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🏡 Lorence Alacar 🏘 Real Estate Specialist
🏡 Lorence Alacar 🏘 Real Estate Specialist
Real Estate Investor | I partner and help people invest in their first rental property
Published Jul 31, 2023
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Last year my wife and I became digital nomads. We packed up our bags and took the trip of a lifetime slowly traveling throughout four states in the U.S. (California, Washington, Texas, Florida) then, five countries in Europe (Italy, Greece, Egypt, Montenegro, Portugal). We lived in each location for about one to three months at a time exploring the cities, learning the culture, and having peace of mind that our properties would be able to support our lifestyle. Are we billionaires that own companies that employ hundreds of employees? No, far from it...
Throughout my career in Information Technology and Real Estate Investing, I learned that having a high income alone won't get you to financial freedom. You also need the ability to control your expenses through budgeting and of course, investing.
So how many rentals do you need to be financially free?
Attaining financial freedom was one of the main goals when I got into Real Estate Investing, specifically income through rental properties. The question that drove me crazy in the beginning was how many rentals does one actually need to reach financial freedom? I found out through a lot of trial and error that the answer is not a one-size-fits-all, but varies based on several factors such as location, property type, rental income, expenses, and most importantly lifestyle choices.
Here's the best visual a mentor shared with me when trying to find how many rentals I needed: Treat each rental property like a source of income that will support a category of your lifestyle. For example, my monthly groceries costs $543.26 per month(average). This means one of my properties will need to cashflow this amount if not more. From there, each property acquired will have a purpose. Whether it’s eating out, entertainment, travel, mortgage, utilities, etc. When you look at it this way, my number(family of four) will be totally different from a couple with no children and will be definitely lower if you are single.
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One property may not cover your lifestyle but as you acquire more properties and assign each property a purpose to your cost of living budget, you will be able to build a portfolio that will cover your cost of living and eventually become financially free through Real Estate Investing.
It's important to note that financial freedom is not only about having high income from rental properties, but also about having income that covers living expenses. This means, the lower one's living expenses, the quicker one can get to financial freedom. This is why it's crucial to have a solid financial plan in place which includes emergency funds, diversified investments, and a plan for maintenance and repairs of not only rental properties but also of what happens in your personal life. Once the required amount of rental properties are attained, it’s important to diversify in other businesses that may help and support your real estate investing journey.
A general rule of thumb is estimated that owning between 10 to 15 doors that generate positive cashflow can provide financial freedom. Don't let the number scare you, remember that building a rental property portfolio takes time and it's a journey, not a destination. Starting small, quality education, and guidance from experienced professionals helped with reaching my goal.
So based on your monthly budget, how many rental properties do you think you need?
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Real Estate Investing Tips
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Heidi Soleymani
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Wow! That is a LOT of traveling in one year. Congratulations on being able to do that (both financially and logistically). It's nice to see the family photos in each location. How did you handle schooling your children? Did you home-school? How did that go?
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