Your Home is Not a Real Estate Investment

My house is not real estate? Well, yes, it is; it’s just not a real estate “investment.” Real estate investing represents an on-going part of a well-diversified investment strategy. Most investors are under-allocated believing that their personal residence is part of this allocation. Excluding your home, How Long Does It Take To Sell A Luxury Home do you own commercial property assets? Your home, while looking like an investment is not an investment you look to for yield or income. Nor is it an ATM machine as we have found out during the recent economic cycle. Your home is the place you live. Monetary benefits, if any, are a bonus derived at sale.
Investment real estate provides four different forms of yield. They are:
Income – as derived from rents or other ancillary income generated
Tax shelter – provided by depreciation of the physical asset over time
Appreciation – the increase in value over time
Mortgage pay down – the increase in value created as income is utilized to decrease debt
Allocation theory suggests that a portfolio should have between 5% and 15% of assets in real estate (excluding your personal The Largest Estate Agency In Usa residence). Thus, investors should have between $50,000 and $150,000 in property for every one million dollars in net worth.
When excluding your personal residence, what percentage of your investment portfolio is in commercial property? Direct ownership of commercial property (such as multifamily) provides a buffer to the daily market swings in stocks and bonds. Real property (physical assets) is an important part of a balanced portfolio. Investment grade commercial property can offer solid yields. Exclude your personal residence from the view that it is an investment requiring a yield. We all need a roof to keep us out of the elements. This one roof should not also have to be considered an investment we rely on for any current or future source of income.

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