Is this a realistic 7-8 year goal as a REI?

Question

Hi BP,

I'm a new REI (with a focus on buy-and-hold investing) and I'm wondering if this map plan that I have for my future is tangible for:

1) quitting my job BY 30.

2) Living financially stable.

My plan is to buy 1 multi-family per year up until I reach the age of 30 (this age is subject to change to maybe 32..). That means over the next 7 (or 9) years (age 23 now) I will have accumulated 21 (or 27) units. There are a number of things to factor in that I don't yet know (taxes, mortgage, etc) but the math that I've done seems promising. Please note that I'm just using random numbers.

I was wondering if you all thought this was a tangible idea and something I could live off of comfortably? Let me know!

Tim Johnson · Answer

Hi @Craig Moore.  I like that you have a big goal!

You may find that you run into challenges down the road that make your ultimate goal difficult to accomplish.  (For example, it gets more difficult to get financing after 10 properties.)  But it's not impossible!  Get out there, run the numbers, and buy that first deal!  If you buy that first property you will be a lot farther along than most people.  Taking that first step will get you closer to the goal.  It will all depend on your drive and determination after that.

Best of luck!

JD Martin · Answer

Well, here's the thing: you can alter the amount of money coming in, or alter the amount of money going out, to suit your particular needs. As I said, I know people who are living on $1500/month with no job. Personally, I don't think they live comfortably, but that's using my criteria of lots of rainy-day savings, good health coverage, ability to eat at any restaurant I want without looking up my banking balance first. It works for them. I am a fairly frugal person but I grew up really poor and there are certain things that are deal-breakers for me: junk cars that leave me on the side of the road, struggling to pay utilities, not being able to go to the doctor (actually, I have VA coverage so that doesn't really count), not being able to properly care for my dog. Just as examples.

If you get one unit a year between now and 30, and keep working, you are probably going to have a reasonably impressive portfolio in 7 years. But if you are really doing it, you are going to eat a lot of Ramen Noodles along the way. If you really want the business to support you to where having a job is optional, all of the "profits" from the business need to be reinvested for a certain amount of time. If you plan on drawing off the money you make from anything you pick up as you go, you're probably not going to live off your acquisitions in 7 years.

Joe Splitrock · Answer

@Craig MooreI think your goal of one property per year is a reasonable. I have read some other people starting out that have crazy high goals. I am not sure with that goal you will retire at 30, but maybe if you keep going you could retire at 35. Most likely you will not want to retire at 30. Although it sounds good today, you will want to be doing something even if it is actively building your rental business. I wouldn't worry about retirement today, because you will know the right choice when the time comes. It is great that you are frugal and willing to save your money.

As far as your numbers specifically. You are saying you could live off $12-$15K per month. I do not think buying one property per year for 7 years will get you there. That will mean that each property will need to cash flow around $2000 per month. Even if each property is a 4-plex, that is $500 per door. That is going to be challenging.

I guess to summarize, I think one property per year is a good goal, but I would move out my retirement plans. You could alternately increase the number of properties per year, but I am a firm believer in keeping goals achievable. I would start with one property, then see how it goes. Revise your goals each year. You may find after two years, you change your goal to 3 or 4 properties a year. It is hard to say, because so many factors play into this.

Tim Johnson · Answer

@Jd Martinsuggested some people live comfortable off $1500 per month.  @Craig Moore estimates he'll want $12K-15K per month.  Someone has been reading The 10X Rule book?

My recommendation is to set small and achievable goals.  Do your homework, analyze literally 50 deals in detail and rank the top 10 before you make your first offer.

To be successful in real estate takes a lot of work.  If you are driven by "I want to retire because I don't want to work", it might not be right for you.  But if you're willing to work hard you can do it!

Best wishes.

Dave Reeves · Answer

I personally would focus on the math for your first property. Get that under your belt and focus on the take-aways. Give it a couple months and be acutely aware of everything that happens during the process. Did you buy in the right area? Did your financing come in as expected? Did you get great tenants? How is your relationship with profession resources now (bankers, realtors, insurance, property managers, etc)?  Then, compile what's good and bad about your experiences. Can you tweak your formula to make it better, more even efficient, cleaner? Did you enjoy the experience so far?

NOW, get serious with short term and long term goals. The single most important thing is that you took action early. At your age, you have time to make plenty of mistakes and can easily recover from them. Think of the concept 'compounding'. Time is on your side, so start slow and SMART. EVERYTHING WILL BECOME MORE CLEAR AFTER YOUR FIRST FEW EXPERIENCES.

Henry R. · Answer

@Craig Moore

Keep doing what you are doing now, stay connected to BP, read, ask questions, talk to @Brandon Turnerhe's a seasoned Investor as is many other multi time posters on BP, keep saving your money. People on BP have told me make offers, run the numbers, etc reah out to BP members, etc. Oh yeah if you haven't yet for me Rich Dad Poor dad is a must read. I read it twice! And will read it again.

You are young you have the time, keep learning and you will make it.

Best wishes to you

Craig Moore · Answer

Thanks again, Joe. I wholeheartedly agree. I wasn't a big party guy in college. My mind has always been stuck on "more". Not so much in a greedy way but I was always focused on obtaining more wealth. It is odd to not have the latest gadgets and stuff but I truly believe your 30s are when life really starts. If you make it that far.. I'll be sure to keep you guys updated! Still saving this money and looking for ways to find capital!

Luc Boiron · Answer

A lot of this will depend on how much you are making now, and how much MF properties cost in your target area.  If you're making a lot of money now and are frugal, you will have a lot left over to invest.

If you're not able to save a lot per year, it's going to take a lot longer to save up to buy property.

Good luck!

Craig Moore · Answer

Good response. I'd say I'm very frugal as well. As I mentioned earlier, I still am wearing the same 2-3 pairs of pants that I bought 3 years ago. No new sneakers. I don't drink, smoke, watch TV, have a high cell phone bill. The only expenses that I have are groceries, public trans. passes and small living day to day things. I wouldn't eat Ramen Noodles due to health concerns but certainly get the context and am happy to live off of oatmeal...

Joe Splitrock · Answer

Perfect response and the best reason to be in real estate. You get freedom to follow what you feel passionate about. I will be interested to hear about your first deal. Please make you update us on your progress. Of everything you have posted, the fact that you are ok living a frugal life, is the most powerful gift you have. Too many young people blow hundreds at the bar, on cars, clothing, etc. Much respect to you my friend. Good luck!

Is this a realistic 7-8 year goal as a REI?

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