The American Michael Quan always wanted to quit working early and retire. After building an IT company and then selling it to a private equity firm, he was actually able to retire at the age of 36. Because he invested the proceeds from the company sale to build up a passive income.
“My daughter was one year old at the time. So I decided this was the perfect time to take early retirement and really be with my family. It was a major motivation to enjoy her first few years at home with her, ”Quan said in an interview with Insider.
Quan, now 44 years old, has set up his finances in such a way that he can live on his net worth and the passive income generated by it. These are his three most important investments:
1. His main source of passive income is real estate investments
In 2020, Quan earned 48,000 euros with real estate, which corresponds to 78 percent of his passive income. He owns three properties – two single-family homes and a condo – in Nevada. The first two properties bring in a constant cash flow every month as they are rented out on a long-term basis. The third property is rented out through Airbnb, which allows him to generate additional income.
Quan is also part of a family owned real estate investment company that owns an apartment building property in Venice, California. All income from this, such as rental income, is shared among the owners.
His fifth investment is a property in San Antonio: a large apartment complex that Quan has invested in through a real estate development company. This enables him to generate additional rental income
2. He collects dividends from his investment portfolio
Last year, Quan collected around 10,000 euros from dividend payments, which is 16 percent of his passive income. He holds exchange-traded funds, mutual funds and individual stocks.
Instead of cashing out the income, Quan reinvests the dividends in his portfolio so that his assets and dividend payments grow over time. This process is known as the DRIP method.
“My general approach to ETFs is that I want a mix of growth and dividend ETFs so that I have a balanced approach within the portfolio. Because sometimes dividends are very nice to have, but other times it’s about growth. Diversification is the keyword. The markets are growing in different ways, ”said Quan.
ETFs can be found through most regular brokerage accounts. If you’re not sure which is the best mix for you, a robo-advisor can put together a diversified portfolio based on your goals and risk tolerance.
But keep in mind that ETFs are not risk-free and not all have the same level of risk; some ETFs are less diversified than others.
3. He earns a residual income with his blog
Quan has a blog called Financially Alert, where he gives tips on money and ways to retire early. While he’s primarily about having fun putting the information together, it also generates additional income from ads, affiliate marketing, and membership fees. Last year, his online passive income streams brought in about $ 8,000.
Quan has also just published a book, “The FIRE Planner,” which is about mindful spending, strict savings plans, smart investments, and living sustainably.
The article first appeared here and has been translated from English.