Financial Planning & Real Estate Investing: What is your Number?

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Have you seen the commercials (below) where individuals are walking around town with “Their Number” (tucked under their arm)?  The numbers are intended to be financial security and ranged from $1.0M – $2.0M.  The basic meaning of the commercial is once you achieve “Your Number” you are good to go because you are financially secure.

I think this commercial is extremely effective at getting individuals to think about their finances. However, I believe it is logically flawed in many ways, and it annoys me that people fall for this hocus-pocus financial planning.

My first issue is with the basic premise of the commercial, which focuses on “Net Worth“.  Your goal as a buy and hold real estate investor is not some “Magic Net Worth Calculation”.  In fact, as a buy-and-hold investor, I believe the net worth calculation is worthless except at cocktail parties or while bragging to friends and family.

If you are a buy-and-hold real estate investor, you need to ignore net worth calculations and simply focus on monthly cash flow.  Note: I am not talking about spreadsheet cash flow, but real cash flow with which you can pay bills, take expensive trips, and buy toys if you choose to.  In other words, spreadsheet cash flow doesn’t count; it has to be real money produced in the real world.

Summary: Focus on Cash Flow NOT Net Worth

My next issue with this commercial is the concept that you need north of a million dollars.  Most people see a million dollars and think, “wow, that would be so cool,” or, “maybe if I had a million dollars I would be set.”  Unfortunately, the next thought tends to be, “I will never get there and thus I will live for today and not plan for the future.”

Instead of targeting a goal that seems so far out of reach, real estate investors would be much better off focusing on calculating their monthly spending to maintain or exceed their current standard of living.  Depending on the person, this could be anywhere from $2K to $20K a month.

Your number is your number and there are no wrong answers.

Ask yourself, “Is it easier to think about $1,000,000 or $5,000?”  I suspect that if most people sat down and really looked at the minimum number of monthly cash flow required to maintain their lifestyles, they would be shocked. The number you calculate may either exceed or fail to meet your expectations, but one way or another you will be shocked, and I propose that knowing is better than not knowing.

I suggest you sit down somewhere quiet and really think about the minimum number you need from cash flow real estate (or other investments) to survive month-to-month without working for someone else.  Remember, if you rely on real estate income/ cash flow rather than a steady job, your expenses will drop in some areas and you will spend money in other areas.

If you are in a relationship, I suggest you share this exercise with your significant other to ensure you are working together and agree on the math behind the minimum number.

Once you have the minimum number, you are good to go. It is up to you where you want to take this number.  For example, if you take your minimum number and multiply by two or three, your life will be pretty sweet.

Summary: Think about Monthly Cash Flow Needs and Not a $1,000,000-$2,000,000 as it is easier to focus on and achieve.

My final issue with the commercial goes back to the unstated subtext, which went something like this: “Give us your money and we will take care of you.” Seriously, that is what they want you to do. In retrospect, this actually might be good advice for the average investor, but I don’t like being average.

I suggest focusing on activities that you can control and that you can decide are good ideas, instead of hoping some third party you have never met, has your back.

Both active and passive real estate investing takes work and it is your job to learn the market, establish relationships, and ensure you are producing monthly cash flow off which to live.

In closing, I want to ask each of you one question:

What is the monthly minimum number you need your cash flow real estate to produce in order to live financially free?

I look forward to your responses.

Good Investing

About Author

Michael Zuber is an active buy-and-hold real estate investor who still has a full-time job. Michael is not an agent or broker, and simply uses the internet and agent relationships to drive his business. He currently averages at least one deal a month and has developed laser focus on his 5 step process.


  1. Nice post Michael!

    Recently, at a local REIA club, I met an investor who built his net worth to 7 million by building commercial buildings. He was negative cash-flowing on several of his buildings even though on paper he was in the black. Unfortunately, the market turned before he could realize the equity and he had to file for chapter 9 and lost all of his capital – OUCH!

    I have a question for you. Given the topic of your post, would you choose to pay off your rentals (selling two to pay off one – when the market turns) vs 1031 into apartments? Just curious to get your thoughts.


  2. Don’t forget to factor in inflation. If you are 45 and plan to live to 85, a 4% inflation means you need to at least quadruple your monthly number. That assumes inflation stays at 4% for the next 40 years. Not something I would gamble on. Don’t forget to factor taxes into that number as well. What happens when your property exceeds 27.5 years? Tax sheltering vanishes, leaving you naked.

  3. Mike,

    Great post. My wife and I decided on our number. We will work until we reach that point. Its funny you mention the million dollars. The million dollar question is funny, most people think of it as a depleting bucket. All I can think about is how much cash flow 1 million dollars will generate.


    • Assuming you have cash flowing real estate (being on BiggerPockets, I would assume as much), you are definitely in a much better position than most retiring seniors. With all the sales propaganda that mutual funds are your way to financial independence in retirement, people will be in for a shock when the discover that mutual funds don’t cash flow like performing assets. They will instead wonder, “what went wrong? My financial advisor said this would work!” Glad I didn’t pay any financial advisor gobs of money for tips on which mutual fund to buy.

  4. Jason Grote

    Thanks for the perspective Michael. I am fairly ignorant and have put little thought into my retirement, but it is high time I begin. This type of retirement makes sense to me. Cash flow is so achievable for someone involved in real estate. Our family initially focused on fix n’ flipping, but are now lifting our eyes to cash flow opportunities. Great post!

  5. Daniel Fisher on

    Great post! You hit the nail on the head about needing (non spreadsheet) monthly cash flow. I have modest needs. Monthly cash flow of 5k covers my needs, but my goal is twice that.

  6. This is something my wife and I have realized over the last few years. It would be nice to just trust some big company to take monthly payments for a while and garantee a retirement standard of living, but that’s not the way it works. They’re selling you services, but your still ultimately responsible for your investing and retirement income.

  7. Good to know im on the right track. Personally, I would quit my job with 3500-5k in positive cash flow (over expenses). It may be leaner some months when tenants dont pay/move out/damage properties, but since I am used to living frugal, I can hang. But then, Maybe I wont quit my job. But those are my monthly cash flows before i can relax.

  8. Cheryl Carrier on

    I’ve been calculating this since my late 20’s. I’m now 54. I started with net rents and payoff periods. I was projecting a stream of income for retirement. The question has been whether to turn the properties over to a management company, handle it myself (I’ve never heard a good thing about management companies) or sell and hold the mortages – A good plan in my book. I’d love to 1031 into triple net commercial. Net worth, while important, doesn’t figure into my RE plans.

  9. Mike –

    Obviously a little late to the conversation here, but I just wanted to commend you on a great article – especially the point about net worth vs. cash flow.

    I come at things from a stock market perspective rather than real estate, but I agree with you 100%. This is a point I’m always hammering away at – it’s not net worth that pays the bills, it’s income.

    So many people freak out about the fluctuating “share price” of their investments (I call share price the “liquidation price” of your investments, or what Mr. Market would pay you to willingly go out of business), when their real focus should be on the income produced by those investments.

    If you own great, world class businesses that are able to grow their earnings and increase their dividends every year like clockwork, who cares what the liquidation value of your investments are?

    Long term investors in McDonald’s, Coca-Cola, Procter & Gamble, etc. didn’t experience the same Great Recession as everyone else did. They had more income in 2008 than they did in 2007, more income in 2009 than they did in 2008, more income in 2010 than they did in 2009, more income in . . . OK, I think you get the idea.

    I always hated this commercial.

    “What’s my number?”

    I guess it really depends on who’s running my money – me or a bloated, self-serving industry with an abysmal track record a business model that allows them to siphon off a portion of my assets each year.

    • Brad,

      You might enjoy He conscisely blasts the idea of paying someone give of cash to simply buy a fund holding 14% WMT, MCD, KO, and a dozen other blue chips to bits.

      In truth though, you can make the cash flow of any deal better but possibly in a detrimental way. For example you can make Disney stock and it’s tepid 1.6% dividend beat VNR’s 9% dividend if you simply 10x more cash into DIS. Same thing with any real estate deal. Which is why it’s good to analyze net worth AND cash flow. Just understand the role they both play.

      • Cool – I know Tim (from Seeking Alpha) – didn’t realize he had his own blog as well. Thanks for the link.

        My formula is fairly simple – acquire as many shares as possible in the highest quality companies as you can identify and pay as little as possible in the process (I use options as the secret sauce that helps me on the last part).

        And I agree – it’s not that net worth is unimportant, but if you acquire quality, income-producing and income-growing assets (be they high quality dividend stocks or real estate rentals) your net worth will take care of itself and naturally increase as a result.

        Sounds like there’s a common denominator betweeen successful real estate investing and successful stock investing – focus on quality, don’t pay too much, and don’t overleverage.

  10. Great article. I am new to BP and am reading through the articles.

    I am wondering how much do you factor in for medical and dental insurance. At work, my employer pays for this, but when I am on my own, I would need to pay for this. I’m wondering how much does this cost to add it to my number. Or what’s a good way to get medical and dental insurance quotes for yourself.


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