The past few months, I’ve developed a slightly new routine…
Every morning — as I wake up with my first cup of joe — I look through real estate listings. Everything new, and everything with a price decrease.
Then every evening just before bed, my wife and I get together and share our favorite houses. We “ooh” and “ahh” and try to picture ourselves in each new place.
Would we actually make use of that sitting room off the master? Is that tub comfy enough for a two-hour soak after a tough day? Will that little creek beside the backyard soothe us to sleep with the sound of running water… or drive us insane with mosquitoes?
You see, we’re moving. Not today, not tomorrow — maybe not even in the next year. But it’s coming.
My sister lives down in Atlanta. My nieces are 8 and 5 years old (soon to be 6) and in the prime fun years. My father, who had just moved down there and was going to help out a bunch, passed last year.
It all adds up to a move. We can take our time… wait for the best situation… keep an eye out for a special deal… but sooner or later, it’ll happen.
For most people, a move is among life’s most stressful events. Me — I enjoy it.
And not just because shopping for houses is the best kind of shopping (if you can keep the prices from getting you down).
But also because with this move comes a huge opportunity. One I’ve been mapping out for quite a while.
And this move will cement the next step.
An Unconventional Way to Retire
When I was a young pup teaching over in Japan, a friend of mine told me about her unusual plan.
As a career educator teaching English to students in foreign lands, she had no ordinary retirement accounts. No 401(k), no pension, no nothing.
Instead, she was saving money and buying houses. Not many — you don’t need many. But her plan was to have three or four houses… live in one… and rent the others out.
Once they were entirely paid off, that rental income would become her retirement account.
Which comes with a bunch of built-in benefits…
- Real estate — if you buy in the right places — doesn’t depreciate. Instead, your property should continue to gain value over time (with ups and downs — see the bursting bubble of 2008 — but overall going up)
- Unlike stocks and bonds, there’s no chance the value of your house will drop to zero. As a tangible asset, real estate will always have value. Put another way… the average life span of a publicly traded business is only 10 years. The average life span of real estate property is, for all intents and purposes, forever
- Real estate is the best form of forced savings. Every mortgage payment puts more equity into your house. And the portion of your mortgage that goes toward paying off interest equals a massive tax benefit, allowing you to write off a big chunk of your income when tax time rolls around
- Rental income is linked to inflation. The more inflation goes up, the more rent does as well. So you never have to worry about financial shocks leaving you penniless and wondering how to survive your golden years
- The sturdiest retirement accounts have enough money in them to live off the interest alone. You want to leave your principal untouched as much as possible. Of course, most people have trouble being disciplined enough to stick to that. With real estate, the property takes on the role of your principal, while your rental income takes on the role of interest and dividends. And there’s no way you can sell off, say, a third bedroom to take a European vacation
- Should a true emergency arise — an unexpected medical bill, perhaps — you’ve got a massive nest egg to fall back on. You can always sell off a property or just take a loan out against its value. When most Americans can’t afford a $500 emergency, it will be nice to know you won’t sweat a $500,000 one
- Renting is easier than ever before. The shared economy is making inroads. You can rent your place out through Airbnb if you like. Or use your property in novel ways. For a certain amount of your rental income — usually under 10% — a management company will take care of upkeep, finding renters and all the day-to-day stresses of being a landlord. You don’t have to do a thing to take care of your rental — someone else is happy to do it for you
- You don’t need a lot of money to get started. Indeed, I bought my first house with only 3% down (that’s not unusual for first-time homebuyers). Once you’ve built up enough equity in your first house, you can use it as collateral to help you get your next. Once you have two, subsequent houses are easy to acquire.
All of this put together is why I’m so excited to get my new place in Atlanta. You see, I don’t want to sell my Baltimore house — I’m going to renovate it into a rental property.
Which will immediately be profitable. I’ve scouted rentals in my current neighborhood, and my house should rent out for around $1,000 more than my monthly mortgage payment. And since rents continue to rise while my mortgage remains the same, that gap will only increase.
For now, I’ll save that $12,000-plus annual income and use it to pay for any necessary repairs… and then pay down my mortgage early with anything left over.
And in a few years — once I’ve paid off my mortgage entirely — this house will be a cash cow.
What’s more, whatever new house we get in Atlanta will actually be our third. My wife and I each brought a house into our marriage — hers is already rented out and more than paying for its mortgage.
I get it — lots of people are scared of becoming a landlord. They see it as an intense side job with a ton of headaches involved.
But if you’re willing to reduce your profit just a bit and use a management company, you mostly won’t have to lift a finger. And you’ll have a passive income stream that will last your entire life.
Put three of them together and you might wind up making even more in retirement than you ever did during your working life.
That’s the sort of unconventional, personal pension plan I can get behind.
Editor-in-chief, Unconventional Wealth
P.S. One of the other nice things about owning rental properties… They give you ins around the world. That’s because some of the most profitable rental opportunities are short-term rentals in beautiful international vacation spots. Those properties can print money — all while giving you a free place to stay when you feel like traveling yourself.
The best way I know to invest in international property is through Real Estate Trend Alert. Ronan McMahon and his team do all the legwork — and make all the necessary connections — for you. See how they can help you broaden your horizons today.
Ryan Cole is the editor-in-chief of Unconventional Wealth. He’s been covering the alternative investment space for nearly a decade and writing about finance and investment for almost 20 years.
Ryan has walked the walk for years, living a very unconventional life. He’s led snowmobile tours through the mountains of Colorado, settled in Japan for five...