Beyond the 401(k): How High-Income Physicians Build Lasting Wealth with Lane Kawaoka

🎙️ 𝗪𝗲𝗹𝗰𝗼𝗺𝗲 𝗯𝗮𝗰𝗸 𝘁𝗼 𝘁𝗵𝗲 𝗣𝗵𝘆𝘀𝗶𝗰𝗶𝗮𝗻𝘀 𝗮𝗻𝗱 𝗣𝗿𝗼𝗽𝗲𝗿𝘁𝗶𝗲𝘀 𝗣𝗼𝗱𝗰𝗮𝘀𝘁 𝘄𝗶𝘁𝗵 𝗵𝗼𝘀𝘁 𝗗𝗿. 𝗔𝗹𝗲𝘅 𝗦𝗰𝗵𝗹𝗼𝗲.

💡 What if earning a high income was not enough to make you financially free?

For many physicians, every dollar still depends on another shift, clinic day, call weekend, or patient encounter.

In today’s episode, I’m joined by Lane Kawaoka, author of The Wealth Elevator and host of the Wealth Elevator Podcast.

Lane started his career as an engineer and built his first real estate portfolio by saving aggressively, house hacking, and investing in markets where the numbers made sense.

He eventually grew to 11 rental properties before realizing that owning more individual homes would also mean more evictions, maintenance problems, management headaches, and liability.

In this conversation, we discuss how investment strategies should change as your income, net worth, experience, and financial goals evolve.

🔥 𝗪𝗵𝗮𝘁 𝘆𝗼𝘂’𝗹𝗹 𝗹𝗲𝗮𝗿𝗻:
✔️ How Lane used house hacking to begin building wealth
✔️ Why investing out of state can create better cash-flow opportunities
✔️ When individual rental properties become more work than they are worth
✔️ How passive syndications may reduce management responsibilities and liability
✔️ Why forced appreciation is more dependable than hoping for market appreciation
✔️ How wealthy investors use real estate, private credit, private equity, and lower-risk assets
✔️ Why tax planning can accelerate your financial-freedom journey
✔️ How to diversify across multiple deals and market cycles
✔️ What happens to your identity and purpose after reaching financial freedom

🔥 𝗞𝗲𝘆 𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆𝘀:
✅ Invest where the numbers make sense, not only where you feel comfortable
✅ Your investment strategy should evolve as your wealth grows
✅ Tax benefits should strengthen a good investment, not justify a bad one
✅ Avoid concentrating too much of your net worth in one deal or asset class
✅ Financial freedom is ultimately about gaining control over your time and choices

If you’ve ever wondered why a strong physician income still does not make you feel financially free…

Or if you are trying to determine whether your next step should be another rental property, a passive syndication, or a more diversified portfolio of alternative investments…

𝗧𝗵𝗶𝘀 𝗲𝗽𝗶𝘀𝗼𝗱𝗲 𝗶𝘀 𝗮 𝗽𝗼𝘄𝗲𝗿𝗳𝘂𝗹 𝗿𝗲𝗺𝗶𝗻𝗱𝗲𝗿 𝘁𝗵𝗮𝘁 𝘄𝗲𝗮𝗹𝘁𝗵 𝗯𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗶𝘀 𝗮 𝗽𝗿𝗼𝗴𝗿𝗲𝘀𝘀𝗶𝗼𝗻. 𝗧𝗵𝗲 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝘆 𝘁𝗵𝗮𝘁 𝗵𝗲𝗹𝗽𝘀 𝘆𝗼𝘂 𝗯𝘂𝗶𝗹𝗱 𝘆𝗼𝘂𝗿 𝗳𝗶𝗿𝘀𝘁 𝗺𝗶𝗹𝗹𝗶𝗼𝗻 𝗺𝗮𝘆 𝗻𝗼𝘁 𝗯𝗲 𝘁𝗵𝗲 𝘀𝗮𝗺𝗲 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝘆 𝘁𝗵𝗮𝘁 𝗵𝗲𝗹𝗽𝘀 𝘆𝗼𝘂 𝗴𝗿𝗼𝘄 𝗮𝗻𝗱 𝗽𝗿𝗲𝘀𝗲𝗿𝘃𝗲 𝗶𝘁. 𝗧𝗵𝗲 𝗴𝗼𝗮𝗹 𝗶𝘀 𝗻𝗼𝘁 𝘀𝗶𝗺𝗽𝗹𝘆 𝘁𝗼 𝘀𝘁𝗼𝗽 𝘄𝗼𝗿𝗸𝗶𝗻𝗴. 𝗜𝘁 𝗶𝘀 𝘁𝗼 𝗯𝘂𝗶𝗹𝗱 𝗲𝗻𝗼𝘂𝗴𝗵 𝗳𝗿𝗲𝗲𝗱𝗼𝗺 𝘁𝗵𝗮𝘁 𝘆𝗼𝘂 𝗰𝗮𝗻 𝗽𝗿𝗮𝗰𝘁𝗶𝗰𝗲 𝗺𝗲𝗱𝗶𝗰𝗶𝗻𝗲, 𝘀𝗽𝗲𝗻𝗱 𝘁𝗶𝗺𝗲 𝘄𝗶𝘁𝗵 𝘆𝗼𝘂𝗿 𝗳𝗮𝗺𝗶𝗹𝘆, 𝗮𝗻𝗱 𝗱𝗲𝘀𝗶𝗴𝗻 𝘆𝗼𝘂𝗿 𝗹𝗶𝗳𝗲 𝗯𝗲𝗰𝗮𝘂𝘀𝗲 𝘆𝗼𝘂 𝗰𝗵𝗼𝗼𝘀𝗲 𝘁𝗼—𝗻𝗼𝘁 𝗯𝗲𝗰𝗮𝘂𝘀𝗲 𝘆𝗼𝘂 𝗵𝗮𝘃𝗲 𝘁𝗼.

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Transcript

Lane Kawaoka: instead of just going to places where you are comfortable in, you go to places where the numbers made more sense, and that was kind of when I started to buy all these rental properties in Birmingham, Atlanta, Indianapolis. Probably not the coolest places to live, you know, I've never lived there, right? But the cash flow is a lot better there.

Dr. Alex Schloe: Welcome to the Physicians in Properties podcast, the show where we teach you how investing in real estate can give you the freedom to practice medicine and live life how you want. Doctor. Doctor. Doctor. Doctor. Doctor. Now, here's your host, Dr. Alex Schloe.

Physicians earn a strong income, but many of us eventually realize that a high income is not the same as financial freedom. Our income is still tied to our time, our shifts in the clinic or the hospital, our call schedule, and the number of patients that we see. Today, we're gonna talk about how physicians can begin moving beyond that model by using passive real estate and alternative investments to build wealth outside of medicine.

Welcome back to the "Physicians and Properties" podcast, the show where we teach you how investing in real estate and entrepreneurship can give you the freedom to practice medicine and live life how you want. Today, I'm joined by Lane Kawaoka. Lane owns more than 10,000 rental properties and leads the Huey Deal Pipeline Club, which has participated in the acquisition of more than 2.1 billion in real estate through the syndication of over 200 million in private equity.

He's also returned more than 45 million to investors through distributions. Lane has an incredible engineering background, and he uses that analytical mindset to reverse engineer the wealth-building strategies that are used by high-net-worth investors, including many physicians. He also hosts the "Wealth Elevator" podcast, where he teaches working professionals how to build passive income and move towards financial freedom.

Lane, thank you so much for joining us today all the way from beautiful Hawaii. How are you doing?

Lane Kawaoka: Yeah, thanks for having me. Aloha everybody

Dr. Alex Schloe: Yeah, absolutely. Uh, so glad to have you here. And before we get started into more, um, you know, tactical investing strategies, do you mind taking us back to the beginning? How did an engineer from Hawaii go from buying his first rental property to owning more than 10,000 units and helping lead billions of dollars in real estate acquisitions?

Lane Kawaoka: Yeah, I think, I mean, maybe similar path to a lot of people listening, right? We're all cut- taught to go to school, study hard. Um, I didn't wanna go to grad school and get a doctorate, so I just Googled what were the highest degrees that got paid without, you know, having to do that, and those were the engineering degrees.

So that's what I set forth to do. Um, the highest amount of pay with the least amount of effort, as they say. And I started to work for the man as a construction supervisor and, you know, my, my par- you know, I always say, like, in people in my ecosystem were, like, first-generation multi-millionaires, right? Like, you know, my parents were never, you know, they weren't accredited investors.

They weren't landlords. In fact, very early on they told me, "Don't rent your property out because your tenants will screw up your property," I think when I was, like, nine or something like that. So, but, you know, kept on this dogma of buy a house to live in, work your white-collar job, and, uh, you know, luckily though, they taught us a lot of good money values.

Don't waste things. Don't buy frivolous things. And very early on, you know, I didn't get paid multiple six figures, but I was still able to save 30, 40 grand a year, and I used that to buy a house to live in a couple years after graduating college. Um, luckily or unluckily, how you see it, I was on a job where I had to wor- travel all the time.

Um, I know some people do, like, locums out there, right? Very similar. You know, you're working on the road, you're a rambling man. And I, you know, had this big house to myself that I was only home on Saturday, and I just started to rent it out and I was like, "Whoa, this is, this is super cool," right? Like, I was in my early 20s and this is a lot of free beer money.

And then I got a little bit more sophisticated, started to buy a, you know, duplex a few years after. And again, this is just restricted by the 20% down payment, right? Me saving my money. Um, but you know, this is where I was able to save, like, pretty much 100 grand every single year. And then the more and more rentals I got, the quicker I was able to save for a down payment.

So by the time, uh, 2015, I had 11 rental properties, and then that was kind of when I transitioned to syndications and private placements from there, when I became an accredited investor.

Dr. Alex Schloe: That's awesome. I wanna stop you for just a second 'cause I think something that you said is really important and pertinent to, to physicians, especially residents who are just getting started. You, you mentioned house hacking or essentially house hacking while you're traveling and renting out your home.

That can be such a great way for folks to get started, and that can look different depending on your scenario. Like for example, we still house hack part of our house. We have a separate basement apartment. That pretty much pays for mortgage, taxes, and insurance for the year, and that way we're able to snowball more capital into more investments, and you can get the ball rolling much faster from that perspective by eliminating one of your largest expenses.

So I wanted to highlight that from your journey 'cause you realized that really early on, and that led to the ability to save a lot more and snowball more and more of that money into those 15 units, uh, which is really, really impressive

Lane Kawaoka: Yeah. I mean, depends on where you're living, right? Like, I was in Seattle, Washington, which like Hawaii, California, a lot of these pr- more primary or sexier markets, you know, you're, you're not gonna buy a property and rent it out anywhere near the 1% rent-to-value ratio. So you've gotta kinda do something, do a little bit more scrappier, buy a house, uh, and then rent out some rooms or get a split unit or quadplex.

Um, but you know, you eventually find, or at least, you know, if you kinda notice the first few units I was in was where I was living, Seattle, wanted to feel it, touch it. That's always natural, right? But the more and more sophisticated you get, you know, you can do this more remotely and you, you know, instead of just going to places where you are comfort- comfortable in, you go to places where the numbers made more sense, and that was kind of where the next generation went when I started to buy all these rental properties in Birmingham, Atlanta, Indianapolis.

Probably not the coolest places to live, you know, I've never lived there, right? But the cash flow is a lot better there.

Dr. Alex Schloe: Yeah, absolutely. And it's all about your goals, right? And I think that's really important to understand that you can invest in other places out of state, and it's not much more difficult, especially now, you know, with Matterport and some of these walkthrough, you know, walkthroughs you can do virtually of the homes and so forth.

We have eight residential assisted living homes. I've never seen any of them in person. And so, uh, there's, there's a lot of ways that you can do that and don't need to be afraid necessarily to invest out of state. But being in your own backyard and having that tangible asset that you can touch and see and get that exposure to initially can be really beneficial.

Lane, when did you realize that owning individual rental properties was not going to be the, the final stage of your investing journey? Or maybe when did you realize that like, hey, just, you know, saving, buying a property, saving, buying a property was not gonna get you to where your goals were?

Lane Kawaoka: Yeah. I mean, that's what they always tell you, right? Like, you, you buy five or 10 properties, you pay them off, and then, you know, you s- you kind of snowflake that debt away. But, you know, like, the, to, in reality, like with 11 rental properties, I'll just use myself as an example, I had maybe a few hundred dollars per property coming in.

I mean, a handful of the rentals lost money every single year. But on a totality, you know, maybe $3,000 a month. You know, not bad, right? I mean, that's kind of like an extra paycheck for somebody a month. But, you know, myself and a lot of my clients, you know, y- you're looking more like $10,000 to $20,000 a month.

And so just to give you a little insight, again, this is just my, um, you know, my data points, my experience share. With 11 rental properties, I had maybe an eviction or two every single year, some kind of big catastrophe that happened every quarter, like a tree falling on the house, a washout in the basement.

Sure, I had professional property management to do all the dirty work for me, although I have to kind of babysit them, right? 'Cause the, the property management in the residential real estate world isn't the greatest But, um, it was doable. But if you wanted 30 houses to get $10,000 a month, you're gonna have to multiply the exception rate by three.

So now you're talking about an eviction shoot every other month and some kind of katash every, every two weeks that you gotta play PM and manage the manager on, and you start to realize it's just not worth it. And this-- And then for me, at the same time, it all kinda came together, um, rather serendipitously.

Like, this was kinda happening and, and I'm kinda like still like, "Uh, whatever. I'm just gonna keep doing it," right? Like, you know, no pain, no gain, right? Like, this is, this is what it costs, the cost of, you know, making $3,000 a month. But I started to interact with other accredited investors, and this is, like, 10 years ago, actually.

Um, I started to interact with other, you know, higher net worth doctors, engineers, like, you know, people that were several decades older than myself. More importantly, they had the same pedigree that I did. They had owned rental properties. Their net worth was maybe, like, $2 or $3 million, a little bit higher than mines at the time, but I kinda respected them, right?

Like, you know, the last person you want to take financial advice from is the guy in the cubicle next to you or the guy who's been the resident, you know, doctor for the last 40 years. Why the hell would you wanna take financial advice from that dude, right? Think about that. But, you know, they always like to spew their stuff, and they always like to...

You know, a lot of people like to get off on their ego thing, right? On giving financial advice. But I wanted to, like... You know, to me, success leaves clues, so I wanted to follow what these really wealthy people were doing and the people that kind of resonated with me, who had not 11 homes, like how I had, but, like, 30, 40.

And what I realized getting to know these people personally is that these cats were selling off their rental property. And I was like, "What?" Like, you know, this isn't, this is what they are supposed to do. Um, and what I realized was, you know, when your net worth gets higher, and a big thing is legal liability, getting sued.

So you've got a big target on your back when your net worth is higher. When, quite honestly, when I, you know, when I was younger... I mean, I had-- I didn't, I actually didn't have a LLC set up quite yet, right? But I did-- I, I wasn't at a huge, huge, uh, risk to getting sued because I was broke. What are you gonna do?

Take my half a million dollars away from me? But when you get above a million dollars, certainly above $3, $4 million, you know, I think you wanna start to be thinking more irrevocable trust, more exotic strategies that go well beyond LLCs and the traditional stuff. But This is the discussions I were having from many, many people and from, you know, just pulling these best practices together.

I started to realize that a lot of these guys would go in as a passive investor to kind of take- get away from the, you know, the management i- issues, but more importantly, the legal liability. I mean, I'm on the general partnership for, you know, thousands of properties and, you know, at its peak, like, shoot, we're having like a drowning once or twice a year.

It's, it's very sad, right? And, you know, we gotta go to the drill all the time. We, you know, insurance and, and investigations, things like that. Um, don't get me started on like homicides where, you know, people aren't even living at the property, this stuff happens too, right? And then we get dr- drug into it.

You know, of course, we're in the general partnership managing members, but this is something that, you know, a lot of passive investors never get exposures to, and why would they? They're just passive investors. And this is where I started to realize, okay, the legal liability, yeah, that really, really sucks.

If you've never been sued, it's just a matter of time, and the, the frustrating part is if you're ever sued, even if it's so dumb, like people coming, a bunch of gang bangers coming on your property and, you know, offing one of their other guys, nobody lives there. You know, you get pulled into it. You know, you've gotta pay like 50, 100 grand just to get the pure facts, the true facts out there to exonerate yourself.

It's super frustrating. So, you know, that's one side. But then now when you... I mean, sure, you guys talk about this a lot, right? But now you're getting access to higher quality institutional deals that you can, you know, get a lot more diversification. Where the way I was going, I was kind of pulling all my rental properties together and getting bigger and bigger and bigger, and that definitely was not the way to go, you know?

Dr. Alex Schloe: Yeah, I think that's really important, and that economies of scale is so important where, you know, like you mentioned, when you're having 15 homes and you're having all these headaches that happen with those 15 roofs and those 15 AC units and, uh, 15 hot water heaters, it, it's not as passive as people think that it may be.

And, you know, one new roof or one furnace that needs to be replaced can wipe out your entire cash flow for a year or more. And so, um, it certainly can be helpful to think about, okay, what are some other strategies that can generate more significant cash flow or reduce my risk or be more passive, and kind of think through those strategies.

And I think, you know, a lot of the folks who listen to this podcast obviously are physicians who earn good incomes, but they still feel financially trapped because every dollar that they make depends on their ability to continually practice medicine. Why do you feel like so many high-income individuals appear wealthy but still struggle to achieve financial freedom?

Lane Kawaoka: I mean, perhaps the system is created to keep them working, right? I mean, to me, it- the, the, the system is, or, or the, the solution, I mean, it is like a simple triangle. Like invest in alternative investments where you can cut through the middlemen and you don't go through the secondary market. I mean, we can talk about this later with my SpaceX stuff, like that's a good example.

But, um, you know, but then you get all these great tax benefits like real estate, for example, passive activity losses, and you kind of run your taxes differently. So, you know, very easily, like people can cut off like 10% of your tax bill, right? In the first year, kind of indoctrinating into this type of stuff.

Some way, way more, right? Some, I mean, a lot of people don't pay any taxes doing this stuff, right? When, and it, it's all legal. And then they run it through an infinite banking plan. Um, and it's just like this trifecta of strategies. You know, when you do one of them, it, it kind of moves the needle. But when you move all three of them together, I think it's very, very powerful.

And, and you know, I've, I've got a lot of doctor clients, and the, what's interesting about them is they make high salaries. Like just like my entrepreneur clients, right? The successful ones. Um, it, it very, it magnifies everything. You know, you take a-- Most of my clients are above the age of 50 these days, and, that. Um, but yeah, you know, m- most of my guys are above the age of, let's say 55 years old. Uh, I would say if they're a doctor making multiple six figures, they're typically, their net worth is like one to two and a half million. And, and that's if they're good savers, right? Most of the people, they go through residency and they feel really behind, and everybody thinks there's this false, um, expectation on the doctor, right?

That they should be driving like a Porsche or something ridiculous like that. And then, uh, maybe they might get on the tracks, but then they'll get a divorce, right? I mean, that just happens all the time. But, you know, a lot of times their net worth will be, like I said, one to two and a half million, um, even if they're good savers.

But if the o- you know, some people will come through and they're already in like a dozen plus syndication deals. They're always got like a, a good tax planner that's doing things like oil and gas deals. We could talk more about that. Intangible drilling costs, something to Google out there for everybody out there making over $400,000 adjusted gross income.

And, uh, I'm not a tax attorney, by the way, that's a disclaimer. And, but if you need a referral, let me know. This, this is very common, right? And, and, you know, doing, you know, running it through infinite banking plan, and they're all net worths are like four, five, 6 million plus. So it's like night and day, right?

It's like, kinda like you take somebody who's just like a weekend warrior. You know, they've got a gut, you know, they're, they're, they're eating some things. Might be doing some intermittent fasting once or twice a week. But you take a pure athlete that is like fine-tuned, and it's just night and day, right?

It's like, uh, you know, you're not... You're different, right? And the same thing, like you take the doctors that are indoctrinated into this trifecta strategies versus not, or doing only one, it's night and day

Dr. Alex Schloe: um, yeah, so I was gonna say, your, your platform, it's, it's called The Wealth Elevator, and you describe wealth building as a progression rather than a single investment strategy, and you've alluded to that previously talking about how, you know, multiple things working in tandem can really help you perform like an elite athlete, not a, a weekend warrior.

Lane, do you mind walking us through The Wealth Elevator? What are some of the major stages as an investor, as they typically move through his income, net worth, and experience, and as that increases over time? What does that look like?

Lane Kawaoka: Yeah, perfect. Yeah, let's just give away the goods that are in the book, "The Wealth Elevator." So, in the book, there's this construct of, like, these different floors, right? And, and as you've-- I've kind of told my story. I've kind of moved through these different floors one by one, and what I've realized is each floor requires a different strategy.

What are you investing in? Um, look, I don't wanna bad talk little rental properties, right? I, I wanna make that very clear. And then you have some gu- some gurus out there trying to sell programs and, you know, "Be a multifamily millionaire and join my program that's 50 grand," right? "After you come to my seminar."

Uh, which they're all virtual these days 'cause none of them, none of them work, you know? Um, but, you know, you, they, they try to tell people, "Oh, you can... Why start with little rental properties when you can just buy big multifamily apartments," right? Like, to me, that's the silliest things. Like, I think for at least from what I've seen a- and what I've seen how people fail, right, going, especially going through those types of programs, is you've gotta kind of go up through a progression.

Um, but there are ways to kind of, um, expedite your progression of these different floors. So maybe I'll just start by explaining, like, the different levels, right? The le- the first level is, like, the basement level, right? Like, I don't think this is anybody listening, but this is the majority of wealth-building dogma out there, the FIRE movement, the rich dad, poor dad world.

You know, these are folks that make under 50 grand a year. They don't have any net worth. Their net worth's under 100 grand. Um, you know what I mean? I, and I tell people, like, if you're in that category, just don't, don't read "The Wealth Elevator" book. You're just gonna get depressed. Um, but there's so many other content, like Dave Ramsey, Suze Orman.

I mean, this is stuff I would like to-- I used to listen to in my teens, and, um, I think they're great, right, for that type of world, right? Like, for example, you can do infinite banking with a little twist for, um, or, or prescriptive certain way for the, the lower net worth people trying to get out of their credit card debt, right, and pay off their mortgages.

It's not super aligned with financial freedom and growing your net worth, which to me is the big, the big piece of this, right? Net worth don't lie. That's the big, that's the score. But going back to the first floor of the wealth elevator, that's where I was in my 20s, buying little rental properties, and that was able to build the asset column and the experience to now be able to, uh, network to get into bigger deals and also evaluate bigger deals, whether as a general partner or a passive investor.

And I think that, that, you know, you kind of get more into the credit investor space, so net worth million dollars or greater, or, you know, as defined as SEC, I think $200,000 a year of income or greater. Um, so but then the next level is the second floor, right? That's, that's kind of that level, and then the next one is the third floor, which I kind of define as like, you know, anywhere from like three to $5 million net worth.

The reason why there's such a big range is highly dependent on your burn, personal burn rate. You know, some of my clients, family of four, you know, kids in their teens, haven't gone to college yet, they're gonna, they're gonna have a higher burn rate need, right? They might be spending 20, 30 grand per month.

Um, so they're gonna need maybe five to $6 million net worth to kind of get to this floor. Other folks, some people that live in a coup- you know, older couple that lives in Alba- Alabama, their kids are already off to college, already f- um, you know, maybe not financially independent, but off of their payroll, and they may only need two and a half million, right?

So that's where the range comes in. But at this point, you've kind of got the basics done, right? You've, you've kind of got F-you money in, in a way. I mean, you could probably put a lot of it in T-bills and life insurance and be okay, which is, uh... You know, I'm not a financial planner, right? But, like, that's kind of what we talk about as the low risk, low return stuff.

You know, that's the brain dead investments that you could be doing out there. Um, but you know, rental properties are higher risks too, right? And so is value-added real estate. So to me, you have to do that to grow your net worth. You know, I don't think you can diversify your way to get there unless you just make a phenomenal salary, and some of you guys do out there.

Um, but you know, I think if you want to expedite your way there, you have to kind of be on this razor's edge. Um, you know, I, I kind of made this mistake myself, right? Like, I had 80% to 90% of my net worth into real estate and then commercial real estate, and then the big bubble popped in commercial real estate the last several years, and I got hurt really hard.

And so I... Now I'm learning that I need to diversify. You know, I have a pillar in commercial real estate, private credit, private equity, and then the really safe stuff, the T-bill-ish, uh, life insurance stuff is kind of my, the way I look at these four pillars today. But, um, but yeah, you know, it's this idea of like understanding where you're at, what floor you're at, and then the first floor, second floor, you're still in kind of growth mode.

And then when you get into the third floor, fourth floor and higher, the penthouse, I think that's especially where you, you need a peer group of other purely passive accredited investors to be around.

Dr. Alex Schloe: Yeah, that's great. Yeah, I think there's certainly a period of time everyone's in wealth accumulation phase, and then you pivot over towards wealth preservation. Obviously, still wanna accumulate over time, but that's where it gets more important if you're, you know, you're retired and, um, you wanna just live off your, your investments, then of course, preservation of capital is gonna be a little bit more important to someone, say, like me, who's in their 30s and, um, wants to accumulate as much as possible.

And, and everyone's risk tolerance is gonna be different in what they wanna invest in and what they want that journey to look like. Um, so I think that that's, that's really important. Do you think that the, uh, kind of, you know, you had mentioned you started with the 15, you know, um, the 15 rentals and then pivoted more towards commercial.

Do you think that there's a certain period in time, of time where investor strategy should change? 'Cause I, I kind of am a, am a firm believer of, uh, shiny object syndrome is not necessarily a bad thing until you get to the point where there's something that you are really, really good at and you're making good money doing and you enjoy it, and then you go pivot to the next, you know, red dress, if you will.

And I kind of equate it to going to an ice cream shop, and initially you're just trying some free samples. That's the different asset classes. And then when you find the flavor that you really like, you pick that one and you stick with it over time. Um, so I think there's certainly multiple arguments of like, yeah, does it make more sense to diversify really early on?

Does it make more sense to try and accumulate as much as I can in one strategy and then diversify? What are your thoughts there?

Lane Kawaoka: Yeah. I mean, depends if you're a passive investor or you're a general partner, right? Like we're, we're kind of on the general partner side, so we have to live and die and pick something. Um, but, you know, thinking more for the passive investor, what's kind of useful advice there? I mean, to, to me, you know, when you're starting out, you have to, you know, like...

Okay, I, I'm just gonna call myself out on this. I got really freaking lucky when I started. I started at the right time, right? Like, that's part of it. Just don't in- don't invest when the thing crashes. Duh, right? Like, I mean, I'm just pointing out the obvious and like behind all p- interviews or talks, just, just don't hit the whammy, right?

Don't invest in commercial real estate in 2022. You'll be okay, right? You'll probably do pretty damn good. That's like me, right? Like anything in real estate did well from 2009 to 2022, '23, right? Um, I, I had a super bad strategy in, initially. I would just buy and hold. I would do no value add, right? But I was doing it in such a good time, I was able to cash flow, right?

Look at the first several rental properties I had. And unfortunately, the... When I was buying those rental properties, um, if I bought that today, it'd be 140 grand per rental property. Today, when I was buying it, it was like 80, right? Duh, that's why you cash flow. That's why I looked like a freaking genius, right?

That's why

Dr. Alex Schloe: Yeah, and in- interest rates are so low.

Lane Kawaoka: You know, it's not your grandpa's real estate game anymore. So if you wanna, if you're looking for alpha, which is to kind of beat the standard quo, right? You have to be doing value add, and that's the aha moment that I had in 2016. I was like, "Yeah, I got really lucky. I invested in a great time," but, you know, what was happening in the previous macroeconomics is not gonna be happening in the future.

You have to be doing value add. You have to be bumping the rents, doing construction, or, you know, why we pivot to private equity today, buying businesses, right? You have to be doing to add increase in net operating income in real estate or EBITDA or the net income in a business, right? To- That's how you get the pop.

That's how you sell it for a higher multiple, um, later on. So that was why I pivoted to commercial real estate because you're able to renovate units and, and we, then we started to develop too, right? Multifamily. Um, I think our, what we were lucky is like we could operate them, right? 'Cause most developers cannot operate the asset.

They, they build it and just un- wanna unload it right away because that's what they do, um, which is actually a good strategy for them. But, you know, I think that's the big thing. As an investor, you have to be going into things and not just buy and hope and pray. That strategy works in good times, but it, and, you know, like it, it works for that idiot in San Francisco, your neighbor who buys his house, in six months it's worth way higher.

You know, I don't know if that's the case these days, but that's market appreciation. That's dumb luck. There's two types of appreciation out there. There's that dumb luck market appreciation, and there's forced appreciation. Forced appreciation, I think a lot of people resonate who's listening. That's where you take fate in your own hands.

You put in a lot of effort and work, and you increase how much money it makes, which in turn increases the value of it, which you can sell it for that. So you have to look for investments that do that. You know, it's not, it's not just esoteric as buy assets, right? Well, buy assets that are, hold its value for somewhat, but assets that you can improve the value of it, right?

And this kind of goes to the whole like mantra of, you know, wealth comes to those people who create value, if you've kind of heard of this. You know, I'm not a huge fan of just buying something and doing nothing to it. Like, you know, that's why I don't do stocks, right? Like there's not, no really value creation there.

You're just trading. Like you're n- you're just playing a stupid arbitrage game where, you know, you're buying something on Alibaba and then you're doing it. Sure, there's some value creation there for distribution, but, you know, true value comes to people who create value and, and it's also repeatable, right?

As opposed to like a one-trick pony. That type of distribution business just, you know, comes and goes.

Dr. Alex Schloe: Yeah. Well, in the control piece, right? Like you buy a stock, it's a piece of paper, but it's not like you're calling the CEO of that company and having any control in the decision that they make that may or may not increase the value of that stock. And when you're, when you own the real estate, when you are able to do that value add forced appreciation, you have a lot more control and a lot more ability to increase the equity or increase the, the amount of wealth that you can generate from that property.

And so I feel the same way. That's why we love real estate so much is 'cause there's so many different levers to pull that are going to increase your net worth. And, and when we didn't really, we haven't really talked about depreciation or the tax benefits or the amortization that's happening, um, the, the principal pay down by your tenants.

And so there's so many different ways to make money in real estate that sometimes gets overlooked, uh, especially in the world where people are like, "Oh, we'll just put it in the S&P 500, and, you know, maybe you'll get 10% over time." But they're not really looking at, okay, well what about all these other levers that are pulled in real estate?

Uh, and then, you know, one of them of course being control.

Lane Kawaoka: Yeah. I mean, I, I do wanna s- point out one thing. I, like, recently I, I did the pre-IPO in SpaceX. Um, I can't really say what exactly I got in. It's just, it starts at 100, right? Like, but it, I think it proves a point, like, and it kinda goes against my rule. Like, I personally don't really feel like stock investing is adding value, right?

'Cause you, you know... Or, I mean, I guess they kinda are, but I, I think the biggest thing there is, I mean, I'll just kinda define some of these terms, is like the difference between investing through the primary market versus secondary market. So, you know, a lot of what we've been taught is to invest through the secondary market channels, right?

The, when you get things from the big brokerage firms or mutual funds, um, even stocks, right? This is what Wall Street wants you to do because this is how Wall Street gets paid. So, and this is why I like investing either directly in a real estate property or directly with a syndication, right? 'Cause you're essentially cutting out all the middlemen.

And th- when you're doing this, you're accessing the investment through the primary market. So if you're following me, when you go through the retail market, you're going through s- the secondary market, or to hammer this home, that's sloppy seconds, right? This is where all your money is going away, and this is why, like my parents, they diligently put their money in the 401Ks their entire lives, and they didn't really have too, too much to show for it at the end of the day, right?

And this is why where very early on when I had a rental property, even though I wasn't doing value add to it, I was like, "Whoa, I'm making prim- pretty good money on this," because I cut out all the middlemen. And this is why on a syndication, right? Yeah, sure, you pay your 20%, 30% carry to your operator, but that's well worth it.

You know, you should see the carry interest on some of these other investments on the secondary market. So, you know, like, I mean, when I did-- If I'm gonna do anything, I wanna try and get directly primary access because I'm gonna get the wholesale price, if you wanna think about it like that.

Dr. Alex Schloe: Yeah, absolutely. And that's massive when you're talking about, you know, a pre-IPO price of SpaceX under 100 bucks. Today, it's at $186 per share, and so that's a massive return on investment and, and certainly, you know, a unique scenario from that perspective. Let's talk a little bit, Lane, if you don't mind, about alternative investments.

What are, what are some alternative investments that you've seen the wealthy use to, to really, uh, jumpstart their journey or, or things that you've seen that really have led to much more accumulation that's often overlooked for folks?

Lane Kawaoka: Yeah, I mean, I mean, I, I'm a real estate fan just like everybody else here. I love real estate. Um, but because interest rates are probably gonna be high for the next decade or two, right? Everybody should have the Chatham Financial Curve and the CME FedWatch tool bookmarked and checked out at least every quarter, saying that the interest rates are gonna stay very elevated.

Um, and, you know, I think that's a big trade wind to real estate, and we don't have that trade wind anymore, right? So this has kind of forced me to kind of look elsewhere. And then also, again, just like in 2016 when I got access to a lot of real estate rental property accredited investors, now I look at my network, which are a lot of family offices, and how do they invest.

And that's kind of where I'm like, you know, "Hey, what are you guys doing?" And what I've realized, just to crudely put it, there's kind of four big channels or pillars wealthy people will invest in, versus obviously real estate, right? We all know that, and, and that, I think that's allowed me to build a lot of relationships with people on this level, um, got me in the door.

And, but, you know, they'll invest in pri- things like private credit, so like on the debt side of deals, uh, either whether that's real estate or, um, businesses. The next one is private equity, right? This is very high-risk, high-return type of stuff, right? It may be a very, very small minority of your portfolio, but this is what allows them to create the returns to then be offset by that fourth category, which is your low-risk, low-return bucket that kind of creates cash flow.

Um, you know, people are familiar with like life insurance. I think today like 4% or 5% there, T-bills a little bit less than that. Um, also closed-end funds if you want to get into that type of world, right? Like, but these are essentially the four, four big buckets. Um, they don't necessarily go into the... You know, a person or average person portfolio, the asset allocation mix looks very different than somebody who has a lot of money, you know, $10 million plus.

Um, again, I'm not a financial planner. I've been told you can't talk about the asset allocation mix because they have all these laws where people who are not licensed can't talk about this stuff. But then again, I say like, well, you know, all the wealthy people I talk to, even, you know, on even 5 to $10 million net worth, their pie charts and what they're investing in is ex- all different, all over the map.

And so I think what I've kind of realized is people, as they're starting to get off of the, the beaten path of the traditional 60/40, you know, stocks, bonds type of portfolio, maybe some international, like that's the standard cookie cutter, um, investment model they want you to do because they make a lot of money off of that.

But as you're starting to get off of this alternative investment world and into this world of a very weird pie chart, you know, I think you need to get around other accredited investors so that you're just not operating as a saddle on your own, right? I mean, it's, it's hard enough finding deal flow, um, but just kind of understanding like, you know, how much alternatives do I want?

Of the alternatives, how much do I want real estate? How much do I want private equity, right?

Dr. Alex Schloe: Yeah, absolutely. And that's gonna differ for everybody, every stage of life, where, where they're coming from, all those sorts of things is, is really important. I wanna pose a scenario for you, Lane, here as we get closer to wrapping up. But, you know, a lot of folks who are here, obviously physicians, they probably earn, you know, $300,000 per year or so.

Um, and let's say they have $150,000 to invest, and they want to reduce the clinical work that they're doing over the next 10 years. So they're on their financial freedom journey. How would you encourage that physician to begin thinking about a financial freedom plan if they're just getting started, they've gone down the traditional, you know, 401k path up until now?

Lane Kawaoka: Yeah. I mean, I, I would, I would probably put in the metaphor of like, hey, you guys get a patient who comes in who's extremely overweight, metabolically deranged, and just like, what would you guys do? You know, most likely you'd probably give him a statin drug to bring their blood pressure down from 250 down to something more manageable, right?

To me, that's, that's synonymous with taxes, right? That's so triaging the taxes, getting them out of that 30%-plus range first. Some methods for that, real estate, oil and gas, right? But then I think after that, once you've got them off of the, you know, the watch list, I guess, right? Um, I think at that point you need to kind of start building that holistic, um, investment portfolio and, and part of that, yeah, maybe a portion of that would be real estate and, and other alternatives.

But from what I've seen, um, you know, we kind of watch people do this a lot of times. They'll start off with maybe 10% of their net worth into alternatives and kind of titrate up from there slowly as they feel more comfortable. Plus, you know, part of that is like what I've learned personally, you know, from this debacle of, of real estate these last several years is you never want to invest in just one or two years, right?

You want to spread this out four to seven years, right? Like I had losses, lot of losses, but I mean, I've been doing this for kind of a decade, right? Like I had deals that are still alive that have been in there and, and, you know, we're not gonna sell them today, right? That'd be silly. But it allowed me to kind of balance out the losses and kind of stay afloat where, you know, unfortunately some people that, you know, they just happened to get started at the wrong time, you know, i- in 2021.

We, we didn't know, but we now know now, and we play- some people play the armchair quarterback, but that was the peak of the market at that time. But to me, I come at it from more of like a, a modest standpoint where I'm like, "Look, I don't know when the peaks or the troughs of the market is. I'm not God. I don't have a crystal ball."

So the-- what I'm gonna do is just pick the best deal that comes up. I'm gonna look at it. I'm, I- I'm gonna operate just... I'm gonna just cheat and I just look at what, how family offices do this. They get deal flow, so, and, and I'm gonna do the same thing. So I get this deal flow coming in from people I like, I've worked with in the past, and I underwrite the deal.

I take the P&Ls and the rent rolls. I don't look at anything on their pitch deck 'cause that's all marketing schlop. Um, I'm gonna underwrite it with my reversion cap rate, exit cap rate. I'm gonna use my expectations of what the rents will do. I may have to, you know- backwards engineer some of the rent comps, 'cause I, I don't know exactly what that market, some market is, but it's probably gonna be a lot better than just taking what the operator says from face value.

And I'm gonna put it into my own spreadsheet, and I'm gonna run the deal. And I've never found a deal that's been overly conservative. But I just trying to compare apples to apples, and I, you know, take these four or five deals and I'm like, "Okay, I'm, I, I don't know if this is the best deal, plus or minus six months, but right now, this period of time, I like this one, so I'm gonna do this one."

And then three months later, I'm gonna pick another one, and then three months later, I'm gonna do that one. So that's the philosophy. And I tell everybody, like, "I don't know if these are the best deals of all time. Nobody knows." But idea is, like, if you go out there and you pick the best one at that period of time, and you've got this attitude, dollar cost averaging, and you never try to invest more than 5% of your net worth into any one deal, 'cause that's how you get burned, um, I think you'll do over time.

Sure, you'll suffer losses here or there, but, you know, I think this allows you to play the game, right?

Dr. Alex Schloe: Yeah, it's, it's, it's not a get rich quick, uh, scheme. It's, it's, you know, get rich over time. Uh, certainly doing it well and doing it right can, um, contract that timeframe, you know, from like 40 years of a traditional, like, person who's putting money in a 401, not a great way to do it. You can certainly contract that down and, and get more towards financial freedom a lot quicker with these alternative investments and doing it well.

It sounds like, you know, kind of your strategy would be educate yourself, um, figure out how to decrease your tax liability,

Lane Kawaoka: 'Cause, 'cause that's the, that's kind of the risk-free return right there, right? Like, investments have risks, don't get me wrong, but if you can mitigate the taxes right up in front, you know, at least we had some benefit there right off the

Dr. Alex Schloe: Yeah, absolutely. And oftentimes that gets overlooked too, is the, the, the benefit, the, uh, the tax benefits of real estate can get overlooked when you're kind of looking at what's the overall return profile look like. I tell folks all the time, "Don't invest in a deal just for the tax benefits." I think there's a lot of people out there who bought short-term rentals just for the short-term rental loophole, did not buy a fundamentally sound property, and they're losing a bunch of money.

But hey, they have these tax benefits. That's, that's not what we're saying

Lane Kawaoka: I, can, can I say something on that? Like, I'm not a huge fan of the short-term rental loophole thing. I mean, it works, don't get me wrong, but, you know, you gotta remember at some point you're gonna sell that property and you gotta pay back the piper on that. And, and if, like, if anything sunk in, it's like the legal liability of this, and you don't want a freaking job, right?

And, and, and we didn't get too much into, like, investment thesises, but, you know, I like multifamily real estate because of the whole, like, the lower middle class is underserved. They're not making more of this stuff, and unfortunately, the rich are getting richer and the middle class is becoming the lower middle class.

Well, they become, they become apartment renters. But I think that's a long-term thesis, and the lower middle class is getting... The population is growing. But I think that's where, you know, you, you, you need to invest in things that have a long runway, a 10-year runway. And short-term rentals, they do really well when, um, I think times are good.

But when times are bad, it just gets totally blown up or, or pandemics, right? People can't travel. So that's what makes me uncomfortable about that.

Dr. Alex Schloe: Yeah, agreed. There's definitely, you know, risks certainly with that. Um, I think, you know, y- yeah, look at the lower middle class, that income gap, uh, is, is increasing between them and the wealthy. Uh, there's not enough affordable housing, uh, uh, projects. There's not enough affordable housing units. That's gonna-- That gap's gonna continue to grow.

Um, the senior population, we're obviously big on assisted living. The, uh, baby boomer generation, you know, there's so-- there's 10,000 people turning 65 every day. There's 4,000 turning 85. Like senior housing is a massive opportunity when you're looking at demographics with a long runway, so there's a lot of good opportunities there as well.

Um, Lane, I want to kind of wrap things up here with, uh, talking about kind of financial freedom and the impact that that's had on your life, um, because that's, that's what folks are striving for mostly listening to this podcast. Or, or I would, I would say financial freedom, but really more so maybe time freedom is, is what people are looking for.

Of how, how can I buy back some time? How can I maybe work some less shifts in the clinic or not have to moonlight anymore, or get some more time, uh, to go to my kids' sporting events? So how has that, how has, uh, real estate, how has entrepreneurship impacted your life from a financial freedom perspective and allowed you to make decisions or spend your time the way you want to?

Lane Kawaoka: Yeah. Well, it creates an, it trades one t- problem for another. I mean, money's not everything, but it sure makes the life a lot easier. But it also creates problems and, you know, just for the same thing, like, you know, work with a lot of like entrepreneurs or, you know, people here, like people hit that finish line, they sell their business for 5 to 10 million, and yet they, but they give up the keys to what gave them their ego.

And I say that in a bad way, but in a good way, it's like what, what gives them fulfillment, right? So when you move from this mode of capital growth, capital accumulation to allocating, you, you know, some people get really excited about it. I've kind of made the transition smoothly, but a lot of people, they get divorced, they get a little bit lost because what gave them that notoriety, right?

You know, I'm not, and that's, I'm not calling people out on this, I'm just kind of pointing it out. Like some, if you're a doctor, you know, maybe you like that attention or being the person who on their worst day you gave them some relief or talked to them, their, you know, that worst dialogue that they're going to have.

Um, you know, maybe you like it because it's truly that human to human interaction. Maybe you like it because it f- makes you feel really good or maybe you don't care about that, you just like the paycheck, right? There's something about this that you keep doing it. And, you know, people who get to a high level, they're, they're kind of kooky people, right?

Like I, I interact with a lot of CEOs, um, uh, in, in my peer groups, and we always admit we're kind of kooky people. There's something that makes us addicted to all of this and, you know, when there's some positive benefit, and I, I would say self-reflect on what that is, but you're gonna lose that when you finally pull the pin.

So some people, they're kind of, they're, they're very well aware of this and they're like, "Well, let me titrate up and kind of work part-time so I can keep that, keep getting my jollies going, but not totally burn out and still play with my kids at that time." Um, but you know, some people are not able to do that kind of stuff.

Like I know engineers aren't able to. You gotta do the 40-hour workweek or none. Um, you know, entrepreneurs are kind of like that too, right? Like we sell our business and we're, we're done. Um, but just something to kind of think about on the other side. But, you know, I, I, I would still take that problem over, you know, having to go to an office or having to work for somebody all the time.

Dr. Alex Schloe: Yeah, 100%. I think a lot gets talked about of like that journey to financial freedom or financial independence or whatever you wanna call it, and then not as much is talked about, well, what happens when you get there? And,

Lane Kawaoka: Yeah, and, and that's where, like, I think you need a, you need a peer group, right? Like, I mean, that's why we do our, like, in-person retreats and we have our community because it is a lot of the stuff that's not talked about, right? Like every, every young guy on TikTok is talking about getting $5,000 of passive income, but first that's not enough.

You need more like 25,000. But once you get there, it's kind of like hopefully you get there before you're like 55, 60 because I think some, some folks before s- if you're not, don't get there by 60, then you c- y- you kind of mold your, um, your identity and your purpose to your job, whether it's true or not.

You know, kind of like if you sprain your ankle and it goes a weird way, y- and it kind of just fuses that weird way. Like it's kind of that, that same effect.

Dr. Alex Schloe: Yeah, I agree. And I think, you know, uh, I think a lot of people love the idea of sipping mai tais on the beach and passive income coming in and don't think about, like, uh, really I think what we're after is the opportunity or the ability to go sip mai tais on the beach whenever you want. Like, I know for myself personally, like, I, I work part-time in medicine.

I'm financially free, but I work part-time medicine 'cause I still love seeing patients. Um, and I've been able to kind of titrate that, you know, accordingly as income's gone up or as, you know, quote unquote passive income and business income's gone up, um, because I still love to do that. And, and you're right, I think that folks are, are looking for what does that look like going forward and how can I do that smoothly?

'Cause you're gonna hit a point where it's that identity, especially as a physician, it's like the identity of the white coat and the stethoscope and, you know, maybe some degree of respect and, uh, you know, the opportunity to take care of patients on their worst days. It's amazing. It's, it's, it's honorable.

It's, it's such a huge privilege to be able to do that. Um, but I think having that freedom to practice medicine how you want to do it is what folks are really chasing after. Um, and it's, it's certainly possible to achieve that and achieve that in, uh, you know, in a, a pretty significant, uh, or short timeframe as long as you, uh, do it right and do it well and have that mentorship and have that community to help back you and, um, educate yourself and figure out what your goals are and what you want that to look like.

And so I hope that some people got that out of this podcast, like, hey, you just, you just need to think differently than what we've been taught about, um, you know, in, in the traditional path to retirement, if you will, um, can be altered, and those four pillars that you mentioned can be a really great way to do that.

Um, Lane, as we wrap things up, what's one piece of advice you'd give your younger self before purchasing your first property? What would that be?

Lane Kawaoka: Um, I mean, I think that was all the right way to do it at the time. Um, don't buy 11, maybe just buy a few and then go into that more passive stuff. But, um, but yeah, you know, like I said, the, I mean, it's all part of the journey. It's all, you know what I mean? It's all in "The Wealth Elevator," these different floors.

So I would say, you know, pick up the book on Amazon. Um, if you guys buy it, leave a nice review, send us a screenshot, and we'll hook you up. Screen- screenshot team@thewealthelevator.com and we'll hook you up with a free PDF. So if you're smart, you'll put into Chat- ChatGPT, ask it questions. Um, or if you're like me, you can't read too well, um, we'll send you the Audible, um, or the MP3 version.

Dr. Alex Schloe: Awesome. Yeah, we'll be sure to include the links, uh, for The Wealth Elevator book in the show notes as well. If folks wanna reach out to you, they wanna work with you, they wanna know more, is there a good place for them to reach you?

Lane Kawaoka: Um, yeah. Uh, accreditedinvestorslane@thewealthelevator.com. Yeah

Dr. Alex Schloe: Awesome. That sounds great. Well, hey, thanks Lane for coming on the podcast. I really appreciate it. Uh, there was a lot of valuable information that was dropped here, a lot of valuable resources, uh, in, in the book as well, so I'd encourage folks to go get "The Wealth Elevator" book and reach out to Lane, uh, if you wanna know more or potentially invest with him.

So with that, it's been, it's been Lane and Alex with another episode of the "Physicians and Properties" podcast signing off.

Hey, real quick, if you're still listening to this, I'm assuming you got value from it, so I need your help specifically. My two-year vision with this podcast is to help one hundred thousand physicians learn how investing in real estate can give you the freedom to practice medicine and live life how you want.

There are two main ways that a podcast grows. One is through ratings and reviews, and the other is word of mouth. If you can please leave me a five-star rating and review on Apple Podcasts and Spotify, as well as send this to one to two friends that you think would get value from it, we can reach the physicians that we wanna reach.

Thanks in advance, and talk to you on the next episode. Please note that the information shared on this podcast is for informational purposes only. It should not be considered financial or legal advice. The views expressed on this podcast are those of the host and the guests and do not necessarily reflect the views of the Department of Defense or the United States Air Force