A Definition of "Financial Freedom" Changed My Life

A Definition of "Financial Freedom" Changed My Life

Specialist · San Antonio, TX · Member since 2011 · 81 posts · 97 votes

I once heard a defintion of "Financial Freedom" that changed my life. The definition went like this;

"FINANCIAL FREEDOM happens when your wants and your needs are exceeded by your passive income."

Once I heard that definition everything changed... everything became crystal clear to me. I had been chasing money but I didn't know exactly why or how much I needed. How much was enough? I had nothing to measure by.

Until I heard that definition, I always assumed that people who were "financially free" were rich. After hearing that definition my life changed completely because I finally understood that being financial free and being wealthy were to completely different things.

That definition said to me that I controlled the bar. Where the bar was set was up to me. At the time I needed $3,500 per month to be free... free from having to have a job or to answer to anyone else on a daily basis. Thinking of becoming rich was daunting but financial freedom was doable. Freedom was well within reach. $3,500 per month was doable!

That definition also said to me; when I become financially free at a modest level, I'd then have the luxury of persueing my hopes and my dreams 24/7/365 days a year. I instinctively realized (finally) that the sooner I became financially free, the sooner I'd have my run at being wealthy.

From that day forward I became singlular in focus and knew exactly where I was at and how fast or slow I was approaching the inevitable first step to my freedom. I had to create $3,500/mo worth of passive income. Suddenly, the mountain of entrepreneurism was not so tall. I could see - smell- the first platue along my own personal hike towards success.

I achieved that goal in a relatively short period of time...1 year. I quit my job and began chasing my dreams every day - all day. My first year I did 45 houses. My 2nd year I did 65 houses. My 3 year I purchased 150 houses and sold 97.

It all started one day when my desire for "chunks of money" was replaced with a desire for "slices of cash flow" that added up to $3,500 per month. After all, money isn't what we are really after is it? I contend we are after our freedom. If freedom could be bought with jelly-beans, we'd all be reading books about how to find jelly-beans...right? All money does is buy you freedom.

I didn't have to be rich to keep my overhead low. In fact, being poor had already tempered me towards doing just that; living modestly. The secret was to keep my overhead low even as I began to make more and more money. Personally, I wanted my freedom more than I wanted a boat or a new car. I put a premium on "Freedom." I wanted my freedom so I could see just who I'd become if I didn't have the pressures of making a living haning over my head. It ended up just as I suspected. I became wealthy after I became financially free.

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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
15y

Mitch -

Welcome to the forum!

Nick's comment about a sales pitch was just more of a function of the fact that we get a lot of people who come here, don't contribute much, and then try to sell us stuff. We're a close knit bunch and very protective of the less experienced investors, which is why we get a little paranoid.

But, the nice thing about this site is that as long as you keep making contributions like this, not only will you help educate all of us, but you'll also gain the trust of our members, which will in turn help you and your business (we have nothing against people who sell stuff, as long as they are willing to give as much as they take).

All that said, it's great to have you here, and I'm looking forward to more about your "adventure" and success.

Let me start with a question that I'm sure some of members are probably wondering about: You mention that you realized the benefits of passive income, but it sounds like much of what you've been doing is very active (wholesaling, flipping, etc).

Are you involved in passive investing at this point? To what extent?

See this reply in the discussion

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  • Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
    15y

    Great story! I can't help but think you're ultimately setting up a sales pitch but given that I seen from your profile you seem to know Marc Faulkner, someone who I think is a cool guy. I'll give you the benefit of the doubt and welcome you to BP and say, if you've got some wisdom, I'd sure to like to learn from it

  • Involved In Real Estate · INLAND EMPIRE, SO CAL · Member since 2011 · 19 posts · 6 votes
    15y

    Well put... I think that is a concept all newbies like myself should really think about and understand. I think most young investors that are chasing the "get rich overnight dream" have a lot to learn from your story. Thank you for the insight and wisdom...

  • Specialist · San Antonio, TX · Member since 2011 · 81 posts · 97 votes
    15y

    For once being poor worked in my favor. I was very good at finding deals. then I found a guy who put up the money if I'd bring the deals to him. We'd split 50/50. At the time we sere buying, Fixing, selling with owner financing and them selling the norte for cash. I made $30,000 total profit on my first 2 deals. That was more than I made in a year working for a paycherck. So, I kept my wits about me, put the money in the bank and rationed it out to myself at the sme amounts I was used to. I didn't change a thing to do with my overhead or my pay...but I did quit my job. That began my fulltime career - March 1996, Never looked back

  • Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Great post Mitch...Welcome to BiggerPockets.

    Posts like this generally fit better on the blog section of the site. You may want to check that out. The forums are more for things that need a back and forth or where you have questions.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    15y

    Mitch -

    Welcome to the forum!

    Nick's comment about a sales pitch was just more of a function of the fact that we get a lot of people who come here, don't contribute much, and then try to sell us stuff. We're a close knit bunch and very protective of the less experienced investors, which is why we get a little paranoid.

    But, the nice thing about this site is that as long as you keep making contributions like this, not only will you help educate all of us, but you'll also gain the trust of our members, which will in turn help you and your business (we have nothing against people who sell stuff, as long as they are willing to give as much as they take).

    All that said, it's great to have you here, and I'm looking forward to more about your "adventure" and success.

    Let me start with a question that I'm sure some of members are probably wondering about: You mention that you realized the benefits of passive income, but it sounds like much of what you've been doing is very active (wholesaling, flipping, etc).

    Are you involved in passive investing at this point? To what extent?

  • Specialist · MA · Member since 2009 · 858 posts · 306 votes
    15y

    I'm with Nick and J Scott,

    I felt like you were about to pitch something but to give you the benefit of the doubt I must say I've never thought of it like that before. I've HEARD people say financial freedom, but I've never really thought of it. I guess for me, liking what I do is half the battle so it doesn't feel like work.

    Breaking it down is perfect though.
    Thank you.

  • Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
    15y
    Originally posted by J Scott:

    Let me start with a question that I'm sure some of members are probably wondering about: You mention that you realized the benefits of passive income, but it sounds like much of what you've been doing is very active (wholesaling, flipping, etc).

    Are you involved in passive investing at this point? To what extent?

    I think he's into notes:

    Originally posted by Mitch Stephen:
    Fixing, selling with owner financing and them selling the norte for cash.

    That and I noticed his first colleague was Marc Faulkner who's into notes. Just a hunch :mrgreen:

    I will say this, Mitch and I shared some pm's already and he's expressed his sincerity to be a contributing member. Seems like a cool guy.

  • Specialist · MA · Member since 2009 · 858 posts · 306 votes
    15y

    LOL...Ok Nick, that's for doing the legwork. I guess all my BP hairs were standing up for no reason. I think we are all pretty sensitive to it now and we need to "explore" a person's intentions a bit more before we jump...:)

  • Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    15y

    Bob Brinker calls it "critical mass." The idea that we don't have to work a job we don't want to. His story appeals to those senses.

  • Denver, CO · Member since 2010 · 41 posts · 1 vote
    15y

    MItch,

    As a new investor still finding my way, I appreciate your post. Often I wonder how much money I will need to make or how many properties in my portfolio I'll need to have to be deemed successful. What really matters to me, which I forget 99% of the time, is that I am choosing real estate investment as a career, not only because of my passion towards the field and idea of being my own boss, but because if done properly and morally, it has the ability to grant me that "freedom" to pursue my other goals in life. Again, thank you Mitch and the rest of you for helping me throughout this process. I love this website.

  • Specialist · San Antonio, TX · Member since 2011 · 81 posts · 97 votes
    15y

    Wow! Thanks to everyone! Thank for the advice Bryan. To Ryan I day;
    Technically i started out lanlording. I got to 25 houses, quit my job and discovered the money wasnt going into my real bank account like it was supposed yo on paper. Repairs, vacancies, move-outs, court costs, lost time...were killing me. I couldnt sell. No one in the nieghborhoods i had houses in could get a new loan. In desperation I offered "owner Financing." Then, something magical happened; I collected an average of $3,000 down per home (25 x $3,000 = $75,000) and people stopped calling with repairs, started improving my propertis and stopped moving out every 6/12 months. THEN, the note buyers started calling me! That's a whole nother story.

    --Mitch Stephen--

  • Investor · Kalamazoo, MI · Member since 2009 · 1k+ posts · 495 votes
    15y

    I like your definition Mitch. I also like what smitnlit had to say regarding, "liking what you are doing." If you are passionate about what you are doing then it is more like fun vs. WORK. My definition of financial freedom used to be: Obtain enough passive income to replace the income of my day job. The reality now that I have done that is, this isn't all passive and it does involve a lot of time and effort. Still- once the mail box money is rolling in, you are now freed up to figure out how to use your time to do more deals and make more money! It becomes addicting and I know Mitch shares this condition and I am glad to see you here on BP. I hope I was the one that invited you. We can always use more experienced investors and I know you have a lot to contribute assuming you aren't to busy doing deals.

    For those of you who don't know Mitch-let me just tell you that, he is a great guy and the Real Deal. I have worked with rehabbers, mobile home dealers, small lenders, developers and other investors, all over the country, that use Seller Financing as part of their business. Most of the time seller financing is employed out of need and not much thought has gone into underwriting, documentation and the actual plan. Mitch is a thinker and Mitch had/has a plan.

    I have bought and sold millions of dollars worth of notes from Mitch and his company over the years. He understands that the essence of Seller Financing is to create a true win for all parties involved and this is one of the many reasons why he is successful. I thought I knew a lot about seller financing and brought a lot to the table when I first met Mitch and have found myself going to him for advice on the subject numerous times since then. I am glad that we have become friends out of our working relationship and I am proud that Mitch says, "Marc did something that everyone else in the country said couldn't be done." Thanks for contributing Mitch and welcome to BP. I for one will be following you, and look forward to your insights. If you are selling something-I'm buying!

  • Real Estate Investor · Kalamazoo, MI · Member since 2010 · 681 posts · 241 votes
    15y

    Don't know why everyone was jumping at Mitch. Seems to me you're innocent until proven guilty! I for one found the post thought provoking. Financial freedom is liberating. Too many people however spend as much (or more) than they make, and are always scrambling. Congrats, Mitch on sticking to your goal and not giving in to the allure of material things.

  • Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
    15y

    Welcome Mitch,

    Thanks for sharing your story. Financial freedom is something quite attainable and is in our control.

    Look forward to hearing more about you and your experiences.

  • Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes
    15y
    Originally posted by Bryan Hancock:
    Great post Mitch...Welcome to BiggerPockets.

    Posts like this generally fit better on the blog section of the site. You may want to check that out. The forums are more for things that need a back and forth or where you have questions.

    I actually think it goes quite well in "Investor Psychology". It seems that it has received a lot of back and forth and it has opened the door for the expression of investor psychology that seems to be a bit cynical and elitist. Thanks for the post, Mitch!
    Bill

  • Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Yeah....it has sparked a nice conversation Bill.

  • Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y
  • Los Angeles, CA · Member since 2008 · 557 posts · 70 votes
    15y

    Great post. Thanks Mitch.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    15y
    Originally posted by Mitch Stephen:
    Then, something magical happened; I collected an average of $3,000 down per home (25 x $3,000 = $75,000) and people stopped calling with repairs, started improving my propertis and stopped moving out every 6/12 months. THEN, the note buyers started calling me! That's a whole nother story.

    Hey Mitch -

    I'd love to hear what your typical numbers are for these types of deals -- how much do you purchase for, how much rehab, where do you price the property and at what percentage do you sell the note?

    I've considered this business model in the past, but it's always seemed that I couldn't mark-up the property enough to cover the loss I'd take when selling the note. In other words, as a made-up example, I'd be all-in for $60K, could get it under contract with seller financing for $100K, and then could sell the note at 60%...which obviously works out to breaking even...

    Perhaps this level of detail is covered in the book, in which case, consider this an opening for you to self-promote and tell us more about the book... :D

  • Real Estate Investor · Honolulu, HI · Member since 2010 · 28 posts · 12 votes
    15y

    Hello Mitch,

    I've actually already ordered your book, still waiting for it to arrive. I will probably post a review too once I've read/listened to it (got the audio one too). So yes, I'd be interested to hear your pitch to get me warmed up before I dive in :lol:

    Anyway, glad to see you here on BP, I'd searched for you here just days ago, so perhaps you picked up on my telepathic request to join :cool:

    So, when you coming out with the movie? It's about time we have a 'based upon a true story' dramatized movie about how a successful RE investor started out and finally made the big time.

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y

    Welcome to BP Nation and thanks for the post, it was a great introduction and conversation starter.

    I too have a very similar business to Jason and have also considered owner carried notes, the problem (as he stated) is selling that note to cash out requires selling at a discount and that discount would typically erase the spread I generated at acquisition and rehab.

    Hopefully, you can shed some light on how you did this correctly and profitably.

    I have heard that same definition of financial freedom, however, to be truely "passive" you must be able to have that monthly check come in no matter if you are sleeping, crusing the oceans, vacationing or whatever. For me, if I stopped investing in RE flips, most of my income would stop too so I am far from fully passive. In fact, I don't believe I will ever be fully passive as I enjoy this so much, it is not really work to me.

  • Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    15y

    i was wondering the same thing j...note brokers and buyers these days are very skeptical of notes from flippers where they didn't hold the property for very long...they're also very skeptical of these new values..i wonder how mitch combatted that..

  • Property Manager · Wyandotte, MI · Member since 2011 · 123 posts · 26 votes
    15y

    Just bought the book. Looking forward to it!

  • Specialist · San Antonio, TX · Member since 2011 · 81 posts · 97 votes
    15y

    Dear Mr. J Scott,
    I don't have to tell you that things have changed and keep changing...so...the numbers that worked when I started are different now. At least some of the numbers are different...I am now buying houses at the exact prices I was buying them at 15 years ago...but note selling numbers and bank loans to investors have deminished in value and/or availability on the investor side.

    Look, I buy a house for $23k. I pay myself $2k...so I'm in the house $25K...

    (I borrow the $25k from a private lender at 8%. I give the private lender a 1st Lien of $25k on the property...one house one lender).

    My goal is to carry a note for AT LEAST double what I have in it. So I offer the house for sale with owner financing for $55k. Let's say[u] and carry a note for $52k

    I've now made $5,000 for myself...$2k I paid myself when I bought and the $3k down payment). I couod have made more...if I'd have collected a bigger down pmt.

    I also have a note for over double what I have in the house. $250 to $350/ mo Positive Cash Flow...with no expenses (in a perfect world. Remember, I'm NOT a landlord).

    I season the notes (or not) and sell them to private individuals that value ME and a 10% to 12% ROI.

    The 2 main obsticales are:

    Where do YOU find the private lenders for the money to buy the huoses?

    Where do YOU find the private investors to buy your notes at 10% to 12% ROI?

    ANSWER:
    You find them in your long history of having INTEGRITY and your track record of never ever missing a payment to anyone - EVER!

    The people that loan me money will not ever loan YOU money...they loan to ME! They are buying Mitch Stephen...because of a relationship that started years ago and on a very modest level.

    The people that buy notes from me will never buy notes from you...they are buying ME!... becasue when things went sideways with a note (which happens now and then) I showed up and fixed things...even improved their standings in the process. It started the same as with the people that loan me money...a long time ago and on a very modest level at first.

    So, YOU want relationships like that? Start talking to people on doing just one deal...even just a small deal. And then, Never ever ever give excuses...simply PAY and Pay on time...forever!

    I wish I could give you some simpler plan...but it hasn't been simple for me...it's been work and cultivation. One row being hoed at a time.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    15y
    Originally posted by Mitch Stephen:
    The people that loan me money will not ever loan YOU money...they loan to ME! They are buying Mitch Stephen...because of a relationship that started years ago and on a very modest level.

    The people that buy notes from me will never buy notes from you...they are buying ME!... becasue when things went sideways with a note (which happens now and then) I showed up and fixed things...even improved their standings in the process. It started the same as with the people that loan me money...a long time ago and on a very modest level at first.

    Thanks for the info, Mitch...

    I get the lending/financing side, and that's not an issue in my case (I have more cash than I can find deals for and plenty of private lenders if I ever needed them), but I'm not sure I understand your points about "The people that buy notes from me will never buy notes from you...they are buying ME!" and "...becasue when things went sideways with a note (which happens now and then) I showed up and fixed things?"

    What exactly did you do to make yourself more trustworthy as a note seller? Did you do extra pre-screening of your buyers? Did you personally guarantee the sale?

    And what exactly did you do when "things went south?" Did you buy the note back? Did you provide some sort of compensation to the note buyer?

    Again, the purchase and rehab side is pretty straightforward (that's my business), it's the note side that I don't fully get in today's market. I'm trying to understand what makes you a better note seller than anyone else, what you offer over and above, etc. I realize that you have utmost integrity (many of us do), but when it comes to selling a note, I don't quite get how your integrity factors into the equation; ultimately, the note buyer needs to do his due diligence on the borrower and make a risk calculation.

    So, any clarification on how you work with your note buyers and provide them great service (other than just completing the transaction) would be greatly appreciated. Also, what are you seeing these days in terms of what percentage of the face value of the note you're able to sell for?

    Thanks in advance!

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