Join us in this episode of Property Investory as we discuss the brilliant game Kulkarni invented for her Mastermind class called Million Dollar Mixing Desk. We chat about becoming the DJs of our portfolios, adjusting the little levers and buttons of real estate to adjust the quality of our investments. And to mix things up even further, the game features real life scenarios featuring real people and their real goal of a passive income of $250,000 within 5 years. Speaking of real life people, the most recent match of the game featuring a certain player named Tyrone Shum— did he come out victorious?

Timestamps:
01:22 | Turn Off Your Autopilot
03:49 | You’ve Got a Million Dollars. Go.
05:34 | Let’s Get Ready to Rumble
07:48 | Real Life Scenarios
14:21 | Winner Winner, Investment Dinner
16:56 | The Challenge: Cut Through the Noise
20:32 | Alternatives to Australia
23:51 | Is The Long Game Worth the Investment of Time?

Resources and Links:

[00:07:00] People got so excited and worked up about it that there were people flinging off their shoes and spreading their cards out on the ground and people arguing and it was just awesome. It's a very engaging game now. 

This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

 

I’m Tyrone Shum and in this episode we’re speaking with Amazon bestselling author, chartered accountant, and founder of the Freedom Warrior program, Salena Kulkarni. We’ll be discussing how she came up with her brilliant game she calls Million Dollar Mixing Desk, how it’s played, and what it teaches its players— and Kulkarni herself.

Tyrone Shum:   

I was recently invited as a guest to attend a Freedom Warrior event, where we played the Kulkarni inspired game called Million Dollar Mixing Desk. It’s been on my mind ever since! Kulkarni explains how the game works and how it came about.

Salena Kulkarni:   

[00:01:22] Full disclosure, it was a game that I created for my Mastermind events that was actually a filler. I had this idea that when people come back from lunch, they're a bit sleepy and tired, and I wanted to create something that would be engaging. This started out as an idea of ‘How do I just bring people's energy up after lunch?’ And the first time we played the first reiteration of this game, people got so fired up and worked up about their worldview of what was the right way to invest, that I thought, 'Oh, that's really interesting'. 

[00:02:09] So then over the last three years, I've progressively upgraded the game and made the deals more complex. And the simplicity of the game hasn't really changed, or the overarching concept. But as the world works, people just started to cheat, where I hadn't expressly laid out rules! And so I was trying to plug those holes. And the game has evolved into [what] we call Million Dollar Mixing Desk game. The crux of it is, how do you bring a level of realism to investing and start to understand how the play of strategy can massively influence outcome? So the theory of investing is all great. But this game is really designed to make people think, rather than invest on autopilot.

Tyrone Shum:   

[00:03:11] Yeah, absolutely. I think, as an investor myself, I kind of went into that mode until I started again, thinking, 'Hold on!' You have all these ideas. And if you've got a plan, there's a plan, but sometimes life changes, and you've got to adapt different strategies. And that's what I love about this particular game, especially when you told me how the first time was a million dollars. I actually wouldn't mind you sharing how that one worked, because it's obviously changed and evolved from where it started. And you mentioned that you guys just put up a thing for a million dollars, and then they went at it. So how did that evolve? Or how did it start?

Salena Kulkarni:  

[00:03:49] One of the things I strongly believe is that there is no right or wrong when it comes to investing. I just think if you make a decision, everybody does it with the best information that they have at the time, or preferences, or who they've been exposed to, or how they learn. 

[00:04:06] So the idea was, I wrote up six deals on a whiteboard. Three of them were local deals, and three of them were international. And I said, 'Right, you've got a million dollars, go. What are you going to do?' And people just squirrelled away and wrote down what they wrote down and then everyone at the table had to share what they did. And we were a smaller group back then. And I couldn't get over how passionate and worked up people [got]. I mean, I thought it would be everyone roughly coming up with the same combination of deals. And everyone was so different. The way they thought, the way they spent the money, the outcomes they thought they'd get. And the way that we've always played the game is it's over a relatively short space of time. So a five year block. 

[00:04:56] From there, it evolved to 'Well, okay, I'll put up more deals', and then it evolved into, 'Okay, now I'm going to layer that with some economic turbulence. And then I'm going to layer that with some personal circumstance cards...' So it's evolved into a card game, which is not particularly complex. But the thing that's probably been the biggest jump in evolution is that, instead of investing for yourself, now I get people to invest on behalf of a real life case study.

Tyrone Shum:   

[00:05:34] That's great. And that was what really, really made it very, very interesting, because you're not just only looking at it from yourself, but you're also looking at it from a real person who's actually going through a situation. And this case study— or this real person, this scenario that we ran over the weekend, which we'll be sharing in this podcast— was really, really interesting. And to me, I looked and I was like 'Hold on, this is pretty real, there's not much that's so different to most average Australians out there that are actually doing this'. But they want to actually get out of, I guess Rich Dad Poor Dad, or the rat race. 

[00:06:10] And that's what really, really fascinated me. And what was really even better was we didn't do it ourselves, because we teamed up in groups. And because a lot of these people who I'd never met, had different personalities, different investing backgrounds and so forth, it made the whole thing a really, really fun and interesting time. I really, really enjoyed it, especially since one of the team members I had was... I don't know how to put it, but he was a real, real big character. 

Salena Kulkarni:  

[00:06:38] The last time I ran a live Mastermind— and I'm hoping to get back to those later this year— but February last year, just before COVID hit, we had a live Mastermind, and I'd actually gone to the trouble of putting all the deal cards on beautiful cards. And each team— I put people in teams of three— had a deck of deals. And people got so excited and worked up about it that there were people flinging off their shoes and spreading their cards out on the ground and people arguing and it was just awesome. It's a very engaging game now. And now I'm trying to make it more thinking and reflection and less rote application of what you already know. So when you're not investing for yourself, you've actually got to take into consideration other people's risk profiles and perspectives. So yeah, it's definitely a lot of fun. And working in teams, I think, gives you that exposure to 'How do other people think about money? How do other people think about investing?' So it's a super fun game.

Tyrone Shum:   

[00:07:48] Absolutely. So let's delve into this scenario that we had. And the reason why I wanted to share this one was because I thought it'd be so, so relevant for listeners out there to hear something like this, and then we work through it, talking about it. Because there's so many ways you could actually help this couple that we're going to be talking about, but also too, it just opens up the opportunity to see as we've been talking about alternative investing, how can we actually lay that into this kind of strategy that they're looking for? So I'll pass it over back to you, Salena, in terms of actually explaining this particular couple, and the scenario behind it.

Salena Kulkarni:   

[00:08:24] So this particular couple [is] based on a real life couple. In the game, I call them Sergio and Lumi. And I started by saying, 'Look, the goal is to get them safely and quickly to the position where they hit their financial goals', which I called 'game over'. And I said that basically after COVID, after the shock, they're super worn out, they had a consulting business that they'd had to shut down for three months. And they're now back up to 70% capacity. They've done a little bit of investing. They had a small portfolio of property, but they're ready to get serious. They've come to you for guidance on how to get to their goals. And they need $250,000 a year before tax to support their lifestyle, excluding the property costs. 

[00:09:15] I outlined their borrowing capacity, their savings ability, their earnings at the moment. And then I put a bit of a limitation in here— I said they like alternative investments, but they don't want more than 50% of their portfolio in that market. The commercial property that they own has a single tenant, but their lease expires in 14 months and they're not going to renew. I talked about how in real terms, any sale would take 12 months to finalise, any residential sales would take six months to finalise. And I gave a theoretical business value of $750,000 but that it was a difficult business to sell. So they don't want to rely on that. 

[00:10:00] And then I gave a list of the five properties that they hold. And the instruction was, how do you get them— given all of the deal flow that we had set up— how do you get them to that passive income of $250,000 [per annum] in five years? And the way the game is played is round by round. So when you first go into the game, you see all these deals, and you've actually got to decide 'What am I going to do first?' And so you only fill out what you can complete in year one. 

[00:10:33] And the interesting thing about this case study, because this is probably a bit more realistic, is that these guys had four investment properties and their home. But they didn't have a huge amount of cash. They had some money in the bank, but most of their wealth was tied up in the properties that they had. And you can see when you start to look at these properties that some are doing well, some are not doing so well. For me, anyway, and this is probably my training as an accountant, I find that people can tell me their situation, but then when you see the numbers, it just paints such a different picture and gives such depth to someone's situation. So when I look at what these guys have achieved, and the years—I even told you how many years they've held each property— you can start to see that they've been investing for about 15 years. And they've created a portfolio worth $3.7 million, and the net cash flow was about minus $8,000 in total, but you start to see, whoa, look at those properties, what's working, what's not. So that's the overview of who they are.

Tyrone Shum:   

It was fantastic to be able to see that and that's the interesting thing. I don't have the sheet in front of me at the moment, so I can't remember the exact properties. But straight away, when we received that, within our team, we looked at the ones that we thought 'Which ones could we potentially sell down first, that were generating negative cash flow?' Because we kept wondering, why should we keep this if we're trying to achieve a positive outcome to try and get $250,000 per year?' It's going to really hinder us to have negative cash flow of $8,000 per year. Even though it doesn't sound like a huge amount on a portfolio that size, it can also hinder what you can potentially invest into, which is why it's slow, you know, potentially then to do anything else. And that was what was really, really interesting, because some people hold on to the portfolio, because thinking there's still a lot of equity in it, which I think this couple had, like somewhere close to $3 million, is that correct?

Salena Kulkarni:   

[00:12:45] $3.7 million, yeah, including their home.

Tyrone Shum:   

[00:12:48] That was a substantial amount of equity. And we thought, 'How can we free that up to invest up to 50% of the total portfolio into potentially other investments, which will generate them a positive cash flow?' And in a very short space of time, we all agreed— and this was a team effort, we as a team, we had to agree— Okay, what should we firstly sell off or sell down? Or should we go back to the bank to try and refinance and try to get the equity out as quick as possible? And I think we all agreed that the first thing we'd do is to sell down the one that was generating a huge negative cash flow of $30,000 or $40,000 a year. That really stuck in my mind. 

 

[00:13:33] And that change makes you think, in your own situation, if you have negative cash flow properties, unless there's a reason why you need to hold on to this, it actually might be a smarter option to actually sell it down if it's not positive cash flow. Because ultimately, you think to yourself, 'Why are we actually holding all these properties? Are we trying to hold these properties just to accumulate a huge amount of wealth?' But once you've got that kind of wealth in that capital, I guess at the end of the day, for me, anyway, I'm looking for passive income. I want income that can actually sustain my lifestyle. It's pointless if it keeps sucking money back out of my own lifestyle to be able to maintain it. And that was a big mind shift for me. And I'm sure a lot of listeners probably feel the same way too. So it makes you reflect and think, 'Okay, what can we do differently?', and change your strategy around and start formulating something different for the next five years.

Coming up after the break, we hear more about the decisive game and its players...

[00:14:28] There [were] probably about five or six different approaches that people took, and everyone was passionate that their way was the right way. No two teams did the same approach. 

How her views on the traditional ways of investing and real estate in general have changed in recent years...

[00:16:09] I think traditional wisdom says: accumulate properties forever and never sell. And I think that kind of worldview probably held merit up until... maybe... I started to question it about 12 years ago. 

She shares her thoughts on alternative investments and how they can save you time and money, if done right.

[00:24:36] Whereas since my pathway deviated into incorporating a small component of alternative, what blows me away and continues to blow me away is that you can actually get a super meaningful result in less than five years. Depending on how much headspace you give this, you can get a great result in two years, in three years. 

And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

Kulkarni describes how the game ignites passion in its players, and what she finds most interesting as she watches it unfold.

Salena Kulkarni:   

[00:14:21] I'll tell you what was fantastic about this game for me on the weekend. [For] every team, there [were] probably about five or six different approaches that people took, and everyone was passionate that their way was the right way. No two teams did the same approach. And you probably should mention that you are on the winning team! So I think what's fascinating is that different people will apply different tactics. The fact that they're investing for somebody else makes it more real, because you do have to be responsible. 

[00:15:01] But yeah, I think there [were] all sorts of random things. I think one of the deals was a renovation deal. And I think one of the teams was talking about, 'Well, let's do five of those a quarter'. And you and I were kind of having a chuckle about, 'Jeez, how hard would it be to find profitable reno deals, five of them every quarter, let alone get the borrowings?' So yeah, I think more people are attached to reality than others! But it's a fun way of kind of looking at what are all the possible ways to skin a cat.

Tyrone Shum:   

[00:15:36] Absolutely. And what was also fascinating as well, too, is we don't all consider and think about this. And because I was very lucky I had an accountant in my group, he thought about the tax implications straight away. Everyone completely ignored that side of things, and straight away he was like 'Nope! Everyone's out of the game because you forgot to pay your CGT!'

Salena Kulkarni:   

[00:15:58] Oh, that was his argument— You're all in jail, so we win! But, no, you guys actually won hands down anyway. But look, I think you've hit on a really good point. I think traditional wisdom says: accumulate properties forever and never sell. And I think that kind of worldview probably held merit up until... maybe... I started to question it about 12 years ago. Because I could see that if I just held on and waited for properties to go up enough in value, and for the rents to go up in value, I was still 25 years away from generating what I call meaningful income from it. So I started to really question that view. And so I think it's always a good idea to be, at least every 12 months, looking at 'What have I got? Is it giving me what I want? Are we moving in the right direction?'

Tyrone Shum:   

[00:16:56] Yeah, and the conversations we've had already, offline, about a lot of this. And this is why I love bringing you on to the podcast to share this, because it makes you start to think, 'Is it possible to do it a different way?' And as we've said, there are so many different ways to skin a cat, but we don't actually realise that if we don't hear about it, or talk to someone else about it that might be thinking differently. And this is what I love about your concern and view— you actually will still continue to go down that same path of looking to just buy a property. Because in the back of my mind, I'm the same. I thought, 'Oh, let's just go buy, say, 10 properties over 10 years, and hopefully generate revenue of say, you know, $100,000 a year'. 

[00:17:34] But that theory, that thought— now I'm being really, really contrarian here, and plus, on top of that I'm talking from personal experience— it's not going to work, unfortunately, in the markets that we're currently in, at this point in time. Interest rates are completely different to how it was back 10 [or] 20 years ago. The cheapest rate at the moment is under 2%. And there are so many opportunities out there that can give you a higher return compared to buying property that might generate five or six, even maybe sometimes 7% yield. And that's not even considering all the expenses that you still need to pay, as well, too. After that, and it's hardly anything that's left. 

[00:18:11] And then you're hoping and praying that you might get capital growth on these. You do at times, but you don't know how long that's going to be. Whereas both Selena and myself, we've been looking at different alternative investments. And that's what I love about the game, because you laid out for us many different options of alternative strategies. You know, the funny thing is that a lot of the alternate strategies that were available, or the alternative investments, [they] were mostly either overseas, with great interest returns with compound. Compared to, say, for example, in Australia, where we had fantastic deals still, but the rate of return was very, very low. 

[00:18:52] And it's realistic here, unless you're actually adding value through some kind of development, or forcing appreciation on a lot of the properties, you probably will be sitting on something for the next 10 years or so, until it generates great capital growth. And that kind of opened up the strategies and thinking that we should probably change and put things into alternative strategies. Which, in my opinion, I've been doing the same thing as well. Rather than put all my equity into buying another property, which I was planning to do next, I started looking at alternative strategies where I'm getting between say 20 to 30% return per annum. And that has been very successful because I'm able to compound it much faster, which allows me to be able to move on to buy other investments as well.

Salena Kulkarni:    

[00:19:32] There's so much gold in what you just said, Tyrone, but I think one of the challenges— which I think we talked about in another podcast— the challenge for new investors is actually cutting through all the noise out there around what is the right way to build wealth. And I think if you're new to investing, one of the best things you can do is speak to as many people who have the results that you want, and ask them how they got there. 

 

[00:20:04] Also consider that the markets are evolving. And 30 years ago in Australia, it was greenfields, like you could pretty much find opportunity everywhere. But these days, everyone's interested in being an investor. So it's harder to find the deals where you create the alpha, being like the higher than average returns. So that's one thing. 

[00:20:32] The other thing is, part of the reason that I started to look at other markets for the alternative stuff is not that those strategies don't exist in Australia, because they do. But they're just so hard to come by. Like you've stumbled across a really great strategy in the alternative space, which offers killer returns. And that's kind of not the norm, that's exceptional. But in the [United] States, for example, where the market is significantly more flexible and creative than ours, it sounds scarier. But in actual fact, the risk on a lot of these strategies is actually very low. And so what I like about the [United] States is that the deal flow for these kinds of alternative strategies is significantly more plentiful. And because such a tiny fraction of their population are investors, the ease of finding deal flow, where you can create that alpha, is significantly easier. It's higher, much higher.

Tyrone Shum:   

[00:21:40] I actually wouldn't mind having a discussion a little bit about investing into, say, for example, the US market, which you've been doing as well, quite successfully. And a lot of the deals that we saw inside the game that we were playing, we all mostly went for those kinds of deals, because they all return a higher return, and for good reason. And that's how it helped us get out of the actual rat race and achieve the passive income of $250,000. We actually exceeded that. I do remember, one other team did exceed it quite substantially as well, too, doing some kind of renovation strategy.

Salena Kulkarni:   

[00:22:12] Yeah! Questionable, yeah.

Tyrone Shum:   

[00:22:14] Questionable! But no, it's all fair, for what we all achieved. And based on the assumptions that we have, based on what the market was doing and the economy and so forth, it wasn't really that hard. To be honest, it was just a little bit of teamwork together, putting our minds together. Luckily I did have an accountant who was very good at numbers. But we factored in if the market went down— which it did, by 2%, our interest rates dropped there for 2% and we got less income— but then, because there's a five year term, we factored that in, and we made sure that by the fourth and the fifth year of term, we actually compounded that and started paying down our investments, which increased our cash flow. 

[00:23:05] And that also was a big, big takeaway for me, because I kept thinking, 'Let's just keep building capital', but then he said, 'Look, why don't we just pay down some of the debt, which will initially increase our cash flow?' And when that happened, it made me realise, 'Oh, yeah, we're using alternative investments to start to build or pay down our portfolio, which would generate additional cash'. So it makes you start to think outside of the square and outside the circle, but until you actually see it on paper and you actually discuss it with someone else, it doesn't become very clear. And that's where I kind of got stuck in my property journey at this point in time, going, 'Wow, it's actually possible to do it that way'. So that's been some amazing insights into what I learnt just playing that game, and it was only within a couple [of] hours.

Salena Kulkarni:   

[00:23:51] It's funny, I've been in the space of advisory and strategy around property for a long time now. And when you're looking at just local real estate, you have to play the long game, there's no question. And most people understand that unless they're going to get into some hair raising type strategies or developments or renos or things like that, your traditional 'buy and hold' is a long play. And so, when I used to try and project for people, where will you be in 10 [or] 20 [or] 30 years, if you stick to this course of action, that's a long one. I mean, it almost feels like another life. That's a long time to wait to get to where you want to go. 

[00:24:36] Whereas since my pathway deviated into incorporating a small component of alternative, what blows me away and continues to blow me away is that you can actually get a super meaningful result in less than five years. Depending on how much headspace you give this, you can get a great result in two years, in three years. And the sorts of returns, they're not probably the 20 to 30% that you're used to, Tyrone, but if you can earn a net return of eight to 12% conservatively all day long in a consistent, reliable way, that is life-changing for people. That is what will give you the freedom to make decisions about how you spend your time, and what you do with your life, versus carrying a huge property portfolio that's just a drag, you have to carry it for a while. And you hope that in 30 years it'll carry you. It's tough.

Tyrone Shum:   

[00:25:43] I absolutely agree. And that's why I totally agree with you. Even if you just compound it or just receive residual income of, say, 10% on average every year, say, on a $1 million or $2 million portfolio, it's all being paid down, that's still the average income that people want to expect when they reach retirement of $100,000 to $150,000 a year. It's more than enough. And because you don't have to work for it, it gives you so much freedom to think about other things. 

[00:26:11] And that gives you more time to be able to put more of the investments away. You might take a small proportion of that $100,000 and put it back into more investments and allow that to compound. And that in turn will give you so much freedom and flexibility just to think about the things that you really, really want to do that can potentially be more impactful for not only your family, but for other things that you want to do. You might have dreams to do great work around the world, go out and save the world or give back and so forth. So whatever it is that you want to achieve, that's the freedom that you need to consider to be able to allow the time to do that. Because as you know, all of us, the majority of us are still in the workforce, working every day to try and keep these assets up kept in order to survive.

[00:26:57] Just to round out the whole game thing, the reason I called it the Million Dollar Mixing Desk game is because I really wanted people to understand that if you think about a music mixing desk, and all the little buttons that you can use to adjust the quality of the sound, I think we need to bring that same metaphor to our investing. There's so many little levers that we can pull and adjust that we don't have to be singular in our approach to investing. We can really bring depth to it if we understand that there's lots of levers that we can pull. And so the game takes the theory away and makes it super practical.

Thank you to Salena Kulkarni, our guest on this special episode of Property Investory.