RE Investors: How diversified is your investment portfolio?

[parkette]

Hi all,

My husband and I own 3 rental properties in Canada and 1 in Australia. We started putting pretty much all of our investment money into real estate 3 years ago when my husband moved to Canada with some padding in his pocket from a business buyout.

We both really love real estate investment, especially the process of rehabbing properties. We've found being (good) landlords to be oddly fulfilling, and have had mostly good luck with tenants. I, especially, have difficulty not buying when we find a good deal. We're a bit cash poor right now, but could (and would) probably scrape something together for the right property at the right price.

I'm trying to think more broadly about our investments. I get a bit worried sometimes about having almost all of our eggs in the real estate basket. I appreciate the diversification of having properties in 2 countries, but all of our Canadians properties are in the same city. I really would like to diversify by increasing our index fund investments, and working on maxing our RRSPs and TFSAs.

Our portfolio at the moment looks like (conservative value estimates for RE):

Real Estate

Rental house #1: Australia
Value: $325,000
Mortgage: $227,000 at 5.25% variable

Rental house #2: Canada
Value: $130,000
Mortgage: $68,000 at 2.25% variable

Rental house #3: Canada
Value: $100,000
Mortgage: $89,000 at 2.99% fixed

Rental house #4: Canada
Value: $120,000
Mortgage: $85,000 at 3.29% fixed

Own home: Canada
Value: $180,000
Mortgage: $127,000 at 2.99% fixed

Pensions
My pension (fed gov't): value appr. $50,000
Husband's super in Australia: appr. $50,000

Tax sheltered investments
My baby RRSP: $1,800
Husband's baby TFSA: $1,100

We also have cash, but nothing significant on hand that we're looking to dump in investments. My plan is to make regular contributions into our RRSPs/TFSAs rather than setting all money aside for the next RE purchase.

I'm wondering if others get quite deep into just the RE side of things? Or are you more balanced than we have been? Do I need a reality check before I get us knee-deep in the next RE purchase?

Any advice, insight, or commentary about your own situation is greatly appreciated!

[Cwadda]

I don't see anything wrong with what you're doing as long as the rental incomes are taking in more than all the expenses for each house (mortgage, taxes, etc) and then putting whatever excess back on to the mortgages. I don't know how the renting market is in those countries but it seems pretty good if you've been able to good tenants. Basically the tenants are paying off the mortgages for you. Once you own these houses outright, your cashflow will be insane and you will easily be able to be FI.

If you can take in around 8-10% in rent of their values per year annually then you're golden. Then they will be payed down in 15 or less years and you will be making some serious money.

[arebelspy]

I'm heavily weighted in real estate. I'm trying to diversify between different cities and states as well as asset types (some lower middle neighborhoods for cash flow, some high end areas for appreciation, etc.).

I'm not too worried about the systemic risks you're referring to, and I build a healthy cushion into my numbers to deal with potential downturns where rents may fall, vacancies may be higher, etc.

Keep your reserve accounts healthy and you'll be okay.

Right before FIRE and post-FIRE I'll be funneling my excess into more equities, but I'm okay being overweighted in RE while still employed and in the accumulation phase.  If you're in a similar situation, the same probably applies.

[daverobev]

Well, I don't know what the tenant laws are like on PEI (in PEI? on seems more appropriate), if they are like Ontario.. well. Good luck - if you get a bad tenant in.

Now. One thought - both Canada and Oz are resource-based, exporting countries. In that sense, they are not counter-cyclical. And the currencies should move together - roughly.

Also you have quite a lot of leverage. You have $850k value, $580k in debt? And "fixed" for 5 years tops? Without knowing what you're *making* on those properties it's impossible to say if that is good, bad, terrible...

If you do the comparisons, housing in Canada generally is horribly overpriced. I don't know about PEI - I know it is NOT Vancouver or Toronto so it's probably nowhere near as overpriced, but still, when they say a rising tide lifts all ships... well a sinking tide probably takes them all down, too ;)

There are still bargains in the US. I'm sure there are bargains where you are, too, and if you got them - good for you. Hard to say without some numbers!

As to me, I'm sorta diversified - one house in the UK, one in Canada, and one in the US. But wildly different values and absolutely not 'optimised' :)

[arebelspy]

Also you have quite a lot of leverage. You have $850k value, $580k in debt? And "fixed" for 5 years tops? Without knowing what you're *making* on those properties it's impossible to say if that is good, bad, terrible...

That's a good point.  The leverage doesn't scare me, but if it's negative leverage, that's bad.  I was assuming these are good investments (grossing maybe 8-10k/month in rent).  Probably shouldn't necessarily assume that.  :)

(Especially given what I've read about Canada and especially Australia real estate.  On the other hand, maybe they'll appreciate a ton. Then again maybe they'll drop. Values are fairly cyclical.)