Anonymous wrote:Diversification in addition to stocks. Owned vacation property for 20 yrs. Tripled in value and get to use the property for pleasure. Can’t do that with stocks.

+1. Stocks, beach house, rental properties. When we retire, we will get enough passive income that we won’t need to draw much from retirement accounts.

We manage all our properties ourselves. If you have great long term tenets, it’s not as hard as long as you have your list of handyman, plumber, etc.. on hand to call as needed.

I have a tenet that has been at my property for 6 years, handles any minor stuff and only calls me for major stuff. I might need to send someone over there maybe 2 times most a year if that.

Diversification in addition to stocks. Owned vacation property for 20 yrs. Tripled in value and get to use the property for pleasure. Can’t do that with stocks.

If you don’t have a goal of being a landlord, don’t became one just because the internet tells you it’s a good idea. The S&P 500 doesn’t call you on Saturday night to say the faucet is leaking or the fridge stopped working.

Anonymous wrote:

Anonymous wrote:Overall I think diversification is the correct answer to this question and there’s nothing wrong with that.

But, plenty of people get into RE because, in no particular order, they heard about it from a “rich” friend / think they are sophisticated investors / are afraid of things they don’t understand (the market/economy) / think “passive income” from their old house is their path to FIRE, etc etc.

Passive income from my old house is exactly how I got to FIRE.

+1
Converting a primary residence to an investment property is a cheap way to get into real estate. I'm retired and don't touch my 401k because I have rental income. That's a big deal.

It's obvious that most people posting don't really know much about real estate and likely don't have the skills to manage and maintain a rental property.

I inherited multiple rental properties and did the same math as OP & sold them. The only way real estate makes sense as investment is to be heavily leveraged at a low interest rate in a rapidly appreciating market (good luck finding that right now). Not to mention have the time to mess with managing them. On top of which, people are about to find out how illiquid real estate can be.

As someone else pointed out, I live in an expensive home that gives me plenty of exposure to real estate as an asset class. If you want more, buy a REIT and let a professional deal with the hassle.

Low risk leverage + income

We have about 5mil in 401k/IRAs/brokerage accounts and 2.5mil in rentals that are paid off. We retired 4 years ago at 55 and the rental income has covered all our basic expense and some, we haven't touched our 401k/IRAs at all. The kids will get the rentals and stocks in the brokerage accounts with step up basis and will pay no tax. They will have to pay tax on the 401k/IRAs but we're in the process of converting some of those into Roth.

Anonymous wrote:Spare me the “diversification” bullshit. For most people, the single most expensive asset is their primary residence. Being a homeowner in the DMV is sufficient diversification into real estate.

But your primary residence doesn't generate income. Real estate income usually doesn't look that great when the stock market is doing great, but those views change when the stock market posts negative returns for 10+ years.

Works best if you are doing short term rentals in a popular area and you are doing the turnovers yourself. That way you can write off mortgage, expenses and depreciation as business expenses. You also have to enjoy the process of weekly and weekend renting. Most don’t.

If you don’t rent much (or if you are focused on long term rentals) and if you are using a management company the numbers usually don’t work. You are better off investing in the stock market.