Hey simple passive cashflow listeners for another week in a row because you guys requested it so much. We are going to be doing another coaching call with yet another accredited investor. You guys seem to really like these and you guys also keep signing up to do more of ’em. If you guys wanna sign up then make yourself anonymous, make a fake name, change the story a little bit so that your coworker doesn’t know it’s you. When they’re also listening to the simple passive cashflow podcast, feel free to do so. Gotta do two things: you gotta be part of our free clubs, simple passive cashflow.com/club joined there.
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Hey simple passive cashflow listeners. Today, we are doing a coaching call with Eric who has a net worth of a million and a half. He’s an accredited investor, and he has a bunch of rentals, but he’s looking to sell them off, go into syndications and private placements. So we’re gonna be talking a lot about how he built up that original portfolio.
He worked with a bunch of friends, a bunch of guys drinking beers, pulled the cash together and that’s how we got to accredited status. And then we’re going to talk a lot about options, 1031, that type of stuff. And a lot of good stuff here. So I think, a lot of you guys starting out, you guys are creeping over that million dollar stage.
This is going to be very perfect to a lot of you guys. All right, let’s welcome Eric who’s also a FOOM member . If you guys want to check out that group go to simplepassivecashflow.com/journey. A lot of high quality people in that group, but, yeah, go there to learn more. But yeah, Eric, thanks for jumping on.
Thanks for having me. Yeah. Once you give people a little context on how you got started a little bit like, how old you are, family structure, then how long ago did you get started to get to the point million and a half now? Yeah, sure. So I’m 33. I’m married. I have two kids under three, and we started out about five or six years ago getting into real estate.
Following college. I worked in oil and gas. My undergrad is related to oil and gas and kind of the business finance side. So I did that for a few years traveling a lot and jumped into renewable energy about five or six years ago. And have been doing that ever since as a project manager for utility wind and solar projects, but along the way we got away from the traditional personal finance stuff, IRA, SEP IRAs, Roth things like that.
I didn’t have any travel expenses like you in part of your career or any living expenses. I’m sorry. Cause I was living in hotels for the first four years out of school. So I was able to stockpile a decent amount of cash. Just didn’t know what to do with it, honestly on the road a lot started listening to podcasts, like a lot of people in their mid twenties, right?
Yeah. I’m 25. I bought my first little house just outside of Austin that we’re actually getting ready to sell. And when listening to podcasts, alternate investing kind of stuff, real estate really starts going down the rabbit hole of rental properties and I think that’s the way many do when you get on bigger pockets.
And that led to other podcasts over the next few years, but probably between. I dunno, 26 and 20. And now we have about 35 units in central Texas of rental properties, all small residential, one to four units. Some of those are probably A class that we’ve lived in around Austin. And some of those are your C class, Eight are B or eight are D, kind of fourplexes and duplexes.
That cashflow pretty well in an area near Fort Hood Killeen, which if you’re looking at it recently, it’s been growing a lot, over the past year or two, but, that’s where we thought we were going to go is rental properties and cashflow. That was going to be our way out to quit working if we wanted to, or as my wife and I, at that point in that late twenties got engaged and then married, that was our pathway that we thought we were going to go down.
I guess as I got older and a little smarter. Started talking with high net worth parents of my friends that I, we were hanging out with, maybe having a drink or whatever. And I realized that none of them own little dumpy houses in Killeen, Texas. They were investing in commercial funds and Large multifamily deals, new development subdivisions, things like that.
So started picking their brain a little bit on it. Like we’ve built up like a nice little portfolio. You think you’re hot stuff and then you find other people that do it very differently. And after a while you start to follow the breadcrumbs.
Yeah. Like you mentioned hot stuff, right? Like in my peer group, I was the guy buying rental properties, thinking I was doing well or whatever, but then you stretch your network a little bit and you realize there’s people your age that have already amassed quite a bit of wealth.
They get there in different ways and I just got my eyes open to the long-term game, not the running back and forth, checking on rehabs and dealing with tenant headaches and all that stuff and it wasn’t what I wanted. So over the past couple of years, we started looking for different ways and luckily a family friend got us in with a group out of Fort worth that does medical office spaces.
And that’s kinda how we got our start in a limited partner investing. And so in 2020, we started putting a little bit of money in probably I think 150,000. Some of that was with the group that I started with just buddies who were interested in the same thing, all, early thirties, good paying jobs, things like that.
We wanted to find a way to get our money to work for us. And then in 2021, we got fortunate with some good appreciation around Austin and sold one of our old primary houses that we had lived in for two out of the five. So no taxes to worry about and started refinancing a lot of our rental properties, just pulling out a decent amount of cash.
And I met Lane. I met you. I think we started talking about a deal in Houston at one point. And that’s where you met the mastermind group and enjoyed that. And since then, we’ve been diving all in. The unfortunate thing is that there are a lot of people who haven’t met any wealthy people.
You don’t know what you’re missing. And I think correct me if I’m wrong, but like you’re lucky enough to be in proximity to some wealthy people that you can see the other side. Is that correct? Yeah. I grew up in a working class kind of middle class, going to work. They advise me to go to school and get a job, get a high paying job that way, whether it’s a project manager, oil and gas.
That’s part of the reason I pursued oil and gas is because it’s typically high paying, but yeah, no one in my family was buying rental properties or looking to invest in apartment deals or whatever. A family friend that I think was a buddy I grew up with and his dad had been doing it in that kind of opened my eyes to it.
And then we got to go rub shoulders with some of his friends at weddings, this and that. And you really saw a different lifestyle from yeah. You know what my trajectory was with rentals and just, a couple hundred dollars here, a unit couple hundred dollars here, a unit first, putting in a hundred thousand and then doubling that in three or five years.
And then we’re just rolling the money over. So just to set the table for you guys on the podcast, we also put this up on the YouTube channel too. I think we have a playlist of all the past coaching calls because we have the personal financial sheet up here. So we’re going to talk through some of these numbers and this and these other charts.
And I think this is also available. And if you guys sign up for the clubs that will pass a cashflow.com/club, all of these get categorized in net worth. Cause we’ve done a bodily, it’s a couple of dozen of these so far, so you can see where you are, but Eric’s got a net worth of 1.5 million. So we’ll fit that in where it needs to go in the pecking order. So you guys can fit yourselves in, but again, network million, $1.5 million. So that’s what I call it, like where he is at this point in time. But the other point, anybody who’s like a physics major took physics. You guys know one in time and then velocity, the velocity ice I call it is which, what do you net at the end of every month?
So his assets or his monthly assets or income coming in here, I think your real estate stuff is about half or a little bit more than half than your day job stuff looks like. That’s moving in the right direction. That’s where you want to go. We had some people in the group where they make most of their money through the ordinary income route.
And that’s why you don’t want to have an app, right? Yeah. It’s been a long time coming. It always hasn’t been that way, but the last two or three years, it has, but granted, we also self manage these, so there’s no management fee. So I do have to devote some time to that. But luckily, To put systems in place and, dealing with good and bad contractors throughout the years.
Yeah. It’s starting to make it worthwhile, dammit. It’s working. All, all those threads that you had in your twenties, they didn’t believe you, but it’s working now. Your expenses are in control. I think this is what we talk about a lot, like in, in our kind of circle.
A lot of us got to this point and worked class. A lot of us are very frugal, but I tell guys like, Eric, Hey, lighten up a little bit, have some fun, things are gonna be okay. Very, so the control we’re pretty frugal. Our mortgage is $1,800 a month in Texas. We have relatively pretty cheap housing. For my job, I get paid mileage and I drive around 50,000 miles a year. So essentially I don’t have a car payment and my wife’s car, she uses it in her business. So it’s written off. So we don’t have a ton of expenses but we do like to travel. So we do have a little bit of fun, but once the kiddos are a little older, we’ll get back to that.
We’re going to get you into the exotic car hacking subgroup. I’m sure my wife would love that. I know which by the way guys, as I’m going through this course, now there’s ways you can hack cars. It’s based on the whole depreciation schedule, it hits the bottom and it pops up.
So the idea is you buy it at the right point. You hold on to it, as it pops up, you can actually own the car for free or make money possibly. But anyway, fun stuff but any net cash flow, you’re putting away quite a bit of money. It’s definitely six figures a year to put two investments in. I could do like three or four syndication deals a year, beautiful stuff.
Talk to us, you started to invest with your buddies, right? Like shortly after you got started, how did that all come about? How did you guys work that? After a few years of me talking about real estate and buying properties and probably headaches that came with that, I convinced three of my buddies that I went to school with in college with, to form an LLC, you start buying some rental properties.
In that Fort Hood area. And we bought a fourplex. A couple of duplexes realized I was the one doing all the grunt work, even though I was taking a small little fee to do it, but I got it. Do you structure that to compensate yourself for your time? Yeah, we just set it up as a member LLC.
And then I had a separate property management LLC, and we did a lease agreement to my LLC for 6% of the revenue of the rent. Oh, you were doing the property management, right? Yeah. So we’ve always self managed. We’ve never used a third party. Yeah. I’ve seen some people. If you have property management, you paid for property management, your role will be asset managers, maybe take a point. That’s fair.
Yes. That’s come up in the last or conversations cause even, that same group, some of the deals in 2020, we all went in. So we, a hundred thousand minimum each show is through and 25. And the idea was whether it’s the fourplex, a duplex, whatever we buy or a syndication, should there be some kind of fee because, I spend a decent amount of time reaching out to people or a decent lot of time dealing with property management stuff to find those opportunities for us.
So we’ve brought that up, but, honestly with the syndication part, it’s been, it hasn’t been too hard, you find a few good people and we’re trying to dip our toes in with the few of them and see which ones we like. And, in a few years, hopefully some deals go full cycle.
We’ll have those three to five syndicators that we can just keep rolling over the money with, with that group. So what percent of your current week, like where you’re actually on real rental properties directly, are through your buddies, LLC or personally alone? Yeah. So on the tab that you’re on, those are all just my wife and I.
There’s another tab that shows the partnership kind of market value, loan balance SENCF. What would you say just dollar wise equity do you have between just personally with buddies? So this one is, its market value is 580,000. So I own a quarter of that. Mostly personally, on your own vast majority.
Yeah. We bought a few and I really liked the model of having all of it, if I’m going to have to deal with it. And we talked about it and I think the better plan for that partnership was to just do syndications and try to get a little bit more money and spread it out that way.
Yeah. But that was cool. You got them involved, right? You got them the taste of blood and I think they’re hooked right. Two of the other guys they’re just kinda like I’ll send them stuff all the time and either they have the money or they don’t but one of the guys who ironically his dad was the one that kinda got us into syndications and helped us get our foot in the door where otherwise we probably would not have, he’s really taken it and run with it and made some connections of his own.
And he lives in the DFW area. So we get together a lot and he has some good connections. Yeah he’s actually brought some stuff to us to look at it. Not just me reaching out to people through podcasts or different networks. Yeah, that’s cool. Like helping those guys, your buddies out.
Good thing. So now we’re getting into the reasoning between why you’re transitioning. As most things like real estate go up in price, you’re paying down your mortgage and your return on equity goes down because your loan to value goes down. Maybe you talk to me about the epiphany of you kinda realizing this, what were the options to talk to that part of the story?
Yeah. As you can see there, my loan devalues, let’s just say 50- 60% on those things and a lot of that’s just trapped equity that it’s hard to get a line of credit on a rental properties, at least with a few that I’ve had, it’s have to really dig deep and look for it. So I haven’t had a ton of luck with that.
So I’ve just had to do a full refinance on ones that make sense. But aside from having the trapped equity in there that I think I could better utilize in a syndication, get a better return with, no headache, no liability, which is another thing that we’ve really thought about. It’s nice to be able to REFI these and pull out 50 or 60,000 every few years, but who knows when that may, maybe it goes the other way or maybe I ended up having a tenant slip and fall. Who knows?
So the idea is just that we’re getting away from this. Yeah, the joke in the group is, can you tell me any good freaking reason why you want to own rental properties directly? In the past, like inefficiency of equity, return equity here. Another thing that a lot of people will come to is they’re trying to get the equity out right.
Then they may still want to own the properties. So they look into these refinances, you’re still talking about recourse debt and another option that comes up is all in one loan. I would say stay away from those generally. That’s just what, that’s just what the lenders want you to do.
Cause that’s cha-ching in their pocket. But they know their options you can solve other than just getting out of the rental property owner. Yeah, no, I looked at those, I looked at a portfolio loan and a couple of the options didn’t seem too bad, but you and I talked in the group about the issue of what if I wanted to offload one property or, within that bundle, it would be a pain.
And then also on some of the leaders. Yeah. So what Eric’s talking about there is like, when these lenders make a loan with multiple properties, There’ll be a caveat where like you can’t, if you take one out the cell and you can’t do that, you have to unravel the entire loan, which is incredibly impractical.
This is why you need to actually meet people because you see a lot of these like crappy Facebook groups that are free. And then you just see like these vendors just poaching people and just writing comments here or there. And there’s no counter argument, that I’m seeing right now, or you don’t get the real, the cons of any.
See people, unsophisticated investors, just going through all these in one mode. So portfolio loans, they don’t realize this impracticality at this type of stuff. Yeah. That’s exactly right. The portfolio thing seemed good on paper from a high level initial conversation, several of the people I talked to said the points were high, so the fees to do it, the fees to unravel it.
So basically the reason for this is I’m going to have forever manage these properties. And over time it may make sense, but I just think the liability part is something I don’t want. I don’t want the headache, the lifestyle isn’t that great because I go out of town to work for work, and I constantly find myself running by a property to look at something or do something.
And just not a lifestyle, whereas if I sell them and let’s say I can pull out a million and a half by selling them over the next year to two. I think that’s a better use of the money for sure. You’re not a bigger pocket bro anymore. You have kids and responsibilities now.
Yeah. No more. I’m not cool doing burgers or anything right now. So let’s talk about the 1031 thing. Cause I think you can’t have recently come to this. You must be saying, went through this kind of talk to us the whole like option of 10 31. So that’s all about it. Talk to me. Yeah. So we have a property just south of Austin that we used to live in.
It’s a nice town home. The market’s going a little crazy here. And so we would be able to sell and probably pull up 200- 250,000 or take it out of that walk away from it. And I started freaking out about the capital gains. So 1031 immediately came to my head and I started thinking about it.
But then I started thinking about what property am I going to buy? What am I going to do? Raw land is a small apartment complex. That’s overpriced right now and another headache and its own. I talked to some people in the group and yeah. They pointed out something. I ha I didn’t even know, because up until last year or even this year, we didn’t have any suspended losses that you can deal with.
Once I actually learned how that works and what would really happen based on their experience doing the same thing, it opened my eyes to not having to do a 1031 and be under the gun to find a property in forty-five days, which good luck. And then. Yeah, if you think you can find a deal in 45 days, you’re the sucker that I want to sell to me.
And every, going back to different podcasts or different stories, the seller knows when you’re doing a 10 31, so they have all the leverage right away. Yeah, just after learning a little bit more about that, and maybe I know you have some articles on why not to do a 10 31, and I look those over, it just makes sense.
That if I’m going to go into syndication and I’m going to, and I have pals built up, why would I roll it into another dumpy property and then be in the same boat? Yeah, that’s really the game changer. So what Eric’s talking about is, as you guys know, one of the reasons why we can buy real estate, as we can deduct the price of the lack of the building improvement over 27 years with all these rentals.
So that’s cool. But it just takes freaking forever. But with syndications, if they do a cost segregation, you can deduct a third of the property improvement in the first year. This creates a boatload of cows, passive activity, losses that you don’t need to use. It just goes suspended. But those suspended, passive losses can we use when you finally sell these properties?
This is what I did back in 2017, when I still thought about seven rentals that year. I had a capital gain and you also get to include the depreciation recapture too. So you add those up. I had $200,000 of that, that I had to pay taxes on, but I had some, a hundred thousand dollars of passive losses that were suspended built up that are used to offset that which indicated Texas.
And which negated any reason for a 1031? Yeah. Did you know how much the 80 to 85 farm or something like? Did you see how many calls you have? We haven’t completed our 2020 return yet. So in 2020, probably won’t be I take that back. We did quite a few. We bought a lot of properties in 2020, cause some crazy deals are coming up, but a lot of them are remodeled.
So we did have some losses and our income phases this out over the 25,000 amount, you can take each. Yeah, a hundred hundred to $150,000, which is most people in our world. Yeah. Yeah. So the last, however many years I’ve been phased out of that. So just carrying those forward, but I don’t know off the top of my head.
But I do know in 2021, just based on the type of deals that we’re going in and the amount that we should be able to offset all of it. Yeah. So when you guys are looking to sell properties, you guys want to see how much passive activity losses you have suspended. This should be an 80 to 85 farm.
Don’t quote me on that, something like that. Your CPA should have that. And unfortunately that sometimes the CP doesn’t give that to you because when they don’t like to give it to you so that they know when you start asking for it, they know you’re shopping around for a new CPA, because there’s a lot of back and calculations that come on that form.
It’s a complicated sheet, but basically the right question to ask is how much suspended, passive activity loss. You have built up so you can offset your capital gains patient ratio with captures of what we sell. So what was your plan like? Like you kinda know that you’re not gonna do a 10 31, but like you still did you decide, like I’m going to sell two off this year or three off this year?
What was the rhythm or cadence to, yeah. Yeah. It’s just the way the market is. And I was doing the math just back at map and kind of that and realizing what the cashflow is on a couple of these properties that are, in that higher market value number, how many years it would take me to get to where I could if I just sold it on the return.
And then if I can just put that money back to work. In various things like that, it’s just, it was just dumb, to hang on to it and take, say 200 bucks a month or whatever. Yeah. It made sense in the beginning. But as your loan devalue went down as a property appreciating you got more equity.
Doesn’t make sense after a while. Yeah. And every time I refinance one, there’s five or 10,000 in fees. Which still lenders, they sweep it under the rug with a higher interest rate to make it a no fee, but they’re still paying for those friction costs. Yeah. So something like that, like you understand this pretty well and you’re able to make an educated guess on this, but like you right now, the game plan is to do the passive activity losses through bonus depreciation costs.
At some point in the next 2022 will be the last year that you get a hundred percent bonus depreciation and then it starts to step down a little bit for the next four years. I don’t think that this is going to be open for a while. They could extend it. They, I don’t think that they will is my guess, or I don’t know.
I just don’t think that sweet deals like this are going to stay open for me. That’s just the way I look at it. So something for you to think about, right? Like you gotta get it while the kids are good. So are you saying maybe liquidate now while the market is also red hot in this area and people are overpaying for everything and try to roll it into deals.
I’m not looking for him, like in terms of yeah, it’s a great time to sell right now. Seller’s market. I don’t, I try and personally, I don’t really try and have that sway what I would do. I look at it in terms of like tax offsetting the tax. Right now, when you go into a syndication and do a cost SEG, you’re getting a lot of bonus depreciation right now in 2022 and beyond, that’s going to be going down a little bit.
So you’re going to get less passive activity losses from these things in the beginning. So you need to keep that in the back of your head. What I would be doing if I wanted to sell these 1, 2, 3, 4, 5, like 12 properties, what I would be doing and be trying to do half this year and then the next year, and then maybe spill over.
I wouldn’t be assuming it was new to every year. No, because in two to three years, you’re not going to get as much passive losses from new deals. Like I would try to front load it. And this is where it makes it hard, right? Cause we don’t know what’s going to happen. We don’t know what Congress is going to extend the bonus appreciation thing.
We don’t know if they might, I don’t know. Who knows they might get better. And maybe you’ll be rewarded, but I don’t know, like this is where it’s just good to talk with people and understand how things it’s a fluid situation. The thing is it’s stagnant and you have to make the best call today.
Based on what is unknown known as in the future in terms of taxes. Yeah. And that’s what makes it so hard. It’s just not knowing. And I don’t want to kick myself in the foot for selling too early, too late, whatever. But yeah, but I think after a while you know what Congress will do, what things, what levers they do pull.
Like another great example. You don’t care about this. I don’t care about this now, but like the state tax, I think it’s low right now. I don’t really know exactly what it is because I don’t care. But like sometimes it floats to 20 plus million. Sometimes it’s infinite. Like it the boy goes up a doubt for that.
Just one thing, same thing with this stuff. I’m assuming bonus depreciation is the same phenomenon. Yeah. I think you’re right. It changes like what you’re talking about and you get different administrations and they’re trying to appeal to different groups. And do different things.
Like the whole land conservation easement thing. It’s a little bit difficult nowadays. There’ll be something else. And as empty people waiting to get full confidence in it, the window’s closing on you already or something like that. Yeah, yeah, I haven’t looked at those, but I know some of the people have, some of the other people and worked out pretty well for them.
But personally, I haven’t really dived into that. Yeah. Yeah. But what else? What else can we talk about here? Space, other sheets. The other sheets are pretty standard. This is just my personal tracker. And I added your summary because I liked it on the first page, this is just a tracker of things that we’ve gone in on that is also yours.
I actually don’t do this, I don’t know. I’m just, I don’t know. It’s kind of a conflict. Yeah. Honestly, it’s like a K-1 tracker and just seeing quickly, how much are we in this year? I may want to change it up a little bit and maybe add some information about the K-12 totals and different things.
Yeah. This one looks like you have like your passive losses and your returns all in the same thing. I keep mine separate, but however you want to do it. Yeah. I need to clean it up a little bit. Yeah. Hell of a lot better than working with a schedule a year, running out the properties. Yeah. Believe me. Cause I have to do this and tax season comes up and have to manage all that and fight taxes every year to pain. But yeah, on the properties, I think it’s just how to strategically offload those. That’s the, if it were me like me playing you’re just I would have mowed half of them this year and you’re going into deals right.
You’re picking it, the passive losses where you don’t help me. Your sales are getting passive losses. Of course, I think that goes without saying, but I would really try and get rid of the other half in the next couple of years, because at that point, the bonus you’re getting is going up, your windows going to close and getting the passive losses and then just to clean things up too.
Because it’s a pain. I still have two rentals. It’s not occupied, but it’s just out there such a pain. We were just on a vacation and I was dealing with things that were either distracting me or causing me to have to send some emails or make a few phone calls every day because of this not even work.
Yeah. What else do you want? One of the things I had written down, right now I work as a project manager, mostly real estate development is what I do just for a different product. We build wind and solar projects, and I have some friends that work in real estate development and they, I enjoy real estate quite a bit.
It’s fun for me, it’s engaging and challenging and all that stuff. So my question is, If you had a desire down the road to be a GP in some of these deals, aside from just being a key principle or, just bringing more money to the table, would it be advantageous to maybe switch careers, try to work for some of these developers?
Yes. I may take a pay hit initially, I’ve seen some of the bonuses that these guys get every now and then it’s pretty crazy on, maybe a new multi-family that sells. So do you. Do you think it would be wise to have all my investments in real estate that I’m hopefully relying on in five to seven years to really start being able, just to recycle and turn over, but also have my W2 in that world.
My goal is to move into that GP role in five to 10 years. Yeah. So it comes down to your goals. If an operator has a good track record, Like really, what the hell did they need you for? What do you do, and it comes down to the essence of what you do for the general partnership where you can either do several things.
You can find the deal, which ain’t going to happen. Talking to brokers, you’re not going to break people with yellow letters and find deals that just don’t work. What the grooves say, they want to sell you on $30,000 programs. It ain’t going to happen. Could it happen perhaps? That’s why these guys make the programs the way they are. So they go find a thousand suckers to run through brick walls and one or two of those guys make it like, it’s you who gave me it’s possible, but here’s where it’s I don’t know if that’d be a good use of your time. Because you make a pretty damn good salary as it is.
Yeah. And it’s a good industry to be in right now in general, signing on debt, being a key principle or putting money down on hard money. That’s another option, right? But you’d really need a net worth of over 3 million to make more sense to do that. And you’ll get there. They want to do that in the future.
Signing your name, on some loans could pick you up substantial money. You know what I mean? It’s essentially money, 30 to a hundred grand possibly. Just for doing that. But it’s all equity. The other things that generally. Get used in a general partnership if you are doing work right?
So are you putting in sweat equity and this possibly you might be able to do, but then you ask the question. If you’re investing with a reputable operator, they should have all these systems and teams in place. What the heck do they need you for? Like the only people that want sweat equity from people are people.
I haven’t got a track record together. And you’re not coming on the ground floor. And that kind of, maybe I put the question back at you. Are you coming? Are you okay? Working with somebody who was in startup mode that could very well flounder. If that’s the case, then you have a shot, but if you’re working with somebody reputable you don’t need cooks.
And the kid cooks more in the kitchen. Yeah. And that makes the concern that you would have to start at the bottom and either work your way up and then start over, or you have to go to a risky startup that you’re putting a lot of trust in. And, but let’s just go with that one, you’re like, all right. I like doing this stuff. It is fun to me. I like this cowboy type of attitude. I want to see what I can do. Then it comes down to. All right. Make sure you don’t sign on debt for number one. Hey, don’t put your whole family’s estate on the line, but is it, then you look at your salary, right?
Like what you’re doing right now, is it that hard? Is it worth you making three, four times this 10 years down the road? I don’t know. And then that, and then I, as your family office guy is going to ask you, amen. Which we’re going to get you the four and a half million dollars that kind of, that upended me off the finish line, I guess we’re going to get you there.
And, by the time you’re 45-50. Do you want more? Yeah. I dunno. Go into my current job and if I like it, I probably work 35- 40 hours a week. And then I have some weeks where honestly, there’s just not much going on. And I work from home, freedom to travel, work from vacation kind of thing.
Cush job, to be honest. So it is hard to leave. Maybe the better play there is just to roll with it and find ways to either increase my income in other ways. Maybe different businesses that my wife and I, since she’s really into that, starting those up and just keep rolling this money in offload these assets, that’ll free uptake.
Just the same, I don’t know, a million dollars. And just keep going and on good deals with good operators and then look up in five or 10 years and beat it at that mark. Yeah. And get to that mark. And you don’t need to go find operators. You can just do like an IUL type of product and put it into an incredibly brain dead mode and cash flow.
And I don’t know those, the reason why you got here is not because you have that attitude that you want to coast, but like you can coast. And I know it goes against everything. Everybody’s told you, everybody’s telling you, you need to work harder to get to the next person.
But like I’m telling you, you’re going to get to a point where it doesn’t matter if you have four and a half million dollars or $10 million net worth, it doesn’t matter. But I think that’s where the fulfillment piece comes in. Like maybe you can carve to start to think about this and what do you guys really want to do for the last 30 years, 40 years?
Yeah. And whenever we go out to dinner, my wife and I, and we were talking non-business even though we somehow circumvent back to that circle back to it, but yeah, exactly. Of course. And we find ourselves thinking about what we are doing all this for? Why are we dealing with rentals?
And, Starting a business to try and make a little money kind of thing. And it comes back to, we don’t need that 10 or $20 million net worth at the end. We just don’t want to have to worry about things, if we want to go to Europe for a couple of months and hang out, we can do that. And eventually our kids are gonna get older and move out and they’ll be fine.
So what are we going to do with our net worth in 10 or 15 years? I think the answer is yes. Whatever we want right or fulfills us at that time. Some guys have a 503C kind of thing they want to do or whatever, and maybe that’s down the road. But I think right now it’s just having options on the table and not being forced to like golden handcuffs and work for a W2.
And this is all uncharted territory. Most people spend their whole life to get to one and a half million dollars that they get there. And there, it’s game over already. They’re already old. It seems really morbid, but there really isn’t a life after you achieved that number that you’re looking for, which you’re already there for.
So you better start thinking about it. Yeah. You hit on it earlier. Relax, go enjoy yourself. Go by that Ford Raptor you want? Yeah, I did order something. Yeah. Very cool. Thanks. Enjoy it a little bit or otherwise, what’s it all worth and or why do it, why are we putting ourselves through second?
Heartache and stress sometimes if we’re not going to cut out, enjoy the fruits of your labor. Yeah. And you’ve got a couple of kids and from what I notice not notice, but statistically 90% of wealth needs the families right. In two to three generations. And maybe it’s because most of the time people are putting their pedals to bed, 50-60 years old, then they get to one and a half million dollars and they don’t have time to teach the next generation. The next generation has already gotten through the college educated system and they haven’t taught, how do they build wealth? You have an opportunity to actually teach the next generation because you have the bandwidth to do it.
Yeah. And that’s important to us, my wife, I mentioned she was a teacher and she realized after a few years in that system, after spending four years of school to go be a teacher, she was going to be working. Forever for $50,000 a year. It was crazy and no matter how good she was or not, she just worked, there was a lot of negativity with all the other teachers that she worked with about not liking their job.
And the older ones were burned out, just trying to get to that 20 year retirement mark. And it was kinda sad, honestly. I don’t want our kids to think, go to school to be a teacher because my grandma was a teacher who went to school to do something right. Yeah, you enjoy it, but also you can utilize it to build your own wealth, right?
Yeah. Maybe it’s maybe it’s like a thing of, like they say, you’re never in balance. You’re always out of balance. You’re just focusing on different time things at different periods. You already buckled down in your twenties and thirties. I’m getting this net worth thing.
Maybe take us a step back to a season in life where you focus on teaching the next generation, which you can always come back to. If you ever wanted to do that GP thing in the future, or make some kind of more lifestyle business or something that’s fun. And I think that’s what I’m getting at.
There’s everybody, there’s something that resonates with somebody like that you want to do, maybe you’d make a dog farm or something like that. I don’t know. Or like a farm. No honey company, I don’t know. There’s something that you’d like to do or like the wine tours or, yeah, no, that’s a pretty fun business.
We get to go right off drinking wine all over the place, so it’s not too bad. But yeah, there’s definitely things out there that I would just enjoy. They just don’t bring in the salary, down the road or not even down the road, but shortly I’ve, we’ve talked about just selling some of these properties.
A little bit of money and just leaving my job. Because I can always go back and work in renewable energy and do what I do. I don’t think I’ll have a problem with that. You can run hers from anywhere. Cause she has employees that kind of run it. She only works five or 10 hours a week and just takes the kids five, six years old and go spend six months overseas or whatever, and just hang out with them and enjoy that time.
I think we’ll be able to do it. Like you said, offloading some of these assets that we’ve worked hard to acquire to low cost spaces that we’ve gotten fortunate on appreciation and investing it wisely. Don’t just put it in your bank account. Do you have any models that have a net worth of four to 10 million that you feel have gotten it?
Because I don’t. And I think the people who are very visible are the people that are like those serial entrepreneurs that just keep going more and more. It’s the quiet people that kind of got off the freeway. Yeah, no. Like you said, the ones that you see are the loud ones that are making all the headlines or whatever, every now and then I’ll run across somebody, whether it’s a landowner that I deal with on a project who 56 years old made a few smart moves when they were younger.
And I’m trying to catch them in between fishing trips or vacations, and they’re just joined life. But the people we know. The people we buy these apartments from they’re typically in the 10, $20 million plus range. And they’re the one dying with the property on their deathbed. As they sign up for the paper.
What I’ve learned is I don’t want to be in that position. Yeah. It seems like a few of them, whenever we’re talking about who the sellers are, it’s a widow or widower and they’re just offloading it and, they, and they’ve worked to manage it on their own, painting walls or whatever they’re doing for the last week.
It’s always the widow, like the wife right back then. And that’s why my list is like, at some point. Stop investing at deals that just go completely passive, like an IUL product. Cause I empathize like they’re panicking, right? Their husband who ran the whole business, the real estate apartment is gone.
They’re just confused. You don’t know what to do. Because they’re rich, but they can’t get it out. They don’t know what to do. Yeah. That’s a scary thing. Yeah, no. Yeah. Yeah. Aside from really getting in the weeds on financials and everything. We like podcasts that talk more about philosophical things and banking and books over kind of stoicism and things like that.
Cause it kinda opens your eyes to there’s more than just trying to just continually make money for whatever reason. You don’t know why, but you’re just trying to increase your bank account. So yeah, you don’t want to be at the end of your life and thinking about it. I wish I had gotten to 50 million instead of my 40 million, But that’s where it’s hard because since I’ve been 18 working all the time the goal is to get there.
And then when you start getting on this cruise control, like we were talking about it the other day is things are easy right now, honestly, we’re rolling into apartment deals and yes, none of them have gone full cycle yet, but I have faith in the people that we’ve given the money to, that they will.
And jobs are going well. We go on vacations when we want to. So things are going pretty smooth. It’s nice. Yeah. Cool. Any other last pondering questions you want to talk about? Or a good, no, I wrote some stuff down, but I think we covered it, yeah. Just thinking about how to offload these properties and hopefully, it might be a little bit of a headache for a couple years, but.
Planning ahead, like we talked about, and then hopefully I don’t get in a situation where I have, I don’t think there will be a lack of deals coming around. That’s one of the things that made me a little nervous is deal flow, but I think. I think there will be plenty of opportunities.
They seem to come up once you start networking, and that’s how I met you. I think I heard you on a podcast or, and then a couple others. And I just finally got to the point where I would email you guys and say, Hey, what’s up? I’m interested in learning about what you do and going towards that passive side.
And then honestly, everyone, I reached out to the three or four people that we’ve invested with who have all been really cool and No, it wasn’t just there’s some imaginary person on a podcast kind of thing. Have you guys done the IBC stuff infinite banking? Yeah. So I set mine up with a guardian and I did it. It’s a 50,000 policy and I already use it. I took a loan out against it shortly after and when I’m on a deal and then I repaid it whenever we had some money coming in from something else.
So yeah, I had it set up and rolling, and then I’m doing a HELOC on my primary. Cool. So what I would, how long have you been doing that? Thus far? Yeah. Four or five months. Okay. Okay. Okay. Yeah, maybe in the next year or two especially before you leave your day job, right? Because that’s what they’re insuring and enshrining or salary.
We’ll Maxwell, max up things out, try and get up to 200, 250,000 a year. So just open new policies, you mean? Yeah. Layer them on top of each other. You’re still in the beginning, so you’re getting used to what the heck 50,000 is, feels like for a year. Same thing I did when I first started, but I would just go big with that.
It’ll be so nice to have a million dollars in equity. Yeah, no, it’s it took me a little bit to wrap my head around, I’ve heard it on people talk about it and I was dumb and not doing it earlier, but yeah, now that I wrap my head around the simple interest part in the loan. Yeah.
It’s super easy and it’s pretty sweet. Yeah. I’m looking at doing one for my wife, but one question since she does not have a duty to how do they qualify income? Just federal tax. My wife’s a teacher too. So that’s the thing you get to maybe talk about offline, but technically it’s supposed to like, it’s supposed to be on like your salary, right?
So no more salary cannot do it. This is One of the common questions we get from like these hackers, they’re always trying to optimize a situation. Oh, I’m gonna get all my kids because they’re younger. Or the cost of insurance. I’m like, yeah, it’s going to be cheaper, but you can’t get Jack from it.
Because they don’t make any salary. And it’s kinda like that whole it’s like a clickbait YouTube videos oh, you can pay your kids. They don’t have to pay taxes. You can only pay them like four grand. Who cares? Who cares? If you save 20% of four grand, it’s nothing.
Yeah. Yeah. But you gotta look at the limits on there’s different auditing, but yeah. Talk to you, talk to the IBC guy that we got and then, but it gets yours first, right? And up yours to two 50 per year, then worry about your wife. But I don’t know. I argue that maybe once you fill up yours, you don’t even eat one.
Yeah. Yeah. So tell me the logic behind that. Cause I’ve expressed that to her that we didn’t really need it for her. Cause if something were to happen to her we’d be fine. You’ll be fine. You’ll be okay. Other than the pure fact that if she passed away, you would need some, have some money to, John, your sorrow and tears.
You’ll be fine. So I wouldn’t, you don’t really eat that in my opinion, unless you want that. That’d be the only reason why you’d want to put it on. Yeah. And that’s what that was. My thing only happens to me, and if people listening right now think that’s not right.
You’re missing the whole point in his infinite banking thing. It’s not for death payout or doing it for the liquidity part of this. Yeah, no, that’s true. Just to, yeah, not for that benefit. It’s just a perk. I used to sell it on it. Yeah. Whatever you gotta do, but if that’s, if you want that death payout, if something happened to her.
Get term-life on her, in my opinion, just to keep things. So I keep it simple, right? I have two policies for myself and I’m like just two log-ins and then sick to have a third one. It’s kind of a pain, and if you did two 50 for five, six years, you already have a million dollars of liquidity in there.
Shoot. Do you think you are more right? I think, and I talk about this bucket system, right? Like you’ve already filled up a few bucks. Now the next bucket is this infinite banking. Once you get like a million dollars in that thing, that’s when we start to talk about the IUL type product. And I’m sure we’ll talk in person about this and other, we have other people going down this path too, but I haven’t really figured out the feel for it. It depends on again, what your goals are, right. If all you want is two and a half million dollars. And then you want to put it in cruise control.
Cool with you. But we may have somebody in the group that wants $7 million net worth. Then they go to priest’s control. So two differences, it depends what your goals are and when you want to get off the freeway, yeah. Yeah. Yeah. I realize this very early on that, like my spouse does not care one bit about anything I do one bit.
It’s just. I like wondering what the little baby should wear. I honestly don’t care. So like amplifiers, right? What things should we get? I don’t care. I don’t mean I care, but I don’t, I’m not the person who asks, we delegate things. We’re not like one of those families.
Yeah. We’re the same way. Yeah. She handles a lot of the stuff like that. And then I handle all the bills, finances, all that fun stuff. So I thought hard about this. And I was like if I died, maybe I would have her talk to certain people like yourself. And Even if she did talk to you for an hour and talk to 20 other people that I trust, you’re not going to get it, she’s not going to get it.
That’s not her thing. She’s not like that. So how do we set her up? So she doesn’t fail. And to me, there’s no way that they’re going to be able to decide, oh, should I go a hundred grand into this deal with this person? It seems simple because we live and breathe it. But for somebody coming in and coal, it’s very difficult and we have some people in the group.
They have no background in real estate investing and they don’t need to, but they need to have at least the interests, which is what makes them start to learn. But if you have no interests, then that’s what the IUL products are for. Yeah. And that goes back to rental properties. What am I going to do with those?
When I’m 70 years old and have to say, I never went down this passive role path and I have a hundred Reynolds and then something happens to me. You have two older ones. If my kids have no interest in it, they’re just wasting away. And then, yeah, that’s the worst. Whereas what you’re talking about, she doesn’t have to deal with that stress.
It’s a login to life policy, whatever, everything’s taken care of. I think she has an interest in real estate. She likes seeing, but she has no idea. And whenever I tell her, Hey, we’re going to go in on this deal. And Alabama, she’s oh, cool. That’s it. Yeah. That’s all.
So she probably doesn’t have an interest in it. She just, I want to make it easier for her and not set up something that’s complicated to unravel and do down the road whenever either something happens or we just don’t want to do it. Yeah. Yeah. But to get it to that point, you make less yield when you get it to that IUL point.
So you have to squeeze it to get to that number. You get there. But, going back to the IBC is one cool thing. I realized I never realized whenever I hear people talk about this two 50, $250,000 policy, a hundred thousand that, you can pay that in a rears on your rider, you can catch up, which is what really sold me on it.
After talking to the person who sent mine. It yeah. Cause you, you freak out, right? Because you’re like, oh shit. What if I can’t make my two 15’s? Yeah. But yeah, some of them are, yeah. Some of them are more flexible than others. That’s why I like this guardian one because it’s one year off, you can skip a year in a way.
Yeah. Yeah. That’s what I like. That’s why at first I was like, I’m going to do 15,000, 20,000, that’s safe. But then I was talking to some others in the group. Yeah. It wasn’t like they were selling me on it. They just told me what they’re doing and why it made a lot of sense.
And it depends who you are if you’re just a salary guy, then it’s one thing. But if you’re a salary guy plus performance bonus or your business entrepreneur then it’s a different thing. For those people, I would say go with the bigger one because you’re going to right size it up into it.
You set a goal and you’re going to hit it. Yeah other than that, man, things are going good. IBCs, they’re getting out of the mentality that I need to retire by accumulating 50 rental properties and dealing with C class tenants all over the place. Changing the mindset of going more towards lifestyle than just hustle. Yeah, we wrapped it up here. If you guys liked this and you guys want to do a free call.
You gotta put you on YouTube land and the podcast. I don’t know, maybe you guys like that, but let me know where I was looking for some folks. Cause it seems like you guys like these types of things, cause there’s always, you see the path based on net worth where people are in a journey and you know this is a step ahead of you. But yeah thanks for listening guys. Check out the website. We have all these guides. I think the one that would pertain to this would be simplepassivecashflow.com/banking for the IBC stuff, and then simplepassivecashflow.com/syndication for the syndication stuff. Okay guys, we’ll see you guys next time. Thanks Lane.