Our 40s will determine how successful our retirement plan carries us through life. If you are a male, your prime earning years are 40-50. If you are a female, you may be bouncing back from having children and ready to start earning.
Whatever the case, success in our 40s will require us to double down on our knowledge and work ethic. Welcome back to the Real Estate Investing at Any Age series (20s, 30s). Please also read the sister article “Retirement Planning in Your 40s.”
Successful 30s? If you were successful in your 30s, you didn’t make the biggest mistake of all time—buying a super home. With this simple choice, plus saving and investing, you will have the resources to jump into multi-family investing.
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For our 40s, we will not be getting into commercial housing, so our multi-family homes will be four units or less.
There are many ways to buy multi-family homes or create multi-family environments. Our 40s will likely be the peak of us managing tenants and properties, so let’s knock it out with a bang.
After our 40s, we should remove ourselves from the tenant business and focus on more significant investments. We will learn a ton about tenant management by establishing ourselves as multi-family investors. Let’s look at some ways we can invest in multi-family properties.
Buy a duplex or triplex. Buying a duplex or triplex is a great way to earn multiple revenue streams from one property. However, the locations of these properties are usually not in desirable areas.
If you can find a great location, clean homes, and high-level tenants, then this is the way to go. You can even house-hack and live on one side of the house yourself.
Build a duplex or triplex. The more straightforward answer is to buy a plot of land and have a duplex, triplex, or fourplex built. Now, chances are your general contractor won’t have schematics for this arrangement, so you may have to hire an engineer or architect to draw up the plans.
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Yes, it will be a lot of work to put this in motion, but having a clean set of units is almost unfathomable. Remember, a plot of land may be outside of town, so conduct your due diligence to ensure you have access to the correct type of tenants.
A promising sign of the health of your community is the number of self-storage units nearby. If there are a lot of self-storage units and apartment buildings, you should have a healthy amount of young adults. You can offer them land for their pets and first-floor accommodations.
Small mobile home park. It may be easier to build a small mobile home park. You can buy land and drop three to five mobile homes. Or you can just add power, water, and septic hook-ups to your lot.
People can then arrange to drop their mobile homes on your property and pay you “lot rent” for the rest of their lives. With this method, you own the land, not the house. The tenants are responsible for all the maintenance of their homes.
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Small RV park. You can also make a small RV park. RV parks may require more permits from the local government, but they do have benefits.
You can offer long-term or short-term rentals. You can also upgrade your park with excellent amenities and charge much more per stay. Adding things like shops and equipment rentals (fishing, scuba, jet skis) can add to your cash flow.
Parking lots and billboards. Not all real estate has to involve tenants. If you can get a plot of land near a high traffic area, you may add some form of advertising.
Think about old school bus stops and other banners you see around town. If you had a building in a commercial area, how could you monetize that prime real estate?
Building a parking lot is similar. If you can secure a plot of land downtown, it may be better to build out a parking lot than a building.
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If you are in the country, maybe creating a flat surface for people to dry dock their RV is an option. You could advertise your lot on Airbnb as “true camping.” Many travelers don’t want to travel into town, don’t mind living without utilities, and love saving some cash.
Rental Income. Overall, our 40s is when we use real estate as our wealth generator. We want to multiple our returns with leverage and knowledge. Leverage is using debt to increase returns.
You shouldn’t take using leverage lightly. However, if you learn to use leverage properly, you can financially put yourself in a fantastic spot. I highly recommend the book “Unfair Advantage” to get an overall over debt and leverage.
The conversion process. As you earn more and more rental income, you want to convert this cash flow into passive income via dividends. You can even invest this cash into real estate investments trusts, so you keep the money in real estate assets.
I like converting my rental income into dividends because I don’t want to retire with a massive amount of properties. Sure, you can have someone else run your empire, but it will still require a lot of time and energy.
If I were turning this real estate business over to my kids, that would be different. I wouldn’t mind holding properties with my kids’ intent to take over the company. Your 40s is a perfect time to have these long-ranging discussions with your children.
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Dream house. Finally, your 40s is the perfect time to buy or build your dream home with your spouse. Yes, our tastes change over time, but you don’t want to reach age 70 and be looking for a home.
You may buy multiple homes after your 40s, but at least this one will still be around. My wife and I were lucky enough to buy our dream home when I was 39. A lot may change over the next 30 years, but at least we are paying off the house now.
Conclusion. Your 40s is all about getting bang for your buck and maximizing your time. Use your 40s to get your finances in order and learn about leverage.
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Then use your 40s to obtain multiple properties and build massive cash flow streams. Convert that cash flow into passive income via dividends. Once you have a set amount of dividend income (say $10,000 a month), you can unwind some properties.
You don’t want to depend only on dividends throughout retirement so that you can keep some properties. If you pay them off, even better. Having $10,000/mo in dividends and $5,000/mo in rental income from two properties would be ideal for me.
I would get all the benefits of real estate without having many tenants. Throw in some royalties and a small passive business, and I am living the dream. Real estate is a fantastic tool if you know how to leverage it.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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