How To Alter My Current REI Plan

Question

I'm self employed and need to plan for retirement. My original plan was to buy a couple properties that would be paid off in 25-30 years and be a source of income. To be honest, I'm not very interested in a lot of REI stuff like creative financing, OPM, flipping, or even investing out of my area.

I basically want to buy and hold properties in my area and have a management company take care of them.

Am I misinformed and this is a bad strategy?

After posting a question in another forum about potential property specs I was looking at I discovered that some of my original expectations were not realistic at all. Now I'm rethinking my whole strategy.

If I'm not that interested in the details of REI and just looking to invest/hold, am I better off just not even getting involved?

Ryan Arth · Answer

It depends. So you don't want to be involved, basically. If you found a property you were ok with, in your area, what return would you net after property management long term. Say that was 10%.

If you wanted RE as an asset class, you could invest in a REIT. You can look one up and see what it has returned over the last 10 years, maybe 8% (for argument's sake)

If you bought the S&P 500, maybe you net 6% long term (again, for argument's sake).

So the question is, is the gymnastics of owning the property worth 2% to you, if you are just looking for diversification and don't really care beyond that?

Or maybe your area will not provide the return at all, and in that case it doesn't make sense for you?  if what you are looking for is income in retirement, you should get there with paid off properties. If you have nothing but cashflow problems the whole way there, maybe it doesn't fit?