Podcast #98 – Fundamentals – How I lost $40,000 as a Passive LP Investor

Youtube: https://youtu.be/D7j79XknQqg

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

Pardon the grammar: I’m an Engeneer, Enginere, Engenere… I’m good with math! Here are the Show Notes:

Summary: I brought a house for $43,000 in 2013 and the operator ran the property into the ground and I sold the property for a net of $7,000.

This is the dark side of investing as a passive.

Timeline:

2013 – Had 43,000 in my SDROTH IRA, The deal 9% and 50/50 split on profits. I got the referral from a Self-Directed IRA company. I asked them where should I invest this money because I did not know any better. If you are looking for a good SDIRA custodian let me know.

2014 – Heard this dude was a scam artist from my network but it was too late. Lets just watch this. I started connecting with other clients via the interwebs and learned they had another market that they did this in to which was MS.

2015 – Heard there MS portfolio went underwater, taxes not paid

Mid 2016 – Got the letter saying they were going under and I had several options,
1) Deed in Lieu – had a lease purchase agreement
2) I did not really understand the other options but basically wait in court forever
For about a few months everything was fine. The tenants were paying their 500 dollar rents and I was pretty lucky compared to the other investors who tenants had trashed the homes. This is when the story started coming out on what this shyster did and the poor property manager that took over these problems.

Note that this was in my SDIRA so you can’t bring in outside funds to help the property or that could throw out your tax sheltered status per the IRS.

Early 2017…The property went offline

From the Property Mangement:
“The home is in pretty bad cosmetic shape. Keep in mind it looks worse than it really is. The photos will be shocking but most appears to be cosmetic repairs. The exterior just needs cleaned up (cut grass, trim hedges, clean and small repairs to gutters and down spouts). However, the interior had a bathroom leak on the second floor, there is alot of trash. It will require new flooring throughout, a new vanity in the bathroom as well as new caulking around the tub. It will need some patching and painting of the interior walls, a new drop ceiling tile and about a 30-yard trash out. I could not test the mechanicals but they appear serviceable. No way to really know until you have them up and running though.”

Summer 2017 – The city had a lot of complains about the grass not being kept.

We could not find these lost Western union checks – they were written out to my personal name.

August 2017 – House listed 25,000 with the broker fee 4000. Average days on market 180 days for a retail ready.

Average days-on-market for homes between $10,400 – $15,600 = 138 (in zip code 16101)

Time suck!

A couple offer/counters.

November 2017 – Property sold and I walk away with $7,000 after sales commissions 9

I only had about $12K in my Roth IRA. I could have kept building that amount via a fund or private money lending (although that was a small amount) because my contributions were 20-40K range. In a Roth IRA you can take out contributions any time. I used to do this for an emergency account but because I am pretty good at finding good deals I would rather have the cash and minimize administrative headaches that takes time away from deal finding, networking, and making podcasts. The fees were about 25 a quarter so that would have been 1% a year. Each transaction I would have done would have been an additional $50 dollars to execute along with the time it consumed.

More information on my recent transitions to syndications please check out my previous podcast.

QRPs

Lesson learned: don’t invest with anyone you don’t know, like, trust, or outside 1 degree of separation. There are deals out there being passed around via daisy chain style where no one really knows who each other are.

http://www.selectcranberry.info/remaxpade/modules/internet/search/search2.asp?p=findahome.asp&listing=true&mlsid=2196&mlsnumber=1301374&officeaccountid=182667&rnmid=171559122112164824&rnmsob=true

https://www.biggerpockets.com/forums/517/topics/490254-913-warren-ave-new-castle-4th-pa-16101

See pictures

 

Podcast #99 – #LaneHack – Pessimist 2×2 Matrix, Hacking Airport Baggage

Here are the Show Notes…. But first please leave me a review: http://getpodcast.reviews/id/1118795347

Go to this link to grab the Action Board worksheet guild. If you are already an email subscriber the link will automatically get sent out to you with all the post that never make it to podcast.

https://drive.google.com/open?id=1ZGa-E0kNgWSfsABozVaMe8fl11tNEoMQ

Optimist/Pessimist 2×2 Matrix – (My friend and his IPA Beer engineered the following idea…)

Good Outcome Bad Outcome
Optimist + +
Pessimist – –

Psychology Today, the average person has 50,000 thoughts a day.

The Rich Are Optimists – 67% of (Tom Corley study) the self-made millionaires in my study forged the habit of being positive and upbeat. A positive, mental outlook is critical to overcoming problems, obstacles, pitfalls, mistakes and failures. Staying positive is a critical component to becoming wealthy. Positivity is like a radar in search of solutions to intractable problems. Thus, positive thinkers are able to see opportunities, where others see only negative consequences.

The Poor Are Pessimists – 70% of the thoughts of the average person are negative (Psychology Today). Negative thinkers are unable to see solutions to problems. Thus, they are unable to overcome obstacles, pitfalls, their mistakes and their failures. Opportunities pass them by because they are not looking for opportunities. They are too focused on the negative consequences.

The Rich Are Decision-Makers – 91% of the rich in my study were decision-makers. Forging the habit of making decisions is critical to success. Those who develop the habit of making decisions are sought after as leaders, by others. Decision-makers have forged the habit of overcoming the fear of making decisions along with the paralysis of analysis associated with those unable to make decisions. The rich do not over think, which is a form of procrastination. It is impossible to know everything you need to know before making a decision. The rich forge the habit of being comfortable being uncomfortable about making decisions.

The Poor Let Others Make Decisions – 98% of the poor in my study were not decision-makers. They succumb to the fear of making a decision. They get lost in analysis and over thinking, which is a form of procrastination. The poor feel uncomfortable about making decisions, so they defer to others.

Don’t examine the roots just eat the fruit!

https://mymorningroutine.com/

Hacking Baggage at the Airport:
Getting your checked baggage off first before everyone else
1) Gate checked because luggage is queued on a First on last out order (FOLO) similar to an elevator. Downside you will have to lug your luggage through security.
2) Have them mark it as fragile

Also you don’t have to pay to gate check a bag, just be nice and ask the counter at the gate.

April 18 & 19, 2018 – See you in Chicago

 

On April 18 & 19, 2018 I will be attending notebuyerbootcamp.com in Chicago-Land!

Why the heck am I going to a note buyer conference? Have I got shiny object syndrome again?

Not to worry I am speaking on a panel about raising private equity 😛

Use $200 off coupon code “SimplePassive”

One takeaway I have gotten from the past couple months of open phone calls with your folks is that after turn-key (SFH) rentals, your natural progression is to forge a path on either syndication as a LP, BRRRRs, or non-performing notes. In that order of popularity from my unscientific study.

If you make it out there… I’ll buy the first drink!

__________Event Information_________

AHP’s CEO Jorge Newbery and 10-years of contacts will gather to share what they have learned about NPL (non-performing loan) investing in order to inspire a new breed of note investors – those who want to achieve superior financial returns and an extraordinary social impact.

Come to learn and connect with some of the leading note investors in our country! It doesn’t matter if you’re new to note buying or a seasoned vet, you will learn step by step how to build & scale a note buying business.

 

Podcast #97 – Investing via Crowdfunding Sites to open the country club – A Chat with Reality Shares

Here are the Show Notes…. But first please leave me a review: http://getpodcast.reviews/id/1118795347

Reality Shares came from the Jobs Act
April 2013 Reality Shares began
Accredited only
14-20% Class B MFH estimates
Also have preferred equity options 10-14% IRRs
1st lien debt or 2nd lien 7-12%
If you are not connected Crowdfunding options
From a syndications view, they are charged an origination fee
1% asset management team (from cashflow) from reality shares
1% Funding Fee, 1% Asset management fee
Some crowdfunding is taking equity upside
Due diligence – credit checks, background checks, 3rd party check of purchase price verification, then look at the deal (market, pricing)
Less than 5% of deals make it to the platform
There is a max the crowdfunding site with one syndicator (2-3M) to diversity risk for the firm
Reality Shares is a Broker-Dealer

The Simple Passive Cashflow Latte

A post just for fun…

When I need that jolt of energy to write an article or do the day job I make a The Simple Passive Cashflow Latte using these ingredients.

Please support the site and buy through this link.

Ingredient Why What Brand
12-16 OZ

Brewed Coffee

Because coffee is the drink of the gods, caffeine Bulletproof (non-moldy beans), Kimera Coffee (Nootropic infused), or Kona Coffee (to support the 808 State)
Butter Fat – because it’s not the 1990s anymore KerryGold because it’s organic. I like the salted version because it’s more widely available but the salt adds depth to the taste
1 Tablespoon to 1 OZ

MCT Oil

MCT are medium chain fats, the key to brain function and good skin. Basically modern day snake oil. Bulletproof Brand has XCT Oil but I use this Mickey T Brand (isolated 8-Carbon Caprylic Acid Molecule) which is the same thing except a lot less marketing costs. You can use Coconut Oil in a pinch but the taste isn’t that great.

 

1 Tablespoon to 1 OZ

Whey Protein Powder

Whey is the cheapest form of protein. This is a way to add a bit of sweetness and blends into a foam. Life is always better with a bit of foam! Optimum Nutrition is the go-to brand for thousands of wannabe bodybuilders so stand on the shoulders of these giants and do the same.
1 Tablespoon to 1 OZ

Collagen Protein

This is the most expensive protein that has benefits for skin, joints, bones, hair, and digestion. Sort of like drinking bone broth without the flavor. I use Natural Whole Nutrition Vital Proteins Collagen Peptides.

I have also used Collagen Hydrolysate under the Great Lakes brand.

Lately, I have been using Collagen Protein – A little more expensive but good for skin, joints, hair. This is lieu of the whey protein.

Other optional pick me ups:

1 Teaspoon (pick only one)

Cocoa Powered for a Mocha

Vanilla for a Vanilla Latte

Turmeric for a yellow mess

 

Cocoa improves blood flow (not saying it’s going to be like Viagra but at least it takes like Chocolate)

Turmeric – Google it

Vanilla – Google it

 

Bulletproof Cocoa

Turmeric powder

Bulletproof Vanilla

 

For those of you who are into the whole autophagy intermittent fasting protocol (12-hour daily fast) this is pretty good for you too because you are basically drinking a MCT oil drink. The only recommendation is to eliminate the whey protein. Also if you really want to geek-out, blend the whey separately because it is the most unstable. By blending separately you allow the butter and oil to cool down the hot coffee and protect the whey from heat.

Blend and serve in a mug that says “What Would You Attempt To Do If You Knew You Could Not Fail” or “Life Begins at the End of Your Comfort Zone”.

Please note that some of the links found on this website are affiliate links. And at no additional cost to you, paid by the seller, I will earn a commission if you decide to purchase which helps pays for the various costs of running this website. Please understand that I have previously used these products. Do not feel the need to purchase these products but if you do please use these links. If you have any additional questions on how I optimize the use of these products please let me know.

SimplePassiveCashflow.com Financial Freedom Independent Mentor Freedom~Number Value-Add NOI Teams Mortgage Integrity Charity Income Escape~the~Rat~Race Empowerment Equity Portfolio Legacy Entrepreneur Millionaire Ink~it~up Choose~Your~Path Prudent~Leverage Net-Worth Stabilized Appraisal Small~Deals E-Myth Pro-forma Network Turn-key Re-position QVD Appreciation=Icing~On~The~Cake Working~for~the~Man Stocks=Ponzi Who~needs~a~401k Cap-ex Assets Rates Cap-rate Syndication 9-to-5 JOB=just~over~broke Wisdom Risk/Reward Retirement~Now Work~On~Your~Business~Not~In~It No~Crystal~Ball Tax~Benefits Inflation~Hedge 1031 Manage~Team Leadership FYIFV Revenue DSCR IRR LLC S-Corp 1099 Schedule-E DTI FannieMae Good~Times Systems Reserves Note Rich Delegate Market Statistics Investing Strategic Proactive Bucket~System Frugal

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Video Walkthrough on new 2018 Buy & Hold Analyser

Spreadsheet download for Hui Deal Pipeline Club members. Sign up by Friday 9th 2018 to get sent a free copy or email Lane@SimplePassiveCashflow.com if you are late. (Current members… no worries it will be emailed out to you this Weekend)

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.

Podcast #96 – Interview – Kevin Bupp – Mobile home investing

Text “simple” to 314-665-1767 to get access to the Hui Google Drive files and the website/podcast via email.

Text “deals” to 314-665-1767 to join the Hui Deal Pipeline Club and get in on the dealflow!

Mobile home investor
His business is not simple or passive
did no go from a career to REI
Started when was 19 years old
Started buying SFHs and 2008 changed things and made Kevin Rebuild
MFH was not scaleable
Then was introduced to mobile home parks
Everyone should start smaller to learn about working with tenants
Anti turnkey rentals 1) based on comps 2) buying retails
Cap rates are only important on the sale
Only look at cash on cash return (not IRR)
used 35% expense ratio
Work with the broker to come to a price – can you help me understand?
MHP have 50/50 LP GP splits where MFH has a little high 70/30 split
40K a year and under, people making 12-15 dollars an hour
Excercise is the success tip

Podcast #95 – Interview – Andrew Campbell from Passive Cashflow Side-hustle to active investing

Show notes:

Autin Texas Native
Bought Duplex and fourplex to start (76 on own for passive cashflow)
Started out with the intention of getting passive cashflow
Was working marketing in Minnesota when father had a heart attack and started buying rentals with brother
Was doing self-managing when first started on own
Flexibility in what you do with your time
Father getting sick was the turning point
Boots on the ground lead is very important
Value-add can mean both 20-30% occupied and adding crazy value and 90% occupied and taking it to 95%
Developments have 25% returns per year

AHP Update & Free Burn Zone Book!

CORRECTION: Hi folks, I checked in with AHP and they told me the “American Homeowner Preservation 2015A+ will continue to pay up to 12% to investors.  We expect to continue accepting investments into 2015A+ through May 24, 2018Currently, we are preparing the SEC filing for our next fund, which will open sometime after 2015A+ closes. For the next fund, we intend to pay up to 10% to investors” 
As you guys know I don’t work with anyone I don’t know, like, or trust. And now add “1 degree of separation” to that list. (I got burned for a $40K loss as a LP on a deal that I started in 2013… More on that story in a future post but if you want to know that referral came from an IRA custodian).
Jorge Newbery is one of those guys that I met on my travels in 2016. He has been sponsoring my podcast from the start and been a mentor helping me along because he used to go after heavy value-add recourse loan apartments back in the day.
He wrote this book “Burn Zones“… Email Lane@SimplePassiveCashflow.com your mailing address if you would like a free hard copy.
And I have some cash in InvestinAHP.com like the deals the Hui Deal Pipeline Club (Sign-up if you have not) I have skin in the game too.
Inline image 1
Wondering what AHP is? Here is a past webinar:

Attached is ALN Market Stats

Attached is ALN Market Stats
 
https://drive.google.com/open?id=1sD7E8Z8rY_3W3WZmDBIlrf7xDBYi_pYE
 
-Occupancy
-Rent Increases
 
I personally don’t read too much into these stats because they are for typical deals. You should be buying deals with stories behind them that transcend these stats. But you can rank on MSA from another so there is some value to doing that.