How to Calculate Investment Targets Based on Your Passive Investment Goals

As a passive investor, it pays to know your goals. Without a goal, it is difficult to design a roadmap and it certainly is a challenge to stay motivated without a target for what you want to achieve in the first place. 

By now, you should understand the value of passive income and you are working on accumulating passive income earning assets. The below are next steps for working professionals who actually want to make it happen.

1️⃣ Generate A Passive Income Goal

Calculate how much passive income you’d like to earn per month. Set the target to match your monthly earned income. This will be your passive income target. Yes, it will be overwhelming to believe that you can achieve such a high passive income goal, but let’s aim high so that someday you can be “job optional.”

2️⃣ Assume a Target Rate of Return

Based on your passive income goals, you must assume a certain rate of return from which that passive income will earn. Realistically, the rate of return should be higher than other paper assets like your 401k but not so high that it is based on high levels of risk. I safely assume a return of 12%, based on my cash on cash target returns from multifamily passive investments. This is conservative because it only includes the passive income from cash flow and not the outsize earnings one can make from the potential sale.

3️⃣ Calculate The Capital Needed To Work For You

Now, if you have the target monthly income and the rate of return, you can calculate the amount of capital you need to our to work to generate those passive income goals. Here is how it works. Convert your monthly passive income goal to an annual target and divide by the rate of return. As an example, if you want to earn $6k monthly in passive income, that coverts to $72k annually. Based on a 12 percent rate of return, you’d need to have $600k at work creating those returns.

This calculation of your total investment based on your monthly goals is one way passive investors can create investment goals. Do not be overwhelmed by the size of the investment. The wealth snowball is built one good decision at a time. Also, for your working professionals, you may have more investment Capital ready to deploy than you think. Find out your options for rolling over your old restrictive , high-fee 401k into a self-directed IRA or eQRP

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💡Invest Your Retirement w/ eQRP

I Rolled My 401k Into eQRP to Passively Invest In Apartments

Author: Rodney