Financial Independence Through Rental Properties

Many investors achieve financial independence through rental properties. Real estate’s income potential and its access to debt make it a very attractive investment for so many people. But how do you approach financial freedom through real estate in the first place? How many units do you need to achieve financial independence? In this video, I talk about my plan to achieve financial freedom through rental properties and go over the process for creating a plan of attack!

Hey everyone my name is jack welcome back to the channel i cover a variety of topics as they relate to real estate investing the markets and pretty much everything as it has to do with personal finance so if you like any of that sort of content be sure to have a look around the channel and if you like what you see be sure to subscribe but in today’s video i want to

Talk about approaching financial independence through rental properties and investing in real estate because it can be very intimidating if you’ve never actually started investing and you want to figure out how do i even approach this how do i plan out my road towards financial independence if that’s something you are trying to achieve you might want to invest in

Real estate so you can retire really early or you’re trying to do it to supplement your future retirement whatever it happens to be financial independence real estate is very common vehicle for actually getting to that great financial status the first thing you have to do though before you actually start trying to invest in real estate is figuring out what your goal

With it is if you’re trying to achieve financial dependence that means defining what financial independence means to you for me personally i just say that’s my expenses plus a little bit more so right now my expenses are well below about thirty thousand dollars per year but i think they’re going to increase to that as my wife and i eventually will be having kids

And we want to have a bare bones budget covered by real estate for us that probably would be a bit more than bare bones but we want to have a little bit of room in case of any sort of emergency assuming that we’re not actually working another salary job we want our passive investments to take care of all of our expenses so you have to know what those expenses are so

Whatever yours happen to be that should be a good baseline but maybe you want much more than that for a really rich financial independence where you can do basically whatever you want then you’re going to obviously increase that number accordingly now i might eventually have to adjust my number upwards anyways because of what the fed’s been doing and valuing the

Currency so 30 000 per year in today’s money might be very different just a few years from now we’ll we’ll see but generally this is called your freedom number you want to figure out what that benchmark is before you actually start going into investing so you at least have a target in mind of course this target could change in the future but at least have something

To start with now that you have your freedom number it probably makes sense to figure out about how many units of rental real estate you’re gonna need to actually reach that number now every property is different every market is different every deal is different you never know exactly how much your deal is going to cash flow in advance until you actually go forward

With the deal get the purchase price and all that sort of stuff you can’t project everything but let’s just say as a ballpark if you get a decent deal that’s nothing too flashy with some nice low interest debt for 30 years you’re probably looking at about 100 in cash flow per unit of real estate that you have and again it could be much higher i currently have a


Rental property that nets about 200 per month in cash flow and totally depends on how much cash you’re actually putting into the deal but if you’re doing the minimum just 20 down per purchase you’re probably not going to look at much more than 100 per unit again it totally depends on the deal you might get a screaming deal your cash flow will be much higher even

Though you’re using higher debt so it totally depends there but we’ll use a hundred dollars per unit as a benchmark so in my case i’m looking to get twenty five hundred dollars per month or thirty thousand dollars per year in passive income so assuming i get a hundred dollars cash flow per door we’re looking at about 25 units of rental real estate that i’m going

To need to achieve financial independence solely through real estate now it might end up being 20 units it might end up being 30 units it might be even more than that or less than that it totally depends on the deal again and how i actually go about doing it and also how much cash i’m actually putting into each deal but i should probably expect to be at about 25

Units of rental real estate to actually reach my freedom number it might be far more for you it might be far less it totally depends on what that number is but at least now i have a target in mind looking for about 25 doors of rental real estate over a certain number of years which is the next part of the plan so you could say that you want financial dependence

You could say that you want to achieve 2 500 per month in passive income but by when is that 2500 in passive income by the time you’re 65 many years from now are you trying to put the pedal to the floor to reach it in as little as five years or even less just going insane with investing going as hard as you possibly can it totally depends on what your goal is

And what your priorities are but you’re not going to know how to prioritize something if there isn’t a deadline on it so for me as i’ve covered on this channel before in my road to 1 million net worth series definitely check that out if you’re interested in seeing what i’m actually investing in and what my net worth moves are every single month because i cover all

My real estate deals on there as well i just closed on my first one this year and that’s all been documented in the series my paths were actually getting there but anyways in that series i outlined my plan to try and reach financial independence by the time i’m 27 years old which is four years from now and i’m trying to reach that one million dollar benchmark

By the time i’m 30. again the fed might make that much quicker and i won’t actually be any richer because of it but we’ll see what actually ends up happening there so if i’m trying to stick to my goals i know i have about four years left to try and acquire about 25 units or so of rental property but let’s break that down even further i’m probably not going to

Acquire them in a linear fashion where i just do a few per year it’s probably going to be accelerating because that’s how pretty much all investing works as you acquire more money you get more money on that money if through your returns and interest and all that great stuff even in a short period of time that can really add up and by the time i’m in year number four

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Compared to year number one i’m probably going to be investing in more units in a given year i just closed on unit number one this year so if i can do about one more in the next six to eight months then that would put me at two units and if the year after that i do three or four i’ll be about five or six units and then after that year i could do another five to ten

And then i’ll be at about 15 units and then in year four i’ll do another 10 units or so to round it out at 25 units and the reason it accelerates is because each unit i get i’ll be getting more cash flow and that cash flow can be poured into more deals and also i’d assume that my salary would rise at least a little bit each year and that could be going towards more

Rental properties in the case of my wife and i we’re only both currently working part-time because we’re currently in school at the same time so we’re trying to finish our school programs first i’ll be done in december and after that my income potential should rise quite a bit because i have all my time freed up it’s not being sucked up by school same goes for my

Wife about a year and a half from now she’ll be done with her program and then her income potential will rise much more as well and all that increasing income potential will be poured back into rental properties and at least until we reach our freedom number but we’ll probably keep going after that so we can get a little bit more comfortable past that but that’s

Not nearly as much of a priority as reaching that freedom number quickly so now that you have your goal and timeline in mind you have to figure out how you’re going to actually get the money to do it maybe you have a great paying job and you can do it very easily you’re going to pace it out or maybe you’re actually making a lot more and you can really front load

It and get a lot of the investment out of the way now or maybe you have a big pile of cash to use it’s totally up to you for as to how you pace it out and definitely depends on your situation this is probably a good time to mention that i’m not a financial advisor in this video is just a way to jog your brain and it’s not financial advice in any way i just hope

It helps you through perspective when trying to reach financial independence if that’s something you’re interested in though i assume if someone just approached you with a plate of financial independence you’d probably be like yeah great why would i not do that now no matter how much money you’re making it’s definitely gonna take at least some work to get to your

Freedom number you’re gonna have to be able to vet deals and run the numbers on them to make sure that they actually work and you’re not buying negative cash flow deals since that would just hamper your progress and you’d have to pour more money into deals and slow everything down you’re gonna have to figure out a strategy on where to invest what units to invest

In if you’re going for residential or maybe you actually want to do office or some other commercial style real estate investing totally depends on what your preferences are i’m really using residential in this example but there’s all sorts of ways to reach financial independence and that’s just through real estate you could also do it through things like stocks

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And other investments to diversify your portfolio and that’s what i hope to cover on this channel in a lot greater detail discussing strategies and how to vet properties what deals that i’m doing and what i think going into them so that you can learn from them and all those things that might be intimidating when you’re just starting out it wasn’t that long ago

That i was starting out and it really took me a while to get comfortable with all these things with real estate and actually being comfortable enough to actually go through with the deal even if you’re making a lot of money it can be intimidating to throw quite a bit of money or take out a lot of debt to actually buy a piece of real estate and i think it’s important

For new investors to get plenty of different perspectives from all sorts of different investors whether that be from someone like me who just closed on their first out-of-state rental property or someone who has hundreds if not thousands of units under their belt and is totally into the game and has been in it for a very long time every single person is going to

Have a different perspective so therefore every single person can provide a different sort of value anyways that’s all i’ve got for today i just wanted to kind of jog your brain about investing in real estate and trying to reach financial independence if that’s something you’re considering i hope this was helpful for at least trying to get your mind in the right

Place before you head into it since it can be very daunting to try and approach something like financial independence knowing that you’re interested in real estate but maybe you don’t have quite a concrete plan yet the more you can start working backwards from your goals the easier it’ll be to actually set out a path to actually start moving forward on it whether

You’re new to real estate or not definitely subscribe so you don’t miss any of my future updates about my future deals i’ll go ahead and include a link at the end screen of this video to my most recent deal that out of state indianapolis property that i’ve covered on this channel before so i’ll go ahead and include that in the end screen definitely stay tuned

For that and if you haven’t already definitely check out my book the one property retirement currently available on amazon i’ll go ahead and include that link in the description below it’s about a simple strategy for building your retirement nest egg using real estate now it’s not necessarily a fast track of financial independence but hopefully you can help

Beginners or those who may be a little bit new to real estate learn how to actually go through the deal process from looking at the numbers on the deal actually going through the process in buying a deal and getting the closing and all of that great stuff and also beyond that with maintaining the property and keeping it rented all of those skills would definitely

Apply to anyone trying to achieve financial independence through real estate and if you end up reading it definitely leave a review on amazon since that would help me out a lot but until next time take care you

Transcribed from video
Financial Independence Through Rental Properties By Jack Duffley