#initiator of the week Post 5 - Passive income and financial freedom Most real estate investors do this…

#entrepreneur This week

Post 5 - Passive Income and Economic Freedom

Most real estate investors do this in order to improve their capital or generate another income channel or both.

When investing in real estate one must keep in mind that there are expenses, and taking into account a monthly rent double 12 months in this year is a mistake.

There are repairs, replacement of tenant, cost of reporting to the authorities on any investment abroad (from the first dollar) as well as to the authorities in the country and tax payments.

It is important to remember that real estate investors in Israel have an exemption from income up to NIS 5,000 + a little NIS per month, or a 10% tax route from the first shekel, which is relatively very low for alternatives. Consult an accountant and understand exactly tax considerations.

Unfortunately, there are many investors who do not know these additional costs, and I propose to understand the cash flow they have.

I meet many clients who come and tell me they want financial freedom.

I asked what it is for them, there are different answers and this time I simply want to explain what it is for me.

Final goal: Non-work income is equal to or greater than monthly expenses.

And now a simple mathematical exercise that everyone will play with the numbers for and build an investment plan.

Suppose you want monthly income of NIS 20,000 not from work.

This means that you need 240,000 NIS per year (20 times 12 months)

Another assumption: know how to generate a 5% net return on investment (that anyone would put any number that suits them, I know many would say it's low). Note that assuming a 25% tax on profit means a 6.7% return on investment.

What capital is needed for us:

NIS 240,000 divided into 5% net = NIS 4,800,000.

Meaning: When we have equity of NIS 4.8 million, which is known to generate 5% of net income, we will generate income of NIS 20,000 per month.

Now according to existing equity + available monthly savings + types of investments you can know what type of investments to target.

There are those in the early years who need higher rates of return to increase their capital, some who need to understand that it is currently not feasible for them and set a lower monthly target and there are those already there.

In conclusion, here I tried to bring down the term economic freedom so that everyone would see what was feasible for them and whether it was now time for cash flow or capital raising investments relatively quickly to reach the required capital for sufficient non-working income.

*** In the picture, a delicious rice dish is served in pineapple in India, to motivate many passive income.