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How to Invest in Property As a Path to Financial Independence

Investing in real estate can help you work towards your dream of financial independence. Find out the steps you need to take today to create a long-term strategy for obtaining financial freedom with your investment properties.
Investing in real estate can help you work towards your dream of financial independence. Find out the steps you need to take today to create a long-term strategy for obtaining financial freedom with your investment properties.

Investing in real estate can be an excellent source of income. In fact, if you find you’re good at managing rental properties, your investments can eventually become your sole source of income.

Managing multiple investments can help you slowly gain enough income to replace your full-time job, if you create a long-term plan and goal. But, how do you transition from owning no property to become a savvy, financially independent real estate investor? This step-by-step guide will help you plot out your course to financial freedom.

1. Decide Your Income Goal

Before you can go all in on a few rental properties and hope for the best, you’ll need to sit down and figure out how much income you actually need to bring in each year to cover your current expenses.

A good place to start is by looking at your current salary. If you bring in $48,000 a year and can cover your expenses, but hope to make $20,000 more, then your income goal should be $68,000, which breaks down to $5,666.67 monthly.

You’ll want to work towards making this number a month through your investments, but don’t forget about income tax. You’ll likely want to make estimated tax payments throughout the year, so be sure to deduct this amount from your income goal.

2. Figure Out How Much Real Estate You’ll Need

From here, you’ll need to figure out how many properties you’ll need to invest in to meet your ideal income goal.

This is easier to figure out if you already have one rental property to base your goal off of. For instance, if you own an apartment complex and bring in $3,000 a month in income (after all expenses), it’s a safe bet that another similar complex will help you meet your income goal.

Likewise, if you own three rental homes and bring in $900 a month, you’ll need roughly 19 similar properties to make $5,666.67 a month. Since you already have 3, you should look to purchase 16 more.

Of course, you can mix up your real estate portfolio, by investing in apartment buildings, duplexes, and single-family homes. An experienced real estate agent with a history in investing can help you find the right properties in your ideal market.

3. Plan Your Timeline

Now that you know your ideal income and number of investments, you’ll want to plan out your timeline for building out your portfolio.

If this is a long term goal, then set your goal date for 10-15 years in the future, depending on your schedule. This will give you time to survey the market, make smart buying decisions, and improve the property value on your already existing properties.

To help estimate how long this will realistically take, plan out how much you can save towards your next down payment using your current salaried income and extra income from real estate. While you’ll likely be making educated guesses, this will help you save and work towards your ultimate goal of financial freedom.

Your timeline might change depending on the market. It could move up or push back depending on available investment opportunities. Letting your real estate agent know your plan can help you find great properties before other buyers.

4. Pick a Real Estate Strategy and Get Started

Once your plan and timeline are laid out, it’s time to start putting your plan into action. Before you jump in, it can be useful to research popular investment strategies first. Doing your homework on different methods of investing can help you learn more about different ways to invest and grow your portfolio more quickly.

Listening to popular investment podcasts, exploring top investing websites, and reading books with real estate investment tips are great ways to gain more insight. Talking to other investors is another way to learn more about your local market and uncover strategies that work well in your area.

Your buyer’s agent is also a great source of information and can also help you along the way if they have a background in investment properties.

One popular method you might want to start with is the BRRRR method.

What is the BRRRR Method?

BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. Following the method is as simple as it sounds.

First, you’ll purchase a rental property, then you’ll rehab and renovate it. From there, rent it out to tenants for a few years. Once it’s doing well and you’re ready to purchase more rental property, refinance your loan to get a better deal and pull the equity you’ve made from the renovation. Then, repeat the process with one or two new properties.

Summary

Earning income through real estate investments is a smart way to start planning your financial freedom. In order to plan out your investment strategy, start by figuring out how much money you want to make each year, decide how many additional investment properties you’ll need to hit that goal, make an estimated timeline, then research strategies to help you begin buying your first (or more) rental properties.

To get started on finding your first investment property, reach out to an experienced, local Clever agent who can walk you through your options.

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Thomas O'Shaughnessy

Tommy O'Shaughnessy is the Head of Research at Clever Real Estate, the free online service that connects you with top local agents to save on commission. Tommy's team of data scientists create surveys, gather data, and analyze trends in housing, real estate, and personal finance. He directs public relations efforts, acting as a "data communicator" between his team and the press. Clever studies have been featured in Politico, the LA Times, CNBC, Forbes, Yahoo Finance, and other publications.

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