Investing at 50+ Years Old: How to (Quickly) Acquire 10 Rentals Cash Flowing $5k/Month


Last week, we spent a lot of time and 2,000 words going through a detailed plan on how to achieve $8k a month in passive income — and 8 paid-off properties! Sounds awesome, right? Check that post out here.

There were a lot of great comments, conversations, and questions that came out of that post. The one I kept hearing over and over and the one I want to address here is:

If I am in retirement or nearing retirement, can I still achieve a rental portfolio that is giving me passive income?

Great question. You can. Here is how.

Save like crazy. And start buying NOW.

In the last article (mentioned and linked to above), I detailed how to buy a property every three years and take that investment, paying each property off early, and over roughly 25 years, you have 8 free and clear houses and $8k in passive income.

But what if you don’t have 25 years to wait? You start saving and acquiring like crazy. Now. Let’s assume for simplicity here you are 50 years old and you have done some saving and have $20k cash in the bank. Let’s also say you have $200k in investments/401k/Roth IRA.

The goal is to acquire as safely, quickly, and easily as possible 10 properties over 10 years. We will do one property a year, each year, for 10 years. Decide if you want most cash flow now (30-year mortgage) or to pay off as quickly as possible and have the most income in 15-20 years (10 or 15-year mortgage).

I personally want to have my rentals paid off when I am of “retirement” age. So, to me, I prefer the 15-year mortgage in this example.

Acquisition Plan Style

Option 1: Do it Yourself-er Model

Work with an agent who is an investor. Make sure they actually own properties. Make sure they really know what the heck they are doing. And begin buying one property at a time that is under market value, needs work, and on which you do everything. This is not necessarily my first choice for you — I do like turnkey properties better for most people (and full disclosure, I do SELL these so I am not totally unbiased) because of the ease of entry, and as long as you work with a great provider, you have many fewer lessons to learn. You just need to know if you trust the provider and whether they have a product and return you can be happy with.

Anyway, find a property, buy it, rehab it, place a tenant, and then refinance it.

Related: The Average Retirement Account Has Less Than $100k: Here’s How Real Estate Can Help

In this scenario, you could buy with:

  1. Cash (your own). Buy it, fix it up, lease it, and then refinance and pull your dollars back out. In this scenario, you want to be as close to the 80% line as possible. Do a 15-year mortgage as long as it will cash flow or will be close to neutral (and you must have reserves set aside to handle).
  2. Cash/private/hard money (someone else’s). Buy with some (or none) of your own money (but have some reserves, people!). Buy, fix, lease it, and refinance. In this scenario, the holding costs will cost you some money from financing it, but it may be much easier to get into these. If you aren’t sure how to do this, hire a coach or mentor. This is a great way to learn, have a guide, and not really screw something up.
    • Costs you $5-$10k for a coach.
    • $100k house, got into it for 80% of value — just made you $20k in equity, you got a cash flowing property, and you didn’t screw the pooch on a bad property or problem renovation issues; you definitely came out ahead.
    • Most importantly, get good management in place unless you are really committed to understanding this part. Most people think they want to make more money here, but most people don’t really want to answer the phone and fix the toilet. Have an honest conversation with yourself, and have a plan.


Option 2: Let Someone Else Swing the Hammer (Retail or Turnkey)

In this example, you should either buy retail properties that are high quality that have actually been renovated and then select a property management company you have vetted, OR my choice by far (again, I know, we sell them, just so it’s clear) is to buy turnkey.

Turnkey properties will offer the best opportunity for a turnkey experience. You literally put it under contract and get an awesome provider who will already have a great management company in place or who will personally manage themselves in-house. I like the latter better because I believe this makes an opportunity for a win/win situation and most closely aligns interests for both parties.

  1. Buy retail. Get an awesome agent who actually OWNS and has rentals, and review properties. Make sure the finishes are nice. Make sure you have accounted for any mechanicals, roof, windows, etc. that would need to be replaced.
    • Select property management company before close
    • Set up and have reserves ready to go for the property
  2. Buy turnkey. Have an awesome turnkey provider for your partner, and make sure you understand how they renovate, what they do for management, and any coverage or repairs they do for you after you purchased.
    • Management, in-house or outside company
    • Set up and have reserves ready to go for the property

There are a few interesting ways you could buy these. With the example I laid out here, you have $20k in cash, which you could use for the down payment, and you’d need to save up the $20k each year for each purchase. Or you could also access your IRA and transfer $100k of your $200k into a self directed IRA and own the rental through your IRA. You can even use leverage in this way; just make sure you are not in violation of your IRA or the types of loans you can use with these funds. Rent payments would go back to your IRA, but you are saving for retirement income, so that doesn’t matter. You aren’t taking income now.

Use an self-directed IRA firm used to doing real estate transactions, and make sure you understand costs to set up, transfer funds, buy houses, etc.

If you used IRA, you could now go after 4-5 properties with the $100k at $20k per door. The loan would be to ______ IRA, YOUR NAME Trustee (or something like that).

Option 1: Numbers and Cash Flow

So, if you used example #1, you would acquire 10 properties, one per year, OR you could do more properties and front load the first. If you can do this, you would just need to have more cash up front to invest or more ability on the acquisition plan and contractors/hard money if you are the do-it-yourself-er.

If you are 50 and you just bought your first house (year one) and did a 15-year note on it, you would would have the first house paid off by the time you’re 65.

That means by the time you are 75, all the properties are paid for. And let’s say (in line with my last post) they are averaging $1k per month and 50% expenses (for maintenance, CapEx, management, etc). You are making $5k a month in passive income and have 10 properties paid off worth $1M. You could also consider then selling a few of these, divesting, and then putting the money in a few more leveraged properties making a higher cash on cash return. I like to be paid off in retirement years (if you can) because even with an uptick or downturn, you will still have a paid off house, and even if rents go down or it takes a little longer to rent because of market conditions, you will be able to easily weather the storm.


Option 2: Numbers and Cash Flow

You put $100k of your funds from your regular IRA in your self-directed IRA (SD IRA), and you buy 4-5 houses over the course of 12-24 months. You do a 15-year note on them.

Age 50, you buy 2.

(Use $40k for 2 properties, $20k down each, and have $60k left.)

  • Let’s say you make an average of $150 after expenses/CapEx, etc. So $150 x 12 x 2 properties = add $3,600 conservatively to the balance
  • $60k remaining in the IRA, plus $3.6k in rental income = $63.6k remaining
  • Paid off (assuming 15-year note) at age 65

Age 51, you buy 2 (total of 4).

(Use $40k for 2 properties, and have $23.6k remaining.)

  • Let’s say you again make an average of $150 after expenses/CapEx, etc. (conservatively). So $150 x 12 x 4 properties = $7,200
  • $23.6k remaining in the IRA, plus $7.2k in rental income = $30.8k ending balance
  • Paid off (assuming 15-year note) at age 66

Age 52, you buy 1 (total of 5).

(Use $20k for 1 property, and have $10.8k remaining.)

  • Let’s say you again make an average of $150 after expenses/CapEx, etc. (conservatively). So $150 X 12 x 5 properties = $9k
  • $10.8k remaining in the IRA, plus $9k in rental income = $20k ending balance
  • Property #5 paid off (assuming 15-year note) at age 67

Let’s say you wait a year.

  • Add another $11k in rental income during year/age 53 (after expenses, like we’ve said)
  • Add another $11k in rental income during year/age 54 (after expenses)

Age 54, you buy 1 (total of 6).

(Use $25k for 1 property, and have roughly $19k remaining.)

**So it’s clear where the math came from here — I used the $20k balance from the age 52, plus 2 years of rental income for age 53 and 54: $20k balance, plus $11k, plus $11k = $42k. Minus the $25k down leaves you with $17k.

  • Let’s say you again make an average of $150 after expenses/CapEx, etc. (conservatively). So $150 x 12 x 6 properties = $10,800 (we will use $11k for simplicity)
  • $17k remaining in the IRA, plus $11k in rental income = $28k ending balance
  • Property #6 paid off (assuming 15-year note) at age 69

Now, you could continue this and buy another property roughly once a year and end up with 10 acquired at age 58, and all properties (assuming 15-year note) will be paid off at age 73.


Related: Want to Retire Early? Sorry, But Much of Your Net Worth May Not Help

Whatever Path You Choose, Take Action Now

Both examples lead to 10 properties in retirement in your early 70s with $5k+ in income (using a conservative 50% of expenses, 10 properties, $1k rent each, and $5k after expenses).

Either way, whatever you are doing, if it is nothing, it will not get you there. If you are taking action, you are making progress. Make smart decisions. Don’t wait. Search out a great team to work with.

You can still have retirement income!

In this scenario, even in your early 70s, you have $5k a month in income, plus whatever you have with your retirement, 401k or pension if you have one, plus whatever you get from social security. You could have a decent income.

The second part here is if you are nearing retirement years, do your best to have your house paid for, cars paid for, and live below your means. Save, invest, and do what you MUST now so you can do what you WANT later!

Any questions about this strategy? Are you buying rentals in retirement?

Let me know your questions and comments below!

About Author

Nathan Brooks

Nathan Brooks is a dad, husband, worship leader, and real estate investor in the Kansas City market. Foodie. Coffee addict. Crossfit junkie.


  1. john culbertson

    Worst advice ever! We are at the tipping point right now as far as RE values. The high end markets around the country are already seeing significant double digit declines and the Dallas-Ft. Worth MSA where I am saw a 2% decrease in sales in JULY! California saw a 12.8 % decline in July. FYI, July is one of the hottest months of the year for home sales.

    I’ve been in RE for 27 years and it’s deja vu all over again. The smart money is getting out now and the dumb money is rushing in. Newbies beware!

    But then again, it’s probably nothing!

    Food for thought:

    • Of course he is not saying to buy high end properties for rentals, but rather buy solid properties that cash flow rental wise in a market that does not fluctuate quite like the Hamptons, Aspen and Miami – more like Kansas City, St Louis, Indianpolis. And make sure that you have enough down and are getting them paid off fast so they are free and clear. . . you can cash flow a free and clear property all day long.

      Also take the time to find assistance on the ground where the properties are that know good solid properties . . . for example in Kansas City where Nathan works and where I work as well. Pre-crash a nice bread and butter rental sold for $60,000 to $80,000. When the crash came you could buy a lot of these houses for a discount true . . . these were bank owned true again, however the people that were loosing properties in this market were owner occupants that bought with zero down, adjustable mortgages with no reserves for when they lost a job or their interest and taxes spiked. The others loosing their homes were investors who had either over leveraged houses or had packages of houses on commercial notes that had to be renewed every 5 years and because the bank auditors were breathing down their throats, the banks did not renew and investors gave the houses back . . . banks are starting to make stupid loans to owner occupants again, however they are still very conservative with the investor so I don’t see this happening again in Kansas City for a while.

      Now my concern is using this model on a Vacation Rental Scenario at the Lake of the Ozarks, Branson or some other area . . . if the market turns and the rich people are not rich enough to buy, will they still want to go on vacation. . . the experts in these areas tell me yes because when the economy tanks the rich people stop going on vacation out of country our to the hot spots across the country and go on vacation closer to home . . .

      Sorry for the rant . . . great comments to think about from everyone. And Nathan, we do need to get you to speak at MAREI in 2016 . . . or teach a turn key provider workshop or something.

    • aubrey smith

      My thought exactly , plus what about people like me living in NYC, right now you cant get anything halfway decent in Brooklyn for under half a mill, his numbers are laughable around here. I’m just waiting for the bubble to pop, so I can scoop up a decent multifamily, I want solid info but I’m just seeing a whole lot of rah rah buy real estate get rich, I know from experience that it’s not quite as simple as it sounds, like what about bad tenants, and don’t get me started on the eviction process in NYC, it took me almost 8 months to evict my bad tenant , and that’s just one factor,there are quite a few variables that need to be taken into consideration, and I’m just not seeing that balanced view, I believe in real estate but I also believe that once again the market has overheated and a lot of people are going to get burned

  2. Michael Swan

    Great article Nathan,

    I have a slightly different take. i started investing about 5 years ago in May 2011. I was 46 years old. I bought a little 1bedroom and 1 bathroom 700 sf condo for $135,000 in San Diego. I put 25% down. After all expenses, right out of the gate it was cash flowing about $330.00 a month. My wife, mom, and dad went in on it with me. I put about $17,000 into it and so did my parents. That was exciting!!

    Now comes the fun part. I started to find other area about 20 minutes away from this area to buy more. These areas the prices were a little lower and you could get more bedrooms etc… For the same price or less. They cash flowed at $450.00 to $650.00 after all expenses. We did this with 30 year fixed mortgages.

    I went to my tax guy for 2 years in a row and he said I owed NO taxes on the cash flow. I was amazed. I had worked as a teacher in a Catholic School for many years and I always had to pay taxes on those w2 earnings. I asked him. What is the catch. He explained to me that as long as we keep proper leveraged debt on these properties, we can even write off the interest on the loan.

    Then, of course I cashed in all those moronic IRA’s and paid the stupid tax (10% penalty) and other taxes (that I would have to pay whenever I withdrew money) too. Also, I refinanced my personal residence and purchased 9 more properly leveraged condos.

    I was dumbfounded when the cash flow was rolling in and all tax deferred!! Here is the kicker. Appreciation started to happen rapidly in San Diego in 2014, 2015, and to astounding levels in 2016 currently. At the same time in 2015, we started investing in small little duplexes in Euclid, Ohio. We were purchasing them for about $30,000 each, including rehab and had a personal connection, family member of a teaching colleague of mine that performed PM in that area. We bought 8 with cash in 2015. Great cash flow rents at $750 or higher each. However, since we have no leverage or debt on these properties, we are not able to write off interest on loans. Plus, we figured we would run out of cash sooner than later. These duplexes were strictly a cash flow play. Although, in 2004, these same half duplexes were selling for about $80,000-$90,000 each. Same concept as in San Diego we bought these based on cash flow, not really thinking about appreciation.

    Last, we kept learning and talking to RE tax experts, RE attorney, attending seminars etc… We found out that since we had this wild appreciation (more than double purchase price) now on our 10 condos here in San Diego, that it was time to either refinace that dead equity just sitting there waiting to disappear with the next housing crisis. We have lived in San Diego and seen this time and time again since the 1970’s. We chose the power of the 1031 exchange and exchanged 7 of our condos for 4 apartment complexes in Ohio.

    We now, after this next 2 sales of Condos wil have 85 front doors. Our current tax deferred cash flow (due to properly leveraged debt) is $120,000 a year and we expect in the next 2 years to double that cash flow. In 3-4 years, we will be working on 200 front doors. 2-4 years after that 400 front doors. 800 after that and over 1000 after that. Apartment complexes are valued on NOI and comps are not important. If I increase the NOI one dollar, the lender says my complex is worth 10 dollars more than I paid for it. That means a 15 unit we own in Painesville Ohio, in the next 12 months or 24 months after purchase, I am expecting NOI to rise $15,000 more than we purchased the property. The bank has informed me that when I accomplish this, my apartment complex will be worth $150,000 more than I paid for it. I only put $140,000 down from the equity on a 1031 exchange of a little condo in San Diego that we only came out of pocket $34,000 in 2012. Not to mention all the cash flow we will be receiving in the next year or so. Maybe $50,000 in cash flow. Don’t get me wrong. There are struggles and trials and tribulations along the way. However, I like this a lot better than speculating in the stock market. I can go to Vegas if I want to gamble. I am in control with this new financial freedom path. I wake up every morning knowing I have ZERO dollars in the stock market. I have passive tax deferred cash flow right now. I won’t need to wait until I am 65 to hope my pension is there for me and that social security will be there too. I don’t believe in deworsiicstion anymore. I am putting all my eggs in one basket and guarding it with my life!!!

    What a country!!!


    • Susan Maneck

      I also got started investing in 2011 when I was 55 years old. I had seen my retirement portfolio go down to $100K the previous few years which is awful scary when you are in your fifties but I didn’t panic and take my money out, instead I starting dumping as much back into my retirement funds as possible while the market was low and by 2011 it was making a come back. Real Estate in Mississippi, however, was not and my house was underwater. So this was my actual scenario.

      Age 55: My mother and I went in together and purchased a 4bdrm 2ba house for 15K. It needed more repairs than were anticipated (about 30k) which I did no my credit cards. A little more than a year later we refinanced it with a 30K HELOC. Our original tenants still live there and pay $840 a month.
      Age 56: Son buys a house for 23K. I end up using money from the HELOC to issue him a mortgage at 5.6% the amount my HELOC costs.

      Age 57. Bought a 3 bdrm 2 ba house from a friend who lives on my street for 35K. Needed paint and new flooring for about 5K. Purchased with small loan from my retirement, balance transfers from credit cards and savings. House currently rented for $825.

      Age 58: Stock Market seems overheated but real estate in Mississippi still cheap, cheap, cheap. Open a Solo401K and roll-over into it about 100K of my IRA funds. Then I start looking for houses to put into it. I find a house for 30K that I like so much I want to live in it myself. Had to fight with Fannie Mae to persuade them I was really going to be owner-occupied even though my old house is two blocks away. I loan myself 30K from solo401K to purchase house. (talk to Dmitry.) I rent out my old house for $875 (now $950.) A month later I find another house for 30K which i purchase inside my solo401K. It rented to $800 originally, now gets $868 via Section 8.

      Age 59: Purchase 2bdrm 1ba house within my solo401K Rented it for $700. Later realized it had aluminum wiring and rewired with copper. Now have it rented HUD for $770 on condition i build a ramp for a disabled couple. Refinanced house purchased two years ago with a HELOC.

      Age 60: Used a wholesaler for the first time. Bought two houses on one lot for 32K. Spent 10-15K fixing up. Used money from HELOCs. Rents for $1500. Bought first out of state property, a condo in Lake Tahoe for $110K. Bought for future retirement home. Rents for $975. Hey, its California, not Mississippi!

      I am now the proud owner of nine properties with only five years of investments made in my old age. Yes, I live in one of them and pay myself about $250 a month to my Solo401K.

      • Congratulations, Susan! Speaking from experience, it is very scary to do the first deal, and you did so well with your first, and then subsequent ones.

        I can’t believe the prices of Mississippi houses – $15k, $23K, $30k? And good rental income!

        Hawaii prices are crazy. The only “deals” are out in the side of the island with bad reputations or condos with high monthly maintenance fees.

        Congrats again, you go, girl!

  3. I read this article, and the comments, with great interest. I am 64 years old and have just a few investments in real estate – in Las Vegas and in Hawaii. So far, I have been lucky and what John Culbertson said is true, to a certain degree. I also think that what you say is true, to a certain degree.

    Michael Swan has done very well – but I take issue with him calling IRAs moronic. They are probably one of the few “gifts” from the IRS for the common man. Investing with IRAs will allow capital gains without paying taxes until you withdraw funds. Investing with Roth IRAs will allow capital gains and withdrawals, tax free. Their only drawback are the rules imposed to keep them legal, but these rules are designed to keep them safe from dealings that may jeopardize the “gift” that these tax free investing vehicles provide.

    Question to Nathan: which bank are you using to get loans with your checkbook IRA LLC? Very few banks have non recourse loans, which is what is needed for IRA loans, since the most important mantra to remember is: the IRA cannot benefit from the owner personally, so loans must be non recourse and NOT involve personal loans based on personal credit worthiness. I have found that these banks give only 60% LTV or less, and in some cities (such as Las Vegas), they do not even offer them.

  4. Peter Crisp

    I’m up in Canada where we didn’t get the 2008 bust, but prices in Toronto and Vancouver make no sense, and most markets outside of these areas are certainly not cheap either. I’m between Nathan and John. I’ve dabbled in real estate since University, but I decided to get serious about 6 years ago, and I’m 57 now. I’m not putting all my eggs into real estate but quite a bit. Depending on the day, I’m pretty happy with the results and I’m on track to do what I wanted to do.

    Here’s the hard truth. There’s a learning curve and if you have no real estate experience and nothing to bring to the table (e.g. construction or engineering background, sales background, real estate broker etc.) and also the temperament to be an entrepreneur, then in this competitive market, starting late, you could get very bruised. I’m learning every single day and there’s a lot I don’t know. Cycles are long and the risk of running out of time to fix errors is real. I’m seeing the same thing in Canada – a lot of smart money is cashing out right now to build a war chest, particularly in commercial, which should be a red flag. I wouldn’t say ‘no’ to investing late or investing in this market – I think there are always deals to be had if you keep looking hard and get creative – but I’d want to have cash reserves or consider going very conservatively i.e. buy a duplex or a modest rental. The model above looks possible but aggressive and it won’t fit everyone. One very interesting point Brandon Turner made recently (on buying older properties) was that around 80% of his properties aren’t producing positive cashflow – and most were the early ones. It’s not that they won’t as repairs are done and the mortgages get paid off, but it was a very useful comment that real estate is often slow wealth accumulation. Very few properties are instant cash machines – or they wouldn’t get sold.

    I have a few ‘tricks’ to add to the model above which might help. First, I look for properties with deferred maintenance and buy low. I reinvest, at this time, pretty much 100% of the income, and use the profits from one place to help pay for repairs at the next place. Taxes are lower on these places, and it takes time for the property taxes to catch up to repairs. Up here, refinancing is a bit harder than in the USA (forget about portfolio loans here – at least from a bank or credit union). So, this is a type of work-around. Second, I look for places that can be fixed using grant money – e.g. grants to improve insulation, replace furnaces or even façade grants. I’m looking at a contaminated site where I can get grants and low-cost loans. The money you can get would require a lot of rental profits otherwise. Third, I like areas that are depressed but have some reason to turn around (like the Ohio example mentioned above – which is very similar to what I’ve run into with Vancouver). I can’t do the work myself because of distance, but I can still buy smart off Craigslist, eBay etc. – and I do often.

    Finally, there’s no ‘one size fits all’ model. For example, a couple I know, who have jointly owned multifamily and sold, just bought a fixer-upper house to augment his savings, which are mainly in stocks. It works for them right now. They did this with a lot of thought about why they wanted to buy (in this case, a mix of cashflow and possible appreciation in their market), how much time they wanted to invest (e.g. how much sweat equity time and property management time did they want to put in), how much risk they were willing to take, and what exit strategy they could take.

    I’m hoping that this provides some realistic advice for anyone who is thinking about starting late vs. being in your 20s and 30s.

  5. Nancy Emineth

    Hello @Nathan Brooks,

    Overall your article provides good information for those interested in REI. However, that are at least two points that should be addressed, since you did mention them briefly in your article.

    (1) Turnkey purchases might be trouble-free, but the properties are sold to the investor at a higher than average price (above market value). Normally, there is no price negotiation and area comps not taken into account.
    (2) IRA Self Directed purchases have very strict guidelines for real estate purchases. One of the largest company is “Equity Trust.” Your easy funding rules listed above has omitted some of the rules. From my understanding, the purchase must be funded 100% by the retirement account – recourse loan. Other funds such as convenience loans cannot be mixed with these types of purchase, so use your IRA account to fund only $20,000 on a $100,000 property is impossible.

    If you reply to the comments, please clarify your example.
    Thank you.

  6. Michael Swan

    Sorry Honolulu Aunty,

    I told you I would upset or offend some people. I had a 10 year period that as a lowly paid Catholic PE and reading teacher, faithfully contributed $6,000.00 of my hard earned W2 earnings into a DEWORSIFIED portfolio of mutual funds and the balance was the same in my account that it was 10 years before. Who was making the money. It wasn’t me. Was it fund administrators? Fund expense ratios? Plan administrators? Financial planners? I know it wasn’t me. Why not just invest what your employer will match and put the rest in your own hands and do what I did? If a lowly paid catholic school teacher can do this, anyone can. After almost 5 short years, I am virtually financially free and have money coming into my pocket every month that I can invest in more passive tax deferred cash flow. One more thing about these 401k’s and IRA’s. I did the math and found out If on my teacher’s salary, if I could somehow get $1,000,000.00 in my IRA by the time I retire, then I could take 3.5-4% of that nest egg and not outlive my money by 85 years old. That is only $35,000-$40,000 a year. Then you have to pay taxes on that money and live in San Diego? I don’t thinks so!! Next the planners say you will be in a lower tax bracket. Wow!!! That means I am planning to be poor. Right? What a joke!! I told you I would offend a few people out there.

    Just a little food for thought. I now have a net worth of 2.5 million after 5 years and as of this upcoming November will be a principal owner in 85 front doors valued at 5.5 million. I just changed the way I looked at things and things changed right before my eyes. If I would have kept on the same track, investment advisors would have said the simple plan to meet my financial goals would have been to work to 70 or 75 years. That way I would not outlive my money. If not, a I would have hoped to die before I outlived my money so I wouldn’t need to be a burden on society etc… I could stop working right now and how long could I last? Forever!!! If you ask most Americans, if they lost their job tomorrow, how long would you last, before running out of money, their answer would be 6 months or less. That would be the extent of their emergency fund. Right? Not me or my family.
    That is why I say it was moronic for me to even go down that road in the first place. Although, that was the only map or paradigm I thought was available or existed to me. Get a good job. Make a lot of w2 money or self-employed money and invest in 401k or IRA and everything would work out just fine. I was brainwashed. That map or Paradigm was not made for someone earning under $60,000.00 W2 earnings per year, especially living in San Diego. By the way, people would say, move away from San Diego and then you could. I don’t ever want to move away from San Diego. It is amazing here in many ways. I will retire here in about 5 years at age 55 or 56 years old.

    If a lowly paid Catholic School teacher can do what I have done in less than 5 years, so can you.

    “Whatever the mind can conceive and believe, it can achieve.”
    Napolian Hill-Think and Grow Rich


    • I suppose, in your case, you could call the IRAs moronic – because you did well with the money immediately and did not have to follow the strict rules that come with self directed IRA real estate investing. You could not have done what you did (fixing, going in with relatives, managing, etc.) in an IRA. Also, you would have to pay taxes on monies that you withdrew in your retirement years, UNLESS it was a Roth IRA (Aunty’s #1 choice). This is one of the times when it pays to be over 59 1/2. I get senior discounts at Ross’ Stores too!

      I understand tax deferred capital gains when you did the 1031 exchanges, but not the tax deferred cash flow. I get depreciation as an expense, but pay taxes on my cash flow (unless it is in my Roth IRA).

      Also sounds like you embrace the principles of the Cash Flow game, your mindset is great. You make it happen rather than let others advise you to be like everyone else.

      • Michael Swan

        Hi again,

        I took my parents along for the ride and they now have that tax deferred cash flow in retirement. They are in there mid 70’s and are really happy to have that cash flow and in a year or two, I expect us to be over $200,000 cash flow per year. My parents had a financial planner sell them some risky Hawaiian real estate and it was a ponzy scheme. I said that we can invest in real estate directly. I am also really worried about people that have listened to financial planners that have less assets, net worth, and cash flow than I have to advise this deworsificstion model. When the stock market tanks, not if, will people be worsified and lose 50% of that phantom gains in their 401k or IRA. Rights now I would have only 40% tied maximum to stocks maximum. This is really scary. The stock market is gambling. I can go to Vegas for that experience. With stocks you can’t follow my 2 rules Iive by now. 1. It can’t lose money. 2. It must cash flow. If I get too much appreciation in my home or my rental properties, I refinance or 1031 to keep that proper leverage at these historically low interest rates.

        Of course, I get to write off the interest on my taxes to keep that tax deferred cash flow rolling. When you 1031 exchange with 25-30% down into a larger property, you keep that tax deferred cash flow rolling in. Plus, that dead equity (similar to the highly inflated stock market), you defer to larger properties or refinance and take that dead equity tax free.

        I have lived in San Diego since the late 1970’s and have seen the housing market go way up and then plummet dramatically. If my family would have used the dead equity to take advantage of these tax deferral laws, we would have had $500,000,000.00 in property by now and at least $100,000,000.00 in net worth.

        We just didn’t have the right map. The Trumps of the world have been using other people’s money for a few generations and learned about this from their parents etc… They just kept taking advantages of the laws available in America. Also, they kept learning and made a few mistakes along the way, but 70% of the 1%ers made their wealth through RE or larger type businesses etc…

        What a country!!


        • Swanny,

          Can you please explain “tax deferred cash flow” to me? This is different from tax deferred capital gains by doing a 1031 exchange, correct?

          Sorry your parents got taken by a Hawaiian Ponzi scheme. Our older generation here in Hawaii used to get schemed too – buying land in Ponderosa Pines and properties in the dessert.


        • Michael Swan

          Hi @Honolulu Aunty,

          Wow!! Every single expense we write off, interest on loan too, depreciation, Cap Ex (roofing, flooring, appliances, electric Breaker boxes, furnaces, AC condensers, Wall AC units, etc..), and office supplies, travel, HOA fees, Management fees, RE taxes, and whatever my tax guy says that makes sure we take a loss.
          The key is to 1031 exchange after forcing appreciation and taking that appreciation, along with debt paydown, and original 1031 exchange downpayment money and exchange for larger and larger properties with properly leveraged debt (30% downpayment and 70% commercial loan), to continue the tax deferral.

          Sooooooooo, you defer, defer, defer, defer, defer (until you have $500,000-$1,000,000.00 tax deferred cash flow per year) or 750-1000 front doors and you DIE. Then your kids inherit at a stepped up basis and depreciation starts all over again. They can continue on the same tax deferral plan, until they die and they have 10,000 front doors.

          Like I said, What a country!!


  7. I hate to be a downer, but can you check your math and explain how in your option 2 the income in year 4 and 5, at ages 53 and 54 when you didn’t purchased any new properties, went to $11K?

    Remember, in your example you purchase 2 units in yr 1, 2 units in yr 2 and 1 unit in yr 3. Each netting $150/mo or $1800 per year. $1800 * 5 = $9k.
    In year 4 and 5 with no new properties, assuming the same $150 per month, you should still be making $9K. So, for the 5 years, your net income should be $3600+7200+9000+9000+9000 or $37800.

    Also, did you count the rental income at age 54 twice? While you show it as $11K (and i think it should still be 9k), you seem to count it both before and after you purchase unit #6.

    Thanks for the clarification.

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