OK, I’ll just say it: none of us are getting any younger. If that’s a bubble burst for you, I apologize—but let’s get that out of the way before digging into this one. We’re all getting older and, now or sometime down the road you, me and everyone else out there is going to need a retirement plan. And, given the economy, the lack of pensions and the low rate at which MOST Americans are saving, those plans need to look a lot different than they did when our parents and grandparents retired.
From where I sit, there seem to be a few retirement go-tos, all things considered. The first: save like it’s going out of style. Save 20% of your income in your 401K and IRAs. Save any other cash you can get your hands on in stocks, bonds, mutual funds and other investment accounts. Will you have money in retirement? Absolutely. Will you be broke until then, trying to fund your future and your day-to-day? Probably—and that’s no good either.
The alternative? Create a revenue stream in retirement. And that’s something a lot of people may balk at—the point of retirement, after all, is to step out of the rat race and not bust your butt the way you did in your working years.
But I’m not talking about a new 9-5, freelancing or picking up some work on the side. Nope—I’m talking about an approach that’s much more compatible with the notion of retirement. I’m talking about creating a passive income source—an income source you don’t have to work at or focus on every day. I’m talking about real estate investing as a retirement plan.
Why Real Estate In Retirement
There are plenty of PROS to leverage real estate investing in retirement. For starters, there’s the fact that YOU have control over your assets and, with it, your financial future. When you invest in traditional funds and accounts, you’ve got some other guy calling the shots—the board, the bankers, you name it. But who isn’t calling the shots? You.
It’s the total opposite in real estate investing. You make every decision, every time. If you want to kick rent up 10%, you can. If you want to flip a property, you can. If you decide to switch over and wholesale for a bit, go for it. The choice is always yours, from day one. And that’s powerful.
Real estate investing is also the only method you can leverage to build your wealth without having wealth. Imagine walking into your bank or a local lender and telling them you expect to make six-figures per year off of your investments for the foreseeable future. They’d probably laugh out loud from that alone. Now imagine you follow up with the fact that you have ZERO to invest. Not only would they laugh, they’d laugh you right out of the bank.
But, again, it’s the total opposite in real estate investing. Here, you can use other people’s money to get rich. I’ve shared a number of posts on this very topic (here, here and here), so read up if you aren’t already familiar with the process.
While this is certainly a plus for any real estate investor, it’s particularly important for those in retirement. Many don’t have the money to retire, and that’s exactly why they start looking into real estate investing. The no-cash approach is definitely a win for these retirees—they can create a powerful passive income stream despite their lack of existing wealth.
It’s even a win for those who do have cash on hand. Many retirees and almost-retirees are afraid of spending too much in these critical years. What if something goes wrong? What if the returns aren’t as good as my existing investments? Putting nothing into the pot really mitigates that risk. Sure, you’ve got a ton on the line, but there’s something about keeping all your cash intact that helps people sleep a little better at night.
And don’t forget about tax incentives. While virtually any income you make in retirement or out is taxed to the max, real estate investments come with a host of incentives and other serious financial perks. Not only will you be able to deduct interest on relevant loans, you’ll also be able to use your investments’ natural depreciation to your advantage. The minute you rent out that apartment, it’s depreciating and continues to depreciate over time—think normal wear and tear, right off the bat. You’ll also be able to deduct a good chunk of costs associated with renovations and improvements—your accountant will be able to steer you in the right direction. It’s all a business expense as far as the IRS is concerned.
So Why Doesn’t EVERYONE Do It?
Wondering why EVERYONE doesn’t invest in real estate if it’s such a spot-on retirement plan? There are lots of reasons, though I’d chalk a lot of them up to fear of the unknown. For our entire lives, we’ve been programmed to follow the straight and narrow—that is, to save, save, save for 40+ years, leveraging traditional investments to slowly grow our wealth. And after that? We retire and live on a fraction of what we used to. Because, by these standards, no work means no cash flow.
Creating long-term wealth through real estate investing really flies in the face of that old school approach—and I think that’s a lot for some people to digest. And that, in my experience, is what deters some potential real estate investors from getting in on the action. They don’t like to deviate from the norm. They feel comfortable with the one-foot-in-front-of-the-other approach to financial well-being.
Not me. I want that passive income. I want to retire and sit on a beach somewhere, drinking tropical drinks and cashing my checks every month.
By investing in real estate, you’re cutting through the clutter and creating a robust passive income stream for yourself and your family. The passive income stream works as hard as you do—if not harder. That’s what’s going to make you rich over time. And you’ll only get there by investing in buy and holds. Layer in wholesaling or rehabbing and you could be generating six or even seven figures fast. And once that side of your business picks up, it’s easy to automate and staff, making that a piece of your passive income puzzle, too.
This is all central to the Nick Vertucci Real Estate Academy (NVREA) curriculum so, don’t worry, there’s a lot more to come. If you haven’t graduated from the Academy, there’s no better time than right now. Check out my site to see when the next class is enrolling or when I’ll be hosting a workshop or seminar near you. We’ll talk passive income—one of my favorite topics—and the ways to create a powerhouse retirement strategy, whether you’re retired, about to retire or, even, decades away.