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How Much Cash Flow Do You Need to Quit Your W2? w/ Daryl Clinch

How much cash flow do you need to quit your day job and go full-time into real estate investing? You may have a big number in your head when we ask that. Maybe you’re thinking of replacing a six-figure salary with six-figure cash flow, but that’s probably far from what you truly need to quit. In fact, you can quit with a lot less cash flow than what you’re being paid today!

Joining us again is Daryl Clinch, who recently went full-time into real estate investing with his mentor and partner, Ashley Kehr. Daryl transitioned from seasonal employment to full-time investor after working at his job for sixteen years and deciding he needed a change. In today’s show, Daryl breaks down exactly how he prepared to quit, the cash savings he had, and the surprising amount of cash flow that allowed him to achieve occupation-independence!

If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).

Ashley Kehr:
This is Real Estate Rookie episode 168. My name is Ashley Kehr, and I’m here with my co-host Tony Robinson for this week’s Rookie Reply.

Tony Robinson:
And welcome to the Real Estate Rookie Podcast, where we focus on all of those investors who are at the beginning of their journey. Maybe you’ve got one deal, maybe you’ve got zero deals, maybe you’ve got a couple and you’re looking to scale. Either way, this is the podcast for you. Ashley Kehr, you’re not by yourself, you’ve got somebody else sitting next to you again. I love when we have a guest surprise in the podcast.

Ashley Kehr:
Yeah. So I’m sitting here with Daryl Clinch again. So if you guys listened, he was on two weeks ago for our Rookie Reply. And the day that he was on, he quit his job. Tony and I were actually getting ready to record and I said to him, “Hey, actually, do you want to be on the podcast so we can talk about that?” And he was put on the spot. So people seemed to love his story and be encouraged by it, but they wanted to know more. They wanted to know the numbers. So we brought Daryl back on to break down the steps he took and what the numbers look like to be able to quit his job.

Tony Robinson:
So Daryl, first, man, congratulations again on taking that leap, I know that’s both a scary and an exciting moment. But like Ashley said, I think we just wanted to dive a little bit deeper into your journey and how you got to that point. I think my first question Daryl is, and this is one that a lot of people struggle with is, how do I prepare for leaving that day job? How do I know if I’m ready? So a two-part question for you. First is, from a financial perspective, what were you doing to prepare yourself to take that leap? And then the second part of the question is, how did you know that you were actually ready to do it?

Daryl Clinch:
So, yeah, I actually didn’t even think that I would ever be able to quit my day job for the simple fact that I was there for 16 years. And when you think about something like that, you feel like you’re just stuck. There’s nothing else. “I’m here. I put this much time into it,” and whatnot. “So this is pretty much it/” but I knew I hated it. And I knew if I was going to leave my job, I figured, “You know what? If I’m going to find something else and do something else, I’m going to need at least $70,000 roughly a year in order to do that.”
So as I met Ashley or whatever, and we got to talk, and when I went through all my numbers and put it all down on paper, I realized that I was living way under my means and that I could actually make it work for $3,500 a month, that I could actually get by and live on it. And I could actually cut more costs and probably go even lower than that.So here I was thinking the whole time that I was stuck and this is all I could do. And didn’t realize that, “You know what? If you actually just go through the numbers, you possibly could live off a lower income.”

Ashley Kehr:
Yeah. So Daryl, when he said that $70,000 amount that he needed to quit his job, to replace his income, that’s when we sat down and looked through what’s actual expenses are, but also going through what his actual take home pay was. And that ended up being what, $50,000, I think-

Daryl Clinch:
Yeah, it was a little bit over $50,000.

Ashley Kehr:
… after he paid his union dues and all these other fees. And then another thing too, when you have a W2 job, he would have to drive every Monday an hour and a half-

Daryl Clinch:
Out of town.

Ashley Kehr:
… to work and then stay out of town and then drive back Thursday or Friday.

Daryl Clinch:
Thursdays or Fridays.

Ashley Kehr:
So just the mileage he’s put on his truck, the gas, there was all these other costs associated with working his W2 job, that he would have less expenses, because now, he basically works at home.

Daryl Clinch:
Exactly.

Tony Robinson:
I’m so happy you brought that up because I think that’s a part that a lot of people overlook. They’re like, “Hey, I’m making 70K a year,” but it’s like, “Okay, how much are you actually taking home?” My partner Omid, we’ll have him on in a future episode as well. But that was part of the reason why he left too, because he was like, “Man, once you look at taxes,” he was contributing to his 401(k). He was doing a stock net. And all these things were coming out of his paycheck. So when he looked at what he was actually bringing home, it was a lot less than what his gross pay was. So if you can frame it that way for the listeners about, okay, not so much, “What does my offer letter say?” But, “What is the amount that’s getting deposited into my bank account every two weeks?” Or however often you get paid, that’s the number that you want to keep in mind.
So Daryl, you work backwards. You figure out what this number is. At what point do you finally feel ready? Was it that you were like, “Okay, here’s a clear path for me to get to that,” whatever it was, $3,500 per month. Were you like, “Oh, I’ve got maybe six months saved up?” What was the thing that made you say, “Okay, I know that I’m ready?”

Daryl Clinch:
I was actually surprised. After we went through everything and I looked at it, I never really had to think about budgeting or whatever, just because what I made, it was comfortable and I didn’t have to be like, “Oh I need to save this or this and this.” And I did put a little bit of money away here, but I was actually really surprised when we did do the numbers at how much I could actually get by and by making that less.

Ashley Kehr:
I think when Daryl, we started talking about him quitting his job and becoming financially free, he had me explain it probably 50 different times as to how it’s going to-

Daryl Clinch:
I didn’t think it was possible at all.

Ashley Kehr:
… work, because he’s always been in that mindset of a weekly steady paycheck. And just me going down like, “Okay, here’s the different ways that you can make money as a real estate investor.” So writing everything down on paper and going through and actually physically showing him was a lot better than just saying, “Oh, I bet you a hundred bucks I can make you quit your job in six months.” But there definitely was that fear and that-

Daryl Clinch:
Oh it was super scary even thinking about it.

Ashley Kehr:
… a lot of trust put into me too as me helping him. But when we looked at his budget and going through it, there was subscription costs that he completely forgot that he had. I mean, the OnlyFans, those charges were… I’m just kidding. But the sacrifices he was willing to make in his budget too, if he needed to. So he was so amped up and motivated to be able to quit his job that he was like, “If necessary, you could probably live on $2,500, not even $3,500 too.” And he’s willing to make that sacrifice.

Tony Robinson:
So Ashley, you brought up an interesting point, that you were the one that walks Daryl through what this transformation or journey towards financial freedom might look like. And what I’m afraid is that some of our listeners might be hearing that and they’re going to say, “Well, hey. Daryl had the unique advantage of knowing Ashley Kehr.” Or, “Omid,” my partner “had the unique advantage of knowing Tony.” And that’s what our platforms, we kind of… We have some opportunities that maybe not the everyday investor has. So Daryl, what I’m curious is, were there any other… I guess first, maybe we can talk about how you guys built that relationship, because that might be instructional for people to hear. But second, was there anything outside of the relationship with Ashley that you felt was one of the things that allowed you to step away and leave your W2 job?

Daryl Clinch:
Yes, definitely meeting Ashley was a huge advantage that most people don’t have. And I’m very grateful for that, but I get laid off every winter. So leading into this, I told her, “You know what? I’m ready to do this. I want to quit my job.” And I just told her I would do anything I could to learn the process, anything I could about it to make money, to be able to quit my job. I hated my jobs that much. So I mean, yeah, her by my side the whole time giving me information, listening to every episode of the podcast, it definitely was an advantage. And then some of the other advantages that I do have is I was in the military, so I get my health through the military. So I don’t have to have a W2 job to pay for my health or to have health through a W2. So that’s one huge advantage and expense that I didn’t have to pay for right there as well.

Ashley Kehr:
And you live below your means too. Already, he doesn’t have any credit card debt or any major debt. You have a mortgage, you have a boat payment, and then you tell about your truck. You just…

Daryl Clinch:
Yeah. So I lease my truck, which is a low payment right now, but I’m turning that in and then I’m just going to buy a vehicle out that way. I have no payment out whatsoever for a vehicle. I don’t have to drive a super nice fancy vehicle. So I mean, if it gets me around and it’s cutting payments and making me live easier, then let’s do it.

Ashley Kehr:
Yeah. I think going back to your first question, Tony, about him having me as an advantage. Daryl and I have talked about this before, where there’s other people in my life that have had the same opportunity and they didn’t jump on it like he did. So I think so many people have different advantages and opportunities available to them, but it’s the people who actually take action on them. And how he even said that he would “do anything thing this winter to help me to learn.” And he did.
I mean, when I tore my ACL, this is my life auxiliary right here. He would come and set up my podcast studio for me and everything. I mean, he even does all my mail now. And we’ll talk about that too when we get more into the numbers of how he’s making income now. I mean, he went from doing a very skilled construction job to now, he is opening mail once a week. Yeah. I think the fact that he took advantage of this opportunity where a lot of people would say maybe they would, but they don’t actually take action and really maximize the opportunities that are available to them.

Tony Robinson:
Yeah. You bring up a really, really good point. Ashley. And I guess two things I want to ask that. First is that I get way more strangers who I’ve never met that reach out to me for real estate investing advice than I ever get from friends and family. And not to say that I can solve all of their… If they did have a question, I’d be able to answer every single question. But I definitely do have a skillset that I think I can show and teach to other people. Like you said, just because someone’s close to us doesn’t necessarily mean that they’re the most well equipped to take the knowledge and information that we have and apply it to their own lives. And then the second piece is that, maybe you don’t know Ashley Kehr, maybe you don’t know Tony Robinson, but is there someone else in your life who is walking the path that you want to walk?
And it’s like, how can you provide value to that person and create an opportunity for yourself? Can you go sweep up the job site? Can you be the person running to Home Depot to pick up supplies? Can you be the person knocking on doors, trying to help get off market deals? There are so many challenges every real estate entrepreneur faces. And if someone who’s hungry, who’s willing to work, comes to them to say, “Hey, I’m willing to help you solve this challenge,” if you really need it and you can show it and prove it, nine times out of 10, that person’s going to say yes.
If someone came to me and said, “Tony, I will knock a hundred doors a day all summer in Joshua Tree to help you find a deal. And all I want is for you to spend half an hour with me once a week so I can ask you some questions.” I’d say, “Sure, absolutely.” But that work has to be there. So anyway, my point is that even if you don’t feel that someone right now, is there someone that you can start providing value to help build that relationship?

Ashley Kehr:
Yeah. And I’ll explain too how we actually structured our partnership too. So once Daryl decide… Tell him what you did, how you used to spend your winters.

Daryl Clinch:
Yeah. So every winter, I was just sleeping in. I’d go to the gym and then I’d wake up and go snowboarding. And that was pretty much my day in the winters. Very not learning anything. Just like, “Okay, I’m going to go back to work. I’m going to just be lazy this whole winter.” Yeah, I legit did not do much.

Ashley Kehr:
And that sounds actually pretty nice, getting to just go snowboarding every day.

Daryl Clinch:
It definitely was nice.

Ashley Kehr:
Doing that. And then, so I think the fact that you shifted and did start to hustle and grind. So he did whatever I needed at first to learn, almost like an intern. And the agreement was, if this started going well, that we would do a partnership. So how we structured it is that we are 50/50 partners on the properties that we are acquiring together. So anything in my previous portfolio or with other partners that I’ve had, that if he does work for them, he’s just paid for that. He’s not getting any ownership of any other properties. So it’s just properties going forward.
So right away, we started working on getting properties under contract. So we have already closed on one and Daryl has certain roles and responsibilities that he’s doing. Yes, he’s getting to quit his job. But this has been a huge benefit to me too, because I found somebody who complements my strengths and weaknesses. And that was a huge advantage to me. That he’s taking over the project management. He does all the materials ordering. He does the estimates on the projects. He oversees the contractors. He has great leadership skills from being a foreman. And he handles the team of contractors. Great. Also, he did quality control in the military. He talks to people when I don’t want to talk to anybody. So there’s all these huge advantages.
And I looked at, “Okay, so I could hire someone, but also I didn’t feel like I was ready yet to be responsible for somebody’s full-time salary.” To say, “Hey, I need a project manager. Will you quit your cushy job and come your safe job and come work for me?” And so taking on a partner, whereas like, “Okay, this is a bit of a risk. You’re going to make money based on how we do as partner in this venture.”I have had pushback as to like, “Why would you just bring on as a partner? You have the experience, you have the knowledge.” But I will tell you what. He cares a 1000% more about what is going on in our business, because it is part of his, and that has made him an even more valuable asset it to me than if I would’ve just hired him on as an employee. And I’m more than willing to share the profit with him, because I know that I’m going to be able to grow and scale better because I have him as a partner on my team.

Tony Robinson:
Ashley, I think there’s a lesson to be learned in that, not only for the person that’s in your position, but also for the person in the other side. You just really echoed everything that I said leading up to that, is that, if you can provide value to someone, you would be surprised in the ways that they would be willing to work with you. You, as a successful already real estate investor, are willing to give up half of a deal to someone because they’re solving a problem for you. They’re making your life easier. So again, for the rookies that are listening, that should be your goal. If you’re looking for someone to show you the robes, you’ve got to identify, “In what ways can I bring value?” Ashley very clearly laid out all the ways that Daryl, as someone who’s new to the role of real estate investing, is providing enough value to her as a more experienced real estate investor for her to feel not only okay with, but eager to, give up half of a deal because it’s a win-win situation for both of them.

Ashley Kehr:
Yeah. Tony, I also wanted to mention real quick too, is we had Anthony Michael on the podcast. It was episode 147, and he did the same thing. He was in Daryl’s position and he went to an investor and basically forced himself into the partnership, but he provided value to this partner. And now, this guy was already doing a ton of flips on his own, But now, him and Tony are 50/50 partners on deals. So go back and listen to that episode too if you guys want to learn more about providing value to an investor to become their new partner. That was episode 147.

Tony Robinson:
So I guess last question for me, Daryl, I mean, so it’s been a little while now, maybe what, like a week or so, a little over a week that you’ve officially left. How is it feeling? Do you feel different? Is there a weight lifted off of your shoulders? Are you floating out of bed every morning now? What is the feeling?

Daryl Clinch:
Definitely not floating out of bed, but yeah, it is a great feeling. I look at some of the old coworkers that I used to have, their Snapchat or their Instagrams. And right now, they’re starting to start jobs up right now and hanging off the buildings and being up there at work and all the stuff I used to do. And I’m just like, “Oh man, I so do not miss that at all.” So yeah, it’s definitely a great feeling.

Ashley Kehr:
So like Daryl said, he thought that he needed $70,000. Okay. Then we looked at it and he was actually bringing home $50,000. And then I think what’s $3,500? That’s $42,000 a year, roughly, that he needed actually to get by. So that was definitely a lot more feasible than $70,000. It made me a lot more confident that I could help him reach that. So the first thing we actually did was I work for another investor. He’s the one I started out with. I did property management for him, and I’ve slowly pulled away from doing different things. And I just love him to death. And I’m so loyal to him that I just can’t completely cut ties yet.
So there’s little things that I shouldn’t even be doing, because they’re not the best use of my time, but great opportunities for Daryl to learn. So Daryl is being paid $750 a month for that, to take care of the asset management of this investor’s properties. So he’s leveraging the ability that he has to work for another investor, also learn, and get paid for it. So right there is his steady income that he knows he is getting. Then we have the two short term rentals that we’re doing. And even though those aren’t done yet, you have what, your savings you’re living on?

Daryl Clinch:
Yeah. I’m living on the savings that I’ve had that I usually deal with through the winter or whatnot. And that’s kind of what’s getting me by right now as we have no income really coming in from these rentals yet.

Ashley Kehr:
Until the properties are done. So those will cash flow each, about Daryl’s percentage, he’ll get between $400 and $500 a month each for those properties. And then we also have a mobile home park under contract where Daryl’s actually going to act as the property manager for that. And he’ll be paid a fee off of that. And then also he’ll get his percentage of the cash. So that’s estimated to conservatively be around $1,500, and then he’ll get paid a $300 a month management on that too. So that gets him pretty close to the number. And we should have these projects and the mobile home park wrapped up hopefully in a couple months. So he’s using his savings to float by. I have another benefit that he has is that I have a lot of other opportunities that he could do work for me to fill that income gap.
And then you have in construction and experience worst case scenario, we hire him as our contractor to whole work on our project. So we can talk about that. And that’s another thing too. If you are in Daryl’s position and you’re partnering with somebody and they’ll say, “Well, I have all these things you can do,” make sure you get it in writing. So we have a dollar amount that we’ve agreed upon that if he does do work on the properties, he’s paid that hourly rate. So having some the roles and responsibilities split up so that it’s defined as to who’s doing what, and that you can get paid for more if you’re doing them. So it never gets to that unfair balance, I guess.

Daryl Clinch:
Our contractors are actually getting paid more than anyone right now.

Tony Robinson:
I was just going to say, I think what I hope is inspirational for the listeners is that, in a very short period of time, you’re able to create a pretty clear path, Daryl, to getting towards your number. You had a little bit of cushion from your job to hold you over, but you work really hard. You work really fast, and you were able to see the light at the end of the tunnel. And it reminds me a lot of my own situation. When I got fired from my job, we had a decent amount of money saved up. I knew we could last 18, 24 months without really having to worry about where the next paycheck was going to come from.
And just having that little bit of runway was enough for us to really go pedal to the metal and really build a portfolio. And that’s the same exact thing you guys are doing now. So for those of you that are thinking about leaving, maybe it’s not even always… Depending on the sever things, but if you’ve got a big enough runway, if you’ve got enough cash saved up, and you’ve got a clear path on how you’re going to replace that income, maybe it’s not even waiting until your investments are completely replacing your income, but you’ve got a clear path to get there. That’s another strategy folks can use.

Daryl Clinch:
Right. And with me not working now as well, I can oversee these projects that we have going on. So instead of me working and then coming home and overseeing them, it gets the projects moving faster and better managed, that way they get done quicker so that we do start having the cash flow coming in.

Tony Robinson:
I mean, you can scale so much faster if you can be in it all day every day. There’s no way we would’ve purchased, I don’t know, 12, 13 short term rentals last year if I was still working full time. We just wouldn’t have had the bandwidth to do that. So there’s some fear and some scariness associated with taking that leap. But the amount of time you get that you can reinvest back into the business, you can’t put a price on that.

Daryl Clinch:
Yeah. Another advantage I’m using right now is I also get the VA loan. So I’m going to take the house that I’m currently living in and I’m going to move out of here and then buy another house to live in with the VA loan, which is no money down. I have to live in there for at least a year. So I’ll move into there and then I’ll rent this house. So there’s just another house hack that you can use and another advantage of being a veteran. And any veterans out there, I would definitely take advantage of these benefits that they give you.

Tony Robinson:
So if anyone’s thinking about quitting their job, quit, go into the military, and then quit the military, and then you’ll be able to follow in Daryl’s back.

Ashley Kehr:
Okay. Well, Daryl, thanks so much for coming back on and sharing your financials with us.

Daryl Clinch:
Thanks for having me on again.

Ashley Kehr:
Where can everybody for find you and reach out to you or learn more information about you?

Daryl Clinch:
You can find me on Instagram @DarylC138.

Ashley Kehr:
Okay. Well, thank you guys so much for listening. If you guys have more questions, more follow up, you want to know more, go ahead and message Daryl on Instagram. And we will be back on Wednesday with another guest. I’m Ashley, @wealthfromrentals. And he’s Tony @TonyJRobinson on Instagram. Thank you guys so much for joining us. We’ll see you next time.

 

 

Source
How Much Cash Flow Do You Need to Quit Your W2? w/ Daryl Clinch is written by Real Estate Rookie Podcast for www.biggerpockets.com

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