Real estate is one of the best asset classes to build long term wealth. As an owner of five properties, I’ve seen my net worth soar over the past 15 years as my principal values and rents have increased far beyond inflation.
I came close to buying my 6th property, but instead of taking down a Hawaiian dream home for my parents, I’ve decided to invest more surgically through RealtyShares, the leading real estate crowdsourcing platform in America.
Here are three reasons why I didn’t want to own more physical property:
1) Property taxes. I’m already paying over $50,000 a year in property taxes. If I buy another property that costs let’s say $3M, I’ll have to pay another ~$35,000 in taxes a year. That’s just way too much.
2) Dealing with bad tenants. If I were to buy this Hawaiian home, one of the plans was to rent out my parent’s old house for ~$40,000 – $50,000 a year after they moved. Tenants can be great, or they can be a real PITA. The older you get, the less you want to deal with tenants.
3) Too much financial risk. To add millions of dollars in illiquid real estate exposure near the top of the Honolulu market, when ~40% of my net worth is already exposed to real estate seems like a really bad move. It’s much better to invest smaller sums in higher yielding markets instead.