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After reading Rob Carrick's article this morning on Blazingly simple portfolio with the issue about no bond allocation got me thinking. (dangerous)! Could one value ones real estate as a form of fixed income. The options of downsizing later in life or line of credit on debt free real estate ( if needed) could be a balance against dividend investing such as Canadian utilities, telecoms, banks, etc. So I guess my question is how do you handle real estate in asset allocation?
 

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I manage property for a guy who has 5 brand new cash flow negative condos for his retirement fund. He's doing very well already but has no principal residence. He figures he'll pay them off and just have the income for his retirement.

BTW it's not his only plan, he also does very well in the stock market and has a sizable portfolio plus he has a business that is close to recession proof.
 

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I manage property for a guy who has 5 brand new cash flow negative condos for his retirement fund. He's doing very well already but has no principal residence. He figures he'll pay them off and just have the income for his retirement.

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The way OP phrased his question I did not interpret it as referring to a portfolio of investment properties. In any case someone who is building his retirement/investment plan on a real estate portfolio is somewhat beyond the scope of the normal use of "asset allocation" in an investment strategy.
 

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After reading Rob Carrick's article this morning on Blazingly simple portfolio with the issue about no bond allocation got me thinking. (dangerous)! Could one value ones real estate as a form of fixed income. The options of downsizing later in life or line of credit on debt free real estate ( if needed) could be a balance against dividend investing such as Canadian utilities, telecoms, banks, etc. So I guess my question is how do you handle real estate in asset allocation?
When you say "ones real estate", I take that to mean your singular personal residence. If I was incorrect, please disregard.

In a sense, home ownership is yielding monthly "rent" that you otherwise would have to pay. So in that sense, you could count it as a fixed income asset.

There are some reasons why that may not be what you want:

- it's an illiquid asset (you can't easily sell the house and kick out the tenants ie. your family)
- it's an undiversified asset
- it's (for most people) a form of leveraged investing

All these things put together make the typical personal residence much more risky and unpredictable than the typical fixed income (ie bonds). So I'd say personal residence makes a poor substitute for a traditional fixed income asset like bonds.
 
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