This week, buyer clients reached out to let me know they were meeting with their financial advisor. The question on the table: is now a good time for them to buy, or should they hold and continue renting?
I haven’t heard back yet. Often, that means the advice was to wait, and from a traditional investment-portfolio lens, I understand why. But this couple shared something with me that changes the conversation. Their goal is to own several investment properties to create retirement income and build generational wealth for their children.
When that is the goal, the question is no longer just “should we buy?” It becomes “what is the most practical path to owning several properties?”
How do financial advisors typically view a primary home?
Many financial advisors leave the home you live in out of your investment allocation entirely. Firms like Wealthfront and educators like The White Coat Investor take the position that a primary residence counts toward net worth but not toward your portfolio mix, largely because you cannot rebalance a house the way you rebalance stocks and bonds. When advisors do include real estate, it is often through REITs, commonly in the 5% to 15% range.
That approach makes sense for managing a stock and bond portfolio. But it can overlook one of the most accessible ways everyday buyers become real estate investors: the home they live in first.
Do most millionaires invest in real estate?
Yes. In a Morgan Stanley survey of millionaire investors, 77% said they owned real estate, making it by far their most popular investment outside of stocks and bonds. About 35% owned REITs.
As for how much of their wealth is in real estate, Capgemini’s 2026 World Wealth Report shows real estate makes up about 19% of high-net-worth portfolios, alongside roughly 25% in stocks, 20% in bonds, 24% in cash, and 12% in other alternative investments. Because Capgemini measures investable assets, that real estate figure generally excludes the home they live in.
In other words, real estate is a meaningful part of most wealthy portfolios, but it works alongside traditional investments rather than replacing them.
What is a REIT, and how does it diversify risk?
A REIT, or real estate investment trust, is a company that owns and typically operates income-producing real estate, according to the SEC’s investor education site. REITs can own apartment communities, office buildings, shopping centers, hotels, warehouses, self-storage facilities, and even mortgages. When you buy shares of a publicly traded REIT, you own a small slice of that entire portfolio. To keep their tax status, REITs generally must pay out at least 90% of their taxable income to shareholders, which is why many investors use them for income.
REITs diversify risk in a few ways:
- Many properties instead of one. If a single tenant leaves or a single roof needs replacing, it barely registers across hundreds of properties.
- Many property types and locations. A downturn in one city or one sector does not sink the whole investment.
- Liquidity. Publicly traded REITs can be bought or sold like a stock, unlike a house, which takes weeks or months to sell.
- Low entry point and no landlord duties. You can invest with a small amount and never take a tenant call.
There are tradeoffs. REIT prices move with the stock market and can be volatile. You do not control the properties, you cannot use owner-occupied financing, and REIT dividends are often taxed differently than rental income. Financial advisors who include REITs commonly recommend somewhere in the 5% to 15% range of an investment portfolio.
So which is better: REITs or owning rental homes?
Many investors use both. REITs offer broad, hands-off diversification. Owning a home directly offers something REITs cannot: the ability to buy with owner-occupied financing, live in the property first, build equity through your own payments, and decide when to hold, rent, or sell. For buyers whose goal is several rental properties, the home they live in first is often the most accessible starting point.
What is the easiest way to build a portfolio of investment properties?
In my experience, the most practical and economical path looks like this:
- Buy a home you will live in as your primary residence.
- Live in it for at least 12 months.
- Transition it into a rental property.
- Buy your next primary residence and repeat.
Over time, each home you move out of can become a long-term rental that builds equity, generates income, and contributes to the retirement and legacy goals many of my clients share.
Why does buying as a primary residence first make such a difference?
Owner-occupied financing often comes with lower down payment options and different terms than investment property loans, which commonly require a larger down payment. That difference can make each step in the process more attainable. I am a REALTOR®, not a lender, so I always encourage buyers to talk with their lender about which loan options are available to them and how they fit their financial goals.
How long do you need to live in a home before renting it out?
Lenders commonly expect you to intend to occupy a home as your primary residence for at least a year, but requirements vary by loan type, so confirm the details with your lender before you buy.
There is also a tax consideration worth knowing about. Under current IRS rules, homeowners who have owned and lived in a home for at least two of the last five years may be able to exclude a portion of capital gains when they sell. Living in a home longer before converting it can preserve that option down the road. A tax professional can walk you through how this applies to your situation.
Have I seen this strategy work locally?
Yes. In the last four-plus years, I have helped 26 sellers keep their primary home and transition it into an investment property instead of selling. Many of them are military families who received PCS orders and realized that the home they were leaving could become a long-term asset rather than a one-time sale.
What should you consider before becoming a landlord?
Owning rentals is a business. Before you commit to this path, plan for:
- Cash reserves for repairs, vacancies, and turnover
- Whether the expected rent covers your mortgage, insurance, taxes, HOA dues, and maintenance
- Whether you will self-manage or hire a property manager
- Landlord responsibilities under Colorado law
- How rental income may be counted when you qualify for your next home
Frequently Asked Questions
Is renting ever the right choice?
Absolutely. If your timeline is short, your finances need more runway, or you are unsure where you want to live long-term, renting can be the smart move. The right decision is the one that fits your goals.
Do most millionaires build wealth through real estate?
Most millionaires own real estate, but the often-quoted claim that 90% made their wealth through it is not supported by data. Research such as Ramsey Solutions’ National Study of Millionaires found that a common pattern is a paid-off home combined with consistent retirement account investing. Real estate typically makes up a meaningful share of wealthy portfolios, working alongside stocks and bonds rather than replacing them.
Are REITs safer than owning a rental property?
They carry different risks. REITs spread risk across many properties and are easy to sell, but their prices rise and fall with the stock market. A rental home concentrates risk in one property but gives you control, leverage through financing, and the option to live in it first. A financial advisor can help you decide how each fits your overall plan.
Can I keep my current home as a rental when I buy my next one?
Often, yes. Your lender can explain how your current mortgage, the expected rental income, and your reserves factor into qualifying for your next purchase.
Should I talk to a financial advisor before buying?
Yes. I encourage every buyer to build a team: a lender for financing options, a tax professional for tax implications, a financial advisor for the full picture, and a REALTOR® who understands how to evaluate a home as both a place to live and a future rental.
