Take early retirement with actual property
Chad Carson was able to retire early in his mid to late 30s with real estate as the main investment option. He has written a book that describes his strategies.
Today's classic is being republished by The doctor on fire. You can see the original Here.
Today I'm sharing my review of "Coach" Chad Carson's first book on how to do it retire early with real estate as the primary investment vehicle.
It is primarily a guide, but it also serves as a kind of reminder as it reflects what he has done in his life. He started out in the real estate industry at the age of 22, postponing his dreams of medical school after injuries made an NFL career unlikely to pursue an entrepreneurship instead.
At first he was a "bird dog" for a real estate investor whom he had met through university, and shortly afterwards he became a real estate investor himself.
After about 15 years he was able to put almost anything on autopilot, and he and his family have explored the world, spent almost a year and a half in Ecuador, honing their Spanish and helping their daughters become truly bilingual.
Chad was kind enough to give me a copy of his first book, and it is available from Amazon from a cent under 10 US dollars for the Kindle version and currently under 16 US dollars for the paperback.
Personally, though I bought several housesI wasn't a big real estate investor. I have been a reluctant landlord in a few different situations after moving out, but when I analyze returns versus my investments these were certainly sub-optimal investments. Reading this 300-page book confirmed this suspicion for me.
Mr. Carson does a number of things in this book very well, and I have a few minor criticisms, but overall I found the book to be a great introduction to what it means to be financially independent and what real estate investing can be like is used in a variety of ways to achieve this goal.
Do what is important
This mantra is a consistent theme on his website and throughout the book. He realizes that what is important to him may be different from what is important to you or me, but it is important to understand what it is. Early retirement should not put individuals in a state of constant leisure activity, but rather enable them to spend more time doing things that are important to them.
"Sleep more. Relax in the morning. Sit on a rocking chair.
Learn something new. Be impractical. Explore.
Visit great places. Go on adventures. Hiking trails. Ride your bike again.
Pull the plug out of the matrix. Work you love Resist the system. Say “slide it “to the man.
Raise your own children. Play silly games. Help with homework. Spoil yours Grandchildren.
Plant a garden. Grow your own food. Eating healthy. Exercise.
Pursue your passions. Volunteers. Listen to people. Have an influence.
Take your cause forward. Create your art. Write your story.
Get off the 9-5 treadmill.
DO what matters! "
He also admits that, as The White Coat Investor would say, "retirement is mushy" and can mean different things to different people. There may still be some work left, there will definitely be some income, but once you have financial independence you can decide how to spend your time without having to focus on making more money.
Real estate versus investing in stocks and bonds
The author invests in both real estate and index funds and discusses how to achieve a state of financial independence through one or the other or both.
You probably know the 4% rule of thumb that a retiree will withdraw 4% of their original nest egg, withdrawals increase with inflation, and the chances of running out of money are very slim.
In Retire Early with Real Estate, Coach Carson shows how a successful real estate investor can expect better cash flow and potentially spend a larger amount in retirement than the investor who relies on the 4% rule.
For example, it's not uncommon for a fully paid property in the right market to see a cash-on-cash return of 6% to 8%. Ten homes bought for $ 100,000 each could generate $ 60,000 to $ 80,000 a year after all costs are met.
The same $ 1,000,000 invested in stocks and bonds may only give you an annual budget of $ 40,000 if you stick to the 4% rule.
The real estate investor also has the benefit of retaining ownership of the asset while the stock and bond investor may have to sell assets in a downward market. The mutual fund owner can also have a lot more cash than he or she started if he or she is not faced with crappy initial returns.
There is much more to this comparison. That's why the book is 300 pages long. The real estate path requires more work up front to find the right properties and tenants, and requires more paperwork and ongoing management, although much of it can of course be outsourced.
Put money in its place
I like the perspective Chad takes when he talks about the role of money in his life and where he wants it to be in yours.
It's not in the front and in the middle.
“My goal with the book is to help you get money back into place. And be Space is not at the center of all of your decisions. Instead, I would love your values, your friends and family, your personal goals, and your life goals to guide all of your decisions. “-Chad Carson
While this may not seem intuitive for a book that talks about investing, analyzing real estate strategy, carefully leveraging debt, and how much money to retire, it is a good reminder that money is a tool is. Nothing more, nothing less.
Figuring out the coin can help you spend time doing things that are more important than money. It is known that I say that Money is everything, but it is certainly not the only one. If you lose sight of this fact, you may never feel like you have it Enough.
While admittedly being frugal, the writer has the resources to spend more and realizes that people will make different choices. It makes it clear that what we spend tends to highlight what we value and that decisions need to be made.
“You can't have it all now. You have to choose. If you want to spend 100% of your income for things, you prioritize those things over everything else. If you want to save and invest a large portion of that income, it is you Choice towards freedom and Flexibility as soon as possible. There is no right or wrong here. There are only choices that connect with your ingrained values or not. "-Chad Carson
Real estate investment strategies
Yes, the book details a variety of actual ways an investor can use real estate to generate the income necessary to retire decades earlier than usual. The author invested only in real estate until his most recent entrepreneurial activities which include this book, website, and course.
Open the book and learn about beginning techniques, which include this House hacking plan, the Live-in-Then-Rent-Plan, the Live-In-Flip-Plan and the BRRRR-Plan (Buy-Remodel-Refinance-Rent-Repeat).
For those who are still in their wealth creation phase, he outlines the rental debt snowball plan, purchase and hold plan, and trade-up plan.
Each plan is detailed, and easy-to-follow hypotheses are outlined with numbers in paragraphs, tables, and sometimes chart diagrams.
Scattered throughout the text are the real-life stories of successful real estate investors who have used some or all of the above plans to achieve or approach financial independence, and most of them fairly early in life. There are a total of 20 of these investor profiles, some of which are from names you may know in the personal finance blogging community.
Chad does not ignore the disadvantages of real estate investments. He fought his way through the real estate crisis ten years ago, introducing a real estate investor who at the time was in big trouble and divorced and filed for Chapter 11 bankruptcy in the middle of the great recession.
No book is perfect
For one, he talks about writing most of this book in Ecuador, but I don't think I saw a single picture from the beautiful country. Fortunately, he has a website and a Twitter account where he shares great photos.
A two year stay?
Excuse the soccer pun, but the All-American dropped the ball a little while talking about doctors. He says, “Most doctors study at least 10 years before they get a high income. You will spend four years at a university, four years at medical school and two years at a residency. "
This is more of a criticism of me as I have had my copy since June and if I hadn't put it off for so long I might have told him to change it to "three or more years later" residency "and maybe mentioned it that an optional grant is under way, but it is far too late for the publisher to make that correction in the first edition.
Income versus Total Return
At one point, a 7% return from real estate investments is compared to a dividend of 1.82% from the S&P 500. If you just look at income and ignore total return, this seems like much better business.
What Chad knows but didn't really include in the book is the fact that U.S. stocks have seen more capital appreciation than real estate, which is rarely much better, in the long run, than keeping up with inflation.
Massive tax burden?
In a section that has little or nothing to do with real estate, Chad compares investing in a tax-deferred IRA to investing in an unqualified, taxable brokerage account.
I agree that tax privileged accounts should be used to the maximum, but the taxable account is really being changed at short notice here. In his example, an investment of $ 10,000 per year in a tax deferred retirement account that returns a generous 10% per year results in $ 1,644,940, while the yield on a taxable account is subject to a combined state and federal tax rate of 30% and only on $ 944,608 or about 43% less.
That's a big difference, but to quote the lady in the Geico commercials: "It doesn't work that way. It doesn't work that way!"
Invested in a tax-efficient manner, for example in the S&P 500 fund with a dividend of 1.82%, the only potentially taxable part of this dividend would be as long as the investor does not sell any shares.
If the investor has taxable income that pushes them out of the lower tax brackets, where that dividend would be in the qualifying dividend bracket of 0%, the dividend could be taxed at a rate of around 15% to 35% depending on the state and total amount be income, but more often on the lower end of that spectrum.
The tax burden would be around 20 to 25% or 1.82% or 0.4% per year. Using my compound interest calculatorUsing monthly investments and compounding (which is more typical for real investment behavior), after 30 years I get $ 1,975,423 for the tax deferred account and $ 1,813,962 for the taxable account, a difference of 8th%. However, that difference could be zero if the investor has taxable income of an average American household.
While the tax-deferred investment benefited from an initial tax deferral, a significant portion of that benefit is likely to be recaptured upon deduction through income tax. Conversely, the taxable account is made up of after-tax funds, and it is entirely possible that an early retiree could fall back on this account for decades without incurring additional taxes.
While no book is perfect, this book is an excellent introduction to the myriad of ways real estate can be used to achieve the goal of early financial independence or early retirement.
In addition to the strategies above, the book also goes into banknote investing. Crowdfunding and other syndicated investments to look for in investment property and more.
Additionally, Chad Carson takes a holistic approach to life and money. More than just a real estate textbook, this is a book of practical advice and philosophies that should guide an investor's behavior.
I will refer to the author by my first name for most of my review because I consider Chad a friend. We have been in communication the entire time he wrote this book and recently shared some high quality craft beers around the campfire in Minnesota late into the evening. I may or may not have thrown pallets on this FIRE to keep the flames strong and toss my mate around a bit longer.
Chad is accomplished, but humble, authoritative, yet quiet, and I highly recommend it Take early retirement with real estate to anyone considering using real estate investments as part of their financial independence plan.
If you're looking for a more in-depth, interactive, multimedia approach to learning about real estate investing and financial independence, check out Coach Carson's free real estate investing course.
Is Real Estate Investing Part of Your Approach to Achieving Financial Independence? Are you investing in single family homes, apartment buildings, REITs, crowdfunding real estate, bonds, or do you use other methods? What percentage of your portfolio is dedicated to real estate?