Funding Your Retirement with Income Property

“At the point the money hits your hands, you have the power to determine your financial future.” ~ Robert Kiyosaki

Real estate investments as a newer asset class in your well-diversified retirement investing strategy? YES! Real estate investments are gaining popularity, even in the workplace through employer-sponsored plan offerings and 401(k) plans.

If your employer currently offers real estate funds or REITs (real estate investment trusts), we recommend utilizing a professional retirement advisor (if you don’t have one already) to help you better understand your options and if working alongside your employer is the right option for you. You should review specifics such as risk tolerance, economic climate and your own personal timeline/goals – will this opportunity quickly fund your retirement? Or will it be an extremely long time before you see its gains? When do you want to retire?

We work with seasoned investors as well as new investors to locate and negotiate the best deals in Tampa Bay – the type of deals that will bring in enough rental income on a monthly basis to fund your retirement.

Let’s take a look at how much income one Tampa Bay rental property could potentially generate for retirement.

(These examples are based on some of our clients’ past performance. Past performance is not necessarily indicative of future results andthere are absolutely no guarantees. Hypothetical performance results have inherent limitations)

Investor: Desired Retirement Age: Investment: Sale Price: Necessary Repairs: Rent: Cap Range: Cash Flow:

30 Years Old60 Years OldA Single-Family Rental Property $36,000 $5000 $1200/month 23%-27% $758/month, $9096/year

Note: The Cap Rate is a ratio used to estimate the value of income producing properties. It is the net operating income divided by the sales price or value of a property (value is almost always higher than the sale price, since we seek out the perfect investments).

For the 30-year old investor, at $9096/year in cash flow, the investment has paid for itself ($36,000+$5000 in repairs) in 4.5 years, just in time for the investors 35th birthday.

From there, the property continues to generate $9096/year in income. $9096/year in rental income for 25 years results in a retirement savings account of $227, 400, when the investor is 60 years old.

The investor could also potentially sell the home at age 60 assuming the market value of the home has increased over the course of 30 years– which would result in a second large lump sum of cash! Although, many homeowners prefer to pass along their investment property (or properties) to their children. It’s up to you!

Please note that monthly rental income could potentially decrease or increase over time depending on average neighborhood rates and/or community changes. And, this equation does not factor in any unforeseen changes such as necessary purchases or renovations (new roof, new AC unit, etc).

A smart investor knows that real estate should not be the only asset in their retirement portfolio. While many properties may generate a great amount of income over time, we do not suggest doing this in place of IRAs, Savings Accounts, Stocks, Bonds, or Employer 401(k) Plans – even if you plan on investing in multiple properties. Diversification is important so that a dip in one asset won’t mean a dip in another asset class.

You would never want to put all your eggs in one basket so to speak, but on the upside, real estate investments (particularly income properties) don’t react to economic changes in the same way stocks or bonds do. Even with our nation experiencing high foreclosure rates in the past five years, many rental properties have escaped unscathed and are still generating rental income.

For more information on funding your retirement with income property, please contact us or simply fill out the Investor Profile Sheet.

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