The Wealth Elevator Method For Real Estate Cash Flow

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Hello everyone, this is Steve Bamport from Skeptics Guide to Investing.
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Today I'm guess we're uh graced with a guest, Lane Kawaka, who is uh a specialist in working with uh real estate investments and trying to set up um businesses and opportunities where you can generate cash flow and uh grow your wealth.
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So he's part of a group called the Wealth Elevator, and uh I think it will be give us a lot of insights into how you can grow your wealth and how you can manage to make your um financial well-being better.
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So, Lane, thanks for coming to us from Hawaii.
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And you're our first guest from Hawaii.
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So tell us what uh what is the key to growing wealth and going up the uh the wealth elevator?
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Yeah, thanks for having me, Steven.
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Um aloho, everybody.
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Uh yeah, so today we are a private equity firm with over$2 billion of assets, but didn't always start that way.
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Um I started working, I graduated with an industrial engineering degree.
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I think, you know, both of us are engineers.
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And, you know, we're both taught to go to school, study hard, invest in the 401k, and buy a house to live in.
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And that's what I did, right?
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Bought bought the house to live in.
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I didn't make too much at my day job.
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You know, some of these guys out of college make multiple six figures.
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I was like maybe one six figure, I guess.
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But I was really good at saving my money.
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And I, you know, was able to save like 20, 30 grand out of college per year, and was able to save up 80 grand a couple years out of college to buy a house to live in, you know, the 20% down payment.
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I I was so what was interesting about me is not only was I a good saver, but I traveled all over for work.
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I was a construction supervisor.
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Um, mind you, I wasn't a very good engineer, so I never did any design stuff.
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I just did construction project management.
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That's what you do when you get a 3.0 GPA.
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And I was never home.
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I was only home on Saturday.
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I didn't have any, you know, kids or spouse at the time.
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So I had an option to just live off the company dime and, you know, live on the road.
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And so I kind of just went homeless for a while and was able to rent that property out.
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And in the beginning, it was kind of a little game.
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I was like, well, this is cool.
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I'm making some nice beer money here, the$2,200 a month rents minus the mortgage interest taxes,$1,600.
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And I was like, well, that's you know, four or five hundred bucks of beer money.
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But then I started the wheel started to turning as I was on the road thinking about this.
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Wow, if I kept doing this a few more times, I'll be able to escape the rat race and you know, fire my boss.
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And I didn't really care for my engineering job at the time.
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And that was kind of the chink in the armor, and I started to realize like, wow, a lot of wealthy people get into rental real estate and expand.
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And that was kind of how I haphazardly kind of found myself on this path back in 2009.
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Nice.
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Do you um like I didn't I didn't really get into your background, but do you think that there was an entrepreneurial like gene or model for you within your family, like somebody who did something like this and you took it from them, or did you just kind of discover it on your own?
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Like, did anybody model this behavior that besides being angry about their job as an engineer?
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I mean, there's a lot of people to find who can do that, but the whole idea of like doing it on your own, like, was there anything in your life that kind of led you there, or did it just happen?
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Yeah, I mean, people ask me this question all the time, and I'm like, well, my parents are like the furthest thing from entrepreneurs, and we didn't have any business owners in our family.
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And you know, I when I started to do this, I didn't know what a credit investor was.
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I didn't have any rich uncle.
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Um, you know, certainly my parents did not have a million dollars net worth.
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Um, you know, I'm considered a first-generation multimillionaire.
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Um but I do remember like, you know, when I was in high school, I'd make these lollipops and I would sell it to the rich kids and make a spread there.
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Of course, you know, mom and dad would pay for the sugar unknowingly, right?
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The the the raw materials.
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I would, you know, I was I was into eBay very early on.
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I remember I sold my Nintendo on my games that were kind of rare for like several hundred bucks.
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And so I was always into that and I kind of understood it.
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And I think the big thing, and what I kind of, you know, I have this in my mind for my kids is like the reason why I kind of progressed was there's a sense of scarcity there.
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I didn't have much money.
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Like my parents gave me like 20, 30 books, and this didn't go very far far, right?
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Back in the early 2000s, like for lunch.
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You know, it didn't go very far.
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So there was scarcity there.
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So what did I do?
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I didn't buy lunch, I just starved and I just saved them my money.
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And then after a month or two, I had a few hundred bucks to buy something I actually wanted.
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So that was the you know, the DNA, but you know, you always have epigenetics, right?
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Like the environment creates the the product at the end of the day.
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Yeah, I mean, I think that you know, a lot of people just have that desire to they see how others live their lives and they want to live it differently.
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And I think that you know that's what makes you know this country great, is there's a lot of opportunity out there for people who are willing to work and scrap and show resilience and grit.
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Yeah, and there's different degrees to entrepreneurship.
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I mean, I'm in EO and other CEO groups, other founder groups.
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To me, what I've distilled down is what an entrepreneur is is somebody who, against all odds, I mean stupid odds, in fact, because most people fail, take on risks for outside return.
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Um you know, I I certainly was not that.
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I was very conservative starting out.
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And I, you know, like, you know, bought that first property in 2009, and then I, you know, kept buying properties, right?
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I mean, it's slow, right?
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Because I'm limited how much money I can save for 20% down payments.
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And mind you, I didn't do any of the house flipping stuff, the wholesaling stuff.
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To me, that's what you do when you don't have too much money and you you know you don't have a good job, where I had a good paying job and I could kind of play that game.
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Um I'll talk about this more on like when we talk about the floors of the wealth elevator later on.
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But you know, by 2015, I had 11 of these little rental properties.
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And, you know, but still all the through this time I was working my engineering job and doing this quietly on the side.
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And it wasn't until 2018 when we started to buy large apartment complexes, brought in investors where I finally quit my day job.
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But all this time I was holding on to the side of the pool or you know, not burning the boats yet, because why?
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I mean, if I can if I can just do both things, then why change?
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I guess I mean, do you is there something about being an entrepreneur that you just found you know, I mean it's so much more satisfying, like because of the investment decisions.
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I used to work in companies and I'd be like, boy, this isn't a really good decision for the company to do this.
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So this is and you just look at it and say, if I was in charge, I think better things could result.
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I mean, does did that influence you, or did you just say I'm about cash flow and all about turning, you know, and and improving and getting and getting more cash flow?
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Like how how would you describe you as an investor?
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A cash as king, or you know, do you did you try to project into areas that you thought you should invest in because you saw population growth and things in those communities?
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Or like what what made you pick some of the properties you you bought?
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Yeah, so a lot of questions there.
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Let me try and hit them all.
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So initially I I felt like I needed to go after cash flow because the the intermediate goal at the time, I thought this was the end goal, little did I know, was that I wanted to replace my income.
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You know, I wanted to get at least 50, 100 grand or you know,$10,000 to$15,000 passive income a month.
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Um, and this would be my ticket to out of the rat race, and I wouldn't have to trade time for money there.
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So to do that, you know, you buy rental property upon rental property after rental property.
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And then later syndication deals and larger commercial assets came into play.
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But in this throughout this time, I I I didn't realize that, you know, yeah, once you do become financially independent, once you do get to the third floor of the wealth elevator in my book, which normally is around four to five million dollars net worth, you hit this critical mass where you can just put your money in T-bills.
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I'm sure you guys have talked about that, right?
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I'm not saying that's a good investment, but it's just an example of very low risk, low return, you know, safe investments that, but you don't make too much.
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So you got to have a lot of it, right?
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Um so that uh we see a lot of clients who have a barbell approach where they work in private equity or they work in private real estate, and they just basically say, I'm all in on these investments and I'm gonna make a lot here.
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So with my safe money, I need to be really conservative because when things go south and the market starts to, you know, crater, I I need to have, you know, my other assets doing, you know, that kind of safety duty for me.
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Yeah.
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And I like, I mean, I personally do the barbell strategy these days, but you know, this is like over a decade ago.
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I didn't have this concept, and all I was thinking was, all right, you know, I was maxing out my 401k in the Roth, and I was like, well, why the heck would I want to do that if I'm making way more money here?
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Um, not a lot of people talk about this with rental real estate or syndication deals.
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You're making money four ways.
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You know, obviously the cash flow, which is the delta between the you know, ex income minus expenses, then you're making money with the appreciation.
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We all kind of know that.
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But the two big things that people forget is the tax advantages.
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I'm not a CPA, a tax attorney, but we can get into that because it's pretty basic.
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But you know, that's another big way you make money.
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And the last one is the tenants are paying down your mortgage for you.
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So they're the ones putting in their heart, sweat, and tears, building up the equity for you.
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And that's the huge difference.
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When, yeah, you could go buy your own house to live in, but you're that sucker paying down your mortgage, putting in their heart, sweat, and tears.
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We want other, we want to outsource that to other people.
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So when you know, I have a video on my YouTube where I just took an arbitrary example from some of my early rental properties, and I'm making high, you know, double digits.
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Uh well, I'm not gonna say the exact number because it's kind of technically illegal for me because I'm not a certified financial planner.
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But I, you know, I'm here I am in my early 20s.
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I'm like, wait, why would I want to put my money in that and make six to eight percent and go up and down like a roller coaster?
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Like, why don't I just do this?
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So, like the discussion earlier about barber strategy, cash flow versus capital appreciation, I mean, that was the furthest thing from my head.
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It was just purely ROI at day one or you know, a few months down the road.
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And that's and and that's what I realized like, wow, I found something here.
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If I just keep buying these rental properties one after one after one, and then by 2015, I had 11 of these things, I'll be able to create a portfolio.
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And, you know, so like, yeah, in 2015 I had 11 of them, and people want to know what it feels like to own 11 of them, it's you know, it's kind of a pain, right?
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It's not scalable.
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But maybe I had an eviction or two every single year, some kind of big catastrophe that happened every quarter, like a tree falling on the house or a washout in the basement.
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Um, not a huge deal because I always had property management, right?
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Like, how else do I get my day job done as an engineer?
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But then, you know, this is where I'm like, well, if I can just scale this a little bit more.
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But then, you know, most of my clients today, they want 10, 20, 10,000 to$20,000 passive income a month.
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But if you do that for rental properties, you're gonna need 30 to 40 of these houses.
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And then that's that's kind of where I transitioned to syndications at private placements thereafter.
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But that got me to a credit investor status net worth million dollars greater at that point.
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Did you find like one of your you you seem like you've got a good skill with communication, and some of those things helped you along the way in terms of getting others to invest and others to support what you're doing?
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Or yeah, but let me let me back up a little bit.
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So, like, you know, earlier you asked like career pathwise.
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So, like my first like five, 10 years of working was private.
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So I was a construction supervisor there.
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I I felt like I did have a lot of autonomy when I did work there.
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I mean, I had a construction crew in charge of, you know, I think over 200 million dollars in construction capital projects and people.
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Um, but it was low quality of life.
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So as soon as I had maybe like a handful of rental properties, maybe three or four, I was I I saw the light in a tunnel.
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You know, by no means I think passive cash flow-wise, I was maybe like a thousand, two thousand bucks a month.
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No, I probably needed a triple or quadruple that to actually be meaningful, but I saw the proof of concept at that point.
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So at that point, I started to take, you know, I I took stuff like a foot off the gas pedal, took a little bit less money, and then I started to work for more government jobs.
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So, like you name it, I've worked it like city government, then then state, then federal.
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This allowed me to kind of focus more time and attention on other things and also get married in the process because that's that's a huge time suck too, dating and all that stuff.
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But well, I'm not sure that's how your wife wants to describe it, but well, she she'll appreciate that it took effort on my part, so she will appreciate that.
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I didn't have money, so I can just paid consultants to just swipe left or right for me.
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But um, but yeah, like at this point, I was like, well, like I kind of when I was working government, I mean people know government, you you work hardly work, and I'm saying I'm I'm I'm gonna just call it out.
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I'm around people that are just kind of doing the status quo, and I can probably knock out what I can do more than other people in like 10 hours a week or less.
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And it was good to kind of start my business and grow it during that time.
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But yeah, it was it was um, you know, for somebody who wants autonomy and control for their outcome, it is very demoralizing to be in that type of environment.
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Yeah, I mean, I've I've been around and know some people in the government space and they always talk about how frustrating it can be.
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I mean, if you're talking to somebody who's thinking about trying to do what you do, is what is it you think that differentiated Lane from some of the other participants in this space?
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Like is it your patience and your persistence?
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Or how do you think that you were able to because obviously not everybody went from 10 properties to syndication and you know a billion dollars in properties, right?
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Yeah, well, I mean I just I just steadily built upon what I built, right?
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And after a while, from money wise, you you're you get that hockey stick of growth.
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But I think you know, I was a good saver, number one, and I had the cojones to try something different, and I kind of I let it kind of stew and simmer, right?
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Like going from one rental property to 11 from 2009 to 2015, that's a long time.
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This is not a get rich quick scheme or anything like that, and it was just standard 20% down payment, buy and hold as they save it up by buy another one.
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Um, I'm not wholesaling houses, not flipping houses, doing any crazy stuff like that.
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So was it your collection process, like like how you chose the houses, or was it like the way you found support for them?
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Like, are they all in one city?
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Can you just give us a little bit of a?
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I mean, I know you had some questions on this early.
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So, like, I mean, it's kind of just straight straight down the middle of the fairway stuff.
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I invested, I mean, originally I bought the first few units in Seattle, Washington, which I learned that you don't want to buy properties in high-priced areas where the rent-to-value ratios don't make sense.
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So the rent to value ratio is you take the monthly rents divided by the purchase price and you're looking for something about 1% or higher.
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You take Seattle or California, you know, you're not there's no shine, you're no way unless you go in like the horrible areas, which you don't want to be a slumlord.
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And because you're and yeah, don't get me started with that.
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Like you're just gonna have too much costs and headaches and and evictions when you go to the city.
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Yeah, I mean, we'd like to avoid the bad investments as well as describe the good ones, you know what I mean?
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Because I think that that's what people are afraid of.
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What's the unknown here?
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Yeah, so there's a bit of a sweet spot, in my opinion.
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Like you don't want to go to the high-end area, like where the best school districts are, because it the numbers aren't going to work, right?
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Your rent to value ratio is gonna be with like half a percent.
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It's gonna be dismal.
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And then you don't want to go to the low end, right?
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There's a nice sweet spot in the middle, you know.
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So, like this is kind of what where I transitioned my portfolio out of Seattle and started to buy properties.
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I had like five in Atlanta, four in Birmingham, uh, one in Pennsylvania and one in Indianapolis.
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So you kind of get the sense of those markets, right?
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They're they're not sexy markets, they're blue-collar markets.
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And the other thing, they're all red states.
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So, you know, when you're the landlord, you typically want the landlord laws on your side.
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And, you know, I'm my investment thesis here was invest alongside the lower, lower middle class.
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Because my investment thesis is, especially these days, like the case-shaped economy, the rich are getting richer, the poor are getting poorer, and the middle class is shrinking down to the lower middle class.
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And people need better options from$800 a month to$1,400 a month these days, maybe on the high end there.
00:19:00.769 --> 00:19:04.529
And, you know, like I think there's a lot of, I mean, it's just demographics.
00:19:04.609 --> 00:19:06.289
It's like, I'm just sitting here as an engineer.
00:19:06.369 --> 00:19:07.409
I'm not a rocket science.
00:19:07.489 --> 00:19:12.529
I had like a 3.0 GPA, 3.01, and I'm not a genius here, right?
00:19:12.609 --> 00:19:19.489
Like, and just like, okay, which population classes and what states and what cities, what submarkets are tend to be going up.
00:19:19.809 --> 00:19:23.969
And we all know there's there's a supply restriction with this type of stuff, right?
00:19:24.049 --> 00:19:26.529
Because they don't build affordable housing.
00:19:26.849 --> 00:19:30.289
And to me, it makes a lot of sense, right?
00:19:30.449 --> 00:19:34.369
Like um, later on, I got stung with like diversification, right?
00:19:34.449 --> 00:19:37.649
I kind of went into a lot of this stuff, but you know, we can talk about that later.
00:19:37.889 --> 00:19:45.249
But you know, I this is where from my investment thesis, like, I mean, you you need to come up with an investment thesis and you need to stick with it.
00:19:45.409 --> 00:19:47.329
If not, just do the S B 500.
00:19:47.409 --> 00:20:09.729
I mean, that's not investment advice, but that's you know, like at some point you need to concentrate in and stand up for something that you believe in and put some skin in the game because the only way you're going to transcend the floors of the wealth elevator is you have some type of concentrated risk, and that is risky, and that is not for everybody, not everybody should invest like this, right?
00:20:10.209 --> 00:20:20.849
I guess like I I wonder like condos versus standalone houses and two-bedroom, three-bedroom, or four-bedroom, like yeah.
00:20:20.929 --> 00:20:25.889
So so to answer that, I would go 80% of the median home price, right?
00:20:26.129 --> 00:20:30.369
Who is a lower lower middle class avatar?
00:20:31.249 --> 00:20:50.529
So typically eleven hundred to sixteen hundred square feet, three bedroom, two-bath, you know, in those neighborhoods that you know so another thing, uh we grade um neighborhoods, and it's it's not exact science, right?
00:20:50.769 --> 00:20:56.609
But so the A, B, C and then Warzone D class, if you want to call it that.
00:20:56.929 --> 00:21:01.809
But as I said, we stay out of the A and the D class areas and a little bit out of the C.
00:21:01.969 --> 00:21:10.049
But the A class, you know, it's you and I got daughters, like we would never want them, we we want them to live up in those places, right?
00:21:10.129 --> 00:21:11.809
They can go jogging at nighttime.
00:21:12.049 --> 00:21:16.129
No beat the B class, you know, it's perfectly safe during the daytime.
00:21:16.369 --> 00:21:18.449
Probably wouldn't want them to hang out there at nighttime.
00:21:18.689 --> 00:21:22.929
You know the C class, probably like, what the hell are you doing out there?
00:21:23.089 --> 00:21:24.129
Day or night, right?
00:21:24.209 --> 00:21:26.929
Like, that's how you grade these things for the most part, right?
00:21:27.089 --> 00:21:33.169
So generally speaking, you try to find properties in this B to A minus area.
00:21:33.409 --> 00:21:42.129
Yeah, you can be you can be searching for a unicorn at the A class, but you're not gonna find where the numbers make sense to um Yeah, other people have figured out.
00:21:42.529 --> 00:21:45.169
I mean, I I I always look for school systems.
00:21:45.409 --> 00:21:57.169
And if you have highly rated schools, it usually translates into places that people are gonna be committing cash for a longer period of time because you're gonna send your kids to public schools.
00:21:57.409 --> 00:22:04.369
And so I always look at the well there's a there's that is correct, and and it and everybody bets that way, right?
00:22:04.449 --> 00:22:11.329
But that often creates a a concentration of uh outside bet where it pushes the prices up, right?
00:22:11.409 --> 00:22:18.929
So, like for example, Los Angeles and Hawaii are extremely desirable places to live, and everybody flocks there to live there.
00:22:20.049 --> 00:22:24.289
Horrible place to invest for cash flow in particular, because everybody's there.
00:22:24.449 --> 00:22:28.609
I mean, it's just like you know, I kind of find like gambling kind of amusing.
00:22:28.689 --> 00:22:37.169
I don't do any gambling, but like, you know, when I mean just use an example when Connor McGregor fought Floyd Mayweather, right, back in the day.
00:22:37.569 --> 00:22:41.649
The sucker bet was and everybody and their mother um bet on Connor.
00:22:42.769 --> 00:22:43.729
That's stupid.
00:22:44.449 --> 00:22:45.489
He's not a boxer.
00:22:45.569 --> 00:22:46.929
It was just a prop bet.
00:22:47.329 --> 00:22:51.809
The smart play would have been to bet on the professional boxer, right?
00:22:51.889 --> 00:22:53.249
Even though he's a little old.
00:22:53.569 --> 00:23:02.129
So similarly, I don't know if I'm captivating that the right way, but you know, investing in the best air, the best school districts, exactly now.
00:23:02.209 --> 00:23:09.729
You're competing with all these outside players that will pay an arm and a leg so junior can go to the best area.
00:23:10.449 --> 00:23:12.529
I think Hawaii has a similar thing out here.
00:23:12.689 --> 00:23:20.849
Like all the Chinese people or shouldn't say people from Asia, um, you know, they're all laundering their money out here.
00:23:20.929 --> 00:23:22.369
That's all they're doing, you know?
00:23:22.449 --> 00:23:30.769
Like they're or I don't know if they're laundering their money, but they're buying houses for their girlfriends, and you know, there's these these hundred thousand millionaires, right?
00:23:30.849 --> 00:23:36.449
Like these extreme, like, why would you want to compete with that person on that level, right?
00:23:36.849 --> 00:23:40.849
Like get away from the competition is a concept to invest into.
00:23:41.809 --> 00:23:44.529
You're gonna find the right point to fishing, you know.
00:23:45.089 --> 00:24:05.969
Yeah, and and that's where like the the type of investing that I've kind of adopted is more of this blue-collar type of investing, like staying away from the sexy things, because that usually attracts the retail investor, the um and so oftentimes you know, deals with a little bit heroin it, oftentimes the best deals.
00:24:06.209 --> 00:24:07.409
You can also value add it, right?
00:24:07.489 --> 00:24:09.009
And do renovations to it.
00:24:09.089 --> 00:24:13.489
But if you don't take any risk, it's hard to expect an excess return, right?
00:24:13.809 --> 00:24:14.609
Right, right.
00:24:14.929 --> 00:24:17.649
But you know, everybody's split on this um spectrum.
00:24:17.889 --> 00:24:26.689
So, you know, like people will invest in like REITs, uh, and this is a good example of that's an institutionalized product found on the secondary market.
00:24:26.769 --> 00:24:27.569
So I'll define that.
00:24:27.649 --> 00:24:31.569
So on the secondary market is basically what we call sloppy seconds.
00:24:31.649 --> 00:24:41.169
What I do, what I've done from the beginning is I I either buy the rental property or I used to buy the rental property myself, and I'm getting primary access to the investment.
00:24:41.329 --> 00:24:52.449
And that was very early on that I discovered it's like, okay, I now I see why I'm making so much money in this investment, because you don't have all these middlemen taking all your fees and stuff like that.
00:24:52.769 --> 00:24:59.649
And, you know, yeah, when you're investing in the public market stocks and stuff like that, a financial planner such as yourself is very important.
00:25:00.369 --> 00:25:18.369
But some wealthy people, and what I started to realize in 2015 and 16 as I started to interact with other credit investors who had a lot of rental properties and were similar to net worths as myself at the time, is I realized they had a large substantial portion of their net worth, not in not only in public market, but private markets.
00:25:18.449 --> 00:25:19.169
So what is that?
00:25:19.569 --> 00:25:31.169
So they're investing directly in rental properties or they're investing in syndication deals directly with the operator and sponsor to capture most of the returns here as opposed to going through all these middlemen channels.
00:25:31.489 --> 00:25:37.729
So, you know, this is kind of where I realized and adopted, like, well, you know, and this is not for everybody.
00:25:37.889 --> 00:25:53.329
You know, I think if anything, I was able to get lucky and build a network and community around myself, which was why we do in my world, we do a lot of retreats for our investors so they can meet myself and the team, but more importantly, other investors, right?
00:25:53.409 --> 00:25:56.689
Like that's how I did it for myself over a decade ago.
00:25:56.849 --> 00:26:02.849
And it was critical to kind of learn these tactics of investing in alternative investments off the beaten path.
00:26:03.009 --> 00:26:18.209
And then now that that triggers a lot of these passive activity losses for taxes, maybe even they do real professional status to drive their own their adjusted gross income with all these more advanced tax strategies that people who just invest in normal traditional investment stocks are not able to capture.
00:26:18.609 --> 00:26:24.449
Um and then, you know, this strategy what I realized is was very common in these circles.
00:26:25.169 --> 00:26:32.289
Um, but yeah, it's not for everybody because you know, you you need to do due diligence and you need to kind of get off the beaten path.
00:26:32.369 --> 00:26:35.569
You can't just can't go to a website and order off a menu.
00:26:36.769 --> 00:26:39.009
I think that's a great uh analysis.
00:26:39.249 --> 00:26:45.969
I I think that there are a lot of people who come from a small business and they sell that small business and have a liquidity event.
00:26:46.209 --> 00:26:55.409
And then I think that you know they like to put some in public markets, but I think a lot of people don't like to see their numbers on the screen go up or down 10%.
00:26:56.209 --> 00:27:05.649
So I think that you could see the value of a private property kind of vary, but you're not gonna be pricing it daily or intraday.
00:27:05.969 --> 00:27:13.169
So some of it is just you know, you believe in the property and you believe in the the people you have renting it.
00:27:13.489 --> 00:27:21.809
And you know, you as long as you do a good job with those things, you kind of you know eliminate a lot of the volatility that you might have.
00:27:22.129 --> 00:27:22.529
Yeah.
00:27:22.689 --> 00:27:30.849
I I think you and I were talking earlier um on the pre-call, you know, like if if I died, I would just have my wife put it all in T-Bills.
00:27:30.929 --> 00:27:44.689
I mean, this is not investment advice, but like there is no way that she's she's gonna be able to figure out, like, all right, source new deal flow and analyze the PLs of rent rolls and to kind of make an a good fig, and are these trustworthy people?
00:27:44.849 --> 00:27:46.129
Do I invest with them?
00:27:46.449 --> 00:27:49.969
Um, you know, of course, I have her come to the retreats so she can meet other people.
00:27:50.129 --> 00:27:55.009
So maybe there's a shot to kind of have her build those relationships.
00:27:55.249 --> 00:27:59.089
But you know, my goal is to just you know grow this to a certain point.
00:27:59.169 --> 00:28:09.329
And if I unfortunately kick the bucket, hey, here's this, here's the um the secondary plan, T bill and chill, and just we got your in life insurance, and that's the plan, you know.
00:28:09.489 --> 00:28:14.449
And and I say that it's like not that she's stupid, but it's just not her interests.
00:28:14.689 --> 00:28:20.689
And a lot of people, and and we'll work with a lot of clients and we'll get to know some of their adult children.
00:28:20.929 --> 00:28:25.889
And what I've realized, I I had the assumption that like, oh, everybody can learn this, right?
00:28:25.969 --> 00:28:33.249
Like it was easy, you know, for me, you know, like, but then I realized like you have to have some type of aptitude a little bit, but mostly interests, right?
00:28:33.329 --> 00:28:43.489
If you're not interested in this stuff, and you're more interested in like working for Meta and you know getting a cool job and a high-paid salary, being a lawyer, you're not gonna be interested in this this type of stuff.
00:28:43.649 --> 00:28:55.729
So oftentimes, sometimes like the best entrepreneurs, business owners, and corporate guys may or may not be the best investors and be able to ascertain risks and things like that.
00:28:55.889 --> 00:29:00.529
Um that's why they count on you to be kind of their eyes and ears in this space.
00:29:01.329 --> 00:29:04.769
I think that finding the right people is a key to the wealth.
00:29:04.849 --> 00:29:13.169
And if you can find people who will treat you well and will take care of your dollars the way they take care of their own, that's usually a pretty good indication.
00:29:13.329 --> 00:29:20.369
Like I think that a lot of people have the realization that if things get bad, I can cut back.
00:29:20.529 --> 00:29:27.409
I know how to manage my own cash flow and manage my own life so that I don't let this decline ruin it.
00:29:27.649 --> 00:29:34.769
And I think that there are a lot of people who, for whatever reason, they feel like they have to spend or they have to keep up with the Joneses.
00:29:35.329 --> 00:29:46.369
And I think that's one of the weaknesses of people is not that they couldn't do things differently, but they just don't have the desire or the aptitude to do things differently.
00:29:46.529 --> 00:29:56.289
So I I certainly think that's the case for the younger folks under the age of 50, because they're still in their jobs and they're still high income.
00:29:56.449 --> 00:30:02.129
Um, but yeah, most of our clients are 50 and older, you know, some over 60.
00:30:02.209 --> 00:30:10.369
And at that point, I think the motivation becomes more well, first they realize, you know, there's kind of three or four buckets.
00:30:10.529 --> 00:30:12.929
There's public markets, right?
00:30:13.009 --> 00:30:16.289
Your stocks, your your index funds, et cetera.
00:30:16.849 --> 00:30:20.209
And they realize how that's all in the same boat, right?
00:30:20.369 --> 00:30:22.689
When the when the water goes out, all of that tanks.
00:30:23.009 --> 00:30:28.529
And they have another, there's another bucket with alternative investments, private investments, right?
00:30:28.609 --> 00:30:35.409
Getting in directly with the DLFL, cutting out the middleman, um, investing people that you need you know like and trust, you have that personal connection with.
00:30:35.569 --> 00:30:40.769
And then real estate is another third bucket too, because of the hard, tangible asset.
00:30:41.089 --> 00:30:48.529
Um, you know, we could always make a case for the fourth bucket, which is private credit, but you know, maybe we don't go there quite yet on this podcast.
00:30:48.689 --> 00:30:51.969
But, you know, like more than the 15 minutes we have left.
00:30:52.209 --> 00:30:52.769
Yeah, yeah.
00:30:52.849 --> 00:30:59.249
That's but they you know, they realized like, okay, you know, maybe when I was, I mean, that's where I was, right?
00:30:59.329 --> 00:31:07.169
When when the Vanguard guy came to us in a corporate management trainee class, and they're trying to get our accounts, that's all I knew, right?
00:31:07.329 --> 00:31:08.049
Public markets.
00:31:08.129 --> 00:31:09.649
That's how everybody should invest.
00:31:10.289 --> 00:31:13.969
Um, and then I realized, wow, there's all these different buckets out there.
00:31:14.129 --> 00:31:16.529
It's a little bit more confusing.
00:31:16.689 --> 00:31:18.049
It's not it's not rocket science.
00:31:18.129 --> 00:31:26.129
And that's what I tell people, it's like you guys are intelligent people from a career standpoint, aptitude standpoint, you guys are much further than I ever got to as an engineer.
00:31:26.289 --> 00:31:29.649
Um, just apply yourself, chip away at it, ask good questions.
00:31:29.809 --> 00:31:34.129
Um good questions are, you know, just keep keep plugging away.
00:31:34.209 --> 00:31:35.649
I always say, I always joke around that.
00:31:35.729 --> 00:31:39.169
I say, like, well, the only bad questions are are the ones asked three times.
00:31:39.329 --> 00:31:45.169
Like if you can't you keep asking the same question three times, just do the uh just do the standard stuff, right?
00:31:45.809 --> 00:31:53.649
But you know, like what what I what we realize is a lot of these people are coming in with like large net worths, you know, four or five million dollars or greater.
00:31:53.809 --> 00:32:11.169
Um, usually like a business owner selling their company and now coming into this this cash, and they they come from a capital preservation standpoint, and they they just want diversification because they realize, well, if if in NVIDIA has poor earnings, that's just gonna crap the whole market.
00:32:11.409 --> 00:32:22.209
And they want they want to take some exposure off of that side and put it to some hard assets, and then also have the exposure to the upside too, and understand the risks with that too.
00:32:22.369 --> 00:32:25.729
And they want to kind of diversify in this manner.
00:32:25.969 --> 00:32:30.529
So, you know, I'm not a certified financial planner and I'm not allowed to talk about investments.
00:32:30.609 --> 00:32:31.889
I just kind of do what I do.
00:32:31.969 --> 00:32:34.609
I sort of adopt my own barbell strategy.
00:32:34.689 --> 00:32:43.729
Um, but what I've realized for high net worth investors over five to ten million dollars is nobody has the 60-40 um standard thing.
00:32:44.209 --> 00:32:48.129
And everybody's asset mix is different.
00:32:48.289 --> 00:32:55.889
That's how we do the retreats so that people can have some beers with each other, get to know each other, and they can talk and they can gather up data points from other people.
00:32:56.129 --> 00:32:58.129
But I think that's what makes it hard, right?
00:32:58.209 --> 00:33:09.489
Like most people do not have a friend or family member that has over$2 million of investable assets, but and they're not even talking and they're not talking about this.
00:33:09.569 --> 00:33:15.329
Like some people talk about sex with their partner more than their finances and intimate things like this.
00:33:15.569 --> 00:33:23.969
Yeah, I think that the discussion about money is wide in this podcast because I think that people have this I'm not good enough or I don't know enough, right?
00:33:24.449 --> 00:33:27.489
And I'm like, well, there's a there's a way around that.
00:33:27.569 --> 00:33:31.489
Yeah, it is to is to keep learning and keep getting smarter.
00:33:31.569 --> 00:33:42.209
And and I think that your arguments about what you've done and how you've done it is an example about you find the right people to be with, you find that what you those people are doing.
00:33:42.449 --> 00:34:05.969
And that kind of leads me to my next question, which is in this space, like, do you have like uh best to worst of, you know, I don't do you know retail real estate or commercial real estate, or I stay out of office towers, or I I like to work with you know just residential, or I like to do some of the storage REITs or storage real estate.
00:34:06.129 --> 00:34:15.730
Like, do you find yourself like you'll see good times and bad times in the different space and you just look for where there's the opportunity, or do you notice there's a trend?
00:34:16.050 --> 00:34:17.250
I mean, I'm biased, right?
00:34:17.329 --> 00:34:19.889
Because we operate multifamily residential, right?
00:34:19.969 --> 00:34:27.010
So that sweet spot between the$900 to$1,400 a month rent, lower middle class workforce housing is what it's called.
00:34:27.170 --> 00:34:35.010
So I'm gonna always have an outside asset allocation mix of that because that's what we cook, right?
00:34:35.090 --> 00:34:35.890
That's what we operate.
00:34:36.050 --> 00:34:37.810
So it's our own home cooking.
00:34:38.050 --> 00:34:45.410
Um, if I was a purely passive investor, I mean, obviously, I like like you have to ask yourself that question, right?
00:34:45.490 --> 00:34:47.170
And everybody needs to answer that question.
00:34:47.330 --> 00:34:50.770
Everybody's in a different situation, everybody has different viewpoints.
00:34:51.170 --> 00:34:56.450
Do you believe that this lower middle class population is growing in the future?
00:34:56.770 --> 00:35:00.530
You know, um things will go up and down, right?
00:35:00.610 --> 00:35:07.250
Like, I mean, we have like ICE taking out some of our great immigrant tenants at this time.
00:35:07.490 --> 00:35:09.890
But you know, that's a subside at some point, right?
00:35:10.050 --> 00:35:12.690
Somebody will, you know, change policy at some point.
00:35:13.090 --> 00:35:17.170
What I would say is like, what do you believe from an investment perspective long term?
00:35:17.250 --> 00:35:18.530
So 10 years plus.
00:35:18.850 --> 00:35:31.330
Um, like this is why like we we kind of looked at investing in some of these like pre-i pre-IPO, which is kind of the equivalent of non-retail access, you know, you're getting in before the retail investors come in at the IPO.
00:35:31.570 --> 00:35:34.050
Um, like just using this as an example, right?
00:35:34.130 --> 00:35:35.730
Like the AI stocks, right?
00:35:35.810 --> 00:35:44.130
Like the OpenAI, Claude, or Anthropic, Meta, uh, Google, Grok, and probably forgetting a few others, right?
00:35:44.210 --> 00:35:46.290
But like that one's too close to call.
00:35:46.370 --> 00:35:47.570
And it's like, I don't know.
00:35:47.730 --> 00:35:49.010
Like, nobody freaking knows.
00:35:49.170 --> 00:35:52.290
It's like a like going horse race back and forth.
00:35:52.530 --> 00:36:01.970
Whereas, like, if you can invest off things like trends, like everybody knows that the AI trend is kind of here to stay, and there's a big power demand for it.
00:36:02.210 --> 00:36:06.610
So this is what the term we we like the investment in infrastructure, right?
00:36:06.690 --> 00:36:11.570
These types of, if you're talking the rails of a growing trend in the future, that's gonna be around.
00:36:11.810 --> 00:36:19.410
Um, like data centers is big right now, but it's predicted to peak next year or the year after, and then kind of trail off, right?
00:36:19.490 --> 00:36:21.250
So that those are the things I don't like.
00:36:21.490 --> 00:36:23.650
I like these basic necessities.
00:36:23.890 --> 00:36:33.970
But to answer your question, like, yeah, if I was a purely passive investor, I mean, obviously, like workforce housing, apartments, um the home builder.
00:36:34.050 --> 00:36:36.690
I don't like the little single-family home rentals.
00:36:36.850 --> 00:36:39.170
Um, I think that's too volatile.
00:36:39.410 --> 00:36:45.810
I think that there's a lot of um multifamily real estate got beat up last several years.
00:36:45.970 --> 00:36:50.130
So that's you know, you buy it when it's lower, which it is like 30% off the peaks.
00:36:50.370 --> 00:36:57.010
Residential, I don't feel like went to that correction yet because the mortgages are 30 years as opposed to commercial properties.
00:36:57.170 --> 00:37:05.410
The loans are in increase, it's amateurized over 25, 35 years, but the loan terms are like three, four, or five years typically.
00:37:05.490 --> 00:37:07.330
So that's what creates that dynamic.
00:37:07.410 --> 00:37:09.650
Um, don't worry if that went over your guys' head.
00:37:09.730 --> 00:37:12.930
Um, I got webinars explaining how that dynamic works.
00:37:13.090 --> 00:37:20.850
But like office, I mean, you know, honestly, I like I'm a I'm a past investor in some office deals myself.
00:37:21.090 --> 00:37:23.250
I I think office has been.
00:37:23.410 --> 00:37:32.210
I just wonder if there's a correlation between them that you notice that hey, when my homes get more expensive, I think there's opportunity in storage.
00:37:32.450 --> 00:37:39.250
Because like I I look at the density of our cities and think that storage is always gonna be an issue for people.
00:37:39.970 --> 00:37:50.050
So it's it's always you're always gonna be satisfying because no matter how much I look, I I see one storage place and then I see a half mile away another stuff.
00:37:50.290 --> 00:37:53.890
Like it feels like McDonald's and Burger King, you know what I mean?
00:37:53.970 --> 00:38:09.730
They're just one figures out where there's gonna be a need in the population, and then the others just copycat that location and say, they must have done the research on the population in this area, and therefore, you know, we're located right between three bigger parts.
00:38:10.370 --> 00:38:12.210
So so storage, here's my take on it.
00:38:12.370 --> 00:38:18.690
Like, I I think it's a good model, but the problem is the institutions, the bigger players are playing it.
00:38:18.850 --> 00:38:30.210
Like the retail investor, one to ten million dollars net worth who wants to deploy$50 quarter million dollars into a deal like that, you don't have access to that type of good quality deal flow.
00:38:30.450 --> 00:38:33.330
The only opportunity you have to deploy is through the secondary market.
00:38:33.570 --> 00:38:40.370
So you're going through like a storage REIT, and but then they take all they in, you know, they deflate all the value for you as the investor.
00:38:40.930 --> 00:38:55.810
So that's why, you know, even if it's like the best investment in the world, if I am investing through an ownership structure, like an institutional REIT, that takes out a lot of the ROI for me as an investor.
00:38:55.970 --> 00:39:00.450
So to meet, and typically like it doesn't make sense for me to do that.
00:39:00.770 --> 00:39:07.090
Um I but you know, the what I would say like that's the that's the structure of the deal, right?
00:39:07.170 --> 00:39:09.890
The like the framework is always like who are you investing in?
00:39:09.970 --> 00:39:11.010
Are they trustworthy people?
00:39:11.170 --> 00:39:15.330
Then second, like, do you like the what's your investment thesis on this long term?
00:39:16.130 --> 00:39:21.250
I I'm not as bullish as storage long term, because what is it?
00:39:21.330 --> 00:39:24.130
Well, it's it's to store people's junk, right?
00:39:24.290 --> 00:39:40.130
Like when you go through a clear, I don't like maybe in the future we have a real recession as opposed to this AI propping up the economy on the lower end, and maybe people actually sell their stuff that they shouldn't have and can't fit in their house, and you know, you have this big swing.
00:39:40.530 --> 00:39:47.090
Um, I'll give you another example, like off or a commercial um space or industrial.
00:39:47.410 --> 00:39:51.570
So that's been increasing because of the data storage.
00:39:51.650 --> 00:39:54.290
Again, data storage is actually even more extreme than I mentioned.
00:39:54.370 --> 00:39:57.810
Data storage is pretty much all institutional.
00:39:57.970 --> 00:40:08.530
I would love to invest and and be direct and primary source with a data storage operator, but those are all institutional players, right?
00:40:08.770 --> 00:40:14.610
You're talking million-dollar check sizes to even get involved in a$50 million project.
00:40:14.690 --> 00:40:17.090
Um so it's just not accessible.
00:40:17.330 --> 00:40:25.730
But you know, that's that that kind of trend has created an increase in the whole industrial real estate world.
00:40:25.810 --> 00:40:39.970
So that's why you're seeing like the little bay, like what they'll do is they'll take those big industrial properties and they'll chop it up to smaller, you know, thousand-foot segments for you know the the maybe a new entrepreneur or the CrossFit gym or the mechanic to rent, right?
00:40:40.130 --> 00:40:48.610
So I think that that is feeling that that upward trend of the data center, which I I'm confident that that'll kind of subside over the years.
00:40:48.690 --> 00:40:51.650
So that's why I'm not as bullish.
00:40:51.810 --> 00:40:53.810
I I like residential real estate, right?
00:40:53.970 --> 00:40:55.170
Long story short.
00:40:56.130 --> 00:40:58.210
I mean, we got about five minutes left.
00:40:58.370 --> 00:41:10.450
I mean, why don't you tell us how we can engage with you and how we can, you know, become a part of your network so that we can all get to that four or five million in uh in net worth.
00:41:10.690 --> 00:41:11.090
Yeah, yeah.
00:41:11.250 --> 00:41:14.690
What I would say, um obviously I don't have all the answers, right?
00:41:14.850 --> 00:41:19.010
And you know, I'm just like everybody else trying to make educated bets.
00:41:19.170 --> 00:41:21.170
And that's what investing is.
00:41:21.490 --> 00:41:21.730
Right.
00:41:21.970 --> 00:41:31.650
You're trying to make um educated bets that said, like what I like about investing in real estate is you can invest with insider trading, right?
00:41:31.730 --> 00:41:33.650
With stocks and stuff like that, that's illegal.
00:41:33.890 --> 00:41:40.370
And that's why I don't like that stocks because I feel like all those politicians and all the insiders have the leg up on me.
00:41:40.530 --> 00:41:41.410
And I don't like that.
00:41:41.570 --> 00:41:42.690
It's not fair.
00:41:43.010 --> 00:41:46.210
Um maybe because I want that, right?
00:41:46.450 --> 00:41:52.210
So that's why I enjoy like investing in like real estate or buying businesses, right?
00:41:52.370 --> 00:41:58.130
Where I know the operator and I know that there's some inside track that we have on an unfair advantage.
00:41:58.850 --> 00:42:08.850
And it's, you know, at that point, um, you know, I think that's where I can mitigate some risks or maybe opportunity for outside returns.
00:42:09.170 --> 00:42:13.650
But, you know, it is I think that the important thing here is diversifying, right?
00:42:13.730 --> 00:42:24.210
Like I had 90% of my net worth into commercial real estate apartments, and it corrected drastically the last a few years ago.
00:42:24.850 --> 00:42:27.410
And I got I got hammered personally.
00:42:27.970 --> 00:42:40.690
So I learned a lesson for diversification, and once you get to a certain point, um, and I talk about this in the book, the you know, the concept of the four to five million dollar net worth rung or the third floor of the wealth elevator, right?
00:42:40.930 --> 00:42:47.730
You know, at some point you should have enough money where you get out of these higher risk investments and you go to T-Bills.
00:42:47.810 --> 00:42:49.730
Or I actually like I I do life insurance, right?
00:42:49.890 --> 00:42:51.090
Whole life insurance.
00:42:51.250 --> 00:42:53.330
I think you get a little bit better return.
00:42:53.650 --> 00:43:07.890
But um, you know, I think at this point, you know, you I learned the lesson, but I wouldn't have grew my net worth to a point if I didn't buy 11 rental properties and then transfer all these syndication deals and apartments.
00:43:08.130 --> 00:43:12.850
So, you know, as as people No, I think I think I think your story's a great story, Lane.
00:43:13.090 --> 00:43:21.090
I I mean I I I think it's been a great 45 minutes that we've had here, and I hope people you know will check out.
00:43:21.170 --> 00:43:28.450
I'm gonna attach some links to some webinars that uh Lane has, and and I'm also gonna have some copies of the book.
00:43:28.690 --> 00:43:28.770
Yeah.
00:43:29.090 --> 00:43:34.930
If you send me an email, I will um we'll figure out how to get the book to you in electronic.
00:43:35.170 --> 00:43:37.650
Is it electronic or is it uh in physical?
00:43:37.890 --> 00:43:38.930
Um we'll have it on the form.
00:43:39.170 --> 00:43:44.770
But yeah, yeah, I mean, if you like what you heard, take a look at um my book on Amazon, The Wealth Elevator.
00:43:44.850 --> 00:43:47.730
I think there's almost 200 reviews on that thing.
00:43:48.210 --> 00:43:54.530
And um yeah, so so reach out to Steven and maybe send him an email.
00:43:54.770 --> 00:44:03.570
We'll we'll compile those and then uh we'll hook you up with the PDF version so that you know smart people are just putting that in their LMs, right?
00:44:03.650 --> 00:44:08.050
Their chat GPTs, et cetera, and asking their other questions off of the source material.
00:44:08.290 --> 00:44:10.290
And then we'll give you the MP3s too.
00:44:10.370 --> 00:44:12.050
Because if you're like me, I can't read too well.
00:44:12.210 --> 00:44:15.330
So I my eyes are just so tired at the end of the day from reading all this.
00:44:15.890 --> 00:44:19.970
I I love listening, you know, and then we'll mark in our exercising, it's great.
00:44:20.130 --> 00:44:20.210
Yeah.
00:44:20.450 --> 00:44:23.090
So thanks for coming online for the skeptics guide.
00:44:23.170 --> 00:44:30.930
And I'd really love to keep talking to you about what you think about the space in general and you know, just uh how you think things are going.
00:44:31.090 --> 00:44:35.890
Do you think rates going up is going to affect real estate and people or so?
00:44:35.970 --> 00:44:40.370
What I tell everybody is like, you know, follow what the rate cap providers are offering.
00:44:40.450 --> 00:44:46.450
Like when we buy a large apartment complex, you know, the the rate cap providers are the guys who provide the insurance for the rate caps.
00:44:47.010 --> 00:44:59.490
So the what I would say is book everybody here should have the on the Chantham financial curve and the CME FedWatch tool bookmarked, and they have these graphs and they have these probability charts and when it's going up.
00:44:59.650 --> 00:45:00.850
Um they're the best.
00:45:01.010 --> 00:45:02.610
I mean that they're like the Vegas odds.
00:45:03.170 --> 00:45:07.730
I'm not I'm not one to pontificate or watch YouTube videos on interest rate predictions.
00:45:07.810 --> 00:45:13.810
I'm gonna go to what people who have skin in the game, and these guys have millions, millions of dollars riding on it.
00:45:14.210 --> 00:45:17.090
Real money is probably a better indicator than yeah.
00:45:17.170 --> 00:45:27.570
So I I mean, I think you know, rates may come down a little bit, um, like insignificant amount, like a quarter point, half a point, but long term, like a year plus, I mean, it's off the races.
00:45:27.650 --> 00:45:30.530
I mean, inflation is gonna come back crazy, I think.
00:45:31.330 --> 00:45:36.050
So those people who are sitting on the sidelines not doing anything are just gonna be left behind.
00:45:36.210 --> 00:45:41.810
And that's to me, that's why you a lot of people will buy real estate because it becomes sort of an inflation hitch.
00:45:41.890 --> 00:45:43.410
It kind of rises with prices.
00:45:43.490 --> 00:45:46.850
And and um Yeah, you know, that's I think you and I are also talking, right?
00:45:47.010 --> 00:45:48.130
That's it's kind of sad, right?
00:45:48.210 --> 00:45:58.610
Like people who are not able to invest in things because they can't rub together 25 grand or 50 grand to save their life will be left behind.
00:45:58.690 --> 00:46:02.050
And and that's unfortunately the the country or world we live in.
00:46:02.130 --> 00:46:10.050
The rich get richer and the poor are never able to buy assets that are able to play this inflation game and they get they get killed long term.
00:46:10.370 --> 00:46:25.090
That's and that's what we're trying to do is get people motivated to and and inspired to, and then give them the steps to make that journey because home home equity and home ownership is a huge plus to your financial well-being.
00:46:25.890 --> 00:46:31.570
Thanks for joining me, Lane, and I appreciate you, and uh I look forward to working with you going forward.
00:46:32.050 --> 00:46:33.090
Hopefully the winner.
00:46:33.410 --> 00:46:33.810
All right.