How Heavy Is Your Wealth Tilted Toward Real Estate?

Question

How heavy is your wealth tilted to real estate?

I’ve been thinking about this lately.  About 80% of my net worth is invested in real estate, real estate syndications, real estate notes or REITs.  Now that I’m in my early 70s, I think that’s TOO MUCH concentration.  I’m going to begin moving to a 60% real estate concentration.

Wondering how others have their investments structured.  How heavy is real estate in YOUR portfolio?

Mitchell Hein · Answer

My current allocation consists of approximately 40% real estate, 40% equities (low cost ETFs and index funds), and 20% cash. While the cash allocation is somewhat high, it serves as a reserve for our rental properties and future real estate investments, held in a high-yield savings account. This amount fluctuates, typically peaking before a property purchase and then gradually decreasing as we rebuild reserves for the next opportunity. As our net worth grows, we aim to adjust this allocation to 45% real estate, 45% equities, and 10% cash.

Bill B. · Answer

About 70% real estate but started at 100% stocks/etfs. The real estate just grew so much faster. I’ll pry hold them until I die. I just can’t see handing the government 30-40% of that 70% in taxes owed. If you leave them to your heirs or charities, they could fire sale them at 20% off and you’d both be better off.

John Morgan · Answer

@Don Konipol

I’m 54 years old and have 60% in RE and 40% in the SM. Because I have decent cash flow with my rentals (about 19k/month net), I invest aggressively in the SM. I could probably live off my real estate mailbox money now, so I’m aggressive with my stocks portfolio.

Paul Azad · Answer

Warren Buffett has told his children to just buy the SP 500 index fund and do nothing else with any capital not allocated to Berkshire stock. This will provide a roughly 10% nominal return likely over the next few decades as it has averaged that since 1900.

He says it's simple and other than his son Howard, the others have little interest in investing/finance, and the sp500 index has outperformed >98% of professional money managers over any 20yr or greater stretch.

Active or even passive management of real estate could be cumbersome for many heirs, not skilled in it.

V.G Jason · Answer

About 12% real estate, and 1/3 of that is SFRs/STRs. Aiming to get it in the 16-25% range, mostly titled towards STRs/SFRs and slightly towards commercial places. This year is 85% done, and I've added about 12-15% of what I did in 2023 REI wise. Think that's the rate I will go at for the forseeable future so may take longer depending upon appreciation. If appreciation catches us, shave off a year or quantity I buy.

30-33% equities, 28-31% private equity/small business(almost tapped out of growing this one), rest fixed income.

Scott Mac · Answer

Hey Don,

How does your age factor into this?

Are you looking for more cash in hand to boost your lifestyle?

A luxury yacht or a dream car or something?

Chris Seveney · Answer

Mine is heavier towards real estate due to gains of the past few years. I am at around 75% but we are also shifting some of it away from real estate. What is a "luxury" for us is I am in real estate and my wife is in finance - so we both have experience and knowledge in each side of things, so it gives us some confidence when we reallocate that atleast one of us "knows what they are doing" - if that makes sense.

Eric Gerakos · Answer

70% rental properties, 20% trust deeds and 10% cash.

Craig S. · Answer

@Don Konipol

There is a great saying I like:

Concentration builds wealth, diversification preserves wealth. It sounds like at your age and stage of life you want to create more diversification to preserve wealth.

In terms of real estate, I think it depends on how diversified and risk-averse the portfolio is. On its face, it sounds like you are somewhat diversified but at the same time it’s mostly still real estate.

At the end of the day there is no right or wrong answer. I have found that the best answer for YOU is what will allow you to sleep well on your pillow at night without thinking too much about it.

Maybe considering some mix of index funds and other investment vehicles outside of real estate could give you more broad financial exposure and diversification. Maybe bringing your RE portfolio closer to 50% allocation. There isn’t a perfect science, really it depends on what will make you feel secure.

How Heavy Is Your Wealth Tilted Toward Real Estate?

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