Sincere Recommendation to Somebody Who Desires Monetary Freedom

Dave:
Monetary freedom is a journey, not only a vacation spot, and that’s a superb factor. Possibly you need to exchange your earnings and stop your job sometime, and actual property can completely allow you to get there. However possibly what you actually need is monetary flexibility. The power to purchase dinner or go on trip with out having to emphasize in regards to the prices and the power to offer that flexibility is considerably distinctive to actual property. As we speak we’re speaking about how your objectives can change over time, however there’s all the time an investing technique to fulfill you the place you’re. Hey everybody. I’m Dave Meyer, head of Actual Property Investing right here at BiggerPockets, and I’m joined as soon as once more by my pal Henry Washington.

Henry:
What’s up buddy? Glad to be right here.

Dave:
I’m glad you’re right here as properly as a result of I believe it’s truthful to say each of us have type of reached our personal model of economic Freedom. Is that proper? Would you say that?

Henry:
Yeah, completely. Completely. I’d say that it typically doesn’t really feel like that, however yeah, for positive.

Dave:
Proper. I believe that’s form of the purpose although. I’ve type of hit monetary freedom too, but additionally neither of us are literally retired at this level. We’re nonetheless working each

Henry:
Day,

Dave:
Which is mainly type of the massive secret on this total trade. Everybody who says that they’re retired is just not truly retired. They’re simply possibly doing one thing completely different than they had been doing earlier than they began moving into actual property investing. However that’s okay, proper? That’s, I believe the entire level of the episode we need to have in the present day is that the journey that you simply tackle monetary freedom doesn’t look the identical. It’s type of a shifting goal. It shifts and modifications, and for my part, a minimum of each actual property deal I do, each resolution I make ought to make me extra financially free and what the precise vacation spot is, I don’t even actually know, and that form of modifications, however it’s about enhancing your monetary scenario with each deal you do. In order that’s what we’re going to speak about in the present day and the way everybody’s objectives are going to alter throughout a wealth constructing profession and the way it’s truly okay to make use of actual property to make your life higher proper now, even when which means it’ll take you a bit bit longer to succeed in some quantity that you’ll have in your thoughts. So Henry, let’s simply dive into your story a bit bit. While you first received began, was monetary freedom even a objective? Do you know that phrase? Was that what you had been pursuing?

Henry:
Yeah, that was 100% what I used to be pursuing.

Dave:
It was. Okay. And what did it imply to you?

Henry:
So I had this imaginative and prescient in my thoughts of sooner or later I might have sufficient rental property that I might simply have cashflow coming in simply in droves, and I might simply be capable of sit on a seashore someplace and never need to work. In different phrases, I simply had this picturesque imaginative and prescient of cashflow, funding all the things in order that I may go the place I wished and do what I wished and never have to fret about making a living as a result of my actual property portfolio simply kicks off all this cash for me.

Dave:
You had been Scrooge McDuck simply diving

Henry:
Into your pool of gold,

Dave:
Simply pool of gold coin

Henry:
Doing gold coin angels.

Dave:
I imply, that could be a imaginative and prescient I believe lots of people have. It modified although, you mentioned that was your imaginative and prescient in the beginning, however it feels like there’s a however coming there,

Henry:
Man, I don’t need to sound like a downer, however I would like folks to have a sensible understanding of what it’s. While you get on this enterprise, as you begin doing offers, what you begin to notice is sure, you purchase properties that do make cashflow, however realistically, in a long-term rental state of affairs, your properties are in all probability kicking off between 100 and $500 per door of month-to-month cashflow. And so so that you can really dwell the life-style you need, it in all probability goes to take an entire lot of doorways in the event you nonetheless have leverage in your property for that to change into a actuality. The opposite actuality is the extra doorways you purchase, the more cash simply is available in and goes out. And so sure, each month,

Dave:
That’s a superb level.

Henry:
I receives a commission from my property supervisor after which mortgage funds comes out and taxes come out and insurance coverage comes out and upkeep requests come out and I’ve over 100 properties. And so this morning I received an e mail, I’ve someone wished $1,100 to switch a entrance door that someone had kicked in and someone wished one other $3,000 to switch a siding glass door and a few trim in an residence, and that’s simply multiplied throughout a bunch of properties. Sure, in my underwriting, I accounted for these items to occur, however the cash is available in, the cash goes out. Except you’re just a few tremendous accounting spreadsheet genius, it’s exhausting so that you can know at any given level precisely how a lot precise web cashflow you may have each single month. After which typically surprising issues occur. And so despite the fact that I assumed I used to be going to have a lot web cashflow, I’ve considerably much less. Possibly this month I had 4 HVACs exit. And so what I discovered was it’s actually exhausting to dwell your life based mostly on that cashflow earnings as a result of each month is completely different,

Henry:
And if each month is completely different, it’s exhausting to have some consistency with having the ability to pay your payments and really dwell off that cash. And so what I rapidly discovered was like I don’t essentially need to dwell off my cashflow. I would like my properties to cashflow, however I would like to have the ability to have a distinct, extra constant earnings stream that I truly dwell off of. After which I can take the cashflow and I can give attention to a quarterly foundation or on a semi yearly foundation on paying down the belongings with the cashflow that I’ve as a result of sooner or later as extra belongings receives a commission off, that cashflow grows exponentially. Now I don’t have leverage to repay anymore. After which you may really dwell off that cashflow,

Dave:
Proper?

Henry:
As a result of it’s kicking off a lot extra cashflow that it’s straightforward to really plan your life round it, and it’s straightforward to care for the upkeep gadgets as a result of your cashflow will go from 100 to $500 a door to love a thousand to 1500 to $2,000 a door in the event you’re not paying that

Henry:
Mortgage fee each month on that property. And so I spotted that the true cashflow that I’m on the lookout for comes after the properties aren’t leveraged anymore. And if I cannot dwell off the cashflow and I can reinvest that cashflow into serving to me repay the belongings sooner, I can get to that objective sooner. And in order that’s why I began flipping homes to generate the extra constant earnings that I can truly dwell off of as a result of I can do the maths and know if I flip 5 homes a 12 months and I common 40 to 50 grand per flip, that’s good. I can handle my life off that.

Dave:
I might by no means, once I first began, assume that you’d say flipping is the extra constant earnings, however the best way you do it, it does truly make sense that in the event you do sufficient quantity, it does change into truly extra predictable than cashflow on a month-to-month foundation.

Dave:
I believe what you mentioned makes a whole lot of sense is that cashflow is nice to carry onto your property, however till you attain a sure measurement of your portfolio, it’s not truly all that reliable, even when it’s reliable on an annual foundation or a long-term foundation, which it must be in the event you’re underwriting properly on a month-to-month foundation, you bought to make lease, you bought to pay to your automobile. You may’t actually depend on that till you get a sure measurement. And truly what I assumed you had been going to say is cash’s coming in, cash’s popping out, which is true from a expense standpoint. However I believe the opposite factor that occurs is you begin to make cashflow and also you, even in the event you’re buying it, you need to use it in the direction of your subsequent deal. You need to use it to fund your subsequent rehab. You don’t need to use it to your way of life. And that may type of spiral too, as a result of if you wish to get to a big portfolio measurement, that you must sustain a reasonably good reinvestment charge. That’s the way you compound. You simply hold pouring your a refund into what you are promoting. And so

Dave:
I believe that’s one other factor that type of will get misplaced within the shuffle right here, however lemme simply take a step again as a result of if you first began, I get what you’re saying. You thought you’d dwell off cashflow. I believe everybody does. Did you may have a quantity in thoughts? X {dollars} of cashflow would provide you with your seashore residing fantasy?

Henry:
Yeah. The unique quantity was simply to get to what my present month-to-month earnings was from my day job in month-to-month cashflow. So I used to be making about $10,000 a month proper

Dave:
Earlier than taxes, earlier than

Henry:
Taxes. So if I may get to $10,000 a month in web cashflow, then I wouldn’t want my job anymore. Looks as if a reasonably cheap factor to consider.

Dave:
Wonderful means to consider it.

Henry:
And also you get there, and like I mentioned, it’s simply not as straightforward to know that you simply’re truly going to have $10,000 each month to spend. However what I really began to be taught was that actual wealth is constructed by way of fairness and appreciation. That’s the place actual property is probably the most highly effective. Actual wealth isn’t constructed by way of leveraged cashflow. Leveraged cashflow. It’s extra of a measuring keep on with know you purchased a deal. That is smart as a result of it makes you cash each month. That’s why they are saying actual property’s a long-term recreation. The actual payday comes a lot later.

Dave:
I do agree with that, and that has been my expertise as properly, that cashflow doesn’t make you a ton of cash, particularly upfront. However I do assume that there are occasions in my life once I take a look at my investing profession the place cashflow did have an actual vital influence on my way of life at that second. My objective once I began actual property wasn’t to retire. I didn’t have this imaginative and prescient of like, oh my God, I’m going to sit down on a seashore. I’m going to purchase sufficient rental properties. My unique objective was like I used to be ready tables and I used to be struggling to make lease, and I used to be like, if I may work out a solution to get 250 bucks a month,

Dave:
That will be actually useful to me. And that’s why I purchased my first deal. I had a pal who was making a pair hundred bucks a month on a rental property and I used to be like, I would like that. And once I received that 200, I believe it was truly extra, I wound up doing a bit higher on that first deal that had a extremely large influence on me. I may exit to dinner, I may make lease. I wasn’t a wrestle to make my automobile fee. And as my way of life received costlier, and I do know folks will say like, oh, you shouldn’t have way of life creep, however that was a part of my objective. I used to be 22 and I used to be scrimping by, I wished a greater way of life. I’m sorry. I wished to go on trip and to not fear about my funds on a regular basis. And in order I type of settled into what I truly need my way of life to be, my objectives completely modified. And that’s the place I took the strategy. You began saying like, oh, truly 200 bucks at a time is just not going to get me the place I need to get to. I received to go a distinct

Henry:
Route. Yeah.

Dave:
I believe that the beauty of actual property is that in the event you begin producing cashflow, whether or not it’s $200 a month or $20,000 a month is its flexibility. It lets you resolve each month based mostly on altering circumstances, do I need to reinvest this capital into my portfolio? Do I need to make investments it in one thing else? Do I need to use it to help my way of life? To me, monetary independence, it’s not some vacation spot that you simply get to the place you’re like, okay, I’m achieved. I’m by no means working once more. Every thing’s superb. For me, it’s like, no, I’ve some stage of independence the place if I select to spend extra this month, I get to spend extra this month. If I select to reinvest it, I get to make that selection. To me, that’s the half that reduces my very vital quantity of economic anxiousness that I’ve had for my entire life. That’s the factor that I discover useful. So let’s dig extra into this flexibility idea. This can be a actually vital factor that I believe a whole lot of new buyers possibly don’t notice, and actually, I believe a whole lot of skilled buyers don’t reap the benefits of as a lot as they need to. We do need to take a fast break although. We’ll be proper again.

Dave:
Welcome again to the BiggerPockets podcast. I’m Dave Meyer right here with Henry Washington speaking in regards to the journey that’s monetary freedom. So Henry, you mentioned in the beginning your objective is to switch your earnings was like $110,000. Have you ever up to date that objective?

Henry:
No, not from a cashflow perspective. The place I’m at in my journey now could be I’m pretty comfy with the scale of my portfolio. Will I purchase extra rental properties? Most likely, however not on the tempo that I used to be shopping for them earlier than. I can’t cross up a fantastic deal in a fantastic neighborhood. If I discover it, I’m going to purchase it. However for probably the most half, I’m not actively making an attempt to scale as a lot. And so for me now it’s extra about paying down the belongings that I’ve, the best way I take a look at issues proper now, I can get to a distinct stage of economic freedom sooner by eliminating a few of the leverage that I’ve versus shopping for extra doorways with extra leverage. So if the objective was cashflow in order that I don’t need to work, I can both get there by buying lots of of doorways leveraged to get me to a month-to-month cashflow quantity that is smart, or I can get there by paying down the doorways that I’ve and exponentially rising that cashflow. And after having a giant portfolio, I like the thought of not rising that portfolio an excessive amount of after which paying them off. As a result of large portfolios, the extra doorways you may have, the extra issues you may have. There’s a whole lot of work that comes with that.

Dave:
Completely.

Henry:
And so I can get there extra comfortably and luxuriate in my life a bit extra by having a smaller portfolio with paid off belongings than having a bigger portfolio with extra leverage.

Dave:
Okay, this simply made me assume scorching. Take query for you. Are you able to be financially free, really financially free, no matter which means to you when you’ve got debt in your properties?

Henry:
No,

Dave:
You may’t. Okay. It’s a must to personal ’em outright. I form of like that take, I’ve by no means actually considered it earlier than, however I form of really feel like in the event you’re type of proper, you continue to have, there’s a specific amount of threat in that limits your quote, freedom. When you have debt

Henry:
And also you don’t really personal the asset till it’s paid off, somebody can come and take that from you and alter your monetary freedom scenario. If one thing occurs and you may’t make the funds, you may lose that asset. After which your way of life is completely different. Additionally, the bigger the portfolio, the higher you need to be at managing your managers or managing these properties your self. And that’s a job. That’s not freedom. That’s work. And I’m not saying that I’m eliminating that work, however I’ll have an entire lot much less of it with much less doorways which might be paid off than with lots of and lots of of doorways which might be leveraged.

Dave:
Yeah, that’s a superb level as a result of monetary freedom, you need to have this cashflow quantity. There’s a sure quantity that you simply want, however there’s additionally an quantity of threat that you simply in all probability need to get to an applicable quantity of threat and an period of time that you really want to have the ability to put into that as a result of regardless of actual property being extra passive than a W2 job, it’s not solely passive. And so it feels like for you, Henry, that’s form of such as you want three completely different variables that you simply’re making an attempt to work on, the full amount of money you’re bringing in, the quantity of threat you’re taking and the time that you simply’re placing into it.

Henry:
And we’re speaking about monetary freedom right here, however there’s one other ingredient to this that we’re not concerning that’s additionally vital to me. And it’s not simply the monetary freedom that comes with proudly owning the properties and getting the cashflow outright, however it’s additionally the legacy of having the ability to cross on these paid off money flowing belongings. It’s the wealth that I need to cross on to my kids, and the extra leverage I tackle, that’s extra leverage I might cross on to them. But when I get these items paid off, folks use the time period generational wealth on a regular basis, however I don’t know that they really take into consideration what which means. If you need that wealth to transcend you, you’ve received to get these belongings to a spot the place you personal them, you management them, your belief or your loved ones owns and controls them and never a financial institution or another monetary establishment. And in order that they’re truly producing significant earnings that you simply cross on to future generations of your loved ones. So it’s extra than simply monetary freedom for me, however it’s additionally monetary freedom for the people who find themselves going to be round after me and that’s going to require me to get these belongings paid off.

Dave:
I like that. This can be a nice take. I find it irresistible. Monetary freedom, the three variables is absolutely cool concept. It’s not simply cash, it’s additionally these different issues that actually matter right here. However I must circle again to one thing you mentioned earlier. Has your monetary objective actually not modified? Is that 10 grand a month you had been making an attempt to switch nonetheless what you’re comfy with? Or has your way of life modified and had gone up?

Henry:
Once I mentioned the monetary objective hasn’t modified, I simply meant I haven’t sat down and discovered what the brand new quantity is. What I primarily deliberate on doing after I discovered that the true wealth is in getting these items paid off was my unique plan was like, what number of doorways do I must get to for me to have the ability to dump a portion of my portfolio to repay nearly all of the remainder? And in order that’s form of how I began this downside. So in different phrases, if I had 100 doorways, may I promote 50 and repay the opposite 50, proper?

Dave:
Yeah.

Henry:
As a result of 50 unlevered goes to pay me, properly greater than 100 levered. And so what I truly began to have a look at was like, okay, in my portfolio, which belongings are producing the best way I assumed they need to or higher which belongings are underperforming, after which I can take a look at the belongings which might be underperforming and I can say, okay, does it make extra sense for me to promote this asset, take that fairness and repay one other asset, or

Henry:
Is that this an underperforming belongings that’s in such a superb space that it makes extra sense for me to pour capital into that asset to get it to carry out higher as a result of the situation is so good? So my objective turned extra of an evaluation of like, okay, let’s get strategic with what you do have after which make choices on what you need to promote to repay those you like or those which might be in one of the best areas or those that you shouldn’t promote however possibly want a capital infusion or possibly some type of exit technique pivot

Dave:
So

Henry:
That it does produce due to the situation or due to another high quality of that property that might say, I shouldn’t promote this property. And so I’ve simply gotten much more strategic.

Dave:
That simply makes a lot sense. I hate the thought, I all the time say this, however I hate the thought of individuals being like, I’m going to purchase actual property and by no means promote. That simply doesn’t make sense.

Dave:
Or I’m going to do one renovation. Possibly that you must do one other. If you consider the best way different folks make investments inventory market, you don’t not put money into a fantastic firm since you purchased it at 20 bucks a share. If you should buy it at 30 bucks a share and also you assume it’s going to go to 50, promote another inventory and purchase extra of that one. It’s the identical idea in actual property. When you have some belongings which might be superb, however you may have one that you simply take from being a strong performer to a fantastic performer, go do this. That’s the form of strategic factor that that you must be doing. I wished to ask you that query as a result of one, it makes me really feel higher about myself as a result of I used to be involved that you simply mentioned, oh, I’ve simply had this huge quantity of success in actual property and my monetary run and objective hasn’t modified in any respect. And that might’ve made me really feel horrible as a result of mine undoubtedly has,

Dave:
However I believe the explanation I carry that up is as a result of form of the way it must be. I do know there are these monetary puritans on the market who’re like, you set a objective if you first began actual property to get 5 grand a month in cashflow, and when you’re achieved with that, you’re retired. And I simply don’t purchase that in any respect. I didn’t get into actual property to dwell the very same way of life that I had once I was 22 and scraping by, and that’s why I simply assume this idea of economic independence as a vacation spot or a single time limit is simply not

Henry:
Actual.

Dave:
What your objective goes to be modifications on a regular basis, a minimum of mine does. And what I assumed my objective was once I was 22 is totally completely different from what it’s now, and it’s not simply from way of life creep. It’s as a result of I perceive issues like threat and time and inflation, which was simply by no means on my thoughts once I was 22. I used to be like, all i’ll ever want is $500 for lease. That’s what I used to be paying in lease. My expectations have modified rather a lot since then. And in order that’s why I believe this idea of locking in that you need to have this date or this quantity in thoughts is actually form of limiting. I simply assume it’s by no means going to occur. It’s a must to waft a bit bit. And I nonetheless hold a objective. I’ve a five-year objective all the time, however it modifications. It modifications and it in all probability will change once more.

Henry:
And it’s not simply your way of life or what you need modifications, however the scenario can change. For instance, I did, I sat up for a very long time. As soon as I get to 100 doorways, I take a look at promoting half to repay the opposite half. And once I sat down to really do this train, I began a few of the belongings and I used to be like, properly, I don’t actually need to promote that one in such a fantastic location and it’s doing properly and I don’t actually need to promote this one in such a fantastic location, however it’s not doing properly. And so I’d slightly attempt to save that one and possibly promote another ones. And so then it turned out like, no, I’m not going to promote half to repay the opposite half, however I’m going to promote ones that it strategically is smart to promote.

Henry:
I’m actually closing on one in the present day. I’m signing docs proper after this to promote a six unit that I purchased only a 12 months and a half in the past as a result of it doesn’t carry out. I wished it to carry out and I can put that cash to make use of some other place. And one other state of affairs, I’ve a legacy property. I name it a legacy property. I knew the day I purchased it, I used to be like, I’m by no means going to promote this factor. I can throw a rock and hit the college. It’s eight models. I purchased it so low-cost and it’s value a lot extra like that is the precise form of property that I need to cross onto my kids. The placement is ideal. After which some fund got here and provided me a lot more cash than it’s truly labored. Precisely, yeah. That I used to be like,

Dave:
Take it. I’ll discover a completely different one. Take. Yeah, I’ll cross one thing else onto my youngsters. Planes modified.

Dave:
Precisely. That’s so true. Nicely, I believe that’s true on a property stage, which of them you need to maintain and hold and alter. However for me, my way of life sensible, it’s additionally actually modified in my life too. I purchased my first deal. I wanted a pair hundred bucks, then I used to be like, all proper, I’m simply going to maintain buying models. That’s my objective, get extra models. However then abruptly I used to be operating out of money to purchase extra models and I figured possibly I ought to return to graduate faculty and I ought to put money into myself in order that I can get a better wage in order that I can go forward and purchase extra models. And if I had simply tried to purchase extra models or if I used to be residing off my cashflow, I wouldn’t have been in a position to try this. And as a substitute what I did was I used to be home hacking on the time, so my residing had been comparatively low.

Dave:
And for I assume a 12 months and a half, two years, I took my cashflow that I might’ve reinvested into extra property or I might’ve used for my way of life and I paid my tuition to grad faculty as a substitute of taking over loans. And I do know lots of people would say, oh my God, you slowed down. You didn’t purchase doorways for 2 years. No, I didn’t. And once I completed graduate faculty, my wage went up by like 80% and what number of extra doorways I may purchase after that quite a bit. That’s when my actual property investing profession actually began to take off. And I believe that’s the type of your objectives, your circumstances simply change. And so by way of speaking this out with you, what I’m realizing is flexibility is the objective, not even essentially a sure quantity that I’m on the lookout for. I simply need the power to alter my way of life as I see match. And I assume in that manner, I’ve change into financially free. I can do this

Henry:
Proper now. That’s 100%.

Dave:
Despite the fact that I’m not at some magical quantity that’s going to love the quantity I need to die with as a result of who is aware of what’s going to occur. However I’ve reached a stage of economic flexibility that I’m very pleased with and really comfy

Henry:
With. We have to put that on a shirt. That’s what it’s. That’s 100%. What I used to be going to say to you too, it’s like what I actually wished as I dug down deep was to not be restricted in my skill to do one thing that I need to do or one thing that I must do for my household. And for probably the most half, I’m there. Sure, there’s limits. Sure. I couldn’t go purchase a non-public jet and fly to Dubai and keep in a penthouse for six months of a 12 months. I’m

Dave:
Not who wants that,

Henry:
However I don’t need to do this just about. If I need to go someplace with a bit little bit of planning and time, I can journey to that place if I must. I used to be speaking about this final night time with my college students as I used to be like, look, I simply wanted to get to the extent of economic freedom the place you should buy 4 tires at a time to your automobile. That’s a superb, oh my god,

Dave:
That’s freedom. That’s so good Freedom. Yeah, you don’t have to simply journey on the 2 entrance ones or bald as hell.

Henry:
Most individuals can solely exchange the one tire that has an issue or the 2 tires, and then you definitely received three several types of tires at three completely different ranges of tread, and also you simply do what you may to maintain that automobile rolling. If I’ve an issue with my automobile and I want 4 new tires, Dave, I may give 4 new fricking tires in the present day with out fascinated with it. I like that. That’s the extent of economic freedom that actual property has introduced me.

Dave:
We must always begin rating, what number of tires are you? You at one tire, proper? Yeah. You’ve got one tire, you had two tires. You’ve got three tires. I like that. It’s so

Henry:
Humorous. You bought to get to 4 tires guys,

Dave:
4 tire membership. It’s like, yeah, I can’t purchase a jet both. I don’t care. That’s not what I would like. However Henry and I are going to Vegas a pair days early earlier than BP Con, and are we going to go do some dumb shit and spend a bit bit of cash in all probability. And we now have the monetary freedom to have the ability to do

Henry:
That. That’s a assure, not a in all probability.

Dave:
Yeah, that’s an absolute assure. I simply didn’t need to say it of the podcast publicly what dumb stuff we’re going to do in Vegas, however it’s going to be a good time. We do need to take a fast break, however extra with me and Henry proper after this. Welcome again to the BiggerPockets podcast. I’m right here with Henry Washington speaking about how monetary independence is extra of a journey than a vacation spot. Let’s get again to it. However I assume that’s why I need to have this dialog with you is I really feel like what will get misplaced in a few of the private finance stuff is like, yeah, you need to compound, you need to reinvest completely, but additionally take pleasure in your life. That’s the entire level. And in the event you simply spend 20 years buying models and making an attempt to get to some vacation spot and don’t benefit from the course of alongside the best way, what have you ever actually gained on the finish of the day, you simply misplaced 20 years of your life.

Dave:
I might slightly make my monetary journey go from 15 years to 25 years and luxuriate in each a type of 25 years as a substitute of being depressing for 15 on the hopes that once I retire, I’m going to seek out one thing significant for myself that’s going to supplant what I used to be doing earlier than. I don’t know, possibly that is simply getting right into a life philosophy lesson, however I’d slightly simply discover a life I take pleasure in and sure, transfer nearer to monetary independence over that point interval, however not at the price of changing into tremendous monastic about it and never having fun with something and doing

Henry:
Stuff. And all of us make trade-offs as properly as a result of issues that all of us take pleasure in or vices that we now have that everyone’s like, man, if I solely made X quantity of {dollars}, I may go do that factor. And for individuals who’ve reached that stage of economic flexibility, it’s not that they will simply go to the financial institution, take out the cash and do the factor. It’s extra about I can assume by way of what I’ve and I can put collectively a plan to get there in a reasonably cheap timeframe. If I wished to go purchase a Ferrari tomorrow, I in all probability couldn’t go purchase it tomorrow, however I in all probability may take a look at my portfolio and if I actually really wished one thing that was costly, I may work out a solution to get there throughout the subsequent six months. And that’s monetary flexibility. I’m not saying that that might be a sensible monetary resolution, I’m simply saying I may get there. I’ve the flexibleness to get there.

Dave:
So this asset that you simply’re promoting proper after this recording otherwise you’re simply liberating up capital to make use of after we’re in Las Vegas,

Henry:
100% blackjack cash, child, I’m double that cash in Vegas, boy. Yeah, that’s the brand new technique. Like it. My money on money return for enjoying blackjack with that cash is a lot larger than if I’d have simply left it on this property. Don’t hearken to me of us. That is horrible monetary

Dave:
Recommendation. No, it’s. This jogs my memory, there’s a blogger and private finance influencer. His title’s Nick Majuli. We’ve had him in the marketplace twice. We truly simply had him on a pair days in the past. He’s superior. He has these ranges of wealth and monetary freedom that I actually like that he simply developed it. However his outdated methods, ranges of wealth was like stage one is like I’m not stressed about debt, which is a extremely vital stage to get to in the event you don’t have bank card debt and pupil mortgage debt. That’s superb. That’s a extremely vital monetary milestone. Stage two. And I like that this isn’t numbers or finance foundation. I don’t care what stuff prices in restaurant. And to me, I keep in mind virtually vividly the time in my life the place this turned true, whereas I wasn’t going out on a date with my spouse and ordering the most cost effective factor, and I may truly go by not the most cost effective bottle of wine, however the second least expensive bottle of wine.

Dave:
I may speed up my life a bit bit. And to me, these are the moments I keep in mind. Not when my checking account or web value hit some quantity. Like, oh, I truly may exit to a restaurant, one thing I take pleasure in doing and never care about it. After which stage three is I don’t care what a trip prices. And that has been a newer monetary milestone for me. However that’s what I keep in mind. Once more, not how a lot cashflow I’ve each month, however I can go do that factor that I actually love and is one thing that’s vital to me in my life, and I don’t actually have to fret about it. If I’m going on a trip and so they nickel and dime me and this silly valet fees you 40 bucks if you present up that you simply weren’t planning on it, you may survive that and you may nonetheless have a good time and luxuriate in your self. And that’s how I’ve over time began to simply take into consideration my portfolio. What does this allow for me? Not the quantity, not any vacation spot, however how does this make my life higher each day, even when I’m not utilizing my cashflow from actual property, which is true. I’m not utilizing my cashflow for actual property, however figuring out that I’ve these useful belongings permits me to have extra flexibility and

Dave:
Reside a bit bit extra of, I assume I might say a bit bit extra of a carefree life.

Henry:
100%. Look, I instructed you stage one monetary flexibility for me was 4 tires at a time. Stage two, monetary flexibility for me is just not having to attend in traces. I pay folks to not have to attend in any traces for something. I hate traces.

Dave:
In the event you ever need to go someplace that’s busy, go together with Henry as a result of he can pay somebody to skip any line. And I find it irresistible. It’s my favourite factor about hanging out with you. I hate you’re going to a restaurant. There’s an extended line. Henry’s going to unravel that downside and I don’t even need to do something. I simply need to be close to you and also you resolve that downside.

Henry:
You’re completely proper, my pal.

Dave:
So what’s stage three for

Henry:
You? Oh, that’s a superb one. I believe. I didn’t take into consideration that one but. Possibly I don’t know what that one is but.

Dave:
Nicely, we need to know. It’s not shopping for a jet. It’s not jet setting in your personal jet, however it’s someplace between shopping for 4 tires at a time at a non-public jet. That’s your stage 4. That’s your stage three

Henry:
Monetary. That’s a good guess. Sure.

Dave:
Nicely, this has been a enjoyable dialog. I really feel like I’ve had an epiphany throughout this dialog about what monetary independence truly means. We might like to know what it means to you. So in the event you’re watching this on YouTube or listening on Spotify the place now you can go away feedback on the episode, please tell us what your stage one, you’re stage two, and your stage three monetary freedom are. That might be a whole lot of enjoyable dialog to have. And Henry, thanks a lot for being right here, man.

Henry:
Hey, thanks for having me, man. This was a fantastic dialog.

Dave:
Thanks a lot for listening to this episode of the BiggerPockets podcast. I’m Dave Meyer. We’ll see you subsequent time. I.