RG 303 – Inflation, Capital Raises, and How to Pay Zero Taxes with Omar Khan
Inflation, capital raises, and tax efficiency—let’s talk about it! But first, join me in welcoming an old guest back to the show—my good friend and the Founder of Boardwalk Wealth, Omar Khan.
Omar Khan is a CFA, a self-proclaimed global citizen like yours truly, and the Founder of Boardwalk Wealth, a premier private equity sponsor focusing on acquiring value-add and opportunistic real estate across the South East U.S. At Boardwalk Wealth, he is responsible for capital raising, strategic planning, and investor relations. With over 10 years of experience in global investing, Omar is one of the best sources of knowledge for multifamily syndication.
In today’s episode, Omar shares his experience going from investment banking to real estate investing. More than that, he goes over how he diversified his investments by investing in both capital- and non-capital-invasive businesses. But what we really focus on for this episode are three critical topics: inflation, capital raises, and how to pay zero taxes.
Inflation and taxes are always going to be constants. So, if you want to learn how to use them to your advantage, learn from one of the best capital raisers in the real estate investment space and press that ‘Play’ button now!
Worrying about inflation is not going to help you—there is no way around it!
Instead of worrying about inflation, position your portfolio to take advantage of it.
When done right, investing in passive income can help you achieve better tax efficiency.
- Physical assets are a hedge against inflation.
- When you invest in an operational business, having a good operating partner is imperative to success. This is especially true if you are also investing in physical assets; it’s difficult to handle both at the same time!
Be Bold, Be Brave and Go Give Life a Crack!
Listen to Podcast
Reed Goossens (00:00):
Good day good day guys. Now, before we dive into today’s show, I want to let you know that some of you may be aware that over the past eight years, I have built a substantial multi-family real estate portfolio here in the US worth over half a billion dollars. And in that time, my passive investors have received fantastic double digit returns. And now you too can invest directly into my deals for as little as $50,000. So if you’re an interested investor, head over to Reedgoossens.com to find out more that’s Reedgoossens.com. Now back into the show.
Omar Khan (00:41):
So what we have to do as investors is realize, invest inflation is here. It is going to be happening for the next few years. There is no other way around it. There’s no use to and Mo. So what we have to do is position ourselves in assets and investments that will positively benefit from this. Now real estate is one obvious hedge against inflation, right? Cause you it’s a real assets. So your value keeps, it just gets, keeps getting valued upwards in real per terms. But you as an operator also know that we can basically take up rents because our leases are say 10 months, 12 months. So every 10 or 12 months, we can Jack up our rents to accommodate the increase in inflation. So that way we can manage that side of the.
Speaker 3 (01:31):
Welcome to investing in the US, a podcast for real estate investors, business owners, and aspiring entrepreneurs looking to break into the US market, join Reed as he interview go-geters risk takers and the best in the business about their journey towards financial freedom and the sheer joy of creating something from nothing.
Reed Goossens (01:52):
Good day. Good day ladies and gentlemen, and welcome to another cracking edition of investing in the US podcast from Los Angeles. I’m your host reed goossens good as always Debbie with us on the show. Now I’m glad that you’ve all tuned into for my incredible guests and each and every one of them are the cream of the crop here in the United States. When it comes to real estate, investing, business, investing and entrepreneurship, each show, I try and tease out their incredible stories of how they have successfully created their businesses here in the us, how they’ve created financial freedom, massive amounts of cash, and ultimately create extraordinary lives for themselves and their families life by design. As I like to say, hopefully these guests will inspire all of my cracking listeners, which are you guys to get off the couch and go and take massive amounts of action.
Reed Goossens (02:38):
If these guys can do it. So can you now, as you know, I’m all about share, ring the knowledge with my loyal listeners, which is you guys. And there’s absolutely no BS on this show, just straight into the nuts and bolts. Now, if you do like this show, the easiest way to give back is to give us a review on iTunes and you can follow me on Facebook and Twitter by searching at Reed goons. You can find the show, every podcast on iTunes, SoundCloud, Stitcher, and Google play, but you can also find these episodes up on my YouTube channel. So head over to reedgoossens.com, Click on the video link, and it’ll take you to the video recordings of these podcasts, where you can see my ugly mug, but the beautiful faces of my guests each and every week. All right, enough outta me, let’s get cracking and into A’s show.
Reed Goossens (03:26):
During the show, I have the pleasure of chatting with a very good friend of mine. Omar Khan. Now Omar is the founder of board walk wealth, a multifamily investment firm here in the United States. And Omar is also CFI CFA I should say. And as over 10 years, experience investing across real estate commodities and has an M and a background at advising on over 300.3 0.7 billion of transactions in his former life before jumping into the syndication world. Uh, Omar is a self proclaimed global citizen like myself, and he’s lived in Dubai, Toronto, Calgary, and Dallas. And for the, all of those who have listened to this show for many, many years, you would know that Omar has been on this show before I encourage you to go back and listen to that earlier episode way back in the day, but I’m really pumped in having him on the show today. So enough at me, let’s get him out here. G a Omar. Welcome to the show. Hello today, mate. Hey,
Omar Khan (04:13):
What’s going on? Finally, we get to talk. I mean, we talk and text all the time, but on a podcast
Reed Goossens (04:18):
We get to talk. What’s going podcast. Yeah, I know. It’s really good. My friend and you just closed on a, a new deal in Gainesville, Florida.
Omar Khan (04:26):
Yeah, no Gainesville, Georgia. I closed on the deal, but I think I’ve reduced my life expectancy by at least like 5%. Uh, just in that process, the man ain’t easy calling, you know, it’s not all sunshines and rainbows. That’s
Reed Goossens (04:40):
The right. That’s right. And, and, and we’ll get into, we’ll get into that in a little bit, but for those of you who don’t know who you are, can you rewind the clock and tell me how you made your first ever dollar as a kid, and then we’ll get into your story about what you built to this this point.
Omar Khan (04:54):
Okay. So I think, I mean, cuz I don’t remember every single detail. I think the first dollar I made was I used to play keyboards when I, I was young. I mean, I honestly, I don’t have any musical talents. I don’t know. Maybe I had it for like the five year window in my life. Right. And I love the synthesizer. I love music. I loved eighties music. Right. So I used to play and then I gave some music lessons, uh, for a couple months. And that’s how I made my first, um, dollar. I am still surprised some, anyone took music lessons from me, but Hey, got a dollar that’s not too bad.
Reed Goossens (05:24):
That’s awesome, man. And you have a, a global background. So, so, so where you’re from, where you’re born, where you’re brought up in and what brought you to the states?
Omar Khan (05:31):
So I was born in Dubai. I grew up in Pakistan. I went to school to Canada for a few years. I thought I was gonna go back to either Pakistan or Dubai. But that time, you know, I just stuck around, had a girlfriend at the time, not with her anymore. Thankfully, uh, you know, got a job. Uh, did that for a few years in Toronto. One of my bosses poached me to go to Calgary cuz this was in the height of the oil. Boom. Right. So we, it was fantastic. I mean you were think like everybody was walking on water. I mean not without realizing it wasn’t us. It was basically the market. Right? So that was a really fun few years. Learned a lot, met a lot of interesting people. Then I met my wife. She is a physician or she is still a physician, but she was in residency training in the us.
Omar Khan (06:12):
And it was Doss of, you know, when we got engaged, we started talking well, whether she comes up to Canada, I moved down and for her to move up to Canada, Canada’s very bureaucratic. Right? So for her to move up, she’d have to pretty much do everything. And she was in the last year of her residency. So this means she was done with medical school. She was done with her training pretty much the last year of her training. And for her to get, go to Canada, she’d have to start pretty much from scratch again, which is, I was never gonna put anybody through that type of mental torture. Right. So, and for me being a finance guy, it was relatively simpler to move down. Cause you don’t really need a license, you just need good networking and all those sorts of ability. So we just packed our bags. I lived in upstate New York for a few months. Do not recommend it to anybody at all. Uh, about Syracuse man. Yeah,
Reed Goossens (07:01):
Omar Khan (07:02):
PTSD from Sy living in Syracuse. Right. And uh, then I moved to Dallas and you know, we, that’s how we started. We could only started doing the typical finance stuff. We had a tax problem. We wanted to solve. I had a good personal and professional background, running deals, all of that sort of stuff. You have a first deal, you know, partner with you as well. And a couple of deals did a couple of those and then just, you know, one foot after the other, right. You do one deal. Then you do another one, you do a couple of developments acquisitions. And few years later you’re on a podcast with reduces.
Reed Goossens (07:32):
Again. Well mate, I’ve been observing your growth for some time now. And um, maybe just give us a summary of what you’ve been involved with because I know personally what you’ve been involved with, but maybe for the listeners, you, you not just the, the run of the mill multifamily, you’ve got some other things going on, uh, other, other sort of prongs in the fire, so to speak
Omar Khan (07:52):
Look. So, uh, I mean, I, my family I’ll give you a background. My family’s a business family, right? So we’ve always owned a lot of commercial real estate. It’s only when I started actually doing a lot of real estate deals. Did I realize that the traditional paths is, you know, you do houses or whatever town homes or whatever, and then you kind of go up and maybe like my dad or my grandfather did that right back in the day. But by the time I was around, we had, uh, actual commercial real estate. That was either it wasn’t a running more investments and holding than that sort of stuff. Right. So for me, I was never really down to the, Hey, get houses and kind of go down that path cuz it just wasn’t really something I was either used to or exposed to or didn’t wanna do.
Omar Khan (08:34):
Uh, so I always thought a real estate as a means to an end, right? Hey, it’s a great business. You meet so many great people, but it’s like any other business and you’ve gotta treat it like a business. Right? So real estate was one thing. But coming from the finance investment banking world, I was exposed to a lot of other businesses. And then just through my network, family, friends, otherwise, you know, when you belong, when say you are an entrepreneur right now, a lot of your friends now are entrepreneurs and they’re doing lots of different things. So once you’re in that environment, you start getting exposed to a lot of people, whether your family’s an entrepreneur. So I just knew a lot of people with different businesses and you know, they were very well to do people. So for instance, I started looking at other business, say my real estate business development and acquisitions going really well.
Omar Khan (09:14):
What other businesses am I looking at? Which are good, sustainable long term cash generating businesses. So now we’re in the QSR space. We’re gonna launch. We QSR is a politically correct word of saying fast food restaurants, right? So quick service restaurants. So we have, uh, the rights in, uh, Florida for a health food chain and we’re opening, uh, locations there because, but again, the reason why I could do that is because it’s very operationally intensive businesses business. One of my really big investors happened to be the CEO of one of the biggest private equity backed franchise owned chains in, uh, the Southeast, you know, once he came onboard, he started investing with us. You know, you meet people. I just started talking to him, uh, learned what he was doing. I had done a lot of research coincidentally into the QSR space because about a decade or not 12 years ago, uh, Tim Hortons, which is the Canadian Duncan, Don it’s the national institution.
Omar Khan (10:06):
You probably know market. I do. Yep. Right. Tim Hortons got acquired by a restaurant brand international, which is uh, global private equity firm. Right. It’s run by a couple of zillion guys. Lima is like the head honcho there. And they had acquired a Canadian national jewel. Now in Canada, it’s a pretty big deal. Right? I mean the us, nobody cares. Right. And it was a big uproar in Canada. How could a foreigner buy this blah, blah, blah, blah, blah, blah, blah. And I got curious. So I started because I was an equity analyst. I started going through the companies financials and started seeing how do you operate it? Cause at Timmies is pretty much every corner in Canada. Right? Pretty much you cannot throw a stone or not hit Timmies it’s that sort of deal. Right. And there’s always a line outside the door. So I realized analyzing that business, wow, it’s operationally intensive, but holy moly, these cash margins are crazy. I mean, once you nail it, this is like a money printing machine essentially. Right. So I kept that at the back of my head, I met tha who was the CEO of this private AP factor. He was on the way out and him and I started talking, we started and you know, that business relationship blossom, but now we’re doing all of this stuff. That’s awesome. In a nutshell, that’s
Reed Goossens (11:13):
Awesome. When, when, when can investors find out about that?
Omar Khan (11:16):
So you can go to our website, uh, boardwalkwealth.com right on the front page. There’s an email option in name, email. And, um, guess how you found out about us click on the button. I don’t even know what it says. You’ll be sending an email. You verify that, uh, and I’ll know when you’re on my mailing list or you can email me at boardwalk wealth, but the bigger point there was, you know, you, as you and I were discussing, I was looking for a true diversification business out outside of real estate. Right? Uh, real estate is a very capital intensive business. Right. You have to have a real estate, you got for money in it. Right. And I wanted as a secondary business, like a compliment to my real estate business, a business that wasn’t capital intensive, but operationally intensive brain power intensive. Right. So because for me that was true diversification because if I had to keep throwing money at something to solve a problem, that’s not a good long term scalable business, right? Yes. Yes. So that’s why I looked around for a lot of times found the right team, cuz that’s very important to have a right o experienced people who knows everybody. And then we went all in, basically.
Reed Goossens (12:17):
That’s awesome. That’s awesome. I’m looking forward to finding out more about that because I don’t, I’ll personally be investing in that coming up here soon, but mate, let’s pivot to the, the, the Genesis of today’s show. Uh, you and I spoke a little bit offline. You, you have a lot of curious thoughts in and around inflation in and around capital raises in and around how to pay zero taxes. So today’s show is gonna be all about really all, all three of those topics. So maybe let’s start with inflation in interest rates and implications for 2022 and beyond, and where you think we are headed, uh, given your background in the financing markets M and a, and what you’re seeing across the world.
Omar Khan (12:54):
Well, you don’t need to be super intelligent, right. To know inflation is happening, right. It’s real it’s happening. But I think a lot of people in my opinion, get really hung up on, oh, it’s happening. The world is ending. And then they stop. Right? And you’re like, look, we, unfortunately, I mean, we don’t have the ability to, most of us at least stop don’t have the ability to do anything about it. So what we can do is proactively plan or at least react in some shape or capacity to position our portfolio, to take advantage of it. Because that’s the only thing in our control, like worrying about inflation. Isn’t gonna help you because there’s no way around it. So inflation, unless they basically, the fed actually follows who on what they say is they violently raise and violently. I’m very careful using the word. They violently raise a rate of interest, right.
Omar Khan (13:41):
Way above what they’ve guided. And then they just stick to it. Right? Because they tried raising the rate of interest a few years ago, the whole market went into a meltdown and then they just kind of backtrack. Right. They, we didn’t really wanna do that. Right. So now it all pens, how much, basically for the lack of a better word, grit do these people have. And that’s basically the game you’re playing right now as an investor, like does a central bank have enough of a political and other backing to withstand this and in a polarized marginalized world like we have right now, the fact of the matter is even if a central banker wants to do so, right? Like the right thing, quote, unquote, whatever that means. They might not have the political backing to do it right, because the political will to do it might not exist.
Omar Khan (14:25):
So what we have to do as investors is realize, invest inflation is here. It is going to be happening for the next few years. There is no other way around it. There’s no use to and Mo. So what we have do is position ourselves in assets and investments that will positively benefit from this. Now real estate is one obvious hedge against inflation, right? Cause you it’s a real asset. So your value keeps, it just gets, keeps getting valued upwards in real per terms. But you as an operator also know that we can basically take up rents because our leases are say 10 months, 12 months. So every 10 or 12 months, we can Jack up our rents to accommodate the increase in inflation. So that way we can manage that side of the book, but that’s not the only game. Right. The other game is to actually be looking at basically right now that can give you say 10, 12% cash on cash on a very, uh, on a sustainable basis.
Omar Khan (15:17):
Not say a sponsor saying, they’re gonna give you 10, 12. They come every three or four at the end of the year. Right? And there, you kinda have to be in operating businesses because only in operating businesses where you’re not encumbered by many fixed costs, right? You fixed costs on drag you down. Do you have the flexibility? Because look, think about it this way. If you have to spend a hundred dollars, right. And 80 of that is fixed costs. Well, regardless of which way the market goes, your Sol basically, cuz you’ve gotta pay 80 every month. Right. But if you gotta pay a hundred dollars, but you, 80% of that is your variable cost. You can adjust to the way the market is going. That puts you at a competitive advantage because a lot of times you can devote more resources knowing that every dollar I spent here is gonna gimme a multiplicative effect.
Omar Khan (16:03):
Yep. Right? So you have to be by designing businesses apart from real estate that are operating businesses that have a low fixed cost ratio. That’s just the way it is. You have to be nimble. And that’s why, for instance, when I was talking about the QSR business, that is a business where we, we’re not gonna own on the underlying real estate, you lease it. And the lease terms are said five years and 10 years. Right? So the annual rent escalators, and you’re gonna laugh at this are 2% a year. I mean, dude, we are raising our, on our properties by like 15, 20, 30% at times. Yep. So this retail guy’s gonna gimme lease me something and all he’s gonna get is a measly 2% a year. I mean, I’ll take that trade all day, every day. Right? So that’s basically it. I think a lot of people get very, especially in America cause uh, Americans have had by the grace of God’s such a good run. I mean it is the apex country, right. That people aren’t used to a lot of gyrations happening at such a quick pace. Right. And when they start happening, people freeze and they don’t take any actions.
Reed Goossens (17:06):
And when you talk about gyration, you’re talking about this, everything’s costing more, rent’s costing more pets, costing more groceries are costing more. You that’s what you mean by. And I
Omar Khan (17:16):
Like how you still say pet by the way.
Reed Goossens (17:18):
Gas. Yeah, yeah. Gas. Exactly.
Omar Khan (17:19):
I say pet as well, by the way.
Reed Goossens (17:21):
Um, no, but, but so how much of your portfolio and what you’re seeing with your investors is in an operating business like a QSR or versus ver versus real estate?
Omar Khan (17:30):
Very, very, very less. Because the reason is the barriers to entry, into getting into operating businesses, true private equity, right. To take away. Real estate is very high because traditionally it’s been reserved for institutions say or people who swing like a 5 million check. Yep. Either that, or say your brother-in-law’s opening something and he asked you for $50,000, but sure. There’s nothing in the middle, right? Say you’re a rich doctor. Uh, you’re a business owner accountant, you got a hundred thousand dollars check. It’s either real estate because you know, that’s a big business or the stock market and the in between part, if it’s an accessibility issue and that’s not been a lot of people aren’t exposed to it. And they’re gonna find out the hard way that if you’re not exposed to things, the right things that can cause a detrimental effect on your portfolio going forward.
Reed Goossens (18:20):
And, and so you, but back to the question is, are you seeing like an 80 20 split with a, with, with an operating business investment in a, in a portfolio versus real estate or a more 50 50, oh
Omar Khan (18:30):
Dude, I’m seeing more like, uh, like 99 to zero. People aren’t even exposed to it at all.
Reed Goossens (18:34):
So you are just saying everyone’s either in the stock market or in real estate and not, not in this sort of, you know, uh, QSR type of, uh, balance portfolio,
Omar Khan (18:43):
Straight up it’s accessibility is the issue. Right? And the funny thing is at least for my investors, uh, because when I tell them, Hey, this, you know, you talk right with all, at least your favorite measures, you talk what’s going on. And I tell them, Hey, this is what I’m doing. Every single one of them have told me, here you go, man. Here’s just let me know when you want me to sign where you want me to sign. Cause this is I, because once you tell somebody they immediately put two and two together, right? There’s no like going back after that to unsee it. Well
Reed Goossens (19:09):
Then, but the let’s talk about then inflation then. And how is a business in hedging against inflation versus a physical asset? We all know. And we talk about on the, on the show, physical assets are hedged against inflation. That’s why people are investing a lot into commercial real estate because we get to depreciate things. But when you’re an operating business there’s and you don’t owe the underlying dirt,
Omar Khan (19:30):
No, no pricing is the biggest driver you have. So for instance, this health food chain that I was talking to you about this, literally, if you, you are gonna laugh when you get introduced to the brand, you know, you come in and you know, they do the whole welcome day orientation. They have demographics and the demographics clearly are. And people laugh at this. When I tell them hundred, $10,000, plus me be an income college educated soccer loans. That’s it. There’s no other demographic because the reason there is that if you, if you’re on average making 110 again, because this is very different than the taco bell demographics, right? Or the McDonald’s demographic where it’s just a race to the bottom, right? 99 cents, 40 cents, 2 cents, 0 cents, right? This is basically you have purchasing, you have pricing power. So for instance, if a soccer mom that has 110,000 college educated soccer mom that have $110,000 median household income, if they’re buying something for me for $7, 50 cents, and inflation goes up by 10% and let’s do my pocket all onto the consumer, it doesn’t hurt them as much because they have enough pricing power. So even within private businesses, you have to realize which segment of the private businesses you’re in. Right? If you are in say the price competition, where everything’s made in China, and it’s a price to the bubble bottom it’s inflation is gonna dis destroy because you have inflation pressure pricing, pressure, competition, pressure you’re gonna kill so very commodity, heavy businesses. They don’t tend to do very well in these certain, certain, certain situations basically. But when you’ve got niche products where you have pricing power as a producer, that’s where you can really crank the schools. Basically
Reed Goossens (21:09):
For those of you who are interested in staying up to date with all the latest happenings in my business, or to learn more about passively investing directly into my multi-family value ad deals, then head over to reedgoossens.com and sign up for my monthly newsletter. By signing up, you will automatically be notified about my new up coming investment opportunities. You’ll be able to stay up to date with all the latest real estate news here in the United States and much, much more. So head over to reedgoossens.com and sign up to date now back into the show. But I would assume that you’d have to also have scale, right? Because you can’t the risk of having one or two, you know, stores.
Omar Khan (21:55):
Reed Goossens (21:56):
Is that you, you need to build a brand around it because you know, oh
Omar Khan (22:00):
Yeah. So in this case it is a franchise that has 140 plus stores.
Reed Goossens (22:03):
Omar Khan (22:04):
So the per so it’s like, say, think about it this way. You know, how Walgreens, when Walgreens orders drugs for manufacturers, it’s not like the Walgreens in around the corner from wherever you live it independently orders, drugs and the Walgreens where I live depend. No, no. They combine all their purchasing at the, at Walgreens holding company. And then they go to say a drug manufacturer and say, look, we’re gonna give you, give me a 20% discount. Right, right. So you’re right. You need scale. And that’s why, when we were looking at these concepts, we didn’t want to go to a brand that was very small, like say less than 50 units, but we also didn’t wanna go to a brand that was over 500 units. Because when you get into that range, you are either in a price competition because now they have to cater to everyone. Or the, the price of entry is so high. That it’s just stupid. So I’ll give you an example with this one. Our price of entry is roughly about $350,000
Reed Goossens (22:58):
Per store and
Omar Khan (23:00):
Per store. Like, because we’re not only the real estate, right? It’s just, this is basically 350 to 400,000 is I give you reed goossens 350, 400 grand. And me the keys to a store that’s up and running and ready to accept the first in, uh, customer right now in this model, these, because this is a newer set of models, your average unit volume, which is say, or gross potential rent in real estate terms that is at least a million 0.5, I’d say at 1.2 to 1.5 million. So think about it this way at the low end of 1.2 million, you divided by 400,000. So it’s a three market layer on your investment just for post that per year. Per year. Yeah, yeah, yeah. Per year, right? In a McDonald’s what happens is you are outta pocket, a million and a half to 2 million off front because it’s a standalone location and you gotta do all the belts whistle. And your first year revenues on average are like 1.7, five to 2 million. So your ratio is very skewed because again, why, because your fixed costs are so high, right? McDonald’s a standalone. You gotta have the big sign. You gotta go do this. Those types of businesses are not nimble. And that’s why a lot of those businesses get killed.
Reed Goossens (24:07):
I would argue. Yeah. That McDonald’s, you’re buying also the brand. So there there’s a brand element to it as well.
Omar Khan (24:15):
Yeah. Yeah. Look, hold on. You are, that is, but you have to look at it over a long term scale. My point is your payback, your investment payback. Yes. For a McDonald’s is more like a five, 10 year plate,
Reed Goossens (24:25):
Correct? Correct. Yep.
Omar Khan (24:27):
But again, the deal there is that your that’s something that is your primary line of business. Yep. Like if you’re a McDonald’s operator, you’re not doing McDonald’s operations and kind of Moonlight trying to hold sales houses, you know, other things. Right. Right. But when you’ve got a 300 5400 grand unit, which to do is you build out five of these for everyone McDonald’s and you make it up basically on margin and volume basically.
Reed Goossens (24:52):
Got it. What, what, but who’s then running that $350,000 store because I don’t wanna run it. I I’ve got, I’ve got, I’ve got a real estate business.
Omar Khan (25:00):
No, no. So this is why I told you, right. Uh, when I partnered with CAS, the big thing was, I told him I straight up, because I initially we were looking at some, uh, Wingstop, which is the chicken brand. I don’t, they have it in California.
Reed Goossens (25:10):
Right? They do. Yep. Yeah,
Omar Khan (25:11):
Yeah. Yeah. That’s another great brand, by the way, they’re going through a bit of an issue, but it’s a great brand. I told him, look, man, if you open a Wingstop, I’m not gonna like fry the chicken wings myself. Cause you really don’t want me doing that. So this is why having a good operating partner is very, was very critical in this old piece. It took me about a year and a half to do this. Cause I went to Paris. He knows all the people in the industry. We picked up this great operator that actually worked underneath him. He was his director of operations. And his deal was like, a lot of guys were in these niche industries is that they made a lot of other people money, but they never got an equity share in the business. And a lot of us art operators in all businesses, by the way, they realize eventually, Hey, if I don’t get equity in this business, I’m just another guy. Right. And I’m gonna retire at 60 and that’s it.
Omar Khan (26:00):
So with him, basically, I interviewed a few people and my whole deal from day one was look, you’ve gotta be at least 45 50. So my mind, the idea was you’ve probably been burn by a few people before, right? Because people make these lofty promises and never follow up. Right. And because you’ve been burned before you actually, and you also see in the next 15, 20, 15 ish years, 10, 15 years, you’re gonna retire. So you’re in that sweet spot where you’ve got the right amount of experience you’ve been burned before. And now you actually understand of having equity in a business and helping it grow. Yep. So I, that’s why it took me one and a half years to find the right operator. We’ve got Greg McFail out in poco, Florida, and he’s 25 years into the business. Knows pretty much every single person is really funny. I’m on these calls now. And some CBR broker will be like, Hey Greg, haven’t talked to you in three years. How are you doing? You still doing taco BES? No man. I’m in cleaning. So those connections you can’t really buy. Right.
Reed Goossens (26:57):
Omar Khan (26:57):
Right. It’s just one of those things. You, you just have to pay your dues.
Reed Goossens (27:01):
So pivoting from just this conversation for a second, looking more into the future of what you think in inflation is going, what these are all good strategies in real estate, investing, investing in QRS, understanding where to invest and, and, and your non-fixed cost versus variable variable costs, uh, in businesses. But what’s your crystal ball saying to you right now, our Omar coming into the next two, three years for, from an inflation and interest rate point of view,
Omar Khan (27:28):
I can really just, I don’t think in the next say one and a half, two years. I don’t think it’s gonna, I don’t think it’s going to materially improve. Let’s put it that way.
Reed Goossens (27:35):
Material improve in from an inflationary point of view.
Omar Khan (27:38):
Yeah. From both either an inflationary point of view, but primarily in inflationary point of view, number one, but also from a point of view of say stuff like supply chain issues,
Reed Goossens (27:46):
Omar Khan (27:47):
Right. It’s not gonna improve because the issue is a lot of people have realized when they whole bought into this whole, just in time manufacturing sort of deal. Yeah. It’s really good. If your system is working super efficiently, but one small kink in your system just destroys everything. So now you see a lot of people are moving their factories from say, China do Mexico, a lot of people, but that doesn’t happen overnight. Right. It
Reed Goossens (28:08):
Omar Khan (28:09):
Cause even if you, even if you have all the money in the world, you don’t have a warehouse, you don’t have a trained workforce. Right. So we’re seeing all of these things and for these things to happen and materialize, it’s gonna take like a couple years. Yeah. It doesn’t happen overnight. And I mean, look, the simplest example is we’re looking for a car right now. Right. Because my parents are gonna come. I got two kids. We gotta look for a bigger car. Dude. I cannot pay people right now, money to gimme a car. Like I’m not saying, give the car at list price. I cannot pay 10 to $20,000 over the list price and get a car right now. Yeah’s so crazy.
Reed Goossens (28:43):
First time in history where cars are appreciating the average job. Yeah.
Omar Khan (28:47):
Yeah. The average car. I mean, and not only appreciating you can’t even find it,
Reed Goossens (28:52):
Right. That’s right.
Omar Khan (28:53):
If you wanted to, you can’t. So in the next couple of years, these things aren’t gonna improve. So what you have to do is position yourself in a way that you take advantage from some of these distortions.
Reed Goossens (29:02):
Got it, got it. As we pivot now into the tax talk tax talk, right? Let’s we talk about inflation. So everyone’s worried about inflation. So they’re trying to hedge, uh, their investments and their money that they have into inflationary, hedge investments, like physical assets. What else are you seeing in terms of, you know, how you gonna pay like next to zero taxes? What, by investing in a physical asset, like real estate or an operating business, like a QSR.
Omar Khan (29:32):
So look, the first thing you gotta start is, and I mean, you know this, you like, hopefully you’re not paying any taxes. Come on. Very,
Reed Goossens (29:37):
You’re one of those here in California. You’re
Omar Khan (29:39):
One of those rich fact taxes. Come on, you don’t pay any of those taxes. Look a lot of people, a lot of real estate people get it, but I’ve seen a lot of people outside of real estate. Don’t really get it. A lot of times, you know, you could be saying, making, say, let’s assume a million dollars a year. Right? And your mom let’s assume your average tax rate is say, we’re gonna keep it simple 40%. Right? So this means make a million and you pay 40. Your take home is 600 grand right now, a lot of people assume when they’re doing their budget, they just start at $600,000. Right. They don’t assume that they can do anything about their tax position, right. Because, Hey, I don’t even see the money. So what can I do? Well, the thing is you can do something about it because when you dare to end position your, and again, this doesn’t happen overnight.
Omar Khan (30:20):
It takes a little a while, right? When you dare that position, your investments towards tax efficiency, right? For instance, when you’re doing real estate, you get all these depreciation. Writeoffs. Now you could say, I’m a passive investor. How do I take it against my active income? Well, a lot of times what people have done is a couple of my investors have done this where say, one of the partners was making significantly more money in and the other partner wasn’t making enough. And in this case they had a couple of kids, right? So the one partner can decide to stay at home. This other partner, who’s making more money. Instead of saying investing more in the stock market started heavily investing in real estate. The benefits of those tax writeoffs now because the partner that’s staying at home also now is doing some stuff to qualify as a real estate professional.
Omar Khan (31:02):
Right? So now all those tax write offs can be taken against active income to actually help people out. So like I said, it doesn’t happen overnight, but when you start focusing on tax efficiency, what you start realizing is that you can do something about your tax position. So think about it. No job. At least to my knowledge is gonna give you a 30 to 40 per percent increase in your paycheck every year, year, or year for the rest of your life. It’s just not gonna happen. Okay. That doesn’t exist. Right. But if you manage your taxes properly and let’s assume you take your 40% in taxes to 20% in taxes over say a five year period, well that’s 20%. You get to keep in your pocket. That’s 200 grand. In this case for the rest of your life, think about it. You had an extra 200 grand a year, or you have your tax bill. That’s assume you pay a hundred grand in taxes. You have it, you pay 50, you keep $50,000 a year that pays for extra mortgages that pays for private school education for your kids that pays for vacations. That pays for savings. I mean, Jesus Christ, man. It pays for pretty much every single thing you were stressed out about.
Reed Goossens (32:04):
Oh, that’s right. Yep.
Omar Khan (32:06):
Right. So if you are not tax efficient and by the way, it’s not just in real estate, oil and gas leases, you can get a lot of write offs, even a hundred percent in some cases. Right? So you have to start focusing on tax efficiency. Cause if you don’t focus on tax efficiency, it is leading money on the table, essentially.
Reed Goossens (32:23):
Yep. No that’s right. And
Omar Khan (32:24):
Every single week
Reed Goossens (32:25):
When you’re living in a, in a state like California, it has higher tax rate. So trying to offset that tax efficiencies is, is so important. What other things you mentioned, oil and gas leases. Have you heard of, um, the, the conservation easement stuff?
Omar Khan (32:39):
Yes, but it’s the, I keeps cracking down on it, man. So I’m really, that’s what I’ve heard.
Reed Goossens (32:45):
Yeah, no, I’ve, I’ve heard the same thing. I’ve
Omar Khan (32:46):
Always been a little hesitant about it.
Reed Goossens (32:48):
That’s right. That’s right. Nobody you you’re completely correct. The, the, the way in which both of us are syndicated is we, you know, we position it to our investors is you have to be more tax efficient with your income, right? You, the reason you invest passively in our deals is so you can benefit in being involved in a physical asset. And I’m, I dunno what you are seeing, but I’m seeing a lot more people focusing on the tax efficiencies these days, coming into this inflationary environment rather than the cash flow, because historically multifamily been fantastic for cashflow, but with inflation prices are skyrocketed. You know, rent are still having to catch up cashflow flow coming outta the gates, you know, plus you know, is a lot lower plus compressing cap rates. Um, so I think having a good balanced, diversified portfolio, like supplementing it with a say, QSR is really, really important. So you get the benefits of both worlds, the tax efficiencies in the physical assets and the cashflow from an operating business. And you also get, you also get cashflow from, from multi
Omar Khan (33:44):
To your point. Again, there is no one pill, there’s no one magic pill. Like you do this in all your problems for solve. A lot of this is basically having the, a to realize that there are solutions to problems, but if you don’t even consider something to be a problem for, or Don acknowledge, it’s a problem. How can you go solve it? Right. Right. So if you never, if you never even acknowledge your taxes as an expense, because if, if you think about it, it is an expense. I mean, you made money and you don’t got it, right. It’s an expense. If you don’t take that first step and realize it’s outflows, Hey, just do this in your head. I make this gross in what are all the outflows leaving me? Doesn’t matter what it’s called. Just realize what, what are the outflows, once you recognize that problem, you can then go solve it, basically. Yep. Get on the path.
Reed Goossens (34:32):
Completely agree. And there’s also other ways of doing tax efficiencies in other physical aspects, like commodities. Yeah. Cryptocurrency, to some extent, but you know, there’s volatility in that. Uh, but you have to also understand what’s the best use of your money. So, you know, commodities doesn’t mean.
Omar Khan (34:49):
And time also, by the way, cause a lot of times you can do things, but they might be very time intensive
Reed Goossens (34:53):
And time and time. That’s right. That’s right. So, so one like a like gold might have really good hedge against inflation. It’s also good, uh, for tax benefit, but it’s may not, it’s not gonna produce you in cashflow. Right? Physical, real estate has the benefits of all of that. You know, operating business may not have as much tax efficiencies because it’s not physical. It’s just operating a business. So having your, your, your prongs in the fire for a diversified portfolio is really, really important. And all of these things are outside, you know, um, the, the conventional investing in this market. So there’s a lot of, lot of places for people to place their money. And it’s just about being educated. And to your point, unless you not acknowledge that something’s an issue like taxes or like cashflow and you don’t focus on it, then it’s all, you know, you’re never gonna be able to fix it. So let’s pivot to the, the sort of the final thing we’re talking about in the green room before coming on this show and that’s, you know, how capital raises are treating high net worth individuals as like walking ATMs. Do you wanna gimme a 2 cents on that?
Omar Khan (35:50):
Yeah. Look, it’s funny that again, your, your sponsor as well. So you probably know a lot of this thing that a lot of times what happens is you have a conversation, uh, with somebody who’s obviously either new or like a little green. And then they say, well, this guy’s giving me a 30% IR. And you’re like, okay, I’m in the market. I’ve probably seen this deal. Cuz if you’re in the market, you’ve see, look, praise you’re in, you’re in central Texas. You’ve seen all the deals, central Texas. Cause they’re being out there public on or off market. Right. You’re like, look man.
Reed Goossens (36:21):
And nothing’s really off market these days.
Omar Khan (36:23):
Yeah. Right. Nothing is, you know this right. Everybody will say, oh this exclusive off market opportunity or proprietary model or this there’s, there are no secrets guys. Everybody knows how to do this. Right. The real secret isn’t relationships. But even then a broker isn’t gonna give deal if you’re 5 million less, just so you got a nice face,
Reed Goossens (36:41):
Omar Khan (36:42):
I mean, Hey
Reed Goossens (36:43):
Look, it’s, Hey, sometimes faces can do that. Right. Hey
Omar Khan (36:45):
Re it doesn’t happen with you.
Omar Khan (36:50):
Look. So the thing is a lot of times we talk to people, both of us talk to people, right? We run similar businesses. We talk to people and say, oh, this is, this person is doing this because the issue you’ve gotta realize is if you talk to five people and four people say, say, let’s assume, say 13 to 15% return. Right. And one guy says it’s 25%. Right? Well, the problem is the guy is treating you like a walking, talking ATM because he’s gonna get you heart and bothered. You think the number on the paper is some sort of either a get or he is gonna get it or some version of that. And we both know that’s not true. Number one, right? Because above market returns, they’re only possible up to a certain level. I mean, it’s, it’s not like you go from 15% to 300% that doesn’t work.
Omar Khan (37:31):
Number one. Number two what’s been happening is with the proliferation of all these capital razors, because they’re not operators. A lot of them they’re trying to do a mid, in my opinion, they’re trying to do a career pivot. So if somebody was making say, and again, this is not looking down on somebody somebody’s making $40,000 a year or 50 or $60,000 a year. And they’re trying to pivot, well, the issue becomes, are you the sacrificial lamb on which they’re going to go pivot their career on? Right? So you’ve gotta be aware of these same because I have so many investors. I know we tossed to people. People say outlandish things with nothing, backing it up as a, and as an investor, especially if you’re a newer investor, you will just assume some guy on YouTube have gone Facebook or LinkedIn. Well, if he’s there, he must be saying it. I mean, it must be true, but it’s not really true. But, and by the time you find out, it’s not really true, the person has your money. It’s two years down the line and now you, they’re not going
Reed Goossens (38:24):
Anywhere. So, so, so what do, what do you say?
Omar Khan (38:27):
So what I say at first for talk or diversity of people, right? And always realize it’s like, it’s like what the banks do with their interest or when they did it, when they were fixing interest, basically they would chop off the top code and chop off the bottom code. And then they would take the average of the middle, right. Come somewhere in the middle and use that as a baseline. So don’t talk to one person, no matter how reputable that person is, talk to at least five or six people. Okay. Now don’t talk to 20 because then you’ll be confused all the time. Right? Find a middle girl out, chop off the top. End of the estimate, chop off the middle end, bottom end of the estimate, take the middle and then use that to realize if somebody’s blowing smoke up your, but, right,
Reed Goossens (39:05):
Right. And it’s also understanding the risk adjusted returns, investing in a tertiary market versus investing in a growth market. You’re gonna have different cap rates. You’re gonna have different cash flows, standing. How the metrics on the financing side work and what levers people are pulling in order to try and juice the IRS through refinancing or over-leverage or me mezzanine debt slash equity. All these things can hurt and add all risk to the deals. So understanding that and comparing it a few against a few different operators in some new, for an asset classes also is really, really important. I E multifamily versus self storage or multifamily versus mobile home parts. Exactly. Or versus your office space or retail, like where do you think the long term future is best for your, your money, you know, to preserve it and to grow it over over a long period of time. So I completely agree with all of that. So before we drove into the lightning round, what are your, what are your parting thoughts for the average investor listening here today, who is, you know, looking at deals that you’ve just blown them with a lot of information from taxations to hedging your inflationary, uh, hedges to QSRs, to, um, talking about being viewed as a walking ATM, what’s the biggest piece of advice for the, for the passive investor out there today?
Omar Khan (40:19):
Look, the biggest piece of advice that I would give to people is a lot of people get really fixated on the deal, right? Oh, this deal says 20%. This deal says 18%. Look in reality. The difference between an 18 and 19% IR is like a few dollars. Maybe it’s not even enough dollars for you to buy a burger. Okay. But what you really have to, to figure out if this is what I do when I’m investing lot people is my, I have two criteria. The, the number one criteria is, well they’re actually together, is this person competent? And does this person, in my opinion, have share a similar, uh, set of ethics, right? Because what you don’t wanna be with somebody who’s very ethical, but a complete idiot, right? Is that doesn’t really help you. Right. But conversely, you don’t wanna be with somebody who’s extremely competent world class, but is a Bernie Madoff, the next Bernie Madoff.
Omar Khan (41:05):
Cause that doesn’t help you. Right. So a lot of times we get so used to making these quantitative judgments on an Excel sheet, 18, 19 1 to right. A lot of this still boils down to qualitative analysis. Like talk to somebody multiple times. If anybody’s trying to pressurize you to invest the first time you talk to them, take a step back, take two or three or four days. Don’t talk to that person, come back, see if it’s a good deal or not. Right. Right. But a lot of this is qualitative analysis because what you’re trying to judge is somebody’s character, which again is very hard to do because it was easy to do everybody to do it. That’s what you’re really trying to understand. And once you have comfort around that, once you understand that don’t even worry about the deal, because if you’re dealing with ethical, right. People who are competent, they deal will work out. Okay. And amount of good deal is worth dealing with people whose ethics are either shaky or they’re incompetent.
Reed Goossens (41:57):
Yep. I completely agree. And it ultimately goes back to that the person will invest in you as the operator first and foremost, before the deal. And that’s, it’s important to understand who you’re getting into bed with and, and who’s who you trusting your money with. Right? Who’s a steward of that capital over the next four, five C. So absolutely love that stuff, mate. At the end of every show, we love to dive into the top five investing tips. You ready to get into it?
Omar Khan (42:20):
Let’s serve. Let’s go,
Reed Goossens (42:20):
Mate, what is the daily habit you practice to keep on track towards your goals?
Omar Khan (42:24):
Oh, so the daily habit is basically I’m very calendar driven. So I, for me, as long as I’m calendar driven, a lot of things happen. Also. The other thing is I I’ve now realized, I realized this for a few years. If I basically write down like three or four, like two major things I have to do today. Right. Cause there’re always a hundred things. Right. I write down the two major things I have to do today and I can do them. Everything else happens. That’s
Reed Goossens (42:48):
A win. Yeah. Yep. Love it. Love it. Question number two is who’s been the most influential person in your it’s a D
Omar Khan (42:55):
Look, obviously I, the usual answer is your parents, right? For most people, that’s their parents. Right? Cause education, a lot of this starts at home. So I would say my parents, but also along the way, I, I wouldn’t say there’s one person, but there’s a lot of composite of people who at various stages, they even said, I mean, it’s even down to the point where somebody said a kind word at the right time. Right. And that helped me get through a certain barrier. So there’s lots of people. Look, I’ve had great mentors at professionally. When I was working institutions, Keith was a senior of mine. Ken was a senior of mine, my boss, Leo, you know, now I have so many entrepreneurs. I talk to you. I talk to Jonathan Toley. I talked to so many other people. So there’s lots and lots of people who are various times that either influenced me or set a kind word, which helped me get to the next level.
Reed Goossens (43:38):
Yep. Love it. Love it. Question number three is what’s been the most influential tool in your business that you can’t run the daily operations without it could be a physical tool, like a phone or a journal, or it could be a piece of software that you just can’t run that business without. What is it?
Omar Khan (43:53):
I think it’s like the G suite, uh, set of like whatever it, Google dos plus the G suite thing, like calendar email and that entire thing basically. But if I had to pick one, it would be the calendar.
Reed Goossens (44:02):
Yep. Yep. I, I do run all my business on Gdrive and it’s funny how back in the day work when you, I remember you used to working for a small company that actually have a physical drive in the office that they’ll save everything on. Uh, yeah. So it, it’s good to come to sump, to the cloud based system where everyone can access it. Um,
Omar Khan (44:20):
And you know, especially when we’re traveling, we can just whip out our phone quickly. See something.
Reed Goossens (44:24):
Exactly. Exactly. Question number four is in one sentence, what’s been the biggest failure in your career. And what did you learn from that failure?
Omar Khan (44:30):
Not focusing on marketing enough. I don’t know if that’s a sentence. That’s a sentence fragment. Yeah. OK. Uh, look, this is just my opinion. I think a lot of college educated people, especially in stem fields or mathematical fields, or maybe fields like finance, we, by the time we’re done with college, we end up thinking that, Hey, I just have to be really good at my job, whatever I do. And that’s, that’s good enough, right? That’s not really the case. Life works because in life, a lot of times it’s not the person who is the most competent. It’s a person who’s probably the most well known, at least on the face of it who gets success quickly. So learning that there is technical competence, but a good part of now me growing up as a person, the ability to present and tell my story in the right way and be a good advocate for that story. And that is something that doesn’t come naturally to me, but it’s something that I have to
Reed Goossens (45:20):
Learn, oh, here, here. And I’m completely the same as you. I’m a mathematical brain structural engineer have to learn about podcasting and advertising yourself and telling a story. So I love that that lesson, last question is where can people reach you to continue the conversation they wanna be in your sphere? Where do they go?
Omar Khan (45:35):
So you can reach out to me boardwalkwealth.com. You can also, uh, go to our homepage. There’s an email option, right on the right side of the page, scroll down name, email, how you found out about us, click the button. You’ll give you access, click on the link to verify yourself. And if you write in your email, when you email us, um, Hey, if you wanna be added to my mobile app, what we can do is just email me. We will, I will have my marketing guy, Sean, add you to our mobile app. We have exclusive video content. All of this is free for our, uh, subscribers. They can get all of this stuff for free. Basically. They don’t gotta go look around.
Reed Goossens (46:08):
That’s awesome, mate. Well, we wanna thank you so much for jumping on today. So I just wanna reflect some of, of the things that I took away from today’s show. I think I really love the way your energy that you bring to explaining something, you know, somewhat complex, you know, like inflation and hedging, your bets against inflation to the audience. I think breaking that down into what you need to do to get from point a to point B. I love your analogy about divers diversification and not, but what you are now doing to add different prongs to the fire, you know, cogs to the, to the machine in order to supplement and be in other businesses to help diversify, uh, your, your portfolio moving forward. And, and lastly, how to, you know, advise the passive investor on what they need to go at and do in order to look for a good sponsor, you know, obvious talk to a lot of people, but understand to invest in integrity first and foremost. And the deal actually comes second. So did I leave anything out?
Omar Khan (47:01):
No, I think you covered everything. It’s your show. You’re the boss.
Reed Goossens (47:04):
Well, mate, I thank you so much again for jumping on today’s show. Enjoy the rest of your week and we’ll catch up very, very soon. Thank
Omar Khan (47:09):
You very much. Thank you.
Reed Goossens (47:10):
Well, they, you have another cracking episode jam pack was some incredible advice from Omo. If really keen to go and check him out, you can just Google his name. OMAR KHAN. Omar can at boardwalk wealth, boardwalkwealth.com or on word, check him out over there, doing some great stuff in the multifamily space, but also in the QSR space. So really, really intelligent guy. Who’s got a lot of awesome things to say. I wanna thank you all for taking some time out of your day to tune in, to continue to grow your financial IQ, because that’s what we’re all about here on this show. And if you do like this show, the easiest way to give back is to give it a five star review on iTunes. We’re gonna do this all again. Next week’s remember be bold, be brave and go give life. I crack.