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Ep 22 Norm and Norma - $25K Fix and Flips Every 9 Months - Invest Only in Stocks

This is Episode 22 of Real Estate Financial Planner™ podcast.

Norm and Norma's do a fix and flip project netting them $25K every 9 months until they reach financial independence (then stop doing fix and flips). They invest the proceeds in stocks.

  • Both are 21 years old
  • Recently graduated from college and working in a technology department of a large health care business
  • Married to each other
  • Have a combined $10K saved up
  • Earns $72,000 combined (they each earn $18 per hour * 2,000 hours = $36,000/year each)
  • Saving about $1,000 per month
  • Obsessed about achieving Financial Independence so they can retire early (FIRE)
  • Want to find their best path to financial independence together
  • Both taking social security at age 67
  • Social security estimated based on them working until age 67

The  Scenario you want to copy into your Real Estate Financial Planner™ software has the following:

  • 2  Accounts (including  Default Cash Account)
  • 0  Properties
  • 6  Rules

Please register for a Forever Free Account or Login to your existing Real Estate Financial Planner™ software to copy this  Scenario into your account.

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Once it is in your account, you can view detailed  Charts for dozens of variables and edit any of the assumptions for  Accounts,  Properties, and  Rules to run your own what-if  Scenarios.

You can change things like:

  • Adjust how much money you start with in any  Account
  • Model variable stock, bond and real estate rates of returns
  • Change how many  Properties you buy and when you buy them
  • Set your own personalized target monhtly income in retirement to indicate when you reach financial independence
  • Model receiving social security payments when you reach a certain age
  • See what happens if there is a market crash or correction for your stocks, bonds and/or your real estate
  • Tweak price and rent appreciation rates for individual  Properties or all your  Properties
  • Find out what happens if you pay off your mortgages early... with cash flow each month or only when you have enough to pay off the  Property in full
  • Use equity in  Properties you own to cash-out refinance and buy more  Properties or invest it elsewhere
  • Model buying more  Properties than you need then selling off any extras to pay off the remaining  Properties to achieve your own user-defined financial independence number
  • Evaluate your own safe withdrawal rate and see how it impacts your investment plan
  • And much, much more...

Scenario

  • Modeled for 720 months (60 years)
  • 17.85% effective income tax rate
  • 3% inflation rate
  • 5.5% mortgage interest rate
  • 4% yearly safe withdrawal rate (SWR)
  • $5,000 minimum target monthly income in retirement (MTMIR) in today's dollars
  • $10,000 ideal target monthly income in retirement (ITMIR) in today's dollars

Accounts

Summary of assumptions for the Account in this Scenario.

  • Account Name:  All-In-One Account
  • $10,000 starting account balance
  • 8% yearly rate of return (at start)
  • Asset Type: Stocks

Properties

This scenario has no Properties.

Rules

These are the Rules included with this Scenario.

Paycheck and Personal Expenses - Norm's Job Income

  • This  Rule runs for the entire  Scenario.
  • Depositing paycheck into  All-In-One Account but no personal expenses with this  Rule.
  • Personal expenses will be Inflation Adjusted.
  • Gross paycheck is $3,000 Inflation Adjusted.
  • Assuming a tax rate of 17.85% on your paycheck.
  • Net paycheck (after taxes) is $2,464.50 Inflation Adjusted per month.
  • The paycheck will stop when they reach "Financial Independence" (goal of Minimum Target Monthly Income in Retirement achieved).

Paycheck and Personal Expenses - Norma's Job Income

  • This  Rule runs for the entire  Scenario.
  • Depositing paycheck into  All-In-One Account but no personal expenses with this  Rule.
  • Personal expenses will be Inflation Adjusted.
  • Gross paycheck is $3,000 Inflation Adjusted.
  • Assuming a tax rate of 17.85% on your paycheck.
  • Net paycheck (after taxes) is $2,464.50 Inflation Adjusted per month.
  • The paycheck will stop when they reach "Financial Independence" (goal of Minimum Target Monthly Income in Retirement achieved).

Paycheck and Personal Expenses - Personal Living Expenses

  • This  Rule runs for the entire  Scenario.
  • No paycheck, but pulling expenses out of  All-In-One Account.
  • Paycheck will be Inflation Adjusted.
  • Assuming no taxes on this paycheck. It is possible this is already an "after-tax" amount.
  • This paycheck will not stop at retirement.
  • Personal expenses are $3,930 Inflation Adjusted per month.

Lumpy Income - Fix and Flips - $25K Every 9 Months

  • This  Rule runs for the entire  Scenario.
  • Depositing lumpy income in  All-In-One Account.
  • Lumpy income is $25,000 Inflation Adjusted every 9.000 months..
  • Assuming a tax rate of 20.31% on this lumpy income.
  • Net lumpy income (after taxes) is $19,922.50 Inflation Adjusted each time.
  • The lumpy income will stop when they reach "Financial Independence" (goal of Minimum Target Monthly Income in Retirement achieved).

Passive Income - Norm's Social Security at Age 67

  • This  Rule starts on month 552 and runs for the rest of the  Scenario.
  •  Passive Income is typically used for things like social security, pensions, or annuities. Unlike  Paycheck and Personal Expenses they count toward whether you qualify for financial independence.
  • $1,553 Inflation Adjusted in gross passive income per month.
  • Assuming a tax rate of 18.06% on this passive income.
  • Net (after taxes) deposited to  All-In-One Account is $1,272.53 Inflation Adjusted per month.

Passive Income - Norma's Social Security at Age 67

  • This  Rule starts on month 552 and runs for the rest of the  Scenario.
  •  Passive Income is typically used for things like social security, pensions, or annuities. Unlike  Paycheck and Personal Expenses they count toward whether you qualify for financial independence.
  • $1,553 Inflation Adjusted in gross passive income per month.
  • Assuming a tax rate of 18.06% on this passive income.
  • Net (after taxes) deposited to  All-In-One Account is $1,272.53 Inflation Adjusted per month.

Significant Events

These are the  Significant Events for this Scenario.

  • Month 261  Achieved Financial Independence Goal
  • Month 553  Achieved Ideal Financial Independence Goal