At what age will you be able to retire?

Posted on Thursday, August 22 2013

One of the biggest news in America a couple of days ago (August 20, 2012) was about Apple’s stock price. As you may have heard, Apple’s latest products, including the much anticipated iPhone5 Are driving its share price to an all time high. As it can be seen, the good thing about the stock market is that it is semi-efficient, meaning any new publicly available information consequently results in an almost immediate stock price adjustment.

The stock market is very liquid and it has a lot of movement throughout the day. I recently read about Robert Kiyosaki’s advice on his Rich Dad’s Blog, that it is imperative for stock market investors to understand how to “trade” stocks. It is important to know when to get in and out of the market quickly, by using “insurance” such as options to minimize your risk. Robert also predicted that the U.S. stock market will collapse around 2016. When this occurs, much of the NZ and Australia’s stock markets will be severely impacted as well. Therefore, if you are a baby boomer with money in the stock market, you need to familiarize yourselves with stock options or else your life saving could be jeopardy.

It is no coincidence that most of the money invested for the retirement savings (Kiwi Savers, and Superannuation) are tied up in the stock market and why many of us are so worried about our ability to retire. According to the latest survey by ANZ, “Confidence was lowest among those close to retirement with 66 per cent of 45- to 64-year-olds saying they were not very confident or not at all confident.”

This is because deep down we all know that the world is entering a different kind of economic environment. This is the post bubble era, where the real cost of excessive credit growth and fractional reserve banking system over the past 40 years is causing an upheaval in today’s world economy. The ongoing Euro zone mess is being pushed forward into the future for the next set of government to deal with. This is likely to make the stock market worldwide even more volatile. Investing seems a lot harder in the world of greater uncertainty when you are relying on the future capital appreciation alone. But you may ask, “Isn’t investing all about deferring your spending today, putting money aside in the right vehicle, and hoping that it will increase in value so that you will be able to spend more in the future?”. This is because most only know how to invest for capital gain. In addition, most people believe that the stock market is the only place where they can invest for their retirement. However, I believe the American real estate, especially the single family home market, is a great alternative for New Zealanders looking to retire, and it is THE BEST place if you are investing for cash flow.

The best way to illustrate this is to use a real life example. One of our latest listings is a 3 bedroom, 2 bathroom property located at 5876 Hamlet Millington, Memphis, TN (

It is currently rented out to a long term tenant at $750 a month. Based on this rent level, the annualized rental income in year one will be $9,000. All of the operating expenses (property taxes, insurance, property management, and repairs) are expected to be $1,932 for the whole year. Using the rental income to pay for all these expenses, the net income from this property would be $6,618 in year one. This means, if you paid the purchase price of $49,900, plus closing cost, your Return-On-Investment (ROI) will be 13.4%. This 13.4% ROI is what you would receive in your bank account when you invest in the property today.

Additionally, due to the increasing demand for rental properties from renters, you can expect your rental income to increase as time goes by.

Undoubtedly, this is a pretty decent return in today’s yield starving, high uncertainty investment climate. Nevertheless, you can make real estate investing even more enticing. For example, if you were to borrow from the bank at 80% of the purchase price at a 5% interest rate, your actual investment would only be the 20% down payment, which is around $10,000. Even if you will have to pay the bank the interest payment on the loan every month, the interest payment will only be around $2,000 a year (assuming interest only). Your net income will therefore be $4,618 instead of $6,618. However, your ROI will be 46% instead of 13.4% because you use less of your own capital. Regardless of what happens to the house price, you will recoup your initial investment within about 5.5 years of purchasing if you paid cash for entire purchase price or within two years if you only paid the 20% down payment. Your risk in this investment is a lot less when you have already recouped your money back.

While stock market investors are trying to predict which stock will go up 20% per year for the next 5-10 years, smart property investors have the upper hand. Real estate investors can see that with the ridiculously low mortgage rates and property prices in America back at reasonable levels (cannot say the same thing about the NZ market), they can purchase homes with extremely high cap rates, which means great cash flow. They are making money every single month like clockwork from their rental income, while building up their net worth. And the more the US Central Banks keep “printing” their money and devalue their currency, the more the inflationary pressure that will drive up the price of your property investment. I know that some of you who invested in New Zealand during the 80’s and 90’s could testify to how inflation is actually property investors’ good friend.

All in all, we expect the American real estate market to peak in the year 2024 based on the Great 18-Year Real Estate Cycle.

Have a look at:

Going back to our Memphis property example, 10 years from now, that property will probably increase in value to around $90,000 and you will be $100,000 richer than you are today. The $100,000 comes from the $66,000 accumulated from rental profits over 10 year period plus a capital gain of $40,000. What would your investment be in 10 years time? Will your retirement savings survive the impending stock market crash?

To Your Financial Freedom,

Chayot Ing-aram
BBS (Hons) & MFin
International Real Estate Professional


America property Investment for New Zealanders




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Expert's Bio

Chayot Ing-aram

Chayot is the co-founder of Property4Prosperity, Inc. He lives and breathes property investing. He received his BBS with Honours and Master in Finance from Massey University. He has been featured in one of New Zealand’s bestselling property investing books, interviewed in New Zealand Property Investor Magazine, and worked in the Committee for the local Property Investors' Association. He is currently residing in L.A., California, where Property4Prosperity, Inc.’s headquarter is located.

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