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.
My brother is very gifted at things that require the use of his hands, a lot of patience, and great attention to detail. He's been a carpenter, a chef, and has also rebuilt cars. He's amazing at all of it. However, he is not so skilled when it comes to managing 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.
Side jobs are great source of extra income and carpenters are always in demand. Building fences and helping with kitchen renovations could also add thousands of dollars into his savings in a short period of time. The savings can then be used as a down payment to buy a fixer-upper which could probably be purchased for around $200,000.
For a couple of years, he can live there while fixing it up and continuing to save more money. Then, he will turn that house into a rental property, renting it out for about $1,400/month. He then buys and moves into a new property that he will call home.
So what happens in 25 years? Let's find out.
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.
In 25 years, he will have his own primary residence paid off as well. If he owned nothing else but these two pieces of property, then he will have about $1 million worth of property for his retirement. Doesn't that seem like a simple way to have other people help you save for your retirement?
When I explained this to my brother, he sold one of his cars! And with the money he earned helping us with our property, he's already putting together a nice little down payment for a home.
My brother is very gifted at things that require the use of his hands, a lot of patience, and great attention to detail. He's been a carpenter, a chef, and has also rebuilt cars. He's amazing at all of it. However, he is not so skilled when it comes to managing 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.
Side jobs are great source of extra income and carpenters are always in demand. Building fences and helping with kitchen renovations could also add thousands of dollars into his savings in a short period of time. The savings can then be used as a down payment to buy a fixer-upper which could probably be purchased for around $200,000.
For a couple of years, he can live there while fixing it up and continuing to save more money. Then, he will turn that house into a rental property, renting it out for about $1,400/month. He then buys and moves into a new property that he will call home.
So what happens in 25 years? Let's find out.
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.
In 25 years, he will have his own primary residence paid off as well. If he owned nothing else but these two pieces of property, then he will have about $1 million worth of property for his retirement. Doesn't that seem like a simple way to have other people help you save for your retirement?
When I explained this to my brother, he sold one of his cars! And with the money he earned helping us with our property, he's already putting together a nice little down payment for a home.
About the Author:
Learn How to Retire with Real Estate with Julie's free Real Estate Investing Starter Tips Guide. Learn how to create financial freedom, 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.
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