Transcription
Now, Brian Miller, up here on stage, do a good, short presentation. He's going to do a great job.
From 2009 to 2012, real estate was being sold for a fraction of our investment costs in Phoenix. Um, so he ended up acquiring and invested in real estate, uh, the Phoenix area heavily. His wife has invested over 35 syndicated investments to date and now enjoys cash flow from 27,422 units, including storage, homes, funds, flex, industrial, multi-family apartments, so diversification portfolio. He also invested in Nvidia at $1 a share, so have grown with that. And so, but I saw when he's on stage, our last summit, I invested my team. I said, "Oh, Brian is like we have within our next workshop, investor access." So that's why he's here today. They kill dry stock. So, congrat, something that's kind of fun. So, a million dollars per year of recurring passive cash flow for the rest of your life. How cool is that?
Yeah, exactly. So, buckle up, 'cause the next 15 minutes, I'm going to walk you through some ideas on how to gain that and then how to play defense to keep that. So, if you want to make a million dollars a year in passive cash flow, how much capital do you need? So, survey says, who's got an idea how much capital do you need? Take a guess.
A lot more.
A lot more.
Come on.
A million bucks.
10 million.
10 million.
12 million.
Okay. So, it really comes down to one thing, and that's depends on your annual rate of return, right? Okay. So, if you can make 5% returns, you need 20 million bucks. Okay. If you can make 25% returns, which I already said is very difficult, you only need 4 million, right? But if you want to figure out, so there's those two levers, right? You either need to make more passive, um, more annual recurring, uh, return, or you need a bigger pile of capital, right? So, if you want to figure out where you are, figure out what your average return is. If you're super conservative and you think you can make 5%, that's all you want to make because you don't want to lose it. We'll do the math and you'll figure out you need 20 million bucks. But if you can earn it 12%, then you do the math and there you have your goal. So, what's it going to take for you to get into the top 1% of earners? Not just during your working lifetime, but for the rest of your life, right?
So, I'm going to share with you five strategies that work for me. First concept is focus on ownership. So, that's ownership of a business, right? Ownership of stocks, ownership of real estate, ownership of intellectual property. I use all four. Would recommend that you do as well. Focus on leveraging compounding, right? So, we need to leverage our time, leverage our outsourcing, or by outsourcing, and then leverage capital, borrow money from banks. Some people think about real estate, you're usually have 20% in the, in the game. The bank has the other 80, but you have to use the leverage to get that quicker. And then focus on tax consequences. We've had a couple great keynotes from Kip and Kevin. I tell you, I can't stress this enough. That's your biggest expense and it will kill you, or if you learn how to play that game well, it'll accelerate your growth tremendously. And then focus on the long term. I bought my first individual stock, my first Wendo house 21 years ago. So, it didn't happen overnight. And then focus on concentration before diversification. A lot of people want to get and try to do 20 different things. And unfortunately, it's really difficult to do 20 things at the same time. Do the what. So, focus on one and then do the first. The first 10 years of my business, I focused on my music business, made a profit, and I took that capital and then for the next four years, when I found real estate on sale in Phoenix, I only bought single-family rentals, right? And you, I'll talk you through how I did that through different times.
So, what is the secret to success? So, I would advocate is two things. One is learning who to listen to, and then learning who not to listen to.
Right? History is full of a lot of really smart people, right, who got it wrong. So, a noble economist said, [clears throat] "Hey, the internet's impact will be no greater than that of the fax machine." [laughter] Steve Balmer said, "Hey, there's no chance the iPhone needs a significant market share." And the New York Times said, "The idea that Amazon could be the Walmart of the web is silly." So, Steve Balmer is a billionaire, right? We should listen to him, right? Christian talks about this all the time. Focus on the billionaires. So, what was wrong with his advice? Well, Microsoft had a competing phone, right? So, Steve had a conflict of interest, and that's a big thing is learning who has a conflict of interest because they're not telling you where. They have some other motivation. So, part of this is learning who to listen to, and it's part of cutting through the noise.
So, I want to advocate there's a, and this is coming from a few different individuals. Okay. So, first, we have the fool. He's confident but clueless. [laughter] Right? Then we have the parrot. He only repeats what he hears, but he repeats it like he's the expert. Right? Then we have the skeptic. Nothing is ever going to work. Then we have the hype man. You can't lose in this deal. Then you have the self-proclaimed guru who says his crystal ball is 12 for 12. And then you have the sage who's freely sharing wisdom. And we had a couple of those guys in this room today. Okay? So, make sure you're listening to the sage.
So, there's a ton of advice out there, a ton of opinions. Some's right, some's wrong, and some's conflicted. Okay? So, beware of the 300 lb guy who's selling you his proven weight loss and fitness. Okay?
And beware of the broke advisor, right, whose only source of income is the fees that he's making off of you. That's done. He hasn't done it, right? I'll tell you an interesting story. So, um, I met a lawyer, right? He had been married six times, right? He was giving me marriage advice at the hacker said, "I'm married 29 years, right?" So, the thing is, I have to admit, he had a lot of experience. [laughter] But here's the deal. You have to look at the track record, right? Not just the experience.
So, someone was all in on Bitcoin in 2014, right? Most of us weren't paying attention at all. And why were we not paying attention, right? We weren't paying attention because we were influenced by either the fool, the parrot, or the skeptic who said it would never work. So, I purchased a book called "The Millionaire Real Estate Investor" by Gary Keller. That book cost me $13. Okay, that book contained advice from numerous multi-millionaires who had succeeded in real estate. I made millions of dollars following the advice in that $13 book. Okay. It also expanded my mind to the concept that someone could make a million dollars a year. When I first read that, that concept, it blew my mind because I didn't even think that it's possible. That was about 20 years ago. I bought Nvidia stock because of a, of a monthly full webinar, right? A $200, excuse me, a $200 membership in exchange for what's now 5,112% returns as of this morning. So, and I didn't sell along the way because of advice I got from another guy who I said, "This thing's gone up a lot. Should I sell?" He said, "I think it's got room to move. Hold on." So, again, it's not always up to you to make the right calls. Learn to find trusted people, right? People that have more experience than you, and then ask that advice, and make sure you're asking from the sage.
So, I've paid $60 a month over the last couple years to a stock recommendation service, and I made a thousandfold return every month on that $60 bucks, right? And if somebody was there 18 hours a day analyzing what was good, what was bad, what was the PE ratio, what was the price you're paying for that stock. I didn't do that. I paid $60 bucks in exchange for that information, right? And I didn't have to do all that time, right? So, I've also had the opposite. I had a financial advisor who met with my wife and I, and he tried to steer my wife that we were going to lose all our money in real estate, right? He wanted us to invest all his money with him, right? I ignored that advice and I made millions of dollars. Okay? I also knew a client at Pitts that stuck with him for the next 10 years, and over the next 10 years, that guy barely broke even, but the advisor made a lot of money in fees. So, when the advisor is making more and more in fees than you might as a client, something is wrong. I was at a medical doctor with eight years of higher education, and he said he parried this advice like, and it was that no one should own individual stocks, and he was like, "It's too risky. It's too risky." Like, just like a parrot, right? Like, why did he say that? Does he know? And he owned individual stock? He's like, "We heard this advice, and he's repeating this advice, right?" There's also investors who think that the stock market is rigged because they bully all the time, right? And then there's investors who have reached 70% annual return year after year for the last 20 years. So, the question I ask you is, who are you listening to?
I'm over here. I like it. I like it.
Listen to people who have actually done it. Okay? Not the guy paring the wisdom that they heard from some self-proclaimed guru. Right? So, Wall Street claimed that Bitcoin was a scam, and now they sell billions of dollars of ETFs, right, with Bitcoin. So, cutting through the noise means a couple things. One is determining what is that person's motivation. What is their experience and track record? Do they have any conflicts of interest? And how much have they actually invested? And of course, what's in it for them? So, become a reader, a learner, a student. Seek advice from someone succeeding who doesn't directly benefit from your decision. And then look for the trend at the beginning of the trend, not at the height of the trend. Right? That's why when your barber and your Uber driver starts giving you tips, tips about when to buy gold or Bitcoin or, right, you know you're near the height of the trend.
So, Ray Dalio has this holy grail of investing, right? And it's, there's a slide of it, but you'll have to mention it for now. But basically, the gist of that is he recommends you hold 15 to 20 different assets. And in order to reduce your risk, basically, the more investments you have, and the less correlated each of those assets you have, it lowers your chance of losing money every year. So, if you own multifamily, self-storage, and office, are you, are you correlating? Yes, you're part of me. So, one of those assets goes down, one of them might, the other assets will go down. You want to own assets that don't basically move in tandem together.
So, I've chosen eight different pillars, um, to invest in. And so, these pillars were started with self, excuse me, single-family rentals. That's because they were on sale, right? Then I also have a multifamily portfolio, syndicated commercial real estate, which is mobile home, self-storage, retail, shopping malls, right? And public equity, which are stocks. And I've moved my allocations for a while. I was very tech-heavy, and then moved into AI, now moving into rare earth, right? Following the trend, where is the ball moving, right? Where's the new money to go into? And then selling options for income, that's another great one, and fixed income. This is your safe bucket, right? You want to have a pillar of your safe bucket. Then private equity. Why did I do private equity? I found a great sponsor who offered GP stakes, right? And those GP stakes allow me to own, basically, [clears throat] I'm a business partner of Bonore and Dio, and these super sophisticated, super wealthy guys who are very, very smart, right? I didn't take all the investments in their fund, but I get a share of that management fee every month, okay? And you can do that. [laughter] too. And then there's a speculative bucket. And speculative bucket is where you grow your capital, right? That's a good if you want to multiply that and then generate cash flow. But if you're getting 9% returns in the speculative bucket, something's wrong. You got to have the ability to win big if you're going to take AMP. So, we make sure. So, then timing matters. So, I would encourage you to deploy new capital where you find the biggest opportunity. And some people want to diversify and just spread a little bit everywhere. But I, I suggest that you should deploy where you find the biggest opportunities. So, diversification sounds really good, right? But if you're buying gold or you're going to S&P at all-time high, how is that going to work? How did that work out for the multifamily operators who are out betting each other in '21 and '22? Didn't work out so good, right? What if instead you allocate new capital to where you see the biggest opportunity? Over time, you'll end up with a diversified portfolio, but you place your holders where they have the highest chance of outperforming.
So, here's sort of how I did this. So, in '96 to '99, I was in tech and in, um, internet stocks. I was buying at 18 to 22 PE, which is fairly high, but that went up to about 80 to 100 PE at the peak. And, and fortunately, that's fun manager was able to get out before too much damage was done. In 2009 or 2012, single-family houses in communities, I bought for 25 cents on the dollar, right? Out of the MLS, which means anybody in the world could have bought those houses, but everyone was scared. 2013 to 2016, mostly mobile home and self-storage, and that's 'cause I could buy nine caps, right? And then 2015 to 2022, moved into multifamily roundup. Then in the public markets, I went from tech stocks to SAS stocks. SAS stocks had reoccurring revenue every month, right? The market didn't know how to evaluate. And then kind of on and on. So, there's been chances to make life-changing returns in Walmart, Microsoft, Apple stock, right? Those were all things. Real estate after the crash in 2008 offered, blockchain generated returns. Bitcoin 2012 to 2019 offered. Okay. But as our good friend Meta World Peace would say, that in order to win the game, you got to get good at offense, but you got to also get good at defense. So, it's important to, as we talked before, protect returns from taxation. I can't stress this enough. It's going to be your single biggest expense. So, don't leave it a chance. Hire consultants. Hire people smarter than you that you can trust. Right? You want to make sure they're in the, the sage category and not in the hustler category, right? And then the answer is the time. I'm going to keep moving. Derek's. But I got a question for you. So, if you put $50,000 into an investment and the operator just screws it up and it goes to zero, how much did you lose?
50,000.
50,000.
Zero plus the future.
Plus the future.
So, not only did you lose the $50,000, you lost the ability to grow and compound that $50,000. Has anybody lost money in an investment before? Okay, I'm going to make you feel a lot worse right now about that. Okay, so, oh, I think I skipped a couple sections, but oops, baby. Here we go. Oh, that was just my Warren Buffett side there. This is why he's saying never lose money. Don't forget about moving one because you're, you're going to see why in a second. Okay, so the $15,000 goes to zero. What happens in 10 years? That 12% at $50 would have been worth $155. In 20 years, it would have been $482. And in 30 years, it would have been nearly $1.5 million. So, starting to make you feel bad about that. That's why it's so important not to lose capital in this game. Okay. It's very expensive. Well, you can't have risk management if you don't identify a few risks. [laughter]
So, partners can really only control who they trust. Right? So, here's a few, just a quick checklist. Determine trustworthiness. Look for long track rates. Do lifeless nexus background checks. Any lawyer can do that for you. Research individuals, not companies. Why have this unscrupulous, people rack a company? They start a new company, and you get back this company looks clean. They have, they have a good business, better business bureau, um, you know, rating, right? But as that same stone egg is running the company, right? You need to figure that out. Research past investors and their past employees. So, avoid any red flags. Make sure they have skin in the game, that they have something to lose. Make sure they have deep pockets, or they're coming to you for your deep pockets. And make sure that they profit after performance, not before. Don't allocate because surprises and things do happen.
So, here's a few quick rules for you. So, don't follow the herd. You got to do your own due diligence. [clears throat] If you can't explain the investment to Grandma, well, don't invest. And if you're not 100% comfortable with the sponsor, don't invest. And if it's not a hell yeah, then everybody, it's a no.
Hell no. Let's take it from Sam Jackson. So, $1 million a year is not magic. It's not.
Yeah.
It's who you mute, and it's identifying opportunities. It's timing. It's defense. And it started with one wrinkle. If you implement these ideas, you'll get there faster. I've done it, and I believe you can do it.