What does diversification look like to you!?

[Kegan Brenner]

My wife and I are currently starting out real estate journey. 1.5 years ago we bought a dental practice, and last year we purchased our dental office building priced at around $2M with $500k in equity. We currently max out our Roth 401k, Roth IRA, and $2k per month into our vanguard taxable account. I want to see what you all do (aside from real estate) to maximize that tax free (or in taxable stock accounts as well) retirement income. Would love to see how you all diversify!

[Thomas Rutkowski]

Quote from @V.G Jason:

This all depends on your income, your spending, and your dependents. This can go so many ways.

The last people you want to talk to is a normal, average financial advisor. And anyone that sells you life insurance. Kick their *** to the curb. 

 @Kegan Brenner

Leveraging the Cash Value of a Maximum Over-funded life insurance policy is a way to put your money to work in two places at one time. The naysayers don't know what they are talking about. You will make more money over time. It's not a get rich quick trick. It is a methodical approach to investing that allows you to earn a higher combined rate of return (Cash Value plus Real Estate)

[Thomas Rutkowski]

Quote from @Mike S.:

Quote from @V.G Jason:

 No, life insurance in all forms is an incredibly stupid vehicle to put money in. 

I strongly disagree with you. A properly structured cash value permanent life insurance can be an incredible tool in your wealth building strategy. You obviously have not studied enough this asset class.

By borrowing from it you can make your money work at two places at the same time, increasing your total return. It's a long term play as the front loaded fee takes a few years to recover from. But in essence it is not different than using a refi on a real estate property, except that you are protected on the downside as the cash value only goes up while real estate can go down. And on top of it, you have a life insurance to protect your family in case of early demise.

If it was so bad, why would so many sophisticated investors using them? You just need to find the right insurance agent specialized in this kind of policies as the run of the mill policy is definitely not what you want for that purpose.

 Borrowing against it, not from it ;)

That's how you can put your money to work in 2 places at one time.

[Thomas Rutkowski]

Quote from @V.G Jason:

Quote from @Pete M.:

Quote from @V.G Jason:

Quote from @Pete M.:

Quote from @V.G Jason:

This all depends on your income, your spending, and your dependents. This can go so many ways.

The last people you want to talk to is a normal, average financial advisor. And anyone that sells you life insurance. Kick their *** to the curb. 

Agreed on all except the LI.  A purpose-built LI policy can do so much and still enable RE investing--when, like you noted, it suits the needs.  Off-the-shelf policy that focuses exclusively on death benefit isn't it, and I see those way too often.

 No, life insurance in all forms is an incredibly stupid vehicle to put money in. 

Not at all and history shows elsewise, but I don't see this going anywhere than yet another pointless internet argument--so good luck!

 Do you not pay your fees up front in any of these? That's the only thing that'd make it a modestly okay investment, otherwise all junk. You're an advisor, and becoming the type I tell folks to stay away from. 

 The policy owner who leverages the Cash Value of a Maximum over-funded policy WILL STILL make more money over time despite the fees. You don't seem to understand that a maximum over-funded policy is not the usual type of policy most people buy.

@Mike S. is absolutely correct.

[Thomas Rutkowski]

Quote from @V.G Jason:

Quote from @Thomas Rutkowski:

Quote from @V.G Jason:

Quote from @Mike S.:

Quote from @V.G Jason:

 No, life insurance in all forms is an incredibly stupid vehicle to put money in. 

I strongly disagree with you. A properly structured cash value permanent life insurance can be an incredible tool in your wealth building strategy. You obviously have not studied enough this asset class.

By borrowing from it you can make your money work at two places at the same time, increasing your total return. It's a long term play as the front loaded fee takes a few years to recover from. But in essence it is not different than using a refi on a real estate property, except that you are protected on the downside as the cash value only goes up while real estate can go down. And on top of it, you have a life insurance to protect your family in case of early demise.

If it was so bad, why would so many sophisticated investors using them? You just need to find the right insurance agent specialized in this kind of policies as the run of the mill policy is definitely not what you want for that purpose.

 If you're paying your expense fees up front, it's going to be a terrible investment. I don't need to get into why, it should be obvious.

No sophisticated investor uses them. I don't know a soul in a real high net worth that has it, I see people maybe under $10,15 MM use them and think they're magic. Maybe $25MM net worth but they are new money and/or dumb money if not both that blindly follow an "advisor".  The real HNW don't touch this. 

Only people to fight me on this is the ones who sell them.

 Your money is literally working in two places at one time. Even though you take a haircut on the fees, you will accumulate more wealth over time. Would you rather have 85% of your money growing at 9% or 100% of your money growing at 6%? 

You're right. It's obvious.

Again, a financial advisor. You guys sell this stuff, no one promotes this besides the one selling it. 

 It still works. Despite what you think.

[V.G Jason]

Buy term policy, invest the difference(vs. whole) in other areas. No need to borrow against it and do that other ********.

It works, but there's better options. Again, only one's that say so are the one's that sell it. No PWM or top tier asset manager is going to tell you to do that unless they sell it.

[Jeff S.]

@Basit Siddiqi when you say 50% RE are you saying 50% percent is equity or are you including debt as part of your RE?

[Henry Clark]

Realize you’re looking for stock type investment strategies.  But, I’m geared to Real estate solutions.

I would check on the following. 
1.  If or when you have kids treat them as a savings plan even if an infant.  Pay them for advertising.  Take the deduction for your business.  Use their tax advantage payroll savings to pay for their car, college, even clothing.

2.  Sales leaseback.

3.  Review all of your living expenses as a deduction

4.  Can you value add your building?  
5.  Anyway for you to live there?  For deductions?

6. Value add. Once established, sell the business then start over again. BRRRR strategy.
7.  When you bought did you put in a noncompete agreement so you could write off early for tax advantage?  Value the building for less.  

You should make more money doing real estate than even tax advantaged savings plans.  

[Joseph Schommer]

@V.G Jason. I am a serial business owner/investor using a well-structured whole life policy to fund everything from house flips to startup capital.

It's compounding interest v simple interest and making $ work in two places at once. Easy to understand, hard to find someone who can structure the policy appropriately... I suspect they've commented on this post already.

[V.G Jason]

Quote from @Joseph Schommer:

@V.G Jason. I am a serial business owner/investor using a well-structured whole life policy to fund everything from house flips to startup capital.

It's compounding interest v simple interest and making $ work in two places at once. Easy to understand, hard to find someone who can structure the policy appropriately... I suspect they've commented on this post already.

 I am serial business owner and run a FO. I use term policy and invest the difference to fund a whole bunch of projects, too. From timber investing, basic equities, angel investing, etc.

The only arguments I've genuinely faced against it it are:

1) Are you investing the difference. 

Yes, yes I am. At less fees and better breakeven/surrender value than Whole Life would force me to.

2) Premium riders waived for disability. 

The answer is go buy disability insurance, as an entrepreneur this a given. 

3) No 1099 income. 

Well no ****, it's not real income to when you re-fi or leverage out.

4) Infinite banking upside.

Don't get me started.

[Jonathan Bock]

@V.G Jason I think you are one of the few on the forums who has a family office haha

What's your opinion on perm policies for EP purposes? 

[Basit Siddiqi]

Quote from @Jeff S.:

@Basit Siddiqi when you say 50% RE are you saying 50% percent is equity or are you including debt as part of your RE?

 Ideally, it would be equity for me.

[Kegan Brenner]

@Drago Stanimirovic thank you for this reply! These are all options I have been looking into. As far as REIT's another area to diversify, can you give me some suggestions here? There are many companies out there and I wonder what the best strategy/fund is for choosing a diversified REIT through Vanguard.