Today we have a very exciting show with Lane Kawaoka all the way from Hawaii!
Lane Kawaoka is a city project engineer and a licensed professional with a masters degree in Civil Engineering. Lane’s passion project is Simple Passive Cash Flow which is a free podcast and online learning resource for real estate investing. While Lane was working as a high paid professional in corporate America and frustrated by the traditional wealth building dogma, Lane was compelled to inspire and mentor other working professionals on how to invest in real estate and build their own portfolios and has recently invested in a large 626 unit multifamily property in San Antonio, TX.
If you’re looking to learn about commercial real estate and multifamily properties, then check out today’s show!
Insight of the Week
On today’s Insight of the Week, we’re going to talk about the power of the mindset.
Although we constantly share great strategies that will help you in your business, we also want to drive the importance of getting your mind right.
It’s important that you leverage confidence. In our Simple Guide to How to Find a Real Estate Mentor, we talked about the importance of finding a mentor and if you can leverage your mentor’s mindset and confidence, then you, as a newbie has confidence.
Surround yourself with likeminded people who are doing bigs and then once you really start to get to know them and you realize they are just ordinary people, that will give you even more confidence to go forward because you begin to think, “Well if they can do it, I can do it to.”
You have to listen to podcasts, read books, pray and do whatever you need to do to overcome those mental barriers.
These strategies that we share are great but if you don’t have the proper mindset, you won’t achieve anything but if you have the right mindset, you’ll will do amazing things.
On Today’s Insight of the Week we’re going to talk about money.
Is money a blessing or a curse for people?
We go through some many different changes and experiences and some bring us close to Jesus and some do not. If making money brings you closer to Jesus and you’re able to bless people and be more like Christ with your money, then that’s awesome. You’re on the right path.
Also remember, the more money you make, the more successful you become and the more you tend to rely less on people, including God. That’s why Jesus talks about rich people in the Bible because when you’re rich, you can buy and pay your way out of many situations instead of leaning on God.
It’s important to remember that can make a ton of money and achieve success, but if it doesn’t get you closer to Jesus then it’s worthless.
In This Show, You’ll Learn:
- 5 Tried and True Ways to Land Deals as a Wholesaling Newbie
- Is Money a Curse or a Blessing to People?
- Advantages of Building Passive Income
- Single Family Homes vs. Commercial
- Investing Out of State
- Structure Syndication
- and much, much more!
“When you’re with your loved ones or family, it’s not about how much you pack into the time, it’s more about quantity time.”
“Eventually things will change.”
Profile: Lane Kawaoka
Thanks for Listening!
Brett: Dashing through the snow, on a one-horse open sleigh, o’er the field we go, laughing all the way. Da da bells rings, making spirits bright, la la la, la la la. Yo! Jingle bells, jingle bells—hardcore Christmas!
Merry Christmas from the Simple Wholesaling podcast Episode 86.
Welcome to Simple Wholesaling, a Christian podcast that supplies simple, yet effective content for real estate investors and business entrepreneurs. Get advice, tips, and tricks so that you can stay true to your values and achieve your dreams with real estate investing you can trust. Now, introducing your host, Brett Snodgrass.
Brett: What’s going on, all you Simple Wholsalers out there. Thank you for joining us on another Episode of the Simple Wholesaling podcast. I am your host, Mr. Brett Snodgrass. I am with my co-host here, Mr. Jaren Barnes. What’s up, man?
Jaren: What’s up, man? How’s life?
Brett: It’s good. It’s good. Just getting ready for the holidays. Got done with Thanksgiving. Ate a lot of food. Hung out with the fam. It was cool. It was good. How about you?
Jaren: Yeah, man. I’ve been learning a lot about mental toughness. I’ve been really getting into like just some—I don’t know. Something shifted in my whole paradigm. I had something really cool happen over the holiday weekend. My wife the other day—the most I’ve ever ran was like four miles, and she came home one day and she said, I got to like three miles and I was so excited to go home and then I realized, why am I excited to go home? I could do more. So, she forced herself to run six miles. And I was like, I’m going to just be real for a minute—man, my wife outdid me? She did six and I’ve only done four?
That can’t happen, so I decided, we actually walked ten miles on Thanksgiving, just to kind of like go for a long walk together, spend some time together, which was really cool. But then I was like, you know what? I think I could run this. So, on Saturday, I took two hours, and I ran ten miles for the first time ever.
Brett: That’s awesome, man.
Jaren: Yeah, definitely—I never thought that Jaren Barnes could ever do anything like that and it was a really growing experience because I got to mile seven and I was done. I could do an entire podcast about all the things that I learned.
I’ll spare all of you guys, but there’s a video actually posted on my personal Facebook wall, if you guys want to find it, it’s Facebook.com/JarenB7 by this guy named David Goggins, who’s like a former Navy Seal and he talked a lot—he has like a condensed version of like an hour interview that’s down to thirty-two minutes or something. I’d really encourage you guys to watch it because that essentially verbalizes everything that I’ve been learning the last like few months.
So, I highly encourage you guys to check that out. It’s definitely, mental toughness has been something that’s revolutionized every aspect of my life from spiritually to physically to business to everything.
Brett: That’s awesome, man. Yeah, man, it’s a lot in your mind and it’s all about the mindset. If you can get over that, you can pretty much accomplish anything, kind of like that video talks about, and just walking with your wife, too, ten miles. I remember when Karen and I—my wife—were training for the mini—I think the most I had ran was like three or four miles and I didn’t think I could do much more than that.
And then, I think one day we ran eight and then ten and then that was some of the best times, too, with us, like when you guys went for that walk. I just remember that, you know. Out of all the dating experiences that me and my wife had, I just always remember that and just doing it together. I think that that’s really cool that you guys are doing it together. I definitely see that and you guys can feed off each other and just encourage each other. So that’s cool, man.
Jaren: Yeah, man. Thanks. It felt like we were on a date when we walked, you know? It takes about maybe three, three and a half hours and you guys—it was just really cool to just share hearts and have that quality time, you know?
My love language is cutesy, so my love tank was full.
Brett: It was full? Did you get some smoochies?
Brett: Awesome, man. Well, hey guys, we’ve got a great show for you today. We have a guest named Lane Kawaoka and Lane—
Jaren: You’ve got to say that three times fast. You sound like that brown bear from Sesame Street. Kawaoka! The guest who’s here and who’s named for it hates us. He’s like, oh my God, you did not just do that to my name.
Brett: Kawaoka. Definitely. He’s a great guest. He runs TheSimplePassofCashFlow.com and he basically has a day job as an engineer and his hobby, I guess, or his side business is he runs his own podcasts and then he buys 600-unit apartment buildings. So, pretty cool guys. So, pay attention because we always talk about real estate investing and this is something that you have to go full-time, and he’s actually training people that have really professional day jobs to build up wealth on the side with buying multi-units and starting off with a duplex or a quad, or up to, now he’s doing 100+ unit apartment buildings. So that’s pretty cool.
And before we get onto the Insider of the Week, do we have a review for today?
Jaren: We do, man. A lot of love these days. I don’t know what’s happened. Maybe my voice has gone deeper or something, but we’ve got more love on the iTunes. On October 5th by MrsJ3, “I was introduced to their podcast by a friend and I am very glad for the suggestion. I have been interested in real estate for a while but not sure where to start. Their podcasts are very easy to follow and not filled with real estate jargon. The best part about their podcast are that they share their faith and incorporate that into their business. Also, the skits at the beginning are so”—cut off, one second, hold on, I can fix this—I think it said something like stupid or corny—there you go—“So corny, but you can’t help but laugh. Makes my day go faster at work until I figure out how to transition into real estate myself. Thank you for sharing your faith and knowledge with us”.
Aw, I feel like it deserves a slow clap. Come on.
Brett: Thank you very much, MrsJ3. Thank you. And thank you all you listeners out there listening right now. We’ve gotten so much love from e-mails and phone calls and just people messaging through Facebook. It’s just been really special, all you guys who talk about Spirits of Foundation section, which is always my favorite and we just really want to help you and your real estate business, entrepreneur business, and in your lives. Just in your lives in general. So that’s why we do what we do. Jaren and I here, and so if you want to show us love, go to iTunes right now and they switched around some things—it’s kind of hard—
Jaren: To figure it out on the phone, it’s kind of funky.
Brett: I think you can write a review on your phone. It’s just hard to see them. Go to the podcasts section, search for Simple Wholesaling and write us a review. We appreciate it.
Brett’s Insight of the Week
Now, simple tips and tricks that make real estate investing easier, faster and better. Brett’s Insight of the Week.
Brett: For today’s Insight of the Week, guys, I’m going to talk about five tried and true ways to find deals as a wholesaling newbie.
Jaren: Haven’t we talked about this like five times?
Brett: I know, but we have a lot of people that haven’t listened to the old podcasts.
Jaren: That’s true. You guys just need to listen to the old podcasts.
Brett: Actually, I want to talk about you know, before we talk about any of that, strategies and all of that stuff is good and we’re going to go through Driver Dollar, social media, and stuff like that. But I want to kind of go back to the beginning of the show and it’s really all about just getting your mind right and having the confidence and we just did a simple guide on how to find a mentor and I was on a podcast recently and they asked, why is it important to find a mentor and somebody told me one time it is about leveraging confidence and it’s almost like you know if you can leverage my experience, and my confidence, all of sudden you have confidence.
The same thing goes for if you surround yourself with like-minded people, people with the same mindset that are doing big things, all of a sudden you really get to know them and realize that they are just ordinary guys and they are just ordinary people, that also gives you confidence to just go forward.
You’re like, you know what? If they can do it, I can do it as well. And that is kind of what happened to me this past year, to the Mastermind group and just getting my mindset right. Sometimes we have just that barrier of “I can only achieve so much, anything beyond that is unachievable because I’m just me and I don’t have confidence”.
We all, I feel like, have that invisible barrier like Jaren talked about with running seven miles and then pushing himself to run ten and, you know, with our business, it was like, yeah, maybe we can do 150 deals, but could we do 300? But more than that, that would be crazy. There is always just an invisible barrier that we have to get over and so for whatever you have to do to get over that– maybe it is just surrounding yourself with like-minded people with the same mindset, getting that encouragement.
Like Jaren, when he’s doing the work, I feel like him and Asia, doing it together, just pushing each other together and like kind of having that friendly competition. Maybe it is not your spouse but maybe it’s somebody else you know. But getting around that, leveraging that can really help you, getting a mentor can really help you and just whatever you have to do every morning to find what it is because I feel like every morning is a different opportunity. It’s a different day. We’re almost different, you know. It’s like I have to like get myself back into who I am because it does not come naturally.
Mindset, I feel like it’s something you have to get into because we’re humans and our human nature is to, we can’t do it because so-and-so told me I can’t. We think about the negatives I’m just me. I’m just a normal person. I can’t do that. I’ve never done it before.
So you have to listen to podcasts, listen to books, pray, do whatever you need to do to overcome those barriers. I feel like that is 80% of it. It is almost all of it. These strategies are great but if you don’t have that mindset, you’re not going to achieve anything. But if you have that mindset and you don’t have any of these strategies, you can just lop everything together, you can achieve amazing things. I think that’s just my insight.
Jaren: That right there guys, if you take it and run with it will absolutely change your life. Another person I’ve been listening to, which is kind of controversial because both the David Goggins guy I mentioned and this guy, they swear a lot. They cuss all the time. So if swearing offends you, don’t check them out. But if you need some kick in the pants motivation, there is this guy called CT Fletcher. Have you ever heard of this guy?
Brett: I think so. He’s a big football guy maybe?
Jaren: No, he’s won that powerlifting– he broke the record for the heaviest curl and then I think deadlift back in the day. But long story short, that guy will kick you in your pants. If you need to just take action and get out of there and honestly, man, mindset– I don’t want to steal your thunder, Brett, but I am just going to tell you, Romans 12:1 and 2, it says, ” Therefore be transformed by the renewing of your mind so that you can prove the perfect and acceptable will of God”.
The key to spiritual development and the key to financial developments and the key to any kind of development really boils down to changing the way you think. The word, actually, repentance in the original Greek, it means to change the way you think. It’s crazy but like there’s so much to what Brett is talking about, like everything, every progress in life, it really boils down to expanding your thinking.
I remember a day when I was like 18 years old I had never worked a job in my life, $1,000 was so much money to me. I was like, what do I do with $1,000? Now, being in real estate and seeing how much money Brett spends on all of these properties, $1,000, I mean I will just at random be like, oh yeah, I will just throw out $1,000. Whatever. Of his money of course. And it’s almost become like nothing. Chump change.
It’s all about mindset. It’s how you view the world. If I think $1,000 is the hugest thing in the planet to me then I will always stay limited. You know what I mean? And that is just an example of where you can bring that all across life.
All things are possible in Christ, you strengthen me.
Jaren: It’s the Bible.
Jaren: Do the word. Be the word.
Do you dream of a life that is purpose-driven and makes a difference? Spiritual Foundations.
Jaren: Do you dream of a life that is purpose-driven and makes a difference? Spiritual Foundations.
Brett: For Spiritual Foundations today, I am just going to also speak from the heart. And it just kind of goes along with what we’ve been talking about, about mindset. I think I did a video when we first started doing the videos and the podcasts for the very first time and the title was, “Money, is it a blessing or is it a curse for people?” And some people say money makes you more of who you already are and I definitely believe that. I definitely think if you are already a generous person, if you don’t have any money, you become rich able to more generous. If you are a jerk, and you make a bunch of money, you’re going to be a big old jerk.
But I think it really all boils down to so many different changes and so many different experiences and some bring us closer to Jesus and some do not and I think that you money brings you closer to Jesus and you’re able to bless people and you’re able to be more like Christ with it, then that’s amazing. That’s awesome. I feel like you’re on the right path.
But I feel like my journey and my story has been kind of a bit up and down journey with my relationship with Christ because the more money you make, and the more successful that you are, the more comfortable you can become and the less you have to rely on anybody else, especially God and that’s what you think. And I feel like that’s why Jesus talks a lot about rich people in the Bible, how it just becomes more difficult– it becomes more difficult because you can buy and pay your way out of many situations.
So I’m talking about money right now but this could be anything. The Bible says to give all the glory to God and it talks about you can gain the whole world, what good is it to gain the whole world and lose your soul? So you can gain all of these fleshly things, all of these worldly things, you end up, it’s not even about this life, it’s about eternity.
So I just want you guys to really take away from this that you can have an amazing mindset, you can accomplish amazing things, you can be rich, you can be so successful in whatever you going to do but if it doesn’t get you closer to Jesus, it’s worthless.
Jaren: 100%, man. You know it’s funny how timely sometimes these Spiritual Foundations are because I have been doing a lot of thinking over the holiday weekend and stuff. One of my core values is to stay hungry the scripture that comes to mind for that is, I think it’s like Matthew 5 or 6 where Jesus is talking about the blesseds and he says like, “blessed are the poor in spirit for theirs is the kingdom of God”. And I’ve been thinking a lot about that because if you can develop a heart position in the midst of business where you are poor in spirit, no matter what, you will always have the heart of desperation for God.
Because what does it mean to be poor in spirit? Well, like if you’re poor, you always have need. You are always in need of a handout. You are always in need of assistance. You are looking for any kind of a way to survive. And so if you’re poor in spirit, you have the spirit of a poor person in relation to God. And the Bible says blessed are you because you’re aware of your need, right? You are aware of your neediness and out of that place comes desperation and urgency for the things of God.
I have gone through a lot recently in our life, like ups and downs, being really close to God, really far away from God. Just some crazy ups and downs but what I realize is that one of the pursuits of my life in any season has to be desperate for God.
If I want to walk close with God, and I’m desperate for him, reading my Bible will not be a problem. A poor person, when they need to make ends meet, look at it at a different way– if you are in love and you don’t have any money but you want to get an engagement ring for that girl, you’ll figure it out. You will do what it takes to get an engagement ring. People in love will do all kinds of crazy stuff.
Same thing with people who are hungry. People will rob, steal, cheat, kinds of crazy stuff to get what they’re desperate for and if you’re desperate for God, it will be easy to spend time with him. And it will be easy to shut things down, to put the family aside, to put the business aside, and seek Him.
So for me, that is why I made it one of my core values to always remain in that heart posture of being poor in spirit. Because you always need God, no matter how successful you are. Probably the more successful you become, the more desperate you need to be.
Brett: Definitely. Right on man.
I hope you guys enjoyed that and I know that me personally speaking and listening to Jaren, I got a lot out of this show and hopefully you did too. And now we get to do the vegan meat–
Brett: Part of the show with Lane Kawayaka.
Brett: Alright guys, we are so excited for today’s guest. We are with Lane Kawaoka from Hawaii. Aloha, Lane. What’s up, man?
Lane: Hey, how’s it going, guys?
Brett: Good. Thanks for being on the show today. Just a little bit of a background on Lane. He is a city project engineer and a licensed professional with a master’s degree in civil engineering. Lane’s passion, though, is a project that he calls SimplePassiveCashFlow.com, which is a free podcast and an online learning resource that teaches people how to take income from their day jobs and poor it into passive income, which we just had a conversation about.
So he works with a lot of high-paid professionals in corporate America that are frustrated from just working the rat race and they’re pouring their income and money into passive income. He has recently invested in a large multi-family in San Antonio, Texas that is currently 626 units and he invests all over the nation. So, thank you very much for joining us today, Lane. We are so glad to have you on the show.
Lane: Yeah, thanks for having me, guys.
Jaren: It’s a real honor, man. I’m actually really interested in picking your brain on this show because I had some interesting conversations over the weekend with my acquisition manager about buy-and-hold and comparing single-family residences to commercial. So I’m pretty excited.
But, to kick this thing off, tell us your superhero origin story. Where did you come from? How did you get started investing in real estate, and so forth?
Lane: So, my origin is pretty boring. I went to school, living that linear path I worked towards. Live, go to school, get a good job, study hard. I went to University of Washington up in Seattle and I got an engineering degree, went to work, studied hard, worked hard, saved a lot of money. I’ve got my About Me page on my website with all this laundry list of dumb things that I would do to save money as a 20-year-old, like wash my car in the rain and do all kinds of weird things like that. But I was able to save money for my first primary residence, because that’s what we’re all told to do. That, and invest in the stock market and mutual funds.
But then I was travelling all the time with my job because I was in construction management, and I was never home. I was only home on Saturday. So I decided to rent it out. I was an accidental landlord, and then things—I was like, whoa, this is crazy, right? Because I saved $80,000 for a $350,000 home in Class A rental home in Seattle at the time in 2010, and I rented it out. The rent’s for $2200, and the mortgage was $1600, and for a kid in his twenties, that was a lot of beer money to go around and play with. So I was like, shoot, I’ve got to do some more. And then I started listening to all these podcasts and books and the rest is kind of history.
Jaren: Wow, where was that first house at? Was that in Hawaii or was that somewhere else?
Lane: So I was living in Seattle at the time, so that’s where I went to school. And that’s just where I decided to buy my first property to live in, because I wanted to live there, too.
Jaren: So how much did it cost at the time? Because I know right now, Seattle is a really expensive market, isn’t it?
Lane: Yeah, it cost about $350,000 at the time. Today, it’d probably be worth—I sold it a few years back, but today it’d probably go for $450,000-$500,000.
Brett: That’s cool.
Lane: And I bought a duplex after because I got a little more sophisticated and I realized that I bought A-Class rentals and A-Class rentals are usually not what sophisticated cashflow investors are investing in. They’re more into B and C-Class. So after that, I bought a B-plus duplex in Seattle for $250,000 that rented for $2000 a couple of years later. That one was a little bit better cashflow, nice. But 2012 came along and the price was just going up and up and up and I couldn’t cashflow and I thought that was the end.
Brett: So take us from your first duplex to kind of more, how’d you got from just being an engineer to getting into commercial? Because that’s what you primarily focus in now, right? Large, multifamily?
Lane: Yeah, so there’s kind of intermediate stuff in between there. In 2012, I was looking around and things weren’t cashflowing and that’s when I realized the difference between cashflow and appreciation and investing and me as a W-2 employee, I wanted to replace my income. So my goal was obviously cashflow. Appreciation, you can’t eat that. I started doing my research on the forums, learned about all the turnkey rentals and I was like, okay, well I’m obviously not hitting the cash funds in Seattle. This is 2012.
So, I bought this rental across the nation in Birmingham and it worked out well so I sold my two Seattle rentals, did a 1031 in exchange for two of those homes for nine rentals out of state. And then I was kind of off and running as an out-of-state landlord, which is kind of a totally different game when you’re remote like that. Definitely good stuff when you’re going to go to the bigger stuff and a little less hands off.
Jaren: So were those all single-family or were they like duplexes or what were they?
Lane: Yeah, they were single-family and I would recommend a lot of people that do single-family because the duplexes, triplexes, and quads, it’s just hard to sell those things. You’ve always got to think about your exit strategy and when it’s time to sell, you’re just going to be selling to a cheapskate investor like us.
Brett: Yeah, you can’t really sell that to a homeowner and single-families, you can fix them up and you’ve got a lot of different people that are going to want to buy those. But yeah, multi-families, you’re just pretty much stuck with the investment crowd.
Jaren: And they are always going to want to negotiate.
Brett: 67 cents to a dollar. So, talk to us about—you kind of teach other people today, high-level individuals that make a high income and do you still have a day job? Are you still doing engineering or now are you a full-time real estate investor?
Lane: No, I mean I still go to a day job. I’ve got to in about like an hour. I always tell people, figure out what’s your highest and best uses starting out? There’s three resources. There’s time, there’s money, and there’s knowledge/network. Figure out what you have. Like, starting out, I didn’t have any time. I was travelling all the time. I was busy at my job. I had a decent amount of money because I was able to save and it took me a couple of years to save that down payment, but I could do it.
And I didn’t have very much knowledge. My network was pretty small back then. So that’s why the turnkey rental was the perfect thing to get started with and the local rental that I just happened to buy at the right time. But you know, at this day and age, you’ve got to really figure out what you’re good at.
Gary Vaynerchuk, if you guys listen to his stuff—his thing is always pushing self-awareness. Figure out what you are good at or what your skills and situation is. Because if you don’t have any money—I’m sorry, I didn’t do that. I don’t know how to make no-money down deals. There’s a lot of guys that do that. Go learn from them. But if you’re looking to keep doing what you’re doing, and quite frankly, a lot of the guys that talk to me, they should just stay at their day job, right? Because that’s simple passive cashflow at the end of the day. A lot of people work hard, going through college, and they busted their butt and you know what? They deserve that.
Jaren: Yeah, I actually agree with that strategy. I’ve told a lot of newbies that have approached me with, how do I get out of my job? How do replace my income with wholesaling? A lot of times, my advice is, why do you have to stop working right away? I mean, I technically have a day job, right? I work for Simple Wholesaling and I am able to start slowly investing on the side but without my day job income, just for me, it’d be a lot more feast or famine.
It’d be a lot more stressful, being married and having to provide for our family. So, I 100% agree, I don’t think that going the zero down money route is necessarily the best way to go. I think if long-term, you’re going to be in the game for some significant wealth, then working a 9 to 5 job for five, ten plus years, that will get you into a place where the vast majority of your career, you can be living off your rental portfolio or your investment portfolio. I think that is a smart move.
Jaren: What are your thoughts, Mister Entrepreneur?
Brett: Yeah, man. I mean, I’m really interested in picking Lane’s brain because I probably am right there. I have a day job. I work here at Simple Wholesaling and I own the business but it’s basically you know, we’re flipping houses so we have to do it every month or we don’t make any money. So I’m probably like your key person that you would talk to, Lane. So tell me about this.
Right now, I’m working this job and we’re making some pretty good money, me and my wife, so now we’re trying to think about the next five years of our life and what does that look like five years from now? Do I still want to be growing this business? Even though I really love it, what should we do next or how should we build passive income? So, what are the advantages of building passive income, I guess? Let me take me back and why should I invest in some passive income properties and what does that kind of look like?
Lane: Yeah, I mean, a lot of guys, I ask okay, so how much money are you making in income and expenses? Because that’s all I really care about. If you’re higher than $30,000, you should probably graduate to a large syndication as soon as possible. At least start out with a single-family home to get experience.
Brett: What was that again?
Lane: $30,000 per year. And there’s a few reasons why I picked that number.
Jaren: And that’s net.
Lane: Like, if you make $250,000 and you spend $200,000 of it, you’re only in $50,000, right? Ideally, you’d like to save more than a good chunk of that. It’s all about the cashflow game, right? The teachers are always the ones that wins. It’s not the doctor. Something that came to mind—I did a speech on why not to quit your day job, you guys should check it out on my YouTube channel.
But the gist of it is you know, all of us are entrepreneurs here but I think we get this ego about we’re going to be entrepreneurs, screw our job. We’re going to go all in, right? But the day job is the thing that gives us our foundation and a lot of business negotiations and making deals, if you’re not coming from a place of abundance, you’re making bad deals.
And I think all the information out there that you’re seeing from all these YouTube guys and these role models and gurus, they’re all the self-selecting guys. They’re the guys that made it. You’re not seeing the whole bunch of people who failed and struck out and never got back into it. At the end of the day, being entrepreneurs, I mean, yeah you want to stop working for the man and leave the rat race, but entrepreneurship, if you do it the wrong way, you keep seeing that business quadrant, you just created yourself a new rat race.
Jaren: Yeah, a 100%. I’m actually going to link your talk in our Show Notes. Guys, the Show Notes will be listed at—what is it, guys? It’s www.SimpleWholesaling.com/Episode86. I used to have a terrible habit, 86 episodes in, of just saying two w’s. Everyone kept giving me crap about it. So, it’s three. Three w’s.
Brett: Cool. So kind of take me into this. So when you said $30,000, I was like, wow. I thought you were talking about when I was a teacher, I was making $30K a year. But you’re really talking about if you make $100,000 a year but you only spend $70,000, so basically, you have $30,000 left in your bank account. Is that kind of what—
Lane: Right. It’s the net that really matters. So, two examples. On the opposite ends of the spectrum. Say, I’ll take like a doctor. They make $300,000 a year. They spend $200,000 of them. I don’t know how they do that but they do. So, they’ve got $100,000 to play with. As you can see, they’ve got a pretty big war chest and for them to buy single-family homes, they’re going to be buying one or two a year.
But then, in the single-family homes, when you get to a certain point, at $200-$300 in cashflow, you’re going to need like 20 or 50 of these things. Which is just not doable. You’re going to go crazy. This is kind of a lesson that I learned when I got to double digits with single-family homes. I wasn’t going to hit my goals with that. I just created myself another job. Yeah, I’m managing the manager and I have them doing all that stuff. But it’s just not what the cool kids just haven’t created themselves another job are doing.
And then you go the other end of the spectrum and you’ve got guys who are kind of scraping by, these are the guys that I like—these are the guys hustling and they are only able to save $5000, $10,000 a year. That’s cool, right? So keep saving that. Two or three years from now, buy one single-family home. And then save another couple of years and buy another. And now, maybe instead of one every two years, you’re buying one every year. And once you get up to that critical mass, like five or ten rentals. Now, we’re off and moving. And it’s all about moving money from that active side to that passive side.
Jaren: So, I want to ask a question, and again, this is coming from the conversation I was having with my acquisitions manager over the weekend. He was highlighting to me—we have properties in Indianapolis where 90% of the properties we sell are in Indianapolis. But then we have a few off-properties that are in Anderson, Monsignor Castle, that are very depressed economies, no appreciation whatsoever. If you’re going to buy a $15,000-$20,000 house right now and in five years, you’re probably going to sell it for $15,000-$20,000 but why people like those is because they can be all in at $15,000 and still rent it out for $500 a month, which is a ridiculous return.
So from your perspective, when you compare apples to apples going from single-family, in like, say, Birmingham to buying the commercial side, multi-family syndications and things like that, aren’t you making in terms of sheer return on investment, from a cashflow perspective, aren’t you making more money with single-families than with commercial?
Lane: I’d say, the rental value ratios are probably a little stronger in multi-family because you’re running it more like a business. Single-family homes, I mean, let’s face it, we’re using bubble gum and masking tape to fix a lot of the repairs when it comes up. But multi-family is done with that really, really professional property management. And they’re running this thing like a business. So you’re not having like rental value ratios of 1.5 or higher, it’s just not going to work for you. A lot of the expenses are like $4000 a year for expenses per unit.
Yeah, you’re getting a lot of return for that $15,000 home that rents for $500 or more. But you’ve got to remember what are you doing this for? Are you doing this for cashflow and the passive income? When I hear those numbers, I don’t think of like how much money you’re making. I’m thinking about how much headaches you’re creating for yourself. I mean, how many of those properties are you going to get? You’re going to go crazy doing those.
With my guy, I invested in DNA. We should probably talk about working together to help find properties for my guys, but I tell them strictly, don’t go anything less than $800-900 of rent per month. The level of tenant, it’s just not worth it. We always use—why are we doing real estate? I don’t particularly like real estate but real estate is a hard asset and the big thing is it’s leverageable. Like, you can’t leverage a $15,000 home. You can’t even leverage a $60,000 home. That’s why we go after the $80,000 ones and above.
Jaren: Yeah, that makes sense. I mean, I hope I’m not over-talking, Brett, because I’m asking a lot of questions. So, let’s dive into a little bit on how you invest out-of-state. Even if you have students and stuff or people that you work with that are buying—in my mind, if I’m local and I’m buying a $15,000 property in Newcastle, I’d be running into the same conundrum that you run into as an out-of-state investor. You still have to have a solid property manager in place. You say you’re buying turnkey, right? So you’re working primarily with turnkey companies or can we dive into how you overcome some of the management difficulties being out-of-state?
Lane: Yeah, so I guess to dive into that last question there, how am I buying properties? Mostly turnkey, initially. Obviously, we’re paying above retail price but quickly transition my guys to work, finding that broker to work with who you trust and picking up rental properties that $5,000-$10,000 light rehab that rent for above that $800-900 a month to get the [inaudible][36:01] tenant.
The property management for multi-family, they’re just far superior, kind of how the broker in multi-family is far superior than your real estate broker and single-family. These guys, they actually do their jobs. They look at the numbers because they manipulate things and everything is cookie-cutter in the multi-family. All the repairs are the same and quite frankly, the single-family tenant is kind of an entitled tenant. I mean, yeah, they’re renting this $500 home, but they feel like this is their house.
Whereas a multi-family tenant, even if it’s $500-$600, they kind of know their role. They’re in that box. They can’t really screw anything up. But a house, you can screw stuff up massively. I had a person move out the other month and it cost like $27,000 in repairs. I’m like, it’s hard to do that in a little 600 square-foot apartment.
Jaren: That makes a lot of sense.
Brett: It definitely makes a lot of sense. Plus, I think what Lane said, that these managers treat it like a business and everything is the exact same so they have a great system. All the doorknobs are the same. They probably have the kitchen cabinets are the same, everything’s the exact same. When you’ve got a hundred different houses rather than a hundred-unit apartment, everything’s just a little bit different because the houses are all different. So it can be a little bit more messy and all that.
Lane: Yeah, and the multi-family, those guys, they have these systems in place. When you buy a property, you want to be having that property management already on your team so they can do a walkthrough of all the units. And they’re doing exactly that. They’re inventorying every piece of hardware that’s there and then they come to me and they say, hey Lane, do you want to upgrade the brass knobs? 20% of them probably need to be replaced anyways.
Those have those sort of numbers. It’s just kind of phenomenal from a contractor’s standpoint, when you’re dealing with a single-family home, you’re working with Bob the cabinet guy, right? When you’re doing cabinets in your apartment, you’re working with ABC, who are super big, a corporation. They’re going to show up on time.
Jaren: So walk me into what that looks like to get started, then. Because I’ve kind of been on the fence on whether I had a rental property earlier this year, and I ended up selling it because I like wholesaling better and I’d rather save up more money to get into commercial in the future. I am a brand new person that has a day job, is extremely busy. What do I need to do to get started?
Am I going to look for a syndication to jump ahold of or am I going to like, try to do, I don’t know if you’re familiar with Michael Blanc but he has a strategy as being the syndicator and kind of talking to mom and pops to put an investment to pull together and they’re like, how do you find the market you want to invest in and how do you get started?
Lane: Yeah, I think before we got started, we were even bashing the single-family home. That’s still how you get started. The pros and cons well go in the favor of multi-family but that’s how you get started. That’s how you get that seed money to get going. You’re going to need about $100,000-$200,000 of liquidity to get going in multi-family. But yeah, there’s two paths to get into multi-family, the ma and pa investor that goes the 8-16-32-48 unit path and to bigger and better things. And then the syndication route, jumping in on the syndication and just running that way.
Obviously, I’ve gone the syndication route and that’s because I started to look at smaller units, like 30-units and 40-units and if you’re below 16-units, you don’t have that property manager outside all day long. That’s a big thing. But I just found the pricing in those smaller units to be a lot worse than what you find in the bigger stuff. I just couldn’t make the numbers work and I contribute that to the fact that in those smaller units, you just have too much competition from unsophisticated ma and pa investors that have been doing it a while and just quite frankly, they don’t use all the electronic and information out there.
They don’t have the contact. They’re not in forums, networking with the right people. They’re the ma and pa investors and they’ve got a lot of money, but they’re not the smart kids doing it. And those are the guys you’re competing in. So that’s why I went into syndication off the bat. But it’s a choice. You’ve got to pick one of those two paths.
Jaren: And with the syndication, I never got into that because it just seems too complicated for me. It’s something that, I don’t know, just seems too messy. I guess that’s just how my brain operates. But take us into that. What does that look like? How do you structure a syndication?
Lane: So, what you just mentioned there, that’s why a lot of people say, that’s the beauty of it, right? It’s something confusing or sort of hard about it. That’s where the opportunity is because nobody else wants to do it. And it’s a different game. You’ve got to pivot your business. It’s not finding deals, operating it, it’s more a networking with other people and working that way and finding investors.
But the analogy I like to use for syndication is the airplane analogy. An airplane flies in the cockpit, there’s several partners and people flying the airplanes. These are the general partners in there. There might be one, two, or even four or five of them sometimes. So that cockpit, they do everything. They find the deal. They manage the manager. They find the lending. They find the investors. They operate it. They’re doing everything. That cockpit of general partners, their net worth needs to be greater than or equal to the loan size. If they’re going after the $5 million dollar loan, their net worth better be greater than or equal to it. So that’s one of the three components.
The second is, they need to have the liquidity because the bank’s going to require the liquidity out of that general partnership group. And then the last thing that they need to have, the down payment, but they also need to have experience. So a lot of the stuff that I work with is non-recourse lending and that’s really the reason why I am multi-family. A lot of the single-family homes, you’ve got Fannie Mae, Freddy Mac loans—they’re all recourse loans. If the property does bad, you’ve still got to pay back 100% of that loan back, potentially.
But a lot of these larger buildings that are 90% occupied or more, you can get on Freddy, Fannie, non-recourse loan on it. If the property goes bad, yeah you have to reduce your down payment, but they don’t come after you for the rest, assuming that there’s no foul play involved.
Jaren: I didn’t know that yet. That’s cool.
Lane: That blew my mind, right? I was like, why is Fannie and Freddie subsidizing all these rich investors and syndicators? But think about it. Our country needs more workforce housing, more decent housing, and this is a way they’re incentivizing investors to go down this route.
Brett: That’s a game-changer information.
Lane: But it’s only on properties that are 98% occupied or above. So you know, all that stuff of, hey this property is 30% vacant. I don’t even touch that stuff. Let other people do that. That’s a lot more higher risk, higher reward. And I’m not really looking to take chances these days. I’m more like a singles-doubles kind of guy. So, only non-recourse lending.
Brett: Going back to something you said previously, you’re buying a lot of turnkey—were you suggesting people that you coach or you’re advising to buy single-families turnkey or do you actually buy commercial property that’s already turnkey?
Lane: Single-family that’s turnkey. And a lot of the people that I help—coaching is not really scalable, right? That’s not a simple passage for me—that’s paying training time for money. So I really don’t like doing that. I mostly put it up there to deter people from thinking I’m a constant supply of advice.
But I mean, everything’s out there for you to go do what you need to do. You can come to my website. You can come to yours. All the resources out there, I mean yeah, go buy a rental property from a turnkey provider. Good luck. But it’s, how do you take the next step? How do you go from there to working with a broker and doing it remotely and how do you transition to multi-family? Like I mentioned, the one tip, don’t buy single duplexes, triplexes, or quads because when you’re going to jump up to bigger things in three to five years, you’re going to have a hard time making that jump.
Brett: Yeah, definitely. That’s good stuff. Well, guys—do you have any other resources, Lane, that you want to give before we go into the next section of the show?
Jaren: I just want to say, we’re recording right now on video so Brett’s not like, Show Notes! Show Notes! But that’s definitely what’s going on in his mind. He wants me to mention something in the Show Notes.
Lane: That’s cool. I mean, it’s the first one, right? That you guys are doing it like this.
Brett: Yeah, it’s new to us, too. Yeah. So yeah, do you have any other resources for someone to find out any more information about, where do you go when you want to learn about syndication or buy multi-families or just buy cashflow rentals? Where are some of the one great resource that they can go to?
Lane: You know, I went to BiggerPockets initially but these days, you’ve got a lot of the sharks in there, the guys trying to set the markers and the providers trying to sell you stuff. You’re not going to really find the investors because it’s hard, right? The investors are not really trolling the internet forums, right? They’re living life. They’re kicking butt at their jobs.
But I found quite a few of them have created secret Facebook groups and I try and filter who comes in. If people are into that stuff, yes, set up a call with me and I want to figure out who you are first and what you’re all about. But the peer group is a big thing, right? That was how I got started. I contacted about four or five investors who are actually buying in those states and from those people, and I built relationships with them as best as I could from 3,000 miles away and I just started building a web, right?
It’s just like finding syndication deals. If I haven’t worked with the person before, I’m going to contact who invested with them in the past because my network is slowing growing to a certain point where I can do that and I ask, hey, how was the last deal or how was the deal before that? And how was this person’s character?
The good thing is a lot of people hang out with each other. It’s those lone wolves that you’ve got to look out for that don’t have the social media profiles and those kind of obscure guys out there. Because if you’re not with the crowd, they’re going to kind of question that.
Brett: Yep. Cool. I like that. We’ll put a link in the Show Notes if someone—I do agree, when you’re in a private Facebook group or peer group, you only want to work with people that are serious and there’s a lot of people out there that are serious. So, I think you’ve got to vet that. So cool, we’ll put that in the Show Notes.
Jaren: In the Show Notes, you will find that at www.SimpleWholesaling.com/Episode86.
Brett: Cool, you ready for the next part?
Jaren: Yeah, man. You?
Brett: Let’s do it.
Jaren: One, two, three. Going Deep.
Brett: In this part of the show, Lane, we just like to ask some more personal questions about you and your life and just kind of how you integrate your business with your life. We know that you’re a civil engineer and you’re a busy guy and thank you for joining us on the show today but we know you’re preaching simple systems, modern best practices in your investing life. Are you able to do any of that in your personal life and what does that look like?
Lane: Yeah, I’m an industrial engineer and you know, those are the guys, by education, they go into the factories and they cut out all the fat and make things super lean. Yeah, I’m a big systems guy. Everything helps me put on my podcast and invest very efficiently and manage things but you know, I’ve heard this quote about, when you’re with loved ones or family, it’s not about how much you pack into the time, it’s more about quantity time, is the thing. It’s something that I always think about. I don’t have kids so that’s kind of what I’m doing now, while the getting is good. Eventually, things will change, you know.
Jaren: That’s awesome. Brett always says that, too, actually.
Lane: For some reason, I may Simple Fast Cashflow at some point.
Brett: Yeah, definitely. I think you’ve got to have the quantity in order to get the quality. Some people say yeah, I can spend ten minutes with my family or loved ones and that’s good enough but I think when you have the quantity, the quality is going to come no matter what. So that’s cool.
Jaren: Yeah, it’s kind of like working out. You may have an off day at the gym but it matters about just the consistency of going. You know?
Lane: Yeah, certain things are quantity and certain things are quality.
Jaren: Yeah, for sure. Well, my question for you, man, in the Going Deep section is, what is your ‘why’? Why is passive income important to you? Why is investing important to you? Why do you do what you do? What gets you up at five o’clock in the morning, you know?
Lane: I’m really trying to find why I do this the last six to twelve months and I think what it comes down to is I see a whole bunch of—I’ve been getting these cool e-mails from people who have bought their first rental and their whole financial outlook has changed. Like, a young family that both of the parents are working and now one of the parents don’t have to work now or they’re looking at, instead of a 45-year career, they’re looking at a 10-15 year career. That’s just life-changing.
And I see this big dogma of the Wall Street and mutual funds and it’s just stealing money away from middle class America, the hardworking people kind of like myself who were forced to go work for the man, get a good job, work forever, and then save up this big chunk of money only to hope that it’s enough. I think it’s a little an unbeaten path, investing in real estate, but I think more people need to get into it and so I try and brand myself as, you know, I’m not really that special, right?
I just tried something and I fell into it and I put the right people around me and I slowly build and I think that this kind of vendetta against the big institutions out there that are just rotten people, robbing people blind. We need to get more money out of that Wall Street casino people are playing around with the money and there’s a lot of corruption and get it back into main street projects with real people getting better returns.
Jaren: That’s awesome, man.
Brett: Yeah, I think you really hit the nail on the head when you talked about just getting into it slow. That’s what we always encourage people. People always look at you, Lane, they look at our business and they say, wow, I want to do this big syndication or I want to do a few hundred wholesale deals or whatever—I’ve been doing this thing for ten years. You’ve been doing this for a while. And just buy that first single-family rental house or just go out and do that first wholesale deal. Just don’t worry about the vast and the greatness and the bigness of it. Just get started. Start off slow. It just takes time to build a team, to build into that 626 multi-units. It just takes a lot of time to get the experience to do that.
So I encourage you, if you’re out there listening, don’t worry about the 600 unit or the 300 unit deals that we’ll probably do. Just do one thing, you know. I think that’s why Lane kept coming back to just getting that first single-family home. That’s a great place to start. You get the experience. You get the management feel of it. You get a little bit of flow and just the confidence and the experience behind it, and then really, it’s not that much different than buying a single-family home than buying an eight-unit. It’s kind of the same process. Just a little more numbers behind it so I think that’s my advice here.
Touch of Randomness
It is time for a touch of randomness.
Brett: In this last section, we just like to end on a bit of a lighter note, Lane, so thank you again for joining us today. This is called The Touch of Randomness. We’re going to ask you a couple of random questions and just kind of name the first thing that comes to your mind.
You know, you’re an out-of-state investor and you probably travel a lot. What is one city that you really look forward to flying into?
Lane: Back home to Hawaii.
Brett: I know—you’re like from the greatest—
Jaren: I was about to say, like scenery.
Lane: I mean, a lot of the places they’re buying today is in that rust belt or I like to call it the smiley face of America, to go from the Dallas being in the middle and then Carolinas on one side and Phoenix on the other. I mean, it’s cool to go there. I think what’s cool is when you can get a few people to go with you along the way. And then you’re on a business trip. I think that’s kind of fun. But I don’t do this because I really like real estate. I like it because it’s aa means to the end and it gets me there the quickest. It helps a lot of people along the way, too.
Jaren: My question—I have another question written down but if home is your favorite, what’s your least favorite? Like, for example, me, I used to live in California and when I drove to Indiana, there were some incredible states and I used to joke and say, I think Utah and Colorado, God, when He was making that, He was just like going all out—He’s like, I’m going to do this masterpiece, but then when He got to Kansas, he was just like, I’ve got to get this done. Because there is not much in Kansas. The greatest thing in Kansas is Kansas City and it’s in Missouri. Sorry if you’re in Kansas. Much love to you but it’s not my cup of tea.
Lane: I only invest in secondary markets and maybe tertiary markets but this is something that comes to mind, another reason why I do what I do. In my early twenties, when I was doing that construction management gig, I was travelling all over the place.
Being a young 22-year-old kid and being at the highest frequent flyer status, flying first-class, that wasn’t fun. Going to places like North Dakota, Montana, going to Seattle, to Denver, wherever, often that Northern plains, and sitting around with the guys with all the suits and I was like, this sucks.
I don’t want to be like these guys who have these road wars who think they’re all cool with their high frequent flyer status, that’s a bad quality of life. I mean, that’s what I defined it as, I was like, no, I’m not going to be doing this when I’m older. Certainly not when I’m these guys’ ages.
Jaren: Mhmm. So North Dakota is probably your least favorite?
Lane: Yeah, you know I worked a while back when the oil was really big and driving around the plains coming up, because back then the hotels are really hard to find. They’re like 100 miles away. You drive up to where the oil fields are and it just looks like hell on earth. Like, the oils burning and the sunset and that’s when they had all those man camps up there and I was like, nah. This is the worst place to be. Absolutely the worst.
Brett: I need to go back home, get on the beach. Sounds good. Well, hey, Lane—thanks for playing our games today. But anyways, thanks again for being on the show and taking the time out of your busy schedule. I know you’re getting ready to head off to your day job but if someone wants to find more information about you, your podcast, your education, or your Facebook groups, where do they go?
Lane: Just come to SimplePassiveCashFlow.com, sign up for the newsletter and get access to the spreadsheets I’ve got and PDFs and just give me your e-mail there. But then, let’s get to know each other, come and listen to SimplePassiveCashFlow podcast and I would say, listen to the first dozen foundation podcasts and let’s have a chat. No agenda. Ten, fifteen minutes and I can usually get someone an outside perspective, get them down the right path, whatever they have working with.
Brett: That’s cool. Love that name. It’s very simple.
Lane: I know. That’s kind of cool. I just realized halfway through it.
Brett: I just realized it just now.
Lane: The thing that I liked, why I picked it was things aren’t easy, but they’re simple, right? It’s not easy to buy a rental property or a wholesale home. But it’s simple. Pretty damn simple.
Brett: The process is, yeah. Definitely I like that saying. Cool. Well, check the Show Notes out, guys, at—
Brett: All right, well thank you so much, Lane. And we appreciate you and all that you’re doing and we just hope you stay blessed, man.
Lane: Thanks, guys.
Brett: It was a pleasure. Talk soon.
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