 Nicely routine K squared of Keller Williams and we are here with the life of the land is in its real estate with think tech Hawaii today's guest I'm so excited to have him is Lane cow with simple passive cash flow dot com Lane go ahead and tell us about yourself I'm amazed at what you've been able to do. Yes, so my tagline is currently owner of 3500 units apartment units and mobile home park units. I syndicate real estate opportunities, and I also coach and mentor a private investor network called the we deal pipeline club. But I used to be an engineer but I left that life behind to kind of do this real estate full time. So great so tell us a little bit about your past huge you were an engineer and how long have you not been being an engineer has that been recent or. Yeah, so I graduated college back in 2007 and I was an engineer up until about a year ago is when I kind of finally fired the boss. Yeah, so I am that was that was super excited so I met Lane when he was still working, which which totally brings us into now explain what maybe syndications are, and how can folks how did you get 3500 doors and what do we really mean by that. Yeah, so I initially invested in things called turnkey rentals. And I bought my first one in 2009, and then I got up to 11 of them in 2015. And then I realized owning single family homes or even small duplex is just really aren't scalable, especially for our credit investors. And I started to join different masterminds and higher level investor groups and I realized what all the cool kids were doing, or going into private placements and syndications, and what those are. Think of it as like I use analogy like an airplane, you know the airplane has the cockpit with in there you have the general partners. These guys will find and source the deal operate the deal find the lenders but the lending and their names and never goes into the investors names, and then limit partners or LPs or passive investors will come and coach. They'll pay to get on the airplane and they'll sit down and they'll be quiet and they will hopefully cash the tracks. And everybody's sort of aligned in owning this piece of property and it can be 100 or 300 unit apartment complex, it can be a commercial property. It's just basically a mechanism for pulling together capital under securities laws. So you started off as just kind of sitting on the airplane and then you grew from there or what is your capacity right now. Yeah, I mean I initially started to just kind of be a LP a passive investor, right, she kind of understand, you know how it all works, but then I stepped into the general partner role right now I'm a general partner and probably most of the deals I'm in. I'll be about 12 to 20 deals, I'd say I'm a general partner and kind of running the deal. But you know we play the role as asset managers. So we are not we also employ third party property managers to do the day to day management. All right, so are your doors here on on in Hawaii are they on a Wahoo or where are you investing. Yeah, so I go off the whole saying live where you want which is here right like I grew up here in Hawaii, but invest where the numbers make sense so my philosophy on investing is invest for cash flow. So the property needs to be at least 1% rent to value ratio or higher. And what the rental value ratio is by taking the monthly rent divided by the purchase price. And, you know, so for example, $100,000 house stuff I would typically buy when I was getting started that rents for $1000 1000 by 100,000 that's 1%. And if you're above the 1% rent to value ratio, you're pretty much in good shape to be able to cash flow. So we'll typically buy class B and C housing in secondary and tertiary markets across the country. We'll see in the south and southeast where the rent to value ratio and then the population growth going on. So when you say B and C what what does that mean, what. Yeah, so, so there's different grades, and it's, there's not really any rule, right. There's ABC and D, which is kind of called war zone type of properties. For the most part, a class is designated by, you know, year built so stuff newer than 1995 2000 is kind of considered class A. A lot of the cool, yummy type of places, we call that a plus, but you know we stay away from a class because it typically doesn't cash flow. So where we stick around our more B and C class assets. So, you know, be class or more a mixture of white collar blue collar mix. And these are the rents between 900 to $1200 per month. And then the class C is traditionally predominantly blue collar workers in your 500 to $800 $900 range. And that might kind of gone over everybody's head. But the way I simplify it because you know I'm trying to, you know, simple passive cash flow is all about making it simple for everybody. If, you know, a class, you know, you and I could probably go running around at nighttime right it's just, you know, it's a nice place to be be class. Maybe you wouldn't want to do that, Keena. I mean it's, but it's cool if you and I were walking around during the daytime, right. C class. Yeah, let's get our pictures and get the heck inside the car, even during the daytime. We don't want to be out there anywhere after passed on. You know, D class, which is a war zone or F class. Yeah, we don't want any anything to deal with. So the whole idea is we try and stay in the sweet spot of between good C class properties and B class properties, because that's where most of America lives. And that's what the population is. And, you know, we want the best rental value ratios but we also don't want to deal with a lot of headaches and I've got a lot of classy properties, and they can be hard for collections. I even know that the value add is so much stronger there. So now that you brought up collections, we do know we're headed into the third month of people in unemployment, unemployment rates or sky high people aren't working, we don't know what we're doing. How are rental collections going for you? I'm probably across maybe about a dozen states, different markets, but for the most part collections are pretty strong. Maybe we average about 97% collections, and you're always going to have about 3% of the people pay late. But I would say April, we are around, I'd say around like 95, 96%. And then May, it came down a little bit to like 93, 94%. But still, I mean, as long as in a lot of these buildings, the crossover point, the break-even point is around 50 to 65% occupancy and collections. So, I mean, this is exactly why like you invest in class B and C assets where you cash flow, right? Because in times of a pandemic for all things, people still need a place to stay. So, yeah. So, wow, that is great. So now you're talking about you're across different states. So what are the best states? What states would you recommend if people wanted to do this that they invested? Yeah, I mean, for the most part, I recommend investing in red states, not to get political or anything like that, but I want to be investing in where there's good landlord tenant laws for me. A lot of blue states, they're in this position where you just can't evict people for almost a year. It's really good. I mean, again, not getting political, but the way I grew up is if you don't pay, you can't stay, right? And a lot of these places like Georgia, Alabama, you know, you don't pay for 30 days, your sheriff is going to come and kick you out, right? Not the greatest if you're the tenant, but as the landlord, that's the position you want to be. So, you know, states like Texas, Alabama, Mississippi, you know, places in the south, southeast is where we like to invest to be on the right side of the, you know, the political spectrum there. And then, you know, the two biggest drivers that we look for when we're evaluating a new market is population growth and job growth. So we want to see a nice mixture of different economies, different employers. And then we also want to see the population being going up. And a lot of that you can find at city data or, you know, just Google, right? You just say population growth or population trends in Huntsville, for example, right? I think at the high level that's the way that you want to be investing and then kind of dig in and build your relationships with boots on the ground. So yeah, so about the boots on the ground, you live here in Hawaii and how are you doing this in different states? Are you flying to these states every other week to look at properties, to check on properties, or how are you doing that when you live here in Hawaii? Yeah, I mean, when I was initially doing this, I was living in Seattle and investing remotely. So I have properties in Birmingham and then to Indianapolis by myself. And, you know, I have property managers in those positions. I'm not a defense kina, but you know, I don't trust brokers, right? Like my boots on the ground, the people that actually hang my hat on for true advice is the property manager. That's the key person on my team. Because at the end of the day, that's the person that's going to inherit my problem. So I want to bring them on board, first of all, because once the transaction is completed, the brokers long gone. Yeah, I might do another transaction with them, but it's that PM that's going to inherit that tenant and that property. And then, you know, we don't want to buy that bad property on the blog. No, yeah. So how are you even finding these properties? If somebody wanted to do this, how would they even start? How would they even find the class D or class C building to start with? Yeah, so I mean, a lot of the commercial properties we buy, I mean, normally the way it works is you don't get access to good deals. I mean, you think there's a whole bunch of properties you can get on loopnet, but you know, they're all garbage deals, right? They're all kind of separate deals. You're not going to get a deal unless you've closed another 100, 200 unit apartment before. Well, the way to start is kind of the build a foothold with some single family home rental, some residential properties first, build a track record, and then kind of build your team that way. And the way I've done it is, you know, this is where your network is your network. And kind of in my group, you know, we have a bunch of passive investors, we kind of help each other out with referrals to that first key member, which is the property manager and then brokers. And then if they're looking for turnkey rentals, you know, we can kind of hook them up with folks that do that stuff too. So you were able to do this while you were working. So do you recommend that people get started in this while they're still trying to do that, that nine to five job? Is that something people can do? I mean, my brand of investing is passive investing, right? And to me, to invest, you need money. You know, if you don't have money, you have, you have a money problem. And I can't really help out with that because my, my brand of investing is going after stabilized deals where you need a 20% down payment. So you're going to need that, that initial capital gets started. So if you need to create, if you need that down payment, then the best way to do that is a day job, right? Most of my clients are doctors, lawyers, engineers, accountant, et cetera. And they realize that their highest and best use is unfortunately whether they like it or not is to go to their day job and make a lot of money there to them. But they're going to be smart. They're going to core it into real estate so that they can become a real estate professional for taxes, you know, possibly offset active income with passive losses, get bonus depreciation and play all these games that the wealthy do. So what if someone only has a small amount of money? Where would they start? I have $20,000. Can I do this with $20,000? Yeah, so $20,000 is probably the smallest amount of money you need to start playing. Ideally, you want to kind of look for a remote rental property and a lot of good rental properties out there are in a $100,000 range. So $20,000 is right on the ball for that 20% down payment. So that's, that would be the way I would recommend going. Of course, you probably need a few thousand dollars, at least $5,000 for cash reserves just in case something, you know, your first tenant doesn't work out or something just happens to break. But, you know, $20,000, $25,000 and, you know, you should be going to be a passive investor. If not, you're always going to be active, right? Like I see too many house flippers, they just flip houses all day long. And I love house flippers because like they pay all my taxes for me. You're welcome. Yeah, thank you. I mean, last year, my effective tax rate was 4%. I barely pay any taxes because all my properties we do cost segregations and we draw out as much bonus depreciation as we can. Okay, so can you go back and explain that again because I think there will be people that will love to only pay 4% of taxes. So how do you use cost segregation? Yeah, so when you want a rental property, as you know, you're depreciating the asset right over typically over 27 years. Unless you do what's called a cost segregation study and we usually purchase one for about $10,000 for, you know, engineer to go in here and give us this big itemized, big stack of accounting documents basically. But what that allows us to do is designate what's the three, five, seven year amortarize or what's the depreciable assets. And right now with the tax laws that change in 2008, we're able to depreciate a huge portion of the building almost almost sometimes like one third of the entire building. So we're able to greatly accelerate the depreciation schedule. But you can only do this when you cost segregate your property. So for properties that are under $2 million, it really isn't doesn't make sense. You know, live in a voice poll, right. So but when you're working on 100, 200, 300 unit building apartment, it totally makes sense that 10 grand is a drop in the bucket. And now all investors can partake in that bonus depreciation, because they're all, you know, equal equity investors, not debt investors equity investors, which means they get equal amount of the upside, and they get the equal share of the depreciation of the asset. So about how many say you just you told me earlier that you just got a 407 door building that correct. Yeah, yeah. Yeah, our last last one was 47. So how many investors are in on those those 407 that that one we just went over the century mark. It's kind of surprised. So what is most 100 investors 100 opies. Yeah. So, so they, but everybody makes the same amount of equity, there's 100 investors and they're all making the same amount of equity. Further investment amount, you know, most times investors will put in the minimum which is around 50 $60,000. And I think on this one the total capital raise was about $8 million. So, you know, if you invested $800,000 you would get 10% of the whole thing. So is that paid out monthly? Are they getting the yearly check or how do they see their return on that quarterly checks. But mostly because like, you know, to do it on a monthly basis just too much admin costs right. And we're not a Wall Street company right we don't have layers and layers of admin and all this love, you know, we want to try and save cost costs. And quite frankly, I go crazy if I had to do reconcile that stuff every single month. So, and most of our investors they're not needing the money to live off of right. I mean, people sometimes newer investors say well I need the cash flow every month I'm like, well this isn't for you right this is more for higher network investors looking to go passive. And this isn't just people are just handing your money welly-nilly you have been vetted what are some of the stuff you've had to go through to be legal because I know when you start getting that many investors there's there's certain things you have to go through. Right, right, like so as long as soon as you start to take in passive investors money where they are not a controlling entity, or they are investing as a LP role. You know, you have triggered securities law. So what I need to do is I need to basically register like kind of like I was creating like a stock in a way it is sort of like a stock. But I operate under a regulation 506 B. It's kind of in the big code of all the SEC documents but I can bring in, you know, investors, but, and then everybody has to sign a big thing called a private placement and the random a PPM for short, which is a pretty big page of documents but you know it does two things it protects passive investors, you know, that everybody, you know, the general partners have fiduciary responsibility to operate the deal, you know, without power play, and in their best, their best, you know, find their best right. And it also protects general partners, because sometimes passive investors can get, they can be a pain. Right, and if they don't get what they wanted they can sue. And that sets the terms pretty mutually so everybody's on the same page. And, you know, that's kind of why when we bring in investors into our group. You know, it's a relationship thing right where people are interviewing us just like we are interviewing them. So yeah, so there's always a risk with investing. That's what investing is but yeah so what if someone wanted to invest with you what would they what would they need to do. The big thing is, you know, get it get to know us right you know I live here in Hawaii so I'm pretty accessible. But you know the way I've kind of gone about, I don't really need to do this for money anymore so it's more about meeting cool interesting people along the way and you know investing with cool people right because some let's be frank like some people can be jerks. I don't want to do business with those type of people. Right, life's too short. So it is that's that's part of the reason I do this job is the people that you meet that's the best part of it. So you do offer some education for for people who'd like to get started you want to share a little bit about that how they can kind of learn from you. Yeah, I mean a lot of it it's on my website for free right like if you want a single family home analyzer simple passive cash flow dot com slash analyzer, for example. Like, I like my parents, they kind of follow the whole dogma, they work and live here in Hawaii my mom was a teacher and my dad works for the state. Like, they are unfortunately a victim of, you know, the economic system where they're, we're all told to invest in wash street mutual funds and work through their 60 or 70. And, you know, I've kind of uncovered, you know, through my travels on the mainland living on the mainland now living back at home now that there's definitely different ways of doing things that are much more tax advantage and risk advantage. You know, certainly risk adjusted returns are better that I just wanted to put out there on the internet for free. And if people are kind of interested to check it out. I'm totally interested in doing, you know, investor calls with people, all I asked is just to go listen to the first dozen podcasts. My first dozen podcasts are all about turkey rentals buying remotely on the mainland. Later, later on, you know, as the podcast progress. And this way back in 2016 when I started it, you know, it gets into syndications and stuff like that. You know, check out the first podcast and I'm totally willing to kind of put in the time and you know have a chat like this over the phone. So yeah. So is there any other advice especially with the way the stock market is going the way we kind of don't know where the economy's headed. Do you have any other advice for people who might want to get started. Yeah, I mean, personally I got out of the 401k all the paper assets, maybe three or four years ago. But I definitely felt like it was a very stressful taking out because everything we're taught is the opposite. Right. But I also created an accredited investor group here locally in Hawaii, where we can talk about these type of things and feelings. And it's not, it's not crazy right to invest in hard assets that cash flow and not be in the stock market. You know, again, it comes down to your network. Oh yeah, yeah. So the stock market was pretty volatile there for a little while. So, but all right anything you'd like to add this has been great because I love when I come and learn stuff and I had already explained to you I wasn't really clear on the ABC class. So, um, but yeah anything else you'd like to add. Yeah, you know I think, I think something that really helped me when I got started like I started to realize what was, what did I have in terms of time money and knowledge. Right, like I was an engineer. I, you know, I made it pretty decent salary, you know, I think too crazy, but I didn't have too much time. So that was where a lot of like what my, my skill set or what my, my avatar was kind of lined up for was to be a passive investor. And at the time when I started just out of college I had no money. So I had to kind of just start buying single family home rentals and you know this is not a get rich quick thing but it's a get rich surely thing. All right, so we will have Lane's contact information on on the link on YouTube. And if you have any questions you can reach out to him you can reach out to me I can get you together. Thank you all for joining us again it's life is life of the land is in its real estate. Next, in two weeks, we're back again and I have the becks, who are Keller Williams agents from the big island to share about what the market and the shift has done on the other islands. So I can, I can tell you what it's like here in Oahu, but are they seeing something different on on the outer islands they are in Maui and on the big island so they'll be with us to share with us. And I would love some interesting topics if there's anything you guys would like to know about we have some more upcoming guests that are that are quite interesting, but I'd love your input and what you'd like to see. Thank you, and I will see you guys in a couple weeks.