Investor Quarterly Letter #2 & My Journey to SPC

2018 Q4 @$5,600/Mo

Executive Summary: The market has been steady and hot. Certain key indicators have turned red like the 10 and 2-year treasury index and unemployment at near low levels of 3-3.5%. It’s still a time to invest but only if it meets sound underwriting principals. Q4 was a huge quarter for the Hui Deal Pipeline Club with several acquisitions. Many of which developed from the early summer time.

The internet has a lot of junk out there. I originally was going to write a monthly post like this however I got too ambitious with all the deals that came in at the end of the year. In fact, I am even contemplating going down to a bi-weekly podcast to concentrate on being a better partner and to lose some weight. Let me know your thoughts on this?

This long document is my investor letter and contains a lot of the articles that I have been reading over the past quarter that has influenced my outlook and investing behavior.

Check out the latest homework on all the asset classes I have been learning about lately to get outside of the apartment investing world.

We had out Sonoma Mastermind. I recorded some of the testimonials there. We had a lot of wine and great relationships were formed!

The next live Mastermind will be in LA to see Tony Robbins. As well as our mini-book club in January which will be a great example of my new group coaching format.

I am finalizing a program for investors to systematically go through the past three years of content without going crazy. As opposed to being a lame old $997 web course… it will likely be a little cheaper (if you let me know you want to be in the beta release) and more importantly, it will have bi-weekly calls! Yup group coaching! I have always been against programs that charge people $5,000 (who can’t afford it) to do simple stuff on the internet. I wanted to make a program that was less of a scam and where I could give a high level of personal involvement (which was the mission in the first place). Apply here.

I want to wish everyone a happy, healthy (as I focus to getting more in shape in 2019), and prosperous New Year. 2018 was a huge year for me and where I reached a milestone in terms of getting to Accredited status and starting to adopt more of a capital preservation mindset. And a little charity – let me know if you have any ideas in 2019. As the new CrowdfunaAloha.com motto suggests “Ohana means family, and no one invests alone. ” Our investor club has grown to over 2,600 and invested over $13 million dollars to acquire over $255 million dollars worth of real estate. Please send me referrals for new opportunities so I can use my network to vet and so I can run their numbers through my analyzer. You never know who is that next up and coming operator.

How do you see the current market?

I summarized my feelings of investing in a living article here.

As for my own portfolio (different situation than everyone else) I feel like I am in a tough place. See my current portfolio here. I know MFH the best and know all the underwriting tricks and can underwrite and verify the numbers myself. However, I am very heavy in MFH (over 80%) of everything I have which also includes my SFH assets too. I want asset class diversity but as I move out of my comfort zone (non-MFH) I cannot verify the numbers and have to relight on my network, peers, and mentors more. As a numbers guy, it makes me a little uncomfortable.

I am trying to stick to boring Class C/B deals that are stabilized today and have non-recourse and long-term debt. Although I have gone into a couple deals lately that are Class A and development I consider them unique deals with excellent risk-adjusted returns and I have mentally allocated a portion of my portfolio to higher risk higher return ventures. But we are not talking Bitcoin or start-ups!

In all deals I take a look at I try to assume 10-15% drop in rents and 10-15% increase in vacancies (assume a rocky 3-6 months as A/B class comes down to C/B class).

But again since some people only read some of my content and hear me beating the (Cashflow and Class B/C) Drum… I feel like I have a need to explain myself.

This deal north of Dallas, Texas was Class A, 2018 build which is going to cashflow sooner than a normal class B/C. Normally, I would not go into a class A deal because they don’t do as well in a recession (but I think this one is underwritten to work with 2% rent increases) and there were 13 acres of developable land not included in the pro forma.

The only reason I’m sort of going against my principles in because of the Land play and how it’s in Dallas growth. I think it’s a really good risk-adjusted return which is why I went in with <5% of my net worth. But it’s more of a higher risk higher return still on the realm of non-recourse fixed long term debt, stabilized, non Development deal. So its nothing too crazy.

The other “non-conforming” deal was an Assisted living deal development which I feel comfortable because the asset class is emerging.

Development of fancy flip homes but amateur hour flippers (who are not W2 engineer/project managers) I will not…

I don’t know what the perfect mix of asset classes but as long as you are in non-retail investments (non-Wall Street) with good people you should be fine.

Join me in the next deal and tell me what deals you are doing – here.

Random sampling of one of our deals:

Proforma Avg $734/mo
Current Avg $744/mo
New units Avg $830/mo

What is a normal IRR?

I am seeing IRRs of 13-15%. When I see deals with 16% plus that are not heavy value add (8K per unit of upgrades) I share my head. I don’t have to look at the numbers to know that they are moving cashflow early to manipulate the IRR calculations. Or smoking something or assuming something like 4% rent increases per year or not assuming a softer market with a small cap rate reversion delta.

2011-2014 was the “golden era of MFH.” LPs need to get off the idea of doubling your money in 5 years as a given… when many of those deals were done without implementing the full business plan of rehabbing most of the units and instead just getting lucky off-market appreciation.

Right now with everyone rushing into the space. Grant Cardone and others are telling people with no job, no track record, with nothing to lose to syndication large apartment building and everyone (myself including), is building up their door counts. I feel like I got into this syndication game in 2015-2016 and started learning about it the right way by actually trying to be an apartment operator myself so I see the whole game played inside and out. I try to stick to the fundamentals (sound assumptions).

After getting into a car accident gives me the opportunity to make some changes – Downgrading Transportation – https://simplepassivecashflow.com/bike/
118 – Interview with Nick Loper – Side Hustle Nation – https://simplepassivecashflow.com/118-interview-nick-loper-side-hustle-nation/
119 – Dissecting my Recent Insurance Claims with Ed Babtkis – https://simplepassivecashflow.com/119-dissecting-recent-insurance-claims-ed-babtkis/
Buying or renting? The biggest inhibitor to financial freedom? – WIth Spreadsheet to backup the numbers – *I spent $300 dollars for an editor to get the grammar and spelling right on this article. I am sick and tired of seeing young families make this mistake
121 – Investing in Coffee Farms with David Sewell – SimplePassiveCashflow.com/coffee
Networking tips page – https://simplepassivecashflow.com/networking
7/17/2018 – Ask Buck Joffrey with Lane Kawaoka
6/29/2018 – Cashflow Guys Podcast – Raising Money For Apartments
122 – Apartment Investing with Michael Blank – https://simplepassivecashflow.com/122-apartment-investing-michael-blank/
Great podcast by Ray Dalio and Tony Robbins discussing the binary economy, relationships, and some ideas I am having to build my investor team – Link
123 – Why to break-up with your Financial Planner – Interview with Brent Sutherland – https://simplepassivecashflow.com/123-break-financial-planner-interview-brent-sutherland/
Mr Money Mustache the guy who wrote the most famous financial independence blog on this podcast talking a little bit able how he structures his day. Note – I don’t really like these living cheap lifestyles cause often its a little selfish not to pay it forward and to do that you need to go big. I like nice things but I’m pretty frugal.
124 – Brian Hamrick from the Rental Property Owners Association – https://simplepassivecashflow.com/124-brian-hamrick-rental-property-owners-association/
125 – Living the FI dream abroad with Jeremy Jacobson from Go Curry Cracker – https://simplepassivecashflow.com/125-living-fi-dream-abroad-jeremy-jacobson-go-curry-cracker/
QRPs (Qualified Retirement Plans) with Damion Lupo – https://youtu.be/fsOy4VrbCrs
126 – Gino Barbaro talks Apartment Investing – https://simplepassivecashflow.com/126-gino-barbaro-talks-apartment-investing/
127 – Estate Planning and Asset Protection with Lawyer Andrew Howell – https://simplepassivecashflow.com/127-estate-planning-asset-protection-lawyer-andrew-howell/
Going from “Active-Passive” Investor to an LP in Syndications and Private Placements – https://simplepassivecashflow.com/syndication/
128 – QRPs, Solo401k the Self Directed IRA Killer with Damion Lupo – SimplePassiveCashflow.com/qrp
Tips for LPs Webinar – email me for link – only for Hui Deal Pipeline Club members
129 – Matt Theriault – Changing strategies in this market – https://simplepassivecashflow.com/129-matt-theriault-changing-strategies-market/
131 – Takeaways from FinCon18 and Side Hustle stories – SimplePassiveCashflow.com/131fincon
A cool tool to find the primary ethic group in an area – https://www.nationalgeographic.com/magazine/2018/10/diversity-race-ethnicity-united-states-america-interactive-map/
My notes of the new tax breaks on Opportunity Fund Zones – https://simplepassivecashflow.com/opportunity-fund-zone/
Fort Worth, Texas – 168-Unit Class C MFH (Oct 2018) – Pre-Acquisition Video
Huntsville, AL – 112-Unit Class C MFH (May 2018) – Pre-Acquisition Video
Huntsville, AL – Drive by of a few Quadplexes on my last trip (Oct 2018) – https://youtu.be/0u3PotmxEjc
Atlanta, GA – 114-Unit Class-C MFH – Deal update – https://youtu.be/8cp0Q-E9gJs
Birmingham, AL – Mid Rehab before selling retail – https://youtu.be/Pd3__1cZJTw
Birmingham, AL – Tour of potential apartment purchase – https://youtu.be/gmMGlZC0lR8
Birmingham, AL – Driving turnkeys and apartments – https://youtu.be/2dTzTiIhu-0
Atlanta. GA – Tour of my rental pre-rehab – https://youtu.be/Yc9KGPhqp_E
SPC133 – Veteran’s VA Loans & Other Financial Wisdom – https://youtu.be/NmUYUwQaaJk
SPC134 – Investing in Diamonds – https://youtu.be/M8Fk1rDnJT4 – article
List of SDIRAs – https://simplepassivecashflow.com/sdira/
Paying down your mortgage faster – https://simplepassivecashflow.com/mortgage/
Hacking your HSA / FSA / Flex Spending accounts – SimplePassiveCashflow.com/hsa
Cost Segregation & Bonus Depreciation – https://simplepassivecashflow.com/costseg/
Testimonials – https://youtu.be/gC0DkCmCyIE
Banking from Yourself webinar -SimplePassiveCashflow.com/bankhttp://SimplePassiveCashflow.com/bank
135 – Interview – Financial Advice from a Broke Millenial with Erin Lowry – https://simplepassivecashflow.com/135-interview-financial-advice-broke-millenial-erin-lowry/
PITA – https://simplepassivecashflow.com/pita
136 – Changes in the Residential Lending World with Graham Parham – SimplePassiveCashflow.com/ep136
A resource to dig up dirt on potential vendors/partners – https://gofishdigital.com/
I am going to be planning a wedding 1st half of 2019 so I apologize if I might seem like I am busy some of the time – http://reialoha.com/how-to-get-married-in-hawaii-on-the-cheap/
138 – Fundamentals – Crypto Currency Basics with Andy Lapointe – SimplePassiveCashflow.com/crypto101
SPC Charity – https://simplepassivecashflow.com/charity2018/
139 – Optimize liquidity with Your Opportunity Fund – SimplePassiveCashflow.com/ofund

MFH rents are up $2 in August to $1,412, up 3.1% year-over-year and 10 basis points from July. A record high for seven months in a row – Yardi Report – [How long can this increase? Not forever but it is steady expansion. New supply is coming online (300,000) new units this year. Be careful when you read these national reports cause you need to dig into the submarkets]
Renter By Necessity (3.5%) continues to outperform Lifestyle (2.4%) as new supply hinders rent growth of luxury units. [This is why you are seeing Class A rents dip in places like San Fran, Seattle, Chicago]
Economic Expansion: More Room to Run? – “At 3.9 percent, the August 2018 unemployment rate is at an 18-year low. However, it took the jobless rate, which peaked at 10 percent in October 2009, more than seven years to reach the trough of the previous cycle”
Deals Pick Up the Pace in Q2 – CPA Executive – [Graph of deal volumes]
Article on Opportunity Fund Zones – Yardi – [Could smart money dumping gains to go into Opportunity Zone Funds causing the sell-off?]
Yardi Report for September 2018
Freddie Mac Launches Workforce And Targeted Affordable Mezzanine Loans To Strengthen Housing Preservation – BizNow –“Strong candidates for the mezzanine programs have experience with affordable housing and a history of transactions with a GSE like Freddie Mac. Mezzanine borrowers are required to pledge a first-priority lien for 100% of equity interests in the senior borrower. Borrowers must also keep at least 80% of the units — including the 50% that are affordable to households making 100% area median income — over the life of the mezzanine loan. Borrowers can’t pay off the mezzanine loan to get out of affordability restrictions.”[Interesting new program which shows how the government is trying to help out the little guy] Additional article.
Apartment Market Has Bright Future at 2018’s Midpoint – MFH Housing News – Delayed marriages, an aging population looking to move out of single-family homes and increasing international immigration are some of the reasons a study from the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC) predicts soaring demand for apartments over the next decade-plus. According to the study, 4.6 million new apartment homes will need to be built by 2030 just to meet the demand, the report says.[More and more people are being forced into apartment lifestyles]
MBA: Commercial/Multifamily Originations Up in Second Quarter, on Pace With Year Ago – MBA – “Second-quarter commercial and multifamily mortgage loan originations came in 4 percent higher from a year ago and 32 percent higher than the first quarter, the Mortgage Bankers Association reported this morning.” – [Despite some volatility growth is steady]
Inside the scandal that could explode multifamily real estate – Housing Wire –[I have heard of sellers falsifying docs which is why you check rent rolls and follow up with on-site checks. In this case, it was the new buyers. I suspect this is mortgage fraud in order to get the non-recourse debt]
In this stage of the market cycle, the search is on in Tertiary markets – Forbes – [I’m seeing secondary markets as too hot at this point in the national market cycle]
Where is the growth going? – ULI – [Very insightful source from a non-biases real estate publication]
Surviving the Retail Revolution – CP Executive – [Everyone thinks Amazon is going to kill retail (I think mid-range retail like Macy’s is going away) but when everyone thinks one thing that may mean the opposite is true]
My friends in Seattle tell me all the time that the Class A rents are coming down 10-15%…
Looks like the Hedge funds are playing in the Mobile home park space – Bloomberg – [The smart money is starting to flow into MHP space]
Clear Skies for Multifamily Investors – MFH Housing News – “While these increases are starting to cause upward pressure on cap rates, apartment values have held relatively steady since tighter occupancy levels are simultaneously causing upward pressure on rental rates. “interest rates ticked up another 25 basis points in June, marking the second time this year that the Fed has raised its fed fund rate. There will likely be two more rate hikes this year, and at least two anticipated in 2019.”
Self Storage Shakeout Ahead? – CP Executive – [I have been trying to learn different asset classes and so close to jumping into a guru educational program or feeder conference just to get into the group. It’s hard to tell what is the real story but for now, I will just absorb info like a sponge]
Rising Interest Rates: The Calm Before the Storm? – MFH Housing News – The Federal Open Market Committee announced the second short-term interest rate hike this year, prompting industry professionals to give their take on the possible effects this might have on the lending process. – “There has been talk about the Fed raising rates every three months. The Fed has penciled in two more rate hikes this year—we should expect one more for sure in my opinion.” However, despite rising rates, the yield curve has flattened” [An older article but you can see the clues of what is coming ahead here]
Commercial Property Executive mid-year 2018 – [I have been reading this material (example page 24) and trying to learn about different sectors. Shopping retail is notoriously beat down by Amazon but is that the whole story??? Sounds like opportunity if you know what to look for, also look at pg 66 for self-storage]
July MFH Yardi Report – link
It is no secret that cap rate compression is upon us. But “Rents grew 2.6 percent during the first half. “Those numbers compare favorably to most years except the peak years of the cycle in 2015 and 2016,” – MBA.org
Economists predict the economy will recede by 2020 – Property Management Insider – [Who knows these are headlines just to sell articles]
Discussion on absorption in ABCD classes – https://drive.google.com/open?id=1a5eQ9DpdzC7yQgypj-HEJnYQJwk_2dF_
Latest market data – https://drive.google.com/open?id=19jOAXXt9pkgsgyeZOXtMODc4bE4SrkBx
This is why we use 1.5-2.0% increases in my of our underwriting models –
An eye on vacancy as we test rents higher
Texas, North Carolina Dominate Fastest-Growing Apartment Markets List – Real Page – [I think these articles are misinterpreted as Dallas is not where smart investors are looking anymore because it is overplayed]
At what point can we put the average consumer? – Arbor – [Rule of thumb is 33% in the previous decade]
June 2018 Yardi Report – [Hints of oversupply in next couple years]
Huntsville brings on Facebook – $750M investment is expected to yield only 100 jobs – Join us on the next deal
Has Our Government Spent $21 Trillion Of Our Money Without Telling Us? – Forbes article
Pools of SFH becoming a real asset class – Arbor Lending Cheatsheet
NY Times – Tax collections would be sufficient to pay about three-fourths of promised Social Security benefits for 75 years.
Looks like the money runs out in 2030
Trade Wars!
- Tariffs imposed on EU, Mexico, & Canada
- EU is retaliating with tariffs on US steel, agricultural, and other products
- Mexico is retaliating with a tariff on US steel and farm products
- Canada is retaliating with tariffs on US steel, aluminum, and other
- 6/22, US threatening 20% tariff on European cars
- 25% Steel, 10% Aluminum, effect will either lead to hoarding of material or less production (loss jobs in USA) Article
Trump administration adds to China trade pressure with higher tariff plan – Reuters

China Vows It Won’t Back Down After Trump’s Latest Tariff Threat – Bloomberg,

China Says It’s Ready to Retaliate on Latest U.S. Tariff Threat– Bloomberg
Dallas and Fort Worth Rents Diverge – BizNow – [The Dumb money has really started to flow into Dallas]
I don’t think rates will really rise much in 2019 – Fox News – [But then again it’s a FOX source]
REBusinessOnline: “The commercial real estate industry shouldn’t be worried about rate hikes, which are happening in baby steps,” says Dhawan. “If the cash flows on your properties are there, who cares about the rate hikes? The real thing to worry about is what happens in the interest rate market as a result of trade developments.”
Crowdfunding sites are dropping like flies because I see so many broken links on my simplepassivecashflow.com/crowdfunding directory.
Some of the top 30 U.S. metros over the next five years might be at risk of oversupply – MFH Housing News – [I keep my eye to units coming online and how it is affecting rent increases]
Time to Step Up the Value-Add Game – MFH News – [Just have to focus on forced appreciation and not just walk into value by just bumping the rents with the market]
Banks still love multifamily deals, but with pricing and rental rates hitting records numbers, they are being more selective – Source – [Where 1.25 Dept Service Coverage Ration was the standard, no longer is DSCR of 1.20 being accepted]
The similarities to the years leading up to the “Apartment Recession” of 1972 are eerie – Crowdfunder – [Although coming from a crowdfunding guy and not an operator himself – these guys don’t know the people or the operation]
Life sciences trends report [I don’t know how this relates to picking markets or deals but its really interesting]
180911 Yardi-Matrix-Monthly-Aug-2018
“Economists report that workers are starting to act like millennials on Tinder: They’re ditching jobs with nary a text” – Seattle Times – [A sign of the times. I can remember when it was 2009 sitting in my work truck at 2am in the morning but being so lucky I had a good job]
12/11/2018 Forbes – The Yield Curve Just Inverted–Sort Of–And That Is A Sell Signal For Stocks – “the spread between the 2-year and 5-year Treasury notes went negative yesterday, the first inversion of the yield curve since 2007. Why wasn’t this the top headline in the financial media? Because the 2-year/5-year spread is much less widely followed than the 2-year/10-year spread. The 10-year U.S. Treasury note is the most liquid of the Treasuries and one of the most liquid securities in all of global markets and thus it the true benchmark for interest rate traders. The 5-year Treasury lies in what is known as the “belly” of the yield curve and attracts far fewer investor dollars than the 10-year.” https://www.forbes.com/sites/jimcollins/2018/12/04/the-yield-curve-just-inverted-sort-of-and-that-is-a-sell-signal-for-stocks/#a6ca4db3eaae
[I do believe that real estate will go down because of consumer instability. But if you have stocks you should sell those before even thinking of lumping it into cashflow type rental real estate.]
ITR Experts Say: Actionable Advice for the 2019 Economic Slowdown – ITR – “Be judicious with your capital; conduct a cash-flow assessment plan for proper allocation during the upcoming period of slowing business expansion and weaker topline growth. Continue to focus on talent development but include some redundancy and cross-training initiatives to protect your company in the event that the slowdown becomes a full-blown recession.” [Don’t underwrite any MFH over 2.5% rent increases per year and be prepared to just cashflow a property long term]
The National Association of Home Builders Housing Market Index monthly reading, an effective measure of home-builder sentiment, was down 13.0% in November 2018 from the November 2017 level, the sharpest year-over-year drop since 2011. – ITR
New US Home Sales, at 42.0 thousand in October, were down 14.3% from the October 2017 level, again the sharpest year-over-year contraction in monthly data since 2011.- ITR
US Existing Home Sales are in recession, down 1.8% during the last 12 months, on average. Existing Sales in October alone, at 5.2 million units, were down 5.1% from October 2017 – ITR – [Look it’s not getting any easier but you definitely can’t sit on the sidelines, get into solid cashflow deals]
US Single Family Housing Permits, which have a short lead time to Starts, are sharply decelerating as well, suggesting that Starts are unlikely to reverse course in the near term.- ITR
Commercial sales weakness – ITR
The first big rollback of Dodd Frank [I don’t really know what huge impact this makes yet]
Apartment construction starts not yet slowing [I am watching for deceleration – seems we are in steady velocity state]
Homeownership very slightly goes up to 64% due to younger people [finally moving out of Mom/Dad’s]
Syndication cartoon video (for those visual learners) – https://drive.google.com/open?id=19_DD4uWbj8vkutJMmi5r2Qw7sKR-R7fD
Syndications comparisons – https://drive.google.com/open?id=1p3OpRBrIHQVPVT1VEQpLZ_rszMCRqnRz
Syndication chart – https://drive.google.com/open?id=19hLpGJnaHzFs5YfiWiBK30Bc3jk1zFa8
May Yardi Report – Link – U.S. multifamily rents rose $4 to $1,381 in May. This represents a 2% year-over-year increase but a 50-basis-point decline from April, as new deliveries took a toll on occupancy rates and growth.
Traders Can Obsess Over Treasury Yields Once Again: Taking Stock – Bloomberg – [A lot of people geek out over divergences and intersection of keystone graphs but I don’t really understand them yet]

I made some revisions with new happiness study data.

One of my goals was to do a raise over $1.0M dollars. A lot of people have a few friends and family but to get over the $250-500k mark is difficult.

This past month I did it with the Atlanta Deal ($1.3M raise) and Huntsville deal ($1.3M). Super excited… I think my investor list is large enough so I’m going to focus on getting to know everyone as opposed to getting bigger. My vision is a boutique syndication business where I know everyone. A few of you call me to thanks for saving them from banging their head against the wall as a direct operator and that is really cool to hear the feedback.

Grant Cardone like him or hate him says some pretty spot on stuff. It frustrating that all these SEC rules make it tough for the non-wealthy to get into private placements and therefore people are left with crap. It’s the non-accredited investor that needs into these deals the most and this is what I try to do to contribute back via my mission!

Check out this 42 minute video – might be a little too long for the Bathroom Break. PS. I have a Hawaii custom license plate “10X”. Best twenty bucks I spent all year.

Too often passive cashflow is associated with scammy multi-level marketing ploys to get people who don’t have the money in the first place to buy into expensive education systems.

“Hey man… let me tell you about passive cashflow and how you can get rich with little to no effort… do you feel that.. its called entropy man!”

As mentioned before SPC-1.0 is getting into the rental property game, SPC-2.0 is turning into more of a passive investors as I have traded my single family home rentals to more scalable limit partnership positions in syndications, and now after I have cashflow (food on the table) I can take some risks and go after SPC-3.0 which is Simple Passion Income.

Being a working W2 professional I have a soft spot for those in my position. It makes no sense for a computer engineer who has a family and working 50 hours a week at a $200K W2 job to do what is required to become an operational lead on an apartment deal. Doing such would require 12-18 months of relentless work without monetary gain and little success to build relationships with brokers, travel to the markets. and put up hard money to close the deal. I have tried to make a team atmosphere where talented professionals can dip their toes in to “scratch their entrepreneur itch” yet keep their regular salaries.

If I had the time I would make another podcast called “Rescuing the Entrepreneur from the W2.”

All to often the entrepreneurs out there reaching success are not those who possess the skillsets but they just went after it and got lucky. Don’t get me wrong they deserve it because of all the sacrifices but imagine if you combines that grit with talent?

Ikigai is the alignment of doing something that is 1) you passion, 2) makes money, 3) you are good at and 4) good for the world. When you get this its like arranging the Infinity Stones on the gauntlet and a higher level of achievement and happiness.

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

It has been really cool traveling and meeting a lot of you.

Interviewing thought leaders and people who write real books!

And being interviewed for the famous Halloween Horror stories with Bob Helms of the Real Estate Guys Radio show. I talked about my fail how I lost $40,000 in my first limited partner deal.

As well as being asked to speak at a few conferences this year.

Another reason my high school was wrong about not letting me take AP English – Forbes: Today’s Best Resources For Finding Renters And Deals by Lane Kawaoka

I tried these things this past quarter:

Aerial yoga,

Getting rid of my car

Another reason not to believe the mainstream news. This hurricane never happened. I had two days off work and there was just a little wind and clouds.

Thanks for all the best wishes about the volcano too. I live 500 miles away in Honolulu. But here are some cool photos from the interwebs.

Although we are a couple months behind on the Ankeny Iowa deal we are making progress with over 50,000 SF of LVT flooring being offloaded for the project – Video

Going to Korea for a week for fun. And the many Mastermind groups meetings!

Pics from our Sonoma Mastermind.

One of the biggest #firstworldProblems I have has been waking up to a billion emails. It’s tough living in HST or Hawaii Standard Time.

I’m serious! Not like when I’m complaining when its a chilly 69 degrees in the morning here… that I’m being sarcastic.

I was always good at having auto filters in Gmail to clear out my inbox each day and move things to such labels like “At home”, “deep thing workshop time”. I recently decided to make a “Calls & Coffee” to auto filter all the useful newsletters (Like Daily Stoic) I read but not get bombarded with in the morning when I have the least patience to absorb. I don’t know if the timing is everything but it is helping me here.

If you are struggling with stress maybe this wil help:

You have a choice…
to be mad or happy
To be irritated or happy
To act with resistance or move forward and embrace the challenge
Its a choice but what is not a choice is that it must get done. The day must get done. The tasks must get done. But in that time the state in which you act (happy sad irritated tired) is your choice

Consciously decide. Get out of autopilot and choose how you want to embrace things.
Only then will you not be a victim

At the end of the day, happiness is a conscious choice. We choose what things mean to us. We assign meanings and labels to the events and circumstances of our lives.

Cap Rate manipulation – How to change a 65% ROI in 5-year deal to 100%
It’s the Lazy-man style for looking at “negative slack” in Microsoft Project Gantt charts
Classic marketing in Syndication portals with fake progress bars to create scarcity
Tired of hearing “I was coming back from church and saw this great 3 bed/2.5 bath”
Recently decided to remove a few videos I had with a previous guess. I feel sorry for the guy because I don’t think he did it intentionally just did not vet the operator.
The pursuit of an entrepreneur dream is not for everyone – It requires an investment in time and money. And whenever you make an investment, you take on risk. In this case its taking time and energy away from a day job that already makes a lot of money.

In order to get enough critical mass behind an idea to turn into a thriving business, you must devote time, often many years. There are no guarantees that your efforts will be rewarded a lot of time luck is required. This Time Risk is that all of your time will be for nothing.

The saying “good is the enemy of great” comes to mind here. For many high paid working professional, you make enough money to be happy but part of what we are going for is not the extra wealth but “passion income.” Feeding that entrepreneur itch or as Buck Joffrey says that primal to our core instincts.

Costco has so much cool stuff for sale. And that return policy!

Minimalist Barefoot Sock Shoes

FlightBoard (With geting rid of my car I have more money and need to buy things like this) Although I’m still debating what I should get.

Complete #LaneHack list

I did not realize how powerful passive losses as I was able to bring $25,000 to offset my W2 income. 2018 should be very exciting with all the bonus depreciation due to the cost segregations. I paid about 12-16% effective tax rate 😁
Ex-NBA All-Star (Jalen Rose) gives advice on how to handle the financial and social pressures of celebrity and wealth.He explains on his voicemail how he wanted people to identify themselves as 1) Addition 2) Subtractor 3) Divider 4) Multiplier. Some of us are unconsciously subtractors and dividers.
4 takeaways from my travels in Korea1) Competition – Pretty much everyone goes to not only school but upper education too (university). If you think your neighborhood poly-sci major, Starbucks barista is a little too qualified for the job then in Korea it’s a lot worse. Kids go to school which ends at 3pm and then go to school again which ends at 10-11pm all to get into the best university they can. Talk about highly competitive! Suicide (something I think is going to be a hot topic soon) is high and pressure increases once you land a job… No wonder people go so crazy partying so much when they are finally in college (ages 18-22). Personally I never really thrived much in a competitive environment which is why I’m proud of my 3.1 GPA in engineering school. I think it’s important for us to take account of our situation and identify when we are in a bad situation and do something about it whether it’s where we live, our job, or what we invest in. What I like about investing in private placements is that no one really does it and it has all the benefits of investing but its not quite the hustle and bustle of single family home investing which I think is a lot of noise. People call this the zig zag theory by observing where the most people are going and go in the opposite direction. This is what it did when everyone around me was buying rentals in Seattle where the Rent-to-Value Ratio (More info – https://simplepassivecashflow.com/rv/) did not make sense and I went off the beaten path to buy 100k homes in the midwest. You might simply adopt this in a different way such as working away from where most people commute to save yourself hours in traffic or moving away from the SF bay area and the $14 cold pressed juice that still tastes like Minute Maid ;p If you are starting out investing I would consider not going into apartment investment because every Tom, Dick, Jane, Harry does that… consider self storage, assisted living, or mobile home parks. Ray Dalio discussing the binary economy – Link2) Korea is a Democracy but it’s pretty much a Socialism society where big brother (cameras everywhere) and Old-world-order rules (nail that sticks out gets hammered)3) Speaking of hammers… people like to get hammered with Soju4) Foreshadowing of housing in the USA – Looking at the skyline you see an abundance of what I will call Class B housing. Think 1990s built 20-30 story, 300-400 unit, 500-1100 square foot apartments, max 50 parking spaces due to reliance on public transportation. The trend I believe that the USA will follow as more and more people will live in apartments. Just follow the rise the microhomes and the gradual increase in rent per square foot in comparison to wages and inflation. 5) Binary Economy – Korea/Japan has a noticeable higher level of middle class than China/Thailand/Taiwan as evident as more cars for regular people and not just the Uber rich. In my travels in other Asian countries with wider wealth gaps between upper and lower class (China/Thailand/Taiwan) you can see these binomial economies play out in small things like sushi menus having cheap California-roll and super expensive caviar rolls in the same restaurant. In the USA although there are places the rich people hangout and regular people go the gap is not as clear than in Asia. Cars are seen as luxuries in Asia and are more expensive that the same model in the USA because those who can afford it are Uber rich – they are super rich and don’t care. The same Lululemon pants (I guess this is a luxury) are 100 dollars in the USA and $130 in Asia. 5) Korean K-Pop is a huge thing. Idolization of celebrities is something that is talked about a lot in tin-foil hat (sociology) media as a means to keep the average public’s attention off the increasing wealth divide. The thought is if you are infatuated will what the Kardasians are doing you will not have the attention to see how different taxes and arrangements are benefiting the wealthy. In America, it seems sports athletes are put on this pedestal. Just a theory here again but don’t underestimate the power of K-Pop. At the DMZ border between North and South Korea soft propaganda is playing over the loudspeaker over to the North Korea side. This recently stopped a few months ago due to de escalation but it was reported that one North Korean defector contributed his betrayal to the K-Pop… And he was really hungry.

Look for deals that have more recession proof assets in 2019
Join our group coaching with bi-weekly calls for less than a cell phone bill
Flowstate – Song of the month – Reik – Noviembre Sin Ti

Get in as a [Founding] Group Coaching student!

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

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

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

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

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

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

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

What’s in the Pipeline?

% Chance of happening – Details – Timing:

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

2) 30% – MFH Apartment

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

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

Events:

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

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

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

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

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

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

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

Track Record of success:

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

2,100+ total units

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

Started investing in 2009 – 9 years of experience

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

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

Investor Quarterly Letter #1 & My Journey to SPC

2018 Q3 @$5,400/Mo

Get the uncut version by signing up for the Hui Deal Pipeline Club

Side topics:

Getting frustrated at W2

What are we talking about “Metric?”

What I don’t like about engineers

New Podcasts & Articles:

My 1st Forbes article: How To Pay Off Your 30-Year Mortgage In A Fraction Of The Time – https://www.forbes.com/sites/forbesrealestatecouncil/2018/05/07/how-to-pay-off-your-30-year-mortgage-in-a-fraction-of-the-time/
These past two podcasts drive home the point that you need to make money somehow to put into passive investing. As explained here Buck Joffrey – What is the formula to Wealth? – https://youtu.be/EI718_LBdC8=
115 – Flipping to passive rentals with Mark Ferguson – https://simplepassivecashflow.com/podcast-115-flipping-passive-rentals-mark-ferguson/
114 – Turning Active income into passive income in a Primary market with Jennifer Beadles – https://simplepassivecashflow.com/podcast-114-jennifer-beadles-turning-active-income-passive-income-primary-market/
HELOC Downloadable Cheatsheet
Jay Papasan – Author of “The ONE Thing” – https://youtu.be/4K4VFnGpfJo
Backwards Engineering Happiness: The Needs after the Simple Passive Cashflow – SimplePassiveCashflow.com/happy

Not ‘Faux’ News [Lane’s Real Talk]:

May Yardi Report – Link – U.S. multifamily rents rose $4 to $1,381 in May. This represents a 2% year-over-year increase but a 50-basis-point decline from April, as new deliveries took a toll on occupancy rates and growth.

Syndication chart – https://drive.google.com/open?id=19hLpGJnaHzFs5YfiWiBK30Bc3jk1zFa8
Syndications comparisons – https://drive.google.com/open?id=1p3OpRBrIHQVPVT1VEQpLZ_rszMCRqnRz
Syndication cartoon video (for those visual learners) – https://drive.google.com/open?id=19_DD4uWbj8vkutJMmi5r2Qw7sKR-R7fD
Homeownership very slightly goes up to 64% due to younger people [finally moving out of Mom/Dad’s]
Apartment construction starts not yet slowing [I am watching for deceleration – seems we are in steady velocity state]
The first big rollback of Dodd Frank [I don’t really know what huge impact this makes yet]
The Fed will likely raise rates in June and again in December [They are always been saying this]
Amazon top candidates
https://www.metroatlantachamber.com/resources/most-popular/fortune-500-fortune-1000-in-metro-atlanta [Fingers crossed since I have half of my Altanta SFHs to sell]

I don’t care about politics but lets understand what’s happening…

Everyone saw Trump shaking hands with KJO from North Korea

For nearly 20 years, U.S. foreign policy has been dominated by military campaigns in Iraq and Afghanistan.

Fighting two wars made it necessary to make deals with other nations to secure key strategic military placement (ie bases in Turkey).

Everything is connected and when you become aware of this the world’s events make sense.

Turkey attacked the Kurds because they knew the U.S. would value the air bases in Turkey over supporting the Kurds.

Russia annexed Crimea because they knew we wouldn’t intervene militarily (Obama would not send more troops).

China built island naval bases in order to expand their military presence.

When the cat’s away the mice play…

Seeing the end game, Russia seized Crimea because they correctly calculated that Obama would not put U.S. troops into yet another battlefield.

Trump’s policy is more independent and less reliant on other countries.

When Saudi Arabia recently petitioned the U.S. for military support, Trump told them to pay for it.

When the UN voted against U.S. agendas, Trump told them that the U.S. would review the support and money it gives to countries that consistently work against the U.S.

One could describe this as hardball. It works in a lot of real estate deals when the winner is the party that is willing to walk away first. Who knows if it will work in world politics???

Right now the US economics look good and rents continue to raise at a steady pace (although not expected to mimic the growth in 2014-2016).

Although we all shake our heads at stories like this…

Call it a flashback but Subprime mortgages are bank except with a new name, “non-prime.”

“allow … borrowers to have FICO credit scores as low as 500 … can take out loans of up to $1.5 million … can also do cash-out refinances … up to $500,000. Recent credit events, like a foreclosure, bankruptcy or a history of late payments are acceptable.”

Other stories remind us of the big picture…

Trump signs bipartisan bill rolling back some Dodd-Frank bank regulations – Los Angeles Times, 5/24/18

“Community banks, which enjoy broad support among Republicans and Democrats, will be freed from Dodd-Frank’s mortgage rules if they make fewer than 500 mortgages a year.”

This unraveling of Dodd-Frank with make lending easier, which is awesome for real estate investors.

Interest rates:

Link to Hui’ Google Drive – Treasure Trove of Real Estate Investing Goodies!

Hacking my 6 needs…

Growth: Revamped my messaging to you. I will start doing these monthly tailored messages.

New initiative: Per the advice of my new health advisor (who said “my VO2 max sucks”) I an starting the day with 5-10 rounds of high intensity calisthenics to get my heart rate over 140 bpm. This should be done in 5 minutes and continue in the fasted state after. Recently I paid for a health MD. It’s cool because he took my blood biomarkers, did a DNA sample, and gave me a supplement plan. We get together and chat about how things are going with Dex scans and VO2 max readings (think Gatorade commercials with Lance Armstrong with the mask on while biking). It cost a couple thousand dollars but I figure it can’t hurt. Your health is wealth. He sold me when he said “MD’s are normally idiots” (He is an MD himself).

Morning time supplements:

Simplepassivecashflow/latte

Vitamin D3 – 5000iu

Omega 3 – 2g

Vitamin K2 – 1g

Alpha Liponic Acid – 1

Multivitamin – 3

DHEA – 1

CoQ10 – 1

Zanthosyn (Astaxanthin) – 12mg

Anastrozole – 0.5mg

Evening time supplements:

Melatonin – 3mg – PM

Zinc Magnesium – 2g

Zanthosyn (Astaxanthin) – 12mg

2. Contribution: I interviewed four candidates for a job. I don’t know if I will work with any of them but I feel like I definitely helped them get where they need to go. Apply here.

3. Significance: Mailing out 160 books (email me for final twenty) and spoke at two events and gave out books there. I also wrote my first Forbes article.

4. Uncertainty: Doing a syndication in a new area in a new partnership. Finishing up two flips (38k & 21k) in Atlanta and will put on market $oon.

5. Certainty: I got bonus depreciation on my K1 and got first distribution checks from Syndications per plan. Also got paid back on a 2nd lien private money loan I did on a flip. And replenished money back into investinahp.com right before the 12% fund closed. A lot of my deals are starting to get cashflow now.

6. Love/Connection: Helped out a few people locally at my meetup get out of a tough legal situation with a lawyer referral. Hosted a mastermind meeting with like-minded people. We had whiskey it was good fun and I think I will continue. I realized part of the reason I don’t like my W2 job is that I am surrounded by W2 mindsets and I too am a product of my peer group.