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Real estate investment - count with bond or equity % in portfolio?

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  • Real estate investment - count with bond or equity % in portfolio?

    I have been riding along with roughly a 65/35 stock/bond allocation.

    In the last couple of years, I have started investing some money in private placement real estate acquisitions.  They are purchased and managed by a local company, the head of which I have known for years.  These are large apartment complexes in a niche area, also managed by the company, that are rarely sold.   As is typical with this kind of investment, I get quarterly dividends (~6-7% annual) and in about 7 years the plan is to refi, get cash back, and start over again.  Sale is possible but not the goal, and the refi is tax friendly.  Many of the previous investments have been held by the individual in each LLC for decades, kicking off income long after initial principal is paid back.

    I have plopped a small amount of money in 3 such deals to date, with the plan of creating a kind of RE ladder where proceeds start coming back one after the other.  These are deals aimed at hitting singles and occasional doubles, no home runs here - no speculation.

    So here is my question.  I am thinking that the RE should factor against my bond allocation, rather than the stock side.  I see my bond holdings as a risk buffer and a flight to quality, not as a money maker.   I typically hear of folks carving RE from their equity portfolio but in my case these deals are more for producing income than capital appreciation.

    Thoughts on placing this on the equity vs bond side of the portfolio?

    Thanks

    p

     

     

  • #2
    Equity produces income in the form of dividends, same as you are receiving on your investment. You have no guarantee of repayment. Bondholders are loaners, equity holders are owners. Sounds like this is a small real estate LP, definitely a part of your equity portfolio, no matter how you "feel" about it.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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