When we want to build a 10 story building, once the ground is leveled, we dig the footings for the foundation. But even before that we must consult engineers to find out just how large a foundation we should be pouring in the first place. The larger it is, the bigger the building we’ll be able to erect — duh, right? To the extent your retirement is built on your real estate investments, how you began back on Day 1 will almost always have a direct impact, for good — or not — on how your retirement turns out.
How do I mean that?
Obviously, investors must begin at the level at which they’re financially capable, and at which they’re able to remain in their comfort zone. I don’t care how much investment capital you have, if you’re not comfortable investing more than 5% of it, you’re simply not gonna do it. It’s how almost all of us are, right? There are exceptions of course, but you get the idea.
I’ve always loved the original Rockefeller’s answer to the question, “How much money is enough for the average person?” His sage answer? “Just a little bit more.”
When I ask folks who call me for advice, how much of a retirement income they’d like to have, more often than not the answer is something like, “As much as possible — as much as we can create.” There’s virtually no wrong answer, but you’ll likely agree, that’s the answer most of us have in our heads. As much as possible, maybe a little bit more.
Thing is, that depends upon how you start.
If you have say, $250,000 in addition to an OldSchool Sominex Account (cash reserves – search the site please.), you could, objectively, comfortably afford to acquire roughly four smallish income properties. Given what’s possible strategically — using cash flow and a small monthly outgo from your Levi’s — Those original acquisitions will ultimately produce almost $80,000 a year — a very conservative estimate. When? Well, the longest would be a bit over 16 years. But most investors can make it happen in 8-12 years or so. It’s a matter of having a sound Plan, then executing it on Purpose.
The ‘Now’ Comfort Zone VS The ‘Retired’ Comfort Zone
What happens though is that having all that equity and/or cash now, makes some people feel more secure — they’re used to the status quo. Perfectly understandable. We’re pretty much all that way to one degree or another. When we begin to think in terms of retirement however, the phenomena of what I’ve called dueling comfort zones begin their skirmish in our minds.
And there’s the rub.
Once you’ve decided to retire, what you have is pretty much what you’re gonna have. The building has been built, and you must figure a way to live in it. Though it might be an uncomfortable fit, there’s usually not a whole lot left for ya to do about it. What makes things worse, is that you realize it was completely within your power — back on Day 1 that is — to have generated far more retirement income, maddeningly more, simply by having laid a larger foundation.
This is nothing new, but never more real than in these times. On one hand folks have suffered debilitating losses in their 401Ks/IRAs. On the other hand, they were burned once, and aren’t rushin’ for a sequel to that horror show. When one looks at investing in well located income property today, it’s easy to see the rare opportunity available. Wicked cool, low interest rates, and equally inspiring price/rent ratios, combined with reasonably prudent leverage, allows them to accomplish more with less capital than in quite some time. The cherry on that cake is their ability to pay off the 30 year fixed rate loans with cash flow. Cash flow that begins pretty much from the close of escrow.
Seriously people — how good do ya want it? 
At some point we all have to decide which comfort zone will be granted precedence over the other. That one decision can, and more likely than not will, be the deciding factor in how your retirement turns out. It’s pretty simple — when you originally plant more acreage, you get a bigger crop at harvest retirement.
Ask my clients, and they’ll tell ya I remind them often that their comfort zone is of paramount importance. It’s truly a balancing act though, when ya think about it. Stretching your current comfort level today, within reason, can make a significant difference in your ultimate lifestyle in retirement. For many, the vast majority, that’s a huge understatement.
The most important thing to remember is that you can modify your comfort zone today, as you’re constructing what will be your retirement. You can’t do much if anything about your financial comfort level once it’s time to retire. You will have built your building, and you’ll have to live with it.
Are you comfortable with the way your plan is goin’ so far? If not, work on learning how to be OK with doing a little bit more today, so you’ll have a lot more tomorrow.
Make sense?
Let’s talk about what kinda retirement income might make you comfortable. We can talk if you call me at 619 889-7100. Have a great weekend.
Related posts:
- Growth Oriented Real Estate Investors Ask — What Is Laying A Foundation?
- 10 Ways Real Estate Investors Can Ensure An Abundant Retirement
- Real Estate Investors Must Deal With 2 Comfort Zones and Big Ben’s Tickin’
- Real Estate Investors: How EIUL’s May Fit Your Purposeful Plan For Retirement
- How Real Estate Investors Can Save Their Retirement
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