• Tue. Jun 21st, 2022

Faulkner: real estate investments that work for you


Retirement strategy may include rental properties

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Don’t buy and sell, just buy.

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Owning one or two investment properties can be a game-changer in retirement.

Imagine you bought two rental properties in Alberta 25 years ago for $ 150,000 each. Your initial investment would be the 20% down payment, or $ 30,000, for each property.

Today that $ 60,000 investment would probably be worth $ 700,000. It’s a pretty effective way to supplement or build your retirement nest egg. And in my opinion, real estate is one of the most secure, predictable, and reliable investments.

Let’s say you are planning a move this year. Your real estate agent suggests that you keep your house and rent it out. Since you are buying a house that you are moving into, you will likely only have to pay five percent on your purchase. And you may be able to refinance your existing home to take out the five percent down payment.

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Since you only make a 5% down payment, your ROI can be up to four times that of a 20% down payment. Let’s say you buy a property for $ 400,000 and put 5% or $ 20,000 into it.

Let’s say that in 25 years, this property is now worth $ 800,000 and has no mortgage. That’s a pretty good return on $ 20,000. And maybe you still live there or it is also now a rental property.

Depending on your lender’s rules, your mortgage on your existing property may not affect your ability to qualify for your new home, as the net rental income can fully serve the mortgage.

I have encouraged hundreds of buyers to consider doing just that. I believe this can be a life changing decision for you and your loved ones. Imagine having a million or two more in retirement. What would you do? Would you travel, give more to your favorite cause or charity? Would you help your children buy a house, would they be inherent in the investment property (s)? Would you like to move your parents to a new house?

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I think in the decades to come we may see a further erosion of middle class wealth. I think we cannot rely on our Canada pension plan to cover our expenses in retirement.

You might wonder why not everyone is doing this. The reality is that almost all of them will not. And it’s all about the state of mind and belief. The most common reason we don’t do this is fear that the tenant will destroy our property. Then we don’t want hassle. We imagine the tenant in difficulty, not paying his rent, having to evict.

Do you see what I see? These thoughts take us away from real estate wealth creation. A change in mentality could radically change our future and that of our family.

When I look at ordinary people like you and me who have been doing this for 20 or 30 years, I don’t see all of us stressed or homeless or worried about our tenants or our financial future. I see us traveling the world, I see our children going to the school they want and our parents living in a beautiful house.

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A good friend of mine served at the table and invested in real estate while I was studying in college.

Today, he owns around 20 properties, travels the world and grants private loans. Poor man.

The reality is that the first five years of investing are likely to be the hardest. You work on your systems, try to buy properties to attract the tenants you want, and learn how to maximize the return on your rental properties. It is after the first five years that the fruits of your labor really begin to pay off.

And there are ways to accelerate the growth of your real estate portfolio. There are local and national investment groups on Facebook that you can join and some are free. Find a trustworthy, investor-driven real estate agent who can mentor and advise you on how to attract and keep the right tenants.

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In these Facebook groups you will find all kinds of real estate investors. Some will be passive investors looking for a working partner to manage and develop their investment. There are a lot of people who created wealth in real estate and didn’t have the money to invest. They have partnered with investors and are co-owners of the rental properties.

With home values ​​in Edmonton being either the same or lower than they were 14 years ago, I think we have a timely opportunity to invest in real estate and potentially experience unusual growth.

Millions of investment dollars are currently flowing into Alberta. Investors are benefiting from our positive cash flows on rental properties while also hoping to benefit from the next boom. Why aren’t more Albertans taking advantage of these opportunities in our own backyards?

I recommend that you find an investment-oriented real estate agent to work with and create your own personal real estate wealth building plan, and maybe do it sooner rather than later. It might be the best decision you’ve ever made.

Dennis Faulkner is an active real estate agent at Re / Max River City. He can be contacted for all your real estate questions at [email protected]

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