Location and Age Now VS At Retirement – Game Changers?

by | BiggerPockets.com

Ask most folks what they think is the most invoked real estateΒ clichΓ©, and the vast majority would probably respond with, “Location, Location, Location!!” There are plenty who’ve been able to successfully ignore that axiom without negative consequences. An example would be flippers. They’re in, out, then on to the next one. As long as someone thinks the property is located to their liking, the flipper has no location related worries.

However, when investing to build a reliable retirement income, that approach can, and more often than not, does lead to major disappointment.

Then there’s the question of the property’s age. It’s fine now at 25 years old, but what about in another 25 years? Do you seriously wanna retire with a portfolio full of income properties sportin’ AARP cards? Why on earth would ya do that to yourself on purpose?

When we add those two factors together, it’s easy to predict how that retirement might turn out. Let’s review, shall we?

A buncha old income properties located in areas that are, um, less than stellar. Management time/costs go up. Tenant quality goes down. Functional obsolescence rears its ugly head. Even worse, what was a mediocre location at acquisition, has gone downhill significantly. You’re now literally hesitant to visit the places yourself.

Again — why would you do that on purpose? What do ya think the dire consequences to your planned retirement lifestyle will be? Here’s just a glimpse.

  • Significantly reduced cash flow.
  • A constant time suck — and at the worst time for you.
  • Who wants to buy them if you decide to make a change?
  • Tenant quality suffers, often further each year or so.
  • Worst of all? You must adjust your planned lifestyle.
If you’re not ready to retire yet, but your properties have been described here, I strongly recommend you make the transition to young buildings in blue ribbon locations now. This isn’t a minor deal, no matter what you may think now. If not addressed well before retirement, it’ll rip your heart out once you realize the truth — too late. In essence, I’m beggin’ ya to stop shoppin’ for retirement properties like you’re at a K-Mart sale. Are you planning a K-Mart retirement?
Please — stop foolin’ yourself

Review your current long term real estate investments by location, then age. If they fail either test? Get out of them by yesterday afternoon around 4:30 or so.

It’ll be one of the wisest things you’ve ever done for your retirement plans — I promise.

Remember this . . .

No matter what you’re tellin’ yourself now about the location quality or age of your investment properties, the truth will smack you between the eyes as retirement hits imminent status.

That’s not an epiphany you wanna have. It’s not the ‘game changer’ you ever want to experience.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.


  1. If your only getting 30% “built in equity” in distressed neighborhoods then you are shopping at the wrong store. I think 30% would be my bare minimum for a blue ribbon neighborhood. I don’t know if I would accept anything less than 50% equity in the slum. Of course each market is different & it is hard to judge.

  2. Jeff Brown

    Hey Bilgefisher — Let’s examine that. You end up with very old properties with somewhat more equity at retirement. But retirement is about income in the end, is it not? Also, if you have those props now, including the 30% bump, why not put them in a hugely better market and location, and end up with 50-100% or more equity and income at retirement.

    I have these conversations daily. The facts are on the side of location quality and younger buildings if looking at decades. The numbers don’t lie.

  3. That seems like a large change in a business to switch all their income properties from old homes to newer homes. Not saying its a bad idea, matter of fact, I like the concept. I could imagine it would take sometime.

  4. Jeff Brown

    Hey Rusty — you make solid points. Here’s more to consider.

    Those with properties bought for $50-100K (or less), and a decade or longer from retiring, can move those equities with stellar results — even if the locations are superb. Why? Simple: A home bought for $50K, now worth $85K and debt free, can be moved into an even better located small multi-unit prop for $250ish K. At retirement that same five figure net equity will be at least a quarter million, and instead of just three figures cash flow monthly, they’ll be benefitting from over $1,500 monthly.

    This isn’t a fair debate. πŸ™‚

  5. Jeff Brown

    Hey Ashly — You’re right, it’s a pain in the butt for sure. It should be done in a logical, ordered manner.

    Bottom line? Better the hard work now then hitting retirement with an income only half or even less than half of what it could’ve easily been. Make sense?

  6. Jeff Brown

    Anonymous — It always comes into account, right? As you’re well aware, it’s different for each investor. Do they make more than $150k/yr, which blocks them from using depreciation against ordinary income? Are they super high cash flow investors who might benefit significantly from using cost segregation? As I sometimes tell clients, ‘You’re gonna get depreciation whether ya want it or not. So if you don’t want it, give me a call.’ πŸ™‚

    Though depreciation can be a crucial factor in any investment plan for retirement, it doesn’t change the end results discussed in the post. Many in the 80’s learned not to buy income property solely for the depreciation, with very rare exceptions.

  7. Long time listener, first time caller. You’ve written here and on your blog a great deal about how to sabotage your retirement through ill advised purchases. I think a great article would be what your base criteria for a retirement focused rental would be. I realize each investor is different but, there has to be a baseline that you build from.

    Good idea, or am I reaching into the cookie jar?

  8. I like the concept. If you wish to live a quality retirement life, you have to plan for it ahead of time, and planning should include reviewing investments by location and age. I believe this will limit headaches in managing properties especially during retirement.

  9. Jeff,

    Really have enjoyed reading your posts and appreciate you sharing your experience.

    I could really relate to what you you said in buying “old income properties located in areas that are, um, less than stellar. Management time/costs go up. Tenant quality goes down……”

    I have learned the hard way and purchased some of these properties. The tenant and maintenance issues can be a real grind! Now I just need to unload this dead weight and move onto some better areas.

  10. Jeff
    What about if there simply aren’t any (or many) newer rentals in our area? I bought an older fc duplex for 27k and it’s current COC is 28% (ROIE is close to that as well) – This is one of my “free and clears”. I also have an 11 unit we picked up for 230K ARC sporting a 24 and 28% coc/roie respectively. Yes, they’re old but the % return seems great enough to overcome that, no? We are at 43 units now. Including an 8plex we just got for 170k (needs 20k work give or take) These 3 I’ve mentioned are all lower income type but not bad areas. We have 3 SFH and 1 duplex to get rid of then accumulate a bit more. I’m considering out of state but … big step.

    I know you advocate “texas duplex” but a duplex fetching 250K would need to rent out for mucho bucks to cash flow would it not?

  11. I agree strategy is dependant on available cash to invest and your age and when you want to retire.

    I believe in saving but also enjoying life in the current.There are some that do not enjoy the current times of today to save for tomorrow.The problem is they might not be here tomorrow.There are some out there that say eat ramen noodles for 30 years and then you will have a million dollars.The problem is 1 million 30 years from now will not be worth anything close to 1 million of today.

    I do have investors that buy the “cash for trash” buildings.They buy for cash flow and yield only and know the properties will need intensive management.Of course these properties do not fit people doing more passive type investing who don’t want their lives disrupted.

    The age of the building is important but moreso to me is the location.What is it today and where is it going tomorrow??

    I look at the future land use map for the city and the county.A mediocre area can become the it spot in 5 to 10 years.You just have to know what to look for.Even if you have a really old building in a great area you can sell for redevelopment.The value for the developer will be the land and not the old buildings that sit on it.

  12. Hey Ken — Bottom line? You’re getting those returns cuz the sellers couldn’t unload the props otherwise. Ask yourself, how many investors passed them up till you bought them? Do you want them as your retirement income sources?

    As far as what I like about TX and the props there, 20% down has generated cash on cash in the range of 7-10%. The difference, of course, is that when, down the road when they’re F&C, you’ll have $250K equity (without any appreciation) and $18-20K income. Also, your TX units will only be 10-20 years old.

    It still comes down to comfort zone, doesn’t it? If you’re comfortable with the status quo, and what you think will be your retirement reality, who’s to quibble?

  13. Hey Joel — You make excellent points. I have clients who’d rather take longer to get to retirement and live a more costly lifestyle, which is fine. On the other hand, some of my younger clients, (go figure) who’re makin’ pretty decent coin at work, have opted to save like maniacs, while living frugally. When I’ve queried them about it, they insist they’re only depriving themselves of ‘excess’, not every day pleasures. To each their own.

    Imagine a 20-something, single, living alone, makin’ about $90K, who manages to save $40-50k a year, after taxes. I have clients doin’ just that. I also have clients who, um, don’t. πŸ™‚

    As far as calling an areas future 10-20 years in advance, your crystal ball is obviously a far better quality model than mine. πŸ™‚

  14. Hi Jeff,

    I greatly enjoyed your video the other day.I am young as well at 36. Your were licensed before I was born! LOL πŸ™‚

    Before listing investment property I was working with developers on big commercial projects for a few years.So I can look at traffic flows and development a little differently than the average investor.Georgia is more sprawled out with land versus some more dense locations where you have to add on to existing structure or tear down completely as no more room is available.

    Planning for retirement is hard as you don’t want to acknowledge you are getting older.. πŸ™‚

    My mom says just wait until I hit 70 and then come back and tell her about my aches and pains in the 30’s. I look forward to more retirement blog articles from you.

  15. Glad you enjoyed the video, Joel. Having worked on large comm’l developments, I can understand some of your previous observations better. I also hope you’ve paid close attention to the fact that many of those commercial developers turned out to be questionable seers. πŸ™‚

    Listen to your mom! Mine told me the same thing.

  16. Robert Steele on

    Hmm, I don’t know of many new properties in blue ribbon neighborhoods around here unless you want to spend near half a million and receive negative ROI. Most of the blue ribbon neighborhoods are mature with older homes. Positive ROI is available in such neighborhoods.

    Typically all the new homes are on the edges of civilization. People want to live closer to their work and thus the older homes in the built-up areas are deemed more desirable. Predicting wether new subdivion X will turn out to be a bad or good neighborhood 20 years from now is a crap shoot at best. I’ve seen it go both ways in a peroid of just 5 years after being built.

    I think I’ll just play it be ear. Year to year if a certain property in my portfolio starts to suck I will at that point exchange it for a better one and leave my crystal ball in the closet.

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