White House Blueprint For A Renters Bill Of Rights

I tend to favor rules that promote personal freedom coupled with personal responsibility. I believe that provides the best environment for people to thrive. But guardrails are also necessary, especially for the neediest in society. I also think affordable housing is an issue, especially for the most impoverished.

Despite how much I agree - and am already implementing - with the blueprint, I also think the root cause of housing issues isn't directly related to housing (I'll share what is at the end). So despite this new blueprint's well-meaning, I don't think 

 focused solely on housing will have the intended consequences.

Putting aside my general philosophy, evaluating its impact on our management operations is still good. Let's dive in.

The goal is to provide "access to safe, quality, accessible, and affordable housing" with "clear and fair leases."

I love both of these goals. I think they're both vital. That's why I thoroughly clean, and repair units before someone moves in. Now, do I rehab them to be brand new inside? No, but they're clean, in good condition, and available for anyone who meets my criteria.

I also think having clear and fair leases is a great goal. I use the same standard lease as all other professional landlords in Oregon, but they're not as straightforward as I would like. To overcome this, I made a video that goes through the lease and explains it. That way, when my new residents sign it, they know what they're signing. This is especially important in the age of DocuSign, which scrolls straight to the signature parts.

I think leases are complicated because of all the nuanced tenant-landlord laws. I haven't gone deep enough into this new blueprint, but it would be great if it simplified the contractual relationship. I'd probably still make a video because I want everyone to know what they're signing.


Around half of renters spend more than 30% of their income on rent and utilities

. All of my residents are in the second half. I've run "experiments" to see what people can afford. I did it mainly because I'd have people 

 to rent one of my places, and to be accommodating, I'd let them. Here's what I learned:

If someone spends 50% of their income on rent, they'll fall behind within the first six months. They can't also pay for cars, food, clothes, phones, entertainment, etc. It requires too strict budgeting. Every tenant left with a significant outstanding bill. Did I pursue or evict them? No. But I'd explain that my place was probably not the right fit for their budget. "We tried, but it's not working."

What about 40%? This was an interesting one because it's right on the edge. As long as life was perfect, they paid on time. They could even handle one small emergency. But when the car broke, and the cat had to go to the vet (true story), they were late.

They'd catch up mid-month. But things would be super tight for the next few months.

It's just not enough of a buffer in the budget. And it takes a tremendous amount of discipline to say, "I like this place, so I'm going to sacrifice some living expenses on my already smaller budget to afford it." It's more discipline than I have, at least.

One resident in this situation always kept the unit's temperature in the upper 70s with a cable package and smartphone (in 2010, before 

 had one). I lived on the other side of the duplex, and his utilities were double mine (and I didn't have a TV). I'll admit that I struggled to sympathize when he said he would be late on his rent. I know that's not every tenant, but my point is that it takes an almost unachievable amount of discipline to live below your means when your income isn't super high.

30% of income on housing seems to be about right in my experience. It's enough to spend and save.

I evicted one person. I was new and didn't know any better. I haven't evicted anyone since then.

My secret: I don't read landlord books. Instead, I read 

. The best approach is to realize each resident is a fellow human made in God's image. They're just as valuable (and broken) as you are. Once you care for someone, you want what's best for them. That includes treating them how you want to be treated by setting clear & fair boundaries.

By the way, parenting books also work for friends and co-workers because they teach you how to interact with everyone in a caring manner.

So, whenever I have an issue, I honestly talk with them. I explain why their behavior is a problem and reiterate my expectations. When I terminate a contract, it's for 30 days (same as the blueprint's proposal) because 

 would want enough time to find a new place. I'm regularly shocked as I collect their keys when they thank me for being patient and fair.

I typically lose ~$500 in the process, but it's the right thing to do.

Oh, and I rarely ever charge a late fee. I mean, they're already struggling financially. Why pile on?


In 2019 Oregon introduced rent caps. I sat in multiple meetings where fellow landlords and property managers fretted over it.

Me? I'm neutral, but I've always been slow to increase existing tenants' rent. The cost of a turnover is so high I don't want to rock the boat that much. Plus, I underwrote the purchase using a lower rent anyways, so I'm still making my expected return (

Plus, the last few years proved, statically, that rent caps don't work. The average rent 

, above the national average. Wait, how does that work? Let me explain:

When rent caps started, construction projects slowed down, reducing inventory. So, when I have a rental posted, I get at least 10 applicants within the first 4 hours. It's kind of crazy. When supply is that much greater than demand, I can almost set my price to anything I want. Apparently, 46% higher, on average (probably more, since that statistic includes people who didn't move).

And anyone who doesn't move gets the maximum rent increase. What are they going to do? Move? If they can find a vacancy (they can't), they'll pay waaay more than the rent increase.

I'm not saying it's right (I didn't increase any of mine by 46%), but that's what's happening. Rent caps made the housing situation worst, not better. It's a perfect example of unintended consequences. Lawmakers assumed a static housing market, but it's dynamic.

I suppose lawmakers could create a law that caps rent increases 

 tenants. That sounds like an enforcement nightmare, but more importantly, that dramatically reduces everyone's incentive to repair and improve a rental.

, Matthew Desmond advocates significantly increasing HUD's budget. That way, more people can get financial help (a rent subsidy), and investors are still incentivized to build and improve their units. I, obviously, like the way that sounds, but there's an almost certainty that rents will skyrocket the same way college tuition has.

In the end, the root of the problem isn't housing affordability; it's a symptom. When you try to stop the symptom, it often creates side effects.

The problem is a lack of caring for each other:

Jesus answered, "The most important is, 'Hear, O Israel: The Lord our God, the Lord is one. And you shall love the Lord your God with all your heart and with all your soul and with all your mind and with all your strength.' The second is this: 'You shall love your neighbor as yourself.' There is no other commandment greater than these." 

Not only is our society turning away from God (and a shared definition of right and wrong), but we're turning away from each other. We're trying to maximize our own lives at the expense of others. Sadly, it results in less for everyone. Until our hearts are changed, blueprints like these are an ineffective bandaid. Instead, lawmakers should focus on rules that foster community.

More immediately, in my initial reading of the blueprint, I'm OK with it. The goals are great, and I'm already doing much of what they want. Bring it on. Besides, we'll see lots of properties become available as less caring operators fail to meet the new expectations and want out.

Those of us who are willing to care for others while making a reasonable return will do great and be able to bless many people.

An Oregon landlord's opinion on the White House Blueprint For A Renters Bill Of Rights – it's probably not what you expect.

Why I'm Actually Fine with the Blueprint For a Renters Bill of Rights

It can be overwhelming when you start evaluating real estate deals. That's especially true if you're stepping in as a Limited Partner without prior personal investing experience. You're relying heavily on the Operator and their due diligence - trust is vital! To build that trust, it helps to know 6 key performance indicators (KPIs) when investing in multifamily real estate. That gives you the knowledge and confidence to spot a good deal that aligns with your investment goals.

What follows are those 6 KPIs, plus 4 bonus qualitative KPIs to consider. You don't need to master calculating each of these. Instead, focus on understanding what they represent so you'll recognize them when you see them in a 

Your ROI is the fundamental metric that the other KPIs build off. It's a percentage of how much you gain or lose vs. how much you invest. Since it's a percentage, it allows you to compare investments quickly. And in general, a higher ROI is better. I tend to think of the equation this way:

For completeness' sake, here's the official equation:

Sure, earning $20K is twice as much, but you had to invest 4 times as much to get it. In ROI terms, that's a 10% vs. 5% return.

Maximizing your ROI, within reason, is the goal. However, there are some shortcomings, the biggest of which is that it doesn't take into account time. Let's say you have two investments of $100K that earn $10K each, but one takes 1 year, and the other takes 5 years. Both have the same ROI ($10K / 100K = 10%), but the 1-year investment is clearly preferred.

So, even though this is the most fundamental metric, unless you're only looking at one year, it's usually skipped in favor of the following metric.

The AAR is perhaps the most relatable metric since stocks and index/mutual funds regularly report it. Think of it as the average ROI over a period of time.

The AAR is what you'll actually earn on average each year of the investment. Another peak of this metric is that it helps make comparisons to other investments beyond real estate.

One shortcoming of the AAR is that it doesn't consider the 

 of time, where a dollar earned today is more valuable than a dollar earned in 5 years. Thankfully, the IRR does.

The IRR is the most useful metric when evaluating multifamily real estate, but it's also the hardest to explain and calculate (without Excel).

In layman's terms, the IRR is similar to the AAR, but it accounts for the value of time. A higher IRR percentage is better, but it's usually a little lower than the AAR because it's factoring in the passage of time, which reduces the investment's value.

In technical terms, the IRR is the annual effective compounded return rate that makes the Net Present Value (NPV) equal to zero.

The NPV finds today's value of a future income stream using a "proper discount rate." Projects with a positive NPV are worth doing, while those with a negative NPV are not. A bigger discount rate makes the NPV smaller because it's basically saying: a higher rate from an alternative investment is "better." Hence, the future income stream must also be "better" to generate an equivalent NPV. Here's the equation:

) is in the denominator, so as it gets bigger, the NPV gets smaller. Furthermore, the denominator gets exponentially larger in each new time period 

, meaning income further in the future is worth less; that's the value of time.

All this begs the question: what is the "proper discount rate?" Or, what's the proper alternative investment to compare? You might think it's inflation, a "safe" alternative like T-Bills, or a popular index fund.

The IRR side steps this question. Instead of choosing an alternative, it asks: what would that discount rate have to be to make the NPV zero? If we solve for a zero NPV on all investments, we can directly compare each investment via the discount rate. The investment with a higher discount rate must be "better" because it means it's a "better alternative investment."

Calculating this by hand is a beast, but thanks to Excel, it's easy to do with the function XIRR(cash flows, dates, guess). Just make sure to include the initial investment in the cash flows.

Hopefully, now you can see why it's useful (but hard to understand).

The ROI is the total percentage return. It doesn't account for time, so it's best for 1-year comparisons.

The AAR is the average annual percentage return. This is what you'll actually receive (in percentage terms) over time.

The IRR allows you to compare investments while considering the value of time.

So far, we've been looking at the overall returns, but there are two sources of return in real estate:

income from cash flow (think of it as dividends), and

income from a refinance or sale (think of it as the value of the asset itself)

The COC is the income from cash flows only as a percentage of your invested amount. This is the average return you can expect during the holding period. It usually starts low and grows over time as improvements are completed (and rents increase).

Only looking at the income from cash flows helps you understand the mix of the overall returns and how it aligns with your investment goals. I suppose there could be a "Return of Net Proceeds," which you'd add to COC to get the total return, but that typically isn't looked at.


The EM is simple to calculate and understand. Instead of a percentage that's primarily useful for comparing deals, EM answers the question, "If I invest a dollar, how many dollars will I get back from the investment?"

Unlike the other metrics, this feels more real and tangible. If you've ever heard a venture capitalist talk about earning 5x or 10x(!) from their investments, they're talking about the equity multiple.

I like to express the EM in dollars because it's even easier to understand. Suppose the investment has a 1.82 EM. I won't say, "It's a 1.82 EM." Instead, I'll say, "For every $100K invested, you'll earn $82K."

If you think that looks suspiciously similar to the ROI, you're right! It's simply a different way of expressing the same metric.


The Cap Rate is a ratio between the annual net operating income (NOI) and the price of the property.

It helps determine the relative value of a property's income after operating expenses. It excludes financing, but that's still helpful since there are many ways to finance a property. Think of it as the inverse of the price-to-earnings (P/E) ratio of a company's stock.

This next part can be a little counter-intuitive, but ideally, you purchase the property at a 

 Cap Rate (though my underwriting assumes that the market Cap Rates will expand (increase) in the future). That's because a 

 for the property's income. Conversely, when selling, you want the new buyer to pay more for the property's income (a larger denominator in the ratio), so you want a 

I remember the first time I heard someone talk about the Cap Rate. At the time, I compared investments using the 

 (the monthly rent should be at least 1% of the purchase price. So a $100K house ideally rents for at least $1,000 a month). The 1% Rule is such a helpful rule of thumb for small properties that I didn't understand why anyone would use a more complicated metric like the Cap Rate when quickly assessing properties.

However, over time, I've come to appreciate it. I'm slightly annoyed that the percentage is inversely related to the value of a 

. So, in my head, I think of it more as the value of the 

The Cap Rate is only useful for comparing properties (there's no direct relationship to IRR), but I like that it factors for operating expenses, so now I regularly use it for larger properties. That, and everyone else in the industry uses it, so it's practical when negotiating a purchase.

It's also helpful to predict the value of improvements. If the market is trading at a 6% Cap. Then you know that an increase of $1,200 to the NOI (from, say, a $100/month rent increase) just increased the value of the property by $20,000. It's only paper wealth until you refinance or sell, but it helps with planning.

If Cap Rates are compressed in a market. Let's say, to 4%. That same rent increase bumps the property's value up by $30,000! If Cap Rates start expanding, it's time to seriously consider selling (unless you still have value to add to the property to force appreciation via an improved NOI).

Overall, it's pretty helpful in driving decisions. Investors who can accurately track and predict the market's Cap Rate have a considerable advantage.


Some KPIs are harder to measure but important to consider.

Is it a "good" market? Can you feel the squishiness? While I don't have a magic formula, there are some metrics I look at:

Median household income vs. Median House values

Distance from me & my personal preference for regularly visiting

I had an MBA strategy professor who said most executives make decisions by taking in an abundance of metrics (like the ones in this list). Consider them. Then, multiply them by ZERO and go with their gut. Ha! That's why I think having on-the-ground experience from someone on the operating team is essential - it helps with the squishiness of it all.

Like everyone else, I also pay attention to all the "Top 10 Hottest Real Estate Markets" listicles. Right now, Dallas-Fort Worth and Atlanta are usually near the top of the list. Though, there are still deals in non-newsworthy markets like Oregon.


In multifamily investing, we categorize properties by classes: A through D.

 properties are in excellent condition and quality. They're usually more stable (read: less risky) because people like to live in newer places, but they also typically have lower returns. Yes, rents are at the top of the market, but you pay a premium (a low Cap Rate) for the property.

 properties may be a bit older with a couple of maintenance issues. Rents are typically right around the average.

properties are older with a lot of deferred maintenance and likely a few larger-ticket issues. Rents are typically below-average, and there are generally more than a few tenant issues.

properties typically require a complete rehab and significant repositioning. There are probably drug or crime issues at the property. These need a considerable investment upfront; even then, there's a risk that it doesn't work because of the neighborhood. I've purchased two D-class properties. One was a huge success because I made the big rehab investment upfront. The other was middling because I tried to make changes slowly.

The sweet spot, in my opinion, is to buy a C-class property and turn it into a B-class property. You do a semi-light rehab: new floors, paint, appliances, and countertops to bring the rents slightly above average. You also paint the outside and take a hard look at the roof. Finally, you bring in a professional property manager to raise the expectations for tenant behavior.

There are four primary types of loans. The debt utilized plays a massive role in the overall returns of the property. The impact is embedded in the above KPIs, but it's good to understand the differences.

: This is similar to a mortgage on a home. Usually, the term is shorter (20-25 years), the rate might only be fixed for the first few years (~5 years), and there's a balloon payment in the middle of the term (~10 years). The loan-to-value (LTV) is also lower (70-75%) than a home.

: These are like Commercial Real Estate Loans, but better. These government-backed loans are non-recourse, offer 30-year fixed financing, and can be up to 80% LTV, making them incredibly attractive. Loan sizes start at $3 million, so these are for larger properties. Access to this loan is one reason I'm looking for properties in the $4-8 million range (80% of $4M = $3.2M).

: As the name implies, these short-term loans (12-24 months) help investors quickly buy a property, do a significant rehab, stabilize the operations, and refinance with a longer-term loan. Interest rates are often 3-4 times higher than conventional financing, but because you can close quickly, it lets you buy at a slight discount. So, you might buy a D-class property and fix it all the way to A-class. It's riskier, but the returns can be substantial.

4) Small Business Administration (SBA) Loans

: Backed by the government, these feature low interest rates and long terms. Unfortunately, they're not available for apartment buildings, but they are available for commercial, owner-occupied properties such as hotels, office buildings, and retail buildings. So an owner-operated self-storage facility qualifies. Given my 

 - and this excellent financing option - I have one eye on self and RV storage.

These key performance indicators give limited partners the knowledge and confidence to spot a good deal that aligns with their investment goals.

6 Helpful KPIs To Always Consider When Investing In Real Estate

When I started my MBA accounting class, it seemed like an easy A. I mean, it's only arithmetic! But, I quickly became overwhelmed by all the terms: debits, credits, accounts payable/receivable, accrued expense, gross profit, journal entries, and more. It turns out that accounting is like learning a foreign language. It feels familiar - and therefore seems like it should be easy to understand - but it's just different enough that it requires focus and gets confusing fast.

All that to say: self-directed IRAs are genuinely confusing. They're absolutely worth learning about, but you're not alone if you still don't get it. My goal is to give you enough details that a) you can talk about them intelligently and b) you'll feel confident about setting one up.

TL;DR Summary of Self-Directed Individual Retirement Accounts (SDIRA)

An SDIRA is a retirement account that lets you invest in alternative investments like real estate and businesses. 

 anything, but the restrictions are important to know.

If you have a 401(k) from a previous employer, you can transfer it into an SDIRA.

Like all retirement accounts, the gains are either tax-deferred or tax-free. Woohoo!

There is a UBIT tax if you invest in syndications, but it can be offset by depreciation if there's a mortgage on the property. Talk to your tax or financial advisor about this.

You, or your family, cannot benefit from the investment. i.e., You can't rent to your family or manage it yourself. If you're unsure, talk to your tax or financial advisor (you should probably do it no matter what).

What Is a Self-Directed Individual Retirement Account (SDIRA)?

The difference between an IRA and 401(k) offered by an employer versus a Self-directed IRA is that - as the name implies - you control what the IRA invests in. You're no longer limited to stocks, bonds, and mutual funds. You're almost unlimited in what you can invest in as long as it's allowed by the IRS and you follow specific rules on handling the money. And the gains are still tax-deferred, like a traditional retirement account.

The IRS requires that a qualified custodian holds the IRA's assets on your behalf. You decide where it invests, and the custodian manages the transactions, records, filing IRS reports, and administrative duties. It's not free, but no custodian is.

 invest in might be shorter. That's the massive benefit of SDIRAs. Yes, it takes more education because you're now responsible, but the rewards are worth it. Not only can you achieve 

, but you can invest in companies that offer the potential for a high ROI.

Here's a partial list of the main categories:

: commercial, shopping centers, office parks, duplexes, raw land, apartments, single-family residences, tax liens, and REITs

: LLCs, limited partnerships, startups, hedge funds, small businesses, equity crowdfunding, and land trusts

: gold and silver, oil, gas, lumber, and minerals


This means that you can invest in real estate syndications 

We form a new LLC for each multifamily apartment and sell equity using a private placement memorandum. So, you're SDIRA can own part of the multifamily apartment.

Restrictions On Using a Self-Directed IRA

Let's talk about that shorter list. You 

 want to break these rules because there are severe tax consequences. Always consult your tax or financial advisor if you're unsure of a transaction or situation.

: These people cannot make any direct or indirect investments/transactions with the SDIRA. They include you, any account beneficiaries, family members (spouse, parents, grandparents, kids, and their spouses, grandchildren, etc.), or an entity owned by 50% or more by a disqualified person. Basically, anyone close to you cannot benefit from it. So, you can't buy a rental through your SDIRA and live in it, rent it to your kids, or manage it yourself.

: You can't use it for your personal benefit. That means you can't buy a rental and deposit the rent checks into your personal account. You must deposit all income into the SDIRA account. Think of an SDIRA as a 3rd-party person who owns the investment.

: collectibles (art, antiques, gems, stamps, etc.), life insurance, S-corporations, and illegal activities

: Sell/exchange/lease property your already own into your SDIRA, transfer/lend SDIRA income/assets to a disqualified person, or supply goods, services, and facilities to a disqualified person.

: Like traditional IRAs, you can't start withdrawing funds until you're 59 1/2.

There are some subtleties and fine print to all of these. So again, consult your tax or financial advisor if you're unsure of a transaction or situation.


Truly Self-Directed IRAs = Checkbook Control

Ready for a little more confusion? There are different levels of "self-directed." Some companies use "self-directed" as a marketing term only: you can direct which stocks, bonds, or mutual funds to invest in only. Umm... No.

Others allow for alternative investments, but you must submit documentation for each investment transaction/transfer to the IRA custodian for their review and approval. This can take 2-3+ days, and they usually charge a fee. That's better, but still not great.

. It allows you to invest, divest, and manage any qualified investment at any time. There isn't a literal checkbook, but if you want the true freedom to control how you invest your retirement assets, you need this feature. Slightly more technical details: business trusts and self-directed IRA LLCs are two entities that give you full checkbook control. For the trust, you're a trustee, and for the LLC, you're the manager.

Can I Transfer My Existing Retirement Account Into a Self-Directed IRA?

Let's get the bad news out of the way: 401(k)s cannot be used in real estate transactions and can't be transferred to an SDIRA. But as soon as you leave a company, that 401(k) retirement account magically becomes an IRA. Which means it can now be transferred into an SDIRA.

Traditional IRA: Yes, to a Self-Directed IRA.

Roth IRA: Yes, to a Roth Self-Directed IRA with the same after-tax benefits.

403b with a former employer: yes, depending on the type, it can be traditional or a Roth.

And, just like all IRAs, you can continue contributing to your SDIRA. The current maximum amount changes yearly. So, 

here are the current IRS contribution limits

Advantages of Using a Self-Directed IRA to Buy Real Estate

Like other IRAs, traditional IRAs are only taxed when you withdraw the funds. This is huge! You can roll 100% of the profits of an investment into the next project. Since you don't pay taxes immediately, that allows for massive compounding! Plus, apartment syndications average 10% - 15% annual returns. The returns add up exponentially.

If you invest $100,000 at 10% and keep reinvesting for 30 years, you'd have $436,235. Not bad!

And if you're using a Roth SDIRA, taxes are never paid!

If you have a 401(k) from an old employer, it's technically now an IRA. That means it's eligible to be transferred to an SDIRA. This is a massive opportunity for you for future growth.

In the same way that it's hard for you to get money out of your SDIRA, it's hard for others - like creditors and judgments - to get money out too. It's usually safe from bankruptcy and hard to sue because it's technically a trust account. Again, think of it as a 3rd-party person; it's not you. It would be like going after your friend for money you owe. Obviously, you hope this benefit never matters, but it's nice to know it's there.

With Checkbook control, you can use your knowledge to invest in ways that support your goals or improve your chances of success.


Billionaires diversify their wealth with 3 buckets, and only one bucket includes stocks & bonds. The other bucket is cash-flowing commercial real estate, and the final bucket is direct investments. 

Read more about the diversification strategy the ultra-wealthy use

SDIRAs aren't perfect. Here are some gotchas to be aware of.

According to SDIRA rules, you lose the benefits of depreciation. Lame, I know. But keep reading because that's not totally true with apartment syndications that use debt financing.

If your head isn't hurting yet, just wait.


UBIT applies when your SDIRA receives unrelated business income. More specifically to apartment syndications, it's the Unrelated Debt Financed Income (UDFI) tax. On SDIRAs, there's a tax on the percent of gains attributed to debt financing. So, if your SDIRA invests in a property acquired with 70% debt financing, 70% of the gains will be taxed.

But there's hope! Remember above how you don't get the depreciation benefit? Guess what? Depreciation and other operating expense dedications 

 allowed when using debt financing. This usually results in no taxable income during the hold period. Only when the property is sold are gains realized.

There's some complicated math to figure out the actual impact, but generally, you can assume a reduction of 1-2% on your syndication's return if you invest using an SDIRA. It's still less than paying income taxes, so it's a net positive.

There's more to the definition of a UBIT, but it's not as relevant to syndications. If you're not doing syndications, ensure your SDIRA receives "investment income" instead of "business income" to be exempt from the UBIT tax. Exempt incomes include rental income, interest income, capital gains income, dividend income, and royalty income. This is another "talk to your tax or financial advisor" situation.

No surprise here. There's additional paperwork to file to track your investments. And each custodian charges a fee. Some are better than others. I would focus more on access to your funds, but you do want to pay attention to fees.

All retirement accounts are heavily regulated by the SEC. The big thing that the SEC looks for is restricted uses. Are you, or another disqualified person, benefiting? If you break a rule, your entire account will be disqualified.

Fun fact: you can hold multiple SDIRAs (by splitting up a larger one or by not combining existing IRAs). That will limit your liability, but you'll want to weigh that against the extra cost and complexity.

We're in the home stretch, and this part should be easy.

Open an account from a qualified custodian (see below).

Fund your SDIRA by rolling over an existing IRA. If you're starting from scratch, consider opening a ROTH SDIRA.

Direct your custodian to invest your SDIRA's funds via checkbook control. Each custodian will tell you how to do it using their system.

Receive income and gains from your SDIRA's investments.

Enjoy gains from a diverse set of assets.

There are many to choose from, but the #1 recommendation 

, but uDirect is most people's choice if they're focusing on real estate.


Whew! That was a ton of information. The general concept is straightforward: it's a retirement account that lets you invest in alternative assets. But there are some considerable tax benefits, but a few tax gotchas to be aware of. And finally, you don't want to invest with a disqualified person.

If you have a 401(k) from a previous employer or an IRA with a traditional broker, you could start passively investing in apartment syndications sooner than you think. This is a great way to accelerate your wealth from one of the best investments on the planet.

A Self-Directed IRA is a retirement account that lets you invest in alternative investments like real estate, but the restrictions are important to know.

What are Self-Directed IRAs? (And How To Invest In Real Estate With One)

When most people accumulate wealth, they start looking for ways to maximize their returns while diversifying. Diversification is good, but it's not as simple as "diversify all of it" because there are different types of investments, purposes, and risks. It's also not as simple as Mark Cuban's "

So, what framework can help you approach diversification more strategically?

 - private wealth management advisory firms that serve ultra-high-net-worth individuals - and their investment framework. I thought it was helpful advice for everyone, not just the ultra-rich.

Think of your income and wealth as three buckets.

The goal isn't to make money in this bucket but to not lose money. And so traditional wealth management diversification works here. These are uncorrected stocks, bonds, commodities, etc. I like low-cost total market index funds for this reason.

You have control over the securities/funds you choose but zero control over the assets themselves. That's a benefit because it doesn't require much time (set it and forget it). Still, it also means there's no opportunity to add value to the investments.

Bucket 2: Cash-Flowing Commercial Real Estate

To me, this is the Goldilocks bucket. "Cash-flowing" means properties that are stabilized or have value-add opportunities (like rehabbing units) but don't require repositioning (ex: apartments to condos) or development. Examples include apartments, self-storage, offices, retail, industrial, etc. I like apartments and self-storage because they tend to do well in good and bad times.

These are tangible assets that you can visit and touch. These are not REITs, where you own a share of the REIT and that owns a portfolio of properties (that falls into bucket 1).

You get regular cash disbursements from operations and hopefully get a lot of your principal back from a future refinance (to buy more property). By buying larger properties, or a share of a larger property via syndications, you can have someone else - an expert - manage the deal (

). They can focus on the project and extract the value from the property, which more than makes up for their fee.

Evaluating and buying these assets requires more work, and they're not as liquid, but you can speak with the operator and provide feedback. You can diversify by participating in multiple syndications, but the minimum investment will typically be at least $50,000.

This is a business or job. It's where you focus your efforts and play offense. Stick to what you know, be aggressive, and take advantage of where you have an edge - superior position, insight, or skill - in the marketplace.

This is not the bucket to diversify your efforts. Focus on 

, and do it incredibly well. Then use the income generated from your efforts to fund the other two buckets, so you don't have to work hard and focus your entire life.

When you look up how billionaires made most of their money, it's from focusing on a single business. Some famous examples include:

Elon Musk: Tesla and SpaceX today, but he started with Zip2, which Compaq bought. Then he focused on X.com, which turned into PayPal, and was bought by eBay.

As you accumulate wealth, you want to maximize your returns while diversifying, but it's not as simple as "diversify all of it." Here's how billionaires do it.

Writing on real estate, company building, and the multifamily industry.