Tag: dealAnalysis

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What’s up investors now on today’s podcast, you’re going to be listening to the recording green sheet that we did showcasing all the monthly updates and news articles that are impacting investors. If you want to go back to the archives and check out this one in the future, go to simple passive cashflow.com/investor letter.

But before we get going, I wanted to do a. Discussion over inflation. You guys don’t know what the heck that is. Basically. It means that your money is less as the inflation rate is essentially eating it away. And why is there inflation? There has been a whole bunch of money printing as the fed is printing money to keep the country afloat

through the pandemic, these last couple of years and all these government spending programs and entitlement programs, whether it’s right or wrong, who cares right? As investors, how we put ourselves in the position to make out at the end of this and capture a lot of this money. And the way to do that is to start investing and get into your money into things that go up with the pace and inflation.

So you can ride that wave. And if you’re a little bit smarter than the average bear, You put it to things that also you can increase the value and do value, add with it, you don’t want to do, folks you don’t want to put your money into your savings account, making sub 1%. And I would also argue you don’t want lazy equity.

Anything more than 20 30% of equity in there to me is dumb, lazy money. You need to get that thing working. If your net worth is over $3- $4 million. Cool. Do what you want. But most of the people who don’t have their money working are living paycheck to paycheck on their half a million million dollars net worth.

Then you need to get that moving. National inflation rate at the end of this past month was 6% folks. Normally it’s half of that. And another website, if you want to really see what people really think it is go to shadow stats to see what it really is the government obviously wants to under-report this.

A lot of people say buy gold, right? And a lot of people who say that are also getting money off of the commissions when you buy through there their referral sources. So be on the lookout for those types of marketers. For me what I’m doing, what I put my money, where my mouth is, I’m buying real estate, right?

That cash flows just in case there’s a recession. You never know. I don’t think that there’s going to be one, but, by investing in cash and real estate, I have my money in a stable asset that goes up and catches this wave.

Bottom line, get your money into work. Where do you get the money from? What’s your deployment plan? For most people it’s cash. Then once you exhaust that and most of you guys don’t have too much cash liquidity around because why would you want to get into stuff?

So after that, the next thing is get money from your HELOC because it’s a reversible way to get some money out of your rental properties or the primary residence. Once you’ve got boosted concept, or you need some more cash to invest. That’s when you start to look to either do a cash out refi or sell the asset, notice how I say cashflow refinance after the HELOC, because at that point, you’re gonna have to pay some lender fees there.

Those are the lenders because the lenders are always going to want you to do that first. So they can chain right to the bank. After you’ve burned through your cash from equity and you’ve sold off some, lazy equity rentals, which I would argue anything that makes less than a 1% rent evaluation, especially some of you guys been properties in Hawaii, Washington, California, get rid of those things.

They’re not good rental properties. They don’t make a good amount of rent for the dollar that it costs. After that, now we start to look into the IRAs and then the 401ks and stuff like that. Now this is where things get tricky, right? Because when you start to take money out of that, you have to pay some penalties, which is not very much.

When you get money outside of all those garbage marketable securities are going to make a lot more. So it’s just a wash at that point. Usually the break even point is about a year or even less or a couple of years at worst. But then it gets tricky because your AGI goes up also, for those of you guys, who’ve been looking at the 2022 tax brackets marathon jointly $340,000 is that big split where you want to stay on this. But this is totally new to you guys. You guys need to check out the tax guide at simplepassivecashflow.com/tax. It is your job to understand this stuff.

And if you guys want to do a free recorded call, I know all the other listeners are chomping at the bit to hear your story. To do that send us a email at team@simplepassivecashflow.com We’ll get you on the podcast for a full one hour strategy call and in exactly your situation.

If you want to check out all the past coaching calls that we’ve done and we’ve, must’ve done maybe a few dozen at this point, go to the YouTube channel and look at the playlist for all the coaching calls. And if you guys are in the membership club, by going to simplepassivecashflow.com/club, you’ll get access to the members portal where we’ve arranged all the coaching calls and order of net worth.

So my recommendation would be, find what your net worth is and start with there and start to work your way down to get to some of the higher net worth folks calls. And you’ll start to see the same themes over and over again.

But the further ado here is the show and thanks for listening.

What’s up folks. This is the monthly market update, January 2022, where we’re going to be going over the headlines.

So the Easter egg for those you guys come in and next week we’re going to be in Hawaii, hanging out have a worst 70 something participants here in Honolulu, Hawaii. So you know who I am my name is Lane Kawaoka. I grew up in Hawaii became an engineer and then I didn’t realize, I didn’t really like it.

Luckily I had invested in a rental property, which eventually grew to 11 rentals in 2015 and then I started investing in syndications and private placements. Today, well over 7,000 rental units of billion dollars of assets under ownership. And I run the family office ohana mastermind where we help you get from a million dollars to $10 million plus.

If you guys haven’t checked out the podcast, go to simple passive cashflow, passive investing, check us out there. But today just a little bit of teaching point. Most of our group are accredited investors these days. So sometimes we’ve bashed little, non accredited investors and they’re buying little rental properties.

Really, there’s no reason why you want to own little rental properties. To me makes no sense. Why would you want to take on the legal liability, the headaches? You’re not able to do value, add real estate, especially if you’re doing it remotely. If you do, you’re joking. And you’re just reading too many BP blogs and stuff like that.

It just doesn’t work. A credit investors invest in as a passive investor where they’re not the active partner. They are the passive, the old money involved. And then let the young people do the hard work and they make money when they make money. But here’s some of the conversations that we’re having in the group.

If you guys want to check this out on the YouTube channel, make sure you guys go to a simple classic castro.com/investor letter, where we have all the YouTube videos to check, take a look at all the charts and funny pictures we have in this presentation. So first thing off teaching point. So multi housing news releases what’s hot and what’s not in apartment interiors.

So what’s hot during Instagram moments. Like nice backdrop. So places where like Instagram influencers or just people just regular people want to take some pictures behind art and customization luxury finishes for all the sort of the theory is if you have a class B apartment, you want to have a class, a.

Clubhouse so that when new tenants come in, they see the new facilities and they, they fall in love with the place. And if you have an in-class place, who will, it needs to look like super posh, a plus if you have a class C apartment, like some of the ones that we have, they look like class B type of clubhouses.

So this is a real page dot crumb or St. Multifamily investment volumes soar in the Sunbelt. So this is not a new story to some of you, all the share of apartment sales in the Sunbelt markets increased by 8.3% in the past 18 months, pushing occupancy and rent growth to record levels as of third quarter.

So the Sunbelt states, if you draw a line from like Arizona, New Mexico, Texas, Alabama. I believe the next is Georgia then out to the Carolinas and Florida that’s considered the Sunbelt, which is where most of the demographics are heading these days. Because for whatever reason, I don’t care why.

I just follow the data and I just follow the money, invest where it makes sense. But in my theories, like people want to be in warmer climates in more economically driven areas.

Think housing news also reports why the south east remains the star multifamily. And it’s some of the reasons for the previous slide, perfect climate, lower costs of living tax breaks, high paying jobs, major metros in Texas, providing lower cost of living compared to west coast tech hubs, Texas doesn’t have any income tax, whereas like Washington state has no income tax.

Who wants to live in Washington? I guess I can say that since I lived there, but just joking. It’s dark all the time. It’s dark at 3:30. Greenville, South Carolina, Chattanooga or rural Tennessee and Savannah, Georgia. Now these are smaller cities that have in common is in lower cost of living, but you might see some good investment opportunities in because the kind of fall in this Southeast Sunbelt type of area. One of the appeals of Southern charm of a smaller town is also appealing to residents.

Me personally, I want to stay above markets that are d efinitely greater than half a million population. I don’t really like those really small markets personally these days, because, if the market gets softer right. Where people move right back into the city centers for jobs right now, we’re in a nice growth pattern right now. So all bolts are fluid, I want to be in those major markets and major markets definitely greater than a million population.

RE business online reports of active adult communities thrive during the height of pandemic is this is a sector strong performance during the global financial crisis. So you’ve seen that this asset sectors resistant to these types of impacts, maybe it’s because they call it a sticky renter who stays in apartment longer than traditional multifamily renters do. The traditional resident stays five to six years of in my opinion, most people move out in one to three years.

Residents really want to be with their peers. Number one marketing term that triggers these kind of older residents. They want to be in a quiet community with activities that cater towards their. I personally don’t invest in. I actually, I am in one, but I just, senior living seems to be a bit of a beach, very similar to investing in student housing, military town short-term rentals.

I prefer not to invest in niches. I prefer to invest in like the glut of America, where most people are at the lower middle class, workf orce housing. So these next series of graphics we have here as joint comes from the joint center for housing studies from Harvard university, who comes up with great, very interesting thought-provoking articles.

I’m going to show some of the highlights here and they’re answering the question, have more people move during the pandemic and in this graph, it shows. The number of people in billions threw her out the last few years comparing 2019, 2020, 2021. Now, one thing that is consistent amongst all the years is you’re going to see a bit of a apex in the may through September periods.

I think that’s just confirms that we all believe, right? Those are the peak leasing months. That’s when people are moving getting ready for school. Definitely the holiday periods are the parts where it is a little bit lower. You see a little bit of a nice little jump in January, right off the first of the year, but then things really start to go into stay frozen.

And maybe that is part of the weather. January, February late January, February is the lowest part of the season. But from my look at this graph, there’s a slight fluctuation between. 2019 being, higher by very small portion, I would say maybe a few percent points more than 20 21, 20 20.

Here’s a little bit different chart showing the temporary change of address requests a little bit different datas. From the summer months, may through September, very consistent through the three years. But in 2020 is where you’re seeing, which is the first year of the pandemic was when things really changed in March.

Maybe people started to you know what I’m guessing a lot of these people moved out of the war. They were maybe somewhere else or with their parents or with some roommates or with whoever. And that’s where you’re seeing this huge spike. March and April of 2020 are people changing addresses.

So this was an increase of 18% to the monthly trend due to patterns at after April don’t know how that helps you investing. But I think, this just, I think this is again, confirms that the peak movements, if you have a vacancy in your rental, your, they want to get somebody in. Prior to August, September, especially October, November.

And now this is the different charges. Your individual moves have been elevated during the pandemic individual moves remain elevated early 2021 before dropping with 19 million was in January through October.

And the last chart here, family moves, fell apart after the onset of the pandemic and have remained at lower levels. One possible explanation is that people who were able to move as individuals had more flexibility during the pandemic and responded by packing their bags and leaving just makes sense, right?

Where those people were in a family who were a lot less able to do so and responded by hunkering. I feel this. I have a child non I don’t feel like I can just go wherever I want. So go figure, switch a news here. Commercial property, executive reports at JP Morgan chase makes Dallas headquarters official.

So they are moving into the chase tower, which is in Dallas, the fourth tallest building to a smaller building, half a mile away. As of September the national office vacancy rate registry, 50% basis drop month over month reaching 14.9%, but it’s still 130 basis points year over year within the same period.

Metroplexes office vacancy rate decrease month over month, but remain higher than the us average plucking in at 18.2%. A hot market like Dallas I think different asset classes, they. They react differently to things like pandemics or recessions, if this is just highlighting the office, but definitely, office in Dallas is doing better.

The other Metro markets switching over to construction activity, top five industrial markets for construction activity. Again, highlighting the word industrial. So this is like warehouses, not necessarily like apartments or places like that. Number one, Dallas. Number two Phoenix, number three, Chicago, four Indianapolis, and five empire, which is San Bernardino area.

So those are the top in terms of square foot, under construction. But you have to also read into the next column here, which is percentage of stocks. Dallas Fort worth is number one on the list with most square-foot up under construction of 36 million, but it’s only 4.4% of their total stock. Whereas Phoenix number two 30 million square feet under construction is 11.4%.

So you could say that Phoenix has a bigger job in terms of their magnitude. Phoenix industrial mark has been a long target for both the developers and investors owning to rapid population growth company, relocations to low relative costs, particularly compared to Los Angeles. So there’s a big migration pattern from California going out to Phoenix other, and the top of the list, of course, Dallas Fort worth Metro had the highest level of industrial nation.

Or 4.4% of inventory because of low taxes, immense population growth, narrative, corporate relocations, despite deliveries this year at nearly 20 million square feet, vacancy kept a low 4.9%, one full point floor event than national figure. In this kind of just two different data sources, but Dutch, industrial, Properties doing a little bit better than the office counterparts, but I think you can also read into, wires.

There’s a demand there. General population growth, and that’s where you can extract relate. If you’re now in a multi-family or residential investor, you kinda need to look at these types of data sources to, to get close to the news commercial property executive reports, interest rates are heading up.

Here’s what to watch now. I think most investors, they freak out about invest in interest rates going up. And here’s why it doesn’t really impact sophisticated investors because sophisticated investors make money based on the cap rate of what the investment is making minus the interest rate, what they’re paying on their debt service as interest rates go up typically, so to cap rates and so to rent squats, exponential.

So I’m going. I always say it sounds crazy, but if I welcome interest rates to book, because that means the prices of my properties are going up. And that’s also means that the rents are going up most likely to.

What should investors be watching a piece of a tapering? So the fate, if the fed tapers bond purchases, the program will end in 2022 triggering the event for interest rates slowly begin increasing. Now the government takes forever to do this type of stuff, and it just the history from what I’ve been tracking at the last decade.

Now, when they say it’s going to end in mid 22, I’m just gambling here, but I’m gonna say it’s probably going to be a six months to a year plus after that, we’re just really going to start to be impactful type of thing. Also watch the labor force participation rate with the fed state of focus on achieving maximum employment and the labor force participation rates still below pre COVID levels.

In spite of the fact that enhanced unemployment benefits have been. And schools up and broadly be open. What is the feds road? Stimulating labor force participation world for means to be seen, as we all know right now the power is in the favor of the workers right now. Where you could probably see in last several years where the employers had the pick of the litter, now.

Workers or having a little bit more rights, they’re pushing the weight around trying to get raises. At least the white colored workers are trying to do that. I just, read all these things where, these long employment applications, workers looking for a job.

And I already have jobs looking for better jobs or saying, screw you guys, I’m not doing like a three-page application. This is ridiculous. Why would I want to spend so much time? And especially if you’re not putting down the dang, like salary rate, maybe it’s just, that’s just me. Cause I’m like, I don’t, I’m not a worker.

I don’t really work these days, but why would you not put the salary on your list? What person do you expect to complete your application? Who doesn’t have the self-respect or knows their value in the workforce that wouldn’t want to look how much the salary is and would wait to the end? I don’t know.

Call me crazy, but now I think a lot of people are moving more in that direction at the point. And I’m sure it’ll go the other way. At some point in the. Good. I digress. The last point here is the wage growth inflation rate. The fed has largely dismissed, concerned about inflation, which was just reported at 5.4% year over year which growth is much stickier and can drive long-term inflation, which could pose challenges to the Fed’s low interest rate environment in the coming years.

Also reporting by the commercial property executives, how high inflation could impact rates. So reads. We don’t really like them. I mean their retail investments, they have some funky rules where they have to pay on 90% of their income to investors, which sounds good, but it’s bad if you really want, what’s really best for the investment, but, reads, I think on an institutional level can be used to just get a look quick Brahma or how things are in relation to different asset classes in the stock market world. Here they’re saying they’re largely depend on the length of time. It takes to study rising interest rates as long as how the high, the rates get inflation and higher rates remaining.

Temporary issue us equity rates, credit profiles are likely to suffer. In terms of liability duration, it’s best for you in the context of performer, these 10 or long-term leases provide less immediate opportunity to raise rents, to offset rising costs, controversially REITs, that own operational intensive property types and shorter lease durations are better able to handle potential spike in interest rates.

So what they’re saying is, REITs are typically big into more institutional tables. Commercial properties, office space buildings, where the, it doesn’t work where you sign a one or two year lease term or one year or less with the apartment owner. Here there’s, they’re signing, several years, sometimes even decade plus term contracts.

So if there’s inflation logically makes sense that those types of leasing environments would make less sense. Or would hurt the REIT in that case where the more agile and more limber investor or private equity investor investing in more residential type of properties who have that shorter time horizon are probably going to be doing better in inflation, as we’re probably going to probably see if any leg between rents going up and inflation going up it’s a pretty liquid type of quarterly.

Goes pretty, it’s pretty instant in a way. But I think, you could probably specificate versus probably say that it could also work in your saying inflation goes down and we go to not inflate inflation environment, but a deflation. It feels shorter term thesis could probably hurt you, but what would probably happen in that environment?

You know what the commercial leases that are long-term 10 years, like those big companies that do those types of leases, they’re not dummy. They know their power. They’re going to probably just retrade whether it’s ethical or they’re just business. So they’ll probably just say. Hey, there’s a deflation and we can’t pay.

And that’s, I think that’s what we’ve heard some complaints from some tenants or some investors who do own long-term triple net deals is that through the pandemic, the tenants of all their nationally recognized names and nationally accredited, good balance sheets. They just said, Hey man, Hey, Mr.

Little landlord, we’re not going to pay you this month. So Sue us. Yeah. Imagine getting a letter from Starbucks saying, Hey, we’re not, we’re just not gonna pay you this month. What are you going to do about it can take us to court. It is what it is. Multi-housing news says inside Texas hot single family market.

And so a lot these built or read communities are coming up because people can’t afford. If they are newer properties, they’re a little bit smaller and, but they’re not as high end, but at least they’re new. And that’s what the appeal to new potential home owners or these buyer to rent.

Communities are coming up with Austin, Houston, San Antonio among the most sought after market. A trend coming up. As many consumers are choosing to rent instead of purchase many younger residents, desiring to live in the moment. So to speak rather than tied down to home ownership and a mortgage, which something I’ve always said, right?

If your net worth is under half a million quarter million, I typically think that it makes more sense to rent and buy investment properties. That is if you are good with your. I guess that said, most people in this country are not good with their money. They spend money once they, for David in to save it.

So buying a house to live in is a force piggy bank, but more information on that go to simple passive cashflow.com/home. And if you’re thinking about buying a home, maybe you read that first before you make potentially the biggest financial mistake of your life. Don’t. So finishing up this article at demand and single found me rentals continues to remain well oversupply, as we suspect that continue for the foreseeable future, the single family rental sector and the build to rent specifically is not a fad.

I see it as the idea is you build these things and you sell it to an institutional owner as a lot of the institutional money is coming into this stuff. But. I am not a huge fan of wanting to hold onto this stuff. Long-term because for the reason why you go to apartments with one roof, all the systems in one place.

Sure. With these built to rent communities, all of the properties are standardized the standard part lists standard, and they’re all in the same facility. So you don’t have the issue of running all over town to maintain properties. And you can have one central hub for your maintenance staff, but they still think.

It’s difficult to deal with the individual roofs, for example, and just too many things that will break on a single founding overflow. Whereas, our apartment, you just have the interior walls of each individual unit is what you have to worry about. You literally, just count up the number of sides of the building that you have to worry that potentially can go.

San Antonio’s top of relocation destination for Austin renters in San Antonio. The overwhelming majority of these searches were coming up from Austin. Houston was number two and Dallas was number three. So these are people searching for places relocating in Texas. Out of state and new renters are more likely to come from Orlando, Atlanta, and Chicago and interesting San Antonio is, are actually looking to move to Austin with the mate majority of local outbound searches for the people who are in San Antonio that are looking to go elsewhere.

So those are the thing, the trading, a lot of it’s a shuffling of the same people, but that’s where people are looking towards. We believe that San Antonio is definitely one of those emerging markets that Dallas is the second with the, people have to move out of Austin into Dallas,

the business journal reports, the fastest rising us rental markets. Number one, Phoenix, Mesa, Scottsdale, Arizona. No surprise. And that from the Dallas business journal, not normally, do you see a Dallas business journal reporting that some of the place other than Dallas is doing well, and then this report from, or just following what Blackstone is doing in a recent article?

Where they’re saying that the, just quoting Blackstone, the fourth quarter earnings could be up 18% on the problem will have an impact on the economy, but the economy is strong unemployment at 4.2%, no layoffs housing prices going up a recession. Isn’t in infinite. I think. That’s what I’m reading from.

A lot of my independent data sources. The only people that are saying that there’s a recession or are like crazy YouTubers that just want to day trade attack. Get you to watch the traffic accident on the highway is really say the housing news also reports that Cardone capital uncle grant Cardone buys for Florida properties for $74 million of, and there was 1700 units in that for four property portfolios. If you do the math and I’m going to make sure I do the math for you real quick. 74 million, advise 1700 is about $435,000 per unit.

I looked at these properties and it doesn’t look like they get any much more than 2 2500, 2020 $500 a month for rent just saying purchase price again, per unit 435,000. Sounds like some California prices to me, if it was me, I’d buy in California for that rent to value ratio, but a different game.

And he gets paid on the acquisition fees, et cetera, that type of stuff. And it’s more of an institutional deal. So investors don’t get paid as much.

Adam reports, house flipping profits decrease again. Oh, I don’t know why you want to be a house flipper order and income, unless you like the ego of it. But it really is not very much money you make. It’s how much money you keep and how much time and energy you put into it. Which is why we like the passive route.

But if you don’t have money, you don’t have a good paying job. Then I get it. You got to flip some houses or go find a job. I wrong with a job. I had one. So if you guys like our community and you’re looking for more other accredited investors and tired of kicking tires with a bunch of the local real estate clubs and beat up groups with lower net worth guys check out our family office group at simplepassivecashflow.com/journey.

We have 85 members a bunch just joined this past month. You get the e-courses, you get the biweekly zoom calls. We have mini masterminds where you break up the big group into little small cohorts based on your net worth. We also teach people a lot of these ideas of wealth building mass we have mentors within the group.

So a lot of people stay stick around up to the first year. It’s a big on community, but it’s within this close knit circle. Also my book is releasing January 25th. So if you guys can help me out check out the book for free. Go listen to, I recorded a bunch of videos of myself reading it, like fireplace story time. Go check them out and go to simple passive cashflow.com/book.

You can also text the word remote to 3 1 4 6 6 5 1 7 6 7 to get access to the remote rental lite e-course to learn how to get started investing in real estate, the rental properties, like how I did.

But now we’re going to get going to some of the, we see some questions queuing up. I see an infinite banking question there. We’ll get that to that, to the, and if anybody has any questions or comments that then we’ll try and get to that too. So this is a personal account of what I’ve been doing up this past month and to round up the year 2021, what a big year again. But we hired some more staff trying to find people that are better than myself at doing certain things.

So I can focus less on, answering middle investor relation questions and Focusing on things I should be doing, which is to getting into infiltrating other circles of other family, office groups, other sophisticated investors, finding deal flow, and doing exactly what, in my opinion, my job is, and not screwing around with editing podcasts, like how I did in 2016 or that doing those types of stuff.

And as I’m learning as a relatively new entrepreneurs, not about, doing things myself, it’s about building the team after a certain point and near ship. The book is dropping seven are the 25th of this month go to simple passive cashflow.com/book to check it out next month.

This this coming month or next week, we have the retreat super excited about that. And I’m going to tell my team, Hey, let’s go out there and let’s go change some lives. The thing that changed my life was meeting other accredited investors and other, just remote investors, investing in turnkeys without even seeing the fraud.

I thought I was crazy until I met a whole bunch of people doing it, and I felt like I wasn’t crazy anymore. So if you think you’re crazy for not investing in the 401k and the stock in and buying your own house to live in and taking money out of your 401k and not doing a Roth IRA, not the health savings account, nothing a 5 29, who doesn’t do a 5 29, you must be in a jackass for not doing that.

You don’t care about your kids. There’s a different way. And will, infinite banking is one of those ways. Do a better 5 29, but there’s a lot of these strategies that I learned that the wealthy do that we’re going to compile a lot of the people who are leading in that direction at, in Hawaii January 14th to the 17th.

It’s not as, it’s probably too late to register, but you can check out the videos that we do coming up some other significance things that I’ve got significance for myself. Close another deal in Glendale, Arizona, and just keep adding to the portfolio. Pizza spread between class a and class C deals value, add development, have be value, add plays to me like what I’m trying to just invest in workforce style housing stuff for the regular people that do it the way I see it.

Pretty recession proof.

But what are some things that are concerning to me, uncertainty? The crumb thing is new main, but I think not to say that’s not important, but from an economic standpoint, I don’t think that there’s huge concerns over the economy. Tax implications potentially is something I’m potentially a little worried about.

Although a lot of the scary things that they did discuss about like getting rid of solo, 401k self-directed IRAs are really inhibiting a lot of that stuff. Getting rid of 10 31, there’s just went away. And I think it’s important to note two years from now, when did the same talk happens again?

That it’s Hey guys, this happened before nothing happened. Don’t freak out about it. This is just a posturing issue thing that goes on in, in Congress that things just don’t really change, but generally move in certain directions. But there was, I think you, and I say top tax implications, I guess what I was thinking of was, where they’re going to be more types of solid case law on like land conservation easements, or.

I don’t know, can’t think of any and nothing really concerns me with that type of stuff either. Especially when you’re a passive investor and you have a lot of passive income, your deductions from the investments, from your depreciation is going to offset and that’s going to be your game.

It’s the people with the ordinary income problems that people make high salaries. Those are the people who have to get your money into passive investing. So you can get trade your passive investing money for. Or passive investing income for your ordinary income. So we can use that to use a passive loss as the lawyer your your income level.

Somebody had a question. What do you think about interest rates impacts in 2022? As I mentioned earlier in the call here I don’t really care too much because cares if the interest rates go up. Then my cap rates are the returns they make from the investments that I’m already in are going to go up in parallel.

Go look, go Google interest rates versus cap rates. They jumped, they go up and down and tanned up for the most part. Sure. Sometime as they squeeze a little bit together and the Delta gets. But as investors, that Delta is very important because essentially what we’re doing is we’re taking that Delta, which is the spread between the interest rate, what you borrowed the money at and what you make in the investment.

And you apply debt and leverage. That’s, it’s a simple thing, but a lot of people just don’t think about it like that. And interest rates are going to dance up and down and sort of cap rates. But as long as you’re in the game it really doesn’t matter, but where the game changer happens is if you’re playing a game of value add you’re putting in improvements, you’re changing out, cut our tops.

You’re adding playground equipment. You’re pressure spraying the side of the buildings to increase revenue on the buildings. Now that is called force appreciation. It’s much more powerful in commercial real estate, as opposed to. Changing out the countertops, rehabbing the kitchen and hope crossing your fingers.

That a home buyer, retail buyer will pay more. That likely happens. That happens a lot, but on the commercial side, it’s a lot more of a sure thing, right? Because properties are based on net operating income, divided by the cap rate. And that is something you have control over your destiny. So yours is going to have a spread in the interest rates and a capital.

But where you take your own destiny in your own hands is when you take that, you increase the value of the building by doing value. Add, maybe you decrease the expenses too, while you’re at it. But calling a cavalier way of doing things. But, I don’t really care about interest rates and plus like the interest rates don’t really change too much, too quickly.

This is just coming from a guy who’s been doing this since 2009. And every time the fed says there’s been a racer rent rates, it’s Ooh, who cares? If I was a home buyer and just buying a house, then I’d kinda worry about it a little bit, should I be paying 3.7, 3.5%. But when you’re in a commercial grade investor doing value on your properties, it doesn’t really matter.

As much, I think when you are looking at the returns as an investor and you look how much money came from just the pure cashflow or that, that play between the interest rates, where the interested city mattered and the value add proportion that you build that equity up, it’s typically like the vast majority is coming from the value, add portion of it.

And another thing to think about too is, When you’re, I said, when you’re evaluating the properties, that’s when you taking your own future in your own hands, but we’ve discussed this many times and that’s what we try and do here. We try and keep things very simple, easy in this crazy world.

Some ways I’ve had some certainty in my life. You’ve got some closings coming up, Q1. Pop some champagne bottles of full cycle deals, but then you know that money’s probably just going to go right back into the next deal again and again, BU but Hey, that’s what I enjoy, right?

Like I think a lot of investors have this attitude of grow plant, some seeds, grow garden, grow some flowers, grow some things with some more seeds and plant the seeds. Had a deal where we returned some capital due to less construction scope. That’s always nice when you overestimate construction scope and you have some money come back got a development. This is just a state of the market. Like people want to buy this stuff at crazy prices. This is the time when you want to be developing and doing value ads to sell to more of that larger investor or the retail mom and pop investor who doesn’t know any better.

And another thing, I’m trying to get rid of all these single family homes. I got one left in Alabama for three, wants to buy it. They offer actually, don’t get probably you guys are real estate investors, pop investors probably give me a low ball offer. Don’t waste my time through. But I’ll be really happy when that one’s gone.

Look it really looking forward to the retreat. Hopefully we can make a lot impact on different people and make a lot of connections cause that’s what it’s all about. Some things I bought a bunch of these COVID tests. What a cool world we live in, where you get. Test yourself to see if you have a disease in real time.

Just think about that. Like what a cool time to be alive. You know that, to me, this is amazing. And then, now they have like terms for different Delta or omicron or whatever. The fact that they even have like names for this type of stuff, they didn’t have this 20- 30 years ago I’m thinking.

Something else I bought, we had our first kid recently and my wife didn’t drive anywhere. So I thought it would be a good idea to not have a car for her, cause she’s not going to drive anyway, but that didn’t go on for very long. Apparently everybody, all adults need their own car is what I learned.

So if I bought this GV 80 which is a cool car, so I was like, I wanted a Porsche because Porsche’s are cool, but they’re overpriced. The sticker price might be like, I dunno, it’s 60, $70,000, which doesn’t seem bad, but there’s absolutely nothing in that car. If you want, like half the amount of like upgrades, it’s gonna, you’re going to turn that Porsche to a hundred thousand dollars Porsche.

And same thing goes for Mercedes GLE, BMW X5. What I like about this Genesis, this GV80 is it comes fully loaded, but even more than what those other cars have. For example, they’re like the button on the thing moves back and forth with ABI going, getting into cars with his grave. When I like some jerk, like parks next to me, and I have to put in a car seat, the baby car seat, like I can move the car out and put the car seat without hitting their car.

Cool when I go like this and I make a, like Luke Skywalker star wars to a mix of look like I’m moving at there’s these like shade, privacy shades in the bag that is makes me feel like I’m in a back Mercedes. The dash is 3D. It’s got all like the standard, like adaptive cruise control type of stuff.

If you guys have a modern car, you guys know what all of these things are, but like this thing is pretty much fully loaded. The only thing that it didn’t have that was in the higher level was like the soft close doors where you can just be like, let go of the door and it closes itself.

Maybe that’ll be in the next car we get, or maybe we’ll just have flying cars by that. But if you’re looking for a extremely good car that’s his like value. Maybe that’s what the V stands for. Good value, eight GV 80 . I would go, I take a look at it, but, and it can’t be Mercedes or BMW or whatever Porsche, but you came for the badge, which I think is fine too.

I only get one of these questions here. So we had a question about infinite banking. After you take out the maximum amount of loan against cash value of a whole life insurance policy to invest in syndication deals. Is it better to fund the paid-up addition to increase the amount of cash value in the whole life policy, or is it better to pay off the loan first?

I think the important goal is to not lose your ability to. To keep over funding or the PUA paid up addition. So some of these carriers, some of the ways you can figure it are very inflexible. Like I have, I’m actually very confused by this too. Cause I have three different policies at three different carriers and three different really wonky restrictions I have to, or like circumstances I need to hit to not lose my PUA.

So like one of them. I have to keep funding at every two at every three years. The other one has some kind of five-year look back. The other one of them is the most is the most flexible where I have, I can just fund it whenever and just skip it. But a lot of this is in the infinite bank e-course you guys can get free access to that@simplepassivecashflow.com slash banking, but that would be the first thing I would look at is how does the.

How does the flexibility component look for that for your policy. And this is where this becomes very personal, right? And you may not know like how your deals are cashing out or your windfalls or cash or your income at your day job. That’s just, you’re going to have the best idea on how to do this and make the best judgment call to prioritize.

Filling that PUA up first, right? If you’re going to be able to hit the PUA A next year and the year after then maybe you might prioritizing paying off the loan. But because you’re mentioning that, I think that’s a big newbie mistake. I see people is they have this loan on their infinite banking, the whole life IBC, but then they freak out about paying off the loan.

I get it like where it comes from. I it’s just Nope. And I think it’s no different than like, when you first got a hilar on your home, there was like a payment occurring in the background, but you learned after some time that, and don’t freak about it. It’s just there, right?

Yeah. You’re making money elsewhere, at a time. Higher frequency, higher rate. And that’s why you’re doing it right. Essentially. We’re arbitraging the money in here, but when we have the big windfalls of cash, this is a good place to put it. And. The paid-up addition, where I think about is every year.

So you get another container unless you don’t start filling them up. And again, that was where I was mentioning. All of them have different circumstances. Some policies are like, you get another container for the next year, but you get, unless you filled up last years, you don’t get another one. So that’s where you have to look at your policy and then you have the kind of forecast or what you’re going to be doing in the future.

I just speak from my own experience. Like I had deals cash out recently the end of the year. And I was looking at my policies and I had to pay off. I had to do the insurance premiums first, I guess that’s the priority, right? You got to do the premiums first, which is usually a very small amount, unless you’re doing a jacked up

infinite banking where the insurance premium is high, as a percentage should be definitely be like less than 30% of the premium that your guys screwing you. Pay that first, then you have to look at, should I pay the paid up addition? Or can you I elected to, I didn’t realize it, but I owed like a pretty large sum loan.

I have a lot of times they don’t allow you to take out even more loan if you don’t pay the premium. So again, you pay the premium first, which is, should be a very small portion, should be pretty easy to hit that, but then the PUA next and then, so what I did, because my stuff is confusing with the three of them.

I made a little spreadsheet where I have the anniversary dates and then I have 2021 insurance premium, 2021PUA and then 2022 insurance premium 2022 PUA amounts and then repeat that for each year for insurance premium PUA. And my thing is what I, and then I also have a a column on the left side where I have my cash value and I also have outstanding loan.

This is how I go. This is my dashboard. So I know that I’m paying off the premiums and paying into the PUA but I may be also carrying a loan too. And that may, maybe the smart thing for me, based on my situation. So I don’t know. If it’s beat at the death there, but if you guys want to dig into it, I’m open to doing a coaching call, but you guys got a recorder, right?

Like I say, you got to put it off for everybody. Clean advice, if not just sign up for the family office subscription. Stop screwing around and get around other people doing this stuff and you start to learn this stuff through osmosis and you start to build a peer group to learn this stuff.

But with that, this episode was also sponsored by GV80 Genesis. Anyway, we’ll see you guys next month and thanks for listening. Bye.