On today’s podcast, I’m going to be going over some family office concepts that I picked up from a recent family office workshop I attended.
So in this a workshop, they had a keynote speaker, Tony Robbins, which is cool. He’s been getting involved with cross-promoting with guys like Peter Mallouk. For those of you guys who have read his previous book. I don’t think he works with them anymore. I think he works at the sky agent cooped up, but all these guys advise high net worth, a hundred million dollar families and above.
Here at simple passive cashflow, myself and my other folks in my family office group, we are folks getting from 1 million to $10 million plus. There’s not really any groups for that so I decided to create it. If you guys want to learn more, go to simplepassivecashflow.com/journey.
So a lot of the stuff I’ve been talking about today are geared for those hundred million dollar net worth families and above. So you take it with a grain of salt and I’ll try and add in some color what really applies to the broke guys under $5 to $10 million net worth. For those of you guys checking out the YouTube version of this. This is just a part of the e-course. The ultimate e-course, which I’m going to add in the notes in here later on. If you guys haven’t checked out all the e-courses we have, including the free infinite banking one, you can check that out at simplepassivecashflow.com/banking and check out all the e-courses. If you go to the top, I think there’s a section for e-courses.
But here’s the first lesson that I learned. To get rich, you need to really concentrate what you do first. Now a lot of you listening, you guys are just salary guys. I paid salary guys. A lot of you guys make a hundred, 200, $300,000 a year plus per person. But the concept that they talked a lot about is, if they looked at the people who got up to the Forbes 40 lists. Your top billionaires and then you take a look at the people that left that list. I think you’ll find some very similarities where the people who got up though this, they were very concentrated. And the people who left the lists lost a lot of net worth . They did that because they weren’t diversified and what got them there was ultimately what got him kicked off the list. .
A great example, if you guys are familiar with Forever 21, it was like this Korean couple. They went all in on retail and just expanded like crazy. Some bad luck. Which of 2008 recession happened and the rise of e-commerce. But, what they should have done is they should have found a way that diversify maybe in the same industry to leverage their networks, current infrastructure but perhaps they should have diversified. I think they lost well over half of their net worth. They got a billion bucks I’m sure. But I think the bad way of taking this advice as being like I gotta be diversified. I don’t want to lose my money. But if you’re under like 10 million, a hundred million dollars net worth, I still think you’re in the “hey concentrate how you’re making your money” and you’ll got to that point where you really can diversify. Just important to keep in the back of your mind. Once you hit your end game number and for a lot of us in our family office group, the end game numbers, we’d be up $5 million.
Oh, so what does this mean for us? Since a lot of you guys are just salary workers or entrepreneurs, business folks focus on how do you trade time for money at the best, which is likely at your day job? But invest on the side to get you up to that certain point. Build up a portfolio of concentrated real estate was all a lot of the people on this top Forbes list got their money and they diversified it.
So another point I had here. I don’t have a BlockFi account. I have a BlockFi account but I don’t really invest more than a couple of grand in it. For me, it’s a waste of time, right? My time is better spent finding real estate deals. If you guys are working pretty simple, 40 to 50 hour a day job you’ve probably got some time on your hands. But no offense. Your time might be better spent, learning a little bit about Coinbase, BlockFis, D5 platforms playing a little bit of money on there than to deal with a bunch of turnkey rentals or something like that. If you guys make over a couple of hundred thousand dollars, $200,000 a year, I would say perhaps, unless you’re really ambitious and you don’t have kids, you’ve got some free time on your hand. You’ve got a little bit extra bandwidth and you find it fun. If all those things line up. Then yeah, knock yourself out. Learn the Lord bill bought it. I like the world of crypto was going, but for me, I’ve made the conscious decision as an operator of apartments that I need to focus on that and stay in my lane.
Another thing that they talked about was this concept of avoiding locker room talk or the common guy. What’s a common guy starts to talk about, deals or ” Hey, there’s this great startup company or tech company that’s coming up my friend knows them, he trusts them” or the taxi cab driver talking about some kind of deal, whether it’s real estate or tech or just some business. And you start to hear these wordings of ” we’re going to go eight to 12 X in the next few years but you got to get in now this is the last week”. It’s just a sign of a sucker deal and that’s what’s really hard. When you’re just some average guy, I still put myself in this category, you’re not getting access to good deals. You’re just getting access to these sucker deals. If there were not great deals, you and I probably wouldn’t really get access to them.
Whenever there’s like that false sense of scarcity, right? You got to get in now, man, there’s this crypto thing is going to blow up. That’s a sure fire way to know it’s a scam, multilevel marketing type of thing. We’ve talked about that the past and the investor letters where, groups will pump up one garbage coin and it just becomes like a Ponzi scheme where the first people who were in, they got out and then everything tanked as everybody’s in that kind of investing period.
Another idea they talked about was if somebody came up to shark tank, And with Mark Cuban, Mr. Wonderful and they use that same conversation line that we’re going to eight to 12 X in the next few years, but you got to get it now. You get laughed off the set in that situation.
For a hundred million dollar net worth families. Again, you take it for what it’s worth. The goal is to have eight to 12 non-correlated asset. In your portfolio. First question, what’s a non-correlated asset,? Non-correlated assets are like things that are not correlated with the economy. Now there are different varying degrees of this, but I probably put real estate. Commercial real estate in this bucket to some extent. Other pure non-correlated categories are life settlements. It’s a morbid thing, but you can bet on people dying as you buy out their life insurance and you get paid up when the person passes away. It’s nothing more sure than death and taxes.
Other non-correlated things are this is what the life insurance companies they invest in right. Large institutional class A assets, primate markets. Really nothing’s more certain let lower return than that type of stuff. 8 to 12 kind of seems like a lot, I think what they’re talking about is multiple deals. Spreading your net worth out and having each of those to be non-correlated or to like hedging each other within there.
Me personally, most of my worth is in multi-family apartments, which I feel like is pretty safe. The need for lower middle-class housing. I don’t think that need is going to be going away. In fact, I think that demand is stronger and stronger every day as our population in our country and the wealth cap increases. But, I’m nowhere near a hundred million dollars net worth, but I need to be thinking, all right, how am I going to start to take, maybe I don’t want the best returns, but I just want certainty. I looking for those non-correlated assets in the future. Some of this might be crypto, so it might be gold. I don’t do that stuff quite yet, but it’s something I’m thinking about in the back of my head. The other thing that they said is Cassius trash, and this is coming from the high net worth folks. Inflation is a lot higher than you think. Somebody mentioned that 40 years bull market in bonds in the last year, guys. Where now $128 trillion is globally looking for parking right now and you guessed it, it’s going into real estate. As you’ve seen, Blackstone and just picking up little rental properties, I think they’ll fail. They did this back in 2008 when the big institutions just aren’t really good at managing assets, especially small little ones when they’re all separate around. What they really want to be in is large multi-family apartments. Where they could buy them within big dozens sets.
Another point was don’t chase what is running. So crypto and tech are two things that are running in this point right now. We talk a lot about emerging markets buying in places where the population is growing because of some economic growth and that’s more from a geographic standpoint. But what they’re not talking about is more from the assets sector approach.
Real estate is another place where it’s always been even kill. People think, look, real estate is getting really expensive, but on all the highs and lows are pretty much smooth it up. Compare to tech bubbles and the crypto market. Try and look around what is the things that people aren’t doing? Something that I was looking at was maybe a development deal in New York. I’m not going to do that but like just thinking outside the box, right? Where is it that the unsophisticated money is not going into or is definitely afraid of. Maybe now is the time to go into shopping malls. No, I don’t really believe that I’m just joking there. That’s traditionally been beat up over the last several years, perhaps now’s the time to go into it. Getting outside the real estate world, what is something that people, the rush has got passed and gone.
Another thing we mentioned that the bond market is flipping. If the bonds can’t get the yield we want. Where do we go? So what are the high net worth families doing is they’re buying businesses or alternatives investments, the outer world. That’s essentially the world that I tell a lot of people to get into. Get off of the retail main street or wall street investments where you’re getting killed by all these hidden fees and carried interest.
Get into more alternative investments where you’re directly investing with the sponsors, cut out all the middlemen and get into more non-correlated assets because the problem with all the retirement funds and 401ks and all these mutual funds is you’re in this heavily correlated to the economy types of assets. It doesn’t take a genius to make money. In Tesla, when the stock market is going like crazy, like how it is because of all the quantitative easing and fake money. It’s always going to make a run. The point is you don’t know when it’s going to drop so smart families, what they do is they diversify and like you said, non-correlated assets.
One thing, bonds are a way to get cashflow and for people in our group, once we hit around three to $5 million net worth, our mindsets starts to to change. $5 million for most folks is enough money to just safely cashflow it. Maybe you’re not going to get 12, 15% plus, but you can save the cash from maybe eight to 10%. Take something like AHP, for example, you’re not going to load up your whole entire portfolio with non-performing note fund like that, but it’s going to be a small piece of your portfolio so you can get diversification and it operates like a bond. In a way where it’s just meant for cashflow and security.
But with the bond market going away and where do you go? The high net worth families, they buy businesses. Not really for the growth potential, but the business is producing that cashflow every single month for them. Take it for what it is! Some of you guys are probably taking like that I need to go buy a laundromat or I need to buy a carwash on those drive through car washes. Some of you guys, me personally, that’s what tells me is I’m going to go buy an apartment building or jumped into a syndication where I don’t have to do anything and I can get all the tax benefits without all the headaches.
Maybe some of you guys you’re a little bit more ambitious out there. Maybe you go buy franchises. From another perspective. What you want to be doing is getting away from ordinary income. That’s what you get from your day job, your 1099, as you guys contractors out there, you guys want to move from that spectrum to the passive income side so you can use these passive losses to possibly offset your income on that side.
Ajay Gupta, the guy that Tony Robbins kinds of self promotes with. I think there’s probably some kind of partnership there with referrals. All of these gurus, they’re just marketing referrals to other people in the space. I think Tony Robins used work with that Peter Mallouk guy, but there was some kind of scandal or something you guys can look up that type of stuff if you’re interested.
They asked Ajay Gupta what’s your asset allocation model and we’ll do this in our family office group. You know where it’s more applicable, right. People between one to $10 million net worth. If you guys join up that we’re not going to show you what people in our private group are doing.
But what I’m going to outline here is what Ajay said, what high net worth hundred million dollar families are doing I’m not saying it’s right or wrong. But when I go through this again, make sure that you’re taking it with a grain of salt. Y’all are a hundred million dollars net worth. You guys are barely even five or 10 minute dollars network. Don’t emulate what they do, but kinda take some things and maybe if you can emulate what the high net worth are doing.
First of all, he said 50% of his stuff isn’t real estate and of that the 40% which is the 80% of the 50% is in cashflowing multi-family self storage, like bonds, we were talking about earlier for cashflow. The other remaining 10% of the 50% or the minority port is 50% of his real estate portfolio is in land, which the purpose of that is to preserve value.
This is exactly what I’ve been preaching to you guys all the newbies, they buy land and I’m like that doesn’t cashflow. That’s what you do when you get to be five, $10 million plus, or what Ajay is saying here is a hundred million dollar net worth families. They don’t need the cashflow. They’ve got $40 million in cashflowing, multifamily and stuff like that. That they can afford to have some money just sitting in a land bank, not doing anything. This is what they do. This is probably not what you guys should be doing. 20% of their total portfolio are equities. Now this is the stocks. Probably on their own and mutual funds and stuff like that they’ve probably got private managers to do it.
But this is what the high net worth family is. The very small portion of their money. 20% is in stocks. It’s just, it should be shocking, right? Like, why is it that the average American is like 80 to a hundred percent, this stuff? This is where success leaves clues. Do what the high net worth families do and they are very small minority in equities. Probably because it’s just convenient, easy for them and they’ve got 50% in real estate cash flowing like crazy for them.
The next thing that they have is private equity. So this is approximately 20% of their total portfolio and private equity is seen as businesses, but not necessary the LP part. Now, when you’re a hundred million dollar net worth family and above, you can push your weight around and there’s a reason why you got to that point in the first place. So there’s some kind of operational value that you bring in that you can contribute in some substantial way to the general partnership.
This is where the rich are getting richer. These families will go into the general partnership, not saying it’s real estate. But more like operating business is where the family has built up at the network and the synergies and experience to add value in that system.
So for example, say you are a guy doing a pizza franchise and you make dozens of these things. You’ve got your net worth to 50, to a hundred million dollars. Something that I’m just making this up on the fly. Something that might make sense to you is going and buying similar franchises that supplement either it’s very similar business model to the pizza franchises, or it is a supplement or adds on and augments the returns of the featured franchises.
Maybe you go buy a bunch of breweries, I don’t know, and combine the two. So these are seen as more asymmetric returns. So this kind of counteracts the cashflowing assets the 10% of their luggage sitting in lazy equity and land. This is the asymmetric part of the portfolio where the private equity is somewhat speculative, depending what kind of business you’re getting into.
It’s not really like cash flowing apartments or anything like that. These are more like businesses. It could just fall. But these are the opportunity for them to grow their net worth even more. And but it’s also heads from the other side and in this thing called what they call this tailrace. Or you could think of this as insurance. So this was a new term that I caught on a little bit. So what they said is, Any bet that you’re making maybe take two to 3% of that bet and put it in something that hedges your investments. So that should your investment go bad. That two to 3% greatly increases to offset your loss. I’m not, maybe in the stocks, maybe it’s like kind of buying I don’t know what it’s called. Maybe like a call position or put position and something that does the complete opposite. Or. Maybe buying a business that kind of supplements. Or it’s the opposite when one does well, the other does well. So for maybe if you have a short term. Rental, maybe you have some long-term rentals. So again, this is the concept of tail risk. This is what high net worth families do, right? When you have a hundred million dollars net worth and above. When you’re less than $10 million net worth. I don’t know if you, if a TRS is really that appropriate. I don’t know if putting money in land, is that appropriate? But it’s just something to think about, right? When you go into a deal, what is some way, where are you putting some money? So if the deal doesn’t go as well because of the economy, because it’s correlated with the economy. That piece can burrow and make the hurt a lot less. Just some side notes here. And they said maybe they like two to 3% in crypto. If not real estate. Where do you go for storage of wealth now, real estate just checks all the box off this stuff. It’s a hard asset. But the reason why you would want to do maybe just a little bit of crypto is because maybe you don’t have the ability to operate real estate. Then you get into syndication. But then again, the question is what if you don’t have the ability to find good, honest people to work with? And for those people. You’ve got to look elsewhere. There, there are other groups out there that, they’ll teach people all about index funds all day long because their assumption is that you guys out there are unable to build relationships with people. If you guys have been listened to this podcast for quite some time, and we haven’t talked, you haven’t joined our investor group and sign up for our lists. What are you guys waiting for? That’s probably the majority you guys. I’ve probably have maybe two calls a day with you guys and we’ll continue to do so until it becomes too much. But if you guys are one of those people out there that listing for several years now, and if never really engaged with me, Yeah, like real estate, probably. Ain’t your thing. You’re just not a good people person. And that’s cool. You’re really losing out. But then, yeah, that’s, if you’re unable to play nice with others and build. Real relationships because for high network people, your network is your net worth. Then that’s what you get. You get the scraps go after your index funds and go off of that.
They say two to 3% crypto, if not real estate, where do you get the storage of wealth? Maybe they’re saying gold and silver, which is alternative to crypto. It suffice for the same thing, which is just a storage apart assets. And this is a big mistake I see for people that are under $5 million net worth. They load up on a large amount, maybe like five, 10% plus of their net worth in gold. And this is what I was saying. My first point was just because the high net worth people are doing this stuff doesn’t mean that you should be very careful. The people that you see, the gurus that you see on the internet, a lot of the time ask yourself, how are they making money? A lot of these guys will just be pushing out as affiliate marketers for gold and silver. And just trying to, scare the heck out of UC Bowen to gold and you buy from them that they make their three to 5%. So I don’t have any gold. If I were to, if I really wanted to hedge myself for currency and I wanted to. Just store wealth, which I don’t know if it’s very prudent. If your net worth is under $10 million. I’ll be do crypto. But I don’t trust myself to hold those cold storage wallets. So I’ll be doing it in an index fund, which sure. I’ll pay an expense ratio of 1%. There might even be some carried interest. There’s a lot of good ones out there. There aren’t really that many ETFs really yet. But very soon, I’m sure you’ll be able to get into this stuff where you don’t have to run around with a plate of engrave, You’re garbled means have your password and have to worry about that type of stuff. To me. That’s where I, I’ll pay for that convenience. And at least that I’m not the single point of failure to forget my password. Another important thing that these guys preach was reshuffling your asset allocation. Now this is, I tell a lot of people on our group write every year, take a look at your investments. Maybe 20% off that are your losers that don’t have the good return on equity. I’m going to say what’s return on equity. What if you have debt equity sitting in your homes or rentals? Get that out. Check out thePage@simplepassivecastle.com slash Roe for that worksheet there. But yeah. Reshuffling your asset allocation, figuring out what is your. Your most pain in the butt properties too. And then always be pruning it right. Selling off those assets, putting it into new stuff, keeping it fresh. Same thing that the high net worth do and something that they said that really stuck with me is. Do this, when things are good. Because selling the good ones. Is hard. Because essentially what you’re doing is you’re increasing the losers, right? But when things are bad. You’re going to be really wishing that you did this. Some of you guys might have, you started with, very crude at 5% of your net worth that the crypto. I still think that’s a lot, but now it’s 30 and 40% in crypto and you’re still riding that. But what happens when you lose half of it overnight? You’re going to be wishing you, what you put 25% of your net worth into real estate. Where yeah, you weren’t, you’re not going to make off potentially high return. But in that next. Reshuffle, which will always happen. You have it there. And part of this is just like mindset. If you’ve made a bunch of money in crypto or some other elsewhere or your business. What into somewhere where you can reliably make good cashflow and it’s a good store wealth. I don’t think anything is better than real estate. I doing this. And of course diversify it out over multiple assets. But, it’s kinda like this thing where it’s A lot of the stuff we talked about here from these family offices, maybe don’t apply to listeners here today. You still have to grow your network to me. Until you get up to $10 million net worth. Now maybe $5 million, you should have number, that’s where you’ve personally hit zero gravity or escape velocity. At that point, now start to change your portfolio to more the bond model. you’re going after more cash line businesses for cash flow, you’re going into asymmetric risks or limiting your aims to metric risk types of deals. Going into insurance, oh, yeah. I forgot to mention that. 5% of these guys’ network is in life insurance. That type of stuff. Infinite banking, right? That’s exact stuff we’re talking about. Simple, passive castle.com/banking to read all about that and get the free e-course by signing up there.
They also mentioned there was some follow-up questions too, but like NTS, that’s the big rage right now. And, they said They were very like, timeless about how they gave us advice. Because I think right now you have a lot of YouTube videos everybody’s into NTS is the thing that talk about. Other than AOC stress or write text or rich type of stuff. But they say collectibles have always got up and down and in waves. And, the NTS is just more of a virtual thing, but, collectibles, like art. Wine. Maybe not baseball cards. But the time these are timeless. Rare valuables that always come up in waves. And it’s important to understand when it’s high, when it’s low and now it’s high. So don’t be the. PETA sophisticated investing do not buy now. And they always, they said the same it’s always been a very timeless piece of advice to buy two cases of rare wine. Save one, but drink the other.
And they also close things out. And this is what we talk a lot about in our family office group is, more of the legacy creation teaching the next generation about wealth. All too often, I think what typically happens for first-generation wealth people is that. We spend all this time. Maybe we do it the wrong way. The 401ks mutual funds buying a house to live in right out of college, that type of stuff. Or as soon as we get money, ultimately it just we do this the wrong way where it doesn’t, it takes. Maybe to your fifties, sixties to get finally get financially free for most people. And in that time your kids have gone there. The. Once they hit 15, 16 years old, you’ve lost that opportunity to model the next generation. And that next generation. Sure. You’re going to pay for every means to go to that. To get college educated. But I think the problem is where you lose impact of the next generation on born generations, the grandchildren, because all their parents, all your kids are going to be able to teach them is how they went to college. And that may or may not be their thing. And we all know that what. Where they’re going to be putting their money, investing their money is going to be at the wrong places. They’re not going to learn how to make money. This is why, for a lot of people. That have joined our groups. I tell them, Hey. Give them that incubator investor e-course to your kids have them learn about this baseline level of stuff. They’re not a credit investors. Yeah. They don’t, they shouldn’t be going to syndications yet, but haven’t learned about the basics now to learn what’s inside the black box so that when they are passed on the wealth, They know about how rental property works. They just know basic business skills. And how the world works. And of course the last thing here is, health as well. The difference between somebody with a hundred dreams and only one is. In the, so the difference between someone with a hundred dreams and only one is their health. If you think about it,
Right now, a lot of you guys are healthy. But if somebody told you in the next few months, you’re going to die because you have some terminal illness. You only have one thing in mind, which is your. It’s just surviving. Unfortunately, most people make changes. In life until they’re forced to.
This can be said for a lot of things. Might them something. I’m thinking about lately is, the choice to quit my day job. And do this stuff full time. So people learn about real estate and get into deals. No, that was a big choice for me.
But once I made that choice. My destiny was formed and I moved along this path.
I, in that case, I made the decision. It wasn’t like a situation where things just got so busy and I was forced to do it. Maybe if you guys are thinking in the back of your head or something that you guys need to make a big change on, be proactive. Don’t be somebody who lets destiny force you into making that change. Make it yourself and control and all that. So that’s all we got for today, guys. If you guys like if you guys want me to share more stuff like this, let me know. And we talk a lot about this stuff every couple of weeks in our family office group. Which we don’t have any a hundred million dollar net worth families and above and nor I don’t think you would want to.
I think if you guys are somewhere between a million, 3million dollars net worth, that’s pretty much where the average in our folks are at. Everybody’s still working. Everybody’s really busy. It’s meant to be a side financial club onto already what busy plate you guys are working on. Every group out there they’re trying to teach broke guys how to get rich, doing big deals. There’s really no other group than our family office group where we’re teaching you guys how they just keep doing what you’re doing in terms of your highest and best use at your jobs, your salaries, your businesses. But how do you invest the right way and what deals to go into, who to stay away from. We help cultivate best practices for tax, legal then we connect you with the right professionals to make that happen.
But the biggest benefit is the network and as you start to create your own family office, start to emulate what the hundred million dollar families are doing and above you’re going to meet up to your group, the people that are on the same trajectory and on the same path as you. People you trust that you can rely on. More information on that, visit simplepassivecashflow.com/journey and I will see you guys next time. Bye.