Episode 040 – Lane Kawaoka
Welcome to another episode of The HERO Show. I am your host Richard Matthews, (@AKATheAlchemist) and you are listening to episode #40 with Lane Kawaoka – How to Use Your High Net Worth Job to Give Life to Passive Income.
Lane Kawaoka is a Licensed Professional (PE) with a Masters degree in Civil Engineering with an emphasis in Construction Management and a Bachelors in Industrial Engineering both from the University of Washington. As an engineer Lane has managed over $230M of capital construction projects in both the public and private sectors. Aside from his day job, he controls 7 Manufactured Home Parks, 15 apartment buildings, and one Assisted-Living Facility totaling 2,600+ units in 11 US markets.
Here’s just a taste of what we talked about today:
- The “Linear Path”.
- Covering up your financial identity in your day job.
- The “Slow Flip” strategy.
- Fatal flow: keep working on your business and not delegating.
- Hiring good people to free up your plate.
- Smart Debts.
- After doing the hard work to become a high paying professional, get started in investing.
- Real estate business side and investing side.
- Investing money to produce more than the effort you’re putting in.
- Surrounding yourself with the right people for motivation.
- Hiring professional work and partnering with people who are aligned with the same direction as you.
- Never take advice from people who are not yet financially free.
- Businesses are riskier but with higher returns.
- Real Estate is more of an endgame strategy.
- If you’re not an accredited investor, you just need to look around.
- Begin with the end in mind.
- Flipping and Wholesaling are both types of active income.
- Use your high-paying job to save up the funds needed to start a passive income.
- Know who your people are and who you’re trying to help.
How To Stay Connected With Lane Kawaoka
Want to stay connected with Lane? Please check out his social profiles below.
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Hello, and welcome back to The HERO Show. I’m Richard Matthews
and I’ve got on the line with me Lane Kawaoka – I’m gonna butcher this.
It’s Kawaoka. Is that how you say it?
Kawaoka close enough. Good try.
Don’t worry about it.
So what I want to do real quick is introduce you so everyone knows who you are.
So let’s see here Lane is a licensed professional with
a master’s degree in civil engineering and emphasis in construction management
and bachelor’s in industrial engineering from University of Washington.
As an engineer, you managed over $230 million of capital construction projects
in the public space, city, state and federal and the private sector.
And aside from your day job, you control seven manufactured home parks,
15 apartment buildings and one assisted living facility
totaling 2600 units in 11 different markets here in the US which is crazy cool.
Passion project is SimplePassiveCashflow.com, Top-50 Investing podcast.
So what I want to do real quick is just start talking about
what you’re known for – what is it that your business is known for?
And then, what is it that you, Lane Kawaoka are known for?
Yeah, so today, you know, I own about 2800 units or so
target Class B and C for recession-proof assets.
And like I said, I work for housing, apartments and mobile home parks
and a little bit of assisted living. And what we do is we do
minor improvements to the property to bump the rents up a little bit,
so that we can increase the force appreciation,
increase the value. So that’s what I’m doing operation,
increase the cap rates and whatnot.
And then what is it that you do with the Simple Passive Cashflow?
Yeah, so SimplePassiveCashflow.com is my, my URL
and it’s also the name of my podcasts. And it started, like, four years ago, 2016.
You know, I’ve been investing for quite a while, but you know, 2016 – 2015,
a lot of my friends were asking me, “Well, how do I buy all these rental properties
across the country?” and then they don’t even step foot in it.
And they’re asking me how I was doing it. And you know, it’s real estate,
or it’s like, anything, any business, right? Nobody ever does anything,
they just hear you talk about it. So I just decided to record it in a podcast form.
So I wouldn’t have to keep repeating myself to people
who wouldn’t follow through with it. So yeah, that went through for like a year.
And then finally, in 2017, people starting to give me a lot of
positive feedback, doing it. And that was – kind of been my passion project.
Going forward, a lot of people say that helps them out,
points them in the right direction & gives them a lot of practical advice.
It’s sort of my give back, freebies out there out in the world.
Awesome. Do you offer, like coaching or training in the real estate space?
Or is it just the podcast?
Yeah, I mean, I started doing that just in the beginning,
but it’s kind of trading time for dollars. But now what I do is I have
a group coaching, and yes, investor accelerator,
so it’s a little bit more cost-effective for people.
Because I don’t think people should pay more than 10 or 20 grand for a mentor,
you know, that’s ridiculous. Especially when like, a lot of these turn-key rentals
to get started in a payment need, like $20,000 – $30,000 to get going,
you know, 10 or 20 grand, that’s like a down payment,
they should put it to a property instead of paying you.
So that’s kind of what I do these days, but mostly the people in there
are accredited investors. So that’s really nothing to them.
You know, if your net worth is under 200, grand, I mean,
you should stick to all the free stuff, in my opinion.
Makes sense. So what I want to talk about is your origin story, right?
Every hero has their origin stories where you started to realize that
you were different; that maybe you had superpowers,
and you can use them to help other people,
how did you start to develop or discover that you were an entrepreneur?
And how did you sort of make this transition from
being a civil engineer to being a real estate investor and getting into business?
Yeah, I think like a lot of like, you know, high-paid working professionals out there…
we all started with this blueprint of study hard in school, go to college,
study hard at college to go get a good job. And I call this the linear path,
I followed the linear path for much of my life.
And I graduated with industrial engineering from the University of Washington,
went to went to work. And, you know, construction & civil engineers,
they just stick us out in the field, it’s not the best job in the world.
Actually, it kind of sucks a little bit. But, you know, and again, following all that
financial dogma, like even buying your own home delivery,
which I don’t quite believe is the right path for most people out there.
But I did it anyway. Because, you know, I’m brainwashed like anybody else.
So I bought that house to live in. You know, I think one of the
things that helped me was I was really cheap when I started out.
So I was able to save most of my paycheck.
I bought a home to live in, in Seattle. And because I was traveling
so much for work and had no life. I just realized that and I was never home,
I just realized, hey, maybe I should just rent this thing out
and just live in the company hotel. You know, as I traveled around the country,
on jobs, so that’s what I did. And you know that property was rented $50,000,
it just went in with 20% down payment, and the mortgage was 1600.
And the rents are 2200. So there was a little bit of a delta between there
and I thought, wow, I gotta keep doing this again, and again, and again.
This is my ticket out of the rat race.
So how long did it take you to go from your first, you know,
rental property to like saying, buying your next property to like
really scaling to the point where you have 2600 units?
Yeah, so I mean, the second property, you know, I was able to save maybe,
$30,000 a year, for the next property, took me a couple years to save up for.
And then things got a little bit quicker because then I caught on to this fact that
I shouldn’t invest in primary markets, such as, where I was living
Seattle, California, New York, you know, places where
the rent to value ratios don’t make sense.
And, you know, if you’re new to real estate investing,
we look at this rent to value ratio, where you take the monthly rent,
divided by the purchase price, and what we’re looking for is something 1% higher.
So, you know, like that first property I bought, was rented for 2200 a month,
and you divide it by the purchase price of 250,000.
That’s much under 1%. I didn’t know that a time.
So then I switched to buying properties out
in the Midwest, Birmingham, Atlanta, Indianapolis.
Where I could pick up very high-quality Class B minus properties, or $100,000.
I rented for $1,000 or more. So that was kind of my protocol for the next 11 properties.
And so you did the single-family homes – to start with – for your first 11 properties?
When did you make the transition into buying multifamily?
Yeah, so that probably came around in 2015.
Got up to that many properties, I thought that I was going to get like
30 rental properties, that was gonna be my financial freedom.
But if you do the math, if you’re cashflowing a few hundred dollars per property
10 properties is just $3,000 a month, you know, that’s nothing for a lot of people.
It’s awesome. Don’t get me wrong, right? I mean, sort of passive,
but as you start to layer on more properties.
Now, even though you have a property manager to manage the day to day
and all the garbage that happens, you know, I mean, I was getting
an eviction or two every year, some kind of a catastrophe happening every quarter,
which was fine, right? The property manager is doing that.
But you know, if I needed 30 properties to hit 9 or 10 thousand dollars a month,
the cashflow, then you multiply all those numbers by three.
And that was what I realized it just wasn’t scalable.
So in 2016, I committed to going into asset class that was a little more scalable at that time.
Did you pick mobile home parks, specifically over something like
apartment complexes or other multi-unit things like Self Storage?
Was there a reason why you went that direction?
Well, I mean, I got I think I racked up maybe like 2000 apartment buildings first.
And then, you know, the mobile home park thing is more of a later thing.
I mean, apartments are just very – the logical progression.
So many investors who have done single-family homes from 2010 to 2015,
you know, it’s not the hardest thing in the world.
And they’re progressing up to larger assets.
And a lot of them are coming into the apartment space.
I mean, quite frankly, a lot of the dumb money is coming to apartments these days.
So as a concerned investor, I always try and move ahead of the pack.
So that’s why I’m moving more into mobile home parks these days,
because it’s just it. It’s not for the faint of heart, right?
There’s like sort of a knee jerk reaction if you’ve never lived in a mobile home park.
And I’ve never lived in a mobile home park. But once you visit them,
I would say they’re a lot better community than a lot of the class C apartments that I own.
So that’s more of a later stage thing. These mobile home parks.
My curiosity is when it comes to running a real estate business
like this real estate investing career. What would you say your superpower
in your business is? What is it that you bring to the table
that really helps, you know, solve the problems for people
because in your case, you have clients, people who live in your properties, right?
So what is it that you do that really helps solve the problem for them
and helps you grow your business?
I mean, on the operation side, I’m just smart enough to know that
I’m not the one who wants to do it. You know, I just don’t have the patience.
And, quite frankly, I don’t want to be the person collecting rent checks.
So that’s why we hire the best professionals that do it as employees.
As far as like the podcasting side, I mean, I think people think I’m pretty authentic.
You know, like, I tell people how it is.
And like, my investors, that’s what they want to hear, right?
They don’t want me to sugarcoat it.
I mean, I actually just wrote this article for a magazine recently.
And I think you’ll like this. You’re a comic book guy, too.
Look at Thor. Look at this character arc in the Avengers.
The first couple of movies, you don’t really like him. Right?
You know, other than the fact that he’s like, ripped.
But there wasn’t much. It wasn’t until like, Thor three
and then especially fat Thor came along.
That really resonated with people, right?
So in a way, I’m kind of like that.
I don’t know, just like my personality. I think people really resonate to and it’s real.
So you’re like fat Thor, right? You? lazy, right?
You, you’re like, I want to have my business, but I want it to,
I want it to run sort of, like on its own, where I’m just providing
the strategy and what is going on, but you have people that are making everything happen.
Right, right. And people want to like work with people that are real, right?
As opposed to their traditional real estate firm whose you know
they’re in white shirt, brown pants, blue pants, brown shoes, you know, that protocol.
And they’re kind of talking from a script.
You know, you don’t know who they are people–wise.
And that, you know, that’s when I invest with people.
I want to know who they are, personally.
Do you still have your day job so to speak as a civil engineer?
Are you all in on the investing now?
Um, yes, I quit last April, because it was just getting to be a little bit too much.
I mean, a 100k job was easy money but the people around
being around that mindset and to be quite frankly, covering it off. Yeah.
Clark Kent has to cover his identity and
“Hey Clark, you want to arm wrestle?” It’s just, you know,
people are telling me how to manage my finances. Like, are you kidding me man?
I like that. I like that picture. It’s like asking Clark Kent to arm wrestle.
He can’t show his true identity.
You know, I think one time somebody heard I owned like,
three rentals, and or five rentals in Birmingham.
And they’re like, “Hey, you know, you can’t say that.
People are gonna think you’re not focused at your job.”
I’m like all right, well, thankfully, you guys don’t know about the other
2800 in the other states.
That’s funny. I had a experience like that a couple of weeks ago I was in San Francisco
– we travel full-time with my family. And I had a gentleman come up to me
just like on the street was just chatting, whatnot.
And he started trying to give me like advice on like, how I should run my life, my business.
And I was like, “You don’t have any idea what the results I have are.
Why are you trying to tell me how I should run my life.”
Right, right. I mean, I like I tell my investors, it’s like,
don’t take advice from people are not financially free.
And sometimes I even include your CPE and your lawyer.
That’s why they’re still working at gov they haven’t figured it out.
Yeah. That’s really awesome. So I like the whole hidden Superman kind of thing.
But you quit last year now you’re full on in the investing career?
Are you still looking at growing your portfolio?
Or are you like happy where you’re at? What’s your plan with your real estate business?
I mean, as long as the deal cashflows,
like I don’t do any development deals. And like that kind of stuff.
Like, I think you’re more traditional real estate, I mean, I’m very not house flipper-ish.
I’m more buy an asset that is performing today.
That has real upside, you know, like, maybe we can pump the rents up
50 bucks in every unit without doing anything,
just by putting right back on the market.
But then there needs to be a component of force appreciation
that we can also work on to bump in additional $50 or $100.
More, as long as it fits those criteria. Man, I think I see I see a lot of like,
newer investors, they’re like, Oh, it’s not a good time in the market.
But if you know what you’re doing, and you can underwrite the deals,
the right way to do your sensitivity analysis.
I mean, I think you keep investing in deals as long as you know, deals are coming by.
But that’s the thing, you just got to be more selective.
Are you looking at, like increasing the cap rate on the property
and then like doing a cash out, refinance, pull your initial investments out?
So you can go and you know, put that into something else with a loan proceeds?
Or are you just buying the property flat and keeping it for cash flow?
Like what’s sort of your strategy with these?
Yeah, so we like to call it like a “Slow Flip”.
So we usually like to hold onto the property for five years,
the first couple of years will be having all the units in each just do that naturally,
as tenants move out. And so you know, you keep your cash flow high,
and you stay in the green. And then as they move out,
then you rehab the units as they come up, on available, and slowly but surely,
you’ll probably go through all the units in the first couple of years.
And then another couple years to stabilize the books
and increase the community at that point.
Once you’ve got the rent increases, and then hopefully
you can transcend to the next asset class level,
like take a property from a C, maybe a C+ or B-
and get a higher cap rate sale for a multiplier.
So you’re pulling out of that one and buying something else?
Right, right. And part of that is like, you know, people are like,
“Well, why don’t you just hold on to the property forever?”
And I’m like, Well, you know, a lot of properties we buy are like
1970s 1980s property at some point. This is the old property, right?
You’re huge CapEx are going to catch up with you.
And it’s just an older property. Yeah, what we try and do is we try
and put nice lipstick on a pig, bump the value
and let’s get out and let’s move on to the next one.
Because our highest and best use is increasing the NOI, which is increasing the cap rate.
Yeah. And one of the things that a commercial investor friend of mine has told me
because I asked him the same question.
I was like, why don’t you hold on to them for cash flow,
because cash flow is like what everyone wants.
And he was like, because, essentially, money loves speed, right?
And if I can pull out of this property now and pull a million dollars cash out of it,
the cash flow over that property would take me
three or four or five years to hit a million dollars.
And if I can take the million dollars out now
and put it into a next the next asset class,
either a better property or increase cash flow, then I can grow my portfolio
a lot faster that way. Right?
Right. It’s based on the person right? Like, if you’re Tom Brady,
you’re already married to that supermodel?
Like, why would you want to, you know,
you’re like, once you stand the property, watch this do nothing.
But he continues to go after Super Bowl rings, right?
And there’s a highest and best use of doing something else. Absolutely.
So what I’m gonna talk about is your fatal flaw, right?
So Superman has his kryptonite, Batman is not actually a superhero.
When it comes to like growing your business?
Has there been something that has either held you back
or something that you struggled with as an entrepreneur
or as an investor that you that you had to work on?
And what was it and how have you sort of worked on that
and helped you overcome that?
Yeah, I think my kryptonite is like, I still do a lot of the computer stuff by myself.
I mean, that’s probably why starting a podcast was not daunting to me at all
I still edit all my podcasts. And, you know, I remember when I was like,
15 or 16 years old, for like, band, you know, the DVDs, tape test,
I would get the software and edit my tape tests together.
Making podcasts, it’s like nothing, right.
But it still takes up a lot of my time right now.
And I probably shouldn’t do that because that’s kind of $10 work and below
but that’s probably my fatal flaws. Like I keep working in my business.
So I highly suggest hiring some people.
I hear you, man, I hear you.
I think one of my problems too, is like, for certain things,
I just don’t trust people, like, you know, like, I don’t want to give the
login to YouTube or like the podcast uploader?
You know, like, I just think somebody can really screw it up.
So I hold on to those. But yeah, I need to give up whatever else I can. Sure.
Yeah, so like one of the things that, uh,
I kind of had the same problem.
And there are things that you can do to get around that.
So like, you know, like Last Pass, for instance, you can share logins with people,
they don’t actually see the passwords.
And then there’s like, YouTube, for instance,
has the ability to give someone restricted permissions.
You can get make them a manager instead of an admin.
And you can start giving away a lot of those things,
what you find – at least what I found in my businesses –
the more I gave away, the less I realized I don’t have to worry about a lot of it.
And it’s really helped grow my business.
So I got that Last Pass thing here, too.
And I didn’t know you could add admin. Right, that?
If you’re on your YouTube channel. If you have a personal YouTube channel
then you can’t add managers.
But if you can transition it to a business YouTube account,
and it doesn’t cost anything, you just, you know, go in there and tell them,
I want to make it a business account. And then you get the ability to have managers.
So you can go to permissions. And you can say,
I want to have managers and you can give them like restricted permissions.
So then you own it, and you’re not giving up your admin or your owner rights.
You just have this person who is allowed to upload videos,
but not delete them, that kind of things, or whatever.
Okay, well, if you’re doing it can’t be that bad.
It cant be that bad. Especially if we find good people.
Yeah, yeah, it’s really a try to pay them on time, you know?
Yeah, pay them on time. That’s one of the things that – for my business –
was like learning how to, like, Oh, man. And once you have people,
then you have to manage payroll and that kind of stuff.
But it also helps grow your business and takes you out of doing some of those things.
And I know, I said, I don’t run real estate.
But I know there’s like you like really growing the real estate business you get into,
how can I have someone who’s doing the acquisitions,
and someone who’s doing you know, managing the property managers
and stuff like that. So it’s not coming to you?
And you start to start really scaling that way.
Exactly. Thanks for that.
Absolutely. So what I want to talk about next is sort of
what is your driving force? What is it that you are, you know,
Spider-Man fights to save New York
Batman fights to save Gotham or Google fights to categorize
all the world’s information? What is it that you are really striving for
with your investing career?
Yeah, I mean, I think like if the one thing that really pisses me off in this,
is that there’s a lot of other working professionals who busted their butts in college
and at their jobs, and they’re still having to live lives where they go to their day job
that they may not like, and they’re gonna have to work at it for 40 or 50 years.
Yeah. And I think that that stems from a lot of bad financial advice out there,
which is starts with, like, you know, just investing in mutual funds and stock market stuff.
And I think that I mean, I’ve kind of proven that as long as you invest in
Yeah, in things that have cash flow, or leverage bubble and hard real assets.
And so these fake paper assets, I mean, you can retire in 5 to 10 years, no problem.
So, I mean, it’s helping
helping people who were in your shoes know that they can actually retire
and do something different than by changing what they’re doing
with their, you know, discretionary income.
Right. Right. And also, you know, there are a lot of websites out there that are these, like,
penny pincher, guys, you know, “save all your money”,
don’t drink Starbucks latte, you know, which I think is like,
you know, don’t go into debt. You know, I’m like, go into good debt
where you’re getting cash flow. Right. So it pays for it
Smart debt, you know, to your little background you got there
Smart Debt that actually pays for itself.
Exactly, exactly. So it’s just very counterintuitive.
You know, people who read “Rich Dad, Poor Dad”, get it, but then there’s no,
there’s none of that, you know, you read that book,
and you’re like, very motivated, but then they’re like, all right, what do I do?
Yeah, exactly. Well, if you’re a high paid professional,
and you’ve done the work to get that good salary you have,
you’re able to save your money and not just having to go through a hole through your pocket.
Well, then you were like, high up, you know,
buy a single-family home, get started,
and then go into bigger deals as you progress.
Very simple. Yeah. Do you? Do you put up all of your own capital for your properties?
Or do you use investor capital or anything like that nowadays?
Yeah. So what we do is when we share in,
we bring in partners on larger deals.
So when I put in my capital, it goes on the same investor class as other investors.
So it’s, we call this private equity, or syndications.
So think of it like the general partners, or I’m in the cockpit with the other partners,
or managing the deal, we’re finding the deal,
we’re lining up the lenders, and then all these limited partners come in the,
in the coach invest money, and they go to sleep, and they go about their lives
and you know, hopefully, collect your checks.
Yeah. And the idea is, as a high net worth, credit investor,
you’re going into dozens and dozens of these projects, curating your portfolio,
and you’re diversified over a lot of different deals,
a lot of different partners, areas, asset classes.
And, you know, you never should have anywhere more than, like 5% to 10%
of your network into any one particular deal.
So one of the things that’s always fascinated me is that in the real estate space,
you have the business side, and you have the investing side, right.
So the business side is like what you’re doing,
where you’re actually buying the properties and managing them
and helping grow them and doing the operations and like,
you’re in the business of real estate.
And then you have the investors who come on,
and they put the money up for real estate, right?
The ones who, you know, they go on their, daily lives or high net worth individuals,
and they put the money in, and they get some sort of return on that.
I’m curious, if you ever think you’re going to make that transition,
or work in both ways where you have the real estate that you’re running the business side for,
and then maybe you’re just taking some of that cash flow that you have,
or the network that you create from the real estate and investing
and other projects that you’re not doing that at this time.
Or you’re just being I’m going to put up my $100,000 or $200,000 or a million dollars
into this project and make a return on it.
Do you think you’ll ever make that transition?
I mean, right now, I’m kind of doing that with my own projects.
I guess, like, you kind of said, but you know, it’s like,
I underwrite the deals myself, I know the people, right?
Like, part half of this is numbers, half of his people.
If I know who I’m working with, and I’m in the general partnership, then, why wouldn’t I?
You know, it’s more information, more insight for me, as an investor to do that.
Have I done that? Yeah, probably a couple of times, we’re not in the general partnership.
And I like to do…like, the people and I just jump in real quick cash.
But I don’t know. I mean, me personally, I’m an insider.
So I want to be on the inside. You know?
That makes sense.
Right? I mean, but probably, you know, in the future,
when I’m worth millions of probably what these other guys are doing.
And they just, they just put in 50 grand and as a test investment.
And if they, if the operator performs. Don’t open up the floodgates, and here I come.
Yeah, but no, no, I noticed the game right,
I can always be in the circles always be at the bar
talking to the people actually doing the deals.
And that’s what’s nice about this, you actually know who you’re working first.
That’s one of the things that really fascinated me about the investing side,
I was talking to another gentleman who does apartment investing,
and he was like, you know, just for numbers that they’d buy a million-dollar property.
And you know, the lenders are only going to lend 8% LTV or whatever loan to value.
So they have $200,000, I need to bring in.
So they would have the investors, you know, an investor put them in $200,000.
And they give them like a 10% equity stake.
And, you know, they would take the property to its highest and best use
now it’s worth $2 million. And they pull out the, you know, they do a cash out refinance,
and the investor who put out his $200,000, he was making 10% of the rent every month.
And he got his $200,000 back in 18 months,
and then he has a 10% equity stake.
So he gets 10% of the million dollars that came back
and like he put up $200,000 and made like, half a million dollars over five years,
it’s like you don’t have to do anything.
And I was like, that’s always fascinating to me that there’s like,
there’s also that side of the investing when you get to a certain level of network,
you can just put money up, let an operator or yourself come in
and actually, really make their money work for them.
It’s such a fascinating, fascinating world
and real estate that you can actually really get your money
to produce more than the effort you’re putting in.
Right, right. And, you know, like, I’m not really a fan of real estate in particular.
I mean, one of the big reasons I like it is just the tax benefits, right?
Like when I was sitting my single-family homes,
I think a lot of people who own rentals know this,
like you’re able to take a straight-line depreciation of 27 years
so on that, you just divide the price of the property
divide it by the value of the building by 27 years,
but on these larger deals that are large enough so that we can do cost segregation.
So we get an engineer to itemize every single component of the building
we get to make this big stack of accounting stuff,
they give it to the accountant and now the accountant is able to write off
the huge proportion of the building and you’re one to call this bonus.
And you know if an investor puts in like 100 grand as a passive investment
I’m seeing anywhere from like $60,000 to $90,000 coming back
and you on bonus depreciation offset their income
and if you’re a real estate professional, that’s the key.
Now you can use that to offset your W2 Income
so if you’re a high-paid doctor making $500,000 going through
a few of these deals now you know the whole game becomes
knocking your AGI from 500 down to 350
or wherever that highest tax you haven’t adjusted gross income.
Right. So people are
it’s dropping down how much they’re actually
being taxed on I mean the reason why – huge savings
Yeah, I mean the reason why I love house flippers
because they pay all our taxes for us,
everything that they make is ordinary income.
Everything we do is pretty much tax-free. You know?
Yeah. And then one of the things that really fascinated me was like
loan proceeds are are are not taxable.
When you do a cash out refinance, not taxed.
So when you take a property and you double its net operating income
and you go from you know, it’s worth a million dollars to $2 million.
That million-dollar spread that you pull out
on the cash out refinance is tax-free, like that’s insane.
I mean, you pull that money out and you go into five other deals.
You get it again. Yeah. And you get the bonus depreciation on that.
And luckily, those passive losses you can carry for that indefinitely.
You don’t have to use it that year.
Yeah, I have an I have a friend of mine who invest in commercial real estate
he calls it an HNB money which is Hip National Bank,
it goes right into the your pocket.
So I want to talk a little bit about some of your own personal heroes, right?
Frodo had Gandalf
Luke at Obi-Wan Robert Kiyosaki, we mentioned, had his rich dad
Who were some of your heroes?
Were they real-life mentors, speakers or authors peers that are just figures ahead of you?
And how important were they did what you’ve accomplished in your business so far?
Yeah, I mean, I think like my investing really took off not too long ago.
You know, when I had 11 rentals, I took that next step, because I started, you know,
to pay money to join these masterminds, and you get around other people
and I tried to find other doctors, lawyers, engineers, other high paid professionals,
to see what they were doing. And it’s not one in particular,
but just the myriad of different topics that they discuss,
and how they really engineer their lifestyle around, you know, some of them like their jobs.
And you know, maybe they might go down to two, three days a week of working.
Some of them don’t, right, and they quit, and they become a real estate professional,
slick, and harvest all those tax losses, and offset every single one of their income
and killing their spouses. But it’s just all like the world is your oyster
– just getting a whole bunch of different data points
and different philosophies from a myriad of people.
When you made that transition to like getting yourself around
a bunch of people who are doing this, that really explode your business.
Yeah, I mean, you know, from 2015 – 2016, to now,
I mean, going from 11 units to 2800. Now, I mean, just
numbers don’t lie, right?
That’s an insane, insane growth. 2800 units.
So just out of curiosity, how much of your personal time
is put into managing a 2800-unit portfolio?
I’m trying to keep it under 16 hours.
I mean, I definitely per week.
Yeah, per week. Some of that is editing podcasts.
Stuff I shouldn’t be doing. But that’s why you build and scale in such a way
where you have professionals working for you. Mm-hmm.
And if you also have other partners to their line, that have skin in the game too.
And a skin and outcome. Also, yeah, we’re all pulling in the same direction.
And I think that’s where the mom and pop investors go wrong.
They don’t trust anybody. They do everything themselves.
And they violate that other rule that I mentioned, you know,
they have huge sums of money to just one deal is a huge risk.
Yeah. So you want to spread that around and actually get you, other people?
I would imagine those 16 hours of work you put into managing portfolio,
not a single one of them goes into fixing toilets.
No, honestly, I don’t know how to do an eviction.
I understand how long it kind of takes, but it’s different in every state.
That’s the property managers’ job. Like, I don’t know.
But it happens in your business, you just,
you know, that’s the thing I know how to do.
Yeah, I mean, that’s why apartments are a little easier,
because now the property managers are a lot more sophisticated
than your residential property managers. Instead of talking about
you don’t talk about individual eviction.
We talked about it at our calls where we’re talking about our
what is our total occupancy? And we’re just talking images at that point.
Yeah. It’s really interesting.
That’s unfair, right? Like, and until you get to that scale.
It’s hard to get that scale,
but once you do, it’s so easy.
Yeah. So do you think from this point, it’s going to be fairly simple to go from
almost 3000 units to like, four or five or 6000 units in your portfolio?
Yeah, probably. But, I mean, now, I’m kind of starting to think about
all right, what’s my endgame here, right?
As I tell a lot of my investors, like, you know, you got to come up with
a simple passive cash flow number in your head, right?
And you got to figure out what your kind of lifestyle you want to live
how much money you need every month.
And for me, I live a pretty simple life. And I don’t really need too much.
So, but then again, once you get to a certain scale,
and you have people you work with,
you have a good relationship with like,
why would you not do it? Right?
It’s easy to keep going.
Right? Right. So maybe just be a little even more selective? I guess?
I don’t know. I’m trying to figure that out.
…what the next steps are? Do you grow your portfolio in real estate?
Or maybe you start buying other cash-flowing businesses?
I don’t know if I’m gonna do businesses because businesses are even more riskier
and higher return, of course, but like, you know,
that’s why real estate so nice because it’s more of an engaged strategy.
Yeah. And I think that’s why I’m going to mobile home parks,
because it is a little bit more cash flow asset.
And I am starting to learn about like life settlements these days,
which is an, even more, lower risk. I mean, it’s totally uncorrelated
with any economic ups and downs. And this is investing
in people’s life insurance that you basically buy it from them as an investor.
And, yeah, when they die, you get paid.
So you know, the premise is, nothing is more guaranteed than death and taxes.
So why not be the on the investor side of that? Really morbid. But…
That’s interesting, I was not even aware that was an investing class
that you can buy insurance policies, and I assume, do you pay out the death benefit?
Right. That’s the beauty of it. Right?
Like you want to be a contributing investor.
Everybody talks about flipping houses and tax liens.
Very few people talk about apartment investing or mobile home park investing,
but nobody’s talking about lifestyle. Goodness, gracious.
Yeah, I’d like I never even heard of that. And I got a lot of investor buddies.
So that’s crazy off to, to look more into that a little bit.
See what it’s about? I assume that’s…
Do you have to be an accredited investor
before you can start investing in things like that?
Yeah. Especially be approved by the –
Well, I mean, you’re being credited as sort of like being pregnant, right?
You are, it’s no one’s going to give you a certificate saying you’re accredited.
And that’s, you know, to me, it kind of drives me crazy.
Like, there are all these like laws that accredited investors supposedly have
more access to these type of private equities.
And, you know, I wasn’t afraid. Not too long ago, I didn’t start off with anything.
And I had to kind of build this slowly. And it’s really sad,
to say that, like, a lot of these better deals,
regular people don’t have access to them.
And they’re the ones that need it the most. Right.
But, you know, if you’re a non accruing investor,
you just have to look around 90 to 97% of deals out there are
regulation 506(b) p, or the Acccept Non-Accredited Investors
you just don’t have access to them if you don’t have the network to get into them
That make sense. So it’s building the relationships that gives you access to the deals
Right. Most people who are real estate investors,
Mom-and-Pops, you know, they’re diving into talking to brokers
and looking for deals. But when your network gets to be
above half a million, certainly accredited, the old saying
“Your network is your net worth”. So much more true.
Yeah, the people that you know,
that really help you get where you’re going.
So let’s bring it on for listen listeners a little bit
and talk about guiding principles, right.
So something that you do on a daily basis,
regularly, that sort of contributes to your success
and your influence, and maybe something that you wish you knew
when you first started out on your, your investing career.
Um, it seemed like begin with the end in mind, right,
and then trying to figure out where you what your pedigree is,
when I talked to newer investors, it’s always like,
trying to figure out where they are,
and the three resources, time, money and knowledge.
Granted, they’re not going to know too much.
But in terms of how much time do they have? Do they work an 80-hour week job?
Do they have eight kids? And then how much money do they have?
You know, like, what I do and what I help a lot of people,
you know, get single-family homes, it’s investing, right?
You need money to invest? If you don’t have money, I can’t help you.
You got a money problem? You know, fix that.
And, yeah, I can’t help you. Right?
Like, I don’t do these creative deals, where no money down.
You need money to do what I do.
So, like, yeah, guiding principles, begin with the end in mind,
because the most people I talked to are like, higher network,
high-paid professional yet, they want to flip houses, and it’s like,
they got their priorities all messed up.
They will say they want to be passive, but they don’t, they’re not doing that.
So it’s like, you know, if you’re if you’re a high net worth individual,
and you’ve got money to put into investing,
flipping and wholesaling is a very active type of thing.
You’re, you’re buying things and selling contracts, and you know,
doing a lot of work for that, actually creating a passive income there.
So you’re actually saying if your goal is actually to create passive income
and you’re a high net worth individual,
there’s probably a different path you should be taking.
Right, right. Yeah. I mean, come on
the more simple passive cashflow train, but if you’re not, I’m cool.
Keep paying my taxes for me, you know, good job.
Yeah, and, like, I’ve talked to a lot of newbie investors that say
getting into wholesaling is a great way to create that cash
to create the money so they can get in and do some of the other fields
you’re talking about, where you have to have money to get any get started.
Where, if you’re going to wholesale a deal or two,
you can create $30,000 that you can use to put into,
you know, a more passive type of style property, right?
I mean, I’ve never wholesaled a property. I mean, I just go to work
at my day job and save money.
And yeah, I ate ramen noodles a lot for the first few years.
But you know, I met a lot of my guys I’m like,
why would you want to wholesale a property and make 10 grand
when you can just work an extra shift on Sundays or do an extra surgery
and you make 10 right there.
Yeah. So I mean, that’s what your highest and best use
So you’re talking to a specific subset of the market that has
the high paying jobs that they can use to create the income they need.
Right and a lot of times, like my heart kind of goes out to these guys
because they’re the ones that busted their butt from kindergarten
all the way through college and then more years of college
and more professional licenses. And yeah, you know, not saying that
this subset is more deserving or not
but I remember when I was in college I wasn’t frolicking playing frisbee in the quad.
I was in the basement doing my homework.
Absolutely. That’s the way it goes down
you put a lot of work in.
But yeah, I really liked that you’re like you know
who your people are and what you’re trying to help.
And you know, really, really hope you can give me a Smart Passive Cashflow,
brand and really help more of those people because the real estate …
What did they say? More millionaires are created in real estate
than any other asset class. So at this point,
I just want to thank you for coming on be on the show
where can people find you if they want to learn more if they’re you know,
the high net worth individual or a highly paid professional
and they want to learn about the investing stuff?
Where can they find you? What kind of people you looking for?
Yeah, let’s say you know if you’re kind of looking to get started,
I would check out my first 20 podcasts which are all about
buying remote turnkey rentals. And then yeah, I mean,
check out the website SimplePassiveCashflow
and then that’s the podcast and then the website SimplePassiveCashflow.com.
And thanks for having me, Richard.
Yeah, it’s good to have you on the show
and talk a little bit about investing.
I haven’t had any other investors on the show before so it’s kind of cool to
again, talk about some of that’s one of my favorite subjects.
So yeah, thanks for coming on the show.
And if you are one of those people who has a highly paid profession
and want to get into real estate, I would check out SimplePassiveCashflow.com
and start looking into some of the real estate stuff.
I know it’s a great way to put your money somewhere
that will actually work for you a little bit harder than
working for it for yourself. So thank you, Lane, for coming on the show.
Really appreciate it. Look forward to speaking to you more soon.
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