Last year, two desperate people came to me for financial help.

He was scrambling to rebuild. Gene’s wife was taken by a rapidly spreading cancer. Medical bills almost swamped their savings and life insurance.

A few months later Roberta came to me. She was recovering from divorce. Her net worth was less than half of what she and her husband had 18 months ago.

They do not know each other, but their financial facts and life situation are similar. Both people were about 50, each near the peak earnings and looking forward to an active retirement. Both wondered if rental ownership could work for them. This article blends and averages their financial facts to show a common solution. The capital they had differed slightly, but did not alter the path each took to accomplish their respective goals.

Each had good income, solid credit, emotional maturity, and intense motivation. Both wanted to be involved in something positive that would keep them productively busy, and benefit others; $275,000 was the average of their capital to invest.

Both of them executed a variation of this plan. Each bought $800,000+/- income property, in a working-class ZIP code. Both put about 30 percent down, an average of $240,000 and then added another $35,000, $5,000 per apartment, over the first year to improve property and then raised rents. To learn more about what kind of improvements and what they cost, click here to link to a previous “Trusted Adviser” column, about rehabilitating apartments.

Last year the return on equity was about 4 percent and the property provided tax shelter near $20,000, which meant about $7,000 of tax refunds. All the property cash flow went to pay the loan faster. The quick mortgage payoff appealed to both households. This strategy enables investors to finish strong … in their retirement rebuilding. The rapid payoff reduces the consequences of higher interest in seven to ten years; the debt will be tiny by then. In nine years the loans will be less than 25 percent of property value, which should mean low rates at that time.

Now they are both in their second year, the improved buildings generate about 10 percent more rent. Plus the slightly smaller loan balance mean that less money is going to interest and the debt is decreasing faster. The tax savings approximately offset the extra principle reduction. The original $560,000 loan will be paid down $45,000 two years after purchase. Each owner expects rent increases will average about 3 percent annually from now on, the long-term inflation rate.

If they stick to this plan their loans will be about $200,000 at the end of 10 years and could be paid off by the 14th year. If rents continue to climb at 3 percent annually the apartments will have 50 percent more income in the 15th year than at purchase. By the 15th year the cash flow, with no mortgage, may be better than $6,000 a month. That extra $6,000 a month will make an immense difference in their retirements.

In the last century inflation has averaged 3 percent. At that pace the $800,000 purchase last year would be worth $1.2 million by the 15th year. If printing trillions of currency brings faster inflation then the free and clear asset could be worth more than $1.2 million.

This strategy is a low risk means of rebuilding wealth. Both households are on track to satisfactory retirement in spite of huge financial and emotional upset.

No one can guarantee the future. Interest rates or some economic surprise may produce a different outcome.
To obtain a chart that shows the math details of this case study, contact me.

The conclusion is to have a plan — no matter where you are in your economic journey.

No strategy works for everyone. My calling is help economic winners make the best financial choice for their next decade. A confidential consultation can help you discover whether rental property can give you the best of success.

Terry Moore, CCIM, a principal at Apartment Consultants Inc, has helped about 400 investors implement smart choices about San Diego rental property. Regardless of your rental ownership, you deserve to know the truth about your options. Contact Terry at or 619-889-1031 or

This article was originally published in the San Diego Daily Transcript and can be found HERE.