Is Real Estate Still THE Best Path to Passive Income? (Invited to Debate)

**Dave Meyer** (0:00)
Is real estate really the best path to passive income? We say it all the time, but today's guest has a different perspective, and today we're gonna debate it, so strap in.
Hey everyone, I'm Dave Meyer, Chief Investment Officer at BiggerPockets. Our guest today is Ryan Sterling. Ryan is the CEO of NerdWallet Wealth Partners. He's been a financial advisor for more than 20 years. So on this episode, we're getting an unbiased outside perspective. If you think I only talk about real estate because I'm a real estate investor myself, Ryan is a neutral party whose only incentive is to help his clients build as much wealth as possible, including some who want to replace their income and retire early. Ryan's take is that you may not actually need passive income in the way you think. I'm excited to hear him out and not afraid to debate him on some of these points. So let's get into it.
Ryan, welcome to the Bigger Pockets Podcast. Thanks for being here. Yeah.

**Ryan Sterling** (1:05)
Thanks for having me. Excited to join.

**Dave Meyer** (1:07)
It should be a lot of fun. We're going to dig into a topic we don't always talk that much about, which is equities in the stock market.
Hopefully, we can compare and contrast it a little bit to real estate and help our audience understand when and where they should be putting their time and attention based on their own individual goals. Ryan, maybe start. Tell us a little bit about your own background in investing and finance.

**Ryan Sterling** (1:32)
Yeah. So I've been in the wealth management business now for over 20 years.
Bulk of my time spent working at some of the larger investment firms, worked at Lion's Bernstein, Goldman Sachs, Capital Group, and 2019, I left to start my own wealth management firm. One thing I think we all have in common here is that I always say that financial independence is mandatory. So our job is to solve for what is our clients' financial independence number. Even if they don't think they can reach it for the next 20, 25 years, we still want to know what that number is and carve out a path to get there. I think about what was my wealth building journey. My wealth building journey was saving, investing in the stock market, having the benefit of compounding, but then also starting a business. Ultimately, I sold the business in 2025, and now I'm the CEO of NerdWallet Wealth Partners, where it's very much an extension of what I built at the predecessor firm.
We're just doing it now with a bigger team, and we're really excited to continue to grow this business.

**Dave Meyer** (2:36)
Well, I love what you said there, Ryan, about financial independence or financial freedom being mandatory. I don't really see another objective in the professional sense that's worth pursuing more than financial independence. I just think not that many Americans think of it that way, and don't have that critical number that you're talking about, of just an idea of where they need to get to.
So maybe if you can do it briefly, tell us how people can go about figuring out what that big picture, long-term goal should look like.

**Ryan Sterling** (3:12)
The general rule of thumb, and I know the Bigger Pockets audience is probably very familiar with, is the general rule of thumb is the 4% rule. So if you're a family who's spending $200,000 a year, and that's your baseline, that's what you want to maintain, you're going to need an investment base that can sustain spending $200,000 a year into perpetuity. As it relates to liquid portfolios, that means you want to have a stock portfolio of roughly speaking $5 million.
In terms of the value of a real estate portfolio, it's probably pretty similar to that, but that's more focused on what's the income that is coming from the real estate assets. But generally speaking, again, when we are in building plans for our clients, and again, let's say it's hypothetically, it's 200,000 is the number that they need to reach on an annual basis, we're targeting a net worth of outside of their personal residence in the $5 million range.

**Dave Meyer** (4:15)
It's funny you say that. I think of it very similarly for real estate, and I talk to investors every day all the time, and I present this idea to them that you need to back into the total value of your portfolio. For us as real estate investors, I think about it as the total equity value, and that's how you should be thinking about growth rather than what is my cash flow this month. Don't focus on, hey, I went from 500 to 600 bucks a month in cash flow. The big picture, the hard thing is building up that three, four, five million dollars in equity.