How To Gain Financial Independence With Real Estate

 Learn articles CBanc logo.

Compound Real Estate Bonds


October 7, 2022

Learn article main image

How To Gain Financial Independence With Real Estate 

What it means to truly become financially independent can vary based on the individual and their unique personal goals. To one person, achieving financial freedom could mean quitting their day job to retire early and pursue their passion projects and hobbies full time. Another person may consider financial independence the ability to live comfortably while still working, though they no longer have to worry about paying their bills and affording other everyday expenses. 

Depending on how financial independence is defined, there are plenty of ways to reach this objective. Potential avenues range from maintaining a monthly budget and following the guidelines of the Financial Independence, Retire Early (FIRE) movement to generating passive income through investing in real estate. 

Essential Information About How To Achieve Financial Independence

One of the fundamental steps to becoming financially independent is to reduce your liabilities and establish positive cash flow by taking advantage of your assets. Liabilities can consist of a mortgage and debts from student loans and credit cards. Ideally, the value of your assets should be higher than your total debts and loans, which is possible when your investments grow over time.

As each person has a unique financial situation, there is no one method to gain financial independence. A common path to start on for beginners is to create a budget, which tracks your income and expenses. This way, you can understand where your monetary funds come and go on a weekly or monthly basis. 

Budgets help you appreciate the amount of money you can spend and save in a given period of time. Then you could designate funds toward diverse categories like housing, real estate investments, or debt payments. Living within your means while saving for the future is at the core of the Financial Independence, Retire Early (FIRE) movement. 

If you haven’t already, establish an emergency fund. As a result, when an unexpected situation occurs, such as a medical expense or car accident, you can afford to cover it instead of diverting your investment or savings funds toward resolving the incident. However, it may make more financial sense to pay off your debts first before you build up emergency funds, especially considering every person’s financial situation is different.

How Do Real Estate Investments Streamline Financial Independence?

Real estate investors potentially enjoy a stream of passive income that their investments produce for them over the long term. Whether an individual invests in real estate bonds or rents out a commercial or residential property, they can grow their net worth with steady cash flow. 

However, it is important to understand the main types of real estate properties and how they’re used before entering the world of real estate investing. Keep in mind location is among one of the most significant factors when considering what real estate property to invest in.

Land Real Estate

This type of real estate involves undeveloped plots or strips of land that can be turned into a parking lot, and a construction company can also develop property on the vacant land. Investing in land could yield favorable returns, particularly if it is based in a desirable area or densely populated metro. After all, supply and demand can greatly affect the pricing of real estate.  

Commercial Real Estate

From hotels and office buildings to restaurants and self-storage facilities, these properties are where companies of all sizes conduct business. An investor can own a commercial property and rent it out to business owners. On the other hand, they could also put money into a real estate investment trust (REIT) that comprises commercial real estate.

Residential Real Estate

Including apartment complexes, single-family houses, condos, and townhouses, these are pieces of real estate where individuals or families live. Turning a residence into a rental property may be a lucrative endeavor, especially if it is listed on a short-term rental marketplace like Airbnb. In addition, homeowners and landlords can take advantage of tax write-offs made specifically for real estate businesses.

Industrial Real Estate

These are properties like factories, warehouses, and truck stops, entailing places where industry and manufacturing happen. Real estate investment vehicles, from mutual funds to crowdfunding campaigns, often financially back industrial real estate properties.

What Are the Different Types of Real Estate Investments?

When it’s time to choose a financial instrument, review your financial goals, then assess the risk versus the return on investment. Do your due diligence, such as researching the development company, details of the property, and neighborhood, before putting your money into any kind of real estate investment vehicle.

Real Estate Investment Trusts (REITs)

REITs make it simple for individuals to finance real estate projects through a brokerage. In turn, the investors can earn passive income through dividend payments. There are different kinds of REITs, with the most common being exchange-traded funds (ETFs) and mutual funds, which share similarities but differ in terms of management styles and operating costs.

Real Estate Bonds

Backed by physical property, such as a residence or commercial building, real estate bonds allow investors to collect interest payments for a set length of time, per the agreement terms. Until the bond reaches its maturity date, which is when the borrower has to repay the principal, the investor can benefit from a passive income paid to them on a regular basis by the issuer.

Real Estate Crowdfunding 

Considered high risk by financial experts, real estate crowdfunding entails investors backing initiatives led by real estate developers and companies. By pooling their monetary resources into a fund, usually a REIT, crowdfunding investors finance real estate projects and may earn dividend or interest payments. The cost of entry into this investment vehicle is relatively low compared to other options, with certain projects requiring less than $100 to start.

Real Estate Mutual Funds

Mutual funds can carry a combination of stocks, bonds, and trusts, and these financial instruments involve individuals or institutions allocating their money into an investment pool. The majority of mutual funds pay a dividend or interest to investors. 

Is It Possible To Invest in Real Estate Without Buying a House?

In the past, investing in real estate meant a person had to put in a hefty down payment or take out a mortgage for a house or another property. Today, this is no longer true, and an individual can get started in real estate investing with REITs, mutual funds, or crowdfunding initiatives. 

Plus, there are disadvantages to owning a house for the purpose of renting it, even if it does generate passive income. The process of finding qualified renters is time-consuming and challenging. Not only do you have to make sure the renters have enough income, but they also have to pay rent on time and take care of the property. Maintenance costs can also become expensive.

Another drawback is if your real estate business is chosen by the Internal Revenue Service (IRS) for an audit. Procuring the necessary paperwork and records of business expenses could be a hassle, especially if you perform your own bookkeeping on top of property management duties. 

How Can You Take Advantage of Real Estate Tax Benefits?

Investors in real estate are able to take a variety of tax deductions related to property management, business operations, and more to reduce their tax burden. For example, a homeowner or landlord could write off the cost of repairing and maintaining their property, as well as fees associated with mortgage interests, property management, and property insurance. Even property taxes can be written off as a qualified business expense, in addition to: 

  • Travel expenses
  • Accounting costs
  • Office maintenance
  • Legal consultation fees
  • Marketing materials

Take a rental property that brings in $50,000 worth of income. If expenses associated with conducting your rental business totals $10,000 and qualify per the terms provided by the IRS, then you can deduct this amount, meaning your real estate business will have a taxable income of $40,000.

What Is a Simple Way To Start Investing in Real Estate?

Industry-leading financial companies like Compound Banc offer tools and products that empower the everyday individual to invest in real estate no matter their income level. Backed by actual assets in the real estate industry, from mortgages to commercial and residential properties, Compound Banc’s bonds start at a mere $10 each. 

These real estate bonds allow investors to benefit from a seven percent annual percentage yield (APY) compound return, creating a sustainable and fixed income stream. In addition, with Compound Banc’s smart technology, users can take advantage of a secure and convenient app that makes it easy to monitor their bond investments and automate savings. Join Compound Banc today to continue on your journey toward financial freedom.


FIRE: Financial Independence, Retire Early | Forbes Advisor 

Make a Budget - Worksheet | Consumer

Real Estate Investment Trust (REIT) | Investor

Donating Through Crowdfunding, Social Media, and Fundraising Platforms | Consumer Advice 

Exchange-Traded Fund (ETF) | Investor 

Publication 530 (2021), Tax Information for Homeowners | Internal Revenue Service 

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.