How much is enough?

21 Replies

2009 - 2012 were fantastic years to quickly accumulate wealth. Many of us took advantage and the ones that were able to buy and hold in mass have built substantial balance sheets. 

When I first started, my goal was to simply have enough passive rental income to pay my own mortgage in the case I got fired from my corporate job. Once I achieved that, the goal changed to have enough to pay for all my living expenses. Once I achieved that it became 100 doors. It seemingly never ends.

So here we are in 2015 and the game is much harder. In speaking with BP veterans it seems like we all continue moving forward. My question is, when is enough enough and what does "enough" look like. Is it $10k a month in passive income? Is it 100 doors? Or is it never enough? When do you take account of what you have and shift to work to protect your assets rather than risk them to grow further?

@Ben Leybovich @Steve Olafson @Brian Burke   interested to hear the pros that have been through multiple cycles and had the opportunity to hit critical mass in their investing careers. Also interested to hear what the plan over the next 24 months.

Interesting question, @Serge S.  ...sometimes my wife asks me the same thing.  LOL

When I started I had no goals, I didn't know what the heck I was doing, I just knew that it seemed like an interesting thing to do and calling myself a "real estate investor" sounded really cool when I was 20.  When I bought my first deal I thought I'd made it.  Perhaps that alone could have been enough.  I slogged around aimlessly for about 8 years just doing the occasional deal and then I had my "midlife" crisis.  Working "for the man" wasn't doing it for me anymore so I set a goal.

My goal was to buy one rental house per year and someday I could retire and live off the income.  I had no idea what I'd do with my free time if that were to happen, however.

I couldn't live off of one rental per year so I started flipping.  Then I started building.  I thought that calling myself a "real estate developer" was even cooler when I was 30.  It allowed me to quit my job and plunge full-time into the biz. 

I had a great flipping business going until 2004. At that point it was virtually impossible to get deals and besides, I thought the CA SFR market was overheated and it didn't make sense to buy more houses in CA. But I remembered that being a developer was really cool, right? So I went back to that. It was that decision that put me in my place. I learned lessons that no one should have to learn and was about 100 times more expensive than a Harvard education.

I bring this up because cycles are real, and an incorrect move at the wrong time can destroy everything you've built and then some.  Fortunately for me, after I regained my consciousness from a knock-out blow I came back better and stronger than ever.  Don't feel sorry for me...I'll do just fine.  My model works better during a downturn and it allowed me to earn enough to make sure that no one but me lost any money.  I didn't lose a single property during a time where guys I knew were losing stuff left and right.

The downturn also allowed me to collect a significant base of assets that will provide for me just fine going forward.  So what now?  Do I sit on the beach?  Take up golf? 

Not me. I love this business. I really learned this business. I respect this business. I don't see myself doing anything else. For now, I'll keep flipping (it's still working just fine), I'm still getting good buy/hold SFR (but probably not for much longer), I'm selling some multifamily, and I found a new strategy that I think will carry the day for the next couple of years. My goal isn't attached to a particular financial benchmark...I'm just not ready to sit around and do nothing. I might not ever stop, but as soon as I get my condo on Maui I'll probably take more time off...

@Serge S.  @Brian Burke  

We all have something that drew us into play in the first place.  I was already my own, boss, so freedom from the man was not my driver.

My work involves/involved lots of travel (18 - 26 weeks per year).  In my forties we had a surprise {he's almost four now} and I wanted to scale back on the travel.  Being a Dad, combined with interests in energy efficiency and building automation led to a couple of small properties (triplex, quadraplex) ... which led to a few slightly larger buildings .... which lead to a second job {not quite big enough to outsource all the management}. 

I could, optionally, leave my other profession behind ... but it pays very well, so I am just picking and choosing my client projects.  We are now approaching the point where I will soon just be managing staff for the rentals.

Along the way we've been learning/doing deep energy retrofits on older building stock (as old as Queen Anne & Second Empire).  There is a fair amount of literature/ case studies on building new highly efficient buildings (i.e. Passivhaus, Minergie, etc), but surprisingly little on retrofitting existing stock.    We've just been asked by another local investor to "consult" on his planned renovation.

With enough to sustain our livelyhood, it's time to learn how to develop.  We have plans underway to build a set of Passivhaus/Activhaus row houses ... aimed at downsizing, retiring boomers {these houses should come-in with annual energy consumption costs in the range of $150 - $250 basis ... which, if an Activhaus would be more than offset by on-site renewable production}.   If that goes well, next we would like to build an Activhaus/Passivhaus 24 - 50 unit apartment complex

... there's always something else :)

@Serge S.  Though there is absolutely nothing wrong with building personal wealth, I think, as you've come to see, that financial goals alone, are ever moving and never ending.  

Perhaps a better measure is: Is my work satisfying and fulfilling?  Is it sufficiently challenging?  Does it help others?  

To my mind, those are the elements that make business worthy of lifelong pursuit. 

For me, I am not sure enough will ever be enough.  In about 6 weeks we will have hit our goal for buy and hold properties and cash flow.  Our goal number will allow my husband and I to live solely off our cash flow.  But I don't see that being the end of working for me.  I do like the fact that I will be able to travel as I please and only work when I want and on what I want to do.  

@Serge S.

Once your passion for real estate disappears.

There will never be enough.  Success in real estate transcends making money.  It's about constant improvement and striving to be better everyday.  There is always a way to improve and its a lifelong journey.  Once you achieve a goal there will always be another one to hit.

What is enough changes constantly. Friends and family members ask me that question all the time and I just ask, "why would it ever be enough?"

First enough is when you can cover your bills, then when you can cover all the extras, then when you can do what you want when you want for as long as you want.

But why would we stop if we love what we do? Warren Buffet and Bill Gates certainly don't talk about what is enough. If you love what you do and you get to do what you love, why give it up?

If you're happy and your life is fulfilling, and nothing else would make you happy and fulfilled, just keep on with your work, without goals.   Do what moves you.   At the end of the year see what happened.  IMHO.

Enough for me is when passive income hits my goal and the mortgages are paid off rapidly.  Then, it's sleep in, go to the gym, travel, chill, maybe flip for something to do, and repeat.  I like things to be boring.  I live a high pressure lifestyle in the military, so when I've achieved what I want then it's chill time and that time is about 10 years from now.  

@Serge S.  , @Brian Burke  

When you say "how much", what do you mean?  Do you mean how much cash flow?  Do you mean how much wealth?

The two of you guys are the best and the brightest that I have had the pleasure of knowing.  And yet, nobody is talking about "time"...

Let me show you something:

That's Aaron and me inside the hyperbaric oxygen chamber.  This is the latest therapy we are trying in our efforts to cure autism...

Now - let's talk about time: I was in that thing with him for 2 hours yesterday.  We will repeat the process every single day for 5 weeks.

Somewhere in the middle of that, I drive both Aaron and his sister Isabella to kumon twice per week - 1 hour each way.

Aside for that, there's school - both of them are in school now...

I love and respect both of you dearly - you should know this.  But, while I don't have enough money, and I don't have enough wealth, which is why I continue to play the game to the best of my abilities, I am most concerned about time - they need my time!

I hope I have enough - time...

Hey @Ben Leybovich is that a soft chamber or hard? You really need hard from what we've experienced. And by experienced, I mean we have recovered our son from Autism. Add me as a colleague and we can chat more. There is a really good clinic for hard chamber a few hours from you.

Originally posted by @Karen Rittenhouse :

But why would we stop if we love what we do? Warren Buffet and Bill Gates certainly don't talk about what is enough. If you love what you do and you get to do what you love, why give it up?

 Warren Buffet and Bill Gates have reached the point of having enough and then some.  Their current focus is on the distribution(philanthropy) of their fortunes rather than the continued accumulation.  

Even with his change in focus Buffet is still running his company.  Obviously he is doing it because it is something he loves vs. accumulating more money.

Great topic @Serge S.  

I am currently sitting in a great place.  There is enough passive income to support our lifestyle at this time.  I am stopping for the time being until the market gives me opportunity for rapid gains again. 

I like to golf, play softball and run.  My wife is an incredible athlete and this is how we like to spend our time.  I can easily play 8 softball games (3 different teams including weekend tournaments), two rounds of golf and run 40 miles a week.  We are very competitive.

I had quit the job 15 years ago and just did the apartment investing part time.  Things were going really well.  I built up many units through all types of creative methods.  By 2008 there was over 1000 units in the portfolio.  The cashflow was unreal. 

The recession hit Phoenix hard.  It is difficult to explain what happened here but the gross incomes dropped on each property by 30 to 50% in a very short time.  I lost many to foreclosure and sold others to avoid it.  I had plenty of money in reserves but it went real fast trying to spread it around to everything.

Experience came in handy for the next few years.  I had to roll up my sleeves and get to work.  The challenges were large as I could no longer get financing and did not have any money left to work with.  Deals were everywhere though.  I managed to scrape together enough money to pick up some incredible properties for little money.

Everything needed rehab.  Most of these were less than half occupied and in bad condition.  I bought a truck, tools, hired help and went to work.

Fast forward a few short years, most of these properties have been sold off.  I picked up a 29 unit apartment and a retail strip mall to hold for cashflow.  I also have cash ready for the next deal whenever that might come.  Right now I am waiting for the crazy buyers to exit the market to jump back in.  That could be years but where is the hurry?

The road has been challenging but I am pleased with where we are.

I always thought having 10 fully paid-off rentals would be enough and I would "retire" by 50. That was my goal back in 2010.  Now I have 12 but they are not all paid off.  As of right now they are "enough" coupled with working part-time, to support my lifestyle.  I would not mind acquiring 4 more just so I have an even 16. But if/when those 12 are fully paid off (7 are paid off; 5 have mortgages) I will be in an even better place than I am now. But as it is, I feel that I'm in a really good place.

A great question.  

The single most formative event of my youth was my father passing away when I was 7.  He had terminal cancer and minimal life insurance.  My mom did not work I knew we did not have a lot of money (but our house was paid for).  What we did have was my mom, an amazing woman who made very conservative stock investments and was very frugal.  Between that, Social Security Survivors benefits, and a little help from my Grandma we pulled through.

After growing up in that situation I knew, even in middle school, that I wanted to have enough investments that if anything happened to me my family would have "enough" to carry on, pay the bills, and not worry.  That is what I call enough.

@Serge S.  - read between the lines of what @Brian Burke  and @Steve Olafson  write!  They have perspective of people who have had pain - and Steve is in basically your marketplace.  Their enthusiasm is tempered by healthy amount of fear toward the beast...

A line from a great movie sums it for many of us. For me, I'm not sure it's a matter of just being able to purchase what we need to live life comfortably. I'm not to that point yet, but when I get there I think that my love of real estate will keep me going.

Originally posted by @Brandon Hicks :

A line from a great movie sums it for many of us. For me, I'm not sure it's a matter of just being able to purchase what we need to live life comfortably. I'm not to that point yet, but when I get there I think that my love of real estate will keep me going.

My philosophy has changed on this.  I do want more and will continue to go after it.  But other things moved to the front of the line many years ago.  I love my life and really enjoy activities and competition.  While I still enjoy real estate investing, other fun and challenging things remain at the forefront. 

***Brag mode on***

Physical stimulation seems to be a big kicker for me.  I have gone across the Grand Canyon and back in 16.5 hours and hiked/run to the top of Mount Whitney.  I ran a 2 hour and 53 minute marathon at the age of 47.  At the age of 50, I was playing on one of the top softball teams in Arizona.  My team was removed from both the Phoenix and Scottsdale leagues.  I was told that we were too good and that they did not have a higher level to move us to.  So we moved to tournament ball and continued winning there in the top brackets.

***Brag mode off***

All of these things provide stimulation in life.  All the hard work needs to lead to something, right?

Originally posted by @Ben Leybovich :

@Serge S.  - read between the lines of what @Brian Burke  and @Steve Olafson write!  They have perspective of people who have had pain - and Steve is in basically your marketplace.  Their enthusiasm is tempered by healthy amount of fear toward the beast...

No fear!  Perhaps a bit of respect.  :)

This is a great question, and one I have been thinking about a lot lately. I think my answer parallels @Ben Leybovich   

Enough is being able to pick my son up from daycare or school (he's 2 now), instead of leaving while he is asleep and seeing him for only 1.5 hrs before bedtime. Enough is being financially ready to have another child. Enough is being free to serve my church and the Jr. High kids more. Enough is being able to spend more time with my WyldLife kids. Enough is being ready to quit my job when the project ends in my town, so I don't have to move somewhere else in the world.

I don't know that I can put a absolute price on that...but replacing my base $70K salary plus enough to pay higher health insurance would be a good start. :)

There are many levels of enough and different levels of not enough. I know not enough. That is when you can't pay the IRS because rent comes first. No income for 6 months and no job prospects. That is not enough.

As soon as I got a job that paid "enough" I had enough. That was level 1. Level 2 was being able to retire and keeping working because retirement wasn't "solid" enough. Level 3 is retiring and where you can fill out a retirement calculator and never run out of money.

Level 4 is being bulletproof. To me this is where fixed income and cash exceed debt.

Level 5 and up just keeps increasing lifestyle. This is done with work that is fun.

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