Is it too late to start investing in real estate in your forties?

Have you ever wondered if it's too late to start investing in real estate in your forties?

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Is it too late to start investing in real estate in your forties?

Guys, there's a famous quote that talks about the best time to plant a tree. And they say the best time to plant a tree was thirty years ago, and the second best time to plant a tree is today.

I'm sure it's a Chinese proverb, and I probably butchered it, but you get the idea.

It's never too late to stop to start investing in real estate.

And there's a few reasons for that. There's a few different ways to invest in real estate.

You've got short term investments, which is doing wholesale deals where you buy where you put a property under contract and you sell that contract to someone else. That's called wholesaling.

You can do that. There's land flipping where you put a piece of land under contract and you sell that, which is typically a six month deal. Those are to kinda get cash. Then there's, property flipping, where you improve the property. You fix the property up. You make it better, and then you sell that. And then you get into long term investing.

Long term investing is how wealth is created.

Yes. You can make money through flipping. Yes. You can make money through land investing. You can do those things, but that money doesn't come time and time and time again. It's not gonna be residual.

It's not gonna be coming in every single month. So if you're looking for cash flow, then you've gotta start looking at long term investments. And regardless of your age, we can look at different long term investments and things you can do there. But you can do short term investments anytime, and you could do long term investments even if you're in your forties. And I wanna show you how long term investments in your forties can make you seriously wealthy in just a few years. And this is how it works.

The first thing you've gotta identify is how much money you're looking for. On a monthly basis, how much money are you looking for? How much money are you going to need? My definition of wealth is how many days you can go without having to work again.

How many days can you go without having to work again? The longer that is, the more wealthy you are. But that brings two things in two things into the equation. It brings how much you're spending.

Okay?

Because and it's how much you are earning.

So one of these two things then adjusts. If you wanna spend a lot of money, you're gonna have to earn a lot more money. Okay? If that's the case, it's gonna take you a lot longer to be wealthy based upon my definition, which is how many days you can go without having to work again.

Now if your spending is lower, then your earnings or your cash flow can be lower, and it will be faster for you to be able to get to that amount than it would be if you want your spending higher. I recommend you come up with a modest budget as to where you wanna have your your cash flow, and then you add to that over time.

But let's just say that you wanted to make seventy five thousand dollars a year to replace your current income. Okay?

And let's say we're not taking into account Social Security or pensions or anything else like that that you may have. Let's also say you're not taking into account any four zero one k's. We're not taking any pension. We're not taking any, Social Security.

Any of those types of Medicaid, whatever. We're not taking any benefits into account. We wanna replace seventy five thousand dollars worth of income. One thing you've gotta realize is ten, twenty years from now, you'll probably be spending less than you're spending now.

Typically, that's the case. Typically, in your forties, you've got kids and responsibilities and extra expenses, and there's a lot of stuff that you're buying. But, typically, with time, you'll spend less. Not saying that you will, but we're gonna plan that you're spending the full seventy five thousand dollars.

So what we're gonna do is we're gonna turn that into a monthly.

Okay? Monthly. Monthly. Here we go. So seventy five thousand divided by twelve gives us monthly six thousand two hundred and fifty dollars.

So if we could make six thousand two hundred and fifty dollars a month, we could be financially free forever. Okay? Now keep in mind, we're gonna make this money through cash flow. So as we know, rents will go up over time and will more than cover inflation for us.

So we don't have to worry necessarily about inflation. So then the question is, well, how many houses do I need in order for me to get to that six thousand two hundred and fifty? So it's really quite simple. What I recommend, and I say this quite frequently, is buy a house a year for ten years and you're gonna look like a genius in twenty.

That's really just what it looks like. And you frankly could buy one every other year and end up with five properties. So let's just say that we did every other year. We were even more conservative.

So you're actually only buying five houses. Okay? So this is year one. You're gonna buy a house.

Okay? This is year three. You're gonna buy a house. This is your four. You're gonna buy a house.

This oh, not four. This would be six.

Let's see. Every other year. One, two, three, four, five, six, seven. Buy a house. Eight, nine.

Buy a house. One, two, three, four, five. So this is your ten. K?

So what's gonna happen is this house that you just bought, on average, is gonna go up in value. Let me show you, in in year ten. Also, your rents on this property are gonna go up by year ten. So let's take a look here. In a ten year period, if you wanna use I mean, we can we can decide whatever time period, you can whatever time period you wanna use. I mean, two thousand the year two thousand, over a ten year period to twenty ten.

Year two thousand average was a hundred and sixty three thousand dollars in q two. Twenty ten, the average was two hundred and twenty four thousand, and that is after the worst real estate correction of all time. So that's probably the perfect one to use. So you're basically saying that over that ten year period, one sixty three, minus two two four. So it went up sixty one thousand dollars.

So sixty one divided by a hundred and sixty three means that it went up three point seven four percent a year. Okay?

And that's kind of the worst of it. If you wanna look at the best of it, if you look from here, which is two thousand and nine, and we were at two hundred and eight, and you wanna go to twenty nineteen.

I think it was q four twenty nineteen.

Three hundred and twenty thousand.

Two zero eight, three hundred and twenty thousand. So in that that's twenty eighteen. In that period of time, minus three twenty, values went up a hundred and twelve thousand dollars. If I divide that hundred and twelve by my original purchase price of two zero eight, that's point five three.

Whoops. Snow.

We went up a hundred and twelve. So a hundred and twelve divided by two zero eight means we had a fifty three percent increase over a ten year period. Okay? So if I wanna divide that by ten, it basically went up five point five percent per per year. So let's talk about this. House number one.

Let's say I bought it for a hundred thousand dollars just so we can keep numbers really simple. House number one, I bought it for a hundred thousand dollars. Guess what? House number one right now is worth somewhere between let's see.

What do we say that is? Thirty three point seven four percent a year is three point seven four times ten is thirty seven percent. So somewhere between thirty seven and fifty three percent is what that property has gone up. So that hundred thousand dollar purchase that I just made is now worth, we'll just call it, a hundred and forty thousand dollars.

Your we'll call it your ten. That's fine. That's worth house one is worth a hundred and forty thousand dollars. Okay?

So I have forty thousand dollars of equity in there. House number three is now worth a hundred and thirty thousand because I've owned it for less. House number five house number two is a hundred and twenty thousand, and you can see as that goes on. Okay?

So then what you can do is you can take the equity from this house, sell this house, and pay off one of your other houses so then you own that house free and clear.

And then a hundred percent of that cash flow. Doesn't mean you want to, but you have the option to do that. So the other thing that we see that happens over time is rents go up. So your cash flow is gonna go up drastically. So, again, any point in time, let's just take two thousand rents for, like, six hundred, and two thousand ten rents for, like, eight ten. Okay?

So six what do we say? Six, six zero two.

And, in two thousand ten, rents went to eight hundred and ten. So the increase on that was two hundred and eight dollars on a six zero two. So we're seeing a thirty four percent increase in rents over that ten year period. So the ticket to this is you wait another ten years.

So now that hundred and forty thousand dollar house is now worth a hundred and eighty or well, it went it's forty percent more than that. So if we take one forty times point four zero, it's worth another fifty six thousand. So that property is worth a hundred and ninety six thousand dollars, okay, when we when we're talking about year twenty. But also those rents, let's say the rent was a thousand dollars a month.

The first ten years, we know rents went up thirty four percent, and then the next ten years, it went up thirty four percent. So we know that rents have gone up six there's sixty eight percent, which means the rents now are one thousand six hundred eighty dollars Even if nothing happened but your rents went up on these properties by six hundred and eight dollars per month times five houses times twelve months, you would be making forty thousand dollars just on the increased rent. So that's assuming you got nothing out of these properties in rent the entire time. If you held on to it in year twenty, you'd be getting forty thousand dollars a month or forty thousand dollars a year that would be coming in.

Now you should be buying properties that you're having some cash flow. You should be able to do those types of things, but that's kind of a worst case scenario. Now if you find yourself in a situation like that, the other thing that you can do is you can take this property and you could then pay off two of your properties because these remember, these have gotten paid down over time. In twenty years period, that hundred and thirty thousand is probably eighty thousand.

That hundred and twenty thousand is probably seventy thousand. So you could pay off potentially three properties with what you could sell one of those properties for, and now you own those free and clear. Now if you own those free and clear, your rents are sixteen eighty.

And you times that by three, so you'd be five thousand and forty on three of those properties times twelve is gonna put you at sixty thousand. You've got two more properties. We'll say that your income on that is six eighty, six hundred and eighty times two times twelve, and that's sixteen thousand. So that puts you at seventy six thousand three hundred and twenty dollars and you own a year and you own five properties, four properties, sorry. You'd own four properties, three are paid off and one you would have a loan on that, and you'd be looking at seventy six thousand dollars. That's if nothing else happens. So historically speaking, in a ten year period, you're going to see values go up on average thirty seven to fifty three percent.

So this compounds over time, but you've gotta have the long term perspective. You've gotta look at the ten year. You've gotta look at the twenty year plan. Now you may say, hey, Ryan.

I'm forty years old. I don't wanna look twenty years. Well, that would put you at sixty. That's not too horrible.

But let's say that you wanted to condense this. Well, if you wanna condense this, you can do one of two things. You can buy a property every year for a year for ten years, so you end up with ten properties, and then you wait another ten years. Or you could buy properties every single year for the first six years, and then you could wait another six or seven years, and you have options here.

I think what stops most people from buying properties is they're scared of maintenance. They're scared of problems. They're scared of things happening. I will challenge you.

Go to someone that owns a property.

Go to somebody that owns a property.

Look at your own property. How much do you spend in repairs? I'm not talking improvements, but how much do you spend in repairs on that property a year? And I'm gonna tell you, it's a lot less than you think. So when it comes to this, there's repairs.

There's what are called capital improvements.

And then we also have vacancy.

Repairs are things that have to be done right now. Can't flush the toilet. Hot water well, hot water's a capital improvement, but can't flush the toilets. There's, the door that needs the lock needs to get replaced, whatever the case is.

This is standard of living. It needs to happen. A capital improvement is something you're gonna put in. It's gonna last a long time.

So the hot water heater is a good example. This is my beautiful hot water heater. Hot water heater, it should last ten plus years. You put a hot water heater in.

It's gonna last ten plus years. So if you spend, I don't know, fifteen hundred dollars on that hot water heater, it really only costs you a hundred and fifty dollars a year because you're gonna have that for ten years. And that's one of the other things you have along with all of this. You're gonna have tax benefits along with this.

You're gonna have the tenant paying down your loan along with all of this. So what I do is I put five percent of my rent, I put towards repairs, five percent of my rent, I put towards capital improvements, and five percent of my rent goes towards vacancies. So if I'm renting for a thousand dollars a month, I say, hey. Repairs are gonna be fifty bucks.

Capital improvements are gonna be fifty bucks. Vacancy is gonna be fifty bucks. And then what I put is I've got my mortgage. I've got my loan, you know, however much that is.

And then I've got taxes and I've got insurance. With this formula, if I can break even in year one with this, it's a good property to buy. And if I'm making money, it's an even better property to buy. Why is that the case?

Because I know ten years from now, these rents are gonna go up sixty four percent.

K? So I'm gonna be getting sixteen forty.

I also know ten years from now, this property that I paid a hundred thousand dollars or twenty years from now, this property pay a hundred thousand dollars is now gonna be worth at least two hundred thousand. But I also know twenty years from now, my tenant has paid it down, and I probably owe around fifty thousand dollars. So I've created a hundred and fifty thousand dollars worth of equity in this property, and I'm seeing significant income from this property on a monthly basis.

Thinking long term is how you invest in your forties and looking for cash flow and what's gonna get you out of the rat race.

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