The Covid-19 pandemic has left millions of people stressed over their finances. The unemployment claims have passed 40 million as more people find themselves in need of assistance. The challenges brought about by the pandemic are evidence that we need to figure out our finances. We need solutions that will cushion us from joblessness.
One solution I’ve found is real estate investing. I started investing when I was 18 years old and founded my company in 2014. Throughout my career, I’ve learned how to sift through all the popular advice about investing to ultimately determine the right strategy to help me realize my goals.
Why Your No. 1 Goal Should Be Financial Freedom
No one is immune to income peaks and valleys. Those working in the gig economy can experience a lack of demand resulting in less income. Employees with steady salaries, commissions, large bonuses and stock options can easily be blindsided and let go at the whim of their employers. Senior managers and executives, and even CEOs, are not immune to being fired by the board or venture capital firm. Commission-based real estate agents and even professional athletes experience income dips that need to be managed.
How do you protect yourself against unforeseen income reduction? Peace of mind and confidence about your future come with preparation and planning.
The Solution: Passive Income And Real Estate Investing
It would make sense to save some money during our peak income days and use these savings to compensate when we reach an income valley. Some of these savings should be like cash in terms of liquidity, but I recommend that the bulk of these savings be focused on generating long-term passive income. Not only will it help fill in the gaps during the income valleys, but passive income can be an important component of your retirement plan.
Passive income refers to money that you gain automatically with little effort on your part. An excellent way to generate passive income is by investing in rental properties. Here are five ways to get you on the road to success.
Review your expenses, and analyze your spending habits. How much do you spend on restaurants, clothing, transportation and more? This may sound a bit like professional organizer Marie Kondo, but make sure you spend your money on things that bring you true joy. Make sure that your revenue exceeds your expenses. I know it sounds basic, but you would be surprised how many people are spending more than they earn. If your revenue suddenly stops or is significantly reduced, your expenses don’t stop right away. You may even incur fees to get out of some service contracts.
Find a real estate investment that fits your personality. I recommend to my investors that they figure out their risk tolerance so they can continue to sleep at night. If the investment they have chosen seems too risky for them, they should pick something more straightforward and less risky.
Pick a real estate investment that fits your life. If you are a busy professional, you may not have several hours a day to work on your real estate investment. If your goal in generating passive income is to spend more time with family and friends, working more won’t help you reach it.
Select the best market for your investment. Identify the selection criteria that fit your investment, and select a market. If you are looking for rental properties, then you might look for landlord-friendly states, low unemployment, business diversification, etc.
Build a team on the ground. Let’s say you’ve decided to buy rent-ready properties. Rent-ready properties are typically vacant properties that require minimal repairs to be back on the market. These include cosmetic or minor repairs, paint and cleanup. In that case, you will need a realtor to find properties for you, a property manager and a contractor to do the repairs.
It takes careful planning and mentorship, but when done right, your real estate investments will generate sufficient income to compensate for a temporary reduction in revenue and can help facilitate early retirement. On top of generating income with little effort on your part, there are several additional benefits associated with real estate such as depreciation, appreciation, tax deductions, mortgage paydown and inflation protection.
We have all experienced income peaks and valleys, and we all want to retire one day. This means achieving financial freedom is not just nice to have — it is a necessity. Rental properties can be a major component of your income protection and retirement plan. If there is any lesson to be drawn from Covid-19, it is that the future is unpredictable and the best time to start working on your passive income portfolio is today. Original Source: Forbes Real Estate Council Author: Eric Martel