We all have our own dream about what our perfect retirement will look like. For me, it’s a quaint bungalow in Greece where I live out my days drinking tea, painting, and doing a little freelance consulting on the side for fun.
Whatever your retirement looks like, one thing is guaranteed: nobody wants to be working during their “retirement” out of financial necessity.
There are many different ways to set yourself up for a work-free retirement (if that’s what you desire). In this blog post, we will show you how to create $72k in passive income for your perfect retirement, whatever that may be.
How many properties?
The answer is probably less than you think!
To earn a passive income of $72k a year, you will need some combination of the following:
- Five $240k townhomes/condos ($1.2 million in houses)
- Four $325k houses ($1.3 million worth of condos), OR
- Three $500k 2-3 unit apartment buildings ($1.5million worth of 3-plexes)
Yes, that’s right! To have a passive income of $72k a year, you only need FIVE investment properties or less. If you are willing and able to live on less yearly income, then you will need even less investment properties.
These numbers are not exact– naturally, they will vary case-by-case. However, this is what the numbers will average out to be over the long-term. Additionally, these numbers assume that the houses have already been paid off. If you have not paid the houses off, then you will need to factor in a mortgage to the income sheets.
Let’s do the math.
A lot of people say, “I don’t have $1.2 million to invest right now.” Castle & Cooke Mortgage and The Denver Metro Investment Group look to buy properties that make sense for each client’s financial situation.
This is determined by using the a working sample of the investment property analysis sheet created by Joe Massey, a Senior Loan Officer at Castle & Cooke Mortgage. You can download your own sheet here. The sheet was designed to quickly and accurately analyze Denver rental properties.
To accurately fill out the sheet, you may follow along with the instructional video created by Massey and Charles Roberts, President of Your Castle Real Estate:
Here is a screenshot of the analysis sheet for reference:
The math is based on a few reasonable assumptions, such as putting 20% down on each property, rent increasing by four percent a year, etc. Based on this, each house will be paid off in typically 12-13 years.
If you purchase one property per year, then over the course of about 16-17 years, you could have today’s equivalent of $72k a year.
Put all of your eggs in a small handful of baskets.
At Your Castle, we strive to be fair and objective in all that we do. That is why we encourage you to spread your investments out beyond just real estate. S&P 500, gold, bonds, and annuities are just a few examples of what may be included in a traditional investment portfolio.
Roberts explains the various ways that multiple investments be beneficial in his Return Across Different Assets video. Along with many other benefits, investment properties are a great way (read: the best way) to build long-term wealth.
If you are curious about investing in real estate, make sure to take a look at our information for Colorado real estate investors before taking the leap.
If you are a first time investor, our blog on five first time investor tips will be a useful place to begin planning for your future.
Do you have any advice for first time investors, or cautionary tales for veterans? Let us know! We are always curious to learn about other experiences investing in real estate.