What would be your Financial Independence Number be? The best definition of a Financial Independence Number I’ve ever heard was enough wealth to cover all expenses indefinitely. So, your wealth or passive income will cover all your personal expenses without working. Your expenses might be covered by a combination of rental income, properties, stock dividends, interest paid, and proceeds from selling your assets. But the main goal is to never run out of income by having your investments pay you indefinitely.
Traditionally, you would need a net worth somewhere between 25 to 30 times your annual expenses. For instance, if you needed $75,000 per year to live on you would have to have a wealth of 1.8 to 2.2 million. This is assuming you only withdraw approximately 5% per year for a 20-year time period. By any definition, that would not be indefinitely.
The good news is that real estate investments have greater income returns than most other type of investments, and you do not have to touch the principal. So financial independence for real estate investors can be stated very simply, your passive income is greater than your expenses. This goal still requires a solid plan and hard work. Once you have obtained your Financial Independence Number as Robert Kiyosaki pointed out in his book Rich Dad Poor Dad, only then are you able to escape the rat race.
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