What’s up everybody. We are going to be doing the monthly market update for May, where we go over the. Latest happenings across the headlines of what’s impacting our bottom line as investors and what to be on the lookout for in the future. My name is Lanco Oka. I read simple passive cashflow.com, currently owner of 4,500 rental units and the creator of the firstname.lastname@example.org and civil past cashflow podcasts.
Before we get started, make sure you guys go to the new YouTube channel. The creative is what a fun channel not so quite made for accredited investors, but for the younger kids out there, just getting started under a quarter million, half a million dollars net worth currently 90,000 views so far check that out.
It is called enriched uncle. On YouTube channel at 1,900 subscribers. And that is me, the girl version of me. So let’s get started. Oh yeah. If you want to check out the podcast, it’s on YouTube, iTunes, Stitcher, Spotify, Google play. So if you teach it once before you get started into the news, first one here teaching point passive losses.
So a lot of the K ones are coming back to vestors. Now K ones are the simplified form of some of you guys have rental properties. They are the super cumbersome, confusing schedule. Ease. K ones are so much more simpler. Here, an example investor put in, actually, this is mine. I put in $60,000 into this one investment and got a $47,000 deduction in the first year or 70% of what I put in as a first year.
Some of you run a property owners know you can deduct the pace of the property over 27 years. They get that paper loss, but with syndications, private placements, You can do a big cost say and get a huge amount, more of passive losses. And we are very giddy over all the cool things we can do with these passive losses, which you can check out email@example.com slash tax.
You guys are tired of flipping houses. I know I would be is a pain in the butt to do that stuff. You guys need to act for credit. If you guys are getting on the path to accredited investor status your boat to this website, simple passive cashflow.com/burr, B R, which stands for buy rent, rehab refinance for Pete.
I’m not a big fan of this and you read this article to find out why. Now there are a lot of different potential changes coming through Congress. One of those things is called these exclusionary zoning processes. So what this is to say it in a semi PC way is basically what we used to have.
This country needs more workforce housing, right? BC, and even call it D class housing because we have a growing population in America and a growing lower middle-class. The wealth gap is getting bigger and bigger every day. Now in the past, there’s this kind of this saying not in my backyard, right?
The rich people are like, yeah, we don’t want these like low income or semi low income apartment complexes or these basically the projects. And we want to keep them separate. Now this none of my backyard concept is trying to be going away. And I think this is good, right? This is exactly what I invest in, good, lower income properties scattered throughout decent areas.
When you have the, not in my backyard concept going on you, that’s how you have Guedel’s that’s so you have the projects, right? There’s huge segregation between the rich area and the super poor area. This is all stuffed into the big stimulus plans to help produce or affordable units, which this country needs much more of it.
Guess what folks rents are going back up? National rents are beginning to upward trend after being flat-lined in 2020 with the pandemic. So hashtag rents do, if you’re a landlord, rejoice,
we’re going to get into some of the headlines here. And these are some of the macro economics. I think all of the investors like when we dive in, highlight this for them, but I think it’s no secret that people are getting the heck out of the high price areas, such as the Bay area sample say San Francisco.
Los Angeles, Southern California, moving to these more pro economic areas for growth areas where the cost of living is just a lot less. And there is just as good job prospects there. So these are six of the places. A lot of people are moving towards air Phoenix, Arizona, Austin, Texas, Las Vegas, Dallas, Texas, Miami, and Atlanta, Georgia.
And where are they coming from? I think. California San Jose and Los Angeles are more of the likely candidates, especially for the Texas and West coast markets, such as Phoenix and for Atlanta and Miami. A lot of people are moving away from your Chicago, DC from those areas. And if you guys are checking this out on the podcast form, which this also gets released once a month we have this we have nice slides and cool pictures for you guys to check out on the YouTube channel.
Also, if you haven’t yet joined our Facebook group the GUI, which we have, we engage in conversation on these topics there moving onto the Bloomberg article where San Francisco residents cause there’s a big Exodus leaving the Bay area. A lot of them are moving to Sachar Bentall, which is adjacent which is an obvious fit for people who don’t want to totally relocate out of the area.
But a lot of them are moving to Dallas, Austin, Houston, Texas, and Phoenix and Tucson, Arizona. In addition to Las Vegas. Yes. So more demographic trends. Now, what we’ve got displayed here on the screen are the red States of the top States for outbound migration. Red is bad and green is good in this case. So that’s where the inbound migration is coming in.
I think a lot of investors have been clamoring about Boise, Idaho, but you got to remember about Boise. It’s still under a quarter million population, which is absolutely nothing. In my opinion, it’s smaller than a tertiary market. I won’t really invest in places unless it’s maybe half a billion or greater population, unless it’s a really good deal, of course, but I still want to stay with solid tertiary markets.
A little bit of humor for you guys. Not endorsing any drugs, but come the simple passive casel.com. You want to be happy?
So Yahoo finance reports that the fed holds rates near zero notes, rising inflation as U S economy strengthened. So I think this is no secret interest rates are still on a historic low. They are creeping up a little bit, but still all time lows for the most part. But inflation is here. Inflation is here.
Folks, if you don’t believe it, this is the game that governments play, where they go into all this debt. The United States has the best military. So we have the Liberty of creating all the free money we can create so that all we’re trying to do is basically inflate our debts away. When your parents bought that 30 year mortgage way back when, that debt is nothing compared to debt.
That’s essentially what the government is doing today, which I think is pretty smart. A lot of people get all wrapped up in what’s the debt number today. It really doesn’t matter my opinion. But how I’m playing it and where I’m putting my money. It was my mouth is I’m buying assets that go up with the pace of inflation.
I think one thing is certain those people who. Keep money in assets that don’t rise with inflation are going to be the losers. People with cash in the bank will be the losers of some more population growth statistics from the Yardi matrix. Where are, where is the rent growth went up and up? I think a lot of the investors, they key in all types of different data sources like.
Job growth, they key in on certain employers. But to me, I think the biggest thing that I look in just terms of a numbers perspective is what are the rents doing on a quarterly and annual basis? And this kind of sums it up right here. The rent’s still going up five, 6% in the inland empire Sacramento, Phoenix, Las Vegas, Tampa are the top five.
The places where they’re decreasing New York, San Jose, San Francisco, Seattle DC are the users.
This is just another same data, but broken up based on the left side, you have all asset classes. And then in the middle, you have this lifestyle asset class, which is more your luxury, your higher end stuff. And then what we like to invest in is this asset class club renter by necessity. In other words, people got it right here because they don’t have too much money.
They’re stuck paying $500 a month for a one bedroom to $1,500 a month, a lot better at that facility or work first housing. Whereas some of our clients, they decided that they don’t want to have this house. It’s too much time it’s old, right? So they’d rather move into a luxury, wanted three bedroom apartment, get all these luxuries, get a pool that they don’t have to clean, even get trash valet.
That’s a non-traditional approach to spending on money on where good accounts and getting money out of that down payment that, that equity and getting it working to build a stable, financial future for their families. As opposed to doing it, the traditional way of buying a primary residence to live and seeking that big down payment.
And there’s dead, lazy equity, not doing Jack and also for going on. Now, they have that big monthly payment and then other stuff to hear some rent, growth trends from some of the top markets. I think, a lot of these top five markets I don’t invest in Sacramento in an empire.
I don’t think I ever invest there. It’s just too expensive for the rent that I get there. Again, I follow this threshold of 1% men to value ratio greater. So you take the monthly rent divided by the purchase price, and I need to get something that’s 1%. So I’m able to cashflow on a monthly basis. Because I don’t really invest off of the appreciation potential of it.
Great. If it happens, but I consider that gambling. So folks who’ve have rental properties in Seattle, California say they have a lot of appreciation. Good for you guys. Easy come easy, go. I want to invest for cash. Okay. Those people investing in that nature are like I said, gambling, and these are the, what I call them. On sophisticated or dumb money or in this graphic, John Burns calls these, the investor mania 2.0 categories. There’s four of them. So the first one is the single family home landlords. Now, the reason why these are the dumb money is because it’s easy to get a rental property, anybody can just get into it. And there’s a high competition value, and this is why we try and buy apartments that are higher than five to $10 million. So we can arise above these types of mom and pop investors. The next one that I think everybody thinks about when they think of investor mania is the house flippers, right?
The HGTV stuff it makes for great TV I’ve met, but you’re a hundred percent reliant on the fact that the prices are going to keep going up. Sometimes if you’re flipping in the right location, like a secondary market, like Birmingham, Atlanta, Indianapolis, Kansas city, little rock. You have the exit strategy to be able to cashflow on the property with it 20% down payment.
But other than that, you’re bleeding money. If things go wrong, you have to switch to a forward strategy. This is why in our group, we do not flip or do Andy’s first strategies. Another one is foreign investors buying secondary. All right, this is the international dub money. And they’ve got a lot of money.
They can do what they want. And then home ownership, helpers. So these are the people that have both rental home groups or shared home equity platform.
Another Yardi report here. This is showing the average units absorb per property. So this is where do we call it? Absorption. So basically how much stuff you have there? How quick is it going to get the stuff. And as you can see, the blue was 2019 and the absorption, it was a lot more than what it was, and it was a lot higher than in 20.
Red cafe came up this full table of the top 30 hottest rental markets. And what’s a hot rental market. They defined it as the same thing as absorption is another way of describing it, but the inverse of it is vacancy days. If there was a vacant unit, how long did it go before getting filled?
Some of the hottest and the countries are in the low twenties. So it takes just under a month to lease up that property.
Some of the occupancies on some of these markets are in the 96 to 98% range. We like to run our properties in the mid to low nineties. Anything higher than that. It’s just a sign that you’re a restaurant high enough. You’re not charging for your properties. You want to attract the best tenants.
And you want to always be pushing rents,
Yahoo finance also reports Warren buffet is right. Relation is running Rapids. And I quote, here we are seeing substantial inflation says Warren buffet said this at the Berkshire Hathaway annual shareholders meeting. We are raising prices. People are. Raising prices to us and it is being accepted.
And another quote here, people have money in their pocket and they pay higher prices. It’s almost a buying frenzy. Buffett said noting that the economy is red hot. So there you heard it there from Oracle of Omaha but a buffet knows what he’s talking about. And unfortunately, this whole pandemic it’s hurt a lot of people and yes, we want to be sensitive to that, but we also want to call it the fact that a lot of folks, especially on the higher end, the white collar workforce out there maybe some of us the same to this reporting.
We’re doing pretty well, right? If you’re able to keep your job and work from home, Yes, you weren’t able to both traveling and going on a nice vacation this year and pay for those sports tickets, the football tickets that you wanted to. That’s a little annoying, but overall, people are putting money in their pockets.
These stimulus checks are going out. It’s just going to calf savings. I think it’s unfortunate that it’s again, it’s the rich getting richer and the poor getting forwarder and divergence of wealth between classes. And here the government is trying to do a good thing, but Oh my goodness.
I fear that this is becoming a 401k 2.0. So the headline read here is secure 2.0, which stance or some kind of governments trying to help people save for their retirement on the secure two on our retirement bill clears committee and move closer to passage. By no means is this finalize and it’s going to be different ways to get it to change, but you can go to our Facebook page and download the actual transcription of
what that document is at this point. Like I said, it’ll probably change many times over, but. My attitude on this is I’m a little worried because this is just like the damn 401k again. And to me, the 401k wasn’t really that great of a deal. I see it more as a way of the government getting what’s with all of these brokerages.
And now these brokerage, which are able to sell all their products of mutual fund projects, which are fee Laden. And have carried interest on their side, where they get compensated, whether or not the price goes up. And ultimately, this is what robs a lot of hardworking Americans of their retirement. Why else can you just buy a rental property?
You make 20, 30% on your money. If you don’t believe me, go to simple passive castro.com/returns. Take a look at that video. Or I’d break down all the numbers how you’re making money, my cashflow, which is the monthly revenue, the tax benefits, the mortgage paid down and the property appreciation are you making money four ways again, you want to take my word for it?
20 to 30% a year, if you don’t trust me, go firstname.lastname@example.org slash returns. But this is very early on. When I bought my first rental, I was like, what the heck? How’d you make it like eight to 10% in all my stock stuff, the stuff that I’m supposed to do, but I’m doing so much better in these like a simple rental property, a turnkey rental of all things that aren’t that great.
And then I discovered the church, right? If everybody just did what I did and bought a handful of rental properties, they’d be financially free, very quickly. I would society function. But, and how would all the wall street executives get all their salaries and build these big buildings in the middle of New York or all these city centers in the financial districts.
We can’t have that happen. We need all the American students that put their money in mutual funds so we can just feed on the debt in their state. But anyway, I digress. If you guys want to join our community, we have the founding office Ohana mastermind to learn more, go to simple, passive cashflow.com.
Slash journey. This group is pretty much a accredited investor only. So million-dollar network and above, or you make over $250,000 a year. You get access to all the products that I’ve created and doing the remote investor. I-Corps syndication LP guide 12 month investor plan, shade line hacking guy. But the power of this group is that network, right?
So we do biweekly zoom conference calls. You get access to the entire library and we have more than eight deal vetting group, but we are here to share best practices for tax legal, infinite bank and legacy creation. And the big thing is the network, right? Magical things happen. You get other like-minded working professionals around you that are pure passive investors.
If you guys are new, check out the email@example.com slash incubators here, you’ll learn how to buy your first rental property. If you’re just starting out. Now a little bit of background of what I’m doing, firstly, in my own life, every month I try to do a recap on what I’ve been working on in terms of these six categories versus growth.
So I’ve been trying to whoop thing. So it’s like this bracelet I wear, but it’s not like some like the Fitbit, I think it’s lame, but this thing is pretty cool. Like I’m a big techie and into fitness. And I haven’t seen anything like that. This it does her HRV. And it also tells you if you can hit an art at your workout today, that’s what this recovery thing is.
It tells you what your HRV is. Ideally, you want to have a lower HRV, tells you how much you’ve worked out that day. So this is great for me, cause I’m always in self-preservation mode. I don’t want to work out too hard and it tells me, Hey, you should hit a seven or a 14 today because your recovery is good.
And it also is a sleep coach. It also tells you how much sleep you should be getting. And the cool thing about this is we can create teams. So I joined my CrossFit gym. I have a household that I’m a part of. So we compete. It’s fun, it’s growth, it’s something different. I’m always moved to get better of how do I get contribution in my life while I started the rich uncle YouTube channel.
And this has been an idea for quite some time. Simple passive cashflow caters towards a credited investors today. We help people buy their first rental properties as turnkey rental rentals. And then eventually it’s become a credit investor at beyond that’s where the private placements and syndications and all these high net worth wealthy people, tactics come in.
But what do you do if you’re just starting out, right? You just graduated college, like how I did back in 2007 and I had a good paying job. But what do you do? Where do you start off? Cause everybody’s telling you all this nonsense about the 401k, each of fun diversifying and 25% international stocks, 25% midcap, all this type of stuff.
I am tired of listening to people who don’t know what they’re talking about and still working their job. The idea is don’t take financial advice from people who are not financially free. So I quit my job. So you know what? I’m just going to make this rich uncle channel and try and help people the way I think I can.
And if you guys are interested, check it out. Maybe if you guys have younger folks in your life pass it on. It’s supposed to be a little bit more fun and a little bit less dry than the content we’ve covered here. We’ll pass passive capsule land. There, I am trying to help. Get them away from their other coworkers at work, telling them to, Hey, if you wait till you’re 67 years old, you can get a lot more money from your pension fund.
That on drives me crazy. Another category that I was trying to do this month was significance. We passed 90,000 views on the rich people channel and why do I do this? I was super upset that everybody’s putting all their eggs in like this pensions, which. If you’re on Hawaii, 55% of it is funded.
If you’re in California, 69% of it’s funded my friends in Washington, here’s this actually pretty good. But for the most part, these States are hoping that you don’t make it to your average life expectancy. So they’ll have enough money and that’s messed up. My most, you guys are pretty prudent. So you guys have your own 401ks and stuff like that, but yeah.
What I realized is all that 401k stuff is a bunch of nonsense. It’s like a cafeteria of garbage investments. And in a way these brokerages are in boots with the government, right? Put your money in this 401k stuff. So you’re captive to all these garbage mutual funds where there’s high fees where you don’t see them and are frankly like you don’t get that much return.
You could get, do so much better. So here I am, I’m giving you that red pill to help you as you get educated. So you can make these better decisions and learn how the wealthy do things, because it’s not much different than how we do it. How you’re taught. We’re actually it is they’re different, but it’s not something that the average guy can implement themselves.
How did I get a low uncertainty in my life? I’ve committed to. Investing a lot of money into Bitcoin crypto. When, a little, certainly anywhere from one to 5% of my network here is a little table of the number of, I guess the way they read this is like your investment level based on your net worth.
And potentially it goes all the way up to maybe a quarter to a big chunk of your network as a very huge Part of your portfolio. Me Amy I’m in this one category, right? Because for me, I operate real estate and that’s what I know when I try and stay in my lane. I have a couple upcoming podcasts on Bitcoin and crypto.
I am a libertarian and I believe in the currency as a way of taking back control from countries and putting it back into people. So I do see it as something like that. And I do see it as a sustainable thing. And right now I see it as a land grab, but yeah, definitely not going to go crazy with this stuff, but like anything, educate yourself as opposed to just opening up an app and asking your buddy what they’re investing in.
How I balance that uncertainty is with certainty. And if you’ve taken a look at some of my past tax returns, you’ve noticed I don’t pay very much taxes. Because I use passive losses from my investing to offset my passive income and I try and lower my ordinary income as much as possible. You can learn more about this.
It’s simple, passive cashflow.com/ . You can also see my tax returns on there, but here’s a good one. On J 80,000 investment got $176,000 of first year passive losses. That’s almost like a hundred percent return of losses right there. Some people think it’s kinda messed up that the wealthy don’t pay taxes, but then again, not everybody’s pulling out their wallet, I’m putting money into each of these K ones represent a business venture that helps low income middle-class families with housing making, improving their community.
And that’s where the tax code is written. It is what it is. Those are the rules that government wants you to invest, especially in things like real estate and the way the IRS says it. If you do not invest well then bro, you got to pay some taxes, right? If you’re a doctor making 600 grand a year and you don’t invest to get losses and you don’t implement real estate professional status, do all these other things.
You got to pay taxes. That’s the rule? Lastly here how did I get a little loving connection in a world where I can’t see and yeah, you folks we’re having a baby. We did a book drive by shower, which I’m not super thrilled about the drive-by thing, but it is what it is. But there was I make all my social media stuff.
I know a lot of people that drives me crazy. Like it’s so lame. Like people have these quotes of like cash flow or passive income, like man’s boring. I make all my social media stuff and I try and keep it light. So fencing the perfect COVID sports masks, gloves stab anyone that gets closer than six feet.
And we try and network virtually, right? We’ve done this as a group within the foam and the incubator groups. Yeah, but, hopefully we can start the in-person events here soon. And if you guys want to learn more about that, join the mailing list and join the clubs that will pass a castle.com/club.
I normally tell people what I bought is that usually I like to go shopping Amazon, but I’ll be honest. I haven’t bought anything because I’ve been buying all this baby crap and I don’t even check the mail anymore because they know it’s not even for me anymore. But yeah, none of this was should have been construed as legal tax financial advice because I am power all your folks to think for yourself.
And now’s the time. If you guys have any questions, type it in, and this thing will feed it right to me. But Hey Craig, yes. Said I agree. The 401k is garbage. I think it was Craig that said, that the 401k is like signing a deal with the government that you don’t want to sign where the government ultimately has a lead over everything you’ve got.
So you know, the government’s got this big debt, right? All they have to do is say, Oh, now we’re going to tax this stuff at this rate. As all the baby boomers taking money out of their return. I thought that was a great way of explaining it. Craig, so thanks for that. Yeah, you mentioned the cares act was a golden opportunity to jailbreak money from the 401k.
I don’t know if you can still do it. You can backdate it for 2020, but if you guys can read the article to get ideas and talk to your tax professional, if you need a referral, let me know. But. You can go to simple passive cashflow.com/covid to learn more about that cares act, Joe breaking a hundred grand from your retirement account.
Oh, somebody wrote a question. Are you noticing tenants wanting an extra or meeting that other rooms so they can have their home office separate from their bedroom? Do you think that an ongoing trend is this a B. Class and above class thing. So generally, like I think people are putting more money into their living conditions is evident by like the substantial loss of home renovations going in.
And I think this is partly to do with residential real estate prices going up. There is a trend people, they’re building larger. Bedroom unit mixes. So two bedrooms and three bedrooms, not a huge amount, more, but like very small, right. As these trends develop.
I don’t know what the mix is. We get the engineers and we figured out what we just copied, what the big developers are doing in terms of 27%, one bedroom, 30%, two bedrooms, or whatever that mix may be. But definitely I think this is more of a B plus class or Hey, minus class thing, a lot of our tenants are hanging anywhere from $700 to $1,400 a month.
The class B minus class tenants. And a lot of these guys don’t really work from home. And we have a few properties where we did have a lot of more white collar blue collar mix. But for the most part, a lot of our tenants are working those jobs where they need to get out of the house or they’re essential workers they’re the backbone of America having an extra room that’s, that’s first world problems.
I think that’s more of a, your E-Class kind of vicinity. And if you guys like this, let me know. And hopefully we can do this again. And if you guys want to join us next time, you can check us out on the YouTube channel.
And the Facebook group is where we will live stream this. So another question here in one of your podcasts or investors calls, you had recommended not to deploy more than $250,000 in a year. Is there any checks reason for this? I don’t remember the context of this. I think what I was getting at, lot of investors low need that rich dad, poor dad book, that purple book that is the red pill of finance for a lot of people.
And they’re like, Oh my God. I got to get out of this, like crap, been investing in, for all my life and they go bonkers, they’re going into all these alternative investment, private placements and syndication deals. And I’ve had people that invested half a million, million dollars at nine months.
I personally am Whoa that’s a lot of them investing, cause the thing is what’s hard about syndications. Anybody can put one together, right? Anybody can invest in it, but like in terms of putting them together, Anybody can do it, you just pay a through $30,000 and supposedly you can magically do it.
So I say that jokingly, because not everybody should do it. And I sure as heck am going to invest in those deals, but those sponsors how do you determine who’s legit? It’s really hard to determine who’s legit and if it were me, I would take the approach of putting my money in. Going with the minimum and seeing how it works.
Call me crazy, but I think that’s a prudent strategy, especially when, lot of people that come into our group, they’ve been investing in the regular 401k stuff that traditional investing model for 10, maybe even 40 years, we have a lot of old people in our group. Maybe I shouldn’t say that, we have a huge range of ages in our group.
Don’t throw it away on some bozo who you just met. I just, today someone just mentioned that, yeah, they lost a hundred thousand dollars investing with this other sponsor and they’re happy that they found this, but that takes some luck. And I think to really feel confident to knowing that you’re putting your money with good stewards is to build your network with other passive investors.
So that you feel comfortable knowing that, other people have had good success in the past, but likely a lot of us and myself included, we don’t have any people who were investing in these types of alternative investments. Most of the people that we associate with or go to work with, or our families or parents just invest in the traditional mainstream retail stuff.
So we don’t have that network. But what I’m saying is that’s why we created simple passive cashflow. So that, that there is an opportunity to find like-minded individuals. And when you do, that’s when magical things happen. And if you want to stop screwing around, that’s where you join the family office on a mastermind, the fault I’m just saying, but, I think that’s the way into it.
And maybe I said the $250,000 in one year thing, I think maybe where that came from was. Like maybe you can go on. So a handful of deals in that first year, within a minimum investments being anywhere from 50 to a hundred thousand dollars. So you could go onto a few deals and you can sit and wait and watch, see how the sponsor performs.
Did they run off with your money to Mexico? They say that they were going to do it quarterly distributions. That start when they started, when they said it was going to So that would be the way I would do it. When I started to buy rental properties, I bought my first three in Seattle.
And my big first pivot point as an investor was investing sight and scene in Birmingham, Atlanta, Indianapolis in 2012, 13 what did I do? I bought one property in Birmingham. I see how it worked. I pause for six months to a year, and then, you know what the damn thing works. So I’m loaded. I loaded all those Seattle properties that have poor cash cashflow.
And I went into and parlayed my money into those other investments. So to me, I’m not saying that you’re going to do this, but I liked the approach of getting proof of concept and then going all of them. And they’ll bark. You’re not old. You were actually very youthful at heart.
Any last questions here? But once going twice, you guys like it does content. Please join the clubs will pass the cashflow.com/club. You get access to the free e-course to start learning more about this stuff and check out the podcast. Again, all of these monthly webinars are firstname.lastname@example.org slash investor letter is where I house all these monthly webinars.
And thanks everybody. And we’ll see you next month. Right?