What seems like forever ago, and yesterday at the same time, I often wandered the supermarket with a calculator in one had and coupons in the other, stretching each weeks’ paycheck as far as one could. Now, as retirement looms, I’m again looking at ways to extend and supplement my hard earned money.
“Retirement is like a long vacation in Las Vegas,” mused The Wall Street Journal personal finance columnist Jonathan Clements. “The goal is to enjoy it to the fullest, but not so fully that you run out of money.”
Yet, how does one accurately weigh the odds to live fully and, hopefully similarly, to the lifestyle you’ve become accustomed to over a 40-year career while knowing that at some point the nest you’ve diligently filled will eventually be empty if not treated cautiously. It’s not like money grows on trees.
Or, does it?
Take a moment to look out the window … the leaves blooming and branches growing on the trees are visual representations of how year over year, decade over decade, home values have increased and flourished providing many the financial safety net that other investments can’t. Wealth is literally growing in your yard!
Why stop there? If owning one property can provide equity access to retirement travel funds or coverage for elderly medical needs, imagine what it would look like to use funds now that would allow you to own additional properties as rentals thereby increasing [now and future] household income as well as building generational wealth.
The sticking point for most is how? Where do I get the money? I get it! That said, with planning and the right guidance, options are available. Three to consider with the fastest avenue to your new goal:
Leap-Frog Purchasing: Most people think that it takes a minimum of 20% down to buy an investment property. However, if a buyer knows they’d like to own multiple properties and has time, they can actually use owner-occupied financing for as little as 3.5% down on a first home, use that as their residence for a year, then purchase a second home at 5% down, turning the first property into the rental. Repeat the process and you have 4 homes with 3 as rentals in under 5 years!
Second Home Purchasing: Individuals can purchase a second home such as a lake house or beach property at a higher interest rate for as little as 10% down, and, depending on the equity position of their primary home, they may be able to use a HELOC (home equity line of credit) for monies on the new property! This is a particularly useful financing tool for those interested in short-term-rental opportunities giving their families the availability for a vacation property while having some of the costs deferred to vacation rental clients.
Self-Directed IRA Purchasing: Least known and pursued, transferring monies from a traditional IRA product to a self-directed trust allows buyers to choose real assets as investments. Most important to remember, however, is that unlike a leap-frog purchase or a second home purchase, any value coming from the property bought by the IRA can not be used by the IRA owner until the age of retirement maturity, including residency.
A 2023 Fidelity report suggests that less than 34% of people are prepared for retirement and that they’ve resolved to the idea that their golden years will not look as fruitful and fun as their working years. With planning, rental investment has the ability to provide for a lifestyle, medical care, the future generation and more.