I was creating slides for a webinar I am going to deliver and decided to evaluate the difference between taking my hard earned money and investing it in a CD, 401K, IRA or Savings. I then took the same money and invested it in real estate.
What I found out was “shocking” even to me who knows intuitively and actually how beneficial real estate investments have been for me. When I worked through the numbers and calculated out the results I was wondering how many people are depending on these sources as a means to retiring financially fit.
Here’s what I found if you bought one piece of investment property that was valued at $400K and put down $100K with a 10% annual return your would be making $10,000 per year on the $100K and at the end of the 15 year mortgage with only a 5% appreciation the property would be worth $870K. This doesn’t include the annual depreciation you also experience that lowers your taxable income or buying the property right and walking into a property that has a value of $600K that you picked-up at the right time and may have needed a little bit of upgrade or management.
When I took the same $100K and calculated the a3.5% return over 15 years the outcome was shocking. The same $100K turned into $119,826 for an IRA and $111,426.
It got me thinking about how one well selected piece of property that was easy to own and maintain would be worth the extra 5-10 hours a month it took to manage the property to experience a $870K return on a $100K investment.
Plus if the right system and people were put in place you may never have to set a foot on the property.
Your argument might be that with a CD, Saving Account, IRA or 401K that they are maintenance free which is correct. Look at the price you are paying for that luxury!
It might be time to consider investing in real estate holdings so you retire financially fit.