57 years old and just started buying rentals. Any ideas?

Question

57 years old, recently gave up on 401K (interest rates are terrible past  few years) and got 1 family home rental. A more stable of building  wealth is to have as many rental properties as possible before I'm  forced to retire from my physically demanding job, The safer route seems  to be to pay off the mortgage rental as fast as possible, which I'm  doing. Then, I'm not sure if I want to go the safer route and save for  another rental (from the income of my full-time job and the 1st rental)  or finance the 2nd rental (and have two rentals and my income pay it  off). If my area didn't have houses For Sale on the market for so long, I  would fix and flip. So that option is out for building wealth and buy  rentals faster. Any other low-risk options or should I stay on the track  I'm going, pay as I go??? Thanks

DL Martin · Answer

I think that this is your best answer. Commit to 5 years of maniacal acquisition, value add and hold.

Year 6, switch gears to mortgage pay down.

Plenty of examples here on BP of young guys whom have done exactly that. I wasted 25+ years working at a "job" when I should have been buying, rehab'ing, renting, refinancing and repeating...

You live and you learn.

DL

Ned J. · Answer

The plan you have will be very slow....and that's not your goal if you are worried about having to retire soon. You wont be able to scale to 10-15 properties by using all you cash flow to pay each one off....and you wont be able to live off of one paid off property.

You are going to have to leverage and then once you scale to your desired level, then start paying them off

Shawn Ginder · Answer

Adding to what Kurt says above, don't be afraid to use leverage, once you get say 4-6 properties or more cash flowing you can put all the extra income toward one mortgage and in a very short time payoff mortgage after mortgage and in say 5 years or less own several properties free and clear reaching your goal. It's having the mentality using leverage to increase the income, which will than accelerate the debt payoff of income producing assets all the more faster. You can learn more at vipfinancialed videos on youtube for further research on using debt to achieve financial freedom in a short time.

Kurt Phillips · Answer

@Dennis M.makes a good point.  @Duane Whittaker your strategy is solid and fool proof no doubt.  Its just the "slow boat to China" if you will.  Depending on the capital available to you and the area your investing in it is not out of the question to accomplish your cash flow goals within 3 years by leveraging the lending from banks.  When you hit your point of critical mass institute your original strategy and pay those suckers off and enjoy retirement.

It is ok to use the banks, they need to lend money and interest rates are still low but who knows for how much longer.  Take advantage of that and in 12 years who knows how far along you will be.  Hope that makes sense.

Arlan Potter · Answer

my advice is to buy cheap properties. use your income to fix them up and get them rented,  the cheaper the better.  Easier to pay off and you get a better rent/investment ratio, 2% or better per month.

Mike Dymski · Answer

The ROI from paying down debt is the interest rate on the debt.  You mentioned that interest rates have been terrible (low) the past few years; so, there is a disconnect in feeling that rates are low but wanting to achieve an ROI that is equal to interest rates.

Troy Williams · Answer

@Duane Whittaker Highlighting  several good points here, leveraging is your key to get the ball rolling faster, although it does increase risk, so the risk tolerance.  You don't want to be stressing about every payment if/when there is a lull in the economy.     I've also started the real estate game about 6 months ago at a relatively late age (44), but jumped in both feet and am now sitting on two very nice cash flowing triplexes.  My risk tolerance is perhaps greater than most as I bought these site unseen while living on the other side of the planet (literally), but I also know that the rents in the market I bought are paying more than double the mortgage and I've got a trusted team on the ground.  I can sleep comfortably know that even when sh*t hits the fan, I've got a lot of cushion, even from 6,000 miles away.

You also asked about low risk options.   Consider partnering with someone to share the risk, "subject to" agreements, or owner financing. I haven't personally tried to the last two so there are probably plenty of bad examples not to try them, but they should at least minimize initial investment costs if done right.

Alan Fitzpatrick · Answer

Im on the same page as the others saying to use leverage and grow more quickly. If you make good buys you can grab a bunch of properties quickly and get cash flow to retire on. I understand you don't expect to have a long time, but to go the cash only route instead of being leveraged takes a long time.

57 years old and just started buying rentals. Any ideas?

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