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Use rental property to diversify your income

December 5, 2010

So we all know to diversify our retirement portfolios.  Don’t put all your eggs in one basket and all that.  Then why do so many people have just one source of income – their 9 to 5 job?  I find this a very risky strategy in today’s market.   With unemployment near 10%, only one source of income is really living on the edge.  Couples with both spouses employed are slightly better off, but could they live on only one of those incomes?  Those who just go to work and then come home and watch tv will be in for a big surprise one day.  I think everyone should prepare for a tougher future and work to build another steam of income besides their day job.

Rental properties are a great way to diversify your income.  I think keeping your day job and paying off your properties as quick as possible is a great strategy.  I am currently managing 3 properties and my
girlfriend manages 2 herself.  We could certainly manage more while maintaining our  9to5 jobs.  It seems we just get more efficient with our time as we acquire more properties.

One of my first goals in real estate investing was to match my monthly fixed expenses with steady rental income.  My next goal is to have my monthly profit exceed my monthly fixed expenses.  At this point you would be able to survive without your job if you had to.  My plan is to keep my job and use the rental income to pay off all outstanding mortgages.  This will leave you with even more cash flow and really lead to financial independence.  With this strategy, your net worth really increases year over year.  It gets addicting and you find yourself not spending discretionary income, but paying off debt and saving for your next investment property.

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