Folks on today’s podcast, it’s a follow up to the last health insurance alternative. A lot of you guys are quitting your day jobs eventually, and the question comes up, what the heck do I do for life insurance or not life insurance, for medical insurance to pay my bills in case I get sick or, something bad happens to me.
So we’re gonna be going to this today with another alternative. Just to get that in your ear and you of be thinking about it. This is the kind of stuff we talk about at our events, which is gonna be coming up very soon. Time is running out to sign up for the retreat. Go to simplepassivecashflow.com/ 2023 retreat and sign up there.
Actually apply there if you are not in our family office group and you’re a newcomer, but really there’s no other way to build relationships. Investors meet myself. Ask all the questions you’d like, or even the hard questions. I think that’s why we create this intimate environment where you guys can ask those difficult questions.
But something I’ve been working on I decided not to go for and buy a house to live in because, My problem is I don’t have a W two day job and clean financials. So what mortgage lenders will do for people like me is they need to get me past this income verification.
They wanna know that I can pay, that I have income, but because I have no W two salary I have, they have to look at my, either my 10 90 nines, which I report. or they look at my bank statements and they go through all my stuff. And as you guys know, mortgage lenders are in the box thinkers.
They don’t really understand. It’s pretty common that, in investors, they bang their head against the wall because the mortgage lenders like you lost all this money on this K one. It’s yeah, you’re supposed to lose a lot of money. It’s all depreciation and paper losses, which is supposed to offset and lower my taxes.
But it hurts you in this situation. But there are lending options as I discovered for folks like myself and a lot of you guys out there who show a lot of negative losses from the K one s on your tax forms to save thousands of thousand dollars in taxes, which is in what my opinion, how you’re gonna do it.
The trade off is when you’re trying to get a home loan and especially a home loan, over that ju loan size, to buy a 1, 2, 3, 4, $5 million house and above. In this tough situation. But just to, so you guys don’t have to go through the brain damage, like once you get past the income verification, which I did, right?
I got past that dungeon stage. Basically, it’s credit score determines your amount of how much loan you can get. They’re quoting me. I need, they need to see 50% loan, the value or loan to income. So they figure out what my income was. I didn’t review it, but whatever it was decent enough.
And then that’s how they figure out what’s your maximum monthly payment is. If you guys wanna hear more about this in detail, we had a podcast about this in the last year, non qualifying co mortgages, and he locks with Benson Pang. If you guys wanna go check out the website on this, but you know the quotes that I got back were.
Nine and a half to 10 and a half percent. And I’m all for taking the arbitrage between, the your cost of borrowing your money and then go invest it and make more other places. But, That really tests my fortitude, right? It’s not like you’re paying four or 5% in an infinite banking policy and you’re gonna go make 15, 20% plus because now the interest rate is higher and also the yields have dropped in deals because the cash flow is a lot lower and due to uncertain times worth where interest rates are at right now.
So that will change probably next year. At this kind of point in time, I was like, yeah, probably not the best. And I gotta admit, I was a little sticker shocked by the monthly mortgage rates there. But, it just and it pissed me off and it’s you know what, I’m just gonna go pay cash for this thing, and I don’t want the mortgage lender to get 1%, 2% on this thing.
I even looked. So this is 30 year fixed mortgages. And I also found that, in this non qm, non-qualified mortgage world where they actually treat you like adults and let you make choices even though they may not be good for you, that they also allowed for some interest only for the whole note.
Which was, you, I, from what the comparison I made, like you’re paying maybe half a percent higher. So if you’re paying. Point 9.5%, it bumped it up to 10%, so not much. Definitely made the payment come down maybe by 10% per month. But, in, in theory, if you’re a, use debt to your advantage purists, right?
You want to get that interest only, but obviously that, that clashes with, I think, most conventional thinkers out there. Still at the end of the day, I kind felt like, just buying a house just was a, I think this is where it comes down to more personal how you are, how you view life and like I’m more to spend money on experiences and things.
I’d rather go and spend a few thousand dollars a month, or heck even $5,000 a month on meals with others. Time savings, spend time with my family or just have less stress of doing, saving money. Like drive, driving to Costco to stand in that awful line.
To save $10 or for me, $30 in gas cuz my gas, my tank is pretty big. But It’s or spend that five, $10,000 plus on a mortgage at a very high interest rate. I think it made that. Made it very obvious and I don’t know what I was thinking. I’m sure a lot of you guys cut waiver on like bad purchases like that, it just, I think for me going through that exercise I was interested and I also wanted to share a lot what I was seeing in the non QM world in terms of mortgages and but also it was a good exercise for me to you.
Reiterate what is it that’s really important to me? What is my ideal life? And, if you’re somebody who wants to buy a big house, because that’s important, that’s totally cool. I no qualms about it. And I think it’s great that you own it. But if you’re somebody who’s on the fence and, you can’t have everything, but you have to figure out what is the most important thing here.
That’s, I think, the message and that’s my takeaway, if you guys want more insights on this, catch up with me in Hawaii when you guys come here in January for the retreat. There’s still time to sign up for that and if you guys are new to the group, join the club.
Simple pass at cash.com/club and we’ll also gonna be doing an Ask Lane show, so make sure you’re on the email list. You can sign up on that list and you can submit your question at simplepassivecashflow.com/question will air it on the show and enjoy the podcast.
Hey, simple passive castle listeners. Today, we are going to be talking medical sharing. What do you do after you leave that w two job and you leave that health insurance behind some other cheaper alternatives and something that I’m personally looking at lately, but don’t you introduce our guest Thomas Lindsay on everyone, Thomas.
Hey, how you doing lane? Thanks for having. Yeah. So Thomas helps people transition from get out this healthcare dilemma that we all will find ourselves after we finally fire the boss and leave that pushy W2 job behind. So let’s start from the top, right? You get health insurance, and maybe we can talk about how it’s a little bit you.
It’s expensive. Why is it so expensive in a normal study? It’s expensive because the insurance companies and the hospital systems like it expensive they make their profits are a percentage of the cost. So one of the things that happened with the ACA is that they said that you have to spend 80% of the premium on.
Medical care, right? And then the rest could be used for administrative expenses, including profit. How do you grow your profit? If it’s based on a percentage of premium, you grow your premium, right? And therefore you grow your profit, you can’t shrink premium and make more profit. You make less profit.
The whole thing and it’s, and it was that way before the ACA I think the ACA just really accentuated the storyline, which is the more premium people pay, the more the insurance companies make. And it’s just a, it’s really a dirty little system where consumers are, left to think that this is somebody else’s money.
I buy insurance and then the insurance company. Pays for my medical expenses. And I have no idea how much it costs. I have no idea how much they’re being billed, how much they’re paying. I think they’re working for me in my, on my behalf to keep costs down, but they’re not right. And a lot of my investors that are doctors or dentists, they see this from the other end.
They’ve gotta do all this coding. Actually. I have a few investors that are actually the coding people. Who support the the medical staff doing all this stuff and, that’s not cheap, right? No, there’s it’s over, it’s 33 to 35% administrative burden essentially. And it’s ridiculous. Cuz when you have that third party in the middle it just creates. Excess costs.
So for a normal person leaving the W2 job, and I’m assuming that traditionally those people you would go and you’d get like a bronze, gold, silver, or just a right open market plan. Is that correct?
Yeah. You have a, yeah. You have a couple of options, right? Once you. No longer once you’re no longer part of a group health plan. You can either go to the exchange or go to the private marketplace or get an association plan. So if you’re a CPA and you’re part of that association, then they’ll have an association plan that, that you might be able to access and use, but those are your three choices.
They’re all terrible, right? Because the premiums are high, the benefits are low. It’s a poor value. And, but that’s all, but that’s, what’s available to the individuals. And what is that? What is the somebody who is maybe 50 years old, pretty good health single person. How much would they expect to pay?
Once they leave their corporate job per month on health insurance on. If it’s just them or them and their spouse, yeah, they’re gonna pay, they’re gonna pay six, $700 in employee, an individual premium and a family of five that kind goes up two or three. If you’re a family and you, yeah.
If you’re 50 years old and you have family coverage, you’re gonna be, in the 1700 to 2000 plus range for any kind of. Benefit, right? Yeah. Yeah. Which isn’t a, that much actually. Traditionally people think you don’t wanna leave your day job just cuz you are gonna have medical insurance, but I always tell people, Hey, do the math, right?
If your medical insurance is gonna be a thousand, $2,000, that may just mean like a few rental properties. There you go, you don’t need to stay at your crappy job for the extra 15 years or stay the extra four years to get that supposedly grandfathered health insurance plan. Yeah. It’s real short term thinking, right?
You, a lot of the stuff is like we’re brainwashed. I thinking like the health and coverage is this magical benefit, but yeah, it all costs money at end of the day. And it costs. I guess what we’re saying here, if you go to the normal, bad options, you’re gonna spend to a thousand of $2,000, we can do better than that.
That’s why you listen to podcasts and listen to stuff, but we’re gonna talk about medical cost sharing today, which I guess maybe you’ll start at the price, right? Like how much does this typically cost in comparison to the normal. It’s gonna be about 60% less than what you’re currently paying and you’ll get, you’ll have lower out of pocket expenses typically as well.
So not only is it cheaper from a monthly cost standpoint, but when you actually go to use the benefit, when you actually go to get medical care, you’re gonna pay less. Out of pocket with most of these health share plans and specifically with Soldera. Yeah. So take us how, what is this thing and, how does it work?
How is it that it’s saving the costs are so much lower? Yeah. It’s saving because it puts you as a consumer in charge of your care. And also. It, you are shopping for the healthcare, right? So you’re a cash pay customer and the health sharing organization will reimburse you for the expenses that you incur that are beyond your chosen level of self insurance in essence, like the deductible, right?
If I’m gonna pay the first 500 of each need then everything after that would be shared among the community. But the way it works is you present, let’s say you, if you’re going for, voluntary procedure or appointment you can either there’s no network, so you can go wherever you want.
You can choose your own doctors or hospitals or whatever. You can either call and talk to the care logistics team and they’ll hook you up with a provider or you can do that yourself and go where you want, but you present yourself as a cash pay customer and they will bill you, you might have to pay something up front when you’re there.
But you wanna pay, you don’t wanna pay any more than your chosen, what they call initial UNS shareable amount. So you don’t wanna pay any more than that. And then have them bill you, and then when you get those bills, you send them into Sedera and then they share them among the community and send you the money to then pay the provider.
So it’s different in that regard, right? Normally with insurance you. You show up, there’s gonna be a copay and a deductible, and even you might even know that there’s co-insurance, but you really don’t know. You wait for the provider to tell you what that is, and they have to look at your card or maybe even call the carrier and then charge you accordingly.
And then they build the insurance company and then the insurance company pays them. And if there’s something that you owe you’ll get. You’ll get a bill for that. And it’s like a paperwork nightmare. You get bills, you get explanations of benefits and you really don’t know what anything costs and you don’t care because it’s, somebody else paying for it.
Or you think the insurance company’s really looking out for you and keeping the costs down, but you’d be, you’ll be shocked when you go from that model to this model. where you actually are engaged in the process and you are aware of what’s being billed. It’s a game changer. So one, one con obviously that you just mentioned is, know, you gotta come out with a little bit of money out of pocket which is probably no problem.
Average listener here. They’ve got a few 10 grand sitting in the bank. 50 a hundred grand in their life insurance policy. They, so they can come out of pocket a little bit. So then you take the, when the real bills come through the majority of the costs, they take that to their the medical share group, which H how many people are typically in one grouping?
It’s the entire community. So with Sedera there’s a little over 17,000. Members that are pulling their resources together. And there’s all kinds of medical sharing groups out there. Some of ’em are small, some of ’em are pretty large. So you can build some of a steady state.
Cause I think I’ve seen some really small ones where it’s maybe like a few hundred people or I don’t know how their, exactly how small is, but the medical sharing facilitators. They bring in the bills and they call up client, 57 and 84 and 236 and say send Tom a check for it this much, and this much.
Yeah. That’s a real convoluted way of doing it. So two things I would say to that is one anything below a thousand would. I would not want to be a part of Ty if you’re a large employer, then when you get to a thousand employees, maybe 1500 employees, that’s when it’s makes sense to start self-insuring to where you’re, you are up to a certain point, right?
You. But before that you don’t wanna be, there’s not enough people yeah. To spread the risk, not enough steady state, keep the costs down. Yeah. Yeah. So I would say that. And then to your, what was your other point? You, you said something else and I just I guess another question I have is oh, people are like, alright, this isn’t like a huge institution.
Even 17,000 is a smaller number. I think people are worried, especially people that are they have some money and they, maybe they take care of themselves cuz they know, fitness is the real wealth after a while. How do I make sure I don’t get into a group of, four foot, five, 300 pound people who eat Twinki for lunch every day.
That’s a great question. And the, yeah, there’s really no way of doing that. At a certain size, it’s gonna be the average of, America, which is not right. The average is not good, but the way costs are controlled is makes all the difference in the world. So one there’s preexisting condition exclusion.
So any condition or any, anything that you have that’s been treated in the past three years or been diagnosed in the past three years? Or that you’re even you’re aware of, and maybe you didn’t even get treatment, you have that issue that’s not shared. Not fully shared among the community until year four of your membership in year one, they don’t share anything in year two, they’ll share, up to $15,000 towards that condition.
And then year three 30,000 and then year four. It’s fully shareable. So that’s one way they do it with, preexisting condition limitations, and then through the cost control mechanisms that they have in place. And just getting actual fair pricing from providers instead of paying, the inflated costs that the insurance companies pay.
And then other services like second MD, if getting a second opinion, they also don’t. Don’t pay for things like if you’re drunk and you get in a car accident, that’s not shareable. If you just like breaking the law, like there’s some religious affiliated, which the one that you’re working with they’re not religious affiliated, but I know some of the religious affiliate, they won’t pay for things like abortion or correct some certain other procedures.
So you gotta be careful about those too, right? And so that’s how, some of the ways they control the cost and make sure that it’s, it’s really for, situations where, you’re in an accident or you’re you get ill and it’s not self inflicted. It’s not, something you didn’t need to have, something voluntary.
So those are ways to control the cost. And it’s amazing what you can achieve when you do that. You can significantly reduce costs by more than half utilizing those tools. Yeah. And I think it’s just another example of, look, if you’re just gonna do what everybody else does, you’re gonna get slaughtered with everybody else.
If you invest in the 401k, you’re gonna work at your day job for 50 years. If you invest, if you use the same healthcare. Coverage is everybody else you’re gonna pay two or three times the price. But like anything else it’s, it’s not without a little bit of work. And but what I keep telling people, especially in the past investors, seller and mastermind that I have, it’s not that hard to be an astute investors.
You don’t need to underwrite deals. You don’t, you don’t need to like go travel. There’s just certain things that you need to do. And this is just a small example of that, there’s some tricky things here. But yeah, I guess Thomas, like where do we start? Like somebody’s quitting their job in the next year or two, maybe take us some practical steps of, know, engaging with a company like yours, but what are some ways of comparing different options?
Yeah, step, step one would be to, evaluate your own current health situation, right? To determine whether do you have a preexisting condition? Are you getting regular treatment for that? How much does that cost? If you can. You can do a little bit of homework. Just because you have a preexisting condition doesn’t mean that you won’t be better off in a health share arrangement.
You just need to look at the, how much that actually costs you. Then look at the health share and say, okay, how much are they gonna share towards this in year one, year, two, year three. And how much will I be saving when I, ditch my insurance and go with this route? Because I can use that savings to help.
Cover some of those costs, right? So you gotta do that analysis. And then there, there are several, there’s probably only really five health share organizations that I would consider. And so you’d go and do a comparison to see, who’s got the best best for you membership benefits for you, right?
Got it. So those would be, those are really the two steps that, that she need to take to get the ball rolling. Yeah. And what would you say like less than half or about 50% savings, the the typical on these things and, yeah, I would say 40% plus easy. I saved 62% when I switched.
After I left my corporate job and then I lost, I couldn’t afford the Cobra premium, cuz my income was cut in half and I went without actually for a while trying to find something that, that I could afford. And that’s when I found the medical cost sharing and I was paying. $1,750 and it went down to $487 in essence.
So I think that’s actually more than 62%. But yeah, you guys can I’ll put all this information along with other information about the subject simple, passive, casual.com/healthcare. And this is something I’m looking into these days. I’ve got health insurance through my wife, but I want to quit that silly W2 job.
And that’s really the only thing holding me back. And I know a lot of people back from putting the day job is just this, what are we gonna do for healthcare, right? Yeah. Somebody I heard use the term spouse with benefits. , that people are looking for, spouses with benefits or that’s the reason, the only reason that the spouse is working is so that they have the health insurance.
it’s a, it can be a game changer. It was for me and I’ve been in insurance, my entire career. I’m a, I’m an insurance professional. I’ve I as a, in my corporate job for 23 years, we did payroll, HR, employee benefits and work comp insurance for employers all across the country.
And we would provide health insurance plans on a group basis. would put together self-insured plans. And so I’ve been in this space, my whole career. I just never realized as an individual out, a free range chicken out in the wilderness, how difficult it was and how expensive it was to find healthcare until it happened to me.
And I was super grateful to have found this this alternative. And so I’m a huge advocate for. And, again, I, when I first came across it as an insurance guy, I was let my red flags go up and I’m like this is not. Yeah. I For me it was, it sounds too good to be true, but then when I start to, travel and I meet in other investors and join different masterminds, these are the things that we talk about, like which, which Medi share are we using or healthcare sharing plan.
Somebody mentioned to me like, there’s one with. bunch of CrossFitters like those kinds of people with eight packs and can I don’t know if they make ’em run like a run test or what, but. Someone mentioned there’s some health sharing plans with that I wanna get in those, those guys don’t there you go.
Get sick. yeah. There’s one affiliate for Sera out of California who has a CrossFit. And so he promotes it among his CrossFit membership and I think he’s rolling it out to other CrossFit, specifically to CrossFit companies yeah. To offer to their me. So for the insurance company it behooves them to get those type of fire breathers in their community.
Cause totally. Yeah. They want the people who are health conscious, who, doesn’t mean you have to be, you don’t have to be a health nut and, or, or being Superman shape. But just, Caring a little bit about, yourself and eating in things in moderation and getting exercise and moving around, it goes a long way to reducing how much burden of a burden you are on the healthcare system.
Yeah. I’ll be on the lookout for that one, but anything anything else we think we missed that, that kind of folks knew newer to this, they need to know about. Yeah, just, there’s a, you wanna look at what the preexisting, first of all, I would say, this is definitely something everybody needs to take a look at.
There’s no reason that you need to continue to do the same thing over and over again, like you were saying earlier and expect a different result, right? The 401k healthcare, get all that stuff. Yeah. Costs. Aren’t gonna go down. And it’s not gonna get less expense. And this is a way where you can take control and have a little bit of individual responsibility in the system and really fight back against, the huge corporations that control healthcare in this country.
So wear it with a badge of honor and go out and help make a change, and cuz that’s the only way things will change is once the insurance companies fill that. But definitely check it out. Fight the power. And what’s your contact for people to get ahold of you ask more questions.
You can reach us@gotpurehealth.com. You can find me on LinkedIn, Thomas rock Lindsay. And then, yeah, I’ll put this all up on simplepassivecashflow.com/healthcare along with a lot of other things I’ll find on the subject. We’ll figure this out together, folks and this would be another good option, joining that simple passive cash flow accelerator program, you get in and you build relationships with other sophisticated and accredit investors and you talk about this stuff, it’s just not something you’re gonna just walk down the street and say, yeah, I do this for my healthcare.
It’s a little personal. So we make people sign confidentiality agreements. So we can talk about this stuff freely. Thanks for joining us guys. And we’ll see you guys later. Thanks lane.
What’s up folks? This is the December, 2022 monthly market update, and you’ve got a long one for you guys, which is probably why we’ll probably move to break these up as weekly installments into the future. But if you haven’t yet, check up my book, the Journey to Simple Passive Cash Flow. I think we’re a little bit over a hundred reviews at this point.
If you Pick it up or if you guys listen to the book on Audible. You guys can leave us a review or you can check out the free book@simplepasscash.com slash book, which is your little trick. If you guys listen to these episodes and we put these monthly reports up on the website at simple pass cash flow.com/investor letter.
So if you’re listening to this on the podcast and something sound interesting, you wanna look at the graphic later you can go ahead and access all the recordings with the cool visuals and highlights and graphs and charts on there. But before we get going Just see you guys here in about a month for the annual retreat.
If you guys want to jump on board and hang out with us for three days you guys can go to simple passive cash flow.com/ 2023 retreat. I think it’s like we’re calling the Huey five cuz it’s, making it like UFC where we start to number them. So we’re on their kind of our fifth one of these big events, but it’s great opportunity for folks to get to know other real.
Credit investors since most people out there just don’t have a clue about, using passive activity losses to lower the order income to drive their AGI down under 300 or 200, or not pay any taxes, or they still think tendered ones are a good idea and get around other people who aren’t, don’t think you’re crazy for taking money outta your HeLOCK to go make a higher rate of return outside of there.
First teaching part today anchor retail. Investments with fitness centers. Now the term anchor tenant is is very familiar in retail, shopping, malls, centers, stuff like that, where you have a grocery store as your anchor tenant. Now, I personally don’t, not super fond of shopping malls and that type of stuff, but like now they’re saying that the fitness center is the retail.
Anchor tenant for that. So that’s just a little bit of information for you guys to just always be learning, right? I think I personally like a lot of apartments maybe even self storage a little bit not huge of animal mobile home parks. And I like office if you can buy it at that right price, even in this pulse pandemic market.
But I’m not a huge fan of shopping. I think e-commerce. I do the little shopping centers, but I think it’s always good that people keep learning about these types of things. Also in the news, our business online reports, especially this great news for you, hunts investors with us.
As you guys know, we’re just wrapped up and we are starting to lease up our first development 230 unit development out there and we are start going to start to lay the foundation for our second development, which is 300 unit apartment complex in Western part of Huntsville. But the good news keeps happening.
First solar. Announce plants to develop 1.1 billion solar module manufacturing facility in Decatur, which we have three apartments out in Decatur, which is, I call it 20, 30 minutes west of Huntsville. So that’s always good to be investing with a storyline like this. Not only is storyline, but also, the numbers and growth population keeps going up and up.
So let’s talk about FTX and Alameda. And although I don’t invest in this type of stuff, and this is exactly the reason why I’ve been following this story as like how some people watch The Bachelor. Because it’s entertaining to me cuz I don’t really have money in it.
I’m sorry. If you had money with block fi and you were lured by the high staking yields and always scratched your head, how are they making those high yields? And to your dismay, this all happened, but for those of you guys who don’t, aren’t familiar, it’s this this dude’s fault.
Sam Bankman freed SPF is what we’ll refer to him. He’s the shyster involved in this. He created an exchange where people would load up their cryptos or buy cryptos and it’s supposed to act like a bank, right? Or like a, like your Vanguard account or your brokerage. But little did people know that, SPF and his little band of eight to 10 misfits in Bahamas, and the story kind of goes deep.
A lot of it is. A lot of the extra stuff, like the whole polyamorous group of bandits he had and his girl ex-girlfriend who had no experience trading or really no real job prior to this. Running a multi-billion dollar company. A lot of this stuff is makes the story interesting.
I see it as a drama unfold, I’m just gonna report on the facts here, but Fdx. Was one company and their other company was this Alameda Research, which SPF kept arms length transaction, arms length to him. He put his ex-girlfriend in charge there. But obviously everybody knows what’s going on, that he pretty much has direct control over both of these entities.
So Alameda Research is the the high risk trading company, which is really how they got started back in 2000 and s. But what they did was they used the deposits from people putting money into ftx to bankroll the Alameda research bets. And so the way the story unfolded, you know, ftx, I believe was the second or third largest exchange at the time.
I think the first was Binance. So these guys are always competitors and they always went head to head and there was a . Twitter, I don’t know what you call the tabacco or they basically, there were some tweets went back and forth where, finance revealed some holes in fgx and people started to look and basically it made the whole house of cards fall.
And boy did it fall. And this is maybe about a month ago, this all happened and basically it. Everybody found what a kind of a Ponzi scheme it all was. Now the lesson learned or at least for myself, is when you have two entities, like we have an apartment here, we’ve got well over 50, some 50, I’d say 50 live deals.
Right now, we’re not allowed to commingle the funds from one deal to. Even though 49 of ’em are doing really well and one is struggling, you can’t bring over funds to save another. That’s commingling now, unless you state it in your ppm. It’s illegal. What these guys did was obviously legal, but the thing about crypto is like, there’s not a lot of regulation in auditing in this.
These guys never even had any board. There was no really adult supervision in this FTX company. Ftx, you might have heard of ’em. They were signing up all these celebrities as spokespeople, like Tom Brady, his ex-wife super model. They were all not in on it, but they all were all paid off to promote the company.
And I just, came back from a going to Miami and I went to a basketball game and the, it’s still named FTX Arena. I don’t know when they’re gonna take that off, but, I guess the lesson learned there is just because there’s a big charade and marketing push around something for example, crypto.com is owned by, it has her name all over the X Staples center in Los Angeles where the Lakers play.
Not saying that’s a scam or anything like that, like a lot of this is like manufactured celebrity manufactured it may or may not be real and I for one know What I do, what we’ve done at Simple passive cash flow.com where we created this investor group it’s follows the same thing.
We like to, I, I like to put it all on display and be very transparent with investors, which is why we do the events so you guys can come and meet real investors than to just go off of how many Facebook likes or Instagram followers somebody has. That’s, that stuff can be engineer. I’ll be the first one to tell you guys that to me the really, the only way to really know if something’s legit is to know the business and know the people, and maybe most importantly, know the people.
Know the people who’ve invested with the people in the past.
But anyway, I’m sorry if you lost money through this. And, the, it seems to be this kind of fraud is pretty ramped in, in the crypto world. blocky.com, which is another big, I don’t know if the word is exchange or brokerage is the right word, but whatever it is, they were also back to backing FTX in some indirect manner, and they also went bankrupt and a lot of people lost lofts money in there.
They’re still investigating all this stuff. It’s fun. If you didn’t lose money to watch all the SPF videos out there, he’s running his mouth and his driving his lawyers crazy. But this is man, like this just reiterates like, why do we invest in real estate? Because it’s a hard asset at the end of the.
Is worth something. In fact, it’s a com. It’s a working commodity where people live in it, and that need isn’t gonna be really going away anytime soon. Out of everything I can think of, other than throwing away the garbage, I think that real estate, especially workforce housing, real estate is here to stay, whereas crypto is not a concern and nor does it provide any utility.
So I’ve always thought about this esoterically and how do I create a will or trust and make sure my kids aren’t idiots investing in Luna or some kind of fake thing. And other than I put the rules like invest in real stuff where you’re highly collateralized and the thing actually makes, has utility in the world because it’s like the tulip thing again, right?
The tulip thing. I guess there was technical collaterals, a physical object, but what the heck did tulips do? What utility did it do? Take it for what you wants. Just ideas I have. Real estate hits both of those. Plus the taxes, right? Getting the passive losses and being able to legally pay less and less, or even no taxes at all.
I just don’t think you can be real estate. I think the one bad thing about real estate is you can’t trade in and out of it on a whim, which might be a good thing for most people. And the other bad thing is you’re not gonna make huge amounts of money. You’re not gonna make 30, 40, 50% plus a year on it.
And if that’s you, maybe. It’s probably a sign that you don’t have very much money and you have to, you’re lower net worth and you have to take these moonshot. But if you’re an accredited investor, you don’t need to get these high returns. You just need your money to be stable and safe and not lose your money and not have it just drop overnight. 10, 20%. Like the stock market or 80%, a hundred percent like crypto. That’s not any utility in the world.
All that said, I the idea crypto. I like it’s, I like the how it’s circumvent countries, they can’t really control it. There’s a whole conspiracy theory over, maybe the politicians or the people who are really in charge or trying to create this debacle on purpose to create the reason for the regulation.
That’s probably gonna be coming down the pipeline. And, so that the kids are finally regulated with this stuff and are taxed, right? That’s the IRS love the taxes stuff as it, as of revenue source. I, for one, has follow Who follows s e c law Think it’s great. Yeah these guys need, people in crypto need to follow scc.
It’s a security, in my opinion doesn’t really matter. I like to see them follow the same rules that I have to do. But anyway, that’s off my soapbox. If you lost some money with this stuff, I’m sorry. Next time, invest in real estate in cash flowing stuff that is providing real utility in the world.
In fact, create value, right? That’s real. Wealth comes to people who create value. If you’re not creating value, you’re just. And we create value by just slowly and very boring fashion changing out units and increasing the value of the property, which our tenants to pay more on rent for, which makes the price of the property go up.
It’s very boring, although it’s very prudent. Okay, so back to the Real news. JP Morgan is about to spend 1 billion on hundreds of rental homes across the. becoming a mega landlord. So I always say Follow what the smart money is doing. They’re picking up rental problems.
So what they are doing, because they have so much money, a lot of times what they’re doing is they’re building big developments build to rent kind of model. And so that they can scale with this. And this is, I think, where the small landlord has the advantage over these big guys because small landlord can pick up rental property here, and here.
And, they’re willing, small landlords willing to put in a little bit of sweat equity and trade time for money where it’s not really efficient for a large player like JP Morgan to own 2000 units across a five mile ring. It’s all over the place. It’s not scalable, which is exactly why, we in this middle market between, few million dollar transaction to 50, a hundred million dollar transaction like apartments because, some of the big players, they don’t really play in the space too much.
Yet we can get better pricing than the, and better synergies and better efficiencies. Than the average mom and Paul investor, even the mom and Paul investor buying a 20 unit or 40 unit apartment complex. Equity multiple says going beyond narrative market drivers wage growth is still healthy.
5% in the US where the fed’s target is 2% inflation. We haven’t really seen the inflation come down by huge amount. There are talks in the tech sector of some layoffs there, but still, Job growth and unemployment is still pretty dang good, which is a great sign for the economy. I actually would like to see that go down so we can just flush it all out and get back to the lending markets being normal instead of being assaulted with these high interest rates.
But in all due time office loans are hard to come by and this is one. You’re buying office. I think if you can buy it at the right price, it’s a good deal. But the thing that impacts that is your lending. And this is why we’ve pause our normal value add apartment acquisitions.
I would say probably at least for six months until we start to see the interest rates come back to earth a little. No different than you buying your home to live in, right? Like the price might stay the same or even come down, but if interest rates go up, your affordability gets worse and worse.
As we kind of brace for even more interest rates hikes on November 2nd, the interest rate got roll 75 basis points and I suspect maybe one or two next year to be coming. We’re just not seeing a real big dent on the unemployment. It’s like you just take a big stick and like trying to chop a tree down and just take a big whack at it.
Fed just took 75 basis points, which is a big jump, but the tree’s still standing. So you, what do you do? You just keep chopping at it until it breaks or the unemployment starts to go up. So you’re trying to induce the unemployment to. So inflation comes down. Big picture, foreign investors continue to seek stability in the United States.
If you think inflation is high in the United States, look elsewhere it’s climbing and I think the United States, even though we, I don’t know if we or myself or we always have a self doom look at our country. A lot of times, United States is probably one of the more stable places, at least legally, and as far as you’re the best amongst the world.
Fundamentals that they did point out is impacting a US apartment market, including home high prices and rising mortgage rates. So this makes people renting in apartments. Even more of a demand as people can’t afford houses to live in. They have to rent somewhere. And a lot of that is in multi-family apartments.
Another shift. Foreign investors are becoming more accepting of secondary and tertiary markets versus a prior narrow focus on US gateway cities and urban cores. It’s always funny, I’ve talking with some foreign investors and a lot of times they don’t know anything other than Los Angeles, San Francisco, and New York.
And you tell ’em, oh hey, there’s this place called Seattle. And they’re like, no, we’re not interested in that. We never heard of that place. That’s just how it is. We think it’s stupid, but I don’t know what many people can name more than six, five or six China cities. I dare you.
I dare if more than five, but I don’t, I certainly don’t. But that has a bigger population in America, so probably should. . But what the, the light reported that Sunbelt cities, including Austin, Dallas, Fort Worth, along with Charlotte, Denver, Nashville attracted more interest, partially due to lower tax.
Incentive is other areas of interest include Atlanta, Phoenix, and Seattle. More stability, consistent returns and current strength as opposed to property sectors in Europe and. There the US dollar offers a degree of stability international currency fluctuations.
It’s commercial property Executive. That’s a article here on the pros and cons of zero cash flow deals. There are times when such deals can be advantageous when they come with a warning label while zero cash flow de. Assets do have a place, especially when it comes to single tenant lease properties.
They’re certainly not for everyone. So here’s my take on this. We always preach cash flow and cash flow is there just in case of hard times. But what do you do? Say you are in tough times and the. The cash flow isn’t there because hey, interest rates went up and which they have.
Are you willing to take a hit on your cash flow to go into a deal, purchase a deal? To some extent, if, I think the second thing to look at is if you’re picking up a property in this environment where the price is lower because. The seller needs to sell it. And they know that it’s a softer market out there, meaning there’s not that many buyers who can qualify or get financing to make the deal work.
So they have to drop the price. And that’s exactly what’s happening. Now we’re in this kind of price discovery land where, buyers still think their price is worth what it was, maybe a year ago. They understand that the new buyers just aren’t able to qualify for as much affordability and they’re holding costs and their debt service is gonna be a lot more, and therefore the demand is less and the prices should come down.
Right now the sides are very separate. And this is this again called price discovery land. Now, I don’t know when the, when it’s gonna stabilize more, but you. We always in these reports talk about things in generalities, good investors should be picking out the outliers, right?
When somebody is really desperate to sell, pick it up at a good price, even though your interest rate is high and potentially maybe even more even. if there is zero or negative cash flow, maybe you guys are gasping out there, right? No, I’m not saying that you should buy something with zero cash flow, but it may make sense if your property capitalize.
Maybe you have 1, 2, 3, 4, 5 years of cash reserves to paid to debt service if you know that you have the collateral there. So a point would be like if you buy, if a property’s normally a hundred dollars and now the price is 75. And you’re gonna suck away a dollar every year on the debt service because you’re negative cashflow.
I might take that deal because I’m like I mean it’s 25 years for me to get to a point where I’m just not going to I’m gonna be underwater now. That’s a very rudimentary example, but it just proves my point that is one way I would say it. And so it’s not, this is what I think.
You just stay semi-hard or it takes a business mind to say in everything that there is risk, you’re going into an asset. In that example for severe discount, how long can you hold onto your breath till things get back to normal and things get back up to where it should be.
And then you know the people who took a bit of a risk or gamble. And that’s not saying that it’s a good or bad thing. Can capitalize on that. Buying something for 75 cents on the dollar like that October. CPI suggests inflation may be slowing as housing demands continue to weekend. This is something I’m looking at closely, and this is from Fannie Mae. Say shelter costs continue to grow at a robust rate, however arising at 0.8% over the month and 6.9% over the year. New cyclical highs.
So owner’s equivalent rents slow to a 0.6 month of or month gain. You’re starting to see the signs of inflation cooling off. I don’t think it hasn’t hit. If you Google CPI or like the big numbers that your layperson will be looking at. But I think these are good signs that you’re seeing things start to reverse on the inflation.
And then the Fed can just give us a break on those interest rates and get back to business. So still we know that shelter’s a legging indicator and that home prices are beginning to. Decline and private measures of rent increases have slowly have slowed and they outright decline in the coming months.
Although we don’t believe this one report will significantly affect the Fed’s current aggressive tightening stance we do view this as a sign. Inflationary pressures are generally slowed this is from Chandon economics. Differences in rent or home personal inflation rates, reach a record. Personal inflation rates can look much different depending on if somebody rents or owns their home. Adjusted CPI inflation rate for renters was 7.8% in October, 2022. Meanwhile, the adjusted CPI rate for fixed rate homeowners total just 5.6 or the same period.
So I guess, overall what they’re trying to say here is the renter inflation. The difference between the spread, between inflation, between the renters and the homeowners is really big right now. A lot bigger than normal. I don’t know what that really means. Maybe it, maybe it’s just saying that the rich get richer and the poor get poorer again.
But or maybe if I’m reading into it, saying, The people who are homeowners and locked in at those nice 3%, 4% interest rates. They’re sitting pretty right now, where the renters are still out there in the cold and rain and their rents are being increased on them. I. Wealth management.com says multifamily investment coming back to earth.
They’re starting to see the rents not level off, but it’s not growing at that astronomical rate as it once did in the past year. Which is echos that last article where we’re saying, inflation is seeming to slow down a little bit.
Arbor reports, this is they’re talking about small multifamily investment trends. Consumer price index services increased 8.2% from a year goal from September, 2022. That’s them again, measuring. I know, I’ve heard of this being as high as 9%. I had to bet that things would get around 10%, but hopefully, we’re just gonna level off here and go back down.
The multifamily sector and small assets sub-sector continue to benefit from a unique set of circumstances. While multifamily assets are not refresh recession proof, they are downturn resilient. Even as rent growth decelerates year over year gains still outpaced inflation. The sector’s unique ability to absorb inflationary pressures in a powerful determiner.
Continues to attract new buyer demand liquidity is another factor that has enabled small multifamily subec to maintain its ity. And this folks is the reason why I invest in this type of stuff. It does well in recessions. I don’t know if the word is, recession resistant, recession proof.
I guess nothing is recession proof unless you’re investing in life sediments, which just determines if people are dying or not, but, a lot. I can’t think of any other businesses more recession resistant than multi-family apartments. If there is, let me know. I’d sure to invest in it, but that’s the thing.
You can’t invest in that type of stuff. It’s going to be somebody’s, business that the average person, the passive investor out there who’s looking to diversify in the multiple things is not able to. Obtain, like how it is with multifamily apartments and syndications and private placements.
A also reports that the loans are way down, which is, no secret to everybody and which is why if you’re a mortgage broker right now, things are pretty tough because just, it’s just hard to get deals done when people, saw like some of these interest rates. Half of what, it was not too long.
And I believe that this is in, just like how the lumber prices shut up a year or two ago. I think we’re looking at the same thing, and maybe even on the same timeline, where it goes back down in a year or two.
Refinancing share of multifamily lending. Loans originated for the purpose of refinancing, accounted for 75% of the small multifamily. So not new originations, but refinancing. You know what I’m prob what I’m thinking a lot of that is, is maybe people taking equity off the table and liquidating it to just put the cash reserves or to show up other projects.
And this is very different than what the regular person will be doing out there, right? People like to pay down their debt. They don’t like to liquidate their equity, but I think everybody needs to take note of this because this is what the pros do. If you had a few million dollars of equity in your apartment, it makes sense to take that off the table and just stick it in the bank.
Because in, in times get tougher, it’s harder to get at that equity. It’s not liquid. Which, just this is befuddles me, right? Why is it that everybody’s taught to pay off their houses and throw money in there where it’s inaccessible in tough times.
So CAPA rate spreads. So I’ve shown this. Many times, and it’s always good to come back to it, why do we invest in real estate? Real estate’s great in all, but like we make a good amount of returns when you apply leverage. And the thing is the price that the percent or interest rates that you borrow, the money is, not saying always, but typically lower than what the cap rates or what the returns on the properties.
What you don’t want is, a time like in 2020 when this delta, the spread is low. What you want is a nice, big, healthy spread there. If you recall, 2010 to 2000, I would say 16 was coin the golden age of apartments in multi-family, where the spread was huge. Then things got a little tricky, right?
As things started to really tighten up. Now, one could say that, this spread is a little bit wider now, a lot wider where it’s been in the last couple of years. But this is a time where it takes very the reason why is because the prices in, that you could buy these properties have come down.
But your hoarding costs has gotten way. But that’s where we are in terms of the spread. It’s, I don’t think it’s not possible for you to be like, oh, like the spread is small now I’ll just wait. Or it’s large. Now I’ll, it’s time to buy multifamily. It doesn’t work like that. Because going into deals, it takes a long time to transact, maybe two to four months from first contact to actually close an asset, and then, who knows what’s happening then.
Which is why the whole. Just keep buying good deals is probably the best approach or kind of dollar cost average to this is always, typically the spread between interest rates and CAPA rates go that spread is there and you apply leverage and you, that’s how you make money.
But, so looking at the graph. This lower one is the all multifamily and this is the small multifamily. Your small multifamilies are typically gonna have a larger cap rate because it’s more headache, it’s more pain in the butt and not, and that’s why the cap rates are higher because you know you’re probably gonna have it is just it for a lay invested.
They’re like, oh, let me go after a small multi-family because the cap rates are higher, but, More experienced investors know that it comes with more headaches and shovels and friction costs too, that aren’t really accounted for in it. But been there, done that. I, we started with a lot of Class C.
Smaller units, like 50 units, 70 units, and we graduated to the larger Class B stuff. Now we’re trying to get to a development and being more of a pro equity lending lender source and just give predictable returns to investors in the debt fund and then for larger returns to do the developments.
But, that’s the, our stories, it started with those Class C buildings, which is typically the smaller multi-family stuff. Not saying we chased the returns because a graph like this told us it was higher returns or higher caps, which not entirely all part of the story.
It’s that was all that we could do back then. But I’m, I’ll give first an experience that it’s maybe not worth it. It isn’t worth it in my opinion.
I would say, There’s a nice, sweet spot, with good tenants or no tenants. That’s why we do the developments,
expense ratios. So this is your expenses and expenses has been going up and up. I would probably say that well next quarter will probably see this bar graph jump. Now, expenses are coming from. Higher insurance costs, rising utilities, which is completely inflation inflationary. Other costs like taxes to property taxes, especially when prices have increased the last several years.
And then now the other thing is that is testing all apartment owners today and all real estate and owners today is the the interest rates going up, especially if you had a bridge law. Hopefully you’ve got a rate cap in there, that also increases your debt service, which makes your holding costs go up, which is why you’re starting to see the expense ratios climb across the bar.
But, it’s all, it all works within the system because if the expense ratios get so high where people aren’t making money, , that’s when kind of the prices go down, and that’s when you know the Fed should manipulate interest rates down. It all it, the nice thing about real estate is you can stay in business as long as you have capital stores to last these things, and these things don’t last forever.
As you can see, the loan to values have come way down, which is tied in with, people think when I talk about capital markets tightening and the lending market getting more difficult, that it just means instead of us borrowing money at 5%, it might be 7%. , but it’s also the loan of values go down.
So they’re like, all right, you can have 5%, but we’re only gonna give you 50% loan of value, for example. So those are the two main terms that are being moved around so that the lenders are basically getting a better deal, so that is consistent in this bar graph on this left side. Now average 66%, which, it’s all this is just averages right across the country.
But you can see where it was at the peak. 20 20, 20 19. Average LTVs were up in the 70% range. Now it has come down quite a bit. And we’ll end with this, the top 20 markets for four cast multifamily growth. This is from wealth management.com. Not saying that this is the all inclusive list or correct, this is just a guess.
But 20 Austin, Texas, and we’re working our way down from the top, from the bottom to the top. So Austin, Texas, Chicago, Seattle, Philadelphia, inland Empire, Los Angeles.
Portland, Oregon, Tampa, Florida, orange, Cal County, California. And then we get into the top 10 here, New York, where rents are going up. Raleigh, North Carolina, Boston Actually Boston’s number 10. Raleigh’s nine. Eight is Charlotte. Seven is Nashville. Six is Kansas City, Missouri. Five Dallas. Four is San Jose, California.
Three is Metro Miami. Is Orlando, Florida and one is Indianapolis. And that is the show. Folks, if you guys are interested in interacting with other high net worth investors, check out simple castle.com/journey. Our paid Inner Circle Mastermind. Say we’ve got almost 800 investors with us. We’ve got a hundred investors in the family office group, so not everybody joins.
But to me, if you’re investing more than a quarter million dollars, joining a group like ours is. Not only the only one out there for purely passive accredited investors, but it is, I think it’s insurance for investing with the wrong people and, but I’m big on like building the community where it’s more about the social connections within the group.
And then also check out my book and give us some feedback. We’re gonna be moving around this format a little bit. I’m gonna be breaking it up as today’s call was pretty long. And then if anybody has any feedback on the podcast things you guys like to see, things you’d like to see less of, feel free to email us at team passive cash flow.com.
And if this is the last time I hear you, see you guys have a great holidays. Happen in there, right?
What’s up simple passive cash flow? This week’s podcast, we are going to be talking to another coaching call. This guy’s got 1.4 million net worth and he is finally ditching the rentals. Now, I would say most of you guys who are investing with us these days, maybe not the vast majority, but. Little more than 50% of you guys have never owned rental property.
It’s funny over the years that this clientele group that ‘s actually owned rentals, like the guy we’re gonna have on the coaching call today. You guys can also check this out on the YouTube channel and it’s probably one of the better places if you wanna actually look at his personal financial sheet.
And look at that stuff. And as always, if you guys wanna sign up for one of these complimentary coaching calls reach out to the team at team@simplepassivecashflow.com. We can change your name identity. We can make it fun. We can be asking for a friend. We’re all, but like ditching the rentals, I think what most accredited investors come to the conclusion of the hardest thing is who do you trust?
And that’s why we say, come out to you. We’ve probably got maybe a couple more weeks or actually maybe a few more weeks until then Hawaii retreat. The Hui five is closing. We are pretty much filled up with family office Ohana Mastermind folks, as we always try and save like half of the seats for them, which means we do have some seats open for people who are not in our Mastermind inner circle to test drive the group out.
And we liked you guys to come out and check out the group once to see if it’s a good fit for. But after that, no, you gotta join. You gotta join the family office group. But my hope is, you come out, you meet yourself, you ask all the questions you want, and more importantly, you meet some other people.
You have a great time, and maybe you meet some lifelong friends too in the process. A lot of that can be very life changing to meet some other people along the path. Some things that I’m personally working on myself here. I was looking at buying a house. I know it’s crazy. I’ve always been a proponent of renting.
One of my big rules is, you don’t buy a house until your network is two or three times greater than that of the house. So if you’re looking to buy a $1 million house, Don’t do it till your net worth is two male female. Now, you probably think I’m a cold, heartless person, a house is something that is not a good return on investment and you can probably do better elsewhere.
And how else are you gonna get unbroke over a million, million and a half dollars net worth unless you invest in investment properties. And most of us in our group are not born from money. First generation wealth first, first generation to get over a million dollars net worth. I’ll be going into more details in the next week’s podcast.
I’ll be talking about what people do on, looking for these home mortgages and stuff like that for the wealthy. So it’s definitely first world problems, but again, if you haven’t yet, please join our investment club. That’s how you get the invites to our events. You guys can join there and check out all the past deals, including the pet fund, Paying out 12, 13% per year, or that’s a little bit over 1% every single month.
It’s in a debt fund arrangement where it’s a little bit lower risk, lower return, it’s not an equity side. And that’s what the market is giving us at the moment. Interest rates. Being sky high, and I can’t make deals work at the moment. So I don’t know how people are doing things out there.
So that’s, I’m just taking what I can get and that’s why the debt fund is becoming more prevalent as a product for us at this point. So if you guys want more details on that simple pass of cash flow.com/club book a call. I like I, we give out free complimentary calls. I wanna get to know each and every single one of you. Enjoy the show.
What’s up folks today. We have a gentleman Jackson here who’s been in a group. I think we met maybe a couple years ago. Or within the pandemic years. When everybody else was, had some free time on their hands and they could study this stuff, but he’s volunteered kindly to open up his personal financial sheet here.
And his net worth is approximately 1.3 million. We’re gonna get into this bunch of questions and I’m sure all of you guys are too scared to ask. I wouldn’t blame you. This kind of takes some gho to get on the internet or a podcast like this, but we also put all these videos.
We must have a couple dozen of these coaching calls. So Jackson is not the only one and we arrange these by networks. So depending on where you are, it’s just easiest to find, if you’re 1.4, maybe you find this way. You start reading down the page from there, but Jackson, thanks for doing this.
Why don’t you give a quick update on what you do for work and how old you are. And just so people get a little context. Sure. Yeah. My name is Jackson. I am currently 34 years old, married. I have one child, an eight month old baby boy. So that’s fun. Profession wise, I am a registered nurse.
I’ve been doing it for about 10 years now. Graduated in 2013, started off working in the emergency department in LA county. It is a very busy department. Just follow that path, right? Good benefit. Government job, winning that pension, the whole plan is to retire with that pension after 25 years and whatnot, but along the way I did pretty well for myself.
Moved up the ladder, became a charge. Nurse, went into management, got my master’s. Currently I’m a director for my hospital and at this point where I’m at after 10 years, I know that I don’t wanna do this forever. I cannot retire off of this and it’s just not sustainable. So I’m just looking for another avenue as far as passive investing and how to find another sense of financial freedom.
All right. And so Jackson, you’re actually rare. I would say in our group most people are, I would say are a little bit older than you and myself, probably in their mid forties. Other kids are a lot older right now. You’re what I call the BEU triangle of parenthood, where we don’t see too many people.
We’ve got. A bunch of Henrys who are young folks making six figures and, not a care in the world and buying Teslas probably. And there’s stupid Tesla whistles too, with their free money. But not many people have the bandwidth to look to doing something else when you have young kids.
At that point. What does your spouse do for work? What’s the situation bandwidth wise, yeah, kid. We actually met at work in the ER, I worked in adults and she worked in pediatrics, so she’s a registered nurse right now. This past year she’s taking care of our baby at home.
And currently going back to school for her master’s to be a nurse practitioner. Okay. And then, so between the two of you guys who likes their job, the least, that’s a good question. Neither of us want to be. A parent at home solely. So we do wanna work, but probably 50, 50, I think part-time positions for the both of us would be ideal.
Okay. So you guys both make pretty good money and it is maybe too early to really tell. It is probably what I hear from other people, what you guys will find is, you guys will keep doing your thing, but one of you guys will have a crappy boss and then that will probably be the front who takes the rent off first.
But hopefully that happens. Although it likely will, both of you guys make about 15,000 per if you guys were both working, is that kind of where you, yeah, that sounds about right, right now I’m making about 200,000 a year salary wise. If you work full time, she would probably be in the one 50 to 180 range.
Yeah. So together you’re definitely above that. $340,000 of just gross income together, this is correct. That’s if she was to work full time though. So right now, since she’s not really working and just focusing on school I think one of our benefits, especially this year is combined. We’re probably looking at 280 combined cuz I would hold the majority of it. Okay, cool. And I don’t know if you did that on purpose, but yeah, I think that’s good.
The only thing I kind of question is like, unless she really wants to become a nurse practitioner and make more money I don’t think paying the money for grad school and all that stuff is like a good investment, especially when you’re gonna see in probably the next five years, your net worth 1.3, male will probably be like two and a half and although two and a half is not there yet.
Yeah. You’re definitely getting over the hump. It’s at that point, you’re gonna be wondering like, why the hell did I do that thing for two to four years? Spending money to get it right. Not only time. But money too, to pay for that degree. I would say if, I don’t know how far along she is now, but if she doesn’t like it or if she’d rather stay at home with the kids or go back to work and just make a respectable six figure salary.
I would say pull out now. Unless you like it, but that’s true. That’s my thoughts. And then, and that clashes with what most people will say, most people will say, yeah, you have to get more because you’re going to be working for 20, 30 years. And then it obviously makes sense, to go from 150,000 a year to, I think they get paid 2 53 something.
And right. I think the master’s worked well for me because I got my master’s in leadership administration and nursing. So that helped me propel at least, get a stepping stone into the director position. So it was the cost benefit that worked out for me. I think for her as a nurse practitioner you get a transition into telehealth.
You could work from home a little bit more flexibility where as a registered nurse, although there’s different fields along with it most of it involves things like patient care hands on works. So I think with the nurse practitioner, it’s just a little bit more flexibility, especially now with this day and age of healthcare where telehealth is really on the rise.
Yeah. I buy that. I like that plan. And so like for you just so I understand when I talk to other people, so for you, like your, the masters was a way for you to get out of the field right. In a way, like actually teaching real people and getting yeah. Okay. I see that in many others, like a lot of our other investors, engineers.
Pharmacists, that’s the same trajectory they get off of the front line as I call it. And into the air condition. You guys are all air conditioned, but yeah, it’s kinda like the construction, it’s nice. It’s nice. When you need that higher level to degree to get out of the construction management in the field role to get a cushy job and just pushing numbers all day long, different quality of life, more freedom.
Yeah. Exactly. But for me in that paper pushing job, I don’t like it. So yeah. Ideally I would wanna do something else, but on a part-time basis, less hours and really just have my passive investments pave the way and help with that. Yeah. And I think that’s something maybe to think about in the future, because at least what I hear from you guys, health professionals, you guys like to interact with people because, you can see the benefit, where, I thinks true. That’s why a lot of engineers don’t like our jobs because we. See people and by you going into that upper level management in the healthcare, you lose that and you become sad, like all the engineers, so yeah. You lose the comradery for sure. I think as nurses, we do we share a lot of interesting stories and experiences.
So yeah, you’re right. That is a key factor to some of our satisfactions in the profession. Yeah, but you got, you’ll have options here in maybe five years or so. So let’s get into the numbers just to sum it up for folks who are listening on the podcast. And we do put this on the YouTube channel.
And then, like I said, if you join the club simple, pass cash, flow.com/club, you will get access to the simple page with all these videos on here, which you can watch all the videos, but net worth 1.3. If we look at the upper left hand corner here nothing really stands out pretty standard.
You guys. Your home and you guys are California, right? Yeah. Correct. Los Angeles. Yeah. So probably what, like a million, 1.2 million house, you guys owe 450, 8,000 on it. So we can talk about that. I think next but you guys are paid off half of it, which is, come to our events, Jackson and people okay.
Might be a little shamed by that, but that’s cool. We’re all learning. okay. Salary and wages. Like I said you’re the only one working right now. But understandable you get the kids. What I really look at is this net cash flow so I don’t know, really have any data on this.
I just use my own, judgment, but. Based on our community where your salary is, your salary should be higher. Because you only have one spouse working. I think you’re, you could be doing a little bit better, but, because you’re only fighting with one arm, basically saving 60 grand a year where you’re at is reasonable, and I guess that’s, maybe we circle back to that point at the end, right? What if your spouse cut bait on the whole nursing thing and just made a hundred grand a year. Now this pops up from 60 grand to 150 grand a year, and now you’re really moving, but we can talk about that at the end, if you want to notate that down.
Okay. Yeah, I was pretty conservative about it. I didn’t include my wife’s potential income. Also budgeted like 12,000 a year for travel expending, expenses. Vacations and things like that. That’s a part of our savings, but I just wanted to budget that out. So the net cash flow is really coming from me.
That’s what I plan to invest, which is not very much, and this is something freshly I’ve been going through too. Like you and I are still in our thirties coming out of our twenties. We’re super cheap. Any vacation over five grand is big. Yep. But then yeah. Yeah. You come to our event, you talk to the dudes in their forties with four, two kids, family.
They’ll tell you, they don’t go anywhere. That’s less than 10, 20 GS. You wow. That’s for one vacation. Okay. So something happens there. I don’t know, man. I just know when you go past that certain age or your family threshold, it’s just like stuff happens and things just cost three X, four X, then what you thought it was.
I like to be there someday, maybe in the next five years. Probably and then, you’ve got, so let’s break it down. Where is your deployable equity? So of the 1.3 million, I’m seeing half a million in your home equity in your house. So where is the other 800 grand or so those already locked up in investment properties.
I have 12 properties now, 17 doors, total. Most of them are single family and duplexes. So those equities, the 20% down payment and whatnot, those are pretty locked up. Okay. Okay. And then the real equity that I have right now is the Osborn road, the duplex on road, number two. That’s the one that I was telling you.
I was working on opening up a HeLOCK for it. Okay. Okay. So there’s 800 grand. Just here. I see you have some stock stuff too. Where did that go? Oh yes. I have a index. That’s my 401k. Okay. Did loan out 50,000 from it to put in a syndication deal but I have about 200, 150 left minus loan. Okay.
So like maybe 10 or 15, 20% of your net worth is in paper assets, the rest alternatives. Yeah. That’s how you do it, man. Everybody asks how much real estate should I get? It’s there’s no rule, but yeah. How much as it, it takes. Yeah. As much as it takes. And I suspect once your net worth goes over, five, 10 million, you, maybe you go back to this type of stuff, this stuff can get tiring.
And maybe talk to, so you acquired all this stuff in 20, 20, 20, 21. maybe for the folks. Yeah, I started, yeah. Tell us the story. Like some of the folks have never owned rental properties since. Okay. Yeah. I started my invest, my real estate investing two years ago at the start of the pandemic. Why did I even look into real estate in the first place is because I was a w two worker.
I remember Trump passed the tax cut jobs act. We couldn’t write off a lot. We weren’t getting any more tax refunds. And I was wondering why this didn’t make any sense. I read rich dad, poor dad, like a lot of the investors did, and we said, oh, you need to do some businesses, invest in real estate, something along the lines with tax benefits.
So long story short COVID happened. This was when I first met you in your podcast. I remember you were talking about syndications at the time, and you said if your net worth wasn’t less than wasn’t more than a million, then go find yourself investment property. And that’s where I was at right worth.
Maybe. 400 K at the time went through turnkey companies and they just kept, I did a cash out refi, actually cash out refi from my primary home used that debt to just continue to buy turnkey investment property 100 to $150,000 ranges, 20% down and just kept on expanding from there. And yeah, at this point I have 17 doors and force indication deals.
Wait so when we first connected net worth 400,000, how did it go up? Like almost a million in two or three years inflation. We had all these properties went up like 40, 50 K some of ’em a hundred thousand just in equity. So that’s what boosted to my net worth, yeah.
Cause you rolled that 20, 20, 20, 21 wave and then you also saved, I’m sure you saved two to $300,000 just from your saving. And your stocks went up a little bit. Yeah. Now you have too much money and now you gotta get rid of these things, these properties. Yeah. But that’s the thing, it’s all on paper, right?
Like now we’ve gotta go through here and sell all this stuff. Talk to me about what’s going on here this 50%, like you bought it with a buddy or yep. With a buddy. When I first started off, I did the first cash out refi took about 300,000 and it afforded me for investment properties out of state in Missouri, Ohio, Texas.
And then my buddy, who’s also reregister nurse similar mindset he wanted to get in on the deal. So I said, all right let’s go 50, 50 down payments. We’ll split everything 50 50. And that, that way I have 10 right now I have 10 conventional loans under my name. It was a way for me to, it benefited me because we are able to.
Put some of those loans under his name, so we can expand more and scale up at the time, when listening to the podcasts and stuff like that, like people talked about owning, 40 properties, 60 properties, but yeah at some point it gets a little bit too much especially with vacancies and evictions and the cost to turn over a tenant.
It, it does eat way at the cash flow. So on paper, it looks like amazing. I, I’m a millionaire on paper, but nowhere near where I wanna be. Yeah. I’m looking down your list here. It looks pretty higher end properties. Maybe they did inflate the prices a little bit, but you’re probably like B class.
Definitely not C-Class properties. So you probably do have a little, yeah. B class tenant profile here. What did, so you are buying this as a buddy, like you got the loans in all your. What was the deal? We split it. So I’ll get one property, put it under my name and then he’ll get the other property, put it under his name and we’ll just go vice versa.
Okay. Geez, you guys are quite tight to the hip now. yeah. yeah. He’s my business partner. He’s he’s my, a good buddy. He’s my best friend. Yeah. So what does he say? Have I talked to this dude? No, not yet. Okay. Now what I would do is I would sell all this stuff at a little discount to him and have him deal with this nonsense.
Okay. And just keep the note in your name. Cuz I mean you bought, you haven’t ran this stuff for very long. Like how many evictions have you had? Only three. And that all happened in 2020. Two only happened this year after the moratorium was lifted. So only three. Okay. I would say out of three evictions, one of ’em is gonna usually be.
Kind of a gut punch, like five grand, 10 grand, like a big trasher property. That’s been my, run rate. So you’re due for a while. Yeah. Yo, it, it happened the one on number four. The property that, so the 50% is with the partner and the one on top is what I own by myself.
And yeah, that one on tech I’m going to, I just finished the eviction. It cost me about 15 grand to fix just to renovate everything, change out the carpets fix the ACS mold and just, yeah. Whole ship bank, 15,000 down the drain. Yeah. Okay. I’ll just, experience share here. Like I had about the same amount of properties and what I did is I put ’em up on that I’m not gonna say the name, but there’s a website out there with a lot of turnkey homes.
And the great thing is that their buyers are really unsophisticated and. So they just, you can just, you can, it’s a great place for you to sell it. Okay. So you can just put it up there with the tenant, with it. Tenant did. So that way you don’t okay. Lose you don’t lose the cash flow and then that way you’re okay.
You’re in a great position cuz you don’t have to, you’re not desperate to sell it. So what I would do it, if it, your partner wasn’t involved right. Is I would throw all up on there for a slightly higher price, maybe 5% over what you think you should get or what they they’re gonna try and like arm wrestle you down.
So they can get their broker fees. Of course. Yeah. That way, they just sell off naturally, cuz there’s a sucker born every day that wants to buy turnkey rentals every day and have ’em just naturally sell off. But like when one of these go vacant, that’s your opportunity to put in 10, 15, 20 grand and rehab it and then sell it, like this and for example, the Caroline.
market value. 1 35. These are retail, right? Like you’re, you’ve got like full price. You’ve got like crap amenities in here, right? Like tenant grade stuff right now. It ain’t gonna sell for this much. Okay. That’s the hard thing about evaluating and it’s all beat up right now cuz you have tenants in there.
So it’s gonna be least 10 grand of repairs. But the idea is if this went vacant, then you fixed it up. You put whatever it takes and then it’s still a good market to sell. So it’ll sell quickly, but you take it off of that, investor website and you go, you find a local broker to sell it retail.
And then, you it’s real estate. You’ll probably get lucky and you’ll find like a a sucker retail buyer who loves your property because you use the right granite countertops in there. Okay. I’m actually meeting with the agent tomorrow. The one on terrace. In Columbus up top of number three.
Yeah. That’s the first one since it’s mine. Solely I wanna sell that one off. Okay. Okay. But do the, don’t you, don’t the thing is you don’t wanna take the tenant out of there. Okay. Yeah. If your agent can guarantee that this thing is gonna sell in two months or less fine, but we’re already talking like September, by the time you get this thing on the market, it’s Halloween and you don’t wanna be selling during that time of the year.
Okay. Especially where we are in the calendar month. But even if it was like March right now, we’re coming into the peak transaction period, I would still put it on the investor website, let it ride there and then just see what you get. And then that way you can be a little bit, you’re still getting great cash flow from this stuff in your.
But however you wanna do it, your agent’s gonna try and trick you to sell it with him. And it could, that’s the right hard thing is you gotta, it sits and he’s gonna wanna get the tenant out of there. And then you’re gonna cut your cash flow stream. That’s the situation you don’t want to be in?
What I would do is I would go into that meeting and say, either I get like some kind of guarantee that this guy’s gonna sell this property with X amount now. Okay. Or just create the relationship now so that when I do have this thing on the website for three to six months, and there’s no action and it goes vacant, then I can pass it off to him.
And he is going to manage my rehab for me. Do you have a contractor to do all this, like your property manager, the managers facilitate the contracting. Okay. So that’s another thing like you’re when you buy to these turnkey providers, you gotta be careful of sometimes the fine. that they’re gonna be, they’re get like first crack at selling your property so they can pick up the easy three to 6% commission.
Oh, okay. So make, before you start talking to other people, figure out if they got you at that. Okay. Typically those property managers are like the crappiest retail brokers. You don’t want to use them, but you may be stuck with them. Okay. Yeah. That makes sense. Okay. Yeah. I have my meeting tomorrow, so that’s good advice.
Yeah. If you have a good relationship with your property manager, you can probably have ’em waive that because they get it, and especially if, you refer them business, sure. They want you to be happy, but I would say that’s how the property management companies actually make their money.
It’s a total grind managing these properties from you. Like you don’t pay enough, I think. Oh yeah. Yeah. Eight, eight to 10% of. You’re talking like a hundred dollars per door, so yeah. For these days. Yeah. They, it’s a tough job, difficult tenants too. So what happened with me? I don’t know what’s gonna happen with you is I, so I did that and seven of my rentals sold in the first year, I think that was like 2017.
So tax wise, I had like quarter million dollars of capital gains, but okay. I had, invested in syndication deals prior to which that’s how I had all the passive losses offset, those capital gains. So people are listening to this. I don’t know why the heck you would ever want to do a 10 31 exchange unless you’re like you’re capital gains is like over two to $3 million.
That’s really the only reason why, I don’t know why anybody I know why they promote it so much. So they, the 10 31 custodians can make a thousand bucks or whatever , but like it’s a really bad strategy if you’re investing in syndications deals and you’re, you. You’re smart about how you manage your passive activity losses.
I guess Jackson, did you see, did you check up your 85, 82 form prior to this? Yeah. I have about 40,000 of passive activity. And then just this year alone, I know I can probably, it’s probably gonna be a hundred grand that I can unlock. That’s just, just sitting there for right now.
Okay. From like your, on your 2021 K one S then yep. And then not even including what did you do in 2022 syndication wise, 2022? I joined three syndication. One of ’em was with you the sanctuary on Broadway, but in 50,000 into there and some storage units and another multi-family apartment, they’re all about 50,000 each.
Okay. You had, prior to this year, you had 140 grand of passive. Is you invested another one 50 in twenty, twenty two. Let’s just call it, two 50 I think is what you should have. You should easily be able to easily absorb, three or four of these sales. Okay. But any questions on that?
How that kind of works? No. And then if I was to sell it, I could reinvest that into another syndication and that will also more, you get more, you’re seeing more depre. Okay. Yeah. Yeah. I figured so. And then it’s, the concept is you’re in an airplane and the noses is going up, but like just gotta make sure you don’t have no passive activity losses cuz after a while the people who are in dozens of deals, they start to get 300, $400,000 of passive losses and it becomes this kind of back room, joking area where everybody hasn’t paid taxes and like half.
A decade, or more Uhhuh . And now you see why, cause you keep right. Keep loading and getting more passive activity losses. And, I’m sure at some point you pay the Piper, but the whole point is delaying the tax bill for long periods of time. Over a decade I think would be pretty easy.
But but E even if so let’s just say one worst case scenario is you put it on the website and you just get, you’re like, crap, I put it for too low and eight of ’em sell, right? Oh, you have $350,000 of capital gains capture, your income isn’t that high.
And that’s, I guess that’s a bad thing, but a good thing is, if your income right now is 200, you could take a hundred grand additional capital gains in 20 22, 20 23. And. You wouldn’t really jump up too much. That’s not the end of the world. . And I say that because a lot of investors, it gets so freaked out about if I don’t have any passive losses, the world is gonna end.
No, your AGI will just go up a little bit more. And in your case, you’re around 200 and it’ll go to two 50 still, no big deal. You gotta, take it on the chin and move on, and just pay the taxes. Yeah. Yeah. Okay. And it’s not that much taxes. But yeah, it’s, that, and it, I think if you do it like that, it’ll naturally like you’ll exit out these things.
And that way you’re not gonna have, you’ll be flush with all this money to quickly invest. And who knows? This year’s already looking like it’s gonna be a slow year. For deals, right? I’m sure that who knows what 20, 23 is. I don’t know if you could adequately there’s always deals out there, right?
If you’re well, networked, there’s always deals out there. I don’t think that’s gonna be a problem, but you don’t, I’m sure like, God, like your yourself, you don’t wanna hold too much cash. Like quarter million thousand dollars of money is, burning a hole in your pocket.
You for a guy like yourself may actually spend it on something stupid, yeah. Like a Tesla I’ve been looking at Tesla. Yeah. Or a lot of Tesla whistles, but but yeah, that’s the nice thing about doing it like this, cuz they, random randomly it’ll just sell it NICES I guess.
But yeah, I, so I sold my, I sold seven of mines in 2017 and then two of ’em, two or three of ’em the next year. and then, and one a year after, something like that. That’s how it happened for me. Okay. The problem with those kinds of websites is it’s like a bidding system and you always get these stupid mobile offers that just totally waste your time.
That’s the frustrating thing about it, but, and you’re gonna get a lot of that, cuz you’re not a motivated seller right, too. Correct? Yeah. Yeah. Yeah. Cause they’re still, these properties are still cash flowing and I’m not in, in any hurry at this point. One of the things that’s like keeping me wanting to keep the properties is that I’m raising rents, like 20% on all of ’em.
So the cash flow, just multiplied naturally. Yeah. Yeah. Okay. Someone like you, I can tell this to most people put your earmuffs on. Yeah. We call this simple passive cash flow. And cash flow is great. But cash flow never created legacy wealth. It’s you selling these properties for 35 grand more profit than you thought how much months of extra $300 a month is that, let me do the math, extra $3,000.
That’s $3,000 a year divided by 35,000 or no, 35,000 divided by if one of these properties sold for 30 th $35,000 more than you thought it was. 30 years of extra, $3,000 a month. That is that’s 11, 12 years, Uhhuh. Yeah. Yeah. Uhhuh, like who cares about cash flow again, other people, this thing, forget I said that.
You’re seeing what I’m saying, right? Yes, Uhhuh. This is, I think what separate. Passive investors who work their day jobs from business owners, right? Who sell their businesses for four, five, 10 million wax like that. That’s what separates people who are in first class or eventually fly first class all the time, like yourself, to people who buy out the plane.
That’s the difference. But let’s get you to 10, $20,000 of passive income first, but that to point what it is like, that’s the sign of what is really like a sea wealth is like the big wax of cash. Like the syndication deal, you put a hundred grand in you, maybe you get this 60 grand, a hundred grand back at served increments.
That’s the big whack of cash. And after a while, maybe you’re seeing this extra $2,000 every quarter, that’s not changing your life one bit, even $2,000 a month that doesn’t change your life one bit. no, I’m still working. So yeah, you’re right. It doesn’t, it’s not a game changer.
Yeah. So same thought process. Like again, we use that to trick you to buy the rental properties initially, but don’t let yeah. Your rents are going up incrementally, then therefore you’re operating income should be going up, but that’s on how these assets are traded. And , that’s the good thing about selling these properties on unsophisticated investor base they’re idiots.
So they’ll buy on for rents. So you’re gonna be the beneficiary of the unsophisticated buyer. Yeah. That makes that makes a lot of sense that you said that. Cause I even have colleagues that, they want to get in on investing and they want to go into buying a investment property. That’s their goal.
And in back of my mind, it’s there’s a lot of risk to it. If you really wanna jump in this game, you need to go full force cuz one, two rentals. You put yourself at risk financially. Yeah. Yeah. To get ’em started. That’s the big thing, you’re becoming, taking that next step as an investor, obviously.
But , this is what you’re transitioning more to a credit investor mindset where you’re looking at things, not on a monthly basis or a quarterly basis. But on one year at the shortest, but more like 3, 4, 5 year time horizons. I was looking at a deal the other day on it’s like a crazy land deal, but it’s gonna take 10 years to come out of the oven and actually make money or put, potential to be sold personally.
I’m not there yet. I’m not willing to wait 6, 7, 8, 9, 10 years for anything. So 10 years, no money until you actually sell the property. That’s where you get your returns. Yeah. But I would like. Eight X, 20 X my money. Oh yeah. Okay. But I understand intuitively if you maybe find me in 10 years, I’d be all about that type of stuff.
. But at this point in time, I have the self awareness to, to say even though it’s good for me in the long term, that’s not what I’m looking for now. So you’re in the middle too, right? Yeah. The deals, because I’m taking on debt to invest in syndications. I need to see some kind of preferred return to at least offset any interest that I have to pay.
Another question too is, since I’m looking more into these type of deals, like how do you really know who’s a good operator? Like how do you know they’re gonna come correct and perform and have a full turnaround in that five to seven year? That’s expected, everybody’s a internet marketer these days, right?
Every. A silly podcast, especially after 2018, 2018, everybody’s got a book it’s just a, it’s a fake it till you make it game. And I’ve been around a lot of these types of, like ecosystems, where they teach people how to do this stuff. They slap the gurus face on the website and they pay the guru 20 grand and the guru hasn’t done shit either.
It’s, this is why I stopped going to a lot of these real estate conferences, cuz they’re all fake. Anyway, like the guy speaking on the stage, hasn’t gotten done Jack and I’m fooled. I have to ask some of my inner circle partners on do you know this person? So what I tell folks is at the end of the day, it’s all your network is your net worth, right?
Like why recreate the wheel on your own? Like how I did, I’ve invested with some bad partners and even as LP, right? Like I’ve lost money. You don’t know until you get into bed with people, but, or you expand your network and just follow your, your peers, your close, inner circle into, follow them into the end zone, have them tackle for you.
There’s two ways. Okay. And that’s why, we have over 90 people now in our family office, inner circle group, it’s a pay to play group. Yeah. But that’ll naturally happen from a group like ours. But it’s more than that, I think that naturally happens. It’ll come through in a conversation, but the people there, they’re more about building relationships with the edge, each other, who’s gonna hang out there in vacations or, hang out. People traveled, like that’s really more important because you’re seen already in five years, you just, all you gotta do is make 10%, or 8% you can probably put your money back in the stock market.
Like you don’t really need. These alternative investments, right? You’ve got that penetration. If you’ve got past that point of no return, 2 million to 3 million net worth, but the currency that you’re gonna want is the social relationships. So that’s my pitch for the family office group. If people are interested more, they go to support pass cash, flow.com/journey.
But to me that’s really I don’t think you’ve come to any of the events. Like we allow people to test drive it once and get a, a look at the people, cuz at least myself personally, like prior to 2016, I was, just doing what you were doing, although myself and until I found myself in a room with all these other crazy accredited investors, buying properties site unseen or doing syndication deals, I thought I was completely crazy.
And that’s what you need to, at least for once, to have the conversations, we can talk about this next, the HeLOCK thing. The, most people think taking on five, 6% on your HeLOCK is crazy. You like, like you said you said you need right now where your mindset is, you need to have a pre to cover it.
Yeah. But I wanna tell you the pre means Jack, the pre is not guaranteed preferred rate turns really means nothing in my opinion. But it’s just, you have to have faith that, or know via your network that somebody you’re working with is proven and gonna do what they say they’re gonna do. Or even in bad times, the assets still beats that certain rate.
But to this is something that, we can talk in theory on this call, but until you meet other people and, build relationships with them that are doing the same thing that went over this intellectual hump, it is, it’s just not gonna. It’s not gonna happen. I guess then you won’t find other things to invest in and and that’s the hard thing, right?
You are your five people you hang out with most. If you don’t have at least a couple other credit investors in that fi that five people, you’re not gonna go anywhere, you’re just gonna stay where they are. But that’s my big thing. And I think it goes beyond so like at the Hawaii retreat we have, we always gonna have like half of the people who are inner circle people, and then the other half are the people kind of test driving the organization.
They’re the ones coming in and, they, it they mix immaturely in my opinion. Like they come in and ask, who’s your lawyer, who’s your CPA. Oh, it B yeah. These people stealing money, what’s happening. And I get it. That’s the normal tendency for most people that do.
And it’s probably what you’re gonna do. , but what I’ll say is look what the more experienced investors are doing, right? They’re chilling, they’re meeting other people. They’re getting to know them personally. They’re not talking about money investments yet. , that happens privately at other times.
More naturally, right? But I think for most investors who’ve never met anybody. Who’s crazy enough to take money out of their home equity and put it into something that might make double or triple that, it’s new for most people. . we, I think that’s important to see that happen.
Firstly but for some reassurance, like that is what the mastermind people are doing. Like they’re taking out their HeLOCK at 7% interest rate and investing that in syndications. Yeah. This is the number one most common question. Cause the way you guys think about it. And I thought about, I thought it this way at one time, we were all taught to be good kids and pay off our debts, right? Yeah. So you have a hundred thousand dollars loan and you’re paying 5%. So what is that? $5,000 a year. Yeah. Probably for you, it’s more like double that right. 200 grand, 10 grand of interest payments per year. So that’s, let’s call it a thousand bucks a month.
That probably freaks you out a little bit. Like I got this a thousand dollars. It’s almost like a big car payment, but the way to think about it and it takes a while to get there is if with high confidence that you’re gonna make the Delta on that, you’re gonna be making at least 10%, maybe in 15, 20%, who knows.
Then it’s just a matter of. and you just had to eat that cost. And that’s where we look at, like the sum don’t look at the monthly payments, look at the sum. How long is it gonna take for you to get traction in these investments? If things go bad, maybe a couple of years like 20,000 bucks and that’s not that much money for the doomsday snare that you have to feed so what’s the normal solution.
Just take out 220 grand dude and just keep 20 grand on the side. Yeah. And then going back to the interest rate thing, that’s all it is. And I think you understand that, but logically, right? If you’re making, if you’re making 15% in your investments and those investments are also helping you save taxes too.
Which is also important to quantify, but let’s just look at it strictly from an interest rate or return perspective. If as long as your Helo is less than that with a. Minor safety buffer should be fine. Yeah. And, but it’s hard, right? I mean you’re well, what’s hard is cuz I haven’t seen a deal go full circle yet.
Like I’m invested se four deals, but I haven’t seen like the real returns where I could speak upon it with confidence, not like the single family homes where I said, yeah, I, I see rental increases. I see the market increases and I’ve experienced it so I can talk with confidence with it. Syndications is relatively new, but it’s more attractive.
Especially being a passive, very passive route versus the owning your own property. Yeah. But the owning your own property there just getting off of the Zillow, house up numbers, then it’s just. That’s all fake numbers anyway. And you have to actually sell it and go through some friction costs of rehabbing.
It and the commissions to get your true walk away number. But that’s, I think that’s, what’s hard for folks like in this commercial world, like there’s no Zillow on like our $40 million property. We’re not gonna tell you how much that thing is worth. We don’t know. That’s you get an appraisal or you get a real bid on somebody wanting to buy it.
That’s your price. But I think you, you have to just, out of those four deals, you’re in, I’m sure like out of, one of the four, something will happen in the next couple years right now it’s a standstill, right? Like it’s just not a transacting time. Cuz interest rates are a little bit spike now.
I think if the interest rates didn’t go up, I’m sure like one of the four for you would’ve cashed out or refinanced the next year. And then you’ll see. 30 grand just dump at least dump into your account. And then you’re scratching your head and it’s this is awesome.
Yeah. Yeah. This is awesome. Yeah. But like also that was my milk money or that’s, that was my interest payments for my 200,000 HeLOCK for, three, four years, and then now it’s that whole idea of now you’re playing with house money. Okay. And I, or you can talk to other people, build real relationships with friendships, if you call it and four, four of them can tell you this and you just have to trust them via proxy.
But yeah like I think this is the same thing with, I dunno if you’re doing infinite banking, but we have the same thing that happens in our mastermind group. Like guys will get a big infinite banking policy and they’re it’s same thing. If interest rates are the same, right?
Like four, 5%, although it’s. Tax deductible, but so is your HeLOCK should be tax deductible. But they’re like the same exact thing. Just change out the world’s HeLOCK for my infinite banking policy loan for myself, then they’re think, thinking, are you guys paying off your interest or are you paying monthly or you guys even paying off your loans?
And then I don’t even have to say it in that group. Like people will already automatically chime in, or we got like a private discord group too. No, man, don’t worry about it, dude. It’s just like the whole I HeLOCK thing. And then people, oh, okay. Same thing. Got it. Essentially, you’re just playing the same game as the banks, right?
The banks they lend their money out at, higher rate and then they , it’s the same thing. It’s just rate arbitrage takes a little while it takes liquidity for you to get the traction going. But you’ll get traction at some point. So that was my. Thought one of my questions regarding the HeLOCK is, should I pull out the money, invest it and then pay it down.
With the idea of once it’s paid down earlier than the five years to just redeploy again and again, could use it as a for savings. I would pull the Helo. I would get monetize all the money out of the Helo because the PLOS can get pulled at any point. And that’s why the helos aren’t ideal, there are a great way for people to get started and, you used it to get started, right? But I would say once you get proof of concept, either move into, move your equity into an infinite banking policy where they can’t pull that stuff from you and you own it, and the rates are better and you also get the life insurance component and the asset protection.
There’s just so many reasons more why the banking is better. Put it into there. So you’re just shifting your equity over. Or, but I think the problem there is now you’re like, oh, now I’ve created this large gap in my home equity debt. I have this payment. Yeah. But if you have the money in your infinite banking, you could just pay it off.
Do you really have it? Or did you just, create another hole for yourself? That’s displaced another gap. yeah. That’s cause the infinite baking, I just, I could just withdraw. I could just withdraw if I really needed it. Yeah. If you really needed to, if your grandma, great grandma got reborn and was, you were totally ashamed for having debt.
Yeah. You could just replace it. Okay. Yeah. That makes sense. I didn’t think of it that way, but yeah, that makes a lot of sense. Yeah. I get it, like you have this other payment and you think you have to pay it off. I tell people don’t worry about it. It sounds irresponsible.
If you have the money. Then, do you really need to pay it off? And this is the whole concept of other people’s money, right? If I, and in here, this is like where it clashes with some people’s really old school mentality. Some people either it’s an Asian thing or like an older generation thing.
They say at some point I want to pay down my debt, but from a money theory perspective, why, if you’re making positive cash flow and it’s growing at the end of the day, like you’re loan, the value, your debt amount really means nothing. I don’t know why people really look at it too much. It’s more about debt, surface coverage ratio and your liquidity.
When things go bad, it doesn’t matter how much equity you have. They you’re gonna shut down your loans and you’re gonna be frozen. It all matters how much liquidity you have. Yeah, right? Yeah. Yeah. Cause it’s all your equity’s all on paper. Yeah. I, this kind of was made very evident to me.
Like we have a one very affluent partner and he’s doing, he’s harvesting all this equity monetizing getting in his bank. He don’t care about the debt. No, the loan of value on his assets. He don’t care because he knows just like the last several recessions, when things get hard, you, they freeze your lines, you can’t get money out of it.
And they still want you to pay your debt service. . But if you have this boatload of liquidity somewhere, you can always keep feeding that. And it’s just a matter of time before things normalize. Again, you get out of there, but here the people have a false sense of security, right? They’re trying to pay off their properties.
What they do. You got 50% paid off or 80% or a hundred. In tough times, nobody, the banks don’t care. You’re you really should never get to a hundred percent, but you’re still gonna have a payment. don’t care. All they care you care about is liquidity and how much you can feed that.
So if you had 20 grand extra and things got really bad, that could feed your payments for two years. Yeah. That exactly does that. That should make you feel pretty confident, right? Yeah. I mean it’s a long time. I’m sure I can find another 10 grand if needed to take it another year. No big deal.
Yeah. That’s a different mindset shift. Sure. Different. It makes, yeah, it makes a lot of sense. Yeah. Most times people focus more on the percent of loan, the value but what it really is the liquidity and then how much cash flow positive. Of or debt service coverage ratio, which is a byproduct of how much cash flow you have or lack thereof.
Okay.
But in a nutshell, I don’t know, I do it, I don’t have a house, but I see a lot of other people doing it. Yeah. Yeah. But, and I did have one more question. So at this point, is it better to invest in like multiple syndications? Just weave it out, a bunch of 50,000 to a hundred thousand dollars deals or really focus on like the bigger projects or whatnot?
I think, I’ll just tell you what most people do. I’m not necess necessarily signing off on the strategy per safety. Sure. What most people will do is they’ll spread it around quite a bit, go with the minimums or, Of a hundred grand, if you’re over a couple million , get to a point where you’re pretty diversified, same theory as your rental properties.
Like you said, I think both of us would agree that one, the five properties is not enough diversification. If one goes bad, it’s gonna be sad, a little bit. Yeah. Be a downer for a few months, but right now you’re at, over a dozen or so if one goes down, you’re oh, that was a bummer.
Anyway. So same thing. Yeah. Think about it like that. Everybody’s a little bit different, maybe a dozen syndications, just try and race up there. Okay. There. And I think maybe you’re doing this too, but another like big beginner mistake is people will diversify into too many operators and too many asset classes.
That’s the, okay. That’s the normal tendency, it’s you’re unleashed in the Las Vegas buffet and you just get everything right. Just Chinese foods, pot stickers, pizza, pasta, seafood, you just go a little bit. You kind of people tend to spread themselves a little thin.
Yeah. Getting the trailer parks and multi-family storage units. Yeah. Yeah. Like this joker came up with my LinkedIn feed. That must be great. Yeah. Uhhuh. But that’s, everybody does it, I guess that’s, what’s cool about that is naturally you get experience and you parlay that into interacting with people.
And really my group is the only group that’s like that the rest of it’s just a bunch of like broke guys, trying to be general partners who are trying to fake it to the naked. Like they don’t have money. Interacting with those types of people is a waste of. , but like by actually coming in and saying, oh, I have a I’m in six indication deals, that’s some street cred.
Right there. And maybe one of ’em is not good doing good. And that’s more street cred too. Or that brings value into relationships. Or at least Jackson knows who not to invest with. But yeah, I think that, that’s, that, that kind of makes sense or, no, it does.
Absolutely. Absolutely. Yeah. OB obviously the more advanced people in our family office group, it comes, it came up a few times where, you know, some of the more experienced people, what they review is reveal is they went down that initial beginner state of a lot of deals, a lot of operator, a lot of asset classes.
And then once they see the deals turnover, or they, they just build certain affinities to certain. To people or, asset classes or whatever, and then they start to consolidate it down, maybe a factor of two. So if they’re, in a, in I guess the other thing that’s happening too at the same time is like, most people will test with a certain smaller portion of their net worth.
And then when it works, then you unleash the beast. Maybe you’re investing 300 grand initially, but if it, if you know it’s working, I know you’re gonna start to unload all this stuff. That’s a million, that’s and yeah that’s the plan. That’s what I have in my mind right now is what I have to do next is really just trade off the single family homes for syndication deals.
Take off something more passive and just let it ride. I’m don’t wanna give you advice, man, but of course, Understood. Maybe the direction you’re heading is, you get into a dozen deals at, the minimums and then you get, go through this first round of who do you like, who actually says what they’re gonna do?
Hopefully nobody steers your money. And then from there you decide, all right, I like this half better. And I’m gonna, do double the amount, a hundred, $150,000 minimums or two, quarter million or whatever. Okay. And you start to do that. And then but the other, that kind of makes you shrink your amount of your choices, but I would still, the other thing that I would think about is, and it’s good to like space out these investments too, right?
If I always thought if you have 24 deals, that’s always a nice number. I think I’m in like 80 or a hundred, it’s a little bit too much, but that’s this kind of what I do. And I’ve got staff to help too, for the. book. Not really bookkeeping, but just that one time a year, when I get a shit ton of K ones back, you have a hundred deals as a LP LP G P oh, okay.
Mean, there’s a check boxes on the K ones, but they’re never right. Like everything on the K ones never. I don’t know why have people that freak out? They freak out because they only have one or four K one S but those K one S are never. And I think I’ve talked to CPAs about it and the CPAs are just like the only important thing is like box four, or I don’t like the deductions one in your gain.
That’s the only important stuff. Okay. But I’m not giving you tax advice here. Of course. Of course, course, the, that’s why, if you have a you’re in most of these deals last five years, right? Yeah. On average. So if you’re going into a deal, a quarter, four times five, If that’s 20 deals.
So that’s why I rounded up to a couple dozen now. That’s I, the ideal, model, nobody ever hits that myself included, but that, I think that’s a good model maybe to be shooting for. So that, if we’ll do this in the retreat I got all ideas, imagine your perfect day. I’ll send everybody out to the beach and then, what does your day look like? Are you working or maybe you’re not right. Maybe you’re just doing the nurse thing a couple days out of the week, the other three days. , you’re just checking your inbox or connecting with other people socially, but you’re you try and find one deal a quarter, right?
Yeah. And then a deal exits early and crap. I have to redeploy it. I gotta, yeah, I gotta invest it now. Uhhuh. Yeah. But it’s not that hard. And that’s why if you have a good network, Okay. To be a passive professional investor, really shouldn’t take much more than like a handful of hours a month if you’re doing it right.
And you have a good network. And that’s what the vision looks like. Couple dozen deals. If you don’t have any hobbies, maybe three dozen deals, , I personally have a lot and cuz I like it. I’ve always been, some people and I don’t know what you play like fantasy football, fantasy basketball.
Are you the kind of the guy who makes a good silly in transactions? No, I let it right. I do one transaction a week and just let it, yeah, just maybe just fix the lineup. So yeah. We all have that one friend who just like, leads the league in transactions. They, yeah, they think that’s an award or something like that, but , some people like they like that, they like to, this is becomes fun for them.
Wow. So there is no normal. Okay. Sounds good. Also, if I was to keep some of these rentals let’s say down the line, I increased my net worth. I was able to go part-time for my nursing job. What’s the possibilities of be qualifying as a real estate professional. I don’t, I think that’s a complete opposite way.
You want to go? Okay. Just saying I’m going out of like almost a hundred people in our family office group, I would say only maybe half a dozen, like less than 10% of people have a handful full of rentals and the whole thought process. Can you tell me a good freaking reason why you would wanna own rentals if your network was certainly past where you are now?
Because you don’t, you’re not doing value. Add any of. No, you’re just a sitting duck floating around in the water. You’re not doing anything. The market goes good. You make a lot of money. If it doesn’t, easy come easy, go. have the liability of your property managers, stealing money from you, which to me happens a high prop, maybe a few percent of the time, most time people don’t even know about it, that they’re getting robbed.
You have the legal liability and then the debt zero name, which I don’t know. It doesn’t matter, but some people worry about that stuff and it makes getting home loans a real pain. I mean it, the only reason to do it is if you’re trying to go for rep status.
So let’s talk about that, right? Let’s fast forward a few years, where do you think your adjusted gross income is going to be? And let me preface it saying well, What if you guys had, this passive cash flow coming in from all these deals, you redeployed this 500 grand and now it’s making $5,000 a month.
So now your passive income is eight, five plus five, see what I’m saying? Like my income, our income will be less. Exactly. Exactly. And this is what I also saying, like, why is your spouse going and getting young masters? We talked about the reasons. But this is that phenomenon where like the more passive income you have, the less ordinary income you’re gonna need to make. So yeah. Right now rep status would be great. But at some point you start to shut off the engines and you start to make less ordinary income. So that rep status really only makes sense.
When you go past this red line three 40 and above, in most cases it’s not worth the brain damage. So yeah, I guess like, where do you think five years from now? Where do you think your adjusted gross? Your ordinary income is gonna be not including probably, yeah, probably a hundred myself. My spouse.
So 200, 200 each. What 200 total. Yeah. You’re not paying any taxes, man. Like you have no reason to do rep status, okay. Okay. Yeah. That makes a lot of sense. Yeah. Thank you for getting that out of my mind, cuz yeah. You listen to these podcasts and they’re all like, this is the, bonus depreciation.
All the benefits, so yeah. That’s why you gotta get off the, if you listen, been listening to podcast for more than like a year and a half, stop listening to podcast, read some books or interact with real people. Cause podcasts are just marketing tools. In my podcast, it’s the same shit.
Over and over again. Like we just, yeah. It’s the same stuff. Yeah. We just go over the surface. And that’s why you do these coaching calls cuz like I get bored and it is fun, deep diving into this, the 50th minute in right. Most times it’s just the surface stuff and people always ask oh we should have guests and but the guests are just gonna tell us the same old stuff and then, but they’re not gonna tell you the reason why not to do it too, which is my job.
Yeah, that’s true. Cuz you normally, the guests will just bounce around the different people’s podcasts and yeah. Reiterate the same thing on the education point, at least, reassures that I’m doing the right thing. But yeah, you’re right. It’s usually it’s pretty redundant.
Yeah. And this is where this is what makes this personal finance, right? Every situation, a little different. But again, this is like more like you gotta find other. To do this and that’s more sustainable way. And to get on the front edge of these strategies. But yeah, you’re heading enough to the, you, you’re that’s the way you wanna hand, right?
Less ordinary income, more passive income. So you can use the passive losses to drive the passive income down to nothing over this time you’re adjusting your ordinary income will go down and your AGI will go down. You’re burning leaner as we call it. I would say so I think maybe something for your family to think about is which way do you want to hit it?
Cuz there’s a few arch types here and I’ve seen this in our family office group. So this is when you guys are, she makes the big bucks, right? Like you option one is you make a lot, you burn a lot in taxes. this would be, if we go back to your personal financial sheet here, you guys get a much higher, bigger house.
You trip, you quadruple your vacation budget. And this is the idea of Hey we like our jobs. We make a lot. And yeah, we have, two kids and we don’t, we see often enough because maybe one of us works at home, but for us it just makes sense for us to just make a lot and spend a lot and yeah.
Pay a lot of taxes in that time. But they know, I think like the thing that I like is I’ve given them the confidence that they don’t need to be doing that for more than a decade. The other opposite of that is you guys kinda like we’re talking here and maybe that’s where you’re naturally guiding towards is like you guys working less, going down to, to, you’re making the efficient amount of income to pay the least amount of tax.
Yeah. Yeah, you don’t get to live large and vacations, but time is more important to you, whereas not your kids aren’t important on the other one, a lot of times the mindset or the justification as well. Our kids are in elementary school high school. It’s not like we can just take ’em out and to go to Disneyland or go and trip to Hawaii.
There’s only a few times a year. And we when we do, we take ’em out and we burn a lot of money. Because we make a lot, but that’s they feel like they maximize their time with the kids. So I would say for you guys, that would be the two bookends, and I guess there’s some in between, but you have to find, yeah, I think I would do both.
I think once you graduate, We’ll probably just try to make as much as possible, enjoy that living. But I’m giving it like a 10 year horizon where the passive income is really gonna drive the way and that’s when we’re gonna work less and spend more time with each other in our families. That’s the ideal vision.
Yeah. Until one of you guys dies, I hate to be morbid, but it happens, right? Yeah. But that’s, I think that’s where you are, it’s cool to talk to some of the older folks and then get their hindsight cuz there’s this concept of 18 summers, you only have 18 summers with your kid.
You’re probably you. And so some of these guys are at the end and they have three or four left and they’re shot. I wish I wouldn’t have done what you did. And so it ultimately comes down to choices. But like most people living the normal paradigm.
they just can’t, their choice sucks. It’s either for 30 years or 35 years both suck. Yeah. Yeah. No thanks. Yeah, but I’d say that’s where it’s gonna come down to at some point. And that’s why the network is important. So you have those types of conversations.
But either way, you got some time, right? And I think you’re ahead of the curve on most people. Just look where your net worth went from like 400, a few years ago to over 1.3, like I said, you’ll probably be around two, two and a half and four or five years at that point, you could probably pull the pin.
And then how old is your kid now? Eight months. Oh, perfect. I felt like a young kid to me. I don’t know. I’m not talking from experience, but to me, I don’t think they remember. These days, so perfect. You, yeah, you burn both ends of the candle now for another four or five years.
And when they’re four or five years old, then you can engage and do nothing. The memories that’s the thing you have, what people you are living the dream that people want most people, they wake up in their 41 42 and they have a 1.5 million in their 401k. And then they have to go through this three to five year journey to get to real passive income.
By that time, their eight year old child is now 14. It’s too late. It’s too freaking late. Yeah, it’s too late. I don’t know about building a relationship, but it’s too late to teach this stuff to the kids. I think at that time, past that point.
But hopefully when people listen, they don’t get sad and don’t wanna play Christmas, Carol and people. but, yeah, another piece is how am I gonna engage my son to teach him this stuff? And it’s tough. Yeah. I don’t know, man. I think if you engage in our community we’ll figure that out.
I I think it’s just time, right? If you’re not my family, like our parents were just working forever. Correct. Yeah. There was no interaction. There was no sharing of experiences. No it’s grind and to brag about, what you’ve done and how much you’ve achieved. Yeah. With so little, but apparently you’re going, when your kid’s five, you’re not gonna deal with Jack and you’re just gonna bother them all day long.
Certainly there’s gonna be some kind of knowledge transfer in that. Yeah. There you go. Yeah. But if not, that’s what the community is for. That’s where you send them up to auntie’s house or uncle’s house. So not let. It is from you, but some somebody else or yeah, the rich dad. Yeah. Or the rich uncle, right?
The rich uncle. There you go. . Yeah, but yeah, the close things out here. Any other last thoughts or questions? No. Oh no, thank you for your time. This is really enlightening and I appreciate everything you do and the education that you’re putting out. Yeah.
Keep up the good work. Like I said I was first introduced to you, two years ago. And, after reading your book recently, like it really resonated with us, we’re going through the same experiences. Yeah. I’m glad to see that I am going through that right path and I appreciate the guidance.
Yeah. Yeah. It’s just numbers here. I think that’s where most of the people who are good with their money and save it typically have to rein them back and save well, you can spend your money more, you can spend your time. more on like life instead of working so hard. So I think that’s the byproduct of this.
But yeah, thanks for doing this Jackson and for other folks listening if you guys are interested in doing this sign up for the club and then shoot a team at simple passive cash flow.com and email, and maybe we can set you up on one of these. We can change your name. We can make a name for you. We can, we don’t have to use your video if you’re scared. Thanks for listening to everybody.
What’s up folks? On today’s podcast, you’re gonna be hearing a little bit more in depth in my story. I get interviewed a lot and it’s very rare that you get interviewed well, like on this recording that we’re gonna share with you guys so you guys know, there’s a lot of podcasts out there, but, we try to keep things cool and authentic for you guys.
And part of that is, not just sugarcoating the narrative that a lot of people will put out there. With that in mind, if you guys have any questions we probably need to do another, Ask Lane show where we open up the question bag. But if you guys have any more relevant, to what’s gonna going on lately go ahead and email it in at the team@simplepassivecashflow.com
We’ll get it. Show going here in a bit on that. If you haven’t yet go and sign up for the club simplepassivecashflow.com/club. You get access to. All the e-courses that we have for free, The Infinite Banking e-course and then a lot of insider information as well as deal access there. And you can also take a look at all the other past deals we’ve been doing for the handful of years prior to this.
I think maybe we started doing this, maybe 2017 was our first syndication transaction. But yeah I feel like we’re not the new guys anymore, right? I think you can tell who is fake if you make it. It’s one way of doing that is just seeing how many assets they own.
Today we own $1.2 billion of assets under ownership. And I’ll be the first one to tell you, 2019, when we are around that half a billion dollar mark, we were getting our feet under. Since then we’ve expanded the team. I personally am not really in the day to day, nor are the principles and partners not in the day to day as we’ve hired that out to industry professionals.
What does that mean? People who’ve been property managers for a long time and have. This is what they do for a living. And we go on and headhunt the best people and bring them in house to asset manage for us. Very different from, I, I think there’s a lot of people out there that think, it’s the bigger pockets mindset, right?
Somebody who just doesn’t like their day job can be a. Real estate investor. I do believe to some point, but when you start to run thousands of rental properties and accept other people’s money in the terms of the syndications, I think you need to really hire a professional to do something right.
And I just don’t wanna discredit people in the real estate investing, real estate operating asset management industry, You. Yes, you don’t need a college degree to do it, but I think experience in this industry is very valuable, which is why we’ve hired people who are much better than you know myself.
And I’ll just, I’ll call myself out on that. But if you guys want to get more involved with us, join the club. We’ll simplepassivecashflow.com/club. Beyond the lookout as we’re gonna start to put out the. The info pages and the signups for the annual retreat here in Hawaii, January 13th to the 16th.
Make sure you apply and if you are on our investor club list, you can’t just come, you gotta just, you have to book that onboarding call with myself so we can get to know each other. And even if we’re not a good fit, I always try to make it a point to point you guys in the right direction cuz it’s, that’s ultimately what I’ve found that I enjoy doing for some strange reason.
So we open up your balance sheet and we look in. It’s basically a short period of time where you get to ask the questions and send you off on your merry way. For a lot of people it can be life changing and that’s, I personally like to be that person to make that impact for you. So make sure you guys sign up for that after signing up for the club and enjoy the show.
Lane, welcome to the show, my friend. Good to see you. And I look forward to the discussion today. Thanks for coming on. Yeah. Thanks for having me love everybody. Yeah. And before we get into your W2 prison break story, which is an awesome one right now, you’re doing some great things. We’re gonna definitely dive into it.
Just, I, to expand on the intro that I gave your bio kind of gives us some background on you. Take us back to the early days when you got outta college and started working and ultimately what led you to where you are right now? Yeah, I grew up in a household where your chocolate goes to school, studies hard, is a good kid, and invests in your 401k and max that out.
Just work it and grind at a job and work your way up the ladder for several decades. Yeah, I was always, we were always taught to save, like when we went to restaurants, we never bought soft drinks. Those are always costly, we are pretty frugal with our money.
. I was able to save, 80 grand in a couple years working and to buy has to live up in Seattle. And that was that program. I call it the linear path. Cause you just follow it, like your brain dead and just good boys and girls just following that path. And that was me like right outta college.
I was a construction supervisor out there. And a hundred percent travel. And I knew you had to pay your dues. But very early, I was like, this sucks, like this engineering job sucks. Yeah. Another fun thing people like say, oh, it’s good to be outside outdoors.
And not stuck in office. I’m the opposite. I went to the, go to the office every day. So be the same thing. Go to the gym the same time. That was more like me, but , that was how, how I was in my early twenties. And you were in engineering, it sounds like that’s correct. I got a bachelor’s in industrial engineering because I wasn’t smarter enough to get it in computer science, electrical, chemical, and not smart enough to get it in like mechanical or civil for undergraduate.
Yeah. So I went to project management, right? There you go. And you mentioned about you were being taught to save. Hey look, my parents did the same thing too. We were frugal. It’s invest in, I drank the Kool-Aid too. Invest in your 401k and save and get a good job. And. Hopefully you retire when you’re 65 and you’ll have enough money to live for the next 20 or some odd years.
What did you do with that? You saved up the 80 grand. So obviously there was some benefits there, you learned those lessons. What did you said you bought a house with the 80,000. Did you buy a rental property or did you buy your main residence? Yeah, I bought the main resonance first because that’s what everybody says to do.
Get on the escalator of wealth building and oh you’re paying rent and throwing money down the tube, which in my opinion is totally false. I don’t know people get that from, but I blindly followed the dog. One, bought a house live in and, appear this 20 something year old kid is living there all of himself and he’s traveling a hundred percent for work.
So what does a cheapo do? I started to rent it out. And I just lived off the company dime, living in hotels for several years up straight. And I, I tell people it’s not what you make, what your top black income is. It’s more what you save. Now, it’s making close to six figures, but like nothing like how kids are making these days, or I know a lot of your guys are making like two, 300 plus thousand.
A lot of my clients make over 500, 600,000 as doctors. It’s all what you net. And at that time, making a hundred grand, I was able to save sometimes 80, $90,000 a year, just paying taxes, basically. So all that money went to buying more and more rentals after that first one, I got that taste of cash.
So I was like, wow. The tenant’s paying down my mortgage, I’m getting the equity appreciation there. I’m getting cash flow, which I can feel like I can finally spend it, cuz it feels like free money. And then I’m getting the tax benefits and then the appreciation to which I don’t really count on, cuz I don’t believe in gambling on appreciation and be going cash flow. But when you add those four up, you’re making like 20, 30% plus and your returns on your money. And I. Why the heck am I doing this? Eight to 10% nonsense.
Great insight. So it sounds like you had a pretty significant mindset shift early in your W2 career. And that really helped you, understand that, Hey, there’s I can leverage my W2 job, you’re out traveling. You’re not really there. So you just said, Hey, let’s rent this thing and you got a taste of the passive income, and then you started acquiring some more properties. And we talk about that a little. And before I go any further, I know people have heard this before, but we’re not talking about wholesaling and flipping houses to me.
That’s what you do when you’re broke. For many of us with good paying jobs and, are busy managing our, like our day job. So we don’t get fired the stuff on the side. it needs to be passive. So I was buying these what they were called, turnkey rentals. Sometimes folks out, out there, like the flyover states where the numbers work way better.
One of the things we look for even today, when I buy large apartments is like this 1% rent evaluat ratio. So you take the monthly rents divided by the purchase price and it needs to be 1% or higher for the numbers to work for the cash. Why is cashflow important? Obviously you get paid every month and, but in case of a recession, you’re not, out on the code, right?
You can pay your debt surface. We, we don’t really look at like loan, the value. We look at debt surface coverage ratio for some more sophisticated investors out there of debt surface coverage ratio, 1.2, five or greater. Like going into these types of deals, you. It’s typically not gonna be where you live.
Most of my clients live in Washington, California, New York. It ain’t gonna be there. Those are called primary markets. So I was buying in lot of these secondary ter rate markets like Birmingham, Atlanta, Indianapolis, Kansas city, Memphis, little rock, places like that. Not the funnest places to go and visit, but they have these great rent value ratios that allow you to cash flow.
They don’t appreciate as much. No, I don’t really care about that. I don’t care about what cash. So I started to buy all these 20 key rentals and just all my money plowed to just down payments on these things over the next several years. Did you, okay? This is great. This is great stuff. So you’re not living in, you’re not living where you’re investing.
Which I think is a misnomer for a lot of folks who are, working in a job that they want to get out of and maybe create some cash flow. So you did this all virtually, essentially, and maybe touch a little bit more on what you mean by turnkey. Rental. And how active were you in managing these properties that you ended up purchasing in other states?
Yeah. This is actually like a product that people will sell Turkey rentals. If you Google it things will pop up. Guys, providers will pop up and supposedly there’s different layers of turnkey, essentially the idea is house flipper out there will go buy a beat up piece of junk and they’ll fix it up.
They’ll but they’ll put it put like a renter type of standard type of stuff. It won’t be like super pretty, but it’ll be like really durable and good enough, for government work or for, class B and C renters for the most part. So they’ll fix the roof, the flooring appliances, the new page job they’ll fit all the interior stuff.
And. Sometimes these guys will even put a tenant in there for you and manage it for you. I always recommend my folks to get a third party property manager to get this all in place. So you don’t, you buy from somebody else, it’s a great way for like new investors to put on the training wheels as a landlord.
But this is what I did, I bought from 2012 or 2009 was when I bought my first rental . So 2015 is when I stopped by these little rental properties, I got up to 11 of ’em and I think they’re a critical part of wealth building, but if you’re already in a credit investor or million dollar network or greater making more than two 50 a year it’s little rental properties are a pain in the ass and they’re still have some little bit of li legal liability and the debt’s in your personal.
Syndications and private placements might be more of your style. That’s where I switched. So for 2015, with 11 rentals, each rental gives me like a couple hundred bucks, few hundred bucks, a cash flow every month. So you add that up. I was positive cash flow, 3000 bucks, which was BEC a lot of that’s when it’s real, estate’s tax free.
So it was essentially like half my paycheck. I saw the like to financial freedom. Yeah. And I actually saw this very early on and my, my attitude towards work changed pretty drastically in the first, even the first several years doing this where I was I don’t really need to do this too much longer.
Yeah. So you were planning the exit. You were you saw it as you said. Yeah. Yeah. My first job was pretty hard. I worked for a very conservative company where, quality of life is low, but the pay is a little higher. And maybe that was probably a good thing too. Yeah.
Because it cl it heated up the wa falling water and it made me really hate my. And wanna get out even more and more motivation to saving, to put the down payments and more properties. But that was I would say my attitude definitely changed after a while. Like I became apathetic in a way where it’s I don’t have to keep doing this.
Like I make more than you guys at me. It’s start to realize. 95% of people out there. They just are really bad with their money. They can’t save it. They spend more than they make. And, let’s put aside the folks who don’t go to college. Not saying college is really that great at anything, but don’t go to college, don’t get a professional career.
A lot of those people, it’s an income. They just don’t make enough money. If you don’t make 50, 80 grand in this country with a family, you’re not making enough money. Quite frankly. Yeah. That’s a different problem. I don’t know how to fix that. There’s so many websites, debt, consolidation. I don’t know about that, but I was good with my money.
So a lot of folks that I think are listening resonating with this, right? You make six figures, but there’s this kind of money mindset out there. Like Dave Ramsey, C you Orman the saver mentality. What I tell people a lot is that’s good for people who, number one, don’t make that much money. Or number two, maybe you do make a good salary, but you suck at your personal finance.
You can’t really keep a budget. And I would still argue that most people are like this. The people who cross over, like people like myself, right? We save a boatload of our, into 401k, even though we shouldn’t be doing that. And we were on this fast pass to financial independence, need to get rid of the Dave Ramsey, Suzy Orman save, say, save.
And you gotta get into being buy assets with good debt and leverage your debt and in a way, be on the offense. People don’t realize that there’s these two paradigms and the two some people call it the rich dad, poor dad mentality to operating system. I call it the simple passive cash flow.com mentality.
Cause actually tell you guys what to do, buying little rental properties to your network, cuz half a million million, then go into syndications and private placements. After that. But that, that’s what I followed. I followed this journey. Once I got to the accredited status, I started to go into syndications in private placements and I started to dump the low, annoying rental properties.
But the annoying rental properties to me was a way how I learned and it helped me really do due diligence on the larger deals as a passive investor. And Yeah. Yeah. Great share. Can you talk about, and I love the simple passive cash flow.com. That’s your, that’s where you teach people how to do this.
And basically follow this path that you’ve developed, which are gonna get to there’s. So a lot more here, maybe talk about one of your first syndication deals. Cause you did make the leap from single family too, to, to syndications, to mal. Yeah. I already had that mindset of these rental properties are a pain in the butt.
It’s not scalable. Yeah. For if, like I said, I had 11 rentals and maybe a few hun $3,000 and pass the cash flow every month. And it was a bit of a headache because with 11 rentals, just to give some people some insight. I had maybe an eviction or two every year, which are a little annoying.
Of course I have a property manager on all these properties. I’m not some idiot who runs this stuff myself remotely. There’s somebody else that takes 10% of the rents that does all my dirty work for me. Yep. But yeah, to deal with these evictions and these, every quarter, you’re gonna have some big kind of catastrophe.
If you have a love of rentals, it’s if you have 10 sons, one of ’em is gonna go to jail every decade, like that’s just the odds. I’ve never heard that before, but yeah, I guess that makes sense. I don’t have sons, but I just see it on TV and, I just see it out there, see if Felic, some kids gonna go to jail, typically a dude . But yeah I, you see where this is going, and totally I’m like, then I started to join. This is where the big thing aha moment for me was I started to interact with other high network accredit investors.
And these aren’t, super rich people, but they have a million dollar net worth or greater. And a lot of ’em were. Of my pedigree I was an engineer, there are a lot of engineers. There’s a heck, a lot of engineers as investors, doctors, lawyers, dentists, accountants, pharmacists, lot professionals also working their day jobs because it’s a great way to, build up that cash to buy more rentals or go into more deals.
But they’re all their main thing was that they were, you. Dumping their rentals and going into these Archer syndications. And I just saw the writing on the wall. And when you meet people who do what you do and they say I used to do what you do, but now I do this. That’s probably one of the best arguments for me that I at least start to look into these large syndicated projects.
But when I first started saw this stuff, I thought they were like Ponzi schemes. But then I started to get to know the people build relationships. And that’s what this world is. It’s a people game, building relationships, the right operators and building colleagues and peers of other passive investors to know who’s legit in this business.
The trouble is everybody’s got podcasts these days. Everybody’s got books. So it’s really hard to determine who’s legit in this, fake it to your, make it type of world that the general partners live. Which is why I tell everybody and how, like my whole method is like building relationships with other passive investors is why we have a community for this.
And you just basically copy what other passive investors do, that have gotten good returns from people having gotten their money. And this is the essence, like this is the country club deals. This is the virtual country. In a way. And this is the way that a lot of investors invest and we can get into it later, but it really opens up the taxes because now when you’re going into these deals, a lot of these deals do cost segregations, which if some people are rental property owners, you can deduct 1 27 of the value of the home every year and take that as a paper loss.
But with this stuff, you could deduct one third of the property all in the first year. Yeah. Like it could be like a 10 or 20 X that deduction, and now you can implement certain strategies. The typical one for my clients are like, you have a couple, one higher paid person and maybe another lower paid one that we wanna have ’em to stay at home and play with the kids and enjoy life.
Now that person can implement real estate professional status rep status, which is a checkbook on checkbox on your taxes. There’s a few loopholes that jump through, but once you do that, now you can use the passive losses to not only offset all the passive income, that’s the gimme, but use it to offset the ordinary income, which I know a lot of you guys have high w two or 10 99 salaries.
And you can basically, if you can pay whatever taxes you want. At that point. Correct. And as you alluded to earlier, it’s not what you earn. It’s what you get to keep, right? This is right. This is a tremendous way to reduce your tax liability. And even to, to zero in some cases, I’m sure. Yeah.
I don’t pay taxes equally. I have million plus bucks of passive activity losses. To use at my disposal. Yeah, there’s a strategy to it. And unfortunately, a lot of CPAs tax folks don’t really understand this stuff. That’s why, like a lot of this stuff is if there’s one big piece of financial advice, never take financial advice from people who are not financially free themselves.
Like, why would you wanna take financial advice from a CPA? The dude has a job at J B. He works for a paycheck. He hasn’t figured this stuff out. Yeah. Show me your income statement. Show me your net worth. Yeah, i, I don’t income. It’s all what you keep and what you accumulate at the end of the day.
There’s a lot of people with high incomes that aren’t the most sophisticated investors. or money managers. And it’s all net worth to me is what your age is. So when did you great stuff? It’s you’re now in these multi-unit deals and you’re buying a lot of commercial assets if you will.
And you’re up to several thousand units now, but when did you start. Really think about, okay, I’m exiting my W2. yeah, I did this. So know, switching back to the W2 world I did change jobs few times actually. I started to work for the government and , I actually, the job became pretty I actually enjoyed it at that cause I enjoyed the full workers.
I liked the management. I didn’t like what I did one bit, but I mean to me, there’s like a triangle of who do you work for? Who do you work with or your subordinates, and then do you like the work that you’re in? I think if you have two out of three of those, you can be pretty damn happy.
You can’t have one or not. Yeah, I guess what you’re trying to find is something that’s all three, which. Good luck but some of my doctor clients have it, because they, if they happen to be, have a good boss, that’s the hardest one. They work with people and they, they often work with people on their worst day and that could be very enriching.
And then they obviously, they may like their coworkers to have a great team environment. That’s the perfect environment where you can make a full load of money doing that. Most of them work two to three days a week. But they typically do once they find this stuff. But for me it was like just downgrading to like more quality of life, less work responsibilities, but after a while, I went into some bad deals with people as a past investor.
Then I realized that I needed to control the capital stack myself and, that’s why I started to do deals myself. And then my impressions would come in and that was it I felt felt a little irresponsible, like bringing in my constituents that here I am working this W2 full-time job on the side.
Little Iwan still. So I eventually cut the cord on that, but if I wasn’t like a general partner geo operator, Probably, that would’ve been a great, like I could have probably still doing it today. Like I enjoyed the work somewhat. It was cruise. I got to do my investing, passive investing thing on the site, which isn’t that hard.
Yeah. To be a passive investor, maybe takes five hours a month to do it. Yeah. That’s really all it takes. Yeah. Great. Yeah. But that, yeah that’s what. I couldn’t just stayed in that job and just kicked back and cruise, but, I think I quit around like 2018, I think. 18 all right.
So you’ve been here for about a little over 10 years in W2. Yeah. But the w two really helped me, propel our company and, build our organization that, I, and I think for my kids, I’m not a huge fan of college and higher education. But I do think that it gets you in a position to compete and get into a fortune 500 company.
And I’m not a huge fan of fortune 500 companies cuz of bureaucracy and everything, but it helps puts you into a system and you can be on the inside and be a. You can learn how their systems are. And a lot of those systems I implement today, minus all the BS, essentially. It goes without saying congrats on the on the exit there, but talk about your company now, you’ve got this big real estate company.
You’ve got over a billion assets under management, over 8,000 units. Talk about what, talk about your business and maybe a little bit about what, like a typical day looks like for you? What are you doing? Yeah, today it’s changed a lot. In the beginning we were running around.
Doing everything, managing the manager, working with investors. When we went over, I would say 500 million of assets on their management. It became unscalable to do it like that for ourselves. And that was a period where we had to reinvest a lot of our. Profits into other staff with who did our job a lot better than us.
So some of the key hires other than, investor relations staff and, marketing staff, but the key hires are like, hiring other property managers. But the property managers who did, were in the industry for a decade plus, and they have this insights, it’s just if you came at, and play doctor or computer scientist or computer engineer for a day, you just can’t do it. Like even if you studied up for six months to a couple years, you just can’t do it. And. Here I am, I guess I’m a semi smart dude, right? But I don’t know, like the little nuances that somebody who was, worked at a 30, $40,000 leasing agent job and stepped up to a property manager that maybe started their own property management company.
Those are some valuable insights that kind of, we have as our operations staff now that we’ve engulfed. So we’ve, our role has changed from, doing everything, to just creating the org structure. And that, that was not one of my forte. So we have some C level staff that help us do that.
But these days it’s more like guiding the direction and business development. Cuz that was essentially what got us started was the key relationships and continuing to build key relationships in the future, like with banks and with equity partners and stuff like that. What is the, sorry, go ahead. Oh, I think still.
I have a life coach and he tells me you need to figure out what you really enjoy out of all these random things you’re doing. And for me, it’s interacting with investors, give them that all home. And you’ve been doing it all wrong of 401ks, this bunch of retail investments that just, go out to the clueless and you need to get into like deals where, people and where.
It does well in recessions and then you you implement that, then you get the cost segregations and the depreciation and losses to do different games on your taxes. Then you do a little bit infinite banking, which is like cash value, life insurance at a 90 10 split with 20 10% being insurance.
And those are 1, 2, 3 combos. Like it’s a powerful thing that is very counterintuitive to how normal people do finances or people still in that Dave Ramsey school of thought. It’s a game changer and it allows, people who’ve been working so hard, I’d say our average client, 1.5 million net worth in their early forties with two kids, you change one thing around now, one spouse doesn’t have to work and now they’re, they see the light instead of now they’re 20, 30 years of working.
It’s really five years ahead of ’em. It’s totally transformational within, these individual families and, putting on the events and then meeting other people who have taken the red pill of finance. That’s what I enjoy. Awesome. And you, so you’re putting on some events too. Talk a little bit more about about that.
It sounds like you have events for your clients. Yeah, we’re a kooky bunch, right? Like we are our deep down core is like we’re savers. We delay grad and we get off on that. People come to, we do in Hawaii, like people come to Hawaii, nobody stays at the high end stuff. That’s not good use of, that’s not good value.
They stay in like kind of the more boutiquey, three star, four star hotels. A lot of these guys are very affluent, especially once they start to invest and. It’s lonely, right? All our friends and family are investing in like the 401k or some of the, the more aggressive ones are doing crypto and Bitcoin or worse out coins.
And it’s just here. We are investing in very stable, boring assets. Like I almost call it like investing in blue overalls and machines and hard work. We buy. 1960s and 1990 properties that caters towards the lower middle class, a grungier demographic. It’s not sexy. We slowly and it takes a while, right?
It’s not a get rich quick steam. We go in and we rehab units slowly as 10 minutes, move out takes forever, takes, several years. but in recessions, it performs pretty well. And in good times it outperforms a lot of the good stuff. Yeah. And it’s like this idea of doing this with so many people is crazy too, that like when people, assemble, I’m going out to like LA next week and Arizona, and just to do a little pop up.
Meeting, but when people assemble and they’re like, yeah, I don’t do the 401k because like all the reasons lane said it totally makes sense, but like none of my coworkers, I can’t, they start to become very distanced from most of their coworkers, because none of that stuff, when they actually use their head and get away from the financial dog mouth put on by all the fan guards, alies all these institutions that want you to put your money in that stuff.
Yeah. They’re. It makes no sense, but I still, people are still like, they’re stuck in that spell. But when I come here, I can have great conversations and we disclose what our net worth is, what we’re investing in. And these, we can talk about these alternative investing ideas, talk about deals. It’s just it’s like a cult to the us, right?
You’re around like-minded people and you’re, you’re all it’s always good to be in, in a different room, especially when you don’t like the one that you’re. Yeah, I love what you talk when you, I love what you say about 401ks. And I saw the light on that too. I always knew it, but I just kept feeding it in cuz it became like automatic, I caution anyone to be very leery of putting your money into into a program, whatever what, for lack of a better phrase, where they control, how much you can put in, they control what you can invest in.
And then. Tell you, when you can take it out, they, and then they tell you when you have to take it out. So it’s just very limiting and it’s all completely one sided. And I saw the light on that. I’m sure you have plenty of thoughts on the topic, but, I got completely out of that.
I, yeah. I, over pretty concisely in a, couple minutes I have four big issues with the 401k. Yeah. Please share type of stuff. Like first, like it’s a lot of it has to do with taxes. . When I put my money, a lot of the whole dogma is predicated on you will be, you’ll get older and you’ll Shivel up and die and make less money in the future.
And at that point you’ll be in lower tax bracket. But not me, not most of my investors, they’re gonna be baller in the future in me in that much higher tax bracket than they are today. Yep. Therefore, you should pay your taxes on the damn thing today. Take it out today while you’re in a lower tax bracket.
Number two. Look where this country is going, how are you gonna pay for all these government entitlement programs with raise taxes in the future? So again, pay your taxes now, get it out. Now the next biggest thing is I think the argument for these 401ks that oh, gross tax free.
When you invest in real estate, that has a bunch of paper losses like depreciation, you can write all a bunch of other stuff. It often is tax free anyway, so that point is negated, but here’s the big kicker. I think, we briefly touched upon this, like how most people are playing checkers, putting money in their 401k or Roth IRAs or whatever.
And we play chess, right? We’re manipulating our adjust gross income on our personal tax return based on what our investments are. And when you play this chess game, instead of checkers, I want the depreciation and losses that come from my investments where when you’re investing, you can invest through a self-directed IRA too.
But when you’re investing through one of these type of programs or solo 401k, it’s you don’t get the passive losses, the flow on your personal tax site. It stays locked up in there. Yeah. And that’s the downside to this. It’s more about using the losses on the deals and the investment ties from depreciation, which is just paper loss to clean up your pay less taxes today.
And you lose that ability when you invest in this insulated 401k or solo 401k. So unless, the only good thing it’s. If you’re investing in non-tax advantage type of stuff. What it’s non-tax advantage stuff like, like your crypto things like that, or if you’re a private money lender in, in, in a, in real estate I wouldn’t do that anyway.
Where you just lend money to a house flipper. And there’s no losses you’re getting paid with a 10 99. There’s no tax advantage with that, that’s the stuff you’re supposed to do it in those type of stuff, but I don’t do anything. That’s not tax advantage really. So love it.
Great share great insight. And something more we can learn at simple passive cash flow.com. I’m definitely assuming that. And then you have a podcast as, as well. Talk a little bit about your. Yeah. It’s basically a fall of my journey. I started back in 2016 when I was buying little rental properties and I would just teach people how to buy, turnkey rentals and yeah.
Back then we had a little incubator group and. Now a lot of the information’s for free. And if you’re just in the game of buying little turnkey rental, you can go to simple pass cash, flow.com/turnkey and get the free guide there. But as I became over an credit investor, and like I said, at that time I was going into a lot of larger syndication deals.
I saw the light and for credit is just, it’s a no brainer to go into these syndicated deals. If you could build relationships and build a community around your. Or join a community out there. And that was where it transitioned and it is, that’s my whole thing is I. I know that there’s something else out there and that’s my job is to cut the corners for a lot of folks, right?
If you’re net worth is a million bucks, you shouldn’t Dick around with little rental properties, you just go to the big stuff, the syndicated deals. But for a lot of my investors that are like one to $10 million net worth what’s after, what do you do after, when you’ve got, five, $10 million plus, and you can comfortably live off your four or 5% off of that.
What are like the 50 million, a hundred million dollar families the family is doing, right? Yeah. That’s the kind of stuff that I try and learn these days and I try and bring it down to my folks and just that insight. Cause you wanna just always be improving as a investor and be, become a professional investor.
The trouble is right. Most people are working their day jobs, so they don’t really have the time to, and, but the, and the issue is interacting with the right higher level people, higher level investors, getting access to those rooms, which a lot of people don’t have the time for nor the network.
But that’s been my passion to uncovering this myself. But even, to implement the strategies for one to $10 million net worth people, I. You look at it and it’s not that hard. Like I said, invest in good deals. Use the passive losses on your taxes, tell your CPA what to do or find a new one.
Yeah, infinite banking and it’s pretty simple, but it’s very counterintuitive to what, like they normally tell us right. To do. Extremely. Great chair. Great journey. Love your story. Just before we wrap up, I got a couple of couple questions for you. I wanted to ask one, do you, whether it’s a morning routine or some habits that you’ve adopted, that you could share with the listeners that have really led to your, to success or keep you up, on the path, if you.
Yeah, I think one thing I do well is I execute I’m the person who will write down my list of things to do, but I’ll actually do it. I, and I think that allows you to constantly innovate and constantly improve. I don’t know what that, if you improve one person every day, at the end of the, you’ll be like 20 something times better than what you.
I’m not a huge fan of like boring routines. I don’t wake up and do yoga. I jump on the emails and put out the fires, just like anybody else. I don’t wake up super early, today was a little early for me. I try to wake up around eight. Nice. If I can. Yeah. And I think like my whole advice from that is Hey, do what works for you guys.
Not everybody is the same, but make sure it works for you. And I would say I’m really good at focusing on what the business is. And for a lot of folks listing, it’s like your own personal finances. What are you gonna do with the investments and taxes? Not what you’re doing with your employer.
You’re building somebody else’s dream with that. Build yours first. Even if it you’re like me. You’re working a day job. You’re sleepwalking through it for a decade. That’s to me, that’s the most important thing is get your own stuff. And doesn’t take that much time to learn, to do what’s right.
And to implement it, especially once what you should be doing. But you can sleep sleepwalk through a job. They take, they pay for your time and your head, but they don’t charge you for your heart. So you you always have those sex, those few extra hours a day to put to where you are doing after you play with the kids and you do your family obligations and you’re tired.
Course, too many people spend so much time, like over the news or like focusing on things that don’t matter. What’s the saying? Most people major in minor things. Tony Robbs both. Yeah. Yeah. Great stuff. Get your own stuff. Awesome. Share. Do you believe in, do you have a coach or a mentor, do you believe in that?
Not really. I think when you’re starting out, I think a coach would be good. That’s the role I play for some folks. My inner circle and mastermind group and. But, you gotta pay ’em right. If anybody’s worth it, you gotta pay ’em and the trouble is there’s a lot of fake gurus out there that don’t really do anything.
They just write books and stuff like that and have YouTube channels. That’s why a lot of stuff on my website is free. I hate that fake picture stuff. The guys that teach people and they mostly prey on not your audience, they mostly prey on the guys who don’t have money and are really desperate.
And they sell ’em on hope and fear, but yeah. Yeah. I would say You need to find a model that’s doing this, but if you’re starting out, there’s a lot of YouTube and podcasts to just start to absorb it. And I would say focus on getting a community rather than worshiping the gods and the gurus.
Find other peers on this journey and that’s gonna be the way to get you off the ground. Of course, I’m super cheap. And that’s how I used to do it initially. But then I saw the light in 2015 when I really started to pay, like five figures plus a year on these mastering groups in education.
And that got me connected with the right committee. Then there’s the freebee free loader tire kicker crowd of peer groups. Yeah. So that was a big thing in hindsight, if somebody’s starting out, so much free stuff out. You should be able to dissect, but just know you’re trading time for money in a way, but I’m always just rolling down the road before you interject any kind of type of money into it.
Like once, once you’ve got some, you might have a rental property or in several deals, then I would say it makes sense to phony up. Once you get proof of concept and this whole thing works and then accelerate it with a better community and network after that, that is actually serious. Go ahead. Yeah.
Thanks lane. We’re gonna, we’re gonna give the website again, simple. Passive cash flow.com. Simple passive cash flow.com. It’s been tremendous, haven’t you? I just, I love the insight. I love the way you think. You obviously think a lot differently now than you did when you first started out, so that’s the, you can see the growth there and really appreciate the share.
Anything else you want to share with the listeners before we sign off or that I forgot to. No, I think some people are saying that eventually you’re gonna quit the day job. I think that’s probably the mindset of a lot of folks, but, speaking from myself and a lot of my folks who are like two to 5 million networks who broke through that part of the stratosphere.
Everybody, you gotta do something with your time and you gotta try and figure out what makes you happy. I do think you have to go through a period, like a little air pocket where you don’t do Jack for maybe six months to several years where you just go weightless.
And this concept of financial freedom to me is kinda like you, you need to save enough money to buy enough assets, to create enough passive income, where it exceeds your expenses. So 10, 20 grand per month. And then you put your. And then you go wait less and you gotta go through this vacuum and air bubble where you’re just floating, but until you’re floating and searching for your next main life mission it’s hard to do that, to search when you’re stuck trading time for money.
So I think that’s what I’m uncovering with myself. And some of my clients have to go to that stage. You gotta get your own oxygen mask in the first year, you gotta get the fi and then the next chapter, your life will come. But it’s a lonely world, right? Not many people get to ponder these types of first world, or I know first world problems, but like the upper 1% first world problems, where you’ve searching for autonomy and trying to find some kind of meeting of what the heck you’re here. when your money continues to compound on itself, where it compounds at a rate where it’s quicker than you could spend at a regional rate of course, but like yeah. Not many people are faced for that.
Most people are stuck in a day job just going at training time for money. Yeah. Don’t have to do that. Great final thought. Appreciate the share. And you are spending some time with us today. I know it’s valuable. Everyone, thanks for tuning in as always to make it great.
What’s up with a simple passive cash flow nation out there? And today’s podcast we’re gonna be talking about religious MES shares, which is these alternative health insurance. Items. A lot of you guys say you’re on the verge of quitting your day job, and the biggest thing is what do you do for medical insurance?
Most people out there are misled to believe that, you better keep having a day job so that you pay for your medical insurance. But something I’ve been going through lately is looking at. How much do these things cost? It can range from a thousand dollars to a few thousand dollars a month.
Seems like a lot of money for most people. If you’ve a million dollars net worth and you’re making 10% off that, that’s a hundred grand. And that’s a fraction of it right there. And, many of you guys listing as it mostly a credit investor base have probably two or three times that much, especially if you count the debt equity in your house or your IRAs not doing anything.
You gotta get it on the table, you gotta get working and, get it working in things that are backed by real estate and cash flow. So also other announcements before we get going here. We are getting into the holiday season, which means we are going into Myself and my team are gonna go into planning for the annual retreat in Hawaii.
That’s gonna be January 13th, the 16th. It’s the Huey five. So it’s like kind of the fifth big event we put on. Great event for you guys. If you guys haven’t interacted with our group to at least come out once and see where we’re all about, personally, I, my eyes were wide open and well back in 2015 when I started to meet other investors.
Up until that point, buying rental properties from 2009 to 2015, I thought I was crazy for buying properties, not for appreciation. Places like Seattle, California, Hawaii. And investing in these lesser known secondary markets, like how we do today with the apartments. If you guys are interested in that, make sure you guys sign up for the club@simplepasscash.com slash club as everybody has pre-vetted, right?
We wanna know everybody who comes as unlike a lot of, these other conferences you see out there where it’s a, it’s a fake it to make it group. Wanna be general partners. Our group is really the only one out there dedicated to purely passive accredit investors or LPs. We wanna know who is out there for obvious reasons there.
And we also wanna filter for the right people who are fun and who are gonna make a great experience. And, for people coming out to Hawaii to meet We’ve gotten great feedback from the past year. So anyway, if you guys have been to the password sheets with us shoot us an email team at simplepassivecash flow.com and be compiling those ideas from past participants and make it even better even if it’s just I wanna go.
On a sunset cruise this time, or I wanna go snorkeling, whatever. Let us know what you guys want to do or any other ideas on, one thing we’re big on is, we put people on small tables after they’ve gone through a couple days of getting to know each other and icebreakers and, getting that comfort built up so that they do feel comfortable opening.
And being authentic with other people. And that’s really where you get the good stuff. And unfortunately you don’t really get this with some of our other events that are like, a few hours or a popup here or there, or we just came back from Huntsville where we unveiled the new 230 unit Chase Creek Apartments, which looks amazing.
It something is real special when you get people to a remote location like Oahu in Hawaii which we’ll be doing in Waikiki by the. And then also when you get adults together for a few days in conjunction, things really open up and, I’ll say it for myself as an adult in my thirties.
Gonna be forties. It’s really hard to meet friends, especially ones that aren’t just living the old pay off your house and work to, you’re 60, 70 years old investing in the 401K nonsense. We’ve got a bunch of folks, a very eclectic group that kind of question the status quo and, doing things very differently.
And the sad thing is a lot of, for a lot of you guys listening, I was there at one point. You’re ashamed to do it this way cuz nobody, everybody thinks you’re crazy out there. But come to Hawaii and jump on board for that. I think I do believe the info page, if it’s not set up already, it may be set up.
Come next month will be simple Passive cash.com/ 2023 retreat is the signup form there for more information. But if that, here we go with the show.
Hey simple passive cashflow listeners. Today, we are going to talk about Ary programs and this is one part of our series that we’re going into healthcare insurance alternatives. After you leave the w two day job, and you’re not grandfathered into one of those legacy health programs after you’re retired from your employer, you guys can find all the show notes to this and the other.
Podcast we have had on the topic, simple passive cash flow.com/healthcare. But today I’ve got Jeff Anoni jeff, why don’t you give a quick background on yourself and then we’ll just roll into the material here. Yeah, absolutely. Thanks first. All thanks for having me on the show enjoyed meeting with you.
Yeah, that was fun. Connecting with you. I. I’m six foot five. So I didn’t really see you there for a while and somebody pointed you out, Hey, he’s down there. And I looked down there and there you were. But anyway that’s my humor for today, but but anyway I’m definitely not an expert on this.
I wouldn’t call myself an expert. I would call myself just somebody that was sick and tired of paying a lot of money every month to, for health insurance for me and my. And I decided do something about it, but a little bit of background about me. I’m a periodontist. I practice in Louisiana and about a year and a half ago, I started the debt free doctor.
It’s actually debt free Dr. Dot com site. And it was geared more towards dentist and physicians and other high income earners. About how to get out of debt, different ways that, that I did it, we were able to do it and then plus some basic investing. And now, I’ve gotten more into the passive investing, real estates, syndications, those sort of things that, that you teach your followers and your listeners and coaching members.
That’s a little background about me. There you go. Yeah. So a lot of, set the problem. A lot of people, they leave their day job and they leave this health insurance behind and something I’ve been looking into is there’s a cost to this and it’s not insurmountable.
And for a lot of people I asked who are in this financial independence path and investing in multimillion dollar deal. they they say, I asked ’em why don’t you leaving your day job? They say cuz of healthcare did you know that, that only costs 500 to a thousand, $2,000 a month potentially, and so that’s how we’re we’re gonna talk about one of those alternatives today, which is meta sharing. And so I guess Jeff, why don’t you define what meta sharing is? And how people use it. About a year and a half ago, we were paying $480 a month for my family. It’s my wife and I and two kids.
And we got a notice from our December. We got a notice from our health insurance that said it was going from $480 a month to $1,600 a month. I said, man, this is outrageous. And cuz at that time I had a $12,000 a yearly premium premium deductible, $12,000 deductible a year.
So I was pretty much not even using my health insurance cause I was having a pay out of pocket $12,000 a year. Luckily we’re a healthy family and we don’t have to use it that much, but I just didn’t. That paying now 1600 a month, like almost $20,000 a year for what you know, for nothing.
So I, I was like, there, there’s gotta be a better way. So I started looking around and I talked to other doctors, talked to, nurses just talked to other people, friends and I kept hearing this thing called healthcare sharing programs, or also called healthcare sharing. I didn’t really know much about it.
I’d heard on the radio a little bit about it started doing a little of, a little bit of research and basically what these organizations are. They’re not health insurance they’re and I guess the easy way to, to describe it. Cause I like to talk and analogies, cuz I’m from Louisiana, I’m just a simple dude.
But if think about you in your, where you live in your neighborhood. your neighbors and if one of ’em gets sick and they’re in the hospital and you look over there and their yard’s two feet high, you would probably maybe pitch in and mow their yard and help ’em out.
And that’s what, how this is structured. So when somebody has a medical need, people pitch in their money and share, and it goes directly to. Whatever medical bills they have that’s a simplistic way of explaining it.
So think of it like in your Colex sec in your neighborhood, but think of it with potentially a thousand, 10,000 people in that sharing program or even more, exactly. Yeah. It’s tens of thousands in, in a lot of these companies and just it’s growing astronomically, just because. How much the health insurance premiums have skyrocketed. And, like my first I was try and sharp shoot these things and I think what if to use your analogy in Louisiana, your next door neighbor happens to be a 400 pound guy who happens to deep fry, crawfish oil in powdered sugar and Oreo cookies and sprinkles and drink coffee.
How do you know my neighbor? My neighbor. Yeah. I don’t wanna be in his medical sharing program. No offense, but you would think that stuff happens, but it’s the benefit of not having to pay all these outrageous and inflatable health insurance costs. That’s where most of the benefit is coming from me.
Kinda. I really think that their cost are so much lower. because they’re because if you’re with one of these big insurance companies, like blue cross or, one of the other larger ones, I’m just, randomly choosing that and now, or all these other yeah. Even a Kaiser.
Exactly what I mean. Think about I don’t even know, but I’m sure you could look it up online. How many millions of dollars a year they spend on advertising. So a lot of your money that you would spend. Would go to pay for their advertising versus these healthcare sharing programs or ministries.
They don’t have all of that. And I think that’s one of the main reasons why they’re able to really decrease the amount that members have to pay. And not only advertising, but just, you think of corporate waste. How many of my investors are nurses and doctors and most of their times are not.
Helping patients listening, all the BS coding and all the paperwork that’s required. Yeah, exactly. I didn’t know a lot of these positions ex existed and people will say, I always ask what people do and they’re like, oh, I’m a coder for health insurance stuff, oh, that’s a, seems like a really boring job to me. yeah, exactly.
What are the other than like your healthcare company, is Medi sharing options, the only thing you found? I, there are different, there’s different companies out there. Medi-Share and Samaritan. Those are two the larger. These sharing organizations, there, there is, there’s probably, 10 or more, but I think they pretty much all work the same way.
So when you have a, if you have to go to the doctor, you have a, a medical event or whatever they have and I’ll just, and I’m more familiar with Medi-Share because that’s who I’m with. But I think that Medi-Share and Samaritan and then Liberty. Are probably the three largest ones, most popular ones.
And they actually have network providers just like an insurance company. And, with Medi-Share, they’ll actually give you an ID card and it has on there, your group number. And it looks just like an insurance card. So you go to the doctor or you go to the hospital, you get your work done or whatever, and the provider will send their bill.
And in this case to Medi. And then the, and the so basically the provider notifies Medi-Share, and then if everything’s approved, Medi-Share will transfer funds from other people. So every month you have, they have what they called. It’s a sharing account. So with health insurance, you’re paying every month, your monthly premium, in our case with Medi-Share every month you have, it goes into a share account.
So whenever somebody. Needs your money. It’s basically that money is shared with other people. So if if you’re out there surfing in Hawaii and you get knocked off a big wave and you knock your head on the surfboard, you go to the hospital and it’s gonna be $5,000. They basically just pull up $5,000 from other Chere members.
They will, pay your bills directly. What I like about it is, cuz if you’re paying, when I used to pay my money with insurance companies, I would just write a check and that’s it. But what I like about Mesha and these other companies, where your money’s going, it’ll actually say, Hey, your money’s going to help out lane.
It doesn’t say, what your medical problem or anything like that is. They will let them know, Hey, I’m actually, my money’s actually going good. It’s going to help somebody just like taxes. Think about how much taxes we pay. It’s just a was of the government. I would love to know where, my tax money is going to help, this a certain person that’s in need, but unfortunately it’s not like that.
Some of these really small medical sharing groups they’ll. Have you send them the money directly and you’re also supposed to give them like words of encouragement, right? You’re not one of those really small ones. Are you the, I know Samaritan is the other one is another main one. They actually will.
Your money. They’ll actually tell you where to send your money. They do it, it’s very seamless. It’s not oh, is my money gonna get there? Whatever, it’s but that was one of the reasons I like Medi-Share because I’m sending. My money every month versus Samaritan and maybe some of the other ones that you have to send to somebody else.
Yeah. But they have something called an AHP or an annual household portion. And what that is that’s like your annual deductible with insurance and there’s with Chere there’s seven, seven different ones. And it ranges anywhere from $500 a. To, I think like 10,000 or 10,500. So again, just like insurance, the higher your annual household portion, or your deductible is the lower your monthly premium or your monthly, share’s gonna be.
So basically, if you pick $10,000 you have to pay out of pocket $10,000 and then Medi-Share will kick in to start paying. And very similar to an insurance program. It goes through some factors, such as age, a number of people, et cetera, et cetera. So it’s fair amongst different participants.
Yeah. And another thing that I didn’t realize until I’d been doing it for a month, so we were paying $480 a month. It got jacked up to $1,600 a month. And then once I got Medi-Share, it went down from 1600 a month to I think, $330 a month. So it was actually less than I was previously paying. So I’d been paying for a year.
And then I started I’d gotten an email about, have you considered doing a changing from your standard monthly share to what they call a healthy, monthly share? And I said I don’t know anything about that. What is that? So basically what it is, it’s an option for people that are. Have a healthy lifestyle.
They’ll actually, if you meet the qualifications, they’ll actually have you, do, your blood pressure, your waste, me measurement, your BMI, your body mass index. So if you and I did this for both my, myself and my spouse, you do it. You verify it. It’ll actually lower your rate even more.
So now it’s, I think ours is $271 a month. for a family of four. Wow. So think about your savings. What it could be. Especially people that are retiring early, they’re financially independent, it’s a huge savings. So I’m looking at the website here and I’ll put a screenshot into the civil pass cash flow.com/healthcare, as you guys can take a look at later, so that kind of helps out the your poor neighbor there who needs to lose some weight.
Probably not gonna qualify for that nice discount then probably not. No. So right now you’re paying a little under 500 where I think most people who don’t have health insurance retire at age 60, hopefully they’re look probably looking at what, 2000 per family sort of the normal per month. Yeah. Yeah. It’s well over a thousand.
I mean it, yeah, it. From most people that I’ve talked to it’s anywhere from 1500 to 2000 or more, and we’re under $300 a month. It’s huge. And it also includes dental. They have a dental it’s included vision is included and then something that I haven’t used, but I know it’s getting more and more popular is the telemedicine.
To where if you don’t wanna leave your house, I think this would be especially good with kids. When you have a kid that’s sick, a lot of times you don’t want to go to the pediatrician and sit in the waiting room and pick up all these other diseases and stuff. If you know that, you’re just gonna get like a antibiotic or something like that.
So they, they have a telemedicine that they do 24 7, where they’ll connect you. With another doctor to see, is that something that they can handle online, with the camera looking at each other, or do you need to actually go in and physically see a physician? But, you’re paying like what a quarter or a third of what most people are paying.
And it’s just absolutely very similar to like people who buy a turnkey rental, they’re probably making about, I’d say 20 or 30% a year. On their investment. Then you look at the people in the stock market at, index fund. They’re making like five to 8% and it’s like, where did all my money go?
People are paying 1000, $2,000 a month on their health insurance yet you’re paying a quarter of that. Yeah, it’s like that, that’s all the money went to advertising and corporate profits and all this paying the salary of this coder who loves their job coding all day. Absolutely.
let’s talk about some of the cons of this a little bit. those three providers, you mentioned, they are all religious affiliated and you take us through some of the the, what are the things that they don’t allow and in kind of their methods, I’m pretty sure they’re.
Fairly similar. If you can actually go to the, Medi-Share is the Christian care ministry or CCM is the company that has Medi-Share and they actually have a, they actually have a statement of faith on the website and yeah you basically have to be a believer. You have to. And like I was telling you before we started our conversation, they’re not gonna come and follow you around and make sure you’re not smoking and drinking.
And, doing all this stuff that, that you’re saying that you’re not doing, but you basically just have to acknowledge that, follow their rules. I’m not gonna use illegal drugs. I’m not gonna abuse alcohol. I’m not gonna, you. Do I think tobacco sex outside of the marriage, that sort of thing.
And you basically just have to sign it. That’s how it is with Meere and it’s, that’s probably how it is with the other ones as well. So that’s really the. The only qualification the main qualification, which I guess for what you’re asking it, it could be a negative for some people disadvantage.
Again, it’s not a, another con I guess that, of these, again, it’s not a health insurance company, so I’m really not sure, but I think there may be just a handful of states. That still don’t accept it. I think most of them do now, but there may be just a few. So you may wanna just check with that.
I think there are certain restrictions regarding preexisting conditions, very similar to health insurance. I think before you had to be in the program before becoming pregnant, but I think that maybe have changed now. I’m not a hundred percent. But whenever I got into it almost two years ago, that was the case.
some of the preexisting conditions, like diabetes and things like that they may just have to have you pay a little bit more, again if you’re healthy, you’re gonna pay less. If you’re not healthy, you’re gonna pay more, very similar to insurance. Yeah. Yeah. Not different than insurance.
I think. Probably the main disadvantage for us. Whenever we switch, we had a health savings account. We had a high deductible insurance policy that was, associated with a health savings account. With these types of organizations, you cannot use a health savings account. But again you’re saving so much money.
What I did was just took the difference and, put it into a fund or something like that, cuz it’s gonna be a huge difference. I don’t even contribute to my health savings account anymore. I’d rather just invest it. That’s a that’s my own choice. Another con to this, is they don’t, they won’t pay for certain procedures that aren’t really aligned with the faith, right?
Like abortion or whatever. Correct. I would check out their website for you guys and we’ve got some of these, the major rules. I’ll cut and paste into the show notes. But yeah, I think, like this is just an option for folks and, Jeff and I are not giving financial advice.
And if you get a health sharing program, They they don’t pay for something don’t come and Sue us. Jeff. , it’s just exactly, I’m just telling, I’m just sharing my experience with them. I’m a customer for them. I don’t work for them. Another simple way of saying this, cuz everybody is familiar with this.
This is nothing more than crowd funding for healthcare. Think of it like that. But oftentimes the things that if you find yourself on the side of majority, it’s time to pause and switch directions. Yeah, absolutely. and have you heard of any issues with them not paying for certain procedures or just any difficulty them fighting any claims or in your experience?
From my personal experience we’ve used it. We’ve had a couple of issues, I have two boys, so they’re always having issues with sports and with going to the orthopedic doctor. So we’ve had some, x-rays and actually, I just had an issue with my knee.
So I did an MRI. We had a little procedure for my son and. They pretty much covered, everything that they said that they were gonna cover. It was very easy, very seamless. I actually did some research before I joined and got online and there may have been like just maybe one or two instances where, something didn’t get paid or whatever, but 98% of the reviews that I had read, they were all.
But again, like you said, not, I’m not saying if you apply to one of these something could, happen like that, where they may not pay, again, I don’t work for the company, but from my personal experience from talking to other people that also had it plus looking online, it was all very positive.
And it’s not like health insurance haven’t snaked their way out of claims themselves. So E either way you. I deal with dental insurance every day. Being a periodontist. When I say deal with it, my staff deals with them. And I actually, I’m not gonna name any names, but I personally know people that are dentists, but on the side they work for these dental insurance companies.
And I’m sure it’s probably the same way in health insurance, because for dental insurance, you have to submit your x-rays. You have to submit notes and all that, which again is similar to health insurance. You have to have a healthcare provider, look at everything and go, okay this person is saying that this patient needs X, this procedure, I’m go, am I gonna prove it?
Or am I not gonna approve it? And these people that are dentists that actually work for the companies they tell them to stall. That’s their stall tactic. They want to delay it. They want to drag it out. They want to keep saying, oh, I need more information. I need more, this, I need that.
So they, they want to keep your money as long as possible. So it’s growing, they don’t wanna pay right away and that kind of stuff doesn’t happen with these organizations. That’s from my experience of dealing with these, cuz we call ’em daily for patients and it’s always, Hey, we need more documentation.
We need more charting. We need more this or that. And it’s just a stall tactic. The person that gets hurt the most is the patient because they’re frustrated, they’re paying all this money and they’re saying I’m paying all this money every year and they’re not even paying for anything. Unfortunately the patient’s the one that gets the worst, the shortest end of the stick, so to speak.
So I’ve actually talked to another guy probably gonna have him on another podcast in the future, so we can dig into this subject more, but, see he said the procedure on these medical sharing programs is you figure out what you guys need and then you submit it to the company.
and then there’s a little bit of procedure making sure that, Hey, are you going and getting the best pricing, is this what you really need to solve the problem? And then at that point, they try and expedite this as much as possible. So that the most important thing is you getting the treatment and getting it knocked out, but you’re essentially a cash pay person.
That’s what he’s kinda said. Yeah. That’s our experience from visiting with the orthopedics, they Metha contacts us very quickly. They want to expedite it. Like you said, they want to get it paid and it’s, it’s more beneficial. They’re just trying to basic, it makes it more beneficial to me, the patient.
Versus, delaying pain. Yeah. And this even works for you say your son goes to the dentist for a cleaning for his teeth, something as small as that is that what’s the procedure there. The same thing, the dental you you could be a provider just like health insurance, so same thing, the.
Is going to get their money when they’re supposed to, but more importantly, the patient that gets their teeth cleaned, they’re gonna get that paid for quicker instead of, having to wait and wait on the explanation of benefits, caught an EOB form that they send out and it’s just delayed and delayed.
So the procedure is your son gets a cleaning. The bill, the invoice gets sent to the Mesha company. Okay. And then that billing gets taken care of there. And then your share that you need to pay if any gets sent to you no different than how the insurance company works today. Correct. Okay. All right.
But anything else you think we need to cover on this subject? Jeff? I have two articles. One of ’em is about Medi-Share and then one of them, because people started emailing me after I put that article out I did the I also broke down the differences between Medi-Share and Samaritan, which at the time, when I wrote the article, again, those were the two biggest healthcare sharing.
Groups out there. So I broke each one of them down and had the differences between the two and again, the advantages and disadvantages of the two. I would encourage people to do your due diligence, take a look at ’em. If they want to contact me more than happy to contact me.
And again, I’m just would tell them exactly what I’ve been telling you just from my personal experience. and be more than happy to help them if they have any further questions about it. But it’s just been a great thing to free up so much annual extra money every year, I’m still working.
It still is a big deal, but I’m still working, a lot, like you said, a lot of your listeners that aren’t actively working anymore and living off the passive income, this could be a huge financial. Boost to them every year. Or more importantly, just that one last excuse why you shouldn’t be working at your day job when you got all this cash flow to replace your W2 income.
So thanks for joining us, Jeff, I’ll link up in our show notes here simplepasscashflow.com/healthcare. I’ve also got medical or Medicare information, the podcast we did there. We’ll get one of the providers here on the podcast too, in the future. But go ahead and share this with your guys, folks.
If anybody who is nearing retirement, doesn’t have health insurance. There’s definitely a option that I’m going to go down myself personally. Talk to you guys later. Thanks for joining us. Thank you.
What’s up folks? Lane here. I’m gonna be talking about bonus depreciation and it going away here in 2022, but don’t worry, it’s not going away until the next few years. It’s just stepping down every single year. So first off, what is bonus depreciation and why should you even care about this thing now?
All right, so for you, those of you guys who know, you know, with rental real estate, one of the main reasons why I like rental real estate is because you can depreciate the asset and create a phantom loss or paper loss, whatever you wanna call it. But you can create these passive losses or pals for short.
P A Ls kind of clever, right? But you can take these pals and these passive losses can offset your passive Inca passive income from what you may say. Well, passive income from rental properties. So like your cash flow that you’re getting from it. Or you know, things you’ve held for a while and you’ve sold it.
Um, in terms of real estate, you know, you can use the losses from other investments to knock it out and not pay any taxes. And this is how I’ve kind of lowered my tax bill quite substantially over the last several years. Um, and this is, I think, the biggest thing that I’ve learned. Why do you wanna do real estate and why do wealthy people do real estate?
You know, for a lot of folks out there, before they even start working with us, they’ve got a high ordinary income or active income, maybe from a day job, or maybe they’re a business owner. But you know, we have a lot of clients that, you know, are maybe dentists or doctors making 600, $7,000 a year.
But that’s all ordinary active income. The problem with that is you can’t use passive activity losses or pals to knock it out because pals are, again, only used to knock out. Passive losses can knock out passive income. So what do we do? Well over time, you know, people work with us. They, you know, they join our network.
They get the connections and the deal flow to, you know, go from high active income or income where they can’t really shield themselves. And where, you know, the IRS is just absolutely destroying you every single year, and we’re moving you away from that to passive income. Why? Because you can use these passive losses to shield you.
From the taxes. And a lot of people who invest a lot in real estate, um, maybe not even more than like a quarter of their portfolio could possibly wipe out their entire tax load, um, from doing it this way. And this is the reason why I don’t invest in crypto or stocks because when you sell that stuff, it.
Consider all ordinary income before I go any further. Of course, I’m not a CPA, a tax attorney, anything like that. But hey, you know, um, I’ve been doing this for quite a while myself, and these are just some things that I personally do and also some of my, uh, colleagues who are also professional passive investors do themselves.
So what is this bonus depreciation thing? Right? So I think so. You guys have maybe owned rental properties before? No. You can write off the property over 27 years as a paper loss or depreciation loss, um, which is great. Just 27 years is a really freaking long time. Um, and this is excluding the land portion.
We’re only talking about the, the, um, property improvement portion that you can depreciate because land is not depreciable cuz it just stays there. But the cool thing about commercial real estate, and when you start to do these things called cost segregations, and we’ll get into what the heck a cost segregation is, is you can do these cost segregations and you can aggressively write off the property a lot faster than that really long 27 year cycle.
A lot of times you can write it off the entire building. Third of it in the first year, which we’ve done on many of our past projects, to create a huge, huge amount of these passive losses that dump on ourselves and passive investors, K one s, and now they can take this huge, huge loss and maybe offset their passive income and some of the people doing rep status.
Which is a little bit more of an event strategy that we kind of help people implement along with their cpa they can use these passive losses to lower their income. We’ve got a great example of that. Come to the next slide and how people are lowering their adjusted gross income from a million dollars maybe to a half a million dollars a delta to 500.
And at 50 cents on every dollar tax savings, that’s a quarter million dollar tax savings right there. But getting back to like this bonus depreciation via a cost, eg, right? So what the heck is the cost? So a cost e.g. is pretty much you pay a geeky engineer like how I was at one time to go out and itemize the entire building.
And if this is all kind of go, get you. It really doesn’t. You pay a guy about five to $10,000 to do this. There’s different ranges, and of course you wanna find a good one and we can kind of help you guys out if you guys need any referrals to this. But the engineer needs to actually go out and visit the property and, you know, take some notes and do their report.
But basically what it is, is this large report where they itemized all the little components of the building from, you know, from roof to plumbing, electrical, concrete, you know, everything. Basically what they’re doing is itemizing all the little components into dollar amounts into different categories, and those categories are five v, seven, 10 year category assets.
Certain things depreciate a lot quicker. Certain things to depreciate have a little bit longer lives than they might be in the 10 year category or more. So again, not really needed from a passive investor’s point of view. Passive investor’s point of view is to understand this stuff on a high level to know who to go get the cost tag or which in syndication to invest in that they’re doing a cost segregation, getting the bonus depreciation, and then be able to communicate.
To your CPA and what the heck to do with all this? Because most of the CPAs we find, or at least from what I see a lot of you guys out there, my clients, 95% of you guys have to change your cpa. Because a lot of CPAs just frankly don’t understand it and it makes sense. That’s why the CPA has a day job. They haven’t figured this stuff out yet.
Right. But hey, you know, maybe not everybody should know this stuff because then who would do our tax returns for us? Right? But anyway. So this Costa gets done, it’s passed off, uh, probably in a nice little PDF or Excel format, whatever. It gets passed off to the cpa, um, that you have and that can be distributed out to, um, yourself or as when we do it, we do a big syndication.
We do this all for our investors. We get the Costa, we pay for it, and then that allows us to pass it to our cpa, who then distributes all the losses, the passive losses to all I. Via the individual K one. So it all comes out at the end of the year on this nice little clean one page, K one document.
And what this does is now each individual past investor, or you know, if you’re doing this on yourself, um, doing it on your own properties, Um, you guys can check out the referral, um, partners at simple passive cash flow.com/coste. By the way, there’s some older videos and education on there if you want to do this all on your own.
But you know, you can go over there and, um, you know, you can do this cost segregation and get all this extra depreciation. Now, coming down here, you know, investors. You know, some of these deals I see, you know, you put in a hundred thousand dollars, you may get a hundred, $120,000 of depreciation losses more than offsetting, you know, maybe you made five, $10,000 a year more than offsetting that, and you’ve got this surplus and.
For those of you investors out there, you really want to have this form called the 85 82 form. Every investor needs to have this. If not, you need to ask your CPA for it. And a little dirty trick is the CPA is never like they give you this stuff because then they know you’ll probably just leave them after that point.
But, You know, I always check my 85 82 form and see how much passive losses I’m floating because that allows me to play strategy and whether I deploy the passive losses and activate it, essentially, you know, keeping it from my storage and using it to lower my AGI that year. Or do I keep it because maybe I’m having a big, uh, capital gain the next year or three, four years from now.
Right? And this is where it gets com complicated and every situation is just a little bit different. And that’s why we tell you guys well. You know, join our organization, you know, a book of free intro call with myself. We can kind of walk through this. Um, I’m not gonna give you any tax illegal advice here, right?
But I’m gonna teach you how this kind of works so you can make the best decisions for yourself. Or at the very least, have an educated conversation with your CPA because, um, you guys need to educate yourself. If not just CPA’s, just gonna do it the easy way, right? You ask most CPAs, how do I save tax?
They’re just gonna give you a bunch of lame stuff like, um, you know, do a 401k, do some pretax, post tax, maybe Roth ira, lame stuff, folks. That stuff is like playing checkers where we play chess. So, moving on. So what’s this bonus appreciation thing, um, going on? So in the following year, um, you know, this is gonna be stepping down.
So from the tax cut and job act, uh, I believe that was maybe around when Trump came into office, he signed in this, uh, nice little, uh, carrot for real estate investors. There was gonna be 100% bonus depreciation, and this is gonna be phasing away starting next year, 2023. Um, where right now in 2022, you get a hundred percent of it.
Next year you get 80% and a year after you get 60%, and then the year after that 40% and the year after that is 20%. So it’s phasing away is. Slowly, right. Not to say that 80% isn’t just as good as a hundred percent, and what I’ll kind of cover is that it’s just, it’s not like you’re getting 20% less.
It’s just for the bonus part. Right, so it’s, you’re still getting the normal, regular depreciation, so it’s not like you’re getting 20% and I don’t know exactly how much, and cuz I haven’t seen it, I haven’t compared my K one s from this year to when? Next year. it’s only 80%. But when I look at cost segregation reports from my own viewpoint and look at the numbers, I really don’t feel like it’s that big of an impact that a lot of people are kind of making their way out to be.
I all kind of feel like it’s a little bit of a scare tactic saying You better invest now, right before it’s a hundred percent before it goes down. Um, if you’re a passive investor and. Number one, your adjusted gross income is not higher than $340,000. Don’t even worry about all this stuff. Right? And I, I think this is a big mistake I see a lot of passive investors making is that they hear about these opponents appreciating passive losses, and they’re great.
But they may not be able to use the damn thing. So again, book a call with us, get to know us. Um, we can dive into your strategy, we can talk specifics, but if you are, again, you’re not a high income earner, this stuff doesn’t really, really pertain to you. It’ll, it only may, uh, mean something later on. But if you’re one of those people like myself who, um, likes to hoard passive losses just for the heck of it, even though I don’t need it, it may not be the best thing.
And you should maybe focus on investing. Better investments, better returns than forwarding passive losses that you may or may not need.
Where does that three $40,000 number come from? Well, these are the tax brackets in 2022, and I think they’re gonna be in inflation and adjusted for next year. So the premise is gonna be the same too. There’s, a lot of my clients who fall right around this red line in terms of income, and that’s why I talk about it a lot.
But also when you look at this, like if you look at. The progressive tax system, you know, most people are paying 22, 20 4%, but there’s a big jump between the 24 to the 32% range and that’s where that, this dotted line where I draw this dotted line where, you know, for a starter strategy for, you know, just somebody listing, you know, just kind of the default.
It probably is a good idea. Uh, above, stay above this line or below the line, however you want to call it. Right? Or keep your adjusted gross income under $340,000. Married, followed jointly. I’ll say that again. Keep your AGI under $340,000 adjusted gross income. Um, if you’re single, uh, it’s a lot lower at $170,000 adjusted gross income.
Now, personally, I’ve kind of taken the strategy where I wanna drive my income down way, way. Um, I use this in conjunction with real estate professional status and also I don’t have very much ordinary income, and if all my income is passive, I can use as much passive losses that I have to offset my passive income.
So if I have a million dollars of passive income and I have a million dollars of losses, I can drive my income down to zero if I wanted to. Right. And that. We’ll save that for your guys’ individual calls, right? If you guys, um, choose to step forward with that and, you know, we, we work with the credit investors here, so, um, if you guys are not a credit investor, maybe check out some of the free content.
Send me an email with some specific questions and we’ll point you where this stuff is in the podcast, on the website. But for, you know, kind of a typical client making say $500,000, you know, What are they gonna do to drop themselves down to three 40? Well, they, that’s a delta of about $160,000 that they need to lower their agi.
So if they can turn, if they can create that passive income to get that and also create the passive losses, they can use the passive losses to drop them down. Um, But if they are somebody who just has, you know, and this is probably you listening right out there, you don’t have any passive income. You only have ordinary income, right?
Ordinary income sucks because you can’t use the passive losses to lower it unless you have real estate professional status. And this is again, where a lot of new investors like this idea of passive losses from real estate. But if you don’t have rep status, It doesn’t do you any good, and it doesn’t really help that you’re hoarding these things too much.
And also, if you’re under, you know, if you’re making less than $300,000 a year, you’re not paying that much taxes as it is. You’re in the 22 or even less tax bracket. It may make sense just to pay the debt taxes, right? Not until your AGI goes up higher. Does it really make sense? Pull these levers again, every situation is different and we give everybody a free introduction, one complimentary conference call with myself because, um, you know, time is important, but I like to help out people.
Um, as this was all new to myself and like when I was, when I graduated college, started working for the man as an engineer in my twenties, the most useless information I got was investing in a 401k. And that’s just crap in my opinion. Sorry if you, that’s all you. But you know, welcome to the simple passive cash flow where we do things Definitely a little bit differently.
But what is this sales tactic that, uh, folks like myself are telling everybody, bonus depreciation is going away. You know, well, it’s, it’s phasing down, right? And you know, like next year it’s gonna go down 80%. But, you know, if you were to think about the bonus depreciation portion is just a portion of all the losses that you get.
There’s. A lot of that, that stuff may not be taken in the first year. And, again, I just don’t think like, it’s, like it’s literally gonna step down 20%. So an example would be maybe you invested a hundred thousand dollars and you got a hundred thousand dollars of passive losses because, you know, the deal is using pretty good leverage and that’s how you’re getting that much capital and equity, um, to contribute to so much of that losses.
So in that, Um, what, what I, what I would say like in the next year when bonus appreciation goes down to 80%, it’s not like you’re gonna get 80%, if it was the same amount of capital contributed the same deal, but in the 2023 instead of 2022, at that point, um, I probably guesstimate that it might be maybe like 10% less than what you got.
Still pretty good, right? Um, you’re just gonna have to invest a little bit more. But you know, at some point this stuff is phasing. And the best time to do this was yesterday. Like, you know, we talked to a lot of our clients about infinite banking, right? And how there was last year there was this big, um, harrah over like the 77 0 4 changes or whatever it was.
But you know, this stuff is never getting better, just like investing, right? The best time to invest was yesterday. But, you know, another thing that these passive losses can do other than just manipulating your adjusted gross income from that year is also. Offsetting capital gains. So capital gains is, you know, when you sell an asset or syndication comes full cycle and you get your money back, and you get your nice returns exactly why you went into an investment for the first place.
Um, you’re gonna get this, uh, hit with these capital gains. And this is straight from my tax form. And back in 2017, I sold, uh, I believe this year I sold six or seven of my little rental properties for a capital gain of, uh, almost $200,000. They’re in line 13, $198,000, right? Oh, crap. Right? That’s a lot of, uh, taxes.
Um, if I’m, if I was in like the $300,000 range, Exploded my AGI up to $500,000. But what I did was I used my passive losses because I was investing in syndication deals prior to this, or maybe in the same year. Um, I was compiling all these passive losses via cost segregation, bonus depreciation, and I was, um, I.
I had a pretty good amount just, um, being suspended is what they call it, suspended passive losses or passive losses that haven’t been executed or used yet. And what I did is I just pulled it down from the cloud in a way, um, and I put it there on line 17 to offset it. Boom. Knocked it out, and then paid no tax.
And this is where a lot of like old school investors, they always talk about this 10 31 idea. Um, 10 31 is just another way to defer, but the problem there is you’re putting all your money from one deal to another and the deals are getting bigger and bigger, which totally violates one of my big things. I tell a lot of my investors, you never want to have more than five to 10% of your net worth into any one.
So old school investors, what they’re gonna do is they’re gonna buy a single family home, 10 31 into a duplex 10 and 31 into a fourplex Aex 16 unit. You know? Then they’ve got all this capital gain and the only way that they can get away from the taxes is die. And the problem with doing it that way is everybody knows when you’re a 10 31 buyer, you’re a sucker.
Right? We love it when people buy our apartments that are 1031 buyers because we know that they are motivated buyers. In fact, they’re so motivated that because if they don’t close the deal in 180 days or whatever, that they have to pay all this taxes to the IRS and to get absolutely killed. Right?
Maybe their four might look like this, but like add another zero here at the app. And this is where this whole new school way of thinking of get rid of that stupid 10 31 exchange and break up your portfolio into many, many deals. Like personally, I think I must be in like 80 or a hundred syndications at this point.
And all my net worth is di like very diversified geographically, different asset classes, different deals. Um, I do a lot of apartments personally and we operate that, but I also go into many, many other asset classes that are a little bit diversified on how it’s correlated with the economy, right? We never wanna know what’s gonna happen with the economy and we never know how it impacts anyone.
Asset class sector. So well, from a tax perspective, what this is doing for me is it’s allowing me, you know, these deals that I’m in, they may cash out and gimme a huge gain, which is good. The bad part is you’re gonna get the capital gains and depreciation recapture. But if I break this up so much, And I keep a certain level of passive activity losses on the 85 82 form.
Then at some point I’ve created this Nirvana world where, you know, if I’m in a hundred deals and 10 of ’em cash out, it gives me a whole bunch of money. You know, my passive loss, suspended passive losses, maybe a million or $2 million. But it may go down to 800, but then when I invest, reinvest the money, it’ll go way back up and it just keeps going up and up and up.
And this is kind of the concept of passive loss nirvana. And you really never pay taxes just like you were with a 10 31. But with a 10 31, everything is pegged on one asset, right? Again, not diversified. Um, Just a different concept, right? Like if you’ve been, think you’ve been kind of beat to death by the 10 31 guy or the salesman selling it, you know, you probably think it’s the best thing.
It’s one alternative. And to me, um, a lot of these, what I try and do, and I try things, make, make things very simple, especially for the people in our ecosystem, right? Like, there’s so many things out there financially, but for high net worth, high paid, professional, professional investors, passive, I. Things are very simple and when it comes to deferring taxes, you know, other than you know, the Section 1 21 where you only have $500,000 in your primary residence in opportunity zones, which is something very different to cover, maybe in another video, but.
The only other options you have is deferring it right? And a 10 31 is just one way you’re deferring your taxes, whereas doing it this kind of chopped up method into diversified many deals with bonus depreciation is so much more of a superior strategy. Um, 10 31 is just a tool, right? And it’s all tools.
You only use the tools in the ripe situation, in my opinion, my humble opinion, because apparently I’m not a financial planner, right? I can’t sell you garbage commission products like they can. Um, a ten one exchange is used in certain situations where you have a highly, highly appreciated asset. You know, so for example, like say a, a guy has a business that he started like a dentist franchise for 50 grand and you know, 30 years later it’s now worth 10 million and now you’re looking at a $10 million capital gain that you made 10 31 into something like kind.
But in that, in that situation, I may probably consider more of a monetized installment. So which is more superior to 10 to one exchange, but either. Like before you got to that point, you should have took the money out and invested in a syndication deal, started to compile your 85, 82 form padded with passive losses.
So when this fateful day comes, and it does always come, um, you have these passive losses to as a, as kind of like a pill to sell the asset and offset that. And then if you come short, maybe there’s some other advanced strategies like land conservation easement. Uh, oil and gas deals, uh, what’s in an op, the combo with opportunity zone and your rep status.
Um, you know that there’s a myriad of different ways, and at that point, if it’s that huge of a, uh, capital gain of over a million dollars, $2 million, then yeah, maybe you would need to do a myriad of different things. But if you’re. Average investor and you bought a rental property for a hundred grand and it went up by a few hundred thousand dollars capital gain.
Dude, that’s not that much capital gain. You should be able to invest, you know, several hundred thousand dollars or at least, you know, refinance and get that money out and invest it. And then you should get, you should be able to pick up, you know, a few hundred thousand dollars at least a passive loss is pretty dang easily.
If you don’t know how to do that, you need to get around other passive investors that are accredited and figure out how to do it, because this is, I mean, taxes are your number one expense in life. But anyway, that’s then on my spiel folks. If you guys like this video, Please leave a comment below or ask any questions.
If you guys have any specific questions, send it to the team at simplepassivecashflow.com. If you’d like to hear more and enter into our free e-course. To learn more about this stuff in a more curated form, um, you guys can join the club at simplepassivecashflow.com/club. Thanks.
What’s up folks. We’re gonna be talking to my friend, Allison who runs a business that helps folks like yourself, trying to find care options for our elderly parents. It’s gonna offer some other options. I didn’t know that was available. Other than sticking your parents in the care home that costs a fortune.
This allows them to age in place, which I think a lot of folks do like because they like their home. And I think it sounds like a great option, at least for myself. Now, if you guys are new to our group please sign up at simple passive, casual flow.com/club.
You get access to a lot of free e-courses, including the infinite banking, eCourse, and a lot of other syndication LP material that will help you in your investment journey.
Now, just a little bit of an update, I’m sure you guys are all aware that the interest rates are going up. We’ve tapered off our acquisitions being a little bit more picky and choosy as of the last couple of quarters. I’m starting to see a lot of the bridge financing, the smaller banks restrict a lot of their lending and this is, Prior to that.
A lot of the big Fannie Mae Freddie Mac lenders started to do the same. So the trend is, bank financing or what we call the capital markets is constricting, which is making it harder for a lot of commercial operators to make these deals work artificially put the price down.
And we could probably say that there’s a little bit of price discovery. Happening at the moment. Good news. Rent’s still going up. It’s a good time to be buying real estate, especially if you’re looking to get money from other asset classes like your stock market or your debt equity in your house into stuff that works and makes sense.
And it’s backed by real estate. And this is why we started the pre-equity plus fund. If you guys want more information about that, you. Join our investor club at simple passive cash flow.com/club. It really allows means to hedge the economy and get more on the debt side as opposed to the equity side.
Equity is great for realizing higher returns, but debt is a little bit more of a defensive strategy, which we’re getting more attuned to. And we’re seeing it as a bigger opportunity for us. Especially as, like I said, the capital markets freezes up and people are really looking for that.
First person on the capital stack, which we can hopefully provide for people or ourselves in the future. So again check out that opportunity. We’ve got that first deal in Manhattan, right across that hard rock hotel in Times square. You guys can jump on board that and own a piece of history with us. Go to simple passive cash flow.com/club. Join us there. I wanna get to know you guys, just hop on the phone for an intro call and enjoy the show.
All right. Hey folks lane here with my good friend, Alison Lee, we are in an entrepreneur group together and we’ve gotten to know each other pretty well. So as you listen to podcasts and people normally say my friend dot, that’s just codename for, I just met the person a little while ago, but here I’ve known Allison for probably over a year now.
And. We know each other pretty well, and she just happens to own a bright star care franchise. So I tricked her into jumping on the call today and giving us the insider’s perspective on what are you gonna do with your elderly parents? Because all you guys out there are the ones who are good with your money.
It’s not your other brothers and sisters who are trying to keep up, but it’s ultimately gonna fall on your hands and what the heck is gonna happen with mom and dad. But yeah. Welcome Allison. Thank you so much for having Elaine. Yeah Allison works out of Honolulu, Hawaii, and she caters towards folks on the island of wahoo for the most part.
Correct for now? Yes. We’re hoping to expand to new islands. Maybe just give us a little idea, just some context of what you guys do for folks. And then we’ll, we’ve got like a list of questions that most of you guys will probably think of out there, as you’re trying to plan the end of care options for your parents.
But yeah. Why don’t you give an insight? What the heck is a Bright Star Care Okay. So like you said, we’re part of a national franchise, but each franchise actually has the flexibility to focus on a variety of areas. So some locations are more into staffing. Others do a lot of skilled nursing.
We happen to do a lot of private duty home care and skilled nursing, which basically means it’s out of pocket care. So it’s not covered by Medicare or Medicaid. It’s private pay or long term care will cover it. That’s the majority of what we do. So what we offer is a full spectrum from just companion level care.
Which is like, Hey, keep mom company, make sure she turns off the stove, that kind of thing. To hands on, help my mom take a bath, get ready in the morning, help make sure she eats, make sure she takes her meds, that kind of thing. And then all the way to we each we do have some skilled nursing care.
So we do a lot of wound care and things like that. And this is the problem for somebody like us, trying to figure out what our parents are gonna do. Like they may be okay now, but that’s the big unknown is like, how are they gonna be in five years, 10 years, 20 years? That’s what makes planning so hard for our parents. And then of course, even for ourselves, I think then the more I’ve done this business, the more I’m aware of okay, we really have to make a plan for this.
Maybe outline the traditional options for folks. My understanding is it’s, you’ve got the care home and maybe there’s a couple different levels and in-home care, but what maybe like the array of options. So I think depending on socioeconomics, there’s a vast array, but I think for your audience it’s probably gonna be more on the higher end. And so there’s where it’s not, you’re not depending on Medicaid coverage, that sort of thing. Although there are those options and some people.
Do financial strategies so that they qualify for that as well. But mostly the people that we are dealing with they’re looking at either aging in place at home or going to an independent living facility which really is more of a senior community lifestyle thing where they’re still quite independent.
Other people are more against it, they need a little more care. So they’ll go to an assisted living facility. And then there are what they call CRCs which is a continuing care retirement community. And that is where you have the whole spectrum. Again, you go from independent to assisted to skilled nursing.
Those are options. And like you said, there are care homes and other things like that. And then what we do of course is the age in place. So you really have a caregiver in the home. Some people do it with their own family members or friends or volunteers from churches or other people will, take the risk and do a private caregiver that they pay out of pocket.
Before we go into that agent place option, I think most people, myself included, thought like the major option was you go into a facility, you pay an arm and a leg. You, if your net worth is one to $2 million, you have to do a reverse mortgage to get in.
And you hopefully they give you a bottle of loop for how much, if you pay for that place and you, hopefully you maybe get a portion of that back . But if not, That’s what it is, right? Like it’s a big financial transaction. Yeah, so I think like the ones that you’re probably talking about are like here in Hawaii, we have Kaha Newi, which is considered the premier high end place.
An Arcadia. I know your listeners are from all over. So those probably won’t resonate, but yeah. Or like a Plaza is a national chain too. But that’s a little bit more mid tier, I think. So it’s, so the Plaza is assisted living, so you I think and independent. Yeah, so it’s more mid-tier and I don’t believe they have skilled nursing.
So if your needs were to exceed personal care, it would essentially kick you out. You’d have to find you’d have to go somewhere else. Whereas the CCC seeds, you can stay in place there. That’s the selling point, right? You have to, you’ve bought in, you’ve paid an arm and a leg, maybe two legs and you’re in there and now you don’t, it’s a set it and forget it in, in your mind and in theirs, yeah. Yeah. And here, there tends for the very good ones, like Kaha Newey that I mentioned, there’s a three year wait list. So who knows if you even ever get to that point? It’s our it’s like investment deals. No, you can’t get in, or like a really good club dance club I’m talking about, right?
Yeah. Make you want it more yeah. And pay more, yeah. As a. Good shopper. And I think a lot of our good consumers out there, we don’t like that. And we inherently makes the hair in the back of our neck stick up but then when you and I were talking, I was like, what did, tell me more about this agent place?
Because personally, what I’ve seen out of my family is, like the, usually the guys live a really long time and they’re usually pretty grumpy and they don’t wanna go interact with people. They’re not the most social of people. And myself included. I think when I get old, I might wanna just hang out with myself with my fancy things around me and my big house and nice view and that’s where this Asian place option comes, where you guys come in, right?
Yeah. So obviously I’m biased. But I think it’s really, for people who can afford it’s to me by far the best option in terms of. Outcomes mentally and health wise to be in a surrounding that’s familiar, especially, a lot of seniors start to have some form of dementia or Alzheimer’s, and those familiar surroundings become really important.
And it’s just a completely, you’re on your own schedule. The care we provided. I’m sure other providers also provide is very customized, very personalized. It’s very much about we’re here to serve you in your home, the way that you want to be served. You wanna eat breakfast when you wanna eat breakfast.
That’s when you’re gonna have breakfast. So you know, it’s a different it’s also, an arm in a leg, cuz we’re providing one on one care. You get a caregiver all to yourself. We have backup caregivers cuz you know, we do have to follow employment law, but the good thing is that means if your caregiver’s out sick, we still have other people available usually to come and provide the support.
But we’ve seen both. We’ve seen people who have transitioned to a facility or we’ve seen people come out of a facility and generally speaking, most people wanna stay at home if they can. A lot of these facilities are beautiful. They look like hotels. They’re very impressive from, our perspective, but there’s no place like home.
Some people have their really extra comfy chair and they have all the things that they like at home and their facilit just can’t replicate that. Yeah. And I’ll say from like a money perspective to most people, they, have a million dollar plus house they’ve probably more than exceeded the $250,500,000 home exemption on the sale of the house.
So if they sell the house now to harvest the money, If they don’t do a reverse mortgage to get into set facility, then they’re gonna be paying a boatload in taxes where it sounds really morbid. If you’ve, if mom and dad bought a house for 300 grand and now they’re sitting on $1.2 million, the $500,000, if they’re married, couple will only take you up to what I say, like 800 grand, and they’re gonna have to pay taxes on the rest.
So you have to pay taxes on 500 grand. You probably lost a hundred, couple hundred thousand bucks right there in taxes. So it makes sense from that perspective, if you’re on the fringe to just stay in place and die in the house so that you can get the step up basis. But nobody likes when I talk about money at death and stuff like that, but maybe let’s go over like the pros and cons of the care home, the way I see it, the care home you get, like the social aspect. Of it and it looks cool. It’s like a country club feel, but that in house, it, correct me if I’m wrong, but don’t you get like a dedicated person, where they’re still playing. So defense on you in the facility, aren’t they.
Yeah, for the most part we have we sometimes, if the care needs are not super high we’ve had couples care where they’re, our caregivers providing care for both husband and wife. I also have thought would be an interesting concept for people to do golden girls style where, if your parents have a really nice home with a lot of space, let’s.
Moms passed away or dad’s passed away and you need a caregiver, mom or dad wanna stay at home. Why not get a roommate who needs care and then they can split the cost of the caregiver. So there, there are ways to be creative about it. Get some rental income. Of course, if you’re a grumpy old guy who doesn’t wanna talk to people, maybe you don’t want someone in your space, so
Yeah. But if you don’t got money, you don’t got choices, right? Yeah. Yeah. So there are creative ways to stay in place. Yeah. And I guess your guys’ services might actually make sense too, for a sparring assisted living investment operator who has a house. Can’t work. The the caregiver angle just find a group like yourselves to outsource that part out.
But what as far as like Costco just generally speaking, what would like top tier care home costs on the high end and maybe low end. And then what would be that this option of the in-home caretaker costs high end, low end, so it’s in terms of the facilities.
So there are care homes, and then there are like the plazas where there are like large facilities. So care homes tend to be smaller. I don’t have the exact pricing on those, but in terms of like the Plaza or something like that it ranges the last I checked from 6,008,000 a month. And that’s for like I said, like a mid-tier versus the CRCs, the continuing care retirement communities.
Those are the ones that you were talking about, where you put down this massive chunk of money up front. And then on top of that, you’re paying the monthly fees. So for us, for PRI for home care, private duty home care, At any given point in time, it is what it is, but I can tell you that it’s been going up and up very quickly.
Yeah. That’s why people need a best, cause it’s probably gonna go up 10% every year. That’s gonna do it with yesterday. It’s like college tuition. It just, yeah. Worst. I guess college is the worst, right? Exceeds the market exceeds inflation, no matter what. So right now for us, it’s very like each company sets their pricing their own way for us.
Ours is very customized. So if it’s a range from 34 90, an hour to 44 90 an hour, generally speaking it can get more expensive, but most of our people are falling around 38, 90 an hour. But is that per month about, or, cause they’re not doing it full time. Some are. Yeah, we have some that are around the clock care.
So I haven’t done the monthly S see I’m is 2000, I think, our business owners will know that right off the top of their head. I should know this, but so 6,500 a week
What is that 20? I don’t know if I’m doing my math right here. Yeah, like 28,000 a month. So yeah, it’s it gets up there. If you’re now that’s again, that’s 24 7. So one of the beauty. The beauty of in-home care is most people aren’t starting off with 24 7. A lot of people will say, Hey, I just need six hours a day.
And then most companies will have a minimum of at least four hours or six hours. We don’t have a minimum, but we have a flat rate if it’s less than four hours, just because to get caregivers. Drive where they’re going spend the time providing the care and things like that. They need to be compensated.
So we have a flat rate for yeah. Anything less than four hours, but just comparing like the high end, right? Like you’re you need the max care 20 grand a month. That’s on par with the top, what the top facilities are charging. But then you also have to put in the fact that you put.
An arm and a leg and two legs, or like a million dollars essentially. And a million dollars. The way we teach it to folks here, it’s like there’s opportunity costs with that money. You could be growing at 10, 15%. That’s 150 grand a year, $15,000 a year. So it’s really 20 plus 15 a month. So like 35 GS a month.
When you take into account that. Most people suck at investing, so they don’t hardly make anything off of it. So I guess it’s 20, $20,000. So then it’s equivalent, but it’s all the usage of your equity I think is well, yeah, I think so. And actually, so it’s more like 28,000 a month, just wanna be honest.
And I always tell people it’s definitely a premium option. It’s a high end option that, not everyone can afford it and that’s okay. There are good options for people. Yeah, but there is also, we don’t, like you said, we don’t have the upfront investment. And then what if you go into one of those facilities and then they die a month later there is a big loss I don’t know all the, like when you can get your money back, et cetera.
But I know that there’s a kind of, they’re promising, they’re never gonna abandon you. And, but it’s like insurance. So you essentially is a pseudo life insurance place that they’re doing. And I’m sure they outsourced the third party insurance companies for that. But they don’t like, to break down like the levels of care, you don’t need to go to that high end 20 something grand a month.
There are other. Maybe talk a little bit about some of the mid tier and like the low tier place options or arrangements that you’ve seen people do in certain situations. Yeah. Like I said most people aren’t starting with 24 7 care and a lot of people don’t ever get to 24 7 care. So some people are eight hours a day, five days a week.
So someone’s there watching. There’s also, we didn’t talk about adult daycare is an option for people too. So if you’re going to work and you want mom to have a place where she’s looked after, and there’s a little bit of stimulation there, day cook daycare centers, just like you have for your little kids.
And often they’re connected. There’ll be like a preschool, right by an adult daycare center. . And so that is generally a much more affordable option. But you guys don’t set people up with that. That’s just another option. No, yeah that’s a different option, but just in terms of, so we’ve had people though who will go to adult daycare and then come home and then we provide care in the home at night.
So you can, find combinations of support or. If you only need us on the weekends or, certain days of the week, so really mixing and matching it’s much more flexible and customizable. I don’t know if you can think of some like typical client profiles, but like when would somebody do like a 5,000 a month?
How that get ’em and then maybe that mid-year I guess cause people come to you and you hear their situations, and then you’re oh, you don’t need that high end or that much time or hours, or you don’t need that. You don’t need the skilled nurse. You can just have a general caretaker, which is a lower, hourly rate.
I wanna be clear. So the skilled nursing is much more expensive, so I haven’t even given skilled nursing rates. The rate that I share is caregiver level. But we do, we have nurse oversight. We have a director of nursing and we’re joint commission accredited, which is like the accreditation that the high end hospitals get to assure that you’re following certain standards and protocols.
We are. Probably on the price, your end of the options in our industry. The hard part is that if it gets to be too little of care, then a lot of companies won’t do it because there’s such a demand for care. Not enough caregivers.
So we’re really trying to utilize the caregivers first of all, it makes sense for us, but also with the clients who really need it. And all like all businesses now are just struggling to find halfway decent people. Cause S are so high and. Nobody wants to do this type of hard work
Yeah so amazingly we have incredible people who like, they’re just phenomenal human beings and this is what they wanna do, but of course they have to make a living. We wanna make sure that we are one of the best employers they can find. And so in order to do that, we have to pay them competitively on the higher end and provide really great benefit.
Which means the clients are gonna pay for it. But that said there’s still tremendous demand. So I would say the sweet spot where most companies are looking at is at least six hours. Let’s say at least 30 hours a week, I would guess is probably. What most companies would be willing to look at right now.
Which is makes sense for a lot of people listing I guess I can go over and help mom and dad one or two days a week. , after I’ve done my job, right? No, it’s hard balancing all the things. So I think a lot of people if it’s, basic level they’re looking for, Wake up time, bedtime or lunchtime are the hot button needs, right? Hey, can you come help get mom dressed and ready for the day? Make sure she takes a shower or, eat something. Cause sometimes elderly people are, will forget to eat. Remind her to take her medications that sort of thing, or get ready for bed.
So yeah, those are definitely the high demand times those transition times and I imagine like people come to you and they may not, this is, it was a new idea for me. I imagine mostly for coming into this and a new person in our home. It’s something new for mom and dad, and then they get more comfortable with it over the time I.
Yeah, definitely. It’s your turf. I think, especially with, excuse me, Asian families, we have this built in hospitality. If you’re in my home, I have to take care of you. And so we experience this even with my own. Mother-in-law when my father-in-law passed. He had lung cancer and we got to experience this from the client perspective. And he, she was really struggling and we’re like, Hey, we have this company, we own and we’ll, provide it for free. she didn’t want it. She was like, what am I gonna feed them for lunch? And I said, you don’t have to do anything for them.
They’re here really to support you. It was really hard convincing her, like eventually we did, but she really should have accepted our help much sooner. And there are tips and tricks that we give to other families, but she’s particularly Persistent in . Yeah. In want that wouldn’t happen with us.
It’s don’t forget to pick out the takeout on your way yet. Yeah. Definitely some generational things and cultural things. But it can be really hard to just. Admit your vulnerability and that you’re at that place. Or, there’s a whole, all the psychology around it, like guilt.
Like I should be the one doing it, that, that sort of thing. And this isn’t really in your, guys’ like part of your guys’ job description, but you must see people go through this quite a bit. What is some of your general pieces advice for. Maybe somebody who is letting mom and dad do their own thing, but now you have to step in right.
And get more involved. Yeah. And we actually see a real uptick in request for care after the holidays. Cuz a lot of in Hawaii, a lot of the adult children will go to the mainland and have their career and they’ll come home and visit and then they’ll. How much things have deteriorated with their parents.
And so that’s a time where they’re really observing new needs and danger issues. Maybe moms forgetting to turn off this stove, or there may be some incontinence where they’re, having accidents and that kind of thing. So I think some things to those are things to look for.
And just be when you’re with them, just be observant, be aware. I would say when you’re in the home, really I think I shared with you earlier offline, how high of a risk falls are for elderly people. When you’re young falling is no big deal. You fall, you get up, no harm, no foul, but for a senior citizen, it can really take someone who seems really vibrant and healthy and independent and put them in a really catastrophic place.
Even, a lot of people die after a fall, once they’re over 65. So fall prevention I think is really critical, even if you’re not at the point. Needing care. Just really observing the home look for, are there trip, hazards, rugs that, or if there’s a lot of clutter, a lot of elderly people start to hoard and put boxes in the way, and you really wanna make sure that those kind of things are put away as much as possible.
Grab bars, make sure there’s good lighting. That kind of thing. So I guess another side business we can get involved in is like getting a set of contractors to like rehab these houses with the right showers or the right. And yeah, I think that’s huge. And actually to do it even before it’s even a concern it’s that’s the trend, it’s the tsunami, right?
The silver tsunami. As what they’re calling the boomers who are aging. So I think those can definitely add value to a home. Other like resources for folks that, if they’re going through this we’ll probably refer people to this episode in the future. Because I’ll probably forget about this in six months about myself.
Yeah, I think, a R P. Which I always crack up cuz I’m now I’m a member they have some good resources and then, I think Hawaii has the elderly affairs. Division, which I know sounds like the elderly dating site, but it’s not, sounds like a dating site to me. we can make that our other side business.
Yeah. But we have a lot of side businesses, entrepreneurs . And yeah, there are a lot of, I think just a lot of resources That are available to people, even if they’re not at this level where they need actual in-home care, there’s, meals, all wheels and family and friends and volunteers through other through church or other programs.
So there are a lot of resources out there. The great thing is we’re in the age of Google and can just do a quick search. And I would say that’s where, that’s where our group is pretty valuable. There are a lot of resources, but which one, what, depending on where you are in the net worth spectrum, it’s different advice for different folks.
Yeah, right? Yeah. Allison’s kind of a high roller like myself. So we like fancy restaurants and. We also like these types of elderly healthcare options, but , maybe to close things out, like if you had to plan something for yourself or your, instructions for your kids, what would you just personally like to see for yourself?
And what are their reasons, based on what you, where you’re at. Obviously you’re a little bias, but like at what point would you phase it in and, based on what you. What would you eat from your menu? What I’m hoping to do is die relatively quickly.
oh, other than that, I think we all thought to happen, like I’ll take it up to 60, 65 at peak health and then just. Just go, yeah, like maybe work. If you had to live for an extended period of time after that peak of health, what would you do if I had to live? And I, if I had the resources, I would a hundred percent use my own services because I love my house
I’ve built it in a way that feels comfortable for me. I’m relatively social, but I definitely things on my own terms. So for me, a facility dictating when I eat or people just coming in I don’t know, it just doesn’t appeal to me at all. I would absolutely, if I can afford it, use my own services.
I don’t drive public transportation, so but what do you do if you wanna go somewhere, can the caregiver take you to somewhere, take you to Safeway or Costco or you want, is that part of the we have one client who our caregiver would take her golfing. Even though her skills have diminished greatly, like that was a big part of her life and her identity.
And so she would take her golfing and And now I think they’ve moved past that, but they go in Hawaii we say Hola holo, which means just go cruise, drive all over. So her shifts are basically they drive in the client’s car. She drives all over the island. They’ll go check out the beach, pick up a lunch.
Hang out. And like I said, the care is very much personalized, customized. It’s not that you, we say age in place and home. It doesn’t mean you have to sit at home all day. You can definitely, go walk the mall or go to church if that’s what they wanna do. And then other people who don’t wanna go anywhere, we also can we help coordinate our team will help coordinate Safeway deliveries or that kind of thing.
You also get a friend too for free. Yeah. Not a free friend, but not a free friend. Nothing is free in this life. The caregivers they learn from each other. It’s really a beautiful thing. We have very interesting clients. So the caregivers can learn a lot from them and the clients love having someone interested to talk to.
Any other for people going through this, gonna shut out a whole bunch of money for, any other like last words or wisdoms from your point of view, other than good luck, you’re the bottle loop?
I’ve wrote down my lessons learned since we’ve been doing this business things I’ve observed. I’m sure your listeners followers already hear this a lot, but be grateful. Every day for every day have people in your life that you love and who love you and make sure you communicate to that to them, because we do have some very rich people who don’t have anyone.
And it’s really sad. So they’re receiving top quality care, but are the kids of those kind of people involved? Did they have just find you guys on their own or? Some of them never had kids. They had like one of ’em found us on his own. And his wife was here when that happened, but she passed.
And so he’s now alone and and not super like happy. Not close to family and the other thing is when you’re super wealthy, you don’t know who’s your true friend, right? Yeah. Cause a lot of people are coming, knocking on the door, trying to be your friend. Know who your friends are.
Be nice to them. Show them love. Be respectful to your caregivers if you ever have, ’em tell your parents, if you do get, if they get caregivers to be respectful to them. And of course not, if they’re, if the caregivers neglectful are abusive, then you would wanna report it. But we definitely have clients that are harder for us to staff because the caregivers keep refusing to go.
And really you don’t want caregivers who don’t wanna be there. Like what kind of, it’s really hard to provide care for you if you’re nasty and so as long as it’s in your control be mindful of that. Don’t be one of those rich jerks who treat people. I wonder if there’s a difference between the Medicare, Medicaid, the option, like the, some people do the, they drain their finances.
and they wanna be broke. So the government pays for their end of day care. It can be a happy place in there. Like I’m sure the caregivers are just strung out. I don’t know. I can’t speak to that. I probably should learn more. It’s not my area of expertise, but I think there are caregivers who are genuinely, whether regardless of the paved source, there are caregivers.
I think anyone who goes into being a caregiver for the most part, you don’t go into it for money. So they’re genuinely fueled by caring for others. But also they tend to have a need for validation and acknowledgement and gratitude. So when you’re caring for someone day after day, who’s just nasty and ungrateful.
Yeah. It can be really hard. Whereas there are some like really phenomenal caregivers who thrive on see that as a challenge. Let me see if I can turn this person around. Like really they’re very empathetic and can really. Really be patient and have that thick skin and build that relationship to where it’s a beautiful thing.
And that is something special but not all of ’em. Aren’t gonna be going holo, holo and driving each other around in the car. No, no lunch together. no, there’s a lot of, and some, and everything’s customized. So there are some people who really want that chatterbox caregiver to talk to.
And other people are like, don’t talk to me, I wanna pretend you’re not here. Leave me alone. I’m gonna live my life and then you come help me when I need you. And that’s okay too. And that’s where you guys come into, you start matching up personalities and a little bit of that. Yeah. So when somebody’s interested and we have care, potential caregivers available, then we’ll go out.
We call it a living room visit. So we have our client experience manager and our. Go into the home to observe the environment and look for those fall hazards that I shared earlier and really get to know the patient and the family and see where the pain points are and how we can help ease, burdens, and make, bring a little joy back into life.
Make things better. And that’s where we come up together with the family. We came up with a customized care plan. What is your budget? What, where are we gonna maximize what we’re doing for you? And then the personality matchup is the second round then yeah. So honestly right now with the shortage of caregivers, it’s do we even have anyone in the first place, but we definitely, and this is the sales thing.
yeah, no, I’m just joking. No, I wanna be fully transparent. That’s sad. Like we do guarantee compatibility. So if it’s not a good fit our client experience manager’s job and we also. An employee experience manager. So they’re checking in with the employee and the client. Hey, how did things go on your shift?
What can we do better? What changes do we need? And so we will keep looking if we need to find someone who’s a good personality match. Yeah, no it’s definitely in demand. That’s for sure. So you think about it as, this is a pretty good business you got going on here.
But yeah, yeah, thanks for jumping on the podcast. I think it applies to our Hawaii clans as well as on the mainland. I’m sure there’s options similar to this, not just going to the local high end care home, and hopefully they have lube for you again, but there’s other options out there.
Allison, you wanna get your contact information out there? If people have any questions? They can reach out. That’d be great. So if anyone has questions, the best thing to do is call our main line (808) 447-7448. Or shoot an email to Honolulu@brightstarcare.com.
All right thanks Allison for jumping on. If you guys have any questions about this we’ll probably make an info page about this type. Information at some point, nothing is coming to me, probably simplepassivecashflow.com/ elder. Something like that. I don’t know, email the team. If you guys are listening to this in the future, we’ll point you in the right direction, but definitely one of those topics that not a lot of people talk about, but it is a huge source of expenses in the future and something to plan.
If you guys heard it, it can cost upwards of 20 grand a month. And it ain’t going, getting cheaper. It’s getting 10% every single year, apparently. So something to think about folks but hopefully we didn’t make everybody be depressed by this today. we’ll see you guys next time. Bye. Thanks Lane.
Here we go. It’s the November 2022 monthly market update. The year is almost over. Interest rates are being jacked up even more to curb inflation. But what are the other stories coming up? Welcome everybody. This is the monthly market update. Here we go. All right. If you are new to these monthly updates.
You guys can check them out at simplepassivecashflow.com/investor letter. You’ll find this in all the other monthly reports. We do this every month. If you guys are new to the group, also check out the I think we’ve got like a hundred reviews on this thing thus far. My first book, The Journey to Simple Passive Cashflow teaches all about taxes, investing in deals, and infinite banking.
A lot of the stuff that I didn’t realize was. Very counterintuitive ways of building wealth that we use for a lot of our clients in the family office group and our investor group. But let’s get started here for you folks. And for some of you guys joining live on some of the social media channels of the Facebook groups and LinkedIn.
And those of you guys who are also checking this out on the podcast form can also check these great graphs and visuals we have on each of these articles. on the YouTube channel. But the first thing coming from John Burns real estate consultant is that apartment rent doesn’t grow to the sky. And I think we all knew that’s why, we never really underwrote more than a 3% rent escalator.
Whenever I see that in a deal, I know that they’re reaching or maybe that they need to inflate the performance a little. And that’s what we teach in this syndication e-course. As a past investor, what are the kinds of things to be on the lookout for? So in this article saying the rents are set to fall in many areas around the country, which is exactly what the Fed needs to help get inflation under control.
So like a lot of places, like we are investing in Phoenix, some of those rent girls were like 20% or greater year. And you know that definitely that’s not sustainable. I would say more on a five to 10 year time horizon. I think Phoenix is more like a two to 3% annual rent growth, or at least that’s what you should underwrite so that you under promise, over deliver.
The combination of recession concerns, requests to return, the office rents that are just too high and a multifamily high of new rental supply are all combining to cause rents to soften. Potentially decline and of course, take all these articles with a grain of salt. And I try and interject my commentary on top of this because, this is national data here, we always try and look at the emerging markets and within emerging markets such as like a, Dallas or Phoenix, you’ve got your submarkets there may be a couple dozen submarkets within one of those major Ms.
But what led to this great growth? Strong job growth, income growth, household formation, bolster demand in nearly every market, even with those with elevated levels of supply move outs to purchase a home or at all times, lows. And are likely to stay low given the relative affordability of apartments at 6% plus market rates.
So what they’re saying is, a lot of the people who were on the fence to buy houses up until maybe a quarter or two ago, they got the wind knocked out of ’em with the interest rates exploding on them. Now they cannot afford that much in terms of monthly payments. Which is why a lot of those people are moving back to apartment dwellings, nicer ones of.
but they’re taking a step back from home Ownership rent to income ratios of 20 to 23% are completely normal within ranges and a testament to the strong growth in incomes among new renters that REITs have observed over the last several quarters. So they get, I think what they’re saying is, people’s pay, their salaries are there too.
The higher rents. Of course we always ask like, how much more can it be going up? Really it’s not getting to that, that one third, rent to income ratio quite yet. We’re still in like that 20% range of business online. Here they’re talking about what were the things put in that, that latest inflation reduction act.
It always seems like they come up with one of these things once or twice a. This one got signed in on August 16th, 2022. And the way it normally works with these is, they sign it in and then, they’re investors and, a lot of the sophisticated investors start picking through it and start to see any carrots or sticks in there.
So some of the tax credits and incentives promoting clean energy in. One of the sole purposes is to incentivize and revitalized domestic manufacturing and many of its tax credits and incentives are focused on clean energy manufacturing. Now, I don’t know how that really impacts any of you listeners out there seems obvious that would be, that where money would go.
Obviously, this is the whole joke about this, right? What the heck does that have to do with inflation reduction act, if anything, that just is more spending, which increases inflation, but any. . We don’t like to get political on this show because it is a waste of time, right?
We need to figure out as investors what is happening here and how can we react for our own good. So one of the things of this inflation reduction Act is the advanced. Project tax credit provision credits up to 30% of the investment in PR in property used in a qualifying advanced energy project.
That one’s a kind of a head scratcher on how to really use that one. I’ll be honest one of the significant drawbacks in the Investment reduction Act is enactment of a corporate minimum book tax. The minimum book tax would be 15% of book. and lastly, as a condition for being subject to the corporate minimum book tax for a year, that the, a coal corporation must have an average book income of excess of 1 billion over three years prior to the tax year.
So it really probably doesn’t impact many of our listeners. I don’t know if any of you guys make a billion dollars. If not shoot me an email. Let’s get you into some deals or especially some of these benefit deals we have coming up. As it’s harder to find deals out there and we’ve taken a break from the normal value ad apartments because it’s not the time to be going into those deals, but these high interest rates.
So I’ve personally been looking at ways to save taxes, right? It’s getting time to be efficient, so to find, seek deals that provide those tax minutes for our investors. So we’ve got some things coming down the pipe for you guys, if you guys are interested in those. If you’re not part of our investor group, go to simple passive cash flow.com/club and get educated and see what’s coming down the pipeline there.
For multi-housing news the article headline is the fed’s painful ounce of prevention worth a pound of cure. And obviously what they’re talking about is curbing inflation, which, they pegged at 8%. The Fed’s funds rate Feds have increased the cost of doing business across every sector of the economy.
This also impacts the US and abroad. The economy this time around is more on secure footing than 2008 excess. Access is where we saw in residential real estate and construction that drove the economy in places like Phoenix, Vegas, Florida, and California in 2008 are not the norm today. And said, we’re still seeing everything from manufacturing and entertainment and technology and healthcare drive our economy today.
And I will also personally add that, we don’t have these no doc, these ninjas that they gave anybody with a pulse. To invest. And I mind you, investors like the, I think the reason that sets us apart from the average investor out there is that we try to invest in things that cash flow and are backed by equity even in hard times.
And I think at the end of the day, you, if you go into things that cash flow, you should be a lot better than most or be able to weather a lot longer recession or maybe even depression, if that will. To be able to come out the other end and hold onto your asset. Hold on to your debt service, whether you do that with cash flow or cash reserves, one or the two or the combination of both.
I know I’m going through this very quickly, but these are very simple yet, these concepts are, have taken me a long time to realize and really think of and how do I strategize my own the whole balance between trying to grow your money. How much cash reserves do you have on ti on, on.
But if you need to invest, like how we are now with, inflation at very high levels where you’re just losing your money, not doing anything, where can you make it and get a nice little yield, maybe low double digits and yet be very secure in investment and not have it be a high risk type of move.
That is the question. That’s what we’re all asking. I’ve obviously got my opinions and I will be sharing those, especially with you guys coming on the January retreat on January 13th to the 16th here in Hawaii. Beyond the lookout for that. Again, club members you guys get invites to that. Freddie Mac reports multi-family investment market index down in the second quarter.
Decrease nationally in all 25 markets on both accorded annual bases. It is similar to the last article, right? Things couldn’t grow at a 8%, 20% rent increased level for very long. And at what point that rents are still going up, but not at that feverish pace as it once was, but it’s not really going down yet.
That’s a. And I don’t really anticipate it going down. And I said this before, if there’s if I was a gambling man, the one thing I would bet on is rent’s not really going down for a long period of time.
And again, different source. Here, there’s seen primary driver between the quarterly decline was higher mortgage rates.
And Aln. Also was saying the same thing. Quarter three brought an end to coasting on 2021. What they found made demand rent growth. Finally, losing steam was a major development in third quarter, but net absorption deserves all the attention has been getting. As mentioned, apartment men has been poor.
All year at mid-year 2022, net absorption was 75% lower than it was in 2021. So what that means, what absorption is new units getting filled in a timely matter, like a days on market. It’s, I would say overall, occupancy is pretty high and, there is a housing shortage and especially with people not being able to afford houses, that’s where the apartment demand is still pretty. For both average asking rents and average effective rent. Third quarter growth was a loss by any quarter since 2021, quarter one. For a price class perspective, average effective growth, rent growth was stronger in the quarter for price classes, A and B, with the other two price classes also seeing larger declines in rent growth.
So what they’re saying, again we’ve talked about this in. Your higher end tenants with, they call ’em class A and B here are less impacted and going through less declines than the Class C or below cohorts. And that makes a lot of sense because this last pandemic really hurt the low end as opposed to the high end.
But I think a lot of it is and don’t get it, don’t get it mixed up with these. Fear mongering headlines. The industry came into a year with a very high average occupancy, very low lease concession availability and double digit 2021 rent growth, thanks to the demand explosion, the from the previous year, and the fact that we had a freaking pandemic in 2020, right?
The high average occupancy provided upward pressure for rents, even as lack, lesser demand was slowly eating away at surplus occupancy. Very low apartment demand degraded further even falling into very slight negative territory nationally in the period. But ultimately lack of household creation and affordability is the cause of this.
The fourth quarter is usually the softest for multifamily demand, and the largest macro economic situations does not prove much reason to expect this year to be an exception. And I would say maybe on 10% of our assets, we are taking a very conservative approach because we’re starting to see some of the signs of normally like we start to see a slowdown in leasing activity.
We’re about Thanksgiving, but we’ve really started to see that here in October. So we might be reading it. Into a lot, but that’s your guys’ antidote from what we’re seeing across the portfolio. But top five markets from multifamily deliveries, and this is where the pros, the big money, is putting money into building new assets due to long term the fundamental growth.
And I, again, as a real estate investor, I think you need to be looking not on a 1, 2, 3 year time horizon, but like a 5, 10, 20. Or more time horizon. Those markets are Dallas, Houston, Washington dc Miami and Phoenix.
Multi-Housing News came up with this great article that I wanted to pull out, why Affordable Housing Production Lakes Demand. We’ve always, everything that’s built is always class a brand new, right? Some of the reason here, housing aimed at people with low to moderate income is not being replaced at a fast enough pace to meet our demand.
Of the nation’s 43 million multifamily units, roughly 10% are considered affordable for those whose incomes are less. 80% of the area median. So this is what we’ve called the missing middle, or I would just call it the lower middle class and workforce.
They’re talking here about the l i htc I call the LTA Lurk program, with, low income requirements for, as part of the building. We try to stay away from this in our investments. It’s just a different little bit different type of a business plan. If you’re that kind of investor, you don’t knock yourself out, right?
You guys that your money. But we found that, whenever we have more than 10% section eight, it gets to be a little bit seedier of a property, although like the LTA and the lurk and depending what municipality you’re. , it’s more, it’s nicer pro assets typically of what I’ll see and they’ll pay get if the average rents are like one 1500, they may require like 20% of the units to rent at 1300.
We’ve got a couple of the buildings like that, and they’re nicer pro properties, so you don’t really attract the CD tenants. But, I really would stay away from that on Class Bs or worse. They’re saying that, Missing middle housing is much more problematic. Very low New construction is coming online.
One reason is rising construction costs, but all require new projects to be more expensive Class A properties. Another factor is regulate regulatory barriers, especially in small markets where there are no clear rules when it comes to zoning issues. I will also. Cause we were always looking for land and we actually just dropped the project in Alabama that we were looking at.
The, some of the costs were just too high. So there you go. Some of the, that’s a real life example of what they’re just talking about with rising construction costs.
Adams reports. US foreclosure activity continu to increase quarterly nearing pre pandemic levels. Definitely nothing near what it was in 2008. I’ll probably call it one or less than a 10th of where it was, but it is picking up from the low of 2020. 1% from the previous quarter and up 167% from a year ago.
But that number is, yeah, this is a great example of fear mongering right here. They’re saying it’s up hundred 67% from a year ago, from a year ago it was pretty much nothing. And it is nothing compared to what it, I would say average it is foreclosure activity is reflecting other aspects of the economy as unemployment rates continue to be historic.
the mortgage delinquency rates are lower than it was before the Covid 19 rate outbreak. And this is what’s the Fed is looking at. Or this is a byproduct of unemployment, which is something that the Fed is looking at. The Fed needs to induce a little bit of unemployment right now. Again, unemployment rates continue to be historically low, so they need to induce more unemployment so that they can get this inflation under.
It’s under control, to get it down to, I think what we’re used to under 6%, I think I made a bet last month with Dean from when we do the Real Estate Brothers for the Hawaii investors, I think I said it was gonna go up to 10% for a 30 year mortgage and then come back down maybe a year from now, or 18 months from now.
Which is why, we’re switching the acquisition strategy. A little bit states that pulls the greatest number of foreclosures, including California, Florida, Texas, Illinois, New York. And some of that’s misleading, some of those, like California, duh. Because they’re like a huge state with a big population.
So its Florida. I’d like to know more percentage per capita, maybe or per person. I think that’s a little bit more. Then just going after the Biggers bigger states.
Last fact here, in fact, nearly three times more homes were repossessed by lenders in the second quarter of 2019 than in the second quarter of 2020. We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction.
I would disagree with that. Common. I think right now the foreclosures is really low. I think really all that is that, that’s basically just shit happens. I don’t know if it’s really indicative what’s happening in the economy, but it’s just, sometimes people go, Troubling times personally, or this, they, they get into a car accident, somebody gets hurt or somebody just loses their job.
I think that’s just the, exceptions coming from, people who just go through tough times in life. And that’s always going to be there. They call it the death, despair, destruction, divorce disaster. That’s what, like those wholesalers prey on right? People, other people’s misfortune, which I don’t really think is very ethical.
I don’t know. I’m not gonna say it’s ethical or not, but it’s jacked up if you if you think my opinion. And that’s always been tick me off that, these guys will go around they’re here to help people solve their problems and buy people’s houses for 50 grand where they really could just sell it to a realtor for 90 and.
They say they’re doing a good thing. I see it as screwing somebody who isn’t the most financially minded or in a stressful distress situation. That said, we don’t have any problem doing it when it’s a rich apartment investor who is just a little clumsy with their money or worse, second generation, third gen generation wealth person who doesn’t know too much about money and is just looking to get paid quick and selected at a good price.
but maybe, I’d say maybe next year, if this all continues and interest rates go up and some of these adjusted adjustable rate mortgages continue to increase the debt service amounts, maybe some of these apartment investor owners might be more distressed sellers ready to sell, at which case might be, we might get involved in some of those acquisitions musicians.
A lot of those people, maybe they just don’t have adequate cash reserves to, whether that’s storm or, some of our cases, like general partners will put in some of our money and that’s why we are here. Because I think I, I will agree with Sam Zel here. He says the US economy is softening, not in a recess.
I says we’re not in our recession yet. We’re in a market softening in inflation reduction. Act pass in August resulted in a lot of spending and is irresponsible, and the title of the act is misleading and it’s going to add on the inflation pressure and not decrease it. Yeah. He’s probably right.
He’s probably right there. Real page. Apartments remain hot, but peak rent growth could be in rear view. I would probably agree that they’re, these guys are spot on with this.
Some of the highest comparison to the 2022 peak in this order. West Palm Beach, Florida, Phoenix, Arizona, Jacksonville, Florida, New York. New York. Fort Lauderdale, Las Vegas, Memphis, Riverside, California, San Francisco, California, Miami, Florida. They’re all. And you were from six to 2% off of their previous high.
Still, if you definitely jump, they jumped, but it’s still up overall.
So these are the top cities where housing markets are cooling the fastest. You don’t wanna be in these markets, I guess is what they’re saying. Or maybe it’s just they, these markets really got really hot and there was just a big delta, what we were saying on the last slide. But number one, Seattle, then two Las Vegas, three San Jose, California, San Diego, Sacramento.
Denver. Then Phoenix, Oakland, Northport, Florida. I’m by a little biased cuz I invest in. I think Phoenix is on here just because Phoenix was like the hottest market in the whole country. So I think that’s what’s contributing to their big Delta. I still think it’s a great place to be, but yeah, like Seattle, Las Vegas, San Jose, those things really spiked and cooling down now.
And this is more for home cells, has nothing, not talking about.
Affordable housing trends Report affordability has emerged as a primary concern for low income earners living in naturally occurring affordable housing apartment asking rent peaked at 16.9% between mid 2021 and compared to an increase at 2.3% in the average already wages over the same period, so people’s pay is not going up.
Their rent is financing gaps widen as construction costs soar. We talked about this earlier with construction costs going up. We just finished our Chase Creek construction 230 units where I would say we probably got hit the hardest with this, with the lumber, I think a year and a half ago.
Our lumber budget exploded, three x outside of our control, but it is what it is. We recovered, moved on and got over it. Substantial progress remains elusive, modest increases, and we’re talking about the Affordable Housing Trends report. So this is where a lot of the federally subsidized rental units by program.
From the most to least is the housing choice vouchers. Then a project or section eight, then public housing and then another.
Si joint Center for Housing studies of Harvard University reporting, leading indicator of remodeling activity. Okay, so as we know in 2020 the remodeling took a big peak there. And then, maybe cuz people were stuck at home and their homes were important because that was the only place they could go.
But they’re saying annual gains in improvement and maintenance. Expanders to owner occupied homes are expected to climb sharply by the middle of next year. So maybe this will help lower some of the raw material costs like lumber.
How rising mortgage rates are pushing people back into the rental market. We talked about that earlier. Here it is in a different format. The tightness you said was created by a decorative underbuilding followed by the global financial crisis in 2008, which occurred when millennials were coming of age forming households and creating a surge in housing.
It’ll take a while before you see a substantial improvement in rent affordability. But a supply increase should eventually boost rental vacancy and decrease pressure on rents. But that’s not coming anytime soon. And this is why I still believe residential multifamily is still the place to be with this fundamental shortage or more demand than supply.
Here, Rob Page reports higher income, renters pay the biggest rent hikes and are least likely to miss a rent payment. That’s because the high income earners, or we call ’em here, market rate, class A people have more liquidity, more savings as opposed to the Class C staff where, you know, I would probably assume that a lot of those guys have either no savings or maybe a thousand or a couple thousand bucks.
When there are uncertain times or a pandemic, those are the people that kind of need that government assistance first, where it’s the wealthier people who have liquidity and savings. And I think that’s what’s hard right now is there is a lot of liquidity still in the system, which is why with the interest rates being cranked up, you’re not seeing the inflation.
go down the next month or the next quarter, right? That’s what’s the problem right now. There’s a lot of quitting in the system, which creates a lot of SL and slack from the Fed, increasing interest rates and that the unemployment doesn’t pop up and doesn’t lower inflation right away. There’s that leg.
Here they’re saying the average renter in class A and B units have seen rent increases 14 to 15% since. Of 2020, which is maybe it was called that three years ago. So about 5% a year, which is pretty high. Again, that’s where we get that two to 3% is what I would normally underwrite. Or, somebody could probably truthfully say it’s 5% but I just probably wouldn’t use that just to be safe, unless you’re somebody who likes to just promise the moon and not.
Wanna make excuses when you don’t hit your targets later. If you’re using the right numbers, then it is what it is, right? Things happen, but, I think something can be said for fudging those numbers and then, when you don’t hit ’em well, it’s yeah, obviously it wasn’t, The rents weren’t gonna go up 5% every single year.
Different story with Class C renters, of course. These are more workforce housing. Folks of average WA range lower than $62,000 a year. Their rents probably went up about 10%, so maybe 3% across the board or 3% per year over the last few years.
But that’s it. That’s the end of this month’s report. We will see you guys in December. If you guys haven’t joined our club, go to simple passive cash flow.com/club. We’ve got the annual retreat from January 13th to the 16th in Honolulu, Hawaii. You guys have to complete the form there and book an onboarding call so we can get to know you because everybody who comes to our retreat, we’ve met, we’ve vetted, we know that they are going to make a great community member there.
Not gonna be a weirdo in Hawaii. We don’t want any weirdos in Hawaii and it is what it is. It’s like we have a private life. Group. We don’t just let anybody in and we especially don’t let anybody come to the physical in-person events because it reflects badly on me, right? , It’s like people think that I know these people super well and a lot of people I would say maybe it was a little bit different than the pandemic, now that we’re out of the pandemic, I would say people who come, I typically met at least half of the folks out there, but it’s always great to.
Associate the face to the name and it gives you guys the opportunity to ask the real questions that you want, right? I’ll put, I’ll remind you guys, whoever’s coming what do you guys need? What can I do to help you? Let’s talk about your situation, right? Let’s not talk about the weather here in Hawaii.
That’s boring, right? That’s not a good use of our time. Anything I can do to help. And that’s what you guys get when you guys come out to Hawaii here in January. Again, join the club, simplepassivecashflow.com/club, and I enjoy the Thanksgiving holidays and we will see you guys in December.
What’s up folks, we’re gonna be talking a little bit about house hacking. Now house hacking might be for the younger guys, in my opinion. Great way to get started when you’re low on capital. Most of you guys out there have spouses. That’ll probably kill you if you even consider having somebody else live in the house with you guys.
Maybe not the best idea for people who want to stay married or above the age of 30. But, maybe if you guys have kids, this might be a great option to reach out to them. Or, maybe if you’ve got kids in college, maybe your kids can house hack it. And this is a great way to collect rent and see how money really is made as opposed to trading time at your W2 day job.
But before we get going, somebody asks a question there, people send me emails all the time and they say, “ Hey, I found this investment making 13%, 15% a year. And I just glanced at it and not all investments are made the same. And the first question that most sophisticated investors ask, including myself is like, what’s this investment backed off of, of course. Beyond performers can mean anything, but this is more like, all right, say an investment performer is. It’s not just some kind of crazy Bitcoin mining machine based on the price of Bitcoin. Where if Bitcoin tanks, so does your investment because it’s based on that, but let’s just say it’s like a legit investment that, there’s a sound P and L and supposedly you’re gonna get 14, 15% off.
The next thing is what do you collateralize? By what are you backed by as what we talk about? When sophisticated investors talk and, sometimes, you’ll see these investments and, there’s kind of one making that reigns through the internet.
Is that you’re investing in these businesses or providing startup capital, but, again, answering that. Butterfly money collateralized by there’s not by much. And which is why it’s a risky investment. And which is why it’s a higher rate of return, or it commands that because it’s more risky.
And this is, I think, where a lot of newer investors chase the higher returns. Ooh, 15%, Ooh, 18%. And they just gravitate towards that, but they just don’t stop to think and ask this question and they realize if things go bad, if shit hits the fan what are they gonna go and collect?
On the right. The nice thing about real estate is the real estate is there and it typically doesn’t go up and down in value. And if it does go down in value, just hold and wait till the better time for the sale, an operational business, like the one I’m referring to here that has like this higher rate of return.
In bad times or, if you ever needed to recollect on the asset’s not worth very much some of these businesses, there’s no real physical inventory. And even if you, there was some inventory in some warehouse somewhere, good luck. Even collecting pennies on the dollar on that.
That’s just another view to look at these types of investments and at least spotting out the bad ones. Another thing that I see going around a lot, especially in the house flipper world, is that there are pretty a lot of good house flippers. Once they do it for several years, they realize house flipping really doesn’t make that much money and it’s super risky.
So what do they like to do? They like to become a marketer, use their social media influence, and that’s why you see all these silly house flippers on social media, all the. Creating this brand. And what they’re essentially doing is they’re taking the unsuspecting passive investors and putting them in a newer house slippers deal and making money on the spread.
So what this kind of more experienced house slipper is doing is they’re pawning off. Somebody else’s deal as they’re up. Some newer flipper who’s really inexperienced, a huge risk. They, their fair market rent for private money might be in the 20% range. Sounds crazy, but it’s also very crazy to be investing in a newer flipper.
It’s, very bad paper. If you wanna use that industry. So what this kind of this middle man will do is they’ll pay, they’ll charge 20% to that newer flipper. And then they’ll give the passive investor 12 to 15% and obviously pocket the spread in the middle. And yeah, I think this is there’s some bid of a cloaking of this a lot of times, and a lot of times just the past investor really doesn’t have the experience to ask the question who the heck is the operator?
And this obviously happens in the syndication world, too, right? Where you have these kind of Daisy chain deals put together. And there’s everybody in their mother raising capital, which, in my opinion, is illegal. because, you need to be a licensed broker dealer to be able to do that.
You need to be an operator and not just a capital razor for that deal, but, I think that’s where there’s all sorts of things out there going on and, potentially nefarious activity and it’s hard for passive investors. And that’s why we always tell you guys, build a network, get going building your inner circle.
And that’s what we provide in the family office. Oana mastermind. There’s well over 90 members in that group right now. We asked you guys to test drive our organization, see if it’s the right fit for you. I really don’t think that there’s anything else better out there with this much sophisticated, accredited passive investors, right?
We’re not some real estate groupy group trying to teach you how to fake it to you, make it and make it rich. Cuz quite honestly, a lot of those groups. The failure rate is like 95, 90 7%. It’s and that’s why I never wanted to create a group like that. I wanted to create a group for folks like myself who are still working their jobs, still running busy entrepreneur businesses.
And how do you be the best pass investor on the side? And my whole formula was for that is relationships and really banding together with a bunch of other purely passive investors and trading the best trade secrets, where to invest who to stay away from, and then ultimately building those relationships with the people. If you guys are interested in that, check out simplepassivecashflow.com/journey for more details and enjoy the show.
Hey, simple passive casual listeners. Today. We are gonna talk about house hacking and how you can implement that or do that alongside of your normal investing or do that as a primary form of investing our guest today is Andrew Kerr from fi by rei.com. So Let’s get into your story, cuz you’re pretty accomplished real estate investor been doing it a while. How maybe give us a little rundown of how you got to this point. I had actually was working in the mortgage banking industry. I skipped college, started right away at 19 working and by 20 I was doing well enough where I could buy my own home.
So at 20 I bought my own place and I did this sort of house hacking style room rental, where I bought a place running out the other rooms. So my roommates, my friends were essentially covering my cost of my mortgage and along the way I had built up. Decent size real estate portfolio. I ended 2016 with about 40 doors, 40 rental units spread out across a couple different states, but most of my investments were there in North Carolina where I grew up.
And then I had this progression in life where I wanted to change my lifestyle. And started selling off all my properties that I actively own and actively managed and started investing in passive income. So I started investing in larger syndications where all I had to do was manage the sponsor or the individual or the team that was running the, this syndication.
And that’s let me free up a lot of time to focus on passion projects, like working for nonprofits and travel. And I think a lot of people listen and they hear about your story and how you’re investing in bigger syndications. And obviously my story is sort very similar. I started in 2009 and our paths it looks like a mirror a little bit.
Yeah. And they’re like I’m gonna invest in syndications, it took a long time. For me, it took since 2009 and then 2015, getting up to 11 rentals. And when did you start again? Just to give some people, how long it. It’s it grows at a snail space, right?
Yeah. I really started going heavy in real estate there in 2010, 2011. I had, while I had bought my first house at 20 and I had owned that property for quite a while. I didn’t go heavy there until 2010. And that was partly because I went from. The mortgage industry, where I had a six figure income to working in the nonprofit industry, where I started as a volunteer with an $800 a month stipend to then $2,000 a month.
So I did it built up a real estate portfolio on a very minimum budget, very minimum salary. And. It takes you about six to 10 years to really change your life around with real estate, which in the grand scheme of things, when you look at it, if you’re gonna be 70, 80, 90, a hundred years old, focusing really hard for six to eight years, isn’t that long of a period of a time.
I know a bunch of investors they’ll do the short term rentals or the house hacking very similar variety, but at some point you had a turning point where you’re like, screw this is too much work. Was there any kind of particular thing you can remember back to, or was it a sort of a gradual thing of slowly transitioning into syndications?
Yeah, it was a bit of a gradual thing, I’m 37 now. So when I started going really into it, it. Late twenties. And at that time I had more time on my hands. I did not nonprofit work. I did hanging cabinets. I did floors. I did painting. I didn’t have capital. So I did a lot of the work myself and the two niches I focused on were.
College housing and affordable housing. And then as life progressed, you start to get into your thirties. You start to get serious relationships, you get engaged, you get married. And I just wanted to be more hands off. My college housing portfolio was always managed by someone else, my affordable housing I did until I just ended up selling it, but just life as transitioned, you wanna spend time on different things.
It is just this progression where I didn’t want to be involved on the day to day anymore. And that’s where I started as I sold off my portfolio, reinvesting it passively into syndications. If you could define house hacking for us and we’ll get into your little twist on house sacking, cuz I, I think when people hear it, it’s it can mean a lot of things, Yeah. So I really look at house hacking as just making a slightly different choice for your housing. All the way back to a lot of folks have read that rich dad, poor dad book that basically says your house is a liability, not an asset. So the idea is just to do the slight change on how you pick your housing, especially if you’re in a high cost of living area.
So you can reduce. That 30 to 40% of your budget. That’s on housing and cut that in half or completely reduce it. And then the idea with house hacking is I define it as these six styles of house hacking. There’s the room rental style house hacking where you buy a big house, you rent out the rooms.
That’s great when you’re just getting outta college and then. There’s the sort of live and flip where you’ll live in the house for a year or two while you’re renovated, and then you sell it. That’s a lot of work. It’s not great for a family. Then those couple other styles are this sort of income suite where you convert a basement or you have a mother-in-law suite.
You have an accessory dwelling unit, like a pool house that you can rent out or a garage apartment, you have this sort of small multifamily and then you have a work provided housing. And then the idea is with all those different styles, you can run out to long term tenants. You can run out to short term tenants like Airbnb, V R B O, or you can do midterm.
Sort of rentals where you rent to corporate housing or traveling nurses. And the idea is you pick the model that’s best for you and pick the type of tenant base that you want. And it lets you reduce your housing costs. My first two house hacks were that room rental style. My third and fourth house hack were this sort of more luxury house hack where we bought this small multi-family property and really created these high end apartments for it.
And I’m happy to dig in more to that style of house hacking if you want. Yeah. When you went, when you did that style the more higher end one was that a short term or long term, the way you did. Yeah, we did a little bit of both. So when we moved to new Orleans, about four years ago, we run in an apartment right away because we wanted to start for looking for real estate and to do a house hack.
And what we found was this old 1920s corner store property that was in really bad shape, had broken sewer lines, it needed new roof. It had knob and tube wiring. And what we did is we gutted it to the studs and we converted it to three high end apartments. And then out back was this barn building that we turned into a one car garage and a sort of carriage house guest house.
And what we do with that carriage house is we rent it out on Airbnb, V R B O. So like during Mardi Graw we get 200 bucks a night for this $500 square foot place. Then the main building. We live in the upstairs, which is a two bedroom, one bathroom apartment. And a lot of folks when they think of house hacking is you really gotta sacrifice on CRE creature comforts.
You can really do it really nice where, we’ve got the farmhouse sink, the stone countertop, the higher end kitchen cabinets with the crown molding. We have a jacuzzi tub in the bathroom, $20 square foot, marble floor in the bathroom, hardwood floors. And then downstairs, we have long term tenants, we got a one bedroom and then a two bedroom.
And the really basic idea of it is those downtown stairs tenants cover our mortgage and a little bit of the taxes and the insurance for the property. And then that short term rental Outback covers all our additional costs. And we usually make, five to 10 grand on the property as well. So not only do we have a really comfortable, nice, higher end place to live, but we also have zero housing costs and then usually are able to pocket some money off of it.
And that gives us a lot of freedom to do a lot of other things that we want in. And you’re taking advantage of it’s your primary home. So in terms of financing and were you doing like a FHA, like 3% down or, yeah, for this one, we actually used hard money because it needed so much work. We bought it for two 70 and it needed to be gut to the studs and we put in about 250,000 into renovating it.
So we used hard money. We got all the renovations done after about 11 months we moved in and then we refinanced out with the conventional loan and then we’re able to pull back out most of the cash we put into it with our equity line that we added on the property. We’re actually working on a new property, which is just a due duplex, which is gonna be a higher end house hack as well.
But like with that, we ended up doing a FHA loan cause we’re sitting on a bunch of cash, but we wanted to. Have that cash on hand to do the renovations and do the value, add expansion on this next property that we’re looking at. So there’s a lot of opportunities out there, but most people, if they’re short on cash will use that FHA loan to do a house hack, cuz you only have to put that three and a half percent down.
And the, you get a little bit better interest rate when you’re the when you actually live in that property, as opposed to a non-owner occupied property, I would say probably what a quarter point or a half a point better. Yeah. Usually about a half a point dependent on the bank. So it ends up being work, working out pretty well.
I know a lot of listeners they live in like California, where a lot of these higher price markets are, they’re priced out. They don’t hit the 1% rent value ratio. And for those people I’ll say, Hey, go outta state rent. Get above that 1% rent value ratio, but some people.
They have limitations and it is what it is. I say something is better than nothing. At least you get outta the stock market and all of those type of investments and house hacking is another option. Or maybe you can go over some strategies for folks who have been investing, but it more, it’s more of a lifestyle change too.
And part of it is with the house hack house. Doesn’t have to meet the conventional 1% role. If you wanna buy the property and have it be a long term rental, you should definitely have it meet those traditional real estate investing roles. But, we’ve worked with some folks that have done house hacks where, maybe you’re in that high cost of living area like California or Seattle or New York and your housing costs are.
Three grand a month. If you can do a house hack and just reduce your cost to 1500 a month, that can be life changing for a lot of folks. Maybe the property will never become a long term rental, but if you need a place to live for that next 5, 7, 10 years, and if you were cut and cut those housing costs in half, most people for $1,500 a month, that gets ’em a new car, that lets ’em travel.
If they want to travel that lets ’em pay down debt, for $1,500 a month in savings. You can max out a 401k at work. So even if you never want to be a big real estate investor, or you’re just trying to, or you wanna save money to invest in real estate, do a house hack in, in that higher cost of living area and reduce your housing costs that will frees up the cash that you can then put in other places.
So now maybe you’ll feel more comfortable investing that estate. Any other nuances about house hacking that after being doing it for a few years, You know the listener out there might, clean some insight over just anything random. Yeah. The biggest thing is that most people had this default of, if I’m doing a house hack I gotta become a giant real estate investor and that’s not true.
And then the other is most folks feel like, oh, house hacking is something you can only do in your twenties. And it’s where you’re gonna have all these giant roommates. And you can really. Quite the opposite of that, where while my wife and I have tenants living below us, we didn’t have to sacrifice on any creature comforts.
Where we live in new Orleans, we have the street car two and a half blocks from us. We have bars, restaurants, grocery store Walgreens, within four or five blocks walking distance, we’ve got original hardwood floors in the place, 11 and a half 12 foot ceilings. That’s this misconception a lot of folks have with house hacking is it has to be giving up and making a lot of sacrifices on location or space.
If you plan for it, you can really get everything you want. And that’s the obvious cons, right? You’re living near your tenants. Me personally, I’m an introvert and I that’s a big one for me. , that’s why I don’t do it. I actually house hacked my primary residence in Seattle for I put it on Airbnb and that was just tiring to have people come in and out.
I just rented like the bottom floor. So I’ve done it, but I know a lot of people there, they might be a little bit more outgoing and they might like to chat up people who are out of town. If that’s you this could be something that you wanna create your life around and.
I guess a captive audience for all your stories, if whatever you will, but maybe give people like insight in your life today. Like how are you using house hacking cuz you’re you’re definitely more on the fi side of things and just given an idea or another viewpoint of things you don’t hear talked about in the workplace cubic.
So back in 2016, I had from building up with those portfolios and selling off money and reinvesting, I got to where in that sort of P community folks call lean fire. So I achieved that towards the end of 2016, and now I’m working towards fad fire, but what house hacking lets us do is, You essentially have five big expenses.
You’ve got taxes, you’ve got healthcare, you’ve got your housing. You’ve got automobile and food and real estate through the depreciation and doing things like cost segmentation. I’ve essentially offset almost all of my income. I have a very minimal taxes. And then by eliminating my housing costs through house hacking, I freed up 50% of my income.
Just by reducing my taxes, my tax liability, and by eliminating my housing costs and that lets me work for a nonprofit. Traditionally, in nonprofit world, you don’t get paid a lot of money. You also don’t have lucrative benefits, stock options, retirement accounts, those type of things, where I know my retirement set from a real estate portfolio and through house hacking, we also, my wife and I have a huge passion for traveling.
I’ve been to 34 35 countries and she’s been to 40, every year we seem to take off for several weeks and travel. By knowing that we have zero housing costs, it’s really easy to say, let’s go to the middle east for three weeks and we don’t have to worry about covering a cost of rent or mortgage back home.
So it just gives you a lot of flexibility in life. So you’ve left the 40 hour a week type of job in an office. Both of you guys are no longer doing. That you can travel. O oddly enough, I ended up sometimes with the nonprofit work. I ended up spending 50, 60 hours a week, partly just because I love it.
But yeah, I work from home managing my real estate portfolio and then doing some nonprofit work. And then travel. So in 2019 we visited guitar, Egypt, Jordan. We went to Jamaica, we went to Mexico and then we visited family and friends throughout the us. So it’s just given us a lot of flexibility, but yeah, we definitely don’t travel full time.
That’s a little too much for us, now in our thirties, we like to have a home base that we can come back to in a regular bed we can sleep in. And we like to just go out and travel, for a long weekend, a week or several weeks at a time. Yeah. I hear you. We’re about the same age and it’s nice to have a garage so you can put stuff in it, right?
Yeah. A bunch of bigger toys. Maybe if you could go over like the high level of your portfolio, right now people are thinking you’re not the Airbnb guy, but the house hacking guy, but how does it look and what’s the percentages of, is it like half syndications, half active, more active income like this?
We’re currently living on our third house hack, which is essentially four units. And we’re currently renovating our fourth house hack, which is a duplex. That’s all we actively manage. When we move out of our third house hack, I’ll actually turn it over to a property manager.
and then I will, when we’re living in the duplex, I just use cozy to collect rent, manage maintenance request from that person living on the other side. That’s all that we own now. And then probably about 80% of my net worth is in syndications. And then the other 20% is in, IRA, 401k, Vanguard, brokerage account, where I take that, jail call and simple path to wealth.
Idea of investing where you’re in a index fund and passively invest that way. Outside of those, I guess it’s six units that I actively manage. Everything else is in syndications. And I think at this point, I’m, I don’t know, maybe in 10 syndications now, I think. And you made me chuckle a little bit.
You actually said you were gonna go visit one of these deals before you go invest in it. I always put it out to my investors. I’m gonna be in Huntsville later on this week. If anybody wants to come join along with me and out of the thousand or people, or so, only a handful of people come cuz everybody’s busy.
Like it’s a little hard except a guy like Andrew shows up cuz he’s got, nothing better to do no offense. That’s the kind of life you want. Exactly. Another thing, I think some folks get too lazy with passive investments where they’re like, oh, it’s passive.
I don’t have to manage it. And my approach has always been, yes, you’re investing in a syndication, but you should still check up on your syndicate or. And then also check up on the property. So I’ve used a service called we go look where if I’m not traveling to the area, you can hire, we go look and they’ll send out a Looker who will then take pictures of the property and you spend a hundred, hundred 50 bucks, I’ll do that where.
The syndicator will send back a report for us. I’ll actually send out. They like, oh, the report says they just renovated the roof. They did all new siding, did all new windows and did landscaping. He sent pictures, but let me spend 150 bucks to send someone out to verify that works actually done. And it wasn’t just something they pulled off the internet.
So I’m always big on while it’s passive. You still need to mind your investments and check up on them from time to. . Yeah. And when I have people come out, we check out units. But if you’re going out by yourself, you’re typically not gonna be able to do that, nor do we encourage ops to even talk with the property management.
A lot of these deals, there’s 50, a hundred guys that’s impractical and not very good LP etiquette, but. What I do recommend LPs do is go ahead and check out the property and walk it and get the feel for it. Is this really a, B, or is it more of a B class neighborhood?
Absolutely. Any insights there that things you key in on, like I know personally, I look for bars on the windows, in the, is it in a primary residence kind of areas and renters area? What kind of cars people are driving? Anything that you can. Kind of things you’ve picked out or things you look at when you do this.
It’s a brief and how long is the trip? Oh a lot of times it’s really short and I love the fact that you mentioned that sort of etiquette is. So when I go in, I don’t go bother the property management. I don’t disturb the tenants. It’s very much, I’m gonna go drive through the apartment community or walk through the apartment community.
Or I might go in not announcing that I’m an owner where if they’ve got, Open house, or if they’ve got the onsite office where I’ll go in and just ask about what apartments are renting for and get the materials. You definitely want to have some etiquette and don’t go in trying to act like you own the place.
Definitely have good etiquette. But yeah, what I like is I love to see where the closest Starbucks is. What’s the closest grocery store and then any other single family neighborhoods that are around, do they have window units? Do they have the AC units in the windows? Do they, like you said, the bars on the window, are there check cashing places close by?
Usually if there’s a check cashing close by you’re definitely a C or. Area unit, if there’s a Starbucks close by, you’re pretty much a B or an a, a class unit. So I try to look at those things. And then I also look at the schools and then what are the ratings of the schools that are close by?
And that can tell you a lot about an area as well. But yeah, most of the time I’ll try to visit friends in the area or go to do some nonprofit work. And then I might spend an hour or two where I’ll drive through the community and drive through their surrounding neighborhood. Just to get a sense.
What are the window? What are you looking for? The window units there? So a as an example, if you’re looking at a single family neighborhood and it looks like it’s an older neighborhood and there’s the window air conditioning units that tells me it’s no central air, no central heat. So it’s an older unit and.
Renovations haven’t gotten into that area yet. So if you drive down a street and you see half the houses have window AC units, it’s definitely more affordable housing, affordable rent area where you can go buy a window AC unit for a hundred bucks at lowes or home Depot, where to put in a central air AC and heat, you could spend eight, 10 grand or more.
It’s something that I always look for to tell what the neighborhood’s and that gives me indication if it is a, B or a C class area. Yeah. I look for the, if it is sort of sensor air which a lot of properties like in Alabama are, for example, If there’s a cage on it. When I had my single family, I always put cages on it.
If it was B minus or worse, I, oh yeah. I probably had two or three of those things grow legs and run away. Yep. I’ve been there. But it’s weird in some, in other markets like Texas, your class C stuff, they don’t have, it’s not normal to have cages on ’em so it’s all a regional thing. Texas, everyone carries guns in Texas yeah.
Yeah. And that was, you. Come up with these stories of reasoning. That was my reasoning too. It’s so hot there. It’s man, you just don’t do that. So Andrew runs fi by REI a A website, a lot about a lot of articles about house hacking.
You’ve got the podcast, you just check that out. But yeah, appreciate you coming on and yeah, you getting to know you a little better here. Thanks lane. And we’ll have to get you on our show to talk about your early house hacking experience and where you’ve been going with your real estate investing.
All right. Everybody out there. Thanks for listening. Join the investment club, simplepassivecashflow .com/club. And let’s get on the phone and let’s see what we can do to move you guys forward to financial freedom. It might not be an apartment deal, might not be a turnkey rental, sometimes it might just be a little a referral to the right CPA or some kind of tweak. Something’s better than doing the whole 401k thing, all right, guys, we’ll talk to you guys later. Bye
What’s up simple pass cash flow! Now, today we have yet another coaching call since you guys love this. And apparently some of you guys like to pick up these free calls. I also put this all in our member site, which you guys can get free access at simplepassivecashflow.com/club. You’ve gotta go into the portal, but we arrange all these coaching calls.
And I’ve, I haven’t looked at it lately, but I’m pretty sure we have at least two or three dozen of all these calls all conveniently arranged by net worth. Eric’s call today. He’s about a million dollars in net worth. And say if you’re a million and a half, you scroll it down to there, you skip over all the broken guys, non accredited guys, and you go right there and you see what’s happening.
There’s calls that are guys, being doing two and 5 million and even plus. I’ve always said that this financial independence journey it’s, you’re not no special snowflake. And this is why I’ve developed the ability to read people and read their personal financial sheets kind of point people.
Down this path. And it’s nothing that hard. That’s why we call it simple, passive, casual.com. But the hardest part is the people. And if we are about filled up with this Napa tour and depending on when this goes out, I don’t know if we are, but if you are still interested in jumping on that, Napa valley tour or drink a bunch of wine.
You interact with a bunch of credit investors. Go to simple passive cash flow.com/napa. The next event that will be the week after in Huntsville, Alabama, October 6th and seventh, and that is going to be a party. Thursday evening, the sixth, and then the next day Friday, we’re gonna start, probably start around 10:00 AM and drive through all the assets and try and walk through as many apartments that we own in Huntsville.
What we can, and we will wanna do is give you guys a lot of data points. See what different locations are, different asset classes. We’ve got a bunch of C class apartments. We’ve even got some B plus stuff there too. And then of course, the class apartments that we’ve built there at Chase Creek apartments, which is the party on Thursday.
But check out you guys can sign up for that. Just go to simple passive cash flow.com/events. That’s the living page. For all our in person events and also check out the January, 2023 annual retreat. We’ve got the page up. The itinerary is still in flux as I always use the month of October, November to pull my inner inner circle.
What did we wanna be talking about that year? And the truth is I don’t really put a huge amount of effort into the itinerary. What I definitely don’t have is a bunch of bring in a bunch of stupid speakers that are just trying to sell their product and fake gurus. I don’t do that.
And the reason why I don’t do that is because we have the most high quality group of people coming to you guys. And when you have that, we just put the table topics out there. We put you guys on, round tables of six and eight and you guys interact and build relationships. And that’s what it is about being a passive investor.
Do you guys want to get involved in this and be new to the group? The first step is signing up for the club at simplepassivecashflow.com/club. There you’re gonna get access to all these coaching calls that we have here. It’s gonna be organized by net worth. That’s one of the many pieces of content in that inner circle portal. Again, go to simplepassivecashflow.com/club, and we will see you at one of the events. Enjoy the show.
Hey, simple past six Castro listeners today, we have a coaching call. I know you guys really like these things cause you go to work and you are sitting there and you’re like, Hey, this guy, Eric, he’s just like me or he’s just a little bit behind me. And he’s just looking for me. The truth is that y’all are driving in your Teslas.
You are not special people. They’re all just, there’s only seven different profiles. I don’t know if it’s really seven, but we’re all the same, right? Work hard. We study hard, we go get a job and work at the job for 40-50 years, all of this normal financial planning type of stuff. But then we break off and do this alternative investing.
And we’re going to meet Eric today. Who’s volunteered to tell a little bit about his story and then hopefully it’s useful to you. Maybe there’s something, some goals that are aligned and next steps moving forward. Eric, why don’t you paint a picture for folks, a little, some of those about yourself and yeah, we’ll get through this.
Cool, cool. Thanks for having me. So I’m just a regular old guy, a small business operator entrepreneur. I have a wife and three little kids and I just moved from San Diego to Pennsylvania. I have been an entrepreneur starting service-based businesses. And about four years ago I left and created a digital marketing agency to serve my niche that I’d been operating in.
And I thought that actually through COVID I got introduced to a couple of people that were into real estate and I had some free time cause I couldn’t do anything in COVID. So he started playing golf with a couple of real estate investors. And they put me on too. That world and it altered what I was interested in professionally and personally earlier.
Yeah. Success leaves clues, if these guys golf, whenever they want in this real estate thing, it’s time to start Googling. Huh? That’s exactly right. Your spouse works or is interesting that you’d ask. We used to work together. We’d actually started a couple of companies together, but with each kid she started to work a little bit less.
So now she doesn’t. Okay. What is, this is actually a great question because I want to make her a real estate professional, right? So this is her earning potential a lot more or very similar to yours. I would say it’s comparable in terms of how she could start something and we could start something together.
She’s not like in a trade; she’s a licensed professional, a doctor, and a lawyer , where she’d got to get a W2 gig for 250 K. But she’s hardworking and smart, so we can start something. And both of you guys are untraditional in terms of income generation, your small business owners, not just working stiffs at a date at a W2, maybe.
Yeah. To be honest, I pulled her into the entrepreneurial world. She probably would have been her risk profile is not that of, entrepreneur necessarily. She had been running, she’d been a teacher and then moved on to other kind of organizational kind of jobs running programming stuff.
Okay we’ll get back to that real estate professional thing at the end here, but just to paint a picture, if you guys are checking this out in the podcast, make sure you go to the YouTube channel where we have the entire financial sheet up. So we’re looking at this, but we’ll paint the picture for the podcast listeners, but we are approximately worth of over a one minute.
It’s in the bottom of that summary. It’s around it’s if you scroll up there is the edit and then put the label there it’s 9 66, 19 62. So essentially close enough for government work, $1 million net worth. And then approximately how old are you guys? I’m a couple of years shy of 40 and my wife’s a couple over.
All right. So how about we. Paint the picture. What do you have now? Cause you haven’t really made too many changes, right? The mindset has shifted maybe take us through like you start Googling stuff to continue that story. So the guy was golfing, it does does seconds and is in the note world kind of that seems pretty far out there for me.
Buying distressed seconds seemed like not the first best move for me, although it’s interesting. But basically he put me on a ton of books and eventually the Googling led me to you. And really the whole idea that he was pitching was don’t ever sell the homes, just move on and keep them and rent them out and so I drank the Kool-Aid. There, as I understand, everybody needs to get their first door before they become, fully drink this syndication Kool-Aid.
So I, we moved out of our San Diego house, like con turned it into a rental and it cash flows nicely and they’re paying down the mortgage for us, which is great. Because of the jump in home prices I with COVID, I kinda, I’m getting to the $500,000 tax-free threshold sooner than I thought I would, even a year ago. So we bought it at 7 25 and lived in it for the last five years and we just moved out six months ago and I’m getting close.
And it, that was my whole idea. I was like, at the very least I’ll hold onto it for three more years and I could sell it then and not pay taxes and all of those gains. So I was really excited about that once I discovered that. So that’s the reason why we held onto it. So you bought it for 700.
What is it worth today? 1.2 and change. I think you might want to double check with a CPA on that. I don’t, like I tell everybody I’m not a CPA, I’m not giving a tax legal advice, but I think it’s as long as you live in the past two, out of five years. Exactly. So I was thinking and I’ve just spoke with my CPA about this.
He’s yeah, you that’s. But, so if you’ve lived in it for two of the last five years, so I could sell it, two and a half years from now, and I would meet that. Yeah. And you think we probably had this conversation last time or the San Diego rental it’s cash flowing, but that’s what the, the new say, right?
Like what you really need to be looking at is. What about six, $700,000 debt equity and this thing making Jack, exactly. So this is exactly what you told me last time. We haven’t changed those people in the past. No. I have a look if you go back to the summary tab though for basically one of the things that had changed.
Cause I’d I was just about to sell my house just about to move and buy the house that I moved to when we spoke. So you messed me up. I went back to my wife, I think maybe your final eh, are you sure man? And I’m like, yeah man, no. I saw the light lane. I understood that your point was there’s equity being wasted in this environment for me now, for the next while I hold onto the house.
So I got the home equity line of credit against that equity. So I have 140 K in a line of credit. I haven’t moved it because I only got a month ago. And so that’s currently undeployed and it’s better than it sitting in the house, but so that’s one of the things I’m figuring out what to do with that.
Cause I got this crazy what an intro of promo promotional rate of 0.9% for the first time. On that one 40, so I’ve got the house, that’s the rental. So I’ve got equity sitting there about five and a half, 500, 5 50 of equity sitting there. I can pull one 40 out and deploy it, perhaps in a syndication Brabson notes and their hips in crypto, whatever the banana, whatever is going to work for the next two, three years.
Did you, do you have any other, like non-equity non real estate equity, non retirement funds that you can deploy first? Because that’s usually the order it’s like investor cash. Then you either go after your rates, your retirement accounts or your equity in your rent, social circle. Yeah. I I’ve got 20 grand, that’s a throne I’ve been playing with crypto.
But other than that, There’s no like side reserves that isn’t deployed elsewhere, to, to buy the second house. They pulled everything out. Got it. And because you’re a small business owner, I’ll just always ask such question. Do you need like cash reserves, dry powder? Are you in very capital intensive lineup?
Th this is the beauty of digital marketing. I have an 80% margin on the software I sell. I’m a really lean in terms of business expenses. So I basically, the business exists for me to pull money out in the best tax advantage ways. Perfect. Essentially, you’re a salesman for somebody else’s product.
It’s a combination of, I sell the right software to the whatever client, and then I stick around as a consultant to make sure that they use it to the best of their ability and so suits their needs. And that way I can go hide and they keep paying me that a subscription fee, like an annuity. And I check in on once a year.
Yeah. It’s simple. Passive cash flow. That’s basically it’s basically. Yeah. Except I’m selling somebody else’s doors. Some folks just going to their day job, checking in, checking a few emails, just sitting there, listening to Spotify, whatever you guys do, but okay. So like it’s not like you have to dump money into paid advertising or you got staff really you don’t need much of an emergency savings account.
And I say that because I always like, am surprised, like some people who have just normal jobs for the like secure jobs too. And they’re like, I need six months of expenses. It’s relax, man. First of all, you’re not going to like wine and dine and live like how you are if you lost your job. So your expenses are gonna go like the path to a third of what it is.
And secondly, you’re going to find a job, man. If you guys make it more than a hundred grand a year, there’s a job market out there. It just got to dust off the resume. Get out there. Yeah. This might sound naive, but I’ve always made my own jobs, not got them. So I’m not so worried about having, this war chest of cash in case of yeah.
Yeah. It just, most people, they have salaries, where they’re like that T-Rex to get fit, fed a goat on a street, it can be scary. If you’re holding onto the side of the pool with that paycheck, that steady paycheck, it can be very scary to think that if you lost that job, literally out on your own, we’re a lot of business owners such as yourself.
You’re like, yeah. Did that every day. Yeah. This is the first, I think when I, the first time I started out by myself, somebody told me that you’re now living in an eat what you kill environment and that’s terrifying, but also really. Yeah, because some people getting off subject a little bit you know what I’ve always thought is like, there’s a lot of incredibly smart people with high paying jobs and salaries that are still holding onto the side of the pool and still being spoon fed Raca lambs on the string.
If they would jump into your world and start to hunt their own food data, actually be pretty damn good at it, but they just never get the chance to test out their skills. Yeah. This is there’s a, there’s actually a group of 40 to 60 year olds that are low key resentful about the entrepreneurship wave that has fallen in the last 20 years because prior to Kevin kids in college, they would have loved to join the startup and been a Gary V Devonte and been part of that culture.
But they miss the social window. Yeah. Once you have kids, as over give them everything, man, and I’m just kidding. They’re great on, and they’re great. They’re great in itself, but yeah, for venturing out on your own and seeing how far you get it it’s different. If you don’t, the thing is you don’t really need to make that much money.
If you follow the simple passive cashflow system, really. There’s really no reason to make more than two 50 a year. Also this is actually why I came back. I answered the call to that kind of coaching call the email that you sent out because my, the industries that I serve from my business have bounced back after COVID.
I’m having a benchmark year. So 20, 22 will be great for me. So I’m anticipating a 20, 22 tax return where I’m going to have business profit beyond what I’ve had previously. So I’m starting to get more interested in, how can I map out losses over the next 10 years? And yeah, this is for everybody, right?
If you have a lot of income, you got a big inheritance or you’re broke and you lost your job that’s for everybody. So yeah, let’s so let’s dig into here. What is your plan to do with the money from, I guess it’ll probably be come from that rental, right? When you take tap the hilar a little bit, what’s your first move and let’s talk about it.
So one of the things I want to save, I’m going to reserve 50 for a syndication, I think, for Sunbelt apartment. And the only question is if I can basically map out selling the rental in two years and having those untaxed gains cover pay at payback, the hilar, obviously, and then redeploy those gains.
So I can get into this three to five year cycle of, the buying and selling of the apartments. Yeah. Did you ever look into doing the little rental properties, the turn keys, that type of stuff, just to dip your toe in and learn that. It’s cool that you have a rental property in San Diego.
Now you have a property management property manager running that for you. I have some no. I have a neighbor who’s a really smart woman that stopped working as her kids. Her kids took our time. And so she’s basically across the street property manager.
So I manage the relationship with the tenants, she’s there to go inspect the light bulb if I need it. Got it. Cool. Learning a lot, to the exterior. Running tenants checks through through the Zillow application medical, there’s one, one rental. I’m like how hard could this be?
And it was like too easy to be honest. Yeah. It’s not rocket science, you don’t need to be a big ingenious. If anything, I had Zillow applicants showing their credit profiles and tax records and I was like, oh my gosh, these people make so much more money than me.
And they want to rent my house. No, no kidding. I obviously can’t really disclose, but I had a doctor that was like, he was, he paid more in taxes than my, my AGI or my pre-tax income. It was like it was insane, but that was also the timing of, COVID and kind of housing and migration being all crazy.
So I know it’s not going to last forever the months where things, bigger things break and it’s a downer, you’ve had that. Yeah. It’s like the day he moved in the garage door, the rent. And I knew it was going to happen and I had the vendor lined up and I’ve got all my vendors and expenses tracked my in my I have a whole air table base for the rental.
But so it’s not like I don’t get excited when he texts me, I wake up to a text and he’s by the way, the ice machine is making a noise. It’s I don’t, it’s a nice place. It’s not like a, it’s not like a shabby. It’s actually harder. I think sometimes it worked with those class, a tenants, then the class BS and CS different set of problems.
Those are more like, Hey, I don’t have the money. Now he was trying to negotiate. Can you get it 10 days? And you get into 14 days, when can you get it to us? W with my tenant, it has been totally the class, a problems of Hey the roller on the blinds is broken. Do you think you can get the handyman to come fix it?
And I’m like, oh my gosh, did you try putting it back together with the clips that probably fell off? It’s then again, he’s I’m paying you so much money a month on this rental. Can you just fix it, man, a bit bitter class, a tenants I’m learning have their own set of issues.
But so I’m not and I know I’m a builder, not a worrier, like I’m way better at creating things than keeping being worried about them. I don’t, I’m probably not good enough at losing sleep about what’s going on in San Diego. And I just eh, it’s fine. And it’s great until there’s a problem.
Yeah. Your time as a small business owner is to spend your time on making more money than just screw. like gating class eight tenants or I’m prospecting. Not checking on him. So you’re going into syndications. Any questions that pop up there that you’ve have, or so what the big, the thing that I find that nobody really wants to talk to me about, I called my accountant and the bookkeeper and like my business people the nobody’s really in this world, it’s like how to map out losses that you can take loss, suspended losses when to, basically like this.
I want my a 10 year view. I like a little, like an extended proforma of okay, I’m gonna put 50 into a real estate investment every three years, every two years, and spread out the losses and offset them. There isn’t really a good. Person, like all the tax people are like, don’t talk to somebody else about that.
And all the real estate people are like, talk to your tax first. Yeah. Let’s go through that. Right now. Like I think the problem is if they’re smart, they stay away from this stuff, like a 10 foot bowl and they don’t know what kind of deals you’re going into. They don’t know what the leverage they don’t know like the cost segregation, they don’t know any of this type of stuff.
So for their point of view makes total sense why they would run away from it. And plus they’re broke. They don’t have money in these deals in the first place. So how are you going to ask them? There’s just it’s like talking to the massive scientists about like Saturn or Mars, like dude, have you ever been there?
That, it’s just in our textbooks. I don’t know. I’m the telescope guy. Yeah. Yeah. I might be wrong there, but okay. Let’s make this a let’s call it twenty twenty two, twenty twenty three, twenty twenty four, twenty five twenty six. And let’s just say you let’s just say you dumped a hundred grand into a deal and for art, for there’s people are gonna say it’s just big ranges.
Well based online experience of what I’ve seen in a stabilize, an older property, 30, 40 years old with a prudent, almost maxed out leverage because that’s a big thing, right? Because it’s your equity, with a hundred thousand dollar investment, then maybe you might see 50 grand back as versus a year losses because what this is coming out.
Is let’s just say UN, this is actually a good strategy for some folks that live in high price areas that have a lot of money to blow. Let’s just say you bought a $3 million house in San Diego. Okay. And out of that, it’s broken up by the land portion, which you cannot deduct and the improvement, the portion, which is the house.
So the, you can deduct the, not the land, but the improvement portion. And I’m just gonna use, I think the land is worth maybe two thirds of these high price areas like California in Texas and Alabama. It’s flip-flop right. Two thirds is improvement. One third is the land. I just asked my San Diego, my accountant button, San Diego, he said 25%.
So I asked him how much I could write off of the house for, I asked him if I need to do cost segregation, because I know I’m only going to sell the house in the next three years. Is it worth it? Yeah. It was like, no, cause you can only take 25 grand. So you’re going to be beyond that no matter what.
But he said it was 25% was the land. Okay. Let’s do a third. Yeah. So you can take with current bonus depreciation laws that are supposedly phasing away, 20 22, 23, 24. So 2024 is still pretty damn good. In my opinion, you can take up to a third of this number in the first year. So 33 grand.
And this is just on like your house, right? This is one little example. I would imagine the next year it might be like conservative speaking. It’d be like 50 to a hundred every year for the next circle on here would be the way I’ve seen it happen on that one house. If you were to do. But getting back to this indications.
Again, I’ve seen deals. If you put in a hundred grand, I’ve seen them come back with a hundred grand plus of losses because maybe you have high our leverage. I don’t know. Just more backs. There’s so many, there’s four or five different KPIs. What time of year you do the cost day that the aggressive enough of the cost, their breasted necessarily the CPA, very many different ways.
I would think you might see, 10,000 of the losses year till whenever, but then you would sell, let’s just say you sell the acid in 20, 27. On your a hundred thousand dollars, maybe you may 50 grand on that money, right? Yeah. I don’t think it’s that rate of return that you made $50,000 of capital gains.
Plus you gotta pay back all this stuff. Okay, so you got, you’re going to hit get hit with this taxable gain. Okay. But those you’re saying that’s that row there of the 50, I thought that was last year you’re saying, yeah, these are a lot, these are losses. But when you sell the asset, you exit the asset, you got to do depreciation recapture.
Oh, you gotta recapture that. Yeah. So that’s thinking all this green stuff and paying it back again. So getting stuck with a bill in 20, 27 is what I want to avoid. But that’s how it works if you’re looking at the world by optically, but what’s really going to happen is this, you’re probably going to go into a bunch of deals.
I would assume that maybe the first several years you do that. So if I had a hundred, but even if it’s just 50, if it’s 50 a year, let’s use hundreds, it’s easy and you’re a baller now you’re credit.
So let’s just say you, every year you did a couple of deals, right? And this particular year in your 2027, you have to pay this back. But look at all the losses you got in the meantime, you have this plus this plus this plus this, your banker on the half, a billion dollars past losses. So how did the, and these interact just perfectly with the sale, but th the timing of like for you and in simple passive cashflow, are you lining up the sale?
Thinking about the deals that are going to be in this sort of wave behind it to offset? No I could care less. What’s happening with your individual investors? What’s going on, then this is your job. Like every deal is a different venture, right? Whatever is on your personal taxes, that’s your job, my friend.
That’s the part that scares me though. Walk me through this. What is scary? What is the concern? Th the sort of the lack of control and the timing like first of all, dude, you made a lot of money here. You gotta pay taxes on it, period, but here’s, what’s going to happen, right?
Like when this thing dumps, you gotta pay back the capital gains, the patient should capture, which also you have to do any. With real estate, you’re able to compile these losses to offset this completely. Yeah. And here’s the cool part. What are you going to do after this deal dumps out? You’re probably going to go into war, but more with $150,000.
And then, this is going to be 75. Yeah. It like, it just gets better. So what did I say? This I’m like, here’s the total of passive activity losses, that you’re accumulating. Would we say around four 50 here in this year, maybe it drops down to 300, right? Because you had this happen.
No, but because you’re getting this big, you’re jumping into the fun house again. You’re getting even more that you began with in a way, because you’re going into kind of two deals with this money. See, this is the epiphany. I think a lot of people get that. You’re having boss being now where you’re like, oh, I never really come back to her.
It just keeps getting bigger and bigger and bigger. I can oddly do this till I die. If they don’t change the depreciation tax laws. Of course, that’s always a risk. But look what you did. You delayed all these taxes for at least several years. That’s a lot better than what most people do it.
That’s why your friends, even though they’re doing notes, which I don’t think is a great investment strategy for taxes. That’s why they’re at the golf course. Yeah. But so when and how does this end does it. You can keep doing this for a long time. It ends when you define it to end, like when we get to end game strategy, it’s call it, so I defined that as four to $5 million net worth. So you can just stop putting your money into value, add real estate projects, just put it in the normal crap that everybody else does at one to 5%, that’s that’s one option. Got it. So this is the, you gotta feed the beast, but then you got, I think that’s the sort of and I go out into chaos willingly like this.
So this is why I’m here hearing. This is exciting to me. You see this is that leap, right? I think this is Tiffany right here. This whole thing about you got to pay back the texts, but Hey, I did beat the boy that money and I got more passive losses to add to my. So you’re never actually paying, right?
Like you’re giving at the end of that first deal, I gave you 50, you’re giving me back one 40. But now I owe taxes on that one 40 on that one 40, but the gains only the gains only 40. Oh yeah. On this, in a scenario, I would say the gains probably are a lot higher than any allergy.
The cash right on, I’m going to have to say I’m paying taxes on this 40. And so not if you were somebody who just, I just invested in one deal and I watched her for five years. Yes you are. Correct. But I don’t know what the heck does that you had going on. You’re going to go on the multiple deals, stockpile, this passive activity, and so you want to suspend, you want to suspend because you can suspend that. Let’s just say you didn’t do a deal until 20, 24 or like we delayed it. You can suspend that passive activity loss and save it. Correct. Suspended. It’s you’re about my age. You don’t really walk though. Like chocolate bar up in the sky, suspended up in there.
You don’t have to eat it yet. It just stays there until you need it until this happened. You need it. But then you’d load that into another deal or two deals and you ended up with even more suspended chocolate bars. Yeah. Yeah. I totally get this conceptually, but because it’s new. And I can’t answer the questions for my wife about what’s going to happen in the future.
I’ll just say like maybe this will help. Here’s an example that I had, like I bought, I think I bought these in 2015, 2006 okay. So I bought a bunch of rental properties a long time ago, 2015. And I sold them, I think in 2017 or 18. And I had a $200,000 capital gain plus depreciation recapture.
So this is, I was like, oh shoot, I have to pay that. When you say capital gain plus depreciation recapture, that means you’re paying that 50 that you put in there. So you said you had 200. Gains and 50 K of recapture that you have to cover up in terms of your taxes. I don’t remember how, what was the breakdown between, but it doesn’t matter.
I had a $200,000 capital gain depreciation recapture. Okay. So two things I might’ve made a hundred grand and I recapture one 50 to get two 50. Let’s just call it that. But I had, because I was doing all this type of stuff. So the years prior, I think by the time it’s 2017, 18, I had maybe about $400,000 of passive activity losses built up.
Let’s just call it four 50. So what did I do? I use this, I took the suspended passive losses and he used to offset the passive income to appreciate recapture. I didn’t pay any taxes that you’re on any of that type of stuff. But then I took all this. And I just went ham and went into art deals. And then, so this went down. I don’t exactly, this has all happened, but conceptionally, that’s a robot. I’m not a tax guy. This is where you’re going to have to go to your tax and have these educated conversations with that’s your job. People think that I’m giving tax advice here. This is infotainment.
Yeah, exactly. So four 50 minus two 50 is what? 200. They went down to 200, I get a little afraid when it gets that first year that, that lower high, that low. Yeah. But then I went into more deals and I’m back up on back, how do people track this though? I think the form is your 82, 84. A lot of this information is on simple, passive cashflow.com/tax.
The guy, the master guide that we have with all this stuff, that age 84 form that’s Chicky, because a lot of CPAs don’t like to give that to you because they know you’re shopping for a new CPA. There’s a lot of the backpack relations, not on the page, but in the software that you won’t have. Yes. This is why you have to know it ahead of you.
You have to know it for yeah. And this is why we have the K one tracker sheet to keep track of all this type of stuff. Like how much passive losses do I have this year? Did I get the previous years? So you and your head can be, plus, or minus 20, 30% at least, and follow it and say, Hey, Mr. CPA, where did you put this big 400 grand of passive losses?
I think I should have you didn’t burn it up. Did you, or maybe you should have, my, my CPA, he drives my income down to the. Even though I’m maybe you should keep some of this stuff, for some of these deals to exit, but his argument was like you’re probably better off.
You can make more money in the two years of not paying taxes on it. And we’ll just worry about that day when it comes. You only live once. This is but this is the contradiction with these two. This is like the re your relationship with the future in the sort of in this formulas has to be so open because yeah, you’re banking that you’re going to have more cash to keep this game going and that, but it’s not a game.
You’re going to have to pay taxes anyway. You’re just delaying it a little bit. Worst case scenario, you gotta pay your taxes, but in theory, you could keep this going for a, to do your DVD on time. Yeah. That’s the. Like people will do land conservation easements, even though it’s like a red flag type of thing.
And a lot of people do it and it works. But even if it doesn’t work and it gets audited and it gets audited every time, even if they say, no, this is totally negated, you don’t get any of that. At least you didn’t pay the taxes for that period of time. And at least they, they wouldn’t really, at least what, my, my context tell me is they’re not gonna lower the evaluation all the way down to zero.
Like you get no benefit to it. Yeah. Yeah. And at worst it’s a free loan until you have to pay back. Yeah. It’s not that hard. I think that’s Toronto trying to, de-mystify just a bunch of colors on a spreadsheet. You get a plus or minus 20% on each deal. You know what I mean? I think what’s the hard thing is it’s conceptual right now, but once you get into it gets a lot easier and you understand that it’s, you’re a smart guy.
You’ll figure this out, but the problem is most CPAs want to stay the heck away from this type of stuff. Cause it’s a guessing game. It’s just like me in the engineering world. So I drove me crazy. I’m like, ha how tall is the retaining wall going to be? It’s I don’t know. It could be five miles off.
Dude, you’ve been doing this for so long. You should know is it going to be 12 feet or 14 feet, man? I have a little cost assessment thing here. Like these guys, in their defense, they don’t do this stuff. You’re that weird person doing this type of stuff that likely they have no clue how to do this it’s they don’t have any of that past experience, the type of accountant or person that does specialize in this stuff just as not a lazy.
Maybe this comes off bad, but like typically the older ones they’re set in their ways. They have a lazy client base that are used to do it the way that CPU wants it to go just the easy way. And they’re a placated audience where you’re not wanting to go. I would say 95% of the people that come through our doors, they got to change our CPA.
Yeah. I had to shop around starting the business. I had the shop around to find somebody that wasn’t like an IRS foot soldier that was just terrified of, the tax laws that are supposed to work for me. Yeah. Yeah. You know how it goes, mean referrals. Referrals is always the big thing here, but there’s no word I’m missing out on.
It’s oh, a real estate CPA, because that’s not a thing. Real, estate’s kind of pretty general. I think a lot of them will do it. It’s just what I would do is I would have conversations like this and it’s like you’re playing stump the chump. Cause you know what the answer is that you’re trying to see if they can logically have played, intellectual jiu-jitsu with you as you go through this.
This is a, that’s like an SNL skit called stump. The CPA chump. Yeah. Yeah. The good ones will be like, man, I’m like three years of retirement. Eric just leave me alone.
I’m not your guy, yeah. Okay. So this is one piece of the puzzle. I have another problem. Okay. Okay. Let’s yeah, let’s go back to your goals here. Hopefully that was useful. That was super helpful. Cause that’s I’m trying to formulate a plan and my second goal that on the sheet.
So I established the trust to start now that I’m worth something. I have to keep it organized and protected. Yeah, that’s good. That’s good. Like again, public service announcement for everybody, you have wills, those things, just go through probate. Don’t do that guys get a living trust. It doesn’t cost very much a thousand, a few thousand dollars.
It’s not for asset protection. It’s just in case you die, your money’s not in boat for your survivors and it doesn’t go through probate and get aired out in front of everybody. So that’s good. You got that done. Okay. I actually, I had the privilege and benefit of I did some things that were on my last five and 10 year plan with my wife.
So we’re like, great. But then for awhile we’ve been aimless and I need a new ten-year plan that will get me out of as much as I love working and doing the sort of work that I’m doing. I don’t want to have to do it. I want to play golf with my real estate guy. My note investor, friends. I don’t, I would say just a different idea.
Maybe it’s just this personality difference, but I’m like, just get moving down the road with this stuff a little bit, get going here and then make another five-year ten-year plan. Just right now, for now the big thing, like the rental property, right? When you put your San Diego property into service, you didn’t know what was going to happen.
You, you haven’t been in a syndication deal. You haven’t, you don’t know what’s going to happen. So just get into one right before you make this elaborate plan that the secret of syndications is just working with honest people that will steal your money. That’s the biggest. That’s a pretty big question, mark.
And especially when 25, 50, 75, K’s the buy-in out of my million net worth. That’s a, it’s a one 10 bed. Sometimes it’s co it’s like a rollercoaster. Get on, man. It’s going to work. You have a lot of fun, do your due diligence because you could die.
That’s good right now. I guess what I’m seeing you as, or what I’m hearing is right? Like you’ve never been at Disney night, never been on any freaking roller coaster making plans of doing this. And I’m like, no, man, just get on one roller coaster. You may not even like it. You may craft yourself and be like, I’m just going to go and eat.
Nodding at Disney Instagram channel the whole day. Like just get one. Who knows? You may really like it. You may not like it too much. We don’t know. Just do one. Alright. Before you you waste all your time and then all the Disney fast festival lightning lanes are all gone, right?
Essentially. Yeah. They’re not fast. Those are all gone, man. It’s lightning lanes. Now you got to pay for it now, right? You’re right. I haven’t been there in a long. You haven’t been there a long time and you haven’t been in syndication deals and the rents have been going up all in 2021. Ain’t going to last forever.
A best time to do it was yesterday. Yeah. So before you, I mean you, right now, you’re sitting in the beginning of the park. You already bought your tickets. You’re already going to go on this ride or this thing part get in there and do something before the park closes. It’s already.
He lost a couple hours of rides make this ten-year or this full day plan. Yeah. That’s just from it’s a good analogy. What a forklift speaking, right? You’ll fall in the middle. I’m sure. The portion of this divergence I wouldn’t say I’m stifled at it, but I’m trying to balance out what’s what is my mind is also exploded with the real, the rollercoaster that is crypto.
And so I’m trying to balance and figure out, so I’ve got this one 40 that I can deploy, today. And then I’m planning out next year and I just need like a six month to 18 month deployment plan. So that I feel like I’m not totally whimsical and just writing checks at the F I hate feeling.
Yeah. You’re so again, you’re like looking at what am I going to do with my 500 grand at deployed equity? I would say break it. Out of that 500 grand off the top of your, at what percent do you want to real estate? What percent do you want in crypto? My gut was a half halves. It go find other, so the magic pill for all this at this point is you got to find, not broke guys to hang out with that are on the same little bit like a half a step above you. Instead of crazy people like me, you, the golf buddies who are like a few steps ahead because we forgotten how to get there. And we were just possibly.
But you gotta find guys half a step ahead of you that are accredited investors that are already on their first fifth, 10th deal. Yeah. See I have a couple of those guys, but they’re probably more than a step, more than a half a step ahead. They’re like, they’ve got some deals they’ve got, they were into crypto earlier.
They had it, they had more to spend earlier. Yeah. I, the stuff that I read and again, like all this stuff, like what is the best asset allocation mix for the alternative S there is not, there is no normal, but if you twisted my arm, I would probably say if your net worth is a million dollars, 5% of your net worth, I think crypto is the average.
Yeah. Average, right? As your net worth increases, goes to five to 10 million. And that number of crypto creeps up to maybe 10, 20%. But that’s typically what you will read in industry news. That’s it? That’s what Forbes will say, but I think that’s, they’re speaking out of one side of the mouth and the people that are, I know I distrust what people, public knowledge has never, public knowledge, I think they’ll say either there’ll be a hundred percent crypto or not ugly ass, like family offices larger.
They’re in that 20% range, but those are 10, $20 million plus families. Yeah. But if I’m, if I have this 500 K that I’m going to basically going to make it go to work for me, where I’m coming from and why I’m like, 90, 10 split to start there. Yeah. Is that real estate works real estate.
We’ll get you guys that two, $3 million net worth and five years easily that why screw around with more of this asymmetric risks crypto stuff at this point. Yeah, sure. You can get there in two years doing that, but you can also lose it. And then now you’re now your goal to getting to 3 million is going to take you 10 to 15.
So that’s the way I’m looking at it. Yeah, I get it. But you’re saying the 500 deployed in three years triples. So what you said no. You’re going to deploy that and deploy the other half a million on top of that at some point, too. So your goal is to, I would say if it were. The boy, the 500 grand, which is half a year net worth in the next year or two years.
But then what I would say back that up, because you’re a slow starter is what are, you can kind of sense. So figure out what your asset allocation mixes right now. So if you’re like 70 30, if you and I were to negotiate the middle 70%, the state 30% crypto, just do that calculation on the first quarter million and make that as your goal first year.
So I think that’s, 150, a hundred into real estate, 50 GS, and to crypto and there you go, get moving down the road as soon as possible. Maybe even make it a goal for the next six months. Because every day you sit by, you put all your thumbs. Let’s do the math, right? Like 500 grand. I think you could be making like, I don’t know, 50.
Per year, you’re losing out on 75 grand assignment, get into the fact that it could be tax-free 52 weeks a year, every week that you’re not doing anything, is you losing 40 $1,400? Yeah. Every day you’re just sitting every day. We don’t do anything. I can’t handle it. Let me write you a check. $200, right? Of course, make a decision, take your time.
But Hey, liquidity anxiety is happening 200 bucks, 200 bucks, 200 bucks every day. You could probably live off that. That’s liquidity anxiety. That’s the term. Yeah, I got that. Your money is not doing anything for you. And I get it like you want to, want to do due diligence, but just know in the back of your head that you are losing this money and opportunity costs.
Yeah. It’s funny though. Normally my default mode of operation is ready, shoot, aim. That’s why I know you already, you’re entrepreneur. But this is kinda, it’s been taking a while because the last time we talked was maybe a year ago and there you haven’t, you liked me cause I just tell you what I think.
Like you haven’t made that much progress. So yeah. I moved across the country. It’s yeah, you got three kids. So the first day I don’t go anywhere fast,
but the liquidity anxiety, I’ll raise my hand. I’ll take that one for sure. And I think the thing that is working against you is again, the peer group, right? Your network is your network. You don’t have the influence, the right influences around you to get you the right information for you to get the right big diligence done.
I think that’s the hard thing. And that’s what the pandemic has made things really difficult for people to move down. Yeah.
Yeah, that is a problem. And I moved away from my golf buddies. They were the richest people. I knew even worse. Luckily you, you’re not, world of the cubicle land where you get all this, invest in your 401k, do the match, all this type of stuff around you, out there on your own.
Yeah. Which is great. And I really, I, the crypto stuff I actually want to keep in I have a self-directed Ross, so I want to keep it there. So I don’t have to great idea. I didn’t, I think it’s in the original thing, but I forgot to mention that. It should be hitting any day now, but I set up a self-directed Roth with checkbook IRA.
So I can, if I deal with notes and crypto in there, I don’t have to and worry about it. Because notes, crypto doesn’t give you any good tax benefits, therefore do it in that type of stuff. That’s why I think a lot of people make that mistake where they will invest in real estate and all that stuff.
But the cash not don’t use the cash. You want to use the cash real estate so you can get the tax benefits for them. Yeah. So that’s why I’m on deploy the one 40, in the syndication, potentially before end of year. And that’d be cool too. Cause you can see that at Kate that 20, 21 K one.
I’ll start playing the game. This tax year. Yeah. Yeah. That’s a smart play, right? I think it is.
I’ve been in banking, man, you’re an over-thinker already, I would say don’t worry about this until you’ve deployed into four deals. Don’t mess around with this yet. But if you’re looking for things to do, you should, everybody should have access to the infinite bank. E-course if you guys don’t have it at home, go to simple, passive cashflow.com/banking sign up there that you get access to the member site for the free, I think two hour course, but yeah, Eric kinda hands off this, hands off the cookie jar a little bit until you go into at least a couple of deals for us.
Cause this is going to confuse you. I, just it’s one of those things and it doesn’t move. The needle is the thing. People thinks that it’s like this heaven from God, but it is cool, but you got to do your. The order is the best good deals. So you get good tax benefits. So to mitigate the taxes, then once you got your ducks in a row there, you got the low-hanging fruit there, then it’s the infinite bank stuff.
Lastly, Maxalt Roth kids. That’s a great idea. Just it’s small potatoes, man. Don’t worry about this. There’s only that’s why I put it on the back burner. I was like, yeah, this is it. Infinite banking. As much as I downplayed it, it is way more important than some silly Roth account for your kids.
Yeah. Yeah. It’s funny that’s there because it’s so in my ear with what people say is oh, your, you need your 5 29 savings for a send your kids. Yeah. When you invest in like marketable securities with no tax benefits, like that’s only stuff you could do, there is nothing tax wise.
You. But when you get into the alternatives world, boom, there’s so much more better options. Yeah. Yeah. So I don’t know. Here’s what I think, man. Like what I would suggest is like maybe both, I like to see you get like a 20, 21 K one, so you can start to see this happen for yourself. May 20, 22 comes around and you got that K one and you’re like, oh my God really is paper lot.
And I do the same thing. Like I put money into oil and gas deal. Cause it’s just textbook like, oh, you get tax minutes. Like, all right, what happens the first year, second year, third year? No, hopefully I don’t lose my money at Bullock gas. Cause there’s a lot of kind of shady people in that world, but that’s just how I do things.
I like, I don’t see it. I see it on the tax form in terms of tax benefits. Yeah, but I think after that first one, it’s going to get moving, but yeah. A quarter million dollars with a part of that in crypto, in the next six months, I think that’s a good semi aggressive plan knowing that, you’re dropping for 200 bucks every day and not doing anything.
Yeah. Yeah. Okay. I didn’t realize, I knew I had range anxiety with my electric car. I didn’t realize I had liquidity anxiety too. Yeah. You got to go see a shrink. Yeah. I used to have one of those crappy Leafs that only went 64 miles and 50 miles in the code when I was in Seattle. That was a real thing.
The real thing. Yeah. I don’t have a leaf, but I got something like that. Yeah. Probably better. Anything. And the least for beliefs or beliefs. Aren’t great. Sorry. Sorry, if you have a leaf. Yeah yeah, probably. Yeah. We have a kid and this, these people are nuts, but just to wrap up here, any other kind of questions they’re off and off or no, that’s cool. I definitely had I’m glad you named liquidity anxiety and also the piece about the, not worrying, not stressing about the Roths, because there’s so much more that you can do with the, for growth over times within.
Yeah. But before I let you go, the after you had six months to a year, you get done that you need to play the quarter million. You start to see it work a little bit. You’re getting good distribution. You’re starting to get a hang of monthly reports. You’re like, wow, this is actually legit.
Haven’t gotten my money still. And then at that point, now we start to look at unloading that San Diego property. But ideally we want to load up on what did we say? Like Capitol? No, you don’t, you’re going to filter all that. So it was good. There’ll be some, but I think my goal was I was going to, I wanted to wait to sell it for 1.3.
So next summer I think I can get that. You’re a gambler. You’re a gambler to nothing falls apart. Yeah, pending the big earthquake that my parents think has been coming for 40 years. You’re like the guy who like ever proposed us to the girlfriend for Seven years. And then, and that two years, two years should not, I think that’s the year, but then you never hear about these guys that the girl leaves them.
No. Come on. Once the house drops, all I’m saying, what if it drops then? I don’t think it’s going to drop, but I understand the, what is, yeah. I’m saying like you maxed out the 500 take it. I think that’s what I, that’s how I would play it, but you don’t know. You don’t know either way.
And then we just joking here. We don’t know either way, but to me, if you can lock in that max out that $500,000 and you make sure it’s the two out of five years, your CPA has blessed it. Everything. I would say, just take it and tap it. At that 0.2 or three years, there’s going to be equity in there.
He locked it. You can’t get up and it’s going to be to talk in a way so that I plant that seed now, because in what, one year you’re really going to need to start to pinpoint, when am I going to sell it? When am I really going to sell this? Because you got that whiny class, eight tenant in back, you got to get them out somehow gracefully.
I think, my hope it’ll just be this summer, no matter what, because I’ll, I don’t want to have to look for another tenant from across the country. Okay. Term contract will be up in the summer, great time to sell. Crazy. Parents want to move into the school district, we’ll pay.
Yeah. Just make sure you account for you’re probably going to have to put in 10 to 20 grand of rehab to make it look pretty, but, and that takes time, but yeah. There’s a way to start to think about it. So basically that I got the hilar gets deployed or some of it gets deployed this year. I have more of it to the blend extra, and then I’ll have the gains from the selling the rental, and then I’m starting the flywheel.
And so by 2024, I just need to have another a hundred, 150 saved up to keep it going. What do you mean? A hundred, 150 to save though. I just need to have a free cash. They didn’t have earnings to keep investing with the next deals to keep the machine, to feed the beast. Yeah. Yeah. You gotta keep making money, which is good because I’m a year ahead where I’ll be making a few, if you scroll down on the summary and what is, I didn’t ask you about what do you mean.
What do you average savings every year? Which kind of your F your velocity, you’re able to save 50 grand a year. It’s ebbs and flows in the years that kids are born, but yeah, around that. So if I can bump that up to a hundred by 20, 24, then I can just deploy, keep deploying. Yeah. And if you are able to deploy a hundred grand, you’re good, man.
We’ll spend time with your kids. There’s really not much more you need to do at this point. You’ve already set this feel emotion. Yeah. But you need at least five years of working and saving and deploying to be in the cycle. Not really. No, that’s not super important. It’s just more like you need to have a million dollar net worth deployed a quarter of a million or half a million, and then continually deploy.
50 a hundred grand every single year for maybe half a decade. And you’re done, you hit that escape, velocity,
escape, velocity, escape, velocity. So everybody has that monthly cashflow number that you want. I think you guys are moving to a cheaper place. So for you guys, it might be 10 grand a month, passive income. So this is the, and we’re going into the vehicle just like faster and faster.
But at some point you hit this escape velocity where your investments are getting that 10 grand a month and it will continue to grow one and I’ll face the face of inflation, but once you’ve got it that far, it’s like a spaceship going out to outer space. It hits escape, velocity, boom, breaks out a sphere.
It goes zero G that’s the analogy. Yeah. Yeah. Okay. This makes it a lot clearer. And you’re talking to me out of my crypto dreams. I would say my only advice there is my thought process, if you are like a broke guy, like under a half a million and you really had to make something out of nothing, then I would probably say, yeah, whatever a piece of crypto, you don’t have much money to work.
He just described me. But the number was different. It’s I feel like you’re not a broke guy. It’s doing all right, man. Doing all right. The fact that you’re even more valid that state of California now you’re doing better than most.
It’s not really much how much you make. It’s more what you keep and part of that is taxes too. And having a less. Lower level standard of living. Some people they spend like 20, 30, 40,000 a month in this spacious, whatever it took me like, cut, you remember the movie inception?
I’ve been like, I like totally used inception to make my wife think it was cool to drive around a car that’s fully paid off. And I paid off our Lindale, her car a couple months ago. I was just like, don’t you feel good every time you get in here? And she’s no, it’s old. Yeah. When I used to do the podcast and I actually had like guests that I stopped doing that because I found that everybody is a stupid group and they don’t really know what they’re talking about.
So I stopped doing that. But one of the questions I always asked is like, what is one thing that you once thought was an absolute truth, then you’ve backed off of I’m like absolute sometimes. But I know enough to know that there are certain things that, based on new evidence, you can always change.
That’s the disclaimer, every podcast here in a little bit, but I thought leasing your car. It was a good thing. And then I did this exotic car hacking class, and I discovered that not what you want to be doing, even if it is for business. So that’s nothing to do with it. You’re always earning it.
Open-minded like you learn these things from their peers. That’s the key critical part. Yeah. So unfortunately you double down on that whole car payment thing and thing off assets. To me, it doesn’t matter if it’s a depreciating asset or appreciating asset, it doesn’t matter. It’s all clumped together and your personal finances and your network anyway.
It’s for me, it’s more of the principle of I don’t need new crap. Keep telling yourself that if you don’t have the money, but if you got the money, you got choices by whatever you want. You did it the right way. Yeah. Yeah. I think that’s a lot of people in our group they’ve started to build that automatic viewpoint.
It’s like super frugal, right? Mr. Money, mustache. Yeah. But whatever, if that effect gets you going, that’s the character you don’t land. I don’t like going home and complaining to my wife about what she bought, but I also, I don’t know. It’s both though. It’s yeah. I’d like to be able to afford the right.
Nice thing. I also just don’t want to fill my life with possessions and like, how did that be the focus? So it’s tough to be both. But when you’re in the growth stage, Especially under a million dollars net worth, or maybe under two to $3 million. So trying to grow your net worth, these are the decisions that you’re going to have to make.
But at some point, the, you hit escape, velocity, your money works harder for you. At that point, time is more valuable than money. And at any point at all for nothing but not many people get to escape velocity or get even close to it. It’s are you saying I shouldn’t pay off my car? Yeah, you shouldn’t.
Yeah. You shouldn’t do that cause it’s like, if you can get really good car loan. No, I didn’t. I didn’t pay it off early. I just mean like we owned it for five years and the loan amortized and it is the last this is done. And now I got. I need to get a new car payment. He wants to go, wants to drive an old car.
And this isn’t my personal thing. This is a person, this is you. You only have one kid, right? Yeah. Yeah. When you have three that are eating Cheerios and puking in the back of your brand new Tesla, you’re going to want to be like, okay, this Tesla is gonna, you’re gonna dive with this Tesla kids.
I’m not getting a new anything I’ve heard. I’ve heard that too. Yeah. And I don’t know, I’m not seeing for experience on that, but yeah. My argument is like the newer cars have the better safety. So that gets you going get a new car. That’s why my wife needs a new car. Yeah. But at the end of the day, like for the money in terms of money, where you look at it, like you have all the equity in that car, just go re leverage it just like you would have had.
But, yeah, you’re not like the poster boy that paid off equity, San Diego, I say, these are like the good, like these things that you’ve kinda brainwashed yourself to thinking like, this is good, right? This got you to this point now, like a savior mentality, but it’s really not gets you to the next level.
It could be, you take, you make these decisions too, like all by yourself. This is the transition to an accredited investor, passive investor, where it’s called peer groups. Your network is your net worth having fun? Because everybody knows that one guy who’s like, when he, when we do like the pop-up events, he’s like really tight, it’s a downer.
Nobody wants to hang out with that guy. And he doesn’t build this network. He doesn’t figure out what, where to invest, where to stay away from. He just doesn’t know because he doesn’t have friends. Social relationships are the currency of the world. The sooner you picked up that once you have money, you need to loosen up and help we’ll fund. You know that’s going to step up to that next platform
that said, maybe we’ll see you in in January and the retreat coming out. Yeah most people will, they will not stay in the nice hotel. They will stay in like the smaller ones. They’re very frequently minded, but they will spend money on other things. But that’s the DNA, but the conscious movement is towards paying money on experiences, trip to Hawaii relationships.
And people bring spouses. It’s yeah, courage. Yeah. It’s encouraged. And this is the group that you want to bring up to. Not the how slipper group, the local group. Yeah. Yeah. Okay. That’s not the Tupperware party scene. No, definitely not. Yeah. That’s the group I want to go. That’s yeah, we’re actually going to do it.
I think I haven’t signed it yet, but I think we’re going to do it the four seasons. So definitely not like by scene, but my whole psychology on this is if it gets the cheapskates and myself thinking differently and a different ethos for one freaking day out of the year, and it kinda set the mood for the right people to start gets you out of your normal state, then you know, it’s worth the extra five grand the way I see it then to go to, I don’t know where we would go the barrier.
Yeah, you don’t. You want to go slumming it, holiday Inn, express or anything? We’re credit investors here. That’s good. Changing future states. It’s good. This is super helpful to talk through it with the different market trends and all your truth telling. At the same time. I’m sorry. You have to pay a wiring fee of $25. Suck it up. All right. Thanks Eric. Talk to you later. Bye. Thanks.
