To retire early you need passive income. There are tons of ways to start raking in the big bucks while lying drunk on a beach, but I am a one trick pony and can only tell you about what I know.
So, over the last eight years or so I bought up super cheap rental properties until we had enough cash coming in monthly that my husband was able to quit his job. I haven’t worked since I started staying home with my sweet widdle chubby babies in 2005. I consider myself more of a manager. A big picture person, you know? So that means we retired young– my husband was 34 and I was 33 when he finally quit– on one income and my incomparable ingenuity (and incredibly good luck).
We now have ten rental properties (or 11 units because one is a duplex) and a property manager who handles it all so we can generally laze around eating grapes and complaining about the peasants. I genuinely don’t know if I would have adopted this method of retiring young if we hadn’t lived near areas that offer a particular confluence of characteristics that make it possible (and advisable) to invest in rental properties.
So what the hell does that mean, Ashley?
They are cheap.
I mean really, really cheap. I’ve bought houses for $13k, $16k, $26k, etc. The most expensive one I bought was the duplex for $136k. You might not have homes at that price near you, but if you have money to invest, what’s stopping you from doing a little research to find places where you CAN buy at that price? The only problem is that there are places that are super cheap because no one wants to live there, which leads me to:
They are NEAR a growing, vibrant metro area.
We live in Charlotte, North Carolina, which is one of the fastest growing cities in the country. Tons of people move here every day, and some of them (and, frankly, the lower income people they displace) end up in surrounding towns like Gastonia, NC and Rock Hill, SC.
They have strong rental markets.
This means houses rent quickly and have a high rate of return versus a (potential) loan payment. You can snoop on Zillow or another similar app to see how long houses sit before they rent. You could chat with a potential property manager and see how long their properties are generally listed before renting. Ideally they get snatched up within a month.
The towns aren’t just riding the coattails of their bigger neighbors, but are making improvements in their own right.
New parks or cleaning up and revitalizing downtown areas: you want to look for an area that WAS economically depressed but is now on the upswing and taking advantage of it. I like to look for areas that have “Food Truck Fridays”, craft breweries, and adaptive reuse projects (I kid you not). That’s a big clue that young people want to live there.
Since I don’t have to do this it is entirely speculative on my part, but if I had to find an area to invest in remotely I would find a list of the fastest growing cities in the US and then spend some time online scouting out which of those cities had outlying areas with home prices I liked (don’t forget to factor in repairs). Then look at some rental listings in that area and decide if that return per month (minus the 8-10% that goes to the property manager and some wiggle room for vacancies and the unexpected) was what I was looking for.
The difficult part is finding that golden area that fits all the criteria: very cheap, experiencing growth, hopping rental market. Once you find that sweet spot you can just keep buying there. Take your time and see if your needs are being met. If not, take a step back and reevaluate. It’s not a race, killer.