Real Estate Agent Retirement Plan
I am going to lay out a plan below on how real estate agents can set up a retirement plan. I have essentially followed this plan after making a couple of poor financial decisions. Learn first from some of my mistakes that set me back a few years.
Real Estate Agent Retirement – Avoid Poor Financial Decisions
You know, the market is hot, I’m selling a bunch of real estate, making good money, going to clubs, traveling to Miami, Key West, some Caribbean Islands and just being careless with money.
“Living the good life.” Making poor decisions. A beautiful waterfront condo with a Gulf Access boat dock. Had to have it, right?
I also had to have a beautiful Cobia Boat to sit in my slip so I can take the ladies and my buddies for countless days out on the beautiful salty sands of the Gulf of Mexico. Each time spending about $150 a day on gas. Not too mention bar hopping by boat. I’d say a simple weekend on the boat ran me about $500 – $700.
My personal overhead as a single man accounted for almost $7,000 a month. That is $84,000 a year. This is not the right path to retire as a real estate agent.
2008 Real Estate Market Crash. No Retirement In Sight.
My sister and I opened Maxim Realtors in 2006. When the real estate market crashed, we had to make a decision. Do we struggle to pay our high overhead or do we liquidate and live as cheap as possible?
Well, only one decision was going to be able to help us in our real estate agent retirement plan.
The crash was coming… And we were feeling it in Southwest Florida. So I had to sell and sell quickly. I sold my condo, my boat and other luxuries right away losing hundreds of thousands of dollars.
I guess I got out fairly unscaved. However, as you will read in my other articles on Short Sales, many did not. Some losing millions ending in divorces and so forth. A mess it truly was. But I was determined to set up our retirement plans as real estate agents and ultimately achieve financial freedom.
If you want to retire young in real estate, Change Your Thinking!
I picked up Robert Kiyosaki’s book Rich Dad Poor Dad that I owned but really never read it. I read it twice in a row. A very simple and MUST read for anyone who wishes to change their lives and retire early through financial freedom.
We knew our income would go down and it was imperative that we took every dollar seriously. This is a book to this day (now on my Kindle) that I will pick up and read on occasion just to keep my mindset in check.
There are so many temptations in this world to be stupid with money. Remember per his book, the rich have their assets pay for their liabilities. As a real estate agent trying to retire in this industry, it is imperative to be very smart with your money. Look if you reduce your overhead by $1,000 per month, that is $1,000 you can invest into your real estate business.
So let’s begin!
Retire in Real Estate with only Good Debt. TWO Types of Debt
This is the debt that doesn’t make us money but sets us back in real estate agent retirement and financial freedom. This is debt on our primary residence, our cars, other luxuries and of course, the worst kind – credit card debt.
If you have this debt, don’t sweat it. Keep reading as I have the plan to get you out of it and set a plan for retirement / freedom!
This is the debt that makes us money every day. This is the debt we use to strategically leverage ourselves to make money each month. A prime example is real estate investing. You are or going to be a Realtor right? Then invest in what you are selling in order to retire.
Want to retire some day? DO NOT Accumulate Anymore BAD Debt
Starting today, make a promise to you and your family, not to take on any new consumer debt. This is taking on credit card debt, financing a new car or replacing the car you have with the next one with debt, luxury debt and even your own house debt (which we will talk about more).
If you are already in a lot of consumer debt, don’t stress. Stressing out due to your financial situation will not help you in any way to get you out. Think of this scenario as a game without the emotions. Everything will be OK. Just follow step by step. PS – An incredible game you should check out and play a couple times a week with your family is the Cashflow Board Game.
Hands down, playing this game on a consistent basis will help you strategize on getting out of debt and creating your real estate agent retirement plan.
The Fastest Way To Retire & Get Out of Debt
Example: You have 2 credit cards and 2 auto loans.
AMEX – $5500 at 8% (Min payment – $150)
MASTERCARD- $4000 at 6% (Min Payment $100)
AUTO 1 – $11000 at 4.5% (Payment $325)
AUTO 2 – $9000 at 4% (Payment $350)
Here is what you do to eliminate this BAD Debt. Start with the highest interest debt all while paying the minimum payment on all other consumer debt.
The AMEX is the first to attack as you are paying 8%. Pay $400 each month until that one is paid off.
Once it is paid off, you take the $400 (What you were used to paying each month on the AMEX plus + $100 (Min payment on the Mastercard) = $500 and apply that to the MasterCard until paid off.
Then take $500 + $325 = $825 and apply to Auto Loan #1 until paid off.
Then take $825 + $350 = $1,175 and apply to Auto Loan #2 until paid off.
Then take $1,175 and apply that to your real estate marketing budget to hire a VA (Virtual Assistant), Lead Generation, Etc. Or put toward paying down the mortgage on your Primary Residence.
Retire Debt Free On Your Primary Residence
“Your Home Is Your Greatest Asset” – I am sure you have heard this before. I will call bullshit on this.
Even though this is an ok investment for the write-offs and potential appreciation, it is still a type of consumer debt as it doesn’t directly make you money.
However, it can be used as a tool to get you ahead and become mortgage free if you follow the steps below.
Pay No Taxes On The Gain On The Sale Of My Home?
If you lived in your home 2 of the last 5 years and sell it, you will have NO taxes on that gain. YOU as a real estate agent should know this and preach to others. There are certain limitations so be sure you speak with your accountant or read the tax code below.
This is the single factor that many millionaires as well as real estate agents were able to retire due to.
How Does It Work?
You can read the full details directly from the IRS here.
Assuming you purchased right and market conditions are good, consider buying and selling a primary residence every 2 years as the gain is free and clear of taxes. This is limited to a gain of $250k for a single person and $500k for joint.
The key to early real estate retirement, is to NOT purchase a much higher price of a home on the next one. Reinvest all of the gain into the next property with the end game / goal to be free and clear on your primary home.
This can be achieved fairly quickly if again market conditions are favorable and you buy right. I personally always (in most cases) buy a property that needs work and renovate it. It took me 4.5 years using this strategy to achieve free and clear status on my home. And on a solid plan to real estate agent retirement.
What is Financial Freedom?
This is when your assets (ie – rental properties, stocks, dividends, etc.) cover all of your personal expenses / overhead. A position of “real estate agent retirement” sitting back on your beach chair and relaxing.
Now, with all your consumer debt paid off (credit cards, car payment, house payment, etc) you can now begin to get closer to financial freedom and retirement.
So… How Can I Retire as a REALTOR in 7 years?
Well first off, keep everything above in mind and set those personal goals. The lower your personal overhead is, the faster you will achieve financial freedom. Now it is extremely important to have a real estate business plan in order to achieve the following.
Plug in your actual numbers below based on your current financial picture as well as your real estate market.
Let’s say your cost to live = Gross Income $5,000 a month to live ($60,000 a year).
To build a predictable business in real estate, a good way is to get listings. If You List You Last. Everything is based on numbers. Track your numbers and do everything to meet your goals.
A great way to list real estate FAST is by cold calling. The link below waives the initial set up fee to get phone numbers of a variety of target markets.
Maintain 20 Active, Fairly Priced Listings at any given time.
- 10% of your inventory should close each month (10% of 20 = 2 closings)
- You should get ½ a buyer for every closing (IE per month – 2 x ½ = 1 closing). Remember, listings bring buyers.
- This equates to 3 closings per month.
- Your average sales price = $300,000 x .03% = $9,000 x 3 closings = $27,000 GCI p/mo ($324,000 p/yr).
- $5,000 Cost to Live + $4,500 Taxes + $2,000 Real Estate Fees / Marketing + $1,000 Misc = $12,500 Monthly Expenses
- $27,000 (Income) – $12,500 (Expenses) = $14,500 (Net Income) x 12 Months = $174,000 left over each year.
7-year Real Estate Agent Retirement Plan
End Year #1 – Getting your business plan set up to maintain 20 listings in your inventory.
End Year #2 – Getting your business plan set up to maintain 20 listings in your inventory.
End Year #3 – Purchase 1st investment property for $174,000 (Net Profit Before Taxes) = $1,200
End Year #4 – Purchase 2nd investment property for $174,000 (NPBT) = $1,200
End Year #5 – Purchase 3rd investment property for $174,000 (NPBT) = $1,200
End Year #6 – Purchase 4th investment property for $174,000 (NPBT) = $1,200
End Year #7 – Purchase 5th investment property for $174,000 (NPBT) = $1,200
Gross Income: $1,200 x 5 = $6,000 Per Month of Passive Income ($72,000 a year).
Many savvy investors will say this is crazy to pay cash for all of these properties, which I am going to agree. Your cash on cash return isn’t going to be great and you can leverage good debt to turn this into hundreds if not millions of dollars.
This is just one example to create passive income which more than covers your personal overhead and achieve financial freedom / retirement early as a real estate agent (investing in real estate).
You Are In Control Of Your Own Destiny.
Look… There is no special talent to make this happen. Just hard strategic work. My goal is to give EVERYTHING to this website to ensure you have the tools and resources to live a truly great life.
I am saddened by the number of people who work paycheck to paycheck. It is estimated at over 80% of people live this way. You may be one of them. But it doesn’t have to be this way. It can be changed and it starts with mindset. Buy the books I recommend and read each morning for 15 minutes. Your Life Will Change! I promise! I’ve seen it countless times with other agents who I coach in our company.
And PLEASE, do not worry about keeping up with the Joneses. Most of the Joneses are leveraged up to their eyeballs in BAD Debt and one sick day away from losing it all.