Well, I’m glad to see from your comments and emails that my cash cow analysis has hit home with so many of you…
The simple fact is that it’s easy (too easy in fact) to put our wishes for a great deal ahead of the more analytical parts of our brains. It is avoidable, of course, and the best way to stay out of those mind traps is to write down exactly what the real numbers are…
Not what you want them to be or need them to be, but just what they happen to be. Dealing with reality is the only way to take firm steps in the right direction!
Now, onto that PPR of yours…
Do you have the wrong PPR at the wrong time?
If you’re one of my students, then you know that I believe that most people have the wrong PPR at the wrong time.
What am I talking about? I’m talking about your dream home, of course! We all want them and usually, we get them sooner than we really should. Granted, we all like to have our dream homes in hand, especially us females with our overwhelming nesting instincts driving our decisions!
But is laying out tonnes of cash for your dream home the smartest thing to do when you’re first starting out in real estate investing? You know what I’m going to say… Of course it bloody well isn’t!!
For many of you, this has been a hard lesson learned. For perhaps another group of you, you have yet to learn that lesson. I’m not saying this applies to everybody, but I can safely say that it is the case most of the time…
Here’s the drum: Most people buy their dream homes before they can really afford them. Their dream homes usually have large mortgages against them, as well as other costs…
Dreams don’t come cheap, do they?
Dream houses require way too much upkeep and end up keeping you cash poor!
Right; so you’re one of those who has your dream home and you’re looking to replace the income from your job by picking up a few cash cows (doing all the proper due diligence!). You’ve got a bit of money in the bank and maybe qualify for a loan for a small cash cow, but it’s not enough to really get the ball rolling as fast as you’d like…
Where do you find the resources to pick up all the passive income moneymakers you need?
That’s right… It’s time to sell the dream house and buy the even better dream of total income replacement.
This is where I usually step away from the conversation if I’m talking to a married couple, because this is where the conversation gets into more personal details, I yo know what I mean…
But honestly, it’s a conversation you must have with your partner or spouse if you’re really serious about income replacement. The terms are usually pretty straightforward, aren’t they?
It’s all about adding dollars and sense to your investing plans…
Rent your home while building your passive income portfolio
If you sell the dream home, chances are you’ve got a nice bit of equity in it. That in itself can be a big help when it comes to picking up a cash cow. Next, you either rent a house for a fraction of what your monthly mortgage was, which is my best suggestion…
Or you buy a cheaper house. My preference is to rent your home while you build your passive income portfolio.
With the big mortgage off your back, lower upkeep costs and more money in the bank from the sale of the dream home—as well as less money coming out of your pay packet–guess what happens?
You suddenly qualify for a lot more money to borrow! You suddenly have more disposable income. You suddenly have many more options to supercharge your passive income portfolio.
All of these sudden and positive changes should make you feel much better about selling your dream home…
Besides, as your passive income increases, your ability to buy another dream home increases, too.
When should you consider buying your dream home?
Which reminds me… just when should you reconsider buying your dream home?
What is YOUR Peg in the Sand that you need to reach before getting back into the dream home market?
Say you’ve successfully replaced your income with passive income…
What do you do next?
Do you pull the pin on your job? Or do you continue to build your portfolio so you get even higher yields?
For most people, I would recommend that you stay in your job and continue to build your passive income portfolio. The reason is simple. If you keep your job, you have that much more capital to invest. This means you reach your goals that much quicker!
Of course, it also depends on the cost of your new dream house, doesn’t it? You might just find that your old dream home just isn’t cutting it in the dream department any longer…
Or you may discover that your dream home is not that large home with all the interior space, land and all the glitter that you once thought you wanted…
It might just be a smaller house by the beach somewhere or out in the country.
It’s funny how that works sometimes….
But, if you’re like many of my students, once you’ve got a few cash cow and manufactured growth deals under your belt, you may want to take on a slightly bigger project with bigger yields.
KEEPING YOUR DAY JOB WILL HELP MINIMIZE RISK AND KEEP CAPITAL FLOWING…
And as a general rule, I would say that until you have trebled or even gotten your passive income level to about four times your earned income, you shouldn’t even think about pulling the pin on your job…
But when you do get to the point of pulling the pin on your job, if possible, buy your dream home first…
That way, you will know the exact costs you’re taking on before you lose your earned income.
Remember to always, always, always know your numbers!