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separate portfolios of different DGI types
#1
There are a lot of everdevelopingchanging ideas in my head, some written down but also changing. I would like to ask for some input on a multi-bussiness plan.
As I wrote before, my wife an I are self-employed. She owns the bussiness and I am her employee (office and field service). I own the premisses (shop) and rent it to her. With retirement, we will loose income from bussiness and rental property - bussiness and premisses are comprise an integrated package and must be sold together or given up.
I plan to replace the income stream from the bussiness by a DGI portfolio. 
Our tax consultant recomments to replace rental income from the shop by buying other rental property. 
My gut feeling (and experience) is, that with rental property I will not be Time and Location Independend (TLI). So I am interested to replace the rental income by a second type and separate DGI portfolio from the first, holding REITs for example:

DGI portfolio type I :  70% of stocks at an average of 3% dividend yield, and say 7% dividend growth
DGI portfolio type II: 30% ... at 7% yield and 3% DGR.
This would be two bussinesses.

About time to get to the question(s):
What is your opinion and/or experience with replacing rental property by a stock portfolio?
What is your opinion and/or experience in running type I and type II seperatly or as one hybrid portfolio?
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#2
Question #1 - I have zero interest in the headaches that go along with being a landlord, so it would be stock portfolio hands down for me personally. However, I can see how the diversification of holding physical property rather than stocks would be appealing.

Question #2 - The only reason I could see to do them separately is if you have two different types of accounts that you are making contributions to. If you have a tax advantaged account versus a cash account for example. Also depends on your tax bracket, because if you are in a lower tax bracket, qualified dividends work great in a cash account.
My website: DGI For The DIY
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#3
Hi Eric,
yep, being a landlord in a building of shops and flats with 26-owners is a headache. We will have to install a separate doorbell, reachable for wheelchair users. I need to write 25 letters to get signatures on consent.

Q2) in Germany all dividends and capital gains from stocks are taxed the year they come in.

I have noticed on SA that some authors track DGI stocks and REITs separately, which reads like running two stock-bussinesses. Others seem to have one set of criteria and do not seem to make a difference if a company trades in cars, pharmaceuticals or rentals.
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#4
I personally no longer own any rental real estate. Like you and EricL said, it's too much of a headache. Though after seeing what you said about being a landlord in Germany, my rental property was not a headache at all compared to what you have to deal with. I still have rental real estate exposure through O and DLR. While I feel both are overvalued currently, you can still get exposure to rental real estate without actually owning the property. Yes, you can get better returns by owning property instead of the stock, but having the stock ensures no additional headaches that come with being the landlord. I'm happy to reduce my yield to not have to deal it.
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#5
(07-19-2016, 11:24 AM)ChadR Wrote: ... to reduce my yield to not have to deal it.
Interesting point. Sounds like a general definition of retirement.  Idea
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#6
I have never had an interest in rental real estate either. Doesn't matter if commercial or residential. I have been a tenant in both aspects and, although I never would bother the landlord for picayune stuff like a drippy faucet, I know many that do and at any hour they feel like it.

Martin, I don't know anything about German tax or securities law but, unless there is a specific reason to separate the funds for those reasons, I would keep all my funds in the same account or at least the same brokerage. I agree that, for your own curiosity, you could keep the funds segregated in a spreadsheet but the larger pot of money you have with an institution oftentimes let's you negotiate with them for comps, lower commissions or whatever.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan


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#7
Another thing to consider with owning physical real estate...

My aunt and uncle owned 5 rental properties, with my uncle doing pretty much all of the work on them (repairs, finding tenants, collecting rent, etc).  When my uncle passed away; my aunt not only had to deal with the grief of losing her husband, but also had to deal with managing the rental properties. It was really tough on her.

With REITs you don't have to worry about this.  The CEO of Ventas doesn't call at 2AM asking to fix a broken toilet at one of their hospitals.  The dividends just continue to roll in every quarter without any extra work.
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#8
Hmm ... more supporters to my feeling about rentals. Looks like I need to wake up the devil's adovacate in me. 

DW, 
it might make sense to have two accounts for separate income for a German couple in retirement. The one with low or no income can be included in health insurance of the other. Also, if one  broker goes broke (err... pun or common etymology?), money or shares may be gone. I never dared to ask Interactivebrokers what will happen to my shares, if all their servers burn down. 

One spreedsheet for two stock bussiness may work, if I add "discipline" to the bussiness plan. In earlier years, I caught myself to use proceeds of a low risk stock to buy highly speculative stuff. 

Cav.,
thanks, I almost overlooked the legacy part of the bussiness.  it. The devil's adocate is awake now: My wife is older than me but with respect to family health records possibly will outlive me. And although she graduated and runs a bussiness, she is .... umm, challenged(?) concerning paperwork. She would rather rapair a rental property than to writing a letter or an email or use the internet. Looks like I should keep it as simple as possible. 

Still, I wellcome more opinions. Perhaps someone how keeps REITS or other stock types as a bussiness separated from DGI ?
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#9
I own Realty Income (O) and MCD ("real estate investment", correct?). Besides that, I don't want to own real estate. Sure, it may be a great investment for some, but not my personality type. I don't want to be involved and have to fix an a/c or find tenants. No, thank you.

As for separate portfolios, I use my Roth IRA and traditional IRA differently based on tax treatment, along with regular brokerage & DRIP accounts.
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