Are you getting closer to retirement and have very little to show for it? Perhaps you can relate to Jim. He was 64 with very little saved up and needing to play catch up with his retirement. In this post you will learn Jim's story and how just one commercial real estate deal has him sitting pretty, providing passive income and enabling him to enjoy life while still being productive.
Jim is a semi-retired electrical engineer. He and his wife Alice have a wonderful life together and he wanted to continue to enjoy that life in retirement. His exact words in the initial interview with me were, "Peter, I'm 64 years old and want to develop a way to maintain my lifestyle and still be productive after retirement from my eight to five job as an electrical engineer." He wasn’t looking to get rich but wanted an investment where he could manage his money and that would give him better return than a conventional investment. After watching my YouTube videos, Jim was convinced that commercial real estate investing would provide him passive income that left him time to enjoy his retirement.
Jim’s Retirement Commercial Deal
He didn’t need to buy a huge property to achieve his goal of maintaining his lifestyle in retirement. He purchased an eight-unit apartment complex, which includes seven one-bedroom units and one two- bedroom apartment.
Negotiations with the Seller:
The original list price was $500,000. Jim started the offering process high because the property analyzed well. However, during due diligence he realized that the property had been mismanaged and poorly maintained resulting in a low rental income. His final offer was $350,000. The seller was from out of state and motivated, so she accepted Jim’s offer. The lower purchase price left room for Jim to invest in improving the property and increase the rents.
Jim dealt with a loan broker who found him a conventional lender. Even though Jim was inexperienced, the lender was confident in his deal and loaned him the money to purchase the property and make the necessary improvements.
Jim renovated six of the eight units at a cost of $114,000. This enabled him to increase the rents. Before renovations, one-bedroom units were renting for $500/month. Since completing renovations they are renting from $800-$1000/month.
Rental Income of the Property Before Renovations: $4100/month
Current Rental Income: $7716
Rental Increase: over $3600
Jim was able to almost double the income of his investment property by:
- Hiring a good management company
- Completing renovations on the exterior and interior.
- Attracting new tenants willing to pay a higher rent with the new improvements.
There haven’t been any problems finding tenants to fill the units in the last two years. Even with the current COVID crisis, Jim hasn’t had any issues with tenants paying their rent.
Increased Property Value:
As the NOI goes up, not only does the cashflow go up, but also the property value. This is how we force the appreciation on a commercial property. Jim did this beautifully. This doesn’t always happen, but Jim found the right deal with the right person through our mentorship. The cashflow has varied depending on monthly expenses.
Average monthly Cashflow: $1100
Current monthly Cashflow: $3800
Property Value: Increased over two years from $350,000 to $665,000
Jim intends to do a cash-out refinance and invest in a second property. However, because of the COVID situation, banks will refinance, but not do a cash- out refi. Exceptionally low interest rates may motivate Jim to explore refinancing with a loan broker so he can pull that money out to invest in another deal.
4 Steps to Sitting Pretty in Retirement
Can you relate to Jim? Do you want to achieve the same success investing in commercial real estate? If you do, here are 4 steps you can take to get started.
#1. Get a Free Copy of My Best Selling Book: Commercial Real Estate for Beginners
This will give you the foundation you need. It will help you understand the terms cap rate, cash on cash, and cashflow. You will learn how to select the market, how to calculate cashflow and much more. You need to understand the basics before you buy any commercial real estate and the basics are in my book.
#2. Watch How to Maximize Your Retirement Savings
Some of you have a lot of savings, some of you have a little. It doesn't matter how much you have you still need to learn the strategies to maximize, to leverage, what you do have. This video will give you great examples of how to do that.
Some of you are my age or older and your retirement savings are dismal. You don’t have time to wait and need to get started now. This video will show you how to do that and catch up on your lack of savings.
#4. Do Something About Your Situation
This is probably the most important step. Don't just sit there looking at your situation and do nothing about it. Just as Jim did, you can:
Apply to my PROTEGE PROGRAM.
Jim applied to our mentoring program where we walked him through how to find a property, how to find the owner, get the financing, due diligence and even meet with him once a month to go over his cashflow. It is our responsibility as mentors to walk you through the buying process and teach you how to operate your investment. We sit with you every month and go through all your cashflow statements to show you how to manage your property management, ensuring you deal is a success.