I began my career as a veterinarian in 2008. The popular advice of the day was to go to university and get a good job, start working, save 10% of your paycheck, and retire happily by age 65!! It turns out there are just a few little problems with that plan!!!
If you remember 2008, you will recall that it was when the bottom absolutely fell out of the stock markets. Now this had no effect on me directly, as I had no actual money in the markets. But it did serve as one of the biggest eye opening experiences of my life. I had just started work where I had spent many hours volunteering in high school. Many veterinarians had come and gone; retired after having very successful veterinary careers. But 2008 was different. 2008 was a year when people actually had to un-retire! Imagine that. Working your entire life in a very successful career, but, then, losing up to 50% of your retirement plan and having to go back to work!! This made me question everything I had been taught about saving for retirement.
For me there were two big problems:
- Who actually saves 10% of their paycheck??
- Even if I did, it would take me way longer than 30 years to reach the retirement level I wanted!!
After searching for an answer to this gap in my retirement planning for more than two years, I found real estate. And once I found real estate, I was completely hooked. What initially was just a way to invest towards my retirement quickly opened my eyes to the amazing wealth building power of real estate. Decades melted off of my projected retirement!!
Let’s imagine a good quality income property in a good area of Saskatoon with a legal basement suite. In today’s market, a property of this type would probably be worth $450,000. In its simplest form, it is basically a giant piggy bank; a forced savings plan. Every month rent is paid and your mortgage pays down. Now let’s just say this property does nothing more than pay its mortgage down. That’s it. It simply is paid off. That sounds pretty boring on the surface. But that’s a forced savings plan of $18,000/year for 25 years! Or $1,500/month each and every month for 25 years! Who couldn’t use an extra $1,500/month towards their retirement??!!
But that’s not even the best part. Who actually paid off that mortgage? It wasn’t you. It was your tenants! Real estate allows you to set up a forced savings plan where someone else will make your payments for you. Earlier I said one of the biggest obstacles to retirement was saving 10% of your paycheck. But I never said you have to be the one to save it!!
With the first of my two big problems solved, I set out to solve the next one. How do I reach the level of wealth I wanted to achieve in retirement? I didn’t need to look very far to solve this problem. After seeing the wealth that real estate could create in just a couple years, the answer was simple. Just repeat the process. With real estate, I could craft whatever I wanted my retirement to look like.
Now real estate investing is not a get rich quick scheme. It is a very strategic long-term investment. I think it is this delayed gratification that keeps so many people inactive. Less than 5% of Canadians will ever buy an income producing rental property. Less than 1% will ever buy two or more income producing rental properties. Yet more and more Canadians are resigned to working longer, retiring later, and retiring with less. But it doesn’t have to be this way.
Real estate has unquestionably been the best financial investment I have ever made in my life. I encourage everyone to give it some serious thought. If what you are doing today is not going to get you the results you desire tomorrow, it’s time to change it up. Real estate was the answer for me; it could be the same for you!
-Bio: Mike Bugg is a retired veterinarian and founder of YXE Real Estate Group