Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
I realize that everyone has a different standard of living and expectations in life, but what is your FREEDOM number that would allow you to leave your W2 position? What would you want to do with your time if it could be freed up more. As I am now 52 years old, I am now pondering this question more than more. The question is really, how much time do we all have? I believe "time" is one of our greatest assets, and if we really knew how long we would live, we could make better informed decisions.
So, what are your thoughts and what is your freedom number so you can really do what you want to do, and when you want to do it. follow your dreams and passions! But it starts with a plan, so what is your plan? What is your freedom number?
I am netting over 100K a year holding rentals. That is not wealthy but certainly gives me a lot of freedom. I am constantly searching for more rentals (income streams) to increase my income.
When calculating my Freedom Number with buy and hold rentals, I used mint.com to determine my average monthly expenses, which was about $2500 a month (I have no housing expenses- I live for free by house hacking, and I have no car payments- I drive my grandmother's 15 year old car that she gave me). So just to be safe I doubled my monthly spend and came up with a freedom number of $5000 a month in cash flow from my rentals (after taking out 10% for repairs and CapEx and 2% vacancy).
I reached my goal of $5000 a month at the end of last year, I have spent this year continuing to work my W-2 job while I built back up my cash reserves, secured long term financing for all my rentals, getting HELOCs on every property I can so I have access to money after I quit, etc. Also, I am currently under contract to purchase ONE MORE rental property, which will put my rental income at about 3x my monthly expenses in Year 1. As the years go on I expect to increase my income with rent increases, build more equity with debt pay down (thanks tenants!), and reduce expenses by eventually billing back utilities to the tenants I inherit when I purchase this fully leased rental property.
With my income soon to be at 3x my expenses I am looking forward to a life of Fat FIRE starting in 2020.
We probably did it backwards. We limited our living expenses down to where we could quit the w2 and pursue rentals and other ventures 17 years ago. Then we grew up in lifestyle as it progressed.
We moved to a more affordable market into a doublewide in a trailer park. Freedom from was that important to us.
Skinny fire is earning your basic necessities passively and will vary by person and location. Started there but have been medium fire for a while I'd say. Fat fire (abundance) is not our desire but YMMV. Good discussionđź‘Ť
@Danny Randazzo I love this ! Yeah, “retirement” to me is still doing RE investing somehow. I do not want to do nothing but I would maybe take less chances as my solid W2 would be gone. I also would need to line some deep pocket investors as I can find the deals but would not want to leverage my huge lines of credit like I used to.
Did you use your own money to keep building your RE empire ?
@David Evans I honestly fit that bill. I thought it only cover major medical stuff. Does it cover colonoscopy procedures every few years and monthly medication?
@Anthony Rosa good for you. I am 52 and targeting 55 as why I ask these questions. Health care as many have stated in this thread is my biggest concern.
@Bob Prisco I am there! Health care is my fear but maybe it always will. I am feeling you about the enjoying life piece. It really helps getting everyone’s perspective, thank you !
So many people here focused on numbers and while not a bad thing if you don't understand their value it's easy to lose sight of what they mean. I see this all the time when people talk about how they want to aquire x amount of doors or they're saving % for vacancy etc...
I like my W-2 and I took a pay cut to go to one where more important then the work I just clicked with the culture and team. My rentals afford me the opportunity to find a W-2 I like rather then one I need to get by. Same can be said about my rentals, my W-2 allows me to pick up ones that make sense to me and tenants that fit well with what I'm trying to accomplish. Unexpected repair gets done right and an extended vacancy isn't that stressful.
i guess my answer is I have no number, or if I do it's fluid based on my lifestyle. I am confident that I can find a replacement w2 that affords me the work life balance and enjoyment I need just as I am in making a smart investment. Both these things lead me to being able to have the clarity to understand what's important to me I'm terms of lifestyle and I adjust as needed.
I'd define your freedom lifestyle first then work up a number to get there...might be diffent then you think.
I agree that w everyone is different, but just like everyone my main concern is kids tuitions and health insurance. My income is close to 200k so to replace my living lifestyle it would take 15-20k a month. I am searching for my third property now and hope to walk away from my w2 in five years. I am 38 now. I think the biggest take away is to build a plan and stick to it. Set a timeline for your goal and what your doing every six months to get there. Hopefully this approach works out for me. I will find out in five years! :)
@Matt K. Thats a great perspective! I took the angle that most do not feel fulfilled in their W2, but I never considered the aspect of the freedom you can find choosing that route based on RE income. Thanks for your input here!
@Jose G Delvalle Bueno that is a hefty W2! I have never achieved quite that high. I imagine that will be tougher to replace but at your age, go as hard as you can and go for the gold !
@Todd Powell. I believe you are correct. They ask that all wellness and routine checks be covered out of pocket. Colonoscopy should be covered if a doctor orders it...medication, they have group discounts at CVS and Walgreens.
I have simple dreams. Doing whatever I find stimulating until I don’t find it stimulating anymore... then finding something new. Not forced to maintain employment anywhere I don’t like. Ever. And not freezing my naughty bits off all winter if I don’t want to.
Most people say ”replace my income”, screw that, I deserve a raise.
My daughter was born a few months ago. Thanks to our rental income, my wife was able to leave her job and become a stay at home mom. As for me, I greatly enjoy my career and have no plans of leaving. While being "free" would be nice, I feel like I have a great balance of freedoms right now while working.
@Todd Powell Every time I see this question (or something similar), I always chuckle as I read through the comments.
You want to know why? Because we human beings aren't rational in any stretch of the imagination.
Most people even if they hit their "target freedom number" will likely move the goal post a tiny winy forward. It's what we do (and there is nothing wrong with that)!
I hear the whole freedom number on podcasts, and I know it is a good catchphrase but not really practical (or even naturally).
When you hit that figure, say $10,000/month, your brain (not you, because you are a nice person), but your brain says: Imagine we could make $20,000. And you say... Hmmmm... Let me think... Isn't that a suggestion I can get behind! And the whole cycle begins.
The beauty of life, eh!
Oh, to answer your question, my freedom number is $16,235.92 🤗
@Ola Dantis how wonderfully and masterfully stated! I think I am wrestling with that exact concept. The reason I convince my brain is “what about health ins and what about if something major happens?”
When something asked a really rich guy, “how much is enough?” He simply responded, “just a little bit more than I have.” Hence why I have seen really rich people die only to see their sacrifices get squandered by his kids and grandkids. If we only really knew how long we would live?
Im lucky that I have thoroughly enjoyed what im doing with Real Estate, otherwise id be content somewhere swinging a hammer and eating chicken/rice every day.
Its much more than financial independence, and hitting a certain number.
For me it will be difficult at 47, I am just getting into the learning stage about RE, Right now I am bringing home $120k a year plus good health, dental, vision and life insurance, I know I will need to own a lot of doors to match that number!!. But I am working on it.. great post by the way!!