Exploring Passive Income Streams: Creating Financial Freedom Through Passive Investments

Episode Transcript
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(00:50):
Aloha Inspired Money Makers welcome to Inspired
Money, the Live Stream podcast. Thank you for joining me today. If
this is your first time here, welcome. And if you're a returning
viewer or listener, welcome back. It's always great to have you with
us. According to data from the U.S. census
Bureau, 20% of American households earn passive income

(01:12):
either through dividends, interest or rental properties and the
median amount is around 4,200 per year.
Of course, that's not nearly enough to achieve financial freedom,
but our mission today is to see if we can get that up a little
bit and have a positive impact. I noticed that every
blog and YouTube channel seems to have a top five ways to

(01:34):
generate Passive income. So this is a hot topic and we'd like to
take it further. In this episode we're going to learn directly from the experts,
practitioners who have built real wealth through real estate
investing, online businesses and more. They've each mastered
different paths to passive income and they're here to share real strategies
that you can start learning from to earn more.

(01:57):
Before we jump in, this episode is brought to you by my financial advisory
firm, runnymede Capital Management. I want to invite you to
take advantage of our three minute financial plan. Head over to
InspiredMoney.fm/getplan. It just takes three
minutes and you'll get a personalized snapshot to help kick off
your financial journey. Again,

(02:18):
InspiredMoney.fmgetplan. Let's
welcome in our amazing guest. Let me start with
Justin Donald, known as the Warren Buffett of Lifestyle
Investing by Entrepreneur Magazine. He's founder of the
Lifestyle Investor and he's a leading expert in
low risk cash flow investing. He's the Wall Street Journal and USA

(02:40):
Today best selling author of the Lifestyle Investor
the Ten Commandments of Cash Flow Investing for Passive Income
and Financial Freedom. And he's helped countless people
create wealth and achieve financial independence through his straightforward
investment strategies. Welcome. So glad to have you here
Justin. Thank you. Yeah, glad to be here. I'm excited to

(03:02):
join. I'm glad that you could make it. I said
aloha to greet everybody. Lane Kawaoka is actually in
Hawaii. After 12 years as a licensed civil
industrial engineer, he transitioned to full time real estate
investing. He wrote a book, the Wealth Elevator,
Real Estate Syndications, Accredited Investor

(03:24):
banking and Tax strategies for first generation
millionaires. As founder of the
Passive Investor Accelerator and Mastermind and
Simple Passive Cash Flow Lane helps middle class
investors build wealth through syndications and multifamily apartments, RV
parks and mobile homes offering access to deals once

(03:45):
reserved for the wealthy. Lane welcome back to inspired Money.
Hey, thanks for having me. Hello, everybody. All right. And you got
your mic and headset all working
so perfect. We have Nick Loper. He's an author,
entrepreneur, and the host of the award winning side Hustle show
podcast where he shares practical strategies and business

(04:07):
ideas to help people earn money outside of their day jobs. As
founder of side Hustle Nation, Nick is passionate about
empowering aspiring entrepreneurs to create extra
income streams and take control of their financial futures.
Nick, so glad to have you here. Thanks for having me, Andy. Excited
to hang out and learn from this distinguished panel.

(04:29):
Awesome. I look forward to hearing the relationship between side
hustles and passive income. And then rounding out our panel today,
we have Deacon Hayes. He's a personal finance expert, a
speaker, founder of well Kept Wallet, a platform dedicated
to helping people make money, save money, and achieve financial
independence. He's known for paying off $52,000 of

(04:51):
debt in just 18 months. He's author of the book you can
retire early, A practical guide to financial Independence.
And he's been featured in outlets like Forbes, CNN Money,
US News, and World Report. Deacon,
you also have an album coming out soon. I do, yeah.
Rap album, of all things. But thanks for having me. This is Winnie in the

(05:13):
background. That's awesome. Welcome, Winnie. And before
we continue, I hear that Justin is also a
hip hop guy, so maybe you guys can freestyle before we're out.
With that, let's go straight to segment one.
Passive income generates earnings with minimal effort after the initial

(05:33):
setup, standing apart from active income, which relies
on consistent work. Examples include rental
properties, dividends, savings, interest, royalties, and
revenue from businesses where direct involvement is limited.
Benefits range from enhanced financial security and
independence to flexible time management, freeing

(05:54):
individuals from the constraints of traditional employment.
Strategies include real estate investments like rental properties
and real estate investment trusts for steady income without the
need for active property management. Dividend investing in
reliable stocks or ETFs yields regular payouts,
while creating digital products can offer continuous revenue

(06:15):
after setup. Peer to peer lending and crowdfunding
provide additional paths to passive income, often
requiring less capital. While passive income promises
financial stability, it generally requires substantial
initial investment, time and research. Setting
realistic expectations and understanding these initial demands

(06:37):
are essential to building a sustainable foundation for long term
passive income.
So I suspect that we're going to hear this idea of trading our time for
money and trying to buy that time back. Nick, can you kick
us off? If you had to rebuild your passive income streams

(06:59):
from scratch with just $10,000 to start, how
would you do that? Yeah, 10,000 bucks isn't going to buy
you a lot of passive income unless you're really going into a lot
of leverage in a real estate deal. But what it can do
is what we look at on the side Hustle show is a lot
of, we call them sweat equity type of passive income

(07:21):
type of projects where you're building digital assets
into terms of online content, digital products,
YouTube videos. And I'm attracted to those types of models
where it's something I can do the work once and get paid for it over
and over again. For example, it takes the same amount of effort to create
a podcast episode, in my case that 10 people listen to

(07:43):
or 10,000 people listen to or a hundred thousand people listen to. Right. So
looking for models with that type of scale and digital
products. Check that box too. Or I create something once, sell it over and over
again. Software is like the holy grail of that, but it's becoming more and
more complicated, or maybe less complicated with AI coded solutions.
But that's kind of the path that I would be looking at because it's

(08:05):
like, okay, if I put that $10,000 into dividend investments, like
this is probably not going to be super exciting. You start to stack it
up, but you're probably better off putting that into some
form of personal project where you can build something up
over time and have that start to experience some
time leveraged income for you. Maybe not completely passive, but you'll, you'll be on the

(08:28):
path. Thank you for that. Justin, what was
your first passive income stream? And then how did
it evolve into something bigger? Yeah, you know, my
first passive income stream was actually mobile home parks. And that
is, you know, back then it was not common. It
was, I mean, friends and mentors and

(08:50):
people, I mean, they thought I was crazy that I was even talking about investing
in the mobile home park. You know, real estate asset class,
I mean, it really wasn't even, you know,
it's its own asset class at that time, or it
loosely was. But I found a deal that, I
mean, when I started looking at the numbers and I compared it to everything else

(09:12):
out there, I compared it to multifamily, self storage, industrial
retail land, I mean, you name it. I looked at, you know, all the
different places that I could put my capital
and I just saw pretty quickly that the returns were much
greater with less work and
you could get lending pretty easily. So I could put 20% down. And

(09:34):
in my case, my first two parks were on seller
finance, so same owner. And that allowed
me to just put 15% down because that's all he felt like he wanted.
And so it was a non recourse loan, meaning if anything went
wrong, the guy bought it from, he could just take
it back versus coming after me and my other assets. But

(09:57):
that single investment created enough in
passive income that my wife was able to retire as a teacher.
And that's when we started our family. And so we just kept buying
parks. You know, our second park covered our survival income, our third
park covered our lifestyle income. And then from that point on, every
additional park was just surplus plus income. And so

(10:19):
the flip, the script gets flipped when you work
your whole career, at least the early stages of your career, to save 10 or
15 or 20%. But once you're in surplus income
and the money you make goes well beyond
the cost of your living, well now 100% can go
towards building more wealth or impact projects. Yeah,

(10:42):
that progression is really impressive. And it sounds like there was a time when even
you thought that there was a crazy idea, because I think I had heard that
you thought it was crazy until a friend of yours was like buying a really
big house and you're like, wait a minute, maybe I should take a, take a
look at this again. That's 100% accurate. Yeah, I was, you
know, I thought he asked if I wanted to go to a boot camp with

(11:03):
him and learn how to do it and invest with them. And I was kind
of like, I don't know, this doesn't sound like what I want to invest in,
so why don't you go try it out and we'll see how it goes. And
it went really well. And I ended up being his hard money lender
because I was like, well, I'll just for sure get a guaranteed return and not
invest in something that was, you know, in my mind at that point in time,
maybe risky. And now looking back, it wasn't risky at all. But back then

(11:26):
it was. So I just took, you know, a set 10%
and. But when I looked at the financials, I saw how
amazing they were and he was making a lot more. So I figured I
should probably start owning and not just lending. Lane, how
about you? I mean, you transitioned from engineer to
real estate investor. Can you talk a little bit about the mindset

(11:49):
shift that you experienced to make that
change? Sorry
about that. My kids running around because that's the
life these days. But yeah, like, I graduated in
2009, just started to work, and for the first decade I
just built my real estate portfolio as a side gig. I was working

(12:11):
my engineering job didn't have very much time. So I
didn't do any of the house flipping type of stuff. So it is
possible to be passive, but you know, it's gotten a lot
harder. Right. Like I started to buy these turnkey rentals that at the time I
could buy for $80,000 with 20 grand down. So it
took me about six months to save up for a down payment on those.

(12:33):
And I just rinse, wash, repeat, did that again and again and again. But
I'll tell you, it's harder for these younger guys these days. I mean those
$80,000 properties that I bought in 2012,
2015 are now going to be
120, 140,000. You know, you need 30, 40 grand
down payment on those things. Yeah, prices are much higher now.

(12:55):
If someone could just pick one strategy today,
is there like, what's your advice to them for starting
when you have, you know, properties that have appreciated so much?
Yeah, the way I break it down is like where you are in the wealth
building journey, right? I mean stage one, get a budget, you
know, be able to save 5,000,

(13:17):
$20,000 per year. If you're not there yet, I don't
think you're ready for any type of passive investing. You don't have enough
firepower. But if you're able to save a decent amount, 10,
20, $30,000 a year, I think, you know, to get to
half a million dollars net worth, start with little rental properties and
then go from there. I think when as an accredited investor,

(13:39):
million dollar net worth or greater, or $200,000,
$250,000 income a year, you know, the little rental
properties are just not really scalable. So I think that's where
syndications and private placements come in. So lp.
But you know, as I break it down in my book, right, there's different
paradigms of this wealth building journey. So different advices

(14:00):
depending on where you are, what your net worth is.
Absolutely. Deacon, what are your thoughts? Because when you
build a website, I think you don't need the
upfront capital that you would buying
real estate. Yeah. So when I started my
journey, you know, our website was just a blog. So it was us sharing our

(14:22):
story, paying off $52,000 debt in 18 months. And, and so it
wasn't really like I wasn't looking to make money with it, I was just looking
to share what I had learned. But then I learned about, oh, how do you
get traffic to a blog? How do you monetize a blog Through Google
Adsense at the time, and then started slowly, you know, making
Like a thousand, two thousand, five thousand, ten thousand plus

(14:44):
per month. And the effort was minimal. Now I will say
the landscape for websites at least has changed dramatically.
Right. Kind of like what Lane was talking about with real estate. You know, real
estate back in the day was cheap. It was easy to pencil deals. You know,
back in the day, it was easy to start a website and to get traffic
and to be able to make money with it. Now people have to be a

(15:05):
little bit more creative and how they get their traffic from different social media sources
like Facebook, Instagram, TikTok, et cetera.
But yeah, it's definitely possible to create a digital asset like an
online business, whether it's, you know, on a profile like Instagram, on a
website, and to be able to make money with it and have some passive
income from it. Do you think that people need a lot of money to

(15:26):
start if they're thinking about trying to generate a source of
passive income? Well, no. I mean, that's the beauty
of doing an online business is it's very little capital to get started.
It does, it is a grind, as Nick would probably attest to when you're saying,
hey, I want to create a digital property and grow it. But if you use
the skills that you have and the knowledge base that you have on that

(15:48):
property, when you have time off right at the nights, the
weekends, maybe in the early mornings, you can easily start to build up
that knowledge base and start to build a following. So yeah, the capital
up front is low, but it does take time to
start getting passive income from it. Cool.
Anybody else want to weigh in on the. Do you need money up

(16:10):
front? I'll say, like my stuff,
like real estate, you're going to need like 20 grand to get started on a
hundred thousand dollars house. So that's kind of where it starts from there, I
think, like what Deacon and Nick do, I mean, if you don't got too much
money or you know, your, your money is already deployed to real estate.
I mean, I think that's how you make nothing out of sub into something.

(16:31):
And at the end of the day, you got to put some sweat equity,
make a website, buy a business, start a side hustle.
I mean, you got, I mean the hardest part is getting that 101st, 100
grand. We have some creative
examples of people starting with lower capital amounts and
like, okay, yeah, we want to own rental real estate down the road,

(16:53):
but what can we start renting out earlier? I mean, we've seen people rent out
their RVs, we've seen people rent out Their backyard sheds. We've had people on the
show renting out mobility scooters and portable hot tubs and photo
booths, right? So you can think about other asset classes
besides just, you know, bricks and sticks and real estate, apartment
buildings and stuff. There's other things you can get started with a much

(17:16):
lower capital amount. We had a woman on who was renting out dresses.
I was like, I never thought of dresses as an asset class, but there she
was making a hundred grand plus doing dress rentals. Love the
creativity. I think there's always a way to be able to make
money with no money. That's not the easiest way.
It's always easier to make or I shouldn't say always. It's usually easier to make

(17:38):
money when you have money. But there's always someone that is going to be willing
to either a
in. Let's just say in the world of real estate, do a no money down
type of scenario. Most people won't. There's always someone that's going to be willing
to do that. And I know a lot of people that have done it and
I probably could, could have done that a couple of times. But then there's also

(17:59):
the raising money. So a lot of people, you know,
once you're a little more seasoned, they want to know that you have skin in
the game. But in the beginning you probably can raise from friends and family
and close network where you
know it's, it's other people's money and if you have money, you can put it
in. And it's ideal to have money in, I think, but I don't think you.

(18:20):
Have to love it. Let's go to
segment two. Real estate offers various
passive income strategies with unique approaches. Purchasing
rental properties provides income through tenant rentals, with
property managers often handling daily tasks. Turnkey
properties already renovated with tenants in place allow

(18:42):
investors to earn income immediately with minimal involvement.
Real estate investment trusts offer another option,
allowing investors to buy shares in companies that own or
finance income generating properties. REITs trade
like stocks, offering dividends and liquidity.
Crowdfunding lets investors pool resources for large real

(19:03):
estate projects requiring less capital and providing
diversified options without direct ownership. Real estate
syndication involves partnerships in larger properties managed by a
general partner, allowing passive income without active
involvement. Each approach has unique benefits and requires
careful selection and management to optimize returns,

(19:25):
offering investors a pathway to consistent passive income through
real estate investment.
So Lane, what was your first real estate deal that really convinced you
that passive real estate income was scalable? So
I bought a house to live in in 2009. I was in my early

(19:48):
20s at that time and I was traveling all over for work. Never,
never really home. So I decided to just rent it out.
Wasn't quite a dress in my closet, but it was kind of the home I
lived in. And that was when I was hooked. I realized
that just by doing a buy and hold rental, no house
flipping, that I was able to

(20:10):
make significant passive income. I think it required
and I think I got like maybe 400 grand. 400 per
month. And that was a lot of beer money to a kid back
then. But realized like, wow, if I just rinse, wash, repeat and did
this several more times, I'll be out of the rat race. So. But
then I realized that was in Seattle, Washington, where prices are really high.

(20:32):
We call those primary markets where the rent to value ratios are well under
1%. So then I kind of wised up and you know, bought in
other places like Birmingham, Atlanta, Indianapolis, where all these little
turnkey rentals were at. It's worth mentioning that
you were able to do that in your 20s because you were also known as
the ramen noodle guy. Well, you know, I was

(20:53):
Paleo back then, you know, back in the early 2000s. But.
But yeah, you know, people identify with that, that saying, right?
You live frugally, I think. I mean, in my early 20s,
I didn't live anywhere. I just lived on the road and my in, you know,
kind of smooching off of the company expenses. And I was able
to save like 80, $100,000 a year for maybe four or five

(21:16):
years. So that was really where it all started. I mean, just
plowing that down into down payments, into properties for four or five
years in a row. Yep, that's powerful. Justin, how
much money did you need to get started in the
RVs and mobile homes? Well, how much I started with is
probably different than what you need. You know, I think it all comes down to

(21:38):
the size of park that you're looking for
because that, that asset. And by the way, if you're going to do some sort
of like bank lending where you're probably going to have to put down 20,
25% or maybe if you're with a, you know, more conservative bank, even up
to 30% versus like a seller finance
scenario, because with seller finance, maybe you can get away with nothing down or 5

(21:59):
or 10 or 15%. So it's really
just size. It's probably going to be based on the noi of that asset. Unless,
you know, I mean, the cool thing about mobile home parks is it's a lot
of baby boomers. And so they often don't value
it based on what it's worth as a
multiple of noi. They value it based

(22:20):
on, in their head, what they want it to be worth. And sometimes that comes
in way higher than it's worth, but sometimes it comes in way lower than it's
worth, you know, so you could easily get
away with putting no money down or putting little down. My
very first deal that I ever did was
$65,000 down, and that was 15%

(22:42):
of. Of this park and I was
making over. So that deal, it was actually I made, I think,
54% cash on cash return. So it
was a really good first deal. It is a great first
deal. If we take a step back for a second. Can you talk a little
bit about the mindset shift that helps people transition

(23:03):
from maybe owning a single rental
to becoming a lifestyle investor? Yeah, I mean,
the whole thesis of the lifestyle investor, it's really
just helping people understand that there is a way that you can buy
your time back and live a life by design, not a life by default.
And so that can be done in various different avenues. I mean, everyone

(23:25):
here is an expert at the thing that they do. And for someone
listening, you could just go deep into any one of the things that any of
us are talking about, and you can find success. The key, I think, is to
really just pick the blueprint that you think is going to work
best and model it and do it to a T. So whichever
strategy sounds the best or whichever one is, you know, you're the most interested

(23:46):
in, or whichever one maybe is the least amount of work because you're, you know,
slammed at your day job. You know, you pick a
lane and you just go. But I think the mindset
shift around it is that really
anyone can do it. They just have to be committed to it, and they've got
to have a process to it. And if you can get someone else's playbook and

(24:07):
just copy, copy it, which, like, I feel like I'm the master copycat.
I just figure out who's best in class and then I just copy them. You
know, a lot of people think what I'm doing is my own original ideas.
I just find whoever's the best at it because I don't want to reinvent the
wheel. Valuable lesson. Deacon, I
noticed that you. You've reviewed a lot of real estate platforms and

(24:29):
crowdfunding real estate platforms on your website. What have you
learned? Yeah, I've learned a lot over the years.
I personally Invested in a lot of crowdfunding deals over the years. What
I found though is they typically underperform the
stock market. There are fees involved with them
managing these properties, right. So while they might get, let's say,

(24:51):
12 return after the fees and everything, maybe you're getting nine
and a half percent. So it is a way to go. If you're like,
hey, I want to have some real estate exposure, there's some opportunity there for
sure, but you have less control sometimes,
from my experience, less returns than if you obviously were to have a property
yourself. But that is definitely a viable option.

(25:15):
Nick, your thoughts? Do you get involved in real estate?
It's been probably 20 years since my last
direct investment into rental property. But it was
really important experience, like going back to, you know, your first,
you know, what, what did that first deal cost you? For me, it was about
$13,000 down, maybe it was 5% down

(25:37):
note. And that was, you know, money that I earned from painting
houses in college with kind of to Lane's idea of how
do I take my active income and
allocate that into, you know, a passive income
strategy? And hopefully that can snowball over time. You think of your, your
income as a, as a pie chart, right? And everybody starts out trading time for

(25:59):
money and it' percent active income. It's probably your day job if you're just getting
started. But it's like if you ever want to stop working or have the option
to stop working, like you need to grow, maybe it starts with a sliver of
a rental property or some interest on a savings account or some dividend
investment. But you got to keep working on that passive income piece of
the pie chart because nobody else is going to do it for you.

(26:22):
Let's go to segment three. We're going to talk about dividend
investing. Dividend investing provides passive
income through regular payouts from dividend paying stocks.
By investing in companies that distribute a portion of their earnings to
shareholders, investors can receive quarterly payments without
needing to sell shares. This approach differs from capital

(26:43):
gains and offers cash flow even during market
fluctuations. Key factors in selecting dividend stocks
include yield, payout ratio and growth.
While high yields may seem attractive, sustainable dividends are
typically found in companies with moderate yields and low payout
ratios. Diversifying across sectors reduces risk.

(27:05):
And dividend focused ETFs offer a streamlined way to access
multiple stocks in one fund. Reinvesting dividends through
dividend reinvestment plans, or DRIPs, further boosts returns,
allowing investors to buy more shares shares automatically. By focusing on
quality stocks, reinvesting dividends and maintaining patience.
Dividend investing can provide a stable and growing income stream

(27:28):
over time.
Nick, I want to ask you because I've heard you talk about peer to peer
lending using websites like
Prosper Peers Street, You've, you've used
Worthy Worth bonds and also

(27:49):
dividend investing. So how do these different things
fit into your thoughts of passive income and
just invest investing in general? Yeah, this is, this is the
constant pull of, you know, simplicity versus diversification. Because I'm
always like, oh, I want to try out this new shiny platform. And oftentimes to
Deacon's point, like, well then over the long run doesn't necessarily

(28:11):
outperform just an S P index fund, but have played around
with a lot of these and actually dividend investing is kind of what
helped get me off the sideline. And this
is obviously not the most tax
friendly strategy, but it was important for me to say, like, no, I'm
looking to build up this passive cash flow and stack that up. And

(28:33):
it started out was like, well, how can we. And this was like, you know,
dividend aristocrats. These companies with, you know, long histories of paying and growing
dividends, you know, AT&T and Coca Cola and Chevron, like, you know,
the household names Procter and Gamble. And well, every quarter or every
year, they tend to raise their dividend. They've been doing it for 30 or 50
years. So it's like, I'd like to buy a chunk of that cash flow and

(28:55):
try and stack that up. And for me it was really motivating to say, okay,
now we're at $500 average a month. Now we're at $1,000 a month.
Could we get it to 2,000? What's it going to take to get it to
4,000? Like continually stacking that up. It's kind of been a fun
little rewarding game in itself.
Yeah, I like the idea of stacking. Deacon, how about a personal finance

(29:16):
question? If someone wants to retire early, should they be reinvesting
their dividends or taking the cash flow out immediately?
Well, I'm going to start with I am not a licensed tax professional, however.
Yeah. So what I would say is I'm a huge fan
of the stock market. I love efficiency, I love simplicity, like
Nick was saying. And so the idea of dividend investing and using

(29:39):
that to be your kind of living expenses at one
point. Right. But people do need to realize, like, what are the tax
consequences if I have it in a retirement account
or a Roth account. Right. Where you have more access to the capital.
So really kind of where are you putting that money? Are you putting in an
individual brokerage, Roth traditional and then from there? Well,

(30:00):
if it's in a Roth, you can take out your contributions tax free at any
time because those are post tax dollars. Right. So there's definitely
ways that you can use your dividend invested
money to draw down to retire early. And there's many
people that do it. And I definitely love that strategy.
I like that. Justin, how about you? How, how do you think

(30:23):
about diversification versus
specialization? Yeah, you know, it's
interesting I think for a lot of people. For most people they build their
wealth via concentration and then they ultimately grow
it and you know, create a much bigger
net worth and estate through diversification. And so,

(30:44):
you know, I've, I've, you know, done things on, you know, I'm more
on the alternative investment side just because it, you're going to get an
average performance that's about 50% higher than just investing in, let's say the
s and P500 index, if you know what you're doing.
But that doesn't mean that that shouldn't be part of the strategy. So I look
at what family offices do and for those that aren't familiar with the family office,

(31:07):
it's the organization that basically manages the money of the
wealthiest people in the world. And I study the data, the
worldly data, the US data. And so I could tell
you, I mean this is kind of where I geek out and spend time,
but I can tell you to a T where
the single family offices or the billion dollar family

(31:29):
offices, the billionaires where they money, how much they have allocated to
it, et cetera. And so, you know, I do think for most people they're probably
going to grow that net worth in one spot and maybe if you're really
early it's, you know, it's not a bad idea to you know, take a
moonshot on something. But you know, I think
over time you're going to realize that diversification really is the way the

(31:52):
wealthy grow their assets. And generally
they've got about only 15 to 25% of their net worth in
the stock market. And then generally alternative investments
are somewhere between 50 and 60%. I actually just met with a family
office last two weeks ago that
has 70% of their net worth in alternative investment. So I just want to copy

(32:14):
the best whoever has figured out how to make and grow
the most wealth. I just want to use their playbook. What's in that
alternative bucket? Does that include real estate, private equity?
Yeah, it'd be real estate, private equity, private credit
venture. You know, those are probably your, your four
biggest areas, you know, that make that up.

(32:38):
Okay, how about Lane? What, what's your view?
Do you end up putting most of your investments in real estate or
do you also balance it out with stock market investing too?
Well, I think people should, you know, I think what
was, what Luke said earlier, I completely agree with,
you know, those people who started their own businesses

(33:03):
or concentrated their investments in one place.
And then when they get to a certain point, I would argue four to five
million dollars net worth is a nice round number just throughout
there, you know, start to diversify at that point,
just speaking from my own experience, I was 90%
plus in real estate in my 20s and 30s.

(33:25):
And that is obviously not diversification at all. But that
concentration allowed me to ride a little nice wave.
And everybody's has a different
crossover point or critical mass point or
a point where they can safely withdraw off of that and put
it into more safer things such as dividend stocks or life

(33:48):
insurance. And at that point they can start to diversify.
But you know, some investors, they choose to keep in
the alternative space and you know, grow it to 10 to
8 figures and beyond 10 million plus. So, you know,
each to their own. I think like, I think what gets lost in the shuffle
and, and what I kind of illustrate in, like I have tables

(34:11):
on this of the different floors of the wealth elevator is it
depends on where you're at. And if you want to grow your net worth
past 5 million, 10 million, you're going to need to go into
alternatives. But you know, I think at some point you need to have some
traditional investments in, in there too, which is kind of what I'm kind of
reshifting personally myself. And I guess that's where you come in, Andy.

(34:33):
Right? No, that's a, that's a good reminder, I think that
yeah, it depends where you are and what your goals are because there are those
who you're trying to make it to that 4 to 5 million
level. And that's going to require taking more
risk generally. But then once you hit that number, then your
focus is like, I want to protect what I have and maybe I

(34:55):
don't need an 8% return. I'm fine with a 4
to 5% return and I can sleep better at night
with that. Let's go to segment four. Online
businesses offer scalable automated models for passive
income E commerce options like dropshipping and print on
demand allow sales without holding inventory,

(35:17):
minimizing startup costs and simplifying scaling.
Affiliate marketing is another low investment model. Earning
commissions through product promotions. Success requires
driving traffic, often via blogs or social media.
Digital products such as ebooks and courses generate
ongoing income after creation with platforms like Kindle

(35:40):
and Thinkific facilitating distribution. Content
creation, including blogs, provides revenue through ads,
sponsored posts and affiliate links. As traffic grows,
blogs can add premium content or brand partnerships to diversify
income. Success starts with niche selection, a professional
website, and automated customer service and marketing

(36:01):
using chatbots and email tools. Reinvesting in
marketing, expanding products and leveraging new channels
ensure sustained income growth.
Deacon, you've really built well kept wallet into a passive
business. What was your biggest learning curve?

(36:25):
You know, it's kind of the old, the old adage, don't
put all your eggs in one basket. Right. So I think that we look at
things like businesses, they go in waves.
And so for a long time, blogs was how people consumed
content. Right. They would read these long articles, you know,
1500, 3000 words, those type of thing, and it was a

(36:47):
great way to generate passive income. I'd hired writers, I
had an editor that managed the writers. But then, you know, we
relied on Google Traffic and then Google totally changed, as you guys have probably
noticed, with Reddit and Quora being at the top, and then big name
sites like Bankrate, Forbes, et cetera. So pivoting. Right. That's
what I've learned. It's like in an online business, you can't put all your eggs

(37:08):
in one basket. So thankfully we've gotten traffic from many different sources,
Facebook, Pinterest, et cetera. But being able to say, hey, how can
we figure out what is being successful today? Kind
of what, you know, Justin was talking about earlier, like, who's doing really
well, what are they using? And then what strategies are they using that we can
implement to kind of grow our business. So one platform that we found

(37:30):
that's I never would have thought in a million years is Threads, which is Instagram's
version of Twitter. So that's something that we're, we're really pouring into right
now to get content there and reach people, build that audience.
It's driving traffic towards the blog. Yeah.
So interestingly enough, I started just doing a call to
action. Say, hey, comment the word invest and I will send you an article on

(37:52):
how to start investing in index funds. Right. And then people just comment the
word invest and I send them an article. I'm actually creating an app right now
to do it automatically so I don't have to manually do it anymore. Anymore. But
yeah, I mean that that is a new way to get traffic that I would
have never thought of, but I had to kind of see, what are the new
platforms, how are they growing, how are people using them? And then
adapting our strategy to that. Yep. Experimentation and

(38:15):
adaptation. Nick, you've seen similar things. Is
there a most underrated passive digital income model right
now? Underrated? Deacon. Deacon. You don't want to pay for ManyChat. I think it'll do
that automatically. So ManyChat does
not do threads yet. I do have many already. Okay, okay. That's one platform it
doesn't work on. Here you go. See, this is how you come up with new

(38:36):
business ideas is you come up with these pain points and problems in your own
life and say, well, shoot, if I'm dealing with this, other people are probably are
too. So the challenge with passive
income on the Internet is something that everybody is looking for.
And we've seen lots of waves over the last 10, 12, 20
years of, you know, whereas, you know, was drop shipping

(38:57):
on ebay and it was, you know, merch, print on
demand merch. And, you know, all of these kind of come
and go and there's, you know,
the. The lower hanging, the proverbial fruit, the
faster it tends to get picked over. One
one that we did this week is like the Amazon influencer program. It's like you

(39:19):
shoot these, you know, cheesy little product review videos of the stuff around your
house, and Amazon shows those on the product page. Somebody watches your video
and if they buy the thing, they sprinkle you, you know, a little bit of
commission. And it's like, this is the easiest money that I've ever made online.
And it's once it's up there, 100% passive. But
because it's so easy, everybody starts doing it and it becomes more competitive.

(39:41):
We've seen that kind of over and over again. But
I like Deacon's point about diversifying traffic sources,
diversifying income sources. Like, my first online business was a
comparison shopping site for shoes. I thought it was reasonably diversified
because I had 20 different advertising partners that would send me commissions when we sold
their shoes. But if you peel it back one layer, like, you know, 85

(40:03):
something percent of that traffic was coming directly from Google Ads. And when Google said,
hey, you can no longer advertise with us, we're going to slap your account,
you know, all of that traffic and income and everything went away. And
it took, you know, three months of pulling my hair
out, literally at that point for them to come back and say, oh, we made
an error, looks like you're good to go again and the faucet turned back on.

(40:26):
But it was kind of a big lesson in, you know, of course, get
while the getting is good. If you find something that is working, double down
on that. But at the same time like how can you take some chips off
the table? How can you diversify away from that? I want you a platform they
have a little more control over. In an online business that always,
the common denominator always comes back to an email list. You know, how do you

(40:48):
get, how do you can be proactive about reaching the customers and
prospects that you have? Yeah, that low barrier to entry is a
double edged sword. Justin,
you've done well with masterminds. Have you invested in
any online businesses? Yeah, you know, I've invested in a number
of online businesses over the years. You know, it's interesting

(41:11):
because I'm not, you know, an online, you know, for
many years I'd never done anything online. I don't know online
marketing or anything like that. I'd always made money in
whether it be real estate or investing in private companies. And you know, I
can give you all the details of why I love the private side over the
public side for opportunities and larger returns.

(41:33):
But I did start finding some, some businesses that were online
businesses and you know, we, we wrote a big wave of SaaS companies,
software as a service. And so you know, that was a huge
vertical for us as investors. That was incredible. But it's
interesting now having the lifestyle investor brand
because now I am in the online space so, you know,

(41:56):
and I don't feel like this is an area of expertise for
me. I feel like I'm a lot more, I have a
lot more knowledge in investing, I have a lot more knowledge in real estate. I,
you know, I know how to invest in these private companies. I like
private credit a lot, so I'm good at those things. And
so it's really fun building a team and really having a brand that's out

(42:18):
there. But it's fascinating all the ways that you can monetize it. I mean, Naval
Ravikant talks about it a lot in his book the Almanac of
Naval Ravikant where he says it's so important to
build a brand and create content that can just live out there. And
I really was doing it before I read it and once I read it I
thought, wow, I've got to continue this. And so you heard about the power of

(42:40):
newsletters, but the power of a podcast and having
downloads and that can add to the newsletter and having a book and
having a mastermind and having courses and having free
resources and having, I mean the list just goes on and on. And we
use AI in our newsletters, which is even more fun. It's just another layer. So
we've got our main email list and then an AI

(43:02):
newsletter. So the opportunities are absolutely
endless. Talk about building the team. Because
I get the feeling that if you have the right team
members in place or you have the right operators in place,
you can actually turn businesses that really aren't passive
into passive income. Because you're more

(43:25):
the hands off investor versus the hands on
operator. Oh, 100%. I will never buy a business
if it A doesn't come with an amazing operator that I know will stay
there or B that I have an operator that I can plug in. So I
don't care how good the business is. If I don't have that lined up
or if I don't have confidence that I could find the person to do it,

(43:47):
I just won't buy it. I don't care how good the opportunity is
because I value my time way too much. And if you don't have an operator
or you have an operator quit, then you're the operator.
And so I always warn people, be careful. You're not buying. You know,
when you buy a business, you invest in a company, make sure you're not buying
another job. That is the biggest danger I see. I see people

(44:09):
doing it all the time, people buying multiple businesses. And even if you're
somewhat good at it and you have a decent
operator retention, there's still systems
that you need to build around it. So you know, we've got,
you know, I think I have somewhere around 75 different companies that, that I either
fully own or partially own outside of our investment

(44:31):
portfolio. But I literally have an operator for
100% of those companies.
Yep, that's what makes it passive. Lane, your thoughts?
You know, I think with we also
do we're also now in the micro PE space.
We've kind of our claim the fame is operating the real estate assets

(44:55):
whether it's developing 300 unit apartment complexes or value adding
1980s 1990s properties. But with
interest rates high right now, still high, even though they're
coming down and expected to be around
3.5% in the long term. So the days of 0%
1% Fed interest rates are not coming back. The way I see it,

(45:17):
we've kind of looked towards like what can we invest in if interest
rates aren't the free money era. So you know, we also
kind of look for, you know, private equity deals. Right now we're investing
in a business B2, B M and A
space. But we're not the operator in that world. We're real estate
operators. But so as I think

(45:39):
was mentioned earlier, we focus on finding a good operator and partnering with
them. Interesting. So you're, you're
diversifying away from just real
estate. I mean, the way I look at it, you know, there's all these different
asset classes, but there's five ways you can get involved. On the really
risky side, you've got venture capital

(46:00):
and then you've got private equity. They're like, I like private equity in apartments because
I can see a trailing two month or two year financials, profit
and loss. There's real estate debt,
investments which are more safe. And then you have, you know, things like life insurance
and that's a spectrum of risk reward there.
I want to ask all the panelists really quickly since Justin

(46:23):
mentioned AI for his newsletters,
Lane, how's AI impacting your business and what you do?
I mean, I'm actually stopped doing my newsletters because
there's so much stuff out there. There's so much, you know, people
are just, it's kind of cheap in newsletters in a
way. I think the average person out there

(46:46):
is thirsting for real authentic content.
And I just don't want to compete in a competitive
market. I mean, I'm sure Deacon geeks out on this. Like, you know, when you're
looking to write a blog article, the basics is you look for something
that's less competitive and you try and rank a better article. But
if, even if you're very confident at writing articles, if something

(47:08):
is being bombarded with a whole bunch of new, new competition coming in
place, it may not be the right, the right place. I mean, obviously
every situation is different. But you know,
we're kind of looking to take a step back from the newsletter
angle and you know, compete in other avenues.
Deacon, how do you position yourself? So AI is helping you in not

(47:32):
eating your lunch? Yeah, I've started to embrace it
for kind of the planning process. Right. So we do 30 videos a
month for well kept wallet. And that's just cumbersome for
me to be like, hey, let me come up with 30 video ideas. So I'll
use AI and say, hey, come up with 30 ideas for the month of February
that are personal finance related for short videos. And then it will do it. And

(47:52):
then I'll say, give me 30 more and then I'll go through and I'll just
select the ones that I like and then I'll outline them. So I really think
AI can streamline people's processes to be more productive.
Also, hopefully with this app that I'm creating, it's going to be an
AI response, right? I'm going to say if someone comments this, send them this
reply so we can make our business streamline so much

(48:13):
faster, get communication to people, drive traffic to the site faster.
So I could only imagine 10 years of doing this, what it's going to look
like. All right, we're going to bring it. Home with Segment five
Managing passive income involves addressing risks and understanding
tax implications to maximize returns. Diversification is
key. By spreading investments across real estate, dividend

(48:37):
stocks and peer to peer lending, investors reduce the
impact of poor performance in any single area. For real
estate insurance is essential. Property and landlord
insurance protect against damages, liability, and lost
rental income. Thorough research and due diligence also play
an important role in making informed investments choices. Tax

(48:59):
treatment varies across passive income types. While most are
taxed at regular rates, qualified dividends and long term capital
gains may benefit from lower rates. High earners may face the
net investment income tax. An additional 3.8%
for rental properties. Deductions for depreciation, mortgage interest
and maintenance costs can reduce tax burdens

(49:21):
significantly. Effective tax planning includes utilizing
deductions, tax advantaged accounts like IRAs, and
strategies like tax loss harvesting. Consulting a tax
professional ensures a tailored approach, helping investors protect
and optimize passive income for sustained financial
stability.

(49:45):
Justin, is there a tax strategy that most people don't know about, but
they should? Oh, there are tons of them. I mean, I feel like
most people don't realize the tax code is actually
written in a way that encourages certain behaviors. And when
you do those things, the government wants to reward you for those
behaviors. If you can do things that help them with housing,

(50:08):
with agriculture, with renewable energy, with,
you know, really any, any form of energy, there
are rewards. And so I think most people don't understand that there are
strategies that you can use to offset your taxable
income and that your CPA probably doesn't know them.
Your CPA probably is not well versed

(50:30):
in this space. Most CPAs are compliance
officers. They file taxes. They're
not tax strategists. I think it's very important to
have a tax strategist that you work with that can
direct the CPA on how to
take advantage of many of these opportunities that are just super low hanging fruit. I

(50:53):
mean, I built a tax strategy masterclass where we
share 27 unique tax strategies
that most CPAs have never even heard of. In our mastermind, we have like
70 plus unique tax strategies. And I'm telling you, we have literally run
this list by tons of CPAs. Most of them have
never even heard of the vast majority.

(51:15):
Interesting. Nick, any
legal or financial risks that digital entrepreneurs should
watch out for? Yeah, this is probably above my pay
grade. The biggest question that comes up is my
side hustle taxable? It's like, yeah, you kind of want to make those
estimated payments on those. But like to

(51:37):
Justin's point, the tax code by and large is written to
encourage entrepreneurship in a lot of ways. And so there's the
moment you start your business, even if you're not making a profit, all of a
sudden you have startup costs that are deductible. You've got business expenses that are
deductible. So it really opens up the playbook a little bit.
And you can also, in the name of long

(51:59):
term investing and deferring cash, especially
if it's a side hustle, you don't need it for day to day living expenses.
You can end up deferring a lot of that with some accelerated,
you know, company match for 1k type of deposits.
Makes sense. Lane, how about tax
efficiency when it comes to rental

(52:20):
properties? Yeah, I mean, our big
strategy is to use the depreciation from real estate.
You know, oftentimes you can deduct that in a little rental property over
27 years. But the cool thing with syndications and private
placements is you can do a cost segregation and now extract the bonus
depreciation and more accelerated depreciation. So what the hell

(52:42):
does that mean? It means that you can take a huge
paper loss off an investment. You know, nowadays
bonus depreciation has been going down, but you know, I've seen it on
$100,000 investment, you get over $100,000
in losses that first year might be a little bit lower than that,
but effectively now you take these losses and drive

(53:05):
down your other passive income. You know, you still need
maybe real estate professional status, which is huge topic to
go into here. But a lot of people are quietly using that
to that strategy in combination to drive down their high
ordinary income. But I think Nick and I should talk because a lot
of our folks are very high income earners and they don't really see

(53:27):
the value of owning a little side business to be able
to legally write off a lot of, you know, basic expenses that they have around
the household. And you can't do that Unless you have a little, little side gig.
That is true. Deacon, closing
thought. Yeah. Well, one thing that I,

(53:47):
I don't think we touched on a lot is risk. Right. I think when it
comes to trying to figure out what passive income strategy works for
you, figure out what is your risk tolerance. Right.
I've actually been very negatively
impacted by the real estate market. I started investing in 2006.
You started investing in 2010, 2012. You've had a positive

(54:09):
experience to 2025 for the most part. And so
the stock market can also. Correct. Right. So there's a lot of things to
consider when people are choosing a passive income stream. So
understanding that risk tolerance, I think, is huge. And then
what. What's kind of your timeline? Right. When do you want to really start
cashing in on this passive income to where maybe you quit your day job

(54:31):
and kind of design that lifestyle that Justin's talking about,
right? Where you're like, hey, I have enough investments, I have enough passive income coming
in because I've chosen the path that meets my risk
tolerance so that now I can, you know, quit the rat
race and do what I want to do with my life full time.
Thank you. Anybody else? Well, I

(54:53):
want to thank the panel for this very thoughtful discussion.
My biggest takeaway from this panel is that passive income
comes in many forms, and I think that it
can be passive or not so passive at the start and
then evolves and becomes more passive over time. But it does
take intentional effort, the right mindset, a smart

(55:16):
strategy to get these income streams working
for you. Whether it's real estate, dividend investing, digital business,
or syndications, the key is to start with a proven
strategy, copy those who are successful, stay
consistent, and then leverage automation and AI where
possible. Now, I don't want you just to watch or listen.

(55:38):
I want you to take action. So here's a challenge for you this week.
Pick one passive income idea that resonated with you today
and then take a first step. That could be researching a
dividend stock. It could be setting up a brokerage account. It could be looking
at real estate. If you're invested in property
investing, really look for a

(56:00):
mentor that you can learn from and copy and
then brainstorm different digital products so
lots of choices, See what works for you. But start small
and start today because that's how you're
going to get started. And make sure that you leave a comment here or
go to social media so that we know how you're doing.

(56:23):
Once again, I want to thank the panelists for joining today. I encourage everybody
to follow them and to learn more. You can find Justin
Donald, founder of the Lifestyle Investor. Check out his book
the Lifestyle Investor. He is at
lifestyleinvestor.com. Lane Kawaoka,

check out his book the Wealth Elevator (56:40):
Real Estate Syndications, Accredited
Investor Banking and Tax Strategies for First Gen Millionaires. You can
find him at thewealthelevator.com. Nick
Loper, author, entrepreneur, host of Side Hustle
show podcast. Find him at sidehustlenation.com
and Deacon Hayes, founder of Well Kept Wallet. You can

(57:03):
find him at wellkeptwallet.com. All of these
guys have books and lots of resources so make sure to check them
out. Thank you all of the panelists for participating
today, and I want to thank the inspired money makers for tuning
in. Make sure that you're here next week. We're going to be
back with The Psychology of Money, exploring the emotions

(57:25):
and behaviors that influence financial decisions. That's February
5th at 1 PM Eastern. Until next time, do something
that scares you because that's where the magic happens. Thanks everybody.

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Exploring Passive Income Streams: Creating Financial Freedom Through Passive Investments