462: Finance Friday: Could a Franchise Fuel My FIRE in 10 Years (Or Less)?

28:51Can you describe what this franchise is? Is that a way to park the cash? Is it a investment? Is it a job? Is it a hybrid? That's a great question. Yeah. So there's an opportunity that myself and one of my good friends is investigating. Um, we're looking to become partners in investing in a franchise or a series of franchises, uh, in the physical therapy space and the passivity level, I guess you could say would be probably fairly low, to be honest. It's going to be a fair amount of work to do. I would be operating pretty remotely, so I wouldn't have as much to do as my business partner who'd be more boots on the ground.

29:36But that being said, it's expensive. It's pretty capital intensive. But assuming that our projections that we've built out are accurate, I think it could be pretty lucrative as well. And so we can dive into that right now, if you'd like. Yes. What is the capital that you personally are going to allocate to this? And how is this partnership going to be split up? Yeah. So we're looking at doing a 50-50 split on everything, all the expenses and all of the revenues and profits. So to come to the table, it would be about$50 ,000 per person just to enter into the franchise agreement. And then to build out each individual franchise location would be somewhere in the ballpark of around about$215 ,000 per person.

30:37and we'd be looking at building out several of these over the course of three to five years, perhaps. And so one of my questions is, well, if I have to outlay, you know, about$265 ,000 in the first year, is the best way to fund this via tapping my home equity since I have so much of it? Or is it better off funding it through maybe an SBA loan? Or is there other forms of financing that I'm not even thinking about that might be better. So I'm curious to hear your thoughts on this. So 215 per person, 430 total purchase price. Is that unlevered? Yes. Okay. So any debt on the business could be shared between you and the partner on this.

31:23Correct. Okay. And then what is the expected income from this$430 ,000 business? So yeah, according to our projections, it looks like it would be, you know, basically breaking even by the end of year one. So after considering like debt service, we'd probably be at about$25 ,000 per person after the first year. But then after that, it would be profitable. So we'd be looking at about$150 ,000 per person in year two and about$180 ,000 per person in year three and moving forward. So let's go through this. The business is going to not produce any income. What is revenue and expense in year one? Give me a moment here.

32:02I can pull up my model. While he's pulling up that model, I'll just define a couple of terms here. An SBA loan is a small business association loan. It's a government-backed program that allows entrepreneurs or aspiring entrepreneurs like Chris here to purchase small businesses, often has much more competitive terms than what you can get from other types of lenders. It's a great option designed to promote small business ownership like this. That's okay. And while you are looking those up, I'm going to ask you, you said, according to our projections, and I'm just wondering where you got the data for those projections.

32:39You said this is a franchise. I'm assuming that the franchise, the main guy at the franchise has given you information that would help with those projections? Yes. So the model that we have is basically populated via assumptions, such as average number of visits and the average reimbursement that you'll get per visit, etc. And then we build out the model of how many patients we anticipate seeing on a weekly basis. and the assumptions that we populated are based on talking with other franchise owners. So we asked them, you know, how often do you see your patients? How much do you get in reimbursement?

33:23What's your total profit margin? And we used those conversations to build out our model. Um, the P and L projections that we built out here show like total, uh, revenues at the end of year one to be 450 ,000 or$457 ,000 and total costs, uh, to be 219. Well, that's the cost of goods sold. Total cost would be$243 ,000 plus our cost of goods sold is$219 ,000. So that yields a net operating income of basically negative$5 ,000 in year one. And this is a service-based physical therapy business. A patient comes in, gets an hour-long physical therapy session. So your cost of goods sold is what? Is the paying the therapist and the staff.

34:16Great. Okay. And then your operating expenses are going to be the rent for the location. Yeah, exactly. Rent, insurance, utilities, all the franchise fees, all of that stuff. What is your partner going to do in this business? He would be basically the boots on the ground operating the day-to-day of the business, managing the staff and being out in the field talking to the referring physicians to build up the network of referrals. And where is the business physically located? It would be not in Southern California. And does your partner have physical therapy experience or office management experience?

34:54So he is in the orthopedic field. And so he has close relationships with all these doctors who do this referring out to their patients for physical therapy. And he is an entrepreneur himself. He runs a small business of his own currently. So he has management experience and he's familiar with the space. And when you say boots on the ground operations, is this person full-time in this franchise? It would probably be maybe 20 to 30 hours a week. Okay. So almost full-time. What will your involvement in the business be? How many hours? Yeah. My involvement would probably be somewhere in the range of about 10 hours a week, I would expect.

35:34Doing more of the remote work, such as handling the marketing, setting up campaigns for that sort of thing. Also helping with some of the personnel management from a distance. Um, you know, look, I, when I, I, you, you, you would know better and with your partner with this, but it feels like you're an investor in this business and your partner, your friend is going to be the operator in the business. Um, if I was your friend, maybe I'm excited about it now, but in year two, I'm not liking this arrangement anymore because I'm doing all of the work in this business and physically operating it and I'm integral to the business.

36:12And so I wonder if you decide to go in with this business, you should structure it as an investor. And then this person gets a compensation agreement and the opportunity to potentially buy you out or have greater ownership stake over time to some degree. So we did talk about that. We talked about acknowledging full well that he will be putting more time into it than I will be. And so what we talked about doing was basically paying him an hourly wage for the additional work that he's doing, that split between like if I'm at 10 and he's at 30, we would pay him an hourly wage times those 20 hours a week that he's going above and beyond.

36:51Okay. So you're going to invest$215 ,000 through some combination of debt or equity to earn nothing year one. And then you're going to drive profits in years two and three to the tune of$150 ,000 to$180 ,000 each is what you said in years two and three. So this business is going to explode. You're going to go from 450 to well north of a million, million five in order to drive to that, that, that outcome. And you believe this, you've done your homework and believe this projection model. Correct. Yes. And when do you want to launch this business? What is the timeline? Sometime in the next year is the, is the goal.

37:29Yeah. Okay. And one year from now, if you were to stop charitable giving or put that on pause for a little bit, if you were to stop contributing to your 401k, I believe you could generate between$130 ,000 to$140 ,000 in cash and add it to your pile of$70 ,000 in cash. I really like that answer for a business that will produce no net cash flow in year one in particular above getting any type of financing on the business, especially since it'll be operated remotely with your structure. How does that sound from an instinctive answer to your question of how to finance it? So I like the idea of trying to finance it, you know, cash as much as possible.

38:15I think I would be unwilling to reduce my giving. It's a, it's, you know, something I believe in deeply. It's a religious belief that I, that I hold that I want to be tithing 10%. Um, so that part I wouldn't be willing to, to budge on, but in terms of over the course of the next year, taking a hundred percent of my cashflow that I'm generating and sucking it away to fund this specific enterprise, I think I'd be comfortable with that. Okay. The other, you know, other options here, we can take cash from this after-tax brokerage, um, account, um, and just convert that into cash, pay a small amount of capital.

38:58gains and use that to buffer your position. That puts you at 130 day one. And it's a pretty short putt to 215 to buy this franchise as you're put in after that from there. But yeah,

39:15again, it's a first time in business. I love the idea of minimizing debt on this particular business, especially since the debt will have so little impact essentially on your return profile based on what you believe here, right? It's either you're going to get a 50 % cash on cash return starting in year two on an annualized basis. You know, that doesn't really matter if it goes to 65 % or 70%. It just adds risk, I think, to that front. So I'd love the idea of being able to do a full cash purchase, at least for your portion, if you can do it. Can your friend swing that? I doubt it. I don't think so.

39:53Okay. So you putting in more cash will create a dynamic where you don't have equal equity ownership. Just zooming back out on this, you know the opportunity really well. I'm not really in love with this plan at the highest level because it just seems a little odd to me that a business would have no cash flow in year one and then Zoom and basically planning to triple in revenue by years two and three. It's certainly possible, but there's a lot of problems here. It's out of state. Your operations are going to be completely remote. Probably by definition could be done by anybody. Not really going to be specific to your skill set.

40:33Your friend is going to be the one that's truly operating the business. And I don't know if I love the plan to just shift the hourly wages. I think I just wonder in year two or three, if this business does actually perform the way you're talking about it. If there's not some resentment there where it's like, well, geez, I could be making an extra 180 grand a year if I didn't have Chris involved in the business. And I think thinking through that in a helpful way with that, that, that acknowledges that reality today and knows that, Hey, here's how we're feeling today, but we're not gonna feel that way in three, four or five years.

41:06If things go well, there's gotta be an upper, you know, I would love to be a passive investor for 10 to 15 % of that business is a home run, right? If you 15 % of$300 ,000 or$400 ,000 a year in income is a home run on a$200 ,000 put-in if it actually can sustain at that point in time. So I don't know. What's your reaction to that? Yeah. A couple of things. First of all, I think the cost curve and the revenue curves in those first three years are going to be the most dynamic and change the most. we anticipate this being like a 10 year hold basically. And in years, you know, four through 10, I pretty much anticipate those profits stabilizing at that$180 ,000 mark.

41:55So it's, it's basically getting the space essentially ramped up to full capacity. And then once it's at full capacity, there isn't really a ton of additional room to grow that. So that's why you're seeing, I think, what might be looking like untenable profitability going from year zero to year one to two to three. And that's just a function of getting the staff in place because every physical therapist that you can bring in is a$100 ,000 basically profit to the owner. If you have the appointments. Correct. And that's where our interviews with other owners and with, you know, my business partner talking to his referring physicians, they're all saying every time I want to, you know, refer a patient to PT either before or after surgery, they have to wait two to three months because everybody's so backed up.

42:57So we see a huge backlog in demand. And so if we can bring the supply to the market, I don't think there will be any problems with meeting that demand. Okay. If there's so much demand, is there enough physical therapists in the area to fill the demand that are looking for other jobs? One of the things that's been popping up lately is this concept that nobody wants to work and I can't find anybody to hire. And of course you can, you just have to pay maybe a lot more than what you think you were going to have to pay. I have no idea what a physical therapist makes, but if you're planning for 50 ,000 and everybody's paying 50 ,000, you're like, well, I guess I got to bump it up to 60.

43:41And then you're like, oh, everybody else is getting 60. Now I've got to bump it up to 75. You know, your numbers start to change significantly when you don't have the numbers that you thought you were going in at. Yeah, you're right. And that's, in my opinion, the single biggest risk to entering into this business is the finding the PTs to do the work. Because if say that we found a great PT, but then they left, you know, a year in or something like that, I couldn't just step in and my business colleague couldn't just step in because neither of us are trained PTs. So that, in my opinion, is the biggest risk to this business.

44:17And we're okay with overpaying somebody to bring them over if they're good and they want to do good work. Based on these numbers, I think that we can afford to pay, quote-unquote, top of market to get somebody really good and then put that risk to bed. Does the business have any current revenue right now? No, we haven't opened. I mean, does the franchise overall? So it does not exist. You'd be buying franchise rights and then entering into a new market. Yeah. And what does a mature franchise, if you go to another market and buy a mature franchise from another owner right now, what would it cost there that's meeting these expectations?

44:57So generating$300 ,000 to$400 ,000 a year in EBITDA? Yeah. We'd probably have to pay a multiple of about 6 to 8x their EBITDA. Okay, so you would put in, in this case,$430 ,000 to buy this franchise. Let's say you did it all cash. And in four years, if things went well, you'd have a business that was generating$300 ,000 to$400 ,000 in profit. That would be worth between, at a low end, 300 times 6 is$1.8 million, and 400 times 8 is$3.2 million. So that's an unbelievable return on an investment. Unbelievable is kind of the word there to use on that front. It is possible, I'm sure, but that is a really, really big promise there.

45:56That again, I just be, it seems, it seems, it seems hard to fathom that, that, that, that is, that, that kind of opportunity is, is out there. That isn't from a franchise perspective. Well, yeah. Okay. Let me, I guess, let me step back. Cause I think I answered your question incorrectly. If we were looking to buy a group of these franchises, then that's when it would be at a higher multiple. If we were just going out to buy a single franchise, the multiple would be probably in the three to four range. Okay. So still we're going to generate$900 ,000 to$1.6 million in terms of the asset that we're going to build on this, on a$430 ,000 put-in.

46:44Okay. Look, I guess it comes down to we're not going to be able, Mindy and I, to really assess, go through the model and all those kinds of things. I think we can bring a healthy skepticism and, and you know, the business, you've studied the numbers and all that kind of stuff. If you think this is the opportunity and this is the way, then I just go all in on it. It's, you know, over the next 12 to 18 months and put all of your discretionary cashflow into a bucket that will go to this to make it levered as lightly as possible, because the return is so incredible that you just described here, you know, within three years, three to four years, you'll generate an asset that goes from$400 ,000 in base value to $900 ,000 to$1.6 million.

47:32I would say, how do I avoid leverage on that? How do I make it as safe as possible? How do I increase the odds as much as possible and concentrate my bet on that? And then after that, once you've done the put-in, you'll have more cash because you'll have cash flow coming from that asset. Then I think it comes down to one of those other more passive strategies that we talked about? Is it going to be turnkey or something as passive as you can get it out of state rental property investing? Is it going to be some form of lending? Is it going to just be putting everything into VT SACS in your after-tax brokerage?

48:02That's an index fund for everyone listening or, you know, a VOO, another just Vanguard, simple, low-fee index fund. Which of those opportunities, moving on from the business, which of those kind of avenues appeals most to you from an investment standpoint? So I've been a big believer in VTSAX for my whole investing career so far, and it hasn't done me wrong. So I like that. I've done a syndication before out of state in the Midwest, and it didn't go great. It ended up being fine, but I think it was maybe the deal didn't perform how we thought it would, but it kind of got saved by a rising tide lifting all of our boats.

48:48If the tide wasn't rising, I think that boat probably would have sank on its own. But so I'm, and especially right now, I don't think that syndication in multifamily space in the multifamily space is a great option just because of, you know, where cap rates and where interest rates are right now. I don't think that that's going to be a good spot to park my money. Um, so yeah, I think, you know, a brokerage account, uh, with VTSAX and VOO is probably what appeals to me the most outside of the business. Okay. So, so let's just, let's just pop back out here in, in 10 years, which is your goal, right?

49:29Uh, give or take, you're going to generate again, between a hundred, a hundred and$125 ,000 a year, perhaps scaling a little bit. If, if, you have a couple of good years in there, scaling even more if the franchise opportunity goes well. And at that point, you're going to have paid down your mortgage balance, let's call it by 30 more percent. So you have 400 ,000 some odd and change in your mortgage balance. You'll have about a million to a million five in accumulated cash that will be dumped basically in index funds across your 401k and IRA. And then you may have this franchise, which I'm going to call 50-50 shot for now.

50:15Hopefully, it's much higher probability than that. And that's the position in 10 years. That puts you at your FI number. But the question is, does that actually translate to cash flow that you can then spend at that point in time to realize your goal? Would you be comfortable beginning to start selling off some of that index fund portfolio, for example? At that point in time, how does that portfolio sound to you? Because I think it is as simple as that at the highest level for you, despite the complexities of the franchise. Yeah. Yeah. So, I mean, if say hypothetically on that 50, 50 shot, if the franchise does go well, then it would be throwing off enough cash to fund our lifestyle for the next 10 years.

50:59Um, if it didn't work out, uh, and say it totally goes bust, then the, the money that I have in my brokerage account, I think I would probably have no choice but to start selling it off. Right. Um, if you wanted to be fi, if I wanted to be fi. Yeah. And the other thing as well is, you know, if I did retire out of medical sales and did go into ministry, you know, I think there still would be some level of compensation. And my wife would be still working throughout this whole time as well. So if she's making, we'll call it maybe 80 to 100 grand a year, something like that after tax from when I'm 45 on to retirement age.

51:48And if I'm working in ministry, making, say,$50 ,000 a year, I think that still would give us enough just income to get through those years. So I probably wouldn't have to sell too much from my portfolio, or I could just maybe live off some of the dividends that it generates. No, I think that's right. Again, I think that because at$375K in household income, I mean, the game becomes very, very simple with your expense profile, right? You're just going to generate so much cash over the next couple of years that you will get to your number. It's just the portfolio at the end that I think you need to think through to a certain degree.

52:29Because, look, you're going to hit the number even if you don't really get that much in the way of returns just from amortization of your current mortgage, elimination of your car payment, and the savings that you're going to generate from the job. I just would caution you as you're moving towards that, if the goal is to truly be FI in 10 years, I think you're going to find it hard emotively or behaviorally to actually start selling off stocks and living off of that portfolio to some degree and truly feeling FI and having that ultimate optionality. If your portfolio looks like$2 million in stocks and$1.5 million in home equity, that's a hard portfolio to truly live off of.

53:19And I know no FI individuals who have a portfolio like that who are actually not generating additional sources of income. If the plan is to generate additional sources of income and be Wi-Fi like Carl, Mindy's husband, then that's different as well because you'll be able to cover those expenses. But I just want to caution you there, and I'd say think about that. You have$3.5 million handed to you. Is that how you'd allocate it at the end of that day? Options to consider that might be more attractive is just pay off the mortgage. right? You pay off the mortgage. Now your housing expense goes to, goes from$4 ,800 a month to something closer to$2 ,000 a month.

54:01That makes things a lot easier. And what you could say, okay, I'm going to put in, you know, I'm going to go to some 5 % yield. I can go on a public REIT, you know, or something like that, that has 5 % yield. Um, that's slightly levered, uh, very highly liquid. And that will give me, you know, if I put a million in there, that gives me$50 ,000. that's actually going to go a long way towards the rest of my, my expense profile here, or I'm going to go into it. Go ahead. You'll be able to say something. Yeah. So something that I've thought about as well, a lot is paying off my mortgage at two and a half or 2.6, 2 5 % paying that down early.

54:36Um, doesn't seem like a great use of my money, just from an opportunity cost standpoint, but in terms of being able to free up cashflow, So by having a paid off mortgage and cutting that monthly payment basically in half, that number gets multiplied by 25x or whatever if you're using the 4 % rule. So I guess that's something I kind of go back and forth on is, well, yeah, paying off my house early would technically lower my FIRE number. but it would also actually be a non-optimal use of my money to do that when I could just put that money into like a 5 % REIT, like you're saying. That's right. So that's going to, that's going to be your challenge.

55:22You don't have a math problem here. The math is super simple, right? You generate$375 ,000 a year and you spend less than a third of that. So you're not going to have trouble from an accumulation perspective. You're going to though, if you want to achieve five and actually get around this dilemma that I'm telling you, I've, I've seen with tons of other people. People just don't have a home mortgage and$2 million in stocks, most of which is behind the IRA, and truly begin selling off the little chunks of equity. They've all got a couple of aces in the hole. You may have that ace in the hole with Wi-Fi and the ministry work.

55:57And so that's fine if you want to get there. But just know that that will be a constraint to feeling fi at that point in time. And that's the trap to think through. That could be a trap for someone like your situation, you're, you've got all the opportunities and wonderful situation and set up in the world. Um, but if you think about, Hey, let's say I wasn't working and my wife wasn't working and I had three and a half million dollars, like surely there's a solution to, to a three and a half million dollar net worth and an allocation of that, that would generate enough cashflow and a low enough cost lifestyle, uh, to meet those needs.

56:31That's an easy, but it will be suboptimal. It will, it will reduce the tax efficiency to some degree of your portfolio. you, it will reduce the long-term net worth, but it will give you that true financial freedom grounding of you don't have to depend on any sources of income at that point in time, which may be more valuable to you and your wife than the optimal state of not paying off that 2.5 % mortgage at all earlier, the 10 % long-term growth that we all expect from our index funds based on historicals. So if I'm hearing you correctly and thinking through it, you know, I'm a big fan of simplicity, right?

57:10That's why I like VTSAX. And so if you did just give me$3.5 million, said, go do with it as you will set this up in just a beautifully simple world, I would put$1.5 million down on the house and then just have the remaining$2 million in a brokerage account, I guess, to throw off the dividends that I would live off of. I'd have to do the math to see what$2 million. That would give you 2 % dividends. That'd be 40 grand. Yeah. And if I didn't have my mortgage expenses and stuff, I think I want to say the number of my annual spending would be somewhere in the range of like 70 to 80 grand or something like that.

57:58So that's halfway there, basically. Say it's 80 grand. So I'd be halfway there just off of dividends. And then I'd basically just have to sell 2 % of that$2 million a year. Or you could go into a REIT that offers 4 % dividend yields to some degree. Or you could buy rental properties with, you know, put$750 ,000 into one to three rental properties somewhere in the country. That will give you a 6 % to 8 % cap rate or some combination of the above. I mean, you can lend to someone right now, if you were to go buy another house, I presume you have an excellent credit score, great income, all that kind of good stuff.

58:38If you were to rebuy this house right now, someone with your position would get a loan for$600 ,000,$700 ,000, and they'd pay 7.5 % simple interest. So getting that cash flow is not a challenge in today's environment. if you just think about like, oh, I could just like lend to someone exactly like me or buy a mortgage REIT with that was backed that with that, that, that, uh, had that, that kind of yield there. Um, so that's, that's just the, the create, that's just the, the question I would pose to you. I think that, I think that when you get to that point, the thing that, cause you don't have big problems, you have, you have great problems here.

59:11You're going to get to fi, you're going to get to fi and it's going to be great. And you, and you, all you got to do is keep doing what you're doing and you don't have to even be that efficient about it in order to get there. But just when you get there, I think that something you might find is, hey, if I don't design my portfolio now with that end in mind, I'm going to find it actually quite difficult to truly sell off 2 % of my equity position at that point in time to live off of it. And you're going to be trapped in that situation because it's going to be very hard to allocate a million dollars in capital gains from your stock portfolio to something that produces a higher income yield if you don't do that intentionally from day one?

59:48So those are the questions I would pose to you because you're in such a strong position. And I think if you think about those, you might feel freer, even if it doesn't actually change the total net worth number at the end of that journey. One thing I want to point out is that when Scott asked you about your optimal portfolio, you didn't mention the franchise at all. Yeah. Just from the perspective of simplicity, having a$2 million pile of cash that's all in one single VTSAX, that definitely appeals to the simple beauty and elegance of the ideal portfolio. Yes. And as somebody who has a rather complicated portfolio, I can tell you, I long for a really, really simple portfolio.

1:00:39We've had lots of conversations about that. So a couple more things about the franchise before we wrap up. How many of these franchises are in the U.S. of this brand? And how proven of a track record does this brand have? We haven't mentioned brand names, so I don't know exactly which one we're talking about. I just want – and you don't have to answer these questions for me. These are just something for you to think about going forward. going forward. I agree with Scott. I don't love, love, love this idea simply because you and your partner aren't physical therapists. And if your physical therapist quit, you can't hop in and take over.

1:01:25It's not like you have a McDonald's franchise. And if your employees quit, you can jump in there and you can figure out that register really quickly. And you can go behind. I think you actually have to know how to do everything when you're the franchise owner. So I just want you to think more about the ideas that Scott, the arguments that Scott made. Because I mean, honestly, if we can't talk you out of this, then great. But if we can talk you out of it, then maybe it's not the right investment vehicle. As anonymous as possible. So there's a bunch of these clinics that are across the country. And in talking with the other owners that we've talked with, which has probably been, I don't know, between 30 and 50 owner interviews that we've done, they're all making healthy profits from their businesses.

1:02:23And do they have trouble finding physical therapists to work in their branches? Or is that a question you haven't asked? That is, yeah, that seems to be the, and that's why it's my number one concern as well is because that seems to be the hardest nut to crack is how do you, and I mean, it's the same in most businesses. How do you find, attract, retain the top talent, right? That's going to be the same question no matter what kind of business you're running. It's no different in this field as well. But the difference is that I'm legally not able to hop in if something were to happen, right? Because I don't have the license.

1:03:06So it's certainly something to think about and weigh. The projections, you know, based on the conversations that we've had, they do seem, I don't know, it seems quite lucrative to me. Um, you know, once you, once you get past the first year, being able to, to have a pretty stable income of, you know, 150 to$180 ,000 per person for doing not that much work seems, seems solid, but there's definitely a lot of risks to it as well. Well, Chris, this has been a really good conversation. Thank you so much for sharing all this stuff with us. And, and, um, we hope, hope it was, um, uh, really helpful here.

1:03:49We appreciate you coming on BiggerPocketsMoney podcast today. Hey, thank you so much for having me. I really respect you guys and appreciate all you've done in this space. And it was an honor to get to talk with you both. Awesome. Thank you so much. Thank you, Chris. We'll talk to you soon. All right, Scott, that was a very interesting conversation. I really appreciated the things that you brought up for Chris to consider with regards to his franchise opportunity. Yeah. You know, I just think it's kind of – it's interesting here because I think that – look, zooming out to the big picture, and I think Chris disagreed with me a little bit on a couple of these points, but I think the house is the major asset and the major consideration here.

1:04:27This is a$1.5 million asset. It has$800 ,000 in equity and$600 ,000 in mortgage balance. We're not willing to work around it, but we have to acknowledge that that is the strategy that is being employed by Chris and Chris's family is investing in this house fundamentally. It is the largest single expense. More money is going towards the house than any other asset. More money has gone into the investment than has gone into any other asset. And that is going to factor in to the path to financial independence. The good news is that we have such a high income. We've been earning such a high income, and we have the opportunity to continue expanding that.

1:05:07That doesn't really matter. We can work around that and begin investing in other asset classes. And I think Chris really needs to think about what he wants that portfolio to look like in a couple of years. And I think that if he does not, he will fall into the trap that too many upper middle class Americans that have the fortune of having and the privilege of having great incomes like he has fall into, which is all that wealth is in the 401k and the home equity and is not really realizable. There's no real freedom there. You're almost even more trapped in that high income treadmill there. If we don't make an intentional effort to keep expenses low, avoid consumer debt, and build spendable after-tax cash flow generating wealth in vehicles outside of the traditional 401k and home equity.

1:05:50Yeah, absolutely. I just am cautious about the ability to hire employees in this. It's getting better, but it's still a difficult time right now. So that's one of the biggest things I would like Chris to consider. Yeah, I think within that framework, I just talked about there, we have now this, this play in the small business category. I love the opportunities in the small business category. And I think this could work. But we got to I think I think, you know, one of the issues paradoxically that Chris runs into is he earned such a high income, that he may find it to this advantage to be actually attempting to run a franchise on the side remotely.

1:06:35In this particular situation thing, you know, and he may be very successful with this. He's run the numbers, he's a very careful guy, and clearly generates a high income, clearly successful in a lot of ways. But I would feel more comfortable with the franchise opportunity if it was local, if it didn't require a specific physical therapy skill set in order to get into and operate. If there were those kinds of backup plans, I think the probability of success would be higher. But with Chris's situation, he is able to generate enough cash on an annualized basis to make a bet like this every two years.

1:07:08So even if he were to make three of them and two of them failed in the next six years, he still might have a winner to this effect. So I think it could still be good math. That's a good point. I like that. And again, everybody's situation is different. So what we recommend for Chris is because of Chris's specific situation. If you have a specific situation that you would like Scott and I to chime in about, we would love to talk to you. You can email Mindy at BiggerPockets.com or Scott at BiggerPockets.com, or you can fill out the Finance Friday application at biggerpockets.com slash finance review.

1:07:46And if you don't want to use your name or don't want to use your video or both, we can have you be anonymous. We just want to share your numbers and tell your story. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the BiggerPockets Money Podcast. He is the Scott Trench. I am Mindy Jensen saying BRB, honeybee. If you enjoyed today's episode, please give us a five-star review on Spotify or Apple. And if you're looking for even more money content, feel free to visit our YouTube channel at youtube.com slash BiggerPocketsMoney. BiggerPocketsMoney was created by Mindy Jensen and Scott Trench.

1:08:23Produced by Kaylin Bennett. Editing by Exodus Media. Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.

1:08:36The holidays mean more travel, more shopping, more time online, and more personal info in more places that could expose you more to identity theft. But LifeLock monitors millions of data points per second. If your identity is stolen, our U.S.-based restoration specialists will fix it, guaranteed, or your money back. Don't face drained accounts, fraudulent loans, or financial losses alone. Get more holiday fun and less holiday worry with LifeLock. save up to 40 % your first year visit lifelock.com slash podcast terms apply