Faster road to financial freedom?

Question

Hi everyone,

This is my first post ever on BP, and I'm a huge fan. I've watched every single podcast and just found out about the site a month ago after reading.. Rich Dad Poor Dad, of course.

I'd love to get some of your brilliant minds to offer your opinions here. I'm 25, with a bachelors degree, working in consulting, making 65k with 18k in student loans, renting, no car payment. I live in Atlanta by the way.

The goal:

to have enough passive income, to be able to travel abroad cheaply, and see the world. So maybe, 3k per month? Basically to do what Paula does (plug to BP podcast 35), seeing 30 countries before age 30.

The options:

1) Keep working, making 65-70k, saving $1k-$1,500 per month, and buy a triplex, live in it, use that cash flow to buy another 2-3 properties. (maybe 10k down on each property, the triplex being 150k and the others being 100k?)

2) Get an MBA, probably a top 25 school, coming out making 100-120k, but with 100k likely in student loans. This would significantly increase purchasing power to buy more properties post grad faster, and could use cash flow to pay student loans. This would also give me way better knowledge of finance and ability to get good jobs long term, if I need to work a regular job.

Can't wait to hear all of your thoughts, thanks everyone!

- Vincent Crane

Eric W. · Answer

Vincent,

Like you, I followed Bigger Pockets for a long time before finally decided to get involved and post.  Lots of great information and resources here.

You listed 2 very different options.

Option 1:  Regardless of your educational motivation you should consider owning income real estate.  Invest based on cash flow, and even though you may intend to manage the property yourself I would underwrite with this expense so you know you will still make money if you decide to travel, move away, or simply get tired of the 4 Ts (tenants, toilets, trash and termites).  For most, and myself included, managing property is learning experience, and it's not all good... collections, evictions, lawsuits, and so forth.  It's almost a "right of passage" to appreciate what an honest and reputable property management company can do for you.  In fact, long term, property management will be the key to success or failure of your income real estate.  Hire them wisely...  Interview, check references, and visit property currently under their management to feel comfortable about how they manage.

Option 2:  I wouldn't consider an MBA unless you're genuinely interested in the education.  You certainly don't need an MBA from some expensive institution to provide you with the knowledge you need to run a successful business, or to successfully acquire income property.  Knowing the answer is not as important as knowing where find the answer.  Regardless of how educated you become, you will always need the expertise of people who have specialized knowledge.  However, if you see yourself as an "employee" the education may be worth while.  And hopefully it will help you get the job of your dreams.  And hopefully you actually enjoy the job.  And hopefully  work with people who appreciate you.  Always be ready for corporate downsize, or for the wind to change direction and your employer tells you you're being transferred to a place you wouldn't want to visit; let alone live.

In any case, I hate to see young, smart, motivated people under a mountain of student loans.

Good luck with whatever you choose.

Azeez K. · Answer

Hi @Vincent Crane

Welcome to BP!

I am a fellow Atlanta Investor here in Atlanta. I have been in management consulting for over 11 w Big4. It's good to see you here on BP.

Here are some new Member Tips

Tip # 1 How to Use @Mentions on BiggerPockets

Tip # 2 Setting up Keyword Alerts

Tip # 3 25 Tips for Real Estate Success

Tip#4 Check out the Start Here page

Tip#5 : Check out BiggerPockets Ultimate Beginner's Guide

Atlanta Meetup: Scheduled for Feb 19. Below are the details.

http://www.biggerpockets.com/forums/521/topics/173...

Please join us if your schedule permits. You will get an opportunity to meet fellow Atlanta REI professionals

Joe Villeneuve · Answer

You need to find exact numbers.  You can't use words like "guess" or "about" when making a decision on what rout to take.

Find at least 5 properties and analyze them with real numbers, then you can use that to define the basis for your goals.

Next, figure out how you are going to buy them, what cash you will get back (cash flow), and then how much money you will have available (and how fast) to move onto your next property.

By the way, if you're working full time, how/who is going to manage the rehab, the tenants, the analysis, the business side, etc...

These are not road blocks, but they are things you need to establish before you can put a business plan together.  It's the forming of that business plan that will dictate if your will be able to do what you want...and what adjustments you need to make to plug the holes in the plan.

Don't give up.  The setup is what you will depend on as you start investing.  Don't let anyone tell you to move forward with out it.  Every step you take, particularly financially dictates your options for the next step, and the next one, and...

It's like dominoes.  A poorly conceived, or complete lack of a business plan means doom.

Selena Owens · Answer

The quote is from Dave Ramsey.

Rick Baggenstoss · Answer

@Vincent Crane I have a similar background as you.  I spent a few years in consulting, MBA, etc.

Consulting is like an MBA.  You learn a lot quickly and get a lot of exposure.  You, hopefully, will learn great business management skills and most importantly, you learn how to learn very quickly.

MBA you get a much broader business exposure.  You'll learn accounting, finance, real estate, entrepreneurship, marketing, strategy ... on and on.  Most importantly, you'll develop relationships which will propel your career regardless of your path.

You don't have to pay $100k to get your MBA.  Try UGA, Tech, full-time programs.  You'll get a full-ride and even get paid to go.  Take a semester abroad, intern abroad.  Enjoy your time and prepare for your career in real estate.

Kevin Auyong · Answer

I've made a few trips to Atlanta looking at real estate and prices went up pretty quickly over the last few years. Only C areas can get you 2%. You won't see much appreciation probably, but run right could be great cash flow.

I too am resetting my life to buy all rentals and live off the rents so I understand where's your coming from. It can be done, just needs work and being smart.

Vincent Crane · Answer

You have all had amazind advice so far, it's great to hear from so many different people that all have much more experience than myself, and have all taken different paths to get there.

@Kevin Auyong  I have yet to buy my first property so you could be completely right. There's very good and very bad areas, it's difficult to find properties at a reasonable price, in a safe area that can cash flow with solid tenants from what I'm assuming.

Kevin Auyong · Answer

I don't think the 2 percent rule is that common in Atlanta-maybe it was 3 years ago. You can still get it but it will be in c and d hoods which are a bit more challenging to manage.

Elizabeth Colegrove · Answer

Oh by the way! I wouldn't be where I am today if it wasn't for my MBA. My MBA is what got me my first "true" professional job at 23. It is what got my foot in the door as an executive secretary to the owners for a commercia/multi family company. It is what landed me my current job. With out my MBA I wouldn't be able to be where I am today on THIS road. There are tons of roads (check out the podcasts). I would NEVER talk someone out of a MBA or hire education! That being said, for what "I" do "ANY" MBA from a well named school was my ticket, not necessarily a 100k degree! Just a second thought on education

Elizabeth Colegrove · Answer

I have an MBA, (although its not from a top 25 rated university, still a great university Texas a&M corpus). I did it while working full time and it only cost me 15 months of my life and 8k and I worked full time and paid cash! I own 5 houses (self manage 11), work full time and did I mention I travel! I have been to 2 different countries in 4 months with another 2 planned for the next 4. We use our W2 incomes to buy houses. Our goal is to retire at 42 and 44, living off a military pension (god/navy willing ) and our houses. So I understand where you are coming from. It possible to do all of it!

You should look at doing it all, not choosing. Owning houses, traveling (now and later) AND buying houses. I went to a great but not top 25 school! I work a great job but it is at a considerable less salary but in a low cost of living area.) We got started with a personal property but it't a single family home not a multiplex couldn't make that work! It has low downpayment and interest rates! If you can have roommates you can live even cheaper having other people pay your bills, build interest while you invest in other things.

The key is to build multiple plans all complementing the same thing! When we were paying cash for grad school we rented a CHEAP A$$ house and lived with another couple. When we bought our first house it was a huge fixer. When we knew I wanted to be able to travel and meet up with my husband this year we rented out all of our houses, I down sized into a "storage unit with a kitchen, bathroom, and bed" but it gave us the money to invest while living!

So splurge on whats important, invest in your dreams and be frugal/cheap everywhere else. There are times where you will need to be extra cheap to get through a stage or time but this should be a phase not a way of life! You can do it all, there are choices involved but know it doesn't have to be a all or nothing conversation!

Faster road to financial freedom?

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