Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and you’re investing with The Accelerated Investor Podcast.
Josh: Hey guys, what’s going on? Josh Cantwell here. We’re just getting started with our live broadcast. We’ve been sending you emails for the last couple of days regarding some alternate investing. And I am particular excited to be with all of you today. Not only because I’m here and hosting the call with a good friend of mine, Greg Herlean, from Horizon Trust, the founder and president, CEO of Horizon Trust, but also because we’ve never done a sort of an alternate investing class to talk about things really outside of real estate or investments that pertain to real estate, but that also include things like crypto currency, cannabis value at apartments and those different kinds of things.
Josh: And so we just opened up the broadcast. We’ve got several hundred people registered and everyone will kind of pour onto this as we kind of get going. So we’re just going to kind of warm things up here for just a second. So thanks a lot for joining me. And I do want to say hi to Greg who’s our guest for today’s class. Greg, what’s going on? How are you? Where are you joining me from?
Greg: Hey, Josh, today I’m in Orange County, San Clemente. I would show you my view, but when I go that direction, you can’t see me, but maybe you can, I don’t know. You can’t see me, but you can see the awesome view from here, the ocean. So it’s a pretty cool Mondays and Tuesdays I get to work for here and then I’m in Vegas the rest of the week, so.
Josh: Nice. Gotcha. So Greg runs his companies, just to give you a little bit of a foundation about Greg. Greg’s done hundreds and hundreds of single family house deals, wholesaling, rehabbing rental portfolio, about 2,000 units of apartments. Greg has flipped and invested in nine different hotels. And you know, Greg was investing very similar to the way all of you got started. He was just very resourceful, finding deals to invest in, and kind of fell in love with, with capital, fell in love with finding the money to do deals. And you know, Greg and I are both very firm believers that, you know, as a new investor, someone who’s maybe just getting started or maybe you’re an intermediate investor doing a couple deals a month. It’s very important to have a diverse business where you make quick singles and doubles wholesaling properties and making quick cash.
Josh: And then also begin to start owning assets. You know, we all got into real estate for long-term wealth. We got into real estate for massive passive income. And so, you know, Greg and I started investing in cash flowing assets and we both fell in love with capital. And my way to really be in the capital space was to start and run my private equity fund. For Greg his way to participate in the, in the capital space was to start a trust company where they could help clients who wanted to roll over their 401ks IRAs set up SEP IRAs, Roth IRAs. And so years ago, Greg founded a company called Horizon Trust. And Greg is the founder and CEO, and they have a massive database of private lenders and private investors. And before you even ask, no, you cannot have the contact list from Greg for his clients.
Josh: But what’s amazing about Greg’s position is that he does get to see a tremendous amount of different types of deal flow. He gets to see people investing in hotels and apartments and crypto currency, cannabis, single-family deals and multifamily deals all across the country. And I really thought it would be amazing to have Greg come on and for he and I to just kind of talk a little bit about some of these alternate investing strategies and some different things that you can do with your self directed account. And so really this class is for those of you looking to passively invest in deals or to actively invest in deals and kind of partner up active investments with your passive 401K dollars, your pension dollars your roll over dollars and Greg is an expert at this area. And so Greg, I wanted to give you a proper introduction. I’m sure there’s some additional things that you’d like to add to that. And also, I don’t know if you’re muted out, just make sure…
Greg: No, whenever you’re talking, I just try to mute us so it’s all you, that’s all, but I’m here.
Josh: Yeah, I’ve got a lot to say. So I’ll mute myself out now and I’ll let you take it from here with your introductions. Just tell us a little bit more about Greg Herlean and about Horizon Trust.
Greg: Yeah, no, thanks Josh. So yeah I mean, you nailed it. I really started in the real estate business doing, you know, from single family homes to apartments and hotels and by default really fell into the self directed IRA space because it seemed to be the place where I found a lot of assets for people wanting to partner with me or do different deals with me or just learn from me. And so, but that’s where they could access funds was their IRA. So they created a self directed IRA. So now, now that I, you know, we probably bring on about 150 to 200 new IRA’s every single month. And so when that happens, I’m able to see what people invest in. I’m also able to see kind of every year people have been with us for a year after year. What kind of results, you know, what’s working, what’s not. If they’re in apartments, if they’re in, you know, what kind of real estate is working, if it’s cannabis, etc. So it’s interesting as the cycles change to see where people are putting more and more in other of the retirement funds. So I mean, you nailed it. So for me it’s interesting, but I also, I learned from that. So when I see a lot of people going to one industry or one place, I like to go there as well.
Josh: Yeah, that’s fantastic. So Greg just talk for a second about how we met. For those of you that maybe this is your first live class that you’ve ever been on with me. Maybe you just downloaded one of our books and jumped on our email list as one of our students and subscribers just in the past week. Maybe you’ve been with me for years, but either way, I appreciate you being here. Greg and I met about four years ago. We share a mutual friend, his name is Vinny Fisher and he’s just a really smart, intelligent guy. And Vinny started a mastermind group called Total CEO. He invited Greg and I to come and participate in that. And we both jumped into the mastermind and part of my success in business and a great portion of my success in business is the people that I’ve met the relationships I’ve created, the other CEOs and entrepreneurs that I’ve been around.
Josh: And it’s really been amazing the people that I’ve met. I’ve had several guys from different masterminds invest in our fund and Greg and I met years ago, we decided to create this sort of sponsorship partnership and Horizon Trust comes to all of our live events. We endorse them on all of our webinars. And a couple of times a year I love to bring Greg on a podcast or to interview and talk about what’s hot. And so we have a longstanding relationship and I hope you guys do business with, with Horizon Trust and you know, they don’t have anything to sell. They have an amazing service that allows you to roll over your pension, your 401K or IRA dollars, and then they’re going to help you administer those dollars into the investments that you want to make. And so that’s the connection there. Greg, I just like to hear you comment briefly on, you know, what has mentorship and masterminds and those relationships that you’ve made, how has that impacted your business life?
Greg: You know, people ask me lessons, you know, what are the things that have helped you create success? And the number one, every time that I always talk about is relationships, relationships, drive, everything. I, you know, I remember talking to this lady who said, you know, I’ve read these books, I’ve gone to these classes. I’ve made a thousand offers a thousand offers and hadn’t closed one deal. And I said, it’s not necessarily about the offers your making, it’s about the relationships that you have. And so, I mean over my years of experience in business, it’s really all about relationships.
Greg: You know, being able to reach out to people that are having success in your expertise or your industry or looking for help in a new place where maybe it’s hiring people or firing people or building your team. Relationships is really the critical parts of building a business. And look along the way you’re going to get screwed that’s just part of business. And you learn from those experiences too. In fact, if you haven’t been screwed yet, you’re still new in the business happens and that’s okay, but it’s how you address that and how you learn from that and move forward. But relationships have been critical to me in growing my business. So these masterminds and different groups that I’m apart of really have really helped me.
Josh: Yeah, no doubt. Same here. I was just talking to a friend of mine, Jack Petrick, who I had a very similar interview just a couple of weeks ago. And Jack is, you know, really trying to invest very heavily in multifamily. He’s been a coaching student of mine. He’s been around mastermind groups and he just called me on Friday. He was all excited because he’s working with a commercial broker and he’s been planting seeds and planting seeds for about a year with these commercial brokers and building relationships. And a commercial broker from Marcus and Millichap brought him a commercial deal, 165 unit value add apartment deal that was off market and they brought it to Jack because he had demonstrated that he could close. Part of his way of demonstrating that he could close is by positioning me because I’m going to actually help him fund his equity and bring in my money and some investor money and partner with Jack on the deal and joint venture with him.
Josh: But, so he postured up with the agents in any posture up using me as part of his team. And he’s got this off market deal. It’s a smoking deal that they’re not taking out to the market and all because of relationships. And so, you know, you can be very transactional in this business and you can just do deals. You can be a hermit, but that’s actually the harder, longer way to do it. Instead of, you know, mentoring and through mastermind organizations. And again, I had the pleasure of meeting Greg years ago. We’ve been doing business together ever since and so we look forward to that. So Greg, let’s jump in, tell us a little bit more about Horizon Trust and if people aren’t familiar with self directed investing or creative real estate investing, give us a quick foundation on that and then we’ll get into some alternate investing strategies and opportunities.
Greg: So yeah, you can probably, we’ve already talked enough about me. You can probably pass this slide. I’ve this for a long time, that’s all this says and I’ve done a couple of books. So can you move on to the next slide? One more kind of talking about the self directed IRA, a self directed IRA. It is not a legal term, it’s just really to describe the type of IRA. So if you have a traditional IRA Roth or and old 401K or a simple or SEP, any of those type of IRA’s can be converted and transferred to a company like ours, Horizon Trust and self direct your funds, you move that account over, let’s say the Horizon from Fidelity, Charles Schwab, Charles Schwab moves to Horizon and it becomes now your self for did IRA with us and it can be whatever it is, simple traditional Roth and you continue to get the tax advantages or strategies that you’ve created elsewhere with us. The only difference really is with a company like ours custodian, you’re able to invest in alternative assets, things pretty much anything you want. There’s a few exceptions that you’re not allowed to invest in. But for the most part you can invest in anything that you like. So that is the biggest difference when you’re dealing with the self directed IRA.
Josh: Yeah, you bet. So most of you probably have a pension or a 401K or some sort of IRA you’re saving in maybe at your old job or maybe at a current job and you’re thinking, you know, all the stock market is the stock market and things have been good for the last 8 years or so. But even it’s amazing, even over that 8 year period, because like 2015, the market was down and last year the market was flat. The average return over the last five years in the stock market is only about 9%. When you factor in some years it’s been up 21% some years up 11%, but then the 2015 was down about 4% or 5% last year was down about 4% or 5%. You know, it averages out to about 9%.
Josh: And it’s just, I think a lot of people are thinking it’s a little bit of a rollercoaster. Things they can’t control that they don’t understand. And so that’s why we’ve decided to host this class is some of you are interested in crypto, you’re interested in cannabis, your interested in the buildings that go along with those types of investments. Maybe the warehouses for cannabis, also interested in value add apartments. And so we’re going to talk a little bit more about some of these alternate opportunities where you can invest in something that you know, that you believe in or an operator that you believe in.
Josh: So let’s talk about crypto for a minute. Greg, let’s jump into some of your slides here and talk about some of the steps to invest in crypto. For those people that don’t know what crypto is, why don’t you just take like 30 seconds to describe what is crypto currency? What’s exciting about it? Why are people looking at this as an alternate investment?
Greg: You know, crypto is like the coffee club discussion now. Anyone that’s out, you know, just, and there’s ups and downs. You know, most people I talked to, you’ve lost money in crypto currency. But that’s not necessarily a case. I’ve got several clients that have only made money who never actually lost money and it’s been over a year. So it really just depends. And so I actually did jump in to doing a little of this crypto currency because I had seen some successful people doing it. It’s not for everybody, right? There’s some risks involved. But in general, you know, crypto currencies is trading, you know, as a virtual currency. It’s a digital currency. And so this currency, it’s traded online anywhere in the world. And that’s what’s really unique about it. And what else is very unique about it is it’s not regulated.
Greg: So there’s pros and cons of it not being regulated, you know, and so and I’m not going to go too deep into that, but since it is an online virtual digital currency that’s being traded, and there’s only so much of it and it’s all any, you know, anywhere in the world you can be trading it and it’s not regulated. There’s some interesting things that are happening. So it really all depends upon the different platforms you get involved with. So there are certain platforms that people run and manage and do the work for you. The actual trading for you on a daily basis or on an hourly basis. That’s actually how I got involved. I didn’t want to just go and like a lot of people, and you’ve might have done this yourself where you might’ve gotten an open up like count.
Greg: With Coinbase, that’s a famous one. You open up account, you put money in Coinbase and you buy Bitcoin, right? That was the big thing, right? You buy Bitcoin and then you’ll watch it go up and down and you have zero control. And if you happen to pull it out the right time you made money. If you waited too long, you’ll actually lost money, maybe all of it. So you have to be real careful. And so most of the people that have opened up and have purchased crypto currency have asked these kinds of questions, using an IRA, you actually can do it.
Greg: And so we actually help you the first step in anything when you investing in crypto or real estate, whatever the case is, is actually getting your IRA set up with us getting it moved over. So once you get the money sent to, you know, you fill out our application, which is actually in this first step, filling out the application with us, giving your money, transferred over, we help you do all of this, it then your money arrives down at Horizon Trust, the next step then is actually setting up an LLC if you want to. And this is just for crypto currency and now you can do this for other entities as well, but most people when doing crypto currency they opened up an LLC that is owned by their IRA.
Greg: So now those funds from Horizon, we transferred and moved to this LLC that’s owned by the IRA. And then the LLC itself actually will have an account with a company like Coinbase. And I say like Coinbase because Coinbase actually doesn’t hold accounts with an LLC. They only hold individual names. And so if you, so there’s other companies that compete with Coinbase, like Gemini. And there’s couple other ones, I’m trying to think of the other one, but Gemini one that for sure works where you actually established the account with the LLC. And there’s another one. I can’t think of it. It might even be on my next slide here. If you push that next slide for me, Josh. I’m not sure if it is or is not.
Greg: No, that’s the applicant. Step two is getting us back the application here let’s see, step three, liquidation. We get your money transferred over to Horizon Trust, I already explained. I’m kind of running through this here real quick. Let me see here. Okay so after you have the LLC, it’s all set. We move the money to the LLC. That was step four. I already explained that all in the one slide, so I got ahead of myself. I apologize. And let me go one more slide and see if I got it here or not. I’m hoping I put it here.
Josh: Time to invest.
Greg: No. Okay. So it’s Gemini and there’s one other name and I’m trying to think of what it is. It’ll probably come to me while we’re on here. But you can open up your LLC can open and own account with Gemini. So once you have that account and your funds at Gemini or the other company that I’m aware of that I’m aware of, an LLC can own. Then those funds will be moved into Gemini account, which is a platform on which you can move your money in the crypto currency digital currency to go buy your different coins or buy into these different platforms.
Greg: So I mentioned this and I’m being general about it because there’s so many platforms, so many coins and if you are one of those individuals that have read a lot about it that have researched a lot and maybe have some friends that are doing it, what I’m here to tell you is that you can use your IRA, your self directed IRA to do those things. I’m not here to tell you which platform or which coin that would give me too much liability. Because they do go up and down so much. I can tell you I’ve actually made money in crypto. And to this day I have not lost money in crypto yet. But you know, but look, it’s going to happen. The, it goes up and down and then things change. But I invested in a platform that actually invests in and actually a theorym a lot of you probably if you looked into it, I’ve heard of a theorym, they trade on theorym and on different platforms.
Greg: What’s unique about that is they actually arbitrage, they arbitrage theorym, meaning there’s different platforms that are buying and selling crypto currency and they happen to buy from one platform and sell to another platform. And those few pennies that they might make on $500,000 in a couple of minutes on different platforms all the time, create these large rate of returns. So this is a long subject probably could do a whole two hours or hour on this subject. I don’t want to. The most important thing I want to share with you is, this is something over the last six months that I’ve seen a huge increase of people investing in and looking in and using their self directed IRA and they do it through an LLC that’s owned by their IRA that they can invest in different currencies. It’s exciting and my caution that I’ll give you, if you’re not an expert at it, even if you are an expert at it because there’s not too many of them is just do a portion of your funds.
Greg: Don’t get too crazy when it comes to crypto currencies. It is very exciting though. I have seen people make a lot of money and I said people will lose money as well. So those are the steps. I kind of went through all four steps in that first slide, but we help you with all four of those steps. We help you move your money, we help you fill out the application, we help you get your funds over to us. We actually even refer out to you and help you and I think Josh can help you this as well, help you set up the LLC. So he’s got a referral partner to do that as well so he can help you set up the LLC. The IRA can own the LLC, we help you get it funded and then get it into your Gemini account to start doing it. It’s not complicated, but we’ve done, I wouldn’t say hundreds, but I know I’ve done over a hundred of these accounts with our trust company.
Josh: Nice. Yeah, that whole process that you just described, we just got that nailed down with Horizon Trust with a joint client of ours, actually a student of mine, his name is Kevin. He didn’t invest in crypto, but you guys literally just wired into a value add apartment deal that we’re investing in. And that whole process of rolling over his money, his was, he doesn’t mind me saying he was going to an annuity in an IRA that he inherited. He rolled over the funds to Horizon, set up the LLC, and then just invested in an apartment deal that we put together. He’s very interested in just being a passive investor. He’s learned all kinds of active investing strategies from me.
Josh: Called me up through our customer service and is like, hey, all this active investing stuff is great, but, you know, I’ve been with you for years I just want to write to write a check and make a good investment and live off of some of the proceeds. So crypto is a different deal because it’s going up and down. It’s a lot more volatile because it’s unregulated. As it becomes more seasoned investment, it’ll become less volatile. But this whole process of rolling over, setting up the LLC and then deploying that into an investment and we literally just did this last week on Friday, we received the investment into this latest apartment deal. So by the way, guys, if you have a question for Greg, you can pop that in. I was operating from two computers here because I want to see if there’s any other comments coming in through Facebook Live. So we’re broadcasting live on Zoom and we’re feeding that into Facebook Live right now and we’ve got a bunch of people on both platforms and they’re both working.
Josh: I love it when technology works. Which is great. So if you guys have questions about investing, passive investing, pop those into the chat box. All right, fantastic. So listen, let’s talk a little bit more about first trust deed investments. A little bit more about cannabis, about what’s going on in the cannabis space. And again Greg you see lots of different deal flow that’s going on and some people like the idea of investing in a business that directly is growing cannabis, other people are investing in businesses that sort of supply the bricks, the sticks, the warehouses for the cannabis operators. And so there’s a lots of different things that are out there in this space as well, which is another alternate type of investment. So you’ve seen a lot more deal flow in this space. So give us the 50,000 foot overview there.
Greg: So here, once again it self-directed space, there’s alternative assets. And so let me preface now this is me, my, I personally invest my funds. So I just want to give you an idea. This is not recommended to you. I’m not saying you should do this, but everyone’s different age bracket and how much money you might have and what your risk tolerance is. But for me in general, I like to leave 25% of my funds kind of in the bank. I’m conservative, I like to have cash, I like to have funds in the bank, 50% of my funds I like to lend. Typically in real estate, real estate has always been a passion of mine. It’s actually how I’ve built my success is in real estate. But in the last 25% I like to do, you know, fun, different things. I just mentioned one crypto, the other, you know, and then there’s also other little different businesses I might invest in.
Greg: And then lastly in the last couple of years, I also put a little bit of funds into the cannabis business, which has been interesting, but I did it in a different way. I did it not in a way where I actually own the license because I know there’s different regulations, as we know that federally it’s not approved. And so that’s unique as well. And so I did it in a way where I actually wanted to be involved on the building side that you said Josh, where I was able to, and there’s lots of opportunities out there where you can actually land or purchase with your IRA funds or non IRA funds, the buildings, the actual buildings that are housing the grow and cultivation or the dispensary’s.
Greg: Now, why would that be advantageous? Well first of all, I believe, and if you notice, there’s actually a bill up right now to try to get this approved to be banked either federally or approved a bill to be approved where it’s going to allow each state to decide on how it wants to bank this industry if that bill gets approved then it’s going to allow states to decide on how that’s going to happen as far as banking that will completely change this industry. It will blow up even more than it already has. And it has blown up a lot actually. I’ve already been involved in one situation where it actually, I got into it and I also sold to a Canada company. Canada companies are very big right now buying these American cannabis businesses. Well, let me back up here. Here’s just one example and I leave the slides with lots of words so as I’m talking, you can actually read and see kind of an idea or concept. This is not an opportunity. This has already been bought and sold and gone.
Greg: But it was an example of what people have done. Where you could purchase or land on a building like this for seven and a half acres, 12,000 square foot building room to add additional buildings on the land. But the lease was not only a lease guarantee lease payment, but it also included between 3% or 5% of the gross revenues that the building produced. So for me, I liked that because I got to participate in the upside but also got a minimum floor of a monthly payment when I owned or lent on this building, I actually lent on this building. So you can go to the next slide here. I think it’s just more words. You’re talking about the actual deal itself. You know, the collateral, I like lending where I have collateral when you lend on businesses, the businesses collateral, but there’s really nothing very tangible.
Greg: For example, in this example because when lending on a piece of property, you could actually sell, right? If they go out of business or let’s say federal, they come in and close the doors, that business is gone. But now I still have a piece of property, water rights and an asset I can put a new business. And so there’s still, I wouldn’t lose all my money is my point if I invested in this industry but through a building. So I’ve seen many, many, I’ve seen thousands of actually people doing this now.
Greg: At first it was interesting because I thought when this investments, these investments came up, people would be totally against it. It’s drugs, you know, people, you know, there’s not, you know, this is for pot heads and, and, and I was blown away on the amount of interest that people have in this 50, 60, 70, 80 year olds that are not only using it and they’re using it because of different pains or aches or problems or there is cancer in their bodies, but also in awe for sleeping better at night.
Greg: You know, there’s so many people using it, it just surprised me. You know, when, when Nevada in particular got licensed and approved to sell, it was first medically approved, like most states, not recreationally approved. And it did make it medically approved, it didn’t do very well. It was doing okay. It wasn’t even paying the bills. But there’s good revenues and all of the companies in Nevada, when Wreck opened up the lines filled up crazy. And I thought, oh, now it’s all these potheads. No, not the case. I went to the grand opening and I was standing in front of attorneys and doctors and all these professionals and I asked them, I said, why didn’t you come and get, you could have got a medical a license in 10 minutes from a doctor, easy. And the reason why most people didn’t go do it is because once you get a medical license, your name is on the records of the state and they didn’t want their names in the record of the state.
Greg: So now that it’s approved in most states recreationally the business is booming. So and on that, I’m not here to pitch you on, you’ve got to invest in pot by any means. But it’s been very interesting the last three to six months as well, just like crypto. It’s been another alternative space and other place that people have put their money in a creative way using real estate. So that’s why I wanted to share that today. Josh asked me again, I didn’t say this in the beginning, but Josh said, Hey, can you talk about some, you know, unique, different things that people are investing in your trust company and outside your trust company that’s different. And so that’s where we kind of focused on today.
Josh: Yeah, fantastic. And I like it because there’s still a real estate investor primarily participating potentially in the upside revenue of what happens inside the building. But the collateral is important. You know, buildings may, there’s a lot of different changes that could happen with the regulation and you still have opportunity to own the building at the worst case scenario. Best case scenario was is upside from the revenues that come in. So a lot of upside, a lot of potential for the future. But the hardcore safety if you will of actually, you know, participating in lending on a building and potentially owning that building if they were to default on the deal there. So Greg, you have here the repayment terms. So help us understand when you made the investment with this. Again guys, we’re not selling securities here. These are not opportunities to invest in our deals. We’re only showing deals that are closed because you can’t invest in them because we don’t want the SEC thinking that we’re soliciting money to invest. So this is again, for informational purposes only. But Greg, how again, tell me exactly how was it structured? So the repayment terms looks like five years with extensions and they’re paying gross sales plus, right? So give us just some more, some more thoughts around that.
Greg: Yeah, so I mean, you can structure that’s unique about a self directed IRA or investing in a business. You can structure the terms however you want, especially if there’s a group of you where you control and put up most of the money. This just happened to be a deal where there, you know, most of the people were people that either, you know, we knew or friends of ours. And so we went in to negotiate the deal. So we wanted to make sure the terms, there was a structure in which we benefited from the upside but also where we were going to get paid back. And so we wanted to make sure that part of the profits, a large portion you can see here would come in and those profits would pay off the loan. This loan happened to be $8 million loan.
Greg: So the loan, you know, so part of the profits of slowly pay off with the, will pay off the principle with the profits and then when, if the building is, I’m sorry, if the business is sold, we also negotiate a portion of the sale, the proceeds. So all the terms are up for you. The point of this discussion and those terms is you can invest one in this industry, number two, and you can structure the terms if you have the majority control of the money being put up. If I happen to put up $100,000, $8 million, I’m not going to have control or much of a say when it comes to the terms, I mean maybe a little bit, maybe a voice or a vote. But this is just for you to kind of, the point is to let you know that it’s happening out there, but number two for you to kind of get your mind’s going a little bit and engage.
Greg: Okay, there’s other opportunities that maybe I’m missing on or that I would like to be involved with and I’d like to create some interesting terms. That’s the point of this. When it comes down to it, back to the basics, hitting singles and doubles all day long in real estate and debt, apartment complexes and flipping homes. That’s where my heart is, that’s where I’m at. But doing these little deals where you might be able to hit some triples and home runs, it’s a big upside or be able to handle the losses if you take some losses. It doesn’t go as planned. That is also a kind of what I’m sharing with you as well today.
Josh: Yeah, you bet. That’s exciting to be able to collateralize the investment, participate in the upside as well as participating in the building if it’s sold. That’s fantastic. So guys, I know that, you know, we’re not here to give you specific crypto investments to make or specific, you know, cannabis investments to make but you see some of the different stuff that’s out there. And again, you could do this stuff in your IRA. You don’t have to settle for stocks, bonds and mutual funds anymore. And so in a second I’m going to give you guys, Greg’s contact information so that you can, you know, you can reach out to Horizon Trust, set up your self directed IRA or your rollover IRA, and then look at these alternate investments. For me, you know, and we flipped about 700 properties and today I’m almost exclusively focused on passive income.
Josh: We’re buying rental properties, apartment buildings, we’re lending out apartment buildings, we’re investing equity into apartment buildings. And I have my private equity fund and inside the private equity fund we’re flipping properties and we’re lending on flips as well. It’s all around creating stable, recurring passive income and you know, building legacy wealth for my wife, my kids and everybody else. And that’s really what Greg’s focused on too.
Josh: So a lot of the guys that are really interested in real estate type of deals as opposed to, you know, cannabis or crypto. I wanted to show you this deal that we’re, we’re literally closing this week, you know the Easter holidays coming up. So it might be next week, it might get kicked a little bit, but this is a 216 unit apartment complex. We call it Crosby Park. Lawton Oklahoma is one of those markets that’s already kind of been through the maturity and the hyperinflation market and it’s actually kind of, the values are coming down a little bit.
Josh: So it’s creating some opportunity to invest where a lot of other markets are still on the uprise, the Lawton, Oklahoma markets, starting to see some, uh, some deals where it’s becoming a little bit more of a buyer’s market and there’s more sellers looking to sell. So this was a property we got under contract with an operator or a friend of mine. And you know, all these commercial deals are all based on net operating income. So the current financials on the property, the rental income is one point $5 million. After vacancy, the gross income is $1.2 got a lot of expenses, $700,000. So net operating income is $545,000 per year, okay. And so we look at this and said, well, what’s going on here? Well, there’s, you know, if we did some value add improvements, we could increase the rents, we could decrease the vacancy and bump up the rent.
Josh: So the opportunity was to increase the rental income, its pro formas out after fixed up at $1.68 million. And reduce the vacancy down to 7%, because we’re going to have one of the nicest buildings in the area. And the operating income here is projected to be $861,000. So by increasing the NOI, that operating income by $300,000 based on a seven cap or an eight cap or a 10 cap, depending on what kind of cap rate your bank is going to give it, this one about a seven and a half cap, that increases the value substantially. So guys, I’m going to give you guys a little bit of a math lesson here. I want all you guys to get out your, uh, get out your calculators or your phones and I’ll show you guys how to value this commercial value at apartment. And the reason why I show you this is again, because a number of my students, my clients, my investors, they’ve rolled money over to Horizon Trust and a couple of them are putting money in this deal.
Josh: And you know we’ve talked to them about it and they’re okay with me sharing this with all of you. So again, take $861,000, subtract the $545,000 and the difference is $316,000, okay. Now I want you to divide, get your calculator and divide $316,000 divided by 0.075 divided by 0.075. So the answer is $4.2 million. All right, we’re able to buy and acquire this building for $7 million. And the after repaired fixed up value is over $11 million. We’re actually able to increase the value by over $4 million by putting in some value add improvements and increasing the rents, okay. Now what I want to show you is the actual deal, and the deal specifics. So now we’re talking a little bit more real estate. So all in purchase price of $6.2 million renovation budget is $1.2 million. Now $1.2 million sounds like a lot, but remember this is a 216 unit complex, so it’s only about $5,000 of improvements per unit, okay.
Josh: It’s not a lot of improvements per unit only about $5,000 thousand $6,000 thousand per unit. So the financing we’re able to secure was $7.7 million, okay. And $5.9 million came from a first mortgage commercial bank loan. And we did have our operators sign a personal guarantee for that. And we then went and raised one point $8 million from private investors and private lenders. And I’ll show you what those private investors got. Again, this is not available for you to invest in. But this is just an example of something you can invest in your IRA, okay. The plan is to stabilize this building within the next 18 months. And the stabilized NOI is $861,000. So again, if you take $861,000 and divide by 0.075 based on a seven and a half cap, which is what banks are valuing stable apartments at right now puts the new value at $11,480,000.
Josh: So again, we’re all in for $7.5 million and it’s going to be worth $11.5 million. So smoking deal, we created $4 million of equity in this new building. Now what we’re planning on doing is putting a new agency loan on a meeting Fannie Mae Freddie Mac loan after about 18 months we are going to refinance it and the Fannie Mae loans going to come in for $8.6 million and pay off the construction financing, pay off the private investors that put money into the deal. And we’re going to have $715,000 of cash out refinance proceeds, which are all tax free proceeds, okay. It’s also going to leave $236,000 of net free cash flow after we pay off the debt service. And after we pay off, you know, all the expenses and the debt service over $236,000 of net positive net free cash flow and still leaves us almost $3 million of equity.
Josh: Now what we did as far as arranging the private lender funds. And the reason why I show you this is again not to recruit money because we don’t need any more money for this one, but to show you a really cool opportunity that had this been available that you could have done it your self directed IRA. Again, this is just for informational purposes, not selling securities here, but this is an opportunity that you could have done something like this in your self-directed account with Horizon Trust, okay. So what we did was we said, look, each investor that puts in $100,000, that’s going to equal a 1.25% ownership in the building, okay. $100,000 is equal to 1.25% ownership in the building. So we’re doing is paying a 10% preferred return to the investors over the first 18 months, okay. That 18 months is again, equal to about $18,000 that’s actually a type on there.
Josh: $15,000 to $18,000 of interest, okay. So 10% over those 18 months, they’re getting that in a promissory note return, but they’re also getting equity in the building in perpetuity, okay. So 1.25% equity. So when we do the cash out refi, after 18 months, the investors are going to get back 100% of their principal. They have already received the 10% return on their money, okay. And they’re going to receive 1.25% of the cash out refi proceeds, which again is non-taxable. Now, if you did this in your self directed IRA, you would have had the $15,000 go back to your self directed IRA and now you’re going to get or would have got around $9,000 of refi proceeds. Now the cool thing about the way we structure these, and I would encourage you to structure these for yourself on your rental properties, on your apartment deals, that kind of thing.
Josh: We leave the investors in the deal in perpetuity forever, even though they have no money in the deal, okay. Even though I have no money. So these guys are going to get about $3,000 per year of cashflow and it’s going to be earned income because they would be earning an income if it wasn’t in their self directed IRA. Now, if it’s in their self directed IRA, it’s protected from taxes, okay. But if it’s outside of their IRA, it’s earned income that’s then going to be offset by depreciation from the apartment deal. And they’re going to hold equity in the building as well. They’re going to own 1.25% of the equity. So if we have, you know, $3 or $4 million of equity in the building, they’re going to own 1.25% of that, which is about $35,000 of equity. So we’ve structured this and as I mentioned before, Greg and I have a joint client that invested in this exact deal in his self directed IRA with Horizon Trust.
Josh: And so we’re happy to work Greg and us and my friend and my student who, kind of the three of us put this all together and benefits them, benefits Horizon and benefits us as well, but really exciting. So when you add in the interest, the refi proceeds and the equity in perpetuity, it produced a 39.9% annualized return in the first 18 months. Really, really fun and exciting stuff again, that you should be thinking about. What can I do in my IRA? What can I do with the local operator, with my IRA? What can I do outside of stocks, bonds, and mutual funds to self direct and get a higher return? And invest with friends and that’s when people that, you know, invest in things that you understand. That’s what this is really all about. So Greg, I know you’ve invested and I’ll bring you back in here. I may have invested in a number of apartments, commercial deals, hotels, things like that. So it, was there any other examples or types of deals, more real estate related that you’ve seen lately that you’d like to kind of add some color to this conversation about?
Greg: Yeah, I mean, like this Crosby Park deal. It’s like, you know, it’s exciting to talk about crypto and weed, but when it comes down to it, I’ve learned my lessons, I’ve taken my beat up, you know, punches and at the end of the day, it’s just, you know, I get real estate, I understand it, it’s been good to me. Sure there’s some kind of, I get beat up once in a while. I’m real estate, but it’s just different, you know? And so you know, I think of this deal, and I think it, man it gets me excited. I’m glad that I keep 50% or so more of my money in real estate because this is the kind of just the perfect kind of deal, especially when I look at those terms that you use inside of yourself directed IRA.
Greg: And so, I mean, if you’re doing that with a Roth IRA, you’re not paying any taxes on the growth and you’re pulling it all out tax free as well. So, I mean these are great deals. You know, I would say, look, if you can make double digit returns, let alone 39%, but double digit returns that have real estate backing it and you can consistently do that, you will crush the market because the market every couple of years is only good, two out every five years it’s good. The other three years it’s going flat or going down so you’re making back your losses.
Greg: And so real estate has been consistent. Sure, you know, we had 2007 and 2008 hit that happened. You know, every 10 or 15 years, you know, the market’s going to do. But the real estate market’s been good now for 10 years, almost 10 years where going on that now. So you know, real estate is, you know, I just get excited when I watch this stuff. You know, and it’s funny because everyone gets more excited when I go and talk to people about their options. They all want to talk about weed and I’m like, it’s exciting, don’t get me wrong. But real estate, you know, hitting singles and doubles and sometimes triples in real estate in the long run has always give me comfort and success. So yeah.
Josh: You bet. Yeah guys, I mean it’s really what it’s about is investing. One of the things I like about it is the sort of predictability. Like I tell people all the time, Greg, like real estate, it’s just fifth grade math. Like my daughter’s in fifth grade, she’s 10 years old, she’s amazing, but she gets real estate already because it’s just simple multiplication and division. So you know, when I look at this deal and I think, okay, what’s my total return? You know, she already knows my 10 year old daughter already knows to look at net operating income from a building and then divide by whatever the cap rate is and that’s the value of an asset. That’s the value of a real estate asset. You know, valuing crypto or weed, there’s definitely a lot of upside there and it’s really hard to value, but there’s a lot of upside.
Josh: You could hit a grand slam there that you may not hit him real estate. So that’s why like I love Greg’s approach of, you know, 50% in real estate and then leaving kind of 25% for these other alternate opportunities to do things, to try to hit a home run grand slam and you might take your lumps. But that’s really, really where it’s at. Guys, I want to get mentioned, our partnership with Horizon goes back years. If you have a self directed IRA and you’re not getting the service that you really want, you know, make sure you talk to Horizon about rolling over your account. We have a special website set up at HorizonTrust.com/SREC S R E C HorizonTrust.com/SREC Strategic Real Estate Coach, go there. If you opt in, there’s some free goodies, some free gifts.
Josh: Then your going to set up a one on one strategy session with Greg’s team and they’ll help you with the rollover. And then if you’re going to make an investment in anything, it could be a single family, it could be hotels, it could be, you know, partner. It could be weed, crypto. Again, they’re not going to tell you what to invest in, but they will have, they do have a compliance department and they do have to make sure that whatever you’re investing in, you know, there’s proper documentation. They’re not going to tell you whether it’s a good investment or not. But if there’s things like a private placement that should be in order or a note and mortgage that should be an order or a purchase agreement. They shouldn’t be an order. That stuff’s got to sail through the compliance department to make sure that all that stuff is on file.
Greg: So, you know, they offer a free strategy session. I’ve had hundreds and hundreds and hundreds of students, you know, work with Horizon, opt in for their information, have conversations, roll over their money. And you know, Greg is again a personal friend of mine, so you know, comes with the highest type of endorsement. Check them out at Horizontrust.com/SREC. Y’all see the phone number and the email on your screen. I will make sure we put that in Zoom in the recording. I will put that up in ITunes and YouTube and we’ll put it up on Facebook. Make sure you guys check that out. So I’ll, Greg, I know we need to wrap up here, but any kind of final parting shots, words of advice, lessons that you’ve learned that you’d like to leave our audience with?
Greg: You know my consistent one is taking action now, man. I just, you know, it’s exciting. It’s fun. You know, it is about building relationships. I love making money with friends and other people in masterminds. But it’s about now. You know I often go back a year or two later and I go to these different groups and some people in the mastermind are like, oh, there you are, Greg I should, I haven’t done it yet I got to get it going. It’s like, you know that every year that you wait is a couple extra percentage points that you’re losing on your account and potentially thousands of dollars less that you’ll have in your retirement account. You know, obviously no one even talks about social security retirement anymore. So it really depends on you and taking action now and it’s starting to save money. So that’s my only advice is get going now and look and if you reach in and say, and you want to talk to me personally, email us and say, hey, I want to talk to Greg Herlean personally, I love to take calls. I’ll answer all your calls and I’ll, you know, I’ll help you through anything that you have questions with, but it’s really about getting going and starting now.
Josh: Yeah, you bet. Thanks. Awesome advice, I appreciate that. Michael’s got a quick question too, which is, what was the overall hold an exit plan for this apartment deal? So again, and Greg, you know, you might have to bounce, I know you’ve got some other things that you’ve got to do, so I don’t know if you want to sign off. I was going to stay on with some of our audience for a few minutes and answer some questions, but I know you were gracious with your time to join us today. Do you need to run?
Greg: Yeah, sure. I’ll sign off. Monday is my kid day, so I got a lot of time with the kids, so I will go and get ready for them and I appreciate it. Thanks for the time today and I look forward to work with you guys.
Josh: Fantastic. Thanks so much for joining us and we’ll talk to you soon.
Greg: All right, thanks.
Josh: All right, take care. All right, guys, it’s fantastic. So a couple of questions. So Michael had asked like, what’s the overall exit plan with this deal? So when we do these big apartment deals, this is our, I think our third or fourth big apartment deal. And just the last six months after this deal closes, I will be an equity owner in about 1,350 units of apartments. Now I don’t own 100% of these buildings, but I own large equity stake in 1,350 apartment units. And Michael, to answer your question about exit strategy, you know, if I sold this building, the question is what would I do with it, right? And so the answer is I would just go buy another apartment building. So the answer with all of these types of apartment deals that we’ve done is to hold them to hold them.
Josh: Because once we have a stable building that’s throwing off, you know, a 15%, 20% return to ourselves and our investors, there’s no reason to sell this building at all. There’s no reason to stabilize that building and then sell it off to somebody else at a seven or a seven and a half cap. The plan is to keep that sucker and let that thing cashflow. It’s going to generate $236,000 of net free cash flow. I mean, why, why in God’s name would we possibly sell it? That wouldn’t make any sense. The legacy of wealth, absolutely. Michael says exactly legacy wealth. Yeah that’s where it’s at. So we’re going to hold onto that building. You know, if I could give you guys a piece of advice, the only thing I would do differently in my real estate career, if I could go back, you know, I was wholesaling properties, I was rehabbing properties.
Josh: I was flipping properties because I needed the money. You know, when I got, when I first got started, I needed the money. When I got sick with cancer back in 2011 and I was making my, you know, my rebound my comeback and I needed the money. I needed the money to make profits from my rehab flips. You know, in and a little while ago, I started, you know, instead of flipping every property, I started keeping more and more of my rentals. I started keeping more of the profits in my fund, I started keeping more of my deals. And, you know, I really loved, loved the idea of legacy, wealth and passive income. And so, you know, I’m flipping less and less properties today. I mean we’ve done 700 flips, so there’s nothing you can ask me that I don’t know about flipping properties.
Josh: But today, you know, we’ve recovered pretty well from cancer. We’ve recovered pretty well from a lot of things and now it’s just all about building and building and building a legacy wealth and net free cash flow, passive income. And so this is a building that we’re going to keep myself, the operator, our friends, our investors that are in it. Once we do this deal, this agency loan is going to allow us to refinance and pull all of our investment out of it and we’re going to stay in the deal and then we’re going to go do another one and then another one and then another one. But we’re going to hang onto them not only for the return, but for the tax breaks, right. Not just the return, you know, the more accredited, the more sophisticated investors I talked to. Not only do they want return, but they want tax breaks.
Josh: They want tax savings. They don’t want to deal with, I’ll pay a lot of taxes to the government. They want to keep as much as they possibly can. But that’s really where it’s at. Anthony says, I want to look into this more, but at my stage I need to be raising money for my business account. And the answer Anthony is yes, you need to be raising money for your own deals, for your own apartment, your own rehabs or own rental properties. And the good thing is once you have an investor who invests with you, you can then refinance and pay off their investment or you can sell the property and pay off their investment. And then you can reinvest. That same private lender can fund two, three deals a year for you, but it can fund 10, 20, 30 deals for you over your lifetime.
Josh: So $100,000 private lender or $200 or half a million dollar private lender is going to be worth hundreds of thousands or millions of dollars to you over the next five or 10 years. But you’ve got to protect their money. You got to educate them. You’ve got to help them save money from taxes. You’ve got to allow them to roll their money over to Horizon Trust, okay. And do more and more and more deals and save them as much taxes as you can and also get them the best return you can and they will absolutely love you, okay. That’s really where it’s at. All right. Michael says the new tax laws are very favorable towards real estate investing. You bet, I mean, our president is a real estate investor. Whether you like Donald Trump or you absolutely hate his guts. And I realize there are people on both sides of the aisle, if both sides of the fence, but there’s no mistaking the fact that he loves entrepreneurship.
Josh: He loves people that take risks. He loves real estate investors, okay. So guys, listen, if you’re looking to take your real estate investing to the next level, you got to join us. You’ve got to join us in our coaching program. Let me help take you to the next level. And you can go apply for free to be considered for our coaching program at Josh CantwellCoaching.com there it’s free to apply it’s free to learn more. And we’ll walk you through a two step interview process, what we’ll learn about you and your goals, and then we’ll present you an opportunity to get enrolled in our coaching program. And now, again, it’s not free. It is a small investment. You know, it’s about one deal, about the cost of one small wholesale deal to get started. And absolutely we can help you take your business to the next level.
Josh: We’ve got hundreds and hundreds of students who’ve been through these programs with massive, massive success. Raul says, Hey, I’m logging off, but thank you for your seminar. I am a current real estate investor and commercial broker. I do both residential, new construction. I have entitlement skills, annexation zone changes, new construction, R1 subdivision. I’m hoping to partner up. Thank you. Fantastic Raul, so we’ll stay in touch. Michael says you offer hundred percent financing for fix and flip loans. The answer is yes. You can check us out online at FreelandLending.com. You can also check out our private equity fund at FreelandAcceleratedFund.com. Okay. FreelandAcceleratedFund.com FreeLending.com. And if you’re looking to take your investing to the next level, you need some help and need some guidance, go check out JoshCantwellCoaching.com. All right.
Josh: Any other final questions that I can answer before I sign off? I’ve actually got a run because I have an interview with new acquisitions manager. Our businesse is booming or business is blowing up and I have got to get to an interview. We’re bringing on another business development manager somebody that can bring us more deal flow. Because we’ve got lots of money. We’ve got about $30 to $40 million at our disposal of true private money that we can deploy into deals. So we’ve got to find more deals.
Josh: Michael says, thank you Josh. I’m so excited to be here. Thank you. Bunch more people that said weed and crypt. Raul says great discussion. Thanks for including the value at apartments and the real estate. Michael, if you want to connect directly with Greg again, reach out to him at HorizonRrust.com/SREC or (505) 847-8944. Michael, we owe you a free gift. So we’ll be sending that out in the mail to you. I’ll make sure that my team reaches out to you to get your physical address. All right, thanks a lot so much for joining me. Cam says, thanks so much for the information. Debra says, great to meet you virtually. Thanks so much for the webinar.
Josh: Anthony says, thanks so much for the insight and the patient’s, fantastic. Guys, listen, I got to run. Hope you enjoyed the class today. I look forward to seeing you again. We’ll be doing another class next week, um, on, on wholesaling and getting deals. Everybody needs more deals. Everybody needs to find more deals. Everybody needs more deals. Everybody needs more properties to flip or wholesale. And next week we’ll be doing that class. So make sure you join us. Abby, thanks so much for joining me, Randy. Appreciate you being here. We’ll talk to you guys real soon. Take care.
You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the Strategic Real Estate Coach and Freeland Ventures on all social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com.
If you invest in real estate, you already know the benefits of doing so – the passive income, the long-term equity, and the financial freedom that allows you to spend your spare time doing what you love.
Greg Herlean understands this too – he has experience investing in hundreds of single-family homes, wholesaling, rehabbing properties, and purchasing multi-unit apartment buildings.
But Greg found his true calling several years ago when he founded Horizon Trust – a company that assists professionals across all industries who want to explore self-directed IRAs, as well as alternative investment opportunities in cannabis, cryptocurrency, other tax-free REI strategies, and much more.
These can all be strategic ways to supplement your real estate investing income – by diversifying your investments. Plus, as Greg points out, profit made on alternative investments can help provide a “cushion,” should you have occasional bad real estate deals.
It’s important to note that Horizon Trust won’t advise you on WHAT specifically to invest in, but they will help you facilitate the entire process, and make sure you’re in compliance with all laws and regulations pertaining to your alternative investments.
So, even if you have the tiniest bit of curiosity about investing in cannabis, cryptocurrency, or other tax-free real estate investing strategies, be sure to check out what Greg has to say.
- How transferring your traditional 401(k) to a self-directed IRA with a company like Horizon Trust can allow you to make alternate investments
- An in-depth explanation of cryptocurrency and how Greg has made money with this method of investing
- The pros and cons of investing in cryptocurrency
- How the cannabis industry has grown as more states legalize recreational sale
- Examples of creative financing deals Josh has structured for value-add apartment complexes
Mentioned in this episode
Horizon Trust contact
Strategic Real Estate Coach
Josh Cantwell Coaching