Advice needed!

[Josiah Charland]

Alright so let me give everyone a little background. I'm 28 years old, I have been working for a large retail company for almost 7 years now. I got married 2 years ago. Me and my wife were able to purchase a property with 2 homes on it. One of them we worked on for about 3 months and moved into it. The other house had major structural fire damage that I am in the process as we speak to get permits to fix. The house was a cash offer me and my wife payed 14k and my father in law spoted us another 14k that we are paying back slowly but there is no rush. I just qualified for a FHA loan of 200k and we are looking for a multifamily. Here's where I need the advice. Me and my wife want to Completly live off of the cash flow from the properties. So far are plan is to move to a place were we will minimally cash flow then rent our current residence. She works a good job that pays good so we were talking about me quiting my job that way I can full time invest and work on the property and she will work the job untell we are making enough for her to quit. What I want to know is what is the best route to quiting your job and making enough to live on. We have no rent, no car payments or other big debts besides the father in law. Anything helpful would be appreciated!

[Lance Johnson]

@Josiah Charland - it sounds like you're already off to a start with the work you're putting in. The real question is how much cash flow do you need to make this happen? If you need $5,000 / mo and you are getting a 10% cash on cash return on your investments, you'll need $600,000 in cash (equity) invested across your various markets. If you can get by on $2,500 a month, you only need $300k in equity.

There is no single "best way" to achieve this. My recommendation is to set a few key, achievable goals and then develop a strategy. Have you looked at the Ultimate Beginners Guide, yet?

http://www.biggerpockets.com/ubg

That will help you get an idea for what's possible.

Determine how much free cash flow you need to replace your income, and then start building out the strategy to achieve it.

[Lance Johnson]

@Josiah Charland - it sounds like you're already off to a start with the work you're putting in. The real question is how much cash flow do you need to make this happen? If you need $5,000 / mo and you are getting a 10% cash on cash return on your investments, you'll need $600,000 in cash (equity) invested across your various markets. If you can get by on $2,500 a month, you only need $300k in equity.

There is no single "best way" to achieve this. My recommendation is to set a few key, achievable goals and then develop a strategy. Have you looked at the Ultimate Beginners Guide, yet?

http://www.biggerpockets.com/ubg

That will help you get an idea for what's possible.

Determine how much free cash flow you need to replace your income, and then start building out the strategy to achieve it.

[Elizabeth Colegrove]

Welcome to Biggerpockets!

Answering you question directly is hard because it depends on so many different things. There are many different ways to skin the cat. You should definitely check out the podcasts, blogs and look around the forum. Everyone is achieving your same goal through different methods, bird-dogging, wholesaling, buy and hold rentals, flips, etc. 

My husband and I personally are buy and hold investors. My husband has a transient career (military) so we rent out our personal house when we move on. We also buy pure rentals. We are investing in the long term as we aren't looking to live off the money for another 15 years. Feel free to check out our blog at reluctantlandlord.net for our way of achieving what you describe.

Good Luck! This is the one profession, that as long as you stick to your morals and don't break the law. There really isn't one answer or even a good answer.

[Andrea Flores]

You can't buy an investment property with and FHA loan.

[Andrew Syrios]

I think, as others have said, you're well on your way. If you can get a fourplex FHA, and live in one and rent out the other three plus the property you currently live in, you're well on your way. I would move one step at a time. Lean just outside of your comfort zone, but don't go crazy. In other words, don't quit your job right off the bat, but get into real estate a bit, make sure it's something you enjoy and that you are making some money with it. Then, once you have a decent footing (it by no means needs to be perfect), make the next step and do real estate full time. That's my 2 cents at least.

[Michael Evans]

Your talking about Financial Independence, which I define as "Having enough monthly cashflow to afford to live the way you want without having to work."  Here is the mathematical equation:

Assets x ROI = Cashflow > Expense Budget

Here are the steps:

• Determine you annual Expense Budget based on how you want to live.
  • Example: $75K/year
• Determine your Return on Investment based on your Risk Tolerance.
  • Your Risk Tolerance is based on how wiling are you to risk losing it all when it comes to your incoming producing properties to where you would have to go back to work.
  • Use a scale of 1-100, 1 = cash in mattress and 100 = I'm gambling the rent money a the craps table.
  • Take your Risk Tolerance # and divide by 5 to calculate your ROI.
    • Example: Risk Tolerance = 50, ROI = 50/5 = 10%
• Income Producing Assets = Expense Budget/ROI
  • Example: $75K/10% = $750K in income producing assets
• For real estate, Income Producing Assets = Property Equity, not the market value of the property. So if you have a $200K property with $20K in equity producing $2K net cashflow/year, then your Income Producing Asset is $20K with an ROI of 10%. By the same token, your $200K property could have $50K in equity and produce $5K net cashflow/year. Now you have $50K in Income Producing Assets with an ROI of 10%.

What I've given you is the basics that you need to calculate your Financial Independence Number (It's a dollar amount): Income Producing Assets = Annual Expense Budget/ROI. This is where I recommend that you start and develop an Asset Accumulation Plan (AAP) to reach your Financial Independence Number.

You can connect with me and I can provide more information/guidance to you if want.

God Bless You!

[Josiah Charland]

Originally posted by @Andrea Flores:

You can't buy an investment property with and FHA loan.

you are able to purchase up to a 4plex with FHA. You just have to live in one of the units for a year. easy way to get into a first property.

[Josiah Charland]

Originally posted by @Michael Evans:

Your talking about Financial Independence, which I define as "Having enough monthly cashflow to afford to live the way you want without having to work."  Here is the mathematical equation:

Assets x ROI = Cashflow > Expense Budget

Here are the steps:

• Determine you annual Expense Budget based on how you want to live.
  • Example: $75K/year
• Determine your Return on Investment based on your Risk Tolerance.
  • Your Risk Tolerance is based on how wiling are you to risk losing it all when it comes to your incoming producing properties to where you would have to go back to work.
  • Use a scale of 1-100, 1 = cash in mattress and 100 = I'm gambling the rent money a the craps table.
  • Take your Risk Tolerance # and divide by 5 to calculate your ROI.
    • Example: Risk Tolerance = 50, ROI = 50/5 = 10%
• Income Producing Assets = Expense Budget/ROI
  • Example: $75K/10% = $750K in income producing assets
• For real estate, Income Producing Assets = Property Equity, not the market value of the property. So if you have a $200K property with $20K in equity producing $2K net cashflow/year, then your Income Producing Asset is $20K with an ROI of 10%. By the same token, your $200K property could have $50K in equity and produce $5K net cashflow/year. Now you have $50K in Income Producing Assets with an ROI of 10%.

What I've given you is the basics that you need to calculate your Financial Independence Number (It's a dollar amount): Income Producing Assets = Annual Expense Budget/ROI. This is where I recommend that you start and develop an Asset Accumulation Plan (AAP) to reach your Financial Independence Number.

You can connect with me and I can provide more information/guidance to you if want.

God Bless You!

Thank you I will plug some numbers into that formula and see what happens. Independence from my job is the first goal im trying to accomplish with REI. Me and my wife both work so we are in the process of making our budget living on here income and saving everything i make that way when I quit to start REI full time me are already living below our means.