11/17/24
The is the first post on my investing blog. The reason I created this blog was to document my experience in entering the real estate investing racket. I think this first blog post should be a bit about my background and why I decided to invest in real estate.
I’m thirty-three years old and have been working full time for ten years. During this time, I have been a follower and proponent of both index fund investing and the financial independence/retire early (FIRE) movement. My primary investment vehicles have been:
- 401(k)
- Roth IRA
- Employee stock ownership plan (ESOP)
- After-tax brokerage
I’ve been fortunate enough over the past several years to max out my Roth IRA and 401(k). Besides my ESOP, I have invested the bulk of my retirement and after-tax savings into index funds, primarily target-retirement funds and S&P 500 tracker funds. These funds have done quite well over the last ten years and I have amassed around $780,000 in net worth. This $780k is spread out with around $580k in retirement accounts (my ESOP functions essentially as a retirement account) and $200k in after-tax accounts. In other words, I have around $200k in liquid, usable money.
Over the past several months, I started to research real estate investing. I did this for several reasons. I wanted to diversify my investments, achieve a higher rate of return than the S&P 500, and, perhaps most important of all, try something new.
Reason 1: Diversifying my assets. With so much of my money in the stock market coupled the extraordinary returns in 2024 (24% year-to-date, 30% year-over-year), I felt like it was a good time to take some money off the table. I sold a chunk of my after-tax holdings and moved it over to a money market account where it is currently earning 4% interest. Getting into real estate is a good way to diversify my extremely index-fund concentrated investments. Real estate does not correlate well with the stock market. That is to say, in today’s stock market, if the S&P 500 moves one way, most stocks are going to move in the same direction. That is not necessarily true for real estate. When the S&P falls, real estate may stay flat, or even rise. So purchasing a rental property is a good way for me to have different, uncorrelated investment vehicles.
Reason 2: Achieve a higher rate of return than the S&P 500. As mentioned earlier, the stock market has experienced significant gains over the past year—and really, since 2010. It has been a historic bull market, and these recent gains prompted me to sell some of my holdings. While the market may continue to rise, I find it hard to believe it can maintain this pace indefinitely. I’d be satisfied with an average annual return of 7% to 10%, but I anticipate the market will eventually slow down.
Given this outlook, I aimed to invest in a property that could outperform the S&P 500 over the next decade. If the S&P 500 is expected to yield 10% annual returns, I needed an investment offering at least 15% annually to justify the effort. Real estate isn’t passive income; it involves time, stress, and responsibility. If I’m going to manage tenants, handle repairs, and pay property taxes, the returns must significantly outpace the S&P 500. Otherwise, what’s the point?
Reason 3: Try something new. I may write another blog post on this, but suffice it to say, I am bored. I’m ready to try something new and real estate investment seems like it might be fun. At the very least, I’ll make a couple good stories.
I created this blog to document my real estate journey and share stories that matter. There’s too much fluff online—articles like “10 Reasons You Should Buy a Duplex” that recycle the same tired, unhelpful advice. I want this blog to offer real value to those who are just starting out or considering a step into real estate.
I’ll share the highs, the lows, the wins, the losses, and the realities of investing. This isn’t just for readers, but for myself as well. It keeps me accountable, grounded, and might even serve as a resource for my future real estate decisions.
So…that’s it! Let’s kick this thing off!