Six years before I retired I suddenly realized I was getting old enough to think about retirement! How did that happen? Part of my thinking wandered to where I would live after I retired. It was obvious to me that, as I was no longer married, it didn’t make sense for me to stay in high-priced Silicon Valley once my all-consuming work life was over. And it was equally obvious that I should set up my retirement home base in my small, lower-cost hometown in a nearby state where both my parents are still active and in good health, and where most of my siblings live with their extended families. These epiphanies lead to the first of three related great financial decisions in my life. Acting on the above realizations, I dove right in and purchased my future retirement home at the end of 2013 instead of waiting until prices went up. I could see the area had been slower to recover from the housing crash of the Great Recession than Silicon Valley, and didn’t want to wait 6 more years to purchase. Soon after buying the house I decided it really made sense to rent it until I retired, which was my first accidental foray into rental real estate. Well, things ran so smoothly with the help of a local property management company that I bought 3 more houses in the same neighborhood over the next few years and another a few miles away! At the time I just considered them to be good long-term investments with minimal initial net income, as I wasn’t yet well-versed in retirement planning basics like investment diversification (I already had a substantial traditional IRA portfolio), cash flow planning, multiple sources of income, or hedging against inflation. Wowee! Those rentals have more than doubled in value, and rents have steadily increased, especially in the last couple of years. On top of that, I took advantage of historically low interest rates and refinanced all the properties at 2.99% in the midst of the pandemic (after I retired). As a result of the increasing rents and decreasing mortgage payments, these properties now cash flow a net $3,000 a month, after expenses, a welcome influx of retirement income! The second related big win was moving out of my Silicon Valley condo and into an apartment a year before I retired in order to sell during a huge spike in housing prices in that area, netting a $600,000 profit after 10 years of ownership. Score! (I could also add that buying the largest condo I could afford at the time was a huge contributing factor to a big win at sale time.) Needless to say, I’m loving rental real estate, and have since used some of my home sale proceeds to purchase a few rental condos in Las Vegas (where my daughter lives). Prices there have increased 40% since I purchased at the end of 2020 - go figure! I’m so happy I stumbled into rental real estate as a retirement income investment! And so far it’s all tax-free using basic rental tax reporting rules. How sweet is that?
Comments
Six years before I retired I suddenly realized I was getting old enough to think about retirement! How did that happen? Part of my thinking wandered to where I would live after I retired. It was obvious to me that, as I was no longer married, it didn’t make sense for me to stay in high-priced Silicon Valley once my all-consuming work life was over. And it was equally obvious that I should set up my retirement home base in my small, lower-cost hometown in a nearby state where both my parents are still active and in good health, and where most of my siblings live with their extended families. These epiphanies lead to the first of three related great financial decisions in my life. Acting on the above realizations, I dove right in and purchased my future retirement home at the end of 2013 instead of waiting until prices went up. I could see the area had been slower to recover from the housing crash of the Great Recession than Silicon Valley, and didn’t want to wait 6 more years to purchase. Soon after buying the house I decided it really made sense to rent it until I retired, which was my first accidental foray into rental real estate. Well, things ran so smoothly with the help of a local property management company that I bought 3 more houses in the same neighborhood over the next few years and another a few miles away! At the time I just considered them to be good long-term investments with minimal initial net income, as I wasn’t yet well-versed in retirement planning basics like investment diversification (I already had a substantial traditional IRA portfolio), cash flow planning, multiple sources of income, or hedging against inflation. Wowee! Those rentals have more than doubled in value, and rents have steadily increased, especially in the last couple of years. On top of that, I took advantage of historically low interest rates and refinanced all the properties at 2.99% in the midst of the pandemic (after I retired). As a result of the increasing rents and decreasing mortgage payments, these properties now cash flow a net $3,000 a month, after expenses, a welcome influx of retirement income! The second related big win was moving out of my Silicon Valley condo and into an apartment a year before I retired in order to sell during a huge spike in housing prices in that area, netting a $600,000 profit after 10 years of ownership. Score! (I could also add that buying the largest condo I could afford at the time was a huge contributing factor to a big win at sale time.) Needless to say, I’m loving rental real estate, and have since used some of my home sale proceeds to purchase a few rental condos in Las Vegas (where my daughter lives). Prices there have increased 40% since I purchased at the end of 2020 - go figure! I’m so happy I stumbled into rental real estate as a retirement income investment! And so far it’s all tax-free using basic rental tax reporting rules. How sweet is that?
Post: What are the smartest financial moves you’ve ever made?
Link to comment from August 8, 2022