In 2002, I was one year into my new job in San Francisco when I decided I needed to build a real estate empire. The dotcom collapse was traumatizing and I wanted to own real assets with more stable cash flow.
After a couple years, my desire for real estate narrowed so I could retire early and live off the income. But then the housing crisis hit, ruining my confidence that I could one day be free due to rental property.
Now things are lollipops and roses. Rental income is strong. Valuations are at all-time highs. Mortgage rates are still close to all-time lows. Yet rental income has dropped to below 10% of my overall income. At the same time, owning physical real estate has become my main source of stress. Given my life is relatively stress-free, any type of stress is ironically magnified.
To maximize lifestyle and profits, I should rationally sell all rentals while valuations are at all-time highs and focus my attention on building an online business since it’s more fun and profitable. Further, online media valuations are still relatively low, meaning there’s tremendous upside, although Vice Media raising $450 million at a $5.7B post-money valuation might argue otherwise.
Despite the logic, I refuse to sell my entire rental property portfolio because of one main reason: insurance against a difficult life for my child.