Do you dream of working because you enjoy your job, not because you rely on it for a steady income? If so, you may want to consider establishing financial independence and retiring early (FIRE) as your personal financial goal.

Achieving FIRE allows savvy people to make the most of the best years of their life. If you’re financially independent, you can travel at-will, work in a field that allows you to pursue your passions and invest time and money in your hobbies and the things that bring you the most pleasure out of life.

Reaching financial independence is a challenging endeavor. It consists of careful budgeting, lifestyle changes and savvy investment decisions. With the right amount of preparation, however, you can reach FIRE.

Using real estate for financial independence

Investing in real estate is one of the fastest ways to generate passive income and achieve financial independence. Savvy investors know that even a small collection of rental properties, when managed correctly, can be an integral part of their path toward full fiscal freedom.

It’s important to realize there’s no one, single investment or lifestyle change that will help you achieve FIRE. Investing in real estate, however, is likely one of the most significant steps you can take toward financial independence. Making a series of well-planned real estate purchases could help you take meaningful steps toward an early retirement.

If you want to make real estate investment a component of your FIRE strategy, there are a few things to bear in mind:

Find your target

Firstly, identify the combination of passive income and savings necessary to help you achieve full financial freedom. It’s important to set a realistic, attainable goal for your target. This number looks different for everyone, depending on your lifestyle, expenses and retirement plan.

If you’re hoping to find an affordable cabin to while away your days in after quitting your job, then you won’t need as much passive income as you would if you were planning to travel the world via cruise ship upon retirement.

Identify the necessary amount of real estate

Once you know how much passive income you’ll need, it’s time to identify the amount of real estate you’ll need to purchase to help you achieve your passive income goals. You should plan on holding your real estate assets long-term and renting them out to generate income as part of your FIRE plan. While it may be tempting to purchase one or two pieces of high-value real estate assets, it may be prudent to instead diversify your assets across several properties.

Make lifestyle changes

Next, you’ll have to consider making lifestyle changes to help you maximize your savings and investment potential. Making strategic choices, like purchasing used cars rather than new ones, will help you ensure that you’re able to save the most money. Reducing travel, and using credit card benefits to travel when necessary, will also help you free up the capital necessary to invest in your future. Cutting grocery bills, using cheaper cell phone service and cutting other household expenses will allow you to trim the fat in your budget.

Establish other investment opportunities

While real estate investment should be a core component of your FIRE strategy, it’s important to realize that it shouldn’t be your only passive income stream. You should establish other passive income streams through stock and bond investments. Index fund investments are an extremely reliable way to increase the value of your investments. Additionally, you should place as much money as possible in high-interest, tax-exempt savings programs, like retirement pension funds.

Going beyond real estate

There are many other steps that are necessary to achieving financial independence that you should keep in mind. Following the ‘4 percent rule,’ for instance, will also help you achieve FIRE faster: the 4 percent rule states you should only withdraw 4 percent or less from your nest egg each year. This will help you ensure you remain on-track for your retirement.

Carefully following these recommendations can help you achieve FIRE, and set you up for long-term independence and stability moving forward. While fiscal freedom may seem like it’s a long way off, when you establish strategic goals and make savvy investment decisions, you can bring yourself meaningfully closer to early retirement.

Regardless of what your journey toward FIRE may look like, it’s important real estate plays a critical role in your financial independence strategy. Investing in rental properties can help you grow your passive income and free up the capital necessary to make other long-term investments that will help you achieve your FIRE goals.