How to Have Someone Else Put $1900/Month Into YOUR Retirement Savings

Saving moneyIf you’ve been checking out our blog lately, you’ve likely seen that both of my brothers are carpenters. They were really helpful with our recent rental property renovation!

All three of us are pretty close in age. And, my youngest brother bought his first house last year. But my other brother hasn’t yet taken the plunge into owning a home. That is fine – I don’t believe owning your own home is the right thing to do for everyone.  I’ve often pointed out the fact that I bought a rental property before I bought my own place to live in!

But,  as I’ve been spending more time with my one brother, I decided to do what older sisters do best – stick my nose where it probably doesn’t belong! 🙂

You see,  my one brother is a talented carpenter. Before that he was an amazing chef. He also is extremely good at rebuilding and repairing cars and will probably get it automechanic ticket to go along with his chef and carpenters tickets. Anything that requires hands on patience and attention to detail seems to be something he is exceptionally good at. That is, except when it comes to his finances.

He’s only slightly younger than I am, and if you’ve been reading our Rev N You with Real Estate newsletters for long, you’ll know that I am in my early thirties. At his young age, he’s happy to keep working for the next 30 years but I do worry about the fact that he’s only saved a little bit for his retirement.

So, I decided to make a plan for him. There’s probably a lot of ways he could save money, but the big thing I focused in on was the fact that he owns three cars! One of the cars has to go, and with it gone, he will be able to save about $500/month plus he can add the proceeds of the sale to his savings.

He can also take on side jobs. People are always asking for help with building fences or kitchen renovations. He doesn’t have to work too many weekends and in a year, he will have enough saved to put 10% down on a beat up house that he can buy at a decent discount for around $200,000.

For a couple of years, he can live there while fixing it up and continuing to save more money. Then, he will turn that house into a rental property, renting it out for about $1,400 / month. He then buys and moves into a new property.

Now, keeping this really simple, let’s look at what my brother has when he retires in 25 years:

Assuming he adds about $25,000 in value by fixing the property up and the property appreciates by 4% each year, in 25 years he will own one property worth $576,743. And – his tenants will have paid the mortgage off for him! It’s almost like someone else was putting nearly $1900/month into his retirement savings plan for him ($576,000 divided by 25 years divided by 12 months)!

Even if the property doesn’t appreciate by 4% each year (which has historically been the average), his tenants will have paid off his mortgage in 25 years, and he will still be able to enjoy profits from the rental income each month (his positive cashflow from this one property could be as much as $2,350 each month if rent and expenses increase 4% each year for the next 25 years too).

Plus, he will also have his residence which he will have paid off by then … giving him over $1 Million in property for his retirement … assuming he does nothing else to further increase his wealth in the next 25 years! What an easy way to get someone else to pay for a big part of your retirement!

When I explained this to my brother he sold one of his cars! And with the money he made helping us with our property, he’s already putting together a nice little down payment for a home.

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4 Comments

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4 responses to “How to Have Someone Else Put $1900/Month Into YOUR Retirement Savings

  1. That’s an interesting concept. Retirement savings is becoming increasingly hard because when it comes down to it, you may outlive how much you had saved up. Also, the next generations may not have social security because of the problems with it. People need to do whatever they can to prepare for retirement if they wish to live comfortably.

  2. @Senior Living Orange County NY – thanks for stopping in! I appreciate your comments as it’s really true. My parents have so many friends that were going to retire this year or next and they no longer feel they can because their stocks lost 30% or more in value this year. And even if the next generation could rely on government $$ for their retirement it’s not enough for most people to live on … so you have to take steps to plan for your own retirement and ensure you take care of yourself!! I think this really is a simple way to diversify your holdings and make sure you have something to retire on! Thank you!!

  3. Pingback: 151 | New York Real Estate

  4. Very good advice. A lot of people still don’t realize that by making small, simple changes in their habits, it will affect their financial status in the end.

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