According to a recent study by Northwest Mutual, 15 percent of millennials expect to retire early, particularly those who were gainfully employed during the pandemic when they spent less and saved more while working remotely. Although younger workers may be ‘a little more optimistic,’ millennials are almost twice as likely to be considering early retirement as Gen Z and almost three times as likely as Gen X, according to the survey.
The new wave of younger workers trying to take early retirement are sometimes adherents of the F.I.R.E. movement: ‘Financial Independence, Retire Early.’ The goal is to save and invest aggressively—somewhere between 50 75% of your income—so you can retire in your 30s or 40s. But how many people can realistically save half to three quarters of their income?
To build a solid foundation for all of your financial goals, such as retiring young, living comfortably, pursuing new ventures, traveling, providing for your family, etc., how you invest your savings is essential to achieving your goals. One of the best ways to build long-term wealth is to invest in real estate, and you don’t have to be wealthy to get started. Through creative, informed investing, younger workers can pave a path to financial independence, hence early retirement, using the strategies below:
Be A Borrower
To start the process, you don’t need to put a 20 percent down payment on a home. While 20 percent will increase your chances of getting approved for a mortgage at a great rate, you can put down less depending on the type of mortgage. Government loans help first-time buyers become homeowners; in fact, an FHA loan requires as little as 3.5% down. So, if you find a good property with investment potential, there’s a good chance you do not need a huge savings account to buy it.
Live For Free by House Hacking
To ensure your monthly income exceeds your monthly expenses, consider house hacking, which works whether you own a home or plan to buy a home. In either case, rent out one or more bedrooms so that your rental income covers the cost of your mortgage each month. In essence, you’ll be living mortgage-free in your own home while it builds equity.
Invest in a Rental Property
Another option is to invest in a rental property in order to increase your income. For instance, you could purchase a duplex or fourplex and rent out each of the units. Since you’d be renting out entire units rather than just rooms, your asking price can be a good deal higher. As long as the location is good, you would be making money each month by collecting more in rent than your monthly mortgage payment. Your rental property would be a steady source of passive income that builds equity; hence, your ROI will be significant when you sell it many years down the road.
If you are financially strapped and cannot afford even a small down payment on a property, consider partnering with someone in a mutually beneficial manner; that way, you can both reap the benefits of your combined down payment. This scenario means you will have lower upfront fees and you can divide landlord responsibilities once you start renting the property. Your mortgage will be covered by tenant payments every month, and if you buy a property in a good location, you will likely be earning additional monthly income. You’ll own the property jointly with a partner while building equity in it. Note that a trusted partner is absolutely essential to success.
These real estate investment strategies can help you achieve your financial goals, and ultimately, give you the freedom to retire early or pursue other interests, passions or business ventures, whatever they may be.
by Ryan Boykin, Atlas AZ