Munzer Ghosheh: Good morning, or afternoon, everyone, depending on where you are. Thank you for joining us for this edition of our monthly educational webinar.
Munzer Ghosheh: Where we typically, invite and speak with different experts from a variety of industries to educate us and educate our audience.
Munzer Ghosheh: Today's webinar is no exception. It's titled, The Waterfall of Priorities, How to Stop Analyzing and Start Investing. I'm excited to have
Munzer Ghosheh: Our presenter, Michael Miller, the owner of Everland Capital, with us today. I've known Michael for a number of years. He's a real estate investor in his own right. He's known for his innovative thinking and problem solving.
Munzer Ghosheh: In the complex world of real estate financing, among others, so I'm happy to have Michael share his expertise with us.
Munzer Ghosheh: But before we get started, I have a couple of… I have my disclaimer that we have to read out loud to everyone. The Entrust Group does not provide any investment advice or endorse any products. All information and materials
Munzer Ghosheh: are for educational purposes only. All parties are encouraged to consult with their attorneys, accountants, financial advisors before entering any type
Munzer Ghosheh: of investment.
Munzer Ghosheh: Today's agenda, I'll hand it over to Mike in a bit. He's going to be explaining the problem, introducing the waterfall of priorities.
Munzer Ghosheh: covering the strategy scorecard, analyzing a case study, and then we'll have some time, hopefully, for some Q&A. If you have any questions, please type in your questions, we'll get to them as time permitted, and
Munzer Ghosheh: And depending on where we are on the presentation, Mike might just come in and answer some of those questions for you.
Munzer Ghosheh: So, I'm your host, Munzer Ghosheh. I've been with the Entrust Group for over 20 years now, actually. I've been working with our referral partners and clients alike to educate them on the benefits of self-directed retirement plans and help them navigate their complex alternative investments.
Munzer Ghosheh: I'm CISP certified, which is, which is,
Munzer Ghosheh: Certification in our industry that's, very highly regarded.
Munzer Ghosheh: A little bit about the Entrust Group. For those of you out there that, in our audience, that aren't familiar with us, we're one of the oldest and the largest self-directed IRA administrators. We provide administrative and record-keeping services for clients who wish to invest in alternative assets.
Munzer Ghosheh: Such as real estate, private equity, private lending, precious metals, and more. Most of our staff is, has the prestigious, as I mentioned, the CISP certifications.
Munzer Ghosheh: Throughout a lot of education, including our monthly educational webinar.
Munzer Ghosheh: And we have about 24,000 and growing active investors with over $6 billion under administration, assets under administration. And for over 40 years, we have empowered our investors to take charge of their retirement plans by allowing them
Munzer Ghosheh: to invest in alternative investments, typically unavailable through traditional banks and brokerage firms. One thing that we differentiate ourselves from our competitors out there is that single point of contact, our regional offices with that dedicated point.
Munzer Ghosheh: Provides that seamless and quick service to our clients, which is pivotal in our industry.
Munzer Ghosheh: So, time now to hand off the mic to Michael, with his presentation, so we're all looking forward to this. Michael, welcome.
Michael Miller: Hey, thanks, Munzer. Thanks, Andrew and team. It's a privilege to do this. We've been, as Munzer said, we've been friends and working together with the Entrust Group for a number of years now. And I gotta say, as a real estate investor, I can really attest to that differentiator, that single point of contact. Munzer and his team has been instrumental in helping us help our investors
Michael Miller: deploy capital, and it's been remarkable, too. I've worked with lots of custodians, and we are now exclusively with the Entrust Group, not because we get anything for saying that, but because we really believe in the value prop and the level of service they provide. So, really fun for me to be here and get to present. I'll introduce myself here real quickly. Munzer did. I'm a banker turned investor. You might look at me on the screen and go.
Michael Miller: You don't look anything like a banker. I vowed that the day I left Bank of America that I would not do my hair or wear a suit and tie ever again, so you get what you get here. But I am, first and foremost a father, a husband. You see my family on the screen. One thing I love to share, a little fun fact, is we are an adoption family. My mom was adopted, I was adopted, my three kids are adopted.
Michael Miller: My wife is an adoption consultant. We run non-profit, working with orphanages and orphan care in Latin America. It's a big part of our why, it's a big part of who we are. As a matter of fact, our company's North Star or mission is to build companies that build and restore family. And so that's why we do all that we do. Beyond that, I'm also a real estate investor. I left a nearly 20-year career as an
Michael Miller: a senior leader in Bank of America, became a full-time real estate investor. My kind of claim to fame is that, you know, I got started and built a portfolio. We bought a little over $10 million in single-family and small multifamily our first year.
Michael Miller: as a real estate company, and we did that largely with none of our own money. We did that with outside investors, creative finance strategies, and some of that out-of-the-box thinking. We don't syndicate, we own our portfolio, so, you know, it's not $20 million that I think we have today. Maybe pales in comparison to some of my syndicator friends that, you know, have
Michael Miller: $200 million, but we own 100% of our portfolio. We have done a lot of work building several companies, including a lot of this type of work, which is to empower Main Street people to invest and to do money different, to find alternative ways to invest, and I think you're all here to learn a little bit about that. We also host, just a little shout-out, we host a podcast called The Dead
Michael Miller: President's Club. You can find that on YouTube. We always say that money's not scary, it's just a bunch of dead presidents, and I interview, mostly in the real estate space, I interview a lot of different leaders, professionals, etc. So you guys are welcome to check us out there. Let me set this up a little bit different. This might be different than the typical, you know, investor webinar.
Michael Miller: I'm not going to talk about any particular strategy. The case studies I'll use are around real estate, because I am indeed a real estate guy. But whether you're looking at any type of alternative asset, from private equity, precious metals, or if you're still in the Wall Street model of, you know, stocks, bonds, and mutual funds, what we're going to talk about today is a common thread that I find throughout all
Michael Miller: or many of the investors that I interact with, especially as we do coaching and consulting and helping people figure out, like, how do I move my journey forward in accomplishing my financial goals? What we find is that people often are stuck. And, you know, you guys have probably heard the term analysis paralysis, or decision fatigue, or
Michael Miller: all of these different kind of terms that get thrown out. What I've discovered is that they can typically be distilled down to one problem, and that problem is not an information problem. Lord knows there is an abundance of information that exists. I could become a YouTube expert on just about anything today, but the problem with the information era is that information
Michael Miller: doesn't equal results, action does. And the distance between information and action is often in decision. And the analysis paralysis and the fear that prevents people from taking decisive action, in my experience, is largely connected to a lack of clarity. I would say that the biggest bottleneck on anybody's road
Michael Miller: to success or action in any decision they make, whether it's investing or life or goals or whatever, is this lack of clarity. You know, it says it on the screen. You've probably read the books, you've probably watched the webinars, you've probably ran 100 numbers on 100 deals, and still haven't pulled the trigger. And I think the lie that gets told to ourselves is that we're lazy. It's not… it's not lazy.
Michael Miller: It's not a lack… what you don't lack is intelligence. What you don't lack is drive. What you lack is a specific, functional, precise outcome that you're looking for. It's an old Hal Elrod quote that says that you can accomplish any outcome that you want to achieve by simply defining the target, identifying the steps to achieve it, and then repeating those steps
Michael Miller: in perpetuity until successful. And in real estate, we say it like this. The biggest problem with real estate is there's a million ways to make money in real estate.
Michael Miller: you just have to choose one. And what you work will work. And in the process of having this conversation so many times, with so many different types of people.
Michael Miller: what we've landed on is this waterfall analogy that we're going to use today of priorities to help people break through the information consumption into action so that they can actually move down the field towards their goals. I've already said this. Why most smart investors freeze is that indecision, right? It's competing objectives.
Michael Miller: It's getting onto YouTube and having the one talking head say this, and the next talking head say that, and, you know, somebody might tell you that real estate is dead, the next guy tells you that we're in the best era of real estate in our lifetime, and the information freezes us. And what we're trying to do today is help you go through just a very succinct.
Michael Miller: Actionable process to get kind of a form of tunnel vision.
Michael Miller: to go, I am going to get so laser-focused on this outcome, this strategy, I'm going to become so clear on what I want to accomplish, that no matter what other information or shiny object shows up in my purview, I know that I am focused on one thing. And here's the hard truth. The perfect strategy doesn't exist.
Michael Miller: and chasing it is likely why you feel stuck at times. So, today's a little bit different, and at the end, we'll give time for Q&A. If you guys want to ask questions about a specific strategy or a specific real estate endeavor, or anything in my expertise, I'm happy to answer those questions. But our presentation today is really to help
Michael Miller: Main Street people, you… people like you and I, figure out how to make
Michael Miller: institutional-style decisions move our action forward, move our plan forward, so that we can actually start seeing results instead of being stuck in the rat race of indecision. So, here's the analogy that I like to use, and I kind of created this on accident, hopefully it makes sense to you, but it seems to have been helpful to a lot of people we've worked through. And it's this concept of the waterfall of priorities.
Michael Miller: What I find is that every investor has the same three goals, typically. We all have to figure out how to make money today, we all want to build wealth for tomorrow, and we all want some form of passivity or freedom. This is the framework. We're all looking at the same
Michael Miller: and goals. We want to make a lot of money, or make enough money, whatever the definition of success is for you. We want to build wealth and legacy, whether it be for retirement, or for future generations, or whatever your legacy plan is. And whether it's today or down the road, we want freedom, we want our time back. And eventually, if we do this right, we can have all three. But the way you build each of these priorities
Michael Miller: Is indifferent, is different, and you build them one at a time.
Michael Miller: And this is where an area of that kind of analysis paralysis can come into play, because it's like, well, I want to make money today, but I also want to give a bunch of money to my grandkids. And those are both amazing goals, and I hope that we can help you achieve them, but recognizing that the mechanism by which I do one is not the same mechanism by which I do the other, and those can be competing demands of our time focus
Michael Miller: and energy. So, let me break them down for you real quick. So, priority one, right? And by the way, I put them in this order. That doesn't mean that this is the necessary order that's relevant to you, it's just the order in which they make sense to me. You choose the order, or the waterfall, of your own priorities. So, the first one is active income. Pretty obvious, right? This is either to replace or supplement your active income. This is the
Michael Miller: you know, this is the eating your bread, so to speak. This is how I pay my bills, this is how I provide for my family, this is how I take vacation. Cash flow that you live on this year, not this decade. And speed to money matters, right? If I'm, like, hyper-focused on getting out of my W-2, and I want to become a full-time investor.
Michael Miller: and I'm busy out here focusing on strategies that are designed and built for long-term wealth. I'm going to be successful at neither of them, because I won't be able to sustain my life, because I'm not focused first on building long-term income. We'll talk more about this… I'm sorry, short-term income. We'll talk more about this here in a minute. But that's priority one, right? Active income today. How do I pay my bills?
Michael Miller: How do I eat? How do I live today? Priority two is wealth for tomorrow, right? This is the legacy piece. This is generational, this is retirement, this is, you know, thinking into the future. The reason why I generally, in real estate, say that I don't like the active income strategies is not because they're bad strategies, it's because they don't build wealth.
Michael Miller: I can make a lot of money, but that wealth comes through ownership, and the various ways that we can own assets and allow them to appreciate over time. And so, that's what this priority is, is how do I build wealth for tomorrow? How do I build ownership through equity, appreciation, debt pay down, tax advantages? This is about net worth.
Michael Miller: Not net income. this is… anybody who is playing the long-term game is thinking 10, 20, 30 years down the road. This is why I love real estate, by the way, because in 20 years, everybody looks like a genius when it comes to real estate. I don't have time to,
Michael Miller: to tell you the full story of my first deal, but I bought my first deal in November of 2007. I think we all know what happened in 2008, and I effectively, it took me 10 years to the month to sell that property for $2,500 more than I paid for it. If I would have waited just another 4 years, that property sold again for double. And so, what it taught me was
Michael Miller: that time covers a multitude of sins, and that wealth comes through ownership over the long haul. And so whether I get a great deal… obviously, I'm an investor, I'm looking for good deals today, but even if
Michael Miller: I make a deal that isn't good, or something happens that's out of my control, if I wait, I win. That's the long-term wealth for tomorrow strategy. The third line item in the waterfall of priorities is this passivity, or maybe we could even call it freedom, right? Freedom, to me, isn't a number on a screen or a bank account, or a wallet. Freedom is, I get to do
Michael Miller: what I want, when I want, how I want, and that I am not trading my time for money. Time freedom is its own asset class, right? And I think we all agree that at some level, we want to be there at some point in the future. So a strategy that can make you a lot of active income today, is very likely going to be a high activity strategy that consumes
Michael Miller: 30, 40, 50, 60 hours a week, that's a job, not an investment, right? I'm not saying it's bad, I'm just saying it's a different strategy, and we'll talk about some examples of that. But the question I would ask myself today is, honestly, how many hours per week will I actually give to, like, this strategy I'm building? Not, like, theoretically, what would I like, but how much am I willing to invest in this? And is my highest
Michael Miller: priority, freedom of time, active income, or wealth for tomorrow. Because the way that we build those things
Michael Miller: are different. Let me, give it to you in real estate, because I'm a real estate guy, but this could apply to any number of strategies, private equity, business acquisitions, you know, like, fill in the blank with your favorite investment strategy. This can apply across the board. The three that I like to use as the example of this, there are many more, is fix and flips.
Michael Miller: Rental portfolios, private lending, or passive, you know, partnership in external deals.
Michael Miller: Fix and flips in real estate are a great way to make active income. If I needed to replace $100,000 or even $150,000 in income quickly, I would fix and flip my way to get there. You know, the average national profit on a fix and flip today is between $30,000 and $50,000, so I need to do somewhere between 3 and 4 fix and flips to replace a six-figure income. I can do that
Michael Miller: relatively quickly, but it is a very active strategy. It might help me build a rental portfolio, like, one of the ways that we encourage flippers to move from active income to long-term wealth is, hey, maybe I'm gonna flip 10, but I'm gonna keep one, or I'm going to flip four and keep 1. There's some strategies that you can get into that can make that work, but it's… fix and flipping is excellent for active income.
Michael Miller: It's modestly helpful because it helps us build capital, but the reason why I always say, hey, I fix and flip a ton, but I flip because I have to pay bills.
Michael Miller: I hate it as a long-term strategy because wealth comes through ownership. And flipping helps me do that by raising my capital and potentially getting me into better deals that I might be able to choose to keep as a part of my rental strategy, but it's really poor from a time freedom perspective. I put a lot of money, work, energy, my team into fixed income. It is a… it is the opposite of a passive strategy.
Michael Miller: you know, when you look at the wealth-building tier of the water flow, fix and flips are terrible at that, because making a lot of money just creates more… more figuring out what I'm gonna do with that money. As soon as I sell it, sure, I got the money, but now my money isn't doing anything, it's not working for me, I gotta figure out what to do with it. So it's a really poor strategy for that. A rental portfolio, on the other hand, is an excellent wealth-building tool.
Michael Miller: You know, especially if you can find a strategy that's still cash flowing, and you can build… like, there are, you know, a half dozen or more ROIs connected to building a rental portfolio. I mean, it doesn't even take 100 rentals. I mean, 10?
Michael Miller: 5 to 10 really quality rentals
Michael Miller: bought today will be paid off in 20 or 30 years, not by you, but by renters. They will be worth double, maybe triple what they are today, statistically speaking. And they will have grown in the value, you know, tax-free in that environment, meaning that I can leverage that equity at any point
Michael Miller: without paying tax on what I borrow, because debt is not taxable. It's an excellent wealth-building tool. But rental portfolios, they're… anybody who has a rental portfolio and says it's passive is lying about having a rental portfolio. Even if you've got a property management and all those things, it's… it's… somebody's still got to manage it, and there's still work to be done. Certainly less work than fix and flipping.
Michael Miller: But, you know, a lot of people get into rentals because they think it's passive, and then they find out very quickly that it's anything but. So, great for building wealth, poor for, you know, passivity, and not as good for active income.
Michael Miller: The last one is passivity, right? Fix and flips, really, really poor for that, we already talked about. Rental portfolio, poor to moderate, like I said, like, you can get really good at it, and you can get it to be more passive, more set it and forget it, but it's never truly passive. But private lending, as an example, is an excellent passive. It's probably the only true passive investment. And for those of you that don't
Michael Miller: know, private lending is the process of investing in somebody else's deals. Taking your money and being either the bank, or investing in a fund, or investing as a partner. You know, there's a lot of different ways you can do it, where you're investing into somebody else's effort to get a deal done. It's the only true passive. It's terrible for active income, right? Because typically, you know, those returns are
Michael Miller: either deferred to maturity, or if you can structure them in a way where you get monthly interest payments, or however you do that, but it's not certainly going to be as sexy of returns as, say, a fix and flip might be, right? So on that scale, it's not quite as good. It can be great for building wealth, especially if you're alternative. I mean, I have a ton of investors that invest with me because they forgot that their 401K was sitting in
Michael Miller: some mutual fund or money market savings account earning 3%, and they invest in a private money deal and get 10-12%, they're stoked about that, because the growth is so much better, and it's backed by a physical asset, etc, etc. So it can be good for wealth building, but it's not the best of the strategies in terms of long-term ownership.
Michael Miller: But passivity-wise, it is… it is really, truly the only, true passive real estate investing strategy that I'm aware of.
Michael Miller: So, let's run a couple of case studies here. I think you'll understand this. I won't spend a lot of time here, but we've already talked about this a bit, but fix and flips, you know, continuing the analogy, great income, zero ownership, right? Excellent. I told you, you know, the average fix and flip profit is between $30,000 to $50,000. Almost nothing for long-term wealth, because wealth comes through ownership. A flipper sells the asset.
Michael Miller: every time, and has to figure out what to do with that money. There's no equity compounding, no appreciation, no long-term tax advantages. As a matter of fact, it's arguably one of the worst
Michael Miller: tax strategies.
Michael Miller: Because of capital gains tax. A flip is a well-paying job, make no mistake about it. And if you're looking to replace your income quickly, and you're interested in real estate, this is where I start. But it is not where I end.
Michael Miller: The second one, rentals, right? We, again, we've talked about these, I won't spend a lot of time, but this is the generational wealth cheat code. To be really clear, if I haven't been already, my goal is to own everything. If I could never sell anything again, that would be my chief goal, because in 20 or 30 years, my kids are not going to look at any piece of real estate in my portfolio and wonder if I got a good deal.
Michael Miller: or how I bought it. They're gonna look at a portfolio that's largely paid off.
Michael Miller: that is worth twice, maybe three times what I paid for it, statistically speaking, and they're gonna think Dad was a genius. And that is my secret cheat code to convince my kids I'm way smarter than I am. I want to buy and wait.
Michael Miller: And I should say this, again, this isn't a real estate presentation, but I should say this. Real estate is arguably a terrible way to get rich quick.
Michael Miller: You know, it is… real estate is absolutely a get-rich-slow strategy, and I'm just really, really comfortable with those get-rich-slow strategies, because even if the market shifts, even if equity shifts around, or I lose value, or we get a big crash, whatever doomsday outcome we're afraid of, the beauty of real estate, unlike any other investment class that I'm aware of, is that the
Michael Miller: value or the equity can come and go, but the cash flow still remains. People still have to live somewhere. And that's what I love about the generational. This is my favorite step of the strategy, is building that generational wealth.
Michael Miller: But this is… this is focused on the future. If I buy a piece of real estate today, and I'm owning it, I am planning on owning it for a long time. Because if I can wait, I can win.
Michael Miller: The last one…
Michael Miller: the really only passive strategy that I know of, and this is where private money lending, investing in operators deals, funds, syndications, joint ventures, like, all the different things that you can do, this is the only truly hands-off way. And the returns in real estate land, in my experience, are typically 8% to 14%. Sometimes they're a little bit better projections on syndications.
Michael Miller: Sometimes they're worse. The returns are more modest.
Michael Miller: Long-term than you're going to typically get in a, you know, self-managed deal.
Michael Miller: you know, on a cash-on-cash basis, right? If you get really good, or total ROI, right? If I put, you know, $30,000 into a fix and flip, get some hard money, kind of go through this thing, and then I make $30,000 in 6 months, well, shoot, like, on an annual basis, that's like a 200% return. I'm not going to get that as a passive investor, but what I get is consistent, reliable.
Michael Miller: returns that don't require any of my energy, or very little of my energy and effort, if any at all.
Michael Miller: to give you guys some context for this, this is the way that I look at this. I told you, we've built a little over $20 million in our portfolio using none of our own money. We use outside investors, we use creative finance, we use different debt structures, but I use all of my money to invest in other people's deals. And the reason for that is because I'm trying to discipline myself
Michael Miller: to ensure… the difference between the rich mindset versus the poor mindset, or the investor mindset versus the employee mindset, is that I want to make sure that I am not working for my money, but my money is working for me. So when I'm doing all of my active strategies, we manage a lot, and I happen to be a guy that loves the game. I love the hustle.
Michael Miller: I love the strategy, I love the management. My team is amazing. We're in this season of growth and having fun. I want to be active. I want to do the work. I want to be in it, but I want to use that investor pool that I'm tapped into to use other people's money to help grow my active strategies. And when I make my money, I want to use that money passively to go into other deals, because I think the
Michael Miller: of investment, in my personal opinion, is passive investment.
Michael Miller: The apex is when I get mailbox money that shows up on a monthly or quarterly, or annual basis, whatever I'm doing, and I did very little, if any, work to achieve it. That's the… that's the goal that I get to. So, someday I'm gonna wake up and I'm gonna go, I don't want to manage all this activity, anymore, and I'm either going to pass it off to hopefully one of my kids, or I'm gonna liquidate it and roll it into something
Michael Miller: completely passive, but I want to have the freedom to do that. I don't want my income to be tied to me getting up, me finding the deal, me managing the contractors, me doing all of the work forever and ever. I think passive investing is the apex of investment.
Michael Miller: So, this, to me, is why we're stuck. It's… indecision is not a personality flaw. It's a predictable result of unranked competing objectives. People that I talk to often, they're like, man, I'm really excited, I want to buy this duplex, this quadplex, I want to buy this apartment building, I want to do this, this, and that. And I get into the conversation with them, and I'm like, so why aren't you doing it? And they're like, well, I just don't really have the time
Michael Miller: You know, until I get enough of these to, you know, get out of my day job, and then I can really go all in. And I stop them, and I go, well, let's talk about that. Because what I heard you just say is that your highest priority is actually to get out of your day job, and yet you're focused on a duplex. And guys, let's be real, the average duplex is gonna spit off $200 to $500 a door.
Michael Miller: If you're lucky. And, you know, candidly, when your water heater blows up or your roof goes bad, a lot of that cash flow gets eaten up anyways. Duplexes are great for building wealth.
Michael Miller: But they're not great for replacing income, but let's just say at $200 a door, you're gonna have to buy an awful lot of doors to replace most incomes, right? The magic number everybody always says is $10,000 a month. I feel like it's probably growing to $20,000 a month, but everybody I talk to, they're always like, if I could get to $10,000 a month, if I could just get to $10,000 a month, well, at $200 a door, you got a lot of doors you're gonna have to buy.
Michael Miller: that's gonna get you there. But 10,000 bucks a month? $120,000 a year? That's 3…
Michael Miller: maybe 4 flips, right? And so that people get stuck, not because the objective of buying a duplex is bad, but we're getting distracted from the priority, really managing and meeting the need that's actually higher on the waterfall of priorities, before I go into the deeper, more long-term strategies. I'm hoping that this is landing, and so here's
Michael Miller: how we fix it, right? We clarify, we prioritize, and we execute.
Michael Miller: Right? I would encourage everybody to sit down and answer this question. What is the order of my waterfall?
Michael Miller: Is it active income? Is it wealth for tomorrow, or is it freedom of time?
Michael Miller: What is the order of those priorities? What order do they waterfall in for you? Because, by the way, success for you doesn't look like success for me, and vice versa. Freedom for me may not be your definition of freedom. I don't need a… I don't need a yacht and a private jet to be free. You might.
Michael Miller: And we have to be able to define that. So we've got to clarify, define each objective, what does income, wealth, and passivity actually mean to you in the form of literal numbers. And then force rank them. Not all of them. It's not that you can't achieve all of them, you can't achieve all of them the same way at the same time. Here's the analogy I like to use for this.
Michael Miller: It's a terrible analogy because I'm not a fisherman, but I think even if you're not a fisherman, you'll get this. If I called you and said, hey, let's go fishing today, and you said, great, what do we want to catch? And I go, well, let's… let's see if we can get some bass, and maybe some tuna.
Michael Miller: I don't know about you, and I'm not a fisherman, but I know enough to know that those are two very different types of fish that live in two very different bodies of water, that probably have different sets of equipment, maybe different types of boat, and different types of bait and tackle and all things. Even if I lived in a place like, say, Florida, where I could go to the ocean and I could go to a bass pond in the same day, what are the odds of me catching
Michael Miller: either of those fish in any given day. Pretty low, arguably. Why? Because my energy is diverted between two different types of fish, two different strategies, two different priorities. But if I said, man, I want to go all in on catching as much bass as I can get today, we're going to get the best bass equipment, the best bass boat, the best bass tackle and bait, we're going to go to the best known bass
Michael Miller: fishing hole, and we're gonna go all in on fishing for bass today. That's what clarity and prioritization looks like. It doesn't mean that tomorrow or next weekend we can't go fish for tuna. It just means that until I succeed at what I'm looking at, I'm not gonna get distracted by anything else. And that's what execution looks like. So first we clarify.
Michael Miller: What are the objectives, and what, what, you know, what do they actually mean? Let's prioritize them, let's force rank them in an order, and then let's get out there and let's fish. Let's execute. One strategy, done well, until it's done its job. Then we move down the waterfall.
Michael Miller: All right, couple more slides, and then I'm gonna end a little early, because I'm hoping there's some questions here that I can answer for you, and here's how you force rank your waterfall, in my opinion. Do I need my investments to pay my bills within the next 12 to 24 months? If yes, active income is likely number one. Another question you could ask is, how much do I hate my boss or my W-2, right? If that's a high priority for you.
Michael Miller: you, then a good chance you're going to need a lot of active income. Maybe you're facing retirement, right? Obviously, most of you are here, and largely what Entrust does is through the retirement process. That's a different… hey, if I'm facing retirement, what do I… what strategy do I need to produce the income I'm looking for in my retirement?
Michael Miller: Is my real goal a number on my net worth statement in 10 plus years, or something my kids inherit? Right? Is my highest objective, not to replace my… this is… to me, this is where, like, doctors and lawyers and professionals and people that have been in long-term careers
Michael Miller: They tend to not be looking to change their income strategy. They're happy with their income strategy. They got a great career. They got a good income. What they're thinking about is, what's my balance sheet show me in a decade, and what can I give to my kids and my children's children, right? That's where wealth ranks really high for those types of people.
Michael Miller: And then number 3, how many hours a week can I really commit to whatever I choose to do, with the job I have, the family I have, and the way my life actually is? It's a very, very important question, and the honest answer for most people is very few.
Michael Miller: And if your answer is very few, you have to reverse engineer that. Otherwise, what happens is you'll turn your dream into a nightmare, and nobody works their nightmares long-term.
Michael Miller: Another way to say that is, whatever you work will work.
Michael Miller: But you will not work something you hate. And if you design a strategy or a system that's not aligned with your life's reality, or your life's vision, or where you want to be in life, you will build a strategy that looks good on paper, but you hate in reality, and actually doesn't produce any result you're looking for. And most people will blame the strategy, not realizing that it was actually just
Michael Miller: an alignment problem, because what you work will work, but you have to be sure that you're aligned with it so that you get excited to get out of bed and do the work. Your ranking in the waterfall is personal. There's no wrong order.
Michael Miller: The only wrong order is an unranked one.
Michael Miller: an order where you don't make a decision. The only wrong decision is indecision. And those are the things that we like to point to for,
Michael Miller: long-term outcomes. Here's the good news, guys. You can have all three.
Michael Miller: In whatever sequence.
Michael Miller: Right? The Waterfall isn't about giving up everything forever, it's about the order of operations. We all have to pay our bills, right? Active income funds the long-term wealth. So whether that's gonna happen through your day job, or through some other active source of income, or you're wanting to make your investment strategy fill that bucket, it has to come first. Because if we're not surviving, if we're not providing
Michael Miller: Then all of our energy is going to be focused on… is going to be divided between trying to accomplish some arbitrary goal that we said was good, and actually paying the bills every month.
Michael Miller: The next one, of course, Wealth Built. Wealth Built today converts to passivity tomorrow. The better you get at building wealth, faster, sooner, ownership sooner, the better you will find yourself, positioned to become more and more passive, whether that's through building team, through outsourcing management, or through liquidating into truly passive vehicles of investment.
Michael Miller: And then, of course, capital deployed. Capital earned actively becomes capital invested passively. We all have to make money in order to have money to be able to accomplish these goals. Each priority executed well funds the next one down your waterfall, but you have to be honest about where you're at in the step of process.
Michael Miller: All right, so, I'll give you, just a couple more here, just quick, quick…
Michael Miller: and I don't know, Munzer can tell us at the end here if this'll go out, or if we send this out, or if you guys can re-review this, but here's just a simple case study, right? If you want to flip your way out of flipping, as an example, right? So people are like, man, I really want to build wealth, but I gotta figure out how to pay my bills. Well, okay, here's your number one active priority is active income, so flip for income.
Michael Miller: master a market, you know, use one buy box, replace the W-2. Spend the first couple of years becoming a high-volume, high-profit flipper. Then, in the next two to five years, start converting your flips into rentals, and keep doing it. One…
Michael Miller: one or two keepers a year, for the next five years will change everything about the future of your wealth building, as an example. Years 5 to 8, the rental cash flow and equity growth begin to compound, and the flipping continues to fund acquisitions. You begin to start looking at other strategies, like leveraging up 1031 exchanges, you know, refinancing and pulling equity tax-free. There's a lot of different things.
Michael Miller: And the finish line is that income has built, expenses have digressed to a point where rental income covers the bills, and you don't actually have to flip anymore. Now, do I think that that'll actually take 5 to 8 years?
Michael Miller: depends upon how aggressive you get, and how concise your goal is. I think you could do it in a couple of years, but it really just depends upon the bigger question in that third tier of Waterfall, which is how much time do I actually have to give
Michael Miller: the strategy. Here's another case study for you. If you want to be in the passive bucket, right? Say, and this is… many of my investors are in this bucket, right? I got $500,000, I don't want to do work, I want to ride into the sunset of the Riviera, or I want to keep my day job and just get some side money, or I want to grow my retirement account, whatever bucket of passivity you fall into, if your number one priority is passivity.
Michael Miller: but you've got capital available, then go place it into a vetted deal. Go put it into a fund. Go invest in an operator. Go invest in a joint venture, and get an average return. Like a private money lender, for example, backed by a piece of physical real estate, is gonna probably get somewhere right now in the 10% to 12% range. Maybe some operators are a little less, some are a little bit more.
Michael Miller: But in that 10%, as an example, that's $50,000 a year in truly passive income. That's…
Michael Miller: pretty stinkin' good for no effort or work. It's beating the market, on average, it's backed by a physical asset, and it's also underwritten against cash flow, not just market conditions. In other words, even if the value drops, it doesn't necessarily mean that your principal balance is at risk. It can be, of course, there's never no risk, but the likelihood is that the cash flow
Michael Miller: is still producing returns that can continue to provide your returns at scale while the markets shift or correct, or whatever cycle you happen to be in. You got no tenants, no contractors, no 2AM calls, and the work really happens up front, right? You gotta underwrite the operator, the deal structure, the protections, the capital does the rest. You find a really good relationship with a really good operator.
Michael Miller: And you can kind of set it and forget it for a long time and get really, really great returns, really great results.
Michael Miller: Here's a couple of my, like, mistakes, or landmines, I would say, that keep people stuck, one of which, of course, is strategy hopping, right? If you're jumping from strategy to strategy to strategy every 3 to 6 months, restarting the learning curve is a huge setback in the action-taking journey.
Michael Miller: Number two, I've talked about this a lot, trying to optimize for all three at once means that you're optimizing for nothing at all.
Michael Miller: And then ranking by what's exciting instead of what's true. I'll tell you really quickly, I have an Airbnb, it's on a lake up in Washington state. We have this beautiful lake house, multi-million dollar home. We bought it as a lifestyle investment, but I'm a real estate investor, so we're gonna get… we're gonna Airbnb it, and we're gonna get good cash flow, and it's gonna pay for us to have this beautiful vacation home that we don't, that we essentially get for free, because Airbnb is gonna pay for it.
Michael Miller: Well, here's what I'll tell you. I have learned that I hate Airbnb.
Michael Miller: I don't want to operate Airbnb. It's not my favorite strategy. I don't care about being a super host. I don't want to roll people's towels and make sure that they have warm cloth to wash their face when they walk in the front door. All of the things that come into hosting an Airbnb, we've proven to not be good at. So, here's the example. My buddy has a house on the same lake, similar amenities, similar structure, similar layout.
Michael Miller: Same exact link. Last year, he did $160,000 in Airbnb revenue.
Michael Miller: We, on the other hand, same house, same type of house, same lake, same amenities, did $90,000 or less in Airbnb revenue. What's the difference?
Michael Miller: I got excited instead of answering an honest question, is this aligned with my life's vision? The performance of the asset is not… is not because the lake is wrong, or the strategy's wrong, or the property's wrong, it's because the operator made a decision to get into something exciting, instead of honestly asking the question, do I want to be an Airbnb operator? And now I have an underperforming asset, which, for us, it works out because we wanted it anyways.
Michael Miller: And so it's just kind of offsetting the cost. But as an investment strategy, that's terrible advice, right? We… if this was my active strategy for an active part of my portfolio that I really wanted to make sure was performing well, I would be having a failing asset because I did something that was exciting, not something that was true to my life and my decisions. If you want to be the exciting Airbnb operator, like my buddy
Michael Miller: loves hosting, he loves nerding out over creating and curating vacation experiences and getting the best reviews, well, Airbnb might be perfectly aligned for you. The point is, is that it's not about what's exciting, it's about what's true. And then lastly, waiting for certainty. Man, if I could say anything loud, as loud as anything else that's been shared today, I would say this the loudest. You will never have 100% of the
Michael Miller: The people, or the answers that you need to make any actionable step forward towards your goals.
Michael Miller: You gotta go anyways.
Michael Miller: My experience has been that
Michael Miller: I have, on average, 70% of the knowledge I need to get anything done. And the rest of it, I've become an expert in, I know a guy, or I know a gal, right? You know, you got a tax question for me? I may not know the answer, but I know a guy. You got a plumbing issue problem for me? I don't know nothing about plumbing, but I know a guy. You know, the what if, what if, what if, what if, what if.
Michael Miller: What I've become obsessively, obsessively convinced of, and that I would offer you today, is this knowledge or knowing that I can solve any problem if I get the right people in the room.
Michael Miller: And it doesn't mean that you have to hire a big team, it doesn't mean that you gotta build a big institution, it just means that you gotta be willing to ask the experts for their help. And, I can't give you my experience, but I can lend you my courage, and my courage says that your knowledge is not what's stopping you from succeeding, action is. And your action is not being blocked by having 100% of what you need to know, your action is being blocked.
Michael Miller: By your… by your unwillingness to jump out of the boat and see if the water is going to hold you up as you move forward towards your goals.
Michael Miller: So here's your homework for tonight, and then I will turn it back to Munzer for Q&A. I want you to,
Michael Miller: To write it down, right? Write down your three priorities. If you're still sitting on this call, you probably already know what they are. Commit to the ranking. Get with your spouse, significant other, partner, whatever it is, and commit to the ranking.
Michael Miller: Then define the number one priority. As a number, monthly income target, net worth target, max hours per week, what is the number one priority, numerically? Name the strategy that serves that priority. Is it…
Michael Miller: active fix and flipping, or active, you know, business acquisitions, or whatever your strategy that you're interested in is. Name the one strategy
Michael Miller: That serves that priority, and take action this week.
Michael Miller: like, we have this saying called the MINS, the most important next steps. What we're not looking for is, is…
Michael Miller: home run, knock-it-out-of-the-park, full field place. What we're saying is
Michael Miller: 3-yard plays trump Hail Marys, right? Moving the ball down the field a little bit at a time trumps the Hail Mary approach, and those little bits of better, those little bits of action will compound into big results for you over time. But indecision ends the moment you give your goal or your outcome in order.
Michael Miller: All right, that's all I have for us today. If you want to connect with us, I'm on Instagram, you can email me, you can find us on YouTube. Whether you're ranking your waterfall for the first time, or you're ready to execute priority number one, I love talking to people. You can get on my Calendly, we can meet. This stuff is fun for me. I don't have anything to pitch you, I don't… it's not like a coaching program I'm trying to sell. I just love… there's an old
Michael Miller: Zig Ziglar quote that says, you can have anything you want in life if you help enough people get what they want first.
Michael Miller: And I just work really, really hard to make that true of my life, because I believe it. The way we say it in our company, one of our core values is that a culture of generosity always pays for itself.
Michael Miller: And so it's my belief that if I can help the 40 people that have been on this call today get a little bit closer to your goals, it's going to be really, really difficult for me to believe that I'm not going to be winning, too. So, feel free to reach out, I'd love to connect, love to help you. Munzer, I will turn it back over to you to wrap us up here.
Munzer Ghosheh: Michael, thanks so much. Wow, wealth of information here. I don't know about the others, but as much as I enjoyed your presentation and found it very educational, I actually love learning
Munzer Ghosheh: more about you on a personal level. I had no idea you were adopted, and your commitment to adoption, and non-for-profit. It's very admirable, and I love that. Thank you for sharing that with us. I appreciate it.
Munzer Ghosheh: So… I don't see any questions, but let's wrap it up. Let's go to the next slide and see…
Munzer Ghosheh: Yeah, let me just talk to you about a couple things real quick, guys. If you're interested in setting up your accounts with us, it's very simple, 3 easy steps, you just go online and open up the account. Takes you 5 minutes.
Munzer Ghosheh: You're funding it with either an IRA from another trustee, or a 401 plan from a previous employer.
Munzer Ghosheh: takes about 7 to 10 days, and then now you're ready to direct us to make the investment of your choice that you want to make an investment in. What I say about that is typically it takes, from A to Z about 10 to 14 days. Michael has, we've run into a couple times where
Munzer Ghosheh: you know, someone would call, and they want, investing in, let's say, ABC Investment. Okay, what's your account number? I don't have one, and I want the investment done tomorrow. I can't do it. You know, there are steps to be done. So, and usually the biggest obstacle would be moving money from one custodian to another, because no custodian is in a rush to do so. So it takes about
Munzer Ghosheh: From A to Z 10 to 14 days. Keep that in mind, please.
Munzer Ghosheh: Next, please.
Munzer Ghosheh: So, Michael has, yes, we do, we send out the replay and additional resources, so there's… there'll be a follow-up email, which would include our video replay, and the slides, and more education.
Munzer Ghosheh: We ask all of you guys on our webinar to please register for next September's webinar, State of the Union for Real Estate Investors. They're all very interesting and educational.
Munzer Ghosheh: You want more information about the self-directed IRAs, please go to our website. Purely educational, there's no selling whatsoever. Go to our Learning Center, you'll learn more about what you can and cannot do within your IRAs.
Munzer Ghosheh: Follow us on all the social media outlets for more updates as well.
Munzer Ghosheh: So, let's see if there's any questions here for us, or for you, mostly.
Munzer Ghosheh: Cody, I got a question for you, Michael. The proceeds from private equity fall in the… into the short-term capital gains? That's a question.
Michael Miller: So I would… formally, I would direct you to your CPA, but yeah, typically speaking,
Michael Miller: proceeds on short-term, you know, are viewed as capital gains, in my understanding. One thing, you know, as we're talking today, obviously through the lens of self-directed IRA, one of the benefits of using your retirement accounts for those types of investments is that you get the same tax benefits as you would from a 401 or a traditional or Roth IRA in your self-directed.
Michael Miller: things like capital gains taxes and all of that can be avoided or deferred, through the retirement accounts, but again, I would refer you to your, to your CPA to get specific advice on your financial situation.
Munzer Ghosheh: Correct, and if I may add, if it's in the context of self-directed retirement plans, everything is deferred if it's a traditional IRA, and then it's actually… if you do it in a Roth IRA, you don't have to pay any CAP gains, but
Munzer Ghosheh: My favorite statement, as Michael said, talk to your CPA, because one thing we don't give is we don't give any sort of financial or tax advice.
Munzer Ghosheh: Another question is, how do you provide asset protection.
Michael Miller: I'm assuming you're asking in… in, like, a… well, actually, I guess I don't know. If you're asking about, as a… as a… like, a private money lender, for example, your asset protection typically is in the form of a deed of trust on a particular piece of real estate. So, you know, there's a… there's about a thousand ways to structure these deals, but
Michael Miller: You know, on a traditional private money note, as an example, you're essentially getting the same asset protection that a bank would get, through the form of a deed of trust secured by a property with lenders' title insurance.
Michael Miller: You know, that's one form of securing your asset. If you're investing in other forms of assets, like, I think you would need to dive into the legal definitions. Like, if you invest in a fund, for example, or a syndication, there's a document called a private placement memorandum that will outline the security, the risks, and the outcomes of that particular fund or investment.
Michael Miller: And then you have to weigh those risks with your, you know, various forms of counsel.
Munzer Ghosheh: Great, thank you, Michael. Question is, what is the minimum investment required?
Michael Miller: every investor, every operator, every deal is different. I would say in most cases, $50,000 is pretty common as a basement entry into real estate deals. But I'll let Munzer confirm this, but as I understand it, there's no minimum… if we're just talking about getting into a self-directed IRA, there's no minimum investment that I know of there.
Munzer Ghosheh: Oh, yes, I mean, in terms of self-directed IRAs, there are no minimums. It's just… what you want to look at it, it's a cost-benefit, if you will, because there are some costs associated with fees, setting up a self-directed IRA, so at some point, it might not make sense for you to set up an account, let's say, and make a $5,000 investment.
Munzer Ghosheh: Typically, what we say is the breakeven is at least $20,000.
Munzer Ghosheh: So… and we see a lot of deals, as Mike alluded to, between the minimum $25,000 up to maybe even $100,000 or $150,000.
Munzer Ghosheh: Any more questions?
Munzer Ghosheh: I don't see… I have one for you, Michael, real quick. I'm just curious, because I've been in this for, it seems like forever, right, in the self-directed IRA world. When we first started, and I talked to investment sponsors, it was them primarily trying to promote
Munzer Ghosheh: the concept of, hey, you know, you can use your self-directed IRA to invest in my offerings or deals. And a lot of them would have a blank face, they have no idea what they're talking about back then.
Munzer Ghosheh: Are you seeing still that, or are you getting clients actually coming to you with IRA funds or retirement plans and saying, hey, Michael, I want to use my IRA
Munzer Ghosheh: or 401K to invest in your deals? Or are you still actively promoting it yourself?
Michael Miller: I have almost never promoted. We've largely been word-of-mouth, referral-based.
Michael Miller: You know, I would say in the space, I see both.
Michael Miller: The main difference is the structure of the structure of the investment vehicle. Some of them cannot be publicly marketed, depending upon their SEC or their Reg D filing, and some of them can be. And so there's some pretty clear lines in real estate land on what we can promote and what we can't promote publicly.
Michael Miller: I would still say that it's true that the average investor would see a PPM and draw a blank stare. It's my experience and my belief, or at least in my company, that people are not primarily investing in a deal, they're investing first in an operator.
Michael Miller: and for those reasons, that's why we've kind of coined this Main Street mission. I come from Wall Street land. I don't have an interest in having a thousand investors. I'm happy with the 30 or 40 of them that I have.
Michael Miller: You know, with the strategies we have and what we're building, I want to be able to pick up the phone and have a conversation with any one of them, and if I grow to a point where that's impossible to do, then I feel like I'm not helping the Main Street investor. And so, I guess to answer your question more concisely, Munzer, I think it depends upon the operator.
Michael Miller: Some of the big boys are absolutely out there marketing and promoting, and people are contributing their self-directeds to all sorts of different types of funds, but in our world, we don't really market or promote at all.
Munzer Ghosheh: Great, thank you. Let's take us to the last slide, please, Michael, as we, as we finish off here, and this way you have,
Munzer Ghosheh: For everyone out there, you have our information to stay connected. Any questions regarding self-directed retirement plans and so on, please reach out to me directly. Any questions about today's presentation, or anything else for that matter, please,
Munzer Ghosheh: reach out to Michael here. I do want to thank Michael for
Munzer Ghosheh: this very educational hour. And, thank you all for joining us, and we hope to see you in next month's webinar. Thank you so much, everyone.
Michael Miller: Thanks, guys.