Friday, October 22, 2010

Retire Early with Passive Income

Most of us, well practically all of us are concerned about retirement. A savvy investor will look well into the future, determine a goal and begin to work towards achieving that goal. We have heard this all before. Saving early in life and choosing wise investments over time will provide a financial windfall – well at least some sense or security and a nice nest egg. The key to a successful financial future lies in compounding. Starting early allows the dividends or the interest earned to grow and these profits continue to grow on top of one another offering a fairly substantial return.

Apart from compounding interest, the other crucial element to a successful portfolio is passive income. Without passive income, you will be faced with a declining asset base once you retire. This is a daunting experience for every retiree. The beauty of passive income is once you stop working these investments keep working for you with little to no work of your part.

As a landlord for many years, I have witnessed this phenomenon and recently after speaking with my financial advisor, learned these small investments made years ago will play an integral part of my portfolio in the future and for retirement. These are so important that I’m compelled to share with my readers about my experiences.

Getting started –

This is by far the most difficult part of every journey and like everything else in life is where you must take on a student mentality. When I began learning about real estate my initial goal was to learn everything there was to learn. There is so much information on the internet today and this is a fine place to start, but it’s not where I began. Every time I heard someone mention real estate I became involved in the conversation.

I was fascinated to learn of the “No Money Down” scenarios and even more determined to understand what made sense and what provided a less risky and rewarding investment. In order to be successful at something it helps to be passionate about it and to emerge yourself and to learn as much as you can. Reaching out to real estate brokers and mortgage brokers is a great place to start. Ask them as many questions as you can and find out what they know.

Beginning with the profit picture is the most critical aspect and you can do it right from your very own home. Many home buyers and investors spend a great deal of time looking at properties prior to understanding whether is makes financial sense. If you are like me, wishing for more hours in the day determining your purchase power and the rate of return (cap rate) and GRM (gross rental multiplier) first will save you a great deal of time and energy. Also, you will become good at determining the true value of a property quickly. It helps to be able to understand a few quick models so you can determine whether looking at the property and finding out more makes sense.

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