There are so many experienced and successful real estate investors on this site.
I have a question that I keep wondering about. And while this is a hypothetical, I suspect there are many people out there for whom this would fit.
Say you have 700K that you could invest in real estate. You are looking to create long-term retirement income. You have approximately 7 years until retirement from good paying W2 job. Where and how would you structure the investment? Long-term buy and hold single families? Small apartment complexes? Apartment syndications? Hard money loans? Notes? Some combination?
I would love to hear from folks who have been doing this a long time, and can see a path to good ($300k per year if possible) retirement income.
How much income could you generate and what would be the plan? (i.e. BRR 5 houses, then sell, move into HMLs? etc)
Thanks in advance!
It depends on how old you will be in 7 years. If 55 you could reasonably hold for 15 years but if you are 65 it likely is not worth the effort involved although doable.
Long term hold is probably not worth the effort if you are 65 and there are far better, much more passive, investments than real estate. Too much work associated with income investment properties if you are really looking to retire.
As for a generated NOI of 300K I see that as a stretch. Realistically it would require well beyond 125 doors. If you could get a 15% return on your 700K you would be doing very well.
If you have any form of pension your total retirement income, pension plus investment, need not be any more than 70% of your present working income. You should be able to get by with less than 300K.
It really depends on whether you want to be active or passive investor and answering questions around time, resources, interest level, control, etc are influencing factors and what level of risk / returns you are seeking. I know when I was younger I wanted to do everything myself but once I had family and now as I get more mature (ha) and think about my time and valuing that even more. I talk to a lot of investors and few want to be more active as they near retirement and gradually increase their passive investments. Passive investing is sure hard to beat if you hook up with experienced operators who stick w/their knitting and are conservative in their modeling and expectations.
Looking for a combination of cash flow and appreciation (value add investing) may be an avenue for some of your money. There are many niche areas but I favor MF apartments as a core REI syndication holding as well as diversification into self storage and mobile home parks as well may be an option. I also like diversifying geographically. Here's some educational blogs to start your research.
@Lenore C. - Investment 101, age and money I won't put on public forum. The numbers is fifth grade math, try it out.
With 7 years to go, only you know how far you are from your Financial independent number. Let's say it's $3 million. Now you have to figure out the return your $700k needs to make to become $3 million in 7 years. In this case, it's 23% a year. Or, you can look at monthly cash flow required. Let's say it's $10k per month.
Our firm tends to advise clients to get into Residential Care Facilities. The rental returns tend to be 2x "normal" and you are ultimately buying single family homes. Also, there is a 70% chance our clients will become an RCFE client, so they are already setting themselves up for the worst. As an example, a $700k down payment on a 3 property portfolio we are selling, is netting $80k per year cash, plus probably $50k equity growth, and a tax benefit worth 30k per year. That's $160k on 700k. That's above a 20% return, and why these homes are so popular with our clients.
Consider your risks as well on other real estate verticals.