How Starting a Rental Property Business Can Retire You Faster Than Your 401k

We’re all taught to save our way to retirement. We take a portion of our monthly income and invest it in a 401K account. However, there is a far more effective way to retire; building cash flow from real estate investments.  

Planning for Retirement

According to a recent study published on, approximately 40% of Americans are at risk of retiring near the poverty level. This risk (among other factors) is causing 74% of Americans to work past retirement age as they attempt to save for retirement instead of building passive streams of income. Their efforts are falling short, with four out of five working Americans having less than one year’s income saved in retirement accounts. Clearly Retirement Model 1 (i.e., saving your way to retirement) is not working for many Americans. Lifestyles Unlimited teaches Retirement Model 2, which is to invest in real estate to build passive streams of income and ultimately financial freedom. The two models will be compared and contrasted below over a ten-year period.

Retirement Model 1 – Saving for Retirement

The median family income in the United States as of 2017 was $61,372 according to the Census Bureau. Taking a conservative approach and saving 15% of that income would equate to ~$767 a month. The vast majority of people can’t and don’t save 15% of their income each month. They live paycheck to paycheck with no savings at all. That is why the median retirement savings of families in the 56 – 61 year age bracket is only $17,000 according to a recent report using 2013 data.   

Let’s assume you save 15% of your income, though. In 10 years, how much savings will you have following Retirement Model 1? And in 32 years? According to historical records, the long-term average S&P 500 return (since inception in 1928 through 2016) is ~10%. The average inflation for the same period of time has been ~3%. Adjusted for inflation, the historical average annual return is ~7%.

At the end of 10 years, you will have saved ~$83,000.

At the end of 13 years, you will have saved ~$192,000.

It will take 32 years to save $1,000,000.

Because of inflation, the $1,000,000 is only worth ~$388,337.03.

If you retire and start living on those savings (i.e., the money from the principal portion of your retirement account), you’ll bring “pray you die before you run out of money” into effect. In today’s money, pulling out the equivalent of $40,000 a year to live on equates to less than 10 years worth of savings. What if you live longer? Where are the golden years for enjoying travel and grandchildren?

Retirement age in the US is 65, but many Americans are choosing to work longer. That doesn’t leave a lot of time to enjoy retirement when the average life expectancy is 79.

Retirement Model 2: Building Passive Income

Investing in real estate allows you to retire AND enjoy your life. To illustrate how real estate investing works, we’ll use actual averages from our members’ current buy, rent, and hold real estate deals. When you buy a single family house that you plan to rent out, you should work with a hard money lender. This allows you to use ~$25,000 of your own money (rather than 20% of the purchase price) to buy the house.  After closing on the house, you should capture ~$20,000 in equity. The house is then rented to a family. By renting the house, you are able to generate $400 a month in cash flow. This is passive income. That $400 is deposited into your bank account each month AFTER paying the principal, interest, taxes, and insurance (PITI). For an initial investment of $25,000, you gained $20,000 in equity and $4,800 a year in passive income. Passive income adds up quickly as you continue to buy, rent, and hold single family homes.

Investing in real estate may seem impossible to someone earning an average salary or to someone without savings. Nothing is impossible when you take the time to get educated and then take action one step at a time. Start saving 15% of your monthly income as you would in Retirement Model 1 (401K), and educate yourself in real estate investing while doing so. Then start buying income-producing assets instead of speculating in the stock market.

The following table shows you how you can increase not only your net worth but your income when you invest in real estate over a 10-year period. Let’s assume you have at least $10,000 in savings already and then you start saving $767 of your earned income each month. It will take 20 months to save $25,000 to buy your first rental house as shown in the table below.

*Using $10,000 in existing savings plus $15,000  accrued from setting aside $767 each month

Within 10 years, you will own 10 rental houses. Assuming an equity capture of $20,000 per house, you will have gained $200,000 in equity. That is $200,000 added to your net worth! You will also have $4,000 a month in cash flow. This is your monthly passive income. That is $48,000 a year!  After 10 years, what would your finances look like with Retirement Model 1 (saving $767 a month and investing in the stock market)? You’d have ~$83,000 in the stock market and no monthly passive income.

What happens if we extend the real estate investment plan three more years? See the table below.

By continuing to invest in real estate for just three more years, you’ll own 20 rental houses. Assuming an equity capture of $20,000 per house, you will have gained $420,000 in equity. That is $400,000 added to your net worth! You will also have $8,000 a month ($96,000 a year) in passive income.  In contrast, after 13 years, what would your finances look like with Retirement Model 1 (saving $767 a month and investing in a 401K)? You’d have ~$192,000 in savings and no monthly passive income.

It should be obvious from the comparison between these two retirement models that building wealth with real estate is much more effective. How will your life be different at the end of those 13 years?

It’s not the money, it’s the Lifestyle.™

You have bills to pay each month. How does $192,000 in the stock market help you pay your bills? It doesn’t. The average family in the US spends ~$5,000 a month.  Could you quit your job if you had $8,000 a month (tax free) in passive income? For most people the answer is yes.

As soon as your passive income meets and exceeds your bills, you are retired. It has nothing to do with age. Lifestyles Unlimited has members who are students in their 20s that have done this.

Does building cash flow require education?  Yes.

Does it require courage?  Yes.

Does it require commitment?  Yes.

Does it require hard work?  Yes.

These are the questions you must consider when deciding to follow either Retirement Model 1 or 2.

Do you really think there is something for nothing out there?

Do you think that you will get ahead without courage, commitment and hard work?

How long will you live in retirement?

How well do you want to live in retirement?

Can you enjoy your golden years?

We hope we have clearly demonstrated the immense value in Model 2.

Building wealth with real estate is so much more effective than speculating in the stock market. Get out there, get educated, and start building passive streams of income for yourself and your family.

“Formal education (high school and college) gets you a job.

Self-education gets you rich.” -Jim Rohn



  1. That was a great post. The author very clearly distinguished the contrasts between both retirement models and building a passive income is definitely the way to go. I just wanted to add a bit to his example. In addition to the additional equity and cash flow obtained from investing in real estate, a person gains even more in terms of personal growth. It takes a special kind of person to slowly and methodically save, invest, identify properties, advertise, rent, manage etc for 10+ years. The kind of person who can do that is rare.

  2. Clearly I need to go to your class. I want to buy some houses but I am a bit reluctant to.

  3. Carrie smith says

    This is a great article. But, the issue I am having is: I own four houses and in order to purchase a 5th, I need a 60% LTV ratio and the 5th house must be a primary residence. So buying with a mortgage to rent out seems to stop at 4 houses unless you have a ton of cash to put down.

    Have you run into these issues? Or, will banks just keep loaning you money for house after house?

    • Lifestyles Unlimited says

      Great question Carrie. This is a common roadblock that we see with investors prior to becoming members. In reality, building beyond four houses is quite simple with the right financing and knowledge of investing best practices. We’ve sent an email your way to discuss how to get beyond this. Thanks for the read!

      Happy learning!
      Happy investing!

  4. Ben siavoshy says

    I would like to learn more about passive income through real estate.

    • Lifestyles Unlimited says

      Thanks for the feedback Ben. We sent along an email to get you acquainted with us and to show you how to learn about creating passive income for yourself.

  5. Dee Taylor says

    Hello. Would love to learn more from your workshops. When is the next one in Plano, TX September /20? Thank you.
    Dee Taylor

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