Note Investing and Retirement Planning
I learned very early on that many real estate veterans are big fans of note investments. It wasn’t until I had seen enough toilets, tenants and trash that I understood what they were getting at…… the consistent cash flow that comes from the note!!
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I want to give you another perspective to consider in your investing business, note sales. The government and financial advisers will often tell you the best way to prepare for retirement is to invest in annuities. They provide a long term stream of payments and can last an entire lifetime. Whether an annuity is right for you as an investment is not the point of this article. Rather, I want you to think about the concept in terms of real estate investing and specifically note investing.
My own father is a good example. He worked at an automotive company for 40+ years and is now retired. What is important to him is having enough income in retirement for his lifetime. He receives a pension, social security, and has a 401k that was battered and bruised by the ebbs and flows of the market over the years. Therefore, because his returns are not consistent his 401k is a big concern. Enter notes as an investment option. I taught him how to take that old 401k and roll it into a Self Directed IRA account. That gives him the freedom to invest in alternative assets such as real estate and notes. He was able to purchase 3 long term notes that are still accumulating cash in his account until he needs the income. He will be able to buy a 4th note in the next two years which will only compound his retirement income. Notes are an attractive investment because of their power to create multiple streams of income.
What makes it an even better retirement option is the greater rate of returns most note investments produce from the stream of payment. While a traditional market annuity is around a 5% return, note investors can see returns of 10% and greater. Notes not only keep up with inflation, they also beat inflation. This is important because the cost of living and medical expenses continue to increase faster than inflation.
Next time you think about selling a note, think first about those you care about. At the very least you have the knowledge and power to help them invest in a note that’s secured by real estate and produces consistent returns over time. My Dad will tell you he has more peace of mind and most importantly more income to enjoy retirement.