Real Estate Investment Retirement Tips
You May Be Only A Deal From Retirement!
A sound real estate investment retirement strategy should include owning commercial property, ie. property that produces positive cash flow month after month, with little or no effort on your part.
When it comes right down to it, (at least from a financial point of view), what you and I (and everyone else) are seeking is to get into a financial position in our lives where the money that flows into our bank account every month from passive investments outweighs the money that flows out to pay for the everyday things we need in our lives.
The only real variable in that equation is how much money do you "need" to live each month. Once your passive income exceeds that amount...you can retire!
Now, the key word here is passive. And that's where what I call "real estate investment retirement properties" come in to play. (And no, I don't mean investing in retirement homes.) What I am talking about is real estate that "cash flows" every month with minimal or no effort/management by you, the owner. And the type of properties that typically fit this description are commercial properties (warehouses, strip malls, apartment buildings, office buildings etc.)
For the past 14 years, this is exactly the type of properties that I have invested in.
There are lots of different ways to make money in real estate, including fixing and flipping and development, to name a few. But the fact is, that you have to "work" at those types of real estate investing methods to generate money on an ongoing basis. Once you stop, the money stops coming in. The same is not necessarily true of real estate investment retirement properties. Yes, you may have to work hard in the beginning to get the properties running smoothly, but eventually they can almost operate on autopilot.A Real Life Example Of A Real Estate Investment Retirement Property
I have an apartment property in my portfolio that I have owned for the past ten years now. What is left of the mortgage is due for renewal in about 7 months. Even with the mortgage in place, the property cash flows. I always refer to this building as "a great little building", because it has cash flowed ever month since I bought it, and it runs like a charm. It's in great shape and I have full time management that takes care of everything for me. (It is located in a town that is a 14 hour drive from where I live so I have to have full time management.) I literally just "cash the checks each month" and watch the mortgage balance decline. A "true" real estate investment retirement property.
My plan with the building is this. When the mortgage comes due (about $490,000 left on it) I will pay it off leaving the building mortgage free. (I am able to do this because I have recently sold off some other projects and have money sitting in the bank.) Once the mortgage is paid off, the monthly cash flow will be in the $9,000/month range, and the stress level for me on this investment will be in the 0% range. A vacancy? No problem. A capital expenditure? Yawn. Guess I'll have to pay it, but there will still be money left over. In fact, I could (and just might) keep this building for the next 25 years and just let the cash come in, headache free. I don't know about you, but that's the kind of real estate investment that I love. And that is exactly why I have focused on commercial property investing for the last 14 years.
One more thing to keep in mind. That is just one 23 unit apartment building! What if you had, say, 5 of those at $9,000/month? Would that type of cash flow cover your expenses and allow you to retire?
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Truth be told, when I first started investing in commercial properties, I wasn't necessarily focused on retirement. I was in my late twenties and what I was focused on, was creating a successful real estate investment business and creating a monthly cash flow. (The more passive that cash flow was, the better of course.) Looking back however, I was in fact trying to "retire" in a sense. My goal was to create a passive monthly cash flow that exceeded my monthly expenses, which I accomplished after only a few deals. I suppose I could have technically retired in my early thirties.
The reality is, I don't ever see myself retiring. And that is by choice. Even now I work when I want to, I work on things I love (like creating this website and sharing my knowledge with you) and I create ongoing passive income. When I take my kids to the beach for the day I still make money, from real estate and my other businesses. And like my real estate, my businesses have significant equity in them.
A final thought on my theory or "definition" of a business. For me, a business is only a business if the owner doesn't have to show up and it still generates a profit. If you own a business and that business only functions and makes you money if you show up every day then what you have is a job. Not a business. And that's why I love commercial real estate investing. But that's another story.
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