Put your money to work so you don’t have to
Imagine that your workday began with the usual routine, but halfway through your morning, you received the news you’d been laid off. THAT WAS ME, as you might have read in my first blog post!
For most people, that means they have zero income starting tomorrow. BUT what if during your employment you leveraged your money?
Robert Kiyosaki said, “The rich don’t work for money. They make their money work for them.”
Three Types of Income:
Most people’s income is active, which means it’s from a paycheck every other week or monthly. But wealthy people typically earn Residual or Passive income, maybe even both.
- Active income is from your employer and requires activity in exchange for money. When you stop, the income stops.
- Residual income means you continue to receive money even after the work is done (for example: writing a book).
- Passive income comes with little effort and keeps flowing when you aren’t working. Real estate investments are one of the smartest and most stable sources of passive income.
Remember my job loss scenario? My husband and I had built passive income, on the side, while I was employed…so the job loss didn’t hurt as badly as it might have for others.
Since being laid off, my earnings decreased by my monthly salary amount, but we still have income.
How is financial freedom achieved? It’s when your earned passive income supersedes your active income.
Just for some context, I’ll share the numbers on one of our rental properties:
It’s a 3 bedroom / 2.5 bath townhouse that cost us $155,000. We rent it for $1500 per month and our mortgage payment is $742 plus $140 HOA every month ($882 total). If I manage that property, the cash flow is $618 per month. If I use a property manager, they typically take 8-10% of the gross rents or $150 a month (so that impacts cashflow). I also set aside some money for repairs or unforeseen expenses.
But I Don’t Want to Be a Landlord
The numbers might look good, but being a landlord does NOT!
This is where, instead, you join a small team and buy real estate.
When investing $100,000 in a real estate syndication, it’s possible to earn $8,000 per year (8%), similar to the stock market.
However, the real opportunity lies in selling the property. Syndications hold the property for about 4-5 years. During this time, improvements are made on the building and the land market value typically rises.
Upon the sale, you receive $160,000 ($60,000 in profit). This, plus the passive income of $8,000 per year (totaling $40,000), equals $200,000, which is a 20% average annual return. Not bad, right?
So why not, while employed, create passive income, so you’ll be less stressed when facing a layoff? You may even find yourself celebrating unemployment (like I did)!