlords cannot evict tenants for non-payment of rent -- it's high time that you diversify your income away from rentals. Hands down, choose broad-market ETFs. That's not even a no-brainer.

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Silly Wabbit
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Re: more rentals or etfs?

Post by Silly Wabbit » Thu Jul 30, 2020 8:38 am

I'd look to triple your liquid assets, e.g. ETFs. It'll give you flexibility to take future deals and avoid short term cash crunches. After that, maintaining liquid assets at around 1/3 of your networth seems fine to me if you want to keep hustling.

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AerialWombat
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Re: more rentals or etfs?

Post by AerialWombat » Thu Jul 30, 2020 8:40 am

sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...I have hustled to make more money flipping real estate and purchasing rentals so I'm at a place where I'm really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market. If you can leave aside the whole " I don't want to stress/clogged toilets/etc" with real estate, where have experienced folks found their sweet spot in how much to invest in the market versus real estate? Would love to hear some advice!
If the 65k at Vanguard represents your entire securities nest egg, then I would highly encourage growing that over real estate.

I own multiple rentals across multiple states. Real estate is the core of my retirement plan. However, I aim for a 1:1 ratio between real estate equity and cash/securities.

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sharp1aarohead
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Re: more rentals or etfs?

Post by sharp1aarohead » Thu Jul 30, 2020 6:06 pm

lakpr wrote:
Thu Jul 30, 2020 8:05 am
With the Covid-19 situation and the government decree'ing that landlords cannot evict tenants for non-payment of rent -- it's high time that you diversify your income away from rentals. Hands down, choose broad-market ETFs. That's not even a no-brainer.
No braineR? I suppose it's all perspective. The last rental I bought for example tied up my cash for a few months but then I refinanced to get back all of the money I initially invested. The result is that now I have a house that essentially cost me zero dollars and I CREATED 30,000 in equity by doing a few renovations...so that's why I keep sticking to real estate...the returns are just so quick, and they start kicking off 200-300 each month in rental income...you are right about the COVID thing. I have one of my seven tenants who missed one payment...not bad in the grand scheme of things really. Do you own any rentals?

lakpr
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Re: more rentals or etfs?

Post by lakpr » Thu Jul 30, 2020 6:20 pm

sharp1aarohead wrote:
Thu Jul 30, 2020 6:06 pm
Do you own any rentals?
I see you are offended; but if you take the emotion out of it, you see that I answered your specific question. You asked the question if you should be diversified in your income. You should.

What if I reframe your question in your previous post as "I bought Apple in 2003 and owned it since, it has done so well beating the stock market hands down; are you a stock picker?"

I admit I am not a stock picker, that's why I stick to broad market indices. Same response, therefore, to your question. You may have been successful in buying a few rentals and may have made out like a bandit. No matter ... you should diversify your wealth. Right now it is concentrated in real-estate and concentrated on just seven specific pieces of real-estate. Get rid of the concentration risk.

PS: feel free to ignore me, I have not gotten off the wrong side of the bed today, I have not set out to offend you. If I unintentionally offended you, my apologies. My last post on this thread.

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Re: more rentals or etfs?

Post by flaccidsteele » Thu Jul 30, 2020 7:13 pm

sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...I have hustled to make more money flipping real estate and purchasing rentals so I'm at a place where I'm really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market. If you can leave aside the whole " I don't want to stress/clogged toilets/etc" with real estate, where have experienced folks found their sweet spot in how much to invest in the market versus real estate? Would love to hear some advice!
Do what you love and what you’re good at

There’s no “slowing down”. You’re either growing or you’re dying

Sounds like your best bet is to continue with real estate

I wouldn’t take advice from people who have no experience investing in the 2 asset classes that you’re asking about
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

bighatnohorse
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Re: more rentals or etfs?

Post by bighatnohorse » Thu Jul 30, 2020 7:21 pm

Diversify - it's always a safe bet if your assets are sufficient.
However, if you find that real estate is your forte, then keep at it but don't neglect other opportunities.

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Re: more rentals or etfs?

Post by abuss368 » Thu Jul 30, 2020 9:05 pm

I would consider at least building up your cash and investments (i.e. increase liquidity).

Have you considered investing in US REITs such as Vanguard's fund?
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: more rentals or etfs?

Post by abuss368 » Thu Jul 30, 2020 9:06 pm

I had a friend of the family that retired early with a ton of REITs (including in a taxable account). The cash flows from dividends let him retire happy and has worked well for over 20 years.

Makes me think!
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

denovo
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Re: more rentals or etfs?

Post by denovo » Thu Jul 30, 2020 9:09 pm

sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...I have hustled to make more money flipping real estate and purchasing rentals so I'm at a place where I'm really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market. If you can leave aside the whole " I don't want to stress/clogged toilets/etc" with real estate, where have experienced folks found their sweet spot in how much to invest in the market versus real estate? Would love to hear some advice!
Do you max out your 401k, start there.
"Don't trust everything you read on the Internet"- Abraham Lincoln

flaccidsteele
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Re: more rentals or etfs?

Post by flaccidsteele » Thu Jul 30, 2020 10:50 pm

Cash flowing real estate > REITs

REIT is not real estate. It’s paper

Dividends taxed as ordinary income

No depreciation

No cash out refi/HELOC/blanket

No 1031

Not even close

OP Don’t listen to people who haven’t been successful owning both rental real estate and stocks
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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unclescrooge
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Re: more rentals or etfs?

Post by unclescrooge » Thu Jul 30, 2020 11:14 pm

AerialWombat wrote:
Thu Jul 30, 2020 8:40 am

I own multiple rentals across multiple states. Real estate is the core of my retirement plan. However, I aim for a 1:1 ratio between real estate equity and cash/securities.
Sage advice.

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AerialWombat
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Re: more rentals or etfs?

Post by AerialWombat » Thu Jul 30, 2020 11:26 pm

unclescrooge wrote:
Thu Jul 30, 2020 11:14 pm
AerialWombat wrote:
Thu Jul 30, 2020 8:40 am

I own multiple rentals across multiple states. Real estate is the core of my retirement plan. However, I aim for a 1:1 ratio between real estate equity and cash/securities.
Sage advice.
It’s just my version of “I dunno know which will do better, so 50/50 it be.”

annu
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Re: more rentals or etfs?

Post by annu » Thu Jul 30, 2020 11:35 pm

I also like Real Estate, more than ETF/MF/Vanguard :twisted:

But what I dont like is leverage or overleveraging, just like it is bad idea to invest in leverage ETFs, real over doing it is recipe for bad times as well.
Even if I do not get rent for 6 months, I will be fine, infact can manage upto a year for the property I own.

Besides leveraging concerns, investing in something that you understand more(looks like you do understand Real Estate quite well), is not a bad idea.
Folks here either had the worst experiences or heard about them, and it is first thing that is mentioned.

I am personally looking into buying Commercial for first time in life, as have access to a good deal, and plan to do that instead of Stocks, as I feel more I am more interested in that over stocks.

CurlyDave
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Re: more rentals or etfs?

Post by CurlyDave » Fri Jul 31, 2020 1:01 am

lakpr wrote:
Thu Jul 30, 2020 8:05 am
With the Covid-19 situation and the government decree'ing that landlords cannot evict tenants for non-payment of rent -- it's high time that you diversify your income away from rentals. Hands down, choose broad-market ETFs. That's not even a no-brainer.
My thinking is that now is the time to buy rentals. The factors you describe have caused prices to fall. Mortgage raters are at historic lows.

Buy low, sell high.

CurlyDave
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Re: more rentals or etfs?

Post by CurlyDave » Fri Jul 31, 2020 1:03 am

sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...I have hustled to make more money flipping real estate and purchasing rentals so I'm at a place where I'm really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market. If you can leave aside the whole " I don't want to stress/clogged toilets/etc" with real estate, where have experienced folks found their sweet spot in how much to invest in the market versus real estate? Would love to hear some advice!
To me, the sweet spot is somewhere near 50/50. Equities vs. Total RE value (not counting mortgages.)

Topic Author
sharp1aarohead
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Re: more rentals or etfs?

Post by sharp1aarohead » Fri Jul 31, 2020 3:37 am

lakpr wrote:
Thu Jul 30, 2020 6:20 pm
sharp1aarohead wrote:
Thu Jul 30, 2020 6:06 pm
Do you own any rentals?
I see you are offended; but if you take the emotion out of it, you see that I answered your specific question. You asked the question if you should be diversified in your income. You should.

What if I reframe your question in your previous post as "I bought Apple in 2003 and owned it since, it has done so well beating the stock market hands down; are you a stock picker?"

I admit I am not a stock picker, that's why I stick to broad market indices. Same response, therefore, to your question. You may have been successful in buying a few rentals and may have made out like a bandit. No matter ... you should diversify your wealth. Right now it is concentrated in real-estate and concentrated on just seven specific pieces of real-estate. Get rid of the concentration risk.

PS: feel free to ignore me, I have not gotten off the wrong side of the bed today, I have not set out to offend you. If I unintentionally offended you, my apologies. My last post on this thread.
Oops! After responding, I wondered if you might think I was offended. I'm not - sorry if that question made it look like I was being snarky. I genuinely wanted to know if you had any so I could better understand your perspective. And I think I know deep down I need to diversity but I just haven't done a good job at it.

Topic Author
sharp1aarohead
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Re: more rentals or etfs?

Post by sharp1aarohead » Fri Jul 31, 2020 7:13 am

denovo wrote:
Thu Jul 30, 2020 9:09 pm
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...I have hustled to make more money flipping real estate and purchasing rentals so I'm at a place where I'm really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market. If you can leave aside the whole " I don't want to stress/clogged toilets/etc" with real estate, where have experienced folks found their sweet spot in how much to invest in the market versus real estate? Would love to hear some advice!
Do you max out your 401k, start there.
I live overseas, so currently I'm not able to do a 401k. I do have an employer match program where I put approximately 600 a month with 600 matched. I also contribute the following
800 to VTSAX
400 to VBTLX
400 to VTIAX
300 each to two 529s.

So, I feel like I'm "filling the buckets" now so to speak, but I see my real estate portfolio growing faster and I just struggle with how to make a plan (one that I can stick to lol) for how to allocate my income...I do like the suggestion of a 1:1 ratio and might put some thought into that.

Maybe this is a better question. I think the reason I'm struggling with this is that recently I had a paradigm shift...I was always thinking about a target number in savings that I needed to retire whereas lately I've been thinking that it's sort of irrelevant if I pay off my properties and have 60k a year coming from them (something I think I can do in 5 years). So maybe that's the better question...how do folks balance building revenue streams versus simply squirreling away cash?

flaccidsteele
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Re: more rentals or etfs?

Post by flaccidsteele » Fri Jul 31, 2020 7:43 am

sharp1aarohead wrote:
Fri Jul 31, 2020 7:13 am
So maybe that's the better question...how do folks balance building revenue streams versus simply squirreling away cash?
Depends on the opportunity in front of me. Which is better and which I’m best able to take advantage of
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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unclescrooge
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Re: more rentals or etfs?

Post by unclescrooge » Fri Jul 31, 2020 10:53 am

AerialWombat wrote:
Thu Jul 30, 2020 11:26 pm
unclescrooge wrote:
Thu Jul 30, 2020 11:14 pm
AerialWombat wrote:
Thu Jul 30, 2020 8:40 am

I own multiple rentals across multiple states. Real estate is the core of my retirement plan. However, I aim for a 1:1 ratio between real estate equity and cash/securities.
Sage advice.
It’s just my version of “I dunno know which will do better, so 50/50 it be.”
How do calculate the real estate side? If you buy a $100k house with $50k equity, do you consider the real estate bucket to be worth $100k or $50K?

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Toons
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Re: more rentals or etfs?

Post by Toons » Fri Jul 31, 2020 10:58 am

Personally
Real Estate...hammers,nails,headaches,time consuming
Prefer Index Funds
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Meg77
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Re: more rentals or etfs?

Post by Meg77 » Fri Jul 31, 2020 11:26 am

sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...
This definitely appears on the surface to be a bit too much of a real estate heavy asset allocation. That said, many would argue RE shouldn't be considered part of your asset allocation since you can't exactly rebalance RE holdings (though once your portfolio is large enough that's not entirely true, especially if you're investing passively into partnerships).

Personally my AA is currently 3% cash, 5.5% bonds, 45% real estate (73% is 1-4 family rentals I own directly, 27% is syndications of apartment buildings), and 47% stocks (80% domestic, 20% international). Basically I invest in RE instead of fixed income. I like to try to keep equities at or around 50% of my assets though.
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
I have hustled to make more money flipping real estate and purchasing rentals
This is an important distinction. It makes it sound as if you are actively investing in RE and moving in and out of deals. In my view that is more of the "how you make money" activity, not the "how you invest over the long term" decision. It's a blurry distinction of course, especially if you are just starting out, but it may explain why you are
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market.
You can always make money flipping properties and then squirrel away part of every sale into a Roth IRA, for example, rather than putting ALL the proceeds into the next deal. The problem with RE is that investors tend to keep betting bigger with every successful deal, particularly when tempted by a 1031 exchange that requires it. But then inevitably a deal will go wrong - and then ALL the previous successes are tied up in it. So I would just try to avoid that trap. Buy and hold at least some properties. Or take some money off the table when you sell if you don't - or at least diversify the proceeds into more than one newer deal.

You asked for personal stories, so I'll offer mine. I have always tried to split the difference. I did the "right thing" since my first job by investing 10-15% or so of my earned income into Roth IRAs and 401ks (in all equities for the most part). I maintained an emergency fund. But then I started buying rentals. I never did anything fancy like a fix and flip; my goal was to hold for the long term which I've mostly done (I bought about 1 unit a year until I had 10, but I've sold 3 that underperformed over time). I put 20% down on all my RE purchases but one (I borrowed 100% from my mom for that to close quickly as it was a short sale). I got long term fixed financing on each. Not saying this is the only way, but I was/am not incredibly savvy or handy so took the conservative approach. Now I have a condo and 3 duplexes.

Along the way as my earned income rose, I contributed more to my retirement accounts too. Once I got married 6 years ago, I quit buying rentals directly but suddenly my new joint income/net worth made us accredited investors. So since then we've been investing periodically into real estate syndications to diversify but also reduce my hassle factor. In the last few years we managed to max out retirement AND start building after tax investment brokerage assets for the first time.

I'm at a crossroads too. I don't know whether to pay off cheap mortgage debt or buy another rental or invest in another syndication or just keep dumping money slowly into brokerage ETFs. I've thought of selling one rental with a lot of equity but little cash flow and paying off another...There's never a right answer and it's a great "problem" to have. I do appreciate having additional liquidity in this market and have extended my EF to more than 1 year. But that cash is starting to bug me to be put to better use.
"An investment in knowledge pays the best interest." - Benjamin Franklin

annu
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Re: more rentals or etfs?

Post by annu » Fri Jul 31, 2020 11:30 am

Meg77 wrote:
Fri Jul 31, 2020 11:26 am
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...
This definitely appears on the surface to be a bit too much of a real estate heavy asset allocation. That said, many would argue RE shouldn't be considered part of your asset allocation since you can't exactly rebalance RE holdings (though once your portfolio is large enough that's not entirely true, especially if you're investing passively into partnerships).

Personally my AA is currently 3% cash, 5.5% bonds, 45% real estate (73% is 1-4 family rentals I own directly, 27% is syndications of apartment buildings), and 47% stocks (80% domestic, 20% international). Basically I invest in RE instead of fixed income. I like to try to keep equities at or around 50% of my assets though.
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
I have hustled to make more money flipping real estate and purchasing rentals
This is an important distinction. It makes it sound as if you are actively investing in RE and moving in and out of deals. In my view that is more of the "how you make money" activity, not the "how you invest over the long term" decision. It's a blurry distinction of course, especially if you are just starting out, but it may explain why you are
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market.
You can always make money flipping properties and then squirrel away part of every sale into a Roth IRA, for example, rather than putting ALL the proceeds into the next deal. The problem with RE is that investors tend to keep betting bigger with every successful deal, particularly when tempted by a 1031 exchange that requires it. But then inevitably a deal will go wrong - and then ALL the previous successes are tied up in it. So I would just try to avoid that trap. Buy and hold at least some properties. Or take some money off the table when you sell if you don't - or at least diversify the proceeds into more than one newer deal.

You asked for personal stories, so I'll offer mine. I have always tried to split the difference. I did the "right thing" since my first job by investing 10-15% or so of my earned income into Roth IRAs and 401ks (in all equities for the most part). I maintained an emergency fund. But then I started buying rentals. I never did anything fancy like a fix and flip; my goal was to hold for the long term which I've mostly done (I bought about 1 unit a year until I had 10, but I've sold 3 that underperformed over time). I put 20% down on all my RE purchases but one (I borrowed 100% from my mom for that to close quickly as it was a short sale). I got long term fixed financing on each. Not saying this is the only way, but I was/am not incredibly savvy or handy so took the conservative approach. Now I have a condo and 3 duplexes.

Along the way as my earned income rose, I contributed more to my retirement accounts too. Once I got married 6 years ago, I quit buying rentals directly but suddenly my new joint income/net worth made us accredited investors. So since then we've been investing periodically into real estate syndications to diversify but also reduce my hassle factor. In the last few years we managed to max out retirement AND start building after tax investment brokerage assets for the first time.

I'm at a crossroads too. I don't know whether to pay off cheap mortgage debt or buy another rental or invest in another syndication or just keep dumping money slowly into brokerage ETFs. I've thought of selling one rental with a lot of equity but little cash flow and paying off another...There's never a right answer and it's a great "problem" to have. I do appreciate having additional liquidity in this market and have extended my EF to more than 1 year. But that cash is starting to bug me to be put to better use.
Mind sharing syndication path? Using some website or worming with a company directly?

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AerialWombat
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Re: more rentals or etfs?

Post by AerialWombat » Fri Jul 31, 2020 12:01 pm

unclescrooge wrote:
Fri Jul 31, 2020 10:53 am
AerialWombat wrote:
Thu Jul 30, 2020 11:26 pm
unclescrooge wrote:
Thu Jul 30, 2020 11:14 pm
AerialWombat wrote:
Thu Jul 30, 2020 8:40 am

I own multiple rentals across multiple states. Real estate is the core of my retirement plan. However, I aim for a 1:1 ratio between real estate equity and cash/securities.
Sage advice.
It’s just my version of “I dunno know which will do better, so 50/50 it be.”
How do calculate the real estate side? If you buy a $100k house with $50k equity, do you consider the real estate bucket to be worth $100k or $50K?
Net equity. Anticipated sale price if I were to sell today, minus mortgage payoff, minus costs of sale (which I overestimate as 8% of sale price to be conservative). So, in your example, I would estimate it to be $42,000 of net equity, not $50,000.

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Meg77
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Re: more rentals or etfs?

Post by Meg77 » Fri Aug 07, 2020 12:56 pm

annu wrote:
Fri Jul 31, 2020 11:30 am
Meg77 wrote:
Fri Jul 31, 2020 11:26 am
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...
This definitely appears on the surface to be a bit too much of a real estate heavy asset allocation. That said, many would argue RE shouldn't be considered part of your asset allocation since you can't exactly rebalance RE holdings (though once your portfolio is large enough that's not entirely true, especially if you're investing passively into partnerships).

Personally my AA is currently 3% cash, 5.5% bonds, 45% real estate (73% is 1-4 family rentals I own directly, 27% is syndications of apartment buildings), and 47% stocks (80% domestic, 20% international). Basically I invest in RE instead of fixed income. I like to try to keep equities at or around 50% of my assets though.
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
I have hustled to make more money flipping real estate and purchasing rentals
This is an important distinction. It makes it sound as if you are actively investing in RE and moving in and out of deals. In my view that is more of the "how you make money" activity, not the "how you invest over the long term" decision. It's a blurry distinction of course, especially if you are just starting out, but it may explain why you are
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market.
You can always make money flipping properties and then squirrel away part of every sale into a Roth IRA, for example, rather than putting ALL the proceeds into the next deal. The problem with RE is that investors tend to keep betting bigger with every successful deal, particularly when tempted by a 1031 exchange that requires it. But then inevitably a deal will go wrong - and then ALL the previous successes are tied up in it. So I would just try to avoid that trap. Buy and hold at least some properties. Or take some money off the table when you sell if you don't - or at least diversify the proceeds into more than one newer deal.

You asked for personal stories, so I'll offer mine. I have always tried to split the difference. I did the "right thing" since my first job by investing 10-15% or so of my earned income into Roth IRAs and 401ks (in all equities for the most part). I maintained an emergency fund. But then I started buying rentals. I never did anything fancy like a fix and flip; my goal was to hold for the long term which I've mostly done (I bought about 1 unit a year until I had 10, but I've sold 3 that underperformed over time). I put 20% down on all my RE purchases but one (I borrowed 100% from my mom for that to close quickly as it was a short sale). I got long term fixed financing on each. Not saying this is the only way, but I was/am not incredibly savvy or handy so took the conservative approach. Now I have a condo and 3 duplexes.

Along the way as my earned income rose, I contributed more to my retirement accounts too. Once I got married 6 years ago, I quit buying rentals directly but suddenly my new joint income/net worth made us accredited investors. So since then we've been investing periodically into real estate syndications to diversify but also reduce my hassle factor. In the last few years we managed to max out retirement AND start building after tax investment brokerage assets for the first time.

I'm at a crossroads too. I don't know whether to pay off cheap mortgage debt or buy another rental or invest in another syndication or just keep dumping money slowly into brokerage ETFs. I've thought of selling one rental with a lot of equity but little cash flow and paying off another...There's never a right answer and it's a great "problem" to have. I do appreciate having additional liquidity in this market and have extended my EF to more than 1 year. But that cash is starting to bug me to be put to better use.
Mind sharing syndication path? Using some website or worming with a company directly?
I have not used any of the crowdfunding websites that I've seen blogged about by some investors. I primarily have gone through one investor team that I've gotten to know over the years slowly (originally one of the guys happened to be my realtor on a small rental purchase; later he got a partner and started doing larger commercial deals). Later I met another investor through a colleague who was his private banker for many years. He primarily invests his own money and has family members who fund most of his deals, but he raises a small amount from outsiders as well on occasion.

A third one I've used though does have a website and is more open to the public, as far as I know. It's called Waypoint Residential. They used to sponsor my local FPA chapter so I met one of the reps there and ended up investing some personally (they market to independent financial advisors who can pool their clients' funds to meet the minimums). I've had good experience with them over the few years I've invested and put my mom in a couple of their deals as well. It's more conservative that the other two routes I've gone - they use fixed rate loans, buy or develop class A properties, max 60% leverage usually. But steady monthly distributions of 4-5% (prior to Covid), plus the annual K1s typically show a loss so it's a very tax advantaged "yield." https://www.waypointrei.com/
"An investment in knowledge pays the best interest." - Benjamin Franklin

annu
Posts: 741
Joined: Mon Nov 04, 2019 7:55 pm

Re: more rentals or etfs?

Post by annu » Fri Aug 07, 2020 5:29 pm

Meg77 wrote:
Fri Aug 07, 2020 12:56 pm
annu wrote:
Fri Jul 31, 2020 11:30 am
Meg77 wrote:
Fri Jul 31, 2020 11:26 am
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
Though a boglehead at heart, I do invest a disproportionate amount of money into real estate...currently I have around 65k in vanguard and own around 800,000 worth of real estate with around 275,000 equity...
This definitely appears on the surface to be a bit too much of a real estate heavy asset allocation. That said, many would argue RE shouldn't be considered part of your asset allocation since you can't exactly rebalance RE holdings (though once your portfolio is large enough that's not entirely true, especially if you're investing passively into partnerships).

Personally my AA is currently 3% cash, 5.5% bonds, 45% real estate (73% is 1-4 family rentals I own directly, 27% is syndications of apartment buildings), and 47% stocks (80% domestic, 20% international). Basically I invest in RE instead of fixed income. I like to try to keep equities at or around 50% of my assets though.
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
I have hustled to make more money flipping real estate and purchasing rentals
This is an important distinction. It makes it sound as if you are actively investing in RE and moving in and out of deals. In my view that is more of the "how you make money" activity, not the "how you invest over the long term" decision. It's a blurry distinction of course, especially if you are just starting out, but it may explain why you are
sharp1aarohead wrote:
Thu Jul 30, 2020 7:07 am
really struggling to decide a strategy moving forward. Part of me thinks I should try to further accelerate my net worth with real estate while the conservative half says I should slow down, maybe pay some properties off and focus on investing in the stock market.
You can always make money flipping properties and then squirrel away part of every sale into a Roth IRA, for example, rather than putting ALL the proceeds into the next deal. The problem with RE is that investors tend to keep betting bigger with every successful deal, particularly when tempted by a 1031 exchange that requires it. But then inevitably a deal will go wrong - and then ALL the previous successes are tied up in it. So I would just try to avoid that trap. Buy and hold at least some properties. Or take some money off the table when you sell if you don't - or at least diversify the proceeds into more than one newer deal.

You asked for personal stories, so I'll offer mine. I have always tried to split the difference. I did the "right thing" since my first job by investing 10-15% or so of my earned income into Roth IRAs and 401ks (in all equities for the most part). I maintained an emergency fund. But then I started buying rentals. I never did anything fancy like a fix and flip; my goal was to hold for the long term which I've mostly done (I bought about 1 unit a year until I had 10, but I've sold 3 that underperformed over time). I put 20% down on all my RE purchases but one (I borrowed 100% from my mom for that to close quickly as it was a short sale). I got long term fixed financing on each. Not saying this is the only way, but I was/am not incredibly savvy or handy so took the conservative approach. Now I have a condo and 3 duplexes.

Along the way as my earned income rose, I contributed more to my retirement accounts too. Once I got married 6 years ago, I quit buying rentals directly but suddenly my new joint income/net worth made us accredited investors. So since then we've been investing periodically into real estate syndications to diversify but also reduce my hassle factor. In the last few years we managed to max out retirement AND start building after tax investment brokerage assets for the first time.

I'm at a crossroads too. I don't know whether to pay off cheap mortgage debt or buy another rental or invest in another syndication or just keep dumping money slowly into brokerage ETFs. I've thought of selling one rental with a lot of equity but little cash flow and paying off another...There's never a right answer and it's a great "problem" to have. I do appreciate having additional liquidity in this market and have extended my EF to more than 1 year. But that cash is starting to bug me to be put to better use.
Mind sharing syndication path? Using some website or worming with a company directly?
I have not used any of the crowdfunding websites that I've seen blogged about by some investors. I primarily have gone through one investor team that I've gotten to know over the years slowly (originally one of the guys happened to be my realtor on a small rental purchase; later he got a partner and started doing larger commercial deals). Later I met another investor through a colleague who was his private banker for many years. He primarily invests his own money and has family members who fund most of his deals, but he raises a small amount from outsiders as well on occasion.

A third one I've used though does have a website and is more open to the public, as far as I know. It's called Waypoint Residential. They used to sponsor my local FPA chapter so I met one of the reps there and ended up investing some personally (they market to independent financial advisors who can pool their clients' funds to meet the minimums). I've had good experience with them over the few years I've invested and put my mom in a couple of their deals as well. It's more conservative that the other two routes I've gone - they use fixed rate loans, buy or develop class A properties, max 60% leverage usually. But steady monthly distributions of 4-5% (prior to Covid), plus the annual K1s typically show a loss so it's a very tax advantaged "yield." https://www.waypointrei.com/
Thanks I will reach out to them. About crowd funded platforms, that was my learning as well, once you get beyond the initial offering brochure, there are details that do not match with summary being shared.

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