How much of your cash flow should you live off of?

[Steven Barr]

How much of your rental property cashflow should you live off of? 

For example, if I cashflow around $30k/month, how much of that should I ACTUALLY be spending on my lifestyle? What percentage should go towards my personal mortgage, toys, travel, etc..

Further, I wouldn't want to develop spending habits that had me on razor thin margins, so what should my OVERALL spending percentage be relative to my cashflow? 50%? 70%? 80%?

I understand the goal is to work to continually increase your cashflow by acquiring more properties over time, and that annual rent increases will give you a natural boost, but I imagine you want some cushion built in to your spending habits for inevitable bad times economically?

Thanks! 

[Steve Vaughan]

We have been coast /medium FI for years and utilize about 60% of our free cf total.  This includes health insurance and taxes. 

The type of cf matters as well.  60% of ours is from seller-financed mortgages.   These don't vary so are more stable than rent. 

I would be more conservative if all my cf was from rent. Most of my op expenses on rentals run about 36% self-managed,  50% with a PM but I've had $30k outflow months so need a fat EF. 

60% works for us but we live pretty modestly and don't have a mortgage.  We are actually paid to live in our house, net of all expenses (t/i/m/r/u) or even our cell phones and internet because of a MIL apt. 

So everyone's situation is different.  We started building what freedom looks like to us 20 years ago by living in a trailer park on purpose for 5 years when we started.  

Whatever your calculation, don't forget health insurance or taxes.  Most do.