Honest Advice to Someone Who Wants Financial Freedom

Dave:
Monetary freedom is a journey, not only a vacation spot, and that’s factor. Possibly you wish to exchange your revenue and stop your job sometime, and actual property can completely enable you to get there. However perhaps what you really need is monetary flexibility. The flexibility to purchase dinner or go on trip with out having to emphasize concerning the prices and the flexibility to supply that flexibility is considerably distinctive to actual property. At the moment we’re speaking about how your targets can change over time, however there’s all the time an investing technique to satisfy 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 buddy 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 honest 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 generally doesn’t really feel like that, however yeah, for certain.

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

Henry:
Day,

Dave:
Which is principally type of the large secret on this complete trade. Everybody who says that they’re retired will not be really retired. They’re simply perhaps doing one thing totally different than they have been doing earlier than they began entering into actual property investing. However that’s okay, proper? That’s, I believe the entire level of the episode we wish to have in the present day is that the journey that you just tackle monetary freedom doesn’t look the identical. It’s type of a shifting goal. It shifts and modifications, and in my view, a minimum of each actual property deal I do, each choice I make ought to make me extra financially free and what the precise vacation spot is, I don’t even actually know, and that sort of modifications, nevertheless it’s about enhancing your monetary state of affairs 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 targets are going to vary throughout a wealth constructing profession and the way it’s really okay to make use of actual property to make your life higher proper now, even when meaning it’ll take you slightly bit longer to succeed in some quantity that you could have in your thoughts. So Henry, let’s simply dive into your story slightly bit. While you first acquired began, was monetary freedom even a purpose? Do you know that phrase? Was that what you have 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’d have sufficient rental property that I’d simply have cashflow coming in simply in droves, and I’d simply be capable of sit on a seaside someplace and never must work. In different phrases, I simply had this picturesque imaginative and prescient of cashflow, funding the whole lot in order that I might go the place I wished and do what I wished and never have to fret about earning profits as a result of my actual property portfolio simply kicks off all this cash for me.

Dave:
You have 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 may be a imaginative and prescient I believe lots of people have. It modified although, you stated that was your imaginative and prescient at first, nevertheless it feels like there’s a however coming there,

Henry:
Man, I don’t wish to sound like a downer, however I need 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 actually stay the approach to life you need, it in all probability goes to take an entire lot of doorways when you nonetheless have leverage in your property for that to grow to be 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 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 acquired an e-mail, I’ve any person wished $1,100 to exchange a entrance door that any person had kicked in and any person wished one other $3,000 to exchange 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 this stuff to occur, however the cash is available in, the cash goes out. Except you’re just a few tremendous accounting spreadsheet genius, it’s onerous so that you can know at any given level precisely how a lot precise internet cashflow you might have each single month. After which generally surprising issues occur. And so despite the fact that I assumed I used to be going to have a lot internet cashflow, I’ve considerably much less. Possibly this month I had 4 HVACs exit. And so what I discovered was it’s actually onerous to stay your life based mostly on that cashflow revenue as a result of each month is totally different,

Henry:
And if each month is totally different, it’s onerous to have some consistency with with the ability to pay your payments and actually stay off that cash. And so what I shortly discovered was like I don’t essentially wish to stay off my cashflow. I need my properties to cashflow, however I need to have the ability to have a special, extra constant revenue stream that I really stay 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 actually stay 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 maintain the upkeep objects 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 when you’re not paying that

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

Dave:
I’d by no means, once I first began, suppose that you’d say flipping is the extra constant revenue, however the way in which you do it, it does really make sense that when you do sufficient quantity, it does grow to be really extra predictable than cashflow on a month-to-month foundation.

Dave:
I believe what you stated makes lots of sense is that cashflow is nice to carry onto your property, however till you attain a sure dimension of your portfolio, it’s not really all that reliable, even when it’s reliable on an annual foundation or a long-term foundation, which it needs to be when you’re underwriting properly on a month-to-month foundation, you bought to make hire, you bought to pay to your automobile. You may’t actually depend on that till you get a sure dimension. And truly what I assumed you have 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 when you’re buying it, you wish to use it in the direction of your subsequent deal. You wish to use it to fund your subsequent rehab. You don’t wish 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 major portfolio dimension, it is advisable sustain a reasonably good reinvestment price. That’s the way you compound. You simply hold pouring your a reimbursement 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 while you first began, I get what you’re saying. You thought you’d stay off cashflow. I believe everybody does. Did you might have a quantity in thoughts? X {dollars} of cashflow would offer you your seaside dwelling fantasy?

Henry:
Yeah. The unique quantity was simply to get to what my present month-to-month revenue 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 might get to $10,000 a month in internet cashflow, then I wouldn’t want my job anymore. Looks like a reasonably affordable factor to consider.

Dave:
Smart way to consider it.

Henry:
And also you get there, and like I stated, it’s simply not as straightforward to know that you just’re really going to have $10,000 each month to spend. However what I really began to study was that actual wealth is constructed via fairness and appreciation. That’s the place actual property is essentially the most highly effective. Actual wealth isn’t constructed via leveraged cashflow. Leveraged cashflow. It’s extra of a measuring stick with know you obtain 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 true 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 suppose 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 purpose 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 take a seat on a seaside. I’m going to purchase sufficient rental properties. My unique purpose was like I used to be ready tables and I used to be struggling to make hire, and I used to be like, if I might determine a technique to get 250 bucks a month,

Dave:
That may be actually useful to me. And that’s why I purchased my first deal. I had a buddy who was making a pair hundred bucks a month on a rental property and I used to be like, I need that. And once I acquired that 200, I believe it was really extra, I wound up doing slightly higher on that first deal that had a very large influence on me. I might exit to dinner, I might make hire. I wasn’t a battle to make my automobile cost. And as my way of life acquired dearer, and I do know folks will say like, oh, you shouldn’t have way of life creep, however that was a part of my purpose. 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 really need my way of life to be, my targets completely modified. And that’s the place I took the strategy. You began saying like, oh, really 200 bucks at a time will not be going to get me the place I wish to get to. I acquired to go a special

Henry:
Route. Yeah.

Dave:
I believe that the beauty of actual property is that when you begin producing cashflow, whether or not it’s $200 a month or $20,000 a month is its flexibility. It permits you to determine each month based mostly on altering circumstances, do I wish to reinvest this capital into my portfolio? Do I wish to make investments it in one thing else? Do I wish to use it to assist my way of life? To me, monetary independence, it’s not some vacation spot that you just get to the place you’re like, okay, I’m performed. I’m by no means working once more. The whole lot’s effective. For me, it’s like, no, I’ve some degree 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 nervousness that I’ve had for my entire life. That’s the factor that I discover worthwhile. So let’s dig extra into this flexibility idea. This can be a actually necessary factor that I believe lots of new traders perhaps don’t notice, and actually, I believe lots of skilled traders don’t make the most of as a lot as they need to. We do must 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 concerning the journey that’s monetary freedom. So Henry, you stated at first your purpose is to exchange your revenue was like $110,000. Have you ever up to date that purpose?

Henry:
No, not from a cashflow perspective. The place I’m at in my journey now could be I’m pretty snug with the dimensions 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 move up a terrific deal in a terrific neighborhood. If I discover it, I’m going to purchase it. However for essentially 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 way in which I take a look at issues proper now, I can get to a special degree 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 purpose was cashflow in order that I don’t must work, I can both get there by buying a whole lot 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 growing that cashflow. And after having a giant portfolio, I like the thought of not growing that portfolio an excessive amount of after which paying them off. As a result of large portfolios, the extra doorways you might have, the extra issues you might have. There’s lots of work that comes with that.

Dave:
Completely.

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

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

Henry:
No,

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

Henry:
And also you don’t actually personal the asset till it’s paid off, somebody can come and take that from you and alter your monetary freedom state of affairs. If one thing occurs and you may’t make the funds, you may lose that asset. After which your way of life is totally different. Additionally, the bigger the portfolio, the higher you must 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 a whole lot and a whole lot of doorways which might be leveraged.

Dave:
Yeah, that’s level as a result of monetary freedom, you must have this cashflow quantity. There’s a sure quantity that you just want, however there’s additionally an quantity of danger that you just in all probability wish to get to an applicable quantity of danger 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 totally passive. And so it feels like for you, Henry, that’s sort of such as you want three totally different variables that you just’re making an attempt to work on, the overall amount of money you’re bringing in, the quantity of danger you’re taking and the time that you just’re placing into it.

Henry:
And we’re speaking about monetary freedom right here, however there’s one other factor to this that we’re not bearing on that’s additionally necessary to me. And it’s not simply the monetary freedom that comes with proudly owning the properties and getting the cashflow outright, nevertheless it’s additionally the legacy of with the ability to move on these paid off money flowing belongings. It’s the wealth that I wish to move on to my kids, and the extra leverage I tackle, that’s extra leverage I’d move on to them. But when I get this stuff 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 meaning. If you would like that wealth to transcend you, you’ve acquired 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 really producing significant revenue that you just move on to future generations of your loved ones. So it’s extra than simply monetary freedom for me, nevertheless 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 like it. Monetary freedom, the three variables is absolutely cool thought. It’s not simply cash, it’s additionally these different issues that basically matter right here. However I must circle again to one thing you stated earlier. Has your monetary purpose actually not modified? Is that 10 grand a month you have been making an attempt to exchange nonetheless what you’re snug with? Or has your way of life modified and had gone up?

Henry:
Once I stated the monetary purpose hasn’t modified, I simply meant I haven’t sat down and found out what the brand new quantity is. What I primarily deliberate on doing after I found out that the true wealth is in getting this stuff paid off was my unique plan was like, what number of doorways do I must get to for me to have the ability to unload a portion of my portfolio to repay the vast majority of the remaining? And in order that’s sort of how I began taking a look at this drawback. So in different phrases, if I had 100 doorways, might 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 really began to have a look at was like, okay, in my portfolio, which belongings are producing the way in which 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 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 purpose grew to become extra of an evaluation of like, okay, let’s get strategic with what you do have after which make selections on what you must promote to repay those you like or those which might be in the most effective areas or those that you shouldn’t promote however perhaps want a capital infusion or perhaps 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 it is advisable do one other. If you consider the way in which different folks make investments inventory market, you don’t not spend money on a terrific firm since you purchased it at 20 bucks a share. If you should buy it at 30 bucks a share and also you suppose 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 effective, however you may have one that you just take from being a stable performer to a terrific performer, go do this. That’s the sort of strategic factor that it is advisable 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 just stated, oh, I’ve simply had this huge quantity of success in actual property and my monetary run and purpose hasn’t modified in any respect. And that might’ve made me really feel horrible as a result of mine positively has,

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

Henry:
Actual.

Dave:
What your purpose goes to be modifications on a regular basis, a minimum of mine does. And what I assumed my purpose was once I was 22 is totally totally 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 danger 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 hire. That’s what I used to be paying in hire. My expectations have modified rather a lot since then. And in order that’s why I believe this idea of locking in that you must have this date or this quantity in thoughts is actually sort of limiting. I simply suppose it’s by no means going to occur. You need to float slightly bit. And I nonetheless hold a purpose. I’ve a five-year purpose all the time, nevertheless 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 state of affairs 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 taking a look at a few of the belongings and I used to be like, properly, I don’t actually wish to promote that one in such a terrific location and it’s doing properly and I don’t actually wish to promote this one in such a terrific location, nevertheless it’s not doing properly. And so I’d reasonably attempt to save that one and perhaps 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 yr 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 elsewhere. 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 sort of property that I wish to move onto my kids. The placement is ideal. After which some fund got here and provided me a lot more cash than it’s really labored. Precisely, yeah. That I used to be like,

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

Dave:
Precisely. That’s so true. Nicely, I believe that’s true on a property degree, which of them you wish 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 purpose, get extra models. However then hastily I used to be operating out of money to purchase extra models and I figured perhaps I ought to return to graduate faculty and I ought to spend money on myself in order that I can get the next 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 dwelling off my cashflow, I wouldn’t have been in a position to do this. And as an alternative what I did was I used to be home hacking on the time, so my dwelling have been comparatively low.

Dave:
And for I assume a yr and a half, two years, I took my cashflow that I’d’ve reinvested into extra property or I’d’ve used for my way of life and I paid my tuition to grad faculty as an alternative of taking up 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 might purchase after that rather a lot. That’s when my actual property investing profession actually began to take off. And I believe that’s the type of your targets, your circumstances simply change. And so via speaking this out with you, what I’m realizing is flexibility is the purpose, not even essentially a sure quantity that I’m searching for. I simply need the flexibility to vary my way of life as I see match. And I assume in that approach, I’ve grow to be financially free. I can do this

Henry:
Proper now. That’s 100%.

Dave:
Though I’m not at some magical quantity that’s going to love the quantity I wish to die with as a result of who is aware of what’s going to occur. However I’ve reached a degree of economic flexibility that I’m very happy with and really snug

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 wish to do or one thing that I must do for my household. And for essentially the most half, I’m there. Sure, there’s limits. Sure. I couldn’t go purchase a personal jet and fly to Dubai and keep in a penthouse for six months of a yr. I’m

Dave:
Not who wants that,

Henry:
However I don’t wish to do this just about. If I wish to go someplace with slightly little bit of planning and time, I can journey to that place if I must. I used to be speaking about this final evening 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 , 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 definately acquired three various kinds of tires at three totally 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 serious about it. I like that. That’s the extent of economic freedom that actual property has introduced me.

Dave:
We should always begin rating, what number of tires are you? You at one tire, proper? Yeah. You have got one tire, you had two tires. You have 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 need. 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 sh*t and spend slightly bit of cash in all probability. And we’ve got 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 wish to say it of the podcast publicly what dumb stuff we’re going to do in Vegas, nevertheless it’s going to be a good time. We do must 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 wish 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 must compound, you must reinvest completely, but in addition get pleasure from your life. That’s the entire level. And when 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 way in which, what have you ever actually gained on the finish of the day, you simply misplaced 20 years of your life.

Dave:
I’d reasonably make my monetary journey go from 15 years to 25 years and revel in each a type of 25 years as an alternative 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, perhaps that is simply getting right into a life philosophy lesson, however I’d reasonably simply discover a life I get pleasure from and sure, transfer nearer to monetary independence over that point interval, however not at the price of turning 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 get pleasure from or vices that we’ve got that everyone’s like, man, if I solely made X quantity of {dollars}, I might go do that factor. And for individuals who’ve reached that degree of economic flexibility, it’s not that they’ll simply go to the financial institution, take out the cash and do the factor. It’s extra about I can suppose via what I’ve and I can put collectively a plan to get there in a reasonably affordable 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 might take a look at my portfolio and if I actually actually wished one thing that was costly, I might determine a technique to get there inside the subsequent six months. And that’s monetary flexibility. I’m not saying that that might be a sensible monetary choice, I’m simply saying I might get there. I’ve the pliability to get there.

Dave:
So this asset that you just’re promoting proper after this recording otherwise you’re simply releasing up capital to make use of once 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. Find it irresistible. 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 people. That is horrible monetary

Dave:
Recommendation. No, it’s. This jogs my memory, there’s a blogger and private finance influencer. His identify’s Nick Majuli. We’ve had him in the marketplace twice. We really 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 previous methods, ranges of wealth was like degree one is like I’m not wired about debt, which is a very necessary degree to get to when you don’t have bank card debt and pupil mortgage debt. That’s superb. That’s a very necessary monetary milestone. Degree 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 nearly vividly the time in my life the place this grew to become true, whereas I wasn’t going out on a date with my spouse and ordering the most cost effective factor, and I might really go by not the most cost effective bottle of wine, however the second least expensive bottle of wine.

Dave:
I might speed up my life slightly bit. And to me, these are the moments I keep in mind. Not when my checking account or internet value hit some quantity. Like, oh, I really might exit to a restaurant, one thing I get pleasure from doing and never care about it. After which degree three is I don’t care what a trip prices. And that has been a more moderen 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 necessary to me in my life, and I don’t actually have to fret about it. If I am going on a trip and so they nickel and dime me and this silly valet expenses you 40 bucks while you present up that you just weren’t planning on it, you may survive that and you may nonetheless have a good time and revel 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 worthwhile belongings permits me to have extra flexibility and

Dave:
Dwell slightly bit extra of, I assume I’d say slightly bit extra of a carefree life.

Henry:
100%. Look, I instructed you degree one monetary flexibility for me was 4 tires at a time. Degree two, monetary flexibility for me will not be 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 wish to go someplace that’s busy, go together with Henry as a result of he pays somebody to skip any line. And I like it. It’s my favourite factor about hanging out with you. I hate you’re going to a restaurant. There’s a protracted line. Henry’s going to unravel that drawback and I don’t even must do something. I simply must be close to you and also you resolve that drawback.

Henry:
You’re completely proper, my buddy.

Dave:
So what’s degree three for

Henry:
You? Oh, that’s 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 wish to know. It’s not shopping for a jet. It’s not jet setting in your non-public jet, nevertheless it’s someplace between shopping for 4 tires at a time at a personal jet. That’s your degree 4. That’s your degree 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 really means. We might like to know what it means to you. So when you’re watching this on YouTube or listening on Spotify the place now you can depart feedback on the episode, please tell us what your degree one, you’re degree two, and your degree three monetary freedom are. That might be lots 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 terrific 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.