The Financial Freedom Formula Has Changed (2025 Update)

Dave:
You may obtain monetary freedom by way of actual property. You simply should be life like along with your expectations of what monetary freedom even means to you and about how we’re going to get there. I’m Dave Meyer from BiggerPockets and I’m right here with my buddy Henry Washington. We’re each actual property buyers who’re on that monetary freedom path proper now, however because it seems, we’ve taken totally different approaches to attain monetary independence. Henry stop his company job to purchase leases and flip homes. I haven’t finished that and I in all probability by no means will. At the moment we’re having an actual sincere dialog about what monetary freedom even means, the professionals and cons of various approaches to attaining it and which could possibly be proper for every of you. So Henry, I’ve what I feel is form of a sizzling take about monetary independence and retired early that I wish to share with you, however first lemme simply ask you, what do you take into account monetary independence? What does that really even imply to you?

Henry:
Effectively, once I first obtained began, I believed I used to be going to purchase some properties and they might pay me each month after which I might not must work,

Dave:
Didn’t work out that method.

Henry:
It didn’t fairly work out that method. However monetary independence, what it means to me now and what I’m working in the direction of is to not must have lively revenue. In different phrases, if I don’t wish to work anymore, then I don’t must, however my revenue wants are met by way of air quotes, some form of passive revenue and actual property’s not actually passive, however the thought is that I might work lower than 10 hours per week if I wanted to and survive. That’s what monetary freedom actually means to me. Now that I’ve began doing this enterprise for slightly bit,

Dave:
So it’s not totally retiring and truly simply not working in any respect based mostly on proudly owning some rental properties,

Henry:
I feel individuals have gotten quite a lot of these buzzwordy actual property targets intertwined as a result of monetary freedom is one factor after which making sufficient revenue by way of actual property to stop your W2 is one thing utterly totally different than monetary freedom. And generally I feel individuals sort of take these two targets and say or use them interchangeably. I vividly bear in mind someone telling me, Hey, I simply hit monetary freedom. I left my day job, however that doesn’t imply you hit monetary freedom. It simply means you made sufficient lively revenue in no matter else you’re doing in actual property that changed your W2 revenue,

Dave:
Proper?

Henry:
You’re nonetheless working, you’re simply now working in actual property, which is superb.

Dave:
That’s a terrific level as a result of So monetary independence, monetary freedom, interchangeable phrases in my thoughts, however retiring is sort of a distinct factor such as you had been saying, however I’m curious since you might say that you simply stop your job, proper? You stop your company job, what was it six years in the past now?

Henry:
That’s proper. 2020,

Dave:
Yeah. So a pair years in the past, however would you say you’re retired?

Henry:
No, no, no. I’m not retired. I’ve to do one thing to make lively revenue to outlive,

Dave:
However I feel that’s sort of the recent take, nevertheless it sounds such as you form of agree is I assume I simply really feel like these items have develop into conflated to the purpose the place it’s actually detrimental and folks begin actual property and say There’s not sufficient cashflow today for me to retire from my job in three to 5 years.

Henry:
There wasn’t 5 years in the past both.

Dave:
Yeah, until you’re beginning with 5 million bucks that I might simply purchase rental properties, all money, you’ve at all times wanted that lively revenue after which you possibly can select whether or not you need that lively revenue to return by way of actual property like Henry has, or you possibly can select from that lively revenue to be by way of a ten 99 or a W2 job I’ve finished. And that’s form of the truth of the state of affairs. And you recognize what? It’s nonetheless nice. You may nonetheless use actual property investing to develop into extra financially impartial and doubtless transfer your retirement date up by 30 years, however the concept you would retire and do nothing in 5 years isn’t very life like.

Henry:
No, that’s completely not life like.

Dave:
Okay, good. I’m glad you agree.

Henry:
May somebody do it? I’m positive there’s a method somebody might pull it off.

Dave:
Positive.

Henry:
However that’s prefer it’s a teeny minority of individuals. Most of us are going to must generate some form of lively revenue as a way to complement our life-style, and I feel we simply must be extra clear about what it means as a result of I feel you completely can put money into actual property and in a course of a 5 12 months interval, decide up some rental properties after which determine easy methods to make sufficient lively revenue inside the true property area of interest to depart your W2.
And that I consider is completely potential, however that doesn’t make you financially free. It makes you financially depending on one other revenue stream that you simply like extra and that you could leverage a way of life that simulates extra freedom. Such as you stated, I’m not air quotes totally retired from any lively revenue. If I don’t flip homes or assist out on BiggerPockets or do a few of these different issues that I do to make lively revenue, then my household can be in a troublesome place. We can not and don’t wish to dwell off of our cashflow from our rental properties, not the approach to life that we get pleasure from. And so I’ve to have the lively revenue, however as a result of I’ve constructed this muscle and discovered this skillset inside the true property business, I now have a device or a number of instruments that I do know I can use to go generate money and I can do this alone time and alone schedule.
And since I can do this, I can simulate freedom. If I wished to go to Europe subsequent week, I imply I might in all probability determine a method to make that work. Dave, I’ve finished sufficient offers the place positive I might go purchase a ticket and my household and I might go and we could possibly be gone for per week or two and my properties would proceed to get renovated and labored on and get listed available on the market and I might get pleasure from my life and I might come again. May I do this eternally? No, I couldn’t. However the life-style and the skillset that I’ve obtained in actual property permits me to have this semblance of freedom inside the lively revenue stream that I’ve in the true property business. I couldn’t do this with a W2, so I get to expertise what appears to be a complete lot extra freedom than I had earlier than. However yeah, it’s a must to have some degree of lively revenue.

Dave:
I feel what you stated is simply so essential, and also you’re saying it’s simulating freedom, however it’s actual freedom. I feel that the issue is that we deal with monetary independence as binary. It’s like both you’re financially free otherwise you’re not. When actuality it’s a path and the purpose, at the least for me has at all times been to only develop into extra financially impartial. Each deal you do, each monetary determination you make will hopefully put you in a greater monetary place so you’ve got extra flexibility. For some individuals like Henry, that flexibility may be going to Europe and simply not working for a few weeks. For me, I relaxation straightforward figuring out that if BiggerPockets determined to fireside me tomorrow, I couldn’t work for a few years and be very snug and to me, wouldn’t take into account myself totally financially impartial as a result of if I left my job right this moment, I would wish to determine lively revenue identical to you Henry. However I’m extra financially impartial than I used to be 15 years in the past earlier than I began investing.

Henry:
Completely.

Dave:
And I’m extra financially impartial this 12 months than I used to be final 12 months and the 12 months earlier than that and the 12 months earlier than that. And I really feel like that basically must be, the purpose is simply to maintain transferring in that route as a result of truthfully, your definition of what monetary independence goes to vary the amount of cash I believed that I might’ve wanted to really feel snug once I began 15 years in the past. I handed that quantity some time in the past, let’s be sincere.

Henry:
Sure, sure.

Dave:
And my expectations, I attempt to not have life-style creep, however while you become old and also you simply have a extra refined life, your bills simply go up. And in order that’s why I really feel like setting this purpose and saying I’m monetary impartial or not is simply not life like. The purpose is simply to maintain making progress.

Henry:
Yeah, that’s completely true. I used to be a type of individuals once I obtained began that I believed I might purchase sufficient rental properties to supply sufficient cashflow in present days
That I might be capable of take the cashflow from the rental properties after which when that variety of cashflow hit the variety of cash I made monthly in my day job, that I might depart my day job and dwell off of my cashflow. However as I began to purchase properties, I began to comprehend that that wasn’t essentially going to be a factor. I used to be completely shopping for properties that cashflow. However your enterprise and your properties, they don’t operate linearly. It’s not such as you purchase it after which it money flows and nothing ever occurs or goes mistaken. It simply makes you simply prints that cash each month and it’s excellent and the world is nice, however that’s not the case. The extra properties you purchase, issues break at totally different instances. Issues break all on the identical time. Individuals transfer in, individuals transfer out. There’s this fixed movement of cash that it’s onerous for you to have the ability to say, okay, effectively I purchased 10 properties and every property money movement is $500 a month, and so now I’ve $5,000 each month that I simply will take out of this account and spend on my payments and the cash is flowing too fluidly for that to be a actuality.
And so I noticed that if I really need these properties to pay me cashflow that I might dwell off of passively, then it’s going to occur far into the long run

Dave:
When

Henry:
These belongings are paid off. And so I needed to pivot my technique to suppose, okay, effectively how can I exploit actual property to nonetheless purchase leases but additionally make money now in order that I can proceed to develop my portfolio but additionally stabilize my portfolio after which begin to aggressively repay these properties so I can hit that purpose sooner. That wasn’t what I believed beginning out.

Dave:
Completely. Yeah. And I wish to ask you about the way you’ve pivoted your enterprise, however I’m simply curious, first was that disappointing to you realizing that?

Henry:
That’s an attention-grabbing query. I don’t bear in mind feeling upset about it simply because I used to be actively within the enterprise at that time and knew, knew I had the foundational ability, which is I understand how to go purchase an excellent deal. All I needed to change was the way in which I used to be monetizing that deal, which was flipping it and getting extra cash upfront versus holding onto it and taking a pair hundred {dollars} right here or there. So no, it wasn’t disappointing as a result of I simply love the enterprise of actual property.

Dave:
Alright, we obtained to take a break, however on the opposite aspect, extra of my dialog with Henry Washington about what monetary freedom means to us. Thanks for sticking with us. Let’s soar again in with Henry Washington. Appears like persons are avoiding entering into actual property as a result of people who find themselves actual property educators, BiggerPockets as a part of this have been saying, Hey, you will get actual property monetary freedom in a few years. And like I stated, in the course of the 2010s, it was at all times troublesome, nevertheless it was simpler than it was right this moment. It was

Henry:
Simpler

Dave:
For positive, however I assume I nonetheless really feel just like the prospect and the worth of actual property investing remains to be so robust that it frustrates me when persons are like, I’m not going to get in as a result of now it’s going to take 10 years to be financially freedom or 15 years to monetary freedom. That’s unimaginable common. It’s superb. The typical profession in the US is like 45 years. You’re saying you chop it into a 3rd if that doesn’t get you excited. I don’t actually know what would, however I do really feel like, I don’t know if you happen to hear this too, however I hear individuals saying like, oh, I can’t discover cashflow. I’m not going to get into it. However the fundamentals haven’t actually modified. That is sort of at all times the way it’s labored.

Henry:
The basics are they haven’t modified. They’re extra essential now than they’ve ever been, proper? It’s the basics it’s a must to keep on with now as a way to achieve success, however that is one of the best ways to speed up that path in any method {that a} regular particular person might. Are you able to do it in different pathways? Are you able to do it within the inventory market? However you bought to get actually good at buying and selling shares. Completely. However the common particular person in actual property can do that with out being an expert actual property investor and that’s unimaginable.

Dave:
Given this, given the truth, it seems like we agree that it’s going to take you 12 to fifteen years to do it, in my thoughts, that’s implausible and you may form of be agnostic, at the least to me, about the way you pursue that lively revenue. I feel there’s an excellent argument to be made that you need to simply pursue no matter lively revenue makes you essentially the most cash, and for me, that’s persevering with in an everyday job. However it seems like for you, why did you make that alternative figuring out that you simply wanted lively revenue to do it by way of actual property relatively than you had an excellent job, you had an excellent company job and also you selected to depart that.

Henry:
Sure, I did have a terrific company job and I loved my job. That’s why I stored it so long as humanly potential. I used to be going to do each till I couldn’t do each anymore till somebody was going to cease me from doing each. And I did. That’s what occurred is I stop when it value me cash to have the job once they wished me to work extra hours and I simply couldn’t give them extra hours, it could take away from what I used to be doing in actual property. However the reply to your query is I had to decide on the true property as a result of I imply, I’m going to throw all of it out right here. I used to be making $110,000 a 12 months, which isn’t a ton of cash, nevertheless it’s good cash, proper? It’s good cash. It’s onerous not to decide on actual property as your full-time revenue path once I’d must commerce 40 hours per week for 12 months to make $110,000 if you happen to depend my bonus, I used to be in all probability making nearer to $140,000 once I might flip two homes and make that and I might flip two homes in the identical month

Dave:
If you put it that method,

Henry:
Proper? We simply bought a deal and made 70 Okay final week. So yeah, it took us 5 months to make 70 okay, however that wasn’t the one home I used to be flipping. I had to decide on the true property. It made extra monetary sense and likewise I like it a lot greater than I beloved my day job. I appreciated my day job. I really like doing this.

Dave:
Clearly I’ve chosen the opposite, proper? I proceed to work full time at BiggerPockets and I feel there are execs and cons, however for me simply I like having a gradual paycheck. I like figuring out that my payments are lined. I like having advantages.

Henry:
That’s the factor nobody thinks about once they depart that W2, that insurance coverage is silly.

Dave:
As you recognize, I simply moved again to the US and I’m like, holy crap. Yeah,

Henry:
It’s no joke.

Dave:
The insurance coverage prices are insane, however that’s identical to my psychology. I like having that as a result of what I really feel like is it permits me to really feel snug taking danger in actual property as a result of I do know that if I put money into a syndication and it doesn’t do effectively, I’ll be fantastic. I dwell inside my W2 revenue and actual property is simply gravy for me.

Henry:
So stated in a different way. If BiggerPockets went away tomorrow, would you go discover one other W2 since you just like the constant revenue or would you determine a method to make use of actual property full time?

Dave:
I assume in all probability the latter. I feel it’s fairly onerous for me to consider working at one other Corpor company proper now.

Henry:
I don’t suppose me or James Dard would allow you to go get one other job. We might simply feed you offers till you bought ok to do that by yourself.

Dave:
Effectively, the humorous factor is I obtained into my job at BiggerPockets as a result of I actually appreciated actual property. I obtained into actual property in 2010, form of on a whim. It was a buddy of mine was doing it, and I used to be like, that appears enjoyable. I’m going to do this and I might actually use 250 bucks a month. So I began doing that after which I went again to grad faculty and I used to be like, I actually identical to the true property factor. And so I googled actual property tech jobs and located BiggerPockets. It was down the street from the place I used to be residing. It was simply sort of coincidence, however I’ve at all times actually appreciated the true property aspect of it. So I feel I might discover a method to both do personal lending or flip homes or simply be much more concerned in my rental properties. I do suppose I in all probability hand over three, 4% money on money return a 12 months. Greater than that, I pay 8% to the property supervisor. However even on high of that, there’s simply an inefficiency of it. I can’t spend sufficient time on it, and I’m okay with that. It permits me to make my revenue, however
I might in all probability do one thing like that. I don’t know. It’d be onerous to consider simply beginning a brand new company workforce.

Henry:
Sure. Sure, sure. That was the place I discovered myself in.

Dave:
Yeah, I get that. Are there any, I imply advantages, you simply introduced that up as one of many trade-offs, however are there trade-offs?

Henry:
Yeah. Effectively, at first, it’s simply scary. So what helped me soar off the cliff truly was we had been promoting a flip. So this was 2021. That was when issues had been going loopy. And what had occurred was we had been promoting two properties and we ended up getting over asking on each properties and the quantity over what we had underwritten them to promote at ended up being a 12 months’s wage

Dave:
From

Henry:
The W2. And I used to be like, look, we’ve obtained this extra cash we weren’t planning on. Let’s simply squirrel that away into an account and that provides us 12 months. We’re used to this revenue, we’ll simply pay ourselves out of that account for 12 months and if this actual property full-time factor doesn’t work, then I’ll go get one other job. And in order that was what gave us the arrogance to essentially pull the set off.

Dave:
Yeah, I imply I might think about that it’s tougher for individuals now to do this, however I feel it’s additionally essential to do not forget that was the anomaly, not now. And other people suppose I can’t stop my job in actual property instantly as a result of it was simpler again then, however that was uncommon. The varieties of returns and the varieties of offers that you simply see right this moment are literally nearer to historic norms
And actual property was nonetheless an excellent funding within the nineties when it was nonetheless these sorts of returns or in the course of the early 2010s when the returns had been strong, however not spectacular. Nonetheless higher than some other asset class, at the least in my view. So I simply suppose it’s essential to recollect, although you hear these tales about implausible returns, you don’t want that. It’s nice. I hope it occurs to everybody, however you don’t want that to develop into financially impartial or to pursue monetary independence by way of actual property. We obtained to take a break, however on the opposite aspect, extra of the BiggerPockets Actual Property podcast are again with the remainder of the BiggerPockets Actual Property podcast.

Henry:
I might say the largest commerce off to reply your earlier query is it’s not on the spot cash once I’m flipping homes. It may be faster if you happen to do assignments, however I don’t do assignments, so if I’m earning money, I’ve to search out one thing, I’ve to purchase the one thing, after which I’ve to get it to some extent to the place someone else desires to purchase that one thing from me, and I additionally depend on someone else needing to wish to promote to me. It’s not like I can simply go to this open market

Dave:
And

Henry:
Purchase properties which might be going to make me a bunch of cash. Sure, the MLS exists. Sure, there are offers on it, nevertheless it takes quite a lot of effort to do this in quantity and use it sustainably. So as a result of I’m shopping for off market and since I’ve to flip a home, I’m doing work right this moment that I received’t receives a commission for at the least 60 to 90 days, and that’s quick, nevertheless it’s in all probability nearer between 4 to 6 months. And so if you happen to slack right this moment, that doesn’t harm you now. It hurts you down the street. And if you end up in a lull the place you couldn’t discover a deal over 30 to 60 days or one thing, you’re going to be on this place down the street the place you’re like, I don’t know the place cash goes to return from. Proper?

Dave:
Yeah. That’s scary.

Henry:
That’s a scary commerce off. So that you’ve obtained to be actually good about your cash and budgeting your cash as a way to have revenue all year long as a result of it’s not a sustainable supply. In order that’s what I envy about what you’ve got. You bought cash each two weeks and it’s not like that right here. Sure, I make them in larger chunks, however then it’s a must to be extra financially accountable with it in order that it’s not all gone on the identical time.

Dave:
See, that’s why I can’t do what you’re doing. I’m not financially accountable. I truly at all times joke with my spouse as a result of I’ve develop into a monetary educator and I’ve by no means had a funds in my whole life. Even once I was broke, I by no means had one. I didn’t neither. I might simply spend cash till I didn’t have any. After which I’d eat ramen for a number of days and then you definately’d wait and also you’d determine it out. I’ve by no means finished that, and that’s in all probability one of many causes I like having this regular revenue. I can’t mess up that badly in two weeks. Proper?
I’m simply kidding. I’ve clearly discovered a method to be financially accountable, however there’s a psychology aspect of that that might fear me. If there was a lull for a month, although it’s not life like, I might be fantastic. It will form of weigh on me slightly bit. And it’s additionally while you had been speaking about that, it made me notice or take into consideration the way you virtually must be accountable, do each on the identical time. In the event you’re going to transition into it as a result of you’ve got gotten to some extent the place you do sufficient flips and you’ve got such an excellent pipeline that even if you happen to miss on one month and also you don’t get an acquisition, you’re like, I’m going to get one subsequent month. You’ve a reasonably good thought of that. However if you happen to simply stop your job and also you’re like, I’m going to go flip homes, then you definately higher have that deal movement work out actually fast. Simply assuming you’re a mean one that doesn’t have months and months and months of emergency

Henry:
Reserves

Dave:
That might get unhealthy rapidly. So that you form of must develop the pipeline of deal movement whilst you’re nonetheless working full time.

Henry:
It’s important to construct some degree of consistency into your enterprise earlier than you stop as a result of somebody has to wish to promote me a home. Now I understand how to go search for these individuals. I understand how to assist these individuals. I’ve positioned myself in a method that I can construct a enterprise round that, nevertheless it’s not like I’m counting on someone else to determine that they need me to purchase their house for me to earn money. That’s

Dave:
Powerful for positive. And also you’re excellent at it, and also you’ve practiced so much to have the ability to have that confidence, and it simply doesn’t come that rapidly. And I’m having fun with this dialog as a result of I actually simply need individuals to comprehend two issues that Henry and I are speaking about right here. Before everything, the concept you’re going to to only do nothing within the subsequent few years, most unlikely until you’re ranging from a really advantaged place with quite a lot of money. And if you happen to’re going to do what? I don’t know, it’s in all probability 95% or extra of actual property buyers nonetheless work for lively revenue. I feel it’d even be increased than

Henry:
That. I feel it’s increased than that.

Dave:
I feel it’s everybody, and if you happen to’re going to do these items on the identical time, earn lively revenue and make investments long run in order that ultimately you possibly can actually do nothing, you possibly can select both the trail I’ve gone down, which is to work a extra conventional profession and make investments on the aspect. Or you would do what Henry’s finished. And there have been form of simply trade-offs and execs and cons between each of them, however each are fairly frequent. You do want lively revenue and also you don’t have to stop your job. The extra frequent method to do that is to discover a method to earn revenue proper now and make investments that into passive belongings for the lengthy

Henry:
Time period. Once we speak about our approaches to actual property, they sound totally different, however the framework is ideally the identical of what you and I are doing, which is we’re shopping for belongings, so we’re rising our portfolio to no matter comfortability degree we’re with that, after which we’re stabilizing these belongings, after which we’re specializing in getting these belongings paid off and throughout all three of these buckets, you and I each have lively revenue coming in to assist us fulfill what’s occurring in these buckets in order that we will lastly end off that third bucket of paying off the belongings in order that we could be financially free. Our framework is precisely the

Dave:
Similar. Yeah, that’s

Henry:
Proper. How we’re producing the revenue and the place inside our course of we’re is totally different, however the body is identical.

Dave:
That’s a extremely good level. I hope that’s encouraging to individuals as a result of I’m positive you hear this on a regular basis. This expectation that you want to stop your job or to be in actual property or really feel the strain, truthfully, to retire and do nothing, simply isn’t needed. And I feel you had been saying you suppose it’s increased than 95%, however do you truly even know anybody who is really retired from actual property?

Henry:
Perhaps one investor perhaps of all of the individuals I’ve ever met.

Dave:
Yeah, proper. Everybody retains doing stuff.

Henry:
That dream of going and sitting on the seaside and retiring and residing. Look, I do know loads of buyers who moved to the seaside, however they work in in the future there.

Dave:
Completely. Yeah, precisely. Precisely. Yeah. So hopefully this dialog helps normalize this for individuals and simply notice that actual property is implausible, superb. It’s unimaginable what it does for you. Simply go into it with life like expectations and never solely will that aid you get in and recover from a number of the concern, I truly suppose it makes actual property investing simpler. Lemme simply give an instance. I’ll purchase a deal proper now that makes three or 4% money on money return as a result of it’s a terrific asset in a terrific neighborhood, and I don’t want greater than that. I don’t want 8% cashflow as a result of I don’t want the cash proper now and lets you take this long-term view. Deal choice and portfolio technique turns into a lot simpler while you’re not hyper-focused on how do I change my revenue by tomorrow?

Henry:
Sure. That man, the strain that you simply don’t must really feel as a way to do that’s superb. Yeah. It’s simply purchase an excellent asset in an excellent appreciating neighborhood that pays for itself and simply don’t give it some thought for the subsequent 15 to twenty years. That’s fairly cool.

Dave:
I simply need individuals as we, particularly coming into a brand new 12 months to enter issues with life like expectations as a result of actual property simply pretty much as good the asset, simply pretty much as good as a enterprise because it’s ever been. In the event you simply have life like expectations about what is possible with this asset class and acknowledge that quite a lot of the advertising and marketing that was happening in BiggerPockets is a part of this during the last couple of years isn’t the commonest method, the extra frequent method to make use of actual property is to take 10 or 12 or 15 years to construct out a portfolio and provides your self most monetary freedom simply over an extended time period.

Henry:
Couldn’t agree extra.

Dave:
Effectively, thanks. This was a really enjoyable episode. I recognize you being right here.

Henry:
Hey, man, thanks for having me. I really like placing a practical spin on issues. That is nonetheless the best monetary determination that I’ve ever made, although I nonetheless work on a day-to-day foundation in an actual property enterprise. So it’s modified my life in additional methods than I might have ever imagined, and I feel that there needs to be much less concern round getting began. There ought to completely be training and preparedness, however there’s a technique that may work for actually virtually anybody,

Dave:
And

Henry:
You should not have to be an expert air quotes actual property investor to hit that degree of monetary freedom inside 10, 12, 15 years. You may simply be an everyday Joe Schmoe with a job and get there.

Dave:
All proper. Effectively, thanks all a lot for listening. We’d love to listen to your opinion about monetary independence and what it means to you. So both hit Henry or I up on BiggerPockets or on Instagram or within the feedback beneath if you happen to’re watching this on YouTube. Thanks all a lot for listening or watching to this episode of the BiggerPockets Podcast. We’ll see you once more quickly.