Easiest, simplest and fastest way to own a paid off home

What if I told you that as a 20-year old, you can own a paid off home in under 5 years?

I know that sounds nuts, especially with the news headlines suggesting the “unaffordable” or “$1.5 million” Sydney houses prices.

Gonna get straight to it. If you want to the fastest way to own a paid off home, buy in a really cheap regional area (whilst still being near shops, hospitals, etc) that costs less than $400k.

Buy it as an investment property, rent living in a cheap home to save as much as possible, use those savings to pay off the mortgage and bam a paid off home.

Once that investment property is paid off, you have the option to move and live in that area, which will free up a tonne of cashflow as you’ll be living in a mortgage-free home, leading to increasing in savings rate and the opportunity to then invest that money into the sharemarket going forward.

This is most ideal if you’re working in a profession where you can WFH, as your job won’t be location dependent, meaning that even if you did move to that area, it won’t be an issue as you’ll still be working as usual.

This definitely isn’t for most people, but it’s an option to consider. Especially if your goal is to own a nice paid-off home in the fastest and simplest way possible, without the hassle of building a 10 investment property portfolio.

Scenario

Let’s say Bob wanted to go this route. He’s earning $80k per year before-tax, which is $62k after-tax.

He decides to buy a nice 3-bedroom investment property in a regional area for $300k. We’re gonna assume for the sake of simplicity that the property is neutrally geared, which means he doesn’t have to allocate extra money to hold the property.

He puts in a 20% deposit, so he’s starting with $60k equity, and taking out a $240k loan.

Assuming he saves 60% of his income by being frugal, he’ll save $37.2k per year. He puts all those savings towards extra repayments to pay off his mortgage.

By doing this, he’ll save 24 years and 9 months of a 30-year loan period, meaning the home will be completely paid-off in just 5 years and 3 months.

So basically in 5 years, the loan will be completely paid-off.

But imagine he had a partner onboard, and earned the same income, and saved and put down those savings towards paying off the mortgage.

Then the mortgage will be paid off in just under 3 years!

Talk about efficiency! That’s literally 1/10 of what it takes for most people to pay off their mortgage.

Owning a paid off home in 3 years!

And look, even if Bob decided that he doesn’t want to live in that home, he’ll be receiving a decent amount of rental income as it’ll be paid off.

But let’s say Bob and his partner decide to move into their new home.

Previously, they were living in a shared apartment and paying $600/week in rent. So $300/week each.

Because the home is paid off, they’ll save $600/week.

Now let’s assume the $6.2k they were using to pay down their mortgage goes towards investing into ETFs. Plus the extra $600/week, that’s an extra $31.2k per year, or $2.6k monthly.

So in total, they’re now able to invest a whopping $8.8k per month!

Let’s plug this into a calculator, and use 7% returns.

After 10 years, they’ll have just a bit of $1.5M.

If use the 4% rule and live off that, they’ll be able to live off $60k per year.

And the crazy thing is that they don’t even need the whole $60k, as they were comfortably living off a lot less as their home is fully paid off.

In fact, after paying off their homes, their total expenses combined yearly is $19.8k.

Here’s some math as to how I their expenses were so low after they moved to their paid off home:

• Total combined after tax income: $124k
• Savings rate (before owning paid off home): 60% – As previously mentioned above, Bob and his partner were saving 60% of their after-tax income, even before moving into their paid off home.
• Expenses before moving into paid off home: $49.6k

So their expenses before moving into their paid off home was $49.6k. As mentioned above, they were renting an apartment for $600/week.

But after moving into their fully paid off home, they don’t have to pay the $600/week in rent, freeing them of $31.2k in cashflow.

So $49.k – $31.2k = $19.6k

The Power of Optionality

Alright the point isn’t to live off frugally forever. Because Bob and his partner have basically reached their FIRE goal, they have so many options.

• Rent out their investment property to receive rental income + dividends from ETFs to travel the world full-time.
• Peacefully live in their paid off home, and use the surplus cash to spend on luxuries, holidays, family gifts or whatever they want to spend it on.
• Continue to work full-time, but working out of choice, not out of necessity.
• Fully retire and live the rest of their lives doing whatever the f*k they want
• Use their funds to start their own small business.

Whatever they want to do, they have so many different options that a lot of people don’t have, and that’s the power of building wealth.

Money is just a tool at the end of the day. But it’s a powerful tool to buy you more time and do the things that you truly value.

Verdict

So, if you want to own a paid off home quickly, then one of the easiest and simplest ways is to buy a cheap investment property that you want to live in, and pay it off quickly in a few years.

It ain’t for everyone, and I understand that moving to a completely different area is a scary change for most people due to personal factors like family, friends, work related and finding it hard to embrace a new change of scenery.

But I promise you, owning a paid off property in a cheap regional area is far easier than buying a sh*tbox $1M property in Sydney.