Would you sell house and invest 750k in vanguard ?

[pudding]

Hi and sorry in advance if this is a newby investor type of ramble.

I'm new to the idea of investing in stocks and bonds so been reading and learning some.

I've posted before about a house I bought and how the selling price of houses in my city has gone way up, and that I could sell it and probably end up with 750 thousand....

As a newby investor I'm aware that inflation will eat it away if tucked under the mattress, so should invest if ever I do sell.

It sounds like Vanguard mutual funds are the way to go... however having read some about investing I do see the risk side to things and that you have be tolerant of these risks and not panic sell and be in for the long term.

Which sort of sounds a lot like owning real estate, and real estate being what I have now and have done really well owning and partly renting out as a landlord. (Though it's had its fair share of being a pain in the behind for sure! )

Before learning what I have about Vanguard I liked the idea of the dividends on the investment and it seemed much more simple than having to maintain a house, find tenants and house market going up and down etc...

But now it seems like what ever you invest in its going to have risks,  and at the moment I'm thinking that I'm already in the investment game with this house, and there's plus and minus to owning actual land and bricks and mortar.

Im thinking real estate is still good. Also investing in vanguard is good.    But... I dont think it makes sense to sell and then invest it all in vanguard... or does it?   

I'd like to be free of the hassle of being tied to the house, but I also like the idea of the money being in bricks and mortar.   

If I really drill down into this, I can't honestly see a day where I'd sell it and go with my check and give it to a guy to invest for me.... I think I'd crap my pants.

Anyone any thoughts?

I've read about making an investor plan and I really want to do that and then shut my inner chatter about it up!  Have to get my ducks in a row though.

Cheers, Pudding

[bobechs]

In general:

1. Over the medium and long term residential real estate value keeps pace with, but does not exceed, the rate of inflation.  This is, as usual, a normal distribution and most people are fascinated to the point of distraction with thinking about, talking about and imagining they inhabit one of the tails of the normal curve.

2. Over the medium and long term the value of low expense index funds not only beats the managed funds, it beats inflation by more than a couple of points.

Make of that what you will.

[marty998]

When you sell up, where will you live?

If you have to buy, then you don't get $750 to invest how you wish, you get a fair bit less, and you lose costs on exit and re-entry.

Would you be FI with the difference?

If you rent, would the dividends on the $750k go towards mostly covering rent?

[pudding]

When you sell up, where will you live?

If you have to buy, then you don't get $750 to invest how you wish, you get a fair bit less, and you lose costs on exit and re-entry.

Would you be FI with the difference?

If you rent, would the dividends on the $750k go towards mostly covering rent?

I think what it is, is that houses here cost so much that if you buy one, then thats it!  All your money has gone.

It's a bit like in the old days you won a million on the lottery and you were set.  Now in Vancouver which is where I live, if you won a million you could only buy a row house, because a detached house is over a million.

So your life wouldn't really change much at all.

If you won a million and wanted to change your life for the better, then you'd maybe rent a place at 1100 a month, and invest the rest.

[Mighty-Dollar]

According to a study by Jack Francis and Roger Ibbotson, real estate grew by 8.6% per year from 1972 to 1999.

According to Fidelity Research Institute real estate averaged a 5.9% annual return from 1963 to 2006. This study may be biased to the downside because Fidelity is in the business of selling other asset classes.

[Mmm_Donuts]

You've posted this question a few times now. I know it's agonizing to make this decision.

If you buy an index fund, you are also owning, in essence, "bricks and mortar" of the businesses listed on the stock market. There is tangible value there as well - it's not just throwing your money on a roulette table, though maybe it can feel that way. If you're worried that you might panic sell in a downturn, then you need to think about a safer asset allocation, like 60% stock ETF and 40% bonds and pref shares. The bonds will drop less, and allow you to rebalance in the case of a market correction.

Also consider that RE values can also go down, as you are witnessing in Vancouver this past month. You are taking far more risk by having all assets in one basket, in the limited market of Vancouver real estate, vs. owing shares of thousands of companies around the world. If I were you, I would be looking to diversify as much as possible.

[ysette9]

This post caught my attention because a couple of years back we did exactly this: we sold our townhouse that we were renting and dumped everything into Vanguard. Obviously this is a very personal experience and you need to determine what will make you sleep peacefully at night, but for us we absolutely reveled in the feeling. No mortgage = free! Not having to think about renters, even with the help of a property management agency = dancing on clouds.

You have to live somewhere so take that into consideration. You also have to think long and hard about an asset allocation you will be okay with. I am so glad we took the plunge though. Having assets in vanguard instead of a house is so much easier, more flexible, portable, and simpler. This is just our experience though.

[Retire-Canada]

Anyone any thoughts?

If I could sell my house and get $750K out of it I'd do that tomorrow and be FIRE'd. For a few years I'd live in a travel van and rent apartments wherever I was if I wanted a real roof over my head. I'd throw the money in the market and let it do its thing.

[triangle]

If your house is larger than you need, or in a location where you don't need to live, and you are not emotionally attached to it; then the next step could be to compare rental prices vs mortgage prices as a gauge to determine if the home is presently over valued or not. Making a objective financial calculation can be a little tricky as your home should appreciate at the rate of inflation but has the constant drag of property taxes and variable maintenance costs attached to it. But those costs need to be balanced against every increasing renting costs if you did not own. Investing the sale proceeds into various stocks/bonds would generate investment income that could cover some/all of your new rental expense but that will increase your marginal tax rate and affordably of subsidized programs like ACA.

[ender]

According to a study by Jack Francis and Roger Ibbotson, real estate grew by 8.6% per year from 1972 to 1999.

According to Fidelity Research Institute real estate averaged a 5.9% annual return from 1963 to 2006. This study may be biased to the downside because Fidelity is in the business of selling other asset classes.

Not sure why you randomly posted this?

Adding the comparison, according to this SP500 calculator, the combined dividend reinvested return for the SP500 during those periods was:

• 13.834% (1/1/1972 - 12/31/1999)
• 10.710% (1/1/1963 - 12/31/2006)

[waltworks]

Schiller data is generally the acknowledged best source for RE prices.

Here's a link to the chart of inflation adjusted prices: http://www.macleans.ca/wp-content/uploads/2014/03/Real-US-home-prices-1890-20142.jpg

I would sell the house and dump the money in index funds and never think about it again.

-W

[clarkfan1979]

When comparing real estate vs. Vanguard, it all depends on how the real estate is leveraged.

[K-ice]

Pudding, do you have a Vangaurd account?

A Vanguard account is not exactly a thing in Canada but are you currently investing in VAB, VCN & VXC?

No I wouldn't sell Vancouver real-estate & dump it all in Vanguard without first getting my feet wet with my TFSA & RRSP for a few years.

The other big question is where will you live? Vancouver is a very beautiful city & once you move out it's hard to move back.

If you have been comfortable with Vanguard for a few years, & you didn't loose any sleep January 2016 & you are ready to leave Vancouver then it may be time for a big change.

[Heckler]

Schiller data is generally the acknowledged best source for RE prices.

Here's a link to the chart of inflation adjusted prices: http://www.macleans.ca/wp-content/uploads/2014/03/Real-US-home-prices-1890-20142.jpg

I would sell the house and dump the money in index funds and never think about it again.

-W

To me, Vancouver RE is a excellent portfolio diversifier.  Granted, 2/3 of our NW is in this asset, but now that we are mortgage free, We are ready for any 20% dips in value, but for 13 years now have only seen increases with short term dips. 

IMO, looking at US housing graphs is looking at another asset class. 

http://www.chpc.biz/vancouver-housing.html

http://www.rebgv.org/home-price-index?region=all&type=all&date=2016-08-01



And creating RE price index charts seems to be an industry on its own here. Just like following the SP500

[Heckler]

SP500 Jan 1977: 103
SP500 Jan 2016: 1907
% change: 1751%

VRE Detached Jan 1977: 75
VRE Detached Jan 2016: 1826
% change VRE Detached: 2335%


VRE Attached Jan 1977: 50
VRE Attached Jan 2016: 721
% change VRE Attached: 1342%

Looks like long term, SP500 is in between my townhouse and your house performance. (But that's not incl dividend or rental incomes, so not quite accurate)

Of course, there is the age old bubble question, just like US had.  It'll happen, but how much?  Then there's interest rates rising too...

Fuck it, I need somewhere to sleep and like my place. I'm holding.

[woopwoop]

What's your ROI with renting out the place? Can you do a cash-out mortgage and just invest part of the equity? Best of both worlds imo if you can swing a large cashout.

[waltworks]

Yeah, real estate always goes up. They're not making any more land! Buy now or be priced out forever.

Man, Canada is going to be so F'd when the party finally ends.

-W

[forestj]

Anyone any thoughts?

If I could sell my house and get $750K out of it I'd do that tomorrow and be FIRE'd. For a few years I'd live in a travel van and rent apartments wherever I was if I wanted a real roof over my head. I'd throw the money in the market and let it do its thing.

This. 750K is almost twice what I plan to retire on.