1) Listen to the first 8 podcasts. These were recorded back in 2016, and since I have moved on to syndications but was created as a foundation to help people get started with rentals like I did in 2009 when I was straight out of college.
4) Join our club and get access to private opportunities. We only work with people we trust so let’s start building a personal relationship. Lets jump on a phone call!
https://www.youtube.com/watch?v=PKLrtUeCAIc&t=37s
Aloha! I’m Lane!
Welcome to the SimplePassiveCashflow.com podcast community!
I used to be an Engineer at a day job I did not like and I thought there was more to life as many of us high paid professionalsthink in our tribe. I used rental real estate as my means to financial freedom and I’m curating the content on this website and our eCourse so others can do the same.
Glad that you have joined us on this journey and hope you can help us with our Mission.
From 2009-2013, as I was buying rentals on my own I definitely made my share of mistakes. One of these was to paying down my mortgage (debt). Here is one of those checks where I paid down my debt. Little did I know that sophisticated investors don’t do this.
“My wife is officially is quitting her job at the end of this year. Thanks for helping us be able to do that. One of her friends had to go back to work 10-weeks after having their second kid because they need her income to pay the mortgage. It makes me cringe just thinking about that.” –Hui Deal Pipeline Club Member
https://youtu.be/2yvR4h9thos
The Top SimplePassiveCashflow Posts:
This website has been going through daily improvements everyday since 2016. I admit things are a bit all over the place as I learn about these investments and wealth tactics. The following are the top posts on this website and a good starting place.
I know I was beating the drum of the Turnkey rental a few years ago but now investing in Syndications. (Turnkey rentals are not passive and still a PITA) I am admittedly a work in progress and this website/podcast is my journey.
Mainstream investing (401K, stocks, mutual funds, 529, IRA, or anything retail) is based on investing for appreciation. You know buy-low-sell-high …. usually based on factors wholly outside an investor’s control.
Then one day (when you are grey and immobile) retire and live off your nest egg at 4% withdrawal rate.
We (us sophisticated investors) call this gambling not investing.
in·vest / verb
to put money to use in something offering potential profitable returns, as interest, income, or appreciation in value.
Buy-low-sell-high trading mentality encourages the churning of holdings … which generates commissions and short-term capital gain taxes. Which is another reason why we do not like commission based Financial Planners or Registered Agents. Some of these guys use hard-selling techniques. If they make enough phone calls, eventually they get someone to purchase a stock and make their commission.
“Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway” -Warren Buffet
In case you have not seen this whole financial world is an engineered system by Wall Street firms and the government which protects them, to prevent Main Street investors from building enough passive retirement income in your 30s/40s as opposed to your 70’s. The mainstream financial news never talks about yields coming from cashflow (income minus expenses). Discussions focus in the context of share prices. It’s pattering you to think buy-low-sell-high. Churn and cha-ching for those executing transitions in the industry. And for most people who are confused and freeze that’s why there is a hidden asset management fee which is an above the line expense to you.
http://www.cfiresim.com/
“We know what is going to happen if you keep investing in the same old stocks/mutual funds/bonds… you will keep working at your job with a lackluster retirement in 40-50 years. Invest in real estate for cashflow is a proven way that I created my pension today and allowed me to retire before I hit the age of 34. Do the math… the numbers don’t lie… people do” – Lane Kawaoka
The secret… Is not about appreciation but cashflow. Creating multiple mini-pensions today as opposed to hoping and praying you have enough to deplete from during your dying days.
How do we ensure not losing money?
Buying assets where the Rent-to-Value Ratio is more than 1%, is needed to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. When I am looking at potential investment properties the rent-to-value ratio is the very first metric I look at with evaluating an investment. To calculate this metric you take the monthlyrent divided by the purchase price/value. For example a home that rents for $1000/month that costs $100,000 has a rent to value ratio of 1% (1,000/100,000=1%). The higher the better. I typically look at a huge list of properties so using excel to make this calculation is the best practice.
It’s sort of like using the dating app Tinder… but with a filter…. I’ll stop there… to learn more click here.
What’s up folks? On today’s podcast, we are gonna be doing a coaching call where we go over the beginner questions on transitioning. Maybe you’ve owned some rental properties and you may be thinking you’re gonna 10 31 into a syndication or into a bigger deal. Guess what? , as far as I’m concerned, 1031s make absolutely no sense unless you’re going to 10 31, like something bigger than a two or 3 million capital gain and depreciation recapture.
So what we’re gonna be going into in detail today on this call is, how do you use the passive losses or how do you go into deals to get enough passive losses to totally offset the capital gain and depreciate, recapture on everything that you’re selling previously? Just experience sharing here, 2015 when I realized the old turnkey rentals wasn’t all what it was said it was going to be. And yeah, back then the pricing on that stuff was a lot better than it is today. I saw the light and I sold pretty much all my. Turnkey rental rentals in 2015. I think I sold six or seven out of the 11 of ’em that year, and I had a big capital gain in depreciation, recapture about $250,000.
But since I was investing in syndication deals prior, I had a lot of suspended passive losses built up. And I believe the form is the 82 85 form. All you guys should have that. Take a look at there and see how much suspended passive losses you have. Great exercise for you to do every single year. And also I just uploaded in the syndication e-course a video where I go through my K one tracker on how do I keep track of my suspended passive losses in this year, and then go look at my 85 82 form for previous years.
But anyway, Hope you guys enjoy the show. Make sure you sign up for the club at simple passive cash flow.com/club. We just recorded the quarterly kimono report and we’re going to be releasing that to you folks. The part one and part two. Part two goes out to the investors in actual deals. We go over all the deals that we’re in in a very transparent form, right?
There’s a lot of people out there. They say they’re in a lot of deals, but they never really, you never really hear. This stuff, nor can you really interact with other investors within the group to figure out if it’s all true or not. And this is what’s hard about being a private investor in these private syndications.
It’s really hard to do your own due diligence, which is why I have always said the. . The only way to really do this and make sure you don’t step on any landmines, and I’ve stepped on the landmines myself working with, dishonest people and people who just are faking it till they make it.
The only way to really figure out who’s legit in this business is to surround yourself with other purely passive accredited investors. Not these, fake it to you make it general partner wannabe groups, but real accredit investor, purely passive groups. I truly believe that our group is the, really, the only one out there with kind of that already have infrastructure in place.
Our family office group, we’ve started it, I believe around 2018 and really got it going 2019 and into the pandemic. I think we’re well over a hundred members in that group right now. . But if you guys wanna get more information about that, just come in, join the group@simplepastacastle.com slash club.
That form will take you maybe about a minute or two, but then we’ll set up that onboarding call with myself to get to know each other. That gives me the opportunity to see what you’ve got going on and maybe do a little bit call, like how we’re gonna be showing today on today’s podcast. But anyway, enjoy the show.
All right, folks. We’ll probably going to add this to the e-course at some point, but we have, we’ll just call them. Bob, and Amy, if I can remember that name right there, names real names so will remain private. But Bob and Amy have been investing a little bit and have some great questions.
And I think these questions are. Going to be very indicative of somebody. Who’s been through a lot of the initial education. So I’m very excited about this what we’re going to be talking about today. Hey guys let’s get this kicked off, have a good conversation here.
Hopefully other people can learn something.
Where do you want to start? You bring the questions I got I’ll try and break down some ants. Okay we’re in our later career years, put it that way. And we’ve been doing, buy and hold and we’ve been doing deeds and we’ve done some hard money loans and. And we finally got into one of your syndications.
So we were actually getting into that now also. But we’re trying to get out of our nine to five, but it’s never nine to five anymore. It’s more like six to four jobs. And so we’re looking more at investing for. More like replacing that income. Yeah. So in other words, we’re approximately is your guys’ adjusted gross income. And let me pause this.
So yeah, just profile, I move on just real quickly. A lot of it just breaks out the numbers. Where’s your adjusted gross income at today. And what is your net worth approximately? Yeah. Let’s see. What is our adjusted? Gross is like a one 70, like about 170. Okay. Approximate net worth approximate net worth is. What about. To, to something that’s went to probably about what somewhere between two and a half and 3 million. Okay. So from adjusting girls skate com side, just before we move on, you guys are not in the highest tax bracket. You’re not both below this red line of 340,000, like some of the investors, therefore, a lot of the cost segregation bonus appreciation stuff lead doesn’t really pertain to you guys too much unless you guys are selling other assets.
If that’s the case, we can talk about that later on. But but yeah, so I know you’ve got some syndication related questions, so let’s let’s start going down the list. Yeah. So we’re, know your specialty is syndications and so we’re looking for some information possibly on what type of syndication would be best for.
Someone at the stage of retiring and getting out of their normal career job into more just doing investing. Yeah. At this you can syndicate anything, right? You can sit indicate a pizza franchise, a burger, join a real estate. Real estate, you can develop properties. You can. Bye in the hope and pray property, you can do value, add, you can do different degrees of value add, right? So you can syndicate whatever you want. I think the essence of your question is what type of risks for bore profile, or it makes more sense for you guys is the question.
And the way I look at your guys’ profile, two to 3 million can mean different things to different people, right? If you guys want. In your forties or fifties, two to $3 million, isn’t too much money and you still have to grow your net worth. But it sounds very morbid, but if you guys were in the late later stages of life, two to $3 million is perfectly fine and you’re already at end game already. So when approximately were you guys at age wise, which you say We’re not quite 60 yet.
So plenty years ahead. Yeah. So for the most part, you guys still have to grow your network. Cause two to $3 million isn’t much see states, right? That said you’ve got more than most people out there that doesn’t say much. But two to three minutes to take $2 million at 10%. What does that 200 grand of passive income a year at 10% that said you would need to get fests that tire $2 million, right?
10% stuff, which isn’t going to be the case most times. And what it’s going to come down to is I’m sure you guys are familiar with asset allocation picks, right? The essence of your guys’ question is like what kind of reward risk reward profile you’re going for? Are you looking for something that’s 10%, 12%, 13%.
20 to 25% a year. Maybe we start there, right? Like I think for most people you guys probably fit this mode, investing in deals where it’s stabilized from the get go, or it’s at least, if the economy takes a tumble backwards, you at least hold onto the asset. So deals that are more, what I call the chocolate type of deals.
If you saw that other. Article that I wrote the other a few weeks ago. Those are more higher risk, higher return. Doubling, tripling your money in maybe two or three years, you don’t really eat to do that at this point. Maybe if your guys wasn’t like a million to $2 million net worth or less, that would be more lined up your ad.
Put, if you could consistently grow your money yet 10 to 14%. Conservative fee is stack winning. Is that sound okay to you guys? Or do you guys want to be more returns? No, that sounds good because we have been, we had several condos. And self-managing and the return there, all the condos were in Hawaii.
So their return wasn’t that great. It’s only five to 7%, but part of that problem was like, you paid a down, right? Your equity position was large, is what this image is pretty much displaying. A, you should have read, leverage it, got that return equity up higher, but that just happens over.
Yeah we’ve gone through the hilar process and the views that for more, investing, using the equity on the properties, but we’re now, we’re now, going through the process of selling those off and investing in, in, better returns. You guys are still, probably in the simple passive cashflow 2.0 stage strangest thing from the rental properties, which are high risk, high liability, big pain in the butt for Paul cheat returns and going to be more of the passive investor.
And maybe in five years, you’ll be transitioning more to this simple passive cashflow 3.0 side, where at your guys’ age, if you guys were. Three and a half to 5 million. Then I would say you were there and then you could probably just invest some equity type of positions and be totally fine.
But just to get a sense, like personal finance point of view, do you guys have kids or just you guys just us and. Out of the what’d you, your guys, you said your AGI is about 1 50, 1 70. What do you guys save every year? I’m just trying to get a sense of your price burn rate or how much money you guys spend on fun stuff.
Yeah. Expenses wise, like you guys say 50 grand a year or 80 grand a year, or are you guys pretty cheap and able to save a hundred?
We’re pretty cheap. You gotta be when you’re investing as a private money lender. That sucks. I guess you could say. Yeah. So 60, 70 about is that believe me, I’ve seen very many levels of cheapness, so I’m looking it up.
But yeah, I don’t know if we have our, I don’t know if we have it written down anywhere. Yeah, but just gut feeling like every year you save more than 50 or 66.
Is that, what does that says last year?
Oh yeah, probably around. Probably right around. Yeah, right around 50. Let’s say wait. That’s how much we spent. Oh, okay. So we’re saving we’re saving 120 a year. Geez. Wow. You guys are pretty cheap. Isn’t that? The that’s what you got, I’m looking at I’m checking the most of the money you guys make, you guys say is basically you’re telling me over half. Yes. Okay. You guys are just really typical white Nepal sabers.
Oh yeah. Yeah. Okay. And in that case, have you heard me talk about this concept of ed game? Like four to $5 million network? don’t know if I’ve seen any I talk a lot about this and the family office group that we had we talk about this concept of getting ourselves to financial independence and then so that your money can grow and you can pass your wealth off to a couple kids who live like trust fund kids, essentially dwindle away, but long after year old dad so you guys are there in a way.
You’re not two, four or $5 million, but number one, you don’t have kids. Number two, our group is a bunch of pretty like frugal people. You guys are definitely more frugal than the average person. Oh yeah. I don’t know if that’s a compliment or not, but maybe it is in our group, but so th.
When I say most people in our group are making 200, 300 plus a year, they live in California, much more higher expenses. For them I say four or $5 million net worth. But for you guys that might be a tad under there. You may be on the bottom limits of this concept called end game. So for you guys might be to this guy wearing the green shirt.
And you might be in this position to just invest in more conservative type of deals and you don’t need to double your money every three to three years in development deals or riskier deals. So I would say at the most just focus on the vanilla deals where it stabilize cashflow line, or maybe do some private equity.
But the tricky part is. And again, telling you where to be centered around, but it’s up to you to create your portfolio. So you get that on your weighted average, if that makes sense.
Me personally, like I’ve got all, I’ve got a lot of, bit different deals. This is where, in my opinion, where I want to personally be like, I want to invest in more or. Value add type of deals that are a little bit cleaner class B acids. So that’d be centered around where my cursor is, but all of a sudden, a lot of deals are in that, right?
They’re all over here on the outside of that bullseye target, but the weighted averages, there is the point I’m trying to make for you guys, you might want to have in this. Mindset as me like same B class. Like definitely not C class assets. Cause they’re just a headache. Although you’re just passive investors, you don’t have to deal with that, but they’re still from a passive investor perspective.
Cashflow is more sporadic in class C properties because tenants, they just don’t pay with a higher frequency we’ll figure. But maybe you guys might work. I’m more of a here. Maybe we see the same way, right? We want better cleaner assets, 1960 seventies and 1980s, which is right here where my cursor’s moving back and forth.
But maybe we’re, I’m up here and I’m wanting to grow my money at the stage of my life. You guys might be a shy under here, so maybe more what we call a deep field type of deal. Or it could be, you just invest near, but you do some private equity down here and the weighted average is right here.
That makes sense. Yeah. Yeah.
But yeah. Does that kind of solve that and then give you some food for thought or the other oh yeah. Confirmation. Yeah. You guys don’t, you guys aren’t really like this, but like some of my investors they’re like, all right, I need the class to beat less class assets in that are little bit at more than value add or like value add.
And they get very precise with this and just know that nothing will ever just hit your box. You got to expand the strict. And you have to invest, especially if you have lazy dead equity it’s so that B S equity in your home that should be put to work and grew in your rental properties. I know you guys have that there or equity is if you have stocks mutual funds, that type of stuff with bonds.
I don’t know why you’d want to hold bonds at this stage.
That’s the biggest thing, right? I think that’s the biggest problem that most people have is they think that this is their strike zone and they’re very patient looking for what’s there, but they got a million dollars, not think Jack for them, that’s where the low-hanging fruit for them. So that’s where we come up with.
Deployment plan where it’d be put the years up on the top. Then we hear like the four sources of money, for you guys are saving, let’s just say you’re saving $50,000 a year, right? This is what your money is coming through. And maybe you quit in 2025 is what this is saying. And then cash may, you may not have too much cash, but you want to deploy that at some point.
And then the other two sources of capital is your home equity, which you can tap via hilar where you finance or selling the assets. I would suggest with it being polite properties with a, just speak, generally bad rental properties through states where you have bad laws and it’s more an appreciation play, which doesn’t help you at the stage of your guys’ life for qualified retirement plan money, which isn’t your retirement.
Self-directed IRAs, 401ks, et cetera. So you start to build this plan where you draw it out and you’re taking money out, not so that your AGI blows up by taking out the IRA money out prematurely. But you leaking it out slowly as the general idea, but this is the name of game you’ve got to deploy it.
Cause I’ve had investors. Say I’m in a dozen deals, but it’s still a while to being to financial freedom. I don’t like, yeah. A dozen deals at $50,000. It’s just like half a million dollars, half a million dollars deployed. Isn’t going to get you anywhere at this know, especially from a cashflow standpoint, you can do the math on that five, 8% on I went to grant is nothing.
What do you got? We got there. You got questions.
Oh so we’ve got a bit in the self-directed IRAs and the 401ks. We’ve got some money in there and I know you’ve gone over. Starting to pull money out of there, but we’re at the 59 and a half, so we can start pulling money out. Yeah. Let’s kinda talk about this cause like how much money would you say you had in the foam equity out of your let’s just call it $3 million net worth.
How much is like as home equity in your rentals and your primary residence. 625. Okay. And then your retirement funds, how much would you say? I’ve got
three to 400,000. Okay. Perfect. It just like the last guy. And it’s more than one. We’ve got a couple of, yeah, but you’re not working at those companies anymore, so it’s fair game to take them out. One of them yeah, I’ve got an ESOP that I’m still working, so that’s still growing.
Okay. But yeah, the result of you taking money out of your IRA. You’re at art you’re I think you’re at that age where you’re not going to hit get the penalty, which is fine, which isn’t much anyway, 10% who really cares about that. The biggest thing is when you take the money out, your AGI will go up and that may push you into the 22% into the 24.
Or what we don’t want to happen is to go over the 32%. So let’s just say your age has one 50. If you take out a hundred grand, it’ll push you to two 50, which is still cool. It’s no big deal. So 24%, but if he pushed you to take, if you take out an additional hundred, which is 200,000 a year, go from one 50 to three 40.
Now it’s starting to hurt a little bit more. This is subjective, right? Most of our clients are in your guys’ situation of that AGI between one 50 to three 50. So that’s the general thought, of course this is personal finance, right? This is you guys need understand how this works and make the best decision and surround yourself with other like-minded individuals.
I don’t understand that stuff too, to ultimately get the best decision for you guys, but let’s just let’s just let’s just go with this right. And see where it takes us. So if we take out. A hundred. What I say a hundred, say we go 150 in the first year. That’ll take you. You’re still under that three 40 line.
And then maybe you would do 150 or 150, or, maybe you just play it out like this. I would rather see you take the money out of your home equity first quicker, because to me, this is the money not. It’s the boss most, yes, there, basically. If you’ve heard the analogy of the wartime general, the, all these dollars right here, you have, or think of them like sold shoes, you’re trying to fight the war. You got 600 of them right here. These guys aren’t doing jacks. Neither of these guys much, but at least they’re like sharpen and pencils are cleaning their guns.
They’re doing something. We know we got to get them out, doing something, they don’t need to be doing kamikaze runs or shooting on the front lines because you guys are already at end game, like you said, but we got to get them out doing something at least harvesting, passive losses for you, but let’s just not do this out of haste.
Do it too quickly. Where your AGI goes up, but I guess just to throw something out there and I’d like to hear your thoughts on this, what I would do is I would go heavy on the hilar first, and I’m just going to do some kind of cascading numbers here to get to your 600. The reason why I’m leaving this at 1 5100, 100, 100, or I really, maybe it shouldn’t be 1 50, 1 50, 1 50 to get it all out in a few years.
I’m just trying to stay under that three 40 AGI, just so that when you play around with these numbers yourselves, you know why I’m playing it. But then this is to me is the biggest thing here.
Yeah, we try to use our Wheelock for investments. That’s what we do now. We’ve got some hard money loans at 12%. So the hard money loans, I would be very cautious of those number one that is ordinary income. You do not want. And number two, you don’t get past losses, private money, and number three, be very careful who you lend money to because there are a lot of people out there that act as marketers too.
And they run these like lending platforms where they act as a conduit to put your money with lower grade operators. People that really should be charging. You should be getting for the level of their expertise or track record. You really should be getting 15 to 20% return on your money, but the middleman was marketing you, that loan is taking the Delta.
That’s very common. But I think just for the sheer ability of getting passive losses and it being not the board is why you’re trying to get away from the private money. Plus all your money is tied up in one deal too, but yeah as you phase out of that, the idea is you’ve got to sell the rental properties.
Cause most of your stuff is in a vocab area, right?
Yeah. No mainland metals, no. We have a property on the mainland, but, and we Airbnb it. Yeah. That’d be the last set I sell. Yeah, that one’s right. That one’s been handed down in the family. That one won’t be going anywhere. Oh, why you say that? Bush? No attachment. Amy’s dad built it.
They want to sell it.
And I think about it when people start to see you, cause they trip and fall. Maybe you might want to reconsider that one, but Hey, I’m okay with it. We can decide in 20, 26, but it’s working and that’s all I’m happy. What to me is the biggest thing is. For hardworking folks.
Like you guys work hard more, especially you guys saved really hard. What your money’s not working for. You’re working harder than your money. Yup. So let’s go off the low hanging fruit first. So that’s the home equity in the local rentals and the primary residents get a hilar, but at some point you have to make the decision to sell those assets.
Unless you think that there are good investments, which are there in our hall, either not put at best, they’re just right. Yeah. We’ve sold two of the four already. And of course there, 10 31 exchanges oh, we don’t want to do those. Yeah. We don’t do any of those type of stuff.
We. Had somebody help us out. We did some I dunno, outside the box workings with those properties. So you used to own property, so that’s the hard part. And in the next three to five years, you’ll be in the same predicament. Yeah no, we don’t, yes. With the the remaining amount, which is.
What less than half, about half the value of the property was yeah, the we there in DSTs. Oh, no, you did a DST and those DST guys get paid so well with all the fees with that stuff. Unless you’re take kicking a capital gain of over a million or $2 million, those types of things are complete scams.
Should be able to offset those, that tax school gain with passive losses.
We might not be doing, don’t be doing it again, shoot. I did it too. I did a 10 31 back in 2000 and well. 14. I don’t know. I got, been there, done that I made the same mistake. Just don’t make the same mistake again. The analogy I use for the 10 31 or DSCs is it’s like a hot air balloon, right?
The hot air balloon goes up when you buy the property, it starts to go up and you can sell it and take a lot and pay your taxes and jump out of the hotter. And in the beginning, the higher balloon necessarily it’s four feet under. You jump out. Ideally you start to get on the passive investing bandwagon.
You start to get these passive losses piling up through normal depreciation bonus depreciation. You’re going to start to accumulate excess suspended, passive losses so that when your hot air balloon goes up and you jump out, you have a pillow of passive activity losses. So that’s what happened to me back in 2000 and.
17. So that’s down here. I had a $200,000 on Jeanette, $8,000 capital gain depreciated capture, but because I was investing into vacations and private placements, which did a lot of cost segregations, I had several hundred thousand dollars of passive losses and I strategically views 200 of it to offset that gate.
And thus. Allowed me to not to have to do a 10 31 exchange, which again, going back to the higher balloons, it’s like the hotter blade continued. When you go into the next property, you go into this hotter bunny Eagle higher. So the next time when you have this debt equity in the asset and you want to get it out or solely.
Instead of four feet up in the air. Now you’re 20 feet up in there. You jump out of that hot air balloon. You’re going to break a leg at the very least, not even hit your head a die. And that’s essentially what the 10 31 it’s ESTs do they see you’re stuck in a spotter for me, and it makes it harder, harder for you to accumulate for more passive activity losses that we can have you jump out and get to more of a portfolio where it’s all broken up into little pieces at a time.
Then these bigger chunks and that’s what we don’t want. We don’t want our portfolio for any one of our, any one asset to have more than five to 10% of our net worth into one thing. That’s not diversification, you’ve done the T the DST I, the psycho I did the 10 31 exchange. The best thing you can do right now is to start keeping passive losses because you’re in this.
You should’ve got out when it was four feet, you’re eight feet, 10 feet in the air, but there’s still a chance Bob and Amy, you get a much passive losses. You can offset it. Just like how I personally did it right here when I finally got out of that. But it was one of those things. Like you have to get around other high net worth investors and get away from the salesmen selling these DSTs these sub 10 30 ones.
It from a high, from like a marketing perspective, the layer taxes. Yeah. Yeah, that’s right. But they’re just trying to sell their product. And the product is not really the right tool for the job. And in most cases, the situation where a DST 10 31 exchange makes sense is say like a client is selling a dentist franchise that they started for $10,000.
And now they are selling it for three to $4 million. At that point, it’s pretty hard to accumulate that much passive losses. So the option that a lot of high net worth people will do at that point is the DST or monetize stall. So something like that, because it’s just such a huge capital gain depreciation recapture.
But if it’s less than like a quarter million, certainly even less than half a million, sometimes even a million dollars. I’ve seen people get a million dollars plus a passive activity loss. It can’t be done to get you or that hotter, but just food for thought now. Okay. Yeah. But a lot of this is simple.
But the hard thing is that there’s all these kinds of products out there. Like DSTs qualified retirement plans. Is that a lot of my huge fan of everybody just trying to sell you stuff right. I think it for me, I don’t give a shit what you do. Like I just tell you what makes sense to me and what other people I’ve learned from do I don’t care what you do, I just don’t like this.
You spend $4,000 on something that only is really good for the person selling you at and not the best for your situation, but I’m not getting financial advice. Of course. Not at all,
but yeah. Yeah. But I think, like I said, man, like I did the same thing. So welcome to the club. I, after a while you stopped listening to these, get salesmens in suits. All right, what’s next? What’s next? You guys got a good one.
Got a you hit it a little bit tax questions though, but go ahead.
Yeah, Amy’s got some tax questions, but I’m not a CPA or a tax attorney, but try my best their job is really just to do the forms. Yeah. I think you hit on it already with the accumulated passive losses. Yeah. Go look at your I think it’s 80 to 8,500. I think it’s on the taxpayers of opacity, castle.com/tax, but that form will have the breakdown of how much it passed suspended, passive losses you guys have because you guys have been investing for quite a while.
So you should have most cases. People have more than they think they have put it that way, but a little trick of the trade, like CPAs, don’t really, don’t like to give that to you because they want to know when you’re shopping and. So most cases you won’t have that form in your documents. You certainly won’t have all the backend computer calculations.
It’ll just be the PDF printout, which is useless for our planning purposes. It’s useful. If you have the numbers there. To go elsewhere to portable or go to a better CPA. That’s actually good. Which in our world, 95% of my clients, they typically change their CPA.
What do you got there?
As you guys have seen the syndicator or the investment side, right? The three steps of simple passive cashflow first step invest with honest people that aren’t going to steal your money or use money, right? That’s the simple part. But that’s the part that unlocks all this other stuff, which is part two, the taxes.
You can’t really do this unless you have the passive activity losses to start to maybe implement real sick professional status to. So you have to go into the deals, unfortunately, which is I think the hardest part, who do you trust? Because anybody can do deals these days, right? Like not most people, they, if they’re new, if they’re under a half, a million dollars for half a billion dollars, $500 million of assets, and we’re well over a billion dollars at this point in 2022, But trying to find reputable operators that kind of give your money to, to be good stewards with your investment capital.
But then they’re really like, it’s simple, right? From the investment side, what you’re looking for. The biggest, low hanging fruit is the taxes. And then the, like the infinite banking too. We can talk about that also, but those that’s like 1, 2, 3 step. All this other stuff, DSTs cure pure BS, all these other products out there that to me are extraneous and in certain situations it makes sense.
And that’s my job is, based on your guys’ situation, it doesn’t make sense. Like for example, I think a cure appeal only makes sense. If you will have an extremely high income adjusted gross income of over 3 43 50, plus which you guys don’t. So does it make sense to use it? Okay.
So step one, you’re saying, they deal with the honest people. So you’d have to basically you’re building your your team basically. Yeah. But you’ve got to go about it a little bit roundabout way, right? Like eight, I think going on the internet, going through the podcast logs, finding people to work with is the wrong way to do it because you’re just finding the people who are good at.
Yeah, this is where it’s. There’s a kind of my spin on it. You have to find other colleagues and peers and credit investors around you that are already investing in this stuff and build long time relationships. I don’t know if you guys have ever come out to us, we’ll pass a cashflow event, but that’s the stuff you need to be.
You need to come out, break bread with people, build organic real relationships because. That’s where you’re going to find out the goods, who to invest with who to stay away from in the initially. The networking and social capital is really the currency of the wealthy. And like you said, you guys are already there to engage.
It was just it’d be good to find people on the same trajectory as your guys’ selves, this blind. Do you have another meetup in Hawaii? No. I would suggest joining the family office Ana it’s a pay to play program, but it’s hard and while you’re right, there’s barely any people, they only meet up groups or like the free ones, which are a bunch of broke guys trying to flip houses or wholesale houses, or do a bunch of birds.
Which in my opinion, what you do is when your network is under half a billion dollars, but that’s beta play, man. That’s what I mean. I went from 2009 to 2015, trying to do it all myself and I never wanted to pay for anything, but then I hit the wall and until I started to pay for mastermind groups to get around other higher network investors, just look at my unit count, didn’t really tick up. That’s why I started to do that. That’s you can try and do it on your own. But I think in Hawaii, it’s impossible to find other people, this type of stuff is you can’t go to wildlife country club because it’s just a bunch of rich trust fund kids there, or high-paid executives who do things differently with their money, not investing in workforce, boring investments, such as we do.
Okay. But yeah, you guys are investing far. The part of the club just know that the network is not completed.
Network is a separate part, a mastermind group, family office salon, a simple passive castro.com/journey for more details. But I think that’s the next step. If you’re investing more than a quarter million, I think it’s a no brainer at that point.
But yeah. You guys have been progressing pretty nicely, right? That’s good question. That seems like a lot of these concepts it’s it’s hard because it talks about this type of stuff.
Your 401k. Who talks about even private money lending on house flips. And we’re like 10 levels above that at that point. Yeah. When you talk to friends and family and you say, oh yeah, I’m going to syndication. They’re like, you’re in the mop. Yeah. That’s what I said. In 2013, I was like, isn’t that look like on this games?
Come on.
Yeah, but now nowadays, that’s where all my money is scattered amongst other people
still sounds, seems a little crazy to me still though, but I think that’s when you find other people that kinda, this is all the way they invest and you start to realize it is a very small community of. Passive investors. It is a lot more comfortable, but I think the hard part where you guys are at, and you just need to have a handful of close compadres, organic relationships around you, that also are starting with you guys.
And that’s the next step. Yeah. Yeah, any other final question, syndication, personal finance tax legal in front of banking.
This is kinda your, this was your guys. This was your guys slide, have you ever had to try and get a hilar on. LLC owned property, rental business property. It shouldn’t matter. He locks are always difficult to get on non owner, occupied properties, regardless if it’s an LLC or not.
If you’re working with the Hawaii banks, the blade banks are very bureaucratic and logical. And if you think they do, because they have no competition here, so they don’t have to. Do anything that’s outside the little box. So that might be the reason why you’re running into that problem. I would just go to a maintenance thing for that type of stuff.
Better rates or competition there. Yeah. But what is this for? Hawaii rental? Yeah. Yeah, just dude, just sell it. What is the, what is it worth today? We’ve got two different condos yet. One one’s about
2 65, the other one’s about 400, 400.
What is that moment? Is it.
Yeah, dude, it’s less than half a percent method evaluation and you having it backed up the eight. What is the HOA is on that thing?
No, it wasn’t that much. Oh, it’s 600. Yeah. So you’re making like 1500 on a $400,000. You take that money and you buy the equivalent, you could be buying for eight minus units on the main land, each writ running for a thousand bucks. No, but Hey, it’s your life? Just don’t complain when you don’t feel like you’re at financial freedom with your buddies, not for you.
And that’s a clear indicator that you must not working for your $400,000. It’s only $1,500 of revenue when you can get it to the mainland and make $4,000 and you could also be doing value add rental.
Yup. So yeah we’re getting there. Yeah, you’re getting there. And part of this is it’s a slow thing too, right? It takes a couple years to get to the swing of things cause it’s to get it. But I think it sounds like you’re heading the right direction. Like you’re thinking about what’s the next, I got my herd of cattle here, which was just the next set of tickets to the slaughter house and having nearby with, I would say that’s $400,000 or you can look at it two different ways.
First is. Which of those remaining combos are boy rentals is the most pain in the butt for you. I would probably do that. Or then just look at it from a pure numbers perspective and the pure numbers perspective. It’d be like, what trend do I have the most debt equity yet? Like the $400,000 one, or which one has the highest or the lowest loan to value would be the numbers, but looking at it.
Those are the two lens you can look through to figure out what kind of rebel you’re adding to that night. Yeah. Yeah. They probably have Hawaiian dates, right? These continents or these cattle?
No, neither one of them. Yeah.
Or they say never be here, farmer that’s right. If you want to eat them or one of the condos we actually bought in the foreclosure. Yeah. Then you should have said she should sell it. Cause you have some good equity and it was just like, people ask us like What do you guys sell these prop?
What are your exit early? If we, hit our business plan, we get hit, more than 20% a year. We can exit early. We’re going to do that because some of the property, like you guys in terrible jokes, maybe you guys are in that, but like Terra Oaks, we picked up a bat, a pretty good price.
That’s why I’m earmarking that with, to exit. Like the same situation, you guys picked up that foreclosure at a good price for us. Like we were still going to the value add process. And then when that callous factored up or take it right.
What’s up folks? I’ve been getting a lot of questions on land conservation easements after the omnibus bill seem to break the conservation easements at a two oh and a half x multiple. Is it true? Are there loopholes? We’re gonna be going through both sides of the argument here so that I kind of stay in the middle and kind of say that I just gave you all the information that I tapped from my sources.
Ultimately, you gotta make. Station, but here we go.
Hi, my name is Lane Koka. I run the Who We Do Pipeline Club. If you guys would look on to join and get involved in our deals, go to sy paso castle.com/club. Um, if you haven’t heard what a land conservation easement is, You know, you’ve probably been living under a bus or some rock or something like that, and you’re probably not an a credit investor.
If you’re not an a credit investor, don’t listen to this video. It’s just, uh, not gonna help you out very much. What this is for high income earners that are making over three to $400,000 adjusted gross income every single. So a bunch of higher roller cokes. This is something that the IRS has on their kind of watch list.
Nothing that I’m talking about is going to be construed as tax legal advice, blah, blah, blah, blah, blah, blah. This is kind of the latest and greatest of what’s been happening. What I’ve been hearing from my insiders on this issue that is all kind of stemming from in December of 2022, this omnibus bill kind of came forth and changed a lot of the tax governments and how this stuff was gonna be viewed by the IRS from the 2016 latest.
But so we don’t lose anybody here. What is a land conservation easement? But basically it is sort of like a donation, right? Where donations, if you guys aren’t familiar, you donate something and you get a tax deduction on your taxes. Real simple. But in this case, what people are doing is they’re going into syndicated land conservation easement deals where a piece of land is syn.
And that piece of land is donated to be put on a conservation easement list where there will not be any type of development. Basically, the land goes to the ducks and the wolves, basically. Nobody else can build on it. It is kind of for the sake of the environment, and this is kind of a good thing in the long run if you’re kind of one of those green people.
But the main thing we’re talking about here is the tax side. What people are doing, or what they were doing is they’ve got a million dollar piece. But they’re getting it reevaluated for a higher and better use. Maybe that land can be redeveloped to put solar panel cells or put a big high rise casino on.
Of course, that wouldn’t be very practical, right? So there’s a level of how practical the ski land can be developed. Some cases it could be developed, you know, 20 x 30 x and that was what people were doing at one time. If you’re kind of following me, What they were doing was buying a piece of land, you know, for a million dollars and saying that it’s worth 20 million in their deduction.
Now, sort of along the years, certainly around 2016 to 2020, these kind of ratios came back and kind of got rained back to earth and the five x multiple put in a million dollar property and you get it reevaluated. 5 million. To get the deduction for the people in these deals still can provide a net positive for a lot of.
Take somebody making a million dollars a year, if they’re able to drive their income down to 50% of that to $500,000, they just shelter that $500,000 from that highest tax bracket, and especially if they live, you know, in state taxes too. And that could mean that their AGI goes from a million down to half a million, but more importantly, they save 50 cents on every dollar on that delta.
So that means that they just saved a quarter million dollars in taxes right there for putting in an investment of maybe a hundred thousand dollars. Again, that five x multiple a hundred thousand dollars infusion of. To get a $500,000 deduction in their adjusted gross income, and that equates set 50 cents on the dollar, a $250,000 gain back, so pretty dang good investment, right?
Something that kind of takes overnight in a way less a hundred thousand dollars and get two 50 back, right? That’s more than double your money. Now, what was been happening in years prior to 2023? Is that these ratios were being pulled back to a five x with the omnibus. There is a little bit more of a ruling system around the governments of this multiple, and that multiple now is two and a half x.
Now, using that same example, right, A guy, you know, using one of these syndicated land conservation easements, they’re adjusted gross. Is a million dollars. But instead of that, that five x multiple, now they’re only kept at two and a half X. So they’ve gotta spend, say, a hundred thousand dollars to get $250,000 of AGI differential.
So that means with a hundred thousand dollars, they can lower their just gross income from a million dollars. Down to $750,000. Still a big amount, but is it worth it? That delta of $250,000 may only mean a, you know, tax savings of $125,000 at 50 cents on the dollar there. Remember, they spent a hundred thousand dollars.
In this investment. So that means they’re only gonna get back $125,000 a delta of $25,000 to the positive. With that, it kind of negates the whole purpose of doing this whole thing unless they’re doing it for the benefit of the ducks and the air and the rivers and you know, all the Pocahontas environment type of stuff.
But is it worth it? Right. And this is kind of what the Omnibus Bill has kind of put. Now I’m gonna be going kind of through my notes here of what I’ve been kind of collecting from my sources that wish to remain anonymous, and that’s kind of the world that we live in this stuff, because a lot of this is not to be considered as tax or legal advice.
If you’re somebody who wants to do this type of stuff, well make sure you work with the right people. This is why people join our mastermind group, our inner circle, and join our club, right to learn about things just like this and deals and you know, where do you invest. Again, you guys can join that at simple passive cash flow.com/club.
A lot of this is based on your personal financial situation. This may not be for you, but certainly if you’re making over, you know, a few hundred, 400, $500,000 adjusted girls income. Probably is something you should learn more about. I’m gonna be going into a little bit more of these details from my notes.
So in years prior, you could kind of be in a deal and as long as you’re in the deal for one year, you could kind of make that election, or the syndication could make that election to make this donation. But now with the omnibus, now they’re saying you need to be in it for three years. Now I don’t know where this magical three year comes from, right?
A lot of these bills and government, you know, regulations don’t make any. The closest thing I can subject that where it comes from is maybe they’re trying to emulate long-term passive income, which, you know, my CPA tells me to hold onto an asset more than a couple years to get at better capital gains treatment. But it is what it is. Three years is what it says.
Another nuance is in years prior, you know, when people were going five x 24 x, 15 x under multipliers, there was some wiggle room. Now what they’re saying is if you go any higher than 2.5, you essentially brick your entire deal. You know, in years prior, you would’ve gone up to maybe 2.4, 2.5.
Anything higher than that would’ve just been, eh, yeah. You know, you’re not gonna be able to count that. But now they’re saying if you’re going higher, It’ll get all disallowed and thrown out Again, these are just, you know my notes, right? Not saying that what will happen if you get audited and what will really happen in the enforcement.
These are just kind of ideas that have been thrown around that I just want to kind of put into your guys’ head. For some of you folks who did conservation easements in years prior, maybe in 2022, and you’re probably freaking out, you’re probably like, oh my goodness, my conservation easement is gonna get thrown out because it’s higher than 2.5.
Here’s the deal from what I’m hearing, as long as your deal was first off, voted for, it was filed into the law in that jurisdiction and everything was kind of wrapped up in a bull before the omnibus came. Through in December of 2022. You should be fine in terms of being kind of grandfathered under the old regime.
Now, of course, you know, nobody wants to do this and I don’t really, I don’t condone any of this, right. But there’s a probably gonna be a lot of people out there who are doing this stuff, who made back date documents, forge documents to get it in before the conception of the omnibus bill in December, 2022.
I’m not, I’m not condoning any of that again, right? That’s not good. But I, again, I think I’m saying that because we talk a lot about entities, legal protection. When people wanna sue you for frivolous reasons, that’s the kind of garbage they’re going to do and pull on you. And this is why having, you know, if you’re a higher net worth individual, just having some LLCs probably isn’t gonna help you too much in terms of protection.
And this is why, you know, the wealthy people go through great extremes to totally eliminate liability or more protect themselves to a certain higher. Because there are a lot of unscrupulous people who do stuff like this, and it’s very easy kind of to fudge a date here and there. All somebody has to do is the CPA Turner who’s gonna be doing stuff like this.
Hey, gimme an extra X amount of dollars, it’s a consulting fee, and I’ll make this work for you. Scribble some dates back here that are completely illegal. I hear about it now. The omnibus bill is pretty rock solid in terms of saying, Hey, 2.5 x multiple, no more. There are some hopes here. Now the new commissioner is coming in and we don’t know how that person is going to be.
Are they going to audit this stuff? Well, we know that the old commissioner would audit everything from 2016 and beyond, so we know that for a fact. But what to what? Right. So one of the due diligence things when you do look at these types of deals was to go into a deal that had a healthy legal budget.
Why? Because if you had a healthy legal budget, maybe seven figures, to keep a battle going, at some point it may not be worth the effort for the iris to fight you, and it will just lead to a. These things are always settled. It just really never gets to the end, like law and Order where there’s a judge that says this or that, it typically gets settled just like any other litigation.
This one’s no different just with tax court. So if you’re able to fight it and be a pester, the theory is that you can, you may be able to get a better multiple or just ski through the system on escape. That is if they audited you, which if you work off years prior, you probably. But I think this is the biggest thing that people who are still doing this conservation easements are kind of looking towards as they’re kind of saving grace of, well, you know, at least I got the tax savings in the meantime.
And if I grew my money, if I double my money in the last two to three years anyway, or maybe even five or six years, by the time this work its way through the audit system as I would imagine something like this would just taking forever. You know, you’ve gotten that time benefit of money. Now, maybe the counterpoint to that is they, maybe they would backdate the penalties and.
And this and that. But if you’re able to grow your money, maybe you’re able to beat that taxes and, and, and penalties. Just another thought. Now we’ve kind of beat up this conservation easement. At this point, I would probably think at home that, yeah, I’m not gonna do this stuff. Now the other side of the coin is, here we go.
And again, no tax legal information on my part. I’m just telling you what people on the streets are talking about, that I kind of interact. So first off, we kind of mentioned it, right? Let’s just say the evaluation is two and a half or five x is what it used to be. There’s a certain amount that your evaluation can go down to that you still get a net positive benefit to.
That’s up to your personal situation, and I think that’s something that I can kind of help out in helping you determine if it makes sense for you or maybe there’s just some other mechanism, maybe real estate, professional status and passive activity. Losses are just a better way of going than this.
Little bit more risky. We’ve got the Tax Pal fund. I’ll get more into that at the end of this video as a more safer option, in my opinion, to get passive losses that are not recaptured. But you know, this is the counterpoint, right? This is kind of the devil’s advocate approach. One thing that I think people have to realize is why do you have this whole conservation easement thing in the first place?
Well, the purpose of it is to designate land that you cannot develop it for the sake of the environment. And whether you kind of believe. Yes or not, kind of do need it, and the government wants a certain degree of this right now. This is just a tug of war game. The omnibus bill has pushed things very in favor of just killing all these conservation easements.
The good ones, the ones that want to go through are not because of this is kind of killing the deal. The only people who are able to do this are big, big players not to doing it in the syndication space or so they. And these are kind of the loopholes. They’re kind of being evaluated by a lot of people right now.
If this year kind of passes by and maybe 2023 passes by and there’s not that much land being designated conservation easement, they may look to ease back on some of these regulations. Or what I kind of feel like is they put these types of loopholes in here. So as a means to allow for future land conservation easements, it’s actually to fulfill it Our.
But they kind of have the ability to award it specifically, or for people who have the legal team to fight it through. That loophole that I’m kind of getting at is right now there are regular conservation easements and these simple conservation easements. Regular conservation easements, the rights are kind of given up.
Land is not really donated, and those are more the traditional conservation easements that I think a lot of us are used to. You are able to, in the syndicated deals, you can use the benefits up to 50% of your adjusted gross income. If your adjusted gross income was $1 million a year, you could buy up all these conservation easement.
Maybe only at a two x two and a half X multiple. Nowadays, we don’t know yet, but you can drive it down to 50%. The other method is this fee simple, which may not be under the omnibus jurisdiction, and I’ll explain why later, but what they’re saying is you can possibly still use these fees, simple type of arrangements where the land is completely given up.
It’s not just the rights. Be simple, just donated and given away. The downside to this is instead of a 50% ability to lawyer h ei, you pony unlimited to 30%, which may be good enough. And what I would probably recommend most people to do is see your tax mitigation strategy, not as just a one trick pony with conservation easements, for example, but to use a conjunction of different mitigation.
And this kind of actually forces you to do that because at 30% maximize use of this, what’s happening is say, take that guy who has a million dollars adjusted gross Inca. 30% of it means that he’s only able to go from $1 million to $700,000 ei. And if you’ve seen our tax videos in the past, I always try to get people around $340,000 married, filed jointly, or maybe even around $200,000.
So obviously if this guy’s at $700,000 right now, there’s a lot of room of improvement here. Maybe they implement real estate professional status, or they have a lot of passive income and they use the passive losses, which again we’ll talk about here at the end of the video. But they use those passive losses that drop them from 700 back to 300 or 400 wherever they really want to follow that particular year using conservation easements.
But again, this be simple conserv. When I started to first hear this, I was like, I thought the omnibus bill was calling out all conservation, syndicated conservation easements as a whole, and to me this was a head scratcher. I personally don’t do the conservation easements, but I know a lot of my clients use them every single year.
Which is why it’s important to get around other people actually doing this type of stuff, because if you google this stuff on your own, you’re gonna find all the content marketers who are posing as CPAs that wanna put out a puff piece like this to make them seem really conservative. So most people will go to them, but there are a lot of aggressive folks out there that are investing in the right things that the IRS wants, that wants to mitigate their taxes as much as legally possible, who are looking for the.
So where’s this like little crevice that lawyers can kind of get in here and break up the whole omnibus thing? Well, it seems kind of strange and stupid. I kind of think it’s a little stupid, but the way it was written into omnibus, it doesn’t specifically call out the whole nuance between free, simple, and regular easements.
So again, where does this lead into? Well, it leads into, well, when the conservation easement deal is being audit. It will eventually go into this audit, and this is where we pay lawyers to do this stuff. And if anybody has done silly things for some legal reason, this is the reason why we have lawyers, and thus conservation easements may not be dead.
But in my opinion, at the very least, you can’t use that 50%. You had to go with the fee simple and do the 30% is what I’m. And maybe that two and a half multiple lies. Again, I don’t know, I just personally think it’s just better to use passive activity losses to lawyer your passive income completely and to dwindle your ordinary income amount over time.
To do this, you’re gonna need to get rid of your traditional investments and get into alternative investments that give you passive activity losses, and to do this a very old fashioned and clean way without having to use conservation. To me, conservation events are kind of like a wonder drug, whereas using passive activity losses offset passive income to cancel that out, or maybe to use a conjunction into real estate professional status to use your passive losses to lawyer AGI at that point.
That’s very basic stuff, and that’s kind of like good diet and exercise in a way, instead of just using the magic wonder. But however you guys wanna do it, and I think this is really gets into your own personal situation and your own risk tolerance you have with this type of stuff. I’ve been very clear, I’m not getting tax or legal advice, but I think this is where you need to have a group of community around you.
And that’s why we always, you know, have these events where people get to see each other face to face and talk about things like this instead of just Googling stuff amongst. Now I’ve mentioned, you know, how do you get these passive activity loss, which I feel is like, is a lot better way of mitigating tax.
Good old fashioned passive activity, losses, depreciation to knock out your passive income. If you’re somebody who has moved off of your W2 job, your business, your ordinary income, now all your income is passive income and therefore you could drive your income down to none. That’s kind of like how I live personally.
I pretty much just have passive income these days, and I’m able to use the massive amount of losses I get from real estate to knock it out, and therefore my adjusted gross income is pretty much nothing. No. Completely legal. So what we have is our taxal fund where what we’re offering investors in addition to a little bit of returns, is you are going to be putting in a dollar to get $1 of passive activity losses.
Now normally with passive activity losses, when the deal is exited or the asset is sold, you have to recapture those losses, which can be a bit of a drag. But we’ve talked about other strategies to mitigate it in other videos. But in this actual opportunity that we have, the passive activity losses will not be recaptured.
In fact, if the asset is ever sold me as the general partner will be, recapturing it on my side, shielding that recapture from you. So this is kind of a game changer. So way you use this is maybe your, you’ve got half a million dollars of passive income and you wanna bring that down to 300. So you need a couple hundred thousand dollars of passive activity losses.
You go look at your 85, 82 form, you, you don’t have it there. Or maybe you only have a hundred thousand. Well, you may need to buy some, and the tax power fund that we have will provide that. We have a lot more information for folks that are in our investor club, if you wanna check that out. Simple paso castle.com/club.
But I think it actually makes this kind of arrangement a lot. More desirable, especially when you combine the fact that bonus depreciation is not a hundred percent anymore as it was in 2022. In 2023, it’s down to 80% and in 2024, it’ll go down another 20% down to 60% until it con completely phases it out, and there’s nothing out there that gives you passive losses that you do not have to recapture.
This is the only thing I’ve heard. So it’s a tool and it may be a tool for your situation. What I would say is join the investor club, so paso casual.com/club. Check out the webinar we have, it’s about an hour and a half. It’s a little technical, but if you are into saving taxes, and you certainly should, if you make over half a million dollars a year, taxes is probably your number one expense.
And with conservation easements through this omnibus bill getting tougher and tougher. Sure. There may be some hope. As I alluded to in this video, it just seems like it’s getting harder and harder. Right? Just like infinite banking or credit investor banking. You know, the terms are just kind of getting worse over, slowly over the time horizon.
But the big thing is the best time they get it was yesterday before they make it even worse. Right? Same thing. But anyway, let’s end of the video folks. Thanks for listening. If you guys have any other questions or specific questions about this, put into the common box below, we’re gonna be releasing other videos that you guys ask us to do. Our email is team@schoolpassivecashflow.com. Share this with a friend. Thanks.
What is up investors? Now on today’s podcast, we’re gonna be doing another doctor coaching call, like how we did a couple of weeks ago. But if you haven’t checked out, I think it was Brian on that coaching call, sometimes we change the names , and then that, I think that goes for if anybody wants to do these, Free coaching calls where we go into your personal financial sheet.
We’ll send you the blank personal financial sheet to fill out so that it helps expedite things and people on feedback. Do people really like to look at people’s personal financial sheet as financial voyeurs is the term. If you guys are listening to this on the podcast form, go on the YouTube channel to find this podcast, if you really want to follow along on the personal financial sheet and see all their numbers and a lot that we don’t talk about, I had a lot of questions and feedback over my analogy that I had a couple of podcasts ago, I believe, and then go back to Brian’s one for the full discussion. But this whole concept of, you know what, all right, we’re investing in deals. We are playing these different tax strategies, or at least learning it, maybe doing, getting some passive losses artificially that you don’t have to recapture through the new Taxal fund and you’re doing a little bit infinite banking or a new accredited.
or a new accredited investor banking, which you guys will probably learn as we rolled that out this year. Let me know if you want to try it out, but, it’s working, but alright, people are moving down this path and I think everybody here pretty much, they’re not trust fund kids.
They made their own money and they’re still working. working hard in their jobs or as 10 99. So their small businesses and what is the path forward and how do they keep working? Do they titrate down? Do they work, do they spouse work? How do you implement rep status? And I introduced this Raptor, Toyota or Ford Raptor gas guzzler versus the Tesla model versus the in the middle hybrid.
Prius model of kind of different paths to doing this. Of course, all this is personal finance and what I really urge you guys to do is sign up for the club if you haven’t, and even if you are scared, book that call with me. I won’t rip your head off. I’m really nice when you get to know me. , we get on one-on-one and you.
Let’s go through this and let’s see which one of these paths really fits well for your family and or at least give you some what the options are. And let’s try and. Compressed time cycles for you because time is really the most important thing out there. But if I’m not gonna go into what the heck this analogy was, but what I’m gonna say is go back to the previous podcast that we did coaching call with Brian.
He was also a doctor. I go over this loosely, if not shoot us email, maybe we’ll do more. But certainly if you’re on the YouTube channel, put a comment below. We’ll answer, this is, this kind of, it’s real quality of life questions and personal finance questions, and this is ultimately what I really like because this changes lives.
Like going into a deal, doubling your money, whatever. That’s cool. Tax savings. Yeah. That’s amazing. When, a lot of the doctors will save 150, $200,000 in their first year by doing some of this stuff, and you. , of course. That’s, if you guys heard my kind of confession last week, sometimes when you have a lot of money, that may not mean too much, but you know when your net worth is under a million, a couple million dollars.
This is. Big life changing moments and maybe can be the difference between you having a second child or third chat, or even kids at all, or even, going down a different path in life, whatever you choose. But again, go check out that order podcast and if you have any questions let me know. Or if we ha you haven’t burned up your free intro call with me.
I urge you guys to do. Let’s get you guys going or at least get you a different viewpoint in so you don’t just screw around for the next 30, 40 years of your life, putting your money blindly into the stuff that they want you to do and enjoy the coaching call.
Hey folks, we have another hard work in a professional. Who’s going to be a volunteer to do a coaching call here. So Derek is a doctor. And if you guys like, like you guys are really liked this, I don’t know why people get like financial warism when they appear in on these things. But the truth is not many.
There’s not too many different profiles. And if you’ve gone to the YouTube channel and look for the coaching call playlist, or got an access to our members portal, which is free, you just got to sign up@simplepassivecashflow.com slash club. We actually align all the coaching calls based on networks.
So you can just find yourself and fit right in and find some of the past coaching calls people in the lower net worth than you. And some of the higher ones that you’ll get to at some point, but Dick in here, there. Thanks for doing this. Why don’t you quickly go over a little backstory to get the people that get to know you like.
Sure. Yeah. Thanks for having me. I’m excited to do this coaching call. As far as my background, so typical working or professional kind of investment background. I met my wife in medical school. We were both physicians and busy with training and residency and all that. So we just went down the typical route of basically doing retirement accounts and funneling all our money into stocks and bonds.
We thought were pretty smart cause we were doing mostly low fee index funds. So we weren’t picking individual stocks. We were doing a lot of just basically Vanguard mutual funds. And we’re doing that for basically 10 to 15 years. Cause we had two children along the way. And then just recently, actually earlier this year brother-in-law got me turned back onto real estate.
So went down a really deep dive into the podcast world and bigger pockets on your podcast. And really just started to look into this indication space and rental property space. And this year we actually purchased two rental properties. So one that’s for a longterm property where we actually have some in-laws staying in it.
So it’s not like a typical rental property, I would say. And then a second was a short-term rental property that we got in the mountain area in North Carolina. So we did all that this year. And then now I’m at the space where I really want to start more looking at passive, truly passive, so syndication type deals and maybe even starting to look into like infinite banking.
So basically just trying to get more sophisticated away from just mutual funds, stocks and bonds actually start. Getting some more investments into real estate. And then where are you guys at? Age-wise you guys got kids? So I am 40. Unfortunately the other complicating factor of my personal history is my spouse passed away suddenly like a few months ago, which complicated the issue.
So it’s just me now as a single father with two kids who are six and nine that has also led to this push very recently to really try to simplify my life and simplify my investment strategy. Obviously I want it to be high yield and useful, but I just really want simple. Sorry to hear that.
I know it’s something that all of us as we’re trying to get our stuff together, we never know what’s going to happen. It could be you, it could be them. I was kinda thinking the other day, if it was me. What’s the point. If I’ve gone, it’s all done the simulation ends, but that’s not a good way of looking at it, but yeah.
That’s definitely gets you on the right path or at least tell you what I think. And great. But but right now you’re still working, right? Yep. I work full time W2. I know I’ve listened to a bunch of podcasts, yours included where there’s talk about like real estate status, professional, all of that.
I am not going to qualify for that. And that’s probably years out because the place I work at is actually pretty cool place. It’s a fun startup and I’m definitely, I think, going to continue it at least for the next few years. So I don’t really have any, that’s not in the immediate future to shut off my W2, if that makes sense.
So just a quick snapshot for people listening on the podcast. We also do this via screen share on the YouTube channel. So if you guys want to flip through some of the personal finance sheets as we go through, I’ll pop on over there later the net worth about two and a half. But what I wanted to dig in on, so assets first, right?
You S you mentioned a lot of it is just traditional stocks, bonds, mutual funds, et cetera. So at what I’m seeing is about 800 grand in that stock bonds mutual funds stuff. And then you’ve got a lot of equity in the rental and the primary residence that you guys live in that equity might be wrong. I might have filled out the sheet wrong.
So the equity is probably in the primary residence, I would say between three to 400, depending on what it’s going to sell for in the market. Okay. Know, you didn’t, you did it right. You did it right. You have the this is what it’s worth now that the Delta is, this is the mortgage on it. So I think you got it, right?
Yeah. So it’s three to 400 probably in my primary. And then the two rentals were just purchased within the last, six to eight months, the equity. And that’s definitely not quite as high, although the market is probably somewhere between 50 to 75,000 for each of those. Okay. So we will we’ll circle back around them.
Like we’re going to invest what money we’re going to use first in one particular order, which is always a very common question that comes up, but let’s figure out what your philosophy at this point. So what is your kind of your adjusted gross income? What do you guess it’s going to be this next year?
So right now, my wage is 265,000 per year. For that comes to after taxes. It used to be, my, with my spouse working as well as closer to half a million, but that’s obviously going to keep and then your expenses, right? Not cheap having a couple of kids, but luckily. The wonderful state of California, a little bit cheaper where you’re at, right? Yeah. North Carolina is not too bad. Although the area man is a little bit more expensive than the typical North Carolina, but it’s definitely, yeah. I lived in the bay area before, too. It’s not like San Francisco, other California areas. Yeah. Did you move over to the Carolinas for work or kind of her family?
So I was in the, I used to be in the military, so we were in California, then Colorado, which I actually really loved, but a lot of my wife’s family is from the Northeast area, so we just wanted to get closer to them, but didn’t want to go to an expensive New York or Massachusetts area. So that’s how we ended up in North Korea.
Okay. So what would you say you guys, monthly burn rate for expenses? You use it utilizing daycare or, yeah there’s afterschool, so our kids are in school, but we have to put them in after afterschool or after care. My wife has some car payments. Cause she got a new car. A couple of years ago.
We have our mortgage taxes, groceries, all that stuff. It’s probably around 10,000 give or take 10 to 12,000, depending on the months I used to track the budget a lot more closely. And then that kind of went away the last year or so, but that’s probably about it and that’s including like our, we would set aside money to go on nice vacations and stuff like that.
We lump that in. So probably 12,000 a month would be Yeah. And I think, this is 12,000 burn rate every month. And so you net about 10. So you’re spending at least a hundred grand a year. Maybe that’d be a couple of investments every year. As long as you for you guys, as long as you can stay above 50, 75,000, I think you’re good enough.
You can let off the gas a little bit, whereas some of the folks that are under 1000001.5 million they might want to tighten the belt a little bit. Going at a pretty decent clip here. It’s just a matter of being smart to work with putting the money. I think that’s my next big step is just being smart with deploying all the capital out for sure.
Yeah. I’m not a big personal finance guy anymore, saving the coupons, that type of nonsense. But you guys are doing pretty well. I’ve talked to some people in California where they make more than you yet. They’re barely able to save 30 to $50,000 and I’m like, dude, what’s going on.
It’s typically private school for kids is what flips that up or extremely big outs. But I think, your house is pretty big for North Carolina. You got the salary to support it and that’s actually something I’ve already been in the process of looking at, I put an offer in, on a townhouse that would be smaller to downsize.
Like I’m already looking at a way to either, do a cash out refi or just selling downsides. So I’m actively looking to pull the equity out of this house. Yeah. Let’s so let’s do this. Let’s go over the deployment strategy first and then we can loop back around to like kind of life choices or transitions.
Maybe I can just be a sounding board for you because at this point I know where you’re going at a certain rate, and I know where you’re going to be in the next four or five years. And most times I think you folks and myself included at one time, you operate as in scarcity mode, right?
You think we’re not going to be able to get there. So we’re pinching pennies, but if we make the right moves and especially if you want to downsize that gives you a lot more. Pushes you further down on the financial independence road. So that said, let’s talk about where so let’s look at this 800 grand in your retirement accounts, you had it broken down one of these sheets, IRA versus RA, right?
I think down here. So let me see here. You’ve got the Roth stuff is about 150,000. 401k 4 0 3 BS. That’s the majority at five 50. And then you’ve got the IRA miscellaneous stuff at one at night 90. So one thing I’ve looked at or I’ve reached out to a company it’s like ERP or something was like one of those trying to tap into specifically that 4 0 3.
Is my wife’s. So now I’m, I was beneficiary now it’s mindset. I’m still trying to look into if that’s yeah. Everybody’s trying to sell you a bunch of stuff, huh? Yeah. All right. Here’s my thing. Retirement counts. You’ve heard me say at night, if you just add them, like I think you’re better off paying your taxes on it today while you’re in a lower tax bracket today.
Look, you’re at two 50 or under the three 40, right? And then especially if you believe taxes are going to be going up in the future, especially if you think your financial picture’s going to be going up the future, that argument where to put it into these self self-directed accounts or qualified retirement plans is what they’re technically called.
Not some marketing term or whatever. They’re all the same thing. Solo 401ks. If that works, if you’re investing in non tax advantage, Okay, like crypto stops, but if you’re investing in real estate, the damn thing should be tax free. Anyway, because you get the losses from the tax advantage asset.
That’s the key thing that people glaze over all the time. So I guess my first question is, are you going to be investing in real estate or do you want to be investing in stocks, bonds, which are funds crypto? So I’m still trying to figure out like what I ultimately want my asset allocation to be. I know that I want to, like currently I’m very heavily in stocks and bonds, and I want to shift that and probably get anywhere from 40 to 50, maybe 60% of my total net worth than real estate, probably 20 to 30 ish and still stay in stocks and bonds index funds.
The crypto piece is the one that I’m still figuring out. I actually listened to one of your webinars that you did. I forget who the person was, where they were, making the point that he thinks Bitcoin is. However many million per Bitcoin and all that. And I have some friends that are pushing Bitcoin hard as well.
I’ve gotten a tiny bit into that space. I wasn’t anywhere on the worksheet, but I think 10 times and crypto dabbling slowly and a little bit, a bit pointed, Ethan, I’m trying to determine is that going to be like 1% of my net worth? Just so I have a tiny stake versus five to 10%, and I’m a little bit more aggressive in the crypto space.
So I’m still doing a little bit of research on that and that’s what makes us hard, right? Because if we’re before we start to decide on self directed IRA, solo, 401k, or take it to cash, you got to figure out what that end asset allocation pie chart is going to look like, but you don’t know what the hell that looks like at this point.
Like I have some ideas. I’ll just shoot you. What most people in our kind of mastermind group we’ll do at your network? They might do like pitfalls five, 10, 5% into crypto. The crazy ones will be doing 10%, but as you can see, it’s, you’re not going balls to the wall with this type of stuff.
The St. Wall street bets type of stuff. So sounds a little bit like more reasonable to me. Yeah. I, and then most of ’em based, they start off with that 50% alternative asset idea, which I think you’re hitting down over time. I think that it creeps over to the majority, but I think most people they’re always going to have order or third of the traditional garbage, if you will.
Personally, I don’t have any of that stuff, but I’m not normal. And I think it’s prudent to have some of that stuff so that you’re always in it. So you’re learning. So the idea is you build the alternatives, get your net worth up to five, 10 million, and then possibly come back to the traditional space is the idea.
But if you leave them the traditional space, you’ll never, you might as well stay on the alternatives because that’s what you got you there in the first place. But let’s just go with, you’re going to in the next several years, we’ve transitioned to half alternatives, half, I don’t know, 40, 45% traditional stuff.
So we’ll leave half of this stuff alone in a way. Are you counting like syndication. Yeah, those are what I call alternatives. Yeah. So real estate is alternatives of crazy. Where did I actually be more comfortable with 65% alternatives, 30%, 5% crypto. That seems like a reasonable starting.
Yeah. And I think that’s, again, that’s no, that’s very typical. The people on the family office group that are, have that kind of mindset, but of course you got to get to your 50, 51st. So let’s have that to be an intermediate goal these next few years, and then get to that once you get proof of concept, but that in mind, of course I’m aggressively pushing you to move this stuff around.
What I would probably do in that case is let’s see again, 800,000 of various pre-tax post-tax various IRA, 4 0 3 B 4 0 1 K stuff. First thing we always do is we don’t touch this stuff first. We, you got liquidity, right? You have full equity first. Yeah. So I have home equity and then there’s a decent amount that I have in checking and savings.
And then also I’ll I got a lump sum for the life insurance, a supplemental life insurance benefit. So what would you say like that liquidity with some up to about like several thousand? It’s about 700, although I like to keep some in reserve, like I’m one of those people that probably wants 75 to a hundred.
And so deployable capital right now, I would say comfortably between six to six 50 that I could deploy pretty quickly. So there’s two paths. Ideas I’ll give you like first is what I’ll do. Cause I’ve already know it works personally. And then there’s the one that most people will do that I see, which has all of a C takes him to the count.
The whole let’s try this stuff out first, before we go crazy with this stuff, to make sure it’s real, let’s get proof of concept, call me crazy. Like when I bought started to do out of state turkeys, I bought one property first and then I bought 11 very quickly, but I think it’s prudent to get proof of concept.
Although we’ve had people invest a million dollars in nine months by joining the family office group and building relationships with other peers and then quickly moving in, which makes me stressful for them. But now they’re happy with, 10, 10, 5 figures of monthly passive cash flow. Now, two years later, those are the two goalposts to think of.
I would say normally I’d be more on the cautious side. I think the one thing that makes me think I might be a little bit more aggressive about deploying the capital is just the inflation that’s already here. And it seems like it’s not going to slow down. I don’t want to just sit on this pile of cash for two or three years and have the purchasing power.
Yeah. So let me, those are the two goals, right? So what I’m going to propose just so we don’t have too many things floating around out here is just the bare minimum conservative one, the bleeding and slowly. So what I would do, so there’s a shoot, there’s three things going on here that I’m thinking in my head first, we got to deploy the liquidity first because that’s the stuff that’s not doing Jack for you.
Then what I want to do is I want to take, I want to leak money out of these retirement accounts slowly so that your right now, your adjusted gross income is about two 50. What I want to do is take, gosh. Wow. You’re married file single now. There is some sort of, I think I can technically still file married jointly for the next two years.
I believe my CPS. Yeah. And that was the same for you. That’s part of the reason too. I’m thinking of selling the house. He said it was like 24 months after she passed that thing. I can still get the full half a million tax-free when I sell the house versus the that’s fair. That’s good. So here’s what I’m thinking.
Say that, that is the case, right? If you’re making two 50 and then you leak out the retirement funds slowly to take you up to this three 40 number about right. So you’ve taken a hundred grand out every year for the next couple of years. If it’s unlucky where you don’t get that treatment then I, then you’re already topping up at the higher tax bracket.
Suz. Does that make sense? So you’re going to have to walk this path down the road with your CPA. Okay. But the idea is we want to be leaking out or retirement funds as quickly as possible, but not to go over this red line here. That makes sense. Do you understand the logic? Yeah. Gotcha. And is there like what, like a rank order of how you think those out?
Yeah. Good. Quick question. But let me get back to that school. So
the one thing that Roth IRAs are you’ve already paid the taxes on it and you can take out the contributions tax free penalty fee. So that’s your, you could always be taking that out in a way. But you have so much money, liquidity wise that you don’t have to touch this probably for the next several years.
And like I said before, I’m still considering keeping, a quarter to a third in stocks and bonds. I could, yeah. I, for you, and this is very personal for your situation because you have all this other liquidity at this. I would probably leave the Roths alone. Okay. You probably don’t have to touch them.
So to answer your question your current one, your 401k with your current employer, all, they can’t touch that. So let’s just leave it alone. The next one would possibly be the four old we B from the previous employer, spouses or this IRA
probably do. The 4 0 3 BS, because my logic is you have crappier options, like IRA, you have a bit more choices with it. And these are typically more of a pain in the ass to manipulate. So let’s get it up now. So I would say,
yeah, I would split a number here first would be the, this would be the first year, because if you’re going from 250,000 to two, try, do this year. And you can, there’s a couple more weeks left, but I still have my spouse’s income for most of this year. And then they also paid out like some months for the, yeah.
The income for this year is going to be well over half a million, but it’s going to be married, filed jointly. So next year is really. Got it.
Got it. Yeah, let’s ear mark that for 20, 22. And then we chip away at this 420 23, 20 24, 20 25 and 26. And is it thought that I’m just slowly drawing it out, stay below the next highest tax bracket and then redeploying the money into like syndication deals? Yeah. Yeah. Of course, people are, will tell you, they said the best thing.
It’s you’re going to have to pay the taxes on it at some point, and you’re not getting the tax benefits today. Yeah, that makes sense. Okay. And then the 401k would be probably you could probably, I’m thinking you’re probably going to quit your job. 20 probably. Yeah. The place I’m at, it’s like a startup and just the trajectory of it.
Like I think the interesting work will be done by then hopefully, yeah, actually 20, 27 with IRA and then 20, 28 for the later. You’ll probably come to a couple of hundred sheets by then and you’ll probably, maybe do a backdoor Roth at that point. A lot of this will change in the next three years anyway, but that’s let’s get you going down the path first.
And I would probably recommend. I can’t the only reason where I might make sense to do a qualified retirement plan is if that doomsday scenario where you are limited to single joint or that 170 max, then you might like, again, like for people listening, the only reason that stuff makes sense in my humble opinion for that tax attorney.
But there’s no right answer for this stuff, as it is if two things apply, number one, you’re already in tax Breck, highest tax bracket, which you are, and number two, you have a boat load and your retirement, which you do. Like I’ve seen people with more like a million million, half in their retirement accounts, you certainly have more than half a million, 600,000.
So that kind of satisfies that. And the reason being is it’s oh shoot, what do we do? Let’s just kick the can down. It’s punting and football, right? In a way, unfortunately, in the things you have to balance. And the reason why I’m not super keen on is these damn things cost a lot of money.
I like your plan. I’m slowly drawing this out as you noted. And then you did mention like the backdoor rods. So that was something we had been doing the last couple of years of my spouse. I didn’t do it this year, but is that something you typically the recommended for? For most people know, because they got to get their stuff together and get their cashflow bucket filled today.
Then when you’re already cash laying 10, $20,000, then Danielle do your backdoor Roths after that people do it all backwards. It’s your scene. So you have the general idea and it sounds like you have a pretty good understanding of, leaking things out. If that would be the conservative way of doing it, if you want it to be a lot work or.
You take it out two times as fast and you start to supplement with some some other more exotic tax strategies and stuff like that. Like land conservation, easements, that type of stuff. Then I, I think at that point it probably makes more sense to join the family office group, talk to other doctors, doing that type of stuff.
See who, with operators that they’ve been working with that, at that point, we’re going to save you 10 times as much as your initiation before a group like that. But again, that’s not for everybody, right? I think you have a pretty dang good like conservative middle of the past strategy right here that you could probably implement, but if you want it to be optimized that’s the way you go to, and then you can unlock all this money and get it deployed right away before the great recession happens, I do have a question about the infinite banking concept, which I know you’ve mentioned on some of your podcasts, like webinars and stuff. Is that something I should consider with starting one of those policies since I do have so much cash that yeah. And that was the other thing I wanted to, so that’s always people always geek out on infinite banking.
And then if people want to, I would always say check out the free, if in a banking e-course we have, you’ve got to sign up a simple passive castro.com/club. Or I think if you go to simple pass to castro.com/banking, you can sign up directly for just that e-course, but it would probably make sense in your position because you have so much that you have that 700,000 just sitting there.
And it sounds like you’re on board to leaking out your retirement accounts quickly. So here’s how I would like mind model this thing out like 28, 22.
So I start to build these like timeline deployment plans and then motto how much liquidity you have. So right now you’re starting with 700 of liquidity. And this let’s just say this line is like how much you’re going to invest. How much money are you going to, you think you’re going to invest in 2022?
I guess it would depend on how comfortable I am findings. Yeah, I’ll say like most people they’ll do at least a hundred, 200,000. Again, I see people do a million the first year, so those are the two ends of the, kick the football. Yeah, I think it will come between anywhere between two to 300, depending, whether that’s $200,000 deals or a few $50,000 deals.
He’s probably a good number to put on that. Yeah. So what I’m doing here is just not figuring out how much liquidity you’re going to be left with. And let’s just say, you go with the same thing in 2023, you’re going to have 200, but you’re also speaking out number were leaking out a hundred thousand each year from IRA.
I think I got my, all my rules messed up here, but I see what you’re doing. You’re going to have 300, right? Yeah no. You’re going to have, okay. So the dude that you’re going to start off with four. Yeah. If you have 700 and you invest that, now you go down to five 50. And then you pull out another hundred, but you invest that you basically went down by four by a hundred thousand each year,
or yeah, down one 50 a year, investing two 50 employees, maybe this year, you get really go crazy on this year to go 300, but you’re still, yeah, I like this. I see what you’re doing. This makes a lot of sense. Like then I get more comfort investing in these deals and then what their deals are.
This is why I look, I like working with smart people. You guys catch onto this stuff. It’s still frustrating, but what does that mean? Think my head against the wall. If I can’t, I don’t know a good communicator, but this is what I’m. So you’re going to invest another 300 this year. I actually think what we’ll probably do is an east each year you might even two X, this investment probably was going to happen.
But yeah, I think you’re probably right. Cause I’m really starting to lean into learning more about this and I’m strongly considering joining your mastermind group, but really getting a strong network of like good syndicators and understanding this space more comfortable. Let’s just say let’s just bump it up a little bit.
Three 50. And I think that went to three 50. Let’s just say you do get a little bit more aggressive, like we’re saying, that was 3 50, 4 50. I think that’s how it is. Okay. So you’re going to, you’re going to basically burn through your past liquidity in three or four years. Okay. So what I’m trying to do is I’m trying to motto how much cash liquidity you have and then how much. So it’s two things. My Jew, this is just real general rule for how much money should I put into my infinite banking every year for six to seven years.
So my general rule is take one third of your annual debt. So for you guys are saving a hundred grand a year, so that’s 330,000 or 32 grand every year, but you have a big amount of liquidity, which we’ve modeled on it, estimated this line, what it’s going to be. What I want to do is estimate, I want to utilize this so that by the year, by the middle of the policy, you should be using this up.
Best as you can. So this is really, this is where, I’m just shooting darts out there to the universe a little bit, but my gut tells me that I’d like you to put in at least a hundred grand because that your liquidity is so high. So I would say on the low end, 130 grand every year, 130 grand every year.
Okay. Yeah. But you want to know what I would do? So this is the, this all depends how you create the policies, how much commissions the agent wants to take, right? So you can crank down the commissions, but, and what that does is cranks down the life insurance portion, the 10 to 20% is the best practice.
If you don’t want to gouge their clients with permissions. Which most people do. It’s like a 50, 50 split. The other good benefit to doing that is you don’t have. You may sign up to do a hundred thousand dollars a year, but only $10,000, really what you have to quit in that year. So that’s the beauty of it.
And I, that took me like three years to latch on because out here we’re all, you’re going to be our good as citizens are like if we save with a life insurance company, we’re going to put in 200, should we have to put in that every single year for six years to a total of 600,000.
But in reality, all we have to do is put in 60, maybe a hundred grand and shoot, we fit that in the first year. Yeah. I haven’t been in talks with somebody who does this and it was, I forgot what the once it’s topped up to one 30 or whenever you’re done the policies. Self-sustaining.
Yeah. And as long as you hit that, if it was a 90 10 split with 10% of the it being insurance premiums, once you hit that, you’re good. You don’t have to worry about the policy cannibalize. Or for the longest time I thought oh, you got to put in the whole thing, not necessary. But if it was configured in a jacked up way where it was 50, 50, 50% of it.
So on the 600,000 fully commit policy for six years, a hundred grand every year, you have to put in 300, that’s a bigger nut. You have to keep funding as opposed to 60, the more important number on these is basically what’s the total amount I need to put in to get past the point where it can cannibalize itself, like where the fund is self-sustaining and if I stop funding it I’m okay.
The policy still, right? Ideally you want to create the biggest container size without losing such container. So for you, you could probably, you have, I just add up this line here R. And you’re going to have it. I’m just looking like on average, you’re going to have maybe 50 at time.
Again, this is the low end one 30 every year.
You know what? I would get just get a max 10, $10 million policy. So $10 million is an important number because at that Eagle higher than that, you got to show a whole bunch of BS documentation to get higher than that. And really you don’t really eat more than $10 million because $10 million typically is a payment of 50 K or six or seven years.
I would just again, this is just what I would do, right? This is more of a progressive way of doing it. I would just start off with a 250 K a year. And then you fund that, maybe you. Backdate it, if you’re a, depending when your birth date is and you fund that first two years right away or worse, probably what’s going to happen.
You go to 50 and then you go to 50 and then you start to just fund the insurance premiums from there on out, but you’ve already hit your watch to your minimum lot. So it doesn’t cannibalize in their first year. So good. Yeah. That kind of answers the question that I had just jotted down to ask you, which was like, where am I going to park my money now?
Cause obviously you don’t get anything on savings or CDs. And I had I have to open a bunch of separate bank accounts. I’m not above the FDI seat limit. So I kind this option. If I can, fund those basically double fund and deploy some of that capital that funds taken care of. And then if I put all that money in pretty quickly, then depending on how the policy is written from my.
With anywhere from a month to six, I should be able to start borrowing a decent amount from that policy to put into. You can do it the next week, get the money back out next week. So this is one of them. This is this one’s funny, right? Because it operates like a hilar account. But it’s still like people, even in the mastermind group, they’re oh, I got to pay interest payments to myself.
I don’t want to own, that stresses me out. That’s $400 a month. It’s no, that’s just a mindset thing. You’ve got to get over that. It’s just the way you’re supposed to use this thing. If you put in two 50 and now your cash value goes down to 200, and then you put in the next two 50 the next year, maybe it’s worth for, I don’t know, four 50.
It’s just call it that the next year you, what you want to do is you want to take out that four 50, and put that into deals or crypto. Whatever. I’m assuming you guys have good contacts for these infinite thinking. Yeah. Yeah. Just yeah, go through the e-course and then, I would say just it’s a couple hours for do that.
E-course but it should get you set up and then yeah, we can refer you out from there. What’s your kind of studied up, but they’re commodities, right? They’re all with the big major companies, that’s really what you want. But the question is where are you going to put the money?
And that’s really up to you. You can put it into deals. Some of what some people do is they, I think a mistake that I see, especially for somebody in your cases, like they want to leave their dry powder. And only take out. You don’t have like that, dude. That’s not what this is for. You got to take it all out.
Unless you’re a business owner that needs a lot of dry capital for yourself. 20, 50 grand and checking 50 grand is way more than you need. But 20 grand just to float your monthly expenses every quarter and then maybe 50 grand to leave it in here. So you deploy 400 in this case, that’s really the way you want to play this.
And then if you want to do 300 of that 400 and deals and then a hundred crypto, that’s how you do it. Okay. I didn’t even, I hadn’t even looked at infinite banking for crypto. I was just looking at it for syndication. So that’s good. No, you can use the money to go to Disneyland. You want it to, obviously you’re not going to do that.
People who listen to this podcast, don’t do that stuff. And, or you could use this as a way better than 5 29 plan. Hell of a lot better. I don’t know why anybody does a 5 29. Oh, I even forgot to put that down. We do have 5 29 plans for our kids, but we shut them off, I think six months ago, after listening to your podcasts and other ones, like those have been shut off, they each have 10,000 in it okay.
Yeah. Just shut them off because just, I would just withdraw it just for simplistic music. It’s today I was trying to get rid of my health savings account because I got 15 grand in there, but it’s like what, a pain in the plug to have this thing. And it got a PM through chip bucks every year.
Like really a 2% adds up all the time. Yeah. 300 grand for, do you have any thoughts about the, like the lump sum? What are they called? MEK plans are like for infinite banking, like the life insurance policy where you can do the lump sum. Instead I spoke to somebody the other day and they were like, oh, some of the.
Drawbacks are that? I think it was, if, the distributions were not taxable, I believe, versus in the other one, they are, there was some differences with it, but I had never even heard of the lump sum thing until I spoke to somebody. I don’t know if that’s something we’re going to have to talk to our experts on that one.
That just, there’s all these kinds of other like variable life. That’s, like they miss the point. They’re like don’t you want higher returns, right? No, we want like liquidity so I can go invest it better stuff. I don’t need six, 7%, once your net worth goes over five, 10 million, then you may come back to that type of stuff.
That’s I think when it makes more sense, but there’s a lot of. Shady stuff, especially in the IUL people’s trends stuff, missions on that are extremely high. There’s a lot of like breasts of salespeople running around saying nonsense for that. But some countries companies actually like really aggressive of teaching the agents.
They have this like farm school where they teach people because it’s such like a obscure product with high commissions that it makes sense to just train trainers or just make real estate agent armies. And out there one in a hundred will actually sell a policy, but it’s pretty good commissions for them at the end of the day.
But basic IPC. This is what it’s for. Once you go over 10 million, I think that’s a little overkill, especially because, you want to get this money working at four or 5% tax free. And then another thing to think about is because you’re the only one for your kids now.
I mean it’s, it would probably be prudent, single point of failure at this point. Now that’s true. That is another good benefit of opening up one of these. And that’s it. You guys have, you have a trust build and all that stuff dating? Yeah. I’m in the process. I got to read it. We were in the process of getting it set up and then my wife passed away before all this stuff was notarized and finished.
So it’s a little bit of a mess. So then I was obviously not in the right state of mind for quite a bit. So I’m finally getting my brain back from brain fog and I’m going to start cleaning that up. Yeah. Yeah. I think that’d be a good to talk to other people too. I mean the questions and like what, who watches your kids?
I’m not giving any advice on that and the cyclist. No, I don’t know. I wouldn’t even trust myself with my own kids.
But yeah, it’s, these questions come up. And it’s hard to find other people doing the same thing. Yeah. You technically just listen to your attorney, but I don’t know if that’s super prudent, you need other viewpoints too, but getting back to the numbers here. If you do that large of a policy, once you fund it up to you, you have that 500, 300,000, you’re going to fund it halfway.
That’s well past the point that it’s going to collapse on you, black hole one on you. So you’re good. And what’s potty going to be happening around year three or fours. These deals are going to start to refinance, or it will be full cycle at that point. And I think that’s the point where it’s a kind of a, make it a break.
It’s if you don’t fund the policies anymore. Cool. That’s fine. I think what’s probably gonna happen is you get that windfalls and you’re like, oh yeah, let me just find the policies the remaining of the three years. And now you’re set up. I like it. That makes sense. Cool. Yeah. But bare minimum, one 30 and I think what most people do is like they, they get up small balls.
Like when I first started to do this, I did a $50,000 policy every year for six, seven years. And then it was just cool to use it and be like, oh, this is like a heat lock. Oh, what is that thing on my portal? And saying, I owe $5,000. Oh, that’s just the interest. I don’t care about that because my cool friends actually know about money.
Don’t freak out about it. And then you add a zero on top of it, once you get the hang of it right in a few months, you, you withdraw money, you pay it back. And then some people in the family office group work doing this site, instead of getting the loan from like Ameritas, Penn mutual guardian, they go to a third party bank instead of paying 5%, they pay 3%.
If you’re doing a larger policy, like how you are, like that adds up, 1% on 600 grand adds up.
Yeah that’s the IBC thing for you. And I think, if you want to play it more conservative, only go into a few deals at the minimum on the investing side, I’ll play more rested on this stuff. Okay. That makes sense. Yeah. And I think as far as the investment side, like I’m willing to ramp it up.
Once I feel more confident in how I can bet, sponsors and deals and have a good network of people who have invested as a past and. And then also, like we said, you could really ratchet this up by getting more aggressive on the withdrawals from your IRAs, right? Mitigate the higher income by conservation easements or something like that.
If it’s still around, if you’re willing to, be careful and work with the right people at that, of course it’s on the list of transactions freaked out. I got a Google debt and this is naughty. Oh, I don’t personally do it. Because I’ve gotten to the point where I don’t have active income, it’s all passive.
And that’s where you’re going to get to at some point. But how can we bridge you to that promise land in five to six years when most of your stuff is passive, so it can offset passive losses. Okay. We got a plan on the IRAs a little bit. You’re such, this is a good call. Your situation is confusing and there’s a bunch of things moving around, talked about IBC. Let’s talk about like lifestyle and just cause that may increase your, if you sell that, you’re gonna stay in that house.
You guys live in now or downsides or, but the plan is to try to sell I’m a little bit constrained in that. A lot of our family is close by and they’re the ones helping a lot with the kids now and they’re in a good school system. And so like I can’t just pack up and go wherever. So a little bit constrained in the market where I live.
It’s quite hot, which is a double-edged sword in that I think my house would go pretty quickly for a good amount without having to do a lot of work to get it ready. Then I have to find something to replace it with. But yeah, the ultimate goal is like, our house is a decent sized, a lot of land and just way more work than I need.
And it’s too big for just one adult and two kids. So that’s definitely something that I want to do is downsize get some equity out. And that would also have the function of reducing my payments, monthly mortgage payments. Anyway. Yeah. I would just say from a, you don’t need to downsize, like some people I’m like under half a million dollars net worth, I’m like, you need to do, you’re already behind in the game, right?
You’re already in your forties and fifties, you have to do this stuff, but for you, you can keep living there. That’s cool. Again, they say you never want to listen to the wherever the heck they are, but they say don’t do anything like drastic for the first year or whatever. But I will say that speaking from the experience from some of the other folks who’ve downsized, they’ve gotten away from living in the big house.
And they’ve gone to one of the luxury condo where now they enjoy it because now they’re hanging with their kids. They got the pool, they don’t clean. It’s just simple, simpler, living, less headaches, nothing breaks. So if you’re going to the more simplistic life, that’d probably be the way of doing, that’s not a bad way of doing things.
I actually personally I think I might like the condo life a little bit better, less nonsense. Don’t have to clean my own pool. That’s what I’m looking at a other con condo or townhouse where there’s community pool and they take care of all like yard maintenance. And it’s just, and again, just getting back to the simplifying things like it’s become clear.
Like I don’t need a lot of stuff, but I just want, time with my kids and possessions that I have enjoy and travel and. Yeah, you, in that primary residence you have now you got to worry about half a million of equity in that thing. So we’ll depend on. So we got, it was a 0% down cause we had a physician’s loan, which was nice.
But the, and we only bought it just under six years ago, but the market’s gone up so much that I’ve talked to a couple of different agents and looking online. It would probably be between three 50 to 400, depending on what it sells for is about equity that we would get. So one thing, this is a tax thing, right?
You’re only able to write up like the exempt from what a $4 million of that’s what I thought too, because it’s just me now. But my CPA said within 24 months of my stuff’s passing, I should be able to get the full half a million. So you’re not thinking you’re not maxing that out. Yeah.
Not quite, but yeah. If I stay in this house for another couple of years, then I’ll be above, the half the quarter million max for myself. Cause then it’s going to revert to it’s just me. It would just be the, yeah. Like it kinda has a good tax need, because you have, it’s something I wanted to do actually, even before this happened, I had already been talking about Hey, we should simplify.
So it’s if the right house comes along, that I can get, I think I’m going to do it. And that’s yet another windfall and more cash that I can do. Yeah. Because if you don’t vote before the year two, you’d use that double tax exemption thing. Yeah. For me, I am, I don’t want to push you either way, unless that’s, before I heard that, I’m like, yeah, you got to just move out, move out and buy it back again.
Feel that’s what you want to do. I don’t know if you can do that. It’s not like a wash sale, but. Yeah, no I think it’s a strong possibility. And even where we live it’s a, it’s more of a isolated subdivision and there’s not as many kids around and there’s plenty of neighborhoods where a lot of their friends from school are that would be cheaper and smaller and have a lot of the things we talked about.
So yeah, it’s definitely on my radar. And that would just accelerate what we talked about. Give me more cash to put into these funds. Yeah. But maybe think about it, I think wait until the spring time or summer, that’s when the Marcus pulls the hottest the world doesn’t end before then.
Yeah, no, I got, yeah, I got my I’m like, I’m looking now to potentially hop on something. If somebody putting something on in December or January, but my goal is probably listing my house in the spring. Cause that’s just, it looks the nicest, it’s the hottest market. But it stinks like, fuck Matthew he’d dump out for a hundred grand.
You put it into an even bigger infinite banking follows. Are you just doing the banking right away at 5%? No. 2020 grand a year. It’s a couple of grand, a couple of grand a month. You always want to do this equation and think how does that two grand a month changed my life if you had to use it?
That could be a lot of less home cooked meals eating out less the more time, right? If you can use that $2,000 every month, that is time or for time. That’s money will work. That’s a good move to create that cashflow and that’s everlasting cash. Let’s just not just running through your pile.
That’s how I would look at it. So you get to live in the condo, get the free, free maintenance on the pool. But what are the downsides of that? I don’t know. Is there a downside of. The only downside is less privacy. Like a lot. I have it’s great. Private lot. It’s gorgeous. Like you’re by nature and it’s very private, very nice.
But I think the positives of moving outweigh at though the just simplifying life, getting a bunch of equity out and redeploying it, getting my kids in the neighborhood with a bunch of their friends, I think definitely outweighs the privacy concern. That’s why I asked cause some people, when they talk to the spouse and they’re like what’s the downside if they can’t communicate because there is a, you just don’t want to do it, which is silly.
You’ve obviously been able to voice your concern, just privacy. But so what if you took $2,000 a month and you bought the penthouse instead of the other one, right? You rented the penthouse instead make $2,000 pumps you into much higher or exclusive community. So think about it like that. The term life, you could get that big of a policy.
You don’t have to pay this anymore. So that feeds up.
That’s been done then.
Yeah. Think we covered a lot here. Any, anything else you want to? No, I don’t think so. This is very helpful. Thank you. I’ll play with helpful to people listening and then I will definitely check out that e-course on the infinite bank. Yeah. I think
trying to think what is the first domino that’s got fall here, but either the house, there were three things moving out of the house. I think you can delay that to the spring or summertime. So that’s third on the list. You already have liquidity, so you could have the, and then you don’t have to do the taking out of the retirement accounts quite yet.
It’s a rough situation, but if the banking seems to be the first domino here, which you’re listening on the podcast, that’s typically not it. If you’re screwing around in front of banking stuff, doing and wasting your time, especially your net worth is under a million dollars. You haven’t invested in anything.
Yeah. I agree though, in this case it makes sense. Cause it gives me a little bit of time to deploy some of this extra capital and then I can get spun up on what’s indications. I want to invest in, educate myself. The house can come later in the year and then slowly peeling away. Some of that retirement stuff can start happening at any point in 20, 22.
Once I have a better idea of my adjusted gross income as well, and then decide how much I’m going to pull. Yeah. And I think once you get moving down the road, once you deploy a million, you should be making. A fraction of your salary. And then when you double that, we should be able to start to see the light.
Once you deploy about a million or 2 million, you start, it should start to see the light on when exactly you’re going to wit yeah. That, that dovetails nicely with where I’m at now, again, the place I’m at, it’s a lot of fun to work at. I enjoy it, but I reading the tea leaves, I think four to five, maybe six years at the most actually doing what I’m doing and then be ready to you write out the the startup or five years that, but you don’t want to go back to practice.
I don’t want to do like a typical family practice. Seeing 20 patients a day, every day, that’s too much. They would want to do that, but it’s something like that. It would be part-time or it would be like part-time remote. There’s a lot of, remote providers where you can work anywhere you want in the world and do telehealth.
And I could do that. Part-time and supplement with my past. Pretty much lifestyle. Yeah. Yeah. I think you’ll have enough at that point where you don’t really need to make a hundred, hundred 50,000 a year. Part-time right. Type of thing. Yeah. But I know you’re you being close mode going 70 miles an hour at that point, but then we’ll see in the next several years, we’ll see if you get bored or not.
You want to yeah. That’s the thing, like I, I do like healthcare, it’s fun working in healthcare. The U S healthcare system is so broken. So if there’s cool projects or companies to work on to try to fix stuff like that interests me. But it would be nice to be in the position where I can decide, what’s project or work on.
I want to take on. And if there’s nothing that’s interesting or exciting or what the work I can. Yeah. If you’re the current employer, the startup thing, is it pretty time intensive or is it. It’s hit or miss. It depends. So it’s actually, like some days are less than others. It comes in fits and starts like a typical startup.
So it’s not a lot of patient care for me. I’m doing a lot more project work, data work, and all sorts of things where sometimes a big project comes along and I’m spending a lot of time one week and then the next week it’s relatively slow. That’s awesome. If would you being the primary caregiver, I would manage if you can’t handle it, you need to step back.
You could. Yeah. If you stuff all this money into infinite banking and you get maybe a quarter million, half a million into deals making 10%, you probably have enough to definitely sustain your costs of living. If things get too busy, like I know you have the option.
To do that. Yeah. Right now it’s not too bad. And the good thing is most of the time I actually get to work from home, which is nice. So even though, even if it’s busy, still have the time with the kids. And then a lot of the work I can do at night when the kids are asleep, just the nature of the startup and I’m doing it.
A lot of it’s project work worker, things I can literally do at 10 o’clock at night while they’re asleep, I can just sit there and get my stuff done. So it’s actually not too much of a hassle. And we have a lot of family nearby that spending time with the kids and watch them a lot and hang out with them.
So far, it’s, I think I’m in a good spot, at least for the next couple of years, if things they are you is a family decently well off where you the, you guys have more wealthy folks and the rest of the family is pretty well off. At least the ones close by. So like my mother is about ready to retire.
Like she does pretty well for herself and she’s transitioning, she’s going to probably transition to working. Part-time she’s. My wife’s parents. I’m not super well off, but they’re fine. Like they’re the ones actually in that long-term rental property we have, and they’re paying well below market rates.
That’s when we’re basically it’s cashflow negative. Like we bought the property, they’re paying the HOA and the mortgage it’s cashflow neutral for us, but it’s building up equity and it has them in a nice spot basically under market. So that’s like a win-win what is their long-term like, they’re going to agent place at least for now.
Yeah. They’re healthy enough and doing well enough. I don’t think there’s any imminent plans for them to go to letter like that. And then also my brother-in-law lives close by as well. And he has his own marketing company and does pretty well. Okay. Not, I live in Potts basement, sealer chat. Okay good.
Yeah, because some of the people that, they’re like obviously the most, often their families, so they have to also keep in mind, providing or in a way, thankfully everybody else in the family is fine. Yeah. Everybody got their stuff together, so that’s good. That’s good. But yeah.
Yeah. Yeah. Any, anything else Derek you guys want go over or? No, I don’t think so. I think that was, yeah, very thorough and super helpful. Okay. Thank you. Cool. Yeah, folks, if you guys like this, you guys wanna volunteer the stuff shaped the folks that email team at simple passive cashflow dot.
And if you haven’t yet joined the club, I book your free onboarding call before I start to outsource it out to the team. I won’t go as in-depth into this type of stuff, but we’ll try and knock it on 15 minutes or 20 minutes or so.
What’s up, simple Passage Castro listeners, today we are going to be talking about mortgage loans for some of you guys who have rental properties, the turnkey or even your primary residents. I think recently, or last year we went to 5 0 6 offerings. Therefore, we only allow accredited investors.
So what do you do if your net worth is half a million dollars and. We’ve shut your doors on you. Maybe we’ll do a reggae plus offering in the future that will allow non-accredited investors to come in. But at this point on, don’t hold your breath on that. For more information, go to simple passive cash flow.com/club. And check out the new pet fund there where we’re paying investors, 12 to 13% monthly based on debt, because this is a strange time.
And we’re recording this in January of 2023. And I haven’t talked to Graham in quite some time. I think the last time we saw each other was at a event prior to 2019 and at the time we were still helping out investors pick up turnkey rentals and we had this program called Incubator, which if you are a non-accredited investor and you would like to sign up for the.
We’ll probably just give that to you for free. It was over 20 hours of coaching calls and I enjoyed doing it. Most of our investors are credit investors and have moved on. But we wanted to do this podcast for you guys to just catch everybody up real quickly. If you have rental ties or you are non-accredited investor looking to get a turnkey rental property, going on with the mortgage lending world where the Fed is jacking up interest rates?
As to date, 3% in the last what? Couple quarters, just unprecedented. But Graham, why don’t you introduce yourself and then your partner there, Aaron, and some of the updates ? Thanks, lane. Good to see you again, by the way. Yeah.
It has been since 19, I believe. My name is Graham Pham. I’m with Highlands Residential Mortgage. My production partner, Aaron Stelli, has joined me today and spoke with. I don’t know, 30 days ago or so, I said, Hey let’s talk about what’s going on in the market on the residential side as well as the like you said, the turnkey side, the one to four category.
It’s still a viable category. It’s it is starting off with newbies as you pointed out. And, but you gotta start somewhere, right? And the newbies need to, they. One to 10 properties, then they sell it all, do an exchange, and they graduate into your accredited program is typically how most people that have gr grown their wealth over the years.
It’s a simple graduation into the commercial end. But we wanted to talk a little bit today about, what’s happening with the market. Yeah. The Feds have have done a number on us. They, I’ve known Ohio, I think it’s six or seven increases last year on the Fed rate.
And the fed rate’s a little bit different from the interest rate. It does have a lot to do. With the cost of money and people say the fed rate is at this, but that doesn’t mean the interstate is at that. Okay. But it has pushed our interstates up. We’re probably, like you say, three points higher than where we were probably this time last year.
And has it slowed the. Newbies down. Yeah, because the newbies, they don’t know. Okay. They’re nervous, they’re scared. Plus they came off covid, 2021 with bottom basement pricing on rates and they expect to get that again. That ship sailed. It’s not coming back. Okay. Wall Street, is addressing the whole situation.
Cautiously, if you will. And the reason being is because, back in 17, 18, and 19, we were originating notes at a higher note rate as well. And the guys on Wall Street were buying these mortgage backed securities from FA and Freddy, and they were hoping to keep ’em on their books for a certain period of time, say three to five.
So they can make some money. That’s typically their mo. But what happened on the 17, 18, and 19 notes, it all got refinanced. And so they experienced a thing called E P O, which is early payoff. And the early payoff took the profit right out of the guys on Wall Street, and so they got stoned. They don’t wanna get stung again.
So they know this inflation that we’re dealing with right now is cyclical happened back in the eighties and nineties with Greenspan. Now it’s happening now. So we are eventually going to run into a recession wall, and when that happens, which say six to eight months from now, the rates will come back down and people that are securing loans today will probably come back and do a a refinance.
And what this one is this a 10 year. This is just the interest rates. So yeah, this agreement. Yeah, this is the interest rates. Okay. And then I believe that. All right. I guess Graham, once, don’t you go over like just little education for folks, right? You mentioned it earlier, the fed jacks up rates, right?
The fed rate. But then that doesn’t necessarily mean it impacts these rates. One for one. Maybe explain the disconnect there, just so people can sound cool in front of their friends why they’re not doing the stock market so they can explain it concisely. Or better yet, to their spouse. They don’t spitter and sputter over their words and say, no, you can’t buy a rental property or a syndication deal.
Give them the elegant way of putting it. When we have a fed increase, does it happen? Sometimes it doesn’t. You’re absolutely right. And there’s multiple factors, which I really can’t get into because I’m not an expert in that area. But one of the things I can tell you right now is that we have had an increase in the rates.
We probably topped out pretty well, and I’m trying to th see this chart here. I would say probably September was September, October was our worst month, but it’s been coming down since then and it’s been settling out, which is good. And people go to say, okay. What are investor rates right now on a single family residence?
They could range anywhere from six and a half to 7% right now. And people are going that’s not, that’s not healthy enough to gimme cash flow. That’s true. But as we discussed Lane, they’re, we’re the theory of, marrying the property and dating the rate is where most of these investors are taking a look at.
So I’m gonna buy a property, I’m gonna yield $150 a month cash flow. But six, eight months from now, I’m gonna read Financee saying we’re gonna get that thing more like in $300 of cash flow. But they’re buying these property cuz they’re more readily available out there. and they haven’t been in quite some time.
The inventory’s been very scarce and mostly the term key providers, as you alluded to, they’re doing more new builds because they just are running out of inventory. I don’t have any commercial loans or any syndications going in. I’m not the expert in, I or I stay in my own lane, in my own little box, but I do actually have up to 43 properties right now, and I can certainly exchange ’em all into your program. But, quite frankly I’m pretty satisfied with the cash flows that I’m getting.
But right now, I think my advice to people right now is don’t get scared by these rates. Anything below 7%, it’s a good rate. I’ve said that for years, and it’s true the cost factor sometimes has been higher than what we expected because of the appreciations, but those costs are coming back down, or should I say the prices, those sums are coming back down.
We are now in a full tilt seller’s, or excuse me, buyer’s market, which is good for the investor. If the investor understands that, then they’re gonna take advantage as we have transitioned to this buyer market for several months now keep in mind as a buyer, as you are maybe trying to build your portfolio is now that we are in this buyer’s market, we’ve seen the rise of seller credits coming back. Borrower might not necessarily be happy with their rate at six and a. We’ll get the seller to pay it down to 6%.
We’ve seen that just the seller buying down the rate and forms of points. For the interest rate. We’ve seen seller credits making a comeback the past several months While interest rates are currently nowhere near the lucky area we were at, so to speak, in just the interest rate world during the covid years.
Keep in mind there’s some more negotiating power that just wasn’t there during 18, 19, and 20. So we’ve seen really that kind of turnaround and a lot of times that can make or. That deal for the borrower as well, if you know all about that cash flow sometimes. That’s an excellent point, Aaron and a lot of the providers, the turnkey providers that are starting to retain more of their inventory than they would like simp because they’re the buyers themselves are a little reluctant to start buying. So they’re incentivizing, if you will, and they’re providing points.
And the reason why they’re doing points, not only to help relieve and make the buyer feel better, but where we are in today’s world, reflecting back to my original statement about wall Street recognizes that this thing is cyclical.
They recognize they’re gonna experience an early payoff in the next six, eight months. Consequently, they’re not juicing the rates. Like they have been before. I’ve been at this 25 years, I’ve always had the ability to do par pricing. Par pricing is a zero point loan, which means I don’t charge anything. I don’t give you any credits.
We haven’t seen par pricing probably for six months up until probably the last 30 days. But primarily on a 25% down, but not on a 20% down, you’re still looking at least a point and a half to two points to do a 20% down because the adjustments are more than doubled. The turnkey providers recognize this.
They say, okay, let’s get this buyer incentivized. Let’s just pay for those two points. And in the lending world for Fannie Mae, that is capped at two. You can’t go any more than 2% on Fannie Mae. The commercial world’s completely different. I, Elaine, you can share with me what some of the sellers in the commercial world is doing.
I think a lot of I think in the commercial world might be legging a little bit, right? As you mentioned, you might say you might guys might be calling it a buyer’ss market, which is this. But at this point in the commercial world, the buyers. Not realizing it’s a buyer’s market yet, because, it’s based on net operating income, not just comparable sales.
Like how residential. So I, I think maybe traditionally this has been the, what the case was and, but certainly what it is now, right? Where the commercial world is, just moves a little bit slower and then potentially legs. But going back to the turnkey world, their product is not really a, a home, right?
It’s a turnkey product that provides cash flow and when you add up the tax benefits, mortgage, pay down, appreciation, et cetera, you guys know the website, simple passive cash flow.com/returns where I add up all the stuff on the whiteboard, you’re making like two to three times greater at least than the crummy stock market traditional investments there.
I to backdate some of this stuff when I was buying this stuff prior to 2015, we would be able to cash flow, what, like 400 bucks per property with full expenses. Then that went to 200 bucks in 2019. If you guys, this is all new to you guys and you’re still in the market for turnkeys, make sure you grab the analyzer.
It’s old, but it still works. Simple passive cash flow.com/analyzer. But nowadays, as the price went up, there was negative cash flow, but. As silly as this sounds, it doesn’t really matter. It’s all what’s your other like in a negotiation, what’s your best alternative to negotiated agreement?
Your batna in this case, where else are you gonna put your money? You gonna put in the stock market where you’re gonna lose another 10, 20% this year? Or are you gonna put it into a hard asset, like a semi negative cash flowing property, like a turnkey, or in this case, it makes sense why they throw you points your way to get your cash flow.
So they can get their pricing, run their turnkey operation business. It is what it is, but you as the investor need to make that personal finance decision what you got in your portfolio. And is the turnkey rental or the syndication better than what you got? And that’s the name of the game, in my opinion.
You know you have to analyze the market and then you gotta pick your poison. Okay? Each market has an A, a, B, C, D property, okay? Typically, your A properties are not gonna bring as much cash flow because they’re newer in a better neighborhood, so forth and so on. Whereas the D, c, and D properties are gonna have a little bit better cash flow because they’re a little bit older.
And maybe in a little bit, not so desirable neighborhood, so you can get close to the 1%. And I think we’ve thrown that terminology around for a long time. 1% rule was something that we all lived and breathed for many years up until probably like you say, 19 or 20. And we started losing that 1% because the cost kept going.
Yeah. Then they went to 0.9, and then they stopped doing turnkey rentals in actually decent markets like Atlanta. Maybe you could throw Birmingham in there, which people are probably shaking their head. Birmingham is a decent market, and then I almost fell off my seat the other month when somebody said they were buying rental properties in B.
My goodness. Baltimore is the hood guys like straight up. That’s de class war zone properties, but hey, it makes the 1% real maybe, right? Is it, are those properties hitting 1%? They’re selling out there? No, not quite. It’s very hard to hit 1% of these days. Yeah. If, yeah, if you’ve been to Baltimore, they, they had these houses called row houses and if you’ve driven those neighborhoods, some people that live in a very nice neighborhood, it doesn’t, you don’t count Lane and you’re out in Hawaii people that live in a nice metropolitan area like Dallas or Atlanta, and then they go into Baltimore, sometimes that, can be viewed a little bit negative, but these are older properties.
They’ve been there for very, quite some time. Are they a C and D property? Maybe not. Maybe not so much. It depends. I’m not an expert on Baltimore, but we still have a lot of activity in Baltimore, believe it or not. Yeah, I mean it’s certainly far from the days when I think you. I think you landed on my, one of my properties way back in 2012 or 13 when I was buying that stuff.
And it was a nice, at the time of 70, $80,000 property in Birmingham in a B minus area. Today that would be like 120,000 in a still B area, but that’s just, the best time to buy was yesterday. I think that’s the thing that guess maybe that’s the point we’re trying to push home, right?
If you’re out there doing nothing, You’re just sitting on cash and your net worth is under two to $3 million. You gotta do something with it. Heck, go buy a turnkey rental. Heck, even in Baltimore I guess. But you gotta do something and this is the name of the game is get your money working, get it out of the regular stuff.
But with that I’ll get off my, I’ll get off my soapbox I guess. No. I’m mainly talking to the non-accredited guys cuz you guys gotta do something and you guys, that’s where I hear the most excuses. I’m just gonna sit on my money. It doesn’t cash flow you. No, please do not sit on your money. I’m still actively buying,
from the standpoint of appreciation, depreciation, I don’t think we’ve all caught up on caught up on that number itself. On paper just yet. California and the, new England, New York, and all the East coast. Those don’t really factor in because, those aren’t the markets that you and I are in, like Birmingham or Atlanta or.
Memphis, these type of markets. We haven’t really seen the depreciation yet. Now the appreciation was going up over the last four years, but it’s now starting to level up. We haven’t seen it go down yet. Okay. Will it? Probably, but I don’t think it’s gonna go down a lot, be honest with you. So let’s just say investors have their rental properties, or maybe they’re getting out of like the turnkey.
guess first of all, if you guys are in the investor club maybe we can swing it to another unsophisticated, non-accredited investor. So make a little P d F flyer and maybe we can move it for you if sucker is born another day. But what if you people wanna hold onto those things because sentimental value, whatever.
What are some options that we can do to pull out some of that equity? Because, likely if they’ve held onto the property for a little bit of. The property maybe went up from 90 grand to not 120 grand. They may, and with their 20% down payment, they may be sitting on 50 grand of 40 grand of debt equity there.
What are some options that they can use to, to tap that, that equity? That’s exactly what I’m doing. I’ve got three properties that were new Bill, 17, I think it was 17 when I bought ’em, and they built up probably 70, 80 grand of equity. Another property I have in Dallas, they built up about $170,000 worth of equity.
So am I cashing them out? Absolutely. Taking my money going elsewhere in this case and going back down to Florida. But yeah, you got some some equity there. You could do it one of two ways. You can get a ca a, a cash out refinance, which is what a traditional Fannie Mae loan will do.
And on the single family, you can go up to 75% on the two to four unit, you go to 70%, but you could also get a heli, which is extremely challenging right now. HELOCs are readily available for primary residents, which a lot of people still use, especially on the West coast cause they’ve got so much equity in their primary residence, they’re utilizing the HELOCs.
But what the HELOCs are doing right now, because the primary rate has gone up, the primary rate is sitting at seven and a half, and typically a HELOC is usually prime plus something either a half a point or a point. Now you’re at eight and a half. Or if you do a cash out refinance on a 30 year fixed rate, we’re still in the upper six.
So it’s a much better bet. Even though you’re paying interest only heloc, you still got a much higher rate of interest. Yeah. The nice thing about the HELOC is, you don’t have any costs, but the bad thing is they’ll sandbag you on the valuation. So what that means is maybe your property is worth one 20 and you have 50 grand of equity there.
use their pencil and say, ants worth 1 0 5. And then you’ll walk and be like, all right, I got screwed there. I guess I’ll take it. But you’re not gonna be able to squeeze the towel and get all the equity unless like you said you refinance it. There. But that’s why we say, try and get HeLOCK first.
If this is all new to you guys, get it rolling. Get the money, put, get into something by rental properties syndication to you, or make 12% in the pet fund. Something like that. Get it going. And then once you’ve tapped that initial equity tranche, then you gotta get at more of it, get the refinance.
But let’s just say some, I invest, some of my investors grammar are semi-active investors. They do syndication deals and they may go after some of that burr stuff. And what’s, what are like, you guys have this kind of three year. State the rate program or something like that.
Maybe it’s quick bit about this thing. We actually do if you originate alone, say in the next six months with us and at an elevated rate. Cause we don’t know what tomorrow’s gonna bring and it has come down a bit. But we know once it hits the recession law, it’s gonna come down even more.
We recognize that. So we want to keep activity going in the investment community. So buy the rate, buy their house today, marry the property date, the rate, because in 6, 8, 10 months down the road, the rates are gonna be decked back down. Give me a call, we’ll refinance it. We won’t charge you any closing costs, and you get your cash flow more in line.
So that’s something we’re doing for a lot of our investors. And is that Fannie Mae, Freddie Mac loan? And who backs that? Is it like a rate cap insurance company? And I guess for your listeners, for new guys ear mouse on this is more technical stuff. Not super important. Just my, I’m just I’m just wondering.
No we strictly do Fannie Mae loans. We do some D S C R lending, but the rate is much higher. The D S C R lending back in March of 2000. Okay. That’s when everybody said, okay, COVID, it’s here to stay. And everybody left the playing field. Jumbo commercial. D s, DSCR R, everybody left the playing field except for Fannie Mae.
For about six, eight months and you probably recall this lane and then eventually stay started coming back on the playing field. We’re starting to feel a little bit of that right now. Some of the capital markets are starting to get a little bit nervous, and I say some of the capital markets non Fannie made Freddie Mac, which are government backed, are starting to throttle back, which, and I’ve seen companies even go out of business.
We had one that we were doing along with just Monday. Can, the CEO o said, we’re not taking any more loans, and they were doing, gosh, billions of dollars of loans a year and they just decided to stop, for whatever various reasons. So it’s a kind of a fickle market right now and some of that will probably affect, some of the commercial lending as well on your side.
Whether it’s got to you at this point, I don’t know. But the D S C R lending stuff is, they’re starting to get nervous. They really. Yeah, so it, it seems to act really similar to like, when we go into one of these, if we do a bridge note, lot of times we’ll buy a rate cap, right?
To combo that little bit more risky strategy so that, say we buy a rate cap of, we don’t want the interest rate to go up more than 2%. Which could protect us in this environment where it goes up 3%. And with, lot of that, if my understanding it’s like third party insurance companies will ensure the lender.
So it’s not the lender putting up the money. I’m wondering is that kind of the same thing going on because it, it seems a good deal for the consumer, risky for your guys’ end because everybody’s betting on the Fed raising a couple of times this next year, like a 0.5 and a 0.5 again, and that means interest rates will grow up.
So that I’m sure you’ve built in some buffer into this three year date program, but Is there like a third party insurance company ensuring the rate jump or no the program itself is an internal program. Okay. We’re willing to take on the expense, if you will, and because our closing costs are nominal.
There are three. $1,300. We’re gonna waive those closing costs to get you back into a better rate. Okay. We don’t have, all of ours are government backed. They’re not insurance backed. That’s mainly primarily for the commercial market. Fannie. Like I say, we were, Fannie Mae was the only people left standing for six months back in 2020.
That’s the only people that were doing loans. And then they, and that started to turn back around and all the, everybody jumped back in the playing field. But no, we’re not insurance backed. Okay. Okay. So ensuring it in-house is what I’m hearing. And if interest rates jump another 2% and people actually call you guys on it and refinance or change it.
Then I guess you’re just working for free, right? ? You just originate a loan for free. Everything has a cost. Yeah. And we’re gonna try to minimize that cost as much as we possibly can. We still want to help out the consumer. I and as far as your prediction on increasing the rates, I have a strong suspicion that the economy is starting to slow.
And we’re seeing those effects in the race. Cause they have come down a little bit since probably November. And which is good. And how long will they sustain there? It’s a great question, but a lot of good numbers. A lot of good data’s coming in. C P I numbers have been good. G D P numbers have been good and we just hope that’s gonna sustain itself, so we won’t have to do any more Ray hikes.
Once again, I’m not running the administration. Yeah, I’d like to see what’s in your crystal ball. The way I see it, the data is saying that we’ve come up the high of 9.1% inflation. We’re now dancing in like the six and a half range. The stuff they’ve been doing, onslaught rates has been working.
Not to say it can’t jump up for a month here or there, or even come down even quicker. To me unemployment is still unimpacted at 3.5. That’s super, super low. So there’s some B dry powder there, but I think once we get under 5%, that might be a trigger for the Fed to really ease up on the rate hikes and I agree.
I just hope it doesn’t get that far. I really do. I think the next 30 to 45 days is gonna be interesting. I think they meet, I think Powell’s supposed to talk on Friday of this week or next week. I can’t remember to give a recap, if you will, of where his agendas are, and I’m hoping it’s gonna be positive or he’s gonna say, okay I’m feeling comfortable with the economy right now, but once again, we’ll have to wait and see what he says.
Yeah, I’ve got a lot of properties waiting to refinance and, So I’m chopping at the bit. I’m just maybe a little bit more pessimistic. Like I think we’ll hover around this 5% mark and we’ll it’ll just be in the doldrums a little bit, at least, that’s what I’m pessimistically thinking.
It’ll be like this for another six months to maybe a year, unless the, I don’t know when the next election is. Maybe the Congress will get pissed off and tell the Fed that you guys need to stop screwing around with the rates and lower it again. This not a politics. Yeah. Yeah. This is not a politics show.
Yeah. . Yeah. No, I think if we hold on for the next six months, I think we’ll start seeing a lot better improvement. Yeah. The next six months is gonna be challenging. One topic that comes up a lot from my investors, and I’m not a huge fan of is all in one loans. You wanna define that and maybe let’s talk through some of the pros and cons a little.
As I mentioned to you earlier we have that available. I do know it’s a working tool similar to a heloc HELOCs a great instrument. I love it. I ha I’m in, I highly recommend it even on, if you can get one on an investment property, which is challenging, but on, on a rock find, you can use it.
And I use it all the time. You find a property that you didn’t weren’t expecting and you didn’t have the available cash at the time, tap in your helo, go buy the property and then pay it back. So it’s a working instrument that’s very similar to what the all in, what is. Okay? A lot of you can secure a loan on a primary, or excuse me, on an investment property, and let’s just say you, the loan amount is a hundred thousand, but they give you a loan.
Tap, if you will, for 200,000. So you go tap into more equity if you want, or pay it down. Very similar to a heloc. I’m not an expert in that area. It’s a very complicated product. Actually I let my competitors run with that one cuz I stay focused and in my lane on the Fanning and Freddy stuff. But I, in some cases it’s not a benefit to the client.
It’s a very narrow niche. Okay. So I wish I could expand a little bit more cuz I just don’t sell a. Yeah, come on Graham. You’re the mortgage broker. You’re supposed to sell everything, right? No, but yeah, Graham, I’m a mortgage banker, just to let you know. And I, I’ve been, like I say, we did about a hundred loans last year and all are Fannie Freddy.
Okay. So that’s hundred month last year, Graham, you what? I said a hundred a month last year. Not total. Yeah, I’m sorry. Sorry. A hundred a month. Correct. Yeah, so here’s my two bits folks. Like the reason it’s not a fanny Freddie Mac backed loan, which you guys don’t really care about on the interest side, on the insurance side, on the backend, if that’s just who holds it.
But what that means for you is the terms aren’t as good and what terms mean are rate and other like loan of value essentially in the residential world. But a consumer, it’s not really the best option because again, the terms aren’t as. When you have a, one-off loan to a one-off tie to a one-off asset like a Fannie Mae, Freddie Mac.
And what I see is it’s one of those sucker products that mortgage brokers have. That kind of, all right, my client is super confused. They don’t know what to do. It’s hard for them to do paperwork cuz it’s face is a pain in the. And let’s just get ’em into this biggest loan that we have possible.
And just that way I can extract my or mortgage origination fee and get paid so we can all, I can have my salary right. And feed my family. But it may not be the best thing for the investor cuz now you’ve given up your flexibility too, that like selling off one of the properties you can’t do that.
You gotta sell ’em all or it’s really hard to. Create a loan where it’s piece, your ability to sell off individual assets one by one. You’re talking about like a commercial loan with release clauses? Yeah. Yeah. It just never really happens like that. No, unfortunately we don’t do those type of loans.
But I think I’m just, and when you talk about this kind of stuff, it’s almost, it makes me think way back before 2008 when we had the option arm, which was an excellent instrument that was utilized by a lot of investors. But unfortunately it was abused by a lot of brokers. to get people in houses they couldn’t afford.
And that’s, a lot of people blame the option arm cause of the deferred interest and all this. And I think it’s a fabulous product. I’d love, I wish they could bring it back, but unfortunately dod Frank Dak will not let ’em do that. Yeah. Yeah. That and interest only 40, 50 year mortgage. Exactly.
And I think that’s important to know, right? Cuz like a lot of new investors, they freak out and they’re like, oh my God, there’s gonna be a 2008. Like it’s still really hard to get a mortgage. A lot of you guys are accredited investors, multiple six figure salaries, and it’s, you gotta show a lot of legit documentation to get mortgage loans, right?
It’s not the wild West days of pre 2008. Anymore? There’s no liars loan out there anymore. There’s no stated income anymore. The closest we come to a stated income is like a bank statement loan. Show me your bank statements cuz a lot of people, they’ll write off everything they can on their taxes and nu down their net income to nothing where they can’t qualify on a traditional loan.
But, so now we go into a like a bank statement loan, which shows that an incoming cash flow from whatever business they’re doing and shows enough to. A loan, which is called a bank statement loan. And we are doing those. Yeah, I almost lost all my hair with this experience. A few months ago I started to look for a house to live in.
I still rent, right? Cuz here in Hawaii or even in California, it makes, to me, it doesn’t make any sense to rent unless your net worth is two or three times greater than that of your house. They’re better off investing your money or actually growing your net worth. But I, I was like, the prices are lower now.
It’s a buyer’s market like you. Let me zig when everybody’s zagging and buy a freaking house. But then I tried to get like qualified for a mortgage and it was like impossible. First of all my like I don’t pay taxes like cuz my income is nothing. Cuz it’s all passive and I use passive losses is zero it out.
But it like to get it through like a mortgage lender for a primary residence for me. Like it just wasn’t happening. And I just got really frustrated with the whole system. It’s like, how the heck can I not qualify? For mortgage. You actually can on the bank statement loan because you got a lot of incoming cash.
And it’s all evaluated from the bank started to show. Yeah. So we did that. So like the bank, we tried, we went down the route of, I guess this is more for the business owners out there who don’t have clean 10 90 nines or W two s no, W two s, W2 s the cleanest way. So we went down the bank statement.
and they just couldn’t make sense. Like the mortgage broker I was working with was like, I’m like, they got befuddled. Cause I had more than like I got 80 something K one s and like things coming in my bank account and they’re, they were trying to make this like spreadsheet with all 80 something of ’em.
I’m like, are you kidding me? I hope you guys didn’t do this. I hope you sent it overseas for somebody to make a spreadsheet and waste 40 hours on this thing and it. It was a waste of time, cuz we all know what was gonna happen. It wasn’t gonna add up to enough. But then they went down the debt service coverage ratio, like you said, approach.
But we’re not renting it out. Then they went down the 10 99 approach and that didn’t add up. That was close. That was the closest thing. But I noticed at that point I had drifted out into the outskirts of non Fannie Mae, Freddie mc. and I was getting really horrible terms and I’m no dummy.
And I told them, if it’s not a Fannie Mae, Freddie Mac I’m, I don’t wanna pay these like semi usy rates. So I told ’em like, all right, I give up. I’m just gonna buy cash with this thing when the time comes. And then when I talk about in my next book, for you guys who are higher net worth the ticket for hot multimillion dollar homes is you don’t get the mortgage on them cuz you max out at $800 million jumbo loans.
Instead get the debt on your stock market portfolio or your infinite banking, get the loan there. I’m looking at, like with JP Morgan private client, so SFR plus 2%, so right now that’s 6.2%, but in normal times or last several years, that could have been like a 2% three. Mortgage payment, doing that type of stuff.
But if you have some high network clients that are with some of the bigger banks in the private banking world, that a lot of times those those banks, especially if you have a lot of money in their bank, they’re pretty forgiving. They really are. And definitely take advantage of those.
Yeah. What do you say, what’s your take on if a guy’s buying a, I don’t know, three, $4 million house. What is the best solution If he wants to throw on some, any good at real estate investor wants to get some debt and not just have it paid off cash. But what are they just screwed?
Or what’s the best? Now you fall into the jumbo world. And the jumbo world is more critical than the Fannie Mae world, believe it or not. Their debt income ratios are less, their credit scores requirements are a little higher. Their underwrites are a little more challenging. Yeah and those type of worlds, it can be very difficult.
It’s a lot easier in the Fannie Mae world. So when you get in those higher loan they’re very challenging. Most, as most of our stuff and our bread and butter is the turnkey stuff, so a lot of times we don’t play in that category as much. We would like to, but it’s very challenging.
Is jumbo. Jumbo loans, like over eight, 500, 800,000, it varies on the state. Seven. Yeah. 7 26 2 is the latest conforming limit. So 726,000. But depending, especially on the West coast, different counties that does go up. It is a sliding scale but just your standard conforming limit across the US is that 7 26.
For a single family. Median home in Hawaii is like 1.1, I think. , , but So are the jumbo loans, are they all Fannie Mae, Freddie Mac, or are some of ’em Fannie Mae, or are they all non-conforming? All non-conforming. Oh okay. Yeah. Like you say Aaron says that it’s a sliding scale, but the general, as you say, 7 28, 7 20.
Yes. 7 26. 7 26, which is pretty much across the board except for some of the other areas like California. They have a high balance areas. Key West Florida High, very high. One of the things, another strategy that you probably know Keith Wek, he always touts the fact that he bought fourplex with an FHA loan.
And you could actually do that today and you could actually get an FH loan, a loan up too close to a million dollars, which is crazy in some of these markets. Yeah. Great for the non-accredited guys, we’re gonna need like damn near 10 of those fourplexes to make a dip in our.
Good for our kids. I think, to maximize their debt on portfolio yeah, it’s just a bad Yeah. It’s just it’s tough, right? when first word for problems, but I always tell my guys get that money working, right? Even. Yeah. You used to be, you could get a HeLOCK for 4% and then you put it into something making plus 10.
And now the hard thing is as you sat around on your butt, now the helos are what, at 6% or seven, right? Sometimes they’re even seven. The prime is at seven and a half. Yeah. And then whatever add your bank has chose to give you, that’s what you put on top. Yeah. So it’s they’re borrowing at seven and now deals aren’t as strong.
Like the best, the more con, most conservative thing is that we have is the pet fund making 12%. So 12 minus seven, the spread is five. I mean you should still do it, but like that spread is smaller. It takes some more conviction in Kones to do what is financially right. And then here I am now I’m working with this debt service coverage ratio, 10 99 loans and they’re quoting me like nine, 10%.
Yeah. I’m like, I should still listen to this guy Lane who said if as long as the spread is there, just go for it. 12 minus 10. But I just couldn’t do it. Ah, so I, I guess that’s a confession on my part. It was just that I was, I got rate shocked at that 10% level for that type of, and I still had to put 40% down payment for that.
We’ve got one going right now for a guy in Texas and he’s doing a, he is got a million dollar home and he wants to tap into his equity. We’re doing a half a million dollar loan for him. And he’s doing a bank state loan, but he actually ended up with around seven and a half, which is not bad because he was turning down multiple times because he does his income taxes very similar to you, which it doesn’t show any income.
So he got turned down three or four times and so we said, all right, let’s do a bank statement one, which actually makes sense mck, because he had a lot of cash flow coming in, so it the bank statements do work from time to time and so that’s 50, he did what? 50% down payment on that thing or how much down?
We do have a 50% L t V, but I don’t think it’s contingent on the L T V. We could have gone up to 80% if the bank statement income would allowed him to do that. Got it. Got. Yeah, I guess that this is more advanced level stuff, but at, at some point you guys have to figure out where do you apply the debt?
Where is your best source of debt? Is it the home mortgage at 5% to 10%, like Graham stain? Is it in your infinite banking at your, it’s some semi fix that, that one doesn’t fluctuate too much. It’s around five, 6% or your security back line of credit at. 2% to 6% in floating there and you have these three options.
It’s like wildcat football again. . It’s just like when we develop a property, we do develop it. Do we keep it? Do we sell it? , do we refinance it? Do hold it short term? We’ve got three options. And then think that’s what, where people want be getting to at some point. Yeah, anything else Graham, they, for folks still with their turnkey or with their primary residents to get the equity out?
It’s pretty much the, those three loans are still available. And once you do get the equity out and you wanna inva invest and if you still wanna do it, in the turnkey world, this is actually a pretty good time because the inventory’s up, the sellers are starting to see the pressure, and they’re starting to get more concessions.
And even the sell, the sales prices are coming down just a little bit, not much, but and once again, these are for the non-credit guys, not necessarily the type of programs that you solicit. Yeah, and I would kinda piggyback on that, just summarize and, definitely seems like a lingering theme throughout this call has just been that a lot of cases time is the biggest enemy.
And sitting on the sidelines waiting for things to change. And as you do, weigh your options, just keep in mind, like Graham mentioned, Seller credits are out there. Our refinance program where we waive their fees. So there’s tools, there’s benefits out there that can act as that encouragement to help you get off the sideline and keep that ultimate goal of whatever you’re working for.
Keep that in motion. Don’t put it in pause. Yeah. Yeah. I think said, Aaron. I think I definitely put in my propeller hat on this talking about secure back line of credits, et cetera. But yeah you, I. I think, so this is a problem that we have in our mastermind group is like we try to over-optimize things and some of the new people, or especially like the podcast listeners, would probably be in this realm where you hear this stuff and you just are confused and dazed and you don’t do anything.
And it’s like you’re sitting on a couple hundred thousand dollars of debt at lazy equity in your primary residence, or 30, 40 grand in your, one of your turnkey rentals that you need to, get it re-leverage and moving. If that’s you, that’s, we’re talking to you, we’re all looking at you in the YouTube.
I like that term. Lazy equity. I like that. But yeah. Don’t you guys drop your information just in case people wanna rejigger get some cash. Or maybe go buy the dream home that now is the time to buy it. Cause it’s a virus market. Zig, when everybody’s sagging, you can always reach us at 8 5 5 3 2 6 6 8 0 2 or you can hit us at the parham team@highlandsmortgage.com and my, anyone of my teammates will jump on it typically myself.
What’s up folks? On this video, I’m gonna be going over the action plan for your 2023 taxes. I’ve been going over what really moves the needle and what really doesn’t work. I think the stuff that is out there in the mainstream, and this is how I’ve found to lore my adjusted gross income drastically over the.
Just a little bit. No, I’m not a cpa. I’m not a lawyer, but I also don’t have a day job like a lot of those guys, and this is a lot of the stuff that I’ve learned from working with other accredited investors through our business and just through my own travels as an accredited investor and an owner of 8,500 rental properties. Here we go.
The first thing I’d like to just identify, we’re not gonna be talking about the lay mold stuff like the 401ks, the Roth IRAs, even solo 401ks, IRAs, stuff like that. . These are all things that I put in the category of small ball type of tactics, small ball, and if you don’t know baseball, right?
This is all kind of stealing bases. Taking walks, little base hits what I wanna do because my time is short and your time is short, as a higher income earner is. Really focus on the big rocks as opposed to the things that don’t really move the needle. Yeah. At some point, these things, which you maybe should jot down or just check out on the YouTube channel, take a screenshot yourself for later, are things that I call optimizing.
the big rocks out of the way, but just in case you want to know what I’m talking about, and you’re somebody who likes to focus on the small stuff. I personally did at one time myself. Again, that’s putting me money into tax-deferred accounts such as IRAs, solo 401ks, or playing around even Roth IRA accounts.
All that stuff just shifts the taxes around. And if you’ve taken a look at some of my other stuff on my past Podcasts you guys can check that out at simplepassivecasual.com/QRP. I really explained the reasons why. There’s no reason that you should be in any of these kind of so supposedly tax shelter accounts, unless your net worth is, I would say four five plus million net worth.
or you wanna really hold non-real estate assets for some strange reason. The next kind of item here is, timing your game harvesting. If you’ve suffered a loss in crypto, which you probably did in the last couple of years, wouldn’t be a bad idea to sell the assets and buy it right back.
Crypto and taxes are its infancy. There’s not really this like 30 day wash rule that you have with stocks. I guess you can make lemon with lemonade or and get the deduction there. But that’s another. . The other one is, income shifting. , this is the whole paying your kids concept.
The whole idea is, your kids don’t make as much money and you’re in, they’re in a lower tax bracket as you. Therefore, if you throw them a bone, throw ’em like five, six grand. You can shelter some taxes that way at their lower tax rate as opposed to your higher tax break. And again, here’s where I’m talking about like small ball kind of things.
Whoop, they do. If you save 10% on your taxes on that six grand right? Yeah, you’re saving money and I don’t wanna phoo this, but again, these are small ball type of activities.
Even smaller than that, buying things that you may need for your business or your real estate rentals or helping you become a better investor. Maybe an iPhone, maybe a printer, or some iPads, maybe even a watch for all I know, right? The, it has to be reasonable, one part of your business. Running these things to your business is a great way to pay for things that. bought anyway and gotten a sort of discount on it because it was a deduction.
Now when you really add this stuff up, does it really move the needle? No, it doesn’t. And it is this same thing like. Buying a rental property next to you.
Know your relative’s house. Your family’s house. And I always tell people like, yeah, it makes sense, but like really how much money you’re really going to is the delta there? How much money would you go to see grandma’s house? You really spend there to be able to deduct and justify to, I would much rather be in a better location, better submarket, or even a better value idea like a syndication.
Who cares if it’s next to grandma’s? and where you can get the, write off some personal things right there. And this is a another example. Play the big game, the big picture. And this are these small ball activities. The last thing that I think a lot of business owners will do is like a S-Corp strategy where they’re playing these salary dividend split.
As W2 workers are 10 99, most of you guys are getting killed with pseudo faf fica South self-employment taxes which get added on top of your federal and state taxes. But when you have a scor, you’re able to carve off salary portion and then the dividend portion. Then dividend portion is the portion that doesn’t have to be subjected to those extra layer taxes.
Kind of a cool thing. , but again, these are small ball activities. Those extra taxes might mean an extra 10, 15%, but on how much, like a hundred grand. Yeah. I guess that might move the needle. Might move in if your, you’re moving $500,000 in a dividends, but at that point, you’re probably better spent, minding something else or what.
I’m gonna be going into. But I’m gonna be going into really the big things that I focus on my clients. The first one, especially for the high income earners, making over $340,000 is charitable donations.
Yeah, giving us stuff away at a Goodwill, but what I’m really talking about here is land conservation easements. Now, I’m not gonna be going into this particular one because it is a Pandora’s box of really explaining it. What I would recommend is go to my website and signing up at simplepassivecashflow.com/club or you’ll get a lot of free content to learn about these types of more advanced tax tools.
But what I also wanted to really go into was, A lot of this stuff is predicated on managing your adjusted gross income, not just deferring, right? Deferring was part of the last slide where it was small ball activities. What I’m talking about is just lowering your AGI.
Through a couple of ways, which I’m gonna get into here, but if you’re able to lower your adjusted gross income, now you’re able to pay lot less taxes. And the more you lower it, the better it gets. So if you’re making $400,000 and you’re in this 32% tax bracket and we lower it a 200, not only do you shelter that $200,000, don’t pay taxes on it, but it’s at a higher rate, right?
And that’s because our tax system is this progressive tax. What I recommend most of the clients do is really try and get to this red line here that I have shown, and this is a point where the break between the 24 to the 32% range, which is a big gap these days, I’m actually saying, maybe even try get into the $200,000.
A g I range at 22%. Of course, I’m talking for merit follow jointly. The, for the single folks. It’s a little bit different on the left side of this single filer status here. But, this is the concept of this is the big things as opposed to the small things that you should be looking at.
The question is, all right, cool. I get it. And this is the 1 0 1. In fact, this is more like the 2 0 1 tax class. How the heck do I do this right? Easier said than done. Here’s a little bit of review for some people who are brand new at this. . And you guys can check what I’m, I’ve got this diagramed in the right way.
On the left side here, I have ordinary income. Ordinary income, boo bad, ordinary income is like the W2 income or, and even 10 99, it gets hit with all these taxes, your ordinary tax and your FICA social security, about 15% on top of the zero to 37%. . We don’t like this stuff. Why? Because it’s high tax. What we want is on this other side of the fence, which is the passive income.
Passive income is cool, right? Passive, right? But other than the fact it’s from a tax standpoint, it’s actually defined as passive income, which can be offset with passive losses, passive activity, losses, suspended, passive activity, losses. We’re gonna use just the short word as pals, P A L S. Kind is cool, right?
Cuz they are, you’re a pal in this respect because you can use these passive activity losses, which you get from large syndication deals or rental properties. The fact that real estate degrades over time on paper, these are losses that you can take to offset your passive income. And when you are in larger syndication deals that do cost segregation and aggressively right off the.
which is a good thing. You’re often able to take, create a surplus of these losses and show a big red. One of the things that like really boggles my head and my clan’s head is in we try and show this to the banker or the mortgage lender and they look at like your tax profile, and you’re like, but you’re losing money.
Yeah, heck yeah, we’re losing money because all the depreciation and they just don’t get it. And just like how people don’t. Forget the 401ks. Forget the Roth IRAs. Forget the IRAs, right? That’s all deferring. What we’re trying to do is lower our a g I today doing these types of things, so getting back to using passive activity losses to lower our passive income.
Again, that’s zeroing that out. Now we cannot use passive activity losses to offset ordinary income right from our day job or your business because it’s separat. , there’s this red line of do not pass, sir. Now, the only way to get past. , there is a way to use their passive losses off offset your ordinary income.
And we’ve done this many times with clients, a high paid doctor making a million dollars, lowering their income to whatever they want, depending how much passive activity losses they have. They do this with a thing called real estate professional steps. We’ll call it reps for short. Now I’m not gonna get into too much of the detail.
Again, sign up for the club, simple passive cash.com/club. You get the eCourse and also check out the taxPage@simplepassivecash.com slash tax to learn more on how to qualify this and to review what we’re talking about. But in a nutshell, if you are able to qualify for real estate professional status now this kind of red line of demarcation goes away and it’s a bit of a free for.
A good free for all for you because now you’re able to use these losses that you get from the real estate to offset and lower your income. And this is where, a high paid person getting, million dollars of income a year, all ordinary income is able to use the losses from the real estate to lower that to whatever they want.
Now there’s a kind of a overlying portion of this that I think gets lost and this is where I come in, for those of people who, sign up for the club form and we get to know each other, I can help you walk through your personal situation accordingly. And then this is really gets into personal finance, whether rep status makes sense and where you are in terms of ordinary to passive income.
Most people I work with, they have a mostly ordinary income, right? They’re doing it the traditional way. They have traditional investments, stocks, bonds, mutual funds. They don’t really have too much alternative investments and pause there. I don’t know why they call it alternative investments when you know real estate is an alternative investment, but
I don’t know why you would call it alternative when it seems pretty traditional to me anyway, but anyway, that’s the terminology we’re using. It’s an alternative investment and real estate is. Something that per the iris code gives you a lot of losses. Again, pals. Our pals, we like ’em and at this point we’re able to get a lot of these losses to play these different games at our taxes.
But if you look okay, what do I do? Here’s what I’m saying, you gotta move away from the traditional investments because that stuff is portfolio income there and there’s no losses. You can’t do anything. And this is exactly what the government or society. , they want people to stay in that garbage so that they pay a lot of taxes.
And oh, by the way, the big brokerage fees are killing you in this process. , when I owned a rental property, I was making like two, three times better than what I was in the stock market. If you don’t believe me, check out an old video I did at simple passive cash flow.com/returns. I go through the numbers and show you exactly, the returns on an investment so you know how you’re making money through cash flow appreciation, the tenants are paying down your mortgage, and that these tax benefits all combined two to three times greater than what I was getting in that 401k nonsense.
But until you start to see this stuff for yourself, you don’t really get it. Hopefully you got from this video, you know this other alternative goal, which is forget about deferring with all the traditional stuff. Get into alternative investments so you can get these losses and over time your passive income will grow also, but also grow as a percentage in terms of.
In comparison to ordinary income because once that happens, now you don’t need that real estate professional status tag, right? If all your income was passive, which is personally where I’m at and a lot of my clients at who invest quite a bit, right? They have a lot of assets real estate assets that proves to a lot of passive income, and especially when they leave their day job, most of their income is passive income and they don’t need rep.
To offset that if they have the passive activity losses. So it becomes this kind of strange paradigm as you move through this financial journey the right way, in my opinion. Picking up alternative investments for the passive losses and then you start to get from, you start to get away from ordinary income and go to passive.
It almost is like you’re. Running paying a lot less taxes, a lot more like cleaner, a lot more efficient way of doing this. And that’s just it just makes so much sense once you understand this whole paradigm
And this is my bucket system that I talk a lot about people, the people ask should I do a Roth theory and Ira solo 401k? To me it doesn’t really make sense until you have today’s cashflow. Figure it out. And what is today’s cashflow bucket? What’s this whole bucket system?
I talk about a lot about my clients. The whole bucket system is. Imagine three buckets. The first bucket is get yours today, right? And I define this as 10 to 15, maybe in $50,000 of passive income a month. Typically that’s gonna be anywhere from three to 5 million net worth. Accumulate that much, and at least that much assets to produce that for you so that you’re living on good life.
That’s a great life. And at that point, you can’t really spend. At that point, that bucket fills up and it’s then the overflow spills into that next bucket, and here’s where you start to fund those self-directed IRA accounts, the solo 401ks, that type of stuff. But if you notice the way conventional financial dogma is structured, , it’s, they say to fill up this stuff first, and to me it’s completely backwards.
And the sad part that I see is that people never get to filling up their today cashflow bucket and they have to keep working. Maybe that’s how they created it so that we all keep working maybe, but, , you know that at that point, once that bucket gets filled, then you start to fill up nonprofits and make me make a mini foundation.
But most people don’t get there. And I think that would, at that point, you would probably have to come out to an event, learn the insider secrets at that point. But for now, just, in a quick YouTube video, just understand, create your cashflow bucket today outside of the tax.
Vehicles so you can get the losses. So you can use these losses to offset your taxes to date, and that’s how you’re gonna have more money to invest. Do other accredited investor banking. That’s another tactic that we have and that’s also in the e-course that you guys can get at simplepassivecash.com/club signup there for free.
What’s up folks? Now on today’s video podcast, wherever you’re watching this a little bit of a confession. So I guess the story starts off, was talking to one of my buddies and we’re talking about another guy who, we always talk about some of the people that are the next level above us that kind of keep things in perspective and learn what the strategies and the path to follow.
As we’re all on this, road of, leading a private equity front and bringing passive investors along with us like you guys, and. , the story that came up was like, this guy that we’re talking about who was high up there and they just wholesale it commercial property for a $3 million profit and there was no feeling there. When, no feeling there, the guy didn’t really care and he made that confession to my buddy. And we both joked and laughed man, that’s a lot of money, right? To just just show up here in your bank account. And number one, how cool it would be to be there and how messed up it is. But then really started to think to myself and this is what I’m talking about now, which is, at some point, we’re not so far off from that maybe I shouldn’t be putting out this on the internet or out there in the world.
The other day I was investing and the deal cashed out and I got a couple hundred thousand dollars just dropped into my account and I’m like where did this come from? I knew I’m not super oblivious, but it’s hard when you have 80 to a hundred, K one s and different things I’m in and I’m I can remember not too long ago when.
Getting, $20,000, $15,000 from that one deal. I did, meant a lot. And it was, we would celebrate and, it was a big thing. I would actually. Just you’re taking a vacation, you anticipate the buildup prior to that and it’s and then you see it drop in your account.
In this case, I don’t even remember the damn thing was coming and I just came and went and I actually forgot about until, again, me and my buddy were talking about the story and I started to self reflect And I can even think a little bit before that, right? I think a lot of investors, are in these shoes right now where you’re going to your work every day.
And I’m wearing like my, my prisoner wine shirt, , outta respect, because I was there one time too, right? I would save my money and, every month they would go up maybe a few thousand, $5,000 a month, and at the end of the year, I would have enough money for, I, when I first started a turnkey rental, which I don’t know why any credit investor would own those things.
That’s eventually was became, $50,000 minimum to go into a deal and then eventually, was the seed money as earnest money into my larger commercial assets as a general partner. Like that money would build up slowly over time. And this is why today I, I don’t.
Feel that taking lightly, taking money from investors. Cuz I know 50, a hundred thousand dollars for most people, even for a lot of our accredit investors, that’s the lifeblood of one year. That’s the heart, sweat, and tear of 360 something days out of the year where you’re saving money and yeah, you’re buying things here, there creating experiences, but You know that, that money that kind of builds up and, within our family office group, I can reflect having these discussions where, now we’re writing these checks of a hundred, 150,000 into this deal. That deal, it, it seems a little bit like monopoly play money a little bit. And we always talk about how is it.
We knew the value of the dollar, but it’s hard for the kids to pick up on the real value of it. But, I guess that’s another topic to be discussed in the future. But I guess what I’m saying is money when you start to extend on that hockey stick, you start to become really desensitized to it.
And, it makes me a little sad in a bit like, the happiest times for me was when, that deal panned out and we, I got this big lump sum of money and I would, open up a hundred dollars bottle of wine. Maybe today I’ve got a couple of $250 bottles of wine. Like I got the Caymus special re reserve and I’ve got.
Stag sleep Cast 23, which I haven’t drunken those yet. I don’t think I’ve drank more than $300 bottle of wine yet. I have ’em, but at this point, when a deal goes full cycle, that’s what, I just do a hundred dollars bottle. You, it’s my limit. But like I can see I guess wine is a great example of something that.
It builds and builds something that yeah, you pay for value, but at some point you have that diminishing returns concept coming up and it keeps going and going and it is just from a dollar’s perspective, the price of these extravagant things or lifestyle, it keeps going up and up and maybe that’s a great way to run a business of high net worth people buying these high end things.
But like from the user’s perspective, like I don’t get that, like that jolt. I don’t get. Excitement. The buildup, like I said, with this money dropping in my account haphazardly of course I’m gonna take that money and go put it into my infinite banking, and which you’ll see later on this year, our credit investor banking a little bit different.
Life insured mechanism for cash reserves for myself to, backstop the opportunities that I am going through and dealing with these days. The takeaway. Take your money and hide it from yourself so you don’t spend the damn thing. Because even myself, like a person who has good money, values and systems, I gotta hide it from myself too, no different than anybody else or somebody in the beginning levels of personal finance.
That’s another segue there, but I think it’s the point that I’m trying to make here you’re building up this money and the zeros just keep adding and adding. So I totally understood when, in the story where this guy makes this huge windfall and he doesn’t feel it, and how a sad thing it is, and I don’t have an answer yet.
I just wanted to share this kind of predicament or. Speaking first world problem, of course, but this is, I think where the solution is in the future is, finding things that you know, bring you joy. The smaller things that may or may not cost money. . I think you guys maybe get the gist of what I’m talking about, or, appreciate the small things, appreciate the small wins that are on the way, or at least enjoy this journey despite how many zeros or lack of zeros you have, whether it’s your first deal or I think what I’m speaking to are the people who are in multiple deals, and you’re on the rails in terms of this quicker path to financial freedom.
Better deals in alternative assets that don’t go up and down in the economy. The tax benefits, the infinite banking, when you come, all these three strategies together, you’re on this rail, this railroad that tracks that gets you a lot faster. And at that point I tell a lot of people just relax and enjoy the ride.
You’re on cruise control. You’re on the moving escalator. Yeah, you can go a little bit faster, you’re gonna get there in heck, a lot of less time than you. So otherwise, would you previously thought or much more exceeded your expectations?
There was a comment that kind of, this all came about this morning to me and I wanted to just capture this for you guys. Comment came through on investors said pretty high net worth investor said that you. . People think that when you become wealthy, all your problems just go away.
And I do think that’s true in, as we reflect on what I’ve this kind of what transpired, however, let me look at my response here. Yeah. As p Diddy, puff Daddy, however you call it, mace, Harlem World said More money, more problems. Yes. Different problems. And I guess what I’m talking about essentially here is
desensitization, I dunno if I’m saying that word right, but of desensitization of wins and celebrations along with the way, and if that’s the kind of their point system in life, then what a sad thing that Azure net worth grows that you don’t. The jolt or the joy from these types of events along the timeline.
However, if you are still trying to get on this moving escalator, don’t just think more money, more problems as a poo thing. You guys gotta get more money because one thing I know is. Creates more opportunities and allows you to have the freedom again bold, that word freedom to do what you want, with whom you want, et cetera, et cetera.
And ultimately to free you up to maybe you’re doing this, gonna just do the same damn thing you’re doing now, whether it’s playing doctor or maybe as an engineer in a great part of a team, working for great people, doing some cool stuff that allows you to. without having to worry of, being fired or, having to just go somewhere else and take a cut and pay.
Do it not for the money. . And it also buys not $20 crappy wine. And oh, by the way, we are unrolling out the the new private label. So for those you guys who refer friends and family, that’s gonna be a little perk of that it’s actually like a hundred, $140 bottle that we have for those folks.
So it’s not just a piece of garbage wine. I wouldn’t put that out there and put, wouldn’t put the simple passive cash flow name on it, and it’s gonna be branded under the off market.
We’re talking about more money, more problems still buys you freedom, better options to do what you want, with whom you want, et cetera, et cetera. I think that, something I said before is, money isn’t everything.
but it sure makes a life a lot easier, in certain respect. But there is definitely a diminishing return side, and I definitely see that. There’s articles written about the $75,000 a year rule. Who knows what that is? With inflation, it’s probably like $120,000 right now, but, What I see it as more like I see most of the investors out there, it’s like somewhere around 20 to $40,000 of passive income every month is enough.
Which is why I always say if you backwards engineer it, At that point, four to 5 million net worth is that sweet spot number, which we try and guide, get, guide you guys towards. And if you guys need, have any help with that, that’s what our inner circle community, the fum is all about There.
But anyway, that’s the confession today. Now I might get some hate mail here. If you have any strong opinions on this drop us an email or put a comment into the YouTube channel box. I’ll try to answer it. And if you don’t and you think I’m an a-hole and you know this pompous person with W first world problems, then that’s fine too, but I guess the reason why I wanted to bring this up is, like I help a lot of people who where was I was, buying rental properties, getting, your non-accredited investor status, getting to accredited investor status, and of course our big wheelhouse is get, moving you past that.
and, for the people who are still in the trenches, cuz they still talk to some of you guys from time to time, you guys do join the club. We can’t really work with you. I share like the remote rental e-course and resources that I would do at the time and a lot of this is just.
Staying the course and living time. This is not an altcoin kind of thing. This is not like investing in Tesla that goes up and down. And man, what a life to live if you’re doing that, I think there’s more important things to be stressing about over that ticker or playing the Osage, sticking your head in the ground with that.
But that’s another video of course. Like that. What I see from people, they, a lot of you guys out there, you guys are good, hardworking folks out there and you’re on this path. And especially when you implement all these strategies is like, what I see is relax, chill out.
And I get it where the stress comes from. Until you’re there, you’re still running. and it’s totally a admirable, makes total sense, right? Don’t let the turtle behind you catch up to you the, with the turtles and the hair analogy. But if you’re going to, if they’re not racing the turtle, and it’s just a race with yourself and you’re going to get there and be the winner and beat your alternative self.
Who is investing in stocks, bonds, mutual funds, random cryptos that pop up here or. . And you’re gonna get there in a third of the time, then enjoy the things that are happening today. Maybe you have younger kids. I try to be more and more present. I catch myself too, right? Like I, I’m always working and stuff like that.
But, those are, I think those are the things that, the things that really bring you joy where the, the big windfalls. Yeah. We’ll celebrate it. But I’m telling you, you’ll get desensitized to that and you’re just gonna write another check to invest more and it’s just gonna keep going.
That if you take my experience it’s just a kind of a game of diminishing returns. And there’s something else. I haven’t really figured it out yet. I have a feeling what it is. , there, there has to be something out there that kind of just brings you joy and that you are finally allowed to really focus on.
And I think this is where, you have like monks and like people who are very low net worth that are very happy they figured it out. But again, there has to be a nice little sweet spot in here, right? You can be a millionaire and be very conscious and appreciative of the small things. , but having your net worth keep growing.
And I think that’s the why, the reason you guys listen to this channel and at least that’s my goal and that’s what I’m trying to help you guys. Not only grow your financial wellbeing, but also the other softer side of this is, it’s taking more of a holistic approach. But anyway, if you guys like this type of, UY selfie stuff or you have any other comments, let us. And we will see you guys on the next video.
What is up? Investors Happy 2023 if you haven’t heard of it yet, or you’re still making that mistake of writing in 2022, but here we are, another year, and another new group of folks coming to the retreat. and I am excited. It always we’re getting better and better at getting people over the hump of, investing in alternative investments, getting over that queasy feeling that, taking out debt outta your home and getting your lazy equity outta different places and putting into stuff such as real estate that can power other tax benefits and better returns.
Today we’re gonna be doing a coaching call, and if you guys like these coaching calls, you guys can volunteer for one for yourself in the future. Make sure you join our investor club@sypasocasual.com slash club and email the team and we’ll try and get you lined up if you guys are more than willing to do something like this in the future.
Now as I’ve been getting better and better, I’ve been seeing different case scenarios such as the doctor that we’re having today. And you know what, I wanted to just briefly talk specifically today, and this probably was one of these categories.
A lot of people here are first generation net worth. You weren’t born with money, you weren’t a trust fund kid. Now maybe some of you guys are, and I would probably, I look down our larger investor list. I think more than 800 of you guys. The US said at least $50,000 with us thus far. And I would probably say less than maybe 5% are people who were born with more than a million dollars net worth.
So that means most of you guys out there are folks who’ve saved hard, worked hard, maybe put your money in the four oh places you shouldn’t have. And I think you’re starting to learn what a mistake that was. , it’s all a transition. It’s all part of the journey. And what I’m seeing is, you have to have a high amount of W two or 10 and nine income, or in other words, ordinary income.
And you, if you’re a good investor, maybe you have some stocks, funds, mutual funds, or playing around with that type of stuff, and you have portfolio income. Portfolio income, order income bad, right? Because passive income is what we want, not only for the fact that it’s, it’s passive lay on the beach mailbox money, but more in terms of taxes, right?
Because when you talk about passive income can be offset with passive losses. Pal is what we call for short. The new tax PAL fund that we have coming up which you guys can get access to the info page through the member site is going to give you guys passive losses so you can knock out those passive income and offset that.
Now, for a lot of you guys, especially the people starting out, you have a predominantly majority past. Ordinary income, and you’re trying to get to that point where you can cap more and more of this ordinary income. And if you’re watching the YouTube channel, you’re seeing me put my two hands together and be a big kind of needle showing that the majority is ordinary income.
And over time, as I’m getting my arms, the other way, the needle goes back to more passive income. To a lot of myself and a lot of the higher net worth investors who have gone to many deals and gotten a. Passive income, passive losses, you start to get to a point where most of your income is passive as opposed to ordinary.
And the reason, part of the reason is, or maybe even the biggest reason other than the better returns, but the fact that you can offset the passive income with the passive losses and stay a whole boatload of taxes right there, that you wouldn’t. Able to do and shelter yourself on the ordinary income side.
I’m, we’re all running these synergizing, these ideas are much better in my next book, which is gonna be rolling out, hopefully by the end of this year, where it’s gonna be talking about these, these nuances of really, we’ve, I think in the past book we talked about a lot of these in generalities, but what are like the steps?
And real briefly, I’m gonna be going over this before we go into the coaching call, what I’ve. Putting together here is this idea of there are different use cases here for different people in terms of, a lot of you guys just, depending on if you do income household some people are single and that’s cool, but I would say the majority of our investor group are married with kids and have, small, two large families and with the two people at the house at least I don’t think we have polyamorous folks out there. I’ve never seen people with more than three incomes. Some people joke that their rental properties or their syndications are multiple spouses, but for the most part, there’s two people kind of building widgets, right?
Or in their income. A lot of putting. Putting ordinary income into their income pile, and that’s what you’re gonna need to do, especially when you’re not a trust fund kid. You don’t have a lot of money to begin with. You have to build your net worth to a million, 2 million, and I’m gonna say loosely two and a half million with a range of a million there, because this is the point where you’re building that critical mass.
To be able to get over this hump. And that’s what I see is down. Now, once you get to two, two and a half million, you’re coming downhill and you’re gonna hit that four or 5 million in-Game Mark. But there are few use cases here. A lot of your folks, especially when you and your spouse are making about the same amount as high income earners, it makes more sense for you to both work your day job not do rep status and burn the afterburners, hopefully, and at some point shut it off. And what we call this is , there’s the, I call this like the Ford Raptor, big truck, you gas guzzler kind of snare where you’re working hard, making a whole bunch of ordinary income. You’re still saving it to put to investments and put to the simple passive cash flow cycle.
And, but you are paying a lot in taxes and that’s just how it is. When you have ordinary income, you’re gonna have to pay taxes on it. There’s no way around it. When you have a big truck like that, you are gonna pay a lot of gas. the next stage. On the opposite side of the spectrum is the, I’m not a big fan of Teslas.
I don’t have one, but they’re clean, efficient energy electric. Type of car and it goes fast too, which is cool. And they’re sleek. But in this analogy, what I’m gonna pull from it is it’s like switching over from like this gas going to electric and what that is, it’s like cleaner, efficient, seemingly if you don’t count all that damn coal that battery, the lithium charging up, the lithium battery and all that stuff.
But if you’re just looking from the cart point of view, if you follow me with this kind of loose analogy, is, or at least people who are more experienced, like I said, like myself or people in dozens of deals, most of their income is passive and that way it’s very clean and efficient in terms of taxes that their passive income is essentially wiped out by.
Passive losses or most of it is, and they don’t pay that much in taxes. A lot of folks, who’ve been investing, go look at your 85, 82 form, you probably have more than a quarter million, half a million in passive losses. Some of you guys have a million or few million dollars that spend a passive loss and yeah.
If you got around a lot of the other accredited investors that are doing this too, you probably scratch your head around and you’re wondering, when am I gonna pay any taxes? In fact, and you may. , and that’s the Tesla kind of side of it, which it’s electric now for a lot of you guys.
And this is where it really gets more personal finance. This is the Prius and yeah, of course the Prius is a much Suckier car than the cool Ford Raptor, which I personally own, and a Tesla. But the Prius was the only car that I could think of that, is a hybrid where it uses gas and it also switches to electric.
and this it’s, this is a tough place for a lot of folks. It’s maybe the incomes are disproportionate where you have a guy who makes. Some gal makes 200,000 and their spouse only makes a hundred together. They make a great salary, right? $300,000 a year. But it’s a little bit disproportionate and it makes sense for them to keep working, but maybe one or the two don’t like their job.
And there’s kind of two case scenarios where. Maybe the higher income earning one, the person making $200,000 a year isn’t doesn’t like their job. And ideally they’re the ones that they want to quit or go part-time first and get rep status. Now that is tough because they make more money. and oftentimes what I’ll advise based on their personal situation, this is where, nice to come to retreat, build a relationship, and understand this.
Or you can learn this from your peers, which is why people join the family office group to synergize over these, these bigger concepts or these more, less high level financial topics. It gets into more personal finance. And for these people it may just mean to just suck it.
and you are the breadwinner and you’re just gonna have to keep working even though you don’t like your job more than your spouse. And where it works better is around, for these Prius owners, all these are Prius owners, right in the middle, in this hybrid. They don’t make too much.
But you have the person who doesn’t like their job making a hundred grand a year. Stop working. Go part-time or just quit working at all. Then, your breadwinner can carry your household and this is where I think is a huge improvement in quality of life.
Maybe that person can get rep status and now take down that barrier where you can use your pals, your passive activity losses to offset all your ordinary income. Now you’re seeing why people are diving into our next tax PAL fund and using these things and using a couple synergic strategies. And two, of course consult your own tax attorney, c p a.
If you guys, most people need a new one. 95% of people, I would say, change their CPAs cuz they don’t know. They have, that’s why the CPAs have day jobs. They haven’t figured this stuff out. But if you guys need a referral, let me know. Shoot us an email. This is a beautiful situation.
Right now. The person who doesn’t like their day job doesn’t have to work and they can spend time with, most of you guys do have kids out there, quality of life, right? It’s great. And sure you’re not like burning both ends of the candle. With ordinary income. And if you’re making $300,000, you’re not able to save a hundred grand a year, and it goes down to maybe 50,000 a year, but, We don’t need that much.
My whole simple passive cash flow prerequisite is, being able to save 25, $50,000 a year, that’s really all you need to do. Some of you guys blow that outta water, a hundred, $200,000 a year, that’s great, right? That’s just gonna accelerate you to get there and blast past 5 million, $10 million net worth.
But that’s not needed in this case. Of course there’s, I think, what we might talk about today with our coaching call participants, doctors typically doctors, dentists, or folks at high income earners that make over 300, $400,000 a year by themself. It typically makes most sense for them to just get rid of the spouse’s job and have them do rep status, especially if you’re above that $340,000 a e i for 2023.
So there’s a few Prius scenarios. What I wanted to say was like, every, there’s a few scenarios here. There’s the raptor, there’s the few Prius scenarios, and then there’s a Tesla scenario. And this is why, I think what makes it a little confusing is because you’re getting advice from all kinds of angles, yet, you don’t know who to really trust and you know what’s really for you.
And that’s my kind of, my job is to simplify things. So if this is new to you guys, welcome to the channel. Welcome to the podcast. Join the club. I give everybody kind of a short time to, if I can get in there and just punch you in the right direction.
And, I still do these onboarding calls with you guys. Would like to get, let’s know you guys a little bit and share this with a friend or interact with our community because likely your friends are co coworkers, family not doing any type of this stuff. Join the simple passive cash from a clan.
A simple passive cashflow listeners today, we have a, another coaching call and you guys love these things. You guys eat this up like candy, it’s like financial fans, lawyers call it that. So I have Brian on the line. He is a doctor and he’s been heavily invested in private placements since. So I’ll have Brian tell his story a little bit, but so do other great accredited investors all here.
So enjoy and thanks for jumping on Brian. Yeah, a little background on me. I am a physician and kind of fell into the standard path, what physicians are told to do and channel all of your. All your earnings and into your 401k and get a nice little stash of equities going.
And maybe if you accumulate enough, by the time you’re 60, you can retire. And a couple of years ago I was on vacation in Asia and I discovered that I didn’t want to work. Ideally I wanted to be totally retired by the time I was 55. I was about, I dunno, 47 at the time. And I looked at my portfolio and discovered that.
Pretty much, all of it was equity and bonds and it was yielding about 1%. And I was thinking there’s no way I’m ever going to get to where I want to be with 1% yield on my portfolio. So that’s when I started educating myself on passive investments in alternative investments. And was there some kind of like thing that happened at work or you just had some free time on vacation?
Oh yeah. No, it was just. For the first time, in about five years, I had a nice two week vacation and we decided we were going to go to Asia and we had a lot of downtime and you just, I kinda self-reflect and thought I really liked this relaxing stuff I could get used to this, can turn in my 80 hour work weeks for this.
Certainly. So yeah, I guess that was the epiphany. It’s there’s more to life than slogging in the office, 80 hours a week. And you’re married. You got kids. So I have a long-term partner. I have two kids. Daughter is a freshman in college and son is a sophomore and got divorced about five or let’s see that’s about eight years ago now.
And still so paying some of that off. I have two and a half years left of that. And then it’ll be clear that. So at this point in the game, are you doing. So let’s just paint a story. You, did you buy any rentals? Did you go through that? Yeah, I did. I did. I bought a single family rental on the east coast in 2007 in a nice little seaside town that had a lot of vacationers from Connecticut and New York.
And got it. Ready to roll. In 2008, then you know what happened in the market in 2008 and it lost about half its value. And so that wasn’t the best experience ended up having various tenants. Some were good, some were bad. One of them ended up being a mobster. After finally getting out of that deal after about 10 years and not making any money out of it, I soured beyond to honor the single family thing.
But when did you start to get into the private placements? That syndication 2018 was my first one, actually, maybe 2017 was my first one, but I really started taking the plunge in 2008. Okay. So yeah, the whole 10 year period. You just work the day job and manage your work in the day jobs, shoveling everything I could and to index funds and all that good stuff.
Yeah. That’s unfortunate. What has been a one or two years later, maybe it would be different, right? Yeah, the syndications, thank God because it’s essentially, the value add deals are doing what I would want to do if I was doing it myself, but there’s teams of professionals that are doing it that are actually good at it.
Like I know where my strengths are and being a landlord is definitely not one of them. Yeah, the property manager is definitely not one of them. Yeah. It all comes down to what your highest and best uses. Like you might be at eight out of 10 in terms of being a landlord, which might be a hell of a lot better than the average Joe listening out there.
Who’s a five and a half out of 10, but because you’re a nine and a half doctor making that hourly rate, it just a no-brainer you spend your time on what’s your highest and best uses. And you focus on that. See, we’re also showing on the screen here. If you guys check this out on the YouTube and I would probably suggest handing off to YouTube channel for this one Brian’s got a plethora of different, all kinds of syndications as private places for the, what are you looking like more than a couple of dozen of these things?
I think it’s, I think it’s up to 22. Yeah, very, yes. Investments between 25 to a hundred, $200,000 minimum. Take us through the, like, how did you first discover syndications and what was your kind of first steps? Because this is the hard part, right? Like you hear about this mythical creature called private placements in syndications where there’s value, add there’s cashflow.
You don’t do anything as a passive investor. You don’t get dead in your own name. You don’t get the high liability, which is a huge deal for doctors. And it all sounds amazing, but you’re stepping out into the a bit. How did she step forth into the, yeah, so the, probably the first thing I did is I found a community of people online and they were.
Vetting some investments and I didn’t, I knew nothing, absolutely nothing. I didn’t know it, a debt fund from a, from a syndication from I mean I knew absolutely nothing. And the people in the group said, Hey There was a triple in lease fund, which is basically a fund that takes over the leases for Walgreens and Rite aids and, Michael’s stores and stuff like that.
And you get like a monthly check every month. And that was probably my first. My first swing and I just went, I cause everybody in this community said, oh, it’s great. It’s great. It’s great. And then they said, Hey, this this is a really good sponsor. If you want to get into apartments, I’m like, oh, okay, cool.
Except they’re like stabilized class, a San Diego. Type apartments. And I didn’t know anything about a, B, C any of that at the time. So I just thought, oh yeah, these guys recommend it. That’s good. So I jumped into that and I still have that. And that’s probably been my worst performing investment since I started.
There’s just the cashflow in that thing is like one and a half percent, I think. Yeah. Class a. C class classic in California. Doesn’t cashflow. I saw a deal. I’m not going to say where it is, but it’s near Disneyland. And I felt like I should put in a bunch of grand just so I can write off my trips to Disneyland.
That’s really the only reason why we do pop up meetings when I go to Southern Cal or Cal. So I can write off my personal trips. Know why you’re investing, right? Yeah. But I decided, I didn’t know. I was investing just going through this I got into some more clubs and met some more people, and then I discovered value add, and the numbers of value add, made so much more sense.
It’s okay, you take this property that this mom and pop wants to get rid of for $25 million. And if you can get it up to par, renovate it, get good tenants in, you can make it, just like that. You can force the appreciation. 31 30 $5 million and. Boom. You’ve, you have an instant return right there.
So the numbers of that made sense to me. So it was like, okay, I gotta find some more of these deals. So just some trial and error and found a couple of sponsors that I really like. I’ve been back to do a couple of deals with, and there’ve been some shiny objects in there. I think I’m in like muse of music royalties.
I saw that. Yeah. I wouldn’t recommend that. At least not in a taxable account. There are no tax advantages to music royalties, and that’s been a stinker, but. If my life settlements, if I was going to do that, I want to invest in like specific songs as opposed. I think he did a fun, he did it. Yeah.
Yeah. Yeah. There’s no fun. No, say it all. No final. And it’s pretty funny too. Cause they send you like the list of the sign that they bought rights to. And you’re like, nobody who listens to this crap. It was listening to that. And about 30 years, what do they do? But that’s probably what makes it a good investment, right?
Like you’re not going to like a Beatles song or instinct song, actually, boys SBA class. You’re always going to over pay for that stuff. Like a sexy California class C property. Yeah. Someone told me once that I forget the exact quote, but it was something like, you never want to show off your real estate portfolio at a cocktail party.
Yeah. So just saying that you don’t want it, you don’t want to buy the shiny as class, a assets. You want to buy unloved, class B minus C that you can make into a nice class B. Yeah. But as you can see, what’s happening in this podcast right here, I’m digressing and going down this rabbit hole, that’s like.
Half a percent of your portfolio and it doesn’t mean anything. It doesn’t return it, but that’s all we want to talk about. Don’t do what I did. Okay. So going back, so a lot of the listeners, they jumped into this world and it is very laughable after the fact, that you just jump into stuff off random referrals and recommendations, but it is what it is. That’s what you do. What are some things that you. Thought initially that you later learned to be not. You got. Tiffany, kinda like I said is more of a live where you want to live, but invest where it makes sense, just because, oh, it’d be so nice to live in San Diego, but it doesn’t necessarily mean you want to invest there.
Like you want to invest where the numbers make sense. Like Huntsville, Alabama, do I want to live in Huntsville? I don’t know, but the numbers, if you look at the numbers of Huntsville, Alabama to invest there absolutely totally makes sense. So I think, yeah, definitely look at the numbers more than the emotions of the investments.
That was the, that was a big one. Try to expand your, talk to as many people in your network as possible because you will learn about some stinkers sponsors and you’ll learn about some really good sponsors. And. No, this alternative investment space is all personal connections. You’re not going to be able to go check a Google review on a sponsor.
So it’s all word of mouth from people who’ve been there, done that. And I’ll just say cause it frustrates me. We have people like, I don’t want to do the family office, a Honda mastermind. I want to start investing a little bit. I’m like, dude, you’re the most exposed right now. This is the time to do.
Yeah, but anyway, you get off of that, but yeah, what, most people that don’t have a single friend or family person that invest in this type of stuff, they’re all investing in the wall street garbage. What do you do? Where do you go? I always tell people that, there’s the free stuff, but I always tell people to be very careful about that stuff.
You always got some shady people trying to sell IUL, ELLs and random stuff like that. You gotta be careful. Yeah, absolutely. Absolutely. Yeah I don’t do IUL, but I am a huge fan of the the infinite banking, the cash value life. God, I wish I knew about that about 20 years ago and we are doing that for our community.
You guys can get the free e-course at simple passive cashflow.com/bank. Yeah that’s a game changer right there. The other thing I wanted to tease out of you is, like you mentioned meeting other people, you’re a fun guy, you, a lot of people are very abundance mindset.
Once you find the right people that aren’t the salesmen or the syndicators of the sharks, trying to find those pure passive. Are there some ways that you build those connections? It, was it just an expensive bottle of wine or no, it’s funny you realize that the whole like passive investing space, it’s a pretty, it’s a pretty small club.
And I actually, lane, I, I. Met you through another friend that I knew from another investing club and you spoke at his club and I’m like, oh, this guy lane just got to figure it out. I got to meet this guy. And it’s just, I think it’s just, you can’t. Go in your little shell, it’s find your people.
And then by, by talking to your people and your network, you’ll learn about more people and you talk to them and you’ll, they’ll tell you to talk to some other people and you just keep expanding your horizons there. Yeah, you can’t shell up. You gotta be, you gotta get out there and actually talk to people.
Yeah. I just got off the phone with somebody and I was like, dude, you gotta get out there. If you’re unwilling to meet other people, you’re just going to be stuck. You’re. That lonely guy who has 20 rental properties and he’s cranky all the time. And if the best thing you got is investing in these garbage, private money lending deals, reinvesting in class C paper and no ordinary income.
Exactly. No, like just keep at it, just put yourself out there and it might take a few years, your course is great. Just learn as much as you can. Because no, one’s gonna, you’re going to have to find this stuff out for yourself. No, one’s no, one’s gonna, you’re not going to have a a rep come into your office and say, Hey, look at this, look what I’ve prepared for you here.
It all is, you really got to get under the hood and learn. And I find it interesting. Much more expense, more, it’s more interesting than learning about stocks and PE ratios and book devalues and all that. Yeah.
So last thing I want to tease out of you and then we can go into your overarching questions that I can do to help, you’re a very, you’re not like in the weeds type of person, which is why you’ve actually invested and they’re seeing the good results.
I think that’s the right attitude. You open up a pitch deck. Are you checking your inbox, seeing a bunch of deals? What are like the first couple of things you’re looking at? Just from a real high level? How long do you even look at that deal? So I think number one is the sponsor. What helps is if it’s a sponsor that I’ve invested with before and I trust.
The, you don’t want to read the thing. You got to read a little bit, but for the most part, it’s okay, I know what I’m getting with this deal so I can just skim over it. What have you. Yeah, that’s a tough one. So if it’s say we’re looking at a multifamily deal. First thing I look at is the market, is it a market that I believe in?
Is it, something like a Phoenix or a Dallas or a Huntsville, or is it, San Francisco? It’s do I even want it, do I even want to be in this market? Bird’s eye view look at the market. So I, okay. Is it the market I want to be in? And then I look at what kind of deal is, this is a class, a stabilized asset type deal.
Is it a super heavy value add like C minus they want to bring up to a B, or is it a, somewhere in between? I the kind of, in-between like maybe C plus that they want to bring up to a B minus or a B minus. They want to bring up to a B plus, I think that’s the sweet spot as far as value add.
And I do like value add as opposed to stabilized. I get personally get scared on development deals just because I want to know that the money’s going to come in sooner rather than later. Obviously the returns are bigger. Potentially in the development deals, but I just, my, my sweet spot is the little value add.
So then once I, once I check those boxes, then I look at it and look at the numbers a little more and say, okay they say that they’re projecting 17% IRR and. Do P 2% return on equity and five years and whatnot, how are the numbers going to make that work? So then I look at and you always gotta remember, you can only trust the proforma so much, it’s kinda it’s like doing a medical study.
You can make the data, say whatever you want it to say, again, it goes back to the sponsor. If you know what you’re getting, you can, you can take the numbers a little more seriously than someone you never did, but still. I want to see what they’re planning to do for the value, add what they’re planning to do.
As far as rent increases, how much that’s going to increase each unit, what that’s going to do to the overall value going forward? What the like the debt service coverage ratio is those types of things. Like how many people are. Are, how many tenants can they lose before they can’t pay the mortgage type thing, breakeven point and the break even point and those types of things.
And if it seems like, checks all the boxes and take the next step, talk to the sponsor, see what they’re all about and go from there. Did you do this by syndication? E-course any kind of, there’s such a things in the numbers to look out for. I did. Yep. Yep. I did do it. You have to remind me what, which ones you’re getting at though.
Like the reversion cap rate increases per year, the annual escalators become expensive. Yeah. So rent increases per year. If they’re projecting over 5%, I kinda, have to look a little closer to say really reversion cap rate. Ideally, I’d like to see 1% above where they’re buying it out.
If it’s a super hot market, I may go down it’s maybe 0.7, five. It has to be really compelling if they’re presenting an exit cap rate that’s 0.5 or less. I think that’s bordering on speculation. So yeah, I mean it’s, after you look through, if you just kinda, you get a sense of what you want to see in the big picture and it’s it’s unconscious, you just go, it’s oh yeah, there’s the cap rate.
There’s the excess cap rate and that, comes to practice, I guess you just gotta do a bunch of them. And then you’re like, yeah, that makes sense. Oh, that one smells fishy. Yeah. Yeah. And then you parlay that in meeting other people, talking the story about this type of stuff. Yeah, totally.
Do you like those kinds of, you mentioned you liked those class C plus. Hi cashflow deals. You’d like those kinds of deals that people do in like Memphis. They’re a little bit more higher cashflow. I haven’t done any Memphis yet. I’m looking at one in Indianapolis and again, goes back to my markets.
Like I’m not real sold on Indianapolis for a market, but the cashflow in this one deal looks pretty kid. So looking at the numbers. My, I kinda like to balance my portfolio. Okay. Half of it is more of an appreciation play, like a heavy value add that doesn’t cash flow a lot. And then the other half is the more, we’re looking at cashflow between six and 9% type thing, still safe assets, just a little higher yield.
Yeah. I haven’t done Memphis yet. I just haven’t. I was just curious. I don’t have any good reason why, and I’m open-minded but that’s a good example for folks like, this is where these are the conversations you have. I don’t know when this podcast were released, but we’re having the retreat in January.
Probably have it again the next year, but that’s where you have those evening cocktail discussions, or if you’re not a night person, that’s where you have breakfast. People are encouraged to have informal breakfast as with each other, have these kinds of conversations. And, you just get your mind open to people’s arbitrary.
Here’s what I like to invest in my personal portfolio, whether it’s right or wrong. Just another few point, totally BS. Nobody is writing some stuff, the end of the day you’re picking pick and resources. Exactly.
But what can I do to help Brian? You think you’ve given the folks a lot of good information. Yeah. One of the things look looking at my portfolio is a little more than 50% of it is tied up in a solo 401k. And the problem with that is there’s obviously no depreciation benefits to being in there. The cashflow is, it doesn’t really do much good imprisoned in the solo 401k, and I would like to start getting that out.
And I’m only 50, so it’s nine years before only like saying that, yeah, it’s nine years before I can start doing it without penalty. And I know you’ve walked some people through how they can gradually exit the solo 401k is, or the work 401k is and try to minimize the tax. Getting out of that what’s your, and by the way, like you, I think he did this exactly the right way for your income level.
Whether you did it on purpose or not, but just for a review for some folks, you can guys can go to simple passive cashflow.com/qrp to read about this whole argument. But generally you want to take, not invest in these retirement accounts because you don’t get the passive activity losses to play different games on your tax.
But the only reason why it makes sense is number one, you have to have a high income you’re already in the highest tax bracket, which should Brian is already number two. You have to have a lot in your retirement. What, a lot more than half a million in there. If it’s less just take the sucker out, it’s just going to befuddle and confuse your life, simplify things.
And what Brian did here, because he qualified. He’s in both of those camps, essentially what he did is he played. You put some stuff into these retirement accounts just to delay the taxes cause he’s already in the highest tax bracket once again. So then now there’s a point, here’s a point where he’s already got him proof of concept with these couple dozen deals and he’s looking for more capital to harvest and now’s the time that we can strategically take it out.
So here’s, let’s go to the questions here, Brian. Where approximately is your AGI. So this year, make it up this year. It’s probably going to be a three 50 K, but next year I’m cutting back considerably. So my bet is next year, it’ll be somewhere around 200 to two 50. Perfect. Must’ve been thinking about this.
This is all coming to comment play, right? When you’re in investing this much, you ideas to quit your job at some point, or to titrate down like how you are. So what you’re having is this opportunity where you want to stay below the highest tax bracket. So anything, when you go over three 30, that’s when you’re in the red zone.
So if you go down the 200, you could ideally beak out one 30 every year. Okay, but let’s before we go there you’re married, filing, jointly, actually hit a household. Okay. Okay. Yep. Is your significant other partner? They work in or what’s yeah, she she’s a nurse and we, we have, we’ve lived in the same household for quite a while, like six plus years, but we just said, we’re not getting married ever again.
Yeah. It’s archaic.
yeah. It’s just that just for us, we’re much happier and she keeps her finances under her belt and I keep mine under my belt. Yeah. Some people think marriage is forever. Some people think of it as, Hey, let’s just renegotiate every day. Everyday you, you don’t sell as another day chosen to buy it’s the same for rental properties, of course, which, by the way, I’m selling out my second to the last one.
Very happy. I thought that so in Y in Birmingham, yeah. Yeah. Yeah. Together, you guys make you guys, aren’t going to be doing real estate professional status. Are you guys thought about that? That might be another talk to have down the road is once I’ll be part-time next year.
You know how to go. I guess the question there is how to get reps without being the landlord. You’ve got to talk to the right CPA. Cause I have a bunch of people who are exactly like you, where you have a boatload of investments and I’ve seen it where they work. They’re still full-time jobs and their CPA is yeah, man, I’m just gonna check this box off for you now.
Totally defies all the little rules, but it happens. You can bet your butt, that Donald Trump is checking that box and real smooth. But he’s obviously the president of their freaking United States for as a full-time job plus. But how can the men not check the real estate professional? He’s checking the box.
Yeah. Maybe he should, technically he shouldn’t right. Is what we’re trying to say, but, that’s where you’re going to work with your CPA. In my non-tax legal opinion. You have a lot of stuff. It’s becoming a full-time job. I actually think you have too much stuff. You should probably go down a little bit and bump, bump your minimum investments up.
But that’s another side thing, but I think what you’re doing is very typical for people getting started, right? Like you go into a lot, you’re trying to see which jockeys are gonna invest more heavily on in the future. So this is very typical, but. But yeah, real estate professional status may be going KP on some deals.
Get some of that carried interests in there. As a loan guarantor to that helps to build the optics, but don’t listen to me talk to your CPA but what that will do, that will be a big thing because now you can, instead of just taking. The default I think is to take out that one 30 or so a year.
So stay right around that three 30, I think that’s the default, that’s the prudent thing to do here, but if you want to get a little more, how much do you have in your retirement accounts now? Just say I think it’s around 1.2 million. Yeah. So it’s going to take a lot of years to leak it out.
A pain to do, to do this. It’s going to take you a decade to do. That’s just, this is use that as the bookend, right? I think that’s a no brainer. You want to take it out. You don’t want to leave it to when you retire because your income is probably going to be higher in a decade.
So you want it to get it out now under that three 30 mark or whenever that changes next year and the year prior. So one 30 a year. You’ll get it out in 10 years. What I, if it were me and I was going to be playing it a little bit more aggressively, what I would be doing is I’ll do real estate professional stuff.
You got to jump through the hoops to get that, obviously, maybe I’m sure you have a boatload of passive activity. Losses builds up right on your 80 to 84. Do you know how much? Half a million probably around there. Yeah. And you’re guessing, and you’re a prime example. People always ask the question.
What happens when I exit a deal and I get my $50,000. Dude, you should’ve been like Brian, you should invest in a dozen plus deals. So you have, you’re sitting here and passive activity loss, Nirvana, and you’re untouchable. Yeah, there’s a deal that went full cycle this year and it was a pretty, pretty nice gain. And I’ll be okay, but a lot of the other guys in the deal, they’re like, oh God, I gotta get something before the end of the year. I gotta share this. I gotta buy something. I got buy this.
It’s yeah, it’s funny. We have guys like yourself. This is the one at school. When you come on their cheat and you meet other people like this, but they have a rap sheet of a dozen plus deals.
They have a half, a million million dollars plus a passive activity losses. And they’re like, yeah, man, I haven’t paid like taxes in seven years. I feel like I should, like at some point, I don’t know if I’d ever get to that point, but I’ve definitely paid enough in my first 30th, so years of work.
Yeah. Yeah. But you’re cutting to the point where you technique, especially FICO real estate professional status, you really shouldn’t pay taxes. You shouldn’t need to pay tax. You can, if you want to hold the passive activity losses to the end, but the way my CPA does it is he just burns up my passive activity losses.
So I pay zero taxes. Gotcha. And, you only live once, right? Or may never see the next time. Yeah. Have you ever heard? I was talking with someone and they said, oh one way you can get reps hours is to take over a triple end, lease for a Walgreens or something like that. Have you heard of anyone doing that?
Yeah. So the easy, like low hanging fruit is like a short-term rental. Maybe your spouse enjoys doing that, or maybe you enjoy. I would not recommend buying some crappy class C rentals. That’s like going backwards or like you said, getting a little triple net, but then the problem with that one is big money.
And kinda gotta be, know what you’re doing when you’re doing that type of stuff, but it is relatively easy. That’s it? I don’t do it. I don’t know. I’m just talking about it, but here. Yeah. Those are your three options, but that’s where you talk to other people doing this and similar situations.
It’s I’m working my doctor job on the side. What are you doing to get the rep status? And so 130 K taken out of that a year. So I’ll owe a third of that, which is what about 45? K? Yeah. But what I would recommend is make for you, it makes a lot of sense to make that jump to rep status, especially peak Fisher point depart time.
And especially with, in my opinion, with your rap sheet here, you have a lot of stuff. You might be a passive investor, but the scene is like a full-time job that somehow you can justify. It takes a good amount of work just to stay on top of everything and don’t waste it on just practicing right.
For your CPA now, or that totally. You don’t want to talk to have your CPA talk to them. Of course, that’d be. Oh, no definitely doing 40 hours a week working on that. Yeah, definitely. Yeah. But yeah if you were to do that, maybe I would two X that and take out 200, $300,000 out of there every year, extinguish that with most of your passive losses.
And then now you’re out of, you’ve withdrew the whole thing out in a handful of years instead of a day. I would play it that way. Yeah. I’ll wait and see if the reps happens or I guess when the release happens, one of the other things I’ve been doing, how I’ve been paying my.
Life insurance premium is with the solo art 401k. You’re allowed to take a $50,000 self-directed loan. And so what I’m doing is I’m taking $50,000 out of that, just paying myself back in that. And then when it’s time for the next premium, just taking that loan out again and paying it back. I still have to pay it back, but nice being able to pay yourself back.
And yeah, that’s a nice little hack there. Yeah. But yeah. Just the hard thing is this is an art form. Like we don’t know what’s going to happen with bonus depreciation in a couple of years. It’s supposed to phase down a little bit. In 2024, it’s still going to be fine, but we don’t know if that’s going to get extended.
We don’t know if you can use a hundred percent of your losses to offset your income, but we don’t know if that’ll be Kat, like how like conservation easements are all a gas where it’s your captain, like 30 or 50. We don’t know how the world is going to change it, that type of stuff.
So a lot of this is a risk and uncertainty, which is most people aren’t comfortable with that type of stuff. And it’s not an exact science, but that’s why I would say, like right now, there’s a clear path on how to get it out in a few years with if you’re able to rep status. And I would take it before it closes up.
That said you could sit around for three years and something really video will Wade better could come down the road. But you’ve also missed out on deploying those funds to right now, it makes so much more sense to have that, not locked up in jail, give it so much more flexibility and yeah. And when you crack those open those retirement funds, then you get more passive losses from that.
So it is a multi-gender dimensional. But that’s how I would play it. I would take it now, or in the next few years with rep status, start researching rep status more. And I that’s where I’ve, it’s really suggest meeting other people that are doing the rep status because now you have a specific target, right?
You’re trying to find those right people to high income earner. With disproportionate incomes that were ideal. You’re unusual where you’re the high income earner yet. You’re great. Part time. Normally that doesn’t happen, right? Yeah. Not really other people’s relationships. You just suck it up and go to work. And then the other person takes over their rep status, most cases, but where you do it all, man.
I’m gonna do it all. Yeah. Yeah. Make them make the money and bring it home. Cook the baby. Also do a 750 hours of the side, right? Yeah. It’s all in documentation. Yeah. Yeah. Any other questions you got or anything you want to talk through? I don’t know.
I think you said maybe I’m a little over diversified, but just going forward, what I, what. Bird’s eye view of what I should be focusing on going forward. It’s, I love multifamily, but I think I’m about like 65, 70 5% or, yeah, multifamily. And I’m trying to get in a little bit of self storage here and there, and a little bit of mobile home parks, but I don’t know if there’s any other directions you think I should be looking into.
Yeah. Just the fact that, your percentages, you’re probably a lot better than most people. Again, like most people who are new, they go into all a bunch of stuff like the Las Vegas and Fay, and they just file, they just go into all these random asset classes, in my opinion, that the way to do it is going deep with one asset class, it learn it, learn the people and then branch out.
As you find other passive investors who also investing in self storage deals, office deals. I’ll just say for myself, right? Like I’m an operator of apartments. I know that a thing or two about that. So I would say 80 to 90% of my stuff is apartments. Vast majority. I don’t know exactly. But I, when I go outside of my comfort zone, apartments, office, self storage, mobile home parks, I want to invest with the institutional operators, especially when I’m not controlling my own debt.
No everybody listing here is our passive investors. You guys don’t have the luxury of being, behind the curtain, on the operation side of apartments. So they have take it for what it’s worth. But yeah, when I invest in stuff where I’m an LP, I don’t want to invest with somebody who just did a weekend bootcamp or on their first dozen deals.
I want somebody who’s more institutional, even though I’m willing to give up return. I’m okay. Doubling my money every 10 years instead of every five. Does that make sense? No, that makes sense.
But if you’re a passive investor and you don’t know one from one first of all, you should know you should meet the other people doing it too, but then maybe if that’s the case and it’s all shades of gray to you anyway. Maybe just to diversify or I guess, yeah. You were saying before, do you have any advice, w you wish you could give to your rookie self when you’re just starting doing this and that would be.
No exactly why you are investing in a certain investment. Like when I was doing it before, it was just dartboard, it was like, oh, this looks good. Throw the dart, oh, this looks good. Throw the dart, throw the dark. And now it’s okay here’s what it looks like. And here’s what I need.
And oh, I need some more higher yielding, higher using plays. I need to start looking at some more, some more of those deals or, oh, I just, I need more cash flow from this. Maybe I’ll double down on the ATM investment or, really think about before you, you pull the trigger, what that’s going to do to the portfolio as a whole.
Yeah. Yeah. But I think one thing. That was really good as you got your skin in the game, that we can have conversations, other paths and investors that you’re not just some newbie accredited investor that has invested in check and adds no value. And that’s why I say go learn one thing first. So you can use that as your ticket to get in cahoots with other people.
Totally. I totally agree. Yeah. But know why you’re doing it just don’t do it because everybody else is doing it. That’s the other thing, right? You have a lot of, there’s a lot of like doctor groups or investor groups where they all like group think their way into, oh, this, these guys are good.
These guys are good, but I would never invest in them because you have this thing called sponsor creep. They become more institutions. Yeah, we’ve got people lining up around the block. It’s I think everybody who’s listening who has gone through the single family home, like turnkey circuit, like they know that there’s two or three companies that everybody talks about, but you only buy from them.
If you’re a sucker that wants to pay 10 to $20,000 over market price. Sure. They’re reliable. That’s the way to invest in my opinion. And it goes same for this type of stuff. There’s some people. They can put garbage out. People will invest because they’re more institutional operators.
Any last thoughts or any questions come to mind, Brian? No, this is helpful. And that is a lot of fun. If you guys want to do one of these calls, even if you’re less experience reach out team@simplepassivecashflow.com. And we mentioned the retreat.
We’re not doing like a really open house type of events these days. I think we’ve realized that a lot of people have figured it out that simple passive casual is a bunch of passive investors. So we got a bunch of those, like newbies syndicators poking around and we have enough live investors, like 700, if you guys out there.
So everything is more closed circuit only to passive investors these days. So that’s kinda why things are the way they are. But yeah. Thanks for listening folks. And we’ll catch you guys next time.
Happy new year. If you’re new to our community, we try to educate people on alternative investing strategies for the wealthy. More specifically people that are above a million dollars net worth things are very different the way we do things, but very simple and implementable by the average person.
As I personally found myself, investing in rental properties and then getting to an accredited investor status and beyond, a lot of things that the wealthy do are very common. And we break these things down into three big things, investing in good alternative investments that are backed by real hard assets, such as real estate deals with value add.
Secondly is the tax strategies, in which you get the passive losses. Larger syndication deals. And then the infinite banking strategies, which we’re gonna roll out a new and improved infinite banking product. It’s tinkering with some ideas if some of you guys have had some issues with you needing to set up a plan for 5, 6, 7 years and six of that plan.
We’re gonna be doing a more quick start version of it. So a lot of you guys who have a large lump sum of money, which we’ve found. It’s a majority of investors, right? Cuz they get it from their lazy equity in their heloc, or they have a glut in their qualified retirement plan. Self-directed IRAs qual.
Roth IRAs, et cetera. They have this big lump sum of cash they wanna front load into the internet banking. We’re gonna be starting to roll that out this year. Also, if you wanna learn more about that, go to simple pass the cash flow.com/bank of course, and then sign up for the e-course, which takes most people two to three hours to go through that The other thing I wanna talk about is the, if you guys have heard, like the monthly updates have gone away, we’re not going to be doing those anymore. Instead I’m gonna be breaking down in much shorter weekly episodes of, news that I’m of stumbling upon in some commentary there. As we I’m always looking to change things just like how we always change up the format of the events.
And then the fam how the family office group. Gets together and collaborates. I’m big on being progressive and taking impact taking the the advice from you guys out there, getting feedback. If you guys have any feedback on the show, more than willing to listen. Go to simplepassivecashflow.com/.Question put it in there. If you have any questions or any feedback there, or just email team simple passive cash flow.com and on today’s show, a lot of this is surrounding like, where do you go after retirement? And I, when I’m starting to realize is you need to find that thing that you wanna do for the rest of your life if you have to do it right.
I’ll say it again. Think of what. Would do if you had to do it for the rest of your life. I think traditionally there’s this mindset of, you working to, you’re 65, which is really 75 today cuz nobody can afford it. And then you shut off the engines and you just live off their remains. People are living longer and I think it, what’s more important is to kinda, as Chris Miles says, live your divine genius.
Or as I say, live your EK guy or find more enjoyment in today than to play. This self gratification or delay gratification game. Which I think a lot of us that listen, at least I can speak for myself. I’ve always been, growing up on this idea of , the marshmallow rule where or the marshmallow theory where you know, you, if you don’t take your money yet, have it grow, it’ll be much more later.
But until then you’re starving and you’re living in hustle mentality, hustle zone, and you’re living at a scarcity, not abundance. So it’s a way to eat your cake and have your cake and eat it too. And, being able to have, that passive lifestyle today.
While spending it, enjoying it, but also know you’d be good for the future. A lot of that has to do with, investing in the right deals getting off the Wall Street path taxes legal in front of banking. But I, what I’ve realized, cuz a lot of people in our mastermind group are coming to events, multimillion dollar net worth, if you have only $2 million of net worth and you put it on to the pep fund.
quarter million dollars right there, 25, 20 grand. A passive income every single month, and it just keeps growing and growing. It’s more than inflation at that point. What’s the problem? It’s this mindset of not thinking that you don’t have enough, but to, it’s different when you combo that with, yeah, we did the spreadsheet.
We know what’s gonna happen with your net worth and your passive income. But a lot of this is surrounding like what’s going on with your headspace and getting to this space of abundance, and that’s, we’re talking about today’s podcast. If you guys have any other topics that you guys let me cover, let me know team@simplepassivecashflow.com But enjoy the show. Bye.
Hey, simple passive cashflow listeners to date, we are going to be talking to a retirement expert and talk a lot about the things after over the hump. In case you haven’t noticed, I am people always ask, like, how old are you or I’m Ali, by the time you’re listening to this, I’m 37,
but whenever we do breakout room. So then I split people out or breakout rooms in our family office group, or the virtual events that we do on occasion. I will usually do a session where we split people off of the age, even though I personally feel like whatever age it is, it don’t matter. It’s talking to some of the other day and it said they’re few years from retirement, but they’re broke.
I’m like, dude, you can’t retire yet. Your bro. So I always go into the groups that are in the fifties, sixties groups. They always get a little annoyed when they jump in on their conversations, but I’m always the way I see it. I’m at that age financially where I’m over the hump and gain in a way, but I’m always just peering at what’s next.
What I like about is people don’t give me advice. There are my grandpa or dad or something like that. And that’s where I can really actually just be a fly on the wall, listen to those types of conversations. And this is, I think what today’s podcast is going to be. We have a guest story minster who also is a TEDx speaker.
You can check her content out@revolutionizeretirement.com, but she coaches and advises folks who have in that second half of life. So welcome, Darren. Thanks for coming. Thanks for inviting me. I’m delighted to be here. Yeah. So let’s talk about the, your average client, they come in, what is, some of the motivations are just prime us, the folks coming in.
I would say there there are a number of things. Ages and types of people that come in, some are coming in when they’re younger in their forties, but these, and really want to think about what’s next, with the notion that it’s money, but it’s more than money in terms of how you want to live the next, half of your life and others come in.
In their sixties, seventies, eighties, and beyond sometimes having retired or retired from full-time work and wanting to figure out, like something is missing and they’re not quite sure what it is. And some just want a little, a little, a reality check to make sure they’re, they’re getting the most out of life that they can get.
So I would say I see that kind of a whole gambit of. And I say, this is typically after, I dunno how long you would say like about a year or a few years of some kind of, they get out of a job. You get out of that kind of hustle and bustle. You have financial abundance, and it’s a bit of a transition you’re drinking pina coladas going on trips when you can go on trips and enjoying the good life.
But there is that emptiness that you said, right? Yeah I often, or not often, a lot of times I’ll see people that, they really have so enjoyed the honeymoon stage where some people actually don’t want to work full time, but they really do want to keep working in some way and use their skills in some way.
And maybe don’t need to financially and might volunteer. Or am I still like to earn a little extra money and other people just, as you said, it’s. No after the honeymoon, there really can be that feeling of, what else is there something’s missing. And, and I think COVID has made it a little bit difficult too, in terms of travel.
Although I think, it will be picking up again, hopefully, but that’s been a hope and dream for many people. And it’s had to, for some be put on the back burner because of just the safety issue. Yeah. And, I have still do those reinsure onboarding calls for people who join the online group@simplepassivecashflow.com slash club and something that comes up.
Every other call people are like I want to get the financial independence, but I still want to work. And I always call them out on it. And I’m like, yeah, that’s what you say when your net worth is under $5 million and you don’t have enough money to retire.
But, maybe you can speak a little bit to that, right? Like some people, they still want to feel like they contribute to society in their way. Posse eeky guys a concept. Sure, absolutely. There’s no one retiree. And I think there’s a number of different kinds of motivations that people have. Some people actually love what they’re doing and want to keep doing it, but maybe not working as hard as they’ve been working.
They may want to, if they’re in an industry that they can consultant or work part time or think about, their skills and being able to give back in some ways, for many people, it’s the satisfaction, it’s the connection, the engagement, the purpose, and meaning, the sense of community.
And after a certain point, after a certain amount of money, it may not at all be about the money, but that there’s something about that sense of accomplishment and meaningful relationships that sometimes, motivate people to want to keep working. So it’s not such an unusual kind of thing.
I think what I find is that people, when they get to be 40 and older, that our notions of successes sometimes changed a little or it’s beginning to shift. And I’m not sure we’re ever free from the accolades of people outside, but I think sometimes it begins to shift and it’s more from inside. So if you feel like you’ve really got some good skills and there’s still some fire in your belly to maybe ways you do want to give back, and it’s not such a crazy idea at all, to think about doing Encore work or working in a different way, or even volunteering.
And being more involved in both volunteering, but also philanthropy. Can you talk a little bit about like the differences of, not necessarily earlier 40 years old or posts, but what are some of like the differences of in mindset that is it before 40 or just generalizing of course, folks out there.
It’s is, are you concerned about how much dollars do you have in the bank or how people perceive you in terms of job title? Is that kind of what you’re talking about? I think if we think about it, there are these different phases of life. And people think about them in different ways, but there’s that phase when we really are programmed to be productive, where we do need to earn money to either support ourselves supportive family.
There’s a lot of motivation on why we want to succeed. And often during those years, thirties, forties, fifties, we, it, even if you run your own business and own company, we still tend to be subject to how people think about us. And how we come across to the world. And I do think it does begin to shift as we get older.
As I said, I don’t think it’s ever totally gone. But I think that as we get older, there really is more of a sense of, I know I did a good job and, I feel that even if, maybe I’m not. The kind of accolades that I would wish that I could get. And I do think that begins to shift. I want to do, you mentioned the word transition and I wanted to, if it’s okay with you pick up on that, because I think transition is such an important word and idea for your listeners to think of.
If you think about it, life is just a series of transitions, from going to school, maybe getting married, maybe having a family, getting divorced maybe not being married, but in a relationship retiring. Future plans, if you think about it, all transitions have an end and unknowing and a new beginning and retirement is a transition.
It’s not a destination anymore in the way it used to be. For some, it may still feel that way. But the traditional retirement age of 62 or 65, just doesn’t cut it as much anymore because we’re living so much longer. And many people, get to be 60 to 65 and they say, Ooh, if I’m going to live another 20, 30, 40 years.
Yeah, I want to think about how do I want to live that and be as vital and full and connected and have purpose and meaning and connection as possible. And I think that’s what begins to motivate people at whatever age. And I like the idea that it’s not age per se, but it’s where you are developmentally.
What’s important to you and what’s your goals and dreams and values. Yeah. I Definitely like where we’ve come. I definitely a lot of the gin, I don’t even know what you call these people anymore. C’s are younger than shit. Sees they’re into like Instagram. How many are they comment on care by Instagram at this point?
That’s for older people now, millennials, but they care about like likes or the validation from others. And then I see it from a lot of the younger people just out of college. Now they’re very into what colleges they got into, where they. With the prestige of their company. And then I guess what we’re alluding to is it wears off after some point.
What do you think is the reason why you start to get over that type of stuff or. I think there are a lot of reasons, but I think that there often ends up being a bit of a shift from just doing, to wanting to reflect more and focus a little more on our inner life, our inner soul.
And I do see this happening more and more, and there’s actually a current book that’s come out called from role to shifting from role to soul. And I don’t think it’s like, it doesn’t mean not working in order to get in touch with what’s going on inside because I think it can happen simultaneous.
Like I still work, but I’m aware that I’m time reflecting thinking about what’s important to me. And, I would imagine that a lot of your listeners, at whatever age they are and you can be pretty young starting to be that reflecting on what am I proud of? How do I want to be remembered?
What impact do I have in the world? And I think we all want to be remembered in big and small ways. And I think it’s an opportunity to think about how do I want to live these maybe bonus years of 20, 30, 40, more years past that traditional retirement age, that doesn’t have to be all downhill. But I think when we’re younger to your point, we need to earn a certain amount of money.
But then after a certain amount, it becomes almost a moot point that, added money doesn’t necessarily bring happiness, but how you’re living your life, how you’re connecting with people, how you’re honoring your values. That often is part of what then ends up becoming important internally to you.
And that can happen at any age. But I think as we get older, And there’s less time ahead, just a year wise then, we know when we’re in our twenties or thirties or forties, I think the shift begins to happen where there is this sense of is this all there is who am I? Who do I want to be?
There’s still a life ahead, to really think about, what impact you might want to have. We might still want to accomplish or say, or do. Want to ask you how do you break this down with people when you consult with them in a little bit, but I just wanted to reiterate something you just said there, we’re all looking for kind of impact in some way or form.
And that typically impact means helping other peoples and in your own special way. My pragmatic approaches. You need money to do that. You can’t just money amplifies messages and signals and your impact. You got to make some money first. You gotta put your own oxygen mask on first. Therefore you have to invest and do these things to get yourself to financial independence first.
But that out of the way, like once they people come to that point financially and are able to not have to worry about putting food on the table. Where do you take them from there? What’s the typical path with a client? I actually liked the framework of helping people think about life as a puzzle.
It’s actually part of a title of a book I coauthored called it’s called the couples retirement puzzle. And the reason why I like puzzle is. Our life has a lot of different shapes and segments to it a puzzle. It’s not going to fit together perfectly like a jigsaw puzzle, but different things impact others.
And you’re absolutely right. Finances is a big piece of it. But it’s one piece of it, but it affects so many other things. It can affect our health and wellness. It can affect where we live. It can infect affect our leisure time. It can affect our expectations of other people, our sense of community.
So you’re absolutely right. Finances are really big piece. I think finances and health and wellness are the two biggest pieces. That impact choices that we have in terms of our lifestyle, but there are other things that are important too, which is, what’s important to me. What impact do I want to have?
Do I, and do I want to have an impact? There are some people who, don’t necessarily, I’m not saying, there’s a right way for everybody, but in my experience, many people do you know that there really is this sense. We want to be remembered. In bigger, small ways, it may even be just how we interact with our children or grandchildren if we have the, or nieces or nephews, but a sense that we’ll be remembering.
In some way. And sometimes it’s through work, sometimes it’s through charity giving sometimes volunteer work but I do think that it matters to those people. And I think it can begin at any age, but I think as we get older when we’re, there’s a different, a shift in urgency, I think, when you just realize maybe they’re less years ahead, That we begin to think more about that and pick them up now, what am I proud of?
I went to help people think of what are three to five things that you’re most proud of, that you’ve called up and said, whatever age you are, what makes you proud of it? What were you doing that may help you have an idea of things you want to do going forward? What are your expectations of yourself? What are your expectations of other people?
Whether you’re in a relationship or not, who generally have friends, maybe siblings, family members, somebody that’s important in your life that we want to connect with and talk with. And it could be really nice and sometimes. Yeah. Sometimes not so deep conversations with people because that sense of connection, I think really is important for people too much.
Isolation is not good. We’ve seen that with the pandemic. That really connection is important. Something that else came to bind that all kinds of different time to time when I do my journaling what’s of blue board is, what, if you were going to die in three months or 18 months, Something just long enough where you had some time to plan and execute something of value.
What would you do? Because I think too often we go through life is there’s infinite time. But when you get focused to narrow in, on a narrow timeframe, you get very focused and the noise goes away, all the extra things that don’t matter. Go away. This is another idea for folks up there too, to do that, that’s a terrific, I just really want to support that.
That is such a good question to ask oneself. If you were told by a doctor that you had five years to live, how would you want to live it? What would you want to do? What would you want to say? And then another question that I like is what if you went to the doctor. And you learn, you only had 24 or 48 hours to live.
What would you regret? Not having said or done, because I think that also can mean that you don’t want to wait until then. So that come back to whatever age you are now and think about what’s important to you. What do you want to make sure that you’ve said or done or experienced? So you don’t reach the end with a lot of regrets.
Yeah, that’s a lot better than Brad Pitt showing up as Tyler Dorgan and putting a gun to your head till I got to do something with your life. It can be related to that. Hey, whatever works for you guys out here, you gotta, pay for what you guys get, gang plate phase. But I think this is where you got to get around other people on the same trajectory, because most people don’t really think a lot like this.
Most people are still trying to get to. Level one, retirement, which is sending the bare necessities enough money. But I think this is why we preach a lot of times to build your network with the right people. Because these are the richer conversation, it doesn’t matter how much you’re going to invest in nature.
It doesn’t matter how much you’re going to make an infinite bank. It doesn’t matter how much you’re going to do the right taxes or legal at best practices. But these are the, like the richer conversations that come from the right people, which you’ve cultivated over the years. Or you can find a consultant, right?
That’s I think that’s the way to do things, pay to play for a lot of those types of stuff. To recognize that money is a really big part of it, big part of the puzzle, but it really isn’t everything so that, it is important to think about what other things are important to you.
And you’re absolutely right though that, if you’ve got the financial wherewithal, you’re ahead of the game. A lot of people don’t have that. And so that really is important, but as I’ve seen a lot in my work. No money in and of itself. Doesn’t bring happiness. If you don’t have a network of social support or, people that.
No, that are important to you. I think that, too much, as I said, isolation, can lead to there’s can be some dark sides and some, rabbit holes, you get into retirement too, but there’s no question that, reaching a point, whatever age that you’re financially set, then that’s great.
And and that’s important to think about now. Just as you were saying at the beginning, how do I really want to live the rest of my life? What’s important to me. What if I always wanted to do and never had time for, we talked a little bit about this is the carrot and of the carrot and the stick, which is what do you want to accomplish?
Like you just mentioned, but we also wanted to highlight the regrets. So what were some of the regrets, show me your clients that you’ve gleaned over the years is the most common ones that probably might resonate with the, the average Joe driving around in their car to their, 500th time this year, whatever, and 5,000 more in the future.
No, I’ve heard of lot. Cause I’ve been working 50 plus years now and some of the regrets that I hear is I worked so much. I miss so much of the time of watching my kids. Grow up. And so oftentimes I’ll see people who are older now really devoting a lot more time and energy to both their adult children, but also grandchildren, because that’s often been a regret more for men.
But I think, I hear it more and more from women now, too. Now that women are more in the workforce of just regretting working so much and losing some focus on other things that are important in life. There’s another expression that people say that generally when people on their death bed, they don’t generally say, I wish I had worked more.
No, that sometimes the regrets really are experiences not had or things not say. I think that the not said is a big part of what I hear, where, I can remember being at a number of different conferences and somebody will come up to me and say, that idea, 24 and 48 hours to live.
And what have I not said was more important than what I’ve had I not done. And, a few people said, I realized I don’t have a good relationship with my son and I really want to work on that now. I we’re both alive and well. For summit, it can also be some experience. And I think COVID has made that a little more difficult.
I’m hearing from more and more people who are older saying, really feeling angry that COVID maybe is robbing them of, the last few years healthy time in their life where they’ve still could travel and hoping that they’ll still be able to, and, there are life circumstances like that kind of national collective.
Life quakes Bruce filer is that term, like life quakes. And I really like it that I think the COVID has been a lightweight for many people and it’s disrupting. A lot of opportunities and, for people, some people who are older there may not be the opportunities to still do things.
So you really want to take stock of, what is important to you? What are things you want to learn or do or say, but I think many people it’s the, what they’ve said and wanting to repair relations. Often wanting to, be more in touch with the gratitude for good things, rather than constantly complaining about, what didn’t happen and forgiving oneself, forgiving other people, all of these things I think are important.
And I hear all of these things from people, not wanting to miss the opportunity of letting people know how much they love them or how much they meant to them. So I think, whatever age somebody is. Learning from that. Cause those were the kinds of regrets that I hear a lot from people missed opportunities and sometimes it’s too late if people have already died.
So when, and I liked the notion, that. People die, but relationships live on inside, but the more that you can work things out with people when they’re alive. It’s great, but it’s not too late. Even after people have died. You mentioned doing some journaling. I think journaling is great.
And sometimes even writing the letter to somebody who was important to you, it could be parent teacher. Who isn’t here anymore to really thank them and talk about how they impacted, what, in what ways did they instill, maybe certain values or certain way of working taking that time and thinking about it and sharing it with people, if they’re still around or writing letters, if they’re not any differences between the older than 60 crowd and younger than 50 crowd.
Take a lot of similarities maybe or interesting question. There are some similarities, but I think it hits with more urgency when somebody. But if know, part of it has to do with what the different life experiences have been that we’ve had, there can be younger people that have, just by life circumstances had a lot of trauma in their life or w lost a lot of loved people and, and have been facing.
Issues about life and death at earlier ages. And I think oftentimes when that’s the case, they may feel the urgency in the same way that somebody older has it. But I do think there’s just something, I remember when I was 17, 18, 19, I there’s a tendency to feel invulnerable. We have forever, but when you get to be 60, 70, 80, you don’t have.
And, feel a gratefulness that you’re so alive. And now even with chronic illnesses, terminal illnesses, a positive mindset can really help you. So it’s not just age, but I think there is an urgency that’s a little bit more intense. The older somebody gets of just knowing that, realistically they’ll probably be less years ahead, although something can happen at any point.
But I think, when kids, I think what I see as a shift is that notion of kind of empty nest. If you happen to have children and a lot of your energy has been raising them, then many times when the kids are launched are beginning to be launched, that sometimes can be an age when people begin to start thinking, okay, what about me now?
No. What did I have to put on the back burner that I never had time for? What do I still want to do? Or is it, will there still be time? And, I think that’s soul searching, often if it hasn’t started already may start, then we will have to ask my wife that she always says, I always think about myself for.
But any people do, it’s some people, are good about thinking about themselves. And then the question is, are they able to think about other people too? And many people feel, particularly I think in the last couple of decades, so much energy is on, child-focused.
And, some people feel like they, they lose themselves. But not everybody has children and how we age what’s important to us, what kind of community we develop, it’s, there’s no right way. Any parting thoughts before we wrap up here? When I how can people get ahold of you the best.
My website is revolutionized retirement.com and. People can reach me through that. Where my emails dorian@dorianminster.com. And I, I do have this fourth on the fourth, Tuesday of each month, except December it at noon Eastern time, I have a free webinar, open to professionals in the public, and people can learn about it there.
And you have to sign up each time, week before. And even if you can’t be there live, you get a recording link after the call. But I w I would hope that your listeners will just think about it. You’ve got this really one really precious, important life, and to really think about how do you want to live in.
What do you want to do? And if you’re in a position, as it sounds like so many of your clients are that you’re financially in great shape, it’s wonderful. So now you can really focus on some of these other parts of yourself and think about, how do you want to develop, maybe other parts or how do you want to be remembered and what did you not have time for that you still would like to learn?
All right. Yeah. Thanks for joining us, Darren and folks, if you guys haven’t gotten on the bandwagon and got it out of the retail marketable security stuff out there, that supposedly is only gonna work to have you work for 40, 50, more years, go to simple passive cashflow.com/start, check out all the free educational material we have on there.
If not you can go work at Walmart. It’s a Walmart. We were like, everybody else does and finds a job that they trick themselves into liking because they have to work. Money’s not everything, but it sure makes life a lot easier. Thanks for joining us. See you guys next time. Right?
What’s up, simple passive casual listeners. Now, this is I believe, a second of this series of what do you do for your healthcare once you’ve left your W2 job. We’re gonna be sticking to this podcast and some notes as well as some of the medi-share topics that we talked about at simple passive cash flow.com/health for you guys to review in case you’re one of these lucky people who.
Saved a bunch of money, invested in it the right way, ran your taxes the right way, maybe did a little bit infinite banking too, and have found yourself in this fi, financially independent paradigm where now you don’t have to trade time for your money, and your money just keeps growing and growing.
You can spend it and maybe spend time on finding your icky guy, your divine genius, whatever you wanna call it. . But one of the things that keeps holding you guys all back is like, what do I want? I gotta stay at my job because I got a pension. I guess people don’t have a pension these days, so that’s null and void, they pay for my health coverage.
The truth of it is I’ve started to look at it for myself or, and employees. Is it just, it really doesn’t cost too much. Of course, if you’ve got underlying conditions and stuff like that, it’s gonna cost more. It’s really not that much that you guys shouldn’t be able to save and invest and over more than pay for.
I think for a normal family, anywhere from a thousand to couple thousand dollars a month, which seems like a lot, but. If you just put what is that, what is that? 20 grand a year? And if you have a hundred thousand or a couple hundred thousand dollars making 10%, there you go.
The PEP fund would be a great option, especially whether it’s secured in pre-equity positions that pays 12% a year or 1% every single month. And it’s starting to, gonna start to flow out this month. Like that’s how you build your retirement. In small increments, right?
Like it’s this paradigm of, what do I want? Do I wanna go on a $10,000 vacation every year? Then just get 1,000 thousand dollars and just make 10% off of it. And then now your vacation pays for a year and you can have it again and again every single year. And that’s how you think you need to start building your lifestyle that way.
But he, again, here is the show. It’s not too late to sign up for the retreat. Go to simplepassivecashflow.com/2023 retreat if it’s too late. We’ll see you guys next year. Check out the event pages for future retreats at Simple passive cash flow.com/events. Remember, we only let you guys come to one of those events to check us what we’re all about.
If not, the family office people get upset with . Those are inner circle people. If you guys are net worth above a couple million dollars, or are going to invest at least a quarter million dollars of your family’s wealth into syndications and private placements, I think joining the family office group is a no-brainer.
After all, it’s kind of insurance in a way, investing with the wrong per person. And when you invest in real estate, you don’t really have to worry about the counterparty risks that you have with crypto and all these other things that are happening out there. It’s, you’re investing in real hard assets.
All you got to worry about is investing with the wrong, dishonest people. And I think that’s why a lot of people like working with us cuz we’re transparent, they can meet who we are. We’re just not just. Random Facebook ads or they can do their due diligence on our community. For more of that check out simplepassivecashflow.com/club. Get to know myself and the community. And here is the show.
Hey, simple, passive casual flow listeners. Today, we are gonna be talking about Medicare. If you got older parents or are over older, the age of 65, you’re gonna wanna listen to today’s podcast, but make sure you guys sign up for the who do pipeline club simplepassivecashflow.com/club. And join our Facebook group.
It’s a great way to build relationships there and join our mastermind where we talk about a lot of these sorts of personal types of issues. Every situation is different and especially when you start to wonder what mom and dad are gonna do after they turn the age of 65. And unfortunately, a lot of you guys are what I call the sandwich generation.
You gotta take care of the older generation and the younger generation who can’t do their own stuff. Wanna introduce our guest Daniel Roberts. What’s it gonna do now? It’s going great. How are you today? Lean. Good. Good. So we are talking about Medicare and woo. I think a lot of, we’ve been doing this series on healthcare Medi-Share Medi-Share I’ll put all the show notes here and all the questions, what we’re answering here at simple along with the other goodies I’ve learned about healthcare and in other insurance programs, but, just to kick us off why is Medicare so confusing to millions of folks needing it these days? A lot of people don’t think about Medicare until the time they reach their sixties. So all your life you’re either.
Getting insurance from an employer where the HR department picks the plans and tells you here’s choice A and choice B, which one do you want? And the employer pays for some or all of the cost of that insurance, or if you’re self-employed you go on the healthcare.gov website and you purchase the policy.
Those are things that people are pretty used to. Deductibles work and they get a little bit of learning on the job. But when you turn 65 and you join Medicare, it’s a whole new animal. It’s a national health insurance system. You have four parts, 10 supplements, and literally hundreds and hundreds of drug plan and advantage plan options.
And so people have to learn this from the ground up when they’re new to Medicare and often. Really are overwhelmed by all the terminology, because they’ve never had this many choices before. So they’re choosing all these different parts of Medicare and they’re not even sure what that means. And so I think that’s what makes it so confusing and really it’s something that can cause a lot of anxiety, which is why so many people new to Medicare rely on their adult children to help them with these choices. I know you got to go on the computer and like research this stuff, right? That’s the truth figure.
So we’ve been talking about Medi-Share religious medical sharing programs. This is another government entitlement program for those 65 years and older, just to reiterate that for the folks.
Yes. And, we like to Create our own self-directed IRA accounts, self-directed health savings accounts. But if something’s entitled to us, you’re sure gonna optimize the heck out of it. And if you have an HSA account, you’ve been saving up money in that, which is one of my favorite investment vehicles for saving up for your future healthcare retirement expenses.
You can use money in that HSA to pay your Medicare premiums, deductibles, copays, and co-insurance once you turn 65 and get into Medicare too. Those two go together very nicely. Yeah. So if a person turns 65 and orders they’re eligible for these these expenses what exactly does Medicare cover? So Medicare has two main parts part a and part B one is your inpatient hospital coverage and the other is your outpatient medical coverage.
So Medicare will cover just about anything that is medically necessary. All the things that you have come to expect in your regular healthcare preventative exams and vaccines. Things are covered under Medicare and then Medicare also covers doctor’s visits and lab work and surgeries. If you have an MRI that you need to have, if you have cancer and you need chemotherapy.
So any medically necessary treatment is typically covered by Medicare. Some of the things that Medicare doesn’t cover would be elective procedures, cosmetic procedures dental, vision, and hearing are a big one. Those are. Fall outside of Medicare and Medicare also doesn’t cover long term care expenses.
So it doesn’t cover assisted living or nursing home stays, but it does cover all of your medical needs in retirement. So just like you would go to the doctor today under 65 and present your healthcare card, you would do exactly the same thing once you’re 65 and you’d be presenting your Medicare card and what’s like Medicaid.
Cause that’s something different too, right? Yeah. Good point. So Medicaid. Health insurance that is made available for people that have low incomes. So you can qualify for Medicaid at any age. Medicare is for people 65 and older and certain people with disabilities that are younger. So technically you could qualify for both.
And if you did have Medicare and you were also low income and qualified for Medicaid, Medicaid would step in to help pay some of the deductibles and things that Medicare doesn’t cover. And so those two can work together with Medicare primary and Medicaid secondary. So I also caught in there that, Medicare does not pay for assisted living or that kind of end of stage care.
At what point, what happens. Yeah. A lot of people don’t realize that and sometimes it’s too late. So if you’re aware of it early enough, you can purchase things like long-term care insurance. That’s a policy that I’ve gotten from my parents and they pay a premium every month that goes toward their future.
Future eventual needs. For long term care. A lot of people don’t know about that though. And maybe by the time they find out about it, they have health conditions that prevent them from qualifying for long term care insurance. And so then you become in a private pay situation. So you typically will need to spend down the assets that you do have in any type of savings accounts or IRAs.
And then once you’ve spent those assets down to a certain level, you can qualify for Medicaid through the state that will come in and pick. That long term care piece. Now that’s not the best of situations because you may not be able to choose the facility where you go for your long term care. You also have to share a room with another person that you probably won’t know going in.
And so that’s not the best way to do it, but if you don’t have any other funds to pay for it, then Medicaid will step in at that point. Yeah. They’ll have to go and work for like Ben Stiller, and happy they could do something like that. So a lot of our listeners are like the financial hacker types.
Yeah. So what’s the best strategic way of gaming the system here. Are they supposed to spend down their parents’ assets and you know what’s what are the strategies that work here? In terms of long term care, right? Is there, do you have to show low income to get Medicare or is that even a part of it for well, so for Medicare itself you don’t have to have low income.
You just qualify at age 65 and there are premiums that you pay for the insurance. You also have FICA attacks during your working years. That you use to pay for some of those premiums for Medicare, but when it comes to Medicaid and the long term care piece, yes, you are going to, they’re gonna be looking at your tax returns.
They’re gonna look at your bank accounts. And so typically if you plan with an estate planning attorney prior to the need for long term care, then that attorney can help you. Hanging onto those assets in the best and most legal ways so that you can achieve the spend down without probably having to bankrupt everyone involved, but you would need to be getting ahead of that and doing that, as a long term care plan before that is needed.
And I think what we’ll do is we’ll put the, some of the notes for that in our tax section. So we’ll pass a cash flow.com/tax on how to do that. But, let’s get back to the subject, which is Medicare, right? Cuz the Medicaid is, sounds like that’s income or net or assets specific, but Medicare is the one when I’m gaining
that’s the reason why this country is going bankrupt. Cause we, we hate these entitlements. Yes. Both social security and Medicare are a huge drain on the national budget, but of course they’re very necessary programs before they came into existence. We had people, that would work into their eighties trying to maintain healthcare and put food on the table.
And. Social security and Medicare were created. We eliminated a lot of the poverty that existed for people that were over 65. And so they’re very beloved programs for those reasons yet they are dealing with healthcare costs, which inflate on the Medicare side. And so there is concern that, within a few years, the trust funds for these will no longer be solvent.
And then there’s some decisions that we made on a national level. The politicians need to quit kicking the can. We need to deal with the fact that we have baby boomers aging in an alarming rate, and this is gonna. Drains on the cost of the system. And so we’ll either have to raise the eligibility age or change some of the benefits to make sure that as a nation, we can continue to afford them.
I mean that I’m not a politician or anything. I’m just trying to get by here. Yeah. , that’s another topic for so when somebody turns 65, they go into I’m assuming is like a website and is it determined by how much money they have is how much premiums they pay or. Totally based on their health status.
A little of both. So when you turn 65, you’re eligible for Medicare, as long as you have lived continuously in the us for five years. So you can sign up for Medicare parts, a and B. Now 99% of all people that sign up for Medicare at age 65, don’t pay anything for part a, which is their hospital coverage.
And that’s because during their working years. As long as they paid FICA taxes for 10 years during their lifetime, or are married to someone who did, then they can qualify for the part a and there’s no cost to them at all. So if they go in the hospital, they’re not paying a premium to have that hospital coverage.
The part B outpatient coverage though, does have a premium. And for most people, that premium is $135 and 50 cents a month. So not a lot, not a huge amount of money compared to what you might spend on insurance younger than 65. However, if you are one of the 5% of people who are in the higher income bracket, like a lot of your listeners here, you can pay more for part.
If you are earning more than 85,000 as an individual filer or 170,000 as a married or joint filer. And so depending on where you fall in that income bracket, you could pay considerably more. I think the highest levels for people earning over 500,000 as an individual or seven 50 as a married couple, and those people will pay approximately $460 a month for the part.
Yeah. And they can afford it. Don’t worry about them. , I’m sure they love that answer. yeah. But so this is something I’m looking at this Medicare stuff, like back then everybody had, or a lot of people, worked at a company for 10, 20, 30 years plus, and they got healthcare for life. Yes.
So a lot of this Medicare. A lot of people aren’t even using it. Cause you’re just using their ex employers when, if they’re still in business, it used to be that way, but more and more of those companies are no longer offering that kind of retiree coverage. And some of them changed that, midstream.
So people might have worked for many years expecting retiree coverage. And then that was either taken away or reduced. So of a. Number of people today that age into Medicare do not have retiree coverage and have to make their own decisions about Medicare. And they have to be aware that Medicare, even though you’re paying premiums for that coverage, it works similar to other insurance that you’ve had.
When you’re younger, as you use the benefits, you have things that you pay for called cost sharing. So if you go in the hospital, you’re going to have a deductible, Medicare, outpatient coverage only cover. 80% of your outpatient needs. So if you have an outpatient surgery or you need dialysis, you need an MRI, any type of outpatient service, Medicare only covers 80% and you have to pay the other 20%.
So this is considerably different than, 20 years ago, when a lot of our retirees were. Set with retiree coverage for life. A lot of people going into it today don’t have that security. And so they do need to learn ahead of time. What Medicare is all about, what it costs, what it covers, what it doesn’t, and then make a plan for affording that coverage.
Deciding what type of supplemental coverage they may need so that they don’t have to pay that 20% out of pocket and being prepared to go the distance with some decisions that they’re gonna make on their own about this coverage. Yeah. So a lot of my listeners they’re they likely will not have a.
Employee sponsor plan into retirement age. Yeah. And some of what I’m suggesting a lot of ’em do is take a look at a meta share or medical share plan, or even like the government standard. Again, more information at that simple passive cash flow.com/health healthcare. So how do these program like that and Medicare, how do they Close up all the gaps there.
Sure. So when you enroll in Medicare and you set up your original Medicare parts, a and B, you have a couple of choices to how to fill in those gaps. One would be, if you’re still working, your employer coverage can coordinate with Medicare beyond age 65. A lot of people work well past 65 today, especially entrepreneurs do many.
Yeah. Some of them enjoy working. And so they continue to have business ventures past then. And then on the flip side of that, you have some that, work because they have to they don’t have enough put away for retirement. And it’s important then, especially for those individuals who set up Medicare as their primary coverage, when they retire, they have to make a transition over to Medicare as primary.
And now we set up a supplement of some sort and there’s really two main routes. You can go with that. You can purchase a traditional Medicare supplement, which does exactly what it sounds like. It’s going to supplement what Medicare pays and fill in some of those gaps. It’s gonna pay for your deductibles, the copays and co-insurance and cost sharing that you would normally pay out of pocket.
There’s also newer options called Medicare advantage plans. And these plans are where you can get your Medicare. Through a private insurance company, like an HMO or PPO that works very similar to group coverage that you’ve had when you were younger and where a lot of the younger audience really needs to pay attention.
On some of this has to do with the political environment surrounding Medicare and Medicare for all. Sometimes we hear politicians say that maybe we’ll transition into having Medicare advantage plans for all. And we encourage people who are younger to begin being familiar with some of these terms, because although you’ll be making these decisions for your own Medicare, eventually you may also have to vote on these types of things within just a few years.
And so understanding how it works and what you want to expect to get out of the program. When you turn 65 could be important for some of the voting decisions you make in the next few years as. what’s this like Medicare part D thing we keep hearing about in the news. Yeah. So for 50, almost 50 years, people on Medicare had no outpatient drug coverage in 2004, 2005, 2006, early 2006.
We had people spending 10,000 a year on their medications for diabetes because although Medicare paid for drugs in the hospital, it didn’t pay for drugs that you pick up at the pharmacy. Medicare part D was created to solve that problem. Legislation was passed in 2006, we rolled out part D and this is voluntary pharmacy coverage.
So you have a card that you show at the pharmacy. When you go in to pick up your prescription, you’ll pay a copay for that medicine instead of full price, the coverage is voluntary because some people may need it. They might have VA coverage and they get their drugs through the veterans administration.
They might have Indian tribal benefits. They get their medicines there. They may just not take a lot of medications and don’t see the need to enroll in part D. But we do encourage everyone to learn about that coverage because one of the caveats to the program is if you don’t enroll, when you’re first eligible and you don’t have other creditable drug coverage, like da coverage or employer coverage.
When you do enroll later on down the line, they’ll penalize you for enrolling late and you’ll pay more for part D there on out based on that, how long you waited. So although the coverage is voluntary and very necessary, it is something that you wanna pick up. And be aware that if you don’t have that coverage in place, you would be penalized later on for not having it.
And probably the bigger risk is you don’t wanna be caught in the middle of the year and be diagnosed with a serious health condition that requires expensive medications and have no drug coverage and not be able to get into that coverage until the next annual election period in the fall. When you can set up coverage to begin the following January 1st.
So your agency sells like a tag along on top of the Medicare. Can you explain like exactly what gaps does that fill? Yeah, so we sell the Medicare supplement advantage plans and drug plans that supplement Medicare. So if someone were to contact us and they’re 64, they’re getting ready to turn 65, they’re gonna access our website.
They’re gonna learn a lot about Medicare itself. We always encourage them to learn what Medicare their federal go. Benefits provide them first so that they can understand where the holes are. And then that’s where we come in. As a broker, we work with over 30 different insurance carriers and all of the states that we do business, which are 48 states here in the us.
And when we work with these products, someone might come to us and say I want a Medicare supplement. Plan that covers everything. So I don’t have anything out of pocket and I want a drug plan. That’s gonna cover these three medications. Then we run searches using the type of software that we have to find suitable plans that are the most cost effective for them that provide the benefits they’re looking for, that meets their needs and their budget.
And on the drug side, of course covers the medicines that they’re gonna need. So we basically shop among all the choices out there and help them find coverage. And that service is free. It doesn’t cost the consumer, anything we’re paid by the insurance companies, the same way an auto insurance or homeowner’s insurance broker would be.
And you guys have a lot of good information like courses and different web materials. What’s the that’s right? You all, you’re all you guys have for that. Or we can put it up on the show notes. Sure. You can go to boomer benefits.com/webinars, and you can sign up for a webinar that we offer once or twice a month where you can learn all the basics.
You can also just go to our homepage at boomerbenefits.com and on the homepage, there is a. That will let you sign up for a six day email course that delivers an email with a video with yours, truly teaching Medicare every day in your email inbox for six days, that helps you kinda learn the basics. And once you get through either the webinar or the video course, you’re gonna have a pretty good idea of what your federal benefits cover.
A pretty good idea of what some of your choices are on the back end. Now you’re ready for a conversation with one of my team that can help you look at specific plan options in your state and provide quotes and things like. And if you guys I’ll also have all the notes that we have here and some of the other before you get to Medicare options before you get to 65 at simplepassivecashflow.com/healthcare, that’s great.
Check out their Facebook group. And maybe if you guys are dealing with, your parents aging and moving in with you and what you’re gonna do for Medicare, maybe you put a little note on there. Maybe somebody else in our tribe is also doing the same. Of course, that’s personal and you pay for what you get in our free Facebook group, but if you’re always inclined to join our paid mastermind of over 50 people at this point, simplepasscashflow.com/journey to be part of the cool kids club there.
But thanks Danielle for joining us. You bet. Happy to be here, talking about it and wish everybody good luck with selecting your healthcare plan options out there.
What’s up, podcast listeners? Now the changes are gonna be coming down the pipeline. For those of you guys who really like those monthly update reports, we are going to be stopping those. I’m sorry. Apparently people’s attention spans are super short these days. So what I’m gonna be doing on a weekly basis on the podcast is doing more of a really quick.
Five articles that I think pertain to real estate investors or investors in general for you guys. Add my commentary. So you’re gonna start to hear these podcasts on a weekly basis throughout the year. If you don’t like it, you can fast forward through it and then skip to the normal, routinely simple, passive casual flow, regular podcasts.
But that’s what’s gonna be coming down in the pipeline in 2023. If any other suggestions you guys have, what do you. What do you guys don’t like? Please let me know. T sensible passive cash flow.com. If you haven’t yet joined our investor club, what are you guys doing? We’re starting to make the first monthly payouts of 1% every month or 12% on annual basis which is structured around our pre equity plus fund or PET fund for short, which is essentially a debt fund, right?
It’s I think it’s the kind of the prudent strategy today. With interest rates sky high, where they’re at, it’s just hard to make deals, pencil, and I, quite frankly, I don’t know how people are making deals work. Actually. I do know how a lot of these newer operators who are trying to build a name for themselves and actually given the opportunity with all the big smart money like us who have over 1.2 billion of assets and ownership.
We’re sitting on the sideline. A lot of these newer people are willing to take chances and getting deals done. At this point in time for our investor group, I feel like the preferred equity approach, which is the debt side, is a little bit more of a prudent strategy at this point in time.
I saw yesterday that apparently inflation went down a little bit to 7% off the highs of nine. Good news. It seems like the Fed increasing interest rates is, seems to be working and, they just announced a half a percent bump instead of a 0.75 bump. So hopefully we’re seeing a light at the end of the tunnel.
. I’m still anticipating maybe at the summertime things really get going, you still gotta get your money moving, right? I’d say if you got several hundred thousand dollars of debt equity in your home, get that out as a HELOC put into infinite banking. Make money there.
And then also put it into something that is making you a nice, high single digit yield to arbitrage off that. For now or if you find great deals out there, put it in there too, but, , right? What are we talking today? Chris is gonna be on this show. A lot of our investors these days are more accredited investors, guys who not really care if they take gas from Costco, right?
And save 10 cents, 20 cents a gallon there. Or screwing around with, credit card hacking, all this type of stuff. Because why? Because after a certain point when your network gets passed, a million, $2 million, all these small ball types of things is really just burning up time and you start to realize time is more important to you than a lot of the cheaper things that I personally used to do, which I have a list at sy paso cash flow.com/cheapo if you guys wanna read that during the the Christmas break here.
Like what do you do when you’re trying to find that passion, but you also wanna align it with taxes for that combo. And this is, this podcast today is more for people around a million, million and a half net worth or less. Trying to find that passion, trying to find that EK guy and what is EK guy?
Something that you love to do, what the world needs, what you can be paid for, and what you’re good at. And this is very different than, something that you love. That you can’t really monetize, like pottery or some random hobby or golf for an example. What we’re talking about are things that you can monetize because the world needs it.
And I’m not saying money is the most important thing, but in our world, the way it works is you. When you create value for other people, you are typically reward with money. So it’s indicative of, or byproduct of one or the two. But this concept of Iki guy a lot of people I talk to these days are high paid.
Professionals, they make multiple six figures. . And sometimes it’s I hate to be a jerk man, but you’re probably better off staying at that high paid job, at least till you can hit your passive cash flow number of 10, 20, $30,000 a month and then just shut off the engines and, go garden and play golf from there.
For some people, they wanna take the approach of, and they’re really unhappy what they’re doing and for those of the people you. We have these calls, they may suggest, taking money outta retirement earlier than later and more aggressively. And there’s some other tax strategies to mitigate that in the meantime, but they just don’t like what they’re doing for work.
And this may be you guys out there and maybe this is a ponder this like how much more can you work at a job that, yeah, you pay get, you get paid pretty well, but you don’t really enjoy. And maybe that there’s some way you can find this concept of icky guy with some other side gig or hobby. That said, most of the people that listen out there are not business owners.
They, you guys don’t have any business aptitude. They’ll be one of, don’t wanna be offensive, but I just want to, state the office. Most people who start businesses don’t make any money and they don’t get anywhere. And, I guess what I’m saying is as I think of raising my own children, I, I think a lot of people say, yeah, you need to be entrepreneur.
You need to be, not be a another government or byproduct of the education system and work in a big company. , but I’ll be the first one to tell you. As a business owner, most people cannot run successful businesses. They don’t have the aptitude for it, and they don’t get lucky with some kind of traction out there.
They don’t, the business doesn’t sell anything. It doesn’t get going. There’s no traction. I think I’ve been blessed to create this simple passive cash flow podcast back in 2016. A lot of you guys seem to like it. But I consider myself very lucky to be in this position. We’ve hired staff to help me amplify the message, but most people never get to that point.
Just look at all like the spinoff of podcasts and YouTube channels these days. So I’m not saying that, don’t go after your dreams, but it’s gonna be no different. The message I send to my kids, which is, yeah, you can have your dreams, but By, you need luck for it to get traction.
But for consider the traditional path of going to school, studying hard, going to college, and working in a J O B, nothing’s wrong with a j o b. If you can save 25, a hundred thousand dollars a year to put to rental properties or syndications and implement these simple strategies that we identify for higher net worth, higher paid and accredited investors to acceler.
To financial freedom. And what we’re gonna be talking about today is this kind of concept of guy. Chris calls it the divine genius. How can you also find something that you like? Can you can maybe monetize it on the side and get a little bit of tax benefit side action there, right?
If you have a hobby that you turn into business and run through a lot of your personal expenses to it. That’s what we’re talking about today. And So again, thank you all for listening to the show this past year, and if you’ve been listening, in years prior, really appreciate it.
It’s allowed our group to, I think raise over 160, 170 plus million dollars that you guys have entrusted to us to purchase, well over a billion dollars of assets that we judiciously run on your guys’ behalf. And although the group has gotten. Still wanna get to know you guys, if you guys, we haven’t had that onboarding call, please book a call.
I’d like to see how I can help you guys out. That’s really what I enjoy. That’s my personal guy. I enjoy connecting with people on a one-off base and setting them straight. After that, you gotta join the mastermind group. I just don’t have time for, everybody and, hand out free advice.
But, if I can give somebody a quick 10, 15 minutes and compress learning cycles and putting ’em in the right path, that’s really what I see as like my gift to the world, or my divine genius as Chris calls it. But hopefully we’ll see you guys in Hawaii next month, January 13th to the 16th.
It’s not too late to sign up. We’ll probably be increasing the prices very early in January as we lock in our headcount, as I gotta pay the bill for all the cool events we’re gonna be doing and the great food and some other surprises. So if you that’s interest to you guys, go to simplepassivecashflow.com/2023retreat. And if not, thank you very much. And here is the show.
Today, we got Chris miles is going to talk about monetizing your divine genius myself. And that sounds a little bit to the normal, simple, passive castle listener. But trust me, this is going to be saving you on taxes at the end of we’ll come around full circle, but how’s it going?
That’s awesome. Wayne, how you been, man? Chris was on the podcast way back when, in August, 2016, we had to go back. That was podcast number 21. And I can truly say that Chris is a good friend of mine, and there’s a little bit of like show, business, podcasting, etiquette, where like he call everybody your friend.
But, and then maybe if you’ve met the guy before you call them like a good friend, but I’ll call you a true. I don’t know what that means, but that’s awesome. It means we’ve talked since then over the last three years. Yeah. We’ve talked at least twice. No. We actually talked pretty routinely, so we’ve done a bunch of work together
so today we wanted to do a podcast on finding your divine genius. And yeah. Why don’t you what does that mean to you, Chris? When you work with. Our divine genius is what is it we can bring uniquely to the table that no one else can. What is it that we can really bring to the world?
So combining our talents, our passions, or our values or mission and everything that combines us being who we are, the best version of who we are and using that to deliver the greatest amount of value to. That’s basically the easiest way to describe it. So I describe it, the same thing, but in a different term eeky guy, which is combining like four things, right?
I think a lot of us have heard this term combined with the three things it’s find out what you’re good at, find out what your passions are. And then something that you can make money with the fourth and final ingredient, which unites the. The power Rangers creating the Zuora on or whatever that thing was, is the, is it good for the world?
So I think you look at like my website and your kind of platform. It’s we’re both good at talking about money and we’re obviously very passionate about. And you know what, there’s ways we can monetize it. And I’ve been starting that group coaching mastermind I was telling you about, and then it’s good for the world.
It’s getting people financially free and getting them outside of the wall street garbage. Yeah. That’s amazing. Another example is like the guy who likes to make pottery, so he’s like good at it. He’s passionate about it. But it sure as heck doesn’t make money. No icky guy, right?
No. So a lot of this is like trying to find a hot. So that you can make some money, but also at a means to write off taxes too, right? Yeah. Everybody talks about do what you love and the money will follow. They’ll tell you that kind of stuff, but the truth is that there’s a lot of people that love to do stuff, but there’s a lot of broke, passionate people out there, passion doesn’t pay the bills alone.
And so it, to me, like I revamped the phrase to be, do what you love that others love you doing. And then the money can follow. And I’d say can, because it doesn’t necessarily mean it will, because you could be awesome. What you do. You could be very passionate about it. You love it.
Others love you doing it, but if you can’t, if you don’t have the right business sense, if you don’t know how to actually monetize it right, or don’t know how to market it, or those kinds of things, you could actually end up not making any money. You could be this really, this alone genius.
I was lonely genius. And we definitely want to be there. And so that’s where, yeah. If you can find something that you love to do regardless of the money and you’re great at it. And people, it solves some sort of problem for people, even if it’s, it doesn’t have to be like a massive world problem, like solving world hunger.
It can just be like something that actually really entertains. There’s, if you ever watched, like America’s got talent, you can see that show up sometimes. Yeah, it might bring on tons of magicians or tons of comedians, but, there’s the guys like Piff the magic dragon. How many communities, come out on stage and a big dragon outfit, like it’s just, it’s just goofy, but it’s unique. It’s something that we remember.
And so finding your own unique twist to things, and then, actually doing that’s where there’s some real, that’s a real secret to creating more money or at least. Since a lot of us are professionals and a lot of engineers and going to make money too. And I don’t know where I got this phrase from, I think it was from you, but. The phrase that really sticks with me is people who create value our reward or reward with money. Yeah. The oldest form of value created.
Yeah. Yeah. So I’m always like, people who to buy and sell stuff on eBay or Amazon and like to do all this arbitrage stuff that creating value, you’re not creating like tangible value. It’s like gimmick. And we all know what happens. Gimmicks eventually go. I know, you’ve talked about this with like multilevel marketing in the past, if you want to expand on that.
Yeah. It never marketing too. Definitely that, that comes up a lot because, for example, it never marketing. They always say, Hey, just do what the leader does and just do it the same way they do it. And so you get a lot of these copycats out there that just don’t work. And you were never meant to be a copy, and it’s kinda like you ever seen the movie multiplicity with Michael Keaton where he clones. I think it was from like late nineties, early two thousands. I can’t remember. But in that movie, he clones himself to do more. The clones got jealous because they’re like, Hey, we’re doing the work while the original guy is, he’s just out there playing, so let’s make our own clone so that, the clones got together and made their own clone.
So it’s like a copy of a copy. And the guy was like, totally, an idiot, so their copy of the copy. They’re like, you know how you get the original, you make a copy and then you make another copy of the copy. It gets less, less pronounced, the ink gets faded. It’s kinda like that.
And that’s kinda what happens to people with business. Even people that are like trying to be coaches out there or whatever, or network marketing, they try to imitate these people. The problem is you’re not them. You can’t be the best at being somebody else. You can only be the best at being. And so finding your own unique flavor to things unique way of doing stuff, that’s really the trick.
And when you start to really own that, and I know, because I used to be the guy that would try to imitate certain behaviors or marketing type things or sales strategies or whatever it would be. And people would say, ah, weird, or like I wouldn’t be comfortable being a.
Like in, in front of a room, so I try to be polished for example, are too polished. And then eventually I just stopped. I stopped caring, I just said, I don’t care. Like I’m just going to do my thing and I’ll do it, do the best I can. And the funny thing is that’s when people start to warm up to me the most, and more people are attracted to me, in fact, better people that are a better fit for me when I’m consulting or when I’m helping people out, whether it be on the insurance side or wherever it might be that people just match it up perfectly.
And that’s because if you are who you are. The right. People show up the right team, the right people to come to support you. And it just makes it a lot more fun. Yeah. And I think you also told me about this. You’re into numerology at one time. I don’t know if you still are. And I was kinda like really but then I started to think of audits.
You got to figure out what, how you are and that’s how you got to create your business or operate out of. Yeah. I don’t know much about numerology really. There’s a thing that I use, like human design. That’s pretty cool. Combines like astrology with some other things too, which I’m normally would be.
Okay. That’s bull crap, but I actually found out that one actually really worked for me. And among many things. So like finding your strengths, if you’re trying to find talents or strengths I used to be a sociology major, so it was all about running tests. Test the measuring and trying to figure out like, finding different things about people and group behavior and things like that.
And so tests I’ve used, like Myers-Briggs, a personality tests. I’ve used the Colby, a index, which is it’s pretty good. That’s more of like how you operate type of test. It’s similar to disc. Some people might use disc. I know Tony Robbins has that on his website for free. So Colby, you gotta to pay 50 bucks for, disc is free on.
There’s things like that out there. Human design, I’ve actually used that one a lot. That one’s helped me a ton on knowing how I should be working and operating, so for example, some people are not meant to just go hardcore, right? Like only a third of the population should be doing, being the type of people of say, got to make it happen.
Like those kind of people. Sometimes there’s different ways of making it happen that are actually more productive for you, depending on who you are. And then another one too, that I do is it actually an easy exercise that anybody can do is what I call a strengths feedback, exercise.
And so what you do is you basically just email or call, you can call people, you can email or text people and just ask them, say, Hey, what are like the top three or four things about me that you think make me different or make me unique, or maybe things you can count on me. Or ask me three words, that come to mind. You make it simple. I’m sorry. Say again. What are three words that come to mind when you think of. Yeah, you can just say words. I always like to have them expound on it because sometimes people have different meanings to words. And so what you might interpret their word to me might be completely different how they describe it.
So if they give you words, have them expound on a little bit, so they can tell you what that really means to them. And that’s money. Like for example, I had a lot of people that do. Yeah. Even though I didn’t feel it at the time I did this back in 2007, I think it was. And they would say things like, yeah, I see like a leader or I see you as a teacher or even your different teacher.
Cause you’re entertaining work. You teach things very simply. Or, you’d like to use like multimedia with your teaching, which I really like, or things like that. Or people would say yeah, you’re loyal almost to a fault, talking about, personal relationships and stuff.
And they would just bring up all these things. And eventually when people would all say some of the same stuff in the economic sense, I call that get a clue because they’re all saying the same thing. And in fact, you have to have people have known you your whole life. You can seriously ask people.
Maybe we’ve known you for a few months, just their first impressions. And it’s amazing that people that might’ve changed your diapers right back in the day might be the same, might say some of the same things as someone who just met you a few months ago, I’d say. And that’s how, like everybody else sees genius, but you usually don’t see it cause you just live with it day to day.
It’s just part of who you are. But for them, they see it and they think, wow, that’d be so cool if I could do that. Or yeah, when you do this, it just, it blows my mind. And so that’s just money right there. If you can find even some of that, that can give you a good step in the right. So another one is like StrengthsFinder 2.0, Pete laundry.
We’ll talk about that book. Is that kind of aligned with the other Colby strengths finder, exercise and human design where the Google terms people can look at? Absolutely. Yeah. All of those things can be great contributors. I really don’t think there’s anything bad about trying anything that helps you understand more who you are.
So that’s step one, find your strengths and talents. And then next thing is figure out what your passions are, right? Yeah. So I do, what’s called a passions test, it’s not mine. I don’t remember who came up with it, but basically to say, find out things that you are passionate about, make a list.
It could be like 10 to 15 different. And then start to rank them, start to find out like, what’s number one, number two and that kind of thing. And I’ll tell you, in fact, it’s interesting because I’ve had people tell me before they say, you know what, Chris, I’m not really like super passionate.
I don’t get really excited. Like I had a guy from Alaska that told me that he’s I don’t get excited about anything. And I known him just enough to say, yeah, you don’t get excited. Like you don’t get like all hyped up. I’m not a hype-y guy. So I asked him, I said is there anything that fires you up, like ticks you off or pisses you off?
That’s yeah, exactly. And he had a whole list of that. So we, we started going down that route. He’s oh yeah. Politics, or my family. It’s okay, we’ll go deeper. What about your family? Like, why just, I’m really protective of them. I’m really like, it’s important to me to prioritize them okay, all right, now we’re getting somewhere and know, get a bigger list than just saying, what are you excited about?
But yeah, just doing that and then going through and just ranking, I was like, what’s the one that’s if I had to choose between two and I used just compare two at a time, it’s almost like a, I call it my M and M game. When I was a kid, this kind of a weird when I was like around 11, 12 years old, I would take two m&ms and I would smash them to get.
And I would see who would be the winner. It’s it’s almost like moral combat, smash together. The ones the winner goes against the next Eminem and smashes and whoever wins at the end, that’s the ultimate champion. And I was always rooting for green because I love green, and and that’s kinda what I do with this list.
I’ll say, all right. Number one to number two on this list of 10 or 15, if I had to choose one, which 1:00 AM I more past? All right, we’ll keep it. Number one. Number one on compared to number three, which one I’m more passionate about? I think number three, wins. Number three, to number four, number three, number five.
Whoever wins. You just keep going through that list. And that one that wins out is the number one. And then just do the same thing for number two. You take that one off the list, and then you start doing that comparison again, and you can come up with easily, like three to five strong passions that you have.
Naked started saying, all right, how did this with my talents and my passions combined together and work together, trying to find global problems or, things, problems to solve. Cause that’s people pay to solve problems. Yeah. And that’s usually the next thing I’ll do is I’ll start making a list of what are things that I hear people complain about that maybe either I would want to solve?
I think I have. Or, maybe it’s just something you just think would be cool to solve. You may not know the solution, but maybe you have to bring your own unique flavor or twist to it. And that’s really, the point is all right, with these things, I am passionate about what are they, that kind of thing.
So most of the people listening are high-paid professionals. They’ve likely got kids busy life. What are some Epiphanes you’ve seen come up through this process that maybe might resonate with somebody. Kinda inspire them to do these exercises because I think a lot of people are like, I’m just too busy.
I might, I make 200 K at my job. I don’t need the side hustle stuff. Yeah, but that’s not the point. The point is the, punch through the object and find out some kind of passion, that makes you have money and you can write off some stuff. Exactly. So that’s the key is if you truly were trying to worry about the money too quickly in this process, You actually end up falling flat on your face, right?
Cause it can happen very naturally. And so the best thing you can do, especially for. Is find ways to apply these strengths and these passions to different places that you’re in, right? Whether it be in the workplace at home with your family or kids if you volunteer, do community stuff with your neighbors, strangers on the street, and try out using some of these things, if it’s just like I’m going to use one strength or here’s a passion on my bill tie in.
So give an example like for me, I remember when I was stock coaching back in the mid two thousands. I wasn’t like I wasn’t hired because I was the most brilliant trader they hired me because I was a good coach. So they said we’ll train you the way we want you to be trained, wants you to teach these people, but we’re hiring you mostly because you have good coaching skills.
So already, I was like the handicap kid they weren’t expecting much enemy. And so I started to do that and I pick up and learn things. And one of those people, I just pick up on certain things, especially financial concepts really easily. And so I picked up on it. I was like, okay, cool.
And then I started perfect on it. And you know what, these guys, they did this, maybe we can make this a little bit more effective here. And then I started to tiny passions because I was getting bored. I was doing a good job, but it was and so when I would teach them about trading stocks and options, there will always be like this flexibility.
There always be out of the 16 sessions I would do with people. There’ll be about seven or eight that you can just be flexible with, follow up on their trades, keep them accountable. And that would be the time I would take the opportunity to go teach something different or something more maybe about economics or something like that.
And we would have such fun conversations talking about that. Cause they would be intrigued. They’re like, oh, this is cool stuff. I like it. Some people call it inner market analysis, but I would just talk about that kind of thing. And they would have so much fun with it. That what was interesting out of 60 coaches, I was like ranked number two with the positive feedback, I would have been number one, but there was a guy who was coaching, double the clients as me.
So he got technically more positive feedback than I got. But for percentage wise I probably had the highest positive. And and it was funny because I was the guy that predicted not to make it right. So that was a big thing there. Other things I’ve learned too is I remember, learning about being a leader and a teacher, and I have a mission statement that says, through powerful conversations and faithfulness, I establish higher standards of service, perseverance, and stewardship to create happy fruitful.
Basically my whole thing is about raising the bar. That’s kinda, my thing is raising the standard, raising the bar, just take it to that next level. That’s kinda like my whole life mission in general. And by the way, mission statements do help a lot sometimes in this case. And I remember, I was volunteering at my church and then they asked me, they said, Hey, can you take care of the two year olds?
And I’m like yeah. I could teach the adults. I’m a good teacher. I’m a good leader. Like, how do we teach the adults? No, we need help with. Like, how am I supposed to be a leader and a teacher to two year olds? And then it dawned on me after a little while I was like, wait, I may not be able to teach by word, but I can get on my hands and knees and interact with them, and play with them.
And I did. And the cool thing is that pretty soon they started responding. And even after I was done volunteering my time there, a lot of them would come up to me when all the parents come pick them up, they would just put their arms up. Like they want me to hold them, that was pretty cool, even though there’s other women there who are much better caregivers than I was right.
Naturally while it was women would just sit there and gossip, I would actually be there and involved with the kids and create that connection. That’s just the name of feud. That’s just a normal life, but I understand, I take all those same things and I applied my business too. I still connect and do things with people in business.
I teach a lot and in fact, I am a teacher. That’s the thing. Get me to retire, which I’ve been financially independent twice in my life. Each of those times I could retire. I don’t, because I have this passion that I want to keep teaching and help people take it to that next level to not be mediocre, just like you teach on the show.
And so those are the things you can start integrating and naturally money just follows. It’s really easy, especially if you start to figure out and hone in really what is your genus and just focus on. So you seen a lot of epiphanies happen and when you’re coaching folks, what are some examples of those that you’ve seen?
Like just people may not make resonate with another working professional. Yeah. I had somebody, I got a few examples. I had a guy, for example, he was a. Okay. I’ll actually I’ll use a woman cause she’s she was actually worked in the it field. So I figured if you got some working professionals, get somebody in it.
We did some of this process with her and she was really passionate, actually. Not about doing tech stuff. She was really passionate about the healing side of things. Like really helping people emotionally heal naturally because she had experiences too. And by the way, one of the coolest things you could ever do, if you’re ever going into the role of trying to provide value or teach something or help people through.
Is do something that you overcame yourself, right? Like for me, one of the biggest things that helped me create help people create more cashflow is that I went through a recession where I went over a million dollars in debt. And I had to avoid filing for bankruptcy. So all those kinds of things and the things I learned going through all that crap is the very things that help my own clients free up 100, over a hundred million dollars of cashflow over the last nine years.
Because you have to figure out the strategies behind that. Yeah. Cause people kept telling me, I want people to hire me, but they kept telling me why can’t find the money. I’m like I can find the money. Not telling them, Hey, I’m broke right now. This is back during the recession, right?
Hey, I’m broke. I had to find money. So I bet you, your situation is better than mine. So your should be easy for me, and that’s how it happened. With this woman, like her thing was healing of the emotional healing stuff. She’d gone through a lot in her childhood and had to work through that as an adult to function.
And so she started do that kind of stuff and she just had a find. Modality, the nice thing that kind of matched up with her. And even when she found it still, as she did it, she morphed it a little bit and try something a little bit different. And she brought maybe this little thing in for healing and this and that.
And we came her own thing. And so pretty soon, even though she’s doing still working it, like she’s still, an it manager at her work making a good six figure income on the side. The thing that actually gets her fired up is that she’s doing this. And she has a side business, a side hustle.
So she does like coaching or like basically like like healing, coaching, like a energy healing type stuff. Reiki you’ve heard of Reiki that kind of thing with magnets and things like that. So she does exactly. Yeah. I don’t know how she does it. She does, but it’s pretty cool.
It’s kinda like a chiropractor I knew in Denver that she it’s seriously not touching it, but she just do this like down people’s backs and they’re like, oh, I feel so good. I’m like she didn’t touch you. What would the heck did she do to you? And I was too scared to try it myself, another person that a good example is the guy out in Washington state.
He really loves. Working with kids like specifically teenagers, and he was working a job full time and he was coaching a baseball team during the summers, like as teenager baseball team, it wasn’t a high school team. It was like the city league type thing. But they would go to state or even interstate championships and win, or at least play and get runner up.
He was really, they were a really good team. In fact, they would perform better than the high school team would do with those samples. And so we, he asked me, he’s okay, Chris, I got to figure out how to make money with this so I can do what I love. And after some time we try to figure it out.
It actually got really hard and we’re like, and I asked his wife, I said, how was he during baseball season? And she said, oh he’s so happy. He’s like on cloud nine. And I tell you the guy’s just energetic. And I’m like, okay, cool. Do we necessarily have to make money? Doing baseball.
You know what if we just said, this is like your outlet to just fire you up, that keeps you doing. Cause you got a job that’s flexible enough that he could take off work and do and will do what he wants. So why don’t we just keep doing that? And they’re like, oh, that takes so much pressure off. Funny enough. A couple years later, he got offered a position with the varsity team. I think you start with JV. And then he got moved up to varsity. He started coaching and making money anyways. And that, that, that path came. He just did something he just enjoyed and his whole thing, wasn’t just winning baseball.
His thing was teaching these teenagers, these young men to become real men to become productive citizens. That was his whole passion had baseball was just an outlet, but the passion was training these youth to become real men. And so I met and that’s what he’s done. And now they actually, I, the last I saw they’re doing like couples, marriage type counseling stuff.
I don’t know what the heck they’re doing now, but it’s cool to see the evolution of the last decade, how it takes them. And now they’re making money. In other ways, anything more for the introverts out there, maybe just with a, making some kind of arts and crafts or musical.
Instrument. Sure could. I’ll tell you if you’re a handyman right now and you live anywhere near me, you’re hired, there’s seriously, like there’s a lot of needs out there. And I’ll tell you, these handyman do not have personal skills, like people skills or not their thing.
There’s lots of things you can do. I know the person that’s there. She’s not very, she’s definitely not a person. You try to strike up conversation with because it’s just not, it’s not going to go anywhere. She’s just an introvert and that’s fine. There’s also things you can do to, even if you want to be in business, you want all the tax write-offs like we talked about at the beginning of the show.
The thing is you could also be a partner because what if you’re the person that’s just perfect being like the COO, right? Maybe you’re the person that’s best on the backend while somebody else is better to be the front man of the front line. But you’re the person on the back to make sure that it actually works or that, things are being fulfilled on.
So there’s a lot of roles you can do and play in and make great money and you can even be in business, but not have to be the face. That’s not real. That’s not required at all. All right. The book, the E-Myth by Michael Gerber comes to mind. There’s the visionary, the operator, like the CEO, like you said, and then there’s all kinds of technicians in businesses.
You need those three characters in every business and you may be just good at sales or you may be good at just making baking or whatever. Yeah. But the link up with those other people is the key. Yeah, that’s right. That’s the thing. You don’t have to be in an alone. It’s kinda if you’ve ever watched YouTube videos of the piano, guys, you ever seen those guys, right?
They take, they do cover songs. And they, and especially, you’ll see, the piano player, John Schmidt, and then you see Steven that’s the cellist. And and that’s, it’s funny because I remember seeing John Schmidt around here locally in Utah, because that’s where these guys are from.
And I remember seeing him be up there and I was like, I don’t even know who that guy is. I just know he’s performing. He was just the piano player and he could play upside down and do all that kind of stuff. But he didn’t really get popular until he started bringing on other people. So he started bringing on like the cellist that brought in a whole new thing and they did, Viva Lavita and love story.
Taylor, swift and Coldplay. They did a little mesh up that that got millions and millions of views. And then they just kept going and they had camera guy. Other people to help support that. And now, these guys go perform and they sell out stadiums and stuff. I mean that just all, these are your guys that were talented individually, but bringing them together that teamwork, that’s the thing that allowed them all to shine together.
They were better synergistically together than they were apart in something. I I was listening to Tim Ferriss’ podcast to stay. He said something pretty cool. He said you don’t need to be the top 1% of 1%. Like Michael Jordan, all you gotta do is figure out like three things that you’re in the top 10% in that here’s the key.
It’s people aren’t good at that. Typically like for example everybody can speak a foreign language, right? Yeah. And it’s no big deal. It’s a commodity, $20 an hour person. But you combine that with two other things that people aren’t good at and Kaboom. There you get now you’ve got a niche.
Yeah, exactly. That’s thing I was gonna say too, is when you blend it all together, think of that we’re in the financial space. And the cool thing is and remember my wife has also the financial space too. And I remember she saying yeah, I guess we’re in competition with each other.
This is before we dated or anything. So I guess we’re in competition with each other. I’m like, no, we’re not because you can’t compete with me. I’m sorry, but you can’t do it. I do. And then to save it. I also said on the flip side, I also can’t do what you do either. So that’s the beautiful thing.
Cause we were both serving the same market, but we were two very different ways of approaching it. Lane, you and we hit some of the same spots sometimes, but we’re two very different people and we have our own unique flavor, our own unique recipe that goes with it. And when you start combining these things to get.
That’s what makes it cool. It’s like my friend who’s he’s one of the, he’s a very popular actor out there. He’s always like a supporting actor. He’s also really funny, even though he’s always in dramas, he always, he’s always typecast as being like a general or a police officer or something.
But he’s a hilarious guy and he would always try to do things to mix it up. Whenever he would do auditions, he would try to do something different. And even when he would be on his own, just to practice on the side, he would say, tons of people have eaten raisins, but how many people have eaten raisins out of a freezer?
How many people have done that? And wait, let’s take it another step. Let’s take raisins down a garden hose into my mouth, out of the freezer. I bet you nobody’s done that before. So he’s having his friend put, raises down there, trying to feed it out of the hose and they’re cracking up so badly.
They came to hardly do it. Or he would go to his auditions, you put maple syrup in his shoes, so people would be like, wow, it’s sounds like pancakes. What’s going on? Like that’s the kind of thing. If you mix it up a little bit and just put your own flavor and twist, that’s the thing it’s I don’t worry about competition.
I know that doing what I do best, no one can imitate it. Even when people try to imitate my stuff and teach my stuff. A lot of times they’ll regurgitate it. It’s just not the same. It’s like a copy. And so that’s the thing is you don’t worry about people ripping off so much because if you know that it’s you’re the innovator of what you do best other people will just have to follow suit with whatever you’re doing.
They can’t create, they have to do their own. I call that the idea that when I look at successful people, that’s usually their contrasting binary strengths, like dirt, no Vince ski seven foot, or, but he can pop threes on a guy that can bench press three 15, but he’s a, I can do walking hand. Or the financial planner. Who’s pretty cool. And funny and charming at the same time.
Those are things they get paid. So if you could combine certain talents with another secondary talent or tertiary talent, then Kaboom. Yeah. I’ll give you another example of, if say you decided to go in the place where maybe you have to put yourself out there, like you’re going to start a business.
Maybe you’re going to go into marketing yourself and things like that. I found some really cool tricks with finding your marketing voice of. Cause, for example a lot of times people will ask me and maybe lane you’ve been asked this too. They’re like, oh, that’s so cool. You have a podcast.
Maybe I should do a podcast too. I don’t know if you get asked that, but I get people ask me that all the time, like maybe I should do a podcast. And and I was like maybe not. Cause it may not be your thing. And so when I do that, like a lot of times I’ll get, people will say what is that thing?
And some people have natural tendency towards certain areas. So there’s really three areas you can look at for a marketing voice. One is course your words, two could be your face or, how you show up and then three could be like your content, right? Like your writings, blogs, things like that.
And a lot of times you get people and you’ve probably seen this two lane, like being out there. There’s some people that just amazing on video. And sometimes it helps course if it’s like a beautiful woman or a good looking guy, or sometimes just really charismatic, like they just they’re just lit up.
They’re the kind of people when you, when they walk into a room, people like, wait, who is that? Like they just grab your attention. They could be doing nothing but walking. But somehow they grab your attends. Those people shouldn’t be worried about doing a podcast or if they do maybe doing like a visual podcast Navy, but for the most part, it might be, what can we do to get them more on video, get them more seen.
They can be more on stages. There’s things like that. Like I actually love being on stages, but I realized for myself, my voice is more like the second one, which is more of an audible voice. And I learned this at a really out of experience because I had. That would reach out. They would hear my podcasts or hearing me on other podcasts even, and they would reach out and remember they talked to my sales manager and let’s say, my sales manager would say why are we talking?
They say, I don’t know. I just really like Chris. I just trust them when I hear his voice. And so I just want to know what the heck is. And so I did a horrible, such a horrible job selling myself. People even know what I did. But they were, but it was such a way that my voice that they would trust it, they’re like I don’t know.
Like I just feel like I should work with them. What does he do? Whatever it is, I’ll do it. And that got me to realize, wait, why am I spend all this time trying to do videos and trying to get on tons of stages when really my voice can be it. And so from that point, that’s when I started doing a podcast as well.
That’s why I created the Chris miles money show five years ago was, Hey, I’m already doing, it’s already working. And that’s why I got an EO fire. It was actually that’s when it hit me. It was like, oh, these people just heard me. And it was enough. And build that relationship. And so for me, I use audio like crazy, but videos are hardly ever.
And the content, I’m not big on content. Some people are just better writing than they are speaking or anything. I don’t know if you’ve ever met the author that you’ve loved the writings and then you meet them in person, you think, oh, wow. That was awkward. Or shall you hear them speak on stage?
And they’re just not the same. I think Michael Gerber, guy’s pretty horrible on podcasts. People say, and they’re like, oh, that guy’s bombed. But he writes these books, like the email. Yeah, it’s you almost want to say, yeah, just go back to writing your books. It’s cool. It’s good.
Just write your books and it’s great. You’re right. Like it’s, it’s a book that’s changed so many business owners lives, and that’s somebody who doesn’t necessarily have to get up on stages seriously. Like he could just do it through his books and get other people on a stage.
If he wants to do that, get somebody else to sell his system, or maybe he just shows up to say hi, and then he walks off, that kind of thing. But. Really, those people, John Maxwell, I know he’s pretty decent on stage from what I’ve heard, that guy, he’s pumped out.
I don’t know how many hundreds of books, and, but we all know him just because of his books. Not necessarily because of his speaking or because of any podcasts he does. It’s just purely the writings. All right. So another while you’re saying that a couple other No, I’ve met a guy through all these calls that I have.
You guys can still book a call with me and chat if we haven’t chatted before. But I hear all these side gigs. One of them was like the, he does voiceovers and animation likes doing that. He just does puts it up on Fiverr. Another guy he does like wedding. He does like the MC for weddings.
He’s a, more of an introvert. I think he’s an engineer too. He says, like people need to get up and part, I need that leader to get them going. So he just steps out of his shell and does it yeah, the, those are great ways to make an extra five, 10 grand a year, and then you can go that into turnkey rental.
That’s yeah. Great. And that’s a cool economic engine you can create because we can generate more money, more income, fast without money in which a business and delivering value for people does. That’s, that just accelerates all your goals. You’re trying to hit when you’re trying to do real estate stuff.
Yeah. A lot of people like to do the silly travel hacking stuff which I thought it was silly until you can pair that with trade lines. If you guys want to check that out, civil pass, a casual.com/trade lines and yeah, I’m making like 10, 20 grand a year doing that little site. So exactly. But yeah, Chris, you want to give folks your contact information to get ahold of you and.
And if they want to continue this thought process with you and maybe do some coaching about, finding the site. Yeah, for sure. Yeah. If you’re trying to find that side hustle and especially trying to get out of the side hustle or make your side hustle your main hustle, right?
Yeah, like the best way to contact me is either one. You can go through my website, money ripples.com. You can message me through there. Also, you can actually follow my podcast, the Chris miles money show. I’ve got several episodes regarding monetize your divine genius. Think different things about, business that can help you grow that plus others on, on personal development, on money and things like that too.
Yeah. A lot of things for free on there and, but she got a pay to play after a certain point and get Chris’s valuable time later on, but it’s probably worth. thanks for joining us, Chris. And we’ll see you guys next time.
[ NOT FOR PODCAST For letter cover]
They were better synergistically together than they were apart in something. I I was listening to Tim Ferriss’ podcast to stay. He said something pretty cool. He said you don’t need to be the top 1% of 1%. Like Michael Jordan, all you gotta do is figure out like three things that you’re in the top 10% in that here’s the key.
It’s people aren’t good at that. Typically like for example everybody can speak a foreign language, right? Yeah. And it’s no big deal. It’s a commodity, $20 an hour person. But you combine that with two other things that people aren’t good at and Kaboom. There you get now you’ve got a niche.
Yeah, exactly. That’s thing I was gonna say too, is when you blend it all together, think of that we’re in the financial space. And the cool thing is and remember my wife has also the financial space too. And I remember she saying yeah, I guess we’re in competition with each other.
This is before we dated or anything. So I guess we’re in competition with each other. I’m like, no, we’re not because you can’t compete with me. I’m sorry, but you can’t do it. I do. And then to save it. I also said on the flip side, I also can’t do what you do either. So that’s the beautiful thing.
Cause we were both serving the same market, but we were two very different ways of approaching it. Lane, you and we hit some of the same spots sometimes, but we’re two very different people and we have our own unique flavor, our own unique recipe that goes with it. And when you start combining these things to get.
That’s what makes it cool. It’s like my friend who’s he’s one of the, he’s a very popular actor out there. He’s always like a supporting actor. He’s also really funny, even though he’s always in dramas, he always, he’s always typecast as being like a general or a police officer or something.
