Freedom number

[Abdul Azeez]

Hello Folks - Thanks in advance for your assistance. I am a relatively new member and have been extensively pouring over the podcasts for the last several number. I just finished listening to one of the podcasts with Peter Clayton on freedom number. The cheatsheet is here -> https://s3.amazonaws.com/claytonmorris/Webinar/You...

I have a few questions based on reading through this.

1. Firstly assuming we use Clayton's numbers of $5000 pm expense and $420 pm income buying 12 properties looks fairly reasonable. However, he assumes all properties are paid off. If I use the more realistic scenario of a beginner investor like me who is probably going to see a further cut due to mortgage and assuming Brandon's guidance of $100 per property, the above $5000 pm translates to 50 properties which makes it seem like a very very difficult goal whereas 12 seems a reasonable goal. Can someone help me understand if I am looking at this the right way? 

2. Clayton obtained the $5000 pm number based on looking at 6 months expense. In my specific case, I am setting aside money for 401K, retirement and 529 plan for child's education. Should these be considered in working out a 6 month expense number or not be considered like what Clayton has done? If I don't consider them, how will these other items be funded?

3. Freedom number assumes some of your other costs are going to go up. As an example, group insurance you may have earlier been eligible for now becomes difficult because you need to go to the insurance marketplace where rates are higher. Where are these considerations factored in?

4. Is there another model I need to use? I know people say to start with 1 property at a time. I am just getting a bit scared looking at the above numbers to see if this is feasible.

Regards,

Azeez

[Joshua D.]

@Abdul Azeez

Great questions.  I loved listening to that podcast about the freedom number. 

1. If you are driven enough, unrealistic goals become attainable. I am in the camp that likes the 12 paid for properties with $5000 cash flow more than 50 units with the same cash flow. Long term the guy with 50 units will do much better as his loans are paid off in 30 years. But this all assumes he can survive the real estate crashes and make all the payments.  The guy with free and clear should not have a problem. 

Leverage is gold. Use it to get to where you want to go. 

I personally like the idea of buying the 12 (or whatever number you need) houses and then flipping and selling your way to being debt free.

2. When I created my freedom number I totaled out all my spending and added $1500 just to be safe.   However, don't get caught up in making the number perfect.  Just set a goal and adjust as more money rolls in. 

Good luck out there