Portion of your NW in real estate

[wildsun]

Obsessed

22% Home
15% Vacation Rentals
04% REITs

41% Total Assets in Real Estate

 

[ArmchairMillionaire23]

I track personal residence separately from other real assets in my spreadsheet.

For those who include real estate in their net worth, how do you value it?

I update mine once a year at assessed value, which seems conservative.

We don't include our home when considering net worth. We paid 42K for it 11 years ago. We might get 75K (minus 6%) for it if we sold it today. It's value is less than 6% of our investment net worth so I don't consider it to have much value. If we sell it when we retire we'd most likely end up having to purchase a more expensive home to live in anyway. The proceeds from the sale would most likely just be used for the down payment for the next home.

 

[skyking1]

guesstimate of 25% in primary residence and beach lot. The current plan is to check out a different area to retire to, and purchase land and build a new home. That will skew the percentage up towards 40%.

 

[anothercog]

DW holds a REIT fund in her IRA, which is about 50% of her IRA but only 2.5% of of our investment portfolio. I don’t really count my residence in my NW unless I contemplate moving and then I’ll consider market value less selling costs and taxes.

If I sold today and moved someplace where $700k would get me a nice house with great public schools, I would hit my semi-fat RE target.

 

[imnontrad]

I only have my home but I was wondering if I should diversify my investment portfolio (home is 15% of NW). But I do not think I want to manage property so I am am thinking of a limited partnership of mobile home parks or else just REITs.

 

[Retired Expat]

All RE is considered in my NW because all are sellable and can convertible to cash, and at some point I may sell them off as part of my withdrawal strategy. But more importantly, they generate a substantial amount of income and are relatively secure investments. Mine return 5-6% a year in net rental income. If you add in appreciation, then 7 to 10% usually. This year prices have spiked so will see what happens.

We turned our 2nd home/vacation property into an AirBnB and rentals more than cover our carrying costs amd depending on rental versus personal use even turns a nice profit. This past year where we couldn’t travel to use it, it generated a 15% net rate of return! But really the idea is to rent it enough to not spend savings to hold it....

But I am a construction/property management professional and made a good portion of my fortune (meager though it is) in buying properties, fixing them up, renting them and ultimate selling as long term cap gains. I can easily see how this isn’t for many people, but if you can make it work it is a great source of stable income....

Finally, if you take advantage of 1031 exchanges you can postpone paying tax on property sold as you grow and improve your portfolio. Like an IRA where gains are not taxed until you ultimately withdraw the money.

Many say that property is the best way to wealth and for me, that has been 100% true

 

[Letj]

We live in Hawaii & since both our home & our rental properties are paid off, by definition, we're real estate heavy:


Home $1,426,000 34.2%

Rentals $1,309,000 31.4%

Cash, savings, etc. $1,434,000 34.4%


We don't plan to move, so our home value isn't considered for retirement income. Our rentals bring in $4,210 monthly, but are getting more difficult for us to manage, so we'll probably sell them in the next 5 years. But, since they bring in 53.1% of our retirement income, we'll look hard at where to put those sale funds.

Selling off rentals is so much harder than we think. The tax hit is tremendous, especially if they’re highly appreciated and owned for a long time. I am truly shell shocked by how much taxes I have to pay. I am selling/have sold 11 appreciated properties and with recapture depreciation tax, 20% capital gains, 3.8% net investment tax and state tax, I am seriously contemplating whether I want to even get rid of any more houses. This market doesn’t present good opportunities for 1031 exchange with only 45 days to identify a replacement property. My other option would be a DST but then your money is tied up with low returns and you lose total control. It’s a real dilemma.

 

[Markola]

If I was interested in owning single family homes, I’d evaluate investing in this company, which claims to take a lot of the headache away for a cut: https://www.roofstock.com

 

[Fermion]

Those of you who don't count RE as part of your net worth will be quite in shock that the lawyer who sues you will definitely count it!

 

[folly]

We have our primary house which we built 4 years ago in a small resort town off the beaten path. It ended up costing us twice what we had budgeted for. So much for down-sizing. We will be here until one of us dies as I think it will take that long for the sales price to catch up with the building cost. We have three rentals, two are senior only housing. They are nice because ppl move in and stay until they die but on the other hand if I want to move in I would feel like crap telling a old person they had to move. Also I have heard stories from other owners that when they attempt to raise the rent some older tenants just ignore them and the battle for $50 increase is not worth the anxiety. Yet we made the mistake of not doing a yearly increase and three years later when we tried to up the rent the tenant call us names and moved out. Lesson learned. We also have REITS. One is a health care properties and the other is a reit that has computer servers real estate. Both have performed well and weathered the ups and downs of the market well. The stock market has done better than both real estate and the REITS. There is less and less trade ppl in the work force. Most have retired and the ones left are swamped with work. If you cannot maintain real estate yourself then I wouldn't be in it. Those youtubes come in handy when you have to fix something you know nothing about!

 

[oiseux]

We have about 20%. Primary, rental to be sold in a few years, rental to transition back to secondary, land, small amount of REITs. Hope this will scale back but right now the RE market locally is bonkers.

 

[Lienlord]

Just did a quick calculation and came up with 73% of NW in real estate, made up of 34 different properties. It would have been even higher, but we just closed on selling our family home of 27 years and the commercial office we ran a business out of for 20 years. The remaining properties are mostly LP's in various real estate ventures; Apartments, Office, Retail, Assisted Living and a Marina.
Also hold notes on approx 16 single family homes that we used to own as rentals but now owner financing to others. Down to one actual rental property that I'm waiting on the current tenant to move out so I can sell it. He's been a good renter for 5 years and has been easy to manage so worth keeping.

 

[VungTau]

About 25%-30% of net worth in RE, REIT's and private equity CRE funds. This does not count my primary or secondary residences. Love real estate, been an investor for many years, prefer multi family properties. But like all investing it is good to diversify by asset class and in the case of real estate also geographically. I used to own physical properties and put together deals, now I prefer the funds and REIT's, much easier.

I am really similar in my portfolio - 25-30% made up of REITs, a bit of SPG when I picked up when it was in the $60's, but the majority in Real Estate Funds that pay around 8% a year with some upside and so far no big downsides. I live comfortably off the RE income and don't have to touch the other 70-75% which is mostly in the market.

 

[Closet_Gamer]

REITs (SCHH, VGSIX) are 10% of my AA, kept in tax deferred accounts.

Residence is not counted in retirement assets but would be about 6% of total assets.

 

[Joylush]

Selling off rentals is so much harder than we think. The tax hit is tremendous, especially if they’re highly appreciated and owned for a long time. I am truly shell shocked by how much taxes I have to pay. I am selling/have sold 11 appreciated properties and with recapture depreciation tax, 20% capital gains, 3.8% net investment tax and state tax, I am seriously contemplating whether I want to even get rid of any more houses. This market doesn’t present good opportunities for 1031 exchange with only 45 days to identify a replacement property. My other option would be a DST but then your money is tied up with low returns and you lose total control. It’s a real dilemma.

That is absolutely true. I’ve sold three properties every year for the last three years. Making an average profit of $100,000 per property has resulted in one property paying for the taxes on the sales. That’s a big bite out of your profit on something you’ve owned and managed for dozens of years. Yes, I know it’s unavoidable but in selling you’ve loss the ability to earn from the $100,000 you’ve now lost, or in my case $300,000.

I’ve had to limit the number of my sales to no more than three a year just to be able to stomach it. Especially since there really is nowhere safer to put the funds and earn anywhere near the same rate of return on them.

The only reason to sell is if you really don’t want to be a landlord forever.

 

[GreenEggs]

Those of you who don't count RE as part of your net worth will be quite in shock that the lawyer who sues you will definitely count it!

That's probably one of the reasons that so many of the high-end homes around here are owned by trusts.

 

[Backpacker]

That is absolutely true. I’ve sold three properties every year for the last three years. Making an average profit of $100,000 per property has resulted in one property paying for the taxes on the sales. That’s a big bite out of your profit on something you’ve owned and managed for dozens of years. Yes, I know it’s unavoidable but in selling you’ve loss the ability to earn from the $100,000 you’ve now lost, or in my case $300,000.

I’ve had to limit the number of my sales to no more than three a year just to be able to stomach it. Especially since there really is nowhere safer to put the funds and earn anywhere near the same rate of return on them.

The only reason to sell is if you really don’t want to be a landlord forever.

I keep bouncing between keeping them forever, passing to kids with step up in basis; and ditching them when I don't want to be a landlord anymore. only 56 years old right now so I don't really worry about it for another 10 years or so. I only have 4 single family homes so no where near the BIG issues of previous posters. The appreciation is probably the biggest hit I'm looking at. We bought them all in the 2009 housing mess from foreclosures r to settle estate. If I keep them until I croak, I'd hope to hire one of my kids as property manager when I'm not in the mood to deal with them anymore.

 

[ER Eddie]

Not much. Only about 5%.