Luckily, Sara had inherited a 2 unit property from her mother in Santa Monica California and she owes only $350,000 on the property that is worth $1,700,000. She lives in the front unit and is renting the back unit as much as she can.
Sara and I spoke for about an hour and much of that time was her lamenting about her life without social security. I guess she never worked a regular job that was on the books and she never married so she doesn’t receive social security but she has a small job that pays her under the table and she gets rent from her back unit when she is able to rent it. Sara confessed that many times a week she “dumpster dives” behind a local grocery store to feed herself. Sara isn’t able to pay her bills, her phone has been shut off and soon her electricity would be cut off.
Sara was upset that the United States doesn’t have a program to pay retirement income to the elderly even if you never worked. Some countries have programs like this but we don’t…here in the US it’s pretty much every man for him/herself. No one is coming to save us…we MUST have a plan so we don’t end up like Sara or the millions of other elderly people living in poverty.
Imagine if Sara didn’t own her property with over $1,000,000 in equity in it…she would be homeless….she has no income. Even if she were receiving social security the average payout as of January 2019 is $1461. Rent in Los Angeles is more than $1461 so Sara is very lucky she owns a property it gives her a place to live. Thank God Sara’s mother had the foresight to buy a 2 unit property and leave it to her without a mortgage…the second unit gives Sara income. I suggested that she rent out the larger main house and move into the smaller back house then she would earn about $4000 a month. That should be enough to cover her expenses. She won’t have a big life on $4000 a month but she can pay her bills and not have to dig her groceries out of a dumpster. Sara will have to be careful with her money every month but she lives in one of the nicest places in the country with great public transportation and a beach close by…it could be worse!
As I listened to the upset in Sara’s voice during our conversation all I could think of was there but for the grace of God go I. This woman’s plight is not unusual and she is better off than many retirees since she owns a property that generates income. Over 7 million elderly Americans fall below the Supplemental Poverty Measure. Millions more eek out an existence. Many are relying on help from family.
You must decide today how you want to live when you are older. If you want a secure, fun retirement you must save and invest your money today. There are many ways to do this but real estate investing is my area of expertise. If Sara had just one more 2 unit property she would most likely be collecting another $6000 a month. Imagine how great her life would be if she was collecting $10,000 a month from all of her units…one unit on her property and two from another property.
This is not hard to do and the time to do it is NOW! Put your money into a property, not into costly drinks after work or Starbucks Macchiatos. Live in one unit and rent out the other. Then save some more money and buy another property…two is all you need to have a secure financial future. Don't worry about the market or interest rates…the sooner you buy the sooner it will be paid off. Then when you’re older you can drown yourself in all the drinks or Macchiatos that your tenant’s money can buy!