Investment Real Estate:
Your Business --Your Nest Egg--Your Future

Real estate is your livelihood now, but it can also be your nest egg later. So says one certified public accountant turned real estate pro who thinks you can make your profession work for you now and in retirement.

“As practitioners, we’re insiders and we’ve got an opportunity to make some sound real estate investments,” says Greg Gillis. The former certified public accountant who is now a salesperson with RE/MAX-Canyon Creek, Bothell, Wash., expects that his investment properties will take care of him when he's ready to retire. “They're an important piece of my future,” he says.

Here's how Gillis is using real estate to plan for a cushy retirement.

Investment philosophy: “I have a long-term approach. When real estate opportunities come along, I pick up properties that are in good condition, find stable tenants, and hold on to them--both the tenants and the properties.

“I don’t like being highly leveraged, so I put at least 25 percent to 30 percent down and get a 15-year fixed-rate mortgage. Even if the market goes south--even if it drops off dramatically--I still have cash flow, and I can afford to lower my rents if need be. Because of the 30 percent equity stake, I’ll never be in a position where I’ll have to give a property back to a lender.”

Portfolio mix: Gillis has acquired five houses in the Bothell area and has a five-acre lot that can be subdivided one day to provide him a healthy profit. Although he intends to keep acquiring property, he hasn't turned his back on other retirement vehicles, namely a SEP-IRA, which he funds regularly. He estimates that 80 percent of his retirement portfolio is in real estate and the 20 percent in stocks through his SEP-IRA.

Why a SEP-IRA when he has all those real estate holdings? He says any financial adviser will tell you diversification is smart. “Being able to put 15 percent of your adjusted gross income in a tax-deferred program is a real incentive. And the way it’s been performing in the last few years, it’s awful hard to argue with being in the stock market.”

Long-term picture: “Fifteen years from now, my properties will be paid off. If I need cash as a retired person, I can sell one of my properties or borrow against it. There's no capital gains tax on a home equity loan--it’s available money.”

Nuggets of wisdom: Here are some further tips from Gillis:

• Stick with single-family detached housing for investments. Multifamily rentals come with lots of problems and management responsibilities. Every time someone's unhappy with the neighbor's stereo, you're involved.
  
• There's no guarantee, but real estate practitioners have better odds than the average guy on the street at being successful with rental properties.
  
• Not everyone is cut out to be a property manager. It takes people skills.
  
• Be selective and find stable tenants. Gillis hasn't had turnover in any of his properties since 1993.
  
• Treat your tenants right. Gillis often knocks $100 off the December rent for the holidays if a tenant hasn't caused problems for him during the year.