Real estate as a tool for achieving economic freedom

Real estate as a tool for achieving economic freedom

Real estate as a tool for achieving economic freedom

 

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Real estate as a tool for achieving economic freedom

Everyone wants to be "financially free". But what exactly is it?
"Economic freedom" is defined as a person's ability to live the standard of living he wants, without the need to work. I mean - his standard of living is funded by passive income only.

Many people want to be "rich" or in more professional words - financially free. But they have no idea what that means? For them of course.

Every person has his "economic freedom number". That is, the value of the assets he needs to reach in order to be financially free.
These properties will in fact generate the right income for him.
One of the first things I ask my clients (and most of them do not know the answer at all…) is what is “their economic freedom number”.

How do you know what the "economic freedom number" is?
You have to calculate the annual income you want, depending on the level of life you want to live in.
Suppose we want a monthly income of 50,000 NIS. Or an annual fee of NIS 600,000.
In order to generate such an annual income for us, we need an income-producing asset value of NIS 7,500,000. This amount, under the assumption of a return / interest rate of 8% per year, will bring us an annual amount that we want. (600,000 / 0.08 = 7500000)
Now - we have a goal!

When there is a goal - you know what the goal is and you can build a work plan to reach it.

For anyone involved in real estate, it is clear that a return of 8% per year from income-producing properties is not in the sky, and even "solid".

Now, why real estate? Why not invest in the capital market as an alternative?
Real estate assets are relatively stable, there are no frequent fluctuations (unlike the capital market), there is certainty in income (there is a monthly rent, and they do not depend on a company decision on dividend distribution, for example). Of course there are risks in holding assets, but relative to other investments, the risk (in my opinion of course) is lower.

In the next post I will talk about the way to reach the number of economic freedom, that is - how do you reach such an amount ??

 

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Responses

  1. The program "Life is not everything" has a scene where Kushnir sits with his pension adviser and tries to figure out what his pension will be.
    Skipping all the punches on the way, he discovers that he will have 1100 shekels from the pension and another 1800 old-age pension from the state, and realizes that he is in trouble.
    50,000 a month sounds pretty bad 🙂

    Personally I have not yet found "my financial freedom number", it will probably be somewhere in the middle