Poll

Do you own income properties as part of your retirement plan?

I plan to retire (or have) with less than $2 million. I don't own any income properties and do not plan to as part of my plan for retirement.
13 (30.2%)
I plan to retire (or have) with over $2 million. I don't own any income properties and do not plan to as part of my plan for retirement.
1 (2.3%)
I plan to retire (or have) with less than $2 million. I already own or plan on owning income properties as part of those assets (30% or less)
19 (44.2%)
I plan to retire (or have) with over $2 million. I already own or plan on owning income properties as part of those assets (30% or less)
3 (7%)
I plan to retire (or have) with less than $2 million and income properties will the primary asset in my retirement portfolio.
4 (9.3%)
I plan to retire (or have) with more than $2 million and income properties will the primary asset in my retirement portfolio.
3 (7%)

Total Members Voted: 40

Voting closed: February 11, 2015, 05:48:44 AM

Author Topic: Who owns income properties as part of their FI portfolio?  (Read 4093 times)

stash4cash

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Who owns income properties as part of their FI portfolio?
« on: February 06, 2015, 05:48:44 AM »
Hi All,
I'm curious to understand what percentage of folks are pursuing income properties as part of their FI plans. We are considering it but to be honest this is mostly about diversification and not because we have a significant interest in running income properties.

Substitute financial independence instead of retirement if thats your goal. :)

kathrynd

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Re: Who owns income properties as part of their FI portfolio?
« Reply #1 on: February 06, 2015, 05:53:25 AM »
I guess I can't vote....none apply

We retire 4 1/2 yrs ago, and live solely on rent.
It is basically 100% of our income.

stash4cash

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Re: Who owns income properties as part of their FI portfolio?
« Reply #2 on: February 06, 2015, 05:56:37 AM »
Hi kathryn, sorry, I intended the last two options to apply? Bad wording on my part?

stash4cash

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Re: Who owns income properties as part of their FI portfolio?
« Reply #3 on: February 06, 2015, 05:57:29 AM »
Fixed wording. :)

morning owl

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Re: Who owns income properties as part of their FI portfolio?
« Reply #4 on: February 06, 2015, 06:00:01 AM »
Do REITs count as income properties? if so, then yes!
« Last Edit: February 06, 2015, 06:02:16 AM by morning owl »

stash4cash

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Re: Who owns income properties as part of their FI portfolio?
« Reply #5 on: February 06, 2015, 06:04:11 AM »
Sorry, I was specifically not including REIT's as I see them as a very different from income properties.
Income properties meaning a real estate asset that you own and get paid a monthly fee for its use by someone else - but that also comes with maintenance expectations (or delegation of those to a property manager).

morning owl

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Re: Who owns income properties as part of their FI portfolio?
« Reply #6 on: February 06, 2015, 06:06:58 AM »
OK, went for the first option, with the caveat that I do own commercial income properties in the form of REITs :) that way I get paid the monthly fee for its use, minus the management hassle.
« Last Edit: February 06, 2015, 06:10:25 AM by morning owl »

stash4cash

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Re: Who owns income properties as part of their FI portfolio?
« Reply #7 on: February 06, 2015, 06:12:58 AM »
Cool thanks. :)

kathrynd

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Re: Who owns income properties as part of their FI portfolio?
« Reply #8 on: February 06, 2015, 06:23:35 AM »
Hi kathryn, sorry, I intended the last two options to apply? Bad wording on my part?

Thanks...voted now

jda1984

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Re: Who owns income properties as part of their FI portfolio?
« Reply #9 on: February 06, 2015, 07:21:15 AM »
I own a duplex.  I've thought about buying a couple more units when we've paid this one down considerably.  One way I see it is if we have three units and the conventional wisdom is to spend 1/3 of your income on housing, we'll receive the average income for our area.  I also see them as a hedge against inflation, but maybe that's not quite accurate.

rmendpara

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Re: Who owns income properties as part of their FI portfolio?
« Reply #10 on: February 06, 2015, 10:08:34 AM »
Hi All,
I'm curious to understand what percentage of folks are pursuing income properties as part of their FI plans. We are considering it but to be honest this is mostly about diversification and not because we have a significant interest in running income properties.

Substitute financial independence instead of retirement if thats your goal. :)

I think often about liquidating my 1 rental property and putting all the aftertax proceeds into equities. Honestly, I can reasonably expect to earn a very similar return, even on an income basis (dividends/distributions), from a diversified equity portfolio.

However, and this is a big difference, the income from the property has different characteristics. The ability to leverage the asset at attractive borrowing rates, reinvest proceeds into equities or other stuff, and the location and possibility of moving back all play into my desire to keep it.

It does take a little work, with some repairs and maintenance on occasion, but I just have to coordinate that. For 1-1.5k per yr (roughly 1 mo rent), I'd consider having a property manager just so I don't really have to think about it much.

If I recall correctly, even when the equity markets dipped by 20%+ a few years back, rents didn't really decrease. In fact, 1-2 years later, as things were getting foreclosed, I bought in and rents have been steadily increasing since then. I actually regret paying off the mortgage early, as equities are up 30%+ since then, in addition to the property itself being up ~50%. If only I had stayed leveraged, could have seen 100%+ returns plus steady cash flow.

Oh well, can't predict the future, but even ignoring that, I've done generally well by owning it. If we hit a recession, I imagine demand to buy RE will decrease, but rental demand should hold steady or perhaps even increase in that area, leaving my income steady and allowing me to reinvest into depressed equities.

Overall, after some rambling, diversification is the biggest benefit. Assuming you buy appropriately and maintain when necessary, RE does provide real returns (greater than inflation) for most situations, and is reasonably liquid outside of major recessions. The biggest drawback is that it's not easy to buy in/out and transaction fees are high, so it's more of a 5+ yr thing (for the casual RE investor). Just be aware that there is a valid case for owning equities in REIT companies, which would be far more diversified than owning a single rental property, although that does prevent you from taking advantage of any particular local market inefficiency.
« Last Edit: February 06, 2015, 10:14:45 AM by rmendpara »

rathga

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Re: Who owns income properties as part of their FI portfolio?
« Reply #11 on: February 08, 2015, 03:08:51 PM »
I have property as a large part of my portfolio.  It is definitely a hassle now and again landlording but the return is worth it - especially with leverage.  I have made around 30-40+% return on equity over the last 5 years.  The income is also good and sufficient to pay for about 80% of my budget now that I am ER'd (with P2P income making up the rest) and that is before capital gains, which are large (with the leverage) and provide a long-term inflation hedge. 

Given the leverage available with property, in my opinion it really beats the crap out of any other investment from a total return standpoint (as long as you pick the right properties are comfortable maintaining high mortgages).