How to have your cake and eat it too with real estate investing

Picture going into your investment advisor’s office to talk about your impending retirement, 15 years from now. You proceed to tell her that what you’d really like to accomplish is to quadruple your investment AND draw a six figure income at retirement. Now picture her chuckling and you being dressed down to more realistic expectations. When you think about it, most other investment vehicles consider the growth of your capital and the income derived from it to be mutually exclusive. If you want income, you have to purchase dividend yielding stocks or mutual funds which tend to experience minimal growth. Or if you are trying to grow your capital, the securities that provide it don’t yield any income. That’s life after all: You can’t have the cake and eat it too. Right?

Except, there is an asset class that can provide strong capital growth and enough tax sheltered income at retirement. So the purpose of this post is to show you exactly how to have the cake and eat it too with real estate investing. Hint: It’s all about timing.

In a previous post, I have discussed how to create a six figure income with real estate investing. It’s one of our most popular reads on the blog, so if you have not yet read it, I strongly recommend it. But in a nutshell, it shows you how the acquisition of 9 well located, quality single family homes combined with a disciplined domino strategy leads to a free and clear real estate portfolio worth about $1.2M in a 12 year timeframe. At your retirement point, this portfolio would yield about $100k in annual income. The cash investment required to acquire such a portfolio would be in the $270-$300k territory.

So we invest $300k and turn it into $1.2M – that’s increasing your capital to four times the size it was when you started. And in twelve years time, that yield $100k in annual retirement income. How’s that for having the cake and eating it too?

So where’s the magic? As i hinted before, it’s all about the timing. Most long term real estate investors want to build cash flow but they need it at retirement, not right now. That is to say, they don’t need the cash flow from their properties to pay current monthly bills or subsidize their current income. Therefore, we recommend that between the starting point and their retirement point, the investor stay focused on capital growth. In other words, use cash flow produced from tenant paid rents to grow your capital by aggressively paying down mortgages till they’re free and clear. And when they’re free and clear, they will produce more income since no portion of incoming rents have to go to banks as mortgage payments. That results in the investor being able to draw a great income from their properties while still holding on to free and clear assets (their grown capital).

It’s a truly beautiful thing. And don’t let the capital invested in the example scare you – this strategy works well with fewer properties, too. Besides, when you consider that just between the ages of 30 and 45 people can (and do) invest over $200k in their 401(k) only to see it decimated by market downturns, it doesn’t seem such an outlandish figure after all. But in the end, you need two vital ingredients to make this a reality for you: A Blueprint and laser focused discipline.

I can help you with both. Give me a call on my cell at 713-922-2702 and let’s talk about your goals and how to achieve them.


photo credit ulteriorepicure

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