Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

How To Retire By 40 With Real Estate

Written by JD Esajian

Have you heard of FIRE? Financial Independence, Retire Early (FIRE) is a movement that has taken the world by storm. It’s made up of twenty- and thirty-somethings who resolve to retire by 35 by achieving financial independence. Although there are many pathways and strategies to retire early, this guide will teach you how to retire by 40 (or 35 if you’re especially committed) through real estate.

What Do You Need Financially For Retirement?

The psychological science of goal-setting is powerful. Setting a goal gives us a clear picture of what we’re working towards and why. It also helps us select a measurable outcome to achieve. We can work backward and set smaller goals and milestones that are achievable in the short term. These will eventually contribute to the overarching goal in the long term, building our confidence and keeping us motivated along the way.

The concept of goal-setting can be applied to our retirement finances. What are your goals for retirement? Do you want to make sure that money never runs out? Do you wish to have passive income that covers all of your expenses? Do you want to own a couple of vacation houses in exotic locations?

No one can decide your goals for you, and there is no right way to accomplish them. However, we can look to the nation’s wealthiest individuals and mimic the habits that make them successful.

There is a reason why 90% of all millionaires invest in real estate.

Real estate investing is a proven method of generating wealth. It takes time, but it is reliable and offers a myriad of benefits. Real estate properties generally appreciate over time, even when accounting for the cyclical ebb and flow of the market. Further, investment properties can produce passive income and offer tax breaks and benefits. Last but not least, it’s the only type of investment that puts a literal roof over your head!

Be sure to check out our guide that compares real estate to traditional investment methods as a way to save for retirement.

Convinced that you’d like to use real estate as a modality to retire by 35? Follow the 8 tips below to learn how.

[ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]

Retire by 40

1. Establish Financial Security

If we were lucky, financial success started with the generation before us. If we had parents or mentors that taught us good money habits and how to avoid capitalist traps early in life, then maybe we started our journey on sure footing.

However, the vast majority of individuals don’t receive any financial literacy education growing up and fall into the trap of consumer debt early in life. We sign off on astronomical student loans without a concrete plan to pay them off and rack up credit card debt without understanding the consequences. Pretty soon, we’re struggling to make ends meet while drowning in debt.

Before you can begin working on attaining financial freedom for retirement, it’s time to establish financial security today. Most financial experts, such as Dave Ramsey, will recommend that you pay off your debt first and foremost. Although it may feel impossible, it can be done. It takes smart strategies and dedication.

Tackle debt with the highest interest rates first, such as consumer credit cards. Then, tackle debts such as your car loan and your mortgage. Your student loans should come last because they usually have low, fixed interest rates.

Tackling and controlling debt is key because your monthly minimum payments can eat up your cash flow. Further, you’ll only pay off interest while your principal amount remains untouched. Control your budget by cutting out unnecessary expenditures, refusing to take on more debt, and living below your means.

Here are some additional tips on how to get out of debt so that you can start investing.

2. Determine Essential Monthly Income

It may take years before you can visit step 2, but if you have arrived, congratulations. Due to your hard work and dedication, you’ve rid yourself of debt and can now focus on building.

Next, it’s time to determine your financial independence number, which also happens to be your monthly cash flow requirement.

How much money do you need on a monthly basis? This includes your bills and your living expenses. You might be pleasantly surprised and find that the number isn’t so scary. Most people can get by on minimal expenses once their debt is paid off. Be sure to factor in the lifestyle you want to live. Is it the one you’re used to, or do you plan to live minimally in retirement? Or perhaps you want to live it up in your golden years? There’s no right or wrong answer; you’ll just want to be honest with yourself so that you can come up with a realistic goal for financial independence.

This will be the number you will keep in mind as you set up your real estate portfolio. You’ll need to eventually generate rental cash flow (after expenses) to match your financial independence number. You’ll likely need to build your way up to a few investment properties to reach that number.

3. Create An Emergency Fund

There’s nothing like an emergency or other unexpected large expense that can throw off your financial goals.

Sudden job loss, natural disaster, or a serious illness are all examples of occurrences that can eat into your income. It’s safest to expect the unexpected and have a backup plan.

Any financial advisor will recommend that you set up a basic emergency fund. During your prime working years, plan on having a minimum of 3 months’ worth of expenses on hand. Eventually, work your way up to 6 months.

Before you retire, consider saving up to one years’ worth of expenses. (That is, if you plan to rely solely on your real estate income.) In case you have any personal emergencies, vacancies, or repairs that exceed your operational reserves, you’ll be covered. Just be sure to replenish your safety net as soon as you can.

4. Calculate Monthly Rental Income

Your monthly rental income is the total rent you bring in across your real estate portfolio.

You will notice that this number isn’t consistent on a month-to-month basis. Your expenses can fluctuate, and there may be months when you have to invest more into repairs and maintenance. Further, vacancies can really make a dent in your bottom line.

To get a reliable number for your budgeting purposes, take an average across your rental properties over the course of 12 months. This will give you enough of a spread to accurately predict your monthly income while controlling for fluctuations that are out of your control.

Figure in Taxes

Don’t forget to factor your tax liabilities into your monthly expenses. Work with a reliable tax professional, preferably someone who is experienced in working with rental property investors. They’ll help you maximize your business write-offs while minimizing your tax expenses as much as possible.

How to retire at 35

5. Invest In Buy & Hold Properties

To successfully retire early through real estate investing, it’s recommended that you take the buy-and-hold approach. This allows you to hold on to properties long-term while they appreciate in value, and rent them out to tenants to generate income as long as you wish. You always have the option of selling the property later on if it no longer makes sense to keep it in your portfolio.

The key to investing in buy-and-hold properties is location and quality. What type of renters do you want? What are the rental rates you desire?

To attract the right tenants and price point, you need to have the right type of property in the right location. For instance, if you want to attract middle-class families, you’ll want to buy in an area that offers good schools and solid employment opportunities. The home should also be the right size for a growing family.

Instead, let’s say that you prefer renting to retirees. It wouldn’t necessarily make sense to buy a starter apartment in the heart of an urban neighborhood. Instead, you might seek out a modest home in a safe retirement community.

Regardless of your preferences, you must always mind your due diligence, understand your ideal tenant, and select an investment that matches their needs.

6 . Keep Your Properties In Good Condition

It might seem like a no-brainer, but you must keep your investment properties in good condition. Successfully buying the property is a great beginning, but you must keep your tenants happy in the long-run.

Keeping your properties in tip-top shape is also in your best interest, as it will protect your property value.

Be sure to set aside a monthly budget for repairs and maintenance. Further, you’ll want to create an operating budget to make improvements to your property. Reinvesting in your property will help improve its value, but also its relevance can continue attracting quality tenants while bumping up your rental rate over time. The more you’re able to reinvest in your property, the more capital gains you’ll earn in the end.

7. Find The Right Tenants

The perfect complement to attracting the right tenants is finding the right tenants. When you hit the nail on the head in terms of choosing a property that meets the needs of your target market, you’ll find yourself sifting through a pool of applications.

Properly vetting these applications can be time-consuming but requires your vigilance. Make sure to pull credit reports, run background checks, call previous landlords and preferences, and inquire about employment and income. Anyone can make themselves look good on paper, so be sure to check their sources.

You can hire a rental property manager to handle this process for you.

Good tenants will pay rent on time and take care of the rental as if it were their own. By finding the right match, you can also have a long-term relationship, meaning that you don’t have to deal with turnover and vacancies as often.

8. Continue Building Your Portfolio

The key to finding success through real estate investing is to build your portfolio over time. Rarely is a new investor an overnight success. It takes time to buy your first property, earn enough cash flow, pay off the mortgage, and then eventually reinvest your profit into a second property, and so on.

However, with time and dedication, you’ll begin to learn from your mistakes and achieve economies of scale. Owning and managing rental properties will start to feel like second nature, and you’ll also develop your own techniques for maximizing your cash flow.

Be sure to stay organized, maintain your properties, keep your tenants happy, and reassess regularly to make sure you’re on track to achieving your goals.

By the time you retire, you’ll hopefully have a handful of successful rental property investments that provide you the cash flow you need to live your ideal lifestyle without having to work a regular 9 to 5.


Feeling like you don’t want to work your 9 to 5 anymore and wish you could retire early? Although it takes hard work and dedication, this goal is attainable if you decide to invest in real estate.

The majority of the world’s millionaires and billionaires invest in real estate, which gives us a clue that they’re on to something. Real estate has been proven to increase in value over time, despite ebbs and flows in the real estate market. This makes it a worthy investment and a reliable source of cash flow.

Many real estate investors have been able to retire by 35 by investing in a portfolio of rental properties that produce enough cash flow for them to live on. If others can do it, why wouldn’t you? Consider the 8 tips we shared today and assess if it’s a strategy you’d like to tackle!

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