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Setting Real Estate Investing Goals that Get the Results You Want!

Updated: May 16, 2021


Where to Start


As with most endeavors, you should start with the end in mind. So you might be saying, "My endstate is financial freedom!" While that is a good start, and I applaud your enthusiasm, that goal lacks some specificity.


As is often preached in the military, in business schools, and by motivational speakers, your goals need to be SMART.

- Specific

- Measurable

- Achievable

- Relevant

- Time-bound (sometimes referred to as "Timely")


These are pretty self-explanatory, but if you would like a deep-dive on the topic, I recommend this article and video by Mindtools.


How Much do You Want/Need?


People invest for many different reasons. Some just want a little extra spending money now or in the future so they can take an extra vacation or go out to eat more often. Others would like to have a nice little nest egg so they can realistically retire at age 65. The most ambitious among you will be seeking to completely replace your W-2 income and live off the grid or simply work on your own terms.


These are all admirable goals, but different paths are required to reach them. How you go about planning towards these goals also depends on your current circumstances and habits.


How Much You Make vs. How Much You Spend


If you live paycheck-to-paycheck and you're not putting anything away to invest or save, then this step will be straightforward because the two numbers will be equal. If this is the case, you need to seriously evaluate your spending habits and try to cut out some items you don't need. I know this is easier said than done, but there is not much of a point in having an investing plan if you have no money to invest.


If you haven't started tracking your spending and saving, I recommend a free budgeting app like Mint or Personal Capital. They allow you to see your spending in real-time across all accounts and in one place. It takes a little work upfront to get all your accounts loaded, but the awareness it provides on where your money is going is well worth it.


Otherwise, determine what your annual income is and how much you spend every year. If you make $80k per year, but your expenses are only $40k, then technically, you only need to make $40k per year from your investments to cover your expenses. Of course, this would leave no room for savings, emergencies, or future investments. So, for your peace of mind, let's say your goal is not just to cover your current expenses, but replace your entire income of $80k.

If you are investing in single-family homes, this is a relatively simple calculation. If we assume your criteria dictates that you make $200 per hour per month of cash flow after everything is paid (mortgage, property manager, fixing the toilet, etc.).


At $200 per month, that's $2,400 a year for one house. So, to get to that $80k figure, you would need about 34 homes. If your head just exploded or you threw your hands up in despair, let me walk you back from the ledge.


I will readily admit that it is a lot of houses. But these numbers are simplified, and there is a lot of nuance missing here. This does not account for the value appreciation or refinancing.


You also don't need to invest in single-family homes! You could just as easily say, "I need 15 duplexes, nine quadplexes, or one apartment with 32 units to make $80k per year in passive income." Hopefully, those numbers sound a little more manageable.


Putting It All Together


Right now, the goal is something along the lines of "Within ____ years, I will own ___ properties producing a total monthly profit of at least $6,700 ($6,700x12=$80k). So does it meet the SMART criteria? Let's see.


We have very specific monthly, annual, and per property or per unit goals, so yes.


We can certainly say this is measurable since it is easy to measure how many properties you have and how much profit they produce each month.


Determining achievability is a little more complicated. The specific goals need to be balanced against the time you're giving yourself to accomplish it. For example, it may not be realistic to buy 15 duplexes in 3 years, but it is very feasible to do in 13 years. And if you don't retire for another 20 years, maybe that works out great.


Relevancy is really up to you. Only you can decide if this goal addresses the core problem you're trying to solve.


We ensured this goal was time-bound by giving ourselves a deadline. If for whatever reason, you don't accomplish your goal by the deadline, there's no need to punish yourself and wallow in self-pity. Reflect on why you were unable to achieve the goal in the time allotted, refine it as required, and move on.


Conclusion


Once you finish drafting your SMART goal(s), the hard work begins. Now that you know WHAT you want to do, you need to figure out the HOW. This can only come through education and experience.


That's where I come in! I hope these weekly articles provide you the knowledge and resources necessary to help you figure out how to achieve your real estate investing goals.


There's plenty more to come in future posts, so make sure you click here to subscribe. I'll let you know when new posts are out and provide valuable "pro-tips" associated with that week's topic.

Ready to start passively investing in multifamily real estate and want to see if our opportunities might be a good fit for you? Click here to visit our website to learn more or reach out to me directly at Tim@ZANAinvestments.com.

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