Well, Hell! Who Wouldn’t Want to Retire Young?- Part Three

Note: This is Part Three in a series about how we managed to retire in our early 30s. You can find Part One here. You can follow me on Instagram to see what we are up to now!

After buying two rental properties in quick succession– the culmination of several years of saving and a fortuitous stock sale— I had a nice steady stream of passive income to put toward our goal of retiring early. It wasn’t enough to live off of, but the potential was there. When I was searching for those newest rental properties there were so many opportunities: tiny little houses for next to nothing, and some of them were already rented! There was just one teeny tiny little problem.

I’d spent all our money. 

Whoops.

Not one to let a little thing like that get in the way of a good idea, I put my thinking cap on. We have always maintained excellent credit, but the houses I wanted to buy were too inexpensive or needed too much work to qualify for a traditional mortgage. Investment loans generally require a 20-25% down payment (which I didn’t have) and wouldn’t be appropriate for the little houses I was looking for anyway. I could see that the improvement in the local economy (this was early 2015) was leading to the inevitable rise in home prices, and I didn’t want to miss out on my chance to buy more rentals at incredibly low prices.

I realized that the little house we’d downsized into at the beginning of this process had been climbing in value the whole time, and was now worth nearly double what we paid for it! I had no interest in selling, but I knew there had to be some lending options available to me. I went to the local credit union and opened a home equity line of credit (HELOC).  Because I was borrowing against our residence, it was a relatively simple process. I felt comfortable doing this for a few reasons:

1. Our mortgage payment on our little house  was initially really low, so adding in the payment from the HELOC was not a financial burden.

Even if we somehow managed to spend the money we borrowed without making any money off of it, we would still be able to make the mortgage and HELOC payment easily.

2. I knew we would easily make the money back from the rentals.

Because I had already bought two rental properties and felt comfortable with the process, I had a good idea of what I wanted to buy and the return I would earn from them. Because of the tremendous rate of return from my rinky-dink little houses, I couldn’t come up with a scenario where we lost money.

3. I wasn’t borrowing money for fun, but as an investment.

This was more of a moral argument I made with myself. I have always been wary of acquiring debt, but this was an investment, not frivolity, dammit!

Moral high ground (and funds) safely claimed, I went a-hunting. With the $60k I borrowed against the value of our home (plus a little more I’d managed to save in the few months I was filling out paperwork and looking for houses), I was able to buy three more rentals.

  • Gastonia, NC: (2bed/1bath, 750sqft) $13k purchase price+ $7k repairs. Rents for $500/mo
  • Rock Hill, SC: (2bed/1bath, 800sqft) $26k+ $4k repairs. Rents for $650/mo
  • Gastonia, NC: (3beds/2baths, 1200sqft) $16k+$25k repairs (this one was in bad shape). Rents for $800/mo

So– to clarify– I turned a HELOC with a $400 monthly payment into nearly $2000 monthly rental income. The rent from the smallest, cheapest house I bought covers the payment all by itself!

So by the end of 2015 we were up to six rental properties and I had more than replaced my paltry teaching income. It was time to start gearing up for the final phase of my plan: world domination. (Or, buying a few more properties so my husband could quit his job and start traveling.)

Retirement sunset, ahhh!
Much better than working!

8 Comments

  1. Thank you for sharing ACTUAL NUMBERS! So many people are understandably worried about doing so, but it really helps take these concepts out of the clouds and into plausible and personalized realities. I don’t know what the market looks like where I am yet (and all prices and numbers will be different, I know) but now I have a better idea of the framework you used. AWESOMENESS.

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    1. I’m glad you find it useful! Home prices have definitely gone up around Charlotte since then, for sure, but I know there are markets that have the same potential. We still plan on buying more (albeit at a slower pace than before)!

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  2. You are lucky to live somewhere that property is cheap. We live in Canada and we dream of doing exactly what you have done but it is simply impossible. There are cheaper areas than ours but absolutely nowhere that a house can be acquired for as little as you paid. I am a teacher and I am very well paid (especially compared to my US counterparts) but I have also fallen out of love with the system. Congratulations on your escape and your dream!

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    1. We absolutely lucked out with location as well as timing! We happened to have a little money to spend when prices were still low. Prices are still relatively low in the areas where my rentals are, but as the market there improves, I will probably look into buying turn-key rentals farther away in order to find houses that fit my criteria.

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  3. I stumbled upon your blog and was surprised at how similar our paths seems to be. We are a family of three and made some drastic lifestyle changes to become boss-free landlords. We are unschool newbies and we also just returned from a couple weeks in Paris, which we hope will be a couple of months next time.

    I am from Canada and, though different than the US, it’s not impossible to find decent, affordable investment housing here — our latest property was purchased for $75,000, we put in $3K and it now rents for $950. So, yes, more than what you paid, but the rent covers the mortgage payment, taxes, and maintenance with some to spare. Positive cashflow!

    I normally keep all this to myself because people can be judgmental about living counter to societal norms, like having a 9-5 job, two cars, and a house full of things. That’s cool, if you want that, but I’d rather have the freedom to travel and enjoy time with my family. Thanks for being so open about your experience.

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    1. I can’t believe how similar we are! I completely agree about not telling anyone; we’ve been working on this plan for years and barely anyone knew until my husband quit his job a couple of months ago. We get a lot of comments about being lucky, and we are to some extent, but I could sell my whole real estate portfolio and barely be able to buy the homes of many of our friends and acquaintances. People get weird when you choose a different path, but that’s their problem! Enjoy your travels!

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    2. Its great to hear your stories about breaking out of the standard system and living the life you enjoy. Thank you for sharing.

      I also live in Canada and have a couple rental properties but the purchase prices are way higher. Can I ask where about in Canada you live?

      Thanks!

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