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Your Guide to Retiring Early with Real Estate Investing

  • September 24, 2020

Some of the best investors in the world talk about how diversifying their investment portfolios with real estate was the best thing they ever did. It’s encouraged thousands of everyday people to adopt their own real estate investments, and many have gotten rich off the prospect.

If you want to start in real estate or you want to take your existing real estate investments a step further, you might consider using it to subsidize your current job or replace it altogether, giving you a comfortable financial cushion.

With the right moves, you could even use the wealth you build for an early retirement. This isn’t the type of goal you shoot for 5 years before retirement (although it’s not impossible to build a fortune in such a short time). It’s something you should consider while you’re young, ideally in your 30s or 40s. You can build up the most wealth and retire earlier the younger you start.

Regardless of where you are in life, there are a few essential real estate strategies to consider. Use this simple guide to help you get started:

Eliminate Bad Debts First

It is very difficult to start a profitable real estate venture when you’re up to your ears in credit card debts. These high-interest debts likely have high payments that suck up your extra cash throughout the month. Without this extra cash, you can’t save up for your first property, cover repairs, and collect a profit.

Therefore, your first step is to tackle your debt and eliminate it as quickly as possible. There are many strategies and expert recommendations on this, and you can try whatever tactics work best for you. But it all boils down to stopping credit card use completely, living a more frugal lifestyle, and throwing all of your extra cash at your debt until it’s gone.

At this point, you’ll have significantly more financial freedom to pour into your investments, and your credit will likely have improved to help you get financing for the first few investments.

Know the Market

Every good investor prioritizes understanding the market they’re in. Not all markets are poised for investments—some are very slow moving without signs of changing. These markets might be okay for the very patient investor, but not for one who’s looking to retire early.

Learning the market is not as challenging as you might think; it simply takes observation and pointed education. You live in a real estate market, as do your friends and other investors in the field. You can observe ebbs and flows, make comparisons using online listing data, and choose markets that are most compatible with your interests and financial needs.

Run the Numbers

Retiring comfortably means different things to different people; therefore, you should determine what income you’ll need to live out the rest of your life comfortably. For some, that might be a yearly six-figure number. Others might be happy retiring on $60,000 per year.

Factor in all of your living expenses for both now and in the future. Think about not only the cost of groceries, utilities, and other day-to-day expenses, but also about what you’ll need as your health declines with age. Health insurance rates will rise, you’ll likely have more doctor’s visits, and you may have to pay for your spouse’s health as well. If you want to leave something behind for your family when you die, factor in that number.

When you’ve determined the amount needed to cover expenses along with some extra for traveling or luxuries, determine how many investment properties you’ll need for the subsequent income. Give yourself a generous margin of error since market fluctuations, repairs, and vacancies in rental properties can alter these numbers significantly.

Choose Your First Investment

With all the preparation out of the way, you’ll be ready to make your first investment. There are dozens of options for investing in real estate, and not all include buying property. Here are a few popular choices:

  • Rental properties
  • Wholesaling
  • Fix and flip
  • Real estate mutual funds
  • REITs
  • ETFs
  • Online real estate investing
  • Partnerships
  • Crowdsourcing equity

Any of these could build wealth, although some are likely to build wealth faster than others. For example, a fix and flip investment is risky and difficult to pull off correctly, but it could yield tens of thousands in profits within just a few weeks.

Consider your interests and what you’re comfortable doing. Rental properties are a great way to start out because the barrier of entry is low, and you can make back your investment in a short time. If you don’t think you’ll enjoy being a landlord, you can always hire property managers to do the difficult work and turn the investment into a passive income.

Add More Properties

You can’t build a real estate empire out of just one property, so add properties as soon as you’re financially able. Each property you own accelerates your profits, and before you know it, you’ll be on your way to not only financial independence, but wealth.

Try to diversify your portfolio with a variety of investments. Run through the options listed above and others you run across and add something new whenever you get a chance. Each type of investment you choose will maximize your profit potential.

When you add more properties than you can handle alone, build a team. A real estate attorney, trusted broker, lender, and other investors are always helpful when maximizing real estate. Property managers can also take a lot off your plate.

Set It and Forget It (A.K.A. Passive Income)

If your goal is to retire early, that means you want to stop working at a certain point. Therefore, you need to develop a real estate strategy that leads to passive income. In other words, you get to set up a system, then sit back and enjoy the profits that naturally come from it.

Setting up such a system isn’t easy, but if it means you can retire early and not work the rest of your life, it’s worth it. You’ll need trusted team members to carry out the basic day-to-day tasks so that you don’t have to lift a finger.

At some point, you’ll likely get to the point where you can sell everything and just collect the profits. From there, it’s a matter of sectioning out your income by months to make sure it lasts you for the rest of your life and leaves some for your family as well.

Let Green Residential Manage Your Investments

You’ll put in a lot of hard work investing—you shouldn’t have to worry about the day-to-day of managing your properties as well. At Green Residential, we know real estate. We’ll handle everything from buying and selling your properties to managing your rentals. For more information about the vast scope of our services, contact us today!

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