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“My wife is officially is quitting her job at the end of this year. Thanks for helping us be able to do that. One of her friends had to go back to work 10-weeks after having their second kid because they need her income to pay the mortgage. It makes me cringe just thinking about that.”  –Hui Deal Pipeline Club Member

 

The typical SimplePassiveCashflow tribe member asks a lot of questions..

Why do I have to work 40 years at my JOB? Why do the wealthy always get ahead? Why do I stay up late at night reading Quora?

I know I was beating the drum of the Turnkey rental a few years ago but now investing in Syndications. (Turnkey rentals are not passive and still a PITA) I am admittedly a work in progress and this website/podcast is my journey.

Mainstream investing (401K, stocks, mutual funds, 529, IRA, or anything retail) is based on investing for appreciation. You know buy-low-sell-high …. usually based on factors wholly outside an investor’s control.

To one day (when you are grey and immobile) retire and live off your nest egg at 4% withdrawal rate. We (us sophisticated investors) call this gambling not investing.

Buy-low-sell-high trading mentality encourages the churning of holdings … which generates commissions and short-term capital gain taxes. Which is another reason why we do not like commission based Financial Planners or Registered Agents. Some of these guys use hard-selling techniques. If they make enough phone calls, eventually they get someone to purchase a stock and make their commission.

“Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway” -Warren Buffet

In case you have not seen this whole financial world is an engineered system by Wall Street firms and the government which protects them, to prevent Main Street investors to building enough passive retirement income in you 30s/40s as opposed to your 70’s. The mainstream financial news never talks about yields (coming from cashflow – income minus expenses). Discussions focus in the context of share prices.  It’s pattering you to think buy-low-sell-high. Churn and cha-ching for those executing transitions in the industry. And for most people who are confused and freeze that’s why there is a hidden asset management fee which is an above the line expense to you.

The secret… Is not about appreciation but cashflow. Creating multiple mini-pensions today as opposed to hoping and praying you have enough to deplete from during your dying days.

Many predict 2020-2030 as the year when many pensions will go under

Financially independent or the truly “wealthy”  look at the world VERY differently than those in the corporate rate race or Wall Street fun-house.

For real estate investors, it’s all about acquiring streams of cash flow …

…. collecting contracts (leases) with people and businesses who work every day and send us a piece of piece of their production.  It’s based off sound financials where you make more income than expenses and not off fake company evaluations and perceptions.

Although equity is nice when it happens we know REAL equity growth is driven by cash flow.  More cash flow equals more equity. Cashflow is the oxegen to survive in order to partake in equity growth. And Cashflow today literally puts food on the table, gas in our cars, clothes on our bodies, shelter over our heads, and a nice vacation if we have extra.

The best part is that we control multiple streams of income and essentially our own destiny as opposed to giving up control to a corporation that is dependent on the overall national and world markets.

As the Cashflow affords us the means to sustain, surplus cashflow and equity allow us to acquire even more cashflowing assets.  It’s a virtuous cycle of compounding wealth. But the good kind.

Learn more about Syndications… with the SPC Ultimate Guide

Join us on the Quest for the Uncorrelated Assets!…

The “Bread and Butter” investments:

High-level snapshot of the current cap rates

Exotic Investments:

Oil & Gas
Website/Online Business repositioning
Life Settlements
Conservation Easements
Diamonds (Just joking)

Tactics of the Wealthy:

Captive Insurance

Tradelines – “Piggy-backing your credit”

QRPs and Solo401Ks

Leveraged stock investing

Surviving the W2 Lifestyle

Other Resources:

Tick, Tock: Timing of the Next Downturn and What it Means For Commercial Real Estate – Yardi Article

Go Bigger! Diversify your money! Invest alongside the pros!

Four ways Sophisticated investors diversify in syndications:
1) Different leads/operators
2) Asset classes such as MFH, self-storage, mobile home parks, assisted living
3) Geographical markets
4) Business plans (5-year exits vs legacy holds). And take advantage of the overall scalability and Cost Segregation & Bonus Depreciation

One of the cool things about investing in real estate is that the properties create a paper loss. For single family homes, you can take 1/27 the value of the property (minus land value because that does not devalue over time) per year for 27 years. This is what is shown below. A cost segregation juices this deduction as it puts the asset on a more aggressive depreciation schedule which front-loads as much depreciation as the tax code allows. This is one of the reasons why bigger deals are better because they can support a 5-8K cost segregation study.

Paper losses due to depreciation!

*Usually I see investors place no more than 5% of their net worth into anyone deal

Sign up for the mailing list and join the free web course “Journey to Simple Passive Cashflow.”

The group coaching is something that I have been trying to put together a couple years now after I accumulated a lot of content and got a feel for coaching students these past few years in a one-on-one setting – see here.

I’m code naming this project, “The Journey to Simple Passive Cashflow” and it will consist of:
1) 27 weeks of curated content with concepts building on top of each other
2) Participants go through those modules together and are able to interact on the Bi-Weekly Call and the Private Facebook group in a “group study” environment
3) Bi-Weekly hour power calls switch between the topics of a) Acquiring you direct investment and b) more high-level wealth building concepts and syndication education

It’s going to be a really cool format where people take the journey together. Think like a Fraternity/Sorority without the weird stuff. When I was going through programs it was most beneficial to connect and climb the ladder with quality people. Who knows someone of your Cohorts might do a deal together or become lifelong friends or accountability partners.

Still working on the website but here is a survey to get on the waiting list here.

Agenda:

Week #1 – Introduction to the “Journey to Simple Passive Cashflow”

Week #2 – Seeing the Matrix – You will know why the middle class is shrinking and what you can do to continue your same standard of living

Week #3 – About Me – Learn about my background and why I have the formula for high paid working professionals to escape the rat race

Week #4 – Real Estate Investing from a 30,000 foot view part 1 – You will understand real estate investing and all the options. We will cut through the noise and identify what are the best options for the high paid professional

Week #5 –  Real Estate Investing from a 30,000 foot view Part 2 – Continuation with the addition of downloadable tools

Week #6 – A free special gift

Week #7 – Fundamentals – You will get to know the basics of what every investor needs to know without reading a gazillion books or going through hours of boring podcasts

Week #8 – In-Field Experience – A guide to effectively network and build your investor circle

Week #9 2018 Trends – The Fundamentals don’t change but the market climate changes so here is the latest market report and things to be on the lookout for

Week #10 – Buying a Rental Property Part 1: Acquisition – Start shopping for deals and refine your criteria to be able to spot out your next addition to your growing portfolio

Week #11Buying a Rental Property Part 2: Lending – You can’t buy anything and use leverage effectively if you don’t know the basics of using the bank to your advantage.

Week #12 – Buying a Rental Property Part 3: Operation – Congratulations you are a rental property owner but that’s only half the battle. Now we focus on managing the manager so we can optimize our returns.

Week #13 Buying a Rental Property Part 4: Mentorship/Networking – You net worth is your network. Don’t be that guy who repels help and good ideas and the last person to hear of the latest trends or work with bad vendors.

Week #14 – Half-Way Point! – Build your portfolio with the end in mind and with a holistic approach

Week #15 Syndications + Apartments Part 1 – Understand why most sophisticated investors scale up to larger investments

Week #16 Syndications + Apartments Part 2 – Find out how you can get access to deals once only accessible to the wealthy within the country club

Week #17 Investor Mindset – Once you get started you realize that the possibilities are endless (I know it sounds cheesy but some people sign the front of the checks and some people sign the back)

Week #18 Productivity – Following up mindset the limiting factor might be the fact that you suck at getting things done. Here are some of the best tips to increasing your output and having more time to do what you want to do.

Week #19 Taxes – You will learn what you will need to know to prevent legal chrn from a lawyer who does not know what they are doing

Week #20 HELOCS/Refinancing – A great way to find lazy money to put to cashflowing rental real estate

Week #21 1031 Exchanges – Don’t be fooled but this talked about tax strategy. It is often not what cutting edge investors use.

Week #22 QRPs – Got funds locked up in retirement funds? Lets free that lazy equity!

Week #23 Life Insurance Banking – Its called life insurance but its use by the wealthy to bank from yourself and avoid taxes.

Week #24 Other Financial Hacks – Other secrets I pick up by hanging out with wealthy people

Week #25 Covering your assets – You will learn some ways to build legal protections around your financial empire

Week #26 Conclusion – Pulling together the basic and advanced topics for you

This is the stuff you don’t hear talked about from co-workers!

Most so-called financial planners don’t even have a clue – although they are probably a nice guy.

These are the secrets of the uber-wealthy and specific mentorship groups that I have spent over $40,000 to learn over the past few years.

All too often I see hard-working people with good jobs struggling to get by.

These are the same people who are forced to take stressful promotions at work, commuting in the car for a couple hours a day (hopefully listening to the SimplePassiveCashflow.com podcast), going home to the home they think they own but in reality, they are just a slave to the mortgage company.

These “good citizens” are victims of an engineered system to keep then investing in 401Ks, mutual funds, and stocks.

This financial system is setup where the insiders are stealing the majority of your returns (and you take all the risk – to learn more about this go to SimplePassiveCashflow.com/FP).

After over 2,000 calls (Now available to Hui Deal Pipeline Club members) between 2016-2018, I have found that most people Major in the minor things…

For example, if you are trying to clear space in your iPhone. #FirstWorldProblem

You are wasting your time with this…

When you should be spending time on this…

And don’t get me started with mentorship. Most people are worried about how much the shovel costs when they are trying to dig a hole.

I am trying to lead folks out of financial entrapment! Let’s get out of the rat race together!

 

Welcome to the website and join the club!

 

****Quick Start List!!!****

Welcome if you are new! And welcome back… here is what I have been working on…

1 ) Just closed my second syndication in my own name. If you want access to these opportunities they are only available to folks with a pre-existing relationship. So sign up for my Hui Deal Pipeline Club and setup a time to chat.

Hui Deal Pipe Club acquisition stats (Estate-2016)- Acquired over $90M dollars of total real estate and $12 million dollars of funds raised.

2) Working with my coaching clients and Starting group coaching. Honored to be part of this paid Mastermind. Email if interested.

3) Moved to Hawaii! Waiting for the right deal to come along in this sellers’ market and ponder life.

4) I stopped looking for deals… I only hunt the hunters to partner with if the deal makes sense. Not to sound high and mighty but after doing this podcast thing for a few years I have reached “critical mass” for social capital and deals are now coming my way. There are about twenty deals I get from brokers in my email everyday and a few syndication deals that are pitched to me every month.

5) I’m just trying to find happiness. Read along on my personal newsletter by signing up here.

Goal: Turn “C” and “B” class properties, 60-300 units (stabilized with value-add opportunity) with at least 75% LTV/25 year amortization. We plan to hold 3-6 years and sell when we have doubled our investors’ money. Utilize Non-Recourse debt for extra security.

Buying Criteria:
Seeking MFH at least 60 – 250 units.
1. Value-add component: typically 85-90% occupancy for non-recourse loan & discount based on condition or motivated seller
2. Price: $1,500,000 – $9,000,000, per unit cost under $55K.
3. Location: secondary and tertiary markets (Not WA, CA, HI, NY, or any other primary market)
4. Class: D/C/B Property in a B/A neighborhood

I read a book called, “The Millionaire Next Door” and it explained why my pain points were motivating for me, and how I channeled that  frustration into something productive…the desire to make my family proud and ‘come up’ in life and pull my family into a better socioeconomic situation, and to ‘have what others have but i never could’ but somewhere along the way, I learned quickly that the ‘having of stuff’ is not what brings happiness so I dont pursue the shiniest of immaterial things… just the MED…. minimum effective dose of what I truly want which is surround myself with a few quality people and necessary things to subsist on than a bunch of trendy new things and fads that will fall off eventually” .  –Hui Deal Pipeline Club Member

Networking with other Buy-Hold investors I discovered 2 things:

1) Passive investors are hard to spot out among the typically ‘active’ RE crowd that are the majority at most local REIA meetings. Trading best practices was very difficult and I got lost in the fix and flipper group think mentally too.

Always consider the source of your advice.. I think we can all agree that going to your mom/dad for financial advice may or may not be the best place to go.. Sure they may be retired but consider the path the took to get there with different circumstances.. In 2015, I started to realize that going to my local Real Estate investing group was probably not the best place for me to go.. I started to pay a lot more to get into more qualified groups and conferences and I found that mostly everyone were real investors and not just Wantrepreneurs.. I got even more focused and as an engineer still working the day job I sought out groups with other investors who were primarily working professionals (doctors, lawyers, accountants, engineers).. A lot of these people were a little older than me which helped me find my highest and best use as an investor but gave me a high-level view of how to put together a holistic life plan.. An example of this happened the other day when I asked my guy at the Mercedes dealership what other people do with their leases do at the expiration of their contract.. Notice I would not ask that at the Honda dealership because people there don’t lease their cars.. By the way I don’t know why you would want to buy a card…. I did the math.. The takeaway is find people who are similar to your pedigree in terms of time/money/knowledge/network and use those as role models.. Grant Cardone has a saying “who’s got my money” which I think is misinterpreted as a war cry to get out there and make money.. I take it as a subtle hint to find those who have what you want and they “type” of money (active or passive).

2) Passive investing is often boring since this is not a get rich quick method of building wealth and uneventful (if things are going well there aren’t too many cool stories).

This podcast and blog are meant to distill content just to the golden nuggets for the passive Real Estate Investor.  I plan to go beyond the newbie tips that clutter the internet and cocktail parties because lets’ face it, as a passive investor your time should be spent on things that you love to do and those who are important to you (not trolling real estate internet forums or making makeshift plumbing repairs on your property).

Even Turnkey rentals are a bit of a PITA.

As I get more experienced, I recognize that there are a lot quicker ways to make a lot of money in Real Estate such as apartment investing, flipping high-end properties, or development but for the time being I have a full-time job that is alright and until that changes this is the path that I have zeroed in on. So if you are like me, join me on this train and if you don’t like your job and want to quit you can get on board too we will wake you up when it’s your time to escape the rat-race.

Real Estate has empowered me financially I wanted to give back to the investor community.

“Overwhelmed by the amount of stuff is on SimplePassiveCashflow.com? Don’t know where the heck to start? Text the word “simple” to 314-665-1767  for the curated course to get you up to speed on the past two years of content.”

My Motivation For Creating this Site:

1) Begin with the end in mind and decide now what you want your obituary to read. We are only here on this earth for a finite period. I like this picture because this is what will probably be on the welcome table at my funeral. I hope you can make it! Rich Cohen wrote that there are four rungs of being remembered after death: “newly dead; dead but remembered; dead and all those who knew you dead; dead and all those who knew those who knew you dead.” In terms of YOU…All that matters is what happens when you’re alive. Your legacy will offer you no pleasure after you’ve passed so live how you dream but know that there are some unconventional paths that you have to take (like buying cashflowing rentals not in your home state). And for myself…fame will do you no favors for me once I die but at least people can use SimplePassiveCashflow.com to get out of the rat race. And if that does not get your going listen to the wisdom of Frank Ostaseski.

2) Create a repository of information where my unborn children or others can reference with some context into what I was thinking. Similar to Seattle Seahawk, Marshawn Lynch’s “Beast-Mode”, I have tried to live my life in “Legacy-Mode”. And I really want to have a real book!

Why a Podcast?

I jumped on the podcast ban-wagon in 2007 while I was working on the road when I did not have a friend near me. It got me into Crossfit in 2008, Paleo in 2009, Real estate investing in 2010, intermittent fasting in 2013, internet marketing in 2015, and led to meeting and creating friendships with a lot of you because we are aligned on the same wavelength. Yes… The phrase “we met on the internet” is totally acceptable! Obviously, a few of these interests have come and gone but in the macro sense, podcasts have instilled a lifelong interest and ability to learn.

Vinney Chopra calls it Automobile University.

When you ask a kindergartner how do you make money? Why don’t they say “invest in cashflowing real estate?” Because their parents don’t have a clue!

3) While I am alive I want to teach/empower others to fish for themselves. In real estate, we use leverage and by teaching others, I am leveraging other people to achieve their financial goals in hopes that they will pay it forward. I poke fun at MLMs a lot but I would like to create a pyramid scheme of philanthropy.

What is the change that you want to make in the world even if its a 1% move in the needle?  Financial education – people have such struggle so much to make ends meet.

I was baptized on Easter 2016 and searched for a way to give back.  I want to help others but I struggle with giving money away because I know I can grow my money much faster and I am much more frugal than any philanthropic organization. Bill Gates gave back only after he amassed a fortune. Tithing as you go along has a smaller cumulative impact. My end game is to give away my wealth to rightful causes via a Charitable Remainder Trust.

4) I hope my blog/podcast will help families realize the powerful wealth-building effects of real estate so they can spend their time on more important, instead of working long hours and worrying about their financial troubles. There are a lot of successful families with good jobs (teachers/engineers/programmers/finance) yet they struggle to make ends meet financially. It is their kiddos who ultimately get the short end of the stick(Cool graphs on this subject) Being a Latch-Key Child growing up, both my parents had to work and I was left home alone after school to fiddle with my thumbs.

With Real Estate you are able to grow your wealth exponentially faster than the conventional 401K’s and stock investing, therefore you are able to escape the dogma of working 50+ hour weeks at a job that is unfulfilling. And if you are one of the lucky ones who happen to do what you enjoy… well good for you 😛

Money is not everything but it is important because it gives you the freedom to live life on your terms. And we are being misled by the Wall Street institutions and prevailing dogma. Don’t listen to your financial advisor who gets paid based on commissions.

As a great time in history to be alive with general peace and technological convinced, I see a silent war being waged upon the shrinking Middle Class. This is the Civil Rights movement of my time. In a way, people are having a Stockholm Syndrome with Wall Street profiteers being the captors. Let’s work together to redirect money from the Wall-Street casinos and corrupt financial institutions…To help the endangered ‘Middle Class’ savers find safer, more profitable investments in Main Street opportunities benefiting local communities.

“I wanted to say thank you to all of the Simple Passive Cashflow listeners. The content has been all over the place from Turnkey Rentals to Turkey Rentals and now to syndications and private placements. The feedback from some of you is that it has been a bit of a roller coaster or “Korean Drama” to follow the websites content. To memorialize the past and de-cuttler the past two years of content I have created a FREE web course to get you up to speed by texting the word “simple” to 314-665-1767.”

Why this podcast/website/syndicating deals is the perfect storm:

Self-awareness is truly the most important aspect of being an investor/entrepreneur. My job being a syndicator is to find opportunities and lead other investors like you to them and using my podcast and experience makes this a logical step for me. I always encourage folks to find out what their competitive advantages and disadvantages are. I can usually help point people in the right direction in a 15-minute free chat – Click here to schedule.

SPC followers are typically younger than 30 or older than 35. My observation is that when people have kids, that takes all precedence.

By doing the podcast I found that there was a lot of things and people that I did not know. As Robert Half says, “When one teaches, two learn.”
What are my downfalls?
Being an engineer and introvert communicating was something I was never good at. However, I think I get it after hearing these “straight from the 1990’s salesmen.” I don’t like to waste people’s time, no tricks, no games, the deals should sell themselves.
What is my competitive advantage?

1) I don’t have kids. After learning about hundreds of listens situations via free calls I hear that this sorta complicates things… 😛

2) I am an ISTJ (introversion, sensing, thinking, judgment abbreviation used in the publications of the Myers–Briggs Type Indicator). I don’t really know what the last three manifest in my life but I am a recovering introvert – a side hobby is this group I started to help others get out of their shell. I believe an introvert has nothing to do if you like people or if you are loud and annoying. Your affinity is determined where you derive your energy. Going to the day job and working with you know “others” was really tiring for me. The weirdest thing is that when I talk to others over the phone or in-person I get so excited and sometimes a little too passionate. That’s how I knew I was on to something. I’ll say it many times but what really fires me up is redirecting money from the Wall-Street casinos and corrupt financial institutions…To help the endangered ‘Middle Class’ savers find safer, more profitable investments in Main Street opportunities benefiting local communities. And it would be awesome to help out people in Hawaii where I now live where so many struggles with finances. I’m not looking to change the world just a portion of it.

3) I do recognize that there are seasons in life and right now I am accelerating my syndication business along with my own investments via my Hui Deal Pipeline Club. Sign up here.

Right now my goal is to get to $10-15k per month of passive cashflow as fast as I can. Once I get there, I plan to put things into cruise control. Sophisticated investors call this going from the “growth stage” to hitting “critical mass”. At that point, I will continue to help others get where they want to be via my syndication business which creates good options for passive investors with so little time on their hands. I trust that at this point deals and opportunities will fall into my lap and the Hui.
4) Some people say they work smart. Bust guess what? I work smart and work hard (2-4 hours every day after I get home from the day job). Right now I am working at a pretty unsustainable pace but I am motivated by being so close to activating cruise control.
5) I don’t think binary. I see the world as shades of grey and zero-sum trade-offs when win-win deals can’t be made. I am able to evaluate deals analytically and make holistic decisions. I seem like a machine sometimes but don’t act like one 😉 Robert Kiyosaki says “there are always three sides to a coin.”
6) Integrity – Through these podcast interviews, I had the idea beat into my head not to chase money. I did it in my W2 career in construction management trading money for a poor quality of life working in something I did not like with people who were jerks. Being a younger investor, I realized that was going to hit “zero-gravity” or financial freedom well before my 40s. And then what the heck would I do??? I plan on doing this for a while… at least a few market cycles. I always wanted to act with my investors best interests in mind. The last thing I want to do is not act ethically and have someone put a hit on me as I check my mail at my PO Box.

“I started the Hui Deal Pipeline Club because I want to see each of you get to your goals financially so you can focus on what is really important to you. There are other fundraisers out there that will train their investors down to 10-15% IRRs on crappy deals and do “deals to do deals” or to pick up acquisition fees. Between investing alongside you folks and wanted to grow my track record the right way with the best product I know you guys will keep coming back and bring your friends.”
“Are you absolutely bored at social gatherings because everyone is super passionate about their JOB and too shameful to get naked and talk about their finances? Been drinking the SimplePassiveCashflow Latte (got your own coffee parcel) and feeling a little lonely? Re-engage your friends having them text the word “simple” to 314-665-1767 to begin the Free web course “The Journey to Simple Passive Cashflow” so they can get back up to speed with financial independence and investing. Remember if you don’t tell them now about it who are you going to have mid-day lunches with when everyone else is still at the day-job.”
If you are new to the site here are the recommended posts to read if you had a couple hours:

 

 

 

“I started the Hui Deal Pipeline Club because I want to see each of you get to your goals financially so you can focus on what is really important to you. There are other fundraisers out there that will train their investors down to 10-15% IRRs on crappy deals and do “deals to do deals” or to pick up acquisition fees. Between investing alongside you folks and wanted to grow my track record the right way with the best product I know you guys will keep coming back and bring your friends.

 

SimplePassiveCashflow.com is for working professionals who are looking for diversification and better returns outside of traditional investments such as mutual funds and stocks. The Hui Deal Pipeline Club is a free investor club where I filter investments and underwrite the numbers and partners myself. Unlike other investor lists and groups, my investors have personal access to me and know that I personally have skin in the game investing alongside with my investors.

 

Let’s work together to redirect money from the Wall-Street casinos and corrupt financial institutions…To help the endangered ‘Middle Class’ savers find safer, more profitable investments in Main Street opportunities benefiting local communities.”

“Start Here”Continue reading

My turnkeys for sale – 2019

Update 1/2/2019…

Thank you for your preliminary inquiry. 

Please submit to me a signed and scanned, Letter of Intent with your Highest and Best Offer. And the name of your property inspector so we can coordinate a showing.

I don’t really have an asking price cause I’m too busy to figure it out. Go ahead an put in your offer assuming items are in stabilized order. If there are any glaring issues we can deduct it and get the deal done. The 5th ave, I just put in 15K of work this past month… it can be sold retail or you can turn it into a turnkey. You are basically buying it from a source (me) where I’m not trying to screw you on the deal and I try to manage issues that come up with the property as efficiently as possible. 

And sorry I will not divulge how much leverage I have on this property because it is respectfully, none of your business. Also, I will not be doing seller financing (There were a couple of you who asked). Maybe you asked because it is a past joke of which you tell people “between the lines” to go screw off when someone has a ridiculous price and you inquire about seller financing. Sort of like when you don’t get selected for a job and they tell you they will “put your resume in the file.” Anyway it made me chuckle 😁

 I am taking the equity that I built up and is now lazy – SimplePassiveCashflow.com/roe

 

 

 

After selling 7 out of 11 of my turnkeys in 2018 and blowing up my AGI… I am looking to sell the last four in 2019!

Two of my Turnkeys in Alabama are good pickups for you turnkey buyers.

I’m not desperate to sell (so don’t give me anything 10% off fair price)… that’s just annoying and wasting everyone’s time. I think I try to be transparent with everyone that these are solid properties with nothing hidden issues. The neat thing about buying from me is that you know that they are proven assets with a decreased change of buying a dud. Plus you can use my team in place so it would be very turnkey.


I’m hoping we can do a direct sale and save on the commission costs. 

1) 509 20th Ave, Birmingham, Alabama – my most solid rental of all. Still with a renter in there since 2016. Rents are $875 a month.

2) 2109 5th NE, Birmingham, AL 35215 – tenant moved out a few months ago and we were rehabbing it with $20K of upgrades. Video



Here are the comps (sold properties within half mile of the subject property ).. https://galmls.paragonrels.com/publink/default.aspx?GUID=54d00a6d-9dc1-4c16-b02e-5f2543e09723&Report=Yes%20%20%20

The average price per square foot is 78.26 you home has 1,008+/- square footage so $78,886.08 for retail sale. But this is a freshly rehabbed. Our plan is to wait till spring February to sell to buyer.

I would encourage you to get your own inspector ($300) and we can split the lawyer fees to sell with title warranty and do the paperwork.

Square Feet Address Year Built 2017 Rent 8/2017 Zestimate 2016 Market 2017
Zestimate
2017
Rent Zestimate
Zillow Link 2017 RentOmeter
AVERAGE
2017 RentOmeter
MEDIAN
Rentometer Link Roofstock list
1,250 509 20th ave NE, Birmingham AL 35215 1961           875       63,000       78,100       71,640 900   https://www.zillow.com/homes/509-20th-ave,-Birmingham-al_rb/ 580 596 https://www.rentometer.com/results/jkHxCQjT0Zg       75,251
1,750 2109 5th NE, Birmingham, AL 35215 1971           921       65,355       71,003 850   https://www.zillow.com/homes/2109-5th-NE,-Birmingham,-AL-35215_rb/ 575 583 https://www.rentometer.com/results/lZjeuNbvaIY       94,071

I spent a lot of time driving Birmingham. Let me know if you would be interested in joining me on a trip out there.

And if you are looking for the latest referrals to turnkey companies let know… if you are in the club.

 

Our 2018 Charity: Choose Love for Our Students

Teachers are good people but man do they not make any money!

Often times they have to pull money out of their own pocket to pay for things the School District cannot afford.

We decided to change that!

The DonorsChoose listing link.

Later that day…

We definitely scored one for the kids!

Here is what we got for the kids:

DonorsChoose.org was a little slow (and ~$200 of fees) the goodies arrived!

My students need supplies to support our Choose Love movement, a social emotional program that teaches children how to choose love in all different situations. We need clipboards, pillows, answer buzzers and much more.

My Students

My students are active, fun loving and excited to learn. They love hands on activities that allows them to engage in building and teamwork with one another. They come to class ready to learn and are eager to share their ideas with each other.

We continue to work together to build a community within our classroom that encourages each other to grow and learn from one another.

Its important that all students have a voice and that we as educators understand all of our students needs. We promote a learning environment that builds a culture within the classroom of love and understanding through learning. Every year I am blessed to have a loving and engaging group of students that encourage me to keep learning along side of them.

My Project

Our school is focusing on our Choose Love Movement this year. This social emotional program is encouraging students to choose love in all different types of situations. The program focuses on 4 components, courage, gratitude, forgiveness, and compassion. With the materials from this project, I am creating a Choose Love corner for my students to use as a space to express themselves honestly with no judgement or fear.

This Choose Love Corner is helping to “cultivate optimism, resilience, and personal responsibility” in all students.

I really want to encourage my students from an early age, a healthy way to express their emotions. A main focus of the corner will be the rug where students can take their Choose Love journals and share about anything they are feeling both at home and at school. The emphasis of the rug is also about different traits that I am hoping to instill in my students as well. Many of the items will be used by the students to make them feel comfortable sharing things in their journal that they may not feel comfortable talking about.

I am hoping that if we can teach students from an early stage and provide them with the life skills of coping with situations, it will continue to encourage a happier and stronger learning environment for all students.

Resources: Tax Deductions and Charites

2017 – Charity – Relay For Life

 

 

138 – Fundamentals – Crypto Currency Basics with Andy Lapointe

YouTube Link: https://youtu.be/1vVQPdfl_So

Also check out Buck Joffrey’s podcast on cypto: https://itunes.apple.com/us/podcast/consensus-network-cryptocurrency-news-education/id1436793238?mt=2

Article Link: Text “simple” to 314-665-1767 to download the Hui Google Drive files and the 2018 Rental Property Analyzer

For a free electronic version of my bestselling book in 12+ categories text the word “ebook” to 587-317-6099.

Please help the show by leaving a review: http://getpodcast.reviews/id/1118795347

Join the Hui Deal Pipeline Club! SimplePassiveCashflow.com/club

Pardon the grammar – I’m an Engeneer, Enginere, Engenere… I’m good with math!

________Here are the Show Notes________

Is dealing in Cryptocurrency dangerous?

Bitcoin grew in value by 1,000% in 2017.

Ripple was the best performing crypto, which had gains of 36,018% last year due to its ease of use. Each coin of Ripple is worth a small fraction of a Bitcoin. The technology makes it easier for banks, payment providers and businesses to send payments globally. They promise to deliver an experience that is instant, traceable, and inexpensive.

NEM is an enterprise blockchain with “smart assets.” It can also be used to manage things like currencies, financial instruments, supply chains, and notarizations. Think how eBay or Amazon takes data from UPS or USPS to track your packages, but a lot bigger.

Other Cryptos:
Ardor
Stellar
Dash
Ethereum (2nd biggest Cypto)
Golem
Litecoin (getting in mainstream vernacular)

BitcoinLearningCenters.com by Andy LaPointe

Mr. LaPointe created this complete bitcoin learning system from the ground up!
You will learn practical insights into this global phenomenon. By the end
of the interview, you will also have a practical understanding of
cryptocurrencies, blockchain technology and Bitcoin.
The information that Andy LaPointe will share is entertaining, insightful and easy-
to-understand. No matter who you are or your background, the information he’ll
share will help anyone to get started with cryptocurrencies today.

You listeners will learn:
– What is a Blockchain?
– What is Bitcoin?
– What is cryptocurrency?
– How blockchain and Bitcoin are related.
– How to determine if investing into cryptocurrencies is right for you.
– What are some of the misconceptions about Bitcoin, cryptocurrency
and blockchain.
– How to create the right cryptocurrency portfolio for you and your
financial future.
– And much more!

ABOUT THE AUTHOR:
Prior to getting involved with blockchain technology in 2013, Mr. LaPointe spent 15 years in the corporate world as a Registered Investment Advisor (RIA), Series 7 Stockbroker and Mutual Fund Wholesaler. He offers deep knowledge of the financial markets, blockchain technology, asset allocation, risk tolerance and cryptocurrency.
Andy LaPointe lives in Northern Michigan and is available for interview by calling 1-231-676-0643 (Eastern Standard Time) or email: lapointeandy@yahoo.com
– Instant Availability
Or visit: www.BitcoinLearningSystems.com

2019 Launch

SPC followers are typically younger than 30 or older than 35. My observation is that when people have kids, that takes all precedence.

 

Launch 2019 with a 50-minute goals brainstorming session.

(we will not be talking real estate investing – the second half of the presentation will be our 2018 Quarterly recap – this will likely take us another hour… please stay if you can or listen on slient)

Here is the editable worksheet to follow along link

Topic: http://simplepassivecashflow.com/2019-launch/
Time: Jan 5, 2019 9:00 AM Pacific Time (US and Canada)

Join Zoom Meeting
https://zoom.us/j/955861870

One tap mobile
+16699006833,,955861870# US (San Jose)
+16465588656,,955861870# US (New York)

Dial by your location
        +1 669 900 6833 US (San Jose)
        +1 646 558 8656 US (New York)
Meeting ID: 955 861 870

***I will assign accountability partners to those who join us and would like to participate.

Want to join us in person in LA? Check out the details here.

Download of “Action Board” guide

Here are some shallow things that I am shooting for in the next two years…

 

 

 

DO NOT READ BELOW THIS LINE!

____________________________________________

5 things you accomplished in 2018?

Move around… do 10 push up, jumping jacks, squats!

5 more things you accomplished in 2018? Reflecting and celebrating the wins in 2018

Top 3 things that were impossible?

What did you do to make those three things possible?

[Health: Get to 155lbs]

[Wealth: Get rid of all turnkeys, do fund]

[Relationships: Create community]

[Personal (skill, hobby, enjoy?): Find something new and fun]

SMART check? Specific – Measurableble – Attainable – Realistic – Timely

On the last day of 2019… I will be immensely satisfied when I…

[Get down to 155 lbs and raised $3M in fund]

If it does not scare you bit… Its not high enough.

If you accomplish it what will it give you?

[A level that I can maintain and focus on quality.]

In TEN YEARS… I will be immensely satisfied when I…

[$25k passive a month with still being able to interact with a person a day.]

“We over estimate what we can do in one year and underestimate what we can do in ten years” -Tony Robbins

5 things you did NOT accomplished in 2018?

[Weight goals
Find a new hobby outlet
Operate in a less frantic mode]

Why not?

1) Disconnect
2) surrogate to accomplish the same why
3) used the wrong strategy
4) lacked knowledge/resources/people
5) you took the easy way
6) crabs in a bucket (peer group)

Creating the plan…

Break down the goal in four chunks:

1) Complete routine of activity 3 days a week
2) Evaluate progress in March 1
3) Possible add 4/5th day of activity
4) Evaluate progress in June 1 and at that point address diet

3 People hack: 1 person above you, at your level, and below you that you mentor

Setup environment

Four tendencies: upholder, rebel, questioner, obliger

Rewards

Taking action

Scheduling in the calendar (not recurring cause it won’t be special)

Every two weeks review big goals

Would you like an accountability partner?

 

Most of you folks are hard-charging achieving types who listen to my podcast at 2X speed. For once you need to stop that just for this exercise.

Set the timer for 20-40 minutes and get into the right State.

Getting into this State is critical. Music, a little wine, whatever floats your boat…

Get a pen, paper, (or your computer/mobile device) and a quiet space and here we go…

 

Book Club – Tax Free Wealth

 

Get in as a [Founding] Group Coaching student!

The group coaching is something that I have been trying to put together a couple years now after I accumulated a lot of content and got a feel for coaching students these past few years in a one-on-one setting – see SimplePassiveCashflow.com/coaching

I’m code naming this project, “The Journey to Simple Passive Cashflow” and it will consist of:

1) 27 weeks of curated content with concepts building on top of each other

2) Participants go through those modules together and are able to interact on the Bi-Weekly Call and the Private Facebook group in a “group study” environment

3) Bi-Weekly hour power calls switch between the topics of a) Acquiring you direct investment and b) more high-level wealth building concepts and syndication education

It’s going to be a really cool format where people take the journey together. Think like a Fraternity/Sorority without the weird stuff. When I was going through programs it was most beneficial to connect and climb the ladder with quality people. Who knows someone of your Cohorts might do a deal together or become lifelong friends or accountability partners.

Still working on the website but here is a survey to get on the waiting list: https://docs.google.com/forms/d/e/1FAIpQLSf2MXLJlfuQK-PL9_56B9xJ0bHGoDPS1tGq7kkUUGSBnr6BXQ/viewform?usp=sf_link

 

What’s in the Pipeline?

 

% Chance of happening – Details – Timing:

1) Currently open for investors – 101-Unit Class C in Gulfport MS

2) 30% – MFH Apartment

3) 90% – Finally a Non-MFH fund syndication (where I do the admin/accounting) to lower costs and get higher prefs and lower minimal investments. Q2 2019

 

Unlock additional info by joining the Hui – SimplePassiveCashflow.com/club

 

Events:

January 17-19 – Online – Use code “LANE” for a discount at MFINSummit.com

February 16 – Honolulu, Hawaii – Use code “SPC” for a discount at infinityinvestinghawaii.com

March 1-2 – Scottsdale, AZ – Titans of Multi-Family Real Estate – wealthformulaevents.com

March 14-17 – Los Angeles – SimplePassiveCashflow.com/mastermindtony

Current investors in past deals let’s meet up when you are in Hawaii.  Non-investors you can still kick it with Lane

 

The Hui Deal Pipeline Club is a free investor club where I filter investments and underwrite the numbers and partners myself. Unlike other investor lists and groups, my investors have personal access to me and know that I personally have skin in the game investing alongside with my investors.

 

We have acquired over $155 Million dollars of real estate acquired by syndicating over $13 Million Dollars of private equity since 2016.

 

Track Record of success:

15 Apartments Buildings Purchased, 2 Manufactured Home developments, and an Assisted-Living Facility

2,100+ total units

10 US Markets – AL, GA, IN, OK, LA, IA, TX, WA, PA, MO

Started investing in 2009 – 9 years of experience

Countless Mastermind and Mentorships in the Live & Virtual clubs through the education platform at SimplePassiveCashflow.com

2,600 investors and 100 new Kool-Aid drinkers every month!

136 – Changes in the Residential Lending World with Graham Parham

YouTube Link: https://youtu.be/AT6x3ViRPos

Article Link: Text “simple” to 314-665-1767 to download the Hui Google Drive files and the 2018 Rental Property Analyzer

For a free electronic version of my bestselling book in 12+ categories text the word “ebook” to 587-317-6099.

Please help the show by leaving a review: http://getpodcast.reviews/id/1118795347

Join the Hui Deal Pipeline Club! SimplePassiveCashflow.com/club

Pardon the grammar – I’m an Engeneer, Enginere, Engenere… I’m good with math!

________Here are the Show Notes________

Graham Parham: New Awards:

  • #1 in units at Highlands Residential Mortgage for 2017
  • #11 in state of Texas and 92nd in the US according to The Scottsman Guide and
  • Mortgage Executive Magazine – 1% top originators in the US
  • Top Ranked – Ask A Lender

 

Discussion today is 1-4 unit income properties, not owner-occupied.

  • 20% down on first ten financed properties? 25% for 2-4 units?
  • DTI considerations when using HELOC from primary residence to invest?
  • Credit scores down to 620. Max. credit score that helps?
  • Reserves?

New Fannie Mae Reserve Requirements for Investors with Multiple Properties Owned

The Old requirements were six months Principle, Interest, Taxes, and Insurance (PITI) on the subject property and two on all other properties up to 4 leveraged 1 – 4 family properties excluding the primary residence. Properties 5 – 10 would require six month PITI on all properties.

The New requirements are based on a percentage of the unpaid principal balance on each loan excluding the primary residence.

 

  • If a borrower has 2-4 financed properties, the reserves of 2% of the unpaid principal mortgage balances are required, excluding the principal residence and the subject property.

 

  1. If a borrower has 5 – 6 financed properties, 4% of the unpaid principal mortgage balances are required, excluding the principal residence and the subject property.
  2. If a borrower has 7 to 10 financed properties, 6% of the unpaid principal mortgage balances are required, excluding the principal residence and the subject property.

The aggregate UPB calculation does not include the mortgages and HELOCs that are on

  •               the subject property,
  •               the borrower’s principal residence,
  •               properties that are sold or pending sale, and
  •               accounts that will be paid by closing.

The subject property will still have monthly reserve requirements based on the total mortgage payment (PITI). Reserves are funds that you have access to liquid or non-liquid.  Reserves are funds you need to have after the closing your transaction. Funds for reserves cannot be your funds for down payment or closing cost.

Fannie Mae now will allow for 100% of the Non-Liquid funds, not 60%

Non-Liquid funds can be used for reserve requirements.”

 

  • IRA’s

 

  • 401K’s

 

  • SEP Funds

 

 

 

Gifts are NOT allowed on an investment property.

  •      Investor interest rates how much higher than owner-occupied?
  •      Mortgage sequencing. Example: if buyer wants to buy in Memphis today, Jacksonville next month, how should they plan?
  •      Overall, lending climate more lose or tighter than 1 year ago? 5 years ago?
  •      What should a prospective borrower do before contacting you?
  •      1031 exchanges Cost and funding
  •      What cost are covered in the exchange

What is UP with interest rates?

4 Factors that determine your mortgage interest rate:

  1. Credit Score

Credit Scores Adjustments

  •   740 +
  •   740 – 720
  •   720 – 700
  •   700 – 680
  •   680 – 640
  •   640 – 620
  1. % of down payment 20% or 25%
  2. Loan Amount Adjustments
  3. Property Type

What about the 15 Year fixed?

Does it make since to pay points?

What is the difference between Mortgage Brokers and Mortgage Bankers?

What are overlays?

Does Fannie Mae have a black list?

Are Appraisals regulated and by who?

Is there an appraisal black list?

What happens if the appraisal does not come in a contract price?

Closing cost differences between lenders

Should I pay cash for my investment properties or use leverage?

The next example will show the benefits of using 20% down leveraging for properties versus buying one property and paying CASH.

If you pay $150,000 in cash for one property, your net cash flow is $1245.00. By putting 20% down with an 80% loan to value and a 5% interest rate, your net cash flow is reduced to $600.81. Let’s not stop there. Keep in mind that 20% down payment on a $150,000 home is only $30,000. If you bought FIVE $150,000 homes and put 20% down on each with the same loan terms and monthly rents, you could increase your return on investment by $1759.05 a month to $3004.05. Invest your money wisely.

The net cash flows do not take into account the annual city, county and state property taxes and the annual hazard insurance. The numbers may vary considerately by the taxing authorities. You will have to include that information in your bottom line.

Graham W. Parham has been a Mortgage Loan Officer for over 18 years with 25 years

in sales and marketing. He is a leader of financial expertise in the North Texas

residential real estate market, developing a significant following among homebuyers

and investors. Known and respected industry-wide, Graham’s production consistently

ranks him as a top producer in this market place. According to Scottsman Guide

Graham ranked 92 nd in the US loan originators.

Graham offers invaluable insight into a purchaser’s likely requirements, providing an

exceptional business ethic of customer service and respect, catering to their needs from

pre-qualification to closing. He is a truly dedicated person, who strives to ensure that

each transaction is handled in a timely and stress free manner. By employing these

standards, Graham has established a solid reputation for going the extra mile to put

together the absolute best financing available for his clients. Graham prides himself on

staying ahead of the curve, keeping up to date with the latest products and industry

trends.

As an active investor himself, Graham has a strong insight on what his investment

buyers are looking for to accomplish their short and long term goals. Knowing that

investment loans strongly scrutinized, it is up Graham his team of underwriters who

understands rental property loans versus that of an owner occupied residence. His

general knowledge of REO properties and Turnkey providers coupled with a strong

operational staff allow his loan closings to be seamless and “On Time Every Time”

Highlands Residential Mortgage, LTD. is completely submerged in the real estate

investing industry and has access to many lenders nationally. Our clients benefit from

up to date guidance on all conventional investor loan programs, and less known

creative financing strategies. Knowing that an investment loan will be far more

scrutinized, it is Graham Parham and his team of underwriters who understand a loan

processed for a rental property versus that of an owner occupied residence.

Just as you would not seek legal counsel from someone who does not have a law

degree, nor should you trust a loan originator for your investment property loan from

someone that is not an investor themselves. Highlands Residential Mortgage, LTD. is

an unparalleled mortgage lender whose delivery sets us apart!

Graham Parham’s team mission is to consult every investor based on those

individualized situations and goals. Whether you are buying your first home or

investment property, we carefully look at your options that will give you the best

opportunity for success. Because we know how important your investment financing

strategy is, our extensive research and knowledge of those programs will be brought

forward in educating you as an investor, throughout the lending process.

“My goal is to continue assisting my clients for life and help them meet the ever-

changing needs life throws our way!”

To get access to the lending guide please sign up below:

is

135 – Interview – Financial Advice from a Broke Millenial with Erin Lowry

Erin Lowry (https://brokemillennial.com/) is the author of Broke Millenial, a book about how to stop scraping by and start getting your financial life in order.
She talks about how she learned about finances at a young age, how she gave up her dream school so she could live her dream life, and how living in New York inspired her to write her book, Broke Millenial.
“Invest your spare change,” may be a catchy line but you really can’t invest your spare change to wealth. It has to be more than spare change.
In the financial world, you are above nothing. Just because you have a college education doesn’t mean that is your way out of financial difficulty. You also need to be prepared to take non-professional jobs or jobs that might be below you.
Just like in any financial goal you have to figure out how to take a high-level idea and break it down into smaller parts. Think of whatever your long-term financial goals are and work backwards to break it down into something that is actually more achievable. A lot of people in their early twenties have beautiful, lofty dreams but no tangible steps on how to get themselves there.
Podcasts are great sources of information.
Saving is important but earning more is bigger. To earn more is a key part of building wealth.
The biggest thing when it comes to feeling in control of your money is that you have to identify what you truly value. Don’t allow other people to dictate where you should spend your money.

Cost Segregation & Bonus Depreciation

Fundamentals – Bonus Depreciation via Cost Segregation Studies with John Collins

Since Mr. Trump enacted new tax law, 100% Bonus Depreciation creates significant tax benefits in the acquisition year.

In one of my apartments $3M, 52-unit building is looking to get more than $266K in tax savings (at 37% tax rate) in his first year of ownership.

On syndications, depreciation is distributed to investors on the K-1 Form.

Basics

One of the cool things about investing in real estate is that the properties create a paper loss. For single family homes, you can take 1/27 the value of the property (minus land value because that does not devalue over time) per year for 27 years. This is what is shown below. A cost segregation juices this deduction as it puts the asset on a more aggressive depreciation schedule which front-loads as much depreciation as the tax code allows. This is one of the reasons why bigger deals are better because they can support a 5-8K cost segregation study.

Paper losses due to depreciation!

What is Cost Segregation?

Cost Segregation is the identification of building components and reclassifying the tax life on each of those components. Typical components that can be reclassified include a building’s non-structural elements, such as carpet, decorative lighting and trim, dedicated electrical and plumbing, and security systems; exterior land improvements, such as landscaping, curbs, sidewalks, fencing, and signage; and indirect construction costs, such as architect and engineering fees and construction permits.

Commercial properties establish a 39-year depreciation schedule, and residential properties establish a 27.5-year depreciation schedule. For example think of a 3 bedroom single family home in Birmingham, Alabama that is worth $100,000. Of that approximately $65,000 is determined to be the building value and $35,000 is determined to be the land value. Each year you can deduct 27.5th of the building value which is about $2,363 a year that can once again offset income gains. This can be taken for the next 27.5 years until all the value on paper is depleted. Unfortunately, you cannot deduct the land.

However, the IRS assigns a tax-life to each of the individual components.

Most components that qualify for accelerated depreciation can have their tax life reclassified to either 5, 7, or 15 years:

  • 5-year tax-life components: tangible, personal property assets (carpeting, decorative lighting and trim, dedicated electrical and plumbing, and security systems)
  • 7-year tax-life components: all telecommunication related systems (cabling, telephone, etc.)
  • 15-year tax-life components: land improvements (landscaping, curbs, sidewalks, fencing, and signage)

What is a Cost Segregation Study?

A Cost Segregation Study is a strategic, tax-saving tool that can be used by companies and investors who have constructed, purchased, expanded, or remodeled any kind of commercial real estate (including 1 to 4 unit residential rental properties). The study allows the owner to take advantage of accelerated depreciation deductions and defer federal and state income taxes on the reclassified building components mentioned above.

During a Cost Segregation Study, components of a specific property or leasehold improvement are identified and reclassified for depreciation over a shorter time (5, 7, or 15 years). For example, 30% to 90% of the total electrical costs in most buildings can qualify for 5 or 7-year depreciation. The result of a Cost Segregation Study is that a property owner’s tax obligation is reduced and his cash flow is increased.

Is Cost Segregation something new?

Cost Segregation is not new. On the contrary, it has been in existence since 1954 when the IRS allowed for certain personal assets to be accelerated into a shorter life class. However, it wasn’t until Hospital Corporation of America sued the IRS in 1997, and won, that the IRS revisited the issue of accelerated depreciation. The IRS ruled that property qualifying as tangible personal property under the former Investment Tax Credit (ITC) rules would also qualify for purposes of federal income tax depreciation under MACRS (Modified Accelerated Cost Recovery System).

The IRS Chief Attorney wrote a memo saying, “. . . Cost Segregation, for it to be properly applied, had to involve those with competencies in architecture, engineering or construction and/or construction techniques, in order for personal property assets to be accurately identified and segregated.” As a result of this memo, Cost Segregation became a viable tax-saving strategy allowed by the IRS.

What type of real estate is eligible?

Commercial real estate (including 1 to 4 unit residential rental properties) eligible for Cost Segregation includes buildings that have been purchased, constructed, expanded, or remodeled since 1987. A study is typically cost-effective for buildings purchased or remodeled at a cost greater than $100,000. A Cost Segregation Study is most efficient for new buildings under construction, but it can also uncover retroactive tax deductions for much older buildings.

What are the steps involved in the process?

From start to finish, the Cost Segregation process can be broken down into the following steps:

  1. Engage a reputable Cost Segregation firm that utilizes engineers and architects trained in Cost Segregation and its application to the proper allocation of assets.
  2. The engineer determines what documents are available (e.g. planning, construction, invoices, appraisal, and current tax depreciation) for reference and referral.
  3. The engineer then sets a schedule for surveying the subject property and gathering the available documents for review prior to arrival at the subject property.
  4. For those documents that are unavailable, time is then scheduled into the Cost Segregation process for document recreation using known industry standard costing data (Marshall & Swift and/or RS Means costing publications). After all necessary documents are acquired, it takes about 4 to 6 weeks to finish the process.
  5. The site survey is executed and completed. Time varies for each survey, but it can be completed within as little as an hour. During the survey, measurements are taken and all areas are photographed for IRS verification and substantiation of asset values.
  6. The engineer returns to the office and “crunches the numbers.” This is when all documents are reviewed in detail, assets are verified and measured against known costing data, and asset reallocation is applied.
  7. A review committee then examines the results of the analysis completed by the engineer of record to verify its veracity and confirms it meets and exceeds IRS guidelines per the Cost Segregation Audit Techniques Guide.
  8. Once approved, the study results are compiled into a final report that includes: all IRS tax code to substantiate the reallocated assets, spreadsheets identifying all assets categorized according to their building codes, representative photographs of the reallocated assets, and the engineer’s credentials for IRS review.
  9. Final report is issued. Digital copies are emailed to the client and the CPA of record for application to the client’s tax return.

Why bother? I’ll eventually get the deduction.

As investors, we like paper depreciation to occur earlier because that offsets gains earlier and gets more money in our pocket earlier. Just like you give a mouse a cookie…. Give an investor a dollar early and… they will turn em and burn em.

In other words, you are not creating more depreciation but you are shifting it earlier to take advantage of the time value of money concept.

On the project level in a single asset LLC arrangement the more you can lower your tax liability the more you can significantly increase your cash flow and create more value for investors.

A Cost Segregation Study in effect gives you an interest-free loan from the government for the first 15 years, which you will then repay interest-free over the remaining 25 years. Wouldn’t you rather have your money? There are also advantages to doing a study if the building is going to be sold (via 1031 exchange) or if the owner of the building dies.

Does the Cost Seg need to get done this year (Dec 2018) or do we just need to acquire in this year (2018)?

For bonus depreciation, we just need to acquire. The Cost Seg can be completed in the next year (2019).

How much will I save on taxes?

Most Cost Segregation firms will perform a free analysis if you provide your basic property information and tax rate. From the information you provide, they can provide a conservative estimate of the accelerated benefits you can expect, as well as their fixed fee proposed for the final study.

Typically, tax savings from 5% to 10% of the building’s original tax-basis are generated, but there are instances where it can be substantially more. Each property and circumstance is unique, so it requires a case-by-case approach to give you a definitive answer.

How much-accelerated depreciation can I get?

Certain types of commercial property can be grouped together to give us an idea of the percentage of those types of buildings eligible for accelerated depreciation. Your results may be greater, or less than those quoted here, but in general, property that falls into one of the following categories is most likely to result in accelerated depreciation within the specified ranges.

Commercial Property Types:

  • Apartment Buildings 15 – 25%
  • Dental/Medical 30 – 60%
  • Health Care 25 – 65%
  • Heavy Manufacturing 30 – 80%
  • Industrial 25 – 70%
  • Light Manufacturing 20 – 45%
  • Office Buildings 15 – 25%
  • Research & Development Facilities 30 – 75%
  • Restaurant 15 – 30%
  • Retail Centers 10 – 25%
  • Senior Living Facilities 15 – 30%
  • Warehouse 5 – 15%

Does Cost Segregation have other benefits?

Yes. Cost Segregation can provide additional tax benefits. It can reveal opportunities to reduce real estate tax liabilities and identify certain sales and use tax savings opportunities. Under certain circumstances, segregated assets may qualify for a special bonus depreciation allowed by multiple tax reconciliation acts enacted by Congress. Additionally, a Cost Segregation Study can

  • Maximize tax savings by adjusting the timing of deductions. When an asset’s life is shortened, depreciation expense is accelerated and tax payments are decreased during the early stages of a property’s life. This, in turn, releases cash for investment opportunities or current operating needs.
  • Create an audit trail. Improper documentation of cost and asset classifications can lead to an unfavorable audit adjustment. A properly documented Cost Segregation Study helps resolve IRS inquiries at the earliest stages.
  • Capture retroactive savings. Since 1996, taxpayers can capture immediate retroactive savings on property added since 1987. Previous rules, which provided a four-year catch-up period for retroactive savings, have been amended to allow taxpayers to take the entire amount of the adjustment in the year the Cost Segregation is completed . . . this alone is huge. This opportunity to recapture unrecognized depreciation in one year presents an opportunity to perform retroactive Cost Segregation analyses on older properties to increase cash flow in the current year.
  • Lower property insurance premiums. Since it generally costs less to insure personal property, versus real property, building components reallocated as personal property should reduce your insurance costs as well.

How much does a Cost Segregation Study cost? 


On average, the total fee will generally fall between 5% and 20% of the estimated Net Present Value tax savings shown on your free analysis. This can be impacted by how large or small the real estate project is. In addition, the location, accessibility, and quality of the records and documents impact the ultimate cost. Minimum fees can be as low as $2,000 for small projects, and some firms GUARANTEE a minimum of 500% ROI (fee vs. tax recovery) on projects over $500,000.

How long does a Cost Segregation Study take?

The time that a Cost Segregation Study takes depends on the size of the project and the completeness of the documentation that you can supply. Generally, it takes about 4 to 6 weeks from the time the appropriate documentation is received and recreated.

What is required of me to have a study done?

You need to provide as much of the original documentation pertaining to planning, construction, and current tax depreciation as you can. This could include a complete set of construction plans, current tax depreciation records such as tax returns, building cost budget information, final AIA (American Institute of Architects) application and a document of certification for payment or other cost information, change orders, direct or indirect costs paid by the owner that are not included in other documents, and other information depending upon the project.

What if I lack some of the needed documents?

Even if you lack some of the necessary documentation, a study can still be performed for you. Construction, engineering, and other specialists will do an extensive site visit. They will measure and estimate using currently accepted costing techniques and pricing guides (such as the IRS-recommended costing publications Marshall & Swift and RS Means) to determine the costs that qualify for shorter recovery life periods.

Can’t my CPA do a study for me?

CPAs are not qualified according to the IRS guidelines. However, most Cost Segregation firms will gladly work with them on a consulting basis to complete the work for you. Remember, the IRS Chief Counsel issued a memo that made it clear what constitutes proper “methodology” in applying Cost Segregation, and it must be done by people who are competent in architecture, engineering or construction and/or construction techniques. See “Is Cost Segregation something new?” above.

Will a study increase the chance of an audit?

A study conducted by a reputable Cost Segregation firm should strictly adhere to the IRS Cost Segregation Audit Techniques Guide. The type of study most firms perform actually decrease your chances of an audit because the study places you in Internal Revenue Code Tax Compliance. However, be aware there are six different Cost Segregation methods allowed by the IRS, and not all are of equal merit. There is currently no standard method, and there is still some ambiguity about which method is best. If you have heard conflicting information about what is, and is not possible regarding Cost Segregation, this is probably why – it depends on which method is being used.

Will I be assisted in the event of an audit?

A reputable Cost Segregation firm can assist you in the event of an audit. They will focus on doing the Cost Segregation Study to create documentation and support for conclusions so that these are easily communicated and resolved with the IRS. In fact, you should expect a final report that is “all inclusive.” It should quote specific Internal Revenue Codes related to the reallocated assets. Additionally, it should provide photographic evidence of these same assets for complete substantiation of the assessment.

Conclusion:

The Pro’s

  • Reduction in tax liability
  • The deferral of taxes
  • Bump in up front cash flow

The Con’s

  • Costs typically range $4,000-$8,000, depending on property size/asset value
  • Accurate and complete documentation is required and requires effort to collect
  • Cost segregation is not feasible below $100,000 property value

Cost Segregation studies is one of the easiest and quickest way to squeeze a little extra profit out of an investment. If you played race video games in your youth (or still do) it’s like paying for the inexpensive computer chip upgrade, its a no brainer. If you don’t get that reference, its “low hanging fruit.”

If this is a concept new to you, you may be able to go back to previous years taxes and get back some benefits this year. Often times getting a quote is free and quick.

A recent quote I got back for a few properties.

 

Who do I call for more information?

For more information on Cost Segregation or a free analysis, contact John Collins, Cost Segregation Specialist at Segregation Holding LLC: (907) 227-2440 or jcollins@segregationholding.com.

Segregation Holding LLC performs Cost Segregation Studies in all 50 states and throughout the globe for US tax-paying citizens owning investment property outside the US.

Addition Resources

Dental Smile Example

Pre-Construction Example

Ranch resort Example

Video

Combine this with an Opportunity Fun Zone deal and wow!

Ep. 14 – Nate Busch of Busch Tax Company – Podcast download here

Sample K1 Form

Hacking your HSA / FSA / Flex Spending accounts

I’m going to start out by saying please do not take this as legal/tax advice!

One rule I follow is “pigs get fat but hogs get slaughtered.”

But if there is a tax code or loophole within reason/ethical good faith you should exploit it as much as possible.

In 2017, I purchased a half acre in a turnkey Coffee farm in Panama in my Health Savings Account (HSA) for about $15,000.

HSA’s are truly awesome! You add money to an account tax-free (like a pre-tax 401k), don’t get taxed on the gains (like any retirement account), and you don’t have to pay taxes when you use it on Eligible Health Expenses (like a RothIRA).

You need a High Deductible health plan to be eligible for an HST. I’m going to get a little political here… health costs are on the rise because it bails people out for not being accountable (good diet, sleeping habits, stress, and exercise program). The company famous for the yellow Twinky bars cited rising health cost as their reason for going bankrupt… go figure.

You WILL have health expenses, MAY have retirement expense… in other words, you will likely die and have health expenses before you retire. So it makes sense to fund an HSA account before any 401K, Roth IRA, IRA, etc.

Here is some information for your entertainment purposes to see what you can start to use your HSA for:

USA Today article

More resources

Getting a doctor to sign off on your medical purchase as necessary will need a template:

Sample Letter of Medical Necessity for Hyperhidrosis Treatment

[Date]
[Insurer name]
Attn: [Name of individual]
[Address]

re: [Patient name]
[Policy number]

Dear [Insurer name]:

I am writing on behalf of [Patient name] to document the medical necessity of [insert treatment option here] for the treatment of hyperhidrosis. This letter provides information about the patient’s medical history and diagnosis and a statement summarizing my treatment rationale.

Hyperhidrosis, or excessive sweating, is a medical condition that can have a devastating effect on a patient’s quality of life, causing physical discomfort, secondary skin problems, social/emotional  sequelae such as anxiety and depression, and disruption of occupational and daily activities. This has certainly been true for [Patient name], who has been impacted by hyperhidrosis for [insert duration of symptoms here].  Specifically, [he or she] has had difficulties with [insert quality-of-life, social/emotional and/or career/daily living problems here].

[Discuss patient’s diagnosis, treatment history, and degree of illness]

[Insert patient’s name] has tried the aforementioned therapies thus far without success and I, therefore,  recommend [insert treatment option here] as the next logical choice for treating [his or her]   hyperhidrosis.

In light of this clinical information, and this patient’s condition, [insert treatment option here] is medically necessary and warrants coverage. Please contact me at [(000) 000-  0000] if you require additional information.

Sincerely,
[Physician’s name]

Here is what I put together to get massages for stress from dealing with SPC listeners who don’t listen to the podcasts before booking a call or people who don’t take action:

[2018.11.8]
[Insurer name]
Attn: [Lane Kawaoka’s HSA servicer]
[Address]

re: [Lane Kawaoka]
[Policy number]

Dear [Insurer name]:

I am writing on behalf of Lane Kawaoka to document the medical necessity of massage for the treatment of mental stress and muscular discomfort. This letter provides information about the patient’s medical history and diagnosis and a statement summarizing my treatment rationale.

“Mental stress and muscular discomfort”, is a medical condition that can have an effect on a patient’s quality of life, causing physical discomfort, secondary skin problems, social/ emotional sequelae such as anxiety and depression, and disruption of occupational and daily activities.  Specifically, he has had difficulties with discomfort performing his duties at work and exercise routine [insert quality-of-life, social/emotional and/or career/daily living problems here].

[Discuss the patient’s diagnosis, treatment history, and degree of illness]

Lane Kawaoka came into the office in early 2018 where we ran a cardiovascular and blood assessment.

Lane Kawaoka has tried the aforementioned therapies thus far without success and I, therefore, recommend massage as the next logical choice for treating him.

In light of this clinical information, and this patient’s condition, massage is medically necessary and warrants coverage. Please contact me at [(000) 000-0000] if you require additional information.

Sincerely,
[Physician’s name]

Paying your mortgage of in 4 to 8 years with “mortgage rate arbitrage”

Flip the Script on the Banks

Summary: Pay a 30-year mortgage in 5 to 8 years by paying back your mortgage with simple interest instead of amortized interest.

I recently discussed this in my Forbes article here.

Is this something new?

We all know it’s a sellers’ market, with the lack of deals out there and the majority of the Simple Passive Cashflow Podcast listeners looking for something to invest their cash in. Good times, if you ask me. This strategy is nothing new but now the strategies that are, “trending,” like bell bottoms, tights, and neon colors but forgotten. One of these old plays from the playbook is called the Mortgage Equity Arbitrage Strategy also known as, the Australian Banking system.

First off, let’s talk about good debt versus bad debt. Obviously, an 18% interest rate paid on something like a credit card is bad debt. But taking a 4% HELOC (Home Equity Line of Credit) or loan from your life insurance policy can be good debt. Especially, if you are putting the loan proceeds into AHP at 12%, a MFH Syndication at 20%, a Turnkey rental at 30%+, or another higher risk syndication at 35%+. Just don’t buy jet skis or other doodads with the money… I don’t know why it’s always jet skis as the example. Maybe something to do with the fact that it is a mini-boat, and boats are known as the worse purchase known to man.

What you do with the liquidity from the debt is what really matters. Traditionally, it has been good to go into debt for a college education paying 4-8%… unless you are getting a glass blowing degree… or maybe a psychology degree so you can trick yourself into thinking college was worth it… or Asian studies degree because you are going to have to get used to ramen noodles in your adult life… or a Communications degree to be able to spin your financial reality. Ok I admit, I had a pretty depressing college experience…

 

Other Resources:

Podcast #105 – Jordan Goodman – Affiliate connections + mortgage rate optimization + Dolphin mentality

 

SPC028 – Chris Myles explains the downside to using Helocs to pay off mortgages & a teaser on life insurance

HELOCs in Hawaii

 

Sample Inspection report

I would say this is a bad report because it’s not Prescriptive. It is very important to have a chat with your inspector so they know it’s not going to be a warm and fuzzy home to live in but a rental property. They will need to avoid citing nitpicky things because the seller is likely another investor and more sophisticated than a regular homeowner and will call BS at your repair requests.

This is where an hour of coaching will go a long way to maximize what you get at the negotiation table.

Now back to SimplePassiveCashflow.com/turnkey