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Reverse Engineering: A Financial Strategy for Ditching Your W2 with Passive Income

Are you tired of feeling limited by your salary and having to constantly keep trading your hours for money? If so, and if you have a desire to break out of the never-ending W2 rat race, then passive income might be the right option for you.

Passive income is income that flows to you consistently without you having to trade any more time in order to access it. It is called “passive” income because little to no work is required to maintain the income after it is set up. In this article, we will break down an efficient strategy that you can use to build your passive income and ditch your W2. Let’s dive into it.

Step 1: Identify How Much Passive Income is Needed to Safely Exit a W-2

For some people, the full amount of W-2 income will have to be replaced in order for a safe W-2 exit to occur. However, this is not the case for everyone. For example, if you are making $150,000 a year, but if you could comfortably live off of $70,000 a year, then you could safely exit your W-2 job with only $70,000 in passive income per year. So, you will need to identify how much passive income you need in order to get rid of your 9-5 W-2 job.

In order to do this, you should add up all of your bills so that you know exactly how much money you would need in passive income in order to be able to pay them off without working your W-2 job anymore. You should also include in this calculation the amount of spending money that you will need per year to make your life comfortable and to maintain a relatively similar lifestyle. This should be income that excludes your savings, as you never want to put all your eggs into one basket.

Once you have added all these things up, you’ll know how much passive income you will need to exit your W-2 job.

Step 2: Educate Yourself on the Different Approaches to Creating Passive Income Streams

Based on the figure that you come up with that represents enough money to safely exit your W-2, you will have to figure out approximately how many passive income streams will be needed to achieve this number. For example, back with the $70,000 figure mentioned above, a person who needs this amount of money to live off of comfortably would have to find $70,000 in passive income in order to ditch his or her W-2.

For some people, $70,000 in passive income per year could be achieved through just one or two passive income streams. But most people don’t have a significant amount of money to jump-start their passive income streams. It will take time and a focused investment strategy to build up to it.

A safe approach is to create multiple streams, so your income sources are diversified, and your risks are minimized, in case one or two of the streams aren’t as successful as projected. One of the best ways to build passive income streams is to invest in multifamily properties.

The passive income that comes from multifamily investments can be significantly higher and safer compared to the passive income that comes from investing in single-family homes. It can also be easier. For example, it is easier to buy one apartment building with ten units than it is to buy ten single-family homes.

In other words, it is much easier to scale multifamily property investments than it is to scale single-family home investments. In addition to the generally higher ROI and better security, this is a great reason to choose multifamily properties over single-family home investments.

Step 3: Plot a Timeline

Once you have figured out how approximately many streams of passive income you will need, and which types of passive income you will pursue, the next step is to create a plan for the timeline of when you will build enough passive income in order to quit your W-2 job. The details of this plan and how quickly you can implement it will depend heavily on your individual situation and ability to make investments and grow passive income.

For some people, it might be possible to quit their 9 to 5 jobs in under a year. For others, it might take ten years or more. However, even if it takes slightly longer than you expect, being able to quit your W-2 job to live off of your passive income will be incredibly liberating. Just imagine how free you would feel if you knew that you had enough passive income to live off of without having to work anymore if you don’t want to.

It can be easier to plan your exit from your W-2 job if you use multifamily property investing as your primary source of passive income. If you do, then it will be much easier for you to anticipate and accurately predict what your cash flows will be year-after-year. Other sources of passive income such as royalties, or stocks, can be much more difficult to predict.

Step 4: Build an Investing Strategy to Fill in that Timeline

The best thing that you can do to help you stick to your timeline for quitting your W-2 job is to build an effective investment strategy. This means you will need to set annual goals and track the performance of your investments closely to make sure the returns you anticipated are meeting the minimum preferred returns. This may not always be the case, and if you’ll need to extend your timeline or revise your strategy, it’s best to know sooner than later.

Be advised, real estate investing is generally a “long game” and while some investments may yield quick and large returns, that is generally not the case in true wealth building. Be patient and allow your investments to grow, just be sure to monitor it regularly.

You can work with a multifamily real estate syndicator, who can find multifamily real estate investments for you and manage them on your behalf. You just have to put up the capital. Oftentimes, multifamily syndicators can help you to earn around 6-7% monthly cash-on-cash, and an average annual return of conservatively 12% - 17% (or more) on your investments.

Whichever strategy or assets you opt to invest in, just be sure the numbers make sense, are conservative, and the timeline is reasonably aligned to market conditions and returns. While it may seem daunting at first, once you see your investments grow, are able to re-invest the profits and investment funds again, and see more growth in your wealth, you will begin to realize this is very possible!


Life is short. If you would rather live a life of financial freedom and abundance than have to work at your W-2 job until you retire, then building passive income streams through multifamily real estate investing could be your best option. People who invest in multifamily real estate properties get to make money both through rental income that comes in from tenants and through the sale of the property. There are also significant tax benefits along the way to help offset the additional income taxes. To eventually become a full-time real estate investor, you have to reverse engineer your strategy. Figure out how much income you can comfortably live on, identify what type of investments you’d like to make, develop out passive income streams, and steadily build your wealth through repeated investments until you’ve reached your original goal for passive monthly income.

Want to Invest with Ellie Perlman and Blue Lake Capital?

If you are interested in learning more about passively investing in multifamily properties, click here to schedule a call with the Blue Lake Capital Team.

About the Author

Ellie is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.

A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.

Ellie is the host of REady2Scale, a podcast that highlights honest, insightful, and thought-provoking discussions on the multiple approaches for successful real estate investing.

She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.

Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.

You can read more about Blue Lake Capital and Ellie Perlman at


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