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Started by Millennials about a decade ago, the FIRE Movement (meaning “financial independence, retire early”) has really taken off. Growing numbers of young people plan to work only as long as they have to and live off their assets and savings. Sounds nice, right? In this article, I’ll explore what it would really take to retire early.

How to Retire Early

My rule of thumb is that you need at least 25 times your current yearly expenses to comfortably retire and maintain your current standard of living. Meaning if you spend $100,000 per year, you’ll need to save over $2 million dollars. I like this formula because it allows for a comfortable withdrawal level in retirement while maintaining your invested assets.

I’m not saying saving that much is easy, but it can be done. It requires a Spartan lifestyle while you save a large portion of your income. For some, this can be as much as 50% of after-tax income put into savings and investments. This may mean cooking more at home and seeing your friends vacation photos on Facebook instead of being there with them. However, it can be worth it for the years of stress-free retirement.

Investing for FIRE

Sorry to say, you can’t just put your paycheck in your piggie bank and hope to retire early. You’ll need to make smart investments. Most rely on the power of compound interest and the cooperation of the stock market. Most expect it to grow at a 7-8% rate per year, but not to rain on their parade, I wouldn’t be so sure about that.

It might seem obvious that there is a potential for a rocky road ahead as the stock market is at all-time highs after a ten-year run. No one really knows if the market will deliver this rate over time. If you look history squarely in the eye, you’d have to accept that doesn’t always perform as expected. I worry for those who’ve already quit their jobs and are relying solely on the stock market.

Diversifying your Portfolio with Real Estate

For both those looking into FIRE and early retirees looking to diversify their portfolio, I recommend investing in real estate. Real estate is a great complement to the stock market and other asset classes because the real estate market and the stock market aren’t directly related. If the stock market takes a hit, people will still need places to live. Moreover, it offers an excellent return that can be better than the stock market.

“Diversification” may sound like a buzzword, but it can mean the difference between going back to work and lounging at home.  I’d recommend a first-time real estate investor buy a 2-3 unit building and live in one unit and rent out the other.

A lot to unpack here, I know, but if anyone would like more information you are welcome to contact me at howard@atproperties.com.

I always ask my clients a few questions at the start of their investment journey:

-If you started today, how well could you retire in 10, 20, 30 years?

-What lifestyle will you enjoy?

-Will income be a curse or a blessing?

-Will the taxman be a problem or a memory?

-Will you own a second home for those bad weather months?

-Will your income be tax sheltered and/or tax-free?

-Will your Social Security check be your monthly walking around cash?

Honestly and objectively answer all these questions. Your answers will determine the actions you take today.

An Investment Plan

If you’re like most Americans, you didn’t like your answers to those questions. Maybe you didn’t even know how to answer. It’s okay. I’m here to tell you that there is still time to earn the retirement you want.

But, you’ll need a solid plan.

Actions taken while following a solid plan are like positive financial dominoes falling against each other, one at a time, building to your preordained result — an abundant retirement.

Sounds good, right? Your first move is to begin a conversation with me to get your retirement ball rolling.

-Howard Abell, Investment Expert

Real estate and stocks are two of the most popular investment vehicles. It is always important to have a balanced portfolio, which will usually include both. However, if you have to pick one, it is my experience that real estate earns stronger and more consistent returns. In this article, I will explore some of the reasons why real estate can better serve your investment goals. Let’s get down to it:

1.) Real Estate is a Tangible Asset. 

Real Estate is a physical investment that you can see and touch. Shares in a company are nothing more than a piece of paper giving you an interest in a company. While these shares have value, real estate is essential! People must have homes to live in and businesses must have places to operate from. You can live in a house or an apartment, but you cannot live in a share of stock from Google.

This tangibility leads to the most important benefit of real estate – it’s not as volatile as the stock market. Stocks can plummet for any reason at any time, leaving investors at the mercy of things beyond their control. Global events, such as natural disasters, corporate bankruptcy, and high-profile white-collar crimes, can all negatively affect the value of stocks. Any of these events could wipe out your portfolio, but a piece of property… and its value… will still be standing.

2.) Real Estate allows for Leverage.

Now leverage can be a double-edged sword, and over-leveraging a property can cause your asset to become a “money pit” faster than you can say “Bubble”. The over-leveraging of properties (coupled with greed) is the primary reason for the 2008 real estate market crash. However, responsible leveraging can allow an investor to put up 20-30% of the purchase price of a property and borrow the remaining amount. It is this leverage that allows the investor to realize higher gains than the stock market.

Not convinced? Let’s look at an example: Say you have $100,000 dollars to invest in real estate, you can generally leverage that into a $500,000 property. So your $100,000 will serve as a 20% down payment on a $500,000 property and you will get a mortgage for the remaining $400,000. If the property appreciates at 5% ($25,000) over the course of a year, that is an unrealized gain of 25% on your invested capital of $100,000. In addition, if the property was generating a positive income, then your returns would be even greater.

Now just to be straight forward, this is the broad view of the investment. It doesn’t take into account closing costs, loan costs, illiquidity of the investment, etc. So there are more costs that would be associated with this investment that would take away from that 25% return. Additionally, you would have to sell or refinance the property to realize that 25% return. However, over the course of a few years with responsible leverage, real estate returns far outpace the stock market. 

Stocks can generally only be leverage at a 50% – 100% ratio if you are trading on margin. So if you have $100,000 to invest, you can generally purchase $150,000 – $200,000 worth of stock. Assuming you purchased $200,000 worth of stock and it appreciated 5% ($10,000) over the course of a year, that is an unrealized gain of only 10% on your invested capital of $100,000. And just with the real estate investment you still have additional fees that will take away from this gain, including brokerage fees and interest on the borrowed capital.

3.) Real Estate allows for more Control.

When you invest in real estate, you have more control in how that investment will perform. You can implement strategies to maximize your returns. With stocks, you really don’t have any control over how the company operates. At best you can submit suggestions to the board of directors, and maybe they will implement some of your suggestions… MAYBE!

Real Estate also provides other advantages for the risk-averse, and in terms of how gains are realized and in terms of the overall volatility and manipulation of the markets, which we will delve into with greater detail in another post, but we can always carry the conversation over into the comments below so please let me know your thoughts and comment below.

Comments and Questions are always welcomed and encouraged! Let me know your thoughts below in the comment section and feel free to post this piece in media.

Smart investors seek the most return for the least amount of effort. Therein lies the
appeal of triple-net properties, which offer the chance to work with major commercial
tenants while at the same time handing off some of the biggest responsibilities any
property owner will face.

Triple-net may align with your goals if you’re seeking a passive investment type that is
better known for reaping rewards than requiring repairs. If this resonates, read on to
find out if this is the right asset class for you.

Triple-Net Property Basics
Triple-net properties hold the tenant or lessee responsible for costs on building
insurance, maintenance, and real estate taxes (the three “nets”) in addition to all other
typical fees like rent and utilities. Long-term leases are the norm here, often running
between one and two decades in length. During the great majority of this time,
investors can typically sit back and accumulate profits.

The key to a successful triple-net investment lies in two elements: smart lease
structure and finding a reliably profitable tenant. Given that triple-net mandates that
the tenant shoulders the cost of maintaining the property, this structure presents a
relatively low-risk and profitable investment opportunity.

Investors who don’t want to bother with property management while preserving capital
and enjoying an assured income stream often opt for triple-net opportunities.
Additionally, investors seeking to replace a 1031 Exchange property may find these
deals attractive as well given the relative lack of involvement and regular rent
payments.

The tax benefits are particularly appealing if you, as the investor have significant assets
such as a business or house along with the intent to sell these for a major gain.
Investors of this type are often able to defer capital gains taxes by using triple-net
leased property in a 1031 Exchange.

Moreover, triple-net investors are able to use depreciation as a means of lowering their
taxes. Items that can be depreciated include roads, shrubbery, office machinery,
appliances, and additions or improvements such as a new roof.

Which Operators and Tenants Opt for Triple Net?
While you will find office and industrial operators amongst the clutch of triple-net
tenants out there, the majority of those who choose this lease structure manage retail
properties such as convenience stores, fast-food restaurants, big-box stores, grocery
stores, and gas stations. Additionally, government entities and agencies have also

proven to be good candidates for triple-net leases given their longevity and
consistency.
Money-conscious tenants may also choose a triple-net structure since rents tend to be
lower. Moreover, depending on your geographic area, triple-net leases may be the
norm for commercial properties.

Triple-net leases are popular among the multi-tenant industrial and retail property sets,
users whose expenses can vary greatly. Such a lease structure is also beneficial to the
landlord as the costs are passed along to the tenant, who then has the incentive to
keep costs low since they are footing the bill.

Business operators may find a stronger incentive to lease rather than buy a given
property when seeking to develop a triple-net franchise given that build-to-suit is
gaining favor. In such a scenario, once the lease is signed, the property owner builds,
for example, a Bank of America. Then the business operator can focus on his core
strengths—in this case, operating a neighborhood bank branch.

Because it’s triple net, the business operator maintains the building while paying
insurance and property taxes. If everything’s going according to plan, they pay their
lease and can still take home their business profit. So everybody’s happy.

Buying high quality, income-producing properties is a key factor in creating a diversified
portfolio of real estate assets. In addition, executing on a disciplined leasing strategy with
creditworthy tenants is also critically important to the long-term success of the portfolio.
employ a long-term, net lease strategy in order to help mitigate risk, provide greater
certainty of rental income and maximize value for positive long term results

Net Lease
A “net lease” is a lease structure that generally passes responsibility and expense risk of
taxes, insurance and common area maintenance to the tenant which helps provide a more
predictable rental income stream over time.

Long Term Leases
Long term leases (expected to average approximately 10+ years) help provide stable rental
income over time and also help mitigate cyclical market risk by reducing the need to reset
lease rates.

Creditworthy Tenants
You should be focused on acquiring properties leased to established, creditworthy tenants
with high operating incomes which we believe will help provide greater certainty of lease
payments and more stabilized occupancy over time.

Contractual Rent Escalators
Contractual rent escalators are generally built into the lease structure such that a tenant’s
rent will increase by a certain percentage each year, thus providing greater income to you
as time goes on, as well as a hedge against potential inflation.