What is your freedom #?

Ever since I came across the concept of financial freedom, I’ve been fascinated by it. Retiring early and living off my investments…sounds awesome!

To me, being financially free simply means all my bills are covered by passive income. I can wake up and do whatever I want, as money worries no longer apply. I can take my kids to the park in the middle of the day, or volunteer, or spend an entire summer renting a house in Hilton Head making memories with my family. Whatever I decide to do, it’s just that, my decision. I’ll be living life on my terms. That’s what financial freedom is to me and I’ve chosen to chase this dream through investing in real estate.

To be clear, I’m not there yet. Not even close. But let’s plan what it’ll take to get there.

My freedom # is $10,000 a month in passive income. Some of you may think that’s a lot, some may think that’s not nearly enough. It depends on your situation, but $10,000 a month would allow me to live a pretty comfortable life here in Cincinnati.

Oh, and before I forget, most (if not all) of my $10,000 a month is tax-deferred as I am a real estate investor and benefit from cost segregation's and accelerated depreciation. Then I’ll 1031 exchange into more property down the road, deferring taxes even more and increasing my cash flow.

Anyway, let’s see what that looks like.

As of this writing, I have $150,000 invested into 5 different real estate syndications. All of these have a 7-8% preferred return, with equity that gives me an upside on the back-end. These deals are projecting (not guaranteed) to double my money in 5 years, what we call a 2x equity multiple. About 40% of that return comes through cash flow over the course of the 5 years, then 60% on the back-end.

I also still own a duplex that I’ve had for about 6 years now and it conservatively cash flows about $500 a month after setting aside money for repairs/maintenance, capex reserves, etc. My wife loves it, I’m ready to sell it and roll the $100K+ or so in equity into syndications. Happy wife, happy life though, right? We won’t count that into my math below since we may just hang on to that golden goose forever.

So what’s that mean for my passive income goal? How much money do I need and how quickly can I get there via real estate syndications?

The quick answer is $10,000 a month, or $120,000 a year divided by 8% preferred. Gets me to a whopping $1,500,000. If I had $1,500,000 to invest right now, I could stop writing this article and get back to the beach!

Unfortunately, I’m not there yet. But I will be!

So $150,000 currently invested at an 8% preferred return will net me $1,000 a month. Not bad, but only 10% of my goal. Seems daunting!

In the below, I’m going to assume deals sell between year 4 and 5 and cash flow always stays at 8%. In reality, cash flow can drop especially if the market takes a downturn, but usually increases throughout a typical 5 year hold especially if you bought it right. In addition, I’m using 50% return on the back-end as we’re projecting selling between year 4 and 5. As noted above, the equity kicker on backed is typically around 60% at year 5. However, we want to be conservative here and will stick with just 8% cash flow and deals selling 4-5 years after initial investment.

I am also planning to put at least $50K into real estate syndications per year. The more I put, the more accelerated my timeline becomes. However, I want to display a conservative view here.

My first $150,000 is spread across 5 deals, but we’ll pretend it’s one investment for simplicity. We’ll call that Syndication A.

Based on the math, it’ll take me 13-14 years to reach my goal. Not too shabby!

*New $ invested is money out of my own pocket. $850K over 15 years

**Returns from sale are calculated as 1.5x of initial investment in that syndication. We typically project 1.6x after 5 years. Selling between year 4-5 so using 1.5x

***Total invested cumulative is the initial $150K, plus $50K annually, plus gains on sale. I do not double count the original investments

While being financially free is certainly a goal, it’s more so the opportunities that I’ll have once I reach financial freedom. I’ll never stop working, that’s just not in my blood. But I won’t HAVE to work, and I can spend more time doing things that serve those around me. Now that’s freedom.

So what are your dreams? What’s your freedom #?