Turning 40 may cause you to begin stressing about your financial future and the fact that you haven’t invested enough during your 20s and 30s. Stress no more, because in this article we are going to help you create a strategy for action that can see you succeed even if you haven’t begun investing yet.
If you have your own home, then that is great because you will be able to tap the existing equity, but even if you don’t own a property then it is still achievable for you to grow a successful property portfolio.
We are going to cover everything from mindset to planning to taking action.
1. Get The Right Mindset
There are two mindsets that are important to adopt if you want to grow your investments after you have turned 40.
– It’s never too late to start
– Now is the best time to start
What is the most famous food franchise in the entire world?
If you said McDonalds then you would be right. But did you know that Ray Croc started McDonalds franchises after the age of 50? And KFC was started after the founder turned 60.
It is never too late to start.
Which is better, to start a bit late or to not start at all?
If you are over 40 then you need to know that it isn’t too late to start, you still have 10-20 years until retirement, but now is the best time to start. If you can get into the market now you are giving yourself what every investor dreams they have more of…time. Time allows your properties and rental incomes to grow, so take advantage of the time you have and start investing now.
2. Commit To A Life Of Education
Getting educated in an absolute must, and committing to ongoing education will see that your profits continually increase. If you learn things once and then stop learning then you will be limited in your ability to invest.
However, if you continue to learn with every investment and actually put time and energy into your education then the amount of money you will be able to earn is unlimited.
Start reading books
Start reading some books about real estate investing. Read a book on each strategy before you decide to invest. If you want you can have a look at my list of the top ten positive cash flow property books. Once you have chosen your strategy (which we will look at in #4) you should read a variety of books on your particular strategy.
Be committed to always learning because the day you stop learning is the day you limit your potential income.
3. Discover Your Goals
Goals are everything in investing after the age of 40. When you are 20 you have enough time to invest in almost anything and make money, but when you are a little bit older you need to be more strategic. Goals give you the strategic focus you need to succeed.
Firstly envisage the lifestyle you want. Where do you want to live, how often do you want to go on holidays, how lavish is your lifestyle? Be realistic, but at least set the bar at comfortable. You don’t want to own investments only to struggle financially.
Then you need to turn this lifestyle into a dollar amount. How much do you require per year in order to continue to live the lifestyle you have envisaged? $50,000? 75,000? $100,000? More?
Now you have a goal income you need to have a timeline. When do you want to achieve this by?
The obvious answer is “tomorrow” but let’s be real with ourselves. You can keep working until you are 65 but maybe you want to stop at 60 and travel around the world.
How many years do you have? I suggest setting a deadline of more than 10 years, especially if you don’t own your own home or have any previous investments.
4. Choose Your Strategy
Now that we have a goal and a time frame it is time to select a strategy to get you there.
In the property world people talk about capital gains vs cash flow but what every investor eventually seeks is cash flow to support their lifestyle. This cash flow can come from rental income or from accessing capital gains.
When choosing your strategy you need to look at the following things:
Which strategy do you love? – You are more likely to succeed doing something you love. I love positive cash flow so that is where I invest. Others love renovating or developing so that is how they invest. The choice is yours.
Which strategy could you get really good at? – If you get really good at one strategy you are more likely to succeed and make more money.
Which strategy is most likely to get you to your goals? – Look at the risk and reward of each strategy and weigh up each. Which strategy comes out on top as the best strategy to get you towards your goals.
5. Create Your Milestones
Now that you have your goals and have chosen a strategy it is time to break it down into milestones and a timeline.
If you want to make $50,000/year then that is about $1,000/week. If you own 10 properties bringing in $100/week in positive cash flow then you achieve that goal. 10 properties earning $100/week in positive cash flow is now a milestone you can work towards.
A milestone is a breakdown of how you can achieve your goal. Instead of a figure like $50,000/year that has no strategy attached to it a milestone implies a strategy.
Once you have your major milestone you can now set your milestone time line. If you have 20 years to invest and want to own 10 properties generating $100/week in positive cash flow each then your timeline may look like this:
Property #1 – Now
Property #3 – 3 years
Property #4 – 5 years
Property #5 – 8 years
Property #6- 10 years
Property #7 – 12 years
Property #8 – 14 years
Property #9 – 18 years
Property #10 – 20 years
Set your timeline towards your major milestone and set actions in place so you can achieve it.
6. Take Immediate Action
We discussed in the mindsets that “now is the best time to start.” The reason being that if you invest in a property now you have time for it to grow in both value and rental income. If you wait then the property will be more expensive and you will make less money in the long run.
Take some immediate action today that moves you towards the first milestone in your timeline. Generally that is buying your first property or your next investment property.
Maybe you can start a savings plan where you will have a deposit in 6 months. Maybe you can go to your bank and apply for an equity loan. You can look online for property investments you can afford, or you could talk to a real estate agent. You could read a book on investing or go to a seminar that you heard about.
Whatever you do don’t sit still. Take immediate action to get educated and to plan your entry into the market. The hardest property to buy will always be your first property.
7. Keep It Growing
Don’t stop at one property and don’t stop at one book. Keep your portfolio growing and keep your education growing. If you keep these two things growing then you should have no trouble making more than enough money to be financially secure.
Be very careful with your cash flow. There are many investors who heavily endorse negative gearing in high growth areas. This strategy can definitely work, but I have seen to many investors living off toast and baked beans who have bought “high growth” properties that are costing them an arm and a leg each week but that haven’t grown in 3 years. This leaves them strapped for cash, strapped to their jobs and penniless.
At least with positive cash flow property if it doesn’t grow then you still have money coming in each week that can help you save a deposit for the next property.
You want to put yourself in a position where you are always able to grow. Generally that requires a mix of positive cash flow and capital gains. Not all of one and none of the other. So be smart in your investing, especially in the early years, and give yourself room to grow and invest in more property.
Keep your rental income growing by constantly raising your rents with the market increases. The more rent you have coming in the quicker your property will become positively cash flowed and you can start to draw an income from it. Also this gives you more disposible income to service more loans, so you can afford more property.
As you can see investing after 40 isn’t as daunting as your first imagined. With these simple steps you can quickly be on your way to financial independence. You are currently in the prime of your life. Why not use this great time to set yourself up for a great future?