House on FIRE

For most people their largest asset is their house, for people on FIRE there is no difference. We were lucky that we bought our house in Houston at a low in the market, so this meant when we sold earlier in the year we made a good profit. We could then buy out right here in Portland.

The Portland housing market is strong right now, and often shows up on lists of the most expensive housing markets. We are obviously hoping that the market continues to rise as we have bought possibly near the top of a market. The market has gained by an average of 10% a year over the last 5 years according to the Case-Shiller home price index. This compares with a national rise of about 6.5% a year. Houses have recovered any loss after the 2008 crash.

Despite this though Portland is still the most affordable major city on the West Coast. San Francisco, Seattle and Vancouver are unaffordable for most people. Even in Portland the median price is over $300,000 and prices in the main city are well over $500,000.

It will certainly be nice if the price keeps going up, but we are certainly not expecting to increase by 10% a year. However it is of course our biggest investment.

The attractiveness of the real estate market due to the good increases over the last few years means that real estate outside of a primary residence is often used as apart of a diversified portfolio. There are several ways to do this, and the most common way is to buy a second home or condo and then rent out. Essentially to become a landlord.

This could be attractive but there is large investment in looking out for tenants, dealing with repairs and upkeep. It’s not as easy as just buying a place and standing back. A lot of FIRE bloggers have nightmare stories about renting out a property.

The returns though could be impressive. When renting, a common number is the 1% rule  which says that you should charge 1% of the property’s value each month. So if you bought a $500,000 property you should be able to rent this for $5,000 a month. This will be enough to cover the mortgage, property taxes and any upkeep and repairs. Hopefully after this you will have some monthly rent left over which will give you some passive income each month. Even if you don’t and you are breaking even each month, then once the mortgage is paid off you essentially have a free house as your tenants have essentially paid the mortgage for you! Hopefully as well the property has been gaining in value over time as well.

However there is a way that has becoming popular to invest in property without the huge investment and with less overhead. This is by using a version of crowdfunding, the most popular version of this is This site allows people to invest as little as $5000 in property (typically office buildings and apartment complexes) along with other investors. Over time investors should receive good returns on their investment as the property is updated and sold.

This seems like an interesting business model and has the potential to return 10% or more annually, although of course like any investment there is a certain level of risk. Quite a few FIRE bloggers have invested in this company and I admit it looks quite an interesting approach to portfolio diversification.

At present we don’t have the free cash to really consider a large real estate investment, however I admit it is something that appeals and might be something we return to in the future.

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Reality shares does sound interesting. I have not done any homework/research on R eality shares to have a strong opinion but what I have read from other bloggers it sounds like a sound investment that can diversify your portfolio.