This major retirement horizon for investors is called the intermediate term and it’s for those who are going to retire in 10-20 years.
With an intermediate-time horizon, you should choose properties in a mixture of growth and income-based neighborhoods. These neighborhoods have strong local economies, healthy job markets, and continued plans for expansion. By investing in these neighborhoods, your properties should generate enough cash flow to pay for the mortgage, cover expenses, and provide some cash flow for the future.
Unlike investors with a shorter time horizon, you have more time and flexibility to tailor your real estate strategy. Investors in this group should choose leverage to maximize their overall buying power. Investors with a 10 to 20-year timeframe should opt for a 15-year fixed mortgage, which means the portfolio of properties will be fully paid for near or before retirement.
At this point in your career, you’ve most likely grown capital by investing in numerous assets like stocks and bonds. While your assets have time to recover from a serious stock market correction, you shouldn’t tolerate too much risk to your portfolio. This also applies to your real estate investments.
The key is to invest in multiple markets to mitigate your overall risk through diversification. The majority of your real estate investments should be in stable neighborhoods with less risk. You could also choose to add a few higher level-of-risk properties to reap potentially higher gains. By diversifying into multiple neighborhoods with varying degrees of risk, you’ll be able to protect your portfolio while simultaneously growing your capital.
Since you wisely invested using “other people’s money” to finance your real estate portfolio, you were able to purchase more properties. These properties successfully increased in value through appreciation and built equity to raise your net worth.
As you can see in the graph above, your initial investment of roughly $371K has grown to be worth over $1.4 million at year 16 after the mortgage has been paid off. The value of your portfolio will continue to grow through appreciation in the future.
You’ll notice your cash flow grows quite dramatically at year 16. This is because you used rents to pay down the mortgage and build equity during that time. After the 15-year fixed mortgage is paid off at year 16, your real estate portfolio will generate over $83K per year in cash flow via rents.
Real estate is a great addition to your portfolio and having this collection of assets that is fully paid off can help ensure you are living the retired lifestyle you planned on. Not only will you be insulated from the ups and downs of the stock market, you’ll also be able to continue taking advantage of this asset collection as it grows in the future.
Creating a Plan for your Investment Horizon Strategy
Now that you’ve realized your time horizon and the coinciding real estate strategy, it’s time to implement a plan. The key to successfully generate income in retirement through real estate investing is selecting the right markets, neighborhoods and properties that match your time horizon and investment goals. Every investor has a unique situation and set of goals, but creating a plan based on your time horizon can help you see your retirement goals realized.
HomeUnion can help. Our end-to-end solution makes it simple for investors to purchase single family real estate. We help you find, acquire, and manage investment properties, so you can invest in real estate hands-free.
How HomeUnion Works
1. MAKE THE DECISION
Be An Investor, Not a Landlord. Invest in single family rentals with HomeUnion.
2. DECIDE ON YOUR FINANCING
Is financing or cash best for your time horizon?
3. CHOOSE YOUR PROPERTIES
We will send you prevetted properties based on your personal investment goals.
4. ACQUIRE PROPERTIES
HomeUnion will do all the acquisition legwork for you, just approve the offers.
5. RELAX AS THE MONEY POURS IN
Watch the money roll in, as we take care of rehab, find good tenants, and fully manage your assets.