EP221: 5 Levels of Leverage That Can Make You Millions

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👉 Are you tired of working hard day in and day out and feeling like you’re just not getting ahead?

👉 Do you ever wonder if there’s a better way to achieve financial and time freedom without all the grind?

It doesn’t matter if you’re a dentist, a lawyer, a doctor, or an apartment syndicator like us.

We’ve been there too, and we know exactly how it feels. The harder you work, the further behind you seem to get.

Now, don’t get us wrong; we believe in the value of hard work. 

It’s essential for personal growth.

But here’s the thing: relying solely on hard work can result in burnout, exhaustion, and frustration. 😩😩

We all know the famous tale of Honest Abe Lincoln and the cherry tree.

Now, picture this: Abe, determined but with a dull ax, attempting to cut down that cherry tree.

It would have been a futile effort, much like working harder just for the sake of it.

Just as a sharp ax 🪓 was essential for Abe to succeed, so is focusing on the right leverage and strategy to achieve your goals. 

Let’s learn from history and sharpen our approach! 

So, what’s the sharper approach?

What if we told you there’s a millionaire fast track? 👀

A way to make millions easily attain freedom, profit, and abundance.

It’s about shifting your focus from distractions and get distracted from the things you are focusing on.

There’s a saying we love “Change what you see, change what you do.”  🩷

So, how can you create a million dollars easily?

How long will it take?

How much work is required?

For us, we found our answer in real estate.  🏢

It’s the asset class that has created more wealth than any other in the world.

We ventured into real estate by purchasing single-family rental properties one at a time and becoming landlords. 🤯🤯

To be honest, our thinking was a bit limited.

But let’s pause for a moment to gain some perspective.

Just think about it for a second.

In today’s world, with the soaring home prices, can you even imagine how long it would take us to achieve financial freedom by saving up some money and then buying one rental property, waiting patiently for its value to appreciate, refinancing, and then repeating the process over and over?

Sure, some folks might be fine with waiting for decades for that slow and steady growth, but here’s the kicker – time isn’t something we can count on or take for granted.

We want to build wealth sooner rather than later, and that’s where our journey takes a different turn.

Have you guys ever heard the story of James Hill, Jay and George Gould, Cornelius Vanderbilt, Edward Harriman, and Collis P. Huntington? 

The scene was: the early 1900s, and the United States is undergoing a transformation like never before.

The demand for transportation is skyrocketing, and the race is on to connect the nation from coast to coast with an intricate web of railroads. 🚂

Now, these railroad titans though they came from humble roots, were visionaries, no doubt about it.

They understood that to accomplish this monumental feat, they couldn’t do it alone, not with a small team, and certainly not with a single-track mindset.

They needed a strategy that would make the impossible possible.

These titans became the wealthiest individuals in the history of the world.

They grasped the secret, which lies in comprehending the five levels of leverage.  And after today’s episode so will you.

Trust us, we’re speaking from experience.

We scaled our multifamily apartment portfolio from zero to over $300 million in just five years. 

Now we’re buying high 8-figure properties, raising capital from individual investors, with over $130 million raised to date.

Now, let’s dive into the 5 levels of leverage ⏬

Level 1 – Team

The easiest way to think about this is to think of how an ant 🐜 colony works. 

They foraged together as a team and that’s how they thrived and survived. 

Another way to think about leveraging a team, let us explain first the incredible story of Sam Walton, the mastermind behind Walmart’s colossal success. Even today, it’s still one of the world’s largest retailers, with a significant global presence.  

But guys, did you know Walton didn’t come from a wealthy family? 

In fact he opened his first variety store in 1945 after leaving the military with OPM, other people’s money.  💵

Specifically, he borrowed money from his father-in-law and whatever he was able to scrape up from his military salary.  

Unlike traditional small-town variety stores that took it slow, Sam had a grand vision.

He believed in providing everyday people with low prices and unmatched convenience.

By 1962, he took his Walmart and took a dramatic approach. Instead of staying at a variety store locally, he expanded aggressively across the United States. Sam leveraged innovation, efficient supply chains, and technology to revolutionize retail. He introduced ‘supercenters’ and turned Walmart into a household name.

So for multifamily apartments who are some of the team players? 

You have your partners in the deal, you have your attorney, your property management company, and more.  

Do you know who is the most significant team player you need to focus on?

➡️ Your passive investors, also known as OPM (Other People’s Money). 

These are the individuals who believe in your vision, don’t have the time or interest to master the skills you have, but would like to grow their wealth alongside you.

With team leverage, you can go from $0 to millions, even buying multi-million-dollar properties.

It’s all about tapping into the power of ‘Team’ leverage for financial growth. 

Level 2 – Time

Now, let’s talk about “Time.” ⏰

You see, time is the most valuable asset we have.

While most people are out there grinding away, we’re strategizing. 

Multifamily is a team sport, so leverage other people’s time to handle tasks you’re not good at, have no time for, or are of low value for you to work on.

For us, we don’t ❌ manage the day-to-day operations of our portfolio; we entrust our property management teams to handle them.

“Time,” is where we get smart about how we invest our precious hours.

We’re not looking to spend a lifetime building wealth; we’re looking to expedite the process.

We believe wealth has the need for speed. 

That’s where multifamily real estate comes into play.

With large-scale multifamily properties, we’re not dealing with a one-off investment.

We’re scaling up our efforts, making our time investments more potent. We’re making money work for us, not the other way around.

Level 3 – Tools

Tools are software and equipment that make your life easier.

In our fashion 👗 days, we visited a factory where they were manually counting labels one by one.

It wasted time and money.

A precision scale could have done it faster. 

For business owners and real estate investors, use tools like Slack, Asana, Notion, Xero, or QuickBooks to streamline tasks and boost productivity.

The right tools can multiply your efforts significantly, so work smarter, not harder.

Level 4 – Debt

Is debt risky?

Not necessarily, if handled wisely.

Think of debt like a sharp knife 🔪; it can be dangerous if mishandled but invaluable if used skillfully.

You see, in the world of multifamily apartments, smart debt is your ally, not your enemy.

We’re talking about leveraging other people’s money—OPM— (again!) to finance our deals. 💰

We’re using loans and financing strategically to acquire properties that generate massive cash flow.

Now, when it comes to debt, the details are crucial. You’ve got to dive deep into the various types of debt out there, each with its unique structure, advantages, and drawbacks.

Level 5 – Tax

It’s not just about how much money you earn, but also about how much you get to keep! 🤓🤓

Let’s get this straight: it’s not about dodging taxes; it’s about intelligently navigating our finances within the framework of the tax code.

As children, we were often told a tale that goes like this: There was a man determined to reach the other side of a mountain.

He tried every method he could think of – running, hiking, even driving.

But despite his utmost efforts, none of them worked. He was on the verge of giving up, overwhelmed by his fruitless attempts, when another person approached him.

Curious, the newcomer asked, “Sir, why do you look so despondent?”

The man explained his plight, “I’ve exhausted every means to cross this mountain, but I just can’t seem to make it.”

Hearing this, the second man posed a simple question, “Have you considered using the tunnel?”  👈

Sometimes we make things more complicated than they need to be.

To get the most out of tax laws, just follow the IRS rules. 

These rules are explained in the tax code. If you earn a salary (W-2 income), you usually pay more taxes. Small business owners have to pay taxes twice – once as an employee and once as an employer. 

Large business owners who employ more than 500 people get tax benefits because they help the economy.

Investors get even better tax deals, especially if their investments help provide affordable, clean housing. 

The IRS gives them these breaks because they are the producers, not consumers.

You see, when you’re in the world of multifamily apartments 🏢, there are tax incentives and deductions available that can help you keep more of what you earn.

We’re talking about legally reducing your tax liability while building wealth.  😏😏

It’s about understanding the tax game and playing it strategically. 

By doing so, you can ensure that your wealth continues to grow, and that you’re not handing over unnecessary chunks of money to Uncle Sam.

Why we ❤️ love each individual level of leverage.

The ultimate leverage in business is utilizing all of the 5 levels of leverage. 

Wealth truly begins to be created when you learn how to harness all 5 levels effectively.

Many people make the mistake of trying to work harder within their current level, only to become frustrated when their income doesn’t go up. 😡😡

It all begins with focus.

Understand that right now, you might be just one leverage or one level away from achieving your next or even your first million.

That’s why every single day of our lives, we actively seek to focus on the things we are currently distracted from.

We are constantly reading books, listening to podcasts, learning, taking classes, and seeking mentorships because we believe that continuous learning is the pathway to success.

Can you see now that even one level of leverage is a power force that can reshape your life for the rest of your life?  

Imagine how much the compounding force would be if you maximized all five levels of leverage, and how effortless you’ll life goals would be.

Now that you are pumped to go out and execute on all 5 levels of leverage, go watch this episode.

In 2023, the 🏢 multifamily housing market experienced a significant decline of over 40% in new construction starts, as reported by RealPage.

This drop was influenced by several factors, including increased borrowing costs, declining property values, high construction expenses, and lower rental rates and occupancy levels.

​​Looking ahead to 2024, the overall outlook is not very optimistic, with many developers anticipating more decreases in new construction projects.

While there may be a surge in the number of completed projects this year, it is expected that there will be a substantial decline in construction activity by late 2025. This decrease will have consequences for both investors and policymakers.

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