He said: Retiring early is possible for all of us. Most people believe a large some of money must be saved in order to achieve this, and yes it helps. However another option, or an additional option, is to generate passive income from month to month. And by passive I mean you shouldn’t be working your ass off to earn the money. This money should be pretty consistent but we all know things happen and there may be a break in this income in any given month. That is where the large sum of money comes in, to supplement. So…. we have taken the first step to earn this passive income, we are moving. We are currently under contract for a new build, which is awesome, but S will hit on that in a minute. I’d rather talk about how we ended up in this situation.
Two years ago we bought our current home and we finally reached a point where we could purchase a rental as well, PASSIVE INCOME!!! Speaking of which I would really like to do a post on how kick ass rentals are! Anyway, I called our agent and let her know we were in the market for a rental that hovered around $100,000-$120,000. She pointed out it would cost less money out of our pocket to purchase another primary residence and rent out our current home, and with that we started home shopping!
Because I feel transparency is the only way for this blog to work I will talk numbers with you. We bought our home two years ago for $280,000 and it is now worth $350,000. In addition, the market is predicted to increase another 5% over the year, which means by the time we move the home should be worth almost $370,000. We currently owe $265,000, and are obviously still paying on it, which means we could walk away with $85,000 if we decided to sell our home when we move.
Based on historical indicators, we anticipate that the current housing market will crash within a few years. When this happens, many people will be upside down in their homes, and the foreclosure rate will skyrocket like it did in 2008. While that isn’t great news for the economy or the people who may lose their homes, having extra cash in that environment creates a lot of opportunities for investments in the real estate market. By turning the equity in our home into cash now and investing it elsewhere until the market crashes, we will be able to seize that opportunity when the time comes. In the end we are hoping to buy 2-3 homes with the $85,000 (plus return on any investments), but time will tell. Either way we are well on our way to generating that passive income! Everyone knows the old saying that says it takes money to make money. By saving now we will be prepared to take advantage of opportunities in the future.
All we have to do now is pack!
She said: The past couple of months have been crazy. It is an extremely strong seller’s market right now, and houses are literally selling in hours; if a house is on the market for more than a weekend something is really wrong with it (seriously, I could tell you some funny stories about houses we’ve seen, but that’s for another day). Every time a new house popped up on the market that we were interested in we had to drop everything, pack up the kids and go see it that day, or else it was gone. We made 4 offers; we were outbid twice, presented with a ridiculous counter offer on one, and actually went under contract on another until the inspection came back and we found out the house was literally crumbling around us. The problem was we were unmotivated buyers in a seller’s market, and we didn’t stand a chance.
During all of this we had a new build lot reserved that we liked but it wasn’t available for sale yet and they didn’t know when it would be, plus we were subject to price increases until we could go under contract. Finally after several weeks, they made our lot available and we got a house. I am so glad to be done house hunting, despite the fact that we were doing it as a financial decision it became difficult not to become emotionally invested when it’s our home where we’re raising our kids. However, we know God has us where he wants us and we’re thrilled to be buying a brand new, beautiful home with everything on our needs list and *almost* everything on our wants list as well.
One of the main reasons we chose the new build option, and the point of all my rambling about our house hunting adventure, is the appreciation. Since we have now locked in the price, by the time our home is built we will likely already have quite a bit of equity in the home due to an increase in the market. Not to mention, over time this house is going to appreciate more than some of the other homes we looked at and considered. And since our ultimate goal is to retire in 10 years, that appreciation will come in handy when we’re ready to sell and move to our forever home with EVERYTHING on our wants list.
We said: We are very excited to have taken our first step towards creating passive income. After all, it really is the key to an early retirement. While there are many different ways to generate passive income, we believe that real estate is one of the best options. Historically, it is a wise long-term investment with many avenues to grow wealth, and it has many tax advantages. Plus, there are multiple ways to invest depending on your financial situation and interests. Stay tuned for an upcoming post from an expert in the industry about the various ways to invest.