NOMAD: Unlock Your Financial Freedom and Embrace Adventure with a 10-Home Investment Strategy

Discovering the World of Nomading

I was fortunate to join a group on Meetup called the Northern Colorado Real Estate Investor Group, or NCREIG for short. Through this group, I met James Orr, a realtor in Northern Colorado who taught classes on an investment strategy he called "nomading." Though the concept of nomading has existed for 100 years, James presented it in a unique, numbers-centered way that I found fascinating. I attended all of his classes for a few years to learn the ins and outs, and today, I want to share a bit of what I've learned so you can try nomading and acquire real estate yourself!

It's important to mention that I have practiced nomading myself. Currently, we are on property number two and working on acquiring property number three. After buying our first house and living in it for a few years, we used it to obtain our second property. We plan to continue this process until we have about seven properties, which would generate enough cash flow for us to retire if we wanted. However, we will likely keep working because we enjoy it.

So, What is Nomading?

Nomading is when you buy a property every 12 months as a primary residence with a minimum 5% down payment. You can then repeat this process every year for as many years as you desire. The great thing about this strategy is that you can buy investment properties at owner-occupied rates and with minimum 5% down payments. The biggest advantage of acquiring real estate this way is building passive income, which allows you to reinvest, retire, or pursue other goals. This strategy is highly flexible, making it suitable for people in their 20s, as well as those starting in their 50s as a retirement nest egg.

How Does Nomading Work?

Year One: The Beginning of Your Nomad Journey

Starting with year one. Buying your first nomad property is similar to buying your first house. The goal is to find an affordable property that will rent well, analyzing cash flow numbers using websites like Rentometer. It's essential to focus on properties that make good rentals, not necessarily your dream home since you'll be turning it into a rental within a year. In brief, you'll put down 3% or 3.5% using an FHA loan and aim for the lowest interest rate possible.

Key Points to Consider:

• Treat this property like a rental. Decide if you'll manage it yourself and try to keep your mortgage payment at or below the market rent. Even if you're breaking even or experiencing a small loss, the strategy will still work well. Additionally, there are tax advantages to buying real estate, such as writing off closing costs and claiming depreciation once it becomes an investment property.

Year Two: Continuing Your Nomad Adventure

Your next significant milestone will be year two. This is usually the most challenging part of nomading since you'll need to save up about 5% down for property number two over the next 12 months (though it's okay to take longer). After securing a signed lease on your first house to offset the mortgage payment, you'll buy and move into house number two. Repeat this process every 12 months. As you continue for the next 5 to 10 years, keep an eye on the following aspects:

• Your investing strategy: How are you saving up enough for each property, and how much are you putting into down payments? Are you saving more than 5%, or are you putting down the bare minimum and keeping some for reserves or stock investments?
• Property management: Will you manage your properties, or will you hire a property management company? While property management companies charge 8-15% of your rental income, they can be helpful if you don't live nearby or if you don't have the time. They also assist with liability concerns, which are crucial for landlords.
• Planning ahead: This is the most important aspect. Determine your goal for the number of properties you want to acquire and outline a plan to reach that goal. When filing your tax returns, report all rental income on your Schedule E and avoid writing off too much. This way, you can consistently qualify for a new property every year.

There are many more options and strategies involved in acquiring real estate, too numerous to discuss here. However, I would be more than happy to chat with you about potential ways to leverage yourself to acquire more rental properties.

Reaching Your End Goal and Beyond

Once you reach year 10 or achieve your “end goal,” you have several strategies to consider. You could sell some older properties to pay off newer ones and live off the passive income. Alternatively, you could keep all ten properties, move into a van, and travel the world while living off the passive income. Another option is to follow Dave Ramsey's approach, gradually paying off the properties to own them free and clear in 10 to 15 years, generating a substantial income. I will be writing a class that delves into the specifics of these numbers and what they might look like. The primary benefit of nomading is that it enables you to live the life you want while creating income without relying solely on stocks that may or may not perform well.

In Summary

In summary, nomading is an incredible strategy that can help you build passive income, retire, or simply live life on your terms. It involves buying a property every year and coordinating with your spouse, if you have one, to move regularly. Please feel free to reach out to me if you have any questions. I would be delighted to help you determine if nomading is the right fit for you.