Podpage Logo Made with Podpage
Sept. 20, 2022

Ep 67: Why "House FIRE" Investing Beats The 4% Withdrawal Rule of Thumb

Ep 67: Why "House FIRE" Investing Beats The 4% Withdrawal Rule of Thumb

Alan Corey lays out how House FIRE is the best method to reach early retirement.  Typical rule of thumbs are to save 25 times your annual expenses in a stock portfolio and then withdraw just 4% of that balance each year.  But what is out...


Alan Corey lays out how House FIRE is the best method to reach early retirement.  Typical rule of thumbs are to save 25 times your annual expenses in a stock portfolio and then withdraw just 4% of that balance each year.  But what is out there for us real estate investors?

Intro from Haley and Justin Brown-Woods, co-hosts of "The Price of Avocado Toast" podcast, who on their own podcast mentioned how the House FIRE strategy  lead to them purchasing a "Student Debt House."

 

 

Read the transcript here:

Alan: Hey, Real Estate Maxi's, Alan Corey here. Today's episode we're gonna talk about House FIRE. This is the real estate strategy that I used to retire early, and also "House FIRE" is the name of my most recent book. But before I explain it to you in details, I want you to hear it from someone else. "

Justin: And then the third book, which was probably the most transformational for me

was called House FIRE by Alan Corey, and it was a really smooth read, really, um, comical, really easy to digest. But in it, he makes a really good point that we, we will review and research things over and over and say, we're gonna take the leap and we never will because we are holding ourselves back. And so in the first few chapters he says, I'm challenging you, reader 3 months

from when you put this book down because you finished it buy your first property, and that was in August that I finished it and we closed on the house in Michigan in November. So it was almost three months Exactly. And I was really proud of that because, uh, I wanted to push myself to, to completing those tasks.

Alan: So my favorite way of looking at this is we bought a house that's going to pay your student loan payments, and then we still own the house once your student loans are 

Justin: paid off. Yeah, and that's actually what the book House FIRE by Alan Corey talks about. He essentially says, if you can become a real estate investor who owns these homes, don't call 'em the home that's, you know, down on this street, you know, the Bank Street home or the Church Street home.

Call 'em the phone bill, call 'em the pet insurance, whatever bill that that home's cashflow is gonna take care of, that's what you wanna call 'em. So this student loan that this is the student loan house. Yeah. It's really exciting when you look at it like that. Like, yeah, I actually, this cashflow theoretically could pay my 

Alan: student loan."

All right, so that was Justin Brown-Woods and his wife Haley. They're the host of the Price of Avocado podcast, which provides excellent personal finance advice if you guys are looking for that. They've got a very interesting story. They inherited $600,000 as a young married couple, burned through it really quickly, and then had a wake up call and basically had to redesign their life, their financial life.

And they did it partly through real estate and it was, It's awesome for me to hear this story unsolicited on their podcast. I actually met Justin at a conference last week and he told me how transformational my book was for him, and then he talked about it on his podcast and I was like, Wow, that, that's great to hear.

So I checked it out and that's the story you just heard right now. And I want to share it with you listeners, sort of the background, if you may be new to this podcast or new to my story or new to my way of real estate investing, which yeah, I call it House FIRE. FIRE stands for Financial Independence, Retire Early.

So that's what we're gonna cover in this episode today. The Basics of House FIRE. And before we get into that, let me tell you a little bit about me.

Hey guys. My name's Alan Corey. I'm the host of the Real Estate Maximalist podcast, and I've been real estate investing for over 22 years. Half my life. I'm 44 right now. I've done it all. The new constructions, the short-term rentals, the long-term rentals, the multi-families, the single families. I once bought 30 single family homes site unseen in one day.

I've done it all and I'm here to share my story with you. And when people ask me what I do, I just find it easier to say, I'm a Real Estate Maximalist. All right guys, so let's get into House FIRE. First, I want you to understand the FIRE movement. You might be familiar with this. It's the Financial Independence

Retire Early. Personal Finance Gurus that are out there, and they teach personal finance advice off the study that's called the "Trinity Study." If you wanna look it up, and I'll have it in the show notes. The Trinity study in a nutshell says this, have a look at your savings, whatever that amount is, you can withdraw 4% of that every single year for infinity.

You could have the worst timing possible in retirement, leaving your day job, but as long as you stick to 4% withdrawal rate each year, ebbs and flows of the market will always have you covered. You'll always have 4%. Your balance some years might go up 10% and might go down 10%, but as long as you withdraw 4% each year maximum, you basically have infinity money.

So the FIRE movement, a lot of the bloggers and personal finance shows out there have taken this study and run with it, and they basically calculate, Hey, how much money do I need in my savings so that I can comfortably live off 4% withdrawal rate? So the way that buyer-minded early retirees calculate that is, Hey, take all your expenses, your monthly expenses.

I'm talking about the car payments, the student loan, the mortgage payments, utility bills, phone bills, what have you. Add them all up. What do you spend in one month? Obviously there's gonna be an average. You know, find your average that you're gonna spend each month and then multiply that by 12. And if you do that, then you obviously get your annual expenses.

This is your burn rate. Now, if you take that burn rate, whatever that number is, let's say it's a hundred thousand dollars that you're spending a year, all you gotta do is take that burn rate, multiply it by 25. So if it's a hundred thousand dollars burn rate, you need 2.5 million in stocks, savings, IRA, some sort of stock portfolio.

And as long as you withdraw 4% of that, 4% of a 2.5 million portfolio is $100,000. So that's gonna cover your burn rate. So you can early retire once you have 25 times your burn rate. Now there's a lot of ways to move the slider around. Obviously, you can reduce your expenses drastically in order to get that burn rate down so you don't have to save as much.

Or it's crafting a retirement lifestyle that's cheaper than the one you have now. Maybe you're not driving as much cuz you don't have a work commute. Maybe you're cooking more of your food cuz you have more time. A lot of these strategies come back to reducing your expenses in retirement. But also a lot of these strategies require you to be a millionaire.

You have to save up because most people's burn rate multiplied by 25 is gonna be over a million dollars. So I didn't really like that principle. I didn't like that you had to save up a million dollars to retire, because that makes sense to most people, and that also seems very frustrating. It seems like an obstacle, a roadblock.

Wow. Yeah, of course if I have a million dollars, I could retire and pull out 4% and live a good life. And people just stop there and they don't even start saving for retirement and they never retire and they just work and grind and say, Hey, that life's not for me. And so that got the gears turning in my head saying, There's gotta be a better way, which eventually led down to the path of House FIRE, which I'll, I'll talk to you in a minute about.

But the second thing I didn't like, About this FIRE way of retiring, of withdrawing just 4% in retirement. It creates a lifestyle in retirement where you have to have a constrained budget, right? We all know your expenses are really gonna go up year after year. So if you have a tight burn rate pulling 4% off your retirement funds and expenses go up, that means you're living a more frugal and less

glamorous life each year in retirement because as expenses go up, you still are stuck to withdrawing 4% each year. And um, that's not my vision of retirement. I wanna live large in retirement. I wanna live bigger. I want to have a more glamorous life. I wanna travel more. I wanna go to nicer restaurants.

That's how I wanna live my retirement. So that was the second issue I had with sort of this plan that works, that mathematically works. And supported by the Trinity Study is just, hey, get your burn rate calculated and multiply it by 25. As long as you save that, you can retire and stick to withdrawing only 4% each year.

It doesn't matter if you have the worst timing possible, because if you have it spread across mutual funds and safe investments in some diversity, that 4% withdrawal weight's gonna cover you for the rest of your life. So what is the better way? This is where House FIRE comes in. My explanation of House FIRE is this:

imagine a bill that you have maybe $150 internet and phone bill combined, something along those lines. That's a bill that's gonna follow you for the rest of your life. You can't buy internet access and phone access in bulk to get a discount. You can't pay it off. It's a bill that's gonna haunt you for the rest of your life.

And I hate things that haunt me for the rest of life, especially expenses and bills. And I wanted a better way to cover that. So in the traditional FIRE method, that $150 bill that we all have multiplied by 12, so that's an $1,800 burn rate just on your phone/internet bill, if you multiply that number

by 25, that's $45,000. So for you to have your internet bill covered forever, you have to $45,000 in a stock portfolio, withdraw 4% of that $45,000 and that's gonna be $150 a year. And that will last you for infinity. Uh, that seems crazy to think about. You have to budget $45,000 just for your phone bill.

So imagine all your other bills. After that, right? I'm painting a picture where you're, you're closer to, closer to having to be a millionaire to retire this way. Now, the house fire solution is the following. That $45,000 could be a 25% down payment on $180,000 house. Now, I promise you, there are thousands of houses out there that are under $200,000 that if you put $45,000 down payment on, which is 25% in any market, we can find you a cash flowing property that spits off $150.

So this is what Justin was referring to. Hey, let's buy a house. Let's call it the "phone bill house." Instead of keeping $45,000 in a stock portfolio, let's take that $45,000, use it as a down payment for a house. That house is gonna kick off $150 each month, and that's gonna cover my phone bill. And that's the House FIRE method.

You're burning away each bill one house of a time, and then you go to your next bill. Maybe you got your gas bill and your utility bill and water bill maybe collectively that's a hundred dollars. Now if it's a hundred dollars times 12, that's $1,200 a year, times 25. You've gotta save $30,000 to kill those utility bills.

And I would tackle those first, cuz those are the bills that haunt you for the rest of your life. Let's catch those on fire. Let's burn up those bills with a house. And then you buy a utility bill house, right? Save up $30,000. That's a 25% down payment on $120,000 house. Promise you those numbers exist.

Long distance investing with a property manager, you can easily find those homes that kick off a hundred bucks a month. And why this method is better than the traditional route of doing stocks is this, if you do this for every single bill, you could probably cover most of your expenses. With four to six rental properties, I was able to do it with five.

This is what happens when you reach retirement. Each year your expenses go down cuz your tenants are paying off your mortgage a little bit each month. Rent will rise typically a little bit each year. 25, 50, a hundred bucks, depending on your market. Everyone's rented the house before and no one ever gets the same rental amount the year following when they renew the lease.

And if you do, you got really lucky. You have a landlord who's checked out. Now, think of it from a landlord perspective, adding 50 bucks to the lease each year, that's gonna increase my living expenses as the tenant, $600. I'm gonna have to spend $600 to move, right? Hiring the moving trucks, taking off work, the time and energy to go look at new properties.

All that is gonna cost me more than 600 bucks. So yes, I'm gonna stay in your house, continue renting even with that 50 bump. And if you do that every year, I'm still gonna stay. So what happens with that? You get an extra $50 of cash flow as a landlord if you're using the House FIRE method. Now that $50 bill covers

my Netflix subscription and my Hulu subscription and my Disney Plus subscription, right? Those bills out the way. And then I get another property, and maybe that covers my food bill. Maybe that covers my car payment. Maybe that covers my student debt. I just went down every single bill in my life and said, I'm gonna buy a property for this, and this property's gonna pay this bill.

The cash flow is gonna pay this bill. And the cumulative effect of this is that once all your bills are covered by houses, spitting off cash flow, my retirement gets bigger and bigger each year. I'm not living on a constrained budget because each year those rents go up and my mortgage gets paid down. So the more houses I have, the more cash flow I have to fund my retirement lifestyle.

And so what happens now for me is, hey, I wanna Tesla and that Tesla has a $500 car payment. I could get a hundred thousand dollars in cash, go give it to Elon Musk and say, Here I wanna Tesla Model X. And then what happens is, I've transferred my a hundred thousand dollars of wealth from my account to Uncle Elon's account and he gets wealthier and I get a car.

But now hear me, This is the better way, the House FIRE way to have that exact same transaction where I get wealthier, not Elon Musk, a hundred thousand dollars that is earmarked for the Tesla Model X Fund. I go buy a house with that a hundred thousand dollars, put it on a down payment on a $300,000 house.

That's one third down payment more than I need to. But the reason I might want to do that is that it kicks off more cash flow. I still go by the Tesla, but I don't buy it in cash. I buy it with a small down payment. It has a financing opportunity with it. A car note that's, let's say $500 a month. My house that I bought with my hundred thousand dollars kicks off $500 a month.

Now that house is paying my Tesla bill. And let's just fast forward 10 years. Let's say it's a 10 year car note and 10 years that house pays off my car note and bam, at the end of 10 years, guess what? I still have that house. And I have my Tesla and I still have my a hundred thousand dollars. My hundred thousand dollars is in the equity of that house Over the past 10 years, that $300,000 house is probably now a $375,000 house.

That rental income, that cash flow was $500 a month, is probably up to $750 by that time, and it was earmarked for my Tesla fund, which is now paid off, and I've got an extra $750 that I don't know what to do with. So I've gotta go make up a bill to spend that cash flow. So if I just collect that $750 each month, so it just goes to my bank account and over one year, $750 turns into $9,000.

So maybe I'd rename that house. It used to be the "Tesla Fund" to my "vacation fund", and now I've got a house that funds a $9,000 vacation for me. That could be one week in Hawaii. That could be six months camping, whatever I want. Now I have a vacation budget house, and that's what's so exciting about House FIRE is that my retirement gets better and better each year and I'm not transferring wealth to someone else.

I'm transferring it to myself into a cash flowing asset or rental property. And that rental property's paying all my debts and all my expenses. So in Justin's case, what he talks about on "The Price of Avocado Toast", which we heard earlier. They called it their "student debt" house. I made that example in my book specifically that hey, you may have student debt and let's say it's $50,000, you can spend the next 10 to 15 years paying off that student debt.

And once it's paid off, now you have $0. Cause you put all your extra money, you worked overtime, everything to pay off that house. Now you're 10 to 15 years in the future. Now you're gonna say, I'm gonna start investing in real estate. And the housing prices have doubled, interest rates have gone up. You've just lost out on 15 years of home appreciation growth cuz you're focused on your student loan debt.

So what he did and what I advocate and why House FIRE Method is yeah, don't pay off that student debt with your cash. Go buy a house that kicks off enough cash flow to cover that monthly student debt payment. And then 10, 15 years from now, your student debt's paid off your house has appreciated you've kept the money for yourself.

And that's what he gets into in his episode 67, um, where he buys his first real estate property. They live in California. They bought a house in Michigan for under a hundred thousand dollars and it kicks off enough cash flow to cover his student debt. They've Alan: Hey, Real Estate Maxi's, Alan Corey here. Today's episode we're gonna talk about House FIRE. This is the real estate strategy that I used to retire early, and also "House FIRE" is the name of my most recent book. But before I explain it to you in details, I want you to hear it from someone else. "
Justin: And then the third book, which was probably the most transformational for me
was called House FIRE by Alan Corey, and it was a really smooth read, really, um, comical, really easy to digest. But in it, he makes a really good point that we, we will review and research things over and over and say, we're gonna take the leap and we never will because we are holding ourselves back. And so in the first few chapters he says, I'm challenging you, reader 3 months
from when you put this book down because you finished it buy your first property, and that was in August that I finished it and we closed on the house in Michigan in November. So it was almost three months Exactly. And I was really proud of that because, uh, I wanted to push myself to, to completing those tasks.
Alan: So my favorite way of looking at this is we bought a house that's going to pay your student loan payments, and then we still own the house once your student loans are 
Justin: paid off. Yeah, and that's actually what the book House FIRE by Alan Corey talks about. He essentially says, if you can become a real estate investor who owns these homes, don't call 'em the home that's, you know, down on this street, you know, the Bank Street home or the Church Street home.
Call 'em the phone bill, call 'em the pet insurance, whatever bill that that home's cashflow is gonna take care of, that's what you wanna call 'em. So this student loan that this is the student loan house. Yeah. It's really exciting when you look at it like that. Like, yeah, I actually, this cashflow theoretically could pay my 
Alan: student loan."
All right, so that was Justin Brown-Woods and his wife Haley. They're the host of the Price of Avocado podcast, which provides excellent personal finance advice if you guys are looking for that. They've got a very interesting story. They inherited $600,000 as a young married couple, burned through it really quickly, and then had a wake up call and basically had to redesign their life, their financial life.
And they did it partly through real estate and it was, It's awesome for me to hear this story unsolicited on their podcast. I actually met Justin at a conference last week and he told me how transformational my book was for him, and then he talked about it on his podcast and I was like, Wow, that, that's great to hear.
So I checked it out and that's the story you just heard right now. And I want to share it with you listeners, sort of the background, if you may be new to this podcast or new to my story or new to my way of real estate investing, which yeah, I call it House FIRE. FIRE stands for Financial Independence, Retire Early.
So that's what we're gonna cover in this episode today. The Basics of House FIRE. And before we get into that, let me tell you a little bit about me.
Hey guys. My name's Alan Corey. I'm the host of the Real Estate Maximalist podcast, and I've been real estate investing for over 22 years. Half my life. I'm 44 right now. I've done it all. The new constructions, the short-term rentals, the long-term rentals, the multi-families, the single families. I once bought 30 single family homes site unseen in one day.
I've done it all and I'm here to share my story with you. And when people ask me what I do, I just find it easier to say, I'm a Real Estate Maximalist. All right guys, so let's get into House FIRE. First, I want you to understand the FIRE movement. You might be familiar with this. It's the Financial Independence
Retire Early. Personal Finance Gurus that are out there, and they teach personal finance advice off the study that's called the "Trinity Study." If you wanna look it up, and I'll have it in the show notes. The Trinity study in a nutshell says this, have a look at your savings, whatever that amount is, you can withdraw 4% of that every single year for infinity.
You could have the worst timing possible in retirement, leaving your day job, but as long as you stick to 4% withdrawal rate each year, ebbs and flows of the market will always have you covered. You'll always have 4%. Your balance some years might go up 10% and might go down 10%, but as long as you withdraw 4% each year maximum, you basically have infinity money.
So the FIRE movement, a lot of the bloggers and personal finance shows out there have taken this study and run with it, and they basically calculate, Hey, how much money do I need in my savings so that I can comfortably live off 4% withdrawal rate? So the way that buyer-minded early retirees calculate that is, Hey, take all your expenses, your monthly expenses.
I'm talking about the car payments, the student loan, the mortgage payments, utility bills, phone bills, what have you. Add them all up. What do you spend in one month? Obviously there's gonna be an average. You know, find your average that you're gonna spend each month and then multiply that by 12. And if you do that, then you obviously get your annual expenses.
This is your burn rate. Now, if you take that burn rate, whatever that number is, let's say it's a hundred thousand dollars that you're spending a year, all you gotta do is take that burn rate, multiply it by 25. So if it's a hundred thousand dollars burn rate, you need 2.5 million in stocks, savings, IRA, some sort of stock portfolio.
And as long as you withdraw 4% of that, 4% of a 2.5 million portfolio is $100,000. So that's gonna cover your burn rate. So you can early retire once you have 25 times your burn rate. Now there's a lot of ways to move the slider around. Obviously, you can reduce your expenses drastically in order to get that burn rate down so you don't have to save as much.
Or it's crafting a retirement lifestyle that's cheaper than the one you have now. Maybe you're not driving as much cuz you don't have a work commute. Maybe you're cooking more of your food cuz you have more time. A lot of these strategies come back to reducing your expenses in retirement. But also a lot of these strategies require you to be a millionaire.
You have to save up because most people's burn rate multiplied by 25 is gonna be over a million dollars. So I didn't really like that principle. I didn't like that you had to save up a million dollars to retire, because that makes sense to most people, and that also seems very frustrating. It seems like an obstacle, a roadblock.
Wow. Yeah, of course if I have a million dollars, I could retire and pull out 4% and live a good life. And people just stop there and they don't even start saving for retirement and they never retire and they just work and grind and say, Hey, that life's not for me. And so that got the gears turning in my head saying, There's gotta be a better way, which eventually led down to the path of House FIRE, which I'll, I'll talk to you in a minute about.
But the second thing I didn't like, About this FIRE way of retiring, of withdrawing just 4% in retirement. It creates a lifestyle in retirement where you have to have a constrained budget, right? We all know your expenses are really gonna go up year after year. So if you have a tight burn rate pulling 4% off your retirement funds and expenses go up, that means you're living a more frugal and less
glamorous life each year in retirement because as expenses go up, you still are stuck to withdrawing 4% each year. And um, that's not my vision of retirement. I wanna live large in retirement. I wanna live bigger. I want to have a more glamorous life. I wanna travel more. I wanna go to nicer restaurants.
That's how I wanna live my retirement. So that was the second issue I had with sort of this plan that works, that mathematically works. And supported by the Trinity Study is just, hey, get your burn rate calculated and multiply it by 25. As long as you save that, you can retire and stick to withdrawing only 4% each year.
It doesn't matter if you have the worst timing possible, because if you have it spread across mutual funds and safe investments in some diversity, that 4% withdrawal weight's gonna cover you for the rest of your life. So what is the better way? This is where House FIRE comes in. My explanation of House FIRE is this:
imagine a bill that you have maybe $150 internet and phone bill combined, something along those lines. That's a bill that's gonna follow you for the rest of your life. You can't buy internet access and phone access in bulk to get a discount. You can't pay it off. It's a bill that's gonna haunt you for the rest of your life.
And I hate things that haunt me for the rest of life, especially expenses and bills. And I wanted a better way to cover that. So in the traditional FIRE method, that $150 bill that we all have multiplied by 12, so that's an $1,800 burn rate just on your phone/internet bill, if you multiply that number
by 25, that's $45,000. So for you to have your internet bill covered forever, you have to $45,000 in a stock portfolio, withdraw 4% of that $45,000 and that's gonna be $150 a year. And that will last you for infinity. Uh, that seems crazy to think about. You have to budget $45,000 just for your phone bill.
So imagine all your other bills. After that, right? I'm painting a picture where you're, you're closer to, closer to having to be a millionaire to retire this way. Now, the house fire solution is the following. That $45,000 could be a 25% down payment on $180,000 house. Now, I promise you, there are thousands of houses out there that are under $200,000 that if you put $45,000 down payment on, which is 25% in any market, we can find you a cash flowing property that spits off $150.
So this is what Justin was referring to. Hey, let's buy a house. Let's call it the "phone bill house." Instead of keeping $45,000 in a stock portfolio, let's take that $45,000, use it as a down payment for a house. That house is gonna kick off $150 each month, and that's gonna cover my phone bill. And that's the House FIRE method.
You're burning away each bill one house of a time, and then you go to your next bill. Maybe you got your gas bill and your utility bill and water bill maybe collectively that's a hundred dollars. Now if it's a hundred dollars times 12, that's $1,200 a year, times 25. You've gotta save $30,000 to kill those utility bills.
And I would tackle those first, cuz those are the bills that haunt you for the rest of your life. Let's catch those on fire. Let's burn up those bills with a house. And then you buy a utility bill house, right? Save up $30,000. That's a 25% down payment on $120,000 house. Promise you those numbers exist.
Long distance investing with a property manager, you can easily find those homes that kick off a hundred bucks a month. And why this method is better than the traditional route of doing stocks is this, if you do this for every single bill, you could probably cover most of your expenses. With four to six rental properties, I was able to do it with five.
This is what happens when you reach retirement. Each year your expenses go down cuz your tenants are paying off your mortgage a little bit each month. Rent will rise typically a little bit each year. 25, 50, a hundred bucks, depending on your market. Everyone's rented the house before and no one ever gets the same rental amount the year following when they renew the lease.
And if you do, you got really lucky. You have a landlord who's checked out. Now, think of it from a landlord perspective, adding 50 bucks to the lease each year, that's gonna increase my living expenses as the tenant, $600. I'm gonna have to spend $600 to move, right? Hiring the moving trucks, taking off work, the time and energy to go look at new properties.
All that is gonna cost me more than 600 bucks. So yes, I'm gonna stay in your house, continue renting even with that 50 bump. And if you do that every year, I'm still gonna stay. So what happens with that? You get an extra $50 of cash flow as a landlord if you're using the House FIRE method. Now that $50 bill covers
my Netflix subscription and my Hulu subscription and my Disney Plus subscription, right? Those bills out the way. And then I get another property, and maybe that covers my food bill. Maybe that covers my car payment. Maybe that covers my student debt. I just went down every single bill in my life and said, I'm gonna buy a property for this, and this property's gonna pay this bill.
The cash flow is gonna pay this bill. And the cumulative effect of this is that once all your bills are covered by houses, spitting off cash flow, my retirement gets bigger and bigger each year. I'm not living on a constrained budget because each year those rents go up and my mortgage gets paid down. So the more houses I have, the more cash flow I have to fund my retirement lifestyle.
And so what happens now for me is, hey, I wanna Tesla and that Tesla has a $500 car payment. I could get a hundred thousand dollars in cash, go give it to Elon Musk and say, Here I wanna Tesla Model X. And then what happens is, I've transferred my a hundred thousand dollars of wealth from my account to Uncle Elon's account and he gets wealthier and I get a car.
But now hear me, This is the better way, the House FIRE way to have that exact same transaction where I get wealthier, not Elon Musk, a hundred thousand dollars that is earmarked for the Tesla Model X Fund. I go buy a house with that a hundred thousand dollars, put it on a down payment on a $300,000 house.
That's one third down payment more than I need to. But the reason I might want to do that is that it kicks off more cash flow. I still go by the Tesla, but I don't buy it in cash. I buy it with a small down payment. It has a financing opportunity with it. A car note that's, let's say $500 a month. My house that I bought with my hundred thousand dollars kicks off $500 a month.
Now that house is paying my Tesla bill. And let's just fast forward 10 years. Let's say it's a 10 year car note and 10 years that house pays off my car note and bam, at the end of 10 years, guess what? I still have that house. And I have my Tesla and I still have my a hundred thousand dollars. My hundred thousand dollars is in the equity of that house Over the past 10 years, that $300,000 house is probably now a $375,000 house.
That rental income, that cash flow was $500 a month, is probably up to $750 by that time, and it was earmarked for my Tesla fund, which is now paid off, and I've got an extra $750 that I don't know what to do with. So I've gotta go make up a bill to spend that cash flow. So if I just collect that $750 each month, so it just goes to my bank account and over one year, $750 turns into $9,000.
So maybe I'd rename that house. It used to be the "Tesla Fund" to my "vacation fund", and now I've got a house that funds a $9,000 vacation for me. That could be one week in Hawaii. That could be six months camping, whatever I want. Now I have a vacation budget house, and that's what's so exciting about House FIRE is that my retirement gets better and better each year and I'm not transferring wealth to someone else.
I'm transferring it to myself into a cash flowing asset or rental property. And that rental property's paying all my debts and all my expenses. So in Justin's case, what he talks about on "The Price of Avocado Toast", which we heard earlier. They called it their "student debt" house. I made that example in my book specifically that hey, you may have student debt and let's say it's $50,000, you can spend the next 10 to 15 years paying off that student debt.
And once it's paid off, now you have $0. Cause you put all your extra money, you worked overtime, everything to pay off that house. Now you're 10 to 15 years in the future. Now you're gonna say, I'm gonna start investing in real estate. And the housing prices have doubled, interest rates have gone up. You've just lost out on 15 years of home appreciation growth cuz you're focused on your student loan debt.
So what he did and what I advocate and why House FIRE Method is yeah, don't pay off that student debt with your cash. Go buy a house that kicks off enough cash flow to cover that monthly student debt payment. And then 10, 15 years from now, your student debt's paid off your house has appreciated you've kept the money for yourself.
And that's what he gets into in his episode 67, um, where he buys his first real estate property. They live in California. They bought a house in Michigan for under a hundred thousand dollars and it kicks off enough cash flow to cover his student debt. They've never been to Michigan, still to this day, have never been.
They bought it remotely. These are things I teach here on the Real Estate Maximalist podcast. These are things you'll learn. Other people doing this in the Real Estate Maximalist Facebook group, Join my newsletter. I wanna share stories like this as well. Follow me RealEstateMaxi on all the social media profiles.
This is what you can do to change your life. It changed my life and it's such a faster, streamlined way to early retire that's not your typical traditional FIRE method of multiplying 25 times your burn rate. Another key piece I want to touch on that Justin also said was that you've got a lot of fire under your butt to get out and invest in real estate, right?
That's part of the House FIRE method, lighting in a fire for you to take action. In my book, I give examples how, Hey, on your own, you can buy a house in 90 days. If you just make that decision in your head, Hey, in three months from now I'm gonna buy a house. First 30 days getting your finances in order. Learning a little bit about real estate.
Next 30 days, looking at properties, making offers, Get something under contract last 30 days, closing on that house. I am actually working on a course right now that streamlines that, that says, Hey, if you want my help, you want my coaching, I can get that down to 10 weeks. If you make a decision today, Hey, I wanna invest in real estate in 10 weeks, two and a half months, I've got a course I'm just about to launch.
So sign up with the newsletter to be the first to hear about it. Where I'm gonna hold your hand and teach you how to do the House FIRE method and get you under contract and closed on a house in 10 weeks, because otherwise you're gonna sit there and analyze and research and be frozen with fear, analysis paralysis, and three months goes by, Six months go by.
Nine months go by. You missed out 10 different houses that would've covered your bills during that time. You missed out on a year's worth of house appreciation. You missed out on a year's worth of an asset paying for your bill. That should be really painful to you. If you've got cash sitting in your bank right now doing nothing for you, let's put it to work.
Let me help you put it to work. That's the message I wanna share. I love the words that Justin said. He said it's transformational to him. The book House FIRE was, this is, it was transformational to me, and it'll be transformational to you. So there's your House FIRE Method in a nutshell. Please, if you wanna learn more, Follow me online, join the Facebook group.
If you want to take my class, you're motivated by a house in 10 weeks. Join my newsletter, follow me on social. Keep listening to this podcast. I hope to launch it in the coming weeks. I'm putting the final touches on it right now. I wholeheartedly agree this is the best method to early retirement. It has the lowest risk and it generates largest wealth for you.
And why I teach it is, I love hearing the stories of Justin and I wanna hear your story. I wanna have you on the podcast one day and say, Hey, Alan. I bought a house in 10 weeks, then I bought another one, and I paid my bills through houses. I get tingles just saying that right now. Those are my favorite guests, those are my favorite stories.
That to me is the most rewarding part of doing what I do. It's not the money, it's not the deal. It's "Alan, this House FIRE Method changed my life, transformed my life." That brings a smile to my face. That is what I live for every day. I want to spread this. I am very evangelical about this as if I'm spreading a religion cuz it's, it's really gonna change your finances, which is gonna change your wealth, It's gonna change your life.
We're gonna celebrate it here together. All right guys, I'll see you next time. I'm your host, Alan Corey on the Real Estate Maximalist Podcast. And I'm teaching you how to go get it. been to Michigan, still to this day, have never been.

They bought it remotely. These are things I teach here on the Real Estate Maximalist podcast. These are things you'll learn. Other people doing this in the Real Estate Maximalist Facebook group, Join my newsletter. I wanna share stories like this as well. Follow me RealEstateMaxi on all the social media profiles.

This is what you can do to change your life. It changed my life and it's such a faster, streamlined way to early retire that's not your typical traditional FIRE method of multiplying 25 times your burn rate. Another key piece I want to touch on that Justin also said was that you've got a lot of fire under your butt to get out and invest in real estate, right?

That's part of the House FIRE method, lighting in a fire for you to take action. In my book, I give examples how, Hey, on your own, you can buy a house in 90 days. If you just make that decision in your head, Hey, in three months from now I'm gonna buy a house. First 30 days getting your finances in order. Learning a little bit about real estate.

Next 30 days, looking at properties, making offers, Get something under contract last 30 days, closing on that house. I am actually working on a course right now that streamlines that, that says, Hey, if you want my help, you want my coaching, I can get that down to 10 weeks. If you make a decision today, Hey, I wanna invest in real estate in 10 weeks, two and a half months, I've got a course I'm just about to launch.

So sign up with the newsletter to be the first to hear about it. Where I'm gonna hold your hand and teach you how to do the House FIRE method and get you under contract and closed on a house in 10 weeks, because otherwise you're gonna sit there and analyze and research and be frozen with fear, analysis paralysis, and three months goes by, Six months go by.

Nine months go by. You missed out 10 different houses that would've covered your bills during that time. You missed out on a year's worth of house appreciation. You missed out on a year's worth of an asset paying for your bill. That should be really painful to you. If you've got cash sitting in your bank right now doing nothing for you, let's put it to work.

Let me help you put it to work. That's the message I wanna share. I love the words that Justin said. He said it's transformational to him. The book House FIRE was, this is, it was transformational to me, and it'll be transformational to you. So there's your House FIRE Method in a nutshell. Please, if you wanna learn more, Follow me online, join the Facebook group.

If you want to take my class, you're motivated by a house in 10 weeks. Join my newsletter, follow me on social. Keep listening to this podcast. I hope to launch it in the coming weeks. I'm putting the final touches on it right now. I wholeheartedly agree this is the best method to early retirement. It has the lowest risk and it generates largest wealth for you.

And why I teach it is, I love hearing the stories of Justin and I wanna hear your story. I wanna have you on the podcast one day and say, Hey, Alan. I bought a house in 10 weeks, then I bought another one, and I paid my bills through houses. I get tingles just saying that right now. Those are my favorite guests, those are my favorite stories.

That to me is the most rewarding part of doing what I do. It's not the money, it's not the deal. It's "Alan, this House FIRE Method changed my life, transformed my life." That brings a smile to my face. That is what I live for every day. I want to spread this. I am very evangelical about this as if I'm spreading a religion cuz it's, it's really gonna change your finances, which is gonna change your wealth, It's gonna change your life.

We're gonna celebrate it here together. All right guys, I'll see you next time. I'm your host, Alan Corey on the Real Estate Maximalist Podcast. And I'm teaching you how to go get it.