You are about to retire at age 66. You have saved $1 million in your 401K and will be drawing $3,000/month in social security benefits. These income streams will total about $6,500/month in passive income.
Is surviving on $6,500/month in passive retirement income enough to live the lifestyle your love? Only you can answer that question; however, you will be better off than 80-90% of Americans in retirement.
Do you know what would make your retirement even more comfortable? How about earning $2,000/month in rental income. More importantly, that number will increase every year or two to keep up with rising rent payments.
RE Lifestyles 4: Single-Family vs. Multi-Family
The magic of rental income. The magic of rental income is that it is consistent and also gives you built-in inflation protection. However, most people do not want to become a landlord.
People fear many things about owning rental properties, but I will address that in a separate article about overcoming limiting beliefs. Today, I want to focus on preparing yourself to receive rental income BEFORE retirement.
Yes, you have to plan to receive rental income before retiring. Ideally, you want to start planning 30 years before rolling into retirement with a paid-off mortgage. However, there are many ways to succeed in supplementing your retirement with rent.
The conversion method. In this method, you would use rents to build a passive dividend growth investing portfolio during your working years. Before retirement, you can shed your properties and live on the dividends.
How to Create Passive Income for Beginners
You can convert your rental income into dividends from REITs if you’d like or invest in blue-chip stocks like McDonald’s and Johnson & Johnson.
The main idea of this method is to frontload all the stress of being a landlord and managing properties early in life. As you age, you can sell properties or transfer ownership to children.
My wife and I are currently using this method. I am 41 and using income from renting rooms to fund our income stock portfolio. By the time I reach 60 years old, I won’t need to hold real estate, as I can transfer everything to children.
House Hacking through retirement. Most people scoff at the idea of renting rooms to make rental income. However, look for this to become much more common moving forward into the 2030s.
How to Create Passive Income for Intermediates
The cost of owning a home or renting a place is too expensive for the average person. As a soon-to-be retiree, you can leverage this growing trend. The thing most people want to keep is their privacy.
You can arrange your house hacking setup to retain privacy for all tenants. This technique can include finished garages or attics, a detached mother-in-law suite, or adding mobile and tiny homes to your property.
Non-tenant rental income. Don’t like tenants? Don’t worry; most people do not like dealing with tenants. There are ways to make rental income without having tenants.
A good way is to buy storage sheds to lay on your lot. You can also set your yard up as a dog park. You can rent your driveway or parking area for rental income, set up a billboard (with property zoning), or leverage other advertising space.
How to Create Passive Income for Advanced
Multiple streams of rental income. I am a huge fan of living on a budget because it allows you to live comfortably while building wealth.
Conversely, I never want to live on a fixed income. Living on a fixed income is the worst position you can put yourself in later in life. If inflation spikes, your living condition changes, or there is an emergency, you will be underwater.
You will have no way to increase your income other than go back to work or ask family. NO, we don’t want to prepare ourselves to live on a fixed income.
By building rental income early, we can allow ourselves the opportunity to create multiple streams of income from rents. For instance, if we rent a home, we can add an extra charge by including a washer/dryer unit.
How to Create Passive Income for the Average Person
We can add a storage unit to the backyard of a home and charge the tenants extra to access it. It may seem small, but adding $50 to your rent can make a massive difference in your quality of life. Currently, $50 will allow you to eat breakfast at McDonald’s several times a month for example.
Start planning today. I understand that the rental market is at an all-time high currently. However, that does not negate the fact that you need to build rental income.
What can you do today that will make tomorrow easier and more comfortable? You may want to invest in Fundrise (affiliate link) while waiting for the housing market to cool down.
You may want to save for a down payment in USDC to earn 9% of your savings. The idea is to move forward in your pursuit of rental income constantly.
What Gets Rewarded Gets Repeated
You don’t need tons of properties to make cash flow from rents. Real estate is a mindset, so as long as you make an effort to build your rental income, good things will come your way.
Conclusion. Rental income is one of the best ways to supplement your retirement. Not only is it consistent, but it grows with inflation. This inflation hedge prevents you from living on a fixed income in your later years.
Your retirement years are supposed to be the most exciting times of your life. You should spend this time with your family and friends, and money should be of no concern.
However, for money to be of no concern in the future, it needs to be top of mind today. No one will give you a home and tell you how to best produce income from it. It is incumbent on you to learn the ways of real estate.
The best book I read on real estate is “Buy, Rehab, Rent, Refinance, Repeat” by David Greene. I recommend you start your journey here. You can also grab my free book “Financial Independence through Real Estate 2.” Good Luck!
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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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