Retire Early with Rental Properties: A Guide for the Aspiring Real Estate Investor in Austin
Every Monday, most of us fight back fantasies of quitting our job and retiring to some distant beach somewhere instead of sitting through the Hwy 35 bumper to bumper beast. And for most of us, this fantasy has been nothing but that: a pipedream only to be realized when we’re too old to check off those bucket list items. But today’s generation is obtaining financial freedom and retiring early at higher rates than ever. While there are many ways to achieve this, our favorite by far is rental property. If you’re reading this blog, chances are you already have some idea of what the benefits of rental property investing can be. We’re also going to assume that you already have some money management skills and have flexed those financial discipline muscles a time or two. Intentionality and discipline will make or break you in this business. If you feel like you don’t quite have those things under your belt yet, we recommend you take a small detour to spend time reading up on money management skills. Resources like Biggerpockets.com have a mountain of information to get you started. But for the rest of us, ready to take the next steps towards financial freedom, we’re going to spend some time learning why and how to go about this.
Why Rental Properties?
First, let’s get the basics out of the way and cover the benefits of rental property investment in general. How can being a professional landlord get me to my retirement goals faster than any other option?
- Consistent cash flow: Rental properties can provide monthly income that covers your mortgage and expenses—and still puts money in your pocket.
- Appreciation: Home values continue to rise, despite higher interest rates, meaning your property becomes more valuable over time. Is your kiddo getting ready to go off to college? Sell one of your rental properties and pay in cash instead of saddling them with student loan debt.
- Tax benefits: Depreciation, interest deductions, and property tax write-offs all add up to lower taxable income.
- Flexibility: Investing in real estate offers you flexibility like no other investment. Want to do a full remodel on your residence? If you’ve got a duplex, you’ve got a place to stay for free because your tenant’s monthly rent covers your mortgage.
- Legacy: Being able to provide your children with a source of income while they pursue that Ph.D. or just after college graduation, can set them miles ahead of their peers and give them the chance to retire early too.
OK, but why invest in Austin’s rental market instead of elsewhere?
With Austin’s cooling housing market, we’re seeing some investors holding out. But this is the opposite of what you should be doing. It’s opportunities like this that separate the hobby investors, who might pad their income a bit here and there, from the serious investors who are hoping to replace their income altogether. Now is the time to snag amazing deals! Sellers are more likely than ever to offer seller financing, helping you skip the interest fees. Prices have dropped enough to get you in the game if you haven’t been able to thus far. With a growth rate of .48% annually, the population is Austin is still growing. Austin still hosts a myriad of tech companies, a major University, and the State’s Capitol, bringing in thousands of jobs. This is why being intentional can make or break you in this business. Good investors are always thinking about the future and reading the signs of a good deal. They are willing to see past the current emotional climate and take calculated risks based on facts. One of our clients invested heavily in Austin during the 1980s when the entire country’s real estate industry was going belly up. Today, he’s raking in over six figures in passive income every month! You want to be that guy! Where there is growth, even small growth, there are jobs. Where there are jobs, there are employees who need a roof over their head.
How to get started: Step-by-step
Step 1: Start with Your Goals
- Set retirement goals: Before diving into the Austin real estate market, get clear on what early retirement means for you. Do you want to travel? Volunteer? Downsize? Whether your goal is $3,000/month in passive income or enough equity to sell and retire, it starts with a number.
Once you have that financial goal in mind, you will help you calculate how many rental properties you will need to meet that goal.
- Set realistic goals specific to property investment:
- Set a realistic timeline: Maybe one property this year, another in two years.
- Run the numbers: Look at expected rent, mortgage, taxes, insurance, and potential maintenance costs.
- Choose the right neighborhood: Austin has a diverse range of rental markets—from family-friendly suburbs to trendy urban areas.
- Inspect and negotiate: Don’t skip due diligence; every dollar saved up front helps long-term ROI.
- Enlist property management: Partnering with an Austin property manager ensures you’re not taking on another job—you’re building an income stream.
A good property manager with a lot of experience in the local market is your best ally here. You need someone who can give you solid idea of what each property will potentially cashflow. This will require expertise not just in property values, but where to find good deals, what are the average rent rates, the average cost of maintenance expenses, and what features of a home or neighborhood attract good tenants and usually go along with longer lease terms. You need someone who really knows the ins and outs of rental investment in Austin to get this right
Step 2: Take the plunge
You’ve plotted and planned. You’ve made countless spreadsheets, finally landed the right property and received the keys…now what?
Each potential investment will come with its own set of challenges and benefits. The name of the game is highlighting the features of your property that you believe will attract the most attention. Focus on making fixes that will provide you with the biggest bang for your buck. Read my previous blog post for more details on that. The most important thing here is to get it done! Vacancies cost money. Every day your property isn’t on the market is one more day of no rent. We see landlords, time and again, drag their feet because they can’t decide if they should go ahead and replace the water heater or they’re thinking of redoing the kitchen counters. In the end, those decisions don’t matter nearly as much as the forward movement of just making a decision. This is why self-discipline is so important if you are going to be successful at rental property investment. Take the time to lay out your goals, weigh the risks, make the decision and have self-discipline to ride the consequences of it. Waffling is expensive. Again, having an expert in your corner makes all the difference here. Even if you are a experienced investor, you’ve maybe gone through the various landlord processes a dozen times. A property manager goes through those same processes a dozen times a month, at least. They’ve seen it all and can help you with those weightier tasks. Some of our clients don’t want to be involved in decisions at all. They want to receive their “Mailbox Money” (as I affectional call it) and not be bothered with the details. We happily take on the task because it often helps to streamline the process, which results in bigger profit markets for our owners. Other clients want us to guide them through it. They want to benefit from our expertise, but they still want autonomy over their investment. We get that too, and we’re happy to walk those clients one step at a time, through the process.
Step 3: Save what you make
Before you use your new passive income stream to fund a vacation or buy a luxury car. (That will come with time.) Remember, your goal is to retire early. The key to succuss here, is leverage as much of your money as you can, as soon as you can, to create a snowball effect in the future. Put every penny of that money into a savings account. That account is what you will use to pay your property taxes, cover a couple of months of vacancy here and there, replace that water heater, and fix the leaky roof. Aim to set aside 1–3% of property value annually for maintenance or vacancy events.
Step 4: Scale Your Austin Rental Portfolio Strategically
As soon as you are able to, use the cash flow generated by your rental property for your next investment. Good investors are always on the lookout for their next good deal. These will come faster and quicker with time, as your profits continue to increase. With each new rental, you’re diversifying your portfolio, stacking income, equity, and security—all working toward your goal of retiring early in Austin.
Step 5: Monitor Your Progress
There are plenty of tools on the internet to help you navigate reports and numbers. But if monitoring numbers and keeping spreadsheet isn’t your thing:
NRPM makes it easy to track:
- Cash flow by property
- Occupancy and vacancy trends
- Equity growth and ROI
- Maintenance history and costs
Step 5: Rinse and repeat:
Eventually, your rental income can cover your living expenses—especially when mortgages are paid down or refinanced. You’ll shift from active investing to passive income, enjoying the lifestyle you’ve worked for without sacrificing your freedom.
Ready to Retire Early with Austin Rental Properties? Neighborhood Realty and Property Management can help! We handle tenant screening, lease management, maintenance, and more. We have been one of the top-producing rental property management companies in the Austin area for more than 30 years, and we’d love to help you reach new levels of success!