Ordinarily, when you start a discussion on early retirement with a strategy like real estate investing, the answer you’ll usually get is something along the lines of, “I’m planning on paying off my house first.” Another popular idea is, “I can always apply for a mortgage or home equity loan if I need the money.”
However, the best answer lies in using your house (in real estate investing) to pay for early retirement. Properties are commonly seen as potent tools you can utilise to protect yourself against the volatility of the market. One of the best strategies that will enable you to retire early is to make wise investments in properties that you’ll rent out to create passive income streams for yourself.
Let’s dive into each of the steps for retiring early with real estate investing.
1. Know Your Reasons For Getting Into Real Estate Investing
There are quite a number of strategies out there, other than real estate investing, that you can adapt to your own circumstances in order to achieve early retirement. So knowing your exact reasons for doing this is critical. Are you looking to retire early and simply live comfortably? Are your goals short-term in nature, such as wanting to cut back on the number of hours you need to work? Do you wish to take your family on overseas holidays more often? Or perhaps you would like to provide for your family and still be able to spend most of your time with them.
Work hard on building your finances around that personal goal, particularly if it involves real estate investing. Your reasons will determine whether long-term property investments are the best option for you and your unique set of circumstances. When you’re clear about your motivations, they’ll give you that extra push you need in order to be successful.
2. Know Where You Are On Your Journey
It’s important to figure out where exactly you are on your journey toward building wealth and retiring early via real estate investing. You might be a complete novice, or you might be a little further along, having managed to accumulate several hundred thousand dollars in your retirement fund. When you’ve figured out exactly where you are on your journey, you’ll know how close you are to fully realising your goal, and how many additional investments will be required, if any.
It perhaps goes without saying that the bigger your current nest egg, the larger your potential opportunities are for real estate investing and ROI. This, of course, doesn’t require you to be rich from the get-go. You can get started wherever you are at present, even if it involves taking baby steps. The important thing is to start saving and educating yourself about real estate investments.
3. Getting Started On Your Real Estate Journey
Create your plan and then work hard on getting into real estate investing and ultimately achieving your retirement goal. Your property will most likely be your biggest asset, as well as your biggest liability. Transforming that into a real estate investment which gives you returns that exceed the amount you’ve invested is one of the first steps toward realising your early retirement goal.
4. Choose An Investment Plan That Works For You
What type of landlord or landlady would you like to be? Does the idea of fixing and flipping properties for real estate investing purposes excite you? Do you think you have what it takes to be a good Airbnb host? Or is house hacking your thing?
In his best-selling book, Retire Early with Real Estate: How Smart Investing Can Help You Escape the 9-5 Grind and Do More of What Matters, Chad Carson shares the stories of 25 ordinary people from a variety of backgrounds who found a way to thrive in the real estate investing niche. Each real estate investor chose a real estate investing plan that suited their own lifestyle and the goals they had set out to achieve.
5. What is Your Financial Independence, Retire Early (FIRE) Number?
Determining your financial independence, retire early (FIRE) number involves much more than just a figure in your bank account, capital gains or income gained from real estate investing. It’s about the lifestyle you want to create and the details that matter to you on a personal level. Your FIRE number is the amount of money you require in order to live your desired lifestyle sustainably on the income generated from your net worth alone, and without taking anything away from your net worth. When you finally have that amount of money in the bank, you can consider yourself truly financially independent.
Upon finally attaining your FIRE number, through real estate investing or another method, you’re completely free of the need to work for money. You can calculate your FIRE number here.