Tackling Retirement One House at a Time

by | BiggerPockets.com

My brother is about to move into his very first home. I’m pretty excited for him because he’s been working towards this day for a really long time.

It’s too bad I absolutely hate the house.

It has a great ocean view and a super convenient location but that is where the positive aspects of the home end – in my opinion anyway. The layout is terrible. It has a ton of useless space, no flow and a kitchen that feels totally backwards. That is why it’s been on the market for over 400 days despite it’s premium location. He’s a bachelor and doesn’t care about things like usable space or kitchen layout. He likes it because of the way the garage is set up. He works on cars as a hobby and this garage is just the way he likes it, with space for his latest project and space to park the vehicle he drives daily.

I had talked him out of it for awhile, but after missing out on another house we both liked, he has gone back to this one again. It is the only thing on the market in the area that meets his needs. I can’t blame him – but when I failed to talk him out of it I decided, on his behalf, it would all be ok if he fixed some of the big problems and turned it into a rental property in the future.

He is a carpenter (and an exceptionally talented and hard working one too!!) he can make some changes to improve the layout. He can even add a suite to the main floor to give him a mortgage helper in the short term and a great source of revenue in the future.

Maybe the house he bought isn’t poised to make him a bundle of cash without some serious sweat equity – but it’s still a step in the right direction. He has next to no savings so this at least puts him in a position where he will build some equity and when he moves out he assures me he can keep it and rent it out.

And that is what I wanted to talk about today … building your retirement one house at a time.

When you sit down and think about it, it actually won’t take that many houses for you to comfortably retire once they are clear of financing. In fact, for many people, as few as three houses free and clear and rented out will give them enough income to live comfortably on.

Let’s take my brother as an example. If all he does is live in that house while fixing it up and adding a second suite he will add a lot of value to the home. Then, if he moves out and rents out both units, moving into a new home to fix up and live in for awhile, he will already have made a gigantic step towards a comfortable retirement. Even if he does NOTHING else to save for his future in the next 25 years he will be sitting more comfortably than many other people.

My personal plan for him is to add a new house to his portfolio every 3 – 5 years until he has 5. Once he has 5, as long as he keeps them all and continues to pay down the mortgages on each of them using the rental income he earns he will be able to enjoy a VERY comfortable retirement.

Keeping it simple – let’s look at how he will do if he only does this once (so rents this house out in a few years and moves into a new one and then does nothing else).

Let’s assume the home appreciates by 3 percent each year, in 25 years he will own a place worth approximately $808,000. And his tenants will have paid off the mortgage for him! It’s almost like having someone else put over $2,700 a month into his retirement savings account! ($808,000 divided by 25 years divided by 12 months = $2,693).

Even if the property doesn’t appreciate by 3 percent every year (which is lower than the historical average annual appreciation of homes in most markets in Canada), his tenants still will have paid off his mortgage in 25 years. Plus, he will be enjoying the rental income he gets each month – and that rental income will keep increasing.

Looking at it in today’s dollars – how many people do you know that have $375,000 sitting in the bank for their retirement producing $2,000 a month income for them to live off of? I have met too many people who are looking at very lean retirements because the pension they’d been counting on has been clawed back or the company they worked for has gone bankrupt. Or, worse, their life savings were cut in half by a crash in the markets. There are plenty of people out there that would be very happy to have a source of income on a monthly basis backed by something of value that they can sell when they eventually need a few more dollars to pay for their expenses when they are elderly (or give to their family members to help them live their last few decades more comfortably.)

That is what just one house could do for your retirement.

I don’t think I have to walk you through just how much better this scenario gets when you add a few additional houses to the portfolio. It’s pretty easy math if you start to image three houses paid off, each producing $2,000 per month in income. You have over $1,000,000 worth of real estate generating a good monthly income to enjoy retirement comfortably.

If you are in your 30’s right now – like my brother – and you buy three or four houses and rent them out you are pretty darn near guaranteed to have all the money you need to be comfortable in your retirement.

Obviously this scenario takes time, discipline and patience – and if you want to get rich off real estate today we have to have a different conversation – but when you realize you’re only a few houses away from a very comfortable retirement in 25 years it kind of makes you wonder what you’re waiting for doesn’t it??

Get out there and find a few really great houses in good areas that will attract great tenants. Stick to real estate investing fundamentals – nothing fancy – just the basics to get a few good solid investments. Rent them to great tenants and then hold onto them so that in 25 years you aren’t worried about anything but where to golf and what rerun of NCIS to watch.

If you aren’t sure where to start check out Shae Bynes post on The 7 Day Plan for Aspiring Real Estate Investors.

And if you want to read another great post on real estate and retirement check out Jeff Brown’s article called: Over 45? Heading for Retirement or a Life Sentence?

Image Credit: © Kevin2010 | Dreamstime.com

About Author

Buy and hold real estate investing in Canada since 2001, Julie Broad is now a full time real estate investor and investing educator.


  1. Your brother’s a lucky guy. 🙂 I’m reminded of a true story I’m gonna tell in a week or two. Love how he bought cuz of the garage. Dad’s last house was bought due to the dang trees. It didn’t have one bathtub in the whole place — really. It was always entertaining whenever one of the female relatives visited, then discovered this tidbit — “No bathtubs?!! Are you nuts?!!” Hilarious.

    • Haha!! I’m sure my brother appreciates me somewhere deep down … He’s so excited about the house because of the garage. It has everything he could want in a garage – space for painting and sawing where it won’t get his prized car dirty, space to park the prized project car and his work truck. Ahhh boy heaven. 🙂 It’s in my nature to think exit strategies so I had a hard time with it but he is so happy and it’s a done deal now. Nothing left for me to do but plan his future purchase. He is SO lucky.

    • By the way – I would think the same thing of a house with no bath tubs. Nobody with kids or dogs would buy a house without a bathtub. Ok – maybe someone with dogs if it’s in a warmer climate but in the winter we can’t bath our dogs outside because we would both freeze!!! Anyway – that’s pretty funny!

  2. Julie,
    I love the concept. That’s exactly what I am doing. If you buy right, there is no reason you can’t own your own home free and clear in 6 years. Buy at 70% ARV including your repair costs. In 2 years, do it again. 3 moves and your free and clear. This counts no appreciation. If your in the States, much of that is tax free. (not sure Canadian tax laws) Keep each home if desired and use the cashflow to pay down debt even quicker.

    Its impossible not to sit back and grin (or if your me, cackle like a mad scientist) when you think of the plan you have helped him lay out. Its so simple its genius.

    The myth that your home is not an asset is only true if you purchase poorly. If purchased correctly, its a solid cornerstone in your foundation of financial freedom.

    Keep the great posts coming.

    • Thanks Jason!! Our tax laws are different in Canada regarding your primary residence (the good news for us is there are no capital gains taxes on our primary residence but the bad news is interest and nothing else related to our home is a write off) but the strategy you’re suggesting would still work in it’s theory. The challenge here really is finding homes that you can buy at 70% ARV … in areas you’d want to live in that is VERY difficult. Notice I am not saying impossible but it’s difficult. I like the way you’re thinking though!! thank you!

  3. Interesting Julie. None of the 55+ communities down here in the desert have tubs. They have what they call a 3/4 bath. All have larger showers where the tub would have been. I am not sure if its a “getting out of the tub” issue that has driven the builders to do this. It (the tub) is a woman’s thing though. I don’t think younger women want a home without a tub. Apparently older ones are willing to make that shift though!

    • Marc – you just brought up a VERY important point when it comes to buying houses and that is understanding who is MOST likely to buy the home from you in the future. You are completely right regarding tubs and seniors… they can’t easily get in and out of them!! If you’re in a market where the most likely future buyer is a Mom with kids then you’re going to want a tub … but if your market is retirees then a tub is probably not as important but space to park the golf cart might be. 😉 Thank you for your comment!

  4. Great post! Our plan is the same, though we’re probably not as aggressive as we need to be. Then again, I don’t believe in retirement until I’m physically/mentally incapable of working, so I can afford to take longer than most. I’m 40 now and hope to have five free-and-clear rentals by 65. That’s should be plenty of time. Thanks again!

    • 5 rentals free and clear is a perfect goal! At 40 – assuming you’ll work for at least another 20 years you have plenty of time but you definitely want to start acquiring them (if you haven’t already) because it does take time to pay them off. Sometimes money that would have gone towards the mortgage pay down ends up being used for surprise repairs or a surprise utility bill you get stuck with … just ask my friend and fellow BiggerPockets blogger Shae:

      Wishing you a comfortable retirement! And many many years before it’s time to retire.

    • Thanks Brian!! I believe rich is a term that we can each define for ourselves. For me rich isn’t as much about money as it is about my health, the quality of relationships in my life and my financial ability to enjoy myself, my health and my relationships. I don’t need Richard Branson-like wealth to be rich. I’m not saying money isn’t important to me – it is – but it’s a means to a goal not the goal itself if that makes sense.

      All that is to say that I totally agree with your pursuit of a decent retirement vs the pursuit of being rich.

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