Part 3 of 3-Part Series
As such a massive part of any investment strategy, it is no surprise we have a special formula derived for this asset specifically. Our real estate ratio is the following:
What annual personal spending is has been defined many times previous ratio’s, but as a refresher, it is the total amount you have spent over the year for living and luxuries. Total real estate equity takes the sum of all equity you have in real estate including personal, business and investments. The real estate ratio outputs the number of years you could support your current lifestyle with only the equity in your real estate holdings. Importantly it also shows how much of your wealth is invested in real estate and if it aligns with our investment strategy or if it needs to be balanced for your best risk and reward returns.
Real estate investment is generally considered a low volatile or very stable, safe investment in all circles of investing. This is based on history as well projections and forecasts for the future based on the reasons discussed earlier. However, that doesn’t mean that all of your investments should be in real estate, just as they should never all be in one basket! This is where we use the real estate ratio, as a part of our overall approach to make sure your financial wealth is in the best position possible.