RISMedia's Real Estate Magazine

DEC 2018

Real Estate magazine is the industry's leading source for real estate news and information since 1980. Published monthly by RISMedia, Real Estate magazine offers timely and relevant real estate news to the industry's top brokers and agents.

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RISMedia's REAL ESTATE December 2018 113 {Power Teams} A ccording to Money magazine, the average 2017 monthly So- cial Security payment in the U.S. was $1,342. This isn't adequate to cover the expenses on a decent apartment in most metro areas, and certainly wouldn't allow anyone to purchase nice clothes, fancy meals or go on any exciting vacations. If you plan to rely only on Social Security for income in retirement, you might also plan to live in low-income housing and receive as- sistance for other basic necessities. As depressing as this is to ponder, it could very easily happen to many of us. Let's break the cycle of the aver- age American and start saving for our retirement today. There's more to the retirement story. The Economic Policy Institute esti - mates that the average working fam- ily in the U.S., aged 32 to 61 years old, has $95,776 in retirement sav - ings. If the advice from retirement experts is accurate, the typical Amer - ican family will have an additional $4,788 to spend each year in retire - ment. This would bring the average monthly retirement income up to a whopping $1,741. Unfortunately, my discussions with many real estate agents reveal that they aren't very good savers. It may be because our income is inconsis - tent, which makes it feel like it's al- ways either feast or famine. Real estate professionals, how - ever, have a distinct advantage over the general population. We have the ability to find great real estate invest - ment properties without having to go out of our way. Remember the last time you were out showing houses and found one that wouldn't work for an owner-occupant, but you just knew it would make a great invest - ment property? Why didn't you buy it? Many people are simply afraid of risk. Only 11 percent of U.S. adults own rental property, according to 2013 data from Landlord Station. Based on some informal surveying of mine, the percentage of my real estate pals who invest in rental prop - erty is even lower than 11 percent. We know how to tell a good house from a bad one, and we come across good deals all the time, so what's the problem? It could be because we don't have money saved for a down pay - ment, or we're afraid we might not qualify for a mort - gage. I believe, however, that the real root cause is that many of us don't fully un - derstand the long-term benefits of owning rental property. I firmly believe that nearly every - one should own rental property as part of their retirement strategy. Be - low are five points you should keep in mind when considering invest - ment properties: Invest for cash flow only. Make sure you only purchase a property that's cash flow positive. Buy "average" properties. If the average home in your market is a three-bedroom, two-bathroom home with a two-car garage, this is the type of home you should buy. Know your total expected return. In addition to cash flow, rental properties pay the landlord in three other ways: principal reduction as you make your monthly payment; ap - preciation as the market pushes the price up; and the tax savings from depreciation. Understand rehab and carrying costs. If upgrading the property is part of your strategy, you must fully understand the costs involved in rehabbing and carrying the property until it can be rented. Prepare financially. Start saving some cash for the down payment and meet with a lender to discuss qualifying for financing. My wife and I have been investing in rental properties since 1992, and we hope to fund a chunk of our life - style in retirement with income from these properties. We have two very important tools we use when analyz - ing properties: a cash flow analysis worksheet and a rehab work - sheet. If you'd like a copy of these tools, email me at Cleve@GoGaddis.com. If you decide to jump into the world of real estate in - vesting, I hope you reach the height of real estate multimillion - aire. Wouldn't that make your retire- ment years more fun? Cleve Gaddis is a master coach with Workman Suc- cess Systems and team leader with Gaddis Partners, RE/MAX Center in Atlanta. He learned sales the hard way, selling vacuum cleaners door-to-door, and now puts those skills to use in helping his team close $60 million annually. He loves to share his systems and strategies to help others succeed. He hosts the Call Cleve Atlanta Real Estate Show heard weekly on NewsTalk 1160 WCFO. Contact him at Cleve@GoGaddis.com. Avoid the $1,342 Per Month Retirement Plan by Cleve Gaddis

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