Even if you absolutely love your work, at some point you’re going to want to retire. That means you’ll want to have savings or investments set up to allow you to live comfortably for the rest of your life without ever going back to work. Over the time that Christina and I have been flipping houses and teaching seminars on real estate investing, we’ve talked to new investors of all ages, and, to me, some of the most interesting people we’ve taught and talked to have been those who’ve worked all their lives and are looking for the best strategy for their retirements. After all, Christina and I will be there someday, too.
A lot of people think that investing in buy-and-hold properties is the way to go for retirement, and there’s some merit to this idea. If you have a good property management company on your side, your rental real estate can basically turn into passive income. After all, your property management team will take care of tenant acquisition and screening, collecting rent, paperwork, maintenance, repairs, and basically everything else involved with your rentals while you sit back and enjoy regular income.
When Fix and Hold Doesn’t Work
But this model doesn’t always work. Even the best property management firm can’t keep tenants in a house if there’s no demand for rentals in the area. You might buy a property now, get tenants, and start collecting rent at a good rate, but how can you tell that the rental market is going to stay stable into your retirement?
And that’s not the only issue you may need to worry about for your rental properties as the years go by. If you buy and fix properties now, they’ll be updated to current standards. However, as the years go by you’re going to have to continue making updates and replacing appliances and utilities as they wear out. If you’re in your 40s now, and you buy rental properties, by the time you retire in your 60s, it’ll have been 20 years since you made your renovations and updates. As houses age, they need more work, and you could be looking at a severe drain on your rental income when you need it most.
A Better Alternative
So what can you do if you don’t want to keep doing all the work of flipping houses into your retirement years? Why not consider becoming an investing partner or private lender? Use some of the investment capital you’ve made flipping houses to fund other investors’ house flips. Then you can let them put in the sweat equity while you put in the capital.
As you get started now, you can see how much a private lender or investing partner can get from backing a motivated house flipper because you’re relying on these people to fund your house flips. Once you’ve become an established house flipper, you can stop putting in the sweat equity and start putting in the capital and still get great returns on your investments.
And, if you start hiring interns and working with younger house flippers now, by the time you’re ready to retire and become an investing partner or lender, they’ll be established enough in the real estate business to be great flippers to partner with. Buy-and-hold properties aren’t always bad deals, but the idea of buying properties now and continuing to use them as rentals indefinitely may not be the best strategy for your retirement. Consider becoming another house flipper’s investing partner instead.