{"id":100549,"date":"2020-01-21T09:00:52","date_gmt":"2020-01-21T16:00:52","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=100549"},"modified":"2024-02-17T15:45:04","modified_gmt":"2024-02-17T22:45:04","slug":"invest-in-rentals-later-in-life","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/invest-in-rentals-later-in-life","title":{"rendered":"5 Smart Ways to Start Investing in Rentals Later in Life"},"content":{"rendered":"

\u201cThe best time to plant a tree was 20 years ago. The second-best time is now.\u201d \u2014Chinese Proverb<\/em><\/p><\/blockquote>\n

Think you missed the boat on real estate investing? That it\u2019s somehow \u201ctoo late\u201d because you\u2019ve reached your 40s, 50s, 60s, or even 70s?<\/p>\n

Think again.<\/p>\n

Real estate investing is not the exclusive domain of the young, hip, and unattached. In fact, middle-aged and senior investors bring some unique experiences and advantages to the table.<\/p>\n

Sure, you might have kids. A spouse. A demanding job. So what? You think you\u2019re the first parent who works full-time to buy a rental property?<\/p>\n

You probably have a lot more savings than the 23-year-old who\u2019s trying to buy their first property. For that matter, you probably have experience buying real estate\u2014in the form of a home. You\u2019ve been through the mortgage financing process before and know some of the pitfalls to watch out for.<\/p>\n

Here are a few pointers for older adults, to buy their first rental property in middle age or later.<\/p>\n

5 Smart Ways to Start Investing in Rentals Later in Life<\/h2>\n

1. Leverage (and build!) your network.<\/h3>\n

Think that 23-year-old rascal has a network like yours? Fuhget about it.<\/p>\n

Take advantage of your superior network and double down on building an even stronger one.<\/p>\n

Who do you know in the real estate industry? In the mortgage industry? In the construction and contracting industries?<\/p>\n

Who do you know who has more money than they know what to do with and is looking for a project to invest in?<\/p>\n

The electrician in your Friday poker group can refer you to trustworthy and affordable general contractors and handymen. The real estate agent in your bridge club may not service the area where you\u2019re looking to invest, but she can refer you to someone who can.<\/p>\n

Don\u2019t stop at friends of friends. Join local real estate investing Facebook groups. Participate in our local real estate investing forums on BiggerPockets<\/a>. Sign up with local wholesalers, turnkey providers, and other off-market sellers in your area.<\/p>\n

Start assembling your dream team. After all, real estate investing is a team sport, and you have several more decades\u2019 worth of contacts to draw on to fill out your roster!<\/p>\n

\"retirement-risk\"<\/p>\n

2. Capitalize on your existing capital.<\/h3>\n

After being employed for several decades, you should have far more money set aside than some 23-year-old just out of college who\u2019s scraping by on their entry-level income.<\/p>\n

That extra capital is a competitive advantage!<\/p>\n

Maybe you can afford to make cash offers to drive a harder negotiation and avoid financing fees. Or maybe you can afford a higher down payment to avoid mortgage insurance and having to resort to tricks like owner-occupied financing or relying on seller concessions for closing costs.<\/p>\n

You may decide that you want to finance your rentals even though you can afford to buy in cash for tax or leverage reasons. But having more money at your disposal is a huge advantage over the young punks out there.<\/p>\n

Use it to your advantage to negotiate hard, get the best possible financing, and move faster on deals than your competitors can.<\/p>\n

3. Take another look at house hacking.<\/h3>\n

\u201cForget it, Brian! I don\u2019t want to live in some trashy duplex!\u201d<\/p>\n

First of all, there are plenty of upscale multifamily dwellings out there. Don\u2019t discount them just because your experiences with small multifamily properties<\/a> have been less than thrilling.<\/p>\n

But even if you are committed to living in a single-family home, there are many ways to house hack<\/a>.<\/p>\n

First, you could buy a home with an in-law suite and convert it to an income suite.<\/p>\n

Or how about a detached casita?<\/a><\/p>\n

Could you add an apartment over the garage? In the basement? Something with a separate entrance of course, so you don\u2019t have to mingle with the riffraff.<\/p>\n

If you have a large garage space, could you rent it out as storage space?<\/p>\n

My partner Deni Supplee is in her mid-50s, and she took a unique angle on house hacking<\/a>. Her children had all left the nest, but she and her husband weren\u2019t ready to downsize from their large suburban home just yet. What did they do? They brought in another child!<\/p>\n

Through a foreign exchange student placement service, they welcomed a 15-year-old Chinese exchange student named Alex into their home. They fell in love with him, and he\u2019s become a member of their family.<\/p>\n

And the placement service pays the majority of their mortgage every month.<\/p>\n

4. Keep your eyes on the prize: income for retirement.<\/h3>\n

People invest in real estate for many reasons and in many ways.<\/p>\n

As an older adult, consider putting \u201cpassive income\u201d at the top of your priority list.<\/p>\n

One of the things I love the most about rental investing is you can forecast your returns incredibly accurately, before ever putting a single dollar down as a deposit. You know the market rent, the neighborhood vacancy rate, the local property management costs, property taxes, insurance. You can accurately forecast CapEx and repair costs.<\/p>\n

You\u2019ll know exactly what kind of cash flow you can expect from a property before making an offer. This means you can only invest in properties with strong cash flow.<\/p>\n

Appreciation may or may not happen sometime in the indefinite future. But cash flow isn\u2019t based on future hopes and prayers.<\/p>\n

Rental properties can be incredibly efficient income producers for retirement<\/a>. The 4% Rule doesn\u2019t apply; in fact, the whole notion of \u201csafe withdrawal rate\u201d goes out the window.<\/p>\n

You don\u2019t have to sell off any assets for the income produced by rentals. In fact, they produce more income over time, not less\u2014rents go up, even as your mortgage payment holds steady (and eventually disappears)!<\/p>\n

\"4<\/p>\n

5. Snowball your extra income.<\/h3>\n

As an older adult, you\u2019ve been at this whole \u201cbudgeting\u201d thing for a while now. Granted, that could mean that you\u2019re stuck in your ways\u2014or it could mean you\u2019ve learned a thing or two.<\/p>\n

When young people get a promotion, the first thing they do is go out and find a way to spend their higher income. It could mean a better apartment, a better car, or just going out to more bars and restaurants.<\/p>\n

It\u2019s called lifestyle inflation, and it\u2019s insidious.<\/p>\n

As an older adult, hopefully by now you\u2019ve witnessed firsthand how counterproductive lifestyle inflation is. Credit card debt? You\u2019ve been there and done that. Faster cars? Not as sexy as they were when you were 20.<\/p>\n

So, when you buy a rental property and start earning that extra $200, $300, $500 a month, what are you going to do with it?<\/p>\n

Re-invest it.<\/p>\n

Set it aside and put it in the stock market. Or in private notes. Or best of all, in more rental properties.<\/p>\n

Because ultimately, you\u2019re on a mission. Your mission, whether you choose to accept it or not, is to retire with more wealth, because more wealth brings more options. As you build streams of rental income, you can retire young, or keep working and building more wealth.<\/p>\n

And when you retire, you can go travel the world if you want, rather than ducking into the Golden Corral before the Early Bird Special ends.<\/p>\n

It\u2019s never too late to start buying rental properties. If you invest strategically, you can accelerate your retirement saving, bend the 4% Rule and build a stable and permanent base of passive income.<\/p>\n

\"\"<\/a><\/p>\n

What worked for you in terms of investing later in life? Or if you haven’t started yet, what are your concerns?<\/em><\/p>\n

Weigh in below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Think only younger adults can invest in rental properties? It’s just not true. Older adults have many advantages in rental investing. Here’s how to capitalize on them!<\/p>\n","protected":false},"author":158586,"featured_media":115391,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-100549","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/100549","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/158586"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=100549"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/100549\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/115391"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=100549"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=100549"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=100549"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}