Real estate can provide passive income, even allow you to quit your day job and become financially free. For many investors, this is the goal: to be their own boss and to be able to work when they want and where they want.
Here are 5 must-haves before you give up your day job.
- 30% more monthly cash flow then you need – Surprises happen. Vacancy, maintenance and other expenses arise and you are not guaranteed optimal cash flow on every property every month. Make sure you have 30% more than what you need as a buffer for surprises.
- 1-2 years of reserves – Depending on how conservative you are, make sure you have 1-2 years of expenses in reserves so you can live comfortably and don’t have to stress over your cash flow and finances.
- Asset protection – Hold your properties in entities like a corporation, trust or LLC. This will protect your other properties, businesses and personal assets in the unfortunate case you get sued and lose. Of course, consult with an attorney to discuss the best entity for your needs.
- A strategy to improve your net worth and cash flow – What are the next steps and initiatives to take your business, cash flow and net worth to the next level. Continue to learn, educate yourself and master new strategies or asset classes. Focus on continuous improvement.
- Know what to do with your time – I personally get stir crazy after 2 days of doing nothing. Exercise, learn and pursue other goals and interests. Get more involved with your family and community, volunteer, give back and fill your time with meaningful tasks when you are not working. A routine of positive things can lead to achieving many goals and tremendous happiness.