What’s up simple passive cashflow listeners. Today you’re going to be hearing an interview that I actually thought was pretty good. I go on a lot of these interviews and there’s a lot of lame podcasts and a lot of, even lamer podcasts hosts that just don’t ask very good questions and put me to sleep.
Because they keep saying the same thing over and over again, but this particular one was pretty good. And I think it would be a good one to share with friends. Again, if you guys are in the investor club, go to simple passive cashflow.com/clubs, sign up there for free. If you guys want to get one of the free eCourses what we do to incentivize you guys to share with friends is if you email email@example.com and CC your friend with the intro and possibly give them this podcast I think it’s a great introduction to what we’re all about here at simple passive cashflow.
And it is going to talk about a lot of the mistakes that we see regular people making with their money. So check out, make sure you’re not doing any of these types of things or making steps in the right directions. That’s all we ask. Yeah. Thanks to you guys who have referred your guys’ friends and today, like I’d say half of the people that we have coming into the group are referrals from their friends. And it’s funny, like a lot of you guys listen to the podcasts a lot, you guys are the ones reading everything, listening, everything, your referrals.
Trust you guys there for some strange reason, you’re probably the one person in your friend group that all your other friends know as the person who likes to read up on all this stuff. And it’s the financial guru guy out of your group. But often it’s not what you know, but it’s who you know, I’ve talked to a lot of very astute, high level investors that are completely honest with me when they book their free strategy call.
And they’re like, you know what? I don’t really know about this investment or all the technicalities. I just trust my friend who does, and that’s the way I roll, which kind of seems a little irresponsible at first, when you start to think about it, you’re just falling full back into the end zone, but you don’t, these guys get into the end.
And I think that’s what’s hard, like at least speaking from my own personal experience, like growing up in a family where parents weren’t accredited, I didn’t have any accredited friends or anything like that. Or my circle just didn’t have any of these types of people. I had to definitely pay to play to get into the circle of accredited, purely passive investors, which is the group that we’ve created today.
And, if you’re in the investor club, you guys do get a spot chance to interact with our accredited investor database from time to time when I travel. We are planning another tour in Huntsville later this summer. Hopefully you guys can come out to that, visit some properties, break some bread, hang out a little.
And maybe you might do something in California. But at the end of the year, we’ll probably be doing that retreat that we always do. Haven’t got the page set up yet, but you guys can check out last year, site years before it’s simplepassivecashflow.com/hui4 Hui the number four. But yeah, here’s the interview and enjoy the show.
I know that You have talked about the counterintuitive ways that the wealthy have created their wealth and make money. I’d love to hear your thoughts. Yeah. followed this whole linear path of going to school, becoming an engineer, and getting a job. Part of that path is the best thing in that thing, 401k. I’ve been investing since 2009 and very quickly I realize what a sham that is. And I might be upsetting as a person, but maybe you should get upset or you shouldn’t get upset. She’d ask what’s the reason why? Because I’m standing here, I’m not working my engineering job anymore.
Because I got smart. And I realized that if I just invested in real estate, I’d make money four ways: mortgage paid down, appreciation, tax benefits and a cash flow. And when I put my math to it I was making like 20, 30% of my money every year on that stuff. If you don’t believe me, you can go to my video where I do a whiteboard exercise and break down the math for you, a simple passive cash.com/returns.
But I was like why the heck would, I want to make eight to 10% only? Not in that 401k stuff. It makes no sense to me, and I discovered this whole sham where they won’t exactly want us to do that stuff. They want us to invest in this stuff because if everybody just followed what I did and bought a handful of rentals, they would be financially independent, who would build our bridges, who would get her coffee, who would do surgeries for us.
Maybe some people would, but. Vast majority with peace out, it would be out of that stuff. And that’s just one of the things, the counterintuitive things that the wealthy do, including, I’m not a big fan of buying a house to live in. And the whole argument for retirement accounts too.
I’m sure you get this a lot, but you sound a lot like Robert Kiyosaki. He also talks about it, following the path, go to college, get a safe, secure job with benefits as in do not do it. And he also talks about the stock market and 401k. Could you hone in a little bit more into why you do not like 401ks?
When I invest, I pull my money out of my 401k’s Roth, stuff like that, because I wanted to invest cash for four main reasons. First reason is, I think you and I, Raj, we’re going to be making more money in the future. Therefore we’re going to be in a higher tax bracket in future.
So I would rather pay my taxes today and Hey man, get it out while I’m in the lower tax bracket state. Secondly, I want, just look at where this country is going with all these government entitlement programs, and how else we’re going to pay for it. Majority of it is going to be inflation. That’s another topic.
And by the way, that’s real estate as the answer for that. You gotta raise taxes, so taxes are going to be going up. Therefore again, here, pay your taxes today, get it out of that stuff where the government essentially has a full lean on you, whatever God in your retirement accounts. Thirdly, I’m not gonna retire when I’m 65, 70, or whenever they say I can get that money.
I’m retired now, so I’d like to get it. I don’t need to use it, but I want access to it. I don’t want it to be locked up. Don’t put me in a category with other people out there that are unable to save money. I don’t need to be on that cruise ship. And then lastly, here’s the big kicker, right?
People will argue you got your money in this retirement account. Supposedly it’s gross tax free, which it does. But if you’re investing cash outside your retirement account in real estate, the dang thing should be tax-free anyway. And the big kicker is if you’re investing in deals that do cost segregation, give bonus appreciation, you should be getting a heck of a lot more losses to offset the gains and even at that investment.
This is where we get into even more wealth building strategies of the wealthy. Like I personally don’t pay taxes and that sounds a jerk move. But I invest a heck of a lot of money into this society. And that’s what the government wants. The tax code is written to incentivize folks like me and you guys to invest your money, do things, tactics such as cost segregation to get a lot of passive activity losses, and pay little to no taxes.
And you don’t get that levers and let you invest cash and you get those passive activity losses. 100% I totally agree with you. And I also would like to say that if you can say one, your taxes, you should save on the taxes legally. That is absolutely true. And if you want to give back to society, then go to charity.
But don’t try to say that people should pay more taxes, at least that’s my opinion. Yeah. The way I look at it is like the government is like, there’s these incentives for you to do what they want you to do. They want me to invest in workforce housing and buy assets that create this economic multiplier.
So I do that. I’m not a dummy. I may not read the whole IRS thing, but I have professionals that do it for me and guide me and I work with them to guide me to what actions I need to take place. I don’t worry about politics. I just worry about what I should do as best as I can.
And I guess what I’m trying to say here is if you invest, you don’t do any of this stuff that the government wants to do. Yeah, man, you gotta pay taxes. All of us, the pitch in the repair of the potholes in the street, pay city state workers, right?
That’s what you gotta do, right? If you’re just another joke, the low average guy out there investing in non tax advantage stuff that the government doesn’t is lukewarm on. Then yeah, bro, you got to pay taxes. You’re a straight shooter Lane. I like your authentic self. That’s very good. I keep it fun. Because sometimes this stuff can get really dry and boring, especially the tax stuff.
I don’t know if you’ve heard this, but at some place somebody was saying somebody, I really respect that the bulk of the tax code is dedicated to how to save on the taxes, the deductions and the credits.
And it’s only the first 50 or 60 pages that talk about how to pay taxes. So the tax code is big and complicated, but most of it is dedicated to saving taxes. Yeah. It is what it is. Some people also say that it’s like the politicians slipping in there what they want, cause they’re all wealthy.
They know what’s up. I don’t care. I don’t care about all this like stories or urban legends? I don’t care. I understand what the system is, understand the game and I play the game and I think that’s what everybody needs to do out there because taxes are your number one expense of life.
You cannot leave it up to your CPA. Your CPA is not equipped to know your situation, what you’re investing in, what kind of deals, risk , work profiles, when you’re getting your passive losses, when you’re exiting set deals and hopefully you’re in a multitude of different deals, that is nothing that a CPA should be doing for you.
That it’s your responsibility folks out there. You need to empower yourself to have an educated conversation with your tax profession. Lane, I love winning, but you say that, you don’t complain and these other rules and you play the rules. So when you’re playing a game of cards, you play the hand that you’re dealt, that’s it?
That’s how you win, right? All right. Good. That we have to establish some of the rules that the rich follow to create wealth and make money. Could you also talk about, there are working professionals, they may know the rules, but they don’t have the time or the expertise, even though they know what’s the better way to invest.
So could you talk to us a little bit about passive investing for working professionals? I was working as an engineer way back when in 2007, I bought my first run in 2009. At the time my net worth was under half a million bucks. So to me, the name of the game is just buying rental properties.
I don’t think that you have enough net worth to be able to go into syndications of private placements, even though there are many indications out there. If you go to the EDGAR sec website for non-accredited investors, you just need to be at the private network of syndicators sponsor. But I think it’s important for investors, especially lower on a net worth scale to invest in rental properties and understand the business, understand how this is done so that when you finally do look at a pitch deck, you’re not totally oblivious to the marketing sham scent that, just every deal looks good, when it’s on a shiny PDF. For a lot of accredited investors guys that make six figures and above you’re, right? Like the time it takes to buy a rental prop, even a turnkey rental, where they fix up the property for you by putting a tenant in there for you. For what, like easily, a few hundred bucks a cashflow a month.
In 2015, I had 11 rental properties. I went down that turnkey rabbit hole for quite some time. And with 11 rentals, it was cool. I had $300 a cash flow per property. So $3,000 a month. No, I’m not complaining. I was in my twenties at the time. That was pretty decent, pretty good.
Not to be ungrateful or anything like that, but I don’t know what American family can survive. All three grand. You’re going to need three times that. So with 11 properties, I had an eviction or two every year, some kind of big thing attached to me that happened in a different quarter, like a plumbing repair or a tree falling on the house, pedal trees or something like that.
If you need 30 houses, then now you’re talking about an eviction every other month and some kind of big tree every other week, it just becomes unscalable even with professional property management to do your dirty work for you. So that’s where I found syndication’s private placement shortly after 2015, when I hit that inflection required and became more of an accredited investor.
Okay. And you are a syndicator yourself now. So could you talk to me about your journey from that point to becoming a syndicator? Yeah, so I was in my late twenties and I wasn’t quite yet an accredited investor. I think I wasn’t quite there, but I was on the path for sure. And I was certainly on the path to retire from my day job as an engineer before I was 40 by being a passive LP partner.
So that’s why I eventually did initially. I was why do I want to take on all the stress and do all these spinning plates? And there’s a lot of investors that don’t realize there’s a huge gap between LPs and the general partners. It’s not just one level. It’s like your guys’ job.
There’s usually two rungs or two salary codes between you and your boss. You gotta go somewhere else and come back. If you want to reincarnate as a boss, same thing as general partners. So that’s it, I went as LP. Because I knew how to analyze deals. I had gone through a coaching where they taught us how to do that.
I felt like I was a really good passive investor, much more than I was able to take profit loss statements, rent rolls, run my own comps and it put into my analyzer and just spot check that sponsor and operator are they being conservative with the deal or really getting what the pro formas that it was.
And I was able to run as an independent and I went on the LP path because I was like if I could just, maybe I don’t double my money every five years or something like that. If I just grow my money at a conservative 12 to 14% IRR. Yeah. I’ll be able to quit my day job. Won’t perform 40.
And that was the goal initially. It’s just to put my oxygen mask on it. I don’t have to go to that job that I don’t like. Because a lot of people want to just copy me and just follow me into deals. That’s how I found myself in a general partner facet.
And then I realized that operating deals, if people are around you and will help you and train you, isn’t that difficult? It’s not difficult, but it’s something that like any guru program will teach you. So eventually I transitioned into more of a general partner role. Today, I currently operate 4,500 rental properties.
So it’s been, maybe it’s taking five years to get there. What I’m thinking is that something that striked me when you were telling me your story that you started with, with a net worth of about half a million dollars. Now you’re at about four and a half thousand units across 12 states, what role did your mindset play in this journey and your success?
And could you talk to us about that transformation from beginning to end? It’s gone through a couple of inflection points when I had just a handful of rental properties in my earlier twenties, this is just in the beginning stages. I was working at a private company and those people will know that private companies are a little bit more stressful, you get paid more, but I started to see the light at the end of the tunnel.
And I was like, Yeah, man. I may only be making a thousand dollars, $2,000 a month from these turnkey rentals. But my time here is ending, and then I soon was making more than my boss’ boss, and I developed a bad attitude at work. Gotta be honest. It’s not like I was walking around oh, maybe it was, maybe it did come across as that, but I eventually started to change jobs to more work for the government.
A little bit more cruise jobs, the bit more free time, to do the real estate investing passively on the side. But I started to adopt the more mindset of where I didn’t need to go to work, but I enjoyed the people who kind of didn’t mind going to do the job. Even though it didn’t take that long every day of actively doing it.
So I became a passive investor and passive W2 worker at that point. And I think most investors find themselves at that point. At least people I work with, or at least maybe that’s just the beginning stage where you start to realize that life becomes light, right? You realize you’re on the fast path to financial freedom.
It’s not going to take 40, 50 years. You’re on the 10 year path plan. You just keep working this, you may not like your job, but at least it’s not like super stressing you out. It’s not everything to you because you have this proven system of buying rental properties and you’re pulling yourself out of there.
Things changed in 2016 when I started a podcast because originally it started How do you buy turnkey rentals? Because all my buddies were asking me. How do you borrow these properties? And like Birmingham and Atlanta never even visited the damn thing. How do you do that? And they waste my time.
They’d ask me all these questions and they never do anything. And I would get frustrated. Like you guys are wasting my time. I was going to record this thing. And then you guys can listen to it if you’re interested in taking action or not. So I did that. The thing got really popular and a lot of people were really like, like I bought a year later in 2017, the podcast got a lot of traction and they’re like, yeah, I actually went and bought a rental property.
Thank you very much. And I got a lot of these like emails and I was like, oh, this makes me feel good. And so, I think a lot of people, they moved from this scarcity to abundance mentality. And it’s not that you’re a bad person, if you don’t have it, but you need money to be abundant. In my opinion, I don’t think unless you’re like a Yogi that goes on in the mountain, it’s truly a funded mindset.
I don’t think nationally you have it. I think it’s good to have a little scarcity mindset in the beginning. This is like the immigrant mentality that a lot of people have, right. They come to America, the immigrant mentality allows them to be frugal. They don’t buy stupid stuff. They’re frugal with their time, how they work for, and it builds, gets them off the ground.
But after a while, maybe even your net worth gets to be half a million dollars more. You start to develop that mindset, that operating system doesn’t help you. It’s like DOS going to Windows or something like that. So around when I had the 11 rentals. I saw the light at the end of the tunnel.
I had a few thousand dollars of cash a month. I started to realize that at the time I was like, in my mid to late twenties, I started to realize in my thirties I’d be able to quit my day job. But then I screwed up. I was like, I’m just gonna be like the internet. Like guys who just take pictures on my Instagram, food travel, travel bloggers, guys who aren’t really quite financially free, but they appear to be right. You want to live their lifestyle. And then I did that maybe for a few weeks. And then I realized this is really lame. Like the guys, like the financial bloggers that are all into their index funds, they work their Silicon valley job.
Then they go to Thailand and they live off their $1.25 million and they live super frugally on their index funds and that’s cool. If that’s you guys, I think that’s cool. Maybe you’ll hit an inflection point in your life, but you get to a point where you’re like, this is lame, is this all that life is for, and most people, if you talk to the successful, maybe not the wealthier on wealthy, but just as successful, the truly happy people. They’ve found ways to give back to other people and make them send the elevator back down or whatever saying you want to use, but find and find other people to help out along their journey and that’s what I clicked to . Then, we’re here.
That’s fantastic. What I’m hearing is like a couple of different stages of financial freedom. So number one, many people keep talking about the financial media and keep talking about how most of the people have not enough money in their 401k accounts, and they will never be able to retire and they’ll work till they die.
And you touched upon why you are not a big fan of 401k. The next stage is people who aren’t able to retire, but on time then you talked about people who have died off on index funds, like they have a million and a quarter, a million and a half, and they’re dead in Thailand and they’re living off the 4% safe withdrawal rate.
And then the next day that you’re talking about is no, that’s not enough for me. I want to go back. I’m going to create real wealth and I’m going to send the elevator down and bring people along for the ride. And I think when you get to that stage, like the next goal is they’re getting to four and a half million dollars net worth.
A lot of people in my circle talk about that number because I think if you can withdraw it at 3% rate, you can have two nincompoop trust fund kids that are just totally doing whatever. And it’s really hard for them to screw that number up. But then here’s something that I’m kinda, I’m not talking truly from experience, but I’m getting insight because I try and surround myself with a mastermind of people that are getting it to this level.
Like people do one or two things here, and we’re already talking about like the top 0.01% that even make it the four and a half million dollars net worth, most people will get off of the bus there because it’s a pool of four and a half million dollars. That’s a great life. You can just peace out and do really whatever you want.
Fly first class has a very peaceful life. There are some people that it’s a very, it’s a smaller minority of the minority that. They get really passionate about something, whether it’s dogs or helping out other people who went through trauma in their life, or for me, it’s I’m just really upset that there’s so many working professionals out there that just are duped by this like fun wall street, nonsense, 401ks buying a house to live in and these are hardworking people. These are like my engineering brothers that were stuck in the basement while everybody’s playing Frisbee in the quad
There’s so many hard working people out there. Doctors have to go to school for 15 years and most of those guys will have to work for their entire life and never really get ahead. If they just bought a handful of rentals, they’d be able to be financially free. And that’s my mission and my hope is if I help enough people.
Get to four and a half million dollars. They’ll reach this God level where it’s like, they’re like I want to find some other way, right? For them, it may not be helping them on the path to financial freedom such as you Raj. But they are like dogs or I don’t know. They want to like their cancer.
I don’t know what the heck they want to do, but maybe they realize that money is a platform or means to get there. So that sends them on this. Like now they have to keep the engines going. So at four and a half million dollars, you can think of a spaceship going into outer space. You’ve hit escape velocity .
You can turn off the engines in cruise control for the rest of your life, but they realized that they need to keep the engines on and go and achieve eight figures. I think that’s 10 million, right? And that money is necessary. The power of this bigger purpose, legacy, whatever you want to call it. But that’s all I have privy to now.
They always say you don’t know the next purchase until you’re there, but that’s what I see at this point. I’m curious to know why you and your buddies in your network talk about four and a half million, not five, not six, not three. Is there a reason why specifically this number?
I don’t know. It’s not as daunting as five to six, but I don’t know. I think that the 3% withdrawal rate has something to do with it. If I just go like 3% of 4.5 million, that’s $135,000 a year, that’s and if you have two kids, that’s like a working man salary tax-free, at 3%, it’s pretty pathetic, right? That’s like the pace of inflation. Yeah. I’m more of a four person. I think that you can easily withdraw 4% forever adjusted for inflation and never run out of your principal. I think I also come up with that number because I see a lot of it’s kinda like a voyeur.
It’d be like, I see a lot of like financial profiles that come through when I’m approving these PPM, is it investor subscription docs? And I know what they make. I know how their spending habits are and I know what their net worth is. And I’m just like I see this come through like hundreds of times and there’s nothing really, that surprises me.
The only surprises are either somebody was whittled this money or they, their trust fund kid, or they won the lottery. That’s the only time it surprises me, but most times I know where people are and there’s always that glass ceiling, four and a half million plus or minus do it yourself.
Okay. I’m very intrigued by your background. So tell us what pictures are you seeing here? Was this an event? I kinda run a family office Ohana mastermind. We’re like a close group of financial fanatic friends accredited investors. I’m big on relationships and knowing everybody that’s just how I am.
That’s how it is here in Hawaii. Everybody knows each other. I surround myself with like minded individuals along the same path as myself. A lot of people are working professionals, still working their day job. They make much more than six figures, net worth million dollars or more, but you wouldn’t know by appearance, right?
Because they are first generation. They weren’t born with their wealth. Their parents didn’t have a million dollars. And the first generation that’s going to surpass that million dollar threshold. So it’s very different from going to the country club a lot of times. It’s just people who are trust fund kids.
I went to private school. I know what this is all about. Most people are there because their parents have money. Oh, I don’t know what the statistics are. Something like 90% of wealth leaves a family in two or three generations for good reason, because people don’t know how to make money legitimately know how to go to work for a salary. They don’t know how to really truly make money. And certainly they don’t know how to make a legacy. Yeah. That’s a known fact, you know that.
So I’d like to go back to your comment about what is a good path to follow for working professionals. So you talked about 401k is not the best thing in the world. Then you talked about investing in rentals, then you talked about investing as an LP. So what’s your recommendation, one other or combination of both.
Could you talk to us a little bit about that? Yeah. First off your guy’s net worth is under half a million. Don’t buy a house to live in and that’s a financial drag on you and to me, I don’t think you people deserve to buy a house until their net worth is over two times what their house is worth.
Even if they’re buying it with debt, the people can listen to me or not. They’re going to do what they want, but that’s just one of my 2 cents. But so you take a guy who is under a quarter million, half a million dollars net worth making able to save over $5-10,000 a year to buy a rental property.
Go buy a few, learn the business, right? If you’re more of an accredited investor with a higher net worth, then look into syndications of private placements and surround yourself with a community of like-minded individuals. We’re also investing in this stuff. So you can get in the ethos. What do you say to people that invest in cryptocurrency?
This is the future of the world economy, and if you’re not investing there, you are being left out. Oh, boy, you’ll find all the can of worms there. Okay. So I am bullish on crypto. I think it is a disruptor. It takes power away from countries and the libertarian in me likes that I think I like the technology thing.
I think it’s definitely an emerging asset class, but to me I don’t really want to take chances. I like real estate because it’s a hard asset, produces cash flow and I can leverage it pretty well with really government subsidized loans and the tax benefits are amazing. Those are three things that cryptocurrency is not.
So the prescription I have and, podcast land, you got a lot of generalities liberals, so here’s one of them guys, if your net worth is over a million dollars, I think you can open up and play a little bit more with cryptocurrency. Obviously, we’re not going to differentiate between the altcoins and more your bread and butter, your Bitcoin with Ethereum, or your stable coins. We’re not going to get into that detail, but I would, a lot of people, above a million dollars net worth, they don’t typically go over five to 10% of their network. If you’re lower net worth to me, the prudent ways to do it, like how I did buy a rental property, who was your portfolio?
Prudent cash flow and it just takes a while to get it going. But most people have this completely backwards. They go and gamble a cryptocurrency first, which to me, I don’t agree with, but I can see if you’re broke, you got to gamble a little bit too. So I see it both ways. But if I were to give my formal answer, like as your net worth goes up, you can take on more asymmetric risk types of deals such as crypto, right? Like I like investing in workforce style, housing that’s cash flowing day one with a little bit of value add it’s nothing crazy. There’s a great return. And more importantly, capital preservation there. And that’s what I base my portfolio off of. I can sleep at night.
I don’t have to worry about it. But now that I’m more of an accredited investor, I don’t need the cash till this is it a ride, so I’m more inclined to go after more asymmetric risk deals such as developments. I’m not a big fan of venture capital. I think that’s just a crap shoot.
Total crap shoot. Even though maybe you could make more money, I’m just not into that. It’s just not the type of investor I am, but as your net worth goes up, you start to get a little bit more ballsy with your investments to use that technical term. And this is a trust fund kids with second, third generation wealth do. They just don’t care. Because they don’t know the value of the money. So they just gamble it on these sexy like developments or these asymmetric risk plays and yeah, they’ll probably be, do fine. But what do you do when you’re first-generation wealthy and your net worth is under a million dollars, you cannot sustain a loss or you just have to build the slope food in a way with cash flow and minor value add. Probably not what people want to hear because it’s going to take time. It does. So what’s the recommendation? So you talked about that you followed the path, right? So go to a good college, get good grades, get a safe, secure, stable job. What is your prescription to a good life? I’m not a big fan of college and all that stuff.
I hang my degrees upside down on the wall for a reason and they’re not displayed behind me. But, you know what? I will admit that my engineering job allowed me to get paid pretty well out of college. And that was what I parlayed and threw into my investments to get me the lift off the ground. I do regret the time that I spent studying, but it was necessary to get that job and the salary.
And I guess what people need to realize is what is your highest and best use, right? If you’re already a doctor or dentist, sorry, buddy, you’re better off just doing the surgeries, keep working. Cause that’s your best ability, your highest and best use to make money, to parlay into passive investing it.
We all have to trade time for money until we have enough money invested. So our money works harder for us. The same money, never sleeps is entirely true. It’s just, most people don’t have their money working for them. Money should be working hard for you. So if you don’t have money, sorry, man, you can’t invest.
This is real estate investing. You need money to invest. So most people are in the square one phase where they have to make money too, to invest it. And for a lot of people, those things are likely in that stage. But as you just slowly move from ordinary income to passive income, you need to realize if your spaceship is going fast enough so that you can hit escape velocity.
And what is your escape velocity? It’s different for everybody. I live a very frugal life here in Hawaii. I don’t buy any stupid things other than a kind of nice car. I don’t spend more than a thousand dollars in a car payment, but that’s like my one vice, I guess I don’t buy a house to live in. I rent because to me it makes total sense here and I can get a good deal on it.
So I don’t need to go very fast to hit my escape velocity, but everybody is different. So people should go to college, get good grades, get an active W2, and a job so that they have money to invest. If they’re smart, if they’re not very good academically, they should perhaps be an entrepreneur and try that route.
I don’t have kids where I can advise them accordingly. But if I had a dumb kid, I’ll probably, Hey man, like I don’t, that’s a psychology degree, probably psch major, or this art, Asian history studies. Maybe we should save $50,000 a year. And perhaps you should just try this, be a landlord and try.
And I’m not saying they should flip houses or anything like that. But this is what we help. A lot of our folks do in our mastermind group is like, how do we groom that next generation, to be a good steward of their wealth, but we have to get them to build skill sets and also show the ability to trade time for money, to be a contributor to society before they step into full-time investor so they appreciate the cash flow.
Yeah. I was reading a book by Chris Hogan and he talks about how he has spoken to 10,000 millionaires across the country. And one thing that he sees across the spectrum is that most, not all, but most of the millionaires didn’t go to top colleges. And the way it is useful is that you don’t want to come out of college, paying down debt in the initial years of your life, because that’s when you should be investing in your wealth.
And the longer your wealth compounds, the bigger the snowball effect you have, right. He’s entirely right. But I think that statement is a little skewed. I think it’s no secret that if you asked most working professionals, those people will not really become millionaires unless they are extremely frugal, right?
If they keep investing in the wall street garbage and doing everything that. Financial dogma says they’re going to do, it’s gonna be really hard. They’ll probably get over a million dollars. Million dollars is not that much money, but they certainly won’t get the four and a half million dollars and achieve true financial independence.
But what Chris Hogan is saying is right, like the majority of those people have beat that threshold probably two and a half, $3 million in the future, or people who’ve gotten off the beaten path and stopped taking a salary. Now I am a proponent. I advocate for a lot of working professionals, like for all those millionaires are probably 10 to 20 to a hundred of guys who are just complete deadbeats that are watching preneurs.
This is 2020, 20 21. If you’re an entrepreneur and your LinkedIn profile, dude, I know you can’t find a job. You probably don’t have a college degree. Yeah, he’s incredibly right. Most people who don’t have college degrees are going to be that higher stuff, but a hell of a lot more people are going to be just total wash outs.
So that’s why I like college because college has the ability to take average below average people and run them through the system. And they come out contributing helpers to society, they come out with a decent paying job and they will achieve a certain level of comfort in life with a set job. Just to be clear, he talked about the good colleges, but not the most expensive colleges.
That’s what he is saying. Okay. Yeah. I think, college and high school are basic academia stuff like colleges, like the new high school, one could argue. You gotta be, have some level of aptitude to run a business or even invest in real estate. You don’t need to be a rocket scientist, that’s for sure.
But college is not much these days. Everybody has a degree. Let’s shift gears a little bit Lane. In this climate when everybody’s talking about how it’s a sellers market and the markets are becoming hot, tell me why do you like real estate in this climate?
It’s a fixed commodity. I think inflation is definitely coming. I already see it on the price. I pay for a stick, a lumber, so the Fed is pumping all this fake money into the system. That’s why the equity markets are so high, despite, the economy isn’t really going full tilt yet.
There’s all this fake money going into the system. And I recently saw a graph of how much money was put in, talking like several trillions of dollars. I look back to 2008, right? The last time they did the same. It’s nothing compared to what it is now.
Like I think that there was something weird going on that they had to cover it up, but it doesn’t really matter. The whole point I hear is they throw in a whole bunch of fake money into the system and it is what it is. The government can create however much money they want. And it’s a great way to make our debts from other countries disappear.
And we can do this because we control the world, monetary policy, all those people are like, oh, it’s still going to end. I don’t think it’s going to end. It’s just going to keep going. So get used to it. But what’s going to happen is our money is going to be devalued. And so what do you want to do?
If there was a storm coming, what would you do? You’d be under the house, but if in this case there is inflation coming. Maybe not in the next few years, maybe not in the next five, 10 years, but it’s coming. What do you want, what do you want to do to hedge yourself against that? Will you want to buy commodities that will also go up when the tides go up too.
And there’s a menu of options, right? Go crypto, real estate. I personally will choose the one that’s also going to get the cash flow that I can like also like value add, right? Again, value add like crypto. I’m buying the same thing that a 14 year old kid is buying on his app, gold doesn’t cashflow for me.
And I can’t leverage this stuff as effectively and prudently as real estate too. And that’s another one and the tax benefits. If my crypto goes up 50%, I have to pay half of that to the taxman. If gold goes up, same thing, but in real estate I’m able to play these levers and shelter those games. I don’t have to make as much gains.
So, if my real estate goes up 10% and like my friend’s crypto goes up 20% at the end of the day, I feel like I’m still ahead. Despite what’s in his bank account before he pays the tax, 100%. I agree. And one thing that you have mentioned, but I just wanted to make clear for our audiences that when the Fed is pumping trillions of dollars, that’s a lot of money folks.
You’d rather be a borrower because what happens is that if you buy a hundred thousand dollars worth of property with $20,000 down and $80,000 of loan, the value of those $80,000 diminishes with time as there’s more money circulating the system. So that helps you, not only that with inflation, the value of a property also increases in absolute terms.
We’re building a multifamily apartment right now and we’re getting killed by the price of lumber and it’s just eating into the contingency and it’ll be fine, but it’s kinda like one of those things where it’s when we build this damn thing, we actually in, take these stupid pieces of lumber and build a house with it, shelter, like it’ll be worth way more because the price of inflation is just going to keep going up and up. It is what it is. And I think it’s also important to ask what you do not want to do? Or what you don’t want to do is just sit on cash, right? Dead equity. Some people will say I have it in my house.
I’m like you can also own the same amount of house and you’d be leveraged, take a heloc, invest it, get a refinance, pull the equity out, also invested in more houses. So you’re even more hedge against inflation. And this is where it hurts. A lot of people have a lot of equity in their homes.
A lot of older people have a lot of equity in at home because that’s what they’re told to do. And that’s the people who are gonna just get jerked around by this inflation. And some people say it’s like the complete conspiracy there is to say oh, this is where the Illuminati, or like taking money from the poor.
And I was like, I don’t really quite agree with that. But I don’t believe in the boogeyman, but regardless that’s what’s happening, right? The poor are getting poor because the poor are unable to put money in things that will go up with what the impending doom has happened. And that’s a sad thing.
They buy things like iPhone trucks, depreciating assets. This is going to be one controversial episode, but I’m loving it. You’re very authentic Lane and I’m enjoying our conversation. Yeah. Until I get some of those trolls right. There is no such thing as bad publicity Lane. Could you talk to us about, we talked about your journey, we talk about the mindset, but if you were to distill your journey into your four bullet points, could you talk to us about what is the secret ingredient for success?
I think for me it was like finding the right tribe. I was investing from 2009 to 2015 all by my lonesome. And I was like, I’m still an introvert. I thought I was super cocky and smart. And I thought like I was going to get super rich by getting 10 Fannie Mae, Freddie Mac loans, 10 turnkey rentals.
And then I thought that was like my path to financial freedom. Then, as I mentioned earlier that that ain’t the way to do things, that’s not what accredited investors think. But I think one thing is empathy, I feel like it is a big thing. Like knowing that you’re not almighty and you always have an open mind, I’m confident I will get it wrong.
And I think that’s important for people to have, but. I’m always listening. I’m always open-minded. Sometimes I have to catch myself that’s wrong and then somebody said I tried this and I always had the catch myself. Cause I’m like, no, that’s wrong.
Shut off in my head. I’m like, I don’t actually say that. But I’ll think about it. And I’ll be like, okay, why are they saying that? Do they have any context? They have any experience, perhaps I should listen, let me go back to the numbers and try to figure this out.
That makes sense. As opposed to incredibly like shutting them off. I think that empathy is a big thing. I’m binge-watching a lot of this show called bar rescue. People watched it. It’s like where this guy goes into the bar and he likes to fix their problems, puts a new drink on the menu.
And it’s always a people person. And you look at the owner, the problems always stemmed from like the owner never has good empathy. They can’t look at themselves and see that they haven’t perhaps an issue. And then of course they need to have the ability to change and take accountability.
I think that’s also the next part is taking accountability and not just blaming it on others. So the ability to change and adapt, if you can change 1% every day after your shoot, you’re like 27 times better. Lane, it was wonderful talking to you today, but before we go, could you tell us where people can find you?
They can go to simple passive cashflow.com as my website got a lot of free goodies there for passive investors. My podcast is simple, passive cash flow, passive investing, and my email address is firstname.lastname@example.org. Thank you Lane.
There, you have it folks today. Lane talked about the path, the traditional path that people have talked about, how 401k is not his favorite investment vehicle investments, inflation retiring at 61, and how you can do better.
You talked about how you can use real estate for four benefits, accelerated depreciation being one of them. He also talked about empathy. Open-mindedness, ability to listen and confidence as one of the key drivers of his success. Lane, it was a pleasure and honor having you on our call.