What Percent of Your Net Worth is Made Up of Real Estate?

[Parsad]

With interest rates so low, and real estate values seemingly high, this is a poll to see how much of the average net worth is tied up in real estate...including both residential and commercial.  Net of mortgages, lines of credit, etc.  Cheers!

[Jurgis]

Net value (price minus mortgage(s)) or gross value?

[Parsad]

7 minutes ago, Jurgis said:

Net value (price minus mortgage(s)) or gross value?

 

I added net of any debt to clarify...thanks for pointing that out.  Cheers!

[wachtwoord]

Very near zero. It's overvalued almost everywhere in the world.

 

* Cropped up by low interest rates

* Cropped up by government subsidies (often in the form of tax benefits)

* Propped up by population growth, which is tapering off in the west

* Propped up by the risen labour participation of women and the associated switch to a two-earner household economy (more jousehold income leads to higher housing prices for obvious reasons). Which has just about peaked as well.

 

So what is the next trick politicians will employ to drive up their RE portfolios? Basic income is the only one I can think of they have left.

[thepupil]

primary home + publicly traded RE (loosely defined) gets me to about 50% 

[SharperDingaan]

If I am in the US, < 1%. I have the big place, a non recourse mortgage as high as possible, and a stack of T-Bills at another bank. Every 6-months I remortgage to buy more T-Bills, and I keep a couple of rent paying squatters in my basement. As/when house prices collapse, I just give my banker the keys to the place. For a while I use my T-Bills as my credit rating, let my bad credit rating run out, then build it back up. The banker exists to take my risk, and the credit score exists to be manipulated !!

 

If I am in Canada, a lot higher than 1%. The banker isn't as dumb,  but the place is just the house + rent on the underlying land lease. The land lease owned in a separate investment account  If your house is worth > 2-3M, ask your advisor why he/she hasn't mentioned this to you .... 

 

Always a twist!

 

SD

[rkbabang]

29% real estate

54% stocks

17% crypto

 

 

But this isn't truly accurate if you consider that in the stocks category I own some stocks that should add to the real estate percentage such as BAM, LAACZ, APTS, RMRM, so I'm not really sure how to calculate it exactly.  In the above numbers those are 100% in the stocks category.

Edited June 10, 2021 by rkbabang

[Gregmal]

Public + private RE easily north of 75%.

 

You have so much optionality with RE. You can lever it in the safest manner possible. When times are good you can sell and 1031 or just do a cash out refi. You can get a HELOC. When times are bad, assuming you took advantage of the good times, you can then put that money to work or worst case just sit tight with a fixed carry. 

 

You are currently in win/win situation. Rates stay low and it has ways to appreciate, rates go higher, the types I am invested in track inflation + some. Cash is trash, bonds are a stupid risk/reward, and equities while somewhat attractive are pricy and outside of that, there's few other options...maybe buying private businesses..but thats a tough game to play. 

 

[BG2008]

47 minutes ago, Gregmal said:

Public + private RE easily north of 75%.

 

You have so much optionality with RE. You can lever it in the safest manner possible. When times are good you can sell and 1031 or just do a cash out refi. You can get a HELOC. When times are bad, assuming you took advantage of the good times, you can then put that money to work or worst case just sit tight with a fixed carry. 

 

You are currently in win/win situation. Rates stay low and it has ways to appreciate, rates go higher, the types I am invested in track inflation + some. Cash is trash, bonds are a stupid risk/reward, and equities while somewhat attractive are pricy and outside of that, there's few other options...maybe buying private businesses..but thats a tough game to play. 

 

 

I am probably closer to Gregmal with private plus public exposure.  30 year fixed rates are hard to pass on.  If rates go a lot higher, I guess I am committed to owning these assets for 30 years until they are fully paid off.  But I am probably too green and do not know what I am doing.  I have never invested in a rising rate environment.  

 

Maybe owning residential RE is just owning a piece of the Maslow's hierarchy on the bottom called "shelter" and if you own 3 units, you basically have 3 families paying you 1/3 of their paycheck for eternity.  What is that worth?  Your mortgage cost is fixed until it is paid off.  Rent goes up over time along with property taxes and operating expenses.  On the private side, I sometimes just think that I have a few families who will always pay me 1/3 of their income.  I don't know what I am doing.  I think that's a reasonable way of thinking about it.   

[fareastwarriors]

Greater than 75%, not including publicly traded REITs. My stock portfolio has done amazing past few years but wow the Bay Area RE has been nuts. Rising tide lifts my little boat. 

[BG2008]

2 minutes ago, fareastwarriors said:

Greater than 75%, not including publicly traded REITs. My stock portfolio has done amazing past few years but wow the Bay Area RE has been nuts. Rising tide lifts my little boat. 

The real tech zillionaire here! 

[Gregmal]

5 minutes ago, fareastwarriors said:

Greater than 75%, not including publicly traded REITs. My stock portfolio has done amazing past few years but wow the Bay Area RE has been nuts. Rising tide lifts my little boat. 

 

In a way, a market like that is probably a pretty good play on the prosperity of the top 1%ers. I was having a chat with a friend last week about the misconceptions around things like sports teams, art, high end baseball cards, etc, and mainly how robust and resilient those markets are, and have been for a very long time, because its a market where participants are basically either not effected to a meaningful degree by recessions, or, like we saw with RE in 09, opportunistic. 

[BG2008]

2 hours ago, Gregmal said:

 

In a way, a market like that is probably a pretty good play on the prosperity of the top 1%ers. I was having a chat with a friend last week about the misconceptions around things like sports teams, art, high end baseball cards, etc, and mainly how robust and resilient those markets are, and have been for a very long time, because its a market where participants are basically either not effected to a meaningful degree by recessions, or, like we saw with RE in 09, opportunistic. 

Gregmal, 

 

We know you like MSG.  You don't have to tout it every minute.  JK 

[Gregmal]

^ I'll have you know, the basis of the conversation was actually predominantly inspired by analysis of vintage sports cards. Something I also have a surprisingly large % of net worth in(not huge but like between 5-10% and mainly from appreciation rather than cost basis). Sports teams(MSG) just just so happened to fall into the general category and discussion. Its great operating in markets where the assets are one of a kind, rarely available, cant be replication and priceless to their admirers who's resources are virtually unlimited. 

[Xerxes]

Do we count real estate where we believe ?
i dont think we should count that 

[Morgan]

5 hours ago, Gregmal said:

^ I'll have you know, the basis of the conversation was actually predominantly inspired by analysis of vintage sports cards. Something I also have a surprisingly large % of net worth in(not huge but like between 5-10% and mainly from appreciation rather than cost basis). Sports teams(MSG) just just so happened to fall into the general category and discussion. Its great operating in markets where the assets are one of a kind, rarely available, cant be replication and priceless to their admirers who's resources are virtually unlimited. 

Not to sidetrack the conversation, but in the last 5-7 years it seems like vintage/classic cars have gone up 2-3x. I should have splurged back then lol 

 

I have 100% of my investments in real estate. The last ten years have been good (an increase in units, property values, and rents), but I’m anticipating a solid drop in prices at some point, but don’t know what causes it or when. Over the next ten years I’m assuming a bit more inflation (rent raises) than the last ten years. We’ll see. 

[Gregmal]

5 hours ago, Morgan said:

Not to sidetrack the conversation, but in the last 5-7 years it seems like vintage/classic cars have gone up 2-3x. I should have splurged back then lol 

 

I have 100% of my investments in real estate. The last ten years have been good (an increase in units, property values, and rents), but I’m anticipating a solid drop in prices at some point, but don’t know what causes it or when. Over the next ten years I’m assuming a bit more inflation (rent raises) than the last ten years. We’ll see. 

Oh its even more than that. Its crazy. PWCC has an index and its destroyed even the S&P over a pretty significant time period. I remember discussing some of this a wee bit ago and Sanjeev mentioned he had bought his nephew a Gretzky OPC 9. If the kid still has it today he's worth a quarter mil.

 

The thing is its a very particular market and even if you're intelligent it requires a lot of different understandings to really get. Which is kind of why the opportunity exists; because its so easy for so many to just write off. But its a hugely lucrative niche. It is probably a good separate thread but if one has little kids and wants to get them financially literate, hands down the best approach is to get them into trading cards. Doesnt even have to be expensive ones, but that will teach them everything they need to know about the financial markets. Things ranging from basic supply and demand, scarcity value, fads(rookies and new product), making a market/negotiating, transaction costs and dealing in illiquid assets, dilution(IE who signs everything put in front of them and who doesnt), all the way down to simply taking care of your stuff(condition is crucial) and processing information and pattern recognition/information sorting.

 

 

[thepupil]

the largest category <10% is not what I would have expected. lots of renters (or people w/ high LTV's) or people w/ some big equity portfolios here! 

 

if your hypothetical COBF poster 20% down on a $500K house/condo a few years ago = $100K, let's say that house is up 20% since, so that's $200K of equity (not counting t-costs), to be less than 2% = $2mm net worth, which I'm sure many posters have (or much more) but not a huge %. scale the house $$$ up or down for various metro areas, or whatever, but nevertheless surprised <10% is 40% 

 

 

 

 

 

 

 

Edited June 11, 2021 by thepupil

[Viking]

In 2 weeks (when i hand over the keys) i will be 0% real estate. As i have stated in other threads, my (our) decision to sell my house was driven to find a better fit personally (live in more active/fun part of Vancouver and closer to family). The significant financial gain at sale was also a factor. So going 0% real estate is both a personal and financial win. In terms of investing, i am MUCH more comfortable investing in financial assets than real estate; a much better fit for how i am wired. 

[TwoCitiesCapital]

15 hours ago, Morgan said:

Not to sidetrack the conversation, but in the last 5-7 years it seems like vintage/classic cars have gone up 2-3x. I should have splurged back then lol 

 

I have 100% of my investments in real estate. The last ten years have been good (an increase in units, property values, and rents), but I’m anticipating a solid drop in prices at some point, but don’t know what causes it or when. Over the next ten years I’m assuming a bit more inflation (rent raises) than the last ten years. We’ll see. 

 

Can confirm that used cars in general are up absurd amounts and even more so for 'classics'/'collectibles'/'sports card'. 

 

I bought an '03 Porsche back in 2017 to be my daily driver since it was basically flat on the depreciation curve at that point and I wanted a fun car after 7-years of not driving in NYC. 

 

If I sold it today, I'd probably make 2-3k on the transaction despite having put an additional ~35k miles on it and driving it for 4-years. 

[Morgan]

34 minutes ago, TwoCitiesCapital said:

 

Can confirm that used cars in general are up absurd amounts and even more so for 'classics'/'collectibles'/'sports card'. 

 

I bought an '03 Porsche back in 2017 to be my daily driver since it was basically flat on the depreciation curve at that point and I wanted a fun car after 7-years of not driving in NYC. 

 

If I sold it today, I'd probably make 2-3k on the transaction despite having put an additional ~35k miles on it and driving it for 4-years. 

You’re absolutely correct. I was looking at early/mid eighties Porsche 911 SC and they were 15-25k for a pretty good one. Now they’re 45-100k for anything. I don’t think I need one at those prices lol.