"Two Lattes and a Cocktail" Invested in Housing will Overflow a Retirement Account:- When passive investing for the long term, little amounts can add up to a great deal of wealth, particularly when it is buying real estate to be held in a retirement account.retirement investing  That was the thrust of a recent article in The Baltimore Sun by Susan Reimer, "Turning two lattes and a cocktail into a retirement fund."

In her very useful Baltimore Sun piece that should be must reading for all about the value of passive investing for the long term, Reimer discussed how Gail MarksJarvis, a personal finance columnist for The Chicago Tribune, wrote about how saving $20 a week would turn into $480,000 in 40 years, assuming a 9.8 percent return.  Doing away with two lattes and a cocktail could easily be almost half a million dollars thanks to compound interest.

Redirecting those funds to acquire real estate assets that then becomes part of a retirement fund could easily result in a much larger amount.  When real estate is held in a retirement account such as an individual retirement account (IRA), the investment income and the capital gains are not taxed.  If the real estate is a small apartment building, the rental income is not taxed.  Should the property be sold for a profit, there would be no taxes on the gains.  The real estate investment does not have to be property as private mortgage notes, loans made from investors to others to buy real estate, can be part of a retirement account, too.

To take the first step in real estate investing does not require a tremendous amount of money.

If the property to be purchased will be the primary residence, it can be acquired for as little as 5% down.  That is an excellent way to develop a real estate portfolio.  Continually buying one property after another will result in a very impressive portfolio.  The sooner that begins, the sooner you put time on your side in investing.  The power of time, in the form of compound interest, is what turns "two lattes and a cocktail" into nearly $500,000.  Having the real estate asset in retirement account shields it from taxes, further enhancing the gains over time.

For private money, investing can yield double digit returns.  A portfolio of private mortgage notes would double every seven years or less from that yield on an investment.  Not only is that return much higher than the 9.8% return MarksJarvis wrote about in The Chicago Tribune, the risk mitigation is better as there is generally few, if any, defaults.  When investing for retirement, risk management like that is critical.

It does not take much overall effort to get started investing in real estate.  

It is best to passively invest with a long term approach.  Not only does that put time on the side of the investor, but it also results in benefiting from the experience and expertise of others.  A retirement account is a very useful financial tool: having real estate in it will allow for the constructing of a towering retirement fund when utilizing passive investing over the long term.