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Aug. 2, 2024 - Fresh & Fit
01:40:11
How To Make HUGE Returns On Real Estate!
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Time Text
Thank you.
What's up?
Welcome to Freshman Podcast.
We're here with Chris Krohn.
We're going to talk about real estate.
I'm excited about this one.
Let's get into it, baby.
Let's go.
And we are live.
What's up, guys?
Welcome to the Fresh Fit Podcast, man.
We're here with a special guest, Chris Krohn, one of the top real estate investors on YouTube.
And we'll talk about that here in a second.
But, yo, guys, check us out, rumble.com slash freshfit.
As you guys know, that is the home base for us.
Where you can find us.
Also, cowsclub.tv.
So, you know...
That's where we were able to unleash and give you guys the real content that you guys want because we have to be careful on YouTube.
But don't worry, this episode is going to be clean because we're going to be talking about money focusing on real estate.
So, anyway, without further ado.
Welcome back.
Welcome back to the show, Chris.
Thanks, guys.
Appreciate it.
It's been a while.
Good to be here.
In person this time.
Yes, in person this time.
We know who you are.
We've had you on the show before.
It was a great discussion.
But for those that might not be familiar with who you are, can you introduce yourself to the people?
Yeah, so I've done two billion dollars worth of single-family residential real estate and played the game where I said, if I can figure out how to scale a game that most people don't know how to play, I can make a name for myself.
Basically, riches are in the niches, so go to a niche that no one wants to play in.
Most people, they do single-family and they graduate to multi-family.
And so I just basically said, hey, let's see who can produce the highest ROI in single-family.
We figured out that game.
And I never graduated to any other real estate because I can't find any other game that has an ROI that high.
Wow.
Beyond that, the last several years I've been in private equity, sift through thousands of companies every year, find 10 companies that I want to bet on.
And so when I'm not investing in real estate, I'm investing in tech and other companies that are insanely disruptive and changing industries.
And so I'm enjoying playing that game as well.
When it's not that, dude, it's just me and my wife and my four kids.
I've got an 18-year-old, my youngest is 13, and we've been world schooling for the last five years.
Wow.
Meaning took them out of public school and basically hired our own teachers, brought them in and said, you know what, we're going to educate you.
We're going to customize your education.
We don't really believe in college anyway.
Let's get you educated based on this crazy world that has changed so much.
Let's get you prepared for that one.
You can't send your kids to public school anymore without them being indoctrinated on some BS, right?
Oh, 100%.
That's what we had to get out.
So, yeah, that's a little bit about me.
Very smart.
And you're based out of Utah, which is a more conservative state, so that makes sense.
Obviously, they've still got their head on straight over there, versus the clown world that we see.
Because, I mean, I wouldn't want to send my kids to public school nowadays either.
It's scary, man.
You've got the whole agenda of, like, warmness.
The alphabet community.
Yeah, that's scary.
Trying to indoctrinate your kid.
And when that comes to Utah, that's when you've got to be super freaked out.
You're like, this is a deeply red state, and that stuff made it here.
And I'm like, okay, I'm out.
We're not doing it that way anymore.
You've seen the Olympics, bro?
That ceremony?
It was crazy.
No, that was disgraceful.
It was awful.
And you're a Christian base, right?
There you go.
And a huge religious community in Utah with Mormons.
Are you Christian, Catholic?
So I'm Mormon.
We definitely consider ourselves Christian.
Fair enough.
So, real estate, you mentioned that you, single family homes is your niche and you also do help with startups 10 per year, you said that you pretty much stake on, where you fund them, get their business off the ground.
Well, and it's not just syndicating and funding them, you know, we've developed a passion for how to grow companies successfully, so when we find a company that we want to back, often they'll literally house in one of our offices, we'll bring them into our culture, we'll provide leadership training, we'll headhunt their CEOs for them, so we take a Really a hands-on approach to helping grow those companies.
Nice.
And you said it's in more industries that are like kind of, you said tech industries that can like really...
Yeah, but also disruptive, right?
I mean, tech is usually, SaaS is where you're going to find 30, 40 X multiples, where you got opportunities for really great growth.
And it's also, software's just how you scale.
You know, scaling companies is hard, and software allows you to scale like crazy.
Boom.
Okay.
So, single-family homes, right?
People always give residential real estate a bad name.
Like, oh, it sucks.
It's not worth it.
I love Greg Cardone, but more doors are better.
It's peanuts to deal with single-family homes or even residential.
He's like, you've got to do more doors, more doors, more doors.
10x, 10x, 10x.
You have a different approach.
You're doing the single-family home route, which I think is great because I'm in the residential space as well.
What is the main reason why you stick to single-family homes and stay away from the duplexes, triplexes, and commercial real estate?
You know, in the game of real estate, people get into these debates about strategy.
They're like, oh my gosh, are you flipping?
What strategy are you leveraging?
Are you doing land development, entitlements?
And I'm like, you know, every one of those strategies has an ROI associated with it.
But it has other vectors that you've got to look at.
It's like, okay, yes.
How much money is it going to make me?
But then, is it a job or is it passive?
So, how much time is it going to take?
By the way, is it hard or easy?
You know, how much risk is associated with it?
Does it work in up and down markets?
And so, I've got six different vectors that I look at when I'm looking at all strategies.
And the reason why I roll with single family is because for me, I can produce the highest ROI with the least time, the least effort, and the least risk.
It works in up and down markets and it provides a service.
And so, you know, I had Cardone on my podcast and he's like, dude, why aren't you doing multifamily?
I said, it's because I like more money.
It's called higher ROI. We just completed a 10-year study year over year on our last 2,130 properties and evaluated where, you know, what is our ROI? What are we making year over year?
We're making 60.6% on our money.
Sure.
That's wild.
Damn.
According to Rule of 72, that means that I'm doubling my money every 10 months.
Wow.
And it's like, can I do that in multifamily?
No.
Multifamily is for lazy people.
It's like, oh, single family.
No, it's for lazy people.
Hey, man.
What are you trying to say, Chris?
Oh, damn.
I'm saying that it's like, oh, I got tired because I was figuring out how to scale single family, and I got 25 homes, and I was the landlord, and I was doing all the work, and it was so hard.
And you know what?
I sold it all, and I rolled it all up, 1031 Exchange into multifamily, and then it manages itself with an on-site manager, and you're like, wow, that's so much easier.
I'm like, yeah, and what did it cost you?
How much of your future did it cost you on the money you're not making because you're lazy?
So, you know, to the credit of people out there that do multifamily, it's not just lazy and easier.
They just can't figure out how to scale single family.
And I always just told myself 20 years ago, if I can figure out how to scale this game, which I don't know anyone that scaled as big as I have, but if you can figure out how to scale it, then you're going to make way more money than multifamily.
And so I basically said, okay, let's take on Mission Impossible.
Yeah.
Let's figure out how to scale.
Quantity and volume is like the name of the game if you're going to go in the single family home realm.
There's been talk for years, by the way, and I really want to get your take on this, because I think it's actually genius that you do single-family homes, because it's an asset class that's never going to go away, and it's the most required.
People always say, the real estate market's going to crash, blah, blah, blah.
I think last time we spoke, there was something like five million homes shortage.
Now it's six.
It's six million, so it's actually went up.
It's gone up, and right now, at the pace that we're going, we're not going to solve this problem for like a decade.
And if you look at that, it's like, where are we at with multifamily?
Multifamily is overbuilt.
That market is softening right now.
People are making less money, and it's because we built too much of it.
What we really need in this country are the missing 6 million homes.
And so anyone that's worried about a bubble bursting, I'm like, the cool thing is, real estate is different than the stock market.
Stock market is like, oh, it's an election year.
I don't know, you know, how that's going to have an impact on the S&P. No one can control the stock market.
Real estate, it's literally just supply and demand.
It's like, as long as there's a demand for six million homes, that market is not going to crash.
And so, you know, there's 324 markets that make the United States.
I invest in the top five and I basically track the inventory in those markets.
And as long as we have demand for homes, we're not worried about a crash.
And that's why we've seen real estate, year over year over year, since 2008, go up in value.
And there's people starting to freak out, like, with the pandemic.
They're like, oh my gosh, 2020, 2021.
Each of those single-family homes went up $100,000.
That's crazy!
Like, it can't keep going up because it's not affordable and sustainable.
I'm like, I got news for you.
It may not be affordable, it may not be sustainable, but it's not gonna stop until we build those six million homes.
Wow.
Okay.
Real estate gets a bad rap right now because the interest rates are high.
It's expensive to get commercial real estate, office space isn't a thing.
What I've come to realize is people ask me all the time, well, why are you in real estate?
The interest rates are high, people aren't renting as much, there's too much inventory, blah, blah, blah.
And they always say the real estate market is going to crash.
But I think they tend to look at the commercial side versus the residential side.
Because what you do is very specific with single-family homes.
And that particular market, there's a huge shortage.
Versus on the commercial side, there's too much.
And a lot of these loans are coming up now.
Can you explain to the people why the single-family home market is completely different from the commercial world and why people need to stop conflating the two and trying to say it's going to be a crash?
It's weird that people actually do that.
At least if you look at multifamily and single-family, it's people that need houses, right?
Yeah.
But commercial is business.
Like, that's for businesses, and it is possible to have a softening or a crash of the commercial market, which, frankly, the pandemic created a lot of that problem that we're in right now, because a lot of people have figured out, why am I renting this really huge building when people are completely capable of working from home?
That's created a nightmare in that arena.
Single family, however, is really just written by supply and demand.
And when you look at the high interest rates, here's the weird thing, because I have a ton of people, they're like, oh, Chris, I want to invest.
And I want to get in the game, but not right now.
Rates are high.
And I'm like, okay, pause.
You don't know what you're talking about.
What is the difference between an 8% rate and a 5% rate?
Well, you're like, that's three points.
That's like hundreds of dollars in payments.
That's such a big deal.
I'm like, did you know in my world that my overall ROI is affected by less than 1% based on that jump in rate?
In other words, all it does is affect cash flow and cash flow is only one of the four ROIs and it's the smallest of the four ROIs.
It's like, you guys are actually like, like you're trying to jump over dollars to pick up pennies and it doesn't make sense because they don't, they think, oh, real estate is always about cash flow and I always tell people in the beginning, if you can get a high ROI and you're broke, because most people get into real estate not because they want to buy a home and have a $400 a month cash flow.
They want that home to turn into five and they want that five to turn into 15 and eventually it's like, hey, I got It's like when I was 26 years old.
I got 25 homes.
They're each bringing in $500 a month.
I'm making $12,000.
I'm now graduated college.
I don't got to get a job.
Real estate works for me so I don't need a job.
Cash flow is important after your money has grown.
But before it's grown, you don't focus on cash flow.
You really got to focus in the beginning on being in a place, being in a market where you're going to get maximum growth so that then you have millions to convert into cash flow.
Growth first, cash flow second.
And I think it's very important when you mentioned earlier that you did your 10-year study and you had a 60% ROI. Can you break down for the audience real fast?
Because people tend to hone in on that cash flow thing that we just discussed.
Can you discuss the components as to how you're able to achieve that return on investment?
Let's start with what most people are comfortable with, a 401k.
Because everyone's told that's your retirement, right?
They just completed in 2024 a study on the last 20 years for the average 401k.
It's producing 4.2%.
Now to put that in perspective, inflation is sitting at 4.1.
Which basically means if your money's in a 401k, it's breaking even.
And here's the bigger problem.
Combine your 401k with maybe a more lucrative IRA earning at 6%.
Let's just say your money's earning 6%.
To put in perspective the difference between 60% and 6%, 60% is not 10 times more.
With compound interest, It's literally a hundred times more plus.
And so a lot of people don't understand that.
So you got some money you save in a 401k or an IRA for some day.
It's earning these single digits.
And at 6% in 20 years, all of a sudden is triple.
So I was like, cool, my 50 grand turned into 150 grand.
In real estate, if all you were earning was it was earning 25%, which is four times the ROI, it makes 27 times more money.
It makes $4.3 million in that same span of time.
So, understanding ROI is actually a really big part of the game.
Now, to break down that 60%, there's four different major ROIs.
The first one is the very obvious, appreciation ROI. And the reason why I only invest in the top five markets nationwide and give people access all over the world to just those five markets, with, by the way, Orlando, Florida, I mean, we're in Miami, but in Orlando, not far away, this is where I buy a lot of my inventory.
Because Orlando is now...
One of the top, it is the 15th largest economy on the planet.
Florida is on the rise.
It has excess money for, you know, in its budget for doing that 8 billion dollar railway and everything else, right?
So Florida is definitely one of the top five markets that I'm in because of the appreciation.
So of that 60%, a lot of that comes from appreciation.
And the reason why the appreciation is so high is because you get to leverage banks' money.
The banks will put up $4 for every dollar you put up.
And so instead of putting in a 401k, put it in a property and then you get leverage.
So that the appreciation now is five times more money to you on that first ROI because the bank's putting up the money.
And real quick, just for the audience out there, for anyone that doesn't understand what Chris is talking about, Fresh, you bought a home in what, 2020 or 2021?
2019.
2019.
How much money did you put down?
12K. 12,000.
What's that house, what'd you buy it for?
330.
What's it worth now?
650.
Boom.
There you go.
$12,000.
For a $300,000 gain, calculate the ROI. I'm such a nerd.
I'm such a nerd.
I'm just so excited right now.
I have to do this.
I'm like, okay, $330,000.
Use the FHA loan, got the property, controlled it, lived in it for a year, got out.
That's a 27X return on your money over five years.
So you take that return, you divide it by the last four years.
You basically made 680% on your money year over year over year.
Think about that.
Now, that's because you have 3% down payment, right?
Super smart.
So that's the first ROI. And that's to add more credence, because you were saying Florida's an exploding market.
I wanted the audience to have tangible numbers.
Like, guys, literally, Fresh is right here to tell you guys the Florida market is crazy.
But Orlando, because of Disney, Universal, that's a booming market, man.
That's really smart, actually.
I think it might be better even than Miami, to be honest with you.
We should go there.
I'm not in Miami for a reason.
We can talk about Miami too, but sorry, continue on.
So you were talking about ROI, I just wanted to give the audience that example so they have some real numbers.
So 27X for fresh.
Appreciation, that's your first ROI. Your second ROI is your cash on cash.
I rented out the property, I'm actually producing a positive cash flow, so what percentage my ROI in the money coming back to me?
So of that 60%, a portion is appreciation, a portion of it is cash flow.
And then the third one is principal reduction.
I buy a house every day and I outsource to a renter and say, hey, will you buy that house for me?
That's what I'm doing.
My tenants are buying me houses.
I buy a house every day.
I set it up, and then I put a tenant in there and say, I want you to pay this off for me.
Yeah.
Is it rent to own?
No, no.
What I really mean by that is...
They're paying the rent, which covers the mortgage.
Gotcha.
You got it.
So principal reduction just basically means, okay, so when they give me the rent payment, a portion of that goes to service the loan, and a portion of that isn't to interest, it's to principal.
And there's an ROI. You know, on a...
On a $250,000 to $300,000 home, that's my buy box that I kind of zone in on.
Say that number one more time for the audience.
Between $250,000 and $300,000.
Okay.
So my average person's price is right around $270,000.
I've got some markets where I'm buying brand new homes for $180,000.
How much do you put down?
20%.
Okay.
Yeah, yeah.
And most of it's people taking from 401ks and IRAs and saying, I'm sick of that.
I'm gonna transfer it to real estate and I'm gonna make 27 times more money.
What is the median, I think last time we spoke, the median house price in the United States was somewhere around 350.
What is it now?
$436,000.
God fucking damn!
I have like almost 100K in a year.
Yeah, it's crazy.
Yeah, I should have bought more.
Mm-hmm.
Yeah.
I mean, we can make that happen.
Let's do it.
No, let's do it, bro.
Yeah, yeah, yeah.
I'm down for sure.
No, absolutely.
So principal reduction.
On a house in that price range, having tenants basically servicing the loan, you're going to make around 4% on your money on average just there.
So what you'd make in a 401K, literally your tenant, by servicing your loan, you're making 4% on that.
And if you add in tax reductions as well.
Now, that's the fourth one.
Oh, because the inflation, right?
Is that what you mean with the 4% or?
Yeah, well, and it's not really inflation.
What I literally mean is I'm making a 4% return on my money by having them pay off the house for me.
Gotcha.
Because all of that, as the principal comes down, eventually I'm going to sell that house and it's like, oh, like the house came down, that's a return of capital I'm getting.
I see what you mean.
What's that ROI on the money I put in?
They're building more equity for you.
In the home.
And that's a portion of your ROI. Absolutely.
And then the last one is your tax advantages, right?
I mean, you get to take the house.
This is the coolest thing.
People don't understand this.
If you buy enough real estate, you don't have to pay taxes, right?
I get to take a house.
I get to depreciate it over 27 and a half years.
So let's take your $330,000 house that you bought four years ago.
I'm going to divide that by 27 Divide that by 27.5, you get to write off 12 grand every year.
Now, let's say your cash flow is $6,000 a year.
You're pocketing six grand, but because you have a $12,000 write-off, that's six grand, you don't pay taxes on that, that is literally tax-free money.
And then you're like, wait a second, but every year I've got six grand left over, what do I do?
Well, where's your income?
Reduce it by $6,000 and now you don't have to pay taxes on that.
If you're in a 25% tax bracket, 25% on that $6,000, that's another $1,500.
So it's like, wait a second, I bought a house, all the...
Wait, wait, wait.
My income is going up, but I don't pay taxes on it.
But then on paper, it looks like my income is actually going down, and I don't pay taxes on that.
So every home you buy, you create this spread where for the first seven years I bought real estate, I didn't even have to pay taxes because of this one little hack that people don't understand.
Yeah.
And I'm going to display to you guys, again, so people understand more simply how this works.
When I was working for the government, right?
I tell you guys this story all the time.
I made about $120,000 per year.
Every year I'd pay $30,000 to $40,000 in taxes, right?
One year I bought like seven real estate properties.
Spent whatever it may be.
Put 20% down.
Some of them bought cash.
Whatever it may be.
I made a little over a million dollars that year, right?
So in one scenario, I make $120K, pay $40K in taxes.
Next year, make a little over a million, buy seven houses, I paid how much of taxes?
$40K while making all over a million.
So I literally paid the same amount of taxes making 10x the money.
You know how much I paid last time for taxes?
Almost nothing.
Yeah, almost nothing.
But that's what real estate does, is it allows you guys where you can make a bunch more money, but the real estate offsets your income.
And this is all legal, by the way.
It's all legal.
Yeah, of course.
All legal.
And that's just the depreciation.
We haven't even talked about cost segregation yet.
Oh, yeah.
The cost segregation lets you get even more tax benefits.
Yeah, but that only depends on whether you actually need it.
Most people don't.
But if you get to a point where it's like, I'm making more and more money, now I gotta get aggressive, then for me, I'm like, oh shoot, I gotta figure out how to now write off millions of dollars years in taxes.
Well then you get more aggressive.
Cost segregation is a great strategy.
It's like, oh, you guys have a business that's called Fresh and Fit.
I'm like, if I were you guys, next year, go buy a commercial building.
Before the end of this year, buy a commercial building, you can rent out 50% of it, you only have a 10% SBA down payment, and if you do the math, after cost segregation, You would literally, for every dollar you'd give the government, you actually get to pocket two dollars while buying an asset that has rental income to you.
Those are aggressive strategies that help people.
Once you, it's like, well, if you can buy 10 homes, you can buy 100.
And essentially, you're gonna come into a lot more income, and when you do, then you need more aggressive taxes.
And I tell people this, like, I tell them that story, not to flow, I'm gonna do this much money.
It's to say, like, Literally, if you're in the middle class and you don't have assets, they destroy you in taxes.
Versus if you have assets and you're in real estate, you can make 10x the money and pay the same amount of taxes as someone that makes 10 times less than you.
That's crazy.
And to your point, Chris, as well, if you're working a regular job, understandable, you're making money.
Putting it in a 401k is one thing.
But putting it into real estate, all these benefits here, why even put it in a 401k anymore?
Speaking of which, you're heavily critical on 401ks, IRAs.
Dave Ramsey.
They're scams.
They're stupid.
They're dumb.
They don't make sense, and they make you poor.
If you want poor people to stay poor, you should put money in a 401k.
Even the creator of the 401k, after a 40-year study, said, this is a failed experiment.
This is a bad idea.
I can almost argue, if someone tells you, the masses say, okay, go do this for the masses.
Go do this thing right here.
I'm like, uh...
It's a different way to make money.
Because you're very critical of Dave Ramsey and the whole saving money thing and the 401ks and the traditional financial advice that they give you.
What do you think is the problem with it?
Why do you think it's a failed system now?
A dying system.
Yeah, a dying system and why should people look to real estate instead?
I just came out with a new book.
It's called Time Machine.
And in that book, what I do is I talk about the five different ROIs that can help anyone achieve a lot of wealth in a very short period of time.
I'm reading some of the comments because we're live and there's someone here saying, oh, this is why the rich stay rich.
I'm like, I started poor.
I don't know about you guys, but I didn't.
Listen, I might be 6'5 in finance, but I didn't start with a trust fund.
I don't got the money.
I had to create that wealth, and we're really exposing here how we did that.
And so when you take a look at the system of 401Ks and IRAs, the problem is that everything society asks you to do with your money is single-digit.
And so we have the stats they're in.
At 65 years old, the average person that followed society's game plan has $254,000 in retirement.
But right now, as of this year, the average American across the board has an average of $304,000 of equity in their home.
So their equity, that was never a retirement plan, that was an accidental...
I was just buying a home to live in for my family.
And paying the mortgage.
Gave them more money than a 40-year intentional plan.
Wow.
And the average person in retirement spends $85,000 a year, so your $250,000 will last you three years.
You spent 40 years...
Saving money for three years.
And so if I'm critical about Dave Ramsey, it's because he gets people focused on the wrong KPI, the wrong goal.
His outcome is debt is evil.
Get out of debt.
I'm like, well, actually, I love debt and debt makes me money.
And Dave, you know that because of all the real estate you own.
Yeah.
No, it's a little hypocritical.
Dave's good for people that are irresponsible and uneducated with money, where it's like, hey, if you don't know how to budget and you're blowing your money, blowing your wad, then yeah, you gotta actually get all your stuff paid off.
But you've got a lot of good people that actually buy into that philosophy of no debt will set you free.
I'm like, dude, when you wasted 22 years of your life or 16 years of your life on Dave's Baby Steps program, and you're like, I'm 52 and I'm finally, I'm out of debt.
I'm like, you were out of debt 30 years ago.
You wasted all your time because for money to multiply and to invest it and go somewhere, you need time.
And so you focused on getting out of debt.
What you should have been doing was actually growing your money.
And if you can learn, most people have debts at like 5, 6, 7%, not 18 and 22, like reasonable rates.
When I can make money earning 25% or 50% or 60%, why would I ever focus on eliminating a 5% mortgage?
When I can grow my money at 50%, it doesn't make sense.
So, make the money, make money and then go pay off your debts.
Like people are retiring their money in the river, you know, they're doing it out of order.
They're prematurely satisfying their debts.
They're like, if I pay off my debt first, then I can invest.
I'm like, uh-uh.
Go invest, make your money matter, make your money, make money, then go pay off your debts.
Because what would you rather have?
Would you rather be debt free, or would you rather have 10,000 residual dollars coming in every month for the rest of your life growing at 10%?
You're right, yeah.
That's financial freedom.
The first one is actually a form of bondage, and it's a waste of time.
Slavery almost.
Yeah.
So, you know, Dave Ramsey, when he does talk about buying real estate, he talks about buying real estate cash, not using loans.
What are your thoughts on buying houses cash versus buying homes with leverage with banks?
What are your thoughts on that?
Well, I love leverage and I put 20% down on pretty regularly.
The bank puts up the other 80% of the money and my rule is I don't want a house to be ever more than 50% paid off.
When I talk to someone, once their house is 50% paid off, I start freaking out because all I see is Hey, if that worked for you, pull out, harvest that equity, and go buy three more.
You know, think about that person that is 65, a lot of young people are watching this, but imagine you're 65 years old, and you got $300,000 of equity in your house, and you have $300,000 for retirement, and you know that you only have a few years to live with what you save for retirement, and strangely, you're like, I got $300,000 in equity.
And in that moment, you're thinking, You know, if I had just bought six or seven more of these, I'd be worth two million dollars.
And then I'd have a residual income from a bunch of paid off houses and then I could live my life.
But instead, I'm going to have to go back to work or rely on government or rely on charity and I'm going to drop below the poverty level on my income because I can't stretch my money.
But modern medicine is going to keep me alive for 40 years, yay.
Gotcha.
That's scary, man.
Yeah.
So would you say it's not a good idea?
Because I have bought houses cash before, but typically it's because they couldn't do a loan.
It was the end of the year.
I didn't have time to do a loan.
I'd buy cash then.
But I always cringe at myself whenever I'm like, oh my God, I've got to buy this thing fucking cash.
Because I do think it's a foolish thing because you can take that, let's say $300,000, $400,000, and buy multiple homes.
And they get the depreciation benefits.
And for the audience, when we talked about depreciation over 27 and a half years, It's off of the purchase price.
So if you buy four of those houses versus only buying one, you're able to get way better tax benefits.
But I guess in what situation would you say does it make sense to buy cash besides maybe some of the ones I... Well, first of all, there's always a way around.
Like right now, you have DSCR loans.
And they'll basically say, hey, if you're going to buy home cash, do it cash.
And then two months later, refinance it, pull 60% of the money out on a DSCR loan.
And they're going to qualify you not based on your credit or your job income, but actually on the merit of the rents from the house.
So I have hundreds of houses that I do DSCR loans for.
If you have anything paid off right now, put those loans in place and then all of a sudden you've got that money out and it wasn't a qualifying game.
Your credit didn't even matter.
Wow.
Interesting, I didn't even know about this.
So if you have, you said it's called what?
DCR loans?
DSCR. DSCR. So if you have a home paid off, go to these people, hey, I want to pull out, is it a cash out refi essentially is what it comes to?
Here's what's happening.
I got people all over the world that follow me on my social and they say, Chris, will you be my mentor?
Partner with me and they're basically saying, if I put up the 401k and IRA or equity in my home, will you put your team to work buying and doing all the work so I don't have to learn how to do this?
I don't want to be coached.
I don't want to do it.
I just want you to do it for me.
And so I'll go in and we'll partner up and I have 1800 partners around the world.
I build their portfolios and a bunch of my partners are in a situation where they can't use their credit.
So I have to use an alternative method.
My method is, we just go buy cash.
I pull my investors together in a fund, we buy cash, and then it's like, okay, well, when you buy cash, your ROI drops by like 80%.
It's awful.
You're lucky if you could get a 10% return.
You'd be lucky if you can get a 10 or 11% return.
That's when I go and buy them cash.
I do the DSCR loans, pull 60% of the money out, go buy cash again, do the 60% loan and do it a third time.
And now I have a whole bunch of houses where maybe the houses are more like 40%, 45% loan to value.
So they're over half paid off, but now they're still performing at a, you know, they're not performing at a 60% ROI. They're still performing at a really high ROI, something that kicks the trash out of your 401k.
Gotcha.
And what's the interest rate like back on these and what's the repayment?
It's actually really similar, especially because there's not a lot of risk to the bank.
The bank's like, hey, we're only giving you 60% instead of the traditional 80%.
So rates are identical.
Okay, to whatever's in the market.
And then what is the repayment like?
Is it like 30 years?
It's just a normal 30-year.
Really?
Nothing weird, nothing funky.
Okay.
Fixed rate, 30-year.
So it's basically a less risky cash out refinance for the bank.
You got it.
Essentially.
And they love them.
Yeah.
They'd rather give that out.
Yep.
And it's great for people like me that are complicated.
Because it's like the average person only can get 10 loans on their credit.
DSCR is a way to work around that and say, okay.
Oh, it's not Fannie Mae.
Mm-mm.
Okay, real quick for the audience.
So guys, once you start doing this and getting into real estate, you could get 10 loans that are like Fannie Mae loans that give you the good interest rates and everything else like that.
After that 10, because I've had to deal with this, you have to start becoming a bit more creative with your mortgage broker and finding loans and stuff like that.
So this is one that doesn't count towards that 10.
Doesn't count.
One more time.
DSCR? Mm-hmm.
Okay.
That's something new.
I didn't know about that.
My world revolves around that system.
So let me ask you this then, Chris.
What if someone says, well, Chris, why would I do that when I could just do a home equity line of credit?
And I can have the money available to me.
I could borrow more and it's there.
I don't have to necessarily pull out one time and then use it.
Why not just do a HELOC? Home equity lines of credit only work on primary residences.
So when you start buying investment properties and it's like, hey, there's cash.
I want to get it out.
You have to do a cash out refinance.
You really can't do a home equity line of credit.
It's really hard.
You have one on a rental, but they gave you a high rate.
Do you want to tell the audience about it a little bit?
Luckily for me, I have a relationship with my lender, and he made a different type of loan for me, but it's this hybrid between HELOC and Cash Out, basically.
It's not easy to get.
No, and that's not a standard program.
No, it's not.
Yeah, I would say a lot of my people that I work with, they either come at me with retirement or equity in a home.
Like, if you bought a home and you're watching this and you're like, well, I've had a home for five years.
Trust me, you have over $100,000 of equity.
And in my opinion, if you don't touch it, that means that your goal is to pay it off.
And I think that's stupid.
You should be asking, how do I harvest that?
How do I take that out?
Because, dude, think about most people.
The average person's country, average household income is $80,000 a year.
Like, Even if you're saving 20% of what you're making, that's like, what, 15 grand a year?
How are you ever going to save enough?
You wait a decade and you're like, hey, I finally have 150 grand.
It's way too much time.
You're wasting time.
It's about performance of your money over time.
And you've got to start young.
And so if you have equity, you pull that out and that's your path.
So let's say, Chris, I'm someone watching here.
I'm 25 years old.
I want to get into real estate and do this the right way.
Should I use you or how should I start this program, you'd say, to get this started?
Well, I think you always have two options.
The first one is you have to ask yourself, am I interested in real estate as a shortcut because I want the money?
Or am I actually passionate about learning how to do it?
And I'm going to tell you, I've ruined a lot of people over the years that I trained to do real estate that never wanted it.
And so you have to ask yourself, am I going to become the master?
Malcolm Gladwell says 10,000 hours to master something.
So if you're like, if this is like your thing, like when I look back on my working life, I'm going to look back and say there was a handful of things I mastered and real estate was one of them.
Then you should do it on your own.
Go find a mentor, get a coach, do it on your own.
But you gotta be honest with yourself.
If you're like, yeah, the reality is I'm interested in real estate because I know how lucrative it is, but I know I'm gonna cut corners.
I don't trust myself to do it on my own.
Then you gotta find a partner.
You go find someone that mastered it, and I would rather have a slice of watermelon Than an entire grape.
Because when you partner with someone like me, who's making 60% of my money, half of that is 30%.
There's no way on God's green earth that you're going to make 30% on your own.
Forbes reports that the average investor pulls in 10.4%.
On their real estate.
I'm doing 60.
So someone says, hey, if I partner with Chris and he does all of the work, that's way better than my learning curve of trying to figure the game out.
So it depends if you want to be the master or it depends if you just want the benefits.
So Myron mentioned my property I first got and I had a mentor to help me with that property because I didn't know what I was doing.
I just knew it was money and real estate.
So that's a good point.
Find a mentor that knows his stuff.
Hey guys, get your questions in, because obviously we got an expert in single-family homes, residential real estate, so if you guys got questions, make sure to get in, like, yeah, literally a master at this stuff.
So let me ask this, because we talked about the benefits of real estate, we talked about residential versus commercial, you know, the scam of IRA, buying cash versus using leverage.
So I guess for the audience that's watching, let's say they're like, all right, I want to get into the game.
I want to get my feet wet.
I want to buy maybe my first or second deal by myself.
Then I go ahead and get with an investor, someone that's knowledgeable like Chris, because I kind of want to understand how to do it myself before I start getting involved with other people, which I tell people all the time, hey man, buy at least one house by yourself, figure out the process, go to the closing table, figure it out, understand how to deal with real estate agents, etc.
If someone wants to do this, what do you think is the first thing they should do if they want to get their first house?
If they're just trying to do a house for themselves and start with a little bit of like house hacking, like this is how I got started.
It was like, okay, this is cool.
This is a three or a three and a half percent down payment.
And so even though we talked about how much homes have gone up by, if I was a young single person, I would be racing to save up 10 to $15,000 in the bank.
When you come out of college, it's like, man, do not adjust to your lifestyle to that income.
Like live on the cheap or else you don't have much of a hope in life financially because I want to be clear.
Like, our Millennials and our Gen Zers, they have it way worse when you compare it to Gen X or Boomers.
They can't buy a home?
No, and not only that, but they get this bad rap that they're lazy.
I'm like, no, no, no, they're way harder working.
We can measure it.
If you take a look, this is kind of crazy stat, Gen Zers, I got kids that are Gen Z, you compare them to Baby Boomers when they were in their 20s, And literally, Gen Z has 85% less buying power than a boomer did in their 20s.
Which basically means they have to work way harder for the same dollar, which means they got to work smarter.
So here's what a lot of them are doing.
They're still living at home.
They're saving their money aggressively.
They're saving $10,000 to $15,000 and that's a 3% down payment on a $300,000 to $400,000 home.
Then go get four roommates.
And then literally rent the house out to them.
Take just a room for yourself.
And then there's a means to actually have the mortgage even potentially fully covered by them.
And it's like, okay, a house hacked.
I worked hard.
I came up with the 3%.
And I've got someone else now actually making my payment.
And then 12 months later, do it again.
Move and do it again and house hack.
And if you could do it three or four times, you're getting away with murder with a 3% down payment, fully legally, doing that system.
And where does that put you in five years?
Dude, you own four or five homes.
And now if they're going up, you know, if they're going up, let's just call it 5% a year on a $400,000 home, that's 20 grand.
I got four of them.
That's $80,000 that I'm increasing every single year.
You're probably not even making $80,000 a year, but now you are in real estate.
Yeah.
Ooh.
So, okay.
So they capture their first home.
They do what you did.
Get the roommates, et cetera.
Get it paid down.
Now it's time to find the second home.
Yep.
What should they be looking for when they're looking at the home?
Should they be looking at, okay, let's make sure the exterior is nice.
Maybe it has some issues here.
What should they be looking for when they're trying to pick up this second home as an investor?
Yeah.
Like deal breakers to stay away from versus things that are good.
Before you actually look at the contents of the house, I actually would crunch the numbers.
I would ask, Where are rents per room in the areas where I'm buying?
Because I want to add it up and be like, okay, my county allows me in this area to have up to five different residents.
So I'm going to have four roommates.
And I can't charge more than $500 a room.
So I'm going to maybe pull in $1,800 to $2,000.
What's my mortgage going to be?
Okay, my mortgage is going to be $1,900.
I broke even.
That's smart.
Hey, I wonder what happens if path of progress is over here.
Homes are a little more expensive.
I ran the numbers.
Guess what?
I'm gonna pull in $2,400 a month, but my mortgage is only going to be $2,200.
I actually have a positive cash flow of $200 a month while I'm living for free.
So you gotta be able to crunch the numbers and just ask, what will actually make the most money?
Because you don't want to burden yourself with debt that you have to service.
You want other people to service it for you.
Yeah, and this is like a really simple, but like, Guys, a calculator that's really good for this is literally just going on Redfin.
Redfin.
It's really basic and simple, but what I've realized is with all my deals, I'll just use the Redfin calculator to see what my monthly payment's going to be and then how much the house generates.
And if there's a cash flow that I'm happy with, a lot of the times, by the time I close the deal and be done with it, it's pretty accurate with how much money I make.
So that's really important to crunch the numbers.
Now, Chris, in your opinion, what do you think they should be looking for as far as a cash-on-cash return, which we discussed before, guys, which is...
Well, we can tell them what a cash or cash return is first and then what they should be looking for.
Let's just say for a moment that you were going to put up $12,000, like fresh.
And that's your 3% down payment on a house.
And then let's just say that after renting it out, there's $200 a month left over.
And as long as you kept your, you know, let's just say vacancies and everything was taken into account, that's $2,400 a year.
So if I put up $12,000 and I make $2,400 a year, I can figure out exactly what my return is.
Everyone should know how to calculate an ROI. You take your gain, which is $2,400 in this scenario.
I'm going to divide it by my investment of $12,000.
And then I'm going to times it by 100.
And that tells me that I have a 20% cash on cash with my 3% down payment.
Do I think you should look for a cash on cash on a home that you're going to live in?
I don't think so.
I would focus more on what do I want to put out and how much do I want to try to get back?
Like my very first house, I didn't have necessarily roommates.
It had a separate basement apartment.
I rented out the basement and that covered the entire mortgage.
So my wife and I lived upstairs for free.
Wow.
So, you know, there was really good house hacking because a person's rent or their mortgage is the biggest expense you're ever going to have your entire life.
If you can be smart and wipe that out in the beginning, then it's like you've removed the largest financial burden.
What should you be doing with that extra money?
You should buy a nicer car.
Just kidding.
You're supposed to save that money.
You're supposed to save that money and by the way, you're not saving it for 401k.
You're saving it to invest.
So now you can buy, you know, so cash on cash, I think becomes more important when you start buying non-owner occupied real estate, meaning I'm buying homes, investment properties, like, okay, now I'm not living there.
It's less confusing.
My optics are cleaner.
How much money am I going to make?
How much money do I want to make on that house?
So for me, right now we're in a scenario where rates are high and rates are scheduled to come down and if they can get a handle on inflation, let's just say in the next 12 to 24 months that rates come down two or three points like they're hoping.
If that happens, cash flows are going to be booming because rents have not been catching up as fast as prices have gone up in the last two years.
So we're in a really weird season of crunch, which is not what we'll see for the next 20 years.
It's like the next two years are going to be funky because rates are high, which means cash flows pinched, but rents haven't caught up yet.
And so we've got this gap.
So I might have a property today where I'm like, I'm getting like a 1% cash on cash.
It's like a hundred bucks a month.
That's not exciting, but in two years when everything evens out, it returns to a 4.5% cash on cash, which is actually, that's actually pretty decent.
Yeah, and I think it's very important for the audience to understand, like, if you guys buy your first house and you're living in it, right, you might make little to no cash, but like you said before, you live in it and you're living for free.
If you're living for free, that's a W. If you're making a little bit of profit, that's an even bigger W. I'll never forget, when I did a strategy that you just mentioned before, my rent was, I believe we're at my old spot, $1,200.
So I got a property, and I had three units.
I lived in one, the other two.
At that point, they covered the mortgage, and I lived rent-free.
So the $1,200 I was spending for rent, guess what I did with it?
You were going to save it.
Saved it.
And buy something else.
Exactly.
But also, I was somewhat house poor.
So the money I had saved, I used to fix repairs for the property and stuff like that.
But imagine if I had to do repairs, we could do it without money.
So you're right.
I think when I got into real estate in the beginning, I was like, I have to buy junky homes and I have to fix them up.
And then I remember after doing that for a few years, I found this really sick deal that didn't need any repairing.
And I'm like, oh my gosh, I feel like I just saved like 10, 20 grand in repairs.
My ROI is going to be really big.
And I thought, I just got lucky.
And that's when I learned, it's like, wait, actually just raise your standards.
Those houses are available.
Yeah.
Turnkeys are available.
And I like them better, personally.
Yeah.
Well, almost everything I do now these days is turnkey.
And if it needs $20,000 or $50,000 repairs, I put that on the investor, not me, saying, hey, you take that risk and then bring it to my buy box.
And then if it still fits, then I'll buy it.
Okay.
And for the audience, guys, a turnkey property is basically a property that you buy, it's ready to go.
Like, you don't gotta do no fixes, whatever.
A lot of people like to fix and flip and whatever.
You don't deal with none of that crap.
It's pretty much ready to go.
Rent are ready.
Maybe you do a little bit of painting or whatever, but it's right there.
Or there's tenants in it already making, paying rent.
There's definitely a lot of comments coming through where people are like, Chris, can I mentor with you?
Can I partner with you?
And there are links provided where you can look at that.
Even if you're just brand new starting out, Yes, I can be your mentor.
I can guide you in doing this on your own.
Or if you're one of those that are like, hey, don't teach me to fish, bro.
Give me a fish.
I think we live in a day and age where you have to decide.
You can't do everything on your own anymore.
You can't, no.
You can't lone wolf it.
And so you've got to be smart and you've got to ask, okay, with the limited resources I have, what should I do?
And then when do I need to hire it out or bring someone else into my world?
And partnering, you know, when I got started, my original partner was my father-in-law.
He was so skeptical.
When I bought my first house, I was just in college.
And he's like, why are you buying a house?
That doesn't make any sense.
I bought my second house.
He's like, are you guys getting divorced?
Like, he was so confused about my third house.
He's like, he wrote me off.
He's like, you crazy.
But after those three houses, I got this weird phone call six months later where he's like, Hey, like, what are you doing in real estate?
He started asking me questions.
I could tell you who's calculating my ROI. So I just revealed all my numbers and he's like, oh my gosh, do you know what kind of ROI you're producing?
I'm like, yeah.
I was like, this is a lot better than my 401k or IRA. I was like, yeah.
He's like, well, what are you doing?
I said, well, it's weird that you're calling because I just found a fourth deal.
I want to buy it.
I need 20 grand.
I don't have the money.
He said, I'll give you the money, but can we partner 50-50?
And I did not have to think about that because I was so poor.
I'm like, You come up with the money, and then I only have to give you half of the return?
And I tried not to sound excited, so I was like, You don't think I'd consider that.
I was like jumping out of my skin.
And we did 50 homes together, millions of dollars in real estate, and that's when I learned the power of, because there's a lot of people listening like, well, what if I don't have the money?
What if I don't have the credit?
The biggest asset that you have is learning how to be resourceful.
You should not take advice from your credit score.
You should not take advice from your bank account.
Because when your credit sucks or you don't have money, you're like, well, I guess I don't have opportunity.
I'm like, no.
That's part of this.
It takes money to make money mindset.
You want to gravitate to a different game, a different mindset that says, well, I can find the resources.
And so I started doing that for other people.
Now they find me and they're like, hey, I don't know how to do it.
You know how to do in real estate, you know, but I've got some, I've got some 401k.
Can we work together?
That's why it's important to go outside, meet people, make connections, go to events, because my realtor helped me with this first property, right?
I met him at Toastmasters.
I didn't even know who he was until I met him there.
But then again, being resourceful, finding ways to make money is very important.
Yeah, and Tony Robbins, years ago I was in his Lions Club.
He'd pay hundreds of thousands of dollars to go through that whole system.
And I was sitting there at his house, and I'll never forget when he said this.
He said, you're one person away from lifetimes of income.
And I think about all the money I've made in my lifetime, and I'm like, Yep.
A handful of mentors unlocked all of the doors of possibility for me.
So everyone's got to be out there thinking, okay, you either subscribe to go to college, which I think is a broken system.
You either think I'm just going to read books.
That's never going to get you where you want to go.
I've never found a system that is more efficient and better than...
Oh, just go find someone that's already done it and if you can find an arrangement with them to learn from them, there will never be a faster way to the top of the mountain.
That's like doing Everest where people die and it's like, do you really want to climb the mountain with a Sherpa in their first year that has no track record or the dude that's been up 200 times and has never lost someone?
Go find the smartest, brightest, most successful person that's relevant And then figure out how to grab onto their coattails.
Grab a tiger by the tail and then let them carry you up the mountain.
That's what I did.
I feel grateful for the people that carried me to the top.
Well said.
So you mentioned earlier that you're very particular about where you buy.
There's five markets that you're buying in.
Can you tell us some of these markets?
I can.
You mentioned Orlando earlier.
Well, can I start by telling you the places where I would never invest ever again?
Please, go ahead.
When I went nationwide for the first time, this was like 2009, this is right after Fannie and Freddie had just, they were getting foreclosures like crazy.
And I got access to a tape of 187 homes that they were going to sell me at a 92% discount.
These homes were in Ohio, so we're talking about Cleveland, and then also in Michigan, in Detroit.
And I was like, oh my gosh, if I get a home at a 92%, imagine for a moment buying like a $150,000 entry-level home for like nine grand.
You're thinking, this is amazing.
So I went in, I bought all these homes, I raised capital to do it, and then I fixed them up, I took them to market, and then disaster struck.
Renters would move in.
They would literally pay me their first month's rent deposit and then they would never do anything again.
These were professional renters.
They would strip everything out of the house, take everything, pipes, copper and leave.
And then I had to refix them up again.
Wow.
And I lost a million dollars trying to escape my 92% discount on 180 whatever homes.
Well, I'm glad that I didn't give up.
Fortunately, I was resilient and I went back to the market and I said, okay, play the game different.
Don't go to blue states.
Go where they have a surplus of beautiful homes.
And that's when I developed a system for basically finding these markets that have really high performance.
Because what I'm about to suggest, when I reveal what these markets are, it's not about a good deal on a house, it's actually about a good market.
In other words, the secret to my ROI, over half of that 60% comes from macroeconomics.
It's a study of population, migration, the economy in those local markets, the companies that are moving in, jobs, like for example, Blue Oval City.
Let's talk about Blue Oval City.
You guys should all Google that so you know exactly what that is.
Ford says we're building an electric plant.
It's $11 billion.
We're going to create 11,000 jobs for the plant and they don't have real estate in that area.
So what happens?
Then you're going to need thousands more jobs for diners and new restaurants and everything else.
And I'm buying these brand new houses turnkey for $180,000 that I'm projecting in the next five years are going to be worth $340,000.
Well, that market won't last forever.
I'm gonna be there for the boom, and when everything is still taking off, I'm gonna pull out, but I'm still gonna have some of my greatest wins.
Those are the markets that I actually look for.
So, we're talking about Orlando.
That's a great growth market.
Memphis, Tennessee is a second market.
Really?
Oh yeah, there's outskirts in areas of Memphis where I'm getting some of my highest cash on cash.
Look up Jonesboro.
I shouldn't even say that one.
That is the market where my cash on cashes are between 4% and 7%.
In a market where it's hard to beat 1% or 2% cash on cash, we are slaying it in those markets.
So Alabama is definitely a market that you want to look to.
Oklahoma is another market that you want to look to.
Those are the markets that I'm in and we're basically...
Any particular cities or are we just going like the whole state is good?
No, not the whole state.
No, no, no.
So when you start...
So talk about Oklahoma City.
We go to Oklahoma City and then in Oklahoma City, then you have to say, well, where's the path of progress?
What side of the railroad tracks do I want to be on?
And then I only buy in certain zip codes.
And then I focus in on an age range of home.
And so I get super, super micro within that zip code down to the neighborhoods.
And now I actually say, now I'm willing to entertain properties in my buy box.
And the majority of homes that we find there, I don't even want.
So it is literally sifting everything.
For the audience, because that's like a really good strategy, because for the audience, guys, when it comes to residential real estate, it's heavily dependent upon comps.
So if the area has homes that are a certain price point, etc., like that's sold in the past year or so, whatever was sold is typically what's going to be...
The general thing, because with residential, it's like comps mean almost everything.
So even if you trick out the house and make it super nice, they're still going to put it at the same...
If your neighbors aren't doing it?
Yeah, if your neighbors aren't doing it, it's not going to work.
So what are some of the things that you look for in the home?
What's your, I guess...
Cash on cash targets?
The price range target?
How much do people need to earn in that area for where you want to go?
Okay, there's a couple of things that are really important there.
First of all, I'm almost always a three bedroom, two bath.
I might be a four bedroom, three bath, but my average square feet is $1,500.
And that's actually really important because if you actually cross-examine all real estate and ask what real estate performs the most, let's say on the high end I have million dollar homes, half a million dollar homes, entry level homes, and then pre-entry level.
And then what's smaller than pre-entry level like a 3-2, then you start getting into really weird two bedroom, one baths, condos, and townhomes.
Your highest cash on cash return.
Is always entry-level single family starting at a 3-2.
If you go to a 5-3, your cash on cash is actually going to go down.
You go to a half a million dollar house, your cash on cash is going to go way down.
You go to a million dollar house, you're going to be majorly negative.
So there's a zone of genius where you earn the highest cash on cash.
So we're always looking for the cheapest Nicest home, in the path of progress, starting at a 3-2, and that's where I'm actually gonna get my highest overall ROIs.
Don't do condos, don't do townhomes, I don't do two bedroom, one baths, I'm always starting with that 3-2.
They have the highest performance, they have the highest growth and the highest gains.
Gotcha.
That's some sauce right there, bro.
Yeah, no, yeah, 3-2's are fantastic.
Because it's, yeah, it's like perfectly in the middle almost.
Okay, so you mentioned, so I got here, Memphis, Orlando, Jonesboro, Oklahoma City, Jonesboro, and then you mentioned, was there, Am I missing one here?
Nothing on that.
Okay.
Why not Miami?
Because we had discussed before Miami.
I think I have an idea of why.
I know why.
Yeah, but what's your thoughts on Miami?
Because you love Florida, but Miami, stay away from it.
Yeah, let's actually talk about affordability.
Go back with me to 1980 LA. People were freaking out.
If we could go back in time and watch the news reports, they're like, guys, real estate just got over $100,000.
It's unaffordable.
No one will ever be able to live here.
The market has to crash.
And everyone's like, why does it have to crash?
Because that's too much.
I'm like, that's not what dictates a crash.
Affordability doesn't dictate a crash.
Now that same home is worth $980,000.
It's a piece of shit, too.
Yes, and if you think real estate's gonna come down, it's not.
So what am I doing?
I'm selecting markets that are pre-LA 1990.
So, for example, when I go to Jonesboro and I'm buying a brand new house for $180,000, I'm looking at affordability.
What state is that in, Jonesboro?
I'm gonna let you look that one up.
So if you take a look at the macroeconomics on that, talk about affordability.
You're looking for an intersection where real estate is way less than what people earn in the area.
So in the reason why not Miami is because the prices have already hiked outside of my price range.
My goal is to always buy and I'm gonna drop a huge nugget here.
I always buy 30% below the median for an area.
So if the national meeting is $430,000, my average purchase price has got to be under $300,000.
My current average purchase price is $270,000.
Why am I 30% below the median?
Watch this one.
For single-family homes, right?
For single-family.
When the market crashes, on a bad crash, like a 2008 crash, a million-dollar home is going to go down to half a million.
Half a million is going to go down to 300.
300 is going to go down to 220.
220 is going to go down to 190.
190 is going to go down to 175.
175 is going to go down to 170.
In other words, everything above the median takes the largest hit.
Everything below the median takes a much lower.
And if I'm 30% below the median, I actually have minimized myself so that it's like, oh, you're right.
We had a nasty crash.
My property barely went down.
But my rents are actually going up.
And so what am I gonna do?
I'm gonna hold.
Why would I sell?
I'm in a good position.
This is why I didn't lose any of my real estate or inventory in 2008 when everyone said sky is falling is the worst market.
I'm like, you guys crazy!
Within five years of buying my first couple thousand homes in Phoenix and Vegas, you know, we had made our investors over a hundred million dollars.
At a time when everyone said, don't.
By the way, we're in the same timing right now.
People are saying, look at interest rates, look at the economy, look at the market, don't.
And I'm like, you guys, I am making the most money I've ever made in the game.
Y'all crazy for not, but watch this.
You wait a couple of years, rates will come down.
We're going to get that buyer's market surging hard.
Real estate prices are going to skyrocket.
What's everyone going to do?
They're going to try to buy real estate.
And I'm laughing as I'm selling my inventory, going to the bank, saying, y'all not counter cyclical.
I'm making money because you're all stupid.
You're always buying when you're supposed to be selling, and you're always selling when you're supposed to be buying.
People don't get that.
It doesn't matter how loud I scream.
They're not getting it.
And earlier in the chat someone said, well, that's why the rich stay rich and there's all this negative sentiment about, you know, the people with the haves and the have-nots.
I'm like, bro, you can be poor and you can have money if you find a mentor and you get smart and you learn how to play the game.
So Miami, the affordability, it's already out of the price range that I want to be in.
That's why I'm in other parts of the state.
There's also one other reason.
It gets super nerdy, but you know, you're in a hurricane area.
And so when I get to Orlando, by the time a level 5 hits and goes inland, it's down to classified as a large storm.
It's not going to do the damage.
And when you're thinking macro and buying thousands of homes like me, you actually have to start looking at, you know, some of the natural disasters and features like that.
Speaking of hurricane, there's one on the way actually this weekend.
Storm.
Are we good in here?
I know.
Yeah, no.
And I've told people all the time, actually, I'd like to get your take on it.
I tell people all the time, condos, don't fucking buy them.
You know, there's very few circumstances where buying a condo makes sense financially because of the HOAs, especially here in Miami, where you're paying $1,000 to $2,000 on HOA alone, which that price can only go up.
What are your thoughts on condos?
Why should people stay away from them?
What's your take?
They just don't perform as high.
Like, literally, if anyone gets anything out of this podcast, it's like, you know, that's really weird.
It seems like Chris is really biasing everything against ROI. And that would be right.
It's like, hey, if I specialize in condos, guys, my 60% ROI is going to be 34%.
I'm like, who's with me?
Let's go.
I'm like, no, that's actually a really unintelligent choice.
So, no, I won't do condos.
I won't do townhomes just because it's less ROI. It's less in demand.
They don't perform as well.
They don't increase in value as much.
Yeah.
We could read some of these chats, actually, because I'm sure there's probably some questions.
We got, what, 4,000 plus y'all in here?
5,000?
Between X, YouTube, Rumble, etc.
I hope you guys are enjoying the show, man.
That's a lot of information.
We get a lot of sauce.
I have a home in New York with three...
Oh, one last thing before I read these chats.
What do you want?
What should people look for when it comes to renters?
How much money should they be earning per year?
And does credit score matter as much?
Yeah, so my average renter makes $60,000 a year.
The moment you find renters that make $40,000 or less, those are the kind of people that when they leave, they leave you surprises.
But if you make $60,000 on up, That's when people start acting like homeowners and they start taking care of you.
By the way, if you guys want to get crazy, if anyone wants to drop in the chat that wants to do a game plan, drop any of your assets.
Just tell me, do you have equity in a home, a 401k, IRA? And I'll project in 20 years what your net worth could be.
That could be a little bit interesting.
Okay, go ahead, guys.
Yeah, drop it in.
That's pretty good.
What do we got here?
I have a house in New York with 331k owed and worth 550 to 600k.
I used the VA loan and wanted to buy a house in Frisco, Texas.
What's my method to get there?
Okay, so a couple of things.
The first one is, if you take a look at that equity, watch how I do this math.
We have a, let's call it on the low side, a $550,000 house.
You're going to go get a home equity loan up to 80% of the value.
So I'm going to multiply that by 80%.
It's $440,000 minus the $330,000.
You have $110,000 that the bank is going to give you on that house.
Now, let me just tell you what that means in my world.
Don't get caught up on the details like, I was in military, so I have VA, so I can do 0% down.
Again, that's getting lost in strategy.
Focus on ROI. You have $100,000 that you can access.
If I put $100,000 earning 34%, not 60%, 34% year over year, For a period of 20 years, that is going to turn into 34.6 million dollars.
That's what happens when you compound your money.
So, you all got to be thinking, how do I access my assets and how do I earn a superior ROI? If all you ever do is go from a lame single-digit ROI like a 401k or an IRA that's earning 5-6% and put it into real estate just even earning 20 or 30%, just wait 20 years.
Your money will multiply and at retirement, you have millions.
You may not be rich.
But you can definitely have two, three, four, five million dollars.
And for the average person, it's like, okay, well, Chris, let's just say I do that, Mr.
Kim Pop, that says, hey, okay, 20 years from now, I've got a bunch of paid off Rinkler real estate.
Real estate that's paid off is going to earn you on average a 5% cash on cash.
So let's just say that you did that.
Let's just say that you had $5 million and you're earning 5% on it.
Your cash on cash is a quarter million dollars a year.
So it's like, I retired, and I got a quarter million dollars coming in tax-free, growing at 5-10% year-over-year-over-year.
That's a good retirement plan, but to do it, Kim Pop's got to take that equity out of the house and go and buy it.
What do you guys think of house hacking and buying a home in Columbus, Ohio?
Is Ohio a good landlord-friendly state?
We talked about house hacking is good, but yeah, Ohio is good.
Get houses for great prices.
Sorry, can I correct that real quick?
Yeah, go ahead.
I hate Columbus.
Okay, you don't like Columbus?
The state of Ohio?
I don't like anything in Ohio.
Oh, you don't like Ohio?
I don't like Ohio at all.
By the way, you're right.
You can buy a cheap house for $50,000 or $100,000.
3% down, you're like, oh, that's great.
But tenants.
It was $1,800, but tenants.
So you've got to be insanely picky and choosing them.
Please be aware that you're in a state that doesn't favor you as a landlord.
They favor the tenant.
Yeah.
Yeah.
Shit.
That's a good point.
Yeah, because we had investment join here, and he does all this shit in Ohio.
But yes, he's getting houses for cheap.
But yeah, finding tenants might be tough.
If I say $15,000 or $20,000 towards a home, average home in New Jersey is about $350,000.
How would I even get a bank to even approve me for that amount?
My sister's husband brought my W-2 to his people and said I only qualify for $65,000, which I don't think is right because I can get that easy in a few years.
With rent utilities, I paid $15,000.
30k truck in two years easy how do I even get the loan to begin with then and if I put three percent down when I pay crap town ton in homeowners insurance do it bro what the hell is this question?
I think I got it okay yeah so let me talk to Vilexia Vilexia first of all if your husband brought your w-2 to a bank and cut you out so they're the middle person you got to pause and get enough financial education to go sit down and talk to the bank yourself for them to say that you only qualify for $65,000 as Trailer Park House, that means that you're not even working part-time and you're earning minimum wage.
So there's definitely something wrong.
You're saying that you can save $15,000 to $20,000 towards a home.
So if you just ask yourself, what is a 3% down payment of $350,000?
That's right around that $12,000 mark.
So in a year, you can save enough money for that 3% down payment.
Now, let's just say that you do have a problem qualifying.
What do you do?
You get a cosigner.
You find someone else that has good credit and income, they'll combine your income with their income, and boom, it's just another way to get a house.
But I would find out for yourself actually what's going on.
Alright, who's up next?
These are all Cows Club chats, by the way.
Guys, again, if you want to get a discount on the chats, join Cows Club, man.
We read all these chats first.
How can you go and get your first house?
Also, is there a way to maneuver not putting a down payment from your own pockets?
Yeah, so if you want to buy a house, like there are no 0% loans unless, well, that's not exactly true, right?
If you're VA, they're 0%.
If you're USDA and you're willing to live super rural, they're 0% down.
So there's a handful of 0 down products that are out there.
But really, you know, for most people, you're going to save a 3% down payment.
That's going to get you into a house.
Banks are built on basically running your financial situation.
If you have an average financial situation for a person, for example, coming out of college, and if you've built your credit up to something really, really basic, go talk to a bank, get qualified, find out what you need to do.
When I got started in real estate, I couldn't qualify.
My mentor said, hey, you're gonna need to state your job for 14 more months so that you get your two-year track record.
I need to put five grand in the bank for your tiny down payment on a tiny little house.
And then I need you to go get two more credit cards and use them responsibly and keep them paid off.
And I did those three things and 14 months later, I barely qualified by the skin of my teeth to get my first house.
Wow.
That 3% down payment?
Became equity in a house that I took out to buy my second house.
The second house bought my third house.
And you fast forward to 25 homes later, four years later, I had $1.6 million net worth all on a $3,300 down payment.
Boom.
Think about this, WFreshFit, no one else gives this much value.
You know it, guys.
Nobody stops us.
Hey Chris, I've got a home I bought for $445K in 2020 at 3.25%.
I owe $385K now and I'm debating on selling it right now for between $650 to $690.
My payment is $2500.
I think I can rent it for $4K. Should I cash out the $200K or go ahead and rent it out?
I was thinking the same thing that others are that it's going to crash.
Okay, so a couple of things for you.
Number one, the market is not going to crash.
Number two, I don't keep any rentals that are worth more than $300,000 because when the market does eventually crash, I think we're a decade out on that, I think you're going to get spanked.
So for me, if I were you, I want to sell that house even if I have a $1,500 a month cash flow, I'm going to take my $200,000 of gains and I'm going to use that to buy two or three homes at a lower price point in one of the top markets where I'm going to get a higher performance on my money.
So a question for you, actually, I was gonna ask this.
When it comes to renters, you said you want them to make 60k per year, bare minimum.
What about credit score?
Because I've noticed, like, with credit score, I'm not putting anyone else in that's under, like, 720 or something, because I've seen people that make 100, and they still fucking don't pay rent.
Yeah, we're 680, 690 minimum, and then anything on up is good.
But yeah, if they have credit glitches, like, that's definitely a red flag that the moment they have problems, they're going to, like, poke around and figure out, who can I get by not paying?
Now, I'm also a professional organization, so I also know how to kick people out immediately and there's no bleeding hearts on our side of the fence because it's a business.
How do you go about...
Evictions.
Yeah, evictions.
How do you go about that?
It is a pain in the ass.
I've done it a few times.
One time I did it.
I do not recommend, unless you're going to be that Malcolm Gladwell 10,000 hour expert, you should hire a property manager and take a cut in the cash flow and have a professional manage that for you because your bleeding heart is going to get you in a lot of problems.
Like, running a real estate long-term rental business is actually a very tough business emotionally unless you're really bred for it.
So, I would rather take a cut in cash flow and I'm going to have someone else come in and manage it for me.
So, I don't have to worry about that.
By the way, cool little trick.
People don't know this one.
When I go into a top market and I bring all my partners with me and every day we're buying homes there, I find a property manager where I can take advantage of them.
This is going to sound a little bit bad but I'm just going to kind of tell you one of the little hacks here.
That when you're a nobody and you go to an out-of-state and you go buy a house and you find a property manager there, you don't mean anything to them.
You mean 100 bucks a month, 150.
There's no loyalty.
100 bucks a month don't get you any loyalty.
So what I do is I find, I stay away from the large companies that manage thousands of homes.
I find one that manages like 500 homes and I know in the next year or two I'm gonna bring them 500 more.
I'm gonna double their operation in two years.
They're not, they're gonna view me as a single client and so instead of charging me 10%, I sometimes can get them all the way down to 6%, but because I'm half their portfolio, They basically treat me like I'm the boss.
And so now what I do is I have bought loyalty in mass.
So it's bulk that actually gets loyalty.
That's one of the things that my partners love is they're not an individual buying a home with me.
They're really part of a collective even though they have individual ownership.
And so you should always look for ways of bulk.
Because bulk is how you drive up ROI. Like you look at what I'm doing there on my rent fees going down from the property manager.
That translates into a higher cash on cash ROI. So you mentioned earlier that you're getting in, you're buying, you're holding for a bit, and then you're selling three to five years out.
Usually five.
I'm doing like a five-year hold.
Maybe a seven on the high side, but sometimes only three.
Okay.
Because I'm waiting for the market to go up to a certain level, and then the market's going to keep going, but I want out because it's outside of my buy box.
So when I left Phoenix, like watch this.
I go into Phoenix and 2009, 10, 11, I'm buying homes for $120,000, $130,000, sometimes $90,000, that we're selling for $250,000 to $300,000.
Once that market came back to 80% of its original value, I left the market.
It kept going up.
But I didn't want that money.
The first money that I made, the first hundred plus thousand dollars, that was the safe money.
The next 50 grand, that was way riskier.
So, my strategy is not to get...
I want the low-hanging fruit.
I don't want the high-hanging fruit.
So, in the markets, I'm going to stay there for the first 5 years.
I'm going to watch affordability get crunched as we're making all of this money.
And then when that market normalizes and has gone from a really juicy opportunity to an average opportunity, I'm bailing on that market and I'm finding the next market where affordability is low, all my macroeconomics line up, and I'm going to go start discharging all my money in that market again.
Gotcha.
So you're holding it for a period of time where it's the most profitable, then you leave.
And you said once it's out of your buy window, which I think you said your buy window was somewhere between $250K to $300K. Yes.
So let's say you buy that house for $200,000.
Market gets better, it goes up to $300,000.
You're getting out at that point.
Not necessarily $300,000 because that's a moving number that's going to keep on moving.
Oh, $350,000.
It might be at that point $350,000.
And it's like, I made my $150,000.
Of course that market's going to keep going up.
In fact, everyone's excited about it, but my ROI start getting squished and they start going down.
And I'm greedy.
I want my 60% ROI. I don't want a 30% ROI because that's now what that market's turned into.
Okay.
Now question, because a lot of people are big on buying and holding etc.
Do you just feel as though taking that money and going into another market is going to present far more opportunity than buying and holding and just keeping it consistent?
No, it's actually not.
It's about a different type of multiplication and velocitizing my money.
So think about this.
You bought your house for $330,000.
Now your house is worth $650,000.
Right now I'm panicking if I'm you because I got $300,000 and I want to do a cash out refinance and at least pull out $150,000.
Why?
Because I'm gonna go buy two more homes.
Because if one home has been doing that well for you, imagine if you had two more.
So you now go buy three.
You wait five more years and it's like, uh-oh, I can keep these homes or sell these homes, but either way I can take my three homes and I can turn them into seven homes.
If one was good and three was better, then seven is going to be the best.
Now I'm going to transfer to seven.
And I don't have to pay taxes when I do this.
I don't have to pay on any of my capital gains because of my 1031 exchange.
Or I'm doing a cash-out refinance, which is, you know, pushing off and deferring my taxes.
So think about this.
Like, let's go really simple numbers.
You're earning a 25% ROI on average on every home.
Let's just say you're doing 25%.
You put your money in a home, it's earning you 25%.
If you can sell it and trade it for three more, now I'm making 25 here, 25 here and 25 here.
I'm making 75.
Okay.
If I go by, if I could double my portfolio again to six homes and I earn 25 on each one of them, it's 25, 50, 75, 100.
I'm earning 150.
More homes earning that ROI is literally more money.
So part of the reason why I sell in five years is because either way, I need to get out and transfer it into a larger portfolio.
Hence, This is how I can compete against Grant Cardone's, the multifamily game where they're like, dude, I just buy one big complex with all the doors and it's all done.
I'm like, I get it.
My system looks harder because I'm buying them individually, but I'm getting higher performance on all of them.
And I'm going to sell these homes and trade up for more.
And that's where I'm going to get a crazy compounding effect.
You're getting just wild volume.
Wild volume, man.
So I want to get out anyway, just because I got to sell them and trade up anyway.
That's clever.
You need a team to do that.
Obviously you're watching the markets, you're obviously tapped in, which is good because you're going to be more informed than 99% of real estate investors because you're constantly looking at markets, you're constantly buying and selling, and you know what's going on.
I think working with Chris, you're pretty much getting the team.
He deals with that for you.
Do you know how big that team is?
That's 200 people.
I was gonna say, you gotta have a couple hundred.
Holy!
Because you're looking at different markets.
Hey, this house is coming up now.
We need to get out.
You probably have...
I don't want to say stop losses.
That's a crude way of saying it.
But you probably have...
No, that's fair.
Okay.
That's exactly what it feels like.
It's like we put in our offer.
We know where we need to be at.
If we're off by a grand, we're out.
Yeah.
And then there's houses that are coming up like, okay, this is starting to get out the buy box.
We gotta sell this.
Yeah, you need a team for that.
That's a lot of knowing when to sell, when to...
Oh, God.
Performance.
Because with single-family homes, since the cash flow isn't as much as you would say, you need to buy more of it, but it has better returns in general.
We're like two-man armies, three-man armies by ourselves.
Twin people is a lot.
That's great.
That's how they find the deals.
What else do we got here?
Big shout out to Fresh and Fit.
And guys, don't worry, we're going to do the Cali Muscle interview coming up shortly here.
We're giving y'all four episodes today, man.
Well, we filmed one earlier, but we're going to do three episodes live for you guys.
Big shout out to Fresh and Fit.
Change your lives out here.
And great meeting you, Bills and Brickell.
Happy to chop it up with you when you're waiting to leave.
We're waiting to leave.
Sir Douglas?
Sir Douglas.
Retirement for police, $320,000, $457,000 plan, $147,000, $5,000, and my 401k.
Let's do it.
Okay, I appreciate that.
Okay, Kim Pop came back!
Okay, so retirement for police, $320,000 stuck in a $457,000, which is like a 401k.
So, you know, what you want to do is you want to talk to your custodian in HR and ask them if you can do what's called an in-service distribution.
This will reveal how much of that money you can take out.
Now, they're going to discourage you from doing that because when you do that, they're going to say, oop, we're going to slap you with taxes and penalties.
Penalties 10%, that's $32,000 off the top.
Then it's going to look like you've got $290,000 coming as personal income that year.
That's going to pop you into a really high tax bracket.
You can avoid all that by actually dropping it in a self-directed 401k, which is your way of saying, I want it out of the 401k market and I want it in my hands in a special device that I can deploy into real estate.
So, if you can do that, you can avoid taxes, avoid penalties, and you may have a full $320,000 right now that you can start investing in real estate.
On top of that, you've got $147,000 in another plan and $5,000 in just your traditional 401k.
So you're in a position, Kim Pop, where first of all, thank you for your service.
Thank you for doing a very hard, dirty job.
And you've got the ability to easily, I believe, with a little bit of time, become a multimillionaire in the game of real estate.
Wow.
Absolutely.
What else do we got here?
I pulled the money out of my 401k when I left law enforcement and I bought a real estate, man, because, yeah, man...
Guys, the stock market, S&P 500, whatever, yeah, you're fighting for pennies, man.
You're fighting for single-digit returns.
Like, people brag, S&P 500 gives a 10% return!
Yeah, like 7% to 10%.
Cool.
They're bragging about that.
It's like, bro, come on, man.
But you don't get the tax benefits, none of that shit.
What do we got here, JTK? Yeah.
Okay.
401K is a way to get a lower taxable income while saving that part of your on-tax paycheck and earning interest on that.
How is that a failure?
Go ahead.
Yeah, I want you to go to my YouTube channel, and I want you to look up the video, 401K Scam, and I'm going to share with you the five ways that the 401K is a scam.
Because JTK... You're getting a lower taxable income?
False.
Anytime you take money out of your 401k, you will be taxed.
Here's the lie that you've been taught that you don't understand.
What you're saying is, when I retire at 65, I then can take it out and I don't have my 10% penalty, but whatever you take out, you're going to pay taxes on.
And here's the horrible lie.
You're going to take it out a little bit each and every year to live off of, and because you're only taking out a little, you're going to pay a little bit in taxes.
I got news for you.
That has nothing to do with a 401k.
That's just called tax bracket based on how much money you earn for the year.
So, like, it's a total farce.
No, your 401k gives you zero tax benefit.
Go to 401k Scam on my YouTube channel.
Let me educate you on the truth about 401ks.
And real estate is going to give you a way better tax benefit.
It doesn't even come close.
Real estate effectively lowers how much money you make per year just off of depreciation alone.
We haven't even talked about cost segregation or whatever.
I told you guys the example before of when I made $120K versus $1.2 million and how I paid the same amount of taxes on 10x the income.
And it's because of real estate, guys.
Which is crazy, by the way.
Come on, man.
It doesn't even come close.
Think about this.
Like, people talk shit about Trump all the time, like, oh, Trump didn't want to show his taxes, blah, blah, blah.
Well, he probably didn't pay taxes.
Why?
Because he's a real estate investor.
He was able to depreciate, cost aggregate, a bunch of other stuff, and it's all legal.
Jeff Bezos, Amazon warehouses, same stuff.
It's all legal, dude.
It's how the wealthy stay wealthy and they don't pay taxes.
They make the joke that Warren Buffett paid less taxes than his secretary, which I believe, because Warren Buffett talks a lot about stocks and all this other shit.
He's heavily in real estate, too.
What do we got here?
Think about this.
Chris, I saw a YouTube short saying you let your wife have guy friends and they have private little walks together.
What occurs during those walks?
What does that even matter, bro?
I just think that's taken out of context.
My wife and I, we've got a lot of great friends and we're really secure in our relationship and our marriage together.
I think there's a lot of trad wives out there that are like, oh, I'm just stay at home and then I basically put food on the table for my husband and that's it.
My wife works in our foundation.
We're going to Guatemala next month.
We're taking our four kids with us.
And this is really cool.
We've got 71 kids that we support that have come out of sex trafficking.
And we basically pay for their therapy, their food, everything.
And then basically help bring them back to life.
We went to Ukraine three times during the war so far in the last couple of years.
We've got a safe house in Mexico with kids that are pulled directly out of sex trafficking that we support.
And so my wife is an activist.
She's out there.
She's an action taker.
And she's just got a huge heart.
So she's out there doing just beautiful work and helping people.
What's up, man?
That's a good leader.
Yeah.
People, Vargas goes, hey, I'm 22 with 35K investments, stocks, crypto.
Should I cash out my investments and start looking for a property or just keep saving and adding to my portfolio?
Okay, this is a really good question.
The question is, when you're young and you're saving money, where should you save it?
First of all, crypto's an investment.
It's insanely risky.
I believe in crypto, but there's less than 1% of my net worth that's actually sitting in it.
I think that it is mostly a great game for hodling and for basically the long game.
The rest of the money that you've saved up in stocks, I actually keep my money in life insurance.
Now, there are rare types of life insurance policies that pay out a very consistent 5%, 6%, 7% year over year, and so they don't dip and move with the market.
They're just actually paying you a really great return.
I save my money, I stash it basically in life insurance and let it build up until it's time to take it out and put it into real estate.
But listen, you're 22, obviously you've got a job.
If you already saved about $35,000, you should already own your first house.
And if you own your first house, you should pull it out and put it into your second house and have your roommates pay the mortgage.
Boom.
Okay, what else do we got here?
I miss your funny hats.
Epidem, can you guys do a real news IRL stream where you ask regular people about the real news and see what they think?
I guess maybe in the future.
ITK goes, a 401k is a way to get a lower taxable income.
Oh no, that's it.
Oh, we got it?
That's it.
We did them already.
Oh, we did?
Okay, CEOs need...
What do you guys think of Nick Rochefort?
He does house reviews and financial advice.
Super funny guy.
Never heard of him.
That is...
I bought a three-bedroom co-op a couple years ago for $230,000 at 4.25 interest rate, monthly payment of $940,000.
I should be getting my settlement check by next year.
Should I pay my mortgage off when I receive my settlement check next year or invest in a property?
What kind of property should I get, by the way?
This is a good question.
Blue Silent, just right now, if you take that money and you pay that house off, I'm just letting you know I'm going to roll in my grave, I'm gonna die, and I'm gonna say that is the worst choice you could possibly make.
Because here's what's going down.
You have a $940 a month payment on a $230,000 house with a really cheap interest rate.
My guess is you're renting out and making several hundred dollars a month.
If you pay that house off, all you're going to do is increase your cash flow.
But here's the crazy part.
By not that much.
Not by that much, because when a house is paid off, You get a very low return.
The more real estate you buy with leverage, the higher ROIs you get.
So, really you should ask this question.
I want to answer the question, when do you pay something off?
Is that fair?
No, that's fine.
When do you actually pay something off?
Write this down, my friends.
When you have a passive income that is greater Then your ideal expenses that basically covers the lifestyle of your dream life, then start paying crap off.
But if you're like, I want to pay stuff off, but I don't have a passive income, your money is not supposed to pay stuff off.
Don't even pay off student loan debt.
You're supposed to use that money, and what do you do with it?
You buy investments that produce a passive income, and when that passive income is equal or greater than the expenses of your ideal life, now start paying stuff off.
You do it in the reverse order, you will wind up poor.
Damn.
Yeah.
No, that's great advice.
I mean, it's very simple, guys.
Like, earn more money, invest money into assets that pay you back, take money that comes from the asset paying you back, and then use that to pay your bills.
That's like working one job, trying to pay off debt.
You get two or three jobs, and pay it off faster.
Well, and let me give you a real life scenario.
When I had a net worth of $1.6 million when I was 26 years old, those 25 properties, I was millions of dollars in debt.
I want to be clear, I owed millions of dollars.
But after servicing the debts with all the rents that I brought in, I had $12,000 left over every month.
So, most people graduate college on a $50,000 a year average salary.
I graduated college with a passive $120,000 a year.
Now, you'd have to say, yeah, but Chris, I was millions of dollars in debt.
I said, yeah, but I had $12,000 and I didn't need a job.
Who was free?
I was free.
I had time freedom and I had money freedom.
I can do whatever I wanted.
The thing is, was I comfortable with debt?
And people, unfortunately, have been mis-indoctrinated about the word debt.
There's two kinds.
A bad debt, like I bought a boat.
It costs you money.
That's bad.
You shouldn't do that, right?
That's Dave Ramsey, and that's good.
He's right on that.
But you should be acquiring good debts.
What is a good debt?
A good debt makes you money.
So it's just like, what do you do with your money?
I acquired debts like what are you doing?
I'm going the guys right now put it put a hundred million dollars in front of me And I will sign it today because I know where to put it like I know how to make a hundred million dollars of debt Make me so much money.
I want that so you got to actually fall in love with good debt And then you've got to do everything you can to stay out of bad debt Got it.
And real estate, guys, is good debt.
Like, if you're using a bank and they're giving you 80% of the loan and you're putting down 20%, well, you put down just a fraction, you put down a fraction of it, that house is generating you money, and the person's paying down the principal for you like we were discussing before.
It's a fucking W. W. Because you're not paying the debt, guys.
They're paying it.
Well, vacancy!
Alright, cool.
You cover the debt for a month or two until you find another tenant.
Who cares?
It still pays for itself in general.
In the long term.
And it goes up in value.
Guys, people still have this weird concept in their head.
They hear debt and they think automatically it's bad.
But guys, real estate debt is the only debt, really.
I mean, I can't think of another one, really, that's like a good fucking debt.
I can't either.
No, I won't have as much as I can.
By the way, I would go into business debt.
Business debt.
Like buying businesses and then owing money on businesses.
I mean, business in some ways is way better than real estate.
Meaning, when you buy real estate, it's predictable, it's consistent, and you know how it's going to perform.
You can fast forward 10 years and you know exactly where you're going to be at.
But when you buy a business, what you can do is you can walk into some really huge active incomes.
Like, for example, Shark Tank.
Yeah.
Same thing.
You buy a business like that, it could do crazy numbers times 10, or maybe not so much, but it's a benefit.
And there's definitely risk to doing that.
Yeah.
But if you know what you're doing, it's like, hey, here's a company that's been around for 10 years.
You can buy this business for a million dollars.
You basically put 200 grand down.
They'll finance the other $800,000.
You buy this business, you're going to be 800 grand in debt.
Servicing the $800,000 is going to cost you, let's just call it $10,000 a month because it's really expensive seller financing.
But the business has a consistent positive cash flow of $30,000 a month.
Would I buy a business that have to pay $10,000 a month due to service that has $20,000 of net profits and has a 10-year history of that?
Yeah, I do that deal all day long.
Please, I want to be 800 grand in debt.
Why?
Because I want an extra quarter million dollars a year.
What else do we got here?
Chris, what would you recommend I do to pay off my debt slash build my credit and save money to invest in some type of property as a beginner?
3K in capital, 5K in credit card debt and collections with a shit credit score sitting at about 530, 560, joining the army in two weeks, four-year contract, 20K bonus, maybe 16K after taxes, 23 years old, and fairly educated credit.
Just allowed myself to drop off mentally and gave up for about two years.
Myrna Fresh, I appreciate your opinion as well.
TIA. Yeah, you fucked up, bro.
I'm gonna keep it a thousand with you.
Fucking up your credit like that is a problem.
And having credit card debt is absolutely gonna hurt you there.
But you're young, yeah.
You can change it.
Chris, what do you want to say here?
I'd say that credit card debt is the biggest problem, right?
Yeah, so I take that $20,000 and because of the situation that you're in, I would pay off the $5,000 of credit card debt.
That's not a lot of debt, but what you've got to be doing is building your score back.
So you're going to probably put out $1,000 and you're going to hire a credit repair company and say, hey, help me rebuild my company.
Because when I come off of active duty, I would like to step back into good credit and I basically want to have a do-over.
So, you get $20,000, you take $5,000, you pay off your debt, you pay $1,000, you find a credit repair company that's going to help you build it back.
What do you do with the other $15,000?
Well, now you've got VA for 0% down, technically you already have 3% down payment on a house, and go buy a house!
When you come out, you'll be able to put no money down and you'll make a bunch of money and you'll be able to save because you'll be active and you won't be able to even spend that money.
But loader beans, I just got to tell you, there's a ton of people in your situation that they actually ignore their bad credit because they're feeling shame and guilt and embarrassment.
And 10 years later pass and they still have the same dang credit score because you didn't take active measures.
So I want you to attack the problem.
Don't ignore the problem.
Yeah, it hurts at the very beginning seeing it and like, damn, this is what I'm into right now, this much debt, but once you pay it off, you're gonna feel a weight lift off your shoulders, bro, and you can focus on investing like what Chris said.
Yeah, get rid of the credit card debt first, man, because the problem with the credit card debt, right, is that the interest rate is too high for you to, like, stave off.
Because the problem with credit cards is it fluctuates between...
I've seen as low as 13% all the way to 30% on credit cards, and it fluctuates.
It's crazy.
So you've got to pay that off immediately, bro.
Because even if you get a property with amazing ROI, that credit card is going to eat into everything you're doing.
Yep.
And it hurts your score.
That's a big one.
Bought a three-bedroom, two-bath last year for 320 at 5.2% principal.
It's 1,800 mortgages, 2,400.
In two years, I'll be moving on orders.
Okay.
Be buying another single family home, $275,000 to $300,000 while renting out the first property.
What should I be doing and looking for to buy more to build my portfolio, et cetera?
All right.
So first of all, you're in a great position because your first purchase was a 3-2.
You did it for $320,000.
You still got a relatively low interest rate.
And you rent that out, you're going to be positive cash flow.
I like that.
On your second house, it looks like you're going to be in an even lower price range, $275,000 to $300,000.
That's also a really smart thing for you to be doing.
Two houses are going to build up equity faster than one home.
So I like the move.
So let's just say you wait three years and you've got $60,000 in one house, $60,000 in the other.
You've got $120,000 between the two of them.
Well, now you've got some money between the two that you can hopefully pull out and go buy a third house without needing to move again.
Very, very smart.
Yeah.
Alright, I think, uh, cause we gotta get Chris out of here, guys.
He's got shit to do.
Yeah, we do.
We do.
Yeah, uh, so, cause Chris is a busy man.
Chris, where can I find you, brother?
What's coming up next?
Everyone can go to chriscrone.com, but the thing is, if anyone wants to get a free game plan, one of the things that I What I love to do is I give everyone a multi-millionaire's perspective on what would I do if I were you.
We did a little bit of that today, but we actually go really, really deep.
I got a team of 25 trained people on my staff that basically know how to deliver a perfect textbook Chris Crone game plan.
So it doesn't matter whether you're worth a lot of money or you're worth nothing, you can get a multi-millionaire's perspective.
And here's what it does.
It gives you options and opportunities that are blind spots to you.
That if you act on, you're going to put yourself in a smarter financial position and everyone has to start from somewhere.
So if you want to become a multimillionaire in the game of real estate, that's not even a lot of money anymore.
If you want to make a few million bucks, get someone else's perspective.
I'm willing to give you that perspective entirely for free.
And on top of that, come and actually join me live September 13th, 14th, and 15th here near Miami.
We're actually putting on the Clever Summit.
I'm one of 20 different speakers.
Where Florida is it going to be?
That's going to be...
In Florida.
But here's what I can tell you.
During those three days, we've got Ryan Serhant coming out.
We've got Cody Sperber, Jen Gottlieb.
We've got Patrick Bet-David.
We've got some of the biggest names in real estate that are going to be taking that stage for three days.
It's close by.
It's very, very close by.
And so coming out to the event, there's a link if you go to www.chriscrone.com forward slash fresh gift.
And you get the tickets there, and then on top of that, I'll give you a free game plan.
So request a free game plan, connect with me and the team, come see me live for three days, and let's help you get straight in the game real estate.
Well, maybe we'll pull up, guys, while he's down here in Florida.
The link is in the description right now, so if you guys go ahead and click in the link in the description right now, you're going to get immediate access to that.
There you go.
Free value.
And what we'll do, guys, is...
I know some of you guys had questions or whatever.
We'll have...
I'll coordinate with Chris.
We'll do a private Zoom call with you guys.
A council club.
And you guys can get more information on, like, if you want to partner with them, whatever.
Because the guys in the council club, a lot of you guys are serious about making money and you guys have questions on this stuff.
So we'll definitely, like, do a private Zoom call where Chris can go into more detail and give you guys some sauce.
And, you know, you guys definitely want to partner with them.
We're talking about doing something on the side as well.
So anything else, Chris, before we close out?
No, man.
It was great.
It was awesome.
Listen, this is an amazing time to be in the game of real estate.
Please ignore everyone that is saying wait.
Waiting is costing you everything.
He could be waiting a long time.
Yeah, guys.
Don't listen to the idiots, man.
Guys, we're back here with Callie Muscle in a little bit, man.
Love you guys.
Peace.
I ran.
I ran so far away.
I just ran.
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