I have two younger brothers. And as their older sister, I cannot help but worry about them and their future. It's my job as the older sister. And lately, I have been worrying about my brother that is closest to me in age.
My oldest brother is a gifted carpenter. He used to be a chef and he was very good at that too. He is also great at rebuilding and repairing cars. His skills, patience and attention to detail are remarkable. However, this is not true when it comes to how he manages his money.
He's only in his 30s, so he foresees that there's lots of time left for him to continue working and saving for retirement. He makes up for the fact that he practically has nothing saved by using his age as an excuse. That's why I worry- the government isn't going to take care of us in our old age and pensions are mostly a thing of the past. If he doesn't save something for his retirement, he won't ever have enough to retire.
I don't want to see my brother in financial trouble later, so I decided to help him with his finances. There was one part of his lifestyle that was glaringly obvious to me that needed to change- he owns three cars. I explained to him if he sold one and put that money into savings, not only would he have the money from the sale, he would be able to save an additional $500 a month.
He can also take on side jobs. People are always asking for help with building fences or kitchen renovations. He doesn't have to work every weekend, and in a year he could have enough saved to put 10% down on a beat up house could be bought for around $200,000.
If he lives in the house while he's fixing it up, he can save even more money. Once it's all fixed, he can rent it out for about $1,400 per month. It's at this point he would buy a primary residence where he will live.
Now, keeping this really simple, lets look at what my brother has when he retires in 25 years:
Assuming he adds about $25,000 in value by fixing the property up and the property appreciates by 4% each year, in 25 years his investment property will be worth $576,743. And " his tenants will have paid the mortgage off for him! It's almost like someone else was putting nearly $1,900/month into his retirement savings plan for him ($576,000 divided by 25 years divided by 12 months)!
"But wait", you may be thinking, "property doesn't always increase by 4% per year". While that might be true, historically the average appreciation of property has been 4% per year. Regardless, after 25 years the mortgage will be paid off by his tenants and the rent he continues to collect can go toward his retirement. Rents and expenses normally increase by 4% each year as well, so in 25 years he could see a positive cashflow from the property of around $2,350 each month.
Also- in 25 years he will have the home where he lives paid off as well. The two properties should give him over $1 million in equity. That's a nice number for retirement- especially nice when the majority of the retirement savings was contributed by his tenants over the years!
When I told my brother my plan, he got excited and sold one of his three cars. With the money he's making by helping us with one of our properties, he's been able to start saving for a down payment for a house. - 29971
My oldest brother is a gifted carpenter. He used to be a chef and he was very good at that too. He is also great at rebuilding and repairing cars. His skills, patience and attention to detail are remarkable. However, this is not true when it comes to how he manages his money.
He's only in his 30s, so he foresees that there's lots of time left for him to continue working and saving for retirement. He makes up for the fact that he practically has nothing saved by using his age as an excuse. That's why I worry- the government isn't going to take care of us in our old age and pensions are mostly a thing of the past. If he doesn't save something for his retirement, he won't ever have enough to retire.
I don't want to see my brother in financial trouble later, so I decided to help him with his finances. There was one part of his lifestyle that was glaringly obvious to me that needed to change- he owns three cars. I explained to him if he sold one and put that money into savings, not only would he have the money from the sale, he would be able to save an additional $500 a month.
He can also take on side jobs. People are always asking for help with building fences or kitchen renovations. He doesn't have to work every weekend, and in a year he could have enough saved to put 10% down on a beat up house could be bought for around $200,000.
If he lives in the house while he's fixing it up, he can save even more money. Once it's all fixed, he can rent it out for about $1,400 per month. It's at this point he would buy a primary residence where he will live.
Now, keeping this really simple, lets look at what my brother has when he retires in 25 years:
Assuming he adds about $25,000 in value by fixing the property up and the property appreciates by 4% each year, in 25 years his investment property will be worth $576,743. And " his tenants will have paid the mortgage off for him! It's almost like someone else was putting nearly $1,900/month into his retirement savings plan for him ($576,000 divided by 25 years divided by 12 months)!
"But wait", you may be thinking, "property doesn't always increase by 4% per year". While that might be true, historically the average appreciation of property has been 4% per year. Regardless, after 25 years the mortgage will be paid off by his tenants and the rent he continues to collect can go toward his retirement. Rents and expenses normally increase by 4% each year as well, so in 25 years he could see a positive cashflow from the property of around $2,350 each month.
Also- in 25 years he will have the home where he lives paid off as well. The two properties should give him over $1 million in equity. That's a nice number for retirement- especially nice when the majority of the retirement savings was contributed by his tenants over the years!
When I told my brother my plan, he got excited and sold one of his three cars. With the money he's making by helping us with one of our properties, he's been able to start saving for a down payment for a house. - 29971
About the Author:
Learn How to Retire with Real Estate with Julie's free Real Estate Investing Starter Tips Guide. Learn how to create retirement savings, positive cashflow and massive wealth with tips like: How to find quality real estate, finding and keeping great tenants, and easy ways to make more money with real estate.
