Passive Income Deferred (Interesting Times We Live In)

2 months ago

Having spent essentially an entire year out of the country, you'd be quite right in assuming that the thought of passive income crossed my mind on a regular basis.

Yes, even when I'm out here enjoying some good ol' Texas BBQ.

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As any readers on here who have followed my blog in the past will know, the journey to early FI begins and ends with cash flow.

More or less...

The thing is, the whole dynamic and concept of cash flow/passive income has changed quite a bit since I started getting heavily into investing in 2012.

For the most part, those big fat lucrative deals just aren't ripe for the picking anymore. I must sound like an old geezer saying this, but back in the day when I was grinding hard trying to get to the promise land of early retirement, things just came so much easier.

Like for instance with real estate, in 2012, you could pick up a really high quality rental unit that would cash flow on Day 1 and offer you at a very minimum 10% cash-on-cash return. In many instances, those numbers could be even larger, say 15% if you knew a thing or two about value-adds and how to buy distressed properties and later fix em up to maximize rents and property appreciation.

Yup, the good ol' days of real estate.

Anyway, when you've got the wind to your back, it doesn't take very long for a hungry financial freedom fighter to be able to turbocharge their cash flow/passive income. I mean back then it was basically buy 1 unit, collect $500/month when you pass go on the 1st of the month. Get 2 units, and you're already sitting at $1,000/month, which is actually quite a hefty bit of purchasing power if you go to most places outside of the major international cities!

Heck, even in HK $1,000/month can do a whole lot of good for you (outside of housing that is).

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But you know what, the past is the past.

We aren't operating in that kind of environment anymore, so really it does no good to harp too much on it, other than to make a point and to share an interesting datapoint that sheds light into the possibilities a bear market can open up for investors who have the courage and capital to take action when everyone else is scared shitless.

What you get are life changing returns.

As far as today goes, I can't help but think it's all just a waiting game for now. I like to call it, "Passive Income Deferred."

I mean I look at even my own situation, and sure I've got some spare cash laying around and a whole buncha mining stocks that I'm investing in right now. Absolutely that's not a place I ever thought I would find myself in, and had you told me back in 2012/2013 when I was obsessing over real estate that one day I would be "balls deep" into an asset class that returns 0% yield, I woulda told you that you were insane.

Sign of the times, though.

Everywhere you look around, most assets are overpriced and in bubble territory.

So yeah, opportunities are few and far between, and I just don't see any low hanging fruit that's enticing me enough to alter strategies right now.

It's a game of patience.

Easier said than done, but hey, interesting times we live in. You could say somewhat unprecedented too.

As for the holy grail to early FI, when it comes to cash flow, after having traveled near and far, I've got to say that my own thoughts are this -- You probably need about $1,000/month USD to scrape by.

Don't worry, with $1,000/month you'll still be able to enjoy all that free time and take in some great sights.

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If you can somehow pull off $1,500/month, that'll give you quite the lifestyle boost and you won't have to count change everywhere you go. A further boost to $3,000/month, and for a simple dude like myself, you're living like royalty!

You can party it up everyday, if you'd like.

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No doubt, I feel like I can make do almost anywhere in this world on $3k/month in passive income. Yes, even in the Bay Area and Hong Kong and similarly expensive cities.

But suppose I even had that kind of relentless urge, the kind that makes you take immediate action... pushing me to put to use all that spare capital I have laying around...

Where would I park it?

Into more real estate? Dividend growth stocks?

What's a reliable Buy and Hold Forever investment vehicle that exists out there right now that isn't priced for absolute perfection (or impending destruction)?

Whenever I ask myself that very question, I always get stuck and I have zero answers.

So, I just keep on waiting, even though deep down I know that I would want nothing more than to convert any spare capital that I have into more income producing assets.

But as I learned in 2012/2013, when it's easy pickings, you can get to early FI in no time. Buying low is some pretty potent stuff, let me tell you.

In a world where ain't nothing cheap though, I don't know, deep down my gut just keeps telling me to chill out and wait for a better opportunity to strike.

Which greatly explains why I've been so eager to travel some more and see some interesting new things.

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Patience is a virtue.

I certainly don't have any, so I gotta find a way to distract myself.

What do you think?

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