You Can Retire Sooner Than You Think by Wes Moss

Author:Wes Moss
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2014-03-14T16:00:00+00:00

Rental Income

There are two approaches you can take with rental income.

1. Wait for retirement and then use a portion of your nest egg to invest in income-oriented properties.

2. Become an accumulator of rental real estate over time.

I saw a lot of individual investors use the first approach successfully in 2009 and 2010, when real estate prices were depressed. Home prices came down close to 30 percent over a three- or four-year period. Rental demand increased as fewer and fewer people were willing to take on mortgages, so it became financially productive and logical to buy a house for $100,000—if you could generate a monthly rent of at least $833 from it, equaling 10 percent per year on your money.

Does this interest you? Great. Below is a quick-and-easy how-to. You can do either of the following:

• Buy a house for $100,000—in cash, so there’s no mortgage payment—generating approximately $10,000 a year in gross rental income (a 10 percent gross yield on the cash you’ve invested).

• Put some money down (say, 20 percent) and borrow the remaining 80 percent from a bank. As long as you have a reasonable interest rate on the loan, you should still have decidedly positive cash flow from the property.

In both instances, you now have an income-producing property that will pay you monthly cash flow for as long as the house is still standing and you have renters. I have seen countless happy retirees use this methodology and turn a portion of their retirement nest egg into income-producing rental property. (Remember Nick and Katie Benjamin?)

This can be a very effective use for a portion of your retirement nest egg. Not only is it very effective at generating cash flow, it can give you a part-time job managing the properties if you have a few of them. Fixing broken toilets, scheduling air conditioner repairs, patching leaky roofs, making sure the lawn is mowed—all joyous work for those who love to be handy!

Some people really enjoy being a landlord. The Benjamins love it. I work with lots of happy retirees (and aspiring happy retirees) who love it as well. It keeps them busy and keeps another stream of income trickling into the reservoir. Furthermore, it helps solve for the strange, listless no-man’s-land some retirees experience when they go abruptly from full-time work to having nothing to do and no income to earn.

The second approach to rental income—and the better way to do it in my opinion—is to become an accumulator of rental real estate over time. The sooner in your life you start accumulating property that generates monthly rental income, the more significant it will be by the time you get to that age of financial independence.

Robert Kiyosaki’s New York Times bestselling book Rich Dad, Poor Dad puts a big focus on rental income. It was really popular in the decade of the 2000s because at that time real estate paid a nice income, and nearly all types of property steadily rose year after year in value. A lot

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