Learn from my mistake
I've held 15% real estate in the AA since ~2011... some single family rental homes and a REIT ETF, the latter held in tax-deferred. The results have been good and the rentals provided some nice tax advantages. I sold one of the rentals a couple years ago and decided I wanted to keep my overall 15% real estate allocation. So I used the net proceeds to buy the same REIT ETF in taxable, which produced income almost as good as the rental.
DON'T DO THAT !!
What a shock when the 1099 arrived... non-qualified dividends, huge capital gains, return of capital. I've since moved it to tax-deferred and all is right with the world once again. Even recognized a taxable loss in the process. Damage was fairly minimal for that one partial year.
Just thought I'd mention it here since most people focus on the tax-inefficiency of bonds in this context. But REITs are far worse. I clearly should have researched that more. But I was fixated on replacing the rental income and simplistically assumed it would be qualified dividends. Never paid attention to it in tax-deferred.
I've held 15% real estate in the AA since ~2011... some single family rental homes and a REIT ETF, the latter held in tax-deferred. The results have been good and the rentals provided some nice tax advantages. I sold one of the rentals a couple years ago and decided I wanted to keep my overall 15% real estate allocation. So I used the net proceeds to buy the same REIT ETF in taxable, which produced income almost as good as the rental.
DON'T DO THAT !!
What a shock when the 1099 arrived... non-qualified dividends, huge capital gains, return of capital. I've since moved it to tax-deferred and all is right with the world once again. Even recognized a taxable loss in the process. Damage was fairly minimal for that one partial year.
Just thought I'd mention it here since most people focus on the tax-inefficiency of bonds in this context. But REITs are far worse. I clearly should have researched that more. But I was fixated on replacing the rental income and simplistically assumed it would be qualified dividends. Never paid attention to it in tax-deferred.
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