How Rich People Generate “Mailbox Money” with Mauricio Rauld

You're listening to Freedom Fast lane, presented by capitalism.com this is the show about building businesses and investing the profits so that you can live life on your terms. And now, your host, the future owner of the Cleveland Indians, Ryan Daniel Moran.

Hey, fastlaners, Ryan here. Welcome to Freedom Fast Lane. Today we're going to be joined by someone that I was put in touch with a few years ago when the Indians, the Cleveland Indians were actually selling part of the organization, and someone put us in touch because they thought it might be a fit for me to raise the money and make a bid to buy a portion of the Cleveland Indians. Now, the Indians ended up going with a private investment rather than seeking syndications. But I met this individual, and his name is Mauricio Ruled. And he really tweaked my brain on how raising money works, on how to generate passive income, and really showed me that a lot more things are possible than what I realized were possible. Now, I'm having Mauricio on the show now because Mauricio has recently made a career change in which he has given up his law practice in order to work with an organization that specializes in alternative assets with the purpose of generating passive income. Passive income is obviously the sexy phrase that I don't really think exists. I think you make your money in business and you invest your money for your passive income. So I mentioned Mike Dillard in this podcast, and I had a great conversation with Mike several months back in which he said, you know, I specialize in what I'm good at, and then I give my money to people who specialize in what they're really good at. And I thought that was a really good reframe. And alongside that, I had a nice conversation with my buddy Jay Massey, who invests in real estate. And he says behind every investment is a business. So if the business is not run well, then there's no purpose in you being a part of that investment. So a lot of people want to go after cool ways that they think is going to make them passive income, but in reality, they don't want to operate another business. They don't want to have another thing hanging over their head. What they really want is to be good at what they're good at and then automate their income through other investments that are well run. Now, full disclosure, I am participating in the investment opportunity that Mauricio has. So Mauricio has this alternative asset investment fund. He's part of a team that operates and automates that for investors. Full disclosure, I am participating in their next raise But I wanted to have Mauricio on to kind of get the psychology and the mentality behind both passive income and what the business operations look like behind an investment fund that specializes in passive income. One of the things that I think you'll find interesting, and this has become kind of a theme as we talk more and more about investing here on Freedom Fastlane, is that the investor in this case Mauricio, is agnostic in terms of what the asset class is. So it doesn't matter if it's real estate or it is websites or stocks. They have their criteria in which they search for and they don't care how they get to their end result as long as it meets their criteria. So in Mauricio's case, it's a lot of real estate. And he'll talk about why at different times in certain economic cycles, certain types of real estate make sense and others don't. And he'll talk about why the one that they're looking at and the one that they've become a top 100 business in the last three years is the one that they specialize in right now. But if the economy were to change, they would just move. They would just go to a different asset class, which I thought was really interesting. A lot of people want to stake their claim and say, this is what I do. This is where I become an expert. But in reality, what you ultimately want is cash flow and wealth. And so I thought it was an interesting reframe from Mauricio to talk about how they're willing to move wherever the market goes. So we talk about that mentality. We talk about where he thinks the economy is going. We talk about how investors are responding to today's economic climate. We talk about sources of passive income, we talk about raising money, and we talk about tax write offs. How do you legitimately reduce your tax burden? We get a little bit meaty and in the weeds when we talk about taxes, but I think you should stick with it because Mauricio has really changed my mind and my brain and how I look at investment opportunities and how I analyze certain decisions. So I hope that you have the same change as a result of listening to this podcast with Mauricio. Raul.

Mauricio rauld welcome to Freedom Fast Lane. Thanks for hanging out with us.

Hey, thanks for having me, Ryan.

Hey, you know, we met because someone thought that we should put together a syndication to buy the Cleveland Indians, which is awesome. And as I got to know you more and more discovered that you were kind of the go to guy when it comes to everyone that I know in the rich dad education community. All of my friends who raise money go to Mauricio in order to structure things. It's like all my rich friends know Mauricio. So. So tell me what your superpower is and why you know everyone.

Well, Mike, you know, I'm always uncomfortable with the superpower term, but what I've been doing in the past is I've been helping basically private investment funds raise money for private investors. And it's usually in the real estate space. They want to go do bigger deals. But it doesn't have to be real estate. In your case, it happened to be the Cleveland Indians, which was a nice little change. But that's what I've been doing for the past, you know, 10 years, is just raised over, helped clients raise over $100 million. And that's kind of how I got to know a lot of these, a lot of these folks.

And what type of deals did that usually look like? I know it's real estate, but is this, you know, $10 million acquisitions is this big multifamily complexes for the most part. What kind of people are coming to you?

Yeah, most of them are real estate investors, mostly in the multifamily space. Apartments essentially. That's been a pretty attractive asset class over five or ten years. And so it's either a big fund that just raises 5, 10, $20 million to go take down a bunch of multifamily apartments, or it's maybe a one off deal where, hey, I've got to go buy this apartment complex that costs $15 million. I'm going to get a 10 million dollar loan and I need to go raise the other five. So it takes several formats, but it's either a fund or it's a project specific raise.

And they come to you because your background is in structuring it so that everyone's protected. Or why do they come to Mauricio?

Yeah, so many people don't realize that you're actually selling a security when you're raising money from other people. And so you've got to comply with the securities laws, which is a whole place that's kind of a black box, so to speak. I just make sure that when you're raising money, you're doing it safely, you're doing it legally, you're disclosing everything to your investors, making sure their best interest is at heart, and basically that you don't end up like Bernie Madoff and end up in a five by three cell.

You know, I've Never told you this, Mauricio, but you kind of changed my life in the sense of you gave me a new paradigm through which to operate. Because, you know, you go through life and you don't know what you don't know. And sometimes when you just shine a light into a new era, you're like, oh, that's how that works. And just seeing how you are able to basically say, yeah, there's a way to structure that, no problem. Let me handle that. You know, I've always said, I want to buy the Cleveland Indians or I want to buy businesses. And so when both of those things became opportunities and I came to you and you said, oh, yeah, you can just structure it this way, it was like, oh, this is a lot simpler than I expected. So I know we're talking super high level, but it was like a flashlight got shined on a blind spot of mine, and it wasn't a blind spot anymore. And I think that's your superpower.

Wow. Well, thank you for that. I didn't know that, and I'm flattered, but. Yeah. I mean, at the end of the day, you don't want to hear no. Right? You don't want to hear, we can't do this. I can't do that. I always like to ask a better question, which is, how can we do this? How can we structure it? If you did know, what would you do? You know, all those better questions than, oh, it can't be done, or it's too hard, or this is too complicated, you know, it's impossible. I always like to switch that and say, how can we get this done?

We were talking a couple days ago, and you said, you know, you've kind of made a pivot in your career lately from the attorney and legal side to you just love passive income, which I like passive income, too. The story that I've created in my head, and you can tell me if I'm right or wrong, is that you helped all of these other people raise money and saw that they were investing into passive income sources. And finally you said, all right, I want me some of this. Is that what happened?

Yeah, enough is enough. Absolutely. It's like I'm helping all these guys become, you know, really successful and help them raise money and. And add a lot of value not only to their investors, but to the, you know, to the communities that they're, you know, investing in and turning around. I mean, a lot of these buildings are dilapidated, and they go in there and they fix them and they. They improve the quality for everyone. And they're making out. Okay. And I'm, I'm helping them and I'm a part of that team. Right. I'm in the legal piece. But, you know, a lot of times the legal piece isn't the sexiest. And it's like, hey, I want to be on the other side of that table and I want to, I want to be the one raising capital and helping out investors and helping out the communities that we're investing in.

So you were part of the legal side of watching all these deals happen and seeing all this passive income. And then you're like, all right, I want to put together my own deals. So what did you look for when you said, okay, I see all these people getting rich or getting passive income or being successful, I want to do this. You've got your own network. How did you actually go about saying, this is the route I'm going to go after to get my mailbox money? Yeah.

I mean, if you want to just take a quick step back for a second, the first challenge is just realizing that it's an issue. Right. I mean, you and I have talked about the fact that we're living in Belize. You know that story, Right. That I was basically living in Belize for two years.

Yeah.

Literally two months ago. Was living in Belize, of all places. Right. So I'm living in what appeared to be, at least from the outside, like I had had it all down. And I'm living in Belize. I'm living on this beautiful island, you know, riding around in golf carts and 80, 80 degree turquoise waters to have an amazing family, got two beautiful daughters and a rock star wife. I have this thriving law practice helping other people go raise capital and help these private investment funds represented all these. I represented the three largest real estate developers down in Belize. And really the way we met through these contacts, I'm hanging out with some pretty amazing people. Right. I mean, Robert Kiyosaki, rich dad advisor. Mike Dillard, who you and I know very well. I was his EVG advisor from the Elevation group days, helped him with a lot of the legal stuff. Ken McElroy, who's probably in my opinion, the number one multifamily investor out there. He's one of the Rich dad advisors. Cal Wilson, you've heard of. Everybody's heard of Jim Rohn. Cal Wilson is the guy behind Jim Rohn, 18 year business partner. And even you, Ryan. I'm hanging out. Ryan Daniel Moran, the one and only.

Thank you for including me in that group. I appreciate it.

And you know the real estate Guys, I mean I'm just part of that group and I don't mean to drop names, but it's just, it really looked like I had it right. I've got the story, you know, from at least from a societal standpoint, I've got it. But my struggle focused around being trapped. And I think that was one of the things that I am happy about and really proud that I was able to identify that because at least professionally and financially, because don't get me wrong, from a family standpoint, I mean, I hit the lottery, right? I mean I had that part down. You know, we could probably do a whole podcast on that and happy to do it. But professionally I just felt like I wasn't getting ahead financially. Like we mentioned, we were just helping all these people get ahead. I'm like a one man show, which you know how that works in terms of being limited, it's difficult to scale. Really wasn't building my ex neck, really wasn't following the advice that all of my mentors were telling me to. I was just kind of doing the thing and it just at some point clicked that my motto in life is work hard, play harder. And I wasn't doing that. I was not playing hard, working harder. I was just working hard and not really having a good time. So anyway, that's where I realized, hey, I've kind of screwed things up. I've been following this traditional path and I need a change. And that's where I basically decided to start investing in alternative assets. Get away from Wall street, get away from IRAs, that traditional kind of BS that we've all been sold and started to look and invest in alternative assets. And it just happens to be that my good buddy Andrew had spent the last couple of years building one of these largest virtual companies that invest in alternative assets. And so he asked me to come on board and join his team, which again, for somebody who's a solopreneur and doesn't really have a team and is trying to do it all on his own to go into a brand new world where there's a, a rock star team in place and just processes that are down and systems that are down, it was just an opportunity I could not pass up. And I basically jumped with two feet in and left the legal world and joined my good friend Andrew.

So some people would say that you had kind of made it. You know, you were, you're in Belize riding around in golf carts. What about the opportunity to join a company that was, was investing in alternative assets with the purpose of Getting passive income prompted you to leave this cushy life in Belize in order to go do something different. What was that moment in which you decided to make that shift?

I think the shift happens. You know, I'm really, I think, like you, really into personal development. I've got pretty big goals. You know, some people want to buy the Cleveland Indians, some people want to buy the Jets. You know, I've got some pretty big goals. And I just realized me helping out other people get to where they want to be wasn't the right path for me. And I needed to make the switch and become one of those people that are out there raising the capital, helping investors. And again, if you provide enough value to people, you can have whatever you want. I think Zig Ziglar said something to that effect. That's what I wanted to do. If I was going to reach my goals, my lofty goals, I needed to step out of the solopreneur world and go join a world class team with world class systems and world class ideas, as opposed to being in my cocoon in Belize, which don't get me wrong, I love Belize. I'm going to spend, I got married in Belize, I'm going to spend a good portion of my life in Belize. But that's not where the business opportunity was going to be.

So tell me about alternative assets. That's sexy, but I have no idea what it means. So we are looking for cash flow. I know that, but what's an alternative asset and how do you determine if something is going to be a fit for you in this new venture?

Yeah, so anything that's not tied to Wall street, which has its own issues. Right. I mean, to me, Wall street is something that I would not want to be a part of, you know, if my life depended on it. Anything that's not a traditional, any paper asset, a lot of people just get involved in basically stocks, mutual funds, anything like that. In the Wall street world, we stay away from that. So we look for real assets, really, real estate, precious metals, anything I can actually physically hold. And a lot of things multifamily, for example, multifamily apartments is definitely an alternative asset that we typically enjoy and love. The challenge with multifamily right now is it's really overpriced. You're kind of reaching the top of the market. If you talk to any of the gurus in that space. And again, I've been hanging out with quite a few of them, they're not necessarily buying any multifamily. They're kind of waiting out because we are kind of at the top of the market. We were just hanging out last week in New York for the back room, which, by the way, is a fricking amazing event. So congratulations. In the back room. We had a multifamily investor there, and he was selling. So multifamily is not there right now. It might be there in the future, but for now, we're kind of passing on multifamily. Same with sort of the single family, the one. The houses here and there. That's a great alternative asset. But again, we're kind of reaching those 2007 levels where prices are just really in a bubble, in our opinion. And it's really. With single family homes, it's really difficult to scale.

Right.

You're buying one house at a time. Multifamily is nice because you can go buy 100 units or 200 units at a time. But oddly enough, what still works at this point in alternative assets and we really love is the mobile home parks. That's an alternative asset that not too many people know about, but that's something that's really attractive and is producing a ton of cash flow for us, which is what we love.

And you kind of pulled that out of nowhere. Mobile home parks, did you have a background in this or did you just say, let's look at the landscape right now. This is the only asset class that makes sense for us.

I have the advantage of coming on board now to an established team. And so the founder of our company, Andrew, had spent the last two years building this company and focused on mobile home parks. And he basically built this thing from zero to a top 100 owner operator in literally the last two years. Just an amazing feat. He was already in that space. And so when I came on board, you know, I was agreeing with him in terms of, hey, multifamily is overpriced. Single family is overpriced. You know, I like precious metals a lot. I'm still, you know, I'm still acquiring precious metals, but, you know, they don't throw off any cash flow, really. That's more. That's more of an insurance policy. It's a little bit of a hedge. And so when he showed me mobile home parks, and once I understood that model and understood that asset class, I was like, wow, this is pretty amazing. And that's. I'm all in.

But to be clear, you are essentially, you're agnostic as far as what the vehicle is you're after, the end result. Is that correct?

Absolutely. We're after an asset that, number one, we can control, which is something we can't do when we're investing in the stock market and Wall street or what have you, you basically hand over your money and, you know, who knows what's going to happen to it. So we can control the asset, and it's got to be real. It's got to be a real asset. Again, I tend to gravitate towards the real estate world because that's what my background is. But I'm agnostic as to mobile home. In years, mobile home parks might be a thing that we move on from, and multifamily is back in the play. I mean, we're really looking at what's the vehicle that can provide us, A, the best opportunity for us to add value and B, the best opportunity to receive cash flow for our investors, especially investors who really are looking for passive income and they're too busy building their own empires that they don't have time to go research and spend the next two years building a team and building systems in place and researching markets. They just want to put something and get the mailbox money, which we all love.

So your overall strategy is to raise the money from investors and entrepreneurs and then deploy that into real assets that have the highest cash flow. And right now that means mobile home parks. But that's not necessarily. You're not in the mobile home business, you're in the cash flow business, correct?

Exactly. 100% correct.

Now, why do you go out and raise money versus just doing debt financing or doing something else? Why do you partner with entrepreneurs and with investors?

Well, raising money can be debt as well. Everybody, I think, thinks of that. You can raise equity, you can raise debt. And again, going back to our initial discussion, you can structure it however you want.

Right.

And so that's, you know, I put my creative hat on, but we go after traditional. And when I say traditional, you know, the banks and the traditional lenders, that's still part of the strategy, but they're obviously not going to be lending 100% of the value of the property or the mobile home. And so we then go out and raise the capital for the down payment and the other cost in order to turn these things around. It still includes the traditional lenders, but the equity piece or the investor piece is what allows us to go scale this and acquire a lot more parks that our goal is, as I mentioned, we're currently top 100. We want to get to top 10 here in the next three to five years. We need help to do that.

Tell Me why you went. At least for right now, you're focusing on mobile home parks. Tell me about, tell me about that asset class. That's something I don't know much about.

Yeah, I mean, I love again, after spending some time researching and getting to know this and being in the business, I mean, there's really, to me, three reasons why I love mobile home parks. One is it's real estate. Right? So all the reasons you have that we all, at least most of the people I know, love real estate, Mobile home parks checks that box. You've got the leverage. You've got the fact that it's not Wall street, it's not paper assets. You have all those amazing tax benefits from real estate that gets passed on with the mobile home parks. And with mobile home parks, you actually sometimes can actually have better tax ramifications than traditional investing. Because my mobile home parks have roads. What multifamily complex do you know that has a mile or two of roads that we can depreciate? We all know real estate is probably the number one vehicle for creating the most millionaires. So it checks that box, it's real estate. They're cash cows. At first, I was shying away from that term, but they're cash cow. I mean, there's such a high demand for affordable housing, specifically mobile homes. Unfortunately, 50% of Americans are living on $600 a week or less. And we sometimes forget that and we get lost in what we're doing. But $600 a week is not a lot of money. And so a lot of people are really getting forced down to affordable housing because they can't afford to spend that much money on their living situation. And so there's a huge demand for the affordable housing and mobile homes, but there isn't the supply. They're not building any more mobile home parts, which you'd think would be a natural market cycle. Very low expenses for us. And part of that reason is because we have the resident actually own their own mobile home. So we don't, you know, we have the pride of ownership. Our expense ratios are pretty low compared to, you know, other asset classes. And it's really, I like to say it's like an imperfect market, which is where the opportunities are. There's so many mom and pop mobile home park owners who are kind of legacy owners. They don't really want to have the park. They kind of just got stuck with it. And, you know, they don't have the money to, you know, to go fix up the park, which is necessary to rehab things and put the marketing into it. And they, and they just, you know, it's very. It's a very fragmented industry. And so we're trying to consolidate that and pick up as many of these parks as we can here in the near future. And then the third reason is Uncle Warren. Warren Buffett is the number one player in the space. He owns Clayton Homes, which is the number one manufacturer. They actually manufacture the mobile homes. And he owns 21st Mortgage, which is the lending arm of Clayton. And So they have 8 billion with a B in outstanding loans in the mobile home park industry. So, you know, if Uncle Warren's in this thing, that's a good sign. And we recently, you know, we partner with him. So we're partnered now with Clayton and 21st. They'll be bringing in. We'll be bringing in brand new homes with Clayton and having their finance in place for our residences. So that's what kind of gets me pumped about mobile home parks.

So that's what has you pumped about mobile home parks right now. And we talked a little bit about real estate being kind of at the top of the market. You know, we had Jonathan Twombly on the show. He talked about the fact that he's not buying anything right now. He's more. He's selling. I was on the phone with Ken McElroy a few weeks ago and he was like, it's probably gonna be a couple years before I do another deal. So what is your take on the overall economy right now? Where do you see it going over the next one to three years?

I am in general, pretty pessimistic. I mean, we've been now on a pretty good run for the last seven, eight years. Right. Since the last financial. Not the last. As a result of the last financial crisis. And I just feel it's going to happen pretty soon here. There's going to be some kind of downturn. We're just printing way too much money. We're getting into debt. That's not really the recipe for wealth. You don't want to just borrow and spend. You want to actually produce and invest. And we're doing it reverse. So my expectation is we're going to have a downturn. That's why I don't want to be in multifamily. That's not why I want to be in real estate. But mobile home parks, they're really. Because they're at the lower end. I mean, think about it. What's below mobile home parks? You're basically either living out of your car or you're homeless. I mean, unfortunately there isn't that much further down to go. And so when everybody gets squeezed down, when the really A plus players get down to A or A minus and you make your way down the cycle, mobile home parks become kind of recession proof, right? Because even though everything's going into hell in a handbasket at that lower level, it doesn't affect them as much for the wrong reasons. Right. It's because they're in an unfortunate situation, but it doesn't affect them as much as it would be. If you're buying a, you know, a multimillion dollar high rise apartment building in.

Manhattan right now, some people have a little bit of a, maybe a negative opinion of owning mobile home parks. What's your opinion of that?

That's the original opinion that most people have. And the best I can do is educate them. I mean, these are hardworking residences that we have. They're just like everybody else. We go in there, we really try our best to improve that community. We take mobile home parks again from legacy owners that just don't have the money to improve those parks. We go in there and we improve them and we just increase the pride of ownership that these residents have. And one of the satisfying things I think in this business is because of the lending models, either Uncle Warren or some private lending that we have in place for these guys, we can actually show them how they can end up owning their own mobile home over the next five years for the same price and sometimes even cheaper than renting. At the end of five years, they'll end up owning their own mobile home and they're just essentially leasing the space from us, the mobile home park. But that's something that's satisfying to be able to help them around and just kind of do a little bit of education and show them how they can be owners and not just renters for the rest of their lives.

One of the things that I have learned, and I thought this was put really well at one of our investment panels, is that behind every investment is a business. There really is no passive income. There are passive income for individuals, but really all money is at work in some way and there's a business behind every source of income. So in your case, you've partnered with a team that is basically building the business of right now, mobile home parks, of going after sources of income. You tell me a little bit about the team behind this business because so many people say I'm going to invest in real estate because it's going to be passive income. And they discover that it's not really all that passive. So tell me about the operations and the team behind what you guys do.

This is definitely not a passive. At our level anyway, we try and make it passive for the investors. But at our level we've got a really big team and processes and systems in place. I mean we've got about 75 to 100 people working for us. We've got a construction company that will go in and actually rehab units and turn these parts around from a construction standpoint. So we brought in a world class construction person who's running our construction company, which you met, Mike. We have a national property management company because it's not like multifamily. You can't just go into any market, buy a mobile home, park, park and then call the property manager to go manage the park for you. They don't exist. And so we've had to kind of create our own management company. And so we have an in house property management company that can manage in any state that we're in. Right now we're in eight states and we're expanding that a little bit. We don't want to be in every state because some states don't make sense. We've got a national property management company, we've got a team of executives. We've just hired our cfo. I mean it's a pretty big team. But most importantly, it's the right people on the team. Right. We always talk about how important the team is. It's important to have the right people on the bus, so to speak. But it's also important to have the right people in the right seats on the bus. And I feel like that's what we've got here as we go full speed ahead here from top 100 to top 10 here pretty quickly.

So tell me how you actually are acquiring all these properties. You've got a big operation in place. It sounds like you're going to need serious revenues to be able to maintain that. How are you going out and actually buying the cash flow? Yeah.

So I mean it starts with a great acquisition team.

Right.

So we've got a full time acquisition team that's just sourcing deals. We work with a lot of brokers, we've got a couple of off market deals. But it's just like any other multifamily. You work with relationships. We've got obviously our broker and we've got our criteria right. We don't just go buy anything that's out there geographically. It's got to make sense. We aren't buying very many homes in Manhattan or California. Right. There's just some marketplaces that don't make sense. But there are certain criteria that we have and we have systems in place and we source those and we go through those criteria. And at the end of every period, we have our acquisition guy, we sit down with our acquisition guy, he shows us what's out there and if it makes sense for our investors and for what we're trying to accomplish, then we make an offer.

Tell me a little about the economics and the financials behind it because if you. I know what it's like having a team. I know what it's like running a business. So how does the company actually make money? At the end of the day, we.

Partner with our investors, right. So I mean, we go alongside the investors. So anytime any private fund raises capital, there's obviously some, some management fees that we get paid just for basically running, running the operations. Right. There's, there's obviously a, an expense to putting this fund together or acquiring your mobile home park. So there's certainly some fees that go to cover that. At the end of the day, we eat, so to speak, when the investors eat. So if there's cash flow, we'll split the cash flow with the investors. Whatever the percentage makes sense in a particular deal. And certainly most of our compensation really happens on the back end. Once we've added a ton of value to a park and fast forward two to three years and we're in a position to exit. That's where we take most of our compensation on the back end. Once we've actually succeeded, if there's no success, then we're not just going to, you know, charge a bunch of fees and live off those we eat. When the project exits, it's successful investors have been made whole, they've got a nice return and we basically partner with our investors and split that with the investors.

So you keep the lights on with some fees and you share in some of the profits with your investors. But where you get your payday is at the end of doing all the work to improve a property's value and then either selling it or having higher cash flow flows when that has improved.

Our motto here, we try and add a ton of value. We really do specialize in acquiring kind of dilapidated or low occupancy parks because again, it's not that they're bad deals, it's just that these legacy owners don't have the capital or even the desire to fix them and turn them around. We go in there, turn them around and we create a ton of value of increasing occupancy, increasing revenues for the parks, and. And we get rewarded with that when three years down the line, we can then get traditional financing or maybe another buyer who buys us out at a much higher multiple. Obviously, because now it's a stabilized park, it's throwing off a ton of cash flow. People are attracted to that. As opposed to something that might not be spinning off too much cash flow at the beginning because it's only 30 or 40% occupied, then that's not as appealing. It's a little bit dirtier. You got to roll up your sleeves and get work done. We do the dirty work and then either flip it to somebody who doesn't want to do the dirty work or get a refinance and get a traditional lender in there to cash us out.

What does a traditional. And if we can't talk about this because of whatever regulations exist in the world, I understand, but what does a traditional arrangement with your investors usually look like? When you raise money, what does that arrangement usually look like with the investor?

It depends. Most of the time it's not about us, right? It's about the investor. What does the investor want? Most of the time, the investor really cares about mailbox money and cash flow. And so the arrangement with the investor in that position is almost like a note, right? Hey, you invest on the fund, you're going to get a 10% return, 12% return. That's going to be truly passive, right? You're not going to worry about doing any work once you do your initial due diligence. And we should probably talk about that in a second. But once you do your due diligence and you make the investment, then you go back to building your empire and not worrying about this and just opening your mailbox every month and getting a check. And that's the model we like to use for investors who are interested in cash flow. Other investors, for example, if investors have money tied up in an IRA and an individual retirement account, which a lot of people don't realize, you can use that to go buy real estate. They don't care about the cash flow because they're not going to see it for the next 20 or 30 years. And so they may be more interested on, hey, don't give me any cash flow. Just give me a bunch of equity on the back end. Once you sell it and you get a big chunk of money, give it to me and I'll put it back in my IRA and grow my ira. That way there's no one size fits all. But it's either a cash flow model where you're just getting a fixed rate of return, or it's more of an equity deal if that's what the investor is looking for.

I pushed back against something privately and you came back to me and proved me wrong on something. I'd like for you to talk about the depreciation pass through. When I first heard what you were doing, I was like, well, you know, you're getting all this depreciation, the investor doesn't get any of this depreciation. And then you went, surprise. Would you tell me a little bit about that? Yeah.

When you said that, I said surprise. But you know, let's just be clear. I'm not a tax attorney and I'm not a tax expert, but I have a pretty darn good team in place and I've got a world class tax person on my team. And so I went out and met with them and they said, no, absolutely we can do it. Because even though it's structured, again being creative, even though it's structured like a note where you're getting that return month in and month out, it's not a note. You are actually an owner of this fund. You invest in the fund, you become a 1%, 3%, 5%, whatever the investment amount, you become a part owner of that fund and therefore you become a part owner of this real estate. I mean not directly, but through these companies. And so all that depreciation, all those tax benefits that the asset throws off, that goes in through the entities you get to participate in. And it didn't sound right when you said it. And I said, hey, let me go talk to my good friends over at Provision. And, and sure enough, I was kind of proven right.

Yeah. So tell me what that means. I've worked with funds in the past where I've invested and then you know, I get my money and it's great, but I have to classify that as normal income. So how is it different if you're an owner of shares in a real estate backed company like you guys, why is that different?

Yeah, in this case you get all the depreciation benefits that you get by owning real estate directly. We can pass that through to the investor because they're equity investors, meaning that.

There'S going to be a nice write off to offset depreciation.

And not to get, not to geek out on you too much, Ryan, but I mean essentially you are claiming on paper and this is all, obviously the IRS wants you to do this, but you're claiming on paper that your asset is losing value, even though we all know the asset is improving in value. Real estate typically goes up, but from a papers perspective, it looks like you're losing money. Just like you're depreciating a piece of equipment. You buy a printer, you buy some kind of machinery for your business, you get to depreciate. Every year that machine loses value. And at some point, after 10, 15, 20 years, the thing is worthless. You throw it away. Same with real estate. Every year, your real estate becomes worth less and less until at one point you have to throw it away. Except that's not the case. The real estate really is going up every year and it's adding more cash flow to your pocket. But from a paper standpoint, you get to depreciate it and act like it's losing money. So from a tax perspective, you capture that differential, that delta. So you have income coming in, but you on paper look like you actually lost a little bit of money. So you don't have to claim as much when it comes to tax time.

So does that mean that the money that you're getting from the investment ends up being tax free? Does that depend on the scenario? What does it actually mean for you and the investor?

Man, you definitely need to check with your professional, right, Your tax professional, all that stuff. So, but in this particular, on the depreciation, it's not tax free, right? That's just you're getting more cash than it looks like you made. But there are ways that you can get funds tax free. And that typically has to do. When you do a refinance and not to get into too much detail, but when you refinance something and you pull out cash from a debt piece, that debt is not considered income.

I speak with Mike Dillard a few months ago and I was like, mike, what's your investment strategy? And Mike was like, my investment strategy is I go to people who are experts in something and I invest in them. So I've stopped trying to figure out real estate and owning a big empire. I just look for people who invest in real estate and work with their deals. So I'm looking at this from like the investor standpoint. All right, cool. There's a fixed rate of return with what you do. You invest in this asset class. That looks pretty solid right now. Well, how does that depreciation offset the income that I would normally get? Does that mean from the investor's standpoint that any cash flow I'm going to participate in becomes tax free? Does that mean that some of it is offset.

Some of it is offset. So you get to claim on your tax return that you've lost a portion of that, when in reality you haven't. And so you get to pocket the money. But from a tax return you get to write off a portion of that because again, the government assumes that your property is losing value every year, but it's really not. It's really a paper loss. Think of it as that. It's a paper loss.

Yeah. So if I invest a million dollars in And I have $120,000 in, quote, passive income, the depreciation might eliminate 30 to 50,000 of that. So part of it is now on paper, it looks like I've only made $60,000. Ish. So my tax burden is much less than it would be if it was if I had made that money in business or if I had made that W2 employee. Correct.

And that. But that's.

We just lost everyone. But all I heard, all I heard was tax free money. And that's all I care about.

That's why it's critical. Ryan, I know you preached that you've got to have a really good tax person on your team. We certainly have one. But everyone should have a. When you're investing and you're doing something outside of a W2, have a really good tax person. They will make you money, will not cost you money.

What's exciting to you about what you're working on? Because it's a very different life to go from living, living in Belize to now being an entrepreneur in a company that specializes in going out and getting passive income from alternative assets. So you have this new venture. What is exciting to you about it?

I'm excited about being with a world class team first and foremost. Again, I was kind of doing this on my own, kind of a solopreneur. Didn't really get to talk to too many people other than phone calls. And so being in an environment where you're hanging around really smart people, that to me was very important. And just building something right. I mean, Andrew built this thing from zero to top 100 in two years. We're going to go from top 100 to top 10 in the next three to five years. That's a big goal, but it's an exciting goal and there's a path to it. And just to me, designing that, I'm all about designing stuff and I want to design my future, our future, and putting this design in place and seeing how we can get from where we are today to where we want to be where is really a challenging but also super exciting.

Tell me a little bit about the arrangement that you have with investors, because I know you're looking for more investors to take you from 100 to that top 10. So what do those arrangements often look like and how should people reach out if they want to participate?

We just recently closed a $2 million raise about three weeks ago. But we've got a new fund that's opening up here. I believe it's a week from next Friday. But. But you and I talked about sort of an exclusive for your audience, which I think we're willing to do. But right now, our fund is going to be the mailbox money fund. Right. You invest in the deal, do your due diligence, but once you invest in the deal, you're just going to get your 10, 12% return depending on the amount you invest. It's just going to be mailbox that we send every single month. Not every quarter, not every year. Every month you will get money in your mailbox. Of course, it's not mailbox anymore.

Right.

It's just a. It's an ach wire transfer into your account every month for that amount. Either a 10% or 12%, depending on the amount that you're investing.

Yeah. So full disclosure, I am participating in that. So I'm totally biased. I believe in making decisions, investments based on the team, and this is a team that, that I believe in. But full disclosure, just want to say I am participating with these guys in their raise. So do your own due diligence. But. But I'm totally biased in what we're doing and what we're talking about.

And speaking of due diligence, I mean, that's kind of an important piece. I mean, that's really where kind of the only work you need to do is do a due diligence. So, you know, me having my attorney hat on as always. I mean, I've got a sort of a due diligence checklist that I think everybody should go through, you know, in analyzing and making a decision into investing into a particular deal. And I'm happy to share that with your audience. It's just a due diligence checklist. And people can go to privateinvestmentguide.com it's privateinvestmentguide.com they can get a copy of that. And also that's probably the best way to reach out to us and we'll get your information there and we'll reach out to you guys.

That was going to be my next Question. How do people get ahold of you? So just go to privateinvestmentguide.com Yep.

Get your info there. We'll send you the report and then we'll reach out to you and see what the level of interest is.

Well, Mauricio, it's always good to hang out with smart people. And you know, you're hanging out with smart people and they sometimes say things that you don't understand. It's why I agree with Mike Dillard on, you know, I believe in making money in business and investing with people who know what they're doing. And I'm really excited for what you guys are doing. So thanks for hanging out with us at Freedom Fast Lane.

Thanks for having me, Ryan. Appreciate it.

Hey, so once again, I can't stress enough the full disclosure of I am participating in Mauricio's latest raise. But please do your own due diligence. Obviously when you are considering an investment, you should do your own research. But full disclosure. Just want to say again and again, I have a bias and I have an incentive in the performance of their fund and their success because I am an investor alongside them. The reason why I decided to invest with them was because I believe in real estate. I want tax efficient means to get passive income and I want to be able to focus on doubling down on my business and investing in areas where I don't have to think. I used to buy a lot of single families. I would like to be buying more single families, but right now I haven't bought a house in about a year. I used to really like multifamily real estate. I still do. It's just I am having a really hard time at this point in the economic cycle finding anything that meets the numbers that I want. So instead I have turned to investment funds and businesses that specialize in this stuff so they can do what they do best. And I serve as the capital partner behind this. I've raised money in the past to buy businesses. I've invested with businesses in the past to get passive returns. And I've found that that is how really wealthy people get incredible things done. Some people want passive income. Some people need capital in order to do what they do best. Also, Mauricio is one of our backroom members, so he's at our quarterly events where some of the best capitalists and entrepreneurs get together and talk about investing, talk about business, talk about scale, talk about hiring. And we have a really good time at the same time. So if you are pacing at least $2 million a year in your business or you have a seven figure net worth, you can apply for the back room to hang out with people like Mauricio and myself over@freedomfastlane.com backroom. So once again I have a financial incentive in the performance of their fund. So do your own due diligence before deciding to do any investment yourself. Hey, I hope you enjoyed today's class with Mauricio on passive income and why really successful people use leverage in order to buy passive income assets. If you enjoyed this, let me know on facebook over@facebook.com ryandanielmoran and if you know somebody who is making money in business and needs areas to invest in, this has been kind of something I've been focusing on here on the podcast lately. So send him over to itunes to subscribe to Freedom Fast Lane. As always, I appreciate your support of the show. We couldn't do it without you and I'll see you on the next episode.