Alternative investment to Real Estate rentals

[2018]

I’ve been monitoring this forum for many years and see a lot of wise people with VERY diverse ideas on managing assets. :>)

BACKGROUND
I retired from corporate America several years ago and have used rental properties as the “bond” position in our retirement portfolio. I’ve been very comfortable with RE for the last 20 years as it allowed us to mitigate 100% exposure to the stock market while also generating income.

As I want to fully retire now we are now preparing to sell RE portfolio over the next few years and as you can imagine we will see significant capital gains due to increased property values. I always self-managed my rentals and not ready to hand off to management company and pay 10% + to cover fees and expenses.

I’m also creeping up on 65 and planning for Medicare premiums to hit, so considering SS to have Medicare premium absorbed from payments. SO will qualify for spousal SS in about 3 years and several years from Medicare so we use ACA to cover her needs.


SITUATION
We’re splitting the property sales across 2 years to minimize the spike in gross income from capital gains. As I understand it the capital gains will affect MAGI and thus impact Medicare premiums, ACA income caps, SS taxable income, and capital gains taxes.
We plan to spend a portion of proceeds on a 2nd home, but will have $300k to invest net after all expenses (including CG taxes) .

OPPORTUNITIES
I’m looking for ideas that would;
1. Keep us diversified and not have everything in the stock market,
2. Generate some kind of dividend style income

3. Shelter the investment to minimize MAGI / CG taxes on that income.
4. Keep assets simple in the event I kick the bucket and SO has to manage. (I don’t expect this but one never knows)

Ideas so far
-Move $ into a trade account for bonds/cd’s and take distributions over 5 more years to delay SS to 70. I have doubts about the long term SS program and suspect changes are coming so not confident with this idea. But I’m already considering SS delay until year after final RE sales to minimize tax impact, so this would kick me out to 66 or 67.


-I’ve explored private REIT’s and like the concept just not comfortable as this is an unregulated market with some horror stories.

-I’ve been approached a few times on annuities and not sure that’s good for us, nor have a strong understanding of them


Thanks in advance for your ideas and feedback.

 

[Another Reader]

I own more properties than you and I retired over 15 years ago. I have the properties with a management company but I make the major decisions. Rents continue to rise and the heirs can sort out the taxes when they inherit.

Finding a competent and honest property management competent will likely be a difficult and trying experience. The alternative of selling and paying the taxes is worse.

What you will give up in extra Medicare costs is unpleasant, but not nearly as unpleasant as selling the portfolio.

Run from the annuity sales people and the private REITs. The properties are a far better income source.

 

[Flyfish1]

I've been investing in private REIT's for years. Yes, there are some bad actors or at least some incompetent managers. You can reach out to me directly if you want one name to avoid. Better yet, stick with tried and true proven managers. I like the private REIT's that are big enough to have geographic diversification as well as diversification across real estate asset classes. For me : MLG Capital and Origin Investments are two outstanding companies. There are numerous others out there but I have many years of experience with MLG, less with Origin but I like them both. Solid, logical reporting, timely payments, diversification, etc.. Origin pays monthly and updates their NAV routinely. MLG pays quarterly and the funds have paid nice bonuses at the conclusion of their investment cycle.I think minimums are $50K for each - I could be wrong.

For more ideas you might want to join the 506 Investor Group. Smart people who really dive into due diligence.

I also hold public REIT's , but it is never enjoyable watching their price drop in knee jerk market sell off's. But, I love the dividends. Real estate for me is one of the biggest reasons I retired at age 59. Cash flow, cash flow and cash flow!