FIRE movement Hot like fire: investing in real estate to fuel your FIRE movement dreams

Investing in short-term rentals to make the FIRE movement a reality

The financial independence, retire early movement (FIRE movement) has caught on like wildfire (no pun intended!), and has left many wondering–can I pull it off? If you are growing tired of your 9-to-5 job and are looking to build financial independence to retire early and pursue other interests, personal or professional, then investing in real estate should be part of your plan. Real estate – including short-term rentals – has long been touted as one of the most secure forms of long-term investments, and with good reasons. 

FIRE movement through real estate investing

Investing in rental properties comes with numerous benefits, ranging from fiscal advantages (hello tax breaks and 1031 exchange!) to the ability to build reliable streams of passive income. Besides, income-generating real estate can also offer a hedge against inflation since rental revenues tend to keep up with increasing prices overall, and property values tend to appreciate over time. 

Out of the many ways to take advantage of the benefits of real estate investing, short-term rentals are one of the most profitable and reliable ways to bring in additional revenues and pave your way towards a FIRE reality. Here are some reasons why short-term rentals are one of the best ways to invest in real estate. 

A FIRE movement staple: predictable passive income

Financial independence implies having enough money saved away for retirement, or robust passive income streams, that you are no longer tethered to a typical career or work day. Investing in short-term rentals is an excellent way to add passive income streams to your budget so you can put more money aside and retire from your day job earlier. It also allows you to keep earning an income throughout your “retirement,” so you do not need to rely solely on the money you saved before taking the FIRE movement leap.

Unlike long-term rentals, short-term rentals like Airbnb allow hosts to be more reactive to demand. For example, you can change nightly rates between high season and low season or during significant events in your area – such as holiday weekends, sporting events, conventions, and so on. It allows you to fully optimize your rental’s pricing based on your long-term goals, increasing rates when you see an opportunity or reducing if you notice occupancy to be slipping.

In addition, short-term rentals are particularly suited for investing in real estate in a post-pandemic world.  Widespread remote work allows employees to travel for extended periods as long as they have reliable internet access. 

Of course, establishing a predictable income requires choosing a property suited for short-term rental in the right location. To help you judge the potential of an investment property as a short-term rental, best-in-class Airbnb calculators provide real-time revenue estimates based on rich Airbnb data and nearby comparable listings, ensuring prospective hosts and investors are equipped with the information they need to make sound investments to make their FIRE dream a reality.

Building a scalable portfolio to pay dividends long-term

You may be familiar with the saying: “it takes money to make money.” It is particularly true when it comes to real estate investing: after all, purchasing a property is no shortchange. However, one of the reasons investors are so fond of short-term rentals is that it allows them to build a scalable portfolio faster. 

Rental income can be a nice bonus to your regular revenues, giving you some leeway in your budget to purchase more properties. Besides, you do not need to sell your previous rentals to finance new ones. You can tap into the equity you build in your properties using home equity loans, home equity lines of credit (HELOC), or a cash-out refinance. The more properties you own, the more your buying power and rental income increase, allowing you to scale up your portfolio rapidly. 

Besides, if the property does not fit your objectives anymore, you can also swap your passive-income property for another one of similar nature and value while deferring capital gains (or losses) and capital gain taxes through a 1031 exchange. It is an excellent opportunity for investors to upgrade their portfolios without handing their proceeds to the IRS when they may need it the most. 

Building a scalable real estate portfolio can be intimidating, especially once you start investing in short-term rentals in areas you may be unfamiliar with. Nevertheless, working with a knowledgeable property management company like Rabbu can give you the confidence you need to build a portfolio that matches your short- and long-term goals. It also allows you to take the backseat while your properties are managed, freeing your time for other pursuits. 

Take advantage of passive appreciation through all of your FIRE days

Imagine this: laying on a beach somewhere, having fully achieved the dreams that the FIRE movement touts, and you’re still earning money–that’s made possible by savvy real estate investments. One of the main advantages of real estate investing is that properties tend to appreciate in the long run without any input on your end. In other words, if you purchase a short-term rental today, its value will have increased by the time you have achieved financial freedom and are ready to quit your day job (or beyond!).

Some investors may be hesitant to carry multiple mortgages including the one for their primary residence. However, perceiving a rental income that may be used to pay for the home loan, maintenance, taxes, etc. allows the investor to hold the property for long enough for the property value to increase significantly with minimal financial pressure. 

You can increase your equity even faster by reinvesting your rental revenues in the property and paying off your mortgage before the end of the life of the loan. Increasing your property value with good maintenance and well-chosen improvements will also increase your likelihood of attracting high-quality guests with in-demand amenities, generating a higher rental income in the process. 

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Passive appreciation can come in handy once you are ready to retire. Depending on your game plan, you may choose to sell the property for a profit to finally enjoy the fruits of your hard work. However, you can also tap into the equity you built throughout the year to finance your next project or lifestyle using a second mortgage or line of credit. 

Are short-term rentals the key to making the FIRE movement a reality?

If you are asking us, short-term rentals are an excellent way to reach financial independence. Being an Airbnb host can be time-consuming, but with the assistance of a trusted partner like Rabbu that can help you buy, manage, or sell short-term rentals, your income properties do not need to take more of your time than you choose – allowing you to focus your time on things that matter most to you

Interested in getting started on your path to financial freedom? Drop your details below and we’ll help you begin. 

Short-term rental real estate investing, made easy.

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  • Rely on trusted partners (us!) to manage your property for you, giving you time back in your busy day.
  • Enjoy higher yields, powered by our innovative dynamic nightly pricing and flexible lengths-of-stay strategies.
  • Get ahead of an already booming industry, effortlessly.