Pathways to Passive Income Through Real Estate for Busy Professionals - Episode 52
We are joined today by our guest, John Casmon, a real estate investor and wealth-building strategist, who shares his inspiring journey from facing financial uncertainties to mastering the realm of real estate investing. John delves into the critical moments that shaped his path, revealing how alternative methods like syndication can open doors to financial freedom, even for those with busy professional lives. His insights offer a fresh perspective on overcoming barriers, leveraging assets, and the importance of diversification beyond traditional investments. This conversation is not just about real estate; it's a powerful narrative on resilience, learning from failures, and the transformative power of informed investing.
About our guest:
John Casmon is a real estate entrepreneur, who has partnered with busy professionals to invest in over $100 million worth of apartments. John also consults active multifamily investors to help them start or grow their business. He hosts the Multifamily Insights podcast (formerly Target Market Insights) and is the co-creator of the Midwest Real Estate Networking Summit. Prior to becoming a full-time investor, John worked in corporate America, overseeing marketing campaigns for General Motors, Nike and Coors Light.
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TRANSCRIPT:
[00:00:00] Naseema McElroy: What's up, my financially intentional people, I am happy to have John Kasman join us today to talk about some alternative ways to build wealth. And I like to share these kinds of stories on this podcast, just so you know, what is available, what is accessible for you, because lot of this information is.
It's often gatekept from us, but hopefully if we can share these stories that are relatable, you can see yourself doing them. So welcome, John, I am super happy to have you on the podcast, super happy to get to know you and looking forward to learning more about your story.
[00:00:47] John Casmon: And Naseema, thank you for having me. I am excited to be here and to talk to all of your listeners today. So let's have a good conversation.
[00:00:54] Naseema McElroy: Yes, let's do it. So let's get started and talking about your journey into real estate. Was that always something that you thought you would get into? I know that's the only method of wealth building that I was exposed to as a kid, like my grandfather owned real estate, my uncle owned real estate.
And I didn't really understand it. But I thought that was the only way, to build wealth. ' that was the only example for me. But what about you? How did you get into it?
[00:01:21] John Casmon: You were more fortunate than I was because no one I knew on real estate. Matter of fact, it's, you go back and you think about your life and there's always these moments that happen. You say, I wonder if that. Was the catalyst, right? Because people always don't know your origin story, right?
So the short version of my origin story is I was always interested in real estate because I was always interested in how to make money, we didn't grow up with a lot of money. I was on assisted lunch, right? So my free lunch basically in high school. And, just money was always tight.
So money was always a driver for me as a young person, just trying to figure out how do I make money? How do people who have money make money? How did they get their money right? And one thing that became clear was college, they go to college, get a good job, the American dream. So that was the first path. And then, I'm a little older. So then you start to think about how much does college cost? I'm like, oh, college is crazy expensive. So I went to a state school in state that I felt I could afford with Pell grants and loans and all that kind of stuff.
But while I was in school, I started to really think more about, money as I'm meeting new people and connect with new folks. And I got a book handed to me. It was rich dad, poor dad. And I read that and I had always been interested in real estate just because it seemed like the most abundant way to create wealth, like you could look around and see houses all around.
So I'm like, okay, stocks, I didn't quite get, I knew people made money in the stock market, but I felt like there was a certain skill you needed to have there to evaluate companies and all that. But real estate seemed like your everyday average person was doing that. But Rich Dad Poor Dad was the first book that really.
Put it in context for me. So it was in my mind. I did what most people do. Once you go to college, you graduate. I got that good job and marketing and advertising. It started growing professionally. As a matter of fact, I was working at General Motors and advertising and marketing and doing quite well, but this was back in 2007, 2008, 2009, and the company ended up going through bankruptcy.
And it was at that time when I realized that, Even though I had done what I was supposed to do, went to college, got the good job here I was at a company going through bankruptcy in a very public manner and there was going to be a big round of layoffs and at any moment, my name could get called.
So. It was that moment where I realized that my job wasn't as secure as I thought it was, and I really needed to take another look at real estate. And that's when I really started to focus on real estate investing.
[00:03:40] Naseema McElroy: Now, that is a very interesting time and you say you're older than me, but actually, I think we're around the same age
[00:03:46] John Casmon: Okay.
[00:03:48] Naseema McElroy: I look young. I know we're around the same age, but I think that's very interesting that was your experience, like going through that bankruptcy. I remember that happening to, the big auto makers and all of that.
And that was around the time. Of the recession and for me, I'm like, I said, my introduction to wealth was real estate. So I had at that time I was 25. I have 5 houses and I had a a condo I lived in LA, a duplex in LA. Two houses in North Carolina and then a single family house in Georgia.
And that's when the market dropped from under me. And so we were in kind of crazy times together. So just so you know,
[00:04:34] John Casmon: Yes. So, you know exactly what it was like there, right?
[00:04:37] Naseema McElroy: I know what
[00:04:38] John Casmon: were looking inside saying, Oh, I need to do something different.
[00:04:40] Naseema McElroy: Yes, and I think it's like one of those points right now where it's not as bad, but a good reflection point for people as people are losing their jobs and the market isn't what it used to be and the interest rates are really high and groceries are expensive as hell.
So thank you for sharing that. We'll start back at that point, but I just wanted you to understand that I was there with you. So, yeah.
[00:05:05] John Casmon: Yeah. And that's the thing, right? And I think, for you at that time, me at that time, even people right now in this present day. When you're going through a situation like that, you have to recalibrate, you have to step back, you have to look at where you're at, where do you want to go, what are you doing, what's working, what's not working, do you need to change your savings, all of that, right?
So, I was pretty young, right? I was early in my career, I was in Detroit at General Motors and the first thing that I realized is, you know what? I don't have any family here. I didn't really want to be in the city in the first place. I like the job and like the company number on love that and I love what I was doing.
But at no point in my life have I ever said, hey, I want to live in Detroit. So I said,
[00:05:41] Naseema McElroy: It's chocolate city though.
[00:05:42] John Casmon: I grew up in Cleveland.
You know, I'm from the Midwest. So
I'm a Midwest kid. It's another Midwest city to me and it was fine. But Chicago was a bigger city, right? Had it was a city I wanted to get to.
So one of the first things I did was said, you know what? I want to move to Chicago and I want to invest in real estate. And that's what I did. And my wife and I, we got married at that time moved to Chicago and it took a little while to get situated, but we bought a two unit and all of this is while working on W 2 job.
So we had our jobs and then we started investing in a two unit, lived in one unit, rented out the other unit. So we call it a house hack now. But that was our introduction. And from there it went to, okay, let's get a pure rental. So we bought a three unit building, which was a pure rental, and that did extremely well for us.
And at that point, this was working, so I wanted to scale and I wanted to go into commercial. So I bought an eight unit building, we saved our money, bought the eight unit and I remember feeling, I anticipated feeling excitement, on the day we closed, but that's not what I felt. What I felt was a bit of anxiety and I also felt perplexed because I was thinking about how long it was going to take me to save up money to buy the next one.
And I was just. I knew this was working, but it was working very slowly. And the reality is that the day job I had at that time was also starting to go through some financial issues and that company actually ended up going through a bankruptcy as well. And I started investing really because when I went through the bankruptcy, the first time.
I watched a lot of my peers get let go and for, some crazy context, my dad used to work at GM. He worked at a Buick dealership, so he didn't work at corporate, but he worked at a Buick dealership in Cleveland and here I was at headquarters and in a way this is a full circle moment for us.
But I watched my peers get let go who were lifers, right? Their job, their goal was to be at this company for. 25, 30 years, retire, get the gold, watch, get the benefits, get the pension. And they were set and they were 20 plus years into this plan, right? And there was no reason to think this plan was flawed based on what they had seen previously.
And I watched these guys get let go. These guys and girls get let go. And they didn't have a plan B, right? So at that moment, part of the reason I went so hard on real estate. Was less about wealth building and more about just insulating myself from job loss. So, when it happened the second time.
anD again, to be clear, I never actually missed a paycheck. I didn't miss a paycheck this entire time through 2 companies that went bankrupt. But, when that 2nd one hit and there was no company to pay him, but the owner pay me out of his pocket, so, just to show you how incredible that was they paid me out of their pocket about 3 months or they got the new company up and running and got some clients to move over.
But that just solidified that, what? What you're doing is working, but it's not fast enough and you're not thinking big enough. And that's what took me to a different approach to real estate, which is buying larger apartments and working with other working professionals to invest in these deals.
[00:08:43] Naseema McElroy: So can we talk a little bit about how you first got started with your buying your property? So, did you do traditional loans up front? Come up with the traditional 20 percent down
[00:08:54] John Casmon: so that was my initial plan.
What we ended up doing was a FHA financing on the first project. So we bought a two unit FHA financing allowed us to put as little as three and a half percent down. So we bought a two unit building. I think we bought it for 362, if I'm not mistaken, 362 K, we put three and a half percent down the seller actually did some seller fund, not seller finance, but he provided some funds at closing.
He paid our closing costs and paid for some other things to get fixed. And when it netted out,
we basically had to put 10, 000 down. So we bought this place for 10 K. We didn't know that was available, so we had saved up, probably close to 100, 000 and we were really shocked that, it only cost that.
So we actually invested about 50 K back into the property to do some renovations and fix things up. And then once that was done. We were starting to look for a second property, a second investment property in our agent looked at our home and she said, I think you've got a ton of equity in the house or that two unit and we dismissed it because we had only owned it for a year and a half.
So we're like, I don't think so. And she's no, I'm seriously, I think you should take a look at it. You may want to get it appraised or something like that. And we're like, we'll see and. I would say it went by maybe 3 or 4 months. And if finally we said, maybe we should take a look at it just to give us some flexibility and we did.
And we were surprised at how much equity we had created. I think the property appraised for well over 500, 000 and they
[00:10:19] Naseema McElroy: And this is in Chicago,
[00:10:20] John Casmon: this is in Chicago. Yeah. So we ended up getting a line of credit for 100 K. So we were like, oh, Okay. Okay. I didn't know that was like, again, I knew real estate worked, quote unquote, right?
But At that time, I think I was just making a hundred K. So I created equity in this one project with basically a year's worth of work for my W two job. So at that moment, I really realized that, ah, this is the path. This is how you create wealth. This is how you create options, flexibility
I need to do way more of this and try to figure out how do we scale through real estate and that second deal.
You, we did more traditional things there when you get into commercial, a lot of more options open up for you. But that first deal and using the FHA financing was key for us because it allowed us to take the cash we were saving or thought we had to use for the down payment and we, it allowed us to reinvest that into upgrades in that property.
[00:11:16] Naseema McElroy: think that's just so interesting and it just goes to show how much we don't know. But you got started anyway and learn so much in that process. So I think that that's an important lesson for people because people. Think that they have to have everything figured out oftentimes before getting started And I always tell people like when you start your first job like especially as a nurse I know when you start your first job You only like really know the basics and then you learn on the job Most of the things that you're gonna learn school can't prepare you but Getting started is really key.
And I love that you guys picked up on those like lessons along the way, and you were able to scale pretty rapidly because of the things that you didn't even know was available for you. So that's pretty cool. So thanks for that. And so the transition into commercial, like from just your multifamily to commercial what was that like?
[00:12:12] John Casmon: So a couple of things. One, and just to reiterate your point, it is so critical to get started. But I think one thing that stops people from getting started is the lack of knowledge or the anxiety that comes from, the fear of what they don't know. So the more you educate yourself, the more you surround yourself with people in this space, the easier it's going to be to overcome those challenges because you just realize their obstacles, right?
And for any challenge or obstacle. You're not the first person who's faced it. Someone else has faced that, whether you don't have money, whether you don't know what you're doing, whether you need a contractor, whether you don't know how to, lease a unit, you don't know how to screen tenants, whatever it is, you're not the first person to encounter this challenge.
So if you can surround yourself with people who have been there, who know how to do it, who have experienced it, it makes it easier for you to get comfortable because you know where to turn. One, you get the knowledge, but even if you don't know. You know where to turn, just like you and, as being an RN, like if you were, you showed up and it was just you probably freak out.
There are other RNs you could talk to this, there's people who've been there for 10 years, 20 years. You can say, Hey, how do I do X, Y, Z or what do you do when this happens? So if you have that, it makes everything much easier. So for me to go to commercial, a few things had to happen.
I needed to solve a problem that I was facing, which was we were saving our own money buying a property. It took us at least a year to save that kind of money to buy a property as we started to scale our family, have my 1st child in 2014, 2nd child 2 years later. Once we had our kids guess what?
I had less disposable income to, to invest in real estate. So now it became harder to save money cause I'm dropped spending money on childcare and all that kind of stuff. So I started to realize, Hey man, it's really skilled. This is going to take more time. And then the last piece is again, that company I was working for went through another bankruptcy and I just realized that, hey, you know what, you better figure something out stop trying to do it all by yourself.
There are a lot of people in your network who are looking for help and they trust you, they like you, they want to, they're happy to partner with you, figure out what you need to know so that you can be a great resource for them and you can be a value for them and it's mutually beneficial. So that's when we started to really scale and go into larger commercial.
And I would just say that I think I always. I talked to a lot of people I networked. I went to a ton of networking events every month. I would attend at least two networking events and from all the people who were retired professionals, full time real estate professionals they always preached about scaling into larger multifamily because it's easier to manage.
It's easy to put together teams, easy to raise capital and that always attracted me, even though I didn't know how to do it or anything else about it, just talking to these folks who had 20, 30 years experience. If you met somebody who had 50 houses across the country, even in one market, they weren't at these events because they were too busy running around managing their 50 houses, right?
But there will be a guy who's got, 500 units and he's at the events and he's explaining how he's got property management teams and he's got this and it's vertically integrated. I'm like, okay, this guy's got. Systems and processes to scale what he's doing versus maybe that person who's continuing to collect properties like it's monopoly, they don't really have a system and property or system and process in place to manage the infrastructure there.
And I think with my corporate background that actually clicked and made sense to me more because if I could scale big enough. Now there's enough resources around to cover those things. I could hire a property manager because there's money there. You've got a two unit. You can't really hire a manager.
Certainly you can bring on a property manager, but they're not full time at your property. They got to go and do other stuff. So if you need them Tuesday at 9am, we'll see maybe I could be there. Let me check my schedule, but if somebody's. Full time job is managing that property.
They're going to be able to do a much better job of overseeing the little things. It's gonna be easier for you to manage them because they're there all day. That's what they're seeing. They're talking to the residents. They're telling you what the issues are and now your job is really to be a great manager as opposed to trying to manage the entire property.
Yeah,
[00:16:16] Naseema McElroy: a lot of things that you had to figure out initially. But I'm sure, like you said, it was the people that you surrounded yourself with, right? That made it so much easier to do. So, what were What do you think was like the biggest obstacle that you had to overcome transitioning into commercial side?
[00:16:40] John Casmon: just believe in. I could, I think that, When you don't see people particularly who look like you in a space like that, there is it's easy to develop self doubt, and one of the things I had to rely on was. The wins that I had created and that kind of goes back to even college.
Like I had people very close to me, family members who told me I was not going to graduate college, and I was a smart kid. So this wasn't about intelligence. It's just they didn't know anybody graduated college. So they just assumed I would fail too. So it goes back there, right? And it's a mental toughness that I had to develop.
I used to wrestle in high school and had a guy who told me I wasn't gonna make the wrestling team. And by the way, they take everybody. All you have to do is show up, right? But he was like, no, you're not gonna be able to do it. And that guy, any day I had a hard day, I would, that guy would stay in the back of my mind.
You're not gonna let that do be right. Are you so I had to rely on that, corporate career. When I got to a company like Jim, I'm sitting around with people who had Harvard degrees and all sorts of stuff. So it's easy to have this chip on your shoulder, right? And I think, yeah. Whenever I faced that self doubt, I had to remind myself who I was.
I had to pull out the resume. I had to read it. I had to go through it. I had to go through my affirmations because it is very easy to get down or to compare yourself to someone or to think that, Oh, I've never done that. Why would you think you could do that? Or to think about failures that you've had, maybe you've made some poor investment decisions.
Maybe you've failed with the property or whatever the case would be. It's very easy to look at those things and to get negative and we have to really manage how we talk to ourselves. And manage your own confidence, particularly when we're interacting with other people who love us and they want to see us do well, but they're also fearful for us, right?
Because our parents, they love us, our friends, they love us, right? They don't want to see us get hurt. They don't want to see us lose money. No one wants to see you suffer, but. you have to build your own confidence, but you also have to root that confidence in action, right?
So I like to tell people that if you are trying to scale your business or trying to track capital for deals, it comes down to confidence, credibility and connections. But confidence is not just putting on a smile and saying I can do it. Confidence comes from putting in the work and you may not, you might not have ever done it before, but you've got to put in the work.
So for me, the hardest thing I had to learn was, what it took to make me confident, which was a combination of networking, reading, talking to people analyzing deals. It took it all because that was the only way I was going to build confidence was to know my stuff. When I sat down with the broker, when I analyzed the deal, when I looked at a market when I projected rent growth, I had to know.
My stuff and that took time, but that was the only way for me to build true confidence and it was the toughest part of it because it did take time, but it also allowed me to feel good and also get feedback. And that feedback kept me going, right? If I analyze the deal and I missed it, but somebody bought it for where I thought the value was.
Okay, that was great for you. Okay, you're good. You did a good job. Other people saw what you saw too, right? So all of that was there, but it was really tough. Just managing myself, right? And staying confident, but putting into work, right? And letting that confidence come from action and not just some false place of belief.
[00:20:14] Naseema McElroy: I Love that because fear is really a powerful thing and It's hard because there's a lot of noise that's created by this fear, especially from the people that are closest to you, because these things that we're doing are exceptional things. These things are not the norm and anytime you break out of a norm or whatever your comfort zone is.
Then there's opportunity there for failure and a lot of people are scared So scared of failure I love failing because that means that I tried you know and I love to fail forward because I'm always learning those lessons, but For a lot of people that can hold them back, but I like how you use that message that the guy says you couldn't and use that as fuel to be like let me show him I can show you better.
I can tell you I love that. And you were able to push through that and you've come so far. And so I just want you to share with the audience, like, where are you and your wife? Are at today, what you have been able to achieve and what you've been able to help other people achieve.
[00:21:21] John Casmon: Yeah, so, founder of Kasman Capital Group, we partner with everyday professionals to invest in apartment buildings and to do it passively. So you don't have to be a landlord, you don't have to be a flipper, you don't have to get your license. You can partner with us on deals that we fund, deals that we lead and operate.
To date, we have invested over 125 million worth of apartments and partner with other folks on these deals continuing to grow and scale those opportunities. And you're right. I just think it's really important for people to recognize the options out there. There are lots of ways to invest in real estate.
Real estate is one of the most proven generational wealth tools out there. And if you are looking to create longterm wealth, if you're looking to just produce a little bit of additional cashflow. If you're looking for some tax benefits, real estate is a proven tool to help you accomplish that.
It has more, options and perks associated with it than really anything else. That's not you running a business. So, I implore everybody to look into it, and you just have to find the strategy that's right for you. If you don't want to deal with tenants and toilets and all that's completely fine.
There are ways to invest in real estate. Without ever getting on the phone with the resident, you can do private lending. You can invest passively in deals like we have with our syndications. There are lots of ways to invest. You can get a note. So I would just say, depending on, your situation, looking at real estate and just find a strategy that makes sense.
But if you have avoided it simply because you didn't want to be a landlord I think you have a very limited view of what real estate investing is or what's available. So make sure you do a little bit more research and see what's available for you. Yeah.
[00:23:02] Naseema McElroy: kind of people that like, when it comes to real estate, now I'm all nervous because I told you about the five houses, but because of the market crash, they caused me to have two for two short sales, two foreclosures, and then ultimately have defiled bankruptcy. And so getting into real estate again, outside of owning my own personal residence has been like.
Anxiety provoking. And so I can honestly say that I don't ever foresee myself being just a regular landlord again. But I still know the potential of real estate and I love the idea of syndication. Can you break down for people who don't know what syndication deals are? What is syndication?
[00:23:47] John Casmon: Yeah, absolutely. And I think what you said is really great too, because listen, a lot of times people come on these shows and I want to talk about the failures, but the failures are what they make us right in a they show us our resolve and our commitment. Because anybody's interested when it's going great, right?
How many people did we hear talking about crypto a year or two ago, right? Crypto is the hottest thing in the world. You hear, I don't hear nobody talking about it now, right? They're not all over my timeline now. And I'm not knocking it. My point is that it's easy to talk positively about something when it's working.
But it's like a marriage or a relationship, right? When you're in that honeymoon phase, it's great. But when times are hard. That's when your resolve, that's when your commitment is tested. And the thing with real estate investing is. It is proven so I've lost money on flip projects and I've had to step back and say what happened, right?
Doing my debrief. Why did I lose money? Like my, my, my multifamily has always been great. Why do I lose money here? And I realized it wasn't income producing, right? And when people lose money in real estate, it's typically because the property is not producing enough income to cover the bills, right?
So if your rents have to come down or your bills go up, that's one. It's because your. You have a big ticket item, right? So you didn't plan for the roof or you didn't plan for certain things that happened. And now you gotta come out of pocket or you gotta figure out how to pay for that. Or it's because your loan comes due, which typically is not the case with with residential, but you may have it on other projects where the loan comes due at an inopportune time.
So those are the three things that we're always looking to fight against. So when we get to syndication, what a syndication, all syndication really is. It's a group of people coming together to invest in an asset. So the word syndication is literally just the group aspect of it. So let's picture. If you wanted to go out and SEMA and you wanted to buy a house or property, I wanted to buy a property, right?
Let's say you've got 100, 000 for your deal. I got 100, 000. Great. You go out there and you could buy 100, 000 house maybe, or I'm sorry, 100, 000 property. So with your 100, 000 down payment, let's just say you buy a 300, 000 house. You still got to do everything you were doing to manage that property, right?
But what if 10 of us who all planned on investing in real estate got together and we put all our money together? Now we've got 1, 000, 000. Now, instead of buying, 10, 300, 000 homes, we can buy one 3, 000, 000 property, right? And it's an apartment building. And now we can hire a property management company to manage it.
And we can oversee that property management company. And that doesn't take up any more of your time. Now that doesn't take up, the other folks and only one person or a couple of us are actually charged with the day to day operations work, making with, making sure that we're sitting with that property management company.
Overseeing the implementation of the business plan and make sure that the results are there. So that's what we do in a syndication space. We bring a group of people together. They don't have to know each other. Like you don't have to worry about that. It's just if you were to buy Apple shares, right?
You don't necessarily know who else owns Apple shares. It doesn't matter for you. So we're coming together. We're buying properties and our investors get all the benefits of being a real estate owner without the headaches of being a landlord or a flipper.
[00:26:58] Naseema McElroy: so can you talk about how you say you help people make money passively? And like I said, most people don't think of passiveness when it comes to real estate, but how does that work with the syndication? And then can you talk about what the typical investment is?
[00:27:16] John Casmon: Yeah. So when we talk about a passive investment or what we're trying to get at is this is something that where you make your investment. So you pay the money or you make your financial investment and then you don't have to do any other work. So you're not sitting down with the contractors, you're not calling tenants and.
Figuring out why they didn't pay rent. You're not dealing with that kind of stuff. So there are a couple of different ways of being passive. When it comes to syndication, there are two sides. There's the general partnership side or the active side of the business. And then there's the limited partner side or the passive side.
So the general partners do everything in regards to finding the property, getting it under contract, going through due diligence hiring or firing property management company. Sometimes they're managing a property themselves. They're going to oversee all active. Elements of managing and running that property, the LP or passive investors, all they're doing is reviewing the deal.
So they're going to have a deal presented to them. They're going to look through it. They're going to ask whatever questions they have about the deal. And then they're going to decide whether or not they want to invest. Once they invest, there is nothing else that they have to do. So they invest their money we send monthly updates on our deals so they can read those emails.
But other than reading emails or reaching out with questions, there is nothing else that they have to do. So that's considered more of a passive investment. The great thing about investing passively in a real estate syndication is you get all the perks of being. An active investor without having to do the active work, meaning that all the tax benefits.
So we get things like depreciation and bonus depreciation, which is all passed through and our L. P. Investors get to take advantage of that to give you some context. On some of our deals our investors have been able to take almost half or a little bit more than half of their investment and write it off through depreciation.
Typically investors on our side, the minimum is 50, 000. So if you invested 50K picture writing 50K, but then being able to turn around. And write off 25, 000 to reduce your tax liability based on the depreciation we have on the property. So for some of our folks who get, who have a great tax strategy, or they're looking to get better at their tax strategy, this can be something that is very valuable to them.
Particularly, if you have other passive gains or other investments that you've made, this is a great way to add to your overall tax strategy. And I would suggest you talk to a tax professional to help you understand whether or not it's a good fit for you, but you can start to see how it extends beyond just the cash flow of the real estate or the property going up in value over time.
People are using this as a tool to. Reduce their tax situation in this, in a specific year to maybe write awesome things in another year, but it's a great way to look at it holistically and put together a great strategy.
[00:30:00] Naseema McElroy: Yeah, I like the tax benefits of it. And oftentimes what I find is that people, especially if, their first generation like working in these high income jobs, just accept tax liability and don't understand that the tax code is written for people who are a little bit higher earning and that they can take advantage of this.
Number one, through tax planning, they need to understand tax planning and that should. Automatically be something that they should people should do is have a tax planner, but opportunities like this and real estate and lowering your taxable income is like clutch. And, I hate to say this, because I feel like this is always something that people say, but that's what rich people do, right?
They limit their tax liability. It's usually the people. Who are in the middle that kind of gets squeezed out for taxes. And if you can find a way to limit that liability, you'll be far better off. And in addition to making an investment for your future.
[00:30:54] John Casmon: I just want to say this, cause I think you, you bring up a really good point and it took me a while to come one 80 on this. So I think I want to share this here. The perspective on taxes needs to shift. And the reason I say that is. If you have it, you did what I did, right?
You got a good job. You're high income earner. Great. The reason you pay the most in taxes is because you're not really doing anything for society beyond your job. And what I mean by that is what we reward in this as a society and as our government is what we can provide and create for other people, which are jobs and housing.
Because we don't want the government providing jobs or housing government housing sucks. Most people understand that nobody wants the government providing housing or you don't want to live in government housing when it comes to jobs or government funding. We don't want that. So. What the government does when it comes to taxes, they're looking to incentivize entrepreneurs and business owners to create housing to create jobs.
That is why the tax benefits are in that sector and not necessarily tied to. Individuals who have a great job and making a high income. So if you think about it from that standpoint, you're actually contributing more by investing in real estate because you're providing housing, you're helping to create jobs.
And what I mean by creating jobs guess what? If you have a, if you have a property, you got contractors, you got painters, you got, appliances you have to put in, you have for us on the larger side, we have property managers that we pay salaries directly for. We have, we have a whole litany of.
Things that we're paying for. We have hundreds of thousands, millions of dollars of revenue of expenses that we're paying for. So we're helping to circulate the economy and keeping cash flow moving. If you just have your job, you're just buying goods and services for yourself. You're not really creating jobs and opportunities for other people.
You're not providing housing for other people. So you don't have to feel. Bad about or, to feel like you're taking advantage of a loophole, like you're creating opportunities to have quality housing, you're creating opportunities for folks to have businesses and employment. So it is a positive contribution to society because we know the counterpoints that is government housing.
Which again is not very advantageous for anybody.
[00:33:07] Naseema McElroy: Yeah, thank you for that perspective shift, because I think taxes are scary for people. And so, they don't think about it like that. They don't think about what they can be doing for society through paying their taxes. So, thank you. I really appreciate that. I also wanted to talk about two things.
Like you said, there's active investors and then there's the passive investors. In these syndication deals, is the percentage that the active investor gets higher
[00:33:35] John Casmon: So typically the passive investor is going to get more. Our deals are typically a 70 30 split. So 70 percent of the profits are going to our passive investors. That does change from groups and deal to deal. So I've seen everything from. 85, 15 splits where 85 percent of profits are going to the limited partners down to 30, 70 splits the other way where only 30 percent of the profits are going to the limited partners.
What I would tell. Busy professionals and investors to think about is less of the actual split and more about the perceived risk in the business plan and the overall returns. And the reason is, in theory, if a, if an operators taking on a heavier lift project then they are going to want more of the upside and the rewards because they're doing a lot of work.
They're taking on a lot of that day to day risk, it's going to be more involved for them and maybe a longer time period to turn it around. So they're going to want to see a little bit more of that profit, right? On the flip side of that, you don't want to do it. I shouldn't say this, I would be cautious if the upside for the active partners was small, say on that 10 or 15 percent range simply because I want them to be incentivized and motivated.
To deliver on that project, when you have margins that small and in their profits only 10 percent and maybe the deal isn't working as well, but they're not going to work that hard if they're not making as much money or they're not projected to make that much money. So I want. That person or that group to, to have a nice incentive to perform but obviously to make sure that it was well balanced based on what I was looking for as an investor.
So it's a range. It's hard to tell, off of a, just one rule of thumb, but typically speaking, at least on our deals, we're looking to double an investor's capital for a five or six year hold. So when we're looking at deals, that's what we're looking at. If we hold this for six years between.
Cash flow, and selling or exit, do we think we can double an investor's capital? And if we do believe we can do that, then that's a deal we'll further explore.
[00:35:35] Naseema McElroy: I love that. That's pretty great return. I think it's It looks Like a great opportunity for a lot of people seems like a great opportunity for a lot of people but oftentimes people are like hung up like especially if it's their first investment like you threw out the number 50 000 and That's just like an example because I know some deal they fluctuate but fifty thousand dollars as an initial investment for people Can sound scary?
and like I'm like, I don't really have 50, 000 liquid, but then my attorney actually does syndications as well. He was like, you could use your your IRA, right? Yourself, you can turn your IRA into a self directed IRA. And I was like, oh, yeah, I have that much money easily. You send it in there or I have another friend that uses Her cash value life insurance to do deals like this, too.
So, I don't know if your clients have used other methods to getting the funding, if that 50, 000 are in that initial investment seems intimidating, but those are just some things that I learned. I was like, oh, yeah yeah, I typically don't have 50, 000 dollars sitting around, but they, I do have access to 50, 000 dollars in some kind of way.
So. Yeah.
[00:36:51] John Casmon: Most of us are actually surprised by the access to capital we have, which is our capital, right? Whether it be a 401k or like you said, a self directed IRA or cash value of an insurance policy. So I would definitely start by looking at it from that standpoint.
And to be clear. If you've left the job and you had a four one K there and you didn't roll it over, you can roll that into a self directed account. It doesn't have to be in the stock market, particularly if everything else is already in the stock market. So you can take that and you can roll it into a self directed IRA account and you can invest in real estate.
You can invest in, precious metals. You can invest in, stocks or bonds and other things you can invest in. Animals, like literally you can invest in cattle or lamb or whatever. So you have a lot of options. You can take more control over your retirement investments. There are certainly some limitations there, but that's certainly worth looking into, particularly if you already have other stuff.
And then I would say to yeah, 50, 000, maybe a lot for some people certainly understand that. I think the the last time I looked, most Americans have like less than 50, 000 in their retirement or in their self direct IRA. So, completely understand that may be a larger number for some people.
What I would suggest in that case is there are some funds or some some different approaches where you can invest with a lower minimum. Thank you. So, I know of a couple of different groups where they'll take you as, little as a thousand bucks or something like that. What I would say, though, is be really clear on what your real goal is, because ultimately, what we're talking about is not a get rich quick kind of thing, right?
56 years worse, and we're talking about doubling the money and that's our target that's not gonna, That's not gonna be enough for someone to just walk around and just quit their day job right away. So, so it's you have to have a plan. And what I would say is if you don't have that, yes, you should find ways to invest, but you should also find ways to increase.
Your income earning potential or increase the investments you have, or in this case, sometimes decrease your tax liability, right? That might help you too. It's Hey, I make enough money. It's just too much going out the door. How do we save some of that? So I would start by looking at. That I would talk to a tax strategist who can help you look at your unique financial situation and come up with a game plan to maximize your dollars moving forward.
And then I would look at investments that make the right choice. As I said, for some people syndications with us make a lot of sense for others that may not. And that's fine. There may be other real estate strategies or other investment strategies that are a better fit for your current economic situation.
But I do think it's important for you to do something to take control over your future and figure out which strategy is right for you.
[00:39:32] Naseema McElroy: I love that. I love that because I think, especially over the last couple of years, it's been all these things that have popped up, make this amount of money in this amount of time. And I, and it's always a cyclical thing. There's always these things where people are just like, if you do X, Y, and Z, you can triple and double your money over the short period of time.
And people are so. So quick to fall into those traps versus those small, everyday things that could be doing that I could net them way more in the long run. But I love that you mentioned this is not get rich quick. This is not the strategy that we're selling. This is an alternative investment. Especially if you're already heavy into stocks like in bonds and stuff like I know.
Most of my money goes into my 403B457 and that's invested directly into the market, but I, because I'm so heavily invested in the market, there's an opportunity for me to move some of those funds into real estate. Like I said, I can take my IRA money and roll that and convert that into a self directed IRA, use that money to invest in real estate.
And so it's just another way to look at diversifying your portfolio. So I want to talk about like what are the goals typically of the people that you work with? What are their demographics and how people can work with you? Thanks
[00:41:07] John Casmon: fall into two groups.
One is going to be a younger investor who is looking to scale. So they're investing with us really, yes. They wouldn't make the returns and all that stuff, but really their goal is to learn how to be a better investor. So it's smart, right? Earn while you learn or, and it's similar what you mentioned before, for someone who maybe needs a little help or they have a few properties, but man, how do I go from three units to, to 12 units?
It could be daunting. But if they invest alongside us or invest with us. There's a chance for them to now learn a little bit more about what that looks like and decisions we're making and ask me questions. So that's something that they're looking for the second group, or, and for that first group, they may have money in a retirement account that they cannot use to invest in their own assets.
There's limitations to that. You can't self deal. So for them it may be easier to invest in someone else's deal. As opposed to trying to find their own investment with their retirement funds. So the second group is our core audience, which is working professional, typically, middle management or senior management.
They are looking to diversify their income. They're looking to diversify their assets, typically not looking to get repaid right away, but they're saying, okay, Hey. I've been working really hard. I've built this up, but what do I have to show for it? And if you think about it, if you make a quarter million dollars, you can't pass that salary down to your kids, right?
You can't pass down your degrees, so you have to accumulate assets and When you think about generational wealth and just take the fluff out of it and just truly scrape this down to the bare necessities, right? It does not matter how much money you make. What matters is the assets you have and what you can leverage, just like a game of Monopoly, right?
If I have these hotels, if I fall into hard times, I can sell this asset and go do something with it. But. That salary, that job that can be wiped out at any moment. So our goal is always to accumulate assets and for that investor, this is a way for them to insulate from just what they have in their W2 job.
And typically they don't have the time and energy to go out there and build a brand new side hustle or create a new business, right? So for them to invest alongside us, it's a great way for them to be real estate investors without derailing their things they already have. These are people who are getting busy moms, busy dads, parents.
You've got a full time job, you got family obligations like people, most people don't want to do all of this and then go be a real estate investor for 10 to 20 hours a week to it's I want to break, I want to go play golf. I want to go be with my family. I want to watch my kids. So for those individuals who already work really hard in their careers and taking care of the families.
Who still want to put their money to work and spend time with their family. This is a great path for them to do that.
[00:44:07] Naseema McElroy: And then can you let people know how they can work with you?
[00:44:11] John Casmon: Yeah, absolutely. So, if you're interested in learning more about, what we do, or even just wrapping your head around, like the concept of syndication we do have a sample deal package on our website and it'll get into some of the terms you may want to know as well as what to look for in a deal.
So you can go to casmancapital. com slash sample deal and on our website, you'll get on our email list and you'll get to learn more about setting up a call with me, and I'm happy to answer any questions you may have. But let's go to our website, chasm and capital. com and use backslash sample deal to download that deal.
[00:44:40] Naseema McElroy: Thank you, John. It's been so informative and I love hearing your story. I love how you turn something that could have been devastating into an opportunity to help others. So I really appreciate that. I appreciate you not giving up. And also just like your story is just so inspirational because, like I said, people just need to know what's possible.
So I really appreciate you sharing with us.
[00:45:07] John Casmon: I appreciate you having me on today and being able to talk to all your listeners and just share a little bit about my journey and hopefully it can help either inspire or inform someone else on their own journey.
[00:45:18] Naseema McElroy: I'm sure it definitely will. Thank you.
Hey there I’m Naseema
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