At one time or the other, everyone will retire or be retired (by organisation or by nature). You cannot continue to work with the same passion and strength forever. One day, you will be tired of work or the work will be tired of you. Faced with this inevitable end of work, you need to have a solid, reliable and stable retirement plan.
Many employees are discovering nowadays that most companies and organisations are more interested in employees taking care of their pension rather than relying on them.
Even more disheartening is the unfortunate realisation by those who were part of previous pension programmes that their money had been invested mostly in the stock market and other financial schemes and had been lost. This shocking discovery came to many when they had passed their peak working years.
One of the reasons for this unfortunate development is the fact that apart from real estate, only very few investments are under the control of the owners of the funds.
In real estate you are literally in charge. However, in several other financial investments, you are either at the mercy of the fund managers or those running the company you have bought into. That is why astute real estate investors keep a significant portion of their funds invested in real estate. So, if you are interested in retiring young, and rich, or you are already approaching your retirement age, then use real estate as a retirement vehicle.
One of the basic issues you need to decide is the amount of money you need annually to sustain or maintain your standard of living after your active working years. You will have to estimate the likely rate of inflation and other expenses that will come with it, such as increased school fees, feeding, transportation, health care and other utility bills.
The essence of this is to help you estimate the minimum income you need annually and set a real estate investment goal that will generate the income you need and more.
In addition to the above, you need to determine the real estate investment that seems best suited for your purpose. For instance, a person who has set an investment goal of having a steady cash-flow of 6 million every year could focus on residential properties located within certain environments that will generate the desired amount yearly, or is projected to generate such an amount yearly.
This individual could also focus on commercial properties such as shopping complexes, or event centres with a similar projected cash-flow. Whatever your goal, there is a suitable real estate investment vehicle for you.
There are several models that have been used and have worked for others. I believe you can adopt any of them and make them work for you. Some years ago, a property developer built a mini-estate of about ten (10) semi-detached duplexes in a GRA as a retirement investment. His aim was to rent them for residential purposes and use the income coming in to maintain himself and his family.
Another individual concentrated on buying prime properties during his working years. By the time he retired, he had three properties in prime locations including the one he and his wife were living in. By then all their children had completed their university education and were all settled.
He then sold two of the properties at very good prices and used the gain as a fixed deposit at his bank. The interest accruing on the money was always in excess of their monthly expenses.
These individuals were not dependent on any government pension plan for their upkeep and survival. This is the essence of planning for your retirement yourself.
Real estate fulfils several roles. It provides cash-flows as well as capital appreciation. Over time, real estate is usually the asset that will eventually outpace inflation in its capital appreciation.
With proper planning and sacrifice, an individual can focus on the number and type of real estate properties he or she would like to have as at the age of retirement. Those who successfully achieve this feat would have a peaceful and more relaxed old age.
Finally, you need to understand that practically any goal is achievable if you give it enough time and sacrifice. For most people, their earning years span between 20 and 30 years, during which a person could save and invest in having at least two or three rental properties.
The key is to start early, start now and stay focused. Using the law of compound interest, appreciation and leverage, and several other tools, an individual can secure his or her future with real estate as one of his retirement nest egg to compliment other asset classes.
But before investing in real estate, understanding /interpreting an agreement, understanding a search (cautions, restrictions, and encumbrances), caveat emptor and paying due diligence is necessary. This will be covered in the upcoming lessons.