podcast Archives - Page 7 of 29 - Simple Passive Cashflow

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.

AHP’s New Fund With Jorge Newbery

https://youtu.be/tJ35PBYyIfo

Today, we’re going to be talking to George Newbury, get the latest on his newest AHP fund. The guests that come on, or I would say in any podcasts that you listened to, a lot of people will just go on podcasts, track record and verification, isn’t there like how it is with George, I’m actually investor with him. I’ve been investing in his fund for the past three, four years Monthly dividends like clockwork but just be aware of that.

We bring in people that I trust I think a lot of people listen to a lot of podcasts. You jot down some names and numbers and you feel like not some random person off the street, but in actuality, you are totally investing some off the street that happens to be able to email the podcast calls, to get an opportunity to pitch an audience out there.

So if you’re one of those persons, don’t do that, guys, you will probably win the financial Darwinism award b y doing this, it is not smart. Build the right people around you, organic relationships with other accredited investors. Unfortunately, a lot of these people, they’re not at the local area.

They’re not on the free forms some Facebook groups are not the places to find other pure passive accredited investors, but they are out there. If you guys are looking to join our inner circle, join the family office Ohana mastermind. Go to simple passive cashflow.com/journey.

Thanks for all you guys. Who’ve been reaching out to me. The daughter is about four months old now. Very happy and healthy. We’re very glad of that. For some of you guys who are not parents yet . Oh boy, boy’s life going to change for your guys.

Something that I’ve been thinking about lately is I’m actually deathly afraid of passing down the wealth to the next generation. 90% of wealth leaves families in two to three generations, most likely because I don’t know what it’s, because either there’s no motivation to do anything or.

There is no need to do a thing to get off the ground and moving. But that is why I surround myself with my family office, Ohana mastermind as we source the best practices for not only finding deals, who to stay away from taxes, legal, infinite banking, but more of the soft stuff, right? Like how do you teach your kids?

You give them an allowance, how you teach them about money investing, et cetera, and what actually works. A lot of that stuff just isn’t written out there. And I also feel like a lot of the events that we put together you bring the kids, they see other people different age ranges. I never listened to my parents and I don’t really think that, if you have a voice to your kids who consider yourself lucky, but maybe if you have somebody else in your inner circle that can help translate, investment financial literacy, I think that’s going to be your best shot.

So you guys want more of these legacy building ideas, go to simple passive cashflow.com/legacy. And thanks for those of you guys who showed up to our Saturday cram school to learn about syndication. We posted the video at simplepassivecashflow.com/syndication and enjoy the show.

Hey simple passive cashflow listeners today, we are going to be talking to George Newbury, CEO of Pre REO, or as you guys know, it also as AHP.

We’re gonna be talking about pre REO one of the new opportunities and then the next fund that George is going to be taking you guys keep asking why does the name keep changing?

A lot of these funds there’s just a sunset date on them in terms of sec can only raise money for a certain amount of time. But I guess George maybe take us up to the top. Cause I think a lot of people have been investing in AHP from back in the day, what, 2017-18, and then the names get confusing.

Yeah. So they’re different , I appreciate that lane so yes each fund is a different fund, a completely distinct separate company, and that we raised money for. And you’re right, the sec allows you to raise money for two years or allows us or anyone to raise money for up to two years, if it’s a regulation A-plus offering.

So each of these are raised in the regulation A+ over two year period, then we have to close the fund. And typically we make the funds a total of five years from the date of the original investment. So our target has always been, Hey, if you invest today, we’ll get your money back in approximately five years.

And that’s been our goal and we did for 5 0 6 C funds, which are accredited investors only, although all those investors have been paid back and then we Now we’re working on we have to close funds that are active. One is AHP 2015 A+ and one is AHP servicing.

And now we’re just launched recently launched the pre REO fund and they will have one more coming up. That’s actually should be going Very soon, which is AHP title. Right now today, as we speak, there’s two close funds that are still have investor money in 2015 A+ and AHP servicing and then investors can today invest in pre REO and AHP title.

Yeah. So some of you guys are aware of the A-plus offering. It’s unlike the 506 B and 506 C and you guys probably scratch your head. Why are they talking about deals on an openly advertising podcast ? It’s because the A-plus offering allows you to do it.

And the second reason why we’re talking about is I’ve invested in the first fund myself. I trust George and that’s why I’m willing to have him on the podcast. And I know you guys listen to a lot of podcasts and a lot of these podcasts, they just get whoever your Brony to come up on the podcast and try and sell whatever random fun.

But not bananas in Guatemala or whatever in some other random country. If you guys are going on podcasts, trying to look for your next investment, dude that is not what you want to be doing. You want to be building relationships with real accredited investors instead of trolling up podcast land, because there is little due diligence.

And by honestly, don’t do that guys. You guys will win the financial Darwinism award by doing it and the funny thing is when you don’t know anybody, you got nobody to tell that the deal went south and you got your money stolen from you. And then you feel, you want like one of these people with, no peer group and we’ll just complain on Biggerpockets or something like that.

But anyway, I trust George and this is why we’ve brought him. Several times and I’ve invested my own money with them. And I put enough to initially you guys paid my car loan for quite some time, but getting a new car, maybe I got to put more money into the next fund to make that car payment.

Let’s talk about pre REO crowdfunding.

Sure. Let me backtrack real quick to give people an update. Cause I know a lot of investors have invested in AHP 2015 A+ and AHP servicing

Actually that’s me I’m interested. So exact money in that one in 2017-18.

Exactly and the market everyone knows it’s not news to anybody that the market is just red hot right now and that includes for mortgages. We have millions of dollars in modified mortgages. These are families who we’ve modified their loans for that we are now selling and we’re selling them at a at 90- 92 cents of unpaid principal balance, which historically we would sell these in the sixties and seventies.

So it’s just a dramatic uptick. So we are selling everything we can we have enough money right now to catch up on all the redemptions from the COVID era. So it will be completely up to date with the redemptions. We expect to the next few weeks to announce to investors that we’re going to start redeeming all the first investors in both funds.

And we expect to redeem on an accelerated schedule over the next several months. And my goal is to, and we expect to do it is in 2022 that both the existing funds, 2015 A+ and AHP servicing will be all those investors will be fully paid off. My concern in the market right now is it is very hot, but that won’t last forever.

And I don’t want to be looking, a year from now. It could be looking back and say, oh, if only we had dispose of our loans in the first quarter of 2022 or the fourth quarter 2021. We could’ve made this and today we’re going to have to settle for this. So I’m trying to avoid that.

I may be getting out a little bit early, but we do have an opportunity to take advantage of the market that it exists today and repay all the investors. And that is our goal over the next late fourth quarter, 2021 through 2022. So that’s an update. So people should expect their money back early, earlier than the five years in most cases.

The good news is we have pre REO and another fund upcoming AHP title, which they can invest, roll that money into if they so choose.

We talked about this on the last time you’re on the podcast, but to the financial audit, you took us to the audit and then you, at that time, I think that might’ve been half a year ago.

And I think that the climate is still the same in a way, right? You are talking about selling off assets to take advantage. So it’s not much change there, but for the pro tip for folks as if you’re in the fund that it’s going to be exiting soon. It makes sense if you want to stay within the AHP family is to get it out now before George is forced to give it back to you in the fund closes and perhaps get it into the next fund that’s coming.

And the good news is the two new funds we just opened up. They’re open for two years. So whether you’re out in two months or in six months when you get redeemed, it you’ll still get your arm. You’ll still have the ability if you choose to roll them into one of the two new funds.

Your team just sent me an email saying, Hey man, like if you want us to put the dividends and roll the dividends over into the new one that’s another idea.

Yeah, absolutely. This is one which we didn’t do before. We can just now do it, is that if you aren’t a best from 2015 A+ or AHP servicing, then you can’t reinvest those dividends any more because the funds are closed.

However, you can direct us to reinvest into pre REO or AHP title, if you choose. So you can, have the option of making that selection. If you don’t choose either, then you continue to get them in cash.

And at one time it was difficult to do it, because people had to resigned docs every single time. It wasn’t that hard but now

It’s a one-time yes. They go in and sign the new investment docs one time and then we’ll continue to do that until they tell us that an investor chooses not to do it anymore. Okay so let’s talk about pre REO, I think is an interesting, probably to your audience for two reasons.

One is as a crowdfunding investment opportunity, and two is as an investment opportunity just to buy pre Oreos, which we now have people who have bought. And I know we’ve talked about this before. You were actually one of the first to share the news about pre REO, but we now have a lot of repeat investors.

We’re getting a lot of sellers on there and we have some investors who have made, because many times they bought, in the last year and some have exited already. Some of them are doing extremely well with pre REO. So I’ll share how this works, how pre REO works and then talk about how people can participate, whether it’s crowdfunding or directly in pre REO.

I’m sharing some slides that often do to you too. I utilize to introduce pre REO and a brief history. Many of you know this, but in 2008 I founded American homeowner preservation, which was a 5 0 1 C3 nonprofit, which had a mission of keeping families at risk of foreclosure in their homes.

Now we had thousands of families come to us. We were only able to help a modest percentage. And what we did is we found that many banks, mortgage holders, servicers were not receptive to solutions that really made a lot of sense. So we changed our approach and we started buying the faulted mortgages at discounts, and then sharing those discounts with families typically in the form of favorable modifications.

Is where the investment opportunity began. Hey, we can we money to buy these mortgages and we need investors. And 2013, we started crowdfunding. But one asset typically performed the worst out of these pools that we bought. And these were first mortgages secured by vacant properties that were in judicial foreclosure states.

Now we could connect with the homeowner and pay them cash for Edina loo. We could do well Coleman or was PA had passed away or there was no one we couldn’t reach the homeowner, then we’d have to go through foreclosure. And the problem with a first mortgage secured by a vacant property is that we would need to maintain the home.

We can’t, the homeowner’s gone. So the city looks to us or whoever the mortgage holder is to maintain the home. And this is as simple as cutting the grass or shoveling the snow. But also if the property is broken into or falls out of compliance, the city can actually require us to bring the property up to code.

And sometimes we were doing all the work to these properties and making them essentially rent ready. And then they’d sit there for six months a year, sometimes two years a while it went through the foreclosure process. And typically some states that are non-judicial like Texas or California, Arizona, the foreclosures move pretty fast.

You can get them done in six months, but in other states where you have to go through the court system, which is like New York, New Jersey, Florida where I am Illinois, Ohio, and states like. It can take a year and sometimes in, and the extremes will be New York and Hawaii which can take 2, 3, 4 years to complete a foreclosure.

Right now my latest research I saw Hawaiian Yorker kind of neck and neck is the longest foreclosure states to the longest and most expensive states to complete a foreclosure in so this property. think about that. We’ve now the city has ordered us to bring a vacant home, into compliance, make it essentially rent, ready, a home that we don’t own.

We just own the mortgage. So we came up with the idea of, Hey What about if we appointed a local real estate agent as a receiver and they could get a court order, which allows them to do any repairs that are still needed and rent the property during the foreclosure term. And if we could do that, then the rent that’s collected will help offset the costs of any maintenance taxes, insurance go be applied to the loan.

To the extent there was excess. And most importantly it’s a lot easier to maintain an occupied than a vacant one is much less susceptible to vandalism and things like that. And also the the insurance is cheaper, just so many benefits that we can get it occupied. So we started doing that and we had some success with it.

But one challenge we had or one concern was because we’re in Chicago and these properties, mortgages and properties are scattered across the country. We would sometimes think we weren’t sure if we were getting the best prices on, contractors, sometimes they take advantage. We felt like they were taking advantage of us a little bit because we were, a thousand miles away.

So in my mind, I thought, Hey, the ideal solution here is to have a local partner. Somebody who knows the market knows contractors and can help and can have a financial interest in the outcome of this, and they could be our partner on these mortgages. And that was the vision that created pre REO in 2020.

And the goal was to get first mortgages secured by vacant homes, into the hands of local investors during the foreclosure process, instead of waiting till it becomes REO, they could actually get control of the property during foreclosure and that was the original vision.

We’ve talked about this in the past and just to connect the dots for people like the large institutions, they bought a whole bunch of little rental properties back in 2010, and now they’re doing a lot of this build for rent things.

And in my opinion, they’ll probably go through a lot of groaning cranes because large institutions just they’re not good at operating stuff there. People don’t care. They’re just people in suits in Chicago and New York just clicking buttons. And they barely want to go to a lot of these flyover states and we’ll buy a lot of these properties from insurance companies or these kind of more institutional sellers.

Because they don’t have too much skin in the game from a management perspective. So this is exactly like George and his company is like an institution right. They get great deals than the mom and pop investor can’t get access to. And that’s their competitive advantage. If you’re, if somebody’s buying 1, 2, 5, 20 notes, you’re just buying junk from some other guy or with George passed up years, dozens of hand handles and Daisy chain deals over.

But the problem that the institutional guys have is they don’t have foot soldiers. And that’s the kind of the bridge that as an entrepreneur, that’s the segment that you’re trying to cross that gap.

Absolutely. We’re trying to get the institutional seller, provide them a vehicle so that they can connect them with with a local investor. That’s what we’ve done. Right now it’s actually working. We have an institutional seller so originally it was mostly AHP assets on the platform. But right now we have some of the biggest funds that are backed by some of the biggest names on wall street that are posting assets on pre REO. Now the majority of the assets come from third parties from institutional funds rather than from AHP.

So we seeded it to get it going, but now it’s going, which is great. We’re the marketplace and in the middle collecting a fee on each transaction and more we had a one of the keys I’ll get to it as financing and that’s where the crowdfunding comes in. But let’s talk about pre REO the marketplace.

So this is actually, people ask what is pre REO? Pre REO is an online marketplace that connects local real estate investors with lenders. And these are, again, typically institutionals institutions that are looking to sell them. When it first mortgages and REO properties, and these are all over the country.

We’ve had a bunch of Hawaii. We’ve had there we’ve had some million dollar homes. We have some homes that are worth, under $10,000- $20,000 and everything in between across the country. I think we’ve offered in more than 40 states. Originally I envisioned mostly lower value.

But today we just listed to a $4 million homes in in New York, on long island. And there again they’re the first mortgage that’s secured by the formulate our home on long island. So we’re seeing some, and we have some in Brooklyn that are million dollars and all over the country.

Once in a while, you’ll see these million dollar homes. Now pre REO has evolved, that original vision that I shared, it was a first mortgage secured by a vacant property. But now it’s evolved. Now it’s first mortgages that are delinquent secured by vacant properties or occupied properties.

There’s you know, as we talk to more and more institutions, they’re saying, Hey the mortgage is backed by vacant properties. That’s maybe 15% of our portfolio. There’s a whole nother 85% of our portfolio. That’s occupied by owners or tenants. Can you list those? And we started listing those and those were bid on just as aggressively as the vacant ones.

So it’s become a marketplace, right? For simply delinquent first mortgages. And now we actually, next month, we’re listing a, we’re entering a new marketing agreement with a a group that does small balance commercial loans. So these are like strip malls, small office buildings retail, stuff like that.

Tons of defaults in that arena right now. And so that we’ll start seeing creeping up. There’s some hotels, I think, in the first batch that are going to creep into the onto the platform shortly as well.

So here are all the problems that we’re trying to solve with pre REO institutional sellers. They often realize that by selling to the local real estate investor, who would bought, who really would be comfortable owning the property that buyer is most likely the best buyer for the mortgage. But as we talk to sellers, the vision was, Hey if I get to sell my mortgages to a hundred different buyers, then that means we have to do know your customer checks on a hundred different buyers.

The big institutions usually have to do backgrounds on each of their of their buyers. That’s a hundred different KYC checks. It’s a hundred different contracts and they thought there’s no way it’s whatever gain we get by maybe selling for an extra 5 cents or 5%. We’re going to get back with, going back and forth on all these different contracts.

Not worth it. We’re not going to do it. So we came up with a solution and the solution was to put all the loans that are transacted on pre REO into our trust and the trustees U.S.Bank. And so now going to the sellers, okay. The buyer is only one buyer for all these loans. And it’s a trust and it’s U.S. Bank as the trustee.

So they know your customer checks. It’s fine. It’s only one contract. And then we sell a participation interest to each of the local ambassadors, and it’s a participation interest in a specific asset that’s held in the trust. And so that was really the key component that has made this really buyable.

And the other problem that the trust has solved is that about half the states in the union require that you have a license to hold or enforce a mortgage. So I’m in Illinois. If you want to start foreclosure on a mortgage here. You need to have a debt collectors license. And if you don’t, you can’t foreclose.

Now, if you did foreclose , then that could be used as a defense by the consumer to delay or stop the foreclosure and also potentially regulators could find or otherwise provide come after you. I haven’t heard of that happening in Illinois, but I have heard in Pennsylvania, there’s been a number of smaller investors who bought defaulted mortgage loans in Pennsylvania, and they’ve ended up getting fine sometimes substantial.

$50,000 and orders to divest themselves of these mortgages. Some servicers have some smaller servicers and mortgage buyers just aren’t buying in Pennsylvania. Georgia is also enforced this. Massachusetts has enforced this other states. Don’t enforce it proactively, but it is still a big risk.

But the great news is if a loan is held, a mortgage is held in a trust and there’s a national bank trustee. Just like how we have it set up then that compliance, you don’t need a license that complies with all states for the licensor requirements. So it checked that box as well by holding them in a trust.

So now an investor who buys just one loan can be compliant in by holding it in our trust. That’s the other problem that we’ve solved. The other big one is that Difficult historically, to borrow money, to buy mortgages or to against a mortgage. So think about if you like all the properties that you buy Lane, multi-family properties, you oftentimes are getting a mortgage and they record a mortgage when you sell the property or refinance.

The mortgage is recorded there, you gotta pay it. But if you want to get a loan against the mortgage, that has been historically difficult. You’re trying to collateralize a mortgage. By using the trust, now we actually take title to the property, provide the participation interest to the local investor, and that allows us to finance.

And if they were to default, there’s a rapid 30 day forfeiture action that we can take. We basically send a notice to the investor. Hey, you’re in default, you have 30 days to bring the default current or to cure the default. If they don’t do it, then they forfeit their participation interest.

It’s something where we don’t get bogged down in a longterm foreclosure or some other type of court action like that. And all these investors are putting down 25%. So the likelihood, especially in today’s market, if anyone defaulting is very modest. The final problem that we solved as local investors.

Today, our star for deals the REOs with the foreclosure merge moratoriums and all the competition in the market. It has been very difficult to have a steady flow of real estate opportunities if they’re buying the properties, but if we move them up the food chain and start buying defaults and mortgages, there are a lot of opportunities and at significant discounts, the average note on our platform is sold right around 75% of the value of the underlying property. So if a property is worth $200,000 that’s probably being offered at $150,000 to buy the mortgage.

So basically our pre REO is providing the opportunities. So you can go identify mortgages that you want to buy you. We also provide you the capital? We provide resources like a service or a law firm. A trustee that can all help throughout the process and a compliant holding vehicle for all the investors.

So it’s really solved a small mortgage investors even a smaller funds, their challenges at finding opportunities, finding money and finding a vehicle to hold the asset. We right now both on the buyer and seller side, we’re seeing a lot of interest next month. We expect to list over a thousand properties in one month on the platform, which is a huge infusion for us this month in October, we should list several hundred next month to be first time we go over a thousand and That is just in time for year end, where we think there’ll be a motivation for funds to sell these at attractive prices. So we do see a big opportunity in the next time and the next 60 to 75 days where for the year end, there’ll be some great deals for investors.

This is where if you people have been watching my monthly updates like Adam came up with some data that saying those people who are house flippers their return on investment is almost like a 10 year low, because so much competition in the market.

So if you’re looking for a different faucet for deal flow, this is where to get it. Granted most, you guys, my audience George, most of ’em are high income earners, passive investors. So they’re more looking for the fun.

Absolutely.

The appeal to the other guys that are more passive investors is maybe it might be a great way that you can find something in your backyard, that something to tinker around and get to get real estate professional status, some kind of thing to screw around with to get that 750 hour.

So you use the passive losses to possibly lower ordinary income, or maybe I buy a house one day here in Hawaii, but I want to get a good deal on it. That’s where maybe it might come down. Like one of these days. Although that one a Millani on there has been on there for, I don’t want to live in there. It’s too close to my parents.

It’s odd. I wouldn’t have suspected. Hawaii has as many assets as we see. We see a lot in Hawaii which historically is not a place that we see a lot of non-performing mortgages, but there’s been a lot especially condos but also some houses.

I want that house that’s $6 million that was worth 10 million that the bank foreclosed on.

You never know. We had two, $4 million assets that weren’t in Hawaii today. But there are some multi-million dollar assets that have been listed on the platform. I’ll tell you there’s one gentlemen, one pre REO buyer who said the best deal he ever did in his life.

And he’s been doing this for a living for years, was on pre REO. He bought the first mortgage secured by a a home in singer island, Florida last year. And I think he bought it for. Under $2 million, just under $2 million. He thought it was worth 2.5 to $3 million and six months later he completed the foreclosure, the tenant.

He paid the tenant $25,000 to vacate the home and he got excited. He called me a few months before it was foreclosed on and said, Hey, the broker says I can probably sell this for three. And then right when he got the tenant out the broker said, Hey, list is a 3.5.

He ended up listing at 3.8. He ended up listing a 3.5 and getting multiple offers and taking off at 3.8, made over a million dollars on one single pre REO asset, which is just insane. And that’s the record deals that I’m aware of so far. You should have got an equity on that line. Cause he essentially, you guys just play as the 12% note we get.

Today we get $2,000 of 2% of the acquisition price. Plus we get the 12% then he put on 25%. So in this case it was a half a million dollars on that he put down. So he put down it’s a big amount of money. He was the risk position. That’s, I think what’s attractive, especially going into a potential, uncertain market of the future, where there’s an investor putting down 25%.

There’s a discount of 25% off the current value of the property. Then the local investor puts up 25%. So the money that we’re putting up is in a pretty secure position, even as this market starts getting on, getting a little shaky in the next year. Which is likely to happen.

I think we’ll be in a very protected position and hopefully everyone does really well, but ultimately there’s going to be a downturn. And I think that 25% discount plus a 25% down payment will keep us in a very protected position and still generate a good return for our investors.

Be good for folks like myself, have trouble qualifying for mortgages or car loans because of our business owners, you guys, it says nice. You don’t have to Dick around with a bank. You guys are just the private lender.

Exactly. We do some very basic qualifications but if you have decent credit and if you’re an investor, the things that may.

Yeah, too many properties or whatnot that may bar you typically, that’s not going to be impediment with us. We’re making common sense logical decisions and in our underwriting, and basically we feel very comfortable the 25% down payment on something that’s already discounted and something that we could forfeit within 30 days of you ended up defaulting. So it does have a a lot of protections for the lender.

Can you take me through maybe not that particular Asur, maybe it is, but like, how does that note trickle? Like where does it originate from what was it in like a lot of 500 to bot.

No. Initially some, most of the ones came from AHP, so they were in like a big pool that we bought and maybe they were vacant initially were all vacant.

So we take the vacant ones that were in long-term foreclosure states and put them on the site, with anticipating people would use the receivership actions. Now from third-party funds, some of them are laid in the foreclosure process. Many of them are occupied. So receivership doesn’t apply on those, but people are just buying them.

And so they may I think for the sellers in their minds, they can pick up more and more or less 5% more than they could buy simply selling it in a big pool to a national investor because that national investor is going to say, okay, if I foreclose on this, I’ve got to pay a commission. I got to do this, that and discounted a little bit for a local REO ambassador here.

We’re selling it to the local REO investor in many cases. So they are comfortable with, paying a little bit more, but now they’re buying the mortgage which they otherwise couldn’t do. The sellers that we work with, none of them would be selling these individually. It’s always going to be in pools of, a hundred or even 500 or more.

And now they’re selling them, effectively one by one, and they’re get taking bids one by one. But the key is the process is that when we close these, we’re typically closing multiple ones at a time and we do one or two closings a month with each fund and so we grouped their assets together. So for them it’s not burdensome to have too many contracts or anything like that.

So I’m just going walk to the steps. It’s hard to follow for myself. So like I go to the website, I look for a property that I’m like, Hey George, I like this one. It’s a million dollar property.

I think it might be worth maybe a little bit more, hopefully a million and a half. But I put down 25%. And I, which is 250 and I pay your guys’ listing fee of two grand, right? So 250, 252,000.

Actually it just changed. So now we got 2000 or 2%, whichever is higher. So in that case you actually played 20 grand. I we’re seeing traction. It makes sense. It’s still a great deal.

I give you about 250 for that property. I take ownership over it is somebody still take ownership for them? To be clear, you’re buying the mortgage. So you take ownership or participation interest in the mortgage. And as part of the cap, the participation interests, you have delegated authority.

So you make all the decisions. Do we proceed with foreclosure? Do we take a modification if the homeowner asks for that? Do we, what do we set if it goes to foreclosure sale? Bidding, where do you set the bid at? Okay. Now it’s foreclosed on, do we sell it as is? Or do you want to do repairs to the property?

These are all decisions that you get to make on the loan. So you’d work with AHP servicing. The servicer will be in constant contact with you in terms of, what. What’s needed, for you to approve, because you’re basically controlling the destiny of this particular mortgage, but yet that’s what you own.

You own a participation interest in the mortgage and after we’ll get the 12% Everything else goes to you. So you get all the upside. So that guy that made a million bucks, we got 12% on our money. He made, a million plus bucks and that is, he gets to keep the upside and that’s, just like when you buy a house or a multi-family building, the lender gets a predetermined return and then the owner takes the risk.

They can make a lot of money, they can make a little money, they could lose a little, lose a lot. That’s what the owner gets, but ultimately the mortgage holder or the debt provider gets a predetermined return. And in this market, that’s where. That’s the way to go in and out in uncertain times, that’s the position that we want to be in the investor that takes it over.

What are most people doing? They can’t do the heartless fraud and. AHB serving. We want about, Nope. I want to make deals. What are the percentage of where people are doing? Yeah. Good percentage. We’re just going to go through the process and go to foreclosure. They’re already, almost all of them are already in foreclosure.

However, I’d say there’s going to be 25 to 30. At some point, want to do some kind of deal like a mod. And my messaging is if a homeowner says they want a mod and they qualify for one we’ll present it to the investor and I encourage them to take it. Or if it doesn’t make if it’s not quite rich enough financially, they can counter it.

But. Reject it. And here’s why, because if a homeowner really wants to stay and the investor really wants to get them out and get the home there’s a reasonable likelihood that Comodo will get an attorney and fight the foreclosure, which could add months or years to the foreclosure. And in those, in that period, the homeowners.

Tourney not paying you. The lender is the investor will then be paying the attorney as well. It will not be a happy outcome. So my, my purse, what I share with most investors is that if you do five of these, you probably get REO on maybe three of them. There’ll be two where you do a mod or some other, maybe a deed in lieu or short sales, something like that.

And that is you have to account for that and be prepared for that. And that really is the right thing to do. And the other part is the investor will say wait, I don’t want a mod because I need to be collecting payments for the next 20 years. I want to get in and out of things, make my money and do it again.

And I say, okay, wait, look at it a little bit differently because today, if you do a modification about on a loan, which you just bought it, let’s say 75. And the homeowner gives you a down payment. Maybe they may give you a lump sum of five grand. Then they paid monthly payments for six months on time.

Maybe you’re getting a grand a month when that started. They made six payments on time. You can sell that loan at probably 90% today. We’re selling our performing loans at 90, 92%. And that will so you’ll make a profit. So you’re starting to make money now. Quite so much as if you actually got titled to the property where you’re going to make a good return.

So do these on an ongoing basis. You get some RTOs, you’ll get some mods, but in all cases there’s opportunities to make money in HBS servicing. We’ll do. We sell it alone. Okay. Actually, I wasn’t aware of that exit strategy, so yeah. And this is an odd one and that came out of pre REO.

So the institutional buyers, when it’s a non-performing loan, the best buyer is the local investor. But when the, when a low, a smaller seller is trying to sell a re-performing loan. Selling them one by one. You’ll probably get the worst price. The best price will be if you can aggregate a large pool of them.

So what we’re doing now is some of the premier investors have agreed to modifications on their loans. And now the people have paid several months on time. We’re putting them in large pools that we offer, which are, they’re not as large as I’d like, but maybe they’re $10 million. And it’s a combination of HP owned assets plus pre REO investors, even some other smaller investors.

And then we offer them to large institutions to. To buy. And when they buy when they make a bid, we’ll come back to the investor and say, Hey, do you accept this? They accept it. And we close. Then we get a 2% fee. And that has worked out well because we’re selling these things at say 92 cents. If they sold them directly on their own a, the institution wouldn’t buy it.

They’d probably be selling. 10 10% less than that. If not even less than that. And I, to give you an example, the last couple of wires we’ve gotten where it came from, Goldman Sachs. These are funds that are backed by Goldman Sachs or other large wall street banks that are buying these these re-performing assets.

And and so that’s. Ultimately pre REO is making money, when they’re non-performing and being sold. And also when they’re re-performing and being coming from institutions and going back into institutions so we see opportunities from both sides. And we educate the investors that this is, you need to be prepared for any of these outcomes and and act accordingly.

But if you do so you can make a there’s the opportunity to make money, regardless of the. Yeah. Cause I, I know you, you have a soft heart, right? Like you want get these things, but you’ve already tried. So it’s Mr and Mrs. Late payments, we want to work with you, but if not, we have to ship you off to our pre REO sharks.

And they’re not, and again, as people, some people will not reach out or respond to. The outreach until there’s Hey, there’s a foreclosure sale next week. And now they want a mod after six months or a year, but that’s what happens sometimes. And again, I still, I encourage investors if we can make it financially viable on both sides to go ahead and seriously consider taking that model.

Yeah. Yeah. Most real estate investors, not in our community. But you know which one I’m talking about. The people that it’s like, they don’t like, they like to be their own landlord. Cause they don’t want the property manager 8%. That’s the scarcity, mind people, typically real estate investors are always the ones that, oh, can I get a discount?

Can I get a discount? Like they’re the ones that the shark. Looking to foreclose these people, as soon as they take over the asset, because time is money and velocity of money, but you guys you keep it honorable, right? Yeah. Yeah. Absolutely. If you do the right thing in the annual do better in aggregate, you may not make quite as much as you could on an individual asset basis, but on the, in an aggregate you’re going to do better.

And as an entrepreneur, George, you’ve done it again. You’ve made little points here and there and that’s an, and you feeling filling the void. So what the needs in the marketplace for the flyers and south and collecting a fee here and there and collecting a spread on the money? It is I actually pre REO.

We see a big. We see a potential for a lot of growth. To the point where right now people are saying, Hey, I bought, I’m buying this loan from some other fund. They didn’t get it off pre REO. Can you provide the financing? And we’re saying, sure, we’ll do the financing. So we’re right now we finance on an off platform deals.

And And, the majority of people are buying on pre REO, it’s not to say every loan is, has to transact on pre REO. They could they may have a relationship at a fund and they want to buy something, but they need the financing. Even a small pools were financing. But again, that there’s a huge need for financing for smaller buyers in this market.

And the buyer doesn’t have to be tiny, even for some buying a few million bucks, they may need financing. So we see it as a big opportunity. If something comes up, man in Hawaii, let me know. And I’ll I’ll do it. I’ll be a Guinea pig for everybody. Absolutely. Go on pre reo.com. I know there’s so I know we’ve had it Hawaii assets.

I’m pretty comfortable. I’m pretty confident that there’s some there right now. I don’t want a three about a week ago. I just don’t want to buy anything on the east side. I don’t know. Hawaiian. Yeah. Yeah. I’m not going anywhere on that side, but So there’s, we, you go through this, the lender, HP financing is the lender, and this is maybe a good transition into the fund. Is that the fund that’s getting these loans? Is that hard for the last year? Yeah, so sure. HP servicing has been funding pre REO loans for the last year. That’s all transitioning right now. They’re all being funded with pre-op by pre REO.

With this new crowd funding offering. So think about that in the past, HP servicing was a 10% fun. So we have money coming in at temper, our repeat behind crowdfunding investors, 10%. And we loaning out a 12%, pretty skinny but it worked right now with the lower interest rate environment we pay crowdfund investors 7%, whereas loaning it out of 12%.

So there’s a five point spread in the middle. And are you guys still doing that? You had that pre REO e-course at one time. Yeah. And we’re doing a new one that is still live at dot com. There is an e-course there’s another one we’re going to do a live one in in December. We record it and share it with make it available.

In perpetuity on online. But yeah, that one, there’s a new one coming up in December. A lot of things have changed since last November when we did that one. So we’re wanna include all the updates in the new one, in the new opportunity. In the new e-course yeah, something I’m thinking of this.

I’m not a big fan of retirement funds, but if you guys got them, the bad thing about note investing is you don’t get the passive losses at the least. But this would be something idea that you would do with in a retirement account, especially when there’s a high potential for explosive gains.

If you were to sell the property. Yeah. Yeah. People have bought P people have bought pre REO with their IRA account. There’s nothing, no problem. Doing.

And let me I got to share about the crowdfunding part of it. And here it is. So this is just so everyone understands on the crowd funding opportunity. It pays out 7% just as all the HP funds, in the past we distribute every month, it’s open. This is key. It’s open to accredited.

And non-accredited investors. That’s a big for regulation. A plus that’s a big benefit that almost anyone can invest. There’s some limits in terms of what, how much a non-accredited investor can can cannabis. But you’ll see that, they’ll see that on the site, the minimum investment, only 100 bucks and that is, we want to make it as accessible as possible to everybody.

And this offering is qualified by the sec to raise up to 75 million through regulation. A-plus. What is that like the BDN or average investor? 7,000 bucks is our average investment. Ooh, wow. Oh and then I guess the other question I had with this prod funding method. Like liquidity, right?

Like when, if the people need their money back, how is that? Sure. This has been a, so historically HP has offered this, I think since 2016, that if an investor needs their money back, we will undertake our best efforts to return it within 30 days and pre COVID. We were consistently able to do it. COVID hit.

We were unable to do it. We just caught up on the COVID air redemptions and the going forward, we don’t expect another situation like that. So we do expect that we’ll be back to returning money within 30 days upon request the or at least undertaking our best efforts to do that. Now, key caveats, all that is if the investment is redeemed in the first.

Year then the return goes from 7% to 5%. If it’s redeemed in the second year, it goes from 7% to 6%. If the investor keeps the the investment outstanding for at least two years, they can request redemption at any time and they’d be able to keep the full 7%. And I think this is for investors.

I think they just need to get a little more sure what this, like these investments, the reason why you’re not making 0% is that there is some liquidity. Like you can’t just assume that you’re going to get the money right back. I still think what you guys do for investors is, pretty amazing.

If you can even there’s even a possibility of redemption. You guys are using in liquid investments at the end of the day. Yeah, investors can’t really expect to get money back and forth and use it like an ATM. Although I know investors have used in the past and they got comfortable with that.

And then when COVID hit, it became difficult to get the money out. That’s something that luckily, the market’s gone the way it has. It’s now gotten returning to the point where, we expect to be returning money early on those two legacy funds.

And I think in the two new funds, I, a pre REO and the soon to be launched HB title, and those you’ll be able to Yeah, I think we’ll be back on track in terms of getting money back within 30 days when needed. Yeah. And everybody asks that question that comes up a lot of times in HP and pro is always in there.

Part of the solution is oh, what do I do with my short-term liquidity before I look up from our longer term or asymmetric type of risk deals? Are those more. And I tell everybody that’s where you guys have to join the mastermind group and stuff’s going around and doing it all on your own, just suckers, like seriously, like you’re not going to find out if it’s different for everybody, finding opportunities is through your network and it’s different for everybody. And everybody’s trying to do this all by themselves. These should be crowdsourcing, best practices for other people. I’m just, I’m not going to tell you guys what to do out there because you, then you guys will get mad at me.

Just like how you got mad at George, because you can’t redeem your $7,000, the first one, right? You guys, these are the tools you guys need to put these tools into the right border and the right name to say and understand what you’re working with. Those pros and cons to everything. I still invest with.

But I have it within my holistic liquidity opportunity fund. I think you guys can still get that article at simplepassivecashflow.com/poolfunds. But as part of the education process, I guess a lot of people alternative investing or private funds are still new to a lot of people agreed.

It’s a new experience and lots of times when things are going well, it’s like today with the real estate market where everything’s going so strong, people forget that, Hey, at some point it won’t be so strong and property values will go down right now. They’ve been going up like you forget people, forget that in 2008 it was really tough to sell properties.

Property values are going down each month and, that went from 08, 09, 10, 11, 12 up into maybe even 13 where things were a lot different than it is today. Remember, all these things are cyclical and that will prepare for the worst, but prepare for the best, but be prepared for the worst as well.

So call to action guys, if you guys want to learn more about this, we’ll stick it in the infoPage at simplepassacastle.com/AHP. We’ve got several other webinars we’ve done on this in the past. And if you’re interested in getting involved in that pre REO thing, us go to simplepassivecashflow.com/preREO and drop a comment into our Facebook group.

I’d be curious. I’d like to find somebody who’s doing and not just, staying to themselves and keeping it to themselves. I’m interested in this type of stuff.

There’s Hawaii on there there’s opportunities in your backyard probably, or maybe your parents backyard.

It’s astounding how many especially when we get the hundreds and the thousand next month, I think they’re going to be all over us. There should be opportunities in the majority of the markets.

But all right, guys. Thanks for joining us. Thank you, George. And we’ll see everybody next time.

November 2021 Monthly Market Update

https://youtu.be/pHJuJvksZU4

Hey, what’s up folks. We are live. This is the November 2021 monthly market update where I quickly go over what is going on is some of the news out there impacting investors, mostly real estate investors. If you guys want to get a hold of my new book coming out next month, I’ll go to simple, passive to cashflow.com/book.

And shoot me an email if you guys are able to help. Need some folks to help me out with the launch. Give me a review, I’ll buy you a book. We also have the the audio version there at simplepassivecashflow.com/book. So help out the cause get the good word out, we appreciate it guys.

And we’ll get started.

If you guys haven’t met before my name is Lane Kawaoka. Currently 6,500 rental units need to update this slide and used to be an engineer. And I show you guys how to escape the rat race, investing in alternative investments and stop doing stuff like buying a house to live in, paying off your debt. Instead buying real assets that produce cashflow and grow for you.

You guys haven’t yet checked out the free podcast, simple passive cashflow, passive real estate investing found on all the platforms. And if you’re tuning in on the YouTube version of this with the podcast version. You want to see the slides that we have check out the YouTube channel and also check out the podcast version.

But before we get going, if you guys have any comments or anything, please type it into the comment box below, we’ll try and answer it if it comes up. So the first thing here, you know what I see a lot of people doing and what I try to do as part of the simple passive cashflow. Just to get people from being victims of the consequences of their own action.

This little picture of this dog who got stuck under a picnic table and it restricted his movement because he went all over and it’s got the leash tangled under all the legs of the table and again, those things are buying a house to live in.

I think if you’re in credit card debt, you need a way to force savings account for your self. Yeah, buy a house because it’s a forced piggybank, but for most of you guys listening, you guys have good financial skills. You guys are the max out, your 401k crowd. Push your money to investments and not necessarily a house to live in.

I still rent today. Next thing is investing in your 401k and getting that company match thinking that’s all cool. And maybe the company matches okay. I guess it’s free money, you’re investing in my opinion, garbage retail investments turbo tax, you guys are just still turbo tax.

You got to get with it, spend some money other than free and, get some deductions in there. But if you don’t have any real estate, go through turbo tax because you’re not going to get any deductions in that thing anyway. And then doing a Roth IRA or any kind of IRA, I just don’t really see the point to if you’re investing in real estate because real estate gives you passive losses.

And that’s what you can use to effectively shelter your passive income. And why are we doing this? Why are we going into good assets? Will inflation is upon us. If you guys haven’t seen here, we’re looking at a little picture if you guys have seen how much a pound of coffee costs in Walmart and it’s not $6.79 anymore.

If you look again, it’s $8.49, the cost of inflation is around us. So here we go. Let’s get into some of the headlines here. Wallet hub released a couple of reports of some of the safest cities in America, and those are Columbia, Maryland, South Burlington, new Hampshire, Yonkers, New York, Madison, Wisconsin, Portland, Maine Warwick, Rhode Island, Raleigh, North Carolina, Burlington.

Think that’s for bond. Winston-Salem North Carolina. Now some of the unsafe cities in America, Lubbock, Texas, south St. Petersburg, Florida, Anchorage, Alaska, Birmingham, Alabama, Baton Rouge, Memphis, Tennessee, Oklahoma City, Oklahoma, San Bernardino, California, Fort Lauderdale, Florida, Missouri.

Some of the people who aren’t sophisticated investors might say yeah, I don’t want to invest in these least safe cities, but I had four rentals in Birmingham. A lot of the investors still go there for rental properties. I have a couple of apartments in Oklahoma city.

I invest in the top 10 worst safest cities in America, and I think it all comes with part of the territory of investing in the right sub markets, even in these bad unsafe areas. You can just invest some generalities of these stupid top 10 list. That’s it, if you’re looking for the safest cities in America.

You’re probably ain’t gonna cash flow there and it’s probably not going to be a good investment. Partly I bring these types of figures up to call up the BS, right? Safest states in America, Vermont, Maine, New Hampshire, Minnesota, Utah, Connecticut, Massachusetts, Rhode Island, Maryland, Washington.

Now you’re not investing in a particular state. You’re investing in a MSA, a city and if you dive down even deeper into a certain MSA or sub market within the market. So for example like Seattle has maybe a couple dozen sub markets within the greater Seattle area. And even within one of those sub markets, you might have a good side or bad side or good block, bad block.

What we tell investors is get away from these stupid top 10 lists and really start to dive in and just know that some of these safest states, a lot of these just won’t cash flow. They’re not going to be good investments. Sure. They’re nice place to live in. And maybe it has a good school district or two, but is it going to be make good investment?

And that is where you separate the real investors to those people who just like to collect houses in random areas of the country, because they feel like it is safe for them. Some of the least safest states in America, Tennessee, Missouri, Florida, Alabama, Montana, Oklahoma, Arkansas, Texas, Mississippi, Louisiana.

If you went off this list, you wouldn’t invest in Texas, Alabama, Florida. I’d say three of the top eight states to invest in quite frankly, so bad data. Michael says he’s jumped St. Louis. It’s only bad in certain areas. So St. Louis and Kansas city, I don’t know what it is about those towns, but man, it isn’t really like block by block those certain areas.

And that’s just go to show you, even in the right sub market, you have to go look block by block.

Okay. Thanks for the comments, folks feel free to drop more comments in, and also if you guys are checking this out on replay, drop the comments below, I might get to it. If I happen to be playing around with social media, which I try not to, I think it feels to me it’s a waste of time. This next slide is some Arbor.

Arbor is one of the the few direct Fannie Mae Freddie Mac lenders that we’ll work with to get these large direct Fannie Freddie loans for apartments, not a good data and newsletters they come up with. So this is an article on affordability and some of the highlights here.

The pandemics economic effects combined with this year, surging rent prices have straightened low-income renters facing housing of 40 back in the spotlight. So as we know that the pandemic impacted a lot of the low end, the class C type of stuff, the class A stuff in a traditional recession, the class A people lose their jobs and move to the Bs and Bs to Cs

but in this particular COVID-19 pandemic slash recession, the A-class were pretty much unimpacted other than paying for a grub hub and not having to go to their college sports games or professional sports games and big, nice vacations. But other than that, they’re pretty good. Some of our class A apartments they ran into a rough month there when a lot of people were realized that

interest rates were low and they bought houses. And this is why it’s nice to invest in stuff that your tenants aren’t exactly economically mobile. Now that could be insensitive, but, Hey, when you’re in an investor, you don’t want too much turnover amongst your tenant.

Next point here reduced business income due to the pandemic and related downturn may decrease the value of tax credits and require affordable developers to seek alternative financing sources. So there’s a lot of developers out there that will develop these properties for the lower income, or it might have say 20% of the units designated to be 20% under the market.

I think it’s a good idea. It’s the government’s way of ensuring that you have ample supply of lower income because even in a good area, someone’s got to take out the trash or do those types of jobs. So it’d be cool if they live close to where it’s at. I think this is a hell of a lot better idea than making a bunch of projects and we’re a bunch of more people are living.

There’s just a lot of unsafe conditions and high crime areas where I think that the it called this the lurk different acronyms L I HTC is another program, but developers will take advantage of these government incentives to build and get either get credits or great loan.

But the give back is they need to have these rent restrictions on a certain amount of units. We’ve got a couple of apartments that have these exact same thing where 20% of the units are designated lower.

The share of the LIC HTC mortgages utilizing the 4% tax credit remain elevated at 40% through the second quarter 2021. Reflecting the continue to attract the of rehabbing versus ground up development. The housing choice voucher program. Another major affordable housing initiative is set to be expanded in the proposal of 2022 federal budget by 5.3 billion.

A 13.3 increased from the fiscal year, 2021 now 3.50 several trillion, still pennies amongst the big stimulus package. So it sounds like a lot of money, but just a drop in the bucket in my opinion.

Now, this article is a doozy here. We’re going to try and break this down. This is from the joint center of housing studies of Harvard university. And if you guys are ever looking to sound really cool and smart in front of your coworkers, friends about investing in rental properties. This is a great source to read about.

So what this article is, and I’m gonna summarize from a real high level here just so you guys have the major takeaways. This is discussing kind of the whole debate, whether you should have zoning restrictions on certain areas of your market, of your MSA or submarkets. Now, if you guys have been paying attention to the last investor letters, the last one we had.

I think it was one month or two months ago. You guys can access the old versions of this monthly newsletter at simplepassivecashflow.com/investor letter. But if you recall, California gotta love California. Probably the most progressive state in the union. They had a restriction on certain single family home zoned areas and due to some of the need for more housing due to high costs, they are starting to break up those traditionally single family home zoning and allow for some more densities and duplexes drop Webster claws or smaller apartments in those.

And a lot of affluent people get upset at this type of stuff. Because it’s not in my neighborhood, right? This is for the rich folks, leave us alone. I don’t know why I say it in that accent, but it’s the battle between the haves and have nots once again, and this has been going on since the beginning of time in the 19th century in America, cities started to itch institutes.

And the builders of homes are lightly regulated in the early 20th century. Progressive reform include the practice of land zoning from Germany in order to provide working class families with low density housing on the urban health score. If you guys are history majors or you love geeking out on this stuff, you guys can look at the 1917 Buchanan versus Warley Supreme court decision which prohibited zone by race.

And in 1926, the courts gave it blessing to zoning that segregated land uses and building types in Euclid versus Ambler. The court endorsed single family homes on the grounds that they excluded parasite apartment buildings that blighted neighborhoods and lower property values. I guess that’s a better term to call those types of the projects right?

Where they just, Hey, let’s just stuff, all the poor people into these really dense populated areas. And I think this is what you think of when you think of the slums of India. I think that’s what they do, generally. The idea and the movement today, at least with the current administration is to break that up, bring spread apart.

People into different areas, which means that the poor people will be amongst some more middle-class people. And then, also the high ends will be intermingled with the middle-class people, single family home at this greatest impact in the suburban boom took place decades after the world war two.

And this is where the FHA, the federal housing administration and the veterans administration. Got together and develop these areas called Greenfield, such as old farms, which generally took the form of single family houses on individual lots. As they say, a lot of the guys who came back from war they wanted to start all life.

And this is where the overwhelming choice to Americans will be to the suburbs developments, cater to this taste carefully Cabernet, calibrating the size of the lots and price point. For these different income levels what the encouragement and approved by FHA such developers, such as William Bevin, explicitly fought barred black Americans.

And in some cases, Jews from buying into these subdivisions. And that was where, we think of it as duh, that’s not right. Back not too long ago, stuff like that.

That Supreme court case Jones vs Mayer prohibited discrimination in real estate transactions. Fun fact, just a little while ago, I saw, I used to have a lot of properties of Birmingham, but Birmingham or the state of Alabama just got rid of a law that said that you could not teach yoga in public schools because they thought that it was the hokey-pokey or kind of mix of churches.

Type of stuff strange, right? This country is so diverse, so amazing, great to live here. So no matter what size of home and yard that possess some urban communities felt like they had a stake in maintaining the social or physical characteristics of their neighborhood to ensure that new development would serve only high income brackets, suburbs, commonly imposed, minimum, large minimum.

House lot size is often up to three acres, but sometimes up to 10 over time, many came to see any new development as a threat to their quality of life. The not in not in my neighborhood. When I was an industrial engineer, we would study things like, they would design like bridges on not really highways, but major thoroughfares to eliminate buses coming through cars.

Buses. So it was one of those like social engineering type of things to keep the poor people out.

Local officials responded by making it more difficult for home builders to obtain construction permits from the 1970s onwards, they implemented measures that impure or block new construction in the name of saving nature. A process that the late Bernard Ferdin a long-time professor at MIT. Describe as the environmental protection hustle, suburban cities and towns became composing outright limits and moratoria on new construction to slow or to scorch development.

In addition, building development, official city engineers, the fire marshals, each impose increasingly demand requirements on new residential development in the 21st century. No large municipalities Metropolitan’s continued to impose non zoning. Anti-growth measures these included, not wanting environments and building Coles, which was their sly way of living growth, but also requirements for project approval from two or more government entities, extracting fees for developers and formal design.

Such restriction, constrained development and thus could contributed to the rise in housing prices. I used to be a city engineer and city controls the permits they can designate who builds and who does it, and they can guide the growth of a city and who moves in and what kind of clientele that they serve.

It’s. So this, if you guys are living in fairytale land, where you believe that, you, anybody can live where they want, you may be mistaken,

but there’s been a movement to increase density and remove barriers to housing developments sometimes called yes. In my backyard has brought about the. Single family zoning fans, as well as new rules to apply accessory dwelling units in single-family houses in states and localities, most notably, Oregon, California, and Connecticut, but the efforts to get rid of single family districts have not addressed the plethora of obstacles to residential development on a scale that would affect housing prices.

Many places have a little. Have failed to increase the level, height or size of the building to allow for more density in Oregon zoning reforms allowed them to Sally’s to acquire large lot sizes, California and new laws allows local jurisdictions to impose more occupancy restrictions on subdivided, lots, these local zoning and design requirements in place and accept lands that have been deemed prime farmland, wetland, or part of conservation.

The new zoning rules usually allow building up to four units on a previous, the single family, a lot, a single number that will remain likely the most development that had been done on one lot at a time by homeowners and small skill builders. Overall, this is a small process. And if you want to grow your YouTube channel and you want to scare people to clicking on your video and watching your videos so you can collect ad revenue that way you scare the crap out of people.

And you tell them that the world is coming to an end, like California housing bubble is going to pop because a handful of inputs are now allowing some duplexes, triplex, or pods to be. As opposed to a traditionally single-family home neighborhood. I just don’t believe that impacts things too much.

That’s why do we need this? Because our country’s population is growing and we need more of this. Value-based. Type of housing to house the Lord middle-class because the shame, the middle-class are dying out. It’s endangered species and they’re becoming the lower middle class and they need, they don’t, they can’t afford these larger single family home lots and generally moving into multi-family apartments.

Last point here merely eliminated single family zoning histories just is light unlikely to increase housing stock. Significant, as I just said, To at least residential development will require peeling back layers of regulations that have accrued over the decades. This could mean reducing minimum, lot sizes, relaxing, overly stringent construction, and site requirements, easing design reviews, and rolling back some environmental controls.

Being certain provisions for wetlands and open space, the political efforts necessary to reverse such entrenched practices, how it will be formidable so that the recent laws against single-family zoning are, but the first steps in a large March. So what they’re saying is, yeah, sure. It can be open to single family home or duplex surplus applause, but good luck trying to get a permit.

Moving on. So the next slide here is taken from the Yardi matrix. A great data source. The image below is basically showing com the January of this year, as the vaccine started to roll out. Man rent increases have been pretty much skyrocketing asking rents nationwide, continue to break records.

Although there is some signs of deceleration, which, normally the rent increase go up two to 3% every year, which kind of goes up with the pace of inflation. You know what I mean? A lot of this growth for the first part of the year, until now, in my opinion, it just wasn’t sustainable. And it’s got to cool off at some point, but asking rents were up 11.4% year over year in September.

Monthly rent growth was 16%. He read a 1%, which is the last month he gained since the housing market began to accelerate in March. And you say, oh my God, we’re going back down. No rent increases kind of goal or a lot more smoother in terms of increase and decrease the fact that it went up 11.4% year over year.

It’s just phenomenal. That’s usually what the top market in the nation. Like the best out of the top hundred, 150 markets did. And that’s what the average is across the country. Just phenomenal. Sunbelt tech hubs are still leading the nation in rent growth as markets in the Southeast and the Southwest benefit from rapid domestic migration and job growth.

The migration story has been playing out for a number of years, but accelerated quickly during the day. Yeah. This is why I used to have apartment in Iowa or we build what best in Kansas city, Indianapolis. I just don’t really like those types of areas. Population growth might be, I might be going up.

I think of it as more stagnant. At the end of the day, the rents are not really increasing too much as it is. The Sunbelt states, your Arizona, your Texas, your Alabama is your George’s Florida. Is your care lines. Single family built to rent continued to grow at even faster paced and multifamily.

The nation rents are up 14.3% year of your occupancy keeps rising up 1.2% year over year. Andrew comments is the build to rent the next phase in your development or an offshoot. So the builds to rent to me is. I just don’t. The big institutions are getting into the space because we’re becoming more and more of a nation of renters.

I just feel there might be a good exit. What is hard to do is if you buy out 50 or you developed 50 houses, the loans don’t allow you to piece off sell a onesy twosy property here, there. So it makes your exit strategy pretty much impossible with that. I’ve looked in. But, with why do we like apartments?

We have one freaking roof, a lot of times, one major Shiller or individual HVACs. Whereas in the apartments, all we’ve got to worry about are the interior walls. We don’t have to worry about all these stupid roofs or all these, like backyard, all this, like landscaping. There’s just, there’s this double amount of things that can go wrong with a single family home.

Other reasons. I feel like single-family yeah. Tenants are a little bit more needy. They’re a little more entitled, right? They, they literally have a Fort to themselves where apartment dwellers, they know their role, they’re renting an apartment, a box within the box, and it’s just easier to keep open mind.

I dunno. I never say never, but I dunno. I just see the large institutions going into it and their property capitalize and they can do things that, the mom and pop investors can do, and they can do things that the private equity guys, folks like us can’t do. No. We don’t build, we don’t build little houses.

I, and I think that’s another thing, right? A lot of this is predicated on relationships. And who do you have in your Rolodex? There’s a lot of house builders out there, it’s just it’s a different type of business. The good.

Bill for. So John Burns reports, the build for rent story, the tenant preferences. So what’s mattering more is spending more money on some pet friendly home designs. So what matters less is don’t spend on head walking and services such as dog walk walking. So for us, we like pets. If it’s in like a.

The plus, or especially a because to me and this one, I’m just speaking in terms of generalities here. So give me a break. If somebody has a house, a dog or a cat, they’re typically a little bit more stable and they’re not going to move with what I’ve, that’s, what’s important to me as the investor.

Whereas you get into the class C housing. Animals are more like guard animals or they’ve you have cats. Now you’re talking about the cat lady at cat dude with 60 cats and they can be destructive. So I think that there’s a different, there’s a paradigm differential between the lower class, the higher class rentals that said.

That’s do cause damage. So it’s supported to collect more rent, which typically anywhere there’s a pet fee cleaning fee and then maybe a bump in rents, maybe about 10% plus every month for those pets, things that other people are looking for. Other high-quality finishes such as a fabulous kitchen.

And this is just, people have been in, locked up in their houses for two years and a lot of people are working from home. So it makes sense to spend a little bit more money than. Typical one-third that your budget kid budgeted, supposedly on your housing, some things that they’re skipping out on a spending less premium Florian, smart tech.

So the premium flooring and the real wood, I don’t know why people would want those. I like the luxury bile vinyl. It looks super cool. It looks sometimes even better than the hardwood and it’s indestructible. And when you get tired of it and if it happens to break, you can just fix it. I think that’s up to the game changer amenities so that people want more relax, relaxation areas and spend less on coordinating social activities.

So if you guys check out my last podcast on apartment life.org. We still feel like the social aspect is really the added value for residents to increase that community aspect of it. So we still like to do things to increase the community aspect or that’s wild seeing why people pay more or stay, they don’t move out because they have a community of friends.

The home office as suspending on a full office or den for single family renters with children, that having met nook is something that we’ve been designing into our new development for that, that dedicated work from home person. But they’re went, they’re seen as lot of people offer that extra bedroom for that.

People aren’t spending the money on. Not spending money on a full office for single and couple single founding renters merchandise, a bedroom for flexibility,

the national association of realtors and an article about renter demand shifts toward more affordable and suburban class B and C apartments. Go figure. They’re setting the apartment demand has surged during the pandemic, continued to soar to a decade high level as 2021 quarter three with a net absorption of nearly a billion units since 2020 quarter to absorption.

Just so you guys don’t know, absorption is new stuff coming online or vacant things be filled up with people or observed. Yearly quarter of a million units in the past 12 months as of 2023, the vacancy rate has fallen to a decade low 4.5%. And the asking rent has soared to a historical high of 10.5%.

So whenever you’re looking at, the demand or the hotness of the barn we look at a lot is not only it is where they asking rents are going. And obviously it’s been on a tear for this beginning part of the year, but what does that the vacancy rates too, can also be an early indicator of, or symptom of a better market or a worst market in the future.

So as vacancy starts to creep up, that’s how you know that there’s too much inventory coming online. And I think at that most cases, in my opinion, you’re going to see that the rent’s late. The vacancy tips. You guys are more graphical people. We have a lot of English in years. So the graph at the top, this coming from the highest 12 month net absorption declining vacancy rate in rapid rent growth as of October 13th, 2021.

So the top growth top graph is the absorption of units. As you’ve seen as of the last 20, 20 quarter three absorption has gone a way. Almost two to three times what it’s normally been. Vacancy rates have also come down. Typically we’re hovering anywhere from six to 10% vacancies. That seems to be the healthy about the vacancy across the board.

But now, Lowe’s are 4.6%, which is indicative of a good, hot, healthy. Asking rent year over year growth, obviously that has skyrocketed 11.4% since last year.

I will just comment, so when the 20, 20, 20 21 quarter one was the part of the pandemic, which you had, and I think my cursor is on at this point, I guess you guys can’t see my cursor. At that bottom of that low scenic rents cuff on a frozen, because what a lot of people, a lot of investors or operators we’re doing is just holding rents where they are.

It was seemed a little unfair with people not working, to bump up the rents. So that was appropriate at that time. At the same time, vacancy remained about the high, it didn’t spike due the pandemic. And that’s what we all thought it would. Maybe thought people were going to lose their jobs are not working, turned out that the pandemic actually froze everything, how it was, which is actually a good thing, right?

Heads and beds rents do collect your rent checks. That was the impact of the pit. That

now this is a breakdown of construction of apartment units by class in 2021 for. And the class is designated by class a, B and C. So eight glasses, your luxury stuff, B class it’s, they’re still pretty nice stuff, especially if you’re talking brand new, definitely not luxury stuff. Class C stuff is your lower income.

And this is why, like, why is there no class C stuff? The cost of that built the dang thing just doesn’t make any sense when you’re billing. Which is why barely any supply comes online. 1.3, 4% of new construction is class C what it is, it’s a split between class a and B, but there’s an interesting phenomenon happening here.

It’s so if you’re looking at the graph, this is probably a graph for a lot of you guys listening on the podcast to go and check out later in the year 2011. You have more class a and class B, but the spread was very thin from 2011 to 2016, they diverged. So the class a share of new construction greatly increased and the class B stuff declined.

That’s the same adverse relate relationship. Now here’s what I’m speculating around 2016, maybe there was just too much nice stuff. Which is why, which is typically what happens when the market gets a little bit overheated. The developers go a little bit too much have on building the class, a stuff that they can’t really get the breaths because there’s too much class, good class space.

So that’s why I think you’ve seen this backtrack and now you’re seeing the class a builds 56% class V builds 42%. They’re coming together against, so one would assume that this is a good sign for investors and the market that this is, will this kind of, this cyclical pattern will continue to have.

I don’t think you’re ever going to get it. It’s just, if I don’t, I never say impossible, but it’s just, it doesn’t, it’s not going to happen where there’s going to be a lot more class B than a, it’s just stupid to do that because you to, again, to build something brand new, it just makes sense that just build it a class.

So I w one would assume that that the just cyclical pattern where it squeezes and expanse will continue to happen over time. It should there be a recession? I, what I would think is the whole quantity would decline, but the percentages will remain the same. This is a graph from ALNF a L N price class averages of effective.

Everybody always says what’s the difference between a B and C D class. One of the big things is, the age of the property. If you want to generalize, I’d say 19, maybe the year 2000 and newer as class, a 1990s, 1980s is more class B 1960s, 1970s, his class C plus D is just kind of garbage.

That’s older than 67 a year. But this is a graph of kind of showing what is the effective rate rents, and you can see how they line up for the class. A slightly above $2,000. A unit class B is around 1700 class C is 1400 in class D is 1100. Of course these are a lot higher because we’re including high priced areas, such as New York, California, Hawaii, Seattle, because a lot of the class C properties that will.

We’re average rents will be around 800 bucks, usually about a little less than a dollar or two, a dollar, a square foot.

If you go by this graph, we’re certainly not buying class D most of the California pricing is a lot higher than this. This is again, we’re an investor needs that, take this all into account and understand this is just the whole United States clumped into one. As we all know, we are very diverse.

Culture political mindedness and also a wide range of housing options. You got a lot of different class, a pricing. Class a and California could mean 3,500, $5,000 a month. And in bourbon, Huntsville, we’re building this stuff. That’ll rent for 1400 to $1,600 for class a, if you guys see that little orange dot there, that is actually.

Percent change of the rents have been changing. And a lot of the increases has been happening in the a B class types of markets or types of assets.

Everybody’s been talking about the supply chains, sorta judges. This is why we like to go into stabilize assets because, and this only kind of impact. Development where you aren’t able to get in front of the problem where the shortages that in our world is 63% are the windows is that’s the primary, the issue getting those windows 17% is getting the lumber.

13% is the engineered wood products. And 8% is the concrete. So it’s. I don’t. I don’t think that this is taking into account appliances. Appliances are another issue too, but this is the building material causing contractor project deletes

overall rental. Market’s been skyrocketing. If you’re an investor being left out or I feel bad for you, jump on board and ride this inflation wave for the next several years. But are the top three challenges for the rental industry, putting out by the multi-housing news. First one recruitment and retention of staff, a lot of people, or if you guys have heard of the great resignation, I’m going to restrain myself from telling you my real thoughts about this whole thing.

People are burnt out. So people are like leaving their jobs. And a lot of it is like lower level staff. Although I’ve have talked to a few of you guys, who’ve booked calls with me. Some of you guys just done. You guys are all white collar workers or you guys are done with it, but most of the people partaking in the great resignation are the, the service workers, the people on the front lines.

And those are the people that typically will employ as the property management staff at these properties and the maintenance handyman staff. So that’s number one, number two. Finding high quality vendors representing the number one challenge, I guess I goes with number one, number two, loss rent, more severely impacting smaller companies.

And there are many positions in this industry that don’t require a college education. They are looking to create programs, promote the industry, to attract workers. There is a lot of churn in the industry as we need to see that labor pool open up. And one way to do that is to advertise industry and all the benefits it offers.

Reminds me of the whole teacher shortage. What anybody wants to teach a bunch of kids and not get paid too much sign up. It’s like property manager, right? Anybody wants to interact with tenants who. They only write two and one star reviews when they are on set, but when they’re happy, they don’t tell a single soar.

They say, thank you. They assume that they’re entitled for good shipments in their $800 apartment. It’s a thankless profession. It requires a lots of tact, lots of project management skills, lots of people’s skills and it’s a very key, critical position in my opinion.

If you guys haven’t checked out the family office, Ohana group, I think we’re getting up to actually, I got to change the site 80 members, or so the initial fee to join is going up next year. So please reach out before the end of the year to partake in 2021 pricing. Cause ain’t going to go down. If there’s one thing that is true in life, it is rents typically don’t go down and the family offers Ohana initiation fee don’t go down either.

Most people who join, should we save them or makeup four or five times that initial fee in their first year. So get on the inside and unless if you’re not tired of listening to the same old stuff, a podcast land, or just to give you just the tip to just get you confused enough to call the guest

and figure out what product and sales funnel you want to fall into. And lastly, help me out and check out my book simplepassivecashflow.com/book. Shoot me an email at lane@simplepassivecashflow.com. If you would like to help me out for a few minutes, giving me a review on Amazon so that my parents can be happy with me.

They don’t know what I do these days they’re upset, or I think they’re just confused I’m not an engineer but unless there’s any other questions, thanks for joining us folks. The legal disclaimer here, of course. Do your own due diligence and think for your guys selves.

Coaching Call – HELP! My Wife Wants to Buy a Home

Dumping your 401k, Helocs, 529s, IBC, Spouse Help Accredited Investor Coaching Call

https://youtu.be/Acn5oHx-DRc

Hey, simple passive cashflow listeners. Today, we are going to be doing a coaching call where the topics are going to be withdrawing money from your 401k. Should you do a 5 29 plan for college savings? If not, what should you do? And a little bit review on infinite banking. I know a lot of you guys have been asking about that.

If you’re like, what the heck is infinite banking? And if you guys want to hang out with more of the folks, just myself and the person you’re going to hear on this next coaching call. Join us in Hawaii in January.

Go to simple passive cashflow.com/ 2022 retreat. And we’ll see you there.

Hey folks.

He just went to this syndication e-course. Why don’t you give people a little context before we get going through some of your questions?

Sure. I’m just looking to understand the syndication laddering. I jumped in there’s a little bit of a lag before I start cash flowing. And I’m dealing with spouse support, so she’s in this wait and see game. I am also looking at my 401k, I’m 41 years old. I’m pretty heavy in my 401k accounts. So what I’ve been looking at is what’s the option as far as borrowing and paying myself interest.

And I wanted to see if that’s what relates to this infinite baking concept that you’ve mentioned before and some of your content. And one of my other questions which I put these together about a week ago. You posted something about 5 29 plans and infinite banking. I have two toddlers and I’m trying to go after I’m thinking capture this time. This time my kids are four years old trying to do like a 50% discount on college so I am heavy in my 529s.

How about we come back to the college 529 savings after? Just a quick teasers. The 5 29 plans are like 401ks. 401ks are like investing for the clueless, 5 29 is they’re essentially the same.

Everything we’re gonna talk about 401ks carries over to the 5 29 plans. I don’t know why anybody does it quite honestly. Just because something’s labeled a retirement plan or education plan, doesn’t mean that’s what necessarily you should use it. If you just want to do what everybody else does, it gets killed and has a bunch of garbage options go with a 5 29 plan or 401k.

First things first, like taking money out of the 401k retirement plan. Let’s kinda talk about that first because it’s a very common thing. Most people don’t have too much in their checking savings account. Why would you, that’s just not good use of your money.

But then they started investing and then now they have to go. They start to realize that this alternative investing is real and now they start to go look for low-hanging fruit. So the order of operations is money in your checking and savings, your liquidity, your home equity, and you can get a Heloc or a cash out refinance.

And then in conjunction somewhere in there it might be tied in order of operations. But your retirement fund possibly getting a loan or just similar to like HELOC in that you can put it back, should all this not work. But most people start to get to this stage and they’re like, yeah, screw that 401ks stuff.

Because the issue that I have it is it’s retail investments. It’s all the stuff they want you to invest in so they hit you with these high fees, carried interest. Vanguard, I used to be in that stuff a long time ago and I thought, whoa, it was these are low expense ratios, right?

That’s nonsense! Like you don’t see all the hidden fees behind it, the marketing the salaries, expense, accounts and that’s the problem with the 401ks you’re trapped with that stuff.

I do have a HELOC and it’s untapped. Between the HELOC and the 401k loan. I figured the 401k loan I think now the maximum borrow is 50% or a hundred grand, whatever is, lower, I believe.

Most people take it all at up to 80 to a hundred percent actually, but you must have what’s your house worth now? And what do you owe on it?

My house is worth about 1.8, live in the bay area and I just refiled pulled cash out. I owe about 1 million.

Okay. So you have a pretty good equity position, which is actually not good in our world. Because we’ve got to get that moving. There’s a lot of people in the family office group that are running around trying to find the best HELOC banks.

Usually it’s just a community. They usually can be in like the 3, 4% range easily at 80% on the value so you have some shopping there to do, to go find that community bank.

Yeah, I went with my local credit union and I got a 3.2.

You could probably do better. It should be a lot lower rate for 50% of the value should be able to take it up to 80. But for now you’re good. You’re not going to blow through 500 grand a million dollars. But put this on the docket to be your next three to six month project is to go find that next HELOC . That’s going to get you 80% and that’ll keep it rolling for another six months to a year maybe two, depending how much you want to deploy.

Got it! And so I just figured though that the 401k borrow would be better for me because I’m paying myself interest.

That’s what people say in theory. You’re paying yourself such a small percentage that doesn’t really matter and you’re prepared to pitch yourself repair. You just throw it down the drain in my opinion. Again, follow the numbers. All of this stuff is just, what other people say. If your coworker saying this type of stuff, you need to stop it, question it.

You’re paying back yourself the interest, but then what you got to really think about is the sunk costs or the opportunity loss of keeping it in there. All this money is not making anything right especially the format. I dunno, you can make an argument either way, right?

What’s going to go off the stocks or the house. Both of them is a kind of a crap shoot to me. But most people they go on raid the home equity first because most people were really skiddish about taking money out of their retirement. They say it like that because you’ll get really freaked out when you start to do that type of stuff.

But if it were me, I would feel a lot more skiddish with money in my retirement plan right now, because that all that stuff is just pumped with money. Equity in your home I feel like there’s a little bit more secure, not just because in 2008 real estate, what the hell? That was a real estate crisis. That’s what triggered the recession in 2008. But typically it’s like most times it’s a crash the stock market with home equity values.

Yeah, I agree. I think that a hedge on the 401k with the market would be the way to go as far as pulling money out of that.

Before we move off the house, are you guys going to stay, you got a younger family, you guys going to stay in the house for the next five, 10 years or at least 15?

Yeah. All I gotta say is most people in my community. They say, screw the house. Let me go get like a little bit smaller, like rental or apartment that has a really sweet luxury pool. And let me spend my time instead of screwing around in the yard where somebody else cleans my pool for me but just saying right because you can unlock a lot of equity that way.

Shoot with a million dollars of equity right now, you could put into something AHP. I would have put all my money in there. That’s for sure. But that could give you a hundred grand passive income a year . That pays for 1, 2, 3, 4 kids college today. I’ll be four college kids in the future. There you go! That’s your 529 done. But they’ll choose to just keep it locked up in our home equity, Jack.

Doing the home equity loan, pulling money out that way and not moving.

For the time being that’s a great plan. I think you’re fine with that for the next couple of years. But if I ask that question and some people have that hint of Hey, I want to move in to a bigger house or a smaller house.

Then I say move out now and just dump the equity up now. But if you’re going to stay there long, What I would say is just refinance the whole damn thing right now and suck out all the equity, do a cash out refinance, suck it all out as much as you can. But of course, I think you’re still in the beginning stages, right?

So that’s where you want to use the HELOC a little bit longer just to make yourself a little comfortable. But at some point, you drain the equity because the HELOC can only get you so far. It can only get you to 70, 80% of the value in most cases.

Yeah. I will shop that. I’ll look into that and I’ll even ask my credit union, the next month or so rates are really good right now, too.

What do you think about the syndication in 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 in deals in terms of risk adjusted returns, right?

Stabilized assets is like buying an existing lemonade stand with existing profit and loss statements. You can see what it runs or a development is just a shot in the dark in a way. Technically, if you could build it there’s more margin 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 preach general wealth building to people is start off with singles and basics. And in the syndication, that is more stabilized assets that give cashflow 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 one by one 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 multi-family deals attractive to me because I can be passive.

I just have to say it because something Dawn, who is a young, kid’s going to listen to this podcast and then think they’re going to go into 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. Can you really tell me any good reason to own a rental property, debt in your name, the headache, the fact that you’re getting abused as a robot rental? Let’s not get started with all this BRRR 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.

My biggest challenge now is just negotiating it with my spouse because the conventional way to invest is just through the 401ks and all 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 lagged.

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

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

Which is just an emotional thing, right? Whether it’s retirement or money on 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 like 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.

Yeah, that’s where my current head is at in as far as the syndication deals, you have the one presentation coming up today. I think it’s a Rora.

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

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

That’s why I don’t like residential properties. But in the commercial world, we haven’t had that big run-up yet. But you’ve seen rents rise the first half of 2021. It’s all completely obvious what’s happening and cap rates are dropping. You’re having cap rate compression.

But it’s not to a p lace where, your average internet investors like jumping into commercial properties quite yet. Right? Maybe this time next year, for sure. There always be deals because what makes for investment? The banks lend money at X and the cap rates are Y and there’s always a difference between X minus Y.

There will always be a differential or always be a difference and when you apply leverage and that’s how you make yield. The cap rates will always be making yielding more than interest rates in a world where gravity works. I’m sure it could go backwards for a little bit.

I don’t think it ever has, but that’s what makes the world run right. I think what you’re getting to is Hey, what if I wait? If you wait, the best time to do anything was yesterday. They always change, like for example, infinite banking they always change the rules.

Best time to get it was yesterday, the best time another one was yesterday. It’s just constantly going to be that, you guys are just like making it tough for your guys doing this. Just be prudent, stoic, and just constantly dollar cost averaging into stuff that makes sense.

And it’s difficult now because you’re getting started. But to me, that’s the outlook that you have, you don’t need to be like me and have a hundred percent of my stuff in alternative investments. That’s for sure. I totally respect if you want 20 to 50% into paper assets.

That’s fine! But over time, the kind of the percentage definitely goes to alternative asset size. You look at I seen as a tiger 21, it’s all $10 million dollar families and above all paper assets. They don’t own like mutual funds and stuff like that.

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

Let’s talk about that a little bit. Your spouse do they work too, or what did they do? You guys single income?

She works. She makes more than me and she’s in tech.

Good for you, man!

She’s really involved in our finances and that’s good I have to say.

Did I send you those videos from our bubble event where we had like a spouse’s panel? I can send. Shoot me an email later and I guess everybody listening, you guys want this spousal tips and webinars. Shoot me an email with the subject line spouse, and then we can send it off to you guys too.

The takeaway is everybody does it differently. It’s just like sick parent. You never tell another person that wants to do cause they always just turn around to get their own way. And you shouldn’t talk about it. But we talk about in our group and we acknowledged the fact that everybody has different marriage structures, different ways of dealing some your spouses, involve, which I think is good.

Some don’t care but tell you absolutely you can’t do anything that’s the most frustrating thing. So I guess be grateful that’s not the case. Sometimes, you have to make deals, right? Like marriages and negotiation. Did your spouse out of your family and their family which have more money growing up?

It was about the same but our backgrounds are completely different. I’m coming from a farm. She comes from the bay area. We have similar backgrounds.

Whenever you’re working with differences and people, it’s always cool to understand the backgrounds of the people then you understand more. Some things I noticed a lot of times is when like the spouse, if they didn’t come from money then they’re really gonna like in the scarce mindset kind of way. Again, not a bad thing. That’s just how they are. They want to cling onto the house so that home equity thing is a big thing.

Which doesn’t seem like the case here. I think that’s the cool thing with people who had money, lower middle class, we’re not talking like low, low end. But they know that there’ll be okay. So they’re okay with you doing things like, taking money out of your HELOC and refinancing or renting. Not owning, you don’t need to own, right? But in this case, there might have an issue with the retirement fund.

I don’t know if you’ve ever had that discussion. Okay, if I were to do one of them take a couple of hundred thousand, which is a very small minority of the whole net worth out of retirements or our home equity. Which one would you prefer? That’s a good starting point. And why?

Yeah, and I do think it’s going to towards the 401k because it affects me and my potential retiring early. And it may be more like palatable to her to accept that.

Something I’ve picked up from Chris Voss seminar he’s said, never split the difference. Funny! He puts you in a high stakes like hostage negotiation. One of the tactics in the book you can pay attention is like, when you negotiate and you’re in a negotiation in this case. Get you label the other side. So then you asked the question, it’s that doesn’t mean that you rather have the security in your house is what I’m hearing.

You labeled them so you get the conversation going, right? No, I’m not. I just think that, and then the retirement stuff is more your longterm thing and you’re, you would retire and that type of stuff, and that’s what our family wants. And then you draw out the information, as opposed to each side stonewall.

But it sounds like you have it sounds like a totally functioning relationship to me. Just got to figure out, you’re not going to go balls to the wall in the first year or two, for sure. But which of the two is the lesser and in this case, it’s the maybe leaving the home equity alone a little bit and going after retirement.

I think that’s what I’m going to do.

Good segue! We’ve talked about the home equity. So what’s your plan of attack is probably the whole the retirement fund. Like you said, you can take a loan on it. I don’t buy the whole thing about paying yourself interest. It’s just like a HELOC that the interest paid as a wash anyway. Next investment you’re just gonna take a loan, the retirement or something like that. Is that the plan?

Yeah, I guess my options would be withdrawal penalty with a penalty or take the loan and then I have my current employer’s account and then I have my own self-directed IRA so those are really like the options I’m playing with.

Okay. You have some IRA, 401k money that has with a previous employer that you haven’t gone over yet? I think one, one rule is you never really want to roll it over. You just want to keep it how it is, because once you roll it off through the existing employer, now it’s probably stuck there.

Actually what I did was I rolled it over into my own self-directed IRA so none of my previous employers have my 401ks.

What’s your plan and that’s talk about it with what the tax implications are?

Currently, my plan would be to take the loan out of my current employer. There’s very little risk that I’m gonna, I’ll work there at least five to 10 years. I had to have to pay the loan back either a time of when I’m terminated or terminate the employment over the life of the loan. I think it’s like a 10 year term.

Again, we’re talking about loans, right? We’re not talking about withdrawals. Okay. So for the folks listening your loans, you’re not taking it out, right?

It’s the withdrawals that now triggers the taxable event shows up as income. What we’re doing here is we’re dancing around it and which is fine for now. If you were more gung ho about this stuff, I would say just take it out. And in this case if we were, let’s just play that scenario out.

What approximately is your adjusted gross income?

Mine’s about 250, individually.

What about combined? Married.

Okay. Sorry. You guys are screwed. You guys are in a tough spot because ideally what you want to do is married filed jointly right now. We try and keep people under 330 cause that’s when you really start to get hammered with taxes. And again, you guys are listening to this in the future, these things, the tax brackets dance around a little bit, but the same idea of poppy ship prevail.

You want it to leak money out of your 401k slowly as withdrawals so you don’t go into that next higher tax bracket. it is whatever, if that’s your plan, but ideally you’d like to stay under there. If you guys made $200,000 a year, married filed jointly, you could take 130 out theory and not be too bad. That probably be a good bet because you’re probably paying less tax brackets today than in the future more than likely.

So I need to encourage her to take a pay cut or change jobs and take a pay cut.

Yeah. Both of you guys make high salaries and for those you guys, in that situation, it might make sense to just suck it up and just work, for burning the candle on both ends a little bit longer.

As opposed to some of our plants that have like disproportionate incomes like doctors and stay at home spouses, that’s the ideal strategy right now. They can do real estate professional status strategy, use the passive losses to offset income. Of course, there’s a lot of hoops to jump through with that rep status strategy.

And we’re not going to get into that now, they have a little bit of options where you guys. Good news. You’re gonna make a lot of money. As far as tax is options there isn’t too many, right? And I think now you start to look at less desirable options or exotic options such as like land conservation easements.

Are you on the lookout on these next solar credits? Coming out with the next infrastructure bill who knows what happens with that. But that’s where I would be looking out to next. Or, if one of you guys are burnt out, our time, right? Like I said, you guys have enough dry powder pretty, you should just be able to make a hundred thousand dollars a year.

The fact that you guys are not is on you guys. That’s just a choice that you guys are making, but you should have that much income coming in that I think that will sustain life for you guys. Most people in our group are pretty frugal. I don’t know why you guys are going to work tomorrow, but you are.

But that just takes a time to understand how this all works because right now, this is what frustrates me. Everybody’s stuck in these 401k, 529 garbage investments and that’s why you all are still working right now.

Make more. And then you try to defer your salary to no, yeah.

Paying at our tax bracket in the future. That’s exactly what the government wants. I don’t think they meant to do that cause I don’t think the government is that smart, but in a way they have a pretty much blank check on all your money right now, the retirement on the 5 29 and not 5 29, because technically you can use it for education expenses.

They can’t touch it. But your 401k, you got to pay taxes on that eventually in your IRA.

And who knows what that is at the moment, we won’t know until I retire.

But I’m betting, that’s going to be higher than what you are now. But the game is what we’re going to try and take it out or withdraw at some opportune time from now to the next few decades, when the opportunity to jailbreak it out, the word tax needs is there.

Again, it’s good right now for you guys. You don’t have very many, right now. But what we do know is like the money is in there now. It’s not making Jack it’s just retail investments, but the idea is to take it out slowly to get it into good stuff, which is still trying to land on your feet a little bit so I get that, but just do it in a tax smart way.

Some people are like, screw this is messed up I’m gonna take all my money out of that stuff, right? Whoa. I don’t know if you can invest that quickly and you just want to be a little smart about this, that’s just going to balloon your adjusted gross income.

You’re going to pay a boatload of taxes on that. Just fly under the radar, stay under a certain threshold, leak it out slowly as the idea. But, for now you’re just going to do alone. And that’s fine. You don’t really trigger taxes at that point. Another hangup people get emotionally is they’re like have to pay to make these loan payments right.

To myself, that’s just an emotional thing for me. If it really bothers, you just set aside a certain amount to extra, to pay.

Yeah, that doesn’t really bother me. It’s just, it’s moving money around in different pockets, right?

Yeah and I think that’s the hard thing , first of all they get emotionally tied that this is a retirement plan. You’re taking money out of your retirement and make no mistake. We’re not doing that. We’re not going and buying like fun vacations with that money for long-term savings in retirement. But it’s not going to be an account with a government for your future.

In regards to the loan, do you know, and there’s certain requirements that I need to abide by to take the loan, right? Or can I just take the loan freely?

I’m not sure on that, but usually they want you to have some kind of hardship thing or you’re buying a house, which should not. So I would think the only thing you guys have is the hardship. I think at this point, it’s going to be hard for you guys. Good luck you can get the loan! All roads just take the thing out.

Yeah we’ll see if we can get it. If not, I guess we’ll do withdraw.

I’m pretty sure you can take a long where your guys at there’s no there’s opportunities for that type of stuff. I’ve seen people like lie, say we’re using it for our home equity because something broke the kitchen bathroom bottle and then turn around and use the money for something else.

I don’t know how legal that is, but whatever I guess. You’re probably not gonna lie. You’re probably come back alright loan is eliminated as sort of option. So you gotta either choose it, withdraw money from your retirement or take a loan from your HELOC. So when you come back to your boss, which is your wife, what do you think?

I’ll be optimistic. She was gung ho for the county line and I think she’ll go for it.

For the loan, HELOC? Yeah. And I would recommend doing that.

I think what I’ll do is I’ll just lay it out, then I’ll try to sacrifice my 401k temporarily, and then that probably won’t work out and then I’ll land into the HELOC.

Yeah, loosening her in a way.

I just can’t share this with her.

Yeah, don’t worry. We’ll probably released this months later so you’ve got a lot of time.

I’ll just look, to hopefully, I can draw on that HELOC that I already set up now any time and when I see a good deal, come by, I’m probably going to jump in.

Yeah and what you have right now, I’m sure it will get you going for the next six months to a year. But you got a lot of equity there so , I would shop around. There’s a lot of disparity between rates and all the values. But what you’re looking for is like 80% on the value, the same rate or better for the most part.

And I think there’s another emotional thing people are like, oh my goodness, this guy’s got 3.2%. I want three, I want to get that. I don’t want to get 4%. It doesn’t matter. Playing a different ball game than most people, because you’re using the money for something else to make more money. I think that will probably get you bonded for a couple of years.

And I think once we get into the first deal and we get that first check, I think it’s going to help me with my negotiations with the boss.

Yeah. I hope so. I really hope so. Yeah. So are we’re good on that subject?

I think the next thing on your list was yeah college savings. So you’re a new father father I’ve taken a conventional road and with the 529 plans and you recently posted about that, right?

Yeah, 529 plans they’re just like 401ks, right? The jacked up thing about them is they keep you within a set of options that they want you to take because they’re high fees. They’re crap. And that’s my only beef with it. If you can self-direct you can self-directed retirement funds. That’s fine. I still don’t recommend doing that. I think you can self-direct your 5 29 self, it’s very limited. If anything, the Coverdell is better. Coverdell is like a self-directed 5 29, there’s more options that you can invest in.

But if you’re investing in real estate pros, tax free anyway, I think that’s why you do real estate. So the gates, all the reason for using this stuff, that’s my opinion. I just think if you invest in cash, you can pay so much less taxes. If you’re smart, because you get the passive to be losses that it negates any of these types of traditional, conventional things.

If you haven’t been tipped off yet, you guys that’s when you get slaughtered with the cows, it’s not a good plan to go conventional in my opinion, but what I would do for education is I would do like an infinite banking policy and just have that as your mark money, especially the kids are a little bit older, just put it in there for safe keeping. But now your kids are younger and my kids like the youngest thing yet for the most part now is the time where you want to be more aggressive, right?

Yeah. So unfortunately I did get aggressive with 529 so at this point, I don’t know how I could get out of the 529 without taking a penalty.

What do you got in there?

I’ve got two kids about 80 grand each.

It is what it is. You can just leave it in there. Start to do, what’s going to do. Not everybody needs to be a 100% like alternative investments. If you want some stocks, there’s your stocks right there. I think that the risk adjusted return isn’t that great. But if you’re trying to satisfy some diversification in terms of different asset classes, there you go.

I would say, maybe stop doing it. You could take it out too, but you already have money to invest, so just leave it where it’s at for now. Just, I wouldn’t put more to it. Does that sound like?

That’s pretty much where I’m at now and I do just designated as like diversification against alternative.

I got some flack for that post, cause like people are like, you’re such a a-hole dare you get rid of your kid’s education fund. Like dude, chill out, man. I have my other retirement and I’ve got all these like money elsewhere just because I don’t call it a 529 plan that you know, it’s not a 5 29 plan.

It doesn’t mean I don’t have a kid’s college, like I’m not heartless other people I don’t know anything about kids. Yeah. So you never want to give parenting advice, but people are like it’s so like it’s very true. Yeah. Very true. Yeah. So for the record folks, I do have a college saving’s plan.

I just don’t put it in that 5 29 plan and I’m sorry if I offend you guys for saying that stuff is nonsense, but it is. You’re putting it in exactly the stuff that they want you to put in with all these big brokerages and their cafeteria garbage options. I’m okay with the 5 29 idea in general, but I’m not okay with the options they gave you to invest.

Very limited!

Yeah, but even with that said, I don’t like the 5 29, because what if your kid doesn’t go to college too? Yeah, to worry about it just make a boatload of money. Something I got really frustrated the other day. A lot of people, especially here in Hawaii. Have a million dollars equity in their houses that are grandparents.

Their goal in life is to pay off their mortgage a million dollars, put it into something I always use AHP. They sponsor the show too, but there’s just an example of a very lazy type of investment fund where you can get 8% I think now when you speak 10%, you speak 12% actually.

Long time ago, if you have a million dollars equity at 10%, that’s a hundred grand a year. That pays for college for three kids today, at private and I forget how much school costs. But I’m like, why don’t you like grandma, grandpa why don’t you get a whole home equity loan and get your money working.

They’re just don’t know about this stuff too but to me is a little selfish because it’s like they’re putting their security higher than they could be paying for their kid’s college today or that could be growing just so much more 18 years from now.

It’s probably bad that I call it selfish. It’s just they’re ignorant to the fact that you can do this type of stuff and if we’re all brainwashed to do exactly what they’re doing right, but I just got frustrated the other day, this is very prevalent,

Very true. Just taking advantage of that gift. You know the gifting.

It comes down to being good stewards with wealth, right? Some people have wealth and they don’t do anything with it. They just squander it for the rest of their life. Other people you know , they understand the risks and prudent debt and they able to have it grow or stay where it’s at.

90% of people or 90% of wealthy family and two or three generations for reason. Alright, good point. . If I were you I know you got other investible funds. I’ll just leave it where it’s at. It is what it is 160 grand in 10, 20 years. Isn’t going to be enough.

They say Stanford and 18 years will be $450,000.

Apparently the side doors closed no, I watched that Netflix special. A bad joke though. The one where all these, like the rich parents were paying for their kids to get in to the colleges. You got to go in the back door and that’s really expensive. It is what it is, with the college stuff for you.

Yeah, I just I’ll look into if I ever need to what’s your on 10% penalty, it’s some money, but it’s not a whole lot.

It’s very similar to some people like have really bad life insurance policies, right? The whole life policies that were just configured the wrong way, their long lost college, high school friends that they never taught. Yeah, it takes them off the lunch, puts them into this really bad policy. Most cases, you can just 10 35 into a new infinite banking, more friendly policy. But in some cases it’s just better just to throw the baby out with the bath water.

Another bad joke too, to just get rid of the life insurance. So the same thought process with the 529. Keep going with it. It is what it is as opposed to withdrawing and starting over again. Yeah. Like the infinite banking comes in because, especially if you have a skeptic spouse, at least that gets your money working 4 or 5% tax-free.

You can sell them on the idea that it’s off the table, litigators, who doesn’t like that and it’s not like you’re putting the money out to an investment where there is perceived risk on, investing in some dishonest person to infinite banking stays. It’s way more I probably shouldn’t say this, but it’s way more secure than any bank or any mutual fund.

It’s a life insurance it’s backed by some of the most like credit rated companies that’s been around since the civil war. If you want anything more secure, let me go to a life insurance company, the good ones, right? The top rated ones, not one of these.

That can be a way, like for somebody in your shoes who has a lot of dry powder. That you’re going to responsibly deploy over the next several years, at least, you’re probably antsy to get it done, but your spouse probably wants to pump the brakes. But as a compromise, maybe just do 50 grand- 100 grand a year into one of these infinite banking policies and invest out of it.

But at least your money is working in that and it’s building up that cash value over time. Everybody over a dollars net worth should have one of these things. It’s a no-brainer. And again, we’re talking to you non- accredited investor who has no money. Don’t do infinite banking.

Don’t get caught up in all the podcasts, marketing hype. It’s not for you yet. There are some fees associated, of course, but in the long run, it makes more sense than that.

Yeah. Cause you’re new to this stuff and share all these ideas. We want to get moving, but yeah, got the ball and chain in a way. The infinite banking is a very logical idea. I think that is very prudent and safe.

Do you have any content on that as far as the background of infinite banking

Yes simplepassivecashflow.com/banking is the place where I through all the webinars and stuff like that. But if people want more in-depth we’ve recorded some FAQ’s, and then if people need like referrals to folks, they can shoot me an email just put IBC in the subject line and I can send that to you.

Yeah, it’s a rabbit hole though. First, like when people come into the mastermind group, is trying to get them to get educated on syndication deals, right? Because the syndication deals is, first of all, you don’t want to invest in a bad deal, with somebody who’s going to steal your money.

So that’s the first thing we try and mitigate. So that’s always like a third of the pop curriculum. Like your first few months are focused on that and then taxes. Especially for somebody in your kind of, income level tax is a big thing, but infinite banking is at the end of the first year, Pete more, most times people who like to lone Wolf and do all this stuff themselves, which I think is dumb because good buck, I’ve took me so long and mistakes and wasted money to learn on my own in my whole, that’s why we have the family office group. Fold your hand and kind of teach you exactly what to do. And then we set you up with people within the group. Who’ve done it already. So you can both build a relationship and a process with that person that you can carry on forever.

Talk, whatever investing or deals do you want to talk about, or, and more importantly, the soft subjects, right? How do you pass this off to your kids? Without them becoming nincompoops.

But then, you talk with them, the pros and cons, how they did their infinite banking policy, why they did $75,000 instead of 25,000. But why did they do $250,000 a year, for example. And then you come up with your own idea, you formulate it, and then we send you off to all the tax legal guys after you’ve already had your plan, because in most cases, if you go off to a professional.

They’re just going to sell you what they’re trying to sell you. There’s so there’s so many things in this financial world, that’s just a bunch of products. You really need somebody who’s going to architect it and that’s going to be you. You gotta be educated in power to talk intelligently and to know what you don’t want.

But yeah, the infinite banking is at the tail end of it. It’s a huge rabbit hole for sure. Huge in terms of burning it. No most people who’ve done it. Say, there’s sort of stuff on it, but just get it then. And don’t complicate it. Just get get like a policy. Like my ch my golden rule is start off with a third of your annual net.

So you guys, I don’t know how much you guys net at the end of the year, but maybe you guys net $120,000 to savings. You could put that to me. Four houses a year. If you want it to, if you want it, if you didn’t value your time and energy, you could buy four axles with that. But my general infinite banking and start off with Elisa third of your debt every year.

And then that way you learn how the infinite banking works. You take loans from that. You invest it, then you have more money. You put it back in there and you learn how it works. And so it’s always good to start off with a little bit of a test investment first and then then go bigger.

My, my first one that I did for myself was $50,000 a year. And then I did bigger after that, after I got the hang of it. But yeah, if you guys net one 20,000 after income minus expenses for a year, do 40 grand every year, but because you have. Like liquidity in a way I think based on the little bit, I’ve refreshed myself in this last, 30 minutes hour talking, I think you should, you guys should probably do 50 to a hundred thousand dollars a year, right?

Because you have all that fullback equity not to check, which you want to do is take that and put it into here for now. You can take it right back with the next day as opponent. That’s the whole point. That’s what you’re trying to do in banking. Yeah. So in fact, I would probably do a hundred grand just shooting from the hip or at least 40 grand a year for five to six years.

I always like to do the shorter period personally. The insurance salesman is always going to try and get you the longer ones. So they get requisitions. They don’t have to deal with you less, every 10 years instead of every six years, but that’s yeah. That’s just my take on it, but we’ve got a lot of content on it.

I’ll just shoot me an email, the subject line, and then I can give you the videos and then I’ll connect you once. You’ve studied up. Okay. Yeah. That sounds good. Yeah, you do something right? Because it’s fun. Stuff is fun. It’s different. And it’s, but it’s totally different. Like we talked about this stuff, cookie. Yeah. I’ve, haven’t heard of it until now. So yeah. It’s interesting stuff. Yeah. And that frustrates frustrating is like everything in mainstream financial advice. If you look up Dave Ramsey, he absolutely heres this whole life thing, afar, he says it’s a total scam. And I’m like dude, you’re not even we’re not even configuring it the way you’re talking about.

And we’re using it for something totally. He says, we’ll get it. If it’s for, if it don’t get whole life, get term life, that’s that’s, what’s like it transformed, but it’s dude, we’re doing it for a totally different way. The wealthy use things very differently. They’re doing this as a way to put money in it.

Suck it right back out as a law firm, ourselves and taking money off the table litigators. That’s all we’re doing. And the fact that it’s like insurance that’s because we can keep it under this what’s called back level. We don’t have to pay taxes. So it’s texting people is what it is.

It’s a text loophole that the Congress people and progress Spain that were just falling if we’re not done. So it makes you wonder who Ramsey’s representing to to poop, right? He’s not representing any. I think he, I think he does a good job. Am and sees the army. A lot of these people, they just cater towards majority of people, the conventional, traditional people, the conventional traditional people are horrible with their finances.

They just can’t seem to save more money than they make. And, or they just don’t make more than $50,000 a year. And I’m sorry, if that’s you, I went to college and I was lucky enough to go. And I’m in the situation where I am. And I think some people in this world are in the same situation, but they play by a different set of paradigms than the people who are still at financial one-on-one level and all that.

So I think Dave Ramsey, I think their heart is in the right place, but it’s totally guided towards other people. Argument about buying a house, not buying house. Like I, I personally believe that you shouldn’t buy a house unless your net worth is two times, three times greater than what the health support.

So if you, if your house is $2 million, you should buy a house to your net worth of 6 million. That’s very unconventional thought. Yeah. House is a Dre. You need to be investing, bring your money. And so sinking in at a house. Not too much just going with the pace of inflation, but for the Dave Ramsey, Susie Orman, and people on the world, a house as a forced savings account, it’s something that they put, a thousand, $2,000 a month to, if not, they’d spend it like little kids. There’s just, there’s paradigms in the world. You need to figure out which side of the paradox.

Yeah, that’s a good point. Yeah. But just do the math. The math, the other day, the math to tell you what to do. Just need to go in with a very different lines. So yes. Bring that paradigm a concept up when I’m negotiating with the boss. Yeah. I do it to myself all the time.

Like I think the biggest thing that I see successful people have is an open mind and they look at something very, without any emotion or prejudices attach, like something that happened to me lately. Like I’m doing this for fun, like this exotic car hacking force. It’s kinda, it’s really cool.

But like the whole idea of leasing a car for some reason, I thought that was a good idea. And that’s too long ago and at least a car a year or two ago, I thought it made sense to me, especially because I was using it for business and I was able to write it off, but what they show me, it was like they showed the numbers, they show how wrong that thinking was.

And the whole premise of all our hacking is there’s a depreciation schedule and it closed and then you want to buy it, but it’s low and that maybe when it comes up or it doesn’t just bleed depreciation as heavily, that’s essentially a hacking at all. But yeah, I was really gung ho about thinking that he says, we’re good now I see the light and I’m sure my ideas would change in the future.

So I reserve the right to change my night. Fine. This is not financial advice. Yeah. But but yeah, anything else? Yeah. The family office mastermind I’ve looked into that. I’m considering it. I don’t think I’m ready yet, but I will probably eventually I don’t think they never ready for it.

I think you just need to do that now. In fact, now’s the time to be doing like you’re starting from square one. Yeah. It’s like shooting arrow. Now’s the time to figure it out, get something with a shooting in the right cow .

I’ll let you know when I am ready and hopefully it’s sooner.

When you got five hours a month to dedicate to something that’s when you know. We have over 75, 80 people in there. It’s not for everybody. Do you want to just keep doing it on your own? That’s cool too.

For me, it’s just deploying my capital. First I got to get through the boss and then I got to put some numbers together, how that investment would return in our household.

I think we have like at least a two X, maybe three X guarantee that you get that first year back.

Cool. Appreciate it! We’ll stick this in the archives with the other coaching calls and then if you guys want to learn more about that family office group go to simple passive cashflow.com/journey and I’ll see you guys next time.

Travel Hacking with Geobreeze Travel

https://youtu.be/kjiVzFbfjRg

Aloha everybody! Those of you guys who’ve been following me for quite a while, it’s been a journey from 2016, doing this podcast. I have always been interested in the financial blogs sphere, podcast space. It was early when I started to read all these financial blogs.

Back then it was silly things like which credit card you would get and you could get these 6% rewards checking accounts. What I would do is I would get these balance transfer offers stick 30 to 40 grand in the bank with all these business and personal credit cards, balance transfers at 0% and make the arbitrage of my 6% rewards checking account as I would go to the bank at 20 degrees outside and ring up 12 transactions at the gas station.

Those are the days where I just would waste my time because money was more valuable than time at that time.

Probably around 2010, I ventured into the travel hacking community a little bit. I went to one of these seminars. Didn’t really enjoy the people because a lot of those people are very scarcity mindset. They collect points, they burn up their time. It’s a hobby. I get it. It’s fun!

It’s like playing an RPG game. Getting points on a video game, but for real life, getting miles on different airlines and using those airline miles in different ways. I know a lot of you guys are into that because if you guys don’t get credit card points or miles you guys don’t spend the money on nice vacations and whatever I can do to get you guys to get those experiences in life.

That’s the point of today’s show is to bring on a travel hacking expert. And this is new to you guys. I think it’ll be a good primer. Some are old to the sport of travel hacking. Maybe in a way I think this would be a good refresher on what’s the newest stuff to be on the lookout.

Hey, simple passive cashflow listeners. Today, we are going to be talking to the creator of geo breeze travel.com and sync up on what’s been happening lately in the travel hacking industry. You guys are probably wondering why I’m wearing this like weird shirt and I’m not in my normal white collared shirt attire.

We just closed the deal in Huntsville and this is their minor league baseball team going up. Probably near one of our apartments. It’s a trash pandas. My dog’s name is Panda. It’s not trashed paddles. It’s trash pandas, but this little stupid panda bear right here, it’s going to make me a lot of money.

Cause we’re going to check in there in Huntsville. Why don’t you introduce Julia on the line here?

Hi everybody. How are you? I’m excited to be here today.

I think a lot of people listening they used to be into financial blogs. Maybe they’ve moved on as life has gotten busier as their network has grown buying rentals, going into syndication deals, but I can speak for myself.

I selfishly brought you on here because you’re a travel hacking expert and I’ve been out of the game for quite some time. I remember over 10 years ago, I went to FTU was that frequent travel university or something like that. My friends and I was like into all this getting all these credit cards getting points.

Back then you could get like 0% balance transfer and then throw them into a 6% savings account and just chart it that way. Let’s give people a little bit of like high level. What are we talking about travel hacking?

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 cash back, 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 to cash in those points at the highest value and it’s like a video game. It really is addicting. It can be a time suck. Maybe let’s start off with, you have a list here of some highest and, or biggest bang for your buck type of tactics. What’s at the top of your list, Julia?

It’s not a game just 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. Some people will make the mistake of researching different cards and saying, I’m going to get a Chase card and then an Amex card, and then a Citi card, a Hilton card, a Marriott card or United card 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 a 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. Make some travel hacking friends and also work backwards to get to your goal faster.

And then, at some point you have to get some credit cards, right? Where a bunch of points. I think a lot of people in our sphere, we know about the old chase Sapphire reserve card, but is that one of the best today? Or what are the cool kids using?

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 of yesterday or two days ago, March 21st, they just increased the signup 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 the five over 24 rule. Which says that if you have already opened five or more accounts with any carriers in the last five years, Chase is just going to 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 and hate relationship with Chase. I do the tradeline cooking thing where I kind of piggyback authorized users of my cards. People want to learn more about it, go to simplepassivecashflow.com/tradeline. I have a little e-course on that. But Chase cancel all my cards so not like that but nominal rewards credit cards. It’s a 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 to log about it. It’s good that you see a company actually has checks to make sure that there’s no weird activities that just bind. I think it’s good business, I don’t know. It’s like surreal but I applied Chase for data 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 Westpoint’s 200,000 points and which 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 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 costs 250,000 points and your points were just sitting there and never use.

Those aren’t going to accrue interest on points. You have to earn them and then burn them pretty regularly. So you want a high cashflow game.

Yeah, I was being an idiot. I don’t know what I was doing. I just wanted to see the points go up again that’s why I was thinking.

A lot of people 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.

Yeah. I was like that precious guide or what are their rates with my points, but how do we use them? What is the biggest bang for our buck to using these points? Since we get a book, a couple of hundred thousand points or so.

There’s a lot of different sweet spots that you can use for these points. I would say you should definitely learn about transfer partners. A lot of people, once they get the Chase card, they just always go through the Chase travel portal.

And then you’re going to get a set amount there where it’s maybe 2 cents per point or something, but if you could figure out how to transfer them to the different transfer partners, you can get a lot more bang for your buck there. One of them are advanced tricks. For example, if you were to Google United excursion as perk you can

book some kind of triangle itinerary, let’s say from New York to London, to Paris, back to New York and that middle leg is going to be free for United. And so you can super hack that in different ways where I had a hangout and a meet up last night with some people who listened to my podcast and I showed them a trick where you can do two little domestic flights.

It’s only going to cost 10,000 points total and then you just get a free flight across Africa or something. And you save yourself thousands of dollars if you learn the different redemption, sweet spots that way.

Once you’re getting into that type of stuff, to me it gets a little freaking complicated, right? Like all this like field dumping and all these chicks like that at some point, is it, at what point does it make sense for someone to just hire somebody like yourself to book that trip for you and how much do those things take costs? I guess Yeah.

So I would say if you’re the kind of person where you really like watching YouTube videos and really like reading about award charts and learning about fuel surcharges and all of those transfer partners, some people really enjoy it. If you’re a person, go ahead and spend a 14 hours doing DIY. If you’re like.

I really just need to get this free trip. And I don’t know where to start. Definitely hire somebody like me or travel hacking coach. And I do 30 minute free calls all the time just to get people on the right track. And I say, okay, here’s your rough plan? Please use my credit card links. That’s how I get affiliate income.

Or if they want to actually hire me to do a full 12 month structured plan to say, okay, each month, I’m going to check in with you. This is the car that you should get. Here’s where you should be. Just to stay on track and meet the sign up bonuses, because that’s where most of your points are going to come from.

I do that as well. And as far as how much it costs right now, I charge 125 for my coaching package for 12 months. And. That includes two video calls and a monthly check-in for a year, just to make sure you’re staying on track with the credit card plan that we put together so that you can earn the most points.

And then you’re not floundering around and being like, I don’t know what card to get, and I don’t know how to use these points once I earned them. So those are the kinds of things that I help people with. Yeah. So this is makes, makes sense for someone like myself. Like I have a halfway decent amount of points.

I think I need help on the backend like I kinda know what cards to go and get. I love to DYI because I’ve been in tradeline hacking and I’m always trying to get new cards cause after a couple of years and I can start tradeline. I get that but where my big blind spot is I don’t know how to use the points.

So to go someone like yourself I’d just be like, all right I got 150,000 points. Here’s where I’d like to go. Can you just book my flight for me?

That’s what card currency is it with? Is it American express?

I think that my American express, I try and stay with the cash back cards on that more, but I think I have a halfway decent amount of like airline.

I fly a lot to Dallas, so like 160,000 with them. We’ve got like 80 with United and then some with Alaska in September, actually butterfly with Delta too, but I never get enough. Here’s my problem, I’m always traveling for like business. I’m always writing it off. I never really traveled like a hundred percent personally.

Yeah. I haven’t done that for a while, but that’s where I would like to use my points because I can’t deduct that price of that flight. I’m just thinking like most things you hire the expert, you’re going to get the biggest bang for my buck for those points and then we’ll tell us two women.

Maybe tell me how you look at like, all right. Lane scholars points. What would you do? How would you book Meyer to Kurt for me?

Rather than saying, okay, we have all of these different points. Let’s see what to do with them. That’s the position we’re in now. So I could figure out an itinerary that way.

But if it’s somebody who’s just starting out, I would say, avoid that situation. And then instead say, where would you like to go on your personal trip? And let’s work backwards from that? You’re like, what do I do? I have some Delta points. I have some United points, so we could you’re out something like that.

And look at different routing maps and say, okay here’s some sweet spots if you want it to go to this city. But really the best points to start off with are the super flexible ones. The chase points, because they transferred it 28 different people, I think. And then American express is really good too.

I really like the American express points because. The membership rewards points can be transferred to ANA airlines through Japan. And they have a program where you can fly around the world in business class for let’s say 125,000 points or so it might vary a little bit. But 125,000 points, which is two credit card signups.

You get one Amex platinum, one Amex, gold, you have enough points for this and you can fly around the world like in stop in eight different cities, all in business class for just that. So those are the kinds of sweet spots that I can show people how to do and it’s very easy. You don’t have to do 17 different cards, which I think some people fall into that trap of if you don’t know how to do the award side of it. You’re suddenly having to open a whole bunch more cards and spend a lot more effort to get the same kind of redemption.

And I tell people like I’m like a recovering frugal cheapo. There’s two things that I’m fascinated with these days that’s Ford Raptors, these big monster trucks. And YouTube videos of people in first-class like Singapore airlines, Emirates and I don’t know why. But I think it’s really cool! You can get like, How much points do you need to have that kind of experience? And because those are like $10,000 flights, right?

Oh yeah! They go for more than $10,000 so it completely depends how far you are flying. I’ve seen them go for as low as 30,000 points for a one-way short segment.

If you just wanted to do a trans European flight or something. From like Paris to Greece. If it was six hours or five hours or so you can probably find some good sales for 30,000 points, which is half of a credit card sign up most times.

Because I’m here in Hawaii and I understand how you use the American carriers, but I think where I would need your help would be like the foreign carriers, just like the Emirates or ANA.

How do I get to use my points of those way better areas? So I would say researched the Star Alliance transfer partners, and you can go through chase with a lot of those. I like to search for award availability on united.com. It’s probably the most user-friendly and then you can also see the different transfer partners with United.

If you’re trying to say, okay, if I want to fly from Hawaii to tokyo, that’s probably gonna be Ana airlines. Which you would want American express points to transfer to that. But if you want it to do like Cathay Pacific or something through Hong Kong, down into India or something like that, then you can transfer some chase points over.

You can do some research on Star Alliance . So it involves knowing a little bit about the different routes and the transfer partners and also where you want to go.

Yeah. What’s the website that everybody’s using these days for all the route maps stuff like that, where they do, they just go to United or American?

I personally just use United and then I try to see what transfer partners are available from there. There used to be a site called award hacker.com that you could use to try to figure out the routing maps. It’s not that good. Honestly, it just ever since the pandemic, all of the routes have changed.

They haven’t been able to update their website because the routes keep changing so often. So I would almost say instead of a website, find a person who can help you with these types of things. I link to all different kinds of people who do this kind of work in my podcast, where I interviewed travel hackers from all walks of life who are able to get super cool redemptions.

What’s the coolest experience you’ve gotten as a points?

One of the coolest ones I got was super easy. I have the Hilton card where I got a free night certificate that I could use in any Hilton hotel in the world. Pretty much. So of course the next question was what is the most expensive hotel where I can use this.

And it was at the grand Wailea in Maui, which starts at $500 a night and it’s so fancy. Have you been there since you’re in Hawaii?

I’ve seen it. I don’t go anywhere near, cause I probably cost like locals, like 50 bucks to park your damn car so I stay clear those places.

It’s super expensive, but I had a Hilton free night and not only did I get the free night with a standard room, but I wrote to the hotel in advance and said, Hey, if you have any upgrades available, I have status with Hilton.

Can you do me a solid, an upgrade me, do a room and they ended up upgrading us to a $900 a night suite for free. And it was overlooking the ocean. It had a balcony and it came a free breakfast. It came with free dinner. They wheeled in a cart of all these local Hawaiian snacks and champagne and it was incredible.

Probably saved a thousand dollars just off of that one night and just have one credit card that did this. And so if you want to, I can make a link for your listeners on where to get that email template that I use. Oh yeah. I downloaded that from your website. Yeah, we can put, we’ll put the show notes on small passive cashflow.com/credit card, and then we’ll link to your website so people can download that.

But this is the cool thing. Like you had this like template of what you email hotels to get like all the free goodies and stuff like that. It’s kinda reminds me of if you Google the a hundred dollars trip and Las Vegas or fifth or $20 trip, I think it’s now a hundred dollars, but you tip the guy where you stick a hundred dollars and then they might give you an upgrade.

This one doesn’t cost any money. This is just a “Hey, I’m celebrating a special occasion. If you have any availability here’s my reference number for my confirmation. Here’s my loyalty number”. And so it’s just the information to provide hotels to make it as easy for them as possible to make a mark on your hotel reservation and say ” Oh yep, you’re here now we do have an upgrade”.

So that they’re ready for you. Especially do this if you’re celebrating a honeymoon or an anniversary or something, because the hotels really do want to be nice to you, but it’s almost just rude to show up and be like, we’re on our honeymoon scramble now and get it figured out for us with an upgrade.

If you’re being a little bit considerate, giving them some time to figure this out, email them a week ahead or something so that they can make some arrangements for you and they’re not scrambling. Yeah. Like when you arrive and processes, yes. It’s so much nicer for the hotel too, because then they’re not scrambling.

It’s nicer for you because it increases the probability that you’re going to get an upgrade. So have these processes in place templates are great. Any other thing, cool. Chick like that you want to share with folks that one’s a good one.

What else? Really? The other one is just connect with other people and there’s so many free places to do this.

There’s Facebook groups where you can ask people different tricks. I have my free 30 minute calls. I have monthly Hangouts every month where all of us will just ask questions of each other and then group think ways to hack things and it was like $5 to join. And I really only charged money to keep a way people who don’t care.

And also that the people who had to pay at least a little bit will actually pay attention and use the advice that we give. So those are some of travel hacker.com or that website, or like those credit card websites, those forms still good. I know what was another one that I used to stat wallet went away.

I haven’t been on any of these. I always just connect with individual people who run these websites. There’s somebody called pack your bag with points. He runs a Patrion where he tries different credit card techniques and does different experiments and then lets us know which ones will get you in trouble.

And which ones work. There’s a guy who runs a website called straight to the points and he is like really into researching all of these award charts and then has a paid newsletter where he just searches for award availability. There are two first-class seats on these different flights go grab them.

And so you, he just spends his time searching for these award availabilities and then emails his email list about them. So those are some ways to get the next level hacks is probably like something you pay a little bit of money for. You’re going to get a lot of savings.

And that’s a good technique guys.

Like just don’t be a free loader like it’s just a big difference between free lowers and people that pay a minimal. It’s a good appreciation. But let’s let’s end with this, like ciao hacking has sometimes connected with the dark side of the world, which is like manufactured spent. Can you maybe just highlight what is that for people who don’t know.

Yeah. So manufacturer spending for anybody who doesn’t know is a way to maximize the number of points that you are turning through your credit card. So you’re spending a lot of money or it looked like you’re sending a lot of money, but really it’s going straight back into your bank account. So it’s almost like this closed loop, but you’re getting points for running things through the loop.

And in the past, there have been different techniques to do. This. One was when the U S mint used to sell gold coins for a dollar, you would buy a $1 gold coin. With your credit card, they would mail you a bunch of gold coins, and then you would just take them to the bank and redeposit them in the bank. So you were basically buying money and getting points for it.

You can’t do this anymore. You guys know who you are, you guys did it. I know you guys did it back in the day. Yeah. Back in the day, that used to be a thing. So with manufacturer spending, there are all sorts of. Questionable things that people have done in order to turn all of these points. I have multiple podcasts episodes where people laugh at themselves about getting the police called on them.

If you do enough weird gift card things, people will assume you stole the credit card. Or that you’re money laundering or something like that. So it’s sometimes associated with. The dark side with manufacturer spending there, but I have a really good trick for everybody. Who’s listening on how to do a manufacturer spending technique that I would actually encourage because it does good in the world rather than destroying things.

So there is a website called kiva.com, k I V A. And if you haven’t heard of this, you can loan money to small businesses who need money for just a few months. And so you’ll learn however much you want $500. It could be less, I think it starts at $25 and then you loan some money with your credit card so you get points for the loan.

And then six to eight months later, they’ll pay you back with PayPal. So you’ve redeposit that into your bank account. You have to float the money for a few months, but I do this all the time because I feel good about helping small businesses. I get points on the credit card. I never actually had to increase my budget in order to get those points.

I just have to wait six months to get the money back. So that is a good way to turn a lot of points without spending way more money, because some people, they get these credit cards and they’re like I’m just going to buy a whole bunch of like purses and shoes so that I can get more points and that is not.

I repeat everybody. That is not how you should approach this game. Do not buy a whole bunch of stuff from Amazon that you do not want or need just to get points, approach it strategically. I just got a text message here from Bob. Bob wants to know what the interest rate on that Kiva loan yet. So you don’t make any interest.

You just get paid back the principal amount. They do charge interest to the people who are borrowing, but that’s how they do their operational costs.

You’re doing a good thing and you get all the credit card points for it. So if you have to meet a minimum spend, like if you’re earning 80,000 points for $4,000 of spend and you’re like I’ll have $4,000 worth of spend to do, what am I going to do? And then you just loan out $4,000 Kiva.

How quickly do they pay you back? The shortest time is about six months. Okay. Because I got a card that does 2% for general stuff. And all that does to your five to four, like just 2% back on everything. I would say really it’s only, I only do this. If I’m meeting a minimum spend and don’t have a good way to meet it for just general everyday spend, if I’m like, okay, which card do I use for this?

There is an app. It is called card pointers and it answers the simple question. What car do I use for this? So you just tell it all the different cards that you have, and it will say. Out of the cards you have currently available in your wallet. This is going to be the Westland to use for groceries. Use this one for guests.

Use this one for gross for restaurants. So card pointers is a really good app for that. Yeah. I will actually use the blue cash preferred card or American express, excuse me, 6% back groceries and uncle and buy like a thousand dollars worth of Amazon gift cards and other random gift cards from Safeway.

And I have a little shame. That’s what I do. Oh, no, no shame. That’s a really good strategy. It is a good idea. If you’re going to just buy a whole bunch of gift cards from the grocery like that, to also actually mix it in with groceries so that you don’t look like your money laundering, actually also buy groceries and charge those first.

Make sure the first thing going onto your receipt is like a banana or cool. I feel accepted as a safe place. Yes. Yeah, no judgment. No, this is encouraged because this is how you actually optimize points and how you approach it strategically by saying, okay. If I have to go to target anyway, rather than just getting my one point per dollar at target, I should go to the grocery store, get six points per dollar on target gift cards, then go spend those gift cards at target.

So some people are like, Oh, it’s really inconvenient to add in that extra step, but you can get so many more points that way. If you. Figure out these additional steps that you can take. What are you like someone like yourself for I have 20 credit cards. So I think I got them all almost once you get to end game and you there’s really, you’ve gotten all the bonuses right.

For these new cards. What do you do is manufacturing spend you’re really only means to get points. No, because they’re always coming out with new cards and new products. You can always close down a card and then get it again at some point in the future. So one of my first cards when I got into this four years ago was the chase Sapphire preferred.

I used it for a couple of years, got some other cards closed down my chase, Sapphire preferred, and then I’m going to get it again in a couple months because. You have to wait 48 months since getting the bonus last time. And so it’ll be right at that four year Mark. So then I’m just going to open, reopen a card that I already had before.

And so if you’re slowly turning through cards like that, you can keep sustaining the game. Plus they’re just always opening new cards. So you’ve got like a tracker on it, like a sauna four years later to get it. I one’s just burned into my mind because it was my first card, but there is a tool called travel freely.com and it’s a really good calendar app where it will send you email reminders about when your minimum spend is going to be due about three months from opening the card.

You’ll send you calendar reminders and email reminders when it’s about to be your one-year anniversary with the card or any year anniversary with card, because your annual fee is going to come due. So you’ll get an email that says, Hey, do you still want to keep this card? If you do, you’re going to get charged $95.

If you don’t want to keep the card, then you should close down the card. So you’re not doing, you’re not doing any manufacturer, spend yourself. Other than just keep It’s mostly just Kiva. Yeah. But that’s just where your minimum spends to get the bonus since. Yeah. Just the minimum spends. And then also, if any of the cards are doing some kind of spending challenge where if it has a special promo of this month, if you spend at least $1,000, you will get an extra 5,000 or 50,000 points or something, then I’m like I didn’t have anything planned for a thousand dollars.

I’m just going to turn it through Kiva. So sometimes I do that. Yeah. 2%, 2% for six months. So 4% a year. Tax-free right, because they don’t tax you haven’t yet actually on this stuff. I don’t know if anybody’s heard of this, but there was. A couple that was churning through like $300,000. In two years, they got cash back and through manufacturer spending and the IRS says they have to pay taxes on it.

So keep that in mind. Don’t go insane. Don’t turn through $10,000 a day or anything like that. That’s why I always encourage, just do the Kiva thing. If you need to meet some kind of minimum spend Or else you could get eventually caught and have to pay taxes on it. But there are people who try to make that their living is just to turn through points and lots of different ways.

I’m of them more legitimate than others and grab the cash back forward. And then they live off of that. But. Everybody who’s listening to this might be thinking, Oh, that sounds like a genius, like efficient thing to do. It is not. It is, you are driving all over town to get gift cards, to turn into money orders.

If your town even still allows this because it’s very location dependent. And so you are driving all over town. Because no store is going to let you just buy $20,000 in gift cards. They’re going to limit you to $500 or something each time. So it gets really inconvenient. You have to go back every day.

And I think a lot of people, when they’re doing this game, don’t take into account how much their time is worth to be driving around the stress of doing this. People do get their cards shut down. They get their bank account shut down the same banks where they might have their mortgage. So that would be very unfortunate.

You could get kicked out of your local Walmart or grocery store. They might just say you’re not allowed to shop here anymore. And that would be very unfortunate. You could get the police called on you. That would also. Very unfortunate. So I know I’ve been there too, because I’m very into the whole optimization efficiency productivity thing.

And it seems like manufactured spending is like the next logical step where you’re like, Oh, I got to sign a bonus. This is the awesome hat. What’s the next step? Is it manufacturer spending? It is not, that is not the next step. The next step is learning how to strategically allocate things and how to learn a word charts to optimize the redemption portion.

That’s the next piece is don’t just keep trying to say, I’m going to earn as many points as possible. Spend time researching how to optimize the points that you are getting at a reasonable rate, fun stuff.

But yeah, I think once people get to, simple passive cashflow, they start to invest in more passive opportunities and get away from being the landlord. It’s where I’m at in my life. Yeah, we’re busy, but stuff is fun. So I’m trying to find that, get back in the game and trying to find that like minimum effective dose that 80, 20, or maybe the 95 five in this case where I can.

Job a little bit more and have some, extra stuff on the side. It’s perfect too, for people who are into house flipping and real estate, because if you have to go to home Depot a lot, or you have to go to Lowe’s or really do anything with home improvement, because you’re doing real estate, you can get a ton of points that way, just from buying different supplies and.

I don’t know if anybody’s maintaining an Airbnb or something like that, but it also opens you up to a whole bunch of the business credit cards, which are really lucrative when it comes to points.

If you guys are gonna spend the money, do it. But you’re not going to spend the money again don’t make the transaction. I think we always have to end with that common sense.

Yeah. Don’t buy things that you don’t need just to get points instead, strategically figure out how to get more points from what you’re already spending and by doing things like the key metrics.

Any last thoughts, and then you want to give your contact information out there?

You can read julia@geobreezetravel.com. My website is geo breeze travel.com. My podcast is the geo breeze travel podcast, and I am most commonly on Instagram, my handle is also geo breeze travel. And if you guys want that email template to get a whole bunch of free upgrades, I’m going to give that to Lane to put into the show notes.

It’s at geo breeze travel.com/download-gifts. And if you go to the website, it’s going to pop up anyway with it. Hey, do you want this thing sign up for it, but I’ll put it in the show notes for you too.

W e’ll put it at simplepassivecashflow.com slash credit card. And if you guys liked this stuff check out tradeline hacking, simple passive cashflow.com/tradelines but have fun with this guys.

Don’t get in trouble but remember your highest and best use is like yet your guys’ day job. I know you guys are fortunate. You may not like it, but it beats flipping houses and having a second job. Thanks for listening everybody. We’ll talk to you guys next time.

Creating Community With ApartmentLife.ORG

https://youtu.be/7IHIEHqI__w

Hey, simple passive cashflow listeners. Today, we are going to be talking about something we’re doing on a lot of our properties and some tips for you landlords out there to increase the community at your properties. Ultimately, it’s going to lead to higher rents and better revenues for you guys.

If you guys haven’t yet joined our club at simplepassivecashflow.com/club. We don’t bite, it’s free. I don’t know why you haven’t jumped in and hung out with us yet.

The new California SB nine bill. As you guys know, California has the population is increasing and there is a lot of homeless there. Basically, the way they used to have before is there were a lot of these single family home neighborhoods.

It’s one of those bills where it’s trying to distribute wealth and trying to get these traditionally single-family homes to be duplexes or multifamily so it can allow for more dense population growth and lower housing costs. What I think it’s going to be doing is opening up California.

In the short term, it’ll relieve some of that need for housing. A lot of these things take a lot of time and a lot of people freak out when they see stuff like this, they’re like,” oh my God, world is ending the California real estate market is going to crash because now you have all these single family homes now double in model supply and flooding the market”.

It doesn’t happen like that guys. In a year, I don’t think you’ll see a decrease in prices because I still feel like there’s a low enough supply and there’s a decent amount of demand so I don’t see, you’ll see prices go down at all, let alone crash.

But I do think that it’ll start to help out the situation where people need that dying middle market and the lower middle-class housing, or maybe it will not do anything, who knows? But I think the one president sending thing with this whole SB 9 California and Oregon are typically be durable, proactive states with these types of things where you might start to see this other more neutral states where they start to break open a lot of old money neighborhoods and bring in more debts building in those areas.

If you’re a rich person in a single family home neighborhood, you probably don’t like this. But for rest of the majority of the population probably allows and opens up the market a little bit. A lot of people are talking about this last week if you haven’t been paying attention, there’s a bill going in Congress right now to change many things. What this is they’re going after a lot of IRA owners and supposedly the rumor is this may or may not impact solo 401k folks. And so the big changes that are supposedly. Coming down the pipeline.

We don’t know yet and been telling people at my inner circle don’t freak out yet. Don’t be like these guys who watch YouTube all the time. I guess you guys are watching this. So keep watching YouTube. It’s fine. It’s good news. Good entertainment. Congress is saying now you guys can’t invest in their self-directed IRAs of private placements and syndications, which is jacked up in my opinion because it’s like how dare you tell us what to invest in. Some people who are the conspiracy theorists are saying, “well, it’s because the government is getting in cahoots with all of these companies like Vanguard, Fidelity, TD Ameritrade. It’s force them into all these garbage retail products where there’s high fees”.

Maybe that’s the case. It probably is the case, but I just find that connection loose a little bit. But what they’re saying, for those you guys who are investing in your retirement accounts, Lane told you a long time ago, not to do this stuff because I don’t know why you would want to invest in a retirement account into something that’s tax advantage already.

You invest in use retirement accounts for things that are non tax advantage, such as, like crypto, goes up but you gotta pay up bit lower taxes which is why you put it into your qualified retirement plans, such as this or things where you don’t get the bonus depreciation or even passive losses, like hard money lending, which is ordinary income.

What you want to be doing with iRA’s is those types of crypto or not tax advantage things. I wrote a really long article and it made multiple videos on this. If you go to simple passive cashflow.com/qrp, if you guys want the whole argument email me, lane@simplepassivecashflow.com. I’ll give you the big blurb of why I’m not a huge fan of investing in retirement accounts, unless you make over $330,000 adjusted gross income and you already have like maybe more than half a million, million dollars in your IRA. If you’re both of those two such criteria, various portion of people out there where it actually makes sense to have a solo 401k or a qualified retirement plan or self-directed IRA even a Roth case, but a bigger topic. But anyway, going back to the news here, people are like “if you’re gonna not allow me to invest in private placements, what am I going to do?”

And then people are like freaking out. ” Oh, my God. I’m going to have to liquidate my positions”, and keep telling people this hasn’t been signed into law yet, but supposedly what they’re saying is they’re going to give to people two years to transition out of the IRA and to dispose of those assets.

Or you can just take, do what I said, you know what I told everybody to do it. Just take a distribution, pay the taxes and the penalties. It’s not that much, any way.

This will probably change a lot of times that they’ll put something out there just for negotiation to get something else and some other. And call me asking why is this all happening?

You can think uncle Peter Thiel backdoored a lot of like class B shares of PayPal and created like a $10 million plus IRA. And he’s screwed the system. And now the system is looking to get back at him. Unfortunately, the millions of Americans who use a retirement accounts as a mechanism for sheltering taxes is also being collateral damaged.

What I personally think they should do to just fix the Peter Thiel’s of the world is just put a cap at $10 million on IRAs. Most of us fit under $10 million in the IRAs so that would solve that problem. But again, why are they not allowing people to invest in private placements?

I dunno, maybe that’s again, that’s the conspiracy theories out there that think that it’s possible trying to force peopleinto this retail, mainstream wall street products.

If you guys have any questions, comments, type it into the comment box below, I’m sure it’ll make people angry and probably wondering what to do. Well email your Congress person, whoever that is. I’ve never personally done that before, but supposedly that’s what a lot of people do.

I have Pete Kelly here. If you guys want to go to apartment, life.org if you guys want to Google their website, also take a look at what they’re up to. Welcome Pete, thanks for jumping on.

Thanks for having me lane.

So what is apartment life? What is the service that you guys provide?

Sure. Back up a little bit, we are a faith-based nonprofit that’s been serving the multifamily industry for 21 years. And so we help apartment owners and operators with two of their greatest needs, which is resident retention and resident satisfaction. And we have a program that saves our average client $188,000 a year and turnover, marketing costs and staff retention. And the way we do that as we address one of the biggest needs that residents are facing, which is loneliness.

Interestingly enough you’ve probably realized this since the pandemic, but America is dealing not just a COVID pandemic that they’re dealing with the loneliness pandemic. It was bad before the pandemic, but it’s gotten a lot worse since then. In 2019, the insurance company Cigna found that 60% of Americans would describe themselves as lonely.

Now, initially you may be thinking, okay, I’m an apartment owner. Is that a really big deal? If you are an apartment owner, that actually is a really big deal, because what that means is that your residents don’t have any roots in that community and it’s a community just down the road offers a good enough rent incentive.

They’re going to pick up and move and go to that community. What we found is that the more relationships an apartment resident has in their community, the happier they are and the longer they stay. The magic number seems to be seven. If seven of your neighbors, you’re almost twice as likely to renew your lease.

We have a program that facilitates building relationships and apartment community. We have two models: we have an onsite model and an off-site model. The basic idea is that they create this environment where people actually know their neighbors, they feel connected, and they do that through welcoming people throwing parties and events, looking out for opportunities to care for people, connect them to one another. And as they do that, it’s just the sticky community where people love where they live and they don’t want to stay.

At some point, resurface countertops, new flooring, nice stainless steel appliances only can take you so far and especially when competition is getting a much higher for the apartment owners or real estate investors perspective, tenants are gonna go to where the best value is and that value just doesn’t necessarily mean that box for the house that they live in the community.

Whether it’s, as the business owner, you see this as your responsibility or not, it is what it is. And this is where we got to a certain point. We would take over an apartment. We would do all the things you’re supposed to kick out a lot of the deadbeats, the shady characters and the way we feel is that benefits the greater community. That’s what most people want. They want those people out, right? Rehabbing units, exterior improvements, playground equipment, all those such new clubhouse. They start to put the money in, but the hard thing to get the property managers on board with all these extra curricular activities that didn’t really hit KPIs.

A lot of our properties we use third party property managers on. We hold their feet to the fire in terms of expenses, how much revenue, how much they’re leasing. Hard KPI numbers but it’s really hard and for those of you business owners out there who have staff or employees, you guys know it’s really hard to keep people accountable to these more softer KPIs on trackable KPIs.

We decided to bring in apartment life folks into the apartments in order to focus on this one aspect of the business and to really give it the emphasis that it really needs. These are the things like a mother’s day, barbecue or Easter egg hunt. It was really hard for us to get the property manager to do that type of stuff, because as things get busy, what’s the first thing that gets thrown to the wasteside.

Pete, I want you go over those two types of models, like how it works coz the first thing I thought of is ” Hey, this is like those two teenagers of the college kids in the red bull car that run around and spread joy and give free red bull around”. This is kind of the same thing.

It’s like that only they’re there to stay and they keep coming back. Our two models that I mentioned, one is the onsite model and what we do is we place a couple that lives in that community. They’re like the welcome wagon like they agreed every new resident when they move in, they throw all the parties and events.

They look for opportunities to care for people. Sometimes it’s the birth of a child, sometimes it’s a layoff or maybe a neighbor’s car broke down in the parking lot and they just help them out. And 90 to 120 days before that residence lease has set to renew, the team will go by and visit them again and just say, “Hey, we’ve really enjoyed getting to know you. We’ve liked, the feel of this place. And we’re just wondering, are you thinking about sticking around for another year?

As they did that time and time again we see retention go up. We’ve done focus groups actually on this. We’ve sat down with residents and said, “Hey what was it that motivated you to stick around? To what degree did the community make a difference?”

And I can remember one focus group out of South Carolina they said,” rent went up by 18% this year and we’re still here so that tells you how much we value it. That’s the on-site.

Those two guys are they like undercover? Does everybody know that they work as an extension of the property management company or apartment life, or are they seen as undercover, like field tenants that happen to give you a helping hand when you move in to carry your boxes in?

We come and we represent the management company and so rather than doing it undercover. We want the management company and the owner to get the credit for the program and so we just say, we’re apartment life. We’re here on behalf of your management team. We’re also residents. So we also live here.

And so they live in that interesting spot where they’re representing the management company but they’re not technically part of the management team. They’re a third party but they live there so they’re also a neighbor. And so that’s why we love the onsite model is because it’s that mediator between the two entities.

And so residents often will tell our teams things that they won’t tell the management company. And so they’re in a wonderful place to get Intel.

Even though in some cases they are wearing the polo of the third-party property management company.

They are but they relate differently because they really are seen as neighbors and friends. So I think about this one woman in Houston, her name was Kathy, single mom. The team went by to do a renewal visit with her and they were friends with her. She came to all the parties and events and said, “Hey Cathy, are you thinking about sticking around? “

She goes, “no, actually I’m not. I’ve had this bug infestation that the management has not been able to address and I already put down my deposit on the next place and they’re like, oh gosh, we’re really sorry to hear that. We’ve just really enjoyed getting to know you. And we’ve loved getting to know your daughter. And so they politely left and then she wrote him back that night and she goes, I’ve been thinking about you guys ever since your visit and the kind of community that you’ve built here.

And this is the kind of neighborhood I want my daughter to grow up in. And so she goes, I decided to let go of my deposit and then I’m going to remain my lease. And so that’s an example where maybe she was frustrated with the management company, but she didn’t voice it quite as directly but because there was a neighbor there that she knew was associated with the management team. But she viewed them in a different light.

Yeah. Like your resident your RA back in college dorms in a way it’s an intermediary, but understand your guys’ business. Like the people are those intermediaries are they typically younger people or I am assuming they’re getting free rent, that’s part of their compensation? Is it to help the people in those situations?

The economic benefit to our teams is the reduction of rent and that’s, what’s in it for them. I would say our two biggest groups of people who do the program would be young marrieds either without kids or just with one or two young kids.

And then the other largest group would be empty-nesters. We’ve had several empty-nesters that have sold their houses or rented their houses out and said, “Hey, we wanna go back to living in an apartment community. We don’t want to have to sweat mowing the lawn, and we love the idea of getting to know our neighbors.

So they’re usually like pretty extroverted people and you just find them off job boards. Unusual job description, right?

It is! Although we can promote it all kinds of ways, the best source of teams or other teams and so we find that the highest quality coordinators come from other coordinators who tell their friends about it and ” Hey, you would be great at this”.

I’d say the ideal profile, if it’s a married couple, one of them, as you mentioned, would be extrovert. The other could be extroverted, but what we really need is at least one person who’s administratively gifted or organized because there’s a reporting function to what we do, because we can do all kinds of great things.

But if we’re not recording that and sending that back to the management team, they don’t have any idea of what’s really going on there and they don’t know how to quantify the value of the program.

I’m selfishly interested in how you do this because trying to get a little bit better outreach with on the investor relations side, see what people are, what we can do to help.

And as you said, most of the times, the example with the person who had the bugs or whatever infestation, they didn’t say anything, right? That’s very typical of clients. Of course you have the 5 to 10% of people who just complain about every little thing, but the majority of the people are just good citizens.

They don’t speak up. So what is like your guidance on those, your employees? Is there like a spreadsheet where they go down every single unit and they need to have a touchpoint barcodes for them to sign scan? What is the, how do you keep them accountable?

We have an in house tracking system that we use where they can do it in real time or they can do it at the end of the month but they have to do it at least once a month record everyone that they visited. What their sediment score was when on the move in so if they’ve visited somebody, they’ll weave it into the conversation, “basically on a scale from one to five, how would you rate your move in?”.

And anything that is lower than a three or lower that automatically get sent to the management team and so that they know, “Hey, here is a retention alert”.

Because what we find is that people are already making the decision to renew within the first month of living there. And so if there’s anything that the team can do onsite to improve that experience, we want the team to know about that and so that’s one of the things we do. We have an in-house tool that the teams log in and record all this but we also partner with Modern Message. And are you familiar with Modern Message?

It’s an interesting gamification, a tool that has become very popular in the apartment industry, but it’s basically an app or a website that rewards residents for engagement. So you probably have some kind of hotel reward system.

Let’s say you’re a part of the Marriott and every time you stay at the Marriott, you get points and then you can redeem those points per stay. Modern Message done is they created a similar tool for apartment residents and so we partner with modern message. There’s electronic tool and then our team encourage residents to use it.

For our clients that have Modern Message, some of the reporting is actually done through the modern message app and we struck up a partnership with them so that at the end of the month we have an API that pulls the data from modern message and we can print it up in a PDF that’s sent on to our client.

Pretty advanced stuff and then I think that data gets fed in with the property managers, as leasing comes up maybe influences dynamic pricing, maybe it doesn’t. But what about the workload of these people? Is it expected to be a 40 hour day, a week job or meant to be more part-time for them?

This would be a part-time role that they do and their nights and their weekends. Because when you think about your average apartment community, most of your neighbors aren’t around until the nights and the weekends and so we look for people who already have regular jobs, but they’ve got some margin in their life at nights and on weekends where they can serve the community.

Again, one of the dynamics could be: young, married husband and a wife, and maybe the wife is wanting to get pregnant. She’s not wanting to work. She’s wanting to work part time and this is a way to lower their cost of living and in a sense, having a part-time job that facilitates neighborliness and their partner and community.

And then the other type of arrangement you guys do if we don’t have a free unit, you guys just operate on a mobile service. Can I just stop it at certain times of the day?

We do. Our oldest model is the on-site model and we feel that by and large, that’s going to be the most effective longterm in terms of actually building community.

But we’ve seen a lot of our clients have them pleased with the offsite model. For a lot of management companies, they want to throw parties. They want to throw events, but they can’t put a lot of attention in it because of the demands of their job. Working in the office, you’re just worried about leasing and you’re worried about maintenance requests and people paying their rent on time.

So the idea of throwing some kind of event or party that brings community together, it’s just one too many things and so we’ll take care of that. In some situations we’ll do what we call electronic visits where we’ll email out or text out all the new residents and say,” Hey, we’re having an event this Saturday. We’d love for you to come down and get to know your neighbors.

Let’s talk about some of those events. What kind of sizes, shapes have you guys pulled in the past?

If you get on our website, you can see like an insane number of pictures and event ideas. People who aren’t yet our clients will from time to time send out event ideas, some of the examples, something simple, like what we call a wine down Wednesday, where you can come down to the clubhouse, get a glass of wine, get to know your neighbors.

Sometimes communities that have a lot of pets will have what’s called a yappy hour and so we’ll have, bring your dog out. We’ll have a special treats. We’ll array for food trucks to come out. Sometimes we’ll have painting classes that we’ll bring in fitness classes. We’ll bring in a chef and teach them how to make a meal.

Pool parties are a big deal. You’re pulling it up right there at poker nights. You see all kinds of ideas up there. What we tell our coordinators is obviously you need to get to know your community and what works. And so we encourage them, especially when they’re new to trial, a wide variety of things to see what works with their community.

Some events are going to appeal to some of their neighbors and other events are going to appeal to other neighbors and so that’s the other reason you want to do a wide variety is you don’t want to keep bringing out the same 10 or 15 residents, but you want to really throw out a wide net that really helps people we’ll get to know others in their community.

Maybe talk a little bit about as the class changes, the clientele more A-class apartment communities versus the C class side. Do you guys cater more towards the other? If not, what are the events?

Historically we started out actually on the nicer end and so we’ve worked, I would say for the first 15 years of apartment life, class A and class B assets. More recently we’ve been doing more classy and even affordable housing. That’s actually a new division of ours is working on affordable and low income housing. The same principles apply, but rather than just throwing a party, which you can still do sometimes what’s helpful is to have what’s called wraparound services.

And one of the communities that we serve in Salt Lake City, our coordinator, who’s an offsite coordinator, organized 1500 meals in the month of July for 30 families. And with one of the residents who was blind, she helped him fill out lengthy paperwork in order to sign up for social services.

Again, we started probably more in the class A, class B assets but over the years, we’ve realized we want to have a tool in the toolbox to serve any apartment community that’s out there.

Yeah! You want to use the right tools. It reminds me of when the first had the pandemic and all these celebrities had sing that stupid song. It just made idiots of themselves. If you come to the wrong apartment community with the wrong event, you can come out the wrong way a lot of times. You would think a lot of the class C places, they need this stuff more than the class A side.

What we really encourage our teams, whatever community you’re serving throw the best looking event that you can. Cause what we don’t want to do is have like for a class C, like a Wiener boil or something like that, you really want the residents to feel like, “Hey, you put a lot of thought and effort in this”.

We have what we call eight layers of the event. Where the coordinators are thinking very carefully about the ambience, how do you create a sense of buzz around it? How do you facilitate people actually making friendships there? How do you take pictures and post about it on the back end? And so we just want the events to really have a sense of sparkle and shine to them.

Have you ever ran into issues with some tenants being like I don’t want cupcakes or on Thursdays, just cut my rent by 20 bucks. That’s where I really need the help has that ever happened?

To my knowledge, I’ve never heard of a resident asking to cut the program for rent reduction. What we actually find is a lot of residents say, I didn’t know, people still live this way in the United States. I think of one particular couple that moved down to Dallas. In the heat of summer and their apartment life coordinator was watching them unpack their truck. And just really unprompted.

They just went over there and took icicles for the kids or like lollipops or what do you call the frozen obstacles and waters for the parents. And this family happened to be moving in from Oklahoma and the wife, “I didn’t know people still did this in America. This blows me away”.

I was like, “oh yeah we have a great community here. We encourage you to come out to the events”. They became really good friends with them. What we find is that people really want to go, they want to get to know their neighbors, but they have lost the art of neighboring if you will.

And it just takes that one or two instigators, the catalyst to get that culture going in the right direction.

It does and I think all the more, since the pandemic has all of our social muscles have atrophied over the last 18 months. It was that catalyst that you mentioned was needed before the pandemic, but it’s needed all the more now because people really have lost that ability to make small talk and they’re frankly intimidated.

Again, they’re lonely. They want to get to know their neighbors but they almost need somebody to hold their hand and say, “Hey welcome! I want to introduce you to Bob over here. He likes hunting just like you like hunting or he likes fishing like you liked fishing”.

They really want that. And again, the management team is too busy to really provide that kind of level of connection. The most they’re going to do for an event is throw food out on a table and say, “Hey, free food”.

It’s just like you guys at work, if your boss asks you to plan a retirement party for somebody it’s really, is this my job description?

That’s a great analogy and honestly some on-site staff because their interactions with the residents often are pretty negative and needed cause the residents, some are always complaining. The last thing they want to do is throw a party for these complaining residents and so having a third party that you can outsource that to can be a good move.

Is this something, some of the listeners might have single family home. Is this a service that you guys would provide to like single family home operators? As opposed to one apartment where you can control the community. Is this something that you guys have branched off or thinking about branching off into some point?

Yeah, especially for single family build to rent, we have given that a lot of thought because that is a really big deal. And that you see a lot of the big players in the apartment industry going that direction where they’re building whole neighborhoods in single family homes, but they’re all owned by the same entity.

So they’re run very much like an apartment community but they have the feel of single family homes. We’ve met with several people in that space who said, “Hey, we would really like the apartment life model, but we would rather not call it apartment life. And so for that group, we’re looking at the name neighborhood life.

And so a name like that would probably fit better for a single family, residential neighborhood.

Apartments have the common space, right? And like you said, if you can get them to be friends, you just create so much value for the tenants in that type of setting.

It will be more challenging to do in single family neighborhoods. Now, I’m looking out my front window and last night hung out and had a glass of wine with two of my neighbors. We just sat in our lawn chairs and caught up and talked about life and it was great. We didn’t have a common space to meet in.

It would be hard to do Texas in the summer, but we we did at 7:30 at night, so it was a little bit cooler then. Even without a community space, there’s ways to build community that sometimes weather is a factor.

Any other cool events or other things you think the folks would like to know about what you guys do?

One of the other things that we’ve realized through the pandemic is a lot of our clients said you’re the only amenity that’s open right now. And they’ve said, we’ve got a fitness center but we can’t let anyone in there cause we don’t want to spread COVID and so I think that was a kind of an interesting discovery.

We were wondering actually, if we would lose business in the midst of the pandemic, but actually the opposite happened. We had a great year of growth because again, we were the only amenity that was open and some of the needs that we were able to meet were just really cool. Like we had this one coordinator up in the Seattle area who was really burdened by the food and security in his community and he got a lot of food donated.

He just started to reach out to churches and government entities. Before you knew it, he just had this whole operation going, all this food being donated. He was able to serve his apartment community and then the one across the street and it grew into its own nonprofit that has in the last year delivered.

I want to say 8 million pounds of food to apartment residence. Which is just crazy. There’s a lot of needs out there since the pandemic and it’s been a joy to be part of helping people meet with those needs.

I think, you guys are a perfect example of trying and find consultants, you put to work with. You seem to pay more money on the front end, but it’s something that you could have never done in-house. It’s just a very special,unique t alent and focus that you guys provide.

If people want to get a hold of you guys apartment, life.org, is there your URL. Pete, you want to give your information in case somebody wants to utilize you guys?

If you’re interested in talking further, you can email me at Pete Kelly. That’s P E T E K E L L Y @apartmentlife.org and either I’ll follow up with you or connect you with the right regional leader. And if you want to read more about us, you can go to just our website apartmentlife.org.

Thanks for listening guys. I think normally I don’t really talk too much about improving the communities. This is the whole part of increasing value and ultimately that’s how we make money. You don’t make money in my opinion, for a long-term basis by buying something low selling high something, buying something on Amazon, flipping it on eBay.

And that’s what traders do but people who make the sustainable wealth create value. And in this case, improving the units, improving the community with services, such as Pete Kelly’s apartment life, those are the things that create longterm value and create wealth. I probably empathize more with the investors.

A lot of you guys are hardworking folks at home, investing your money the right way in tax advantage things that utilize great wealth building strategies. We try and help you guys out. You guys are people I think of first. At the end of the day, you can think of them as are the clients, really the tenants who pay us rent? Or the clients investors, you could go either way on this?

This is what we’re doing on the tenant side. But thanks for joining! We’ll see you guys next week.

Scarcity to Abundance with “Money Honey” Rachel Richards

Coaching Call with a Million Dollar Investor (Chris)

https://youtu.be/mj51m79IOzQ

On today’s podcast we’re going to be doing a coaching call but a little bit of announcements. We’re going to be unveiling the new Infinite Banking e-course. I put this together to get all our questions on infinite banking. I think a lot of you guys listen to this stuff on a podcast and you hear all the benefits of it.

A lot of benefits, a lot of high net worth investors do it. I think every investor over a million dollars network should definitely have some sort of Infinite Banking policy but it’s not all sunshine and rainbows as you guys know. I do it! At the end of the day, I think the benefits outweigh the cons, but get yourself educated.

Check out our infoPage@simplepassivecashflow.com /banking to learn more there, get free access to that e-course. Probably tell you guys about a couple hours to get through, but again, that’s free. Check that out there. We’re also going to be doing a bootcamp one of these weekends.

Make sure you guys sign up there, get on the email list by going to simple passive cashflow.com/club, to get the invite to that free a weekend boot camp. And some other things that I’m following other than the Delta spike in COVID cases.

Peter Thiel, he screwed it up for everybody. If you guys don’t know the story, but Peter Thiel basically stuffed his Roth IRA with a whole bunch of severely undervalued stocks B shares, whatever you call it, but basically that he pissed off the government.

And now the government is tightening a lot of these self-directed IRA. And pretty much screwing everybody’s even doing the regular Roth and regular IRA. We’ll see what happens. Who knows they might put a capital in the Roths. A one thing I’m looking for is they might be putting like a appraisal requirement on all your assets in there where they make you get. a $5,000 appraisal fee

Which would pretty much Kubosh the whole point. You’re going to have to base so much in fees, but I’m looking for this in the next RISE Act. Something that was put on the faults when Trump was in office, but is coming back up. Of course it’s going to be sold as I forget what RISE stands for, but it’s Hey, let’s help Americans save money.

By changing a bunch of the ways that the self-directed IRAs, etcetera work. But I think it’s gonna screw a lot of you more sophisticated investors up. I don’t do any retirement accounts. I don’t know why anybody really does it. If you invest in real estate. If you guys do crypto, I’d probably do it on crypto, but, check out my long list of reasons why at simplepassivecashflow.com /QRP. But, beyond the lookout for that infrastructure bill, I’m actually pretty bullish overall. There was the recession is over the world’s shortest recession of what, like two months or something like that is over. And looks like rents are coming back up.

I think the rent more terms, how they stay how they are, always offers stability I feel bad for the small landlords. It’s the small landlords who are put in a hard space once all these moratorium are up and things start to open up. Whereas, on the larger apartments, the commercial property managers have a lot more tools at our disposal to adequate the protect ourselves, the landlords.

I’ll be on the lookout for the rise act, the secure act whatever, they’re going to call the infrastructure bill.

And then some of you smart investors out there that utilize the whole buying something under market in your IRA, swapping it over to Roth. That little chikaru you guys like to do that I think is a little risky. I think might be definitely going away as they might put in some kind of nasty language in the RISE act where they’re saying you cannot buy things under fair market value.

Which makes no sense if you’re a real estate investor, you’re always buying under a fair market value. But anyway, we’ll try and be on the lookout together. If you guys want some more insider tips, join our family office. Ohana mastermind, go to simplepassivecashflow.com/journey and enjoy the show.

We are going to be doing a coaching call with a million dollar. We’ll just call it that! Call it a million dollar net worth investor. Chris, he’s been part of the HUI pipeline club for quite a while.

About 2016.

I always remember when we have calls and I remember we were talking when I was at my past day job.

Back when you used to live here?

Yeah. Why don’t you give us a little context on yourself. You’re up there in Washington, where I used to be.

I live in the Northwest. It’s like you said, I work in the power industry as a technician there electrical task 📍 guy.

We have two kids, my wife works and we own a business also. Started chugging along on real estate when I started talking to you back in 2016 had done a lot of actual like futures trading and other types, like stock investing, hoping that would set me free, and learned a lot.

Then my neighbor’s house came up for sale and I started looking seriously into what it would take to have rental properties and dove into bigger pockets and your website at the time of your podcast and just tons of podcasts and got fired up on it. And looking at the slower moving animal that is real estate investing.

What made you finally get rid of like the stocks and options and all that type of stuff?

I don’t do it anymore. It was definitely time consuming and it’s just seems so unpredictable. Just trying to check on, I was doing an option selling and try to do that monthly income model. It was so volatile and just not a lot of fun trying to sleep in doing that thing.

I just ended up really, the fire got lit by this house that was right by me or which I did not buy, but it got the fire lit and I just started digging. And ended up, I got into the turnkey if you want to chat about that for me.

Why did you not end up buying that rental nearby?

The whole bigger pockets land and the financial calculators that you get the 1% rule is really why I did it. Honestly, it would’ve been a good deal for us just because of speculation and the houses have gone crazy around us. But you don’t know and so that’s the very first thing you learn, you don’t go for cashflow.

It would have been a break, even deal for us. As far as the rent, barely making it and no cashflow, but it would have been a great speculation as far as appreciation you don’t know that and no one tells you to do that.

People invest that way, right? Buy low, sell high, go on appreciation. And if you’re bleeding cash a little bit every month, most people that’s how they invest.

I guess I got talked out of it just because I’ve done the speculation thing with the stock trading and stuff. And so I wasn’t really interested in speculating anymore.

I was interested in cash flow and so I ended up not pulling the trigger on that deal and then really did a ton of podcasts on turnkey investing and retail turnkey thing. I ended up all over looking at tons of different stuff and really I just pulled the trigger on ensemble.

And after awhile I was like, I’m just going to do this. It seemed like a huge deal at the time. Now in hindsight, if you haven’t get operator, even though you’re paying retail, it still works. It still makes money every month. I’ve been in that for four years now.

And it’s just been chugging along for better or worse there’s been nothing to do. That’s where I’m at. I was not tempted to buy anymore. There was a fire lit buy pretty quickly by thinking about multi-family and mobile home parks in particular. And I went down that path and that’s been a two year journey of being involved in that.

Let’s get people up and where we are in the scorecard here. Cause this is what evolved really matters is what your net worth is. Your net worth is just shy under a million dollars, just call it that on a good day.

You’ve been pretty good with your money, right? Like most people in our group compiled a bunch of assets, have your liabilities in order. Now let’s take a snapshot of like your monthly velocity. You make a pretty good salary on 9,000 a month. You’ve got some real estate income. The important thing here is in net cash flow 3,600 a month. You’re able to put away and save maybe 40 grand a year. Is that about right?

Yeah, I would say, that would probably be about right. That’d be probably max right now, depending on. This has nothing to do with the business that we own right now, what you’re seeing here. I would say 40 is a good number right now.

That’s awesome! You’re not making a huge salary, like some of these other guys, but you’re definitely in the average of where people are saved. Most guys are between 30 to $50,000 a year. And at that point, you’re moving at a pretty good clip.

You’re not buying a syndication or two every year or two syndications or more, or three houses every year, but you’re steady making progress. And at this rate, you’d probably be a lot different financial situation. I don’t know if you’re gonna be financially free at five years, but you’ve got to definitely getting there probably going to be there and like under 10.

It all matters on your living expenses. And I know the picture here. I can just guess from seeing so many financial profiles like this, I’m sure you can tighten the belt a little bit, but you’re just seeing the light at the end of the tunnel and you’re gonna coasted there.

You don’t need to live in ramen noodles. We don’t. We have some perspective on that for sure. You’re going to live a little bit, and it’s like just there, right? As you lay out the plan, the tightening maker may not. When we talked a long time ago, you were doing the turnkey stuff. I think that’s what connected us in the universe. And then you went off the simple passive cashflow registrar. You became more of a do it yourselfer kind of guy. Tell us how that little experiment went. What did you go off by? What did you do?

I wandered out, I got very interested in the mobile home park thing.

And it’s why I got interested in it because when you look at mobile home parks, what’s interesting about them is that they can be passive in some respects. If the mobile home park is all tenant on homes that is a really cool model where the person that lives there owns her own home, they just climb you rent the dirt to them and you just maintain the property.

That’s not the part that we bought. We definitely saw the lure of the higher rents from owning homes so we bought a park and I have a partner on it. It was just two of us. We bought a park that that has 25-ish tenant and our I’m sorry, we own 25 of the home. It’s a lot of work.

As far as just keeping people in. It’s a low-income housing community is what it is. I’ve learned a ton about it. I definitely get that the tenants own their own homes or I don’t even know their names barely. Actually I say that it’s like, they’re really super easy they just do the thing and take care of their house.

They pay me rent every month. You run into problems in a mobile home park when you’re hunting people to collect rent and they don’t own the house and they trash it. You may have said this before, but it’s like pig pen or something. It gets, they go crazy.

And so you get to rehab or, do a rent to own handyman special kind of stuff, doing a lot of that stuff every year. Pretty much every couple of months with turnover. But the other thing I’ve learned is that, low-income housing is high demand and we never have an issue with vacancy.

You’ll have vacancy just because you’re turning one over, just cleaning it up, but really it is pretty incredible. I’ve seen the whole thing and I do realize that I’d prefer to be more of a passive investor at this point in my life. It’s something you’re always thinking about when it’s yours and you’re the operator you’re everything, and you’re communicating with the manager and doing all that.

That’s the story. The partner you went into was he more sophisticated operator experience with this stuff. Nope. We were both just interested in doing it. Had done like the kind of a Academy mobile home park bootcamp stuff. Exactly. Just pretty much just fired up newbies and dove in.

And the person we bought it from was super helpful. And that was probably the easy part honestly, we had that person helping us and they had tons of properties in that area, they just held our hand on it. And we got go on that way. And yeah, that was the story.

I will say like that the mobile home park education out there. There’s only one group that does it, but they actually do a pretty good job of actually teaching it to you. It’s a shame that there’s a plethora of multifamily crews teaching it but they only teach out how to buy the properties.

None of them actually teach you how to operate it because a lot of them have been operated them thing or own rental or own multifamily in reality. But I think Frank and Dave do a pretty good job. Yeah, you get a lot of operation stuff and they’re available to you, and it’s it was good.

I felt like he showed up with stuff. He just, I, yeah, it was like maternity thing. It was like once it was super scary and then we did it with the mobile home park too, it was like now we’re in it. However many thousands of miles away doing it. Both of you guys are remote?

It’s remote and he spent a lot of time on the phone. The business exists inside my phone? Did you guys know each other or you just happened to meet up randomly? Yeah, meet up randomly! That’s crazy! It’s just powered out and have been so two years in now over two years of doing it and we’re thankful for our manager.

Be cause it’s been a crazy year what really no desire to travel there right now. It’s just spend letting a check along that’s as we can given everything going on and still demand as far as that goes.

How many times did you visit that property?

Once I’ve only ever been there once. The weekend I bought it and I can say that crazy. We got a good manager. She managed a ton of the properties of, or three or four of the guys properties that we bought it from a regular human. We learned our lesson actually right off the bat.

Hiring somebody that was living there in the park. That was one of the low-income tenants. It was a lot of drama that we pretty quickly realized was a mistake. That’s what’s hard with mobile home parks because there’s not that infrastructure, there’s not a plethora of different third party property managers in that asset class.

The two you guys would have had the gun around and interview specific people have trained up on a day, which is hard. Exactly! We’re lured in by the money and doing it. It seemed great and it’s been fine.

It’s a learning experience but it’s pretty time consuming. And for where I’m at in my life, it’s just not the right time. Like I say, it is for sale we’re trying to move on from that and do some other stuff passively. Okay. How much money do you guys have tied up in it and get leverage?

I have about 225 tied up into it for me and I’m hoping to chat with you about deploying that.

You didn’t really make money on this? This is just got your original, down payment back out. We’re not, it’s under contract to sell. We’ll see how, in the end we should make some money, when it’s all done, I’m not going to say what that is until it’s all done.

We need to speculate on it now we’re talking taxes. We need to know. It’s 50 grand or something like that? Oh, it’d be more like about 70 grand. Okay. Here’s what it would be, but I can work with that. Not much. And then maybe you took some depreciation too throughout the couple of years.

I don’t know, maybe 80 grand capital gain plus depreciation recapture. You’re thinking. I think so. You’d have to speculate on that a little bit. I’d have to look back to read that. Okay. A lot of syndications, they’re going to get 50 to 70% of what you put in as passive losses to offset that right away. We can talk about that in a little bit. Like the turnkey in Memphis, how’s that guy going? It’s just smooth. It’s funny. And a super smooth we had the glitch this year with COVID itself.

The person lost her job. It was like a half payment one month and then I got, everything back the next month. It’s been super smooth. Far I’ve had a couple of patients it’s been. It’s a big operator. I’ve been tempted to sell, but I’m like, I don’t know why I would deal with it.

Just selling it. I don’t know. I guess I couldn’t do it a sec. I’ve only had it for four years, so I’ve just been paying interest or it’s the wrong end of the amortization table. I wouldn’t sell them until you’re tapped out on deployable capital and then look to sell it.

It’s not going to be a lot of money there. Yeah. And if it’s work, if you’ve got a good tenant, that’s gold, right? The good tenant is a big thing, but the search to get there is above the cost of the road to get there. Let’s put that on this tab right here, there’s like a deployment plan.

You can put on here what you’re going to sell to get funds and how you’re going to deploy it. That’s how to use this tab. Okay. But I would say. If you have any other liquid cash that you want to invest, or as we start to transition more into what’s the deployment plan now. The deployment plan is going to be the funds for the mobile home park right now.

I have cash sitting around that I’m wondering if I shaded this 45,000- ish cash that comes back in that’s really just the money coming back in from my investments. I could sit on that or not. I’m trying to decide if I should put that like in AHP type deal and I just don’t know how liquid they are.

You’re get the money back out a couple of months to two months. The other thing is there’s always the loan from my 401k, you can always do the 50,000 from that pretty quickly too. Probably faster than getting that money at AHP too. You are running a little fat here on liquidity definitely. I don’t think you need that much, maybe 20 or 30 grand, but yeah, I think that’s where a lot of conventional financial advice is, you need X amount of expenses.

You don’t really need that. If you are able to get it from a credit card line or take it out from your Roth IRA or IRA. You know that we’ve got to get your good to get your money in the game. You’re not $2 million stimulant dollars a year. No, I can flame it. Yeah. I’d like to get it moving. Oh, actually a question I had though for you, and I think as far as deployment, I was thinking about selling the note that there’s two notes up there, just up the page a little bit.

One of those is a, is it a self-directed IRA? It’s fine, but the $30,000 note originally, now it’s 25,000. In my name coming back to me, it seems like it might be better off deploying that into a syndication or something, instead of just income.

That’s taxed, like regular income. It seems like a better option to move it out of there. Sell that and move on and put it into a syndication. Yeah. If you’re only making 9%, age does everything for you and both of my ordinary income. Not saying you would go down one specifically.

I would say, correct me if I’m wrong here, but invest the mobile home park money 200,000 there. And then either the note or you’re gonna touch any of this, the stock stuff, or are you going to keep that where it’s at? Right now, I’ll probably leave that word is other than I may I have the ability to pull that $50,000 loan off my 401k.

Where seemingly unrelated question. But this ties in, what is your adjusted gross income around as a household? A 125. Okay. You guys don’t pay too much taxes. Now, you guys are under the 300 threshold.

This year will be quite a bit different more. We bought a business last year that has got quite a bit of income. We’re trying to get all of our books handled right now. I can’t give you an exact number, it won’t be a crazy high. It might still be under 200.

Next year, will the business do the same thing? We’re going to try to make sure it does. We have plenty of things that you can buy. We’ll keep it down. We’re pouring money into infrastructure right now. We’re we have enough expenses. I think that okay then to zero.

Yeah, the zero that income out. And that’s the goal of the business, right? On taxes. Okay. I’ll leave this alone. You can incorporate in as you feel comfortable with. I would think since you’re not in a high tax bracket, even with the business to take it out slowly would be the thing to do.

If you’ve heard me multiple times, I don’t like these types of retirement plans because you’d rather pay to taxes now. Taxes growing up. Your tax bracket is lower now and then you don’t get the passive losses that play that game from this stuff but if you take the character. Oh yeah.

Okay. You don’t have to decide now, but I would say, maybe think about just leaking out 20 to 50 or a hundred grand every year. Through like a 72 T thing? Or how would you say doing that? No just cash it out. Yeah. Okay. But I’ll just let that stew for you right now.

We’ll see. Exactly. Yeah. That’d be like a chat with the tax guy. No, it’s not tax for the tax guy. It’s a little right here. You don’t have to talk. No tax guy tell you about. It’s which way do you want us to stir the ship man? Yeah. The tax guys down in the engine room.

I’m telling you what happens if you do it. I’m telling you what’s going to happen. We all know. Just don’t worry. Your tax bracket is basically, and how much you’re going to take. And then just wait out from there is what you’re saying. But that’s more of a strategy thing, right?

You need to do the math on. All right. If you take it out and you start investing in cash, what will the implications be? Will you be making more money there? What kind of losses will you be getting? Will there be cost segregations done? That’s what you need. That’s your job.

That is not the job of your CPA tax person. Big thing. It’s your number one expense in life. Got to know what that is. That’s not the job of your tax guy. That’s unfair for them to know. I’ve definitely heard you say that before. It’s getting up to speed on that stuff is really a goal this year, just to be dialed in.

Good questions ask. Yeah, it’s pretty simple. I would say come to the bubble or get around the other people in our tribe. You’re not going to get it if you want to pay somebody to tell you how to do it. I think that’s costly. You guys can’t afford having office consultant under $5 million net worth.

But you’re gonna have to get this from your peer group of other high net worth accredited investors what they’re doing. I would highly recommend that and just getting around other high net worth people is a big thing and yeah not on the bigger pockets. That’s for sure. So I would think about that maybe taking out maybe 50 or a hundred every year and put it to investments, but you got a backlog, you got the mobile home park things first.

Ideally with the mobile home park thing, the way it’s going to work is sell it in the beginning of the year so you have the entire year that builds up your passive losses. Follow up, do you know how much passive losses do you currently have just built up? I don’t know, go look at your form. I think it’s 48 25.

No, it’s not. I don’t know. It’s 48 something. Okay. But if it is a form that has all your passive losses on it, your federal depreciation schedules. Okay. I would ask your CPA for that but they don’t give it to you or they screw around with you. They’re playing games, cause this is a big game that CPA’s played.

They don’t like to give it to you because now they know you’re shopping for a new CPA and that form has a lot of built in formulas and calculations in the spreadsheet. You might have 20 or $30,000 of built up losses, suspended, passive losses to offset that mobile home park sale. Again, I think you said you’re looking at maybe an $80,000 capital gain plus depreciation recapture.

So if you already had $30,000 to spend in losses, now we’re only looking at 50,000. Okay. Different. Okay. Yeah. Okay. So if you went into a normal syndication that does 70%, 80% leverage and does it cost sake and 50 cents of every dollar is, Put back as bonus appreciation. You’re one, you’d knock that out with a hundred thousand dollars investment.

Okay. But, so that’s how you that would probably knock out your, what you’re going to get on that mobile home park. Things move super slowly, right? As you’ve seen the mobile home park, it’s probably going to be quarter two when you actually sell it. But then you have to go in into another deal before the end of 2021 to kind of book that, to offset it.

Yeah. And in your opinion, given where I’m at, would you deploy do that in multiple chunks at a different deals? If they’re available, a hundred thousand electric 5% rule, right? I don’t want you to put more than $150,000 into anyone deal. You. You didn’t follow that role on the mobile home park?

No, I did not. You at 20% of all in it, probably back then your net worth wasn’t as high. So yeah, that was a, that was breaking a Cardinal sin, my friend, but Hey, it’s real estate. It works out well, most of the time. Yeah, it’s true. It’s a forgiving asset class. Slow moving and forgiving.

Yes. Deploying into multiple things this year, that would be hopefully if everything, hopefully deals are available and able to get that deployed. It’s just like when I sold my in 2018 or 17, I sold seven or eight rentals for our capital game of $200,000, but I had gotten two deals and I had several hundred thousand dollars of passive losses built up.

Have you sat the offset, so that essentially doing the same thing here for you,

Get that done. Then worry about the retirement funds, that’s okay. That’s definitely what I’m thinking. I don’t want to freeze stuff up. And like I say, I have the cares act distribution, which isn’t a huge cause you can chop that up into three pieces.

That’s not going to add much. To our bottom line this year, I tell it to you now, because you got to decide in the next few months, whether you’re going to really do this crazy idea that Lane’s talking about. you’re going to take out 30 to 50 grand every year, 30 to a hundred grand every year for the next three to five years.

It’s a slow thing. This note that’s not in your retirement funds? I would unload that as you can, just in the same style is unloading the turnkey. Like maybe just throw the turnkey on Roofstock they allow you to list it with a tenant in place.

Okay. Okay. You’re not obliged to sell it. You’re still making cash flow on it. And then same thing. Like this note, you can sell it while you’re collecting payments at the right price. What I would recommend. You don’t want to really sell this in the next few months, but just put it up anyway.

Just put it up at a, make me move price and see what happens. Yeah. The turnkey or the a note. You mean both of them. Okay. I’ll have to look into that. And then. Yeah, they squeeze down the liquidity. I don’t think you need as much. Yeah, I can definitely deploy that. Yeah. I don’t know if you want a little bit of a cashflow stream.

Maybe you thought 20 grand and HP or something like that before they, their current fund goes away. Pretty straight forward, I think. Yeah. There’s not a ton of moving parts right now. Yeah. It’s just, yeah. We’re waiting on kind of a load of capital to come in and then nothing crazy to do right now.

I don’t think unless I get that. We’ll move forward that your highest and best uses at your day job don’t get fired. I don’t know what all the business is, but it’s the business of a capital intensive business. You need money to do marketing or. Not at all. Nope. It’s a local service business.

And we bought it, it was already cash flowing. An owner finance deal. There’s not a lot to it. It’s not capital intensive at all. We make money. If anything is just time, it’s time, that’s all it is. Yep. It’s learning.

We’re going to build it up to turn it into an asset to try to possibly. Sell that to you at some point here. We’re learning the ropes of that business now, too. I guess we’re glad for it. Mobile home park now, service business, just learning. Yeah. That’s, you guys are in a good spot.

You got a day job. That’s probably low stress makes pretty good money. Yeah, recognize that you can not put your heart and soul into it and put it somewhere else and make money there. And that’s your, all your highest and best use to put your overflow time into the business? I think the only thing for you guys is maybe this is maybe years down the road, but I don’t own that service-based business.

You can turn it into some kind of passive cashflow stream as opposed to right now it’s ordinary, right? It’s a business. Yeah, but maybe you, when you reposition it, you stabilize it, you sell it off to somebody, but you retained investor rights. You find some young whipper snapper who wants to trade his time for money and you just, you maybe you’re still working on it.

Don’t get me wrong. But you change your compensation from, An ordinary income business to more of a K one passive stream. So that’s a conversation you could have with your CPA, but, follow me here. Yeah, you’re the one having steering this conversation. They’re not going to tell you, Oh, Chris, we should turn this into passive income so we can take your passive losses that you have a glut of and offset that they’re not going to come up with that stuff.

Yeah. That’s not their job. Their job is not to transform your life

okay. Yeah. I definitely, I need to get more education around that and, just to know what the right question to ask my dad at this point that’s certainly a goal this year. I don’t know if that’s possible in your business, we have some Doctors, they own a medical clinic and that’s how they do it.

So they changed the color of money from ordinary the passive. So now they’re able to use the passive losses to offset their ankle and they don’t need to be real estate professionals to do that. Okay. Yeah. That’s, the goal is to, is you nailed it yet, finding that young whippersnapper and all that to get them, it would be a good,

it’s not a high tech job. And who cares if you’re getting paid top dollar, I don’t know what your salary from that, but like maybe you were making a hundred grand a year from that business who cares if it’s 50 or 60,000 young worker stuff, it doesn’t get the game. It doesn’t get the perfect picture you’re getting paid and the passive income color, which you can drive down to zero.

What’s your other stuff going on? Yep. That’s the goal. We’re just building it right now. It’s slightly more time consuming. Does your where your guys’ AGI is getting real, super professional status, I don’t think is a big deal. You don’t really need it.

That’s more for the guys above 300,000 a year. Does your spouse work? She runs the business. She’s the sole owner. Okay. We could make, use the owner and free her up if you made a lot more money at your day job, if some people are listening, that would be a move that we look into, but for where you’re at, the way you guys are doing it is optimal.

I think. Okay. It’s just where we are now. We’re, it’s a, it’s learning as we go and seeing what works best for us. And this is, best right now. It sounds like you might need a new CPA,

we’re in the hunt for that right now, actually. There’s a section in the e-course currently that has how do you interview a new CPA? Okay. But I would ask them in your situation Hey, I have this business. Can you tell me about, changing this money from ordinary income to passive income and how that would happen?

What if I were able to do this, how would the passive loss would I be able to use my passive loss to offset my passive income for my business? That’s the main point of doing that is to offset the passive losses from your investments. Is that what you’re saying? You want to ask him that at least that’s my style.

How you ask him not a stump, the chump question. Oh, tell me about non conservation easements, right? But you want to have a dialogue with them and just feel them and see if they, you can work with them. if I have a lot of passive losses, how can I use them?

They’re like, no, you can’t do that. That’s a business. You can’t do that. Then, you’re not working. It’s somebody who’s open-minded who’s creative. Maybe they just don’t have the experience. Okay. I think that’s one way you can ask, that’s the least of my style in our mastermind.

We have people do it different ways to vet the CPA, but that’s my style. It’s I go in there, how can I use the passive losses to offset this cup right here? They’re like, Oh, you can’t do it. That’s not someone who you want to work with.

We want somebody who’s Oh, okay. So this is ordinary income and you can’t offset it with passive income service professional. If we were able to change it from ordinary to passive, right? Like your notes, for example, that’s yeah. Yeah. So to have that intellectual conversation with your CPA is unfortunate.

That’s maybe you have to get up to that level of yourself too. I definitely need to get there, but it’s I feel like I can have a conversation with them. I think that’s what’s hard for a lot of CPAs. Most of their people coming through the door or totally blew this up and stuff.

They’re like, Oh my goodness. Another sucker. You’re only going to have to do 401ks or self related Roths. Sorry buddy that’s all you got. They know you don’t have anything else cooking, just like the average American out there. Right! Yeah. I’ve been on the hunt really for somebody for a while.

At least gonna ask me good questions too. And I’m willing to pay for it for a while for sure. We’re gonna figure that out this year. Cool, Chris, I appreciate you doing this. I think a lot of people, follow the little journey out to mobile home park.

Yeah. Glad to chat with anybody about that. Yeah. There’s a lot of stories. If you guys haven’t please check out the website and join our clubs simplepassivecashflow.com/club and we’ll see you guys next time.

The Practice of Groundedness with Brad Stulberg

https://youtu.be/7cWGKbyouhk

hey, simple passive cashflow listeners. Today, we are going to be talking with Brad Solberg, who is dropping his book It’s releasing this week, the practice of groundedness. We’d like to take a break from the real estate investing tax legal.

Infinite banking, which by the way, we’re also dropping the infinite banking e-course this week. If you guys want to pick that up, go to simplepassivecashflow.com/banking. A lot of you guys are high paid professionals, and what also say are really type a personalities , with the path to financial freedom, you guys realize that it actually is pretty simple.

But how do we create a well-rounded life with happiness and something that doesn’t pressure our soul, which we’re going to talk about today. Brad, thanks for coming on.

Yeah Lane thanks for having me on the show and a chance to talk to your community about the new book.

Talk to us about how you started down where did the book come from?

I like to think about this topic using the metaphor of a mountain and when most people see a mountain, the first thing that they notice is the peak.

That’s where their eyes go, everybody glances up. And the second thing that you’ll notice, particularly if it’s a striking or really prominent mountain is the slope, the steepness of it. No one ever looks at a mountain and says, wow, look at the base of that thing. Yet without a strong and solid base when rough weather comes, the peak and the slope, they can’t hold. They’re not stable. The mountain degrades over time. And in my own executive coaching practice, what I realized I worked with so many very high performing entrepreneurs, executives that have spent so much time focusing on the slope or the metaphorical peak of their mountains and not enough time tending to their foundations or that base.

And as a result, even though they experience great conventional success, they often feel a lack of fulfillment. I call this If-Then Syndrome. They tell themselves a story. If I get promoted into the C-suite, then I’ll be content. If I hit 2 million in saving, then I’ll be content. If I buy this house, then I’ll be content.

And what they find is that once they get to that place where they thought that they’d be content and fulfilled, they’re not. They still want more. Some of this is just. You’re driven. You’re high achieving. You want to strive for greatness, but if that striving for greatness gets way too unchecked, then you don’t have fun along the way.

You can’t experience joy. You constantly feel empty and that ultimately led me to explore , what would it look like to pursue success in a way that is more grounded? Hence the title of the book, the practice of grounded-ness. What does the latest research, what do you ancient wisdom traditions?

What do people that really practice this have to say about building and maintaining a strong foundation? A strong base on top of which any striving can . And the answer, it’s paradoxical. It’s not that you stop striving. You don’t become a monk in a Zen monastery, completely disconnected from the world.

What happens is you still strive, but the texture of that striving changes. It goes from a place of compulsion or need or fragility. To a place of fulfillment and strength. And that’s the practice of groundedness. And then the book, obviously as well, how do you develop this quality? What are the principles that make for a healthy foundation?

And we’ll dig into that a little bit more, personally, like I’ve literally done that in the last five to 10 years where, I have a journal in the form of a spreadsheet of course where I’ve written down, like when I get this, I will be happy when right. And every six months I’ve written stuff down.

10 years ago, it’s funny. It’s I’ll be happy when I have three rentals or 11 rentals, or when I, invest passively in my first invest our apartment. And then it was like moving away from Seattle to Hawaii or having this wanted like a C class Mercedes car. That was a big thing for me.

If you do this, you have to write this stuff down and you don’t just go on autopilot in life. You start to realize that when you put that flag in the sand or, summit the mountain one step over a period of time, you start to realize it’s endless maze, or it’s just a constant path. I would encourage everybody to go through that exercise. It’s probably going to take you guys a handful of years. You guys are really smart and like philosophical about this stuff. You guys will figure it out and maybe six to 12 months. Where are we go from there, Brad?

An exercise in the book in a huge part of the book and it walks readers through this is to reflect on what I call your core values. So these are the things that you most aspire to that make you who you are, or perhaps even if you really admire, look up to someone else, these are the things that you admire about them.

The qualities and characteristics that you see. And want to embody yourself. It could be things like health, creativity, love, family, community, vulnerability, presence, authenticity on and on. You pick between three and five of this. Then it’s super important to define them in very concrete terms.

Lane, let’s say that you tell me a core value of yours is community. That’s really ambiguous and broad. What does community mean to you? Give me one or two sentences and I’m asking you you don’t actually have to do it right now, but really get concrete. What does community mean? Let’s do the exercise.

I wouldn’t say community is a big for you, maybe like honor. Okay, great then how would you define it? Not having like spineless people that just take over on you and I want to personify that, right? I’m not just doing things for money or because it brings me, money in the bank, but do things that Sprite at the end of the day.

If you think about your day to day life or your week to week or month to month life, what practices can you engage in that represent honor?

Do things that make things better at the end of the day for majority of people not just driven by the bottom line, thinking if you can, and I know I’m putting you on the spot here, get even more concrete. What is that? Give me an action that does that.

I mean find people in my network and cut people out that don’t personify that. But then you have those people in your network how are you honorable with them? Okay it’s more for things I’m doing personally?

What are you doing? Yeah.

Trying to figure out how to help them, whether investors or employees.

I would push you to get even more concrete and maybe it is three times a month help an investor or an employee in a way that has nothing to do with your own success or bottom line. That then is how you practice honor.

What the book asks you to do is identify three to five of these core values, get really concrete. Like we just did into practices and then you show up and you practice those values consistently. Start at a very noble or honorable core value, and then you get all the way down to habits you can practice.

And that helps ground you in the present moment because regardless if you get that C class or you get that house or you get that passive income, whatever it is y ou can show up today, act in alignment with your core values. And it’s really ironic. We think in so many bullshit self-help offers tell us this, that we need to be like super motivated and inspired to get going.

But what all the latest scientific research says is actually the opposite. You need to get going to give yourself a chance to feel inspired or motivated. Don’t have to engage in positive thinking or self-talk, or get all hyped up. You just show up and act consistently in alignment with your core values.

And I argue that’s ultimately the key to building this kind of grounded foundation upon which you can strive. There are two ways to strive for that c-Class one is without this foundation and you get there and you might be pretty stoked for a day, maybe even a week, but then ultimately you feel empty.

It’s like what you said, crap. What’s the next thing. The other way is to strive by showing up day-to-day consistently acting on your core values and then the C class you enjoy it. It’s a nice thing to have, but it doesn’t leave you immediately seeking the next thing because you’ve built a steady foundation that day in and day out.

Cause that C-Class gets old and a little dirty. Researchers call this, the arrival fallacy in the arrival fallacy is just that. So many people myself at times included, this is all humans, we tell ourselves a story that will arrive when something magical happens. But the goalpost is always 10 yards down the field.

We never really arrived. We’ve got to learn how to be able to embrace the process of going for outcomes that we care about because it’s the process that makes up our days. It’s about also you could argue it’s shifting from an outcome oriented mindset to a process oriented mindset. And if you nail the process and you enjoy the process, the outcomes take care of themselves.

Whereas if you’re so fixated on these certain outcomes, it can cause you to become pretty anxious and restless.

And I think that’s exactly what I do, when, like whenever we do a deal, I personally find like one little stupid thing. I want to buy on Amazon or like a little reward to get me to that next goalpost.

I also do this with my teams. I’ll tell them like what’s the goal. What’s something that you guys want on Amazon again. Cause it’s easy. It’s like when we hit a goal, you’ll get that. But yeah, I guess what you’re telling me, that’s the wrong way of going about it, right? That’s the achievers.

Again, I want to be clear. It’s okay to Buy a nice watch, buy a nice car, whatever it is . This is not about not achieving or not chasing goals. I think what I am saying is it’s about not getting so fixated on those goals and instead, figuring out what can I do today to show up live alignment in my core values, how can I be present?

How can I be patient? How can I be vulnerable? How can I build community? How can I do these things that I know are going to be the solid foundation? That are there for me. And they keep me strong, regardless of what’s happening externally. This is the stuff where your portfolio absolutely crushes out of your mind performance

and this foundation provides you gravity so you don’t completely go off the rocker and make a mistake. Take a risk that’s unnecessary. The flip side is also we go through a recession portfolio tanks. There’s some kind of external event that you could never imagine. It’s this foundation that holds you up during those difficult times.

And again, the whole argument of the book is so much about the current culture tells us to only focus on the peak of the mountain or the slope. Again, this is the metaphor for our own lives and we neglect these foundational principles that are really the most important thing that support everything else.

What is another common value that you see in, what are maybe a few habits that you’ve stumbled upon that you see a lot of people? I think one that your listenership in particular Lane will resonate with is taking something that is very common in sound investors and applying it to all of your life, which is don’t go for like big heroic efforts.

Don’t try to hit home runs just consistently put the ball on in play. Small steps consistently taken over long periods of time, lead to big gains. In investing, this is the rule of compounding. But the rule of compounding is also true for developing relationships, for taking control of your health for better nutrition, for really any kind of daily practice.

Again, the current culture says. You should find a way to hack your way to greatness. There’s overnight success, take 19 different supplements and you’ll be Superman or superwoman and none of that’s true, of course. The real way to get long-term gains no different than investing is to be patient.

And take consistent small steps over time. It doesn’t mean that you shouldn’t adjust your strategy as you go, but if you try to swing for the fences, you often strike out. So it’s much better to just have small, consistent gains. That’s how you build a durable base. So that’s one key value of groundedness.

Another key value of groundedness is this notion of accepting where you are to get where you want to go. So often we don’t see clearly the current situation that we’re in. We put on our like rose tinted glasses and we tell ourselves a story that it’s better than it really is, or it’ll quickly change, or, a whole bunch of these kinds of stories that dilute ourselves from actually seeing reality for what it is.

And it feels good in the short term, but in the long-term it’s detrimental because if you’re not clear about what’s actually in front of you, then you can’t take wise action to impact. So there’s a practice in the book around self distancing, because so often we’re better at giving advice to our friends than ourselves.

For areas of our lives that we’re really struggling with the exercise is pretend that a close friend is in the exact same situation as you. What advice would you give that friend and then go do that thing so often. People give advice to a friend that’s very different than what they’re doing it’s so simple, but it’s hard.

The example of this is I’ve worked with some elite athletes and they hate being injured and I’ve coached elite athletes that are literally limping out the door with a sprain hamstring to go do their workout because they don’t want to miss it. And I say, Jim, if you saw a training partner, limping out the door to do a workout, what would you tell.

He’s like, I tell him just rest, take one or two more days off. So you don’t blow up your hamstring. And then it’s why are you limping out the door to do a workout? Like you need to follow that advice yourself. Acceptance seeing situations clearly, even when you necessarily , even when you don’t necessarily want it to is another key principle.

Community, we talked a little bit about this, but investing in relationships, realizing that if you are going to take this process view of life much of what makes a process fulfilling and enjoyable is the people that you’re along the ride with. And I think what happens too often with high achievers is we’ve become so focused on what’s out in front of us.

So focused on efficiency and optimization that it cannibalizes the time and energy that we need to build those close relationships. So it’s a little bit about reprioritizing, the role of community in our lives. Obviously COVID has made that challenging over the last year and a half. But I think we’re seeing even more so just how important it is because we’re realizing like, wow, it’s really tough to be isolated.

So those are just a few other examples. That community thing is a big importance and especially in investing. Lot of people , they listened to the podcast while they’re doing chores or just stay in their boxers on their computer.

These are the guys who go through this syndication e-course . But the whole point is you get to know a little bit baseline so that if you do happen to find other accredited investors, you can build those relationships. And that’s the community aspect of it.

And we do a lot better in communities too.

We like to think and tell ourselves a story that we’re the center of the universe, but we’re actually not. We’re just a little speck and the people with whom we surround ourselves have an enormous impact on us. So the best way to be a really thoughtful, patient, consistent investor is to surround yourself with really patient thoughtful, consistent investors.

The best way to become a great athlete is to surround yourself with other great athletes. The best way to become a loving patient parent is to develop relationships with other loving patient parents. And again, I think what happens in our like outward focused optimization hustle culture. Because we spend so much time pushing forward for these things out in front of us, that we neglect the time and energy to build those communities.

Going back to the whole community thing your network is your net worth is what we always say. I still have free onboarding calls if you guys want to get signed up for that fees to go to the website I think it’s simplepassivecashflow.com/contact but we asked you guys to join the club first, do your pre-work first before booking that call with me.

Some strange people that they’d like to do everything by themselves. They’re most of them are introverts office, but these are the guys like investing in notes and private money lending and there they stay to themselves. To them, they think 10 31 exchanges is a good idea.

Their strategy is just whack, right? And there’s a huge difference between those people like that and people who get all these other investment constants that we get, the biggest difference is like those people don’t interact and play nice with others, from somebody who sees a whole bunch of different people, the successful people and the people, they might have a semi high net worth, but they’re just doing it the wrong way.

They’re driving around with a handbrake on. It’s the ability to who you know, and collecting the best practices from your network so just another plug for community there. But Brad, your kind of mindset I like I really personify with the stoicism type of mindset.

For those you guys not aware of that. I’ll let you define that for us.

Yeah. So the Stoics, it’s a group of thought that came out of the ancient Roman empire. And it is very much one of trying to cultivate equanimity. So inability to absorb life’s highs and lows and counter to common belief.

Stoicism is not about not feeling emotion or not showing emotion. I think a lot of people are very misconstrued and confused about that. Cause we hear oh, you’re so stoic. You don’t show emotion. Now the Stoics had tons of emotion, but what they realized is that the human life is going to contain all kinds of highs and all kinds of lows.

And if you’re going to have skin in the game and you’re going to care deeply about pursuits. Eventually those pursuits are going to break your heart cause they don’t always go your way. And what stoicism teaches is that you take the highs and you smile and then you kiss them goodbye and you take the lows and you let them hurt you.

And then you kiss them goodbye because everything’s impermanent. There’s this quote at the start of the book from a stoic philosopher Epictetus that said people complain that their hands and feet are hurting in callous. Of course your hands and feet are hurting if you’re going to live a life and you’re going to use your hands and feet, then your hands and feet will become hurting in callous.

The point being that there is no free lunch. And if you want to have skin in the game and you want to put yourself out there, it is going to be distressing at times. And we have to accept that. And if we refuse to accept that, what ends up happening is we don’t take risks. Our lives become smaller, not larger, or we dilute ourselves and we’d pretend that none of that bad stuff’s going to happen.

And when it does, we get totally surprised and completely blown apart.

Another stoic lesson that I like is the obstacles the way, when things are getting tough, that should be a good sign for you that usually makes most of the other competition give up. And when you get past that obstacle, things are going to be much better for you doing the lower competition.

Look, I talk about being at the point of discomfort. So growth comes from being a little bit uncomfortable. If you’re always comfortable, you’re probably not growing. This is true in any domain of life. So it’s really important to identify what areas of my life do I want to grow in. It could be anything from lifting weights, becoming a better investor, being in more intimate relationships.

Learning more about NASCAR, you name it. And if you’re completely comfortable in those areas of your life, then you’re not setting yourself up for growth. Now this isn’t about jumping off the deep end that just leads to anxiety. That’s no fun. It’s about finding just manageable challenge is what I call them in the book.

Things that are adversely slightly outside your comfort zone, and then going and pursuing those things. Again, you don’t want to do this in all areas of your life at the same time, either because that can be overwhelming. But for those select areas that you do want to grow in, it’s so helpful to make yourself a little bit uncomfortable.

I see this play out and I see people get a lot of success with this especially like most of our listeners are introverts. They don’t really get it. They’re a little scared of people. They come out to the Hawaii meetup and the retreat and they meet their tribe.

More introverted people that are interested in these types of financial topics and their financial fat fanatics. But yeah, I think a lot of you guys, I don’t want to pigeon hole the audience, but I think a lot of you guys out there do subscribe to the stoic philosophy and I think it’s your jam.

I do think there’s a lot of misconception around introvert too Lane. I think that introverts and I’m an introvert. We get this wrap is being like very much wanting to be isolated and left alone. And what the research shows is that’s not the case at all. What introverts generally want is really deep connection in focus and conversation.

If you go to a huge party, which most introverts don’t like doing, it’s hard to have that, especially if it’s a deep party where you don’t know anyone. You’re not going to get that one-on-one intimacy or finding your tribe. Whereas most introverts thrive in small groups of like-minded people. So it’s not that

I’m either in or out it’s do I thrive walking into a room with all kinds of people or do I want to be a little bit more deliberate and intentional about how I build that community? So for introverts is kind of like, you know, you’re getting out of your comfort zone and when you feel that typically is a good sign, And so the other two that I wanted to briefly go over Brad, if you could help us explain you also follow the ancient wisdom of Buddhism and a Taoism what are the kind of like the two big takeaways from those two, for those people who aren’t super familiar.

Yeah. So like stoicism, a huge takeaway from Buddhism is this notion of impermanence, which is the everything changes. As an investor, it’s really important to remember that because it prevents you from clinging to the highs and then being really disappointed when they’re no longer high or getting so caught up in the lows that you become despairing and depressed.

So you could sum up Buddhism. In two words are the teachings of Buddhism, which is everything changes. And. I actually think that’s really empowering because what it means is that the future is not yet determined. And if we can build again, the strong foundation of grounded-ness to support everything else that we do in our life, the stuff that comes and goes and changes will be able to hold all of that.

See it clearly, and then take wise action as a result. And Taoism is very much about paying close attention to what is going on around you. Ancient houses and they called it the way and the way is the flow of the universe. And what Taoism teaches is that we are always operating in harmony with what’s around us at the highest level.

Alluded to this earlier, you never really go at it alone and paying attention to what’s happening around you is so important for yourself. And I think all of these ancient wisdom traditions, they really point toward the value of I’m going to sound like a broken record, but accepting and seeing things clearly so that you can take wise action being really present

that’s a part of seeing things, clearly paying close attention. Patience which is letting things unfold on their own time. Taking small steps for big gains, realizing the consistency compounds, not trying to always hit home runs, but being really deliberate and just walking a long path, having a long view and vulnerability, which is about putting your skin in the game it’s really easy to fake it and be too cool to care.

And I believe that’s a protective mechanism because you’re scared to actually try something because if you try something you could fail and you have to be okay with that.

Other than picking up your book, the practice of groundedness on Amazon. Brad Stulberg , B R A D S T U L B E R G, any other last parting thoughts?

I really appreciate you having me. If you all liked what I had to say I’d be honored if you read the book. I tried to write it in a way. I guess this will be my last thought. I wanted to close the knowing doing gap in this book

so many books are all about knowing. So they help you understand the topic.

Which is great, but they miss the doing part. Which is okay, now that I understand these principles, now that I understand this philosophy, now that I can express this mindset, how do I actually show up day in and day out and implement it.

In every single page of this book I checked against the criteria of, will this be valuable for someone to actually do something in their life that is productive and different as a result.

And I think that for anything that you read, whether it’s my book or something else. I would really push yourself to realize it’s one thing to know and be able to talk about something. It’s another thing to do it and practice it, which is why the title is not just groundedness. It’s the practice of grounded.

Yeah, thanks for thanks for doing that because that’s, it drives me crazy. And why don’t I try not to read too many books? Cause like they like tell me all these stupid scientific studies, like what’s the one, the power of habit. That was a horrible book. It just told me all these stupid like scientific studies and nothing like nothing practical that I could implement.

It just wasted my time. I hope that if you guys read my book, it’ll be a very different experience because I tried to write like the kind of anti at that book. I want every single page to be hey, here are concrete practices that you can implement in your daily life that will make you more grounded.

And I think that’s maybe that’s a type a and me like everything. I do everything I spend my time on. It should create some kind of habit change or actionable item if it isn’t, it’s just wasting your time. Yeah. But I need to be more grounded. Shut out a little bit too. You’ll read the book and hopefully your whole community does too.

I appreciate you having me on the show today.

Thanks, Brad. Again, the practice of groundedness and get out of your comfort zone guys. Join our community simple, passive cashflow.com/club. I don’t know why you haven’t signed up yet and reach out to me.Book your onboarding call.

I won’t fight. I’m a real person. So many people have been listening for two to three years. And it just finally now picking up the zoom call and talking to me. Those are your action items. Pick up practice of groundedness, read practice in pick up the phone and call Lane, or schedule your onboarding call. I won’t yell at you guys.

I promise. All right lane. Thanks for having me on. Thanks everyone for listening. And if you pick up the book, I appreciate it. Take care of everyone.