Tag: #LaneHack

Never Invest in Real Estate Based on an Internet List

https://youtu.be/NPHXCfRR7lE

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

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

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

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

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

What to Tell Your Lender When Applying for Mortgage Loan

https://youtu.be/RvQ3t9TrZro

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

And try to rent them out

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

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

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

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

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

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

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

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

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

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

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

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

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

Syndication eCourse Freebie

https://youtu.be/3hOywQBjUB0

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Structure a Syndication With Development?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

https://youtu.be/bUY12oylSp4

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

 Yeah.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Okay, got it.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Thankfully not. 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Is that a trigger for an audit though? 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

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.

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.

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.

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.

Real Estate Lending Update + Non Conventional Home Purchases With Benson Pang

https://youtu.be/wlKJQ7M0N2Q

Hey, simple passive cashflow listeners. Today, we are going to be doing an update on what’s happening in the lending environment. Going to talk through the key factors in getting the loan debt to income credit score. Other tips for you guys picking up your primary residence or your remote rental property.

Joining me today Benson Pang.

Hey lane. How are you?

Good. It’s always a funny thing in YouTube world or podcasts world when everybody says something lame oh, I’m walking my friend Benson and that’s a code word for yeah, I just met and I barely had a two minute conversation, but here I actually know Benson.

He’s actually a pretty good friend of mine. Him and his wife run their mortgage lending company nestmade.com. So Benson and Mimi, they lend out of California, but they can lend out of multiple states, but they’re also in the family office Ohana group. You guys can learn more about that at simplepassivecastle.com/journey.

It goes in with our whole, invest and work with people, you trust. I thought it’d be Benson on who does this for a living to break down, what’s been happening with the lending environment and some of these key items to be on the lookout for, if you guys are looking out for your next real estate loan.

Generally, before we dive into some of the numbers how is lending today? I know during the pandemic things were pretty crazy for you guys with refinance, right?

Yeah. Back in March to July there was so much uncertainty last year and a lot of lenders pulled out of lending completely.

We see debt to income ratio, like being pushed lower and lower. There’s margin compression. There’s all kinds of things going on in the lending world. I think the biggest thing is the non QM stuff, like people who have less than perfect tax return, they went like they got nowhere to go because they’re all gone.

Until most recently they all trickle back. We have the last couple of months, we signed up with a lot of new lenders that are doing a lot of the non QM stuff that jumble loans and non QM are back basically.

So we’re going to be going through, the kind of a chart of what are the things that you guys need to do to qualify for the best rate, but to outline this for you guys, listening in podcast form we’re going to be talking about two things here, right?

Owner occupied properties, your primary residence, dream houses for a lot of you guys and the non-owner occupied properties. The biggest one that people look at first is to qualify as debt to income ratio. Maybe explain what that is and what is the percentage.

There’s a lot of talks about what the debt to income ratio needs to be. Before we get into that, debt to income ratio is debt divided by your total gross income before tax, right? So your debt could be your PITI, principal, interest tax and insurance, HOA mortgage insurance all added together plus any of your credit card payments, not balances payments, your student loan payments, and also your car payment all bunch up together.

Let’s say it’s $5,000 and you and your spouse make a $10,000. That’s 50% debt to income ratio. Okay. Right now, if you have a great credit score, like 740 or higher you should be able to qualify at 50% debt to income ratio. In some cases where the credit score is lowered or your LTV or loan to value ratio is higher.

Meaning you put 5- 10% down that might get pushed down to 45% or even 43% to get a DU approve eligible.

Now a lot of people listening are engineers. You are an ex engineer yourself too. Do you see any like mistakes that the weekend spreadsheet junkie that makes their own debt to income calculations, and then you guys run it.

Are there any kind of common mistakes you see the folks at home banking and they’re calculating this stuff and then you get all upset when you’re there like I’m 51%, right? How’d you get 47%?

Especially the ones who already own one or two investment property. A lot of people think that they can just use a gross rental income. A lot of times it’s really if you own a property for a year or two, we actually go off of your schedule E and there’s a very specific calculation. It’s really not that hard. It’s your net income, you add back your taxes, insurance and mortgage interest.

And that’s your total gross income. And then you subtract your actual expenses. So super easy, but people, it’s actually, even on the Fannie Mae website guidelines, they’ll teach you how to do it. If not, you guys can reach out to me, I’ll let you know how to make that work.

And the second thing is a lot of people think that a student loans, just because it’s zero payment, a lot of people are on deferment or forbearance on their student loan. We still have to assume a number, cause eventually you’re gonna have to start paying again. So Fannie Mae and Freddie Mac, they each have their own calculation.

One is half a percent and one is 1%. Personally, I like to use the 1% to be more conservative.

You need to be able to show what bank statements or W2 statements to show this.

So for W2 employees, we asked for one year W2 just to show the history. So you need two years of working history. Now with that same company and student, you working as a student counts too. So if you graduated from college and now you got a $200,000 engineering job, we can use that $200,000 right away.

And what about like you’re a business owner, you don’t have those clean.

So if you’re a business owner, typically we asked for two years of self-employed history and we look at two years of tax returns. There are times we only ask for one year of tax return when you have the business for five years or more.

And then just, say your debt to income is all right. Again, what are the kind of the credit score ranges that you’re looking for?

So when you’re looking at credit score, a credit score is going to do two things for you. One is if you’re eligible for that program or not. So some programs have a minimum of 660 credit score, 620 credit score it depends on what you’re trying to qualify for. Number two is it’s credit score affects the risk of your loan and the higher the risk the higher the interest rate or pricing for that loan. In fact, a lot of people, a lot of us get conventional loans, so if you were to Google, Fannie Mae, LLP loan level price adjustments. That’s actually where you see all the price adjustments. So if you have a 740 credit score, will typically give you the best interest rate 720, 700 and then 680 so it goes up and down and 20 points increment.

Maybe if you can help demystify this, I still am confused when you get your rate sheet, right? Like you might have a lower rate, that’s competitive with other folks, but you also have to look at the fees. That’s how lenders make money on loans and that’s how they keep in business, right?

Yeah, absolutely. Man, who doesn’t want a 1.8, 7, 5, 15 year fakes, no point no fee, right? It’s all over the billboard. But you’re driving 60 miles down the freeway and you’re looking at the billboard and actually the fine prints are so small. There’s no way you can see the fine print.

But basically you gotta look at your situation is, and then you needed to have someone to help you break it down where the points of the loan, the lender fees, and also do they have other junk fees or appraisal fees?

You gotta be put it side by side, a lot of borrowers that when they come up to me, they’re like, oh, what’s your APR? Like personally, I’m not getting a credit card. So I don’t really look at the APR, I actually looked down into all the nitty gritty numbers and put it side by side and match it up.

But it makes it hard, you go on LinkedIn, you typed in the word lender and there’s like instilling in mom-and-pop daisy chain lenders, that may originate one or two loans a year, one for themself, one for their bop, their fees are all over the place.

I think that’s in every field, right? Not just in lending and real estate, there are real estate agents good, bad, and engineers, there are good engineers, bad engineering. So I think in lending you really want to be aligned with let’s think about it for a second here.

You’re going into contract you, your lender and your real estate agent, and then you three against a listing agent, the title officer, the escrow officer and the seller they’re all picked by the seller. You need to be aligned with the best of the best. You need a really good real estate agent to represent you. You need a really good lender to be protecting you as well.

It’s the intangibles, right? Can you close or are they going to say what they’re going to do? Or are they just going to bait and switch on.

Exactly. There are lenders out there. I’m not gonna say who, but you just gotta be careful who you’re aligned yourself with and you want to be aligned with someone who has a track record and have your best interests in heart.

Is it similar a lot of people do the infinite banking? In the beginning, you don’t know what kind of like rates and fees you’re going to get like you gotta unfortunately get that, have that nurse come to your house and you get your physical first. Is it the same thing with the lending? They’ve got to run your profile for a couple of weeks and then you get to that point where you see the whole picture?

The good part about lending is there’s no blood draw or lab work to run your credit to run your interest rate, we really only need four or five items, right?

Your credit score, what you think your credit score is and obviously if you’re saying you’re 740, we run it at 720, that would be different in interest rate or pricing. So your credit score, how much down payment and then are you buying a single family or condo?

Is it owner occupied or not and your zip code? Like those few things will basically give me enough information to run a quote for you. And that quote should be able to stick with the whole transaction throughout.

Let’s get to some of the problems you’re seeing through transactions. Maybe we’ll break it down on owner occupied and non-owner occupied too. But like the first one is when I was buying a lot of these rental properties, of course I was using my own money. My parents never give me anything and nobody gives me gifts. But some people when they’re buying their primary residence, shoot, what kind of 20 something year old kid can afford $200,000- $300,000 down payment.

All these guys are getting it from their parents. What’s the best practice is there to work that in?

A lot of people when they come to me obviously there’s some gifts involved. But for gift letters for the most part, conventional loans are pretty easy. They make it really easy for us lenders and also the borrowers. I typically suggest there are two ways of sending money into escrow. You can have the donor write a check and deposit in the borrower’s account, but you would need a lot of documentation showing how the money is deposited.

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

So this way, there is a receipt and there’s no way that money is going wrong anywhere. But for FHA loans do know that, we will ask for the sourcing of the donors funds. So meaning I will ask for two months of bank statements from the donor.

I’m trying to sharp shoot this. If I get a random check from my friend or my parents two and a half months prior to when I throw this money into escrow does that nobody checks. Or there’s nothing I need to write that this was my money?

In the real estate industry, and I hear a lot of real estate agents would say oh, you need to have two months of bank statements, clean bank statements or seasoned funds.

Really that’s a myth. But it really depends on what the deposit is for. We call them large deposits. So large deposits definition is basically any deposit. That’s more than 50% of the total gross income use on the loan application. So let’s say if you and your wife combined $10,000 gross rent knowing gross income on the loan application.

So anything higher than $5,000 deposit into your account. We just have to know what it is and why is it deposited? We just want to make sure it’s not, you’re not loaning a $5,000 to go buy this house and now you have to pay it back and we need to add it to your debt to income.

Or it being a gift or cannot be a gift?

And we just need a documented, source and explain.

I just got it from my block 5 man.

Or crypto deposited from Coinbase. We can use crypto as down payment.

I’ve got this other, like one guy it wasn’t he wasn’t annoying, but the bank was being really annoying. They’re like, oh, we see her in these private placements a nd to make sure like LPs don’t co-sign on the debt, they’re passive investors. But they’re asking all these questions. Any thoughts on that other than finding a new lender?

He can explain all you want but if met with an underwriter that won’t let go sometimes it’s just easier for you to change lenders, to someone who can get that scenario ran by their underwriter. And if you get the, okay, then resubmit that application over there. That’s what we do as brokers.

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

For you guys, this is how the industry is made, right? Like you have lending brokers and you have the people on the, kind of the sales side interacting with you, but there’s a person in the back office.

Maybe it’s an open-ended different company. Whereas the underwriter, now this is where you need to have a good broker or front office person to take your story to them. Now, if you have just some bureaucratic idiot on both ends, you’re going to run into all these types of problems, but you need to have somebody to sell your story to the right way. See, even if you do have a bureaucratic idiot as the underwriter, you can pass all these barriers.

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

And Benson’s a license loan officer so he has no comment on this, but I’ve had clients where they’ve changed jobs the last second and they let it slip on their on email and their lending broker kind of kibosh is the loan. I had to tell my guys as well, if anything like that happens, use the phone.

Yeah. We’ve had loans where we call so a lot of people there are a couple of times where they submitted their pay stubs. We got into escrow, got loan approval and they quit.

They told me that I can quit my job and my wife can quit her job so we can get real soon professional status or some other random tax scheme.

Yeah, I know. We actually do a final, verbal verification of employment three days before you close, meaning you sign documents. A lot of lenders, they wait until that last minute, because if you think about it, Hawaii or California, we close escrow in 21 days, 30 days. It’s very typical, but when we’re in the Midwest, other states they might take 60 or 90 days to close an escrow. Heck their appraisal process is probably two months right now.

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

It’s okay. If you don’t work there, you just don’t want to make sure they want to make sure that there’s no loan fraud, right?

I think they’re just in the back office, they’re drinking Johnny Walker, red label and trying to screw people over at the very last sec.

We’re talking a lot about like primary owner occupied houses. How does this change for you if you’re buying a rental property?

Non-owner occupied. First of all, if you’re talking about conventional owner, non owner occupied no gift is allowed. No gift is allowed.

At least in the last two months, right?

Yeah. We look at your bank statements and and there shouldn’t be any gifts in the past two months. And if you’re looking to do some DSCR loans and for those who don’t know, DSCR, it’s a debt service coverage ratio.

It’s a terminology that’s often used in the part mint and loan world. So they have it for one to four unit for people who don’t want to show their tax returns. And we base it off of the income of the property that you’re buying to qualify you. And a lot of those programs will allow a gift letter or will allow gifts.

So what is the debt service coverage ratio, the magic number they’re looking for?

One, the magic number is one you can do less than one. You just need to take a higher rate.

That’s actually not hard to hit. Like for the larger apartments. It’s usually like 1.25.

Yeah. So commercial loans Fannie Mae, Freddie Mac the multifamily home loans, they asked for 1.25, and the 1- 4 is private investors so they really only ask for one, or even less than one, depending on the LTV.

And, you’re talking about shopping it to different lenders. Does the Fannie Mae Freddie Mac FHA loans always the best?

Oh always. I would say, I like to look at FHA as a band-aid loan. So if you have some sort of history credit history in the past bankruptcy or your low credit score, FHA is going to be more forgiven because they are backed by the government.

And there’s a huge insurance costs upfront and every month. And then and then people typically who are in an FHA loan, they’re only in there for maybe five years or so. And they’re going to refinance out of it into a conventional loan. That’s what we typically see. And conventional loan has slightly higher interest rates just because I think she has a huge mortgage insurance to hedge against the risk.

Conventional still have a very low interest rate, not as low as FHA. And then after conventional, then it’s going to be your DSCR your non QM loans. So people who can’t prove tax returns, income.

And we’ll get to that non QM loan here in a feature gets you on a future podcast to talk more about that cause that’s something I said selfishly and interested because I don’t make too much money on my taxes. So little screwed for getting loans.

Yeah and there are multiple ways to do it. Yeah. Let’s we should get together again.

So you wanted to talk about the second time home buyer tactics, because I think a lot of your clients are California guys. They see a lot of equity, they got a lot of debt equity and they run up, put it into anotherasset.

Yeah, I think the first question when someone come up to me and say, Hey, I want to buy my next house, my next primary home. Okay, cool. What are you going to do with your first primary home? Are you planning to sell? What are you planning to do? And because of, forums and whatnot, how’s hacking, that next big thing. A lot of people want to rent out their first primary home and buy the second house.

I love giving our guys a hard time, right? Like you already got a house and you want to go buy another one. It’s oh, you already got you two Moderna shots or Pfizer shots and you want to get booster shot. Most of the grill, it hasn’t gotten any, but I don’t know. I just give them a hard time. Just to be fun with them cause they get it.

We have a housing shortage, let’s just sell your first house. I get it. There’s some sentimental value, you want to stay in, you want to rent out your first house is fine. But the question is now a lot of people, they’re like, oh, I don’t want to pay interest so they keep dumping money on their first house, the first mortgage so they can have low interest so you paid in low interest on the low interest rate.

Which is not what you financially want to be doing folks.

Yeah. That would be another podcast. We’re in a super low rate environment. Typically I ask people to just make the minimum payment, whatever your PNI is and tuck away the rest of the money and invest it somewhere else that’s growing faster than 2.8, seven, 5%.

So people who are looking to tap into their equity to buy their next house, because they want to buy their next house next year. I like to tell them to plan ahead. Don’t do a cash out refi right before you’re trying to buy your next primary home because when you sign your loan documents, next time when you sign your loan documents, when you’re signing the deed of trust, look at item number six, I think it’s six.

It’s basically telling you that you’re going to move in that house for a whole year, within the next 60 days and move in that house for a whole year and, Fannie Mae is going to catch you. If you’re not careful and that you’re not staying in that house and have you buy back the loan.

So if you’re planning to do that, do it today, take the cash out, put it in the bank and so next year you’re not violating any rules. You can use that cash to go buy your next primary home.

It’s similar to if you get an owner occupied house with some people. Technically, this is fraud, I believe because you can’t get an owner occupied mortgage then move out right away with the intention of doing that, right? If your employer fires you change jobs involuntarily. I think that’s another thing, you said 12 or something like that, like 12, like you’re signing up for this more occupied government like I’m signing off.

Yeah, because your loan is going to be sold to other investors that think this is your owner occupied house, and with a lower risk, give you a better rate. And now, they’re not buying the investors, not buying what they thought they were buying. They want you to buy it back, buy back that investment, which is your loan.

And, a lot of people. Have success sneaking by but with technology today, you never know, right? They have QC department, they’ll check your Facebook, your LinkedIn, just to make sure you’re staying in that house. They, when you listed on the MLS for rental they see it right away.

They have an alert that says 1, 2, 3, main street is up for lease and they’re like, wait a minute. Buy this house as an owner occupied.

People think that there’s privacy and like they hide behind their Wyoming, like LLCs for supposedly. The government knows everything. Even all you guys are signing on like deals as LLC, as passive investors, the government has your social security numbers on there. They haven’t figured out how to use artificial intelligence very well. If you’ve heard about this offensive, but like they audited like pizza chains, like the small mom and paws who are like, those guys typically stuff, they make a dollar, but in the cash register, put the other in their pocket, do that type of stuff.

But they audited like the number of pizza boxes that the chain was buying. And then they look for discrepancies.

You can’t outsmart these guys. In, in our area, Sam Wu is a really big a Cantonese food joint and he got caught there’s another one in Mama Lou’s just recently got caught at the dumpling house.

They can sit out there and count people walking in yeah. Gallons of canola oil or something like that. I don’t know what they use.

So this next one house hacking. You and I are not, we’re a little older these days but at one time we were both broke engineers. And when we would do stuff like this, but now, married, kids. It’s just not cool to have somebody live in your duplex house, but a lot of you, some of you guys, I dunno, I listened to my podcasts. You guys don’t have money, but you might want to buy a duplex.

Stripe books are called live in one side. Maybe you’re weird like that. Maybe talk us through some of your clients doing this and how that works.

Actually I can talk to you like back when I first started in mortgage or even when I was a poor engineer the goal is always to buy a three unit or four unit as my first house.

I was single back then. I didn’t live in a garage. But like your first house was always the, oh, you get it by the two duplex, a three unit, four unit, and then you can live in one and rent out the other three. But in California, it’s just so hard right now. Do three and a half percent down FHA loan lived there for a couple of years.

And until you save enough to buy your second primary house, which is at that point would be an upgrade because you might be going to a duplex or condo. But you gotta keep in mind when you’re doing house hacked is like, what is your motivation to move from house A to house B? And does it make sense, right?

If you already live in a million dollar house and now you want to go buy a $350,000 house to move into. Just doesn’t make sense unless you are in a retirement age and you’re ready to downsize. Your kids went to college and emptiness or you want to buy a smaller house.

Sure. I think that’s when you go downsized, but for people at uni who are just have kids, if you own a $1 million house, you might be buying a one and a half million dollar housing. House hack it that way. So proving of your motivations, always like the number one thing.

You moving closer to your employer. If your employer is set in San Francisco, why are you buying in Los Angeles? So in that case if your employer allows you to work from home, you might need a letter to say, they allow you to work from home, and now you can buy a house near your parents in LA.

I would probably argue, if you’re under a quarter million, half a million dollars net worth will remote buy properties at cashflow. The house hacking, especially in California, primary market, gambling on appreciation. It would probably go up it’s real estate. All the data’s showing, all the historic. How how long are these primary residence loans taking, compared to the non owner occupied these days?

How long is the application to close? The closing period that, if you’re putting in a low offer on a property, which should you account for these days.

I think we’re averaging about 13 days between application to signing loan documents on all primary home or non-owner occupied.

I got a little this question is why I have a friend. So I have a friend that buys a rental property and there is a repair such as HVAC is broken, or there may need to be repaired the roof, right? Say call it 10 grand of repairs on a $80,000 house. Would it be smart or could he work a deal with the seller for the seller to do that improvement? Fix the roof, improve HVAC and increase the price and that way the buyer can lump all those costs into a loan. Instead of dumping another 10 grand Cash is king. Is this something that you can do legitimately in your loan and close your closing or does it need to be off on the side?

You can definitely do it within the closing inside the contract, if you’re planning to just add it to the purchase price, you should be okay. Just make sure your appraisal comps are going to be. It’s comparable, this house 80,000, going to $90,000 is going to be comparable to other homes being sold that’s $90,000.

What we cannot do is add it to the loan. So if your loan is already $50,000, you want to add 10 grand to it that might not work just because the LTV might be too high for the loan.

But if your appraisals or you got some cushion in your appraisals, You can fix a lot of stuff in, yeah. And as an investor or, people who are listening to this podcast is probably smart enough not to do that. Added to the house and now it’s, the praise value’s too high and you have to come up with the difference anyway.

Just to close out this summary. Primary residences, remote rentals or other, not owner, occupied properties anything think that can you’ve seen clients get hung up on in the closing process that just have people be aware.

Yeah. I think one thing that I would suggest is like taxes. A lot of people they ran out the other unit of their property and not report that tax. I’d say go ahead and report it. I don’t think it’s going to do too much of a difference on as far as how much more income tax you have to pay.

When it comes to applying for a loan it’s going to help you in a long way in the long run.

You want to get your contact information out there if anybody’s looking to get along?

Yeah. Man, you caught me by surprise. I would just go on Yelp and type in NestMade Mortgage and you’ll be able to see us on top.

NestMade.com, thanks Benson for joining us and we’ll see you next time on what I got my personal question for those business owners who can’t qualify for home loans and fit in the box. All right, I’ll talk to you soon.