Guest Post-Climbing A Different Route To Financial Independence Using Real Estate

Today I am very excited to bring you a guest post by Chad Carson who blogs and offers other resources at  I stumbled upon Chad through this BiggerPockets podcast episode.  His story started similar to most real estate investors I’ve heard as he was interested in learning to grow a business, acquire more rentals and make as much money as possible.  However, he then zigged where most seem to zag.  He asked the simple question: “Why?”  He realized that you don’t need to get as big as possible if the ultimate goal is financial freedom.  

I asked him to share his story.  Our methods of earning money and investing could not be any more different.  However, we have applied many of the same wealth building principles and have very similar life goals, interests and philosophies and are at a similar place in our journeys.  I love to highlight the many ways to reach financial independence to plant the seed of  possibility for our readers.  

If you like our story and get the basics but feel that you don’t earn enough money to follow our path or simply want to accelerate the process, this will be especially useful.  Pay particular attention to gems throughout this post such as “house hacking” and “live-in flips”.  Also pay attention to the tax and leverage opportunities offered using real estate investing instead of investing in paper assets.  These strategies can greatly enhance your wealth building process while providing a pretty awesome lifestyle as Chad shares.


 Meet “Coach Carson”

Torres del Paine NP, Patagonia, Chile
Torres del Paine NP, Patagonia, Chile

Thank you for letting me share with you, fellow Elephant Eaters! When I first read about the concept of ​Dirtbag Millionaires​, I knew I had found my people. I’m happiest dressed in my camping pants, all-purpose shirt, a fleece, and hiking shoes or sandals. I also love to accumulate money and retire early. So it feels good to be in the right place!

I’m going to share the story of my climb towards financial independence. Some of the strategies I’ll describe may sound familiar, and others may be a little uncommon. I have been an entrepreneur and not an employee since I graduated from college. Real estate has been my primary vehicle for earning money, growing my wealth, and producing passive income. Both of these make me a little different than the norm around here, but I hope you’ll find the differences interesting.

Even if real estate is not your thing, I challenge you to look for the core principles that can be applied to your situation. As Mr. EE often advises, the important skills are to ask questions, think critically, and translate the information you read here into a context that works for your life.

Now, let’s start at the beginning of my own climb towards financial independence.

The Allure of Entrepreneurship

Up We Go! (Inca Trail to Machu Picchu, Peru)
Up We Go! (Inca Trail to Machu Picchu, Peru)

My financial independence story started shortly after college. I was fortunate enough to earn a scholarship to play football at Clemson University in South Carolina. My NFL ambitions were quickly deflated soon after I graduated, so I began considering other options.

I majored in Biology, so that interest led me to take the MCAT exam and apply to medical schools. But even though I loved science and the idea of practicing medicine, the entire path forward seemed too personally restrictive. I would be studying for another 6-8 years, and then I would be stuck paying off student debt for a few years after that.

I also had some opportunities to work for investment banks on Wall Street. They actively recruited successful college athletes because they could typically handle the high pressure and intense work environment. The big income and high stakes were interesting, but like medical school a little voice in my head said it wasn’t for me.

I think what bothered me about both paths was that they seemed too conventional. I had already climbed ladders. I got good grades. I worked hard. I earned my scholarship. I played a leadership role on my team.

What excited me, instead, were the ideas of freedom, exploration, and personal growth. I wanted to travel abroad, learn more languages, and get outside my comfort zone. I wanted to read books I chose, think broadly, and have conversations with interesting people.

Like anyone else, I also wanted financial security to pay the bills, but I wanted to have my cake and eat it too.

The path that seemed to offer the most opportunity to embrace freedom while also building a financial base was entrepreneurship. More specifically my father had owned rental properties for well over a decade, so becoming an entrepreneur who bought, sold, financed, and rented real estate made sense to me.

I could go into a lot of detail about the specifics of my business, but it might not be relevant to the point of my article. Click on these links if you’re curious about ​my sprint during the first 5 years of business​, my strategy to ​finance real estate without a steady job​, and how I ​started a real estate business on a shoestring budget​.

In the rest of this article I want to focus on how my entrepreneurial venture and real estate fit into the overall goal of financial independence. So let’s dig more into that.

Financial Independence & Free & Clear Real Estate

Dead Woman's Pass, Inca Trail to Machu Picchu, Peru
Dead Woman’s Pass, Inca Trail to Machu Picchu, Peru

Even before I articulated it this way, financial independence was always ​my desired destination​.  I realized that I live in an economically centered society where financial skills are valuable. Maybe hunting, farming, and survival skills were most valuable 500 years ago, but now the ability to thrive and survive depends upon being able to win with money.

So, freedom, autonomy, and flexibility were my goals, but real estate entrepreneurship and a mastery of personal finance were the means to that end.

My ultimate money goal was an investment portfolio that produced passive income to pay for my desired lifestyle. This is similar to the concept of ​the 4% rule as a safe withdrawal rate​, which many early retirees use with stock portfolios. But instead of stocks, the core of my portfolio would be rental properties and notes secured by property.

So, my plan was simply to create regular, sustainable cash flow from those real estate sources to cover my family’s living expenses. A clear explanation of the numbers behind my goal can be found in my ​free and clear real estate plan​.

Three Financial Games (The Fundamentals)

Like any journey towards a lofty destination, I zig-zagged back and forth along the way. I also began reimagining the concept of retirement when I realized it wasn’t just about the peak of the mountain. Retirement also included ​the plateaus along the way ​(i.e. mini-retirements, semi-retirement, etc).

But, as I read books about money and personal finance, it became clear that I had to master three equally important fundamentals in order to reach any stages of financial independence. These three fundamentals were:

  1. Earn as much money as possible
  2. Save as much money as possible
  3. Invest for maximum safety and return

If those sound familiar, it’s because they’re the basics. You already know them. These are the games we all play.

The more difficult task for me was actually DOING whatever it took to win at each of the three. So let me outline the basic game plan I’ve used with real estate and other means to win each of these games.

Please remember as you read the details of my story that you don’t have to use real estate as heavily as I have. My point in sharing with you is not to make you a full-time real estate investor, but to show you that just doing a deal or two can change your entire financial picture. And trust me, with a just little study and hustle, one or two deals is very achievable. With that understood, let’s talk about earning more money!

1. Earn More Money

Saving money is essential, as I’ll discuss in the next section. But the journey to financial independence (FI) begins with the engine of earning money. During your growth years, the more money you can make, the better.

In the beginning, my core strategy to earn money and to pay my bills was finding and quickly reselling real estate deals. I was essentially a deal finder extraordinaire (i.e. a bird dog who sniffed out deals for others). Other landlords and house flippers would buy the deals that I turned up, and I would make a small profit.

I had zero business experience, a tiny bit of real estate knowledge (from begrudgingly cleaning or painting my dad’s rentals over summer breaks in middle school), but ​a whole lot of hustle​. I also loved learning something new, and I studied marketing, negotiations, and real estate values voraciously until I began making progress.

At first I just scratched out a living. This is where the dirtbag, low-overhead mentality helped me out! I joined up with a business partner (who I still team up with today, 12 years later), and we started fixing and flipping houses together for bigger profits.

Both of these income streams, wholesaling and fix-and-flips, were just like earnings at a job. We were simply self-employed in the business of quick turning houses. This was fine up to a point, but profits on house flips are taxed at the highest rates (earned income rates + self-employment taxes). This takes away a big chunk of my ability to save more money, which was the goal after all.

So, we decided to be in two different businesses. The first was house flipping for current income, and the second was rental real estate for capital growth and long-term income.

Each year after doing a few flips to put food on the table, we started keeping a couple of rentals. After a couple of years, we began selling some of these houses to our tenants.

Holding rentals was a very helpful move to increase our ​net ​earnings for a few reasons:

  1. We sheltered some of our active income with ​depreciation from rental properties​.
  2. We netted a higher price selling to our tenants because they negotiated less, we paid no commissions, and we had no holding costs waiting for the house to sell.
  3. We got the benefit of long-term capital gains on our profits.
  4. We got rental income forever on the properties we kept.

The long term capital gains treatment turned out even better than we thought. As many of you know from reading posts by really smart people like ​Jeremy at GoCurryCracker​, capital gains for people in certain tax brackets has actually been ZERO over the last few years.

So, many years we have legally been able to reduce our tax rates to very small percentages or even zero, and we’ve been able to invest those savings. Earning money is important, but HOW you earn your money can play just as big of a role in your long-term climb to financial independence.

2. Save More Money

Once I had income streams in place, the next fundamental was to start saving money. As you may know, ​the math to reach financial independence ​quickly is simple. You need a HUGE savings rate (thanks ​Mr. Money Mustache​).

Luckily, I was all about frugality right out of college (by necessity since I made no money for a while). And as a dirt bag and out-door lover, fancy stuff and expensive toys ​were too heavy ​anyway. So keeping expenses low was not that difficult.

I was also fortunate that my wife was more of a dirt bag hiker than I was! We even hiked and camped on our first dates:). Her frugality had more of an environmental motivation, but it blended well with my financially motivated frugality (although I share her environmental concerns).

In addition to watching our everyday spending and ​driving old cars​, something called “house hacking”​ gave us a huge boost in lowering our expenses.

House hacking essentially means you rent other units or bedrooms in your primary residence.  In our case, we lived in one unit of a quadraplex we owned. Our total payment (including taxes/insurance) was $1,089/month and the rent on the other 3 units was $1,200 total!

By house hacking we lived for free and in fact got paid over $100/month to live there! With 2 incomes and no kids, we really piled up some savings.

When we decided to have our first of two children, we bought a 1500 square foot single family fixer-upper house, but we kept the 4-unit as a rental. It has cash flowed nicely ever since and will be paid off in under 15 years if we stay with the minimum payment.

For those who are willing to live simply, nothing beats house hacking for cutting housing expenses to the bone and creating a long-term wealth-building machine at the same time.

Because of my real estate background, I also differ from other early financial independence writers who insist that ​your residence is a terrible investment​.  In fact, with an entrepreneurial mindset it can be one of your BEST investments.

Sure, it requires a little effort. Sure, it requires some knowledge. Sure, MOST people who own residences overpay and buy based on emotions, but are you normal? I think not! You can house hack, as I’ve explained, or you can take advantage of the best tax law in the land by executing ​live-in flips​.

Live-in flips simply mean you purchase a residence that is under-valued, remodel it, and resell it after two years or more.  Those profits are tax free up to $500,000 for a couple or up to $250,000 for an individual.

I’ll get off my real estate soap box shortly, but if you want to see a cool plan to flip your residence three times and own it free and clear, ​here it is​.

Now that I had worked on a mastery of saving money, it was time to invest those hard-earned dollars.

3. Invest Safely For Maximum Return

As I wrote before, my investment growth strategy has been mostly about real estate related investments (until recently when I started diversifying more into Vanguard index funds).

Our long-term rental holdings are all residential properties, including houses, small multi-units, and a few mobile homes. About 50% are college student rentals, and the other 50% are regular families. We also have a small portfolio of private mortgage contracts secured by real estate. These are relatively passive, are very secure, and produce great income.

The primary goal has been to safely grow our nest egg to the point where it would support us on its own.

I have used debt and other forms of leverage, but I subscribe to the Warren Buffett idea of only using smart leverage. Smart leverage has allowed me to use rental income to amortize loans and build equity on a very consistent and predictable basis. While there are many viable paths to financial independence, this predictable method has suited my need to have more control over the process and timing of my journey.

The overall savings have been distributed both inside retirement vehicles (Roth IRA, traditional IRA, and TIAA-CREF annuity contracts) and outside retirement vehicles (our real estate company and some personal holdings).

The Joy of the Journey

Picnic, wine and preparing for daily siesta in Seville, Spain
Picnic, wine and preparing for daily siesta in Seville, Spain

I have probably given you more detail than you bargained for about my journey towards financial independence. As you can tell, I love the process and the journey almost as much as the destination.

It has been a lot of fun to make this climb. We are getting very close, but we’re not 100% at our final financial goal. I’ve come to realize that the plateaus or resting places during my climb have been equally amazing. We have taken a 4-month sabbatical to Spain and South America, we have taken month-long road trips out west, and we have taken countless smaller family trips in between.

That’s one of the things I love about being a full-time entrepreneur. I didn’t have to wait for flexibility. I’ve had it since the very beginning.

Yes, I have to hustle. Yes, income is less secure than in a job (especially early on). Yes, I probably could have made more working on Wall Street or a more traditional profession for 10-15 years and then retired.

But my original goal was freedom, flexibility, and autonomy. Why wait until retirement?

It’s been a pleasure to share with you. I look forward to reading your comments below. I’m happy to explain more or answer questions if you have any.

Thanks again Chad for taking the time to share your story and some great resources with our readers.  Please click over and check out all that he is doing at

*Thanks for reading. If you enjoyed this content, you can find my current writing at Can I Retire Yet?. Enter your email below to join our mailing list and be alerted when new content is published.

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10 comments on Guest Post-Climbing A Different Route To Financial Independence Using Real Estate

  1. Thank you for sharing…that is an inspiring story. I agree that real estate can be a great way to build your wealth, but I’ve always been concerned about the amount of work and expense required to maintain the properties. You mention that you have recently begun diversifying into index funds and other investment vehicles. Do you see yourselves moving more in that direction as you get older? If so, is that purely to diversify in order to hedge your bets, or is it an attempt to develop a revenue stream that takes less work? I understand that rental real estate can be considered a source of passive income, but a traditional investment portfolio seems like an even more passive option that allows you to pick up and travel the world without the concern that a water heater or HVAC system is going to fail in one of your rental properties. I ask because I am on the horns of a similar dilemma. We have a rental property that stays fully rented and is still new enough not to require any maintenance…and we utilize a property manager to handle everything (for 10% of the gross rent)…but that one property causes me more worry, and exposes me to more risk of loss (vacancy, catastrophic damage, lawsuits, etc.) than all my other investments combined. I can live with that risk and anxiety at this age, but I think that I want to offload that and buy a truly passive financial product when I get older in order to have one less thing to worry about as I sit on a beach or travel the world in retirement…and I just wanted to hear your thoughts on that. Thank you.

    1. Aaron,

      Great comments and questions for Chad. I am in a similar position to you and am considering adding a few real estate investments. I share your concerns and am curious to hear his response. Here is my $.02.

      I think the comparison of real estate and index funds is kind of like comparing apples and oranges. Yes real estate is a bit more work but it also has the potential for greater returns as there are relatively safe ways to use leverage and better potential to find deals. Yes real estate has risks as you state but paper assets have their own risks such as historic ability to lose 20+% of their value in a bad day or 50+% in a year which could also cause people to lose sleep at night.

      I think that you are looking at things in the right way in looking at the positives and negatives of taking one path versus the other. It is important to invest in something you understand fully and are comfortable with the associated risks.

      It also worth noting that there is no rule that anyone must choose. As Chad and I are both doing while going in opposite directions, I think it is wise to focus on mastering one approach first and then diversify into a hybrid approach, incorporating both paths so that all of your assets on either side are not exposed to the risks offered by the other.

      Thanks for the comment.


  2. Hi Aaron,
    Great question! I agree with Mr. EE that real estate has potential for better returns, and just as importantly you can control the timing of those returns. Index investing is a wonderful strategy, but the biggest hole I see in the plan is the timing of your retirement. If the market tanks in your early years, you’ll have to adjust your plans. Diversification into real estate returns (income and loan amortization) can smooth out those potential ups and downs.

    I am diversifying primarily to not have all my eggs in one basket. It’s less about the work involved for me. I feel very comfortable traveling the world and taking time off owning rental properties. I find it’s a matter of having good management processes, a good team, and conservative cash reserves to handle weird times.

    You say a big part of your concern is about the unknown problems and costs with real estate (vacancy, capital expenses, lawsuits, etc). You are wise to be concerned with these, but I think there is a reasonable way to address them.

    Many people get into real estate (probably not you), ignoring some of their line item expenses. They account for taxes, insurance, property management, and maintenance. But they fail to include vacancy and capital expense reserves. I recommend opening savings accounts for each item, and then building a reserve account. For example, if your roof has 10 years left, estimate the future cost, and create a discounted schedule back to the present and set that money aside each month. Do the same for HVAC or other big-ticket items.

    When you have a competent 3rd party manager, a quality property that attracts good tenants, conservative debt structure, and sufficient reserves, I can sleep very well and travel very well without worry.

    The liability, which you mentioned is a separate issue. I would first talk to your insurance agent and up the liability insurance to the point where you feel very comfortable. A 2 million liability policy is actually VERY cheap and can handle most potential problems. Then if you still want a little more insulation, team up with a competent local attorney and ask him or her about setting up an LLC in order to separate the rental asset from your other assets (this is just what I do, I’m not qualified to give asset protection advice, as you know).

  3. Gentlemen,

    Thank you both for sharing your perspectives. That is a good point about failing to appreciate that my index funds could drop by 50% in one year, but it is unlikely (though not impossible) for property to drop at a similarly precipitous rate. Also, you’ es prompted me to look at increasing my liability coverage, and I will do some more reading on LLCs in the next few weeks. It is always good to get a sanity check on my own ideas…and I appreciate blogs like the 2 of you have so that I can continue to learn and examine my own methods.

    Thanks again,

    1. Aaron,

      Thank you for the comments/questions. I also found reading the blogs of others very useful when I started down this path, and I started this to pay it forward to others. However, this blog only made me realize how much I didn’t know. The coolest thing about doing it is continuing to learn and be challenged by questions/comments from readers like you and making connections with others in the field that I respect like Chad. Blogging is a lot harder and more work than I ever imagined but also one of the more rewarding things I’ve done and I would recommend it if you have any interest. Until then keep chiming in and sharing your thoughts!


    2. No problem, Aaron. Thanks for the great questions. Sharing my ideas and getting questions from people like you has forced me to learn even more. Best of luck with your real estate tweaks.

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