Are you ready to Retire?

where to investIsn’t it surprising that most people spend more time picking out a cell phone or planning a vacation than they do planning to retire. In a hypothetical situation where you are retiring in 15 years and are given $35K to invest, do you know where you might have the best rate of return (ROI)?

You could put it in a safe and insured certificate of deposit (CD) but your interest rate will be less than 2 percent. The value of the CD would only be $47,233.26 at the end of 15 years.

Put the money in a mutual fund with higher risk and you will get a greater rate of return. If we estimate a 7 percent return, we could project a value of $99,713.14 in 15 years.

But if you use the $35K as a 20 percent down payment plus closing costs to buy a $150K rental home you could realize a lot greater proceeds. If we use a investment analysis spreadsheet, we can grow the $35K to a potential of $153,302. This factors in leverage, 3 percent appreciation, 7 percent sales expenses, re-investing the cash flows and paying taxes which the mutual fund and CD example don’t do.

So your ROI for the above examples is 2 percent for the CD, 7 percent for the mutual fund nd 14.19 percent return on the rental home. As the rate of return increases on investments, additional risk is reasonable.

Homeowners, homebuyers and investors are more familiar with owning homes than they might be dealing with mutual funds, bonds or similar investments like these. The housing marketing is continuing to recover and home prices across the country are rising. Now is the time to act and as a RealtorⓇ I can help you invest in a rental home. Contact me today about the possibility to grow your retirement fund exponentially.

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