Achieving financial independance - how easy is it?

Question

I'm curious to know how many RE investors here achieved financial independance.  I think that's #1 reason as to why I'm interested in the subject.

When I say financial independance, I don't mean you don't work all day.  What I mean is if you chose to take a 1 year vacation, you would come back to find your house and your car still in your name.

Currently I have $4000 monthly expenses and $500 positive cash flow from my 9-5.  Armed with that, lots of energy & motivation, an amazing relationship with my wife who's also very interested in the subject, and a powerful brain (I had median PhD income when I was 19 with a 2 year community college degree) - can someone honestly tell me if I have a shot at achieving financial independance in Real Estate within 2 years?

I know a "guru" will say I can do it in 2 months... as long as I buy the seminar package :mrgreen: .

What about you real RE investors? You think I got a shot?

I've been working for 5 years with longest break of 4 days when I was in the hospital.  I think 1 year vacation is well deserved  :mrgreen:

David Alexander · Answer

Just got back in town after taking my daughter to Gatlinburg, Tn... for a few days...

Anyway, I picked up a new book at the airport....

Great Book,,, great read...

The 10 Roads to Riches.... 
Ken Fisher.,..

Enjoy.

Joshua Dorkin · Answer

Interesting reads, Ivan and Sheila.  Thanks for sharing!

Ivan Jouikov · Answer

Great write, Sheila!

According to what you say, I've been living extremely rich life :)  Especially:

Living a rich life is laughing your ass off and crying your guts out.

I used to believe being a man means you cannot cry or show weakness.  Now, even though I'll still hide it, I _love_ letting tears roll after an emotion movie, or when you wake up on Saturday and realize what an amazing week it was. My wife says she thinks it's very cute :)

Still, no matter how much I enjoy my life, I still have to spend most of my time at my 9-5.  I would much rather spend that time with my family/friends/pursuing my passions.  And for that, you do need money in the bank/real estate/whatever.

Ivan Jouikov · Answer

I'm not going to go into definition of "rich" as I wrote a whole dissertation on it ;)  http://www.passiveincomefrom0.com/2009/01/why-i-want-to-be-rich/

At the end of the day I think it all comes down to how much I disagree with the idea of 9 to 5.  Mke and David - thank you both for your insight!

Sheila O'Shea · Answer

Funny, I wrote a bit on the subject myself.  Just posted it today, in fact.   :wink:

http://cyanidefish.livejournal.com/189644.html

Sheila O'Shea · Answer

The most important question you can ask yourself is--

Do you want to be a rich person, or do you want to live a rich life?

Here's a tip:  You don't have to be a rich person first.  You can live a rich life in any moment.

David Alexander · Answer

You have to create more than one tier of cash flow to get complete financial independence....
            
            Ivan you can certainly achieve it depending on what you call  financial independence in a matter of years...
            On a basic level...
            
            You'll likely have to work your tail off....
            
            I did.... Although of course early on you don't know what you don't and at times you become stagnant knowledge wise believing you know everything....
            
            The moment you do that... you should start studying again, because you are in for a greater learning curve... 
            
            So, what do I mean... levels and tiers..
            
            Well first you can invest in real estate....and you have X cashflow depending on how you did it...
            
            Then you realize... to free yourself up you have to pay someone... and teach them your systems...
            
            For instance I'm on the phone couple 2 - 3 times a week with my office... for about 5 - 15 min... 
            
            Checkin' the pulse so to speak..
            
            From their I've built other businesses besides real estate.. that provide cashflow and the ability to invest in real estate and other passive vehicles...
            
            So, I have created simultaneously created another level of freedom and other tiers of cashflow...
            
            For instance just met with a friend and we are creating a business that invests in stocks... Yep... I'm going to create a stock portfolio.. haven't done that in years.. 
            
            But,it will create a tier...
            
            So, I personally have a ton a freedom... I believe I could leave for a year plus... and it would still run and probably all grow without me... (maybe even better) as I would be forced to create better systems to allow more freedom.. 
            
            Sure, I'd make a calls, check some email etc.. but, nowadays I'm so far out of the day to day... my biggest decision is typically lunch...
            
            That said... I'm not the kind of person where my brain rests...
            
            So, I continually think about business etc... because "I love it"....
            
            I've just learned not to act on ever whim... or I'd always be busy as hell...
            
            And my people can't get done what I have put in place already as it is....
            
            Now, like Mike said.... It can all be attacked... at least until your like Gates and the rest of them....
            
            but, after awhile what I've learned is create cashflow from different sources...
            
            In different segments.. 
            
            Not just one type...

Michael Rossi · Answer

Ivan,

I think the entire concept of financial independence is a big joke and largely a myth.  Yes, you can certainly build a business that will support your family and allow you to control your schedule.  Can you take a year off and do absolutely nothing, and expect the money to keep rolling in?  No.

The bottom line is that no matter what you do, YOU must be actively involved in your business if you want it to keep going.  That doesn't mean that you must take care of the minutia, but it does mean that you must at least manage the managers and the macro view.

Furthermore, it is nearly impossible to get to a point that you are financially secure for life.  Look at all the millions of people in this country who thought their retirement was secure.  They had enough money, diversified per the "experts" in mutual funds.   Then, one day they woke up and their retirement fund was cut IN HALF!

In addition to that, there are many other issues that can rob you of financial independence.  I was talking to a friend of mine the other day, who is also one of my mentors (no, I certainly don't pay a mentor).  We were discussing insurance and the deductibles we have.  I have a $5,000 deductible on all my rentals and he has a $10,000 deductible on his.  The idea is that the higher deductible keeps the insurance premiums lower and when you have dozens of rentals (hundreds for my friend), that insurance premium savings is significant.   I can certainly afford $5,000 (and my friend can certainly afford $10,000) if there's a fire or something else bad happens at one of my rentals.  Therefore the deductible seems like a smart move.  However, the hurricane that brought 80+ mph winds to Ohio this year (and destroyed the roof on my personal home) really got me thinking about this issue.  What if a bigger storm came through and destroyed all the roofs on my rentals?  That could certainly happen.  Could I afford $5,000 out of pocket for every rental?  Could my friend afford $10,000 for every rental?  Could I get a loan to cover this amount (using my property as collateral) if all my property were severely damaged?  Probably not and the result would be that my nice little illusion of financial independence would be gone!

The bottom line is that life involves risk and you can't remove that risk with insurance or a good plan.  You've got to be continuously involved with your business and keep making the changes that allow your business to stay successful.

To answer your question directly.  I think that you could realistically build a business that would provide $4,000 per month with relatively few hours of weekly work in about 4 years (buying 10 rentals per year).  You could do it in half that time if you were willing to do the management and maintenance yourself.

Good Luck,

Mike

Ivan Jouikov · Answer

Thank you for telling me what I needed to hear.  Now the only question is - how fast can I get 40 rental properties.  Only time will tell.

If that means 10 more years without vacation, then so be it.

I don't consider 2 weeks to be a vacation.  I live by the rule work hard play hard.

Michael Scott · Answer

Financial independence is different for everyone. Build residual income and find a source for transactional income.  It's hard work.  I'd say most investors "work" more than most day jobbers, but it's usually because they want to.  Stay consistent.  Patient people get the leftovers from those that hustle.