Today’s podcast. You’re going to be hearing me being interviewed by another guy. And the reason why I wanted to share this is because it was actually pretty good. I go on maybe several podcasts as a guest speaker every week. Which puts our brand out there and really helps us attract the best people to come to our events and join up with our community, which we highly vet people coming into our group.
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Everybody gets a free strategy session. After that, you’ve got to pay for it. A lot of people out here and you’ve got to spread the wealth. A lot of folks have been listening to this podcast for four or five years now. And it’s always cool to interact with people.
And that’s been my mission that I’ve realized as of late if I can just get on the phone or a zoom call with someone for five minutes and let’s talk some stuff out. There’s so much bad financial advice out there. And a lot of the stuff that the wealthy people are doing, investing in good deals, using real estate tax advantages to pay little to no taxes, say it that way.
And infinite banking, you add those three combos up. It’s a very powerful thing. And a lot of the things is, finding other mentors and people doing this. You guys can check out our events at simplepassivecashflow.com/events. It does cater towards the family office ohana members.
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And then hopefully we’ll see you guys in Hawaii in January, they’re treated, it’s going to be barring any fourth, fifth pandemic again. It was a great experience last year and what we should be wrapping up the promo video we created. And for a lot of you guys, who went on the trip.
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We’re going to talk about counterintuitive wealth rules that the rich follow. Lane has a unique way of talking on this subject and you have experience in this topic Lane. But before all that, before we get into the meat and potatoes of the show,
let’s talk about your past and how you got started in real estate. So currently I run apartment syndications that currently have over 6,000 units today, but, where I started from was back in 2009 when I bought my first rental property. I grew up in a household where we’re taught to be very frugal, go to school, get a good job.
I eventually became an engineer because I followed this linear path, right? All this financial dogma, go buy the house to live in. I eventually started to rent it out. And that’s where I got this taste of cash flow and I eventually bought more and more of these turnkey rentals out of state for cash flow and then often a little bit.
Awesome. Yeah. You took the traditional path of becoming an engineer. What was it like to go to school for that long and then arrive to the realization that you weren’t where you needed to be. I got to my freedom number and I was still working and I had changed jobs a couple of times. In the beginning, I worked for a private company. I guess that’s where you learn the most as a professional, but I searched for easier jobs to work at . So I’d have more free time to do what was really important, which is the real estate investing part of it.
So I eventually created a nice lifestyle where the jobs are pretty cruise and, it was able to invest passively. Eventually I got to a point where I started to do bigger deals, started jumping other people’s money involved and therefore even needed to turn it into a true profession and spend all my time doing it.
That was where I finally quit my job back in 2018, I think, and never looked back since. I think the hardest thing that a lot of people talk about when they make that jump. Especially if you’re a high paid professional your identity is wrapped up. I wasn’t engineered to introduce yourself.
You say you’re an engineer. And part of it is that baggage or that identity, you went to school for a dozen plus years to be this profession. And you feel like you’re just throwing it. Yeah, certainly I feel that way too. I’m still in my full-time job as a CPA.
And when somebody asks me what you do, it’s hard not to say, oh, I’m an accountant. Oh, I’m a CPA because I don’t really know why it’s just so ingrained in this, we spent so much time acquiring this credential. And so we just, we want to share that, but it’s less popular to say, oh, I’m a real estate investor or go into that for some reason.
I think it’s the way we’re just brought up. Would you agree? Yeah, because it’s like 2021 now, right? If you’re an entrepreneur on your LinkedIn profile, we all know you don’t have a job, you can’t find a job, you’re unemployed and by having that professional title, society gets you a certain amount of notoriety.
I was thinking the other day, I was watching a commercial on senior housing and I was imagining if I was really old, what would we talk about? But we talk about how you know Jerry over there with Jerry was the doctor or Barry was the engineer, so much of it is predicated on your titles of your occupation. And when you get to a search important, you give that up, most people get to that stage where they are financially free. They don’t give a rip anymore because they’re FII and they don’t live by normal society kind of values at that point.
They’re just titles and knots. Yeah. And it’s interesting, if you traveled to other countries, they’re more defined by their family. So they talk about their family name, but in America it’s we’re identified by our occupations and it’s just a different, different way people identify themselves for sure.
These days, I’m kinda like you know what, I am, what I am. I don’t care who you are. It seems funny, but it’s like what car do you drive? What’s your net worth? That’s all that really matters. I know that sounds very shallow. But, as a real estate investor, you need to stop.
You’re getting off the beaten path and we just stop caring what other people think about you. And we could certainly dedicate the whole show to that, certainly. But today, specifically again, the counterintuitive wealth rules that the rich follow. Before we even dive into what these rules are, why did you outline this?
Why did you basically discover this so early in life, like how did you stumble upon these wealth rules? Yeah, so I went out, bought a rental property, and got around 2015. I had 11 of these rentals and at this point I just was doing it all by myself. Around 2015 was when I finally got out of my shell and started to interact and network with other pure passive high net worth investors.
And for me, it was a game changer because now I started to really get a glimpse of what the high net worth folks do. And what I realized is a lot of what they do is very counterintuitive to what we’re all taught right by our parents, school workers, friends. And the crazy thing is like a lot of these things work.
They’re very attainable. It’s not something that anybody can’t do, but there are certain financial dogma out there that totally tells us it’s the wrong thing. For example, not going into all this debt, getting whole life insurance or buying a house to live in. We can talk in more detail about these things.
Another example is like the wealthy don’t do these thinking retirement accounts, that’s for suckers, it’s like in the first year that you’re like stop, I can’t take money on a retirement. That’s an absolute sin. My friends and family. But I’m just saying, Hey man, like that’s what the wealthy do. I just figure out what the wealthy do and take the best practices and make sure that it’s logical from a numbers perspective. And I just go with it. Yeah, you’ve figured out what they do, and then you just copy it. It’s not like you’re reinventing the wheel, you’re just copying and pasting what works.
So let’s dive into that wealth rule that the rich follow that is counterintuitive to our culture. You mentioned on your website, don’t buy a home to live in. Okay. Can you unpack that? Because that’s certainly counterintuitive, let’s use the art type of the young professional.
This is who it really hurts. A house to me is a kind of a financial drag on your finances. You put this big lump sum down payment into a house and it doesn’t really grow for you. Conventional financial wisdom will say you’re putting money into this house and its growing equity.
Yeah, you could put it into five houses, right? And the crazy thing is that it’s you paying money for the mortgage and putting your heart, sweat, and tears and sweat equity into there. You have five families paying this stuff for you, putting their sweat equity into your wealth building. And that’s the big difference.
It comes down to paradigm shifts, right? Most people listen, most people in the water are really bad with their finances and can’t seem to save money. Sometimes it has to do with their saving skills, just basic personal finances and budgets, other times, it’s that they just, quite frankly, don’t make enough money.
And I’m speaking more towards the higher paid professionals out there, you guys make a good salary. You guys are living in a different paradigm than most of America and most of America, if you give them $10, they’re going to spend 11. They are irresponsible from a financial perspective. And not to say and not to cast any judgment or anything like that. But for those people, certain sets of rules apply. And this is where Susie Orman and Dave Ramsey’s. I don’t like their advice, but their advice is good for this subset of people that aren’t, haven’t really got a grasp on their basic finances.
So for those types of people, a house is a forced savings account, you put money into it. And it gets their grubby hands off a bear from spending it and that’s the benefit to that. But if you’re like, a lot of my clients, they are that diligent savers or the max out, their 401k guys, they save at least $30- $40,000 a year.
Now these are the different people on the other side of this paradigm that should go on the offense and invest money in assets, as opposed to just sink it down into their house. You mentioned a valuable term there often. It’s a difference between defense and offense. There’s two ways to pay money, right?
You can either go on the defense and try to save and cut your life back, which works for a lot of people who are, high thrill or they just want, they don’t have a lot of discipline, but if you want to truly get wealthy, you have to play more offensive, which is focusing more on income than just cutting back.
Tying it back to don’t buy your home. Do you believe that just because it’s a way for you to just tie up all this money without producing income. What’s the exact reasoning why maybe a 22 something that 20 something that just got a high paying job. Why should they not go buy their own home?
It just comes down to numbers, right? I’m like all right, show me how the numbers grow by you sinking your money into your house, right? So just typically real estate goes up and appreciates, right? And I think that’s why it’s such a forgiving asset class, you take that same money and you go plunk it down in real estate, properties or syndications and you show me what’s in the five, 10 year picture. How that money grows. The numbers don’t lie here. That’s all it is. Some people will say renting is like throwing money down the tube. That’s the biggest bunch of baloney I’ve ever heard. Yes, myopically it is.
But what if you’re taking that money and you’re making way more money on the side and rentals or syndications, you need to look at the bigger picture. I try to model the way. I rent my net worth is pretty decent and I have a sort of a feeling where I don’t think people should buy their primary residence unless a certain net worth is at least two times.
So the homes about their net worth needs to be two times the home’s value. That’s what you’re saying, right? So if they’re buying a $700,000 house, their net worth better be, at 1.4 or to me, it should be three times or more, but right. At that point, then you can start, like a lot of this wealth building in the beginning is the most critical stage when the net worth is under a quarter million or under a million dollars.
You can’t be screwing around and doing these like bad financial things, like buying a house. But once you get to a certain tipping point and it’s different for everybody, once you’ve hit that sort of almost escape velocity. Now you can take your foot off the pedal and start drinking some caviar, champagne, and buy a house to live in or buy a nice car.
That’s the beautiful thing. Go, Penn, buy a nice car. If you have the cash flow to support it. And you’re already past that critical point. It’s all about rate of return and rate of return is very important, especially early in your career because you don’t have a lot of capital to work with. So you need a higher rate of return to make the same amount of money than say a very wealthy person would. So what you’re saying is instead of plopping down 30, 50, a hundred thousand dollars for a down payment, deploy that in other cash flowing assets. And let’s say you’re making $2,000 a month from that.
Would the down payment, but then you’re paying 700 and rent while your nets 1300. Is that kind of what you’re saying? That’s the logic, but then we run into, I coach and counsel a lot of folks, and eventually what it comes down to is the people that are listening to the podcast, understand what we’re talking about.
They get it, but they cannot convey and communicate this to their spouse, the anchor, and they cannot effectively bead and manage and, take their family to where they want to be if that’s their goal , maybe that’s just the, the stoic within me, the obstacle is the way you got go through this and you can’t just, buy things that you want on a whim, like a house.
You have to do what is necessary to get to where you’re at and if you’re under a million dollars net worth, you’re broke and that was a derogatory term, but like you got to do stuff that you probably don’t want to do to get to a certain point to be financially free, if that’s what you truly want.
Yeah. You have to think counter-intuitively about what we’re talking about on the show here. So the second pillar that you mentioned in one of your online resources is you don’t buy mutual funds or other wall street products. So you’re singling out an entire type of investing here. Like we’re talking stocks, ETFs, bonds.
And so why do you hold that position? Because that’s very current counterintuitive. Yeah. When I started investing, I was making maybe 20, 30, or 20 to 30% returns on my money, just with a simple rental property. People don’t believe me. They can go to simple classic housel.com/returns, check out the video on the whole math.
But just go with me on podcasts land and here I am in my early twenties and I. Why am I need to put my money in this, like supposedly like stock market, for what case mutual fund stuff, when I’m only making eight to 10% and it goes up and down like a freaking rollercoaster, for me, it was like, no clear picture than that. Why the heck would I want to do that? If I just do take a little due diligence and yeah, sure. I’m getting off the beaten path, but it’s not that hard. It’s simple, passive at some point, and I can make much higher returns by doing this on my own. Why would I not want to do that?
And then I started to uncover that the whole system is engineered to keep us investing in that garbage before one K’s weren’t around earlier than the eight, 1980s, it was an engineered thing. Yes. It was to get people to actually save their money. The people on that side of the.
But it was a way for all these mutual fund companies like Fidelity or Vanguard or Charles Schwab’s to get it that all this money is sitting on the sidelines from the average Joe. Joe wasn’t able to get involved in the stock market, but now all these companies are able to get at these people’s money and they take their money at huge hidden fees and carry interest.
And what the average person doesn’t realize is just getting robbed in their sleep, getting this stuff, and nothing is not clear. I’m only making eight to 10% of that stuff. And I’m making such a bigger return than doing it on my own. Where did my money go? went to those big buildings and went to these high salaries for all these Ivy league grads who work in these ivory towers.
If you want that stuff in, you’re okay with those returning to school. But I realized, that the man behind the curtain, the wizard of Oz, referenced that it’s, this whole system is engineered to keep us in this. Because if everybody said what I’m preaching, go buy a handful of rentals and eventually get involved in syndications.
Most people are able to get financially free in less than 10 years if they make a halfway decent salary. At that point Ooh, what choose to go to work in a cooler, build our bridges, who would play doctor for us? Who would push the government paper up. Nobody would write.
Maybe some, but I wouldn’t. Yeah it’s sickening when you think about it that way that there are things in place to get people to do things for long decades, and then you eventually retire underwhelmed at what you’ve built your life towards. Yes. What frustrates me is like, there’s so much here’s some of the dogma that kind of prevents us all to do this right.
And it’s built in grading society. Let alone all the marketing, which you pay for as an investor comes out and hidden fees, part of the operating budget of the mutual fund or the broker. But people say you don’t want to take money out of your retirement. That’s a sin.
You can’t do that. You’re not, you can’t do that. But when I did. To me, it made sense. I’m going to take my money out, but I’m not going to be a bonehead and go buy a car or a jet ski with it. I’m going to keep putting it towards long-term assets that I don’t intend to use for a while.
I’m not taking the money out. So you can call it retirement money or not. It’s still my, my, my asset column. And then they call like, when you take money out, they call it like a penalty, 10% penalty. But to me, I was like, If I can recoup that 10% penalty in six months. And after that, it’s all gravy. Why the heck wouldn’t I want to do this.
Yeah. And so you were basically taking money out of your 401k and investing into real estate. When you discovered this, did you withdraw all your money from your 401k? I actually didn’t do this for quite a while. I was just, I was worse off than probably some of the listeners. I was always taught.
You never touch your retirement funds, which is complete bullshit. So it took me, I had bought several renters rentals up until that point until I finally pulled the plug on the retirement funds. I wish I would have done it a lot sooner, I was a good boy. I was like, you don’t do that type of stuff. You don’t pull your retirement fund and take a 10% penalty, like that’s just stuff. You’re not conditioned to. And yeah, I’m the person that preaches, do you run your numbers? I’m the one that saw the numbers, but I didn’t do it for such a long time. So I get it.
I know how hard it is for people to get off the beaten path and think alternatively, but, think for yourself, do the numbers yourself, that numbers don’t. And on the positive side, if you’re a person who has worked for 10, 20, 30 years by now, and you have a sizeable 401k balance, go ahead and try to tap into that through a self-directed IRA, certain options that, I’m not qualified to speak on, but there are ways to tap into those funds and diverted and.
Real estate or syndications like you’re involved in to get that higher return. So if you’re earning eight to 10, maybe you can get 20 to 30. So yeah. Yeah. Let’s talk about that a little bit. Like I think one thing is like getting out of the retail types of options. So all the analogy I like to use is when you’re investing in these brokerages, it’s like the cafeteria in high school or at least at my high school.
You have, you’re stuck with the school lunch. You’ve got only the options that they have and typically it’s crappy food and it was really expensive. But what do you do when you get your off campus pass? Which is synonymous with investing outside of these brokerages, investing in CrossFit real estate on your own in a year out there, you got your car.
You’re going out to Burger King and McDonald’s KFC, right? It’s cheaper food. It tastes better. The one thing about this, an analogy where it breaks down is it’s not healthy. I think people get the analogy, right? Like when you get out of your money, out of that retirement fund stuff out of the mutual fund stuff, now you can go invest in actually good investments or people aren’t robbing you blind with all fees and stuff like that.
So you’re going from a retail investment. So non retail, it’s like people that buy stuff at sex. It was like, I got a shirt there for 34 bucks. Cause I had a gift certificate, but I can get that same shirt elsewhere on Amazon for five bucks. It’s crazy why anybody shops there, but that’s how most people invest and that’s how a lot of people shop.
But now we’re talking about all right, so you can invest the money through a self-directed retirement system. So yeah, you could still keep it in the qualified retirement plan, retirement money. But invest in things outside the garbage cafeteria investments, such as real estate. But one thing I help clients is that every situation is different.
So a retirement plan typically is not the way to go. Because when you start investing in larger deals, you can get the tax benefits of passive activity losses. You can’t use the passive activity losses to offset your passive income or your passive or your ordinary. Which is a big strategy for the high net worth high income earners.
So when you’re investing in this retirement plan construct, for a lot of those guys, the best plan is to get it out of there and invest cash. So you can take advantage of the tax benefits of. Right on. Yeah. Yeah. Thanks for sharing that. And back to your analogy, I just want to add, where the marketing dollars are, that’s where most people will be.
Okay. So like the fidelity, the Vanguards, they have the biggest marketing budgets. And so that’s where most people invest. If you take, for example, in the grocery store, But the biggest food companies have the largest marketing budgets. So that’s where most people will shop. It doesn’t mean it’s the best food for you, or it’s the best investment product for you.
It’s just where those companies have invested. So once you get out of that realm and you can see the horizon, the, all your options as they are, then you start to realize like what a lie you’ve been sold on, this whole time. So it’s pretty, I don’t. Marketing kind of makes it where it’s like really this whole investing thing is really complicated, right?
To scare the crap out of you. And I tell people, investing is not that hard, especially when it’s real estate, right? Where are you investing in a commodity, such as a house that people rent it simple, passive cash flow, but like these brokerages and all the investing dogma make tries, they try and make this stuff really complicated.
And investing in stocks is complicated. My opinion, which is why you don’t. And th and I think that’s where a lot of people get intimidated, right? They’re like, oh, I don’t understand math or understand the stock stuff. So I’m just going to give it to the guy in the suit that seems to know what the heck he’s doing.
And that’s exactly what they want. So I think my message is like, Hey guys, I think that’s complicated, right? Don’t get bamboozled into thinking. You need to go with these seemingly smart people. Like your financial planner just gets paid off. I haven’t found one financial planner that actually has made their wealth outside of selling.
People are salesmen. Actually I have, and they invest in real estate, hit backdoor. Yeah, I once heard that the average salary for a financial planner is 70 or 80,000, but yet we’re putting all of our eggs in one basket for them to teach us how to get rich. And it just doesn’t make sense.
So definitely you have to follow who you are. You have to watch who you are, following who you’re getting your advice from. And if you’re getting advice from somebody who is making money off you via commissions, that’s probably a bad sign. And that’s what we see a lot in the wall street in those wall street products.
So that’s why we caution you. Okay. 100%, you only take financial advice to people who are not financially free. Unfortunately, this is not your parents. This is not your coworkers, especially the coworker that’s been there for 32 years. You don’t want to take that financial advice from that sucker.
He’s been stuck there. And sometimes this can carry you forward to CPAs lawyers, right? Bobby should have said the whole disclaimer, or we’re not CPAs are not lawyers, but look, I’ve left my day job during this stuff and figured this stuff out. A lot of CPS and a lot of lawyers, they fit.
They’re still stuck in the day job. They’re still working trading time for them. There’s very few financial professionals that have actually done so. Yeah, totally. And CPAs, they know the tax rules, but then they keep earning money the wrong way. And that is heavily taxed. The lawyers know the legal rules, but then they don’t, take advantage of them or implement them.
So it’s You have to really be humble and maybe not come from that type of background to achieve wealth. Because if you know the tax rules up and down, or the law up and down, sometimes you just take it for granted and you don’t use it to get wealthy. Definitely agree with that.
Let’s get to the final point of this, the final counterintuitive way that the rich get wealthy. I want to talk about taxes. So you’re saying that generally speaking, the rich don’t pay taxes. I assume they may pay some taxes, but they don’t pay as high of a percentage in taxes as, for example, an employee or a self-employed person.
Why is that? And how do they do that? Yeah. They’re investing in real estate as the primary weapon to lower their taxes. So real estate is cool because it’s the one asset class out there that you can deduct the price of the improvement over, if you have a rental property at 27 years, so you can take that paper loss or a Phantom loss off of your passive.
Which is cool when you put this on steroids in larger deals that can do a cost segregation which kind of itemizes all the pieces of the building. At the end of it, you can deduct a third of the building value in the first year, right? Which now gives investors a huge amount of passive losses to now play different levers on their taxes.
Passive losses can be used to offset passive. Often, that more than offsets the income for that year, but also can create a surplus, a loss, which is a good thing. Now we’ve worked with clients to, like a lot of people will, we might implement, you’ll see professional status, which has a lot of things, moving parts with them. We’re not going to get into it, but now you can possibly unlock the passive losses to lower your ordinary. And that’s just one strategy, right? And there’s different types of deals you can go in, basically you’re going and you’re following the incentives that the IRS has put into the tax code.
The government wants us to invest our money and put our money in certain places. It’s our job. And with the help of our professionals to figure what those are, and also the best practices from our community or mastermind. Like this is what the wealthy do, they figure out what these things that the IRS wants us to invest in, put our money there and we can drive our adjusted gross income down or get different tax credits. People want to go and look at my taxes. They can go to simple passive cashflow.com/tax and see how much I’ve been paying the last several years every year. Some people will think that’s messed up, right?
To me, I’m just doing what the government wants me to do and you know what, and I’m the one putting my money into a lot of these apartment deals for workforce housing. This is what the government wants, right? We have no government housing for this type of stuff. They want investors such as myself to put money into this stuff.
And therefore I get great tax benefits from it. Whereas if you’re somebody who just puts your money into stocks, mutual funds, you’re going to have to pay taxes on that because you’re not investing with how the government wants you to do it. Everybody needs to pull their weight. If you don’t give, not putting your money in the right stuff that they want you to do, then you got to pay taxes, bro.
And unfortunately it’s the people, the hiking comparators that are getting killed by this stuff. It’s not the wealthy, it’s not the low, the lower end. It’s the shrinking middle-class. So they’re going to be killed with this stuff because they’re not following the breadcrumbs. Yeah. It’s surprising that more people don’t talk about taxes and they.
They get their tax return and they pay what it says on it. And they don’t really think about how to lower that because it’s just become so big a part of our life. And, if you think about a hundred years ago, there wasn’t even an income tax a little over a hundred years ago. So now we’ve allowed the government to step in and encroach so much.
But for wise investors like you who know how to not cheat the system, legally take advantage of it then. You’re just going to be in the top five, three, 5% of people that pay little to no tax relative to their income. So it’s very powerful. If you can save 40%, which is, some people pay 40% taxes.
If you can save that, then that’s just more, you can circulate back into investment. So you just. Yeah, and this is like going out to the higher income earners and the higher net worth people, had a case where, a doctor wanted to like, they make pretty high salaries, like $600,000 AGI.
And by doing a few maneuvers, real estate professional status coming into some deals with larger bonus losses, we were able to lower them from 600 grand down to 400. I’m just saying, using these round numbers. And that affects them, saves them a hundred grand yet they’re wasting their time trying to learn some kind of short-term rental strategy where the best they could make $5,000, $10,000 a year.
And this is, I think, where people like they get confused. Because they see all these investing strategies. But they don’t really understand the high level. What’s really going to move the needle? What’s the 80 20 here? So for higher income owners, it’s more for. If the, exactly how you said if we could just move on from 600 grand to 400 grand, we just sheltered, we just saved maybe a hundred thousand dollars of taxes right there.
Who cares if they would’ve had 10 rental properties or 20 rental properties, in fact, right? Like it’s more kind of what moves the needle in terms of dollars and what your debt at the end of the year. And this is how the game transitions from a lower net worth investor to a higher net worth investor beyond.
Yeah. And I know you focus a lot towards you’re working highly paid professionals. There’s certain things that people need to focus on in different parts of their career. For example, if you make 50,000 a year, try to get that up. Obviously if you’re making 600,000 a year, you need to focus on getting that up, but also focusing on getting your tax down.
So there’s different goals that you need to take stock of as an individual. But I think the highest. Priority, you would probably agree. This economic independence is getting your rate of return really high and getting your net worth to that million plus mark to where you can really start to make massive moves.
Like things really start to move. And these strategies really start to make sense once your net worth goes over half a million. If you’re under there, do what I did. When I graduated college, I didn’t have one. I didn’t have very much money. And I had to just buy rental properties.
So from 2009 to 2015, I was just picking up these trenches on boats, myself. Yeah. So again, we’re talking about different advice for different wrongs, right? So to me like the split is anywhere from under half a million dollars to over half a million dollars now. If you’re over a half, a million dollars net worth, like you said, a lot more of it is taxes.
Of course, you still have to invest in the right assets. But when you’re below that, that’s where I was between 2009 to 2015. I had a good paying job, but I didn’t have any net worth at the time. So what did I do? I just picked up rentals, diligently and saved my money. I was able to accelerate through this pretty quickly because I was able to save anywhere from 50 to $80,000 for my day. I was an extreme saver, this is where I just picked up assets. And one turns around though after the next. And I think a lot of people don’t realize that wealth building isn’t a get rich quick thing. From 2009 to 2015, that was a long freaking time.
And, people expect to just go to the big stuff and skip over that. The crazy thing about this, like real estate investing and wealth building is it goes exponential. But yeah, you got to put in the effort in the beginning and a lot of it is just building your network up slowly.
And then at some point it takes. Yeah, it’s that compound effect, certainly. For example, you read books like the slight edge or the compound effect, and they talk about how, get up a little bit earlier one day or go to the gym one day or read 10 pages of a nonfiction book. You’re not going to see the impact of that.
Day, month, even year, but you are going to see that impact in five to seven to 10 years, like you saw in your financial life, right? In the beginning, this is all new to you, right? You don’t, you definitely don’t trust it. So you go buy a rental property. But after that, you’ve got to get another fine.
All your other lazy equity is, and that could be in your primary residence. So take a heat lock, get a cash flow refinance, deploy the funds for. Did money in your retirement funds, put that to good work or just, you’re just sitting on cash. Once you’ve got proof of concept to me, that’s where you got to invest more heavily and get more involved.
Because a classic example is like a guy invests $150,000 and he’s like, why am I not doing financial freedom? Do you need to invest more? This is not magic, right? It’s just a certain rate of return times how much money you invest. The rate of return doesn’t go up and down very much, unless you want to take a lot of risk, which I don’t recommend.
Therefore you just have to invest more and if you don’t have the money, then you have to save more and just take more time. But at some point you gotta start like in your mind, I be like pulling the goalie, or taking money out of the 401k. Yeah, absolutely. There’s hope for those people who have bought into the traditional beliefs of buying your home to invest in wall street products because you can always get those out through a self-directed IRA, simply cashing out your retirement account, doing a heloc on the personal residence.
The world’s financial, world’s pretty forgiving in that you can tap into these lazy equity items that you mentioned. That’s a great term for it. Lazy equity and turn it into high producing equity for you. Yeah there’s sorts of things that are reversible, that I would recommend for new people that are faint of heart.
The heloc or taking loans for your 401k or taking withdrawals from your Roth, IRA, your contribution. So you can take out tax-free because you’ve already paid your taxes and you can take that penalty fruit. So do that first, but once you’ve got proof of concept, now you need to start to look at the marquee of reversible things.
Like maybe you have a rental property, maybe you have a primary residence that you should unload, or maybe you just want to keep living there. So you do a cash out refinance. How much refinances you pay fees for, but it probably will make sense to strip out the equity and now invest it elsewhere.
Other irreversible things include taking money out of your 401k or retirement, but you can’t really put it back. You can, but only at a certain pace. And I don’t know why you want to put any more money into it once you’re taking it out. To me, it makes no sense. But you know that those are the two wrongs.
If this is all new to you, focus on the reversible. And then once you’ve got proof of concept, now you have to go all in on this stuff. Yeah. And that’s a great way to wrap it up here, but first before we let you go lane I want to introduce the last portion of our show, which is the triple threat.
And it’s the same three questions I ask each guest. So the first one is what has been the app or resource that has been the biggest game changer for your business? I like to go to docs. I dunno, Gmail. It’s just nothing special I use, yeah. Those are great tools for sure. I use them every day.
The second question is what has been the biggest lesson for you in the last year and why do you think that happened? I guess, like going to the pandemic, we showed how multifamily apartments survive this stuff. It’s a basic necessity. And it I didn’t, I was a little worried in April, may of 2020, how all this stuff would happen. I’ve ever been through it and done it before. And I was worried how collections would go, but collections came pretty well and occupancy did drop maybe a few percent points, at the end of the day, we still had cash flow.
If we keep, more than 50, 60% of the people have heads and beds, so work rules. No, I’m probably even more confident in the strategy of going after workforce housing, because, at the end of the day, people need a place to live. Population is going up, immigration is up and, it’s the shrinking middle-class or falling back to lower middle-class into these more value based upon housing options.
It’s what’s more in demand. Yeah, sure. There’s more cool ways to make money and like hotels or hospitality type of stuff. But I think we’re all reminded why that stuff is more discretionary spending and it gets killed in situations like this. Yeah. So absolutely you went through COVID, but you just have to trust in your assets, trust in your underwriting and carry through that will carry you through the storm for sure.
Question number three is our podcast is all about helping others achieve freedom with real estate investing, whether that’s financial lifestyle or otherwise. So what does freedom mean to you? Freedom is to do what you want, where you want with me. Why? I think something I’ve learned is when there’s kind of two people going through life and most people are the people who are trading their time for money.
They go to work every day. And everything is when they go home, they’re resting, recovering, going back to work, treating their time. Once again, until you’ve reached that point of real retirement. Many people retire, but they don’t have enough money at that point.
They’re just eating off their pile of cash. But people who’ve achieved that escape velocity, that critical mass to have enough money that regenerates and grows, whether they do anything or not, those people have truly gotten to that cog scenario. And for people finally, lucky enough to get to that point before the age of normal retirement age, those people get to a point in life that not many people get where they get the options to design their lifestyle and figure out what impact they want to make in the world if that’s what they so choose. To me in your life, really doesn’t start a show. You can like not having to go to a day job every day.
That’s definitely true for me. Your life doesn’t really begin until you have ultimate choice over what you do with your time. I don’t know if a lot of people would agree with that. Maybe you would like your job or otherwise, but I think it’s definitely something that we should all strive for and it should be in the back of our mind at all times too.
Because that’s how we’re going to achieve our higher purpose. Our higher calling is when we have choices, we can over time. Nowadays I understand why old people are grumpy, but they don’t have to put up with all this type of nonsense. People who are financially free, they can say no.
And they do say a lot of things that they don’t want to do. And that doesn’t really meet their calling and is not aligned with their values. And great things happen when you can say no most of the time. That’s a good way to end it. This has been a great episode on the counterintuitive ways that the rich get that way. I have appreciated your time and your expertise Lane, and I hope the listeners got a lot out of this episode. Where can people learn more about you if they are interested? I know that. That you mentioned a website simplepassivecashflow.com I believe. Yeah. They can check out my podcast: simple, passive cash flow passive real estate investing. In the beginning, I would talk a lot about rental real estate. But as I became an accredited investor, the topics of kind of change to syndications taxes, that type of stuff, infinite banking, or they can check on my website, simplepassivecashflow.com. Thanks again and hope you have the rest of a good day and hopefully your kid doesn’t give you too much trouble. Thanks Lane.