How can I retire before I turn 40?

Question

Hello BP family,

I am 29 and in the process of acquiring my mothers Single family home. The current value of the home is listed at around 114-116k range. She will be turning it over to me (everything in my name, Deed, title, mortgage) with about 83k left on the house. It is pretty much a turn key property that I want to rent out as soon as I can claim ownership of the home. I will be acquring about 30k of equity and want to eventually use that to buy a second property and that's where I need some assistance.

What are some strategies I can use and/or implement to reach retirement strictly off of REI before age 40?

How can I go about properly obtaining my second property with 30K of equity?

What types of homes would you guys recommend buying?

I want to thank all you guys in advance for any advice thats provided.

Bill B. · Answer

It really does come down to what you can live on. I retired at 39 and I didn’t really start until I was 35. I bought one rental per yeat worth about $110-$130k with 25% down every other year as a straight rental and 10% down the other year as a primary and then moved. That means I needed about $20-$25k per year for purchases. I never made more than $60k but I lived on $30k and made it happen.

5 years later the rentals were producing $50k per year and I quit working. I still bought 1-2 houses per year and stopped at 13 with about $120k/year in income. I could have become bigger but the return to my lifestyle with more money was less and less. I still put in 3-4 hours per month dealing with the rentals but I ca put them in from the beach, a cruise ship, or wherever.

Now I’m just paying them off with the spare cash flow. Within 3-4 years I expect them to all be paid off, worth about $3 million and producing about $200k per year in income.

The market today isn’t as friendly to you as it was to me, but if it takes you twice as long, that’s still only 10 years. Plus I did it pre-bigger pockets and all the free awesome help you can get these days. And I didn’t try hard cause I liked my job.

Ps. If you’re single you might sell that SFR and try house hacking a local fourplex, I have a couple friends that started that way as it was easier to qualify and expand.

Anthony Gayden · Answer

The first thing I would do is figure out what kind of lifestyle you want to live. It's a lot easier to retire at 40 if you believe you can have the quality of life you desire with $20,000 a year.

Anthony Dooley · Answer

@AJ Harris if you are going to invest in Las Vegas, I don't see a clear path to reaching your retirement goal. The big question is, What do you mean by retirement? If you mean sitting around the house watching daytime television and not working, that is a really boring destination. My goal is to never retire from doing what I love to do, which is buy great income producing real estate.

What would the rental income be on a $115K house in your area? I hope you have a great income from your day job. Reduce consumer debt, increase your income, and buy fantastic deals that cash flow. This will get you to financial freedom, not your mom's house with $30K in equity.

Joshua D. · Answer

@AJ Harris

Sounds like you got a good goal and some vision as to how you want to get there.

My goal is to retire by about 40 as well and I am 30, so we are about in the same boat. I think you timeline is doable if you hustle like a crazy person you can retire on 60-70k a year.  This goal is not for the faint of heart!

I remember the first time I had equity in our duplex and I got on here and asked about the same question you are asking... “what do I do with the equity and cashflow for maximum growth? Sell? Leverage? Refi? 2nd morgtage? 1031?  Air b&b?  Buy multi? Buy SFR? Pay down the morgtage?... The options are limitless.

The responses I got from folks had about as much variety as the options. So I came to the following conclusion...

The scary/awesome thing is that at the end of the day NO ONE but you can awnser that question. That’s why this game is so fun, cuz you the boss.

I would recomend listening to EVERY BP podcast ever made. At the end of 250+ episodes you will have developed your own solid investing philosophy that will help guide you.

As far as a tactic to look at for maximum growth I (some random guy on the internet) would recomend maxing out on the BRRRRR strategy.

Figure out what works for you and go all in.

@steve b  brings up a good point about finding what you love to do and doing that now... don’t wait till your 40. However this journey to financial independence in 10 years is an adrenaline rush in and of itself. Enjoy all of it!

Josh Dillingham · Answer

@AJ Harris you may have $30k in equity but you likely will only be able to get refinance at 75% LTV which would be about $86K, so you would only be left with $6K after paying the original mortgage off.  You'd probably be better off helping your mom sell the house, avoiding capital gains, splitting the profit with her then using that money towards a down payment for the next property.  To be honest it doesn't sound like there is enough equity in this house to do to much with it.  that doesn't mean you can't achieve retirement by age 40.  Give us the answers to the questions that @Michael Plante asked and we could better help.

A simple path to Financial freedom is: Save 50% of your income, use your savings to invest in a multifamily property that cashflows and can allow you to force appreciation by rehabbing it.  use the forced appreciation to cash-out refinance.  Use the cash to by another multifamily. repeat.  AKA: Buy, Rehab, Rent, Refinance, Repeat.  BRRRR.  follow this model and in 10 years from now you can realistically own 20 units, cash flowing a total of $5,000 per month.

Josh Dillingham · Answer

@Anthony Gayden loved the podcast this week!  Awesome story, Congrats on all of your hard work and success!

How can I retire before I turn 40?

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