Justice Pays: How Passive Investors Can Cash In on Litigation Settlements : The Cash Flow Fight Club Podcast

Patrick Grimes:

We’re working towards social good, and we’re helping provide meaningful settlements, providing access to justice for those that otherwise couldn’t have it, and enabling an industry of contingency fee-based representation that otherwise wouldn’t exist. We get a really great risk adjusted return. We’re going to get a really solid, reasonable equity-like type of return that you would get in real estate. Litigation funding provides a way to allocate outside, rebalance your portfolio.

Mike:

Did you know the legal industry is as large as the global airline industry, yet offers unique opportunities for recession-resilient investments? Have you ever wondered how individuals take on giant corporations in court and win meaningful settlements? What if there was a way for you to invest in the legal system while empowering justice for those who couldn’t otherwise afford it? Well, in today’s episode, Ligia and I are joined again on the podcast by Patrick Grimes, founder and CEO of Passive Investing Mastery.

We explore those intriguing questions and uncover the world of litigation investing. Patrick’s built an $600 million plus real estate portfolio, but he’s also recently ventured into the realm of legal funding, a niche investment space that supports meaningful settlements while offering solid returns for the investor. Together, Ligia and I will dive into how Patrick’s approach combines diversification, financial strategy, and ethics to create opportunities for investors and justice seekers alike. Let’s jump in.

Patrick, welcome back to the Cashflow Fight Club podcast. We’re excited to talk to you again.

Patrick Grimes:

Yeah, I’m happy to be here. I really enjoyed the last one, although I think I got knocked out pretty good. But I recovered them back on my feet now, so let’s do it again.

Mike:

10 count and you’re back up. Yeah. This actually would be a fun topic to match up against something potentially. But, yeah, I’m excited. This is one… Man, it’s catching me totally from the foundation, ground floor zero, square one. Probably that makes sense to be our starting point. If you want, give a quick overview of your background, what you do, and then we can jump into litigation investments.

Patrick Grimes:

Yeah, sure. Well, I probably, like many of your listeners, I was a hardworking professional out there doing the W2, making a great income, looking for where to invest it. And so my journey started back in two, six and seven, did some investments in some speculative real estate stuff. Lost it all, 2009 and 10. A lot of people had some challenges back then. I was beat up and battered early, and humbled. I made it back in and I was successful engineer and did automation, machine design and robotics for a lot of great companies like Tesla and a Lockheed and JJ and Abbott’s. It’s a really rewarding and fun career, but I was surrounded by people that didn’t know how to invest outside of their day trading or their 401K and IRAs, and I knew that there was more. And I remembered that there was potential in real estate.

But I learned how to do it recession resilient, learned how to invest for cashflow, and I got back into it and then grew from single family to larger apartments. But then it was really all about diversification. Even in the beginning, I didn’t want to be on the wild ride of high-tech. And so I realized, I was like, wait, man, I’m way over indexed in real estate like I was in high-tech. I need to continue my allocation strategy. And they go to the pie chart of the wealthy, and there’s all these different alternatives. And they get into it to not just get financial independence, they want financial stability. They want make sure that their foundation is rooted into different asset classes, different markets, different mechanisms that you can invest that don’t ride the same curves together. Ride the same volatility together.

And so, you’ll lose your shirt if something happens. Maybe you lose a button. And I know what it’s like to lose my shirt. You can see a lot of non… We work on non-correlated alternatives now as our investment thesis, and true financial security, which means allocating any the assets that will allow you to build a legacy for yourself that won’t ride the curve of traditional markets.

Mike:

Yeah, it is a familiar story for a lot of people. Certainly the highs and lows, they’ll live the ’08/’09 depression. Real estate built back up in the teens, and certainly some turbulence with the interest rate run up. And diversification is always a hot topic. And it’s interesting for me to always hear different takes on what people think of when they hear the word diversity and diversification and how that plays out in your investments. I love the way you described it in terms of things being on separate, disconnected if you will, patterns and curves. Where hopefully when something’s down you have a, as you termed it, recession resilient investment there as well to even some things out. But, yeah, interesting stuff.

Let’s get into the topic of the day. I’m really curious to dive into what you term litigation investments and hear more about that. Maybe just give us the 101 on what it is in general, and we can dive in to a little greater depths after that.

Patrick Grimes:

Sure. Well, if you’re looking for allocation strategies. Which, like you said, isn’t just diversification in a bunch of real estate, it’s allocating it in different markets. You start with, well, what markets? And then markets like healthcare are steady eddy. Education, steady eddy. Right? Legal services, accountants, plumbers, they all tend to be fairly regular. They’re things that are needed regardless of what’s going on. And so, when you want to enter into one of those markets… In fact, if you look at our deck, we show the curve of legal services with gold, the S&P and real estate, and oil and gas just dancing all around it. And it’s just this solid, steady, almost linear progressive growth. When you want to enter into one of these, you got to figure out how to solve a need. In real estate, providing housing for tenants, that’s ultimately what you’re doing. And you’re solving the need in the operators by giving them funds to either acquire real estate or to be able to improve real estate. And that’s really what investors do.

Now, and litigation services… Or sorry, legal services, you got to figure out, well, how can you contribute? Where’s the need? [inaudible 00:06:16] complex. Although legal services is around the same size as the global airline industry, the global airline industry is just dramatically complex. They have first, second tier supplies, a ton of ways. It’s super complex. And attorneys, they’re just hourly rate people. They have court fees and filing fees and hourly rates. They also have some marketing spend to be able to attract clients. Look at that industry, you’ll find that there’s cases in which there are individuals out there that have been harmed, sometimes by one-off situations, where one individual harmed another individual. Or there’s thousands, tens of thousands of individuals which are just similarly harmed by one, kind of the villain. The one defendant, somebody that did something. And a lot of those cases, those harmed individuals, they don’t have the money to pay attorneys. That’s expensive.

Litigation is just the process of settling a dispute through our court system. And harmed individuals, they have the right in America. They have the right in America to seek justice if they’ve been harmed, they can’t always afford it. What litigation funding inherently does, is it allows attorneys to be able to work under a contingency basis. It helps to fund attorneys so that they can then pay their hourly rates, the court fees and the filing fees to be able to provide the service, this access to justice to these individuals that want to go against the big bad wolf, the big bad Goliath. They provide access to them that they wouldn’t otherwise be able to afford.

Mike:

Okay. Yeah, very interesting. I think you’ve described it, but just to gain a little more clarity, under what circumstances are these raised, invested funds I assume, going into litigation? For instance… Or maybe just give us an example of how this plays out, it might be the easiest way to work through this.

Patrick Grimes:

Like many things, even in real estate there’s a million ways to invest in real estate. There’s all kinds of assets in real estate all over the country. Litigation and litigationers, there’s people are litigating for the weirdest stuff all over the place. And there’s a big broad spectrum. Then there’s some that are just one big company after one big company. We tend to focus purely on when it’s thousands of individuals harmed by one big bad mean guy, right? The one big bad mean company. And when this has been going on for a long time and they’re near settlement, it’s the case that about 90% of civil lawsuits settle outside of court. And especially when we’re late, we’re very late staged in these. In our world, it’s not so much like, are they going to win or lose? It’s more, they’re negotiating settlements, got a pretty good feel about what they’re settling for. Or there’s already been settlements and we’re helping them get it to fruition.

And in those cases, it’s pretty narrow where… We call them mass torts. Mass tort just means there’s a mass number of people that were harmed. And tortum just means wrong or injustice. So we’re looking at mass torts, wrong or injustice was done. And in those cases as mass tort industry, there’s some really notable cases. The first one that happened in America was around 1910, and it was when a bunch of people got together and said, “You know what, I’m pretty sure these cigarettes that we’re smoking, actually, they’re not healthy like they’re telling us. I think they’re causing cancer and these horrific illnesses.” And all these people were dying, but all these people were the disadvantaged people that couldn’t afford to go against American tobacco. And so it was in fact the first third-party investor that came in and said, “Look, I will fund and support, lift up these harmed individuals to go up against American tobacco.” And then they won for billions of dollars. that was the first.

Similar, fast-forward to today. Now litigation funding, just to be clear, it’s been going on for a lot longer than that around the world. And it goes back to the dark ages in which there were peasants, and the lords would fund the litigation or the fight for the peasants to keep their land from other disputing peasants from other lords. It’s crazy. This goes back a long, long time. But in America, 1910 is when this became about really fighting against the big bad evil corporations. But then fast-forward to today, really common on the news you’ll hear about things in which there’s been misbehavior, corporate misconduct. For example, a Roundup weed killer. They lobbied, this was Monsanto, to have the EP even produce reports to say it’s safe. And you can spray this. And it was farmers and landscapers that essentially bathed in this stuff on a regular basis.

And unfortunately that was false. And they’ve since retracted those EPA reports. And now there’s thousands of farmers and landscapers which are suffering right now, and there’s been settlements and ongoing settlements right now for different aspects around that. Another one is a firefighter foam. I don’t know. And these are ones that we are actually part of our fund. Firefighter foam, where firefighters use foam to cut off fires. And inherently that was a PFAS or AFFF aqueous firefighter foam. And inherently they said, “Well, you can even eat this stuff it’s so safe.” Unfortunately, now military and civilian firefighters are suffering from horrific diseases, cancers, non-Hodgkin lymphoma as a result. And now there’s even legislation proposed to provide a firefighter relief act for specifically AFFF firefighter relief act. And that’s one, we have term sheets right now with attorneys that they’re fighting against that.

And another one is a really big one, is Camp Lejeune. Actually, one of the cornerstones of our fund right now is Camp Lejeune. It’s a Marine base. I actually own a multifamily property just down the road from Camp Lejeune, believe it or not. A portfolio of them actually in North Carolina. Our military went to go fight to prepare to go to war. And for a long period of time, actually we were 17 years cited from the time that they discovered contaminants in the water before the government actually… DOJ actually didn’t think about it. And so civilians, contractors, military and their families all drank this tap water, unfortunately for that.

And as a result, fast-forward, there’s everything from Parkinson’s to all kinds of cancers and diseases coming out, unfortunately, for these heroes of our nation. And there’s attorneys that have been working, and there’s a law passed now that actually says they’re taking ownership over it, of the situation. Now they’ve taken ownership, but they’ve published a grid saying based on how long you were in Camp Lejeune and what your medical records say your symptoms are, and this is how much you’re owed. And so, we can contribute in all these cases to attorneys, and we can lend into attorneys just like we lend into real estate to help them find and onboard and acquire these clients that have been similarly harmed, and pay the fees to help them get across the finish line, get their settlement.

Mike:

Yeah, super interesting. And at least for me, unthought of way of using funds and allocating funds. When I hear you describe some of these, I think of class action lawsuits, is that largely what most of these are, or they can be anything?

Patrick Grimes:

Actually, we don’t do anything in class action. Class action, which you find is it’s not what we call a mass tort. Class action is where it’s literally one lawsuit, and the people that started it make a ton of money, but all the other people that were added later, maybe they get 50 or 70 bucks or something. It doesn’t really provide meaningful settlements for the claimants, which is really what we’re doing. A mass tort means they’re all individual lawsuits, not one lawsuit, and they have to settle these based on the merits of each of these cases. They are settled together because you group them together, but each of the individuals are offered 100, 200, 3, 4, $500,000 in settlements, very much so meaningful settlements for everyone. And so we do that kind of, it’s called a mass tort space.

Mike:

Okay, interesting. Yeah, great clarification on that.

Ligia:

And it seems like there is some ethical considerations that you have when it comes to those litigation finances that you become part of.

Patrick Grimes:

We have a slide in our deck, it’s social good. And I think because there’s a stigma around ambulance chasers and people who are taking advantage over the system. And there’s medical malpractice and there’s things where it’s like, hey, look, this isn’t really producing a good result. And there’s those people on the board, call this number, get justice you deserve. But it’s not really what we’re doing. We’re either doing these large class actions, which there’s often laws officiating or cases, case law officiating. Yes, these defendants are liable and responsible. They caused it and they’re liable. Causality and liability on a mass scale. We do some other ones which are sexual survivor, sexual assault. Not human trafficking in a broad sense. They’re all very nuanced. But there’s some other ones where, for example, in LA Juvenile Detention Center there was an individual who armed dozens of people, kids, children through the LA Juvenile Detention Center.

You don’t have to actually prove and put these kids on the stand and relive this stuff, you don’t have to prove that the harm was done. You just have to prove that they intentionally made an effort to cover it up. And there’s lots of other examples of this, like the Catholic Church and other things. Obviously we’re not going up to the church, but there’s lots of this systemic cover up. And if you’re not disclosing this to the authorities and you’re covering it up, then the bar is very low for us to go after and get compensation for these individuals. And that’s another example.

Yeah, it is true that we’re working towards social good. We’re not necessarily impact investors or ESG investors as here’s our thesis. But just like in our decks for real estate where we say we want a cleaner, safer, and improved living experience for our residents. We’re helping provide meaningful settlements, providing access to justice for those that otherwise couldn’t have it, and enabling an industry of contingency fee-based representation that otherwise wouldn’t exist.

Ligia:

That’s beautiful.

Mike:

Yeah, it really is. Just to round out the model itself, maybe to clarify. It sounds like you’re raising funds on a specific basis, you’re finding an investment, a case with certain criteria. Like it’s a certain percentage close, it’s maybe a certain likelihood of being settled, or it’s already settled, or something. And you’re raising a certain amount of funds to invest in a particular litigation. Or is this more of a fund to funds type model where you’re raising funds and you can allocate it to multiple litigations?

Patrick Grimes:

It’s the latter. Litigation funding can be just one big case against one dependent, one claim. And you can have a big win-loss or make a huge-

Mike:

Sure.

Patrick Grimes:

Or you could get involved really early on when things aren’t really determined and get a 30X return, like your oil and gas drilling or angel investing. We’re like, okay, we want to get rid of that win-loss. We want to go really late stage. We want to get rid of any binary risk, so let’s diversify it across lots of cases, thousands of claimants, thousands of harmed individuals. And let’s put it all into one diversified litigation portfolio, and that’s what it’s called. It’s very analogous to our debt fund. We have an income fund where we provide a portfolio, you can diversify into lots of different operators and different assets in commercial real estate. And we have a very narrow buy box for loan to value, and we have a very narrow buy box for our returns.

Very similar way, but just like in any asset-backed lending type of investment, we have a buy box where we want experienced operators that are attorneys. We want certain skin in the game, we want a small loan to the amount of settlement loan to value, we want a certain duration of time. And then we want to get diversification across defendants, across claimants, across cases, and put it all in one diversified portfolio.

And my partner, David, we’ve been working together to get to… We’ve been talking about doing this three years, we finally got it running and he’s been doing this for 10 years. He’s got a lot of relationships, got a lot in legal services. It’s more of a niche. It’s a $400 billion niche industry, mass torts. But he’s got the relationships. And so, we have a ton of demand for attorneys saying, “Hey, look, we like your funds, but we’re going to layer it in and spread it out across.” So we get a really great risk-adjusted return where we’re not going to strike it big, but we’re going to get a really solid reasonable equity-like type of return that you would get in real estate.

Mike:

Perfect segue into, exactly what is that? What are the somewhat expectations, or on average? I’m sure there’s a little bit of variation, maybe a lot of variation. But if Ligia and I were to come and we had 100,000 to invest in that, how would the slide deck, or how would you present the expected… Or maybe not the expected, that’s probably the wrong word. But anticipated returns.

Patrick Grimes:

Yeah. [inaudible 00:19:32] We build it up. We’re so late stage that we’re looking at things that are in the process of settling or will in the next two, three years. Maybe on the outside four. We really see it really being middle-loaded, the returns in the fund. Where they start the settling in years two, peak in years three and four, and tapering in year five. So it’s really like that middle-loaded return base. And then investing means the concentrated… On an IRR base, we’re looking at that 20 to 35% IRR over the five years with the majority of the funds coming back in the middle is what we’re projecting. You don’t have to wait to the end. And it’s not like it all comes back at one refi or one sell, like in real estate, you’ve got literally thousands of different lawsuits in there, and some of them are grouped together as they settle. But that’s how the timing and return metric comes in. And depending upon how much you invest, you can get a little higher return, a little lower projected return. But that’s why the range.

Mike:

As far as the return profile goes, similar to many real estate syndications, is there an expected monthly or quarterly distribution, and are there certain prefs to be expected?

Patrick Grimes:

It’s structured in a similar way that we structure our real estate deals, with the caveat that there isn’t a cash on cash return. Because inherently in real estate you’re leasing the tenants. You’re providing housing, then you get a steady eddy rent payment, and that’s used then to pay back your principal and interest, or just interest payment in the dust. But in litigation funding, you’re contributing towards attorney’s salaries needed to provide access to justice for the harm that you inherently are not paying to support steady eddy payments. But settlements happen, and those are buckets that come in, and then that’s why you have a large amount of them.

To make sure I differentiate that. Now, we get a bell curve or we project a bell curve of returns because we’re in so many different settlements intended to settle short and some a little longer, so it can look a little bit like there’s cash. But really, that’s distributions coming from individual lawsuits coming through. We do have a preferred return. Because just in all of our other deals, we write an eight or 10% depending upon your class of share. Preferred return, meaning at 100% of the profits without any sponsor participation until you’re at these different metrics. And then subsequent to that, you have a split with this sponsor based on how things perform. We give away 100% of the deal, it’s pretty high numbers. And then we then share only in the profits as we outperform to those numbers.

Mike:

Okay. Interesting.

Ligia:

I was wondering, what are some of the risks that you see in this type of investment? What’s the rate, and what are some of the risks that you see?

Patrick Grimes:

Well, the reason why we’re in late stages, is because we already see… Well, the success rate may be, what if all of a sudden one of the cases goes in favor of the defendant? Well, in all the cases that we’re negotiating and that we’re into, those have already been essentially to the point where they’re negotiating settlements. And so then the risk doesn’t come necessarily you’re going to win or lose. It comes to, how much is that settlement going to be? In the case of Camp Lejeune, we already know because they’ve already published a grid, here’s your minimum settlement for different kinds of diseases. In the case of things like the firefighter foam or Roundup or sexual survivor, we got to look at other cases. And just in real estate where there’s appraisers that go and appraise the value of real estate.

In legal services, keep in mind this is $500 billion industry. There are law firm valuation specialists and go and evaluate a law firm’s client list, they call it a docket. You can look through and say, okay, they can do due diligence on it. Say, okay, here’s all your case files and show here’s proof that they were exposed, and here’s proof of their medical records showing their issue. And, yes, this applies to this case. And then this case is likely to settle in this amount because this is where they’re currently at and where we’ve seen other ones settle.

There’s some knobs just like in real estate how the underwriting can turn up or turn down based on certain factors. But there’s a lot of historic numbers as well as current numbers that we use to put in there. And then we lend on a very low loan to value. Because the real risk is, what’s that volatility in the real estate market and where’s your investment at? Or, what’s the volatility in the case value, the claim and the settlement value, and how much are you investing? And so, we’ll lend at 10, 20, 30% loan to value in those cases.

Mike:

One thing I’m curious about, and it sounds like you’re mirroring as much as possible some real estate type things. But what’s a timeline that investors that we would come in and hold? Is it a 5, 6, 7 year hold period, or what do you guys try to target?

Patrick Grimes:

The typical mass tort timeline is seven years, and we’re in that last one, two or three years towards the end. When we’re contributing towards a case, when we contribute doesn’t really change when it settles, but we try and contribute towards the end. Returns go down because risk goes down the later you invest. But that’s where we would rather be, we’d rather be at a low risk, reasonable return. That’s why we gave it a five year is what we’re projecting to be, because we think we’re in that two or three, maybe four years where we see the majority of settlements, and then everything should be tapering down in that fifth year. So your capital back earlier, and that’s really what we’re targeting.

Mike:

Okay. So a five-year hold period if we were to put money in. I’m curious, I don’t think this is super clear to me yet. But from the litigant’s point of view, as they get later into the process, what’s the need for money? Is it just that they had some to get going, or maybe the attorneys have supported some element of it pro bono for a while until they get, and then they just have this need to get to the finish line? Or, what are the funds… Or I guess, why are the funds needed at this late stage of some of these torts?

Patrick Grimes:

A lot of these attorneys have their current list of clients that they’ve acquired through people calling them, or they’ve acquired through their past proceeds and they’ve developed and baked this new case. They said, okay, now I’ve got this big list of clients, they call it a docket. And they’re saying, well, just like if I owned a property outright without a lender. Well, now that this case is really strong and I’m at the 11th hour, I really need some cash to either, one, be able to support getting these guys across the finish line, which is a lot. And it doesn’t really change. From my understanding, it doesn’t really change. You have thousand individuals in one lawsuit, that the amount of money to get across the finish line doesn’t change much whether they have 1,000 or 10,000, because it’s one case and you’re grouping them together anyways.

Really they’re like, look, if I can essentially refi out some capital out of this current docket, I can use that to then get them across the finish line. Or if I have excess, I can use that to attract more and increase the size of the docket, which is a new claimant origination we call it. Then I’ll have more people, I’ll look even meaner and scarier. And as I keep adding more people, the defendant will get even more scared to me, they’ll be more likely to settle sooner. A lot of these attorneys are saying, look, we’re going to take this to the finish line regardless. If we can monitor and get some more capital that just continue to add more and more clients to our pile, then we’re going to get a bigger number faster. And we’re okay with sharing in the proceeds. Because for them, like I said, they’re going to do all the same work anyways.

It’s really just like in a real estate deal where operators are asking, I need capital to acquire real estate, or I need CapEx, capital expenditures, to improve real estate to complete my business plan. The attorneys come and say, look, I need capital to either acquire more clients to increase the value, or I need capital to complete the business plan, operating expenses, or court fees and filing fees to get to settlements. It’s very similar in those two.

Ligia:

And I guess all the proceeds come from the settlements.

Mike:

One other thing I’m curious about is, how or what is the process to go about finding these? Is there a marketplace for this type of stuff, or is it just networking? Like with your partner, he’s been in the industry for 15 years and so he has connections with a lot of different people? Or what’s the avenue for you guys to tap into some of these?

Patrick Grimes:

There is a marketplace if you’re going to go be an ambulance chaser and go find people that got a DUI, or go find people that whatever it is, but not in our space. In our space, it’s purely there’s a handful of attorneys, maybe two or three dozen. Maybe half dozen or so each going after one type of case. And so it’s those partnerships that Dave Gooseman, my partner, who worked in when we met private equity doing hedge funds, sovereign funds, large institutional investments in litigation funding, and other assets as well that were similar credit-based assets. But he was doing this on 20, 50, $100 million check sizes.

And wouldn’t let me in three years ago because I couldn’t write that big of a check. And so when he finally left private equity, he called me up and said, “Hey, let’s do one for accredited investors.” But he’s leveraging those same relationships through 10, 15 years of spending three-quarters of a million dollars in litigation, and collecting billions of dollars through litigation proceeds. And he’s leveraging all those relationships to be the originator on the team that is out potentially on the streets working with the attorneys to structure these loans and get them valued. And then had together the agreements and then the economics for the low loan to value, and then rest of the fund.

Mike:

Okay. Let’s talk about investors for a second. You mentioned accredited. What’s the profile, accreditation status, minimum investments, anything else like that?

Patrick Grimes:

Accredited investors. All of our investments of RegD 506(c), only for accredited investors, 100,000 minimums. And that’s how, even since I started. Now, in that space though there’s so many individuals which are feeling right now heavily indexed in real estate. Because we just got done with a boom and commercial real estate got hit hard, and they’re realizing that they were riding this and then they took a big hit. And so our other two funds are taking advantage of the hit. Litigation funding provides a way to allocate outside, rebalance your portfolio away from real estate. Not only for those that are feeling tapped out and over allocated into real estate, but we just got done the fastest, largest interest rate hike since the Great Depression, at a time when our spending has been spiraling out of control and the world’s biggest economies are betting against the dollar. 11 out of the last 14 Fed rate hikes ended in a recession.

If you’re heavily indexed in equities, you’ve seen some instability, you very probabilistically should be concerned about your investments in the stock market, and should be potentially looking at allocating into non-correlated investments. Ones that don’t rise and fall with the stock market and real estate, that ride out recessions. We’re not going to make bazillions of dollars, but you can at least put some allocations away into a bucket where if you go to sleep at night, everything else falls apart, you still have settlements coming in from the judicial process and United States legal system. And it won’t matter what happens in gold, it won’t matter what happens in real estate, won’t matter what happens in the stock market. And that’s the profile of an investor that’s truly looking for not just financial independence, but financial stability through allocations and the non-correlated investments.

Mike:

If the legal system is a behemoth, and it is one of the American branded parts of our country when people think of the United States. I think the legal system and litigiousness is top of the list.

Ligia:

Maybe you touched on this earlier, but do you mind touching again on the tax benefits of this type of investments?

Patrick Grimes:

Didn’t mention it. And it’s a really good question, because a lot of investors come to me and they’re like, “I want real estate, I don’t want oil and gas.” And because the government does in fact incentivize certain kinds of investments, because they need investors to go house America, feed America, energize America. So housing, food, energy incentivized. But there’s also a reason, it’s because people aren’t naturally doing that on their own, which is because it’s inherently risk in those markets. It’s important to know that not all investments should be tax advantaged, because inherently they’re incentivizing you to do it because the free market on its own aren’t choosing to invest enough without the incentives in those. That’s ultimately a factor of the risk level. And so to really build true non-correlated investments, you can’t always invest in tax incentive places. Oil and gas, it’s incentivized all in, but man, you going to have the stomach for it. It’s very volatile.

While we don’t have these fancy tax write-offs in year one, and depreciation, the government doesn’t need to fund that, doesn’t need to incentivize it, because inherently the asset is more stable. We do have one attribute which is attractive, in that when you invest it shows up as an asset, so there’s no losses. But when you get your K-1, it comes back your profits as capital gains. And so, some of our investors have said, well, this is great. If I have other capital losses in that year, I can offset those gains or those losses. But inherently it is, so not tax advantage other than it’s better than ordinary income. Capital gains provides that advantage.

Ligia:

Thank you for that. For clarifying that.

Mike:

Any final thoughts? Any questions that we haven’t asked are important for anybody looking into these types of investments, or that’s curious that you want to bring up?

Patrick Grimes:

I challenge investors all the time to do the pie chart of where your assets and your allocations are. Take a hard look at the biggest chunks of that and see how you feel about that right now. Take a look at the past market fluctuations and cycles and how stable those are right now. And consider other investments into, like I said, some of these other industries. And there’s a lot of fear associated with doing something new. You have to step out. And people say, “Only do what you know.” But what they’re saying is do what’s comfortable. And when you do something that’s comfortable, you tend to get way over indexed in that one thing. Which, your fear of doing something risky is actually driving you to create a risky portfolio, an out balance portfolio that could potentially cause you to lose your shirt, like I have before.

It does take that step to take the time, do the research, learn. We have a litigation investment mastery series, called Litigation Investing Mastery. It’s like 20 emails, 150 pages on everything you need to know about litigation funding, and on investing in litigation funding. We have tons of mastery sessions, we’ve done talking with Dave Gooseman, talking about the asset class. We bring a lot of parallels and it’s very similar. If you take the time to educate yourself in what these non-correlated investments are, although it may feel uncomfortable going in, you may find yourself in a much more secure and comfortable place on the other side.

I’m happy to chat with anybody. And also, I think I gave away a copy of my book online. If you would like, I can give away a copy of my book on this podcast too.

Mike:

Really love it.

Patrick Grimes:

For Persistence, Pivots and Game Changers, Turning Challenges Into Opportunities. And I wrote a chapter in this book with some other people, Phil Collins, lead guitarist of Def Leppard is on this, and some other real estate investors, entrepreneurs. It’s really cool. Because I told my whole story, it’s the first time I really got it all out there. It was a little embarrassing, I lost everything, was a snot-nosed engineer and then made my way through all the assets. I actually sign it and send it out just because I feel like I’ve gotten a lot of good feedback that it’s helped people step out of their comfort zone. And I’m happy to contribute back.

If anybody wants to chat, passiveinvestingmastery.com, the calendar’s always there. It’s one of the things I love to do is talk to investors. I’m happy to, wherever you’re at, help you get pointed in the right direction.

Mike:

Okay, passiveinvestingmastery.com. And a link to book is there as well?

Patrick Grimes:

Oh, yeah. Passiveinvestingmastery.com/book, and that’s actually a secret link /book. Put the name of the podcast in there, because it says where you found us. Make sure you put something in there, because we don’t necessarily just willy-nilly send it out to everyone. We need to know come in from a legitimate source. Passiveinvestingmastery.com/book, and then just put Fight Club podcast in the promo code, and I’ll sign it and we’ll get it onto you.

Mike:

Okay. And your other resources you mentioned, can those be accessed through your main website in terms of the litigation specific email course and things?

Patrick Grimes:

On our homepage you’re going to see featured investments, our income fund. Cashflow or acquisitions fund, which is buying properties in cash right now. And both of those are taking advantage of the downturn, which is they’re both exceeding projections. We’re doing great. The third one is litigation funding. You can opt-in on that page, but we’ll have webinars. At the top of the page you’ll see resources, and then we have all kinds of resources. One of them is Litigation Investing Mastery series, and you can also register for that. Then we can either read them online and we send them out to you every few days, so it’s little digestible chunks. But there’s a lot of opportunities for education.

And set up a meeting. I’d be happy to step you through wherever you’re at, whatever’s the best fit. Like I said, it’s what I love to do is be able to invest back into the people out there and share a little bit about what got me along my journey.

Mike:

Yeah, that’s the best way for sure. Love a good conversation. Well, again, Patrick, thank you so much for coming on again. I love your journey from the full spectrum of experience, from losing it to learning from it, to refining. And now, as you mentioned, capitalizing on distressed assets and trying to make the most of a certain situation in real estate. And now diversification opportunities. Great stuff. We’ll make sure and get those links in the show notes. I wish you all the best with this. And, yeah, thanks again for coming on the show, man.

Ligia:

Yes, thank you.

Mike:

Really happy to be back. Sorry, go ahead.

Ligia:

I said, yes, thank you again, for sure. It’s very inspiring to hear you talk and hear about your new adventures.

Patrick Grimes:

Oh, you guys are so sweet. I’m just glad this time I’m not laid out on the floor and getting up with a black eye. I got knocked out pretty bad last night.

Mike:

A little practice session. But this one, like I said, it might be good to pair up with something. But yeah, we wish you all the best and stay in touch. And if we can help you in any way, let us know. But thanks again.

Patrick Grimes:

Thanks so much.

Mike:

For those of you joining us today, we hope you enjoyed this time in the champion’s corner as much as we did. Got some awesome takeaways. And most importantly, will take action to continue living your best life and maximizing your potential. Mindset is such an important aspect of life. And when coupled with action, delivers undeniably powerful results.

Ligia:

Please subscribe to the podcast to hear from more great guests and get the latest mindset mastery insights and cashflow match-ups.

Mike:

Again, thank you so much for investing your time with us, and we look forward to seeing you next time on the Cash Flow Fight Club podcast.