How to Build Wealth Like A Pro (ft. Jeff Ervick)

What if the smartest way to build real estate wealth is not quitting your day job, but using it as fuel? Jeff Ervick joins us to map a step‑by‑step journey from cold‑weather BRRRRs to scalable multifamily syndications, private credit, and smart insurance structures—all while keeping a high‑earning W‑2 in tech. 

Jeff is an accomplished Real Estate Fund Manager and Investor Relations Maverick. He has successfully deployed over $50M of equity across a $220M portfolio of assets under management and development, comprising multifamily, luxury SFH builds, ground-up development, Airbnb, and light/flex industrial properties.  Jeff’s LP and GP portfolio comprises over 2250 doors under management and development. 

Transcript

Meet Jeff Irvic And Origin Story

SPEAKER_00 0:00

Welcome to the Everyday Millionaire Show with Ryan Greenberg and Nick Calvis. Alright guys, welcome back to another episode of the Everyday Millionaire Show. We are here with Chase Nick and Jeff Irvick. How are you doing, Jeff?

SPEAKER_06 0:15

Hey, I'm doing good, man. Appreciate you guys having me on the show.

SPEAKER_00 0:18

I was talking to somebody yesterday. I was talking to Tyler yesterday about the Benfield deals and and that I found you, and I was like, he's like, how did you meet him? And I'm like, I don't know. Ironically, my wife taught your daughter. Yeah. But I don't think that's how we met. I forget how we actually met. Oh, through I think Sean Magner.

SPEAKER_06 0:34

Yeah, yeah. So Sean, I've known Sean, I guess, since uh 2015 or so. Um, my buddy actually went to high school with him. My college. So a buddy does real estate down in Dallas, right? And he's uh and I was talking to him one day about it, and I'm like, hey, I want to get into real estate. And he's like, all right, well, you should go meet my friend Sean. He lives in Baltimore City uh with the high school with him, and I think he's killing it. One of those things, right? So met Sean, took him out to lunch, uh, picked his brain, and then end up going to a couple uh REI conferences, you know, here locally. Met some people, and that's kind of how I got in real estate. But yeah, that's how you and I met uh because he brought you to my son's your son's baseball chair. Yeah, we had a uh we had a cornhole tournament for his baseball team, his travel baseball team.

SPEAKER_00 1:16

Smoked historical dude. There were some pro fucking cornhole players at this place. Is that recording that big camera on the top? Just to confirm. Okay, cool. Um, yeah, that that was a fun thing, but god, I got humbled. But literally killers.

SPEAKER_06 1:31

It's funny. The first time, like I'm I'm I consider myself pretty decent at cornhole, right? Like, you know, backyard dad kind of thing, right? Played since I was college, whatever. And you're right, like these guys will just hit you know three out of four holes, right? And some of them had jerseys.

SPEAKER_03 1:45

Yeah, they had jerseys.

SPEAKER_06 1:47

They had jerseys. Wow. You know, there is a well, there's a there's a couple that have that came to a few of our events um that were actually amateur cornhole players. They're based out of Pasadena, and so they travel around the country playing cornhole. It's insane. Yeah. What a wild hobby.

SPEAKER_00 2:01

What a wild hobby to get into.

SPEAKER_06 2:03

I mean, you know, I like having fun and not really worrying about it. So yeah.

SPEAKER_00 2:08

So you have uh an interesting real estate story because your main, I don't know if it's your main now, but your main source of income, you have a W-2 job. Sure. A high, a high income, well, can I say high income? Yeah, that's fine. High income um W-2 job, and you've strategically used real estate to help with your W-2 taxes.

First BRRRR In Dundalk And Hard Money

SPEAKER_06 2:29

Yeah, so it it it started out where, you know, um looking to, you know, yes, offset some taxes, but also more or less um create a different passive income stream, right, with my W-2. So that's kind of where I started. Uh, you know, got into um uh buying a couple rental properties, doing the Burr method. Um, you know, found Dundalk as I you know, I looked into Baltimore City because Sean was in Baltimore City pretty heavy. I'm like, eh, I think I'll hold off on that one. Um end up going to like Dundalk, um, buying a couple houses there. Uh the first one I bought, it was crazy. It was like this temperature out right now, like 30 degrees, 20, 20 something degrees outside, middle of February, um, back in I think it was 2016. And um uh and it was like one of those live auctions, right? So like people are out there, like there's an auctioneer and you're throwing up your hand, and I'm looking around, I'm like, I don't know what I'm doing, but I'm just gonna keep on bidding until I know this is what I want to pay for. I don't want to pay any more than this, right? So end up winning that deal, and that was my first um my first uh go-round into you know how to burr a house.

SPEAKER_00 3:31

Was that a burr?

SPEAKER_06 3:32

Like you had to do the renovations and it was a foreclosure or pre-foreclosure auction gut job kind of burr method, yeah.

SPEAKER_04 3:39

So yeah, and how'd you finance it? Like, I mean, just this is your first house. So, like what were you thinking? How did you finance it? Like you won the bid, like what happened right after that?

SPEAKER_06 3:48

Yeah, sure. So right afterwards, I was I was nervous as hell. I'm like, what the hell did I just get myself into? Right. Um, I don't know what I'm doing, and so forth. But there's this guy named Gabe uh who was kind of like helping me out and like uh kind of show me the rope sort of thing. Uh and the same token, Sean introduced me to Brooke Kane from uh Kane uh investments, right? So uh I actually borrowed money from Brooke as a hard money lender for the deal. So borrowed his money uh enough to pay cash for the house and uh and put the um I do all the rehab, right? And then once I got done, uh refinanced it out. And I I think I left uh actually I think I came came back with like three thousand dollars from closing. Nice.

SPEAKER_01 4:25

So that sounds similar to what I did. I bought a house. Yeah. First uh first house I purchased, I used Brookcane as well. Yeah and then I fumbled through the construction process until I was able to like find decent contractors towards the end. What was that process like for you and finding contractors?

SPEAKER_06 4:40

Yeah, so I was still, you know, I I've I had a W-2 job at the time, right? So didn't really have a chance to um, you know, go out and vet a ton of contractors. Uh so I I used my relationships with uh people that I knew from the real estate masterminds that I was a part of, uh, ended up um you know hiring uh you know one of the guys as like a PM, right? And he is already he this guy already flipped about I think he already has done maybe 10 or 15 homes at the time, right? And he lived up that area, so he had all the contacts, he had the uh engineer, the construction folks, the um uh all the the trades and so forth. So he was able to kind of help manage it for me while I was still working a job and kind of going back and forth. And you know, of course I wanted to, you know, go in and what I can do is swing some hammers and you know do some demo and so forth, but realized it, you know, I was just kind of getting the way, right? So I'm like, I'm gonna let them do that, right? And and then I just helped kind of PM the pro the project uh until we finished.

SPEAKER_00 5:35

That it's such a classic first-time investor thing. Like, well, I'm gonna go do this part of it, and then you realize like what your hourly rate is, what you're getting for that, and you're like, nah. I was when I first bought like we bought like uh a couple of turnkey rentals with tenants in them. That was our first strategy. We didn't actually start with the birth strategy, we started buying tenant-occupied stuff.

SPEAKER_02 5:55

Yeah, nice.

SPEAKER_00 5:56

So we were doing maintenance calls, and I had no bit like we were YouTubing how to change a toilet, and I was like literally carrying a toilet into a house. I was a gym teacher at the time, and I was like, after school, my partner and I, Tyler, we would meet at the house and just try to fix the stuff ourselves. Sure, yeah. With like Ryobi tools, and like we just it was walking with a tool belt, like yeah, I'm this is your Mr.

SPEAKER_06 6:18

Contractor.

SPEAKER_00 6:19

Um, and that was short-lived. And I was like, I'm never gonna fix a toilet again. Um that's not gonna be on my thing. But everybody that I most people that I know try to do it themselves, they try to manage it themselves, they try to, and it's just never worth it.

Contractors, PM Support, And Time ROI

SPEAKER_06 6:36

No, and for me, I think my time was better spent spent elsewhere, right? So uh the return on investment for me, that couple hours or a day of going through and trying to, you know, help these guys out and you know, maybe save a couple bucks here and there, it wasn't worth it for me versus you know, going out and winning a new deal, right, for my day job. Right. So um so build helping build those relationships and get that, you know, on the business side or on the real estate side was good because it allowed me to kind of like empower them or hire that person as like my BM for the job while he had subs that he would just kind of you know bring in and then I would pay the sub, right? So he made a fee on top for just running it, right? What is your W-2 job? Yeah, so I sell um technology solutions uh to the uh federal government. Actually, yeah, nice. So um, and I also run a cloud business too. So I got uh cloud and technology solutions, yeah. Nice.

SPEAKER_01 7:27

Can you give us like an example of like what type of technology solution?

SPEAKER_06 7:31

Yeah, so uh so you've got a data center, right? And that data center has um a bunch of servers in it, um, you know, and the customer might need to either buy some more servers or refresh the servers, right? Maybe they're running end of life. Um that that would be like the hardware portion of it. Um, and then there's software, so maybe there's a new solution that they need to do um identity access management for um zero trust, right? So bringing in the um the right software and kind of working them together and having my team kind of manage the process. Gotcha. Yeah. So it's anything from cyber, network, data center, all that kind of stuff, right? So uh even I've sold even some sure microphones in the past, right? So yeah.

SPEAKER_00 8:14

And the data centers, they're are they owned by the government? I feel like aren't they mostly like private companies that own the data centers?

SPEAKER_06 8:20

Yeah, I would say um it well, I guess it depends, right? So the the data the physical actual building is probably owned by somebody else, right? Um the government would, you know, own the material or own the uh actual um like servers inside there. Uh you know, it's different than like Amazon. Amazon will buy build a warehouse, you know, they buy all the servers, they manage it, they do everything, and then they lease basically the cloud to you, right? You rent to the cloud, right?

SPEAKER_00 8:46

Got it. Yeah. So one of the things that I know you do um is syndications. So you buy apartment buildings and they you I know you have strategy you've had the we've because we talked privately uh about a ton of different strategies that you use to help offset your W-2 income. Sure. And that's something that I think a lot of people um a lot of people like want to just like quit their job and get into real estate full-time. And I've seen so many people come and go in this. We personally kept our full-time jobs for a long time before we figured that it was better to go full-time into the business. Um, and we actually started active businesses at the same time. So our home remodeling company, our property management company, so we had m other streams of income rather than just relying on the passive income to um and and Nick has a different story. He he relied on all the passive income and he built an incredible business doing that, but we have all seen people come and go very quickly. Um so what strategies do you use to offset W-2 income? Because there's the rules of being a full-time real estate person, and what kind of strategies can you tell us about?

SPEAKER_06 10:00

Yeah, it's a uh it's a tough uh tough thing to do, right? Um it's not it's not you know easy to be able to go and say, hey, I'm gonna, you know, buy a property and then offset my taxes on W-2, because it's you can't take passive losses and offset your active income.

SPEAKER_05 10:16

Right.

SPEAKER_06 10:16

So we uh uh I have a what my wife, right? So she's our she's my my 100% partner, right, in all of our businesses. Um she helps manage uh all of our investments, manage uh our properties. She works right in our business for the syndication side. So she's actively involved in it. So on you know, able to have her be our real estate professional status.

SPEAKER_00 10:36

Ah, okay.

SPEAKER_06 10:37

That's then from our general partnership um that we have. So even so, like I invest in in all of our deals, and I invest in other people's syndications too. I invest in a lot of different opportunities, right? Um, for me, the the most important thing for me is diversification, right? I want to diversify my portfolio, right? And I'll get uh we'll talk, I would like to talk about more uh how I do that and so forth and what I've done and how I also uh help coach other people to do that as well too. Um, but ultimately you've got your general partnership um yeah uh business, right, which is my our active um real estate business. That's what owns our apartment complexes. Uh what we do management, asset management of those apartment complexes. We're involved in daily financial meetings and daily um you know construction meetings, right? Talking to contractors, um, understanding what what the how what needs to happen at the property in order for it to add value and increase in in uh in in our value, right? So that's the active side of a house, and then I invest as a limited partner in all my deals as a as a as an LP, as a passive investor.

unknown 11:44

Yeah.

SPEAKER_01 11:44

Sorry to cut you off. How'd you go from buying residential uh real estate to the syndication?

W‑2 Tech Career And What He Sells

SPEAKER_06 11:50

Yeah, that's that's a good question. So um I I I had those rental properties in in Dundalk, right? And I bought um I bought a couple other ones, I sold a few, flipped a few. I started doing private lending out of my self-directed IRA, which we'll get in talking about self-directed IRAs as well too. Um, and I was looking to buy another rental property. I had uh, I think I I ended up having three at the time and I had the private lending going on. And I decided that, you know, I I really wanted to scale my portfolio, right? And and buy bigger or get bigger, right? And and and think bigger about what I wanted to do for my own portfolio, right? And so for me, that was okay, how do I buy an apartment complex? Or how do I, whether it's you know, a four, a five unit, a four unit is not necessarily considered uh multifamily, but a five unit and above, right? Basically. Um what year was this? This was uh 22. Okay. Uh so 2022. Yep. So so looking to how do I invest or how do I, you know, own my own, right? Um through that I kind of uh stumbled across a couple different masterminds in the real estate business, which you know those are all over the place, and you got some gurus telling you what to do and how to do it and so forth. So, you know, joined joined one of those programs, um, but mainly to join the network, right? Because it was a massive network. Um, and through that I actually met my partner Claudio. Um, he lives right here down the road from us, uh, who's also another business owner, owns a technology firm as well. Um, and so he and I had the same vision, the same mindset, the same goal, the goals, uh, what we wanted to do, what we want to achieve. We just have we have different skill sets. He's super uh articulate and um and creative when it comes down to the operations of businesses and and and growing and scaling businesses. And I was good at uh you know building relationships and talking to people, right? Um, and uh from my sales career, right? So anyway, so got to what the thought of wanting to scale my pro my my portfolio. Um that's how I got into this world of understanding, you know, how to buy and acquire multifamily properties, and then we started our our firm, uh Flores Capital Partners, um, and then we started closing on a couple deals. We got it got our got our feet wet, understood what what we did right, what we did wrong, and continue to grow every single time. And and since then we've closed over 11 deals.

SPEAKER_02 14:10

Nice.

SPEAKER_06 14:10

Um, yeah. So it's been it's been a good journey last couple years, but ultimately I was looking to scale, right? And I couldn't do it, you know, I couldn't do what you guys were doing, right? As far as um, you know, owning a construction firm or or even buying multiple single family properties to what I wanted to get um, you know, from that. And and I think that was the the reason why I chose to um move away from the single family rentals to the uh multifamily.

SPEAKER_01 14:34

So what what did your first deal look like? And how did how did you analyze it to determine that that avenue would be better for you than just buying a bunch of more residential real estate?

SPEAKER_06 14:45

I think it's uh I think it's the the ability to scale faster, right? Door count, um valuation wise, um and you're also not reliant on you know neighborly comps, right? And that's kind of uh the difference between um you know a regular single family investment property and a multifamily property. Multifamilies all based on net operating income, right? And and I'll say the the cap rate and how you how that affects uh the value of the property. So if you operate the business efficiently, your property will grow in value, right? Um how we underwrite it is there's uh a uh a template, you know, or there's a uh uh Excel spreadsheet basically that we use, right? Or a program we use uh to input all the parameters of the deal before to evaluate it or to underwrite the deal. Um I am not an expert in underwriting. I know I can get I can I can get dirty with it, right? And I can get through it and I understand what it is, but I'm not a pro at it, right? Which is why we we partner with people who are pros on it, right? So we have a guy in our in our our team um who's been underwriting multifamily properties for the last 15 years. He's probably underwritten over 10,000 properties, right? He's acquired uh through his last firm. He was a CI CFO or sorry, CIO, chief information officer of his last firm, um, which was a multi-billion dollar firm in California that was doing the same thing, buying and operating multifamily properties. Well, he was the main person underwriting those deals, doing all the due diligence, understanding what needs to go into his underwriting to make sure it is going to be successful property. Um, so we partnered with him, and uh, and then I that's how we we, you know, uh multifamily is different than single family, where you need to have a team. You you know, you can't do it by yourself. I can't there's no way that one person would ever be able to underwrite a deal, due diligence a deal, transact the closing of a deal, um, you know, sign on the the debt for the deal, raise all the money for the deal, asset management the deal, property management the deal, uh, and and then efficiently run it for the next five years all by yourself, right? You have to have a team, and that's what we rely on our big time is our team.

SPEAKER_04 16:56

So for the listeners that are more residential, yeah, right, and they might not understand too much about commercial and they're thinking, okay, well, if I own residential, I control the asset, there's tax breaks, right? Like the whole spiel for residential, what's your spill for buying commercial or being in syndications where you get limited returns versus 100% returns if you own a single family?

From Rentals To Multifamily Syndications

SPEAKER_06 17:18

Sure, yeah. I think it just depends on what your investor DNA is, right? What do you, what do you want out of the investment, right? Are you looking for um, you know, you want that single family, you know, you want that property, right? That you can see, feel in touch, you can go to every single day. It's in your it's in your hometown. Um, you can talk to the tenants, you can vet the tenants, you can do that stuff. If you want to be active in that business, by all means go be active in that business, right? I mean, I'm never gonna tell somebody, you know, one way or the other is better than the other. I just this is just an opportunity I chose, right? So um, so that's first and foremost. Like it depends on you, the investor. What are you trying to do, right?

SPEAKER_01 17:56

Make make more money. What makes more money?

SPEAKER_06 17:58

Yeah, what well, what makes more money, you know, it just depends on you know what the value of that money is, right? So um, I would say, you know, with the single family investments, like so, even I'll take take for example my my properties in Dundalk. I have uh I did the burn method, all three of them, right? And you know, you put tenants in there, tenants move out, you got three thousand dollars of of uh of capex you gotta do to at a minimum probably, right? To to fix that property up and get it rent ready again. 3,000 is a win. Yeah, it's a is a win, right? So let's call it okay. So what 5,000 then? 5,000 for five grand, right? And um, and if you're making, you know, 350, you know, on average, cash on cash return on that, right? Or monthly cash flow in that, your whole and and you have to change you have to trans uh transition every single year. You're basically your cash flow is wiped out. Now, if you have um, you know, a roof that needs to be repaired, right? Or hot weather that goes, or or you know, you've got a flood or something like that, right? All these other things that come up, like these unknowns, for that single person or single asset, um, your cash flow is wiped out. And that's happened to me multiple times. Trust me, I I've I've had multiple evictions out of my property. I've had to change multiple um, you know, uh AC units, hot water heaters, big plumbing jobs. Like my last one I did, we did a um a$60,000 reno on it, and it looked beautiful and it was actually done very quickly. Um, but the the uh the main line in the basement was cracked and nobody knew it, right? So it was flooding the entire basement. So we had a we did a I think it was a four or five thousand dollar job, right? Just to repair the main line under the concrete, ripping up all the carpet, ripping up the the bathroom. Oh I can't.

SPEAKER_00 19:39

I just had that happen this year, that exact thing. Now, to kind of straw man the because the reason that I didn't get into trying to be think bigger and buy bigger is um uh operating on NOI and getting your valuation on NOI because a big part of the multifamily thing is like that liquidity event.

SPEAKER_05 19:58

Yeah.

SPEAKER_00 19:59

You have to refinance these properties typically every five years, right? Yeah, I would say on average, yeah. You bought a property in 2022, rates were very good. Yes. When your rates go up on a multifamily property, your NOI goes down. Correct. So at that point, the bank could be now instead of it being a liquidity event for you, it's a liquidity event for the bank. Because they could be then requesting money rather than giving you money. Correct.

SPEAKER_06 20:25

Yeah, sure. If you if you've got a a a deal where you're you need to bring cash in for a refinance, um then then yeah, then that's definitely definitely something that happens. I think uh we didn't technically didn't start buying until twenty three, right? Evaluating in twenty two and then bought in twenty three. But the folks who were buying in twenty twenty-one when there's early twenty two, maybe when they had uh yeah, they had the three and three something percent commercial rates and they were floating. Um that's what got people in trouble, right? Is that they know a lot of people that went bankrupt during that time, during this last couple of years. Yes. I mean you could people deals were just you know, people were buying deals left and right, right? And uh and investors were throwing capital on them left and right because the deals, the cap rates were good and the interest rates were better. Um, and you know, the the evaluation or the underwriting looked good. Like nobody at that time knew that, oh my gosh, right? COVID's gonna happen and rates are going to, you know, triple in you know in value.

SPEAKER_00 21:24

I didn't know that either, but that's what scared me away. Sure, yeah, yeah. So I didn't ever do that because I at the time didn't have the money to do a look like to pay the bank, you know. Yeah so that that's what kind of steered me away. Um, but I guess you're saying you got in it when the rates already started kind of ticking up. So even even so, let's say we did get it into that point, right?

Underwriting, Team Roles, And Risk

SPEAKER_06 21:43

So um, you know, you you if you operate uh the property well, right, and yes, you might have to have a cap capital vent come in. Um it creates another opportunity, right? And so, in fact, actually, we created an opportunity out of that such thing. So um we created Created a private credit fund. We opened that up uh this past summer and that invested into a multifamily property that needed a cash in uh to help refinance it, lower that interest rate, lower the debt while they were putting in tax abatement programs. So you basically we we were helped helped this um this 249 unit class A deal in Houston, Texas, um refinance and restructure their debt, lower, lower the interest rate from a from it went from exactly what we talked about, three something, whatever it was, ballooned up to like almost nine, nine, ten percent, right? And then if slowly came down, but it was still too much, right? So we restructured it at a low six, I think it was right at like six point oh three or something like that. Um, and at a fixed rate now, right? And so, and that property also implemented a tax abatement strategy, which then reduced and removed all of the taxes, right? So then you don't have taxes on the property. So you you reduced two of the most expensive three things on your on your property insurance, taxes, and mortgage, right? Um so that created an opportunity for us to create a fund. We did, we raised two and a half million dollars, put it into the fund, put it into the property, and that fund that property is now paying my fund back uh 14%, right? So um, and and that that gives uh you know, so again, finding an opportunity in a situation that like that where um it could have been a very disastrous thing for that that group um turned out to be a you know a blessing, right? Turned out to be an awesome opportunity. Now, um you know, we we were talking about like you know the difference or the multifamily and so forth. Uh again, I think you want to go back to the ability to scale or actually like the number of units, right? Because if you think about a hundred unit of property, um that, you know, when when I'm when my single uh family rental, when that person moves out, right, or stops paying rent, or I have to evict that person or uh a big capex project comes up, right? That kills my cash flow for that that unit, right? But when that happens on a hundred unit property, you don't really feel it, right? When it happens even four, five, six, seven, ten times, you don't really feel it, right? So now yes, your your your your revenue or your your rent will fluctuate that month and so forth, right? But um it's not as like like it's not as big of an event if you have a single family home versus a hundred unit where one person gets evicted or you have to move out, right? So um, so that was another reason why I liked the opportunity for multifamily, right? Because it gives you that economies of scale. And in the same token, instead of having um, you know, to bring on a uh a construction person or or maintenance person um, you know, every time and pay those you know higher fees for, you know, I've got to bring a maintenance person to the property. So hey, that guy, that plumber, that's gonna that plumber's gonna charge me, you know, 250 to$300 just to just to show up, right? So we are able to hire full-time maintenance staffs right for our properties, right, where they're there full time. So, you know, and the property pays for it, right? So um you get a better return, right, from having a maintenance person on site working through all these deals or all the all the maintenance issues. Um, you also have a leasing strategy and leasing coordinators and so forth, right? So you have you have on-site staff that helps manage the property and manages what's uh you know the operations of the property.

SPEAKER_00 25:26

Yeah, the way I've heard it described is it it's its own ecosystem. It creates its own ecosystem where you can support an in-house team to to help manage that.

SPEAKER_06 25:36

And also depends on the size. So not every not every multi-fit like a 20-unit wouldn't be able to support a full-time staff, right? So if you have uh three or four 20 units all in in within a five mile radius, yeah, then then you can hire, you know, you can combine them and hire one, and that person can float around all of them, right? But if you uh like I'd say on on average, it's usually a hundred and plus, uh, a hundred unit plus is where you get on-site um leasing and you get on-site maintenance.

SPEAKER_04 26:04

Yeah, that was my next question. Yeah, what what at what point when you're scaling do you get that on-site staff? I guess my follow-up question would be um for people that like are looking into commercial, how did you get started into that space? I mean, I know you went to the networking events and then the relationships, but like how do you put that team together in the commercial side of things? Because like the residential side is pretty easy. You find the contractor, yeah, you know, you find your hard money guy, and you're pretty in property manager and you're pretty set.

Single Family Versus Syndications

SPEAKER_06 26:33

Yeah, you gotta you gotta vet people, right? And you gotta build a relationship and you gotta um, you know, I I um it's uh it's kind of uh you know, trust and verify, right? So you gotta trust a person, but then verify they're gonna do the job, right? But then, you know, when you're when you're partnering with another general partner on a deal, um, you know, there are there is an operating agreement, so everyone has to, you know, uh abide by the operating agreement, uh roles and responsibilities of that, right? So um, you know, we we kind of divvy up responsibilities and say, okay, your your group is responsible for for this portion, you're responsible for this, you're responsible for that. And then collectively we make decisions on you know major things that go on, like refinances or you know, major capex projects if we're not already putting that into the business plan already, um, you know, or um or exit strategy as well too. And usually you want to have a few different exit strategies, right? So you mentioned earlier about um, you know, a five-year cycle. So um you'll see there's there's different asset classes, right, in multifamily. So you got your class and also kind of similar in in single family, you got your you know, nice areas and your not so nice areas, right? So we look for properties that are in nicer areas, class B areas, so to speak, class A A B areas, um, but might be a a rougher asset, right? So the goal would be to value add that, right? So you you buy it, uh mismanage or misoperate, miss uh mismanage or neglected uh asset, right? Um, and add value to it. So you force that that appreciation by um updating the units, you know, painting the exterior, redoing the roofs, um, new HVAC, um, you know, doing stuff, uh adding some playgrounds, well, you know, certain things to to beautify, right, the low the asset and create a better um space for the residents. And then by doing that, you know, um you're also looking to increase rents a little bit too, right? Now we don't go to a point where we're gonna say, all right, hey, market rent is 1500 bucks, we're gonna make it 1500 bucks or more, right? You got to slowly increase them as you go and you gotta test the market, and that's what you know, good a good marketing strategy does. Um and uh by doing that, by increasing those rents for each of those units a couple hundred dollars, right? Um, you know, but but offering a better product, right? So we're offering nicer and nicer accommodations for that resident and for their family. Um, you know, you you know, you you get to appreciate the value faster, right? Um so you're not just waiting for time, right, to appreciate it. You're you're actually forcing that up with uh with that increased rents. Same thing as a burr strategy. Basically it's a it's a massive burr strategy, is what it is, right? And then um there's different finance strategies. So you can do like a bridge loan, which is kind of like a larger, not really hard money loan, but it's um, you know, it's a uh it's a it's a loan that has a higher interest rate, usually interest only for a year or two. Um, and they also also uh bundle in the CapEx in there as well, too. Um so that way you can do your business plan and then goal will be to re you know stabilize the property and refinance it. We've also found that we um we have a couple of those deals and they're uh they're a pain to work through, right? They're hard, right? So and it requires a lot of a lot of um a lot of blood, sweat, and tears, right, from our bridge loans? The uh well, the the the heavy value ads, right, that require bridge bridge loans. Because a f Freddie and Fannie um institutional debt, they're not gonna put debt on something that's that looks like that, right? So they're gonna have to you're gonna have to fix it up, get that bridge loan at first, fix it up, and then go and refinance into institutional debt. So we've kind of shifted our strategy a little bit. Now we're looking for opportunities that are able to get that institutional level debt first, right? So the Freddie Fanny Mac, the really good debt on it. So it's fixed rate. Like our last one we just got, I think it was like just under 6% or 5%, 5.75% fixed for five years with two years of interest only. Um, and I think it has a 1% uh you know refinance fee after five years, right? Um, our goal would be to exit that property in five years, though. So our our time frame matches um usually the debt, right? So if it's a five-year term, you know, um, then we're going to hold it for five years, and our goal would be to sell it in five years. But you know, another section on that as far as the passive income for the investors, right? Investors come in, they actually are they're limited partners, right? So you mentioned, okay, so why would somebody want to invest in a deal, a multifamily deal versus buy their own rental property? Well, you can invest, you know, probably the same amount of money, right, into a multifamily property. Um, and you're not required to be on meetings every week or pick the color of the paints or worry about tenants tournaments and trash, you know, all that kind of thing. You know, our team manages that, that, that portion of it, right? The operational side of it. And they're the limited partner, but they still get the uh the ability to receive depreciation through a K1 because they're limited. So they're basically fractional owners, right, of the property. So they're they're buying shares in our operating agreement that is actually buying the property.

SPEAKER_00 31:40

It's like buying a stock of Nike. You can't control what Nike makes, but you can get the dividends from it.

SPEAKER_06 31:45

Exactly. Yeah. So you you're you're able to partake in the losses, the paper losses up front, right? From doing cost segregation studies and bonus depreciation. Um, and we do that in all of our properties, by the way. So we're able to get it now with 100% bonus appreciation, be able to get that up and pass that on to our investors pro rata how much they're putting into the investment, right? Um, this is kind of where the tax strategy comes into play, too, because a limited partner won't be able to take that and put that against their active income, right? Um, a passive investment can't offset active income, right? So even I went to earlier, I invest my in my properties as a passive income. I can't take that, even though I'm a general partner in the deal and I'm getting general partner losses on my general partner business. My investment business in the same deal doesn't partake in, you know, act or depreciation that can offset my active income, right? So that only can handle or only can offset passive incomes, right? So you're everyone again, not tax advice, right? But work with your CPAs and your financial folks on that, right? But it's very smart for people, it's very, very um, you have to understand what you're what you're after, right? So what I tell people all the time is if you've invested in your first deal, right, you're gonna get a bunch of passive losses, right? You can't, if you can't use them, right? Your CPA will tell you if you can use them or not, then you you can push them forward or you can uh push them down the road, right? Until you know you have such such an event like a liquidity event um of selling uh this or you've earned um cash returns, like cash and cash returns like a dividend on it. Um let's say you earn six thousand dollars on that, but your depreciation for the year is twenty thousand uh loss. So then you can offset that. So you won't pay taxes on that because it's passive income offset by passive losses, right? So that's when it's that's when it gets very powerful when you've got like I've got some investors who have been investing in syndications for 10 years and they invest in two or three different syndications a year. Well, after five years, those two or three are are exiting and they could buy more next year. Two or three are exiting, but they're buying more, and then they keep on stacking them up. So they're having 10, 15 different exits a year, right? Those exits also have recapture, but you can offset that right with the depreciation from the new property you're purchasing too. So there's a lot of strategies that come on on that, but it's like snowballing the effect, right?

SPEAKER_05 34:01

Yeah.

SPEAKER_06 34:01

Um, and that's that's something that uh like I just I'm I'm I'm very excited for that, just to build that kind of snowball that's gonna continue continue to grow um and have different tax advantages as well, too.

SPEAKER_01 34:14

A limited partner, do they get a percent of the would that be like of the monthly cash flow based on whatever they put into the into the deal?

SPEAKER_06 34:23

Yeah, correct.

SPEAKER_01 34:24

And it's it's it all based on the cash that is in the deal, not what the value like what the property is worth.

SPEAKER_06 34:29

It doesn't, it has nothing to do, um, it has not the cash flow has nothing to do with what the value of the property is because really that's just paper value right now, right? And just like selling a stock, you don't you don't have a uh you don't either lose or gain money until you sell that stock, right? Um, so the equity we build in the property over that five-year period continues to grow for that investor, but we offer uh them distributions, right? Or or um, you know, distributions based on cash flow, right? So as operating the property, as we build up our reserves, right, and we have an extra, you know, 100 grand uh per quarter, so to speak, right? Let's just brown numbers. We'll say we've got an extra 100 grand uh from you know the three quarters of uh of cash flows, right? And we've got enough reserves in our bank and enough operating um you know income to make sure we're we're able to pay over all of our expenses in the debt service, um, then we'll take that and we'll distribute it to our investors, right? So um we'll uh it'll be like I said, pro rata, um, their investment around. So if somebody invests$50,000, they'll get their portion of it. Some invests$500,000, they'll get their portion of it. Right. So it just depends.

SPEAKER_01 35:38

So then after five years, if the property is sold and there's a profit, they would get a percent of the profit.

SPEAKER_06 35:45

Yeah, so so we structure it in a way where there's a preferred return, right? So uh, and I'm gonna use round numbers and typical numbers in syndication business, but you have what's called an eight, like a let's say it's eight percent preferred return. That means the first after after expenses and fees, uh, the first eight percent goes to the investor, and that's an annual on an annual basis. So let's say we only make um we only distribute five percent year one. That means there's a three percent carryover for year two, so we have to distribute 11% year two in order to make sure we catch up on that preferred return. So it's a cumulative, uh not a compounding effect, right? Um, so after that 8% preferred return is met, so let's say we meet it in year one. We pay the investors 8% return on their money. So someone put 100 grand in, they make$8,000 in cash flow year one, usually paid quarterly, right? Um, then the property or the the the remaining would be split with between the general partners and the limited partners, and usually it's around a 70 to the investors, 70 to the limited partners, and a 30 to the general partners. So right. So let's say there's an additional 100 grand of income uh that we can distribute to our team, we've already met that pro that that 8% preferred return. 70 grand would go prioritize to them, and 30 grand would go to the in uh into the general partners, right? And so when we go upon a sale, um the same thing, right? So if we've already met the preferred returns, then the sale and all the all the promote it's called. So after we paid the preferred return, after we paid back their capital, their initial capital into the deal, um, and paid all the banks and all the other people, right? Um, then there is a promote. And so let's say that promote is a million dollars, then we'll split that prorata 70-30 to the investor, to the investors, to the partners.

SPEAKER_01 37:30

So the GPs they typically don't put money in, it's just the investors, but the GP basically structures the deal and and manages it.

SPEAKER_06 37:37

No, we we always invest in our new deals, yeah.

SPEAKER_00 37:41

But not all GPs have to, right?

SPEAKER_06 37:42

No, no, not all GPs have to. Um it depends on what your responsibility is.

SPEAKER_00 37:47

I feel like it's an easier sell to the LPs if the GPs are also. Totally totally.

SPEAKER_06 37:51

I mean, you know, we um we require anybody who joins our our one of our one of our projects, one of our one of our deals, um, that they also invest in the deal, right? So um, you know, I think it's important, right? It's it's uh skin in the game. Skin of the game. It's it's putting your money where your mouth is, right? And if if I can't and if I'm not willing to invest my own cash, then why am I gonna go and try to ask this person to invest their cash into the deal, right? It just to me it just doesn't make sense. So um, so yeah, there's there's GP money that's put in the deal. Typically, um, you know, usually it's about a 10 to 20 percent of the total raise, right? So if the raise is five million dollars, usually about half a million comes from our partnership, right? Into the deal.

SPEAKER_01 38:33

Yeah. So that's 70% that's to the investors, that's like split evenly between half our rattle of their investment.

SPEAKER_06 38:44

Yeah. So so in and the way we have a portal, uh so I have a a deal portal that we put a deal into, and all the investors come in, they sign all of our our docs. We have a oh, we do a usually we're gonna do a 506C, which is for accredited investors only. So we'll open that portal up. Investors will come in, we'll verify that they're accredited. Uh, and then if they're accredited, um, which we can get into that if you want to, what that means, but if not, people can Google when accredited investors. Million dollar net worth makes over 500,000 a year, 250,000. 200, 200 single, 300 for a married couple. Yep. Uh foreseeable future, right? That's what. Um, so if they're accredited investor, uh they can go into our portal, uh, they can review the PPM, which is a private place in memorandum and a subscription documents, and also the operating agreement of the actual property that they're going to be investing into. Um, they would sign the docs in that portal, and then they would commit, let's say they commit 100 grand into the deal. Um, it would calculate how much of the ownership they have, right? So and it shows them that they own, you know, whatever, three and a half.

SPEAKER_00 39:41

If it's 100,000 of a million, they get 10%.

SPEAKER_06 39:44

Exactly. So they own 10% of the deal, and then they would we would distribute it into the, you know, our distributions go out through that portal as well, too. And it calculates based on you know all of the investors what the um what their distribution is. And so it's actually pretty cool, right?

SPEAKER_04 39:59

How many investors do you typically have on one deal?

SPEAKER_06 40:02

Um, I'd say anywhere from like 30 to 50.

SPEAKER_04 40:07

So 30 to 50 is split up between that 70%, depending on how much they yeah, depends on how much the raises, yeah.

SPEAKER_06 40:14

Yeah, whatever.

Scaling Benefits And On‑Site Operations

SPEAKER_01 40:15

So that 30% could potentially be the same as that 70% for the GPs, then I'm sorry. In a scenario where let's say there's three GPs and they're up on$100,000 each for the deal, and you got to raise a million. Yep. GP's put in 30%, the other 70% is coming from seven other people,$100,000 each. Once that's seven 70% split, if you guys profit a million, seven hundred thousand goes to those seven people, each is getting a hundred thousand, but you guys are also getting a hundred thousand too. So sure. So that could be the same in the same sense, the same amount.

SPEAKER_00 40:47

Right, but the GP's also getting a fee, right? A management fee, too.

SPEAKER_06 40:50

Yeah, yeah. So usually on the properties, you're gonna have a a property management fee. You guys are obviously familiar with that, uh, an asset management fee, right? So to manage the assets, some and and up front, there's usually an acquisition fee. The acquisition fee is for uh the time and energy and all the if the the costs for us to go ahead and and get the property because it it costs a lot of money, right, to buy a$10 million property, right? It's not just going in and say, hey, I'm gonna you know, write a check and go ahead and buy a$10 million property. You have to hire lawyers, um, there's bank lawyers, there's you know, there's brokers. You have to pay. I mean, there's a lot of people we got to pay.

SPEAKER_00 41:24

We had to do that to buy these stupid offices here. It was the hardest transaction I've ever done for$350,000. Like it was because it's commercial technically. Yep, it was the hardest tra it was probably the hardest refinance that I've ever done is these two little offices that we own. So I yeah, the lawyers had to write the contract and they gotta make sure they agree together or they talk about it. It wasn't just like a real estate regular contract that you know one of our transaction coordinators could do, or it's was lawyer to lawyer. It was like, yeah, it was a pain.

SPEAKER_06 41:55

Yeah, I mean, so so we hire uh we hire our lawyers uh before we even put an offer in, right? So our lawyers will review, um well, we'll do what's called LOI, right? So you put a little letter of intent in, right? Say, hey, I'm gonna buy your property for$10 million. You know, here's our background, here's our here's our our collective team's experience and so forth. This is why we can close the deal. So you wanna, you know, brokers want to make sure that they present the best offer to their their seller. Um, so we'll put an LOI in, right? And and then after that LOI is accepted, um, then we'll negotiate what's called a PSA, a purchase and sale agreement. That PSA is important, right, to make sure you hammer out all those details. And that's where the lawyers kind of go back and forth as well, too, because you can you can uh live and die right by a PSA, right? If you negotiate it correctly and you put the right terms in for the contract and what the seller is responsible for, um, and what you, the buyer, are responsible for, it's it's uh it makes the deal.

SPEAKER_04 42:54

And what's a yeah, what's a PSA for a purchase and sale agreement?

SPEAKER_06 42:57

Gotcha.

SPEAKER_04 42:58

Yeah, and and so I'm kind of learning this too because Sean's actually doing a transaction, uh, one of the agents on my team for a commercial property for one of his clients on a bed and breakfast. And uh he just put a LOI in and he was like, I thought we, you know, wrote the contract and then we negotiated, and he was like, Commercial is so different, man.

SPEAKER_06 43:16

You negotiate, then you write the contract, and then you might negotiate a little bit more. Yeah, and it's one of those things like after you put an LOI in and then you do your due diligence, right? And then the PSA comes in. Um, you know, you could go back and say, Hey, you know, you didn't tell us that the plumbing was, you know, you know, broken in these four or five different areas from from the street in, right, which is responsible from the property, right? So you got to fix the plumbing before we buy this property. Um, you know, if they don't disclose certain things, right? So, but you know, it's what's a fine line, right? Going back and retrading, right? Like you don't want to put offering for 10 million and come back, you know, when nothing's wrong with the property and be like, yeah, now we're gonna now we're gonna put in for now we're gonna buy for nine million. We don't want to buy for that, or you got to fix this or fix that, right? You have to kind of do your Due diligence almost before the LOI and then really thoroughly well after you have uh the PSA or the LOI signed, right, or accepted.

SPEAKER_00 44:08

Can we talk about um the self-directed IRAs? Because my parents are finally, after me being doing this for 10 years, are ready to invest. Nice, awesome. And they have a retirement account. Sure. They were both, you know, my dad was a uh W-2 earner and has a pension and then a separate retirement account, and they want to move one of those retirement accounts over to based on my accountant's advice, move it over to a self-directed IRA. Sure. And there's only very few companies in the country that do these things, like the actual self-directed IRA. Yeah, a real self, because then they there's two, there's a an SRD, so there's two different types of IR directed IRAs. Yeah. I'm learning that. And um there's only the one you can only invest into one thing annually, the other thing is like the Wild West.

SPEAKER_06 45:01

Yeah, I guess it depends on on the company you're setting it up with, right? Um what company do you use? So we I use a company called Equity Trust.

SPEAKER_00 45:08

Yep.

SPEAKER_06 45:08

Yep. So they're they are the largest in the industry, I would say.

SPEAKER_00 45:11

That's who Kyle uses, that's who owns technically Dorsey or owned Dorsey is Equity Trust, and we had to go through that whole process with his self-directed IRA.

Building A GP Team And Value‑Add Plan

SPEAKER_06 45:20

I I so yeah, so I've got a uh um actually, in fact, I I'm on my website, we'll share the link with you guys too. I actually did a podcast uh with uh uh my my partner at uh Equity Trust about self-directed IRAs. Um, and people can even contact him directly and go set up theirs. I don't get paid for it. It's just I just love the fact that um it gives my investors an opportunity to go, you know, do something that I've done, right? I did this back in 2017, I set up my self-directed IRA, and that's when I started private lending out of it, right? So I would say I'd send, you know, I actually had an investor who I repeat would send, you know, 30 or 40 grand every time he wanted to buy a new property up in upstate New York. Um, and he would pay me uh 12% plus three points, right? So I basically treat it kind of like a hard money deal.

SPEAKER_05 46:03

Yeah.

SPEAKER_06 46:04

Um and and sometimes they said, hey, well, can you do it for 10 instead of 12 and so forth? And so yeah, we negotiated here and there, right? But you know, we underwrote the property, you know, you you send the um the title company and does the uh promissory note and the deed or the mortgage, right? And you have them do it so you're in first lien position, you know, all that kind of stuff, right? But going back to your parents, right? So self-directed IRAs, um, there are the two of the main ones are your traditional and Roth IRAs, right? Um, and then you have a checkbook IRA, right? Or a checkbook LLC IRA, which is basically you have an LC that owns IRA and you have checkbook control. So if you're going, if you're um, you know, buying a rental property and you want to write um, you know, and you got to do and you're doing the rehab, you can't be managed, so you wouldn't be able to do it because you can't be managing it if it was your own. You can do it for your parents, right? Right. But you can't be doing the work in the in the property itself, like you have to hire an actual contractor, but you can write a check, say that person needs five grand to pay their plumbers or whatever it is. You can write a check out of the IRA and give it to them, and then that's that's how you can use that as for a checkbook.

SPEAKER_00 47:07

So now the big question, the question is, and the I guess the solution for this is because what for my parents' sake, they have let's just call it a quarter million dollars that they want that they have in this one account. It's a 457 or four, whatever one of those four not a 401k, but something very similar.

SPEAKER_06 47:23

So four or three beers or that one.

SPEAKER_00 47:25

Yes, exactly. They if they just liquidated it and gave me that money, they would have a tax event. Sure. And they've been saving this up for the last 30 years into this account. Um with the self-directed IRA, they can move that two, let's just call it 250,000 over to a self-directed IRA with no tax event.

SPEAKER_06 47:46

Correct, yeah. Yeah, so so all they're doing, and again, there might be specific parameters around this 403B versus if someone had it uh already had a traditional IRA. So I'm gonna speak on a traditional IRA side because I don't know that specifics. I'd have to talk to my guy Paul at Equity Trust because he knows that information, right? I'll have to link me with him. Yep, I will. Um, and so if you have a if you have uh say you had a 401k you contributed to for your you know careers, right, or multiple 401ks, and eventually you you left that job and you brought him into an IRA. You have a traditional IRA because it was pre-tax money in a traditional IRA, and that custodian is a Schwab or Fidelity or Morgan Stanley or whoever whoever might own it, right? You can only invest into the 10 mutual funds that they choose, right? You can't invest into anything alternative, gold, you can't invest into crypto or real estate, all that kind of stuff. So, yes, you create an account with a custodian, right? The custodian, I'm gonna say Equid Trust, there's a horizons out there, there's there's like seven or eight big ones out there, right? So you open up a traditional or whatever like for like for like uh traditional IRA account with um that custodian, the self-directed custodian. You tell your current custodian, liquidate my account and transfer or mail or check or wire the money over to this other custodian, and here's all the information. So that gives um them like you don't get the money and send it to them, it goes right from custodian to custodians, right? So it's a non-taxable event. You're just basically transferring it from one account to another, right? You're not you're not you're not you know withdrawing it, you're not taking distributions out of it, you're just transferring it to another custodian. Once it lands in that custodian's lap or in their their bank account, it's in your account, so you can see it. You have to do what's called a direction of investment. So let's just say your parents um wanted to invest into a syndication, right? Or something like that. Um now the tricky part is they wouldn't be able to invest directly with you, right? Because you can't invest with your uh parents, your your children, or even like your spouse. But like your cousin, I think you can invest with your cousin, your third cousin, and your sister's boyfriend's husband, or whatever it is, you can invest with that person, right? But you can't invest with direct um, you know, uh descendants. Well, does that mean that he couldn't borrow the money? Correct. Okay. Um so you'd have to figure that out and talk to Paul. He can help you kind of figure out how to navigate that, right? But let's say your parents want to take that money.

SPEAKER_00 50:09

Well, they could be a partner with me or something using that money.

SPEAKER_06 50:12

Yeah, yeah. They could be the partner. Yeah, yeah. They could be an equity partner.

SPEAKER_00 50:15

I think that's the because we did talk to somebody not from equity trust from another company, and that's kind of the route that they said like they would just become a partner, not a lender.

SPEAKER_06 50:22

Yeah, because they if it as a they can't lend the money to you, but they can invest into a deal that they are also part owners in, or their IRA would be an owner in. So on the that was my backup plan for this Benfield deal.

SPEAKER_00 50:34

And we could talk about that too. Yeah. Um, was to partner with them and use that money because it's literally the exact money that we need for the down payment. And they would be able to do that.

SPEAKER_06 50:42

Actually, it might not be a bad idea, to be honest with you.

SPEAKER_01 50:43

And does it does it cost money to lend out of your IRA?

SPEAKER_06 50:47

Yeah, it uh there are fees, right? So there are account setup fees, right? Maybe a couple hundred bucks.

SPEAKER_00 50:53

It was six hundred bucks for the people that we talked to. Yeah.

Investor Returns, Prefs, And K‑1s

SPEAKER_06 50:56

Do you have to pay like an interest on the money that you're lending? No, no, no. You don't pay any interest. All it is all they do is charge a fee to set it up and then a fee for uh an annual fee, right? Or maybe it might even be like a trend, there might even be a transactional fee, like um, if you need to wire the money by tomorrow, right? Then there might charge you a$75 fee for that or something like that. Now, if um there are some, so you got to look at the fee structures for like a few of them to kind of get what it is. Some of them charge you like two grand just to open up an account, and others don't charge you anything to open up account, but to invest in a deal, they'll charge you um you know$500 or$600 or whatever it is. And then there's also a percentage of how much is is in the account that they charge you on an annual basis. So$250 might be, I don't know, maybe it's a half a point or something like that they charge you. Yeah. Um, so uh or is it gonna go with that? Yeah, so I I think it is uh it's I I love the fact that we can do this, right? Because it gives you such flexibility to invest into real estate deals, it gives you invest you can invest into crypto through these uh accounts, you can invest in gold or silver. Um, you can invest in stock market if you want to, but why would you do that if you're already investing elsewhere? Right. Um, and then you can invest in private equity, right? So you can lend money to people right as a private lender, or you can send it, hey, I I have this private equity deal um that I want to put in that that in 10 years could be a 10x or 15x return, right? Obviously, it's a risk of private equity deal, right? But look at Peter Thiel, right? The guy who uh had PayPal, right? He went, I think he did all of his all of his investments or his he started it with his uh IRA, and now his IRA is worth like five billion dollars or something.

SPEAKER_00 52:30

Yeah, I was just talking to my Merrill advisor today about uh putting some money into some PE stuff like with OpenAI and all these companies that are probably gonna be.

SPEAKER_06 52:38

You got a guy who has got tons of good venture deals and he's he's really good if you're able to introduce you to him.

SPEAKER_00 52:43

So I I do want to talk about the these Benfield houses because it's funny enough, the podcast that we talked about. I don't know if you were even on this yet when we had Brooke Kane in my basement. Oh yeah, yeah, I was so oh yeah, because we bought the house together. So we had Brooke Kane on the podcast. Yeah. I think that was the second time on the podcast. I love Brooke. Brooke's awesome. Yeah, great guy. Um but at the time, Chase and I had the opportunity and Tyler to buy the first two Benfield deals, that duplex. And Nick weighed in. We asked the the listeners to weigh in. We bought the place for$550. Let's just say we put$100K into it with between you know renovations and stuff like that. It appraised at$1.15 or one almost$1.2 million. We asked, what would you do? Would you sell it or would you keep it?

SPEAKER_03 53:32

Yeah.

SPEAKER_00 53:32

The cash flow is not great. Yeah, it's not a cash flow deal, but we had$400,000 in equity. And Nick said sell it. Everybody said sell it. And then refi it. We refined it and we kept it. And it doesn't cash flow well, but I'll say we had a we had uh we had to keep the tenants at their rate for uh I don't know, six months, let's just say it was like$1,800. So we were actually losing thousands of dollars a month for a couple months, and then we basically doubled the rent when they left, and they left the place. This is why I love these class A assets. We didn't have to do a single thing to the house after they left because we we had renovated it while they were there. Oh, excellent. We did a full renovation, not a full renovation, but a cosmetic renovation while they were living there. Sure. They went away for two weeks, and I had people there working like basically around the clock to get it done. And um, we gave them, I think we gave them a month free. We gave them a month free for us to be able to come in and do the the renovations. Like we're gonna give you a new kitchen, we're gonna give you a new bath, give you a month free. You can go somewhere else, you can go on vacation, whatever, but we're gonna be working here, and they were cool. They, you know, everything was good. They we doubled the rent and not doubled, but almost doubled the rent. And the house was when they moved out, literally, they they had steam cleaned the carpets. Yeah, like it was perfect. We didn't have to do any touch up paint, we didn't have to do any, there was no capex involved. So that's what made me love start loving that class A asset. Yeah. Now the guy who sold us those deals bought the two next to next to it for the listeners. We now I now have the contract to purchase those other two. And again, we're gonna buy it, we're gonna and those two already were fully renovated, appraised at 1.2 million, and he wants 1.05 for the property. So we're gonna purchase that property, we're gonna put 250,000 down, just as a regular DSCR, 25% down, and the play is that we're gonna try to subdivide the middle lot and build something new. But from a from an asset, from a cash flow perspective, the deal is not a home run at all. But from a future perspective, it could be a very profitable piece of real estate in a class A community that in Saverna Park, there are just no rentals, like nobody has rentals.

SPEAKER_06 56:01

It's very hard to find them. Yeah, it is. Um, and night and good ones. Like so uh you like I had some friends that were renting in our neighborhood and and their place wasn't nice. Like it was like they uh they're like, well, that this has just been a rental for 20 years, right? And there are a few nice ones, like uh in fact, I don't know, my neighborhood, and actually Saverna Park in general has a lot of military folks, right? Folks who work at For Mead and um or even people come in from you know different transfers military. So like that's where we drag Chase from. Oh yeah, there you go. Nice. Um actually we talked about that, yeah. So my um like two of my neighbors, one's one's a Canadian military, right, who's here for a couple of years renting up a spot right next to me. Um, and the other one just moved in from, I think they were in Hawaii, right? So they um they're able to get you know great spots here and and so forth. But the beauty about having that kind of rental here is that you know the the market is so hot for a rental in Savannah Park, right? People just want to be in Saverna Park and have the school district for their kids and so forth. So um, you know, you're not gonna have an issue renting that out, right? Ever. Right. So and the tenants you're gonna get are gonna be nice.

SPEAKER_00 57:01

And they're typically this is the other problem with a lot of the other asset classes that I've started investing in, is they turn over the the class C, D, whatever you want to call them, they turn over every year, two years if you're lucky. Yeah, the life cycle of these class A assets is especially here, most of them are families with kids. They want to have those kids be in that school district for long term. Like the other two Benfields that we're about to buy, the one is on a four-year lease. Yeah, that's awesome. That's like we know for four years we're not gonna have a ten thousand dollar turnover event. Whereas my house is in two one two one eight. It uh I'm I'll be lucky if I get two years. Yeah. So that's you know, but again, we have to put 250,000 down. That's why I called you. Originally, we were gonna use some private money from you. Yep. Turns out we just refinanced some stuff and we got the money together, but we are looking for a third partner, so that we we we're gonna continue that conversation.

SPEAKER_06 57:59

Continue the conversation, figure that out for sure. Yeah, it's awesome. But I love I so so I love all the like the stuff you guys are doing, also with the home builds, right? The custom home builds. So, so that that I think is is such a cool market to be able to find. Um, because again, yeah, it's not like it's a a quick flip or anything like that, right? But it's uh it's you're you're building value in a community um that you know, you're either taking down an older house, right, or you're taking a lot that could have been a dangerous lot or whatever it might be, uh, and you're not dangerous as in like kids playing in it and getting hurt or whatever. Um, to now you're building, you know, beautiful homes for you know residents, like new homes. So I think that's an awesome play too.

Portals, Accreditation, And Fees

SPEAKER_00 58:35

Yeah, I mean, we have uh we live in an area that's very dense. So when you find land and you could build a single house, what I we talked about this the other day, and Chase and I, we've always talked about the the reason that we're sticking with these single, double, you know, up to four lot basically um builds is because we are in this kind of lane that not a lot of people are in. The the flipper that will hire a contractor and flip a cosmetic house or whatever cannot do what we do on this side, they they just don't operate that way. But then on the contrary, Ryan Holmes and DR Horton also don't want to get involved in that because it's yeah, they want the 250 lots or whatever. They want a big track that they can build on. Um, but there is long-term holdings for that. So, like right now, I I didn't even tell Chase this, but we got our first comments back on a lot, Azalea that we bought. Is that in Glen Burney? Yeah. So we bought a lot in Glen Burney and we did our initial build um to get our building permits and found that the the county has a sewer line that's encroaching on our lot. Oh wow. So they're trying to make us do this thing that's gonna cost time and money to move where we're gonna put our taps in. Yeah. So we basically went back to the county, the engineer went back to the county and was like, no, you're trespassing on our lot. You need to move this thing. So now we're fighting back and forth with them on that before we can get approval. So like we're a few months in now, like I don't know, three months in maybe two, three months in two months in. And we hopefully by the end, hopefully by mid-February, we'll have approval. Once the we got our we did comments, the first set of comments, we've passed those, and now we're working through this one. But once we start that, then it's another six months to build it. Yep. So you gotta be and the bank for all you listeners out there, if you're trying to get into development, the bank does not like land. Yeah, they do not want to lend on land. We had to pay cash for that, full full cash. There's no lender on it. And if there was a if you could get a hard money lender, then the deal doesn't make sense because then you're just paying way too much interest. So for anybody that's listening, that's trying to get into that, make sure you have the timeline and the capital to do those kind of deals because they are profitable. The one in Annapolis right now that we have groundworks plumbing, we have a big foundation in. We have foundation in, groundworks are there, yeah. So all the PVCs on you know, with gravel, and then it's snowed. Six inches of ice on top of ice. They did just snow ice dumped. So now we have six inches of ice on top of our groundworks. We cannot get the next inspection until the plumbing inspector can see the groundworks.

SPEAKER_02 1:01:15

Oh wow, yeah.

SPEAKER_00 1:01:16

So this is what my plan was. I talked, I think I told you this this morning. I was going to have my guys go put a tarp over the foundation, so there'll be an eight-foot hole with a tarp over it, and then big kerosene heaters to melt the ice. Just to melt the ice, yeah. So that the it was either that or we send people in there with pickaxes and removing it. But but now, since the foundation's in, we do have a lender lending. Okay. Luckily, only on the um construction. So I think we've only drawn like 80,000 on the draw. So we're only paying, you know, nine percent, nine and a half percent on eighty thousand right now, which isn't crazy, but we're stuck. I can't do anything until the ice melts, or we go melt it ourselves so we can see the plumbing, yeah, so we can get to the next phase, and then we can go vertical. And once we can go vertical, then the bank will give us our next draw. Yeah, but we're just floating. I had to pay the foundation guy, we had to pay the backfill guy, we had to pay the utilities guy. All of that came out of pocket. So we're floating like hundred plus thousand dollars. Yeah, plus the purchase, you know. Yeah, yeah.

SPEAKER_06 1:02:22

It's not for the pain of heart, right? So you got to make sure that you know what you're doing, right? And and you can't, but those are certain things that like you can't underwrite, or you can't underwrite a snowstorm coming and hitting this area uh that was a generational storm, right? That dumped uh an inch of ice on top of five eight inches of snow and and it hasn't got above freezing the past week, right? Which is not going to, right? So I haven't got above 20 in the past week.

SPEAKER_00 1:02:44

I literally am gonna think I'm gonna like build a tent, yeah, like a TP and put a heater in there. And like Mike, we were I was with Mike Griffith, one uh a politician that uh we work closely with, and he's like, just light a fire in there. I'm like, I'm like, it's a PVC. Can you say that again? I'm like, well, I could I could pay to replace the PVC, but this is downtown city of Annapolis. So it's not even Anorondo County, it's a whole different jurisdiction, which has a whole nother set of rules. Um, so I'm like, yeah, I'm not gonna go set a bonfire in there, but I think kerosene heaters and a tarp could maybe could work. So so that's our next step if this thing doesn't actually melt next week, because we're just waiting. We're just waiting with a big hole in the ground and an ice skating rink on top.

Commercial Contracts, LOIs, And PSAs

SPEAKER_06 1:03:32

Well, I I think you know, you bring up a good point as far as like using this, that kind of uh development for you know earning different incomes, right? So for example, um, you know, earning passive income, right? A lot of high net worth individuals or high earners want to find different ways to do that and how can they how can they get into different passive income streams? Um, you know, that's why we do uh you know the syndications, the rentals, the private credit funds, so forth. But another asset class is building homes, right? And partnering with somebody like yourself, um, you know, that can that can manage all of that and knows how to do the construction, knows all the people for the permits. Like you can't just jump off a street and be like, all right, I'm gonna go buy a lot and build a house, right? Because you don't know the contacts, you don't know how to do that. So um, like we we did the same thing. Like part of our strategy was to do that. So when we went down and we partnered with a builder in in Houston, right? Um, who's actually we're partners with on that class A deal in Houston as well, too. Um, and they are a couple that builds, you know, three or four houses a year, right? And so we partnered with them, um, built two eight hundred and fifty thousand dollar spec homes and uh custom homes in in in Houston, and it was a good return, right? Um, and so I think you know, having that as an alternative um income stream for somebody is is huge, right? So uh and that's what I think just kind of get back to like one of the one of the biggest things that I do um is I I love I look for opportunities, right, to diversify my own portfolio and then help people who don't know how to find those opportunities do that as well too, right? Um starting with their W-2 job, like I'm a you mentioned from the beginning onset, like I yes, I'm a W-2 employee for for a company. Um, and I'm an advocate for people to stay in your W-2 job and build passive income on the side, right? You there's a lot of gurus out there who say, like, you gotta, you know, if you want to you gotta dive right in, you gotta leave your your your day job, right? Or or so forth to to do this. And um, and I'm the opposite. I'm like, use what you're you know, use that, you know, until until you get to a position where hey, okay, it makes sense, maybe like you guys, it makes sense to leave the day job and just do well, obviously you went from a day job to an active income job to do passive income, right?

SPEAKER_00 1:05:38

But um Yeah, I didn't go for I didn't I never actually went without a job because I was working then for my own company that is not a passive company whatsoever.

SPEAKER_06 1:05:47

Yeah, you're still putting in 40 hours a week or more, right? Way more. Way more, probably way more in in your job uh or in your your current job, but for you went from in uh you know W-2 to your own business owner, right? Which is which is awesome, right? A lot of people don't have that or can't do that, right? So in order to you know continue to grow your portfolio and diversify uh in your in your passive income you need that income from your W-2, right? And so having uh having a model or having a kind of a playbook right is important for a lot of people because they just don't know where to start or where to begin. And so I actually wrote an ebook about that, right? How to how to earn passive income as a W-2 employee. I'll pass the link to you guys too you can put it on our website. But it it goes through kind of like my story of what I did and how I did it um and and being able to also invest into stock markets and and um you know uh stuff that is you know the 401ks and so forth and and putting putting your your your money there and then also using that right uh to also invest in other things if you want to do different arbitrage ways.

Self‑Directed IRAs And Rules

SPEAKER_00 1:06:53

There's a lot of different things we can talk about but so what's your opinion on when is the right time and and I you don't I don't have to get into specific numbers. I will just be transparent when I was teaching full time I was making like$58,000 a year and then I took three years to to retire quit whatever you want to call it I went part-time I went four days a week and then I went three days a week and then during COVID I was like that's it I'm I'm done I was making like thirty something thousand dollars a year as a three-day week employee and I was scared to leave and my parents were scared for me to leave the job and that month I made I think the month that I decided to quit it was July I forget the year I made$160,000. Sure yeah and my mom when I told her I was not I called school and told them that I'm not coming back she's like you're gonna lose everything what are you doing? This is what you went to college for like you're gonna I'm like mom I just made more in one month than I've made in the last four years teaching sure yeah I cannot go back to school yeah that is that is my point that is my breaking point Tyler and I said we can survive off of this much money this is what we need to make we can do that. Yeah what is your do you have is there do you think there's a number or is it like a situational basis? Like what would be your suggestion to somebody that's trying to leave their W-2 job.

SPEAKER_06 1:08:13

Sure yeah if that if somebody's trying to like they are they they they hate their job right and they want to leave they want to get out there then I I think it's based on what you know what can you survive on a monthly basis right because there there has to be a certain number in in someone's head now it's not like hey I have to have and Chase can talk about this too because he did that same thing. So let's bounce we can bounce the people like oh I have to have you know 20 grand a month in order to to quit my job you know but you're you're only making 75000 in your day job so that's actually a lot that's a lot more right so um but yeah I would say it each person is different.

SPEAKER_00 1:08:46

I think we talked about earlier is your investor DNA right what is your investor DNA and how that how are you going to get to making a certain amount of passive income per month but also that person needs to probably live very frugal right you have to be frugal on your on your um on your expenses right you don't have to have the big flashy car of course you you made 1610 one month did you go out and buy a brand new Mercedes Benz no I didn't start spending money like those first a couple of years where I quit we were very like I had a paid off Tacoma yeah I did not have any other expenses I didn't have a boat I didn't have anything I did I just lived based on what I knew that the company could afford to pay me.

SPEAKER_06 1:09:24

Yeah exactly yeah so so you you you have to have you have to have the right mindset in order to do that right and and everybody's gonna have a different number but I think if you are gotten got to a point where either you're one for one right in your passive income or or or your side hustle whatever it is um to your day job then sure that could be that could be a number people want to say hey if I can make 75 grand a year um you know in my side hustle then why do I need this day job but then again and if you look at it like all right if you're making 75 grand while you have the full time job and you're making 1500 you know why would you leave your day job then right if it's truly passive right like so that's that's that's the if it's active it's a different story.

SPEAKER_04 1:10:04

Yeah and and on a lot of investments especially in the the residential side become active because like Nick for example 100 units now you're actively managing them that's a lot but Nick has steel balls of steel like he has yes more than his risk tolerance we'll talk about Nick next his risk tolerance is through the roof and I'm sure he's got processes above beyond processes down like Pat right well now you man he's a property manager for his own yeah so you got processes and people doing doing that right so yeah which is important yeah and that I mean that comes back to like not everything's passive but like a syndication could be passive or stocks passive right like those type of things and I agree a hundred percent W-2 I always told like people that are like yo chase how did you become a realtor like what's that lifestyle like dude keep your job first become a realtor sell on the side until you have that active income if that's your transition. Now you're just talking about a job change though right like I was already I was already working 40 hours a week as a realtor and then 40 hours a week as my W-2 in the military as well. Yep probably more as a realtor than I was doing my military job. But um so it it was kind of like I for me right like 60K was was my lifestyle that a year. That's what I had to live on because that's what the military paid me. Yep yeah and so if I didn't if I didn't make that I had to I was gonna have to go find another job like whatever that was um so I had saved up just from being a realtor my side hustle 60k. So I'm looking at my wife and I'm like all right well we have 60k we have one year to figure this the fuck out sure at the end of the day so it was like either we're gonna figure this out or you know I'm gonna go get a contracting job and do cybersecurity and you had a you had a you had a fallback plan which is which is perfect.

SPEAKER_06 1:11:42

Right I had a lot of people should or should not have that or may or may not have that when they leave a job but right if you if you once you make that that that jump like you guys I don't know that that that feeling yet you guys do. So when you make that jump um did you work harder right or did you did you say all right cool I made that jump all right now I'm gonna sit back relax and go on vacation.

SPEAKER_04 1:12:04

I had a I had a a top producing agent talk to uh he was also in the military and he told me he was like dude you it it'll hit you like a freight train but as soon as you're it's your last day yeah the next month and a half you are gonna work more than you've ever worked in your life totally and it's just because like in the military you're just used to that that paycheck you know every 15th and 30th boom boom boom and it's just consistent and you it's reliable and then you get out and then the next month you're like oh shit no paycheck this time so yeah I mean I I think you just like your back's against the wall it's like toxic clocks fight or flight right and then another example Nick you've never had a W2 job right no I I have I mean I've worked at like Costco like seasonal back in the day and I used to be a dishwasher and a cook at a restaurant when I was like 13 to like 15.

SPEAKER_00 1:12:55

So but in your adult life?

SPEAKER_01 1:12:57

No you never had a W2 though actually no I I worked at the port but that was when I was like I think 18 or 19 working for like a year.

SPEAKER_00 1:13:06

Yeah so so you just side hustled you just had the hustle and did the landscaping thing and then built the portfolio without without having so there's all these different ways to skin the cat for the listeners out there like we have Nick who's really never had a true full-time job for working for somebody else and then Chase and I quit our full-time jobs you keep your full-time job and invest in real estate way more than Chase and I invest in real estate like the as far as numbers go you know obviously the the syndications and stuff are are massive so there's so many different ways for the just like because part of this podcast is to educate people and help people. And um I I don't want to give out we're not giving financial advice we're not certified financial planners and we've had a lot of those people on these podcasts and they all are boring and it's not not as fun. But there are there are situational like the everything is situational.

SPEAKER_04 1:14:01

If you are happy with your job keep your job yes if you hate your job and you like your side hustle figure out a way to safely quit the job and go full time or find a new job what you're doing go into side hustle you're finding a new job right so yeah also there's a ton of W-2 jobs that I mean contracting you know this in the contracting world the the the government world alone there's a lot of brain dead jobs that pay you a lot of money 150 to 160 and you may work like 20 hours a week I mean you're there 40 yeah but you're really working and focusing on that job for 20 when you can work another 20 hours on your sidehouse you know and I think you know what a lot of uh a lot of the people I talk to who are kind of not sure what to do or how to how to start their journey in the passive income are you know technology people right people who are in in either they're they're in that technology space from like an engineering perspective or a sales perspective.

Partnering, Fees, And Use Cases

SPEAKER_06 1:14:53

And it doesn't matter federal government or not it doesn't matter but um you know they've they've they've created a great uh career right in in the technology space and they're like hey how how do I how do I take what I've done right and what I've earned so far and start start creating that passive income stream right um and that's one of the things I do a lot and like you if people follow me on LinkedIn is where I'm most active on that and and I'm very much to the T telling people like hey this is or or you know not telling people but you know explaining to people like this is how I did it and this is what you can do too. So you know a lot of technology folks make a lot of money and they also change jobs often right and so when they change jobs often what do they do they leave a 401k that turns to an IRA so what do you do? You take that IRA and you put in a self drive a self-directed IRA and you begin your passive income stream there. There's also the backdoor uh Roth IRA conversion because if you make too much money you can't can can uh yeah because you only can invest seven grand a year into a Roth well you can't even put in money to Roth at all right so you have to put it into a uh into a traditional that's six six or seven grand a month or a year into a traditional and then you transfer to Roth and you pay taxes on that right but if you can offset those taxes passively then there you go the strategy for you.

SPEAKER_04 1:16:04

Speaking of engineers I had a couple buddies that were engineers and they were working two active jobs with you know Google or Home Depot at the same time doing like cybersecurity and really like interchange between meetings and they were making like 250 at each job. So they're making$5000 working for two companies 40 hours a week absolutely insane. That's a lot of work yeah yeah yeah but and I and I don't want to offend anybody by saying brain dead it's not that the jobs are brain dead they're just they don't require a lot of mental focus if you are really good at your job.

SPEAKER_00 1:16:36

Yeah especially I feel like now with engineers with AI I mean that had to make a lot of people's jobs a lot easier. I know nothing about it. I can't even get into our damn bank account that we have um so Chase has this freaking online bank that he signed at this podcast. We have you know we started a bank account it's like an online bank and I just texted him yesterday dude I can I can't pay this person can you can you do this?

SPEAKER_06 1:16:58

Like I don't even know how to use it any so we uh we established relationship with uh with a banker uh and I think that's the most one of the one of the key things to do especially if a business that like we open a bank account or two or three bank accounts per per asset that we or sometimes four bank accounts per asset. So how do my business and all that stuff I have I'm with sure united locally and well there you go so you can just call in be like hey can I any new bank account here's the operating agreement you know chase and I or whoever our our managers will sign up.

SPEAKER_00 1:17:24

I let Chase handle this one and he picks them because he's a freaking TikTok millennial or not a millennial what do you call you what is Gen Z Gen Z Gen Z Gen Z or the millennials and he's the Gen Z guy. So I I let him handle that and we ended up with some Fruitloop online bank whatever yeah yeah I've never heard of it.

SPEAKER_04 1:17:41

I have sure I I just I don't you know blue something or whatever one of those things it's all good.

SPEAKER_00 1:17:47

So one one of the things that a lot of people uh like I I'm I'm a big proponent of and I've used uh for my own investments is also the whole life insurance policies right how to how do you how to become your own banker or BYOB or infinite banking you guys ever heard of that concept before I actually just went through um the life insurance I I had life insurance and I I was a dumbass and didn't pay because you if you pay annually it's like three percent less than if you pay monthly so I paid annually for my term life insurance and then it lapsed so I had to go get the physical done and all that stuff again and my my insurance broker I had a a meeting I had my insurance broker and my CPA on the meeting and I said what like the minimum for the whole life policy was$15,000 a year and I would have to pay into it for I think 14 years or something and then you have it and I was like for two million dollars of life insurance. So my and and let we can go back and forth on this because my CPA then looked at the returns through State Farm that the whole life policy was getting sure versus what I'm getting at Merrill Lynch with my actively managed accounts over there. Sure yeah and he said to me that it didn't really make sense to go that route because of the returns and at Merrill Lynch I have CMA accounts that I can borrow against anyway. So what would be the benefit to doing a whole life policy versus a term because just to put in perspective a term for the same two million dollars was only like a thousand dollars a year.

Class A Rentals And The Benfield Deals

SPEAKER_06 1:19:18

Yeah yeah yeah but you never get that back. Yep you don't get it back and it falls off after you're 55 or 60 years. Okay so when you'll be what 65 or something 65. Yeah so uh what happens when you die at 66 right so well um the idea I guess and and you can sh straw man me on this but um the idea at when I'm 66 the assets that I currently own will be the life insurance policy so so there's that Dave Ramsey thing of buy term invest arrests right which is what exactly what you're talking about and then there's the concept of infinite banking or you know money money um uh uh in optimization of that money as well too right so I I like to make sure I um like again I I use this my myself right so I've got multiple insurance policies on myself whole life insurance policies right um and um I I want to make sure people understand this is that it's not for the investment like I would never call a life insurance policy an investment right it's protection right and that's an that's one of the pillars of I think it's a major pillar along with LLCs and trusts and so forth that you can do to protect yourself and your family against anything that happens right against the un unspeakable you pass away right you know at whatever age between now and 120 right your family is going to get that death benefit right um you know if uh if you get sued right for some reason you guys you know someone slips and falls on one of your properties or something like that and they sue you they cannot touch that money in your life insurance and your cash value your life insurance right so it's protected from from that as well too um and it grows right so it does grow it compounds every single year it was like four percent yeah so so usually when you look at a uh an illustration and again I'm not a life insurance broker I just love the I'm just a nerd about this kind of stuff right so um but I do have partners I'm partnered in a company called Money Insights that um that they are the brokers right and they're the ones who can kind of run through the illustrations and show people this is what you do and how you do it. Um but what it does is you've got a uh a guaranteed return right and so on average that guaranteed return is gonna be three percent right um and it depends on the company too it you have to look for a mutual company not an index life mutual company right and I I there's a difference between IULs and whole life insurance policy. I don't like the IULs that are that are indexed market based and so forth because it fluctuates and we looked at that too and then obviously if you and some some it also depends on how you construct the policy because if you par borrow against it then you're you don't get returns if it's structured correctly you will get returns um then there's a mutual company like the Mass Mutuals the Northwesterns uh or the um uh one life americas and lafayats and those guys right so the mutual companies pay a guaranteed return 3% not a lot of money but it's just kind of equivalent to like a um a high yield uh savings count yeah and then they have a dividend and they haven't missed a dividend in 160 years now think about that as if they paid dividends and return guaranteed return to their policyholders for over 160 years that's longer than than we can think of for a long for a lot of things in this country that have happened more than technology more than you know Ford cars you know all these kind of different things right um so you again you don't want to think of it as an investment you want to think of it as a protection for you and your family and against your and for your wealth right now what you what what I did right is I took uh I took a hundred grand and I I funded my policy up front so I overfunded it right and then I also have it structured where it's got a paid up addition and then also has a premium. So you've got the overfunding a paid up addition and a premium. So every year um I put in 4000 into my policy every single year right and I can immediately take and borrow against that policy right and it still grows compounds every single year. And I do the upfront payment once a year as well too so the BYOB the infinite banking side of the house right is borrow against that and then go buy your a car right for example. All right so you you borrow like 50,000 from your policy and you go to a car and you or go to a dealership and you buy that car for cash right but you treat it like the bank. So if you're gonna get a six percent or five percent interest rate from a bank on a monthly basis and you've got a five year term on that on that on that that car's loan and it's let's just round numbers let's say it's 500 bucks a month you pay yourself 500 bucks a month right and you put that into a specific bank account and in the year you pay your premium and you pay the interest on that and it's simple interest right but you can pay a you know principal down as much as you want and then you have a simple interest payment. So what you're effectively doing is you're paying into the insurance company and you're getting that return back in your policy. So even though you're paying a five percent interest rate which was what their interest rates are the policies that I have um I'm getting a six percent return on my money there. So I'm actually making money in that policy there. Now how you actually optimize those, that's buying a car, right? That's one thing like buying like expenses and like you don't want to pay credit cards off for that kind of stuff, right? You want to use it for an asset of some sort right but what's really valuable is when you use that insurance that cash value that insurance to optimize it right and you basically you take that five that five that 50 grand out and you pay a five percent on that annually right but you find an investment that pays 10% right so then your arbitrary charges right and you're taking then you're making 10% on that investment you're paying five percent but your insurance policy pays you six percent so really you're making 16% on that same dollar if you if you put it into that bank first. It all depends on where do you put it first going back to the the Morgan Stanley thing if you have your money in the bank account right and you're um and I do I do this too I have a I have a securities back loan as well too right so I I do that also that's that's also kind of another arbitrage method as well too is there anything you don't do no not really I'm just kidding. But if you take uh if you let's say you you have that fifty thousand dollars and you weren't gonna you don't have the loan from the from your Morgan Stanley let's say you take that 5000 and you invest it into a rental property first right or or to a into a passive income first right um that will make that 10% return and that's it right and then the money's out of the bank account so it's not earning any money there right so it's only earning money in that in that investment account just that one spot. But if you put it into a life insurance policy first, right, and you're making that guaranteed return plus a comp plus the compound effect of that policy every single year plus you're making the dividend when they pay you a dividend um you are effectively making money in two different sp places plus you have that guarantee of that death benefit in case something happens to you which I think is the most important thing. Again that's why I don't want to say I never tell people the life insurance policy is your investment. No it's your it's your method to how you become your own bank and how you drive more return on that same dollar right and a lot of people don't get that it's a very hard concept to understand. You got to like watch but I watched a shit ton of videos on it right I mean I watched I follow this guy you know on YouTube who had you know a hundred videos on it and I watched almost every single one of them just to kind of understand it. And then I also went and got a couple of different people to give me life insurance policy so I understood the quotes and so forth or understood the illustrations and how it worked. And I was skeptical at first but then I did it and I'm like oh okay that works. Oh I am getting a dividend this year I got like six and a quarter or something like that from my Mass Mutual for a dividend in my in my life insurance policy and now I have a and I also have a two million dollar death benefit.

SPEAKER_00 1:26:50

In case something happens to me I pass away right my family's protected right that that I will say I've learned this year and I don't know if if Nick has one I know Chase's a little young for this yet but you're never too young for it. You should get one 100% so I we'll we'll come back to it we'll come back to it actually when you are younger it is cheaper.

SPEAKER_06 1:27:09

Much cheaper it's much cheaper so especially if you're healthy non smoker younger right yeah uh we could talk about a funny story about that too.

SPEAKER_00 1:27:15

So um so I um learned about life insurance recently um and key man insurance or we'll call it key person insurance to be um politically correct. So that is very important for business partners that would not be able to operate the business effectively without the other. So like my business partner is operating a commercial construction company basically under our umbrella. He's building multiple big buildings that I have no idea how to do so if he died yeah I would need to hire somebody that would cost a lot of money to hire to figure out how to Fulfill the contracts that we are in. Like we're in two million dollars. Let's say we're in a two million dollar contract to build a building. Totally. Yeah. That we're we're redoing um penthouse, the strip hub in the city. Yeah, you're talking about that, yeah. It's all str metal structural beams and framing. I don't know anything about that. Like he knows all of that stuff. Without him, I would be it, it would be a huge failure. So that is key man or key person insurance. That is super important when you're operating a business that you know if that other partner died, they would have some you would have money to hire and get those get get at least through those contracts so you don't get sued by those people because that's what would end up happening. I would I would default on the contract.

SPEAKER_06 1:28:40

Yeah, and so I don't know, is that is that set up the same way as like a whole life insurance policy? No, it's term oh it's term okay gotcha. Because you can do it, actually it would probably make more sense to do a whole life insurance policy in that fact. Well, there's just a lot, yeah. Because you probably have to, if you're trying to get a death benefit of five million or ten million dollars, it would be it's a lot of money. Yeah, it's a lot of money.

SPEAKER_00 1:28:59

Because it would have to be for at least five million would be like the absolute minimum just based on the contracts that we have. We're about a$10 million company now. It's like if we didn't have that, it would, you know, that is a whole nother thing.

Infill Builds, Permits, And Bank Draws

SPEAKER_06 1:29:11

But also, just so you know, the the way they structure those policies too is that usually there's a term rider in there that allows the death benefit to be uh to be large enough to cover the cash that you're putting into it on an annual basis, too. So that's how they that's how you do it when you when you don't so you're probably the policy won't what's called mech, um, which would be like then it turns into like this is now an investment account. It's not an investment account, it's a life insurance policy, right?

SPEAKER_00 1:29:33

Yep. And then the other one is just like a term life insurance policy, which is important, especially like we're having kids, yeah, that my wife would not be able to live her lifestyle as a she works as a teacher, she could not live the lifestyle or or sustain what we have if I died.

SPEAKER_03 1:29:49

Yeah.

SPEAKER_00 1:29:49

So that is super important, and that's why now I have the policies in place to you know protect her and the kids. So it's really just to protect that next generation or your wife from or husband, whatever, from the uh hopefully, you know.

SPEAKER_06 1:30:06

So I think I think also you know, it's you can do both, right? You can have a term policy that you know is gonna be a bigger death benefit for yourself, it's a smaller payment that you know will last between now and when you potentially retire, right? Um, but you should also look into doing the whole life insurance policies now because they last for your lifetime, right? And that's the most important thing. So your kids are the ones who are gonna benefit from your death benefit, right? When you pass, um, and if that's structured correctly, and also if it's owned by a trust, right? So your your trust, right, owns the actual policy, even though it's you know your it's your policy, right? You can then also still borrow against that, right? And the trust then then borrows the money or lends you the money. Um, but if you structure the trust correctly, then the kids, right, don't just take that money and run, right? Or don't take the money and go to Vegas or buy a Lambo, right? They're now putting a death or putting a policy on themselves and their kids, all owned by the trust, right? It's called the Rockefeller method, right? So the Rockefellers did that, and now their generational wealth is insane for generations past when he initially started this thing, right? So um versus the Vanderbelts, like the whole story about the Vanderbilts, they lost everything second generation or third. They were more wealthy than Rockefellers back in the day, but they lost it after the first generation or second generation because they didn't have this structure in place, right?

SPEAKER_00 1:31:27

So and it's always the second generation that messes it up because they were the ones that were coddled and enabled because their parents had so much money.

SPEAKER_06 1:31:34

Yeah, so so again, it's not my kids aren't gonna mess it up, but their kids could probably do that, right? But if I teach my kids correctly of how to do this, and and it goes back to you know being young and putting it on it, like I think now is the best time to do it. Because if you even do a$10,000 a year policy, right, which is let's just say it's a$500 or you know,$750,000 death benefit or something like that, actually maybe less. I don't even know what the number would be. Let's say you do you put up$10,000 a year into your policy. Um, by the time you're 40 or 50 years old, you're gonna have a massive cash value that you can then pull against and use that for your investments, right?

SPEAKER_00 1:32:05

Um and it it's based on the this is the the funny story. I'm not gonna say the whole thing, but I'll give you a snippet. Like it goes on your health. They they do take blood, they take your and they take, you know, they come and do a physical. And my so there's like super elite, super preferred, whatever. The the highest one was they tried to give me the one down because technically my weight now I'm I'm like in very good shape. We do Iron Man's like sure, yeah, yeah. Luckily, I've posted a lot on Facebook about my training because I they tried to give me um the low the one step below the top, which would have costed me more money annually because technically, because of your BMI, my BMI, dude, is over I have a six pack.

SPEAKER_06 1:32:51

I'm like and you're and you're you're big, you know, so you've got muscle. So your BMI is more than fat.

SPEAKER_00 1:32:58

Yeah, so your BMI is higher, so they try to get me low. My insurance broker sent my Facebook and Instagram to the to the underwriter and was like, look at this guy. He literally posts every day about training for fucking triathlons and ironmans. Yeah. And they gave me super per they gave me the top one.

SPEAKER_06 1:33:14

Perfect, yeah. He was in he was in Cabo doing five miles a day on uh on vacation. I saw one couple years ago and then doing Instagram recently.

SPEAKER_00 1:33:20

It's so funny that like all the dumb posts that I make on social media actually came to like actually helped you out actually. So that's why you've been posting. I gotta keep my life insurance underwriters happy.

SPEAKER_06 1:33:32

Yeah. I I think that's awesome. Like I love the fact that you guys are doing uh Iron Man's, like more power to you. Like I I I think I um I tried at one point to like you know get myself to do a triathlon, I just never did. In fact, I bought a bike, you know, or I know my neighbor gave me a bike. This is like 20 years ago when I was living in Virginia, and I'm like, all right, I'm gonna fix this bike up and I'm gonna do it to a triathlon. I just never did. I think it's swimming always scared me, right? Um, and uh even though I'm a good swimmer, right? Just the distance of a swimming, I think, is what scared me.

SPEAKER_00 1:33:59

But I do, I mean, you know, it's always the swimming that keeps people from doing it, and then it's funny once you figure out swimming, it's the easiest part of the whole thing.

SPEAKER_06 1:34:07

So maybe I need to take to take that kind of advice and join you guys in your next triathlon.

SPEAKER_00 1:34:11

In fact, I gave you a few. You could come train with us every morning at LA Fitness. We're there. Yeah.

SPEAKER_06 1:34:14

Uh I train every morning. I go to I go to uh Apex Performance right right down the road here, right behind the bowling alley. Um and it's uh it's crossfit type workouts, but it's functional fitness, right? So it's it's uh you know, you got your gymnastics still, you got your heavyweights and your cardios and so forth, right? So um and but I've been doing that for I don't know eight, nine years or so right now.

SPEAKER_00 1:34:33

Um triathlon, I'll tell you this, it's addicting and it's fun and it's challenging, and mentally just like I it was the best thing that I ever got into for myself because I was always an athlete and I played ice hockey. That's a very hard thing to do as an adult because any adult league is gonna be at 10 o'clock at night. It's tough to totally field a team of 10 people. Um, so triathlon's an individual sport. You can train by yourself. We don't treat it as an individual sport, we train together. There's a nice big group of us that do it together, and um, it is so much fun. The mental challenge behind it, the physical challenge behind it, um, all that, like I can't recommend it enough. Chase.

SPEAKER_04 1:35:14

I mean, I mean I was literally about to say I would beg to differ, but um you know, I I'm more of a sports guy though. Like I like basketball, flag football. When I first moved here, I played flag football for three years, like competitively. Yeah. Um, I'm just that's in my DNA. I like that team sports, the the underdog feeling. Yeah, the Broncos. Um yeah, exactly. Um, but no, like the the Iron Man though, it it it is like I couldn't do this if it weren't like we had a good group just mentally by yourself. Like sure to even today, right? Like we're in the pool, and I'm just like, I'm so is it Friday? I am over this already, and then we had to run after. So the just the mental toughness brings me back to like the military and like all right, hey, this is what we have to do, we're gonna do it.

SPEAKER_06 1:35:58

No, I love it. You gotta stay dialed. That's what's nice about it.

Development Risks And Capital Timing

SPEAKER_00 1:36:00

Like, you have to stay dialed. We're about to race Puerto Rico in a couple in a couple six weeks from now. And like, if you don't stay dialed, you will fail out there and you will fall over, and like it will not be pretty. Sure. And that to me, like I always want to have some race that I'm signed up for to keep me pushing. Yeah, and going in that in that direction. Um, so I have a coach who's a professional, she was a professional Iron Man person. Like that, she was she's one. Basically, if you saw this lady, you'd think she was David Goggins. She's she's a beast. Um, but that keeps me like paying her my her monthly fee, she puts in the workouts into my app. I have a training peaks app that she puts all those workouts in. It keeps me structured because it's easy to just not go to it's it's easy to stop, like not go. It's easy to not train if you don't have something to train for. Or people to go or people to run.

SPEAKER_04 1:36:52

Like honestly, like I'm I'm swear to God, if it weren't for them and the way they bully me, we all bully each other purposely.

SPEAKER_00 1:37:00

It's a it's a it's a calculated bullying to make sure everybody's held accountable.

SPEAKER_06 1:37:04

Well, it's funny because over COVID, um, you know, I I was going to to the gym before COVID, right? Doing CrossFit before COVID. And after once COVID hit, we shut down for like six months. And and I was at a buddy's house, and he's like, Hey, go to my neighbor has this good gym, go hang out and work out with him. So we did that. I think I did it like twice. I'm like, this is just not the same feel, right? Working out in someone's garage or my basement or something like that. Like, I don't get the motivation, right? But so I'm I'm and I and also I'm always about making sure I start my day off with a workout, right? So I get up at 5 45, I go to the gym six to seven, I'm home before you know, kids got to go to school. Um, and it just it starts my day off strong, right? It makes me it makes me more motivated to do that and I'm awake first. If I slept in until 7 30, I'd wake up and I'm like groggy. In fact, this past couple days of the snowstorm, I was like itching to go back to the gym. I'm like, I need to go back to the gym. I can't, I can't, you know, I can't go run outside, right? Um, you know, I can't work out in my basement. I don't have I don't have anything in my basement to work out in. Um, and I miss the I miss the team. I miss the guys there again and the gals that are at the gym. Like those are like we've our 6 a.m. crew, like we're the 6 a.m. crew, like that's what people call us, right? Because there's like a five or six like you know, rotating that that are are always there, right? On one of the one of the five days. Um, and it's important to have that that motivation, but also that that camaraderie, too. I think that's important. So I love what you guys are doing too. That's awesome. We're trying to get Nick in there.

SPEAKER_01 1:38:24

Yeah, Nick, you should do it, man. I will. How about we do one with them together? I won't do a man, Iron Man. Fuck no.

SPEAKER_00 1:38:30

Okay, half Iron Man. Half Iron Man, which Iron Man is what? Tell me what it's it's it's we'll do Eagle Man. We're already signed up for it. I don't know if Chase is, but I'm but I will. We have we have a very large group of people doing Eagle Man. Um, and it's right in Cambridge, right at the Cambridge Hyatt. Okay. So you've been there, I'm sure. Um local, great race, easy course because it's all flat. Um don't worry about the distances, it doesn't matter because you'll just train for it. No, it's a what is it? It's a half iron man, it's a 1.2 mile swim. Okay. So that's about 35. Is it in the river or it's in the chop tank. Okay.

SPEAKER_02 1:39:03

Yeah.

SPEAKER_00 1:39:03

Um, it's about 35, 40 minutes to for a not good swimmer. Like I'm not a fast swimmer and we'll do about 40 minutes. Okay. And then it's a 56 mile bike, which is about three hours, and then a half marathon.

SPEAKER_03 1:39:17

Okay.

SPEAKER_00 1:39:18

My time at the last one was I think five nineteen, five hours and nineteen minutes or something like that. So it's not like crazy. The full Iron Man was a whole different that's a bog.

SPEAKER_06 1:39:27

That's a different, that's a different one that's a whole different bulk beast.

SPEAKER_00 1:39:29

But the half Iron Man is a very fun distance because it's we've done a lot of like Olympic distances and sprint distances, which is Olympic is basically half of a half Iron Man. Okay. So a quarter Iron Man. And then a sprint is half of that. Gotcha. So a sprint is like not enough. It's like an hour.

SPEAKER_06 1:39:44

Yeah, I mean, but but going from doing never doing that and then jumping into like a half Iron Man, or you know, is that like that?

SPEAKER_00 1:39:51

No, it's not fun. We have we have Chauncey who we have Chauncey um who uh is doing his first triathlon will be that. Yeah. Um my future brother-in-law Jim just signed up for that. That will be his first triathlon as well. Um, it's a triathlon. It's not a uh Iron Man is tri Iron Man is a triathlon. So the first Iron Man is going to be the half.

SPEAKER_01 1:40:10

Their first one is going to be the half one? Yep. Oh, okay. Yep. Interesting. When is this? When is it happening?

SPEAKER_00 1:40:14

It's June 6th or something like that. Okay. So you got you got plenty of time. Okay. Now you have to do that. You can come to the gym. You can come swim, come swim with us. Yeah. Um, we'll teach you how to swim. Honestly, once you figure out the swimming, you will not be scared of swimming at all. It is the easiest part of the whole race.

SPEAKER_06 1:40:28

Um, it's funny, is uh is so going back to college or going back to high school and so forth. My dad was a swim coach at high for high school, right? For growing up. So I know how to swim very well. Um from freestyle wise and so forth. I just the distance is what kind of gets me. And I, you know, I'm not really a long distance swimmer, but it always got me. But here's a funny story, right? Um, so well, two funny stories about that. So grow growing up, my dad's like, Jeff, please. I was I was an athlete. I played pretty much every sport except for tackle football. Uh I even did gymnastics, I did ice hockey, baseball, all that kind of stuff, right? And he's like, Jeff, please go out for the high school swim team. I'm like, all right, dad. And he's like, you it was like my junior year. I'm like, all right, fine, okay, I'll go do it. But you have to buy me a Mustang, right? And he was because the Mustangs were like the thing. I wanted to I wanted a five-speed GT or or uh or uh LS Mustang, right? And he's like, all right, fine. And then my mom got a wind of it and she said, Hell no, we're not buying you a Mustang. I'm like, okay, shit, I guess I didn't last swim in there. So I I can't I feel like a dick doing that, but I just I'd never I never swam like four schools or anything that kind of stuff. And it's funny is I married a collegiate swimmer, right? So my wife is a collegiate swimmer. You have no excuses.

SPEAKER_00 1:41:31

I had no idea how to swim. I literally, so my first race, I had swam in the pool, practiced. My first race was in the ocean.

SPEAKER_02 1:41:38

Yeah.

SPEAKER_00 1:41:38

And I literally thought I was gonna drown the entire time I was swimming. It was just a sprint, luckily, so it was only 750 meters, but I thought the whole entire time I was gonna drown because that was my first open water swim.

SPEAKER_06 1:41:48

Or against tide, though, as or the current.

SPEAKER_00 1:41:50

So it was actually it was choppy, so it was coming from the side, and it would happen to be coming from the side that I breathe on. So I'm breathing into the water these. So I was breathing into waves, and they were just smacking me in the face, and every time I came up to breathe, I would get smacked in the face of the waves. So that whole time I went out for a practice swim the day before. I got out of the water, I called my mom, I said, Mom, I might die tomorrow. Oh, jeez. And I got through it, and then I hired a coach and figured out swimming. And then once we figured out swimming, like right, there was a point where it clicked, right?

SPEAKER_04 1:42:18

For you too.

SPEAKER_03 1:42:19

Yeah.

Stay W‑2 Or Quit: How To Decide

SPEAKER_04 1:42:19

I no, I had no no practice, no business even being in the water, to be quite frank. And like I thought I could swim and I'd get in the pool and I'd do like two strokes, and I'd be like, Holy crap, I'm swallowing water. What is going on? Yeah. And then you get the flippers, and you, you know, there's a point that's flippers. No, not in the race. Not when you race when you're just practice. It's great. Yeah.

SPEAKER_00 1:42:38

There's there's there's toys they call swim toys that will help you to practice things, you know. Yeah, to help you practice the to getting the breathing down. Once you can get the breathing and the stroke down, yeah, it's so it's the easy, it's literally the easiest part of the entire race.

SPEAKER_04 1:42:52

Yeah, and then you get you have your safety swims, right?

SPEAKER_00 1:42:54

Like a brushstroke, and then you'll like and then you stop doing that. Like once you get to a certain point, like we don't do brushstroke anymore. Like, it's just speak for yourself.

SPEAKER_03 1:43:02

Yeah, it's true. Depends on how I'm feeling halfway through the swim. Every now and then I think there's a shark trying to attack me, so I'll do a little brushstroke with it.

SPEAKER_00 1:43:09

But it it is super fun. They have them all over the place, and um we're yeah, we're going to Puerto Rico in a couple weeks to do Puerto Rico half Iron Man, and we're doing Cambridge. Um, we did one in a Miami Zoo, which was really cool. So we swam. That's cool. We swam and ran, like we were running and seeing like elephants and whatever animals. So, like, and the culture, man, is just like all these people. It's mostly people that are like ex-addicts or like you know, like that are sober or athletes or yeah, or like they've had some sort of trauma because they want to like mentally, you know, whatever. But it is like the culture you get there, and like at at Eagle Man, there'll be 3,000 people there. That's a lot, and they're just like it's just that energy that I've haven't felt that like that since I went and played like a championship game in high school hockey. Yeah, like it's like just that energy is just unmatched, and that's why that's why I like it.

SPEAKER_06 1:44:01

All right, well, you're convincing me, so it might take a little more, but yes, you're convinced me about my uh, I'll keep selling you.

SPEAKER_00 1:44:06

So um while we wrap, we're gonna wrap this up. So, how can people get in touch with you so they can either invest in your syndications or you can get you know coaching through your coaching platform?

SPEAKER_06 1:44:17

Like what's your so uh the the best way to kind of follow me on LinkedIn and and you can have conversation there and you can schedule a meeting through there as well, too. So it's uh linkedin.com slash in dash, it's Jeff Dash Irvic, right? So we'll put it in the show notes as well too. Um they can also go to our website too, it's valoriscapitalpartners.com and on there has everything from my ebooks for passive income to uh ebook for uh life insurance, um, the investment optimizer has information about our fund, our past deals, um, and then also our who who we are as partners and what we look for as well too.

SPEAKER_01 1:44:50

So awesome. You got anything else? No, that was great. Thanks for coming on. Yeah, I appreciate it, guys.

SPEAKER_06 1:44:55

It's been awesome, man. Yeah, thank you. Until next time, guys. All right, see ya.