In my previous three posts, I discussed why we invest in rural rental real estate. Some of you might be wondering “Kenny that’s great, but Why are you investing in the first place?” The answer is simple: passive cash flow.
What is Passive Cash Flow?
When an investment yields more income than expenses, you have cash flow. Even better, because this money comes regardless of what you do with your time, it’s passive cash flow. This is the opposite of active income, which is when you trade hours of your life (via “work”) in exchange for money (via a pay check).
Active income is how the vast majority of the world covers their living expenses.
Passive cash flow is how the wealthy cover their living expenses.
When we started out our entire goal was to build enough passive cash flow so we didn’t have to work if we didn’t want to. It just turned out that after looking into a LOT of different options, rural rental real estate was the best way we could find to do so.
You should be working to build passive cash flow. Why? Here’s a list:
10 Reasons You Should be Building Passive Cash Flow
- You don’t want to work 9-5. Who dictated that 9-5 (or whatever your office has) is the best? Maybe you want to wake up and go to the gym at 10 and put in some hours at midnight. What’s wrong with that? As a serious night owl, I can safely say: nothing.
- You like to travel. So you want to see the world? Why don’t you go on a trip for a couple of months. Oh right, there’s that whole job thing. If you have enough passive cash flow, you can just go. Work when you want and where you want. Here’s a picture I took whilst my wife and I were playing with a cheetah cub in Zimbabwe:
- You know social security is hosed. If you ever hope to retire you better not be relying on social security.
- You recognize stock dividends won’t cut it. The average dividend is well below 4%. After taxes, you’re not even keeping pace with inflation. Sure, you can make money when the stock price goes up, but that feels a whole lot like speculating.
- You hate having a boss. Do you hate your boss? Do you hate the idea of having a boss. I have a real problem with authority and having someone tell me what to do never sat well.
- Your passion doesn’t pay. What do you like doing in your free time? Collect stamps? Work on a political agenda? Dress up like a cow and moo at strangers on the street? You can’t really pursue these if you have to work 9-5 to keep food on the table.
- You want to spend more times with your kid/wife/husband/parents. Working 9-5 with a 30 minute commute to and from means that 9 hours of the 16 hours (56%!) in a day you can’t be with the ones you love.
- You want to be healthy. Are you too tired and/or busy to work out when you’re at home? If you’re your own boss and living off passive cash flow, you can pop to the gym whenever you want.
- You want to work on your own terms. Works towards your goals when and how you want to.
- You don’t want to work. Maybe all you really want to do is play video games all day? Go for it. It’s not like anyone is going to fire you.
Wrap Up – Build Passive Cash Flow
Work to build passive cash flow. Once you’ve enough coming in the door, you can do what you want, when you want.
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