Passive Income = A Path to Financial Independence (Part 1)

you and i have talked about this a lot you want to know okay what's point a and what's point b that's that is definitely who you are you see the end result and you find the most efficient path to get there you've been paid very well to make that path as efficient as possible and the problem with transitioning to something like this is it's the inefficient path that actually nets you the result two lifelong friends document and share their personal stories as they seek financial independence and to retire early one reaches fire in 2020 during a global pandemic inspiring the other to play catch-up this is two sides of phi [Music] if you had to define it what is passive income generally speaking referred to i think of passive income as being something which doesn't require active time inputs to generate you know future revenues so something that's completely divorced from time inputs and there's a lot of narratives that are built around this sort of false narratives that it's like that's kind of set it and forget it um thing and so that's the ideal scenario but obviously it takes time inputs to create the product or whatever it is that you're creating to sell on the front end and so you know it's never maybe as passive as you would expect it to be although i think there are there there are ways to make it sort of more passive than than less um but you know i mean i think that the government definition like that there is a standard definition that the government has for tax purposes and that is related to rental property so if you think of it it's in its most basic sense you know you're earning rent from a property that you own right and right so neither you or i um do that right now but but that is i think that's the the sort of generative form of passive income it's by buy a piece of land and then rent it to somebody else and you know receive a perpetual paycheck and certainly in the fire community that flavor of passive income exists and for some people it's like their thing right they start acquiring rental units uh maybe it's even half of a duplex that they live in in the beginning and then over time they get more and so that sort of rental idea becomes a passive income strategy for them even post uh retire early not total yet totally not interesting to me at all yeah me either really i mean i've thought about the idea of you know having a rental management company and you know then they get a cut but i i don't know i i think it's more of just like a a thought like oh maybe that's just kind of from a diversification strategy but i like the idea of having you know reits and other real estate investments in my portfolio right as opposed to having hard you know property ownership that just sounds like another headache waiting to happen totally yeah it seems like a lot maybe that's naive but that's how i think about it no and it seems like a job to me actually and and it's it's also an extension of what i do for a profession right now designing homes so i'm always interacting with that space and okay yeah and it's fair and i also see all the problems so you know i i'm just i'm going to look at this house you know this weekend um which is i already know what it's going to look like it's going to be this dump you know it's in this awesome location and it's just going to be a complete dump and it's going to be built by somebody's uncle you know hand dug the foundation or something and you know so that that also kind of factors into it that you you see all the problems and to me it's there's nothing i don't know if you you just moved so you must have had this experience like calling subcontractors calling contractors trying to get work done in the house is just you know it's just not something i really want to spend much more time doing so you know i like you paper assets are much more interesting to me yeah in that sense but you know if we're talking about passive income there's a lot lots of other ways to to generate passive income other than just owning property for people who are new to our conversation may not be aware of kind of your trajectory jason's like short version of that is you were an architect at traditional firms you then started your own business and doing architecture doing residential architecture and somehow still over recent years and still do sorry somehow over recent years you transitioned to your business meaning a whole variety of things including passive income generation and so how did you go from i have a business as a residential architect to passive income streams are now apart and a big part of how i operate i mean it was i've talked about this a little bit in the past but you know in some ways it was out of necessity because when i first started this business i started it in the model of every other architecture business that i've ever worked for and that i ever knew and that was serving clients and when you do client service work you're you know trading time for dollars and when you're just one person you know i i live in a pretty remote place so i didn't have this dream of scaling and having a studio full of like 10 other architects who are kind of subserving it to me i had always just seen this almost as a lifestyle business so just you know designing working to feed my family and make a good life for those around me and you know just to enjoy life and so with that with those goals in mind serving clients you can trade every single hour of your week and still not have you know serve them correctly or properly so one of the things about you know practicing as an architect is you are designing a home first and i'm doing residential architecture so i find a client right we're designing that home and it gets to a certain point and then we have a contractor go and price it out right and so there's a waiting period there so you can't just have like one job at a time you need to have a couple of jobs at a time and so what i found was okay i have one job but need another one so i get a second one and then that one gets to a similar point and let's say those lag points where you're not doing anything overlap well then you have no income right so so let's pick up another one sounds bad right and and what what happens is you know i started this firm when i was 39 um and which sounds like you know i have enough experience 25 years experience or whatever and it's still actually not a lot of experience in the architecture field for someone who wants to spend three or four million dollars on a home they they look at you like you're a kid and so what you end up doing is you end up sort of stepping back and say do some renovation work or you do a little bit of commercial work and so what i did was i filled my business with this kind of stable of projects which were on the sort of lower side of the budget let's say less than a million dollars for a house or a renovation or a commercial project and what that means is it's a shorter time frame so it's smaller scope of work shorter time frame and so you end up have you get on this hamster wheel of shorter project finish the project start a new one and they're always looking for these little sort of bits of projects and i at a certain point got to this uh point of burnout where i realized this is just not the business that i really wanted for myself and so i stepped back and said how can i retool this so i could just i really enjoy working with clients and designing homes but i just i don't want to do five of them at once i want to do one at a time and so really the passive income side of the business was born out of that need to try and make up for the income gap of the let's say four other projects that i wasn't going to take and so i just started trying a bunch of different experiments and and really the way i approached it was you know i want to take the work that i'm doing with this one client and use that work as kind of content and you know turn that into interesting information that i can put out in the marketplace and try and productized it almost in a way you know and and um and it didn't happen overnight but you know i mean we're eight years into the business now and um my goal was always to have an 80 20 split between passive revenues and active services because i felt like the active services are always going to feed into the the passive revenue you know i need to have that client work in order to have the content of the passive income right and um and now how did it take to get to that split did you did you get to it or oh yeah and i mean i was gonna say last year was uh it's probably two years ago i hit it and last year it was more like 90 10. wow and those splits are i mean i'm not prepared to talk exact numbers but you know if you just think about 100 grand right um and if you think of 20 grand of that being you know related to client work um so if i have one client a year you know 20 000 on uh paying for a plan set or you know working with a traditional in that traditional client role not much right that's not a lot of client work so you can you can see how much actual room and and you know the 80 accounts for a pretty significant portion of the revenue and obviously we've scaled it quite a bit from there um but i think that is that's definitely the thing that's made fire even a consideration for me is that i have all of these assets out in the marketplace that are working for me it's you know it's not dissimilar to you buying paper assets you know investing in the stock market it's just it's just putting your money uh to work in a different way or your time i guess in this respect right um so yeah it's not overnight was there any kind of inspiration for that journey or was it wholly organic i mean was there something you saw or read that sparked something like how do you get to that point to say that's the kind of solution that that will work for me i think you and i both have that uh tim ferriss's four-hour work week as one of those kind of transformative books and for sure for me i happen to read that at the right time when i was searching for solutions to the problem that i have and i i don't know if you're like this but you know everything that i'm consuming in this moment is always being put through that the filter of what problems i'm addressing so you know in that moment when i encountered that book i was having problems serving clients and it was the perfect solution uh for me to just start experimenting and so there's no direct corollary for that in that book then he doesn't say go start designing plan sets and start selling them but it's pretty easy i think you know even now as you and i have been talking about maybe side hustles that that you're considering it's pretty easy to take a generic idea and then put it through the old your own filter of you know whatever profession you're in or whatever areas of expertise you have i mean have you thought about how you might generate passive income or it sounds like it might be something that's interesting to you i have i think i'm still in what i suspect is common and i've asked you a little about this but not too much so certainly something i want to dig into a little more i feel like i'm in the scatter shot stage like i have this like big basket of ideas that i'm constantly chucking stuff into that i think of while i'm taking a walk in the morning or driving in the car like those kind of quiet times where you know you're just thinking through just idea generation right um and so i have a lot of ideas and they're all in the exploration phase like nothing i think is so far along that i've made big commitments because some of the stuff you've told me has been um and i this may be we haven't really defined side hustle versus passive income i was actually going to ask about that yeah but some of those um you know i would slot into this kind of side hustle notion and and the ones i've that you've brought to me have really all dealt with trading time and and it's interesting to me because those are the ones that i come you know i came up with plenty of those too when i first started exploring this kind of passive income business you know i mean i did this way before i started the firm but you know i started an etsy shop and i started selling like hand-cut paper goods kind of strange weird niche right but i was essentially selling my time and you know the price that someone wants to pay for a paper cutting versus the time that it costs me to actually create the thing and then ship it out and then if there's any damage and shipping it goes at a certain point it didn't make a whole lot of sense you know i i i was actually thinking about uh when i first moved to maine and we cleared all the land around here i took all the soft wood and i cut it up and i was selling it at at the road because there's a lot of you know this is a vacation spot and there's a lot of campgrounds around here and people sell camp wood that's like a little cottage industry here and i thought oh i could i'm gonna get in the middle of that value exchange right so it's like you know what a bundle of wood sells for not very much two dollars and fifty cents okay yeah dude a couple of those you got a beer oh my god but but hear me out like so i have this little stand at the road right so i put 10 bundles out there a day okay if i could sell 10 bundles in a day given where we're at it's a lot so you put the thing out there right and you got a little coffee can and and it was literally a coffee can and um you know in the in the morning you come out and check and if you sold 10 bundles you get 25 bucks and most of the time what happens is you sell a few bundles and then people like they don't even have two quarters so they just put two bucks in the thing and they take the bundle of wood anyway or they take two bundles and leave three bucks or you know the local teenagers come and rip off the entire can which all of which happened to me and you know it's that classic like what am i doing with my time this makes zero sense and if i fast forward to like one of the more successful products that i made during kovid um was this little add-on for this app on the ipad called procreate so love procreate oh yeah so you use it yeah for drawing it's just great yeah this little sketching app right and um i just made this kind of little procreate pack for architects and you know there's a ton of people who want to learn how to sketch on this thing and i just kind of made these little blueprint canvases and i photographed a bunch of materials and things around the studio and i have them as backgrounds so i created this pack and sold it for 25 bucks and you would be shocked at how many of these things i have sold now one pack for 25 bucks it's a digital asset i made it once and i put it up let's let's say it took me four or five hours to create that and every time i sell one i'm making more per hour right just the it's just and it it goes on to infinity it's it's got nothing to do with trading my time except for that one little chunk of time that i yes that i created no hassle i mean you know i got a ton of wood around here but yes i'm not trying to sell it anymore and those are the ideas that i'm most excited about and that's why i haven't gone too far with anything because to your point i don't want to just do time for time for money things as much as i you know oh let me back up i think there's a place for that right if you get a lot out of the engagement like let's say a one-on-one engagement like coaching or consulting which you definitely do some of as well um you know there's there's certainly value to that you know it's not the best dollar value per unit time well for you it might be yeah it might be correct because i don't have a a you know salaried job anymore yeah and also your i feel like your hourly rate that you can charge for the level of information that you have yeah it's pretty high so if it's someone who's in a similar position to you you know you can start charging at i don't know what you would recommend someone charges for professional services but right you know 600 000 bucks an hour i don't know i mean you can at a certain point that makes a ton of sense and and we can get into that idea about like this 25 product versus a 700 product you know it's you got to sell a lot fewer of the 700 products to actually have it make sense and for you you know if you're if your time is worth a thousand bucks an hour i might trade that hour for a thousand bucks i mean there's a certain curve there where it does make sense right well honestly um and maybe it's getting a little far ahead but it will maybe speak to to that particular question what i find i'm doing lately is trading an hour or two of consulting a month to pay for exploration of a potential passive income generator right or even a side hustle right like i paid for my drone which may or may not turn into something commercial it's certainly entertaining on its own or even if it just helps us with this this this video channel right i paid for that by doing a little consulting and i'm very you know specific about the type of consulting i choose it's you know very contained hourly you know chats on a topic it's not going to blow up into some lengthy project that i'm going to have to like decline because i don't want to do that but i love that idea you know when when thinking about you know true passive income generation some body of work is done and maybe there's some upkeep over time but maybe not somebody work is done and then there's a product digital or otherwise right digital maybe is the easiest model that has a life of its own at that point people are able to acquire it or subscribe to it or somehow engage with that material that you spent some time on you know four or five hours in your example of the brush set and then from then on they can just purchase it you're not doing anything additional to it necessarily it just exists do i have that right yeah and there's i mean depending on the product so that that's an example of a real low touch product um there are products as you get higher and higher up so i sell some products for a thousand dollars right like a training course that has some consulting uh associated with it okay selling something that like that has a different level of touch but you know the value exchange there is much much different and um i think the sales process on those tends to be a little heavier up front but then the person who buys that thousand dollar product is just a much better customer than the one who's buying a ten dollar thing like a ten dollar paper cutting which is not actually passive and they get it and they're like oh this the paper is kind of bent at the corners like oh my god yeah but you know what i mean i think you know i'd like to hear what you so you kind of rationalized you traded a little time to buy the drone and then you rationalized that you could use it as a passive income generator how how so i would say as potential i don't think that's necessarily a big one for me number one i i need to to learn and i am spending time learning to to become a better videographer right uh i i think one passive income generation idea i've certainly seen in that space is stock footage yeah right making your and and you've probably done some of that how long you've been in drones but making you know still photos uh you know aerial photos and aerial videos available for purchase or license uh on any of the various exchanges that are out there that's this one simple idea and you're actually t you're taking the part 107 exam right to become a licensed operator yeah absolutely since you know to do commercial work with drones that's to my understanding is required so yeah that's that's an example of something i am doing just to to build some skills yeah so like it it kind of builds out this stable it's it's one way that i've also used passive income to build a skill set because when i first had the business working active services you know that's a certain set of skills that you use to serve clients but it's it's an entirely different one to try and market a product or create a video you know that's gonna have ads shown on it or right edit footage for you know black box to you know get royalties from um you know stock footage and and i think it's interesting that you've kind of brushed up against that so early here because it's a great way to kind of find new interests and for someone who is now not working um you know for not trading your time for dollars as you were previously what is there that need to kind of seek out a vocation or you know like does passive income kind of fill this inherent need to feel useful or does it feel a part of the job um aspect i mean i'm curious about that because i look at myself walking into phi and saying how am i going to feel here am i going to feel like i'm without a job i think it's a few different things it's a very very good question and it's not something i would say i sit and actively think about but i mean i like the idea of um you know spending my time doing things that are of interest to me maybe things that i always wanted to spend time learning more about or just came to stumbling around you know looking at ideas right having this time to organically come to concepts that seem interesting and i think that for me you know in some way in which you and i i think are very similar is you know having sort of an entrepreneurial mindset of well if this is interesting to me maybe i can turn it into something that will generate some revenue maybe it's a small amount maybe it's not who cares um at the very least any income that's generated will reduce my need to withdraw money even according to my plan right because i have a plan i i pay myself once a month from my money market account that's all budgeted for but if i can withdraw less that's great right that only de-risks this whole fire idea or allows me to you know sock away some money in the you know ultra vacation fund right for some crazy trip we may come up with down the road or you know allows me to make a charitable gift you know whatever it is um i just like that idea of you know that kind of it's like a double dip right you're doing something that's super fun for you and fulfilling and may also generate income and you're learning skills and also yeah exactly i didn't even say that and but i am and that that but that for me like at the core i guess to be honest is always about the biggest one of the biggest things like for me like learning and growing and building a set of skills is is to me so fulfilling like i was saying to laurie my wife um you know doing the part 107 exam for for drone commercial drone pilot even if i never earn a dime with that thing like just learning that information it's so cool yeah it's so cool like i mean reading those sectional maps i want those dude i want to where can you buy those sectional charts like i want that for like a huge poster i had said the same thing i was looking at my area of california i just can't believe how much is packed into those things yeah yeah it's just remarkable so yeah let's look up look sectional charts if you want to see what we're talking about if uh it's interesting to me that you landed in this place that i mean we are very similar here uh the thing that i have discovered over many years of creating passive income earning products is those things which i have created just out of following my own curiosities and i've absolutely removed all pressure of having to earn income from those are the things that have been most successful and it's all been really yeah and it's all just been around this idea that i'm seeking out knowledge and information and when i discover it i find a certain formula for how i learned that skill and i'm just going to share it you know and whether that is in you know the shortcut to you know procreate pack you know you can sort of draw blueprints by hand hand sketch blueprints or if it's something like building a business you know that's that's another kind of information product that i have like a course on how to do it what it is that i figured out how to do with this business you know and right it's just that process from you know not knowing to knowing that's that's so exciting to me and all i do is kind of take that transformation and package it up as a thing and that's the that's the product but yes but i never started with the intent of you know creating this thing it was just i'm gonna check this out and i'm gonna follow where my interests lead me and if something great comes out of it cool and it sounds like that's exactly where you're at because now when you were starting to talk about like taking the part 107 exams like oh geez i mean you could you could actually do a quick little video series on how you took that and what how you studied and what i mean sure there's lots of different ways to just take everything that you're doing right now and by openly sharing it to turn it into something what are the lessons you learned you know the biggest mistake or you know thing you would guide people to not do i mean every situation is different but there must be some key lessons in there [Music] you

Channel: Two Sides Of FI

Views: 22,578

Keywords: 2 sides of FI, 2sidesofFI, two sides of FI, fire movement, FIRE movement, financial independence, financial independence retire early, fire documentary, fire documentary netflix, FIRE documentary, eric reinholdt 30x40, eric reinholdt career, eric reinholdt net worth, jason 2 sides of FI, eric 2 sides of FI, eric reinholdt architect, retire early, early retirement, passive income, side hustle, fat FIRE, internet business, online marketplace, digital assets

Id: PEuN5QtBEyk

Length: 26min 17sec (1577 seconds)

Published: Sun May 30 2021