Retirement plan: My idea.

[Tom Smart]

Retirement Plan.

I used to have a 401k. That was before I lost my job. My search for another job landed me in another country, working as a contract employee through a third party.

I got interested in real estate because I want a vehicle to invest in for retirement.

I have two reasons for choosing real estate. First, because I no longer have a 401k that I can contribute to, and second because I don't like the conventional wisdom that says in order to generate an income during retirement, take your nest egg and allocate percentages to stocks, bonds, and cash. Then withdraw 3-4 percent per year, and if you're lucky, you die when your money runs out 30 years later. If you're not so lucky you outlive your money and live on social security your last few years of life. Either way you die broke and leave nothing to heirs.

My plan is to buy some rental real estate, financed to cash flow positive for the next ten years or so, then some time after age 59.5, tap my 401k funds to pay off the mortgages; my hope is that the result will be a steady stream of income that returns about 6% of the funds invested, which is quite an improvement from the 3-4 percent rule typically quoted by the financial planner types. And the entire nest egg (invested in real estate) remains intact to be passed down to heirs after I'm gone.

The process includes all of the challenges of investing from far away. I've looked at turnkey operations, and I have looked at single family homes in neighborhoods near the home I still list as my permanent address in the U.S., and I've looked at multifamily properties. I have decided to pursue Single Family homes, for what are probably typical reasons, and I have focused on simply buying a new home from the same popular builder in my area who sold me my permanent residence, and renting it using professional property management. The advantages to this method for me as I see them are:

1. The process is known to me, and not difficult to implement from far away.

2. Eliminates the difficult task of evaluating MLS properties, including hiring someone to perform inspections, and hiring someone to repair and rehab to get a property ready to rent.

3. Reduces maintenance risk by allowing me to plan for long term maintenance based on typical life expectancy of new equipment.

I am interested to know if others have implemented strategies similar to my idea, and how well it has worked for them.

I am open to suggestions seeing that I have virtually no real estate investment experience, no financial planning credentials, and I just made this whole thing up.

Thanks in advance for your helpful comments.

Sincerely,

Tom Smart