During the 2008 global financial meltdown I was earning good money and home loan rates were falling. I had just gotten married and we were trying to find a home. We really wanted to stop paying rent and put that money into our own place. It didn’t have to be our forever house, something we could rent out later would have been fine. We sent almost two years searching for a property we could afford, close enough to work, and in a safe area to raise a family. Finally we borrowed some money from relatives to increase boost our price range and bought a house in a good area, but far from the city. A long commute was nothing new for me, so we snapped up the property.
I threw most of my income into paying down the home loan, and in a few years had enough to purchase a small house even further from the city. The property was simple, had a decent size yard for the area, and had a good rental yield. I had spent years researching property investment, because I was forced to realize I’d probably never make it to a C-level (CEO, CTO, COO,…) position in the corporate world. I was a hard worker, but didn’t know how to pick my battles.
Before settling on property investment I had looked at buying into a franchise and trading. I wanted to continue working, so I thought I wouldn’t have the time to trade. Property investment seemed like the right fit, so I spent years reading magazines and inspecting properties nearly every Saturday morning. Finally, two years later, after a few false starts, we found the right investment property.
I spent some time renovating the kitchen, then we leased it out through an agent. Since then we’ve had some ups and downs with this property over the years, but I always planned this would be the investment to fund our retirement. Years later the property would put a few hundred dollars into my pocket each month. The rent came in, and things would break, but I had to remember I was running a business. It was our tiny boutique hotel which needed to be maintained and managed properly to keep the guests happy and the money flowing in.
There were times when I looked at the property and a little voice says “get rid of it”. This usually happened when I received an email from my property manager about an urgent repair. I know I need to maintain the property, but sometimes the repair items seemed ridiculous, like the light bulbs don’t last long enough, or there were sparks when flicking the fan switch on and off really fast. Those were the times I really needed to wait for the wave of doubt to pass.
I accepted investment properties were long, long, long term investments. There would probably be decades between buying a property and hopefully cashing it in to fund your retirement. Over this time anything, and everything could, and probably would, happen.
Watching rent money go into repairs was just part of owning property. When I was working I had the income to handle years when the rent didn’t cover all the maintenance and loan costs. In retirement this shortfall came out of our savings. This should have worried me, but I knew, or hoped, the investment would be worth it. The real test would be 10 years from now when our savings were running low.
Selling the property was always an option. Here, our Government would let us sell assets and keep any profit without paying tax if we were over a certain age. That currently seemed to be 60. Retiring early meant that I still had over two decades to reach that age. This meant even though my investment property had doubled in value, the tax on the profit from a sale would leave us with maybe $100,000 plus our initial investment. Now, that’s still a lot of money, but would fund only a few more years of our retirement. If I could hold out till 60, the payout could support us for a decade, maybe even two.
Joe retired in his mid-thirties to spend more time with his young family. He started this blog to share his story, help others plan their path to retirement, and enjoy retired life.
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