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How ‘Finance Ninja” Daniel J. Mills Started at $30k a Year and Grew a US Rental Empire from Japan

The BiggerPockets Money Podcast
52 min read
How ‘Finance Ninja” Daniel J. Mills Started at $30k a Year and Grew a US Rental Empire from Japan

While living abroad, it can be very difficult to invest in assets in your home country, especially if you’re an American. Daniel J. Mills found this out early in his professional career. As a English teacher living in Japan, he had to jump through a sizable amount of hoops to find a way to invest in American stocks, index funds, and later real estate all while overseas.

Growing up in southern California, Daniel knew that there was money to be made through entrepreneurialism. He saw his father grow a business that was profiting millions each year, only to see it later become liquidated. Daniel didn’t really think too much about money or growing his personal wealth until years later.

After college, Daniel moved to Japan and became an English teacher making a salary of around $30,000 (USD) a year. He met his wife, settled down, and bought an apartment in an appreciating part of the city (contrary to many other parts of Japan). Daniel was saving around $1,000 a month, and realized he didn’t want to be making $30,000 a year forever. So, he started investing in index funds and stocks, which grew his net worth and allowed him to invest in other asset classes, like real estate.

Daniel even shares a tax loophole that allowed him to write off 100% of his 6-figure income while he was in Japan (solely from real estate depreciation)!

Flash forward to today, Daniel has rental properties in Idaho, Alabama, and Tennessee with partners from Japan and the United States. Daniel agrees with many other real estate professionals in the fact that you need a tried and true team in cities where you’re investing. Living in Japan, he doesn’t have much to worry about in the US, thanks to his fantastic property managers, handymen, partners, lenders, and real estate agents.

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Listen to the Podcast Here

Read the Transcript Here

Mindy:
Welcome to the BiggerPockets Money Podcast, show number 165, where we interview Daniel Mills, a U.S. citizen living in Japan who gives long-distance real estate investing a whole new meaning.

Daniel:
I think the big thing is not to get overwhelmed and to keep things as simple as possible in the beginning. I see this so often, people that just don’t get started because they think it’s a very complicated situation, and it’s almost like once they make a decision, they can’t change it.

Mindy:
Hello, hello, hello. My name is Mindy Jensen. With me, as always, is my rocking-and-rolling cohost, Scott Trench.

Scott:
You always drum up these great intros, Mindy. Thank you.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big-time investments in assets like real estate, start your own business, or just invest in real estate from literally the other side of the world, we’ll help you reach your financial goals and get money out of the way so that you can launch yourself towards those dreams.

Mindy:
Scott, today’s guest comes from our Facebook group. If you’re in the group, you have seen Daniel Mills commenting on every single post that’s up there. He is one of our top commenters, and when we reached out, he’s actually a very interesting guy. We talk a lot about foreign tax and investing in this episode, but we did feel it was really important to share this story because so many people want to retire outside of the country or somehow take advantage of geoarbitrage.

Scott:
Yeah. I think it’s a fascinating story. It’s a completely unique perspective, but I think it also, if you’re not living in Japan, highlights how great we have it here in the United States in terms of applying the basics of building wealth. When you listen to this show, think about the hurdles that Daniel has to jump through in order to build wealth and apply the same fundamentals we talk about week to week here on the BP Money Show. They’re so much harder for him doing it through Japan. There’s a couple of loopholes, too, that he benefited from that I think are really interesting, but I think you’ll enjoy this show and I think it’ll make us appreciate the things that we have here in the States as investors as well.

Mindy:
Yeah, it really does make me appreciate being a local-ish investor.
Daniel Mills, all the way from Japan, welcome to the BiggerPockets Money Podcast. Konnichiwa. Is that right?

Daniel:
Konnichiwa.

Scott:
Daniel Japan Mills.

Daniel:
Yes, that’s me.

Mindy:
I bet that’s not what the J stands for.

Scott:
Okay, probably not. Yeah. Well, welcome.

Mindy:
Daniel-

Daniel:
It’s great to be here.

Mindy:
It’s great to have you. I am so excited to talk to you. You are all over our Facebook group. Thank you very much for your contributions. And I would like to know about your money story, because you’re in Japan. Why are you paying attention to money in America?

Daniel:
Well, I’m actually from America, and that’s where I grew up. Yeah, my money story really didn’t begin until I came to Japan, but it’s probably a good idea to back it up a bit to show how that all came to fruition. Basically, I grew up in southern California, typical middle-class household.
My father worked for Hughes Aircraft, a big company out there, but he always wanted to be an entrepreneur. He was dabbling in a lot of different things, including real estate. None of them really worked out until I was about 14, and he started a company where he used his own money to get FDA approval on high-pressure tanning beds in Europe. He brought them out to the States and started selling them, and it was amazing. First year, I think it was $6 million profit, and the next year, it was just going up amazing levels. Now, our lifestyle didn’t change at all, but this was an incredible business.

Scott:
Don’t they already have sun in southern California?

Daniel:
They do. They do, but he was selling them all over the country and he was getting distributors that had their own area. It was just a great model. All of that was wonderful, until it wasn’t. At some point, which is probably when I was in my senior year of high school, my father decided he wanted to break away from the company he was working with and start his own company and make his own tanning beds. They were a much larger company, and he started getting sued.
Right at this point, I knew things weren’t looking good, but I actually joined the Marine Corps right after high school. A few days after I was in boot camp, and I had a plan, I was going to get into federal law enforcement and everything, but actually I was only in the Marine Corps for less than a year because I got injured. I received an honorable medical discharge, I came out, and by that time my parents had lost everything. The only thing they had left was their house. We were living and Virginia at the time because my father had an office over there.
That started me off. I didn’t have any way to pay for university at that time. I blew through a lot of the money I got when I was in the Marine Corps, as you can imagine a 19-year-old who gets 20% disability paycheck plus their paycheck for the year. Basically, through my 20s, I think it’s a good story of somebody who got started late, because I just was not focused. I didn’t know what I was going to do. I think I went to three different universities. I did a lot of different jobs. I became a certified massage therapist at one point, which was a good job. I did a lot of different things.
It all ended up when I was, I think, 27 years old is when I graduated. I was back in California. I had a degree in Asian religion, so very marketable. I had about $20,000 in student loan debt that I didn’t need because I pretty much worked my way through, but decided one year to not work and party. That’s where I got all of that debt. I was actually working as a martial arts teacher in my hometown because I’d been doing martial arts all my life, and I loved the job. But I decided at that point that it was now or never to go to Japan, because I always wanted to live in Japan for at least a year or two, do martial arts, learn the language. That’s when I headed out to Japan.
Luckily, right before I left, I realized, “I’m almost 30 years old. I haven’t gotten this money thing together,” and I bought a book called The Complete Idiot’s Guide to Getting Rich. It was a great book. It was FIRE before FIRE. They went through the wealth stages. They talked about where you’re going to hit financial independence. It started off with saving and then earning more money, index fund investing, and then real estate or business. I followed it like a blueprint. I still have, I think, this little plan that I made from that book. I saw it the other day. I remember my big goal at that time was to get just… I thought if I could earn $20,000 a year in passive income, I was set.

Scott:
What was your financial position at the time that you read the book? You’re 28. You’re heading to Japan. What was the net wroth, I guess?

Daniel:
Negative $15,000. I had $20,000 in student loan debt, and the only asset I had was a car, which I did sell before I left, for $5,000.

Scott:
Nice. So do you read this book literally on the plane, or right before or right after you move out there, and how do things evolve from there?

Daniel:
Yeah, I think I was reading it all the way on the plane before I came out and just taking notes. It was the first time that something clicked about finances. You would think, coming from a family who lost everything, you sometimes hear people on this podcast say, “I was so motivated to make money,” but I really wasn’t. I was kind of a hippie in my 20s. I was studying Buddhism and I did martial arts, and that was it. I really wasn’t interested in money. I’d picked up a few books and never got into it. This was the first one that really clicked.
When I came out to Japan, one of the first things is you have to get an apartment. In Japan, it’s a little bit different than in the United States, or at least I think it is. We have something called key money, which means… Basically, you get an apartment. I have to pay first and last month’s rent, but I also have to give a gift to the landlord, which is great now as a landlord in Japan. Most of that five grand was gone just moving into my first apartment.

Mindy:
What kind of a gift do you have to give them?

Daniel:
Oh, money gift. You give them a couple thousand dollars to-

Mindy:
I like that a lot.

Daniel:
Right? Yeah.

Mindy:
We should implement that in the U.S.

Scott:
It’s first and last month’s rent, a gift, and then ongoing rent after that?

Daniel:
Yeah.

Mindy:
Wow. Okay.

Daniel:
One thing is apartments in Japan… The cost of living is a lot cheaper than people think. I think people have this mindset that Japan is like the ’80s and ’90s, the bubble economy. It’s not like that. There hasn’t been any inflation in Japan since that time. You can rent an apartment… I think my first apartment here was $400 a month and-

Scott:
Where specifically in Japan are you?

Daniel:
When I first moved, I was living in the suburbs of Osaka, and now I live in somewhere called Shiga, which is about 20 minutes from Kyoto, maybe 45 minutes to Osaka. It’s actually where the ninja are from, if you’ve heard of Koga ninja. They’re from Shiga.
Anyway, yeah, so apartments are pretty inexpensive. There’s no tips that you have to pay. The living expenses are not that bad. That was really my first step in the process because it was the first time in my life that I was going to save money. I did pretty well at it, I think.

Scott:
Sorry, I was cracking a private joke to Mindy about how you’re the finance ninja, and that’s true. Anyways-

Daniel:
That’s going to be my blog.

Mindy:
That’s what I was thinking.

Scott:
That’s awesome. Going back a second, how were you making money at this at the time?

Daniel:
Oh yeah, so I got a job teaching children English, basically. It’s really easy, as I said earlier on to you guys, that if you’re a native speaker of English, to get jobs teaching English. Usually, you teach at something called an eikaiwa, which is a conversation school. You teach kids during the day, a couple of adult classes at night. The pay is about $30,000 a year. And it’s pretty much the same. This is one big wake-up call, as you’ll sometimes meet guys who are 40 years old, they got married, had kids, and never did anything else. They’re still at the eikaiwa and not very happy with their situation.

Mindy:
They’re still teaching there or they’re still learning there?

Daniel:
Still teaching. No, I mean there’s teachers that have come over, started that job, maybe they were thinking, like me, “I’m going to leave. I’m going to go back to the United States in two years,” but they end up meeting somebody, they get married, have kids, and they’re stuck at that job, because it’s really hard to get something else.

Scott:
It’s easy to get that job, but it’s hard to get involved in the economy in other meaningful ways besides teaching English.

Daniel:
Yeah, exactly. Yeah, so the first year, basically I was saving. I created two bank accounts, and this was my method. I got my paycheck in one bank account, I pulled out about $1,000, I put it in the other one, and I just lived off the rest. For the first year, that’s all I did. I just saved money, about $1,000 a month, all in Japan. In Japan, we have pretty much a 0% interest rate. The banks give you a 0.005% return, so we’re not getting very much on that, but it was the first step. Then after I’d been working for a year, I met my wife. This is going to sound bad, but she was a student, an adult student, at one of the schools that I taught at. Yeah, I always have to clarify that.

Mindy:
Thank you for clarifying.

Daniel:
Yeah, an adult student at the school where I worked. We met, and we got married maybe six months after we started dating, so it was quick. We’ve been married for over 12 years, so I think it’s worked out.
The great thing about my wife, and I think this is an interesting point, too, because if you are moving abroad and you are single and you’re looking to date in your country that you’re staying, one of the issues is cultural issues around money, cultural differences. In Japan, the basic culture around money is that women control all the money. Men work, and they work tremendous hours usually, all the money goes to the wife, and she takes care of it. The husband gets an allowance.

Mindy:
I like that a lot.

Daniel:
Yeah. Well, lucky for me, my wife was not like that at all. She didn’t like that system. I think on our first date, we were talking about stocks and how I was starting to invest and everything, and she told me later that this was one of her little checkpoints, that she was like, “Okay, this is good.” She’s not very traditional in that sense, but we hit it off right away with our talk about money on the first date.

Mindy:
Wow. I love that you talked about money on the first date.

Scott:
Was it in English?

Daniel:
In Japanese. Probably the first two years with my wife, we only spoke Japanese. Then her English has gotten way better than my Japanese because she did a master’s degree in a U.S. school, so now she’s much better.
But yeah, so it was right after we met, I was able to open my first brokerage account in the U.S., and I started investing, just following along exactly what the book told me to. I think I just did VTSAX, the Vanguard Total Stock Market Index, and those were my first investments.

Mindy:
Wait, The Complete Idiot’s Guide said put it into VTSAX?

Daniel:
Yeah.

Scott:
This is a great guide. I’ve never heard of this book, but-

Mindy:
Yeah, I don’t like those books because of the title, The Complete Idiot’s Guide. I’m not a complete idiot, so I’m not going to read the book. But I am going to read the book now.

Scott:
Apparently, we’re reinventing the wheel over here.

Daniel:
Yeah. Their stock picks, their index funds were VTSAX, and they told you at certain dollar amounts, go to the bond, put a little bonds in there, do the Vanguard real estate one. They just went through the whole thing, and that’s what I followed. Just put it in like they told me to.

Scott:
You said you had 15 grand in student loans at the time. Did you invest or pay those off? How did you think about the balance between those?

Daniel:
At this point, I didn’t pay them off. I just kept investing. In the following year, I did pay them off. The reason is that when I got married, first of all, my wife is bringing in extra income. She worked as a university administrator at the time. But the exchange rate dropped, so it became very favorable to the yen. I, at that point, went into my next phase of investing. It wasn’t just saving. I wanted to make more money.
This was around 2008, and it was a perfect storm for me. I know it wasn’t great for everybody else. The yen increased in value. A lot of Japanese companies started to suffer because they couldn’t do their exports. What happened was one of the companies, I knew somebody who worked there, they had a grant from the government where they would pay half of the employees’ salaries for every hour of training they got. Because they weren’t making any money, they decided to hire me for 12 hours a week to teach English to 300 students at one time for $100 an hour. In addition to my full-time job, I was doing that.
I eventually had to… I started a little business. I started hiring people to do the classes and taking 50% of the cut because I couldn’t do it all myself. Then, in addition to that, I found a few other companies that wanted the same deal, usually in the evenings, and I started teaching there. I was receiving $100 to $200 an hour teaching students at that time, in addition to my $30,000 salary. That was the part at that time in 2008, I believe is when I paid off my student loan entirely, and my credit fell.

Scott:
At this point, 2008, you’re married, you’re debt-free, you’re beginning to invest in these assets. How are things feeling, and what happens next?

Daniel:
Yeah, so at that point I realized that I didn’t want to be one of these guys that got stuck in the eikaiwa life, $30,000 a year, because I knew some of them had had some good years, too, where they had these great extra income or something. I knew that I had to go back to school if I was going to stay in Japan, so I went looking for a master’s program at that point. Even at that time, a lot of degrees are offered online, so I found one that didn’t cost a lot of money, Shenandoah University in Virginia. I did a master’s in education there. They had a grant where if you got selected to the program, 50% of your tuition was paid. I was determined not to get any more student loan debt at that point.
So I did that. I started my classes, working full-time and, of course, doing these extra classes. Scott mentions it a lot with a lot of the guests, there’s this period of hustle that’s for a period of time. Mine was about eight years where I just went crazy. I’ll tell you a funny story at the end of what happened at the end of that eight years, of what I ended up doing, but I’ve become much lazier since then. But it was necessary for those eight years, I think, to really put in the work.

Mindy:
You’re living in Japan, teaching English to Japanese students, and taking classes at an American university in English for eight years.

Daniel:
Well, for the master’s degree, it took me three years. The eight years is then I started my doctorate degree.

Mindy:
Oh, well, of course.

Daniel:
Yeah. The reason I did that is after I got my master’s degree, that qualifies you, that and some publications, to get a university job. That was life-changing, because going from $30,000 a year to a full-time university lecturer position, I think it was $55,000 or $60,000 a year, I’d never earned that much in my life, so it was great, and in addition to that, a lot less work. You’re teaching 10 classes a week. They’re hour-and-a-half classes, and they’re all pretty much the same class, so you don’t need to do a lot of preparation. We’re talking 15 hours a week of actual in-the-class work, maybe another 10 hours of preparation or whatever else, grading or something. I hit the jackpot.

Mindy:
I think that’s a very interesting comment that you made, “It was a lot easier.” This higher-paying job was a lot easier. When I was younger, I worked at Dairy Queen, and that is not a cushy job, for all of you who are thinking, “Wow, she’s got such a glamorous life.” You run when you are at Dairy Queen, because I was working there in the summer and it was very hot outside and there was this huge line all the time. It was just constant go, go, go for $3.35 an hour.
I have found that as I get more educated, my jobs are easier. As I have more life experience, as I have more everything, my jobs are easier and I’m making way more money. I’m talking to my husband, too. He’s like, “Yeah, my first job was at McDonald’s, and you run.” I think everybody should have to work in food service because you will learn what a delightful job that isn’t. You work really hard for that $3.35 an hour. But when you’re up at the $50 and $100 an hour, it’s more mental than physical. I don’t come home from work exhausted. When I worked at Dairy Queen, I came home from work exhausted. I just think that’s funny.

Daniel:
Yeah, I think you’ll find this interesting. My wife’s first job was Dairy Queen in Japan.

Mindy:
Oh. Mine was in Orland Park, Illinois.

Daniel:
Yeah. I didn’t even know they had Dairy Queen because I’ve never seen it here. My wife comes from a pretty small town, and I was surprised, because whenever we go to Hawaii, that’s the first place she wants to go is Dairy Queen. She still loves the food. She didn’t like working there, though.

Mindy:
It’s an interesting experience, but I learned how to make that little curlicue.

Scott:
Brandon Turner gets started at Cold Stone Creamery, so we’ve got a small-

Daniel:
Ice cream.

Scott:
One job that leads to successful investing at first, it’s ice cream.

Mindy:
What was your first job, Scott?

Scott:
My first job was working for my friend’s dad, who was a real estate investor. I would have odd jobs. One time, he gave me a set of keys, and I had to go to one of his housing developments. It was a bag full of keys, and he was like, “Try the keys in all the doors, and tell me which one goes to which.” It took me like four hours to do this. There was like 150 keys. I was like, “Nope, not that one. Nope, not that one.” Collect the cash. I’d collect $10,000 in cash.

Mindy:
Wow. That was your first job? How have I known you for 100 years and I never even asked you what your first job was?

Scott:
Yeah, I was a strange utility guy. I was bigger, so that may be why I had to collect the-

Mindy:
Yeah, Scott’s a big dude.

Scott:
Yeah. I didn’t intimidate anybody for the rent, but hopefully I guess they would… I could’ve gotten shot. Okay, moving on.

Mindy:
Okay, back to Japan. You have a master’s degree. You got your doctorate degree.

Daniel:
Yeah, so at that point I got that first job, I realized how great it was, and I found out that if I wanted to get a tenured position, which is even better, I need a doctorate. I immediately enrolled in a doctorate program. All the way up until 2016, I was basically doing the same thing. I was working full-time, but less, because not only are the hours, but we also get summers and spring off. We’re talking almost seven months a year of actual work, and the rest is paid vacation. Of course, we have obligations to do research and whatnot, but it’s still a lot better.
I graduated in 2016 with my doctorate degree, and just everything worked out. My university needed a tenured professor, so I got hired there, which doubled my salary. It’s just the best job in the world. I can’t imagine doing real work. I hope none of my bosses are listening.

Scott:
During this eight-year grind, you were able to avoid debt, it sounds like, but were you also able to build wealth during that period?

Daniel:
Yeah, so we were doing the same thing. My wife was mainly the money in Japan. She kept her money in Japan. I sent everything back home I could, and it was all index fund investing. The first breakthrough into real estate, though, in 2014, first of all, we purchased our apartment where we live in Japan. That was a big decision.
I’ll tell you a little bit about real estate in Japan. It’s a very interesting market. It’s basically like, and this is a generalization, there’s some different real estate that might work differently, but basically if you buy a house, it’s like buying a car in the United States. The value just depreciates over the course of time. Even the rents go down that you could charge for that property. I was very worried about that. I thought, “Why do I want to invest money in Japan when the value is going down?” Now, they do offset that a lot in the way that you can a lot of times get 0% down loans, and the interest rates are below 1%. So when you start weighing that, it starts to make sense.
Luckily, I also have a very money-savvy wife who realized that buying a brand-new apartment, which is what most Japanese people do, is not the best way to build wealth. Instead, we bought something that was 15 years old, that had already depreciated pretty much to its bottom, but it was right next to the station. It’s five minutes from the station and five minutes from a big shopping center and everything. So we bought that. It was about $170,000 for a three-bedroom, and this was a lucky break. We found out, my wife didn’t even know it, but she had actually received an inheritance from her grandmother when she passed away. We used that money as the down payment, so we didn’t even come out of pocket for that. Amazingly, this property, and this never happens in Japan, has actually appreciated. It’s worth about $210,000 now, and that’s six years later.

Mindy:
Why did this one appreciate?

Daniel:
Most of the population in Japan is going down almost everywhere. For some reason, this small town where we live in, called Kusatsu, people wanted to move here and people are having children here. It’s a little different than the rest of Japan. Because of that, the money has poured in and they’ve built wonderful parks and facilities and all this type of thing. We live right behind a really nice park area that has restaurants and walking areas and cherry blossoms and everything you can imagine. We just really lucked out on this. I will, of course, concede that we inherited the money that we put in here, but when you look at my net worth, this really hasn’t helped build it because, in Japan, there’s no HELOCs, there’s no cash-out refinances, so I can’t tap this cash. We’re just living here. It’s trapped money, but it’s a great place to live, so very happy with it.

Scott:
It’s just funny, because I wasn’t thinking about this prior to our chat here, but yeah, okay, the population is declining in Japan. There’s a whole bunch of reasons for that, which I’m sure could be a whole podcast or several podcasts describing it, but that’s a fundamental difference, I think, between Japan and the United States and real estate in general. Here, there are a lot more people coming into the United States on an annualized basis. Population growth is pretty stable, predictable, and there’s not enough housing supply. There’s plenty of land. That’s what we’re seeing there, and that’s driving all of these fundamentals that we take for granted here in the United States around real estate investing. That’s fascinating.
I also think it’s fascinating that you took money out of Japan and invested it into the United States. Is that mechanically challenging? It’s simple conceptually, but is there a difficulty in doing that as a foreigner, or living abroad?

Mindy:
And is it financially difficult? Does it cost you money to send it over here?

Daniel:
It does. There are some really great services. I’ve evolved as I’ve been here, but I currently use something called TransferWise. It seems to be the cheapest way to send things over.
Yeah, one of the biggest issues that we have is, after 9/11, with the Patriot Act, has made it very difficult for United States citizens abroad to deal with money in many ways. Just to get an overview of what goes on, basically, in Japan and in foreign countries, a lot of times they don’t want to work with Americans because the U.S. government requires that they do an exceptional amount of reporting on those Americans and what they’re doing with their money abroad. It can be very difficult to open any sort of thing here. I was able to open bank accounts. That was fine. But you can’t open a brokerage account, and it wouldn’t be tax wise to do that anyway because the U.S. is one of the only two countries in the world, and the other one is a very small, I believe, African country, that requires its citizens to continue to report and file taxes while living abroad. There is restrictions on that with investing in foreign passive investment companies.
So you’re kind of stuck. You can’t invest there, but then when you go back to the U.S. and you try to open a bank account or try to open a brokerage account, most of them will say, “Well, if you have no U.S. address, we can’t service you.” So there’s no way to do that. Actually, the first brokerage account I opened, I did that. I used, at the time, my parents’ address when I had opened it, and then my parents moved abroad. They moved to Thailand. Yeah, my father had another company there. And I called the brokerage company and I said, “Yeah, we’re living abroad,” and they immediately shut my account down.
I was upset and shocked. I was thinking, “What am I going to do? Can I not invest as an American? Do I have to go back?” After talking to different people, and I’m definitely not giving advice here, I’m not a CFP or a CPA, but I’ve talked to a lot of different specialists in the area, and what I was told first of all is, “The first option you have is that you can create and establish an address, a residency, in the United States,” and you can do that in a variety of ways if you do have family living there and you’re visiting, and you have a driver’s license and you pay maybe the bills and things like that. This is a bit of a gray area, but I’ve talked to them and they said there’s nothing illegal about doing that. But it’s one option.

Scott:
You can have my laundry room for a thousand bucks a month if you’d like.

Mindy:
You could rent mine for 900.

Daniel:
Maybe this is a good business. We should talk about that.
That’s one option. The other one is you invest through a broker. In Tokyo, you’ll find American stockbrokers, but of course you’re handing over a lot of fees there to do it and they’re registered in the United States. Then the final one, which is probably the best option, is there’s a few brokerages that will deal with you, usually only if you’ve opened your account in the U.S. first and then you move abroad. Fidelity is one that I’ve talked to, and they said it’s completely okay to have a Japanese address. There’s some countries that are restricted, but Japan is fine.

Mindy:
My parents live in an RV, and they travel around the country building churches. They don’t own a house. They have a house on wheels. They have residency in South Dakota, which doesn’t have state income tax, and South Dakota’s residency requirements are you have to have an address, like a Mail Boxes Etc. Do you know what that is?

Daniel:
Yeah.

Mindy:
You have to have an address there that’s like a P.O. Box or a suite or something, and you have to sleep in their state at least one out of 365 days a year. That’s it. You just have to sleep over, and you don’t even have to sleep over in a house. My parents sleep in a hotel one night every year in South Dakota, and then they have a South Dakota residency. They have South Dakota license plates and South Dakota driver’s licenses. I wonder if North Dakota does that, too, because they have very low population.

Daniel:
Yeah. Those are all probably good options that you could do if you’re in the situation, but it’s just something you’re going to have to research.
We’ve found so many things in the 14 years that we’ve lived here. Our estate planning was something that was a nightmare. I initially went to do estate planning and asset protection through an attorney in the U.S., and he promised me, he was like, “We know what we’re doing. It’s fine. You just need to do this, this, and this.” Luckily, I didn’t listen to him.
Because you’re paying taxes in both countries, so one of the things, of course, he wanted me to do was to transfer my rental real estate into LLCs. Well, in Japan, they don’t have an LLC like we have it, so that’s a sale. If I send it to my LLC, then if I own it, I’ve got to pay the capital gains tax and the recapture. It would’ve been ridiculous, and you can’t do it. There was a lot of little things like that. In the end, when I did my estate plan, I had to get a Japanese CPA, a Japanese attorney, a U.S. attorney, and a U.S. CPA to work together to come up with the plan, and it was very expensive.

Scott:
Geez. Going back to your story for a second, mechanically, how did you… Did we ever resolve this? How did you invest in the United States mechanically? What option did you choose?

Daniel:
Yeah, I maintain residency in the U.S. I maintain a residency in Idaho.

Scott:
Got it. Okay, so you said earlier that we were going to hear something funny at the end of your story. You said you spent eight years grinding it out, and you became a tenured professor. You solve all of these ridiculous, crazy problems around residency, investing out of state, just trying to maintain the very basic, simple approach to wealth we tout here on the Money Show all the time, from Japan. What have we got? What’s the fun part here?

Daniel:
Yeah, so I did my doctoral defense, and I was absolutely exhausted. I had all these plans of what I was going to do when I finished. Travel. I had other research I wanted to do. I ended up, it was summertime, so I had no work teaching, I sat on the couch and I started watching Friends, and I did not leave that couch until I watched all 11 seasons of Friends. My wife used to leave in the morning, because she had a more nine-to-five job, and I was still on the couch when she came back. I was mentally exhausted, so for those few months, I didn’t do anything. I was on a break.

Scott:
There you go, a well-earned sabbatical after an enormous grind. That’s awesome.

Mindy:
Scott doesn’t get it. Did you ever watch Friends-

Scott:
Too bad Game of Thrones wasn’t out yet. Yeah.

Mindy:
Scott, did you ever watch Friends?

Scott:
I watched a handful of Friends, yeah.

Daniel:
When Ross cheats on Rachel, she’s upset at him, and he says, “We were on a break.”

Scott:
Oh, yes. Okay, now I get it. Yeah, I don’t know Friends well enough to go back to that kind of stuff.

Mindy:
I know Friends well enough, and my girls-

Daniel:
Yeah, me too.

Mindy:
… are starting to watch Friends.

Scott:
All right, so we’re a tenured professor now. You just finished. You’re binge-watching all the many seasons of Friends. You finish up with your break, which I didn’t know. I didn’t get. What happens next? What’s your wealth position in a general sense, and what happens in the next couple years?

Daniel:
Well, a little bit before I got the tenured position, I started investing in real estate, but it really ramped up once I finished my doctorate and everything. In 2014, I had been putting feelers out, I think it was on Facebook, saying that I wanted to invest in real estate. That was the next step in the book that I told you about, invest in real estate. I was following that book. I’d read a few other books at the time about the subject.
A friend reaches out to me, and he’s actually a lawyer in Los Angeles. I went to high school with him. He said, “Me and all my partners are all investing in Boise, Idaho.” This is in 2014. He said, “We got a property manager. We’ve got a real estate agent. If you want to tag along, you can.” I just thought to myself, “This is the best thing ever. This property manager is not going to piss off a bunch of lawyers from LA, so I’m going to go in with them.” I didn’t know anything about the market. Luckily, you guys probably know, Boise has been one of the largest growth markets in the country, if not the largest.

Scott:
[Crosstalk 00:38:50].

Daniel:
Yeah. I got in there and I got great advice. The guy that I worked with there, a real estate agent, he was also an investor, so he recommended a town right outside of Boise called Caldwell. The strategy he gave me, which I think was just a one-off strategy, but I capitalized on it, was to find four-bedroom, two-bath houses with a bonus room, and then turn the bonus room into a fifth bedroom because there was a lot of large families that were living in that town, and you could rent it for the highest price. That’s what I did. I found two of them, one after another, and did the same strategy, fixed them up. At the time, it was a bit of deal, but I could buy-

Scott:
Can I-

Daniel:
… it at the 1% rule. Yeah?

Scott:
Let me interrupt for just one second here. You’re coming out of this eight-year period and you’re able to avoid debt, but you’re also able, it sounds like, to generate enough of a liquidity position in addition to your investing to support this. Is that right? Is that just a result of grinding it out over eight years to accumulate that liquidity, or is there any other forces at play in allowing you to come up with the cash for these investments?

Daniel:
Yeah, it was just saving and investing. Everything I invested in was in a taxable brokerage, and that’s maybe another component here, because as somebody living abroad, if you don’t have earned income in the U.S., you can’t invest in an IRA or a 401(k) or anything like that. Everything is going to be taxable unless you can start generating an income in the U.S. or you go over… There’s the earned income exclusion on taxes, so if you get over that earned income exclusion, over like $110,000 for an individual or something, you can start investing that into an IRA. But I wasn’t at that level, so everything was taxable brokerage. I did cannibalize my brokerage quite a few times over the next couple of years at this point in order to buy real estate because I was getting so much better of a return.

Scott:
So you shifted money out of your index funds, basically, into real estate. Okay.

Daniel:
Yeah, exactly. Yeah, so we did the two in Idaho. At the time, I could buy them at the 1% rule pretty much, $120,000, rents for $1,200. Those properties are now worth $300,000. I did a long-term BRRRR. Eventually, I was able to take that money and continue to grow.
The first properties were in Idaho. I was still chasing the 1% rule. I think that’s an interesting thing that I’ve learned over the time. I had it in my head so much that 1% rule is what you need to go for, that once prices started to rise in Idaho, I stopped buying. I wish I never did, but I did. I moved to another market at that point. Throughout 2015 all the way up until, actually, last year, I bought a number of properties in Memphis.

Scott:
Were you using BiggerPockets as part of that process to invest in the United States? I’ll explain why I’m asking that. It’s not just nepotism or me plugging BiggerPockets here.

Daniel:
Yeah, I was definitely using BiggerPockets. I was looking up things and people. It was after the Boise investments that I started to get involved in BiggerPockets, because when I did Boise, I didn’t have any idea what I was doing. I just followed along with what the real estate agent said, and I’m just lucky that it all worked out.

Scott:
Well, I just want to chime in that I think that the community, especially in 2014, ’15, ’16, I would say that the 1% rule was just a sacred number within the BiggerPockets community. I think that was a big disservice to a lot of investors, because as interest rates fall, you can still cash flow on a lower than 1% rule situation. That’s a reality. That’s a big lever that I think some people missed. I just wanted to chime in with that, that I got kind of sucked into that as well, and it’s been hard to fathom investing. I think a lot of people have lost money by not sticking to a formulaic approach long-term investing rather than attempting to chase that higher 1% rule. Anyways.

Daniel:
Yeah, it’s something I tell a lot of people on the BiggerPockets forum because I’ve learned that lesson. It depends on your situation. If you need cash flow, you need cash flow, but if you have a great job like I do, and there was other factors in play, and I think this is… I told you about why I didn’t invest in Japanese real estate, because the prices are falling, but that actually created an incredible loophole which we ended up taking advantage of.
My wife and I didn’t even know about this, but the first time we went to file our taxes in Japan, we went to the Ministry of Tax and we showed them our tax return. We said, “We’ve got this U.S. real estate. We don’t really know how to calculate it.” The guy is like, “You’ve done this all wrong.” He’s like, “All of these houses are over 20 years old. In Japan, we have a rule that if it’s over 20 years old, the entire structure can be depreciated in four years.” In Japan, the structure is worth nothing, and you can take that directly off your income. If you have a structure that’s worth $100,000, in one year, $25,000 can be cut from my income, so my income goes from 100 grand to 75 grand. If you buy four houses in a year, you’re paying zero taxes. Rich Japanese people have known this for years.
The thing is, next year, they caught the loophole, and it’s being closed. I’m really wondering how it’s going to affect markets like Hawaii, like Honolulu, because Japanese people have been investing there, and they’re doing it for a tax purpose. That’s why they pay premium prices. They don’t care. They just want the tax loophole. But I think I found a better deal with it because I was buying cash-flowing properties that were giving me the tax loophole, and all that cash flow I was able to also write off because of all the other expenses.

Scott:
That’s awesome. You’ve already won with that. Now you have a great problem where you’ve got all this benefit from depreciation, but now you’re going to not be able to offset your income with depreciation like a lot of other real estate investors. Is there a strategy in place for that challenge when they catch the loophole in the next year or two?

Daniel:
We are working on it. My wife, in Japan, she’s taking the certification exams for certified financial planner and tax preparer and all these type of things, so she works a lot on our Japanese side. They haven’t written the law yet, so we don’t know what it’s exactly going to say. We’ve brainstormed some different strategies. One thing my wife thinks is that they’re going to still allow depreciation of capital expenses, so she’s wondering if we can do some sort of big BRRRs, like do some BRRRs where we have a lot of capital expenses upfront. Maybe it’s going to be a longer period of time, but we’ll still be able to depreciate it. But there’s a possibility that they’ll just say no foreign real estate, because there’s no benefit to the Japanese government to allow people to buy foreign real estate and then depreciate it off of your income in Japan. We’re going to have to see.

Scott:
That’s fascinating.

Mindy:
Yeah, I wonder what that’s going to do to the Hawaii real estate market, and even some southern California.

Daniel:
Yeah. I’m looking at that. I don’t know how much it’s going to affect because there’s other foreign forces in play. There’s still Chinese investors and whatnot that want to keep the market afloat, and they also have their own reasons.
This is one thing I often say on the BiggerPockets forums, because people say, “I don’t understand why these people are paying so much for real estate, especially in multifamily.” It’s because if you’re a rich Japanese businessperson, you’re making a lot of money, you can just depreciate everything. The play is different. You have to know what you’re investing in. It’s not all about cash flow. It could be about appreciation. It could be about tax advantage. For us, that was a big part of it.

Scott:
Going back, that’s just absolutely a fascinating discussion around that, and a perspective-changer. It’s just going to make me think about the world slightly differently, so thank you. That’s super valuable.
Jumping back to the fundamentals here, you’ve got a position now where you’re comfortably employed, it’s something that you seem to really like and that you really enjoy and are thrilled to be doing, I think you’ve described it as like, “I get to do this?” That sounds great. You have dual income with your wife. You have investments in after-tax brokerage accounts and real estate. You were mentioning, I think when I interrupted you, that you have investments outside of Boise as well. What’s the fundamentals of your portfolio and that progression from that point where you shift out of Boise to wherever you are now?

Daniel:
Yeah. Just to give an overview first, so I have a couple of different portfolios, I guess. My personal portfolio, which are all in my name because part of that tax advantage is you have to have them in your name… You can’t have them and then LLC. Those are taxed different in Japan.
So I had the two properties in Boise and then I started buying in Memphis, Tennessee through a turnkey company. You hear some bad things about turnkeys. I, again, must’ve hit the jackpot because, to this day, I’m getting 20% cash-on-cash return on every one of those properties, and they’re my most trouble-free properties. I’ve had the same tenants from day one. I think only one of them have changed. I own five in Memphis. Yeah, so I have five in Boise, and then I actually own one with my mom there once I ran out of loans, which I can talk about in a second just to cap it off.
Then I moved into Alabama. I bought one in Fultondale, which is right outside of Birmingham. That was also a turnkey. I wasn’t as happy with the experience. Then, and this is the big move, I went into Huntsville. I started to learn a lot more about real estate, and I realized that market is key. I did a lot of research, and I chose Huntsville. That is what set off my bigger portfolio because later on I did partner with people, and we now own about 50 units in Huntsville. That’s maybe a different conversation, but the first part is my own properties.

Scott:
Can you walk us through, very briefly, the how of the financing piece? The real estate story, we might have to just get to another time with all this stuff. But the how of the personal financing, was this at the expense… Did you have to liquidate large portions of your investment portfolio in index funds in brokerage accounts, or were you able to snowball it? What did that look like? Then how did getting loans work for you in the United States?

Daniel:
Yeah, so it’s a little bit of everything. At first, we did have the cash. The first house we bought, my wife actually had the cash saved up, and we did that. Then I think the next one, it was my cash that came in. Then we started liquidating a little bit of our funds. But after a while, the cash flows coming in, we still have high-enough income and everything like that, and eventually we’re able to start refinancing some of these properties that allowed us to keep buying, especially at that time.
The thing with the financing, this is very interesting, so I mentioned that one of the negatives of being an American is that you have to continue filing taxes in the U.S. One of the positives is that we can still get conventional financing on U.S. homes because we’re filing taxes in the U.S. There’s a lot of mortgage brokers that won’t want to work with you or are not experienced enough to do it, but when you find the right ones, it’s the same process.
The only issue here is that I have to translate a lot of documents, and depending on the mortgage broker, they might want you to get those professionally translated, or you could do it yourself. That can be a big difference in expense. Then when you do the actual notary, it’s much more expensive in Japan because you have to go to the consulate, and consulate charges $50 per seal. A typical house will be $350, at least, $400 maybe. A few times, we actually flew to Hawaii to do it because it was cheaper to go and have a vacation and then do three refinances at once. So those are some of the issues.

Mindy:
That’s not very fi of you to fly to Hawaii to refinance three houses.

Scott:
That’s a business expense.

Daniel:
Yeah. I may have been there on a business trip when I did it.

Scott:
Yeah. Makes you depreciate-

Mindy:
That’s way more fun.

Scott:
… these types of things.

Daniel:
Yeah. But yeah, that personal portfolio that I’m talking about in my name are mostly single-family. The newest one I did is I actually built a duplex, and I bought that with a friend of mine here. Most of them are single-family, except for one duplex. Then the big portfolio is where we went to next. Do you want me to go on to that, or do you have a question?

Scott:
Well, just quick question, why… We talked about how Japanese real estate is tending to depreciate, but you imagine that there’s a way in there, especially with the gift and all that kind of stuff that you talk about, was there any consideration around investing in Japanese real estate and applying some of that skill there? Why stay away completely?

Daniel:
Yeah, so I think there is, and there may be something in the future that I do, both for diversification, but also maybe there’s some tax benefits. Maybe that’s the only place to get those tax benefits. My business partner, who I eventually bought the Huntsville properties with, he actually owns two large buildings in Japan. He was able to do that because, at the time, which was a few years ago, the banks were giving 110% loans for people to buy apartment buildings. He had no money out of pocket to buy these apartment buildings, and it’s getting paid down. Even though there’s some depreciation, rents could go down, he’s still making a lot of money on it.
Unfortunately, there was a little bit of a bank scandal that happened here, and after that, they stopped with these 0% down loans. Now we’re at 20%, 25%. I’m still very interested in it, and I know people who are making good money in Japanese real estate. There’s a lot of little techniques you can do. I know some people, for example, that are looking to buy houses and rent them to American, mainly, military here because they get a stipend for their housing, and you can rent it at higher rates. There’s all sorts of things you can do. But whenever I do a one-to-one comparison of what I’m getting in the U.S. with the cash flow plus the appreciation, and then I look at Japan, I just almost always come back to I think the U.S. one is going to be a better investment.

Scott:
Love it. Okay, so tell us about the big investment now.

Daniel:
Okay. Yeah, I’ve been chomping at the bit to tell you this one because it’s also another funny story, I guess. I got to credit BiggerPockets for this because I met my two business partners on BiggerPockets. One of us has actually… Let me see. I’ve met both of them face-to-face, but one of my partners has only met me. One of the partners, the same one, has never, ever been to Huntsville. We formed this partnership on BP because we were some of the only people that had a big Japan connection. We’re all married to Japanese women. Two of us were living in Japan at the time. One of us is in Hawaii.
But my partners, one is a real estate attorney and the other is a commercial lender, so it’s great. I’m the oddball out. They used to call me the kanban musume, which in Japanese means the poster girl, because I was making all the connections. I had discovered Huntsville. I had made tons of connections there with people, and I knew the market.
So we teamed up, and we were just going to buy a fourplex. That was the plan. We tried to buy. Lots of things fell out. Our realtor came to us with 19 duplexes and just one portfolio, 1.5 million, owner financing, 4% on the owner financing. But here’s the deal. We weren’t allowed to inspect before we buy. Of course, we’re like, “We’re not going to do this. There’s no way.” But we were really having a hard time finding it, and our realtor, who is a third-generation realtor in Huntsville and he’s a big investor, he said, “Guys, I believe in this one so much that I’ll invest with you on it.” We were like, “Really? Okay, we’ll consider it.”
We did a dumb thing, but I think the market saved us. We basically went into it… It really wasn’t a dumb thing, especially for my partners, who’ve gone on to be syndicators in the area, because it really broke us into the market. But once we got hold of the property, not only did we get the properties, we also got three workers. We had a full-time property manager that lived in the area. He looks like Yosemite Sam, carries a six-gun on his hip, and he’s been working there since he was 15 years old. Then we had two maintenance guys that were full-time, and we had two trucks. We got a big package of stuff.
It’s been a complete adventure. When we finally went in to inspect those properties, one of them had a hole in the floor to the ground. When we told the tenant, “We’ve got to fix this,” they were like, “No, it’s okay.” That was the level of what we were dealing with. Our initial plan was we were going to… Again, this is a big mistake, because we thought, “We’ve got a lot of cash flow coming in. We’re going to use the cash flow to fix up the properties,” so we were undercapitalized when we went in.
Basically, two and a half years later, we have changed our strategy, and it’s worked because of the market. The market just went up, and we’ve been able to sell them one at a time. Right now, we have five under contract for much, much higher prices. We basically have done a long-term flow. And we’re not going to just make our money back. We’re making a great return on those properties, but it’s been a big adventure for two and a half years now.

Scott:
That’s awesome. That’s a huge risk that you guys took, and a gut check, but it seems to have paid off really well.

Daniel:
Yeah. It’s really funny. One of the things is, with my partners, we call each of our properties after a Japanese food. Those ones are called gyoza. I don’t know if you know what gyoza are, but they’re little dumplings, because there are 19 duplexes. So those are our gyoza.
Yeah, as I said, it was a gigantic risk. It’s not something I’d recommend, but it got us into the market. Everybody knew us. Right after that, we got offered a 12-plex which was almost brand-new. So we were able to buy a 12-plex after that, and that was our next purchase. I only own a small portion of that 12-plex because I couldn’t add much to the deal.
My partners have now moved on. At that point, I realized that I didn’t want to be a syndicator because of all the work we’d been doing on this other stuff, and sleepless nights and everything, so they decided to be syndicators. They are syndicating two deals currently in Huntsville. They already closed on one, and they’re doing really, really well. It’s great that we got into this, but crazy story.

Scott:
I just want to point out that, yes, sure, there’s some luck involved in that stuff, but let’s be real here, you’re not some hot-shot executive or whatever with all this stuff. You taught English, and now you’re a professor. You saved your money, and you built a financial fortress grounded out over a very long period of time, constantly referring back to, I think it’s The Idiot’s Guide to Getting Rich, along the way, and built this financial position, took a couple of risks as you got more comfortable, built a sizeable financial position, and then found yourself in a position where you’re like, “You know what, this could be an opportunity, and this is what opportunity can smell like with this. This is what risk…” You were able to do that. If you’d gotten wiped out on that deal, what would’ve happened to you?

Daniel:
Not much. I’d be set back about a year. It was money that we had refinanced out of our original Idaho properties. I think my initial investment was $75,000. I invested a further 50 since then. But my total net worth right now is probably about $1.2 million. So it would’ve hurt, but it wouldn’t have wiped us out. I’m also really lucky I have… I’m a little bit high-strung and I get stressed out. My wife is so calm about these things, and she’s just like, “It’s okay. We learned a lesson. Don’t worry about it.” Luckily, it’s worked out.

Mindy:
Yeah, I want to point out that you invested, you bought properties that you were unable to inspect, forbidden from inspecting, I think is the better way to say that, so that is not a rookie move. If you are listening to this and you have $10,000, and you get this, “Ooh, here’s 19 duplexes,” but you can’t look at them before you buy them, that’s not a good idea. That is an incredibly bad idea. That’s a great way to lose all your money if you don’t have a financial cushion. But because you have spent so much time investing and saving, it sounds so crass to be like, “What’s $50,000 or $75,000? It’s not going to ruin me,” but that’s investing from a position of financial strength, which is something Scott harps on all the time.

Scott:
Yeah. You just did all the fundamentals right.

Daniel:
We had our runway.

Mindy:
You had your runway.

Scott:
Yeah. You had all your fundamentals.

Daniel:
Yeah. Again, I always tell people, don’t do what I did in this case, but the market is also another part of that. If we had done this in somewhere like Memphis, where you have a flat population, it’s one thing, but Huntsville has now been nominated as the next space command. It’s rocket city. The population is growing like crazy. The properties that we bought, I think they’ve almost… Some of them have almost doubled in value since we bought them, even the ones we weren’t able to fix up.
We have lots of people exiting 1031 exchanges in California and they want to buy property in Huntsville, and we got in there three years ago. A big part of that was me learning how to analyze markets. As I said, I don’t bring a lot to the deal with a lawyer and a commercial lender because they know way more than me, but the one thing that I did bring was the market analysis. That really helped us.

Scott:
Yeah, that’s it. Sometimes it is rocket science.

Daniel:
Yeah.

Mindy:
Okay. Well, we’ve talked a little bit about what you’re investing in real estate-wise, but we haven’t talked about what else you’re investing in. I know in advance that you invest in crypto, so I want to talk about where you are putting your money besides your index funds and besides your real estate investing.

Daniel:
Yeah, so there’s not much more than that. Just to add one little thing to real estate, this year I have invested in some syndications. I’m an LP in a few different syndications.
Besides real estate and index funds, the only other thing is I started to dabble in cryptocurrency. One of the things that did it to me is, maybe a couple of years ago, a friend of mine who doesn’t invest very much, he said to me, “Hey, are you going to invest in Bitcoin?” I almost regurgitated what Scott says quite often on this show of why I wouldn’t invest in Bitcoin. And of course, it exploded. I thought to myself, “If I had maybe up to 1% of my net worth in crypto, it wouldn’t be such a bad deal.” It’s a black swan event. You can capitalize on it.
In addition to that, there’s some really interesting things that are going on with crypto. Big banks are starting to approve the stable coin as a means to transfer with blockchain. There’s a lot of large brokerages that are buying in to Bitcoin. We can’t really know if Bitcoin is going to win out, but I thought a small position… Currently, I think I’m at 0.5% of my net worth right now. I might bump that up a bit, and that’s all I’m doing.

Scott:
Yeah, I have a tiny amount in Bitcoin, as well, in crypto because I don’t view it as an investment. I view it as a part of the cash position, and the cash position involving dollars, involving gold, involving crypto, involving whatever other currencies they have in there. Look, I’m skeptical of inflation. I’m skeptical of crypto in a general sense. Who knows if Bitcoin is actually going to be… There’s a whole bunch of problems, all these people losing their passwords, all these other issues. Who knows what crypto is going to win out at the end of the day with that, if there even is one with that kind of stuff?
Yeah, I just think it’s not really… You’re not going to get rich investing in a currency or in a store of value. You’re going to get rich investing in an asset that appreciates in real value against whatever currency you’re trying to live on and then also produces that cash flow.

Daniel:
Yeah. One thing I don’t know about my strategy because I’ve never really invested in single stocks or anything, is that at what do I harvest the returns. Do I just let it ride? Right now, I’m just letting it go because I don’t have that much in it, but it’s very volatile. Is there a point where, if it does triple or double, it already has since I’ve had it, do I pull my original capital out? I’m not sure.

Scott:
I think it’s going to be super volatile, but I also wonder if the dollar is going to be very volatile. That’s where it gets hard.

Daniel:
Yeah, I wonder if I can capitalize on that as somebody who’s earning in yen. We’ll see.

Scott:
Yeah, we’ll see. Very interesting. Could you give us a quick overview of your portfolio?

Daniel:
Yeah. I don’t have the percentages actually in front of me, I think, anymore. Cash, I think I’m at about 7%. That’s all. That includes cryptocurrency. I think I have 1% bonds. After listening to you guys… I used to have about 20% bonds, and I think after a few of the shows, I was like, “Yeah, there’s no reason I should have that much in bonds right now.” That’s gone down to about 1% of my portfolio. I think I have about 20% currently in stocks.
I want to beef up that position. I feel like I’m at a point right now where actually I am on Lean FIRE right now with what I earn. I’m not planning to retire, but I could do it right now with that. I think within three to five years, I’m going to be in a Fat FIRE position, and I don’t want to be so overweight in real estate.
Then I think somewhere in the 50%, 55% is my personal real estate that’s all in my name. Again, that was a big part of that for tax reasons. Then joint ventures and limited partnerships, I don’t remember what I’m in there, but maybe like 10% or something. Then, finally, I have a couple of hard money loans that I have that are great. I’m making like 12% return on those.

Scott:
I don’t have the numbers in front of me, but here are super-specific percentages of my net worth. I love it.

Daniel:
Yeah. I just don’t have the spreadsheet in front of me. This is one thing I do with my wife every month. We go through all of our bank accounts, all of our accounts, our passwords, all that type of stuff, and-

Scott:
A money date.

Daniel:
… we have it set up. Yeah, we do the money date, and we look at everything and decide what we’re going to do next.

Scott:
Awesome.

Mindy:
Yeah. Look, another successful investor who does a money date. If you want to learn how to do a money date, you can go to episode 157, where Scott and I talked about the steps you can take to do a money date with a spouse, more geared towards a spouse who is not on the same page financially. I say spouse. I mean partner. I’m sorry. I’m old.

Scott:
This has been awesome. Thank you so much for sharing the story. The story was just so fun to be a part of and to hear about. Thank you for being so generous with sharing the details and the numbers as well. I think it’s about time to move on to our famous four, though. What do you think, Mindy?

Mindy:
I think it is about time to move on to our famous four. Are you ready, Daniel?

Daniel:
Yes, I’m ready, I think.

Mindy:
Okay. Question number one, what is your favorite finance book, which I think we’ve already talked about?

Daniel:
Yeah. I think I have to plug The Complete Idiot’s Guide to Getting Rich by Stewart Welch and Larry Waschka.

Scott:
That’s so funny. What a great title. Maybe an episode title, Mindy.

Mindy:
I’ve never heard of either of them.

Scott:
What was your biggest money mistake?

Daniel:
I’ve had a few. I think the biggest one is taking out the student loan debt. I had no reason to take it out. It was just one year where I decided I didn’t want to work and I took it out, and just didn’t make sense at all. I spent a couple years paying it back.

Scott:
Yeah, it seems like it followed you for a little bit there. That’s a great mistake.

Mindy:
Followed you around the world-

Daniel:
World, yeah.

Mindy:
… around the globe. What is your best piece of advice for people who are just starting out?

Daniel:
I think the big thing is not to get overwhelmed and to keep things as simple as possible in the beginning. I see this so often, people that just don’t get started because they think it’s a very complicated situation, and it’s almost like once they make a decision, they can’t change it. I tell people all the time, “If you start investing in a Vanguard S&P 500 index fund, and you decide later on you want to pull some of that out and pay off some debt or whatever it may be, you could do that. You can change your position later on.” The important thing is just getting started and not to be overwhelmed by all the different advice you’re going to get.

Scott:
Love it. What is your favorite joke to tell at parties?

Daniel:
Okay, I’ve written this down because every time I try to tell it, I make a mistake. Here we go. How do you tell the gender of an ant? You throw them in water. If it sinks, girl ant. If it floats, boy ant.

Scott:
Fantastic.

Daniel:
Because Mindy has laughed, Kathleen told me she’s buying me lunch when I go to Hawaii next.

Scott:
That’s awesome.

Daniel:
I got that from a professor at my university. One thing I will add is that, in Japanese, these type of jokes… I’m going to teach you one Japanese word or maybe two here. To say dad joke in Japanese is oyaji gyagu.

Scott:
Oyaji gyagu.

Daniel:
Yeah. Old man is oyaji, and gyagu is a gag, an old term for a joke. I do them all the time in class, and I get lots of groans. I do them in Japanese. There’s some great ones in Japanese.

Scott:
Do you know what the Pink Panther said when we sank all those ants?

Daniel:
No.

Scott:
Dead ant, dead ant, dead ant, dead ant, dead ant, dead ant. Okay.

Mindy:
I look up jokes in case our guest doesn’t have one, and I’m like, “Ooh, dad jokes, Japanese,” and it says that, oyaji gyagu. Then it said, “Ambiguous word separation. Japanese can be very tricky when it comes to word separation. Where does one word end and the next one begin? You can turn a relatively innocuous phrase into something dirty and/or hilarious. ‘I made bread.’ Pan, tsukutta. ‘I ate underpants.’ Pantsu, kutta.” I’m sure my-

Daniel:
Pantsu, yeah. Bread is pan, and underpants are pantsu.

Mindy:
Pantsu. Look at that. Now I learned Japanese.

Daniel:
Exactly. I’ll give you a Japanese joke. I always tell this to my students, and I get really great groans. I’ll have to explain it. What is the smelliest city in Japan? Almost all my students say Osaka because Osaka is a little bit kind of an industrial city. But the answer is Nada. I don’t know if you know where Nara is, but Nara is this old capital of Japan with deer and everything. The thing is onara means fart. Yeah, that’s the answer. It’s much better in Japanese.

Scott:
I love it. Well, this has been just fantastic. Your story was awesome. Your jokes were awesome. I learned so much. There’s a lot of perspective-changing that goes on, but I love that even though there’s a lot of challenges that go along with the investing from a foreign country, the fundamentals don’t change. You literally built your wealth, your financial freedom from The Complete Idiot’s Guide to Getting Rich from Japan. I just think that it’s a phenomenal take on the personal finance story. Thank you so much for spending some time with us today and sharing this. I learned a lot and really enjoyed it.

Daniel:
Thank you so much for having me on. I love BiggerPockets in general, but BiggerPockets Money is my jam. Especially since you guys had the Facebook page, I love spending time there and helping people out, hopefully, and sharing my story.

Scott:
Yep. A little surprise for those listening, one of the ways we found Daniel here is because he’s one of our top contributors in the Facebook group. We were just thrilled to be able to reach out and invite him on the show. It sounds like you were going to apply at the same time, but we beat you to it, or Mindy beat you to it.

Daniel:
Yeah.

Scott:
Anyways, thank you so much for your contributions to the Facebook group and on BiggerPockets. I know you’re active there, as well, on the forums. We just really appreciate it. Hope you stay a part of the community. Thanks so much for sharing the story.

Daniel:
Thank you.

Mindy:
Yes, this is wonderful. Thank you so much, Daniel. We’ll talk to you soon.

Daniel:
Okay, talk to you soon.

Mindy:
Okay, that was Daniel Mills. Scott, what’d you think of the episode?

Scott:
I loved it. I had a lot of fun talking with Daniel. I thought his money story was incredible. Again, I mentioned this in the intro, but I feel like the fact that he had to jump through these hoops to invest in index funds and invest in real estate, and the creativity that he’s applied, I think make you appreciate the things that we’ve got here in the U.S. in terms of real estate investing and those types of things, and the relative simplicity of being able to do things like invest in index funds. Not hard. That’s a challenge for a lot of people, and yeah, I think it’s just impressive the way he was able to go about this.

Mindy:
I do too. His story really kind of… Not really kind of. That makes it sound like it’s very and sort of at the same time. His story exemplifies where there’s a will, there’s a way. He wanted to invest, so he did. There are a lot of people who live in America who have the ability to invest and just decide not to. Here’s a guy who had to jump through hoops to do it, and he still did it. I love his dedication and his determination. He’s just going to reap so many financial benefits from being determined to do the investing thing.

Scott:
Yep. I also want to point out the tail and the compounding nature of wealth-building here. He’d been doing a lot of things for a long time, but it was a slow pattern at first. He wasn’t making as much progress until the last five, six, seven, eight years, when the compounding nature of investing really began to kick in and propel his wealth past that million-dollar mark.
Just keep that in mind. If you’re slogging through that first debt payoff period or building that first liquidity position, it gets better and it begins to accelerate. The pace of that acceleration is going to differ for people. Yes, it’s been influenced by the bull market we’ve experienced over the last 10-ish years here, but I do think that that is the norm on an average basis. It’s not going to always be that way, but just know that that’s the game. It may not feel like you’re close to a million now, but you may not be that far away from it if you’re beginning to invest and accelerating that savings rate.

Mindy:
Watching the snowball is so fun, like, “I’m saving a little bit. I’m saving a little bit more. I’m investing. I’m investing a little bit more.” Then, all of a sudden, the exponential growth. What is it, hockey stick growth? It’s a little, a little, a little, a lot, and just through the roof. That’s so much fun to do.

Scott:
Absolutely.

Mindy:
Should we get out of here, Scott?

Scott:
Let’s do it.

Mindy:
Show notes from today’s episode can be found at biggerpockets.com/moneyshow165. With that, Scott, from episode 165 of the BiggerPockets Money Podcast, he is Scott Trench and I am Mindy Jensen saying we’re moving out, Brussels sprout.

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In This Episode We Cover

  • The challenges and benefits of investing in American assets while abroad
  • Getting rid of debt fast so you’re able to scale your investments
  • How money is easier to make as you become more educated and experienced
  • The ins-and-outs of Japanese real estate compared to American real estate
  • Converting bonus rooms to bedrooms for higher rent
  • Forming partnerships with real estate professionals who can help you
  • And So Much More!

Links from the Show

Book Mentioned in the Show

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.