Heroic Investing
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Privatizing Your Public Pension Through Real Estate

Despite our institutional bias that there are MANY services performed by local, state, and federal government that could be done much better and more effectively by private industry, we’re also aware that the use of “privatize” and “public pension” in the same paragraph could literally cause heart stoppage in millions of public sector employees who have relied upon their government’s retirement promise for years. For them, we agree that changing the rules of the game in midstream amounts to a cruel trick.

Let’s approach the idea of privatizing your public pension from a different angle, through the selective use of real estate investments. Throw out your preconceived notions of a private company walking into the midst of your Golden Years plans and conducting a massive re-arrangement campaign. How about, instead, you take it upon yourself to institute a personal investing plan that equals or even eclipses anything your good old government pension offers.

We’ve discussed income property investing before, recounting the ways it could completely change your family’s financial future (in a good way) for generations to come. The problem, as we’re well aware, is that the general public has been brainwashed over the decades to believe that the stock market is their only legitimate investment choice. Who can blame them? A targeted campaign of disinformation by Wall Street operators and their willing accomplices in the media is a tough opponent to overcome, but we’re going to give it a shot.

First of all, we would like to point out that any real estate investment suggestions made here are the very same ones used to spectacular effect by Heroic Investing founder and CEO. Jason Hartman, as well as many employees of the company. In short, we put our money where our mouth is and walk the talk.

Income property. You’ve read it here before but were perhaps unclear clear on the details of how the process works. Not a problem. It’s a particular slant on real estate investing. We’ve come up with a clear example of exactly how an average wage-earner can create massive wealth over the course of a few decades.

Let’s start by assuming you walked into your favorite local bank and managed to procure a loan for $100,000, which you used to purchase a single family residential unit and rent it out for $1,000 a month. Now you have what is called passive income, a term invented to refer to money that flows into your pocket without you exerting yourself physically or mentally to make it happen. Nice, but we all know it’s not one hundred found money. It takes money to operate a rental unit, right? Yes indeed it does, so deduct about $300 from that $1,000 dollars. That’s a pretty fair estimate of how much it costs you each month to meet advertising, vacancy, insurance, and maintenance/repair costs, leaving you with $700. For now, let’s consider that your passive monthly income. There is still a loan payment to be made, which we’ll discuss soon, but for now, pretend like you now have a $700 monthly income and don’t have to work to get it.

Zooming thirty years into the future, the mortgage is paid off, and you’re earning $700 a month plus have the equity built into the rental house that is entirely paid off. Will seven hundred smackers buy you the kind of retirement you’ve dreamed about? We certainly hope not. You can do much better. Now pretend that you managed to buy nine more properties during that thirty-year span and now own ten, each throwing off $700 a month. That’s beginning to look like a decent addition to your public pension. Keep in mind this assumes you never refinanced or raised rental rates, which you most certainly should do.

But the best is yet to come.

The bad news is that you do have to pay the banker back each month. The good news is that you’re going to have your tenant do it for you without even twisting his arm. Each month, in addition to regular expenses already mentioned, you subtract from the rent an amount equal to the loan payment. Yes, this reduces your cash flow even more, though, if you chose an income property according to Jason Hartman’s suggestions, you’ll still be in a positive cash flow situation.

The bottom line is this. You borrowed money to purchase an asset (real estate). Over the term of the thirty-year mortgage, you rented out the asset to a tenant and used the money he paid you to re-pay what you borrowed. After the loan is paid in full, you own a valuable asset you never really paid for and which has probably doubled in value approximately four times over the three decades, leaving it with a value of around $800,000. Where we come from, this is a good deal and seems to qualify as a perfect way to privatize your public pension. Sort of. Maybe the semantics aren’t perfect but we hope you were able to hone in on the Big Idea, and go forth to use it to your advantage.

The Heroic Investing Team

HeroicInvesting.com

 

 

 

 

 

(Flickr / polizei2)

 

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