Monday, August 15, 2016 / by David Veenstra
It’s surprising to realize that most people in Kalamazoo and around the country spend more time planning their next vacation or cell phone purchase than they do on their own retirement. Let’s look at a hypothetical situation where you have $35,000 to invest for your retirement in 15 years. Have you compared where you might have the best opportunity?
The safest place to put your $35,000 investment might be a certificate of deposit because it’s insured. Unfortunately, rates would be less than 2%. The value would grow to $47,233.26 at the end of the 15 year holding period.
Investing in a mutual fund has more risk but also a greater opportunity to earn a higher rate of return. An estimated 7% return would project an accumulated value of $99,713.14.
Using the $35,000 for a 20% down payment and closing costs on a $150,000 rental home could realize much higher proceeds. Using a familiar investment analysis spreadsheet, the $35,000 could grow to a future wealth position of $153,302. This analysis considers leverage, 3% appreciation, re-investing cash flows, 7% sales expenses and paying applicable taxes which the previous examples do not.
The rate of return on these three examples are 2% for the CD, 7% for the mutual fund and a comparable 14.19% return on the rental. As the rate of return increases on investments, additional risk is reasonable.
Investing in a Kalamazoo area rental property is an option that the Veenstra Team is happy to help you consider. We have a quick form that will help us learn a bit more about the type of rental property that would be best for you. We have owned rental property for over 30 years and are able to guide rookie investors through the process. There are different types of rental properties for different levels rates of return. The form we have created helps you and us determine what we should be looking for with your investment purchase.
Contacting us does not obligate you to anything. If you are considering ways to diversify your retirement income, or are interested in learning more about investing in real estate for your retirement, give us a call at 269-350-5514. We help you make wise real estate decisions that meet your real estate goals.
Talk to you soon!
Jason Veenstra - REALTOR