Alternative Investments Real Estate Pros Use to Diversify Wealth

0:00Semi-Pro just means aspiring to be pro. Probably not going to be pro. I'm also semi-pro pickleball. A handful of things go on me. Know that semi-pro is just a fancy way of saying I'm passionate and not great. But all what we're saying here on the BYOB podcast. What we're saying is there's really cool things you could do that enhance your life, that involve thinking about different, about happiness. You can't amortize your happiness. What he meant was you can't think about how many days you're happy with something and try to count up all the pennies. Sometimes some things you're just going to make an investment of It makes you happy. The happiness is the investment. Welcome back to the Be Wealthy podcast with Brett Tanner. It is episode 0007 call and that is the lucky number. People don't realize how lucky seven is. And one of the things I think about Call is I think about somebody Mark Cuban's quote, Someone had to be the luckiest person on the planet. Why can't it be me? And you're lucky here today because it's episode 0007. Yes, yes, yes. They the podcast episodes do not do themselves. I cannot do it. We are real people calls real. We're still working on his nickname. If you would, please, please, please come up with a great nickname. We need something like Baba Booey, something amazing. I want it to be special. If not, we're definitely gonna create that internally. But today is all about the investments that you've never heard of and is. My investing journey has gone on and on.

1:27I find myself finding access to better investments that have better returns that are actually less noisy. If I look at it in the beginning, I thought the only way to really invest in real estate is you buy single family homes. That was my thought process. And now I realize there's a whole gamut of things. Number one, inside of real estate, we'll talk about today. But there's other investments that make a ton of sense. And what makes all that possible is is truly the information age. No, I'm not a baby boomer, but the information age really changed it. I go back to 1999 when I went to college. Your while email was a tool. Everyone understood that emails a tool college professors would not accept a paper via email. Right? Instead, they asked you to actually hand it in and paper where today you can access any type of information, You can go on masterclass and watch and get the skills. Some of the best professionals, business people, athletes, celebrities in the world. And you can watch it on demand on your phone anywhere in the world. So there's access. There's so much more access to information, which on the investing side gives us better access to assets that were primarily in the past. Only available to really, really wealthy was kind of behind closed doors. And these weird things. And it's not that he was hiding it, it's just they had a different level of access. And I think what's so cool about today and what we're trying to bring to you on our podcast is different ways to think about your money, to live better and ultimately have a really, really kickass life. So today's all those seven investments, one of the investments is going to be so crazy you can say, I don't believe it. Brett This is a scam. It's a legal call. You're going to. It's got to be something crazy good. It's too good. But there's an a there's an investment out there that you could invest your capital. And there's a way, if you wanted to, to get 100% of that money back and you could use that money to do another deal.

3:09And the question would be, how many times can you do it as fast as possible? And so we're going to talk about that when we get to It's one of the five. I want you to stick around and make sure that you listen and hear that investment. And I want to hear your comments about what you think when you hear it. So live update I had a crazy business world. I had a crazy business week. Just a lot going on in my office. We're making some changes and I needed to do something personally that would actually live or be wealthy. Mission. I want to do something epic. And and so I on Thursday night I was driving home and I thought, what a cool way. Why don't we do an emergency fishing trip to my favorite place on the planet, which is pulling me to Mexico? I walk in the door. It was like 7:00 at night. I asked my ten year old, Hey dude, how do you feel about flying to Mexico tomorrow? Fishing for two days, catching fish coming and eating it? We're going to do some probably e foiling. We're going to do something crazy. And how do you feel about that? He goes, Dad, I'm 100% in so we load up and we rolled into Pertamina. We found a room. I wanted to make sure I text my fishing guide, which I'll come up here in a minute that owns a company. I said duty of about two boats available for two days, so we'll figure it out. So I don't have a room yet booked, booked to book flights there and back and figured out the room on the way confirmed as we were in the air and I had to of the best days ever fishing. Part of that story is money. It's not all about the dollars and making it and growing your net worth. All those things are super, super important.

4:36But I think there's a connectivity between what we really want in our lives, which is better experiences, right? We want to really live that wealthy lifestyle which isn't about money. It's really about moments. The more moments you can create, right, and the more magical that moment and we all have the ability to create them. I think we just lose that. Is it that inspiration call, we lose that desire to create those moments are we can get stuck in. So I'm constantly thinking about what's the most, what's the most momentum, what's the most epic thing I can do in this moment to make it really matter and be something I won't forget at the end? It was an incredible trip. We got a ton of fish and I'll share a little more about the story in one of the five investments we're going to talk about today. So as we jump in, right, we said we got we have more access than ever to impossible investments. You know, most of us only know what we know. And if we really look back in the past, what you're going to see is we've all kind of been fed a certain group of investments like alternative investments. A lot of the things we talk about today aren't things that were being talked about. People have talked about rate stocks, mutual funds. If you look at the whole 41k world until the last really ten years, you were primarily limited to taking your 41k funds and going in this generic mix of either stocks or mutual funds or ETFs that are, you know, that are just kind of generic general plan. Put your money in the stock market set and forget it. Work 30 years, put your head down and we hope you can retire. And what's cool now is you realize, hey, I've got a retirement account, I could self-directed account. So it may if you're a current employee, your plan may not allow it. But some people have had a prior fall and a lot of people in the real estate industry came in this industry from another business.

6:13So if you actually have an old 401k, you could self-directed, then you could put it to any of the investments that we're going to talk about today. So there's just a different way to be thinking about your investments. And again, the thing we talk about here is where do you have that unfair advantage when you go to invest your capital, all of the money you can make the return is largely based on where is your unfair advantage. You know, if you think about, again, there's three resources in life money, talent and time. So if you've got the capital, where is that talent that you have that you know more about this asset, This investment could be real estate in your area, could be land in your area, could be some other business type investment in your area that you might have an unfair advantage. And that's where I think you should look about playing. So there's definitely no shortage of experts on the subject. Everything I'm going to show you on here either have millions of dollars of those investments or I will specify the last was an example of something I'm in the middle of doing. So none of this is theory. We're not the coal, We're not I know you are a 2024 credit card with 23. We get this wrong every time, 24, 24. And so coal, I know in your world on the tech talks and the interfaces that there are no shortage of the 24 year old wizard who is yet to do anything and you know it's funny cool today I think there's more of a desire online to look rich than be rich.

7:34Like, I don't really care. They don't want to do the work and do the things to get the money. What I want to do is pay someone else to sit in their Lambo and take a picture of it and pump it online. Oh, you know, like, you know, that's that. Yeah. You don't want to own the plane call when you could pay to take the photos. You can't fly in it, but you take the photo, crush it on, you know, get a lot of likes and get a lot of sharing of You're just as good. Just as good. I mean, flying private, this is cool. You know, It's really cool sitting in that seat for 5 minutes on the hot tarp. It still sounds amazing. What a win. But you got to really disconnect from that because if you really think about it, people have a greater desire today to look wealthy than be wealthy. So this show is all about how to actually be wealthy. I could care less how you look. This is my dressed up outfit where I've got my got my Viagra. By the way, greatest thing ever latest guy to VRC, not a sponsor. The show should be. And by the way, couldn't love it more. I don't care if they ever become a sponsor. They're going be free of all the promotion in the world for our from our 50,000 viewers worldwide on every episode. But very cool. This is my dress up outfit. So the hoodies really I'm dialed in. And so with that, let's jump into today's episode. So we're to go do a handful for investments. Five that in no specific order that I think are things you don't know about. You've never heard of these or if you heard of them, you're probably not super familiar with the mechanics and exactly how they work.

9:00And so today's goal is to kind of demystify that, explaining the pros and cons of each of these and really give you a format that if you want to learn more, you can go find a way to learn more about these assets, will give you a specific way to do that, and you can begin investing in them if that's something you wanted to do. Now before we jump in, no matter where this goes today, I want you to know that the first thing you should do should not run out and buy any of these assets. You have to get an education. Again, it's back to run for advantage. You need to take the time to go learn, earn and master these assets. When I decide to start investing in any of these things and I'll do exactly what I did to do it, I found the number one expert I got there courses and training. I joined their program. I bought every single book in public industry publication, and I read all of them. Now, what happens when you read 40 or 50 books on a subject? A lot of them are crap. They're just not good. Goal that not every single book written on a subject. I know it sounds impossible. Some books are garbage. Some books will change your life in order to change your life. $2 can also waste a tremendous amount of time. So you got to be careful that some of the books are crap. And so I'll give you the exact model of how I went about thinking about it, how I got started, and then really where we're at today with each business. So let's jump into my favorites, the favorite I ate when we had all of our events or in our masterminds. People say, What's your favorite business? Brett? You've got these seven different companies that you own and operate. What's the favorite one? And I always have the same answer. I love to businesses. I love our investment company that goes out and we're we're making cash offers on commercial buildings, on houses, on multifamily every day.

10:28We're trying to buy assets that we either want to flip, we want to keep in our portfolio. And that's a big part of what we do. And I just that business, I love it because that's my passion. The investing side of the world is where I spend my time. I love the creativity and deals and I just enjoy playing in that investment space where the decisions are all based on math and not emotion, because today there's too many times where we're looking at decisions are based on emotion, right? People are going to make a decision emotionally and then come back and try to justify that decision with logic. And that's what you see happen all the time. And what I love about the investment company is that's not the case. That's not the business. So my second favorite or my other business, it would be the of the assets were to talk about. My favorite one is hard money lending, right. First position lending. We'll talk a little bit about some of these seconds that we do. But primarily you're lending money to another person who's going to buy the home. So there's two ways that you always think about owning real estate. You can own the asset. We're very familiar with owning an apartment building or a single family home house in your neighborhood. Right. A very, very simple thing for us all to understand, right? We own a home. I was not familiar, Right. Even though I'd sold, you know, probably $1,000,000,000 worth of real estate as a as a real estate agent. I wasn't that familiar with the other side, the debt side, whether that's hard money lending or a seller finance note, which we'll talk about here in a second. So hard money lending, you're basically you're going to the first mortgage no different than the bank the on the mortgage that you have at home. No different than that. And the borrower's going to make payments to you. So technically, the home is owned by them. You have an instrument, a deed of trust that is recorded in a promissory note, the recorded against this piece of collateral and the borrower has to pay you one of the terms in that agreement.

12:05Hey, huge thanks to everyone who's written a review for the podcast. It helps us. It helps us share the message. And again, we want to be transparent with what your honest feedback. We have some great feedback from David Ronnell, he said. Brett brings more passion on the topic of wealth building. More than anyone, I've had close proximity, I've learned so much about money and investing, didn't know what I didn't know until getting him in my life. In business, if you're serious about these topics and even think you've got it all figured out, I predict you'll blow your mind with the BYOB podcast. He's blow my mind many times. You his teachings are capital L legit. I'm all in with Tanner Cap. That's a little reference because I renamed my company Tanner Cab after billions after cap. Bobby Axelrod, one of the greatest characters of our time. Thank you, brother Bonnell. Love you, man. He's been in our mastermind a really long time, great dude, and is an awesome, awesome human being. Not as good as golfers. Me joke. He kick my ass last time we played but appreciate Dave Brother Brunell. Also, we had one from Candace Decker. My friend. She's been on our mastermind as well a while and said Brett's a wealth of knowledge. He gives a different perspective that we're going to find in the fluff of the real estate and influencer industry. He provides no nonsense practical traders. A wealth I highly recommend. Thank you. Can love what you're doing. Love. Yeah. In our world. We would love to get your comments. Please write a review. We care about them. We use it to make it better. Back to the show. And so for the purpose of this conversation, we're going to see that all of these hard money loans were business purpose, meaning the person that is buying the property is not going to live in it as a primary residence.

13:39They're going to occupy it as an investment property and the way to think about it, right, is if you think about investing, if you were to go buy that home and let's say there's a 300,000 or house and I got a really great deal and I was to buy that property for, say $250,000 to be a great deal. Now, if I went to lend someone money and they were buying it at 250,000, a normal scenario would be I'd want 20% down. So even though it's worth 300,000, they're buying it at 250,000, 20%. $250,000 is $50,000. So my loan amount from to them is going to be $200,000. So the worst thing that happens if I do this right and I understand the value of the real estate and I like the deal is that they pay me as agreed right. If the best thing would happen, they actually don't pay me and I get a 200, I get a $300,000 house for $200,000. Now, not rooting on anyone to fail. That's not what investors do. Investors have one job. Don't ever forget that your job as an investor is to accurately price in the risk You're going to invest your dollars right in your accurately pricing in the risk meaning of something as an insanely high return. It has high risk. If it has no risk, the return is going to be much lower. So your job is to price it. So on a hard money loan rate, the typical interest rate, you're going to see around 10 to 4% I'm sorry, 10 to 14%. And that's going to include points and fees. And so usually that's broken up a couple of different ways.

15:01There's the interest rate that the borrower is paying. Again, I mentioned 10 to 14% in the borrower going to probably pay 1 to 2%. They call it points one or two points of the loan amount and that in addition to the interest rate. And so all in, if you figure the return of all of that, you're going to land somewhere in that 10 to 14% overall, if you do a loan at, say, 11.9 and a point and a half, you'll be pushing up toward that 14% depending on if it's a six month or 12 month loan. And so I love lending money to people. The way I think about it is I love lending money. I love lending money at prices that I would love to own the underlying real estate app. So if I love that house at 250,000, I would really like it at 200,000. It's a great investment. The other positive, I think they're relatively low risk. If you're if you can really understand and you know for a fact that the value of that home is $300,000, there's very little risk in this investment. It's also fairly liquid. Some of these loans could be 6 to 12 months and you could do longer ones. There's ones that might take more construction or whatever, but your average hard money loan that I do is about 6 to 12 months and we have a three month interest minimum. So if someone wants to buy it, they have to sell it really, really quickly. There's there's work that goes into actually placing a loan. So we want to make sure that there's a certain amount of time use. That's 90 days for us. And I always measure noise in investing, right? I think about how much noise noises were, how you get all this white amazing white hair that's noise and investments.

16:23All that was done call through business and noise investments. And that's what I'm going to share with you. The five best investments today that don't have a ton of noise. Investors don't call that often. They make their payments into to you. They're interest only payments primarily so that you're not having to figure out amortization schedules or payoffs. It's really simple. Here's where we're at. You're just pro rating that one month. The other thing I love about hard lending, it's fairly simple to start. You don't need a huge marketing campaign. You likely know in your market out there today, people that are doing fix and flip properties are probably a good number. About 60% of all of the fixed and flip transactions are financed by hard money. There is short term loans that are being done not by banks for whatever reason, the banking industry. It makes no sense to me. Call why the banking industry isn't going after. Why is the banks are not going after this incredible loan product? I think it's because, number one, it's in and out. It's faster. Banks love placing money in parking of the borrower, going to pay for five, seven, 20 years or refinance. They're not someone's going to pay off. And the deals are a little more complicated. And sometimes the value of these properties, right, because they're it's a fix and flip the property may need a tremendous amount of work and banks do not love properties. You need a tremendous amount of work because if the borrower doesn't pay, they don't want to be in the Oreo business and the bank doesn't want to become the biggest flip or the country overnight of their borrowers don't pay. Instead, they would rather let investors like you and me solve that problem. And so there's you can go and type in hard money lender, insert your city or state ideally your city, your county. And there is no question they'll be a handful of images that come up. Some might be national companies, some of you local, but it's a fairly simple business to start and you already likely have access to the people that are doing it.

18:04So you could find a really great operator and you could lend money to them. As I started, I started my hard money lending business, I believe was like around $300,000, which in my market was enough to do about two loans the same time. When I started, my average loan amount was around $150,000 per loan. And people always ask, What's the amount of money and get started. You didn't have to do one loan in your market. Now, I've never taken $1 out of that and I've grown that hard money lending business significantly over the last probably I think I've been doing around eight or nine years or coming up on almost a decade and I've just grown it really significant level. The interest has come in there and compound and I keep lending it back out. It's become an incredible cash flow business that really only has one person running it. For me, it's doing a full time job. It's probably a third of her overall work, so I love not a lot of people in it. You could easily do it yourself. You've got high returns, you've got liquidity, you got low noise. I love it's a more reasonable AMI lending business. You can also put collateral on it. So if I've got $1,000,000 worth of notes out there, I could go to a certain bank that wants to be in the space that understands debt and you can actually pledge that million dollars of debt and they would give you a line of credit. So let's pretend I had $1,000,000. I went out and did ten different loans at $100,000 each. Now I've got $1,000,000 in loans. I could go get a line of credit for, say, 70% of that amount, $700,000, probably around prime plus a half prime plus one, which today's around and around 9%. As we're filming this podcast. And I could go back, I could borrow against my loans and I could take some of those funds and I could lend those again.

19:34I could put a little bit of debt. So now I don't have any money in my checking account. I'm not getting drag on cash, meaning that money's sitting in my checking account. It's not earning me more dollars. It just sitting there. And so instead of if I had $1,000,000 out, if I borrowed $100,000 that now I've got 1.1, I've got $1.1 million lent out, I've got 100 $1,000,000 of my cash and $100,000 on a line of credit. Now is all my payments come in. I'm going to immediately apply those to the line of credit dry. Bring down that line of credit. So every dollar I place on that as it comes in, earning 9% on it, every time I do that, I'm I'm freeing up that dollar and so I'm earning 12% or whatever my rate was. And that whole concept, there is a huge idea What I did that changed my actual financial life was understanding the velocity of money. I don't want to take on unreasonable debt, but I want to have a small amount of debt that allows me to optimize the return. Again, if I had $1,000,000 of my cash and I have $100,000 in a line of credit, I've only got 10% leverage. It's very, very low. But it allows me as that cash flow comes in to create additional returns. All right. Let's switch gears. Let's go to my the next business you never heard of, which is notes similar to hard money lending. Right? These are notes that are secured by houses. But the difference is these are going to be for the sake of the conversation today owner occupied.

20:55So think of the seller down the street from you. He sold his home, he sold it, and when he did, he wanted to get a certain price. And so he offered seller financing. He didn't want to lower the price to to pick up and in into land where the conventional market is. So he was able to sell it for a little more money because he was willing to be the bank. And if the seller financing transactions, there's less criteria for that seller to go off with that financing, it still needs to go through a process called the ARM, a low process which complies with Dodd-Frank. And I know that's a lot of gibberish, but all it really means is that if you're a seller selling a property and you had your borrower go through this process, it gives the documentation and it proves that that borrower has the ability to repay. They've got the they it doesn't mean they will pay you, but they have the ability to repay. What's great about the seller financing, the seller financing process is you may not have let's say you got paid in cash. Well, if you tried to do a loan with JPMorgan Chase and you say, Hey, all of my money is in cash, first of all, call they're not going to take the loan. Okay. It's a tricky game to say, Listen, I don't think you understand. My boss pays me in all cash, even though that's something that happens. It's tricky to explain. However, in seller financing, if you could document the actual cash and you could go through and show, Hey, here's their rent receipt and they are going to ask for you, the here's your car payment, you're going to show how that money was spent as and when in your account you could actually get approved. Now the seller is financing it, the company is approving it. And so now we've got this note. That note can then be sent to a servicer who would collect the payments on behalf of the lender borrowers and their payment goes lender and the seller got some sort of a down payment. I would say the average seller financing is somewhere between ten and 30% as a down payment.

22:34So the seller, instead of having to lower their price, to me, the conventional market, they might have made it got a higher price because they had a greater audience, right? They had more supply of borrower. They could do all the borrowers that could qualify as opposed to the conventional market, which might only be this section of borrowers. So now these notes go down the road and the borrower might have paid for ten years. Now that seller gets to a place to say, Hey, I've I originally the loan for $250,000 over ten years. It got paid down to $150,000. My borrowers always paid. But now I kind of want to sell this note. It's paying me 1500 dollars a month and I want to sell it. There's marketplaces you could go to to actually sell this note. And so what I love about notes, it's a similar thing I love about hard money lending is rates go up and get really, really high. It gets harder to buy hard assets, houses, buildings and apartments that make sense because as rates of went up and now we're as we're as we're building this today, investment real estate rates are around 8%. Well, if I'm going to find a house in Maricopa County in greater Phenix, that will make sense to buy with a lot of debt. We'll call it 80% or 70% debt. It's hard to find an investor that makes sense with 8% debt because the return on the House is probably going to be about 6%. So I'm losing money on every dollar. I borrowed the opposite side of that is interest rates are really, really high. Debt rates go up, which means the returns on debt or even better. So there's a market cycles where it makes a lot more sense to invest in real estate hard assets. You know, if you're going to own forever, it's always a great time. But today it's harder for me to find assets that I want to buy that make a tremendous amount of sense.

24:07It is much harder to do that. And so in the debt side, it's easier than ever because rates are very, very high. So if I want got down the road, I've got this 50 mile an hour payment, I want to sell it. A borrower will typically pay about 85% of what's called the UPB. All it means is what's owed. So borrower owes. In this example, they started at 250,000 or a loan amount. They've paid it down 150 over ten years. And that seller says, Hey, look, this has been awesome. I want to go buy a boat or something really cool. I want to go buy an investment property. I've got this note's $150,000, 15% of that coal's going to be 2025. And so if they could sell that note for what is a $127,500, they might be happy to walk away today, take their hundred $20,500 and go do their next investment. So there's marketplaces where you can sell that on. If you want to take a look at the stuff, There's a great site out there called Paper Stack. We'll drop in the show notes, but it's paper stack. Stacy, you could go there and you could see seller finance notes. There's a handful of reasons I love the notes, but the first one is you can buy season notes. So the example I just gave you, that borrower had ten years of seasoning so we could look at the last three years of payments of that payment history and see do they pay on time, Do they pay late? How many times do they get to 30 days, late to 60 days, late to 90 days late. And so in looking at that, I can make a really good decision on do I want to buy this note? I also get to look at their collateral, what's called a collateral filed. So you've got the deed of trust, a promissory note.

25:33All the other docs that are part of that mortgage process did they have the Dodd-Frank compliance? Did they go through the ARM process? So I can look at all that and really evaluate what am I buying, most importantly, right. Hopefully that home that they bought, that they did the loan for $250,000, again, if it was worth 310 years ago, hope that homes worth $400,000. So my risk as the lender is going down every single time the borrower makes a payment. I want you to think about that for a minute. Imagine an investment where you loved it on the front end and every time a borrower pays you your returns the same. But your risk is going like this, right? Values going up your principal balance is going down. And so the gap is getting wider and wider and wider between the amount owed and the value the property, which means your note has less risk to you. Again, as an investor are only jobs to price and risk. It's got less risk built into it. So most of the notes, you're not going want to sell them. You get something great, you just hold on to it. You got a 30 year cash flow. If you wrote a 30 year note that notes going to pay you every single month for a very long period of time. So the the biggest difference between notes and hard money lending hard money lending are typically shorter term notes are going to be the longer term notes are going to use. They have a principal and interest component right there paying principal down. You're also going to impound for taxes and insurance. All that means is it's a little more complicated to collect. But there's a lot of servicers, there's a there's probably 50 big national servicers across the country that would handle this for you on your behalf. They're going to charge around 40 to $50 a month to collect that payment, make sure the insurance is paid, the taxes are paid, and then send the money to you every single month.

27:14So it's got a high return. It's got fairly low noise. It does have more noise. I mean, there's more things like the borrower might not pay their insurance and you might have to force place the insurance, buy insurance on your behalf because of that burn down or they didn't pay the insurance you would actually be left and have to collect. So there's there's it's more it's less noise than hard money. I'm sorry. It's more noise than hard money, but it's much, much less noise than what a single family rental property would be. There's a lot more moving parts in a real property. There is a piece of debt because really all we're trying to figure out on the outside, did the borrower pay or do they not pay or do they did they miss a payment or miss an insurance? But usually it's all around paying and it's not that hard to manage that process. The other beautiful part about notes is if you if you own that note. So one way what I explained earlier was selling that note was selling it at a percentage of par, right? It took $150,000 note. We sold it for 85%. The technical term would be selling it for 85% of what par was par being 100% of the note value. Another way to do it right would be you could take that note and I'll just give you a different example. Let's pretend I bought a property for $50,000 and I got the greatest deal ever. I was probably worth like 80 or 85,000. And then I went and I was able to sell it for $99,000. Now why can I sell it for 99,000 if I think it was worth 85?

28:33Well, if I'm willing to offer seller financing, I can get a premium because I'm willing to offer financing to people who otherwise might not have been able to buy a home in the conventional market. Right. So I'm able to charge a premium for that because I'm willing to offer the financing that a bank would not. So the borrower puts $10,000 down. That's an $89,000 mortgage fixed and 9.9% for 30 years is $774 a month. So let's assume I do this loan and I've got an investor, I've got an uncle that hit the Powerball and he's crushing it. And he would love to lend me money at 8% interest. And I've got this note. And what I want to do is as quickly as I can, I want to create another note so I can have $774 a month coming in. So I go to my rich uncle Frank, and I say, Frank, dude, give me 40 grand. And I'm going to give you the next and I did some math here. I'm going to give you the next 64 payments. So Uncle Frank, for the next 64 months, I'm going to send you $774 per month. So I may get zero, but I've got my 40 grand back. So now Frank is going to say, well, what if what if the borrower doesn't pay? Or or what if you don't pay me? Frank, That's the best possible scenario. You've got to note that for $89,000 on a property that's worth somewhere between 85 and 99,000, we'll even say it's 85. And so if the worst case scenario you foreclose, you get an $85,000 house for 40 grand.

29:56How safe is this investment? It's the safest thing ever called. That is almost the safest possible best bet I can think of. Something is less than 50% loan to value, right? Investment to value. So that's not going to happen because we're doing this with Uncle Frank. I'm going to step in and I'm going to pay and I'm going to make sure he gets his money back so that I still own my note. And what's valuable now? What do I have? I have my $40,000. I can go do this transaction again and then I can come back to Frank and I could sell on the payments. Now, once those 64 months are up, so for 64 months that $774 is going to him after that period of time, that comes back to me. So I still own write the remaining 294 I'm sorry, 286 payments. So it started out at 360. Uncle Frank got 64. I still own 296 payments at $774 a month. That's $229,000. And I basically have no money in the deal. If I wanted to raise $50,000, it would have just involved me selling him more payments. It might have been another another year's worth of payments. So I have gone to 72 payments or 76 payments and I could do the math for whatever that would be. So I can there's a way here where I could get my capital back and go create another note, and then I want to see how can I go to this as fast they possibly can and go create hundreds of these.

31:13And it's all the cash, all you want. I have done this exact thing and I can tell you that it absolutely works in a day. I've got over 100 notes doing this exact thing. I love notes, lover, seller, finance, space. It's a beautiful, beautiful business. There's a number of places you can go to learn more about it. I would tell you one of the books I would start with, there's two ones I love. It's My Life in a Thousand Houses The Art of Seller Financing by Mitch Stephen. Great dude, what a good book. I actually went out spend a day with them because I wanted to learn more about the space. I'd also read this in book called Invest in Debt by Jimmy Napier, and we'll drop that in the show notes for you. Those two books kind of give you the way to think about this debt and seller finance space in a different way. But I want to do the next one, and this is one I definitely think you likely will not have heard of. I had heard of it, but I didn't realize the way you could do it. And it's oil or natural gas royalties. So most people are familiar with about seeing natural gas. You might have seen different like the companies that are that are drilling it or that are refining it or that are selling it on the stock market or things like that. But what if you could own right the royalties to it? So I want you to think for a minute. There's you think about land, two ways to think about it. You got everything above the surface where the buildings are. You've got if there's cattle grazing the land, everything from the surface up, then you've got everything below the surface, which would be the mineral rights, natural gas, oil, all that stuff. And so you could sell that together, but you could also separate it.

32:38So I invest in the royalties only. So someone else owns the land, They're doing their thing. I own the rights to the minerals, the royalties in the ground, primarily in the natural gas space. And I got involved sort of looking at different types of natural gas at a really, really good friend in this space. It was crushing it and I had a belief that natural gas, as we keep moving forward environmentally, the United States has a tremendous amount of natural gas. It's a very, very clean fuel, relatively speaking. And we've got a ton of it here. Right. So it's likely that we're going to keep pulling out more and more prices. When I started investing in it, we're an all time near all time historic 30 year low. And so I like the space. Now, what I didn't realize is it's a real estate play. I had a 1031 exchange, so I had sold a property and I did not want to pay tax. I wanted to. 1031 So an exchange that for a different income producing asset and I only had 45 days to identify the property. So that's how it works. From the day you sell to you want to buy, you got 45 days to do that. And so I was getting towards the end of my 45 days to identify the properties. Now you got six months to close, but again, only 45 days to identify and my buddies like, Dude, you should 1031 exchange into a natural gas royalty. And I kind of look, I'm like, man, you got a you got to read some books and stuff. You can't take a house and invest in royalties that aren't even there. Like, it's not even a thing. And he's like, Dude, it's David. Real is like first thing he said, which is again, something I learned from a really good friend, a Kent Clothier, who said, Brett, is that your truth or the truth? First of all, you're wondering like, how many kinds of truth are there?

34:07Well, I guess the answer is it's it's my truth. And so this was one of those cases where this gentleman said to me, is Brett, is that your truth or the truth studies that line on him a lot. And I said, Well, I guess it's my truth. He's like, Yeah, I do it all the time. You can absolutely. 1031 exchange, you know, natural gas royalty. So I did. I bought my first one. And of course whenever you do your first investment and I trust it entirely in the process with my friend, but I had one of the foremost experts. His family was in it right. Just a legacy kind of generational natural gas and oil royalty guy. And I made my bet all based on him in the knowledge I had. I had a little bit of knowledge, but I'm literally basing it entirely on a great human being. And you know what happens when you do something like that? Coal, of course, it crushes natural gas, went from like $3 to like 850 or nine. You can go look at that spike. And it was insane. But there were other really, really cool parts to it, right? So that depending on your strategy and for the sake of the conversation today, you can invest in producing or non producing royalties. Everything I buy in the natural gas or oil space is all producing. I want things that are actually have cash flow. I'm buying a stream of someone else's cash flow. They were getting it before. Now I'm purchasing it, but I like to buy in what my friend calls white space. So we're buying, we've got cash flow and there's all these wells out there. It's producing but we're buying it where there's white space. In other words, it make logical sense for them to put another well in there. And as that happens, I get more money, right?

35:31I get I get another bite at the apple. They find more. And so I've done this a few different times and it's worked out really, really well for me. And so things I love about it, You talk about noise, there's zero. If you call one of the operators that's it's taking in paying the royalties to you, you're like, Hey, I want to really get involved in the process. I want to call you. And they're like, Dude, did you get your. Do you need to update your A.H.? Other than that, goodbye, which is amazing from a passive investment standpoint. So all the investments, when you're investing capital, you should be thinking about how passive is this investment? How much of my personal time am I going to spend managing this asset after I start, after I make my initial investment? This one, you'll spend zero. You're going to get a high return. 10% plus is where I think you're going to land. Now. It's a declining yield curve. Super nerdy. All that mean you're the money you get the first year. If they don't drill another well will slowly decline over the first ten years. Then it kind of trails out. But the goal being that they re drill another well. So it goes like this. Hopefully it pops back up and you have some of that throughout. You're able to 1031 exchange into it. You're you also have some upside. I mentioned they drill another well you've got upside baked into it again if you go to the Internet, you wouldn't learn about this. You wouldn't know that this is just an investment out there that's totally available. It's primarily been kind of hidden and on the side for for certain groups, whether it's family offices. But there are some there's actually some publicly traded companies now that actually do this as well. And again, I'm a private investor investment capital into the exact investment that space.

37:01So I encourage you to take a look at natural gas royalties or minerals as a passive investment. You might be in a state like whether if you're in there all over Texas, got some stuff in the Northeast, around Pennsylvania, I've got some stuff up there. There's a number of in place in the country that there's a ton of natural gas in the United States. Next example I never heard of what be a land lease, a little more expensive to get into these. But there's places where the land you own the land in your leasing it to someone else. If you see some of the best real estate in the world might be on a land lease. If you go a popular company that does be Starbucks, someone owns a hard corner. You know, the on the the hard corner of Main Street and Main Street, they've got that spot there and they don't want to sell the land. But Starbucks wants to go in there and build a Starbucks or the new QuikTrip wants to go in there. And the land's just incredibly value. So I just want to get rid of it. So they're basically going to say, Hey, Starbucks, come here, build your building, do your thing, I'll lease you the land. So typically you're going to buy a land lease at around a 5% return. But you're if you buy it for, say, a couple of million dollars, the building and everything might be worth six or $7 million. You've got very, very low risk, completely passive. There's absolutely nothing to do other than set your checking account and watch for that money to drop in. And so most people aren't aware that some of the best real estate out there might be on a land lease. And these are investments you can take advantage of. The way that I'm using this in my world today is I've got some of these houses that I bought that achieved their returns.

38:20They did a certain thing and now I'm in the middle of taking about 21 of mine in Alabama and I'm in a 1031 exchange that into something like that. I'm actually looking at doing it's on a land lease. I'm looking at doing a Starbucks on an 18 year lease. But there are other ones I've looked at. I don't think those are the ones I might do this time, but we're just a landlord. So again, I would just be buying the dirt underneath the Chick-Fil-A or something like that. The another investment that you likely hadn't heard of. Lastly, another thing, something super random which relates call to the punter made a fishing trip and so went down there and I've been going to this place impugned a meter I'm the self elected mayor call and when you're self elected you really can't be removed. Think of the benefits. And I go there all the time and I've just fell in love with this fishing company, specifically the owner and his staff. He's now got one of the biggest fishing companies in in Mexico. If you ever go there, it's super max, greatest dude ever. And so I love going with him. I love the way he treats my family. I mean, I'm a semi-pro spear Fisher Cole I don't know if you know that. And semi-pro just means aspiring to be pro. Probably not going to be pro. I'm also semi-pro pickleball, a handful of things go on. We know that semi-pro is just a fancy way of saying I'm passionate and not great. Golf passionate. That's not not super. That's super fantastic. And so we go down the river and I've just built this incredible relationship with this gentleman. And I was asked him like, Dude, how do I get in the boating business and what are the ideas? I always think about how do I take some of the expenses I have? Usually it's done in business. I try to take our biggest expenses and how do I turn around and turn those into profits, right?

39:53So if I'm paying for something as and making a business out of it and I actually make money, I don't have the expense. Well, a little different here. I've got an expense that's called fishing and spearfishing. And as a guy who spends probably 20 or 30 days a year in a boat in the water, it's a significant expense. And so I'm like, how do I get in the boating business? I could maybe have a better boat, make it more cool, live a more epic experience with my kids and family. And then how do we not pay for that, right? Like, how can actually make money? And so he's like, Dude, if you bought this kind of boat, we have a need. And you could it could do some of the fishing tournaments. There's these huge fishing tournaments out there, which I don't know if that's my thing, but I don't know, maybe it is my thing. I don't know. What I want to do is go out and I want to fish all day. I'd like a little cabin inside and get some, have some food. I can chill out, go in the AC for a minute, then I want to go back and play fish all day. And he's like, You can make this the best. You could buy this boat. I'll charter it out for you and I'll manage it all. When you come, you just use it. You pay your actual costs and you can get your money back in probably 3 to 5 years. If we do this right now, it's not the this is not the wildest returns. Call where you're like, this is how you should bet your retirement. However, I think if you say what's what investment out there can I use create incredible happiness in my life and then get my money back and not have a lot of financial risk.

41:11I think if that's the case, I think most of us would say yes to that. If we're in a financial position to do so. I don't think you should start investing in yachts. That's what we're saying here on the Be Wealthy podcast. What we're saying is there's really cool things you could do that enhance your life, that involve thinking about different, about happiness. And so I want to get into a story about my father in law. So I had this cabin in the mountains about 3 hours from from Arizona in Pinetop. And in the summer for a couple of months, when it gets the can get a little hot. And I have a problem. If the room's hot, I cannot sleep in. So our cabin will get up to, like 80 degrees during the day. And then it would take to like 1030 11 at night to get down to where it's like the 72 and I could actually fall asleep. And am I going to go midnight tonight in an upstairs where the kids are? Is we just like it out of it? So I'm just not sleeping. And I this is 2020 and I'm like, I wonder what it cost to put an AC unit in here. Now, not at that point in time that a lot of cabins, the newer built ones, had AC but the like long standing thing built prior to 2000. No one has an AC unit, so I put it in a cot. At that point in time, it costs 20 $500. And my father in law came over. Except my cabin wasn't huge and it was before. The prices have blown up on everything. But so my my vala comes over, he walks in the house and I've got this thing in the middle of the day down to like 70 degrees and it's almost cold inside. It felt in the cabin and he's like, What's going on? You'll see. I said, Yeah, I mean, I couldn't sleep. It's annoying. It's 20 $500. And I just it's, it's going to make me happy. And I think someone's going to be 20 $500 when I sell it. And he'd owned a cabin there for 30 years. And the next week I see the same AC guy installing an AC unit at his cabin.

42:43And I said, I can't believe that you've even had a camera 30 years and you just got. He goes, Brett, I thought about what you said, You can't amortize your happiness and what he meant was you can't think about how many days you're happy with something and try to count up all the pennies. Sometimes some things you're just going to make an investment. If it makes you happy. The happiness is the investment. So I think about that a lot. I've learned a lot from my father level, a tremendous amount from him. And it's just you can't you can't amortize your happiness. And so I'll keep you updated on what was with the boat. And I'm most excited about being in business with the owner of this company. He is the person I simply want to be. I think he's my spirit animal, one of the coolest humans I've ever got to meet is an amazing dude, and so I'm excited to announce today I become that guy's business partner when with my new fishing yacht called, they were dropping out there. So those were the five investments we talked a lot today, but I want to back up. We talked about hard money. Why? I think it's something you should look at. And people are there's never going to be a shortage of people that want to borrow money. Right. When you're lending money to others, there's never going to be a shortage. And you should look at notes. It's a marketplace out there. People are creating them. People need to sell them. It's a space you could play. And we talked about natural gas royalties and now it might be the most passive thing you can imagine. We talk about land leases is just an investment you had never heard of just where you're owning land, the land underneath some of the best real estate out there. Look, there are some weird about how could you take a life experience, life experiences and take your course, eliminate them get your money back and allow you to have a better experience at less money.

44:14And so all you think about is investments. If you're going to go into any of those, go find out. Go find the top expert, go find the best books in the space. Go read and get educated before you do absolutely anything. Education is the answer. I did want to go to our Facebook groups. If you got questions and you love watching the podcast, you'll want us to answer something. Please, please, please. Post is in there. We will answer them. We've got a handful today. And so the first question comes from Robert. He asks, Do you have thoughts on a Sep IRA? I am a real estate agent. First thing I would tell you, if you're a real estate agent or any business professional that had a former career, if you had a former career and you've got an old retirement account, I would find out. Are you able to self-directed that retirement account? We'll drop a link to the company we use. It does all the self directing for the Be Wealthy podcast. I love them. They do such a great job for our client. Just tell them we sent you and they will take amazing care of you, but they're going to help you take your old for one K that's in some likely mutual fund or thing or whatever, and their base is going to help you get it into where you have checkbook control and you get to decide where your money goes. Because the thing that I believe that's so important is that you're the one guiding it. So, Robert, you're a real estate agent. Why not take your old retirement account, put it in your control, and then invested in the real estate in the thing that you know better than anyone else? Second thing I would think about doing is I would set up, try to figure out how you get a Roth account that's also self-directed so they could help you set this up.

45:38You've got your traditional account and it may make sense for you to convert some of your traditional IRA to Roth dollars. Now you're going to pay tax when you do that, but all the money you make in that Roth account, you will never pay tax. You need to do a little math and assume and guess like how long do you have before retirement, What rates of return do you get? And then you could you could analyze, hey, here's going to be a tax in a traditional versus if I did in a Roth, should I pay tax today or should I pay tax later? If you've got a longer horizon, it will make a tremendous amount of sense for you to look at paying the tax now so you don't paying it later. In a lot of cases, it the longer your horizon, the better. But it will save you millions and millions of dollars will drop a link in the show notes to get connected to those guys if you want. But I'm a huge fan of you investing your dollars and taking control of it. A question to the best ways to find building or multifamily. The best way to create funds, pooling resources to build multifamily, and the best way is to hold it if it's purchased by pulling clients funds, and that's by Shonda. So a lot going on there. Number one, if you're going to go create a fund or take people's dollars more like a handful of people's dollars and put them into a fund, you need to make sure you're following all the fund rules. I see many people that are taking a bunch of dollars and throwing it into kind of an entity or not, and there's a lot of ways to get into the SCC and get into trouble. So we're not going to cover that here. But if you're going to set up a fund, there's a way to do it. Those documents are expensive.

47:02It is a process. But I'm going to I'm going to answer your question and let's pretend there were three people and I want to buy apartment for $300,000 and we each put $100,000 into an LLC with an operating agreement. That would be a way to do that. It needs to specify whose capital it is. You need to have an attorney that's vetting it for you to make sure it's legit and then you need experience, right? I would if you have. Do you have lots of experience finding and building multifamily or is this your first venture there? I'm always very skeptical of anyone who takes someone outside funds into an investment strategy that they haven't yet done lots and lots of times I think there's tremendous risk there. And I think actually the fundraising business is fraught with people that actually don't have money in the deal and are taking crazy amounts of risk. And so I'm always the fan of why are you taking control of your money and you putting it in there. So, Seana, I might actually solve your thing a different way. How could you go earn the that you're currently raising? How can you raise your income so that you actually don't have to raise outside funds? I have done nearly all of this outside the first couple of years where I just I had an investor fall in my lap, but it was only a couple of years. I wired that back. I was in all of this by raising my income and just in taking those funds and investing it. So I put the pressure on driving my income to solve the capital raise problem. And then I was able to invest and I didn't have to pull it and dilute my returns. And that's the way I did it.

48:21You go slower, but I think in the end you get there faster because you're able to make your own decisions and you don't have to rely on others or go slower with a group decision. Third question from Anthony on buying my first roll the next 30 days. I'm currently negotiating. Should we cost right away or would you wait the way I would do it? One of the reasons I would wait right now and it won't really matter there, but there's a bill in the House that likely will go through that will move bonus depreciation back to 100%. That's super nerdy. Cool. What does all that mean? When you do a course segue, it's going to get you more tax dollars back likely next year than it did this year. Does it matter when you file the return? It matters when the tax law passes and they're talking about making it retroactive so it actually would apply to 2023. But every year, I basically before I file my tax return, I get the costs done. You can do that any time you want that day. That matters for a rental property is the day you placed it into service. So if you bought it and signed a lease, say in 2024. Any time the cost is going to apply to that year, if you want it to are when you file that costs the report, we'll drop a link in there for you to get the costs report. We've got a company that does it. I have not seen anybody does it for less than they do and they do all of ours. And we actually just keep a know a list of these. And at the end of the year, we give them all of them, we get all the costs and then we file those with our tax returns. So as we're wrapping up here today, we talked about a lot. We talk about the investments. I did about five investments I think you had heard of.

49:44There are lots and lots more. But I want to give an example. There's a whole world out there that you might not have heard about in investing that might be really cool and might be the thing that could unlock exactly what you want. Your investment in matches up with who you are as an investor, and that's going to be based on a couple of things, right? Who you are as an investor, how active do you want to be? How passive do you want be? What about from a risk standpoint? Everybody wants the crazy return, but do you want risk that's so high that you could lose 40% of your capital? Or do you want a little less risk right Where you would, you know, you got a safe return, but you know, your money is relatively protected. What about noise? Right. I think we're all at different journeys. And how much noise are going to take for me? I'm in a place with all this beautiful white hair. That noise matters to me. So investment, if you can make a crazy return if it came and it was safe, but it came with a tremendous amount of noise, that's not for me, right? I do not want a lot of noise. I'm looking to simplify it. I just I'm in a different place. So you got to know those things about your investment and think about these investments I gave you ones that I think hit all the criteria for from for the novice or for the super sophisticated and just give you a different things to think about. So get started. A pick one of the assets that I talked about above and go grab two books and the top podcast on the space, go research it and go listen to it and really dig in and see if this matches up to what you would want as an investment. Does it make sense for you? And then if you do all of the research and you're very comfortable and you underwrote and looked at hundreds of deals, when you're ready, make a decision and go forward If it's right for you, Hey, if you made it this far, you must like what you're hearing.

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53:46I don't love it. And I get a lot of flack from the financial planner world because I think buying a stock portfolio and just buying the average ETF, I don't think that's what most people want and that's what you want to do. Do it in your own self-directed retirement account. Take your money out of there. Self-Directed. What does that mean when you self-directed act, you have checkbook control of your retirement account. If you want to put it back in the same thing you were doing, you'll save all the fees that you were paying before. But better yet, why don't you go invest it or? You have your own advantage. Think if you were to invest it in the assets that I covered today on our podcast of five Invest we never heard of, but you were taking your retirement, getting those types of returns in something that you understood and you have an unfair advantage. I can't say enough amazing things about today's sponsor, which is Horizon Trust if you go to MaxOutRetirement.com, they will take care of you. They'll knock 20% off your first year fees if you go there. They're the best at what they do. They're were all my friends and family go check out horizon trust go to MaxOutRetirement.com they can help you get control retirement funds self-directed so you go out and you can be wealthy and then just say now get back to the shop now let's get back to the show.