Are you wholesaling, flipping, or landlording? Have you thought about how long will it take for you to quit the rat race? Most investors never ask that question and waste years pursuing a real estate strategy that will never let them achieve their financial goals AND delay their retirement by YEARS with the wrong strategy.
Many investors take a step back after flipping a ton of houses. They made great money doing it, but then they realized that flipping houses was:
▪NOT generating passive income,
▪Was a TON of work, and
▪Was NEVER going to let them quit working.
The reason for this is that many people…
“don’t ask the right question!”
To many, their goal was just to get started with real estate investing. But later they realize by NOT asking this very specific question, they wasted several years pursuing a strategy that would NEVER help them retire and build real wealth.
That stops today because we’re going to ask (and answer) that question right now.
To answer this question, you really need to be clear about your goals. And the best way to do that is by answering these next four questions:
If you could have your real estate investments produce your monthly target number passively each month, you could quit your job, retire, or do whatever you wanted.
That’s your “get out of the rat race number," and THAT’S what you’re seeking with real estate investing. Am I right?
Let’s do an Example:
For the purposes of our discussion, let’s say you decided you needed $5,000 after taxes to cover your living expenses and quit your job.
Then you need to ask yourself the next question:
How Passive Do I Want My Income to Be?
Flipping houses is still a “time-leveraged” activity, meaning it can produce more income than many day jobs that have you strapped to a desk. But it’s still a lot of work. If you’re not buying, fixing, or selling houses, you’re not making money.
Same thing for wholesaling: If you’re not marketing, talking to sellers, and doing deals, you’re not getting paid.
And the worst with either of these strategies is that they don’t give you any kind of residual income nor does it build your wealth. When you sell the renovated house, you (hopefully) make a profit, but then that house stops paying you. It’s over — the money stops flowing- your net worth is not accumulating.
At this point you might throw up your hands and say, “OK, Melanie, but if it’s not wholesaling or rehabbing and flipping, then it must be rentals, right?”
And so we get to our next question:
How Many Rentals Would I Need to Own to Retire or Quit my day job?
Rentals don’t produce the kinds of cash flips can, but they do produce passive income so you can retire or leave a job you hate. Now have you thought about how long it would take to retire using this strategy?
Let’s do some quick math.
If you buy and manage your rentals properly, and we’ll assume you can expect an average monthly cash flow of $300 per month from each single family rental (after all of your expenses are paid, including vacancies, repairs, mortgage payments and taxes).
We determined earlier that our target number is $5,000 per month. That means you would need a portfolio of 17 houses to generate that much income.
Now lets consider these two questions:
▪How long will it take you to buy 17 houses?
▪How much work it will be to find, buy, and manage 17 houses?
Now if we pursue an aggressive strategy, we could purchase 3-5 properties a year until we hit our target. This could take us 3 - 6 years, depending on how fast we want to go.
“That initial investment of time will last you a lifetime of residuals and cash flow to live off of.“
- so I’d say the trade off is a pretty good one. Not to mention the increase in property values over time and how much your net worth will go up by.
As for managing those properties- we always have the option of hiring property managers so we can leverage our time spent and still have enough money to quit our job and live off of the cash flow your properties produce forever.
We do have to consider how property management cuts in to our cash flow - and to offset this, we’ll have to be even more intentional about buying discounted properties, increasing the value by forcing appreciation with repairs and some renovations in order to charge even higher rents to mitigate the expenses for having property managers, and we just need to keep our other expenses as tight as possible to make sure we are getting what we need each month from each property to hit our goals.
As you can see with this one brief example, this is an extremely do-able goal. Would you put in the time and effort for a few years in order to have passive income coming in for the rest of your life? I‘ll tell you from experience that this tradeoff with your time and effort is definitely worth the rewards.
If you’d like some help setting up your strategy and getting started with your real estate investment goals, sign up for my FREE Live Advanced Masterclass where we go over all the steps necessary to map out your investing strategy, find, analyze, finance and close profitable deals and create your passive income for life. Click the link below to get started.
Thanks for stopping by, we’ll see you soon.
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