#3 – Lane Kowaoka – Real Estate – Simple Passive Cashflow
Lane Kawaoka (@SimplePassiveCf) is a Licensed Professional (PE) with a Master’s degree in Civil Engineering. His focus emphasized Construction Management and a Bachelors’s in Industrial Engineering, both from the University of Washington in Seattle, WA. He currently owns 21 Apartments Buildings, 2 Manufactured Home developments, and an Assisted-Living Facility totaling 4,500+ units in 12 different states.
He started investing when he was 13 years old with the $2,000 earned from the summer job picking Pineapples in Maui. He bought a $500 Ukulele and deposited the $1500 into a Roth IRA via mutual funds. You can hear the Ukulele played in the SimplePassiveCashflow.com podcast’s theme song.
Lane started his venture in real estate investing in 2009 after living on the road for five years as a construction supervisor by purchasing an A-class rental in Seattle that rented for $2200 per month. Three years later, he was able to acquire a duplex. While looking for a 3rd investment in 2012, the market was rebounding, and he realized most investments would yield negative cash flow.
After this realization, he converted his portfolio to secondary markets with robust job markets and Rent-to-Value Ratios that would yield $250-$400 monthly profit between rents and all expenses.
Lane’s passion project the Top-50 Investing podcast SimplePassiveCashflow.com, a free podcast and online learning resource in passive real estate investing. Working as a high-paid professional in Corporate America and frustrated by the traditional wealth-building dogma, Lane decided to inspire and mentor other working professionals. His focus is to help with real estate investing and building their portfolios.
Lane urges other working professionals to get started by utilizing their highest and best use (their day job) to save for the 20% down payment for a conventional loan. They will then be able to acquire a single-family home rental. The Simple Passive Cashflow method is to only buy investments with a healthy cashflow buffer that can withstand a market downturn. Lane has gotten so much appreciation for his work, so he enjoys what he does so much.
In addition to mentoring and mastermind group, he also partners with investors who want to build their portfolio but are too busy to handle direct investments. He uses his engineering mind, investing knowledge, and network to optimize investment returns for others by operating the Hui Deal Pipeline Club. In this free investor club, he filters investments and underwrites the numbers and partners. Unlike other investor lists and groups, Lane’s investors have personal access to him. They know that Lane is personally investing alongside his investors.
Today Lane lives in Honolulu, Hawaii, where he brings solid investment opportunities and bridging the financial gap to the home where he grew up. There he operates ReiAloha: Hawaii’s Passive Real Estate Investment Ohana. He still works the day job as an engineer but more because he wants to with people he likes to be around and is a non-profit organization. In the grand scheme of things, the day job is pretty “Simple Passive Cashflow.” It allows him to operate his syndication and investing business property without pressure to take unnecessary risks for his investors to put food on the table.
Show Notes and Highlights from the Episode are below.
Who is Lane 2:37
His start with single-family rentals 3:55
Lane realizes SFR not scalable 4:50
Simple Passive Cashflow – who it caters to 7:36
Syndications in Passive RE Investing 8:52
House Hacking 15:07
More Syndication Information 16:44
QRPs – Alt investments no 401ks and other mainstream products – Diversify 18:34
4 main reasons not to put your money in normal retirement vehicles 24:06
1031s are obsolete? Lane explains why 27:47
SPC Podcast 30:39
Lane realized that single family rentals are not scalable but for many you have to start somewhere
“And I started to realize or started to learn from them that rental property is a great way to get started, but very different than what higher net worth accredited investors do. After a certain point they go into these private placements and syndications or country club deals – Where they’re passive LP partners, limited partners. So they have little to no liability. They don’t get any of the debt in their name. And the greatest thing is that they don’t do anything, right. They just invest their money in their passive LP partners.”
Syndications in real estate done passively
“it’s a way of putting together investors’ capital sort of like a mini co-op or mini crowdfunding. Where now a bunch of investors can team up as passive investors and go after a larger asset. And there’s a general partner that operates set investment on behalf of the passive investors. So I think, I think we when we try and do is we try and go after deals that are in the hundred to 300 unit spectrum where we stay below the institutional players”
Main reasons not to invest entirely in traditional investment vechicles
“Let’s, let’s break that down, right. Because you are correct. Right. And that’s why people, people ultimately put their money in these retirement programs is when it’s in this container, it grows tax-free right. But there are four big reasons why I don’t do any retirement things and high net worth people don’t do it either. Right? So it should make your ears perk up. Right?”
The 1031 exchange most real estate investors use is obsolete
“I don’t know why anybody does a 1031 exchange to me they’re obsolete because like when I sold my seven rentals a handful of years ago, I had a $200,000 capital gain, but I went into a bunch of deals and I had several hundred thousand dollars of passive losses, which I use to offset that gain I didn’t need to do 1031, and 1031’s most times will just screw you over the next time you’re looking to sell that property because you have this big depreciation recapture. What you want to do is you want to break it up into smaller chunks so you can better put yourself to defer that. And everybody knows 1031 buyers are suckers. They’re distressed buyers. They have to buy. So they’re always going to be purchasing for a higher price. I lick my chops and we find a 1031 buyer because I know they’re desperate and I know I can hit them and hit them hard.”
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LINKS FROM THE EPISODE
- Connect with Lane Kowaoka
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