How I make $100,000/mo PASSIVE…I am the BANK

Summary

• I secured a deal 60 days ago that pays me $100,000 a month in passive income by acting as the bank for a foreclosure property.
• When evaluating investment opportunities, always consider yield, capital preservation, tax advantages, and equity growth.
• A CEO got an unethical investment proposal: invest $450,000 in a startup for a 10% yearly return, to be paid at the end of 12 months.
• Analyzing the startup deal: capital preservation is low, yield isn't great, tax treatment is poor, and there's no equity growth, making it a bad deal.
• In contrast, I invested $2.5 million in a foreclosed building with a clear path to capital preservation and strong yield, but no equity growth and poor tax treatment.
• The building had four offers, one with earnest money, ensuring a buyout between $5.1M and $5.6M, safeguarding my investment.
• I demanded personal guarantees from the buyers to further secure my capital.
• Structured the deal for a monthly yield of 4%, translating to $100,000 a month, with significant tax implications.
• Negotiated terms included a minimum carry, guaranteeing at least a $200,000 return even for short-term loans.
• Aim for high yields to compensate for high tax rates; for me, a net return of 27% post-tax is acceptable.
• Reject risky deals, especially if it's likely that the deal is being offered because the other party assumes you lack knowledge or experience.

Video

How To Take Action

I would suggest the first step is to check any investment opportunity with these four things: how much money will it give you every month (yield), if your money is safe (capital preservation), if the taxes are low (tax advantage), and if the thing you're putting money into will be worth more later (equity growth).

For better deals, look for ones where someone is in a hurry and needs money fast, like when a building is being sold for much less than it's worth. In my deal, I made sure there was a buyer with serious money already offered and even got a promise from the person I was lending to. This made sure my money was safe.

Make sure you get paid enough each month to deal with high taxes. My deal had a 4% yield each month, which means I got a good amount of money even after taxes. If taxes are high, aim for a high return, like 27% after taxes for me.

Avoid risky deals, especially if you think someone sent it because they think you don't know much. If a deal seems too risky, doesn't offer good returns, taxes are high, and there's no extra value added later, it's probably not a good choice.

Remember, the more deals you do, the more chances you'll get for even better ones. People will know you're someone they can turn to for fast, big money deals, and that's how you find the really good opportunities.

Quotes by Alex Hormozi

"One of the deals I did 60 days ago pays me a hundred thousand dollars a month in passive income just by being the bank"

– Alex Hormozi

"Just being the bank"

– Alex Hormozi

"I want to walk you through it because it looks okay but as you as I show you the framework that I use, you'll see more and more why it wasn't good"

– Alex Hormozi

"So if I do this investment, is this going to cost me a lot tax wise?"

– Alex Hormozi

"You really need to make sure the downside is good"

– Alex Hormozi

Full Transcript

one of the deals i did 60 days ago pays me a hundred thousand dollars a month in passive income just by being the bank and so what i will show you in this video is how i find these deals how i structure these deals and uh one thing to make sure that you don't do because actually one of the ceos of the companies in our portfolio actually reach out to me because he got an email from his wealth advisor i'm gonna use quotes here because it was almost borderline unethical what the deal looked like but i want to walk you through it because it looks okay but as you as i show you the framework that i use which has four four lenses that i look at investments through you'll see more and more why it wasn't good and then at the end i'll show you what what was good and the deal that actually made this happen all right so the deal that his advisor sent him was hey we've got a business that wants 450 000 right 450k to invest in their startup okay so we're sending this money to a startup just in case you're curious it's a little bit risky all right but we'll get into that in a second so 450 000 to a startup and he said they're willing to pay you 10 per year and they're going to pay this at the end of 12 months all right which means at the end of 12 months he's going to get 450 000 plus 45k all right that is what the uh return is going to be all right and so they were like hey can you break this down they're like it doesn't sound like a good deal but we kind of want you to walk us through it all right and so here's how you should think about these investments all right number one is yield all right which is how much money cash flow is coming to me every single month all right that is one way that you look at the investment the next way is capital preservation which is how likely am i am i going to be preserving my capital that my money is going to come back to me all right all of these are on a scale so it's not like a yes no it's more like to what extent right the next one is tax advantage all right so if i if i do this investment is this going to cost me a lot tax wise right something that's treated as capital gains versus something that's income is going to have a better tax treatment and then finally you've got equity growth all right so does the thing that i'm buying or putting my money in become more valuable all right so when you're looking at any kind of investment or anywhere to put your money look through this lens of one two three four and think okay to what extent is my capital being preserved to what extent am i getting the yield what are my tax advantages am i growing all right and so i walk them through this exact same process and so let's look at this deal that you got all right so capital preservation box one uh well they're this is going to a startup and they're saying they're not going to pay you anything at all and then at the very end they're going to give you uh 495 000 at the end right 450 plus 45 000. uh how likely do i think that's happening with a startup i would put that as an no probably not likely yield wise i'm going to get 10 okay that's cash flow kind of good but for for a debt deal uh probably not great all right because we're going to compare this to is that like if you look at indexes like the s p i i don't even know what it was last year but i'm guessing it was really good it was probably 20 something like that last year and so literally having 100 capital preservation and having a 20 increase in equities which is here right you'd have a better return there but this one has no increase in equities because we're not participating on the upside we're just participating on the downside which by the way when you ever do money lending all you get is guaranteed cash and you participate on the downside so you really need to make sure the downside is good all right and then the fourth box here is tax advantage these guys make good money and so i was like ten percent i was like you're going to get taxed at 45 right of that 10 which really means your effective increase is going to be 5.5 all right that's how much you're actually going to make on this deal after taxes that's like barely enough to cover inflation and so they're saying risk 450 000 to barely cover inflation not participate in the upside at all be tax disadvantaged and have and do this with a startup so that you're very unlikely to have your capital preserved right so like this is borderline unethical how bad this deal is and so what i want to do now if you guys are good with it is i'll show you the flip side which is the deal that i just did um about 60 days ago all right so here's how this deal worked i wrote a note for 2.5 million dollars all right uh to secure a building out of foreclosure all right so somebody emailed me and said hey um i found this building it's two uh it's 2.5 million dollars that's how much i can buy it for and i said okay well tell me more about this deal so we're going through the same framework all right so we've got capital preservation we've got yield we've got tax and we've got equity all right so in this in this situation um he then said i have four offers on the building already between 5.1 and 5.6 million all right and i was like okay so now i know that this is reasonable and he sent me the offers over so i knew that they were good on top of that they had taken the top guy and this guy had put 300 000 in earnest money down meaning he had committed to doing the deal as soon as he as soon as it comes available all right so we have a real buyer lined up at 5.6 million sounds good so far and this building is worth 2.5 so i'm thinking capital reservation if if for some reason this deal goes through i've got three other people who've said they've been willing to give more than twice as much money as i'm buying this for all right pretty good now mind you i'm not buying the building i'm the bank here i'm the one lending the money to the guy all right now he's gonna make good money on this he's gonna get two and a half million that's not his money and then he's gonna sell it for 5.1 to 5.6 in this case 5.6 and he's going to end up making 2.1 million on this deal minus whatever my fee is for supplying the money now on top of that i asked to have a personal guarantee from him and the partner all right so just in case these three offers fall through on top of the fourth offer with the earnest money i got personal guarantees by both the buyers of the building all right so this is how i wanted to make sure that my capital is preserved so i'm like cool check now do i participate in any of the equity of this of this business the answer is none i don't have any equity participation from a tax perspective if they're just going to pay me a yield which is exactly how i structured it what am i going to have bad tax treatment you bet your ass i am it's going to be treated as regular income so it's got to be really worth it for me on the yield side and so the way that i wrote the note is i get 48 to 96 per year you're like how can you achieve you know uh returns like that if you look for them right that's the simple answer right and the more deals you do the more people know that you have money that you can do deals and then the more they reach out to you right and if there's not a lot of people who can just snap a hat and just throw out two and a half million dollars and so you get on a higher and higher list and you get access to different deals all right that's the short answer so what they're doing here is that means that i'm getting four percent per month all right now if you do the math on two and a half million four percent per month is a hundred thousand dollars per month now you might be wondering why would anyone pay that this is a bridge loan this is a short-term loan it's called hard money lending private lending private placement different things like that but they need money fast and so they can't go through a normal process because they got a steal on this building right how many times you get a building for two and a half that's worth five immediately right not many and so they need someone who can immediately provide liquidity and in exchange they pay a higher rate now they're not planning on holding the money for the whole year but if i do multiple deals like this then i can effectively get a rate that's comparable to this over the time period of the year all right so four percent per month that's a hundred thousand dollars a month their planned holding time was going to be 60 days i gave them 90 days at this which means in the minimum carry meaning if they did it in two in 24 hours i still get two months of minimum carry meaning if i'm gonna do this deal i have to make at least two hundred thousand dollars on just sending the wire and then getting the money back even if it takes a day like it doesn't matter all right so i set up a minimum carry for that of of times two i'm giving them up to 90 days where they can continue to pay and if it's like 65 days it still rolls into three months right which means then i'm at like three times this right which is 300 000 and so sometimes when people were like why aren't you selling stuff on this channel it's because um i don't really care and so hopefully this makes sense to you if you're thinking if someone emails you god i hope they don't email you but if someone emails you a deal that looks like this one run the other way and you know question their morals and ethics because either they absolutely absolutely have no idea what they're doing or they're expecting that you have no idea what you're doing and so that is why i'm making this video so that you don't do a deal like this you think through it through within uh these these four levels and there is a point because i know i'm going to get this question well at what percentage is it worth getting the yield which is this fourth box here right well i'm going to get taxed on this right at my after tax rate on this is going to be like 27 return so for me 27 return still makes sense after taxes and everything um so that that deal makes sense but it has to be really really good for me because i have a ton of income so i'm gonna get taxed at the highest bracket if it's any kind of regular income type deal and so if you're gonna do a deal like this you have to make sure that it makes sense all right so hopefully that makes sense to you guys hope you enjoyed that uh like subscribe all that stuff and i'll see you guys next video