WTR Interview: Lane Kawaoka, The Secrets of Passive Cashflow

Want the most income for the least amount of work? Want to have lower effective taxes? Join WTR as we discuss The Wealth Secrets of Passive Cashflow with Lane Kawaoka from Simple Passive Cashflow.  You will learn how to quickly determine if a property will cashflow, best assets for passive income, how to manage them as well as secrets the wealthy use to prepare for and invest in new opportunities. As always, there’s a Value Bomb of something to watch out for.

Ingenious tactics to accumulate wealth, for people who see things differently.

Lane Kawaoka

lane@simplepassivecashflow.com

Simple Passive Cashflow

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      • Bought rental in 2009, made good cashflow
        • Focused on saving more $ to buy more rentals
      • 7 years to get 11 rentals
        • Now 1100 rentals and was able to quit day job
      • First couple rentals in Primary market of Seattle
        • Found primary markets costs are too high so profit is low
      • Found secondary markets have higher rent to value ratios
      • Figure out rent to value ratio
        • Monthly rent divided by purchase price
        • Tries to look for 1% or higher for figuring out if property will cashflow
      • Appreciation is gambling, cashflow is the sure thing
      • Recommend people under $500k net worth, start by building low risk, single family rentals
      • Focus on passive investment
        • It’s not “active” investments
        • No tricks or games like no money down payments
        • Find quality investments
        • Use property managers
        •  property inspectors to make sure good quality asset
        • 1-2 hours per week
      • Look for other people doing passive investments
        • Local REIAs/real estate clubs usually have active investors of lower net worth
        • Use what they are using,
          • Markets
          • Providers
          • Property managers
      • Since most passive investments need $20k+ to get started, there’s less people competing for those assets
      • Single family homes are good to sell to retail buyers, they are an easier exit strategy
        • Duplex, quads etc. are more difficult to sell
      • Passive investor needs to focus on being an investor, not a landlord
        • Hire 3rd party property manager for that
        • Need rent to value ratio over 1.0 in order to afford paying for the property manager
      • This strategy may cost a little more, but enables scaling to acquire more assets rather than spending time managing properties
      • Use time for best use for making more money
      • Refer to Lane’s article of 25 questions to ask when interviewing a new property management
        • Use as guideline
      • Real estate investing is “end game” financial wealth building
        • There will always be a need for a roof over people’s head, so always need for real estate
          • Especially B & C class housing
      • Make money with regular business, then put into real estate
        • Once it gets big, buy more assets
        • Beauty of real estate, passive losses offset active income
        • Average W2 employee is missing out on the real estate tax benefits
        • Can wright off all things that are used for “business”
        • Can depreciate cost of building 1/27th every year as a paper loss on taxes
      • Primary home mortgage interest is now capped (first $750k)
      • Pretty sure real estate investment will most likely always be a business expense
      • These are “Wealth Secrets the wealthy do that the average people out there never do.”
      • When you buy a major capital purchase, you either pay interest to someone or give up earning interest on your money
      • Non mainstream tactic is Infinite Banking concept
        • Using life insurance
          • Normally for death benefit
          • But using as loophole because insurance isn’t taxed
          • Can access money through loan so no tax
          • Sheltered from creditors and litigation
          • Wealth use it to store liquidity/money for opportunities, not rainy day find
      • Last year had had couple opportunities for private placements
        • Used life insurance for funding
        • Now has been replenishing to be ready for next opportunity
      • Have seen people use it for saving for college
        • “blows the 529 out of the water”
        • Money in life insurance does not count towards expected family contribution, allowing getting more financial aid
      • With 401k and 529 “you’re stuck with garbage investments.”
      • Limited investments with little choice in 401k and 529’s
      • Once money in there, it’s hard to get out because you’re playing in those companies pond
      • Lane’s mission is to create a website and podcast to show people it’s possible to buy single family home and scale from there because if you keep doing mainstream investing you’re not going to get anywhere
      • 3 rules of investing for simple passive cashflow
        • 1. Only invest in hard assets like real estate
          • Mutual funds and stock are paper assets
            • Anyone can say something and value goes down
        • 2.  It needs to produce income
          • Single family homes and investment properties create “mini pensions”
          • 401k doesn’t produce income today, gold is hard asset, but produces not income
        • 3. Leverage
          • To be able to “retire” in 5 years instead of 40-50, you need to leverage
          • Real estate has government backed loans to be able to leverage the assets
      • Leverage is using someone else’s money to let your money work for you
      • Traditional money mindset is to not use leverage and don’t take on more debt
        • Not what business do
        • Business takes on more debt to finance what brings them more income
      • Value Bomb:
        • Don’t work with anyone you don’t know, like or trust
      • If you’re interested in purchasing single families homes, listen to first 20 podcasts at SimplePassiveCashflow.com

About the author, Kevin

I believe there's more to be had for your money by first avoiding losses, rather than just chasing a rate of return.

Along my journey, I've come to realize that almost everyone, including most so called "financial professionals," are missing important information about how money works. It's not their fault, all the mainstream media, big banks and financial companies have been preaching the same thing for decades. Commonly people are told to go to school, get a 9-5 job with a good company, put your money into a 401k or similar retirement account and retire living off the interest of their savings. But the result is it's not working for most people. They have little to no control over their money and are loosing thousands, even hundreds of thousands of dollars over their lives, to inefficiencies and lost opportunity on their money. I'm on a mission to change that by empowering people with clarity and to take back control of their wealth.

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