Retirement Plus: Supplement Your Retirement with Rental Income
There has been a lot of debate on whether you should purchase a home or not, and I’d like to put this topic to rest. Not only should you own one house, but you should also own many homes.
In addition to owning multiple homes, you should rent out at least one room in your primary residence to family or friends.
Yes, renting property to others can cause some drama in your life. However, it creates something powerful that you cannot substitute: rental income.
Rental income is a powerful brand of passive income that everyone must tap to create their dream retirement. Today, we will focus on becoming real estate moguls. Let’s begin.
My rental retirement plan. I’ll start with my rental retirement plan. I currently own three homes and a tiny house. Here are my rental numbers: Arizona home ($2,300), Florida home ($1,900), and rental room ($1,000).
I collect a total of $5,200 in monthly rental income—a fantastic sum. However, let’s not get too excited yet; I still have mortgages on all my properties.
After accounting for my mortgages, my rents are: Arizona home ($450), Florida home ($500), and rental room ($1,000). My total profits are $1,950/month.
I laid out the mortgage first because they will not always be there. Eventually, I will pay off all of my properties, which is part of my retirement rental plan.
I am 43 years old. Let’s assume that in 20 years, I will have paid off all of my properties. Let’s also assume rents increase by 3% annually.
My rents will be as follows: Arizona home ($4,200), Florida home ($3,400), and rental room ($1,800). These properties and rooms would generate $9,400 in rental income profits. Simply incredible.
In essence, I would be able to fund my lifestyle from rental income. I would much rather have $9,400 from rents than a couple thousand dollars from social security.
Start building rental income today. How do you start building rental income today? The question has stopped many people dead in their tracks.
There is no easy way to obtain a primary residence, let alone a rental property. However, where there is a will, there is a way. Let’s consider some options.
Join the military. If you are under 40, you should join the military. For some reason, people do not consider the military an option. The military is the reason I retired at age 42. It also helped me purchase all three of my houses.?
While serving overseas, I saved $60,000 for my first house. I then used the VA loan for homes two and three. I may even use the VA Loan to purchase a fourth home.
If you find yourself boxed out of the real estate market, the military can open more doors than you can imagine. It just takes some faith and hard work.
Big city arbitrage. The only way to purchase a property is to generate a massive pile of money in a condensed timeline. You cannot slowly save your way to success because housing prices move faster than inflation.
The key to big-city arbitrage is getting big-city bucks into small-city housing. You want to work in a big city but purchase property in a small town, in a small state. Let me explain.
Let’s say you make $200,000/year in San Diego, California, and you have a wife and two kids. You want to keep working your job but move your family to Pensacola, Florida.
You would rent a room in San Diego and keep your living costs to $3,000/month. The remaining $164,000 would go to building your life in Pensacola, Florida.?
With the right motivation, you could pay off your house entirely in three years—especially if your wife gets a roommate on her end.
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After three or four years, you could join your family in Pensacola. Your family would have a paid-off home and could start working toward purchasing another property. That’s how you create generational wealth.
The reality of real estate. The reality of real estate is that you cannot afford to purchase a home where you work; you must acquire some kind of advantage.
How can you get ahead if you make $200,000/year and spend $200,000/year? The numbers should be $200,000/year and $100,000/year.
How you secure your advantage is up to you, but it will require immense sacrifice. Some other options are getting roommates or moving in with family.
However, focus on the benefits. Once you get into your first home, you can start a positive chain reaction that leads to a successful retirement.
My sacrifice. My wife and I didn’t just end up with three houses and a tiny house—we sacrificed. I spent eight years away from my family because it would give us a long-term financial advantage.
Now, everyone sees that we own multiple properties and assumes they magically appeared in our possession. Nope, we earned them.
Did I mention that we had roommates for five years? In fact, we still have one who pays us $1,000/month.
I’m looking toward long-term goals. Our assets generate passive income and build equity, which I can use to purchase more properties.
Between maintenance, mortgage, and depreciation write-offs, our rental income is tax-free. The toughest thing you can do is get money into your account without paying taxes—real estate helps.
Yes, owning and maintaining real estate can cause some heartache and frustration. However, time heals all wounds.
Our first home in Arizona was underwater for almost 13 years because we bought it in 2008. However, over the years, it’s become a money-maker. The more time passes, the more valuable it becomes.
Plan your retirement passive income. Real estate gives us tax-free income, growing equity, a place to live, and increasing rents—everything we need.
It’s time to start planning your retirement passive income. Let’s say you have a 401 (k), social security, and an annuity.
Wouldn’t adding $2,000/month in rental income be nice? However, you can only reach this rental income milestone by making moves today that affect tomorrow.
It’s very challenging to turn a profit on a real estate investment in the first ten years—unless you are a professional who can leverage economies of scale.
For us normal people, time is our best friend. We need to get real estate early, struggle, and reap the benefits ten to twenty years later.
Conclusion. The good part is that we can pass advantages directly to our kids. Time is also their best friend. As we hoard real estate, their wealth and advantages grow along with the markets.
I know everyone is saying not to purchase real estate, but that’s not the path. Real estate is your money maker if you want to add stable, tax-free (using deprecation) income to your retirement. Good Luck!
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.? I have no business relationship with any company whose stock is mentioned in this article.
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