Want to Retire Early? Invest in Real Estate
Ok, who doesn’t dream of early retirement? There may be a few workaholics out there who won’t know what to do with themselves when they stop working, but for the rest of us, having no boss and wide-open days to fill how we want sounds pretty amazing.
And why wait until you’re 65 to do it? The whole point of early retirement is to do it when you’re young and healthy! But if you stick with your 9 to 5 and go through all the motions of a traditional career, your chances of early retirement are much lower – which is why you need a non-traditional method for securing your escape from the daily grind.
That’s where real estate investing comes in. While many of us have made some progress at saving for retirement through 401k’s, IRAs or stocks, these aren’t usually going to make the kind of gains you need to retire early – but real estate can. There are also a few distinct advantages that real estate has to offer over other investment vehicles, and these are extremely beneficial in helping you achieve your dream of early retirement.
When you use a buy-and-hold strategy for real estate investing, you’re setting yourself up for long-term, reliable income in the form of rent payments. Not only is this dependability something that many of us need just for our own peace of mind, the amount made each month off rental properties is usually much more than what you’d get in stock dividends. In fact, a recent calculation in a BiggerPockets post showed the income yielded from a $500k real estate investment was several percentage points higher than what you’d see with S&P index funds or a 10-year treasury bond, and that translates to a difference of tens of thousands of dollars. It’s much easier to retire early when you’re making that kind of passive income.
Real estate investing also offers up a number of unique tax benefits that you won’t find with other investments. A few of these advantages include: depreciation, lower capital gains tax, 1031 Exchanges, no self-employment tax, and a few other notable deductions as well. The end result of this? A lot more money in your pocket so you can save for that early retirement, and then enjoy it even more when it happens. Be sure and connect with a great accountant when you do start investing, and one who understands the ins and outs of real estate tax benefits.
Control Over the Investment
Finally, real estate investing offers control that virtually no other asset can. With real estate, you’re in charge of the asset, making the decisions and calling the shots. You choose the market, you choose the property, you choose the tenants. You can also do things like force appreciation through improvements and set higher rents by adding some upgraded features. With index funds, you don’t have this level of control. The only thing you can do is pick which stocks to invest in and decide when to sell them. Real estate allows you to really dig in and and gets your hands dirty (literally, if you want to). You have power and influence that you won’t get with any other type of asset, and it’s this control that will enable you to make the kind of money you need for early retirement.