Journey to Multifamily Millions

Moving Up the Wealth Elevator with Real Estate with Lane Kawaoka, Ep 96

• Tim • Season 1 • Episode 96

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Today's guest is  Lane Kawaoka, Lane is the author of multiple investing books and founder of thewealthelevator.com, where he empowers accredited investors in their quest for diversification and superior returns. 

In this episode, Lane shares his path, which began with a single rental property and ended with over 10,000 real estate units. He emphasizes the value of passive income and the switch from managing properties directly to investing in syndications for greater returns and diversity. The complicated process of creating a profitable real estate portfolio, the value of surrounding oneself with like-minded investors, and how distinct investment methods are appropriate for different phases of wealth accumulation are also covered in the conversation.

Tim and Lane also discuss the dangers and difficulties associated with real estate investing, emphasizing the necessity of careful research and the value of taking lessons from both achievements and setbacks. 



Episode Topics

[01:15]  Meet our guest, Lane Kawaoka
[01:42] The Journey Begins: Lane's First Steps into Real Estate Investing
[05:59] The Pitfalls of Property Management and the Shift to Syndication
[10:46] Navigating the Complex World of Syndication Investing
[19:15] The Evolution of a Real Estate Investor: From Single-Family Homes to Billions in Assets
[30:57] The Wealth Elevator: Lane's Guide to Accelerated Wealth Building
[35:17] What is one red flag every investor should look out for?
[36:03] What is a myth about the real estate business?
[38:26] Connecting to Lane 




Notable Quotes

  • "Dump single-family rentals, leverage gains for value-add opportunities. Syndication offers commercial assets with less competition." - Lane Kawaoka
  • Luckily I learned later, better than never. After college, I realized the potential of house hacking." - Tim Little
  • "A natural progression is to move past single-family rentals. Syndication solves many problems." - Tim Little
  • "Vetting people is where we, guys, are horrible. Wives are better at sussing out BS." - Lane Kawaoka
  • "Surround yourself with like-minded investors. Ask for unvarnished feedback before investing." - Tim Little
  • "Never take referrals from those not invested in past deals themselves." - Lane Kawaoka

 



👉Connect with   Lane Kawaoka

👉 Connect with Tim

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https://podcasts.apple.com/us/podcast/journey-to-multifamily-millions/id1634643497

[00:00:00] Lane Kawaoka: Numbers wise, you can get yourself to four or five million dollars net worth. And as I said, money's not everything, but it does buy a certain cash flow stream if you're able to convert it to cash flow. And that most of those people I see out there who are pretty happy have ten to twenty thousand dollars of passive income a month. I know that they had that study out there where you're super happy at $75, 000. Dude, I don't know anybody who can survive off $75, 000 and be super happy about it. 

[00:01:04] Tim Little: Hello everyone and welcome to the journey to multifamily millions. I'm your host, founder and CEO of ZANA Investments, Tim Little. And on today's show we have with us Lane Kawaoka. Lane is the author of multiple investing books and founder of thewealthelevator.com where he empowers accredited investors in their quest for diversification and superior returns. Lane has had a successful corporate career as a civil engineer and now has a real estate portfolio of more than 10, 000 units. Lane, welcome to the show.

[00:01:37] Lane Kawaoka: Hey, thanks for having me, Tim. Aloha, everybody.

[00:01:39] Tim Little: Aloha. Yeah. And it is great to have you here. So I gave our listeners a very high level overview of your background, but can you tell us more about how you got started in real estate and how you got to where you are today?

[00:01:53] Lane Kawaoka: Yeah, so I started as a civil engineer. I grew up in one of these families where we're taught to be pretty frugal with our money. we weren't broke, but we weren't super affluent either. So I think it's very common that I see from a lot of, white collar professionals out there. Then, you're taught to go to school, study hard, invest in the 401k. And, partially on the way is having a family, investing in the 401k. We all know that's a half truth right there. And that's what I did. I graduated college, started to work as a construction supervisor in construction management with my engineering degree. didn't really like it from the start, was never really a good engineer to be honest. but started to save my money and bought a house to live in. But, because I was traveling all over for work as most young professionals are, I decided to rent it out and just live off of the company dime from hotel to hotel. And that's where I got this taste to cash flow. And I was like, whoa, that was, back in 2009, back then I was in my twenties and able to rough it back then. And, but it was, I was like, wow, making money, like mortgage, pay down, appreciation, tax benefits. And I was like, why the heck would anybody want to do that 401k traditional investment stuff? And what did I do after that? I did it again. I bought a duplex a few years later, and this was around 2012. Prices started to go up. This was in Seattle, Washington, and I started to learn more about secondary and tertiary markets. Started to go heavy into these turnkey rentals, eventually expanding my portfolio to 11 of these rental properties in 2015. said the same thing. Hey, just, Go out and get a better job than I have and invest in a 401k because that's what they know, right?

[00:03:42] Tim Little: And they think that's the best advice they have to give, not necessarily knowing that there are these other ways to make money out there. And it seems like you fell into it. in a good way by renting out your place. And that's one thing that I wish I had the insight to do when I was that young, right? Like when I was in college, I talked to, guys that, house hack when they first started in college. And the thing was, I was actually renting an apartment from someone. I was roommates with someone and it never dawned on me the fact that this guy had bought this. This, this house basically, with a VA loan and had two other guys living in it and that we were paying his mortgage. I just got annoyed with all the rules he had and never thought to ask the questions of Hey, how did you learn to do this? How are you making money? And so that's one of the ways I kick myself, but luckily I learned later, better than never. But, After that, you went to the next logical step, which is the duplex, which is what I did as well, right? Can I ask why you decided to go with the multi units or did you have a lot of single family units as well? Or were those mostly Multifamily units, duplexes , triplexes, etc. What did that look like in the composition?

[00:04:57] Lane Kawaoka: Yeah, initially, they were all like these, the duplex was more, I didn't really consciously go into multifamily at that point. I don't really consider multifamily,less than eight units, that's still the residential world, all The first 11 properties were all single family home residential type of properties for the most part. I, and I tell people today,if you're making over a hundred grand a year, you're kind of white collar professional. You're probably going to dump these little single family homes or these first starter properties. And therefore it would be nice to have them as single family homes because they have a nice resale value. So you can just sell it to an unsuspecting, residential owner, retail. Owner and whereas the hard thing about the duplex triplex or quads is you'll eventually need to sell it to more of a cheap skate landlord in the future. And it's tough to get that nice price at the end. cash flow is better. Don't get me wrong, just it's. You want to have a nice clean exit and pop and then go into your next set of assets, whether that's more properties or syndication deals at that point. But I guess like my story, like 2011 to 2015, I'm chugging along with this pretty nice portfolio. They were in Birmingham, Atlanta, Indianapolis. I had property managers, doing my dirty work for me. But it was always a bit of a headache. with and for not much juice to squeeze, so like a couple hundred bucks per cash flow per property. I guess it was cool, but most people out there need five, 10, 000 of passive cash flow a month. And with 11 properties, maybe I had a few thousand dollars. to give anybody any insight, what 11 rental properties are you going to have some kind of big Eviction maybe once or twice a year. Some of those resulted in 20, 000 of repairs. I know on the YouTube channel, we threw up some like just trashed properties that I had that, these idiots would just like mess the property up just on the way out. And then you're like, do the math. Sometimes it's not good to be an engineer and you're like, Oh my God, that was like profit for three properties for three years each. And then you lose all faith in humanity. And you just put your head down and like, why are we doing this again?And then, you have these big issues that come up with 11 properties, some kind of big catastrophe that happens every quarter, like a tree falling on the house, some kind of, flood out in the basement or one of them. And, I get it. Like you have, that's, you have reserves and, on the portfolio level, you're making money. But from a time perspective, even with professional property management, it's becoming a bit of a headache. And now when you're saying, all right, you need 10, 000 of passive cash flow a month. Now you got to triple that portfolio. So now go to 30 rental properties, and now you just increase the exception rate by three times. So now you're in fiction or two every other month and some kind of big catastrophe every other week. And it's Geez, like nobody told me about this, about growing your portfolio. I thought if somebody had one or two rental properties, they were extremely rich and here I am in my late twenties and I wasn't rich, I didn't feel rich at the time, but this is where I transitioned more to like private placements and syndications because I started to interact with more accredited investors. got away from like the real estate clubby people and the non accredited investors on the internet forums out there. And a lot of these guys were saying the same thing, dump your single family home rentals, take some of the nice gains that you got. And, go and do some more, take advantage of the value add process that's in there, right? So I think a lot of people might be familiar with that burst strategy, but I call that kind of thebroke people strategy, it's just a lot of risk. You can make a lot of money, I can't say that, but it's just not scalable. But, that was where the syndication model, where you're able to get commercial level assets on a bigger scale where there's less competition. And, do this diversified over multiple deals and assets and operators. 

[00:09:03] Tim Little: Yeah, and it reminds me I just saw a headline today and I think it was like Dave Ramsey, who said something like there's nothing passive about being a landlord. And while I do not agree with Dave Ramsey on much that I can agree with that sentiment, because, like you said, a lot of the clubs and everything. And I think it's a good place to start. But I think it's also a natural progression to move past it. Cause you get that first single family, maybe you get a couple of them. Maybe you're like you and you get to 11 of them, but you realize, all the impediments there, the inability to scale, which is a big part that you just said. And then to the fact that any big event at any one of those properties could wipe out the profit for a year. that you made on that property. And so you're like, there has to be a better way. And the better way is finding the scale because if you have a say 100 unit property, the dynamics are just not nearly the same. And The more numbers you have, the more you're reducing risk to. That's why even at my low level, when I first started, I was like, I want a duplex instead of a single family. Because I was dividing the risk at least in half, right? If I had one side vacant, at least the other side was rented. So I thought I was being smart there. But again, it only lasts for so long until someone moves out or they trash the place this and that. And eventually you start to look for other options. And I think it sounds like, like me, you saw a syndication and you're like, okay, this solves a lot of the problems that I have in it. And it makes a lot of sense. So talk to me about what, like the first syndication deal that you got into. Did you go into that as a passive investor? Did you do it, were you on the general partner's side? What did that look like?

[00:10:58] Lane Kawaoka: Yeah, initially, I think I was, LP. cause I was initially looking just to invest my capital. I knew the sponsors pretty well, but  that's the tough part, right? When you're first interacting with people, the best people you're going to get are, just starting out, right? Under 1 billion of assets under ownership, and it's really hard to determine who's legit. they might've flipped some houses before, but, A little bit different than, 50 unit apartment complex and a 300 unit apartment complex.and that's I think what's difficult, or at least what I found difficult when I started to get into this world. started investing in syndication. My first syndication deal was 2012. lost all the money in that one. It was just a bad operator. I think he was actually stealing money. but that's, unless you have other plans. Purely passive investors, it is like walking in a landmine field and, like it's, when you talk about risks, there's two things. There's the risk in the deal, is the Duke going to be ran with, rep with, run well. Is it the right investment? And the second is the counterparty risk, right? The counterparty risk is basically people stealing your money. Nefarious things happen. And as an investor, you can look at the property. You can vet, vet the numbers. We teach people like, Hey, look at the reversing cap rate. Look at the full occupancy. What are the assumptions in the deal? And you can see how much bloat is in the numbers. But what it's hard to quantify, especially these days is, people, dishonest people out there, doing nefarious things. And that's where you have to marry up these two sides of it, the people and the deal. And people talk a lot about this in terms of the horse and the jockey analogy where, in a race, race horsing, you have the jockey, which is the operator and the horse, like the deal. Yeah. I will say like we do a little bit of venture capital investing in that world, the jockey is much, much more important than the horse. You can have a very good operator and a horrible, stupid idea, and it can still fly. real estate investing is the opposite, actually. it doesn't take much to, or an operator to run a good horse. In reality. That is, when you have these honest people stealing money, that's when you're going to get burned a hundred percent of the time. Okay.

[00:13:30] Tim Little: that there certainly have been some who are, who are shady. but you're absolutely right in the sense that, you, I think too many people, especially when they are doing their first, deal as a passive investor, right? They're just worried about it, but. Vetting the deal. They're like that, they took some classes, watch some YouTube videos and they're like, okay, let me start crunching the numbers on this and they almost look at vetting the person or the team as a secondary when, like you said, it should actually be the opposite. Most people are going to be finding deals that have similar returns. There's going to be some variance here and there. But what's really going to determine the success of that deal, outside of all the things you can't control, like the markets and the Fed and this and that is the team itself. the experience that they have and the people that they have, on their bench to, to advise them and everything else. So I think that's a really important point that sometimes, people are so worried about vetting the deal. And I think I was this way too, when I first passively invested and not focused enough on vetting the team.

[00:14:38] Lane Kawaoka: Yeah, it's a classic. You focus on what you are somewhat, experienced and  of real estate investors, you, you understand somewhat, it's not a complicated business, right? I think that's why a lot of alternative investors start in real estate, especially multifamily investing. Yeah. Because all of us have owned rental properties before, and we've all lived in apartments at one time in our life.unless, your parents are rich enough to have you be the landlord, but that's something I think we aspire for our kids these days. But, that's what you focus on. And, when you're not the best at reading people. to me,this is I think we're guys are horrible at this, like vetting people. Usually, like the wives are a lot better at this, that's why I bring mines around because they can snoop out BS better than I could ever, to me, buy me a beer, like we're buddies for life somewhat. But, I think that's where I'm like, unless other people that have invested with this sponsor before. You got nothing. You got nothing at that point. And that's why it's important. I've always taken a different approach. I want to expand my purely passive investor network so that it can encompass and get these sorts of proxy referrals in this case. Because I, myself admittedly, say I will make mistakes with people if you leave me up to that. I'm a numbers guy, an engineering guy. I can take the p and ls and the rat roll and plug it into my analysis and see what's legit. And that's actually what I did initially, right? Like I would underwrite the deal myself and figure out like, are they using the right reversion cap rate? If not, all right, let me normalize it. Is this still hitting 80% in return in five years? If not, if it's 60%, then, all right, that's fine. Everybody's hiking up their skirts to some extent. But let me figure out who are the people who are being very aggressive and not mean, and not even waste my time. So it's a process of elimination for me, from my account there. And let me just go interview more and more sponsors and operators out there. Today was a little bit different. Like we focus on operators over two or 3 billion assets under ownership. And, for the most part, if you own. 20, 30 properties, you're up to a level where you're not like a fly by night organization and, unlike other passive investors, we have access to Yardi and CoStar. So I can see what your P&Ls are, your debt service coverage ratios are on your 30 assets. and we can have these general partner to general partner type of conversations, but LPs don't really have that. And most times you're just getting like a nifty PDF. Marketing document with absolutely no PNLs, no NETRLs, and that's just not the expectation that LPs should have getting that type of information. Yeah,

[00:17:13] Tim Little: Yeah and I think you will go a little bit to another point and about like you know how do you vet these teams specially for someone whose you know newer to this And I think it's exactly what you talked about which is getting into those groups, right? Surround yourself with those people whether you know like minded investors or going to conferences, because while it may seem to you and me that everyone is a syndicator, because that's the circle that we're in. It's clearly not the case. It's a relatively small world. and so if you start to surround yourself with those people you will talk, right? And if you're thinking about investing with someone, you can go to a couple of different people and say, Hey, have you ever invested with this group? And you'll hopefully get the unvarnished truth of what that experience was like.

[00:17:47] Lane Kawaoka: yeah, unsolicited, referrals, right? I think that was Like when I mentioned like the first deal I lost money on I asked it one of these you know You go to these conferences and it's all these like vendors like the self directed IRA vendors There's dozens of these guys and I made the super dumb mistake I didn't know any better back then but I was like, alright, I have this new self directed IRA Roth thing I got 50 grand in it. What should I do with this? And the guy was like, Oh, Hey, you could invest with these guys. And he just, I don't know if he just drink beers the night before with the guy, or they had some referral relationship, where they got some kickback or whatnot, but I invested with the guy and the guy just stole my money, and that's part of the game, lesson learned, never invest, never take the referral from somebody who's not in a past deal themselves. That's the golden rule of referrals. a lot of people out there, they make themselves look like they're in a lot of deals, and they know everybody, and they just say, Oh, so and they're good. But when you really find out, and there's no way of verifying what's in their actual, their portfolio, what deals they're in, because this is the private placement world, they never invested with that guy. In reality, they're only in two deals. 

[00:18:54] Tim Little: Yep. Yeah. and as much as we like to talk about, real estate in general being lower risk than some of the other alternatives. Assets out there, right? Let's say crypto or whatever else. It's still not without its risks, right? There's still inherently risk out there and everybody needs to remember that. All right, lane. We'll fast forward a little bit for us. Cause you talked about when you first, you did your first deal, as a passive investor, fast forward to what you're doing now and what that looks like, because it sounds like it's on a, Much bigger scale. when you start talking about billions and stuff like that.

[00:20:05] Lane Kawaoka: Yeah, we cut our teeth back in 2016, 17, we did a lot of classy multifamily. We did a lot bigger stuff. In 2020, we just have to try and differentiate ourselves. We tried to start developing. because you make a lot bigger whack in terms of net operating income boost. I think that's where a lot of people got caught, right? There was a correction from 2001 to 2003. If you're not aware of this, you're probably sleeping under a rock or something like that. And if you look at most value-added multifamily plays, what you're trying to do is, you're trying to bump the rents up, right? And, new flooring, new appliances and nothing. We haven't heard anything before. It's not a breathtaking new business plan. And that's part of the good thing, right? It's nothing, nothing super advanced. But all you're trying to do is jump the NOI by 10 to 20%, which is more than enough to double your capital in four to five years. But, when the market goes down 30%, You're underwater, right? And that's where,of course, 40 year highs in interest rates, the quickest time in history. In theory, we won't really be seeing something like that in the next, in our lifetime, but it's within the realm of possibility. Therefore maybe that safety factor of having you control your own destiny with increasing the NOI by 10, 20% isn't enough. And that's where, just to diversify, we started in 2020 to build a new workforce housing from scratch, right from the ground up. And this time, you mature as an investor. if you look at my portfolio from 2010 to 2020. It was like 80 percent plus of real estate, specifically, residential, real estate, multifamily apartments.that worked for me. It was a good time to do it, but more and more, just how the credit investor tapped me on the shoulder and said, Hey, dump your single family homes more and more. I'm seeing credit investors and family offices diversify into different asset classes and different risk reward profiles. I think more, a lot of people still like multifamily, right? Don't get me wrong. I'm not, bashing it over the head. We still do it. We will still do it in the future, you never know what's going to happen in terms of the market, which asset classes get bit in 2021 to 2023, I think that the official stats across the nation is the commercial real estate went down by 35 percent where it was only 20 something percent in the Great Recession of 2008, 2009. So it goes to show, right? you don't know what's going to happen in the future. So to be super heavy as I was 80 percent plus in that stuff. We always hear this age old conversation of diversification, and then, of course, diversification is for fools, as the other guys say, the answer is probably somewhere in the middle and, I guess looking forward, again, don't get me wrong, still invest in my apartments, right? I love them. where else are people going to live, especially in the lower middle class, but I think I'm going to take a little bit more of a diversified approach, maybe not. 80%, maybe, I don't know, 50 percent multifamily residential, right? And then 20 percent in some different asset classes, maybe even outside of real estate, to diversify. But, I do know I'm not a huge fan of traditional investments, that's for sure.

[00:23:27] Tim Little: Yeah. And I think a lot of people are right there with you, but,like you, I'm still a fan of multifamily. It's just how we do the deals, it is different. Now it was a couple of years ago. And, even finding deals that, that pencil out that, that makes sense has become much more difficult than it was,a year or two ago, largely because of the rates, but not just because of that, the price of everything has gone higher from,the people to the materials. and so all of that has. made, CapEx and stuff like that, the investments that you have to put into it, far greater than it would have been before. And,I think one of the challenges is that like if I was a new passive investor coming into this right now, One of the challenges would be that vetting piece because the market has shifted so dramatically in such a short amount of time, right? Like I know most syndicators are going to be the armchair quarterbacks and say, hindsight being 2020 like, Oh yeah, we never would have done variable rate loans, bridge loans. and so we only do,locked in loans like, okay. But at the time everyone was doing not everyone, a lot of people were doing bridge loans, on, on these properties because it made sense at the time. And, as you said, the fastest rate hikes in history, that was a, Basically a black swan event that no one underwrote for now, if you had a locked in rate, you were fine and you're even better, but, the people who didn't, I don't know that they could have saw that coming. So now, how do you vet them? they really screwed up. and how are they going to move forward? I don't know. It's tough when you have huge shifts in the market to look atthe background and history of folks and say whether they're good or not. Now, hopefully, most of those operators are able to hold on to those properties and or and restructure debt or do whatever they need to do to still make them profitable in the end. And I think that will be the true grit to show, which is You know, which investors are worth their salt, so to say, in that even facing some challenges, they were able to pull it out and do what was, in the best interest of their investors. But it's just certainly challenging times right now compared to the boom years, couple of years previous, 

[00:25:55] Lane Kawaoka: Yeah, you don't have market corrections and anything. I, I think part of that, I'll add on to what you were saying earlier, like 2016 and say 80 percent of the loans generally were done, Fannie Mae fixed debt, five year, eight year terms, because the pricing hadn't run up the, we all know the pricing ran up from after 2020 after the pandemic and it's not that you operators like, chose to do it. They were forced to do the bridge notes and the variable rates because the rates had gone up. And why were the prices going up? because the rents were skyrocketing in 2021, they're booming. and it's just here's my takeaway for passive investors looking out there. We know now that 2021 was a very frothy year. That was the year where if you jumped in, you got burned. And operators got burned too. we're in the same boat, make no mistake. But if you jumped, if, if the same kind of thing could have been said in 2016, I say 2016, because that was one of, that was like the golden era of apartment investing. You missed that wave, you missed out on like half of it, pretty much. And then the same thing could have been said about 2020. You never know when that's going to be, there is always going to be uncertainty. And this is where I think it's Investors, such as engineers, right? Like We're very analytical people. This is where it's going to work very against you as an investor. Right now, the fear is very high. But if you look at it from the other perspective, prices came down 30%. The only reason why the returns aren't as high is because you got to put a boat load more money into a down payment. So your principal drag is so much higher right now. That's why your return on investment economics aren't there, but the safety, be, Simply because you have lower leverage, it's a lot safer right now and you're buying it at a way better basis than you were a couple years. Identify the fear in the space right now and understand what it feels like and how it greatly contrasts from the jubilance of 2021. Now is the time to be investing, not in 2021 when everybody was like, it's going gangbusters. And this is the hardest part for people to understand. And people typically only get this reality realization two times in their life, right? Cause market cycles typically last seven to eight years. The last one lasted 12 years.I felt what it felt like to be in the highest highs and I, now I feel like now this is the time to get into it, but it certainly does feel scary. but that's where you have to lean into it, that's a hard thing. Most past investors, they just have day jobs and they're not huge on like getting out of their comfort zone. But that's what you have to be doing when you're a real estate entrepreneur or just an investor. a little tough love there, right?

[00:28:40] Tim Little: yeah, no, it's real. cause you, you almost have to go against your human nature, right? Move past the fear. And yeah, we can say the whole cliched, be greedy when others are fearful and fearful when others are greedy and it's cliched. For a reason. because from

[00:28:55] Lane Kawaoka: The damn thing is true. It's true. It's so true, right?

[00:28:59] Tim Little: it's just, it's one of those things that's also easier said than done because you have to move past that fear. Like you talked about, which is, as I've seen, very hard for a lot of people to do, like right now, so many people are just holding tight and not willing to invest because they're like, I don't know. I want to see what happens first. Things are a little scary right now. but I also think your diversification play makes a lot of sense too. because, it insulates you for the next thing that happens. whether you have, triple net lease or something that's low, maybe lower return, but that low, lower risk as well. And then that way your whole portfolio balances out and becomes more resilient to, these shocks to the market. 

[00:29:41] Lane Kawaoka: add on top of there in terms of asset class,people may only invest in one asset class, but the biggest thing is the four to seven year diversification in terms of time. If you jumped all into 2020, 21, 22, you're screwed, obviously, right? But, as operators, we've been doing this before that. And for that, we'll survive and make it over the hump. and I would suggest the same thing for passive investors, right? You gotta build that pipeline of deals, go into a deal, a quarter, if you can, or two deals a year and spread that over four to seven years. And then you can sleep well at night. And you can even, now you can even invest when things are super frothy for all we care, right? Because you have that diversification in your time. Time pipeline.

[00:30:28] Tim Little: exactly. And there's so many ways to diversify even just within real estate, whether it's over that timeline, by asset class. Among different operators, those are all different ways to be diversified rather than say, only investing with one operator, only investing in one asset class or even regionally, right? Only in 11 cities. Those are all important parts of diversification. all I do know is that you have a new book out, so I would be remiss if we didn't talk about that, the wealth elevator. Can you quickly go through what the basic concept is behind that? Yeah.

[00:31:10] Lane Kawaoka: there's the cheat code elevator in there going up from the different floors, there's never been a book out there that identifies different paradigms of the wealth building journey, right? there's like Dave Ramsey, you mentioned him. At first I didn't really like the guy cause, he speaks to the broke guys out there in debt, right? And he confuses a lot of people. Thou shalt not go into debt, And but the real estate investors are like, what the heck that's super usable, right? But that identifies like there's different parts of people right in different parts of the wealth building journey. When I first started graduating from college as a young engineer, I was on the first floor. I bought single family homes. That's what you should do. But as you become an accredited investor and you grow up, you start to get into that second floor and then the third floor. And there's different strategies in terms of what you are investing in? Are you investing in rental properties, syndications? Are you diversifying into venture capital deals? And then what are you doing for your privatized banking? And then the plethora of different tax strategies that make sense for different portions of the wealth building journey again. for the engineers like it because I, I'm an engineer and they got charts and tables in there based on where you're at, but it's all about figuring out where you are. Most people, under 5 million net worth are in that second floor of the wealth elevator. But it's important to also understand what's on the third floor and then the penthouse level, right? And that's my role is to take those strategies from the next floor, two floors ahead, and allow people to cut corners on the way to get there. If I knew what I knew now, I wouldn't have bought 11 single family home rentals and created all this brain damage. I would have, and I'm obviously I've been a lot further along the line as I would have been now. But, not all of us have rich uncles, right? Or no accredited investors in our network. nobody's gone out. And there's very rare any books even written for accredited investors, let alone different levels of accredited investors out there. So that was what I sought out to create. I'm a very non mindset type of person. I think that a lot of that is fluff. For me, it's more about what are the tangible actionable steps and strategies for different things. Parts of like your prescription based on where you're at. And that's the whole where the whole idea of the wealth elevator came from. and I always try to create like we're mostly like a community of investors where You send the elevator back down for the next guy, right? Most people who discover this whole world of alternative investments paying little to no taxes with passive activity losses rep status It's like drinking like water from the fire hose for the first six months to a year But then it very, you get used to it after a while, and especially after you meet other accredited investors and you become friends with them and you start to swap these best practices, but, that's where, this changed my life so much, allowed me to quit my job in 2018 and go on this next entrepreneur journey I'm on today. And what I realized, a lot of people like myself, The white collar professionals out there, the doctors, dentists, lawyers, engineers, especially, you're always going to be working your day job and you're the ones who pays the most in taxes and work. I think it works the hardest for society. if only there was some type of cheat code out there to help you get out of it and allow you to get what you want with whom you want on your terms. And, going back to that landlord you got annoyed with.that in thinking about your college apartment, right? He who controls the money, controls the terms.

[00:34:29] Tim Little: Money is not everything, but it makes life a lot easier, and it comes with a certain set of control and power. For example, or whether because I read a book that happened to talk about syndication or another book about accredited investors and it's very random and happenstance. Because there isn't enough information out there like you say, so I'm glad that you're contributing to that and I'm trying to do my part by having you on here. So hopefully that educates someone because we shouldn't stumble upon it. It should be something that's taught, but unfortunately it's not. So I think you're doing a service there. All right. We do need to move on to the turbo round. So now I'm going to ask you the three questions that I ask every guest we have on the show. I just ask for a quick honest answer. Are you ready to go to the lane?

[00:35:16] Lane Kawaoka: here we go. You

[00:35:17] Tim Little: All right. What is one red flag? Every investor should look out for

[00:35:21] Lane Kawaoka: again, I don't invest with anybody unless I know somebody personally that has invested with them in the past. So for me, it's like a relationship. But I think that's hard for investors because unfortunately, you got to get off of your computer and kind of meet people in real life. Sorry.

[00:35:37] Tim Little: yeah, definitely. Yeah

[00:35:39] Lane Kawaoka: if you're an introvert like me, you may or may not like some people who think you don't like people. I get it. I'm an introvert too, but you know what? This stuff is super important. Your family's livelihood doesn't lie. So can you get out of your comfort zone and shake somebody's hand? Sorry for being a meanie, but I bet your spouse would really appreciate that.

[00:35:56] Tim Little: Yeah, especially if you have 50 or a hundred thousand dollars, you know riding on that investment all right next question. What is a myth about this business that you would like to set straight?

[00:36:07] Lane Kawaoka: I think especially today, like there, there is a lot of sentiment that a lot of the companies doing this are like faceless companies and big institutions. when we first started, like the brokers, like what, like you guys got a hundred investors investing in this deal and they're just regular guys. Because most of the time these commercial assets are locked in. The only access is the big institutional Wall Street players who then go stack their 2 and 20 split scheme on top of and with another 2 and 20 to another commission rate for the certified financial planner. In a way, this whole system democratizes that for the average guy and cuts out the middleman, which I'm all for. I like that type of stuff. so it's not. That's the myth. It's not just faceless institutions. It's real people doing this type of stuff.

[00:36:54] Tim Little: Yeah, absolutely. All right. Final one. What does success look like to you?

[00:36:59] Lane Kawaoka: numbers wise, you can get yourself to four or five million dollars net worth. And as I said, money's not everything, but it does buy a certain cash flow stream if you're able to convert it to cash flow. And that most of those people I see out there who are pretty happy have ten to twenty thousand dollars of passive income a month. I know that they had that study out there where you're super happy at 75, 000. Dude, I don't know anybody who can survive off 75, 000 and be super happy about it. double, triple that, at least, right? But then, yeah, at that point, you get to a point where you are, you should be happy, right? and I always say, let's get you to that point, as they say in the airplane, put your oxygen mask on before you help other people, get your net worth to that level so you can get your passive cash flow to that level so you don't have to really worry about money. And then,I think that the second part of life is figuring out what you're going to do after your FI.

[00:37:53] Tim Little: Yeah. No, I couldn't agree more. It may be true that money doesn't buy happiness, but money can solve problems. Money can solve it, right? And the fewer of those problems you have, the less stress that you're going to have from those things. So can it buy happiness? Not directly. But it can make finding happiness easier. I think maybe that's the best way to look at it. So I certainly agree with you there. All right, Lane. Hey, this has been awesome. Please tell our listeners how they can get a hold of you. And if you have anything else that you'd like to share with them.

[00:38:26] Lane Kawaoka: Yeah. They can go to Amazon, pick up the book. I appreciate that. If you do a review for us and you send us a screenshot team@thewealthelevator.com, we'll hook you up to the audiobook version so you can be time efficient with your time and maybe wash the dishes and listen to the book at the same time. But, if not check out the podcast, the wealth elevator, and then website wealthelevator.com. Thanks for having me, Tim. 

[00:38:49] Tim Little: Awesome. Yeah. And it's been great having you. I appreciate you coming on and I look forward to continuing to see you do big things on your journey to multifamily millions.

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TIM LITTLE (FOUNDER/ CEO)

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