Early retirement sounds like an unreachable fantasy to most people. Yet, there are so many stories floating around the internet about people retiring comfortably at 40. They must just be lucky, right? No. They’re real estate investors.
The truth is no one “gets lucky” with early retirement or achieving financial independence. It requires the right mindset, planning, saving, and, well, buying investment properties. I’m not saying a real estate investment is the only path to early retirement. In fact, a well-rounded investment portfolio is the ideal path but you can’t have that without real estate investment properties.
Real Estate Investing: The Ultimate Path to Early Retirement and Financial Independence
There are a few reasons why you need to start buying investment properties if you want to retire early and make enough money to reach financial independence.
Reason #1: For one, investment properties, in the form of rental properties, can provide a good return on investment, if done right. Not only will you be making money in real estate, but it will be a consistent and reliable income with no “expiration date.” It will be rental income that will require work initially before retirement and allow you to live comfortably with little effort after retirement.
Reason #2: The idea of financial independence leading to early retirement is this: your net worth reaches a much higher value than your actual annual spending. Some financial experts agree your net worth should be 25 to 30 times more than what you actually require as an annual income. Real estate investment properties are high-value assets. A combination of leverage, equity, and real estate appreciation will build your net worth much quicker over time than any other form of investment asset.
Reason #3: Becoming a real estate investor is by no means easy, but it is 100% possible. With all of the free resources available for a complete real estate education as well as beginner and user-friendly real estate investment tools, anyone with determination can become a real estate investor and buy investment properties.
Click here to start your real estate education with our free eBook.
Reason #4: A major issue with some investment assets is fluctuation and inflation. While the US real estate market has seen its share of ups and downs, investment properties make for a relatively stable asset. Even better, if you’re worried about inflation’s effect on your retirement plan, real estate investment properties increase in worth with inflation as will your rental income and return on investment.
Learn more about why you should invest in real estate for early retirement: What Are the Benefits of Investing in Real Estate?
How to Retire Early with Real Estate Investment Properties
We can get you started on the path to early retirement with real estate investing with some of our best tips. Our focus here will be residential real estate investment properties, but it is a good idea to look into passive income investments in real estate as well to add to your portfolio. Here is a great read to learn more about this: “What Are the Best Passive Income Investments in the Real Estate Market?”
Work on Your “Relationship” with Mortgage Lenders
As mentioned, one of the most powerful tools for achieving financial independence with investment properties is leverage. You don’t have to be a millionaire to be a successful real estate investor. You can easily use a rental property mortgage for almost every investment property you wish to add to your portfolio.
This means, however, you have to be the kind of real estate investor mortgage lenders will fight over. Start working on this today! Check your credit score and debt-to-income ratio, do your best to pay off personal debt (car, student, and credit card loans) and save up money for cash reserves and the typical 20-25% down payment. When you get to the point where you can start investing in real estate for your retirement plan, you don’t want investment property financing to get in the way.
Here’s the only guide you’ll need for this step to early retirement: Rental Property Mortgage: The Ultimate Guide to Getting Approved
Consider Forming a Real Estate Investing Team
Just as you need mortgage lenders on your side, a real estate investing team might be necessary as well. If you currently have a 9-5 job and don’t want to give up that security to get into real estate investing just yet, you’ll need a real estate agent who knows what they’re doing.
The real estate agent should have experience in the real estate market of your choice. Even more importantly, this real estate agent should possess great knowledge on how to find below market value investment properties. As we will see next, these are an important type of investment property for building wealth and reaching financial independence.
Consider adding Mashvisor to your real estate investing team. To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
Learn to Find Below Market Value Investment Properties
With investment properties reaching all-time high prices, it can be difficult to start building a real estate investment portfolio in the current housing market. That’s why if you want to successfully plan for early retirement in the US real estate market 2018, you have to hone your skills of finding below market value investment properties. These investment properties allow you to gain equity immediately and promise a higher return on investment and cash flow.
Start your search for below market value investment properties with:
- Short Sale Investment Properties
- Foreclosures and House Auctions
- HUD Homes
- Real Estate Owned (REO) Investment Properties
- Off Market Investment Properties
If you’re on top of your game with real estate investment analysis (comparative market analysis and investment property analysis), you can find below market value properties in traditional investment property listings as well.
Alternatively, enlist the help of a real estate agent. Be vocal about your wish to find below market value properties and make sure the real estate agent can achieve this goal for you, even in the current housing market.
Use a Rental Property Calculator to Find Positive Cash Flow Properties
If you’re just starting out in real estate investing, which you likely are simply to get your retirement plan off the ground, you won’t be on top of your game with real estate investment analysis. However, this doesn’t have to be a setback. Use a rental property calculator.
Not only will a rental property calculator help you identify below market value properties through comparative market analysis, but more importantly, this tool will help you understand the cash flow and return on investment through investment property analysis.
The only way you’ll benefit from investment properties in retirement is if they have positive cash flow. With Mashvisor’s rental property calculator, for instance, a real estate investor can enter in the rental property mortgage facts (monthly payment, interest rate, type of loan, down payment, closing costs, etc.) and all rental property expenses. The rental property calculator then figures out your cash flow using an accurate estimation of rental income from predictive analytics. From there, you can see the major return on investment metrics like cash on cash return and cap rate.
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
The takeaway is that with a rental property calculator, a real estate investor can easily find positive cash flow properties. These are the investment properties that make money for you while paying off their own debt. This is key to early retirement with real estate investing.
Be Prepared to Invest in Multiple Investment Properties
Once you find a positive cash flow property, be prepared to start the investment property search over again. That’s because to reach financial independence, you will need to buy multiple investment properties. This will need to happen over the course of a few years, but in time, your positive cash flow, return on investment and net worth will be great enough for retirement.
Related: 5 Tips for Buying Multiple Investment Properties
Take Care of Rental Property Management Now…
So you won’t have to later. The reality of everything we have said here is that it will require work now. Finding and buying investment properties requires time and effort and it doesn’t stop there. With your first few investment properties, you’ll have to be a landlord. That is until it makes financial sense to allow professional property management to step in. This will happen once you buy up enough investment properties (or a multi family home) to have a greater cash flow where sacrificing some rental income is not an issue.
Be a good landlord now and take care of your investment properties and tenants to ensure the positive cash flow keeps coming. It’s the best way to carry out your retirement plan with real estate investing.
Don’t reduce the success of others to simple luck. Instead, look closely at what they are doing and apply it to your own plans. You’ll see that real estate investment properties are the way to financial independence and early retirement. Keep our tips in mind and get started building an impressive real estate investment portfolio for retirement today.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
How does real estate investing work into your retirement plan? Share with us in the comments below.