Cold open

SPEAKER_00 0:00

Welcome to Live Let Thrive, a podcast about the Airbnb life, the share economy, and everything in between. Here are your hosts, Micah and Steve.

SPEAKER_04 0:12

Hello, hello, hello. And welcome back to another exciting episode of Live Let Thrive. What is up, Micah? Man, I'm chilling, Stevie Sacks. How you doing?

SPEAKER_07 0:26

I'm excited about this show. This show's gonna be off the chain. I feel it. I feel it. And we're coming at the we're coming at people from Arlington and Fort War, Texas. And this is Live Let Thrive, your favorite Airbnb VRBO, home away, lift, turbo, all that stuff podcast in the world. And we have special guests today for this episode, special episode 180 of your Live Let Thrive podcast. Are you excited, Micah?

SPEAKER_04 0:54

Let's get it, man. Who we got? We got two special guests on.

SPEAKER_07 0:58

We have Terrence Hutchins and Adam James

Terrance Hutchins introduces himself from DFW

SPEAKER_07 1:02

has been on our show a few times before. And we always get great ratings because he's a great guest. And he's bringing extra firepower with him, Terrence Hutchins. Terrence, why don't you introduce yourself? Who you are?

SPEAKER_03 1:13

Awesome. Well, thank you guys for having me. Uh Terrence Hutchins, as he said, I am uh coming out of the DFW as well. Um, I work in finance and tax planning. Uh, I do a little bit of real estate investing. I am uh married, have three kids. So I get off my full-time job, go to my other full-time job, run them around town to all their events. And um, I met uh Omar, um, I guess through a mutual friend, probably uh a couple years ago, I think it was. And so uh we we were doing a little bit of work together in uh one of his his little side hustles, and uh he invited me on to talk about this strategy, I think uh that will help some of you guys out there looking to compound your money, arbitrage, and and use the power of the dollar to get you to where you want to go.

SPEAKER_01 2:06

He practiced that for like two months, by the way. Wasn't that amazing, guys? That's his elevator speech. It was amazing.

SPEAKER_02 2:16

Take the cue card away, rip it up now. It's pretty good, man.

SPEAKER_07 2:20

It's pretty good. Adam, if you could you tell our our um guests that may not have have heard your previous episodes, who the hell are you,

Adam James on going from homeless in 2013 to a seven-figure empire

SPEAKER_07 2:27

Adam?

SPEAKER_01 2:27

Guys, go back if you want to hear the best show they ever done. I think they got the most views. Um, it was like I was on the 100th episode. Go back, check it out. I promise you, it would change your life. I talk about from being broke, being homeless in 2013, not too long ago, from bad decisions to recreating myself and building a you know, seven figure empire, which has opened up a lot of things. So uh this is the best uh podcast in this industry, hands down. Uh it's embarrassing, but I call these two for advice all the time. Uh Micah always sends me two, he sends me to the answer machine most of the time, but hey you know I'm totally true. But you know what? When he gets back to me, you know, Adam I got two minutes. He usually gives me about 30 seconds, but when I get him, I think great information. They both have changed my life. So thank you for the opportunity to be on the show and to really share because these guys are amazing.

SPEAKER_04 3:21

By the way, I'm gonna vouch that episode 100 was life-changing. I've had people from Florida hit me up and say, dude, I'm

How COVID tripled Adam's business while others shut down

SPEAKER_04 3:29

I'm I'm hopping in like straight up. That episode 100 was life changing for real.

SPEAKER_01 3:33

For all of us, just as much for me, too. So it was great.

SPEAKER_07 3:36

What has changed? What have you done different, or what has uh have your has your business grown since our last episode with you?

SPEAKER_01 3:42

Um, I think the last episode that we're talking about, a lot of things have changed. You gotta understand, I haven't been here. Last time I was on here was uh pre-COVID, right?

SPEAKER_05 3:51

Oh wow, yeah.

SPEAKER_01 3:52

And so, guys, I wonder what everybody has gone through. Uh, you know, a lot of my friends and people that were in, you know, we're part of these mastermind groups and everything, but I see the majority of the people that do what we do uh are out of business. And uh they really are. And I have to say, just through the right coaching, uh, listening to different podcasts, staying on this podcast and listening to you all, that literally my business tripled. You know, COVID is a terrible thing. We all agree, right? And we however, we hate for the losses. However, there was a lot of opportunity, and my business on I say I say tripled. I'm I'm being trending, it really tripled uh because of the pandemic when everybody was shutting mines only, it it it grew. And so, how how did it impact your your your your business guys?

SPEAKER_04 4:46

I don't know if we can like you said, COVID's a bad thing for people, but like for business wise, business wise, it was awesome. I mean, it was people needed, I mean, you just had to pivot. It was a pivoting point. The people who pivoted, they made a lot of money, the people who didn't shut down, and but shut down that really just it really kind of separated, you know, the people who are willing to go through the struggle, change, roll with the punches, and you know, you would have grown. I and most of the people we've talked to have grown from it, you know.

SPEAKER_01 5:16

Yeah, but it's also but but also consider we're getting a lot of the great information when you have information like the show and the podcast that is keeping us up to date, you're literally telling us what to do and not do. That's why I always encourage people to surround yourself with people doing bigger and better things than yourself because it's just gonna pull all that out of you, and so I really believe that the reason was everything to pivot is because what you guys are doing on the show and just sharing the information. So thank you for that.

SPEAKER_04 5:44

Oh, yeah, for sure, man.

SPEAKER_07 5:45

That's good, that's good. I just um you know, you know, we're going far. It seems like so long ago when COVID like first started, right? Yeah, and and I was like, okay, the media is just trying to tell us another, you know, the bird flew, swine flew, this flew, that it's just another one of those, and they're just blowing it out of proportion, right? And so I wasn't really I wasn't really scared of it at first, right? I wasn't I wasn't freaking out, staying home. I was still doing my thing, going to work every day, of course. And um, then they started shutting everything down. That kind of yeah, that was different. That that kind of that was different, and I was, you know, I got little ones, and that's what scared me the most, because I got little ones, right? And so um I was freaking out a little bit after uh you know, after everything kind of went you know crazy a little bit, but after I said it settled down a little bit, or I settled down my mental state, I was like that this is probably the time to start to try to invest. It's I mean it sounds crazy because the stock market did that huge dip, right? And then um, and then um yeah, everything everybody got scared staying home, didn't want to do nothing. I was like, This is it sounds crazy, it sounds like the world's gonna end, but this is the time to invest. And I was out like in a few weeks looking for houses, and and um and and so and and and signing up for getting arbitrages and and and stuff like that, and getting uh rents at a at a really, really good rates and locking them in for two years, you know. So we got we yeah, we we were uh bold enough to invest at the right time, and we're taking, you know, we're you're we're we took advantage of that and we're doing very well because of it.

SPEAKER_01 7:18

Well, let me so the the the question is it's all about fortitude. If you if I can add to that, I think what separates what is so good about a share economy and what we're doing is that the most of us are contrary investors. When people are selling, we're buying, right? And when people are buying, we're selling. That's what keeps you ahead of everything. And if people really get that if they if you just if you go against the flow and not with the flow, a lot of the times, that's where all the opportunity, and that's what Terence does for a living. You know, um, I've personally know about 45 people who have died from COVID. In fact, literally, um, my my my uh maintenance guy just lost his grandmother and his dad over COVID last week within two weeks. So it's serious, guys. It really is serious. I can literally say I know 45 people, but you know, I understand I'm part of a big church organization, so that's how I know so many buys because the church affiliation, but it's really serious. But in that same thing, would be if I want to ask, how did that shift? How how how were we able to go from a pandemic to

Drive-to markets versus fly-to markets during COVID

SPEAKER_01 8:26

make a difference in our business? Like, what do you what do you guys think would happen? I could tell you what would happen in the area where I'm investing, Michael. What do you think? Why did why how did your business? I can tell you what happened in mine, you know, but I'll I'm willing to hear it.

SPEAKER_04 8:39

I know in mine for sure, it was mine was a location thing. Same with me. It just so happened to be a location thing. I was in a drive-to market and not a fly to market. But what it did was now made me really look, step back and realize like, hey, if you're dependent on airfare right now for guests to come in, smart, you might want to have another group of places that people actually drive to. Because even right now, I don't know if you know this, like even in places like Houston, this is a little bit of a slowdown because like like the airline industry is on a shortage of workers, they have a shortage of pilots, uh, shortage of resources. So a lot of those places are still slow due to COVID. So it's just a matter of pivoting, understanding your market, and then seeing, okay, this market's taking a dip. Where can I go to a different market that still has that uproar uptick? And by the way, I'm not saying my market.

SPEAKER_01 9:34

Me either.

SPEAKER_02 9:35

Sorry, guys. We would have decided that before we came in here. So that's never gonna happen.

SPEAKER_01 9:41

I'm in El Segondo. Yeah, go to El Segondo. That's if you want to go there.

SPEAKER_07 9:48

So yeah, I'm in BF Egypt. Just listen to the previous 179 apps and you'll find out where Micah is. Exactly.

SPEAKER_01 9:58

So what happened with me is that with the same with him, is that everybody's leaving California in New York. And so I can put out there, if you guys can find out where

Paying 25-30% over asking in Oklahoma's booming market

SPEAKER_01 10:09

the majority of those people are going to and consider investing in those areas, it's going to take, you know, that I I will promise you, you'll have a different life. But I was just blessed that I didn't go to the major markets, but a lot of the people were leaving California. I mean, the area that I'm investing in, you can't even get a home there without paying 25 to 30 percent over right now. So that's why I'm just doing arbitraging right now too, it switches. So that's what's going on right now.

SPEAKER_04 10:40

Let's touch on that. You see, you only do an arbitrage right now.

SPEAKER_01 10:42

You're not right now because where I'm at, I don't want to. I mean, I know it's it's it depends on, okay, right now I am, but I I want to see a little decrease. My my own realtor said don't buy right now. Because it it's it, my own realtor's my I had a realtor tell me yesterday that she feels it's terrible to have her, she's telling her clients not to buy right now. But listen, you don't have to listen to that strategy, but it but you gotta look the city where I'm at, the mayor said that in the next two years, our population is almost gonna double. This is this this this just came out. He just announced this right now. That's how many people are moving in. So consider this. Yeah, you're gonna pay the extra 25% over asking, but you're still gonna get the equity up because everybody's moving here. We have no houses where we're at right now. I think that's just the ideal market, in my opinion, you know.

Buying with time, not money, at the top of the bubble

SPEAKER_01 11:36

But if you guys want to do that, it's it's a bit, but I really believe that it's going to tip a little bit and come back down, but right now it's at the peak. And I just don't want to spend 25 and 30. I don't know. What do you think about that?

SPEAKER_04 11:49

I'm not buying with I'll say this. I don't really buy real estate with money, I buy with time. So I would say buy with time, not money. If you're buying with money, I do think it's gonna tip, and I do think we're at the top of that bubble. You we don't no one knows when the bubble's gonna pop, right? We're at the top. I mean, I don't know, and then I don't see a slowdown. You know, I don't see a slowdown right now. So if you're buying with cash, I think it could be better put to a better use, in my opinion.

SPEAKER_01 12:16

Well, we're gonna we're gonna talk about that too. I'm sorry to interrupt, guys.

SPEAKER_04 12:20

Oh, go ahead. Oh, go ahead.

SPEAKER_01 12:23

You go ahead, go ahead. No, this is your show, brother.

SPEAKER_04 12:25

Oh, Terrence, you had let's hear from Terrence. You had a very, very interesting. Oh, yeah, go ahead, Terrence.

SPEAKER_03 12:31

Well, I was you know, like I said, I was a sidekick to Adam, so I was gonna let him talk for the most part. Um, but I mean, I think just in the real estate market, just with anything else, I think you look at economics, and so even to Adam's point, um, yes, the the market is is is is obviously increasing. Uh, I think last month we were uh 16 over prices from the year before. And um, but I mean, supply is just still at lower numbers. Uh, I mean, we see more housing starts now. Uh, but I mean, you're looking at big hedge funds, big companies, they're buying single-family houses now. And normally they don't put their capital where they feel like it's not gonna be leveraged properly. Um, but to Micah's point, I think if you have the time, then you can certainly make money. Uh, if you look at even millennials, uh, people that are age 29, that's actually the biggest demographic in millennials. So the average age that people buy houses, I think, is around 30, 31. So you have a lot of people that are gonna be coming into the market uh that are gonna be needing housing. Uh, and then just with the government, I think they're also going to just uh potentially assist with affordability. Um, as as housing prices increase, that kind of prices some people out of the market, it's gonna put pressures on employers to potentially raise wages. But the government, uh, specifically with you know the um uh administration we have now, I'm assuming that if if if housing gets higher and higher, you're gonna see some type of assistance, but you're also gonna have a market for renters. If I mean if as prices continue to go up, if you have the capital with the rates being so low, uh and then that will probably stay this that way for you know another year or so, uh, then the affordability for people that have the capital is actually lower than it has been in the past. But you're gonna have a market of probably a higher market of people that will want to want the affordability of being able to just rent in nice areas who may not be able to afford to get the house that they want. So they're gonna be willing to wait. And if you're able to provide that housing through just traditional purchasing or through the arbitrage, I think there's still gonna be a lot of opportunities um out there.

SPEAKER_01 14:53

So, guys, I'm I'm renting my houses before I even get in them now. That's how crazy it is. I'm literally doing that. So he's telling I'm literally renting the houses. I no longer go get an arbitrage, I get the client and then go get

Renting arbitrage units before signing the lease

SPEAKER_01 15:09

the arbitrage. I've done that three times in a row now.

SPEAKER_07 15:13

So if there's no houses, no inventory, how are you finding houses to arbitrage?

SPEAKER_01 15:16

Well, I'm do there there there's there's no houses to buy. Okay, there's plenty of houses to rent.

SPEAKER_02 15:23

Oh, I see. I see.

SPEAKER_01 15:24

But there's there's no houses to buy right now at a normal price. There's supplier. Go ahead.

SPEAKER_07 15:29

Over here in this area, it's it's getting even bad to find a house to rent at a reasonable price.

SPEAKER_01 15:34

No, not that's yeah, okay. So that's a different over there. All right. Yeah, not here, not here. That's why everybody, you know, and so what is happening with this with this pandemic and everybody moving, this is a hey guys, this is a this is a a ninja move. You know, if you're in an area where everyone is coming to, what would life look like if you can have the tenant pretty much fund your arbitrage and uh you have it rented to them before you even get the place? That's what I'm doing. You know, so you know, if if I'm talking to a potential person and hey, I need a place to live, hey, listen, I will say, I will get the pictures from the place I'm thinking about doing, the person. They already have nice pictures, and I just forward it to them. And when they say yes, I'll take it because they know that I keep saying, listen, if you find something, then I go after I get the content, then I go and get the arbitrage. So I'm literally renting my places before I'm not, I don't need to wait anymore. That's that's how serious the market is. I wanted to test it and it it takes an effort. I'm writing a book on that too, but just imagine I rent them out before I even get them. I'm not doing that anymore. I let the tenant pay for it now, most of it.

SPEAKER_06 16:47

Yeah, I love that. I love that.

SPEAKER_07 16:50

Yeah. So so you're you're still you're still heavy in the arbitrage game, of course. Now, I did you ever did you ever dabble in the management at all?

SPEAKER_01 16:59

To be a I just I'm started that now. Yes, I'm doing that now. I I man, in the last year, I picked up about four clients, and it's been amazing. I'm really that's the next route I'm pursuing is getting into the management.

Management deals: charging owners for furniture and keeping anything over $2,400

SPEAKER_01 17:15

And it's been amazing. It is really, I just I find houses that haven't been selling, that have been on the MLS, they're just not sell. You can find that out. I can go to Realtor. And then I do a campaign and I call them and say, what if I can make you two and a half times uh the can the the your the the your your rent? And uh they I I have them get all the furniture, I have someone come in there and decorate it, they do it, I charge them for that, and then after that I get a percentage of it, and they love it. I have an investor right now, he's giving me, he's converting all his houses. I got three of his houses, and it's generating me oh almost $1,500 a month just by management.

SPEAKER_07 17:59

Nice, nice. Do you like that model better than arbitrage?

SPEAKER_01 18:02

I actually both, you know, we we we're all about the share economy, multiple streams of income. So this is this is what I'm doing. This is why I'm on the show right now. So the management is great. I think it easier because there's no risk, right? But there's no ownership. But I'm still making so this one place, this house, we made a deal that anything over $2,400, I get to keep. I'm renting it for $33. $3,300 a month. Everybody's happy. So I usually do like a 30 and 70 split, but no, guys, with the tools that you're learning from this show, people don't know about it. If you go to anyone and they got money to invest in furniture, that's easy money. It's easy because it stays booked. I don't have to do anything, and none of the money has to come out. So just imagine making 30% off someone and and there's no rent. And only thing, and guess what? With with with Airbnb and VRBO and all these other places advertising, I don't have to do anything because we are called hot leads. You guys know that, right? It's different. The the tenants find me first. I really don't have to do too much, I don't have to pay for that. They find me. So by me just putting on those free sites, they come to me. But the thing is, is that the people that I'm managing for just don't have access to how to market. And so with the hot market, I've never had a problem. These places are going just like that. So I think it's a great opportunity to go into management.

SPEAKER_07 19:28

So what sites are you are you on?

SPEAKER_01 19:30

The same one. Uh my the greatest ones for me have been Turbo Tenet. Um, I don't, I've only I haven't been booked on VRBO in about a year. I don't even, I haven't even had to, honestly. Turbo tenant, uh uh I I use websites that do this

Marketing on Furnished Finder, Facebook Marketplace, and personal websites instead of Airbnb

SPEAKER_01 19:48

that you post once and it goes on all of them. Michael, you know those.

SPEAKER_05 19:51

Yeah.

SPEAKER_01 19:52

Um, but that's a conversation. There's websites like Turbo Tenant, Facebook Marketplace, Airbnb, VRBO. Uh, I have my own website, which I learned from you guys. And I say 98% of all my bookings are coming from I don't really get booked on Airbnb anymore. Smart. I don't really get it but you know what another thing, guys, I do I when my places are booked, guys. Write this down, guys. This works amazing. I went on Airbnb and made it so that everything is instant book. Terrence, we're gonna come, we're gonna connect it all. Not no instant book. I remove that. No, you know, you can't instant book on any of my things anymore because I'm forcing the conversation. When everything is booked, this has worked 98%. Hey, I would like to book your place. I would be like, hey, this place is booked, but I have this. You guys, they take it 99% of the time. When you guys have it, where if your place is booked, keep marketing it. Don't stop marketing your place when it's even when it's booked. Because if you have other places, they take it. I I say maybe 3% will not take it. Because if you're if they're looking for a two-bedroom already, and you have one coming up in a week, bring them to that one. And then you give them special pricing. Like, hey, I haven't marketed this place. This is what's gonna cost. I would say if I hit the button to publish, it's gonna be nice, it's gonna be 2,000. But if you take it before I publish it, I give a discount. So I it works every time. Now I've already had the professional photos in there. I got a video. Well, can I see it? So I send them the link with the photos and everything, and then I bring them right to my website.

SPEAKER_07 21:43

Now, and how do you do that? How do you get past the you know all the stuff that prevents you from sharing stuff through the Airbnb messaging?

SPEAKER_01 21:51

Airbnb, I just have them. Um, you can put your website, you could you could put so you got to do it with integrity because I don't want to take anything away. You got to set it up with. Ask, can I speak to you? So I will say, Hey, um, this place is booked. You know, I have other places, right? And if you want, I can put it on the Airbnb or you can look at individuals. They always say, No, let me let me let me contact. They always do that. So if you you you can put your phone number in there, I don't know that no, you can't, it's never been a problem. You put your your four, you put your number separate and it can go on there. You you put the first three, send, second three, send, second, send, and people can contact you. But if now what I do, if they want that, I make it this is me, I make it mandatory that say they want my place. I usually make them stay on, I make them stay with Airbnb for like a day or two. That's what has been working. I say you can have my place, but because I you have to phone the money through Airbnb. Does that make sense?

SPEAKER_04 22:52

Yeah, I tell people to do that too.

SPEAKER_01 22:54

Yeah, I do that too. I matter of fact, uh, you told me to do that. Thank you. That guy told me to do that because I don't want I don't ever want a situation that that the money is not that people have a right to merge, but I make them if I met them through Airbnb, I make sure that I generate money from Airbnb for them.

SPEAKER_04 23:12

Yeah, that's what I've been doing too.

SPEAKER_01 23:14

Like they stay a couple days, then just yeah, you stay there a couple days and blah blah blah, and then they want to convert it, they want it. But some people I've had people, you know, I feel safer on Airbnb. I'm like, great, okay, but I'm gonna, it's gonna be an extra thousand, no problem. We can do that. And so, but once you market it and you send your and then with your welcome, hey, another thing you can do when you're sending your welcome messages, hey, this place is busy, they allow you to have your website on there, you know that, right? You there's different ways to infuse your website. My website's on there every time. Hey, this place is booked for more information, blah blah blah. They find you that direction.

SPEAKER_04 23:52

You haven't had any issues with that? Because I know a few people that actually put their website in the pictures, man, and I was like, never, I've never had a I never had an issue.

SPEAKER_01 24:01

I've never my website's on everything. My website's on everything. I've never had an issue, but I I don't I think I've booked I've been booked in Airbnb this the last couple years, it's not, it's it's really gone to almost zero. I I just put my step on there for SEO. I just I just put my stuff on there for SEO, but I really it's very rarely that I get booked on there. Very rarely now.

SPEAKER_07 24:26

Question for Terrence. Yeah. Okay, so you're you're the you're the tax guy, right? And and and a real estate investor, right? So so here's what I'm here's what I'm

Flipping in a hot market and using 1031 exchanges

SPEAKER_07 24:37

seeing. You you said, okay, yeah, that the housing market might be like um overheating or you know, inflated crazy. There's always opportunities, right? And so so I would I would automatically think, okay, well, if there's if if you know you can't get people can't find a house, if you're able to get one off market, you know, and and fix it up, sell it, you you probably should have a successful flip going on, right? You probably should because if you put it put a halfway decent looking house out there, it's gonna sell quickly, right? Yeah, let's just say, yeah, let's say you buy one for 100 G's, uh put 50 into it, sell it for 250. I don't know, make you anywhere from 50 to 100,000 profit. Yeah, now you're and you're like uh you know a lot about the 1031 exchange. What's the best way to use that big chunk of profit where it's not going to get taxed? And and what's the best property to put that in that not everybody and their mama's trying to buy right now? No, no, yeah, yeah. We can get a decent deal and and use that money to to grow.

SPEAKER_03 25:40

So um, I would say, I mean, what I'm looking at more so now is uh uh new construction on the residential side, just because uh one you can kind of price control it a lot better than on a current house. Um, and even in that, most of the time with the new construction, you're trying to go where things are going, so you haven't maybe seen as much appreciation in that space. And a lot of times, as new developments are coming up, you got to kind of think about what's going around that, uh, so that if you can drive traffic, if you can, depending on you know if it's a long-term rental or a short-term deal, uh, you might evaluate it differently. But I'm looking at new construction on the on the

New construction and multifamily as better 1031 targets than overpriced single-family homes

SPEAKER_03 26:24

on the uh residential side, and I'm looking more so on multifamily, uh, because I think that's kind of where the government would also come in. I think that, like I said, on the affordability of housing, I think that as they've continued to provide liquidity into the economy, you know, literally sending people money, then um you'll see that, hey, will they pay people's rent? Will they will there will there be more, will there be bigger programs like with Section 8 and such, where hey, if I'm providing this multifamily housing, then I can um then I can uh um allow that you know to have just that market of people that are always gonna be available to rent out what I'm doing. And then one thing that uh like with the 1031, um obviously if you have that bigger profit, you can actually you know move that to a bigger just to basically trade up so that you're looking at just having a bigger space and you're gonna maintain that um the the tax deferment um on it. And and I think in the multifamily space, you're gonna you're gonna have less uh competition, uh depending on your area, but you know, in the in the in that space, if you're gonna be marketing there, you're gonna be kind of networking in that space. I think that that's gonna be a uh a very viable place to do. And you know, one of the things that, or even on the commercial side, you know, just how it's valued differently based on cash flow versus um the area. I mean, if if you can do value ads to those type of properties, then you'll get a lot more appreciation that you can control. So a lot of the strategies that you guys talk about or that Adam talks about, it's like, hey, if you can employ that in the multifamily or commercial space, then that can definitely increase your value. Um, and and the cap rate that you have on the property that will give you just a bigger purchase price. And then now, hey, I can leverage that capital more. Once I got a higher valuation, I can use that capital. So I can instead of me having to profit from selling, I can profit from borrowing and just you know take the equity out and apply it somewhere else. So I still maintain the flexibility, uh, but I don't have the tax advantage because the 1031, I mean, part of the issue that especially in today's market is time, you know. I don't want to I don't want to jump into a bad deal because I have this deadline looming over me. Yep, you know, and so I think a lot of people uh they they they aren't, you know, it's come unless you're just constantly getting deals and evaluating deals, uh, you kind of have to really be on target because you know, if you miss that deadline, then you're kind of uh out of it, you know, as far as the the the capital gains or whatnot that you might pay, or the short-term gains that you might pay on a flip.

SPEAKER_04 29:08

Now, you you y'all you touched on appreciation there, man. Uh appreciation's huge,

Appreciation versus cash flow: which builds wealth faster

SPEAKER_04 29:13

you know. Now I have a question, and this is for everybody in the group. Which is more important, cash flow or appreciation?

SPEAKER_07 29:21

Both.

SPEAKER_01 29:23

Hey Terrence, and I want to hear Terrence's answer because you do this for a living, exactly right. Yeah.

SPEAKER_03 29:29

So I would say, I mean, for me, I would say the appreciation is more important. Um, just because I think that it's just it's almost like I think about it. I I play basketball, and I think it's it's kind of the they say the ball moves faster through a pass than a dribble, right? So hey, if I'm getting and not that you know cash flow isn't great, but I think how you build wealth is gonna be that through that appreciation, uh, and just the the ability to um interesting. Like I said, the the borrowing capacity to get more equity out of the property without selling it, um, it's it's gonna be based on that value. So I think you can you can turn the money faster through quicker appreciation. Um and then ultimately, you know, on the cash flow side, a lot of people, especially like in your case. I mean, that's why you're trying to get multiple streams, so that a lot of times you're just reinvesting that cash flow, but you're reinvesting it to get more appreciation, is kind of how I look at it.

SPEAKER_04 30:33

I'm happy you answered that way because uh basically I've been buying out of state in a different market.

SPEAKER_01 30:40

Uh a different market, but I've been telling you that for years, bro. Get out of dollars. Sorry, never mind.

SPEAKER_04 30:49

This is what happened. Like, I was talking to my mentor today, and he goes, Look, Micah, you keep buying in these cash flow heavy places, but you're not getting appreciation. Which, you know, and that's what I've been doing. I was like, damn, he goes, he goes, Man, if you think 10 years down the line, he goes, think 10 years down the line. Let's say all these houses are paid off, but they're worth what they were 10 years ago. You really didn't go nowhere, you just got some more cash flow. So, and that's why I decided I'm actually gonna start buying in the DFW again because of the appreciation aspect. And that's why I want to hear your, you know, appreciation is very important.

SPEAKER_01 31:24

And I'm gonna go ahead. Go ahead. No, no, I want to hear this. I'm sorry, I didn't mean to interrupt you.

SPEAKER_04 31:28

No, no, so I said I'm I'm now only going for cash flow and appreciation markets.

SPEAKER_01 31:32

But what if I'm paying devil's advocate, right?

SPEAKER_04 31:35

Oh, go ahead, go ahead. Because I want to hear that.

SPEAKER_01 31:37

Okay, so if you're in okay, can can people get rich off investing in slum areas?

SPEAKER_05 31:45

Oh yeah. Oh yeah, yeah.

SPEAKER_01 31:47

All right. So so say if you bought 50 properties for 5,000, Detroit, you could do that. I did this now. Detroit, you can buy a property for 5,000 and use cashing flow, it can cash flow, but if you have 50 properties that are paid off, they may not have gone up that much, but if you got 50 houses that are paid, paid isn't paid off some slight appreciation because I can go buy there and burr the mess out of all those places, too. You get what I'm saying? So I've always built myself from those smaller markets, like he said. Like I used to invest heavily in areas that didn't capitalize that much, but I was able to pay them off quicker because I put more towards the principal. And then when they're paid off, remember I rehabbed them. Don't forget about that. So I got something for five. Now it's worth 80. But now that same house that I've gotten for cheaper in those areas, I can if instead of it taking me 25 years, it's paid off in five or 10. You know, so consider is really what you're doing with that profit because if you're only making $300 a month and you're putting that towards principal, you're knocking off 10 to 15 years. All it's really about really what you you want to do.

SPEAKER_03 33:00

So I would say just to respond to that, I think that it it maybe also depends on your main revenue source, right? So if you have the ability to, I mean, if you can apply your skill set as far as how you create systems and invest and are able to take advantage of the market, if you can apply that skill set into just your main revenue source, I mean, that'll provide you your lifestyle. So if you can then say, hey, even if I'm breaking even on a property, if if it can compound at a higher interest or a higher growth rate, then that cash flow you're getting, it's gonna be hard to catch up, right? You're thinking, all right, just think about okay, just say you have a hundred thousand dollars. So I have one property, I have one that's you know, give me a cash on cash of let's say 10 in cash flow, right? I'm thinking of I'm making 10 grand a year from rent.

SPEAKER_01 33:58

Other ones from rent, yeah, from rent.

SPEAKER_03 34:01

Okay, okay, right. So hey, you're making 10 grand a year in cash flow. This other one's going up 10 a year, though, in appreciation, and that's compounding. I'm compounding on a hundred thousand at 10 versus you're compounding at 10 on 10,000. So you're saying, okay, I'm making 10,000 this year, I'm making 11,000 next year, I'm making 11,000, you know, 100 versus hey, I'm at 110, now I'm at 120. You see what I'm saying? So if I'm making five percent on my cash flow or three percent, right? Hey, at the end of the day, my balance sheet is gonna look better than yours. So if I go to the bank, they're gonna say, Oh, well, you know, we're we're gonna give you more money, we're gonna, and and then on top of that, who's gonna granted in your market, maybe they're gonna take over ask, but I'm imagining people aren't in the slumlord places. I didn't say 25.

SPEAKER_02 35:01

I didn't say slow. Did I say slow? He didn't say slow. Oh my god, I'm canceled. There it goes. He canceled. It's like cancel um slow tooth movement. I didn't know to say that. Probably not getting the 25% over asking. Shut down, pal. It's over.

SPEAKER_03 35:23

Um, so you're not getting 25% over asking, and you also have to think, okay, in higher appreciation areas, then you're gonna attract other things, right? Like the reason that people are moving from California is because of the taxes, right? And then more favorable terms when they move to other states. But hey, when that corporation moves, they're not gonna move in that area that you're investing in, they're gonna move closer to the area that I'm investing in. So it's gonna drive population, it's gonna drive commerce. So the fact that my appreciation is going to probably increase, I'm gonna have more advantages or more opportunities for that to continue to increase than you would, depending on the area. Now, if you have more data that says, hey, this is a low area, and it has, even though it's cash flowing today, there's reasons that it will appreciate down the road, then that's a different story. But you know, Michael said if you're looking at, hey, if it's 10 years and it hadn't gone anywhere, well, something's gonna have to materially change for that to for people to feel like it's gonna be valued at a much higher platform. I mean, I even think about cars. Like, I mean, you think about brands like Kia, you know, they're making more luxury vehicles, but a lot of people just mentally they just won't buy that brand because of what it used to be, you know. Uh and they're really nice cars, but I'm just saying that that area or that you know, some things just are ingrained in people's minds as far as value. So they're just like, you know, I can't see myself buying unless there are bigger players that decide that that area is going to be more valuable and they're going to to that area.

SPEAKER_01 37:00

So, why is everybody so why are so many people like the area that I'm investing in? You can't even get a house in a i mean, they go like that, the ones that are in the challenged socioeconomic areas. So, and I know some people are very wealthy from doing it. What do you think? Are they making money off the cash flow, or

Why Starbucks opening in a neighborhood signals gentrification

SPEAKER_01 37:18

what do you what do you think, what do you think is happening over there?

SPEAKER_03 37:21

Are you saying in in the areas that that you're that are challenged? Yeah, yeah, part of it is just the the the money is so cheap right now. I mean, that's the other part. So it's just the affordability. Um, you know, people you you look at savings rates, skyrocketed just because with the pandemic, uh, you know, Micah mentioned earlier with travel, hey, that came way down to a lot of discretionary spending. A lot of people were just putting that money into their houses, uh, they were putting they were or they were saving it, and so that was allowing more people to be able to afford houses. So with supply having come down, if you think back just to the financial crisis, right? Um, you know, a lot of builders went out of business, a lot of builders stopped building as quickly, and so as you have populations that are you know approaching ages of buying a house, uh, it's just supply and demand. So there's just a lot more people wanting to buy a house than there are available supply. And with money being so cheap, then that means affordability has created even a higher level of supply to chase after that uh or sorry, uh demand to chase after that more limited supply. And and honestly, the people that have the most money in real estate, they don't own small stuff, right? I mean, they might have a smaller sliver, but if if I if I'm a multi-millionaire in real estate or a billionaire, even I'm owning you know high-valued properties, right? Uh, so so more you're gonna be more in the kind of um mom and pop space, I would say. If you're compiling the 50 properties now, because it's just more work. I mean, just think let's like that's why yeah, so like like even uh like like private equity companies, right? I mean, if you have a uh company that's trying to grow through private equity, they'll tell you, hey, those people they look they reach, they want you to go out of business or they want you to grow, grow, grow. Because in their minds, look, we'll invest in 10 things. If two of them hit really huge, we'll win. The other eight can all go out of business, right? But it's like in in in your in a hey, if if I do uh if I buy a property and I can flip it for five million dollars, hey, how much work would I have done to make five million versus you know these other 20-30 houses? So I think you just think about time and uh effort. I mean, and and like most people say, hey, the the the only difference between a bigger deal and a smaller deal is the money behind it, right? A lot of times they take the same level of effort. Um, and so it's like you know, you can do it through that, but to me, it's just more effort is gonna be required to make the same amount of money.

SPEAKER_07 40:01

Now, here's here's real quick. I'll bring up uh a friend of the show, Al Williamson,

Buying up the block between the hood and the good neighborhood

SPEAKER_07 40:06

right? Here's where I think, yeah, yeah. A mentor to all of us. Here, here's what I think that he kind of he kind of bridges the gap that you're talking about between slum or whoever brought up that word today, and and then the high appreciation neighborhoods, you know, because he builds like if if if if my memory serves me correctly, he builds like at the edge of the good neighborhood into where the hood starts to begin, and he and he buys up the block, like as he says, so he's getting the price the houses at at a great price, which some people would consider them that's not a good neighborhood, it's a few blocks from a good neighborhood, but then he builds and he makes them beautiful and he and he and he bridges the gap between you know the the lower neighborhood and the higher neighborhood, and so he gets the best of both worlds, he gets houses for cheap, he gets the cash flow immediately, and then he and then the the prices of the whole block go up, so he gets the appreciation.

SPEAKER_01 41:04

I you know, he taught me I do the same thing. Um, the only time I would invest in socioeconomic areas, this is what I do. If I see them building any type of Starbucks near there, that area is about to be gentrified. You can bet your life on that. It's a hundred percent true. Uh the the the young lady I'm um I'm seeing, uh she bought her house and and uh there's a there she's about to sell. I said, listen, you need to start working, get your house rehab because they just put a Starbucks there. That's the beginning. And it's actually happening, the values are shooting up. But I did what what I read his book on that owl guys, he's a great guy. Read his book, and I started buying up the block, but he said, Adam, don't do anything, just wait. So I bought up the block, the area is getting gentrified, I just boarded it up, right? And I am not joking, I'm getting offers for double the prices of my houses, and they they're boarded up because the area is starting to get gentrified. So definitely, I can definitely see that. And if I can change it right now, he talked about one of the main things I love about the show about share economy. You guys don't mind if I shift it a little bit, do you? And he talked about compound interest, and so you know, we want freedom. You know, I don't want to have a lot of money, but with the share economy, you know, we talk about how your house can be a liability if it doesn't produce anything, if it's not making money, right? Uh, or your car. And so what I try to do is that everything that I have, it needs to generate income. My home generates income. I go back from two cities, and when I'm in one city, I'm Airbnb it out. I'm in the other one, so I haven't paid a mortgage in almost six years. Literally, I have not paid one. Um, my car, one of my cars is in the shop for two. I want to get another car under my LOC, but it's getting fixed up to put that on Turu and everything. I don't invest in anything that doesn't generate money. And so the question was this he keeps talking about compact compound interest and appreciation. And him and I already been talking about that. I said, I said, what can we do, guys? This is the meetup protested. What can I do to generate income? Because, like most entrepreneurs, I how many of you guys have to put money away for taxes? Do you guys have to do that? Or I have to just meet. Yeah. So I have to put money away every quarter because I pretty much know what my tax bill is. Then for everyone listening, when you have an arbitrage, what is the average arbitrage cost? Uh uh, Miko or you, Steve, what is the average cost to get a arbitrage together?

SPEAKER_07 43:42

You can probably get a one bedroom uh together, one bedroom condo, whatever, from anywhere from five to ten grand.

SPEAKER_01 43:48

Okay, let's say 10 grand. So my numbers are right. It costs me about 10 grand, right? What is the so what is your average? I don't do anything unless I generate minimum of $500. Profit is that kind of like the standard?

SPEAKER_04 44:02

Yeah, kind of, yeah, yeah, standard. Am I wrong? Am I wrong? Well, no, no, mine used to be 500, but it's a thousand now. But five, is it?

SPEAKER_01 44:09

That's depending on the area. That's amazing. Yeah. So where he's at, are you pulling that in those smaller markets? Is that the minimum for a thousand profit? If you are, you're amazing. Don't give that name out. Yeah, don't give that name out. No, if listen, if he's doing that in the market and I know where he's at, I'll see you.

SPEAKER_03 44:25

Michael with the flex.

SPEAKER_01 44:26

Yeah, yeah. But what I'm saying is so so let me tell you about the situation. This is going to tie in the show again. And I'm really excited to talk about it. Do I have permission to do this? Yeah, good. So I'm having this money, right? I'm putting this money away. I'm taking the $10,000 and I'm investing in these arbitrages. And my art job is every arbitrage, my rate of return is around 60%. Is that right? I'm talking about if you're investing 10, minimum you'd be making profit is about 7,000 a year. Am I correct? So if you put 10 and you're making seven clear, that's about 70% rate of return. You guys get that? Am I right?

SPEAKER_06 45:04

Yeah, yeah.

SPEAKER_01 45:04

All right. So my problem, my issue, listen, how what can I do at the same time? Imagine if I could have an arbitrage making money when I when I use the money to invest in an arbitrage, and also it can compound money in another way. And we figured out how to do this. And I'm writing a book on it. And that's why Terrence is on the show. So, guys, let me tell you what the issue was. I'm in a different stage in my life, and I'm all about leaving legacy. I want to make sure that my family, whatever future kids always are taken care of, right? But it's very difficult to do that when if your goal, um, I have a certain amount of number. I think I have the rule of 25. I believe 25 arbitrages can give you, it should be able to generate you a passive income around 160,000. That's just my numbers. You're gonna take 30%. Yeah, that's easy, guys. Believe it or not. So if you do the math, right, that's around like $50 or $60,000 of cash, but you can do it so you can buy one and do it slow. So I would take the savings, right? I'll put money in my savings account, wait till it gets to that, and then I'll go get another place. Is that kind of normal what a lot of us do, right? I said, that doesn't make sense. I said, how can I build wealth, equity, and my arbitrages or a down payment for a real estate investment? So let me tell you what I came up with. I became my own bank. I no longer became my own bank.

Becoming your own bank: earning on both the policy and the arbitrage

SPEAKER_01 46:37

No one is talking about this in the country right now, guys. Not the way that we do in our we're we're doing it. And that's why I have that guy down there. Uh, we're gonna talk about that. So imagine this. Instead of taking my $10,000, right? Listen, guys, and just going getting arbitrage, which generate me a 70% return. I take my $10,000 and I put it in a life insurance policy that's gonna generate me anywhere from five to ten percent, right? And now the benefits, he's gonna talk about that. Once I put that money in there, I'm generating now money on the life insurance and on the arbitrage, right? How much you guys when you put your money in a savings account, how much you guys are earning? 1.5. What if you could put it in a vehicle that you have access to it pretty much immediately, but you're inning anywhere from four to twelve percent? And you can borrow from it, and you can borrow from it, and you're and you're using your arbitrage to fund your retirement. How's that sound? Can't beat it, can't beat it. This is this is what we bring when I come on your show. That's why I only come every I I you only see me every two years. So now when they call me, I'm like, I see you next. You guys are not ready for this, okay? So I only come every two years because when I come, I drop it and you won't hear from me again for a little while. So, guys, what we're bringing to the table this show is that the share economy is can work for your car, your share economy can work for your house. But now, why not use the share economy to fund your retirement? You're doing it anyway. So if you don't, do you guys do you get what I'm saying so far, guys? Oh, yeah. Okay, so I'm gonna pass it down to this guy right here. So when I came to him, we created something, we created this together, and it's working out amazing. So, no longer I don't have to worry about retirement. My all my houses, if something happens to me, uh there's a death benefit, but he's gonna talk about exactly how everyone can do this, right? But you need a specialist to get this done, all right. So, Terrence, if you want to just add to it, tell him what's going on with that. Quick question, Terrence.

SPEAKER_03 49:05

Go ahead.

SPEAKER_04 49:06

Yeah, are you gonna be schooling us on IULs?

SPEAKER_03 49:09

I'm gonna show you. I'm I have an example, I'm gonna show you how uh how it works and how you would want to design it. Um, because I think that many times when people talk about this concept, uh or just the policy in general, uh, it's kind of like you know, I have a son who's about to be two in November, right? And if he was running towards me with a scalpel, I'd be worried, right? I'd immediately try to go grab it. But if that scalpel was in the hand of a surgeon, that same tool would now all of a sudden be much more useful, right? It'd be much more impactful. And so that's why it's important if you're gonna use this type of tool, then one, you need to work with someone who's you know qualified that's not just trying to sell you something, uh, but also is gonna be able to evaluate your situation and be able to tell you, hey, this is a good fit with what you're doing. Because if it's not a good fit, then ultimately you want to, you know, go a different route. But for the people that it's a good fit for, then it's really a way to effectively just compound your money in multiple avenues, and so that's kind of what what um Adam did. So I had a little couple slides, so I don't know if we want to go through them. Yeah, Arthur, I can try to just give you the high level go through the uh so let me let me go ahead and uh get this up and we'll um just kind of kind of work one thing, guys.

SPEAKER_01 50:30

I am not an insurance person at all. You know, I'm giving that disclosure statement, that's him. So do your research, do everything. This same with everyone, I'm just giving the disclaimers.

SPEAKER_07 50:40

I've heard of this concept, it's fascinating. I I want to hear this.

SPEAKER_05 50:43

Yeah, yeah. I've been all right.

SPEAKER_01 50:44

So I built I have all my life insurance now through my arbitrages and my renters pay for it now. I don't I'm set for life.

SPEAKER_03 50:51

All right, I guess you gotta make me the host to uh share it with you guys.

How indexed universal life insurance works with non-direct recognition loans

SPEAKER_01 50:55

Um, Mike, I just send it to you if you want to. Oh, yeah, go ahead.

SPEAKER_04 50:59

But you let me uh make you a uh host real quick.

SPEAKER_03 51:03

Yeah, go ahead. Yeah, all right, great. Okay, cool. All right, so I'm gonna walk through this with you guys. All right, so basically, um, and then kind of Adam's point, right? This is only a component of my business, and like I said, I'm more interested in finding the right people to do this versus just trying to make this you know to the masses because I don't think it makes sense for everybody. But a lot of your viewers and listeners, uh, I think could make sense depending on their situation. So, you know, first, this is completely illustration. Um, everyone's situation is different, so you'd have to evaluate it specifically uh to make sure that it was you know right for you. Uh, but just the idea of just having permanent insurance, which is really the tool that we're utilizing uh to kind of fund this strategy. But one, it kind of like to Adam's point, right? It makes sure that you have that death benefit so that it allows you to you know transfer wealth tax-free, it allows you to uh you know cover taxes if necessary, uh, to uh help fill in the gap from a retirement standpoint for spouses. It does give you flexibility with how you make premium contributions, so that's very flexible when you talk to people who are in the real estate or business owners, and that cash value access is really what allows you to get um more of the living benefit behind the insurance that you own. And so you can effectively have your policy tied to the stock market, you could have it tied to an index, which is kind of what we'll do with the illustration, and then or you could have it guaranteed to some interest rate, plus the company that you're buying from can give you dividends or additional uh profit share out of the plan. All right, so here's just a couple you know quotes by Albert Einstein, uh Warren Buffett, and Christopher Begg, but it just talks through the idea of compounding and the importance of it when you're evaluating a business or an endeavor and how that really can separate you from your competition. And so, one of the key components that if you're gonna use this strategy, all right, then as an investor, you're gonna want to have some level of cash, you're not gonna put your last dime into this type of plan, all right. Um, you're gonna want a policy that has low expenses, has a high surrender value, meaning I have high access to the money once I put it into the contract. And then I have favorable loan terms, which I'll go more in depth uh with that. But I mean, I've talked to people, I've been in the business almost 15 years, and so I've talked to people that have used this type of policy, but they were sold it, and you know, they've had their policies for 15, 20, 25 years, and we're reviewing them, and we're like I'm having to make or tell them, hey, look, this is actually not gonna work for you, right? You're gonna have to make big changes to it, and it's just a bad taste in their mouth, and so a lot of the bad press behind this pool is really based on the misuse of it. And unfortunately, you know, in in a in a capitalistic society, not everyone is always gonna do what's in your best interest as far as recommendations, and so when you buy something, you have to just really understand it and make sure that it fits with what you're doing. So I want to stress that uh just to make sure that people are aware that uh this is not for everybody, but like I said, it can be a really powerful tool if your situation makes sense. But some of the synergies that you can find through real estate or arbitraging, uh or it in this policy as well, is what we call this non-direct direct recognition. So, what to kind of give you that in layman's terms, if I have a million dollars in the bank and I go to want to buy a property, all right, and they're telling me I gotta put $200,000 down, all right. Once I put that money in the property, that money is gone. Okay, I no longer have access to it, it's just tied to the equity, all right. But if I had a million dollars in a property, I could go to the bank and borrow $200,000, but I still have a million dollar property, so my money in the property will still compound on a million dollars, and then I could take that $200,000 on and buy something else. So I now have two different assets that can grow for me, and that's pretty much the concept we're gonna use with the insurance, all right? And so we're using leverage to compound our returns so that it gives us greater benefits over time, and this is not a tool to just make money quick, all right. So, in real estate, not that you can't make money fast, but generally you want to make it when you have a sustained business model, it's because you have a long-term view, like Micah mentioned earlier. All right, and so I did a case study um of a nice eligible bachelor, similar to Adam. All right. Um, Adam remembers when he was 36, he had more hair, of course. Um but good health, guys in real estate, and he was taking that ten thousand dollars and he's just committing it for you know 20 years, okay. And so what I did was I just back tested what would happen. So in this case, the $10,000.

SPEAKER_01 56:12

Let me answer your question. So, like, so for example, when I do an arbitrage, it costs me about $10,000, right?

SPEAKER_05 56:17

Right.

SPEAKER_01 56:18

And so when you're saying $10,000 a year, instead of taking that $10,000 and immediately going buying out, going by, I'm putting it in an insurance policy.

SPEAKER_02 56:27

Correct.

SPEAKER_01 56:28

And then you just did it for the next 16 years. That's what you're looking at right now. So the next 16 years, if someone would do that every year, correct.

SPEAKER_03 56:34

Yeah, so I'm basically saying, okay, hey, as um Steve mentioned, hey, instead of taking that money and

The 16-year back test: $10,000 annual deposits growing to $230,000 cash value

SPEAKER_03 56:41

exclusively using it to buy your furniture and stuff, right? Hey, I would take that same $10,000, I'm gonna deposit it into this life insurance contract. So what happens is I'm gonna actually buy insurance. So in this case, this guy is buying about $300,000 of death benefit. Okay, now, secret, all of us are going to die, and no one likes talking about it. But having been in the business, you know, I've had to have tough conversations with people that have been in that situation. So that death benefit is valuable, all right, if it is you know necessary or it's needed, okay. Uh, but in relation to the strategy, that's gonna be more of an ancillary benefit, all right? But it can be a primary benefit depending on your objective. So I take that 10,000, I buy this policy, the insurance company is gonna charge me a cost, all right. So that cost is gonna be subtracted out, and depending on the carrier, that net balance or my cash value, some of them will give me 90 to 95% access to it. Okay, so if I put 10,000 in, I could have upwards of eight to nine thousand dollars of accessible cash to pull out of that policy, all right. So I put the 10,000 in like quickly, right?

SPEAKER_01 57:53

Within like a week, right?

SPEAKER_03 57:55

I put the 10,000 in, and then what I do is I make a separate agreement with the company, all right. So I create a loan on my own money. So as Adam said, he's the bank, okay. This is my money, so I am able to create a separate agreement and create a loan with that money. So I have the 10,000 that I put in. The company is now saying, Hey, every year we're gonna tie your growth to a market index, like the SP 500. Okay, so they're normally gonna either say, Hey, it's gonna grow one of two ways. You're gonna give you a range of returns, so hey, it's gonna go from zero to eight percent, or we're going to subtract a spread depending on what the turn return for that year is. So this year the SP is up 17. So your contract might say, Hey, look, the first five percent of growth on the SP, we're gonna keep it, but you get to keep the rest. So in this case, hey, I would have made 12 if the market does 17, I make 12. Or if there's a range between zero and eight, let's say, if the market does 17, I get eight percent. If the market goes backwards, though, my money doesn't go backwards, all right. So I'm able to basically protect my money and I'm getting a similar return to what mut rates are now, right? Where it's not going anywhere. All right, I pull that. I'm sorry, can I pull that 12? Yes, you can. All right, so so so yes, so that so basically now my so let's say I put that 10,000 in, I have 9,000 of cash value, and then I get a 10% return on it. Now I have $9,900. All right. Now, what I did though, when I put that first 10 in, I created a secondary cut uh agreement, right? So I have a loan for $9,000 potentially. Okay, I take that $9,000 and I'm using that to arbitrage. All right. Now remember that $10,000 I put in, the insurance company is still allowing me to compound that money based on their growth, but then they allow me to take it out, and I can take that money and then compound it with my arbitrage. Okay, but the other component is that secondary agreement that I made, that $9,000 loan is what's called a participating loan. So even though I borrowed $9,000 from the company, they're actually still gonna credit me based on what the stock market did. Okay, so if I borrow at 4%, let's say on this loan, and the market does 10, I'm gonna make 10% on that loan. So basically, the company is going to pay a portion of my loan back for me because of how the contract is designed. Now, this started like back in the 1800s in Russia, this concept of and then the IRS, because you know they let us have fun, they just don't let us go buck wild. But it was really savage. I mean, if you go back and look like in the 80s and stuff, you had a lot of companies that were buying policies on their employees, they were actually taking the cash out of them, and when the employee died, they would get the death benefit, all right? So the company would use the money from the employee as an investment, they would use that to invest in other stuff, and then they got the death benefit on top of it. So the IRS put a little bit more restrictions on things, okay? So that's why I said, hey, when you you do this, there are still ways to do it in the business setting, but you have to play by the rules, all right. Um, but in this case, uh I just did a back test. So I said, okay, let's just take the last 16 years and just look at, all right. So here's what happened in the SP. Now the SP goes back to about 1926. So 74% of the time, the SP actually goes up in value. All right. So you actually made money 74% of the time, but about 57%, it actually goes up more than 10%. Okay. So lar in large part, you're gonna be making every year on this, and generally you're gonna make double digits of returns or up to double digits returns potentially, just based on the dynamic of what the index that is tied to. Okay. So what I did is I said, All right, you're putting $10,000 a year in, all right, and your cash value, just a living benefit projected over 16 years, the last 16 year history would be about $230,000. So on face value, that's about a 4.2% return after tax, all right, with basically zero downside. Okay. Now, if you were taxing that every year, you're probably close to playing closer to six percent. So you're getting a solid return just on its own merit, uh, especially for people that are in higher tax brackets. So it can have utility depending on your situation, just as a standalone tool. Okay. Obviously, on the real estate side, I use 30%, right? Um, I'm not as talented as like Adam and Micah, who are getting 60 and 70 in my illustration. But um, I just said, okay, if you did that for you know this 10 basically the same window of time, after that 16 years, you would have made 66,000 of income, right, at a 30% rate of return. So you just reinvested your income. So you made $66,000. Okay. Now, the idea is to use this in conjunction with each other. So I can not only use it in the insurance space, I can only use it in the arbitrage space, but I can use it cohesively. So basically, what I did is I took that same $10,000 and then I created the separate agreement 16 different times. So every year I put 10,000 in and I basically withdrew out the loan amount that was available. So as my money grew every year, I basically just took it out, okay, and I formed a separate loan. So in this case, I mean this is a convoluted illustration, but I had 16 different loans all right out there. But if you look at it cohesively, my income was lower because I didn't have full access to the 10. So that is a negative if you want to look at it like that. Hey, maybe I was only able to take out 8,000 this year, 8,500, right? So my income was down, but if I add that to my actual cash value, now I have $286,000. So instead of me having a $66,000 of income with no cash value or $230 of cash value with no real estate, I have both. And then I have the loans, which in this case was about $111,000. Okay. So if I pass away at this time, I basically get the $300,000 of death benefit plus the $230 of cash value. So that's $500,000 of death benefit. Now you ask, okay, what does the company do about the loan? Well, they are in control, so they just subtract that from my death benefit. So I would leave $400,000 tax-free to my beneficiary. All right. But if I lived, I would just my money would continue to compound. And so if I got an 8% return on that $230, hey, I just made $20,000. All right. Um, and so that's the power of being able to do this over a long period of time because you're just compounding on a bigger number. All right. Uh, and so my net growth is $176,000, uh, all said and done, versus having you know a lower value if I just use one strategy by itself.

SPEAKER_04 1:05:25

Yeah, now my question is this on that loan, on that loan, does that loan show up in your personal name?

SPEAKER_03 1:05:32

No, it's no, no, it's a separate, no, it won't show up on your credit or anything. Yeah, so it's just gonna be a separate agreement. Um, because it's I mean, it's technically your money, right? So uh you're not having to report that or anything.

SPEAKER_06 1:05:46

But you have to pay it back with interest, right?

SPEAKER_03 1:05:49

So that's the thing, you can pay it back,

Taking loans against the policy with no credit check or repayment deadline

SPEAKER_03 1:05:52

all right. But if the company, so once again, if if your money is compounding and the company is actually chipping in to pay it. Then you can basically try to arbitrage and say, Hey, my the cup, the money that the company is paying on my behalf is going to be more than the actual interest on the loan. All right. So that arbitrage, that difference actually reduces my loan over time. But like I said, the dirty secret is you're gonna die. So the company's gonna recoup it eventually, right? They're just gonna take it from your death benefit whenever that day comes.

SPEAKER_07 1:06:26

Now, I I guess it's just what what I'm asking, because like for this, for example, 401k loan, you could take it out, and then you got up to like, I don't know, three years or five years, whatever to repay it, right? Five years to repay it, depending on what you choose, at whatever interest rate, four or five percent, which is it's it's just you're paying it yourself, so it's no big deal. Um, is this the same thing where you have a certain amount of time to you have to pay it back, or you could just keep that 10,000 forever?

SPEAKER_03 1:06:52

Right, you could keep it forever as long as you have enough cash value in the policy, then you there is no requirement for you to pay it back, so it's completely up to you, and that's part of why you know, like I said, you work with someone like me or or someone else that can kind of give you the instructions. So, this is something you annually review to kind of just ensure that okay, this makes sense as far as how I structure it, or hey, and that the other thing is that 230 is still your money, so if you wanted to take a portion of that out, you still could. All right, now you could just take a straight withdrawal and it'll reduce your death benefit and your cash. So, if I want to take thirty thousand dollars, I just take thirty thousand dollars out, and my death benefit will just go down by thirty thousand.

SPEAKER_07 1:07:32

All right, yeah, it sounds too good to be true. This is like you put 10 10 grand in, you get a $300,000 policy, and then you can immediately pull that $10,000 back back out.

SPEAKER_01 1:07:41

It's not true. We this is what I do, that's why I came out the screen.

SPEAKER_03 1:07:44

So, like I said, it's not it's not you can't pull the full 10 out, no, all right, but you might be able to pull out in this case, year one, it was like $7,800, right? I could pull out $7,800 and I use that into the arbitrage.

SPEAKER_01 1:07:58

I've got nine back.

SPEAKER_03 1:07:59

Um so yeah, so it's just a matter of like I said, the company, I didn't like I didn't want to push it to the max, right? As far as withdrawals, but I just said, Hey, and and that's the thing. I actually talked to a guy who uh one of the companies that I work with who's like one of their um you know advanced

Banks and corporations using life insurance cash value for decades

SPEAKER_03 1:08:16

planning people, and he says, Oh, yeah, I mean if you look at any bank, you know, Bank of America, uh Wells Fargo, you look on their balance sheets, about five to fifteen percent of it is in life insurance cash values. Okay, um, and so you think those guys know what they're doing, and but and the funny thing is he says, look, we don't advertise this because this isn't something that we like want people to do necessarily, but it's just a byproduct of the contract, right? So it's like we don't tell people, hey, put money into the policy, then immediately take it out, right? But it says it's kind of built in, and he says, you know, we do this with corporations all the time, and they just try to arbitrize the difference themselves because in the in the in the past, uh, a company could actually take the money out, and then um they would actually you could use this to like pay your employees, um, and they would either get and they would basically use the tax benefits of paying their employees through the insurance, or they would take they would borrow the money to pay their employees, but that wouldn't be considered income uh to the to the owner, right? So it's almost like you you could you could just basically take advantage of the the tax code through that arbitrage, right? I basically take money from a higher tax bracket and I take advantage of it in a lower tax bracket, right? Or I get I I get a deduction at a higher tax bracket and then I pay taxes at a lower tax bracket. So that spread, right? That arbitrage is kind of how you profit.

SPEAKER_01 1:09:47

So so let me actually this is great. You're actually arbitraging an arbitrage. If you think about it, you're doing it double, right? No, it's it's it's literally so I'm literally my my my savings account while I couldn't put in the money, I'm earning anywhere from five to twelve percent on that. Then I'm taking it over and doing an arbitrage where I'm making 60 on that. So e and I don't have to pay the loan back. So if I'm making 12 and they and my loan is four, I'm still making eight. They just subtract it. And then if then imagine if you're doing that with every new unit you get. Like, for example, what's the date today? What's the date today?

SPEAKER_07 1:10:26

21st.

SPEAKER_01 1:10:27

On the 23rd, I have a flip. I'm not getting on, I'm selling, I did a flip, worked out great. I'm making a large sum. The owed me would have taken that and immediately put it at 1031 and down. I'm not doing that now. I'm gonna take the, I'm gonna put that in insurance, then borrow it, then put that as a down payment. So I'm just getting life insurance, life insurance, life insurance policy. And so what he's not gonna do.

SPEAKER_07 1:10:53

Get as many life insurance policies as you can.

SPEAKER_01 1:10:55

Yeah, because it's a benefit, because there's no point in my cash, just there's no other vehicle that I know. Remember, guys, I'm not a professional. I used to be a stockbroker. You want to go to Terrence, okay?

SPEAKER_05 1:11:06

Right?

SPEAKER_01 1:11:07

Yeah, talk to him. What I'm saying is, what vehicle that you have that you can get access to your cash somewhat quickly, right? To invest, where you can provide a legacy for your family, you're protecting it. And he was telling me um there's a way to even get living benefits. And um, and he can talk about that. I think you have to get an appointment with him, but there's ways that you can enjoy some of your policy while you're alive. It's can't say if you have to go go explain that, Terrence. Go ahead, man. I thought that was a million a brilliant idea.

SPEAKER_03 1:11:43

Yeah, so I was saying uh to Adam earlier that uh depending on the policy that you have, there are uh in and and you have different things that come up. Uh, so long-term care, disability, things that might happen will allow you to actually accelerate the death benefit. So if I have this $500,000 death benefit and I have a situation that comes up, I could accelerate that death benefit to use towards like long-term care, for example. And it allows me to basically not have to come out of pocket for that money. But even to to your point, Adam, just to touch on you could even do the 1031, right? But kind of the reason that you also last episode on episode 100, right? The life-changing episode. Uh, use you talked about the use of business credit, right? So, what if you had a line of credit where hey, I still choose the 1031, I could use a line of credit to fund this, um, or I could use that line of credit to put my next property, but I can still maintain the use of the funds in the 1031. So there's all kind of ways to move this around uh to where you could still get the tax advantage and maintain the premium, or like in this policy, the minimum contribution was only like three thousand dollars. So if one year you didn't want to use it, you could just lower the contribution, you keep it for the death benefit, and then the next year you could make it up. So, hey, if I only put in 3,000 last year, if the cap is 10, I could actually use the contribution I didn't put in from the year before and add it the following year. So if I put in three one year and the cap is normally 10, and I only put in three, I could put in 17 the following year if I wanted to, right? So it does give you a lot of flexibility. Um, but like I said, it's really gonna be the oversight of how you manage the policy, how you're managing your cash flow to where you can really maximize the use of it.

SPEAKER_07 1:13:40

Can we add go ahead? Yeah, go ahead. Oh, well, we all got a million questions, me and Mike, I'm sure. Yeah, um, but like, and this is this is this is kind of related. Is is there anything like this with with health insurance? Like, because I'm asking because me and Micah, we both uh plan to retire from our jobs fairly quickly, yeah. And is and we're gonna have to be out there and get our own health insurance. Is there anything any vehicle like this similar in health insurance?

SPEAKER_03 1:14:06

No, I mean that's just more of a yeah, major medical risk, right? So you're basically uh there's not gonna be the same access as far as the capital. Uh, because this, I mean, the the reason that this policy is the way it is, it was more of an unintended consequence, right? Uh, with with with people, uh, originally there were pretty much only term policies, so people would only insure your life for a certain period of time. But the companies effectively people were coming to them saying, Okay, what if we wanted to insure it forever? We didn't want to only insure it for a small window. Well, the company had to basically go and say, Okay, well, if we're gonna do that, we have to charge you more money because we have to make sure that we have more to pay you out, versus only potentially paying you out. We have to guarantee that we pay you out. Well, if we charge you more, that doesn't mean that more people are dying in that year, so that excess money was created and it basically is just housed inside the policy, right? So, this was more of an unintended consequence as far as how this eventually became what it is today.

SPEAKER_07 1:15:11

That health insurance just has a whole different dynamic behind it, okay, okay, because that would be a game changer if they did make something like that for health insurance.

SPEAKER_01 1:15:20

Well, let me ask you a question: the money that you were going to put away for your health insurance,

Using policy cash value as collateral to secure investor capital

SPEAKER_01 1:15:26

couldn't you put it to the contribution and then loan it back out? Could he like say if your payment is $300 a month? Could he put that in the in the life insurance policy and then take it out? I don't know. I'm just being creative. I'm trying to find a way to do it.

SPEAKER_03 1:15:38

I mean, you you could, um, but I I probably wouldn't go down that road. I mean, uh, I would say in your case, uh, the HSA is probably your that's what I was getting at.

SPEAKER_07 1:15:48

There's a HSA now.

SPEAKER_03 1:15:49

Yeah. So the HSA is probably the best tax tool in the in the code because you get a deduction for the contribution, it's tax-free for withdrawals if you use it for health insurance, or not health insurance, but health-related um things. After 65, you can use it to pay health insurance, uh, but you can actually grow it tax deferred. So I can invest the money and then I can pull it out tax-free for health-related situations or for health insurance past the age of 65. But I get the deduction on the front end.

SPEAKER_06 1:16:21

Okay, yeah, that's what I was thinking. The HSA, because you know, you could tie that to the index funds or whatever, right?

SPEAKER_03 1:16:27

Yeah, the investor growth. Uh, yeah, exactly.

SPEAKER_07 1:16:30

Yeah, okay. I do have another big question. Uh uh, with all this sounds great. I I've heard I've heard someone uh mention stuff like this before. It's really it's fascinating. And um let's say you're in a business partnership, you know. I have a business partner and we're growing this business together. And I've always heard in the past, you know, partnerships they always do where they they each get a life insurance plan on each other in case one of them dies, right? Pays the other one out. Can you use this in like in that situation too?

SPEAKER_03 1:17:00

Yeah, you could use the exact same concept. So that would be like a buy-sell agreement, uh, or uh like a key person. So if you guys have a rainmaker for your one of your staff people, you can use this in the in a in a similar way, except that you probably wouldn't uh necessarily take the money out, but if you're using it for like a key staff person, there is a way to um basically give them access to the money, but you tie it over a certain period of years, so they call it a golden handcuff. So you say, hey, this is this policy that that's out there for you, but you can't use it for five or ten years. So you basically have this carrot that keeps them invested in your company. Um, there also is a way to do it with um, I've seen it used with like college coaches who make a lot of money. So, nonprofits, if you pay somebody over a million dollars, there's a 21% excise tax on the additional income that you pay them. Okay. And so there's it's called a split dollar arrangement. So I won't go into the weeds on that, but there's actually a way to do it that would kind of compensate the staff person, but also keep them invested in their in their program. But going back to the buy-sell agreement, you could do the same concept, except hey, the death benefit would be used to kind of buy out the other partner, so you'd have to be conscious of that with the if you're using it from the the loan standpoint, just to make sure you had enough liquidity to buy out the partner. But that's really the only thing you'd have to kind of keep in mind. That's right. Um, on that perspective. Micah, you got any questions?

SPEAKER_04 1:18:36

Oh, now man, I I'd uh I kind of already knew this stuff. I watched, I'd watched Jay Make Macy's uh interview with this, and this was like dead on, spot on of what he was doing. He basically was doing the exact same thing, pulling from the 10k every year, then he'll put it in like crypto, uh Toro car, things like that, making money, then go do it again. Yeah, man. This is off the chain. I was I was loving this.

SPEAKER_07 1:19:00

Just as long as you don't gotta pay back.

unknown 1:19:03

Right.

SPEAKER_03 1:19:03

I mean, like I said, the company knows you're gonna die, right? So they're they're like, hey, we're gonna get our money back eventually. All right. They just you just buy in time until you have to pay it. So you can pay it back if you want, all right, but you don't necessarily have to. You just have to have enough cash value in the policy to support the loan that that's out there. Because the the policy is basically the collateral.

SPEAKER_07 1:19:30

Wow. It's creating money out of thin air. It's it's crazy. It's hard to wrap my head around it. It sounds too good to be true. It's insane.

SPEAKER_01 1:19:39

You know what people have been doing. This banks, if this is how Walmart banks, they've been doing this for centuries. This they've been doing this for centuries. And I tell you guys, one of the things we don't want is like if something would happen and someone I've seen so many people I had to send money uh for their funerals and things like that because they they weren't willing to put the investment a month. You know, one of the things I do is that you know, I'm more into the future right now, so I do a lot of arbitrages, whatever the profit is, I put it right back into the policy. I just put it right back into the policy and just forget about it. I just I automate my retirement.

SPEAKER_07 1:20:14

So, Terrence, you're saying this works better than a GoFundMe?

SPEAKER_03 1:20:19

Uh uh, it's a lot more secure, I'd say.

SPEAKER_04 1:20:28

Um so oh man, wow, and you've taught people to do this who invest in real estate as well.

SPEAKER_03 1:20:38

Correct, exactly. Like I said, I think it it works best in that situation, in that dynamic, because it allows you to not only just compound your money in the policy, but it allows you to compound it in whatever your you know investment thing of choice is, so that you kind of just multiplying your money, right? The velocity of money. So instead of me, uh, it's kind of like why do you hire a staff person, right? To do the stuff you don't want to do, uh, but you pay them at a lower rate, you just you know make a higher number, and but you multiply yourself. So this is a way to just multiply your dollar, at least the real the money that you're already you're already gonna put the money into the arbitrage, so why not leverage it and use it for another tool that can compound it? That's another way.

SPEAKER_07 1:21:25

Now, is there any downside to it? Because you did say it's not for some people, some people it's not it's not good for them.

SPEAKER_03 1:21:30

Oh, I mean, if you don't have the cash flow to to finance it, then I'd say it's probably not for you. Um, if you're if you're not healthy, so if because it is insurance, so if the cost is going to be prohibited from that standpoint, uh, and and when I say not healthy, I just mean sometimes if you've had some history that would kind of put you in a bad spot, kind of like your credit, right? Except it takes a long time for the insurance company to get your credit up, right? It's not 45 days, Adam. Okay, so so they might treat you poorly based on some history that you've had. And if that extra cost is will be embedded in the policy, and so it doesn't work as well. Um, so so yeah, so like I said, if you don't have cash flow or the the the cost of it is gonna be higher, um, then it's probably not a good tool for you. But generally, a lot of folks that we're dealing with, uh, you know, that have have higher incomes, they can support the policy. Like I said, this is something to supplement what you already would be doing, and it provides you the ancillary benefits of the death benefit with the cash value that can compound.

SPEAKER_07 1:22:33

So you mentioned you there is 10,000 an arbitrary number, is just it's just you're just saying you could pay anything. You said anything from 3,000 to correct whatever, whatever you want to pay, right? A year, yeah, yeah.

SPEAKER_03 1:22:45

So I so generally how I design them is is is we kind of base it off of that. So that number that you're kind of willing to contribute. You're saying, hey, I'm comfortable with this number, and then I would design a policy to maximize the cash value growth off that number. So the lower the insurance premium or death benefit, the less cost is associated with it. So I'll try to keep the death benefit down so I have more money that can be accessed from the cash standpoint.

SPEAKER_07 1:23:17

And you could and you could set it up where let's say someone doesn't have ten thousand dollars to start it up today, but they can do monthly payments too.

SPEAKER_03 1:23:24

Correct, you could do that. Uh now it it's not gonna give you the same access. Uh, and so if you're doing monthly, I it would be more of a build-up, right? Because they're not gonna give you if you haven't put in 10, they're not gonna give you access to it. Right, but next year you can pull out it, yeah. So you said, hey, I'll build it up, try to kind of prepare myself to do it. Or I mean a lot of people they just do it traditionally, like I work with a good amount of physicians, so but you know, when they're trying to expand an office or they're trying to add a deck on their house or a down payment on a second home or a wedding, that cash value can be used in that same respect. Um, and they're in higher tax brackets, so you know, if they're with higher wage earners, you know, they're not hiding from the IRS. So you would really get taxed at 35 or whatever, then um, this is a way to you know say, hey, this is some money that's gonna grow tax deferred, you can access tax-free and not have to worry about paying that 20 capital gain up to or 35 tax on.

SPEAKER_04 1:24:25

You would want to put the 10k straight up front, especially if you let's say you're about to throw this thing into an arbitrage. That's what I'm saying.

SPEAKER_01 1:24:31

That's the whole point of the show. You just might as well, you know, you go ahead and go ahead and throw it in the arbitrage, just put one vehicle in there so you can earn on both sides. You're missing it, doesn't make sense not to. And can I add to this, guys? This technique allowed me to get, um, I gotta be careful what I'm saying on the air. It allowed me to get an investor. Um, because what I so I had this investor that's investing in my arbitrage, right? Or or a real estate deal. And one of the things they like, I talked about this. I said, listen, um, instead of giving me that, right? Where he gave me the money to rehab the house that I'm flipping. So this sold it. I said, what I'm gonna do is like we're gonna take that, and I made him the beneficiary of the policy in case something happens to me for the loan he gave me.

SPEAKER_06 1:25:23

You know what I'm saying? Nice, always nice.

SPEAKER_01 1:25:25

Put it in the policy, he's the beneficiary, and automatically when the house gets done, I get to keep the policy. You get what I'm saying? And bring it so he funded my policy. So not only are you gonna be an investor, I'm gonna give you this interest rate. Don't forget that policy's earning money, right? He put the money in there, but it lowers my opportunity cost because say if he's charging me nine, but I'm making six off the policy. You get what I'm saying? So I just effectively drop my interest rate to three percent.

SPEAKER_03 1:25:58

Yeah, and then and also you don't even have to name him beneficiary per se, you can just do a collateral assignment.

SPEAKER_02 1:26:04

This a lot of times attends a lot of times.

SPEAKER_03 1:26:08

Uh, like with if you go to a small business loan to get a loan, the bank will make you get insurance and they'll say, Hey, assign it to us so that if you don't pay the loan back, we get paid first, and then the excess goes to your beneficiary.

SPEAKER_01 1:26:23

This is before I knew them. But with with every time I'm raising capital and I'm talking to people, I always get insurance. I get something on them. Like, listen, if something, if I get hit by a semi, you're taken care of, they that's that eliminates the risk. But it also I'm getting both benefits of it too. I believe life man, my father passed away uh when I was young, man. And um, I tell you, if he didn't make those decisions, if he didn't talk to Terrence, my mom, he's been uh transitioned for man, 25 years. My mom has never worked today. Because at your age, instead of buying that maybe that next fancy car or that next thing, he was putting away life insurance. He was putting things. So just really consider what what whatever the decisions we are right now, where we are today, is is the is of the choices we made four or five years ago. I just spoke at a at a school today at today, and I was talking about it. Just imagine if we make these decisions. It's great arbitrages, guys. We come in and have fun, but we're all committed to whoever's listening, that they have a different life, a better possibility to create the future. We want freedom in other areas. So if we're gonna share economy or house, our car, why not our retirement? Something to consider.

SPEAKER_07 1:27:42

It's a mic drop right there.

SPEAKER_02 1:27:46

People have a shirt on this phone.

SPEAKER_01 1:27:52

You know what, guys, edit it out. Edit that out. I know if it's not live, it can edit that out. Just better not be in the show.

SPEAKER_07 1:28:01

Oh man, what you guys think, man? What's that some mind blowing stuff? Well, I wasn't even expecting that. That you know, that's just yeah, like I said, I've I've heard about this before uh on on another show, and it and I thought it was it sounded really good. Now I was just thinking, okay, five or six percent. People don't even ah, that's not a lot of money, but no, it's it's compounding, plus you get to use it. I mean, it's just it's a beautiful thing, man. I'm definitely gonna hit you up after the show.

SPEAKER_01 1:28:25

That's your contact, man. Where's that slide?

SPEAKER_03 1:28:26

You forget to put the slide up, uh, let me see.

SPEAKER_04 1:28:33

By the way, I don't get to take anything. Yeah, send us your contact and we'll put it in the show.

SPEAKER_03 1:28:36

Yeah, I'll shoot it.

SPEAKER_04 1:28:37

Yeah, I'll send it to you so you have it and all that show notes because that was good, yeah. That was good, yeah. But uh that's the second one on IULs and insurance I've heard this week, and I was like, yo, this that's a calling, man. That's my second one I've heard this week.

SPEAKER_03 1:28:52

Oh man, and so you know, like I said, I mean, even in this case, I mean, like even uh Steve, if you we talked about it, like I said, I I would kind of look and say, Hey, this is kind of what else you have out there. I would tell you, you know, objectively, if this it would be a good fit for you or not, right? Because I mean, to me, the worst thing would be for somebody to do it, and then it's not what they expected it to be, and now they have a bad taste in their mouth, right? So nobody wins in that dynamic, right?

SPEAKER_07 1:29:19

Um, so one question that popped up today, and it's it's a buddy of mine at work, you know, he's he's not an invest into investing very much, or especially not real estate, whatever. But he did a couple years ago, bought some land here in Texas, like a little bit outside of here, about side of Dallas. And he was just yeah, yeah, he's thinking, oh, maybe I'm gonna retire there, whatever. He bought like 10 acres for about 80,000 bucks. And anyways, uh it, you know, he started he started dating this lady, they you know moved in with her. They're they're doing good, you know, they're doing good at their place.

SPEAKER_01 1:29:49

He's talking about himself, now I'm joking.

SPEAKER_02 1:29:52

So we're not still we're gonna go with you, but yeah, the podcast. All right, so we're gonna we're gonna keep it real. He's talking about himself, man. Don't you third person ass person here? I know some person can't be able to do it.

SPEAKER_07 1:30:11

Anyways, this this this friend, yeah. Is is that it wasn't in the cards for him to go build out there because he's with he's uh he's with that lady now, and and they're doing real good, and you know, he's he's getting close to retirement age. So he's like, so he put the the land on the market, you know, everything's been going up crazy this past few years, right? So he's he's able to sell it for like 160 grand, right? Double his money, not bad, right? So I asked him what he's gonna do with the profit, how to you know avoid the tax hit. He said he's gonna 1031 it. I said, Okay, that's cool. And and he said, into the house where they're living together, and they're gonna redo their, you know, it's like a backwards concept from what us investors are like, you know, take the money out of the house and use it to buy stuff, yeah. And he's wanting to take it out of the profit of the land and dump it into that house to pay it off faster, and they're gonna read. I said, Well, first of all, I didn't know you could do that at 1031 into an existing house you're living in. But he said he's gonna redo like the mortgage, like he him and her buying it together, and then they're gonna dump the money in there. Now, my my uh question to you, Terrence, what do you think the better the better decision to do with that big chunk of money he's gonna come into? How to how to use it better than just dumping it into that house?

SPEAKER_03 1:31:26

Well, so I mean the I guess the the only problem would be from my standpoint is that money. I mean, the idea of the 1031, right? The reason the IRS gives you the tax benefit, which is why a lot of times they the iris gives us tax benefits, is because they want to enhance our behavior. So that money, if it's gonna go in his primary residence, um, and there's other strategies we could talk offline about you know the sale of your primary house and stuff as far as tax-wise, but that investment is no longer you know viable, right? I mean, if it's in his house, he's not making money off his house anymore, right? Versus that land, at least it was appreciating. So now he's got this house that he owns, and it might be free and clear, but he's not able to really do anything other than with the cash flow from the what he was paying into his mortgage. So, going back to our argument before, right? That cash flow he's freed up from a monthly standpoint. Hey, maybe he makes a thousand dollars, two thousand dollars a month, he's making twenty-four thousand dollars a year of extra cash flow he just generated. But if he took 160,000, you know, he's only got to make uh you know five, ten percent on that just to make it make sense to where he's gonna end up with more money once you've cap factor in the equity growth on what he could put that money into, plus the you know, cash flow from putting it into something else that can also generate income to him. So it's almost like the the he, I mean it's it's it's not a bad tool, but also if you own your primary residence, you already get the benefit of it, right? So that's the other thought. I I guess I don't see why you'd want to do that because if I own my primary residence for two out of five years and I sell it, I can exclude up to 250 or 500,000 of gain on it. So he's basically not capturing the I mean, he's not paying the tax per se, but it's almost like the the next investment that he makes, he's not gonna get the tax benefit because that money's gonna have to come out of his own pocket versus it having come from that land deal, and then he's gonna miss out on the tax benefit that he already could have capitalized on whenever he sells this house that he lives in now. So it's almost like the tax benefit stops at that house versus continuing to move forward into future deals, right?

SPEAKER_06 1:33:54

Right, right.

SPEAKER_07 1:33:54

Yeah, to me, it sounds backwards from what we're we're learning as investors. You know, you want to pull money out and use it for the next thing and the next thing and the next thing pulling it out, but he wants to put it back in. It's just it's just a uh yeah, a backwards concept to me. I was wondering if you knew a better, you know, if

Why dumping $160,000 land profit into a primary residence is backwards

SPEAKER_07 1:34:10

he'd want to be a real estate investor, is there anything else he could do with it?

SPEAKER_03 1:34:13

I mean, so in land, I mean there's no depreciation, so uh he's basically just gonna pay a capital gain tax on it, which isn't terrible. I mean, at 15 probably is what he's gonna end up paying. So he's paying at the lowest tax rate on it. Uh so now it's like okay, he made 80,000, so he's he's you know paying 15 on that, uh, which is what 12,000. So hey, he's got 148,000 now, free and clear, he can do something with. Um, so I would say just in this case, if he's not really willing to multiply it, I would just pay the cap gain, and then that 148, especially because you also think the mortgage on his house is what three percent somewhere in that range, right? On so it's three percent on a declining number, whereas I can take 148 and compound it at a higher number, right? So it's like he's losing money in a sense, he's arbitraging opposite, yeah, as far as in that case, uh as well. Yeah, so I think the concept sounds interesting, but once you get under the hood, he's the opportunity cost, I think, is is high.

SPEAKER_01 1:35:24

And he could take that taxes, the capital gain, do what we're talking about, run it through. I do that, run it through an insurance policy. I I take my I save every month for taxes, and I'm I the insurance that I have, one of the policy automatically just takes it and put it in the policy. At the end of the year, I'm just gonna take a loan out, pay it, and just start the whole thing over and over and over again.

SPEAKER_04 1:35:48

Where's this guy with 10 acres for 160 outside of Dallas? Right. I was thinking the same thing.

SPEAKER_07 1:35:56

It's far away from Dallas. This is like past Dublin. It's way, way I just I just said outside Dallas.

SPEAKER_01 1:36:02

Let me ask you a question. This guy did something creative. I I don't know if it's legal or not with a 1031. I I'm sure I'm wrong, but he found someone that had land or something in a 1031. So an investment, he it was opportunity zone, and so he gave him his money, this guy, for the 1030 with the invested, but then the guy gave him the money back through a loan with like a zero percent interest and forgivable. Does that make sense? Somehow, yeah, so he he had an opportunity zone, right? He needed to put his money somewhere. He knew the person pretty well. I don't know, I could be wrong. Take this all right. Then he he invested, he gave him the money, but he's but he but he they were trying to work out a deal, but he needed that cash back at the same time. So then the guy with the opportunities opportunities loan then loaned him the money back so he can do other investments at an interest rate, and he adverted a lot of that tax situation. Does that make sense?

SPEAKER_04 1:37:10

It sounds like he got sounds like person B had a tax credit somewhere, and he might have yeah, it sounded like he had a tax credit. Now I've heard a lot of people doing that shit. Like, I know a lot of rich people doing that right now. They ain't paying capital gains, they just taking their whole chunk of gain, putting it into an opportunity zone, fix it up to rent it out. They're not paying any taxes at all.

SPEAKER_03 1:37:37

Yeah, you just have to hold it for seven years, yeah.

SPEAKER_04 1:37:40

Um, see, I'm I'm interested to know how he did that.

SPEAKER_03 1:37:44

But I mean, the the the key is I guess that separate loan, right? Um which I mean generally the IRS was gonna kind of force you to have a a minimum interest rate, right? Uh for it to be considered a loan. Um, but I mean he he pretty the other guy really just did him a solid. I mean that's it, because he can make it forgivable and he can make it one dollar a year.

SPEAKER_01 1:38:11

Yeah, uh I've loaned myself, I've loaned myself money to my company at at a dollar a year. You can do stuff. There's creative things that might, you know, you can do stuff like that.

SPEAKER_04 1:38:20

I just did that with my I used personal line of credit, loaned it to my business, and then they have to pay business on uh interest on the personal line of credit, right?

SPEAKER_03 1:38:31

It's also a way to not avoid paying taxes because loans aren't taxable. So a lot like you see these wealthy people, they'll take out massive loans when they just you know they own a high percentage of one individual stock and their stocks worth millions of billions of dollars. Well, instead of me taking out income and paying 35 tax, I could just borrow the money at four or five percent, knowing that I have the assets to pay it, and then I'll just you know pay the interest on those loans and yeah, I do that with my flips, guys.

SPEAKER_01 1:39:03

I do that with my flips.

SPEAKER_03 1:39:05

You can take loans off stocks. So, yeah, I mean, if you if you go to the bank, right? Yeah, and the bank says, Hey, you're worth a hundred million dollars based on the value of your stock, and they'll give you ten million dollars or whatever it is, right? Well, that money is a loan, so I can go turn up on my ten thousand dollars, pay the IRS zero dollars. All I gotta do is pay the interest on the loan.

SPEAKER_02 1:39:29

That's awesome.

SPEAKER_03 1:39:31

Or I just get, or my company pays me just enough to pay the interest, right? So it's like, okay, pay five percent on 10 million, right? And I basically live on 10 million, but I'm only paying taxes on the five percent, you know, and my company deducts that money anyway, right? So so it's like uh a loop, right?

SPEAKER_07 1:39:56

Wow, so the tax the rich people don't pay taxes.

SPEAKER_03 1:39:59

Well, that's that's a strategy that some of the energy that don't pay taxes. I mean, like I said, the IR the tax code is written to incentivize behavior, but there are unintended consequences that happen, but the IRS is always gonna be slower to put to close a loophole, like the opportunity zone, they want people to fix up the the you know poor neighborhoods. But what's gonna happen, right? It's gonna gentrify areas, so it's gonna almost drive out the people that they're trying to help, which means that people like us can go buy the multifamily housing around those opportunity zones because the people that live there they're gonna get priced out for taxes or whatever, and then they're gonna be renting in those areas, right? So you're going kind of like you said, the guy out, right? Let me buy on the edge of that spot because we know there's gonna be a footload of traffic that's gonna have demand going there because people normally they want to stay in the same area, but if they're priced out, you know, you're right there to kind of provide the housing for them.

SPEAKER_04 1:41:05

They they turn they turn Redbird into an opportunity zone. And if you ever look at Redbird now, they tore down the damn mall and they're building high-rise apartment buildings. I looked over, I was like, What? Yeah, it's like but you know, and that's what people are doing. They they if you ain't gotta pay taxes on it, I mean you right, or people sell.

SPEAKER_03 1:41:24

I mean, you can do it with if you sold a business, you can use that money from your business sale to put it into the opportunity zone.

SPEAKER_04 1:41:33

Okay, oh yeah, man. I'm gonna go back and re-watch this.

SPEAKER_07 1:41:38

Yeah, well, cool,

Oklahoma cannabis: the number one producing state in the world

SPEAKER_07 1:41:41

man. This has been a great episode. We've been we can go on hours and hours, but um we've been on a while, yeah. Where okay, where can folks find you guys? Adam. Go ahead.

SPEAKER_01 1:41:53

They can find oh, you can go to uh velocitycorporate housing.com. Um Facebook at Velocity Corporate Housing. You can find me. These guys know how to contact me.

SPEAKER_07 1:42:03

And let me give you a cell phone number.

SPEAKER_01 1:42:04

I'm just yeah, you can I gave you a Google number, so you don't even have it. So don't worry about it. Oh, you don't even have it there, Pat.

SPEAKER_07 1:42:17

Oh, I didn't even ask one question before I get to the the closing part. Uh, how how's the how's the weed situation in Oklahoma?

SPEAKER_01 1:42:25

Amazing. That's how I know that guy right there. Yeah, that's how we connected. There's still money to be made with that. It's amazing. Um it's amazing. As you guys know, I think one of the greatest investments you can make is in in cannabis. Uh, Oklahoma is the number one cannabis producing state in the world. They sell more cannabis in anything, in any place, is beating California. Um, that's how I know Mr. Terrence because my business partner is a doctor. We have we're we're doing something with that. Um, we have land, we just ordered our did she tell you that, Terrence?

SPEAKER_03 1:43:01

Have you spoken to uh we talked about a week ago? Yeah, yeah. I was excited.

SPEAKER_01 1:43:05

I mean, uh Yeah, we just uh we just uh we're we're our building should be built in the next three or four months. Um we're looking at returns from anywhere from 60 and 75 percent. And what I'm so excited about is the difference that we're gonna make because we the way that we're growing, uh no one in the country is doing, and we're testing that right out. And uh we bought our land um a year ago and it's almost doubled in price. Yeah, we just it's it's if you guys can get land in Oklahoma. If can I make a suggestion? If you're in Texas, I would I would go way out there in the middle of there and buy land and I would hold it. Because once it becomes federal, guys, listen, once it becomes federally accepted, they the multiple becomes automatically a 10x. So whatever you're doing, the multiple becomes a 10x. That's why Terrence, who's our financial CEO, um, we're trying to get everything together because once it becomes federal, it's gonna be a lot more difficult to get in. So if you guys can find a way to invest, we're we're we're looking for you know partners and investors right now, um, in a in a minute, but we're testing our situation. And a lot of people in cannabis, they just rushed into it and they're falling off right now. But we're doing the the slow, steady. We've researched, we have meetings, and we're coming out on top because we just didn't rush right into it. But a lot of places are shutting down now here.

SPEAKER_07 1:44:32

They just any any any free samples.

SPEAKER_01 1:44:35

I've never smoked it. I don't I got you. I've never I don't, you know.

SPEAKER_04 1:44:42

Has Oklahoma move recreational?

SPEAKER_01 1:44:44

Uh it's the same, it's basically recreational now. It's medical. You you pay 50 bucks and you can get it. It's basically it's it's it's medical, but it's so easy to get your license. It's pretty much recreational.

SPEAKER_07 1:44:57

Got the migraines, got the migraines.

SPEAKER_01 1:44:59

They get everything, but you know, a lot of people are coming from Texas all the time. I mean, back and forth. You'd be shocked. People are coming from Texas. Uh, a lot of doctors are prescribing it and they're going to Durant. Um, it's just it's just an amazing opportunity to get into something that's really making a difference. You know, I offer what we offer is turnkey solution. So we're looking for people who can't get into Oklahoma that want everything done. That's what we're creating is turnkey. Like I'm never going to be there, I'm never going to touch, I don't have to. I'm an arbitrage guy. So how can we get it, make a difference, put the right teamwork in there. But you can't invest in Oklahoma unless you are, unless you live there for a couple of years, me. So you're gonna have to go up under someone. But it's it's amazing. You're it's it's it's it's the low entry to get in, but the returns are uh amazing. If you want to talk about that with me, you can contact me too. So we have all that coming together.

SPEAKER_03 1:45:56

Yeah, two years though. Two years. A year, a year, okay. You give me a year. Where can folks find you, Terrence? Uh so I have a website, it's uh my business is Logos Financial Group, so L O G O S F G dot com. Um, I'm on Instagram, Logos Financial, and um I can put put that also in the I guess show notes for that. But uh, but yeah, so we help people with you know on the finance side, on the tax side, and uh I do a little bit of consulting uh as well. I'm working with a business now that um we're really excited about. I think we will have uh uh uh uh hopefully a big exit at that one day down the road. Um, but uh but yeah, so uh not Adam, but hopefully Adam too, though. Um but uh yeah, I'm really excited about what they're doing and and kind of the the concept. I think that's gonna be big as well. So we're just trying to uh uh live up to you guys' standards, right? Uh and and and and what you guys got going on.

SPEAKER_07 1:47:01

We learn from our guests, man, all the time. This is awesome. Thank y'all so much for hopping on. Yeah, I see you guys in two years. In two years. Any closing advice uh to our listeners out there? Anything?

SPEAKER_01 1:47:18

Um, whatever you want in life is on the other side of hard and uh never give up. You can overcome anything. And if you just really just manifest what you want to put what you want and surround yourself with good people, keep listening to the show, it will happen. I promise you.

SPEAKER_03 1:47:35

Man, I have a uh there's a proverb that says people perish for lack of wisdom, but how that's defined, it says that people throw off restraint when they don't have vision for where they're going. And so if you don't have vision for where you're going, you're not gonna be disciplined, you're not gonna stick with whatever you're looking to do. And so I think it's really about finding out, you know, your vision for things, getting knowledge from things like these people like this podcast, surrounding yourself with people that can you know build you up when your vision doesn't seem like uh you can see it clearly, and uh just continue to grow and ultimately you'll get to to your destination.

SPEAKER_01 1:48:15

That's amazing. This guy's talking about vision wearing bifocals. So you know we can you know he can see into his future. So I gotta get you back. He can see decades.

SPEAKER_03 1:48:24

Oh, okay. That's all right. I'm gonna bank that one. I'm gonna bank that one. Uh so we're gonna be.

SPEAKER_02 1:48:47

I'm sorry.

SPEAKER_01 1:48:48

I gotta get him. He's always cracking on me. I'm sick of you.

SPEAKER_02 1:48:51

Hey, it's all love. It's all love. I'm sick of you.

SPEAKER_01 1:48:54

I'm sick of you. Thank you, guys. I'm tired. I'm sick of this.

SPEAKER_07 1:49:00

Yeah, thanks again. Thanks for hopping on. Um, yeah, hit him up. Make some start to get out there and and and use that vision. Use that vision. And any any closing words, Mike?

SPEAKER_04 1:49:10

Man, that is it. Thank y'all for continuing to listen to us. Follow us, live let thrive on Instagram, email us, livelethrive at gmail.com. And yeah, continue to thank you for listening to us. We are happy we've been able to provide value. And uh remember, like, comment, rate, share, all that good stuff. Subscribe.

SPEAKER_00 1:49:26

We are out being awesome. Thank you for tuning in to this week's episode of Live Let Thrive. Be sure to tune in next week for all the latest in the world of Airbnb and all that entails. Bye-bye.