3 Degrees of Freedom

Ep 140 - Leveraging an Unfair Advantage to Create Freedom with Ethan Gao

May 16, 2023 Derek Clifford Season 3 Episode 140
3 Degrees of Freedom
Ep 140 - Leveraging an Unfair Advantage to Create Freedom with Ethan Gao
Show Notes Transcript

In this episode, we are joined by Ethan Gao, a dedicated family man and esteemed attorney with a wealth of knowledge and experience in the field of law. Ethan's expertise extends beyond his legal practice, as he is also a successful life insurance salesman, helping individuals secure their financial futures and protect their loved ones. Additionally, he serves as a gap lender, providing crucial financing to bridge the gap in various projects and transactions. As a key principle and loan guarantor, Ethan ensures successful project completion, making him a trusted figure in the commercial real estate community.

Ethan delves into his journey, revealing his mastery of the three degrees of freedom and discussing which area he aims to further develop. He shares invaluable advice for individuals aspiring to attain his level of expertise in their chosen field. With an unwavering commitment to success, Ethan provides insights into his daily motivation and productivity practices, offering a glimpse into the mindset that has guided him throughout his professional growth.

Our guest paints a vivid picture of his evolving definition of success, shaped by his experiences and achievements. Finally, Ethan offers an exciting glimpse into the future, sharing his vision for himself and his business in the next three to five years. 

Join us in this captivating episode as we explore the strategies and philosophies that have allowed Ethan Gao to leverage his unfair advantage, ultimately creating freedom in his life and inspiring others to do the same.

Connect with Ethan using the links below and learn more about his business:
LinkedIn: https://www.linkedin.com/in/elgao/
Email Address: ethangao@gmail.com

Unlock 3+1 degrees of freedom (time, location, financial + health) with our 5-Point Blueprint! https://elevateequity.org/podcastgift

If you really enjoyed this content and are looking for more, you can continue to learn more about us in several different places for free!

If you'd like to have a FREE copy of our 7 Ways Commercial Real Estate Syndications Protect and Build Wealth, simply click the link below. We are here and vested in your long-term success! elevateequity.org/7waysEbook

Unlock 3+1 degrees of freedom (time, location, financial + health) with our 5-Point Blueprint! https://elevateequity.org/podcastgift

If you really enjoyed this content and are looking for more, you can continue to learn more about us in several different places for free!

If you'd like to have a FREE copy of our 7 Ways Commercial Real Estate Syndications Protect and Build Wealth, simply click the link below. We are here and vested in your long-term success! elevateequity.org/7waysEbook

Derek Clifford:

Today, we've got Mr. Ethan on the Zoom call. How are you today, Ethan?

Ethan Gao:

I'm great. Thanks for having me on. Derek, how are you?

Derek Clifford:

Thank you, sir. I'm doing well. For those who don't know Ethan, Mr. Ethan Gao is a father of five. Which shows his dedication and commitment to his family values professionally, Ethan's an attorney with a wealth of knowledge and has experience in law, and he's also a life insurance salesman who's helped numerous people secure their future and protect their loved one's financial future, as well as a gap lender, Ethan provides financing to bridge the gap between what a borrower has and what they need to complete a project or a transaction. And he's also a key principal, loan guarantor and completion guarantor. Providing financial support and assurance to make sure that projects are completed successfully. And he's got a diverse skillset of experience. He's become a respected figure in the commercial real estate community ever since you came onto the stage about, what was it, maybe a year to six months ago? I think we first met each other. And so yeah you're, more involved in some of the meetup groups and love to see on LinkedIn and all those social platforms. So, Ethan. Which of the three degrees of freedoms, which is between time, location, financial, would you say that you're currently the strongest in? And then which one do you think you want to grow more in given your business and your background?

Ethan Gao:

Yeah, so I have zero locational freedom, so that leg of my school is completely there is no leg of the school, so I've got five kids. We live in Houston, Texas. We've been here 10 years. We love it here. We got a big old house in the suburbs, and my, family is fully entrenched here, so I have zero locational freedom and it's not really something that I'm looking for unless there's some really weird weather event or like it floods every day or something. So I've had time and financial freedom for approximately five to seven years. I'd probably like to get more time freedom. But of course all of those are related. As Derek the more time freedom you have, that probably means you have more financial freedom and vice versa. If you've got more financial freedom, then you've got more time freedom cuz you can just say, Hey, all of these people that I but I don't really like that much, I can just stop talking to 'em.

Derek Clifford:

That's right. And I, get the whole financial piece and as far as like the location free freedom piece goes, there is a certain point where you can get your, time and financial freedom up to a point where you're like, all right, kids, we're gonna go on a yacht and we're hiring your teacher at school, and she's just gonna come and, or he's gonna come and we're just gonna, he's gonna teach her right on the yacht. So I imagine that there's obviously. If you have enough money or enough time, you can throw stuff at it. But for most people, I understand this is just generally where it is. So if you're looking to grow that that, that location freedom, do you have a plan for it or have you thought about it? Or what's your, general approach to maybe trying to create some of that? Are you just waiting until the kids get older or how does that work?

Ethan Gao:

Yeah. So for me, location, freedom's not super important. Unlike you guys, I'm not a big traveler. I never really grew up traveling, growing up. And then I'm a little bit curmudgeony, as you might see from various podcasts I give. I don't actually love to travel. I, went to Europe with my wife in 2000 and. Nine. I think I, I might be getting this wrong. So, my wife is a, she loves to travel. She grew up traveling. She loves to see new stuff. And so the last few days I was like, man, I'm spent. I'm gonna stay at this hotel and I'm gonna watch Family Guy. And that's what I did. I sat at the hotel and I watched Family Guy, so I got to see Oxford, but I did not see Cambridge. And I just asked my wife, was it basically the same? And she said, yeah. I was like, okay, cool. I watched Family Guy that day.

Derek Clifford:

I think there's something to be said here about this. This is a different direction than I was imagining we were gonna go here with this. But I think that there's something too, if you're married and you have kids, you know what is what's important to them too. And sometimes you gotta mold to that. I love this though, Ethan, because maybe the fact that you and your wife and your kids especially you and your wife have worked so hard to get this life for you, you get to be able to enjoy some of that. So if you do have the location freedom, as long as your wife takes all the kids or most of the kids, right? Maybe you have a, remaining balance of them at home or something with you, right?

Ethan Gao:

No, they're a packaged yo man. It's, they're, it's all or nothing. Sometimes we, don't get, we get discriminated against constantly. Both subtly and not subtly. Like for example If you invite, my kids to a birthday party and you don't want five kids being Chinese you might not have a choice. So we got some, we've got some really good friends where we already know we're, half the party with just my, crew. That's very cool. And then there's, and then there's some, they're just like, Hey, can you just bring this one particular kid that's actually friends with my kid? We don't actually know the other four and we don't want to pay for, the kids to come to Chuck Cheese, which I totally get in respect cause I would be the same.

Derek Clifford:

Yeah. I know. Appreciate.

Ethan Gao:

But yeah. My kids are basically a package deal. So it's a reflection on my wife more than anything else. So I, think a lot of this is just influenced by your parents growing up quite a bit. And then with mine, definitely personality it's a better fit for me. My parents are homebodies and they're never really cared about going places, and so I never really did either. And then just in general, I prefer comfort and I prefer a consistency in my schedule. So when you throw travel in there, it basically completely blows it. Away. So I don't, I get very uncomfortable sometimes traveling because it blows away the consistency and my responsiveness and how I manage my, business. But my kids love traveling. So my wife has taken them on two week trips across the United States and they love that and this, and I'm like, look, I can just go to Laine if I need to get a. Croissant or something like, that's pretty much the same as going to Paris. Like it's not that different. Or I'm like, Hey, I'll just, I'll watch this on YouTube. I'll watch the fireworks on YouTube. It's pretty much the same, except I didn't have to be there with a billion other people.

Derek Clifford:

Yeah. It's really funny how some people have the draw to want to travel and some don't. And to be honest with you, like I like travel just because we get to experience some new things, like we get new food and new culture. Some of those things that you can't get. At least as, the real deal. But let's, shift here just real quick. So your wife loves to travel. Your kids like to travel, right? And, you don't, was there a discussion at any point or did you guys just decide, oh, you know what if, she likes to travel, then she can just go do that and I'll just stay at home or I'll stay in the hotel. How did you guys negotiate or find that out and how did you guys come to the solution to be like, look, you just go do it. Like how did you arrive at that?

Ethan Gao:

Yeah. So I would say that's prob, so my wife and I are pretty much like 95% consistent in almost everything. So I met her when I was 16 and a half and she, had just turned 18. So we met the first day of college at Cornell University. Wow. So I literally met her. In one of my first classes. And then we started dating and then we started living together. So essentially I've been married since I was 16 and a half, more or less. And she's been married since she was 18. So we just have a lot of common life experiences going to the same college, having relatively similar jobs. She did investment banking And private equity, which are very high demanding type of jobs. And now she and I have the same ethnic background. We both were born in China and we moved to the US as, kids who didn't speak English when we were young all this stuff. So one of the biggest gaps we had was this traveling thing. I just didn't really care that much and she really loved it. So the, way it worked was, I it, didn't really work. I was just completely exhausted. So we did a two week tour of Europe and we went to Belgium, France, Italy, Switzerland, Germany, and the uk. And, the UK was the last portion. And I was like, man, this is pretty much, I was just spent, so the last four days I was just like, look, I'll come on the trip. But the actual sites I don't want to go to. I don't really need to see both Oxford and Cambridge. Just show me one. The other one's pretty much the same. I. And so she was like, that's fine. And so she just did it herself. And so we've known that was our preference set. And then with the kids so sometimes she'll take these two week two week long trips in the middle of the summer and she'll just take them. Usually my in-laws will go with her, so she's got other support. Makes sense. But a lot of times I basically thought her look I, can probably go for Three to five days without it really impacting kind of my business or, just being super annoying for me. And she just said, you know what? Why don't you just stay? So sometimes my parents will come and then they'll stay with me while my kids are gone with my wife and my in-laws, ah, some other times, like my friends will come and stay with me and keep me a company and stuff. It's rare that I'm just alone by myself in a big house. That's all. Or sometimes I've done like the first three days, like I'll fly in, we'll do three days, and I'm like, I'm out. I gotta go. And then I'll fly out. That's very cool that they do the rest.

Derek Clifford:

Yeah, no, I love that. Thanks for explaining that. I think that gives a little bit of shading to people who are maybe thinking that it's black and white and it really isn't black and white. There's there's a lot of options that you can have, especially if you like travel and maybe your spouse doesn't. If that's the case, then maybe you can do what, Ethan and his family's doing, which is an awesome idea. Bring, the parents in to either go with you or to stay with you or stay with your spouse. Or go with your spouse. I think that's a really, cool idea and I love that approach.

Ethan Gao:

Generally speaking though, you can't send your spouse. Spouse with your parents. That usually results in all kinds of fights and issues. So you can send your spouse with their parents or you can go with your parents, but usually mixing those two is gonna not result in anything happy for anybody.

Derek Clifford:

That makes a lot of sense. I love it. Okay. Yeah. So let's switch gears here. So I think that your your the, degree of freedom that you have the most mastering in is the financial right. Yes. And if people wanted to develop their own level of mastery in that degree freedom, which is financial, what advice would you tell them early on? What would you give?

Ethan Gao:

Yeah, I would say a couple of things. I bought my first life insurance policy nine years ago, and then I liked it so much that I became an agent seven years ago. So it life insurance is real estate, so the best time to buy it was many, years ago. The second and best time is right now. And in particular for life insurance. I'll just give personal examples. So when I bought my first policy when I was 27, I got the highest health rating. So great, for me. And then I bought another policy. Three years after that, I gained 20 pounds and then I got the second best health rating and I bought my last set two years ago when I got diagnosed with sleep apnea, which is genetic for me, my father. Has it, and my daughter has it as well. So once I got that diagnosis, I'm basically permanently stuck at the second worst health rating. I could become a muscle guy and lose 40 pounds and it doesn't really matter. I have sleep apnea, so therefore I have a much higher chance of randomly dying throughout my life versus somebody who does it. So therefore, I am stuck at the second best rating. So that's why I always tell people. Buy life insurance early when you're healthier. Cuz 98% of people do not get more healthy as they age. Usually once they hit their mid, middle, mid thirties, early forties, a bunch of genetic things will start showing up and it becomes harder and harder to get the highest health ratings. And when you get the highest health ratings, you also get a better deal on the life insurance product. So that's something I would say, just buy it early so I have it. So I I'm a real practitioner of that, so I got it on all my kids as soon as they were born. So they had zero chance of reflecting any genetic issue. There you go. Yeah, it's instantaneously, right? So I've, hedged that bet.

Derek Clifford:

Let me ask you too because there are some famil, there are some people out there that may not be familiar with the types of life insurance policies that are out there. I've heard of infinite banking as a concept that also utilizes some form of insurance policy, if I remember correctly. Where you're able to borrow from yourself, essentially, right? Like you put money into this thing and then you can use it to help fund your own assets in, within your insurance policy. Can you talk a little bit about how, basically how it works for people and how it fits into your. Degrees of freedom, essentially, cuz I want to help like empower people to maybe follow along your footsteps if they want the same degrees of freedom that you have.

Ethan Gao:

Yeah, that's a really interesting question. So life insurance is relatively flexible, so let's just start with the, first principles. So there's permanent insurance and there's per insurance is what most people are familiar with. You pay X dollars usually less than a hundred bucks a month. You get covered for several million bucks. So in case you get hit by a bus, your spouse or your kids or your in-laws or your family is protected, right? So most people have that through work, through a group plan. It's usually pretty competitive pricing wise. And then even if you shop for it outside of your group plan, and even if you have some sort of health issue, it's still not gonna be that expensive because in general it's, like a rental. So once your rental term is up, so usually that could be age 65 or 10 years, 20 years, whatever the case may be. If you die the day after that term lapses, you get $0. So all you've really done is you've given the insurance company money for a period of time that they booked us earnings. That was just. Not free money for the insurance company, but it was in, in, some ways. You never got anything out of it other than this protection. So I it's kinda like car insurance. Car insurance is generally not that expensive unless you start crashing your car all the time, like my wife does.

Derek Clifford:

Yeah. Then it becomes expensive. There's a premium that you pay, and then depending on what features you want on that policy, you pay a premium and everything is captured into that one payment over the life of the time that you're covered. And then if something happens during that coverage, then whatever the limit is or whatever the the payout is based on it happening according under those rules, then you get payout of that policies limit.

Ethan Gao:

Absolutely. And I like to pick up my wife. She has totaled her car three times and then the other person's car as well. So we have made tons of money off of Geico insurance so much that they no longer really want to they raised our premium significantly. So now we're at progressive and hopefully we won't be crashing our cars anytime soon. And then maybe we can go back to Geico. Pretty, decent service. We've gone through the claims process multiple times. But the cars were, that's six cars gone. Out of the market. So that's number one. So a lot of people have term insurance and then the Dave Ramsey Suze Orman's, they always say buy term and invest the difference. America's a consumption driven society. Nobody does that. I think fewer than 1% of people have the discipline to do that. They will buy term and then they'll just spend the difference. So it doesn't really do anything. Whereas a permanent policy, which can come into various different shapes I, myself, own a bunch of whole life policies, and then I own a variable universal life policy. I do not own a index universal policy, but I've looked at many of those and I'm familiar with them. We've got clients that own them. So all of these are permanent policies. What it means is you should theoretically die with this policy in place, so therefore you have a 100% chance. Not you, but your family has a 100% chance of collecting on this policy when you die. So you've now, you've given your family financial stability in case you die, and then the longer you live, the more payout they get. So that's very different than a firm policy, which is if you die the day after, it's too bad. It's, all or nothing. That's right. It's like a, it's like an option in the stock market Silicon Valley Bank, it either goes to a billion or it goes to zero. You don't really get the range of possibilities in between. Yeah. So what I really like is, I like whole life policies that maximize the cash value day one. So there's policies you can buy. Where you could put in a hundred dollars and you could borrow out $95 to the next day. It's not technically a loan to yourself. A lot of people get this wrong and a lot of the sales and marketing techniques I, know why they say it this way, but it's, technically imprecise and I don't like being technically imprecise with anything. You are either borrowing from your policy, so the life insurance company makes you alone. From their cash, or you pledge it to a third party like I do to a bank, and then I have a line of credit against Ah, the policy. I see. It's generally cheaper to get it from a bank. It's generally not. Not right now. It's a weird interest rate dynamic. But for the past few years before the Feds started raising interest rates, I was borrowing from a bank at 3%. And I was making five to 8% within my policy. So that was almost like a arbitrage or positive carry. I should be trying to put in as much money into the policies as possible and then just borrow when I need to. So that's what I do with my personal.

Derek Clifford:

Got it. And that five to 8% is you issuing notes to various investors or in investing in instruments or notes something else, right?

Ethan Gao:

No. That's the rate of return inside my policy. I see. Very cool. That was my long, that's my long term rate of return within the policy. And that's, a post-tax number? Yep. So the higher your tax rate is life insurance basically grows tax income, tax free. So the higher your tax rate is if you're like a fancy doctor or a fancy lawyer, your tax rate is gonna be way too high. Yep. The tax equivalent you're gonna get closer to the 8% tax equivalent. Yeah. If your tax rate is zero, cuz you're a real estate investor and you know you've never made a dollar, then it's you're gonna earn closer to the fourth. Yeah. Because there's, the tax adjustment is zero cuz you don't pay taxes anyways.

Derek Clifford:

Of course. Okay, so let's, talk about this real quick. So one of the things, one of the ways I got to know you was that you're a gap lender, a KP, loan guarantor. For those out there who don't know what that means, a gap lender is someone that I mentioned in the beginning of the show. Basically it's, someone who is able to help get a property closed, right? It's like a hard money situation, more or less. But basically it helps fill the gap between what a sponsor needs to close a deal, because sometimes they'll raise capital to get 90% of the way there, and then they're missing 10% and then they have some things in the hopper, but the close date's coming and they may lose the opportunities. So they need to find someone to step in that can lend them that money to close.

Ethan Gao:

Exactly right. So most people just associate with a hard money loan. Again, that's technically imprecise, but it's the best baseline. A hard money loan is almost always a first lien de of trust. In our situations, that's not available. There's already a lender that already approved you. You can't just replace you can't go. Replace 7% money with 18% money and then still be able to pay your investors that 15 to 18% IRR or 7% cash on cash, that'll be impossible.

Derek Clifford:

Yeah.

Ethan Gao:

So the situations that I really am looking for are situations like you described, Derek, where let's say you're buying a 25 million apartment building in Phoenix, you're gonna borrow 15 million from Freddie Mac. That means you need to raise 10 million of limited partnership money. This is a specific case. This is why I'm, saying this so specifically this is the first deal I did in this space. So that lead sponsor raised 8 million. She could not raise the last 2 million in time. She could not get an extension. She had hundreds of thousands of dollars of earnest money at risk. She felt very confident that she could raise a. Money to pay me back post-closing my,$2 million in that case post-closing because she had already she'd already done 10 deals before, so she was just like is there something? There was just something go, yeah, it was just the deal was the, her normal bread and butter deal. It was going to the same investors. Just for whatever reason on that one she, fell short and she couldn't get an extension. Many times you can get an extension, just post more earnest money. Usually that's how you get an extension. Yep. Or make more of it non-refundable. So in that case I lend her 2 million bucks and she closed. She was happy. She made our acquisition fee. She didn't lose her earnest money, and then she continued raising money post-closing, and it took her six months to raise all that money. And she paid me back and she paid me along the way. So every two months, she basically made a principle reduction. So that worked perfectly, and that's really what I'm looking for. I'm looking for a situation where somebody has raised at least half, and I really prefer that they've raised 70 to 80% if possible. But we'll, consider cases. 50% or even below. It just depends on the right situation, another deal that I did that was highly successful, I think was a $6 million loan that we had to do the exact same day. The only reason we were able to do it same day was because I'm a corporate attorney and I could just drop everything that I'm doing to work on it. And also I was already familiar with the deal. I knew one of the guys, one of the lead sponsors in the deal and i'd, already watched like a webinar about the deal before, so I was already familiar with it and it was in Texas, so that was a highly successful deal. I got paid back in 88 days, which was nice. Less than three months, which is great. So they just, after closing, they brought in some additional partners and they helped capital raise to backfill. So that's my ideal scenario. Just situations where folks are just short. On fundraising and they have confidence that they can raise it post-closing to pay me back.

Derek Clifford:

It's mainly just a time type of constraint, right?

Ethan Gao:

Correct. Sometimes when I like to joke around, I say Hey, basically I'm, like the undertaker that resurrects your deal from the debt. So you are about to lose all of this money and look stupid and return millions of dollars back to your investors, I have come back and I'm resurrecting the deal from the dead. Now. I can't keep the deal alive forever. I, can give you up to six months.

Derek Clifford:

Yeah.

Ethan Gao:

But you need to pay me back in that six months. So it's resurrected for six months. And if you can't then, we have all kinds of problems.

Derek Clifford:

We have an issue. Yeah, exactly.

Ethan Gao:

Yeah. And again, if you're making me payments along the way, that six months can be flexible too. What I don't want is you call me in six months you say Hey, Ethan, I've raised $5. Where can I send the $5? That's not good enough. If you've raised a meaningful amount or you're trying like, that's great, but if you're just gonna constantly fail, then I'm just basically stuck in the deal with you and I might as well, that's not the situation I want to be in.

Derek Clifford:

Right, of course. Yeah. So it takes a lot of due diligence cuz you gotta know who you're working with upfront and there's a lot of risk there and so you gotta be confident absolutely for that. Absolutely. And some of the other things that you do is a key, principle and also loan guarantor. And just for those people who don't know what those things are the way I understand it is a key partner or a key principle is someone who comes on and basically signs alongside of a, or the same thing as a loan guarantor basically signs on to the loan, paperwork for a net worth purpose, cuz a, a bank is going to lend to an entity with the members on that entity having a net worth higher than the loan value itself. So if you don't, if you, let's say that if you're trying to find a, an investment and the investment is a 25 million property and the loan is 15 or$20 million, You're gonna need a net worth of all the people on the balance sheet for that entity that's taking over of at least 20 million or more. And it's actually not a common thing. So there are a specific people out there who bar who, who basically allowed their balance sheet to get added to the deal if they trust the deal. And then the key, the KP part of it, or the key principle or key partner. On this is someone who not only usually does that a loan guarantor, but also provides leadership and guidance on the investment itself, and does both because they're earning an equity stake for being that, seniority voice on the on, the project. That is what you do in a nutshell, at least with your lending services. But I know there's so much more because you're also in law right now and the, and life insurance. So you have a lot of stuff going on at, any one time.

Ethan Gao:

So yeah, you got exactly right. Many times even though the lead sponsors can satisfy the net worth requirements, so in your example, the 20 million requirement, sometimes they can't satisfy the liquidity requirement.

Derek Clifford:

Liquidity.

Ethan Gao:

So the liquidity requirement is generally 10% of the loan. In your example, they needed to have net worth that was 20 million or more, and they ha they would have to have liquidity of 2 million or more. So many times we all know real estate investors. Many real estate investors have$17 in their checking account.

Derek Clifford:

That's right.

Ethan Gao:

Because they keep reinvesting it. They refuse to pay taxes, so they 10 31 everything, so they, they ain't got any cash.

Derek Clifford:

Yeah. And when the banks underwrite the real estate investors who qualify as real estate professionals, it's like losses every single year, right?

Ethan Gao:

Yeah. Derek, you're apparently horrible at making money, like I have no idea. You just lose hundreds of thousands of dollars every year.

Derek Clifford:

That's right. That's right. Then you have to sit down and explain to them how the i r s works and.

Ethan Gao:

Yeah. Then all the add backs and things.

Derek Clifford:

Yeah.

Ethan Gao:

So, sometimes I get brought into deals just for the liquidity portion, not necessarily the net worth portion. Sometimes they need me for the net worth portion, not the liquidity portion, and then occasionally they'll need me for the experience portion. So because I've gotten on so many deals in a relatively short amount of time I, I think technically I'm a GP on like over 2000 units across the country.

Derek Clifford:

Wow. Cool, love it.

Ethan Gao:

Because I did some larger deals that, you know and to be fair, I have not a big percentage. So I own like on average 6.8% of 2000 units or something.

Derek Clifford:

That's still quite a bit, that's still a lot. That's, a very, that's very nice. Because you know it is that many units, right? Like depending on how much they grow to it's a great boost to your net worth. I just don't know how you do, it at tax time. That must be a very interesting.

Ethan Gao:

But put it all into one LC and let God sort it out. Have all the K one s go to one specific place, or just hopefully a NET

Derek Clifford:

you mean, your accountant, right?

Ethan Gao:

Yeah.

Derek Clifford:

Alright let's, switch gears here real quick and 'cause I want to talk about this with all of the things you have going on with your kids, these two degrees of freedom that you have and this third that's not as important to you right now, at least, how do you keep yourself motivated and productive on a daily basis? You've got a lot of things going on.

Ethan Gao:

That's a great question. So my short answer is greed. My slightly longer answer is I have always been ingrained to work hard, so like it's relatively hard for me to do a shitty job. Like I would have to try to do a shitty job. I know that's a little bit different than a lot of other people, but just remember I went to college when I was 16. I graduated from college when I was 19, and I graduated from law school when I was 22. And then I worked at some of the best law firms in the country doing very advanced work. Just culturally and work experience wise, I've always been expected to produce at a very high level and at a really quick pace. So it's not particularly hard for me to continue doing this type of pace. In many respects. I actually have a much easier schedule than I used to working full-time. I definitely have a much easier schedule. There's no if ands or butts about it. So I'm just used to working 60 to 80 hours a week, so it's not particularly hard for me to continue that. And a lot of the stuff that I do now is more business development, meeting great people like you and just talking shop and stuff. It's not I have to do super complicated analysis or get on a 17 hour conference call and say every, and we need to change to a or this.

Derek Clifford:

Sounds like the law business.

Ethan Gao:

Yeah, that's exactly. I've had those long ass meetings where we're like, okay, cool. We're gonna make that LC a Corp. So change all of the documents and it's not as easy. You can't just do control H, it doesn't work that way. There's all kinds of repercussions throughout the documents. Yeah. You just look at your ppms. I, bet you 99% of ppms have a bust in there.

Derek Clifford:

I bet you.

Ethan Gao:

Just somewhere there's a bus, like the refers to the wrong section where it uses the fined term that wasn't defined, or it meant to say this thing and it says the other. Just because. So I've had those long sessions and then you stay up all night and you say, oh, cool. We've made the LLC into a corp. Great. We're done. And then you get the call from the client the next day. They're like, oh, we need to actually just go back. And make that a LLC again.

Derek Clifford:

Yeah. No, that's perfect.

Ethan Gao:

And then, cause you've added other changes along the way, you can't just go back to the other version. Now, you gotta go back to the other version and then add all these additional comments you had before and now you gotta set another all night doing it.

Derek Clifford:

I love it.

Ethan Gao:

That's the job and lifestyle that I was used to. So what I do now is much better than that.

Derek Clifford:

Yeah. Yeah. It sounds like you have more control of your time and, you get to choose who you're working with. And I think it's really interesting how nowadays you get to decide who you want to work with based on the conversations you're having and the baseline of like other people you've talked to, right? Like you have your your amount of experience of people that have done things that actually worked out well. And then you have. Other people that you meet, you're like, yeah, I'm not quite sure about how to, and so you get the that's your new job now, right? Is trying to find people that you can believe in to jump on their role, to jump on their deals as a gap lender, kp, loan, guarantor, all the while also being a good steward of your insurance policy because I assume that's where most of the liquidity that you have comes from, right, from that policy.

Ethan Gao:

A lot of it. So I have 15 policies, so a lot of my liquidity is in those policies, but I also have quite a lot of cash as well. Awesome. So I'll use up my cash first and then I'll dip into the credit line against my policies. It's the order of opera. I hold very little cash at the bank, so I usually have to explain to, bankers when I'm doing the KP thing because they, usually just don't, they don't see people at my age that have that kind of cash value in their policies and sometimes, They're just like, Hey, do you, did you mean the, death benefit? Is this or.

Derek Clifford:

The actual cash value.

Ethan Gao:

Yeah. I'm like, no, this is the cash value. The actual death benefit is 50 is 10 times higher.

Derek Clifford:

Yeah. That's amazing. And I think that's because of you. You had a, big shovel to work with as a lawyer and you worked really, hard, I can tell for many years. So you deserve all of that, and congratulations. Let me talk about this real quick and then hopefully we can quickly move to the rapid round here. I want to talk to you about how your mindset's changed over the years while you were building all of this up. Like obviously mindset is a big piece of all of this, right? Overcoming challenges running into problems and overcoming them, and then having family stuff going on. How have you evolved from when you first started here, when you came to this country, not speaking English to now being at the pinnacle of success and basically doing what everyone wants to do, which is being a KP, right.

Ethan Gao:

Yeah. Let's, knock me down several pegs like I'm doing Okay. Let's not say I'm not a, I'm not the pinnacle.

Derek Clifford:

Yeah.

Ethan Gao:

Maybe I'm like at the top of this, like small-ish mountain, but let's, not, okay. Let's not talk about the Himalayas yet. I would say mindset wise, and even just within the last year or so, that I've been very active on the multi-family front is what it's taught me is I need to be more selective about the people I partner with upfront. So when I first started in this, in doing real estate deals like nine years ago, every time I met somebody new, I would say, oh my God, I gotta drop everything and do their deal. Cause if I don't do this deal, it might not come again. And so I quickly grew out of that as I realized that people a lot of people are just full of crap and they don't actually know anything or know what they're talking about. And then a lot of other people, they might know what they're talking about, but they're just very bad Personality fits for me. So for me, I'm a technical, precise. Kind of guy. I get back to people all the time, so if you text me, I text you back. You call me, I'm gonna call you back. You email me, I'm gonna email you back. I think in my entire life I might have missed maybe two dozen emails where somebody had to follow up me and say, Hey Ethan, you need to do X, Y, Z. You didn't do it right. Usually I would've said, it's very rare.

Derek Clifford:

Yeah. It's usually because we're either sick or yeah.

Ethan Gao:

Or you're traveling.

Derek Clifford:

Something like that.

Ethan Gao:

Or some sort of consist, yeah. A lot of times. So this is so ingrained to me that sometimes when I do miss those things, when I dream, I. I'll dream about that email. And I'm like, oh fuck I didn't reply to that. So then the next morning I'll reply to it. I love, so my brain knows to jog and, like I'll like, it'll actually show me the email that I missed and say, Hey dude, you didn't do that. Or, Hey, that's amazing. You need to do the following three things.

Derek Clifford:

I think that's a blessing and a curse.

Ethan Gao:

Yeah, my memory is pretty solid. Just in general, although at this point I am getting to know a lot of people, so sometimes people will call me, they're already programmed into my phone, so I already knew. I already know I talked to them, but it might be, a lot of times it's, folks like Derek Johnson.

Derek Clifford:

Yeah.

Ethan Gao:

I'm like, shit, I probably know four Derek Johnson's and I don't know which one specifically, or I can't place them and I don't know what we talked about. And then as I keep talking about 80% of the time I will it'll, pull it from medium term memory and, back to the top. And then 20% of the time I just hang up and I'm like I, seriously have no idea. I dunno who I talk to. I, really have to go on LinkedIn or search my emails for Derek Johnson to make sure.

Derek Clifford:

You have to scratch your head oh yeah, it's this guy.

Ethan Gao:

Yeah, exactly. Yeah, no worries. I'm using, I'm just using Johnson'cause it's a more common last name than your actual last name.

Derek Clifford:

No worries. I love it. Okay, hey man, so this is great. I, do want to ask, okay, I said that there was gonna be one more question, but just real quick, I have to ask you this. Yeah. Where do you see yourself, your family, and your business headed in the next three years, five years? Where do you want to grow to with all this?

Ethan Gao:

Yeah. So I want to be, I want to be the first or second call on every multi-family syndication, whether they're missing the last piece of fundraising. Ah, awesome. I want to, I want to be so well known or know enough people like yourself where people just start referring me very relevant stuff. And then I would also love to be, this is less. Less likely because there's more competition for the KP loan guarantor stuff. And then on many of them they, want you to do more. They might want you to raise a bunch of money or put in a bunch of money for the deal, which I'm not prepared to do right now. But I would also love to be among the top few people where people are like, oh, man, like we need X million more net worth or X million more liquidity. Who do we who, can we grab? I would love to be the guy that, that experienced sponsors want to partner with and are excited about grabbing and throwing me onto their stuff.

Derek Clifford:

Very cool. And what about the, vision for your family? You like it where it is right now, you just like to keep it where it is and just watch your kids grow and be more involved in their experiences.

Ethan Gao:

Yeah. So I definitely can't have more kids, Derek, like I, I'm already, this is too, this is way too many kids. And, really, yeah. One of the only reasons we had so many was because we had four daughters in a row and I really wanted to have a son and so did my wife. So she and I we were both born in China during the one child policy, so neither of us have any siblings. Oh, wow. And then, so in general, I just. Felt like we were missing out on a lot. So I, only have cousins and they I'm not close with them at all and I'm not close with my aunts or uncles because we don't live in the same country. So I didn't want my kids, or I didn't want my wife to miss out on having a son. So it was really important for us to try and we, got one congrat, but yeah, five kids is way too many children. It's too many it sounds like. I don't I, don't. I don't know how many times I can emphasize that. It's not required that you have this many. Yeah. It's probably not even preferable that you have this many.

Derek Clifford:

Yeah, I'm just doing the math on how many bathrooms are in the house and who gets to use the bathrooms at what time? Like you run out of the numbers get very, like these things get and then like seats in a car. Yep. And I just now I'm starting to think about, it's oh my gosh, this is, that is quite a lot.

Ethan Gao:

So it is, so the answer to your question is not enough bathrooms and not enough seats in the car. So we have two Honda Odysseys, so we really can only drive minivans. And then if we were to have more kids, we were to actually have to buy like a, those airport shuttle, the Ford Transit, like

Derek Clifford:

a Hummer or something like a Hummer.

Ethan Gao:

No, it's usually like the airport shuttle van type of thing.

Derek Clifford:

Yeah

Ethan Gao:

It's more like a seat's, like it's like a mini bus. So, five, we can barely, five plus the two parents we can jam into a Honda Odyssey. Can't really jam in a ton more stuff.

Derek Clifford:

All right. Man I, appreciate you coming on and being very tr very transparent about all this stuff, but I think it gives a great perspective to people out there who are looking for, to pursue the time and the financial freedom that you have. I know location freedom, it's not as important because it's not relevant right now. And I think that's important to know. The cool thing is though, is that you've enabled that for your family so they can go out and do that whenever they want to. So it's, like this. I do think that you have all three of these. It's just a matter of you you wanting it more than anything else because I really do think you could make it work if you absolutely wanted that, that locational degree of freedom. There's ways to make, it's just gonna be extra hard doing it with everyone all involved. So I completely see that.

Ethan Gao:

Yeah, absolutely. Having kids is like having a bunch of anchors that drag you back.

Derek Clifford:

Yeah, Hundred percent.

Ethan Gao:

Like it's very difficult to move. It's almost like having a disability in many ways. That's right. It's like you just, you're just limited in what you could feasibly accomplish.

Derek Clifford:

I completely agree. Yeah. All right, so let's head into the rapid round. These are five or six questions that I ask every one of my guests, and they're meant to be answered in about a 32nd timeframe or less. So if you're ready, we're going to rapidly ask them to you. Right now?

Ethan Gao:

Absolutely.

Derek Clifford:

All right. Number one, can you name a resource that was or is essential in your journey so far to help you pursue your freedom?

Ethan Gao:

Yeah. One day when I was a little bit more into real estate investing, I went to a networking session and that day I decided that I did not want to try to find borrowers to lend money to, I wanted to find lenders. So I went and I found the oldest looking guy that looked like he had the most amount of money, and I talked to him and then we became friends and he partnered with me on many deals.

Derek Clifford:

Awesome.

Ethan Gao:

And talking to him, having a gray hair. That's been through 40 years is extremely helpful.

Derek Clifford:

That's amazing, man. I love that. A piece of advice. Go seek out someone that's got wisdom. I love it. Number two, if you woke up and your business was gone and all you had was $500, a laptop, place to live and food, what would you do to rebuild?

Ethan Gao:

I would buy the stupidest sounding cryptocurrency and pray.

Derek Clifford:

You really would?

Ethan Gao:

The dumber it sounds, the more I'd put in.

Derek Clifford:

That's awesome. I love it. Facetious question and a facetious answer. Number three, what does your self-reflection and goal setting practice look like? If you have one?

Ethan Gao:

I don't really have one. And I also like my, my kids take my older two kids, they're nine and 11, they take some personal financial classes and stuff, and they just ask me, Hey Daddy, do you ever budget? And I said I don't really spend money, so why do I need to budget? So I don't really set goals. Like, I don't, I'm not a good five year plan. I'm not like Joseph Stalin. I can't put together like a five year plan. It's too hard. I could put together like a three month or six month, but five years is a long time.

Derek Clifford:

Yeah. I get it. I love that. I love that your kids come home trying to ask you questions about personal finance that was taught by teacher that doesn't have, that doesn't have any financing.

Ethan Gao:

I've been known to say some rude stuff like I don't need to budget, or only poor people budget. I've been known to say some stuff that I tell them not to repeat outside of my house.

Derek Clifford:

All right, everyone listening on this podcast, this is not a reflection of teachers or people out there, we want you to strive to succeed. And this is something it's all about a mindset thing. So I'm not, I'm trying.

Ethan Gao:

The more serious question, the more serious answer is not the only poor people budget. It's really that. I was so ingrained to be frugal throughout my life. And then because I met my wife so early, there's just not a lot of things that I need or want to spend money on. So I don't have a like a lot of guys, they want to go play poker. I'm not interested to that. A lot of guys love to do alcohol, I don't drink. I don't care about that. I don't have, I don't have anything against people drinking and I've drank before. It's not like I have a religious prohibition. It just doesn't do anything for me. I don't do smoking. That's not interesting to me. And then sometimes guys just wanna watch, I don't know, a football game together. I can watch that by myself. So there's just not a lot of activities and things that I'm actually interested in spending money on. Therefore, I don't really have to budget.

Derek Clifford:

Yeah that's really, smart and you said, I think that's worth this weight and gold right there. So building up that habit is actually worth itself for your financial success. Number three what are the core work habits that you attribute mostly to your success? I think we just touched on this, but I don't know if you wanted to add anything to that.

Ethan Gao:

Yeah. So I would say getting back to people quickly, even if it's a no. What I really dislike is people string you along and say yeah, And then they never do it. Yeah. They ignore you. Yeah. Yeah. Those people start getting moved down my list pretty fast. Yep. So getting back to people, even if it's a no, and just, telling people right away. A lot of people appreciate that because you tell them no, and sometimes they'll need a reason and you tell 'em the reason and then they might refer you more relevant stuff in the future, or they just respect that you didn't waste their time and they're not relying on you. Like that guy where he borrowed $6 million from me, he called me at 9:00

AM and I wired him money at 3:

00 PM. There was really nothing that we could have, like there was no time that could have been wasted. Yeah. So if I had strung him along and said, Hey, yeah, I'm gonna do it, and then five o'clock comes and I said, oh. I didn't actually have 6 million. I'm sorry. Did I, tell you that I was gonna do that? I'm so sorry. Or even worse, like just, or just delete 'em from my phone. It's like I don't even know who this person is. Like just delete 'em. If that would've killed him he had to rely on me. He had to rely on me and, cross-checking with his partner who knew me that, I had the actual ability to send $6 million that day so that he could actually plan. And he made several other calls and I was not the cheapest, but I was the one that he thought would most likely perform. And then the one that had all of the money. So he would've had to piece it together with a few different people. Yeah. He thought it was worth the premium to pay one person because then the execution risk would've been low. Because if, yeah, if you got it from three people and then the last guy didn't show up, you still didn't accomplish your goal.

Derek Clifford:

We see that all the time. Also, in the transaction side, like sometimes buyers or brokers will recommend certain buyers, even though their price is lower. Than another person because of the certainty of the close. Yep. Ease of the transaction and all of that. Because that really is worth something.'Cause it's very hard for people to understand how much risk is worth and that's just the way that it goes. If you lower risk, you gotta pay a little bit more. That's just the way that it is. And this type of transaction, right?

Ethan Gao:

Absolutely, that's what I like to tell people too, is that if Ethan Gal makes you a commitment on Friday night you can feel free to play with your kids over the weekend and watch football or go drinking, smoking, really care.

Derek Clifford:

That's right. It'll happen.

Ethan Gao:

The money's gonna be there on Monday morning. I'm not going around telling people like, I can do this, and then I, don't do it.

Derek Clifford:

A hundred percent.

Ethan Gao:

So, the second part of that would be the, somebody recently told me this, it's called the say do ratio. So literally if you say something, do it. And if you're doing something, tell people you're doing it right. So my ratio is very close to one-To-one. A lot of people they say, oh yeah, I'm like 30 minutes late. And then they show up two hours late.

Derek Clifford:

Same, here, man.

Ethan Gao:

Most people start moving down the list of people.

Derek Clifford:

That's right. Same for me. Like I'm usually pretty as close as I can get to that one. And I would also, I love that you said that 'cause I would attribute that also to a lot of my success as well, and even in just like telling brokers like, I can't do this or it doesn't make sense for me or I'm not ready to buy anything yet. That's usually paid off in the long run. It's painful and it's awkward, and people in this day and age aren't used to that. But you need to, because that's what people deserve to hear, just like you said. So I love that. Last question I have for you today, what tool or process has become your most important time, money, or energy saving ninja magic trick that you use almost every day if you have one?

Ethan Gao:

Oh, I don't really have one. So I use my emails as a task list. So before I go to sleep or before I'm about to shut off, I'll just search on my unread email. You just do in Gmail it's. Is colon unread. And I'll just re, I'll just scan through them to make sure. And then I also put stuff on my calendar. So if you and I talk about something and then you're like, Hey Ethan, can you like call me in a week? In one week? I'm gonna have the best deal for you ever, but I can't tell you about it right now. You need to just call me in one week. I will literally send myself an email that says, Derek one week, and then once I get to my computer, I'll go to my calendar and I'll write, get together with Derek.

Derek Clifford:

That's awesome.

Ethan Gao:

And just, simple stuff like that people don't seem to do. No, Yeah, I've got, yeah, I've got multiple people that somehow just rely on their memory and their memory's not that good. Can't do it. So I'm just like, how? How do you function?

Derek Clifford:

Even people with good memories, you will mix. You will mix it up. That's just the way it is.

Ethan Gao:

Correct. Even people with amazing memories, you will start having. Difficulties.

Derek Clifford:

There's something I have to show you after the show because I've done this a lot in my career and I have something that might be able to help you with the way I manage email 'cause I do it just like you. Okay. I have a little twist that maybe you can use.

Ethan Gao:

Okay, cool.

Derek Clifford:

In any event Ethan, this was awesome having you on where we've reached time and so I'm, unfortunately, we're gonna have to end the podcast, but before we go, why don't you tell the audience how maybe they can get in touch with you or how, like, when they should get in touch with you. Floor is yours, man.

Ethan Gao:

Yeah, just email me. It's just my name. EthanGao@gmail.com. So I was the first guy with his name that took the Gmail so great for me. And just email me. So I will text people back. I don't love texting, but I'll, definitely text people back. I'm still from that generation. Like I didn't really have a cell phone until I was fairly old and smartphones didn't come out, so I was used to blackberries. So the blackberry was my thing. So I'll, text you back no problem. And you can call me. And and if you got something urgent, just feel free to call me. Usually I reply to emails unless I'm doing something like this where I shut off my phone, where I turned off my sound. I'm gonna be checking my stuff all the time. So if you haven't heard that from me in 24 hours, I might've been, I might've gotten hit by a bus and my wife's about to get a lot of life insurance money.

Derek Clifford:

Oh man. Anyways, Ethan, it's been awesome having you on. I'm, excited to show you what I have here as well after the show is over.

Ethan Gao:

Great.

Derek Clifford:

But I really appreciate you coming on and for all of the guests that have listened to this point, at the end of this entertaining, very entertaining show I want to thank you guys as well. And please, wherever you're watching or listening to this podcast please interact with us. Give us a thumbs up, a subscribe anything that you can so that, that way. The interaction helps entice those algorithm gods to push us in front of more and more people out there who both want to hear from amazing people like Ethan or we can find other guests to come on just like Ethan to help add value to you. Thank you for that. And Ethan, thank you so much for coming onto the show, man. It was a pleasure to have you on.

Ethan Gao:

Yeah, thank you so much.

Derek Clifford:

All right, cool. We'll see you guys next time.