205. Next Level Income with the Investment Optimizer

You are listening to the Wealth Without Bay Street Podcast, a Canadian guide to building dependable wealth. Join your host, Richard Canfield and Jason Lowe as they unlock the secrets to creating financial peace of mind in an uncertain world. Discover the strategies and mindsets to a financial future that you can bank on.

Get our simple seven step guide to becoming your own banker. It's easy. Head over to 7 Steps CA and learn exactly the learning process required for you to implement this amazing strategy into your financial life. That's seven Steps ca. How do you create an optimized opportunity fund that allows you to transact over $1 billion worth of real estate? Well, we're going to find out. We're joined by Chris Larson today. This guy's done it all. He got his first rental property at the age of 21 while I was going through college. He's retired from the medical career that he was in. He now helps and coaches people on how to maximize their real estate portfolios in multiple areas. He's done syndications. He owns a bunch of car washes. He knows about just distressed debt. He knows about rental, the rental game. He's really done it all. And more importantly, he's understood that along that path he needed to find more efficiency on how he could get the dollars that he was flowing from, from his hands to the deals he was funding and, and put some optimization on that capital. So we're gonna talk a little bit about that as well today. Chris, we're so excited to have you on the program with us.

Oh, guys, I'm excited too. You know, I always, I have a real fondness for my friends up north as my wife is also Canadian originally. She's been in the States most of her life at this point. But yeah, I'm fired up.

That's awesome. Chris, talk to us about how to take income to the next level.

Yeah, so, so Next Level Income. We, we founded Next Level Income several years ago because I, we started our syndication business for, for people that aren't familiar, you know, basically taking investments that, that we were interested in ourselves and we started in the multi family space, which is kind of what, what I dive into deeply in my book, which I'm happy to share with the audience if you're listening here today. But we had, we had these investments and you know, people would you. We have investors invest alongside of us. So we started out in 2016, my partner and I, with our first syndication. I started investing long before that in multifamily, but we did our first syndication in 2016, 100 unit apartment building. And, you know, over. Over the next few years, as our investor base grew and our online. My online presence grew, I had people reach out and they said, hey, Chris.

I want to invest, but I don't know this, or I want to invest, but I don't have enough money. I'm. I'm in my early 20s, and I want to become accredited, which, you know, you know, people want to make more than $200,000. And I say, oh, you can do this. And I'd write an email, I have a phone call, and then, you know, a few months would go by, and instead of like, one or two calls or emails that we could be like one a day. And I thought, all right, there's. There's this real desire out there. There's this need for financial education. And, and, you know, my original marketing director, Caleb, who unfortunately passed away about a year ago, but he inspired me to start our podcast. So we started the podcast, we started the blog, we launched our first episode at the beginning of 2019. So I guess that means we're going into our. We've been going five years now, officially with the podcast, wrote a book, and all of this was done to help curate financial knowledge. So, so that we could, you know, help people that wanted to get, you know, we're, we're people like, like, like we are. And probably a lot of listeners are along the journey. So, you know, we have everything from, you know, how to increase your earnings to, you know, how to improve your. Your legal structures, your tax structures, to how to analyze investments and what, what investments are out there. So next level income is really a. An education source, and it's largely free with, with our information, with all that we have out there, and to help people with financial literacy and financial education.

That's incredible. And, you know, our condolences on the loss of Caleb.

Yeah, thank you. Thank you.

And it sounds like, you know, he continues to serve as a source of inspiration and.

The book, the links to, you know, the podcast how to get connected with you, we will include all of that in the, in the show notes for all of our listeners and viewers, but the book itself. So having culminated this knowledge and all these experiences, like, what was sort of that, that prime inspiration for writing the book is that sort of a gateway into your ecosystem to say, hey, get a glimpse of, you know, our thinking and how we approach things, and then we'll open the door to our community and how you can, you know, gain more knowledge. Because we talked a little bit about a course that you've put together, we can share some details about that. But what inspired you to write the book?

Yeah, great question, Jason. So I'm talking with Caleb, and he's like, hey, man, you should. You should write a book. I'm like, I'm not gonna. Like, if you could. If you can see my degree, like, I have an mba, but I also have an engineering degree. And most people would say that engineers aren't. Aren't great, you know, writers. So I can write. Okay. But I was like, write a book. And, you know, he kind of. He was like, well, he goes, think about it. If you write a book, we can take the book and we can repurpose it. You can do, like, blog content and different things. And I know we're all. We're all big fans of Dan Sullivan. And, you know, one of the. One of the books that, that he wrote does a really great job. And Caleb kind of said, you know, as I was thinking about it, I'm like, well, wait a minute. What if. What if I, you know, for me, I'm like, writing a book was too much to think about. And he's like, but you could break it into blog, you know, blog posts. I'm like, well, I can write a blog post. I'm like, what if I just outline, like, these blog posts that I would write that would, you know, be valuable and kind of put together really, the process that I followed to become financially independent. So I, I wrote an outline and I put it all together and I looked at it. I was like, okay, this. This all makes sense. And I said, okay, I'm going to get up every morning, you know, after the night before. I'm going to write like the. The topic. And I'm just write. I'm going to write for 90 minutes. And I kid you not, it. It all came together. It took me two weeks to write the book. Wow. So it's not a. It's not a super long book. You know, it's. You could read it on an hour and a half flight, you know, from, you know, from here up to Montreal, for instance, or, you know, from a city in the US To a. To a big city in Canada. But. And if you want a copy, you can get it for free@nextlevelincome.com. just click on the book link. I'll send you. Ah, there you go. Address. And I'll even send it to you if you're in Canada. So that's the only other country we send it to. But what. What I did was I wrote. I wrote a Little bit about my story, but I also wrote kind of the process that, that somebody can follow and also the process of how to, you know, analyze a multifamily deal. Like what it takes to, to purchase a multifamily deal, you know, from a high level. It's only 100, it's a short hundred page book.

But one of the key pieces, as I know we'll probably get into today, and really the cornerstone is chapter three, which about my, my opportunity fund, which is, you know, this, it's. Everybody likes to jump forward to the investments and that's real sexy and exciting. But, you know, I think a lot of people would be better served if they kind of fixed their financial foundation and kind of understood some things there, which is why, why I included that chapter. And the other answer, the answer to your other question, which was, you know, is this like a gateway basically into our ecosystem? So, yeah, there's, there's a couple things that it does. So somebody was like, Chris, you, you give your book away for free. Like, how many thousands of dollars have you spent doing that? And here's the thing, if, if you get this book and it gives you some value, that's going to make me happy. You know, every, you know, I get, I get emails and you know, and people say, oh, I enjoyed the book, I learned a lot, and this has helped me in this way. And that's really, that's rewarding. So that, that makes me happy. The flip side is if you read the book and you're like, this is bs, I don't like this guy. I don't like what he's doing. And you never bother me and never take my time and don't spend 30 minutes, you know, on a phone call with me learning more about what we do. Because you figured it out in the book. Well, if it cost me seven bucks to send you this book and it saves me 30 minutes of my time, that makes me happy too. So that's a good, that's a good fit and you know, even better if you read it, you learn it, you're able to put stuff in place and maybe even you work with us and you know, one aspect of our business, then that, that's a win, win too. So it's been, it's been really good and I really didn't set out to, to really have it suit that goal, but it is, it's the entry like, you know, it's the it from a marketing perspective. For any marketers out there, it's the top of our funnel. You Hear us, you learn about us. Read the book. If you want to learn more after you read the book, then you know, we can, we can set up a call and we can, we can go that direction.

I love that because you're, you know, the book is providing value. It stands on its own. It does open doorways both for you and for other people. And that doorway that opens for them, we don't know. We're not, you know, there's a, there's a bunch of doors in front. They choose which one to walk through. The one they might walk through the one of. I'm gonna give this book to a friend and never read it again. They might walk through the door of. I'm gonna give Chris's team a call and see what programs they offer because it's really interesting me. They might walk through the door of, wow. I learned about multi family deal analyzing. I'm gonna go contact a multifamily realtor locally and see if I can't go look at some property and try to do my own thing right. So the other thing I find is really interesting about that and it's, it's not unlike what, you know, Jason and I have done with some, with our books and, and the ones that we have another, another one coming out here in the next quarter is awesome. The, the, the, the idea that you're giving people tools, you're, you're, you're increasing the capacity of their toolbox. And much like when in 2016 when you, you guys started syndication, you probably recognize that there was an opportunity for not only a higher caliber and size of deal, that as you grow up in the scale and size of property or the amount of doors on a deal, there's some economy of scale to that and that you could, you could do that effectively with opm, other people's money, but the opium that you wanted to work with was people that were, I guess I'll call them, you know, couch sit investors where they know they want to participate in the thing, but they don't know how to do the analyzing or they don't have the time to go get the realtor to look at the property or to deal with like the, you know, the type of reporting that they have, like the environmental reports and all the things you need to do in the due diligence process. You know, you're talking about 100, 100 property, multifamily unit, you know, complex or whatever. You've got some due diligence involved. It could take some time. Maybe there's a Few months of that activity and there's skill sets that you need to do that effectively. You might know the general process of it, but until you actually go through the, the experience of it, you don't really, you might know, but you don't understand. So knowledge does not equal understanding in that, in that relationship. So you, you're giving people opportunities through the syndication model to, to participate in, in someone else's experience and, and to get the advantage of a multi family opportunity without having to do the multif family work, if that makes sense. So really the book is giving them, you know, the guidelines on, hey, you know, pick, pick your path. There's lots of paths here. You decide which one you want to go down and fill your boots.

That's exactly right. And you know, the thing is, I mean I, I like to put my money where my mouth is. Like, I started out as a passive investor, you know, you know, talk about you're being able to sit on the couch and be an investor. You know, we call them limited partners. So our, our limited partners or LPs are, are actually in front of us as GPs when it comes to the financial side of the property. Like they get the majority, if not all the cash flow and the returns before we really make anything, you know, in terms of equity on the back end. And it's a great way, it was a great way for me to learn about the business. We actually did a JV partnership with your original group that we invested with Richard. And that was a great way to learn. And you really see, you're like, okay. And actually that, that JV partner actually made a mistake on our first deal in terms of the taxes. So you know, fortunately we, you know, we kind of shared the, the burden of that. But you, you learn a lot and it's, it's nice to, to see and learn and it gives you an idea because when you're an investor you get to see everything. You, to see all the financials, you see how the process works. You can go through it and you can say, hey, is this really what I want to be doing? And a lot of people like you mentioned, they don't understand, you know, these third party reports that come through, they don't understand that we're doing a deal right now. We have a, you know, right now we got six figures of hard money out on that. This is a mobile home park portfolio. We'll have six figures in sunk costs. You know, even if we don't go through with this deal. And a lot of people don't really understand, you know, the magnitude of some of these costs on the front end that you want to incur that are, that are significantly different from, you know, buying, you know, a fourplex or a single family home or something like that.

And what are some of the, I guess the landmines, you know, the mistakes that you just sort of see repeatedly because presumably you have a number of people who come into the community who have maybe had some degree of experience, good, bad or otherwise in this, you know, real estate investment space. And what are some of the biggest, most common mistakes that you see where you just go, oh my God, not again. Like this just keeps coming up.

Yeah, so there's a few different buckets. So the first one, Jason, is, you know, one of the things I like to know when we, we have a call with a potential investor is, have you invested in real estate before? Because people that have invested in real estate and have owned their own real estate, they understand the complexities of it. They understand that it's, it's not all, you know, you know, whipped cream and cherries. You know, there's, there's some, you know, like some rocks mixed into your ice cream that you gotta be be aware of, you might chip your tooth on.

But the other. So let's kind of walk it back a little bit. The first thing is you get people that say, I get a 30% return on my real estate investment. I say, okay, well how much do you set aside for vacancies? Oh, I don't have any vacancies. Okay, how much are you paying your manager? I manage it myself. Okay, what do you set aside for maintenance and turnovers? I don't, we don't, it's a new property. We don't have any maintenance. Well, it's interesting that if you go to a bank and you say, hey, I get $2,000 a month of income. They say, well, we'll credit you $1,500. Why, why is that? Why do they not give you the full amount? I see you nodding your head up and down, Richard. It's, it's because the bank knows you have to set aside this money, right? So you know, it typically when you account for all those things, that 30% return goes to a lot of times zero. And the mistake is your, your novice or your investors that are, that are managing things themselves, they don't run it like a business. So they're not taking those fees and those expenses and those future expenses and those reserves and setting them aside as you would with say, a multi family property. You Know, we, we pay a property management company, we have reserved, set aside, we have money set aside, you know, for turnovers, et cetera, et cetera. You know, so that's the first thing, that's the first mistake. If you're, if you own your own properties, treat it like a business. You, you know, evaluate other deals like, like you would your own properties, right? So you can, you can look at things that way. The second piece is people want to jump in quickly. They're like, oh, you know, time, time is, time is your friend when it comes to investing. But it can be your enemy if you rush into it. And I think you're way better going slower at first. And like we did, we gave up 50% of our profit to be a JV partner. But we got all that knowledge. And I remember talking to my partner, we, we were like, hey, we're cool if we make zero on this first deal just for the experience. Like the value you get in that experience is, is massive. And.

It'S still. There's a friend of mine that pops into my head.

They bought a car wash and they didn't call me and I'm like, why wouldn't we have owned 32 car washes? You would think that he would be like, oh, well, we ended up buying the car wash from him and his partner. They really didn't want to run a car wash, you know, so it's like, okay, you know, jumping in too fast and not asking for help, right? Or not be not being willing to pay for that help is, is the second mistake that, that I find people making. And then the last one, when it comes to like some of these bigger deals, I've seen this again, I've seen this, you know, since before we bought that first deal. And I hear it and I see it.

On a very regular basis. Everybody's like, oh, if it's a good deal, the money will be there. You gotta have, you gotta have a good deal. You gotta have the capital to purchase that deal. And you have to have a operating team that can run that deal really well. And that's the last mistake that I'll point out is neglecting one of those three things. You know, deal flow, like really good deal flow, capital to purchase those deals and culture, you know, cultivating those partnerships. And that can be institutional capital, like people that are going to write eight figure checks, groups are going to write eight figure checks, or you know, people like our investors that are going to write a 50 or $100,000 check and then finally neglecting operations on the back end, that's where the rubber meets the road and ultimately is going to make.

You successful, become your own banker and take back control over your financial life. Hey, is this even possible? You may be asking, can I even do this? Well, you better believe it. In fact, it's easy to get going. So easy that we've put together a free report, 7 Simple Steps to becoming your own banker. Download it right now. Go to seven steps ca. That's seven steps ca. Now let's get back to the episode.

Oh, that's so good. So good. Tales of the trenches. You know, as we like to, as we like to say.

Well, and you know, we could, we could talk through, it's, it's Friday. We could talk through the weekend with all, all these things. But why car wash? Those are, yeah, those are three. Why car washes?

Yeah.

Oh, oh, good one. So, all right.

So there's, there's, I'll try to be succinct here, but listen to, listen to our episode 100 of our podcast. So if you go to nextlevelincome.com click on, on, on the podcast and episode 100, I talk a lot about, I, I, I made it episode 100 so I could remember it. I talk about what, what's the, what the, what is the real estate cycle and what, what I believe is a 18.6 year real estate cycle. And as you go through this cycle, there are certain asset classes that perform better at certain times. And we're, we're later on in the cycle right now, so we're in kind of the second phase and really getting into the final half of the second phase of the real estate cycle. And what do we typically see? We see prices that are high, we see interest rates that are high. And it's hard to make certain deals work. Like it's hard to buy a single family home and make it work today. So I think that during this part of the cycle that you have these types of operating real estate, like short term rentals, hotels, mobile home parks, car washes, senior housing that really are real estate, but also have an operating component to them, like basically a business through real estate. Right? So that's what a car wash is. So there's a lot of positive trends for why I think, you know, specifically express tunnel car washes work. But right now in the cycle we can buy a car wash and finance it at a 7 or 8% interest rate, just like our mobile home parks and still make a lot of money for investors. So that's, that's Number one. Number two, there's about, we're getting, when we started buying, there's about a 15 year Runway before the industry was going to be built down. So we gave ourselves five years to acquire 150 locations and, and roll those up. And what you get with the car wash space is that once you get over the kind of critical mass, you know, we're getting into a top 50 owner in the country right now. You know, once you get to 50 locations, 100 locations or more, you know, we're buying at a 8, 8x multiple of EBITDA. But as you hit those higher numbers of washes, that multiple when you sell goes from 8 to 12 to sometimes, you know, 15 or even 20x multiple of EBITDA. So right now if we buy the 8x multiple of EBITDA and we put it into our current portfolio, it's, it's worth, that wash is worth about 50% more just because of, of the scope of our operations at this point, the.

Scale and size of how the portfolio is built. And so that's because a, an institutional level investor, like a pension fund or like a BlackRock or something, they'd say, hey, you guys have a whole package here of 200 car washes. We see the cash flow on that. We have to place this money or our investors are going to get upset with us. And we have this magical fund that we created. We put a label on it that called it blah blah, blah, cash flow plus dividend payment, whatever fancy title and name that we just launched. And our mandate says we need businesses like yours. So here's a blank check. How much do you want for your car washes essentially is what you're getting at.

You nailed it. Yeah. So the types of groups that we foresee purchasing our portfolio as it gets larger are just like you said, Richard, private equity groups that can write a really, you know, that you can write a nine figure check. We have, we have our own integrated operating group with the car washes, our own operating team, which makes us fairly unique because, you know, we're, we're up, we're a private equity group, you know, so we can write, we can write pretty big checks when it comes to buying washes. So we can buy, you know, say eight washes at a time. We can write a $50 million check, you know, for, you know, a bunch of car washes, which not a lot of small operators can do. But you know, if you're a big operator and you can write that check, you probably have your own operating group. There's not a lot of private equity groups that also have their own operating group. So we could sell to a private equity group that wants to buy the operating company along with it. We could sell to a large owner of car washes like Mr. Wash that owns 300 some locations. They actually might be up to close to 4, 400 now and, and, and incorporate your operating team into theirs. You know, so we have a lot of, or we can parcel it out and just sell our regional portfolios as well with or without the operating group.

What I hear you saying in there is that you've taken the EVA principle or the economic value add principle similar to like a Walmart who they have their, their main stores and then they have the distribution centers which operate as a separate business. And those distribution centers produce a lift when they sell their goods and services now to the retail store. So you, because of the operating group, you essentially have a double business model and you could sell one or both or to combine as a package. Hence why you can, you know, claim a larger multiple on the exit strategy. And I think what's really important about that is it it goes directly to the types of things we learned from Nelson and Nash around becoming our banker principles. Who's very focused on the economic value add model. But recognizing that you can do that in, in small incremental ways on your day to day cash flow at your household level. And all you're adding really effectively, Chris, to this example in the, in the car wash structure you identified is a level of scale. You're just adding more zeros onto the transaction level by which you're doing it essentially. And in order to get from A to B somewhere you had a long term vision. So you were thinking long range. Without that long range thinking, you couldn't create the aggregate capacity where now you can say, oh cool, when I go and make an offer on a, on a car wash now, or I want to go buy a guy that's got three or four of them so I can buy in bulk a couple I know the moment I take even if I'm paying a great market value and that guy's gonna have a huge win, huge win for them, they can sail off into the sunset, be crazy happy. We smash that into our portfolio. We already know that we've, we've maximized an increasing value. So I don't even need to pay under market, which a lot of people think, oh, a real skate game, you got to get it under market. Like no, you can pay market because you built a structure that allows you to increase value instantly.

That's exactly right. That's exactly right. Now we don't, we don't want to overpay, certainly. Right. And erode, erode that value that we created. But yeah, we can pay, we can pay market value and know that we're increasing that. And the nice thing is, you know, if we have like, we, we just bought four locations just south of, of where I live in Asheville, North Carolina, from another operator that's a little smaller than us, but they have several locations. And there's not a lot of people that can go and buy those four locations, you know, from them and do that. You know, it's either you're looking at bigger groups that probably, you know, that may build their own locations. We build, we buy current locations and renovate them. So we're very, we're very agile and very nimble as well on the front end. So that, that allows us to, to be more flexible and really enhance that model too.

Oh, congratulations. That's.

That'S great. And clean.

And clean. Exactly. We love washing cars in our household. Absolutely.

And you mentioned earlier, you know, you sort of made the comment around people.

Having to fix their financial foundation in the sense that.

Yes, yes.

Our late mentor said something to us years ago, the late Nelson Nash, who developed and pioneered the process of becoming your own banker. And he said that a skyscraper can't stand on a weak foundation. And so could you expand a little bit on some of the most common things that you're seeing among, among people coming into the community who require repairs to that foundation? What are the most common things that you're seeing?

Yeah, so I think, I think a lot of this. So it's, it's interesting. My son comes home yesterday. Now look, I have, I have an MBA in portfolio management. Like, I, I feel like I know a fair amount about the, that fact financial system and especially the traditional. Right. Financial system, like, you know, like the stock market. And he has to interview somebody about the stock market. So he, he starts asking me these questions and we're kind of going through it and it's, it's things like, and you can tell, you know, it's, it's like, you know, is the stock market the same or like, safer than gambling? It's like, well, it, you know, it can be, it can be like gambling if you're trading on a short term basis. It can be, it can be safer if you're investing over long periods of time and buying like value stocks. It can also be way more risky if you buy A bunch of options. And I was like, Ethan, we could go buy a bunch of options for you and you could lose like a million dollars. You know, that's way more risky. So you know, it's, the first thing is a lot of people don't understand the, the risks in the stock market. I have one of our investors, he's pretty sophisticated guy and he made this comment to me, he said, Chris, you know, I was telling my wife that over five year periods that this, you know, stock, like the stock market hasn't lost. And I'm like no, the ant, that's 20 year periods the stock market hasn't lost. And then I said, but you also have to take into account the risk free rate during that period of time. So one of the things I love about you know, having our, our life insurance policies, our cash value life insurance policies is that, you know, just like a company. So if, you know, when we're doing our, when I was doing my mba, we would do a net present value analysis. And what would you do when you did that? You would put in basically the cost of capital. Well, as an individual, I love you guys are nodding your head up and down. So if you're an individual investor, I want you to look yourself in the mirror. I want you to ask yourself what is my cost of capital? Which cost of capital? Well, for me I look at my, I look the other day because I was, I was sharing some information with a guy I work at, at the gym that was asking me about, know some, he's actually, actually asked me about the stock market as well. And he said, I explained to him, I said hey my, like this, in 2023, my, my policy with dividends paid out 5.75%. So you know, I, and I can borrow at approximately that amount. So whether I'm, I'm taking the money out of there, not getting the dividends or you know, I'm borrowing at say 5.75%. That's, that's my personal cost of capital. So any investment I look at has to, has to exceed that. So if I look at investment in the stock market and I think the stock market is going to return 10%, you know, you have to say okay, 10%. Well if it's, you know, if it's in a, if it's not in a retirement account, which we can talk about, you know, how would a fallacy. Those are qualified plans but I'm paying tax. So what is, what is that? That's like an 8% pre tax rate, 5.75% for most, most high income earners. Well, you know, it's like, okay, so why would I invest in the stock market at historic highs today if I know I'm basically getting an 8, 8%, you know, pre tax rate of return with, with no risk? You know, it's, it's not, that's not guaranteed, but it's, it's, it's darn near it. So that's the first thing. Most investors don't, they don't, they don't understand what their cost of capital is. And they're just having money like sit in an account in the bank and they're like, well, I'm not getting 5.75%, Chris. Well, maybe you should look at an option, you know, that can give you that. You know, when it comes to, you know, as a corollary to that, I really, I hate it when I hear people say I can get a better investment than investing, investing my money in a life insurance policy. That's not an investment. It's not an investment.

You're never has been, never will be.

Yeah. And I love how Nelson, first off, you know, this quote unquote investment has a guaranteed rate of return. You know, that's not something we talk about with investments, but Nelson has, he talks about setting up the business. Setting up a business. So when, when I talk to investors or I talk to clients, I say, look at the cost of setting up your policy and you, you can strip out those fixed costs in the first couple years and you can say, hey, it's going to cost me say, $20,000 to set up, you know, these policies. And then, and then you have the insurance, the insurance is set and every dollar that goes in, you get a dollar that, that can come out the other side. So that, that's your, that's your cost to set up this plan, right? And then you have that, you, you don't evaluate, you evaluate that more as a business. You don't evaluate that as an investment. So I, I think we do in, in the industry, the insurance industry, I think we do our clients a disservice when we say, oh, it's going to break even in seven years. You're basically calling it an investment. And that's not really, it's not really what this is. I think, you know, that's the second thing. When people look at setting up something like this, they, they look at it like an investment. They ignore the fact that it's, it's private. It protects you from creditors. You know the other story, I like to tell, which is not a pleasant story. But my best friend, his wife died three years after he set up his insurance policy. Okay, like, if you said, hey, what's your rate of return in the policy? I would say, well, hey, what was my friend's rate of return when his wife died? Are you going to go ask him, hey, what was the rate of return on your wife dying after three years? That's crazy. It's not. You can't look at this like an investment. You have to, you have to look at it in a different, in a different manner.

How do you put a rate of return on peace of mind?

Right? It's. Yeah, it's. This is, this is something that is, is totally unique. So number one, not understanding cost of capital, not having a vehicle that gives you that. Number two, analyzing this system, you know, which, you know, if we're talking about cash value of life insurance or infinite banking or family banking or bank on yourself, you know, we call it investment optimizer when we blend it with an investment strategy, but not understanding that's. That it's a system, not an investment. And then the last piece is not understanding how to use it. So, you know, this is like you were saying, Richard, with, you know, economic value added. It's like the story that Nelson talks about of taking peas, you know, out of the, out of the back of the store, you know, not paying for them. My boys are like, dad, why do you pay for your car washes when you go instead of just using a free code? Because I know that if I pay and it's tax deductible, by the way, but, and I have a membership, but if I pay that membership is enhancing the value of the business. That's going to be a multiple of, of what I'm spending in there. And again, it's a fairly sophisticated concept, but if you understand how to utilize how this works and just in your own personal system, if you can take that cash value in your policies and then put it to work and leverage it in other ways, then you don't have. I call it this liquidity drag, you know, so, like I never have money burning a hole in my pocket because it's safe in my insurance policies. And I'm not, I'm not pressured to go out and get a rate of return like blackrock is to go, go spend their investor dollars, like you were saying, Richard, and potentially make a poor investment. So I think when you set it up, what ultimately happens is you, you give yourself peace of mind. Like you were saying, Richard, you Give yourself a cost of capital. So when you look at a, look at a deal, you're like, well, that's going to give me 8%. I'm getting 6% tax free. Like, why would I, why would I take that additional risk? So you're going to go after higher quality deals. You're going to take time to do them, and then, you know, the final piece is, you know, not, not appreciating, you know, the full, the full system and all the value that it has and how to use it. And that's what we really like to do is help investors, you know, take their insurance policies and then understand how to use them and put, put that cash to work. And really, then you just blow, you know, you blow all the numbers out of the water in so many different ways.

Have you ever heard the expression, the more you make, the more they, the.

More you make, the more you pay? Is that what you said?

The more you make, the more they take.

Oh, the more they take. Yeah. Oh, yeah, right.

So the, the key here for all of our listeners is as a good refresh, if you understand the grocery store example, becoming your own banker. The rest of it is a piece of cake. What Nelson was trying to get across, among many things, is that when you build a business.

The larger the business becomes, the more profitable the business becomes, the more money the IRS or Revenue Canada wants to get their hands on. So when you build a business where you pay absolutely no tax on a guaranteed buildup, how much of your capital do you not want flowing there? And the, the whole notion of, you know, again, you talked about taking the peas and going out the back door with them and all of that. You'd be shocked how many advisors we talk to in North America who have no idea that cash value isn't money.

Cash value is not money. It's the net present value of the future payment of a death benefit. The money that you're using is the insurance company's money, your cash value. There's a reason why they don't call it the cash account. They call it a cash value because it's not money.

Yeah.

And so the larger you build your banking business, the less capital there is for the IRS or Revenue Canada to get their hands on. And that, that's just for other people. Yeah, it's a, it's a fatal error in thinking that this has anything to do with the function of investing. This is all about controlling how you finance the things that you want, including investments. And so that's where that, that distinction just needs to be made, because we, we get into all of these discussions in, in our profession and with the general public about man like, look, look at all the cash value you're building up and look at how you get to use it. You're not using the cash value. It's not money. And so it's, it's just a tool. But the more capital that you have flowing to that entity that you own and control, the less money there is available for the government to get their hands on. And so how much do you want to shield from onerous taxation? So here's, here's the thing. You might find this useful, Chris, in your dealings with folks in your community. Yeah, we go through a quick exercise in logic. So let's go through that quick exercise in logic.

Let's do it.

Your money must reside somewhere. Agreed.

Agreed.

So if you store capital inside of an entity where you pay no tax on the buildup, you have a guaranteed windfall that you pay no tax on. You have ready access to capital on demand on your terms. And the only loser in this scenario is the irs.

Logically speaking, how much of your capital do you not want residing there?

Not one. Zero. The answer is zero to that. Yeah. You want as much as possible. Yeah. And that's what got it. Yeah. And it's. Yeah. And that's the thing. And the other thing is, people, I think this was a year ago when we saw the collapse of, you know, Signature bank and, you know, a couple other banks out. We, people realize, wait a minute, like, my money's not safe in the bank. You know, it's, it's like, people like, what do you think? I'm, like, I'm not really concerned about it. Like, why aren't you concerned about it? Because it's not where my cash resides. Yeah, very good point.

And you're, you know, further to that, the other people that don't get the advantage of your cash when it's not, you know, when it's in the insurance machine and it's, it's funded as premium is a traditional banking sector. They can't manipulate the money supply and lend out multiples through fractional reserve lending because your money's not in there, your money's somewhere else. And you're not doing your borrowing. You're so your, your depository business, the, you know, savings accounts, you're shifting where they live, the borrowing aspect of your business, you're also shifting who you're doing business with in that transaction. So the combination of those two events, you know, maybe small and incremental at your, you know, but with you, with the number of investors, growing organization, syndications, larger, larger types of deals that you're doing, the level of scale that you're starting to achieve is going to be different. And so that scale is available to anyone. It's just, it's just relative to your own circumstances. And another thing that you mentioned earlier, Chris was around, you know, that joint venture that you did on that first kind of multifamily type project and you said, hey, even if we don't make a dollar and all we do is kind of get our money back, it's worth it to do this experience. So I view that as capitalization, not so much in that you're using your own capital, but what you're doing is you're capitalizing your education process. No different than someone who goes and gets a university degree. They're going to pay all the money or they're going to borrow someone else's money to go put themselves to get a degree. And the whole purpose of that degree is to create a future income stream that's greater than if they didn't have the degree. That's a form of capitalization. And so that's, that goes right down to the cost of capital like you identified. But people don't recognize it. So they take these things that they're already doing in life and they can't attribute it to the fact that hey, going and get a college degree is no different than a startup business. You just didn't understand what business was. To see the relationship.

There's always a cost to capital.

That's right, There are no exceptions. Let's, let's expand upon this, this concept because this is, this is one of my favorites. So time comp, money compounds, right? Like everybody, you all know that if you're listening, you know, you certainly understand compound interest. But time also compounds. And if you spend your time when you're early, goofing off, you know, drinking, doing drugs, it's funny, I just had, had somebody stand on one of our short term rentals that has a, a local restaurant and lives out of town. He was visiting and we got to talking and he's like, man, you bought your first property 21, that's awesome. He goes, I was, I was screwing off doing drugs when I was that age. And what happens is you don't get that time back. So if you're young, if you're in your early 20s and you're listening, first off, I commend you. But that time you spend, if you go work and you get your education. What happens is that education and that work that you put in, that compounds over time. So you as an entity, you, with your experience compounds, and you're more valuable as you go on. Robert Kiyosaki talks about this in his book. He says, hey, pick a job for how valuable it's going to make you in your next job. Same concept, right? Same concept. This is also one of the reasons, and this is fairly controversial, probably this is one of the reasons that men make more money than women. The time that women lose in the workforce when they have children. And Canada has some great policies when it comes to encouraging parents to have children, which I think we could learn from here in the United States. But that compounding of that time and that experience is a huge factor in the difference in the amount of money that men and women make. So if you're hearing me say that and you're like, yeah, there's a difference, you already understand exactly what we're talking about today, which is time compounds just like money. So, you know, when you're, when, when you start off in life, you can enjoy life, you can do fun things, you can have great experiences and great relationships. But, but don't forget that that time you spend watching that next Netflix series instead of reading a book that may enrich your life and do that, it's. That's. You're not going to get that back. And even worse, somebody else is doing that. You're never going to catch them if they continue at that same pace. Just like if somebody starts investing and you start investing the same amount and the same thing, you're never going to catch that person either.

That's great advice. And we're talking about NextLevel Income.com again. That's NextLevelIncome.com so just ease on over there. Make sure you get a copy of the book. Make sure that you subscribe to the podcast. Tune in if you're like me. I'm going to tune into episode 100 because. Very curious. You know, we have, we have 13 companies in our family group of businesses. And so been looking at not only car washes, but Laundromats as another business. And it's just really interesting, you know, so that was absolutely great. And then you can also. We're going to be learning a little bit more about the course that Chris and his team have put together. And so that may also be something that we share with our community. But, Chris, this was absolutely incredible. Thank you so much. And Rich, bring us home.

Yeah, I love how you have an episode 100. We also have an episode 100 for simplicity and remembering as well. So I thought that was really interesting when you said that. I also, by the way, it was interesting about the 18.6 year cycle. And I thought, okay, the engineer in you, 18 is not sufficient. It has to be 18, 18.6. You're not 18 and a half years.

I want to be precise. Yeah, 18 and a half will probably get you close enough.

But yeah, I, I really appreciated that. Now, now, Chris, you know, you, when you, when you start on this journey and you got your first rental property at 21, you probably weren't thinking about all the value you were going to add in the world when you got older. It might not have been present in your mind at that point, but I'm guessing as you've leveled up to next level and next level and so on, you've recognized is that you are starting to bring more value to more people. The people are reaching out to you. Like in those emails you said, you know, you may not recognize that you're showing up with a cape and you know, spandex and like superhero, but you're doing superheroes.

I did race bikes for 20 years. So.

Okay, so, so, so you know what it feels like.

So he does know what it's like.

To do to, to, to go fast in spandex or whatever. So you, you recognize that you are showing up and you can show up and so can other people as a hero to others in their life. And so our question for you is, who do you most want to be a hero to?

Yeah, I mean, that's, to me, it's easy right now. My, my father passed away when I was five years old. So, you know, the, the, the value of life insurance and the value of time is, is something that I've always, you know, you know, almost inherently known just because of that experience. But I have, I have a vision. I write it out, a three year vision and I update it twice a year. So New Year's, so love to go through it around, you know, this time of year and also on my birthday every year, which is in June, so it's convenient about every six months. And this is the lens that I look through, Richard. I say, you know, I want my boys to look at me and be proud. My sons are 12 and about 14, soon to be 14. And if, if they can look at me and be proud, then I feel like I'm, I'm doing the right thing. And I, I was dealing with a friend one time, he's going through a divorce and he was facing a decision. And I said, is your daughter going to be proud of you if you do this? And, you know, to me, that's, you know, that's the thing. You know, all these things I do, am I. Am I going to be a good person? Children are smart. They can figure it out. And, you know, if, if not God, then certainly my children can, can judge me and figure out, you know, if I've lived a good life.

Chris. Thank you again, gentlemen. This was fun. And to all of our viewers on the YouTubes, you just saw another video appear out of nowhere. That's K, courtesy of our editing team. And so we've recommended this next video just for you to continue your journey of learning. Be sure to check out the show notes so that you know how to get connected to Chris and to his growing community and make the rest of your week outstanding. Thanks so much, guys. This was awesome.

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