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Why Real Estate?

5 Reasons You Can't Retire Without Owning Income Property

Approximate Reading Time: 3 Minutes

Learn > Why Real Estate? > 5 Reasons You Can’t Retire Without Owning Income Property

Published: December 1st, 2014

According to the most recent Retirement Survey from Transamerica, more than half of working Americans (58%) expect to retire after age 65 or do not plan to retire at all. Why? Because if you’re like many retirement-aged (or almost retirement aged) Americans, you don’t have enough money to retire. And you know it.

It’s clear that the traditional ways of saving for retirement are not working anymore. So, if you don’t want to end up like the 50% of Americans who die with less than $10,000 in assets…you need to make a change. In this article, we’ll discuss the reasons why you won’t be able to retire AND, why your solution is to invest in real estate.

You Will Never Be Able To Retire:

If you’re like most Americans it’s true. That’s right, you may never be able to retire:

  1. 1. Saving 10% of your income for retirement and 10% for emergency savings is not enough. If you don’t use leverage, you will need to flip these ratios and live on 20% of your income and invest the other 80%. Who can do that?
  2. 2. Medical advances are helping people live much longer. Are you set up to potentially take care of yourself and your family for 20 or even 30 years after you retire? Do you have any idea how much money you will need for that?
  3. 3. In 1984, a postage stamp was 20 cents, bread was 71 cents, gas was $1.27 and an average new car $6,294.00. If you hope to retire in 30 years, you will need to triple the amount of income you’d need today. And once you are retired, you will need to make sure your remaining nest egg is still growing faster than the rate of inflation, which is usually not the case for retirees who tend to stick with ultra-conservative investments. What do you do?
  4. 4. Traditional retirement plans are simply not dependable. You would have been happy to retire in October 2007 when the Dow hit an all time high of 14,164. But if you waited 18 months when the Dow plunged to 6,594, you would have lost half your nest egg and probably need to go back to work.
  5. 5. If you are able to retire, what is generating your monthly income? A life’s work of savings all tied to the stock market’s whims. What would bring more reliability and comfort?

Your parent’s retirement plan just won’t work for you today. It’s time to come up with a new solution that will not only benefit you, but also many generations to come.

In my book, Retire Rich with Rentals, I share the strategies I learned on my radio show after interviewing self-made millionaires over and over again to understand their strategies and their secrets.

Can Buying Rentals Help You Retire?

Here’s 5 ways they are able to beat the odds, and so can you:

  1. 1. When acquiring income property, you can use just 20% of your own cash and borrow 80% of OPM (other people’s money). If you rent the property out, your tenant will pay off the OPM through their monthly lease payments. This is the ultimate form of leverage because in 30 years, you can own the property free & clear. Or better yet, you can pay it off in 15 years or less if you use any extra cash flow from the rents to accelerate the payoff of the loan. This is much easier than saving 80% of your income for retirement and living on only 20%.
  2. 2. If you do own rental property free & clear once you’re retired, you don’t have to worry about depleting your savings if you live a long, healthy life. You can live off the rental income and not touch the principal. But if you do need access to funds for medical reasons or perhaps your kid’s college, you can get an equity line fairly easily. Your on-going lease payments will pay off the debt for you once again.
  3. 3. Inflation is not necessarily a negative thing for landlords. Historically, property values have increased faster than the rate of inflation. Rents also tend to increase along with inflation.
  4. 4. In 2008 when the stock market collapsed, real estate asset values also collapsed. However, rents continued to rise so landlords actually enjoyed pay raises during that recession. Asset values are not a great concern to buy & hold real estate investors because they don’t intend to sell. They just live off the cash flow from the rental income.
  5. 5. Wall Street has turned into a bit of a gamble. Headline news can literally rock the markets overnight. This is not the case for real estate. No matter what the news, people want and need shelter. Plus, the U.S population is growing by 4.5 million people every year. Permits and housing starts are lagging with only 1 million new homes, so there will be demand for housing for years to come.

Author

Kathy Fettke

Kathy Fettke

Kathy Fettke is the Co-Founder and Co-CEO of Real Wealth Network. She is passionate about researching and then sharing the most important information about real estate, market cycles and the economy. Author of the #1 best-seller, Retire Rich with Rentals, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR and CBS MarketWatch.

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