Episode 44

An Introduction to Real Estate Investing: Simple Passive Cashflow [Lane Kawaoka]

by | May 12, 2021 | Podcast

Have you ever been interested in real estate investing? Today, Lane Kawaoka is going to be sharing his story about how he got started in this space and how real estate investing has allowed him to quit his 9-5 job and focus on Simple Passive Cashflow full-time.

Nick (00:01): This is the Nine-Five Podcast. And I'm your host, Nick Nalbach where we get into the minds of entrepreneurs and people just like you. So you can start, build and grow your own online business. Welcome

Nick (00:19): Back to the Nine-Five Podcast. I'm your host, Nick Nalbach. And this is the show where we get inside the minds of entrepreneurs and business owners to help you start and grow your own business. And today with me, I have Lane Kawaoka. Today, we're going to be talking about Lane's story about how he broke free from his nine to five and got into entrepreneurship. And we're going to be really talking about how he broke free in the real estate rental business. That whole realm that I know virtually nothing about. So I'm really excited about this because we have not talked about any investing on the Nine-Five Podcast yet. So before we do that Lane, why don't you give the listeners a little bit of an idea of who you are and what it is you actually do?

Lane (01:01): So currently today own 4,500 rental properties.

Lane (01:05): We put together apartment syndications for passive investors to come in. I also in the family office advisor, I help high net worth clients break free from the normal financial planner, garbage at your best in real stuff that the two wealthy are into these days. But I didn't always start off with that. Um, graduated college back in 2007, um, I was told to go to school, study hard, be a good little boy and, uh, work at my engineering job, whatever for 40 to 50 years, uh, started to buy a house to live in which again, follow all the financial dogma out there, which I definitely do not agree with, but because I was never home because I was working for the man all the time, I decided to rent it out. But the mortgage was 1600. The reds were 2,202 young, 20 something year old kid that was on a beer money at the time.

Lane (02:00): But that was, I know that all man, like asset cashflow and it all kind of grew from there.

Nick (02:04): That's really awesome. I'm really interested in your whole take. And we're going to kind of get into this later in the interview about that, that dogma of going through school, college, getting a career, writing that career out till you're 65 and can finally retire. I think we're really on the same page with a lot of that stuff. So I'm excited to talk to you about that. Um, but before we do that, I like to ask all of my guests that come on the show, what is your superpower and my superpower. I mean like, what is that thing that you think that you just crush it at? Or maybe you have people that if they have questions, they always come to you about the specific thing. So what do you think your super power would be?

Lane (02:44): I think today, um, my technical expertise in bedding deals, underwriting deals, but also I figured out the secrets of the wealthy by doing joining different masterminds, getting around, improving my network and I've realize how to get wealthy and how to keep your wealth roll it. And the crazy thing it's very counterintuitive to everything your parents taught you. It's almost like somebody doesn't want you to break free from your job, actually, that makes a lot of sense, right? We want, we need people who would get my coffee for me. Right? Yeah. Everybody bought a handful of rentals and went FII and fired their bosses.

Nick (03:24): I'm completely with you on that entire thing because yeah, I feel like a lot of people come out with books and I know like investing books are a big one that really grind my gears because they talk about how you are going to build this wealth with investing. And the key aspect of all of those books is that you have to have a pile of cash in order to turn that into wealth. So I'm interested, you basically started growing your wealth from investing. And I guess I'm really curious. Did that, did you immediately start in the real estate investing or did you start somewhere else and kind of build up a little bit of cash before diving head first into real estate?

Lane (04:05): The students really soft with much. I mean, I had a college education and a good paying job. So not like one of those fake gurus who I don't know, walked in the snow or to go to school there, you know, like, like I'm going to, it's, we're talking, we're just talking about real estate investing today. And look guys, if you guys are broke, you're in credit card debt, eventually, maybe this stuff will start to make sense to you guys. But like, we're kind of talking, I kind of work with guys with good paying jobs, right. They're responsible with their money. Right. Um, a lot of my guys, they can save 20 to 30 grand at the very least per year with right. Which they put to real estate investing, all that stuff you see on TV, wholesaling, flipping houses. We don't do any of that stuff. Right. That's to me for guys who are broke, trying to get rich, but the brand of investing I do is more cashflow base. It's more passive buy and hold. Um, it's great for people who have good paying jobs or are successful business entrepreneurs and they want to put money into something that grows prudently. And it's, you know, there's not a get rich quick thing, but it's certainly as a guy rich Shirley thing, can you help? Sure. It helps you pay a lot less taxes too.

Nick (05:09): That is really interesting. What, what kind of sparked all this? I mean, you, I guess, first of all, what were you doing before you got into the real estate investing? Cause you kind of took a complete one 80 from what you were originally doing.

Lane (05:22): So kind of going back to that first rental, I, it took me a few years to save up the down payment money. This is a house in Seattle. I think it was like 60 or 70 grand and you need 20% down payment. Right? So again guys, if you guys can't save up money, the same for you, right? This is for responsible people, financially responsible people. So I bought that house to live in. I rented it out and I was collecting cashflow. And here's a crazy thing. Like when you start to go into the numbers, like how you're making money with this real estate stuff, cashflow, right? Your rents are exceeding all your expenses, property management, because we don't do our landlording ourselves. Uh, the repairs, the cap ex the vacancy. You're probably going to have, there's a Delta in there that comes up positive at the end of the every month.

Lane (06:09): Right? We don't invest for appreciation. It's nice that we get it. But I consider that icing on top of the cake, Warren buffet says, how do you invest rule number one of investing don't lose money. How do you ensure that? Well, you best and cashflow positive things, kind of mind blowing to most people because most investors don't invest this way, but that's one of the four ways you make money, um, cashflow the appreciation, which has leveraged the tax benefits and the fact that your tenant is paying down your mortgage, right? Those of us who own houses, part of that payment, a smaller Bart is going to your payment to principal, which is essentially going to your equity buildup. So when you combine all that stuff, you know, you're making like 30 something percent on your money, even on the rental. That's not that great. Um, people don't believe me.

Lane (06:53): You can go to my website and look at my whiteboard video where I kind of do this math for you guys. And it's the simple, passive castle.com stock returns. But this is a Disney that I got. I was like, why the heck would, I want to put my money in the stock market, which have fun stuff at like eight, maybe 10%. Right? That's what my grandpa got. But I don't know about these days. Right. It's up and down, up and down. But when I can just put something in it, something that makes sense that I have control over making like three, four times that

Nick (07:21): That's, I don't know all, all of that stuff for me. It was, it always got kind of difficult to comprehend because it seems like exactly what you're talking about. Like all the different things that go into figuring out if you have that cash positive Delta, by the end of everything, you got the property management, you got all the taxes, the utilities, like all of that.

Lane (07:39): Yeah. Yeah. Well, let's start off with this like this, the probably the most basic thing to understand as a cashflow investor is this thing called the rent value ratio. So this is like the quick and dirty way to figure out if you're going to cash flow. So you take the monthly rent divided by the purchase price. So we're looking for something that's 1% or higher. So for example, you know, a lot of the places that we target are like a hundred thousand dollar purchase price that runs for a thousand bucks. So 1000 divided by a hundred grand is 1%, you know, places like in California or Seattle or Hawaii, you'd be lucky to find a place in the ghetto for $400,000. We don't buy places in the ghetto, by the way, that'll run for two grand, right? Two grand divided by 400,000 is half a percent, no vinyl that ain't going to work. That's less than 1%. So that's the real quick and dirty way of figuring out are you going to cashflow?

Nick (08:28): Okay. So explain that, explain that concept. Cause I've, I've spent some time on your website, the simple passive cashflow. Now, when you're talking about cashflow investing, like what does that term actually mean?

Lane (08:41): Yeah, that basically it means like your income that you're bringing, bringing in your brands more than exceed all your expenses and expenses or repairs maintenance being your property manager, large cap X problems. Like the roofer is going to get need to get repaired every 20 years or so. Right. You need to put money away sort of in a bank account that you kind of control, um, for that rainy day to happen, right? You're going to have your tenant move out at some point, right? You're going to have to cover your mortgage costs and then you're going to need your pay, your mortgage, your principal, interest taxes, and insurance. So I would suggest, you know, after something runs as well on the rent to value ratio, right? You can make that analysis in like 10 seconds, but then maybe download my web, my analyzer it's free on my website, simple pass a capsule.com/analyzer. I think I spell it a little funny. There's two ways as people spell it, but just Google it on my website, download it for free. And it's an Excel spreadsheet, you know, all those main things like the expenses, repairs, maintenance, property management, there's footnotes in there that has sort of normal ranges. And at that point you can start to dig in and kind of create your own perform on your property.

Nick (09:49): Cool. Okay. Yeah. I will, for everyone listening, I will put a link to that in the show notes for this episode. So you can go download and get that analyzer from lane and kind of start plugging this in and kind of building your own portfolio in a way, is that

Lane (10:04): Yes, that's all it is right there. Right? Like, I mean in far as books, I mean, there's not really much books to read. Right. Um, I mean, there's, there's that part, but like, to be honest with nothing in that books that tells you what to do, it's a bunch of pie in the sky, you know, white, white buffaloes up there. Right. It's a good mindset, but don't get me wrong. But most people that read it are kinda like, all right, the heck do we do now? Right. Right. Well, in my opinion, go out and do it, but at least know the numbers first. Right. So you could get a feel and you know, what is a good deal to buy or better than average or not a sucker deal at least. Right.

Nick (10:37): So I'm curious. Why, what was the transition for you from going, you were an engineer before doing what you're doing now. Was it, did you not like your job or was there like a certain moment when you were working that nine to five job where you're just like, I need to get out of this. Like I need something else.

Lane (10:54): Yeah. So I, I was, uh, uh, civil engineer, industrial engineer. So I got put out in the field, um, as a construction supervisor, managing dudes two or three times my age, a lot of union workers. And everybody knows how that is. Yeah. It's sucks. Right. And it was a hundred percent travel, had no quality of life. And although I knew that that gig wasn't for long, I eventually go out and find a more corporate job eventually. Like I just started to realize like, yeah, probably don't want to do any of this for 30, 40, 50 years. Right. Like when you put your money in the stock market and all this stuff, you know what you're going to get, right. You're going to accumulate a certain amount of money. I just, I bought, I was lucky enough to accidentally buy one of these rental properties. And I saw the light. I saw what it could do. And when I plugged it into my spreadsheet, because I'm no dummy, I can project what's going to happen. I was like, shoot, I'll be out of the rat race and like a decade or less. Right. And that's where things started to kind of, the wheel starts moving my head. And then so all my

Lane (11:54): Focus went to saving my money and that was good at saving money. But putting my money in the right stuff was the next step.

Nick (12:01): That's interesting. Cause we CA we kind of have a little bit similar history. I'm actually a project manager for a construction company right now. That is my nine to five. And it's very much the same way. It's I don't know what your first job is, but

Lane (12:15): Yeah, like for a lot of people it's like doing inspections on like concrete curing, right. Or for me it was all like the BS HR stuff. Right. Like one of my employers, the sexual harassment on one of the hotel employees, and it's my job to like, do all the paperwork for that. And coaching council is it's like, is this really what I've spoke? Like, yeah. They paid me well, but I'm just essentially building somebody else's stream here and nobody appreciates. And then going back to like, what was the one thing that broke the camel's back? Well, one of my employees died, not under my watch, but I, you know, competent email, you know, you're a large company, right. People die every other year, every, every year on average, I know it's horrible. Right. But you're out there in the field still happens with, you know, 40, 60,000 employees in a company.

Lane (13:06): And this guy worked for me for a good year. And I got to know the guy pretty well as a younger dude. And the email went out. Right. You know, just some generic company blast some nonsense. Right. What was happening. Right. And, and I'm like, well, nobody cares. Right? Like what, what chilling more experienced? Can that be right? Like this guy, like nobody cared. Yeah. They did some stupid like paragraphs and not PSAs, but essentially physics on. Right. Right. Nobody cares what you do at work. Everybody's more interested. Or at least in this company, culture, people are more interested in their bonuses or scorecards trying to go after their next promotion. And yeah, just got to, for me, maybe I just got really jaded very early in my career. Um, well, I actually do know what happened at that point. When I got that, that moment, I already had a few rental properties.

Lane (13:59): I was already past that. I was like, screw you guys. I'm probably making more than I boss right now, top line, you know, like I think it was a gradual thing. Right. Cause I didn't have had 11 rentals in 2015. So, and I started in 2009. So it took me a long time to build up any scale and a lot of rentals, it sounds really cool, but that's only a few thousand dollars of passive castable a month. Right. Nowhere near enough to fire the boss yet, but you're getting that right. And the crazy thing, but this stuff, is it like the kids that hockey stick up eventually go to escape velocity

Nick (14:36): At what point? So you had 11 properties at what point? Like how many properties did you have when you kind of hit that hockey stick moment with what, what kind of really set that in motion?

Lane (14:47): Well, so when I hit a lot of properties in 2015, I, I had a pivot point at this point just to give people a sense of what's it like to have 11 properties? I mean, I had a property manager that kind of did all my stuff. I had several property managers cause they had four properties in bourbon County, five in Atlanta, another couple of Indianapolis and Pennsylvania. But you know, the property managers, they take care of all the dirty work for you. So it's really my role as that manager, the manager with the letter rentals, I had maybe an addiction or two every year, some kind of big Patash fee, like a tree falls in the house or a store washes out a side of the house every quarter, which is no problem that cadence of exceptions come up. But for what, $3,000 passive cashflow a month now I'm not complaining about that.

Lane (15:36): That's great money, right? That's for a lot of people, that's a third paycheck a month, but what kind of American family kids survive off $3,000. You need more like 10, right? That's what most of my clients shoot for $10,000 a month. So multiply that by three or four. Now you're talking about our fiction every month. We've gotten a big catastrophe every couple of weeks, right? It's just not scalable. And this is when I started to pay money, to get into different coaching environments, different masterminds. And I leveled my network to be around higher net worth investors. A lot of high net worth doctors, lawyers, engineers like myself, but maybe 10, 20 years older than me. And I realized like there was a different way of X guys invested. They didn't invest in mental problems around problems are a great way to get started. Don't get me wrong. Your net worth is under a quarter million, half a million buy rental property. Right? Check out my website. The first dozen podcasts are all about buying rental properties. But from our accredited investors, higher net worth investors, the general trend is to get away from boarding the properties directly. You know, you don't want the liability. You don't want the loan. It's all these annoying loans in your name. And then to be more of a passive investor in a multitude of different syndications and private folks is kind of the bottom.

Nick (16:47): Interesting. Okay. How, how does that all work now? So you're talking to get away from the best first. Let's, let's talk about the rental property because I think that's what majority of people here

Lane (16:59): Let's give people some tangible vice-chair right? Like a syndications come later, but get your net worth out to be a photo mail. I half a million first and then get there.

Nick (17:08): So let's talk about that. If we're, if we're going to start investing in rental properties, like what is the first step? Obviously we talked about the rent of value, that simple equation, the monthly rent divided by the purchase price. So do we just start searching for available properties that kind of have that criteria? Where exactly should we start in terms of like narrowing down our search when we're looking for these rental properties?

Lane (17:31): Yeah. So let's talk about location first, right? Like, so there are kind of three types of areas, primary markets, secondary market, and Trisha markets. Primary markets are like the whole freaking state of California, Seattle, Hawaii, New York, Boston. Those are those places aren't going to work. Right? Tell you guys, ain't going to work. Stop wasting your time. Um, part of the reason is you just got so much dumb money. There it's too much people, too much money that don't know what the heck they're doing, what you really got to do to, especially if you're looking for cash flow, you have to go to these less sexier markets like Birmingham, Atlantic Annapolis, Kansas city, little rock, Memphis, uh, Jacksonville, Florida, for example. And you may even have to go to some of these more tertiary markets like, uh, Huntsville, Alabama, uh, Waco, Texas, uh, in a lot of these markets, I would stay above a quarter million population.

Lane (18:21): We don't want to go to super pulled off towns where if the one meat packing plant closes you're screwed and we want robust Cod. So that's first layer there. Right? Second thing. Um, you know, we try to invest in red States not to say anything politically, but what were the landlord who want the landlord friendly laws on our side? We don't want to invest in the socialist Republic of California, where if somebody doesn't pay, they could SWAT in your house for a year. I don't even know. I just know I just go, I don't invest there. Um, and then thirdly, like in terms of the spectrum of rentals, you know, we don't go to the high-end luxury. These are the A-class type of properties. We definitely don't go to the, the D class, the awards on areas. We kind of stay in the middle B and C classes, what these calls. Um, so a lot of the rents in this range are like $700 to $1,200. And we call this workforce housing. This is a middle of America. This is where this, I mean, providing good quality housing for these folks who are budget conscious and you know, good people. And that's what this country needs more of as the population improves.

Nick (19:28): Th th that all makes sense to me. It's I don't know. I think when I initially think of like real estate investing, you think of like, getting those luxury, like destination properties, where people are just going to want to love to come here, because it's on the beach in Hawaii or whatever. Yeah.

Lane (19:44): Oh, those are trophy assets, man. I mean, maybe I'll do that one day when I'm like crazy rich Asian, but this is how, this is the way I've built my wealth. And I call myself first-generation wealth. My parents didn't have a million dollars and you know, we have to build our wealth slowly and prudently with floating onto the edge of the pool. Right. We have to put food on the table, why we have to invest for cashflow, a lot of trust fund kids and generational wealth people. They're just hitting, trying to hit home, runs all the time in. If they strike out, it doesn't matter. Right. I don't play by that set of rules. So I can't invest like that even though they're. Yeah, very well. That may work out, probably work out, but I just can't sustain a loss by investing in that night.

Nick (20:30): Well, that, that makes perfect sense. I mean, a lot of the stuff that we talk about in the entrepreneurship space in general, the, the money, if you're going to be making money, it happens on the less sexy side of everything. Like everyone sees what's in the headlines and all plastered all over Instagram. It's like, Oh, check out like flashy cars and houses and stuff like that. But the real money is made behind the scenes that no one wants to pay attention to because it's dull, it's boring and it doesn't stand out. And like, kind of, kind of fits with what we're talking about here. You're not going for those crazy properties that are flashy. You're going for just modern, regular houses that like you and I wouldn't be looking to live in like yeah,

Lane (21:10): Most people in our country will buy. It's crazy. I mean, the whole idea is like boring investments, the big, exciting life.

Nick (21:19): Okay. So, so we, I guess I understand the primary, the secondary, the tertiary, what kind of money do we need to have upfront? Like how much do you think we need to have on hand to start investing? Obviously I don't doubt you'd want to put yourself in debt to go try to start a rental property that may or may not work out. What is your thought process?

Lane (21:39): Yeah. So let's, let's break that down, right? Like I know a lot of people are trying to get debt-free, but look, guys being debt-free is not aligned with finance, but let's make the distinguish distinguishing between good debt and bad debt, because there is a big difference, but that is, you know, it's something you're buying to buy an asset such as a rental property that makes you more money in the longterm it's arbitrage simply. So for example, a lot of my folks, they try and pay their houses down or pay down their student debt before they invest you do that. And you'll never invest. Um, but yeah, if you have credit card debt, well, first of all, bro, this probably isn't for you, right? You already have credit card debt. You're not working on yourself. The reason why you got into place in the first place, you know, you probably should just turn this podcast off.

Lane (22:24): But if you are, you know, credit card debt, free consumer debt, right. You know, 10, 15% interest rate and above, uh, you know, yeah. I would say put their money into investments, but don't take my word for it. Run the numbers yourself. Right. The numbers don't lie. So yeah. So like the prototype is a hundred thousand dollar house. You need a 20% down payment because you were getting a non-owner occupied house. 20% down is the standard for Fannie Mae, Freddie Mac, government subsidized loan, right. It just rate 30 year fixed. And you know, so that's 20%, 20 grand right there. You can have some closing costs and I would always recommend maybe a few grand, at least for some cash reserves. Maybe you stumble off the gate of your tenant moves out the first quarter, who knows? But yeah, maybe 25, 30 grand would be good enough liquidity to get going.

Nick (23:13): Sweet. Okay. So then after we've, we've kinda got this place. How, what are you actually doing actively to fill that spot in terms of like marketing and getting people? I know you said you have property managers, do they kind of handle a lot of that stuff? It does. Is it actually like a real estate agent or do you kind of handle that?

Lane (23:31): Yeah, I don't do anything wrong investor, not a landlord. Right. But the most people play this game to be landlords because their properties don't fricking cashflow, which is why they have to pick up a barrel and mop the floors and the property. But a Greg's less right. We hire professionals because we have the float in our budget to pay them. Right. So we do it. So yeah, you get a poppy manager to do is probably the most critical person on your team on, fortunately, you don't want to go to the big brokerage houses, you know, the big name brands out there because they're likely going to find the dude who can't sell houses, managing your rental. So if you know this game, this is, what's hard about rental property and investing in general, it's all your network, right. You're going to get referrals, certainly network.

Lane (24:17): So for a lot of people, these days are horrible socially. So they cannot build relationships, other P or passive investors to figure out who do they work with. So to kind of point out the barrels right off the bat, this is it. But, you know, once you've, you've made a big, make a few friends and they tell you who they're working with. And a lot of guys, I mean, that's why I do what I'm doing, right. Because I've kind of had to apply where it's like as kind of cool to get people started to kind of get off on it. And I think a lot of people like to give back too. And there are people who are very abundance mindset, right? Once they have some tasseling rentals of their own, I mean, it's not a competitive thing, right. They they're totally willing to help us the right person. So I think when people are coming into this, it will start to discover that it's a good community of people who are kind of giving back. So it's not going to be too hard to kind of find these referrals that people have worked with.

Nick (25:10): I think I've noticed that a lot, I've always had that mindset in not obviously investing in real estate and all that, but that everyone's like, no, one's going to want to help you because you are going to be potentially a competitor of them. And the more I got doing, like as podcasts and interviewing people and talking with more people and just kind of putting myself out there, the networking side of things, you realize that yeah, you're right. People, people do want to actually help. They're not just going to lead you astray or just tell you to get bent. A lot of times people are going to help you. You just have to be willing to add.

Lane (25:41): Yeah. And like on that note, like it wasn't that the grant book give and take or something like that, you know, there's perpetual givers and there's people who just take and absorb gifts from everybody and seem to help out any the key is just figuring out where the generous people out there that keep those people in your circle and get very discriminatory against the people who just sucking energy. Never let it go out. And it's pretty easy to figure that out. I, I think after a while,

Nick (26:10): Yeah. I mean, I think just even just sitting down and talking with someone for 10, 15 minutes, you can kind of get a, a decent gauge on if that's a good person or not.

Lane (26:19): I mean, unless you're Sheldon Cooper, I mean, you should be able to do it. Yes.

Nick (26:25): Okay. So what, what do we do next now? So we got, we found the rental property. We got to find ourselves a manager, property manager to kind of handle that stuff. And then just kind of rinse and repeat or what, what are we going to do here next?

Lane (26:37): I mean, it's pretty simple, right? Simple task, a castle for a reason, way too easy. It is. But you know what? Life's not easy, but it sure is simple. The hard thing here is the limiting factor is how much money can you save to buy more of these freaking rentals, right? I'll quickly, can you save money? I mean, when I first did this, I bought my first one at all. Then it took me a couple of years to buy the next duplex in Seattle. Um, I mean I made almost six figures when I starting out. And my claim to fame is that I was able to save a lot of money. Right. Super cheap. Um, I have a web page on my website where I have all these cheapo things. I went to buy, like charging my anchor boxes that like charging things at work right there, dying.

Lane (27:26): I was working on the road all the time, actually. Like, didn't have a place to live for like three years. I just lived off the company dollar. I didn't live anywhere. So I just banked all that money. I mean, I was saving like 50 or a hundred grand per year for a few years there. Right. That just went all at the black rentals and maybe 30, 30 grand a piece right. With the down payment. So that would help me accelerate it. So if you know what to do, it's a scalable thing. You're going to be limited to how much money you've been saved. And that's cool if you can, if you can only say five grand, well, that's awesome. You're light years ahead of the dude. Who's bleeding money every month with credit card debt, right? Five grand, five grand, you know, maybe you save up, you know, maybe you pull the money from the retirement accounts, which I don't really like you buy rental. And now you're making even more money to save up faster and faster and faster. And this is where the whole hockey stick right.

Nick (28:16): Was when you were starting, you said it took you a couple of years to get your other, your next property. That duplex was all the money that you were making from that rental property, getting reallocated back into getting this next duplex, or how much, how much were you reinvesting, I guess, into the business and what you were trying to do versus like

Lane (28:34): Taking home? All of it, bro. I mean, it was all going back to bind bar weapon, jury, and this is the, this is like, what's wrong with mainstream financial doggone, right? Like they tell us, like to save up two to $4 million. So then we're old and gray. We can live off. This is the accumulation thing. Right. But what happens when you're old and gray? Well, you could live off of the pile of cash in your cave and it two windows down to nothing, but you're going to want to switch that accumulation to cashflow. So I'm like, dude, why don't you just go like start with the end in mine and do cashflow from the get-go like how we're doing right. Each rental property is like a mini pension. And the nice thing, like you're saying, it's like, it's cashflow, right? It's putting more money in my pocket. But the nice thing about nine to fire fibers and which I didn't quit my job for a long time is that I, my job put food on the table. And then all these rental properties, the money that had kicked off, I didn't have to use it to put food on our table, but I can use it to go Bible our board and his income shirts. Right. This is exactly the point of why the rich get richer or get where,

Nick (29:42): Where you're putting that money though. The reinvestment into your business is what really scales that thing. And I wanted to come back and touch on something that you just mentioned. You talked about the nine to five, working that nine to five, you end up saving up enough money that you can retire and just kind of siphon off whatever you have left for for retirement. And one thing that really the millionaire Fastlane by M data Marco is the book that really completely flipped a switch on in my brain. And one thing he said was, there's no guarantee by the time you get to 65, that one, your retirement accounts are going to have accumulated what you thought they were going to accumulate. And two, that you're going to be healthy enough to even enjoy retirement when you get there. So why are we spending all this time and effort to work 40, 50 years of our lives to hopefully enjoy retirement at the end? Why would we wait? Why would you put that risk? When would you ever bet your life and years on that gamble? Like that's such a huge investment for very little return.

Lane (30:38): So it makes no sense to me. It's not what the street wants us to believe. Right? I mean that's, and that's the difference, right? Like when you invest in wall street and all the stocks which have funds, they're all retail investments and that's the difference between rental properties on your own or syndications of private placements. They're not retail, right? It's like, I don't go to move at Marcus to buying the same pair of Nike's for 150 and I can get it at 97 bucks at foot locker. Right. Stupid. But that's essentially what everybody's doing. They're putting their money in the stuff that supposedly has a low expense ratio. Yes. Right. How am I making 30 something percent on my simple rental, but like eight to 10% of this other stuff to stole on my, with my money go. Right. Well, how else do they have all these buildings? Right. All these executive salaries. Yeah.

Nick (31:26): Nailed it, man. Like

Lane (31:28): There's, I mean, just to point out what it is, right? It takes a little bit of due diligence. You have to kind of connect with people. You have to get off the very, um, the beaten path. And most people will not do that. Most people will not go out to a secondary market. Right. They will not venture out of their comfort zone. That's frankly, what this comes down to. And that's cool. Right. Because if everybody did this society would crumble, right?

Nick (31:51): Yeah. That's we actually talked about that back in. Oh, it was, I think it was episode six with PJ talking about like entrepreneurship and starting your own thing. Like everyone's not going to do it, but that's good because you need, there has to be workers. There has to be employees. If you have a business that has employees, you need people to work for you in order to scale and grow your business. But that's not for everybody entrepreneurship and doing this investing and real estate investing, that's going to be more, I guess, something that people are going to want to do as opposed to working a nine to five. And that's why I wanted to start this podcast for those people that are like the nine to five is just killing me. I don't, I'm not enjoying it. I have no passion in it. I want to do something.

Nick (32:29): I want to build something on my own. And yeah, it's the barrier to entry is a lot higher than running a nine to five. It's comfortable to sit in a nine to five because you know, that paycheck is going to come every and know that you're possibly going to get a raise at the end of each year. But that's all it is, is comfortable. You're going to stay at that. There's gonna be no growth, I guess, or progress beyond that comfortable state. It's getting outside of that comfort zone and being willing to take risks and bet on yourself. That's when you're going to see the growth and the progress and the financial freedom that everyone always talks about wanting, but don't want to put the effort.

Lane (33:02): Right. I, and I think w something I want to point out for people it's like, it's not binary. It's not like you, you know, you stay, you suck and you're going to stay at the corporate job. Right. Suck it up. And it's not that, or the complete opposite, which is all right, you're going to quit tomorrow. And you're going to go sell something on Amazon and create this business, whatever. Right. What I'm kind of saying and proposing and what I've caught them all with all personally is like, I just bought some rentals. Right. As I worked my day job, as I shut my mouth, um, I bought more and more rentals. And actually, you know, like as the years went on, I got rid of, I got out of that, that private sector job. And I went to more government jobs. There are a lot more show.

Lane (33:37): And actually, so I, my job a little bit, but like, like slow, like it's not like binary, right? Like my way is kind of like the middle, like, and buying and buying hold real estate. That's cashflow is not really a people. It's technically a business. I mean, for taxes. Yeah. I certainly call it a business. Right. But this is like, it is about as passive you can get, right. You don't need any kind of special skills. Entrepreneurship is not for everything. Actually. It's not for most people. I think that's, most people should not sponsor them. And there's a better especially doing it. Right. I mean, it's 2021. If you have entrepreneur on your LinkedIn title role, can't find a job. That's the way I, it I'm just getting old, but like, that's why there's jobs. But what I'm saying here is if you're a good nine to fiver, cool.

Lane (34:23): Maybe that's your highest and best use, right? That's all she wrote for you, but take your, your side money and buy rental properties on the side. That's passive. Like we're not flipping houses. We're not wholesaling houses or buying a whole and imprudent rental here. And yet it's going to take, go out. But in less than a decade, you'll probably be financially free by going down this path. So it's, it's yeah. It's not, it's not a black and white, it's more shades of gray and here's kind of a third path that I've kind of proven work your day job, save your money, invest prudently, just had it grow over time. And eventually you hit that hockey stick F I, and maybe, you know, a lot of my clients like, like the doctors, like they still like their job because they interact with patients and stuff like that. But they just pull back on how many hours they're happy, you know, at the end of the day, we're trying to find our happy. So right. Normally 40 hours a week is too much for most people. Right. But you know, 20 hours, 15 hour for four are over. But

Nick (35:24): Well, at that point, it's, you're working the job because you want to be there now because you have to be there. And that's where a lot of us get caught in that nine to five. You're in the nine to five, because you have to be there. There's no other way that you're going to put food on the table and be to live your life. So I love that, like trying to create those passive sources of income and additional revenue streams so that you can, it's like, do I want to work 20 hours? Do I want to work 30 hours? Or I don't want to work no hours in this nine to five job. Like I have the freedom to choose because I will want to, not because I have to,

Lane (35:55): I mean, I got to a point where I was doing my engineering job in like two hours a week of like real work. Right. Not just being there, doing some things on my laptop on the side. Right. I didn't, I didn't quit until I started my podcasts and all my platforms really started to take off my coaching. If it weren't for that, I would have been perfectly happy. Like just keep working my nine to five, you know, semi six figure salary don't really do much. Yeah. It sucked to have to go to work every day. But like all in all, like that was a pretty good, like happy life. Right. And I think, I mean, I think that would make most people happy.

Nick (36:35): So how much before we start kind of wrapping this thing up here, I'm curious, like, I really like the fact that you were building this well-working your nine to five and that's you were doing it kind of on the side. How much time were you investing in the real estate rental area? Like in relation to how your nine to five year 40 hours?

Lane (36:53): I was spending quite a bit of time, um, maybe a few hours a week and then one of the weekends, but most of it was not value added, like me playing around on my spreadsheets, basically counting my money, like Scrooge McDuck, because it was so fun. Right. When you start to see this thing growing, you get two or three rentals and you're just, Oh, where am I going to buy the next one? It gets to be so fun. Right. So, but really value added stuff. Like for each rental you should spend no more than like an hour or two a month. Like, what is there, like you send your, your property manager sends you an email saying something's broken. Yes. Or you build into your system in the process is like, do don't even bug me if that's another source of dollars, just go on and do it for principal over a thousand dollars, send me two bids and I'll look at it for five minutes in Google ads and say, yes. Right. It's very S can be very slow.

Nick (37:45): Now, once, once we have that say we got several rental properties here, you, you did mention syndication and like taking a bigger, progressive step beyond just rental properties without, I guess we'd probably need a whole nother episode to kind of talk about that. But what, like briefly, what does that entail at? What, what was the next step you took after you've accumulated these rental properties?

Lane (38:08): Yeah, so I, I was I'm coming to operator, right? So I've put together syndication deals for investors, but for most high net worth investors, they come in as a passive LP limited partner into one of these deals. A lot of times the minimum investment. So like $50,000, but they diversify over dozens and dozens of deals. And in these opportunities, they're stronger deals because there's value add opportunity to pretty much do a slow flip with cashflow tax benefits are stronger than owning rental properties. And this is where I think people like the deals, right? But the deals allow you to get passive activity losses, which offset passive income. But if you're a real estate professional status and taxes, it's possible to offset your, so this kind of makes people's head explode, right? You're adopted 600 grand and you're able to do this maybe, or down to 300 with all your passive activity losses. And you just say for Silvaco 50 grand, 50 cents in every dollar above $330,000, AGI, these are what the wealthy do, right? This is, this is the crazy stuff. And then you start to get into other higher net worth strategies, like infinite banking, where you using whole life insurance. I figured in a right way to kind of bank on yourself.

Nick (39:20): Interesting. That's yeah. That's kinda kinda mind boggling.

Lane (39:25): Yeah. I mean, it was for me. Right. But it just stuff is kind of simple, right? The things that they're using a very simple, but they use like the infinite banking because it's this a loophole you just don't, you don't pay taxes on it because it's life insurance. Right. Interesting. Well, it all starts, you got to get, you got to get going right. To reach the promise land.

Nick (39:44): Exactly. And that's for the final, I guess, closing statement here. And then we'll kind of talk about, let you talk about your simple, passive cashflow just a little bit, but what would be some final tips or advice that you'd want to leave with the audience here, if they're interested in doing exactly what you did starting out with these rental property

Lane (40:04): Or picking them up? Yeah, I would, um, tell them to go check out my podcasts. If they're looking to get a rental property, I started it back in 2016, a long time ago. And all my friends were asking me how I did. It said nobody listens. Right? So I recorded a lot of podcasts, like, you know where to go and like the numbers we talked about today, um, a lot of the basics or the first dozen podcasts, I would say check out simple passive cashflow. And I have a lot of stuff on my website for the older stuff, simple passive cashflow.com/he is a lot about vault rental. Turkey's a great way to get started. They're kind of like, um, rental properties, the training wheels, but, you know, for higher net worth investors, I've kind of moved on myself, right. As a team owner and a credit investor and opening up the world of these other wild stretch that the wealthy.

Nick (40:52): So like, like the other links in this episode, we will be putting all of these links in the show notes for this episode. So if you are interested in getting access to the podcast and the turnkey, the first couple of posts that you got on simple passive cashflow, there we go. Um, all that will be in the show notes for this episode now. So what exactly, if someone's coming to your website, I know you, you work with people and kind of help them get going. Like what tag exactly does, what do you offer? I guess, for people that are interested in really taking this serious and maybe they want to work with

Lane (41:25): Yeah. I mean, first thing, first, everything is unfree on the website, right? All the guides, the podcasts everything's on there, you can go through on your own. Right. And I that's, it, I would encourage like, there's really no room in this world for all these BS, like fake gurus out there charging 20, $50,000 in coaching. I didn't use any of that stuff. I just kind of scrounged around on the internet and I kind of converted it in a way that to help other people kind of, to kind of send the elevator back down on other people. Um, but for some people who are like, whatever, I'll just invest alongside the, do we have an investor club? And then we also have the coaching and mastermind side because for higher network people, it's all your network is your network. Right. But how do you find these high net worth investors that you can call your peers? Because they're not at the local real, they're not on some free internet site. Trollin' right. They're busy people with kids. So I've kind of created use my platform to monetize because I am a lightning bot for high net worth of credit investors that are cool people. And I kind of filter the right people and create that master professor. That sounds really cool. That's awesome. But that's yeah. That's the one thing you can regrade, right? Everything else on the free on the website for free, right?

Nick (42:34): Yeah. I love that. I love that mindset. Even away. Everything for free. I mean, it's like you said, it's not trying to be the next guru is just it's, it's simple, but it's amazing how many people won't take action. They'll hear all this. I have all the information there.

Lane (42:50): My freaking time is all the tire kickers. I'll just read a bunch of stuff and not buy the book. But the people, the people who are takers will come read all this stuff, ask a few questions, a piece out here, but the people who really want to community and are good people and want to build a long-term relationship with and want to geek out on this like wealth building stuff, they stick around.

Nick (43:12): Awesome. I love it. Well, lane, where we already talked about simplepassivecashflow.com, where else would you like people to go to get in touch with you?

Lane (43:22): Uh, that's it, yeah. Simplepassivecashflow.com and then, uh, yeah, the website iTunes with the play simple passive cash. Perfect.

Nick (43:28): Easy enough. Well, man, I want to thank you for taking the time to come and chat with me and give awesome advice for the listeners. Um, I'm probably going to start looking into investment properties here. Cause I, I love that idea of just the, like you said, the simple passive cashflow that's it's so simple, but

Lane (43:45): It is, it is, but it's not easy. Right? It's easy. Everybody would do it.

Nick (43:52): No, I love it, man. Well, yes. Thank you for coming on and take care of man. Keep, keep growing that passive wealth. I love it. Yeah.

Lane (44:00): Yeah. If you need any help, um, let me know, reach out.

Nick (44:04): Appreciate it.

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Show Notes

It can be an amazing feeling when you see that savings account start to grow. But what happens while that money is sitting there?

Virtually nothing. The interest you earn, even in a high-yield savings account is not much. If you want to start seeing real wealth and growing your net worth, you need to be thinking about investing your money.

Like I mention in the beginning of the episode, there are several different ways to invest your money (I only touch on a few of them), but in this episode, we’ll be talking specifically about real estate investing.

Today’s guest, Lane Kawaoka of Simple Passive Cashflow, shares his story of going from a full-time engineer to full-time entrepreneur by investing in rental properties.

As you’ll hear in this episode, the concept is really simple. In the episode, Lane shares how he transitioned to real estate investing (he didn’t even have to quit his day job until it completely replaced his income!), and how you too can get your foot in the door with real estate investing.


Key Takeaways From This Episode


When investing in rental real estate, there are a few things that Lane takes into consideration before purchasing a property:

  • Cash Flow – you need to be able to earn a positive ROI on your investment. To figure this out, Lane starts with a simple formulaMonthly Rent / Purchase Price = 1%

    1% and greater should be the number you shoot for. If it’s less than 1%, you won’t bring in more money than you invested until much later

  • Location – Lane suggests staying in a population of 250,000 or greater. Anything less than that and your market may be too small.
  • Type of Property – Focus your efforts on “middle-class” property that an average consumer would be looking to buy. Going too high-end will be difficult to market and you will take a bigger hit if you can find a renter. Likewise, focusing on low-income households be result in less consistent tenants.
  • Hire a Property Manager – many people will skip this step because they want to keep more of the profits, but unless you’re looking to manage any repairs, maintenance, and general renter needs yourself, a property manager is a wrothwhile investment.

The concepts that Lane shares in this episode are fairly simple, but that doesn’t mean that it won’t be hard work.

You still have to be willing to put in the work. If you are willing, investing in rental real estate properties might be a better place to put that money that you’ve saved up rather than leaving it in a low-interest bank account.


Disclaimer: I do feel that it is important to maintain some amount of money in a savings account for emergency purposes. I am not a financial expert, nor do I claim to be one. If you are uncertain about what financial decisions are best for you, I recommend consulting a certified financial professional.

I Want to Know…

I hope you enjoyed this episode of the Nine-Five Podcast. Thank you so much for listening!


Are you making your money work for you?


Leave a comment below and let me know!



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"The value you provide to others directly correlates to your success. The more value you provide, the more successful you become. Focus on the value!"

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I am an entrepreneur and adventure enthusiast, looking to break free from the Nine-Five grind. I'll show you what has worked and is currently working for me, as well as what hasn't worked so well.

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