Real Estate Portfolio Benchmarks

8 Replies

Curious to hear how everyone evaluates their portfolio as a whole. What metrics do you use to compare your holdings (or single holding) to the S&P 500/Vanguard Index Fund? 

@Josh Lewer Very interesting topic... I am curious of what others will say.. A big bench mark for me was quitting my 'normal job' and investing full time.

Thanks for the thoughts. Do you compare any numbers from your RE holdings against the stock market? @Nick Britton

@Josh Lewer I don't...I know I cashed out my 401k and I cash flow thousands of times greater then dividends ever will...

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Thanks @Nick Britton I know there are plenty of numbers that goes into a RE portfolio. Are you are concerned about the overall yield? For example, I know savings yield almost 1%, index funds have hit 7%, what is everyone's goal here? Double index fund returns or is there more to it?

It may boil down to individual financial modeling...

I haven't looked at that way before exactly, @Josh Lewer .  Not with portfolio holdings, anyway.  Leverage is too big a factor with RE.  A 3% rise in home value equates to a humongous gain, dollar-wise with a mortgage.  Not really apples to apples with a 10x magnification to me.

I do measure my ROI against the S&P, though. My leveraged ROI has been around 20% on average. When the stock market approaches 15% with regularity and my control, I will invest more there. No tenants or toilets in paper securities, but no control either. When Greece defaults or the Chinese dollar is devalued, my properties don't tend to care. Good discussion!

I'll be honest.  I basically just do the numbers and ask myself if I am happy with that amount of cash flow being produced from the property.  I still have traditional investments, and we all know how those go.  As long as I clear my minimum threshold, I am happy, but I am sure there is certainly a better, more precise, and formal way of making the determination.  I'd be very curious to read a little more about it if anyone has some insight.

This question comes from reading a few of Buffets letters (showing my nerd side). He always compares his performance against the S&P 500 and provides lengthy discussion on this comparison. @Brandon Ingegneri I too wonder if there is formal way of doing something similar. (IRR, ROI, etc.)

@Steve Vaughan I will take a look at some ROI calculations. In the book Millionaire Real Estate Investor, the authors provide a handy chart talking about levels of return (ie 1-4% dead money, 5-7% safe money, etc.) which is why I am curious to see what others use for that calculation. Or if many just stick to cash flow exceeding budgeted personal expenses as the ultimate goal.

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