proTip Archives - Page 3 of 18 - Simple Passive Cashflow

How to Vet a Deal with Jim Pfeifer

https://youtu.be/HCmsfhmK_rg

Now on this podcast, we’re going to be talking to Jim Pfeiffer a lot of folks are going through the podcast circuit, getting to baseline, right? And I think everybody needs to spend about few months, maybe six months reading books, listen to podcasts, getting the basics down on your drive, to and from work.

Now at some point, you become, you top out, right? And once you get search at the point, need to search to build a community around you. This is what we’ve done here at simple passive cashflow is why we have the retreats. This is why we had the family office, Ohana mastermind, the higher level mastermind group for our accredited passive investors.

But Jim’s going to be talking about we’re gonna have a conversation about vetting deal flow, which I think is very pertinent to a lot of you investors out there. But before we get going with that interview wanted to share a little bit of what we’re working with here. Recently, our group proposed an alliance partnership, to absorb some deal flow from a group of investors that are farming a bunch of.

Let’s call them wholesale leads, very grassroots call-in people, motivated sellers just in mass. We started to look at the arrangement and the potential deals that would come from that and we politely declined no, and here it was the reasoning why. And the reason why we can attract this type of gravity to these types of opportunities is because our group that we do pipeline club we’ve acquired over a billion dollars of assets.

And there’s probably only a few people I know that aren’t on that institutional wall streets stage that have acquired a billion dollars assets under ownership. Not some nonsense where somebody’s been in an LP and a bunch of deals and trying to cherry pick the thousand unit deals, but like a really a billion dollars.

Most people they’re just screwing around with $200 million, $400 million of assets. We have a billion dollars of assets is about 7,000 plus units at this point. But the capital has come from our group over $120- $140 million thus far. Now one of these Daisy chain things where somebody brings in a billion dollars of $40 million capital raise and not being acquired $250 million building.

No, none of that. When we go into deal, we’re taking it over. But, going back to this opportunity to absorb this deal flow, a lot of those types of deals would have been very unvetted deals that it’s the opposite way where we’re heading. What I’m trying to portray and what I want you guys to understand the way this business works is a lot of the deals are controlled by brokers.

Multi-family apartments, commercial, retail, industrial, once you start to get into this bigger scale, it’s becomes on a scale where the small guy cannot compete. You want to keep running your little single family homes, that’s great, but you’re going to be competing with every single mom and pop investor there.

So the way we’ve always seen, as you have to swim upstream, you have to get to that the next best deal. A lot of the brokers there do actually doing their job as opposed in the residential world where these commercial agents, they’re the ones sending flowers to the widowed person who owns the property or building relationships with the families to get the listing so they can sell it to make their commission, but bring it to the top sellers or buyers out there such as us.

And a lot of these deals are just done off market because a lot of these brokers, they don’t really care whether they get 36 million versus 34 million. Really doesn’t mean much again, their commission base, right? It’s just percentage their biggest concern is they want to work with people who can close the deal and is closed, say a billion dollars of deals in the past.

Go figure. These are the types of deals where when you start to bu y deals from a certain seller, you can start to get the additional deal flow from that seller, because as we’ve seen, when you crack into this a treasure trove of seller, They typically all, maybe a handful of these large apartment buildings, which isn’t a bad way of going if you have that operational experience.

But one of the lessons learned I see from these large families is eventually as the saying goes, and I guess it’s not the same, but it’s backed by data or they say 90% of wealthiest families are two to three generations. Most times we’re buying from the folks that have just had it. Their parents, their grandparents had owned these properties, build the critical mass.

And at this point may not be the decaying, but at least the knowledge share and the motivation is decaying. And I’m sure at some point, if they don’t do their estate planning properly, the family will probably come back to earth. From this point, we buy their assets at a discount because they are distressed or they don’t know what it’s worth.

It’s not as valuable to them as it was the generation or two prior to them. But so going back to, what’s the difference between working with some other, these alternative deal flow, more grassroots calling up these guys are just bombarding with yellow letters, calling up sellers, t hat approach is just you start to work with people who are unsophisticated sellers than a lot of those deals fall apart.

There’s a lot of skeletons in the closet. There’s a lot of hair on that. Those types of deals where we specifically like to work in a buy box was very clean financials. There might be some hair on the deal, but at least we know about it as opposed to it’s just more of a riskier type of situation.

Similar to like b uying a deal off of a foreclosure where you don’t even get to visit the property. There’s just a lot of unknowns. Most times these deals, they just don’t pencil for even bridge financing and we’d prefer to go to bigger scale properties. Of course, there’s some deals out there. It was like $450,000 per unit and the average rents, I’m sure we’re not more than 2000, mid 2,000per unit.

I just don’t know how that deal works, think about it. Buying a $450,000 property that rents for $2,000. Oh wait. Maybe some of you guys have an inner California property and yeah. Making fun of you because you probably should unload that the numbers just don’t make sense in that type of stuff.

Especially if your net worth is under $4 or $5 million and as I always say always caveat is catching me doing this. You can do whatever you want. Once you have that much money, you can be in capital preservation. No one should fault me for buying a big primary residence after my network gets to a certain point, right?

After a certain scale become, what do you want to use the money for? But if you’re serious about getting your net worth from a million dollars to $5 to $10 million, there’s a certain way you have to invest and especially if investing for cashflow.

If you guys have any question on this email, the team@simplepassivecashflow.com. Book, a coaching call, where we record the call for other people’s benefit. But I want to get this dialogue out to you guys. And you want you guys to ask to start to ask the good questions. So we stopped skimming the surface, like a lot of podcasts out there, and we start to dig into this type of stuff.

And the only way we’re going to be doing that is through dialogue or unless you guys joined the investor club and come out to Hawaii and hang out with us and build a relationship. With that enjoy the interview and we’ll see you guys next time.

Hey folks today, we are going to be talking with another sophisticated investor who was also more of a passive investor, right? As you guys know, we don’t have gurus on this podcast because that’s just a waste of time and you guys are tired of all that nonsense as it is so I think of a couple of p recursors here.

Jim Pfeiffer, he’s from LeftField Investors and I think what I like about them is just not another real estate rookie group, where people are trying to get started as general partners and trying to fake it till they make it. It’s just passive investors like our community of passive investors. And the other thing is, we’re going to be just going through this organic conversation of, how does Jim look through deal offerings? I’ve always, started with the numbers myself.

I’m sure you guys have heard this a million times. You look at the reversion cap rate, rent increases per year, what are the economic occupancy as some of the big ones. A lot of this is outlined in the syndication ecourse. You guys can go pick it up on the website. I think it’s in the product section.

And if you guys try it out, you don’t like it, I’ll refund it for you. I’m confident they’re ain’t nothing better for a few hundred bucks for sure. But I’m probably going to take whatever Jim says here and add it to the course too. But I also being like I think this is like a good example of a way to interact with other investors, right?

Sometimes I can get to a point where I may or may not agree with Jim. But there’s something, if I can ask as a question investor of being inquisitive, I think there’s something there that I have a viewpoint that I can see. So I’m going to really try and model how you guys should act in terms of always having an open mind, always be learning, because not everything that Jim believes.

I believe that everything, I believe that Jim believes, but I think it’s cool when you can get two smart guys together and have a conversation about this type of stuff. So you guys are lucky, you guys are being able to be a fly on the wall, but welcome Jim. I appreciate you coming on.

Yeah, no problem. Thanks for having me. I’m excited to have a chat.

Quickly, give us a little background on like when you started investing and then what are you investing in these days? Maybe a little insight and how many deals you’re in just to give people quick back.

Sure. I’m on career number four. I won’t go into all the details, but I was a stock market, investor, mutual funds, all that stuff and my my last career before this, I was a financial advisor and that taught me a lot about money. And once I figured out how money worked, I no longer wanted to invest in the paper assets from the banks and financial institutions are pushing and I realized that real estate was where I wanted to be so I totally transitioned. I did the active stuff. I think like you Lane, I was into turnkey, single family homes, and I thought I’d build up a portfolio of those and then I realized that’s too slow.

I went into multi-family and bought some small multi-family and then I got tired of managing the property managers and then I discovered passive investing.

For the last four years I’ve been, investing passively I’m in probably over 40 deals. Over that time, some of them I’m all in, on my own and others, I use a company called tribe vest to do some group investing and that’s how I get into some more deals.

I’m in a lot of different asset classes because one of the things I believe in is diversification, not just by deal, but by market, by operator and by asset class. So I’m in multifamily, self storage, mobile homes some industrial stuff and a little bit of commercial.

Before we move on, since you have an insight into the financial planner world industry, for those of the people that are new to the group, and still haven’t really dispelled the wizard of Oz effect behind the curtain. Any insights there you can give, like how financial planners really work?

I think most of them are well-intentioned and they know their product. But that’s all they know, and those products are marketed to them by the companies that they work for and they’re paid to sell those products. I found that at the end of my financial advising career, mostly I always believed that I wanted to recommend to my clients the same things I was doing.

And I was investing in real estate and speculating in the paper assets of the stock market. I had a hard time being true to myself because I one, a financial advisor they won’t recommend real estate because they’re not licensed for it. They also won’t recommend real estate because they don’t get paid for it.

And the third reason they won’t recommend it is because they don’t know anything about it. They’re stuck in their world, which is paper assets that financial institutions are pushing toward to them. What I learned, you need to find a good financial advisor. You need someone who is recommended by somebody else.

And who understands that you’re going to be doing real estate and that they need to support that and they need to, put their commission second and serving you first. And that’s hard to find someone like that. But when you find someone like that, then you can still have them help you with insurance or even your 401k or any of that, any of this stuff that you want to be in that world. But they’ll also support your real estate by making sure that your other assets are working together with you real estate, but that’s a hard person to find.

I personally don’t have any paper assets, but as a man who’s in, seeing both worlds, do you own any paper assets anymore or is it all alternatives?

It’s moving more alternative and I still have some paper assets because I have several different retirement accounts and so I still keep a little bit in there. But mostly when I do anything, that’s the paper assets, stock market. I want it to be something that’s paying dividends and part of the reason it’s more liquid.

So I think having some investments in the market might make sense because that stuff I can get in and out of if I need to and most of the real estate, it’s so illiquid that’s why I still have a small foot in the door. We call the alternative stuff left field because my former financial advising colleagues would say I’m way out in left field when I told them about the alternative stuff that I do. And some of our people, we call them center fielders where they have 50- 50 in left field and 50% in the market but I’m probably 90% in left field.

Yeah I’m a hundred percent left-field and this is my personality. The reason I asked is I always try and ask like smart people, what they’re doing and I get it. Like some people they want to play more right field or center field. If you want to call it, I’m cool with that. I think I’ll eventually come back to center field. Once my net worth hits a certain magic number, probably eight figures and above. I want to start to do IUL that type of stuff. At this point in time, that’s where I’m at, but it’s cool to hear your input and I think we are aligned with that.

Absolutely.

Maybe we’ll keep it in terms of like multifamily investing, because that’s just what I know the most. You grab a pitch deck or, like how are you vetting a deal? What are you start off? What is the first thing? Cause a lot of new investors, like it’s overwhelming, right? You get a pitch deck. It’s wow. It was like, 30, 40 pages, or maybe it’s only three pages. What do you start? Like, how do you break things down?

That’s a great question. And everyone does it differently, and my thing is I’m a passive investor, so I don’t want to re underwrite the deal and so we’ve already passed the part where I’ve pre-screened the operator. So I assume that the work I’ve put into getting to know the operator, that they are sending a deal that probably makes sense and probably fits within my parameters. So then what I want to do is look at some of the metrics that I like and to do that. We have, I think you have this too. We have a deal analyzer 30 or 40 metrics, if the sponsor gives them to us from the pitch deck.

Then, basically I just look at those and the Excel spreadsheet turns it red if it doesn’t fit within our parameters and green, if it does. And I use the red ones I just pick those out and I will ask the sponsor questions from that. And that helps me figure out, okay, is the sponsor going to answer me in a timely fashion?

Do they know their deal? Do they have the answer is at the, on the tip of their tongue or do they have to go ask somebody else and just gives me a second kind of opinion on the sponsor. So that’s the sponsor, not the deal. Then for the deal, aside from the red flags, what I’ll look at are a few of my kind of favorite metrics and I can go over those if you’d like.

Yeah maybe t here’s a bit of a chicken and egg thing here, right? Before you even get presented a deal, which you can go down your checklist. How did you get to know them? How did you get their name in the first place? Like maybe you’ve get there by referral. Like how you’re getting these people in the first place?

The sponsors? The best place I think is your network right? Using people that, can trust or refer you to who they are familiar with. So that’s one way use your community. So for instance, our left-field investors, again, we have a website that has a long list of sponsors, but those aren’t necessarily our favorite sponsors.

Those are just people we might’ve had conversations with, but if you’re inside a community, you can talk to other people, make sure that they have relationship. And that they, they’ve actually invested with them as we were talking offline earlier. But just make sure that and trust, at least the person that’s referring you.

I think that’s a huge first step. Then, you got to talk to them, I think and they might all say the same thing. A lot of them are salespeople, but you can get a sense of a person having a conversation. We have a list of questions that we ask our sponsors, just to make sure that they have all the information and they’re sharing it with us.

It’s hard in a half hour, an hour phone call to really get that from them, but just to see what kind of person are they and talk to them a little bit and read and hear what they say, go to their website. You’ll get some basic information, read a book that they wrote, listen to their podcast.

And they’re going to tell you who they are, right. Again, you have to filter through the selling part of it, because I think there’s a lot of operators out there and some of them are excellent marketers, and some of them are excellent operators and maybe some are both, but when you want to find is the excellent operators and not the excellent marketers.

So talk to others who have invested with them as well. I prefer a sponsor with some experience. I don’t eliminate you if you don’t have the experience, but if you have 10 or 15 years that you’ve been doing this, that gives me some confidence. I ask how many exits do you have? How many deals have you gone full cycle and let me see the numbers on them?

Another one that I like is how many current investors are in multiple deals or how many repeat investors do you have? Because that tells you something. If you have people that are investing more than once with the same operator.

So you going down this list, something that occurred to me when you were just talking about, like to have a list is a great idea because I think this is where it’s hard, once you’ve danced around on this a little bit, like you get more experienced, you understand what the questions are. And really more importantly, like what is the reason why of the question behind the actual question. This is very similar to like, when we would have new investors go talk to property managers, we would send them to an entirely different market that they didn’t want to botch the relationships they could learn.

Ride the bike with training wheels first so that they could learn the lingo, have the person talking on the other end, educate them too in the process and then go talk to the people that they want. So that can be another tip in the situation for you guys because we talk a lot about this in the syndication secrets part of the ecourse especially as a non-accredited investor or a lower net worth accredited investor under like a million.

You can get yourself discredited sometimes by asking 21 freaking question, game, question train to some of these guys, especially you’re talking to the principal of the company. Which is what’s going to happen when you’re working with more of a middle market, new market operator or a newbie when y ou’re talking to the principal. If you’re talking to some sales guys, they’ll talk to you all day long. That’s just part of their role and responsibility. I think that’s like we got to get people at the baseline first. That really helps them actually learn, have confidence over the phone cause not a lot of people talk on the phone.

That’s absolutely true. And I think the trying to figure out the sponsor is a big part of this and getting to where you have confidence in them and then it just makes everything a lot easier. You mentioned, asking questions for me, if they’re not willing to answer my questions, there’s enough sponsors that I’m going to move on to the next one, because I’m not asking the 20 questions I’m asking maybe four or five targeted questions, but I’ve had situations before where perhaps the sponsor is short with the answers or doesn’t give me full information.

And for me, that’s probably enough to move on because they’re asking me to send them a wire for 50 or a hundred thousand dollars and, they’re going to hold my money for five to 10 years. So I don’t think it’s unreasonable for them to answer all of my questions. So I’m pretty strong on, I’m going to ask you questions and you can choose to answer or not answer, but if you don’t, I’m probably moving on.

And I like how you said that it’s funny to give a mouse, a cookie, it’s going to happen. You give it an investor, a list of 21 freaking question. They’re going to ask all 21 freaking question, unless you make it explicit. Don’t ask all these questions. Pick a few that you like and just use it as a framework to starta conversation.

I’ve had people, I think people doing this all different ways, like the 21 question guy, which sometimes they don’t like to work with those kinds of people for obvious reasons. But then there’s some people that are always on the opposite expectation. They may ask one question, but they’re like, they’re more like, oh, they want to get to know you as a person.

So I think that’s great, the hard thing that you see a lot is like a lot of these guys are trained professionals. They’re salespeople, right? They’re trying to sell you on a deal. So of course they’re going to be very good at that.

We mentioned before, you’re trying to figure out, okay, is this a salesman or is this an operator or both? You want to make sure that you’re investing with someone who isn’t just good at sales, but they’re actually good at running an asset, managing an asset and that’s the most important part. For me, a lot of people say you can have a good sponsor can do it have an average deal, and that’s better than an average sponsor with a good deal.

Because even if it’s a good deal on average or bad sponsor can contain it, right? So you really want to make sure that the sponsor is someone that you want to invest with and someone that you want to have a partnership for a long time. And one of the things I check on that is, I expect a fairly, q uick response because the only way to gauge if this person is doing what they’re saying, they’re going to do is by the early communications you have with them. And there’s no other way to gauge whether they’re legit or not. So I expect that, they’re going to be thorough and professional and respond in a timely manner.

And if they don’t, I know that’s just going to frustrate me after because if they don’t respond to me when they don’t have my money yet, h ow are they going to respond when they have my money? And I know I’m the kind of person, if I have a question, I don’t have a lot of them, but if I have a question I’m going to want you to respond to me within a reasonable amount of time.

So those are some of the checks I do just to make sure that I’m compatible. Cause there’s some really great sponsors out there that I probably won’t invest with because we don’t see eye to eye on some of those things and that doesn’t mean that they’re bad. They just might not be good for me.

Just for some people to understand the world of syndications a little bit just because somebody has a logo on a website doesn’t mean, they’re a sponsor, but there are different levels of sponsors. And I’ll define that as more on the institutional side, you have people that have been around for more than five, 10 years past the last recession, 2018, like these are your more institutional operators.

You’re going to have higher splits. Maybe not as good deals where you might be able to double your money in 10 years, but there’s more of a track record there and they have higher fees were split for passive investors. And then on the other end, you have complete newbies who took a bootcamp and it’s still trying to raise money at $25,000 at a time.

Probably people you don’t want to interact with, but I guess Jim, like maybe talk us about that spectrum and your thoughts. Do you like to invest in when institutional guys are in the middle or are you willing to roll the dice at some newbie? Yeah, I’d prefer not to to have someone brand new.

I also, I sometimes avoid people that are training other syndicators because I think what happens there is you start a program where you’re going to train a bunch of other syndicators and then that’s really your boots on the ground is going to bring you a bunch of deals, right?

Whoever that syndicator is. And so then you’re partnering with five different people on all these different deals and that just makes me a little nervous. I think that experience is really important. Those are the kinds of syndicators that probably don’t even advertise, like some of my favorite syndicators, they don’t have a podcast.

They don’t have a website other than just a basic website, because they have been around long enough that they have all the investors they need. And you’re just lucky to be a new investor with them. So if you can find those, I think those are the perfect ones to be, but I also don’t want to exclude someone who’s brand new just because they’re new and they might be new to syndication, but maybe they been in real estate, their whole career.

They’re just switching from one model to another. I think you can’t just write anybody off, but for me, the things I’m looking for are experience, deal exits and, quality communication skills. If they happen to have a podcast or happen to have a real salesy website, that’s okay as long as they have the other stuff.

For the new people, I want them to have some kind of financial experience, it’d be great if they were affiliated or partnered with people who have done this before. The one biggest mistake I ever made, I think in syndications, was investing with someone who is doing something completely new. They’re turnkey company and that’s all they knew, but it was in Dallas and Dallas, the market went past them and they couldn’t get any good deals to do turnkey anymore. So they decided they were going to do a commercial office. And it was a complete disaster. And the reason is because they didn’t have any experience in that.

So what I should have done is either one, not invest with them when they’re doing a completely different asset class, or I should have asked, Hey, who on your team has experienced on office space? And that would have given me some confidence. I see some syndicators now are switching from multifamily to self storage.

And if they’re doing that and they’re hiring a self storage expert, then that’s not a new asset class for them because they’re hiring someone to manage that for them. But if they just said, Hey, I had success in multi-family. Now I’m going to syndicate self storage. Then I might have a problem with that. I don’t know if that makes sense.

In your defense there, I think in that multiple situations. At least you trusted the operator, right? Like it’s not, you’re vetting two things here. Is the operator honest and are they competent? Now, they may or may not been a competent right. Have having an experience at an asset class, but they have shown a true track record to not steal people’s money in the past with the other business, which you would think carries forward. Ultimately, you have to take some chances out there, right? Unless you have a huge network already of people you trust of organic, pure passive investors.

So I’ve invested with people in the past and got burned. You gotta take some chances, I guess what I’m saying. You got to try, you got to kiss a few frogs.

Yeah I agree. And I’ve invested with new people before and I don’t want to discourage that, but I also am a lot slower. If someone’s been around for 15 years and they have 30 exits and they’re talking to me about all these deals, they’ve exited, I might talk to them for a half hour and invest in the first deal. They show me. But if somebody, only been around for two years, does it or five years even, and has no exits and it’s only in five or six deals.

It may take three conversations and they might have to send me two or three deals that I don’t invest in before I invest in that last one. And that new person also probably I will need a pretty solid referral from someone that I know knows what they’re talking about. So that’s how I look at that. It’s a scale of how much evaluation do I do on somebody the longer your track record probably a lower amount of due diligence.

Yeah. Throw a coin in the game, see what happens. And I also do the same thing with newer operators. And it’s funny, these guys always come off cause they’re probably desperate for some money.

They’re always coming off as Hey, we got a deal now. Hey buddy. If you don’t know me Lane simple passive cashflow, like I don’t sleep with people on this first date. I want to say, I’m going to sit. I have controls on myself, right? I’m going to sit on your email list for six months.

I’m going to watch two or three deals to go by and then I’m like, Get ready to hit a pitch if I do it at that point. Or if I can find other people that have invested with you in the past, but I do the same thing and I think it’s very similar. We all have these kinds of these rules in place, but it’s hard to tease these out of each other. Talk to each other more than 20 minutes and get to know each other.

You’re right. And the other thing I like to do that is new, I didn’t use to do this but someone recommended it is once I invest with somebody, I’m going to try to wait a year before I recommend them to anybody or before I invest with them again.

And that just lets everything because these are such a illiquid investments. It helps to just see how they’re doing right. Are they sending me reports like they said they would, are they sending me distributions like they said they would? Is the deal planning out like they said it would? Because sometimes you get excited because you meet somebody and they seem like they have it all figured out and they’re really great.

And they have, four deals in the first four months. And now all of a sudden you’re four deals in and you find out that they don’t communicate well or, all of their K1s come two months late or whatever it is. Then you’re stuck on now I did four deals with them.

The other thing that I do is when I invest with a new syndicator, I’m going in at the minimum, or it fell even cut the minimum. I’ll go with the lower minimum because I just want to, I want to dip my toe in and then once I am comfortable and have seen how you operate then in the other deals, I’ll put more in, but first one I’m always at the minimum.

Yeah. And you raise a point there, and this is more speaking towards passes, connecting with other passes. Some passes come in a little aggressively talking to other passive investors and they’re like, oh, who do you use? We just spent five minutes drinking a beer together. We’re best buds now. Who you use?

So that partly has to do with it. You probably are not comfortable because maybe they don’t have that proof of concept. And I think most of it, want to hear your thoughts on this Jim, but to me, I think people spend a lot of time and energy to learn and put in testaments, which is like putting their own family’s capital on the line, taking a risk.

You still want to give that away to some random person, they just met. Like I’ve never seen passive investors get with each other, even if they have built that organic relationship over time and just say, all right, boom, here’s my spreadsheet. Where’s yours? Show me yours, I’ll show you mine a thing.

Yeah. I agree with that. I think real estate, especially in the syndication space and in the active space, people are willing to share information and not feel like I’m competing with you, even people who are syndicators can work together, but at the same token, like you said, I’m not just going to say, Hey, here’s my list of sponsors that I’ve invested with to somebody I don’t know yet, because I’m not trying to protect it and not share, but I don’t even know you yet.

So do I want to send some Yahoo to one of my favorite syndicators who’s gonna call and do something that, that may reflect poorly on me. Number one, number two, it’s also, like you said, you spend a lot of time and effort talking to these syndicators and developing these relationships so those are things to be protected.

Then once I have a relationship with someone else who’s passive, , we have some groups that are super tight and even there we share eventually, but once you really get to know each other.

You invest in the relationship.

Exactly. And then you can share but even at that point, I’m not sending you, my list of all the sponsors I’ve ever invested with because that it just doesn’t really make sense. I think part of it is the discovery you get a lot of new people and it’s just like drinking out of a fire hose.

If you say here’s 10 syndicators, go invest with all of them. You know what I say? Some of my sponsors are that I like are on this website, others, you can find on your own, but go talk to some of these guys and just get used to talking to some syndicators. And then we can talk about, who my favorites are and which ones you might want to do stuff with.

It’s all in that discovery and learning. Learning to train your BS detector is I call it.

Exactly.

Yeah. I think, and I talk a lot about like givers and takers. I think there’s a book on this. I think when you pose going guns, ablazing and talk, Hey, Jim, who do you work with? You tip yourself off to sophisticated people. You’re just some guy who is not really into the relationship and you may not be one of those people who reciprocate back. You’re just one of these guys who runs around with throwing out business cards. An inch deep, a mile wide, right? You want to be the complete opposite inch wide mile deep.

That’s the kind of person you want to find and connect with. That’s the whole purpose of these communities is to find people that you can connect with and they’re going to give something back. It doesn’t always have to be reciprocal a hundred percent, but if I’m going to tell you who my three favorite sponsors are, then, I’m hoping you have some sponsors you’ll share back with me, or if you don’t have any yet, then go out and do some research, find some. And then let’s talk about the ones that you found and compare them to the ones that I found.

And so there’s like a give and take. You don’t want to be in one of those relationships where someone’s just always doing the taking, and then you feel like you’re taken advantage of.

By coming to me and being like that guns, a blazing person you’ve demonstrated to me that you do this a lot and the person that you’re going to give me your three people is just going to be what you heard from the other guy in the first five minutes of that conversation too.

If you want to tip people off that you’re the most I don’t know, you’re just not the guy that you’re interacting with. Do that, please. Let us know early who you are.

Anything like real high level to any strange things you do that kind of go to a stent of kind of verifying or just before you invest, that may be different than anything everybody’s heard out there.

We talked about it a little bit. This always sounds shallow when I say it, but really I like to test their response time. If I’m going to send you an email and I don’t get a response within 24 hours, that says a lot to me. Or if I ask you questions about a deal and you say, Hey, I just did a webinar.

Go, listen go watch the webinar. Okay. I’ll I will go watch the webinar, I’m asking you specific questions that I want specific answers to. So those are just some, I guess they’re tests that I do because it’s so hard to determine if an operator knows what they’re doing or if they know the deal and you’re taking a huge chance with a huge amount of money.

So for me it’s about the little things, because I get super frustrated if people aren’t going to communicate with me in a normal amount of time, that’s why I got out my turnkey properties cause the property managers were unresponsive. So I don’t want to get into the same cycle here. So that’s my main thing is I send emails or I’ll give a call to somebody and it’s a test.

Are you going to respond? How quickly are you going to respond and how thorough? So again, when you’re talking about the amounts of money that we’re investing, that kind of stuff sounds like that’s really your test? That’s it, right. If you’re going to communicate with me in a way that I expect, then I know we’re gonna probably have a good business relationship. But if you don’t communicate with me how I expect, I know that I’m not going to be dissatisfied no matter what the returns you send to me.

I think that’s definitely a good point there too. Punctuality kind of shows the professionalism and how they run their shop. I will say to that for those of you guys listening. Cause there are some non-accredited investors actually listened to the show that there may be a little bit paradigm here.

Jim has probably already filled out a questionnaire. The customer service investor relations staff knows what type of investor and he’s seen he’s a serious investor. You might be a non-accredited investor or just a shy under a million half. I don’t definitely do the 21 questions, but they may not come to you immediately with a response.

They might have shit going on, so I dunno, I always see it from two sides, right? I sit on the other side of the seat too and part of it is, I don’t know, it, it is what it is. But it’s hard, right? This is what makes it so hard is because there’s not many signals, two signals.

The website is just a binary thing is they have it, they’re not, is it just looked like garbage, most of them are great. Everybody’s got a logo like it, there’s not many like true signals that you can use. It’s very difficult.

That’s why I use those, but, I don’t have those aren’t hard solid rules. If someone comes back to me in 48 hours instead of 24, Hey, sorry. It took me so long to get back to you. Something was going on, it completely fine. Or if someone comes back to me more than 24 hours and it’s someone I really want to do invest with because they come highly recommended, then I’m probably going to be like, oh, I won’t count it this time, but if I’m on the fence or if it’s somebody new or, it’s just another layer of check for me.

And so I don’t rely on any one thing, but those are just some of the indicators that say, Hey, this might not be what I’m looking for. And everybody, and I get it, everyone gets busy and all that stuff. And so you have to make sure that the parameters you’re setting aren’t too strict in one sense. But in the other sense there’s a ton of syndicators out there. So if for whatever reason, I don’t click with one of them it’s not the end of the world for them. It’s not the end of the world for me. I move on.

And here’s another way of looking at it too, folks. Like when you work with more of an institutional operator, they’re likely to have an investor relations staff and that’s their job, to follow up in a timely manner, maybe 24 to 48 hours. But when you’re working with a smaller outfit that maybe you don’t want to work with me, they’re just a complete newbie. The principal will be answering the phone calls and emails and that’s not, you want. What’s the important stuff? What is the stuff that actually like indicating of future success is not how much, how quickly they invest.

They pick up the investor’s phone call or email. I guess if you think about who’s the customers right. In the situation is it the investors or is it the tenants at the freaking property? I don’t know. I’m just putting it out there. Like I think it depends. I don’t know. What’s your thoughts on that Jim versus do you want to see systems and processes with the institution or would you rather have the organic art as a smaller operator? Cause it’s two paradigms, right?

Yeah, it is. It all depends on the relationship, I think. I don’t really care which one of those you are, but if you’re the small independent operator and the principal is picking up the phone and answering the emails, that’s great.

But at some point you’re going to grow and I need to have somebody who is willing and able to hire somebody to pick up the slack and take care of the investors. You’re shifting as you grow. So if you’re just starting out and you check all the boxes, I’m like, okay, I’m in.

And then you start growing and then your communication becomes worse and you aren’t willing to invest in your own business that tells me something right. And that’s going to be discouraging. So I’m not really as concerned with, are they a small operator or a big operator I’m concerned with, do you have the appropriate tools in place or procedures in place to make sure that you’re running your business effectively? And I would certainly rather you take care of the tenants and make sure that’s running as it should, if there’s an emergency or something, then responding to an email of mine, but you should have procedures in place so that if you’re growing like that, that any, and the principal is out in the field or something that they should have a way to communicate to you.

Like, Hey, I’m out, I’ll get back to you. I have an assistant or I’m going to hire an investor relations person. So I think that’s important too, to make sure you understand what they’re capable of and what the staff is and are they willing to, as they grow their staff so that they can take care all of their customers, whether it’s the tenants or the investors.

Because the signal is, this person is not a good business operator . So how are they in operating their business of X amount of units on the other side of the house?

Exactly.

I think this is just more personal, right? Like me personally, I like to feel like I’m digging a little bit for the diamonds in the rough. I will like to go to like more introverted operators that a good are operating, but are horrible at marketing and maybe that’s the reason why I do what I do. But I like to look for like really crappy PDF pitch decks, and really crap, no website, no presence at all. And I like to dig and I like to find those current investors that they invest with and verify tracker with that way.

Whereas I don’t like some of these operators, like when I go to the website and I look at their team, this person just does their internet marketing. This person just writes articles like who is the freaking operator of this thing that actually does anything?

And that’s just like a different point of view on like something in my head. I’m just thinking about a certain situation of an operator like this but t hat’s just how I am. That’s what I want.

I get it. I have one of my favorite operators now is someone who, he has a website and and he’s not very sophisticated, but he knows his market. He knows his asset class and he does a fantastic job at running his real estate business. He’s not so good at the other stuff. Like finding new investors, marketing, a flashy website. And, you know what, like you said, I’d prefer him to someone who’s really good at having a website or really good at podcasting. I want someone who’s really good at operating and then they can learn the rest of the stuff.

He can hire people as he grows to, make all his documents look shiny, or his website improves as he becomes more, professional. He’s a professional manager of the asset and that’s what I want. That comes in a shiny package, fine. If it comes in a dull, ugly, weird looking package, fine. If I can dig down and make sure it’s a good operator, that’s where I want to be.

Just like the turnkey provider stuff, right in that world, you and I have left that far behind, but people don’t know there’s marketers, they don’t do anything. They just set you up with the turnkey provider or the operator and in a way they’re same thing in this world.

There’s syndicators that just sponsor a deal. Which is personally I think is illegal based on what my attorney’s telling me. You cannot be a non-sponsored based compensation being a part of the GP and not doing anything, even though it happens a lot of times. But like I, as an investor and I think you’re like this too.

Like we like that personal thing, we to like that grass you’ve probably shop at the farmer’s market like I do. You want to know where your fruits and vegetables come from, but you guys, this thing, you guys may not care about that. You may want to go board, skew it more on the side of a more mature institutional operator.

But I’m just pointing that spectrum out for folks. Yeah, that absolutely makes sense. You gotta become comfortable with who you’re investing with, however that is, and it’s got to match your outlook. And that’s why there’s probably so many syndicators. There might be some people, the only people they want to deal with is, slick marketing website and an awesome podcast and they’re in.

Maybe that’ll work out for them, but it sounds like we’re aligned that we want someone who’s operator first and that seems to make the most sense to me, but it’s all got to make sense to you as the investor.

Yeah, I think you and I aren’t on the extreme, right? The extreme would be like, I know some guys that will invest in private money lending deals, which I would never do because it’s not an institutional asset.

The returns aren’t that great it’s ordinary income, but they tell me, you know what, definitely like I trust this guy and that’s all that really matters to me. And I know personally and it’s worked in the past. I think that’s the extreme. We’re more on the site left center or something like that.

I would agree with that.

But any other last parting words Jim any last tips and then we can get your contact information for people to get ahold of you.

I would say for those people that are new to this or just getting into it or trying to figure it out, it is daunting to send that first wire for 50,000 or a hundred thousand dollars. And that’s why use your network, use your community, whether it’s simple, passive cashflow or left-field investors doesn’t matter or different community altogether. I think working together in this is super helpful because it’s not like the stock market where you can just go in and buyand sell, when anything goes bad or wrong.

These are very illiquid investments. So doing some due diligence up front, it’s passive investing, but it’s not passive until you send the wire. Everything before that, analyzing the sponsor, analyzing the market, the asset class, the deal, all that is active and then you get to the passive stuff. If you want to contact me, you can go to, www.leftfield investors.com or you can send me an email at Jim@leftfieldinvestors.com. So I think take action, get in the deal, see how it goes, but be active until the passive starts.

How to Travel and NOT Be Broke

https://youtu.be/lFg9ohH6EZ4

Just by leveraging the loyalty programs that are set by credit card companies or airline companies or hotel companies try to rent them out and for anybody who’s not familiar with travel hacking at all, it’s a way that you can get free travel or a lot of cashback if you want. Just by leveraging the loyalty programs that are set by credit card companies or airline companies or hotel companies. And if you’re not aware, there are dozens of different credit card options and different loyalty programs out there.

And it’s all about how to strategically approach the game so that you can meet the travel goals that you want. You can get the travel that you want for almost free, very close to next to no cost while just learning to play the game and plan strategically. Which I think a lot of people in your audience obviously do as they’re researching different real estate and different passive income opportunities.

Yeah and I think that people listening, they’re like myself optimizers and this whole travel hacking thing, you’re literally collecting points and then you have to figure out where that cash in those points at the highest value. It’s like a video game! It really is addicting. It can be a time suck. Maybe let’s start off with do you have a list here of some highest or biggest bang for your buck type of tactics? What’s at the top of your list?

It’s not just a game for how to use the points, but also even how to bring in those points and so my number one advice to people is I have a few. The first is the best travel hack is finding friends who can show you even more travel hacks, because so many people do it the very unoptimized way of I’m going to watch 14 hours of YouTube videos and read blogs.

But really if you just join a community, whether it’s on Instagram or a Facebook group or something, I host different Hangouts. If you just find somebody who’s already into this kind of thing, like you went to the frequent traveler university conference.

It speeds it up so much. If you can just ask your questions there. Secondly, if you’re like, I really just don’t want to interact with people. How do I do this quickly on my own? My advice is to work backwards. So some people will make the mistake of researching different cards and saying, I’m going to go get a Chase card and then an Amex card, and then a Citi card, a Hilton card, a Marriott card or United card.

And then I’m going to figure out what to do with all of those and that’s a really inefficient way to go about it. Instead, I would recommend start with the goal that you have in mind for free travel and work backwards from there. If you’re telling yourself, okay, I want a free trip to New York city and I currently live in Hawaii.

Here are the airlines that fly from Hawaii to New York city. I want to stay in this area of Manhattan. Here are the different hotels that are servicing in that area. Here’s how many points I would need to get that free flight and to get however many nights in the hotel for free. And then here are the credit cards that can earn me kinds of points that can actually be transferred correctly to that airline or that hotel.

Then it really narrows down how many things you actually have to research and figure out and how many points you need to get in the exact currency that you needed in, rather than just shooting all over the place in the dark. Makes some travel hacking friends and also work backwards to get to your goal faster.

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.

January 2022 Monthly Market Update

https://youtu.be/pNf50kfgLy8

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pretty recession proof.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Stress Busters for High Achievers with Trish Ahjel Roberts

https://youtu.be/ci5tyW239w0

This week’s podcast, we’re going to be talking about some stress busters for a lot of you, higher achievers out there. Most people that are listening are in the investor database here make multiple six figures and really grinded on both ends in terms of making a lot of money and saving it, being good stewards of money and wealth.

A lot of people here bare minimum saving 30 to $50,000, some able to save multiple six figures after , all their personal expenses and we still do the on free onboarding calls for a lot of you guys and just being nothing really surprised me anymore. I’ve talked to people who make $500,000 and spend three, $400,000 every year.

A lot of it usually has to do with private school or those types of expenses, but I’m not huge on the saving your way to financial well-being, although that is a part of it in the beginning, if you can be a good investor and then get yourself into the right deals, get yourself into the passive investing world.

So you can use the passive losses to lower your passive income. That’s the way you’re really gonna make movements, especially as accredited investor and getting your net worth beyond the million dollars. So before we get to that podcast, I just wanted to talk about a couple of things that an investor emailed me the other day, and I thought it pertained to a lot of what you guys were, questions we’ve had lately that have come up.

The question was, ” what do you think about, the inflation? Obviously it’s pushing prices up and then the result of that is interest rates also going up. And my response to that is, I try and keep things very simple. As investors, we are making money off of the Delta between the cap rates and the interest rates and cap rates typically trade up and they go down at the same, they’re correlated with each other and there’s always a consistent Delta between not sometimes that Delta squeeze this.

And that’s not good for us, but typically it returns back to that healthy Delta where we applied. Good leverage or hitting good debt service coverage ratios pay for the debt. But that is how we’re making money with that Delta and we leverage that of course.

The things that impact the interest rates in a date is loan proceeds and this is how much money the banks ultimately give us at the end of the day. Two things that move and impacts loan proceeds: Number one, interest changes, which is a little bit lower impact and that was the primary concern of this investor. The second is the improving net operating income, which is higher impact.

Or in other words, if you’re going through and you’re rehabbing the property, six months to a year, you’re improving that and operating either by increasing the rents, which is improving the income or decreasing expenses, which is typically rare, right? Normally we’re trying to make it a better product for customers.

Therefore the income goes up and the expenses stayed the same or gradually increased too. But those are the two things that really move the needle and I’m downplaying the whole interest rate things because when you’re doing value add you’re increase in net operating income that drastically improves your loan proceeds how much money you’re able to create and thus take out of the loan.

Even in an environment where interest rates are going up and up, I don’t anticipate interest rates going up more than half a percent full percent in the next year or two. I’ve just seen it happen so many times where , the fed says they’re going to raise interest rates and it’s like, all right six months went by and nothing happened and then it finally gets going and it just moves at a turtle’s pace.

Let’s think what happens when the interest rates go up. The reason why the fed moves to bump up the rates is because the economies is doing well. As investors, you’re literally leverage 4- to- 1, but I would argue, leverage even more that if when the economy goes up, the rents are going to go up much, much higher than what the interest rates are in relation and what the economy is doing.

That makes sense for those of you don’t know, or, basically what it means is you have an apartment that rents for 700 bucks and if you can bump that thing up 200 bucks, the interest rates, the economy is taking a long and that is huge value.

If I just do the net operating income increase on that $200 bump and rents times 12, that’s an increase of $2400 a year and at a five cap, that’s almost 50 grand right there just for that one unit, just for rehabbing that one property, one unit in the complex.

Imagine if you do this for multiple units, and multiple months in a row, right? You’re talking about millions of dollars of value ad creation. And it really doesn’t matter what the interest rate change was. It’s very barely moves, and I understand that what people are thinking interests are going to go up, but the larger impact.

Again, it’s net operating income getting more solidified. Even if the rates go up half a percent, which isn’t going to happen for a very long time and the second example here If net operating income improves $500 a month or $6,000 a year, this is just again like same calculation I did at a five cap, which you divide it by 0.05 is the math.

You’ve created $120,000 of value every single month. That 120 grand pays for a lot of interest rate bumps up. We are getting greedy in a way it’s why don’t you take it?

It’s a sure thing. If you delay during your refinance but if you’re increasing the value of the building in that case, $120,000, you can see why it is a cavalier way of doing things from one point of view. But it’s the smart business way to be doing things because if something were to happen in the economy, you could be able to refinance pretty quickly and get out.

But if you’re making $120,000 every year, just by simply rehabbing a unit or two, then it just makes sense to stay in the game while the game is hot. And I don’t want to equate this to a craps table in Las Vegas because that’s not how it works. It’s it’s like a crap’s table where you can’t lose the money that you already made in a way, because you’ve created that value and you get out before that seven comes out.

Again, every month that goes by, you’re continued to upgrade units, and this is , how you’re making money in this business.

Another analogy that I’ve used is, if you guys like that high seas crab fishing, Alaskan fishermen. It’s like you’re raking in the big catches, right? The storms coming in at some point. Yeah. You got to seek refuge before that hurricane gets too rough. When that point is, you should have captain that kinda knows when it is to pull anchor and a skit back into base. But until then, if you’re raking in the big catches, you keep going. And part of this mindset is interest rates are not really concerned to us because most people have this false sense of intimate doom that interest rates are going to increase.

Now, again, like I said, early, it’s probably will increase, but slower and impact isn’t much when you compare it to the embolic push the value of the property is, maybe we bumped it a million, $2 million in that time. The issue with longer-term agency debts is even though a lot of people like them and they seem conservative is that they come with these big prepayment penalties, which is the dark side of those long-term agency loans.

And I personally would rather not get into it until I absolutely have to enforce to get into or before the storm comes in a way. And I’d like to get my capital back out. And that’s the idea of getting my capital back off the table. So say we, things do bad happen at that point, I’ve taken my original capital.

I’ve playing with house money at that point. But if you guys have any questions on that, we’ll be doing a section on this or another Saturday cram school. Come to simplepassivecashflow.com/syndication. Read the free syndication guide there and join the database at simplepassivecashflow.com/club we’ll be doing more educational events throughout the year.

And what we talk about these types of things. I think once you start to understand the numbers, you start to realize how really robust this type of investing is, especially when you’re going after cashflow first. Whether you’re buying a single family home turnkey, what’s the worst that can happen, right?

Like the economy goes the other way. You lose money in that turnkey rental but at least you’re cash flowing. Your debts first coverage ratios are strong. You continue to cashflow and you still make money. You’re still paying down your equity just have to wait for the market to come back different store with value, add real estate, right in value, add real estate.

It’s the best of both worlds. You can make money in a bad economy but also power yourself through a bad economy with the value add as we’ve stated early, but anyway, here’s a podcast stress free busters for high achievers. Last thing I want to just mention is that time of the year, I know in Seattle it was dark all the time. Sometimes it got to me. So maybe check on your compadres out there, see if everybody’s good. You never know people are dealing on with out there. And we’ll see you guys out there.

Hey, simple passive cashflow listeners. Today, we are going to be talking to Trish Ahjel Roberts from mindblowinghappiness. com. Now we’re not going to be talking about, as much taxes or investing concepts today. Today, we’re taking a little bit of a break from the hard topics that we normally talk about on the podcast.

And talk a little bit about in a little bit more happier, a little less, some stress busters for executives here. But if you guys haven’t please join our private club at simplepassivecashflow.com/club. You get all the goodies there. In addition, you get the intro HUI e-course for free there, but a welcome to Trish. Maybe let’s talk about a little bit of your background, how you came to a trading, mind blowing happiness.com.

Yes, thanks for having me Lane. It’s a pleasure to be here. And so I started my business about a year and a half ago. I had worked as a financial advisor for about 12 years out here in Atlanta.

So it’s always funny when I tell people that I’m a self-actualization coach with a background in corporate sales, finance, Buddhism, and yoga. It’s a little bit of a mix.

When you mentioned you worked as a financial advisor for quite some time once you get out of that line of work?

It was interesting cause I worked with a lot of high net worth clients and it was surprising to me that I found many times they were very stressed and very unhappy to be quite honest. So as I was studying Buddhism and yoga in the background, I decided to go ahead and take that to the forefront.

So now I teach executives as well as all kinds of people, how to live a happier, more joyful and more fulfilled life. So I know today we were going to talk about some stress busters for executives because whether you’re executive or entrepreneur, you’re under so much pressure, especially coming out of this pandemic.

So not just to generate revenue for your business, but also to balance family life with business and be there for your employees and for your investors. It’s just a lot of pressure coming from all different sides.

You have a list of six here that we were going to talk through. What’s the first stress buster for busy professionals?

So the first one is really tapping into some of your hobbies. A lot of times we may have hobbies that we like or hobbies that we used to like. It’s always great to think back to your childhood. Cause sometimes you can find some nice little nuggets there that maybe you haven’t thought about for awhile and most things, because we’ve all been trapped in doors for awhile are available online.

So I know there is for me, I like to write there’s some writing classes that you can access online. There’s a group century arts that I like out of Canada that does adult writing classes. There are poetry, open mic nights that you can find. Sometimes I go onto meetup.com or event bright. So there’s some neat things that you can find that you normally wouldn’t think of even a virtual painting. Tap into some of your hobbies and maybe something that’s a little bit less traditional to find a nice way to relieve stress.

Yeah. I think people always have their primary thing. For me, it’s at my computer going through deals or creating stuff, but basically you’re always trying to find some kind of hobby that’s totally different.

Maybe it’s not definitely not productive, but maybe playing pool or. Pottery or something like that. Whatever that is for you and not strategic, cause when I was in corporate, I played a lot of golf. I was never good at it, but I played it because it was a thing to do to make those business connections, but doing something that’s not strategic, just completely for enjoyment is a great way to relieve stress.

And what do you do when you have a client? That’s like cherish. I dunno. Like I’ve tried it all and nothing really gets me going, like it might just something wrong with me or what are some tips there?

One of the most powerful tools that I use with clients and also in my workshops, it sounds really corny, but it’s journaling because a lot of times we don’t ask ourselves the powerful questions that we need to ask to know what we really want.

So if I have a client who really says, I don’t like anything, I only like to work. I know that when you were like, five you didn’t only like to work. There had to be other things that you liked. So going through some sort of powerful questions to take you back to a place where you can remember what brought you joy is a good technique.

I do have a book that I like besides my own books that I could mention to your clients. There is a book called Live in Wonder by Eric Saperston, which has excellent journaling prompts for that type of thing.

All right. What’s next on the list here.

So next on the list is exercise and everybody knows that we need exercise just to maintain our physical bodies and feel healthy. But during the pandemic, a lot of us got really sedentary, and started wondering why. You know why we can’t sleep or why we don’t feel good. So companies like Peloton have made a ton of money and been hugely successful offering virtual options for people at home, but there are lots of other options for virtual exercise.

So some of the ones that I like of course is orange theory, which is one of my favorites. They offer at home fitness as well, but. There are also lots of local mom and pop businesses who could use our support as well, but who also offer very specified yoga. So you can have virtual, private yoga sessions where you actually say exactly what you’re working with as far as your stress levels, or if there’s any limitations on your body and you can set up a one-on-one session.

That’s convenient for you. And I recommend that if you go to a yoga studio that you really want a studio that knows how to teach, not just traditional yoga postures, but also breathing exercises, which we call pranayama and meditation guided meditation. I would also encourage your listeners to ask for yin, Y I N, or restorative yoga, because those are all really excellent.

To help reduce stress. Cause stress is the biggest contributor to disease. And when you are really focused, like your listeners are, then you don’t have time to be sick. You’ve got things to do. So yeah.

Another thing there that I try within thrills of pandemic was like somebody said, Oh, try meditation and I’ve tried it a gazillion times. So I gave it another goal. But this time I found out there’s these ad hoc. Zoom meditation like Romans where people will join a just random people will join at different slots of the day. You’ve just Google, like zoom meditation or virtual meditation. There’s these groups that will meet up and sometimes there’s discussion and it’s a little bit weird, but I don’t know. It might be your thing. That’s the whole thing here is try different things, see what works for you.

Yeah. And meditation is actually an interesting one because anything else is a whole spectrum and there’s all different styles. Some I think are fabulous. Some are not my favorite. So usually the ones that I recommend are going to be more guided, cause sometimes you can go into meditation and you’re just listening to silence for 10 minutes. And if you’re like me, I’m thinking about like my grocery list and my laundry list, so you want something more specific. If you go on I can give you a few, but if you go on my website, mindblowing happiness.com under resources, it will lead you to some of my guided meditations, but I also like cadabra.org, which is a Buddhist organization. I also Chopra, Deepak Chopra has some wonderful offerings as well. So there’s a lot of tools available for good guided meditations.

Yeah. We need tools. Cause if not, I’ll just make myself crazy and talk to myself when I meditate.

Everybody does the same thing. It’s not only you. Yeah, I’m just not like a hipster who has no job, that it can just hear his mind like that.

It takes practice. That’s the thing, the first time anybody tries it, our minds are very busy. I like to think of it as like the dog with the frisbee. If you’ve ever had a dog, you throw the Frisbee, the dog will chase it, you throw it again and they’ll chase it. And our mind is like that.

So whether it’s on the web, you click a button, it takes you someplace else. You start reading something else. Your phone rings, you look at that. Something beeps like we’re constantly going from thing to thing. So being able to slow that down, it takes practice. Yeah, it doesn’t happen the first time I’ve used one of those like headbands that kind of like monitors, like the waves of your brain and tells you how many times a monkey comes in your brain.

I never liked that thing. It took forever to calibrate it. I wasn’t a big fan. I have never heard of that. It sounds pretty high tech. Yeah. It’s, I had to figure what it’s called. But it’s maybe like sooner. Do something like that, but it goes over your head cost a couple hundred bucks. I thought it was working.

And then I got this thing that like straps on my lobe of my ear, but I thought it was a little bit less invasive that you didn’t have to really calibrate and that was the annoying thing about the other one. But yeah, what’s so what’s after meditation, what’s the next go-to.

So that was exercise and we wandered into meditation, but the next one is doing charitable work. And again, I would preface all of these by saying, if it’s not bringing you joy, don’t do it. Cause it won’t really stress. So if it’s sitting on the board of a charity and that’s going to be more stressful than that’s not the option for you, but if you want to relieve stress, doing something.

That you enjoy helping others naturally produces, serotonin in our bodies. I had been doing virtual online tutoring for adults who are learning to read. So again, you can reach out to a local charity that you are really interested in and find out what virtual options they have. They pretty much are all accustomed at this point to providing virtual volunteering options.

And it’s just a great way to make yourself feel good if you have the time. And if you don’t let that one stress you out. Yeah. I can go go two ways on this. I talked to a lot of people in our group and quite frankly, for them to go build a house with habitat for humanity, despite how great that is, it’s a waste of their Their talents, it’s not their highest and best use. We have a lot of like very highly capable and highly connected people in our group on the other end, right? Like maybe better to build a house, get some exercise then, and to get out of your normal thing. You’re high leverage kind of position.

You can look at it both ways, right? You can. Do a charity exercise that is very different than what you’re normally doing, or you can leverage your skills and talents in like a rotary, for example. Yeah. I think in this example, though, if you’re looking to reduce stress, I really want you to give yourself a break from being a high achiever all the time.

So sometimes it could mean just delivering groceries or. We were talking more about virtual ones like the online tutoring, but whatever it is, it could be very simple, human human to human connection. And not necessarily always using those higher level strategic skills that we’re accustomed to.

Yeah. I’ll be honest and maybe people think I’m a jerk for this, but I don’t volunteer at habitat for humanity or the food bank. I don’t think that’s a good use of my time. For as much time I have on earth personally, I get off on helping people with these initial strategy calls that if you guys haven’t booked yours, I’d like to get to know you a bit better.

And I enjoy it. I really get off on it. Like how we can, like how I can in 15 minutes really move people’s mentality or just, Hey here’s we’re going to tower and take money out of the 401k. Slowly. So we don’t have to pay too much taxes or here’s why we know high net worth folks.

Aren’t doing the strategy and doing this instead. I found my residents frequency and the residents frequency is what I call like your Sonicare toothbrush, vibrating at that perfect frequency with high speed, low drag. I think that’s, I think you have to figure out what that thing is. What’s you’re put on this earth to do what nobody can do quite like you.

Or maybe you’re not that great of it. Maybe what you do a little bit better than the average, right? If not, I don’t know. This just keep bringing out ideas, I don’t think you’re a jerk for a smell. So I don’t like habitat for humanity either or necessarily food base. So I think whatever, whatever it is should be something that you enjoy.

And the example that you gave where you enjoyed doing those consultations. It’s still perfectly. It’s still perfect. It’s like when I do like my 30 minute coaching consults, it’s kinda the same thing, cause I don’t charge for them. But in that period of time, you can offer something that you are uniquely qualified to offer.

Yeah. When my, my my mom and my wife were teachers and one thing that menial tasks they made us do was cut the damn paper towels and half it’s to make it stretch further. Oh, and then nothing upsets me more than just doing that. Your activity, like I get more stressed doing something like that.

I get handsy. So I always, yeah, I always refuse. I’m not going to help out with school stuff, but maybe that’s why having a kid, I need to learn a lesson. I need to change some diapers and come and get used to it. But what’s that, what’s the next what’s the next stress Buster we got. So the next stress Buster is getting connected with affinity groups, which is basically just like-minded individuals.

So it could be based on whether a mom or a dad whether it’s a student, it could be your ethnic background. It could be a women’s group or men’s group LGBTQ whatever you identify with. So it’s just a great way to get away from, maybe being in A larger group where maybe you’re not as connected as easily with everybody involved and finding a little safe space.

So it could be, mom’s night out virtual or in person or girl’s night out or whatever it is, but just a way to kick back with people who you identify with. And that’s if I were to break that down, it’s, you’ve got some kind of rapport, similarity to kind of stuff. Make things go, but then is another, is it just as much you don’t know these people, if it doesn’t work out, doesn’t matter.

You’ve got that freedom to that too. And then there’s also Business organizations, of course, there’s a national association of female executives or national black MBA association, or some of them are organized by professional groups like out here in Atlanta. I belong to a, like a professional club called the gathering spot.

So they have a lot of different groups within that group. So yeah. Whether it’s a separate kind of group or one, that’s a subset of a larger organization, even the corporations that people already work for. If they’re not entrepreneurs have those kind of Affinity groups as well. And they may call them different things.

They don’t always call them affinity, but you know them when you see them. Cause they’re the groups where you look for people who, you feel like you connect with it. Yeah. So you guys have mentioned, some of you guys are in like Tessa clubs. It’s just totally you guys all or don’t own Tesla, then you have nothing else in common, but just another reason to have a potluck, and then some, a lot of guys and gals would go into the mom’s new mommies, new daddy’s groups. And then I think a lot of people, lot of our people in our group work are guys. So the other guys will be like the baseball coaches, for the kids. And I think the feedback that I hear is you meet people, you got to be there anyway for your kid, but like you get to meet people and it’s totally not non-judgemental, it’s just like totally.

Like what they do from you in their day-to-day professional life is so different and you don’t talk about that stuff, it just allows you to feel a little bit more understood before you even open your mouth. So that alone is a little bit of a stress reducer. And the fact of the matter is we all need to be connected.

One of the difficulties in this quarantine life that we’ve all been living is that people have been feeling isolated and it’s caused really a mental health crisis in this country. So getting connected is always important. Yeah. I think for a lot of folks in our group and myself included. W what we do is very high stress, and it’s hard for us to even explain what the heck we do.

It’s nice to leave that behind from time to time and just have to explain it. It doesn’t matter. It doesn’t matter at the end of the day, or to take a break from it. Yeah. And then the flip side of that, too, is that you could be part of entrepreneurs, group, or CEOs group, that Or even mastermind group, that allows you to connect in a professional way as well.

Yeah, I think I just been conscious of both of those, right? I think people need both. They need something totally non-related to what their thing is, their highest and best uses. And then to get into a mastermind group that augments exactly that or their interests. All right. Where are we? Where are we at with the, we have any more, what do we have to, we’re up to number five.

So number five is spiritual. We talked a little bit about meditation, cause that’s a great way to access kind of that spiritual self, for a lot of us, we belong to churches or synagogues. And we know we can go into them, but many of them now offer services that are accessible virtually as well.

Of course there’s also TV services, but that’s another great stress reliever. I talk a lot with my clients about the difference between spirituality and religion, because like I grew up Catholic, so religion was religion. It wasn’t until I got older, I realized that spirituality doesn’t have to be religion.

But it is a way of. Nurturing and acknowledging your inner self, which is important for managing stress, right? The dating app say spiritual but not religious. Exactly. And I think I mentioned the Chopra app already. I liked them for that. I also like the Gaia channel and kidnapped, but that work was another one.

And the last one I had, if you want to give you want me to give you number six? Let’s do it. So number six was really going old school and just remembering that if you are really having an issue with stress management therapy and coaching two routes that are always there for you now that every, all the doctors are on zoom, right?

So you don’t have to go into their office for those things either, which is fantastic. If you don’t, if you don’t feel like traveling and the big difference really between I’ll just mention it. So you’re. Your listeners are aware of it, but the big difference between therapy and coaching therapy is typically dealing with past incidents that you’re trying to work through that may be affecting you now, whereas coaching I’m sure.

Probably all your listeners have coaches anyway, cause they’re so top notch, but coaching is working on setting goals for the future. So it’s more future driven. Yeah, I know. That’s what my coach says. I’m like, don’t you want to hear my context of why I am? She’s I don’t care. I don’t care. We’re going to go past present features is going to talk about the future.

I’m like, all right, I it’s like a therapist to work through your, your teenage years and stuff like that. Yeah. And maybe another thing like the therapy, right? There’s a lot of these apps that people can just sign up for. They can pay for the hour and just talk to somebody. They don’t really get to create that long-term relationship.

They can just try it out, see how it works and go from there. Yeah, they do have apps now for therapy. I think that you can even text where you don’t even have to make a phone call or do assume that you could actually look at text therapy because, I am a mom to a 20 year old and the younger generation, my daughter doesn’t pick up the phone.

She talks to texts. So some people don’t really want to talk. Yeah. And it’s like the younger generations, like people don’t talk about it with all the, like the COVID stuff, but a lot of people are like community, more people are committing suicide right. Lately. Yeah. I don’t know what the, I don’t know what the numbers are.

Maybe like 20 to 30% more than average or something like that, or sounds about right. Yeah. Yeah, no, isolation is a real issue. Like even when we look at some of the. Rioting and things that were taking place. I think a lot of that is also related, not just to the political environment, but also to the fact that people are isolated and stressed out.

Yeah. And I think it’s I think when you’re spiritual like that, you don’t have to go into the office. I think that’s the big hangup is you need to go to your normal PCP, get a referral to this person, go through all of that. Maybe the therapists on the app isn’t as good.

I don’t know. But if that barrier to entry is a lot lower and you need it, give it a try. Even if I don’t know. I probably say if you don’t need it, maybe just see what it’s all about. Just give it a try. It might be for you. Cause I know a lot of people in my network have used it for therapeutic reasons.

The app. Yeah. It just wanted to just have somebody to talk to and just curiosity over the whole virtual therapists. It’s not like they’re cuckoo anymore, right? It’s not a stigma, but some people still think it is just unfortunate day. No, it’s funny. The first time I went to a therapist was when I was married and it was like for marriage counseling.

And I remember the building had a big letters on the outside mental health, and I felt like I needed a wig and shades like a scarf to put over my head to go in there because it was such a stigma in my mind. But now I like to think that we’ve come a long way since then. And That people feel good about taking care of their mental health, the same way that we’ve learned to feel good about taking care of our physical health.

Cause like we all know we need to exercise and drink water and eat well to take care of our bodies. And I think for our mental health, we need to learn the same thing, that there are certain things we need to do to just maintain our mental health quick tips or tools that you’ve seen lately that.

Just to have people try out to close things out. I think I gave you guys most of the kind of online resources that I was thinking of, but I will say one thing that I think is extremely important is to have a mindset of gratitude. So for myself I always wake up with this kind of gratitude mindset.

I actually. Wrote an affirmation that I use to create my mind, happiness, self care e-book and you guys can access that on my website. But gratitude, cures. So many things like you, you can’t be angry and grateful at the same time. It’s really impossible. And Yeah, it’s just a cure for a lot of things.

So many times we think, especially as high achieving individuals. So many times we think about what’s next, bigger, better, faster, stronger, and taking that moment to be grateful for where you are, is incredibly important. Flips everything around. I used to do this really strange activity where I would write down.

I would be happy when.dot dot. And I would think of what I would want, like kind of lifestyle. I wanted car I wanted where I would be living out my daily activities B and then I would do this exercise maybe every six months to a year. And I realized that kept changing as I started to mold my life to be more of that.

And then I, after doing this for like maybe five, four to six years, I started to realize that this damn thing keeps changing and this is like a constant moving cycle might as well just be happy with the journey and you hear about it. So cliche. But until you do this little.

This little exercise on your own, which will take you four to six years, maybe for smarter than me, it’ll take you one or two times and doing this every six months, you start to realize that it’s just a constant, constant battle or constant, journey, depending on how you look at it. It’s true.

If you’re not happy in the moment, you’ll never be happy. It’s just true. And when I was working as a financial advisor with my clients, sometimes we would say what dollar amount do you need? Do you know how many millions of dollars do you need to be happy or to have everything you need?

And it’s really hard to get that number because there’s always something more. So yeah, you got it right lane. You gotta be happy on the journey. There’s a balance there, right? Folks. People not in their head right now. You gotta make some money because. The $10 and below at wine really sucks.

So you need to get a decent amount of money. So that’s the challenge of life, right? Balancing the two. Oh, you do need money, it was shocking. We’ve had so many suicides among very wealthy people or drug overdoses among wealthy people. So yeah, the balance is definitely key.

Money’s not everything, but it sure makes life a lot easier. For some who said I’ve been rich and I’ve been poor, but I like rich better. Yeah or I never liked cars, but then I got one and now I like cars, exactly. But yeah thanks for joining us, Trish. Again, you guys can read more for her content at mindblowinghappiness.com.

And if you guys want to make me more happier, go ahead and book that Intro onboarding call. If you have never connected yet, go to simple passive cashflow.com/contact. That makes me feel really special that I can help people out in the world, that’ll be my release, make me happy. All right. See you guys. Bye.

Thank you.

What to Do Before You or Your Parents Die – Annette Kam

https://youtu.be/kgMl_iEYiLY

Wow on today’s podcast, you’re going to be able to download a free family planning spreadsheet. Ooh, we love spreadsheets. Don’t wait You can grab that at simplepassivecashflow.com slash legacy, and it’s going to be a good one today, but before we get going a little bit recap, Christmas is over you.

Celebrate Christmas. Hopefully we’re all selling in the new year. But right now, in terms of investing things have going pretty well for investors right now that everybody knows about inflation, even the regular people out there, they know that inflation is rising. All the bolts at this point and prices on real estate is just keeps going up commercial real estate.

Hasn’t really gone on the huge frenzy that residential real estate is going. But I definitely see the second half 2023, the commercial prices will definitely be running up along what you’d like. Have you seen with the residents prices? Which means it’s not yet too late to get. As far as apartment goals everything’s going pretty well.

Rents are continuing going up. I anticipate rents that kind of slowed down a little bit, but still be increasing which has healthy,

but as much as I love and investing in apartments majority of my net worth is in that asset class. I’ve been looking around lately and you always want to look for stuff. The contrarian point of view, and what is one of those will tell us, right?

We’ll tell us, get beat up in the pandemic recession, but something I’ve been realizing is, hotels, just like short-term rentals. Everybody’s looking at short-term rentals out. Airbnb VR BL there are discretionary items. That’s something I’ve been learning a little bit of doing my due diligence on this asset class is either there’s a big difference between the two and the three star hotels.

The crappy holiday and expresses that I stayed. And for about five years, the comfort ends the maybe the semi nicer, three, four star hotels, the lore and Marriott’s those types. Those are the ones that are gonna to me, struggle in another pandemic or session, especially as people stop spending money on that of.

Something I’ve realized lately is the high-end luxury stuff. Like your four seasons in Hawaii or a Hilton in Hawaii. And it keeps saying Hawaii, because I think there’s a big difference between investing in 2, 3, 4 star hotels in the middle of a piece of junk Alabama, Kentucky, like these areas that no wonder they want to go for vacation.

Really your only reason you’re going there is because your company tells you, you got to get your butt on a plane. The go talk to some folks in the flyover states, but places like Hawaii, we always beat up on Hawaii. California is places where it’s not a really great place to invest for cashflow, but it is always going to be paradise.

And place where people will aspire to live the dream for their one week of vacation. And the people that are self selecting to going to these places are going to be going to the five or six star hotels. So started to look into buying a hotel in Hawaii, is that everybody wants to do that. What a flip trophy asset that is add that to my coffee and chocolate farm parcels,

but . I started to talk to some developers that I knew and some other folks in the industry and start to realize that if go off on this investment thesis, that I needed to stay to the high-end. So I can go into recession, proof assets that cashflow, I need to be now competing with the institutional operators, which is not going to happen.

It’s the same reason why. There were a few out there that we’ll invest in like Maine Frank computers, but now Amazon is getting into the game. All the little guys are getting blown out of the water with this type of stuff. Same thing with industrial and office space, which is why the average person can’t really get involved.

But, apartments, you can buy , smaller apartments or put together private equity group go after a 40, $50 million. But within industrial and office, you’ve got to get too much huge or scale and very similarly, and maybe to March stream case luxury five star, six star hotels, which are talking now on a magnitude of , $200 million plus, and there’s not very good financing on that.

So you’re talking about it, bigger equity in comparison to the purchase price. Another thing. These are the weird wants to don’t really think of as an investor when you’re outside of the industry. Something I’ve learned is that, developers went to making these really fancy five, six star hotels.

When you look into the PNLs of this stuff, they’re not really cash lying, or it’s not, doesn’t seem too much of a moneymaker, but what’s really, the moneymaker is selling off the timeshare. So if you’ve seen a place like Hilton wine village, there’s it was built in different phases and there was a section of it that gets sold off to the timeshares because the timeshares goes after How do I say this in a nice way, but they are the absolutely worse consumers buying that stuff. So basically you can, if you’re the hotel owner, you create a nice property, a campus, you make a couple of timeshares, you sell it and you gouge those types of unsophisticated investors, so-called investors, but we all know who the people buy timeshares.

Those are the people just get suckered into buying this stuff because they want that dream. They want to feel like an infant. But they’re really just a timeshare person with a bunch of points or whatever, but that’s the play for these large hotel operators, developers that they create the campus and they make their money on that sale of those timeshares, to the sucker buyers.

Another thing too, that I also found is a lot of these bigger brands, like the Hilton. Th these main states, if you’ve heard, they get out of it. And lot of the money is coming in is dumb institutional money. Again, like these are the people who are investing the lazy retirement funds of a lot of folks that don’t listen to this podcast.

The expectations are a lot lower and a lot of times these big hotel operators they’re just lending their brands. So really they don’t have any skin in the game. Just another example of the bigger that you get, it’s easier to not fail and you don’t really have skin in the game.

And as much as I’d love to go on and invest in a Hilton or four seasons, they don’t need private equity money. So it’s not really finding any deals in that type of work. But you can go buy a holiday Inn or just one of these Thor and hotels. But again, like I said earlier, I think there’s a lot of risk into buying that type of discretionary item in the two to four star category.

But anyway, part of this whole idea of investing in hotels and probably not going to do it, but it was just put on because the mastermind that we’re putting on in Hawaii, this next. Pretty much the final week to buy your ‘ tickets. For those of you coming out, or you’re going to have over 80 people there, I’m really excited to see you guys there.

We’re going to have a little less than half are family office, Ohana members or VIP’s, and then general admittance . So looking forward to meeting you a lot of people in person for the first time, but yeah, enjoy the show

hey simple passive cashflow listeners. Today, we are going to be talking to Annette Kam who wrote a book called Wait, Don’t Die Yet! So it’s a complete guide for all things that nobody wants to talk about before, during, and after a loved one’s passing so going to be a lot to do with legacy and estate planning.

If you guys want to check out the show notes to this, we’ll post the video of this, and also a more pertinent information surrounding this topic at simplepassivecashflow.com/legacy and before we get going, I’m going to apologize because Annette is here in Hawaii too. And she is probably going to get me to speak some pretty poor pigeon English, which tends to come up when we get together, but we’re not drinking, so won’t be too bad. But, Annette thanks for jumping on. Appreciate it.

Thank you for the invitation. I’m excited. I’m really excited to be here.

Yeah. So paint the picture for us. What did you do before you really got interested into this topic matter? What did you do for that treaded day job?

Oh, my history wise I like to go back to my history because to me, everything is not a coincidence. Okay. Back in 1968, I spent two months in the hospital with a ruptured appendix almost died, but that propelled me to become a nurse. So for the last 42 years, I was a nurse. I retired five years ago. But within this timestamp, I also came down with an illness called fibromyalgia and it was very debilitating suffered for over 10 years.

But then found this book that changed my life. Connected up with the doctor, started a nonprofit here in Hawaii reached out to the mainland and beyond. And last November, I had to pivot my whole focus in life because of what had happened to me with my in-laws passing and this is what has led me on a new mission.

So I stepped down as president of the nonprofit last November, and I wrote this book to help people realize that they think they have their affairs in order, for passing or their loved ones passing other parents past again, that is such a myth that they think as long as they have the will, the trust and all that. They’re fine. That’s really not the case, basically.

So before we unraveled some of those problems and issues that people don’t think of too much, you spent a lot of your career as a postpartum nurse and we’ve had a lot postpartum nurses or doctors in that arena on the podcast in the last several years and they give some insights into this from their dying patients. Anything before we move on any takeaways that kind of have been impactful to your life, going through that experience with so many patients?

I was a postpartum nurse I didn’t have the death and dying part as much, but I’ve seen the lights. I did an interview once and it was interesting because she said I’ve seen life coming to the world.

I’ve seen suffering because of my family had to go and now I’m helping people in death. That’s a kind of a neat psycho through to be in touch all phases of life.

All right. So let’s get into this typical example, right? So I think the most people that are listening here, mostly accredited investors may be in their thirties, forties, and fifties and they have an older parent that is dying. Most of the people listening are typically first-generation wealth folks. So a lot of our parents, they might have a million dollars now cause you know, when you’re a good saver, anybody can get to a million dollars in 70, 80, 90 years. So not talking about a huge estate being left behind, but what are you seeing as some of the pitfalls or the mistakes that people should be planning for right now? Knowing that the, this is going to happen.

If you look at the history of what I went through in my book my father-in-law was very organized. He was 99 when he passed had both of his checkbooks, your balance to the penny and 16 years before he pass you actually educated us one Sunday night when went over there

and he told us exactly where the safe was, where the key to a safe was. This work is we always trust the best directives, power of attorney he had all that stuff. So we thought when he passed and my mother-in-law told me, you take care of everything. We thought it wouldn’t be that much of a problem because he had all this paperwork, but then we found out.

It wasn’t just the paperwork that was enough. It was all the other mundane things that people just never think about. Things like the secret safe he had a secret key that he showed us. We went to get the key. Here’s a key instead of one key on a key chain there’s 20 keys on the key chain. All unabled.

So this is little things like that just makes you that’s a little harder when you follow up with somebody who passes. Just little things like that had mentioned about utility bills with the telephone company where, 10 days after my father-in-law passed, my mother-in-law’s phone broke, but online that’s the one that communication with us.

And you think it’s so simple, I just call the telephone company up. They can fix the home, but it took me three months, 29 phone calls and getting the better business bureau involved because she was not on the bill so she didn’t have the authorization, even though we have to still pay the bill, she wasn’t authorized to get it fixed.

How simple would it have been just to add on the second name and people don’t think of those little things, just little things like that and location of words, your motor vehicle registration, who’s on the registration. And how do you sell the car if your name is not on it? Yeah. So these are the things that I captured in the book.

When I started going through all this, not knowing what phone numbers to call, who to call, what to follow up on, what happened is I started making a list and I gave this list of to friends. Cause we’re all baby boomers and we all have parents that are passing or spouses that are sick actually with the age responses or sick.

And everybody, I gave this to told me you got to get this out there and that’s why I wrote the book. It was to help people to avoid going through what I went through, basically. That’s a basic premises is just getting them through. But the book itself is not just about the things you do beforehand.

It also takes you through everything to like caregiving, and a file system what to do after that, there’s even a section on transitioningif they need a carehome . What are you looking for? These are the thing that people just don’t think of, basically.

Yeah. So we’ll dive in today, the care home and the assisted living portion here in a little bit, but just to close the loop on all those, the laundry list of things that you should probably be looking for Annette’s book, we’ll get you guys access to electronic copy later.

I’ve got a laundry list of things and a Google sheet form for that we use in the family office group at simplepassivecashflow.com/legacy . But my suggestion would be, yeah. It seems really annoying for a lot of us because on the parent’s passing, like our time is very valuable, right?

We are the sandwich generation. We have to take care of the older folks’ affairs close it up but also we got the younger generation to take care of. So if the older generation could just spend granted, it takes them a long time to do this. But Hey, they have time, at that point in their life, print out the Google sheet or whatever, put it on paper for them to hand write it in.

I think everybody over a million dollar net worth should have an executive assistant scan it and then put it into your Google doc form. You don’t have mom and dad do that. But to me, that’s a best practice, but any other best practices you’ve picked up.

The book itself has my story in it and everything segues into the guide book that is a free downloadable also and people think I don’t have time to do this at all, but actually in reality, it takes maybe two weeks to fill it out because then you’re not gonna fill up the whole guidebook at once. It’s really not the pipe that you’re living through at the moment and it just has all the important information.

So you just got to tell your heirs where the information is you fill it out, basically download the guidebook, you fill it out and then you just update it once a year. I recommend using a erasable pen because things change, you’re adding properties, you’re adding more assets, you sell properties, and so these things have to be updated obviously, but it’s easily done with this guidebook that I included.

And it tells everything, basically if you have a mortgage, who’s the mortgage with, who’s your agents for insurance, it covers everything that I could possibly think of. I don’t know. It’s just a great resource, I think and I just want to help people out basically.

Checklist manifesto, because I’ve read that book fly a plane without it.

Here’s something that I’m not really familiar is like the parents get to that age where they can’t take care of themselves. Maybe walk us through that issue.

Yeah. I went to that with my father-in-law and then my mother-in-law actually, my father-in-law was going through your possibly passed away too soon, but then my mother-in-law got sick a little later and there’s nothing like, one thing that really pertinent is that a lot of older people once they fall, that’s the downhill trend.

She didn’t break a hip, but she did fall at one was supposed to be a short, we have since ended up being three months. And then all of a sudden you don’t realize that these rehab centers can tell you next week she’s gotta be out of here. And then what do you do? So then you have to go find out carehome or a nursing home, whatever.

And what I found out, and I was really fortunate because the social worker helped us. But what I found out is that you have to be very careful about your carehomes. You think that when you’re looking for a good care home or that you’re looking for a place that’s safe it’s clean, you have RN running a place on those activities.

But the book goes into a little bit more of that because I interview caregivers and I was really lucky because the caregiver I chose, she had been doing it for 16 years. Before I even introduce it to my mother-in-law, we had sent there, she had already gone there to interview her and find out what her favorite foods were because can you imagine going to a care home and not being able to eat the foods that you want?

In my mother-in-law’s case, all she went over, talk about tacos, burger king, Coca-Cola a hot cocoa, sushi. So if she had that once a week, she was happy.

I’m actually general partner in a deal where we’re building some assisted living and we’re building them a pod. This is on the mainland. Every pod is supposed to be like a different ethnic group. Older people that they like to live with their own ethnic kind of group, whether it’s right or wrong, it is what it is. It doesn’t matter, but they have different like food offerings.

Yeah. So the transition part is there’s a part in the book about going through the transition part where I’ve interviewed caregivers, whether or not you’re going to be the caregiver for your parents or you don’t have room and the caregiver has to go outside of your home. It’s just some guidelines.

Things like if you think about like my girlfriend, she brought her mother and her to her home and forgot about the prologue, I guess what she fell and broke her hip s o these are the little things that I covered in the book that are not really little things, actually big things.

If you really think about it is wow, there’s a lot of things, people think about like pen rail, safety, stuff like that, but they forget the little things now.

So, at what age should like my generation be like, Hey mom or dad? At what age do they hit that you should start to have this conversation like, all right, the next five to 10 years, what is the plan?

It’s already rough thing because it’s a sensitive topic and really when you’re in your thirties, forties, your parents are in their fifties, sixties, and they’re like, I almost 70 and I’m doing well, but if I didn’t go through this and somebody who’s brought it up Hey, tell me about what’s what you got pat, and, down the road, you don’t, it’s not a subject that people like to bring up because it’s not an easy subject to bring up because the personal thing.

I’m not even at that point where I’m sick or dying, so why we’re bringing it up now, but people just don’t realize just how important it is to be ready ahead of time, because things can happen at any time.

One of my friends just texted me, emailed me the other day that his brother who is only two years younger, he was like 68, just passed away suddenly. Nothing in order. So that propelled him to really take a look at the book and say, I got to get my things in order for my family, because you think you’re 67, I’m still young and I still got time. That’s all we associate, we have a kind of a long lifespan, so you think you have a lot of time, but the death has no post mortem. When it’s going to happen, you’re either going to be ready or you’re not basically that’s bottom line.

I haven’t thought too much about it. We haven’t had a thought yet, but you got several options and maybe add on to find missing anything, but your first option is t he parents, they own their own house so they’re already living in somewhere, they age in place, right? This is typically what most folks want to do cause you know, people don’t like change, change is bad.

And they got all their crap all there they don’t want to go through it, but it’s the cons are obviously right it may not be set up to be medically, the best place they could trip and fall and they don’t have the medical staff there available.

So you’ve got to have somebody come and help them out, or you gotta be a person to do it, which in my opinion is not the highest and best use, especially if you’re listening to this podcast right now. The next option is, you have a series of different assisted living, semi assist like maybe can you break down those different options?

I know here in Hawaii, it’s interesting because there’s assisted living facility, but you also have to think ahead because they’re nice places, wonderful places, but then you have to think about down the road once they need more care, can they stay there?

And many of the places here, they’re not an hour once they need skilled nursing care, they’re outta there. They’re fine as long as they’re ambulatory and they don’t have any major medical problems, but once they hit a certain benchmark and they need more skilled nursing care, you have to find another place. I think there’s only in Hawaii. There’s only three places that let you w hen you get in, you can stay until you die. Cause they have the care that they give you there.

But it’s like a jacked up system, right? Because it’s a life of lottery like you pay in and if you die early, then the house takes the money. If you happen to live the most. Then you eat off of the other person who’s died off their funds that they put into the system. Yeah. I mean it, no, I don’t know. The way we do business, it’s carried interest to me. I don’t seems to me that they make money when the person does not live long, which doesn’t seem to align interests. But anyway that’s just how it is, but is that pretty much the gamble that unsophisticated money people have to make.

But you know what to do because s ome of them here that I hear, I haven’t checked out myself is that, yeah, you got to put it in like a million dollars. You have to put in 5,000 just to be on the waiting list, which is like four or five years long. So you have to think way ahead.

And most people who are, hoarding cash in their house only have sub million dollar net worth and they have to either sell the house and they don’t want to do that because they want to live in place as much as possible or do a reverse HELOC first mortgage, which is in a bad idea in some cases.

But I don’t know. It’s worth the discussion because it gets complicated like this, typically the house wins, right? The sophisticated operators win off and then the uneducated consumer gets screwed at the end.

So now, with your listeners here with this network of what we have, including myself, it’s nice to have all these other properties and you can still end up going to a really nice place that will take you all the way until you pass away because you can sell one of your properties. At least here in Hawaii, you can, and you can get back a million dollars from one or two properties so that’s one thought. Yeah, you don’t have to give your whole network away if you have only one property. Yeah. That house has got to go when it’s time for you to actually get there. And that’s the only way to get there is by selling your house.

Can you stay in the house and then assign the rights to it at a future date? Does it work like that? Or do you have to totally commit?

Yeah. Once they say, okay, we have an opening, you got to take it now. I think you got to take it and then you have so much time to get the money in, to pay for the rest of your stay there. Yeah. That’s how I understand it. I’m just talking to different people who are in the process of doing it.

My brother-in-law, I have a friend that is doing that now. Just getting prepare, but yeah, this is a really interesting situation that you find yourself inside, especially here in Hawaii it’s not cheap. That a nursing care home will probably cost you anywhere from eight to $10,000 even more a month and people aren’t prepared for that.

I don’t know if you can speak to this, but for some people maybe under half a million dollars net worth, probably on or under millions is still a thought, is the strategy sometimes to exhaust all assets to be a warden of the state.

Yeah, I think two years but it might be more now where you have to exhaust everything and then there’s this gap of two years or more now. In order for you to qualify, to go under state care.

That said you don’t really want to go to the state care.

Some people have to. The private care home as I found out are not actually bad. They’re much cheaper and it’s not bad, getting like maybe four people, enough resident home, we’re really fortunate here in Hawaii because we have that culture like that. There’s a nice Filipino culture that they do this for the family and they do this for others.

So that’s what happened in my mother-in-law’s case and I was really happy with what we ended up with.

Yeah. My personal way I’ll do it, but it’s technically legal to sanctions right, we all know that but that’s just how people do things in Hawaii. And I guess what we’re talking about folks, most of the listeners here on the mainland, but here you’ll get somebody who everybody’s got side gigs here in Hawaii

cause it’s so hard to make ends meet. So you might have a nurse that works their job, and then will also part-time live in somebody else’s houses, stay in caregiver. Best of both worlds right. You get people who like love the client, gives them the best care and it’s a win-win for both.

We do have our big box assisted living and care homes here in Hawaii, but not as prevalent as the mainland, as things on the main things are typically.

Yeah, you can pour it a lot more too. That is one of the things where, nice to live in Hawaii. If you know the right people, right? It’s all your network, is your net worth, or your networkers who watches your mom, what’s your opinion between some of those smaller let’s call them boutiques versus the big boxes. What’s your personal opinion?

Say, a personal opinion, depends on what kind of setting you want your parent or you want yourself to be in. Some people like to have this nice setting where they go through the dining room to eat, and then you have all these friends there, versus staying in a home where you’re eating with two or three other people.

Yeah. So this is a personal opinion and also you have to look at what kind of activities do they offer? If you’re just going to sit and watching TV all day in this home, that doesn’t make any sense, but do they have activities to keep you busy? Whatever it is, it could be, do they have shows to watch and do they have classes or art or whatever.

Those things are things that are part of a assisted living facility. They do have these things and that’s pretty impressive when you actually go to visit them and you see what they have. Aside from they have, some of them even have a beauty salon or pickleball courts, it’s crazy, but they do offer those things.

Yeah. You like the thick of all. That’s a thing now. Here’s the big question is like, all right, mom and dad are getting to that age. Who do I talk to? Is there a date, like a website with, let’s like a directory, like where do I go to figure out number one? What are those big boxes and how can even start to find some of those smaller boutique?

The first step obviously is communicating with your spouse or your parents. You have to get the communication open first to even talk about something like this. And then once they see that, yeah, I should start thinking about this and, long-term care or whatever, maybe we should start looking.

When my mother-in-law was at that point, we had to scramble to look for different places. So we went to visit different places before we settled on one, I think being able to have the conversation and then actually going out to visit the different assisted care facilities is a big help because then you have open communication.

Yeah. I don’t mind being here or I don’t mind staying at least they have input rather than if they get sick and they’re forced to do something because that’s the only place that’s open at that time, which is sad. So planning ahead is important. Like many of these places you can reserve a spot for down the road know, and it cost you maybe a $2,000.

Where do they get the list of places first?

Well, hospital’s setting, Rehab center, a social worker will help you do that. There’s the private ones and then, the state run ones and then the more private ones, a more exclusive ones, I think it’s on their own basically. Hey, get up to yellow pages, do an internet search, there’s many out there.

It’s better for you guys to do the searches. If not, you guys would get head hunted with a bunch of sales reps. We’re bringing it to the ones that just are good with marketing.

Yeah, and you got to do it early. You got to be prepared. It’s sad to say that you have to think of this so in advance, but you really do because you just never know. Tomorrow your spouse could have a stroke and then what?

So getting off the topic of care homes, any things that you’ve seen, like a lesson learned, or maybe this has happened that should have been avoided somehow it’s a little bit proactive planning we want to mention.

Yeah and that’s what the guy looks about. Cause the guy just step by step and apply the book. It’s just little things like. Say something happens to your spouse and I ended up in the hospital. Okay. Would you know exactly what meds she’s on? How much the dosage, how often is taken what’s for, who her doctor is, or the doctor’s phone number?

The guide will guide you through all that stuff. So that there’s no question and all you do is update it. You can just grab this book and go, Hey, this is what it is, or make a copy of that part of the guidebook and take it to you with that too, at a hospital. But those are the things that are important things like you can have insurance, but okay if you pass away, who’s my agent, like I have some whole life insurance policies and when I looked up on the website, okay, who am I contacted this I four different numbers. So then I got to my agent, I said, okay, I know you’re the first contact.

What’s the second contact in case I can’t get hold of you and that’s in my guidebook, so I put it down. When I went through this whole process of my mother, my father-in-law, I can only tell you how horrendous waste of time staying in the phone, especially with Hawaii being six hours on for three to six hours

the mainland is closing and we’re waking up and I have to get hold of all these important people or departments and you have to go through a long list of okay go on the internet, find out the number, call the number, and then you’d get transferred and transfer. So those phone calls took me anywhere from half an hour to an hour, just to get to the right person.

So this, the guide book had every phone number in there, the contact person, so he can go straight to the number, if something should happen to you or your heirs can go straight to it. There’s people don’t realize how many places have to be notified. Your pension, your social security or insurance, all kinds of stuff.

Everybody’s gotta be notified and they all want your death certificate. So that’s another thing you have to think about how many death certificates are you going to order when your loved one passes. People don’t realize all these little things that they need to end up doing, and, they need time to grieve. They don’t need to be thrown into this situation of having to handle all this in the middle of a loved one passing so this is just to avoid all that basically.

We’re known for the simple, passive way of doing things. So if we pay a little bit of money, not overpaying, but we just pay for time. Like when people get married and, spouses have to change their name there’s consultants for that, we pay consultants to book our rewards travel or our credit points. The other thing. I paid people to negotiate cars for me. I never go to the dealership. They just do all that stuff for me.

I pay them a little bit, but there should be somebody who like, there’s a huge service for somebody who like does this stuff for people. So I don’t know when I find that person, I’ll put it into that webpage for you guys and there’s gotta be somebody or you guys out there have found lift up these private consultants that do this.

This is what entrepreneurs do, they find that need in the community and they fulfill it and they monetize it. But it’s a little bit of a public service here. Just off the top of my head, if you guys have wills, you guys don’t want wills. You guys want trust so you can skip probate.

To me, if your attorney gets, you probably need a new attorney because that’s not what you want. I like to know your opinion on this so like my opinion, I just see so many clients, they go through so much battles, even when all the surviving siblings can still get along to liquidate assets.

If you guys are already at that point, or your parents are urgently liquidate this stuff and get rid of the stupid things, because it’s like all this crap about like sentiment of vow was just going to piss people off at the end of the day.

You’re so right Lane because right now, I know so many people who got along with the siblings until the parents passed and all of a sudden they want to sell it and one person holds off. You don’t want to bring the one sibling to court, to settle this, so things just go on for years.

Whatever reminds me of is that boss at work would never like to be the enemy and always wanted to play both sides. At the end of the day, all their employees get pissed off at each other and the team falls apart anyway. So you parents out there, you guys need to be the bad guy and make the unenviable decision just to making a call for everybody so we can just all move on and focus. That’s my rant.

I agree and I’ve seen this in my family is broken up. Sibling getting along and then all of a sudden, not getting along, not talking to each other.

Or they get cute with, oh, somebody gets the sports car, somebody gets this, dude just liquidate everything and just a math exercise. I think part of it is if you’re older and why not give away the things now? Why wait until you die to give away everything?

Okay. Folks be careful there. Do not give properties away.

I got property, what’s wrong with that? You give it to them while they can enjoy it.

Of course, we all want to be on the up and up, 15,000 exemption, whatever. Yeah. I agree like those smaller things give it away now, but like properties, the reason why you guys don’t want to give properties away is your kids will not get the step up basis and they’re going to absorb the base that you have and they have to pay huge capital gains. So I’ve seen this happen two or three times where a family has like a $500,000 property bought in Los Angeles and now it’s worth 4 million and the parents just so kind in their heart to give it away, but dude, don’t do that. You screwed them over.

Oh yeah. After your parents died or whatever, I think that you’d probably agree with me on this is that you do an appraisal. So that’s your cost basis for tax wise and you don’t end up paying up, crazy taxes, with the appreciation.

Yeah. If the estate is over five, $10 million, you probably should consult an attorney because it may make more sense to put into irrevocable trust, a dynasty trust, but if it’s less than that keep it, that should be pretty simple.

But I will say, to be prepared you have to get a good attorney and a good accountant. I was fortunate because I had and they spoke with each other. So that was really nice, so I got things done, which would have been very difficult if I didn’t have someone I trusted.

Any other last tidbits of advice?

All I say is, get prepared, take the first step. I think the book that I have is pretty, pretty comprehensive and whether or not people think they need or not, it wasn’t hard to download it because it’s free, it’s Annettekam.com, A N N E T T E .com one word, you can download the book for free. You can download the guidebook.

If you think, nah, I think I got everything covered. I encouraged them to just go on Amazon, look at the reviews because I get emails, I look at the reviews and I know that something as simple as this book and it’s not difficult, you can probably read it in a couple of days, but as something as simple as this can impact so many people, that’s what I’ve learned.

People that have all of a sudden said, okay, yeah, I’m ready to do this. Tell me I’m doing it and it’s changing our lives because I’m communicating with my husband, so that’s important thing is communication, get prepared, do the first steps, just one step at a time. If you don’t make the first step, nothing is done.

So folks go to Amazon, pick up the book, Wait, Don’t Die by Annette Kam there’s a 123 five star reviews, which is pretty awesome. People are so negative these days either to see the two or three stars so that means it’s pretty good. Her website, she has the free electronic copy of this.

You guys can read it, but Hey, I would pick up the hard copy for mom and dad. You know how they don’t trust anything that’s electronic these days. They don’t think it’s legitimate. So like the 20 bucks you guys pay will be worth it. That’s like a one hour of some new college aged kid, maybe you guys hourly rates for way more than that.

So just pick up the book, buy two for them put it on every John that they have, so the parents can read it and maybe it sends a message that way. We’ll put this in the show notes at simplepassivecashflow.com/legacy. Thanks for jumping on Annette.

Oh, thank you for having me Lane. Appreciate it.

Coaching Call – Withdrawing My Retirement Money

https://youtu.be/n0Ysf5G9ZlM

Hey, passive investor out there. Are you tired of going to the same old real estate clubs where you’re just hanging out with broke guys who are trying to flip houses and wholesale so there’ll be other little homes for pennies on the dollars? Why don’t you come and hang out with some accredited investors out in Hawaii?

The HUI 4 is a go which is January 14th to the 17th Martin Luther King weekend, which is a long holiday. Flights are pretty cheap from what I see. And we’ve got the room book pricing at 240 dot folks tonight in Waikiki. We’ve got an entire weekend planned of events. But the biggest draw folks is the network.

Your network is your net worth as we say, and there really is no other passive investor group like ours. There’s a lot of folks out there that try and teach people how to make something out of nothing. We’re just not that group.

The topic materials that we’ll talk about: deal flow, vetting deals, knowing who to stay away from, retirements, estate planning, taxes, and just good old fashioned and getting to know people that are on the same journey as you. Most of the attendees will be accredited investors.

Everybody will be fitted by myself. No randos is my style. To learn more, go to simplepassivecashflow.com/2022retreat registration opens for everybody this week. We’ve already sold out 45 of the seats. Total capacity that I’m shooting for as the very max is about 80 people, because we want to keep things very intimate.

This is not going to be death by PowerPoint and a bunch of random speakers. It is going to be more focused on you guys, building relationships with each other, which is why we have a weekend full of serious and not so serious fun plans. Again, check out simplepassivecashflow.com/2022retreat .

And here is the show.

We are going to be tackling the age old question pulling money out of retirement funds. For lower adjusted, gross income folks under $300,000, I think it’s a pretty much no brainer to not really get started with these retirement funds. But this is the situation for a lot of folks that have been following all that financial dogma, putting your money into these pre-tax post-tax type of retirement funds. And for a lot of folks that make a lot of money, it’s just what seems to be like the best plan at the time because it’s like when you put your money into these retirement accounts, it’s like just kicking the can down the road.

Especially in the beginning when you’re younger at your career, you’re making a boatload of money all your friends are putting their money into retirement funds. To me, all you’re doing is essentially just like putting your kicking the cans down the road. Now, we’re going to talk with Emmanuel right here.

Who’s kicked the cans down the road for a decade or two, and it’s not a coming to Jesus moment. Like he’s known this, the situation has come up and I think we’re going to go through a situation. Every situation is a little bit different. We’re going to try and go through a different twist the situation a little bit here.

But there’s no one way of playing that this is a complete art form. This is where you get around other people that are like-minded to strategize this. A CPA lawyer, if they’re smart they stay the hell out of this type of conversation, because it is a gray area. It is an art form to do this and they will never give you strategy unless they are always a hundred percent correct, this is not a multiple choice test.

This is not something they teach you in high school or college, where there is only one answer. There are many answers and in this one we don’t know some of the variables, like what’s going to happen in terms of Congress tax laws. We don’t really know but what’s going to happen in Emanuel’s future.

So this is where we have to make a best educated guess based on what we know now. But Emmanuel wants you to say hello and tell us a little bit about this predicament.

Hey Lane. Thank you so much for taking my questions. My question to you is as follows. And I think a lot of people would have the same question is that, I’ve been feeding this beast self-directed IRA rolling over some old work 401ks and I’ve got about seven to $800,000 of syndications 100% with almost no cash in it. Probably, $20,000 of cash. My question to you is that, do I jailbreak it, meaning I start once the syndications sell you get about most of them.

30 to 40% of your original cash, including all of the cash on cash. So let’s say, $50,000 of cash coming out after the end of each syndication. The question is how do you reinvest that 50,000 in another syndication? Or do you cash it out? Pay the 10% penalty pay the taxes and I used to be in about 35 high-end tax bracket. Syndications have dropped me to about 20 to 25% tax bracket. That’s my question to you Lane.

In case people missed it. You’ve already invested in syndications because you follow the blueprint, invest your cash, illiquidity first and then once you’ve burned through that, you start investing home equity.

You’ve done that a little bit, but you’ve deployed all that and then you’re low on cash and what’s good thing. You don’t want to be sitting around with cash. And then what do you got in like retirement plans? That’s next on the shelf?

I’m 52 years old. My goal is to retire in the next five years. Retirement, meaning not completely hanging my coat and playing on the golf course, but not having to work for a living of f our or five days a week.

You’re lucky to be in an occupation where you’re able to slowly pull back on your hours work. When I was working, it was either 40 hours plus or nothing so you’re lucky in that type of situation. A lot of couples that make the same amounts of money, t hey can’t really do real estate professional status. They can but it doesn’t really benefit them because one person would have to draw back their hours and therefore they would make less money.

And then they drop out of that highest tax bracket, which is a good thing. For them, it’s they just have to work to a certain predetermined point and then just shut off the engines all at one time and it coast off or go down to part time. But for you, you’re the breadwinner and then you’ve got to figure out what that point is to pull back yourself because you’ve got to keep working.

AGI wise, just the paint the picture you’re in the highest tax bracket. So we’ll just put you in the 400 plus. What do you got in pre tax retirement post tax? So pre taxes, the Roth right?

Yeah. So I’ve got no Roth and I would probably say I’ve got half of them. So just to let the listeners know, I’m 100% in real estate. No, no stocks, no bonds, no mutual funds, no ETFs, none of that. I’ve got probably two thirds of money in syndications. I’m investing through an LLC so all of those syndications are basically pre-tax money.

The only post-tax I have is really an investment in a conservation easement this year. It’s gone. It’s just a promise of a K1 that’s gonna give us probably a 4.6 X passive loss for 2021. So my goal is to drop to even a lower tax bracket.

Maybe like yours, maybe a 4% or 5% and then I was thinking then if I’m at that tax bracket, even if I pay a 10% penalty, then it’s really a 15% hit on whatever distribution before the age of 59 and a half, which was, my question, do I wait until 59 and half? Or do I jailbreak, pay my taxes and penalty?

How old are you again?

I’m 52, seven and a half years of continuing to feed the beast or jailbreaking, cashing out now pay the penalty 15 to 25%, depending on next year’s tax bracket. And depending on what the Biden administration does, are they going to raise taxes? Because I’m right at that 4 to 600 AGI.

Sorry again how much post tax IRA money do you have approximately that you have?

I’ve got no post-tax money whatsoever.

Pre taxes Roth. I think it’s pre tax, but the other one, the regular IRA that you have.

The traditional one, the one I have all this syndications in I would say about 800,000.

Just not to get into the whole big picture, you’ve got a bunch of just non IRA money syndication?

Correct. And that’s invested through an LLC. Again, that’s still pre-taxed, but it’s not caught on put in jail. When those syndications sell that cash I don’t have to wait until I’m 59 and a half. I can pay myself so that I can reinvest that money.

For purposes of this video for folks. It’s the lion share. This $800,000 is like the lion’s share here. All right, here’s what I’m thinking. There’s two big variables here, right? Let’s just start at the most aggressive one and the numbers tell you to do this right.

We’ll start at the most aggressive one and if you just keep it there, what will happen? And then we’ll talk about maybe one in the middle and then you and I can go back and forth on which one kind of appeals the most.

Let’s just say you take out this 800 grand now. Your AGI will blow up for sure and this is where I would suggest making this kind of deployment plan, like where you put the years here, you figure out when you’re deploying or when you’re leaking money out of your retirement. So in this case, I would say maybe not the deployment plan, but remove from IRA.

Obviously as soon as you remove it you’re going to put it right into investment anyways so maybe it’s the same. But let’s just say scenario one next year, or this year you just drop 800 grand out. I don’t know if I would suggest that.

There’s so many different options out there, but one common one and just to make this math simple as doing conservation easements. So if you did 800,000 at a five to one multiplier, you dropped 160 in there to get the deductions to offset that. So you don’t go into the red and do it even that higher tax bracket.

That’d be one way to do it. Let’s add on if I’m forgetting anything is like you got to 10% penalty, right? You don’t have to pay 80 grand and then you’ve got your taxes, but we’re mitigating that by doing the CEs here. But the question is if you pay 80 grand to get it out, we’ll be pooped that by the other option, but we need to compare different scenarios.

So this is the option where you’re going to just take it out right away. This is the option I think most people would do where they would keep it in there until the 59 and a half. At that point, you probably have to do the conservation easement or whatever you’re going to do to mitigate the tax in it but the problem is we don’t know if that fricking thing is going to be there.

Yeah, exactly. We don’t even know, like you mentioned it in one of the videos. You don’t know if they even going to allow us to do syndications in the future.

You know that’s a moot point and then the decision is easy. Whatever cash comes back from selling the syndications and all of that 800,000 is probably going to roll into cash in the next two years. And if we have a grandfather exit then that’s a moot point, then you’ll have to catch up.

Let’s just be like really optimistic and just assume the government’s not going to do anything, call the government, but you’re entirely right. I think that point alone, if I were to play this, I would try and get it out quicker than later in that fashion. But just to play devil’s advocate, let’s just say you left it in there.

I think if you’re in your thirties, I think it’s a no brainer, right? Like you got 20, 30 years to 15 and a half, but you’re pretty dang close. You’re still young man up there, you know that you’re close to the fifty nine and a half and most people like you look crazy and I do this.

I used to do this too. You drive around for like an hour or two to save a little money, or some people don’t drive around for four hours, two hours to go save a $25 wire fee silly. But in the same line of thought, like people, they don’t want to pay the $80,000, 10% penalty. But if you paid the $80,000 penalty, which I call the ticket to the real debts, now let’s just say that this investment grows.

What do you think that you get in if you left it in here in the IRA?

Just to make the math easy. Let’s say I keep doing syndications, right? So am I including the cash on cash? And then when everything sells out, what are we thinking? 180 to a 100% return after three to five years, right? That’s probably average.

Or it’s called a 15% per year. You’re already using your retirement fund to be in private placements, but I’m just outlining this example for the average guy. Who’s probably just going to put it into some mutual funds at 8 to 10%. Let’s give him the benefit of the doubt. Whereas the syndication investor, if you unlocked it, maybe you get 15% to be conservative. The Delta is 5% so that person would be forgoing 5% of 800 grand every year.

What does that opportunity costs? Yeah, that’s 5% of 800 and not even in compound interest, right? To me, that break even point is in year two by just pulling the plug on it now. Now that’s all the way there I think that this seems to be the better way of doing it, but then here in lies, the problem is you have pretty good deal flow.

You know where to put your money, but the point 800 GS in one year. It’s a pretty big feat, right? So maybe more practice, practical game plan would be to leak it out slower like 400 grand this year, next year, and then the other path, the year up pass.

That’s probably what’s going to happen, right? Because 800,000 let’s say just to make the math easy, let’s say this. Eight syndications at a hundred thousand each. I don’t think syndication on they’re going to sell more than three, maybe four year. So that’s going to return to cash and I probably 300 at the most $400,000 in cash coming back to a year.

So the 800 per annual, i t’s not like I can hit a sell button and all of a sudden all of my positions turn into cash. I have to wait for the syndicators to sell the assets.

This will be naturally be spaced out for you anyway.

Exactly. It will be a jailbreak over probably two to three years, maybe five, it depends. Some syndicators might want to keep the asset longer.

So let’s say, your dog eats a biscuit when is it going to come out the other end? You put in 800 in different periods. The dog ate the biscuit awhile in the past. You know how many biscuits he ate, when do you think it’s going to come out here? But how much do you think in 2022?

I think in 2022, we’re going to see quite a bit, so I don’t know. Let me just make some numbers here. Does that sound about right? What you think will come out the other end since I like that.

What number did you come up with?

I think next year we’re going to see a lot of this stuff come back. Are you thinking 300, 300 next year, then 200 to 200.

Why don’t you do it life easiest for the math, just do 200 times four 800.

So the question is that, do you leak out the 200 pay the penalty plus, whatever my tax bracket is. Now then, 10% of 200 is 20,000, plus, whatever the tax bracket is. So that’s the cost of basically breaking in a jail.

Like what the tail end of this thing pushing through, and maybe coming out 2025, 2026 you’re getting really close to the point where you get the free jail card or you save the 10% anyway.

Also what listeners needs to know is that once that money is jail broken then you can use the passive losses to offset your passive gains, which tribes your AGI even further. Which right now cannot do, because it’s pre-tax money, but now I’ll be using post-tax money for it, that makes sense.

It gives you more options and levers to play now. Another kicker, this one isn’t as a huge game changer as our private placements even allowed in IRAs is the conservation easement around after the year 2022. I’ll remind people again, right? Emanuel doesn’t have mutual funds and crap like that in his IRA. He’s all private placements and syndications.

But do you think if you were doing the mutual funds and all that stuff. I think it’s a no brainer. Get jail break that stuff and give it up now. But Emmanuel created a little bit of a pickle for me. I don’t know which way to go. I’m kinda like just, let’s just split the difference here, right?

Like maybe you naturally let it flush out and then you take it out slowly as it comes out and that’s the last hurrah. Some would say you’re already to the end, the terminal point already. You might as well just stay on the bus so the whole way. You definitely don’t want it all to go at the same time, whether it’s 2028/ 2029/ 2030 because it makes your AGI go up. So we need to leak it out slowly so we don’t get into that predicament, which every other person in frickin America is going to that and you don’t want to be that guy.

No. And I agree with you Lane totally leaking it out, actually makes sense especially because my tax bracket is a little bit lower. If I was still in the, whatever 35, 42%, whatever the Biden administration wants to do, then it’s really painful because you’re taking a 40% on tax bracket and then another 10% of penalty.

So then you are, not exactly, but you are technically 50%. Where if you drop tax bracket, like I said earlier, 5%, 10%, and then you add the 10%, then you will be in a hole at about 15, 20%. But like you said, it’s going to hurt in the first two years break even and then after that, I think it’s all gravy, right?

I know your situation personally so like here’s another, like just let’s zoom out a little bit. You’ve already mentioned that you want to like work less, right? This is a good thing because as you start to leak this out y our AGI is going to be quiet. Let’s just say you go down to part-time 20 hours a week, two days, two long days a week, right? So you’re making salary cut in half, basically. Your AGI goes down to 250 and you go on this plan of leaking out 200 every year.

Starting this year. You’re not allowed to work more than three shifts because it’s a tax den and then that way you don’t have to do as much fricking conservation easements, which is already a risk too. Eyes wide open work with the right people but it is a bit of a risk there too.

I think it’s a good risk. I think that this also brings in lifestyle too. I think this might be that we’re suddenly, take your AG up to 400, 500, just get a little bit of land conservation easements to bring you down back to 300 land or two hundreds and just do this naturally as the deals cash out and you’ve jailbreaked it out. Maybe around fully by 2026. What normal people would have been, they would have been screwed come to age 60 cause now like all this money and they would have to take it all out anyway. Sure. They don’t have to pay a 10% penalty, but the 10% penalty is nothing in the whole grand scheme of things.

They’re doing exactly what the government wants. Now, they’re handcuffed. They’re taking their $800,000 at age 60 at the highest tax bracket. Sure. You’re not going to be working at that point already. I think you still want to work past your 60, right?

Oh, totally. Richie’s not to work 12 hour shifts, times five or four. I don’t want to clock in 60, 50 hours a week. I wanna clock in 20.

Most guys, they would say I’m quitting in your 2025. Therefore let’s just break all this out 2026/ 27 or just wait till 2028.

But just the lifestyle, you’re more smoothing this all out. So this to me makes more sense.

Yeah. And just doing one conservation easement while I’m jailbreaking this make sense and I wasn’t going to do more than one per year, maybe 50,000. 50 times four as a 4X, we’re doing 200,000 passive loss. That’s more than an offsetting the actual taxable income so that would keep things low and then like you suggested leak it out 200 grand a year. At year four, you’re completely done and you would’ve broken even at year 2.

Conservation easements to me are driving 65 miles an hour in Hawaii, where the speed limit’s 50 and it’s probably like for you guys driving 85 miles an hour. It’s illegal technically, but not unsafe, in my opinion.

You mentioned that it’s like a shot of lipitor just get that shot. Just shut up and do it and we’ll talk later about syndication.

That said now that we’re like getting down to the nitty-gritty here, I’d like to know your thoughts. Could you probably know this a lot better than I do? I don’t do conservation easements. I just use bonus depreciation and my AGI is already low. What are your thoughts on getting this conservation easements all as soon as possible, right before things change? Cause you can bank the losses, right?

That’s right. So I just did one a few months ago. So it’s basically going to be for 2021 tax year 51,000 at the 4.6 X, and of course I still have passive losses from the syndications that are not in jail. That’s another 1.5 and I think I would be able to get to that 10%, maybe even below that in a tax bracket. So jail breaking next year would be great.

You liked the idea of getting it all now as opposed to something like this, like spacing it out or what do you think?

I’m thinking, again, just to make calculations easy, two or three syndication selling out of a year, 200 grand, jailbreaking that taking the hit on taxes and penalty, and then just be completely out, in this model in four years, maybe five years at the most.

The new cash don’t invest that in another syndication because obviously that’s going to just keep kicking that can down the road, that was my feeling and the purpose of my call to you today is to figure it out. But realistically, it’s not like I can jailbreak 800 tomorrow, it’ll have to be leaked out.

Let me just play devil’s advocate for you, right? The best time to invest those when you began yesterday. Yeah, exactly. The money’s already invested, so for you, it’s no different what I’m talking to are the people who have the 800 grand in their silly mutual funds, you’re making subpar returns.

For you, the best time to have these passive losses and these levers was yesterday. But then again, you already have a boat load of dry powder of that passive losses to use at your disposal. So maybe it’s not that too big of a thing. But it’s hard to quantify, right? Like one would think that it’s better maybe jail break the money now and get it into deals now, instead of spacing it out into the future.

But I guess they’re already in a deals, right? Yeah they are, like you said, conservation easement is on the risk meter. It’s definitely higher than let’s say syndications. So the key is, as I leak out that cash 200 a year, put that back in and to let’s say two, three syndications.

Take the passive losses apply that to future taxes and then I don’t have to do any more conservation easements and decreases my, risk is that what you were alluding to a little bit Lane?

Yeah, it seems I get the same way, like the conservation easement, the best way that best time to do it was yesterday before they close the door. Yeah, I think for many reasons, I like this general plan. Again, if somebody was not like Emmanuel in private placements with this IRAs already, I would probably urge them to do something more aggressive like this. And I agree with you. Now that I know, if my money was in stocks and mutual funds probably I will jail break that as soon as possible.

Again, leak it out. I dunno. Like you said, if let’s say if it was all in an ETF or stocks or whatever, then you press the sell button. And I think what, within three days everything’s in cash, but, taking an $800,000 cash out would be, it would just the adjusted gross income. I think even if you sell it, even if somebody is on stocks and bonds and ETFs, maybe still leak it out, either way.

Let’s talk about this. I’d like to get your input, cause there’s a lot of your coworkers who haven’t figured this stuff out. This scenario right here is a guy with 800 grand in his traditional stocks, bonds mutual funds. He finds alternative investing. Here’s how I would do it. And I’m going to also add in this, I don’t want them to invest a hundred grand right away especially as you’re a new guy, you know what the heck you’re doing, but this is where infinite banking comes in.

This at least allows you to fund this. So what I would do maybe remove 3, 400. We’ll take it out in two years. I’m interested in how you would do this iBC. So like when you create an IBC, you got to sign up for a six year window plus or minus a year. If you set it up like a 70/30, 90/10 split, you’re going to hit your necessarily deposits into this thing in the first year and a half easily. So I think people get freaked. I would get freaked out initially when I was like I need a sign up for something I can hit because we’re good boys and girls, we need to hit our quotas. But it’s not the case. As long as you fund your first year, you’re good.

You don’t have to really worry about it, but still, I would still try to abate the plan as much as possible to size it the right way. So what I would be doing would be maybe. I’d be putting 200 a year for six years. Because the 400 grand that’s already all right here. So that’s accounting for. This, if you don’t fund it, who cares, but I’m sure the money is going to be rolling in, or this person has likely making money to put into funnel through here. But this way, at least this stuff is baking.

While it’s just sitting there, maybe I would even have them play the game or they fund us two times in a six month period, depending where your birth date is you can o verfunded in the beginning to jumpstart this. But something like this and then I would deploy 200 every year for handful of years and, you could get a conservation easement like this, or you can not do a conservation easement if you freaked out about it. How would you do it?

That’s exactly how I would do it. Of course, you’re not leaking out 400,000 tax-free so you’re losing, you’re getting hit by, let’s say 20%, so you’re still losing, what is it like 80,000 a year.

That’s why that guy’s doing this, the conservation easements in the first year.

Exactly. So you have 200, I would probably say, so do the IBC, then you borrow against it. Then you deploy your dry powder at about, I’m thinking four syndications per year at 50 each.

So you can spread, even if you stay with the same syndication you could just, spread your risk four syndications per year. And then after four years, you’ve got four times four, you’ve got 16 syndications. You’re golden then.

Yeah. Maybe at once you get a few years down the road or maybe a year plus or met them, you doubled up.

Yeah. You get to the point where you can’t track those dividends and those key ones get really annoying. So I probably would say maybe get a dozen syndications and then double up, like you said. Instead of doing 50, do a hundred because now you’re more comfortable about, the PPMS, the syndicators and so on. And then you’ve got probably the same returns, but with less hassle. Less dividends to track,less K1s to pass on to your accountant.

Yeah. And this is where people can go on download the K1 tracker. Go to simple passive cashflow.com and then search for K1 and then try to pull it up. Now, show people what the heck it is.

I had 16 K1s for this year.

It’s not pulling up, but you can see it here. It’s just a spreadsheet. I’m your CPA is going to do all this stuff for you, but I tell everybody to just tabulate yourself. So you kinda know what the numbers should be plus or minus 10, 20%. Ultimately, you’re going to have to go to your CPA and say, oh, Hey, what’d you put? I thought it was gonna be around $80,000 in losses. Can you just show me on the form where you tabulated it that. Oh, you forgot about it. Oh, shoot, man. It was like, when we used to do like the engineering stuff, like I was always a project manager.

I don’t know how to do all this, like the technical stuff. So same thing here. I don’t know how to do all the forms, so that’s a CPA’s job, but I’m smart enough to know how to get the wrong answer, to know what it should be to play stump the chump come fact checking time. Part of that’s my construction background. We don’t do it to publicly humiliate them, cause that’s their job.

Yeah. It’s crazy because one missed K1 is like the hundred thousand dollars, $150,000 of like passive losses.

Which is even at the most tax rate, that’s 20 Gs right there that’s probably what more than that, like that guy saves every year that CPA. That’s a good idea to track it that way.

And part of that is to learn right. The first few years, I’m still learning what is being included, what is not being included sometimes. What are the check boxes on the thing?

It just helps me follow that chunk of money around. And I said I thought it was going to be like $180,000 of losses. How much did you use? How much did you keep suspended? I’m just following the large sums of allocations. Yeah, you’re exactly right. It’s very common, right? These guys, they just forget one but it’s a big feed, like 20 grand.

Yeah, that’s huge. 20,000 is $20,000. That’s, whatever, half a syndication at 50.

Yeah. It’s hard to see here, but like the dark part is like last year’s one and then this one is this year’s one. Even if you get that big bonus depreciation lost your first year, the rest still trickles in every year.

Yes, it does. But that’s why for the listeners, that’s why you want to do, four or five syndications a year, because you always want to get that big one year or first year bump bonus depreciation. Now whether the IRS is going to allow us to do the bonus on their cost segregation that’s yet to be seen. But at least for 2021, it would be still. Yeah, as my understanding, and I’m not, neither of us are CPAs or lawyers just a couple of guys who learned some things from various people, and still rely on our professional providers, but bonus depreciation is phasing out 20% every year.

I think starting into your after 2020, which to me. I see your guys’ K1s. You guys will never use the passive losses really. I think still by the year 2024, it should still be great benefit. Yeah, but maybe after 2025, it’s kinda not as good.

They still won’t get rid of the actual cost segregations so we’re still fine. That regular depreciation will typically offset your cashflow in most deals or you’re going to run dry is when the deals cash out. But when the deals cash out anyway, you’re going to have to pay the depreciation recapture any of that.

Yeah. That is not the end of the world, because when that’s indication sells, you’ll be two years later, you should have another eight, maybe 10 syndications to offset those gains. So like you said, those losses are just going to be kicked down the road and your tax bracket should remain pretty low by then.

In this case, we’ll call it PALs passive activity losses cause they’re a pal. If you put in 200 grand, you might see a hundred, 150,000 of losses the first year, then you get another 150,000 and then 150,000, the 50,000. But then, so you’re walking around with maybe 500,000 of passive activity losses by the year 2025. So let’s just say one of these deals cash out and you have minus 150,000 and you still have a surplus. But then you take that investment, you can put in something else, and then you end up with even more eight passivelosses to begin with and this is where you keep the good time.

Yeah. And then in your model, you’re just looking at whatever we’re jailbreaking, which is what I call old cash, the new cash, which you should be investing. If you’re still young, then the new cash is on top of. No 200 and that will generate even more. So that’s when your net worth becomes exponential.

That’s right. But for your example, passive activity losses are passive. They cannot offset your ordinary high adjusted, gross income from your day job. You’re not doing a real estate professional status. That could be another thing you do, that’s another option.

Yeah, when I draw let’s see halftime. If I do retire in five years, spouse, but do it for you. That’s right. No, not married. Yeah. Part of the team, they got to pull their own weight now. Have you thought about that or? And that’s that’s probably another call that we could do together or maybe through the FOOM group, we can look at that see if I could qualify or if Ashley can qualify.

Cause you’re probably walking around with a half a million. Maybe you’ve been dealing with passive activity losses at this point. Right now there’s a barrier that we can’t use that to offset your ordinary income every year and that’s why you’re stuck doing these kind of up in the air conservation easements, but if you were to do the real estate professional status, various ways of doing it you got to jump through some hoops.

Now you don’t have to deal with this low risk and you can use these passive activity losses but then that’s another discussion for another day by is it worth it for you to burn this stuff up? You’ve got a lot, so you could like. My CPA, what he does and I fought him on this initially be burned by passive activity losses up.

So my AGI was like nothing so I didn’t pay taxes and I was like, Hey man, like at some point in 2023, 24, 25, all these things are going to come back at me. I’m not the pay, my depreciation recapture and all that capital gains and you’re giving up like dry powder man. Yup. But then his reasoning was like you’re right. But I think where you’re at, and I think where a lot of other people are at arguably, you’d rather have money today to invest. And you’re going to make a hell of a lot money in the first now the next few years than you are paying incremently 10 to 20% less tax taxes on that gains in the future, and that’s where we don’t know, right? This is part of the art, which how you want.

That’s been super helpful Lane. Thank you so much for your time. How would you do it if you were, let’s just say magically, boom, you are a real estate professional. You got your spouse to do it for you. Would you burn up your passive activity losses to pay no tax today? Or how would you?

Yes, I think so.

That’s the YOLO lifestyle, right?

Yeah. Money, save his money earned, if you can save now I say save now, take the hit now then you’re less at the Beck and call of the government, right? Because once you have those traditional IRAs, they still have you on the hook where that money is in the bank personally, then it’s free. The profits are still taxable but the ability to invest or the vehicles to invest that increases your ability to get there.

But that’s another wrinkle in here, right? When bonus appreciation army does fate starts the sunset. Let’s just call it after your 2025. You’re not going to be getting 150,000 of losses. You might be getting like less than half of that so it’s looking like this. If you aren’t in those professional status strategy, it makes sense to get it all done now and pull the plug as opposed to that strategy we were talking about earlier, right? I think this is what you’re ultimately going to do but if you think that they’re not going to renew that bonus appreciation on which I don’t think they are, I think it’ll come back in our lifetime at some point.

And you and I will be jumping for joy and getting in there when the opportunity comes up. I think they’re going to take a break from it for a little bit. So with that thought I would argue, Hey Emmanuel, maybe just get it out aggressively now. The only reason is to get the passive losses, grab it while you can because after a while it phases out, and this is if you’re doing with professional status strategy.

Yeah I personally can do it myself, but my wife can, as of let’s say, she probably could qualify in 2022. And if I do retire and drop my hours in five years, then by the time, things are phased out, then I could just do real estate professional status and that guy would just keep gravy going.

I would push you more, I would say go after rep status, yeah as opposed to this. I think this is your baseline. But if you’re going after real estate professional status, get it out sooner than you think, maybe in one or two years so that you can take advantage of the maximum amount of losses.

So use it to learn income now, or at least keep it because if you wait more than a few years, this thing is going to go way down. I would think about again, like many different paths to go down based on your assumption of what are the tactics. And you have to guess in a way. I’m going with the hypothesis that I don’t think bonus depreciation is going to get extended.

Therefore, get it while the getting’s good and combo with real estate professional status and therefore that’s why we back. We backwards engineer that. Yeah. Get it out now.

Yeah. That makes sense. For me, it really depends on syndicators, selling those assets and basically converting that to cash and then cashing it out.

But you’re stuck. Here’s why I like that strategy. I guess it doesn’t apply to you cause you’re already stuck in there, but for people with a clean slate, like one big thing. I don’t know. Conservation easements plays a part in it, but what if it doesn’t next year?

Or in three months they put the kaput on that type of stuff. This is the plan, but, or like a wild cat in football. We’re going to give it to the running back so you can run it and do the conservation easement but you can also throw it if the conservation easements gets cut off. By doing this, you’re able to have this A,B plan. Once you start to take out the money.

Ultimately, staying flexible and keep in touch with what the tax laws are going to be for the following year and just adjust yourself to that.

I’m more confident that they’re not going to renew the bonus depreciation a hundred percent past 2024, 2025 than I am.

I think that there’s a better chance that conservation easements are still going to be around in some form.

No, that’s what I’ve been hearing too, but again, the depreciation is going to be phased out. They won’t like completely go away but the cost segregation will stay. The constant easements, I think, they’ll stay but I think the IRS is going to be scrutinizing. So getting up, 8 to 10X return losses, I think those deals are going to go away.

The more conservative underwriting’s at about 4 to 5X. I think those are probably more viable and probably safer for everybody. So I have to agree with you on that one.

Yeah. I agree too. I think it might go down to 3 or 4X, which is still on average. It’s still plenty.

Just a couple of guys making some educated guesses. If you guys take this as legal advice or tax advice, don’t do that. You’ve been idiot to do that. Everyone’s situation is different and this is why you got to build a community around yourself.

Any last parting thoughts, hopefully that gives you some clarity.

I’m good man. Thanks for the help and bouncing ideas. I’m gonna think about it and probably do one of those options, man. Thank you so much.

For Beginners: Get To Know Your Credit Cards

https://youtu.be/uv2iOi6T4N8

Who are in this hobby are really frugal and they’re just like savers by nature. And they don’t like to go out and spend the points, but it’s not like money. You don’t save these points until retirement or something. You want to earn the points, know how you’re going to use them and then know how to get more points.

try to rent them out and

If you are a very beginner, like this is the first you’ve ever heard about this, the most popular beginner card these days is the Chase Sapphire Preferred and as ofyesterday or two days ago, March 21st, they just increase the sign up bonus to 80,000 points instead of 60,000 points that’s worth more than a thousand dollars in travel credit.

So Chase Sapphire Preferred is one of the most popular ones for beginners these days. We always recommend start with your Chase cards instead of starting with American express or another family like that, because of something called the5/24 rule, which says that if you have already opened five or more accounts with any carriers in the last five years, Chase’s just gonna reject you if you apply with the chase card. So it’s good to get the chase cards out of the way first.

And then you can move on to American express that doesn’t have this rule. You can move on to Citi cards, bank of America something else like that.

Good advice. I have a love & hate relationship with Chase . I do the tradeline hacking thing where I kind of piggyback authorized users of my cards. People want to learn more about it. Go to my simplepassivecashflow.com/trade and I had a little e-course on that. But chase cancel all my cards. So I’m not in the phenomenal rewards, credit cards. Great place to start there.

Why did they cut off all of your lines, too many authorized users?

Yeah, it was getting a little ridiculous. I was turning people a lot quicker than I do these days and I have flagged on about it. It’s good that you see a company actually has checks, so it make sure that there’s no weird activity such as mine so I think it’s good business. It sucks for me , but I applaud Chase for doing it,shows that they have their S together.

How many points did you lose when they shut you down?

I think at the time, I think I lost myself west point 200,000 points. Goes to show, right? Savers are losers, just like people with all this equity in their house or the bank.

There is a strategy called churn and burn where earn and burn where you’re earning points really quickly and then you want to use them quickly as well. You don’t just want a whole bunch of points sitting there in your account not being used because a lot of airlines will de-value their awards programs. And so if you just have hundreds of thousands of points sitting there and you’re thinking, okay, it’s like around the world trip or something is going to cost 200,000 points and then the next year they’re like, oh, now it cost 250,000 points. And your points were just sitting there and never used.

This website offers very general information concerning real estate for investment purposes. Every investor situation is unique. 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.

BIG MISTAKE in Managing Real Estate Property

https://youtu.be/3tRnTjDXY2s

What are any lessons learned to open up the spending money stuff? Because I think you’re a big inspiration and building your portfolio but I think people here they’re already doing that. They know it works but how do you take it and get from scarcity to abundance mindset.

Yeah. I think part of it is there’s two ways to go about something. You can try to figure something out on your own, and certainly you can do it. There’s a lot of free resources out there but you’re probably gonna make costly mistakes. It’s going to take you a lot longer. And this is a lesson I’ve had to learn. There is such a thing as being too cheap and too frugal. And if you’re not willing to invest in yourself or invest in a way that can help you grow and get ahead or just invest in the right things and not be cheap, then you’re really going to be holding yourself back.

A perfect example of this is when I first wanted to hire a property manager. I was trying to look for ways that I could do it frugally and not give up so much of our rent money. And we had these two people that have been working for us really hard workers. They did a lot of the cleaning and the maintenance at our properties.

They seemed really intelligent, always went above and beyond, and we decided to hire them as employees of our company and train them on how to be our property managers. Everything started out great but then six months in my husband went to the rentals to collect rent one day from the lockboxes. And he realized there was a lot missing and it wasn’t just the normal tenant paying late.

It was a significant amount. So we come to find out that the property managers stole $6,000 in rent that month and run away. We still don’t know where they are to this day. And we found out they’d been squatting in vacant rooms and units in our properties for almost a year. That was awful like such a violation of trust.

The huge moral of the story is there are certain places where you don’t be cheap. It doesn’t make sense to cut corners because being cheap can end up costing you a lot more in the long run. And we definitely should have hired a reputable, licensed, bonded insured property management company and then that wouldn’t have happened.

Yeah. I call it CFE cheap easy free. Anytime you try and do that, you get burn. And I started to adopt this maybe four years ago, maybe I think five or six years I was doing. I had a dozen rentals at lease. I don’t know what the hell I was doing, but like I was doing the dog sitting thing. I was watching other people’s dogs because I like dog.

But this one dog attacked me and I was like, what the hell am I trying to do? Trying to make a few hundred bucks every other week. And I have this scar on my leg that helped me understand that yeah,don’t be cheap, easy and free. And also, I think you’re seeing like the syndication world, like a lot of this building networks or other peer passive accredited investors. Accredited investors can smell cheapos from a mile away. They know for sure.

For sure. I think a big difference between non-accredited and accredited investors is that there’s different goals. I think when you’re first starting out, you don’t have any money, but you do have more time and you’re willing to hustle and work harder and maybe self-manage and do things that you wouldn’t be willing to do later.

But then when you get further into your realistic, investment journey it flips the other way. Where suddenly you have a lot more money and you don’t have a lot of time. That’s why we’re actually selling some of our rental properties right now and transitioning all of that money into syndications because I’m sick of dealing with him.

I’m sick of the liability. I’m sick of having tenants. I would rather make a little bit less money. You still make great money in syndications. I’d rather make a little bit less money and literally not have to do a thing. What we found is that investing in syndications aligns so much better with our passive income goals.

Another thing that accredited investors realize is relationships are the currency of the wealthy, but the right relationships with also abundance mindset at people and if you want to call it accredited investors too. Non accredited investors, not saying they’re bad people, but they just don’t have money and they run on a different operating system.

Yeah, and I used to be one and I totally see now how my mindset has changed over time. And it’s really fascinating. I just had different values and goals then, and definitely was more in this scarcity mindset. Now I’ve totally flipped in the opposite direction, but surroundingyourself with people you’re absolutely right.

Is the most important thing. And that’s another thing I’ve had to be okay with investing in is especially with growing my business with my books and my courses. I definitely hit a wall because I’ve been trying to figure it out all on my own. I was like, what do I do now? And I ended up investing into a mastermind that really helped me strategize and be clear on where to go.

In my opinion, I want to be the dumbest person in the room. I want to surround myself with people who are already five or 10 steps ahead of me so that I can mimic everything that they’re doing.

December 2021 Monthly Market Update

https://youtu.be/JHE1Mpe408Y

It’s December, 2021. Welcome everybody. This is the monthly market update. Here we go!

Easter eggs for you guys starting out. If you guys are checking this on the podcasts go on over to simplepassivecashflow .com/ 2022 retreat. The retreat is on, in-person not virtual like we’ve done last year, but in-person in Waikiki. Check us out the full itinerary, January 14th to the 17th. Again, simplepassivecashflow.com/2022 retreat.

If you guys are tired of kicking tires of the bunch of broke guys at the local real estate club or the free online forms out there, you got to check out our group. Everyone’s vetted before they come. This is not going to be a bunch of randos meeting up in Hawaii. Only people who are coming are people I know and it’s a good group of folks we have about 75 people signed up nearing the head count, soon. You checking this out on the YouTube channel. We’ve got a lot of different slides and graphics going to be going through a bunch of articles and I’m an engineer so I like charts.

A bit of my background. I’m no longer an engineer, no longer doing the project engineer stuff bought my first rental in 2009 and over 6,000 units now. We just closed the deal on Phoenix yesterday. I think 6 or 7,000 units at this point. If you guys haven’t heard of me before, check out simplepassivecashflow.com, which is my blog and check out the simple passive cashflow podcast on iTunes, Google play.

And if you guys are listening to this live, feel free to drop a comment below or question we’ll try and get to it as we go along. All right so first teaching point here, inflation is upon us if you haven’t noticed. All these things going up beef 24%, gasoline 51% hotels and motels all the stuff for the rich folks, right?

Because if rich folks aren’t really impacted by the old recession call it what you want. To me it’s a little sad. But again, it’s the rich get rich and the poor getting poorer. A lot of these energy commodity is going up for 49%, used cars and trucks going up 26%. I just sold a car. Sold my car a couple of weeks ago, I bought it for 53,000.

I sold it for 60. Used cars going up and it’s hard to get a hold of new cars. Here’s another graphic here showing some of the increases in poultry on the slide is what was up 44% since two years ago, fruits and vegetables up 18%. Inflation is coming to get you. Maybe it’s only going to get your mom and dad who are just sitting on their home equity, paid off houses.

That’s the people that it’s coming after, or the poor people, who don’t buy assets and the reason why you want to buy assets is because it goes up with the pace of inflation. In my opinion, you don’t want to buy gold because it doesn’t really do much does, has no utility and it doesn’t cashflow make income.

It said buy real estate, which is the best of both worlds, goes up with the pace of inflation and it produces cashflow. All right so let’s get into it. Some of the reports here, Blackstone the big company that we’d like to follow because they’re the people who are smart with money they just bought Bloomberg entertainment for about $3 billion.

Now, if you haven’t been noticing, Netflix kind of started with the streaming service, but apple TV, disney plus all these streaming services where you control the channel and you control your audience essentially control your platform, right? Facebook did. Now, Amazon is doing with ads.

If you control where people go, you can somehow monetize it today. Gone are the days of NBC, Fox, CBS, and channels and you want to control the media channel or in terms of streaming services and, Blackstone sees playing that said Moonbug entertainment. This is one of those news where it just like sucks for the small guy, because folks like us, we’re not able to play at these types of institutional assets.

We like to play in apartments, which is somewhat attainable to the average million dollar $5 million Joab. But it’s not like y’all can buy an entertainment company, but just for food for thought here. CVS health plans to close 900 stores and focus more on their digital strategy.

I think we’ve talked about this on earlier investor reports, which you can get all the past investor reports go to simplepassivecashflow.com/investorletter. We’ve been talking about how Amazon was trying to get into the pharmacy business. CVS has a stranglehold on there but as business think of Kodak or MP3s, if you don’t change your business, you’ll get steamrolled.

And CVS is closing brick and mortar stores to focus more on their digital strategy. ULI forecasts the transaction volumes posed to bounce back to pre pandemic levels. US GDP strength 3.4% in 2020 as expected the first economic contraction since 2009. Recovery from the pandemic is expected to occur dramatically faster than what transpired following the great recession of 2008 according to Washington DC group. You guys are probably thinking captain obvious, but they’re expecting a bounce-back and growth of 5.7% expected at 2021 with the continued growth of 4% in 2022.

The outlook is optimistic for most sectors of commercial real estate. The hospitality industry is still showing signs of struggle. Hotel revenue per available room, which we call is RevPAR saw one of the starkest numbers in ULI’s presentation following a 47.4% decline. RE business online reports the American Liberty hospitality opens a 300 room dual branded hotel in Houston.

So the bite we just mentioned with some hospitality, struggling big companies are opening up these hotels 64 Alameda road, that’s supposed to be a combined Hilton garden Inn and a hotel, two suites by Hilton, 300 room.

Now there’s a reliability of small multifamily tenant base fuels recovery from Arbor, which is a big commercial lender so we have a lot of good neutral information. Sometimes you got the news from multifamily housing news, which is more of a pro industry type of news, where the lenders, they show things how it is for the most part.

But they’re showing here how the year-over-year change been leveled off since 2014, which is consistent. However, the origination VAT value, a year of your change has been going up and up steadily. Analysis of work from home trends finds that small multi family properties may be less affected than larger properties because fewer tenants can work remotely.

Smaller multi-family cap rates filled at 5.2% in the third quarter effect the unchanged for the last quarter. Asset prices rose 2.9% from a year earlier at 7.7% over the pre endemic levels. One complaint I hear a lot the cap rates are compressing. Yeah man, that’s been happening since 2008 and it’ll continue to do that.

But the whole point as an investor is you’re doing value add, and you’re making money off of the spread between the cap rates and interest rates and as cap rates go up, so as interest rates go up. Sophisticated investors don’t really care because again, they make money off of the Delta and they value add to transcend what’s happening in the market.

Yardi Matrix reports that gateway markets rebound and when we’re talking about gateway markets, we’re talking about those California markets got a beat down at the recession. Demand for rentals of the United States has been extraordinary this year. With over half a million apartments being absorbed, which already topples 2018 single year high of 370,000.

So over a hundred thousand units than the last previous high, which makes sense. 2020 was a year of a lot of traction projects, halted projects that were just completed, might have been paused to lease up and everybody just stayed in place, but now you’re seeing a lot of this train slack come back. Moving on to the more residential side article for Redfin saying home sale prices up 13% from 2020 they’re outlaying 2019, 2020, 2021 on this nice little graph.

It takes up the seasonality of the thing. The thing that you could see, especially at 2021 is after February, March, April, when the vaccine started to roll up, you really started to see that built up demand come through. Median home price increased 13%. Like I said, this is up 30% from the same period in 2019, two years ago, asking prices on newly listed homes are up 11% and on average, 4.9% of homes for each week had a price drop.

Now, this is coming from a real page, going back to the commercial apartments, luxury apartment rents premiums going up once again. So this answers the question what’s better with class A, B or C. If you look at the graph, class C rents have been very slow linear growth or class B and A rents

you’ve seen a nice little tick up the last half of the year. The difference in effective rents between the two products segments went up just over $300 in 2010 to a whopping $500 in 2020. So that gap is growing as it should. It’s you know, this is if you’re always going to have higher rents, classA, B to C that makes sense that gap is going to be growing.

The difference in rent then slipped by just under $400 by the end of 2020, but steady pricing power in the most upscale properties in 2021 as push a difference back to $449. The class C average rent price is 1189 now $358 under the class B. Again, this goes back to the unfortunate reality, which is the class A renters and class A folks are typically peachy in the aftermath of the recession, or it’s a class C people that have the most difficulty paying rents.

I would probably extrapolate at class A people can work from home, class C people are more of the service sector. Maybe they had shut down, some close business sectors.

Rent still rising but growth slowed significantly from apartment lists. The slightly significant slowdown rent growth has continued to exceed its pre pandemic trend. To make more clear. The chart below thoughts are national median rent estimate against a projection of pre pandemic. The national rent rose to 1312 this month, which is $107 greater where we projected it would be if the rent growth over the last year and half had been in line with the growth rates, we saw 2018, 2019.

I think we can safely say that I wouldn’t say it’s slowing down, whereas it’s going backwards. Look at some of these rents going up, I go back a couple slides. The rents are just going up too high for a short period of time. It’s cooling off now a little bit, but it’s definitely not declining.

Here’s a chart of 10 of the top rent growth market. Tampa, Florida, Gilbert, Arizona, Glendale, Arizona, Mesa, Arizona, Chandler, Arizona, and all those four Phoenix right there. Boise, Idaho, Henderson, Nevada, which is Las Vegas, north Las Vegas, Nevada, and St. Petersburg, Florida. All those 10 have gone up 32% to 36% since March of 2020.

Absolutely crazy. Normally, when you’re doing your normal conservative projections, you’re assuming that the rents are going to go up to 4 or 5% at extreme levels in the past since March of 2020 you’re talking 30%. That’s pretty crazy. The markets remain extremely tight.

We’re now seeing the first signals that pressure is beginning to ease.

It’s also important to know that 35 of the nation’s hundred largest cities have seen rents jumps by more than 20% since the start of the pandemic. Even if the rent is finally cooling, this year’s rent boom has already added significant housing affordability for American renters. But hey, they’re just pumping in a whole bunch of fake money in anyway with all these stimulus plans.

What is the buy back America or infrastructure 1, 2, 3, 4, 5? Rent data tech cities are back in the country’s major tech centers. Rents are making up for lost time with record growth. Again, the same thing we talked about, the last one. This is from realtor.com. This one’s looking at more from a national taking into account all markets. They’re putting a retro thing from 11 to 13% year over year.

And what they say is the rise of remote work filled this migration continued declining for rental housing i n urban areas, particularly in heavy tech markets like San Francisco and New York. However, the rising vaccination rates of many major company signaling a returned the office, the demand for urban housing has been recovering quickly in just the past two months.

Rent growth has surge in tech centers around the country. I’ve had a lot of investor calls from you guys lately and one of the sentiments I’ve been hearing is ” dammit, they’re making me come back to work screw that. I quit!” Just kidding, you guys get paid too much because they’re going to just suck it up and it worked for a few more years more, but yeah, it’s tough to take back that freedom when you’ve been given it that long.

Just reading, going down this list. We won’t go down that list, not that important. Inclusion and incentives zone in 6 New England States. We’ve talked about in the past, how you’ve got zoning restriction and tax restrictions in California. You’re starting to see some of this in the new England states where they’re breaking down the not in my backyard type of restrictions, where there’s so much pressure in all these markets for cheaper housing, more affordable housing for regular people, not just rich people.

Where they’re bringing people to live in those types of areas where more the old school mentality, the last 20 or so years, 10 years was they try and segregate people and rich people. Obviously that creates a bunch of projects for the bad areas. Maybe if you’re a rich out there, you probably liked it.

Cause you don’t want poor people nearby. If you’re trying to run a city or a nation in m y opinion it’s not the best thing. You need a little bit of mix. So you don’t have all these Banana Republics and these ghettos all around the place. But whatever, I don’t care. I spend my time not on politics but investments that will make me money and folks like yourselves. But this is just one article showing that how this stuff is popping up so something to be aware of.

Pricewater Cooper. They came up with a report where they mentioned climate change is hitting the property sector where they surveyed a bunch of folks, the top cities: Nashville, Raleigh, Phoenix, Austin, Tampa, Charlotte, Dallas, or Atlanta, Seattle, Boston are kind of places people are moving to they say.

The impact from the pandemic was less than the real estate industry expected at this point last year. Now that the industry should use its good fortune towards both preparations and continued uncertainty and making strides towards ESG improvements.

Yeah. Sometimes you’ve got to scratch your head on that, those high-end accountant’s reports. Especially if you’re investing in workforce housing, you sometimes you got to take that stuff with a grain of salt. That said, here from glowbest.com, why invest in lower middle class housing to hint is that the hedge in case of a recession, but also to capitalize a current momentum. Now, in most recessions everybody’s impacted the rich people are impacted. They lose their jobs. They moved down to the Bs. They move down to Bs and Cs different thing that happened in this pandemic where the A’s are pretty much unimpacted, the Bs and Cs are more impacted. I still believe that in most cases and economic recession, I think it’s prudent to not stay with the luxury type of stuff.

For the majority or your portfolio so they’re saying here, despite the uncertainty within the market class C properties are being taught as the best position property for an economic slowdown by experts in the market during a panel discussion at the national globe street multi-family conference here in Los Angeles. Panels discuss the gap between rent rates for A and class C properties and viewed some of the current trends within class C properties.

ATTOM reports that seller profits increase across US in third quarter as national median home prices reached another record.

Worldpropertyjournal.com reports 30% of us markets to experience double digit rent increases in 2022. Again, a lot of what we said here, just a little bit different graphs. If you guys check this up on YouTube channel. That way, you know I’m not making this stuff up. It’s multiple people saying the same thing.

12 month absorption of apartments. The top are Dallas Fortworth, Houston, New York, Los Angeles, Washington, DC, Atlanta, Chicago, Austin, Seattle, Phoenix.

Dallas business journal reports that rents in Dallas-Fort rocket 15.5% in a year, even with the increases, Dallas is still more affordable than most comparable cities across the country. And like Dallas, many US cities shall start increases. Phoenix was up 27% year over year in September, New York rolls 18.3% and Nashville jumped 17.5%.

And just to speak about a real world example, comparing Phoenix and Dallas. Phoenix, you’re buying maybe class B assets for about 200,000 to mid $250,000 call it that. For the same price, you’re buying more A-class assets in Dallas. Maybe it’s just too many Californians moving to Phoenix.

They needed more to Texas Dallas, but that’s where the pricing is. If you want to buy a class C property in Hawaii, you’ll probably pay 300 to $350,000. And that is Investing 101. Does that make sense for that income stream?

REBUSINESS online reports, demographic economic trends, like they sustain build for rent sectors for growth. A lot of people it’s going to be coming more of our renters nation and it doesn’t make sense to do build for rent. I’m not a huge fan of it. I like more mature neighborhoods. I don’t like all these like new houses all in one area because when a recession comes, that’s the first place where the water retreats from.

I think we saw it a lot in the great recession. If you can remember that old movie, The Big Short, the big tracks of homes in Florida, right? Like the build to rent type of stuff makes sense in theory, just like hotels do. But in recessions, I don’t feel like, I’m not super comfortable doing that type of stuff.

National multifamily housing council reports, how will President Biden build back better framework impact the multifamily industry? They’re saying the plan is to offset by tax increases on corporations, wealthy American. Including changes to like kind exchanges increases the ordinary income taxes at general 20% capital gains tax rate that carry interests for sponsors, 20% pass-through deduction and taxation unrealized capital gains at decks.

A lot of these things didn’t come through permission. They didn’t touch them. Everybody got up in arms about changing the self-directed IRAs but a lot of it didn’t really change. We got to see how it goes through the Senate at this point but maybe it’s on a chopping block later.

At this point in time nothing super huge in my opinion. We keep it simple. You don’t care about stuff. You invest good stuff that cashflows grows your money and gives you like passive activity losses to lower your passive income, that’s what you got to do. That’s the low hanging fruit right there.

And then you don’t have a high income. The only people having high incomes are people still working their active jobs and that’s what you got to try and get away from.

Also expanding on how the $1.2 trillion infrastructure bill impacts multi-family. The infrastructure bill will repair and upgrade the nation’s roads, bridges, mass transit, high speed rail broadband, power grid, water pipes, electrical vehicle charging stations on for critical infrastructure. We have a breakdown on the YouTube channel here of all of this. But to me, it’s just basically a way to just dump a whole bunch of money into the system, paying ourselves basically.

Commercial property executive identifies three trending demands in commercial real estate, which is the evolving hybrid workplace, post pandemic office. We don’t know exactly how that’s going to be, but definitely we’re not going to be going back to the office a hundred percent as Adam and Eve had eaten the apple and have proven that they can eat the apple and work from home, potentially.

I am still a doubter, I think, especially in the coastal areas where you have a lot of tech markets and more independent white collar workers, I definitely do think that they can handle themselves and manage themselves appropriately where your sub hundred pay workers. I still think they got to get to the office and be managed and supervised.

Another trend is supporting employee wellbeing, being thoughtful design real estate can incentivize employees to return to the office. So what you’re seeing the new builds or the office stuff is a bunch of other services that attracts people to them. The incentive to get on the bus, get on the train, get in your car, to come to work for the socialization, other facilities and the demand for warehouse continues to increase.

Commercial real estate applauds $1.5 trillion infrastructure plan. The big thing here is infrastructure and housing are intrinsically linked and this is our president investment in our nation and will help lift communities industries throughout the nations. The president of the NAA and CEO.

Four ways Phoenix benefits from the infrastructure bill, climate protections, the infrastructure investment jobs act will accelerate Phoenix efforts to complete transportation projects along with many of the city infrastructure priorities. These projects will call to create high paying jobs and connect with more families with economic opportunities. Transit south central extension and downtown hub will connect with the current light rail system in downtown Phoenix and operates south. Roads Phoenix adopted the ‘co-payments system which will apply reflective coating to the neighborhood streets, the lower the extreme surface temperatures around the city.

Other initiatives include cool corridors, which is the plant and Jade trees into the neighborhood and along with city streets. And jobs, the nation’s growth is set to increase 0.4% compared to Arizona, which is showcasing it analyzed growth of 1.6%, about three times, at least three times more.

And the other thing I’m personally following, not on this list is a TSMC and Intel building a whole bunch of apps to make all the chips that are in shortage. We don’t want Taiwan to make all the chips because those Chinese guys are always flying airplanes around their space or supposedly near their space. Not violating any international laws of course, I think what 80% or so of all the smart ships, the really good ones, not the dumb ones that go in your kids toys, but the smart ones that go on your iPhone pros are made at Taiwan and the ideas that want to repatronize some of that back to American. Places it’s going is Phoenix.

Inflation’s influence on multi-family home buyers this is from multi-housing news. Higher spending rising energy prices reduced rising housing prices, low inventory across multiple inputs.

Higher wages need to be kept and filling employee shortage, shipping delays, and other factors are issues we face today. Despite all that effective breath growth growing 11.2% nationally in 2021 quarter 3 so cheers to all the landlords. Boo, to all the tenants up there, they don’t like that. You don’t want to pay more rent, they want it for free.

ATTOM they report the U S foreclosure activity continues to increase nationwide. Now this kind of makes sense. After all of the rent moratoriums going away or the foreclosure moratoriums going away nationwide one in every 6,600 units. States with the highest foreclosure rates are Illinois, then Florida, New Jersey, Nevada and Ohio among the 220 MSA out there.

Those with the highest foreclosure rates in October, 2021 were St. Louis, Missouri, Trenton, New Jersey, Miami, Florida, Chicago, Illinois, and Cleveland Ohio.

How the pandemic has impacted the movie theater property values. The cinemas emerge far behind the pack of other businesses in a race to resume normal operations. Cinemas were already difficult to value because they’re unique. A uni Tasker, right? This big building, the only people who want to buy that building was Toys R Us and they went out of business. Just joking there, but it might be true.

And the lack of comparable transaction data across the country makes it hard so the ticket sales give appraisers and taxes are the big hurdle in valuing these movie theaters. So if you guys think of a good idea, what to do with these big movie theaters, other than that Toys R Us, let us know.

Join the Facebook group, join the community, create a discussion, or just buy rental properties and afar the other day. Because a lot of these other ideas that I bring up like industrial storage, buying movie theaters what’s the other one big office complex it’s out of the reach of the average Joe under $5 million. A lot of this is institutional type of money that has access to it.

Dallas business journal reports at San Francisco and Los Angeles among regions, losing workers to Dallas-Fort Worth. San Francisco bay area took the number four spot last week. Last month, the region wasn’t even in a top 10 prior to the pandemic.

The numbers were another sign of a growing number of companies and workers moving their home bases from places such as California and New York, to Texas. Lower costs and taxes for businesses, as well as those that employ are driving the shifts. One thing I would mention, like the people will talk about like taxes.

Just because a state has no income tax , like Texas doesn’t mean that’s a good place to invest guys. Like that’s say I don’t know. That’s just not a good way to invest because yeah, sure. That’s one of the many factors of picking a good market to invest in, but really what you should be looking at the property to look at these one-off types of things that may choose to investor from time.

ALN apartment data construction times have continued to climb, but for the first time in more than five years, average lease up duration has decrease. So what that means is that the average time that it takes to lease up one of these things is deficient because more demand for apartments for renters.

Rent cafe says that millennial home buyers feel the rise of lifestyle renting in 2021. Yeah. sucks to be a millenial. Sucks to always be the new guy, right? The top 10 largest city for millennials over $50,000 versus Indianapolis, Las Vegas, Phoenix, Oklahoma city, Memphis Nashville, Charlotte Columbus, San Antonio, Texas,

Louisiana, Kentucky doesn’t necessarily mean that they’re good investment areas just saying that these are where the percent change in applicants among millennials making a 50 grand. That brings us to the Easter egg, which is if you guys want to get access to my free book r eleasing this month, we had to delay it a month.

We got busy because we press go on the retreat and I got busy with that so we delayed it a month, but go to simplepassivecashflow.com/book. The free audio book is on there folks and if you guys like it, you guys like the book, please shoot me an email and I’m looking for people to help me out and write some reviews for me so that we can get some more eyes, ears on the good work of simple passive cashflow the journey to that on Amazon when it finally releases.

Shoot me an email at Lane@simplepassivecashflow.com if you’d like to help out. If you guys are tired of hanging out with a bunch of broke guys and you guys want to talk to other pure passive accredited investors, go to simplepassivecashflow.com/journey.

Check out the family office Ohana mastermind, really no other group out there like it. We gotta change it, there’s about 80 members in here now and then every year the price goes up.

Now I’m going to be going into some of my personal stuff. Again, if you guys have any questions, type it into the chat, but I was defined six ways to for my own personal development.

So in terms of growth, we hired the chief operating officer. He starts today is December 1st and more staff is being hired in the coming months. Some of you guys have applied some of y’all, I know you just don’t like your jobs, but we got you on the list. Should an opening come up and this is going to help, allow me to travel and join other groups, get around other circles and find and source the best practices, how do you build wealth pass the five, $10 million stage.

As far as contribution back to the world, that’s what simple passive cashflow is for me, right? If you guys haven’t seen the mision, check it out. It’s simplepassivecashflow.com/mission, but it’s all about bringing like-minded people together. The first conference I went to was way back when in 2016, And I was like, whoa, this is crazy. People are buying.

At the time I was buying little rental properties, turnkeys. I was like, wow people buying properties, site unseen for cashflow 2000 miles away like me, this is crazy. Then I realized there’s a lot of other people doing this. There are a lot of people like yourselves out there, especially accredited investors during this buying, going into syndications with a bunch of seemingly random strangers.

But if you want to make the world a little bit smaller, associate the names of face, get to know me a little bit more on a personal level, and more importantly, you meet other passive accredited investors. Come on to retreats or simplepassivecashflow.com/2022retreat . We’ve got about 75 people signed up at this point. We do have a strict cap due to strict COVID measures here on the islands.

As far as significance, keep closing more deals , more value add stabilize apartments. I haven’t updated this matrix that I did for myself. There’s gotta be three or four slots missing here, but this is how I visualize my investing.

I try and scatter it from class A to class C buildings, maybe a little bit less class C these days. And that’s a lot of this cluster here is how a lot of the first deals where we start. But you also spread it around from the yield place to heavier repositions at develop. And some of you guys, I don’t want to put the cat’s out of the bag, but we’ve got a lot of sales coming in early quarter 1 2022. Time to cash that money.

As far as uncertainty though, h ow do I counteract that? I’m doing a second infinite banking policy and I’m wondering where do I put my money when I’ve maxed up my infinite banking policy? I get a lot of liquidity anxiety when I money’s sitting around, especially large sums of money sitting around not doing anything.

So I’m pondering doing some crypto staking, maybe a hundred, $200,000 to start. But this is where I rely on my family office Ohana mastermind. Some of you guys will email me asking what I’m doing. You guys got to join the family office group. That’s where you’re going to find the good stuff. If you got a hundred thousand dollars and instead of making 0%, you make 10%.

You do the math, that’s a thousand bucks right there that you missed out almost every month, times 12 that’s 12 grand, maybe 15 grand, just only on a hundred thousand dollars. It is silly to just do it on your own and how do I get some certainty? Close a deal recently, and we are looking to sell 3 Texas apartments and another development for more than preforma so that’s cool.

And love and connection, I’m super excited. Super, super excited that y’all are coming to Hawaii, January 14th until 17. Cause it’s not free check it out at simplepassivecashflow.com/2022retreat. But if it was free, you probably wouldn’t want to go in any way because it probably be just another bro fest at the local Reia with a bunch of people who think real estate is the way to get rich.

Just for fun some doodads that I’ve been buying. I’ve been using this whole foods a lot to not waste my time grocery shopping. It also helps me control my spending, buying things I shouldn’t be buying. You guys have seen these bone conductivity headsets. It allows you to hear what’s going on around you so you don’t get hit by the proverbial bus.

As we all joke about a lot and then you get paid out through your infinite banking policy hopefully if you have that all set up. If you don’t know what we’re talking about, check out the infinite banking e-course simplepassivecashflow.com/banking.

You gotta put in your email to sign up for that free course. Of course, I have to have my mic because I’m on the phone all the time. Hopefully, this will prevent me from getting hit by the bus when I do not go golf shoe shopping or outside of the house, I’m a little worried that my wife will now know that she has access to me at all times, even when I’m on the phone.

And I cannot use the fact that I have my apple AirPods pros in my ear, filtering out outside noise. For you golfers out there. I’m not a big golfer, it’s a waste of time. But when I do, I hit Titleist Pro V1 the best ball that you can get your money on, get your hands on. I feel like $4.50 cents per ball’s a little expensive

so my little hack here is I go on Amazon. I used to do this on eBay, but E-bay is a little strange these days. I like Amazon better so I can buy used golf balls but there’s a grading system, I guess there’s single A, AA, AAA, all the five A. Go look it up guys every golf ball provider of these used balls has a different grading system, but you can pick up these semi nicked up balls for about half the price of it.

And when you’re like myself and you just lose them half the time, it takes a little sting out of the whole thing. But when you hit a good one, there’s nothing more pure than hitting a Titleist Pro V1 and getting those extra 20 yards bonus roll off the thing.

That’s it. Thanks for listening folks and we will see you on the next report.

Why You Should NOT Do 1031 Exchange! Instead, Do This!

https://youtu.be/0rl6Vn9GlZc

Hello simple passive cashflow listeners. Welcome to another show. Now we’re going to be answering a very common question , should I be doing a 10 31, exchanging my property for another property? Quick announcements: we are going to be doing the 2022 mastermind retreat, open to past investors, family office members, and select you.

We members out there now to learn more, go to simple passive cashflow.com/ 2022 retreat.

This is going to be January 14th to the 17th. We have a pretty packed weekend. A lot of happy hours on a time for you guys to get together, meet at the bar over a meal, over a long day of masterminding, especially on Sunday, which is the workshop day, and fun stuff like hiking.

We’ll definitely be doing a luau, but really getting the group of mostly accredited investors around the table and interacting and building those organic relationships, which is critical to being a passive investor. Finding where to invest, where to stay away from, tax, legal, infinite banking, and a lot of those more softer conversations about legacy planning, building your family office.

A lot of those are the conversations that’s going to be coming out in Hawaii for those who come. Again, check out the website, simplepassivecashflow.com/ 2022 retreat to you there.

Now what I’ve been up to this past month I’ve been freaked out with Biden changing the regulations on the estate taxes. Now I’ve been looking at ways to get money out of my own personal estate by doing an irrevocable trust. Now, there are a couple ones that I’m looking at either it’s called the HYCET, you have your cake and eat it too, or this BDIT.

No, I’m not an attorney and I’m still learning this stuff, but this is the thing with, high net worth investors is first to go talk it out with other people. Of course you have your estate attorney helping you along the way, but a lot of these ideas, you need to work out with other people in your similar net worth range.

We’ll say a accredited investors, of course, discuss what is going to be the best fit for you. A lot of this stuff can be very expensive, but sometimes it’s just finding them loopholes of the system. It’s what the wealthy do.

Cool idea that I heard lately was making BDIT where you’re making an irrevocable trust . Putting all your investments in it, creating that trust into a suit, a real estate professional status. For some of you super smart people out there who understand that once you’re a real estate professional status.

You’re going to have your passive losses offset your ordinary income by doing a few things on your taxes. But what’s really going on is when your real estate professionals status, all your passive income, passive losses is ordinary income, ordinary losses. So follow me on this. If you have your BDIT trust a real estate professional status.

Therefore shouldn’t all the income and the passive losses coming from it be ordinary income, ordinary losses. Get your head scratching there. Coming over to Hawaii, we’ll have that great conversation with amongst other financial fanatic friends out in Hawaii. And I will talk about brainstorming ideas like this so we can take it to our tax and estate attorneys, professionals to put and implement because to me the best practices come from folks just like ourselves.

And then, be educated and take these ideas and then put them into reality with the right professionals. But again thanks to guys for a listing and hope to see you in Honolulu, Hawaii, January 14th to the 17th and enjoy the show.

All right, so you guys are jumping into a live coaching call here, and this question comes up quite frequently. As most people out there are running around thinking about these 1031 exchanges, which I don’t know why anybody does this stuff because you’re at this 45 day rule where you have to identify properties.

And I don’t know who the heck can find a good deal in 45 days unless they blindly trust real estate agent and they just go into lukewarm crappy deals. But anyway we love 1031 buyers and sellers because they’re desperate and we know we sell it for a stupid price to them because they’re desperate.

But anyway, we have our friend Steve Vollmer here from state of Washington, I’m going to be talking about their situation and we’re going to walk through the pros and cons and how it works for taxes. As I prefaced all this stuff here, I’m not a CPA, not a lawyer, but this is what I did with all my properties.

In 2017, when I sold, seven or eight of my turnkey rentals, I had a capital gain and I had a depreciation recapture, and we’re going to go to these numbers in this example of $200,000. But I had been going into syndication deals that did cost segregation. I had maybe a few hundred thousand or maybe even more of passive losses.

So I just brought over $200,000 to suspended, passive losses, offset the gain. And now I was able to diversify instead of being like trapped into one or two deals, which breaks the Cardinal sin of mine never go into a deal with more than five or 10% of your net worth depending on what your net worth is. Hey Steve are you there?

I’m here.

I really appreciate it and we’ll get into the whole analogy with the hot air balloon. In case you still want to go down this route to at the end, but why don’t you give us some round numbers on what the situation you’re in so you’re going to sell this property. What did you buy it for? And what do you think you can sell it?

Sure. So I bought a couple properties and since I’m Steve Ballmer let’s say that I bought them for about a $1.7 billion sold them for $2.5 billion. Is this really 1.7 million? Or can we go with that 1.7?

Okay. So would you say 2.5 minus 1.7 is the capital gain.

Sorry. What was it again? 2.5 minus 1.7 so we’re talking about a capital gain of 800 grand.

Yup. Now, there were some sales costs, of course, but there’s also about a 200,000 of depreciation that I’ve claimed.

So we have to add on top of that point, do you know? And so that puts us up to $1 million.

It might be a little bit less than this because all the commissions and stuff like that can be deducted too. But let’s just go with a million dollars because this is a great round example. Let’s not try and create any brain damage for ourselves during this recording.

So we have a million dollars of depreciation capture and capital gain that we have to offset, which on the one hand is good job there, Steve. But how are we going to offset this so that it’s not a huge capital gain? A million dollars is a lot of money to offset. Most people are looking at maybe a hundred to a few hundred thousand dollars of capital gain and that’s what I was then in.

But, are these like kind of the true numbers, are you really looking at a capital gain depreciation recapture about million dollars or is it really less?

I hadn’t run them by a CPA.

You don’t need a CPA. This is ain’t rocket science here.

It actually is 200,000 a depreciation and it was 790 as capital gains.

Okay, so let’s just call it a million.

I’ve got 170 in deferred passive losses.

Okay. So that’s on whether 280 or 285 form.

Exactly, I look at it earlier.

For you, those you guys listing what that form is Steve has accumulated passive losses from previous years that he wasn’t able to use. So they stay on his books as suspended, passive losses and they’re very deep within this was an 280 or 285 form. Is that the right one?

Yeah that sounds right.

So most likely your CPA will not give this to you because they want to know when you’re trying to shop around. But you’re entitled to this as a client and you want to know what this is as an investor. If you dump out that bucket, you’re looking at what you had what 200 grand and of 80, under 80 to 85 as suspended, passive losses.

I said 170 but we can be round.

Yeah, let’s go around and let’s just call it 200, you got to fill the gap of 800 grand, not impossible. And it is, this is just one property, right? There’s another?

Yeah, they were two properties that sold as one part of one deal separately.

If you wanted to offset this via cost segregation, by going into syndication deals, of course, this is the big disclaimer: Every deal is different, varying amounts of cost segregation or deals, different ages of properties, different geographic locations, many factors. But for the most part, like in multifamily value add class B, class C, I see whatever investors put in, assuming that there’s prudent, leverage, 80,70% of the value maybe you see 50% to 80% of what you put in as first year losses. I’ve seen it come back over a hundred percent too, there’s this run with 60% just to be conservative.

Oh, wow. Yeah, that was one of the big numbers that I was wondering if I bought into a syndication that did cost segregation with X dollars. What percent of X might I get back in losses?

In theory, you could go invest like 1.2, 1.4 million and knocked this 800 grand out. I wouldn’t suggest that. That’s a little ballsy to just go and you didn’t call me, I guess so. And you’re a high roller there. I was actually behind you in Starbucks, one of these days in Bellevue back at the thing before you bought the Clippers.

But anyway, so yeah, like you could go onto you could deploy that much money and do that. Not recommended, I have people in my mastermind group, they’ve done it because they armed self with the right investor group and go off of referrals and deploy very quickly. Personally, what I see a lot of people do and what I would do is just go in to a few deals at the minimum. Test the relationship out. Unfortunately, that means maybe if you do a hundred grand a few times, that’s 300 grand, that’s not going to get you anywhere $800,000 of passive losses, maybe by investing 300, you get 200,000. Does that kind of make sense? In theory you can, but let’s be real here, right? You don’t take me as I just jumped into the abyss type of guy.

No, I’ve never seen on any of your other coaching calls. You give that advice to anyone.

Have you sold the subject property yet?

You’re going to love this one. All the proceeds are sitting in QI accounts as part of a 1031 exchange.

And these 10 31 guys drive me insane because like a lot of these things, like all these self-directed retirement accounts, these other solo 401k accounts that people tout as all these snake oil type of products. They’re good in the right situation. They’re all tools. Same thing with 10 31 exchanges in the right situation. They make sense. You have until the end of the year to accumulate $800,000 of passive losses.

Yeah. That’s the challenge.

This is just for the viewers, right? I don’t want you to get down on yourself, but if you would’ve done it, like the way I would have preferred, it was like, all right, let’s wait until like January, February of 2022 and that way we have all of the remaining of this year and next year to build up 800 grand of passive activity losses.

How do you turn that kind of a sale? So it turns out that it was actually in about January that I went to my real estate agent and said, “Hey, I’d love to talk about what these would be valued with” and by the time that conversation resolved and as a buyer was found and three or four months dragged out. We got to June before closing actually.

You haven’t sold this thing have you yet?

Yeah, I have started the process in January, but it took six months to sell. So you were trying to time it a sale to land in January. How would that even be possible? You seems like selling it.

You sell it that you sell at the end of the year, right? Or you delay it or you you lead with, let’s just start off getting passive activity losses as much as we can first. And then we go and sell the asset, ideally in the beginning of the following year.

Okay. So you put it on the market in November, October, so that closing happens in January?

Yeah or you just wait until middle of quarter one. If you wanted to do this the smart way, you don’t do this until you’re at the end of your quest for $800,000 of passive activity losses.

So you know what it might sell for, and then you build up the passive losses ahead of time?

Yeah. It’s not a guessing game, right? You don’t need CPA to do that. You and I just did that right here. Maybe it’ll come plus or minus 15 grand. But go get close to $800,000 then let’s get our calculator. It’s all water in the rich now, right now. Let’s not worry about it. But in case this happens again, you don’t have another one of these types of properties. Do you just got everything locked down?

No, I had all my real estate portfolio in those two properties.

This is the analogy why I don’t like these 1031 exchanges in it. I don’t like the strategy of putting all your eggs into one basket, like how you have. The obvious thing is you want to diversify, which is why my rule for 5 to 10% at most of your net worth and to any one asset, because things happen, locations changed.

I don’t think would find a nuclear bomb and Tacoma or whatever Pascoe who knows right. Things happen. This is why I like to diversify over a few major markets and stay away from a complete tertiary market portfolio. But nevertheless, it’s like the analogy I use is like a hot air balloon.

So maybe 5, 10 years ago, you got it. You bought the asset, you bought the beginning assets that started this. And the hot air balloon goes up and up. Maybe when you had a hundred, few hundred thousand dollars of capital gain, the hot air balloon was like eight feet up in the ground. You could probably jump out and you’d be okay. The real Steve bomber probably, twist an ankle.

You’re pretty energetic guy.

That’s what I did. Like when I sold my seven rentals, I had a $200,000 capital gain depreciates recapture. So maybe I was 10 feet up in the air but by having all these suspended, passive losses built up in my 280, 285 form, it was I took a bunch of pillows in the ground. I have 300,000- $400,000 of passive activity losses pillows. Then when I jumped out 10 feet out of there, the hot air balloon, I just land on a bunch of pillows in a pool.

In this case, you’re rolled that hot air balloon up. I know you want to call like 70 feet up. Nah, I don’t know 40 feet up there. It’s going to hurt but you’re probably going to live and this is why I like this analogy. Here’s what I really suggest real time, look I’m not a big fan of like easily investing but you got to get going right.

You’re going to get some damn pillows under you, because if you fall out of this hot air balloon at 40 feet up in the air, there’s a good chance that you’re going to die. We know for a fact, you’re going to pay a boatload of both taxes on $800,000 capital gain, most likely 50 cents on every dollar that you don’t put to protect yourself when you fall out.

For the next six months, you need to be running out there and at least trying to go into deals with get a lot of cost segregations that get bonus depreciation to save you 50 cents on every dollar we know for a fact you’re gonna pay for that. Obviously, you don’t go into bad deals with bad people, in a way it makes sense. This is why a lot of my guys will use like conservation easements is another exotic thing that you might want to consider in this situation? Cause you’re screwed. There’s a lot of scrutiny over conservation easements. When you Google it, you’ll get red-flagged all over the place.

A lot of my guys do this. A lot of my doctors, they do this kind of every year, they make $700,000 and they each bring their AGI down to 400 to save. They spend money but to get that tax break and it’s like they spend a dollar to make $4 in a way. And that’s what you might have to do here.

You may have to take an extra chance to save money on taxes, which you know is going to evaporate.

Would it make sense to focus or to go look for development deals or something that would have a higher loss up front? I don’t know if development has a loss of higher loss up front.

Good question. So you cannot take depreciation until your asset makes a dollar. If you’re talking ground up development, you can’t take the depreciation from that until that thing gets built and making money. So that’s typically that might put you in 2020 to 2023.

Or higher value ad plays? If there’s currently a break even but there’s 60% occupancy and they’ve got to do a major reno to convert a motel into apartments.

At the end of the day, essentially, what you’re discussing about is stretching your dollar and getting more leverage on it by going into these crappier more distressed deals, which in theory it works. So to answer your question, yes. Another option might be the opportunity zone funds type of deals and they’re both good ways of mitigating the tax. But personally, I wouldn’t do either hairy deals.

I don’t want to go into hairy deals, especially if you’re an accredited investor already. Like you want capital preservation, you want to be going into good deals and solid locations and opportunity funds. The reason why the government gives you such a perk there is because it’s in a really crappy area so you have to ask yourself. I had another guy in my group

he still a franchise and he hit them both load of capital gains. We’re talking like millions. So he’s desperate. Instead of you looking forward to feet down this, guy’s looking at 200 feet down on the hot air balloon. He’s screwed. He’s going to die, jumps up. So he was looking for all kinds of things.

And I advise some, don’t do the opportunity zone fund thing, because you’re not an operator. You hadn’t really owned properties out of state for goodness sake. I think you, Mr. Steve Ballmer, based on your experience, you said I think you have at the aptitude to do that but this particular guy had no real estate operation experience.

So that’s why I was so strongly against it. Now a year and a half later, the person’s like, this is the pain in the butt there’s a reason to why. So the lesson learned is don’t let the tax tail wag the dog. What do you think of that? Those are options.

It sounds like I got to sit down and do some math and decide whether, like maybe you break a leg jumping, but weight heals and you can run from there versus, if there’s some amount of risk to take upfront. I guess another question would be since the proceeds are currently in 10 31 accounts, if I can find 10 31 deals, if I could like for a third or half that money, then I’m only talking about half the amount of capital gains that I have to pay taxes on.

And going back to the analogy, this is you’re 40 feet up in the air. Let’s just throw 20 feet of pillows in there 10 feet of pillows. It’s better than nothing.

So I could be a little bit of a distressed buyer and a little bit of a smart investor. And then next time I roll things over try to be smart about how I do that.

Or you just get out of that stuff all freaking together, right?

I guess the question is how much pillows to throw under versus how much pain to take now?

If you want take a blended approach, maybe you try and go into a few hundred thousand dollars of syndicated deals and you get like a couple of hundred grand of passive activity losses there.

Maybe you do a 1031 but do 1031 to a smaller property and maybe you do some opportunities zone and some distress stuff. If it were me, I would do the land conservation easements, take the gamble there, the tax gamble on the audit, and also try and do as much syndications as possible.

That makes sense. Plus I love running around outside so land conservation easement sounds like something that would support that community.

There you go. It can feed the ducks. Of course I will say this is recorded in 2021. There’s a lot of scrutiny around this. There are some simple types of arrangements where they’re supposedly less audits, but, we go into this very in detail with my mastermind people along with the right people to work with, which is the most important thing.

If somebody is just listening to this on the YouTube channel and not paying anything. That’s where the danger comes in when you’re just blindly start to jump into these types of things. Maybe here’s what I would do a little bit about your situations Steve.

What I would do is try and go into a few deals, before the end of the year, try and put, maybe you get a couple of hundred thousand dollars of passive losses. And then if you find a good property and the next is your 45 day period over?

No, I’ve got about 20 more days.

You’re screwed man.

Let’s just say you find something or maybe you find something and you’re like, dang it, like this thing sucks, but whatever. I’d rather go onto a crappy investment that paid the government, which some people believe, believe maybe you shelter a little bit there and maybe you throw in 50 grand into a land conservation easement to get that 5X multiplier to get $250,000 of losses and you break it up a third.

Or worst comes to worst maybe you don’t get that property in the middle and you don’t do a 10 31 exchange and you just suck it up 50% on $300,000, $150,000 tax bill. It’s not the end of the world right. That’s how I would do it.

I think I’m seeing a lot of the mom and pop mistakes, come out here.

I will just discuss, people say, oh, can you 10 31 into a syndication? The lawyers will always say, yeah, you can, but they’ll never give you the details of the details as you can go into a deal with what’s called a tenant in common, but it’s nobody does it because it’s super complicated and it’s a real pain in the butt.

No syndicator in their right mind, who is not desperate for money will let you end for less than like a million or 2 million bucks.

Okay, that’s interesting because, my real estate agent that I’ve worked with is setting up a fund and he’s accepting tenant in common to partner alongside the fund. Just the fact that he’s accepting tenant in common, like a little bit of a red flag.

How many deals have he done? What’s this track record with his experience?

He’s been in real estate for about the last 10 years.

That doesn’t mean anything, right?

I know of two or three other large properties that he’s acquired and one that he’s closed. As far as I know, this is one of his larger renovation deals and he’s also offering this on a less of a renovation, more of just buying below market deal in a fly over state.

It’s a wild plan with a really good dumb money investor such as yourself. Let’s just say it’s a good deal, right? I’m actually looking at a 10 unit and Ballard right now. That actually is a good deal.

You found a unit in Ballard that’s a good deal?

Yeah. 10 unit, because Seattle is actually a little distressed at the moment right now.

Let’s just say it is a good deal and you make a bunch of money, but you’re going to be in the same dang predicament when you sell and this is where it’s stop doing the crazy chain. Get off of the stuff. You say you want to move to the more passive thing anyway. And like all these BRRRRs and flips, it’s all ordinary income.

You want to get away from that stuff. That’s like going out partying at 2:00 AM in the morning, every Friday and Saturday you want to get away from that stuff. It’s tiring. It’s not tax efficient.

That’s exactly why I’m looking to get into syndications. I was tired. Being liable for loans and insurance, especially when the property manager sometimes didn’t pay taxes or the post-service slowed down.

And so the property manager that was still using mail and not direct deposit was late to the bank. So yeah, I would love to get into some of these indications exactly. Because I’m looking to be passive. Yeah. Yeah. But I guess to round out this example, Steve is there any, did that kind of capture everything for you?

Just play at all scenarios or anything you’ll want talk through on this tender day? Yeah, I think I’ve been looking for someone to give me a straight answer about how difficult this is going to be to deal with the tax situation and. Cause the, the real estate agent that I was talking to is oh, just 10 31 it and the 10 31, guy’s just send me the property replacement properties.

Here’s some ideas. Yeah. And this is why I fight so hard for you guys. Cause it’s like sophisticated investors don’t do that type of stuff. The people that do the 10 31 exchanges to me are like the really dumb money that like trust fund kids who like inherited. All this money, which I know in your case is not the case.

You actually did a good value to the property and it went up in the right place. But like normally it’s like big families that they pass down a 40 unit or, big assets to their kids paid all paid off. And so I guess the closing question is because my real estate experience has just been through this one agent pretty much he’s.

The deals he’s found in the past have doubled twice over the past 10 years. So I’ve made plenty of money with him. And I’ve got one friend who’s also in real estate. I just don’t have much of a network. I found you because I was two, three weeks ago. And all of a sudden I had money in a forty-five days to do something with it.

I started going through podcasts and you were in interviewed on one of those podcasts. How do you build that out? So do you find deal for, what do I do you make a podcast and started in 2016 where you helped people to get turnkeys? And people think you’re a legit person and they attract them and you have two or three calls with guys like yourself every day, but that’s not practical advice because every makes so podcasts these days.

And it becomes very disingenuous. I think. But I, the only advice I have is don’t go to the local REIA and I know where you’re at, Steve, all these ones are just for broke. Guys are flipping a house, flippers and sharks and wholesalers. It’s not your crowd. It’s not the million-dollar accredited investor.

It’s not the guy for the guys making over 80 grand a year. I was in this case back in 2012 and I felt super out of place. And that’s why I went to out of state turnkeys back in 2012. Yeah. 2012. And it’s, I think this is a point where you got to play the pay to play and this is where, like in 2015, I’ve had 11 rentals and I didn’t start to get into the big stuff.

And so I started to get into these higher level groups and often you have to pay or travel to go and find these other pure passive accredited investors. But sorry for the, I’m not really giving you any advice here, right? Maybe the only other thing is some people say we’ll go to places where rich people hang.

Like the country club or the cigar room, but unfortunately, a lot of those people are just like high paid, like corporate guys or trust fund kids, second generation, third generation wealth, who just invest a little bit differently than folks like you and me who are the people that made their first million dollar in their family.

I guess closing question then is going through your website. There’s lots of, it seems like there’s lots of. Opportunities and educational offerings and meetup things. What’s the difference between a mastermind and a mastermind family office. And it seems like you mentioned potentially doing something, in Portland.

What are those the same? Are they different? I’m a little confused about what all of the networking opportunities related to simple passive cashflow. Yeah, good question. And it’s changed over the years and then probably haven’t updated the website at all. But first, when I first started to do this thing back in two weeks, it doesn’t like 16.

Like it was cool just to meet investors, but then simple passive castle became a thing. We have over 600 investors that have actually thrown in at least 50, a hundred grand into deals thus far. And it has been a huge target on our backs that we are a legit investor group with people would love to infiltrate the group and we’ve had people in the past.

So all the little fun, free things that happy hours, I’ve cut that out. And at this point it’s only people that have invested in past deals. Or in the family office mastermind group. So you got to put up some money to invest, to be in the invited in a way, because I protect the identity and privacy of my group and the members for their own purpose.

And I don’t want a bunch of douchebags coming in and just reading email addresses and phone numbers. I’ll be honest. Cool. I am sure everyone appreciates that. We’ll have to follow up on how to get it. Yeah. But that’s why we do these calls, to get to know each other, build relationships and just see what I can do to help out and see where you’re at and see if you’re a good fit.

Like I kinda ch I see my role as being just that good Stewart that the gatekeepers. Bringing in the right people filtering the right people, especially for mindset, right? There’s some people that are super cheap out there that are just a little weird and they just don’t give back to others and they don’t, they’re not just good community members.

Maybe they’ll get there at some point, but, Yeah. That’s what I wanted, because we joke and laugh about this in all our calls. Our mastermind group calls is who the heck do we talk about this stuff? Our parents still do it. Our coworkers think, we can’t tell our coworkers that we’re gonna pull 50 grand from her 401k, friends and family.

Like I don’t talk to this stuff about my friends either. I’ve always joked that I’ve said Thanksgiving is one of the loneliest times because everybody thinks that like a real estate agent or they just don’t understand. Nobody understands me, but you guys understand me and, figuring out these little hacks for financial freedom, but tax the legal, infinite banking, that’s where it gets all pulled together.

Yeah. It’s like a club for financial fanatics, but yeah. I think that addresses most of the curiosity I had at the start of the call I appreciate the honest feedback. Yeah. And I think thanks for breaking down the 10 31 exchange thing, because I think this is a good call where we finally talk all options. This is a very common question that comes up.

Cool. I appreciate your time.