The 411 On Passive Investments With Hunter Thompson

CGT 3 | Passive Investment

While it’s not wrong to think about the world of investors as a community of people with a singular focus in the field of investments, it’s also a pretty limited view. The truth is, many investors are looking to passive investment to create more non-primary streams of income for themselves that aren’t particularly high maintenance, but this system comes with its own unique set of quirks and challenges. Brett Swarts speaks with the Managing Principal of Asym Capital, Hunter Thompson. Together, they go into the ups, downs, highs and lows of the world of passive investment. If you’re looking to put your money into a new stream of income that won’t take over your entire life as it is now, passive investment is a great place to start.

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The 411 On Passive Investments With Hunter Thompson

I’m excited about our guest. He has years and years of commercial real estate experience. In fact, he has a fund where he helps passive investors invest alongside of him. Over $90 million of acquisitions in multiple states and multiple product types, self-storage and multifamily. You can find him at ASYMCapital.com. If you want to hear even more about him, he has a podcast called Cash Flow Connections. He’s located in the Los Angeles area. Please welcome, Hunter Thompson.

Thanks for having me on.

Hunter, I’m glad to have you on and I’m looking forward to sharing your wisdom with the readers. Before we get started, can you give our readers a little bit about your story and your current focus?

2008 always plays a role for me. I was insulated from the trauma that was taking place in the marketplace because I was still in college. When I saw 2008 happened, I was not a victim. I saw, “This is going to be an incredible opportunity. I should dedicate a lot of resources also known as time to learning as much as I can about financial assets.” The driving factor here was investment blood in the streets. I can tell from having a general understanding of what was going on, this is going to be an incredible opportunity. I took a lot of time to learn and study people like Warren Buffett, Charlie Munger and I start investing in stocks.

I had some success as most people would starting in 2008. In 2010, something happened that people don’t talk a lot about but for me, it was this massive moment which is the European debt crisis. Basically, it’s very similar to the lack of liquidity that took place in 2008 in the United States. The Central Bank froze up, massive government intervention and bailouts. All of a sudden, everyone on CNBC was talking about the Greece Bond Yields. You watch every day to see if the Greece Bond Yields would go above 7% or below it. If it was above 7%, the S&P 500 is going to collapse. If it stayed below, you’re going to be fine. I was thinking, “What are we doing?” If I had a team full of people, we could never predict what was going to happen and also the Greece Bond Yields would play any role.

I started focusing my attention on trying to find other ways to invest that were noncorrelated that provided more significant cashflow and therefore more predictable. That’s what led me to real estate. It’s a favorable timing because of the market dynamics, but something that I don’t think gets talked about enough is the market acted as a filter. I’m aware of the fact that not only did I enter the sector, from a timing perspective at a favorable time, but when I started to learn from people, the people that I was learning from, they were the ones that were able to weather that storm. Especially in California, that was something that was hard to do. The rest is history. I started the company with my own personal investment portfolio and my family’s investment portfolio as well. It’s going from 5 to 10 investors now we have about 300 and acquired about $90 million in real estate over the last couple years.

When people were running the other way, you’re taking massive action to not only invest to get educated and to find out how the rich and the wealthy make this work and what are they doing? You were able to have the vision and the courage to make a shift in 2010 from the stock market to invest in real estate. I’ve got to applaud you, you could have done in a better time because, at that point in my journey, I’m at Marcus and Millichap sitting in the office and seeing all the blood in the street in Sacramento. It’s one of the hardest-hit cities in America and this is where people were buying foreclosed properties and discounted properties from sellers who had to sell because they couldn’t get the liquidity that the banks weren’t lending and people were hurting. To be able to take advantage of that and make wealth for you, your family and investors are amazing.

Before we dive in too much into the technical, I’m curious, who was Hunter before this success, the podcast, the big company and all the commercial real estate success? In other words, we’re all given certain gifts in life. Some might call it superhero powers. They were given these God-given gifts to do certain things in life. As a child, a lot of those can be seen in these gifts or developed by our parents, coaches, mentors and such. What were the gifts you were given? In particular, how do those gifts helped you help people?

I’ll be honest about that. One gift that I thought has been helpful but at that time was scary was that I didn’t make for a good employee. I felt that it didn’t work for me. That’s not necessarily a strength. It’s something that – was concerning. In school, for example, I did okay. I’m working in the quasi-corporate world. I didn’t excel and I was concerned. I was like, “This is a good template for the future of my life. I will be okay, but nothing spectacular is going to come of it.” The reality was, I had something else to offer and that my skills weren’t being used. Most importantly, things weren’t moving quickly enough.

I love being an entrepreneur because I have the ability to direct and change quickly in terms of where I want to allocate my time, which is my most important resource. To answer your question, in college, I didn’t want to get a summer job and there was an incredible opportunity back then. I was also favorably timed in this as well, which was the poker boom. I’m from Memphis, Tennessee and about three hours away, there was a poker player by the name of Chris Moneymaker, who invested or purchased into a tournament for about $17. He won that tournament, which got him into another tournament with 200 people as a $200 tournament. He won that tournament which got him into the main event, and he won the main event of poker and won a $1 million from the $17 entry.

This story was remarkable that it created what’s known as the Poker boom. If you look it up on Wikipedia, multibillion-dollar shuffle into the Poker business which made it lucrative if you dedicated the time and got a coach. This is when internet educational content was readily available behind a paywall. I dedicated the time to do that and it was a good way to make $5,000, $10,000, $15,000, $20,000 on a regular basis on a monthly basis as a college student and that’s what inspired me to come out to California. I have a background as a poker player. Interestingly, the United States government made it illegal to play online Poker. What happened was, right before that happened, I fell out of love with Poker, took my money out of the Poker world, the United States made it illegal. I felt that I’m not going to do that anymore but that’s when the real estate collapse happened and that’s how this all ties in together.

To start, you have to dedicate time and resources to learning about financial assets. Click To Tweet

I’m seeing a little bit of a theme and correct me if I’m wrong, but you shifted from stocks to real estate, but even before that, you shifted from Poker playing to being an entrepreneur or working through that. You were able to shift well, launch and be successful because it sounds you’ve been successful in each one of these. Seeing that timing, I want to try to connect these dots here. When Hunter was a kid, was he seeing patterns or things that people weren’t seeing and knowing when to take action, versus maybe the other siblings who weren’t doing that? Where’s this insight coming from, Hunter?

The thing about going left when everyone’s going right, that is something that came naturally to me. That can be a strength as an investor, but it’s not always something that wins. Sometimes there’s a reason that everyone is saying, “Don’t do this. Don’t go right.” For someone like myself, there’s plenty of examples when everyone said, “Don’t go left,” and I went right without looking right first and that results in something negative. Thankfully, I was able to overcome that by the time I entered into real estate sector.

Getting on this theme of going left, right or seeing the insights that people aren’t seeing, but taking the action to do it and it took a launch.

We take it for granted. It’s like when I grew up in the ‘80s. We didn’t have the internet until I was about a junior high school-ish but even then, it was starting out. Now it’s the same thing with educational content that’s podcasts or YouTube that can be readily consumed, which has changed in the educational world and access to information. I think about Khan Academy and how Bill Gates got behind Mr. Khan and basically say, “Go and educate the whole world. I’ll give you $100 million. Quit your day job and make YouTube videos to educate people in the most remote parts of the world so they can get an education.” Who knows that could be the next Albert Einstein, Bill Gates or Steve Jobs, who could change the world for the better through going all-in on education? I couldn’t agree with you more on that point.

There are a couple of stages of that and I’ll mention them quickly. I did a podcast on this going all-in on free educational content, there’s little risk. When you do that, I suggest identifying three people that you like and not focusing on anyone else besides those three people. Go all-in in their direction as fast as you can. If you can identify someone that has a paid product, I can tell you from personal experience, if people invest their hard-earned dollars in educational content, the result is usually ten times more, but you don’t need to do that first. Go all-in on the free stuff first, identify those thought leaders that you like, don’t be afraid to put your money where your mouth is, and that’s how you become an expert quickly.

I launched a whole new world for me in ClickFunnels with Russell Brunson and what he’s doing. My mind is exploding. They say when the student is ready, the teacher will appear and I’ve heard of Russell for a while now, but I’ve always pushed away. Finally I go, “I’m going all-in.” I’m drinking the Kool-Aid per se, but I’m loving it. It’s not only the tool, but it’s also the process of education and all of what he has to offer.

I’m in the middle of this 30-Day Challenge. To your point, there’s something about putting money behind your education. There’s something about free is good, but you don’t have any skin in the game. Until you burn the ships or even put some money up, you’re not necessarily all in. There’s no cost to you, so you’re maybe not going to absorb it in the same way. There’s some emotional thing that’s attached to that, which helps us to absorb more because there’s loss factor. You can speak to that and how that’s affected you as an entrepreneur and how you got past all that.

It is funny that you say that. I exactly relate to what you’re saying. For years, I saw Russell Brunson’s name and this is the thought that came across my head. I feel that this guy changes name so his name sounds like Richard Branson. That’s what I always thought. That’s as far as my studies went.

I launched a book. I finally googled, “What is this free plus shipping thing?” It led me to Russell Brunson and I’ve never gone spiraled into something so deeply. He created this massive infrastructure for you to be able to do that. So much so that I’m going to his conference in Nashville, which is something I never do. I’m super focused on productivity. I was still around in LA and I’m flying there because he got me in his funnel and he created this infrastructure where you can get at multiple levels. He has the free book, the $100 a month subscription and the conference that’s $1,000. What do I create with my business?

My book is free, $7.99 at RaisingCapitalForRealEstate.com you can get it. I have a mentorship program that’s $4,000. Our minimum investment amounts are $50,000 and I have a conference that’s about $1,000. When you’re in that, you have many options because maybe there’s someone that only wants to buy the $8 book. They’re going get a ton of value, but there’s still a potential for them to go all in, the way that it did it with Russell so they can be encouraged along the way.

I’m used to make a phone call, talk to somebody on the phone, figure out what’s valuable to them and try to solve that problem. That’s the typical commercial real estate way. It’s slowly moving into response emails or automated emails, blogs and video stuff. This idea of the value ladder, which totally makes sense because it gives people a chance to digest and get to know you. You put some skin in the game, so now they’re more likely to consume your next content. You’re not asking them for the million-dollar check here. You’re saying, “$10 to start.”

CGT 3 | Passive Investment

Passive Investment: Anytime you think there’s a potential for a lucrative outcome, go all-in on the action. You can be an expert in six months or less on anything with the availability of free content out there.

 

Eventually, if you add enough value and you’ve it nurtured and develop that relationship, they’re more likely to stay, which only makes sense for all of us. It’s brilliant what he’s doing. It’s a small world. I’m this close to going but I’ve got another ticket to go to a big event and I’m traveling so much. Otherwise, maybe I’ll see you there on the next one. Shifting more into tactical. We’ve talked a little bit about the entrepreneurial part. Talk about your company, ASYMCapital.com and how you help people create and preserve more wealth. It touches on tax deferral because a lot of readers here and they’re figuring out how someone like Hunter Thompson, who has all this experience, how is he deferring capital gains taxes when he’s in and out of real estate deals?

This is an important topic because of the way that we invest. To clarify, I specialize in passive investing. To give a quick summary, most real estate investors invest in a property, they buy a property, they may even have a property manager manage that asset, but it’s still them interfacing with the property manager. When we invest “passively,” we have an operating partner or a sponsor who oversees the entire investment process. Meaning, if something goes wrong at the property level, the property manager may call the sponsor to say, “We have a termite infestation,” or whatever but the sponsor would never call the passive investor and say, “What are we going to do? We’ve got to spray for bugs.”

All the passive investor does is put up their capital and they receive quarterly distributions and checks thereafter. I love this way of investing. If you’re interested in me talking more about this, you can google my name and passive investing. There are many discussions on this. Generally speaking, one of the challenges with this “syndicated passive investment world” is we pool many investors together. Let’s say 100 investors together to buy high quality commercial real estate products that we would not be able to invest in individually. When you pool a lot of investors together, one of the challenges with that is that it limits your ability to 1031 exchange. You did mention some of the tools that allow you to do that. To be honest with you, we haven’t done it yet and it’s becoming more and more in demand because of the fact that many people have much gains that they’ve acquired over the past years.

Let’s talk about it online because the readers are going to want it. This is going to be valuable for them. Honestly, total disclosure here, I messaged him to be on the show. We’ve never talked before this show. We had a five-minute warm-up before the show. Walk me through, Hunter, what are you facing and let’s see what tax charges might be able to gather to help you out?

What’s typical in the space is that you can pool investors together. In order to implement 1031, the big challenge is that all of the owners of the asset and the entity need to be on board for that 1031 to be implemented. I have invested in deals where we have done this as a passive investor but we have not created the entities that have accomplished that. There are some ways around that. One of which is prior to the sale, you could send out a letter saying, “Is everyone on board for this 1031? If not, let us know. We could get an appraisal for the property and potentially sell your shares in the entity to a new investor that wants to participate in this 1031.” Another option that I’m not as familiar with is the Delaware Trust, which I like to get your perspective on and how to use that for this particular strategy.

The Delaware Statutory Trust, that’s to be confused with the Deferred Sales Trust that we specialize in, is another form of a 1031 exchange. It’s a way to sell something and move it into like-kind investment real estate within the an equal or greater equal within 180 days and identified within 45 days so follow those rules. The big corporation that says they’ve already purchased the property, – it’s an investment grade. It’s Class-A and nice stuff. It doesn’t necessarily have to be but you’re buying your 1030 shares into that entity. That’s a challenge because what we found is the whole entity must move which is Hunter is touching on. He has to replace that person before they move because if the whole entity doesn’t move, it can be a taxable event and it doesn’t work. When you have 5, 10, 15, 20 or 100 investors on one deal, the likelihood of everyone agreeing and wanting to do that is low.

Therefore, most of the syndicates we work with before they found us, they don’t do a 1031 or a Delaware. They say, “Everyone pays their tax. Go their separate way.” “We’ve got another deal. Let’s do it.” What they’re missing out on is the 30% to 50% in capital gains tax and depreciation recapture which they paid. Let’s imagine it was a $400,000 initial investment and it’s turned into a $1 million over this 5 or 10-year period of time. That’s a $600,000 gain of which let’s say it’s in California, you’re looking at state, federal, Obamacare, as well as depreciation recapture. Let’s use a 40% number there. What’s 40% of $600,000? That is $240,000. If you don’t do a tax deferral strategy, you’re looking at paying a $240,000 capital gains tax depreciation recapture. The intent is to get a deferral, not to pay that and keep the money working for you, therefore, into the Deferred Sales Trust.

Imagine there were fifteen investors in your deal, Hunter. For example, you might say, “I need to try this out for myself before I recommend this to my investors. I’m not sure about it. Let’s put my $1 million into my own Deferred Sales Trust.” What’s unique about it is we’re not doing a 1031 exchange. We’re doing what’s called an installment sale. It’s based on IRC 453, which is not IRC 1031. We have different rules, meaning the whole entity doesn’t have to move. Hunter can put his single amount in here, whether it be carried interest or whatever ownership he had into this Deferred Sales Trust. At which point is the best part for me as a commercial real estate broker and owner, you can use those same funds to invest into your next deal immediately. All tax-deferred.

Imagine that all ten of us had this million-dollar situation with about $240,000 in liability. We could put individual Deferred Sales Trust for each of them. This person over here may only want to put $100,000 share to your next deal and use the other amount to live off of and pay cash tax on. These five people over here may want you to trust it all. They can pay the tax and these five do it. It’s not only flexible for the exit but also flexible for the reinvest, for the re-up.

We like to call it the Go Fund Yourself because you’re using your funds to invest in your next deal and we’ve saved that 30% to 40%. Add that up over the next 5 or 10 deals you do in the next 5 or 10 years and we’re saving an average of $240,000 per year. If we do that let’s say four times, we’ve added one more deal that you essentially return on your investment. There are multiple ways to look at this. Questions on that so far?

None. That’s great and I’ve heard of some of these strategies, but we haven’t implemented them. Let me ask you something and I don’t want to turn your interview around on you but I’m fascinated.

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This is good because the readers are going to want to know the same questions. This is the first time. Ask as if you normally would.

One of the things that are interesting about this is the legal component here, cumbersome in the sense of, does the investment amount need to be large enough to substantiate some of this and where do those numbers typically fall?

What’s my return of investment? I’m going to pay these fees and go through this process. What point does it not make sense or does it make sense? What we found is $500,000 in actual proceeds for every $100,000 of liability. Not to be confused with gain. Your gain, let’s say is $300,000. Your liability is 30% of that, it’s $100,000 so the liability is the first thing. The second thing is the actual proceeds. If you have a deal that’s $250,000, proceeds and only $25,000 in tax, we say -it’s too small. Why? Our fees are going to outweigh the savings in tax, which leads into Rule 72 which states that if I can earn 7% on any given amount over a ten-year period of time, that amount will double. That’s how we set.

Most of our deals were earned about 8% target rate and net 6.5% after the recurring fees. If you let that amount compound, let’s imagine at 6.5% and you didn’t take any payments, you let it compound, that original amount of the whole amount will double. Let’s say it’s $500,000 in there, that will turn into $1 million within about eleven years. The Rule of 72, Rule of Compound Interest. It’s a mathematical equation but we found $500,000 is the minimum proceeds and $100,000 liability.

That being said, you said, “I have 2 or 3 that are closing.” I go, “Are they closing within the next 1 or 2 years and they can add up to that amount, let’s talk.” If it’s a one-off deal and it’s less than that, don’t do the deal. We’ll say no to you there. We have a Deferred Sales Trust calculator that walks you through this. You answer twelve questions side by side comparisons and you can get a quick answer. Does that answer the question so far?

I have a million more. In fact, I’m going to invite you on here to come onto my show to discuss this in a lot of detail, because I’m sure that you can even repurpose this. Let me ask you one last question, so I can understand or I’ll ask you as many as you want. This is what I love to do.

As many as you want. We have no time period here and the readers are going to like it. Keep going.

Our funds, for example, our typical entities would have, let’s say $5 million of equity in them. Let’s say ten years down the road, we have a $5 million capital gain. There’s a $5 million taxable event where our equity position has doubled. That would be a great deal for us but then you have this massive $5 million liability. Walk us through the steps. Is it possible to do this after already creating the legal documents and not setting the intention that it would take place? We’ll amend the legal documents to say this is it or at least vote on it. What I’m trying to say is if there’s a fund that’s already up and performing that wasn’t created with the intention of the structure, is it possible to then do this retroactively?

Absolutely, as long as you don’t have a live buyer buying it and has removed all contingencies. There’s nothing remaining at all. For example, let’s imagine you went into escrow and he’s in his due diligence period. He’s like, “Brett, we’re about to sell this thing. We bought it for $5 million. It’s only for $10 million. Can we still do it?” Yes. We add the language into the addendum, which states that the seller has the right to a 1031 exchange or a Deferred Sales Trust and no additional cost to the buyer.

It doesn’t affect the buyer in any way but we add that language a placeholder. As long as we’ve done that before they removed all contingencies, we’re good. Let’s imagine you said, “Brett has removed all contingencies. Is it too late?” Let’s send it to a Qualified Intermediary. Let’s make sure we send it to one will give me both options like Deferred Sales Trust, Delaware or 1031 Exchange all three options. Let’s make sure we have that.

When we send it there, the next window is day 46. There are multiple windows. Ideally, we do it from the beginning. The first purchase and sale agreement, you’re there. The second window is before they remove all contingencies. The third window would be, they’ve removed it. Let’s send it to a Qualified Intermediary. We call this the benefit of save a failed 1031. On day 46 or day 181, between those time periods, we can save a failed 1031 exchange. The last point to this is we don’t charge anything unless you continue the deal.

CGT 3 | Passive Investment

Passive Investment: When you invest passively, it’s ideal that you have an operating partner or a sponsor who can oversee the entire investment process from start to finish.

 

You can only put it in the document, use the QI Company and find a deal that works out for the 1031, great. You decide you don’t want to do it last minute, no problem. We don’t charge anything neither does a tax attorney. There’s no risk of having the language. In fact, we believe you should have it in every single deal. Have it there just in case you want to use it and don’t want to pay all that tax. Have that option but get with us early. Make sure you’re with us early so we’re putting all those things in place.

– It’s a great tool and underutilized in the space obviously.

Yes. We’ve done a couple of thousands of these for the readers. It’s a 24-year track record fourteen IRS audits. We’ve already blazed the trail. It’s new to people who don’t know about it because they haven’t heard about it. It’s not new in the sense that we haven’t blazed the trail. That’s there. Shifting back to our conversation here. What are some of the top three wealth secrets you’ve learned over the years that you can share with some of our readers as far as creating and preserving more wealth?

This is one of those but to circle back on the tax, the Solo 401(k), the Solo (k) vehicle is the most advantageous thing that I have found when it comes to most real estate entrepreneurs. I’m not an expert in this particular field, but if you google this concept, you will likely have your mind blown if you’re not already familiar with it. Many real estate companies are owned and operated by one person because it’s a scalable business. This entity which over the last couple of years I created and started investing in. The Solo (k) has all the bells and whistles of everything and little downside, a lot of flexibility and also you can direct your own investment. For those of you that are reading, a lot of people, mostly readers of this blog, may be familiar with the concept of self-directed retirement but the general public is not. It is an overwhelmingly underutilized tool.

If you don’t know, you can take your funds which are in retirement accounts depending on which retirement accounts there and whether or not you’ve quit your job recently in a variety of other things, you can self-direct those funds and control where they’re invested. Meaning, you can invest in anything that’s within the wall, but not just stocks, bonds, and mutual funds but in the types of deals that for example I or my clients invest in. Within the self-directed umbrella, from my perspective, the Solo (k) is an incredible tool and it’s got to be one of those tips right there. Do you want to add anything before I jump to the next?

No. That’s a great point. The traditional stocks, bonds and mutual funds you’re not getting the depreciation right off although on the Solo 401(k), you might not get that as a part of the plan. You’re not getting as much opportunity for the appreciation or the risk-adjusted rate of return. I believe that is probably true. It’s the best way to create and preserve more wealth is through investment, cashflow, real estate especially if it’s value-added, force appreciation opportunities.

I’m biased. I love mobile home parks, multifamily in senior housing. That’s my world and what I know. Those three are phenomenal. If you can change from stocks, bonds, and mutual funds that are subject to a debt crisis or overseas China Trade Wars and you can move it into cashflowing investment real estate in your backyard are good locations in the United States have grown job markets. To me, that’s a no-brainer especially to diversify. They may not be all of it. You can take a portion of it, and you try $20,000, $30,000, $50,000 of your $250,000 retirement account and you diversify some of it outside of the stock market, which is a key to reducing risk. Keep going with your second one, Hunter.

I would find a mentor. This is something that I have been fortunate. The timing of my entrance into real estate allowed me to filter through a lot of noise. If I’d moved to California in 2005, as opposed to 2010, the likelihood that I wouldn’t be able to clearly identify who was best in class is Gerry Lowe because everyone was making money hand over fist. What’s happened since 2010, the markets change but more importantly, the access to information has changed.

If you’re reading this at home and you haven’t quite identified someone who you intuitively know, they think about the world similarly to you but have done it at a more elite level, tune yourself into that reality and don’t hesitate to reach out to the people that are guests on this program. My flavor may not be for everyone but every known and you may hear a guest that comes on the show that you go, “Everything this person says is along with the same world view as I but they’ve focused their energy towards a different thing that I need to learn about.”

There are a lot of interesting things about ultra-high performers. Most of them have a healthy relationship with competition. Part of being competitive is not only the bank accounts, but the positive influence you can have on the world. You can use this to your advantage and say, “I want to be in a similar position to where you are right now.” Their instinct is to say, “Do I want this person to be a competitor or do I want this person to tell a story later in their career about how I help them?” That’s a powerful tool because it’s not about coming up with your own playbook. It’s about reverse engineering someone else’s to get to be an expert as quickly as possible.

The mentor part of it is the most rewarding if you can mentor someone else, but also the best way to learn. Let’s face it, unless someone’s teaching us or helping us with that, it’s hard to know that. Number two is the mentor. How about number three?

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Most investors want to focus on two different things, the predictability of outcome and the higher return profile. Think about that clearly quantify your own specific goals before making an investment and look at things on a risk-adjusted basis. If that is your goal, if you want the predictability of outcome or the higher return profile, there are two components of any investment. The cashflow that’s predictable and the upside which is less predictable but has the potential to generate more lucrative returns. That’s the first step. Is that your goal? How are you going to achieve that within your particular investment? I will look at things through a risk-adjusted basis.

One of the things that people don’t pay enough attention to when it comes to assessing risk is looking at the amount of unknowns associated with the deal. There are many examples but I’ll give you one. If I’m looking at a blended fund, I would like to have at least one of the assets be an equity buyout. Where the management stays in place and we simply replace the equity. The amount of unknowns is drastically reduced. If you’re thinking about investing in your entire portfolio, that transitional period, for example, where you’re going from one owner to the other, that’s where there’s a lot of unknowns associated with your investments. You can limit the amount of unknowns drastically helps that.

Another thing is if the sponsor and the operating partner have intimate knowledge of the market prior to the purchase, they have other assets in the market, they have a property management company that they’re simply moving their team from one asset to the other. Things like that help but the challenge is, it’s not easy to put that into a financial model but it does play a huge role in the outcome of the investment.

The intangibles of the team and the track record and how they’re going to execute the business plan, not just finding the deal, that’s a low-price deal or value-added potential. How you’re going to execute that? If you’re investing with that investor or you’re an investor investing with different groups, every time you make a move or jumping to different ones, you’re changing the denominator which could be the unknowns. The culture, the relationship, the track record, all of those things that performance. Sticking with those who have performed and those who you’re going to limit the unknowns. Is that a fair summary?

100%. I’ll give you an example. You mentioned the mobile home park business earlier. I’m a huge proponent of that business. That business has changed drastically over the past years. Years ago, I had an investor presentation dinner. I presented in front of people that were accumulated worth $30 million and I intended to raise at least a $500,000. I raised zero, not $1. Part of the reason for that was that no one had considered investing in mobile home parks at that time and everyone assumed it would be a total nightmare. Now, if I go into a room with 30 investors, believe me, that $500,000 is coming in to cause people have tuned in to the fact that it’s an incredibly favorable asset class.

However, there are a lot of nuances to that asset class. There are a lot of ways it can go wrong and you have to be betting on a team that knows what they’re doing that has been through it. That has been through what happens when a septic tank goes wrong and when a city tries to condemn your mobile home workers that are doing everything they can to get that thing out of the way. Those types of things require teams, properties and relationships that already exist. The mobile home park business for example where there are all this interest people are jumping in the sector. New teams may not have been through what’s required to make a successful investment even though it could be a great property.

Thank you for sharing. Those are the three wealth secrets. We’re going to wrap it up with these last questions. Hunter, how do you stay centered in your values?

The second one is going to embarrass me but I’ll be honest. To be centered, I do some journaling every morning and write down the main things that I want to accomplish and the reasons why. That’s something that people talk about a lot but I have found that it cannot be overstated. Truly understanding foundationally what motivates you. I’m training for a marathon. It’s the first marathon I’ve ever run. I’m out running around 5:30 AM. Why am I doing this? What’s the motivation? What is it about it? To be honest with you, that particular thing is because I like to have consistent goals that I can accomplish. Mental fortitude and overcoming adversity. Those are the types of things that I like to have as an entrepreneur, so it’s a goal. That’s how I stay center. If you’re getting beaten up on your feet or otherwise, it’s a humbling experience. Everyone has those days when they don’t want to go and run.

How do you drive to new heights and reach your goals? How do you stay encouraged to drive into new heights because you’ve accomplished so much, what basically keeps you going? What keeps you take in? What keeps the fire burning within the belly?

I have talked a lot because I own a podcast, but I’ve never talked about this before. This is the first time I’ve ever admitted it publicly. If you ever listened to an interview with Kobe Bryant, Michael Jordan, and their teammates, they will talk about the fact that they get motivated by negative things. For example, Kobe Bryant hears that the adversary team thinks that he’s overrated. He wants his teammates to tell him that because he gets mad and “drops 60 points” on them on the next time they play.

Michael Jordan gets benched early in his career. He’ll never forget it. He’s going to punish that coach next time they play because he got benched. I’m on the other side of the spectrum. The reason I was embarrassed about this is not common but what makes me elevate my game is when I think that I’m at the top. What that means is I realized that I want to think this has to be the best version of this ever because that’s what I want to be known for. It would hurt my feelings if someone said, “You have a real estate conference but it’s not that good and no one’s interested in going.” I’m not Michael Jordan. That would break me as a person. That would not motivate me.

CGT 3 | Passive Investment

Passive Investment: In order to actually implement a 1031 exchange, all of the co-owners of the asset need to be on board.

 

What I want to hear is, “That person flew across the country because they know you’re going to put on the best conference.” I go, “We’ve got to do it. How can we get better speakers? How can we get better content?” I’m sure there are a couple of people out there that may relate to this but regardless, everything that I mentioned is on a spectrum. There may be times in your life where you need that negative, you need that person that can say, “This wasn’t enough.” There may be times you need to be picked up and someone to say, “You have to deliver what people demand which is the best.”

I love that answer and that is inspiring. I bet you do put on the best conference. I want to thank you, Hunter, for being on the show. It is more than a pleasure to get to know you. My favorite thing about podcasting and content marketing is the ability to meet people that you never would have met or connected with. If it wasn’t for this amazing thing called the internet, podcasting, LinkedIn, and all of those things so I’m grateful for having you on the show. I want to thank our readers for reading the blog of Capital Gains Tax Solutions Podcast. As always, we believe most high net worth individuals and those who helped them struggle with clarifying their capital gains tax deferral options.

Hopefully, you learned about Hunter and some of the stuff he does. His website is ASYMCapital.com. Also check out his podcast, Cash Flow Connections Real Estate Podcast with Hunter Thompson and reach out to him if you want to look to invest in real estate, commercial real estate, be passive and learn ways to create and preserve more wealth. Lastly, not having a clear plan is the enemy. Get a plan for your wealth and for a proven tax deferral strategy so you can create and preserve more. Thanks again for reading. I look forward to seeing you in the next episode.

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About Hunter Thompson

CGT 3 | Passive InvestmentAsym Capital (Asym) is a private equity firm based in Los Angeles, CA which helps accredited investors passively invest in mobile home parks and self-storage facilities due to their ability to perform during economic downturns.

Since inception, Asym has helped more than 300 investors allocate capital to mobile home parks, self-storage facilities, workforce housing apartments with some of the most well-known operating partners in the U.S.

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