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Goal planning (step 1)

March 20th, 2007 by Kenric

I’m new to this long term goal planning, but I have an idea of what I want in the future.  From the tag line of this blog, it’s quite obvious that passive income is what I want.  So I’m going to begin my goal planning based on the amount of passive income that I would be happy with in 10 years.  I’ll work on a 1,3 and 5 year as suggested after I get my 10 year done.

My goal in 10 years (Dec 2017) is to have $25,000/month of passive income.

Some may look at that as a crazy, impossible goal.  I have thought about it and done some general calculations and it’s a very realistic goal.  This is where my engineering background comes into play.  I plan on reverse engineering my goal to figure out what I need to do today.

But, off the top of my head, here is what would achieve the goal:

• 25 single family houses cashflowing $1000/mo
• 1 large multi-unit (100 units) cashflowing $250/unit
• $5,000,000 in a 6% CD
• $3,000,000 NNN commercial property at 10% cap

See, now that doesn’t sound too bad at all.  Given what I have today, I am pretty confident that I can meet this goal.  I just don’t know which way to go yet.

I know that some of you are thinking, $1,000/mo cashflow on a SFH?  He’s crazy.  But let’s think about it.  Suppose you have a SFH cashflowing $200/mo right now.  In 10 years, is it possible that rents may go up by $400?  If so, you’re at $600/mo.  Also, in 7 years they may become a time where you can refinance to a lower interest rate and have a lower payment due to less principle owed.  I think I can squeak out another $100 from that.  Going against you will be rising property taxes and HOA fees.  I can safely say that this SFH will probably cashflow at least $600/mo 10 years from today (assuming you have a 30yr fixed loan).

Then there’s the element of massive principle paydown chunks.  This is where you sell off some properties and use the cash to pay off your other properties.  If I need 25 SFH @ $1000/mo, I would probably have to buy at least 35.  Why?  Because hopefully I have alot of equity in my extra 10 homes that I can sell off and use to pay off part of my 25. 

This is where I hope my planning will tell me exactly what you need to do today.

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