The past 9 months or so have been a roller coaster for me. I started this journey with the belief that I might be able to quit my day job by the end of 2012. I think I will postpone quitting for a while, but only because it gives me more financial security. In fact, that is my primary concern right now. How can I prepare for quitting my day job.
Ultimately this means replacing my day job with other income and then slowly turning it into passive income so that I can have more time to do what I want, but the difficult question is what to do first. If I start investing the extra cash that I have now in small investments, it will be a long time before I buy my first rental. I don't like the idea of waiting too long, so that is one of my primary concerns right now.
How to Save Up a Down Payment
One of the advantages that I have with saving up a down payment is that I have a few hundred dollars each month from my blogging business. While I could probably find a loan from loan sites such as this or get a second mortgage to pay for the down payment, I would much rather wait a year or two and not have to worry about losing the house than be in debt over my head.
I am currently saving all of my net income from blogging in a high-interest savings account. It may not be much now, but it will slowly build up. While my .8% interest rate may not sound like a lot, it is better than nothing. Over the next year or two, I hope to have enough money to provide a down payment on a rental property AND still have some left over for an emergency fund. My wife and I already have a decent emergency fund, but if I am going to be taking on more risk, I want a little extra cushion.
How a Rental Property will Help towards My Goal
So, what happens if I am successful at buying a rental property? Real estate is often a long-term investment and hardly would replace my day job income by itself. I am not foolish to believe that one rental property will be enough, but I am excited about how this will help diversify my income. More than anything else, I expect it to generate $300-$500 each month. It will be difficult to find a property at the right price, but not impossible. Having an additional few hundred dollars each month will go a long ways to giving me a little extra security and help me transition out of working a full-time job. I don't expect it to be easy, but I think with the right amount of dedication, I can slowly make my dream a reality.
Once I save up my down payment, I will start looking more seriously for rental properties. Whether that is the traditional single family home or something similar to a condo or timeshare and buy a serviced apartment. Regardless of which route I end up going, I have to first save up the down payment. Otherwise I am just dreaming – as is too often the case of online investors.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.