Aug 29, 2022
In this episode, we welcome Dr. Axel Meierhoefer, Founder and CEO of The Ideal Wealth Grower, to offer his perspective on what’s happening in the world and how real estate can still be a profitable investment even as the value of the money decreases. He digs deep into economic cycles, assets with long-term potential, and what we should be doing now to build and protect wealth. To Dr. Axel, the end goal is time-freedom point, where we can be free to choose what we want to do with our time and without having to worry about money and expenses.
[00:01 - 07:02] Stop Trading Time for Money
- Dr. Axel talks about how he started his journey to financial independence
- What is the time-freedom point?
- Through conversations about his investments, he’s able to educate others about wealth-building
[07:03 - 24:14] Invest in Assets That Hold Their Value
- Cycles in the economy repeat themselves, with periods of prosperity followed by recession
- Understanding these cycles will help us make better investment decisions
- More thanan money, we need investments that retain value and create legacy like real estate
- Is economic realignment under way?
- Solving the illiquidity through tokenized real estate
- Dr. Axel goes into detail how their platform works and how shareholders can benefit from the system
[24:15 - 26:03] Closing Segment
- Reach out to Dr. Axel!
- Links Below
- Final Words
Tweetable Quotes
“If you want to do something that creates a legacy, that gets you to the time freedom point, that allows you ultimately to turn something over to your kids and their kids can turn it over, you need something that retains value.” - Dr. Axel Meierhoefer
“One thing I know is people still need to live somewhere, right? And people still need to have some means of exchange with each other if they want to have any form of economy.” - Dr. Axel Meierhoefer
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Connect with Dr. Axel at the Ideal Wealth Grower’s website!
Resources Mentioned:
- The Fourth Turning by Neil Howe and William Strauss
- The Sovereign Individual by James Dale Davidson and William Rees-Mogg
Connect with me:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
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Email me → sam@brickeninvestmentgroup.com
Want to read the full show notes of the episode? Check it out below:
[00:00:00] Dr. Axel Meierhoefer: And that's why I'm saying we need to be aware. That's why these kinds of studies about, you know, where are we, where are we in the cycle, can this keep going on, or are we moving closer and closer to kind of like a realignment of some kind? And I think we do, I mean, certain things. I think we see it, you know, there's war in Ukraine, there's increasing friction between the United States and China as the two biggest economies in the world. Things are changing.
[00:00:38] Sam Wilson: Axel Meierhoefer is the founder of Ideal Wealth Grower and host of The IDEAL Investor Show. He's a mentor that helps his clients reach their time freedom point. Axel, welcome to the show.
[00:00:49] Dr. Axel Meierhoefer: Hey, Sam. Thanks for having me.
[00:00:51] Sam Wilson: Hey, the pleasure's mine. Actually, there are three questions I ask every guest who comes in the show. In 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get there?
[00:00:59] Dr. Axel Meierhoefer: Yeah, absolutely. Well, I started in Germany, came over to the US with the military, stayed longer than anticipated, and then actually had to decide, do we go back or do we stay? We decided to stay and out of that came a job in the civilian world as an executive in a software company, which begged the question, okay, so do you want to work forever or do you find a way to, you know, have a point in time when you don't have to work anymore? I said, no, I don't want to work forever, but how do I make that happen and started to research. And at the time stock market was terrible. So I looked for alternatives, found real estate really studied, turned our house that we lived in into an investment property. So we could move and basically went down that rabbit hole deeper and deeper and deeper. And ultimately now where we are is I founded an organization called Ideal Wealth Grower, which invites people to receive mentorship to go down the same path that I've gone down to build a residential real estate portfolio and reach what we, like you said, call the time freedom point, which we define as the point in time on the calendar where your passive income, the money that your investments make is equal or more than your life expenses, including like having a vacation and getting some nice things and going out to dinner and all the other stuff that you have and keep growing from there. And then you have the freedom to decide, okay, if I don't really need my regular job or whatever other income source you have, what do I want to do with my time? Which can mean you keep doing what you're doing, because you love it, or it can mean you want to do half of it because you don't love it so much and do something that doesn't make money, but you love that more. Or you can say, Hey, you know, I don't want to do very much at all anymore that is creating time for money, but rather do things that I'm really passionate about it. And don't care about money because I know my passive income is taking care of me and my family.
[00:02:57] Sam Wilson: I like the idea of that. It's certainly a theme that we've had here a lot on the show, which is, you know, no longer trading time for money. I mean, that's a common theme, I think, in most real estate investment circles. But tell me this, do you have, and I know it depends on the types of investments that you're putting people into, but is there a general rule where you say, okay, if you're going to make investments, is there a nest egg size? Let's say you're trying to replace, we'll just keep this easy math, that you're trying to replace a hundred thousand dollars a year income. What do you see most people needing in order to get that far in a passive investing, I guess, portfolio? They need 1 million, 2 million, 5 million. What do you see on average?
[00:03:41] Dr. Axel Meierhoefer: Yeah. I mean, that million in asset value is one way to look at it. What I have done is actually to look at what is a realistic cash flow outcome from a residential real estate property, meaning like a three bedroom, two bath, four bedroom, two bath single family home or duplex, something like that. What I found is for, like what you're saying, a hundred thousand is kind of like in the area of about 8,500 a month or something like that, you're looking anywhere between 10 and 15 properties and depending on how much income, how much disposable income you actually have that can take anywhere from 8 to 12 years to get there.
[00:04:18] Sam Wilson: Got it. That's a very precise answer. I appreciate that. That's very, very helpful. That's really cool that you helped people kind of get down that path. How did you hatch the idea that you could bring other people along this journey?
[00:04:30] Dr. Axel Meierhoefer: Well, I didn't hatch it to be very honest. Actually, other people hatched it so to speak for me and they hatched it based on the fact that, as I got more and more passionate and excited about the whole investing, I don't know, some people might say it feels a little bit like bragging, but I just felt it was exciting to me to tell other people what I was doing, you know, telling people, Hey, I found this awesome property in Idaho and I bought it and it's managed and it makes, at the time when we first started, it makes $200 a month. And then a couple of months later, we meet for, I don't know, Memorial day or Thanksgiving or something like that. And somebody says, so anything new that then you're doing? And I said, oh yeah, yeah, I found a new one in Ohio that I'm doing now, right? And so over time as I kept, my conversation became more and more I did this investment, that investment and so forth. And some of my friends and colleagues were saying, wow, I mean, you, aren't you afraid that, you know, like how do you know that they work? And so, I have always been in this kind of instructional, loving to educate other people kind of frame of mind. So I immediately started to get a quote, unquote, lecture people, oh, I'm looking at this and we analyze this and this and that and so forth. And after a while, people basically knew, okay, if we ask him something, he's going to probably go down that rabbit hole again. But there were also sometimes situations like I had a property we lived in California, in the Santa Barbara area. And when my wife and I moved, we turned that property initially into an investment property and then ultimately 1031 exchanged it into a whole bunch of smaller properties in the Midwest. So that was a great new story for our friends and family. And at some point, people back to the point of hatching said, you know, for years now you have been telling us about it and you have all this kind of fancy language and stuff like that. But the bottom line is you're obviously making the money because sometimes the conversations were okay, so you're doing this consulting work and the economy is going up and down. Do you always have enough money to actually pay for everything? And you're living in pretty expensive areas? And I said, well, you know, it's been all my business initially, but now it's subsidized by more and more of the passive income. And I'm actually looking forward to the day when all the passive income is enough. And I don't really have to necessarily work in any kind of regular job anymore. And that was probably the hedging point, right, where people said, well if that is really what is happening, you should tell other people how they can do that too.
[00:07:02] Sam Wilson: That's awesome. I love that. What are you telling people right now? I mean, the conversation, I mean, obviously everybody's crystal ball is broken, but people are looking right now, I think, especially investors are going, where are we? Where are we going? What's coming down the pike? I don't know. What are your thoughts on that?
[00:07:20] Dr. Axel Meierhoefer: One thing that I've always been interested in let's say the last year or two, I have really started studying quite a bit is to see how have we, and to your original question, how did we get to where we are right now, but on the bigger picture. And so if somebody were to ask, okay, what did you study? Where did you go? What did you find? I, for example, looked at a book that I really, really recommend is called The Fourth Turning, which actually describes that economy and social developments are happening in cycles that are anywhere between about 90 to 120 years long. The two authors analyzed that for the last 500 years and found that about a hundred-year cycles keep repeating themselves. So if you look at where we are right now, we are at the end of a hundred-year cycle that started with The Great Depression, right? So if you read it, I don't want to go too deep about what that particular book says, but fundamentally that's one thing to say, okay, what are the indications of where we are and what is to be expected? Another one is the book called The Sovereign Individual, which basically was written just when the computer age started projecting that microprocessors and the internet and mobile phones and all that kind of stuff is fundamentally going to change our society. And I think we've all seen this, but what hasn't happened, and you and I, before we started recording, touched on blockchain and crypto and stuff like that. The Sovereign Individual is basically going through the extreme, in a sense to say, we need to have sovereign money, right, and you, if you think that through what I'm taking from, that is, well, ultimately the things that make us as individuals, sovereign, if that's really something that we want or that we believe that we have rights and so forth, then the things that we can really influence ourselves. So I go back to the fundamentals and say, okay, we, as human beings need shelter. We need safety. We need food. And we need one thing that Maslow doesn't have in his basics for pyramid of needs is some way to exchange with each other. Now, right now, if you take the money that we are always talking about, when we are talking about real estate investing is basically the money governed by our government. And we have ours in dollars and the Japanese have Yens and the Chinese have Won and the Europeans have Euros and sometimes you might be lucky to live in an area where the money is at least reasonably stable, even though if you look from The Great Depression to today, 99% of the value of the dollar is gone. If you compare what was the dollar worth in 1923 and what it is now, what you can take in 1913 when the federal reserve was started, anywhere between 95 to 99% of the value is gone, right? So why is that relevant? Because every kind of money, things like pretty pictures under the pieces of paper that have ever existed ultimately become worthless. So for me, going back to your original question, that means what I'm looking at is what are the things that retain their value. Nobody would debate that a gold coin, a one ounce gold coin has value, had value 5,000 years, 2,000 years, a thousand years, and today, right? I think something similar will happen with something like Bitcoin. But the other thing is when we go back, anything that is related to real estate always had value. And even in the way that we built here in the US, which is not like the Romans built or some of the early Europeans built, but even our houses now is a hundred years. And when you look at a house that was built in 1913 and kept up well, because $4,000 to build a really nice house then, that house is probably $400,000 now.
[00:11:15] Sam Wilson: Every bit of.
[00:11:16] Dr. Axel Meierhoefer: And the thing is what is really an interesting way to think about, when the people in 1913 when the fed was created, moved into this brand new house, did they get any different value from the house in what it is for? What does it provide? To somebody who buys that same house now fully renovated by a turnkey provider. And the new family moves into that same house, they get the same fundamental value of living in a space and all that out of the house. But it's a hundred times more expensive. Or you could say your money is a hundred times less valuable. Those kinds of things go through my mind. And that's why I'm saying, you know, for the people that I work with, I always want to get the message across that if you want to do something that creates a legacy, that gets you to the time freedom point, that allows you ultimately to turn something over to your kids and their kids can turn it over and so forth, then you need something that retains value. And that's where you get to real estate and gold and silver and maybe Bitcoin and things like that.
[00:12:22] Sam Wilson: Yeah. That is absolutely, absolutely true. The other way I think about that is things that can be repriced or repriced easily. I think about, you think about real estate. Okay. So you buy an income-producing real estate. Well, today you're paying in dollars, and then maybe it's next year, our version of money has changed, but I can still then reprice that to whatever that day's version of money is, is that kind of what you're saying?
[00:12:48] Dr. Axel Meierhoefer: Well, that's one way to look at it or you could basically go and say, okay, how much did an ounce of gold cost in 1913? How much does an ounce of gold cost right now? And how many ounces does it take to buy the house? And if you compare that to the number of dollars, you will be shocked because obviously, I'm not pooing currency because it's a dollar or because it's a yen or because it's a Euro, the system in and of itself, the way we are living in and where we are right now, if you look at our economy and you said the crystal ball is broken, true, but there is a lot of facts. You can't debate or deny the fact that we have more than 30 trillion, I can't even fathom what that means, but 30 trillion in national debt. That doesn't include city debt or state debt or anything like pension plan debt. Anybody who's ever done anything in business or even in your private life, where you're so, so over-leveraged in debt. Now we go and bring it to our real estate investing or your Bricken Investment Group and you think about, and talk to your clients. I'm sure you're bringing this up too. When the media tells us the federal reserve has increased the interest rates by 1%, for now one and a half percent in the last two cycles, it gives us automatically because we think in those categories, oh, one and a half percent. Yeah. That's something, but it's really not that much. It takes on a different quality when you look at it that, okay, that debt that we had in 2021 cost us 562 billion in interest at 0.25% interest. Now we are at 2.5%. How much is that? That's eight times as much. Well, and basic math tells us if it was 560 billion, it's eight times more interest and all we're talking about paying interest on it, it's eight times more than that, right? So we are looking now at potentially paying $2 trillion just an interest, but guess who is paying that? Anybody who pays taxes that in some way. And that's why I'm saying we need to be aware, and that's why these kinds of studies about, you know, where are we, where are we in this cycle, can this keep going on, or are we moving closer and closer to kind of like a realignment of some kind? And I think we do. I mean, certain things, I think we see it, you know, there's war in Ukraine, there's increasing friction between the United States and China as the two biggest economies in the world. Things are changing, not necessarily with guns, in Ukraine, yes. But in the bigger picture, we are not really shooting at each other, which used to be the way, right, the French revolution, World War I, and World War II and stuff. We used to shoot at each other and then at the end we reorganized everything. That's how the United States became the number one dog in the game, right? But I hope at least that we are not going to shoot at each other to realign, that we just realign by recognizing that certain things are just not sustainable going forward anymore. How is that going to look like? I can't predict, but one thing I know is people still need to live somewhere, right? And people still need to have some means of exchange with each other if they want to have any form of economy. However, that might look like. I don't know if we all going to have Bitcoin and Lightning Network in the future as our way of exchanging, or if we have a hybrid between regular money and digital money, who knows. But the means to exchange a service for a good, you know, something you do for some food that you buy or a car you want to have, and one of the ways that we are doing it in our Ideal Wealth Grower system is to help people to have value assets that even as the value of the money is declining, the value of the property remains. It's just more money. But that house in 1913 and the house in 2022 is the same house, fully renovated, same service that it provides to you. It's just more little pieces of paper that you need to put on the table.
[00:17:00] Sam Wilson: Right. Yeah, absolutely. I like that idea where the value of whatever it is you're investing in remains absolutely the same. Tell me about this. You guys have, are working on, or maybe you currently have a platform where it is bringing some liquidity to real estate investments. I know, especially for us here on the commercial side, when someone parks a hundred or 200 or $500,000 with me. That's a pretty illiquid investment for actually all of us, myself included. I'm in plenty of deals right now that are completely illiquid. My capital is parked. Of course, I get my returns, but it's still parked capital. How are you guys solving the liquidity issue in real estate investments?
[00:17:43] Dr. Axel Meierhoefer: Well, the way we are serving it is basically by what I call fractional or tokenized real estate investing. And it's in a sense, you know, yes, you are a person. Yes, you may have an asset like a house, but for the stuff that you do, you get paid in some form of income salary and stuff like that. If you take that analogy and you try to transfer that into a typically illiquid asset, like real estate, we are using a platform that a friend of mine has founded where they go out basically and say, okay, let's look at the criteria that we want to have for a well-performing residential real estate property. Let's say a fourplex, and that fourplex is somewhere in the Midwest and it costs $240,000. And we have four units, each unit is rented for 600 bucks. So we have $2,400 rent. Now I would say, and I'm sure you would say just on the phase, regardless of how the process works underneath, that's 1% performance between purchase price and rent. That's pretty good. And if these four units are reasonable, like one or two bedroom, one bath units, $600 a month is actually not really an outrageous level of rent, right? So you have some of the criteria, then you look at the region where it is and you find out, well, this house is in a nice neighborhood. It has good access to reasonable schools to shopping, to transport and all those things that you would normally use to identify suitable properties. So this company, this platform goes and said, let's sign a contract for a 123 Bricken Avenue where this house happens to be. They put it under contract and the right next step is to say, okay, now let's form an LLC. That we call 123 Bricken Avenue, LLC. And because it's $240,000 and we want to sell the shares at $50 a pop, it's, what, $4,800. And then they put that literally on the platform. And so we have two scenarios, people who come to us and say I have 10, 15, $20,000 that I can use to invest. And we all know how the markets have gone up in value. That's typically right now, too little to really be able to make an investment in a full property, right? If you take our $240,000 property, we need $48,000 down payment for 20% up. So if you have 20 or 25, I would say, well, let's park it in our cash flow parking spot, which is this platform because that 123 Bricken Avenue for your 20 or $25,000, we can get about 10% of that LLC in shares. Of those 4,800 shares, we can get probably 450 or 480 for the money you have. And you will participate in the performance of this property, in the cash on cash return. They have $2,400 rent, the depreciation, all the good stuff that I'm sure you have many times mentioned on how real estate is actually a really good investment and what it does for an investor. All of that, you participate in. The only thing that you don't have when you invest in this platform compared to buying a property outright is the leverage, right? Because if you had to only put in these 20% slash $48,000 and you get a $240,000 property, you make all the rent, you get the whole benefit, but you only needed to put 20% in. Well, if you go on that platform, it's basically a cash purchase. But the beauty is, and why we are recommending it is for one, for this person that has that 20, $25,000. But also for people to say, I know real estate investments is getting me into valuable assets just as we discussed earlier. But I only have a few thousand or I can only really put a couple of hundred dollars aside, but then you can get familiar, go through the same process, all the things that we normally do as I mentioned, and putting your money into this cash flow parking spot until it has grown to be enough to make a direct investment into your first own property. And the reason it's liquid, because that's what you were asking, Sam, is how do you do it to keep it liquid is that, in this kind of investing, it's a cash purchase and the rent proportionally to how many of the shares you own? Let's say you own 450 of the 4,800, you get proportionally that's about 9% or so, 9% of all the things, the depreciation, the rent, and so forth. You get every day. Now you don't get your tax papers every day. You get that once a year, but the rent is basically in your account. You can log into your account. And every day at 6:00 PM, you see the rent for the day is there, which also means if the day comes where you say, Hey, Sam actually wants to now buy this property next door. That is the same thing, same price, same rent, same thing, but they want to own it together. Well, then we sell our shares. We got our rent yesterday at 6:00 PM. And we get the value of our shares, plus any kind of appreciation and now have that cash to buy the property next door. That's just another fourplex, the same thing on the same street, right? So that's basically how we basically keep the liquidity because I call it the share, meaning like the relationship between those who actually have the property on the platform and us as the investors is updated 6:00 PM every day. So the fact that your share, basically your relationship with the providers is up to date at 6:00 PM every day, which means you basically are good. You have your rent money. Everything is in your account. If you say, I want to sell my 450 shares tomorrow, you get the value of your shares. If there was any appreciation in the property, then they're not $50. There might be $51 now per share. Plus you get got all your rent up until yesterday night. So you're all good.
[00:23:43] Sam Wilson: That's amazing.
[00:23:43] Dr. Axel Meierhoefer: Obviously, these shares don't go back to some kind of title company. They just go to somebody else, either in the LLC or on the platform where every Friday after 3:00 PM, any shares that have been provided back to the platform for, say, for anybody who goes there and wants to have some more, right? So it's basically, very, very liquid in that sense, but all the rules, all the things that we and your audience are familiar with when it comes to residential real estate investing apply except for the finance.
[00:24:14] Sam Wilson: Right. Axel, this has been absolutely fascinating. Thank you for taking the time to come on the show today to kind of break down where you think we are going in the economy. We've talked a lot about money. We've talked about ideal wealth growing and talking about, you know, finding the right amount of cash flow to how much money you're looking to replace. Things like that. And then also just a really unique platform that you guys are working on that is bringing liquidity to the real estate, I guess, you could call it shares space 'cause they're, that is really what's lacking is liquidity amongst shareholders. So I think that's going to be a really interesting thing that, you know, and we see this coming. It's something that's been needed for a long time. So thank you for taking the time to kind of pioneer that product and figure it out here for our investors. If we want to get in touch with you or learn more about you, what is the best way to do that?
[00:25:00] Dr. Axel Meierhoefer: One best way is to just go to idealwealthgrower.com and wait about 30 seconds and something pops up and says, set up a call, so you can do that. And you get like, an invitation to the newsletter and stuff like that. But also if you just put Ideal Wealth Grower into Google or any other search engine, we are pretty much on any social platform and so forth. So there's a thousand roads that lead somehow to get to us and get in touch.
[00:25:26] Sam Wilson: Awesome. And we want to make sure, of course, we put that in the show notes, idealwealthgrower.com. Axel, thank you again for going to the show today. I certainly appreciate it.
[00:25:34] Dr. Axel Meierhoefer: Yeah. Awesome. Thanks, Sam. Thanks for having me.