Cashflow investing.
Lane Kawaoka is the Founder and CEO of Simple Passive Cashflow.
After discovering the difference between Cashflow Investing and appreciation investing (gambling/speculating), Lane took up investing in real estate for passive income. Now Lane teaches others how to have their own Simple Passive Cashflow.
Learn more about how Lane Kawaoka can help you earn passive income through real estate investing by listening to this episode of The Thoughtful Entrepreneur above and don’t forget to subscribe on Apple Podcasts – Stitcher – Spotify –Google Play –Castbox – TuneIn – RSS.
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Welcome to The Thoughtful Entrepreneur Show. I'm Josh Elledge, Founder and CEO of UpMyInfluence.com. We turn entrepreneurs into media celebrities, grow their authority, and help them build partnerships with top influencers. We believe that every person has a unique message that can positively impact the world. stick around to the end of the show. We're all reveal how you can be our next guest on one of the fastest growing daily inspiration podcasts on the planet in 15 to 20 minutes. Let's go.
On with this right now we've got Lane Kawaoka. Lane, you're the Founder and CEO of SimplePassiveCashflow.com. Thank you so much for joining us. Aloha. Josh. Thanks for having me. So Lane, Are you in Hawaii? I am. Where do you live? So I was stationed there for three years at Pearl Harbor. I am in Honolulu. Oh, you're in Honolulu, nice. And have you been there your whole life?
0:59
I grew up Up here, but I was up in Seattle for 14 years working the day job. And then I just moved back a couple years ago once I sort of became ephi. And
1:09
live where you want invest where the numbers make sense.
1:12
Yeah. Why? Why go back to Hawaii?
1:15
families here and you know, I mean, it's right now it's the middle of winter. And it's what's a bog a cold 75 degrees for me out here.
1:24
Yeah. What were you doing in the Pacific Northwest?
1:28
So I was an engineer, for railroad engineer than city engineer. You know, jobs pay a lot better on the US mainland than out here.
1:39
Right. Right. Particularly, you know, I think, you know, Hawaii is an amazing place to live, especially if you have a little bit of you know, you have a good standard of living, right, you've got Yeah,
1:49
and I mean, it's good if you're rich, because you can hide here. Nope, you know, everybody's nice and frugal, and everybody's driving around Toyota's, you know, that's all it is and what better way to get out of the rat Race and I thought I didn't like I was living up in Seattle and everybody was driving on Tesla's and Porsches. And it's just sort of a rat race out there. And
2:07
yeah. So talk to me about getting started in in real estate. How did that start that that began for you?
2:17
Yes, I graduated college in 2007. With engineering degree did construction management and I bought a house to live in. But because like everybody slaving away at their job, especially the new people, you get to travel a lot. And I was traveling 100% of the time, it was never home. So I rented it out. And the rent was 2200 a month, the mortgage was 1600 a month and to a young 20 year old kid, that was a lot of beer money. And I was like, shoot, I gotta do this again and again and again. And that was the start of the bug. Yeah, I mean, so fast forward to 2015. I had 11 units and fast forward to today. I got 3000 units and I quit the day job last year.
3:00
So how did you get your again i? Maybe I kind of missed that but I how did how were you able to get your first one though?
3:09
Yes So I, I kind of worked with a lot of high net worth investors A lot of us have good paying jobs engineers, doctors, lawyers, dentists, no tricks, no games here we save downpayment money usually you need about 20% down and you use a Fannie Mae Freddie Mac government subsidized loan. So a lot of the houses that we buy initially starting out there, you know, they're called turnkey rentals $100,000 property for a good three bedroom two bath and a good class area. That'll require probably what 2530 grand downpayment for downpayment and cash reserves closing costs and you're off and rolling.
3:51
So lane, you know, I would say a good portion of those who listen to this podcast would be established business owners like they bet in business for a while, or, you know, they're they got some good momentum now. And however, I suspect much like myself, that they may not be very well and I can speak for myself, I wouldn't consider myself very diversified, like I've put my heart and soul into the B quadrant. Uh, and So at what point do you think someone should start looking at passive revenue through real estate?
4:30
At some point, you got to move to the eye. But you know, the bad thing about real estate investing is it's not an asymmetric growth, like how your businesses you know, took me a long time to get up to 11, rentals and even 3000 rentals of the sea. It's not a get rich quick thing. So what I would say is it's an end game strategy. But as soon as you save up 30 grand of liquidity that you're not going to use it as a marketing budget or something new no capital expense in business. business, you know, fight to put that into a rental property and get this thing going because you know, maybe you buy one a year or maybe you buy one every three years. But quickly that picks up speed and exponentially, you might buy one every year, then two every year, then you're often rolling.
5:18
Talk about risk in terms of the you know, the model of, you know, fixing and flipping versus buying and holding.
5:25
Yeah, make no mistake, I don't fix your flip. You know, your number one rule number one is don't lose money, and how do you ensure that you ensure that the rents are much more than the rent the mortgage and the repairs and cap x? We use this rule called the 50% rule. So you take your rents and you chop it in half. And that's how much expenses you should be able to account for in your underwriting. So you know, even in a recession, I mean, bring on the recession is what I say, Hmm, now I can buy everybody's properties all the fix and flippers who screwed up Wow.
6:02
What would you say is, I mean, if you are buying and holding or renting properties, what would you say, however, is the biggest area where newbies probably screwed up in some way?
6:16
Well, they're just where you're buying. I mean, you know, so sophisticated investors don't really buy in primary markets like Seattle, anywhere in California, New York, Boston, you know, Miami, they're all the sexy places to live where your rent to value ratios aren't going to be high enough for you to be able to cash flow. And for those who, you know, quick at the math thing, you know, you you're looking for a rented value of 1% or higher, you calculate that by taking the monthly rent divided by the purchase price. So $1,000 a month rent divided by $100,000 property is 1%. And that's right about the threshold you're looking for something 1% or higher. Okay, so you know, we'll look at a lot of markets. secondary markets like Kansas City, Birmingham, Indianapolis, Memphis, those type of areas. Not the coolest place to live in. But hey, like I said, invest where the numbers make sense. Interesting. So
7:15
what is there any particular type of property that you think is a great first? A first time investors property or like what's what's a great starter property to begin with?
7:28
I always look for like, you know, a lot of my guys are engineers so their numbers base so I go 80% of the median home price. So for example, you know, in Birmingham, I'd say that I don't know this off the top it is exactly but I have a feeling that the median home price is probably around 140 $150,000. You know, that probably makes people's head explode in the state of California right? So what I'm trying to do is I'm trying to find a property in the hundred thousand dollar $120,000 range Double our rent for about 1500 bucks a month?
8:04
And then what would you say? Are some of the things that might be surprising for a first time investor? Is it that the repair costs are more is that that, you know, working with the renter's might be a challenge is it that, you know, hey, listen, don't do this, this, this and this yourself, or what else might you think that somebody doesn't really know how it works would be like, Oh, well, I lane says do this. I wouldn't have thought that.
8:34
Yeah, I mean, you know, a lot of this is insulated by the property manager right there doing all the dirty work for you. Yeah. But I do think, you know, if you've got a pretty good business, your net worth is half a million or a million dollars or more. You know, buying these rental properties can get a little tiring and that is why I ultimately sold all my selling all my rental properties and opting for syndications and private placements as an LP investor, which is a lot scalable way of doing it, but you know, there's different options for the right situation. Every situation is unique.
9:07
Mm hmm. And so lane, obviously, you're doing this quite a bit and at some point you decide that you're going to share what you've learned with other people to do, did you have any issue with that in terms of like, okay, now I'm going to teach people how to get rich slowly, or, I mean, I'm just wondering if you're, you know, if you had the issues of like, you know, I remember I could speak for myself, right, where, you know, it was one thing to create my own consumer product, but me now with my influence I started five years ago, even though I built a seven figure company, I still felt uneasy or insecure about teaching people how to grow a business for some reason. I don't know why. It's my again, my own insecurities. But did that was that a factor for you at all?
9:54
Um, no. I mean, I kind of just started it just out of just I wanted to help people and yeah, that was A little selfish because I started my podcast back in 2016. At the time I was still buying these rental properties, these turnkey rentals are starting to phase out of it at that time, but you know, a lot of my friends even 510 years earlier than that, were asking me what are you doing for like money? You know, like you're buying these properties sight unseen, how you doing that? And, you know, we all know that most people will never do anything, and it's just a complete waste of my time. So what does a guy like myself do who doesn't like to waste time but make a podcast and record like, follow my journey? You know, if you know if you can't sit through the first 10 of my podcasts, which are all about turnkey rentals. I'm sorry, bro. Like, this is not for you. Hmm.
10:43
So that might be for someone who's taking a look at laying the work that you're doing just say listen, go binge listen to 1010 of my podcasts and you're gonna know in your gut whether or not we should become friends or not.
10:55
Right, right. I mean, this is simple passive cash flow. It's not that complicated if you're if you want him to be a passive investor, which I think is the, like, probably the best, like return on your time and money for that matter. I mean, like you shouldn't be spending more than a few hours a week, or even a month on passive investing, spend your time in your highest and best use, like, you know, for you might be your business, right? For some of my other guys, it's going in on the weekend and doing an extra surgery on overtime.
11:28
So it does talk about time a little bit more. So if I've got a business and that business very easily takes, you know, eight to 10 hours a day of my time. What would be a great place to start with, I would imagine to say, Do take some time, take six months or so and just start I don't know, I don't know what the timeframe is but just learn learn a lot of stuff. Listen to a lot of stories of other people and save up your money, get your down payment, and that's, you know, that's like your phase one. Right, what would you say that that's accurate?
12:02
Yeah, I mean, so step one is gone binge listened to the first 10 podcasts a lot shorter back then. And also that will take you an hour or two. Step two is, you know, maybe join, like my, I have a free Facebook group of, you know, people trying to get into this because that's the hardest thing, right? You know, a lot of people, they don't have the peer group to think that they can do something different. Obviously, business owners are a different breed. So you kind of got a leg up there. But you know, just get started and start learning about it. And now if you're, if you're the pedigree that has the money saved up, ready to go to buy a rental property, yeah, reach out to me, I'll connect you with a few people that I work with. And at least you don't have to start from scratch.
13:18
Yeah, I mean, you know, just probably off the top of my head, maybe a couple hundred bucks a cash flow per month per property. So now you're taught with 10 times 200. That's a couple grand a month. You know, nothing to quit your job over. Right, right. But it's a start. And, you know, like that's, that's why like, I've kind of gravitated more towards passive syndications and private placements, because in that sample size of 10, that's exactly how many I had back in 2015. You know, you're going to have an eviction or two every year, you're going to have some kind of bigger issue come up. Of course, a property manager is going to be doing the nitty gritty on it. But you know, if A lot of people, they say they need five times as much of that. So now you're having an eviction, like every few weeks. I mean, it's just not scalable, right and smart investors, what they do, one of the biggest mistakes I see is investors don't flex their equity. Yeah, they're cash flowing, whatever. But it's also like, you know, as the property appreciates over value over time, and they make the mortgage payments and the equity position gets bigger, their their equity gets bigger in the property and their return on investment stays the same. So I call this metric your return on equity. So you can have a lot of equity in a property but still be making the same thing. So at some point, investors need to either sell or refinance or 1031 exchange into the next bigger property or many properties to keep that leverage high.
14:49
Talk to me about your own business where you've now become a mentor and you facilitate masterminds Is that correct? That's correct. And and talk to me about like how you develop looked at how you build that. And, and, you know, again, you've built up a great kind of, you know, outside of your own investments. You've built up a nice practice where you can help a lot of people and, and and be paid well for it.
15:14
Yeah, I mean, I can do this a lot of ways, right? You can do real estate education for the masses, which I think the podcasts is and the website I mean, everything is on the website for free, right? gracious, if you don't have the time, you know, or the patience to sit through and read. I'm sorry, I can't do anything for you. My vision, and you know, I think I see this every time I in the holidays roll around. I don't like to talk about like what's happening at the day job, right. I don't care about what people are doing at their work. I like to talk to investors who were kind of like thinking of how to design their lifestyle. And I I'm more of an introvert so I don't like to talk to too many people, and I'd rather have a smaller core of inner circle mastermind, if you will. And that was kind of my vision of success or what I wanted to achieve. So that's why I've, I've gravitated away from real estate education from the masses to let's get a good select people who are very motivated, and very collaborative and a good group of people. So, you know, like, uh, next month, we're doing a mastermind here in Hawaii. You know, of course, we're doing a seminar day, but you know, a couple of days of hiking luau, you know, it's all about relationship building your network is your network.
16:34
Nice. So, you know, I really love that model where you, you know, you just give, give, give, give lots of content and just let that you know, all of that service, do its job right and build relationships with people build up that trust, and then people will self select some people get off the elevator on the third floor, and they're like, lane. Thank you. That was awesome. You know, I'm on to some other pastures or whatever. But other people, you know, they stick with you for the long haul. And they're like, Listen, if I work with anybody, it's going to be late. Because I have a relationship with this guy. And that doesn't happen immediately when when were you when, how far into your podcasting path? Did you start getting your own students?
17:22
I mean, I, I'm kind of lucky, I kind of had this vision and from the get go, right, because I didn't really need to put food on the table, the real estate and my engineering day job did that for me. Hmm. So, I mean, I, I, I realized very quickly that I didn't want to work with the CFE crowd, the cheap, easy, free, folks, because they just are a bunch of assholes. They just ask all these questions and you never hear from them again. They just rob your time.
17:49
Yeah. You
17:50
know, I'd rather work with you know, people who are good people who like to reciprocate and it's ultimately how I found a lot of deals, you know,
17:58
through the process, so Wonderful all right well lane comm oka for people who are watching the video. I think you'll know what lanes website is. You've added on the screen there behind you and it that is simple passive cash flow calm. Yep. And slash club. What happens in the club there? Well, that's the mastermind, right?
18:22
Yeah. So we have, we do deals within our club and you guys can check out there and but we also have a free Facebook group too.
18:30
Yeah. So we have, we do deals within our club and you guys can check out there and but we also have a free Facebook group too.
18:37
up. You can access everything by going to Lane's website. It's simple passive cash flow.com and Lane Kaabah. oka in Honolulu, Hawaii. It's been a long time since I've been there. I left in 94. So I was there from 91 to 94. And so my wife actually met at a luau, and we spent See about 20 magical days together while she was on vacation. She was a she was a tourist and I was a sailor and we met at a luau. And before she's getting back on the plane right before I bring her to the airport actually propose to her. So we do each other 20 days. And so we'll celebrate our 25th wedding anniversary this year, and hopefully we'll make it to Hawaii for that. Do you
19:25
remember which Lula was or what? Sally island?
19:28
Well, it was the military one that they did on the other side of the harbor. I'm trying to say is there a name for that one?
19:40
I'm trying to figure out when to take the group when they come up next month. But uh,
19:45
yeah, well, don't go to that one. If you're single and looking to get married because you'll probably get engaged right away. Or maybe you do maybe that's the one you want to take them to. Yeah, and build some magical romance while they're out learning about real estate.
20:00
We'd be glad to have you back, Josh, because, you know, I don't pay any taxes, essentially, with all this real estate investing. So be nice if you support our economy.
20:09
Nice. Nice. All right, lane. Thanks so much, brother. I appreciate you. All
20:13
right. Thanks, Josh. You bet.
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