Raise your hand if you enjoy receiving tenants’ phone calls regarding a broken furnace at 6 am on a Sunday! Anyone? Yeah, me neither. There is no denying that investing in real estate comes with its issues. And yet, there is a reason why most people (myself included) think that those small inconveniences are well worth it.
Real estate remains to this day one of the best ways to generate passive income quickly and, therefore, achieve financial freedom. What would you do if you didn’t need to get up every morning to cover your living expenses? Would you travel the world, spend more time with your family, or finally get started on this business venture that has been on the back of your mind for years? That’s up to you!
Either way, here is how you could reach financial freedom within a decade!
Step 1: Figure out your freedom number
There is no one-size-fits-all when it comes to financial freedom. Therefore, your first step should be to determine the amount of passive income you need to generate to pay your essential living expenses. In other words, what are your total monthly costs?
The easiest way to figure out your budget is to use a budget-building app. You will need to upload your credit cards and bank accounts information on the platform, so each transaction is accounted for. Go over for your expenses in the past 90 days to determine how much money you spend on average every month: that’s your freedom number.
It may be higher or lower, depending on your lifestyle. My first freedom number was artificially low: I was living for free thanks to house hacking, biked to work (no transportation expenses), and was rarely going out. If that’s your case, budget for the life you want to live rather than the one you have now.
Step 2: Scale up!
There is no mystery here: the more you do something, the better – and the more confident – you get. It is valid for all things in life, from playing sports to driving. It is also true of real estate!
If you are like most people, it took you years to finally be in a position to buy your first property. Real estate is a significant investment, both mentally and financially. You need to put enough money aside for a down payment, build up your credit to get the best interest rates, gather enough information to feel confident you are making the right decision, and finally get the guts to take on that big step.
The good news is that buying your second property will be a lot quicker. You will already have the education – and potentially the capital, if your first house was a house hack – to buy another property within the next 12 months following your first purchase. The more firsthand real estate experience you gain, the more confident you will be. You will also get access to the cash flow brought in by each property. Before you know it, you will be able to buy a third, fourth, fifth building and so on, faster and faster every time. You will also have a track record impressive enough to convince investors to trust you with their money as you expand your portfolio.
In short, investing in real estate leads to exponential, not linear growth.
Step 3: Become an expert
By the time you own multiple properties, you will have the credentials you need to persuade others (and yourself!) you have the required competencies to bring them the best return on their investment. If you stay motivated and disciplined, you should be able to achieve basic financial freedom within three to five years. You may not be able to purchase a private jet just yet, but you should clear enough passive income to cover your basic monthly expenses.
Time to switch to full gear!
There are three main issues real estate investors face in their career: shortage of money, time, and finding the right deals. By achieving financial independence first, you will regain the time you need to find the best transactions and the people willing to invest their money in real estate.
With an established personal track record, you will have no issues finding investors for your real estate deals. Focus your energy on identifying the best buys in your neighborhood, and you are well on your way to become an expert. It is then up to you to determine how many properties you need to purchase to achieve your dream lifestyle.
How much money do you need to live the way you want to live? Whether you want $1,000 or $100,000 in passive income monthly, you still need to take the first step to achieve financial freedom. The sooner you get started, the sooner you will be able to enjoy the fruits of your labor. There is no time like the present to start investing in your future!