I am a strong believer that the best way to retire rich and early is to invest in real estate. I prefer to invest in long-term rentals to provide me with constant passive income. I also fix and flip homes to provide short-term income in order to buy more long-term rental properties. I have 16 long-term rentals and I have a big goal of purchasing 100 rental properties by 2023. I have fix and flipped over 100 homes in the last ten years and I also sell real estate as well! I have learned how to buy properties cheap, how to maximize profit potential and how to finance multiple properties. I discuss many of my strategies on InvestFourMore.com and I also have written 5 books on real estate.
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Cash flow from rental properties helps you retire rich and early
The biggest problem I had with most methods of investing money is they depend on the capital investment growing. If you invest $100,000 in the stock market, you make your money by those stocks going up and your investment increasing. That $100,000 is not actively producing income, unless you sell the stocks and then your investment is no longer an investment. There are stocks that provide dividends, but most of the returns on those dividends are extremely small. Rental properties will usually take an initial investment to purchase as well, but they also provide cash flow every month. If the value of my properties goes down, my net worth may go down, but I am still collecting cash every month. If my property values go up, my net worth goes up as well and I am collecting cash flow. My investment does not have to appreciate in order to see high returns.
Why rental properties are a better retirement choice than the stock market
I won’t go into the entire discussion about why rental properties are better than the stock market, but I will touch on the most important reasons.
- Rental properties can be purchased below market value
If you want to buy a stock, you have to pay market value and everyone pays the same price at any given time. With real estate you can buy properties below market value in a number of ways. I can buy REOs, short sales, estate sales, homes that need work, homes that are rented below market rent and off market properties all below market value. I like to buy properties at least 15 percent below market value and by doing that I sometimes make 100% returns on my money as soon as I buy the home. I write much more about buying property below market in my book: How to Buy Real Estate Below Market Value.
- You can leverage rental property purchases with other people’s money
When I buy rental properties I do not pay cash, I get a loan. This allows me to buy more properties, which increases all the benefits of rental properties; appreciation, cash flow, tax benefits and equity pay down. You can buy stocks on margin, but those margins can be called in if a stock price drops too low and you cannot leverage as much as you can with rental properties. Many people worry about getting multiple loans on investment properties since some banks will tell you that you can’t have more than four loans. Don’t believe those banks! I talk more about how to get loans on more than 4, 10 or even 100 rental properties in my book How to Get Financing on Multiple Investment Properties.
- You don’t have to guess when you are going to die in a retirement calculator with rental properties
If you have used a retirement calculator that tells you how much money you have to save to retire; it will ask you to enter how long you will live. The reason the stock market calculators do this is because at the end of your life your retirement is eating away at your principal investment. You are using the money you saved to live on with the stock market instead of the returns that money is producing. With rental properties the cash flow is what you live on, not the money you used to buy those properties. You don’t have to sell your rental properties at the end of your life because they are producing enough income to live on.
- Aren’t stocks more liquid than rental properties?
Yes, technically stocks can be sold much quicker than a rental property and with smaller commissions and costs. However, you don’t have to sell your rental properties to take cash out of them. You can refinance your rental properties or take out a line of credit on them to take out cash. The awesome thing about refinancing is you can take cash out tax-free and still own the rental property. If you bought the property right, then you can still cash flow as well!
Check out my books on Amazon
You can also check out all of my other books at my Amazon Author page here.