The Financial Freedom Formula Has Changed (2025 Update)

Can you still achieveYou can achieve financial freedom through real estate. You just need to be realistic with your expectations of what financial freedom even means to you and about how we are going to get there. I’m Dave Meyer from BiggerPockets and I’m here with my friend Henry Washington. We are both real estate investors who are on that financial freedom path right now, but as it turns out, we’ve taken different approaches to achieve financial independence. Henry quit his corporate job to buy rentals and flip houses. I haven’t done that and I probably never will. Today we’re having a real honest conversation about what financial freedom even means, the pros and cons of different approaches to achieving it and which could be right for each of you. So Henry, I have what I think is sort of a hot take about financial independence and retired early that I want to share with you, but first lemme just ask you, what do you consider financial independence? What does that actually even mean to you?Well, when I first got started, I thought I was going to buy some properties and they would pay me every month and then I would not have to work,Didn’t work out that way.It didn’t quite work out that way. But financial independence, what it means to me now and what I’m working towards is to not have to have active income. In other words, if I don’t want to work anymore, then I don’t have to, but my income needs are met through air quotes, some sort of passive income and real estate’s not truly passive, but the idea is that I could work less than 10 hours a week if I needed to and survive. That’s what financial freedom really means to me. Now that I’ve started doing this business for a little bit,So it’s not fully retiring and actually just not working at all based on owning some rental properties,I think people have gotten a lot of these buzzwordy real estate goals intertwined because financial freedom is one thing and then making enough income through real estate to quit your W2 is something completely different than financial freedom. And sometimes I think people kind of take those two goals and say or use them interchangeably. I vividly remember somebody telling me, Hey, I just hit financial freedom. I left my day job, but that doesn’t mean you hit financial freedom. It just means you made enough active income in whatever else you’re doing in real estate that replaced your W2 income,Right?You’re still working, you’re just now working in real estate, which is amazing.That’s a great point because So financial independence, financial freedom, interchangeable terms in my mind, but retiring is kind of a different thing like you were saying, but I’m curious because you could say that you quit your job, right? You quit your corporate job, what was it six years ago now?That’s right. 2020,Yeah. So a couple years ago, but would you say you’re retired?No, no, no. I am not retired. I have to do something to make active income to survive,But I think that’s kind of the hot take, but it sounds like you sort of agree is I guess I just feel like these things have become conflated to the point where it’s really detrimental and people start looking at real estate and say There’s not enough cashflow these days for me to retire from my job in three to five years.There wasn’t five years ago either.Yeah, unless you’re starting with 5 million bucks that I could just buy rental properties, all cash, you’ve always needed that active income and then you can choose whether you want that active income to come through real estate like Henry has, or you can choose from that active income to be through a 10 99 or a W2 job I’ve done. And that’s sort of the reality of the situation. And you know what? It’s still great. You can still use real estate investing to become more financially independent and probably move your retirement date up by 30 years, but the idea that you could retire and do nothing in five years is not very realistic.No, that’s absolutely not realistic.Okay, good. I’m glad you agree.Could someone do it? I’m sure there’s a way someone could pull it off.Sure.But that’s like it’s a teeny minority of people. Most of us are going to have to generate some sort of active income in order to supplement our lifestyle, and I think we just have to be more clear about what it means because I think you absolutely can invest in real estate and in a course of a five year period, pick up some rental properties and then figure out how to make enough active income within the real estate niche to leave your W2.
And that I believe is absolutely possible, but that doesn’t make you financially free. It makes you financially dependent on another income stream that you like more and that you can leverage a lifestyle that simulates more freedom. Like you said, I am not air quotes fully retired from any active income. If I don’t flip houses or help out on BiggerPockets or do some of these other things that I do to make active income, then my family would be in a tough position. We cannot and do not want to live off of our cashflow from our rental properties, not the lifestyle that we enjoy. And so I have to have the active income, but because I’ve built this muscle and learned this skillset within the real estate industry, I now have a tool or multiple tools that I know I can use to go generate cash and I can do that on my own time and on my own schedule.
And because I can do that, I can simulate freedom. If I wanted to go to Europe next week, I mean I could probably figure out a way to make that work. Dave, I’ve done enough deals where sure I could go buy a ticket and my family and I could go and we could be gone for a week or two and my properties would continue to get renovated and worked on and get listed on the market and I could enjoy my life and I could come back. Could I do that forever? No, I couldn’t. But the lifestyle and the skillset that I have obtained in real estate allows me to have this semblance of freedom within the active income stream that I have in the real estate industry. I could not do that with a W2, so I get to experience what seems to be a whole lot more freedom than I had before. But yeah, you have to have some level of active income.I think what you said is just so important, and you’re saying it’s simulating freedom, but it is real freedom. I think that the problem is that we treat financial independence as binary. It’s like either you’re financially free or you’re not. When reality it is a path and the goal, at least for me has always been to just become more financially independent. Every deal you do, every financial decision you make will hopefully put you in a better financial position so you have more flexibility. For some people like Henry, that flexibility might be going to Europe and just not working for a couple of weeks. For me, I rest easy knowing that if BiggerPockets decided to fire me tomorrow, I could not work for a couple of years and be very comfortable and to me, wouldn’t consider myself fully financially independent because if I left my job today, I would need to figure out active income just like you Henry. But I am more financially independent than I was 15 years ago before I started investing.Absolutely.And I am more financially independent this year than I was last year and the year before that and the year before that. And I feel like that really needs to be, the goal is just to keep moving in that direction because honestly, your definition of what financial independence is going to change the amount of money I thought that I would’ve needed to feel comfortable when I started 15 years ago. I passed that number a while ago, let’s be honest.Yes, yes.And my expectations, I try not to have lifestyle creep, but when you get older and you just have a more sophisticated life, your expenses just go up. And so that’s why I feel like setting this goal and saying I am financial independent or not is just not realistic. The goal is just to keep making progress.Yeah, that’s absolutely true. I was one of those people when I got started that I thought I would buy enough rental properties to produce enough cashflow in current days
That I would be able to take the cashflow from the rental properties and then when that number of cashflow hit the number of money I made per month in my day job, that I could leave my day job and live off of my cashflow. But as I started to buy properties, I started to realize that that wasn’t necessarily going to be a thing. I was absolutely buying properties that cashflow. But your business and your properties, they don’t function linearly. It’s not like you buy it and then it cash flows and nothing ever happens or goes wrong. It just makes you just prints that money every month and it’s perfect and the world is great, but that’s not the case. The more properties you buy, things break at different times. Things break all at the same time. People move in, people move out. There’s this constant flow of money that it’s hard for you to be able to say, okay, well I bought 10 properties and each property cash flow is $500 a month, and so now I have $5,000 every month that I just will take out of this account and spend on my bills and the money is flowing too fluidly for that to be a reality.
And so I realized that if I truly want these properties to pay me cashflow that I could live off of passively, then it’s going to happen far into the futureWhenThese assets are paid off. And so I had to pivot my strategy to think, okay, well how can I use real estate to still buy rentals but also make cash now so that I can continue to grow my portfolio but also stabilize my portfolio and then start to aggressively pay off those properties so I can hit that goal sooner. That wasn’t what I thought starting out.Totally. Yeah. And I want to ask you about how you’ve pivoted your business, but I’m just curious, first was that disappointing to you realizing that?That’s an interesting question. I don’t remember feeling disappointed about it just because I was actively in the business at that point and knew, knew I had the foundational skill, which is I know how to go buy a good deal. All I had to change was the way I was monetizing that deal, which was flipping it and getting more cash upfront versus holding onto it and taking a couple hundred dollars here or there. So no, it wasn’t disappointing because I just love the business of real estate.Alright, we got to take a break, but on the other side, more of my conversation with Henry Washington about what financial freedom means to us. Thanks for sticking with us. Let’s jump back in with Henry Washington. Feels like people are avoiding getting into real estate because people who are real estate educators, BiggerPockets as part of this have been saying, Hey, you can get real estate financial freedom in a couple of years. And like I said, during the 2010s, it was always difficult, but it was easier than it was today. It wasEasierFor sure, but I guess I still feel like the prospect and the value of real estate investing is still so strong that it frustrates me when people are like, I’m not going to get in because now it’s going to take 10 years to be financially freedom or 15 years to financial freedom. That’s incredible average. It’s amazing. The average career in the United States is like 45 years. You’re saying you cut it into a third if that doesn’t get you excited. I don’t really know what would, but I do feel like, I don’t know if you hear this too, but I hear people saying like, oh, I can’t find cashflow. I’m not going to get into it. But the fundamentals haven’t really changed. This is kind of always how it’s worked.The fundamentals are they haven’t changed. They’re more important now than they’ve ever been, right? It’s the fundamentals you have to stick to now in order to be successful, but this is the best way to accelerate that path in any manner that a normal person could. Can you do it in other pathways? Can you do it in the stock market? But you got to get really good at trading stocks. Totally. But the average person in real estate can do this without being a professional real estate investor and that’s incredible.Given this, given the reality, it sounds like we agree that it’s going to take you 12 to 15 years to do it, in my mind, that’s fantastic and you can sort of be agnostic, at least to me, about how you pursue that active income. I think there’s a good argument to be made that you should just pursue whatever active income makes you the most money, and for me, that’s continuing in a regular job. But it sounds like for you, why did you make that choice knowing that you needed active income to do it through real estate rather than you had a good job, you had a good corporate job and you chose to leave that.Yes, I did have a great corporate job and I enjoyed my job. That’s why I kept it as long as humanly possible. I was going to do both until I could not do both anymore until someone was going to stop me from doing both. And I did. That’s what happened is I quit when it cost me money to have the job when they wanted me to work more hours and I just couldn’t give them more hours, it would take away from what I was doing in real estate. But the answer to your question is I had to choose the real estate because I mean, I’m going to throw it all out here. I was making $110,000 a year, which isn’t a ton of money, but it’s good money, right? It’s good money. It’s hard not to choose real estate as your full-time income path when I’d have to trade 40 hours a week for 12 months to make $110,000 if you count my bonus, I was probably making closer to $140,000 when I could flip two houses and make that and I could flip two houses in the same monthWhen you put it that way,Right? We just sold a deal and made 70 K last week. So yeah, it took us five months to make 70 k, but that wasn’t the only house I was flipping. I had to choose the real estate. It made more financial sense and also I love it so much more than I loved my day job. I liked my day job. I love doing this.Obviously I’ve chosen the other, right? I continue to work full time at BiggerPockets and I think there are pros and cons, but for me just I like having a steady paycheck. I like knowing that my bills are covered. I like having benefits.That’s the thing no one thinks about when they leave that W2, that insurance is stupid.As you know, I just moved back to the United States and I’m like, holy crap. Yeah,It’s no joke.The insurance costs are insane, but that’s just like my psychology. I like having that because what I feel like is it allows me to feel comfortable taking risk in real estate because I know that if I invest in a syndication and it doesn’t do well, I’ll be fine. I live within my W2 income and real estate is just gravy for me.So said differently. If BiggerPockets went away tomorrow, would you go find another W2 because you like the consistent income or would you figure out a way to use real estate full time?I guess probably the latter. I think it’s pretty hard for me to think about working at another Corpor corporation right now.I don’t think me or James Dard would let you go get another job. We would just feed you deals until you got good enough to do this on your own.Well, the funny thing is I got into my job at BiggerPockets because I really liked real estate. I got into real estate in 2010, sort of on a whim. It was a friend of mine was doing it, and I was like, that seems fun. I’m going to do that and I could really use 250 bucks a month. So I started doing that and then I went back to grad school and I was like, I really just like the real estate thing. And so I googled real estate tech jobs and found BiggerPockets. It was down the road from where I was living. It was just kind of coincidence, but I’ve always really liked the real estate side of it. So I think I would find a way to either do private lending or flip houses or just be even more involved in my rental properties. I do think I probably give up three, 4% cash on cash return a year. More than that, I pay 8% to the property manager. But even on top of that, there’s just an inefficiency of it. I can’t spend enough time on it, and I’m okay with that. It allows me to make my income, but
I would probably do something like that. I don’t know. It’d be hard to think about just starting a new corporate team.Yes. Yes, yes. That was the position I found myself in.Yeah, I get that. Are there any, I mean benefits, you just brought that up as one of the trade-offs, but are there trade-offs?Yeah. Well, first and foremost, it’s just scary. So what helped me jump off the cliff actually was we were selling a flip. So this was 2021. That was when things were going crazy. And what had happened was we were selling two properties and we ended up getting over asking on both properties and the amount over what we had underwritten them to sell at ended up being a year’s salaryFromThe W2. And I was like, look, we’ve got this extra money we weren’t planning on. Let’s just squirrel that away into an account and that gives us 12 months. We’re used to this income, we’ll just pay ourselves out of that account for 12 months and if this real estate full-time thing doesn’t work, then I’ll go get another job. And so that was what gave us the confidence to really pull the trigger.Yeah, I mean I would imagine that it’s harder for people now to do that, but I think it’s also important to remember that was the anomaly, not now. And people think I can’t quit my job in real estate immediately because it was easier back then, but that was unusual. The types of returns and the types of deals that you see today are actually closer to historical norms
And real estate was still a good investment in the nineties when it was still these kinds of returns or during the early 2010s when the returns were solid, but not spectacular. Still better than any other asset class, at least in my opinion. So I just think it’s important to remember, even though you hear these stories about fantastic returns, you don’t need that. It’s great. I hope it happens to everyone, but you don’t need that to become financially independent or to pursue financial independence through real estate. We got to take a break, but on the other side, more of the BiggerPockets Real Estate podcast are back with the rest of the BiggerPockets Real Estate podcast.I would say the biggest trade off to answer your previous question is it’s not instant money when I’m flipping houses. It can be quicker if you do assignments, but I don’t do assignments, so if I’m making money, I have to find something, I have to buy the something, and then I have to get it to a point to where somebody else wants to buy that something from me, and I also rely on somebody else needing to want to sell to me. It’s not like I can just go to this open marketplaceAndBuy properties that are going to make me a bunch of money. Yes, the MLS exists. Yes, there are deals on it, but it takes a lot of effort to do that in volume and use it sustainably. So because I’m buying off market and because I have to flip a house, I’m doing work today that I won’t get paid for at least 60 to 90 days, and that’s fast, but it’s probably closer between four to six months. And so if you slack today, that doesn’t hurt you now. It hurts you down the road. And if you find yourself in a lull where you couldn’t find a deal over 30 to 60 days or something, you’re going to be in this position down the road where you’re like, I don’t know where money is going to come from. Right?Yeah. That’s scary.That’s a scary trade off. So you’ve got to be really good about your money and budgeting your money so that you can have income throughout the year because it’s not a sustainable source. So that’s what I envy about what you have. You got money every two weeks and it’s not like that here. Yes, I make them in bigger chunks, but then you have to be more financially responsible with it so that it’s not all gone at the same time.See, that’s why I can’t do what you’re doing. I am not financially responsible. I actually always joke with my wife because I’ve become a financial educator and I’ve never had a budget in my entire life. Even when I was broke, I never had one. I didn’t neither. I would just spend money until I didn’t have any. And then I’d eat ramen for a few days and then you’d wait and you’d figure it out. I’ve never done that, and that’s probably one of the reasons I like having this steady income. I can’t mess up that badly in two weeks. Right?
I am just kidding. I’ve obviously figured out a way to be financially responsible, but there is a psychology element of that that would worry me. If there was a lull for a month, even though it’s not realistic, I would be fine. It would sort of weigh on me a little bit. And it’s also when you were talking about that, it made me realize or think about how you almost have to be responsible, do both at the same time. If you’re going to transition into it because you have gotten to a point where you do enough flips and you have such a good pipeline that even if you miss on one month and you don’t get an acquisition, you’re like, I’m going to get one next month. You have a pretty good idea of that. But if you just quit your job and you’re like, I’m going to go flip houses, then you better have that deal flow work out really quick. Just assuming you’re an average person who doesn’t have months and months and months of emergencyReservesThat could get bad quickly. So you sort of have to develop the pipeline of deal flow while you’re still working full time.You have to build some level of consistency into your business before you quit because someone has to want to sell me a house. Now I know how to go look for those people. I know how to help those people. I’ve positioned myself in a way that I can build a business around that, but it’s not like I’m relying on somebody else to decide that they want me to buy their home for me to make money. That’sTough for sure. And you’re very good at it, and you’ve practiced a lot to be able to have that confidence, and it just doesn’t come that quickly. And I’m enjoying this conversation because I really just want people to realize two things that Henry and I are talking about here. First and foremost, the idea that you’re going to to just do nothing in the next few years, very unlikely unless you’re starting from a very advantaged place with a lot of cash. And if you’re going to do what? I don’t know, it’s probably 95% or more of real estate investors still work for active income. I think it might even be higher thanThat. I think it’s higher than that.I think it’s everyone, and if you’re going to do these things at the same time, earn active income and invest long term so that eventually you can really do nothing, you can choose either the path I’ve gone down, which is to work a more traditional career and invest on the side. Or you could do what Henry’s done. And there were sort of just trade-offs and pros and cons between both of them, but both are pretty common. You do need active income and you don’t need to quit your job. The more common way to do this is to find a way to earn income right now and invest that into passive assets for the longTerm. When we talk about our approaches to real estate, they sound different, but the framework is ideally the same of what you and I are doing, which is we’re buying assets, so we’re growing our portfolio to whatever comfortability level we are with that, and then we’re stabilizing those assets, and then we are focusing on getting those assets paid off and across all three of those buckets, you and I both have active income coming in to help us fulfill what’s happening in those buckets so that we can finally finish off that third bucket of paying off the assets so that we can be financially free. Our framework is exactly theSame. Yeah, that’sRight. How we’re generating the income and where within our process we are is different, but the frame is the same.That’s a really good point. I hope that is encouraging to people because I’m sure you hear this all the time. This expectation that you need to quit your job or to be in real estate or feel the pressure, honestly, to retire and do nothing, just isn’t necessary. And I think you were saying you think it’s higher than 95%, but do you actually even know anyone who is truly retired from real estate?Maybe one investor maybe of all the people I’ve ever met.Yeah, right. Everyone keeps doing stuff.That dream of going and sitting on the beach and retiring and living. Look, I know plenty of investors who moved to the beach, but they work in one day there.Totally. Yeah, exactly. Exactly. Yeah. So hopefully this conversation helps normalize this for people and just realize that real estate is fantastic, amazing. It’s incredible what it does for you. Just go into it with realistic expectations and not only will that help you get in and get over some of the fear, I actually think it makes real estate investing easier. Lemme just give an example. I will buy a deal right now that makes three or 4% cash on cash return because it’s a great asset in a great neighborhood, and I don’t need more than that. I don’t need 8% cashflow because I don’t need the money right now and allows you to take this long-term view. Deal selection and portfolio strategy becomes so much easier when you’re not hyper-focused on how do I replace my income by tomorrow?Yes. That man, the pressure that you don’t have to feel in order to do that is amazing. Yeah. It’s just buy a good asset in a good appreciating neighborhood that pays for itself and just don’t think about it for the next 15 to 20 years. That’s pretty cool.I just want people as we, especially entering a new year to go into things with realistic expectations because real estate just as good the asset, just as good as a business as it’s ever been. If you just have realistic expectations about what is feasible with this asset class and recognize that a lot of the marketing that was going on in BiggerPockets is part of this over the last couple of years is not the most common way, the more common way to use real estate is to take 10 or 12 or 15 years to build out a portfolio and give yourself maximum financial freedom just over a longer period of time.Couldn’t agree more.Well, thank you. This was a very fun episode. I appreciate you being here.Hey, man, thanks for having me. I love putting a realistic spin on things. This is still the greatest financial decision that I’ve ever made, even though I still work on a day-to-day basis in a real estate business. So it’s changed my life in more ways than I could have ever imagined, and I think that there should be less fear around getting started. There should absolutely be education and preparedness, but there is a strategy that will work for literally almost anyone,AndYou do not have to be a professional air quotes real estate investor to hit that level of financial freedom within 10, 12, 15 years. You can just be a regular Joe Schmoe with a job and get there.All right. Well, thank you all so much for listening. We’d love to hear your opinion about financial independence and what it means to you. So either hit Henry or I up on BiggerPockets or on Instagram or in the comments below if you’re watching this on YouTube. Thank you all so much for listening or watching to this episode of the BiggerPockets Podcast. We’ll see you again soon.