In the my last post, I told you how I found the path to (early) financial independence and how I got to where I am today. What I haven’t told you is where “here” is, which is the topic of discussion for today. 
New Beginnings
Flickr photo by surawine
I’m about 2 years and 9 months into my journey to financial independence and I’m feeling very positive about the future.
I’ve been at it longer than that, you see, but I sat on the idea for a while for various reasons, even after I had figured out exactly what I needed to do. I had researched passive income for a while before I finally settled on real estate as my means to achieve it. But my family wasn’t ready financially for about a year after we had made up our minds.
So we started saving our money for a rental property and cut our 401k contributions. (I can hear the gasps ringing out through the personal finance blogosphere.) When we got educated in locating and managing property, and had a decent amount of money put aside, we went after it and sure enough: we bought our first rental 3 months later. We didn’t know everything but we had a team of people to help us from contractors to insurance agents, inspectors and mortgage brokers.
That one house got us started down the right path and added $300+/mo in rental income to our family.
Getting Serious
It wasn’t really up until this point that I realized we simply weren’t saving enough. I think at the time my wife and I were saving about 12-15% of our income, and while that is higher than the “standard advice”, I knew that we could do better. Over the course of the next year, we focused a lot on the other side of the personal finance equation: spending (less).
We dropped our cable, cancelled our gym memberships, and raised the deductibles on our insurance and otherwise upped the seriousness of our finances. In 2011, we saved about 40% of our income, which i consider both an achievement and also “Not quite good enough.”
The Present
Fast forward to today: we’ve purchased two more houses and between our 3 rentals we’re making $1209/mo in rental income, which at this point gets 100% reinvested back into our business.
Here’s a little graphic I made to summarize our business as it stands right now:
Note: this only takes into account income and expenses related to the properties and not to general business overhead. Our overhead is pretty small and strictly optional: we have an online fax service that we use and we have an umbrella insurance policy. Total monthly overhead: $46/mo
The Future
We made a lot of progress in the last two years but things will probably be slowing down from here on out: Mrs. Dollar is going to quit her job at the beginning of March to work for the family full time. This was always in the plan: raising our own kids is very important to us.
She’s also a licensed realtor and a freelancer so she can still bring in some cash part-time but it won’t be the same as she brings home with her 9-to-5. We’re also going to start having kids this year which will be a huge, new adventure.
Still, my goal is to purchase 2 more houses in 2012 and for our rental income to exceed our bills within the next 5 years.
Do-able? Yes.
Difficult? Also yes, but I’m up for the challenge.
Stay tuned for case studies of the three houses we’ve purchased in upcoming posts!
How about y’all? Do you have plan for financial independence, and if so, how far along are you?
Things I Learned In Europe
13 Comments
Very nice cash flow on your properties. I’m looking forward to the details.
We have a 4 plex and a house and they are doing OK. I’m also investing in dividend stocks to generate another source of income.
retirebyforty recently posted..Dividend Income Portfolio Jan. 2012 Update +RDS.B
Thanks, Joe! We’re really happy with our progress so far. Cashflow like that is actually pretty typical in today’s market in my area.
Dividend investing also appeals to me and I have thought about branching out. It would certainly be less work but with an appropriately lower yield too.
I’m a new reader by the ways of My Broken Coin, and one of my goals is to own 2-3 income-generating properties down the road. I’ll be following along your journey with interest.
Well Heeled Blog recently posted..10 Ways to Deal with Your Wanderlust When You’re Short on Time and/or Money
Thanks for stopping by!
I’m a huge believer in the wealth-building power of real estate so that will be on of my big focuses for the blog going forward.
very impressive there, DD. You’ve covered a lot of ground in less than three years. Congrats!~
Very cool, too, that you are positioning yourselves so your kids will have a stay-at-home parent.
Our daughter came along 10 years into our marriage. (Surprise! b-control isn’t 100% effective) we were both very career focused and tried the child care route at first.
Deciding to stay at home was tough for my wife. She had always worked and felt she wouldn’t be caring her share. Until I said, “If you continued to work, what could we possible buy that would be of greater value than our daughter staying at home with her mom?”
She also returned to night school for her degree which gave me evenings along with our little girl. she and I still laugh about the good times we shared and I believe a large reason we have a great relationship today is those hours we had then.
jlcollinsnh recently posted..Travels with “Esperando un Camino”
Thanks, jc. I’m pleased with our progress but we’ve got a while before we have our freedom!
My wife comes from a stay at home parent family so it was no problem for her to make the decision. We went ahead and moved up her quit date by a few months to get us used to it.
I completely agree: you can’t place a value on being able to raise your own kids. So many work and spend a good chunk of that extra pay on day care…
Thanks for sharing your story!
What’s a pet rent?
I will be following your journey closely. It always inspires me to achieve something more, something better. I want to pay off our debts as much as I can this year. This is my most important goal right now. Then… I will save for a down payment for a new place. One step at a time, you know…
Aloysa @ My Broken C recently posted..How “Do Not Need” Lists Can Save You A Buck
I’m glad you asked
Pet-owning renters know that they will have to pay extra to have a pet, and in our area it has become increasingly popular for landlords to charge a monthly fee for them in addition to the normal refundable deposit.
One step at a time is right! As long as you have a goal and you work towards it, you are already a step ahead of the crowd. So many people wander through life and don’t understand why they don’t achieve what they want, especially financially. You can achieve exactly what you set out to do, but you have to set out to do something or you will achieve something else entirely.
What you have described in this post is basically the way of life that I dream of in the future. I would love a stay at home wife that could do some freelancing..
She’s a realtor as well? O la la! Nothing gets me going like some good old real estate talk.
I wish the best for your family. Think of the other bright side — Less income = Less Taxes, More Kids = Less Taxes. DOUBLE SCORE.
Drew @ EpicFinances recently posted..Borrowing Interest Free Funds to Invest in Stocks?
I’m really excited for her She turns in her 3 week notice this friday!
As she’s told more and more of her friends at the office, she’s started to get more realtor-related business which is awesome. She just landed a property management gig with a fellow investor for 3 properties. I’m hoping to get her to guest post about it
Congrats on your investments.
As a European, what I don’t understand is why would a renter who is able to pay 970$ rent/month not buy the property himself when mortgage is “only” 480$?
In Europe you can’t find properties where the rent is more than the mortgage payment, leaving most owners with a negative cashflow.
Would appreciate if you could enlighten me on this point.
Kind regards,
Marc V.
I don’t know much about the housing markets in Europe but the payments I quote there are all for 75% loan to value. You can see on the case study how we bought the first one. The payments for that one total 664 for mortgage, taxes and insurance and in order to pay that little you would need to come up with 25% down payment plus closing costs (which would be around 30k for that property). Most people don’t have that kind of cash or they have bad credit so payments would be a bit higher.
In addition to what Dollar D said, some people would prefer to live in a rental so they don’t have to deal with all the baggage that can be home ownership. Loans, repairs, having to sell before moving. The rent we charge is close to what the mortgage payment would be with a 15-20% down, which is what most people do who have the money and credit for it.
There are many people who get foreclosed on a home that was too big for them, but still want to live in a home. They rent instead, hopefully a smaller home that they can handle! (We don’t approve tenants unless they have income that is at least 3x rent price. )