Transcription
An 8-figure real estate portfolio. And here's why.
All right, the old raging debate: Bitcoin versus real estate. And, uh, it's completely wrong. It's the wrong question to ask. It's why 99% of people get it wrong, but not you. We're going to fix that for you right now.
Okay. So, there's sort of a few different ways to look at this. Now, I ran a poll on Twitter. Not a poll, but I just asked the question, "What do you think about Bitcoin versus real estate and the debate? What is misunderstood?" I said, "I'm going to make a YouTube video. I want to break this down." And I asked people to, um, you know, give me what their number one point that you think is crucial from either a Bitcoin perspective or a real estate perspective. And I grabbed all of these comments. I think we had, uh, I don't know, over a hundred comments. I threw it all into Chat GBT and we kind of summarized it and I kind of broke it down into three different types of people here.
Okay. Number one, we sort of have like the hardcore Bitcoiner. The hardcore Bitcoiner basically says that it all has to do with easy financing and leverage. Every Bitcoin versus real estate debate obviously acts as if they're purchased in the same way with cash. That's, that's actually pretty insightful because they're not purchased the same way. That's interesting. We're going to break that down. I saw here it's simple: You can't live in your Bitcoin. That's the Bitcoiner perspective. That's the most common response I get, with the second being that with Bitcoin, there is no yield. So, real estate has cash flow. Bitcoin has no yield. Both of which you already know, so I'm sure you'll be offering solutions. Cheers. Of course, we're going to break that down. Don't worry.
Uh, we have another response here. This one was a little bit longer. I'm not going to read the whole thing to you. But it says, uh, he's basically talking about what should I do? I'm thinking about refining my real estate. Maybe I could buy more Bitcoin. Maybe what I should do is I should sell calls or puts on the Bitcoin ETFs. Then I could be a happy medium. And so, he's overwhelming himself. It's analysis paralysis. So, we sort of have the Bitcoin approach. We have the people that don't understand there's leverage being played, and then we have people who just get so caught up in, uh, analysis paralysis. So, let's end all of that for good. Let's break this down.
So, the first thing is like I said, asking which is better, Bitcoin or real estate is the wrong question to ask. And it's really false choices. Okay? If you're asking that question, you completely miss the point. What I say, spoiler alert, is what if buying both, I could end up with more of both? What if by buying both at the same time, I could end up with 10 times more Bitcoin? Okay, let's break that down.
So, the first thing, like I said, the camp number one is these Bitcoin maximalists. Um, real estate's dead. Bitcoin is the only asset you should be buying. Okay? Uh, real estate maximalists: You can't live in the Bitcoin. There's no cash flow. Okay? And then the camp three, the confused people in the middle. But what if there's a fourth group? All right.
So, real quickly, my story. A lot of you have heard it. In 2008, I had the wake-up call, right? Before 2008, I was 28 years old. I had built up two different businesses. I had two big, high-value exits. I basically put everything into real estate. So, sold my businesses. I thought I was set for life. I had a portfolio worth multi, multi, multi-millions. I was good. I thought I had it all figured out. But when 2008 came, I got wiped out. I found out that the market collapsed overnight and I went from feeling really rich because I had a lot of net worth on paper to feeling broke right away. I had millions of dollars in mortgages that I couldn't afford. And I was trapped and I had no way out because I sold my businesses.
All right. The lesson that changed everything for me, and I'm going to teach you right now, is that the crash taught me the most valuable lesson of my investing career: is to put all your eggs in one basket. If you want to put all your eggs in one basket, make sure that you have a way out. Make sure that's properly risk-mitigated. And I'm going to break that down for you. But let's go back to the lesson.
Okay, first of all, the wrong math. So, most people think, well, Bitcoin is certainly better than real estate because scenario one: If I put $100,000 into Bitcoin and it goes up by, let's say, 25% a year for the next 10 years, then, uh, I'm going to have about $930,000 of Bitcoin. But if I put the same $100,000 into real estate and real estate goes up by only, let's say, 5% a year, plus I reinvest some of the cash flow that comes in, I only have about 200 grand. So obviously the 900 grand is more than the 200 grand, right? How many people think that way? The problem is you're missing a lot of the benefits of real estate.
So, let's go to the next scenario, which is still not right, but some people think it's better to think of it like this. So, what if I didn't put $100,000 in real estate? Instead, I only put 20,000 down. Then on a $100,000 property. Now the property grows at again the same 5% over 10 years and the property is worth now $162,000, which means I had a profit of $62,000. However, oh, and I have $24,000 of cash flow coming in at, say, $200 a month. So I made $88,000 from that deal. Now, that's not on the $100,000 property. It's only on the 20,000 that I had put in, the 20% down. Now the ROI, the return on my investment of the 20,000 is 435%. Now we're getting a lot better. We're getting a little bit closer to Bitcoin.
Okay, but now what if we start combining these? Okay, so now we didn't pay cash for the real estate. We only put 20,000 down. The 80,000 that we didn't deploy, then we put that into Bitcoin. So now we put 80,000 into Bitcoin that's going to continue to grow at the 25% rate for the next 10 years that we're talking about. Now, it's been going up about 55% for the last five years. So let's just say over 10 years it goes down to about 25%. Now, the investment period, 10 years, the growth multiplier is 9.3 times and my final value of the Bitcoin is $745,000. That is a Bitcoin ROI of 831%. So the real estate went up 435%, but the Bitcoin went up 831%. Did better. But what happens if we combine them together? So now on the real estate, I got 87,000. On the Bitcoin, I got 745. A total of 832,000. Okay, we're getting better, but we're still not there.
Let me show you a much better way to think about this. And this is where most people completely miss it. There is a hidden multiplier. The hidden multiplier most people have no idea about, but I'm going to break it down for you right now.
Okay, without real estate, let's say I have an annual income of $500,000. Now, I don't know, you live in New York, you live in California, you live in Norway, you live in a high-tax area. Okay, with $500,000, this is back-of-the-napkin math. Let's say you have a 50% tax rate because you're at the top of the income bracket. Okay, so 50% goes to taxes. That means you're going to pay 250 grand, or your after-tax income is $250,000. I made 500 grand, half went to taxes. I have 250,000 left to buy Bitcoin with. So, I buy $250,000 of Bitcoin.
Now, another scenario with real estate. Let's say that I still make the $500,000. However, what I do now is I buy a $500,000 piece of property, which gives me about $450,000 of write-off back. Now I have about a 10% effective tax rate, which means I'm only paying taxes of $50,000, or that means that I have an after-tax income of about $450,000.
Now, how do we do that? Well, real estate has a lot of advantages that most people don't understand. Like number one, obviously the leverage. I can control a $500,000 asset for 10% down, 20% down, something like that. Number two, someone else can pay off the property for me and I can still get cash flow. Number three, because I can get long-term debt, inflation destroys that debt for me. But more importantly, we're talking about here, number four, is tax depreciation. Now, thanks to Trump's new beautiful big bill, he's reinstating what's called bonus depreciation. So, I can do a cost segregation on the piece of real estate, and I can bring all the depreciation forward in year one, and I can write that off against my income. Now, even if you're earned income, like a W2, for example, there's exclusions for STRs and things like that. We can figure that out.
Now, this is only writing off the cost of the building, not the land. So, of course, you'd want to buy it in an area like San Antonio, Texas, or like, uh, you know, somewhere in the middle of America in Missouri where the value is in the building. But, let's say that we have something like this. So, now I have available for Bitcoin $450,000 instead of $25,000. So now, if I buy the real estate first, I have more after-tax income. I have 80% more money available for Bitcoin before cash flow. So, it's not about which one is better. It's how do I get one to get me more of the other? And in this case, we got 80% more Bitcoin.
But it doesn't stop there. Okay, now on top of it, I've, I've got more money, I've got more Bitcoin, and I have the piece of real estate. So now let's think about this. Okay, 25% annual Bitcoin growth projected out right here. I have the tax savings advantage, so I get an extra $200 grand into Bitcoin that's growing at 25%. In 10 years, that becomes $1.9 million. Then on top of it, I have monthly cash flow coming in from the piece of property that someone's paying off for me. So let's say that's $500 a month for 120 months. That's another $150,000 that I can dollar-cost average into Bitcoin over the time. And so now I have total Bitcoin acceleration. I have the tax savings that I'm able to put into Bitcoin, plus I have the cash flow from the building I'm able to put into Bitcoin. And over a 10-year period, I could have over $2 million. That's how you 10x your Bitcoin by using it with real estate in the same strategy.
Okay, now this sounds really good, right? This is back-of-the-napkin math. This works, but of course, there's details. But the one thing I want to talk about right now is the dangers. Avoid the trap. I talked about my own trap in 2008. So, we want to watch out for a couple of things.
Okay, the first thing is going back and seeing what did I, what did I get wrong? What did I get wrong back in 2008? Well, the first thing is I went 100% real estate. I had no diversification. I sold my businesses and I was all in on real estate. Then I was overleveraged. I had used a lot of leverage and when the market dropped, I owed more than the properties were worth. On top of that, I had no cash flow. I was only relying on appreciation only. In California, the properties I owned, the values were so high, I couldn't rent them out to cover the payments. In hindsight, it seems pretty stupid. Um, and I had no exit plan. That's why when the market crashed, I went from being rich to being broke with millions of dollars in mortgage I couldn't afford.
All right, but today, here's what I do now. Instead, I have multiple assets, right? We're talking about two right here. So, now I have real estate and Bitcoin, and I have my businesses. I'm not selling my businesses like I did before. Then I use conservative leverage, whatever that is for you. Maybe it's 60% LTV, 70% LTV. I make cash flow a priority. So, any property that I'm going to buy, I'm going to make sure the rents can cover the mortgage plus some so I can have my dollar-cost average strategy. And then I have an extra strategy. I can always plan to delever because I have multiple assets because I bought the real estate and I bought the Bitcoin. So, even if the property values came down, even if the rents didn't cover for some reason, if a renter moved out or something like that, I have the Bitcoin. I can sell some of the Bitcoin. I could borrow against some of the Bitcoin to cover that asset while I need it.
All right. Now, whatever the conservative LTV is for you, think about that. But cash flow first is always going to be the big piece. The diversification is going to be big. Not like Ray Dalio talks about it, but I have Bitcoin. I have my real estate and I have my businesses.
Okay. Now, there's three phases for you to do the same thing. Here's what you're going to do. The first phase is you're going to build the foundation. This is going to take you the first couple of months, maybe for the first six months, you're going to work on this. Number one, you need to start building some cash flow. You should have some income because this works if you can write that off. Write the income off. So, you have some income coming in. Whatever you're planning to put it towards taxes, maybe you could start to sort of put that away in a savings account. Number two, identify how much you could potentially save. If I buy this property in Texas or this property in Kansas or Missouri, how much will it cost? If I cost it, how much can I write off? Now, you're starting to make a plan. Number three, I need to find the property market. Remember, again, you only write off the home. So, like a beachfront home in California, most of the land, uh, the value is in the land. That's not going to work well for you. So, I want to buy something where most of the value is in the property. So, in phase one, get the cash, identify my savings, and find the property markets.
Phase number two, implementation. This is month 6 to 18. Now I got to get the property. I got to acquire the piece of real estate. I need to deploy the savings. So, I'm buying the piece of property. The money that now I'm being able to write off on my taxes instead of sending to the government, I can deploy that into Bitcoin instead. Then on top of it, as that rental property is bringing cash flow in every month, that is now dollar-cost averaging into Bitcoin.
Phase three, this is the fun part. This is the scaling part. This probably happens in 18 months or two years down the road. What we do, we can refinance the property. We can pull some cash back out of the property. What do we do with that? Well, we can take that equity, which is debt. It's non-taxable, and we can buy more real estate. When I buy more real estate, I write off more of my earned income, which means I have even more money back that I didn't send to the government, and I can buy even more Bitcoin. And now I have two rental properties dollar-cost averaging into Bitcoin for me at the same time. And this becomes a flywheel. Each phase builds more momentum. Of course, you start with one property, you get it going, and then you roll to the next and the next and the next.
Okay. Now, here's some common objections. I can already hear them coming in. Go ahead and drop them in the comments down below. I'll read them. Try to reply to as many as I can. Objection number one, again, you can't live in Bitcoin. Of course not. But you can leverage Bitcoin to buy things that you want, like a place to live, right? Uh, objection number two, Bitcoin has no cash flow. True, but we can harvest cash flow through it by leveraging it with debt. I've talked about this extensively. I'll put a video, a link to a video down here. I call it "The Five-Year Retirement with Bitcoin." So, we can get cash flow from Bitcoin. But again, gold doesn't have, um, that either. That's why we use real estate and Bitcoin together. It's a great pairing. Of course, objection number three, it's too complicated. Uh, yeah, it's complicated if you try to do it all at once, which is why I've broken it down in three phases so you can sort of grow into it.
All right. Now, the master key here is combining both of these together. All right. What we're doing is not about either or. It's about using both together, getting $1 to do multiple jobs. So, we want to use real estate. It's the foundation and it's the cash flow. It gives us the leverage that we need through the loans. I gave you all those, uh, benefits, right? So, I get the leverage, I get the inflation destroyed debt, I get the cash flow from it, I get the tax efficiency. That's the big one. Then I put that money to get more Bitcoin because Bitcoin is going up so fast. It's appreciating way more than real estate is. I have exponential returns. I get massive liquidity from the Bitcoin. And then I can put that back into real estate to write off more income. I take the income that I keep from taxes and I buy more Bitcoin. And it becomes a big cycle.
Now, in this, the together, the sum is greater than the parts. Real estate on its own, Bitcoin on its own, well, Bitcoin on its own is great. Just do that. But if you combine them together, they become even more powerful. That's how I was able to 10x my Bitcoin by combining them.
All right. The challenge for you is to get this deployed. So, what are you going to do? Stop thinking like everybody else. Life is not linear. It's not black or white. It's not one or the other. It's both. It's not real estate or Bitcoin. It's how do I use them both together? Because remember, the wealthy don't work harder than you. They just use money differently. I like to say the reason why you have to work so hard is because your money doesn't. So, what you want is your money doing more than one job. It should be doing two jobs, three jobs, five jobs.
If you'd like, I have a wealth engine assessment. It can show you how many jobs your money is doing and how you can get it doing more than one job as quickly as possible. It's a free assessment. I'll link to it down below if you want to go through that, just so you can start to plan out what your next steps are if you want to get ahead. All right. And if you want to learn more about investing in layers and how this works, you should probably watch this video right here. And I hope to see you over there.