By Jennifer Frost
Nearly a quarter of Americans retire before the age of 55. These days, ‘retirement’ does not necessarily mean not working or earning an income, but rather living day-to-day life doing things for enjoyment, perhaps generating a passive income instead of ‘actively’ earning money. Being savvy with property can be a great option in this respect. However, you will need to save a lot of money – in the case of investing in new properties, a 30% down payment. This means working hard in order to reap the benefits. Not only should you therefore do what you can to stay healthy in later life, but it is also important to plan your passive income as soon as possible to help you achieve early financial independence.
Downsize your property
It goes without saying that you need to make sure you have sufficiently prepared for retirement by crunching the numbers. Depending on your financial situation, you might want to downsize your own home – something that 42% of Americans choose to do. As long as you move to an area that is less expensive, this can mean paying off your mortgage straight away, or shortening your mortgage term by at least a decade, reducing your personal living costs in the process. This allows you to either live on the nest egg that you have accumulated (if applicable), or work far fewer hours doing something that you (hopefully) enjoy.
Invest in rental property
Investing money into rental property (for example, using the money gained from downsizing) can help you on your path to an early retirement. This has proved to be a very successful source of income for many people, including (now famous) Canadian blogger Peter Adeney, who earns $25,000 a year from one rental property alone. When starting out, you can achieve at least a 10% return on investment. The key is to do your research on properties. Factors worth prioritizing are the location of the property and its consequent appeal to potential renters. This will increase the likelihood of you having long-term tenants, resulting in you have a steady passive income. It is also worth bearing in mind how much updating the property will need; all this will of course mean more upfront costs, which you will need to cover before renting out the property.
The key to early retirement may lie within your own four walls
Depending on how you view retirement, reaching a point of financial independence is probably a lot more achievable than you might think. By knowing your numbers inside out and doing your homework on which types of rental properties can be the most profitable, you could find yourself in a relatively comfortable situation financially. Regardless of how much or little you want to ‘work’ during retirement, you will need to make sure you save as much as you can initially, probably cutting back on certain luxuries while doing so, and then investing your money very wisely. The careful planning can, quite literally, pay off.
