Move and Modify: Part 3
Financial Freedom
I wanted to make sure financial freedom had its own post because the importance of this concept is huge for our family.
Let’s start by answering, “What is financial freedom.” Dave Ramsey says that financial freedom is personal. He describes financial freedom as having different meanings for different people. He says maybe it’s:
“The freedom to choose a career you love without worrying about money”
“The freedom to take an international trip every year without it straining on your budget”
“The freedom to respond to the needs of others with outrageous generosity”
“The freedom to retire a whole decade early”
For Team Wayne, financial freedom is defined as: Our passive investments (rental properties) are paying for our lifestyle by covering our entire monthly budget. Our family monthly budget is approximately $3,400 at this time. The goal is to get to a place where we are profiting more than $3,400 from renters payments after paying the mortgages of the rental homes. We can begin saving and planning for future purchases for our family such as a forever home, a beach house, kids colleges, cars, and everything else in life that parents typically stress and plan for after this end line has been crossed.
In the Rich Dad blogs, Robert Toru Kiyosaki says, “Financial freedom is about much more than just having money. It’s the freedom to be who you really are and do what you really want in life. It’s about following your passion, making choices that aren’t influenced by your bank account, and living life on your terms.”
I feel like a lot of millennials have it right here in this area with the surge of young people traveling the world and working remotely or selling everything they have living in tiny homes. There is no need to feel chained to a job that is making you miserable day after day, at least for the long term. In my opinion, living for the weekend is a depressing mentality in which one thrives on a future event as a fuel to get through the painful hours of the 9am-5pm work day followed by a mourning of the death of the weekend beginning halfway through Sunday. Team Wayne believes wholeheartedly in Robert’s truth when he says financial freedom is “being who you really are” and reaching and obtaining your heart's desires without fear and financial anxieties. It may not be glamorous and seem elementary to some people, but for us, we have a “live” (growing and developing) plan as to how we can obtain financial freedom.
Our live plan to build and obtain this freedom is fairly simple. It looks a little something like this:
Step 1: Flip or BRRRR 6-8 properties in the first year (BRRRR - Buy, Renovate, Rent, Refinance, Repeat)
Team Wayne closed on our first property on January 1st, 2020. We have given ourselves until January 1st, 2021 to have bought, sold, and profited from 6-8 flip houses and/or BRRRRs. This timeline gives us anywhere from 6-12 weeks to flip and sell a fixer upper or buy, renovate, rent, refinance, and repeat (BRRRR) rental properties. In case you are wondering, we’re on track so far, at least as of July 2020. We have completed and sold two flips and are working on our third and forth. We completed our first flip in ten weeks and our second in six . Starting now in July of 2020, we have 6 more months to acquire approximately 2-4 more deals. We plan to have Sean working on the projects himself and being hands on less and less so that we can start acquiring more deals and working on two at a time. We will try our best to hire out and sub-contract jobs so that Sean can focus on finding the right deals for us. Besides, he’s the money crunching, monster machine!! (Blaze and the Monster Machine reference? Ayyooo, moms). Like always, we’ll let you know how it goes and keep you posted on step 1.
Step 2: Flip or BRRRR 8-12 properties in the second year (BRRRR - Buy, Renovate, Rent, Refinance, Repeat)
Step two is laid out almost exactly the same as step 1. The differences are that we have bumped up our flip and BRRRR goals only by a few deals. We wanted to give ourselves an absolutely attainable finish line at the end of year two so as not to set the bar to high. Our strategy is to set goals at a level that stretches us to learn and grow but also set ourselves up for success by choosing a goal we are confident we can achieve. In other words, our goals are not too easy and not too lofty.
The other difference is that we are setting our eyes on deals that are BRRRR heavy, meaning that flips are nice for fast cash but BRRRRs are a longer investment strategy. We are looking to be out of hard money in about a year from January 1st 2020 and this fact alone can give us more money in our pocket (because we don’t have to pay a hard money lender approximately 10-20k depending on the deal). This gives us more money back so that we can invest the extra cash into properties we can keep long term and rent out. When we make a deal with a hard money lender, we sign a contract saying we will sell the house and get him all his money back in NO LONGER THAN 6 months. So, if we don’t have to pay anyone back in 6 months, we can keep the house and rent it out as a BRRRR.
Step 3: Freedom!
Beginning the year 2022, Team Wayne’s goal is threefold: be out of hard money, be able to acquire traditional loans from the bank, and be financially free.
As a reminder, our definition of financial freedom is that our passive investments (flips and BRRRRs) pay for our lifestyle, meaning our monthly budget of approximately $3,400 is covered.
Here’s the first key feature. At this point in life, we will have been saving and snowballing our profit from deals one into the next. We will have created a snowball so big that we will not have to use a hard money lender to pay him for his money.
Out of hard money? Check.
The second key feature of step 3, is that Team Wayne has been working full time as S + A Invest | Design meaning that the bank will finally approve us for traditional loans! A self employed person must show proof of self-employment history with tax income documents and statements for a total of TWO YEARS before the bank will approve you for a mortgage loan. In 2022, we will have met the two year minimum and will no longer need a hard money lender to buy our deals for us and then we pay him back, with a BUTT load of interest. I guess that's the price of being rich and loaning your money out to newbies like us. But as my sister-in-law always says, it’s just a season in our life right now and like winter, it will eventually come to an end. Unlike my occasional desire for a nice winter snowfall, I won’t wish this borrowing money season back in the least once it’s gone.
Be able to acquire a traditional mortgage loan after two years of self-employment? Check.
Finally the last key feature of our financial freedom plan: We haven't given ourselves a hard number for exactly how many flip to BRRRR deals we want to acquire in the next 2 years. There are lots of reasons for this but to name one, it is no surprise that the pandemic has impacted the housing market and the world right now. We’ve been receiving the sweetest messages from people reaching out making sure we are doing ok in our own business during this time. The simple answer is that the pandemic hasn’t changed our business strategy to much. Because we are in the middle of a pandemic, there is really no telling what’s going to happen next. Instead of living in fear, we are choosing to press on and create beauty in the world when it is so difficult these days to see it. Our goal is to be a reminder that beauty still exists and people are capable of things they themselves can’t always see. That being said, we may have to switch in the near future to only doing BRRRR deals for a while if financially possible so that we don’t have to risk a quick resale with a flip house. As long as people still need beautiful and affordable spaces to hunker down, then we will keep on flipping on.
After 2 years, we have a goal to be receiving enough rental income from BRRRR deals that after paying each rental mortgage, we will be profiting enough to pay for our month to month budget, meaning… financial freedom! When explained in one sentence, this concept may seem easy, but with each deal, each remodel, and each signed closing document, we will be tried and tested on our ability to persevere and move and modify some more. . .
Become financially free while simultaneously creating a life for our family that is lucrative, beautiful, and meaningful? Well…...we’ll just have to wait and see.
Ann | DESIGN