https://www.youtube.com/watch?v=BnvkMpUu-7c

1 00:00:00.000 --\> 00:01:00.000 one of the deals i did 60 days ago pays
me a hundred thousand dollars a month in passive income just by being
the bank and so what i will show you in this video is how i find these
deals how i structure these deals and uh one thing to make sure that you
don't do because actually one of the ceos of the companies in our
portfolio actually reach out to me because he got an email from his
wealth advisor i'm gonna use quotes here because it was almost
borderline unethical what the deal looked like but i want to walk you
through it because it looks okay but as you as i show you the framework
that i use which has four four lenses that i look at investments through
you'll see more and more why it wasn't good and then at the end i'll
show you what what was good and the deal that actually made this happen
all right so the deal that his advisor sent him was hey we've got a
business that wants 450 000 right 450k to invest in their startup okay
so we're sending this money to a startup just in case you're curious
it's a little bit risky all right but we'll get into that in a second so
450 000 to a startup and he said

2 00:01:00.000 --\> 00:02:00.000 they're willing to pay you 10 per year
and they're going to pay this at the end of 12 months all right which
means at the end of 12 months he's going to get 450 000 plus 45k all
right that is what the uh return is going to be all right and so they
were like hey can you break this down they're like it doesn't sound like
a good deal but we kind of want you to walk us through it all right and
so here's how you should think about these investments all right number
one is yield all right which is how much money cash flow is coming to me
every single month all right that is one way that you look at the
investment the next way is capital preservation which is how likely am i
am i going to be preserving my capital that my money is going to come
back to me all right all of these are on a scale so it's not like a yes
no it's more like to what extent right the next one is tax advantage all
right so if i if i do this

3 00:02:00.000 --\> 00:03:00.000 investment is this going to cost me a
lot tax wise right something that's treated as capital gains versus
something that's income is going to have a better tax treatment and then
finally you've got equity growth all right so does the thing that i'm
buying or putting my money in become more valuable all right so when
you're looking at any kind of investment or anywhere to put your money
look through this lens of one two three four and think okay to what
extent is my capital being preserved to what extent am i getting the
yield what are my tax advantages am i growing all right and so i walk
them through this exact same process and so let's look at this deal that
you got all right so capital preservation box one uh well they're this
is going to a startup and they're saying they're not going to pay you
anything at all and then at the very end they're going to give you uh
495 000 at the end right 450 plus 45 000. uh how likely do i think
that's happening with a startup i would put that as an no probably not
likely yield wise i'm going to get 10 okay that's cash flow kind of good
but for for a debt deal uh probably not

4 00:03:00.000 --\> 00:04:00.000 great all right because we're going to
compare this to is that like if you look at indexes like the s p i i
don't even know what it was last year but i'm guessing it was really
good it was probably 20 something like that last year and so literally
having 100 capital preservation and having a 20 increase in equities
which is here right you'd have a better return there but this one has no
increase in equities because we're not participating on the upside we're
just participating on the downside which by the way when you ever do
money lending all you get is guaranteed cash and you participate on the
downside so you really need to make sure the downside is good all right
and then the fourth box here is tax advantage these guys make good money
and so i was like ten percent i was like you're going to get taxed at 45
right of that 10 which really means your effective increase is going to
be 5.5 all right that's how much you're actually going to make on this
deal after taxes that's like barely enough to cover inflation and so
they're saying risk 450 000 to barely cover inflation

5 00:04:00.000 --\> 00:05:00.000 not participate in the upside at all be
tax disadvantaged and have and do this with a startup so that you're
very unlikely to have your capital preserved right so like this is
borderline unethical how bad this deal is and so what i want to do now
if you guys are good with it is i'll show you the flip side which is the
deal that i just did um about 60 days ago all right so here's how this
deal worked i wrote a note for 2.5 million dollars all right uh to
secure a building out of foreclosure all right so somebody emailed me
and said hey um i found this building it's two uh it's 2.5 million
dollars that's how much i can buy it for and i said okay well tell me
more about this deal so we're going through the same framework all right
so we've got capital preservation we've got yield we've got tax and
we've got equity all right so in this in this situation um he then said
i have four offers on the building already between 5.1

6 00:05:00.000 --\> 00:06:00.000 and 5.6 million all right and i was
like okay so now i know that this is reasonable and he sent me the
offers over so i knew that they were good on top of that they had taken
the top guy and this guy had put 300 000 in earnest money down meaning
he had committed to doing the deal as soon as he as soon as it comes
available all right so we have a real buyer lined up at 5.6 million
sounds good so far and this building is worth 2.5 so i'm thinking
capital reservation if if for some reason this deal goes through i've
got three other people who've said they've been willing to give more
than twice as much money as i'm buying this for all right pretty good
now mind you i'm not buying the building i'm the bank here i'm the one
lending the money to the guy all right now he's gonna make good money on
this he's gonna get two and a half million that's not his money and then
he's gonna sell it for 5.1 to 5.6 in this case 5.6 and he's going to end
up making 2.1 million on this deal minus whatever my fee is for
supplying the money now on top of that i asked to have a

7 00:06:00.000 --\> 00:07:00.000 personal guarantee from him and the
partner all right so just in case these three offers fall through on top
of the fourth offer with the earnest money i got personal guarantees by
both the buyers of the building all right so this is how i wanted to
make sure that my capital is preserved so i'm like cool check now do i
participate in any of the equity of this of this business the answer is
none i don't have any equity participation from a tax perspective if
they're just going to pay me a yield which is exactly how i structured
it what am i going to have bad tax treatment you bet your ass i am it's
going to be treated as regular income so it's got to be really worth it
for me on the yield side and so the way that i wrote the note is i get
48 to 96 per year you're like how can you achieve you know uh returns
like that if you look for them right that's the simple answer right and
the more deals

8 00:07:00.000 --\> 00:08:00.000 you do the more people know that you
have money that you can do deals and then the more they reach out to you
right and if there's not a lot of people who can just snap a hat and
just throw out two and a half million dollars and so you get on a higher
and higher list and you get access to different deals all right that's
the short answer so what they're doing here is that means that i'm
getting four percent per month all right now if you do the math on two
and a half million four percent per month is a hundred thousand dollars
per month now you might be wondering why would anyone pay that this is a
bridge loan this is a short-term loan it's called hard money lending
private lending private placement different things like that but they
need money fast and so they can't go through a normal process because
they got a steal on this building right how many times you get a
building for two and a half that's worth five immediately right not many
and so they need someone who can immediately provide liquidity and in
exchange they pay a higher rate now they're not planning on holding the
money for the whole year but if i do multiple deals like this then i can
effectively get a rate that's comparable to this over the time period of
the year all right so four percent per month that's a

9 00:08:00.000 --\> 00:09:00.000 hundred thousand dollars a month their
planned holding time was going to be 60 days i gave them 90 days at this
which means in the minimum carry meaning if they did it in two in 24
hours i still get two months of minimum carry meaning if i'm gonna do
this deal i have to make at least two hundred thousand dollars on just
sending the wire and then getting the money back even if it takes a day
like it doesn't matter all right so i set up a minimum carry for that of
of times two i'm giving them up to 90 days where they can continue to
pay and if it's like 65 days it still rolls into three months right
which means then i'm at like three times this right which is 300 000 and
so sometimes when people were like why aren't you selling stuff on this
channel it's because um i don't really care and so hopefully this makes
sense to you if you're thinking if someone emails you god i hope they
don't email you but if someone emails you a deal that looks like this
one run the other way and you know question their morals and ethics
because either they absolutely absolutely have no idea what they're
doing or they're expecting that you have

10 00:09:00.000 --\> 00:10:00.000 no idea what you're doing and so that
is why i'm making this video so that you don't do a deal like this you
think through it through within uh these these four levels and there is
a point because i know i'm going to get this question well at what
percentage is it worth getting the yield which is this fourth box here
right well i'm going to get taxed on this right at my after tax rate on
this is going to be like 27 return so for me 27 return still makes sense
after taxes and everything um so that that deal makes sense but it has
to be really really good for me because i have a ton of income so i'm
gonna get taxed at the highest bracket if it's any kind of regular
income type deal and so if you're gonna do a deal like this you have to
make sure that it makes sense all right so hopefully that makes sense to
you guys hope you enjoyed that uh like subscribe all that stuff and i'll
see you guys next video
