❓ What is the HENRY method? · The HENRY Investor

19d ago (edited) in General

❓ What is the HENRY method?

TLDR: The HENRY method prioritizes growing Net worth over Cash Flow (at least at the beginning of your investing journey).

There are three pillars in the HENRY real estate investing method.

Make (High) Active Income
Avoid Taxes on Active Income
Re-Invest Tax Savings

You are in this group because you have already achieved the first step in the HENRY method.

Steps 2 and 3 become more enticing for people with large tax bills - which is why this strategy is more effective for HENRYs than it is for lower income earners.

Let's assume you use the HENRY method to avoid 50% of your $80,000 federal income tax liability for that year (I successfully avoided 98% of my federal income tax liability of 80k in 2022 - and yes, I worked with a tax professional).

That means you would've saved $40k in taxes - which you can now re-invest into other assets.

💥 BOOM! 💥

Now imagine what that would look like if you did this every year for 5 years.

Lower-income earners looking to invest in real estate prioritize cash flow - their goal is typically 10k a month in passive income.

Now, that's not a bad goal to have - I'd argue that is the END goal - but it shouldn't necessarily be the initial focus for HENRYs.

**The HENRY method prioritizes net worth growth over just cash flow by analyzing a real estate investment on a holistic level considering tax savings and equity growth - and not just cashflow, cashflow, cashflow.**

In other words: "The goal isn't 10k in cashflow in 5 years - the goal is a net worth of $3,000,000+ in 5 years"

This should be everyone's goal - because if you can achieve a net worth of $3M (or more) in a short period of time, you can always "trade" your assets (while avoiding any taxes) for highly cash-flowing assets. (And cashflow much more than $10k a month).

The end goal is the same - but the HENRY Method is ideal for High Earners because: