2023 investment strategy: Index funds with high tax bill or real estate?

[White.Beard.Doc]

From your posts, I thought you were already heavily invested in real estate?
And that you were already taking advantage of the tax savings?

The questions would be Are you perhaps too exposed to this asset class?
Do you want to expand the business you are currently running, or would you prefer to put more of your assets in something truly passive, like index funds?

Or are you asking whether the current economic climate is conducive to buying more real estate now? For that, I assume the answer is that it is more risky, has a wide spread of possible returns, positive or negative, and has the potential for a high payoff if you can buy at a low price.

Yes, we have a lot of RE investments, but we also have a lot of stock investments and we own 3 companies that I founded. We could purchase more RE and remain well diversified. RE, even passive RE, requires more effort than a stock index fund, but there are professional managers that can take care of most of it.

[White.Beard.Doc]

I've previously mentioned NNN commercial properties and these are NOT labor intensive. The only thing you have to do is pay the mortgage, which I don't anyway as it is ACHed by the bank. You can still do a cost seg bonus depreciation study. I note the current Dollar Generals on offer have had a raise in the CAP rate offered so things are moving in a positive direction for buyers. You also don't have to worry about having a target on your back like residential landlords do now. We currently have 6 anti-landlord bills in committee in our legislature and I intend to testify against them when the public comments are scheduled by the committee.

Dennis, it sounds like you have a great RE investing plan. How widely diversified are you beyond these NNN leases?

[CordMcNally]

I continue to consider increased net worth equals increased financial security, but there comes a point.....

We currently spend on the things we want and do not deprive ourselves of anything, the grandkids education is taken care of, and the travel plans are taken care of. Still, this inflationary environment could get more ugly, and if there is a long horizon ahead, what then?

Not always logical, but personal finance is very much a psychological game.

And personal finance is personal so I’m not sure if anyone here will change your mind regarding what YOU want to do. I’d put it in a taxable account and keep enjoying life but that’s me and real estate is also not a big part of my current life.

[Tangler]

And personal finance is personal so I’m not sure if anyone here will change your mind regarding what YOU want to do. I’d put it in a taxable account and keep enjoying life but that’s me and real estate is also not a big part of my current life.

Yes, I am not smart or dedicated enough to compete in realestate so i would personally do option 1, but I am not you.

[Tim]

I continue to consider increased net worth equals increased financial security, but there comes a point.....

We currently spend on the things we want and do not deprive ourselves of anything, the grandkids education is taken care of, and the travel plans are taken care of. Still, this inflationary environment could get more ugly, and if there is a long horizon ahead, what then?

Not always logical, but personal finance is very much a psychological game.

Ahh, that last sentence is so revealing. Not sure if you will ever get your head straight. I doubt you really get much satisfaction or ego boost playing the tax game or playing the CRE game. Been there, done that.

Riding that bike, travel, a little work seems to come too easy. Life is challenging, what’s your challenge?
I have no clue. Mine is babysitting contractors on some minor remodeling stuff for my daughter. Oh well. Gives me satisfaction when I see her eyes and it’s an unspoken “thank you”. Boy those guys can pretend a ton and try to bait and switch even on simple crap.

Find your niche. Easier said than done.

[dennis]

Dennis, it sounds like you have a great RE investing plan. How widely diversified are you beyond these NNN leases?

We are also invested in a couple of local syndications, one is with a company whose niche is self storage facilities and two others are ground up developments of multifamily complexes. I have a line on a syndication that will purchase some local retail space. They had one under contract but it fell out during due diligence so they still are looking. The rest is directly owned multifamily and single family. We did have one investment in a syndicated office building that was hurt with COVID and sold last year at a 14% loss.

[White.Beard.Doc]

Many thanks to those who replied. It helps to consider different perspectives and to think things through. When I was younger and had fewer choices, it was easy to just get up and go to work. With more choices comes more options.


Why do I want to increase our net worth? I tend to think about the many risks out there. High inflation with a long retirement horizon. Economic effects of massive national debt. Dysfunctional government and the possibility of a congress that will tank the economy, just to prove a point of how red or how blue they are. How do I insulate myself and my family from the potential chaos around us?

Will continuing to optimize change our life? Probably not, but yes, optimizing could turn out to be important if some of the very bad things that I mentioned above come to pass.

What is the psychology of my relationship to money? Having enough money means having security. It means I am taking care of my family. It means I can enjoy a nice home, nice travel, and I can help provide security and education for my extended family. It means I can eventually relax when I retire. But relaxing and sitting still is not in my DNA. I continue to enjoy working hard and playing hard. I am sure that will change, just not sure when.

[Anne]

Many thanks to those who replied. It helps to consider different perspectives and to think things through. When I was younger and had fewer choices, it was easy to just get up and go to work. With more choices comes more options.


Why do I want to increase our net worth? I tend to think about the many risks out there. High inflation with a long retirement horizon. Economic effects of massive national debt. Dysfunctional government and the possibility of a congress that will tank the economy, just to prove a point of how red or how blue they are. How do I insulate myself and my family from the potential chaos around us?

Will continuing to optimize change our life? Probably not, but yes, optimizing could turn out to be important if some of the very bad things that I mentioned above come to pass.

What is the psychology of my relationship to money? Having enough money means having security. It means I am taking care of my family. It means I can enjoy a nice home, nice travel, and I can help provide security and education for my extended family. It means I can eventually relax when I retire. But relaxing and sitting still is not in my DNA. I continue to enjoy working hard and playing hard. I am sure that will change, just not sure when.

Unless you have previously overstated things regarding your investments, you are financially secure unless things happen that would devastate all Americans (or even worse, all humans) in which case nothing you do now will make a difference. There are people wealthier than you who have a vested interest in making sure the economy’s house of cards doesn’t collapse, let them do the heavy lifting aka worrying.

I don’t think there is anything wrong with trying to optimize throughout your life especially if you have a goal greater than yourself/your family but it seems like your stated goal is security for you and your family which you already have but you don’t seem to believe you have. So I think you should set some goals for 2023 on how to improve your mental security. Your retirement horizon is not that long—not saying you are old, but that’s true for all of us. It’s later than you think.

[taxstra]

Tend to agree with the others on here. If you have more money than you think you’ll need, I’d just go the index route. If you enjoy the game of real estate, not going to argue with it.

[SeattleCPA]

I don't have a whitebeard. But I have lots of gray hair. And partly because one of my roles is to unravel the financial complexity active investors create and their heirs later deal with.

There is much to be said for simplicity. Simplicity scales.

I believe (and observe) one can earn a higher return with some active investing in alternative asset classes. But gosh it can come with a cost. Maybe one the wealth creator avoids but then leaves for surviving spouse or kids.