Start at 45, Retire at 55: The Late Starter’s Rental Playbook

Dave:If you’re in your 40s or even your 50s thinking it’s too late for you to build a comfortable retirement, think again. Today I’m going to show you a strategy that could cement you a comfortable retirement in just around 10 years. It’s not sexy and it won’t get you rich quick, but it works. In this episode, I’ll show how the average American can replace a comfortable portion of their income, if not all of their income with rental properties faster than you probably think. All you have to do is follow the steps and let the system work. If you can do that, you’ll not only have passive income to support you in retirement, but you’ll have a sizable chunk of equity somewhere around $2 million in just the next 10 years. That sounds a heck of a lot better than relying on a social security check, right?This is how you start at 45 and retire by 55 with rental properties.Welcome to the BiggerPockets Podcast. I’m Dave Meyer. Today we’re talking about how to get started even if you’re not fresh out of college and willing to hustle at all costs to build your wealth, because real estate really does work for people at any age. I know that people on social media, the ones that you see talking about rental properties and how much money that they’re making are often very young, but that does not mean that you cannot get started a little bit later in life. And as I’m going to show you in this episode, in just the next 10 to 15 years, you can build a financial future to be excited about. And the good thing is there are actually some advantages to starting a little bit later in your career. First and foremost, maybe you own a home and you have some equity in it.That means you could be sitting on tens of thousands or even hundreds of thousands of dollars in equity that you can tap and put into your first rental property or maybe even more. The second advantage of being a little bit older is your retirement accounts. If you’ve been investing in your retirement accounts through an IRA or a 401k, hopefully with a match, you may be well ahead of the average American and you can actually tap some of those funds to buy rental properties. The third advantage of starting a litle bit later is higher income. It is no secret that people a little bit later in their career earn more money. In fact, if you look at some of the data, according to Smart Asset, folks who are 25 to 34 years old, their median salary is just under $60,000. But for people who are 45 to 55, the median salary is almost $72,000.And this can make a really meaningful difference in building your portfolio. You’re going to be able to buy sooner. You’ll be able to buy more sooner as well. And that advantage can compound over the next 10 to 15 years. The fourth advantage of being a little bit later in life when you’re starting, no offense to any 20 or 30-year-olds, but older folks tend to be a little bit more mature. All 20-year-olds do this, but social media is full of people who are taking a lot of risk and who really want to show off all their gains. But at 40 or 50 years old, you have no one to prove success to but yourself. And a lot of what makes you successful in real estate is about that. It’s actually really about knowing what you want, being able to be persistent in pursuit of your goals and not getting distracted by everything else or what other people might think of you.If you’re anything like me, the older I get, the more clear I am about what I want and what I don’t. And that has really helped me in my real estate investing career stay laser focused on the types of deals, the types of funding I want, and it makes my portfolio much more efficient. So all of that to say, if you’re starting in your 40s or 50s, you’re not necessarily at a disadvantage. It is true that you won’t have as long to compound, but you can absolutely do this and I’m going to show you the steps exactly how. Step one is starting with strategy. Ask yourself, what type of real estate investing best aligns with your personal goals? Because there are a ton of different ways, great ways that you can make money in real estate, whether it’s long-term rentals, short-term rentals, commercial real estate.They all work, but you need to focus on the ones that are best aligned with your personality, your stage of life and the things that you want. Because if you don’t do that, it can be very easy to get distracted by different kinds of deals, to get FOMO based on what you see other people doing, but knowing what’s best for you will keep you on track until your retirement. So if you really want to get into this, you can buy my book. It’s called Start with Strategy. It’s all about aligning your portfolio goals with the types of real estate deals you should do, but I’ll give you just a quick summary of things to think about. If your priority is just stable, predictable, long-term returns, go with long-term rentals. I know it’s a little boring. I know not everyone gets super excited about owning rental properties, but it just works.It is super stable. It offers great risk-adjusted returns. And I think for the majority of the investors out there, people who just want financial freedom 10, 15 years from now, long-term rentals do the trick. You don’t have to overthink it. If you want to accelerate your cashflow and to accelerate your timeline a little bit and you’re willing to put in a little bit more effort into your portfolio, you consider short-term rentals. Everyone looks at short-term rentals and thinks, God, that would be easy. And there are great deals out there, but it does take a little more work. You’re dealing with constant turnover, guests. You have to like the hospitality experience and be able to create a good experience for your guests. But if you do that, the cash on cash returns can be at least better than long-term rentals. Now, if you want to maximize your cashflow, there’s a strategy out there called co-living.This is where you get multiple people living in one house. It’s kind of like a rooming house where you get a bunch of people, maybe it’s a single family home and you rent out individual bedrooms to different tenants. That does take more property management work, but the cash on cash returns are great. They are significantly better than long-term rentals. I think in a lot of cases, they’re even better than short-term rentals. So if that aligns with your strategy, if you’re willing to do a little bit of extra work, check out co-living. So those are three great options. Now, if you like renovations, willing to get your hands a little bit dirty, there are two other strategies I recommend. One is the BRRR method. If you haven’t heard of BRRR, it stands for buy, rehab, rent, refinance and repeat. This is a version of long-term rentals, but rather than just buying something and renting it out immediately, you do a renovation.And this can really supercharge your returns because not only are you getting cashflow, but you get a big bump of equity upfront on these deals. It’s kind of like flipping, but you hold onto the property. So you get the benefits of flipping, which is making a bunch of cash all upfront. But at the end of the day, you get to keep it and you have a cash flowing rental property. Personally love the Burr, and if you’re willing to do even modest sort of cosmetic styles of renovations, you should definitely check this out. Another great way to build equity and get those big chunks of returns in a relatively short period of time, think about a live-in flip. This is one of the most underrated styles of real estate investing. It’s basically doing a flip, but on your primary residence. So what you do is buy something that’s not in great shape, but it’s good enough to live in.You move in and you do the renovation around you just like a flipper would for a property they bought. But the key to a live-in flip or the reason why it’s so good is first and foremost, because you get better financing. Flippers often pay hard money loans. They’re paying 10, 12, 14% on their loans. That eats into your profit. But if you do a live-in flip, you can get owner occupied financing. That’s more like six or 7%. That advantage really compounds over time. And the second thing that is truly great about the live and flip, I love this, is that the gains that you earn are tax-free. The US Tax Code says that if you live in a property for two out of the last five years, when you go and sell that property, there’s no capital gains up to $500,000 for married couples. So that is another great way to get started and build up some equity maybe to use to go buy rentals down the line if you are willing to do a renovation.It’s an awesome strategy. The last one I’ll mention is a good option for anyone who maybe wants to invest out of state, maybe you live in an expensive market in Washington like I do, or in California or the Northeast, and you want to buy cash flowing rentals, but you don’t want to do a lot of the work. There is a whole class of investment called turnkey rentals where a company goes out, they find the deal for you, they renovate it and make it tenant ready, and you just buy it. They even put property managers in place. So this is a really hands-off way to invest. Now you’re not going to get the massive returns that you get with a burr because someone else is doing the renovation for you. But if you really don’t want to work hard at this, turnkey rentals are absolutely a good option.So think about these things. Don’t just think about what will make you the most money. All of these options can make you money. Find something that speaks to you that you like because all strategies can make money, but only a few may fit you best. Picking your strategy well is actually, at least in my opinion, as important or maybe more important than the ROI you get on a single deal because as I’m going to talk about throughout this episode, real estate is about time. It’s about persistence. It’s about letting the market do its thing over the course of a decade or more. So think about something that you can stick with and hopefully something that you like. Once you’ve done that, you can move on to step two, which is something I call the resource audit. Previously we talked about the advantage of being a late starter and the resource audit is where you sit down and think about what things can you bring to the table to build your portfolio?Because you can’t start with nothing, but luckily, as long as you have one or two of the three major resources for real estate, you absolutely can get started. Those resources are time, they are money and they are skill. Let’s just go through those quickly. Time, as I pointed out when we were talking about different strategies, different approaches to real estate take different time commitments. All of them take a little bit of time. Real estate is not truly passive. You got to put in a little bit of effort, but the amount of work it takes to do a live and flip versus a turnkey rental, super different. Live and flip, you’re going to be thinking about it all the time. Turnkey rental, you’re going to buy it and once a month you’ll check your owner statement and that’s about it. So think hard about what time you’re willing to put in.The more time you put in, the faster your returns will grow, but that doesn’t work for everyone. Second thing to think about in the resource is money. How much capital can you safely and responsibly invest into real estate? Spend a little time thinking about this. If it’s 20 or $30,000, you can still get started. The more the better. Obviously the more rentals you can buy upfront, but you don’t want to give up your emergency fund. A lot of people who are a little bit older want to diversify into the stock market. You can absolutely do those things, but think about what you’re willing to commit to real estate. And as I’ll show you in a little bit, I’m going to walk you through an example. The more you can put in early, the faster you will reach financial freedom. But even if you’re just starting with 10,000, 20,000, $30,000, if you have a solid income, and I’m not talking crazy income, like even the average income, you can make this work.The third resource to audit is knowledge. What do you know? What are you good at? Because again, if you’re great at property management and working with people, you can consider doing co-living. If you’re great at renovation, you have experience with construction, do the burr, do the live and flip. You can really accelerate your investing with that. Doing the resource audit is going to help you figure out the strategies that we were talking about before if you’re kind of on the fence, but also help you figure out what your first deal is going to look like, which we’ll get to in a minute. But first we have to take a quick break. We’ll be right back.Welcome back to the BiggerPockets Podcast. I’m Dave Meyer today talking about how you can start at 45 or really anywhere in your 40s and retire in 10 to 15 years using real estate investing. Before the break, we talked about the first two steps that you should go through. The first is thinking about different strategies. The second is doing a resource audit to figure out what time, what money and what knowledge you can bring to building your portfolio. And by following those two steps, hopefully you now have a sense of what you’ll be good at, what you like, and what kind of property you should be looking for. I’m going to walk you through an example of what kind of deals I would look for personally. I’m going to basically use a basic affordable long-term rental. This is the kind of stuff I actually buy right now.It’s the kind of stuff that I see here in 2026 that are getting good discounts that are good to buy, but you can use the same steps I’m going to use right now if you are doing a short-term rental, if you’re doing co-living, those kinds of things also work here. But just for the purpose of this episode, I’m going to do an example doing long-term rentals. Now, when I look for a long-term rental, there are a couple things that I look for personally. I think that they have to cashflow. It absolutely needs to break even. I think this is super important. I know people debate this, but especially in the kind of market we’re in right now. If you’re trying to focus on getting financial freedom and trying to retire in 10, 15 years, look for cashflow. That’s going to keep you in the game long run.So you have to at least have a two or 3% cashflow, ideally something like five or 6% if you’re starting a little bit later. The second criteria I look for has light value ad. So being able to do a little bit of a renovation and grow the equity in my properties, but I don’t love heavy construction renovations to be honest. So I look for more cosmetic kind of work, things that can be done relatively easily. And then the third thing I look for is having upside. Upside to me means looking for properties that can have a little bit of a pop sometime. So they’re good right now, but if things go well and if I hold onto them long enough, which is really the most important, you’ll be able to generate some of the massive returns real estate investors get from owning real estate long term.Examples of upside are one, being in a great neighborhood where people want to live that can push up values, that can push up rents. Number two is zoning. I love zoning upside. Like can you buy something where you can add an ADU or you can develop something in the future? Or you could just turn a single family split level, something like the house I live in, into two different units. Those are all upsides that can take your deals from good today to great in the future. If you can find things that meet those three criteria, cashflow, they have upside and they have a light value add. Those are good things. Not all of them are going to work, but those are good things to screen properties by. Those are good things to talk to your real estate agent about. Now I’m going to show you now, I’m actually, if you’re watching on YouTube, I’m just going to pull up a listing and the BiggerPockets calculator and show you how to analyze these deals and what to actually look for.All right, so here’s a property I found in Wichita, Kansas. I’m going to be honest, I pick Wichita pretty randomly. I love scrolling around on Zillow and I was just looking at Wichita for affordable properties, things where I can buy a duplex. I really like $150,000 per unit or fewer. So for a duplex, that’s 300,000 or less. And I actually found this duplex here in Wichita, Kansas that is listed right now for 250,000. So this property I’m looking at is actually four units. This is a fourplex for $250,000. Super affordable, just over $60,000 per unit. Let’s check it out. So first thing I’m going to look at is I go through the deal and I just look at the pictures. I like that it’s brick construction. That is usually a good sign. I like that it is purpose-built, meaning that this was designed to be a fourplex.It’s not just an old building that’s been cut up a lot. I’ve bought a lot of those deals. They can work, but at this stage in my career, I like purpose-built stuff. And when I go through the photos, it’s in pretty good shape. There’s relatively new carpet. The paint looks good. The kitchens are a little dated, but they’re actually perfectly fine. There are decent appliances in there. And so I think you could actually rent this out or do a light cosmetic rehab to increase your chances of rents. The other thing I like about it, just last thing here, is that they are two bedrooms each. I think that’s going to get me good rent. So now what you have to do, because obviously not everything that looks good on Zillow is going to be a good investment property. I’m going to run this through the BiggerPockets calculator.First thing I’m going to do is just put in the address so I remember what I’m talking about. And then I’m going to put in the purchase details. So for this, I’m just going to assume I pay full asking price for this right now, $250,000. Purchase closing costs, I’m going to estimate about $5,000, but talk to a lender and they can give you these numbers more accurately. Now I’m going to say that I’m going to rehab this property, but not a ton. I’m going to put like $20,000 into it because honestly, it looks pretty good on the inside, but I have a feeling just looking at the exterior that you might need to do something to the roof, that you might need some HVAC work. So I’m going to assume I’m going to put 20,000 bucks into this and that’s going to raise my after repair value.Once I fix this up even nicer, it’s going to raise this to about $300,000. This is the power of the bur. By investing 20,000, I’m going to increase the value of my property by 50,000. And of course, I’m just giving you examples. I don’t know the exact numbers, but this is a very realistic, almost modest example. Being able to put in 20, raise the value 50, that stuff happens all the time. And so I’m just kind of using relatable numbers that most people can go out and get. Next thing I’m going to do is put in my financing details, which for this, I am an investor and I have to put 25% down. Now, if you do a house hack or a live and flip, you can put as little as three and a half percent down. But for me, buying out of state, I put 25% down.Interest rates are about 6.75 as of today. And then that’s it. I move on to my rental income. I did a little bit of research for this and I found that rents in this area are going to be somewhere between 600 and $900. Now I don’t want to estimate the high end of that because I like to be conservative in my investing. I personally would rather put something like 750 in there. And then if I get up to 900, great. But if I only get 750, then I’m fine. I know exactly what my numbers are going to be. But remember, this is a fourplex, so 750 times four units is going to be $3,000 a month in rent. This one right here meets the 1% rule. If you’re following along, that’s just a rule of thumb of will it cashflow? And already I’m feeling like this is going to offer good cashflow.Now for expenses, property taxes on this, you can actually just go and look up. Usually they’re on Zillow, but if they’re not, you can actually just go and look them up on local county records. For this, I think they’re going to be about $4,000 is what I found. And my insurance is going to be about $2,200 a month. Next, repairs and maintenance. I want to set aside some of my cashflow to make sure that when those things that inevitably come up in owning a rental property come up that I have money to pay for them. So I like to actually put aside, I’m going to actually increase. Even though this place is in decent shape, I’m going to say 10% repairs and maintenance, 5% for CapEx, and I’m going to put 5% for vacancy. Then I need to account for my property management fees. And as an out – of-state investor, I’m going to pay a property manager.Usually I pay about 8% for that. The last thing you want to do, especially if you’re renting out a single family home, is put in your utilities. But because this is a four unit and one of the reasons I like these purpose-built four units is because they often are metered separately. So the tenants can just go and sign up for their own electricity and gas, water, all that, and they pay it. I don’t actually wind up paying anything. Usually you still have to pay like 50, I’m going to say 25 bucks a month for trash or something like that. And that’s it. That’s really all I need to do to figure out if this deal in particular is good. I’m going to hit finish and look what we got here. We have $400 a month in cashflow, a five and a half percent cash on cash return.I already like this deal. So this is just assuming modest rents. This is assuming you pay full asking, which right now in this market you can often get discounts below that. But even at this, even if I bought it the way it is as is right off the market, getting the kind of cashflow that I would like. Now I still will try and negotiate this down. I’ll try and get it for about, let’s just say we can get it for 235. If we can do that, our cash on cash return goes to about almost 7%. That’s the kind of deal I get genuinely excited about. And we’re getting a 16% overall return. So the cash on cash return just talks about the money you make every single month. But in real estate, in rental property investing, you get money from amortization. You get money from tax benefits, you get money from appreciation.And so that 16% return is really, really good because if you compare that, for example, to the stock market where you get eight or 9%, that’s a huge difference that will compound a lot over the next 10 to 15 years. So hopefully you can see just by this example, these deals you can absolutely find. And I know that they might not be where you live. If you live in an expensive market, finding cashflow might be difficult. So you need to think to yourself, are you willing to do out – of-state investing? I do this myself. It’s really not that hard. You can absolutely do it because you can find deals in the Midwest or the Southeast that do cashflow and have big upsides. Or you might need to go to something like a live and flip or a house hack if you live in those more expensive markets.Again, I’m just giving you an example of the kind of deals that I like to do in today’s market. So following along here, that was step number three in how to go about retiring in the next 10 to 15 years. Again, what we did was started with our strategy. Then we did our resource audit. Then we went and looked for deals and made sure that we can find the kind of deals that we’re looking for. The second half of step three though, once you found your deal is you have to actually go and fund this deal. So remember, we talked about the pros of being 40 plus. Well, you may hopefully have some more options to fund this deal. A couple options. One, if you have a primary home with equity in it, you can use a HELOC, which is a home equity line of credit.You can pull some of the money out of your primary residence and invest this into rental properties. Super common strategy. It’s a great thing to do. You can do a cash out refi. It’s kind of similar idea. You tap that equity you have in your primary residence that you can put into your rental property. Maybe you just have cash saved up. If you have 40, $50,000, you can go and buy a rental just like the one that I was talking about. So that’s just kind of like saving up your money from your income and your bonuses. Hopefully if you want to do this, I should just say that if you want to retire quickly, you have to have a good savings rate. The more you can save every single month to put into your next property and deal, the better. Not everyone can save 40% of their income, but if you can hit 20%, that’s like a good barometer.That’s what most budgeting experts say you should be saving. If you can do that, you’re going to be able to stay on this 10, 12, 15 year timeline. The last thing I should mention, again, 40 plus advantage is the 401k. You can actually borrow against your 401k or an IRA to go out and buy rental properties. You should talk to a CPA about how to do this the right way. But a lot of investors tap their 401k to buy rentals and it’s a great way to secure your retirement because you have that money just sitting there and it could be earning you cashflow. You can’t touch all of it right away, but if you’re starting in your 40s, the time until you can actually touch that money from your 401k, not that long, right? 10, 15, 20 years, it’s a lot different than someone who’s starting in their 20s or 30s who aren’t going to be able to tap that money for 40 years.So that’s a big advantage that you have. Figure out how you’re going to fund it. I know this is a hard one, but I gave you a couple options. You can also partner with other people if you don’t have the capital yourself. And if you want, we have other videos on BiggerPockets you can check out to see how to fund rental properties, but pick the way that you’re going to do it. And then you go close. That part’s super easy. Go and follow the advice of your agent and your lender. Do all the paperwork. It’s not that bad. Go close on your property and start property managing. Again, we have more videos. I’m not going to get into that in a lot of detail. There are many other episodes of this podcast about how to go be a good property manager, but go out and find great tenants, screen them properly and do a good job taking care of your property.Once you’ve done that, you can move on to step four, which is scaling. It’s basically just repeating what I just told you. Each time you’ve saved up enough money or you’ve built enough equity in your previous property to pull it out and invest into your next property, go out and buy another deal. Find another deal just like the one that I showed you today or just like the first one that you actually go out and buy. And remember, you don’t actually need to save up for a down payment every single time. You can refinance equity out of properties. Of the reasons, just going back to my example, I wanted to invest $20,000 into this property to boost that value from 250 up to 300 is so I can go and tap the equity I just created, all that money I just earned. I can go and refinance out of that and take some of that money and go and buy your next rental.And a good rule of thumb, not everyone’s going to do this, you don’t have to go down to the day, but a good rule of thumb is try and buy a property every two years. If you can do that, if you can build equity and save up money to go buy these properties every two years, you can get to financial independence in the next 10 to 12. I assure you, you can absolutely do that. So just ask yourself, can you do that? Can you figure out a way to save more money, to do the projects, do the renovations that will build that equity? If the answer is yes, you can move on to steps five and six, our last two steps, which are stabilizing. And then the fun one, which is harvesting, which is reaping all the benefits of your hard work. We’re going to talk about those last two steps, but first we have to take one more quick break.We’ll be right back.Welcome back to the BiggerPockets Podcast. I’m Dave Meyer talking about how you can start later in life in your 40s and still retire by 55. And I’ve walked you through four of the six steps to do that. Just as a reminder, the steps are first and foremost starting with strategy, then doing a resource audit to figure out what you can add to your portfolio. Step three is just finding your first deal, going out and analyzing deals like the one I showed you and funding that. And then four is scaling, basically repeating the process of step three over and over again over the next decade or so. Step five is kind of concurrent with step four, right? While you’re scaling, you also have to do some stabilization. So you need to take care of your property. I want to make sure that everyone is thinking about this.So you need to be proactive about doing maintenance. Don’t wait for things to break. Don’t try and save $500 right now and ignore a problem until it gets worse. Keep your eyes on the long term here because if you’re focusing on, oh, I only made a hundred bucks in cashflow this month, it should have been 200, that doesn’t matter. It really doesn’t. What you’re trying to do here is to retire by 55. And so you want your properties to be in a condition that when you’re ready to kick back and not work so hard, that they’re in a really good shape and you’re not going to have headaches taking care of these properties. So again, one thing to think about is proactive maintenance, right? Making sure your properties stay in good condition. Number two is ensuring turnover from tenants is limited. You want good tenants.If they want to stay, let them stay. Don’t push rents up so much to push great tenants out. I promise you every experienced investor will tell you that turnover and vacancy kills your deals. So if you have a great tenant, figure out how to keep them. Third thing to think about in stabilization is upgrading your units. So when people move out, take advantage of that and upgrade the units, one, so they’re in better condition later, but Two, because they can generate more rent for you now. I actually call this a slow burr. In the traditional burr, you rush to try and maximize your equity gains so you can refinance quickly. You don’t need to do that. I actually like doing it slowly where I let my tenants stay for as long as they want. When they move out, I spruce it up. Maybe I add a bedroom, maybe I upgrade the kitchen so I can get more rents.And this is a great way to maximize the return on equity that you’re getting over the lifetime of your deals. Two other things to think about. First, grow your cash reserves. So if you are earning cashflow again, don’t think about it as your cash flow for today. Think about it. This my retirement. And until I actually retire, I am going to reinvest this money back into my deals. So I talked about proactive maintenance, but try and get 15, 20, $25,000 in cash reserves. I know that sounds like a lot. It is. But if you set that money aside, I promise you it will hit different if you have a roof to fix, if a HVAC system fails and you need to repair it. Because then you’re not like, “Oh, I have to come out of pocket to fix this. ” You think to yourself, “Oh, I put this money aside and today that bill is due.I’ve been waiting for this. I knew it was going to happen and I got to pay for it now.” I promise you mentally it will be better for you if you set it aside now. You will not be mad about it. You’ll be like, “All right, that was the business’s money. Now I’m spending it. ” Instead of, “Hey, I’ve been counting on this 500 bucks a month in cash flow and using it and now I need to figure out how to get 20 grand to fix a major issue,” build up those cash reserves. The last thing in stabilization, something I just recommend over time, do it at the right point, is think about property management. If you are getting ready to retirement and the cash flow’s good or you’re investing out of state, think about hiring a property manager. It can be really beneficial to just do self-management for the first, I did it for 10 years of my portfolio.You really do get to earn bigger returns, you’ll learn the business, but if you want to be truly retired and not thinking about this every day, hire a property manager. It’s great. Hopefully over the course of owning a property, you will increase your rents more than eight, 10%. And so if you go out and pay eight to 10% for a property manager, it’s kind of a wash over the long run. And that gets you the retirement, at least the kind of retirement I’m thinking about. So those are the five steps, right? At this point, you are a full fledged real estate investor. You have a portfolio that is building equity, that is generating cash and is setting you up for this retirement. Once you got that, you get to move on to step six, which is the fun one. It is harvesting. Shout out to my friend, Chad Carson, coach Chad Carson.He is the one who introduced me to this idea that every investor goes through three stages. The first is first just getting started. Those are kind of the first three steps here, like doing your resource audit, picking your strategy, finding and funding those first deals. Then you move on to this next stage that’s scaling, which is what we just talked about in steps four and five, repeating the process and making sure that your portfolio is constantly in good condition. But once you’ve done that, you move on to this harvest stage. You have a respectable rental portfolio. It’s time to retire early. Now that’s going to look different for everyone, how you use your cashflow and equity to make your life easier. But I just actually just want to show you how this works. I’m going to show you a financial model that I personally built.I’m going to put it up on the screen if you’re watching on YouTube, but if you’re listening to the podcast, I will just describe for you what I’m talking about here. But basically it’s a financial independence calculator. And what you do is you input different things about your life. And I should mention, you can download this. If you’re BiggerPockets member, go to biggerpockets.com, the resource hub. So biggerpockets.com/resources. Download my FI calculator. You check it out there. Basically put in your current income and a little bit about your deals and you can see how quickly you can get to this harvest stage. So in the example I’m going to show you, I’m putting in what I think are pretty average inputs, average assumptions for the average American. So I’m going to put in things like my current income. So if you’re starting at 45, I put $80,000.That is about the average of what people make in their mid to late 40s. And so I’m putting $80,000 there. I put in a little bit about my tax rate to make sure that I’m doing all the math behind the scenes correctly. And then I go on to just a couple of assumptions about my life. So if you’re going to do this for yourself, go and edit these things, but I’m going to put my pre-retirement savings rate, how much I can save every month at 25%. And again, this is going to be really important to how fast you get to the harvest stage because the more you can save, the faster you can buy properties. And so I put mine at 25% and you also need to put in your initial savings. I’m putting $50,000 in here, assuming that at 45, I’ve built up a little bit of a nest egg that could come from your 401k.It could come from equity in your home like we talked about, but what’s the initial money that you can put into real estate? The next thing is retirement spending. How much of your current income do you need once you retire? I put about 75%. I think this is about average when you talk to financial planners or experts. They say most people reduce their spending once they get to retirement. And so I put 75% there. This is really most of what you need to do to figure out if this is going to work for you. Then I just do a couple assumptions about what I’m going to buy. I put my average property price at 275, so I’m buying cheap properties, but you can change that if you want. Average appreciation at 3%. That’s actually below the long-term average. Long-term average is something like 3.5%. But again, I like to be conservative.Then I put my average return on equity. So this is how much I’m going to be generating by each property in terms of cash. Now I said before the deal we were looking at somewhere around a six or 7% cash on cash return. But for this input, I’m thinking about what my average is going to be 10, 15 years from now. And the beautiful thing about real estate is that your cashflow will go up over time. If you’re using fixed rate debt, your mortgage is going to stay fixed, but your rents will go up. And so your cashflow gets better. And so for my portfolio, 10, 15, 20 years from now, I think I can easily earn return on equity of 10%. So I’m putting that there. That’s relatively conservative. Then I have a couple just other things that I put in there. You can mes with these.I’m not going to get into all of them, but it’s just little things that you should think about like what the rate of inflation’s going to be. I know most other people wouldn’t factor this in, but I do. I think a lot of people, when they plan for retirement, forget that inflation will eat away at their spending power. And so they think, “Oh, I’ll be fine on $75,000 a year 20 years from now.” But 20 years from now, that 75 is going to spend like 60. And so you have to adjust for that. And my financial calculator does do that. And so just using these examples, if you just do $80,000 of current income, starting with $50,000, getting a 10% average return on equity over time, it will take you 10 years to retire. At the 10 year mark, just doing this, modest investing, easy investing, not doing burrs, anything crazy.Your real estate value will be worth $1.8 million. Your equity value, so your nest egg is over $600,000 and your cashflow would be more than $60,000 after taxes. So that’s actually what you can go and spend is $5,000 a month to fund your retirement. That is absolutely incredible. You probably have to earn more like 90 or $95,000 to be able to do that if you were doing this any other way. But because real estate has so many tax advantages, you get to keep way more of that income. Now, if you want to do this faster, we can play around with this. If your current income’s $100,000 and your initial savings is $100,000, let’s see how that changes it. That actually moves it down to nine years and $76,000 of tax advantage cashflow. Or if you’re moving the other way, maybe you make $60,000 and your initial savings are just $30,000.No shame in that. Everyone’s there at some point. That changes it, but you’re still at 11 years to reach retirement and get to that harvest stage. And so a thing I want to impress on people is that the math doesn’t change that much. I just really lowered income and really lowered your initial savings and it’s still like 11 years. You’re still able to buy a property every couple of years and let the market do its thing. That is how you are successful in real estate. So if you’re starting at 40 or 45 or 50, it doesn’t matter. What really matters is can you get started today? Start compounding today. Start enjoying the benefits of real estate today, but they get better over time. Letting the market do its thing is the key to success. So find a strategy that you can stick with. Figure out how much time and knowledge and resources you can bring, because the more you can bring, the faster this will go.Be disciplined about what deals you buy. Use the BiggerPockets calculator to go out and analyze these deals. Once you’ve figured out the formula that works for you, repeat it as often as you can and make sure to stabilize your portfolio, keeping it in good condition so that when you’re ready to retire, things are easy for you. And once you’ve done that, you get to move on to this magical harvest stage where you get to enjoy the fruits of your labor and retire off real estate. So that’s it. That’s the plan. Those are the six steps you need to follow to start in your 40s and retire in your 50s. If you’re listening to this, if you can follow these steps, you can absolutely do it. If you need some help, go to biggerpockets.com/resources to get this FI calculator, figure out how long this will take you.If you want to analyze deals, go to biggerpockets.com/calculator to find the rental property calculator that I used. We have a bunch of other tools that you can use there and go and get started. That really is what it takes. Hopefully this episode will help you in that effort. I would love to hear how your journey is going along the way. Let me know in the comments or share your journey at biggerpockets.com/forums where we have a community of over three and a half million members sharing and growing together. That’s our episode for today. Thank you so much for watching. My name’s Dave Meyer and I’ll see you next time.