Achieving financial independence and retiring early is the goal of every driven and ambitious individual. This shared goal has given birth to a strong lifestyle movement known as the FIRE movement. FIRE stands for «financial independence retire early» and its main goal is to promote various strategies that can increase your income and help you save money in an efficient manner. One particular approach that has been gaining a lot of traction lately is investing in real estate. So is it possible to retire early with real estate? And what is the best way to achieve fast FIRE with real estate? In this article, we will introduce you to the FIRE movement and show you how you can achieve early retirement as a real estate professional.
What Is the FIRE Movement?
Like many lifestyle movements that have emerged in recent years, the FIRE movement is driven by millennials’ desire to subvert established norms and etch out a new path to financial freedom. The FIRE movement’s rapid rise in popularity is mostly due to the strong traction that it has amassed on various online platforms. Here are the main aspects of the FIRE movement:
- Build up a high amount of cash by saving money in an aggressive manner.
- Live a frugal lifestyle and avoid trivial spending.
- Boost your income by investing in multiple assets.
So how do real estate investments fit into this? In the next section, we will delve into how you can achieve early retirement by owning rental property.
An Easy Way to Join the FIRE Movement: Invest in Real Estate
As most savvy investors know, buying investment property is one of the most effective ways of securing financial independence. In fact, the rental income that these investment properties generate can go towards helping you achieve a wide range of financial goals. Below is a detailed step by step guide on how to join the FIRE movement with real estate.
1- Pick a real estate investment strategy
Reaching financial independence can be done in various ways. In fact, you can use both short- and long-term real estate investment strategies in an equally effective manner. Short-term approaches such as house flipping can yield decent returns and scaling this venture might allow you to join the FIRE movement fairly quickly. However, owning a rental property is the safest real estate investment strategy that you could implement. Generating passive income from rental properties is very simple and the strategy is easily scalable.
Another decision that you have to make early on is whether to invest in single family homes or multi family homes. While both options can be highly profitable, single family homes are usually the ideal option for beginner real estate investors.
2- Avoid investing in expensive housing markets
Buying in an expensive real estate market might seem like a good idea upon first glance. After all, these markets boast some strong economic indicators and the average rental income in these areas tends to be quite high. But if your goal is to join the FIRE movement, affordable secondary markets are your best bet. These real estate markets allow you to invest in multiple properties and generate cash flow through various assets. On the other hand, investing in an expensive market involves gambling on just one investment property. The second approach is inherently more risky, especially for real estate investors on a budget.
3- Choose a profitable investment property for sale
After picking your strategy, your next step is to choose a good investment. Joining the FIRE movement is only possible if you manage to invest in a profitable income property. In fact, property search is the single most important step in the process. This is why it is essential that you rely on an advanced tool that can identify top investments for you. A prime example of such a tool is the Mashvisor Property Finder. Thanks to its AI technology and advanced algorithms, the Property Finder can rapidly sift through the market and zero-in on investment properties with the highest returns that match your criteria.
On top of helping identify top properties in any market, Mashvisor can also help you with your investment property analysis. Thanks to the investment property calculator, you will get a full assessment of your investment’s income, expenses, and overall profitability.
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4- Explore multiple financing options
A common mistake that many novice real estate investors make is failing to explore all the financing options that are available to them. Since FIRE relies on limiting spending and maximizing income, you will need to pick a financing method that comes with favorable terms. Shop around in order to compare different financing packages and explore less conventional routes such as HELOC and private financing.
5- Keep rental property expenses under control
The key to generating positive cash flow is having a solid grip on monthly expenses. When not managed properly, recurring costs can quickly snowball into a high expenditure. To keep expenses in check, avoid excessive spending on extra amenities and take a proactive approach to rental property renovations. It might seem odd, but timely renovations can help you avoid costly structural repairs down the line.
The Pitfalls You Should Avoid When Investing in Real Estate
If you are not careful, several things can go wrong when planning for retirement. Here are some of the mistakes that you should avoid when you’re trying to generate retirement income:
- Not sticking to a good plan and wasting your rental income
- Paying too much for an investment property
- Buying rental properties that require a sizable upfront investment
- Not properly factoring in recurring costs when doing an investment property analysis
The Bottom Line
Joining the FIRE movement and achieving your financial goals is easily doable with real estate investing. As long as you take a conservative approach to the housing market and avoid aimless spending, you can look forward to early retirement. To check out some more investing tips, head to our blog.