@Bruce C. This is a great question. I own a small business in Cali. We have 3 part time 1099 employees/ subcontractors but I am forced to work a W2 for the insurance. (I have a wife and 2 kids) I have contemplated paying out of pocket for insurance but it's crazy expensive any suggestions?
This is one of the first questions I asked myself when I first decided I want to become a real estate investor. While it is easy to throw a round number out there, I preferred to start by writing down the life/lifestyle I wish to have. To me the main goal is to have enough to be able to do things I enjoy such as traveling and finally being able to build a car from the ground up. I have researched Dave Ramsey's method and I believe there are great concepts to learn from him. I have also read Lifeonaire which in my opinion (correct me if I'm wrong) conveys a similar message to living a simple life which includes having no debt. After deciding to desire to invest in real estate, my opinion has begun to differ.
I know many people would argue that running a real estate investment company or having 100 units to manage is not true "Freedom" however I believe this is a case by case situation. I am personally an active individual that enjoys working toward a goal. With that being said I will have no problem managing properties and running my own company in the future. To me financial freedom allows me to "buy back" my own time and allow me to do things I want, when I want. If I want to go on vacation with my family for 2 weeks, I can do that. I want to be able to pick my future kid's from baseball and basketball practice, or band concerts. I am rambling at this point, but moral of the story is to me financial freedom is being able to live the life that I envision and dream of.
With that being said, I have the following goals and "Numbers" set as a goals for each stage of my investing career:
Current: New investor, W-2 Job, no investment properties yet. Intention of studying to get my real estate license by the end of the year, if not the beginning of 2020.
End Passive Income per month: $15k:Which should be enough to cover expenses including travel expenses as well as charity donations. Including continuously investing into my portfolio/deals.
End Income Goal (At the Moment): $1 Million per year
Vehicle: Buy & Hold rental properties, Commercial Multi Family Rentals/Development.
@Aaron Bonne that’s easy. Debt free and $2 million in the Vanguard S&P 500 index fund. Pull 6% per year out ($120,000 first year) plus wife’s pension plus social security plus grandkids coming over whenever the hell they want to. If a human being needs more than that. . .
How to get there? Been a general contractor for 30+ years. Finally figured out I can build multi family and reach my goal. (slow learner) Just can’t get the same numbers with single family. It will take about 50 units. Working on my first 10 unit complex right now.
We've replaced our entire W2 income with real estate rental properties. So we have financial freedom in the sense that we're self employed and can make our own decisions and schedules but we essentially work full time at rehabbing and managing the properties. Actually managing the properties we've rehabbed is not too much work so I guess once we stop rehabbing we'll be a bit less occupied. There's always repairs to be made though. Today I had an HVAC unit go out at my own home and spent an unplanned 1/2 day figuring that thing out. Our actual costs to exist with no debt is about $3200 per month so anything above that and we're solvent. We don't drink, smoke or gamble so that helps, lol.
My wife and I set a number a while back and together we hit it. But the thing is, just like others have said when you hit it, you’ll move your number up. I always thought I wanted 100 units. I hit that a while back and kept reinvesting the money. Now it’s about adjusting the portfolio to minimize the headaches and stress while keeping the same cash flow. We both own our own business but I have employees So I have been reducing my role so that I can have more time with my family. Now to use time and inflation to grow our portfolios. My plan is to reduce role and increase cash flow equally over the next few years. The key I figured out was not about a number but time. The real question is what do you do after you hit that number. Do you keep going or do you stop and enjoy it. For years I just kept going. And wrapping up a bunch of assets to reduce time expense is difficult. Buyback in the end it’s well worth it.
I have 2 numbers - one with and one without some form of health insurance. With, it is about $10k a month. Without... 35-40k.
For those of you that have hit your goals and left your w2, how have you managed to pay for healthcare? My wife takes medication 1-2 times a month (avg about 1.2) that is $22k if I use a freaking coupon.. And we’re not even over 40 yet, so it will only get more expensive
I pay about $1500 for health insurance + dental for a family of four. So how does your “retire number” jump so much if you’re not provided health insurance.
Just buy your own.
I haven’t had a “real job” in well over a decade.
And my magic $ keeps moving. So long as I like what I’m doing (growing a portfolio) I keep going. My wife keeps asking at what point I’ll stop for sure. Told her $1m/month
My comment earlier about seeing a lot of $10K is somewhat tongue-in-cheek. I see that number thrown around a lot, probably by a lot of folks making less than $50K/year household income. It's in all the guru podcasts and blogs...
How many of us would actually keep our lifestyle the same, though? You'd get to $10K, then realize you want a fancier car / nicer house / luxury trips. Now you "need" $20K-$30K/month. Then that's not good enough either.
My thought is practice contentment and do what you enjoy. Sure, if you enjoy managing 300 doors and that leads you to have a $30K/month income, then by all means do it and enjoy the fruits of your labor. But don't worry...plenty of people have lived long, healthy, exciting, fulfilled lives on far, far less than $10K / month. It's just another status symbol, like so many other things.
I have 1500 doors and I work less than when I had 250. When I had 250 I was very hands on. Now I have a team and my only work is buying/selling/banking related.
As you grow you add staff and try to hire yourself out of a job
4k per month and I think I would be pretty comfortable. That would allow extra money to be put away in savings or towards a vacation. My goal is 10 houses in 10 years.
8k per month for a 2 income household. Pretty overkill, but gives enough of a buffer I don't think we would need to worry.
I really think I could make do with less, however these amounts would make me feel comfortable leaving my full time job if my primary house wasn't paid off. If my primary home is paid off than I could definitely live on much less not to mention the money I would probably save in gas not driving to work 5 days a week. 2k a month in cash flow more than likely could cover me provided I had no mortgage and no car payment. We already grow our own food and do bartering for things we don't have so those costs are minimal at best. It also helps to have friends and family in different trades that can assist you when needed.
I have thought about his a lot lately and I would like to give each of my children a house of their own for their future or sell at a very reduced rate. Once I reached my number in cash flow I would start paying down some of these houses, but I still would buy the occasional house if it met my criteria.
5 houses with no mortgage would be more than enough for cash flow. 10 houses if they still had a mortgage. However I could see this becoming a family business that gets passed down the line someday. My teenage son has already shown an interest in real estate and i'm sure it won't be long before he is in the game too. 10 houses you say that can't be enough. Well it can in my area considering 3 bedroom rentals start at 1500 a month. We would like to keep self managing our properties, but if we decided we don't want to a PM can be arranged. Like my dad always said never say never because you never know what life will bring. Whether it's 25 houses or just 2 I am happy to be given the opportunity to spread my wings and expand my portfolio.
@Cody L. That’s what I keep thinking every time I see someone say that owning real estate isn’t financial freedom - build into your “Financial Freedom #” the cost of growing your business, so that you can work on it AND in it as little as possible. Heck - sell your business and then invest in it. Isn’t that Robert Kiyosaki’s 4th quadrant?
Same concept applies when determining the magic number to offer for a property: if you don’t have contractor skills or just hate it (I personally enjoy it, but I’m slooooow), that’s not an excuse to not invest in RE, it’s a reason to make sure you build in the cost of hiring out the contract work or prop management during the analysis process. Present your magic number offer, and if it’s not accepted, see where you can make adjustments or move on to the next deal.
My goal number covers my lifestyle. It is more than enough to cover my expenses and savings. It's also the number my financial advisor calculated after we talked about a lifestyle after retiring. It's actually around $2300 after I handle my liabilities.
That’s awesome Corey, at least you have a plan which separates you from many others. Building a rental portfolio is the wisest thing you can do IMO, and starting as early as possible is the key
Aim high, I love it! $1MM a year is buckets of money, especially given the tax benefits involved with real estate.
What would you do with all that money? I think that’s what excites me the most, thinking of all the ways I could give back and help others. That kind of money will allow you to build orphanages in 3rd world countries, feed thousands of families at thanksgiving, or whatever else inspires you!
You and I are in very similar position. I’m in no real rush to leave my day job, at least not yet. Just trying to make good money and put a lot of that earned income into syndications to set myself up for future.
I am heavily pursuing the passive route. Partner with experts while I focus on job and family
Nothing wrong with having different goals than others. And don’t be ashamed of where you’re at. Getting to the $1,000 a month in passive income mark is a feat in itself.
Have you considered house hacking a duplex, just to get started? It’s how I started and hands down the best decision and investment I’ve ever made
I have 2 numbers - one with and one without some form of health insurance. With, it is about $10k a month. Without... 35-40k.
For those of you that have hit your goals and left your w2, how have you managed to pay for healthcare? My wife takes medication 1-2 times a month (avg about 1.2) that is $22k if I use a freaking coupon.. And we’re not even over 40 yet, so it will only get more expensive
I pay about $1500 for health insurance + dental for a family of four. So how does your “retire number” jump so much if you’re not provided health insurance.
Just buy your own.
I haven’t had a “real job” in well over a decade.
And my magic $ keeps moving. So long as I like what I’m doing (growing a portfolio) I keep going. My wife keeps asking at what point I’ll stop for sure. Told her $1m/month
Because the medicine is expensive and we haven’t found any open market health insurance that makes it affordable. $1500 a month is about 25% of what my monthly plan costs now
To make matter more exciting, our plan through work had been trying to get the amount it pays reduced as it is.
Awesome, not only do you have a plan you’ve calculated how long it’ll take you to get there. Let that first one cash flow, refi when you can, and buy another cash-flowing asset.