Author Topic: Absence of Physical Real Estate in High Net Worth Portfolio  (Read 1084 times)

stevewilson

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Absence of Physical Real Estate in High Net Worth Portfolio
« on: August 25, 2019, 10:16:36 PM »
Do you guys think it is wise for a $40 million portfolio to contain all etfs (stocks/bonds/REITs etfs) and no physical real estate?

nsmall

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #1 on: August 25, 2019, 10:45:45 PM »
Whats your goal?

SwordGuy

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #2 on: August 25, 2019, 11:03:05 PM »
There's no financial reason that one needs to own real estate, particularly with a $40M portfolio.

powskier

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #3 on: August 25, 2019, 11:19:34 PM »
I don't think it's wise for anyone with a $40 million portfolio to be asking strangers on the internet for financial advice, assuming of course this post isn't a prelude to spamming some financial services.

marty998

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #4 on: August 26, 2019, 02:16:01 AM »
Someone who has made $40 million should probably keep doing what they are doing and not diversify.

However, if you are a hapless fool who has been gifted $40m, then chuck it all in an S&P 500 fund.

If you know what you are doing, then some direct exposure to commercial realestate is probably not a bad idea.

I don't have $40m so what the hell would I know.

daverobev

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #5 on: August 26, 2019, 06:58:11 AM »
Stocks and (particularly) REITs hold real estate.

If you want a house, buy one. If you like renting, rent. With that amount of money you can do whatever the hell you want.

PDXTabs

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #6 on: August 26, 2019, 08:51:15 AM »
I don't think it's wise for anyone with a $40 million portfolio to be asking strangers on the internet for financial advice, assuming of course this post isn't a prelude to spamming some financial services.

I think that it is legit. Check out his other post.

I personally feel no need to hold physical real estate in my investment portfolio. Of course, my investment portfolio is two orders or magnitude less that yours. It might not be a bad hedge for some real SHTF type stuff, but in that case owning one property (that you might live in) would be sufficient.

norajean

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #7 on: August 26, 2019, 09:37:01 AM »
4% of $40MM would be $1.6MM per year.  I guess for that amount you could live in a suite at a 5-star hotel for $2000/night for less than half your income.

GuitarStv

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #8 on: August 26, 2019, 09:53:19 AM »
What does your asset allocation tell you to do?  Once you've settled on that, you just keep doing it regardless of the money involved.

vand

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #9 on: August 27, 2019, 08:55:45 AM »
What does your asset allocation tell you to do?  Once you've settled on that, you just keep doing it regardless of the money involved.

I agree with this, but of course your AA may shift to a more defensive approach once you have accumulated "ample" wealth to meet your needs and your goal shifts from accumulation to preservation; most people with $100m net worth would not try to grow it at the same rate and take the same decisions they would if they had $100,000 net worth.

OTOH

> if you are a hapless fool who has been gifted $40m, then chuck it all in an S&P 500 fund.

I couldn't disagree more strongly with this position.
Hapless fool is probably ill-suited to handle emotional swings that come with a TSM portfolio.

GreenEggs

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #10 on: August 27, 2019, 08:29:56 PM »
Do you guys think it is wise for a $40 million portfolio to contain all etfs (stocks/bonds/REITs etfs) and no physical real estate?


I would say that it's probably unusual for somebody with $40M to not have any real estate holdings, but there are good reasons not to.  Mainly because it is a very illiquid assett.  Another reason is that it may not be an investment that you have experience with. 


Some investors specialize in real estate.  Some just dabble in it.  Some just aren't interested it it. 

stevewilson

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #11 on: August 28, 2019, 05:53:24 AM »
Thanks for all the feedback. Was debating with a friend who wishes to liquidate all his physical real estate and hold just etfs. He's main reason was ease of management and less administrative expenses.

I really didn't think that was a good idea but struggled to articulate a good reason as to why.... I suppose the SHTF point could be one.

BicycleB

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Re: Absence of Physical Real Estate in High Net Worth Portfolio
« Reply #12 on: August 28, 2019, 05:27:19 PM »
SHTF is a fundamental reason. However, depending on individual circumstances, I wouldn't advise acting on it.

A $40M portfolio (I assume we're talking US$) implies that the holder is in position to choose their lifestyle. If they do not wish to administrate real property or be tied to it, then ETFs are a legitimate vehicle. By design, they closely reflect the value of the underlying securities. They're similar to mutual funds in being relatively liquid, with some additional liquidity advantages. Either mutual funds or ETFs can provide performance similar to global equity markets as a whole or any slice of global equity markets that the owner chooses. So they're excellent in producing a lifestyle where responsibilities and decisions are limited to the digital/financial realm.

Is the choice to go all-financial/all-digital unwise? I suppose an all-financial portfolio could be stolen or blocked by hackers, insiders or other parties. That's a risk separate from STHF, and one that real property is probably not subject to.

Some of the decision depends on what laws the owner is subject to. I read that as a side effect of recent tax collection laws/regulations, American citizens are less free to buy securities from global locations than we used to be - but you probably know a lot more about that than I do. Likewise you probably know more about the tax laws related to your friend's portfolio. I suspect those make more difference than any of these other factors.

For some people, there's never been a time when a huge fortune could be so liquid so easily as the last 10-15 years. I understand some of your distrust though. Some coutnries' citizens can't easily have liquid fortunes, so they amass property. Property is harder to seize across borders. International authorities can freeze bank accounts more easily than they can seize apartments or other real estate. Plus laws can change at the drop of a hat.

I guess your friend has to judge the risks for his/her situation, compare to his/her values, and act accordingly.

Curious what other thoughts on this you develop or would care to share.
« Last Edit: August 28, 2019, 05:30:09 PM by BicycleB »