How To Replace Your Income With Real Estate Investing (EASY!)

Imagine being able to replace your entire salary by investing in real estate now and planting those seeds for the next 10 to 15 years.

If you're interested in learning exactly how to do this with my whiteboard, then definitely keep reading.

Replace Your Income With Real Estate

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What we're doing here is aiming to replace our income with real estate.

Let's say we have active income we generate when we're working (most people are working a 9-to-5 job, while some are self-employed, running their own business.)

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However, the idea is that 40 years later, you will retire, and you're going to be old. That’s the reality of the situation.

I didn’t make up the rules—time continues with or without us.

This cycle is what we are traditionally taught as the right way to do things: go to university, get a degree, get a job, and yada yada yada, right? You know what the cycle is, and we're trying to break out of this cycle.

For me, success is being able to walk away from this in less than 40 years.

For clients that come to us and say, "Ravi, I actually want to buy property. I don’t want to get screwed over by the wrong property and lose money on it. Can you just do it for me?"

We go and:

• Do all the research,
• Handle all the end-to-end work,
• Hold your hand through the entire process,
• And get you into a position where you can do it in less than 40 years.

If you want to know how that whole process works, definitely check our website and book a free discovery call with my Search Property team.

Now, if we're trying to replace our income within 40 years, we need to do things that most people traditionally don’t do.

What most people do is:

• Buy their home,
• Stick to one house,
• Potentially buy a second property,
• Become an investor (by accident),
• Continue working until they eventually retire and rely on their pension.

However, we’re not looking at doing that. Instead, when we earn our active income, we want to invest it well.

If we invest it well, we will generate passive income and then we can retire early—that might be 10 years, 20 years, or 25 years, but you’re still doing it in less than 40 years, which is the traditional number.

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I can tell you now that we have some clients who will potentially retire in the next 7 to 10 years, and that is fantastic. It actually makes me feel all warm and fuzzy inside because it means that we’re ethically doing the right thing.

By paying us, we’re doing them a greater service by effectively giving them back their time. And that’s what you’re looking for:

• How to move at speed,
• Buy the right assets,
• And be able to get back your time.

That’s why, when you get hit with an upfront fee for a service you’re actually going for, it’s speed and time that you’re buying back. And we already know that if you work 40 years, you’re going to be old, and trying to go and travel at that point isn’t going to be fun. Trust me.

Therefore, in this case, what we’re trying to do is get the best of both worlds.

Yes, you CAN, but it’s the road less taken (Wow! We’re getting philosophical here, haha!)

Anyways, let’s assume we earn a $75,000 salary.

How Does Replacing Income with Real Estate InvestingWorks?

I want you to be able to substitute your numbers into this.

• Get the formula,
• Get the principles right.

If you’re making $50,000, put $50,000.

If you’re making $250,000, put that in as well.

So how do we do this?

At the moment, we need to live, right? So we’re either:

• Renting; or 
• We own our own property.

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If you’re renting, you’re paying rent.

If you own a property, you most likely have a mortgage, so you have a mortgage repayment to make every month.

Once you’ve earned the salary, the largest expense you’re going to have is either:

• Your mortgage, or
• Your rent.

Now, if we go ahead and purchase our own home, it’s zero income being produced from the actual property, but in turn, I don’t have to pay rent, which traditionally was known as dead money.

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If I go and invest in a property, then I earn X amount of income from that property, but I have to continue renting.

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So what I want to focus on in this article is this question:

If I’m going to invest, what am I realistically looking at? (I want to look at conservative numbers.)

If I buy a house for $500,000—let me pause here for a second, because a bunch of comments have been coming up saying: “No, Ravi, you’re an idiot. There are no properties available for $400,000 or $500,000.”

Yet, we buy hundreds of these every single year. We’re doing it every day at the buyers agency, so if you’re not finding them, there’s a problem with your process and research. That’s why you need to move at speed, and most of the time these properties are off-market, so you’re never going to see them anyway.

Going back to my whiteboard, if you are going and buying a property for $500,000, I’m going to use an approximation of $100,000 as your upfront fee.

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This could be:

• Deposits,
• A buyers agent fee,
• Accounts,
• Conveyancing,
• Inspections.

Then for the average growth, we’re doing 5%.

I can tell you, we will outperform 5% every day of the week, but we’re looking at conservative numbers, so let’s be conservative.

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Again, 5% for the average growth and a rental growth of about 2%.

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In Year 1, we have a $500,000 asset going up by 5%, which means you’re making $25,000. If we pause at this moment, you have effectively invested $100,000 into buying a property.

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Now, your cash flow sort of takes care of itself, but if you get a conservative 5%, that means you made $225,000 on paper from that property. This means your $100,000 that went in produced $25,000 in Year 1. If you think about this, when you’re investing cash into the bank, the bank is giving you 4%, so you’re putting $100,000 in, and 4% comes back out, which is $4,000.

In this case, I’m putting in $100,000 and getting $25,000 back.

What’s beautiful about this is that it’s tax-free. So these are things you need to understand when it comes to your mindset around investing, because there are so many things most people miss out on.

I still, to this day, get emails after having made hundreds of videos on my YouTube channel.

People still ask me things like:

• How is equity tax-free?
• What does that even mean?
• How do I buy multiple properties with one deposit?

That’s why you need to educate yourself with my blogs and videos. I try to make them entertaining, but if you get bored, well, it is what it is (Haha!).

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Now, in this case, we’re assuming neutral cash flow, so what goes in comes out. It’s all good.

But what happens after 5 years?

What happens after 10 years?

Well, after 5 years, the property is worth $638,000. This means I’ve made $138,000 over a 5-year period. That’s effectively doubling your money in 4 to 5 years. It’s a pretty good position to be in.

The cash flow now is about $3,000 per year that you’re getting back into your pocket.

In all of this, we’re assuming no rate changes. We’ve seen rates go up by 400 basis points in 18 months—it’s been crazy. We’ve got banks now calling for rate cuts coming in the next 8 months.

This could be:

• 100 basis points;
• 200 basis points; or
• No change.

However, what we’re going to do is assume the rate stays exactly where it is today.

Sure! Here’s the continuation of your blog, proofread for clarity and ease of reading:

I still, to this day, get emails after having made hundreds of videos on my YouTube channel.

People still ask me things like:

• How is equity tax-free?
• What does that even mean?
• How do I buy multiple properties with one deposit?

That’s why you need to educate yourself with my blogs and videos. I try to make them entertaining, but if you get bored, well, it is what it is (Haha!).

Now, in this case, we’re assuming neutral cash flow, so what goes in comes out. It’s all good.

But what happens after 5 years?

What happens after 10 years?

Well, after 5 years, the property is worth $638,000. This means I’ve made $138,000 over a 5-year period. That’s effectively doubling your money in 4 to 5 years. It’s a pretty good position to be in.

The cash flow now is about $3,000 per year that you’re getting back into your pocket.

In all of this, we’re assuming no rate changes. We’ve seen rates go up by 400 basis points in 18 months—it’s been crazy. We’ve got banks now calling for rate cuts coming in the next 8 months.

This could be:

• 100 basis points;
• 200 basis points; or
• No change.

However, what we’re going to do is assume the rate stays exactly where it is today.

In 10 years’ time, that property is now worth $814,000. This means you’ve made $314,000 from that, and it’s giving you cash flow of about $77,000 per year.

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We know that to buy this property, it costs us $100,000. In 10 years, I’ve now tripled my returns. By putting in $100,000, I’m getting $100,000 plus, and that’s based on conservative numbers.

Now, to give you an idea why I keep saying this is conservative: if you buy the right properties, like I have been doing personally for the last 9 or 10 years, I’ve averaged about 11% annually in my personal property portfolio.

I’m not just saying I got lucky because I bought one in this location and then bought all of them there. No, I’ve got them across five different states.

I’ve bought them over:

• Different time frames,
• Different types of assets,
• Different price points.

However, the main thing is that if you know what you’re looking for, you will outperform the market. If you don’t know how to do it yourself and you’re not an expert in that field, you need to outsource it.

This is how you get speed, and this is how you’ll get results that other people won’t.

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Now in this case, if we look at this:

10 years is the time frame, and using the cash flow to get $7,000 a year, I would need 10 homes to be able to get there.

Is 10 homes possible? Yes, it is!

Is it something that you’re looking forward to? Well, probably not.

However, is there another way? Well, let’s explore what it looks like if we bought five homes.

Now, if we bought five homes and instead of rushing to retire in 10 years, what happens if we kick the can down the road and say: We want to enjoy life. We want to travel. We’re going to buy five properties, one every year (which is very doable, depending on your situation and strategy).

Then you go: Okay, I’m going to hold this for 15 years.

In 15 years, your cash flow is going to be around $65,000 to $75,000 a year, and your equity position will be a whopping $2 million.

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Now, when I say that number, people are going to go: That sounds like a load of sh*t. I don’t know how this works.

That’s why I want you to take some time to read my blogs, watch my videos, educate yourself, and know that this system works. It’s just a matter of unlearning what we’ve been taught and looking at things differently.

People tell me all the time they can’t afford a mortgage. I know people have borrowing capacity issues. These are things that we’ve been taught, and they are distractions.

What you need to focus on is:

• Getting the right people around you,
• Getting the right strategy, and then,
• You’re on your way.

Some people will do this in 5 years, and some will do it in 20 years, but the main point is that we’re still doing this within 40 years, so that, to me, is a win in my book.

There are some people reading this blog who might be slightly older and have already been working for 20 years. The benefit you have is experience (yes, experience is a good thing).

More importantly, you have the ability to say: Okay, I now have a solid 10 years where I can really restructure. Hopefully, some of the upfront cash I have, whether it’s from my property that’s grown in value, or savings I’ve made over the last 20 years of working full-time, and plus, I’ve got things like super as well where I can invest my money into property.

Knowing all of this, what we’re really designing here is a 10 to 15-year plan to get you to replace your income purely by buying the right assets in real estate, and keeping it really simple.

“Keep it simple, stupid.” This is pretty much what we got told, right?

KISS… it’s all about KISS. It’s about kissing, guys! This is what it is. This is what this article is about. We’re going to scrap the whole idea that it’s about replacing your income—it’s all about kissing. And you’ve just been taught exactly how to kiss your retirement.

I hope you guys have enjoyed this short and sweet article.

Catch you guys in the next one.

Thanks, guys!

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