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Episode 19: Part 1: What ‘Financial Independence’ Means to a TREE

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Episode #19: Part 1: What ‘Financial Independence’ Means to a TREE

Episode Summary

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As real estate entrepreneurs and investors, the topic of financial independence and financial freedom is a familiar one we think about often.  In recent years, the topic of financial independence has become more mainstream, especially through the FIRE movement–Financial Independence, Retire Early.  In this episode, we begin the first part of a two-part discussion about the principles of financial independence, and how those principles apply–often somewhat differently–to Thoughtful Real Estate Entrepreneurs. 

Free PDF Guide: 5 Critical Mistakes That Make Most Real Estate Investors Accidentally Lowbrow

We’ve created a free PDF guide just for listeners of the Sleaze-Free Real Estate Investing Podcast, called “5 Critical Mistakes That Make Most Real Estate Investors Accidentally Lowbrow.”

For instant access to the PDF, just go to http://Pod.thoughtfulRE.com

References in this Episode

Music Credits

The theme song is an excerpt of “No More” off the album “Golden Era” by Forest For The Trees.  You can check them out on Amazon, iTunes, and Spotify.

Full Episode Transcript

This is Jeff

This is Jeff from the Thoughtful Real Estate Entrepreneur. Welcome to episode number 19 of Sleaze-Free Real Estate Investing show for those of us who never felt at home in the We Buy Houses crowd. And this show what we do is we take a stand against what we call the lowbrow approach, the mainstream guru seminar distressed seller approach that ends up giving real estate investors a slimy reputation. Instead we discuss the strategies, the tactics and the philosophies that we call the thoughtful way and enlightened approach to real estate entrepreneurship that focuses on constantly sharpening

The sophisticated real estate entrepreneurs, three most critical capabilities, seller relations skills, deal architecture, skills and opportunity vision. When all three of these capabilities are successfully in motion, you can make an excellent living today and build long term wealth while creating value for everybody that you touch. along the way. We’ve got show notes for today’s episode at www.thoughtfulre.com/e19. Please do yourself and do us a big favor by hitting the subscribe button in your podcast app right now. And if you would be so kind as to go to iTunes and provide a rating and a review. That would be so helpful. Just do it honestly give us the score that you think we really deserve in your real thoughts. But the more reviews there are, the more it helps other people like you find the show. Now in the last episode, we discussed what we call the most amazing part of owning rental properties that nobody talks about. So go back and listen to that one. If you have not done that already, in today’s main course, we’re going to begin a discussion called what financial independence means to a TREE to a Thoughtful Real Estate Entrepreneur. But as always a little bit of food for thought. Because after all, we are Thoughtful Real Estate Entrepreneurs. That means we like to feed our minds with things to think about. And here’s what we’re thinking about today.

Today’s Food for Thought is built on a quote that I heard recently on the how I built this podcast. Now, if you’re not listening to how I built this, you should check it out, because it’s a lot of fun, actually. Great. It’s actually great journalism and a great interviewer who does the show, but every story is just extremely interesting and captivating, and there are now lots and lots and lots of episodes, so you’re going to want to check that out. A few years ago, in one of the groups I was a part of through EOE

Is the entrepreneurs organization. It’s a global network of entrepreneurs and I member of my local chapter in my EO group, we went to Las Vegas for a little retreat. And one of the companies based in Las Vegas is Zappos and Zappos. I had heard does free behind the scenes tours, where they will take you into the office they’ll kind of share their secret sauce if you don’t know much about their company. They’ve got a distinct in a really unique and cool company culture. And they’ll they’ll give you a behind the scenes tour of that for free and no problem at all. So we went and we did that. And after it was an amazing experience and got to see behind the curtain under the hood so to speak. And then after that, we did something else that they offer and we went downtown Las Vegas where the CEO Tony Shay has his apartment. And Tony was very big into working to revitalize downtown Los

Vegas, and he was using his apartment as part of the headquarters for that overall effort. And so they would give tours of part of his apartment. And that was a very, very cool experience. And all of that stuff that day left me really inspired to study and be a fan of Tony Shieh. The CEO not exactly technically the founder, but the guy who made the company what it is, and, and everything he does. So I’m a big fan of these days. In fact, he has a book called Delivering Happiness. That is a really cool biography about him and how he built the company and all the things that they went through to create this really unique company and really unique culture. So Tony was interviewed on the how I built this podcast A while back, and in the interview, the interviewer asked Tony, what he defined as success and Tony shieh said, my definition of success, I guess is getting to the point where you are truly

Okay, with losing everything you have, I just had to hit the pause button immediately that it blew my mind. I didn’t even know what to think about that statement at that moment. But it hit me as such a profound thought that I had to stop and really think it over. And I keep going over it again and again in my mind, because that to me, is such a profound thought. Success is getting to the point where you are truly okay with losing everything you have. Wow. So I just wanted to share two reflections I have about that. And I think they kind of go together in a sense to

I don’t know about you, but I do definitely myself. spend energy worrying about protecting what I have and not losing what I have. I don’t like the fact that I do that. But if I’m being honest with myself, and I’m being honest with you, I do and deep down in my heart. I do sincerely believe that

As long as I have my own resilience, I will be okay. That if I had to I could recreate what I have, I could probably even do a better job recreating what I have. Because even if I lost everything, I’d still have my knowledge and my experience and my maturity as an entrepreneur.

Worrying about, quote, not losing, is definitely a scarcity mentality, rather than an abundance mentality. And I try to be really conscious about having an abundance mentality all the time. But the truth is, it’s hard to do that sometimes. And it takes a real, intentional effort. But what if, I mean, what if I could no longer be worried about losing things about losing everything? If you just take that thought and just try it on for a minute? If you really put yourself in those shoes, and think what would it feel like to not be worried at all about losing what I have?

It’s it’s kind of a hard idea to try out. Because it’s very foreign, but it feels unbelievably freeing.  When you think about it from that perspective, the second reflection I wanted to have is that, you know, as soon as you become okay with the worst case scenario, in anything, it really no longer has a hold on you.  Because what really matters most could not possibly be lost or taken from me anyway.

What would be most important that could never be stolen from me is is who I am. It’s my sense of self, my my integrity, my own standards for myself, my relationship with myself, my relationships with other people, these are within my control, they can’t really be robbed from me. You know, when I do my morning ritual every morning, Michael sort of modified a Miracle Morning process. I remind myself very literally each morning that it doesn’t matter. If my

Businesses up or down. Or if I’m making tons of money or barely scraping by that regardless of which of those tracks I’m on, I still am the same guy. I’m still the same Jeff, I am just as worthy as a human, no matter whether things are up down or in the middle, and that my happiness is my own choice. It’s not correlated with outside forces. That can you know, that have an impact on me that I have no say over my happiness is my own choice.

So I hope that this quote makes you think deeply like it did for me and I hope it continues to make you think deeply like it’s continuing to do. For me, I found it unbelievably profound. I’ll give it to you again. My definition of success is getting to the point where you’re truly okay with losing everything you have. And that is today’s food for thought. You know, real estate investors get so caught up in which strategy to use what the best way to

Alright, we are moving on to the main course of today’s episode and today’s topic on Thoughtful Real Estate Entrepreneurship is what financial independence means to a TREE. What financial independence means to a Thoughtful Real Estate Entrepreneur. So first off just let’s step back for a second Why am I doing this episode? Why is this a thoughtful topic rather than just diving in and talking about more, you know hardcore tactical real estate equity stuff? Well, first, you know, I’m actually going to do two episodes on this. I’m not just going to do one. I originally intended to just do one. But as often happens for me, as I start mapping out my episodes and outlining them, I realized that there was more to discuss here than just one episode really could hold. So the answer to the question of why would we be discussing what financial independence means to a TREE? Is this why are you doing what you’re doing? Why are you out there studying real estate entrepreneurship? Why are you listening to this podcast episode right now? Why are you trying to buy properties? Why are you doing what you’re doing is the ultimate thoughtful question. deliberateness of purpose is one of the absolute core premises and tenants of being a Thoughtful Real Estate Entrepreneur and asking yourself the question, Why are you doing what you’re doing is something that you have to do if you want to be on task. And now that you know your why, once you’ve answered that question, you need to then thoughtfully select the how that will get you to that why. And that’s the spirit behind the purpose of this episode. And here is what I found.

When you gather together a group of aspiring or active real estate entrepreneurs, if you were to pull them as to what they want from real estate, what they’re hoping it will do for them. Do you know what the number one word is? That would come up in that poll in that conversation? The number one word is freedom. What does freedom mean? Well, freedom means different things to different people. But Dan Sullivan is the founder of Strategic Coach, something I’ve been a part of for a long time. And so I consider Dan, a mentor to me and

Dan teaches that there are really four types of freedoms for entrepreneurs, freedom of money, freedom of time, freedom of purpose and freedom of relationship. Now, on the surface, most real estate entrepreneurs are concerned with freedom of time and freedom of money. But I do honestly believe that the importance of freedom of purpose and freedom of relationship becomes more clear and appreciated later as they continue to develop more and more freedom of time and money. But, you know, I’m no different. I absolutely want those four freedoms. And on a daily basis Sure, I very concerned with increasing my freedom of money and my freedom of time. And people who are interested in real estate have been tuned in to this idea of how real estate can deliver freedom to them, especially financial freedom for a long time. This is not a new thought for anybody who’s listening to this podcast episode right now you’re not thinking, Oh, I never really considered being free before. That’s not even there’s no chance that that’s happening. But what’s interesting is that even beyond the real estate investment community, in the last few years, the idea of financial independence has taken on kind of a new life and it’s almost become more of a mainstream concept. And it has been sort of reborn by the millennial generation, generally speaking, who decided that they didn’t want to just slave away at jobs forever and watch life, pass them by, and there is kind of a new or maybe it’s a renewed movement that has been born and today, a lot of that movement is referred to as FIRE FIRE an acronym and FIRE stands for financial independence, retire early.

FIRE takes the principles that were first produced kind of in popularized by a book from, I believe, the early 1990s. It was called your money or your life. And I will put a link to that in the show notes, of course, as well. And the main today, the main mascot, kind of in the leader of this current wave of financial independence is probably generally considered to be a guy named Mr. Money mustache. So his real name, but that’s what he goes, it goes as and he built a really crazy big following as a blogger talking about the concepts of financial independence and giving people tools and tips and strategies for achieving it. And so he’s kind of like the the leader of a tribe of people who are increasingly fanatical and that that tribe is growing increasingly as well.

Today there, there are lots of other resources as well. Lots of other books, lots of other podcasts, conferences, things like that, that all focus on this topic of financial independence. Last week I went and I saw the premiere of a documentary. It was kind of a small time premiere night it was at it was held at a big theater, but it wasn’t distributed by the big theater. And it was a documentary called playing with FIRE. And it was, I gotta say, a very well done documentary. And it followed a young couple, who had decided that the financial trajectory of their lives needed to change so that they could better pursue their actual life priorities, which were based around spending more and more time with their young toddler daughter, and not needing to work forever. And the documentary follows their journey over the course of about a year and along their path. They go and they meet, they they take a literal physical journey, and along that path they actually meet and talk to many of the sort of gurus and most prominent voices in the FIRE scene, including Mr. Money Mustache himself, Vicki Robin, who is the author of your money or your life, and several others, it I’d say it’s a very well done documentary. It’s shot Well, it’s produced nicely. It’s just good, good quality. And it’s got a great storyline that’s very, very engaging. And I recommend that you look it up and you see when it’s available either in your area or at a theater. Or maybe more likely, I would expect that it will be streaming online Pretty soon, so keep your eyes open for that. But I want to give you a big picture overview of some of the broad concepts that are expressed through the FIRE movement, the scene in this movie particularly, I looked up financial independence in Wikipedia, just out of curiosity to see how they would articulate a definition. And the definition that you find on Wikipedia says this. financial independence is the status of having enough income to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others income you earn without having to work a job is commonly referred to as passive income.

I found another definition on another of the sort of prominent websites in this financial independence community called Get Rich slowly. And I’ll put that in the show notes to.

They said financial independence occurs when you saved enough to support your current spending habits for the rest of your life without the need to earn more money. Okay, so we have a pretty clear idea of what the definition is. And it’s very much along the lines of what we learned when we read Rich Dad Poor Dad is that when your passive income exceeds your living expenses, you are now financially independent and you are out of the rat race. And so what that means is there are basically two forces that get you towards financial independence. The first one is you can increase your income, especially your passive income, meaning the stuff you’re not going to work and work job and trading time.

In order to get or you can decrease your expenses. And in reality, of course, for most people, it’s almost certainly going to be some combination of those two things, right? You’re going to increase your passive income, some, you’re going to decrease your expenses, some, and you’re going to write the ship, so to speak. So here are the big picture steps, kind of, in my own words, from this movement. The first step is to be very deliberate with what it is that you want. It’s, it’s about starting with asking a lot of questions to yourself about what you want in your life. Why do you want that? How do you want to spend your time What does an ideal day look like? How do you want to be remembered? And to get really clear on that first. Now, I have to say from my own experience, having asked myself a lot of those questions, many different times over the course of my entrepreneurial career.

That sounds ridiculously simple, and it is ridiculously simple, however simple as we know does not always translate to easy. And I would say it’s easier said than done to come to very unbelievably clear answers about some of those questions. So you want to not skip over that step or not gloss over it and take it faster than you should. It’s important to get real clear with what you’re trying to accomplish. The second step then is to drastically and aggressively recalibrate your spending so that that spending is in perfect alignment with your goals and your objectives. And I think that most people find that when they really take a look closely at it, they’re spending is not really a reflection of what they say that they value the most. Right? So we’ve started by getting clear with what we want. And then secondly, we start to drastically recalibrate our spending in a way that reflects actually what we said that it is that we want. Step number three, is in this movement of financial independence through this recalibrated spending that you’ve just accomplished.

Which really, in most cases means cutting your spending on the many things that you said are not priorities, right. So you reduce spending on things you don’t think are priorities for you. That means you’ve increased your rate of saving, right, so the amount of the percentage of money that you’re saving out of your income, that percentage number is going up. So you increase your rate of savings as much as possible. And in this movie, playing with FIRE, this is a major, major point in the movie. And at multiple times during the movie, they would look at this couple and then they put a graphic up on the screen, it would say, at this moment, their rate of savings is 7%. And then it was 50%. And it was 75%. And it was back down to 57% and what not.  But they were always reporting the couple savings rate at any moment.

The fourth step that would would then be to invest the money that you saved in cash flowing investments, and now the FIRE community, as I’ve noticed, really seems to worship index funds. index funds are a product of the stock market if you’re not familiar with it. It’s basically a mutual fund that samples the entire market. It’s hyper, hyper diversification. So you’re what you’re betting on is the overall market trend, not the trend that any particular stocks. So instead of owning a few shares of a few companies, you own, you know, one 100th of a share of every company. It’s kind of along those lines. Some of these people, when they’re talking about cash flow producing investments, they do acknowledge real estate. Some of these people have real estate as part of their plans. But generally, I found from what I’ve seen, they tend to be very oriented towards index funds. And then lastly, step number five, when your income exceeds your expenses, just like in that rich dad cashflow game, you are financially independent, which to these folks means that they have retired can retire from actively working. That’s sort of the big picture overview that you get when you start to dig into the financial independence FIRE movement. One important side note I did want to make is about debt. When people talk about financial independence, there is a lot of talk about debt. And precisely, there’s a lot of talk about eliminating debt and the role of debt or the lack of role of debt in the strategies. Within the financial independence community. There are different schools of thought around debt. Some are just categorically against any type of debt, whether you’re buying a house or a TV or anything. Others are in favor of certain strategic uses of debt, and whatnot. And I just wanted to note that debt is a big part of this overall discussion. But it is an unbelievably epic topic in and of itself and is really kind of beyond the scope of our two episodes here, and something we’re going to need to dig into separately

Alright, so we’ve now kind of laid the framework down and the foundation in order to have a discussion about these concepts by explaining some of the basic pillars of these concepts. First, I want to start with what I really, really, really like about these ideas.

The most important thing to me is what do you value? Be very, very thoughtful about what it is that you value, right. And I believe me when I say I’m talking to myself as much as I’m talking to you, listening to this as well, but this is something that we are good at is being thoughtful, and it’s something that we need to continue to make sure that we aim our thoughtfulness at is getting really clear on what we value and what we want to sort of design and optimize our lives around. One of the ideas that one of the there’s a very specific things that was said in the movie that I thought was really powerful the struck me was spend money on what you value.

This isn’t about depriving yourself from anything. This is about saying, I really value, you know, let’s say I really value eating organic food, for instance. So the documentary is saying, then that’s what you should be spending a lot of money on. If on the other hand, you don’t really value clothing, then don’t spend a lot of money on clothing. Like that’s an area where you could make a lot of cuts in favor of spending more money on the things you really do value like, say eating organic food.  So it’s about spend money on what it is you really value super intentionally and recognize that what you don’t value as much you should stop spending money on. And so a real simple kind of profound question is they mentioned in the movie.

If you had another person, look at your bank statement, and your credit card statement, and they went through and there they were saying, I’m just going to see what storyline this bank statement tells with that bank statement. Tell them a storyline of what is most valuable in your life. And for most of us, the answer is probably not.

So what what is it you want in your life? You know, this is just a such a important question overall and I love the deliberateness of the FIRE movement. People are being very conscious, very thoughtful about identifying what they want, and not just settling for getting on an autopilot societal track where they just do what everybody else does. And they’re 50 before they ever even think to ask why they’re doing what they’re doing. It’s about being thoughtful and deliberate about everything. Like I mentioned, it’s not about deprivation, it’s about it’s actually about getting more of what you really want. By giving up things that you don’t care as much about. The human nature seems to be to focus on what you no longer have, right. You no longer have the BMW and you only have the the Honda Accord now but instead of focusing on that, think of what you do have which is positive cash flow Now perhaps each month. And regardless of how you feel about debt, it’s definitely dumb. And just about any school of thought to be expensively financing the purchase of things that you don’t really value, right? Now, if it’s something you value, the whole debate about whether you should use debt or not as completely a separate topic, but if you don’t really value, you know, electronics equipment that much, then why is it you are buying a big TV and putting it on a credit card at 18% interest? That doesn’t make sense. And so it’s about being intentional and allocating your spending accordingly. But as you might have been guessing, there are actually quite a few things about what I have personally experienced a little bit through the financial independence FIRE topic that does not quite sit right with me as a Thoughtful Real Estate Entrepreneur. And well, so many of these ideas is I think are fantastic. There are some things that as a TREE, I just feel are a little bit different. And that is what I really want to spend time talking about.

The first idea is the notion of saving, you know, saving, quote unquote saving money actually kind of bothers me, the idea of stockpiling dollars, which is a an item that we know is constantly decreasing in value through the effects of inflation, does not seem to really make sense to me. Now, I think what they’re saying when they’re talking about saving is actually not so much building up a gigantic savings account, hopefully. But what they’re talking about is spending less on stuff that doesn’t matter to them, which I hope is the case and I absolutely do agree with but when somebody asks How big is your savings account? To me as a Thoughtful Real Estate Entrepreneur? That’s not a question I’m really interested in thinking about or focusing my life on growing my savings account. Sure, there is a role for savings as a business person as a, just as an individual for a safety net or for this or for that. But in terms of an actual vehicle that is helping me get to my financial independence, if I’m a thought for real estate entrepreneur, that’s not the tool that I’m going to be most focused on.

The second thing that kind of just just sits a little bit funny with me is the idea of playing offense vs. Defense, increasing your income versus decreasing your spending. And as we mentioned, of course, in all likelihood, your pursuit of financial independence is going to be some combination of those things, right, cutting out the spending, that doesn’t make sense for you, increasing your income over time. But at the end of the day, I’m an entrepreneur, and entrepreneurs have a need. We are we have a need to create things. We have a need to create value in the world, I would so much rather increase my means and make more money than decrease my spending. Or at least the proportion of my changes, I would rather have be much, much more about growing my upside than cutting back on my spending. I love to create value, I need to create value, it is fun for me, I would be tortured if I couldn’t be doing that. And that’s actually part of the you know what I find interesting about the word retire, retire kind of means to take something out of service. I don’t want to be taken out of service. I do want to get to a point where I’m not required to do things that feel like an obligation to me, but I don’t want to be taken out of service because I’m an entrepreneur being of services is what I was born to do. So I want to improve my defense, but I really want to utterly explode my offense. And as I read and I see a couple of these, you know, movies and stuff like that their focus is much more on cutting expenses than it is on exploding their offense. The third concept that just leaves me feeling a little funny is about the topic of investing and control. Now things like index funds as an investment vehicle, or anything that’s, you know, based in the stock market lacks a major element that I as a TREE personally value a lot. And that is control. Now, am I suggesting that I have 100% control in real estate that that nothing could blindside me that could be outside my control? No, of course not. I was alive in 2008. I saw what happened. There were people who were blindsided. There’s no doubt about that. But I do have a lot of control over a lot of elements of my investment. When it’s in real estate, right. I can ensure that my properties are being managed well, I can ensure that my properties are being maintained. Well, you know that my lawns estate mode that my Picket Fences stay painted freshly white, I can ensure that my marketing for new tenants or for new properties or to sell my property or whatever type of marketing I’m doing is top notch. I can ensure I give my customers again tenants, whoever might be wholesale buyers, I can ensure I give them great customer service, I can ensure I underwrite my rental properties prudently. And especially as a Thoughtful Real Estate Entrepreneur. This is a major point. I can ensure that my ability to use my own savvy and my own people skills to negotiate is there. I can ensure I can control my outcomes. I can greatly impact my outcomes in negotiating with people, because that’s what I do. And that’s what I’m good at. negotiation comes up so many times of negotiating the price and the terms of a purchase the price and the terms of a sale of a property, the the pricing and the rents and the terms of a lease, etc, so on and so forth. So when I look at control, there’s 100% control is an illusion in anything. But when I look at the elements of things that I can control, in real estate, entrepreneurship versus the the elements of things I can control through securities, like index funds, it’s not even a comparison. The fourth thing that strikes me when I hear about the financial independence concepts that are so mainstream, is the idea of diversification. You know, as I mentioned, index funds are kind of like hyper diversification and the mainstream thought

The mainstream opinion is the diversification is key, and the more the better.  And I don’t disagree with elements of diversification to a certain extent. But it has also been said that diversification is simply your insurance and protection against needing to be an expert at anything. And I believe very strongly with that approach. Now we as TREEs, we love to become experts in the many facets of Thoughtful Real Estate Entrepreneurship. It’s just interesting and fun. I don’t want to have to be a generalist. I want to dive deep into this topic and all all the sub topics because I love it. And it’s super interesting and fun to me. Rather than putting all my eggs into a bunch of different baskets, I would rather have a couple baskets that I know really, really well. As I was mapping out my outline for the podcast here I just thought of this simple kind of sports metaphor, when you’re an expert at something. When you’re down by two points, with three seconds left in the game, when you’re the expert, you want the ball in your hands. And it made me think, you know, Phil Jackson, coaching the Chicago Bulls in in the 90s. And the 80s. Did he say to himself, you know, we need as many players as possible, who we can pass the ball to, for that game winning shot. No. Phil Jackson had Michael Jordan. Phil Jackson’s approach was we need to focus on isolating Michael Jordan so that he can take the game winning shot because they had an incredible basket in Jordan, right. He was a basket, they put their eggs in, they weren’t looking to spread their risk from him and put their eggs in a bunch of different baskets. They said we have this incredible basket that is an absolute expert and we’re looking To actually intentionally put the weight of this risk on his shoulders, we’re intentionally allocating our risk into that basket. Because we know that basket Well, we know that basket knows how to perform. And I think the same thing is true for us as Thoughtful Real Estate Entrepreneurs is some level of diversification, of course, is, is smart and prudent. But we don’t necessarily want or need to have our eggs spread across a bunch of bunch of bunch of different types of baskets, in order to allow ourselves to not have to learn about one of those baskets very deeply. We want to learn about one of those baskets very deeply because it’s an awesome and fun and super intellectually stimulating basket, real estate. And the fifth and final thing that I find just hits me a little bit funny with some of the FIRE concepts is I find that overall they’re relatively financially simplistic. Now, simplicity is not a bad thing by any stretch of the imagination. But when they when they’re talking about the cash flow and creating financial independence, or really, it’s just kind of a cash in, cash out concept. If the delta between the cash coming in and the cash coming out is positive, then you’ve got financial independence. But that’s all well and good, but it doesn’t really account for many of the more sophisticated financial forces and economic forces that you experience in real estate and real estate investing is sort of designed to capture some more of these much more sophisticated financial dynamics. For instance, the first one that comes to my mind is the effects of inflation on debt. Now, if that doesn’t make sense, you need to go back and listen to our last episode, Episode 18 called the most amazing part of owning rental properties that nobody talks about. And that we discussed there. The idea that when you hold debt when you when you owe people when there’s inflation that’s good for you because it because it sort of erodes the impact of the debt that you owe. So go back and listen to that one.

It’s financially simplistic in the sense that it doesn’t really take account for the tax benefits of real estate, which are many and significant like depreciation. Many lots of different types of deductions, not the least of which is interest, deductions, etc. It doesn’t take into account a sophisticated financial force and dynamic of a whole topic in and of its own of arbitrage. arbitrage is making margin on money. You know, it’s how banks make money. They bring in money by paying savings accounts 1%, they loan it out a 3%. arbitrage could also be seen as the strategic use of debt borrowing money as at 5% for your real estate investment that’s generating at 10% return. And so you’ve got an arbitrage that way, rap notes, things like that things we haven’t even talked about in this podcast yet we haven’t even gotten to yet are sophisticated financial forces that are not really a part of the the thinking with the FIRE movement. Lastly and very obviously is amortization and principal pay down of debt by others when you have a rental property with an amortized loan, that renter is paying your loan off for you. So there’s a lot of things there that that don’t quite resonate perfectly with me about the financial independence or the FIRE movement. In short, I think the spirit of all the concepts behind that movement feels really good to me as a TREE and me as sort of the leader of a tribe of Thoughtful Real Estate Entrepreneurs. But it’s some of the strategies and the tactics that are offered by that movement for achieving financial independence. said I don’t feel quite achieve what we need to and want to and are capable of achieving as thought for real estate entrepreneurs. So leaves us with a bit of a conundrum. But our goal here in the rest of this episode in the next episode is to kind of fill that conundrum and say, how would we adapt those strategies for thought for real estate entrepreneurs in a way that makes sense for us and how we do what we do? So, you know, what does financial independence mean for a TREE? Well, so you know, it’s interesting for regular people, I feel like the sequence of questions that they asked that they have to ask is this number one, what do I want? And why do I want it? In other words, that’s their why that’s their purpose. Number two, now that I know what I want and why I want it. Number two, how can I get it? This is the house right? This is the strategy their vehicle and number three, now that I know what I want, why I want it and how I can get it. What do I need to do to achieve that? How right? So this is like the plan. This is the what? So it’s why, how and what. But for TREEs things are a little bit different, aren’t they? Because we already know that we love real estate and we know already that we want to use real estate as our vehicle we already have the big picture of the how mapped out at least at the big picture level. So our sequence of questions is more like this.

What life outcomes exactly am I trying to use real estate to achieve? Okay, so now we’re re clarifying our why but already knowing that we want to use real estate to do it. What life outcomes exactly am I trying to use real estate to achieve? The second question we experienced is of the many approaches and strategies for investing in real estate. Which ones will get me to those outcomes right. This is our first how we know our broad How is real estate, but what version of real estate is going to get us where we’re going. And I hope if you’re listening to this, that part of your answer there is we’re going to use thoughtful strategies and the investing concepts within the thoughtful platform. And the third question is, now that I know what life outcomes I’m trying to accomplish with real estate, and I know of the many approaches and strategies, which ones I’m going to be employing within real estate, what is my plan for executing those strategies? So I feel like our sequence of questions is just a little bit different because we already know that we want and love the idea of using real estate to get where we’re trying to go. So I believe the most precise question that we need to answer for ourselves and this is going to be the focus of part two of our episode to episode series here is this. What are the ways of Thoughtful Real Estate Entrepreneurship that will create the type of financial independence we are seeking.

That’s the question I’m going to leave you with today. And when we come back on the next episode, that’s the question that we’re going to tackle and wrap up this two part series on what financial independence means to Thoughtful Real Estate Entrepreneurs. Thank you, as always, for listening to Sleaze-Free Real Estate Investing. On the next episode, I just told you we are going to be discussing the second part of this topic about financial independence. Again, do yourself do us a big favor by subscribing to the show. Please go to iTunes and rate and review the show as it will really help other people be able to find us on the iTunes platform. Reminder we’ve got show notes including transcript and links to all the stuff we’ve mentioned and and there’s been quite a bit of it today in this episode at thoughtfulre.com/e19.  Until next time this is Jeff from the thought for real estate entrepreneur signing off.

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