I talk with real estate investors almost every day, and the number one question they ask is, “How can I leave my W-2 or at least become work optional through passive investing in real estate?” I’ll cover a simple, but not easy, strategy below that you can leverage to reach this goal in 5 years or less.
4 Steps to Leaving Your W-2 Job and Growing Wealth Through Passive Investing
1. Get Your Financial House in Order
The fastest way to retiring in 5 years or less is to get control of your current spending and finances. There are tons of books and strategies out there to do this, but my wife and I chose the Dave Ramsey Baby Steps. While there are very strong opinions about the Baby Steps, they allowed us to pay down our debt, increase our savings, and give like crazy to the causes we care about most. Once we were no longer burdened by the heavy weight of debt, we could shift our efforts over to wealth accumulation and giving like crazy.
2. Find Your Minimum Required Income Level (MRIM)
Now that you don’t have any more “bad debt,” what is the minimum amount of income you need to live on annually? This number will include your mortgage (if you didn’t do Baby Step 7 above), utilities, groceries, auto, household expenses, planned giving, and a little extra for fun experiences. It’s important to include anything that regularly comes up throughout the year. (Here’s a hint: birthdays, Christmas, soccer uniforms and summer vacations come up every year.)
3. Invest Your MRIM Each Year For 5 Years
Here’s the tricky part: Once you determine your MRIM, you’ll need to invest that amount each year for 5 years into a passive investing opportunity with a 3–5-year hold period that has projections of doubling your investment during that period. If you do not have enough income to save your MRIM each year, your goal should be to focus on increasing your income so you can save this amount each year. There are plenty of great resources available to help you figure out your strategy to increase your income, so I’ll leave that to the experts in that field.
4. Reinvest Your Original Investment When Deals Go Full Cycle
Once you hit the 5-year mark, your first investment should go full cycle returning your original investment with the additional returns. You’ve now created your MRIM for the following year, and you can invest your original investment to keep feeding the machine. From that point forward as your deals continue to go full cycle, you’ll simply invest the original investment amount and live off the additional returns produced by each investment opportunity.
Replace Your W-2 Income Through Passive Investing in Real Estate
Shazam!!! You’ve done it! You’ve created your path to leaving your W-2 or becoming “work optional” in just 5 short years through passive investing. Of course, this is not an easy process, but the strategy works if you can execute it perfectly. And even if it doesn’t work perfectly, maybe it will take an additional year or two to hit your target. Either way, you’re well on your way to breaking those golden hand cuffs.
