House Hacking: Retiring Early

I think most people DREAM about retiring early. 

And I'm sure you've seen hundreds of "financial guru's" on your Instagram and TikTok feeds trying to promote their course on some get rich quick scheme to early retirement.

It's the longgg gaaaame, delayed gratification is underrated

I'll be the first to say, I'm no financial guru and I'm not selling you anything - nor will you get rich quick by house hacking. 

I'm just a regular average joe guy in the middle of Iowa who drinks beer on the weekends and watches Survivor every Wednesday night with my fiancé and our dog.

Anyways, 

In this video, we will talk about how house hacking won't get you rich tomorrow, next month or next year - but I'll explain how it can set you up for early retirement + we will find how many properties you would need to acquire to live off the CASH FLOW if you decided to hold these properties until they are paid off.

We will use the examples and calculations from our previous discussions - which was our 200k property at a 6.5% rate over 30 years with 5% down. 

Now, the important part - with those loan terms, this brings the mortgage payment to $1,200/mo. Remember this.

We will assume property taxes are $3,000 per year and home insurance is $500 per year

bringing the total payment on each of these properties to about $1,500.

we are going to assume these properties rent out for $2,000/mo.

We are also going to save 10% of the $2,000 per month of income for repairs and maintenance - which is another $200 - bringing our total monthly payment to $1700/mo.

Rent - expenses = our cash flow of $300/mo

So, here's the first scenario

Let's say you begin house hacking at age 20 and are going to retire early at age 50 (to all you peeps about to go to college or are in college, volume up)

After you've owned each property for 30 years, you don't have any mortgage on that property. No more $1,200/mo payment to the bank.

Now, once we take the $1,200 mortgage payment out of the picture, your total payment on this property is now about $500 per month. The only expenses to own the property at this point are taxes and insurance + the monthly reserves for repairs/maintenance which was - $500

I know what you're thinking - property taxes are now more expensive after 30 years and so is home insurance, and there are other costs that go into owning a home.

Yes, thank you, if you would like a video later on to include these factors I would be happy to

We are not going to account for any rent increases, expense increases, fees, inflation - yada yada yada

We are going to assume these all stay the same so the numbers are easy to understand but again i would be happy to explain with the increases if the people want it!

Okay - back to the calculation:

so your rent is $2,000/mo and now you only owe $500/mo. You are now cash flowing $1,500 per month!

Let's say you need $70,000 per year to live off of at age 50

If each are bringing in $1,500/mo, that's $18,000 per year in cash flow. (!!!) 

In order to live off of $70,000 per year, you would need to purchase 4 of these properties beginning at age 20 to live off the cash flow by age 50. 

Reminder: Each of these are also now worth roughly $363,000!!

 

Now Retiring Early with $100,000 per Year:

With the same calculations, each property generating $18,000 per year, you would only need to house hack 5 or 6 properties to get you around $100,000 per year!

Another reminder: Until the loan is paid off, you're still receiving $300/mo on each property in cash flow!


Lastly, $150,000 per year:

You would need 8 or 9 properties to generate around $150,000 per year.

$10,000 per year for 8 or 9 years in down payments will generate:

150k per year, for the rest of your life. 

 $2.9million worth of real estate (owned free and clear)

Again, remember your rents increase over time as well. That $2,000 you charged for rent when you were 20 years old will not still be $2,000 when you turn 50. These numbers are probably MUCH better, and likely don't even need to go to that 8th or 9th property.







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