Tag: proTip

Non-qualifying Home Mortgages and HELOCS With Benson Pang

https://youtu.be/PVKHW4R35lY

Hey simple passive cashflow listeners. Today’s going to be a little bit more of an advanced topic or for some of you guys save for the later, it’s going to be talking about what do you do to qualify for a really big mortgages when you buy these really big houses that, you shouldn’t be affording it, but Hey, you got all this cash flow because you’ve been investing the right way.

 

Now again, might be a more advanced topic for later. But if you’re getting started and you’ve got a lot of home equity, if you’ve got more than 20% of your property, your home paid off, dude, you guys gotta do something with that, right? You guys should not be living by the mindset of paying off your house.

 

Right? There’s these two kinds of sets of paradigms out there, 99, 95, whatever. I’m just making this stuff up. I’m going to argue that 99% of people out there are really bad with their money. They’re not like folks like you who listen to financial podcasts, max out your 401k, good little boys and girls work your jobs.

 

High contributors to society pay most of the taxes. It’s not the wealthy people paying the taxes, that’s for sure. If you want to check out our tax guides, go to simplepassivecashflow.com/tax. If you’re interested in learning more about that type of stuff, and it’s not the poor people. Obviously, we’re not going to go down that road.

 

Now again, a lot of these people were people that look like grownups, that kind of act like kids financially, nothing wrong with this. Again, most people are like this, and this is why the mainstream financial advice out there on the street is buy your house to live in because y’all, can’t seem to keep your grubby hands off your money. So we need you to put your money into this house and pay it down over time. Before you spend all your money on all these things that you can manage your money in, create a budget for. But again, a lot of you guys aren’t like that,   there’s a paradigm shift here, the type of advice you’re moving away from this Dave Ramsey world, where you’re told to pay off your debt and you  use debt now responsibly.

 

And this is why you listen to this channel and you are supposed to use debt to your advantage. What I would suggest is to go to simplepassivecashflow.com/heloc if this whole concept is new to you, I am going to suggest checking out some of the articles I wrote in Forbes at simplepassivecashflow.com/debt.

 

It is a mindset shift. And I think that, you know that you understand it, but you may not embody it. And you’ve got to get around other people, right? You have to join our mastermind group, getting around other people who are taking a huge HELOCS and then taking it. The next level of getting things like secure backline of credits, secure Line of credits on the infinite banking policies is the next step.

 

And for somebody who’s just thinking about refinancing their home, that might make their head explode. And because it goes against everything we’ve been taught, like I always say, take advice from financially independent people moving on this path. Not from your parents, your friends, or family.

 

How are you going to spend 30, 40, 50 years paying down their house and that’s it. They’re going to be cash poor house rich. That’s not what you want to be. So again, all you guys, you’re going to get me to get a heloc first, because a lot of your equity is going to be trapped in your home equity right there.

 

HELOCS  are a great way. You don’t pay fees on it. The only downside is you’re not gonna be able to tap all their equity because the banks are gonna want to sandbag you on the evaluations to cover their old buds. But that’s fine, right? For a lot of you folks who have your properties paid off more than 30, 40% plus, that’s not a good thing.

 

Any time you’ve paid off your house more than 50% and you come into one of our events before are looking around oh my goodness, you need to stop doing that for your own good. And then put it into good investments where you’re going to create positive cash flow and grow your money.

 

And then that kind of creates gets you on the bandwagon for all these tax advantage investments. But, before I go into the whole simple passive cashflow, the trifecta, which is good investment, tax systems and infinite banking, I’m just going to send you to the websites simplepassivecashflow.com/heloc  to get started with that and enjoy the show because if you keep following this, it take most people like four to seven years to get on the bandwagon, get your passive income up by getting your lazy debt equity, which is typically in your home doing something. And if we get them doing something, at some point, it’s going to grow over time.

 

If you have a million and a half in the bank right now, it may not be in the bank. It may be in your home equity, retirement accounts,  if you get into something lame, that’s making 10%, which is very achievable in the alternative investment world. You’re making 150,000 probably tax free. You probably don’t need to be going to work tomorrow.

 

You have enough potential energy. You just have to really shift things and part of that is getting a heloc and putting that money in the right place. So it’s a knowledge game. It’s a mindset shift to get there. Fortunately, you’re gonna need a peer group to do that, but enjoy the show.

 

Hey folks, I got my buddy Benson Pang, a lender out of California, to help me out with a personal issue that I’m having. As a business owner, I am pretty good with my taxes and deductions, but in terms of dropping down my taxes, I drive it way down. If you guys want to see my taxes, I think last year, My AGI was 25 grand in 2019 or 2020. And then this year it’s probably gonna be something very similar. I haven’t gotten it back, definitely like nothing of course, but which excuse me for going into loans now. I co-sign on all my general partnership syndication deals, but it’s totally asset backed.

 

And the funny thing is they don’t care about credit score on my tax returns, they just based it off of the asset and my personal net worth. But unfortunately I can’t go buy a house here in Hawaii cause I don’t fit in their stupid box. For those of you guys who are business owners, this podcast has really pertained to you guys and it also may pertain to you guys. For those success stories out there, you guys want to buy those 1, 2, 3, $4 million.

 

Dream homes. I think today’s podcast is going to pertain to you guys. But this is the second time we have Benson on the podcast. Hey Benson, why don’t  you tell us your engineer to lend a story real quick.  Hey Lane. Good to see you again. I went to school for engineering and graduated civil engineering. I worked at a local utility company, new nuclear power plant for four years.

 

And God, my engineering, masters, professional engineering license, and gave it all up to be a loan officer.  As an engineer, I need someone to explain to me how a loan works in the engineering way. So the whole reason I did that is so I can benefit the engineer  crowd. So we got Benson to explain it in engineering, speak to me today.

 

So maybe it should explain to us like, okay, what options are available for weird folks like us in this situation. For weirdos, like you. I filed my taxes. I got with letter taxes. It’s just, you have a lot of legitimate deductions. And I think in 2020 a lot of self-employed borrowers will suffer for the most of the year. Really for the first eight months of the year is really uncertain. You don’t know where your next dollar is going to come in. You have to pivot very quickly. And hopefully by now of last year, you have already pivoted and started making some reasonable income. And a lot of times when we look at business bank statements, it shows that around August or September is when people started getting their regular deposits back. If you were to look at your 2020 tax returns, you’re going to be like, boy, how am I going to qualify for a loan?

 

Because the first nine months or eight months, it’s just crap. Recently there’s a lot of bank statement programs that pop back up as they allow us to use your business bank statements from your last 12 months to qualify you for a loan. So even in a conventional loan and a home equity line of credit, those are all requiring tax returns, business main statement loans.

 

We call it non QM loans. They don’t look at  your tax returns, and really only look at your business bank statements. So I’m right to think like the Fannie Mae Freddie Mac route is no blood. All of us don’t even waste my time. Yeah, I’ll take a look at it just to see if you qualify, there are things that I can add back but for the most part, yeah, you’re right.

 

It’s going, we typically glance at it and go straight to the business bank statements and a lot of people ask oh, I also have a lot of expenses on the business bank statement. My answer typically is I don’t worry about the expenses. We look at the deposits, legitimate business deposits, and then 50% is the most we’ll take from it.

 

We deduct 50% as your expense ratio in cases like real estate agents, where they don’t have a lot of expense. So we just need a CPA letter saying that, oh, their expense ratio is 10% or 15% and we can use most of that business deposit.

 

Even in a higher expense ratio type of business, I don’t know, manufacturing planner. That will use 50% yeah. You mentioned the 12 month rule. Would it behoove me to take all my income in a certain period of time and then lock it in? Is that part of the game? Yeah, basically. So the lenders we use have an AI technology where we send in bank statements, it spits out an income.

 

And obviously I know how that works. They add up all the business deposits and average in the last 12 months.   What about some business owners who do this S-corp salary, dividend split, where, I can show how much I make right. Are they going more on the business level or that S-corp  level where I can connect to and show my business level?

 

Since we’re  already looking at the business deposits. They’re not going to care about how much of the business paid you as a business owner. Let’s just go off like a million dollar home  this is what exponentially, the price of the home that you’re getting into. You still have to maintain a debt to income ratio, right?

 

If you’re buying a $1 million home, 20% down, your monthly payment is probably like $4,000 or $5,000. Ideally we want to see $10,000 after your expense ratio. So if it’s 50% and we wanted to see $20,000 gross being deposited into your business bank statements, average for the last 12 months or a million dollar purchase price.

 

Correct. Prices here in Hawaii and California are expensive. Yeah. And we go up to a one and a half or even $2 million in those business bank statement loans. What about there are some ballers in our group? What do you do when you’re trying to buy a $5 million home?

 

I asked the question because, like I rent where I live  and I should probably buy, but I just do it to motivate the young guys, give them somebody to aspire to, a good role model. So I don’t buy my house to live in. And I’ve been using this whole thing as an excuse.

 

Oh, I can’t qualify for a loan. But that’s why I’m asking you the question, what do you do when you’re at the end game and you actually want to have a place that you just sink money into, as a money pit. And you want to buy a $5 million, $10 million house. What are the options for that?

 

 At that $5- $10 million range, now we’re talking to a whole different loan. A lot of the loans go up to $3 million. And then when you get past that 3 million, you actually have to have some sort of banking relationship at that point. We also work with lenders that can go up to that level.

 

But now we were talking about okay, are you a private banker with XYZ bank? And now they can hook you up because you have $20 million sitting in that bank. Got it. Like  a lot of people get a collateralized loan on their cash value, life insurance. Morgan Stanley has that.

 

A lot of those wealth management companies have collateral. Like they use their cash as collateral. So that $3 million purchase price. Again, you just have to strategically find that full month period where you have 20 grand for every million dollars so 60,000 or a little under a million dollars  of income per year. But when you get above that mark, this sort of Johnny Walker blue label comes in and walking into some banks is like, just giving you the Johnny Walker blue label and you go divvy that up to your friends and lending partners. Like, how does that work? Asking for a friend, of course. It’s still all by the guidelines, right? But I think in that realm, guidelines are meant to be pushed a little bit. So let’s say someone who has less than required income, but they have other compensating factors, like they have a really high credit score or they have a lot of cash reserves.

 

Then that can be looked past. So it really depends on the price range. I think those borrowers all look very different. It’s not just an 80,000 to $190,000 engineering job. The one thing I’m concerned about doing is that I don’t want them to lock up dead  equity, right?

 

You hear these IUL, premium financing, these types of products that a lot of us talk about in end games scenarios. Like they don’t lock up a lot of your liquidity. You can’t touch it. It’s dead to you. It’s effective, like you put a down payment on something cause you can’t touch it.

 

That’s something I’m a little weary about. So what about this strategy? Let’s just say you went out and you bought the $5 million home cash. Can you get a heloc  and effectively strip out 80000 of that. That’s a lot of money for a heloc. When I think about a $5 million house, I might just invest enough with you and have the cash flow to rent a $5 million house, but that’s the problem, right?

 

At some point, that’s why I do what I do. I kinda currently rent a million dollar house. That’s an average house here in Hawaii, but when you start to get to that higher echelon three, four, $5 million to rent your option goes severely down. That’s true. Yeah. And the people who rent out to those people, they’re a little cookie, right?

 

They’re typically like international Asian investors that own that south. And they, for some reason, somebody tricked it into renting them and they just slipped this on a whim and they kicked you out. Like I don’t want to be kicked out of the place I live. That’s why, unfortunately to me, I have to buy at that point.

 

When you’re at that one, one and a half or even 2 million, I think it would be wise to buy. But if you were to take that money back out of your down payment money back out, you might have to wait a couple of years for that appreciation to happen before you can take the money out. I agree with you.

 

If you put that down payment on any half decent investment, you’re going to have a lot more fun. This is like, when you have such an amount of money you don’t care anymore. It’s more about enjoyment and quality of life, that’s what people tell me. I think at the $5 million, $10 million house, I don’t think it’s about money anymore at that point. Your taxes are like 40- 50 grand right there anyway.

 

Your property tax alone  it’s a lot. So you’re saying the banks would max out the amount of the heloc  thing. Like it’s not as simple as getting 80% of the value. Yeah. Is that the four or $5 million property? Yeah. But when we’re talking about let’s say let’s bring it back from Mars back to earth for a second.

 

For people like you and I, we have a $1 million house in LA or Hawaii, and perhaps your loan is up to six, five, 600,000 and you need a couple of hundred thousand. Usually the helocs  are not a problem, which kind of brings me to a lot of people asking me, like I asked, should I cash out?

 

Or should I take a heloc? How do you typically do? On earth, not mars, right? Like the heloc  you’re going to get away with less fees doing it that way it’s more flexible. To me, the downside is that HELOCS can be pulled at any point, whenever the world gets a little crazy. And I think the bank is always going to screw you with the appraisal.

 

They’re always going to shortchange you on that perspective. Effectively, you’re only getting if the advertised LTV was 80% email and he gets 75 or 70, but at least you don’t have to pay a lending broker and go through all the blood draws of DNA samples and pay fees too. I don’t know what you would do?

 

 I’ve gotten a couple of helocs  myself and a couple of times I, they actually asked for more documents and when I was refinancing myself.    They actually asked for more because when you get a heloc  now you’re at the bank level, you’re at their mercy of their guidelines, their heloc  guidelines.

 

And each bank might have a different guideline. The US bank or bank of the west, they one might ask for two years of tax returns. One may ask for one year. But if you’re doing a conventional loan, you already know what the guideline is. So to me it’s a similar difficulty and even on a cash out, you can do a no point and maybe even no fees kind of cash out refinance. The pros and cons are number one. I need a HELOC, or why do you need a HELOC?  I need access to money from the equity, right from my house. Why do you need it? Is it for the short term or is it for the long-term? To me HELOC is more like the short term.

 

Like you said, less secure because they can pull it anytime when there’s an economic downturn. They can pull it to today. Tomorrow. Wells Fargo froze everyone’s personal line of credit, even though they unfreeze. I think a couple days ago but it shows that they can do what they want to do with their line of credit.

 

What about the jumbles is conventional financing, right? So for me, there’s no chance that even looking at that, when it comes to jumbo, you’re looking at an even lower debt to income ratio, right? 43, a debt to income ratio instead of 45-50. And they asked for more documents. So a lot of times in LA our clients who are looking at 1.1, 1.2, we in 20% down, we sometimes help them do what we call a piggyback loan, where they get the first loan as a conventional loan, Fannie Mae, Freddie Mac loan, and then a second as a piggyback HELOC.

 

So it was a smaller amount where they can manage to pay off in the next 10 years. Again, heloc  has a ten-year drought term adjustable rate. It can turn into a fixed loan after 10 years at market rate. And that like whenever that fateful day comes, when I give you that call, you may choose to piece it in that fashion or go to somebody in your black book to get the whole thing as a business loan or  the non QM. See, that’s a thing too. Bank statements are just one of them. There’s 1099 loans where, you get a 1099, you’re a truck driver. You could be a real estate broker and you get a 1099. I can go off of that 1099 instead of bank statements. And or if you have a couple million dollars sitting in a bank and you just don’t have active income, we can actually use something called asset depletion loan.

 

You, you have $2 million, we divide by 84. And that’s your monthly income? That sounds like a lot of people in the mastermind are getting like they’re stuffing their cash value and over time, maybe it goes to over a million dollars. They can take the loan from Penn mutual or whoever they’re working with at 5% or they can take it to one of these little small banks and get 3.5%.

 

That seems to be that option for that. Is that the same term for what that is?  Yeah, you can actually get a bank statement, loan or asset depletion loan for three and a half depending on your down payment amount and credit score range between three and a half to four, that’s another option.

 

What about another person who mentioned to me that just getting a straight up business loan is not on your house. But you get a business loan on your business, but then you just use that to pay cash for the property and you collateralize a loan with the property. I would say, if you can get it collateralized using the home instead of a business loan,  that would be the wisest, just because it’s going to be stupid, expensive to get a business loan.

 

And they always trick you. I got a letter from American express the other day. Oh, working capital loan, only 0.75%. I’m like, oh my God, 0.75% per year. And then I looked into the fine print it’s per month. And if you multiply that by 12 that’s a 9% interest rate. Yeah. That’s how all of these online banks make money, right?

 

Like they’re all free and they have good services, but they send out these teaser rates for working capital or essentially like payday loans for business owners or online people. That’s how they’re making money. That’s all online banks are. And sometimes I just like to look at those letters and try to call in and see what they really are.

 

And I got offered a 13% interest rate loan by some lendme.com or something. And I’m like, dang, that’s predatory. I mean it’s white collar payday loans essentially on the internet, essentially what it is. That’s why we do infinite banking, right? You stuff, money in there and you don’t have to deal with one of these guys.

 

You can just bank from yourself.  You bankrupt yourself and you have to start young too. It’s not something you want to start. You start whenever you can. You can be 25 year old. You can be 55 year old. You just gotta start somewhere. Never too late to start infinite banking.

 

Going back to this first world problem. Big home purchase, which by the way, I’m not doing guys relax. Oh my goodness, that’s an expensive home. It’s kinda just curious like what the interest rates are, what are the options? Planning ahead, but if you exhaust all options, all I’m hearing is just, we’ll go talk to you.

 

There’s a way to do it at the end of the day. I think if you’re Lane or you comfortable living in it for the next five, 10 years, I think it might be a good time to consider the options.

 

Folks, if you guys are in similar positions as this going to Mars scenario reach out to Benson Pang, nestmade.com. He’ll help you out. You guys can guinea pig it  for me and then that way Benson knows what to do when I finally come knocking. When you get that $10 million property. We’re going to party in it. One of these days. Thanks for jumping on Benson. Appreciate it. Hey, thanks Lane.

 

Never Invest in Real Estate Based on an Internet List

https://youtu.be/NPHXCfRR7lE

And this is an extreme example that 10 90 premium split. In some cases, some of the people in the family office group have found that the 70, 30 premium split is actually better. That’s an, I actually. And this is just more of the extreme about that example, where you’re still complying with those mech limits.

So you’re getting the tax free treatment, but you’re stuffing as much money into the cash value and you’re minimizing your fees. One unique way that someone explained. To me, as far as understanding the premium keyway relationship was relating it to your house, the base premium is like your mortgage. So that’s an expense or a cost that you have to for your house by slowly paying down the principal.

So base premiums does add a small amount of cash value. Just like how paying down your mortgage slowly pays down the principle. You can think of your paid up additions as if you were to do that. Renovation where you spend $50,000 to renovate the kitchen at $50,000 spent on the kitchen, basically increase the value of your house.

Hopefully, almost exactly the same or even more so that’s the home relationship. As far as the base premium, paid up additions to mortgage and our renovation, again, different ways to understand this and it to me personally. And it really took me about a year and a half to. The school and the differences between typical whole life insurance, configuring it in a way and using it in a way that the wealthy do have for some of you guys use that strategy where you’re taking a hilar out on your mortgage and paying down your mortgage with simple interests versus amateurs interests.

It operates in a very similar way. And in fact, when you’re using a whole life overfunded or infinite banking or whatever you want to call it, simple, passive cashing, it is superior to using a heat. In my opinion. And I actually think that this is a lot better than using a 5 29 plan for your kids’ college savings too. .

Coaching Call With Henry – 2016 Hui Investor | Searching for Purpose Then but NOW FINANCIALLY FREE

https://youtu.be/8n7Hm-Ru070

Hey simple passive cashflow listeners. Now on today’s podcast, we’re going to be doing a coaching call with a long time ago, investor. And we’re just going to call him Henry in this case, if you guys haven’t heard of this acronym, Henry stands for high income, not wealthy yet, but he’s certainly accredited nowadays.

 

That’s for sure. But I think he is a great role model and this particular gentleman has been a great blue  guy for us in our hui investor group. Most of our investors are in their forties and fifties, but they have younger kids finally going to college and that’s really the benefit of our mastermind group.

 

And if he were to come up to our retreats, they get access to these kinds of Henrys, these high income, not wealthy yet, guys that work for Amazon, Microsoft making a button book 50 under $150,000 out of college. And the world is at their fingertips. If they can find a way not to get caught up in the rat race, just like all the other friends.

 

But before we got to that, Just had a taxi and sat down with my guy and just wanted to go over some takeaways I had. Now if you guys want to get the full tax simple passive cashflow guy, you can go to simplepassivecashflow.com/tax. But I just want to list down a few of these takeaways that I had. So first, cash donations, $300 per person.

 

A hundred dollars per couple. Now this is important above the line. You can take up to a hundred percent of your AGI, but this goes away in the year 2022, where it goes down to 60%. So you might want to think about doing it every other year, perhaps number two here, 50% of your Beale and beverage deductions is typical.

 

But remember. In the year 2021 and 2022, it is a hundred percent. So that is going away after this year, 58 at 58 and a half cents per mile. For your mileage, number four here, equipment purchases in the year 2022. This goes away in the year 2024. Just keep that in the back of your head. So it’s been a couple of years since the fifth point here.

 

Everybody was talking about the 1031s getting killed. And I think this is the same thing that happened several years ago when we’re doing the same fire dance, but it’s just an example where there’s a bunch of games being played. And I think a lot of that kind of marketing by CPAs to get that using fear tactics free  will.

 

Clear minds typically prevail. Although I do think. In the future, it’s going to get harder to pay less tax. And that’s why you need to get on this now and understand how the games are being played. Number six here on January 1st, 2026, the tax rates will go back up as of right now.

 

They’re a little low. The 12% tax rate goes back up to 15%. The 22% tax rate goes back up to 25%. 24% tax rate goes up to 28% and I’m a person always asks why reasonable behind this is, I think this came about, Trump put this in, or this was a stimulus plan package where the tax rate would temporarily again, til 2026, all the tax brackets are brought down, maybe a few percent points across the board to give people generally some tax relief, which means well, and this is where you have to take ownership over your old plan. If the taxes are going to be going back up the next several years now is the time to be potentially jailbreaking your retirement funds or what I call leaking that out slowly.

 

Now, if you want to go over this in a quick onboarding call with me, go and sign up for the hui pipeline club at simplepassivecashflow.com/club and you get one free, quick coaching session. We can talk about this very thing. How will your taxes get impacted and how to best strategize to take your retirement funds out or check out we’ve done a couple of coaching calls on it when you do sign up for that list.

 

You do get access to all the past coaching calls too, along with the one where we’re going out today. Second to the last point here, 1099s will be reported from Zelie cash app, Venmo, PayPal go fund me. So if some of you guys were keen on the fact that all these pay apps weren’t going to be telling you to the government, what you were making, or you could get some payments in that way without paying taxes on them.

 

Shame on you. You shouldn’t do that. This might be kind of smart. But now starting this year, those apps will be sharing that information to the government for whatever it’s worth. And this probably had to do with, several years ago, they started to ask for social security numbers on LLCs. This is all part of the government getting more and more information  whether it’s right or wrong, who cares it is what it is folks. So get used to it. And the last point here, the 1040s  are due on October 15th,  2022 not in April. I don’t know why everybody thinks they’re doing April.

 

You need to file and extend in April but be like all the cool kids that just extended out to October your tax preparer will thank you in the long run. And they will be less in a rush and they might not want to just do it the easy and quick way when you do it like that, you can also see the latest tax changes in the tax code unfold through the summer months.

 

And some of these points that I made earlier today, you’ll be able to make better plans. And some people think that giving the IRS six less months to audit your file is prudent too. I don’t know if that’s fact, but look, just with being able to see what unfolds ahead of you in terms of which way the tax code goes.

 

I think that’s reason enough to, Hey man, just file it in October. Again, I think most of you guys listening out there are good little boys and girls like, oh, I first thing was, Pay our taxes and fire taxes when you’re supposed to, which you, they brainwash, you think it’s April, really that’s when you need to file.

 

But doesn’t mean when the 1041s  are actually due, which isn’t again in October. So be like the cool kids. If you need a new CPA, now’s not the time to be looking for one. Probably we want to be looking for one after the tax season. Amy, April, they’ve got most of the lay people doing their taxes at that point.

 

And then March, they’ve got to do all the LLCs and corporations at that point. So that’s a very busy time. In fact, it’s already busy for them right now and might want to start hunting, interfering in May or June. If you need  a referral shoot us an email team@simplepassivecashflow.com.  If you haven’t joined the club and checked out all the great information that we have behind the members portal, which you can only get when you sign up at simplepassivecashflow.com/club, you can join us there.

 

And, thus far we’ve raised over $130 million from investors, just like you from our group, which is crazy to think that, I’m not gonna mention the name, one of the big crowdfunding websites out there. They’ve raised about a quarter million dollars of capital, a little bit more than a half of that, which is not bad for a little website, a simple passive cashflow created several years ago in 2016, actually we started this, and if you guys are new to the whole private equity, crowdfunding syndication,  506B and 506C world, and go on Google on espn.com. The WMB amounts, a $75 million capital rate to eight growth strategy. And this is nothing new, right? This is how things are getting done in the world.  I’m not advocating for this investment. I personally wouldn’t invest in this.

 

They’re going to raise $75 million to pay for a bunch of staffing costs to push the WNBA forward again But this is just a great example of something that is right underneath our noses that happens all the time where private, wealthy individuals. will  fund a project and become part investors within this little country club deal they have going on. Again, we’re not giving any legal or financial advice or investment advice.

 

You’ve gotta be crazy to take some word or some guy from the internet  and that’s what we tell you guys to think for yourselves, right? Again, I’m not investing in the WNBA personally, but just wanted to point that out there. And if you guys like the show, please rate and review, it’s been awhile since we asked for that and enjoy the coaching call

 

 

Hey, simple passive cashflow listeners today we have our friend Will Rogers. We don’t know if that’s the exact name, but that’s the name that we’ve chosen for him today. He is a simple passive cashflow Hui OG here. So here’s this guy  when we  started the podcast we would do organic events, pop-ups and we stopped doing this because we realized whenever you put real estate on any kind of local REIA , this is when I was back in Seattle. Bunch of RIFRA comes in, you know, people who don’t have any money. And, but this one dude came in and he made, what were you getting paid originally?

 

Like 150, 200,000 at your tech job. Did you have a beard at the time? No. I grew into that. Yeah. You grew up, but yeah, you, you are like what? Just out of college, high paid salary. They call you guys HENRYs. I don’t know what the acronym is called, but high income but  not high net worth yet back then. Higher earners are not rich yet.

 

Yeah Henry we’ll just call you to change my name from Will to Henry. Got it. But net worths slightly over a million, but once you continue the story for us. So I went to school on the east coast. I graduated in 2016 and then I moved out west for a job to become a Henry. So it was working for Amazon. It was a very low starting position entry level. And I was a software engineer or programmer, those of you who are not in the tech industry. And I’ve read rich dad, poor dad because  I was probably like three weeks into my job. And I was like, man, like I spent four years prepping for this thing.

 

I don’t feel like I’m making an impact that didn’t like what I was doing. I guess I just have a low pain tolerance cause I was the only three weeks in, but yeah, I just, I read rich dad, poor dad. And then I started scouring meetup, like meetup.com, like the app. And I saw like a hundred different ways to meet up with people and talk about real estate because that’s the way I thought was a good way out.

 

Tried to do my own developments, but I wasn’t rich enough yet at all. And my income wasn’t there, the Seattle market was too high priced. So I just kept looking and failing. And finally I stumbled upon simple passive cashflow and specifically Lane. He was still here in Seattle. I think at that time he was trying to get rid of like 10 single family homes or something.

 

Henry likes the single family home. Steve. No, just kidding. It was kind of true. I mean, you, you said, Hey, you should start with a couple of single family homes. I got a few. And then you know, things make sense. We’ll move on to syndications. And I basically begged Lane to just let me jump ahead and just say, okay.

 

I get the single family home thing. I don’t want to be called at night. I don’t want to manage managers of, or properties. Can I just be in a syndication? Frankly, my net worth really wasn’t there yet. Because I had just started working. It’s just fresh out of college. The income, I think, was the only thing that really made sense, but it did take me some time to kind of nudge Lane  into letting me into a deal. We formed a relationship, got to know each other, things like that. And that was, yeah, that was 2016. So now we are here.

 

Back in that day, like their first couple years out of college. What was your top line salary? I asked this of everybody, what did you able to save like, and that’s kind of your velocity , how quickly you’re moving. How much of a cheapskate were you? You’re still kind of a cheapskate.

 

I am, I think this year is the first year that I decided to  ease up a bit. But yeah, when I first started, especially in Seattle, like these rent prices out here were completely foreign to me. I’d been in Virginia my whole life and, you know, 700 bucks a month in rent was pretty solid.

 

You get out here and rent is three grand and you’re like,  what’s going on? So I got as many roommates as I could. I actually had three roommates with me. We were living in a three bedroom and so one. Pair of roommates where it’s actually a couple and they shared a room and we divided up the rent and I paid as little as I possibly could. So I think my entry level was between, I think it was like one between 120- 150  and I think the first year I saved 78,000.

 

I beat you with my time. I was over a hundred  but, yeah, I think it makes sense. Save any money, but that’s all that really matters. Like if you’re a younger person or even if you’re older, if you can save 50 Gs a year, I mean, you’re going to get to where you want to be under a decade. I think I agree. Yeah.

 

Talk to us about, you’re hanging out with like a lot of people with a traditional mindset where. You know, a lot of computer programmer types, a lot of  ego is involved in those kinds of jobs or the way they invest. Maybe talk us through the struggles and the differences between the simple passive cashflow folks and those that peer group you’re stuck in.

 

The biggest challenge was upfront about converting. But then, you know, as any reasonable person does, they’ll look to their left and right. Maybe talk to their parents and say, Hey, is this doesn’t make sense? Things like that, but you’re right in the engineering sector, at least especially software engineering, people love optimizations, and they love thinking that they can dive in and do it themselves.

 

So it’s not uncommon for friends of mine to think of stock traders and lose an entire year’s salary just because they thought they could be, you know, a stock trader or it’s not uncommon to have friends of mine who really, just want to optimize their 401k as much as they can. And there they do a mega backdoor Roth and all these things.

 

And in my opinion, you know, they’re kind of like optimizing percentage points. So, you know, there’s not many people around me who would do something like this just because they’re busy, either micro optimizing, or they believe that they can do way better. And that stuff can get addicting and it can really feed the ego when there’s like that instant feedback.

 

Right. You make a trade and you get confirmed confirmation bias, I think. Yeah. A little dopamine hit and then he doubled down. Yeah. One of your first deals. Like we had fires and then we didn’t pay cash for like a couple of years to just kind of gummed up cash flow. But I think a lot of people, they don’t realize, like it’s kind of like a train or there’s a lot of slack, like the train might stop.

 

But things might be going well, but you don’t see that slack come out until the very end. For me, it was about visibility. Right. So if I understand that it’s recoverable and that the long-term business plan is still valid. Like who cares if, you know, as long as people don’t get hurt who cares if a couple of units burned down, if a tree falls on it things like.

 

Oh, the tree you’re in that one too. Yeah. I saw a lot of it. I mean, it’s been what, like, I don’t know, five years, six years. So it’s yeah, I’ve seen a lot of stuff. Yeah. Did I tell you on that tree one, we also had a homicide.  You sent up a news article. I wasn’t going to mention that here because that really scares people and thinks that we’re, you know, I don’t want people to think that we’re in a slump.

 

W we’re really not, but these things at scale will just happen. So, yeah, I mean, that’s why I bring it up cause we kind of stay away from the class C hairy stuff, you know, a little bit better clientele today. Personally, I think it’s a lot harder for you Lane to like manage those deals and make them happen.

 

But those are the ones with, in my opinion, like a lot of meat on them. But they’re riskier. Yeah. Are you doing any direct real estate personally these days? Because  some people will buy a few rental properties locally. That to me doesn’t make any sense, but it is what it is.

 

Right. They do it in better areas, but then they’ll go to us to outsource the hairy pain in the butt stuff with difficult tenants. And that’s the way they diversify amongst them. But the pay scale, I guess. Yeah. You need that. So Henry talks to the young Henry here. Let’s kind of build a timeline.

 

So you started this in 2016. That’s when we first met, tell us what you did and then maybe, you know, take us through the years of what you did. And maybe some of the lessons learned here. I think this is the best stage for you to kind of talk through it. And if you guys are listening to the podcast form, we have this in a YouTube channel.

 

We have the personal financial sheet up with the, the investment that you’re acquired, the cost of hoop at market value, etcetera. If you guys want to follow along in video format. I’ll probably be out of your friendly to cause you understand you’re very you have a very high EQ.

 

That is what I noticed most computer programmers, engineering types do not have that. Right. And I think from what I see of a lot of the engineers that invest with us, they’re typically not true.  You’re capable. Weller’s the technical, they’re the people who have some people’s skills, stepped in engineering sales roles,  and kind of gotten out of the trenches with that stuff.

 

But it’s just a takeaway that I’ve kind of seen from you and other engineers amongst the group. That makes sense. That’s a lucrative angle software and then software sales it was 2016. I begged Lane to get into the first deal in terms of a syndication. So basically I would be part of the limited partnership, the LP, and then Lane was part of the GP so he was responsible for bringing people into these deals. And then he was also responsible for vetting them prior to me. I mean, obviously I still have water. I’m responsible for my own money. Right. So I need to validate everything that Lane is saying and make sure things make sense, make sure the business plan is feasible.

 

I had to pick that up and learn it pretty quickly to get into that first deal. I don’t even think that first deal is displayed here, but I can’t remember what it basically is, any deals that are closed. I don’t think I put it here because the market value is now zero. The personal financial sheet is just supposed to show currently what you all said today, but I think you jumped in to a Georgia deal.

 

Maybe I think that’s it. Okay. It might’ve been, it might’ve been Joseph or I don’t know. Well, we’ll see. But anyway, regardless that was the first deal. Basically. I just saved up all the money that I could keep my expenses low. I liked the deal. I liked the performer. I was happy with the business plan.

 

It wasn’t what I liked about it. I don’t promise any stellar returns, right? I was, my, my general plan was to build up several of them. Kind of base hits, get a foundational layer down to, to replace my living expenses and then start swinging for the fences. So, you know, we can talk about that more later if we, if we need to, but that was the rinse and repeat attitude I had for at least I think the first four deals were just going to be base hits apartments.

 

Stable communities, population growth. I think I got into maybe one or two C-level deals, which I, I actually didn’t mind that our word problems, you know what I mean? Things happen, but that’s where I wanted to go. So yeah. And I see here, maybe we shouldn’t show this to folks, but like you got in at the right time, we were kind of getting started and you got in at the lower middle.

 

Done this cause we had built a relationship and I didn’t feel super comfortable with you flopping in 50, a hundred grand. But gone are those kinds of days because I’ll tell you what, it’s a crap shoot. Like, you know what I mean? This is a game of social investing both ways, right? Like I’ve met, I built a relationship with you.

 

You’ve come to Hawaii and hung out at the retreat. It’s been quite lucrative. I think both ways. Right? Investing. But sometimes when you bring in investors that under $50,000 are kind of interesting characters and you I’ve pointed this to you, right? Like, cause you’re on the fast track and you kind of get zipped by all these investors, people in their thirties, forties, and fifties.

 

I mean the way they wrap their mind in terms of investor mindset or just money scarcity, you know, ideal. Yeah. And it can, yeah, I think, I think what was important to me was understanding it from a root level, trusting you. And then understanding that all of my work was upfront, right. That’s really the key to investing in syndications.

 

Do all of your homework and then once the, once you send your money over that, that’s it, you’re an LP, right? You’re, you’re a silent partner in this. And if, if it goes bad, you didn’t do it. And so you can see here that I think I did at least a reasonable amount of homework for the Huntsville apartment. There’s one apartment listed on this sheet here where it says my acquisition or the cost to, to, to get into the deal.

 

It’s 50,000 and it says the market value today is 8,200. That’s just because we were waiting on that last little bit to trickle in. Cause that deal did finally close. So that w we, we still made a lot of money on that deal or, or more than 50,000 that I put in. But yeah, that’s, don’t, don’t think of that as like we lost 80 or 90% of the investment.

 

Yeah. And just to summarize for folks when he means, like going in on a base hit, stabilize, you know, light value add first, and then I don’t know if we kind of came up with that strategy for you to aggressively kind of move into more home runs. But then you kind of went and did some developments. Yes. So here’s the thing.

 

Lane  was kind of my foot in the door to the entire industry. And then I don’t know if he ever met any other real estate people, but people talk about it. Like people really love it. The community is pretty big and there’s not a scarcity mindset in the real estate community  that I’ve seen.

 

So, you know, talking about it, networking things I basically met other people who do what Lane does but in different areas of the world and in different asset classes and in different stages of those asset classes. I think most of you have the ability, cause you’re not married, no kids in theory, you should be able to take more risks AF but I think it’s prudent exactly what you did.

 

So I think this is a great blueprint. But then you kind of went into more of these developments where now personally, I’m kind of looking at New York development myself because New York, you got beat up, right? Like, heck this is the time to do it. Yeah. Yeah. And I, you know, I was really scared because again, like I did all my homework, I’d put the money into the development and then COVID.

 

Yeah. So we thought it was going to go bad, but then lumber skyrocketed and we had most of our places already built up. So now all of a sudden we’re looking at extremely valuable assets and yeah, I mean, I just got lucky there, I think. But it didn’t look good at the start. W what is your kind of general advice to these minds is like, well, what Ryan’s doing, or what I’m saying is like, if you’re listening to the podcasts and you really shouldn’t be using the podcast, Financial advice.

 

That’s just silly, but get in a few ducks, get in a dozen stabilized deal first then depending if you don’t have a wife or kids or spouse or whatever to worry about, and you’re, you’ve got a good stable job, then roll the dice depending where you are in terms of your mindset. Yeah. And it depends on, you know, make sure you have your emergency fund.

 

I don’t think I have that shown on this sheet. You know, make sure you have a year or two of expenses saved up. And then, you know, make sure that you’re not going to miss the money. And just, just keep like, keep working hard and keep putting money into it and, and guide the Henry’s. They can make hay now before they get married and they have to go and go to council with somebody else.

 

Who’s likely going to say no, like I got lucky, right? Like a lot of the stuff I did first was before. I got married and I got proof of concept from most of the people in our group. They’re married and they’re kind of getting started with it. So I totally sympathize, I may not have the best strategies or been through it myself or have experiences, but other people’s problems on Henry.

 

Well, no, I mean, I would say it is, but it’s also mine too. Right. I, I want to expand my network and I want to help my friends out and I want to show them the way, you know, in terms of real estate is, is a, is a really good thing. But the thing is, they only see what they want to see. So if you come to them with a pitch and you haven’t proven success, like you don’t have a proven success of, or track record, they’re going to be skeptical.

 

Right. But now if I tell some friends about this, they’re like, oh, well you gotta get me in, you know, I have like friends lining up saying, Hey, like, how can I get in? Can you connect any, this is how much I have, you know, but five years ago I was laughed at. So I see that it could be similar. For spouses or family members.

 

So let’s, you came to the retreat in 2019 and drank the Kool-Aid with everybody else. And I remember you were kind of just searching, right? Cause at that point, what was your network? Maybe half a million. It wasn’t that much. No, but you had proof of concept with this stuff at that point and you knew to take us back to that mindset where you thought you were going to be in the plans at the time.

 

And then we’ll kind of go through. The junk. So specifically you want to know specifically what you want to know, like take us through like the transition. Cause everybody hears about people who are starting off or kind of people who have already left their job, but take us back to just wasn’t too long ago that you were, I mean, you had a cushy six-figure multiple six-figure job.

Give it up. What takes us to. Oh, yeah. So basically how did I, yeah. Transition, transition into

that stage two, because basically the way that I thought of it was to get that base layer down. Right. And then once I have that base layer start taking more risks and that there are more risks in terms of real estate, but also in terms of life. So what, what, like, is it a number baseline? And it’s different for everybody.

 

It was, it was, it was a mill for me. I needed a middle one once I, once I had a mill, I left my $300,000 job and I am now, you know, I went to go make an educational product that teaches people how to get into the tech industry that took about four months. And then after that, I’m now at a small healthcare startup.

 

So you know, that salary cuts, you know, that’s everything. But it’s. It’s far more enjoyable to me. So you left, like, I don’t know. I don’t know what they call it. The big five tech companies. Exactly. Fang is typical. Yeah. Facebook, Amazon, Apple, Netflix. Google. Yeah. We don’t want to say who they are. They’ll come and find you on one of the big floors.

 

And you went from what salary? To what? After the transition. Yeah. That’s a big thing. Yeah. So this is so. Like I said, like why my safety net was so large of a million, I think it was because I knew the cut would be substantial. So my last year at my job, I made 300,000 and then I left into a, basically four or five person company to make this educational product.

 

I was actually just going to partner with them and bring my content to their educational platform. And, I had no idea what I had no idea what they were going to pay me. But we worked out a monthly kind of stipend that they would give me. And that was it. It was roughly 50,000 a month, but you know, it was only gonna take me three or four months.

 

So it wasn’t, it wasn’t close to three, 300,000 there. And then we also worked out a royalty deal that would kick in after we launched the product. And then obviously those, those monthly stipend payments with. Would go away. But yeah, I mean, that was risky to me because I mean, you know, I’ve, I, I met this guy online.

 

I literally just messaged him on LinkedIn was like, Hey, can I make a course on your platform? So it was, it was, it was a huge risk. And I didn’t know if they were solvent enough or anything like that, but just trusted them and went with it. It was a bit of a success, but now you’ve kind of, I mean, projects like that, it wasn’t going to come around.

 

But now you’ve kind of found that more long term. That’s really good. So this is a little bit more play. Yeah. So right now I’m at like the 180 mark for your salary. And then I get a half a percent of the company, so, but that’s all funny money, right? Like it’s, it’s, you know, until we get bought out or go public or.

 

Something like that. I mean, the, or leveraged buyout, you know, I mean, it, it, I’m not going to see any of that. So, basically now it’s like 15,000 a month from that place. And then I, the reason why I took this, I was actually like retired just cause like I had good monthly income from the royalty, and I had a good safety net and I don’t have many financial commitments.

 

But the opportunity, like I said, it’s just, you’re at the stage now where. You can say, why not? And you can risk something for a few months and if it doesn’t work out, just leave and then go hang out, chill and wait for the next great opportunity. So I took on this and, and now you know, I used to be like a software engineer.

 

Now I’m more of a leader across different organizations in the company, which it was that would have taken me years to do at my old job. Is it a resume builder? So I thought it would be but I, I it’s, it’s the only start-up I could find that actually has like enterprise clients that like they’re extremely early stage, but they’re already cash flowing.

 

They have enterprise clients, you know, six-figure contracts, seven figure contracts and. Crap, an existing P and L of profits or revenue. My goodness, which is, you know what I mean? Like that’s, that’s like a one in a million chance. So yeah, I’m actually extremely bullish. Yeah. So, I mean, from my point of view, it’s like your salary is a lot lower than what you should be.

 

Well, you’re kind of trading that sweat equity for a bit of asymmetric risk. This is the beauty of your situation if you take those kinds of risks. At this time. You don’t have a five $10,000 mortgage, although I don’t think you’ll ever get that in the next 10 years anyway. I hope not unless I, you know, get crazy and then lay in, you got to shout at me, it is a substantial pay cut for that asymmetrical upside.

 

In fact, my old employer did call me since I left and they asked me to come back and they wrote me an offer and. Stupid to say no, but, you know, I said, no, you know that was, that was between four and 500. So, most people listening are in the group. Would Bobby take that and just go rock on their butt and just do that for maybe five to 15 years.

 

But I think you’re a little bit of a minority in terms of your, I mean, your, your age too. I mean, much of your time too. Spear out with this type of stuff, but explain to us, like we’ve had this conversation before you have a bit of an itch, right. To kind of do something more meaningful. And I think this is because you’re a lot more experienced beyond your years.

 

And part of that is like, it’s not how old you are in my opinion, it’s how much time you have to think about random stuff like this. And I think that’s what financial freedom does. It gets you out of the day-to-day kind of get more philosophical. But, I mean, so you, you, I, if I recall you kind of looked at one time, Hey, why don’t I do something entrepreneurial right.

 

In the realm of real estate and then take us through that journey. Yeah. Can you refresh my memory there? I had like a hundred ideas and I got really distracted. Yeah. And I know we’ve checked in a few times in the last several years. I remember at one time, you’re like, you’re trying to buy some rental property.

 

You’re trying to do the turnkey thing or the burst. Okay. And I told you, man, you’re giving up your competitive advantage. You know, you’re pretty good at this computer thing, you know, don’t do anything other than computers. W what I didn’t understand is that you have to look at barriers to entry, right?

 

And you have to look at market knowledge and you have to look at track records. So I had a. None of those went for me when I said I wanted to go flip houses or I want to do a burn model in Seattle you know, there’s, there’s a trillion YouTube videos of that online. And, and really all you have to do is, you know, maybe you can wholesale your way there, or maybe, you know, you get an FHA loan, you put down nothing and you, you try to make it work.

 

But it still takes three to four years, I think, to actually build up what would be my equivalent current income. And so that’s an opportunity cost of at least, you know, 900, maybe. So. Yeah. I just, I think at the time I just didn’t, I disliked where I was so much that like anything sounded better. But yeah, I think that was just like where I was.

 

That was my mindset at the time was just like, okay. No matter the cost, I eventually realized that I just needed to suck it up. So, yeah. So I was thinking about this. I’ve been thinking about this for the last couple of weeks, as I always kind of ponder random things. So this concept is like being in the top 10%, 5%, 1%.

 

So like I’ve been kind of screwing around with my trust, right. Trying to find strange ways to pay off my kids when I die. One of those things is like, you know, the trust will continue to give you X amount of money to sustain a pretty decent life. But if you want the load, you have to demonstrate that you’re in the top one, five, 10% of the people that you’re doing.

 

So for example, I don’t know. What would you say in the computer programming world? I mean, you’re basically saying. We’ll give you, you know, in terms of trust, we’ll give you this monthly stipend or whatever, but, but if you want all of it, you have to prove yourself. Yeah. Okay. Or like, if you, like, for example, say you’re my kid and this is just hypothetical.

 

There’s no way I’m going to really write this into any kind of document. I’ll just break my trust. Right? If you came to the trust trustee and said like, Hey, I want to get at daddy’s trust fund and I want to do it. We would probably say, Hey, hell no, man. Like you’re like 50 percentile at best or maybe top 20.

 

Cause you’re kind of smart. Right. But then we would look at you as somehow needing to demonstrate that you’re really good at something. And the computer programmer. I don’t know. Maybe your top 10%. I don’t know. Right. But something, cause I think. When you raise kids, what? I hear a lot of people, as you’re trying to find, what is their penetration into one thing that has God given talent that they enjoy?

 

Yeah, my favorite mechanism for that is time. So, you know, you can try to plan for all these things, but like who knows what’s going to exist by that, you know, by the time they want it. So my, my favorite one and it’s not, not really a friend, but someone that I do know of. They have a trust fund ready for them at 35 and their parents cut them off at 18.

 

They made them pay for their own college. They made them, you know, pay their own way. So, basically the option is starved from 18 to 35, right. Or. Do something. And what actually happened is this person pursued what they liked. Because most of the time, people don’t want to be an artist or a musician, or they don’t want to take a risk or be entrepreneurial early, early on because they don’t want to start at 60.

 

Right. They want to focus on retirement, getting that bank roll up. So if you tell someone, Hey, you got to figure something out. I don’t care what it is, but at 35, you’ll be okay. Typically by that time they’ve settled into something that they. They’ve been, you know, 10, 12 years at it. And they’re typically pretty good.

 

They’ve done 10,000 hour. Exactly. Exactly. But what if in that case, what about if you have a situation where somebody is really smart, they’re just a little lazy and all they want to do now is wait until the 35 and we’ll smoke ganja and play the guitar. And they suck at playing guitar. How did they do that for free?

 

You know, how do they do that for free? They have to create money. So, okay. So you’re saying like totally starve them on everything until they’re 30. Yeah, then they get the mother load, you know, how they go off into the mountains somewhere and just it’s, it’s great. You know, you basically say your kid’s college, you’re taking care of your retirement’s taken care of.

 

But you better do something. So the college is not paid for. Wouldn’t be paid for, so they got to work through it. They got to know how much it sucks. Yeah, I’m sure you, you, you can, you can, you know, fiddle with it in the way that you want. Yeah. Well they have, but that, if they want to go to college, you got to pay for the damn thing and make the minimum payments.

 

Therefore they have to go and trade time for money in society. Exactly. Exactly. Yeah. It’s kind of a form of child abuse, potentially some good. See it like that, but I think it’s a forcing function. I think 18 is too young. I think 25 is too young. I think 40 fives are too old because now they potentially have spent because here’s the thing at 352, no one really knows what they want to do at 18.

 

Most people don’t know what they want to do at 25. So by the time they’re 35, if they do have this escape hatch, and they’ve really just been miserable for the last 10 years chances are they’ll go switch. And start to do some, okay. I should have done this now. I have that opportunity. If you wait till 45 they’re 20 years into doing something they don’t like potentially.

 

Yeah, yeah. Yeah. I like it. W w w I’ll think about that a little bit more. I like the idea. I like the idea that but going back to like, so in your twenties, you got to this point where you were, I think a lot of high, high net worth entrepreneurs get, they have a little. S network, they have means, and they have a network to be able to solve problems.

 

And I remember that was one thing that stuck with me that you’ve kind of repeated again, is I have the skillset now, what problems can I solve with associate? Because money comes to people who create value and essentially solve problems. Yes. And that’s exactly right. And so I started off at websites, right?

 

Like I would optimize my company’s website. Make them the most money possible. But now I switched over to healthcare. So basically, we’re optimizing the revenue cycle of hospitals. It adds value. I’m good at it. And people know. Yeah. Do you like the fact that it, maybe you are making something a little bit easier, faster, say somebody’s life or to, ah, so we don’t, we don’t save anyone’s life and I’m kinda glad we don’t like it.

 

It gives me the opportunity to kind of breathe a little bit. We’re not making medical devices. We’re not in the operating room where we’re not telling doctors what to do. We’re not making any recommendations like that. We are using machines. But it’s, it’s really just after everything is said and done after the patient has either checked out, right.

 

Like, or died. How do you get paid by the insurance company or the government? If, if that was the program that is under. And so we make sure that that happens quickly. Got it, got it. So investing wise, switching back to there, what is the, what is the game. Are you good? Are you taking more risks or, I mean, between the job versus investing, which one are you getting more risk tolerant towards or what’s your game plan investing minds?

 

This is, you know, this is part of partly why I wanted to take the call with you. I don’t know, you know, I have my base. I am doing something that I like. I think it could be lucrative enough for me to get to the next level net worth wise. But yeah, I don’t know. My most recent investment was like a fund.

 

Right. And it was a 20 pref and they just made subdivisions. Why? Because I wanted to make sure of my royalty income. That, you know, at least this would pad it a little bit. But beyond that, like, I don’t know. I don’t know, like I’m, I’m probably, you know, if I quit tomorrow, I’d probably still be able to fall back on like a hundred grand a year.

 

So, that’s enough for me. So I don’t, I don’t know what’s next. There are a lot of people in the group that are between five to $10 million networks. They are maybe a couple of decades older than. There were, you know, like the, not, not a kind of employee part of the business, but actually the entrepreneur that started it and they’re exiting or they’re at the point of exiting.

 

What I would recommend is again, come over to the retreat and then, you know, you’re good at drinking beers, interacting with people. I’m a fly on the wall. Right. I think that’s a good way to do it. You know, being the younger guy, it’s good to kind of just be in the flat in the wall, find valuable ways you can add value to these more guys with a little bit more experience with stuff.

 

I mean I’m part of more entrepreneurial groups where you gotta pay to get in. I mean, I would recommend finding those groups locally and then just getting around like high performers, successful people that make not 50 grand a year, but $500,000. Okay. You’re a leader of leaders, I would say, I mean, what’s five, 10 grand to kind of join a group like that, you know, more entrepreneurs.

 

Yeah. And that was, yeah, that, that, that makes sense. I think here, here’s kind of my point with that is like, let’s say I do go to the retreat. And I meet these people. They’re exiting, you know, most of these people. Or Don may, maybe they do want to go for round two, but most, most entrepreneurs that I’ve met that have an exit, you know, they’re, they’re at least recovering for a couple of years.

 

So do you think they’d be ready for some young gun like me to come up and say, Hey, you know, how can I add value to your current situation? Maybe we could do this or that. Do you think that what we received adds value right away, but like, I mean, just to start the relationship, but then maybe check in once in a while, but like, Maybe it’s different.

 

Maybe there’s a paradigm here between the people that, you know, that are kind of exited. Like a lot of those guys are in very asymmetric types of businesses, right. Tech stuff. Right. You know, like I think that’s where you come from. Where I come from, the people who are successful entrepreneurs, they built up really boring non tech businesses.

 

Right. They grinded it away and they just built it. And for them, they know that they can do it again. We’re subconsciously, I think the tech entrepreneurs, like you gotta love it. Lucky people just hit the lottery, basically. Yeah. So it’s different, right? And the smart people who are in tech that hit the lottery with that stuff, go buy a $5 million house in Bellevue Washington, and just hide out for the rest of their life and just hope that they don’t spend all their money.

 

But the entrepreneurs that I see a lot, the guys who have the boring businesses, they have so much like business building. That it’d be a shame for them not to use it and they enjoy the rush. So they would be a lot more inclined to jump back right into the pool. That’s who I’m looking for. And you’re right.

 

I don’t have that network, like I know people who got rich on Bitcoin or invested in GameStop or, you know what I mean? And, and now they’re, they’re fine. But you’re right. They retreat. So. Yeah. I don’t know. I don’t know people who already, I don’t know a lot of people, I know one person that comes to mind, but beyond that, like the network is pretty.

 

Yeah. So like, I mean, of course you’re kind of feeling people out feeling, figuring out where they are and the pecking order, but then you also need to identify, is this somebody who kind of built this slowly? You know, it’s just like a blue collar investment. You buy a stabilized asset and you force appreciation slowly over time, you know, rent, average rents go up $5 every month.

 

You know, sometimes it goes backwards $3, but it kind of powers forward. As opposed to that, that one, that the lucky lottery winner, which is going to know. I think the key that you said is the boring business. I love being bored. Like if I, if I broke down what our business actually does, like where I’m, where I’m currently working, you know, probably half the people listening would fall asleep.

 

But that’s where I want to be. I don’t want to be in an ultra exciting area because it’s probably saturated. Probably has people in it who will get really rich and then probably didn’t learn very much. You probably know people like this. Gamblers, right. Or, you know, I can go to Vegas with your friends.

 

You always have that one friend who doesn’t know what the hell is doing and he’ll, he’ll win really big. And then he might say like, I have this system, you know, it’s all about the system. I’ve heard the system, I’ve heard the system with stocks. You know, I’ve heard of the system of gambling with Yeah. Land flipping, right. You know, there’s, they, they feel like they have a system and they’re gamblers, but the people who you’re looking for, the people who like, not here’s my system, I just think every day I make my business a little bit better to either increase income minus expenses.

 

Yeah. So two different mindsets and the fallacy, I think for the gamblers that they start to associate the wind. With themselves, right? The self confirming bias versus the I, at the end of the day, you want to do something just like any worker, right? Any low-level salary worker, they want to do a good job is what I believe and no different than yourself.

 

You want to do a good job and be rewarded with the results. It’s the, it’s the cycle. You are a high performer in life and that’s what you want. And therefore that’s, I think that’s why you like to grow a business. It’s very similar. I don’t know if you’d like to grow gardens, like plant vegetables. My grandfather, he was a botanist, but that’s the closest, if I’ve ever come, I think you might really enjoy that.

 

Right. You plant it and you’d go walk away. You come back in a couple of weeks, month, and you have some vegetables. If, if that’s the case like that will confirm my. My analysis, if you like, I’ll get a vegetable garden on the roof there. Yeah. That’s Washington. I can’t grow very much here. Oh yeah. Yeah. You have to hit it when the time is right in the summertime.

 

Right. But I mean, that’s, to me, like, what’s your China, like you’re a young guy, right? Like you gotta find something that feeds this dopamine. Like you’re addicted to this, this thing. And I seem like the people that do. They’re just looking around for problems, the way to kind of go about solving problems.

 

I mean, a lot of them like, we’ll look into like, oh, let me go start a realtor thing. Because they like real estate. Probably not the best thing. Right. Because you’re giving up your advantage. But I guess identity, some people, their advantages building, hiring people, building systems. I don’t know if that’s your thing and you’re more technical.

 

Well, that is my thing, actually, like I think I used to be software. I wasn’t actually a great software engineer. But I think I am good at hiring the right people and getting a system down to, to operate a business. Yeah. You can know, that’s, that’s your, maybe your 10%, your top 10% in that category for your competition feel okay.

 

Gotcha. But if that’s the case, then I guess you could do anything, you know, at that point, right. It’s the people portion of building, building organizations.But yeah, I mean, I think that’s, I mean, is that what you’re kind of pondering these days, trying to find that next vegetable garden or that next thing to make it? I like the vegetable garden I’m in now with, with my work, at least I would like advice and expertise on where to grow. I think because my mindset for the past five years has been like, get the base layer income.

 

You know, get, get, get passive income, get all that going. I don’t think more passive income is going to move the needle for me, honestly. I don’t know. I mean, like, even if I double or triple my net worth that probably won’t move the needle for me, you know, I probably need to attend to X and, and I, I know how to do that with a business sense, right.

 

Because I can go work at startups, peek behind the curtains and, and help them out. But I don’t know how to do that. As an investor, here’s an idea. So this is, you know, what a lot of music musicians will do, or like YouTube stars will do if they realize that their fire burns out pretty quick. Right?

 

For a lot of this stuff, it’s the, not for long league, like the NFL. So what they do is they empower others, they become like a producer for some other young pers startup. And maybe for you, it’s like, maybe you could create your own incubator. If you enjoy empowering others, then. If you’d like the people’s stuff you get off on that type of stuff, that might be a good way to kind of keep things going.

 

That’s a good idea. It’s funny. You mentioned that I wanted to, like, I did not want to, but I explored that a little bit. I even bought some office space. But I just haven’t had time to set it up. Yeah. At the end of the day, I think most people will agree with passive cash flow, not a big motivator. It’s not going to change your life very much.

 

And with the G six plane, just out of grasp of even the best of us, if you can find something that helps people. I mean, that’s what I, I mean, civil, passive cash flow, essentially that right. I’ve kind of luckily stepped into this thing where we help people. And then they’re like, you know, they, it’s kind of a game changer for most people and then what they do after that, you know, that’s up to them, what they do with it.

 

You know, there’s, if there’s some way you can use your skillset to help people, that’s bridged the gap, doing a little quicker than what used to do, then you might enjoy and get enrichment off that just helping other people, empowering other people. That’s very common.

 

And that, that may be why I enjoy my current role. So well, cause I, I do, I just, I report to the CEO and I just help them as much as I can, like get where he wants to go. But I do think you have a good point there about scaling that out even, and perhaps making an incubator. But I do think I still need to kind of have a track record before that.

 

Sure. You have a lot of time to do that, but I mean, if you can’t think of anything else, then we’ll then just give your money to some charity. Right. But I think when you do that, you don’t get, as you don’t get leverage and we love it. We’re real sandbars. We’d love each other. Leverage and it doesn’t compound, you know, it doesn’t, it doesn’t like to bring people together to work toward like, you know it.

 

It’s not compatible. Yeah. It’s a night. That’s like a nice firework show. One time I checked and it’s cool. But I think a rotary does this, right? The rotary has a lot of affluent people in it. They’re in that mode to get back. They could just give money, but they’ve, they use the leverage. They leverage the relationships of the group and then their problem solving skills to bolt and make a bigger impact into the community.

 

I mean, I’m not going to go. I mean, I’m not going to go do habitat for humanity. I don’t know how to build anything either. The only reason I would go for like a workout, but I just see that as your community, right. I don’t know, you’ve grown something basically from the ground. I wouldn’t even say basically from the ground up, right?

 

Like this is yours. It was just you and me and six other guys who came a long time ago. So you have that. And I want that it could be through a business. It could be through an investment. It could be through an incubator, but I think you’re right. I think that’s where I need to focus.

 

Henry. That’s such a trying to build. I hadn’t recalled. But anything else you’re pondering these days? No, we covered it. Thank you.

 

Well, I’m sure you’ll have more questions in the future. And thanks for being a part of the group. You’re always a lot of fun. So folks joined the group as kind of eclectic folks. We got Brian L Henry here who is kind of the younger guy in the group.  I think the one thing that’s common, even for the 50, 60, some 70 year olds, Very eclectic group.

 

Like alternatives to thinkers, people who’ve gotten it off the beaten path. So if you guys like these types of calls you guys are already kind of in the community reach out, let me know, and that we can make up a fake name for you. Henry is already taken and Mike’s been probably used two or three times at this point, but thanks for listening guys. See you guys next time.

 

What to Tell Your Lender When Applying for Mortgage Loan

https://youtu.be/RvQ3t9TrZro

I always tell my clients to give me the full story. I don’t want to have any surprises while we’re in escrow it’s oh, so you own a house with your parents and you forgot to tell us. And we always ask for the full story up front, then we can know how to what’s going to come our way and how we can prepare you when we submit your file to the underwriter.

And try to rent them out

For you guys, this is how the industry is made, right? Like you have lending brokers, you have the people on the sales side interacting with you, but there’s a person in the back office. Maybe it’s an agent at a different company. Whereas the. Now, this is where you need to have a good broker or front office person to take your story to that, that if you have just some bureaucratic idiot on both ends, you’re going to run into all these types of problems, but you need to have somebody to Excel your story the right way.

See, even if you do have a bureaucratic idiot as the. You can pass all these barriers. I always tell my clients to give me the full story. I don’t want to have any surprises while we’re in escrow. Oh, so you own a house with your parents and you forgot to tell us. And we always ask for the full story up front, then we can know how to what’s going to come our way and how we can prepare you when we submit your file to the underwriter.

Benson’s a licensed loan officer. So he has no comment on this. I’ve had clients where they change jobs the last second and let it slip on they’re on email and their lending broker kind of kibosh as the loan I had. So my guys will, if anything like that happens, use the full. We’ve had lungs where we call.

So a lot of people, then you’re a couple of times where they submitted their stubs. We’ve got into ESCO, got loan approval and they quit. I quit my job and my wife can cook my job for jobs so we can get real professional status or some other random tax schemes. Yeah. We actually do a final verbal verification of employment three days before you close.

Meaning you sign documents a lot of lenders. They wait until that last minute. When you think about it, Hawaii or California, we close escrow in 21 days, 30 days. It’s very typical. But when we’re in the Midwest, other states, they might take 60 or 90 days to close an escrow. Heck their appraisal process.

Probably two months right now. There’s appraisals shortage right now. So like in two months, who knows if you’re still going to be employed. So they always do a verbal verification of employment right before you close. Sometimes Fannie Mae picked about 10% of loans. So sometimes they will call after the loan is closed to see if you still work there.

It’s okay. If you don’t work there, you just don’t want to make sure they want to make sure there’s no loan from, I think they’re just in the back office there, the Johnny Walker, red DayQuil and checks with people over at the very last second. And we’re talking a lot about like primary owner occupied houses.

How does this change for you? If you’re buying a rental property, non owner occupied, first of all, If you’re talking about conventional owner, non-owner occupied, no gift is allowed. No gift is allowed at least in the last two months, we look at your bank statements and there shouldn’t be any gifts in the past two minutes.

And if you’re looking to do some DSCR loan and for those who don’t know, DSCR, it’s a debt service coverage ratio. It’s a terminology that’s often used in the part mid and loan world. They have it for one to four unit for people who don’t want to show their tax returns. And we base it off of the income of the property that you’re buying to qualify you.

And a lot of those programs will allow a gift letter or will allow gift. But what is that debt service coverage ratio, that magic number that they’re looking for. One that managing numbers one can do less than one. You just need to take. That’s actually not hard that it like for the larger apartments, it’s usually like we’ll fight to fight.

Yeah. So commercial loans, Fannie Mae, Freddie Mac, the multifamily home loans, they asked for 1.2, five. And the one to four is private investors so they really only ask for one or even less than one, depending on the LTV.

This website offers very general information concerning real estate for investment purposes, every investor situation. Always seek the services of licensed third party appraisers inspectors, to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information is not guarantee as in every investment there is.

The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best,

How to Invest in the USA as a Canadian With Quentin D’Souza

https://youtu.be/wzgh0fPwlyg

What’s up investors! On today’s podcast, we’re going to be talking to a Canadian investor that it’s going to answer the question on, how can Canadians or folks outside the United States invest in the United States. Now we’re going to be going into just some investing and entity structuring ideas, and we’re not advocating for any of this type of stuff, but it gives a good insight into what it takes for some other folks that, we have to have some international investors in the group, but they have to go through and, it might also expand your mind to thinking, to get an outside of the United States.

 

And this is a typical topic for a lot of high net worth investors when their net worth goes over three or four or $5 million. A lot of people might have a lot of distrust in the United States government, or just want to diversify over the United States. Now I personally believe that the United States is the best nation out there because we have the best military. But it might be prudent to get outside of the United States for other reasons like taxes, or maybe just having another passport to be able to get out of town. If you’re in the United States and you love the United States, today’s podcast probably isn’t going to be too much value for today.

 

But before you go, I just wanted to go over a couple of thoughts or lessons I like to share with you guys before you guys take off to the podcast. Now somebody introduced to me this idea of an incubator group out there, and this is really not in the world of real estate, but in the world of venture capital.

 

And I’ve spent a couple of years, I spent a lot of my time looking into venture capital because here we have all these investors looking for ways to grow their money, which ultimately just ended up coming back to real estate, mainly for the taxes and the stability. 

 

Especially when you go into stabilized apartments or stabilize properties that it’s already occupied and it’s more of a cash flow model, really. You’re very conservative in your investment and you can really sleep at night or venture capital projects, very, asymmetric type of returns where you might hit it big the 5% of the time. Sure, maybe the overall return when you average all the losers might be a little bit higher than real estate, but personally, that’s just not the way I like to invest. I’d rather hit a high percentage of singles doubles and also get the tax benefits  from it, which you don’t get from all these other asset classes.

 

But somebody brought me to one of these incubator groups and what I’ve learned. And I could be wrong because this is outside of the realm of real estate as there’s a lot of these incubator groups put forth by these influencers, or you can call them mini gurus  if you want. But a lot of these guys, they just couldn’t hack it as venture capitalists, actually doing the thing.

 

And as the same goes, those who can’t teach. So in this world, those who can’t make freaking companies. What they do is they’ll create these incubator programs, where they get a bunch of other mini startups and they give them the resources. They give them some general education, coaching, mentoring, and they create this kind of greatly branded and marketing incubator where they will go out and possibly raise capital from them.

 

And it gives some legitimacy to the venture capitalists, but really this is all just a fabricated business model for the group creator to extract money from these diamond doesn’t venture capitalists to join their incubator group and also to make possibly big money. All the fact that they have this group and some unsuspecting high net worth ultra high net worth person coming along.

 

Just thinking that group is legit when it’s just not, it’s just put on by somebody who could do their thing. And they’re pretty good at internet marketing. So just be in the world, that’s out there. I ran into a lot of folks like that. And then the second teaching today is, I think we’re in a very unusual time or in a bull market folks, if you have it realize, and if you think that the market is going to be cooling off anytime, I would disagree. A lot of the stuff I’m reading is, we’re really not going to hit any Rocky times until the year 2026. Now you may disagree with that. You are probably going to miss out on the best bull market run that you ever did see even more than the time, 2012 to 2016, which was known as the age of the apartment.

 

Now is the good market’s, it’s a bull market. The tide is coming in. And it’s potentially not a good time to be doing more of a duck and cover strategy or what I’ve called a strategy part of the end game strategy. When you have a lot of money, you just want to get a little yield.

 

One of those strategies in particular is the triple nets, right? When you go into a commercial real estate property and your tenant pays off all the expenses for you, it’s lower risk, lower return. But it may not be the best thing in this type of environment right now with inflation running rampant, a lot of your tenants, which on the marketing cereal box, they tell you triple net deals, you have corporate back, very strong tenants, but that can also have a double-dip because very sophisticated tenants they know what’s happening in inflation and they can just tell you to go screw off when it’s time to they can drop their lease, or they’re a lot more aggressive and a lot more sophisticated in terms of negotiating with you, the landlord in the triple net deal or the triple net arrangement each you have with them. 

 

Think of it like a lot of mom and pop investors got kinda rocked with the pandemic  because they weren’t able to fully capitalize on the rent’s going up and they bent over just giving away rent concessions to the tenants, thinking that yeah. It made sense in a pandemic, but the professional landlords, the kind of the way we do, we’re not hugely impacted by rent moratoriums, eviction moratorium, and we know how to play.

 

Our vendors know how to play the game to extract the whole amount of rent that is due, and that rents are going up over time. And that’s just something that the mom and pop investor that the amateurs just don’t have the ability to do. And that’s just making the comparison, which triple net  it’s two.

 

And you combine that with the fact that like Walgreens, these types of stores are closing. Possibly because of Amazon coming and taking over the pharmacy sector too. And again, I’m just bringing up this concept. You may agree or disagree, but it might be a time to be more aggressive in times of vocal bull market.

 

And when you should be aggressive and huddle and ducking cover into these more conservative triple net type arrangements that are traditionally lower return, lower risks, and just be cognizant of what other large families are doing. Large families, what they do is they go into those asymmetric risk plays with a certain amount of their net worth while also playing it safe.

 

Not saying that  you have to have the same strategy with your entire portfolio, or another idea would be to be bipolar, which a portfolio potentially being very risk tolerant with a smaller portion going after more asymmetric risk returns and maybe being more conservative with a majority or portion, or maybe even a minority or portfolio if you’re in the beginning, wealth building stages under $5 million net worth.  And to go into deals that are more conservative with that portion of your portfolio. Now everybody’s different and this is where I talk to a lot of new investors. We have our onboarding call, which you guys can still do. If you sign up at simplepassivecashflow.com/club, we only do one per person these days for people.

 

After that, you’ve got to join the family office ohana  mastermind, get around other folks, just like yourself doing this and start to build relationships with other high net worth families. If you’ve been around the circuit, dumpster diving in the free Facebook groups, the free online forms, and even worse, the free meetup groups out there with a bunch of house flippers and lower net worth guys. Just join the family office ohana mastermind, right?

 

You got to get to a point where you pay to play. And that’s what I personally did in 2015, when I had 11 rentals and I saw the light and I got around other high net worth folks. And I realized that was what you do to get your net worth up, to be about a quarter million, half a million dollars.

 

But when you become an accredited  investor, it’s about investing in good deals where you get the tax benefits. You start to learn how to play the game of passive activity losses. You pay less taxes, a little bit infinite banking, and that’s the way that the passive accredited investor invests. 

 

And unless you get it around a community like our family office ohana mastermind, you do not get that. So apply, go to simplepassivecashflow.com/journey and hope to see you out. At a future event, we were doing a meetup in San Francisco and we’re also going to be doing a tour in Houston  but you guys can check out all future events at simplepassivecashflow.com/events. All right, here’s the show.

 

Hey, simple passive cashflow listeners. Today, we are going to be talking about investing from a different country and in this case, Canada. So we’ve got one of our experienced investors here. I’ll do the disclaimer right now. We’re not lawyers, not CPA accountants. We’re just a couple of guys who are real investors and use professional advice from our professional advisors. And this is how we do it. Not saying it’s right or wrong, but hopefully it’ll just give you some ideas as this podcast is just for your entertainment out there.

 

But thanks for coming, Quentin appreciated it. Oh, no problem Lane. Give people a quick overview of some of your wide range of experience. I think people need to understand that you’re quite a big dog there in Canada.

 

Thanks man. I hang out with big dogs, so I feel like this small dog with them, but I’ve been investing since 2004. By the end of August, I’ll have $80 million of assets under management. The smallest amount of equity I own in any project is 25% and that’s about 30% of my real estate portfolio is 25% like personally owned by me not shared and the other 75%, I own 50 to a hundred percent of.

 

So I’ve got a large stake in my portfolio. I have single family homes with up to 40 unit apartment buildings. We’ll have 15 apartment buildings across Southern Ontario. I do invest in the US. And I’ve got some reasons for that. I’m sure we’ll talk more about it. I’ve written five books. I run a real estate investment club in Ontario which is a Durham REI. I was a teacher for a long time and I left teaching to be a full-time investor in 2014. And I haven’t looked back since I flipped like a dozen houses. I’ve done a whole bunch of other strategies and you know what, I really love investing in real estate, not for the fact that it’s investing.

 

I just like being a transaction engineer. Like I like putting things together. Making deals happen refinancing projects, I love all that sort of stuff. And I understand the asset class. And that’s why when I looked at what I considered diversification, as, moving money outside of the area of where I mostly control, which is Southern Ontario and looking at the U S as a way to expand it. 

 

On this show, I have a loose policy where it’s a no gurus, Quintin fits in that category. We’re going to try and bring some real value, which is, how do we invest from Canada and I was really interested in investing outside of the country at one time. And we’re going to talk a little bit about that, but just, so your main business, you’re an operator in Canada morons more importantly, more than Eastern side of Ontario, maybe describe your portfolio, like just percentage, like what percent in Canada then versus a United States and anywhere else, just give people like a real quick macro view.

 

I would say that I’ve got to all of my, like I’ve got a, like an $80 million portfolio just in Southern Ontario. And I would say that 75% is in multi-family the other 25% would be in one to four unit properties. In the U S I don’t have very much, I got probably about a million invested in the year.

 

About maybe 550 K worth in like I’ve got four single families in Tampa or five single families, one one’s a duplex. I actually gotta go back and look, I can’t remember, but then I’ve got to have visited it. I’ve been there. I’ve been to like when I went down, I went, I’ve been down to Tampa a couple of times.

 

I actually like to visit the places that I invest in. So I was there and I looked at the properties that I purchased at least the first two. And then No, I’ve been doing syndications in the U S. I have invested in an ATM fund down there. I do other things too.

 

I’m like on the board of directors for a company called rental , which is they basically do bank account checks for tenancies and stuff like that. I’ve got private placements. I’ve invested in different companies too. So I’ve got my, I’ve got funds in different places, but on the real estate side, I would say like about a million down in the US as a hedge.

 

Like I understand real estate and that’s why I want to continue to invest. And I like the fact that I get to invest in an asset class I understand with other operators down there and what I like is that I’m not depending on the Canadian economy now I’m looking at the US economy and different demographics in different areas as well.

 

I’m getting paid in US dollars, so I get some currency hedge there, which is useful for me. I think that’s really great for myself and also like everywhere we go, when we go on vacation, we spend US dollars. That’s what we like. I’m going to Costa Rica and spending US dollars.

 

I go wherever. And so it’s handy to be able to have those US dollars already converted for me. And having the proper structure is really important. Cause you can get slammed. Especially Canadian investing in the U S with double taxation. That’s the worst.

 

It’s two hands coming into your pocket at the same time, taking your money and pulling it out. And I don’t want to do that. Having the structure is important and taking the time to get it right to avoid doing that. But I’ve, I’ve enjoyed everything I’ve done up to this point and my experiences I’ve had.

 

Some experiences with property management in the U S like it’s like with the rental properties that I’ve had. And having to deal with that. But I think overall my experience has been really good and I’ve really benefited from real estate over the last, I dunno, two decades.

I’m really happy with doing it and I’m continuing to do it, right? 

 

So I’d like to point out for the folks, like in this lens of diversification, I like Quentin  and cut on myself. We’re considered operators, which you guys are not, you guys listing are mostly passive investors. And, I. I think of operating, where we eat our own cooking. We’re going to be heavily into our product through Quentin and it’s going to be up in Ontario for me, that’s going to be apartments that I run. I personally feel like I’m in like 80% of my own stuff. And it seems like the same thing for Quentin, very heavily that side, the analogy I, or the similarity.

 

I see it like people used to live back in the day where they buy their own company stock that they work for. We all know that’s dumb, but people used to do that pretty religiously until things like Andra started to happen and woke people up. But that’s what we do. So people always ask me like what should I do?

 

How should I diversify my portfolio? That’s the first question? Are you an operator or are you just a passive investor  of your passive investor You’re more likely to diversify a lot. But I personally came to this epiphany where I was like going into a lot of deals by myself, I got a lot of my own equity in there.

 

I probably want to have this new site idea of having 20% of deals where I’m not the operator and a totally different asset class, not apartments as just being prudent. And I don’t know, maybe for Woody, how did you come with the same thought process too? Is that what kind of led you to come into America?

 

One of the things that I’ve looked at over the time is Robert Kiyosaki’s, where you have employees, self-employed business owners, and investors. And so for me, I’m trying to focus on that right side in Canada, I’m the business owner in the U S I’m the investor. That’s the way that I see myself and by doing that, I’m able to use my experience in the asset class as a way to get involved in different projects down there.

 

I’m also learning how to do this stuff, right? Like it’s also part, I enjoy learning all the time, but I’m able to see what the projects are like. And then I can look at different projects and invest in different projects that I want to and yes, I can diversify across different projects, but at the same time, like my concern is that I’m not a big enough player in a particular project in order to affect change in that project. Whereas here I’m an operator. If something needs to change, I’m going to make it happen. That’s my role. I make things happen. I make nos into, yes, right. In a project where I’m a small player, I don’t have the ability to do that.

 

So when you have an operator, that’s also an investor in a project, it makes it a little bit more comfortable for that person, because then, you have quite a few people that are brought together and then they have a little bit more control, a little bit more control than most.

Like you were explaining before your analogy there, but that, that gives some comfort and it gives you some diversity because then you can be in different like different projects in areas that you like, maybe it’s Arizona, maybe it’s Texas, maybe it’s Alabama wherever it is that gives you still that geographic diversity.

 

But for me, like I’m getting into being more on the investor side of things, rather than the business owner side of things. Yeah, it’s because you’re used to driving your car and your family around all the time. It’s nice to get into an Uber once in a while. Just relax and play with your phone, enjoy the scenery outside.

 

But for some people it’s very difficult to turn that off. Yeah. Oh, yeah, my son just started driving. So now I’m in the passenger seat and I’m not, it’s not like being in an Uber. I’m like, you’re conscious of what the heck is happening. The nuances that are going on behind the scenes when a certain message comes out.

 

But then I don’t know, I do this. I kinda enjoy it. Like a little. Then we’ll talk about this at the end. I’ve been in deals with the passive that haven’t gone as smoothly and things I’ve blown up and I just find it entertaining and being on the other side to just be a passive investor on that. Before we move on, let’s talk about this. Some similarities or differences. With Canada rather than the US, you see both sides of any quick things that come off to the top of your head, just, just for investors out there, just for a general, broad understanding of differences between the two.

 

The structures, the way that we buy stuff, like the syndication model is very similar. Sometimes it’s structured differently. So like when I’m putting a bunch of people together to buy a building in Ontario if I have less than 10 people, I’m probably just going to use a corporate structure.

 

We’ll have a corporation and we’ll have shares and Instructure. If. No more than 10 people. I’ll probably do an LP-GP structure, which is pretty much the same as the syndication model than the U S you have. You have the second  just a different way that it’s set up, but big picture wise, they’re very similar.

 

So from the multi-family side it’s quite the same, just some nuances that are different on the residential side, you get, you have this beautiful product in the US it’s called the 30 year mortgage, 30 year term. We don’t have that. Like it’s not there’s no.

 

The longest that you can get is a 10 year term. And I don’t even think you’d want to have that. So you know, you have this 30 year  term, like a super low. It is really awesome. And you’ve got some more, I would say, innovative products on the financing side, particularly in the one to four unit space.

 

We don’t have those sorts of things, but what we do. Is on the financing side for the multifamily units, we do have the ability to get higher loan to value, which I don’t think I’ve really seen in the U S but we have like CMHC financing that can get us up to 85% to 90% loan to value with the 

sub 2% rates. Which is a pretty different outcome you’d have to, you’d probably. You’d know around the multi-family side, whether you have what you have for financing in multi-family buildings. Yeah. So that’s the big piece there. And so that probably means you guys don’t cashflow a lot on a lot of the deals just because the amateurization is wasted.

 

No one, the amortization can be like, you can get it up to 30, per 30 year AMS for the multi-family side. Typically their 25 year AMS on the multifamily. But if you’re going to CMHC financing, amp Amery will go up too. So it actually works out really well. On the resi side. So one to four units, you’re like, it’s typical to get 30 year amortizations.

 

And right now Rezi rates are probably around, I would say 2% to, probably, depending on your qualification rate and all of those things. But it’s, I would say it’s around that, cashflow wise, like I would compare Toronto to like Like a New York or somewhere in California and the landlord laws are like in California too.

 

So it’s pretty nuts when it comes to that. It’s tough. Like you get a lot of appreciation. So my, the way that I’ve been able to do really is I don’t buy anything that doesn’t have cash flow in my market and I make it work. And I, we work to do value add, we do turnover units. We do a lot of different things to make it work and make it cash flow and then refinance and do it again. And pay back the investors funds and continue to own it. And that’s why I liked the syndication model in the U S. Where we were doing exactly the same thing, except I didn’t have to worry about financing.

 

If I try to get financing as a Canadian in the US it sucks like it, like I’ve I spent almost a year and a half getting financing for those rental properties in Tampa a year and a half. It was brutal. And just at the point where I was about to get financing, it was like, Martin. 2020, and then, COVID but they got rid of all the foreign national lending.

 

So it was a real pain. So what’s nice for me as a Canadian investing in the US is I get to take advantage of leverage, which I wouldn’t necessarily be able to do if I were to invest directly in the projects myself. Now you would have asset-based lending for multifamily buildings in the US but you still don’t as a foreign national, unless I partnered with somebody else who is a national in the U S I wouldn’t be able to take advantage of it in the same way.

 

So it’s interesting that I’m able to take advantage of that. Through investing in syndications in the US yeah. And just to a side note, the key principles, the loan guarantors in American syndication, before we go get that Fannie Mae Freddie Mac, I don’t think you can be a foreign national.

 

I’ve seen it done sometimes if you have a green card, but then I’ve seen it happen sometimes, but it just takes an act of God. And people are like, lenders are just really confused when it does happen. But yeah, that’s up for Americans, but I guess going back to your investing in Ontario, it’s a primary market.

 

So you focus on things like the more outskirts, the more rural areas of Ontario or. I focus on the 401 corridor, which is from Toronto to Kingston. It’s a major highway corridor there and it’s where a lot of the population in Canada is along that 4 0 1 corridor. I stick to the bigger cities and the bigger locations within there, but on the outskirts. So the suburbs are low. So I’m not in Toronto, but I’m in the outskirts of Toronto, but not in, not rural. So suburban, I would say. So Pickering, Ajax would be Oshawa Kingston and I work hard to buy properties directly from owners. When I buy it.

 

All the buildings that I bought have never been listed on the MLS system. It’s always, I always worked directly. I have a good reputation. I like people who know me. I do what I say I’m going to do. If I say, I’m going to close, I’m going to close. And my reputation is really important. So that’s how I do a lot of the work that I do in Ontario and I, and I’m what I’m hoping for. Those same relationships through the people that I’m investing in the U S with. So they’re like me in the U S and that’s what I want one to be able to do.

 

To be able to invest in an asset class that I understand. And be a little bit more hands-off but still, I can read the numbers, I can see what’s going on. I like it, and I have no problem putting people’s feet to the fire if I think something’s a problem. Yeah. And I think what I like about our relationship is, you understand what’s going on and it’s, for some people you need to tell them something like we just had a fire at one property.

 

And detailed unsophisticated investors, they freak out right where you’re going to ask the right question. All right, what’s the deductible, the cover or the kind of anomalies fine, got it. I’ve had it. I had a total loss on a building. I’ve had to start from scratch.

 

Took me two years to rebuild. Like I went through the whole process. Actually, what I did was a little bit different from that. I hired an independent adjuster, so that they fought on my behalf. For me against the adjuster of the insurance company in order to get me a little bit more, we do that every time too.

 

And one time we did it, we got I think three times as much as the first offer. If you’re on a little residential property may not be worth it. Cause I had rental property that I owned outright myself and I just got steamed real. It was just the biggest, it wasn’t big enough.

 

Nobody would work. And I just got screwed over by the insurance company, but that’s why the bigger stuff it’s better, but let’s get into the question at the top, so a Canadian wants to invest in America in a syndication. How do you structure it? Again, you’re not a lawyer, but how do you do this yourself?

 

There are a bunch of different ways to do it. And you have to be careful because some of the advice that you see on the internet is old and it doesn’t work anymore. Like some of the things that you hear are like buying it as a Canadian, you hear buying an LLC. If you buy in an LLC as a Canadian, you’re going to be double taxed.

 

The Canadian government doesn’t see that as an independent entity and you’ll be double taxed on that. And if you earn a dollar and you get taxed 20 cents there and 30 cents here what do you have left? Yeah. Why did you do it in the first place? It’s important that you get a structure that avoids double taxation.

 

So the way that I do it in the U S is I use a limited partnership where the general partner is an LLC and the general partner owns 0.5% ownership of the LP and 99.5%. Is owned by the limited partner and that can be a corporation and that can be owned by a Canadian corporation, or it could be owned personally.

 

The idea is that when you are doing your taxes in the US you’re going to try to take as many. Deductions as possible so that you get to a zero tax rate and you’re not bringing anything back. And what’s nice is that they have so many differences, the other difference is depreciation.

 

Like your depreciation is super awesome. The US I can take the sum of that depreciation upfront because you can segregate it. You can. There’s just so many more benefits. I can get zero every year and I’ve got, and I’ve got like a backup from previous years because I’m able to do that.

 

But with having that limited partnership And doing my taxes in the U S when I take the, whatever I’ve finally made and bring it back to Canada, it’s usually zero. And then that way I’m not double taxed on that, on the income that I’ve made in the U S there are other ways to do it.

There’s, S-corp, let’s recap the first way. So I think some people, they get confused cause we throw around the terminologies that LP and LP, which is a different thing. It’s a position within a larger deal partner. But there’s no soul, the entity LP lP or the entity and LLC.

 

So you’re creating a Canadian LP US. So I’m creating a US LP that has so in every US LP, this is the legal structure. There is a GP and an LP within that, right? The limited general partner and eliminated partner within the limited partnership. So the general partner in this case owns another structure that I own.

 

Which is 0.5%. It’s an LLC, right? So I’ve got my LLC that owns 0.5% of the LP. And then 99.5% of the LP can be owned by me. It’s a limited partnership, or it could be owned by. A corporation can be a U S corporation like an S Corp or whatever you do, whatever you want to do as, I, I can just, for me, it’s just personal.

 

Then, that’s one option for structuring. So it’s like you have control, you’re the thing that you can. Through is your LP within this energy and you have control over it. I think a lot of people do this in America, where they have a family management company, a holding company where they own a piece of it LP.

 

They have control over that. So that way it’s like a, it’s like all this kind of like an LP works in a syndication, but you’re doing this all on your side. And so this entity goes into all these other deals. So I just want to. Break that out for folks, because now they’re thinking like, do you make an LP for every deal?

 

Now this is all of your institution. That’s right. It could be your base structure. And then that’s what goes into investing in like these other projects or owns the property in the U S right in Canada. What you’re talking about would be like a family trust, right? Like it would be like that type of arrangement.

 

But within a bunch of other structures, but for, in the U S the way that I have it is that I know other people that have done it differently, right there. There’s the right thing. Like I stay out of the gray area. Okay. I’m not into it for, to, to hide my money somewhere or to avoid taxes. I’m okay with paying my fair share of taxes, whatever, but there are other ways to do it that I’ve heard that people do that are Canadians, who are investing in the U S yeah. Yeah. So this is like me personally. I’m not a lawyer. But I’m not a huge fan of series

 

People use them, but these are like the similar things that other people do. And just, we’re just talking about it here, just to give you guys different ideas, because I think this helps people learn too when you start to get creative with this stuff, but yeah. So how are some of the ways that people get around?

 

Yeah. So there are, what’s interesting about the U S is that every state has different types of if you form a corporation and in some states there, it gives you additional privacy that you may not get in other states. So that’s one of the things that. It is like the Nevada Corp, right?

 

So people may want to invest in, or create a corporation in a place where it’s hard to get details on who owns the actual structure. And so if you were to use a Nevada Corp as a Canadian, you move money into there, then you buy whatever assets you want with the Nevada Corp. That’s somebody who’s probably trying to avoid it.

 

Taxes now we’re not giving anybody advice. I feel like I’m doing something right? No. This helps us understand this. Like what are some of the pros and cons between different states? So correct me if I’m wrong. But I think Wyoming similar, whether you have that anonymity where like you put it in the LLC and you have this anonymity, but to me that enemy’s kind of stupid because any halfway decent lawyer can figure out what it is and subpoena what’s in it.

 

But in this case, we’re going off the thread that countries are clunking and dumb and they can’t really do that unless they have a reason to uncloak the the entities. So we’re saying, we’re not saying this, but what people do is like they throw into the Nevada thing that kind of cloaks it and then if you can’t see it, you can’t tax it.

 

But I don’t here in America. You’re supposed to self, self Self do your taxes right in your, in the best way that you can. And what’s right based on your understanding of the taxes. To me. Yeah. This is a little shady, right? This is an up and down to you. Yeah. And that’s why I stay out of that sort of stuff.

 

I’ve got an ITIN number. I follow the US tax return, as part of what I need to do. And I filed my, take my US taxes, take it to my accountant and make sure that it’s filed in Canada too. So that’s just to be clear, that is not me. I’m not doing that at all. No magician tricks here.

 

This Pelosi of this. Yeah. I bought that. I think that’s, I’m aggressive, but to hide it behind something, knowing it’s there that’s to me, that’s not. No, and you’re just inviting to, to get into more trouble for something else. Like I, it’s just, you don’t want people to just keep looking at everything that you do just, for something like a, a small portfolio or wherever else you are, you just.

 

I think that you have to weigh the risks when you do something like that. It just doesn’t make sense to me. And I think there are lots of different ways to structure yourself properly and you just need to find an accountant and a lawyer. Who are familiar with both the US side and the Canadian side at the same time and get their advice.

 

Cause there are like I’ve heard of structures where there’s a Canadian corporation that owns an S-corp in the US and then the S-corp is what purchases properties. There’s lots of different ways to do it. What year? Trying to avoid double taxation. That’s as a Canadian. That’s what I’m trying to avoid.

 

I don’t mind paying taxes, but I only want to pay it once. I don’t want to pay taxes, like two countries’ taxes on the same dollar. It doesn’t make sense. Then what’s the point? And that’s all that I’m really trying to do. And then the other piece for me, Hedging against what I’m doing in Canada and the US and then, having that diversity of currency, as something that I find appealing to me. So when I’m diversifying in an asset class, I understand, but not necessarily in a whole bunch of others. Yeah. Yeah. Going back to the whole. The other nefarious type of entity structure, but you see it, the hard thing is like passive investors out there.

 

You don’t know who to believe, right? Everybody’s shape-shifters out there. And a lot of lawyers who haven’t built up their firms yet, or are young and hungry. What they’ll do is they’ll put their whole business on this kind of aggressive strategy. And they’ll run around and say, Hey, I got this magic trick where we hide all your assets in Nevada and there you don’t pay taxes. If you do, we’ll tell all your friends and yeah. Their professional license and everything, but they’re hanging their hat on something. That’s a trick. And in my opinion not really the right way to do things. So it’s hard for people, right? And this is where I keep coming through.

 

You can’t just trust licensed professionals. This is where you have to build your network with other capacity investors here, all the different pros and cons of different options, understand it yourself and B become the architect. But then of course go to the right professional, the referral that you deemed the right strategy, and then go and implement it.

 

Just like taxes, right? There’s guys who like the same thing. There’s all these different strategies out there. Some in my opinion are very nefarious and aren’t right. I think you as investors need to take ownership over that. Yeah, absolutely. Like I, what I do is I’m always looking for peers who are either at the same level of being, but, or just above where I am at and, talk to them about how they do their structures and what they’re doing.

 

Not necessarily the. Like I’ll ask different professionals about how they would structure it, but, and then I’d go, I’m going to go that extra step and talk to other people that I know who are already doing what I want to do and talk to them about how they’ve got it structured. And not just one person, two or three people that are doing the same sort of thing, to be able to figure this out and then make a decision.

 

Based on that and what you get from the professional, because in the end, like you’re paying somebody, and when you pay somebody, there’s going to be some bias there, no matter what you do. And they’re going to want your business. So you have to make an educated opinion. And I like mine.

 

I’m always trying to hang out in a room where I’m not really the smartest person in the room and, I don’t want to sound egotistical or anything, but I think I’m pretty bright and I’ve got some experience, so I need to find like rooms that have those types of people and, I’ve joined different, like coaching, like I’ve I was part of strategic coach and I’m part of the entrepreneurial organization which I really enjoy.

 

In that group, there are real estate investors from across Canada and I’m able to be in a room with them and like they are, they make me, he looks small and that makes me feel good. Cause I feel like I’m learning all the time. So find that room and they don’t have to be like 20 years in front of you, even if it’s just a year or two in front of you.

 

That’s probably the best thing, especially if you’re just getting started because. It’s easier for them to want to share with you. If you’re going to ask me questions, I don’t mind talking to you Lane, but if I get a new person who’s starting investing, asking a bunch of questions, I’m going to go say, go talk to your lawyer or go talk to you.

 

Like, why are you talking to me? Read it, read the basic primer book on this stuff, guys. Like why are you bothering me? So at the same time, though, if you had somebody who just went through the process, they’re going to want to share that knowledge with you. Because they’re like, they’re proud about going through it.

 

I did great last year, great. Then that’s the person that cheated that you need to find. Groups like yours, like your tribe, right? Like that’s the type of thing that will help people. Get from where they are to the next step, because they’re interacting with other people who have already done it. And that’s what we want to do. And I think this is where you get in the right groups that people pay for. They help out here’s exactly what I’m doing to print it right now. I’m picking his brain on this Canadian thing and we’ll get to my.

 

Selfless question here at the end. But he helps me out because he knows that the person that he’s helping, if they’re the right person will reciprocate, and not only is it the right thing to do and he enjoys it, this is when you get into these types of worlds, these masterminds, like these are the magical things that happened.

 

But so here’s my myself, as the question went in it, because you’re a little bit further along the road as I am. And I just kinda liked that I respect your opinion. Not saying I would follow it. But getting these different opinions from people on the same level is important. So it’s a question about diversification.

 

If I understand it right. You and I are in different situations. You’re in Canada coming to the US. I’m using Canada, maybe one of them for diversification from a real estate standpoint, or maybe a currency standpoint. I don’t know what side of the fence I’m on at this point, but so if I understand what you’re doing, most of your stuff is in Canada.

 

You take a little small chunk and in us, is this just some place to fund for you? Or is this like a true hedge? Cause you have no intention of really assigning this money back to Canada and you don’t need it. You don’t need the money to survive, put food on the table. So what is like the, is there, it’s just a, something a hobby, give me some insight.

 

That’s hard. That’s a hard question for me. I would say that for me there’s a couple of different things. It’s again, moving to that investor side rather than the business owner side. You’re right. It’s not a lot of funds for me to be able to. To put it in and invest in different projects.

 

It’s also, I think I don’t intend to bring the funds back, but I do like the idea of being in the unit. For quite a few months of the year. Particularly as I get older. So I’m thinking that it probably would be good to have all of these things set up. I’m a planner.

 

So  I tend to think 10 years down the road and getting all of these things set up we’ll set up. And my family up in the future, for the things that I intend to do in the U S in the future. There is a, there’s a little bit of that. There’s a lot of just being able to have us dollars for different things that I’d like to do.

 

And it you’re right. It’s not a lot of my net worth that’s going in there, but it’s it’s it’s enough that I think will be useful for me, for my future goals and plans. So it’s not like you’re not like a prepper kind of mentality then by no means. And you’re not thinking about the Canadian dollars.

 

No. And I’ve had many people ask about investing with me in Canada and from the US and I’m like, why would you do that? It doesn’t make any sense for me because the state of California is the population of Canada, right? Come on. Instead of coming to Canada, just go to a different state.

 

You’ve got so many different opportunities in the US instead of going to Florida, going to Arizona or going to Texas, you’ve got a lot more of that. We have some of that in Canada with provinces, but the population is so small. If you were to, if I were to say if someone were to ask me that I would say hedge against it, Asset classes in the U S do like storage or do something else, mobile homes, or do do something else that if you’re comfortable in the real estate space, there are other ways that you can do that in there, but you don’t necessarily have to go out.

 

And Like there, there’s so many different types of investments out there that you can do that are, I feel like better than putting money in the stock market. If you can do private placements in companies, that’s another way to do it, especially if you understand who they are and what they do. That’s something you could do. But come to Canada. I’m not going to say, I’m not going to tell you to do it. W it would serve me well, but I like to have investors invest in my projects, but I’m. Okay. I think for what I would suggest for Canadians to definitely do, to consider it and to do it and to do it properly and structure it correctly and stay outside of do it.

 

Don’t do the legal stuff, like just do it right. But don’t worry about what I say, an American co investing in Canada. I don’t think that’s necessary, you can do what you need to do from a diversity perspective in different states. Two, two common mistakes that come to mind that new investors do all the time is, they think that the grass is greener on the other side. They’re in the US, but they think Canada is the untouched proverb, the opportunity. And then the second lead, like shiny object syndrome, a lot of investors get this there, they start to open up into this world of alternative investing and then it becomes like a Las Vegas buffet.

 

They’re going after the Asian food, the seafood that deserved the Italian food. Which is a multi-family self storage, mobile home park. And then they want to go off to Canada too. I was still able to just focus on one thing. Residential multi-family, I think it’s the start or the basis of it all, but, I think people spread themselves too thin and they don’t earn anything, spend at least a couple of years into one asset class first or that before you branch off to something else.

 

Because the biggest thing is investing with the right people that aren’t going to steal your money. It doesn’t matter what asset class. For sure. And you have to figure out what your goals are too. So some people, like when I first started, I needed to replace my income. That’s what I needed to do to leave my teaching job.

 

By 2012, I had enough funds to be able to do that. I didn’t leave my job until 2014. And then I just kept building and building that one type of residential. Real estate where I was getting cash flow from it until I did really well with that. I had really solid cash flow coming from that.

 

And then I moved away from that into multi-family because multi-family is not as great on the cashflow at the beginning, but it’s great for your net worth. So it was more of a net worth plate. Stabilize the asset, get the property refinance and into longer term financing. Then we started to get cash flow from those assets, but it takes three to five years, at least you can get a home run maybe once in a while, then you can do it in one or two years, but mostly it’s three to five years.

 

And once you do that, then you start to get the cash flow that comes to that. But people have to first figure out what their goal is, right? Is it cashflow or net worth? Because some people don’t want to quit their jobs. They don’t want to do that. And they don’t, then they need to just focus on, okay.

 

Let’s not go to the buffet. Let’s find out where the ribs are. Okay. Let’s find the ribs. I’m a meatatarian so I don’t know. Yeah. My cell phone went through it. When I go to a buffet, I love crab legs and bone marrow, that’s all. I’m big on ribs. So that’s where I would go. But you gotta find what that is, and then get enough of that, so that it’s substantial. And then you can worry about the desert and the salad and the, whatever. Yeah. Go have your pizza then, and then your noodles. Just gotta build that up first and then, and you’re right. 

 

The shiny object syndrome is a problem. Like I see so many different people that have been really successful in real estate only to sell it too early. And then get into something else. The analogy that I use as a hockey stick while I’m Canadian, I gotta use a hockey stick. Great. So you got the base of the shaft, you got the base of the stick where you hit the puck and then it goes up the shaft of the stick. What ends up happening is most people. Actually sell their property, probably just a little bit up on the shaft of the stick and they missed the full shaft, right?

 

Because of whatever reason they got distracted, oh, this is going to be the next big thing. I have to solve this. I got to get into this and they miss all of that. And I think that you got to watch out for that shiny object syndrome. So you can get that big lift that happens, with properties over time.

 

And that comes with mortgage paydown. It comes with appreciation and it comes with cash flow and value add repositioning those assets. Even if you can take a single family home, And give it to its highest and best use. Maybe get it to the place where that could be like a triplex or fourplex by rezoning, doing whatever you can do.

 

You can make that thing make you money. There’s no tomorrow, if that’s what you want it to do. So like you got to figure out what your goals are, but don’t. Don’t get distracted and then sell that asset, especially if it’s just some tenant that’s causing you, whatever problem it is, you get too emotionally attached and that’s why you sell it.

 

You can’t do that. Don’t let somebody else affect the way. The reason why you sell an asset. That’s not a good thing. That means you just got to hire the right people. You’ve got to find out who the, who is. That’s going to help you to manage that asset better and take yourself out of the thinking process, because then you’ll get too, you’re too emotionally involved and then you’ll sell it, right there at the bottom of the shaft rather than at the top. So once I close up here, All right. So you’re a Canadian citizen. You don’t have the protections of the SEC. What if something bad happened in a deal? And then, your general partners you decided to invest with across the country line border, goes haywire. What would you do as a GP?

 

So I would make sure I have the address of the GPs home. I’d find it in my truck and get my baseball bat and say hello. No, you know what? I think that The thing is that you can do as much due diligence as you can, but it depends on a lot of the things that you can foresee coming, especially if you’re not getting numbers from somebody.

 

Having experience in this business is really helpful, but there are some things that happen that we have no control over. We’d get A hurricane or, there’s a flood or whatever it is, but the thing is, did that person have the right insurance in place that the people have? And as a LP, you can ask a GP, that sort of stuff, right? That’s what you should be doing. You’ve got to advocate for yourself. And hopefully if you’re with a group of people together who are in an LP, you get the ability to be able to move that GP forward a little bit just by asking the right questions and staying on top of it.

 

But as a Canadian investing, I have less protection than somebody else, but you got to remember too. It’s just, it’s not just me and not as an LP. I got all these other guys who are SEC protected and you know what they’re going to do. They’re going to complain more than me. Yeah. Like a class action lawsuit, where you’re usually going to have, you’re going to have that one guy out of the LP of 20 guys or even 150 guys, there’s always going to be a leader that emerges. I call it like the lord of the fly. There’s always one guy that’s going to take command of the mutiny and charge things ahead.

 

Hire the lawyer, just the nature of these people in these deals. They may or may not know what the heck is happening, but there’ll be a leader that usually arises. This is why I enjoy being an LP sometimes. Cause I’ve seen this happen a couple of times where a deal has gone sidewards and. I’m a GP, so I know what’s happening. I’m not, I’m a GP, so I know I’m not a GP, this kind of deal, but I know what the GPs are going through, but I see it from what the LPs are doing. And sometimes it could be overboard and too much and really annoying. And that would really upset me if I was a GP. This is, I think, what happens.

 

And I think this is why it’s nice to invest in a group like that, that maybe you are the person that I don’t care about. There’s somebody else that probably cares more than you. That’s going to carry the metaphoric baseball bat. That’s great. It’s all metaphorical and that’s what I’ve said.

 

But yeah, but the other piece there too, is that this really isn’t a significant amount and might not be worth as well. For some people that it may be, but like it’s not really a significant amount. Saying that I wouldn’t be upset if I lost it, but I’m not going to eat tomorrow because of it.

 

Like it’s not, and that’s traditionally the type of investors I like to work with anyways. Like I’m an ideal investor for myself because I know that I I don’t like to invest with people who are bringing 50 K or 75 K like I’m usually looking for people to bring 200 K or 250 K to any project that I do because I’m dealing with a different person.

 

I don’t like to see people take money from lines of credit, and invest with me. I’m looking for other types of people. Like my last, the last couple of buildings I had my last building I had 700 K one person. Brought two. And then I’ve got a 16 unit where I have 900 K that one person brought. I would rather deal with those people and be in a partnership with them, a 50-50 partnership and get the deal done rather than have 10 or 20 people with 50K each.

 

I just find that the people who have 50 K are usually the biggest pains. Take the guy’s 25 grand, cause he needs it more than the other guy. No blast though. The worst is the last 20, 20 grand the person with the last 20 grand I’ve. I turn many people away from investing in my projects because I just, I met a point in my investing career where I would rather not deal with pain in the right.

 

And this is why I tell people like, if somebody is willing to take 50 grand or less, they’re desperate for cash for their project, because if not, they will just pull it out of their own pocket because most general partners, their net worth is well over $5- $10 million. And they’ll just feel it personally, if I take a guy’s 30 grand. Yeah. It’s a little sketchy. You want to be careful with those types of deals for sure. 

 

Great insights. I. I read between the lines with your little us. You’re not going to be domiciled. I see it. I don’t know if you’ve thought about it this way in your head, but I see it.

 

I think I see you doing it as an envelope system, people’s budget, and they have like their little play money fund. I feel like you’re using your US  money as you’re playing money. So when you go on vacation outside of Canada, you just feel like you can just blow it off. Maybe just don’t tell your wife, I’m neither confirming nor denying what you’re saying. It seems whimsical, but this is what people at the end game do. And I think this is what kind of keeps it fun, just bigger  envelopes.  And I love learning, right? For me, this is new learning.

 

The US for me is new learning. It was almost like starting from scratch again, like investing directly in going through the process and, and I enjoy it. So I like to continue to learn. I’m going to keep doing this until I can’t anymore. This has been a fun conversation and I really appreciate it.

 

Folks, once you guys get Quentin’s  book the title is The Action Taker’s Real Estate Investing Planner. Yeah. The Action Taker’s Real Estate Investing Planner, it’s on Amazon. Yeah. And last name D S O U Z A. It’ll probably pop up to the top of Amazon and pick it up. Yeah, thanks for coming on Quentin. No problem and one thing too, is they can reach out to me on Instagram at QMANREI. That’s my Instagram handle and trying to get my followers up on there. So yeah. Cool. There you go. Consolidate your channels, right? I can only focus on one. I’m not really that good at multitasking on multiple social media things.

 

Thanks everybody for joining us today. We’ll see you guys next time.

Want to Get a Loan? Do It the RIGHT Way

https://youtu.be/zoaZOzv4-m4

I typically suggest there are two ways of sending money into escrow. You can have the donor write a check and deposit in the borrower’s account, but you would need a lot of documentation showing how the money is deposited. We’ll ask for a canceled check or check image and the transaction history.

 

Sometimes it takes three, four days for it to clear. So depends on where you are in the contract. You might not have that luxury. The cleanest way. I always tell people is just have the donor and wired directly into the escrow’s account.

 

try to rent them out and

 

Let’s get to some of the problems you’re seeing through transaction. Maybe we’ll break it down. Order occupied it, non owner occupied too. But the first one is when I was buying a lot of these rental properties, of course I was using my own money. My parents never give me anything. Nobody gives me.

 

But some people when to buying their primary residence, shoot, what kind of 20 something year old kid can afford to $300,000 down payment. A lot of these guys are getting it from their parents. What’s the best back to sit there, like work that in a lot of people, when they come to me, obviously there’s some gifts.

 

But for gift letters, for the most part, conventional loans are pretty easy. They make it really easy for us lenders and also the borrowers. I typically suggest there are two ways of sending money into escrow. You can have the donor write a check and deposit in the borrowers. But you would need a lot of documentation showing how the money is deposited.

 

We’ll ask for a canceled check or check image and the transaction history. Sometimes it takes three, four days for it to clear. So depends on where you are in the contract. You might not have that luxury. The cleanest way. I always tell people is to have the donor and wired directly into the escrow’s account.

 

So this way there is a receipt and there’s no way the money is going wrong anywhere. But for FHA loans do know that we will ask for the sourcing of the donors funds. So meaning I will ask for two months of bank statements from the donor, I’m trying to sharp shape this. If I get a random check for my friend, Two and a half months prior to when I throw this money into escrow.

 

Nobody checks or there’s nothing I need to write that this is when the real estate industry, I hear a lot of real estate agents would say, oh, you need to have two months of bank statements, clean bank statements, or seasoned funds really that’s a myth, but it really depends on what the deposit is for. We call them large deposits.

 

So large deposits definition is basically any positive. That’s more than 50% of the total gross income used on the loan application. So let’s say if you and your wife combined $10,000 gross ran knowing gross income on the loan application. So anything higher than $5,000 deposit into your account, we just have to know what it is then.

 

Why is it deposited? We just want to make sure. You’re not loaning a $5,000 to go buy this house and now you have to pay back and we need an attitude that we can come or get, or it can’t, it gets, it’s a gift. And we just need a documented source and explain, I just got it from my block five or crypto deposited from Coinbase.

 

We can use a crypto as down payment. I’ve got this other, wasn’t he wasn’t annoyed, but the bank was being really at the way. They’re like, oh, we see her in these private placements. And we amount to make sure, like LPs don’t both sign on debt. They’re the best investors, but they’re asking all these questions.

 

Any thoughts on that? Other than finding a VA letter, you can explain all you want. If you met with an underwriter that won’t let go. Sometimes it’s just easier for you to change lenders to someone who can get that scenario ran by their underwriter. And if you get the, okay, then resubmit that application over there, that’s what we do as brokers.

 

Sometimes we run into cases like that. Yeah. Lender aid doesn’t work out. So we quickly, we have your application. We it’s so easy for us to go to the second lender, go to the next lender that can get this done ASAP.

 

This website offers very general information concerning real estate for investment purposes, every investor situation. Always seek the services of licensed third party appraisers inspectors, to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information is not guarantee as in every investment there is.

 

The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best in.

Syndication eCourse Freebie

https://youtu.be/3hOywQBjUB0

Finally, we’re able to edit the latest Sunday cram school. I think we did on Saturday, actually. We got a bunch of investors who want to learn about syndication topics, did a bunch of FAQ’s in a presentation form, and we edited it up for you guys to listen in today’s podcasts.

Now, there are a lot of things that I had to actually edit out due to SEC reasons. If you want the full cut of it, you guys can go to simple passive cashflow.com/club. Join the database there, and we will get you a copy or you can send an email, the team@simplepassivecashflow.com with the subject line Secret Hui Message either way that works.

We’ll get this unedited version out to you guys, but just some takeaways that I’ve been seeing this week, actually this month, a lot of this came from the Hui retreat that we had recently in Hawaii, really excited about doing it next year. Not only talking about investing money, where did you get your money from?

Where do you put it? How do you protect it? Taxes, et cetera., but more about the relationships because to be seen, if you’re doing the 1, 2, 3 simple passive cashflow plan, investing in good assets where you’re cash flowing, just in case of a recession with good honest people. Secondly, you’re investing tax wise, smartly.

You’re using the passive losses effectively to possibly pay less taxes on the ordinary income side. And you’re doing a little bit infinite banking. But mostly you folks out there will make six figures. You’ll be out of the rat race in four to seven years for the most part. Some of these takeaways that I wanted just summarize for some of you folks is we talk a lot about end game getting the four or $5 million net worth because that’s a threshold where you can get to and get back into the marketable securities, the wall street crap, and just make that four or 5% return or put it into infinite banking, which is even more secure and life insurance and make that return tax free there.

If you’ve never heard about it and go to simple passive cashflow.com/banking, get the free ecourse to learn more about it. The ideas you have to get penetration and grow your equity into, more semi aggressive deal to get yourself to this sort of higher level $3, $4, $5 million net worth and at that point you can go into cruise control. Now, one of the ideas that, we talk a lot about in our family office group and in-person meeting is this concept of what do you invest in when you get to end game?

Not necessarily for equity growth or better returns, but more for stability and some people they titrate to that point slowly, right? Where in the beginning, they are going to be in rental properties, syndications to get up to a point, maybe two to 3 million, but maybe take, I don’t know, a quarter of their portfolio and slowly put it into these more end game type of investments.

Just to name a few. Just to get the wheels turning case. You’re not aware of some of these types of things still in the alternative investing space, they might be like life settlement investing, where you’re going to be buying out the life insurance product of somebody who is unfortunately going to be passing away or in a terminal illness seems very morbid, but it is one of those things that is guaranteed to happen, it’s just a matter of when.

Another investment that a lot of people talk about are triple net deals or commercial leases and this is where they say just go buy a Walgreen’s once you have a boatload of money, something I want to point out and a discussion topic that came up that I wanted to share is, maybe triple net deals aren’t the best thing to be doing at this point in time this market cycle. Right now rent increases are skyrocketing. The economy is doing pretty good. If you’re not going forward, you’re going backwards and we’ve heard this in many types of personal development, and also I’m going to extend it out to real estate.

Now, hear me out here now, triple net deals like investing in a Walgreen, any kind of type of corporate based, big corporate tenant is very, and especially when they take care of all the expenses, which is the term triple net comes from you, the landlord investor, you pass all those expenses off to the tenant.

You don’t make as much money, but it’s still pretty decent return for a very low risk. But now what you’re starting to happen, this market cycle is a lot of these very sophisticated corporate tenants they know their value and they know that inflation is going up. For a lot of them, they’re making the good business decision to just dump their leases so the landlord to go screw off.

Which may not seem like the right thing to do, but in terms of their leases, it’s totally within their contractual basis for them to do this. Combine this with the fact that you’re seeing a lot of these Walgreens and these pharmacy stores that were traditionally, one of the people who would take up these single lot kind of type of triple net ideal type of investments for high net worth families to go after.

Partly because Amazon’s coming down to town with the pharmacy stuff and just less need for brick and mortar. I’m not saying it’s going away completely, maybe not be the time for this. And this is where it’s a concept of, there’s a time to get aggressive and there’s a time to huddle. I’m trying to emulate and so I don’t see it that often, but large families, family offices, the guys that are 50, a hundred million dollars net worth.

Now these guys, sometimes you can make the argument that they have enough money where they could just live off the remains and they’re 20 something plus off swing can live off of it and they’re fine. But the ones that are being done correctly, they are still semi aggressive in the market. And what are they doing now? Are they getting more aggressive buying rental properties while the rents are going up and interest rates are still pretty low and continue down that track, or are they going into triple net deals, which is the duck and cover where there are these from a risk standpoint, there are these kind of headwinds that are fitter the commercial leases are heading into.

Now, I don’t know. But I just want the pulls it out there as a question to ask. Now, maybe you can take the standpoint that I’m just going to be very stoic, whether they’re good times or bad times, I’m going to be doing the same thing regardless.

Fine I don’t know. I’m there’s different investment philosophies out there, but I’m starting to catch on to the fact that maybe you might be very stoic and, or maybe a family offset might be very stoic in their philosophy, but still they recognize when the timing is good. There’s a time to get in. And then when there’s a time, when things are overheated, you go to a hedge strategy where you protect your tail.

Just thought I put that out there. Now that said, there’s a lot of people that listen to podcasts and just don’t have very much money and they have very little investment knowledge and are very unsophisticated, even though they listened to a gazillion podcasts. Now, if you’re out there and your net worth is less than a million dollars, I have to say that you can’t play the strategy where you can just duck and cover.

You need to get out there and you need to grow your money. Let’s just say at that, because I talked to a lot of people and they’re like, yeah, the other world’s going to end the, everything’s going up, interest rates are going to skyrocket, which by the way, that’s why you invest in real estate. When you are basically hedging that the interest rates will be going up because you’re hedged against it and protected because you will have the rents in play.

If the rents go up, the rent is essentially a way to hedge that interest rates go up because when interest rates go up, that’s indicative of a good economy and that just pretty much gets passed on unfortunately to the tenants. So there’s a lot of people that kind of say the economy is just too hot and they just use that as an excuse not to get started.

And, one way to figure out what’s real, who’s not, say, what’s your net worth. If you’re less than a million dollars I’m just going to discount your type of opinion, to be honest. But that’s just me. You guys might be different, but I just want to pose a different ideas of some things I’ve been listening to.

But with that, here is the replay of the sensored version of the syndication cram school we did. We’ll try and do another one of these in the future, but what I would really suggest for everyone of you interested in being a passive investor is get educated. Do our syndication e-course it’s a few hundred bucks, but if you definitely join up at some point, we do refund that for it.

We have a refund policy. So it’s kind of no risk type of thing. The worst thing you can do is learn something and this is where you learn all the little tricks that syndicators do, what to invest in and mort importantly what to stay away from. You can’t just go off pro forma, a pro forma mean nothing.

If the numbers that were used to assume that pro forma are all vague and overly exaggerated, and that’s what the syndication course does to get more information, go to simplepassivecashflow.com/club. And we will be sending out the uncensored version or the one with all the extra goodies, basically here for the end of the next month. Be sure to go to simple passive cashflow.com/club it’s up there and enjoy the show.

How to Structure a Syndication With Development?

https://youtu.be/1q-Q_Z8slXU

You figure out what your asset allocation or time horizons are, and money is money. Try to rent them out.

What do you think about the syndication and the laddering with the development at county line? Developments, I would personally go to more of a stabilized cash flowing asset, especially if you’re new to this type of world. You think of deals in terms of risk adjusted returns, right? Stabilize assets it’s like buying an existing lemonade stand with existing profit and loss statements.

You can see what it runs or development is a shot in the dark in a way. Technically, if you could build it, there’s more room for error, but you have to wait a lot longer to see the egg hatch. The way I did it and the way I preached general wealth building to people is start off with singles and basics.

And in the syndication, that is the more stabilized assets that give cash flow quickly and have lighter value add or in the rental property world for people under half a million dollars net worth , just go buy rental properties like how I did.

Yeah, I think in my situation though, I need to be a little bit more passive. I’m not going to go out and buy individual properties that’s what makes your multifamily deals attractive to me ‘coz I can be passive.

I just have to say it because something Dawn who was a young kid is going to listen to this podcast and then think they’re going to go on an apartment deal and they have no money. And so I have to say that, but yeah, if you’re an accredited investor, in my opinion, people joke about this all the time in my groups usually tell me any good reason.

To own a rental property, that in your name, the headache, the fact that you’re getting abused as a robot rental, that’s not get started with all this BRRRR stuff. Right? I think that general strategy is going into intermittent deals, spacing it out and just dollar cost averaging, same technique. They taught you with stock market investing.

So my biggest challenge now is just negotiating it with my spouse because the conventional way to invest is just through these 401ks and these other vessels to invest. I’ve got to convince her that this is going to pay off and be able to produce some passive income. But the current deal is two years lag.

You screwed yourself you shouldn’t have done that, man!

I screwed myself, but I think that county line project is going to be fun to watch to be a part of. This is why I’m going back to the 401k, because I think it’s a good strategy with Horton negotiating with her that it’s, if I want to retire early, let’s use some of my retirement and not really hit the family.

Which is just an emotional thing, right? Whether it’s retirement or money in your wallet, it’s all the money at the end of the day.

I think where people get gummed up, they emotionally feel like 401k Roth, IRA, that’s your retirement! And I even have sophisticated investors, earmarking things in their own mind that way too. So I get it. They think one is more long-term, one is more short term. But to me, it’s all the same. You figure out what your asset allocation or time horizons are and money is money.

This website offers very general information concerning real estate for investment purposes, every investor situation. Always seek the services of licensed third party appraisers inspectors, to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information does not guarantee as in every investment there is.

The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best in.

Today’s Real Estate Condition: Good or Bad?

https://youtu.be/-9qqMO57pSg

But in the commercial world, we haven’t had that big run up yet but you’ve seen rents rise the first half of 2021. It’s obvious what’s happening in cap rates are dropping. You’re having cap rate compression.

Try to rent them out.

And do you see the fluctuation or the opportunities to tailing off or increasing? What do you see as far as the market conditions?

Right now the getting’s good, right? Because in the residential market has gotten really overheated in my opinion because of low supply. I think demand has even gotten lower, but because supply has dropped so much, that’s what dictates the prices.

Which is very emotional driven and that’s why I don’t like residential properties. But in the commercial world, we haven’t had that big run-up yet, but you’ve seen rents rise the first half of 2021. It’s all completely obvious what’s happening. And cap rates are dropping. You have a cap rate compression, but it’s not to a place where your average internet investors like jumping into commercial properties quite yet.

Maybe this time next year, for sure. There always be deals because what makes for investment banks lend money at X and the cap rates are Y and there’s always a difference between X minus Y. There will always be a differential or always be a difference in then you apply leverage and that’s how you make yield.

Your big cap rates will always be making yielding more than interest rates. In a world where gravity works. I’m sure it could go backwards for a little bit. I don’t think it ever has, but that’s what makes the world run. I think what you’re getting to is like, “Hey, what if I wait”. If you wait the best time to do anything was yesterday, they always change.

Like for example, infinite banking, they always change the rules. Best time was yesterday, best time to buy another one was yesterday. It’s just constantly going to be that. You guys are just like making it tough for your guys. Just be prudent, stoic, and just constantly dollar cost average into stuff that makes sense.

And it’s difficult now because you’re getting started. But to me, that’s the outlook that you have. You don’t need to be like me and have a hundred percent of my stuff in alternative investments. That’s for sure. I totally respect if you want 20 to 50% into paper assets, that’s fine. But over time, the kind of the percentage definitely goes to the alternative assets size and look at, I seen as group tiger, 21, it’s all $10 million families and above all paper assets.

They don’t own like mutual funds and stuff like that.

I do think that we’ll always try to be conventional in some manner from our perspective, but I have a job to do and just convince my spouse that this is legit. And try to jump into one of these more conventional deals you do.

This website offers very general information concerning real estate for investment purposes, every investor situation. Always seek the services of licensed third party appraisers inspectors, to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information is not guarantee as an every investment.

There is. The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best in.

How to Calculate Your Capital Gains and Depreciation Recapture? Why Not Do 1031 Exchanges?

https://youtu.be/bUY12oylSp4

What’s up simple, passive cashflow. How is your first month going out to the job that you may or may not like? For some of you guys came down to Hawaii, drank the Kool-Aid at a whole bunch of cool people, and I’m still coming off that hive, still wearing the same shirt that I was wearing the whole weekend.

 

What’s going on?  7% inflation.  Some people will say that it’s really like 15%. If you don’t count all the changes, the last couple of decades where they call it, quote and unquote Hedonic inflation. If you take all that stuff out, really all you are talking about is 15% inflation. But either way, let’s just go with what the government tells us, because Hey, what they tell us must be right.

 

Now to put things in perspective, junk bonds, which are  essentially what they’re called junk bonds, are garbage borrowers and right now that’s being paid at a much lower rate than the pace of inflation. Let me say it again, junk bonds are making less than inflation right now, which says you better get your equity into assets that  at least keep pace with inflation.  Hopefully, you’re getting yourself into cashflowing ones. But if you got money in your home equity or rental properties, that’s just sitting there idle. The government’s taking their money in, and this is a sad thing that this is the way the government takes money from the poor or the middle class that aren’t able to get into good investments.

 

It’s the rich get richer, the poor get poorer and unfortunately, a lot of you folks drive to work or hold onto dear life, staying at home as much as possible working from home. High paid working professionals are the folks that are going to be having to pay for it. Anyway, we’re going to be talking about syndication stuff, mostly the 10 31 exchange.

 

Hopefully it’s going to help a lot of you investors out there. And remember we’re going to be sending out a secret HUI message because some of this stuff I can’t see in the podcast, for some reasons we’re going to be rolling some stuff out that is going to change that. But for now, if you want to get a hold of this 40 minutes secret HUI message, send an email that’s team@simplepassivecashflow.com before the end of the month, before we send it out, if you’re already in the club , you can join at simplepassivecashflow.com/club. You’ll be getting this video later on this month, but if not send team@simplepassivecashflow.com  subject line secret HUI message and I will be sure to get that out to you before the end of the month.  But for now, just enjoy the show.

This common question comes up quite often where they ask, Hey, can I do a 1031 exchange into a syndication deal? The answer is, yes you can, but it’s very impractical for you to do. You need to do what’s called a tenant in common or a TIC.

 

Most syndicators won’t want to touch you because it requires a lot of brain damage in terms of legal maneuvering unless you’re bringing in maybe one, two, $3 million or above it, ain’t going to happen. And I would ask why would you be wanting to do that in the first place with current bonus depreciation laws?

 

Again, my example, in 2017, I sold seven rentals and I had a quarter million dollar capital gain. It depreciates recapture, which sounds horrible, but I had maybe a few hundred thousand dollars at least some passive losses built up from going into deals prior that I just bought over and offset it one for one.

 

We’ll do a couple of examples. So this guy bought a property for under 600 grand. I don’t care what the loan is, that doesn’t matter, but they’re going to sell it for about $900,000, maybe even a million dollars. So the other question I asked is when did you buy it?

 

So we’re going to figure out what the capital gain and depreciation recapture is.  A lot of people think that they need a CPA to do this. This is a lot easier than designing a retaining wall, in my opinion. Of course, your CPA is going to need to bless the numbers at the end of the day, but this is essentially how you do it.

 

And so capital gain here, I’m just going to take $900,000 minus 600 minus some commissions in there. I’m looking at about a $250,000 capital gain but we also need to know what the depreciation recapture is and that’s why I asked the question, when did you buy it? He had it in 2012, which is about a decade ago.

 

Most residential properties depreciate over 27 years. So I’m just assuming there’s maybe a third of the weight through that depreciation. Of the $600,000 basis, maybe half of that is, I don’t know where this property has been. I’m assuming it’s a high price land area.

 

So the property improvement is lower at $300,000, let’s just say that the building improvement or less. So that’s where I came up with this depreciation recapture of 50 grand but maybe I’ll just be more conservative call it 75. So we’re looking at it. We add up the capital gain and capture, and that would be the 25 here.

 

So the goal here is get $325,000 of passive activity losses, at least. So you can wipe that out. This guy is smart. He’ll sell this property beginning part of next year so he has all of that year to build up passive activity losses. And I know in this particular case, this investor has already been investing and they probably have maybe a headstart on that.

 

Maybe they already have it already. I’m not quite sure what they’ve been investing in, maybe they went into several deals and they have already done that. I think this is found on the 82 84 form, but don’t quote me on this. Let’s go to your situation sir.  Just going through the process, maybe in the same similar fashion, what did you buy the property for originally?  Thanks for being a volunteer too.

 

Hi lane. Yeah. So my situation is that we had actually purchased this property in 2006 for 1.47 million and we’re selling it or we’re considering selling it now at the end of 2020, and somewhere between $3.7 to $4 million. We’ve done maybe about $120,000 worth of improvement in the house over that period of time. We’re just projecting out that the gain could be somewhere around 2.3, 2.4 million. 

 

So I’m going to go 4 million times 95% for 3.8  just do account first and commissions and then I’m going to subtract off a hundred grand off repairs cause supposedly that’s going to lower your basis a little bit. Let’s just call it 2.7.

 

About depreciation recapture, you’ve had this for quite a while. Let’s just call it two thirds of its service full 27 year life. Just to be simple. This is California again, or there’s this Silicon valley. Okay. Let’s just call it 600 grand is the server for life.

 

I  think you depreciated maybe two thirds of it. My math that I’m gonna be using out of the sky is 600 grand times two thirds. So that’s 396,000 let’s just call it $400,000, which appreciates recapture. So 0.4 plus 3.7 is 4.1million  of capital gain. A good problem is that my friend does a good job. That’s how investors are supposed to work right.

 

At the time we bought it, we thought we were crazy to buy something over a million dollars. But, as it turns out that it was a good investment and traditionally in the last year seems to.

 

Especially with the high end, going up more right during the pandemic. So the haves and have-nots kind of binary economy out there.

Your situation may warrant it and in my opinion so what’s bad about 1031  is when you’re going into the next deal, everybody knows you’re a sucker. They’re going to abuse you. You’re probably going to overpay by 5, 10%. If you don’t know that well, you’re probably the sucker in the room that doesn’t realize it. 

 

What if you do a dead river, is that a better strategy? 

 

All that does is essentially extend your timeline because with the 10 31 exchange, the hardest thing is the 45 days to identify the next property, which isn’t going to happen unless you’re buying the lukewarm crappy deals, where you’re not overpaying. For that example one, right? That guy was looking at $325,000 capital gains, appreciate recapture, a very different story than where you’re at. In my own opinion, I’ve seen investors invest a million dollars and get half a million plus of passive losses in a year.

 

So it’s not out of the question that somebody can deploy that money. I’ve seen people deploy two times that and get a million, $2 million of passive losses too, at the same time. But that might be a little more extreme. So if that’s the way you want to head with it you better get started now or get moving on this plan.

 

Therefore, I would say if you twisted my arm where this dotted line would be, I would say one to $2 million or greater. It might makes sense to do both, go into deals, get passive losses, to offset a portion of this 4 million depreciate gains and recapture, but it might make sense to do some of these more exotic strategies where you’re monetizing installments so it is just under scrutiny. Let’s talk about the 10 31, right? Another reason why I don’t like it is you’re putting all your eggs into one basket yet again. To me, I like the idea of having no more than 5% of your net worth to any one asset.

 

 Yeah.

 

 This is common with people with dentist practices, right? They started it with 50 grand. Now it’s worth 5 million. It’s on your scale for those people going to exit and end game monetize installments so where you push the sale 30 years into the future where the taxable burden isn’t anything, isn’t a bad way to play it.

 

I see. So you think some combination of maybe 1031 and also just investing in real estate where you can use the depreciation on those assets to offset the gain would be the best strategy? 

 

Yeah. Going back to your reverse 1031, all that does is extend your timeline out. But I think you first have to ask the question. Is this even something I want to do? Do I want to have all this liability on my hands? Do I want to take our debt out and get another property and have all my eggs in one basket? Maybe you don’t. Most people would say no. 

 

So if I were you would just keep the property and keep writing the appreciation? One option would be to just keep the property and then try to borrow money off of the property. 

 

That would be ideal in my opinion, get a heloc  or get a refinance the equity out and invest it, build up passive losses. Most people going into, on this scale would be going into a handful of deals every year at a hundred, $200,000 a piece. You’ll be passive activity losses, maybe a million, 2 million, 3 million so when you finally do sell your tax over and it’s way less.

 

I see, so you can build up. Basically use a heloc  build up, you hold a bunch of assets and then use the depreciation on those assets so when you finally sell this other property you can offset the gain. Okay, got it. 

 

Let’s just use that as strategy number one. There’s a whole bunch of combinations in the middle with a reverse or 10 31 or monetizing stock sale, or another option is a delayed sale trust, which is very similar. Where all these things are a tricky legal move where you put the asset into a trust and technically you don’t own it. You gotta do your due diligence on it but in a certain situation, it may make sense. 

 

Okay, got it.

 

Like I say, some of this stuff is like some risks for an audit and losing an audit that it may make sense to diversify yourself amongst different strategies. 

 

Let me ask these questions and maybe I can just outline what I would do. Do you want to own another property? 

 

One of the things I was thinking about doing was to diversify my real estate holdings and, right now I’m 90% invested in Silicon valley in a couple of cities and so the idea behind doing the 10 31 exchange was to see if you can take that  cash and sort of buy homes in different locations like Denver, Houston other areas that have a good combination of cashflow and appreciation. That was the strategy behind doing the 10 31 exchange. But as you point out, when you do the 10 31 you’re limited both in terms of time and in terms of  choice. That’s one of the drawbacks to doing it. 

 

But obviously  you acknowledged the drawbacks, but you’re a rich person. You can do what you want. You can buy a flying spaceship if you want. No one’s gonna say anything. You make your own decisions. Out of this $4 million bounty  do you want to take a million dollars to buy some real estate that you own directly by yourself? What was your vision for this $4 million boom? 

 

The idea was I was thinking, I have a $700,000 loan on the formula, it’s not that much. But I was thinking, take the 4 million and then buy maybe $8 million worth of real estate i n different locations, right? Diversify in all of these emerging markets. But doing that as part of a 10 31 exchange is probably very challenging because you have to know you have to have the boots on the ground.

 

You have to have connections in all these local markets. So that was the vision. This was to take the inherent wealth in the Bay area real estate and try to diversify it. Not knowing what’s going to happen in the future  in this local market. 

 

And then you become a remote landlord. It’ll work at 50%. Any idiot can cashflow it for 50% the value. Will it be a good investment? Where could you do better otherwise? Probably not, but let me be more clear. Do you have some kind of thing within you that you’re like, I want to hold on to X amount of properties by myself. I’m just trying to see where you are. 

 

I don’t have that particular vision. The only goal was can I pick this one property that has been great for appreciation over a 15 year cycle and really converted into a bunch of cashflow properties? 

 

You’re not like I want to, whether it’s a syndication in these X markets or as a passive LP partner, non managing member, or same markets, but you own a handful of properties in there. You don’t care one way or the other? 

 

Yeah I don’t care, Because my only goal is to achieve a cashflow vehicle. 

 

You mean you’re not one of these ego-driven guys that like getting off on things like owning a 16 all by themselves and like telling their friends. 

 

Thankfully not. 

 

Or maybe you learn that along the road. But I dunno if it were me, I’d kinda like to own, I see a lot of high net worth people owning like 50 units, a hundred units by themselves. But that’s a fraction of their total net worth. So just something to think about too. But that’s why I asked, I didn’t know what your vision is, like some people are like, I like the syndications. I like everything about it. What, I still want to have a quarter of my stuff in stuff I own.

 

Yeah, there’s some value to that in knowing that, Hey, this property has your name behind it, and you can know you can pass it on to your kids, which you could probably do with the syndication to the appropriate legal documents. But to me, I was just thinking, look, this is not my only house.

 

I have my primary residence and I have one other property. This particular property, how can I use it to diversify my real estate holdings throughout the country? But that may be an impractical thing to try to do in 45 days or, whatever the 10 31 exchange rule is. The other thing I was thinking about is, could you do an opportunity zone, but then at the end of that six or seven year cycle, you’re still hit with a capital gain, right?

 

With a little bit of a step up  and the basis.  

 

That’s not what I’m  not looking at. Look what you’re  doing. You’re going in as this is not your primary thing, right? You’re an amateur, no offense and you’re looking to go into these different markets and now you’re telling me you’re going to go into a crappy area that has designated opportunities. Oh, boy, this is just getting worse and worse.

 

An amateur in the hood now.  I’m just going to shoot him. Let me know what you think, but here’s what I would do. I would draw out the heloc  as much as I can and start investing, make a goal to invest a million the next six months to a year and sell this thing no earlier than January of next year.

 

That way you have that entire year to source passive losses and go into good deals, that makes sense. Now, if you’re slow, if it’s going a little bit slow, What I would do is I wouldn’t sell this property until the following year, January. So like 2023.  That way you have two entire years to build up 4 million of passive activity losses.

 

If you don’t get there, that’s no problem. You get to two and a half. That’s good enough. But you give yourself that long to make good sound decisions, spread out your capital so that when the deals finally do exit it’s not all hitting you at once and you’re in the same damn predicament that you’re in right now.

 

 I see. But if I have some liquidity now, even without the heloc , I could do some of those investments?  

 

Exactly. You got money all over the place under the couch cushion, but even better. In most cases, people don’t have too much money other than an equity in their rentals or their retirement funds. The more, the better. Like you gotta get moving on this, but you gotta make a decision first. 

 

This is really interesting. Cause I never actually ever thought  about using the passive depreciation on another property to offset the gain. I didn’t even think about that whole possibility.

 

 A couple of aha things that keep in mind, like in 2022 after this, the bonus depreciation kind of steps down 20%. But, I wouldn’t worry about it too much. It’s still pretty awesome even in 2024 beyond so this is all well within your window. Not all deals do a cost segregation and elect to do a hundred percent bonus appreciation cause it may not make sense all the time, but even with regular depreciation, pretty damn good. It’s going to chip away at this thing. 

 

That’s a really good point and I was thinking about selling this property three years ago. And at that time there was in the high twos and now the same areas towing the high threes.

 

And I was just like, at that time, I thought the high twos would be a lot and I was thinking about off loading it and then I thought about the transactional cost of selling it and what to do with the game from that. Then, having to go through this 1031 process. But now that it’s even higher then I was like, okay, let’s really think about doing it now, but now you’ve made me even rethink that.

 

What you have now is a substantial  amount of money. $2 million is nothing but four or $5 million plus of equity to be deployed elsewhere. That’s F-you money. That’s life changing money, right?  If I toss a coin and I made 500 grand, I wouldn’t care. I’d probably just keep it in there and lose it eventually. But if I made $5 million, then I’d take it out cause that changes my life significantly.  

 

Yeah. This is a great idea. Maybe this is something that I would consider then. Not selling it and then just taking the heloc  and trying to do the passive depreciation.

 

Other things to think about, not all deals are going to do cost segregation. I think I mentioned that, but trying to diversify over lots of deals. Maybe,  you just keep a million dollars back, throw in an infinite banking policy and then  you pay taxes on a million.

 

That’s not the end of the world in 2023, but maybe another thing to keep in mind and jot on your piece of paper is maybe you do some of these land conservation easements. Who the hell knows if it’s going to be around then.

 

Is that a trigger for an audit though? 

 

Oh yeah. That guy is but all the smart people do it. The smart people know who to work with. That’s why people  don’t pay that much taxes. Doctors who pay  less than 20% in taxes. They do, if you want to be like those people bring it on, there’s nothing wrong with it.

 

Just make sure that the people that you’re working with or dotting their I’s crossing their T’s, they have a healthy, legal budget. Nothing to be afraid of.  I always say like know the risk, go on eyes wide open. What you’re doing is you’re diversifying  over three strategies here, right?

 

You’re doing the cost segregation, that is all very legal at kosher. I really worry about that too much. The whole thing about going into one building that can beat up some, you can do a 10 31 exchange there too, but there’s risks with, going into the wrong investment and running it yourself as an amateur.

 

And then thirdly is like the land conservation easement, but if you’re backed into a corner with a half a million, a million dollar capital gain that you still haven’t mitigated, then, yeah, that’s the end of the world. 

 

These are really good. Is a family office thing that you have going on? Is it meant to help with situations like this? That’s what I was going to ask. 

 

Yeah. These situations are simple, right? This is the simple stuff we do all the time that you’ll learn is actually easy stuff after a while the value is with the people, right? Where do you go for those deals?  Charges change over time. But mostly, you’re at a point in your life where it’s more about the relationships with the right people. Very few people even talk about this stuff or know about it out there. I can tell already it will save you like 10 X at least what you pay for the initiation fee. 

 

Yeah, that’s what I was considering and, I think this has been a great discussion. 

 

Don’t pay it to the tax man, go and invest the money in the right places that eventually help pump the country.

 

Yeah absolutely. This is great food for thought and I really appreciate you helping me think through some of these strategies, because honestly for this sort of magnitude of the investment that I have had, I don’t have proportionally the right kind of advice. If you go to a financial advisor, like you go to a brokerage or a bank, real estate is like their blind spot. And they don’t know about all of these alternative investment strategies. 

 

They’re going to say it’s risky or it’s a scam, we’ll just say that’s because they don’t do it and that’s why they still have a job and they can’t make money off of it. 

 

 It’s very difficult, I think what service you’re providing is unique and it helps people that are in situations like this to think through what are the alternatives and what are the strategies. Then, I will definitely follow up with you and your associates in person, to figure out how I can be part of that family office.

Yeah, you guys are listening, go to simplepassivecashflow.com/journey and then apply there.