Trying to set aside an extra million dollars in the next 40 years so you can retire? A little overwhelmed by the concept? You’re not alone, but the good news is there is a less intimidating and much more obtainable approach that will allow you to retire comfortably.
Rather than focusing on a finite savings goal that may or may not hold the same buying power by the time you retire, you can take an inflation-proof approach by focusing on income instead. Multiple income streams. And not just a mashup of Social Security with a 401(k) that you plan to cash in. We are talking about passive income that will rise in value with the economy from a variety of real estate investing avenues for the ultimate security blanket come time to retire. Follow these five steps to build a robust retirement through real estate.
1. Buy dividend-paying REITs
Real estate investment trusts (REITs) can be an incredible way to invest in real estate without having to physically own or manage any real estate yourself. There are over 200 different public REITs to invest in across a wide range of real estate sectors, allowing you to diversify your portfolio. Plus, because of the REIT structure, these companies often pay higher-than-average dividend returns, making them a perfect addition to a retirement portfolio. Keep in mind: As with any stock, there is always a risk of a correction or crash, and because REITs invest in real estate, they are more susceptible to real estate market fluctuations. .
2. Purchase rental properties
Rental real estate is the mecca of passive income. It’s something that, if purchased properly, can result in cash flow from day one, keep up with inflation, and retain its value or possibly appreciate over time.
Rental properties do not need to take a ton of your time or constantly suck away money on repairs if your investment is structured accordingly by utilizing a property management company. Depending on how you enter the purchase, you could be earning a few hundred dollars a month on a single-family property on up to several thousand for a commercial property while you are still working. But the piece de resistance is that the renter is paying off the mortgage for you. That couple hundred extra a month can eventually turn into thousands, especially if more rentals are purchased or once the mortgage is paid off. If timed well, rental income can quickly offset your working income, giving you significant passive cash flow to retire with.
3. Create new income through mortgage notes
Mortgage notes are an additional and diversified income stream to utilize. Rather than owning and leasing a property, you simply act as the bank, lending money to someone else as they purchase a property and having them pay you back through a mortgage over time.
You can create mortgage notes from properties you own or through private lending, or purchase existing ones from other sellers, generating new avenues of income. However, it’s important you fully understand the risks and due diligence involved in creating or purchasing mortgage notes, including the possibility of having to foreclose if the borrower stops paying.