I retired early with a significant portion of my net worth in property and a smaller — but still meaningful — allocation to equities. Over the years I’ve seen readers ask a recurring question: what does a 70/30 real estate-to-equity split actually look like in practice for an early retiree? In this piece I walk through the mechanics, the risks, and a few realistic examples of income and liquidity management so you can judge whether a heavy real-estate tilt fits your objectives.
Why someone might choose 70/30 (real estate : equities)
A 70/30 allocation toward real estate and equities isn’t arbitrary. For many early retirees the priorities are: 1) generate stable cash flow to cover living expenses, 2) preserve capital, and 3) capture some growth to remain ahead of inflation. Real estate — whether rental residential, commercial, or REITs — often looks attractive because it can deliver recurring rental income, tax benefits through depreciation or interest deductions, and modest leverage to boost returns. Equities provide growth, diversification, and higher liquidity compared with bricks-and-mortar holdings.
In practice, a 70/30 split emphasizes income generation and capital preservation with a growth element. It’s not conservative in all senses (property brings concentration and operational risk) but it hedges market volatility differently than an equity-heavy portfolio.
What "real estate" means in this allocation
Real estate can be several things, and how you structure that 70% matters enormously:
When I model a 70/30 allocation I prefer to separate direct real estate (what I call "operational properties") from financial real estate (REITs/ETFs) because their cash-flow, tax, and liquidity profiles differ so much.
A sample balance sheet and cash-flow model
Below is a simplified example for an early retiree with a total investable asset base of $1,000,000 allocated 70/30:
| Asset class | Allocation (%) | Value ($) | Expected nominal yield / return |
|---|---|---|---|
| Direct residential rentals (2 properties) | 50 | 500,000 | 4% net cash yield (after expenses & mortgage) |
| REITs / real estate ETFs | 20 | 200,000 | 3.5% distribution + 2% price growth = 5.5% total |
| Equities (broad market / dividend funds) | 30 | 300,000 | 6% long-term nominal return (incl. dividends) |
From a cash-flow perspective that implies about:
Total predictable cash movement = $36,000/year before any portfolio liquidations or principal sales. That may or may not cover your desired spend, so you must plan for additional liquidity through scheduled equity withdrawals, refinances, or property sales.
Liquidity, sequence risk and withdrawal strategy
One of the first practical issues I flag with a property-heavy portfolio is liquidity. Direct real estate is slow to sell and transaction costs are high. That matters most when markets turn or when you need cash for planned or unplanned expenses.
Here are a few pragmatic liquidity strategies I recommend:
When I run withdrawal scenarios for readers, I stress-test against adverse outcomes: a 20% drop in REIT prices, a year with two vacant units, or rising interest rates increasing mortgage costs. A realistic plan assumes you can shift withdrawals to equities or tap credit lines temporarily rather than forcing property sales.
Tax and leverage considerations
Leverage amplifies returns and cash flow for real estate, but it also increases risk. Many early retirees use mortgage leverage in direct properties to increase yield — but you need to model rising rates. If interest-only or adjustable-rate debt exists in your portfolio, simulate scenarios where payments jump 1–3 percentage points.
Taxes are another major driver of net returns:
I encourage readers to work with a tax advisor to quantify the after-tax cash yield of each slice of the 70% real estate allocation. The headline yield can be misleading after depreciation recapture, state property taxes, and capital gains.
Volatility, diversification and correlation
A 70/30 allocation may reduce day-to-day portfolio volatility compared with 100% equities, but it introduces concentration risk by sector and geographic exposure. Local rental markets can move independently from national stock indices — that can be a benefit or a weakness depending on the shock.
Mixing REITs into the 70% slice increases diversification because REITs often have national exposure and lower idiosyncratic landlord risk. If you own local properties plus REITs, your portfolio benefits from both direct control and market diversification.
When 70/30 might not be right
There are clear cases where I would advise against such a heavy real estate tilt:
In those cases, a more balanced or equity-heavy portfolio with diversified income streams (bonds, dividend equities, annuities) may be better.
Practical next steps if you’re considering 70/30
If you’re thinking about adopting a 70/30 real estate-to-equity allocation, here is a short checklist I use with clients and readers:
Crafting a retirement strategy with a heavy real estate weighting requires honesty about day-to-day tolerance for landlord tasks, willingness to hold through local market cycles, and a plan for liquidity. When done thoughtfully, a 70/30 mix can provide durable cash flow and inflation resilience — but it also demands active risk management and a clear playbook for withdrawals and stress events.
