BiggerPockets Real Estate Podcast: How to Retire with Rentals in Just 10 Years (It’s Still Possible!)

Host: Dave Meyer
Guest: Paul Novak, Sheboygan, Wisconsin
Release Date: May 19, 2025

Introduction

In this compelling episode of the BiggerPockets Real Estate Podcast, host Dave Meyer welcomes Paul Novak from Sheboygan, Wisconsin. Paul shares his inspiring journey from dividend stock investing to building a robust real estate portfolio aimed at achieving early retirement within a decade. This detailed conversation offers valuable insights into strategic investing, creative funding methods, and disciplined financial planning.

Paul’s Investment Journey: From Stocks to Real Estate

Paul Novak began his investment career in the stock market, specifically focusing on dividend-paying stocks. However, he soon realized that achieving financial independence through dividends alone would require an impractical principal sum.

Paul Novak [02:21]: "If I want 100,000, I did like eight and a half million dollars in the market. Seems crazy."

Confronted with this daunting figure, Paul sought alternative investment strategies and discovered real estate. Inspired by the tax benefits and the potential for more manageable cash flow, he transitioned to real estate investing in 2021.

Paul Novak [02:58]: "When I looked at how much I needed to have total in that portfolio to live off dividends, it seemed like an unattainable number."

Using equity built from refinancing his primary residence, Paul secured $112,000 to kickstart his real estate journey, locking in a favorable mortgage rate of 2.38%.

Paul Novak [03:34]: "My wife had a similar career and similar journey. We've really just gotten disciplined at whittling down our expenses. And I think our savings right now is somewhere around 55%."

Acquiring the First Rental Property

Paul’s first foray into real estate involved purchasing an off-market multifamily townhouse. This property acquisition was facilitated through family connections, allowing him to negotiate directly with the landlord and secure a deal below market price.

Paul Novak [05:05]: "We ended up finding our first deal was a multifamily, a side-by-side townhouse. It was actually an off-market deal that I learned about kind of through family."

The initial cash flow from this property was a significant motivator, as it surpassed the returns he could have expected from dividends.

Paul Novak [06:37]: "So I start doing the math and I thought, wait a minute, if I had 50,000 in VO, what I'd be getting in dividends? Like it's nowhere near 570, 750 bucks a year."

Managing Properties: A Natural Fit

Paul enjoys managing his rental properties, attributing his success to skills honed in his 20-year corporate career in manufacturing. His ability to handle metrics, manage people, and navigate difficult conversations has made property management a rewarding experience rather than a burdensome task.

Paul Novak [09:22]: "I really enjoy dealing with people... I've managed people forever. It's just so much based on people."

This hands-on approach has allowed Paul to maintain control over his properties and ensure their profitability.

Scaling the Portfolio: Challenges and Strategies

After successfully acquiring his second property in early 2023, Paul faced a common challenge: limited capital to continue scaling his portfolio. Despite the potential to grow, his savings were depleted, necessitating a reevaluation of his funding strategies.

Paul Novak [24:10]: "We had to find ways to get capital... I never ever would have considered [a 401k loan] before."

Creative Funding: Utilizing 401(k) Loans

To overcome the capital constraints, Paul turned to a creative solution: taking a loan from his 401(k). This unconventional approach allowed him to secure $50,000 with minimal fees and the interest paid went directly back into his retirement account.

Paul Novak [25:04]: "I decided to take a loan out against my 401k and almost use that as like the bank. So I pulled out the full $50,000 and I only have to pay in fees, $10 a quarter while that money is borrowed."

This strategy enabled him to finance his third property without waiting to save the required funds, accelerating his investment timeline.

Paul Novak [25:25]: "We use that for our third property."

Current Portfolio and Future Plans

Paul's disciplined approach has led him to acquire a total of five rental properties within approximately four years. He leverages both HELOCs and 401(k) loans to fund additional acquisitions, maintaining a balanced and manageable portfolio.

Paul Novak [26:58]: "We sit down quarterly and we actually go through your real estate strategy. We go through each element of it and kind of talk about, okay, what are our plans over the next quarter, the next six months?"

Paul and his wife are focused on paying off existing loans to solidify their financial foundation, ensuring they can retire comfortably within the next six to ten years.

Paul Novak [28:28]: "I think the day could come that we'd at least have all the properties that we need. Me, knowing me, I'm never going to stop, but at least to know like, hey, I could get this."

Paul’s Retirement Goal: Financial Freedom in a Decade

Paul’s ultimate objective is to retire within ten years by owning between seven to ten fully paid-off rental units. This strategy aims to generate over $10,000 in monthly cash flow, providing sufficient passive income to replace his current W2 income.

Paul Novak [31:19]: "We really have a clear path to more than $10,000 in monthly cash flow in less than 10 years."

His methodical and conservative investment approach ensures sustainability and minimizes risk, aligning perfectly with his long-term financial goals.

Conclusion: A Blueprint for Early Retirement

Paul Novak’s story is a testament to the power of strategic planning, disciplined saving, and creative funding in real estate investing. By leveraging his corporate experience, making informed investment decisions, and utilizing unconventional funding sources like 401(k) loans, Paul is well on his way to achieving early retirement through rental properties.

Paul Novak [33:00]: "Awesome. Thank you."

His journey provides a valuable blueprint for aspiring investors aiming for financial independence through real estate, demonstrating that with the right approach, retiring with rentals in just ten years is indeed possible.

Key Takeaways:

• Diversify Investments: Transitioning from dividend stocks to real estate can offer more sustainable and manageable returns.
• Leverage Existing Assets: Utilizing home equity and retirement accounts creatively can fund property acquisitions without significant delays.
• Conservative Financial Planning: Adopting a conservative approach to budgeting and financing ensures stability and minimizes risks.
• Strategic Portfolio Scaling: Focus on quality over quantity, managing a smaller, well-maintained portfolio can lead to substantial passive income.
• Clear Financial Goals: Having a well-defined retirement goal provides direction and motivation, allowing for disciplined investment strategies.

Paul Novak's journey underscores the importance of adaptability, strategic planning, and disciplined execution in real estate investing. His approach serves as an inspiring example for those seeking to achieve financial freedom through thoughtful and methodical property investment.