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$1m portfolio with 30% in real estate

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  • Avatar scutum 
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    Status: Physician
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    Joined: 09/08/2019

    I’m about 5 years into practice and just crossed the 1m mark on my investments between 401k, 457b, HSA, 429, Roth’s, brokerage accounts and crowdfunding real estate. I just realized I’ve got 30% into CF real estate. Is that a crazy high percentage? Why or why not?

    #244643 Reply
    Liked by SLC OB
    Avatar Peds 
    Moderator
    Status: Physician
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    Joined: 01/08/2016

    Maybe.

    #244669 Reply
    jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016

    CF = Cash Flowing?

    Don’t know that I would say crazy high, but higher than I’d be comfortable with. We recommend a pretty basic allocation for portfolios, though, so that’s why. Investing decisions have as much to do with personal preference and comfort level as they are about portfolio allocation so I cannot definitely say you’re right or wrong. As I said, I personally wouldn’t be comfortable with it. Others on this forum would. Up to you to decide what is right for you.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #244671 Reply
    Avatar Peds 
    Moderator
    Status: Physician
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    Joined: 01/08/2016
    Earnest refinancing bonus

    Crowd funded

    #244672 Reply
    Avatar Larry Ragman 
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    Status: Other Professional
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    Joined: 08/30/2018

    30% is not excessive if you are comfortable with the risk. I’m down to 10% or so now, but it was higher for years. Depending on your real estate profile (I.e., likelihood of capital losses), you might even be better positioned than the index stock market investor for the next downturn.

    #244673 Reply
    jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
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    Crowd funded

    Click to expand…

    Duhhhh, thx.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #244674 Reply
    CordMcNally CordMcNally 
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    Status: Physician
    Posts: 2805
    Joined: 01/03/2017
    Why or why not?

    Click to expand…

    Only you can really answer that question. What’s your goal asset allocation?

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #244680 Reply
    Liked by Tim
    Avatar Tim 
    Participant
    Status: Accountant
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    Joined: 09/18/2018

    Two part response:
    •Real estate at 30% is a personal choice.
    • CF as an investment vehicle I tend to view as an alternative or private equity play. I tend to favor limiting such to 5-10% simply due to the higher risk and liquidity issues. Really depends upon the “edge” you bring to the selection process and the number of deals (diversification within the CF itself).

    #244683 Reply
    Hank Hank 
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    Status: Attorney
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    Joined: 03/27/2017

    Have any of the crowd funding platforms been around long enough to weather a market downturn? I can’t think of one that predates 2008.

    #244689 Reply
    Avatar SLC OB 
    Participant
    Status: Physician
    Posts: 559
    Joined: 06/23/2018

    I think 30% in real estate (especially in HCOLA, like California or NYC) is common, but Crowd Funded RE is more risky.

    I personally would not feel comfortable however I currently have about 65-70% of my net worth in real estate, due to my primary home and two rental properties. But that is all under my control. We’ve had a ton of appreciation in the market which is why so much is in RE.

    You have to think about your risk tolerance and if that is appropriate for your Asset Allocation. If not, rebalance.

    CONGRATS on passing the $1M net worth mark! Big deal, especially only 5 years out of training. Did you have student loans?

     

    #244694 Reply
    Liked by Tim, StarTrekDoc
    Avatar StarTrekDoc 
    Participant
    Status: Physician
    Posts: 2040
    Joined: 01/15/2017

    Congrats on $1M — you’ll find it easier to 2M and beyond.  at 5yrs post — very good track – keep it going!

     

    Like SLB and Tim said – 30% in investment portfolio is fine.  We’re about the same when considering retirement funding sources:  1/3 real estate, 1/3 pension , 1/3 equities.  Like SLB we’re directly residential rentals.   To each their own.  Crowd funding is fine too — just make good choices.   2008 is an eon ago.  A lot of CF came into being simply because of the internet and direct to investor trends overall.  2008 jump started it with the crash and huge influx of opportunities.

     

    #244701 Reply
    Liked by q-school
    Avatar EntrepreneurMD 
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    Status: Physician
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    My commercial real estate value happens to be about 30% of NW. Not sure if crowdfunding is more or less risky than personally owned real estate. Not too well versed on crowdfunding, but I read it’s recommended to be limited to 10-15% of portfolio. I do like the real estate as an investment vehicle.

    I like real estate because it comes with very generous tax breaks and depreciation deferments and should appreciate nicely over the decades (our area experiences significant population growth year over year). Don’t you give up the tax benefits in a crowdfunding model? NNN and annual inflation adjustments protect against inflation too.

    It’s generating for me in annual lease income, after expenses, the equivalent of 1.2x 1 year’s average gross income for my specialty. That will be great to carry over into retirement. In theory, I may never have to touch the other 70% of NW or the real estate building equity.

    I currently plan to buy more high end commercial RE to maintain 20-30% portfolio balance over the coming decades.

    Lots of people here don’t seem to like real estate. Curious to know what the financial folks here recommend on average to their clients, FI vs. not yet there. I don’t like too much leverage (currently at 15% of NW), but I’ve seen people leverage in real estate up to 100% their entire NW.  Yikes!

    #244769 Reply
    Liked by StateOfMyHead
    Avatar Brains428 
    Participant
    Status: Physician
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    Joined: 11/09/2017

    I don’t think that people are anti-real estate. I think people are anti-landlord. Retiring from medicine to pick up a different job with different headaches… I guess the difference is autonomy and some of the tax benefits.

    I’ll leave the AA to the experts.

    #244777 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 323
    Joined: 06/10/2019

    I don’t think that people are anti-real estate. I think people are anti-landlord. Retiring from medicine to pick up a different job with different headaches… I guess the difference is autonomy and some of the tax benefits.

    I’ll leave the AA to the experts.

    Click to expand…

    I agree and that makes sense. I’ve been very cognizant of that, so I’ve shied away from residential real estate. 5 tenants averaging $5K each is very different from 50 tenants paying $500 each.

    I’m still running a busy medical practice. I have an employee with property management experience managing the tenants but knock on wood it’s not too difficult right now.

    I guess one of the benefits of crowdfunding is you don’t have to worry about that.

    #244778 Reply
    Avatar StateOfMyHead 
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    Status: Advanced Practice Provider
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    Joined: 01/01/2019

    Like others said kudos on your achievements! The residential rentals I own and manage are 1/3 of my NW at this time. I’m not well versed with the crowd funding model but I don’t think I would count that modality in the same risk/reward category as individually owned properties which I consider the “bond” portion of my portfolio.

    #244785 Reply
    Liked by Tim

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