GET RICH SLOW

By: Mark Frentz
www.akerahomes.com
mfrentz@akerahomes.com

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A Simple Method Over 30 Years

A week ago I was helping a family with some retirement planning. They were strapped for cash and didn't have money to put into purchasing rental properties even though they understood how much their money could grow in real estate. The advice I gave them? Forget about saving for real estate! They already own one property and that property will multiply over the next 30 years to allow them to purchase more property without extra cash infusions. I'll explain this really soon, but for now I want you to realize that this family was ecstatic. Now they could begin to rest knowing that their future would be taken care of and what they needed to focus on was not saving every penny for their retirement, but rather simply doing life together as a family and allowing the retirement to grow as time continues to roll on. This is almost exactly the opposite approach that most people I know take toward retirement. People I usually talk to aren't stressed about retirement and are putting away a few dollars into their RRSPs every year. This is often actually killing their retirement because RRSPs were never even meant to help someone retire on their own. Because of the average person's lack of knowledge about how investing works and what their retirement needs are, the average family becomes more and more stressed about retirement as times goes by rather than, like the first family I mentioned, more and more relaxed. So... how can you retire after 30 years of getting rich slow?

Getting Rich Slow

Here's the plan for this strategy: How could you retire with over $20,000 each month ($240,000) in income from real estate investing in around 30 years without saving an extravagant amount of money each month? Before we get into it I want to warn you... Real estate is easy to do, very difficult to do well. If you have a great understanding of how real estate investing works this strategy is fairly simple and easy to realize. If, on the other hand, you have no idea what you are doing in real estate investing the only way to make this happen is by communicating and joining with someone else who does understand what she or he is doing. If you join with someone else, you will pay for their services and this won't look exactly the same... but say you only realized half of this each year and you had none of the work with finding and maintaining that real estate portfolio over the 30 years of this strategy? Would this still be appealing if you invested the original money once and then, 30 years later, you retired on only $120,000 each year? I'm guessing for most people this would still be pretty exciting. On to the strategy...

If real estate increases in value by 3% per year (this is conservative, but realistic) you can refinance your first property every 5 years and pull out enough money to purchase a new property. That means you portfolio doubles every 5 years! If you purchased a rental today, you could have 2 rental properties in 5 years, 4 properties in 10 years, etc. What this could look like is that you would own 16 properties in 20 years! Now, there properties would not be cash flowing by much.... they would be cash flowing a tiny amount and your extra money would be reinvested back into them. For the last 10 years you would simply keep putting all the cash you make on the properties. Also at the end of the last 10 years you would be able to sell around 4 of the properties to pay down the mortgages on the rest of them. That would leave you with 12 properties without any mortgages. At that point you would simply live on the cash flow from each property (today that would be around $2,000 per property per month if they are all suited). This would total far more than the $20,000 each month that I suggested at the beginning of this post. You would actually be closer to $24,000, but I like to play things conservatively.

Potential Problems

I've tried to use simple numbers and estimates, but there are some obvious problems with my example. The biggest is that the market does not climb in ANY city by 3% each and every year. There are dips and peaks in every market. The ideal is that no matter where the market is you can refinance the existing properties in order pay for new properties whenever it is possible... that will AVERAGE 5 years. It won't be exact. Another large problem that is obvious to me is that you may have some difficulties qualifying for 16 properties. If this happens the simple fix is to begin purchasing properties with over 8 doors in them. These properties will qualify themselves and isn't actually a big problem. You simply need to understand what you are doing or, as I mentioned earlier, you can pay someone else to take care of the larger details. Lastly, you may not have 30 years until retirement... If you have far less time you may need to put more money into properties each year, but the important point I'm making is that you need to make a decision to get into property NOW, not later.

Summary

The beauty of this basic plan is that if you have the will/motivation to save enough to make sure you get into property as early as possible you are then able to leverage your existing investments to grow your retirement each and every year. The last thought I want to leave you with is this: If it is too late to really take control of your retirement it typically is not too late for your kids or grandchildren! Teach them and guide them. If most 18 year olds spend the first few years of their working lives to purchase a property, they then can go to school or work or not and they have already make huge steps toward taking care of their own families and retirements.



As always:

Here's to your future of risk-averse investing!

If you would like to learn more about investing in real estate please contact me at the email address listed at the beginning of this article or go to my website at: www.akerahomes.com/investing-in-real-estate.html