One of our all time most-read blog posts is How I can Retire Early Through Property Investing. And we get it. Everyone wants to retire early, but they don’t necessary know how to.
It is true though. You can earn the merit of early retirement through property investment – indeed, property investment is among the most effective means of securing financial freedom and an early retirement.
As the age-old saying goes: “There are numerous paths to success,” and this holds true for achieving retirement through property investment. Various strategies are suitable for different individuals, as people may have their preferences for different investment approaches.
In this post, we outline 4 common strategies to retire early through property investment.
1. Positive Cash Flow Properties
This approach involves acquiring a property that, from day one, generates more rental income than you spend on expenses. Instantaneously, your passive income increases, bringing you one step closer to retirement.
Even if the rent does not increase over time (though it typically does), you could still retire by steadily accumulating positively cash-flowing properties. Generally, as time goes by, your rental income will increase, allowing you to pay down your mortgage. Consequently, your total positive cash flow may exceed the cost of your lifestyle, solely based on a few properties.
If you’re wondering whether a property will deliver you the cash flows you need to retire early, we’ve built a simple, easy to use investment property cash flow calculator here. It’s free, easy to use, and shows the capital growth and cash flows you can generate for 10 years.
2. Buy and Hold for Capital Gains
In this strategy, you purchase properties primarily for capital appreciation. While you rent out these properties, they still incur monthly expenses.
The objective is for the properties to double in value every 7-10 years. Once you have acquired a sufficient number of properties and allowed them to appreciate adequately, you can rely on the accrued equity. You borrow against the property to generate your income and use your equity to cover the difference between your expenses and income.
As long as your property values continue to appreciate, you should possess ample equity to sustain your livelihood indefinitely. However, this approach relies on obtaining loans from financial institutions, and securing this financing after retirement can be challenging, so it’s advisable to thoroughly research this strategy.
3. Vendor Financing Sales
This method involves selling your property, but instead of receiving cash, you assume a loan with the buyer. Essentially, you provide the buyer with the mortgage for the house.
In return, the buyer pays you above the market rate for your property (resulting in profits), and they pay you higher-than-average interest rates (resulting in further gains). This can serve as an excellent way to generate passive income.
A property need not be in a rural area to achieve positive cash flow. If you employ vendor financing, you can apply this strategy to nearly any property.
Terms typically span 25 years, although they are often paid off prematurely, allowing you to reap your profits early. This strategy does require consistent property transactions but may entail far less effort than your current 9-5 job.
4. Utilising Your Superannuation for Investment
It is feasible to utilise your superannuation to invest in property. Self Managed Super Funds (SMSFs) enable you to manage your superannuation and invest it according to your preferences.
You can even leverage the property’s value to make investments. This approach is gaining popularity, and the associated tax benefits can accelerate the growth of your investment portfolio.
Read more about our thoughts on SMSF for property investment in this blog post.
Want to learn more? Book in a free consultation with our licensed property coaches here to learn more about retiring early through property investment.