What is the fastest way to become financially free?

[Mary Jay]

Hi guys!

You have helped me a lot already to understand things about real estate. I have realized that I have been doing things wrong...(Like negative cash flow on my two rentals, etc) ...So I figured that may be you could help me out to figure out what is the best way to get financially free? Everybody probably has different meaning of what financially free  means to them. To me being financially free means  to be able to quit my job, which I am really, really, really tired of...

Once I quit my job I probably will need about 6K per month for my expenses from the cash flow...

How to achieve that the quietest way and the way that produces the lowest risk? 

Disclaimer: I am not very good at saving money ( being a single mom of a teenager son who needs a car and will go to college in 3 years is not helping my savings either). I think at current condition I can save about 10-12k per year for downpayments...I doubt I will be able to save 20K per year...

Here are few options that I thought of:

1) Option number one: If I focus on cheap single family houses. For instance, if I buy one cheap SFH for 20K somewhere in the Midwest and it will bring me about 400-500$ per month in rent. IF I have 12 of those, there is my 5-6K cashflow per month... If I pay cash for them, cash that unfortunately I do not have. So I would have to finance them. If I finance them then my cashflow goes down, so I will have to do probably 20-24 cheap houses in order to produce 6 K income ...

Positives: easy to pay them off and be debt free... So 12 houses will cost me probably around 240K if I buy each house for 20K. If I finance them then I will need 20 houses so it will be 400K leveraged to produce 6K income after mortgages are paid......

2) Option number two: Buy multifamily. Lets say a fourplex brings me anywhere from 800$- to1K per month in cashflow. Then I will need 6 fourplexes...Fourplexes cost more money than single family...It can cost anywhere from 50K to 200K per fourplex... So 6 fourplexes probably will be anywhere from 300K- 1.2ml....So I probably will be in debt longer and means the risk is higher... I do not really like debt, buy I understand that it is a necessary tool.

3) Option number 3: While I am working at my W2 job I will qualify for financing. So may be I should buy those 6 forplexes and then when I hopefully quit my job in 3-4 years, I will be paying off those forplexes while also buying one cheap single family per year with cash? (Hopefully I will be able to save some cash from the cash flow to invest) 

Which strategy would you chose and why?

[Caleb Heimsoth]

Well the absolute fastest way would be to win the lottery or inherit around 5M dollars. Those two ways are instant. Lol

Assuming that’s not an option, I would buy some residential single or multifamily first and then graduate to apartments, note investing and things of that nature.

Unfortunately at 10-12k a year savings rate that would take a long time. I like to do a simple calculation of saying my invested equity earns me 8 percent annually, so if you need 6k a month you’d need 72k a year and 72k, divides by .08 is 900k In invested equity. Now 8 percent is fairly conservative. So let’s say you’re doing great and earning 12 percent. Then it would Be 600k I’m invested equity.

Another way to look at it would be, in the markets I’m in (Memphis and Cleveland) you can buy a house for 40-70k for cash and cash flow around 450 a month. So let’s split that difference and call it 55k (I’ve got 3 so far and my average purchase is 62k)

At 72k a year you need 13ish houses. 55k times 13 is 715k. So you can see a pattern to start to develop.

Now let’s say you do apartments and you earn 150 a month per door. So you’d need 40 doors. In Cleveland for example (one of the cheapest multifamily areas I’ve seen per door) I’ve seen multifamily selling for 28-35k a door. So again let’s split that difference and call it 31.5k a door and you need 40 doors. So that means purchase price of 1.3M. With 25-30 percent down that is invested equity of 300-400k. So that would be the quickest. You’d want to double check to see if that 150 per door number is accurate. I am not sure if it is. The other numbers I posted I think would be fairly accurate