All Forum Posts by: Lane Kawaoka

@Aileen Soriano-Pisaturo 

I first dipped my toes in the 'flyover states' like Alabama, Florida, Indy, and Texas. These places often offer better cash flow and rent-to-value ratios. If you're a high net worth investor aiming for lower risks, then venturing into lower cap areas like California and New York has its perks too.

More important on where you invest... people you work with matter a lot, especially if you're leaning towards being a passive investor. There are a lot of folks in this field who might have less than $500 million or a billion in assets under management and are still learning the ropes.

I started out by buying small turnkey rentals on my own. This was way back in 2012. But for someone who's an accredited investor, this approach isn't really scalable. Plus, if you've got a million or more to invest, it's just not worth the risk, in my opinion.

At the end of the day, it's all about finding the right PURELY passive investors, which is a tough nut to crack. Most of these investors aren't hanging around on internet forums, as those spaces are more for active investors or newbies. Keep this in mind as you navigate your investment journey!

I think you are talking about the Security Backed Line of Credit (SBLOC), think of it like a HELOC or real estate mortgage but for your traditional investments. You can own Stocks with a top-tier brokerage, maybe JP Morgan or Vanguard, or even a newer player like M1 Finance. With an SBLOC, you can borrow against a portion of your stock value.

The amount you can borrow depends on how volatile your stocks are. Got Tesla stock? Super volatile, so maybe you'll get a loan for half its value at 2-4% + SOFI interest. But stable stocks like AT&T might give you 60-80% LTV? You'll get a much better loan-to-value ratio.

Your borrowing rates? They're tied to how strong your banking relationship is. The higher your net worth, the better the deals you get. That's why this strategy really shines at the 'Penthouse' level which I talk about in my new book. It's a double or even triple win: you earn from your stocks, and you can reinvest the loan in more stocks, real estate, whatever.

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In 2015 , I've had 11 rental properties, properties worth about a hundred grand, renting for a grand a month. I was paying 10% plus the first month's rent as costs.

Now, if you're banking on the occasional vacancy or eviction, say every couple of years (three if you're lucky with good renters), that 15% cost doesn't seem too far out there. And if you're dealing with the tougher, less lucrative properties, hitting that 15% is pretty standard because its less revenue, think 700 dollars a month than 1000 top line rents.

We play in the class B asset arena, 100-200+ units, we're looking at costs around 3-4%. But keep in mind, we're also covering salaries, which is part of the dance when you step into commercial territory.

You're looking at a potential 12-15% return, and maybe an extra point or two if it's a first or second lien. It's all about how long you're willing to let your cash play the field—could be half a year, could stretch to a few years.

But you've gotta watch out for the risks, right? Especially the counterparty meaning if the guy steals your money - that's why I would be careful to lend to anyone with a net worth under 1-2M. 

You'll be paying the bank around 6-8% on the home equity line of credit (HELOC) side, so you've gotta know eyes wide open about the arbitrage.

Some folks reckon it's too risky. That's investing for you—it's not everyone's cup of tea. It's definitely not a game for the faint of heart. Financial independence is not on the cards for some people.

The following is all good but all the best documentation or PPMs does not protect again shady people. Best to know other passive investors who can verify track record.

For what its worth MAGI impacts your eligibility for free health care. I see investors using the massive amounts of PALs or depreciation from their real estate to lower their MAGI to the needed levels.

I followed a similar path after having 11 rentals (1 in indy) back in 2015. Syndications are more scalable.

Stick with groups that have done at least 1B in AUM for starters.

You know, the MFH value add deal with new appliances, a fresh coat of paint, playground equipment and so on—for about six grand a unit. The goal? Bump that net operating income by a measly 20% over four or five years (to then double our principal investment).

But here's the kicker: you pour in all that cash, maybe even double your capital. And what happens? All it takes is a shift in the cap rates—no one's fault (or Jerome Powell throwing salt on the situation lol recently saw a meme of him like Saltbaw)—and suddenly, you could see 30% of your property value vanish. 

So, what's the move? We're seeing a pivot towards development plays. They're about crafting real value from the ground up. It's more than slapping lipstick on a pig and hoping the NOI boost sticks.

But, you've gotta partner with folks who know the ropes. Lenders aren't handing out loans for this kind of work unless you've got a solid track record. Many new operators might score a loan for a value-add on a 100 or 200 unit complex after a weekend boot camp, but when it comes to ground-up development? That's a whole different league.