All Forum Posts by: Tucker Cummings

I’ve got my eyes set on early retirement from my W2 and then want to build or acquire businesses afterward. For other people that left their W2, at what point did this you decide to step away from the W2?

My monthly expenses are $4500, my monthly income is $5000 after taxes/contributions, my wife’s income is $4500 after taxes/contributions. So I see exit points when my passive income hits expenses, matches my wife’s income or my income, the sum of all three or a multiple of my expenses.

My first thought is that I would exit when passive income is 2-3x my expenses, but I have a feeling it would be hard to find motivation to work for someone else when I’m making more money by employing my dollars to work for me.

When did you retire from W2?

@Shiloh Lundahl

Might be cheating the game, but I'd take the $1,000,000 and invest it BRRRR style in multifamily. Keep the $1M capital and get the passive income too.

If I just had the 10k, I’d have to wait a while for that to build up to $1M

As the previous two stated, I had experience this past year when we flipped and refinanced our primary. Appraiser told me just by looking at comps he was thinking our house was worth about 262k. I showed him comps, the improvements we made and "before pictures" of our house. I also said, "I know you've been doing this a long time and you probably have your way of appraising and doing things. But if you don't mind, I'd appreciate if you took a look at this packet I put together and what I think the property should appraise for."

Appraisal came back at 277k

These properties and their numbers aside, I prefer the cash flow over appreciation. However, your rents are going to increase along with the appreciation. So if the property doesn't appreciate, you'll have a tough time raising rents as time goes on. My recommendation is to invest where you'll have 50% mortgage, 50% net (used for Capex, Maint, Vac., PM and remaining is cash flow), you can also get a 20% cash on cash return and expect a modest appreciation that is in-line or better than typical RE appreciation (2-3%/year).

Also just consider where you might be starting. If this is your first deal, maybe it's a great one for you to get started. If you're experienced, maybe it might be better to push your funds into a deal that's in a slightly better area where you can get some appreciation. You might also just want to hold them for a few years, collect your cash flow and pay downs, then 1031 exchange into a better property. 

Lot's of maybe's, but that's because you need to ultimately decide your situation and what's best for you.

I set out a goal to read 52 books in a year, or one book per week. One of my FAVORITE's was the sequel to Rich Dad Poor Dad, which is Cash Flow Quadrant by Robert Kiyosaki. That one was great. But here's something that has really stuck out to me from "Richest Man in Babylon"

I'm paraphrasing, but essentially he says somewhere in the book that "most people don't create wealth because they don't try to get wealthy." Then when I take a step back and look at society, I think he's exactly right. How many people are actually trying to create long lasting wealth?

Then I just read this yesterday, the book was quoting Robert Kennedy - "Some men see things that are and think, Why? I see things that never were and think, Why not?" I'm still molding over that quote, but it's been stuck on my mind lately.

Overall, I've seen that most books repeat what other books say in a particular genre or topic, but they might have just one or two differentiating points. That being said, I've found that by constantly fueling my brain with intelligent input, I'm having more intelligent output. Assuming you're just talking about RE and investing, here are a few other books I've enjoyed this year.

1. 1. Set for Lift by Scott Trench
2. 2. Multiple Streams of Income by Robert Allen
3. 3. Buy Then Build by Walker Deibel
4. 4. The book on Tax Strategies for Beginners
5. 5. Never Split the Difference by Christopher Voss

Mine also gave my wife and I about 30% returns as well, but if we look at the stock market across the long term, 8(ish)% tends to be the market return. It may have been 30% this year, but next year could be 2%, could be negative, could be 100%, who knows. 

I guess when I look at stocks vs. RE (and I have 3 properties right now), its really like comparing capital appreciation to capital producing. And I just need to ask myself "do I want to put my capital in something that will appreciate, or do I want to put my capital into something that would produce capital"

I started thinking about this a lot lately, especially with the rise of bitcoin and the fall of the dollar. Who knows, maybe one day instead of exchanging dollars for rent, we'll exchange bitcoin/crypto or stocks in exchange for rent. That's just theory I'm running in my head, and I don't have any cypto at the moment. But if crap hits the fan, I think there's a lot of value in having something that produces capital (whether cash, crypto or stock) vs. capital itself.

This is the methodology and track that I was thinking. I've already done 3 deals by saving up my cash, rinsing and repeating (BRRRR method). I've got the team to make it happen, made of people much smarter than myself. The main difference between you and I might be that I'm using a property manager to take care of bed bugs and toilets, which goes against your final point about having better luck at a casino. My PM has been amazing, and she is an investor herself with a fantastic reputation. Perhaps there was a bad experience fueling that point you made.

Either way, the whole purpose of doing this and exploring this option is not to escape hard work. I want to free up my 9 hours of work/day that I'm paying to the man so that I can focus on building a business. Whether that's in real estate, buying a business outside RE, building an entirely new business of my own, or some other path is yet to be seen. But either way it goes, I know there is a lot of hard work ahead of me. 
 

@Bob Norton that's great. Thank for the very clear and planned advice. That's exactly what I was looking for!

@Patricia Taveras great suggestion. I was just speaking to someone else who expressed this might be an option to explore. I'm not sure if I can do it on mine, but I will definitely be looking into it more. 

@Joe Splitrock thanks for the advice. I think considering all things I'm leaning more towards leaving my 401k as is (which is a change of mind from the start of this post), but I'm still going to talk to my CPA about options.

I invest in Fayetteville, NC, near Ft Bragg and rent by the room to soldiers, all on the same lease. My gross rent on the MLS property is $1250/month. Property was $100k purchase price, mortgage is $534 and I budget 10% for PM ($125), 10% for combined capex + maintenance ($125), 5% mortgage for vacancy ($26). So that puts me at $440 projected cash flow. In reality, the property has cash flowed at $500. I'm sure there will be future expenses that might knock me down closer to the projection. However, only 2 of my 3 rooms in that house are rented at the moment and I'm hoping to get the third room filled when the lease renewal comes around in April, which should raise my gross to closer to $1500-$1600/month.