Traditional Financial Planning advice goes out the window when you start investing in real estate.

Questions for BP:

- What proportion of your total wealth is held in real estate?

- Why do you keep the asset mix you keep?

- Here's my % ratios with a fake Net Worth amount.  How would you change the asset mix and why?

Thanks!

Originally posted by @Frank Jiang :

Traditional Financial Planning advice goes out the window when you start investing in real estate.

Questions for BP:

- What proportion of your total wealth is held in real estate?

- Why do you keep the asset mix you keep?

- Here's my % ratios with a fake Net Worth amount.  How would you change the asset mix and why?

Thanks!

 Aside from a 401K plan from my employer, and cash reserve funds, all the rest is in real estate. So I would say 70%. 

The reason why is simple to me. Real estate makes me far more money than my other investments. 

I keep about 50% of my net worth in real estate right now.  The rest is in cash, small business ventures, and various other publicly-traded securities.  

The amount YOU keep will depend a lot on your personal circumstances and propensity for risk.  This is a good question to review with a good fee-based planner that isn't trying to sell you crap for a commission.  In general, as you age you should decrease your leverage which will in turn increase the absolute amount of equity you have in your real estate.  This will likely increase the amount of your asset allocation that resides in real estate, but it doesn't have to.  If you pour in more free cash flow into cash, securities, or other assets you may have a lower percentage of your asset allocation in real estate as you age.  

In general, the more dollars you have tied up in real estate the lower your ROE is likely to be.  However, you're likely to generate more free cash flow as rents rise and your payments stay fixed.  Inflation will erode the value of long-term, fixed-rate debt and extra payments will decrease adjustable-rate mortgages if that is how things are financed.  

The asset allocation you have above is overly-weighted in real estate and gold IMO.  I would favor investing some money in securities to provide diversification.  Everyone's situation is unique though and this is a planning exercise you should work through with a good professional who knows your personal situation.  

@Frank Jiang

I invest a large portion of my 401k in real estate directly.