.jpg)
The Real Estate Investing Club
Real estate pros share their stories on how they got started investing in real estate and then grew from their first deal to a portfolio of cash-flowing properties. In each episode you'll learn the strategies our guests used to create generational wealth for themselves and their families, and the steps you can take to do the same in your own back yard. Our goal at The Real Estate Investing Club is to teach you the fastest ways to start and grow your real estate investing career in today's market - from multifamily, to self-storage, to mobile home parks, to mix-use industrial, you'll hear it all! Our guests share their career peaks and valleys and the best advice, greatest stories, and favorite tips they learned along the way. Want to create wealth for yourself using the vehicle of real estate? Getting mentorship is the fastest way to success. Get an REI mentor and check out our REI course at https://www.therealestateinvestingclub.com.
The Real Estate Investing Club
🚀 The Wealth Elevator: Lane Kawaoka Reveals Secrets to Building 8-Figure Wealth 💰
Want to learn more about investing in real estate? Visit https://www.therealestateinvestingclub.com
Interested in investing in my projects? Visit https://www.kaizenpropertiesusa.com
0:00 - Introduction to Lane Kawaoka from The Wealth Elevator
2:24 - Lane's journey from Seattle engineer to buying 11 rental properties
5:43 - The billion-dollar operator club: How Lane reached massive-scale real estate
9:32 - Why Lane believes real estate's golden age of free money is over
12:58 - The accredited investor secret trifecta: Real estate, taxes, and infinite banking
16:38 - Why being sued is inevitable in real estate business (and how to handle it)
20:51 - Diversification strategies: Moving from real estate into private equity
26:51 - The four floors of The Wealth Elevator explained
35:14 - How commercial real estate crashed 20-30% and what Lane learned
40:45 - Lane's predictions for the next market cycle across asset classes
THE WEALTH ELEVATOR FRAMEWORK 🏗️
In this powerful episode of The Real Estate Investing Club, I sit down with Lane Kawaoka to unpack his revolutionary "Wealth Elevator" framework that's helping investors accelerate their path to eight-figure net worth. Broadcasting from sunny Seattle, Lane shares the hard-earned wisdom from his journey to becoming a $1+ billion real estate operator and how he's helping others avoid the 15-year learning curve he experienced.
FROM ENGINEER TO REAL ESTATE MOGUL 📈
Lane's story begins as an engineer at the University of Washington who accidentally fell into real estate when he bought his first property in Maple Leaf. What started as a necessity ("I was traveling all over for work and never home") evolved into a 15-year odyssey that saw him acquire 11 single-family properties throughout Atlanta, Birmingham, and Indianapolis before scaling into syndications and private placements.
"I used to take the stairs," Lane admits, "but the Wealth Elevator is meant to expedite you through the process so you don't have to do it the slow way like I did."
THE FOUR FLOORS OF WEALTH BUILDING 🏢
Lane reveals his unique framework that maps wealth creation stages to building floors:
BASEMENT: The Dave Ramsey crowd in credit card debt
FIRST FLOOR: Non-accredited investors building rental portfolios
SECOND FLOOR: Accredited investors ($200k+ income) diversifying through syndications
THIRD FLOOR: The "$4-5 million endgame" where the 4% rule takes effect
PENTHOUSE: Eight-figure net worth with asymmetric investing opportunities
THE DEATH OF FREE MONEY 💸
In a sobering analysis, Lane predicts the end of real estate's golden era: "The Chan Financial Curve shows insurance rate cap providers aren't predicting interest rates below 3.5% for the next decade. That era of interest-free money is gone."
This insight has led Lane to diversify beyond real estate into private equity deals, emphasizing the importance of working with operators who are "introverted" and "socially awkward" - people focused on operations rather than marketing.
CRASH COURSE IN COMMERCIAL REAL ESTATE 📉
Lane provides an insider's view of the recent commercial real estate correction, sharing how his portfolio was affected by the 2022-2023 crash:
"We used bridge debt like everyone else and got hurt... but the lesson is diversify over 4-7 years. We know there will be market corrections every 5-12 years - we just don't know when
Join our community of RE investors on Skool here: https://www.skool.com/the-real-estate-investing-club-5101/about?ref=44459ba83f5540f19109c8a530db4023
0:01
yeah all right we are back with another episode of the Real Estate Investing Club hope you guys
0:15
are having a great week great Friday as always on the podcast we do our podcast recordings on Friday
0:21
and it is a nice and sunny day here in Seattle so I'm excited about that i'm really excited to uh
0:26
go out and actually experience the outdoors this weekend man it's a it's been six months since I've
0:31
done that so it's going to be a good day it's a good day for a second reason because we have Lane Kawaoka on the show with us from beautiful Hawaii he is uh with the Wealth Elevator and he has tons
0:42
of experience to go into so I'm excited to jump into this lane thanks for hopping on yeah thanks for having me hello everybody absolutely um before we go into the the meat of it we always like to
0:53
start with stories we like to hear how people got to where they are um why don't you take us to the beginning of your story and uh tell us how you got here yeah so I was on this linear path that
1:02
go to school study hard um became an engineer went to University of Washington out there in Seattle
1:08
started to work for the man and you know just kind of blindly followed the put your money in the 401k
1:14
nonsense and buy a house to live in um so after a few years I saved up 80 grand to buy a house up
1:22
there in Maple Leaf you know North Seattle oh nice and nice yeah well I think it was like 350 was the
1:29
purchase price right so 20% down payment and I you know young 20-year-old kid had a house to himself
1:37
essentially but because I was working for the railroad back then I was traveling all over for work and never home only home on Saturday so I just decided on a whim to just rent it out and
1:47
that was the start of this crazy journey for me started to realize like wow this powerful stuff
1:53
and you know bought another duplex out in um South Seattle after that started to learn you know maybe
2:00
you shouldn't buy luxury properties that you want to live in you know I think maybe you've kind of gone that direction with the mobile home parks too yeah um but then started to realize like you
2:11
know places like California Hawaii Seattle just aren't going to have the rent to value ratios to be able to you know make any cash flow so I started to buy bought 11 properties in at
2:22
Atlanta Birmingham Indianapolis oh nice and you know that was around 2015 so I went as a remote
Lane's journey from Seattle engineer to buying 11 rental properties
2:30
turnkey investor from 2009 to 2015 and then um that was kind of the second big pivot when
2:37
I went into syndications and private placements from there when I realized that the little single
2:42
family homes just weren't scalable when I became an accredited investor yeah yeah and that is uh
2:49
that is kind of how the trajectory goes for a lot of investors is they kind of jump you know
2:54
land into it um not intentionally but maybe they buy like you did they buy the single family house
2:59
they're like you know I can rent out this room or I can I can rent it out when I'm not here and then they realize like holy crap there is income coming into me every month this is a great you
3:08
know this is a great strategy maybe I should turn this into a business um and so you went
3:13
from single family to duplex and then you bought some throughout the country you were looking in
3:19
uh you know lower price point markets um at what point did you actually make the switch to the syndication side i'd say 2016 we started to get into that type of stuff um you know paid
3:30
a lot of money for all these like guru courses and classes and you know physical groups right and I
3:37
don't know if it was worth the money but I mean I learned how to underwrite the apartment deals out of you know those times and but I realized like unless you live where the deals are at you
3:47
know it's just probably better to just be a passive investor but because I was like doing this podcast back then I had built up an audience of you know single family home remote investors
3:59
and we were all kind of growing into the same direction of being accredited investors and
4:04
about the same time I mean this was just like a cornucopia year like 2016 for me was when
4:11
I started to interact with other accredited investors and this is kind of where I realized and I learned you know kind of put together this curriculum that accredited investors follow which
4:20
is you know invest in alternative investments whether that's rental properties when you're getting started or larger deals when you're more accredited combo with the passive activity losses
4:32
AGI manipulation on the the tax side and then infinite banking and this trifecta super powerful
4:39
and you know I didn't read it in a book I just I had to get it from other accredit investors but
4:44
the problem for me is like my parents never owned rental properties i didn't have a rich uncle i didn't know anybody who was accredited and I just started to um piece this all together
4:54
as you know best practices from all these people I was I was sort of meeting as informal mentors
5:00
and you know that was Yeah so we started to you know syndicate little 50-unit class C properties
5:08
i mean it's where everybody starts cuz you got it because you can't raise capital for crap and
5:14
that's all you're stuck with um you can make good money doing that right and it was a good
5:19
market for sure mhm but you know like some of those properties like 80% of the tenants paid
5:24
the rent you know 80% collections and you know that's just how it is in that class C clientele
5:32
having to deal with evictions and uh people trashing units doing turnovers all that stuff
5:37
can be very uh can be a headache if you don't have the right property manager in place yeah yeah but
The billion-dollar operator club: How Lane reached massive-scale real estate
5:43
it it is kind of it is what it is in that rung of properties and tenant classes i mean eventually
5:48
moved up to a little bit class bigger properties more class B started to develop right because
5:54
developing you know to get the loans for that you need to have a better resume right so I think what
6:00
we started to realize is a lot of people who just bought some rentals and thought they could buy a 300 unit apartment complex were competing with us on the bidding table pushing prices up so we
6:10
started to kind of move elsewhere um obviously we felt the effects we got established before the year 2000 i think 2000 we went over1 billion dollars of assets owned oh wow and wait in the
6:22
year 2000 yeah sorry 20 Yeah 2020 oh okay 2020 yeah nice yeah so that was kind of a a year where
6:32
we started to you know kind of take ourselves out of the business hire asset managers to kind of play that that rung that first line of defense to operate the property managers and I think this is
6:44
a big differential that I never realized initially like you know yeah you can run some single family homes by yourself maybe some small apartments but unless you grew up in the business right you were
6:55
a property manager for 10 years and you know went through this there's a lot of lessons learned going through it where just you can't just be an entrepreneur and do it um so that's you know we
7:08
went through the ups and downs of the 2021 to 2023 um you know since then commercial real estate has
7:15
come down 20 to 30% in the commercial office space um we got hurt too just like anybody else if they
7:21
don't cite it they're lying um and you know these days we actually also look at private equity deals
7:29
things outside of real estate because my long-term thesis if you look at I mean look this is the real
7:35
estate investing club i'm a real estate fanboy too man i will always invest in real estate but
7:42
if you look at where the what the Chan Financial Curve is I mean everybody should have that page bookmarked the Chan Financial Curve these are the insurance rate um cap providers they're
7:52
the guys who have skin in the game and predict where the interest rates are going they're not predicting the Fed rate to come under three and a half% maybe in the next decade so the error
8:02
of interest free money is gone huh i was lucky to ride that way from 2009 to 2022 summer of 2022 mhm
8:12
so yeah I got we have a loan um our lowest loan is uh it's 3.1% and it's just like that's never
8:21
going to happen again yeah i mean you know it's all speculation but I want to be a realist here
8:28
like that real estate's good because it's slow and steady but the bad thing is it's slow and
8:35
steady so you have to use leverage in real estate especially to get you know yields that people want
8:42
but you need to combo it with the right capital markets which is the loans right so it used to
8:47
be you would get 75% loan to value today that's maybe down to the 50s and that is driven by the
8:54
10-year Treasury which is driven by the Fed rate and we're not seeing that rate coming down you
9:01
know even under two I mean even 2% that's not I don't think that that's going to happen so long
9:07
story short we just lost a big trade win behind our backs for the whole real estate thesis so I
9:14
mean we've been kind of going back to the drawing board ourselves maybe we just start private money lending on house flips or you know we're still I mean yeah sure if you can find a property under
9:24
value by 20 30% then yeah that obviously is going to make a deal and still specific but you know
9:31
this is kind of why we've kind of opened things up to buying businesses doing things a little bit outside of real estate but um but yeah you know I think that's kind of what we're long story short
Why Lane believes real estate's golden age of free money is over
9:42
that's what we we've been doing these days but um I wrote a book right the wealth elevator and I It
9:47
kind of chronicles this like like based on where you are at these are the steps that I've kind of
9:53
gone through over this last decade plus yeah yeah that's really interesting so you guys have kind of
9:59
you've gone through the syndication phase you've you've built your portfolio do you still did you
10:05
guys sell off your portfolio your or your real estate portfolio or do you still have that um you still have your asset managers in place and everything's kind of cooking yeah I mean
10:13
we'll continue to do it right because that's our business but you know through this journey I've
10:20
met people on that next level right the you know people on the penthouse level and beyond and that
10:26
I co-ename in the wealth elevator book you know your family offices and I think that's important
10:32
and I wish I had when I you know just buying little single family homes is what are the people
10:38
doing on the next level up and also the next level up beyond that because that helps me cut corners
10:43
along the way um and you know when we we buy these apartments from very wealthy people right these
10:50
family office type of people or even the people below that right your 10 to$100 million net worth
10:58
families that you people never hear about you you never know who they are but working with them on
11:05
transactions you start to realize I mean who these people are and there's a lot of them and
11:11
then also what is their mindset and what are they doing right and This kind of helped me personally as an investor myself kind of battling with them on transactions buying properties from them and
11:22
negotiating you start to learn about like what's what's the next level right because eventually we
11:27
buy these apartments we're going to be them hopefully not on our deathbed like how some of them are but you know you start to understand like all right there's there's pieces and levels
11:36
to this journey and that's kind of why um it took me a while but I came up with this construct of
11:41
like a building right you have different floors of the building and the wealth elevator is meant to kind of expedite you through the process so you don't have to take the freaking stairs and do it
11:50
the slow way like how I did it without any mentor i mean there's a lot of books out there written
11:56
for the broke guys out there dave Ramsey Susie Orman right if you're in credit card debt you
12:02
make under $50,000 a year you probably shouldn't be living in Seattle right obviously but that's
12:08
in the basement level of the wealth elevator right so it's at least it's the term is coined there the first floor of the wealth elevator is for guys who are not accredited but have decent incomes that's
12:18
kind of where I started out of college right and I you buy rental properties until you get to a
12:23
credit investor status or your income surpasses $200,000 a year then you get to the second floor
12:29
of the wealth elevator which 200,000 200,000 that has to be um kind of location specific
12:36
because 200,000 in Seattle that is not a lot of money um but 200,000 in you know Dayton Ohio
12:43
uh that's that's a significant income um so that has to be that has to be kind of a a very loose
12:51
you know level to the to this elevator concept you're talking about yeah I think it mainly
12:56
coincides with the you know the SEC definition of a credit investor okay at that point which is
The accredited investor secret trifecta: Real estate, taxes, and infinite banking
13:01
$200,000 um you know because a lot of investors I talk with you know their net worth may not be that
13:09
great right because I mean how else they're not going to be that great because they're investing
13:15
in crap investments right but they have great incomes you know maybe as a household make make
13:20
over 300 350 right at the lease and them buying little rental properties is just a waste of time
13:29
they're not going to do this burst strategy because they have better things to do right their hourly rate at their job is more than $300 an hour they're professionals and especially at
13:40
that level again their net worth isn't that high yet maybe even still under half a million but they
13:49
are our target to get sued right and that's like like rental properties are like bullet sponges for
13:56
lawsuits essentially right oh yeah you mean like if somebody trips and breaks their leg or whatever
14:04
on your property and got it yeah i mean we get we get sued all the time as the you know the general
14:09
partnership or the ownership LLC where people are just trying to get the insurance policy money all
14:14
the time and you know we a lot of time like we have processes to deal with i mean it happens all
14:20
the time legal team knows what to do but that's kind of where an individual owner that'll tear
14:27
them up inside and just be so like weathering from a mental standpoint yeah the first time uh
14:35
we got sued was one of our mobile home parks and um I won't give any details but it was basically
14:41
a tree branch fell and we had been doing all the right stuff like we had arborists go to the park
14:46
we had we had um you know that the trees were being cared for but for some reason this fell and we got sued and that that first lawsuit uh yeah it's it's stressful from the if you don't
14:56
deal with it often just the idea of being sued is it's just a stressful experience and it's not
15:02
something that you want to go through yeah i mean at least what I've learned I mean I don't even
15:07
know how many times it's happened but you know you get your legal team involved right you don't wait
15:13
you just get them involved it costs money but that's just how it is these things right like it's just it's just a a number at the end of the day and this is where you need to have a certain
15:22
amount of scale in your operation you have if if you have I mean use my 11 rental properties
15:27
when I had it this is kind of dating me back in 2015 i made a few thousand a month and it
15:33
piles up to be what 36 $40,000 of profit a year well when you have a lawsuit you know you just
15:40
know you're gonna have to spend 10 20 grand on lawyers to see it through at the very least you
15:46
know and you know if you're I think not to freak everybody out right because I'm not a lawyer here
15:52
i'm not selling people's LLC's here so I mean as long as you're not doing anything nefarious
15:59
or you're doing what's right you're fixing things when there's broke which I think most people are reasonably doing out there in clear conscious there's not much to worry about right it's just
16:07
going to be a dollar thing at the end of the day um is it is it right no but look this is
16:14
what happens to all businesses all businesses um if you haven't been sued you probably haven't been
16:20
in business long enough right unfortunately yep unfortunately but that's look if you can't handle
16:27
it then just be a passive investor and you know there's a reason for being an LP and you also get
16:34
exposure to so many different deals right you can split up your allocations and deals to you know
Why being sued is inevitable in real estate business (and how to handle it)
16:40
as low as maybe 50,000 50,000 would be the bare minimum if people are if operators are looking to
16:46
take under 50 grand I would run away they're just desperate for money i mean it just when you get
16:51
under that level I mean we used to allow people at lower minimums but they were just the worst investors um too worried about the money yeah call you up like every other month and like ask
17:02
like ridiculous questions and just like no like we want there's a partnership both ways here too but
17:09
um yeah you know like that that's that's kind of how you get exposure to different geographic
17:14
areas maybe mobile home park throw some mobile home parks in there too right self storage maybe
17:20
some private equity you know this is kind of the way that I realize on that second floor of the wealth elevator that wealthy people are starting to diversify their portfolio and the
17:28
key thing here is they're getting direct access to deals they're not going through Wall Street
17:35
and some really bloated REIT where all these institutions are getting their money first and
17:41
huge hidden fees and they're not going through some crowdfunding website where the broker dealer
17:46
gets their cut arbitrarily right you're going and you're building a relationship with the operator
17:52
and you're finding and you're diversifying your your own investments and taking ownership of your own portfolio and you know then it steps up to the third floor of the wealth elevator where
18:02
about this time you start to hit that net worth threshold of 4 to 5 million which I define as endgame which I think for everybody listening even if you're in Seattle or California it's usually
18:12
a number where you want to aspire to so that you can do the old 4% rule and live off of that amount
18:20
and be comfortable right now I tell people yeah you know you want to get to that level and keep
18:26
steadily continuing growing after that but you know depending on what your age is if you're an
18:32
older person in your 60s and your kids are adults already already financially independent not a
18:39
liability for you anymore then you may be totally fine with 3 mil as your endgame number and that
18:45
puts you at the third floor of the wealth elevator already but for most you know folks in their most
18:51
of my clients are in their 50s their kids aren't yet done with college you know they may be paying
18:56
a h 100red grand a year for USC or I don't even know what you know my parents are complaining about how much UDub was last night i was like geez it's like triple now these days guys when I went
19:05
it was $10,000 a year and now it's like I can't I don't know i think it's like 30 or something like
19:10
that for instate not for out of state yeah yeah i I did out of state it was like 27,000 per year but
19:17
I think it's 2x that today um so that Yeah that's that's kind of where I think like people need to
19:26
like have that number right like $1 million is nothing these days and the only way you're going
19:32
to get there is to invest in alternatives put it through an infant banking plan and be smart with
19:40
your taxes and doing things well beyond 401ks and Roth IAS and all that basic stuff so do you
19:47
um you know real estate is obviously what we talk about here but do you also you mentioned buying
19:52
businesses do you also uh recommend people to buy businesses before they invest in real estate or is
19:58
that something that you generally look at after you've already been established in on in real estate yeah i mean I'm not giving any tax legal or investment advice but the way I I mean the way I
20:10
did it is like I started with real estate first so I'm a little bit slighted towards that angle
20:15
biased yeah i I feel like private equity deals are harder for people to like do due diligence on
20:23
and analyze unless they know they've they're in the industry like you're right if you're buying
20:29
a septic treatment company then if you're in septic treatments then then yeah sure buy a
20:35
septic business but otherwise doesn't make sense yeah it's just like like why are you buying a some
20:40
properties out of Memphis right i don't think Memphis is the greatest of areas but maybe they live there right so that's their insider advantage but all that aside I mean you need to be kind of
Diversification strategies: Moving from real estate into private equity
20:51
looking at it as like the horse and the jockey analogy right where in this analogy the horse
20:58
is the deal right the horse runs the is the one freaking running the jockey is the operator on
21:04
top of it now using this analogy in real estate deals you you can typically do the due diligence
21:12
on the horse or like the apartment or the mobile home park right you can look at the P&Ls the rent rolls and you can typically see how it is and in the real estate world like we we're not geniuses
21:22
here right like we're the dumbest guys in the investment world let's be let's be frank about
21:27
that and that's what's kind of great about it right your jockey or your operator doesn't need to be that amazing just an honest person right and that's what but and you don't find that until you
21:38
do business with people or at least what I found going through so many general partners myself um
21:43
you have to be a genius but you do have to be um you have to be tenacious and you have to be
21:50
uh organized and responsible i feel like those are higher are are better qualities for a GP
21:57
than being you know super intelligent um because real estate is really simple but you do have to
22:02
actually do the work and that's the thing that people that I found people make the biggest mistake on is they just they get lazy and they don't actually do the work um and so yeah I I
22:12
agree that real estate you don't necessarily have to be a genius well no I know you don't need to be a genius but uh you do have to you know use basic intelligence and then apply it to what to to real
22:23
estate you have to do the work you have to create the processes the systems um and get in bed with
22:28
the right contractors the right property managers you have to have some general level of wisdom and apply it for uh for to see those results otherwise you're going to you're going to be in a world of
22:37
hurt right right whereas like private equity venture capital angel investing you're selling
22:44
something from scratch you're recreating the wheel so a lot of it and you can have a really dumb idea but if you have a good operator per CEO at the helm it'll just it'll work have you bought
22:57
other businesses outside of real estate yeah so I mean we've done a whole bunch of you know physical
23:03
businesses virtual businesses too um again like this is just my method but what I've taken from
23:11
the real estate world is it's all with the people first where if you have honest people with a track
23:17
record that's what I'm going to roll with as opposed to like just meeting somebody out of
23:22
the blue and going with them because their number supposedly look good right i've I've seen it where
23:29
people fake it till they make it till the cows come home essentially so a lot of these deals that
23:35
we've done on more on the angel private equity side I prefer private equity because there's
23:40
existing P&Ls too so there's like financials backing this up right um just like apartments
23:46
right like or mobile home parks right you buy them and you can see the usually two-year P&Ls to back
23:51
it up right um so it's not a just like random guess what the income is and expenses are but in
23:59
these cases like we've met the people through work you know maybe they were investors of ours in the
24:04
past since maybe half of our investors these days are business owners themselves and successful ones
24:10
which is why they have surplus to invest go you know go figure um another ways is like you know
24:16
we've been in different you know business groups and you know like one of the partners we found
24:22
um this is more on the real estate side you know we had a contractor that was also an owner
24:27
operator you know apartment owner um work on one of our properties and we've built a relationship
24:33
and you know they inherently know other colleagues or friends of theirs just like how we know and
24:38
when we get on that that sort of level right when you get on you know the club of1 billion dollars
24:44
of um operators and above you know you get some pretty um good folks that are more the operator
24:52
types as opposed to like marketers out there um so that you know taking part of that you know
24:58
into the world of private equity I like to work with people who are very introverted you know like
25:03
maybe even socially awkward who knows right like I want the people who are who operate right and
25:11
those are the people that I like you know not not saying I won't work with them if they aren't but like that's kind of the target where if we want if I want to take a shortcut finding new partnerships
25:22
that's where I start with first but but even before that it's always referral right word of mouth from my general partnership base yeah so kind of on going to your your elevator concept
25:34
um you kind you've mentioned four rungs up to this point the bottom rung the Dave Ramsey rung where
25:39
you just have a job and you're not really maybe you're investing a little bit in the stock market but that's really it um and then the the next run up you're making $200,000 a year maybe you've in
25:49
you've bought a few properties uh but you haven't you know you're not living off those properties yet and then after that you mentioned uh the one that you define is the four to 5 million after
25:59
the 200,000 and that's when you you get to the point where you can live off of if you had just taken that money put it in the stock market live off of that you know the couple percent that's
26:07
being spit back at you um that's the next rung and then what's the fourth rung that you had mentioned
26:13
yeah I would call probably call this the penthouse level you're good right you certainly aren't you
26:19
know I mean you should never invest money that you can't lose that goes without saying but certainly at this level like even more so and going back to your earlier question like I think people should
26:30
try invest in real estate first because it helps you like you know it's a little bit more like you
26:37
can underwrite a deal and if it goes good or bad you kind of know what it is right it's easier to
26:42
isolate the issue or and that way you become a better investor right oh you know when when I
26:48
look at the next pitch deck you know I'm going to look at what the how long the bridge terms were for right in the loan for example um but when you do private equity there's not really any kind of
The four floors of The Wealth Elevator explained
26:59
correlation that you can go after the fact right it's more so with this with the person and like I
27:04
said it's hard to do due diligence on people on their inner workings assuming they're an honest
27:10
person so what what I would say is like start with the easy stuff first which is real estate
27:16
then go to private private equity angel investing after would be the flow so the way that comes
27:22
into the wealth elevator construct and in the book there's like this table kind of to outline
27:28
um you know all these floors but you know when you have you know at this point you can kind
27:34
of you got a lead if use a baseball analogy you got like a sevenr run lead in the eighth inning
27:40
go ahead take some swing you know swings for the fences and have some fun here right take some a asymmetric investing you know I like the idea I personally do not giving any legal
27:50
about tax advice or investing advice cuz I'm not a certified financial planner so I can't sell people
27:55
marketable securities apparently but I do like this um idea of uh barbell investing where you
28:04
you've got the two sides of the barbell where it's you know obviously heavily weighted on the outside
28:09
on the inside but it's still balance for me but I like the idea of having a lot of life insurance
28:15
that's where the infinite banking and the accredit investor banking that we do a special twist on
28:21
And then on the other side you know more somewhat risky stuff right but that's where
28:26
you get the outside returns from and that may not work for that doesn't work for most people
28:31
out there they and they should not do that but for more experienced investors that's what I
28:37
see as kind of a consistent thing out there for them you know so if you're a bad golfer don't
28:43
use blade irons just don't you're going to you're going to go crazy same thing here like if you're
28:50
an inexperienced investor don't do what I'm kind of saying out here in fact just go invest in the
28:56
Vanguard 500 you know in ETF ETFs um but that's kind of where at this level of the wealth of
29:05
you've already established yourself as an investor you got money to lose in a way and it's about
29:11
growing your legacy you got to get your legacy past 8 figures which I think for most people who
29:17
start at a reasonable age in their 40s you've got a few decades to get it there it's very doable um
29:24
and you know like we do investor retreats and I'm big on like getting the next generation involved
29:29
cuz at at the end of the day at once you have $4 million net worth even three if you have two kids
29:36
and you give them a million half $2 million that's probably enough that's the point of
29:42
diminishing returns i think um in fact it's probably better to give them less than that what's
29:49
more important is give them the relationships and the knowledge and that's why we allow our members to bring in their kids to the event so they can meet other people in in the ecosystem but this
30:00
is kind of where like unless you get your net worth to past 10 million and beyond you're just
30:07
going to it's just going to be cut from cousin to cousin this you know nephew to niece and it's
30:13
just going to go nowhere if anything you're doing a disservice to all your kids because you're just
30:19
making generation two especially generation three spoil rich kids and then eventually it'll go away
30:25
right as the saying is 90% of wealthies families in two to three generations for a reason um again
30:31
we try and create the ecosystem so that they have the relationships and deal flow to prevent that
30:37
but you know most I'm not going to live forever so I may not run the group forever but for most
30:43
people they need to learn how to do this or take the approach that some of our members have where
30:49
we're going to turn this into a real Rockefeller thing right it's a irrevocable trust where we're
30:54
going to we're going to assume that all these Gen 2 Gen 3 kids are just going to be idiots you know
31:03
like like I do in industrial engineering right we poke it we make it so it's dummy proof right
31:10
they may be smart and there may be somebody in there that can you know grow it but we're going to assume that everybody's dumb and just bunch of rich spoiled kids who like to go on raves and
31:20
just going to just blow it yeah and it's funny how uh how easy it is you know you're saying $3
31:26
million you've thrown that out there a few times um 3 million is not a I mean you could spend I I
31:32
always like to think of like is it a lot of money if I can spend it in a weekend surprisingly you can probably spend $3 million in a weekend if you go out there you buy yourself a car buy yourself a
31:41
I don't know really crazy trip go to the go to the casino and spend it all um so yeah three million
31:47
is definitely not a lot and uh but being able to safeguard that um in your future generations
31:53
we we just had our first and she's uh almost two now which is crazy oh cool but um instead of you
31:59
know instead of giving it get it giving money to her in the future you know teaching her how to you know teach a what's the phrase the what teach a fisherman how to fish or something like
32:08
that you know teaching her how to actually create the value versus just giving them the money is is
32:13
um the most important thing um but hey I just took a peek at the clock we have run our time down so I do have to move us on to the quick question round are you ready here we go all
32:22
right starts with uh education could be any form could be a conference you've gone to mentorship
32:28
program you've been a part of book you've read movie you've seen anything but I need two recommendations one for general life wisdom and then one for real estate a general life
32:37
wisdom u for our work week i think that unlocks you thinking differently off the beaten path uh
32:42
the next obviously I think the wealth elevator my book there is no other book that breaks out
32:48
down the different stages of this wealth building journey what got me all the time is like you hear
32:53
all these like everybody listens to tips here or there from all these podcasts or Tik Toks or whatnot but at what point in the journey does that make sense for that piece of advice cuz you it can
33:04
be horrible advice if you're on a different part of the wealth building journey and what it comes down to is what your net worth is and that's the first part figuring out which floor you're at yep
33:16
i love it and uh if they want to get that book um they just type it in I'm assuming in in Amazon The Wealth Elevator it'll pop right up yeah I think we got I mean over a hundred reviews so
33:26
you can't you can't miss it now and then yeah if people you know buy it and they leave a nice review and email it to us we can hook you up with the MP3s and the PDF version too just email
33:36
it over teamalth elevator.com perfect all right next question is for your younger self let's go
33:42
back to the lane who was uh just starting out uh maybe he bought that first uh the single family up
33:48
here north Seattle go back to him look him in the eye give him one piece of advice moving forward
33:56
i would tell him not to buy 11 rental properties maybe just buy a few and then move up to the second floor of the wealth elevator i think that slowed me
34:05
down a little bit but then also find this guy Gabe Peterson out in Seattle and then
34:10
hang out with him because apparently everybody else were you know didn't really do much right
34:16
there you go all right next question is about the US it's a big place there is a lot of opportunity out there give me the single metro you're most excited about investing in
34:25
today it's tough i mean you know all your normal sunb belt states have been kind of overbuilt um
34:35
with the 2000 to 2023 buildup um so in the short term the next couple years that supply is going to
34:45
you know come to fruition and it's going to be a little bit difficult for rents in those locations
34:54
um tertiary markets didn't have the big buildup you know so maybe that but you know there's not
35:00
any particular one and it's a little bit of a whack-a-ole game so it's kind of hard to say which ones they are um you know I I think that's what excites me about private equity it's
35:12
not really about a geographic location but it's a it's a situation where you have a owner who's
How commercial real estate crashed 20-30% and what Lane learned
35:18
retiring or has taken it up to a certain point and they can't do it anymore without any more money yeah I listen to Alex alex Herozi is um I'm sure you've seen him on YouTube or whatever and he
35:29
he's he does private equity and uh uh it sounds like a lot a lot of fun going in there um if you
35:34
have a specific skill set that your team can apply to a business finding something that's just you know for Alex it's it's marketing it's sales that has a bad sales department and then applying your
35:43
your process to that business sounds like a lot of fun and I understand the the desire there um
35:49
I'm not quite at the place where I can where it would make sense uh to leave real estate um but
35:54
one of these days I'm definitely going to get on the equity side that sounds like fun all right next question is about I lost my spot it's a There we go it's about lessons learned um not every deal
36:05
we get into goes the way we expect it in fact uh many times things go wrong but we get to learn a lesson there so what was a deal that went a little sideways for you and then what was the lesson you
36:14
pulled from it i mean I think that in the recent history we saw commercial real estate correct 20
36:20
to 30% with 40-year high interest rates um nobody saw it not even the institutions we um you know
36:28
a lot of people used bridge debt so did we in a lot of these deals and we got hurt ourselves
36:34
um that said the other side of it is why why would anyone anybody dumbass use this stuff well because
36:42
you don't have prepayment penalties and that's how you get in and out of your deal quicker especially
36:48
when you have a value ad type of project right but the problem that we saw is the you know the
36:54
quickest increase in interest rates in history caught everybody off guard and that was the the
37:00
thing that you know hurt everybody your the notes expired in a in the worst time where the property
37:07
values didn't recover in time so it's very difficult for investors including myself in
37:15
those projects but the lesson learned is diversify between four to seven years you know dollar cost
37:22
your portfolio essentially we know that there will be a market correction we absolutely know there
37:31
will be one typically every what 5 to 12 years to give you a wide range some would say 7 to 8
37:38
but we just don't know when exactly that is so the only way to protect yourself is to just diversify
37:45
over a time horizon here yeah that makes sense um you can't I mean you can never truly predict the
37:53
market you can have an understanding of where it goes but uh you can't predict the day uh the day
37:59
that something's going to happen so uh spreading that out over time spreading the risk out over time that makes a lot of sense um would you suggest I mean you mentioned bridge debt was kind
38:08
of was a thorn in your side at one point would you suggest people not use bridge debt and instead
38:14
um maybe raise more capital or is bridge debt something that you still are a fan of um just
38:20
maybe not with tight timelines i mean bridge debt with tight timelines is synonyomous right that's
38:27
they go hand in hand um I guess I would say like on it depends on the deal right like if you can
38:33
get in if you know you can get in and out and you're buying it at a huge discount then fine
38:38
so it's very dealsp specific but you know it depends on your risk tolerance right like I
38:44
mean take a angel investing deal you're going to lose your money 95% of the time right in those
38:50
things but if the return Yeah if the returns are there and you average it out in a large portfolio
38:56
over time your average rate of return is going to be you know higher than you know what than par or
39:03
your par yeah so I I think like look it depends on how you are an investor and it kind of depends
39:10
on what floor the wealth elevator you're at you know for me personally I think I understand the
39:15
risks there are few things in in that I now aware of that I will make me a better investor in the
39:21
future but generally speaking no it I mean I'll I'll look at it but it will not be a precluder
39:29
not to do it again yeah makes sense it's a tool that because that's how you make that's how you
39:34
make returns outside returns on the run up that that five six seven years up you make a boatload
39:41
of money and then you're ready for what for it to kind of correct in a way yeah um all right
39:49
that leads us to the second to last question and this is about current today's market um what do you see happening in the next two to three years people have been talking about a recession do you
39:57
see that happening um just where do you see the market going in the next uh two to three years we
40:04
can go down to one year because uh we're in such a interesting time so over the next year what do you think is going to happen i mean we've talking about like three different market cycles here like
40:14
I'm in commercial real estate so I know that pretty well i feel like commercial real estate we've starting to see the bottom of the market i've seen some of my appraisals come back for
40:22
way more than it was uh 6 months ago m um you know those are just one-off data points anecdotes stock
40:32
market I don't know I don't have any stocks uh it seems like it's on all-time highs you know hint
40:39
hint but I don't know right like we've detached from reality in the stock market right price to
40:44
earning ratios just doesn't even matter anymore apparently it's all on what potential it could be
Lane's predictions for the next market cycle across asset classes
40:49
and then residential real estate again I don't really I'm not in that that area but I've seen
40:55
in residential commercial real estate you know didn't go through any correction like commercial real estate which is weird really really weird um you're starting to see a lot of in Florida like
41:05
a lot of these institutions started to buy the little turnkey rentals get into the landlording
41:10
game you're starting to see weakness in the Sunb Belt Florida for that type of stuff uh what is
41:16
it that yesterday I put on my social media that I saw that uh FHA loan defaults are at all-time
41:23
highs really that's an indicator yeah google it i mean I was kind of surprised one of my my
41:29
my team sent that to me um so that you know at some point there's always a market cycle as we
41:37
said buy low sell high it's easy to say but it takes real balls to do it when like commercial
41:44
real estate when it's been beat up and there's there's blood in the streets yeah so you do see
41:50
um and when you say commercial real estate you are talking about general commercial real estate not
41:56
um you know multif family specific or or yeah when I mean when I mean commercial real estate
42:01
it's office space apartments things basically bought without like the residential 30-year
42:08
mortgages right because that's what created this huge divot in commercial real estate the lending
42:14
mechanisms are not on 30-year cycles right it is on you know 1 2 3 or under 10 year debt cycles and
42:24
that's what created the huge issue in commercial real estate when interest rates skyrocketed
42:29
m so people need to understand what exactly triggered this damn thing because it well
42:35
maybe it doesn't because it's always going to be something different next time but it's important to understand what exactly happened so that you can be a better investor next time
42:45
and know what went wrong as opposed to just being like most investors like oh commercial
42:50
real estate looks sucks looks like it sucks you know like well understand what is here you know
42:56
what went wrong and you do think we're at the bottom we've we've hit the bottom and it's on the upward trajectory i mean at least I've seen data points and adults in my portfolio to to say
43:06
that not to say that you know there are a lot of people just holding on holding on and you know I
43:14
think a lot of there are some people there are some people out there just faking it till they
43:20
till they can hold on longer and at that point it's just you don't know i mean at some point
43:27
they're going to have to let go and that may even crater the commercial real estate even more right
43:34
but I think we've already kind of seen most of the trouble assets go through at this point and we
43:39
kind of know the extent of most of it the nuclear bomb blast went off summer of 2022 into 23 this
43:48
is just all the fallout from it yeah makes sense all right that leads us to the very last question
43:55
this is for the listeners um you've given us a lot to think about i'm sure people want to reach out get in talk get in contact with you this is a two-parter where can they find you and then
44:03
what can they expect when they reach out they can check out the book The Wealth Elevator on
44:08
Amazon um like I said if you uh want the free PDF MP3 version because you don't know how to
44:15
read or you know lazy like me and doesn't read and sitting in the sauna just want to put those earplugs in and listen to something yeah yeah i mean maybe you're not like a biohacker and likes
44:26
to listen to the audio on 3x as you scroll with your finger on the physical copy um but if that's
44:32
you you know like yeah shoot us an email team at the wealth elevator.com and um if you're a credit
44:38
investor um you know reach out we can we can certainly chat um but yeah thanks for having me
44:43
Gabe appreciate it awesome yeah absolutely um for everybody who's with us today thank you guys for
44:49
showing up you are the reason we do this so if you guys have any questions reach out to me gave real estateclub.com um if you guys want to support the show just leave us a review other than that I hope
44:58
you guys have a great week and uh we'll see you on the next episode of the Real Estate Investing Club
