- The needed sum is calculated simply: annual expenses divided by the capital's yield. At a 4 percent yield you need 25 times annual expenses, at 10 percent 10 times.
- The 4 percent rule is the classic benchmark for a stock and bond portfolio: you can withdraw 4 percent of capital a year with a low risk of exhausting it. For income property the calculation goes from its net yield.
- An asset's yield sharply changes the required capital. For income of $2,000 a month at 4 percent you need $600,000, and at a property net yield of 10 percent about $240,000.
- The main risks of the plan are inflation, which raises future expenses, and overestimating yield. Calculate by net yield after costs and taxes and with a margin.
«How much money do you need to stop working» is the question for which people start investing in the first place. The answer is calculated more simply than it seems, but it depends on one variable that is often underestimated: the capital's yield. We break down the calculation using the 4 percent rule for a portfolio and net yield for property, and show how yield changes the needed sum several times over.
A simple formula
To live on passive income you need capital whose yield covers your expenses. There is one formula: the needed capital equals annual expenses divided by the yield. The higher the yield, the less capital you need, and vice versa.
| Monthly income | At 4% yield | At 8% yield | At 12% yield |
|---|---|---|---|
| $1,000 | $300k | $150k | $100k |
| $2,000 | $600k | $300k | $200k |
| $3,000 | $900k | $450k | $300k |
The table shows the main point: an asset's yield changes the needed capital several times over. For the same income, at 4 percent you need three times more than at 12. So the question is not only «how much to save» but also «what to invest in».
The 4 percent rule
The classic financial independence benchmark is the safe withdrawal rule: from a diversified stock and bond portfolio you can withdraw about 4 percent of capital a year with a low risk of exhausting it over 30 years. Hence the rule of 25: the needed capital is annual expenses times 25. This is a conservative benchmark for an exchange portfolio, built on historical market data.
The question of financial independence is not only how much to save but at what yield. A yield of 4 versus 12 percent is a threefold difference in capital.
Calculating from property yield
For income property the logic is different. It gives cash flow directly, not through capital withdrawal, so you calculate from net rental yield. For the properties DOMA represents in Bali, net yield is calculated in the 10–15 percent range from statements. At 12 percent, income of $2,000 a month needs capital of about $200,000, close to the villa entry threshold from $139,000. How net yield is calculated is covered in villa yields in Bali, and the mechanics of growing a portfolio in reinvesting and a villa portfolio.
Bottom line: to live on passive income you need capital equal to annual expenses divided by the yield. For an exchange portfolio the benchmark is the 4 percent rule and a multiplier of 25. For income property the calculation goes from its net yield, and at 10–12 percent the needed capital is two to three times less. The key is to calculate from net figures and with a margin for inflation. If you would like to calculate what income a specific property in Bali would give, write to us.
This material is for information only and is not individual investment or financial advice. We are not financial advisers. The 4 percent rule is a historical benchmark, not a guarantee. Yields are given as ranges.
Sources: DOMA project canon, the DUVI index (issue 1, July 2026). The safe withdrawal rule is given as a well-known financial independence benchmark and is not individual advice.
FAQ
How much money do you need to live on passive income?
The formula is simple: divide the desired annual income by the capital's yield. For $24,000 a year at a 4 percent yield you need $600,000, at 10 percent about $240,000. An asset's yield changes the sum several times over. This is not individual advice.
What is the 4 percent rule?
It is the classic financial independence benchmark: from a diversified stock and bond portfolio you can withdraw about 4 percent of capital a year with a low risk of exhausting it over 30 years. Hence the rule of 25: the needed capital is annual expenses times 25.
Why is the calculation different for property?
Because property gives cash flow directly, not through capital withdrawal. Here you calculate from net rental yield: if a property gives 10 percent net, then for income of $24,000 a year you need capital of about $240,000. But property is less liquid and needs management.
How much do you need to live on income from a Bali villa?
For the properties DOMA represents, net yield is calculated in the 10–15 percent range from statements. At 12 percent, income of $2,000 a month needs capital of about $200,000. Entry into a villa starts from $139,000. The figures are ranges, not a guarantee.
What are the risks of a plan to live on passive income?
Two main ones: inflation, which raises future expenses, and overestimating yield. If you calculate from advertising percentages rather than net ones, the plan falls short. So calculate by net yield after costs and taxes and build in a margin.
Can you combine sources?
Yes, and it is more sensible. Part of the income from a stock and bond portfolio under the 4 percent rule, part from rental property as cash flow. The combination reduces dependence on one source and one yield.