Categories: Podcast

215 – How to Invest in 4500 Multifamily Units with Lane Kawaoka

Synopsis

From working as an industrial engineer to owning 4200 rental properties, Lane Kawaoka has truly made the jump on his way to building his passive income. Today, he tells us about his own real estate journey that led him to where he is now, enjoying his life in Hawaii.

Key points

Leaving A Linear Path To Do Real Estate Investing

Lane grew up taking the linear path: getting an engineering degree and working to save money to buy his own house. He eventually did save up enough money to buy his own house but was never home to live in it.

So Lane decided to rent it out for $2,200 and it started his foray into real estate.

By 2015, he had accumulated 11 properties bringing in $3,000 in passive income. But with an eviction every year and a catastrophe happening every quarter, the income wasn’t enough.

The Shift To Multifamily Syndication

Ultimately, Lane decided to get into apartment syndication since it offered the ability to diversify, invest in different areas, and even have some tax benefits.

He targets stabilized assets that are 90% occupied and are 100 units and up but below 350 units. He avoids the 20-60 unit properties as he’ll be fighting against mom-and-pop investors.

Also, with 100 units and up, he can get his own handyman to drive around to do maintenance.

The Benefits of Multifamily Syndication

With multifamily syndication, Lane is able to reach his goal of 14-15% internal rate of return growth. Also, as he is better suited to being a passive investor, he works instead as the asset manager auditing the financials and doing business development.

Deals can’t be found off-market as it typically goes through a broker who will prioritize someone with a history of closing large deals. As most properties are typically $50 under market with rent, he is still able to make improvements and raise the rent by $100-$150.

Lane works with a couple of syndication groups, but the bottom line is he’s in it for the long-term, equity growth gained after holding on to the property for 5 years.

The Impact of COVID-19

According to Lane, the pandemic didn’t have much of an impact on them. They still collect 97% of the rent. Rental collection only dipped to the mid-90% around April-May. In the Class C buildings, it went down as low as 80%.

How To Get Into Syndication

For Lane, it was important figuring out who actually works to get the deal, so it’s key to choose people with similar styles and who you can work well with.

He started from ground zero and had to trust the people he met through conferences. But he advises against going to wholesalers or flipper arenas as most investors there don’t have any money.

Lane even paid $25,000 to join different masterminds, where he got to interact with people with successful businesses. He prefers partners who have at least $1M net worth or more.

His advice for those starting in syndication is to at least filter things. The more you say no, the better things get. It’s a big mistake to just float along and keep passing out cards without taking the time to identify the people you should go deeper with.

What’s Next

Lane just plans to keep picking up deals that cash flow. He believes he’s got to be in the game as the more money he has in deals, the more he can grow his net worth.

COVID-19 actually vindicated the idea of getting into secondary and tertiary markets, not for appreciation and cash flow. He’s looking at investing in red states and emerging markets.

He believes in investing for the long-term. And with syndication, he is able to improve the community for the greater good. So he will continue to look for deals, make interior improvements, increase the rent a bit, flush out some tenants, and wait until the profit and loss statements stabilize in 5 years before selling.

Simple Passive Cashflow Podcast

Lane started his podcast, Simple Passive Cashflow, in 2016 while he was investing in single-family homes and turnkeys. Lately, he now focuses on talking about syndication investing, infinite banking, and taxes.

He gives a lot of tips to help people keep more money at the end of the day so that they can put it into more deals. And if there’s an overflow, they can place it in infinite banking.

Last Tips

If you’re an accredited investor with a net worth of at least half a million dollars, then consider getting into multifamily syndication. For those just starting out, it’s better to do single-family homes, out-of-state.