Sell Stock to Buy Rentals?

[Carl M.]

I would love to hear some advice and thoughts about diversifying my investments by selling stock to buy houses cash to rent out. It sounds good in theory. I will own the home free and clear and generate immediate cash flow. I talked to a friend of mine who's strategy is to pay cash for single-family homes and rent them out aiming for a 12% return before expenses. For example, if he pays $100,000 for a single family home he expects to rent it for $1000 per month. He owns 14 homes this way. I have limited experience. We have flipped eight homes in just over two years. We've done well doing this. I'm definitely looking to create some passive income and a little more freedom in my life.

[Jonathan Azevedo]

I'll play the contrarian here.

Sound diversification helps manage returns in all economic climates and across different asset classes.

You can leverage your money more with real estate. But stocks have their benefits as well.

However what's your specific plan? Why are you investing? What's your definition of success? Are you aiming for cash flow or appreciation or both? How much time and spare money do you have? What's your time frame to retirement? What are the tax implications of your strategy?

All these are factors to consider.

Before you go cashing out of stocks remember that they are easy to manage. Seldom do you need to come up with 450 cash for a new oven just because you own shares in GE. Not the same with real estate. You won't ever pay a handy man to update your S and P 500 index fund.

You can buy and hold for long term with good results in the stock market as well as real estate. It all returns to your plan, and your goals.