Dear investor,

This is the new monthly letter update called the “GreenSheet.”

Many of you have said that although you enjoy the updates to the various SPC Ultimate Guides (such as for tax or syndications) that the emails was too long to read. Going forward I will create an archive-able web-post here which you can access the index on this page.

Quitting my job last month has allowed me to spend more time making this “great (online) American novel” I call SimplePassiveCashflow.com. Hopefully the contents can help you quit your job too and spend time on what really matters.

1. Live Coaching Call w/ Non-Accredited Investor
2. Hunter Thompson from Cashflow Connections
3. Timeshares are the worse. Mostly because there is negative equity as soon as you purchase because you have to pay a huge sum of money to leave your monthly/annual commitment.Check out these tips from a timeshare lawyer that helps poor consumers exit these bad deals – SimplePassiveCashflow.com/timeshare
4. Added a link to schedule a free tax/legal strategy call with my CPA in the Tax guide.
5. Life Settlement Info Page – https://simplepassivecashflow.com/life-settlement-investing/
6. New Most Popular SPC Page – SimplePassiveCashflow.com/top
7. (Here is a cheaper service for cost segregations for single family homes or under $2M assets – but I am personally a little skeptic)
8. Live Coaching Call w/ Non-Accredited Investor – SimplePassiveCashflow.com/155jason 
9. 152 – Kyle Jones Apartment Investor & 7 lessons learned –
10. Update to Banking Guide – 

    Index Universal Life (IUL) Caps: Will They Rise When Interest Rates Rise?

    Normally when we are taking about a banking policy we are talking about a wholelife product however sometime an indexed universal life (IUL) is preferred which is why it makes sense to work with only people you (we) trust. The cap defines the upper limit of the policy cash value crediting rate.

    Typically (2014-2019) IUL caps have gradually fallen, leading some to wonder what would stop carriers from gradually dropping caps to the policy’s minimum guarantees. This concern is particularly common when the client is considering whole life as an alternative because whole life discussions begin with guaranteed performance enhanced by dividends. Legally this is possible, and advisors may need some clarity to make a decision.

    So, how valid and relevant is the concern that caps may fall to the level of policy guarantees?

    Cap levels are essentially driven by the amount of money the carrier has available to purchase long options in support of its IUL book of business. While option pricing is a combined function of option budget, market volatility, and the price of zero-risk products, data indicates it is the option budget that is by far the overriding driver. This is particularly true when considered over the medium to long term.

    It’s indisputable that the reason whole life dividends, universal life declared rates, and IUL caps have fallen over the last 20 years is the declining interest rate environment. As rates fall, the general account return must also fall because its portfolio is comprised of primarily fixed income investments. When rates rise, bond returns in the general account will increase slowly as the life insurance carrier replaces maturing bonds and adds additional bonds with new premium. The question is this: will the carrier keep the extra return instead of passing it on to the end client in the form of higher caps, dividends, or declared rates?

    The life insurance carrier would say that they take their profit in the form of money management fees, costs of insurance, and policy charges; thus regarding the improved yields as policy owner money. On the other hand, cynics would disagree and say the life insurance carrier will pocket the increased yield.

    Let’s assume for the moment the cynics are correct, and that carriers have no regard for policyholders and deal only in their own self-interest. Well then, is carrier self-interest positively served by such behavior? The answer is no. And here’s why.

    IUL products are mostly sold to clients below the age of 65 who will live for a long amount of time. If interest rates rise but caps do not, then an IUL product becomes less attractive compared to similar products issued by competitors with higher caps and higher client yields. Healthy clients, encouraged by agents and other advisors, will surrender their policy so that they can move to the more competitive products. Furthermore, this would create another problem for the original carrier because the remaining pool would be the unhealthy, and this would result in more early death claims and therefore further losses.

    Will the original life carrier care about these lapses? After all, they won’t be paying a death claim and have already booked profit, as we noted above. The answer is yes.

    One of the great advantages of life insurance is that as standard practice the carriers guarantee the mark-to- market value of the bonds that support the cash surrender value. This was not an issue in a declining rate environment because the carrier could sell the attractive higher-yielding bonds and pocket the gain. However, when rates are rising and especially if the rise is rapid, the reverse is true. Thus, clients induced to surrender by higher caps elsewhere create a significant mark-to-market liquidation loss for the short-sighted carrier.

    For example, if the insurer has a general account with an average bond maturity of ten years (typical for the industry) the losses would be a 9% loss on the cash value surrendered if there was a 1% increase in underlying market interest rates, and a 35% loss if there was a 5% increase. For a single client this is unpleasant but unlikely to break the carrier. However, if it happens on a large scale it creates an enormous loss that no senior management team is likely to survive.

    Given the potential for considerable losses and that the carrier hits its profit objectives by passing through the increase in general account yield, the carrier is incented to pass through improved yields to the client in the form of higher caps. By doing so, the carrier attracts more premium while simultaneously protecting prior profits. By not doing so, the carrier risks mass surrenders which could result in the loss of hundreds of millions of dollars.

    No one knows when interest rates will rise, but data and logic tell us that the life carriers will protect their profits. To do that they must pass on improved yields to the client in the form of increased caps and/or improved participation rates.

    I’ve been burned before with Life Insurance that was sold to me by a 24-year-old out of college salesperson and everyone says whole life insurance is a scam. What can I do with my old policy?

    Have no fear my friend you basically have three options:

    • Cash it out and just walk away with the cash that’s in it.. In that case you obviously no longer have a life insurance policy so the death benefit goes away.. Because of the way it was designed, it possible does not have enough built in cash value yet for there to be any tax consequence so you don’t have to work about that..
    • Borrow against this policy and use the money that way.. You can use it as a properly design self-banking instrument, the downside being that the it’s not a great cash building policy so there’s more cost in it than what you’d like to see and the loan rate may not be real favorable.
    • Open a new policy (one that is designed for cash build up) and do a 1035 exchange into and this time get a policy optimized for banking.. The nice thing here is that there would be little cash right up front to boost the new policy because we are using the old one.. The downside is just going through the process of getting a new policy with physical evaluation etc..
11. Ep. 150 – Live Coaching Call with a Doctor going 45 to 75 MPH! 
12. Ep. 150 – Apartments to Mobile Home Parks with Paul MooreTake the hint from other high level investors and be aware that MFH Apartments is where a lot of new syndicators are starting businesses and where all the gurus are teaching about the space. It might be time to look elsewhere other than Apartments and into mobile home parks. Learn more about the asset class here
13. Episode 149 – QRP Retirement plans Follow Up Webinar – Follow up on QRP questions with Damion Lupo – Video
14.  Additions to the Analyser –
    

    What are these expenses?

    Taxes: In the beginning of the acquisition process you have to ASSume part the taxes as a certain percentage of the market price.  However keep in mind that every county calculates this differently and re-assesses the tax basis for properties especially when the property transfers ownership. Best tip is to get around other passive investors in that area to ask them what the change as been or to assume that taxes will go up 10-80%.

    Insurance: You can take a certain percentage outlined in the spreadsheet, ask the current owner (if you believe them), or what we suggest is to get one of our insurance referrals within the mastermind to give you an actual value.

    Management: This is typically 8-10% of the rental revenue plus 50-100% of the first months rent. The property management can also collect additional fees by splitting late fees or charge for renewing previous tenant leases. This is where it is important to have peers or a mentor to save you hidden dollars here. Also make sure you pick a good one with this guide.

    Vacancy/Turn-over Expenses: Typically it takes 2-6 weeks to do some touch ups around the property after a tenant moves out to when the new tenant moves in. 4 week vacancy is 1/12th loss rents and needs to be accounted for as a “Vacancy” expense line item. This is where most novice investors fail to account for.

    Maintenance: I have always been told to put aside 10% of the rents or 1 months rents as money set aside to fix random things in the property. Also remember that when you old tenant moves out you might have to fix a thing or two (or $20,000).

    Also don’t forget about contract services such as lawn/yard service, snow removal, pest control, or pool maintenance.

    Cap Ex: This is not in your net operating income for all you geeks (engineers) crunching numbers but this is another 10% or so going to a cash reserve account to pay for broken stuff down the 2-15 year road. This money is to pay for large ticket items. More info here. I say geeks because experienced landlords know that its very hard to predict this stuff and it is a waste of time to track and build models to predict this stuff. In reality the best thing you can do is spend your time not in Spreadsheet Land but find more deals to decrease your risk but making more cashflow! Easier said than done when you are limited with fund and getting started which is why you get a mentor to mitigate your risk and understand that these scary things is exactly why you should push forward because most people will back out and thin your competition.

    Utilities – In most single family homes the tenant is in charge of the utilities (electric, gas, trash, sewer, water) which makes you life easier. However in 2-4+ unit arrangements the responsibility is all over the place.

    HOA Fees – It worth mentioning but check if your property has this. Condo or townhouses typically have a HOA monthly fee and is why we don’t recommend them as investments in addition the face that it is a nightmare dealing with their governance system.

     

15. Additions to the guide to People/Psychology guideWall of Shame (don’t make these mistakes)Deprival Super-Reaction TendencyPeople prefer avoiding losses over acquiring gains.  Most of us have a stronger reaction toward losing something we already own. I see this when people have made bad decisions in buying a non cashflowing piece of land or crappy turnkey rental and they just won’t sell for a loss even though they have no other capital to get themselves moving again. When I lost $40K in this deal… my first inclination was to just hold on (stick my head in the sand), but realizing this I sold at a lost and moved on and freed up my mental bandwidth to close on over 1,500 units in 2018.Excessive Self-Regard Tendency
    We overestimate our skills, which leads to overestimating the competency of our decisions, which leads to overestimating the value of our investments or assets.  While confidence is needed in investing, excessive self-regard results in people thinking they’re better at picking stocks or investments than they actually are.  I see this went I go to networking events and run into someone venturing over from the stock trading camp or someone who thinks they are super smart because they are a genius in the computer science universe.
    If you are doing well monitoring trends 28 hours a day awesome for you!
    Sometimes I have a call with someone and they argue with against starting out with a turnkey rental and cite the reason why MFH is superior because they have listened to 1,000 hours of podcasts (inception by Guru) but they don’t have any experience even running a SFH!
    Real estate is very simple and requires soft skills to acquire the network needed to excel. In that respect it is like playing ultimate frisbee where the playing field is leveled and the physically gifted don’t really stand out like a pick up basketball game would. If you don’t know what I’m talking about you should check out the sport, it could be your calling.Social Proof Tendency
    We tend to seek out people who think the same way we do, and we want to do something just because someone else has done it, rather than for its own merit or because we’ve done the research.  This leads to an unhealthy herd mentality.
    Example:
    Investor A tells Investor B that Operator C is a great operator. Investor A does not know anything (how to run the numbers) just investing in a few deals done by Operator Z. Now Investor B invests in Operator C’s deal.
    Charlie Munger’s example:
    “Big-shot businessmen get into these waves of social proof.  Do you remember some years ago when one oil company bought a fertilizer company, and every other major oil company practically ran out and bought a fertilizer company?  And there was no damned reason for all these oil companies to buy fertilizer companies, but they didn’t know exactly what to do, and if Exxon was doing it, it was good enough for Mobil, and vice versa.  I think they’re all gone now, but it was a total disaster.”
    Combine Excessive Self-Regard (rich people with investing track record or not) with Social Proof Tendency you get a recipe for group thinking. This is something I constantly see in my of the groups that I paid to be in and as I grow my own mastermind.Consistency Avoidance Tendency
    Just because something has worked in the past does not mean that markets do not change. It is difficult to be objective and move against your past operating system. This is why in the podcast we always ask guests what is something they once thought, put their ego aside, but they realized was wrong.Envy/Jealousy Tendency
    Its no doubt that its impressive when someone says they own 2,600 units or whatever. Not going to lie, its definatly a pissing contest.
    You might see a 310-unit deal come by and a 424-unit come by and want to invest just to increase your unit count. Just know to keep to your underwriting standards and not compromise.
    Deals are like airplanes. Everyone is waves goodbye in great admiration and fanfare when the airplane takes off but once it disappears into the horizon no one knows if the plane made it to the end goal.
    Sometimes it is clear that some planes leave the origin with a quarter tank of gas or a drunk pilot.
    It is often the deals that you don’t do (even though it costs you $50,000 of earnest money) are the best deals you make because you prevent the drain of money and more important life energy.
    People prefer avoiding losses over acquiring gains.  Most of us have a stronger reaction toward losing something we already own. I see this when people have made bad decisions in buying a non cashflowing piece of land or crappy turnkey rental and they just won’t sell for a loss even though they have no other capital to get themselves moving again. When I lost $40K in this deal… my first inclination was to just hold on (stick my head in the sand), but realizing this I sold at a lost and moved on and freed up my mental bandwidth to close on over 1,500 units in 2018.Excessive Self-Regard Tendency
    We overestimate our skills, which leads to overestimating the competency of our decisions, which leads to overestimating the value of our investments or assets.  While confidence is needed in investing, excessive self-regard results in people thinking they’re better at picking stocks or investments than they actually are.  I see this went I go to networking events and run into someone venturing over from the stock trading camp or someone who thinks they are super smart because they are a genius in the computer science universe.
    If you are doing well monitoring trends 28 hours a day awesome for you!
    Sometimes I have a call with someone and they argue with against starting out with a turnkey rental and cite the reason why MFH is superior because they have listened to 1,000 hours of podcasts (inception by Guru) but they don’t have any experience even running a SFH!
    Real estate is very simple and requires soft skills to acquire the network needed to excel. In that respect it is like playing ultimate frisbee where the playing field is leveled and the physically gifted don’t really stand out like a pick up basketball game would. If you don’t know what I’m talking about you should check out the sport, it could be your calling.Social Proof Tendency
    We tend to seek out people who think the same way we do, and we want to do something just because someone else has done it, rather than for its own merit or because we’ve done the research.  This leads to an unhealthy herd mentality.
    Example:
    Investor A tells Investor B that Operator C is a great operator. Investor A does not know anything (how to run the numbers) just investing in a few deals done by Operator Z. Now Investor B invests in Operator C’s deal.
    Charlie Munger’s example:
    “Big-shot businessmen get into these waves of social proof.  Do you remember some years ago when one oil company bought a fertilizer company, and every other major oil company practically ran out and bought a fertilizer company?  And there was no damned reason for all these oil companies to buy fertilizer companies, but they didn’t know exactly what to do, and if Exxon was doing it, it was good enough for Mobil, and vice versa.  I think they’re all gone now, but it was a total disaster.”
    Combine Excessive Self-Regard (rich people with investing track record or not) with Social Proof Tendency you get a recipe for group thinking. This is something I constantly see in my of the groups that I paid to be in and as I grow my own mastermind.Consistency Avoidance Tendency
    Just because something has worked in the past does not mean that markets do not change. It is difficult to be objective and move against your past operating system. This is why in the podcast we always ask guests what is something they once thought, put their ego aside, but they realized was wrong.Envy/Jealousy Tendency
    Its no doubt that its impressive when someone says they own 2,600 units or whatever. Not going to lie, its definatly a pissing contest.
    You might see a 310-unit deal come by and a 424-unit come by and want to invest just to increase your unit count. Just know to keep to your underwriting standards and not compromise.
    Deals are like airplanes. Everyone is waves goodbye in great admiration and fanfare when the airplane takes off but once it disappears into the horizon no one knows if the plane made it to the end goal.
    Sometimes it is clear that some planes leave the origin with a quarter tank of gas or a drunk pilot.
    It is often the deals that you don’t do (even though it costs you $50,000 of earnest money) are the best deals you make because you prevent the drain of money and more important life energy.
16. 
17. Additions to the Syndication Guide – To be a General Partner you need to find the deal, run it, bring a large portion (25% of the total capital), and answer annoying questions from the bank like this:https://youtu.be/WHC7LmUrnKEUltimately the reason I decided to not do a 4-50 unit by myself was because of the leading options under $1M are horrible and full recourse. Check out with these options for debt that the pros use which are typically out of reach from mom & pop investors.What is Syndication?
    A syndication is pooling of capital to invest in an opportunity. The benefit of putting capital together is that it might make it possible to purchase something that one person or small group may not be able to on their own with a Joint Venture agreement. We use syndications to get into opportunities to get away from the mom and pop chaotic and highly competitive space of under $1M-$2M deals. In addition, we try to stay under $10M-$20M purchase price sizes so we do not compete with larger institutions or hedge funds who are mostly interested in capital preservation not optimizing equity growth.
    You can syndicate anything from a shave-ice store to a multi-million dollar development. I just try to stay in my lane and focus on cashflowing real estate where tenants demand is high.
    Video version of this article with extra commentary:<a href="https://youtu.be/z5WHIa5FFng%5B/embed%5D" target="_blank" data-saferedirecturl="https://www.google.com/url?hl=en&q=https://youtu.be/z5WHIa5FFng%255B/embed%255D&source=gmail&ust=1559113668961000&usg=AFQjCNGZ6g95TgHv60sX47JIVtQukfua1Q">https://youtu.be/<wbr>z5WHIa5FFng

    My Experience with Syndications
    In 2016, I paid over $30,000 to get the mentorship to be an apartment operator/investor. What I learned in the process was that I did not need to be a General Partner because I had enough income and net worth to invest as a Passive investor (LP). After doing turnkey single-family homes from 2009 for 7 years I was ready to graduate to bigger deals as a passive investor.
    Technically, I paid $40,000 on this fiasco too.
    Since then I have been General Partner and Limited Partner on over a dozen deals from 2017-2018.
    Webinar – What are Syndications/Private Placements? – https://youtu.be/n_qsZHBOCS4

    <a href="https://youtu.be/n_qsZHBOCS4%5B/embed%5D" target="_blank" data-saferedirecturl="https://www.google.com/url?hl=en&q=https://youtu.be/n_qsZHBOCS4%255B/embed%255D&source=gmail&ust=1559113668961000&usg=AFQjCNHHCbdHxFEcFUoGDeKsGPRzh8Ynig">https://youtu.be/n_<wbr>qsZHBOCS4

    Two Types of Syndications
    There are two forms of syndications:

    1. A single (of finite number of assets) that are going to be put into the ownership entity. For example we are going to syndication the purchase and rehab of a 200-unit apartment complex at 123 Main Street. The assets are identified before capital is raised. This allows sophisticated investors to vet the deals on an individual basis.
    2. A Blind Pool Fund (like a real estate fund) where capital is raised based on the sponsor’s vision, track record, and reputation. The capital is raised first the sponsors will then go out and acquire properties.

    What are the Various Roles in a Syndication?
    Whenever you are learning something new like ball room dancing for example its best to learn the definitions first. Then once you understand those we will build up on the concepts. Remember mastery only happens with the right Mastermind and actually jumping into deals.

    Sponsor/Lead/Co-Sponsor/Manager/General Partner (GP)/Syndicator
    There are many terms for this person or company that organizes this investment and that is responsible for managing the whole operation on behalf of the investors. They are interchangeably known as the Sponsor, Lead, Manager, Operator, or Syndicator. Being in over a dozen different arrangements I can tell you that sometimes there can be a lot of dead weight in a GP however if you are looking to be in the GP you need to help with the deal with 1) finding it, 2) doing the grunt work, 3) bringing in a lot more capital than a typical Limited Partner.
    The loans (financial liability) is guaranteed by the Loan Guarantors or Key Principals (KPs). You guessed it! Typically a “rich dude/gal” with a net worth of over $2-5M is signing on the debt for the entire GP and Syndication. You can get compensated for this but every case varies which determines if it is a good risk reward. If you are a “rich dude/gal” we should probably connect and you should enroll in my mastermind with over 50% accredited investors too. But for the rest of you under $2M net worth keep reading…

    Investors
    Investors are known as Limited Partners (LPs). Not giving you any legal advice here of course but 80% of my investors invest in deals via their personal name because as the name implies there is limited liability because the liability goes through the GP first and the loans are guaranteed by the KPs.

    Legal Structures
    As mentioned before, the syndication may be created with a certain tax and legal structure. It is usually created as a Limited Partnership (LP) or a Limited Liability Company (LLC) to own the property on behalf of investors.
    Accredited Investors
    An accredited investor is a defined by the United States Securities & Exchange Commission as someone who makes a minimum of $200,000 ($300,000 if filing jointly) or has a net worth of 1 million dollars excluding personal residence. The significance of being an accredited investor is that you can invest in things that those with less money, cannot. You can also be something called “a sophisticated investor” which has a much more nebulous definition but essentially says you know what you are doing even if you don’t have that much money. These laws were put in place long ago to “protect” the average person from predatory activity. The irony of this all is that there is no protection for the average Joe, or pension funds for that matter, against investing in a wildly bloated stock market at record valuations. Every major trader out there knows we are in a bubble but there is no protection for individuals dumping money into their retirement accounts to buy mutual funds. It’s an archaic system which makes little sense. Certainly, there has been some recognition of this fact. The 2012 JOBS act made it easier for Main Street America to participate in “alternative” investments via crowdfunding and made it easier for sponsors to advertise previously unknown opportunities. However, we have a long way to go. I would advise you that you need to know the lead syndicator personally. None of this “we met at a local REIA and he pitched me his deal”. If a guy does not have a list of solid investors they must lack the track record. Also I did a podcast with Amy Wan a syndication attorney talking a lot about this topic.
    It is a misnomer that syndications are only for accredited investors. 97%-90% of deals out there also accept non-accredited investors it just that you are not personally connected to any of these people.

    Two Typical Syndication Methods
    Most deals are put together with the following structures which follow the SEC’s governances.

    1. Regulation 506B – 97-90% of deals our there accept non-accredited investors and the GP cannot openly market the deal to a non-private list (no TV, Radio, social media ads for example). Investors (LPs) will self certify if they are accredited or non-accredited.
    2. Regulation 506C – the minority of deals following the new rules where you can advertise into the free world but the SEC says if you do this you cannot bring in non-accredited investors. Investors (LPs) will need a third-party letter from lawyer, accountant, or third party site like Verify-Investor validating Accredited status.

    The Process
    The following is how the process typically works.

    1. Someone finds a deal.
    2. GP ties up the property up in a contract and starts building their GP team. (This is where they call me and see if the Hui Deal Pipeline Club is interested in the deal).
    3. The GP performs their due diligence and in parallel they get the syndication lawyer (not another run of the mill person who happen to pass the BAR) to create an investment package typically referred to as a Private Placement Memorandum or PPM. The PPM includes details of the property/deal, terms, sponsor contribution, equity splits, projected returns (proforma), fee structure, payout structure, and other marketing. The PPM is a heavy document over 100-pages. In most cases it scares new investors because it discloses all the risks that can happen. In the end it does two things: 1) Signs the GP up to be fiduciary to no lie, cheap, steal, and run the investment to the best of their ability and 2) Signs the LP up to minimize their ability to sue the GP incase the deal does not go well after all in everything there is risk and sophisticated investors know this.
    4. The GP will then go about raising money from investors (LP). They will decide a minimum investment amount based on the downpayment needed, cash reserves, capital needed for extra construction, fees/compensation for putting the deal together. Experienced GPs will always write the PPM to allow some wiggle room incase an extra 5-20% of capital is needed so they don’t have to spend another $10,000 for another irrevocable PPM. I am mentioning this because a common question from LPs is why does the PPM say the max raise is $4M and the sponsor just told me their take get is $3.5M? As a LP it is important to understand the rough breakdown on what the initial capital raise is being used for. Beware if capital is being raised to pay out investors in the first year. This is technically a semi-legal Ponzi Scheme but is not a good best practice by a GP and a way of tricking unsophisticated LPs.
    5. Once there is enough capital and the financing is worked out, the property will be purchased and the sponsor manages and operates the property. This is always a monumental movement as millions of dollars are being wired in from dozens and dozens of LPs in just a matter of days.
    6. After the property is acquired the fanfare and excitement goes away and the GP rolls up their sleep and gets to work. Distributions and profits are given as outlined in the PPM. In a way the LP courting stage is over, the wedding was a blast, and now we see how well this marriage lasts/goes.

    Why did I focus on being a LP
    Again for me, it was simple math. The assumption was that my money would grow at 15-20% a year in part cashflow and equity & forced appreciation. The syndications that I do are not BS REITs and RE Funds where you know the people running the deal for you and you don’t have layers of people taking hidden fees.
    I get all the pass-through tax treatment and depreciation and interest expense. In fact it is stronger than my direct ownership rentals because of cost segregation and bonus depreciation. See our tax guide.
    What I give up for control (most of which is an ego thing) I gain in diversification (multiple partners, markets, business plans, and asset classes). And the property management is typically a lot more professional than the property managers in the residential (1-20 unit) world.

    What are the downsides of a Syndication?
    Syndications as a LP are for people with money. If your net worth is under $250K its cool to learn but you really should not think about investing in one. Being an LP is more of an end game strategy or once you have hit your critical mass point.
    Lack of liquidity. Should something happen in your life like someone kidnaps your child or your spouse wants you holdings its almost impossible to get the money out. Again not for broke people.
    Lack of control. The GP calls the shots and you are on for the ride. Then again most LPs are amateurs and at some point its better to give the wheel to the pros.
    Costs and fees can be misleading. We break these down in our MastermindYou have to find another deal when it exits. Although I find this fun!

1. [Resource MFH info page] Physical Occupancy vs. Economic Occupancy in Apartment Investing – Note this is mostly used as an example of what LP’s should be aware of. In most cases LP’s either know too little for example they just look at the Pro-Forma returns and don’t look at the assumptions that the operator used to get there. Or they spend so much time evaluating things that have little impact to the numbers for example running away when they hear of minor foundation issues or rodents that can be remediated with a few thousand dollars of seller concessions. In the Passive Investor Accelerator & Mastermind we try to focus on what is really important but obviously that is not free (but going into a bad deal is costly too). Vacancy in apartments decreases top line income and getting occupancy as high as possible is the goal. There are two different types in apartment investing 1)Physical Occupancy and 2) Economic Occupancy. Physical occupancy (number of units that have a tenant with a signed lease, occupying a unit) is what most people are familiar with in apartment investing and what is often overlooked when a passive investor reviews the underwriting assumptions of a syndicator. This is shown on the rent roll with the tenants name next to the unit number which also needs to by physically audited with boots on the ground verification. Physical occupancy is a percentage calculated by dividing the number of occupied units by the total number of units for example a 100 unit apartment with 8 units vacant has a physical occupancy is 92% (92 ÷ 100).Pay attention here… if a rent roll shows a unit is occupied, doesn’t necessary mean it’s also generating income. A tenant might be a deadbeat or the nice way of putting it there might be “loss to lease.”Economic occupancy is the amount of money of actual rents received as related to the occupancy. This also takes into account tenants who don’t pay the full rent and also things like concessions ($200 move in specials, discounts to motivate tenant prospects). This is the net rents received (not including other income). The net income will deduct for bad debts/loss to lease. The economic occupancy is calculated by dividing net rent received by the gross rents possible.On the same 100 unit apartment, assume each unit rents for $1000/mo. There’s a gross potential of $1,200,000/year (100 units x $1000 = $100,000/mo x 12 = $1,200,000/year). Using the same physical example say there are an additional 10 deadbeats (that the previous seller stuffed in there right before the sale) and 10 people only able to pay half the rent… then you are looking at an economic occupancy of 75%.This might be a little too much info for a LP but Economic occupancy can be a sign of the following:Bad Management and bad collection practices
   Bad tenant qualification practices
   PM stealing money
   Bad rent collection practices
   Lack of maintenance, causing tenants to leave
   Or a clear sign of opportunity!

Why Invest as a LP in a Syndication?

1. Minimizing PITA (simplepassivecashflow.com/pita): No more managing tenants, vacancies, maintenance and the managing the manager (who is a $12-20 dollar employee who’s compensation structure us not aligned with your goals) By passing the control of the day to day operations to true experts who are literally partners (direct alignment of compensation and motivations), you can assure the investment is being optimized while you spend your time on what you want which is 1) making more money at your day job, 2) spending time with your family or 3) finding that one off deal that you want to do one your own while pairing with a Limited Partner strategy.

2. Asset Diversification:  Many commercial real estate investments have high acquisition prices (think $10M+) where most people don’t  have access to. You want to get away from these other Mom and Pop invests like these 1-40 units. When I was a syndication newbie and thought I could do everything by myself and did not trust anyone. I then realized in a few months that 1-40 unit deals had horrible pricing because all the amateurs were involved and the ones that looked good from a per unit price prospective were under 80% occupied and had ISSUES.  Investing passively in a group can allow you to invest in multiple asset classes (apartment/mobile home/assisted living), in multiple locations and with varying business plan duration. 

3. Avoid Credit and Liability Risk:  Investing passively allows one to avoid being exposed to credit or liability risk.  No W2 documented income no problem!  You do not need to personally guarantee multi-million dollar loans and and be the fall guy. Plus now you can get into all the travel hacking credit cards and tradelines you want (Simplepassivecashflow.com/tradelines).

4. Cash Flow:  The goal of a LP syndication investor is to create a “ladder” of investment that create accumulated cashflow and cash out (refinance or sell) at different times. It’s like your grandpa’s CD ladder strategy but with 10-30x returns.

5. Taxes: All the deprecation benefits of single family home being your DIY direct investing but even better! Bigger deals are able to pay for a cost segregation to squeeze out even more depreciation. More info Simplepassivecashflow.com/costseg

1. What is an example of an investor split on a Development deal?

   First off most development deals are higher risk and higher returns. Whereas I tend to invest the majority of my portfolio in cashflowing stabilized assets. Development deals have two huge “ifs” which are what the property sells for and how long construction will take. Typically there are huge promote fees on both acquisition/funds raised and during construction.

   Here is one example using a sponsor’s proforma, the manager is at 5.88% of gross on fees + 50% equity.
   Manager profit ration of 38% with a client return of 14%. [That seems greedy to me given the client return and risk.]

   Manager Fees

   3.3% dirt + build ($12.05m) = $397,650
   1% sale ($16.27m) = $162,700
   3.5% build ($11.32M) = $396,200
   50% equity Class A/B; 65% equity Class C
   Gross margin: $4,217,712
   Duration 24 months (build to sale) – this is the largest variable other than what the property sells for.

   To Class A shares or the LP portion ($10.60m raise)

   Preferred return = $2,226,000 10%
   Remainder margin = $1,991,712 * 50% = $995,856
   Total = $3.22m
   $10.60m -> $13.86m ~ 14% return
   To Manager:

   $956,550 fees + $995,856 margin = $1.95m
   Manager/Class A = 60%
   Manager/Margin = 37.7

2. What are some things that most LP’s over look:
   1. Many general partners put up substantial amount of money that is non-refundable after a certain point in the diligence phase. This is called your money going hard. It’s a dirty little secret that many operators will force a deal to happen with loose underwriting rather than pull out of the deal and eat $50,000 to $200,000 of their non refundable earnest money.
   2. It is good to look at the how the capital raised is being used. The largest amount of money will be used for the down-payment and then for the capital expenses. Then the fees (rightly so) and cash reserves to mitigate a cash call but not too much to dilute investor returns. Be careful if there is extra money raised to pay out investors in the beginning stages of the investment. I am not an attorney but I believe that may be a Ponzi scheme but is definitely not a best practice in borrowing from the future to pay investors out of. The cashflow should come from the income minus expenses generated.
   3. Where are LP’s in a capital stack? Sometimes there may be a preferred equity partner in the general partnership that is gaining better treatment before LPs. Something to be aware of and understand how profits flow to investors.
   4. Anyone have “the talk” with their parents? Any insights to add to this article to help others in our community? 
   5. Additions to the Crowdfunding guideChicago company that was recently shut down for allegedly running a Ponzi scheme.They promised investors returns of 15% to 20% on Chicago real estate. This is a huge red flag in my opinion. Those returns are extremely tough to achieve in Chicago, even in “high yield” areas.https://www.housingwire.com/articles/46567-sec-shuts-down-equitybuild-claims-company-is-135m-real-estate-ponzi-scheme
   6. Additions to the 1031 Guide – Delayed Sale TrustGood for people selling very large assets such as a $5M dentist franchise due to high costs.
      Defers taxes on the sale of a primary home. Unlike a 1031 Exchange, the proceeds from the sale do not have to be invested in “like- kind” property in a very short timeframe to achieve tax deferral. Moreover, a DST can be used to “rescue” a 1031 Exchange that is in danger of failing.Doing this converts an illiquid asset, like a business or commercial real estate, into a diversified portfolio of liquid investments. Now you get diversification from a variety of asset classes or geographical locations like how we are investing syndications.There is an added benefit of being able to split partnership interests and outside of taxable estates at the close of the DST ($11M and $22M married). Here is one firm that we have a relationship with.
      Additional reading: IRC 453, Installment Sales
   7. Additions to the QRP & Retirement Plan GuideCan a Roth IRA be converted directly into a QRP? And if so, can a Roth IRA be converted into a regular IRA first and then immediately converted into a QRP as a way to get around this rule?Converting Roth IRA into Traditional IRA is called “Recharacterization”. It is not as common as Traditional IRA –> Roth IRA, due to the tax benefit of Roth IRA.In 2018, as part of the Tax Cut and Jobs Act, recharacterization of Roth IRA conversions from traditional IRAs and qualified plans (e.g., 401(k)) was repealed. As a result, all Roth conversions taking place on or after January 1, 2018 are irrevocable. But recharacterizing Roth contributions is still permitted. For instance, a traditional IRA contribution can be recharacterized to a Roth IRA contribution and vice-versa.Prior to January 2018, an investor had four available recharacterization options including: (1) traditional IRA contribution to a Roth IRA, (2) Roth IRA contribution to a traditional IRA, (3) conversion of traditional, SEP, or SIMPLE IRA and (4) qualified plan (e.g., 401(k)-to-Roth IRA conversion to a traditional IRA). Under the new rules, the list of options has been reduced.According to the IRS, a Roth IRA conversion made in 2017 may be recharacterized as a contribution to a traditional IRA if the recharacterization is made by October 15, 2018. A Roth IRA conversion made on or after January 1, 2018, cannot be recharacterized, the IRS says. For details, see “Recharacterizations” in Publication 590-A, “Contributions to Individual Retirement Arrangements (IRAs).”https://www.lordabbett.com/…/roth-recharacterization…
   8. Additions to the Turnkey Rental GuideWhere do I get a loan?
      First off do not go to a big bank lender like Chase, Bank of America, Wells Fargo. Even worse they use the same guy that got them their primary residence. Don’t use those guys cause now you are buying a remove non-owner occupied rental!
      You are getting an investment property that you are not going to live in. It is a going to be a little different and a typical residential owner occupied property and the drone working at those big banks will just mess it up as the file gets passed from the sales guy (the one you interact with) to the underwriters (people who cover the banks butt).
      Not all lenders are created equal. And it always preferred to work with a lender who is an investor too or works with other sophisticated investors to draw the best practices as opposed to it being a blind leading the blind experience.
      If you are serious buyer let me know and I’ll connect you with who we use.Who are you using and I’ll let you know who I recommend.If you would like a referral to a turnkey provider or broker let us know here.
   9. Additions to the Newbie Money GuideSaving rate versus investment returns?Albert Einstein supposedly once said that compound interest is the eighth wonder of the world. But Einstein was an employee never understood leverage in government subsidized real estate loans x compound interest.What matters more: your saving rate or your investment returns?Accumulating Wealth in the Early YearsIf your goal is to achieve a net worth of $1 million (bad goal since it should be more a cashflow per month number) and you invest $10,000 every year and earn a 7% annual return on your investments — which is a reasonable assumption for long-term stock market returns — you’ll accumulate $1 million in about 30.7 years.
      The pixelated chart below shows exactly how long it would take to reach every $100,000 net worth milestone, using the assumptions of a $10,000 annual investment earning a 7% annual return:Notice how each $100,000 net worth milestone takes less time to reach than the last.Take away 1: We are told the normal stock market stuff grows at 8-10% a year. But what happens if you direct invest in deals and make 25-35% a year? What about a conservative 15%?You might find these charts discouraging if you’re someone who has yet to save their first $100,000.The numbers don’t lie: The first $100,000 takes the longest to accumulate. Warren Buffett’s longtime business partner Charlie Munger even once said, “The first $100,000 is a bitch!”I’m not a rocket scientist (did go to Space Camp) but it takes a large portion of the fuel to get the Space Shuttle off the ground a few inches. The rest is just momentum. In a real estate investor’s progression we call this the law of the first deal where its not going to be that great but as you stick to it you learn and more importantly your network grows (or join these others on the journey) and your ability to attract better deals improves.Have you ever tried to court a cat? You need to attract it! That’s how good deals are… they come to you.SimplePassiveCashflow.com is meant for high(er) net-worth, wait correct that… not-broke people who are responsible with their money and hard working professionals. We are real estate investors and you need money to invest.If you are aiming for financial independence (especially while working a full-time job) focus on variables you can control. Those ingrained in the the FIRE (Financial Freedom Retirement Extreme) movement focus on saving money. Never having a $5 Simple Passive Cashflow Latte. We astute investor responsible use debt to maximize returns (and be smart with how we spend money).
      Personally I live by the Fat FIRE life style which consist of:
      1. I don’t buy anything I don’t really need
      2. Focus on experiences and get out of trading time for money
      3. And BTW I drive a Mercedes (only after my cashflow allowed me to do so)

I designated a set 1-2 hour time block in my calendar each week to learn new things and finally get through some of these online classes that I never got to go through.

Illegal SEC practices

The Miracle Morning: The Not-So-Obvious Secret Guaranteed to Transform Your Life (Before 8AM)

• You don’t need 8 hours of sleep
• Overall was not impressed but I was already aware of this community online (Facebook or super motivated people)

I finally sat down and finished my K1s & Schedule E for all my rentals and syndications. It took me 4 hours! With a little help of chemicals. What a relief!

So many people have been complaining that a recession is coming. 

When I ask people what they are doing its often the $1M net worth and higher still investing because they have the networks and know what to invest in which is cashflow. And its the broke people who are scared out of their mind to do anything and listening to the ill-advised of the ultra wealth $5M and above who can live off 2% returns a year and not do anything.

It drives me crazy every-time I see someone under $500k investing in private money lending with has no upside and no depreciation.

Complete #LaneHack list

Single Family home landlord insurance companies payout sometimes. 

MFH/Commercial claims actually pay out and give us free new roofs 😁

No more Passwords!

The most frustrating thing is to lose an hour of productivity every few weeks when your cookies on your computer refresh and you have to remember and change your passwords. Try LastPass to make this first world problem go away!

Purchase annual Premium subscription for only $36/user/year

Unfortunately, I did not #LaneHack Roomba beer pong but did come up with the following.

8?s to Identify a Real Problem
Why isn’t this problem already solved?
Why am I not where I want to be?
How did this get to be a problem to begin with?
What have been the impediments or constraints that have hindered me from solving this problem? (skills, desire, resources, time, discipline, environment)
If I could only ______ really, really, well, I would have it all figured out
What could I do to make this problem even worse?
What can be done today to improve this situation?
If I only had ____, I could solve this problem.

Change Your Cell Phone Reminders

You can change the sounds your cell phone makes and those sounds can become triggers, reminding you to engage in a good habit. The theme from the movie Rocky can serve as a reminder to stop watching TV, get off the couch and exercise.

You can set your cell phone reminders to anything that serves to remind you to engage in a particular new, good habit.

Post Pictures Where You Can See Them Every Day

Every day, millions wake up, head for the bathroom, gargle and brush their teeth.  The bathroom mirror is the first thing many of us see in the morning.

Pictures are effective in forming new habits, but not so effective in eliminating old, bad habits.

If you want to stop eating, place a picture on your bathroom mirror of the figure you desire to have. This will act as a trigger to exercise (new habit), and exercise is one of those keystone habits that affect other habits, such as eating junk food.

You can also download a picture to your cell phone and make it your background picture, something you cannot avoid seeing every day.

Remove Environmental Triggers

If you have the habit of watching TV after eating your dinner, which triggers sitting on the couch and drinking alcohol, put a sign on your dinner table that says “Read” or “Exercise” of “Go For a Walk”.

If your kitchen cupboard is a trigger to snack on junk food, then remove all of the junk food and replace it with some healthy alternatives.

If McDonalds or Dunkin Donuts is a trigger to eat junk breakfast food, then change the route of your commute to avoid seeing those yellow arches or that big donut sign.

Depending on the study, 40% or more of your daily activities are habits. Since habits are a major factor in determining the circumstances of your life, changing them must become a priority, if your life is not what you desire.

Passive Investor Accelerator & Mastermind

-Mostly Accredited high paid professionals
-27 weeks of content
-bi-weekly Zoom Video calls

SimplePassiveCashflow.com/Journey

It’s going to be a really cool format where people take the journey together. Think like a Fraternity/Sorority without the weird stuff. When I was going through programs it was most beneficial to connect and climb the ladder with quality people. Who knows someone of your Cohorts might do a deal together or become lifelong friends or accountability partners.

If can do me a favor… If you get a chance people review leave a review for the podcast on iTunes (https://podcasts.apple.com/us/podcast/simple-passive-cashflow/id1118795347) and email simplepassivecashflow.com to a friend.

Investor Quarterly Letter #4 & My Journey to SPC

2019 Q2 @ First Quarter Without a W2!

Questions from the HUI!

I summarized my feelings of investing in a living article here.

What is this China Trade War?

Potential higher costs for goods.

President Trump raised tariffs again on $200 billion worth of Chinese imports, from the previous 10% increase to 25%.

Most believe its good in the long run but short term it’s a bit of a head-to-head hunger strike (where the US should prevail)

May 13th China put higher tariffs on about $60 billion of American goods.  

The Dow plunged as much as 700 points. (China impacted stocks Apple and Boeing impacted most)

Comments from the Facebook community:

“We have the food and we can print money. China has US treasuries, which they can sell (but it would hurt them, too). They can and will manipulate their own currency by pegging it to the dollar at artificially low rates. Most of the tariffs from China are on American agricultural products, which the US government subsidizes anyways. I am not worried about it. I feel like it will end before the 2020 election with some kind of concessions from Trump and declaration of victory, regardless of whether it is a good deal. If he can get them to do something about intellectual property theft, that would be a win. The PRC can afford to wait it out for now I think, as they don’t need to worry about politics. Which suggests that something will probably happen before US elections. Definitely some interesting game theory to consider.”

“A tariff is simply a tax on foreign goods. But the people that pay the tax are the citizens of the taxing country. So we’re paying an artificially high price for the same goods. Regardless of the outcome, the citizens of the U.S. are being hurt by this policy. The amount paid for every job saved is exponentially more than the job value. Also, where goods cross borders armies do not. So an economic war could lead to an armed conflict.”

“Being from Iowa, and knowing many farmers, the sanctions are having a substantial impact. With China boycotting US soybeans, the market has dropped and many doubt if China will ever return to the same level of import. The US needs China more than the inverse. Who owns the US debt? China. Where are most of our day to day products made? China. Who is positioned to be the next super power? China. The Chinese are positioned all over the world and they can take a longer economic hit than the US in my opinion.”

“I have first-hand experience with high tariffs being slapped on some of my old products. All you can do is absorb it or raise your prices until you can find a non Chinese manufacturer (could take years or more realistically you may never find one). Might be good for the long run (3+ yrs) but definitely not for the short term in my industry.”

Other Articles: NYT – Reuters – CNBC

The other Monthly Green Papers

May 2019

1. What do I ask a property management company during interviews
2. The Newbie Wall
3. Apartments to Mobile Home Parks with Paul Moore – https://simplepassivecashflow.com/150paul/
4. 19.05.23 – Crypto Trend
5. 19.05.23 – The State of Bit Coin
6. Ep 153 – Lessons from the Wealthy w/ Frazer Rice – https://simplepassivecashflow.com/153rice/
7. Life Settlement Info Page – https://simplepassivecashflow.com/life-settlement-investing/
8. The Cons of Private Money Lending
9. Land Conservation Easement info page
10. Commercial Shopping Center Investing w/ Michael Flight (EP156)

I designated a set 1-2 hour time block in my calendar each week to learn new things and finally get through some of these online classes that I never got to go through.

Getting out of comfort zone with apartment and moving toward a new asset class (MHP).

I’ve been trying to get jacked (in shape). Because the summer is coming and the sun is coming out and the gunz must too. Its been over a decade of the college days when I would go to the gym and work out for two hours and I need that extra boost therefore I am looking at pre-workout drinks.

If you haven’t been doing a lot of pre-workout I would go with C4.

Tour Highlights

Trying to get organized on so much content.

The Newbie Wall

Stop Asking Couples When They’re Going to Have a Kid (or Another Kid)

https://kit.com/SimplePassiveCashflow/super-random-other-fun-stuff

Complete #LaneHack list

New format for monthly updates!!!

Passive Investor Accelerator & Mastermind

-Mostly Accredited high paid professionals
-27 weeks of content
-bi-weekly Zoom Video calls

SimplePassiveCashflow.com/Journey

It’s going to be a really cool format where people take the journey together. Think like a Fraternity/Sorority without the weird stuff. When I was going through programs it was most beneficial to connect and climb the ladder with quality people. Who knows someone of your Cohorts might do a deal together or become lifelong friends or accountability partners.

Investor Quarterly Letter #3 & My Journey to SPC

2019 Q1 @ FI! Quit Job 4/5/2019!

Questions from the HUI!

I summarized my feelings of investing in a living article here.

We are witnessing history in the making with the longest bull market since WW2. (Source)

I don’t know what the Black-Swan Event will finally make the economy tip…

And on March 22. 2019 CNBC announces that the ‘Yield Curve’ inverts as 3-month yield tops 10-year rate.

China’s debt bubble from overbuilding coming to pay the piper? The Wall? Government shutdowns? At least we don’t have to worry about missiles hitting Hawaii anymore.

Here are some more scenarios from our online tribe:

“Total corporate debt has increased by over $2.5 trillion or 40 percent since its previous record high in 2008, to about $9 trillion, dwarfing commercial real estate debt, which is about $2.8 trillion. (By way of comparison, residential mortgages have decreased from $11.3 trillion to $10.7 trillion over the same time span.)” – CPE – 19.03.6

How likely are these events?

But I’m beginning to search for something other than MFH Apartments. Email me for a sneak peek 😉

Look at the uptick in Retail vs MFH H2-2016

[Investors are chasing for decreasing yield these days] – REI.com – 19.03.4

[Sophisticated Investors know interest rates and caps go up and down together and their money is made in the delta between the two] – REI.com – 19.03.4

MFH is great but you need to be aware of new Class A apartments being built to put downward pressure on pricing – Source MHN

Something I am watching lately is the jobless claim stats which seems to be a more of a direct indicator that the manipulated unemployment stats. To use a medical analogy, the jobless claim is like your blood sugar level where the unemployment stats is your longer term A1C number.

Jobless Claims are:

1. Complete data – not sampled.  Most official data is a partial sample.  Jobless Claims are conducted across all parts of the US.
2. Not modeled.  Most official data gets modeled and extrapolated.  That means inflection points and disruptions get missed until the model is ‘corrected’.  Jobless Claims are pure
3. Actual data, not opinion.  A lot of data points are actually just opinions and soft surveys.  (Q: How do you feel about prices?  A: I dunno.  ok?)   Conversely, each Jobless Claim required an individual to raise their hand and say they were just fired.
4. Frequent and Real time.  Jobless Claims are published each week within days of filing.

But enough of this doom and gloom because most gurus out there call recession everyday just so they can have Tweetable content.

I saw the new Group Coaching program and wondering if you are still investing your money on the LP side of deals or if you are moving more towards selling courses and education?

1. Episode 147 – Economic Predications with MoneyBall Trader
   
   Vice Index
   Watch the China Trade
   Economic indicators
2. Episode 146 – Investing in Musicals w/ Matt “Broadway” Picheny
   
   Matt, and I met a few years back when we were starting to invest in apartments. Having the right network is critical and its important to grow with people. Make no mistake this type of investing is high risk high reward but it’s a whole lot of fun. When I build my base of cashflowing Class B and C apartments I will look to trophy assets like these.

3. IRS notice 2019-07  (https://www.irs.gov/pub/irs-drop/n-19-07.pdf)

   
   ​​Section 199A was enacted on December 22, 2017, and was amended on March 23, 2018, retroactively to January 1, 2018, by the Consolidated Appropriations Act, 2018, Pub. L. No. 115-141.
   The Treasury Department and the IRS wanted to clarify the rules and prepared a document* to explain the Section 199A deductions.  
   
   BELOW IS JUST AN INTERPRETATION AND YOU ARE ENCOURAGED TO FIND YOUR OWN LEGAL AND TAX PROFESSIONAL *IRS notice 2019-07  (https://www.irs.gov/pub/irs-drop/n-19-07.pdf) explains the administrative rules and defines a safe harbor for real estate investors as is defined in Section 199A of the Code.
   Safe harbor for the purposes of section 199A, a rental real estate enterprise will be treated as a trade or business if the following requirements are satisfied during the taxable year with respect to the rental real estate enterprise:
   1. Solely for purposes of this safe harbor, a rental real estate enterprise is defined as an interest in real property held to produce rents and may consist of an interest in multiple properties.
   2. The individual or relevant pass through entity (RPE) relying on this revenue procedure must hold the interest directly or through an entity disregarded (such as an LLC) as an entity separate from its owner under § 301.7701-3.
   3. Taxpayers must either treat each property held, for the production of rents, as a separate enterprise or treat all similar properties held for the production of rents as a single enterprise (i.e. owned by the same LLC).
   4. Commercial and residential real estate may not be part of the same enterprise. (There is a question regarding the treatment of mixed-use buildings under this ruling, that has not been resolved yet)
   5. Note: Taxpayers may not vary this treatment from year-to-year unless there has been a significant change in facts and circumstances.
   6. This includes a deduction of up to 20 percent of aggregate real estate investment trust (REIT) dividends and qualified publicly traded partnership income.
   Additional Safe Harbor Requirements (A) Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise; (B) For taxable years beginning prior to January 1, 2023, 250 or more hours of rental services must be performed (as described in this revenue procedure) per year, with respect to the rental enterprise. For taxable years beginning after December 31, 2022, if in any three of the five consecutive taxable years that end with the taxable year 250 or more hours of rental services are performed (as described in this revenue procedure) per year with respect to the rental real estate enterprise; and
   The taxpayer maintains a record of the following:
   1. Hours of all services performed.
   2. Description of all services performed.
   3. Dates on which such services were performed.
   4. Who performed the services.
   Rental activities allowed in the 250 hours for the purpose of this revenue procedure include:
   1. Advertising to rent or lease the real estate.
   2. Negotiating and executing leases.
   3. Verifying information contained in prospective tenant applications.
   4. Collection of rent.
   5. Daily operation, maintenance, and repair of the property.
   6. Management of the real estate.
   7. Purchase of materials.
   8. Supervision of employees and independent contractors.
   9. Rental services may be performed by owners or by employees, agents, and/or independent contractors of the owners.
   The following tasks are excluded and not allowed to be counted as part of the 250-hour Safe Harbor:
   1. Financial or investment management activities, such as arranging financing.
   2. Procuring real estate.
   3. Studying and reviewing financial statements or reports.
   4. Planning, managing, or constructing long-term capital improvements.
   5. Hours spent traveling to and from the property.
   [In order words you seem like you need to do actual work]
   Clearly Excluded from Safe Harbor:
   1. Real estate used by the taxpayer including an owner or beneficiary of an RPE (relevant passthrough entity), as a residence, for any part of the year.
   2. Real estate rented or leased under a triple net lease for purposes of this revenue procedure, a triple net lease includes a lease agreement that requires the tenant or lessee to pay (at least a portion of) rent, utilities, maintenance, taxes, fees, and insurance
   3. LLC’s where commercial and residential real estate are part of the same enterprise, such as an apartment complex and industrial building in the same LLC.
   These rules place the burden of keeping time spent records of the rental services, on the Taxpayer. The work can be performed by a combination of owners, agents, and contractors. The key will be that all those involved in an investment will need to keep time records starting January 1, 2019, and will need to consolidate them for the next tax year.
   The goal, of course, is to obtain 250 Hours of Services to qualify for the Safe Harbor and the tax savings.
   You should talk with the managing partner of the pass-through entities you own and make sure these requirements are being meet starting January 1, 2019.
   Don’t have 250 hours?
   Should you not be able to reach the 250 Hour threshold to shelter your income, you can instead focus on reducing income instead to reduce tax expenditures.
   To reduce income, property owners may want to consider cost segregation studies to increase/accelerate depreciation.
   Also, under the new law, improvements to the interior of a building may qualify for bonus depreciation.  Unfortunately, there seems to be a wording error in the legislation, which will need to be fixed by Congress. 
   
   The error in the legislation is technical, so property owners will want to consult their tax advisors to determine what position they want to take on the error.
   Summary
   The Treasury Department and the IRS have clarified their understanding of Section 199A of the revenue code.   In this case the changes relate to businesses and additional savings that can be garnered with an additional deduction of up to 20% of the taxpayers qualified business income for non-corporate taxpayers including businesses operated through partnerships, S corporations or sole proprietorships.
   Your goal as a real estate investor is to reach the 250-hour safe harbor mark so you can take these deductions.  This will not be easy. If you are excluded from the safe harbor, look for ways you can accelerate depreciation so you can save on taxes instead.   This tax change is significant and very complicated. If you need a referral to my CPA let me know.

4. 

5. FORBES – Is All Debt Bad Debt? – By Lane Kawaoka – 19.03.29
6. Our Book Club Webinars – Tax-Free Wealth – Learn how I am able to write off these types of items in my business (and fight of mosquitos).
7. 
8. Update to SPC Ultimate Guide to Taxes – 
   Capital Improvements vs. Repairs & Maintenance Expenses
    
   Once your property is in service, you’ll need to determine whether each repair and maintenance expense you incur should be classified as a regular expense or a capital improvement. Capital improvements must be capitalized and depreciated which sucks because you can’t take the tax deduction right away. Most rental property owners will prefer to have as many of these costs as possible classified as regular repair and maintenance expenses in order to maximize current year deductions and minimize depreciation recapture.
    
   There are three safe harbors that help move some expenses that would otherwise be classified as capital, into the regular expenses bucket:
    
   • Safe Harbor for Small Taxpayers
   • Routine Maintenance Safe Harbor
   • De Minimis Safe Harbor
    
   Here are some examples of maintenance (Not Capital improvements)
    
   Fixing:
   • an existing AC unit
   • a faucet or toilet
    
   Replacing:
   • a few shingles on a roof
   • a cabinet door
   • a few planks or tiles on a floor
   • a broken pipe
    
   Costs incurred to:
    
   • inspect, or clean part of the building structure and/or building system
   • replace broken or worn out parts with comparable parts
    
   Here are some examples of Capital improvements (Boooo you have to capitalize)
    
   Additions (e.g. additional room, deck, pool, etc.)
    
   • Renovating an entire room (e.g. kitchen)
   • Installing central air conditioning, new plumbing system, etc.
   • Replacing 30% or more of a building component (i.e. roof, windows, floors, electrical system, HVAC, etc.)
    
   Passive Activity Limits
   In 2017, I was able to bring $25,000 of passive losses to deduct off my W2 income to ultimately pay 14% effective taxes for the year.
    
   Under the passive activity limits, you can deduct up to $25,000 in passive losses against your ordinary income (e.g. W-2 wages) if your modified adjusted gross income (MAGI) is $100,000 or less. This deduction phases out $1 for every $2 of MAGI above $100,000 until $150,000 when it is completely phased out. Note: these limits apply to both those filing single or married filing joint.
    
   In addition, in order to take losses against your ordinary income, you must materially participate in the activity by meeting one of the following seven tests:
    
   1. You participated in the activity for more than 500 hours.
   2. Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who didn’t own any interest in the activity.
   3. You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who didn’t own any interest in the activity) for the year.
   4. The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you didn’t materially participate under any of the material participation tests, other than this test.
   5. You materially participated in the activity (other than by meeting this fifth test) for any 5 (whether or not consecutive) of the 10 immediately preceding tax years.
   6. The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital isn’t a material income-producing factor.
   7. Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year.

   High Paid W2 Earner & “Real Estate Professional” the perfect “Kobe & Shaq” Combo

   The “real estate professional status” allows real estate investors to take unlimited rental losses against their ordinary income – strategically you want to get out of the highest two tax brackets at least. This has now been limited to $250,000 in losses if single (and $500,000 if married) under the excess business loss limits introduced by the Tax Cuts & Jobs Act.

   In order to qualify as a real estate professional you must spend at least 750 hours in a real estate trade or business and more than half your total working hours must be in a real estate trade or business.

   Due to these requirements, many investors who work a full-time job or full-time in another business that is not real estate-related will have a hard time qualifying as a real estate professional.

   Meeting the above requirements will not necessarily allow you to deduct your rental losses against your ordinary income. You must also materially participate in the rental activity using the same tests mentioned above, but is most commonly done by electing to aggregate all your rental properties as one activity and then working 500 or more hours in this single activity per year.

   Note that if one spouse qualifies for the 750 hour test, both spouse’s time on the rental properties count towards material participation, and losses can then be taken against either spouse’s income.

   This is a great strategy for couples where one spouse works in a real estate trade or business, works only part-time, or not at all outside of your investment activities.

   Note: In any year you elect to be treated as a real estate professional for tax purposes, you’ll need to keep a log of all hours worked within a real estate trade or business

   More homeowner advice:

   Join the movement of high-income earners who are renters cause they did the math and did what made sense.
   
   Learn more about renting in primary markets here.

If you are like me and lost when it comes to the softer side of being a human you need a book like this to tell you what to do.

We went to Tony Robbins as a group in March and it was a great time of transformation. Here is the Tony Robbins Priming video to use at home. I ripped the mp3 here if you want to download and store on your phone for quick reference. If you propeller hats out there want to add it to Alexa/Siri’s quick play as your morning ritual good for you!

Here are some takeways I had:

Less urgency with more systems

Barriers- peers around to do the same things, 

What needs to shift what actions… Deciding how to do this

Why will you live in a beautiful state everyday no matter why?

Life is too short
It is a slippery slope backwards
In the end a beautiful state is what we are after anyway not money, house, job or relationships. 
I have control over this… Potential => Actions => results => belief/concerns

Flavors of reaction: 

Three things that cause suffering the fear of 1) loss 2) less 3) never have something

Suffering => appreciation => joy

You will make more money if you are in a better state.

Two things that I did to start investing to go bigger – 1) started something that could be better and connect with others and build a platform to have larger impact. I made small changes and found models and copied and got around the right people and slowly built 2) started paying to learn

https://www.youtube.com/c/SimplePasiveCashflowdotcom

Trying to make a cost-effective program that combats predatory real estate companies:

“A couple of years ago I was scrolling my Facebook feed and saw an ad from a notable author that said “make a bunch of money with zero money wholesaling and flipping houses”

And I said wow that’s amazing.

I’m going to be an entrepreneur!

I showed up at this seminar by the end of the day I paid $40,000

(of course on my credit card), hehe.

First, off I should have not even been doing those active real estate activities cause I was a busy professional.”

Hopefully my addition to Forbes can prevent someone from investing in a hotel –

Hotels are a speculative asset class. Class B and C apartments perform in tough times because everyone needs a place to live. Vacations are a discretionary item on most people’s budget. In good times it outperforms many asset classes because of dynamic pricing, where the prices surge due to demand. Hotel investments have a place in a portfolio after more recession-proof assets are acquired first. – Lane Kawaoka

Just Closed 101-Units (not puppies)!!!

How to make Coffee: Pour Over with a Chemex – “when you have time to have a cup of coffee while you are waiting for your cup of coffee”

I went to got to a free Transcendental mediation info session. It was in a historical home and it felt like Scientology. Nah Nah its not a religious cult or anything but a specific and structured for of mediation for two 20-minute periods a day. Part of the structured part is due because it’s a highly branded and franchise system. It was under $1,000 dollars for a handful of instructor-led sessions but I opted to try this “HeartMath Inner Balance Lightning” out for now. Stay tuned!

Nothing like units finally getting rehabbed after the seasonal slow and cold weather up in Des Moines… The market is coming back!

My business partner… Chase Keller always willing to pick up the paintbrush or help with customer service.

What would you do socially, if you weren’t at your day job?

I would say at home, possibly eat junk food, and not get a lot of inspiration from seeing the struggles of W2 people around me. Where else would I get an insiders perspective of the humor of the hampster wheel if I were not in it myself?

We have all heard the “5 people you hang out with most rule… yada yada” perhaps a new circle with a mindset more supportive of your goals?

I am trying to build that here but its a lot harder in Hawaii. The entrepreneurial spirit is poor here perhaps with a smaller population pool or just island complacency.

Local client meetings, realtors, travel, interviews, exercise, gym, hobbies?

At this point, there is nothing that I cannot do with having to fulfill the requirements of my day job. Granted it could shut off the computer at 10PM instead of midnight but I see that as a small price to pay temporality for the “easy money”. I talked with another friend who broke it down to hourly rate. I think he said $75 dollars and hour as a consultant, which is why he refuses to take on low ROI tasks like property management.

For now (in this season) it is good but I agree. And at the least you will get a commitment that I will not be here for more than 4 years. I think the security trigger is having my syndications start to cash out after the repositions take place.

One bad decision can cost you significant money. A lot of my investing peers are doing passive investing have pretty boring. Yea I don’t think I have failed much (other than this one) not for lack of doing my due diligence but for the most I have taken very small risks from turnkey rentals to 90%+ stabilized non-recourse apartment investments today.

When you are in a position of weakness financially you tend to get attracted for the magic pill and that Jeepers Creepers guys whispering to you about “hey do you want to hear about passive cashflow.” When you start of a high paid professional you sort of have a leg up on a lot of people and can transcend a lot of these growing pains.

Guess what? There is nothing passive about getting cashflow.. If it were that easy to get then it would be easy for the next kid who lives in their mothers basement to take it away.

When you are in a position of scarcity/weakness, all future decisions you make are made out of necessity – to solve some immediate short-term immediate need, which is usually a financial one.

By covering your bases and having a stable day job that puts food on the table you minimize the chances of a bad decision from the following reasons:

Out of desperation, you fail to do your due diligence (homework) before making an investment;
Out of desperation, you partner with someone whose background you really don’t know enough about;
Out of desperation, you ignore facts or details that a non-desperate person would never ignore.
Never make a major decision when you are in a position of scarcity/weakness. Only make major decisions from a position of abundance/strength.

This allows me to store cash in a very secure (Certain) place

In whole life policies, you have this add-on where you are allowed to add paid up additions (purchasing larger death payout and cash value). In my policy, I need to put in at least 70% of $35,000 once every three years. Note – there are other types of these riders where the requirement is to put a more consistent amount every year but personally prefer the 1 out of three-year arrangement because my business income fluctuates so much. 

Without penalty, I can go over 120% or $42,000 every year as my max. If I want to put in more I would have to make a new policy and get another physical. This limits the risk for the insurance company if you are putting away infinite amounts of cash after deciding to pick up the hobby of skydiving while smoking 2 packs of cancer sticks a day.

Taxes

One of the reasons I moved on from Turnkey rentals is because on bigger deals you can pay for a cost segregation to write off almost 30% of the asset in year one!

Not have to wait for 27 years!

And if your CPA isn’t understanding or proactive in communicating this to you… you need one. (I can let you know who I use)

Numbers don’t lie look at the year one depreciation I am getting on these deals:

That’s $62,452 that I can use to take off my income! If you are in the highest tax bracket that’s like $30,000 tax savings!

As a full time real estate profession (I quit my day job) I am able to take all of those deductions. For those of you with day jobs you are capped depending on your income level however those deductions carry forward to that magical day when you fire the boss.

Thanks for you folks who gave testimonials it make me feel swell 😁

The previous seller let the property drop 10% occupancy during a long closing period… oh well let’s make do and get after it!

I’m so tired of watching deal pitches and people using the phrase “I’m so excited”… I don’t care if you are excited… show me the numbers…

Why people fail/Blind Spots

After over 1000 strategy calls with investors and coaching clients over the past couple of years here are some of the most common excuses/pitfalls people fall victim to:

1. Health problems/take care of family getting in the way
2. Ask-hole – there are givers and takers, takers only take and operate with a scarcity mentality operating system. What is worse is these guys are always seeking and not doing. Before you seek out the wisdom of a $1000/hour person and was their time go do the thing that the 5 dollar book said to do or what you said you were going to do.
3. Never launcher – These guys use perfectionism as their excuse never to launch a product, website, or idea. Subconsciously they are either a coward to put themselves out there or have an inability to get things done.
4. Debbie Downer/Negative Ned – No one likes yourself. Take a cell phone out and do some camera work to see how unfriendly you come across. You may not want to even interact with yourself.
5. Worrying about how much the shovel costs when the project is to dig a big home
6. Misplaced energy – This is the guy who reads all the books, has a vision board, but when you check his facebook it’s all about snowboarding trips every weekend to take advantage of the season.

Complete #LaneHack list

1. The Law of Avoidance by Mark Manson – How to not give a Fuck – audiohttps://simplepassivecashflow.com/lanehack/

1. Look fo

Get in as a [Founding] Group Coaching student!

The group coaching is something that I have been trying to put together a couple years now after I accumulated a lot of content and got a feel for coaching students these past few years in a one-on-one setting – see SimplePassiveCashflow.com/coaching

I’m code naming this project, “The Journey to Simple Passive Cashflow” and it will consist of:

1) 27 weeks of curated content with concepts building on top of each other

2) Participants go through those modules together and are able to interact on the Bi-Weekly Call and the Private Facebook group in a “group study” environment

3) Bi-Weekly hour power calls switch between the topics of a) Acquiring you direct investment and b) more high-level wealth building concepts and syndication education

It’s going to be a really cool format where people take the journey together. Think like a Fraternity/Sorority without the weird stuff. When I was going through programs it was most beneficial to connect and climb the ladder with quality people. Who knows someone of your Cohorts might do a deal together or become lifelong friends or accountability partners.

Still working on the website but here is a survey to get on the waiting list.

What’s in the Pipeline?

% Chance of happening – Details – Timing:

1) Currently open for investors – 101-Unit Class C in Gulfport MS

2) 30% – MFH Apartment

3) 90% – Finally a Non-MFH fund syndication (where I do the admin/accounting) to lower costs and get higher prefs and lower minimal investments. Q2 2019

Unlock additional info by joining the Hui – SimplePassiveCashflow.com/club

Events:

January 17-19 – Online – Use code “LANE” for a discount at MFINSummit.com

February 16 – Honolulu, Hawaii – Use code “SPC” for a discount at infinityinvestinghawaii.com

March 1-2 – Scottsdale, AZ – Titans of Multi-Family Real Estate – wealthformulaevents.com

March 14-17 – Los Angeles – SimplePassiveCashflow.com/mastermindtony

Current investors in past deals let’s meet up when you are in Hawaii.  Non-investors you can still kick it with Lane

The Hui Deal Pipeline Club is a free investor club where I filter investments and underwrite the numbers and partners myself. Unlike other investor lists and groups, my investors have personal access to me and know that I personally have skin in the game investing alongside with my investors.

We have acquired over $155 Million dollars of real estate acquired by syndicating over $13 Million Dollars of private equity since 2016.

Track Record of success:

15 Apartments Buildings Purchased, 2 Manufactured Home developments, and an Assisted-Living Facility

2,100+ total units

10 US Markets – AL, GA, IN, OK, LA, IA, TX, WA, PA, MO

Started investing in 2009 – 9 years of experience

Countless Mastermind and Mentorships in the Live & Virtual clubs through the education platform at SimplePassiveCashflow.com

2,600 investors and 100 new Kool-Aid drinkers every month!

Investor Quarterly Letter #2 & My Journey to SPC

2018 Q4 @$5,600/Mo

Executive Summary: The market has been steady and hot. Certain key indicators have turned red like the 10 and 2-year treasury index and unemployment at near low levels of 3-3.5%. It’s still a time to invest but only if it meets sound underwriting principals. Q4 was a huge quarter for the Hui Deal Pipeline Club with several acquisitions. Many of which developed from the early summer time.

The internet has a lot of junk out there. I originally was going to write a monthly post like this however I got too ambitious with all the deals that came in at the end of the year. In fact, I am even contemplating going down to a bi-weekly podcast to concentrate on being a better partner and to lose some weight. Let me know your thoughts on this?

This long document is my investor letter and contains a lot of the articles that I have been reading over the past quarter that has influenced my outlook and investing behavior.

Check out the latest homework on all the asset classes I have been learning about lately to get outside of the apartment investing world.

We had out Sonoma Mastermind. I recorded some of the testimonials there. We had a lot of wine and great relationships were formed!

The next live Mastermind will be in LA to see Tony Robbins. As well as our mini-book club in January which will be a great example of my new group coaching format.

I am finalizing a program for investors to systematically go through the past three years of content without going crazy. As opposed to being a lame old $997 web course… it will likely be a little cheaper (if you let me know you want to be in the beta release) and more importantly, it will have bi-weekly calls! Yup group coaching! I have always been against programs that charge people $5,000 (who can’t afford it) to do simple stuff on the internet. I wanted to make a program that was less of a scam and where I could give a high level of personal involvement (which was the mission in the first place). Apply here.

I want to wish everyone a happy, healthy (as I focus to getting more in shape in 2019), and prosperous New Year. 2018 was a huge year for me and where I reached a milestone in terms of getting to Accredited status and starting to adopt more of a capital preservation mindset. And a little charity – let me know if you have any ideas in 2019. As the new CrowdfunaAloha.com motto suggests “Ohana means family, and no one invests alone. ” Our investor club has grown to over 2,600 and invested over $13 million dollars to acquire over $255 million dollars worth of real estate. Please send me referrals for new opportunities so I can use my network to vet and so I can run their numbers through my analyzer. You never know who is that next up and coming operator.

How do you see the current market?

I summarized my feelings of investing in a living article here.

As for my own portfolio (different situation than everyone else) I feel like I am in a tough place. See my current portfolio here. I know MFH the best and know all the underwriting tricks and can underwrite and verify the numbers myself. However, I am very heavy in MFH (over 80%) of everything I have which also includes my SFH assets too. I want asset class diversity but as I move out of my comfort zone (non-MFH) I cannot verify the numbers and have to relight on my network, peers, and mentors more. As a numbers guy, it makes me a little uncomfortable.

I am trying to stick to boring Class C/B deals that are stabilized today and have non-recourse and long-term debt. Although I have gone into a couple deals lately that are Class A and development I consider them unique deals with excellent risk-adjusted returns and I have mentally allocated a portion of my portfolio to higher risk higher return ventures. But we are not talking Bitcoin or start-ups!

In all deals I take a look at I try to assume 10-15% drop in rents and 10-15% increase in vacancies (assume a rocky 3-6 months as A/B class comes down to C/B class).

But again since some people only read some of my content and hear me beating the (Cashflow and Class B/C) Drum… I feel like I have a need to explain myself.

This deal north of Dallas, Texas was Class A, 2018 build which is going to cashflow sooner than a normal class B/C. Normally, I would not go into a class A deal because they don’t do as well in a recession (but I think this one is underwritten to work with 2% rent increases) and there were 13 acres of developable land not included in the pro forma. 

The only reason I’m sort of going against my principles in because of the Land play and how it’s in Dallas growth. I think it’s a really good risk-adjusted return which is why I went in with <5% of my net worth. But it’s more of a higher risk higher return still on the realm of non-recourse fixed long term debt, stabilized, non Development deal. So its nothing too crazy.

The other “non-conforming” deal was an Assisted living deal development which I feel comfortable because the asset class is emerging.

Development of fancy flip homes but amateur hour flippers (who are not W2 engineer/project managers) I will not…

What is a normal IRR?

1. After getting into a car accident gives me the opportunity to make some changes – Downgrading Transportation – https://simplepassivecashflow.com/bike/
2. 118 – Interview with Nick Loper – Side Hustle Nation – https://simplepassivecashflow.com/118-interview-nick-loper-side-hustle-nation/
3. 119 – Dissecting my Recent Insurance Claims with Ed Babtkis – https://simplepassivecashflow.com/119-dissecting-recent-insurance-claims-ed-babtkis/
4. Buying or renting? The biggest inhibitor to financial freedom? – WIth Spreadsheet to backup the numbers – *I spent $300 dollars for an editor to get the grammar and spelling right on this article. I am sick and tired of seeing young families make this mistake
5. 121 – Investing in Coffee Farms with David Sewell – SimplePassiveCashflow.com/coffee
6. Networking tips page – https://simplepassivecashflow.com/networking
7. 7/17/2018 – Ask Buck Joffrey with Lane Kawaoka
8. 6/29/2018 – Cashflow Guys Podcast – Raising Money For Apartments
9. 122 – Apartment Investing with Michael Blank – https://simplepassivecashflow.com/122-apartment-investing-michael-blank/
10. Great podcast by Ray Dalio and Tony Robbins discussing the binary economy, relationships, and some ideas I am having to build my investor team – Link
11. 123 – Why to break-up with your Financial Planner – Interview with Brent Sutherland – https://simplepassivecashflow.com/123-break-financial-planner-interview-brent-sutherland/
12. Mr Money Mustache the guy who wrote the most famous financial independence blog on this podcast talking a little bit able how he structures his day. Note – I don’t really like these living cheap lifestyles cause often its a little selfish not to pay it forward and to do that you need to go big. I like nice things but I’m pretty frugal.
13. 124 – Brian Hamrick from the Rental Property Owners Association – https://simplepassivecashflow.com/124-brian-hamrick-rental-property-owners-association/
14. 125 – Living the FI dream abroad with Jeremy Jacobson from Go Curry Cracker – https://simplepassivecashflow.com/125-living-fi-dream-abroad-jeremy-jacobson-go-curry-cracker/
15. QRPs (Qualified Retirement Plans) with Damion Lupo – https://youtu.be/fsOy4VrbCrs
16. 126 – Gino Barbaro talks Apartment Investing – https://simplepassivecashflow.com/126-gino-barbaro-talks-apartment-investing/
17. 127 – Estate Planning and Asset Protection with Lawyer Andrew Howell – https://simplepassivecashflow.com/127-estate-planning-asset-protection-lawyer-andrew-howell/
18. Going from “Active-Passive” Investor to an LP in Syndications and Private Placements – https://simplepassivecashflow.com/syndication/
19. 128 – QRPs, Solo401k the Self Directed IRA Killer with Damion Lupo – SimplePassiveCashflow.com/qrp
20. Tips for LPs Webinar – email me for link – only for Hui Deal Pipeline Club members
21. 129 – Matt Theriault – Changing strategies in this market – https://simplepassivecashflow.com/129-matt-theriault-changing-strategies-market/
22. 131 – Takeaways from FinCon18 and Side Hustle stories – SimplePassiveCashflow.com/131fincon
23. A cool tool to find the primary ethic group in an area – https://www.nationalgeographic.com/magazine/2018/10/diversity-race-ethnicity-united-states-america-interactive-map/
24. My notes of the new tax breaks on Opportunity Fund Zones – https://simplepassivecashflow.com/opportunity-fund-zone/
25. Fort Worth, Texas – 168-Unit Class C MFH (Oct 2018) – Pre-Acquisition Video
26. Huntsville, AL – 112-Unit Class C MFH (May 2018) – Pre-Acquisition Video
27. Huntsville, AL – Drive by of a few Quadplexes on my last trip (Oct 2018) – https://youtu.be/0u3PotmxEjc
28. Atlanta, GA – 114-Unit Class-C MFH  – Deal update – https://youtu.be/8cp0Q-E9gJs
29. Birmingham, AL – Mid Rehab before selling retail – https://youtu.be/Pd3__1cZJTw
30. Birmingham, AL – Tour of potential apartment purchase – https://youtu.be/gmMGlZC0lR8
31. Birmingham, AL – Driving turnkeys and apartments – https://youtu.be/2dTzTiIhu-0
32. Atlanta. GA – Tour of my rental pre-rehab – https://youtu.be/Yc9KGPhqp_E
33. SPC133 –  Veteran’s VA Loans & Other Financial Wisdom – https://youtu.be/NmUYUwQaaJk
34. SPC134 –  Investing in Diamonds – https://youtu.be/M8Fk1rDnJT4 – article
35. List of SDIRAs – https://simplepassivecashflow.com/sdira/
36. Paying down your mortgage faster – https://simplepassivecashflow.com/mortgage/
37. Hacking your HSA / FSA / Flex Spending accounts – SimplePassiveCashflow.com/hsa
38. Cost Segregation & Bonus Depreciation – https://simplepassivecashflow.com/costseg/
39. Testimonials – https://youtu.be/gC0DkCmCyIE
40. Banking from Yourself webinar -SimplePassiveCashflow.com/bankhttp://SimplePassiveCashflow.com/bank
41. 135 – Interview – Financial Advice from a Broke Millenial with Erin Lowry – https://simplepassivecashflow.com/135-interview-financial-advice-broke-millenial-erin-lowry/
42. PITA – https://simplepassivecashflow.com/pita
43. 136 – Changes in the Residential Lending World with Graham Parham – SimplePassiveCashflow.com/ep136
44. A resource to dig up dirt on potential vendors/partners – https://gofishdigital.com/
45. I am going to be planning a wedding 1st half of 2019 so I apologize if I might seem like I am busy some of the time – http://reialoha.com/how-to-get-married-in-hawaii-on-the-cheap/
46. 138 – Fundamentals – Crypto Currency Basics with Andy Lapointe – SimplePassiveCashflow.com/crypto101
47. SPC Charity – https://simplepassivecashflow.com/charity2018/
48. 139 – Optimize liquidity with Your Opportunity Fund – SimplePassiveCashflow.com/ofund

One of my goals was to do a raise over $1.0M dollars. A lot of people have a few friends and family but to get over the $250-500k mark is difficult.

This past month I did it with the Atlanta Deal ($1.3M raise) and Huntsville deal ($1.3M). Super excited… I think my investor list is large enough so I’m going to focus on getting to know everyone as opposed to getting bigger. My vision is a boutique syndication business where I know everyone. A few of you call me to thanks for saving them from banging their head against the wall as a direct operator and that is really cool to hear the feedback.

Grant Cardone like him or hate him says some pretty spot on stuff. It frustrating that all these SEC rules make it tough for the non-wealthy to get into private placements and therefore people are left with crap. It’s the non-accredited investor that needs into these deals the most and this is what I try to do to contribute back via my mission!

Check out this 42 minute video – might be a little too long for the Bathroom Break. PS. I have a Hawaii custom license plate “10X”. Best twenty bucks I spent all year.

Too often passive cashflow is associated with scammy multi-level marketing ploys to get people who don’t have the money in the first place to buy into expensive education systems.

“Hey man… let me tell you about passive cashflow and how you can get rich with little to no effort… do you feel that.. its called entropy man!”

As mentioned before SPC-1.0 is getting into the rental property game, SPC-2.0 is turning into more of a passive investors as I have traded my single family home rentals to more scalable limit partnership positions in syndications, and now after I have cashflow (food on the table) I can take some risks and go after SPC-3.0 which is Simple Passion Income.

Being a working W2 professional I have a soft spot for those in my position. It makes no sense for a computer engineer who has a family and working 50 hours a week at a $200K W2 job to do what is required to become an operational lead on an apartment deal. Doing such would require 12-18 months of relentless work without monetary gain and little success to build relationships with brokers, travel to the markets. and put up hard money to close the deal. I have tried to make a team atmosphere where talented professionals can dip their toes in to “scratch their entrepreneur itch” yet keep their regular salaries.

If I had the time I would make another podcast called “Rescuing the Entrepreneur from the W2.”

All to often the entrepreneurs out there reaching success are not those who possess the skillsets but they just went after it and got lucky. Don’t get me wrong they deserve it because of all the sacrifices but imagine if you combines that grit with talent?

Ikigai is the alignment of doing something that is 1) you passion, 2) makes money, 3) you are good at and 4) good for the world. When you get this its like arranging the Infinity Stones on the gauntlet and a higher level of achievement and happiness.

SPC followers are typically younger than 30 or older than 35. My observation is that when people have kids, that takes all precedence.

It has been really cool traveling and meeting a lot of you.

Interviewing thought leaders and people who write real books!

And being interviewed for the famous Halloween Horror stories with Bob Helms of the Real Estate Guys Radio show. I talked about my fail how I lost $40,000 in my first limited partner deal.

As well as being asked to speak at a few conferences this year.

Another reason my high school was wrong about not letting me take AP English – Forbes: Today’s Best Resources For Finding Renters And Deals by Lane Kawaoka

I tried these things this past quarter:

Aerial yoga,

Getting rid of my car

Another reason not to believe the mainstream news. This hurricane never happened. I had two days off work and there was just a little wind and clouds.

Thanks for all the best wishes about the volcano too. I live 500 miles away in Honolulu. But here are some cool photos from the interwebs.

Although we are a couple months behind on the Ankeny Iowa deal we are making progress with over 50,000 SF of LVT flooring being offloaded for the project – Video

Going to Korea for a week for fun. And the many Mastermind groups meetings!

Pics from our Sonoma Mastermind.

One of the biggest #firstworldProblems I have has been waking up to a billion emails. It’s tough living in HST or Hawaii Standard Time.

I’m serious! Not like when I’m complaining when its a chilly 69 degrees in the morning here… that I’m being sarcastic.

I was always good at having auto filters in Gmail to clear out my inbox each day and move things to such labels like “At home”, “deep thing workshop time”. I recently decided to make a “Calls & Coffee” to auto filter all the useful newsletters (Like Daily Stoic) I read but not get bombarded with in the morning when I have the least patience to absorb. I don’t know if the timing is everything but it is helping me here.

If you are struggling with stress maybe this wil help:

You have a choice…
to be mad or happy
To be irritated or happy
To act with resistance or move forward and embrace the challenge
Its a choice but what is not a choice is that it must get done. The day must get done. The tasks must get done. But in that time the state in which you act (happy sad irritated tired) is your choice

Consciously decide. Get out of autopilot and choose how you want to embrace things.
Only then will you not be a victim

At the end of the day, happiness is a conscious choice. We choose what things mean to us. We assign meanings and labels to the events and circumstances of our lives.

1. Cap Rate manipulation – How to change a 65% ROI in 5-year deal to 100%
2. It’s the Lazy-man style for looking at “negative slack” in Microsoft Project Gantt charts
3. Classic marketing in Syndication portals with fake progress bars to create scarcity
4. Tired of hearing “I was coming back from church and saw this great 3 bed/2.5 bath”
5. Recently decided to remove a few videos I had with a previous guess. I feel sorry for the guy because I don’t think he did it intentionally just did not vet the operator.
6. The pursuit of an entrepreneur dream is not for everyone – It requires an investment in time and money. And whenever you make an investment, you take on risk. In this case its taking time and energy away from a day job that already makes a lot of money.
   
   In order to get enough critical mass behind an idea to turn into a thriving business, you must devote time, often many years. There are no guarantees that your efforts will be rewarded a lot of time luck is required. This Time Risk is that all of your time will be for nothing.
   
   The saying “good is the enemy of great” comes to mind here. For many high paid working professional, you make enough money to be happy but part of what we are going for is not the extra wealth but “passion income.” Feeding that entrepreneur itch or as Buck Joffrey says that primal to our core instincts.

Costco has so much cool stuff for sale. And that return policy!

Minimalist Barefoot Sock Shoes

FlightBoard (With geting rid of my car I have more money and need to buy things like this) Although I’m still debating what I should get.

Complete #LaneHack list

1. I did not realize how powerful passive losses as I was able to bring $25,000 to offset my W2 income. 2018 should be very exciting with all the bonus depreciation due to the cost segregations. I paid about 12-16% effective tax rate 😁
2. Ex-NBA All-Star (Jalen Rose) gives advice on how to handle the financial and social pressures of celebrity and wealth.He explains on his voicemail how he wanted people to identify themselves as 1) Addition 2) Subtractor 3) Divider 4) Multiplier. Some of us are unconsciously subtractors and dividers.
3. 4 takeaways from my travels in Korea1) Competition – Pretty much everyone goes to not only school but upper education too (university). If you think your neighborhood poly-sci major, Starbucks barista is a little too qualified for the job then in Korea it’s a lot worse. Kids go to school which ends at 3pm and then go to school again which ends at 10-11pm all to get into the best university they can. Talk about highly competitive! Suicide (something I think is going to be a hot topic soon) is high and pressure increases once you land a job… No wonder people go so crazy partying so much when they are finally in college (ages 18-22). Personally I never really thrived much in a competitive environment which is why I’m proud of my 3.1 GPA in engineering school. I think it’s important for us to take account of our situation and identify when we are in a bad situation and do something about it whether it’s where we live, our job, or what we invest in. What I like about investing in private placements is that no one really does it and it has all the benefits of investing but its not quite the hustle and bustle of single family home investing which I think is a lot of noise. People call this the zig zag theory by observing where the most people are going and go in the opposite direction. This is what it did when everyone around me was buying rentals in Seattle where the Rent-to-Value Ratio (More info – https://simplepassivecashflow.com/rv/) did not make sense and I went off the beaten path to buy 100k homes in the midwest. You might simply adopt this in a different way such as working away from where most people commute to save yourself hours in traffic or moving away from the SF bay area and the $14 cold pressed juice that still tastes like Minute Maid ;p If you are starting out investing I would consider not going into apartment investment because every Tom, Dick, Jane, Harry does that… consider self storage, assisted living, or mobile home parks. Ray Dalio discussing the binary economy – Link2) Korea is a Democracy but it’s pretty much a Socialism society where big brother (cameras everywhere) and Old-world-order rules (nail that sticks out gets hammered)3) Speaking of hammers… people like to get hammered with Soju4) Foreshadowing of housing in the USA – Looking at the skyline you see an abundance of what I will call Class B housing. Think 1990s built 20-30 story, 300-400 unit, 500-1100 square foot apartments, max 50 parking spaces due to reliance on public transportation. The trend I believe that the USA will follow as more and more people will live in apartments. Just follow the rise the microhomes and the gradual increase in rent per square foot in comparison to wages and inflation. 5) Binary Economy – Korea/Japan has a noticeable higher level of middle class than China/Thailand/Taiwan as evident as more cars for regular people and not just the Uber rich. In my travels in other Asian countries with wider wealth gaps between upper and lower class (China/Thailand/Taiwan) you can see these binomial economies play out in small things like sushi menus having cheap California-roll and super expensive caviar rolls in the same restaurant. In the USA although there are places the rich people hangout and regular people go the gap is not as clear than in Asia. Cars are seen as luxuries in Asia and are more expensive that the same model in the USA because those who can afford it are Uber rich – they are super rich and don’t care. The same Lululemon pants (I guess this is a luxury) are 100 dollars in the USA and $130 in Asia. 5) Korean K-Pop is a huge thing. Idolization of celebrities is something that is talked about a lot in tin-foil hat (sociology) media as a means to keep the average public’s attention off the increasing wealth divide. The thought is if you are infatuated will what the Kardasians are doing you will not have the attention to see how different taxes and arrangements are benefiting the wealthy. In America, it seems sports athletes are put on this pedestal. Just a theory here again but don’t underestimate the power of K-Pop. At the DMZ border between North and South Korea soft propaganda is playing over the loudspeaker over to the North Korea side. This recently stopped a few months ago due to de escalation but it was reported that one North Korean defector contributed his betrayal to the K-Pop… And he was really hungry.

1. Look for deals that have more recession proof assets in 2019
2. Join our group coaching with bi-weekly calls for less than a cell phone bill
3. Flowstate – Song of the month – Reik – Noviembre Sin Ti

Get in as a [Founding] Group Coaching student!

The group coaching is something that I have been trying to put together a couple years now after I accumulated a lot of content and got a feel for coaching students these past few years in a one-on-one setting – see SimplePassiveCashflow.com/coaching

I’m code naming this project, “The Journey to Simple Passive Cashflow” and it will consist of:

1) 27 weeks of curated content with concepts building on top of each other

2) Participants go through those modules together and are able to interact on the Bi-Weekly Call and the Private Facebook group in a “group study” environment

3) Bi-Weekly hour power calls switch between the topics of a) Acquiring you direct investment and b) more high-level wealth building concepts and syndication education

It’s going to be a really cool format where people take the journey together. Think like a Fraternity/Sorority without the weird stuff. When I was going through programs it was most beneficial to connect and climb the ladder with quality people. Who knows someone of your Cohorts might do a deal together or become lifelong friends or accountability partners.

Still working on the website but here is a survey to get on the waiting list: https://docs.google.com/forms/d/e/1FAIpQLSf2MXLJlfuQK-PL9_56B9xJ0bHGoDPS1tGq7kkUUGSBnr6BXQ/viewform?usp=sf_link

What’s in the Pipeline?

% Chance of happening – Details – Timing:

1) Currently open for investors – 101-Unit Class C in Gulfport MS

2) 30% – MFH Apartment

3) 90% – Finally a Non-MFH fund syndication (where I do the admin/accounting) to lower costs and get higher prefs and lower minimal investments. Q2 2019

Unlock additional info by joining the Hui – SimplePassiveCashflow.com/club

Events:

January 17-19 – Online – Use code “LANE” for a discount at MFINSummit.com

February 16 – Honolulu, Hawaii – Use code “SPC” for a discount at infinityinvestinghawaii.com

March 1-2 – Scottsdale, AZ – Titans of Multi-Family Real Estate – wealthformulaevents.com

March 14-17 – Los Angeles – SimplePassiveCashflow.com/mastermindtony

Current investors in past deals let’s meet up when you are in Hawaii.  Non-investors you can still kick it with Lane

The Hui Deal Pipeline Club is a free investor club where I filter investments and underwrite the numbers and partners myself. Unlike other investor lists and groups, my investors have personal access to me and know that I personally have skin in the game investing alongside with my investors.

We have acquired over $155 Million dollars of real estate acquired by syndicating over $13 Million Dollars of private equity since 2016.

Track Record of success:

15 Apartments Buildings Purchased, 2 Manufactured Home developments, and an Assisted-Living Facility

2,100+ total units

10 US Markets – AL, GA, IN, OK, LA, IA, TX, WA, PA, MO

Started investing in 2009 – 9 years of experience

Countless Mastermind and Mentorships in the Live & Virtual clubs through the education platform at SimplePassiveCashflow.com

2,600 investors and 100 new Kool-Aid drinkers every month!