What’s up simple pass cash flow! Now, today we have yet another coaching call since you guys love this. And apparently some of you guys like to pick up these free calls. I also put this all in our member site, which you guys can get free access at simplepassivecashflow.com/club. You’ve gotta go into the portal, but we arrange all these coaching calls.
And I’ve, I haven’t looked at it lately, but I’m pretty sure we have at least two or three dozen of all these calls all conveniently arranged by net worth. Eric’s call today. He’s about a million dollars in net worth. And say if you’re a million and a half, you scroll it down to there, you skip over all the broken guys, non accredited guys, and you go right there and you see what’s happening.
There’s calls that are guys, being doing two and 5 million and even plus. I’ve always said that this financial independence journey it’s, you’re not no special snowflake. And this is why I’ve developed the ability to read people and read their personal financial sheets kind of point people.
Down this path. And it’s nothing that hard. That’s why we call it simple, passive, casual.com. But the hardest part is the people. And if we are about filled up with this Napa tour and depending on when this goes out, I don’t know if we are, but if you are still interested in jumping on that, Napa valley tour or drink a bunch of wine.
You interact with a bunch of credit investors. Go to simple passive cash flow.com/napa. The next event that will be the week after in Huntsville, Alabama, October 6th and seventh, and that is going to be a party. Thursday evening, the sixth, and then the next day Friday, we’re gonna start, probably start around 10:00 AM and drive through all the assets and try and walk through as many apartments that we own in Huntsville.
What we can, and we will wanna do is give you guys a lot of data points. See what different locations are, different asset classes. We’ve got a bunch of C class apartments. We’ve even got some B plus stuff there too. And then of course, the class apartments that we’ve built there at Chase Creek apartments, which is the party on Thursday.
But check out you guys can sign up for that. Just go to simple passive cash flow.com/events. That’s the living page. For all our in person events and also check out the January, 2023 annual retreat. We’ve got the page up. The itinerary is still in flux as I always use the month of October, November to pull my inner inner circle.
What did we wanna be talking about that year? And the truth is I don’t really put a huge amount of effort into the itinerary. What I definitely don’t have is a bunch of bring in a bunch of stupid speakers that are just trying to sell their product and fake gurus. I don’t do that.
And the reason why I don’t do that is because we have the most high quality group of people coming to you guys. And when you have that, we just put the table topics out there. We put you guys on, round tables of six and eight and you guys interact and build relationships. And that’s what it is about being a passive investor.
Do you guys want to get involved in this and be new to the group? The first step is signing up for the club at simplepassivecashflow.com/club. There you’re gonna get access to all these coaching calls that we have here. It’s gonna be organized by net worth. That’s one of the many pieces of content in that inner circle portal. Again, go to simplepassivecashflow.com/club, and we will see you at one of the events. Enjoy the show.
Hey, simple past six Castro listeners today, we have a coaching call. I know you guys really like these things cause you go to work and you are sitting there and you’re like, Hey, this guy, Eric, he’s just like me or he’s just a little bit behind me. And he’s just looking for me. The truth is that y’all are driving in your Teslas.
You are not special people. They’re all just, there’s only seven different profiles. I don’t know if it’s really seven, but we’re all the same, right? Work hard. We study hard, we go get a job and work at the job for 40-50 years, all of this normal financial planning type of stuff. But then we break off and do this alternative investing.
And we’re going to meet Eric today. Who’s volunteered to tell a little bit about his story and then hopefully it’s useful to you. Maybe there’s something, some goals that are aligned and next steps moving forward. Eric, why don’t you paint a picture for folks, a little, some of those about yourself and yeah, we’ll get through this.
Cool, cool. Thanks for having me. So I’m just a regular old guy, a small business operator entrepreneur. I have a wife and three little kids and I just moved from San Diego to Pennsylvania. I have been an entrepreneur starting service-based businesses. And about four years ago I left and created a digital marketing agency to serve my niche that I’d been operating in.
And I thought that actually through COVID I got introduced to a couple of people that were into real estate and I had some free time cause I couldn’t do anything in COVID. So he started playing golf with a couple of real estate investors. And they put me on too. That world and it altered what I was interested in professionally and personally earlier.
Yeah. Success leaves clues, if these guys golf, whenever they want in this real estate thing, it’s time to start Googling. Huh? That’s exactly right. Your spouse works or is interesting that you’d ask. We used to work together. We’d actually started a couple of companies together, but with each kid she started to work a little bit less.
So now she doesn’t. Okay. What is, this is actually a great question because I want to make her a real estate professional, right? So this is her earning potential a lot more or very similar to yours. I would say it’s comparable in terms of how she could start something and we could start something together.
She’s not like in a trade; she’s a licensed professional, a doctor, and a lawyer , where she’d got to get a W2 gig for 250 K. But she’s hardworking and smart, so we can start something. And both of you guys are untraditional in terms of income generation, your small business owners, not just working stiffs at a date at a W2, maybe.
Yeah. To be honest, I pulled her into the entrepreneurial world. She probably would have been her risk profile is not that of, entrepreneur necessarily. She had been running, she’d been a teacher and then moved on to other kind of organizational kind of jobs running programming stuff.
Okay we’ll get back to that real estate professional thing at the end here, but just to paint a picture, if you guys are checking this out in the podcast, make sure you go to the YouTube channel where we have the entire financial sheet up. So we’re looking at this, but we’ll paint the picture for the podcast listeners, but we are approximately worth of over a one minute.
It’s in the bottom of that summary. It’s around it’s if you scroll up there is the edit and then put the label there it’s 9 66, 19 62. So essentially close enough for government work, $1 million net worth. And then approximately how old are you guys? I’m a couple of years shy of 40 and my wife’s a couple over.
All right. So how about we. Paint the picture. What do you have now? Cause you haven’t really made too many changes, right? The mindset has shifted maybe take us through like you start Googling stuff to continue that story. So the guy was golfing, it does does seconds and is in the note world kind of that seems pretty far out there for me.
Buying distressed seconds seemed like not the first best move for me, although it’s interesting. But basically he put me on a ton of books and eventually the Googling led me to you. And really the whole idea that he was pitching was don’t ever sell the homes, just move on and keep them and rent them out and so I drank the Kool-Aid. There, as I understand, everybody needs to get their first door before they become, fully drink this syndication Kool-Aid.
So I, we moved out of our San Diego house, like con turned it into a rental and it cash flows nicely and they’re paying down the mortgage for us, which is great. Because of the jump in home prices I with COVID, I kinda, I’m getting to the $500,000 tax-free threshold sooner than I thought I would, even a year ago. So we bought it at 7 25 and lived in it for the last five years and we just moved out six months ago and I’m getting close.
And it, that was my whole idea. I was like, at the very least I’ll hold onto it for three more years and I could sell it then and not pay taxes and all of those gains. So I was really excited about that once I discovered that. So that’s the reason why we held onto it. So you bought it for 700.
What is it worth today? 1.2 and change. I think you might want to double check with a CPA on that. I don’t, like I tell everybody I’m not a CPA, I’m not giving a tax legal advice, but I think it’s as long as you live in the past two, out of five years. Exactly. So I was thinking and I’ve just spoke with my CPA about this.
He’s yeah, you that’s. But, so if you’ve lived in it for two of the last five years, so I could sell it, two and a half years from now, and I would meet that. Yeah. And you think we probably had this conversation last time or the San Diego rental it’s cash flowing, but that’s what the, the new say, right?
Like what you really need to be looking at is. What about six, $700,000 debt equity and this thing making Jack, exactly. So this is exactly what you told me last time. We haven’t changed those people in the past. No. I have a look if you go back to the summary tab though for basically one of the things that had changed.
Cause I’d I was just about to sell my house just about to move and buy the house that I moved to when we spoke. So you messed me up. I went back to my wife, I think maybe your final eh, are you sure man? And I’m like, yeah man, no. I saw the light lane. I understood that your point was there’s equity being wasted in this environment for me now, for the next while I hold onto the house.
So I got the home equity line of credit against that equity. So I have 140 K in a line of credit. I haven’t moved it because I only got a month ago. And so that’s currently undeployed and it’s better than it sitting in the house, but so that’s one of the things I’m figuring out what to do with that.
Cause I got this crazy what an intro of promo promotional rate of 0.9% for the first time. On that one 40, so I’ve got the house, that’s the rental. So I’ve got equity sitting there about five and a half, 500, 5 50 of equity sitting there. I can pull one 40 out and deploy it, perhaps in a syndication Brabson notes and their hips in crypto, whatever the banana, whatever is going to work for the next two, three years.
Did you, do you have any other, like non-equity non real estate equity, non retirement funds that you can deploy first? Because that’s usually the order it’s like investor cash. Then you either go after your rates, your retirement accounts or your equity in your rent, social circle. Yeah. I I’ve got 20 grand, that’s a throne I’ve been playing with crypto.
But other than that, There’s no like side reserves that isn’t deployed elsewhere, to, to buy the second house. They pulled everything out. Got it. And because you’re a small business owner, I’ll just always ask such question. Do you need like cash reserves, dry powder? Are you in very capital intensive lineup?
Th this is the beauty of digital marketing. I have an 80% margin on the software I sell. I’m a really lean in terms of business expenses. So I basically, the business exists for me to pull money out in the best tax advantage ways. Perfect. Essentially, you’re a salesman for somebody else’s product.
It’s a combination of, I sell the right software to the whatever client, and then I stick around as a consultant to make sure that they use it to the best of their ability and so suits their needs. And that way I can go hide and they keep paying me that a subscription fee, like an annuity. And I check in on once a year.
Yeah. It’s simple. Passive cash flow. That’s basically it’s basically. Yeah. Except I’m selling somebody else’s doors. Some folks just going to their day job, checking in, checking a few emails, just sitting there, listening to Spotify, whatever you guys do, but okay. So like it’s not like you have to dump money into paid advertising or you got staff really you don’t need much of an emergency savings account.
And I say that because I always like, am surprised, like some people who have just normal jobs for the like secure jobs too. And they’re like, I need six months of expenses. It’s relax, man. First of all, you’re not going to like wine and dine and live like how you are if you lost your job. So your expenses are gonna go like the path to a third of what it is.
And secondly, you’re going to find a job, man. If you guys make it more than a hundred grand a year, there’s a job market out there. It just got to dust off the resume. Get out there. Yeah. This might sound naive, but I’ve always made my own jobs, not got them. So I’m not so worried about having, this war chest of cash in case of yeah.
Yeah. It just, most people, they have salaries, where they’re like that T-Rex to get fit, fed a goat on a street, it can be scary. If you’re holding onto the side of the pool with that paycheck, that steady paycheck, it can be very scary to think that if you lost that job, literally out on your own, we’re a lot of business owners such as yourself.
You’re like, yeah. Did that every day. Yeah. This is the first, I think when I, the first time I started out by myself, somebody told me that you’re now living in an eat what you kill environment and that’s terrifying, but also really. Yeah, because some people getting off subject a little bit you know what I’ve always thought is like, there’s a lot of incredibly smart people with high paying jobs and salaries that are still holding onto the side of the pool and still being spoon fed Raca lambs on the string.
If they would jump into your world and start to hunt their own food data, actually be pretty damn good at it, but they just never get the chance to test out their skills. Yeah. This is there’s a, there’s actually a group of 40 to 60 year olds that are low key resentful about the entrepreneurship wave that has fallen in the last 20 years because prior to Kevin kids in college, they would have loved to join the startup and been a Gary V Devonte and been part of that culture.
But they miss the social window. Yeah. Once you have kids, as over give them everything, man, and I’m just kidding. They’re great on, and they’re great. They’re great in itself, but yeah, for venturing out on your own and seeing how far you get it it’s different. If you don’t, the thing is you don’t really need to make that much money.
If you follow the simple passive cashflow system, really. There’s really no reason to make more than two 50 a year. Also this is actually why I came back. I answered the call to that kind of coaching call the email that you sent out because my, the industries that I serve from my business have bounced back after COVID.
I’m having a benchmark year. So 20, 22 will be great for me. So I’m anticipating a 20, 22 tax return where I’m going to have business profit beyond what I’ve had previously. So I’m starting to get more interested in, how can I map out losses over the next 10 years? And yeah, this is for everybody, right?
If you have a lot of income, you got a big inheritance or you’re broke and you lost your job that’s for everybody. So yeah, let’s so let’s dig into here. What is your plan to do with the money from, I guess it’ll probably be come from that rental, right? When you take tap the hilar a little bit, what’s your first move and let’s talk about it.
So one of the things I want to save, I’m going to reserve 50 for a syndication, I think, for Sunbelt apartment. And the only question is if I can basically map out selling the rental in two years and having those untaxed gains cover pay at payback, the hilar, obviously, and then redeploy those gains.
So I can get into this three to five year cycle of, the buying and selling of the apartments. Yeah. Did you ever look into doing the little rental properties, the turn keys, that type of stuff, just to dip your toe in and learn that. It’s cool that you have a rental property in San Diego.
Now you have a property management property manager running that for you. I have some no. I have a neighbor who’s a really smart woman that stopped working as her kids. Her kids took our time. And so she’s basically across the street property manager.
So I manage the relationship with the tenants, she’s there to go inspect the light bulb if I need it. Got it. Cool. Learning a lot, to the exterior. Running tenants checks through through the Zillow application medical, there’s one, one rental. I’m like how hard could this be?
And it was like too easy to be honest. Yeah. It’s not rocket science, you don’t need to be a big ingenious. If anything, I had Zillow applicants showing their credit profiles and tax records and I was like, oh my gosh, these people make so much more money than me.
And they want to rent my house. No, no kidding. I obviously can’t really disclose, but I had a doctor that was like, he was, he paid more in taxes than my, my AGI or my pre-tax income. It was like it was insane, but that was also the timing of, COVID and kind of housing and migration being all crazy.
So I know it’s not going to last forever the months where things, bigger things break and it’s a downer, you’ve had that. Yeah. It’s like the day he moved in the garage door, the rent. And I knew it was going to happen and I had the vendor lined up and I’ve got all my vendors and expenses tracked my in my I have a whole air table base for the rental.
But so it’s not like I don’t get excited when he texts me, I wake up to a text and he’s by the way, the ice machine is making a noise. It’s I don’t, it’s a nice place. It’s not like a, it’s not like a shabby. It’s actually harder. I think sometimes it worked with those class, a tenants, then the class BS and CS different set of problems.
Those are more like, Hey, I don’t have the money. Now he was trying to negotiate. Can you get it 10 days? And you get into 14 days, when can you get it to us? W with my tenant, it has been totally the class, a problems of Hey the roller on the blinds is broken. Do you think you can get the handyman to come fix it?
And I’m like, oh my gosh, did you try putting it back together with the clips that probably fell off? It’s then again, he’s I’m paying you so much money a month on this rental. Can you just fix it, man, a bit bitter class, a tenants I’m learning have their own set of issues.
But so I’m not and I know I’m a builder, not a worrier, like I’m way better at creating things than keeping being worried about them. I don’t, I’m probably not good enough at losing sleep about what’s going on in San Diego. And I just eh, it’s fine. And it’s great until there’s a problem.
Yeah. Your time as a small business owner is to spend your time on making more money than just screw. like gating class eight tenants or I’m prospecting. Not checking on him. So you’re going into syndications. Any questions that pop up there that you’ve have, or so what the big, the thing that I find that nobody really wants to talk to me about, I called my accountant and the bookkeeper and like my business people the nobody’s really in this world, it’s like how to map out losses that you can take loss, suspended losses when to, basically like this.
I want my a 10 year view. I like a little, like an extended proforma of okay, I’m gonna put 50 into a real estate investment every three years, every two years, and spread out the losses and offset them. There isn’t really a good. Person, like all the tax people are like, don’t talk to somebody else about that.
And all the real estate people are like, talk to your tax first. Yeah. Let’s go through that. Right now. Like I think the problem is if they’re smart, they stay away from this stuff, like a 10 foot bowl and they don’t know what kind of deals you’re going into. They don’t know what the leverage they don’t know like the cost segregation, they don’t know any of this type of stuff.
So for their point of view makes total sense why they would run away from it. And plus they’re broke. They don’t have money in these deals in the first place. So how are you going to ask them? There’s just it’s like talking to the massive scientists about like Saturn or Mars, like dude, have you ever been there?
That, it’s just in our textbooks. I don’t know. I’m the telescope guy. Yeah. Yeah. I might be wrong there, but okay. Let’s make this a let’s call it twenty twenty two, twenty twenty three, twenty twenty four, twenty five twenty six. And let’s just say you let’s just say you dumped a hundred grand into a deal and for art, for there’s people are gonna say it’s just big ranges.
Well based online experience of what I’ve seen in a stabilize, an older property, 30, 40 years old with a prudent, almost maxed out leverage because that’s a big thing, right? Because it’s your equity, with a hundred thousand dollar investment, then maybe you might see 50 grand back as versus a year losses because what this is coming out.
Is let’s just say UN, this is actually a good strategy for some folks that live in high price areas that have a lot of money to blow. Let’s just say you bought a $3 million house in San Diego. Okay. And out of that, it’s broken up by the land portion, which you cannot deduct and the improvement, the portion, which is the house.
So the, you can deduct the, not the land, but the improvement portion. And I’m just gonna use, I think the land is worth maybe two thirds of these high price areas like California in Texas and Alabama. It’s flip-flop right. Two thirds is improvement. One third is the land. I just asked my San Diego, my accountant button, San Diego, he said 25%.
So I asked him how much I could write off of the house for, I asked him if I need to do cost segregation, because I know I’m only going to sell the house in the next three years. Is it worth it? Yeah. It was like, no, cause you can only take 25 grand. So you’re going to be beyond that no matter what.
But he said it was 25% was the land. Okay. Let’s do a third. Yeah. So you can take with current bonus depreciation laws that are supposedly phasing away, 20 22, 23, 24. So 2024 is still pretty damn good. In my opinion, you can take up to a third of this number in the first year. So 33 grand.
And this is just on like your house, right? This is one little example. I would imagine the next year it might be like conservative speaking. It’d be like 50 to a hundred every year for the next circle on here would be the way I’ve seen it happen on that one house. If you were to do. But getting back to this indications.
Again, I’ve seen deals. If you put in a hundred grand, I’ve seen them come back with a hundred grand plus of losses because maybe you have high our leverage. I don’t know. Just more backs. There’s so many, there’s four or five different KPIs. What time of year you do the cost day that the aggressive enough of the cost, their breasted necessarily the CPA, very many different ways.
I would think you might see, 10,000 of the losses year till whenever, but then you would sell, let’s just say you sell the acid in 20, 27. On your a hundred thousand dollars, maybe you may 50 grand on that money, right? Yeah. I don’t think it’s that rate of return that you made $50,000 of capital gains.
Plus you gotta pay back all this stuff. Okay, so you got, you’re going to hit get hit with this taxable gain. Okay. But those you’re saying that’s that row there of the 50, I thought that was last year you’re saying, yeah, these are a lot, these are losses. But when you sell the asset, you exit the asset, you got to do depreciation recapture.
Oh, you gotta recapture that. Yeah. So that’s thinking all this green stuff and paying it back again. So getting stuck with a bill in 20, 27 is what I want to avoid. But that’s how it works if you’re looking at the world by optically, but what’s really going to happen is this, you’re probably going to go into a bunch of deals.
I would assume that maybe the first several years you do that. So if I had a hundred, but even if it’s just 50, if it’s 50 a year, let’s use hundreds, it’s easy and you’re a baller now you’re credit.
So let’s just say you, every year you did a couple of deals, right? And this particular year in your 2027, you have to pay this back. But look at all the losses you got in the meantime, you have this plus this plus this plus this, your banker on the half, a billion dollars past losses. So how did the, and these interact just perfectly with the sale, but th the timing of like for you and in simple passive cashflow, are you lining up the sale?
Thinking about the deals that are going to be in this sort of wave behind it to offset? No I could care less. What’s happening with your individual investors? What’s going on, then this is your job. Like every deal is a different venture, right? Whatever is on your personal taxes, that’s your job, my friend.
That’s the part that scares me though. Walk me through this. What is scary? What is the concern? Th the sort of the lack of control and the timing like first of all, dude, you made a lot of money here. You gotta pay taxes on it, period, but here’s, what’s going to happen, right?
Like when this thing dumps, you gotta pay back the capital gains, the patient should capture, which also you have to do any. With real estate, you’re able to compile these losses to offset this completely. Yeah. And here’s the cool part. What are you going to do after this deal dumps out? You’re probably going to go into war, but more with $150,000.
And then, this is going to be 75. Yeah. It like, it just gets better. So what did I say? This I’m like, here’s the total of passive activity losses, that you’re accumulating. Would we say around four 50 here in this year, maybe it drops down to 300, right? Because you had this happen.
No, but because you’re getting this big, you’re jumping into the fun house again. You’re getting even more that you began with in a way, because you’re going into kind of two deals with this money. See, this is the epiphany. I think a lot of people get that. You’re having boss being now where you’re like, oh, I never really come back to her.
It just keeps getting bigger and bigger and bigger. I can oddly do this till I die. If they don’t change the depreciation tax laws. Of course, that’s always a risk. But look what you did. You delayed all these taxes for at least several years. That’s a lot better than what most people do it.
That’s why your friends, even though they’re doing notes, which I don’t think is a great investment strategy for taxes. That’s why they’re at the golf course. Yeah. But so when and how does this end does it. You can keep doing this for a long time. It ends when you define it to end, like when we get to end game strategy, it’s call it, so I defined that as four to $5 million net worth. So you can just stop putting your money into value, add real estate projects, just put it in the normal crap that everybody else does at one to 5%, that’s that’s one option. Got it. So this is the, you gotta feed the beast, but then you got, I think that’s the sort of and I go out into chaos willingly like this.
So this is why I’m here hearing. This is exciting to me. You see this is that leap, right? I think this is Tiffany right here. This whole thing about you got to pay back the texts, but Hey, I did beat the boy that money and I got more passive losses to add to my. So you’re never actually paying, right?
Like you’re giving at the end of that first deal, I gave you 50, you’re giving me back one 40. But now I owe taxes on that one 40 on that one 40, but the gains only the gains only 40. Oh yeah. On this, in a scenario, I would say the gains probably are a lot higher than any allergy.
The cash right on, I’m going to have to say I’m paying taxes on this 40. And so not if you were somebody who just, I just invested in one deal and I watched her for five years. Yes you are. Correct. But I don’t know what the heck does that you had going on. You’re going to go on the multiple deals, stockpile, this passive activity, and so you want to suspend, you want to suspend because you can suspend that. Let’s just say you didn’t do a deal until 20, 24 or like we delayed it. You can suspend that passive activity loss and save it. Correct. Suspended. It’s you’re about my age. You don’t really walk though. Like chocolate bar up in the sky, suspended up in there.
You don’t have to eat it yet. It just stays there until you need it until this happened. You need it. But then you’d load that into another deal or two deals and you ended up with even more suspended chocolate bars. Yeah. Yeah. I totally get this conceptually, but because it’s new. And I can’t answer the questions for my wife about what’s going to happen in the future.
I’ll just say like maybe this will help. Here’s an example that I had, like I bought, I think I bought these in 2015, 2006 okay. So I bought a bunch of rental properties a long time ago, 2015. And I sold them, I think in 2017 or 18. And I had a $200,000 capital gain plus depreciation recapture.
So this is, I was like, oh shoot, I have to pay that. When you say capital gain plus depreciation recapture, that means you’re paying that 50 that you put in there. So you said you had 200. Gains and 50 K of recapture that you have to cover up in terms of your taxes. I don’t remember how, what was the breakdown between, but it doesn’t matter.
I had a $200,000 capital gain depreciation recapture. Okay. So two things I might’ve made a hundred grand and I recapture one 50 to get two 50. Let’s just call it that. But I had, because I was doing all this type of stuff. So the years prior, I think by the time it’s 2017, 18, I had maybe about $400,000 of passive activity losses built up.
Let’s just call it four 50. So what did I do? I use this, I took the suspended passive losses and he used to offset the passive income to appreciate recapture. I didn’t pay any taxes that you’re on any of that type of stuff. But then I took all this. And I just went ham and went into art deals. And then, so this went down. I don’t exactly, this has all happened, but conceptionally, that’s a robot. I’m not a tax guy. This is where you’re going to have to go to your tax and have these educated conversations with that’s your job. People think that I’m giving tax advice here. This is infotainment.
Yeah, exactly. So four 50 minus two 50 is what? 200. They went down to 200, I get a little afraid when it gets that first year that, that lower high, that low. Yeah. But then I went into more deals and I’m back up on back, how do people track this though? I think the form is your 82, 84. A lot of this information is on simple, passive cashflow.com/tax.
The guy, the master guide that we have with all this stuff, that age 84 form that’s Chicky, because a lot of CPAs don’t like to give that to you because they know you’re shopping for a new CPA. There’s a lot of the backpack relations, not on the page, but in the software that you won’t have. Yes. This is why you have to know it ahead of you.
You have to know it for yeah. And this is why we have the K one tracker sheet to keep track of all this type of stuff. Like how much passive losses do I have this year? Did I get the previous years? So you and your head can be, plus, or minus 20, 30% at least, and follow it and say, Hey, Mr. CPA, where did you put this big 400 grand of passive losses?
I think I should have you didn’t burn it up. Did you, or maybe you should have, my, my CPA, he drives my income down to the. Even though I’m maybe you should keep some of this stuff, for some of these deals to exit, but his argument was like you’re probably better off.
You can make more money in the two years of not paying taxes on it. And we’ll just worry about that day when it comes. You only live once. This is but this is the contradiction with these two. This is like the re your relationship with the future in the sort of in this formulas has to be so open because yeah, you’re banking that you’re going to have more cash to keep this game going and that, but it’s not a game.
You’re going to have to pay taxes anyway. You’re just delaying it a little bit. Worst case scenario, you gotta pay your taxes, but in theory, you could keep this going for a, to do your DVD on time. Yeah. That’s the. Like people will do land conservation easements, even though it’s like a red flag type of thing.
And a lot of people do it and it works. But even if it doesn’t work and it gets audited and it gets audited every time, even if they say, no, this is totally negated, you don’t get any of that. At least you didn’t pay the taxes for that period of time. And at least they, they wouldn’t really, at least what, my, my context tell me is they’re not gonna lower the evaluation all the way down to zero.
Like you get no benefit to it. Yeah. Yeah. And at worst it’s a free loan until you have to pay back. Yeah. It’s not that hard. I think that’s Toronto trying to, de-mystify just a bunch of colors on a spreadsheet. You get a plus or minus 20% on each deal. You know what I mean? I think what’s the hard thing is it’s conceptual right now, but once you get into it gets a lot easier and you understand that it’s, you’re a smart guy.
You’ll figure this out, but the problem is most CPAs want to stay the heck away from this type of stuff. Cause it’s a guessing game. It’s just like me in the engineering world. So I drove me crazy. I’m like, ha how tall is the retaining wall going to be? It’s I don’t know. It could be five miles off.
Dude, you’ve been doing this for so long. You should know is it going to be 12 feet or 14 feet, man? I have a little cost assessment thing here. Like these guys, in their defense, they don’t do this stuff. You’re that weird person doing this type of stuff that likely they have no clue how to do this it’s they don’t have any of that past experience, the type of accountant or person that does specialize in this stuff just as not a lazy.
Maybe this comes off bad, but like typically the older ones they’re set in their ways. They have a lazy client base that are used to do it the way that CPU wants it to go just the easy way. And they’re a placated audience where you’re not wanting to go. I would say 95% of the people that come through our doors, they got to change our CPA.
Yeah. I had to shop around starting the business. I had the shop around to find somebody that wasn’t like an IRS foot soldier that was just terrified of, the tax laws that are supposed to work for me. Yeah. Yeah. You know how it goes, mean referrals. Referrals is always the big thing here, but there’s no word I’m missing out on.
It’s oh, a real estate CPA, because that’s not a thing. Real, estate’s kind of pretty general. I think a lot of them will do it. It’s just what I would do is I would have conversations like this and it’s like you’re playing stump the chump. Cause you know what the answer is that you’re trying to see if they can logically have played, intellectual jiu-jitsu with you as you go through this.
This is a, that’s like an SNL skit called stump. The CPA chump. Yeah. Yeah. The good ones will be like, man, I’m like three years of retirement. Eric just leave me alone.
I’m not your guy, yeah. Okay. So this is one piece of the puzzle. I have another problem. Okay. Okay. Let’s yeah, let’s go back to your goals here. Hopefully that was useful. That was super helpful. Cause that’s I’m trying to formulate a plan and my second goal that on the sheet.
So I established the trust to start now that I’m worth something. I have to keep it organized and protected. Yeah, that’s good. That’s good. Like again, public service announcement for everybody, you have wills, those things, just go through probate. Don’t do that guys get a living trust. It doesn’t cost very much a thousand, a few thousand dollars.
It’s not for asset protection. It’s just in case you die, your money’s not in boat for your survivors and it doesn’t go through probate and get aired out in front of everybody. So that’s good. You got that done. Okay. I actually, I had the privilege and benefit of I did some things that were on my last five and 10 year plan with my wife.
So we’re like, great. But then for awhile we’ve been aimless and I need a new ten-year plan that will get me out of as much as I love working and doing the sort of work that I’m doing. I don’t want to have to do it. I want to play golf with my real estate guy. My note investor, friends. I don’t, I would say just a different idea.
Maybe it’s just this personality difference, but I’m like, just get moving down the road with this stuff a little bit, get going here and then make another five-year ten-year plan. Just right now, for now the big thing, like the rental property, right? When you put your San Diego property into service, you didn’t know what was going to happen.
You, you haven’t been in a syndication deal. You haven’t, you don’t know what’s going to happen. So just get into one right before you make this elaborate plan that the secret of syndications is just working with honest people that will steal your money. That’s the biggest. That’s a pretty big question, mark.
And especially when 25, 50, 75, K’s the buy-in out of my million net worth. That’s a, it’s a one 10 bed. Sometimes it’s co it’s like a rollercoaster. Get on, man. It’s going to work. You have a lot of fun, do your due diligence because you could die.
That’s good right now. I guess what I’m seeing you as, or what I’m hearing is right? Like you’ve never been at Disney night, never been on any freaking roller coaster making plans of doing this. And I’m like, no, man, just get on one roller coaster. You may not even like it. You may craft yourself and be like, I’m just going to go and eat.
Nodding at Disney Instagram channel the whole day. Like just get one. Who knows? You may really like it. You may not like it too much. We don’t know. Just do one. Alright. Before you you waste all your time and then all the Disney fast festival lightning lanes are all gone, right?
Essentially. Yeah. They’re not fast. Those are all gone, man. It’s lightning lanes. Now you got to pay for it now, right? You’re right. I haven’t been there in a long. You haven’t been there a long time and you haven’t been in syndication deals and the rents have been going up all in 2021. Ain’t going to last forever.
A best time to do it was yesterday. Yeah. So before you, I mean you, right now, you’re sitting in the beginning of the park. You already bought your tickets. You’re already going to go on this ride or this thing part get in there and do something before the park closes. It’s already.
He lost a couple hours of rides make this ten-year or this full day plan. Yeah. That’s just from it’s a good analogy. What a forklift speaking, right? You’ll fall in the middle. I’m sure. The portion of this divergence I wouldn’t say I’m stifled at it, but I’m trying to balance out what’s what is my mind is also exploded with the real, the rollercoaster that is crypto.
And so I’m trying to balance and figure out, so I’ve got this one 40 that I can deploy, today. And then I’m planning out next year and I just need like a six month to 18 month deployment plan. So that I feel like I’m not totally whimsical and just writing checks at the F I hate feeling.
Yeah. You’re so again, you’re like looking at what am I going to do with my 500 grand at deployed equity? I would say break it. Out of that 500 grand off the top of your, at what percent do you want to real estate? What percent do you want in crypto? My gut was a half halves. It go find other, so the magic pill for all this at this point is you got to find, not broke guys to hang out with that are on the same little bit like a half a step above you. Instead of crazy people like me, you, the golf buddies who are like a few steps ahead because we forgotten how to get there. And we were just possibly.
But you gotta find guys half a step ahead of you that are accredited investors that are already on their first fifth, 10th deal. Yeah. See I have a couple of those guys, but they’re probably more than a step, more than a half a step ahead. They’re like, they’ve got some deals they’ve got, they were into crypto earlier.
They had it, they had more to spend earlier. Yeah. I, the stuff that I read and again, like all this stuff, like what is the best asset allocation mix for the alternative S there is not, there is no normal, but if you twisted my arm, I would probably say if your net worth is a million dollars, 5% of your net worth, I think crypto is the average.
Yeah. Average, right? As your net worth increases, goes to five to 10 million. And that number of crypto creeps up to maybe 10, 20%. But that’s typically what you will read in industry news. That’s it? That’s what Forbes will say, but I think that’s, they’re speaking out of one side of the mouth and the people that are, I know I distrust what people, public knowledge has never, public knowledge, I think they’ll say either there’ll be a hundred percent crypto or not ugly ass, like family offices larger.
They’re in that 20% range, but those are 10, $20 million plus families. Yeah. But if I’m, if I have this 500 K that I’m going to basically going to make it go to work for me, where I’m coming from and why I’m like, 90, 10 split to start there. Yeah. Is that real estate works real estate.
We’ll get you guys that two, $3 million net worth and five years easily that why screw around with more of this asymmetric risks crypto stuff at this point. Yeah, sure. You can get there in two years doing that, but you can also lose it. And then now you’re now your goal to getting to 3 million is going to take you 10 to 15.
So that’s the way I’m looking at it. Yeah, I get it. But you’re saying the 500 deployed in three years triples. So what you said no. You’re going to deploy that and deploy the other half a million on top of that at some point, too. So your goal is to, I would say if it were. The boy, the 500 grand, which is half a year net worth in the next year or two years.
But then what I would say back that up, because you’re a slow starter is what are, you can kind of sense. So figure out what your asset allocation mixes right now. So if you’re like 70 30, if you and I were to negotiate the middle 70%, the state 30% crypto, just do that calculation on the first quarter million and make that as your goal first year.
So I think that’s, 150, a hundred into real estate, 50 GS, and to crypto and there you go, get moving down the road as soon as possible. Maybe even make it a goal for the next six months. Because every day you sit by, you put all your thumbs. Let’s do the math, right? Like 500 grand. I think you could be making like, I don’t know, 50.
Per year, you’re losing out on 75 grand assignment, get into the fact that it could be tax-free 52 weeks a year, every week that you’re not doing anything, is you losing 40 $1,400? Yeah. Every day you’re just sitting every day. We don’t do anything. I can’t handle it. Let me write you a check. $200, right? Of course, make a decision, take your time.
But Hey, liquidity anxiety is happening 200 bucks, 200 bucks, 200 bucks every day. You could probably live off that. That’s liquidity anxiety. That’s the term. Yeah, I got that. Your money is not doing anything for you. And I get it like you want to, want to do due diligence, but just know in the back of your head that you are losing this money and opportunity costs.
Yeah. It’s funny though. Normally my default mode of operation is ready, shoot, aim. That’s why I know you already, you’re entrepreneur. But this is kinda, it’s been taking a while because the last time we talked was maybe a year ago and there you haven’t, you liked me cause I just tell you what I think.
Like you haven’t made that much progress. So yeah. I moved across the country. It’s yeah, you got three kids. So the first day I don’t go anywhere fast,
but the liquidity anxiety, I’ll raise my hand. I’ll take that one for sure. And I think the thing that is working against you is again, the peer group, right? Your network is your network. You don’t have the influence, the right influences around you to get you the right information for you to get the right big diligence done.
I think that’s the hard thing. And that’s what the pandemic has made things really difficult for people to move down. Yeah.
Yeah, that is a problem. And I moved away from my golf buddies. They were the richest people. I knew even worse. Luckily you, you’re not, world of the cubicle land where you get all this, invest in your 401k, do the match, all this type of stuff around you, out there on your own.
Yeah. Which is great. And I really, I, the crypto stuff I actually want to keep in I have a self-directed Ross, so I want to keep it there. So I don’t have to great idea. I didn’t, I think it’s in the original thing, but I forgot to mention that. It should be hitting any day now, but I set up a self-directed Roth with checkbook IRA.
So I can, if I deal with notes and crypto in there, I don’t have to and worry about it. Because notes, crypto doesn’t give you any good tax benefits, therefore do it in that type of stuff. That’s why I think a lot of people make that mistake where they will invest in real estate and all that stuff.
But the cash not don’t use the cash. You want to use the cash real estate so you can get the tax benefits for them. Yeah. So that’s why I’m on deploy the one 40, in the syndication, potentially before end of year. And that’d be cool too. Cause you can see that at Kate that 20, 21 K one.
I’ll start playing the game. This tax year. Yeah. Yeah. That’s a smart play, right? I think it is.
I’ve been in banking, man, you’re an over-thinker already, I would say don’t worry about this until you’ve deployed into four deals. Don’t mess around with this yet. But if you’re looking for things to do, you should, everybody should have access to the infinite bank. E-course if you guys don’t have it at home, go to simple, passive cashflow.com/banking sign up there that you get access to the member site for the free, I think two hour course, but yeah, Eric kinda hands off this, hands off the cookie jar a little bit until you go into at least a couple of deals for us.
Cause this is going to confuse you. I, just it’s one of those things and it doesn’t move. The needle is the thing. People thinks that it’s like this heaven from God, but it is cool, but you got to do your. The order is the best good deals. So you get good tax benefits. So to mitigate the taxes, then once you got your ducks in a row there, you got the low-hanging fruit there, then it’s the infinite bank stuff.
Lastly, Maxalt Roth kids. That’s a great idea. Just it’s small potatoes, man. Don’t worry about this. There’s only that’s why I put it on the back burner. I was like, yeah, this is it. Infinite banking. As much as I downplayed it, it is way more important than some silly Roth account for your kids.
Yeah. Yeah. It’s funny that’s there because it’s so in my ear with what people say is oh, your, you need your 5 29 savings for a send your kids. Yeah. When you invest in like marketable securities with no tax benefits, like that’s only stuff you could do, there is nothing tax wise.
You. But when you get into the alternatives world, boom, there’s so much more better options. Yeah. Yeah. So I don’t know. Here’s what I think, man. Like what I would suggest is like maybe both, I like to see you get like a 20, 21 K one, so you can start to see this happen for yourself. May 20, 22 comes around and you got that K one and you’re like, oh my God really is paper lot.
And I do the same thing. Like I put money into oil and gas deal. Cause it’s just textbook like, oh, you get tax minutes. Like, all right, what happens the first year, second year, third year? No, hopefully I don’t lose my money at Bullock gas. Cause there’s a lot of kind of shady people in that world, but that’s just how I do things.
I like, I don’t see it. I see it on the tax form in terms of tax benefits. Yeah, but I think after that first one, it’s going to get moving, but yeah. A quarter million dollars with a part of that in crypto, in the next six months, I think that’s a good semi aggressive plan knowing that, you’re dropping for 200 bucks every day and not doing anything.
Yeah. Yeah. Okay. I didn’t realize, I knew I had range anxiety with my electric car. I didn’t realize I had liquidity anxiety too. Yeah. You got to go see a shrink. Yeah. I used to have one of those crappy Leafs that only went 64 miles and 50 miles in the code when I was in Seattle. That was a real thing.
The real thing. Yeah. I don’t have a leaf, but I got something like that. Yeah. Probably better. Anything. And the least for beliefs or beliefs. Aren’t great. Sorry. Sorry, if you have a leaf. Yeah yeah, probably. Yeah. We have a kid and this, these people are nuts, but just to wrap up here, any other kind of questions they’re off and off or no, that’s cool. I definitely had I’m glad you named liquidity anxiety and also the piece about the, not worrying, not stressing about the Roths, because there’s so much more that you can do with the, for growth over times within.
Yeah. But before I let you go, the after you had six months to a year, you get done that you need to play the quarter million. You start to see it work a little bit. You’re getting good distribution. You’re starting to get a hang of monthly reports. You’re like, wow, this is actually legit.
Haven’t gotten my money still. And then at that point, now we start to look at unloading that San Diego property. But ideally we want to load up on what did we say? Like Capitol? No, you don’t, you’re going to filter all that. So it was good. There’ll be some, but I think my goal was I was going to, I wanted to wait to sell it for 1.3.
So next summer I think I can get that. You’re a gambler. You’re a gambler to nothing falls apart. Yeah, pending the big earthquake that my parents think has been coming for 40 years. You’re like the guy who like ever proposed us to the girlfriend for Seven years. And then, and that two years, two years should not, I think that’s the year, but then you never hear about these guys that the girl leaves them.
No. Come on. Once the house drops, all I’m saying, what if it drops then? I don’t think it’s going to drop, but I understand the, what is, yeah. I’m saying like you maxed out the 500 take it. I think that’s what I, that’s how I would play it, but you don’t know. You don’t know either way.
And then we just joking here. We don’t know either way, but to me, if you can lock in that max out that $500,000 and you make sure it’s the two out of five years, your CPA has blessed it. Everything. I would say, just take it and tap it. At that 0.2 or three years, there’s going to be equity in there.
He locked it. You can’t get up and it’s going to be to talk in a way so that I plant that seed now, because in what, one year you’re really going to need to start to pinpoint, when am I going to sell it? When am I really going to sell this? Because you got that whiny class, eight tenant in back, you got to get them out somehow gracefully.
I think, my hope it’ll just be this summer, no matter what, because I’ll, I don’t want to have to look for another tenant from across the country. Okay. Term contract will be up in the summer, great time to sell. Crazy. Parents want to move into the school district, we’ll pay.
Yeah. Just make sure you account for you’re probably going to have to put in 10 to 20 grand of rehab to make it look pretty, but, and that takes time, but yeah. There’s a way to start to think about it. So basically that I got the hilar gets deployed or some of it gets deployed this year. I have more of it to the blend extra, and then I’ll have the gains from the selling the rental, and then I’m starting the flywheel.
And so by 2024, I just need to have another a hundred, 150 saved up to keep it going. What do you mean? A hundred, 150 to save though. I just need to have a free cash. They didn’t have earnings to keep investing with the next deals to keep the machine, to feed the beast. Yeah. Yeah. You gotta keep making money, which is good because I’m a year ahead where I’ll be making a few, if you scroll down on the summary and what is, I didn’t ask you about what do you mean.
What do you average savings every year? Which kind of your F your velocity, you’re able to save 50 grand a year. It’s ebbs and flows in the years that kids are born, but yeah, around that. So if I can bump that up to a hundred by 20, 24, then I can just deploy, keep deploying. Yeah. And if you are able to deploy a hundred grand, you’re good, man.
We’ll spend time with your kids. There’s really not much more you need to do at this point. You’ve already set this feel emotion. Yeah. But you need at least five years of working and saving and deploying to be in the cycle. Not really. No, that’s not super important. It’s just more like you need to have a million dollar net worth deployed a quarter of a million or half a million, and then continually deploy.
50 a hundred grand every single year for maybe half a decade. And you’re done, you hit that escape, velocity,
escape, velocity, escape, velocity. So everybody has that monthly cashflow number that you want. I think you guys are moving to a cheaper place. So for you guys, it might be 10 grand a month, passive income. So this is the, and we’re going into the vehicle just like faster and faster.
But at some point you hit this escape velocity where your investments are getting that 10 grand a month and it will continue to grow one and I’ll face the face of inflation, but once you’ve got it that far, it’s like a spaceship going out to outer space. It hits escape, velocity, boom, breaks out a sphere.
It goes zero G that’s the analogy. Yeah. Yeah. Okay. This makes it a lot clearer. And you’re talking to me out of my crypto dreams. I would say my only advice there is my thought process, if you are like a broke guy, like under a half a million and you really had to make something out of nothing, then I would probably say, yeah, whatever a piece of crypto, you don’t have much money to work.
He just described me. But the number was different. It’s I feel like you’re not a broke guy. It’s doing all right, man. Doing all right. The fact that you’re even more valid that state of California now you’re doing better than most.
It’s not really much how much you make. It’s more what you keep and part of that is taxes too. And having a less. Lower level standard of living. Some people they spend like 20, 30, 40,000 a month in this spacious, whatever it took me like, cut, you remember the movie inception?
I’ve been like, I like totally used inception to make my wife think it was cool to drive around a car that’s fully paid off. And I paid off our Lindale, her car a couple months ago. I was just like, don’t you feel good every time you get in here? And she’s no, it’s old. Yeah. When I used to do the podcast and I actually had like guests that I stopped doing that because I found that everybody is a stupid group and they don’t really know what they’re talking about.
So I stopped doing that. But one of the questions I always asked is like, what is one thing that you once thought was an absolute truth, then you’ve backed off of I’m like absolute sometimes. But I know enough to know that there are certain things that, based on new evidence, you can always change.
That’s the disclaimer, every podcast here in a little bit, but I thought leasing your car. It was a good thing. And then I did this exotic car hacking class, and I discovered that not what you want to be doing, even if it is for business. So that’s nothing to do with it. You’re always earning it.
Open-minded like you learn these things from their peers. That’s the key critical part. Yeah. So unfortunately you double down on that whole car payment thing and thing off assets. To me, it doesn’t matter if it’s a depreciating asset or appreciating asset, it doesn’t matter. It’s all clumped together and your personal finances and your network anyway.
It’s for me, it’s more of the principle of I don’t need new crap. Keep telling yourself that if you don’t have the money, but if you got the money, you got choices by whatever you want. You did it the right way. Yeah. Yeah. I think that’s a lot of people in our group they’ve started to build that automatic viewpoint.
It’s like super frugal, right? Mr. Money, mustache. Yeah. But whatever, if that effect gets you going, that’s the character you don’t land. I don’t like going home and complaining to my wife about what she bought, but I also, I don’t know. It’s both though. It’s yeah. I’d like to be able to afford the right.
Nice thing. I also just don’t want to fill my life with possessions and like, how did that be the focus? So it’s tough to be both. But when you’re in the growth stage, Especially under a million dollars net worth, or maybe under two to $3 million. So trying to grow your net worth, these are the decisions that you’re going to have to make.
But at some point, the, you hit escape, velocity, your money works harder for you. At that point, time is more valuable than money. And at any point at all for nothing but not many people get to escape velocity or get even close to it. It’s are you saying I shouldn’t pay off my car? Yeah, you shouldn’t.
Yeah. You shouldn’t do that cause it’s like, if you can get really good car loan. No, I didn’t. I didn’t pay it off early. I just mean like we owned it for five years and the loan amortized and it is the last this is done. And now I got. I need to get a new car payment. He wants to go, wants to drive an old car.
And this isn’t my personal thing. This is a person, this is you. You only have one kid, right? Yeah. Yeah. When you have three that are eating Cheerios and puking in the back of your brand new Tesla, you’re going to want to be like, okay, this Tesla is gonna, you’re gonna dive with this Tesla kids.
I’m not getting a new anything I’ve heard. I’ve heard that too. Yeah. And I don’t know, I’m not seeing for experience on that, but yeah. My argument is like the newer cars have the better safety. So that gets you going get a new car. That’s why my wife needs a new car. Yeah. But at the end of the day, like for the money in terms of money, where you look at it, like you have all the equity in that car, just go re leverage it just like you would have had.
But, yeah, you’re not like the poster boy that paid off equity, San Diego, I say, these are like the good, like these things that you’ve kinda brainwashed yourself to thinking like, this is good, right? This got you to this point now, like a savior mentality, but it’s really not gets you to the next level.
It could be, you take, you make these decisions too, like all by yourself. This is the transition to an accredited investor, passive investor, where it’s called peer groups. Your network is your net worth having fun? Because everybody knows that one guy who’s like, when he, when we do like the pop-up events, he’s like really tight, it’s a downer.
Nobody wants to hang out with that guy. And he doesn’t build this network. He doesn’t figure out what, where to invest, where to stay away from. He just doesn’t know because he doesn’t have friends. Social relationships are the currency of the world. The sooner you picked up that once you have money, you need to loosen up and help we’ll fund. You know that’s going to step up to that next platform
that said, maybe we’ll see you in in January and the retreat coming out. Yeah most people will, they will not stay in the nice hotel. They will stay in like the smaller ones. They’re very frequently minded, but they will spend money on other things. But that’s the DNA, but the conscious movement is towards paying money on experiences, trip to Hawaii relationships.
And people bring spouses. It’s yeah, courage. Yeah. It’s encouraged. And this is the group that you want to bring up to. Not the how slipper group, the local group. Yeah. Yeah. Okay. That’s not the Tupperware party scene. No, definitely not. Yeah. That’s the group I want to go. That’s yeah, we’re actually going to do it.
I think I haven’t signed it yet, but I think we’re going to do it the four seasons. So definitely not like by scene, but my whole psychology on this is if it gets the cheapskates and myself thinking differently and a different ethos for one freaking day out of the year, and it kinda set the mood for the right people to start gets you out of your normal state, then you know, it’s worth the extra five grand the way I see it then to go to, I don’t know where we would go the barrier.
Yeah, you don’t. You want to go slumming it, holiday Inn, express or anything? We’re credit investors here. That’s good. Changing future states. It’s good. This is super helpful to talk through it with the different market trends and all your truth telling. At the same time. I’m sorry. You have to pay a wiring fee of $25. Suck it up. All right. Thanks Eric. Talk to you later. Bye. Thanks.