Investing Secrets Your Co-Workers Don’t Know About

MORI 158 | Turn-Key Real Estate

What investment options do you have if you don’t have $1 Million laying around?

What could you do that’s better than your IRA or 401k?

How would you like to quit your job within the next 10 years?

In this episode, Cash Flow Expert, Chris Miles, interviews professional investor Lane Kawaoka about his experience doing investments with as little as $100, as well as turn-key real estate and other options. Learn how you can get much better results than investing in traditional retirement plans.

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Investing Secrets Your Co-Workers Don’t Know About

Before we get started, make sure you check out our website We got a new facelift, so check out the site. It’s awesome. Also, if you’ve got questions or show topics you would like to hear about from, email me at A quick shout out to our sponsor American Homeowner Preservation. You would love to be able to get great returns while making a great impact on people’s lives, specifically if you want to help people either stay in their homes or sell their homes. This is the actual mission of American Homeowners Preservation, where you could pull your money, throw your money in, and get paid 12% annually, 1% per month.

You get paid monthly cashflow and can do with as little as $100 total. If you want to check that out, go to On my show now, I’ve got Lane Kawaoka. Lane and I first met when he reached out to me after hearing me on John Lee Duma’s show on EO Fire and said, “Let’s get you on my show.” When I showed up nationally for two interviews, and in fact, they were so good. One of them I promoted for the next six months to my email list.

If you are on my email list, you’ve probably seen me talk about the show saying, “Check it out. It’s pretty awesome.” He’s got a show Simple Passive Cashflow, which is a great show, so check out. If you are already listening to podcasts, check out his show but the guy who works ITs. He’s like Batman. He’s IT by day in the Seattle area and a real estate investor and investor of many things by night. Anyways, love to welcome you out, Lane. How are you doing?

Chris, thanks for having me on.

Tell our readers a little bit more about yourself. What’s your background? How did you get started down this path?

I am like Batman but instead of IT, I do civil engineering. I graduated from UDaB up here in Seattle. I went to work for a company that maybe travels all the time. I didn’t live anywhere for quite a while. I did the travel 100% and lived in hotels. I was able to save a lot of money and bought that first home in 2009 and didn’t live there. I became an excellent landlord and was like, “This is pretty cool,” and started renting it out.

It was an A-class rental for $350 and rented for about $2,200. The rental value ratios that’s not going to cashflow but at the time, it did because the prices were low. I was hooked because my mortgage was $1,600, and the cash I brought in. Since it was a brand-new home and there was that Delta between there. I listened to all the podcasts. I read that Rich Dad Poor Dad book, then everything went into saving money for down payments, and the rest is history. I did a couple of 1031s, and it took my portfolio into the double digits and doing this podcast. It has been pretty cool.

It’s awesome too because you are not only doing that. Obviously, you got a double-digit property. You’ve got your show and are holding down a job, too. How do you balance all that?

One part of the thing was realizing what made me happy. Being an engineer isn’t quite fulfilling. I know a lot of people that come into my show, and we talk. They were doctors or lawyers and engineers, and it always seems like the majority of them are engineers because we work with things, not people. Doctors help out people. It’s not very fulfilling, to be honest, taking emails with other introverts and not very fun people. It seems like the whole engineering thing wasn’t fulfilling to me and this real estate stuff seemed a lot more lucrative if anything, and it is more fun. I do like it.

Tell us a little bit, now you are starting to build as bigger. Obviously, people keep coming to you. They want to know what the heck you have out there like what investments are there. Of my readers, one of the biggest things we try to do is expand that vision. For example, we had one of your friends, Buck Joffrey. You introduced me to Buck. He came on the show a little while ago. We basically ripped on 401(k)s, mutual funds, and how millionaires look at those things as being a joke and looking at a bigger world. That there’s a much bigger world of investing. In fact, the non-conventional ways of investing are way better than the conventional. What’s your take on that?

MORI 158 | Turn-Key Real Estate
Turn-Key Real Estate: Private money lending is not as high as turn-key or single-family home rentals. But if you don’t have the time to do the work, that is what you get.

I’m not a fan of the 401(k) either. For the most part, you probably talk about it all the time on this show that when you are not the direct investor investing, there are all these middlemen taking all these profits. Take a look at the turnkey rental. Turnkey rental is great. It’s not scalable but you are making 25%, 30%, and 35% a year. You compare it to your 401(k), your mutual funds, and make single digits. It’s like, “What the heck? Where did all the money go?” It went to all of those people in the fancy suits on Wall Street.

It’s pretty clear as day when you look at it from that perspective. You need to take a little action on your part, educate yourself, and try and get closer you can to the direct investment, whether it’s syndication, a turnkey rental, doing wholesale, and a little rehab. There’s a different spectrum of this investing. I cater to sophisticated and non-accredited investors. The guys who don’t have the huge firepower and a nuclear arsenal of the Buck Joffrey’s of the world. The radiologists are making $400,000 a year but the engineers or the IT guys make $70,000 to $150,000 a year.

Which is a pretty large segment of the population, isn’t it?

A lot of times, the people who get into this investing, there’s always some a pain point or I call it the Han Solo moment in my show but there’s always some trigger. For a lot of doctors or lawyers, they make so much money. They can buy the Lamborghini or whatever car it is to self-medicate themselves to not making change fit. As a part engineer, it sucks because you are making good money but you can’t buy that nice luxury car or that big house unless you do something out of the ordinary.

You got to get a little bit more creative. You obviously have more limited options but there are still plenty of options, aren’t there?

There are so many options. All you have to do is turn yourself onto them and that pressure. It’s bad that you don’t get paid very much but it’s good that you come to this realization quicker because time is the most important thing.

What are some of those options that you’ve come across or even you’ve talked about on your show?

The first thing that I started with was the single-family home rental. I did it in Seattle, which is very similar to a lot of other primary markets like San Francisco, California. A lot of the East Coast. They work great but after 2012 when the prices were going up. You don’t get the rent-to-value ratios needed, which is like 1% to a cashflow.

I don’t care if your rent is $2,000 and your market is $1,800. That’s not cashflow. That’s probably losing money. Cashflow is after vacancy, all the taxes, insurance, the property management because you don’t want to be renting this stuff by yourself, the vacancy, and capital expenditures, which creeps up and thought bigger than your thing.

Like, what’s your real profit?

These homes that we like to buy, these hundred-thousand-dollar Class B, B minus homes, that sweet spot. $100 will go to the property manager, $100 to maintenance, and $150 to a CapEx and vacancy. The remaining $450 will go to the PIT and the mortgage. Now you are left with a couple of hundred bucks every month, in theory. It doesn’t always work out that way.

Even if you screw up and don’t buy the right turn-key real estate deal, you will still make around 20%, which is still double to get in the stock market. Click To Tweet

I showed a webinar on the performance of some of my properties. 3 out of the 10 lost money, and that’s how it goes. Overall, I hit my numbers. I started with the single-family home rental, then I transitioned to turnkey rentals in the Midwest, and different parts of the country, Birmingham, Atlanta, and Indianapolis are the places I went to personally but that was the gateway. I think of it like drugs. Turnkey rental is the gateway drug to bigger and better things.

The nice thing about turnkey and the definition of turnkey is that you are able to get in the home, buy the home, and get renters. You usually have to do very little maintenance, hopefully. There are lower great properties where you might do a lot more work but, in these cases, you might do very little maintenance at all. You can get a renter within a month or two. Sometimes they even have a renter already there, which is nice. You can find that thing lined up, and you let it go. You don’t have to put a lot of time or effort into it. It’s very leveraged.

Even if you screw up, you don’t buy the right one, and it’s not performing like crazy, you are still making like 10% to 20%, which is double to get in the stock market.

That’s a 10%, 20% cash-on-cash rate of return. We are not even talking about depreciating your taxes or any possible appreciation that would happen. That’s all bonus if you think about that.

The market is a seller’s market by no means. I’m seeing cashflows of single digits but as you said, when you add in the mortgage, pay down, depreciation, and the tax benefits. You can’t quantify the inflation hedging, and now you are talking 20% to 30%.

I’ve run the numbers. I did a show and also did a blog post on it where I said, “What would it take to retire in 25 years based on trying to have $5,000 a month cashflow, $60,000 a year?” If you go by the traditional financial advisor method, you would have to put away for the next 20 or 25 years between $8,000 or $10,000 a month to do. We’ve got friends. We got people that you and I have both know and worked with, that pretty much if you got $300,000 or $400,000, you could probably cashflow about $5,000 a month.

I meet many people with $300,000 and $400,000 of cash and are not doing anything with it. I’m like, “Where did you come from? You came from your job. Why are you still working?” If you can effectively put it into some real estate, there’s no reason you shouldn’t be making double-digit returns. That should be enough. I don’t even know what they call it. What is the opposite of the pink slip?

I say, “You getting fired or you fire your job.” That thing. It’s for retiring. It’s called the gold watch, the little handcuffs.

They call it the FU money because once you have enough cashflow, you tell them to screw off. You’re there on your own accord.

That’s not the point. Whatever you want to be doing, it’s being able to do what you love with whomever you love and do it on your terms rather than feeling like you have to do it because of the money or the paycheck.

You want to be there.

MORI 158 | Turn-Key Real Estate
Turn-Key Real Estate: If you can save at least $10,000 a year, getting some single-family home rentals and building it slowly is advisable.

Single-family rentals are a great option for sure. I love that. That’s one of the coolest things because you can own something. You can control it. It’s not like you have to wait for some manager like a mutual fund manager to make decisions for you. You call the shots, do everything, and make better returns probably than the stock market anyways if you are doing it right. That’s an awesome option. What other options are available to those that are civil engineers, other engineers or IT guys? What is available to them?

When you go down on the spectrum, a lot of people will say, “I don’t want to go through the trouble of buying a home. I don’t want tenants, termites, and toilets.” Although, you always pay a property manager to do it for you. You see a wide spectrum of most people who don’t even listen to podcasts and don’t even take any action. There are different levels of calling it an action to take but if you are unwilling to do it, first of all, get educated, work with a mentor, and find other investors who are doing it because it’s your peer group. That’s very important.

If you have no time to do this stuff, then let’s talk about private money lending. In a lot of these projects, you can be a debt owner or equity owner. The debt owner is somebody else that is flipping a house, and you analyze the deal. You look at it, and they give you a rate of returns between 12% to 15%. It’s not as high as a turnkey rental or a single-family home rental but you don’t want to do the work. That’s what you get.

Loaning out money and doing nothing else with your mind or with your bronze or anything. That’s pretty good.

Now the returns are getting scrunched even lower because of this market. Investor money is pretty easy to find for the right deal. If you want turnkey rentals, I always tell everybody to start with that, so you can learn how to swim in the shallow end of the pool. Once you know how to do that, branch out and start finding your own distressed properties and start with a couple of thousand dollars rehab, $5,000 rehab, $10,000 or $15,000 rehab. Each time you move up the ladder, your returns are getting better as opposed to starting. Some people like to start right off the bat, and that’s how you get blown out.

I’ve seen some people mandate. They try to start up. For example, rehab properties. They can be great money but they can also kick your butt, especially if you are trying to count on appreciation and things like that. You can get burned.

That’s the problem with engineers. I think we can do it all. We take apart stuff, toil, and tinker and waste their time doing this stuff. Rehabbing that’s another job. You always got to come back to the goal. What’s the goal here? Trying to find another job or what are you trying to do here?

I had a guest that was on the show, and that’s how he started making money. He was doing a lot of rehabs and make great money. After a while, he realized, “I quit a job to do then this, which is like another job. What am I doing? I’m making great money, at least. Better money than I was with my job, but now, I’m working my tail off.” That’s when he wanted more of a lifestyle and went for turnkey rentals instead. He’s like, “No more of this flip and try to make a profit. No more of that. That’s great, but I want a life now.” He went the turnkey route.

The first question I always ask people is, “After you make money at your job and have some expenses, your rent, your car, your food, your leisure. How much money at the end of the year are you able to sock away?” For people making more than $20,000 or $30,000 a year, they should probably buy a few single-family home rentals and then step up to the syndications, the private placements, for those who can barely save, buy a single-family home rental, which by the way, you need probably about $20,000 to $30,000 to buy your first single-family home rental.

It’s going to take some of these guys forever. If you can save $10,000 a year, you can probably buy your first one in a couple of years. Maybe rate the 401(k) at that point. Once you get proof of concept and you are getting a few of them, you can probably retire in 8 to 10 years but there are some people that barely can save $5,000 a year and it’s going to be a hard road. I’m sorry. I’m not your guy. I’m not a magician.

8 to 10 years is a little bit tough. Unless you are making $1,000 or $2,000 a month, then maybe you could do it. You don’t have that far to go. I’ve noticed that has been the case too with the clients I’ve worked with. Some of them were like, “I need to make $20,000 a month.” I’m like, “That’s a bigger road,” than someone is trying to make $5,000 a month. I had somebody come to me, they are like, “$5,000 a month, then I’m good.” That’s pretty simple.

People need to see the magic for themselves. They can’t just cash out their 401ks and just listen to some guy on a podcast. Click To Tweet

It’s like the cashflow game. The teacher has a disadvantage because their goal to get out of the rat race is the lowest. It’s not the doctor.

The doctor, the lawyer like, “Dang it. Not again.”

After playing the game, you get it because that’s the goal. That’s why you are playing the game.

One thing I learned early on too once they started to expand my vision a little bit more and I left the traditional financial industry. I realized, “If I don’t have the money, who does?” Obviously, you got to be careful because you don’t want to be borrowing money, whether it be from banks, family or whoever. You got to be careful but you got to know what you are doing. You got to have the right education and training and make sure you are doing it right. I’ve seen plenty of people partner on deals, and one finds the deal while the other one’s got the financer. They partnered together and created something better where they both won.

The model that I preached to a lot of people is, “If you are in this zone where you can save $5,000 at least, $10,000 a year, cool. Let’s get some single-family home rentals and build this slowly. At some point, we can get maybe between rental up to 3 to 10. Let’s talk about stepping up to the syndication world with private placements because that’s going to be more scalable.

That’s a lot of people that I’m running around with these days. They all started with single-family home rentals. They all check that box but then they realize that they did all this work to get each home. It’s only a couple of $100 of passive cashflow. At that point, the hedonics have hidden, and their passive cashflow number goal increased vastly from $5,000 $10,000. The single-family homes weren’t going to cut it at that point but there’s no better way to start.

Even if you are breaking even now or paycheck to paycheck, $5,000 to $10,000 a year is not that hard. You don’t have to necessarily work harder. Lots of the money is already there. For any of you that are reading this, if you haven’t been to my website to get the whole Beyond Rice & Beans: 7 Secrets to Free Up Cash, that’s the thing there. Previous helps you find the money. As you said, some people are contributing their 401(k)s now. I blew this one up on the previous episodes where I talked about how the 401(k) match is not a 100% rate of return, even when you get a 100% match.

The data show is more 2.5% rate of return. Compared to that, even with single-family homes, there’s no comparison. There are ways to do it, especially if you are already putting money away in different places or a lot of money has been withheld from paychecks. The cool thing is if you become an investor, you start to step now into the investor world but you are stepping into the business owner world, too.

I know a lot of you guys reading this are already business owners, too. For those of you that are not, that’s the cool thing. You shouldn’t get tax breaks that you never had available to you before working your job. I’m sure, Lane, you’re seeing that already with what you are doing with your investing.

You can write off a lot of stuff.

You can make income and keep it, which is pretty cool. There are lots of options there. If you haven’t downloaded that book, download the book because there are options there. If you are that person where you’ve got maybe $50, $100,000 or even $25,000, you are like, “What the heck do I do with this?” Whether you’ve inherited it or you’ve had money from an old IRA or 401(k) or something like that and you are like, “What do I do with this money?”

MORI 158 | Turn-Key Real Estate
Turn-Key Real Estate: Invest where the numbers make sense, and this is not in your backyard for those who live on the West and East Coast. It is in the blue-collar states.

There are options. If you’ve got even life insurance policies like we’ve talked about in the show before, there are some cool things that you can do with life insurance to make money twice with that. You make money in real estate and with your life insurance, too. There are options, and there might be resources of money you don’t even realize you have been taught not to think about.

Financial advisors and most people aren’t good at telling you, “Whatever you do, don’t touch that money. Don’t think about it. Let it sit there. Don’t worry about the market swings because you are in it for the long haul. Someday, there will be some magic golden egg that you will have. It will be awesome.” You will have this golden goose that’s popping out little poop eggs. It’s the reality. Not the golden eggs that you would think they would be. They are more like poop eggs there. They are not even chocolate. That just looks like it. There are options for you. There are great things to do for sure.

It’s all dogma. That 401(k), I cashed that thing out but it took me a while to come to that. I had four rentals at that point until I finally cashed that sucker out. It was a very soul-searching thought process. I didn’t have a mentor helping me at the time. It was like, “If I do this, I will buy these two rentals.” I’m an engineer, so it takes some of the emotion out of it. It seems you are programmed.

They have the best marketers that teach you that stuff but it’s the wrong way to go. Get that money out of that 401(k). Pay the taxes on it. Pay the penalty. In fact, I don’t call it a penalty. I call it a ticket to get your money out of 5% in a year crap and get it into 20% plus returns. The crossover point will be in six months to a couple of years. It’s a no-brainer. Look at the math.

That’s true. From there on, you are free and clear.

I don’t tell people to take my word for it. They need to see the magic for themselves. At the same time, people have to sleep at night. They can’t cash out their 401(k)s and listen to a guy on a podcast.

As a disclaimer, we are not telling you you should be buying or selling anything now. We are telling you about options. What would be your advice for people that maybe are scared to make that leap? They’ve never bought a rental property or never done anything outside of that 401(k) or IRA. What would be your advice to them?

Make a list of all the issues that are coming up. A lot of the ones are, “I don’t want to manage this thing.” You are not managing it. You hear all the horror stories of property managers. One of the big things with property managers is they need a license to be a property manager. I don’t know why but most people will go to the big brokerage houses like Century 21, Woodmere, and Coldwell and get a property manager there because those guys are real estate, agents. What you are getting, are you getting the guys who can’t sell the houses?

They are the worst of the worst. We all know real estate agents and real estate brokers. There are some of the biggest jokes out there. Stay close to the sophisticated or heard. Always go off referrals. That checks off that box with the property manager. Invest where the numbers make sense. Don’t be that guy who needs the touch and feel of his property. That’s how grandpa and grandma used to do it. We’ve got the internet. You are well connected. You are networked. Invest where the numbers make sense, which is not in your backyard for most of us that live on the West Coast and East Coast.

It’s in the blue-collar states. I don’t know what you talk about a lot of people. After you take away all the barriers, I always come back and say, “If you keep investing in the stock market and mutual funds, you are going to be making 8%, 10%. You are going to work until you are 70 years old or 65, or who knows what it’s going to be at that time? This is what’s going to happen.” You told me that that’s unacceptable.

If you do this, if you take this red pill, if you call it that, and you buy one single-family home this year, then you buy 1 two years from now, and you buy 2 more the year after, and it’s starting to steamroll, you are going to be out of this rat race in about a decade at most. Make a choice. Don’t say, “I don’t know the numbers. I don’t know this.” That’s what the numbers are. That’s what’s going to happen. You make a decision consciously. After that, you can’t help people. I don’t know what your thoughts on that are.

Sophisticated investors don’t care about debts or interest rates. It’s the cashflow that impacts their net worth. Click To Tweet

I would say this just because 6 or 7 billion people on the planet think something is true doesn’t mean it is. This is why I left being a financial advisor. I looked at the evidence. I looked at what people’s results were after getting advice, after being in the stock market for decades, even in the ‘90s. The ‘90s were awesome. Even better than they have been in the few years. The ‘90s were the roaring ‘90s. They are amazing in the stock market. I remember there were mutual funds I was selling that seriously had returned 1999 over 120% that year. It being more than doubled. You can imagine, we are saying like, “People make 12%. That’s easy. That’s the average.” Not anymore.

People don’t say that. As you said, Lane, 8% to 10%, that’s if your fund does well and you get a match on your 401(k). You are going to get that actual rate of return, the actual yield, and you do the numbers. You are not going to be retiring. It’s when you factor in inflation. It’s not going to happen. You are guaranteed failure. The whole reason they are telling you to put your money in a 401(k) and IRA, is they will say, “We will be okay because you will be at a cheaper tax bracket when you are older.”

The only reason that would be the case is if it doesn’t work, if you end up going broke, live off nothing, and trying to rely on the government to take care of you. If you want to take control of it, if you want to retire, that can happen earlier than age 70 or 80, depending on how the numbers work for you and what the markets do right before you retire. You got to look outside of this. You got to look outside of the traditional box. You cannot be doing the same thing because if the majority of Americans are retiring broke now, why would you want to follow that model? Why would you want to do the same thing they’ve all done? We’ve already proven that to be true, so don’t do it again.

Another thing that people always say is, “I don’t want to go get all these mortgages because I’m debt averse.” The biggest quote that I’ve heard in the last year or two is that sophisticated investors don’t care about debt or the interest rates are going up or whatever. It doesn’t matter. It’s the cashflow and what should impact your net worth.

I will say that again, “Debt and interest rate are not important. It’s only in your cashflow and your net worth.” You hear it a lot like, “I will give that to you. You don’t want to be in too much debt because in case the market corrects.” Now you are going to be underwater in these mortgages but we are not doing what all those suckers did in 2008. We are buying these prudent cashflowing rentals in blue-colored states that are cashflowing.

We went through the numbers, and in those environments, there’s going to be more renters for your home because people can’t buy homes. If you are going to still hold onto the property because if you have this cashflow buffer in there, now you lower the price of the rent by $50, and your Craigslist ads are going to be blowing up. That’s the safety in it. That’s the beauty. It’s not the get rich quick thing that a lot of people were doing in 2008. This is creating cashflow investing.

I tell people all the time, “If your mortgage payment were $1 a month, you wouldn’t care about paying it off early.” In this case, you are looking at properties. If your mortgage payment is less than $0 a month because you are making money on it. Even if it were zero, you wouldn’t care. You would say, “Even if I want to be debt-free at some point, I can always go buy a bunch of life insurance and have that payment pay off at death. At least I will know I will leave my kids with no bills.” Worst case scenario, you go buy life insurance because who cares? If it’s productive loans that you are using, which by the way, banks do all the time. Every time they loan you a dollar from the bank, every dollar from savings that you put into savings is their debt if you think about it.

They are paying you interest, and they don’t care because they are leveraging the crap out of it and making way more money than what they are paying you. If you knew you had a magic ATM, you could put a dollar into it and get $2 back out. How many dollar bills would you grab from everybody around you to be able to throw in there and say, “I will pay it back $1.25 if you give me that dollar?” “Thanks. I will pocket the other $0.75.”

If somebody wanted to give me a loan and I will be glad to pay them 5%, 6%, 7%, or 8% because I know I can turn that much into something else. A lot of people hear this 15%, 20% or 35% and think it gets scammy because it’s way higher than what they are used to. It does sound a little too good to be true but it isn’t. You programmed to use to be single-digit investment returns. That’s the difference between direct investing and being through the daisy chain of all these middlemen taking their profit.

Even the table scraps or what’s falling off the table. Lane, it has been awesome. I appreciate you being on our show. Any final words for our audience?

No, just keep buying direct investments that are cashflowing. I’ve got some spreadsheets on my website Simple Passive Cashflow. I’m starting to branch out. There are some wholesale deals and apartment syndications. I got this little Hui Deal Pipeline Club, and you folks can sign up for my website. Keep networking and learning.

The important thing has an open mind. The turnkey rental is one thing but it doesn’t stop there. There’s all this neat stuff out there. I don’t even know half of this stuff, Chris. You do a good job. If people don’t want to go down this direct path, you are excellent at tweaking their situation to optimize their situation. The best way I know how to do it is, “Let’s go get some rentals and apartments,” but some people aren’t willing to do that. I’m like, “I don’t know what to do. Go talk to Chris.”

Sometimes, simplicity is way cooler too and more fun. That’s for sure.

People’s lives are complicated.

That’s true of lives and emotions. That’s what everybody knows. Appreciate you. Everybody, go check out Sign up and go to his pipeline list. I’m actually on his email list, and I see some amazing deals come through there that are awesome. There’s some great stuff on there, and check out his podcast as well, Simple Passive Cashflow. A great podcast. I’ve enjoyed being a guest on it. I know he’s got good stuff. As you can already tell, Lane is awesome. Lane has got some great information, so check that out. Lane, thank you so much for being on the show and all the rest of you, have a wonderful and prosperous week. We will talk to you later.

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