How to Retire Early with Real Estate Investing

Many agree that real estate investing is one of the best ways to create and grow wealth. If you put effort and careful planning into it, real estate investing will guarantee you a secure and fast retirement.

For many people in their 20’s and 30’s, retirement may seem like a distant concept – something that you don’t have to think about every day. But if you’re smart and extremely hard-working, retirement doesn’t have to happen in your 60’s; with real estate investments, you can go from zero to retired in a few years.

If you like the idea of early retirement through real estate investing, read through the following blog to understand how to make that happen.

Real Estate Investing vs. Other Retirement Planning Options

So, why choose real estate investing as a retirement plan over other common options, like stocks? There are two main reasons:

1. Real estate provides investors with more control over their investment because the real estate property is a physical asset. Moreover, you make all the key decisions such as how much to charge for rent, who the tenants will be, and when it’s time to sell your investment property.

2. Real estate has less risk as a retirement option than stocks because an investment property is a physical asset, so it’s hard to just lose everything in real estate investments. Moreover, the real estate market is much less volatile than the stock market.

Benefits of Real Estate Investing for Retirement

Cash Flow

The most beneficial reason to choose real estate investments as your retirement plan is that they allow you to generate a consistent positive cash flow – the difference between your rental income and rental expenses. Positive cash flow is your best friend when it comes to early retirement planning. It helps real estate investors become debt free and provides high rental income for real estate investors. So, if you begin early with your real estate investments, it will be easier to retire and live off your real estate investment income.

Tax Benefits

By owning rental properties, real estate investors become qualified for different tax deductions on several expenses associated with the rental property and its functions, such as depreciation and insurance. These tax deductions will definitely have a positive impact on a real estate investor’s wealth, whether it’s for career purposes or early retirement.

Real Estate Appreciation and Equity

Equity and appreciation are long-term advantages of real estate investing. Both deal with an increase in value but in different ways:

Real estate appreciation is an increase in the fair market value (FMV) of a real estate investment property over time.
Equity is an increase in a real estate property’s FMV due to mortgage payments (which, naturally, factors in time).

These increases in value are perfect for retirement planning for real estate investors. If you begin early and buy a real estate investment property in your 20’s or 30’s, with an increase in value you can sell the investment property later on for double its original cost – or even more!

Tips to Retire Early with Real Estate Investing

1. Plan

Before getting started, the very first thing you ought to do when considering real estate investing for retirement is to identify a set of realistic goals that you want to achieve. This means need to create short-term and long-term investment plans for the coming years. Ask yourself how much money you’ll need and how much you are willing to spend on an investment property, whether you should use cash or mortgage for financing the property, and how many years you want to invest for. In addition, make sure you have a plan for management – are you going to be managing the property yourself or will you count on the services of a professional property manager to take over this job for you?

Sit down and think carefully about how you’d want your future to look like. Depending on when you decide to retire, your plans will differ in length and nature. Still, it’s important to have a timeframe to work with in order to keep yourself on track.

2. Do Your Research and Buy Right

Real estate investing is a business that requires research. Looking for the best real estate investment property is probably what needs the most research. So, your next step should be searching for the right investment property.

Buying a cheap real estate property is not always a good idea; you need to buy the right property at the right price if you want to make money with real estate in the long term. Is the property in a good condition, or will it require repairs to get it into shape? Don’t buy an investment property just with the hope of future real estate appreciation.

Keep your numbers in mind – be sure to research the house, location, and neighborhood to see if this property fits the bill. Do your real estate market research carefully so you know what to expect.

Mashvisor helps potential real estate investors quickly find the right properties and analyze their capabilities using predictive analytics. All you have to do is type in the name of the city or neighborhood you are interested in, and Mashvisor will provide you with property listings with information on rental income, cap rate, cash on cash return, occupancy rates, etc. This includes traditional rentals and Airbnb rentals, as well as single-family properties, townhouses, apartments, and condos.

3. Check Your Finances

Once you have a property in mind, you want to ensure that you’re in a good place financially. Banks will want to confirm that you have enough for a down payment, as well as reserves to fall back on. You also need to check the different financing options and pick the best real estate investment strategy. While beginner real estate investors might go for loans with relatively low interest rates, more experienced investors may opt for alternative sources of funding for real estate investing such as real estate partnerships, seller financing, commercial financing, Home Equity Line of Credit, and other creative financing options.

You’ll also want to run the numbers to find out whether or not the investment makes financial sense. This means analyzing cash flow, rental return, cap rate, cash on cash return, and other values. To do this, add up all of your projected expenses (taxes, insurance, utilities, maintenance and repairs, and property management costs, as well as vacancies) and subtract them from your estimated annual rental income.

Now, ask yourself how many rental units would you need to buy in order to achieve your income goal? Keep in mind that your goal is to make money in the long term. Thus, it’s probably best to start small with a few property units, and then build towards more, depending on how much rental income you want to be making per month.

4. Expect the Unexpected

No matter what, there is always some sort of risk in real estate investing, and you will likely face some unexpected drawbacks. So, if you are investing in real estate for retirement, you should make sure to commit to your real estate investment portfolio and try to keep it successful for as long as you can and expect the unexpected.

A tenant may cause damage to the rental property, or not pay rent on time, you might face high vacancies, you might receive a call at 3 am from a tenant regarding a plumbing issue, and the list goes on. Regardless of the situation, you need to be prepared, especially financially, against any potential harms to your real estate investment property.

Bottom Line

Real estate investing is the ultimate option for early retirement if you put effort into it. It generates plenty of profit, provides tax deductions, and has a long-term advantage of real estate appreciation. As rewarding as this sounds, this requires hard work. Before starting your real estate investment portfolio, you must plan properly, research accurately, and prepare financially in addition to deciding which real estate investment strategy to go with.

Remember, the sooner you start your real estate career, the sooner you will reach your goal of early retirement. To start your real estate retirement planning, begin your trial with Mashvisor and search for the best investment property for you.

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