Being a landlord is hard… very hard.
From the jump, you have the three “Ts” to deal with – taxes, trash, and tenants. The first two are predictable enough. But in my experience, it’s the third that will give you trouble.
You would be simply amazed what seemingly reasonable people will do to another person’s property. Once, as a landlord and operator of a Papa John’s restaurant, I had a disgruntled employee haul a deer carcass into the store freezer.
That’s not all tenants, of course. Some are an absolute joy to have. But other times, the responsibilities simply aren’t worth it.
That’s why my mother – despite having decades of experience buying, selling, and renting real estate – is ready to walk away entirely. And honestly, I don’t blame her.
I mentioned Mom’s leasing situation last November, writing how:
She has owned a townhome for over 25 years and is currently renting it out at a below-market rate. So below market, in fact, that after deducting HOA fees, property taxes, and management fees… she has very little left over for her.
So, is it really worth the hassle?
Neither of us think so.
Her last tenant has now officially moved out, so her recurring rental expenses will soon come to an end. That’s the good news.
The bad news? There’s still quite a bit of cleanup ahead.
I don’t know exactly how much she’ll need to spend to get the property ready to sell, but it’s clear the unit wasn’t left in great condition. Between repairs, hauling away debris, and preparing the home for listing, we have some meaningful work ahead of us.
Fortunately, she should still walk away with a profit when everything is said and done. More importantly, she’ll be able to redeploy that capital into far more passive, hassle-free investments.
And while it’s ultimately her decision, I think I have a blueprint that could help.
A $500,000 Blueprint for a Comfortable Retirement
We all know you can’t just live on Social Security alone. The average Social Security check for retirees is about $2,000 per month.
So, as part of The Wide Moat Show, my co-host, Nick Ward, and I put together a blueprint for investing in exchange-traded funds (“ETFs”) to generate steady and reliable income.
The goal is to generate enough monthly income to cover living expenses without drawing down principal. And after much consideration, we came up with three key pillars to base our portfolio on:
-
Safety
-
Income
-
Growth
To fulfill that first part, we allocated a portion of the portfolio to short-term U.S. Treasuries. This can be achieved through ETFs like the iShares 0–3 Month Treasury Bond ETF (SGOV). Managed by BlackRock (BLK), it invests in ultra-short-term U.S. Treasury securities.
SGOV is a great example of what we call “sleep well at night” capital. It’s not designed to generate high returns. In fact, other than the approximate 4.13% dividend yield, it doesn’t generate any returns at all. But it has other advantages.
In a market downturn, this bucket can be redeployed into risk assets at more attractive prices. Think of it as dry powder that gives retirees flexibility when they need it most.
Next – and most importantly – we focused on building a diversified income engine. This includes a mix of covered-call ETFs, utility-focused funds, and select income-oriented strategies that can generate yields in the 8% to 12% range.
This collection produces cash flow through a combination of dividends and options premiums. And that, in turn, allows investors to collect meaningful income throughout the year.
These strategies aren’t without risk, mind you. Nothing ever is. However, diversifying across multiple managers and asset classes helps smooth out volatility. It also reduces reliance on any single source of income.
Finally, we layered in a growth component using high-quality dividend growth ETFs. This category includes names like:
-
Vanguard Dividend Appreciation ETF (VIG)
-
Schwab U.S. Dividend Equity ETF (SCHD)
-
iShares Core Dividend Growth ETF (DGRO).
A hybrid strategy like the Amplify CWP Enhanced Dividend Income ETF (DIVO) is also worth considering. It mainly owns high-quality, dividend-paying stocks but also sells covered calls on the side, boosting its total income potential.
These holdings don’t generate as much income as the other two categories I’ve listed. But they are essential for the long term, allowing the portfolio to thrive over a multidecade retirement.
Their dividends should grow over time, allowing retirees to keep pace with inflation and maintain purchasing power.
This third category of our blueprint provides a psychological benefit as well. Investors are far more likely to stay disciplined during volatile markets when they know a portion of their portfolio is still compounding and increasing its income stream over time.
Otherwise, they’re prone to panic-selling, which leaves them on the sidelines of maintaining and building impactful amounts of profit.
The Bottom Line for My Mom and Other Retirees
When we put it all together, this portfolio Nick and I created generates roughly $3,000 per month in income. Add in the average Social Security benefit, and you’re right at that $5,000 monthly target.
Of course, there are trade-offs to this setup. For instance, there’s limited exposure to real estate… no international diversification… and a reliance on income strategies that can fluctuate with market conditions. Yet the retirement alternative seems to be chasing unsustainably high yields or relying entirely on capital appreciation.
At the end of the day, this approach eliminates quite a bit of unnecessary risk. And it reflects the philosophy we’ve championed for years: Build a portfolio designed to pay you, not one that forces you to sell pieces to survive.
For retirees like my mother, that distinction can make all the difference.
At Wide Moat Research, our focus has always been on identifying durable, income-producing assets that allow investors to sleep well at night. That means prioritizing quality, diversification, and long-term sustainability over short-term yield chasing.
In today’s environment, simplicity and reliability matter more than ever. So our goal is clear: Own great assets, get paid consistently, and eliminate as much unnecessary stress as possible.
It’s about as “perfect” a strategy as I can come up with for my mom. You might find out that it works for you, too.
Regards,
Brad Thomas
Editor, Wide Moat Daily
|
