"The Ups and Downs of Passive Investing"
Real Estate Investing Expert
Episode 50: "Bad Beats"
Listen to the Podcast Here:
On today’s episode of The Real Estate Nerds Podcast, we get to hear about both a Bad Beat and a Best Deal–because in the real world, sometimes they happen right on top of each other. That has certainly been the case for multi-family investor Ola Dantis. Tune in to Episode 50 of The Real Estate Nerds Podcast now to hear Ola dish about one of his worst deals, a bonus Best Deal, and many of the lessons he has learned along his path to real estate success.
Ola Dantis on Multi-Family Investing, Freedom of Mind, and Freedom of Time
Ola Dantis sits down with our host and attorney Scott Smith. The pair of investors chat about Ola’s real estate beginnings and the ambition of all real estate investors: freedom.
[1:00] Ola is originally from the U.K. but has lived in the U.S. for the past five years. One day he received a call from a friend whose business was taking off. The friend wanted Ola to invest in his business and invited him to learn about the opportunity in Dubai. Ola explains: “I did what any wise man does: consulted my wife.”
[2:30] The two argued about the value of the trip, but Ola ultimately decided to go in hopes of learning something valuable.
[3:00] Ola ended up making the trip to Dubai, and spent the majority of it in his hotel room dissecting his friend’s business. He observed that his friend’s real estate business was doing very well back home in London. Ola decided to do the same thing in the United States and was buying his first properties within three months.
[4:00] Scott asks how Ola’s plan evolved over time. Ola points out that his trip changed everything. When he got back, he began diving into researching many investing books, podcasts, and forums like BiggerPockets. One book that was influential for Ola–and many other investors, was Robert Kiyasaki’s Rich Dad, Poor Dad.
[6:00] Once he’d finished Rich Dad, Poor Dad, Ola moved on to reading “more tactical content” about real estate investing to construct an investing plan. He settled on multi-family as his asset class of choice, explaining “Our first property was a multi-family. That’s how I got into it.”
[7:00] Ola knew from the beginning he wanted a business that was in some form passive. He uses this language because he recognizes “Real estate is never totally passive. If you’re not a creator or syndicator like myself, you can’t just be somewhere on a beach and your business runs. You have to manage the property manager.” He does acknowledge that you can be a passive investor on some deals, but to a degree you will typically be taking some action. When asked about his motivations, he says: “It’s about freedom of time and mind.” For him, true freedom of choice was tied to making good money.
[9:30] Scott probes Ola on whether money is a prerequisite to certain kinds of freedom. Ola points out the variety of experiences that are only available to those who have achieved a degree of financial stability. Pursuing truly ambitious goals generally does require capital. Ola believes this is also true of “freedom of mind”–and points to some of the experiences that combat the modern problems of anxiety and depression. Money can be used towards fulfilling activities.
[11:30] Scott points out that there’s a trade-off in freedoms. You may be able to use real estate to quit your job, but you will still have to manage your investments. Ola points out that he sets goals in terms of which freedoms he hopes to pursue: “I don’t have to be a billionaire at the expense of spending time with my daughter..I don’t have to be a billionaire at the expense of my soul.” He believes balanced goals are as important as goals that are specific and measurable.
[14:00] Scott asks about fears or anxieties that Ola has overcome. Ola speaks to a fear that is fairly common among real estate investors: “If I get very successful, will I still be the same person?” He also has fears of failure, but believes both can be addressed through consciously not growing too quickly and simple awareness.
[16:00] In reference to anxiety, Ola points to social media. He worries at times about the social media culture of artificial happiness, and projections of unrealistic standards of looks and success. This gives him concerns for his young daughter: “Our kids grow up into a culture of constant polished images of nonreality. It’s just not true.” He also recognizes the utility of social media for real estate, and has raised a substantial amount of money on Instagram himself.
[18:00] Scott points out many of us use social media to compare ourselves to others in a negative way. He wonders whether there is a more positive way to use these tools. For Ola, it’s all about realism. He thinks if people posted truer reflections of their life, social media could have a more positive impact on the world. “Make sure you’re pushing out reality,” Ola advises.
[20:30] Scott and Ola reflect on why people go to such great lengths to create ornately artificial impressions of themselves on social media accounts. For those who use social media deceptively, Scott warns, “You’re only tricking the people that are at the bottom tier of awareness of society. Everyone else has already picked up that there’s just no way your life is that great. It’s just not realistic.”
Scott and Ola transition into a real estate war story of one of Ola’s worst deals. As an avid podcaster and podcast listener himself, Ola is particularly excited to share about one of his worst deals. While he loves a great success story as much as anything else, he shares our opinion that discussing our worst investments can be extremely valuable.
[23:30] Ola had gotten into a partnership and bought a large house in Baltimore, Maryland. He wasn’t accustomed to buying houses that large–2500 square feet. He also knew personally he did not want to do a flip, since he preferred more passive investments and flipping is extremely active.
[24:40] Ola, despite knowing that he didn’t want to do flips, got drawn into the project after being promised high profits near $50,000. He freely admits he got overexcited. They bought the house, and it simply sat for the next three months. They did some very small repairs but the entire project took nearly seven months to finish. For the beginners in the audience Ola points out, “If you’re doing a fix-and-flip, you want to be done in about 3-4 months from start to finish.”
[26:00] For each additional month that clicked by, Ola was paying interest to his hard money lender. Contractors weren’t completing their work on time. He knew from his projections that his budget would be higher. He knew rebuilding such a large house would be a massive project, but he didn’t realize it would take so long.
[28:00] If you get into real estate, according to Ola: “You’re going to fail…It’s okay. Don’t give up.” He believes if you tell yourself you can succeed, you will. Things just happen in real estate, and that’s okay. It’s still a powerful vehicle, even if you get beat up a bit along the way.
[30:30] Scott agrees and adds: “You can only say ‘I’m a failure,’ when you stop. Otherwise, you’re just learning on your path to success.”
The Other Side of the Investing Coin: One of Ola’s Best Deals and Today’s Take-Aways
We were fortunate to also have time to hear Ola tell us about one of his best deals, which teaches some slightly different lessons. Then, each investor shares their favorite take-way for our listeners from Ola’s story.
[32:00] Ola shifts gears to tell us about the property involved in one of his best deals, which also happened to be his earliest. In fact, it was his first multi-family investment property in a “good area” of Baltimore.
[33:00] Ola’s team remodeled the home and installed new appliances. Now, “This thing cashflows like a monster.” He points out that sometimes good deals and bad deals happen right on each other’s heels, and real estate can just be an “up and down game.”
[34:00] For Scott, one of the major lessons he learned from Ola’s story was the importance of moving in the right direction. Fears and anxieties are normal; it’s all about which action you take.
[35:00] Ola has two lessons: “First and foremost, real estate is an abundance game. There’s enough to go around.” He adds that the other major lesson is that real estate isn’t a get-rich-quick scheme, but a long-term plan. There will be ups and downs, and how you handle them will determine your success.
Connect with Ola Dantis
Connect with Ola on his website, InvestWithOla.com. You can also find him on Instagram most often out of his different social media accounts.
When making business decisions that affect your long-term goals, like what types of investments to make with your retirement dollars and which vehicles to use, it really is best to be aware of all of your options. We frequently talk about the Solo 401(k) and Self-Directed IRA as tools for funding your retirement. But what about life insurance? And what about the stock market? What if we told you there is a tool that allows to to reap some benefits of both? It’s called Indexed Universal Life Insurance–and some investors have found it a useful addition to their retirement plans.
What Is Indexed Universal Life Insurance?
Indexed Universal Life Insurance (IUL) plans are a variety of permanent life insurance plan that features a cash-building element. One primary benefit of these plans is that the policy holder gets some of the gains of being associated with the stock market without all of the risk Wall Street is famous for. This is in no small part because of how these policies are designed. IULs earn in part because they are directly linked to a market index, such as the Dow or the S&P 500. Any gains remain within the policy, albeit a cap rate will limit how much you can make. However, you are protected during a particularly bad year for your index with an IUL. The worst case scenario with these plans is that you make nothing, but you never actually lose money no matter how poorly your index performs. The protection of your principal is actually derived in part from the same cap rate that limits your gains.
How much money do policyholders stand to make? Historically, returns run between 5-9%. The S&P Index has actually returned at 9-11%, but the upside limit on UILs stems from the account’s cap rate. For this reason, many advisors argue that the UIL can make a wise addition to a retirement or estate plan once more traditional and self-directed accounts are maxed out.
Tax Benefits of Indexed Universal Life Insurance (IUL) Plans
There are three key tax benefits of IULs. First, you may pay into the policy with pre-tax or after-tax funds. Withdrawals from the policy may be made tax-free if you are under 59 1/2. Such withdrawals are regarded as loans, with your death benefit serving as collateral. Any funds paid out to the beneficiary are also tax-free, including normal benefits upon your passing. This is true regardless of their value.
Ask the Experts at Royal Legal Solutions About Your Retirement Planning Options
Regardless of where you are in the retirement planning process, Royal Legal Solutions an assist you. We have extensive experience educating investors about self-directed investment options. Many of our investor-clients love our Solo 401k information, product, and compliance services. Our Self-Directed IRA services can also be helpful for retirement planning, as the SDIRA is yet another vehicle that allows you to diversify and take total control of your investments. To determine which of the available retirement planning strategies are best for you, consult with one of our experts at Royal Legal Solutions. You may also contact us with any questions you may have about your options.