How To Improve The Inner City - The People's Hedge Fund

[Ryland Taniguchi]

My wife taught elementary in a rough area in Tacoma and in a privileged area in Wallingford. 

In Tacoma, the elementary kids had to duck under desks as they experienced a drive by shootings. Kids are joining gangs in the 2nd grade. An elementary kid stabbed another kid. My heart broke when I heard stories of a kid who would put his "free" school lunch in a zip lock to take home to feed his mom. Life is survival in some ELEMENTARY schools.

In Wallingford, the kid's eat expensive organic snacks and wear name brand clothes. The parents raise $450,000 a year to get a teacher's assistant in every classroom. If a child gets behind, a private tutor is hired immediately. Unlike the Tacoma school, you don't need to offer free pizza to get parents to be involved in the PTA.

There is a majority disparity in America. A class struggle. Very rich and very poor. I think it's time we Really help the less fortunate in our country. What has the government down to ACTUALLY help the poor in America? Has Obamacare, Section 8, Minimum Wage Laws, Rent Control and Food Stamps changed the disparity between Tacoma and Wallingford? Absolutely Not! And the government social programs have actually widened the gap between Tacoma and Wallingford.

We need to change the way we attempt to help the Inner City and At Risk youth through Social Capitalism or Social Entrepreneuership.

Being a real estate investor for sixteen years has been a constant battle with roller coaster ups and downs. Through overcoming daily challenges as a real estate entrepreneur, I have now learned to build and run a hedge fund.

The average American hate the hedge funds.

Why not create a People's Hedge Fund? A 501(3)c that operated exactly the same as a hedge fund where the profits help a Social Cause. Running a hedge fund is learning how to hedge your bets so that you get high returns regardless if the market goes up, down or sideways. We put 70% of our portfolio flipping notes that we underwrite at 50% LTV non-recourse for IRAs. We underwrite and sell a tranche of paper through a FINRA broker/dealer to credit unions. We have been getting around 48% IRR with this strategy and can get 96% through leveraging a warehouse line.

We put 30% of our portfolio to land development deals where we structure seller JVs and cash the seller out at permits. The fund keeps it's money in a project no more than 12-months and we target deals where we put in let's say $80,000 soft costs and structure a pay-off of $240,000 in 12-months when permits are completed. So what I do is partner with another investor, have them take over the risk of completing and taking a loan out on the project, and they get 70% equity. The cash from the new partner is used to give me $240,000 (200% IRR on my soft costs) and the downpayment money to cash out the seller. So we try to get a 200% IRR with as much safety as possible in a very risky asset class. Try to minimize or avoid holding costs.

So, in a nutshell, we are talking 80% to 120% combined IRR while also reducing risk through hedging. According to the rule of 72, these type of returns mean you double your money every year.

I want to improve the Inner City through such a People's Hedge Fund. Find ways to create the initial nest egg and then use the profit from the nest egg to help the Social Cause without losing the nest egg. And replace the government as the way to help the Social Cause.

My vision is to provide education and opportunity. Not handouts. I think it is noble to give Christmas toys, food, clothing, shelter, etc. But that's not what I am trying to do. I want to target age 3 to 7 and want to increase their Financial IQ. 

How to do this? Free After School and Early Education programs that focus on Financial IQ... Funded by the People's Hedge Fund. By the way, I have a name for this People's Hedge Fund and it is called Start With America. 

I do want to help the adults and at risk youth in the Inner City as well through Financial IQ Entertainment. Start With America will be the first non-profit media and tv production company that creates a show called Start With America that creates entertainment from this People's Hedge Fund. I envision the non-profit producing movies, owning sports teams and being named on sports stadiums. 

This is my passion and purpose in life. It is what drives me to get better and better at this real estate game. Money does not motivate one like a vision for the future can.