How to Retire Early
Today we’re going to be talking about one of my favourite topics which is “How do you retire early?” I want to talk about society’s game plan that they’ve laid out for us. Because in general, we have a society that says get good grades, if you get good grades you can go to college, graduate college, go get a job, work for somebody else for 40 years, throw money in a 401(k), IRA and here’s my question for you, “What are the net results of that game plan for the average American?” Well I’ll tell you right now that our government post statistics from the Social Security board that say that the majority of us at age 65 at retirement, have very little. In fact, the average American saves about $55,000 versus what they actually need to support a retirement where their same standard of living that they’ve been used to can at least still be there versus getting reduced in half or down to 1/3 or even less.
If we really want to get to the bottom of how to retire early, we have to understand how wealth is created, where it’s created. And there’s a study that was recently done by Oxfam international,
I want to share with you just a few of the statistics.
- 85% of the people have as much money as the bottom half of the world’s population.
- The richest 1% has amassed about 46% of the world’s wealth which is about $110 trillion.
- The top 1% has 65 times the total wealth of the bottom half of the world’s population.
- The percentage of income gap by the richest 1% in the US has grown nearly 150% over the last 30 years.
- The top 1% of wage earning households in the US, brings in about $1.2 million per year, that’s 41 times as much as the average income for all wage earners who bring in, in our country about $40,000 per year.
So why do I share all that with you? It’s because the world’s wealthiest all have something in common and I promise you it’s not go to college, get good grades, work for somebody else, make them money, retire poor and die.
So speaking about early retirement, I retired when I was 26 years old through real estate and that was just a year out of graduating college. How it happened was kind of weird for me because I went to college because I wanted to be a doctor, and at some point in my sophomore year I got sick and tired , so I kind of gave up on that dream. With the help of my first 3 mentors in real estate, I was reading books, gobbling up everything that I could. Now the first house that I bought was no ordinary house. It was $40,000 below the market. It was bought with a basement apartment that once I moved in and rented out would cover my entire mortgage. And 12 months later I was able to take some of that $40,000 equity and I was able to move it into a second property. My second property became my third, my fourth and it just kind of kept on growing I had about 25 properties by the time I turned 26. My portfolio was doubling each and every year and now I own a lot of paid off real estate.
Here’s the cool thing about real estate, it can compound. Now I’m not talking about your traditional 30 year strategy; buy a house, put in a renter, and be on a 30 year mortgage or maybe an accelerated mortgage and then 15, 20, 30 years the house is finally paid off. I don’t like that strategy one, because I don’t like 30 year game plans, because if things slow down all of sudden I miss my chance at retirement when I’m actually hitting that retirement age, or maybe you haven’t started young enough
Real Estate “Compound”
What I like to do in real estate is I like to compound it. I don’t buy and hold, I buy and trade,I’m constantly trading. If I buy a house, within a few short years, I should be able to trade it for more real estate. Here’s what I love about real estate, if I do it correctly I can take that one home and I can turn that into 2, because I buy it with equity, I buy it with cash flow and there’s always a plan. I’m never buying haphazard real estate and I’m never buying a home with this stupid 30 year plan saying “Hey I’m just going to keep on paying this down and let someone else pay the mortgage off,” meanwhile I get 5, 6, 7 years here and I start getting the depreciation declines on my returns and the diminishing returns equal I got to dump 10,000 or $20,000 back in that house anyway. If I can buy that one house correctly, with that equity like I did on my first house, I’m now going to take that equity and let it season and take 6-12 months, I’m going to turn that into my second house.
Now if it worked one time this is the power of one, then why not 2? Why not 5? Why not 10? Well my intention with those two homes is to turn them into four homes because cash flow on four homes is way more tasty than cash flow on one. If I can take 4 homes and turn them into 10 and 10 into 20, and ultimately what do I do at retirement? I’m going to sell off all these leverage properties, 1031 exchange to avoid taxes and I’m going to roll them all into a pile of paid off homes, paying for me a retirement that I can control.
Why I say at an early age? I believe that most people depending on where you’re starting can actually retire inside of a 5 or a 10 year period of time given the right plan. In comparison yes, real estate can give you more equity, more cash flow, more tax advantage, and more.
In the stock market you’ve got to be worth well over a million dollars if you want to have a very basic retirement without touching the principle and just living off the interest. In real estate who cares what your net worth is? That’s not what you’re focusing on, what you’re focusing on is the ‘what’. That’s right, it’s the cash flow. It’s the residual income. It’s like yeah maybe I am worth a half million, maybe I’m more 3 million, but frankly do I have enough money residually that just rolls in from my real estate that covers all my expenses? And here’s what I find. I find that what you can do in 30 or 40, 50, 60 years in the stock market is achievable inside of 10 years with real estate.
Real estate done right can not only produce all these amazing advantages but it can be a huge accelerator which is in my opinion what most people in this country need. With that, thank you so much for watching our video today.