Many people dream of retiring early, but it's not an easy feat to pull off. To leave the workforce behind ahead of your peers, you'll need to be pretty secure in your income -- especially if you're retiring at a point where you're not yet eligible for monthly Social Security benefits.
Of course, you could invest savvily in stocks throughout your working years in the hopes of growing wealth in your portfolio. But stocks aren't your only ticket to an early retirement. If you play your cards right, a few smart real estate investments could get you there as well. In fact, here are a couple of specific moves worth making if early retirement is a big goal of yours.
1. Buy and hold an income property
You'll often hear that it's a good idea to load up on quality stocks and hold them for decades. During that time, those stocks could gain a fair amount of value so that selling them translates into very nice profits for you.
The same concept applies in real estate. Properties have a tendency to gain value over time, so if you buy a home at the right price and keep it for many years, it could end up being worth hundreds of thousands of dollars more by the time you're ready to sell it and use your proceeds to fund your early retirement.
Of course, owning a home also means having to keep up with mortgage payments, property taxes, and maintenance. And so that's why instead of just keeping that property, it pays to rent it out.
If you buy a home in an area where rentals are harder to come by or where demand is strong, you might manage to command enough money from your tenants to cover your mortgage costs and then some. And then, at the end of the day, you could be sitting on an asset worth a whopping amount of money.
If the idea of being a landlord doesn't appeal to you, hire a property manager and outsource the task instead. You'll pay for that service, but you might still come out well ahead financially.
2. Buy and hold REITs
It's possible to invest in real estate without actually owning property. All you need to do is load up on REITs, or real estate investment trusts.
REITs can make you money in a couple of ways. Like stocks, they can gain value over time, creating a scenario where you can sell your shares at a higher price than what you paid and use that profit to fund your retirement.
But what makes REITs particularly valuable is that they're known to pay higher-than-average dividends. That's money you'll have an opportunity to reinvest through the years to grow wealth. Furthermore, if you hang onto some REITs in your portfolio during retirement, you can use your dividends as income.
Many people need to keep working well into their 60s to boost their nest eggs and avoid straining their limited savings. But if you invest in real estate, you might set yourself up with plenty of income to allow for an early workforce exit.