Beginner can't make the math workout!

[Jared Ebert]

I am a high earning professional in a high stress job just getting started in my career in my mid 30s. I've never invested in RE. I love my job, but I'm also often burned out and don't see myself doing it into my 60s. My biggest goal with REI is to find a way to pull back from my job and retire early. I would like to be financially independent within 15 years from now.

Almost certainly unrealistic, but my goal would be to replace at least half of my income by RE within 15 years, about $180,000, and I could drop down to half time at my current job.

I can’t not get my job’s match which is 6%. At my salary that maxes out my 403b. I put in $19,000, my job puts in $19,000. Then we’re also offered a 457 where I can put another $19,000. It’s hard not to use the 457 because maxing this retirement account saves me about $6,000 on taxes. We save 20% of our income towards retirement (retirement accounts, real estate investing, etc) which comes to about $73,000 annually. Subtracting $38,000 from my retirement accounts leaves $35,000 to use annually towards RE investing.

Reading RE books and listening to the BP podcast, I get really excited and fired up about it, but I can’t quite make the connection to how it makes sense. Feel free to tell me how dumb my math is, because I’m just not getting it.

$35k as a down payment at 25% down, means I can buy a $140k property annually. Let's say it cash flows $300 monthly, yearly I have $3,600 in cash flow. Which in this hypothetical example, my ROI is 10.3%.

If I repeat this process every year, at the end of 15 years my cash flow is $54k. Nowhere near my goal of $180k.

Part of what doesn’t make sense to me is that in 15 years, I’ve invested over $500k and only earned $400k in cash flow. I know I’m ignoring any appreciation, but I hear over and over again not to count on appreciation because that’s a gamble.

How are people getting into this business enough to replace they’re income? Or buy multiple properties per year? I understand this is most likely a very complex question. I appreciate any input. Thanks.