← BiggerPockets Real Estate Podcast
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- [00:00]
A
Financial freedom is a journey, not just a destination, and that's a good thing. Maybe you want to replace your income and quit your job someday, and real estate can absolutely help you get there. But maybe what you really want is financial flexibility. The ability to buy dinner or go on vacation without having to stress about the cost. And the ability to provide that flexibility is somewhat unique to real estate. Today we're talking about how your goals can change over time. But there's always an investing strategy to meet you where you are. Hey, everyone. I'm Dave Meyer, head of real estate investing here at Biggerpockets, and I'm joined once again by my friend, Henry Washington.
- [00:45]
B
What's up, buddy? Glad to be here.
- [00:47]
A
I am glad you're here as well, because I think it's fair to say both of us have sort of reached our own version of financial freedom. Is that right? Would you say that?
- [00:56]
B
Yeah, absolutely. Absolutely. I'd say that it sometimes doesn't feel like that, but yeah, for sure.
- [01:00]
A
Right. I think that's kind of the point, though. Like, I've sort of hit financial freedom too. But also, neither of us are actually retired at this point. Like, we're still working every day. Right. Which is basically sort of the big secret of this entire industry. Everyone who says that they're retired is not actually retired. They're just maybe doing something different than they were doing before they started getting into real estate investing. But that's okay, right? Like, that is. I think the whole point of the episode we want to have today is that the journey that you take on financial freedom does not look the same. It's sort of a moving target. It shifts and changes. And in my opinion, at least every real estate deal I do, every decision I make should make me more financially free. And like, what the actual destination is, I don't even really know. And that kind of changes. But it's about improving your financial situation with every deal you do. So that's what we're going to talk about today and how everyone's goals are going to change during a wealth building career and how it's actually okay to use real estate to make your life better right now, even if that means it will take you a little bit longer to reach some number that you may have in your mind. So, Henry, let's just dive into your story a little bit. When you first got started, was financial freedom even a goal? Like, did you know that word? Was that what you were pursuing?
- [02:20]
B
Yeah, that was 100% what I was pursuing.
- [02:23]
A
It was okay. And like, what did it mean to you.
- [02:25]
B
So I have this vision in my mind of like, at some point I would have enough rental property that I would just have cash flow coming in just in droves and I would just be able to sit on a beach somewhere and not have to work. And just. In other words, I just had this like picturesque vision of cash flow, funding everything so that I could go where I wanted and do what I wanted and not have to worry about making money because my real estate portfolio just gave kicks off all this money for me.
- [02:58]
A
You were Scrooge McDuck just like diving your pool of gold.
- [03:05]
B
Yeah, doing. Doing gold coin angels.
- [03:07]
A
I mean, that is a vision. I think a lot of people have. It changed though, because you said that was your vision at the beginning. But. It sounds like there's a but coming there, man.
- [03:18]
B
I want to sound like a downer, but like, I. I want people to have a realistic understanding of like, what it is when you get in this business as you start doing deals, what you start to realize is like, yes, you buy properties that do make cash flow, but realistically, in a long term rental scenario, your properties are probably kicking off between 100 and $500 per door of monthly cash flow. And so for you to truly live the lifestyle you want, it probably is going to take a whole lot of doors, if you still have leverage on your property for that to become a reality. The other reality is like, the more doors you buy, the more money just comes in and goes out. And so, yes, every month I get paid from my property manager, and then mortgage payments comes out and taxes come out and insurance comes out and maintenance requests come out. And you know, I have over 100 properties. And so like this morning I got an email. I have, you know, somebody wanted eleven hundred dollars to replace a front door that somebody had kicked in. And somebody wanted another $3,000 to replace a sliding glass door and some trim in an apartment. And that's just multiplied across a bunch of properties. And yes, in my underwriting, I accounted for these things to happen, sure. But like, the money comes in, the money goes out. And unless you're just some super accounting spreadsheet genius, it's hard for you to know at any given given point exactly how much actual net cash flow you have every single month. And then like, sometimes unexpected things happen. And so even though I thought I was going to have so much net cash flow, I have substantially less because maybe this month I had like 4h vacs go out. Right. And so what I learned was it's really hard to live your life based on that cash flow income. Because every month is different. And if every month is different, it's hard to have some consistency with like being able to pay your bills and truly live off that money. And so what I quickly learned was like, I don't necessarily want to live off my cash flow. I want my properties to cash flow.
- [05:32]
A
Yeah.
- [05:33]
B
But I want to be able to have a different, more consistent income stream that I actually live off of. And then I can take the cash flow and I can focus like on a quarterly basis or on a, on a semi yearly basis on paying down the assets with the cash flow that I have. Because at some point, as more assets get paid off, that cash flow grows exponentially because now I don't have leverage to pay off anymore. And then you can truly live off that cash flow. Right. Because it's kicking off so much more cash flow that it's easy to actually plan your life around it. And it's easy to take care of the maintenance items because your cash flow will go from a hundred to five hundred a door to like a thousand to fifteen hundred to two thousand dollars a door. Right. If you're not paying that, that, that mortgage payment every month on that property. And so I realized that the true cash flow that I'm looking for comes after the properties aren't leveraged anymore. And if I can not live off the cash flow and I can reinvest that cash flow into helping me pay off the assets sooner, I can get to that goal sooner. And so that's why I started flipping houses to, to generate the more consistent income that I can actually live off of. Because I can, I can do the math and know If I flip five houses a year and I average 40 to 50 grand per flip, like, that's good, I can manage my life off that.
- [06:54]
A
I would never, when I first started, think that you would say flipping is the more consistent income. But the way you do it, it does actually make sense that, like, if you do enough volume, it does become actually more predictable than cash flow on a monthly basis.
- [07:08]
B
Yeah.
- [07:08]
A
I think what you said makes a lot of sense is that cash flow is great hold on to your property, but until you reach a certain size of your portfolio, it's not actually all that dependable. Even if it's dependable on an annual basis or a long term basis, which it should be if you're underwriting well on a monthly basis, like, you got to make rent, you got to pay for your car, like, you know, you can't really rely on that until you get a certain size. And actually what I thought you were going to say is like, money's coming in, money's coming out, which is true from a expense standpoint. But I think the other thing that happens is you start to make cash flow and you start if, even if you're acquiring it, you want to use it towards your next deal, you want to use it to fund your next rehab, you know, you don't want to use it for your lifestyle. And that could sort of spiral too, because if you want to get to a significant portfolio size, you need to keep up a pretty good reinvestment rate. That's how you compound. Right. You just keep pouring your money back into your business. And so I think that's another thing that sort of gets lost in the shuffle here. But let me just ask, take a step back because when you first started, I get what you're saying, you thought you'd live off cash flow. I think everyone does. Did you have a number in mind? Like X dollars of cash flow would give you your beach living fantasy?
- [08:30]
B
Yeah, the original number was just to get to what my current monthly income was from my day job in monthly cash flow. So I was making about $10,000 a month right?
- [08:43]
A
Before taxes.
- [08:44]
B
Before taxes, yeah. So if I could get to $10,000 a month in net cash flow, then I wouldn't need my job anymore. Seems like a pretty reasonable thing to think about.
- [08:54]
A
Great way to think about it. Yeah.
- [08:55]
B
And so you get there and like I said, it's just not as easy to know that you're actually going to have $10,000 every month to spend. But what I truly started to learn was that like, real wealth is built through equity and appreciation. Like, that's where real estate is the most powerful. Real wealth isn't built through leveraged cash flow. Leveraged cash flow. It's more of a measuring stick to know you bought a deal that makes sense because it makes you money every month. That's why they say real estate's a long term game. Like the real payday comes much later.
- [09:31]
A
You know, I do agree with that and that has been my experience as well, that cash flow doesn't make you a ton of money, especially upfront. But I do think that there are times in my life when I look at my investing career where cash flow did have a real significant impact on my lifestyle at that moment. My goal when I started real estate wasn't to retire. I wasn't like, I didn't have this vision of like, oh my God, I'M going to sit on a beach. I'm going to buy enough rental properties. My original goal was, like, I was waiting tables and I was struggling to make rent. And I was like, if I could figure out a way to get 250 bucks a month, yeah, that would be really beneficial to me. And that's why I bought my first deal. I had a friend who was, like, making a couple hundred bucks a month on a rental property. I was like, I want that. And when I got that 200, I think it was actually more. I wound up doing a little better on that first deal that, like, had a really big impact on me. You know, like, I could go out to dinner, I could make rent. I wasn't a struggle to make my car payment. And as my lifestyle got more expensive, and I know people will say, like, oh, you shouldn't have, lifestyle creep. But, like, that was part of my goal. I was 22, and I was scrimping by, like, I wanted a better lifestyle. I'm sorry. You know, I wanted to go on vacation and to not worry about my finances all the time. And so, like, as I sort of settled into what I actually want my lifestyle to be, my goals, like, totally changed. And that's where I sort of, like, took the. The approach. You started saying, like, oh, actually, 200 bucks at a time is not going to get me where I want to get to. I got to go a different route.
- [11:10]
B
Yeah.
- [11:10]
A
I think that the great thing about real estate is that if you start generating cash flow, whether it's $200 a month or $20,000 a month, is its flexibility. Like, it allows you to decide every month based on changing circumstances. Do I want to reinvest this capital into my portfolio? Do I want to invest it in something else? Do I want to use it to support that, my lifestyle? Like, that's, to me, financial independence. Like, it's not some destination that you get to where you're like, okay, I'm done. I'm never working again. Everything's fine. For me, it's like, no, I have some level of independence where if I choose to spend more this month, I get to spend more this month. If I choose to reinvest it, I. I get to make that choice. To me, that's the part that, like, reduces my very significant amount of financial anxiety that I've. I've had for my whole life. Like, that's the thing that I find valuable. So let's dig more into this flexibility concept, because this is a really important thing that I think a lot of new investors maybe don't realize. And honestly, I think a lot of experienced investors don't take advantage of as much as they should. We do have to take a quick break though. We'll be right back.
- [12:22]
C
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- [12:56]
A
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- [15:40]
B
No, not from a cash flow perspective. Like, where I'm at in my journey now is I'm fairly comfortable with the size of my portfolio. Will I buy more rental properties? Yeah, probably, but not at the pace that I was buying them before. Like, I can't pass up a great deal in a great neighborhood. Like, if it comes, if I. If I find it, I'm gonna buy it. But for the most part, like, I'm not actively trying to scale as much. And so for me now, it's more about, like, paying down the assets that I have. The way I look at things right now, like, I can get to a different level of financial freedom faster by getting rid of some of the leverage that I have versus buying more doors with more leverage. So if the goal was cash flow so that I don't have to work, I can either get there by acquiring hundreds of doors leveraged to get me to a monthly cash flow number that makes sense, or I can get there by paying down the doors that I have and exponentially increasing that cash flow.
- [16:42]
A
Right.
- [16:43]
B
And after having a big portfolio, I like the idea of not increasing that portfolio too much and then paying them off. Because big portfolios, the more doors you have, the more problems you have. There's a lot of work that comes with that.
- [16:55]
A
Totally.
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B
And so I can get there more comfortably and enjoy my life a little more.
- [16:59]
A
Yeah.
- [17:00]
B
By having a smaller portfolio with paid off assets than having a larger portfolio with more leverage.
- [17:06]
A
Okay, this just made me think, hot take question for you. Can you be financially free, truly financially free, whatever that means to you? If you have debt on your properties, no, you can't. Okay. You have to own them outright. I kind of. I like. I kind of like that take. I've never really thought of it before, but, like, I kind of feel like if you're sort of right, you still have. There's like a certain amount of risk in that that limits your quote, unquote freedom. Right. If you have debt and you don't.
- [17:35]
B
Truly own the asset until it's paid off. Right. Someone can come and take that from you and change your financial freedom situation. Right. Like if something happens and you can't make the payments, you can lose that asset and then your lifestyle is different. Also, the larger the portfolio, the better you have to be at managing your managers or managing those properties yourself. And that's a job. That's not freedom, that's work.
- [18:00]
A
Yeah.
- [18:01]
B
And I'm not saying that I'm getting rid of that work, but I'll have a whole lot less of it with less doors that are paid off than with hundreds and hundreds of doors that are leveraged.
- [18:10]
A
Yeah, that's a good point. Because, like, financial freedom, right. You need to get your. You should have this cash flow number. Right. Like, there's a certain number that you need, but, like, there's also an amount of risk that you probably want to get to, an appropriate amount of risk and an amount of time that you want to be able to put into that. Because despite real estate being more passive than a W2 job, it is not entirely passive. And so it sounds like for you, Henry, that's a kind of like a. You need three different variables that you're trying to work on. The total amount of cash you're bringing in, the amount of risk you're taking, and the time that you're putting into it.
- [18:43]
B
Yeah. And we're talking about financial freedom here, but there's another element to this that we're not touching on that's also important to me. And it's not just the financial freedom that comes with owning the properties and getting the cash flow out. Right. But it's also the legacy of being able to Pass on those paid off, cash flowing assets. It's the wealth that I want to pass on to my children and the more leverage I take on, that's more leverage I would pass on to them. But if I get these things paid off, like people use the term generational wealth all the time, but I don't know that they actually think about what that means. If you want that wealth to transcend you, you've got to get those assets to a place where you own them, you control them. Your trust or your family owns and controls them and not a bank or some other financial institution. Right. And so that they're actually producing meaningful income that you pass on to future generations of your family. So it's more than just financial freedom for me, but it's also financial freedom for the people who are going to be around after me and that's going to require me to, to get those assets paid off.
- [19:52]
A
I love that. This is a great take. I love it. Financial freedom, the three variables is really cool idea. It's not just money, it's also these, these other things that really matter here. But I need to circle back to something you said earlier.
- [20:07]
B
Yeah, yeah.
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A
Has your financial goal really not changed? Like is that 10 grand a month you were trying to replace still what you like you're comfortable with or has your lifestyle changed and had gone up?
- [20:20]
B
When I said the financial goal hasn't changed, I just meant like I haven't sat down and figured out what the new number is.
- [20:25]
A
Okay.
- [20:26]
B
What I essentially planned on doing after I figured out that the true wealth is in getting these things paid off was my original plan was like, how many doors do I need to get to for me to be able to sell off a portion of my portfolio to pay off the majority of the rest? Right. And so that's kind of how I started looking at this problem. Like, so in other words, If I had 100 doors, could I sell 50 and pay off the other 50? Right? Yeah. Because 50 unlevered is going to pay me well more than 100 levered. And so what I actually started to look at was like, okay, in my portfolio, which assets are producing the way I thought they should or better, which assets are underperforming? And then I can look at the assets that are underperforming and I can say, okay, does it make more sense for me to sell this asset, take that equity and pay off another asset, or is this an underperforming assets that's in such a good area that it makes more sense for me to pour Capital into that asset, right? To get it to perform better because the location is so good, right? So my goal became more of an analysis of like, okay, let's get strategic with what you do have and then make decisions on what you should sell to pay off the ones you love or the ones that are in the best areas, or the ones that you should not sell but maybe need a capital infusion or maybe some sort of exit strategy pivot, right? So that it does produce because of the location or because of some other quality of that property that would say I shouldn't sell this property. And so I've just gotten a lot more strategic.
- [22:00]
A
That just makes so much sense. I hate the idea. I always say this, but I hate the idea of people being like, I'm going to buy real estate, never sell. Like, that just doesn't make sense. Or like, I'm going to do one renovation. Like, maybe you need to do another. Like, if you think about the way other people invest stock market, like, you don't not invest in a great company because you bought it at 20 bucks a share. If you can buy it at 30 bucks a share and you think it's going to go to 50, sell some other stock and buy more of that one. Like, it's the same concept in real estate, right? Like, if you have some assets that are fine, but you can have one that you take from being a solid performer to a great performer, go do that. Like, that's the kind of strategic thing that you need to be doing. I wanted to ask you that question because, one, it makes me feel better about myself because I was concerned that you said, like, oh, I've just, like, had this enormous amount of success in real estate, and my financial run rate and goal hasn't changed at all. And that would have made me feel terrible because mine definitely has. But I think, like, the reason I bring that up is because, like, that's kind of how it should be. I know there are these, like, financial puritans out there who are like, you set a goal when you first started real estate to get five grand a month in cash flow. And, like, once you're done with that, you're retired. And, like, I just don't buy that at all. Like, I didn't get into real estate to live the exact same lifestyle that I had when I was 22 and scraping by. And, like, that's why I just think this concept of, like, financial independence as a destination or a single point in time is just not real. What your goal is going to be changes all the time. At least mine does. And like I, you know what I thought my goal was when I was 22 is completely different from what it is now. And it's not just from lifestyle creep. It's because I understand things like risk and time and inflation, which was just like never on my mind when I was 22. I was like, all I'll ever need is $500 for rent. Like that's what I was paying in rent. My expectations have changed quite a lot since then, you know, and so like that's why I just, I think this like concept that of like locking in that like you have to have this like date or this number in mind is honestly kind of limiting. I just think like that's never going to happen. You have to go with the flow a little bit. And I still keep a goal. Like I have a five year goal always. Yeah. But like it changes and it probably will change again.
- [24:28]
B
And it's not just like your lifestyle or what you want changes, but like the situation can change. Like for example, you know, I did, I set up for a long time. Once I get to 100 doors, I look at selling half to pay off the other half. And when I sat down to actually do that exercise, I started looking at some of the assets and I was like, well, I don't really want to sell that one because it's in such a great location and it's doing well. And I don't really want to sell this one because it's in such a great location, but it's not doing well. And so I'd rather try to save that one and maybe sell some other ones. And so then it turned out like, no, I'm not going to sell half to pay off the other half, but I am going to sell ones that it strategically makes sense to sell. I'm literally closing on one today. I'm signing docs right after this to sell a six unit that I bought just a year and a half ago because it doesn't perform like I wanted it to perform.
- [25:16]
A
Yeah.
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B
And I can put that money to you somewhere else in another scenario. Like I have a legacy property. I call it a legacy property because I knew the day I bought it I was like, I'm never going to sell this thing. I can throw a rock and hit the university. It's eight units. I bought it so cheap and it's worth so much more. Like this is the exact kind of property that I want to pass on to my children. Like the location is perfect. And then some fund came and offered me so much more money than it's actually worth.
- [25:49]
A
Exactly. Yeah.
- [25:50]
B
That I was like, I'll find a different one.
- [25:53]
A
Yeah, yeah, I'll pass something else on.
- [25:56]
B
Plans change.
- [25:58]
A
Exactly. That's so true. Well, I think that's true on a property level. Right? Like, which ones you want to hold and keep and change. But I just, for me, like, my lifestyle wise, it's also really changed in my life too. Like, I, you know, I bought my first deal, I needed a couple hundred bucks. Then I was like, all right, I'm just gonna keep acquiring units. Like, that's my goal, like, get more units. But then all of a sudden, I was, like, running out of cash to buy more units. And I figured maybe I should go back to graduate school and I should invest in myself so that I can get a higher salary so that I can go ahead and buy more units. And if I had just tried to buy more units or if I was living off my cash flow, I wouldn't have been able to do that. And instead what I did was I was house hacking at the time, so my living expenses were relatively low. And for, I guess, a year and a half, two years, I took my cash flow that I would have reinvested into more property or I would have used for my lifestyle. And I paid my tuition to grad school instead of taking on loans. And I know a lot of people would say, oh, my God, you slowed down. You didn't buy doors for two years. No, I didn't. And when I finished graduate school, my salary went up by like 80%. And you know how many more doors I could buy after that? A lot. That's when my real estate investing career, like, really started to take off. And I think that's the sort of, like, your goals, your circumstances just change. And so, like, through talking this out with you, what I'm realizing is, like, flexibility is the goal. Like, it's not even necessarily a certain number that I'm looking for. I just want the ability to change my lifestyle as I see fit. And I guess in that way, I have become financially free. Like, I can do that right now.
- [27:40]
B
That's 100%.
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A
Even though I'm not at some magical number, that's going to, like, the number I want to die with, because who knows what's going to happen? But I have reached a level of financial flexibility that I am very proud of and very comfortable with.
- [27:57]
B
We need to put that on a shirt. That's what it is. That's 100% what I was going to Say to you, too. It's like, what I really wanted as I dug down deep, was to not be limited in my ability to do something that I want to do or something that I need to do for my family. And for the most part, I'm there. Yes, there's limits. Yes. I couldn't go buy a private jet and fly to Dubai and stay in a penthouse for six months of the year. Like, I'm not.
- [28:27]
A
Who needs that?
- [28:28]
B
But I don't want to do that. Right. Like, pretty much, if I want to go somewhere with a little bit of planning and time, I can travel to that place if I need to. I was talking about this last night with my students as I was like, look, I just needed to get to the level of financial freedom where you can buy four tires at a time for your car. Like. Like, that's freedom.
- [28:54]
A
Oh, my God, that's freedom. Yeah. You don't have to just ride on the two front ones. They're bald as hell.
- [29:01]
B
Most people can only replace the one tire that has a problem or. Or the two tires. And then you got three different types of tires at three different levels of tread. And, like, you just do what you can to keep that car rolling. I was. I. If I have a problem with my car and I need four new tires, Dave, I can get four new fricking tires today without thinking about it.
- [29:24]
A
I love that.
- [29:25]
B
That's the level of financial freedom that real estate has brought me.
- [29:28]
A
We should start ranking how many tires are you. You at one tire, right? Yeah. You have one tire. You had two tires. You three tires. I love that. It's so fun.
- [29:36]
B
You got to four tires, guys. Four tire club.
- [29:39]
A
It's like, yeah, I can't buy a jet either. I don't care. It's not what I want. But, you know, Henry and I are going to Vegas a couple days early before bpcon, and are we going to go do some dumb and spend a little bit of money? Probably. And I have to find we have the financial freedom to be able to do that.
- [29:56]
B
That's a guarantee, not a probably.
- [29:59]
A
Yeah, that is. That is an absolute guarantee. I just didn't want to say it on the podcast publicly what dumb stuff we're going to do in Vegas. But it's going to be a great time. We do have to take a quick break, but more with me and Henry right after this.
- [30:13]
C
Aaron, the ad guy here, if you're a landlord, you've probably done this. You approve a repair, it's done, life moves on. Then three months later, you're like, wait, did that water heater really cost that much? Baselane keeps track of all of that for you. It's free banking for landlords that automatically tags every transaction to the right property. And just as a side note, Baselane itself technically isn't a bank. Thread bank does that part and they're a member of fdic. But regardless, rent comes in, expenses go out, and you can finally see how each unit's actually doing. So go to baselane.com bp and grab your $100 sign up.
- [30:48]
A
Bonus Tired of traditional lenders holding you back? Host Financial is here to change the game. They've ditched the DTI restrictions and they zero in on what really matters your property's income potential. So no more chasing papers for tax returns or personal income statements. Think about it. A lender that values your property's worth over your PayCheck? That's the host financial difference approved in 47 states. They are ready to help you make your next big move. Curious if you qualify, just head over to host financial.com and find out. Stop letting outdated lending practices hold you back. That's host financial.com where your property's potential meets unlimited financing. Okay, let's say you're one property's mid flip ones between tenants. One's on Airbnb now. Try explaining that setup to a regular insurance company. Yeah, it's not fun, but with National Real Estate Insurance Group, it's actually easy. They're built for this stuff, whether it's flips, short term rentals, even creative deals like subject to or sandwich leases. Doesn't matter if you've got properties in an LLC or a trust. Either they just roll it all into one bill and their coverage flexes as your properties change. If you invest in real estate, this is who you want. Go to nreig.com bppod to check it out. That's n r e I g.com bppod.
- [32:00]
B
Foreign.
- [32:03]
A
This show is sponsored by Airbnb. Later this year, we plan on taking a winter trip to the mountains, and we're definitely going to stay in an Airbnb. We're really looking forward to cooking a few of our own meals, seeing a few sites, and relaxing comfortably in our own space. We also love the idea of being able to offset some of our vacation costs while on vacation. Have you thought about hosting your home on Airbnb next time you're away? I know I have because it's so simple. And now it's even easier than ever. With the co Host network, you can hire a high quality Local co host to take care of your guests while you're away so you can travel stress free and earn a little extra cash for your next vacation. Co hosts can create your listing, manage reservations, message guests, provide on site support, and they can even do design and styling. Find a co host@airbnb.com host welcome back to the BiggerPockets podcast. I'm here with Henry Washington talking about how financial independence is more of a journey than a destination. Let's get back to it. But I think that, I guess, like, that's why I want to have this conversation with you is I feel like the, you know, what gets lost in some of the personal finance stuff is like, yeah, you should compound, you should reinvest. Absolutely. But also enjoy your life. Like, that's the whole point. And if you just spend 20 years acquiring units and trying to get to some destination and don't enjoy the process along the way, like, what have you really gained at the end of the day? Like, you just lost 20 years of your life. I would rather make my financial journey go from 15 years to 25 years and enjoy every one of those 25 years instead of being miserable for 15 on the hopes that when I retire, I'm going to find something meaningful, meaningful for myself that's gonna, you know, supplant what I was doing before. Like, I don't know, maybe it's just getting into a life philosophy lesson, but like, I'd rather just find a life I enjoy and yes, move closer to financial independence over that time period, but not at the cost of like becoming like super monastic about it and like not, you know, enjoying anything and doing stuff.
- [34:19]
B
And we all make trade offs as well because there's things that we all like, enjoy or vices that we have that everybody's like, man, if I only made X amount of dollars, I could go do this thing right? And for people who've reached that level of financial flexibility, it's not that they can just go to the bank, take out the money and do the thing. It's more about, like, I can think through what I have and I can put together a plan to get there in a fairly reasonable timeframe. Like, if I wanted to go buy a Ferrari tomorrow, I probably couldn't go buy it tomorrow, but I probably could look at my portfolio and if I really, truly wanted something that was expensive, I could figure out a way to get there within the next six months. And that's financial flexibility. I'm not saying that that would be a smart financial decision. I'm just saying I could get there. I have the flexibility to get there.
- [35:09]
A
So that this asset that you're selling right after this recording, are you just freeing up capital to use when we're in Las Vegas?
- [35:16]
B
100% blackjack money, baby. I'm just. I'm gonna double that money in Vegas, boy.
- [35:22]
A
Yeah. That's the new strategy. I love it.
- [35:24]
B
My cash on cash return for playing blackjack with that money is so much higher than if I'd have just left it in this property. Don't listen to me, folks. This is terrible financial advice.
- [35:34]
A
No, it is. This. This reminds me, There's a blogger and personal finance influencer. His name's Nick Magiulli. We've had him on. On the market. We actually just had him on a couple days ago. He's. He's awesome. He has these, like, levels of wealth and financial freedom that I really like that. He just evolved it. But, like, his old strategies. Levels of wealth was like, Level one is like, I'm not stressed out about debt, which is a really important level to get to. Like, if you don't have credit card debt and student loan debt, like, that's amazing. That's a really important financial milestone. Level two, and I love that this is not, like, numbers or finance basis. I don't care what stuff costs in restaurant. And to me, like, I remember almost, like, vividly, like, the time in my life where this became true. Whereas, like, I wasn't, like, going out on a date with my wife and, like, ordering the cheapest thing, and I could, like, actually go buy not the cheapest bottle of wine, but the second cheapest bottle of wine. Like, I could accelerate my life a little bit. And, like, to me, like, that's. Those are the moments I remember. Not when my bank account or net worth hit some number. I was like, oh, I actually could go out to a restaurant, something I enjoy doing, and not care about it. And then level three is, I don't care what a vacation cost. And that has been a more recent financial milestone for me. But that's what I remember. Again, not, like, how much cash flow I have every month, but, like, I can go do this thing that I really love and is something that's important to me in my life, and I don't really have to worry about it. Like, if I go on a vacation and they nickel and dime me and the stupid valet charges you 40 bucks when you show up that you weren't planning on it, like, you could survive that, and, like, you can still have a great time and Enjoy yourself. And that's how I've, like, over time, started to just think about my portfolio. Like, what does this enable for me? Not the number, not any destination, but, like, how does this make my life better on a daily basis? Even if I'm not using my cash flow from real estate, which is true, I'm not using my cash flow for real estate. But knowing that I have these valuable assets allows me to have more flexibility and live a little bit more of, I guess I would say a little bit more of a carefree life.
- [37:46]
B
100%. Look, I told you, level one financial flexibility for me was four tires at a time. Level two financial flexibility for me is not having to wait in lines. I pay people to not have to wait in any lines for anything. I hate lines.
- [38:02]
A
If you ever want to go somewhere that's busy, go with Henry, because he will pay someone to skip any line. And I love it. It's my favorite thing about hanging out with you. Like, you're going to a restaurant, there's a long line. Henry's going to solve that problem. And I don't even have to do anything. I just have to be near you and you solve that problem.
- [38:19]
B
You absolutely right, my friend.
- [38:21]
A
So what's three? What's level three?
- [38:23]
B
Oh, that's a good one. I think I need to think about that one yet. Maybe I don't know what that one is yet.
- [38:27]
A
Well, we want to know. It's not. It's not buying a jet. It's not just that on your private jet, but it's somewhere between buying four tires at a time and a private jet. That's your level three.
- [38:39]
B
That's a fair gas. Yeah.
- [38:41]
A
Well, this has been a fun conversation. I feel like I've had an epiphany during this conversation about what financial independence actually means. We would love to know what it means to you. So if you're watching this on YouTube or listening on Spotify, where you can now leave comments on the episode, please let us know what your level one, your level two, and your level three financial freedom are. That will be a lot of fun conversation to have. And Henry, thank you so much for being here, man.
- [39:05]
B
Hey, thank you for having me, man. This was a great conversation.
- [39:07]
A
Conversation. Thanks so much for listening to this episode of the Biggerpockets podcast. I'm Dave Meyer. We'll see you next time. Thank you all for listening to the Biggerpockets real estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico, Content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose and remember past performance is not indicative of future results. Biggerpockets, LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.
- [40:00]
D
Martha listens to her favorite band all the time. In the car, gym, even sleeping. So when they finally went on tour, Martha bundled her flight and hotel on Expedia to see them live. She saved so much she got a seat close enough to actually see and hear them. Sort of. You were made to scream from the front row. We were made to quietly save you. More Expedia made to travel Savings vary and subject to availability. Flight inclusive packages are atoll protected.