Financial freedom and what it means to you

[Richard Moro]

Hi guys my name is Rich and this is my first post.!

After much thought and "what if people think I am dumb" I have decided to make a post to the forum. I have been reading 5+ articles a day and 2 podcasts a day from Bigger Pockets and I feel like I know the basics as well as I can for only a few months of research. I am from Orland Park IL, a southern suburb of Chicago but I would like to buy multifamily property in NWI (Northwest Indiana) as many counties around me have very high taxes. From all my reading and listening I have learned quite a lot but I have never really heard exact numbers on how much a year anyone makes. This could be because it is a touchy subject to some or maybe you work a normal W2 job as well and don't think about it all that much. I feel like everyone's numbers will be different as everyone's lifestyle and place they live is different. I would just like to ask though, what is your lifestyle and how much a year (break it up if you work a W2 job) do you make? I currently am 22 years old and make 20$ an hour as an HVAC apprentice and have about 20k liquid and 10k in assets (cars). That being said my idea of financial freedom will be far different then someone who is married with 3 kids and live in Salt Lake City. For me I would love to move to a huge plot of land outside of Dallas, have multiple cars/trucks with a pole barn as my passion in life is racing cars (SCCA, Track, ext). I also would want to help out my parents and have enough to get my future kids into any college debt free. Do I know what I will need for that at 22 years old (or even 32 years old) I don't think so. So after my ranting and raving I open it up to you guys to tell me what you make a year, how your cash flow is and what you do with your lives and how you live. 

Thank you and go easy on a first time forum poster as I am sure I am coming off slightly uninformed. :)

[Jerry W.]

@Richard Moro, Welcome to BP Bud.  Since you asked a pretty open ended question I will give you my 2 cents worth, keep in mind things are different for everyone depending on their perspective so keep what you want and discard what you want.

First, the journey of a lifetime begins with one step.  it is great to see the end picture, but, watch where you put your feet too.  w get your first property.  @Scott Trench wrote a book called set for life I believe.  I have not read it, but it sounds like a great book for someone starting out.  The only reason I have not read it is that I am nearly 60 and am very far from that stage of investing.  Getting your first deal will show you how it is done, give you hands on experience, and start you building a base to work off of.  Things grow in investing at an exponential rate.  So you might do one deal in for first two years, then 2 deals the next year, then 5 deals the next year, then 12 deals the next year.  After you have rental income for over a year it will be easier to get loans for real estate.

I started investing over 20 years ago.  my only thought was hey this is a good deal and me and another guy partnered.  We fixed it up on evenings and weekends, and rented it out.  I had NO CLUE what I was doing.  I figured hey, this place will pay for itself so in 15 years I will own it free and clear.  It needed very little work.  Our next purchase was 3 houses in a group.  One was huge, but needed massive work, the other two were old, but had no structural defects like the big house.  We split off the big house and sold it while fixing up the 2 smaller houses.  Over the next 15 years we added more units getting close to 20 units.  During that time I never took any money out of the business, and put money in a few times to be able to pay property taxes at the end of the year.  About that time my partner moved away and after managing the business by myself for several years I decided to buy him out.  So when I bought my first rental with my partner I was taking home $1,200 per month, and I suspect my partner made about the same.  I had looked at my real estate investing as a pot for retirement money.  We sold a few houses and I got some loans and paid my partner $300,000 for his half of the business, and he got about another $30K from properties we sold.  His payout was about 10 to 15 X his annual salary of when we started.  I also bought him out a commercial property for another $250K that he will get in payments over the next 15 years, so you can add another 10X his annual salary from when we started investing.

My point is don't invest thinking in 5 years I can retire.  Concentrate on making good purchases and then getting another and another.  Eventually we got a small 5 unit house, then later a 7 unit.  If you reinvest all of your income and add some from your W2, your portfolio growth will explode.  If you take the profits out and use them you will grow, but very slowly.  It took us nearly 20 years to accumulate 20 units.  After I bought my partner out, despite taking on an additional $300K loan, I have added about a dozen units in the last 3 years.  About the time I bought him out I found BP and rapidly educated myself like I should have 20 years before.  I only made my first investment plan 3 years ago.  I have changed my plan 3 times since then.  In just 3 years I have grown my business by over 50%.  If I had not gained experience, and built up equity and strong base I would not have been able to do that.

It's great to have a plan to own a ranch with 500 cows, but buy your first cow or two and start raising calves.  Save your money and buy more cows and calves.  You can add 2 or 3 cows a year, but when you hold back your heifers you can raise even more calves when they mature and produce calves.  When you have 20 cows your herd builds fast.  When you have 100 cows your herd gets big even faster.

Have a goal, but work on the first purchase, maybe do a house hack where you buy a duplex and live in half, or buy a house, fix it up and sell it and buy 2 more.  Just get started.  Before you know it you will have multiple houses and maybe a few multi units.  Your path will obviously be different from mine, but I shared mine to give you insight on how others have done it.  All of mine has been done while holding down a full time job.  Good luck on your investing.