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Getting Started in Real Estate Investing Later in Life

Today we are going to talk about Getting Started in Real Estate Investing Later in Life. Suppose you are 45 or 50 or older and have yet to have really started to save for your retirement. Perhaps you are starting to get a little anxious about what you can do. I would recommend investing in Real Estate as it provides you more control and is less volatile than stocks or bonds. At this late stage you need to be more careful with your investing as you can’t afford major mistakes or setbacks. You need to get started soon, though. As the saying goes, “The best time to plant a tree was 20 years ago, the second best time is today.”

With that in mind I would stay away from some of the more risky strategies like Flips, New Construction or Land Development. These not only require more money up front but they also are more tied to economic ups and downs. Instead, I would recommend sticking with long term rentals. How you get those rentals can vary: you can build new, refinance and keep as rentals; you can buy properties in trouble, fix them up and then keep them instead of flipping them or you can buy properties that are already rentals and just keep them as rentals.

If you don’t have a lot of money to start you can use some strategies found in my Cash Management book like Agreements for Sale, among others. This is where you make an offer to buy a property in the future, say 1, 2 or 3 years out. You agree to the buy it at the current price, you pay the seller a deposit which they keep, the property stays in their name but you manage it, pay the bills and keep the cash flow for the length of the contract. At the end of the contract you buy the property in full. This strategy lets you pay a little down now and control the building for a few years while the building appreciates and you can save some money to take it over.

One of the benefits of starting later in life is that, during your fifties, you are typically in your prime income producing years. You and your partner are making a higher salary than ever before in your life. (Not always but that is the norm). Your expenses are also lower than ever as your kids are, or soon will be, out of the house. This saves you money on gas, clothing and food. Higher income and lower expenses lets you save at a much quicker rate than ever before. Savings you can put into your real estate investing.

You also have more time now. You can do your own property management and repairs which will further improve your cash flow. It is cash flow that you really need to focus on in this stage of your investing career. Whether you buy your units or fix and refinance you should be putting 30% to 35% down and keep the mortgage payments as low as possible. You don’t want to be fighting to make mortgage payments if a downturn in the economy pops up and rents go down.

As a general strategy I would recommend getting 8 or 10 rental units fully paid off within 15 years. Extra money and savings that come your way should go towards buying properties and paying down existing mortgage debt. In 15 years, with no mortgages and you doing your own management and taking care of most of the repairs, the rental income will go mostly into your pocket. The tenant will be paying utilities so you will just have to worry about property taxes and insurance. This relatively high cash flow from 8 to 10 units will make a very nice little monthly retirement income.

If you would like to discuss this or have any other real estate investment questions please do not hesitate to get in touch with me.