Real estate investment portfolio

[cyanide12345678]

Question for the older docs who have more disposable income and are invested in real estate. What's worked out for your portfolio? Single family home rentals, multi family rental, commercial rentals, crowd funding sites like realtymogul, fundrise, rich uncles, alpha flow etc, REIT ETFs like vnq, vnqi, schh, kbwy, iyr, rwr etc, or peer to peer lending. What does your real estate portfolio consist of?

Which types of investments have proved to be the best from a return on investment perspective? Which have been the worst? Which have been the most time consuming?

I'm personally looking to make real estate about 8-10 percent of my portfolio. So far I only have 3 percent of my portfolio in real estate through VNQ basically.

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[emergentmd]

Active to passive. But all are essentially passive with property manager.

6 rentals - best long term piggy bank
1 vrbo - best lifestyle decision. Free vacations.
Apartment - passive good monthly income and high return when sold
REIT - meh

 

[cyanide12345678]

Active to passive. But all are essentially passive with property manager.

6 rentals - best long term piggy bank
1 vrbo - best lifestyle decision. Free vacations.
Apartment - passive good monthly income and high return when sold
REIT - meh

What were your rentals? Single family homes or multi family homes? Which REITs did you invest in? As an average return on investment, what did the rentals give you over the course of many years?

I wanna be like you when I grow up

 

[sum dude]

Active to passive. But all are essentially passive with property manager.

6 rentals - best long term piggy bank
1 vrbo - best lifestyle decision. Free vacations.
Apartment - passive good monthly income and high return when sold
REIT - meh

Actually REITS outperform Real Estate long-term, w/ less risk and hassle (FWIW, stocks have historically outperformed both)

 

[Hercules]

What is your goal in adding real estate to your portfolio? I think that answer will help drive what is right for you. I’m relatively heavy on real estate in my portfolio with about 25-35% of my portfolio in real estate so I’m obviously a fan. For me the primary goal of real estate is to generate tax advantaged passive income and diversification with the side benefit of adding to my net worth over time. Here are mine in order from most active to least active:

Multi family: My favorite but the least passive by far even with a property manager. I purchased one multi family rental last year and have a contract to purchase a larger one right now. These are by far my best returns with good cash flow and some solid tax breaks (which is incredibly significant in our tax brackets— I paid no taxes on my net income from these last year due to accelerated depreciation).

Commercial rental: I have a separate LLC that owns the land and building that my urgent care is in and rent out an additional building on the property to a commercial renter. Nice return here but somewhat artificial since I can set the practice’s rent and thus shift profits from one LLC to the other.

Timber: Not a super high ROI but solid diversification that is not correlated with the stock market. Also a nice inflation hedge.

Crowdsourced RE: I’ve got several through EquityMultiple but none have come to maturity. They spit off some cash flow, but until my capital is returned I can’t glowingly recommend them.

REITs: I don’t really consider these real estate investments as they share much more in common with equities. I hold about 8% of my equities in a REIT.

Hope that helps

 

[deleted109597]

This is why I don't buy real estate.
Even the ones I wanted to. F that noise. The only benefit I see is that it forces you to put that money somewhere.

 

[GonnaBeADoc2222]

How does somebody begin to learn about how to buy rental properties? My time horizon for this is probably a few years off as I don't even have my primary residence yet and we are still nomads geographically, but I figure it can't hurt to learn

 

[cyanide12345678]

How does somebody begin to learn about how to buy rental properties? My time horizon for this is probably a few years off as I don't even have my primary residence yet and we are still nomads geographically, but I figure it can't hurt to learn

Bigger pockets is a forum based on real estate investing. One of the books I really liked was building wealth one house at a time. The forum owner Brandon has a few books which have extensive calculations that you need to know when buying property. Those are good starts I think

 

[RoyBasch]

...some solid tax breaks (which is incredibly significant in our tax brackets— I paid no taxes on my net income from these last year due to accelerated depreciation).

Can you elaborate a little bit how this works?

Timber: Not a super high ROI but solid diversification that is not correlated with the stock market. Also a nice inflation hedge.

I've been reading about timber for a little bit, what vehicle do you use to actually invest in it?

 

[Hercules]

This is why I don't buy real estate.
Even the ones I wanted to. F that noise. The only benefit I see is that it forces you to put that money somewhere.

Well there’s unquestionably benefits beyond that but to each his own. There’s a learning curve and a little bit of time that has to be spent on the front end for real estate. I would also say that for my mileage, multi family has a better scale and similar hassle to the single family rentals.

 

[Groove]

I think I'm just too lazy for real estate and don't mind admitting that. I feel like I'm too old to master it enough to the point where I would feel comfortable investing and I'm too familiar with stocks and dividend investing and stuck in my ways. I'd much rather receive dividend checks in the mail compared to renter checks. I don't think anyone has ever persuasively convinced me that real estate's ROI consistently outperforms the S&P during the long haul and there's just so many buried and hidden total costs of ownership.

Plus, when I retire... I want to sit on a beach somewhere warm sipping pina coladas. The last thing I want to do is worry about running a real estate empire. I seem to be in a minority on here though.

 

[emergentmd]

What were your rentals? Single family homes or multi family homes? Which REITs did you invest in? As an average return on investment, what did the rentals give you over the course of many years?

I wanna be like you when I grow up

Duplexes - alittle more work b/c of two tenants but mitigates vacancies.
Reits - Been all over the place but currently in Healthcare facility Reits such as OHI which does Quarterly dividends, some will do monthly. Dividends about 7-8% yearly

Rentals returns are very area dependent. You have to decide if you want to invest in a place that is appreciation heavy (cali) or income producing (less sought after area) or somewhere in between. I only buy rentals in my home area for obvious reasons and the place I live in is expensive. Income producers like to fin 2% rent/sale but that is impossible in any nice area, you would be lucky to even get 1%. I know where I live 1% is not even possible.

I did get a good deal on my properties about 4 yrs ago at 1%, raised rents about 30% in that time and now I am at 1.25%. I should clear about 5-8K/property but do extensive renovations when tenants moves so I have ended up breaking even (including P&I).
The value comes with appreciation as prices have appreciated. I purchases each at 160K(bought prob 20K under market), now valued at 275K. I put 60K down in each, and could pull close to 100K out of each property with a refinance. So in 4 yrs, I am up 40K and still would have 75K in equity.

Great return but I would say an anomaly and I was lucky to find it.

All investments have their plus/minuses. Rentals are not for everyone and there are pitfalls and can be a money pit. The pluses of rentals over REITS are

1. Leverage esp with low interest rates- I put in 60K, property went up 115K (72%), but my return is close to 300%
2. Depreciation - Once I cash flow, all of the income is not immediately taxed
3. 1031 conversion - On sale, all profits will not be taxed
4. Deductions - Anything I do concerning the rentals are tax deducted. Mileage, food, "items" for the rentals

 

[EctopicFetus]

Thoughts on opportunity zones? It’s all the rage.

 

[deleted497653]

A quick way to learn about real estate is through taking a realtor class just to get a good general base. I found a good affordable three week Monday to Thursday school here. Took it last June. I read a few good books. Will add them on this post when I get a chance. Other than my home, I decided not to buy real estate for now as cash is tight but I have good friends with single family rentals. Making money in real estate is slow. The idea is “leverage” ie you might need to finance your initial properties with borrowing money then start using money made from one property to finance the next purchase. Initially you will not take out the profit money for immediate spending.
One day I’ll get back on the bandwagon. Also wanted to add that you should be open to apartment complexes and not limit yourself to single family homes.
Your local market is your best bet! Again, it won’t be quick money...but you can do it.

 

[Hercules]

Can you elaborate a little bit how this works?

Depreciation is an expense that shows up on the P&L sheets and tax returns but uses no cash. Part of the recent tax bill was adding accelerated depreciation whereby instead of spreading over 5, 15, or 27 years you could accelerate parts of your depreciation schedule and front load it.
Example: I had a $350k property that I put $20k into and financed the rest on a 10 yr note. It was a turnaround but still produced $10k in net income. I paid to have a cost segregation study done and was able to justify accelerating ~$240k in depreciation to use against any profits. So $10k went this year to erasing those profits so I paid no taxes on them. In the first 3 months of this year there has been another $14k in net profits which I will use part of the remaining $230k of accelerated depreciation to erase again.

That means each dollar I am making on this rental property is truly putting a dollar in my pocket. As an EM physician each dollar I earn by the end of the year is putting about $0.55 into my pocket.

That’s why I like the tax aspects of real estate for physicians. All of this is while ignoring the fact that in addition to the net income, it’s also generating a significant amount of equity with 10 year financing.

I've been reading about timber for a little bit, what vehicle do you use to actually invest in it?

My timber vehicle is pretty simple. I purchased a small piece of timber property (a little under 200 acres) in a nearby state that had better government incentives. As long as I follow their best practice recommendations for timber farming they do cost sharing with me. Two years ago when I prepped 1/3 of the site and planted it, the incentive program picked up almost the entire tab, so I got to plant the next harvest at virtually no out of pocket cost. Timber isn’t very sexy and I could have gotten higher returns on that money but it’s a nice diversification.

 

[Tenk]

I think I'm just too lazy for real estate and don't mind admitting that. I feel like I'm too old to master it enough to the point where I would feel comfortable investing and I'm too familiar with stocks and dividend investing and stuck in my ways. I'd much rather receive dividend checks in the mail compared to renter checks. I don't think anyone has ever persuasively convinced me that real estate's ROI consistently outperforms the S&P during the long haul and there's just so many buried and hidden total costs of ownership.

Plus, when I retire... I want to sit on a beach somewhere warm sipping pina coladas. The last thing I want to do is worry about running a real estate empire. I seem to be in a minority on here though.

Na, I’m right there with you. Passive >>>> active.

 

[miacomet]

Duplexes - alittle more work b/c of two tenants but mitigates vacancies.
Reits - Been all over the place but currently in Healthcare facility Reits such as OHI which does Quarterly dividends, some will do monthly. Dividends about 7-8% yearly

Rentals returns are very area dependent. You have to decide if you want to invest in a place that is appreciation heavy (cali) or income producing (less sought after area) or somewhere in between. I only buy rentals in my home area for obvious reasons and the place I live in is expensive. Income producers like to fin 2% rent/sale but that is impossible in any nice area, you would be lucky to even get 1%. I know where I live 1% is not even possible.

I did get a good deal on my properties about 4 yrs ago at 1%, raised rents about 30% in that time and now I am at 1.25%. I should clear about 5-8K/property but do extensive renovations when tenants moves so I have ended up breaking even (including P&I).
The value comes with appreciation as prices have appreciated. I purchases each at 160K(bought prob 20K under market), now valued at 275K. I put 60K down in each, and could pull close to 100K out of each property with a refinance. So in 4 yrs, I am up 40K and still would have 75K in equity.

Great return but I would say an anomaly and I was lucky to find it.

All investments have their plus/minuses. Rentals are not for everyone and there are pitfalls and can be a money pit. The pluses of rentals over REITS are

1. Leverage esp with low interest rates- I put in 60K, property went up 115K (72%), but my return is close to 300%
2. Depreciation - Once I cash flow, all of the income is not immediately taxed
3. 1031 conversion - On sale, all profits will not be taxed
4. Deductions - Anything I do concerning the rentals are tax deducted. Mileage, food, "items" for the rentals

So how much are you grossing (cap rate, I guess) on the SFHs after all expenses/upgrades/vacancies/turnover? I ask because I had a duplex I would rent to residents and decided it wasn't worth the headaches for diversification, and I didn't want to get stuck with a huge tax bill in twenty years when I sold it.