Can’t pull the trigger on real estate investment?

New bricked
Jun 18 31 Comments

I’m 32, net worth 1.5M liquid, all in vanguard funds, diversified across total us, total international and some muni bonds.

I can’t help but feeling I would really benefit from some real estate diversification. I already own some Vanguard reits in my 401k but it’s not the same as having a more direct exposure.

I’m not interested in buying my house here in the Bay since I don’t have a family to please and my rent is affordable. I’m also not comfortable with buying an out of state rental and dealing with a property manager, I am “domestically challenged” and feel I would be easily taken for a ride.

I also don’t like the online services such as fundrise, they are basically just a glorified reit targeted at millennials and are terribly tax inefficient, I care a lot about taxes so I stick to Vanguard reit in the 401k.

I was thinking to maybe try some syndications, but there are so many sponsors and it’s really hard to trust some random marketer enough to throw 100k at them.

Thoughts?

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TOP 31 Comments
  • Tableau VJSQ52
    REIT in Roth
    Jun 18 4
    • New bricked
      OP
      That’s what I basically do already. REIT in 401k and in backdoor Roth
      Jun 18
    • Smart. Same
      Jun 18
    • Amazon LayZ
      Sirs, which REITs should a noob be looking at?
      Jun 18
    • New bricked
      OP
      Personally I just do VNQ and VNQI
      Jun 18
  • How did you save 1.5M at age 32?
    Jun 18 2
    • New bricked
      OP
      I didn’t save all of it, a good portion is investment returns. Frugal living, sp500 returns and a smallish (500k) startup payout.
      Jun 18
    • E*Trade / Finance cbEV72
      Clearly, whatever you’re doing is working. I’d hesitate to change much in your approach to spending and investing. Actually you might be able to retire already.
      Jun 18
  • E*Trade / Finance cbEV72
    In my opinion unless you’re into actual real estate management, reit is the way to go. I doubt you’d be able to extract extra spread without getting into routine operations on a property. You can always diversify within reit space. When I look at real estate my goal is diversification rather than the yield. For instance last year reit did very well compared to equity indexes
    Jun 18 4
    • I concur
      Jun 18
    • New / R&D 🍻ilkebeer
      Excuse my lack of knowledge in this area. Isn't buying a rental with a mortgage like buying equities on margin, so the advantage is that while I'm not super liquid I can invest larger amounts and make more? It seems easier to get a mortgage than a large margin
      Jun 18
    • Amazon LayZ
      Fair point, @ilikebeer. But for someone who has little savings for now (can't buy house), would you recommend getting REITs? If yes, could you please recommend some?
      Jun 18
    • E*Trade / Finance cbEV72
      I think you’re confounding leverage with diversification. They are separate aspects of investment. I see roughly two reasons to invest into real estate: it’s expected low correlation to equities and expected high yield from income stream. Some people also speculate on the capital gain -read price appreciation- and I don’t think it’s a good idea, personally. I think in average you’ll barely get the inflation back in price appreciation once all expenses are in.

      The low correlation is the reason I do real estate because I happen to believe that this sector is indeed relatively low correlated to equities where the most growth is usually expected. Potentially you can improve the risk return characteristics of your overall portfolio when correlation among assets is lower. This has little to do with leverage, read mortgage.

      The leverage helps you increase return while risk is increased proportionally. So if your risk tolerance is high you can get a loan such as a mortgage and increase the return while taking more risk. This is different from diversification where you get less risk for about the same return.

      Margin loan is very easy to get. If you bring 1.5m $ liquid assets to any brokerage you’ll get a margin loan approval in a day. You can borrow large amounts against your assets. Is it s good idea? That’s a different question🤪
      Jun 18
  • Amazon PIPorGTFO
    Real estate is not passive. If you don't feel like it's made for you then don't.
    Jun 18 2
  • Amazon djmdke
    Don’t. Can’t. Not. Count those words in your post
    Jun 18 1
    • New bricked
      OP
      Is that supposed to be some motivational crap? Otherwise I don’t understand your point.

      I said can’t because I don’t have time to deal with property managers, and am wondering how other busy Blind folks invest in real estate so I can hopefully diversify my net worth.
      Jun 18
  • Groupon omgod
    I was considering Fundrise. Could you share your reasons as to why is it tax inefficient?
    Jun 18 1
    • New bricked
      OP
      It’s taxed at your marginal tax rate, the worst possible outcome. It means that your 7% becomes 3.5% at most TCs in coastal states. Compare that to direct real estate ownership and it’s a night/day different.
      Jun 18
  • Oracle el loco
    Crowdstreet
    Jun 18 0
  • Google / Other
    fuXh50

    Google Other

    PRE
    Microsoft
    fuXh50more
    Don’t bother with real estate, plenty of other investment avenues with faster growth and stronger returns
    Jun 18 4
    • Tesla mkjs98z
      Like?
      Jun 18
    • Google / Other
      fuXh50

      Google Other

      PRE
      Microsoft
      fuXh50more
      Stocks, etfs. I prefer long term passive investment
      Jun 18
    • New bricked
      OP
      While I agree with you, as my asset allocation confirms, it’s hard to get the benefits of direct real estate ownership: you get to leverage your investment without major recourse options, and you get massive tax benefits. That’s the main reason why I started this thread.
      Jun 18
    • Google / Other
      fuXh50

      Google Other

      PRE
      Microsoft
      fuXh50more
      Tax benefits aren’t as massive with the tax reforms. Buying real estate in the Bay Area is impossible in the current situation unless there is a downturn. Cash sharks are waiting on the sidelines for when that happens.
      Jun 18
  • I believe the term you’re looking for is “pull the trigger.”
    Jun 18 1
    • New bricked
      OP
      Totally. Still sleepy lol.
      Jun 18
  • ViaSat / Design mark1650
    Tahoe
    Jun 18 0
  • Like all things, once learned, you will eventually become great at it.

    This is your choice. If you don’t see good reason, don’t do it.

    You must be highly motivated to own a home. You must be very responsible and it requires a very different way of thinking.

    Being a property owner, who rents out their property, is extremely different from being a home owner. In fact, it’s the second phase after being a successful home owner.

    If you’re looking for high rewards, a risky but usually a fair investment, and a ton of hard work, then pull the trigger.
    Jun 18 1
    • I have done both and I loved both. Renting out was a bit of a pain for me but the check every month was extremely sweet!
      Jun 18

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