Retiring Rich via Real Estate Investment

Scenario 1: You are in your 20's or 30's and you are really starting to take momentum with your career. You may even have a spouse and a few kids by now! You may not. For some people at this age, you may be noticing what the generation before you is doing with their golden years (your parents). With the bulk of the baby boomers just around the corner from retirement, it can be eye-opening to see what some will do with their time. There will be some baby-boomers that will continue to work into their retirement. For some it is a choice and they love what they do, for some they won't have a choice but to keep working to make ends meet. Some will retire and live off a fixed income via pension, and some will retire and live off their investments. Perhaps they will travel, or purchase a summer home somewhere. It is then that you start to wonder what your own retirement will look like. If you want to paint yourself a pretty picture, it might be wise to invest in commercial real estate.

At this age, you are in the best position to make high-risk investments (development/redevelopment projects, vacant properties, single tenant properties, large renovations). You are certainly a busy person with your career growth, and possibly some new family members to raise, but you also have the energy to invest in real estate. High-risk means high return. Properties that require a lot of renovations, and/or leasing, and/or redevelopment are what you should look for. These are the years to flip houses or buy an empty plaza, as examples.

Scenario 2: You are knocking on the doors of your 40's. Your kids are in high school, or close to it, and maybe you are settled in a career path and workplace now. 

Investment wise, you may still have some energy left for high-risk investments that require a lot of your time, but this is usually the time to start transitioning your real estate portfolio to medium-risk options, like office and industrial properties, and properties with a few tenants.

Scenario 3: Preparing for your 50's in real estate investment means you have lots of time to grow but you want to keep preservation in the forefront of your decisions. Low-risk options will be what to look for, but they will be what make stable returns for you in your retirement years. Depending on how well you have done with previous investments, this might be a good time to invest a large sum of capital, utilize your life experience, and cash in on a large land development project, or vacant land purchase. This kind of move will yield big results. Other low risk real estate assets include retail properties and multi-tenant properties like apartment buildings. You may also want to diversify your portfolio asset-wise and geographically.

How to Invest: It goes without saying (I am going to say it anyways so no one gets offended) that you can be any age you want and do what ever the blank you want with your money. Here are a few tips for you to try on making your big decision on investment.

1. Consider the risk you are willing to take: How old are you? HA! Just kidding. It doesn't matter, how old you are, but if you are willing to put a great deal of work into your investments and you have a thirst for a big pay day, go high risk. Flipping a house or plaza, buying land, buying properties that require major renovations, or development/redevelopment projects are good examples of high risk. Medium risk options are office and industrial properties (depending on the market), and properties with a few tenants. Low risk options include retail properties and multi-tenant properties like apartment buildings, or developing a condominium complex in a nice neighborhood.

2. Leveraging your lender's cash: Take advantage of low interest rates. If you have a down payment of $300,000, you could buy a condo for the purpose of renting OR you could use the $300,000 as a down payment for significantly more expensive property at 65% loan to value and make money on the bank's money. Once you buy the big one, lock in a fixed rate for 5 to 10 years to preserve the interest rate, as the low interest rates probably won't last forever.

3. Start Looking: Check out ICX.ca for commercial listings, or check out my own commercial listings in this area on this website. It is good to start looking on your own first. It is similar to comparison shopping, and it gives investors a better idea of what sort of value they should expect from the asking prices. Once you have a better idea of what you are thinking, get acquainted with a local realtor and start narrowing down your choices together. If your realtor is commercial savvy then he or she is the next best thing you've got to insurance. Also find yourself a good team to work with that includes an environmental engineer, inspector, lawyer, accountant, and mortgage broker. Your realtor should be able to have a list of recommendations for you based on his or her experience, or you may already have them lined up before-hand. Fortunately for you, your realtor has probably worked with many of these professionals before you, and may be able to recommend someone who has consistently been better than the rest.

4. Complete Property Maintenance: Once the asset is purchased, asses if there are any long-term or immediate projects that need to be done. If the roof leaks, don't be "that guy" and wait until it has spoiled your plaster, or rotted your structure to start doing something about it. There are many renovation projects that are better dealt with when they first surface, rather than later when it has caused more problems. Good maintenance means better appreciation for when you sell in the future too. Big ticket renovations add value if you sell soon after completion, more so if they add to the bottom line. A brand new rubber membrane roof on an industrial building looks expensive, but keep your receipt. You'll get it all back and then some when you sell a year later.

5. Calculate Returns: Calculate your cap rates, return on equity, and appreciation to make sure it is a better-than-the-rest decision. If you don't sell quickly, you could also take advantage of refinancing for some extra cash when interest rates are lower.

Most importantly: Make sure you get a commercial savvy realtor who knows what he or she is doing!

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