How to Retire Early With Rental Properties

We have all been told to go to college, get a good job, invest money in the stock market and retire at age 65. The stock market is said to be the best way to accumulate enough money to retire. We see the retirement calculators that tell us how much to save based on how long we want to live. For most of us to make money last in retirement, you have to be frugal and spend less money than you did before you retired. I have more than a few issues with this plan, and I choose to use a completely different plan for my retirement. The key to early retirement is investing in rental properties or another income producing investment.

I don’t want to wait to retire until I am 65

I don’t want to retire at 65 because that would mean I have to work 28 more years. I may work that long, but I don’t want to have to work that long. With an average income invested in the stock market or a mutual fund, you are not going to be able to retire at 45 unless you make huge sacrifices. To retire early you have to start saving at 15 or live extremely frugal before and after retirement. Most of you reading this are probably past the age of 15! In order to retire early without living frugal, you need to change the way you invest or get a higher paying job. I like the idea of having a high paying job and investing wiser, but let us discuss investing in a different place than the stock market.  

Rental properties are a great way to retire early due to cash flow

One of the biggest problems I have with conventional wisdom regarding retirement plans is we have to guess when we are going to die. We use a retirement calculator to find out how much money we will need in retirement, and then put an age in the equation to make sure we don’t run out of money. Hopefully, we don’t live too long and run out of money when we are 85! This is one of the main reasons I love investing in rental properties. I can use the cash flow the rental properties give me for retirement without eating away the principal balance. If I have $5,000 a month coming in from rental properties, that $5,000 is going to keep coming in every month until I sell the homes. It may even increase as rents go up and my mortgage balances go down. No more calculating when you are going to die and worrying about if you will outlive your savings.

You will have income coming in by doing minimal or no work every year for the rest of your life. You can hire a property manager and never worry about the repairs or vacancies and retire in style. Many investors end up quitting their day jobs and concentrating on investing in rental properties at a very young age. They buy a couple of properties, realize how great of an investment it is and they get hooked.

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Rental properties help you retire because of passive income

It takes money and discipline to find and buy your first investment property and create passive income. However, the more you buy and the sooner you get started, the easier it gets. In my models, I project a passive income of $250,000 to $350,000 a year after 10 years. To make this much money you have to buy 3 to 4 properties a year for ten years. This can be very difficult to carry out for many people, but it is possible with hard work, a budget and being willing to act fast. Even if you can only afford one property a year for ten years, that can equal $75,000 to $100,000 a year in passive income. How long would you have to invest in the stock market to generate $100,000 a year?

One of the reasons I can achieve these income figures is my current rentals all make at least 15% cash on cash returns. Those returns do no include appreciation, equity pay down or tax savings. Check out my complete guide on investing in long-term rental properties to get more information on how I buy properties, how I finance them and numbers on my rentals.

Rental properties help you avoid penny-pinching in retirement

Most retirement blogs are based on living frugally and making money last. Personally, I want to buy as many rentals as possible to be able to retire as early as possible with as much passive income as possible. I don’t want to penny pinch and worry about what I can afford. I want to be happy and be able to afford whatever I want for my family and myself. I hope this blog can help you get that as well. Remember, the key to early retirement is investing in rental properties. Here is another article that goes into even more details why rental properties are a better investment than the stock market.

Conclusion

Rental properties are one of the best tools for early retirement because of the passive income they provide. I have bought many more properties since writing this article and I now have over $12,000 a month in passive income from my rentals. That money will increase as I get older. I could retire now, but I have too much fun with real estate.

For more information on how to buy the best rentals which will make the most money, check out my book: Build a Rental Property Empire: The no-nonsense book on finding deals, financing the right way, and managing wisely. The book is 374 pages long, comes in paperback, audiobook, or as an eBook and is an Amazon best-seller.

This post may contain affiliate links and I may be compensated if you make a purchase after clicking on my links.

23 Comments

  1. Peter D. June 23, 2015
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