All Forum Posts by: Lane Kawaoka

@Scott Loud

I do this whole life insurance thing, and some folks call it "infinite banking." Basically, it's a way to store your cash while still having access to it for things like loans or investments. The key is finding a provider with insurance costs below 10% to maximize your benefits and lower your commissions you pay.

You start by setting up this whole life insurance policy, and you pay premiums into it. Over time, the policy builds cash value, and you can borrow against that cash value whenever you need it. It's a bit like having a savings account that grows over time, but with some tax advantages.

In my case, I use this strategy when I'm involved in syndication deals. It's super handy to have that cash readily available for investing in these opportunities without jumping through hoops or waiting for loan approvals. Happy to answer any questions or provide more insights!

I did it when I started working and did not have much money but a good W2 job. It depends on your higher and best use. Most people don't make 100k a year and they do more active stuff. Turnkeys is a good way to start on the passive side - most investors graduate out of it.

@Josh Haney I used to buy turnkeys from 2012 to 2015. I even had a few rental properties in Seattle before that. But with the rent evaluations in markets like California, Hawaii, and New York, cashflowing just wasn't possible.

So, in 2012, I bought properties in Birmingham, Atlanta, Indianapolis, and Pennsylvania. It worked out well. Back then, you could get a property in a good class B area for around $90,000 and rent it for $900 to $1,000 a month.

Fast forward to today, that same property might cost you $130,000 to $140,000. Especially if you're going through a turnkey provider who inflates the price. And the rent? Maybe $1,100, which is below the 1% rent to value ratio.

If you're a busy professional earning six figures, turnkey rentals can be a decent start. But many investors move on from them pretty quickly. Especially accredited investors who shift to private placements and syndications. Around 2016-17, I sold many of my turnkey rentals and dove into syndicated deals.

It's all a journey, really. I like to think of it as a "wealth elevator." You're constantly moving up to more scalable investments. If you're not yet an accredited investor, buying some rental properties can boost your net worth.

But, as always, it depends on your situation. If you need any advice or help, just reach out. Take care, man!

I've chatted with a bunch of investors who jumped into short-term rentals, thinking it's a gold mine. They were banking on the idea that the market would stay the same forever. They didn't consider potential regulations or the chance of too many rentals dropping prices. Historically, it's been pretty easy to get into the short-term rental game. But betting big on that staying the same? Not a move I'd make.

The writing's on the wall. Cities want that sweet hotel tax cash. They're not too keen on real estate moguls making bank or rental options dwindling.

Here's a tip: Don't lock yourself into a 25-year financial deal based on today's market. It's bound to change.

Honestly? I steer clear of the latest fads, especially when everyone and their dog wants to rent out a space. It's a race to the bottom, folks. My advice? Stick to the tried-and-true class C and B rental properties. Avoid getting too niche, like student housing or military towns. Stick to the basics and play it smart.

We have over 1000 units in Houston and Conroe

Totally agree. Once I got 11 turnkey rentals I got to accredited investor status and sold off the rentals for syndications. Good luck!

Internal Rate of Return is often mixed up with return on investment and cash on cash. But here's the thing: over a single year, these percentages look the same. IRR, however, dives deeper. It considers the time value of money and gives you an average return, annualized, over a certain period.

For instance, imagine you invested 10k and got a 7% return annually for 5 years, compounding each year. That's a 7% IRR over those 5 years, assuming you get your 10k back at the end. When it comes to real estate, it's rare for an asset to give a consistent return. Assets usually grow in value over time. IRR can factor in this growth and the increase in cash flows, giving you a single metric to evaluate an investment.

But here's my personal take: I don't put much stock in IRR. Why? It's easy to manipulate. A slight tweak, like showing a refinance in year 2 as part of your pro forma instead of year 3-4, can magically boost a 13% IRR deal to 16-17%. If you really want to get it, I'd suggest playing around with an IRR calculator spreadsheet.

For me, a deal that meets the minimal IRR standards is around 13-15%. But you've got to dig deep. Look at the cashflows, capitalization events, and then go even further. Check assumptions like occupancy rates, yearly rent increases, and the reversion cap rate used.

To be honest, I don't chase IRR because it's often tweaked. I focus on the total return over a 5-year span. Think of it like checking an NFL player's 40-yard dash but for apartment underwriting. There might be other methods out there, but I aim for consistency. My goal? To pick the best in the field.

For those interested, here's a BP article that sheds more light on IRR: What is Internal Rate of Return (IRR)?

See past events here http://simplepassivecashflow.com/events

Back in 2018, I sold 7 single-family homes and faced 200k of capital gains. But guess what? I just offset it with 200k of passive losses from diving into syndications. 

For those new to the game, the 1031 exchange is basically a way to postpone the taxes on your property's capital gains. The catch? You've got 45 days to pinpoint a replacement property and then 180 days to seal the deal which is really annoying and when you go into a value add syndication you are stuck in the same predicament again.

I'd only recommend a 1031 as a last resort because eventually, you'll have to pay those taxes. The only exception might be if you're planning to take it to the grave and benefit from the step-up basis. 

I began my investment journey in Birmingham back in 2012 and got four rentals. By 2015, I took a step back because the market felt a tad overheated.

Steer clear of the Endlsey in Birmingham; it's a bit rough around there.

Back in the day 2015, many were eyeing North East Birmingham. Getting permits there are a nightmare, especially for out-of-state investors like us.

Around 2018, I shifted my focus to Huntsville. Investing in apartment syndications and private placements there seemed like a smarter move. Huntsville's vibe is more up-and-coming. Just compare the population growth! Huntsville's numbers have even surpassed Birmingham's.