Inflation Hedge + income for next 40 yrs in retirement? (funds, pay, rent)
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Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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What are your ideas for a long term inflation hedge + sustainable income for next 40 yrs in retirement? + allow freedom to live / travel internationally as 'working' volunteer for next 10 years, and still have a place to return home and store stuff? I am thinking that real estate may be one of the few options for inflation hedge with income.
My history has dictated that Real Estate has been better wealth builder than stocks. I've liquidated most of my investment props in last 2 yrs. to take advantage of cheap LTCG, and to avail stepping up cost basis + relocating and getting better cash flow props.
scenerio... Consider starting with ~ $1m and come up with your best plan for $40k - $50k / yr income + inflation hedge.
Plan A = Sell home, use 50% of the equity + RE investment funds to buy a 'higher end' senior mobile home park in an income Tax free state -with minimal rentals (most or all units owned, just paying me space rent). It seems those folks won't be going anywhere soon, and probably more apt to pay space rents on time. Places I've found provide ~ 7% cap rate
Plan B = Buy a mixed use commercial property with at least 5 tenants and an apartment / storage space for our junk
Plan C = forget the volunteer stuff, and Buy and sell primary residences every two yrs to collect tax free income.
I really need a rural place to keep equipment and tools stored, but... I can not seem get a rural residential rental to pencil out to a positive cash flow, even at today's reduced prices. (I currently have about 8,000 sf of covered shop space full of equip and acquired supplies (hardwoods, building materials, ornamental iron, diesel engines, gensets...)) Unfortunately the dozer, trackhoe, dumptruck and one tractor is still living outside I'm afraid much of that stuff needs to go, as It won't be much good after sitting around for several yrs.) Buying a campground / retreat center is very enticing, but I'm afraid too troublesome and low cash flow to leave to a 'manager'.
I have sold off my rentals over the past few years too. I think you'd be nuts to get a "mixed use" property as in my neck of the woods (suburban Chicago) those have some of the worst "ROI" -- despite the fact they are DARLIN' to all the various town planning/zoning officials who lap up the 'dreamer's cola" that academic types spew about such properties "revitalizing" central business districts.
Similarly there is NO WAY I could live through the upheaval of selling my home every two years -- and I worked part time as a real estate agent!
Why does that only leave the "manufactured housing development" as your only option? Not saying is not a good idea (I think Warren Buffet has manufactured housing holding...) I'd like to see a place that can generate 7% return {whoops re-read post, not sure you are saying THAT, but still...}
If you don't need to live anywhere close to anything, and just what a place that is "big enough" I would look into go into "deep rural" zone, get cheap land. Get cheap pole building, cheap manufactured housing for your "stuff" and leave your money working. You can't get rental rates to "pencil out" becuase they DO NOT, that is why rurual areas are DYING -- even the cost of living may be LOW, the odds of EARNING even that low COL is all but impossible. The exception tend to be places with a sizeable number of retirees -- and they do NOT rent commercial space!
I do not give "stock advice" but there are all kinds of investments that pay dividends /throw of income and they require a lot less work than actively managing ANY real property... My experience is that ACTIVELY upgrading, renting and selling properties HAD been a decent way to make money,with a different level of knowledge and risk than traditional financial investing, but I think that is shifting -- the whole world is moving closer to the American-style business, and that is a bigger opportunity than any sort of simple "shelter play"...
Heck if you only NEED $40K on $1M that is 4% -- CDs will do that. I
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,660 posts, read 57,778,624 times
Reputation: 46126
Quote:
Originally Posted by chet everett
I think you'd be nuts to get a "mixed use" property...such properties "revitalizing" central business districts.
Yeah, that's some of the stuff I dumped at the 'peak' BTDT enough myself. Chicago area markets would make me tremble.
Quote:
NO WAY I could live through the upheaval of selling my home every two years
understood... I've done 8 primary residences myself plus made the kids each build them for homeschool projects. ~ 10 other land / commercial projects have not been too disruptive, but each with an element of risk and hassle. I really like the commercial stuff, but it can sit vacant a long time in a tough market. I am most interested in 'Triple-net', as I perceive some ugly increases in taxes and insurance coming soon.
Quote:
... I think that is shifting -- the whole world is moving closer to the American-style business, and that is a bigger opportunity than any sort of simple "shelter play"...
What is this option? - small business / entrepreneur ? , If so...Yikes, I'm too old to 'pay-the-dues' (5-10 yrs of tough effort + lots of good luck). I watched my parents and my in-laws struggle through small business and contracting... it wasn't pretty.
I'm not so sure we will continue to be a 'consumer based economy'. Cheap Healthy Food and Health Care / physical therapy should be good in the future.
Quote:
Heck if you only NEED $40K on $1M that is 4% -- CDs will do that. I
I'm afraid this tact may not survive potential hyper inflation (sometime in the next 40 yrs). I don't know what value would be left of the principle in the event of severe devaluation, Also not sure how Real estate might survive that type of episode.
Thanks for the thoughts, I'll sleep on them for awhile. I'm glad I don't have props in 'Midland' USA. Fortunately we have a very desirable region (mild climate, super scenery, diverse jobs and EZ access recreation, Income tax free WA living and Sales Tax free shopping in OR (few minutes away), cheap 'green' power). I will probably only invest in markets and properties that are attractive to the changing USA demographics.
There will be tons of bargains in a year or 2 when the dust settles. Cash is king. Mobiles are a good idea. Look up "Deals on Wheels". Nevada is a good location: no hurricanes, no tax, no termites, no mold.
Investment value aside, I wouldn't want to be a long-distance landlord, even with property management.
As for building or owning a place to store stuff, it's be a real target for druggies, break-ins, etc. Squatters.
Investment aside, if I had a plan like the OP (and I did in my 30s, couldn't make it work without a real home), I'd store my stuff in storage facility and just pay, where it's safe and untouched and in a proper temperature. If I bought any real estate, I'd view it as an investment, get good property management, and light a candle in church for my venture.
Great plans for retirement, volunteering overseas! Best wishes.
Lately we have been looking at tri-plexes up through 6-plexes, in the local city. Most of them would work on paper. However as we have toured 15 so far, not a single one of them is entirely up to code. The local inspectors have obviously been snoozing. So I look at them, just knowing from my past history, and I see a lot of up-grades that will be needed sometime just to get them up to the national code.
[crumbling foundations, knob-tube insulators with cotton-braid wiring, fuse boxes, banisters with no vertical supports at 3.5 inches, handrails at 24 inches instead of 36 inches, asbestos everywhere, lead paint, and no insulation]
On paper they all show a profit, but their really run down.
We have also looked at a couple mixed use commercial properties with store frontage downstairs and apartments upstairs. As I look around, I see vacant signs in store fronts. So I am not comfortable doing store fronts. If a local economy can not support small businesses, to keep those storefronts filled, then your empty. Ouch.
Around here trailer parks seem to work. 50% long term pads, and 50% overnight rentals.
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