I would like to share with you my other investment approach (instead of stock investing). This way I use also for my 10 Years For Retirement plan. For more than three years I invest into apartments for rent, but I do it little bit different than many other people.
We are not living in US, but I will show all prices in USD so you can easily understand it. The amount itself is not so important as it will be different from country to country. The thinking way is the most important so I recommend focus on this.
I bought two small apartments in my current city. For this time I will explain only first apartment. Cost was $40,000 so we used $8,000 from our money. For the rest we used 30 year mortgage with 5 year fixation. Let me say that I don’t intend to hold this property for 30 years. If price will be good I want to sell after 5 years.
When I calculate all expense I earn every month $200 from rent which is $2,400 per year. As you can see I have investment return 30% each year ($2,400 / $8,000). But the best of this is that current apartment’s price is now $60,000 and price is still growing.
So after 5 years my total incomes will be $32,000 (5*$2,400 + $20,000 = $32,000). Thanks to this after 5 years I will have $40,000 on my bank account instead of $8,000 ($8,000 original investment + $32,000 earned). As this is good income for my 10 Year For Retirement plan I want to share this with you as well.
What is unique point?
Many people buy flat or apartment as well, but they don’t have same investment return. The reason is simple, in case you buy a flat for $40,000 (all from your pocket) and you get $4,800 by renting (approximately 2 times more than with mortgage).
You earn 12 % annually and sometimes much less, but if you use leverage as I do, you can earn much more with no higher risk (my monthly mortgage pay is around $200 so this is not big problem for me to cover if any problem happen). So instead of putting all your money to flat, think first about this investment strategy.
Of course I use the situation that bank mortgage in my country are very cheap now (around 2% for 5 years fixation), so you also need to check this as well during your investment return calculation. In case you don’t know, how to make this calculation, let me know and I will prepare sample and share in next article.
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