I posed this question to the people who attended our Cashflow | REDEFINED event last Wednesday night in Perth. The response from most was predictable and completely understandable.
Most were doing what they had to do and wishing they could do what they wanted to do.
So what was stopping them from doing what they wanted to do? The answer is likely to be the same for them as it is for you. You still need to exchange your time for money.
By that I mean you still need to work every day, either for an employer or in your own business to earn money to pay your bills and meet any financial commitments you have. I am not saying that there is anything wrong with working, not at all. Working in a job you love is an honourable and worthy thing to do.
But for how long? Have you given any thought to how long you want to continue working? How many more years? And what will happen to your income after you stop? Could you afford to live in the same way you do now?
Consider what would happen to your finances if you lost your job or perhaps were injured and could not work. How long would you be able to last before you ran out of money? Research shows for most of us that time is less than 90 days.
To have income that still comes in, enough to pay for the lifestyle you want, whether or not you are working, is the ultimate financial goal. This is where you have the freedom and choice to do what you want to do rather than what you have to do.
Income comes from assets. And the best type of asset to produce a steady income, month in and month out, is real estate. Though not just any type of real estate. The average yield for residential property is somewhere between 4% and 5% and that is before any costs. Net yields could be as low as 3%. And if you have any borrowings, then you may not be able to collect any income at all. That means you would need to rely on capital growth to eke out a return from your investment. The last few years since the GFC have shown us that growth in values is no certainty.
The last few years since the GFC have shown us that growth in values is no certainty.
If you want to use property to create income to replace your work income, you need to find property that has a rental return in excess of 8%, ideally 10% or higher. If you can achieve this, and then reinvest your cash profits while you are still working, so you can own more positive cashflow real estate, could mean that pretty soon you will be able to do what it is you want to do, rather than what you have to do.
For a really good example of positive cashflow real estate, check this out –www.daylesfordplace.com.au – this is a project of mine that I am incredibly proud to tell you about. It is the single best development project I have ever created.