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The path to early (Age 57) retirement; long-term rental properties



I have been extremely passionate about personal finance for the past 7 years. In 2014, I started doing a ton of reading and finally started my Roth IRA. Shortly after, personal finance became a passion that I can’t seem to ignore. Today, I do everything I can to learn as much as possible. I don’t accept financial mediocrity in any way. If there is a way to squeeze out an extra $100 per month in income, I’ll work to find it. So, after plenty of roads traveled, I have landed on long-term rental properties as my next venture. With that said, I can’t continue on without crediting AJ with giving me the extra push to overcome my “analysis paralysis” as they call it. That’s enough background, let’s get into it.

Where I started

Once I decided that I wanted to do this I needed to start crunching the numbers. I knew I couldn’t jump in blind, so I needed to learn everything I could about the local real estate (RE) and rental market, as well as rental investing in general. I started studying home prices, rent prices, and everything in between. I learned everything I could about operating costs, depreciation, capital expenses, deductions, etc. I also knew that I needed to clearly define my goals in RE investing. After some thought, I decided that I wanted a blend of cash flow and appreciation. Essentially, I would be willing to give up a little bit of one for a little more of the other. If appreciation was slow, I’d be okay with that if the cash flow was high, and vice versa. Clearly defining your goals and expectations will make this a less stressful endeavor. DISCLAIMER – in no way do I intend to “get rich quick” by purchasing long-term rental properties – I’m in this for the long game, please don’t forget that.

After weeks of intense research, I realized that I needed to do two things to make this a reality – get a pre-approval from a lender (you should always buy investment properties with mortgages vice cash, and we’ll talk more about this in a future article!) and have a real estate agent start searching for properties that fit our long term goals. In this case, the RE agent part was easy, as I have a good friend who also used to be my neighbor that recently became an agent. Coincidentally, she also manages the rental properties for her brokerage – two birds with one stone! Shortly after we went under contract she was awarded the coveted ‘Rookie of the Year’ award at the local RE banquet. Couldn’t be happier for her!

The lending aspect was a little tougher as my normal lender was charging insane fees on investment properties, which immediately eliminated her. You’ll quickly learn that a mortgage lender may be competitive on one product, such as VA loans, but not quite as good at others. To expand my options, I actually started looking at real estate company websites in my area and sure enough, one of them had a list of “preferred” lenders. I contacted all of them, and in turn, found a great lender with good terms! Within days I had a pre-approval and was ready to shop. I fully intend to use this lender again in the near future.

The search for “the first one”

One advantage I had during my search is the fact that I’ve lived in this area for the better part of 15 years. I have owned multiple properties here and know which neighborhoods were good and bad, which ones had the most renters, and had the highest appreciation rates/growth. The hardest part of the search, in today’s market at least, is finding properties where the numbers work. My agent spent weeks sending us various rental prospects in order to find ones that met our requirements.

We had looked at a few properties when we decided to place an offer on a single family home for $147k. This offer was quickly accepted and we moved on to the inspection phase. Our inspector subsequently identified several issues with the home – some of which were concerning the roof and HVAC unit, which can be costly. We asked the seller to resolve them. Several days later we still didn’t have a response. Around the same time, my wife found a duplex for sale while browsing Realtor.com in bed one evening. We immediately called our agent and discussed the property. We submitted an offer which exceeded the list price that evening without even seeing the property. Sometimes, the numbers are JUST THAT GOOD! The seller accepted our offer and we moved on to the inspection phase, yet again. This time, everything was perfect. Note that once we went under contract on the duplex we terminated the contract on the single family home, which was still in due diligence. Yes, contrary to popular belief, you can absolutely be under contract on more than one home simultaneously. For us, the only expense we incurred by doing this was an extra $275 home inspection fee.

What are these numbers you speak of?

People have different ways of evaluating rental properties. Honestly, several methods are correct and it largely depends on your personal goals for the property. For the sake of this article, I’m only going to talk about the numbers I use to evaluate a property.

I’m looking for a cash-on-cash return of 10%+. This refers to the annual return on my initial cash investment. For this property, the purchase price was $165k and my total cash outlay was about $44k. This brings my cash-on-cash return to around 15%. This is well above my 10% threshold. If I have low vacancy and maintenance costs for the year, this could be upward of 20%! Take a look at my final numbers using the ‘CDS Rental Calculator’ below, which you can download for yourself on Google Play or the App Store. The ‘CDS’ acronym stands for Chandler David Smith, a real estate investing guru, and clearly, the namesake behind the app. Check out Chandler and learn about his huge success on his personal website.

Other considerations

None of this is a one-size-fits-all approach, per se. There are a lot of different strategies that RE investors employ. For you, the primary goal may be property appreciation to pace inflation or maybe it’s to maximize cash flow. Either way, RE investing is a great way to realize your dreams and diversify while you’re at it.

Another huge consideration is where you are buying. In some growing cities with hot RE markets, you’ll be lucky to find a deal that will cash flow 5%, much less 10%. These cities are completely saturated with savvy RE investors and newcomers that are looking for the next deal. This makes it very difficult to successfully locate, analyze, and close a deal. For me, I’m going to continue investing in my local area as this is where most of my knowledge lies. I have also developed some small parcel subdivisions which has further increased my knowledge, but I’ll talk more about that at a later time.

Where am I now?

Now that you are mostly done reading this you probably think I have 12 properties by now and am making $15k a month in cash flow, right? Well, I’m not. In fact, I only closed 2 weeks ago and just received my first month of rent payments – YES! As far as long-term goals, I plan on having 10-15 rental units in the next 5-7 years. This could cash flow an estimated $65-100k per year on average after expenses. Who wouldn’t want an extra $100k? Come on.

But seriously, I’m just starting out in rental property investing which is why I felt that this article was so very important to write. Plenty of people are stuck analyzing deal after deal and need some inertia to get them moving. Hopefully this article can serve that purpose. Get that passive income, Idiot Nation!


  • D.C. Poc

    D.C. joined the Marine Corps right out of high school. When he left active duty after 5 years of service, he quickly earned a bachelors degree and an MBA. He got his first private sector job at a modest salary and quickly worked his way up through promotions. Once he started making decent money ($38k at the time), he quickly realized he needed to learn how to save for his future. After nearly ten years of research and application, he wants to share his knowledge and financial best practices so more people can become Wealthy Idiots!


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