Earlier this year, 2020, we ran all the numbers to becoming financially independent and being able to quit the corporate job. The outline of the plan required the following aggressive goals being met:
- 2020: buy two additional rental properties cash-on-cash flowing 13% or higher
- 2021: repeat goals of 2020
- 2022: buy one more cash flowing property and then put rental cash flow towards paying off our primary residence mortgage
- 2023-2024: finish paying off primary residence mortgage
- 2025: quit the job!
Even as each property would allow us to pursue the next property that much faster, this plan would require us to put new down payments down almost as fast as we saved up enough cash. Already in the past, we’ve used almost all of our cash to pay for the down payment and rehab on properties (we have used our own cash, not hard money lenders).
Our pre-pandemic 2020 retirement outline included us leaving only around $4,000-6,000 on hand as total emergency fund when acquiring and rehabbing new properties.
The main thing we’ve learned from the first half of 2020 is that income and economy are all uncertain. We’ve reordered some of our priorities:
- 2020: maintain a full cash-on-hand 6-month personal expenses fund and full cash-on-hand maintenance/vacancy expense fund for rental properties. Buy one property.
- 2021: if emergency and maintenance/vacancy expense are still fully funded: buy two properties.
- 2022: repeat 2021 goals
- 2023: repeat 2021 goals
- 2024-2025: pay off primary residence mortgage
While this doesn’t look like a huge change to our timeline, the shift in priorities means we’ll put those emergency funds as the top priority and hold off on buying if the need arises.
There are other ways in which we choose a cautious approach to our investment properties, the first was already mentioned: using our own cash to buy and rehab properties. Saving up our own downpayment does slow us down, but having the cash ourselves and not having to worry about the refinance in order to repay hard money lenders has given us a lot of peace of mind regarding rehab timelines.
Our other cautions come in the form of the high standards we set for our properties, our tenants, and ourselves as landlords, and we’ve already written about those standards here.
The journey to FIRE is constantly evolving. We’ll keep learning and sharing our journey along the way!