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I'm an older sister with two little brothers. Like any big sister, I worried about them when they were little and I worry about them now. Lately I've been worried most about my oldest brother and his future.
I'm an older sister with two little brothers. Like any big sister, I worried about them when they were little and I worry about them now. Lately I've been worried most about my oldest brother and his future. You see, he is a talented carpenter. Before that he worked as a chef " and was amazing. He is also extremely good at rebuilding and repairing cars. Anything that requires patience and attention to detail seems to be something he is exceptionally good at. That is, except when it comes to his finances. Since he's still young (in his early 30s), he feels there's lots of time to work and make money to put away for his retirement. I wish he didn't think this way. The government may not take care of us when we're older, so the time to start saving for your retirement is now. I don't want to see my brother in financial trouble later, so I decided to help him with his finances. There was one part of his lifestyle that was glaringly obvious to me that needed to change- he owns three cars. I explained to him if he sold one and put that money into savings, not only would he have the money from the sale, he would be able to save an additional $500 a month. He can also take on side jobs. People are always asking for help with building fences or kitchen renovations. He doesn't have to work every weekend, and in a year he could have enough saved to put 10% down on a beat up house could be bought for around $200,000. Since he is a carpenter, he can even buy a house that has been listed as a "handyman's special". If he lives there while he's fixing it up, he can save even more money. After a few years he can rent out the house for about $1,400 a month. Then he should buy and move into a different property. Now, keeping this really simple, lets look at what my brother has when he retires in 25 years: Assuming he adds about $25,000 in value by fixing the property up and the property appreciates by 4% each year, in 25 years his investment property will be worth $576,743. And " his tenants will have paid the mortgage off for him! It's almost like someone else was putting nearly $1,900/month into his retirement savings plan for him ($576,000 divided by 25 years divided by 12 months)! "But wait", you may be thinking, "property doesn't always increase by 4% per year". While that might be true, historically the average appreciation of property has been 4% per year. Regardless, after 25 years the mortgage will be paid off by his tenants and the rent he continues to collect can go toward his retirement. Rents and expenses normally increase by 4% each year as well, so in 25 years he could see a positive cashflow from the property of around $2,350 each month. Plus, he will also have his main residence paid off by then, giving him over $1 Million in property for his retirement. What an easy way to get someone else to pay for a big part of his retirement! When I told my brother my plan, he got excited and sold one of his three cars. With the money he's making by helping us with one of our properties, he's been able to start saving for a down payment for a house. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Learn How to Retire with Real Estate with Julie's free Real Estate Investing Starter Tips Guide. Learn how to create retirement savings, positive cashflow and massive wealth with tips like: How to find quality rental properties, finding and keeping great tenants, and easy ways to make more money with real estate. |