Are Rental Properties a Good Way to Fund Your Retirement?
Kevin Davidson and Steve Rosenberg discuss a few things you need to think about if you are considering using rental properties as part of your retirement fund.
How much cash flow do you want in retirement
Know what your goal is as far as how much cash flow you want from the property or how much you want to own in assets. Your strategy for reaching that goal is going to depend on the cash flow target you set and how many years you have left before retirement.
You will have a different strategy based on a 30-year goal as opposed to someone that’s retiring in five years. Someone may be able to buy a property with a negative cash flow that will go up in appreciation faster while someone else needs the cash flow now.
Set your goal and develop your strategy to reach that goal in your time frame.
When you’re looking at a property, understand that a piece of real estate is the same thing as a stock, an intellectual property, or owning a business. It is a mathematical equation, and the numbers have to dictate whether or not it’s a good deal for you based on your goal. What’s a good deal for me may not be a good deal for Kevin. The property and your goal need to match your strategy. What might at first look like a great deal could make you go bankrupt because you can’t sustain a negative property. It might be worth a million dollars more in five years, but maybe you don’t have the means to hold it for those five years.
There are multiple ways to invest in real estate
Holding real estate is a great way as long as you have the right strategy and financial ability to do it. There are countless ways to invest in a property, and you need to find the one that works for you. There’s no set playbook with real estate and that can be a bad thing or a good thing. You can buy and hold, buy and flip, buy at the tax lien, buy foreclosures, and rehab to name a few. There is also wraparound where you buy trailer parks or you could go into a syndication for apartments. The list of options goes on and on.
Strategies vs Goals
These are all strategies not goals. Flipping houses is just a strategy not an end goal. You are doing the flipping for a reason just as you might buy and hold. Normally the reason you do these is to create wealth. People often misunderstand the definitions of strategies vs goals, and it’s important to understand what a goal is and what strategy.
The strategy is how you are going to get to your goal. Investing should take in consideration the economy and real estate market because real estate is cyclical. Just like stocks, there’s a good time to buy as well as not a good time to buy.
Educating yourself is important.
Take the time to educate yourself to learn what is good and what is bad for you. Plan your strategy and make intelligent decisions. Don’t do anything hastily like jumping on the first deal you find. Surround yourself with a team that will help you find properties that fit your goals.
If you have any other questions about how to get into investing or if you are an investor looking to improve your portfolio, Steve is available for consultations. Request a 30 minute consultation today.