Blogs

How to Choose the Right Financial Planner

https://youtu.be/KSar5qUV1d0

It’s not about gaming the system, the tax system, really the tax code. I’m sure you’ve heard this before, but there’s thousands of pages. This thing is a beast and I would not prefer to personally read it, but there’s only a few pages that are about how to pay tax. And the rest of this gigantic document are all ways their roadmap to not pay taxes.

And so you really need to be working with somebody who is. Knowledgeable about the tax code that really seeks to leverage it in your favor and not do unfortunately what most CPAs for common people do. And they say, Hey, let’s just defer some money and not pay tax on it this year. And that sounds like a great end of story.

If we stop there, but you still are going to pay tax in the future. So you’re just kicking the can down the road and you end up with this big tax bill, the end and especially. For your audience and myself and our audience as well at the money advantage. If you’re looking to grow your wealth and increase your income, you’re going to probably be in a higher tax bracket in the future.

And I do not want that tax bill on a higher income in a higher tax bracket. And with 19 trillion plus dollars in us debt right now, we’re in a position where if the government says, Oh, Hey, let’s go ahead and increase taxes and decrease tax brackets. So that more people are paying more taxes in the future.

I don’t have control of that, and I certainly don’t want to be at that mercy. So I don’t want to just defer tax. Which is a fancy way of saying postpone. I don’t want to just postpone taxes until the future. And that’s what a lot of times you’ll hear as a tax strategy. And it’s really not a tax strategy.

Yeah. And what you just said, just drives me crazy all the time. Most CPAs don’t have a freaking clue what they’re doing. That’s why they have that job. And that’s why I sit at home in my shorts all day long and not to say that, Hey, I’m not a CPM, not a lawyer. This is where you have to learn these strategies and you’re not going to be the ones can potentially be a little dangerous, right?

If you go overboard with these proportions, You possibly can get audited. Yeah. Reasonable salary. That doesn’t mean you’re going to say, Oh, my reasonable salary is $1 and the rest of my money is coming over without self-employment tax. That is, that’s stepping over the line and here’s the line. And you want to be working with a tax strategist that says, okay, I understand the lay of the land and the landscape.

And I’m willing to walk up to that line. But I’m not going to cross over. And that’s the piece that instead a lot of CPAs will just say, Hey, I’m just going to stay as far away from the line as possible. And that’s where a lot of money gets left on the table. And unfortunately way too many people are in that position where they say I have the best CPA in the world, and yet they’re still leaving a lot of money on the table.

So again, it is not about doing things that are illegal, that can land you in a huge amount of hot water. Absolutely would never recommend that. But what you want to do is understand how to proactively leverage the tax code. Here’s my analogy. This stuff is like doing a surgery, Rachel and I aren’t going to do surgery on ourselves, period.

We’re not even doctors. No, but we can recommend possibly. Hey, why don’t we do this? Have you heard of this other operation? And if your CPA is like any other CPA out there, they haven’t even heard of the damn thing. So maybe you have to go to first a CPA who can do that operation, but you also even good CPAs, but they’re just looking for the easy way out times than not.

They don’t want any kind of odd potential in the future, even though it is totally legit, they just want to do what’s easy. So you as the client, like I always say, you’re the boss, you’re the property manager works for you. You need to tell them what you want within reason. Same thing here. Your CPA works for you.

You need to tell them what you’re going for and need to hear them out. If not in to get a new CPA, she mean, and get to someone who, who is legit. And I can do this stuff for you, but yeah, but never do it without a CPA. You are using their recommendations. Now, what you want to do is ask yourself, is this the CPA for me?

Are they going to help take me to that next level? And a couple of questions you can say is, are they meeting with me outside of tax season? That’s just one really good, but almost indicator or a marker. Are they concerned with helping me strategize outside of just saying, okay, what did you already do?

And how can we react to what you did in your business and your real estate and your investing and all of those things, really? You want somebody who’s going to help you plan ahead so that you use the right deductions so that you apply the right things in your strategy and process so that you can take advantage of the tax code. .

Intro to Cryptocurrency w/ Bob Burnett (Part 1 of 2)

https://youtu.be/FvtMiG3R2S0

Hey, what’s up simple passive cashflow listeners. Now I wanted to announce a new project I got going on. The rich uncle YouTube channel. So those of you guys have been following me for the past several years since we started this podcast back in 2016, simple passive cashflow started off with me buying some turnkey rentals, eventually getting my portfolio to 11 and 2015, and I felt the pinch and I realized these rental properties was not the path to financial freedom.

It was the path there, which I still think non-accredited investors under quarter-million half a million should definitely go on buy a rental property. You get that experience, feel what it is to be or moat landlord, and then move off to bigger and better things as you become more of a credited investor or on the verge of.

So it’s a transition into being more of a passive LP partner, diversifying yourself over multiple deals out there where you’re just an LP partner, little to no liability, no debt in your name. You can still Chavel hack all these credit cards, which we’ll have a feature podcast on that too.

And you can also partake in the value add strategy, right? When you’re buying turnkey rentals, which you’re essentially doing is your. Just buying an asset that has little to no built in equity in there other than your down payment. And there’s no business plan to increase the revenue, therefore increase the price where these a large apartments indications, mobile home parks, et cetera.

There’s usually some business plan to force. Appreciate the asset. And maybe we’ll get lucky with some market appreciation in there too. That’s typically real estate goes up in price, but the big thing is that force appreciation. The only way you can do force appreciation is if you do it on your own, in a burst strategy.

And that is that my first premiere video on the rich uncle YouTube channel. You guys can go and check out, So a simple pass, a castle podcasts and YouTube channel. We’ll continue on this path of, as you guys grow with me to be accredited investors, but lately maybe I’m just getting old, but I see a lot of kids these days between the ages of 18 and even.

Mid to early thirties, they already haven’t gotten it together, right? Their net worth is still under a quarter million, half a million dollars. And maybe for you guys listening, maybe this would be that cool hip fun video version of simple passive cashflow for kids where they can learn about this stuff.

Learn more about those basic financial things. In this first video, which we’ll be talking about is the burst strategy. Which you can give them. A lot of these people like to do this by rent, rehab repair. I frankly think it’s a waste of time and not a really good risk adjusted return when you could just be a passive Opie partner.

But what do you do if your net worth is lower and you’re not having any connections, that’s what this video is talking all about. So share it with your kids and listen to the rich uncle as they start to become old and grumpy. In the future, but for now it’s just rich. Uncle is a YouTube channel and on today’s podcast, I’m going to be quickly going over what is a bridge debt and private equity. And I think a lot of you guys have told me, you’re frustrated about other podcasts out there. Just sustain on lane thing.

And yeah, everybody does podcasts these days. They’re easy to be honest. Now, this is a sort of a sample of what’s you’re going to find in the syndication LPP course. And if you guys haven’t checked that out, please go to simple passive cashflow.com/syndication to check out the free guide the syndication.

And there’s a, be a link in there to the e-course. Now the e-course I think it costs like maybe a few hundred bucks. But it’s really good. It’s not just some lane book that just going to tell you every little thing that everybody other regurgitates over and over again, just runs through spin texts, application to regenerate the same old, a hundred page 200 page book, it’s going to tell you the secrets of what syndicators are doing out there to trick you guys into going into whatever deal. Not saying it’s a bad deal, but I think it’s just good to be aware of these things. And today’s podcast talking about. Private equity and bridge check is going to be a sample of what you’re going to find in the e-course, which I think it would , take most people 10 to 15 hours to go through the entire course.

But with that said, here is the content.

Hey, simple passive cashflow listeners. Today, we are going to be talking to Bob Burnett chairman and co-founder to be systems, but he is going to be catching us up to speed on this Bitcoin crypto craze that has been happening. It’s going to be a little bit of review, but a lot of new concepts and good ideas that when I first saw his presentation.

Really helped the whole thesis around inflation and investing in just real hard assets and maybe Bitcoin might be wonderful, but welcome Bob. Appreciate you coming on and doing this for those of you to sing on the podcast I would encourage you later on to come over to the website and the YouTube channel to catch up.

We’re going to have a full presentation on this. If you guys know PowerPoint slides going to have a lot of good hemorrhages that we’re going to be referring to. You guys can also check out our crypto page. It’s simple, pass a castle.com/crypto and join our community too. We have also a lot of discussions on crypto with the group.

But yep. Bob let’s let’s educate the folks. All right. Hey, thank you lane. I appreciate the chance to talk to you again and especially to your viewers and listeners today. And frankly, anytime I get a chance to talk about this topic I do so because not only is this for me, one of the greatest financial opportunities for people, but it’s something that.

I believe in passionately from the perspective of freeing people and creating a quality around the world. And I think nothing represses people more than mismanagement of money or corruption of money. And I come from that spot when I speak with people almost from an evangelical perspective, sometimes I like to say, So as you said, for those of you watching on YouTube, you see the title of this as a freedom and money.

And that’s the perspective that I come from as I talked to you today. And one of the first things I like to do when I speak with people and lean on, I’ve already talked a little bit. But I’ll pose this question, to, Julaine for the benefit of the users, which is, if you think about where crypto is having its largest impact, do you have a couple of guesses as to where that is?

And Where is it? Yeah, I’m going to give away the slides here. Cause I know what the answer is. Here’s where it’s happening, guys. Where’s the adoption of the Bitcoin and all these deals where it’s all these jacked up countries there’s turmoil within their currency.

So as a side here, Nigeria, Vietnam, Philippines, Turkey, Ru. The United States is relatively low on this list, right? Bob? Yeah. And I think that’s important from a couple perspectives. The first one is what this tells you is that, people in turbulent areas of the world are recognizing the value of cryptocurrency faster and appreciating it faster than those people.

And first of all, countries, the bottom of the list for those of you who are only listening is Japan, Germany, us. So you have these really stable countries, which actually have very low adoption rates, like four or five, 6%. And you have at the top of the list, you have Nigeria 32%. So that’s very important to remember.

So when we look at, what’s the price of Bitcoin, for instance, which we’ll talk more about later, is it. Is it a bubble? Is it about to burst? Is there no opportunity for upside in it? The answer is absolutely not. We’re just barely getting started and it’s also important. I think when you reflect on this, you might say why do we need money?

Why do we need a new form of money? What’s wrong with the dollar or the Euro? I’m going to talk to you later. I think there are some. Severe things wrong with it, but I’d say the average person doesn’t see them. And so they think, Hey, there’s no need for some new version of money, but I’ll look at these other places.

They understand it. And there’s a stat that over the last three decades, 57 countries have had their currency fail. Some of them multiple times, like Argentina Chili’s and Bob way. It’s a pretty common thing for a currency to fail. And when it fails, it generally means the people that have held their wealth in that currency.

They’re at a total loss. As you look at this if you struggle and we talk about Bitcoin is you struggle a little bit about, what’s its importance. It may be important to change your optics and say, Hey, am I looking at it just through my eyes, maybe sitting in Los Angeles, California, or Birmingham, Alabama, or some place in a first world country, or would I see it differently if I was in a logo’s Nigeria or Manila in the Philippines, maybe you’d have a different perspective.

The other thing is main my background is actually as a technologist, as an engineer. For those of you who are a little older, I used to be the chief technology officer at a company called gateway, which in the nineties, early two thousands was one of the largest PC companies in the world.

And. In that role, my job was to not only develop the products, but create the vision for the company about where we were going. And it made me a history student about technology. And what I realized through that work was that the most important inventions in the history of mankind have all been from the perspective of creating a degree of freedom.

If the invention creates freedom, then it will be revolutionary and massive and almost impossible to define the economic and social implications of that technology. Things like the cell phone, things like electricity would fall or in other words, disruptors within industries. Yeah.

And massively disruptive. You think about the automobile. It wasn’t just. The automobile, but it changed, what roads look like? It changed how people work, where they work, how far they could live from work where they went on vacation, the implications are just so numerous.

And that’s the same with crypto currency. I can sit here today and I will, and I’ll give you some of my thoughts about the future, but. I’m sure I’ll just be scratching the surface of what it really means and what the possibilities are. So just most of the people here if you were born in, let’s say the eighties or the nineties, it means that you saw the beginning of the cell phone and at the beginning of the cell phone it was just a mobile phone.

It, wasn’t the centerpiece of your life and in this thing, driving social media and the centerpiece of your financial world. You’re absolutely right lane. The other thing I’ll say about Bitcoin, because I have a little acronym it’s called privacy, inflation protection and efficiency.

I think that these things are at the fundamental tenants of what Bitcoin is providing privacy, because what’s happening in the world is we are losing even the choice to be anonymous in our financial transactions. I can’t even decide to buy a cup of coffee at Starbucks and have that be a private transaction

that ability is being taken from us. Inflation, we’re going to talk a lot about this in just a second lane and then efficiency. I’ll talk less about this later, so I’ll do it a little bit now, but when you look at things like for instance, remittance. Remittance meaning, sending money overseas.

And you look at the countries we talked about at the beginning, Nigeria, Vietnam, Philippines one common aspect of all those countries. My wife actually being Filipina and having family back there as a business factor, money is constantly being sent, from the us back to the Philippines.

And when We use the traditional bank wire system, Swift system or Western union, or places like that to send that money. It’s massively inefficient. It’s very slow. It’s very expensive. For instance, sending $200 from here to the Philippines with a service like Western union is likely to end up with the equivalent of $150 in purchasing power landing.

At the end point. Terribly inefficient, but if we use crypto currency, we can see like 98, 99% of that value move. And we can do it instantly instead of over three days or five. And that’s the trouble, right? Like these large companies like PayPal or the credit card companies, they’re all getting their share.

And the buying power that transaction between buyer and seller is being wasted loss. Exactly. And they’re able to do that because in large part it’s an oligopoly, it’s a very small group of companies who. Coordinate and control pricing in those markets. In any market, your viewers are obviously more financially astute than the average risk and reward are generally tied to each other.

If as an example, I’m going to send $200 to the Philippines. And if I show up at a bank or a Western union office and I hand $200 in cash to them, To start that transaction there essentially is no risk in that process for any of the people providing the service throughout. And I’m not denying there is some service being performed, but the risk of taking a 25% cut doesn’t make any sense.

And but that’s what happens when you have monopolies and you have oligopolies and the banking system is, probably no better example of that in the world than the banking system. Okay. We’ll talk for a second now about money and inflation and what’s kinda going on in the world and, the first thing is I’m gonna play just a very short little video clip here.

From a guy named Neel Kashkari who’s president of the federal reserve bank of Minneapolis. This is from a 60 minute interview about a month after the COVID crisis. And I think you’ll find his words. Very interesting. Can you characterize everything that the fed has done this past week as essentially flooding the system with money?

Yes, exactly. And there’s no end to your ability to do that. There is no end to our ability to do that. So very interesting quote, so it basically is saying there’s a certain amount of money out there in the world already, and we’re just going to print. As much as we want without any control, there’s no oversight.

There’s no vote by Congress. There’s no vote of the people. They’re going to print as much as they want and there’s no end to that ability. Very scary. No, what, there’s different theories on this, right? Like my thoughts. And I don’t really care too much. At the end of the day it’s going to become inflation, the reason why I invest in hard assets, but like why can America do that right?

Is it because our military, why doesn’t all the other countries just print a bunch of money too? The truth is lane. They do Canada prints it. The ECB managing the Euro, does it, the bank of Japan, does it. Bank of Japan has been doing it for since 1980, since their financial crisis there.

And as they print this money and they create debt, they create a lot of debt for the governments. Then what they have a tendency to do is repress interest rates. And as they repress those interest rates and the debt grows. They backed themselves into a corner because if they have all this debt, the us has debt somewhere just short of $30 trillion.

Now, if they increase interest rates, they’ll increase the debt burden on their own debt. And they can’t do it right. They back themselves into a corner where the natural thing is at some point, if you repress interest rates, you create certain actions you create inflation. Does, they’re trying to create inflation.

We’ll talk about that later. Their stated goal is to create inflation. At some point, You have to use increase interest rates to dampen the inflation, but they’ve lost that tool because if they increase the interest rates now they’re now their debt burden is ridiculous. It’s a very ugly circle.

And so there’s different schools of economic thought about it. But you talked about like sound money and hard assets. The Austrian school of economics is really founded on that principle. And it would say you don’t do this. If the economy is taking a hit. You have to let it take its hit and you pay the price and it will recover and self balance and everything will be okay if instead, what you do is you just keep printing money.

You’re kicking the can down the road, but the problem at the end gets worse and worse. Theoretically, I’m not actually predicting this, but theoretically you end up with the these embodied way case. Or the Venezuelan case where people are, walking around with wheelbarrows full of cash to buy a loaf of bread.

That classic example it does really happen. It’s even happened in modern days. I think because of, as you said, the U S that won’t happen too, because. At least right now is the global reserve currency that provides some insulation and encounters the hyperinflation forces. But it doesn’t mean there won’t be material inflation forces though.

And again, we’ll talk about that in a little bit. So second thing want to talk about here. This is a little privacy and just a little history lesson. There is an organization, a lot of people probably haven’t heard of it’s called the international bank of settlements.

And I think a good way to think about it is the bank of banks. So if you have the central bank of Peru and the central bank of Austria, and they want to move money between them, they need a bank in the middle of them to make that transaction. And that’s the international bank of settlements. It’s run by a fellow named Gustin Karstens.

He’s a former finance minister of Mexico. And I found this quote which was from January 1st of this year, speaking at a conference about the future of digital money, basically central bank controlled digital money which is called CBDC central bank digital currency. So I’m going to play this short quote for you here.

 

We don’t know. For example, who’s using a $100 bill today. We don’t know who is using the 1000 to date. It gives you friends with the CBDC is the central bank will have absolute control. On the rules and regulations that will determine the use of that expression of central . And also we will have the technology to enforce that those two issues are extremely important.

And that makes a huge difference with respect to what? So hopefully you were able to catch that those of you listening. He does have a little bit of an accent, but what he’s really saying is we’re at the central bank level, there’s an attempt to redefine what cash is and to do so in a way that essentially leaves no room for privacy and financial transactions anymore.

And I think that. Understanding that, a lot of critics of this will say things like don’t do anything wrong. Why should you be worried about people knowing what your financial transactions are? If you don’t do anything or you shouldn’t worry about it. And the big concern is the sex traffickers, the money launderers the drug dealers, we have to protect against those people.

And, my comment is first that. I believe, and this is a us thing that, I have a right to my privacy. And that if, unless I’m suspected of doing something, I shouldn’t be surveilled is essentially saying we are going to surveil everything and not just at the U S level, but he’s talking, this is the international bank of settlements, not the fed.

This is not even a us agency, but talking about a global oversight over this whole thing. Number one, number two, one of the. Powerful things about blockchain, but also the negative things about blockchain is that every transaction is theoretically preserved forever. So what it means is there can be a revisionist interpretation of transactions.

So today I don’t think anybody would dispute that. Filling your car with gasoline is in any way an offense and that something that you should pay a fine for, or be in prison for, but in kind of a potential dystopian future. And I’m doing this for illustrative purposes, not to scare people, but to say, what if 20 years from now global warming does take hold and that environmental concerns get bigger.

What’s to stop them at that point from going back and looking at the blockchain and saying, Hey lane, over the course of the last three decades, you’ve purchased a hundred thousand dollars worth of gasoline and you therefore created this carbon footprint. So here is a tax or a fine for having done that.

Or maybe in a real dystopian view you’ve personally ruined the environment, therefore I’m putting you in prison. So again, I’m using extreme examples for illustrative purposes, but that we never know. But things to think about yeah. Yeah. And I, again, I think what you have to do is you have to say, where is your line?

What is reasonable? And I think for a bank or a federal agency to say, Hey, we want regulations that financial transactions over a certain size or repeated at a certain level with a certain volume maybe those need to be disclosed. Fine. Okay. I understand. I’m not so libertarian or so extreme to say that should be the case.

But I think this line of saying it’s the beginning of this quote, we don’t know who’s using a hundred dollars bill today. I’m like Hey, if I want to use a hundred dollars bill, I believe that’s my right. And if I do something wrong with it, let’s say I buy cocaine with it.

Fine, arrest me for buying cocaine, but don’t use the a hundred dollar bill as the tool and upon which to do that. And these are like, this is why I don’t like politics, right? It’s like the big government spokes against this crypto currency are using this as their argument.

When in actuality, they just want to make sure they can tax people at the end of the day, or maybe there’s a few other things that I’m missing that they want, but they’re using this as the scapegoat. Yeah, I would agree with that. And again, there’s always unintended consequences, so how big is the reach?

So anyway it’s a point in time where I think we have to be very careful. Yeah. That was my big thing against the script though stuff. Yeah. I think it’s great. And I’d sure to not have to send wires off and all this type of stuff and. All these estro companies would go away and all these title companies, cause they would be tracked.

Yeah, Bitcoin, but these are some of the unintended consequences and the governments don’t want this to happen. They lose their power as the central banks and Oh yeah. May not be good to be betting against the big guys. But I don’t know. I think you’re going to get into it later, right?

There’s becoming more mainstream adoption of the big banks by the stuff that it’s hit that tipping point where it’s hit that adoption point. Yeah, absolutely. Absolutely. And I will tell you lane again, this is just one person’s opinion, but I would say the number one reason that governments want to con then you control money.

Is that. If government wants to accomplish something, let’s just say they want to build a bridge somewhere. Okay. There are two ways to pay for the bridge. Federal government let’s say, okay, they can tax people or they can print new money. Okay. So if you tax people there is. No way around it has to be fully disclosed.

People get pissed off, they stop electing their officials, right? So it’s a lot easier to print money because you say we need a hundred billion dollars to build this bridge, okay. If we just print the money and we just dilute the overall several trillion dollar money supply by a tiny bit.

We’re basically stealing the money from the people who already had the money. I use the word it’s insidious. It’s hidden. Yes. It gets the money from people, Roz them in their sleep, but people don’t know. And now the government and everybody’s yeah, inflation happened.

Do you know? It sucks for all of us, it wasn’t our fault. And people buy that storyline. Yeah. I like to call it death by a thousand paper cuts because you take a little piece every day and it’s not enough. To make it hurt. If you don’t, eventually you lose an arm. If you take a big enough paper, if you lock the whole arm off at the beginning, people are going to be pretty upset about it.

But if you take it a slice of skin every day, it’s less upsetting. Yeah. And this is what do you do about it? You buy hard assets. You don’t be a saver. The savers will be the losers. Yeah. Yeah. And see, that’s the, that’s a great point lane because to me, that is the fundamental problem with the world we have today.

That you’re absolutely right. Your community here is ahead of the game because you’re providing yourself by investing in hard assets, investing in cash, flowing assets, you provide yourself. A lot of protection against this inflation, but the sad part of it is that if you look at the wealth distribution, we have a slide on this.

If you look at the wealth distribution of low income people and high-income people, high-income, people have very little cash and a lot of assets and low income people have a lot on a percentage basis. Low-income people have a lot of cash and no assets. So when inflation occurs, it hurts the low-income people way worse than it hurts the high income people.

So it’s this whole thing about taxation. So when the president administration is doing a lot of things to raise taxes on the wealthy, that’s the way they do and to make the poor feel better, not. Fully disclosing that while they are raising taxes, they’re printing the shit out of money and hurting the poor a lot worse than the wealthy.

Yeah. It is what it is. And it’s important to be educated and know how the system works. And I know here’s something funny. We usually get takeout and I eat more than my fair share of for sure. And if my wife’s a safe or weird, yeah. I eat her food and the next coming days, I call it inflation, and I’m being a troll, but I do it because, you only got one time in the world and China’s valuable, blah, blah, blah.

But it’s true. Right? Savers are losers. People who hold onto things and don’t do anything are ultimately going to be for the future. Yeah it’s true. And part of my message here today is in the current financial system, that is absolutely true in the Bitcoin system that can change a little bit.

And in the Austrian school of thought, it can change a little bit where not that investment can’t be rewarded, but that in a true hard money savings is not penalized. They’ll put it that way. You know that, you’re not gonna get obscene wealth through savings, let’s say, but you’re also not going to get robbed.

So this is what I believe an economic system that would have that characteristic would be fair to me because I like to give an example. I have a grandson he’s nine years old and his name’s Arkin. And if I say Arkin, Come over to the house and help me clean the garage.

Okay. And let’s say I give him $20 for cleaning the garage what I want to say as his grandfather is, Hey arch, and put that money in your piggy bank and save it for college. Save it for 10 years. And when you go to college, that’s going to help pay for your college. But I can’t give him that advice today.

That by the way, that advice was given to me by my grandfather, but I can’t give it to my grandson. Why? Because if he puts $20 in a piggy bank or a savings account, he’s going to have about 12 or $14 of purchasing power, 10 years from now when he needs it. It’s ridiculous. So what it does is it forces a nine-year-old into investing.

And one thing about investing is investing always involves risk. So we can do it certainly in a way where he does not taking inordinate risk, but it doesn’t seem fair to me that a couple hours of work that he put in to help me. That labor can’t be preserved and used later in time with equivalent value that, we’re basically robbing from a nine-year-old kid.

That’s what inflation is to me, it’s robbing from a nine-year-old kid and stealing the work that he put in cleaning a garage. And I think when you think about it in that context, and then you extrapolate it and say maybe it’s robbing from somebody who worked for 40 years and put their money in

their savings account and money market funds. And now they’re trying to retire and live off of that. And I think, again your folks listening to this, you probably understand that, it’s a shame that people are taught that, but that’s what our system teaches people because they should get that money instead of in a money market or a savings account.

Should have been going into hard assets and preferably cash flowing hard assets and but that’s not what most people do. And that’s what certainly what not most people are taught. Yeah. And that’s unfortunate. But maybe you should just join your kid, steal his money. Let’s call it inflation either.

He’s going to be really smart in the future, or he’s going to be an email child and. Go down a wrong path. One of the two risks. Yeah. So anyway we will, we should probably keep this thing, moving it not not bogged down too much. What happened with Bitcoin in the last year has been.

Just unbelievable. And certainly several other cryptocurrencies have followed along, but I like to focus on Bitcoin because it’s the granddaddy, it’s a trillion dollar market cap. And I’ve been preaching about it for several years now. And, but a lot of things happened in the last year because of.

COVID and the resulting actions by central banks around the world. And as I said, in a previous slide there, basically a decade happened in a year. And so all of these things the level of quantitative easing concerns over stability of a lot of governments.

It accelerated a whole bunch of things and made the case for the Bitcoin at an unbelievable level. And one of the things we saw and you talked about this earlier lane was this dramatic change and rapid maturation of the market where Big banks, big financial institutions, JP Morgan Stanley, Deutsche bank, et cetera.

They’ve all jumped in. They all have a presence. They’re all providing services, often custodial services being the number one thing that they provide. So this concern like about, Oh, it’s a for instance, Janet Yellen us treasury secretary. Who has as pissed me off, frankly, frequently, lately, because she’s been saying things like Bitcoin, doesn’t have a function other than to help.

Money launderers and criminals. That’s really not true. And we can, because of the blockchain take a reasonable estimation of how much illegal activities going on. Most of the estimates are about one or 2% of the money in the Bitcoin world is being attributed to some sort of criminal, which is less than the U S dollar.

By the way, which is probably more like four or 5%. But nobody blames the dollar, for, to pay no attention to the man behind the curtain. Yes. Yeah. Trust us. Trust us. And we’ve had wants is always wants the best and will always want the tech. Yeah. Yeah. Yeah. Unfortunately a lot of people believe that and, but I don’t think the facts supported very well.

And just on that list, just to expand on it a little bit, not only has. Some of those big companies, but all the big payment processors, visa, MasterCard, PayPal, Venmo, just the other day. They’re all in big life insurance companies, Massachusetts mutual, New York life. They both put several hundred million dollars into Bitcoin.

We’ve got funds like Guggenheim Tesla put a billion and a half dollars in, so this is rapid acceptance across the institutional and corporate. Structures around the world and we’ll dig in a little deeper on that in a minute. I had given a speech in February of 2020 and right before COVID and at that point in time, Bitcoin was trading at about $9,500.

And. We saw a dip. It had it had a big blip on black Thursday, March 12th, recovered very quickly. And has been as high as 65,000 and now sits at 55,000. And a lot of people when they looked at this situation for instance, the gold bugs and maybe there’s some of the on here today, they’ve been dreaming about this day when the world return into this chaotic situation, whether that was a pandemic, a world war, something like that, what happened in gold would suddenly become this massively appealing asset.

Didn’t happen. That same period of time I talked about Bitcoin being up about 300% gold, only up about 20%. And this year it’s only up about 3%. It’s just kinda been middling. It really hasn’t done anything. And it’s my belief. I don’t think I can prove it nor can I think anybody disprove it.

But I think basically what has happened is. I think Bitcoin has stole all that thunder. So the trillion dollars, Bitcoin Rose almost a trillion dollars in market cap between early 20, 20, and today. And I think it stole all that from gold. And that gold is probably be in the 2020 100 range, at least if Bitcoin wasn’t there.

And I think what’s happening is that.

People are realizing that Bitcoin is superior to gold in every metric, except for history. So it’s merely a comfort factor that, gold has thousands of years of history as money, or at least as a store of value. And I’m not saying it’s bad. I don’t think it’s going to crash necessarily overnight or anything like that.

But most of the attributes that have made it appealing as money I believe are diluting. And we’re going to see it kinda middle along and probably float down to more its natural rate of what its value is as jewelry and as an industrial usage, what the gold people like to say, it’s intrinsic value. And I think we’ll find that most of its current value is in the speculative component.

Not in the intrinsic value. And this is happened with silver. For instance, silver is lost it’s positioned as money and this is where a lot of like the gold bugs. And we don’t want to mention names up there, but if you break down, love their thesises on why gold is the thing, other than the fact that they get compensated and get commissions every time you buy and you click on their link Same could be said for crypto.

And so I think we both agree with a lot of these guys’ arguments, but why not crypto? And they can’t answer it other than the fact that their website cannot get commissions off Bitcoin. Yeah. Yeah, it’s very true. And he said, I can tell you laying in that, tell your audience, I’m not here selling anything.

I’m doing it from an, like I said, purely evangelical perspective because I want the world to be a better place for my kids, for my grandkids. And I think this is not to be overly dramatic. There is a one-time chance in the history of mankind left to take control of money from governments. This is it.

I don’t believe they will ever let a Bitcoin sneak up on them again, that they were blindsided by this. They ignored it for a long period of time. And now that it’s it got really big, really fast. They didn’t see that coming. They didn’t see the adoption. Infiltrating, fortune 500 companies and major funds and big financial institutions.

And now they’re trapped. They really can’t ban it legally. There’s no way that’s going to happen, they can’t shut it off. Technically it’s too big and too widespread. They can make it maybe a little difficult, but they can’t stop it. And this is it folks, this is our chance. So if you like your fee out money, then you know, God bless you and, go for it.

But if you want the world to have a hope of having a true free, transparent non-inflationary money supply, this is it. Jump on board. Now w one of the things I’ll say here is I think people often have a hard time figuring out what Bitcoin is. So they like to compare it to things that they already see.

Is it like this stock? Is it like gold? Is it, but the problem is. It’s so many things. I think you have to really say it’s something unique in and of itself. It’s a monetary network, a decentralized monitoring and work. It’s a protocol like the internet court has a money characteristics, very strong as a store of value, some value as a medium of exchange.

It has the ability to be a unit of account. Although right now it’s, doesn’t really have a lot of that. And I think when people think about, should I put some of my net worth into it? How do I think about it? How do I evaluate it? It gets really difficult. And I think people get stuck on that.

I say that you have to think about it completely differently if you’re a trader type person, which I am not, but if you are. It’s going to be very tricky because I think a lot of the things you think you may know about what a certain trading pattern looks like, or a certain shape of a curve or a certain pattern you may see that in Bitcoin and say, Oh if this was happening in a stock, it would mean I buy or I sell, or I do this.

But don’t think that you can apply those same curves to Bitcoin. It might work one time and then be an absolute dumpster fire the next time. Bitcoin doesn’t follow those patterns and again, it’s not a company, there’s no leader, it has no head. It isn’t beholden to anybody. That’s a big thing, but the last thing I’ll say about it here is.

This is the way I look at it. I don’t measure it in dollars. So I view Bitcoin as in the merging parallel financial universe. Okay. And if I move some part of my wealth from the existing, see out universe, primarily dollar base, and I move it over into the Bitcoin universe. I don’t intend on it ever going back.

Okay. That I am not in fact I don’t like to use the expression I bought to Bitcoin. I’m more likely to say I sold my dollars and acquired Bitcoin. And that’s one thing I think people often kind of mistake when they think about money is they forget. That it’s always a two-sided transaction, whether you’re buying a house or a pack of gum, you are selling your dollars and you’re getting this other thing, whether it’s a commodity or an asset.

So if you bring that, let’s say it was an asset. When you bring that asset back to dollars you’re bringing it back into this. Scary thing. We’ve talked about inflation a little bit already. You bringing it back to this thing that is not working for you. So if you do that, you better get it somewhere else quickly because it’s a horrible store of value.

It may be, one of the worst stores of value of all time. And so anyway, this is a important part of, I think about trying to get the right mindset, to think about how Bitcoin works and and how it might fit in your world. Okay. Since I know you’ve seen most of this already lane.

There’s a predominant feeling. If I go out and I spoke last week at at Florida Gulf coast university, and I had a classroom, I had about 80 kids in the classroom and I asked all economics and business students and I asked them what’s the current rate of inflation. And every single answer I got from the audience.

Referred back to this chart for back to consumer price index or PCE. And the numbers that they came back with were 1.5, 2.1 those kinds of numbers. And then I said to them, I said in your life does the last year, does inflation feel like one and a half or 2%? And basically nobody felt that their world felt that way.

And so you have to peel back the onion a little bit and say what are they actually measuring? When the fed measures consumer price index, they’re really measuring the cost of the base and necessities of life. At best, by the way, I’ll even be kind to them. And just say, let’s say they’re just looking at the base standard of living.

They’re not looking at asset inflation, they’re not looking at luxury items. They’re not looking at aspirational items and you start looking at those things and you see a whole different picture and you realize that real inflation. Is way, way higher. My personal belief, if you blend it, it’s probably more like 10 or 12% right now.

And for those of you who can see the chart, this is a growth of the expansion of the money supply, which is up by about 30% year over year. So from a technical basis, that’s what inflation is. Inflation is expansion of the money supply. You don’t feel it’s symmetrically. It’s not like the price of apples and bread and toilet paper all went up 30% directly.

In fact, it usually inflates through hard assets. First, the things that you know, that lane talks about all the time, those are the things that see at first. So when you’re investing your money in those things, That’s great because you’re ahead of the inflation curve and you’re buying those assets with pre inflated dollars, and it might take two, three, four years for all these effects to filter through.

But some of it’s immediate in this world. I just so happen. I have a chart here just current from yesterday, lumbers up 265% gasolines up 182%. Corn is up 84%. Sugar’s up 59. Cotton’s up 54 coffees up 13. You start looking at those numbers and then, for a lot of the folks here, you look at real estate.

I know I live in Florida. Real estate prices are up 16% in Florida this year. One year and it’s, and if you’re looking at things like Miami beach properties or Naples, Florida properties are up way more, in the higher, more desirable areas. I got a direct antidote for that.

So we’re building a 200 unit apartment complex in Huntsville right now getting kick their butts with the lumber prices going on. As I said that’s inflation. It’s not the fact that the Lumber’s more expensive it’s inflation. Yeah, we’ve got contingency to cover. Cool. But how great is it going to be in the future when we finish building this thing and sell it?

Because already, just in the past, I would say a year we bought out another hundred unit out there. The cap rates have come down at least a quarter percent. We have a couple million dollars of equity in that property. And part of that is rehabbing units. I’d like to say it’s our hard work and dedication.

I would say a million out of $2 million of it. Just that one property is inflation. Yup. Rates coming down. Yup. The right side of the curve. I’m glad you’re blessed with that lane and those people doing similar projects that may be watching, God bless you.

There’s an actual name and economics for it. It’s called the effect. And the cancion effect basically says that as new money comes into the system, those closest to the money. Benefit most. And I think you would know it as those people that see new money come into the system, they have access to cheap money.

Like people you land, you have access through the banking system and you have credibility, so you can get access to money at very discounted rates that allows you to get into these assets before the effects of the inflation have rippled all the way through the system. And so you’re going to buy those assets with pre inflated dollars.

And you’re going to ride that whole thing up. You’re gonna ride that whole inflation curve and do really well. But again, the guy that unfortunately is making $12 an hour and, barely covers his rent and food every month. He’ll never get out from that.

And if what I like to say too, is the best measurement of inflation is not what it costs you to live today, but are what will it cost you to live in your dream? So if your dream is a penthouse, condo in Miami beach and a Lamborghini, and you’re 20 years old, let’s say and say how much money is it going to take for me starting at zero to get to that?

You’re gonna have to not only earn all the money, but you’re gonna have to beat inflation the whole time. Let’s say to try to get there by the time you’re 35. If that’s your goal, you’re gonna have to do something really extraordinary in high inflation times. So again, that’s partly why when I started this about.

How did the poor get repressed and oppressed it’s because of this. And another thing to remember is the dollar is the global reserve currency. So all the other currencies in the world are pegged to the dollar. So if you’re a poor person in Manila, like we talked about earlier that the gap to affluence has just gotten so massive.

Like how do you ever close it? It’s almost unattainable. Here’s just a couple other things, just to show, how inflation has changed. No. This is since 2000, average home price, up 5% price of a car up for college, up over six. We have all of those sorts of things collectible whisky and homes in the Hamptons.

We have all those things. All so we’re nearing the midway point here, folks. We’re really gonna, we’d like to, we’re going to have Bob back to finish up the conclusion, but we’re going to make this a wrap up part one here for you guys, because I got to go get my COVID shot so I can save other people’s lives in the process.

And we’ll record this in a future podcast, but thanks for coming by Bob we’ll connect next week and wrap this up and I guess for you guys listening we talked a lot about inflation, right? This is the insidious way that the government devalues your money. If you just had it where everybody else has it in their bank accounts and their assets that don’t really appreciate with the pace of inflation.

So another good reading would be going to simple passive cashflow.com/debt. I wrote an article in Forbes regarding this topic and yeah, this isn’t the stuff that our parents taught us. But certainly, hopefully it’s not the stuff that myself and Bob were going to teach our kids and hopefully you’re going to follow suit, but we’ll catch you guys next week.

 

How Do the Wealthy Pay Off Debt?

https://youtu.be/I1eVpkOPWMI

The wealthy, think about how do I have capital that I control because I like to think of it as an emergency opportunity fund, right? You’re going to have life come at you where you have a bigger expense in some months that you weren’t expecting that would be considered an emergency. You’re also going to have opportunities, which is the thing that’s really exciting.

It’s the reason that I want to have cash that I can get to, and that cash that I’m storing. Is way more valuable than paying off the loan as quickly as possible. Here’s the thing. If I have the cash to be able to pay off my mortgage, I’m not in debt. Now. This is something that we talk about on a regular basis.

And people say just because I have a loan, that means I’m in debt, but I know you and your audience are super smart and you’ve probably thought this completely through already, but you’re only in debt when you have negative equity. And negative equity is a position where your assets are less than your liabilities.

Now, if you had your cash sitting somewhere that you could access and say you had $700,000 and you want to pay off your $700,000 mortgage. You could, if that was the best use of that capital for you, but what if there was something that would produce a higher return than paying off that loan? And you wanted to go ahead and put that into a commercial property or multi-family deal, or you wanted to go into mobile home parks.

And invest in that you have so many options when you have cash, but you limit your options when you just focus on paying off the loan and interesting, like that word opportunity fund doesn’t exist with the layman. They have an emergency fund. And as you can see what I do at my opportunity fund for when deals come along, my video, there is simple passive cashflow.com/bull fund, but I use a little bit of infinite banking and some other more liquid investments in there is that all the time.

May 2021 Monthly Market Update

https://youtu.be/0JKNzum9mr8

What’s up everybody. We are going to be doing the monthly market update for May, where we go over the. Latest happenings across the headlines of what’s impacting our bottom line as investors and what to be on the lookout for in the future. My name is Lanco Oka. I read simple passive cashflow.com, currently owner of 4,500 rental units and the creator of the content@simplepassivecashflow.com and civil past cashflow podcasts.

Before we get started, make sure you guys go to the new YouTube channel. The creative is what a fun channel not so quite made for accredited investors, but for the younger kids out there, just getting started under a quarter million, half a million dollars net worth currently 90,000 views so far check that out.

It is called enriched uncle. On YouTube channel at 1,900 subscribers. And that is me, the girl version of me. So let’s get started. Oh yeah. If you want to check out the podcast, it’s on YouTube, iTunes, Stitcher, Spotify, Google play. So if you teach it once before you get started into the news, first one here teaching point passive losses.

So a lot of the K ones are coming back to vestors. Now K ones are the simplified form of some of you guys have rental properties. They are the super cumbersome, confusing schedule. Ease. K ones are so much more simpler. Here, an example investor put in, actually, this is mine. I put in $60,000 into this one investment and got a $47,000 deduction in the first year or 70% of what I put in as a first year.

Some of you run a property owners know you can deduct the pace of the property over 27 years. They get that paper loss, but with syndications, private placements, You can do a big cost say and get a huge amount, more of passive losses. And we are very giddy over all the cool things we can do with these passive losses, which you can check out more@simplepassivecashflow.com slash tax.

You guys are tired of flipping houses. I know I would be is a pain in the butt to do that stuff. You guys need to act for credit. If you guys are getting on the path to accredited investor status your boat to this website, simple passive cashflow.com/burr, B R, which stands for buy rent, rehab refinance for Pete.

I’m not a big fan of this and you read this article to find out why. Now there are a lot of different potential changes coming through Congress. One of those things is called these exclusionary zoning processes. So what this is to say it in a semi PC way is basically what we used to have.

This country needs more workforce housing, right? BC, and even call it D class housing because we have a growing population in America and a growing lower middle-class. The wealth gap is getting bigger and bigger every day. Now in the past, there’s this kind of this saying not in my backyard, right?

The rich people are like, yeah, we don’t want these like low income or semi low income apartment complexes or these basically the projects. And we want to keep them separate. Now this none of my backyard concept is trying to be going away. And I think this is good, right? This is exactly what I invest in, good, lower income properties scattered throughout decent areas.

When you have the, not in my backyard concept going on you, that’s how you have Guedel’s that’s so you have the projects, right? There’s huge segregation between the rich area and the super poor area. This is all stuffed into the big stimulus plans to help produce or affordable units, which this country needs much more of it.

Guess what folks rents are going back up? National rents are beginning to upward trend after being flat-lined in 2020 with the pandemic. So hashtag rents do, if you’re a landlord, rejoice,

we’re going to get into some of the headlines here. And these are some of the macro economics. I think all of the investors like when we dive in, highlight this for them, but I think it’s no secret that people are getting the heck out of the high price areas, such as the Bay area sample say San Francisco.

Los Angeles, Southern California, moving to these more pro economic areas for growth areas where the cost of living is just a lot less. And there is just as good job prospects there. So these are six of the places. A lot of people are moving towards air Phoenix, Arizona, Austin, Texas, Las Vegas, Dallas, Texas, Miami, and Atlanta, Georgia.

And where are they coming from? I think. California San Jose and Los Angeles are more of the likely candidates, especially for the Texas and West coast markets, such as Phoenix and for Atlanta and Miami. A lot of people are moving away from your Chicago, DC from those areas. And if you guys are checking this out on the podcast form, which this also gets released once a month we have this we have nice slides and cool pictures for you guys to check out on the YouTube channel.

Also, if you haven’t yet joined our Facebook group the GUI, which we have, we engage in conversation on these topics there moving onto the Bloomberg article where San Francisco residents cause there’s a big Exodus leaving the Bay area. A lot of them are moving to Sachar Bentall, which is adjacent which is an obvious fit for people who don’t want to totally relocate out of the area.

But a lot of them are moving to Dallas, Austin, Houston, Texas, and Phoenix and Tucson, Arizona. In addition to Las Vegas. Yes. So more demographic trends. Now, what we’ve got displayed here on the screen are the red States of the top States for outbound migration. Red is bad and green is good in this case. So that’s where the inbound migration is coming in.

I think a lot of investors have been clamoring about Boise, Idaho, but you got to remember about Boise. It’s still under a quarter million population, which is absolutely nothing. In my opinion, it’s smaller than a tertiary market. I won’t really invest in places unless it’s maybe half a billion or greater population, unless it’s a really good deal, of course, but I still want to stay with solid tertiary markets.

A little bit of humor for you guys. Not endorsing any drugs, but come the simple passive casel.com. You want to be happy?

So Yahoo finance reports that the fed holds rates near zero notes, rising inflation as U S economy strengthened. So I think this is no secret interest rates are still on a historic low. They are creeping up a little bit, but still all time lows for the most part. But inflation is here. Inflation is here.

Folks, if you don’t believe it, this is the game that governments play, where they go into all this debt. The United States has the best military. So we have the Liberty of creating all the free money we can create so that all we’re trying to do is basically inflate our debts away. When your parents bought that 30 year mortgage way back when, that debt is nothing compared to debt.

That’s essentially what the government is doing today, which I think is pretty smart. A lot of people get all wrapped up in what’s the debt number today. It really doesn’t matter my opinion. But how I’m playing it and where I’m putting my money. It was my mouth is I’m buying assets that go up with the pace of inflation.

I think one thing is certain those people who. Keep money in assets that don’t rise with inflation are going to be the losers. People with cash in the bank will be the losers of some more population growth statistics from the Yardi matrix. Where are, where is the rent growth went up and up? I think a lot of the investors, they key in all types of different data sources like.

Job growth, they key in on certain employers. But to me, I think the biggest thing that I look in just terms of a numbers perspective is what are the rents doing on a quarterly and annual basis? And this kind of sums it up right here. The rent’s still going up five, 6% in the inland empire Sacramento, Phoenix, Las Vegas, Tampa are the top five.

The places where they’re decreasing New York, San Jose, San Francisco, Seattle DC are the users.

This is just another same data, but broken up based on the left side, you have all asset classes. And then in the middle, you have this lifestyle asset class, which is more your luxury, your higher end stuff. And then what we like to invest in is this asset class club renter by necessity. In other words, people got it right here because they don’t have too much money.

They’re stuck paying $500 a month for a one bedroom to $1,500 a month, a lot better at that facility or work first housing. Whereas some of our clients, they decided that they don’t want to have this house. It’s too much time it’s old, right? So they’d rather move into a luxury, wanted three bedroom apartment, get all these luxuries, get a pool that they don’t have to clean, even get trash valet.

That’s a non-traditional approach to spending on money on where good accounts and getting money out of that down payment that, that equity and getting it working to build a stable, financial future for their families. As opposed to doing it, the traditional way of buying a primary residence to live and seeking that big down payment.

And there’s dead, lazy equity, not doing Jack and also for going on. Now, they have that big monthly payment and then other stuff to hear some rent, growth trends from some of the top markets. I think, a lot of these top five markets I don’t invest in Sacramento in an empire.

I don’t think I ever invest there. It’s just too expensive for the rent that I get there. Again, I follow this threshold of 1% men to value ratio greater. So you take the monthly rent divided by the purchase price, and I need to get something that’s 1%. So I’m able to cashflow on a monthly basis. Because I don’t really invest off of the appreciation potential of it.

Great. If it happens, but I consider that gambling. So folks who’ve have rental properties in Seattle, California say they have a lot of appreciation. Good for you guys. Easy come easy, go. I want to invest for cash. Okay. Those people investing in that nature are like I said, gambling, and these are the, what I call them. On sophisticated or dumb money or in this graphic, John Burns calls these, the investor mania 2.0 categories. There’s four of them. So the first one is the single family home landlords. Now, the reason why these are the dumb money is because it’s easy to get a rental property, anybody can just get into it. And there’s a high competition value, and this is why we try and buy apartments that are higher than five to $10 million. So we can arise above these types of mom and pop investors. The next one that I think everybody thinks about when they think of investor mania is the house flippers, right?

The HGTV stuff it makes for great TV I’ve met, but you’re a hundred percent reliant on the fact that the prices are going to keep going up. Sometimes if you’re flipping in the right location, like a secondary market, like Birmingham, Atlanta, Indianapolis, Kansas city, little rock. You have the exit strategy to be able to cashflow on the property with it 20% down payment.

But other than that, you’re bleeding money. If things go wrong, you have to switch to a forward strategy. This is why in our group, we do not flip or do Andy’s first strategies. Another one is foreign investors buying secondary. All right, this is the international dub money. And they’ve got a lot of money.

They can do what they want. And then home ownership, helpers. So these are the people that have both rental home groups or shared home equity platform.

Another Yardi report here. This is showing the average units absorb per property. So this is where do we call it? Absorption. So basically how much stuff you have there? How quick is it going to get the stuff. And as you can see, the blue was 2019 and the absorption, it was a lot more than what it was, and it was a lot higher than in 20.

Watch it.

Red cafe came up this full table of the top 30 hottest rental markets. And what’s a hot rental market. They defined it as the same thing as absorption is another way of describing it, but the inverse of it is vacancy days. If there was a vacant unit, how long did it go before getting filled?

Some of the hottest and the countries are in the low twenties. So it takes just under a month to lease up that property.

Some of the occupancies on some of these markets are in the 96 to 98% range. We like to run our properties in the mid to low nineties. Anything higher than that. It’s just a sign that you’re a restaurant high enough. You’re not charging for your properties. You want to attract the best tenants.

And you want to always be pushing rents,

Yahoo finance also reports Warren buffet is right. Relation is running Rapids. And I quote, here we are seeing substantial inflation says Warren buffet said this at the Berkshire Hathaway annual shareholders meeting. We are raising prices. People are. Raising prices to us and it is being accepted.

And another quote here, people have money in their pocket and they pay higher prices. It’s almost a buying frenzy. Buffett said noting that the economy is red hot. So there you heard it there from Oracle of Omaha but a buffet knows what he’s talking about. And unfortunately, this whole pandemic it’s hurt a lot of people and yes, we want to be sensitive to that, but we also want to call it the fact that a lot of folks, especially on the higher end, the white collar workforce out there maybe some of us the same to this reporting.

We’re doing pretty well, right? If you’re able to keep your job and work from home, Yes, you weren’t able to both traveling and going on a nice vacation this year and pay for those sports tickets, the football tickets that you wanted to. That’s a little annoying, but overall, people are putting money in their pockets.

These stimulus checks are going out. It’s just going to calf savings. I think it’s unfortunate that it’s again, it’s the rich getting richer and the poor getting forwarder and divergence of wealth between classes. And here the government is trying to do a good thing, but Oh my goodness.

I fear that this is becoming a 401k 2.0. So the headline read here is secure 2.0, which stance or some kind of governments trying to help people save for their retirement on the secure two on our retirement bill clears committee and move closer to passage. By no means is this finalize and it’s going to be different ways to get it to change, but you can go to our Facebook page and download the actual transcription of

what that document is at this point. Like I said, it’ll probably change many times over, but. My attitude on this is I’m a little worried because this is just like the damn 401k again. And to me, the 401k wasn’t really that great of a deal. I see it more as a way of the government getting what’s with all of these brokerages.

And now these brokerage, which are able to sell all their products of mutual fund projects, which are fee Laden. And have carried interest on their side, where they get compensated, whether or not the price goes up. And ultimately, this is what robs a lot of hardworking Americans of their retirement. Why else can you just buy a rental property?

You make 20, 30% on your money. If you don’t believe me, go to simple passive castro.com/returns. Take a look at that video. Or I’d break down all the numbers how you’re making money, my cashflow, which is the monthly revenue, the tax benefits, the mortgage paid down and the property appreciation are you making money four ways again, you want to take my word for it?

20 to 30% a year, if you don’t trust me, go look@mymathandofthepassivecashflow.com slash returns. But this is very early on. When I bought my first rental, I was like, what the heck? How’d you make it like eight to 10% in all my stock stuff, the stuff that I’m supposed to do, but I’m doing so much better in these like a simple rental property, a turnkey rental of all things that aren’t that great.

And then I discovered the church, right? If everybody just did what I did and bought a handful of rental properties, they’d be financially free, very quickly. I would society function. But, and how would all the wall street executives get all their salaries and build these big buildings in the middle of New York or all these city centers in the financial districts.

We can’t have that happen. We need all the American students that put their money in mutual funds so we can just feed on the debt in their state. But anyway, I digress. If you guys want to join our community, we have the founding office Ohana mastermind to learn more, go to simple, passive cashflow.com.

Slash journey. This group is pretty much a accredited investor only. So million-dollar network and above, or you make over $250,000 a year. You get access to all the products that I’ve created and doing the remote investor. I-Corps syndication LP guide 12 month investor plan, shade line hacking guy. But the power of this group is that network, right?

So we do biweekly zoom conference calls. You get access to the entire library and we have more than eight deal vetting group, but we are here to share best practices for tax legal, infinite bank and legacy creation. And the big thing is the network, right? Magical things happen. You get other like-minded working professionals around you that are pure passive investors.

If you guys are new, check out the incubator@simplepassivecashflow.com slash incubators here, you’ll learn how to buy your first rental property. If you’re just starting out. Now a little bit of background of what I’m doing, firstly, in my own life, every month I try to do a recap on what I’ve been working on in terms of these six categories versus growth.

So I’ve been trying to whoop thing. So it’s like this bracelet I wear, but it’s not like some like the Fitbit, I think it’s lame, but this thing is pretty cool. Like I’m a big techie and into fitness. And I haven’t seen anything like that. This it does her HRV. And it also tells you if you can hit an art at your workout today, that’s what this recovery thing is.

It tells you what your HRV is. Ideally, you want to have a lower HRV, tells you how much you’ve worked out that day. So this is great for me, cause I’m always in self-preservation mode. I don’t want to work out too hard and it tells me, Hey, you should hit a seven or a 14 today because your recovery is good.

And it also is a sleep coach. It also tells you how much sleep you should be getting. And the cool thing about this is we can create teams. So I joined my CrossFit gym. I have a household that I’m a part of. So we compete. It’s fun, it’s growth, it’s something different. I’m always moved to get better of how do I get contribution in my life while I started the rich uncle YouTube channel.

And this has been an idea for quite some time. Simple passive cashflow caters towards a credited investors today. We help people buy their first rental properties as turnkey rental rentals. And then eventually it’s become a credit investor at beyond that’s where the private placements and syndications and all these high net worth wealthy people, tactics come in.

But what do you do if you’re just starting out, right? You just graduated college, like how I did back in 2007 and I had a good paying job. But what do you do? Where do you start off? Cause everybody’s telling you all this nonsense about the 401k, each of fun diversifying and 25% international stocks, 25% midcap, all this type of stuff.

I am tired of listening to people who don’t know what they’re talking about and still working their job. The idea is don’t take financial advice from people who are not financially free. So I quit my job. So you know what? I’m just going to make this rich uncle channel and try and help people the way I think I can.

And if you guys are interested, check it out. Maybe if you guys have younger folks in your life pass it on. It’s supposed to be a little bit more fun and a little bit less dry than the content we’ve covered here. We’ll pass passive capsule land. There, I am trying to help. Get them away from their other coworkers at work, telling them to, Hey, if you wait till you’re 67 years old, you can get a lot more money from your pension fund.

That on drives me crazy. Another category that I was trying to do this month was significance. We passed 90,000 views on the rich people channel and why do I do this? I was super upset that everybody’s putting all their eggs in like this pensions, which. If you’re on Hawaii, 55% of it is funded.

If you’re in California, 69% of it’s funded my friends in Washington, here’s this actually pretty good. But for the most part, these States are hoping that you don’t make it to your average life expectancy. So they’ll have enough money and that’s messed up. My most, you guys are pretty prudent. So you guys have your own 401ks and stuff like that, but yeah.

What I realized is all that 401k stuff is a bunch of nonsense. It’s like a cafeteria of garbage investments. And in a way these brokerages are in boots with the government, right? Put your money in this 401k stuff. So you’re captive to all these garbage mutual funds where there’s high fees where you don’t see them and are frankly like you don’t get that much return.

You could get, do so much better. So here I am, I’m giving you that red pill to help you as you get educated. So you can make these better decisions and learn how the wealthy do things, because it’s not much different than how we do it. How you’re taught. We’re actually it is they’re different, but it’s not something that the average guy can implement themselves.

How did I get a low uncertainty in my life? I’ve committed to. Investing a lot of money into Bitcoin crypto. When, a little, certainly anywhere from one to 5% of my network here is a little table of the number of, I guess the way they read this is like your investment level based on your net worth.

And potentially it goes all the way up to maybe a quarter to a big chunk of your network as a very huge Part of your portfolio. Me Amy I’m in this one category, right? Because for me, I operate real estate and that’s what I know when I try and stay in my lane. I have a couple upcoming podcasts on Bitcoin and crypto.

I am a libertarian and I believe in the currency as a way of taking back control from countries and putting it back into people. So I do see it as something like that. And I do see it as a sustainable thing. And right now I see it as a land grab, but yeah, definitely not going to go crazy with this stuff, but like anything, educate yourself as opposed to just opening up an app and asking your buddy what they’re investing in.

How I balance that uncertainty is with certainty. And if you’ve taken a look at some of my past tax returns, you’ve noticed I don’t pay very much taxes. Because I use passive losses from my investing to offset my passive income and I try and lower my ordinary income as much as possible. You can learn more about this.

It’s simple, passive cashflow.com/ . You can also see my tax returns on there, but here’s a good one. On J 80,000 investment got $176,000 of first year passive losses. That’s almost like a hundred percent return of losses right there. Some people think it’s kinda messed up that the wealthy don’t pay taxes, but then again, not everybody’s pulling out their wallet, I’m putting money into each of these K ones represent a business venture that helps low income middle-class families with housing making, improving their community.

And that’s where the tax code is written. It is what it is. Those are the rules that government wants you to invest, especially in things like real estate and the way the IRS says it. If you do not invest well then bro, you got to pay some taxes, right? If you’re a doctor making 600 grand a year and you don’t invest to get losses and you don’t implement real estate professional status, do all these other things.

You got to pay taxes. That’s the rule? Lastly here how did I get a little loving connection in a world where I can’t see and yeah, you folks we’re having a baby. We did a book drive by shower, which I’m not super thrilled about the drive-by thing, but it is what it is. But there was I make all my social media stuff.

I know a lot of people that drives me crazy. Like it’s so lame. Like people have these quotes of like cash flow or passive income, like man’s boring. I make all my social media stuff and I try and keep it light. So fencing the perfect COVID sports masks, gloves stab anyone that gets closer than six feet.

And we try and network virtually, right? We’ve done this as a group within the foam and the incubator groups. Yeah, but, hopefully we can start the in-person events here soon. And if you guys want to learn more about that, join the mailing list and join the clubs that will pass a castle.com/club.

I normally tell people what I bought is that usually I like to go shopping Amazon, but I’ll be honest. I haven’t bought anything because I’ve been buying all this baby crap and I don’t even check the mail anymore because they know it’s not even for me anymore. But yeah, none of this was should have been construed as legal tax financial advice because I am power all your folks to think for yourself.

And now’s the time. If you guys have any questions, type it in, and this thing will feed it right to me. But Hey Craig, yes. Said I agree. The 401k is garbage. I think it was Craig that said, that the 401k is like signing a deal with the government that you don’t want to sign where the government ultimately has a lead over everything you’ve got.

So you know, the government’s got this big debt, right? All they have to do is say, Oh, now we’re going to tax this stuff at this rate. As all the baby boomers taking money out of their return. I thought that was a great way of explaining it. Craig, so thanks for that. Yeah, you mentioned the cares act was a golden opportunity to jailbreak money from the 401k.

I don’t know if you can still do it. You can backdate it for 2020, but if you guys can read the article to get ideas and talk to your tax professional, if you need a referral, let me know. But. You can go to simple passive cashflow.com/covid to learn more about that cares act, Joe breaking a hundred grand from your retirement account.

Oh, somebody wrote a question. Are you noticing tenants wanting an extra or meeting that other rooms so they can have their home office separate from their bedroom? Do you think that an ongoing trend is this a B. Class and above class thing. So generally, like I think people are putting more money into their living conditions is evident by like the substantial loss of home renovations going in.

And I think this is partly to do with residential real estate prices going up. There is a trend people, they’re building larger. Bedroom unit mixes. So two bedrooms and three bedrooms, not a huge amount, more, but like very small, right. As these trends develop.

I don’t know what the mix is. We get the engineers and we figured out what we just copied, what the big developers are doing in terms of 27%, one bedroom, 30%, two bedrooms, or whatever that mix may be. But definitely I think this is more of a B plus class or Hey, minus class thing, a lot of our tenants are hanging anywhere from $700 to $1,400 a month.

The class B minus class tenants. And a lot of these guys don’t really work from home. And we have a few properties where we did have a lot of more white collar blue collar mix. But for the most part, a lot of our tenants are working those jobs where they need to get out of the house or they’re essential workers they’re the backbone of America having an extra room that’s, that’s first world problems.

I think that’s more of a, your E-Class kind of vicinity. And if you guys like this, let me know. And hopefully we can do this again. And if you guys want to join us next time, you can check us out on the YouTube channel.

And the Facebook group is where we will live stream this. So another question here in one of your podcasts or investors calls, you had recommended not to deploy more than $250,000 in a year. Is there any checks reason for this? I don’t remember the context of this. I think what I was getting at, lot of investors low need that rich dad, poor dad book, that purple book that is the red pill of finance for a lot of people.

And they’re like, Oh my God. I got to get out of this, like crap, been investing in, for all my life and they go bonkers, they’re going into all these alternative investment, private placements and syndication deals. And I’ve had people that invested half a million, million dollars at nine months.

I personally am Whoa that’s a lot of them investing, cause the thing is what’s hard about syndications. Anybody can put one together, right? Anybody can invest in it, but like in terms of putting them together, Anybody can do it, you just pay a through $30,000 and supposedly you can magically do it.

So I say that jokingly, because not everybody should do it. And I sure as heck am going to invest in those deals, but those sponsors how do you determine who’s legit? It’s really hard to determine who’s legit and if it were me, I would take the approach of putting my money in. Going with the minimum and seeing how it works.

Call me crazy, but I think that’s a prudent strategy, especially when, lot of people that come into our group, they’ve been investing in the regular 401k stuff that traditional investing model for 10, maybe even 40 years, we have a lot of old people in our group. Maybe I shouldn’t say that, we have a huge range of ages in our group.

Don’t throw it away on some bozo who you just met. I just, today someone just mentioned that, yeah, they lost a hundred thousand dollars investing with this other sponsor and they’re happy that they found this, but that takes some luck. And I think to really feel confident to knowing that you’re putting your money with good stewards is to build your network with other passive investors.

So that you feel comfortable knowing that, other people have had good success in the past, but likely a lot of us and myself included, we don’t have any people who were investing in these types of alternative investments. Most of the people that we associate with or go to work with, or our families or parents just invest in the traditional mainstream retail stuff.

So we don’t have that network. But what I’m saying is that’s why we created simple passive cashflow. So that, that there is an opportunity to find like-minded individuals. And when you do, that’s when magical things happen. And if you want to stop screwing around, that’s where you join the family office on a mastermind, the fault I’m just saying, but, I think that’s the way into it.

And maybe I said the $250,000 in one year thing, I think maybe where that came from was. Like maybe you can go on. So a handful of deals in that first year, within a minimum investments being anywhere from 50 to a hundred thousand dollars. So you could go onto a few deals and you can sit and wait and watch, see how the sponsor performs.

Did they run off with your money to Mexico? They say that they were going to do it quarterly distributions. That start when they started, when they said it was going to So that would be the way I would do it. When I started to buy rental properties, I bought my first three in Seattle.

And my big first pivot point as an investor was investing sight and scene in Birmingham, Atlanta, Indianapolis in 2012, 13 what did I do? I bought one property in Birmingham. I see how it worked. I pause for six months to a year, and then, you know what the damn thing works. So I’m loaded. I loaded all those Seattle properties that have poor cash cashflow.

And I went into and parlayed my money into those other investments. So to me, I’m not saying that you’re going to do this, but I liked the approach of getting proof of concept and then going all of them. And they’ll bark. You’re not old. You were actually very youthful at heart.

Any last questions here? But once going twice, you guys like it does content. Please join the clubs will pass the cashflow.com/club. You get access to the free e-course to start learning more about this stuff and check out the podcast. Again, all of these monthly webinars are held@simplepassivecashflow.com slash investor letter is where I house all these monthly webinars.

And thanks everybody. And we’ll see you next month. Right?

How to Increase Tax Deductions on Single Family Homes

https://youtu.be/-TQIx5njkz4

So DIY cost sag is a platform we developed after being in the industry since 2002 and doing well over 15,000 studies. And we saw a need in the market for smaller properties under a million dollars. And whether it’s a single family, residential, duplex, quad, or triplex. We cover those, or it might also be a dentist office or any other kind of commercial property under a million.

We actually go up to $3 million, but it’s a lower cost quicker alternative. So how that works is we’ve built a modeling system and we’ll model the property. So it’s a non inspection product. It takes essentially. Five or 10 minutes to input the data you put in your credit card and you get your results instantly.

So what happens with that is you’re done and you get your results. So it is going to air conservative. And because we’re not inspecting it, there’s been a lot of talk like on bigger pockets of your folks. That’s in the bigger pockets about these solutions. We have tremendous supporters and people that question it mostly competitors, but we provide audit protection.

So in the event you’re auditing, which is very rare. But if you are audited, we are going to send an engineer out there and do a full engineering study, which we do again, we’ve done well over 15,000 a year since 2002. So we will defend you fully so you’re protected, but it’s a quick and easy solution, whether it’s a one to four family with a discount code that you’ve got through here with lane, it is, uh, $640.

That’s a wonderful word and matter. What’s a single family or quad anything in between. And if it’s under a million dollars in five plus units, it’s 1200, $1,390. That includes the audit protection is one 95 it’s insurance policy. So basically. It works great. It’s a good solution for the right situation.

Certain, there are plenty of properties that are under a million or right in that borderline that justified the full asset detail that you’d get from a cost segregation study for a future abandonment and disposition and things that depending on your purpose with the property and what your plans are with it.

I talked to folks and say, this is your best option, or this is your best option. Are you looking to maximize your depreciation and do a lot more value add? Or are you just looking for quick deductions? And an answer here, but if you’re a real estate professional or not, sometimes that makes a difference.

How valuable are these tax deductions to you for an officer? And it also takes into account, like how long are you going to put onto the property? It’s just like a turnkey rental that you’re going to dump in three years to go to syndication deals. Maybe it doesn’t make sense, but if you’re costing out maybe a little bit.

Larger property, especially in California, maybe that might be just enough to get some tax savings, to save up more money and eventually go into deals and get cost segregations there, and then sell the properties and not have to do a 10 31 exchange as I don’t like at all. But you guys can go to again, civil pass, a castle.com/cost state.

And then there’s the link there with the discount code SPC.

Are Bridge Debt and Pref Equity Good for Deals?

https://youtu.be/vDCJ0suvLac

Hey, what’s up simple passive cashflow listeners. Now I wanted to announce a new project I got going on. The rich uncle YouTube channel. So those of you guys have been following me for the past several years since we started this podcast back in 2016, simple passive cashflow started off with me buying some turnkey rentals, eventually getting my portfolio to 11 and 2015, and I felt the pinch and I realized these rental properties was not the path to financial freedom.

It was the path there, which I still think non-accredited investors under quarter-million half a million should definitely go on buy a rental property. You get that experience, feel what it is to be or moat landlord, and then move off to bigger and better things as you become more of a credited investor or on the verge of.

So it’s a transition into being more of a passive LP partner, diversifying yourself over multiple deals out there where you’re just an LP partner, little to no liability, no debt in your name. You can still Chavel hack all these credit cards, which we’ll have a feature podcast on that too.

And you can also partake in the value add strategy, right? When you’re buying turnkey rentals, which you’re essentially doing is your. Just buying an asset that has little to no built in equity in there other than your down payment. And there’s no business plan to increase the revenue, therefore increase the price where these a large apartments indications, mobile home parks, et cetera.

There’s usually some business plan to force. Appreciate the asset. And maybe we’ll get lucky with some market appreciation in there too. That’s typically real estate goes up in price, but the big thing is that force appreciation. The only way you can do force appreciation is if you do it on your own, in a burst strategy.

And that is that my first premiere video on the rich uncle YouTube channel. You guys can go and check out, So a simple pass, a castle podcasts and YouTube channel. We’ll continue on this path of, as you guys grow with me to be accredited investors, but lately maybe I’m just getting old, but I see a lot of kids these days between the ages of 18 and even.

Mid to early thirties, they already haven’t gotten it together, right? Their net worth is still under a quarter million, half a million dollars. And maybe for you guys listening, maybe this would be that cool hip fun video version of simple passive cashflow for kids where they can learn about this stuff.

Learn more about those basic financial things. In this first video, which we’ll be talking about is the burst strategy. Which you can give them. A lot of these people like to do this by rent, rehab repair. I frankly think it’s a waste of time and not a really good risk adjusted return when you could just be a passive Opie partner.

But what do you do if your net worth is lower and you’re not having any connections, that’s what this video is talking all about. So share it with your kids and listen to the rich uncle as they start to become old and grumpy. In the future, but for now it’s just rich. Uncle is a YouTube channel and on today’s podcast, I’m going to be quickly going over what is a bridge debt and private equity. And I think a lot of you guys have told me, you’re frustrated about other podcasts out there. Just sustain on lane thing.

And yeah, everybody does podcasts these days. They’re easy to be honest. Now, this is a sort of a sample of what’s you’re going to find in the syndication LPP course. And if you guys haven’t checked that out, please go to simple passive cashflow.com/syndication to check out the free guide the syndication.

And there’s a, be a link in there to the e-course. Now the e-course I think it costs like maybe a few hundred bucks. But it’s really good. It’s not just some lane book that just going to tell you every little thing that everybody other regurgitates over and over again, just runs through spin texts, application to regenerate the same old, a hundred page 200 page book, it’s going to tell you the secrets of what syndicators are doing out there to trick you guys into going into whatever deal. Not saying it’s a bad deal, but I think it’s just good to be aware of these things. And today’s podcast talking about. Private equity and bridge check is going to be a sample of what you’re going to find in the e-course, which I think it would , take most people 10 to 15 hours to go through the entire course.

But with that said, here is the content.

 I get asked all the time, so bridge notes on these large deals, as opposed to agency longterm, fix Fannie Mae, Freddie Mac, agency debt, is it good or bad? And, same thing pref equity, when there’s a small layer of a wan or pref equity investors, which sort of acts as like a mezzanine debt layer, is that good for a deal?

 

 It’s yes and no. And  I found this  analogy watching ESPN  it’s been the NBA trade deadline somebody, I forgot which player it was, but they were like, bringing over a person, who’s got their contract expiring soon to bring them on your team.

 

Do you do it or do you not right? Is it a good thing? Is it a bad thing? It can be a very good thing. It can be a very bad thing. And I thought this is a very analogous with  originals as a good or bad or pref equity is a good or bad. If you guys aren’t NBA fan or basketball fans, you guys can probably still understand the concept.

 

You bring over a player  a guy who doesn’t really want to be on that team and you bring it over to the new team. You bring them over to hopefully make your playoff run. , you get up and usually a pretty good talented player who wants out of their contract and is a free agent for part of a year, or maybe at most, a couple of years.

 

And it can be really good or bad. The bad thing is that this player doesn’t want to be where they’re at and they’re whatever. I’m just gonna play out to get my contract, , get my numbers up. So I can get my maximum value on free agency,  Which can be bad thing because they just want a ball hog and get their numbers up and they don’t want to play as a team and for  a playoff team, making that playoff run.

 

This can be not good for your success. On a championship runs to have a roll guy who’s just trying to  pad their stats. It can be a very good thing. On the other hand right now, here’s this player who’s really motivated and maybe they’re coming out of bad situation to coming on new team. And they really want to, they’re trying to make that playoff push and they want to win that championship.

 

It can be a very good thing. Is it good or bad? I don’t know. There’s, it can go both ways. And now we’re bringing us back into what the question of the day here, bridge notes, ? When you’re going in with a bridge note, ideally you want to be going into a situation where you have severely under market rents.

 

So you know what this bridge, no, the bridge is ideally from one to three years, you might have some extensions to be able to add on to it. But the bridge note is you exactly what name implies. You’re bridging yourself over to the side where you can refinance with that new net operating income to be able to capture that higher worth.

 

And at this point you pull out a lot of equity. You give back a lot of returns to your investors and you get an maybe at that point, you go into the longterm agency financing. So it can be very lucrative and very good idea. But sometimes, and I’ll use this term are the same bridge notes pro equity in mix.

 

Good deals better. And worst deals worse. Makes good deals better. And worst feels worse. It’s a magnifier. So it’s not as simple as Oh bridge don’ts are bad. Bridge debt is bad or preface equity and situations are good. It’s bad. It’s always, if you have a good deal. And this is what’s hard for most passive investors.

 

You don’t have the P and L you don’t have the rent rolls. You’re not able to do your own analysis. You’re really taking  what your general partner is saying. You gotta really trust them. Who knows? They might be doing a bad deal and trying to push it through. And at this point, a bridge note or private equity may be bad.

 

Yeah, the bridge, no, ideally you want to be having that situation where you have undermarket rents, so then you bump it up. You get all the value out and that’s the perfect situation, right? The bad situation is maybe it’s not that under market rents and you have your struggle and you’re essentially already know by getting that extra leverage and kind of behind the gun.

 

It’s  not as sure thing as fixed rate debt. It’s a bridge note and it’s taking a little gamble in the beginning and sometimes gambles don’t pay off. It’s a calculated risk, right? And I think in that situation, we’re using it the right way that calculated risk can be way more returns, maybe way more reward and certain situation.

 

It makes sense. Now, moving over into the pref equity, Situation. Now a lot of times pref equity is seen as a small layer of mezzanine debt or additional leverage, right? The bank will give let’s just go with 80% loan to value on a property or maybe 70% loan to value on the property. They might be, the sponsors might be using a small thin layer of pref equity.

 

It’s always a small there, maybe five to 10% at most sometimes of the capital stack. So they’re going to get loan for 70% of that. And then maybe you get an additional layer of 5%. So if overall, be at like maybe 75 to 80% on the value, sometimes it’s possibly even to get higher than that. If the bank is giving you 80% on the value.

 

And you’re able to stack another 10% of pref equity. Now you’re 90% on the value. Most investors on sophisticated investors that are know a little bit about this stuff. They’ll be like, Oh my God, that’s too high loan to value. I always say as investors, you got to look at it and not just, obviously that’s probably like that knee jerk reaction.

 

Oh my goodness.  It’s too risky. But let’s pause that way. If you’re covering your debt service coverage ratio every month, like a 1.2, five, as far as coverage ratio is what the bank is looking. Is it really that dangerous? You could have a terrible deal at 50%.

 

Loan to value and it’d be still bad deal. At that point. You wouldn’t want to stack another layer of private equity on there, but if you have a really sweet, strong, solid deal, where under market rents strong financials, then, it is prudent to put on additional risks, which is pref equity and get that leverage point higher.

 

So  it’s all situation based and yeah, I think that it’s hard as most passive investors. They can’t make that determination, even if it’s a good deal or bad deal. Yeah. A lot of things in the pitch deck, it’s very misleading in most cases. And. Passive investors are not able to do to competence this period.

 

You guys can go on rent to meter, whatever the websites, but it’s just hard. And unless you walk the property, then you know, what kind of vibe the property is, or you, especially, if you walk calm, so you don’t have that delayed GTE to do this. I to close out right bridge Nolan’s prep, equity.

 

They can be good about. But yeah, if you guys have any questions like this, let me know. But will stick this into the e-course in the originals and pref equity section. So you guys can refer to it in the future. And if you guys want to learn more about this, go to simple passive cashflow.com session syndication, check out the free guide.

 

 If you want to get that. LP syndication e-course the links will be on there too. simple passive cashflow.com session syndication, I don’t think there’s anything else like it out there for plastic LP investors to be the best LP investors you can be. You’re not gonna be underwriting specialists, but there are things to be aware of, right?

 

The little tricks and games out there that are being played at least know, eyes wide open going into a deal, is this a good deal or is it, are these just sucker assumptions that the sponsor is using? If you guys have any questions email isLane@simplepassivecashflow.com. See you guys next time.

 

Bye. 

Offsetting Active Income w/ Passive Losses as an Accredited Investor

https://youtu.be/WFcivagBeN0

So people ask I’m a high paid professional making over 200, $300,000 a year. How come I can’t get these passive losses or pals for short and offset my active W2 salary and pretty bad, but supposed to be calmed down. What’s the deal, man. Yeah. Yeah. Well, the, the most simple way to explain it is that you’ve W2 business, income, capital gains, stock sales, interest, dividend income, all of that income is considered non-passive.

 

So I go out and create a passive loss. I can’t let my passive losses against my non-passive losses. So my goal then should be to recharacterize my passive losses as non-passive.

Taking Profit First w/ Mike Michalowicz

https://youtu.be/lj56RsKnpvQ

Super excited to be having Mike McCalla, widths author of the very popular book profit first now Mike came over to a mastermind that I’m a part of and gave a keynote. And I’ve heard about the whole profit first system, which. Do you guys know Google ed? There’s a chart online where it spells it out. Pretty simply. We don’t really need to read the whole book, but, I think it’s good to hear about it.

Different ways, listen to this lewd show. So what does it inspire? What does the action plan that I did? You’re supposed to pay yourself for said kinda split things out now. Not as super childish as an envelope system. But a virtual envelope system, right?

So you have your checking account maybe is your owner’s pay. Or I had been using my infinite banking account as another sort of virtual envelope. And also my spouse’s account as another envelope to take things off the table, take profit first, at least that’s how I’ve been using it. If you haven’t heard of the infinite banking, check out the infoPage@simplepassivecasual.com slash banking.

And also while you’re at it, learn how we use these short-term liquidity sources as our opportunity fund. You can learn more about that concept@simplepassivecashflow.com slash Oh fun. But enjoy the show

hey, simple passive cashflow listeners. Today. We have a real life author. Who’ve actually sold more books than a hundred, like some of those other podcasts.

That’s the best intro Everlane. That’s it we’re done. I’m so to social proof right there. But, Mike and I met a few months ago in San Diego. He came and gave the keynote speech at our mastermind. He wrote the profit first book, clockwork search, the pumpkin plan. That was a popular one.

And he’s also looking to release his next book, fix this next. He, by the age of 35 founded and sold two companies w one to private equity and another to a fortune 500 today is working on his third multimillion dollar venture profit first professionals. And he’s a former small business columnist at the wall street journal for more business make-over specialists on MSNBC.

And he is here to help give some insight more for the passive investor today. But thanks for coming on, Mike. Really appreciate it. Yeah. Happy. We were able to pull this off. Thanks for coordinating this lane. Yeah. Yeah. Once you go over your story and kind of you were working in corporate and I think a lot of

the investors and listeners here are in that cubicle. Maybe they’re middle management, maybe they’re upper middle management. Maybe tell us a little bit where the inspiration for like the suite of, pretty awesome books came from. Thank you. Yeah, I did corporate for one year, my adult life, and it was difficult.

So the quick story is I’ve been an entrepreneur for the entirety of my life. When I graduated college, I tried to get the corporate job and couldn’t start a business in the tech space. Through raw effort, a lot of ignorance, but I was able to sell it to private equity. I then was in computer crime investigation, had that company.

It was a fast run, sold it to a fortune 500. I was acquired by Robert half international, if you’re familiar with them. And that’s the corporation I worked for one year after being acquired, it was for me, murderous figuratively speaking, I just had never experienced bureaucracy. Like that or gamesmanship or whatever it wasn’t about getting results.

It was much more about the politics and I couldn’t handle it nor could they handle me. Like it was oil and water. So I left that I was escorted out in fact gratefully and started my next business where I was an angel investor. And I was just horrible at it. I started a business that had no right to be in.

I thought, cause I knew entrepreneurship so well. I two exits I had proof. I knew the process and I sucked at, I collapsed. I lost all my wealth. It was Financial travesty and, ultimately triggered depression and struggle and but a restart. So I’m actually most grateful for that period of my life because I felt called to figure out.

How to make entrepreneurship simpler for me and for our fellow entrepreneurs, how to really master the journey. And I decided it was 12 years ago, decided to become an author. And I started writing books to solve my own challenges. I started new businesses that I own today that made them the Guinea pigs and platform profit.

First professionals is one. I own four companies now. And have those businesses operate and use these principles while I teach the systems. And that’s who I am today. I’m an author. I love entrepreneurship. I love micro business and small business. I am convinced it is the backbone of our planet and these businesses, our businesses need to be successful.

So I hope my books are support in that journey. Yeah. Let’s talk about profit first, because that was my first introduction to your content. And I’m going to share this little image. I took your ideas and I, hopefully I didn’t bastardize it too much. This is good. This is an engineers interpretation.

Of your ideas. So for those of you guys don’t know, you can correct me if I’m wrong, Mike, see, this a game of telephone worked that profit first is this idea of, obviously paying yourself first. And I think a lot of us are like, all right, done. I can go home and back to my nap, but it’s a little bit of based on how much you make and for a lot of us that working the day job, that may just mean how much income you bring in.

Yeah. So based on which category you’re in, you can split off how much profit you want to take off the top, which you should spend because after all, that’s what makes us happy. And then how much we need to pay ourselves as owners. And then how much we did to save for tax and operating expenses. Yeah.

That’s exactly it. Yeah, that’s called the taps chart or target allocation percentages. What we did is my business. We studied about thousand other companies, but they were the fiscally elite. The leaders in their industry and it was everything from like a pizza shop. What’s the best pizza shop financially in the world achieve numbers to real estate, to professional services and everything in between.

And we found that these are what. On average, the fiscally strongest companies are industry agnostic. One thing is interesting about that chart. You’ll notice that column B, C and D. If you look the profit or increasing profits from five to 10% to 15, and then in column D it drops back down to 10, 15%.

What’s interesting is that there’s a sweet spot. We found for businesses once a business surpasses a million dollars in revenue. There’s a fundamental shift where the business owner is extracting themselves from the business. Actively and is investing more in the growth of business, through automation, efficiencies and so forth.

So we see a dip percentage-wise in profit and also the owner’s compensation continues to drop. But then these businesses, once they surpass the $5 million Mark, we see the profitability start increasing dramatically. And the owner, you can see the owner’s pay continues to drop because they’re extract themselves from the business in the process and the.

Reward they get is ultimately in the distributions of the business, but they’re not working in the business anymore. Yeah. But 5% of 5 million is way more than 50% of Texas. Exactly. It’s way more. I’m an entrepreneur and what I did here was my goal for my little coaching and education group.

Right now, I’m in that stage, B C that you said I’ve got normally when at any business you bootstrap it from the beginning, right? You do everything yourself. I’m still editing podcasts and stuff like that. We’re recording my own video, editing the video, uploading the video, taking it, all this silly stuff.

But as you said you take after you hit a certain level of scale, you need to slow down to speed up. In a way, when we started a business, when you’re in the a stage, if you will, the only way to run the business, if you’re the sole partner, is you doing all the work?

And if you start with another partner, you’re splitting the work amongst each other, but is not just. Contingent upon the owner is fully dependent on the owner’s effort, but very quickly as we get to stage B C and in really in column D that’s where our behaviors and owner needs a change. So in the beginning you must support the business.

There is no other resource. Quickly on, especially by column D we need to change our behavior and not do the work anymore, but really become delegators at work to specifying and having clarity on the outcomes we want for our business, but have other people at the resources, do the work. And that’s a tough transition for many people.

Many people will, since you start a business and launch it off your sweat, the common belief is I got to keep sweating. I got to do more work myself, and we get in this trap of thinking that the growth of the business. It’s fully contingent upon our effort and working harder. We’ll get more results. But of course there’s a cap on that and we hit it and then we get stuck.

What do I do? Cause I do everything. I’m the hero for this business. No one can do it. I can do. And that’s the problem. We need to start transitioning our mindset from doing the work, to designing the outcomes, to saying I have to create a business structure that is healthy and strong and delivers the outcomes that I expect.

But without any of my effort, it’s where we stop asking me, how am I going to do this work? And asking, who’s going to do this work. So that’s that transition? Another big takeaway I had. And if you didn’t come speak on stage, I would have never got this highlighted there in red, the operating expenses for the category that I thought that I was in and I realize I put in there 28%.

I don’t know why I did that, but I was like, okay, I’m almost spending nothing. I’m doing everything. I’m not spending anything on operating expenses. And to me, that kind of was like a big wake up. Hey dude, you got to spend money on this. I got to hire people to help me

it’s a rare circumstance. Most businesses that I walked through this are spending more than they should. It’s rare, but does happen that people are spending less than they should. And they’re like, my business is nailing it. I’m not spending any money, but then they realize perhaps you did in your case is I’m not investing.

Forward. So if you’re in column a or B, for example businesses at that stage sometimes can run solely off the owner and we can have a tremendous amount of personal income coming in, with very low operating expenses because we’re doing the work. And so there is no operating expense, but that becomes a trap in itself in that you have to do the work.

So now. The only resource us is the exhaustible resource. And the day we decide to take off are one, a little break. The business starts slowing down. So this pathway from a to F was designed on the analysis of businesses that grow with the intention of investing in having other people, other resources, technology, doing the work, some business, if you’re like in a.

Uber driver or you’re in the gig economy and stuff. Let’s see. We can cut the expenses even more. If you just want to be the one person ever only doing the work profit first, the percentages as I show them here, may not be optimized for you and you can ramp up the profit and ramp up your compensation, but realize the trade-off is you won’t be putting any money flowing into the business to scale beyond yourself.

Yeah. This business I’m working on is like a mastermind and private group coaching business. And initially when I was in step a here. I was just doing conference calls every week, zero costs other than those three week subscription. But then, like after you came and talked I started to implement, trying to spend some money, different reports, different other subscriptions that add value and I’m really having trouble spending money on the group.

So I keep asking them what do you guys need? I’m willing to spend some money here, even hired another membership coordinator. That was the way I took your word and put into play. Yeah. No, well done. I’m just looking through your chart right now. It’s a pretty good interpretation.

I give you an a plus. Thanks. Yeah. My parents never gave me any good compliments. So I really appreciate that. This is super good. And the interesting thing about profit first is, and you do the exact right thing. Lane is. It is a, framework, but it is not a manual, a definitive manual. Each business can customize the process to cater to their unique works or unique needs around the framework.

That’s why I see what you did here. Nice, sweet, nicely done. Let’s switch over from, most of the people listening there are entrepreneurs and, one of the topics that came up at my recent Hawaii mastermind is look, maybe the, our highest and best use is just going back to our day job.

So speaking for those. Those W2 guys that are just stuck there and, it’s probably not the worst place to be. I started to think, how can I apply this to a lot of, my avatar, that is my passive investor. And one way I realize is like a lot of these guys, most of the times it’s like the dude, right?

The dude there’s so many dudes in my like mastermind. There’s like maybe 20% are like the wives and they take the reins financially. But, regardless, like there’s always one person in the relationship that is a little bit more gung ho about the financial stuff and the other one takes the back seat reluctantly, most times.

So what I thought was like, instead of taking this profit. Like the profit is essentially put it in your spouses of spending bucket and have them to see some of the gains. Any thoughts on how does a, somebody who’s not an entrepreneur doesn’t really have any op ex. How did they apply this to their normal life?

Yeah. If you’re not an entrepreneur yeah. So this can play into your personal finances or your personal endeavors. But let me tell you the intentions of each account. So the profit is in a business sense as a celebratory account, meaning. That is a reward for doing something that very little of the population does do, which is start a business only about 7% of the world population will ever start a business.

So that you’re called a shareholder. And so profit is a reward for making this investment and owner’s pay is the pay for the operations of the business, as well as the key employee. So many it’s called an owner operator. Many business owners also operate the business. So that’s your pay if you had to replace you and taxes are reserved for your tax liabilities and op ex is the ongoing concern of the business.

In our personal lives, in the book profit first, there’s a whole section called profit first life. And we talk about this. It does translate to, because a family income, a family of one, two, I have three children, family of five is like a small business. In fact, most small businesses don’t have more than two employees.

So most families are bigger than most small businesses. And. We treated the same way. There’s an income source. Maybe it’s your salary. And maybe there’s contributors to that. So you have multiple income source or revenue streams rights. There’s multiple contributors. It goes into this main bucket and then we divide the money up also, and the labeling may be different, but the concept’s the same.

You may have a retirement account, which is your profit, which is, future savings. You may have your lifestyle account. To support your life. My wife and I actually, we have a debit account. She has one and I have one. So we have our allowance or with the primary working. And when my debit card, I can’t run the debit cards cause I have depleted my account, but she can still use hers.

And so that’s how that works. Then there’s tax reserves and so forth. This is the. Old world. Our envelope system is just a modernized flavor of it. We do this at our bank. So every time you log into your bank account, you don’t have to read income statements. You don’t have to read your bank statements, bounce.

She’s got the Rihanna stuff. Use lie in your bank account, and you see where money is allocated with what intended use before you spend it. Yeah, we had Benjamin Hardy on the podcast here recently and, he wrote the book, willpower doesn’t work and he’s totally true. Like we suck at controlling it solves we do.

So w I love that. So willpower. Is like a muscle it fatigues, right? So we can be very staunch about something. I’m not going to touch this money. I was going to sit here, I’m say for my future. And then we’re like like a muscle, it starts fatiguing and you put a little weight on it’s males borrow from this account and then we start unwinding the whole system and we’re done.

So with profit first, we, same thing as willpower. We don’t try to use willpower because it’s a weak muscle. What we do is with profit. For example, in these reserves, we actually will transfer money out of your main bank account. Hide it away from you. You intentionally hide it from yourself in another bank, so you can’t access it.

So you can’t see it and you have to make, do with what you have. When we can’t see something, we don’t worry about that thing. So don’t use willpower, use your habits, to your benefit, block and tackle for yourself in advance, by moving in, hiding money from yourself so that you won’t play a game with yourself.

And then, how I implemented that as I, over the last six months, I’ve been opening up new bank accounts, not just making sub-accounts in the bank account, but brand new bank accounts. In my name and wife’s name and signing the profit and owner’s pay. And she’s what the heck are you doing?

What is all this stuff trying to explain? Hey you for the five, 10% of profit, I’m like, I don’t know. It’s going to take some time. Yeah. Know, it will take time. And it confuses some people, they see it. They’re like, what the heck is this? And they don’t get it. So that skepticism and it’s normal.

You know what I encourage people to do? I set the system up for myself 12 years ago. I didn’t even believe it would work. I was, it was desperate times for me. I’d wipe myself out financially. I needed to do something. And it took me a few iterations. I was like, Holy cow, this is working for me. And it’s been life-changing for me, the system.

And So I expect skepticism. And why invite people is let’s just try on a small basis. Let’s just have one account, a profit account or something. Let’s just transfer a small amount of money in there. Every time money comes in, we’ll put small percentage, meaning just one or 2%, and we’re going to hide that money from ourselves.

Then the rest of our lives will run the normal way. After two or three months, let’s see how much our normal life has resulted in savings. And let’s look at how much this little profit account has. And inevitably the profit account is more consistent accumulate more money. And more effective. And then when they start ramping it up, it’s, we’ve got to buyers way into this channels, our existing habits logging into a bank account, seeing the balances to our advantage.

And then once we start seeing the advantage, that’s when we start winning our favor into it. And then we start rolling out the whole system. So one thing I do with like I said, with the profit, that just goes into the spouse’s account. That’s gone off the face of the earth. Lucky for me, they don’t spend it that much.

The second the owners pay is like I use if in a banking, I’ll throw that into my life insurance as an overfunded payment and then it’s gone. And then everything else I’ll keep it. My plethora of bank accounts. I love it. The bank may get frustrated, so as we set up profit first, we have over 300,000.

We think it’s 350,000 businesses now, but over 300,000 businesses have implemented it. The feedback we regularly hear is the bank is like, what the hell are you doing? Why Sam all accounts and there’s confusion over it. Realize you get a bank is a vendor. You can negotiate them and say, listen, if you’re gonna charge me fees, I ain’t going to bank here.

So I want to set these accounts. Don’t charge me fees, just like any other vendor. They have flexibility and can, if they want your business address that, then we start transferring money in and what the banks notice. And what you’ll notice is now you’re accumulating more money because you know what the money intended uses.

So we don’t spend flippantly or frivolously. And the banks, we got banks calling us saying, we want your client to improv. At first they store more money with us. They’re more active with our bank. So if these accounts don’t let the preconceived notions of banks or an account, and our bookkeeper who does not understand the process, dissuade you from it, we’ve 300,000 plus businesses at serving.

It will serve you. I’m convinced of it. You’ve got to try it out and get past that initial. Negative rhetoric. You may hear from, to some people that just aren’t familiar with this process, right? And for a lot of you guys who have reluctant spouses I did write an article for you guys@simplepassivecashflow.com slash spouse.

This is on the list of tips, right? Create a profit first account for them to just see the rewards, as opposed to them just thinking you’re just socking away, investment money, given away, checks here and there for investments, they don’t see any of the cashflow with. It goes, hand-in-hand like, every time we close a deal, I tell you guys like, go and celebrate, go for a nice dinner or something, make it a milestone that you can not you don’t care, but your family and your spouse can point back to yeah, listen with profits.

So I’ve been distributing, when we take a corporate profit. Our entire family shares in it. And my wife and I own the business, but my wife and I, we share the profit from the business that you’ll start family, the majority of it, but the kids get to, and now there’s an excitement as we’re recording this, it’s a quarter ends in just five more days and there’s a profit distribution coming out already.

My kids were like, Hey, how is the business doing? Because I consider them investors. They don’t invest money. They make sacrifice. And so there’s an excitement around it. When you engage your family, what are some things, you don’t give them money or, what are you celebrate?

Or like a company retreat or what are some things? Yeah, no, I actually do give them money, but we will celebrate collectively in some way. But They actually get a portion of money and not nothing substantial. Like I don’t want them to think that there’s free money being handed out, but I do want them to appreciate what the business is doing and how it’s impacting them and the family as a whole.

So that’s why we’re sharing some of it, but we do some activities and when I first did, I remember the first distribution 12 years ago, it was $8. I just started system. It was $8 that came out, but it was the best eight hours of my life. I went right to Starbucks and said, give me a nice cup of coffee.

And I enjoyed that. And for the first time I didn’t have to use a credit card or debit card or borrow money or make an expense. It was just, the business was rewarding me. I was like, Holy cow, it’s amazing. And it’s grown to, A lot of money. And so we’ve gone, we rented a castle out in Ireland and spend time out there and, we’re doing these activities that are dream activities for us all from the business.

And it’s taken them a while to get there, but it’s just a celebration every single time. I think that character trait is. Very common amongst my group. This past few months in the Hawaii mastermind, nobody stayed in four or five star will tell they all stayed in the two or three star value.

Hotels. I love it. Yeah. It can get weird, right? Like they don’t want to spend money cause they’re always going by that attitude of saving. So there’s gotta be a balance and right. You’re saving, but you can get to the point of being a miser and you have to define your definition of it.

But when I travel for business, it’s all about the profitability. I stay at The motel AIDS. I remember going to a conference. It was this ritzy hotel in Scottsdale, Arizona. And after the event Isaac, my presentation people’s event Hey, you want to hang out? What hotel room are you?

What room are you at? Oh, I’m down the road at motel eight. And they’re like, wow, you’re not paying $500 a night. I’m like, no, I’m paying like 80 bucks a night. And they’re like why I’m like, cause the profitability and I, we actually share profit with my employees. Now we’re small. We have 12 employees here but my employee, Lisa is the Booker for my scheduling, my travel, she books, hotels.

And she knows if I’m staying in a motel eight, we’re all sharing a little bit more profit. So when it comes to the lifestyle, my business it’s healthy, but it’s frugal. And then when the profit comes out as a bonus distribution, you know that’s my opportunity to splurge a little bit, as I define it.

And that’s when we live a little high in the hog, but then we go back to appropriate lifestyle for the business to be healthy and sustain. Yeah. Yeah. Hey man, I did the same thing. I think we met at the Torrey Pines in San Diego. I don’t stay there. I was not saying that I was not staying there.

Yeah. I stay in the Airbnb. That’s a hundred something bucks. I stayed at the motel eight. So you stayed at a ritzy place compared to yeah, there was no I don’t remember the event. I walked into the lobby and there was vomit on the floor and I. Someone was just drunk and puke. I took a picture of it.

I said to Lisa, I said, I think this is the last motel eight. We got to go beyond the puke level. Yeah. Go at least holiday and or fed. Exactly. Exactly. Live a little bit better. So let’s switch over to the pumpkin plan. Now I didn’t read the book, people have been telling me about some of the ideas of it.

Cause this is one of the first ones you wrote. Yeah, you give a little bit background for people, for the passive investors out there. What’s the pull from this one, there’s the short and thick of it is that it’s the application of the parade of principle or the 80 20 rule that 20% of your opportunities are going to yield 80% of the benefit.

So how do you determine that? And I made into a multi-step process. It was actually formulated after the process of growing colossal pumpkins. I found that. The vast majority of pumpkin farmers, no shock here, ordinary pumpkins for Halloween and the fall holidays, but there’s a small faction grow class of pumpkins and they changed the process just a little bit, but the pumpkin responds with organic explosive growth.

So in the book I document. Their process loosely, but translate to the exact steps businesses need to make. Who are those colossal potential seeds you have around your organization? How do you water and feed those things have colossal growth. There’s usually a few things in your business, matching your, there.

It is matching your best clients to your true uniqueness in your environment and systematizing it that becomes this seedling. To fuel the super fast growth. So the way I look at that, another idea, it was like when I had 11 rentals, I would look at maybe 20% of them that sucked the boss and try and look to sell it or unloaded.

That’s the other side of it. So it’s. Yeah. And I talk about that. I call that the rotten pumpkins, there’s certain ones that are distracting and there’s actually certain clientele that They’re so difficult. They don’t pay well. They threaten I’m gonna slam you on Yelp.

You’ll never get another client again. They damage your property. Those clients are actually costing us to keep them we needed and there’s rules of course ramp, but you need to jettison them as quickly as possible. So you can matriculate or serve your best clients. So I think when I kind of work with investors and a lot of you guys, there’s probably about a dozen pass free coaching calls.

I’ve given people in exchange for having their lives on the internet on YouTube. But like most times I look at people’s portfolios. It’s not really about getting into that next deal at 15, 18% IRR it’s they’ve got most of their portfolio doing absolutely nothing, either debt equity, or. California rental, that’s making $2,000 a month.

That’s over 600 grand. Like it’s amazing, like most cases, even with, investors that are listening to podcasts, pretty good network that this is the case and yeah, that’s the pumpkin plan needs to be put in place.

Mike let’s let’s pitch people on the new book, the new idea that’s coming out. Let’s talk about that one a little. Thank you. So the new book is called fix this next and what the thesis as I determined that the biggest challenge entrepreneurs face. Is knowing what their biggest challenge is.

So the vast majority of business owners are to scrambling, to put out whatever fire presents itself. And it’s a constant rush to all the apparent issues that present themselves. But they don’t know, what this, there it is. They don’t know what the specific challenges that they have. And what. This does what fixes sex does is a tool like a compass to very quickly pinpoint the specific need your business.

Has I call it the vital need and with every business at any given moment, there is a vital need. The question is what is it? So this is a. Design around a hierarchy of needs. It’s a compass. If you will, to very quickly through a series of simple questions, pinpoint what to work on next. And when you concentrate your effort on that and resolve it, then you go through this process.

Can you find the next fix? You start deliberately stepping forward. One step after the other and March forward, most businesses are scrambling and they never get unstuck because they keep on circling around and around. Now with fix this next. We know what to work on next and move our business forward.

It’s particularly applicable now, by the way, with this, with a macro crisis going on, there is a impact what’s called micro crisis on small business macro crisis facilitates more micro crisis. So how do we navigate the individual crisis isn’t challenges our businesses are facing in this moment.

Well said. I’m not big on the shelf help guys who read a whole bunch of books and never do anything I’m big on. I hope I’ve never heard that actually. That’s funny. Yeah. Actionable advice. And like Mike’s books have really helped me out in terms of, here’s another example like on our 3000 units on the operational side of our house, we’ve implemented the profit first.

Awesome. Hold them to put away invested distributions in a little side account for us. They’re a little annoyed by that, of course, but Hey, we’re the boss, your business is your business because we have just we pay taxes, we have to pay investors. Like Mike’s books have really helped me out and giving me actionable things that change my business.

And if you’re one of those guys who reads a whole bunch of books and not really any habit change, I think you guys need to do that. We have the book club. Now we read a book every other month. You guys can get access to that lean and simple passive cashflow, or go and sign up@simplepassivecashflow.com slash lane hack.

And we’ll probably. We’ll do a mic book here. Have you the self exists next? I hope you, I think it will serve you. I really put my life’s effort into this and I think that it will be a great impact, so I hope you guys enjoy it. Yeah. Anything else? Parting words, Mike, for the passive investor stuck in the day job, any.

Yeah, you’re the irony is your clients want you, so I know taking the leap to out of a day job into doing this full time. Maybe it’s not appropriate for you, but it is a necessary side hustle clients. It need great offerings. And I suspect if you’re doing this and you’re listing stuff like this, that you’re committed to being of great service.

So market aggressively make sure clients are aware of you because if they don’t find you, they’re going to find the alternative. And I suspect the alternative is not better than what you have to offer. Yeah. Said. All right. Thanks Mike. Really appreciate it. Thanks brother. Pleasure talking with you lane.

Tax Deductions | Single Family Home vs Apartment

https://youtu.be/z_gYhWYhf1Q

It sounds great. Right? You’re getting 10 to 15 times more deductions of first year, but there’s a cost to this. And when I do it for my large apartment buildings, I’m usually paying five grand or so on that thing to do this, to extract it out. But that requires sending out a guy on expenses to travel out there, but that’s obviously not cost effective to spend $5,000 to get $20,000 of deductions.

At 25% tax bracket, that’s a break even. So that’s where this do it. Yourself. Cost segregation product comes in, but bill, let me put you on the spot here. Why would Lane’s spend $5,000? What else am I getting it by cost? Say that somebody’s spending 600 bucks and one of these things. Isn’t getting just sitting no eyes wide open what they’re going into.

Well, there’s a huge difference. And I think on your bigger deals, if you’re spending 5,000, you’re not getting a very good study. You need to spend more than 5,000. Are there usually between five and 10? So on an apartment complex, it might be 7,506, six to eight, depending again, on the engineering that’s done.

So on a full study, we look at it and I think anybody else would look at. What are the engineering hours it’s going to take to do the work? Cause we send somebody on site. We count everything. We qualify everything and we do all the asset detail. So in a full study, you get complete asset detail, meaning all your roof deal tale, all your HVAC detail, all your straight line detail.

As well as all your short life detail, carpeting, flooring, cabinets, everything, you’ve got some, and we give a hundred page report or back to you showing out all that detail. And we go into everything, electrical breakers, no one else gets the breakers. We need things that people don’t do. So we are deeper, but everybody goes in an engineer’s pretty deep and gets all the outlets and things.

So that’s what a full study is. It’s a lot of pages. It’s a lot of research. And a lot of documentation with the guy on site here. Oh, you always see the guy inside. Yeah. You always send a guy inside an engineer. We send our own engineers. Some people would send picture takers and interviewers and stuff, but somebody all wasn’t goes on site.

That’s pretty much what happens now with DIY it’s a non inspection product. So DIY means we’re modeling. So we’re going to air conservative. So if we would’ve gotten a 25% results by going on site, we might get. 19% by the DIY because you’re not sending somebody on site. If in fact, you’re audited, though, again, as I mentioned, we will go send somebody on site and we will do that a hundred page report for you.

But what you’re going to get with DIY is a model solution, which is what a lot of the people out there do models and residuals and sampling, and they add pictures and some engineering. But what you get is a one-page report that gives you your five, seven, 15 and 27 and a half year. And then some categories of generally what it would be, and then a receipt, and then your data inputs, because some people put the date wrong, we fix it for them.

We don’t charge afraid of that. You get a very streamlined report, but that’s all the CDA cares about CPR. 100 pages they want. Five seven, 15 and 27 and a half to put on your tax return and they’re done. So that’s what DIY does. So it gives you a lower number. It’s a lot less expensive. And so that’s why it’s good for the lower value properties where maybe you can’t justify a five or $10,000 study.

Asset Protection for the Accredited Investor w/ Brian Bradley

https://youtu.be/qBmh2TFVWnw

What’s up investors on this week, we are going to be talking to a lawyer

Diving into some other legal strategies to protect your wealth that you probably don’t hear that often. We’re going to be going over the LLC, and why that may not be the best means to protect your wealth, especially if you’re a higher net worth little update on what I’ve been up to.

It’s been a really crazy week. Two closings. We had close on a class ADL in Dallas and another class B deal in Houston. Glad to get those knocked out, always a little stressful to close , go to loan committee, get it all wrapped up.

It’s not a race, it’s a marathon. And then we get hard work. If you guys haven’t checked out all the good news that’s been in the economy, make sure you guys at least check up the monthly reports, which are@simpleclassiccastle.com slash investor letter. All the videos that we do on a monthly basis are up there.

If you want to dive into the headlines and get a little commentary from myself. You can access that there again, simple plastic capsule.com/investor letter. And this is your guys’ last call for the incubator group, where we help younger and newer investors under a quarter million dollars net worth to get their first turnkey remote rental.

If you guys go to simple passive cashflow.com/turnkey, there’s a free guide there. There is also the remote investor e-course which if you buy that and you eventually joined the incubator, we do credit you back to what you paid there, but thank you, Bader is really all about the peer group, right?

Your network is your net worth. You have folks around you and where we can help you move through the process. Especially in, through the inspection process and connecting with all the brokers, lenders, property managers, just connecting with the folks in our role at that. But here is the show.

We’re not giving any legal advice out there, but through my travels and connecting with high net worth investors and things, I do myself, open this up@simplepassivecashflow.com slash Vigo, enjoy the show.

 Okay, simple passive cashflow listeners. Today. We are going to talk to Brian Bradley here about some of the misnomers I’ve been hearing about, legal protection.  Again, starting out with the Cabot. I am not a lawyer. So I brought a lawyer here to talk about this stuff, but nice to have finally have you on again, Brian.

 

Yeah, thanks lane for having me back on and it’s going to be a fun topic and I gotta let everybody know I’m not your legal guru, like I’m really good at what I do, we’re just going to talk about this, in generality and I’m definitely going to blow up a lot of the status quo and misconceptions, especially around LLCs.

 

Like our last episode, we had a cool slide presentation, but this is going to be a different. Topic today. Yeah, Brian’s has been doing some stuff for my high-end clients and the family office, Ohana mastermind. So if you guys are interested in doing that, check out the sales page, it’s simple, passive casual.com/journey.

 

If not continue to devour the free podcast land and hear the same stuff over and over again on all podcasts. But I think we’re going to blow it out of the water, the sobriety of like I think the first question just to kick things off is. Everybody thinks that they’re super protected with an LLC, right?

 

Wyoming, Nevada   tell us like the dark side of these LLC.  Are they truly Bulletproof? No, there’s there. There’s nothing that’s truly Bulletproof, especially if it’s purely domestic like whatever you create. Eventually, if you get to a high net worth, like you have over a million of unprotected, net worth of assets, you should start adding some sort of offshore component to it.

 

 Because we have what’s called the U S constitution full faith and credit clause. So it’s always been to limit. Anything purely domestic, LLCs. I’m not gonna, like coopoo all over them. They’re I use them, they’re a foundational level. But there’s a lot of things that aren’t just being spoken about them.

 

And a lot of people being misled, I think, either intentionally or not. Or just from lack of knowledge on what happens in court, like in these things called jurisdiction and legal nexuses availing yourself of state rights and that’s where this needs to get sorted out.

 

And and I’m going to pick on California a lot here because it’s the most, a lot of people live in California. There’s a lot of money in California. And you have a lot of California investors investing all over the state. So I think it’s a great example of a state to use. And so I want to start.

 

With, like I think the big misconception is with charging orders and what a charging order is just trying to limit the member of an LLC legal responsibility to paying a judgment. They’re trying to keep it within just the LLC a court order just within the LLC. And so you hear these States and there’s a lot of fusion over word.

 

You go, do you go to Delaware, Wyoming, Texas. And at the end of the day, it really just comes down to, what are you holding? So let’s just stick with the example of the state I’m talking about. Let’s say it’s California real estate, and you own some California real estate. You’re a California resident.

 

And you went and set up a Wyoming LLC because you read it on the internet or your CPA told you to go ahead and do that. What you did is just convert your Wyoming, LLC to a California LLC, because you’re doing business in the state of California. And not only are you going to pay the franchise tax, but if you ever have a liability issue in California the judge in California is going to apply what law, like California law, not Wyoming law, because you’re a resident there, the properties there the lawsuits coming through there.

 

A California judge, doesn’t give a hoot that you have a Wyoming LLC.  There’s no legal nexus there. That Wyoming, LLC just did a fancy thing called legally availed itself with the protection of laws of California. And like I said, that’s the state, the assets in that’s the state that injury or damage occurred in.

 

And this can go for  any state, if you had an asset in Ohio and you put it in an, a Wyoming, LLC is the same principles that apply. And so I want to harp on this just a minute longer because I do get a ton of calls on this and clients just confused as heck on what they shouldn’t stuff into, a Wyoming LLC.

 

And it’s  because just by simply owning an out of state, LLC, you have to register that LLC is doing business in the other state, like you have to register it in California and pay the franchise tax. And this is just basic case law. And once you do that and you, again, avail yourself of the privileges and laws of that state and given that state jurisdiction there’s a great case.

 

 Indian palms country club association versus anchor bank in 2015. And it lays out all the multiple standards, like the legal standards that you’d have to meet to successfully beat a piercing, the corporate veil argument. And so for sticking with California now that LLC is registered and paying the franchise tax in California, you just gave California jurisdiction over the LLC, plain and simple.

 

And you’re a resident of that state. There’s another caveat against you. And then you have a California asset in an out-of-state Wyoming, LLC, or Delaware, LLC in Nevada, LLC, with no connection to Wyoming whatsoever. You just did this fancy word. I told you about a village yourself. Of the laws of California.

 

And so you just transferred that Wyoming LLC  to a California LLC by was called a direct, substantial and systemic contact with California. Yeah, something I see common, cause I always say the tail end of this, especially when my clients work with me and they’re, what happens most of the time is like the lawyers just going down their check sheet and their sales form and ask the client like, Hey, do you want to be anonymous?

 

And then the clients obviously Oh yeah, I would like to be on office. Alright, sign you up for this thousand dollar Wyoming, LLC, which is also a pain in the butt to upkeep in the future. That’s a classic case. And I tell my guys like, all right like how you’re saying, it’s not truly anonymous.

 

But like anybody who’s going to get sued, they’re going to Pierce right through that.  We’re just going to make things a little bit harder, right? This day and age nothing’s ominous.  Correct. And that was going to be my next blow up of this whole thing of an amenity.

 

And so it’s a big concept, a big misconception. And I think that people just think that you can create this, anonymous Wyoming, LLC. It sounds so cool. Like I can just disappear and ghost to lawsuit, and I’m like the legal system doesn’t work that way. Like one, if you’re creating these LLCs.

 

You have to also pay for a registered service person, like service of agent and that costs money. Their sole job is to say, Hey, congratulations, your LLC just got sued. You’re served, go find a lawyer, defend yourself. And then the simple reality is that once a lawsuit’s filed and starts and you’ve been served because you’re not going to avoid the legal service.

 

The legal process starts, and this is thing called legal discovery. And then you’re going to end up going into court. And the judge is going to say, Hey, like you’re getting sued for, $1 million or whatever the law and the number is like, here’s an asset declaration list all of your assets to make sure that , there’s something that can be collected on.

 

And at that point you can do one of two things. You list your assets or you lie and commit perjury and say you don’t own them. Or the LLC doesn’t own any. And then that’s called perjury. You go to jail. You get sanctioned, your lawyers get sanctioned and a lot of bad things happen to you. So there’s no such thing as an amenity.

 

Once a lawsuit starts and amenity works in the sense of, I own an LLC, I want some privacy to where someone can’t just look up my house residents and go egg my house and harass me because they don’t like me. And if they’re resourceful enough, they can find all that stuff. I have access to that stuff.

 

I just use, a scraping program and a skip tracing program and I can find. Where you used to live with your cousin’s name is where they live, what their number is. What’s your dad’s name? It’s like it’s. No, exactly. So I think that a lot of these burns are just preying on the naivete of a lot of people and the idea of Oh, wow.

 

So you’re telling me, I can just become a ghost by creating this, anonymous LLC. And no one will ever be able to find me. And if I did get sued, I never have to respond and show up. Sorry, like you’re going to have a default judgment entered against you and you wouldn’t even be there to know.

 

And then you’re going to end up having to pay the maximum out because you didn’t even try to defend it. Yeah. Along the lines of this anonymity thing.  Is more from a tax perspective. Again, Brian’s the lawyer on hand here, but just speaking for taxes, this is corporate transparency act that got enacted in January, 2021.

 

So now, I guess what they were trying to block was people were just making all these random LLCs and none of it kind of points to them personally. And they were possibly hiding a bunch of nefarious action, or maybe just hiding, disproportionate amounts of income and expenses likely it was happening as most good business operators try to do to some extent.

 

But now on a lot of K ones, we have to put social security numbers on there. Even if you have LLC. So a lot of investors have gotten upset with us and it’s Hey man, it’s not our fault. We’re just following the corporate transparency act. So even now the IRS is like blowing this way.

 

There’s nothing that’s transparent. There’s really nothing. And that’s where real act like asset protection for it to work. You want it, you do not want to be not paying your taxes. You’re going to have to pay your taxes. Otherwise that’s tax fraud. And the system blows up or you don’t want to be committing fraud, were fraudulent transactions and things like, so whenever you  you’re creating an asset protection plan.

 

It has to be taxed neutral. And this whole idea of anonymity and hiding, if you excite assets, that’s bad, like IRS is going to come down on you. Like the, the judge is going to come down on you. So fraudulent transfers after a lawsuit. That’s why you have to be proactive when you create these in Korean, before issues, before problems, these are all the things that you need to think about.

 

Get your system set up as a business structure early, and then let it grow with you. But like you said, like  even the IRS is cracking down on asset disclosures. So I’ll just have a system that’s just strong where you don’t have to hide. And  of course, maybe it goes without saying, people listening, if you guys are doing any nefarious action you guys should go to jail.

 

And we’re talking to people running good businesses and doing things the right way. But yeah, so if the LLC is not the way to do it, LLC, so owner, so now we’re going to get into some strategies here where you don’t own it. You perhaps control it. Like the big sane is the Rockerfeller’s right?

 

 Own nothing. Control, everything. Correct. Rich people don’t own assets. They just get the use and benefit and enjoyment of them, their LLCs on them, their management companies do their trusts do. And then it’s just how you properly construct them, layer them and use them. That gives you the benefits of it.

 

And for example, if you’re owning real estate, like I would say, like everyone should go jump back on that last episode we did for the really good long presentation, but your real estate, you put into LLCs. And that’s going to operate as a holding company. Your LLCs should then be owned, not by you as the member, but by a management company.

 

As the member of that LLC. And then that management company should be a limited partnership so that you can then split ownership and you would be the managing member of the limited partnership. And then that management company would then be owned by a very strong asset protection trust when the timing is right and asset protection trusts come in a lot of different flavors like everything else.

 

So it’s just a matter of picking the right tool that fits the right client profile at the time. And what’s, Brian’s kind of alluded to, I think we did a previous presentation, but I think we did that just with our private foam group, Brian. But if folks listening here are interested in an, of course it needs to be an accredited investor and a part of our investor group, but just shoot me an email laying at school, past cashflow like that.

 

You guys take a sneak peek of that, but, But, yeah so there’s different, layers to this, right? Based on  how much net worth you have, how much liability may be going into some of the layers. Yeah, correct. And so like the entry level, like we’re talking about, like when we were, dogging, LLCs, that’s the foundational level.

 

That’s where your start. That’s not where you think you’re, silver bullet vampire, wearable Slayer is going to be like, that’s the base layer. I own an asset. The very first thing you should also do is budget to put that asset into something because there’s risk with it. So that goes into an LLC in the state where the assets at, because that’s where the lawsuit is going to be coming from.

 

You’ll hear some people talk about series LLCs, and I know we were talking about it off air. Like you can give your own thoughts on that, but mine is, I use them, but I only use them for clients  where they won live in a state that has series LLC statutes. And the asset is also in the state that has series LLC statutes.

 

Otherwise, if you’re in California and they don’t recognize a series of LLC, you’ll get no protection from it, but you’ll be paying extra franchise tax on each sub series. But to get back to the point is if you’re just starting out your green horn and investing, you start out with an LLC and insurance, let’s say you start growing, you have four or five more units.

 

Your net worth is probably around 500,000.  No five, 500,000. And, depending on your professional risk, that’s where you add a management company to own those LLCs and all your  of those. LLCs will full directly through to the management company. So it’s just one tax filing. You’ll be doing your business.

 

Out of that management company, you’d be managing that layer. And then the, and that management company is just an LLC. It would be a limited partnership, actually limited partnership. Why would it not be an LLC? The big difference between an LLC and the limited partnership is that a limited partnership has dual classifications of ownership.

 

Think of it as like a split personality. So you have a general partner and limited partner, the general part portion of it. Is it going to be the what’s going to be owning all of your assets? Like all of your LLCs, your passive syndication shares  whatever it is that you own, whatever’s risky, whatever we need to protect around that would be, like owning those.

 

You wouldn’t be managing that general partnership share. The limited  portion side of the limited partnership is what actually owns that management company that would be a trust like an asset protection trust, or a bridge trust, or a quantum living trust. And you can’t get that layer and split personality of ownership with an LLC.

 

It only comes through the limited partnership. So that’s

 

very clever. Yeah. And so that’s what legally separates you from management from ownership, because you actually can split it with the limited partnership.  So if you think of it in terms like a syndication deal, there’s general partnership side, there’s some it partnerships, which is why a lot of past investors like to invest in the LP side because they’re not managing members are very low non liability.

 

But in this case, you’re running your own syndication or deal in a way where you’re both. But you have the LP portion, which is the actual valuable part of it as the LP side. Of understanding. Yeah. So the ownership side. So if you think of it as like a syndication, all of your deals would be owned by the GP site and then the LP.

 

Is what is the ownership, the controlling portion of the whole management company. And that would be your trust, like a, a bridge trust or an asset protection trust. And then you would just be the beneficiary and the creator of that trust. And so you’re just a managing member of that management company, which then that management company owns all your sub assets.

 

Yeah. And I think this is very common folks, half a million million dollars net worth and above, they have this type of. Holding company. I think most people have it as a set up as an LLC though, the wrong structure, because it doesn’t give you the flexibility for the third stage properly. And because you don’t have that split ownership status.

 

And so the second layer should be a limited partnership if done. And specifically, I like Arizona for the limited partnership because Arizona is the only state that allows you to disconnect that management company from a trust by statute. No other state allows you to do that yet. Not even like Wyoming or Delaware.

 

And what that does is. During a lawsuit, we can disconnect legally the management company from the asset protection trust. And like with our bridge trust, you’re now fully foreign offshore. When everything, like your doomsday scenarios coming at you, just take us logically so should you get sued?

 

Wouldn’t they just say okay, you’re controlling, but you also own that and control that. How would you, how would that happened? That’s a great question. So the bridge trust is both an offshore trust and a domestic trust. So it’s actually a foreign asset protection trust.

 

We just build the bridge back domestically to the U S for the IRS to classify it as a domestic trust, to keep your costs down  and not have to have you do the IRS. Acid declarations. Now let’s say a big lawsuit comes and we agree it’s really bad. And we drop IRS compliance. That’s how it then becomes a foreign asset protection trust because it already is.

 

It’s a cook islands, foreign asset protection trust from day one. When we create it registered offshore with an offshore trustee from the moment it’s created, we’re not doing this after the fact. So as legitimized. What we do is just name through the control test is a state and you, as the trustee, all we have to do is blow up one of those elements to fall out of compliance with the IRS and  the way we do that is just by removing the name trustee.

 

So you’re no longer the trustee. The offshore trustee is automatically foreign asset protection trust with no more domestic connection and no more domestic compliance. And how do you get around like the fraudulent transfer? And for those that aren’t aware, it’s a ubiquitous term, right?

 

My understanding is if not for this lawsuit, you wouldn’t have done this. Yeah. So all of this is created before the lawsuit and because it’s just one trust and it was a fully registered foreign asset protection trust from day one. And then the trust was fully funded from the moment we created it. There was no fraudulent transfer of this going on whatsoever.

 

And the trust itself is a foreign trust. So there’s no transferring of assets. Yeah. So the think of it figuratively, the bridge was built. You just disconnected one then, which is not a chance, maybe just thinking of it as a bridge. And then like some bridges have gateways that open up. The gate to the center, part of the bridge, we just opened up and we’d already had the assets over on to the foreign asset side of it.

 

Yeah. So again, those, I’d say like when to go off shore, Stephanie, more for the higher net worth guys or higher, job liability folks, and to categorize that, those are those you guys doing deals out. There were doctors in the spotlight of litigation. It was just a lowly computer program.

 

I don’t think you have too much to work out. As far as occupation, we get a lot that meets the, like that client profile are the self-funded real estate investors, like the cops, firefighters, nurses, who over the last 15, you know, school teachers who over the last 15, 20 years invested in real estate to fund their retirement.

 

And they have that, that net worth, but one lawsuit they’re completely wiped out forever and they have nothing to go back on. And so that’s the other profile that we get a lot of calls from are the self-funded we, real estate investment retired. So let’s dig into some of these, in the middle strategies, right?

 

A little bit better than an LLC, not as heavy duty as a bridge foreign, going to the cook islands came in wherever, the cool place to Sydney. Yeah. It’s the cook islands is the strongest, the other places There’s just too many ways for the us to reach control and jurisdiction and get access to your strategies, like in the Caymans or The Bahamas Caribbean we always end up having to build back exit strategies out of those, to the cook islands anyways.

 

So that’s why we just go straight to the cooks, but a lower level of protection. Let’s say you’re under 1 million there’s this trust called a quantum living trust, which is actually one of my favorite asset protection trust because. I’ll be honest. Like I see the most risk is that, 250,000 to below a million net worth because you’re new, but a lawsuit is going to wipe you out and you may not be able to get it back.

 

Yeah, you’re exposed that first hundred, $250,000, the hardest money to make came up. Yeah. And then breaking like the above 1.5 million is the next hard one to push through. And, but you’re at that level to where you can’t really like, you use a boxing term, you’re going to take a floating ribs shot, and that’s going to knock you out where a more experienced fighter can take that they know what it feels like.

 

And it’ll phase them. But they can get back up, dance around, get, recollect themselves and get back in the fight. So for that under 1 million, we ended up  creating a quantum living trust, which is just a bridge trust lights. Is this like some reference to like ant man and Fanta umbrella or.

 

No. I don’t know why we ended up coming up with, like the quantum, I don’t get into the naming.

 

Okay.  I’ll have to ask Doug Hey, like who ended up? Was it your wife that ended up coming up with the name of this? Or like why? But I never got into the question of why it was named that,  but the great thing about this trust is, it’s half the cost of the bridge trust.

 

And then it works as an offshore trust and a domestic trust, but it also works as a revocable living trust. So you get almost a three for out of it. And it comes in at an affordable entry level spot to give a new investor or a person with a lot of assets, but low risk, some offshore component protection when they need it.

 

And then when they can  keeps scaling. So you and I were discussing offline little bit my asset protection strategy. And then you kept using this term grant or trust. Can you define it? Yeah, a grant or trust is a trust essentially like the easy way to do it is it gives the trustee the power and authority to manage their assets, is the easiest way to do it.

 

It doesn’t take anything out of your exercising control. Yeah. And I think that’s, this is where it confuses a lot of investors, right? Coming outside of asset protection, there’s a lot of  marketable  products out there, like 10 30, one exchange. You can call it the 10 31 super Sonic exchange.

 

Right now it’s just a marketing term for the adapter and 31 exchange or a QRP are essentially solo 401ks with a little bit of twist, where quantum. Auto row asset trust. Is it an, the grantor trust is like that distinguishable legal term of, is it or is it not? Yeah, 

 

and so in the world of asset protection,  I have an irrevocable asset protection trust, and then some banks haven’t, it’s hard to get lending through, but that’s because they’re not using a grant towards trust. And so there’s different types of trust. And so it depends on the type of trust that you create and what is being created for.

 

So we specifically use grant toward trust because again, we can still have them irrevocable, which for an asset protection trust you want, but banks and lenders understand them and they’re easier to use and manage. You are given because it’s a self-settle spendthrift grant towards trust authority to manage your affairs.

 

So it’s easier. When it comes to closing deals if you went to Nevada and created a Nevada irrevocable asset protection trust, a lot of these trusts aren’t grant towards trust. And so banks get a hesitation or pause. Like you were talking about how you have a hard time with, a setup from the past getting funding and that’s because it wasn’t a grantor’s trust.

 

Yeah. Every time  I S K P I, one of these deals. I have to answer the question. Sometimes they, they ask sometimes they don’t. I just don’t say anything until they ask, but. Yeah, I have to explain. It’s not a grantor stress or well, with anything you set up, even if it’s just an LLC,  they’re still gonna ask.

 

So you just got to understand, like, all they’re doing is doing their due diligence, just like when you’re buying a property or an investment. And they just want to make sure Hey, if you’re having a mortgage, are you going to be able to pay? Or are you trying to set this up to, the bank on payments?

 

That’s all they’re essentially, they’re trying to figure out. And then you’re usually working with a junior level employee. Doesn’t just check in boxes and doesn’t know what the heck you’re doing. Cause that’s why they still have a day job. Exactly. And then it goes to the underwriters who then they call them, they say, what is this like, Oh, I’m just putting it into my asset protection trust for, a rainy day.

 

Okay, great. No problem is essentially how for our side of it, because we use grant or trust.  It’s a really easy, quick conversation, but I would just tell your listeners expect. To explain some stuff like when you’re creating asset protection, because if you look at it as a flip side of the business or the lender, they just want to know.

 

Yeah. And I’ve had to do it where I take it off the UCC filing to and on. And this was just my personal thing. Like more asset protection you do, it can  complicate your life. And if you’re a very unorganized person, Who doesn’t have a good understanding.

 

It can be very confusing a lot. And this is where you need a network people around you to best practices and in Tara and the right professionals too. And that’s where I’d also say if the system someone’s creating starts getting too convoluted and the optics look bad is because it’s too convoluted and the optics look bad, like we create a flowing system through stuff that.

 

Banks and lenders understand LLCs limited partnerships, grant or trust they’ve been using them for decades. There’s a lot of case law on it when you start using stuff, because I want to hide because of an amenity and you start getting all these creative, like some people send me their spreadsheets.

 

Like you did the same thing of your setup. And I’m like, Oh my God, just looking at this makes me look like I’m looking for curious, George right now. And a bank is going to look at that and say this is just too confusing. Like I didn’t want to spend the time. So we create things that are very flexible, but are very strong and just using legal systems and processes with easy flow through that banks and lenders understand.

 

Yeah. When you get to be too cute with your strategy and lenders and those guys, they just tell you no, after a while. Yeah. And you’re also just spending a lot of money,  and it’s not going to do the intended purpose. This probably doesn’t apply to most people, but it’s a cool conversation starter.

 

And I think a lot of people maybe they’ve listened to this for cool things, the sound cool around the cocktail party when they can have a cocktail party again. But yeah, I have your cake and eat it too. Just, yeah it’s a good one. Like I work with Jeffer Dawn. So this is where like your high rollers, like I don’t even bring  this.

 

Trust up unless you have a hundred million or more, because essentially it’s called the high set trust and it’s have your cake and needed to. And that’s because essentially you have to be able to take out about, max out your gifts exemption in amount, so like 22 million, I think it is right now and put it into.

 

A trust that you would gift to, your grandkids for the issue in the past was when you gifted assets to someone, you can’t get them back. Like it’s more of a tax strategy this trust to decrease your taxable estate and let it grow, capital gains tax free. But once you gift that money to someone, it is no longer yours it’s gone.

 

And what happened was in 2009, we realized we may need that money back. Like we just gifted $22 million to, Johnny. But now we lost 60% of our wealth and we need that money back, but we couldn’t get it. And, or Johnny is a crack head and, or you change your mind because good boy, Johnny turned into cocaine, Johnny, and you’re like, there’s no way I’m giving 22 million to cocaine, Johnny, because what is he going to go do?

 

Spend it all on below and cocaine, like cocaine, no. You wanted to be able to change your mind and get the money back at a certain point. And so Verdon genius, attorney to the stars. And I don’t even think not even like Uber high net worth is right term for who he represents, but.

 

Came up with a high set trust and it allows you to gift, that money, as long as you’re willing to be able to give up the 22 million or what, like 15 million, if you want to not need it to live gifted to whoever in your family, you want to gift it to decrease your taxable estate. At the same time, the money is going to increase.

 

Let’s say it’s over 20 years, 15 years at 6% as you’re investing. So you just turned like 20 million into, 60 million growing tax, deferred capital gain tax free, and then you want the money back. You can get it back and not have to pay the taxes on it. And that you stay in limbo land or you run the Wildcat offense based on maybe some years, The administration might bring that $22 million threshold up or down. Right now I’m expecting to get to go down, and so we’ll see what happens, like right now the bed is going to be like that gift amount is going to go back to where it was before or lower. Yeah. So you just wait maybe  10 to 20 years for it to go swing the other way.

 

And then you get it out. Yeah. And that’s where all of these, tax mitigation strategies and different trusts, cause not all trusts you use are for asset protection. Some are just for tax mitigation, strategies and taxes change per administration. Yeah. And that’s per state, right? To have per state and per state.

 

Exactly. Certain things that you do in one state, you won’t be able to do one another. But like I said, tax advantages and benefits and credits especially federal change as a new administration comes in. So that’s why you always have to be talking to your CPAs and your lawyers and your representatives.

 

And like you mentioned before a creative team, don’t be your own expert because you’re not going to be able to know all of the specialty, gadgets and gizmos and what to do. That’s what our jobs are for. Your job, go find deals, close deals. Let us take care of you. Protect you, let your tax guys, let you pay zero taxes, if you can.

 

Exactly. And like another one that is that kind of like the AP trusts. I’ve heard of that. I had a few clients that did something like that. That essentially the same thing. There’s a there’s trust with a, B portions in there, but I never heard of like an Abe unless it’s like a marketing term of a B.

 

It’s probably a marketing term, but it sounds like the same thing. You have the option to at a certain period of time. Yeah. Yeah. Yeah. And then there’s different trusts. Like people spin off quantum trust or tiger trust platinum trust. Like you hear all these different spinoffs, but what you need to just pay a caution to is, go and look up on the IRS website.

 

If you’re looking at a system and you want to make sure that the IRS won’t red flag you there’s a page that we have. I can send you the link and you can link it on there. For tax avoidance and hindrance. And some of these marketers and, legal service providers, if they’re advertising for tax advantages and tax cuts through asset protection planning, that’s a red flag because asset protection is tax neutral.

 

And the second you start doing, specifically tax focus for asset protection you’re going to fall into a lot of potential fraudulent. So just to check my understanding. Today there’s a lot of market terms out there, but to me, the big ones, is it a grantor trust? Is it given mobile bookable or vocable?

 

Those are, to me,  my takeaway is those are the two big things that said yes or no, or one way or correct. And that would also fall in the line of, do you want it for asset protection or do you want it more as a like irrevocable versus revokable. Do you want it to be able to be changed or not?

 

Revokable means it can be changed. And a court judge can force you to change it. Irrevocable means is not going to be easily changed and most likely it’ll be hard for a judge to order you to change it. That falls in line of asset protection or non asset protection grant towards trust, or just a different type of trust that allow you to maintain, investment control and power of the trust.

 

While you’re investing, it does grants more of those rights to the trustee. You, the creator of it. And then the rest of it is just making sure, like the big takeaway don’t get too cute with your system. Don’t fall into the anonymity trap. If you’re not in that state, why would you create an LLC in that state to put something into it?

 

Like illegally? There’s no justification for that. Cause I want to sound cool and be Anon, right? Exactly. I’m going to go to my lawsuit because I have an anonymous LLC. Yeah. Yeah.  It makes sense after  we talk about it. But when you’re in the heat of things and you’re getting sold a bunch of products, it can be.

 

Yeah, sure. That ends the car too. That’s like when you talk, make sure you talk to specialists, like that’s my other big takeaway is if it’s a real estate attorney who. They’re a real estate attorney. They’re good at closing and negotiating closing deals. And they’re not asset protection attorneys.

 

Like your business attorney is not an asset protection attorney.  It’s I go to the right doctor for the right medical issue, go to the right lawyer for the right issue. Asset protection attorneys should be specifically an asset protection attorney. Otherwise they probably just went and took a continuing legal educational course and Oh look, I just learned about this cool thing called an LLC or a series LLC.

 

And then they just trying to add extra revenue into their firm and stuff, everybody into it. And that’s the wrong tool. And this is going to sound self-serving but guys, if you guys are just listening to this stuff, you guys are just drinking from the edge of the river. Jump on, in, on the pool party and join a family office or how to mastermind, there, you’re gonna meet up with 50 to 60 accredit investors, all doing the same thing, build your thing and bring in guests like Brian to answer more private questions  

 

if not yet, just keep going through the sales calls guys. They know how to go. It’s just go call up all those lawyers up there and have them sell you stuff on a sales call. Is that what you’re going to get. You’re not going to get that other perspective that you’re going to get from him up to your best or.

 

I agree with you a hundred percent on that. I don’t think it’s self-serving. I think that the more someone educates themselves and gets into a mastermind group and affiliation of other smart people, you’re going to see your rate of growth accelerate and the people amount of minds that you can piggyback ideas off of is I think of it as like a pie chart.

 

There’s three categories. I know this, I don’t know this. And then the things I don’t know that I don’t know. And so if you’re in a mastermind with smart people, I know something. I don’t like, I already know it. I know. I don’t know this. Hey lane. I don’t know this. Can you help me? Sure. Great. Go to this person.

 

All right. Awesome. I don’t know. I don’t know something. And that’s where most of your assets are. That’s what you’re operating in the most out of that percentage of your pie chart, you’re going to get the most loss you’ve ever seen in your life. So the goal is to shrink that as fast as possible.  Get educated. So you can have the informed conversation. Is this the grant or trust, right? Is this an irrevocable or vocable trust? Why does each one of those options matter per my specific situation, but, or you can just invest in the stock market guys and work for 50 more years, but probably aren’t you.

 

I get folks share contact information and I appreciate you coming up. Yeah, no, definitely. You can reach me at my email. Brian B R I a n@btblegal.com. My website has lots of informative information. I use it more as a legal reference for people. So lots of case law. Like everything that I do, I live through case law because I’m a trial lawyer by trade.

 

And I just like to cap people have the most information as possible. So www dot BTB, legal.com. A lot of frequently asked questions on there. More than you can probably think of yourself as well as lots of videos for educational references. So if you guys haven’t yet joined our investor clubs, simple pass the castle.com/club.

 

And if you just waiting around, just in podcast land join our masterminds opacity council.com/journey. We’ll see you guys next time.