Buying Freedom as a Green Beret With a $60M Real Estate Portfolio

0:00I I built the five stages of freedom or the five stages of income rather as a way to visualize like where I'm at and where I want to go and just a way to understand how income truly works. So there's stage one I call like just hourly pay. You are you work an hour, you get paid for an hour of work, whatever that pay may be. You may be a line cook or you may be a nurse working at a hospital making $75 an hour. It doesn't matter. You're you're getting paid by the hour of work, right?

0:31So, the catch there is you don't get paid if you're not working. Okay? So, then there's stage two, which is your salary, which is typically getting paid for a a responsibility, a set of tasks of some kind, right? So, you're paid in order to manage this department or whatever [clears throat] it may be. And that gives you a little bit of flexibility in your time and how you use your time. But ultimately, typically, there's still some sort of 40 hours a week roughly tied to it.

1:05Maybe there's a little bit of pay beyond that. But also, that typically means you need to be a little bit more available. So, if you're not at work, you may still have to respond to a couple emails and take care of a few things just to make sure that your role and responsibilities are fully taken care of. Right? That's what we all aspire to be, right? That's what everything in school talks about is, hey man, you know, go work for a big company, become a mid-level manager, and then move your way up into a seuite and da da da da da. But ultimately, it's still the same trap as hourly pay really.

1:38You're still getting paid for your time. It's just slightly more flexible. Maybe it's a little bit better pay. It's fantastic. Maybe it even comes with a super cool title that you're, you know, makes it sound awesome to all your friends. You know what I mean? But ultimately, you're still getting paid for your time. And if you're getting paid for your time, you can't be free. — Someone else controls your paycheck. You can you're ultimately not in control of your time anymore, — right? So that's stage two. That's where most people kind of stop. — stage three is what I call transactional.

2:12This is typically what a lot of people if you're a high performer a lot of times you get frustrated by the lack of meritocracy in stage one and stage two income right so you want to be compensated because you're a badass you work faster than people you know things better you're you're speedy you execute quickly or you're in something that compensates for a result typically like sales right so — commission House flipping works kind of the same way, right?

2:44House flipping is kind of the same way, which is fantastic. You can make a lot of money in a transactional income structure and a lot of people do. You know, lawyers are kind of a transactional you know, they can also be paid hourly, but you know, there's different ways that they get structured it, but ultimately it comes to like you make a commissioned, you get paid for some sort of result. This is where a lot of people I know make a lot of money. But they're also stuck in the grind and the hustle because if leads aren't coming in, if there's no real continuous generation of income, you can't stack income on each other.

3:25So — to get that sale now, you have to start over at zero with a new lead to get another another sale, — right? And then and eventually some companies have a little bit of compensation structure where you get residual income from previous sales and stuff. Sure. But ultimately once that runs out, you're done. You still have to show up to keep making your 500 grand a year or 700 grand a year. You know what I mean? It's pretty special. And then people think that, hey, I'm sick of working for someone with a salary.

3:58I'm going to jump into this kind of transactional income. But then they get themselves stuck there because they've expanded their lifestyle now that they're making 300 500 $700,000 a year as a realtor or a loan officer or a you know whatever it might be. They get themselves stuck there and now they have to keep working that hard, keep grinding in order to keep making that money. Yeah. — Right. So and then stage four, this is what I think is the crown jewel of where it really shifts people's mindsets from the traditional models that they understand cuz stage one, stage two, and stage three, everyone's kind of familiar with it and they, you know, some people are a little bit afraid to go in stage three because of the risks because it can be kind of feast and famine times depending

4:47On the economy or markets or whatever it might be, right? Or depending on their product or whatever. And then but stage two feels nice and secure because it's a salary, but someone can fire you tomorrow for downsizing or whatever it is. But stage four, this is where it comes from ownership. You own something that yes, you're involved with. I call it semi-passive income. Stage four income is semipassive. And what I mean by that is it's semi-passive because there might be a heavier upfront lift to get it established, to get it moving, to get systems in place, but once the systems are in place, it just takes your light touches here and there to keep the machine moving.

5:31— Make sense? So this is what I think this is that big paradigm shift for most people is like once you get in it, once I got my first multifamily deal, I was like, "Holy crap, this is real." I turned a little bit of heavy upfront labor and effort and learning and things like that into $2,500 a month that never really went away. — Yeah. — And all it took was me maintaining it. Yeah. The first three months were heavier, right? Like 10 20 hours a week, but then after that it was like two to three hours a week and I was still making $2,500 a month.

6:04And if I take that in compensation for my per hour from what I was making in the army, I'll take the $2,500 a month for seven to nine hours of work all day. — Yeah. — Right. — That frees up all all that other time to do something else with. — Exactly. So, and I think that's the big thing. And then but it also allows you to compound and scale your income based upon either streams of income or owning that system and machine that allows you to scale your income within it. And that's kind of what some of the other frameworks show you how to do.

6:37But ultimately, it's like, all right, well, where do I want to be? I want to be in a stage four income. I want to be able to have control. I want to be able to actually have something that produces income so that way I can eventually leave my job — and I want something that, you know, can grow in some value so I can create net worth and wealth and stuff for my family. — and you can't do that. You can't sell your job. Your job has no value on the marketplace. So in order to do that, even if you do that, you can do that in a stage four income system, right?

7:09And then beyond that is stage five income. That's purely passive. And most people chase this passive income thing, which is all a fallacy ultimately because there is still some management you need to do. So let's call it a stage four. Truly passive income is when you've dumped $10 million, you sold all your assets and all the equity and you you have $10 million in equity and you dump that into a portfolio and now that's just kicking you income. — That's truly passive income. Anything else is stage four p semi-passive income, right?

7:42Because you typically still need to understand it. You need to be operationally involved a little bit. — So that that's my five stages of income. And the cool part about it is you can be in all of them at once. — Yeah. I was going to ask like do do you have to just be in one or do you recommend being in multiple? — You you can you can be in multiple and that's kind of the cool thing about it. So while I was in the army I was a stage two income, right? But I was also building my stage four. So I own stuff in stage four and stage two.

8:14And then for a little bit I would do some sales work for a guy because it helped kick me up some cash so I could do other stuff. Right. So then I was in stage two, stage three, and stage four all at once. — But then I had a dividend producing stock. So that's a stage five. — Yeah. — Right. So that's it is like it's just ultimately like, okay, what do all of my income streams? Where do they come from? And how much of my time, effort, and skill is involved? — Yeah. Yeah. That's super helpful. As you explained that I was envisioning the same thing like I could see myself like prior to the army you know working high school jobs stage one you know and then army it's more like management as an officer and then you know as I got out of the army then I started flipping you know stage three and I did some I was a loan officer for a while to your point you use that as

9:03an example stage three commission and then transitioned from flipping which I thought was investing initially to short-term rentals which we were heavily managing in the beginning to your point and then — now I mean we we have 43 listings total and we spend more less time on those than we did at with one in the beginning because we just have systems in place to manage all the day-to-day. So, — but the key was to own the system, right? Was to own the potential of it, build it, learn it, so that way you can implement those systems because your first one, I'm sure your first deal was a show at first, right?

9:41Exactly. — It was a mess. You're learning and it's scary and you don't know what the hell you're doing, but eventually you've mitigated enough risk and you learn what creates risk, which is just lack of predictability. And ultimately, we all know that lack of predictability is really just a function of knowledge and control. So if you can learn stuff and you can control it, which you can't control a job, let's be real. So as long as it's a system that you own because then you can control it. And then you have to have the parameters and all your legal agreements that you truly do have some sort of control, right?

10:12— And that was it for you guys is cuz you did exactly that. And that's the thing is the paths are infinite. And that's what I want people to understand. The paths to financial freedom are infinite. I'm a big real estate fan also, right? Because of the I like the way the metrics and the time and all the other things kind of compound together. That's my favorite also. — But man, the paths even within real estate are infinite almost. So, and it's just something that people just need to understand the underlying structures and frameworks, which is why I wrote the book. So, that way, all right, as long as you follow these frameworks and these principles, it's going to work predictably.

10:49It will predictably get you where you want to go. Just stick with it. Pivot as you need to, you know, along another path. That's fine because it all happens, right? Starting to flip and then you pivot. I started in multif family, pivoted, went short-term rental kind of stuff, too. Pivoted, went to self- storage. — Yeah. And that that there was such an epiphany moment going from stage three to stage four when, you know, we were flipping before and everything that every dollar we made, it was from constant hustle to all of a sudden having my first short-term rental. And it it it was really it was it was a good pretty good cash flowing property.

11:24It wasn't going to change my life, but at the same time, I recognize the fact that okay, I this is coming in regardless, you know, and I I have to put in some effort and I could I I saw a path where I could reduce that effort, add more of these, and I could see now a direct path to where this is going to change my life. Like this is going to support me forever if I just keep at it and just stack these on top of each other and and and to your point about salailability too. Now, — you know, we have a good system in place that we control that I don't run the dayto-day.

11:59So if if we had to or decided that we wanted to sell it, we could sell the whole package because it's just a stream of income that's managed by others altogether, you know, and and I think there's a ton of value to that. So, yeah, that's that's super helpful to kind of get that visual around the different stages. And that kind of ties in too to the, the freedom metrics, or or matrix, I should say, which is, you know, kind of a a simple way to map where your money is working for you versus against you, and then what move to make.

12:35So, how does that work? How do people how can people use this? So the freedom matrix is exactly the how do I get to a stage four income like what do I need to buy? Because that's the natural question is okay yes I want a stage four or stage five income. What do I do now? Okay. Well, you need to buy something that fits. And that's what I was like, all right, how can I visually and methodically show this in a way based upon what I've learned and my little bumps in the road and then also what I've watched tons of my friends and other people like you do that's been predictably successful.

13:12Okay? It has to cash flow day one. — It has to be able to appreciate and you have to have control. Those three factors have to be. So I was like, "All right, well then what are all these other things that people buy and do with their money or invest in or whatever that they think gets them where they want to go but ultimately doesn't?" And I it all came down to those three factors. It's a mix primarily of the two two biggest questions, right? Is does what I buy go up in value or down in value and does it cash flow or doesn't it cash flow?

13:50Okay, name anything that anybody could ever buy and it fits within those questions and obviously two questions, four possible combinations of answers there creates the four quadrants of the freedom matrix and that's what I was trying to do is how can I simplify it with two questions as to and then adding a third question the control question right is how can I get someone to understand what are the basic characteristics of an asset that you need to buy in order to do this because asset is this weird blanket term.

14:24And you know this, right? Rich Dad Poor Dad kind of does a cool thing where he's like, "All right, does it put money in your pocket or take money out?" Right? That's a great way. It simplified that thing because asset is really an accounting term that means anything that has some sort of value that you could sell. A business asset is a car, the furniture, guns, jewelry, anything that you could sell is an asset, right? And technically fits into your net worth. But that's confusing and that's that kind of gets people thinking these weird ways and gives them these outs and mental excuses to go buy expensive stuff and think they're buying assets when ultimately what we want to understand is the flow of money.

15:06And that's truly what it comes down to is is all right. So if we your typical middle class family, what do they do? They buy cars, their house, they buy fancy stuff, maybe a little bit here and there, they buy clothes, they buy that stuff, and then they invest in typically some sort of stock portfolio within a retirement account, right? An IRA, a Roth IRA, a 401k, whatever it may be. So all of that though requires all of their money to be trapped.

15:38It doesn't give any cash flow. It traps all of their money until they're of retirement age. So, there is no way for you to get freedom from doing that until you're 59 and a half or 65 or whatever the your, you know, your target date fund maybe has. — Right? So now, now, okay, well, if that doesn't get me there, what does? — So, that's kind of what I broke it broke it down is if if you visualize, you know, you know, a cross matrix there. Basically, I have it where on the left side is non-cash flowing and on the right side is cash flowing.

16:14On the top is appreciating and on the bottom is depreciating, goes down in value. So again, those are the questions, right? Does it go up in value or down in value? Does it cash flow or doesn't it cash flow? So everything that most middle class families buy keep them trapped because it stays on the left side of the matrix. It may go up in value, but it doesn't cash flow. But it also a lot of what they buy goes down in value. Yeah. And they buy it with with credit. So now if something goes down in value and you buy it with credit, now you get the interest hit and the depreciation hit, right?

16:49Which robs you of your wealth. But then everything else that you buy, if you're dumping money into your 401k or whatever, which is great, don't get me wrong. I get it. But ultimately, it just robs you of your freedom because you are trading your time for that money that you're putting in there. I'd rather just trade my time learning how to buy an asset that gives me income now and gives me income forever — and then will also give me appreciation because that's ultimately what the stock market does. Everybody says, "Oh, it gives me, you know, compounding interest." No, it doesn't.

17:20It just appreciates. You know what I mean? Unless you're unless you're getting dividends and then you buy more stock shares with the dividends, then yeah, that compounds. But — yeah, so ultimately it's just really a way and I'll make sure that's also on the on the bonus sheet for your listeners, too. So that way it's the visual of it. Because I want them to be able to see it as we're talking about it a little bit. — so I'll make sure I put that on there for them. — Awesome. — But it's really just staying to the upper right is the goal. Something that appreciates, something that creates cash flow, and something that you have control of.

17:55Because why the control was so powerful is it moves into my four drivers of appreciation, right? Which I talk about, which you know I can touch on real fast. But if it cash flows, that means I could buy a business and real estate's a little slower than a business. We all know that. But it also doesn't appreal estate appreciates faster than a business ultimately. Like the value is goes up faster. It's got a higher multiple, right? So, buying what I call freedom assets is it's something that truly an asset that will buy your freedom, meaning it has to cash flow, which means I can now buy one and like you did with your short-term rentals.

18:31You bought one that created, you know, $2,000 a month in cash flow. Then you bought another one that created another 2,000. So now you're making 4,000. Then you bought another one and it creates more. And it allows you to compound your income to the point where you can actually become free in typically 5 to 10 years is what I say. And that's not a get-rich quick. That's a realistic timeline based upon how fast you want to move. But if you're buying stuff that goes up in value, cash flows from day one, and you can control that income, especially, you can then make the value go up and all this other stuff, then you truly can build your freedom pretty quickly, especially if you buy assets like my first storage deal, right?

19:08A lot of effort, — but I ultimately had control over driving that income up, which drove the appreciation value up, which allowed me to buy more income. And I literally with that one deal, if I bought it myself and it was like a $110,000 down payment. A lot of people have that. If you bought that one deal and were willing to put in the work, you could have made your net net worth go up two and a half $3 million in the course of two years and have a $10,000 12,000 a month plus net income.

19:45$144,000 a years forever. — Yeah. — And then on top of that, then you let the time do the work, right, of compounding because rents go up, rates go up because of inflation and all the other things. So that only works for you, man. You You get it? — Yeah. Yeah.