Are you familiar with the FIRE movement?
(Oh no, did I just call it a “movement”? That sounds cheesy and political. Let's start again.)
Are you familiar with the acronym FIRE?
There is a small but growing minority of people, myself included, who don’t want to depend on a 9 to 5 job for income, and our goal is to achieve financial independence and retire early (FIRE).
And we're not talking about retiring in 25 years instead of 40. We're talking about retiring within 5-10 years, regardless of age.
Sound impossible? Not at all. Take a look at Kevin and Ashley Thompson, a married couple who retired before they were 30 by investing in rental properties.
But it takes determination. If it were easy, everyone would work for five years, yawn, and say, “Ok, that was fun for a while, now I'm going to retire to the beach.”
Here are 5 essentials for achieving FIRE through real estate (though some apply to FIRE in general): This is in preparation for my upcoming live masterclass on Real Estate FIRE Escape: What It Takes to Retire in 5 Years in a Rental Home (yes, reserve your seat before it fills up!).
Real estate investment strategies to achieve FIRE
You may be yearning for fundamentals right now, but hold that thought for a second. Let's start by discussing investment strategy. Trust me, you're going to want to hear this.
There are many strategies to choose from, but they should be in tune with what you're aiming for, how much risk you can tolerate, and the cash you have on hand. The go-to method for beginners is house hacking and long-term rentals. Once you've gained enough experience, you might want to level up to a large apartment complex, for example, now that your wallet is thicker than ever.
By the way, below are some investment strategies you can implement to achieve FIRE through real estate.
Strategy Descriptions House Hacking Buy a multi-unit property, live in one unit and rent out the others to cover expenses. Long Term Rentals Buy properties in areas with high rental demand and focus on cash flow. Short Term Rentals / Vacation Rentals Buy properties in tourist destinations and rent them out on platforms like Airbnb or VRBO. BRRRR Method Buy a distressed property, renovate it, rent it out, refinance and repeat the process to scale. Property Syndication Pool money with other investors to buy larger, higher quality assets. Real Estate Investment Trusts (REITs) Pool money with other investors to buy larger, higher quality assets. Live-In Flip Buy a property, live in it while you renovate it, and sell it tax-free for a profit.
Remember: start small, learn the ropes, and before you know it, you’ll see better, more profitable real estate opportunities.
The 5 Fundamentals of FIRE
Now let’s take a look at the basics of achieving FIRE through real estate investing.
1. Set a FIRE date
By when do you want to retire?
Or, more precisely, by when do you want to achieve financial independence?
There is a difference between the two. Financial independence (FI in personal finance parlance) means being able to pay your bills solely with passive income from rentals and other investments. Many people who reach FI choose to continue working because they love their job or want to continue to grow their passive income to better live in retirement.
So, what is your goal FIRE date?
You can tweak it later, but for now, set a date that you think is a bit ambitious but achievable. Work backwards from here to calculate what it will take to get there. (Use our free FIRE calculator to try out your personal numbers for financial independence and early retirement.)
And it's up to you whether you're willing to put in the effort.
2. The speed at which you achieve FIRE depends on your savings rate
If you save only 5% of your income, like the typical American family, you'll likely work for 40 years before retiring.
It seems like a typical American family.
If you were to live on half your income and invest the other half (or more), your financial situation would be dramatically different.
Don’t get me wrong, retiring within 5-10 years is not “normal” or “ordinary” – extraordinary results require extraordinary measures.
If you can house hack and live for free, that helps. It doesn't even have to be a multifamily home. Look at our co-founder, Deni, she's house hacking single-family homes in the suburbs to house foreign exchange students.
Think of it as attacking the problem from both sides: you’ll end up investing more money each month, making it much easier to hit your minimum FIRE income.
In other words, you'll be able to pay your bills much faster with passive income.
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