How COVID Changed Real Estate Forever (+How it Didn’t!) with Ken McElroy

Brandon:
This is the BiggerPockets podcast show 493.

Ken:
If you can find those places and find those markets that are emerging and be ahead of that and use this model, you can do very well financially. It’s a little different than the long-term 12 month let’s say lease, but there’s a whole market coming, I believe, especially on the single-family side.

Intro:
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Brandon:
What’s going on everyone? It’s Brandon Turner, host of the BiggerPockets podcast here with my cohost, Mr. David Greene. What’s up, man, how you doing?

David:
I’m doing great. California is beautiful right now. The housing market has been so ridiculously hot. It’s been very to [crosstalk 00:01:01], put buyers in contract, which now it stinks because every time somebody buys a house that if they hold it long enough, especially in a market like this, it’s not ridiculous to say that house will make them a millionaire at some point. And so when you can’t help people get that goal, it bugs me, but it’s cooled off a little bit. We had a really good week. We put 10 people in contract last week. So now I’m like a flower that just got water again. I’m all excited.

Brandon:
There you go. That’s cool man. Well I do have a question for you. It’s actually a pretty serious question. How do you feel about golf?

David:
Yeah, that’s just funny. Okay. Brandon and I had a conversation after this podcast. I just want to bring this up and see if anybody else is on the same page as me. The concept of golf, what you are trying to accomplish, is insane. You’re talking about taking a ball that’s this big, an inch or something and-

Brandon:
Like the size of a golf ball.

David:
Yeah, the size of a golf ball. That’s great. Putting it into a hole that is half the size of a shoe or less than that. It’s over 400 yards of space. If someone said, hey, this is what we’re going to do and you didn’t know anything about golf, you’d say that’s impossible. That can’t happen. And yet there’s people out there doing 18 holes of this ridiculously impossible task over and over and over, that’s [crosstalk 00:02:13].

Brandon:
Yeah, but let me give you an analogy here, because I know you’re not a big analogy guy, so let me give you one. I’m a brand new investor, I ain’t got no money, I don’t know what I’m doing. I just heard that real estate is a good idea. And 15 years later, I just crossed a hundred million dollars in real estate owned. How does that happen? That’s an impossible feat, but what’s not impossible, is hitting the ball a little bit. The first swing, the thing falls off the tee and moves six inches and you feel like an idiot and you put it back on there again and you hit a little further and you get it 10 feet. Then you get 10 feet further and then 50 feet or yards, whatever, I don’t know, I don’t do yards. And then eventually if you just keep hitting it toward that hole and you just keep going, eventually it falls in the cup and that my friend is the secret to any success. Thank you. That was good. Right? Come on.

David:
That’s a great-

Brandon:
That was a good analogy, right?

David:
If someone’s having a hard time with real estate investing, go play golf. It will see very easy after that.

Brandon:
Or you’ll never do anything else your entire life [crosstalk 00:03:06].

David:
Well. That what we are saying, in order to get good at golf because it’s so ridiculously hard. Effort people have to put in that, we would have probably cured cancer seven times over, that would just go to sport of golf.

Brandon:
This might be true. All right. So with that said, let’s get to today’s quick tip.

David:
Quick tip.

Brandon:
Today’s quick tip is, before I get to the quick tip, let me say this, today we’re interviewing a genius of a man. His name is Kenny McElroy or Ken McElroy. You’ve probably heard of him before, because he’s been on our show before, back on episode number-

David:
Ken McElroy is also one of the advisors and partners with Robert Kiyosaki in the Rich Dad company. He really specializes, my understanding is a lot of Robert’s real estate investments, Ken is the person who’s actually making the decision, analyzing the properties and directing the resources. He has a ton of experience buying a lot of properties.

Brandon:
All right, he was on episode number 52 of the BiggerPockets podcast, a long, long, long time ago.

David:
Wow, OG right there.

Brandon:
Yeah. Ken is one of the smartest people ever. Today we talk about a lot of stuff, including whether or not you should go into debt, good debt, bad debt, that kind of conversation, whether you’re new or your experience. We talk a lot about the economy, what’s happened, what’s inflation doing. Do Ken think the real estate market’s going to crash soon or do we have some hope? What’s the data that helps support that. It’s a really fun conversation. Now, the reason this is tied into the quick tip today, is because we talk a lot about debt and about some of the ways that you can use debt to get wealthy. And so here’s my tip for you, buy a property for your kid. If you have a kid under five years old, buy a property, put it on a 15 year mortgage. It doesn’t even have to make money. It could literally break even every month.

Brandon:
Buy it, put it on a 15 year mortgage, in 15 years, it’s paid off to nothing. You now have a property worth, probably a quarter million dollars that you owe nothing on it. Your tenants paid it off. That’s what I’ve done with my kids. I bought my first one for Rosie, four or five years ago. And Wielder is getting one right now, we’re in process of closing on it. In fact, by the time this interview airs, we should have closed on it. And so this basically works because you’re using debt to your advantage. You’re not paying the mortgage. Your tenants are paying the mortgage, right? It comes out of the cashflow. And so you’re not doing anything and you’re probably just gets paid off and plus it’s going up in value. That’s a quick tip today, is if you’ve got young kids, buy a property for them, put it on a 15 year mortgage, pay it off and their college education is completely paid for. There you go. You’re welcome.

David:
No exaggeration, this is the financial success starter pack for your kids, your starter kit. They should pay for their college, pay for their first car and pay for the down payment of their own first home so that they can go repeat the cycle and have some leftover.

Brandon:
And more importantly is that it shows a real world picture of the power of assets versus liabilities and the power of passive income, the power of wealth, the power of real estate, in a way that you could never just tell them or make them read a book. You’re showing them over the course of 15 years, what it can do. There’s your quick tip for today. All right. I think that’s about it. Again, today’s show phenomenal with Ken McElroy. I love this guy. He is amazing and you’re going to love him as well. So stay tuned for the whole interview with him. And if you have not yet left a rating or review for the show on iTunes or Stitcher or Google play, wherever you’re listening to this, Spotify, please do so. All right. Without further ado, I think it’s time to get into a very awesome, fun and deep conversation with the Ken McElroy.

Brandon:
All right, Ken, welcome back to the BiggerPockets podcast, man. Always an honor. Great to have you here.

Ken:
Great. Thanks guys. As always I love your show and can’t wait to chat about what’s happening.

Brandon:
Well, thanks man. Well, for those who maybe didn’t listen to your last episode, don’t know much about your story. I talked a little bit about you in the introduction. Why don’t you give a quick, who are you and how’d you get into real estate?

Ken:
Sure. Haphazardly, really I was managing a property out of university and trying to pay rent. I was making a little bit of money, but I immersed myself in property management as I was trying to finish up school. That really gave me the platform for understanding how deals work, because in property management, your entire job is to obviously manage the property well and produce cashflow and send the owner’s checks. And if you don’t, you get fired. That was how I started. And then really, one day Brandon, I was like, I’m on the wrong side of the desk here. The owner was coming in, and I was like, man, how do I own these things? That started my journey, I got my real estate license, started getting educated and I started buying small deals and just like everybody, I didn’t know how, I didn’t have any money. My parents certainly didn’t have any money.

Ken:
Luckily I was on a wrestling scholarship in college and that’s how I got there. But other than that, I probably wouldn’t have gone. I just started realizing the power of cashflow. I started buying small deals and then I started buying bigger deals. We started buying 100, 200 unit deals 20 years ago and obviously syndicating because you run out of money. And then I ran into Kiyosaki. Honestly he was just somebody I was raising capital on and he had just launched Rich Dad Poor Dad. So this was a while back. We became friends and then he’s like, you got to teach what you’re doing. So I started doing that. I started writing the books, but I’ve been a hardcore real estate investor, manager. We have 250 people working for us. All we do full time is apartments. We have a self storage office. I just love this business. It’s just provided the greatest amount of freedom that I can ever imagine.

Brandon:
Yeah. Yeah. I love it, man. I’ve said it before and I’ll say it again, The ABCs of Real Estate Investing and the Advanced Guide, those changed my life. I read those books. I was like, I’m going to buy multifamily. And then I started buying multifamily now, I don’t know, 2000 units, something like that right now, it all started with reading your books. You’re inspiring a lot of people about multifamily can get you out of a job, it can get you out of that life that you, that’s prescribed for us. Right? Work till you’re 70 and maybe then you can retire the richest guy in the graveyard. I want to do more than that. Right? And that’s what your book really taught me.

Ken:
Thank you. I appreciate that. I didn’t know how to write a book. Robert’s like, you just need to do it. So I did. And then what became my why really is, I started doing, I still do, I donate all of my proceeds for my books and all that stuff to charity.

Brandon:
That’s cool.

Ken:
We have a full-time director of philanthropy now at our company. All she does is give away money. That’s been great. It’s been a great venue for me to be able to educate and talk about war stories and stuff that I’ve been through in the last 25 years, buying and selling apartments and commercial. It’s actually been a blessing, the whole thing.

Brandon:
That’s cool, man. There’s a few things I want to cover today, specifically some of the fundamental rules that have guided your career. You’re not the guy that came in, even David and I, we kind of got in heavy at the last cycle and we’ve only really been through, a cycle, a cycle and a half, but you’ve been around for long enough to see things come and go. And so you see a big picture. I want to cover two things today specifically. One, I want to know your thoughts on where we’re at in the market. What’s the world doing? The eviction moratorium, what COVID did, where the economy is headed. I want to get your thoughts on that. And then I want to go into some of the rules, the fundamental rules or the fundamental truths that you believe in when it comes to multifamily specifically. Maybe we can start with the first piece there.

Ken:
Sure.

Brandon:
Where the hell are we going?

Ken:
I know. I know.

Brandon:
This is crazy.

Ken:
Well, it’s interesting to me, I really, really believe that we’re heading into a pretty heavy problem around affordability. Not just from the inflation that we’re seeing, that’s recent. But we always were under delivering new construction and supply for years. If you go back to the National Multi Housing Council, which I’m a member of, or the National Apartment Association which I’m also a member of, they projected that we were thousands and thousands of units off of what we needed to deliver. And so what’s happened, we have three projects under construction right now, we’re getting hammered on construction costs. And so are the single family guys. Lumber is lumber, right? It doesn’t really matter where it goes.

Ken:
I really believe, if we’re going to continue to build, one, we’re under supplied, but two, the cost of construction has to move into a higher mortgage payment, a higher rent payment and all those kinds of things for it to make sense. I think we’re we’re heading into some serious affordability issues, and then now you’re layering on the inflation piece. And so I think we’re going to have some disruption certainly with the forbearance and the eviction moratorium and all that, of course. But on the rent side, on the eviction side, I really don’t see much disruption from a landlord standpoint. I think we’re going to start to see some real squeezes on the single family side, more than anything.

Brandon:
Would it be right in saying you don’t predict or do you, I know predicts the wrong word, but do you anticipate any decline in prices for real estate investors? Are we worried about another 2008 happening?

Ken:
No, no. I think, 2008 was very different. I went through that. There were a bunch of things happening at that time. Everybody wants to compare it and I get that, because that’s kind of the last thing that happened. But I think this is more like what went on in the 70s when we started to see higher interest rates and potentially higher inflation and those kinds of things. And certainly, I don’t know, you probably don’t remember, when I was a kid, people were lining up for gas shortages and all those kinds of things. I think it’s probably a little bit more like that. In 08, as you know, what happened was, the market popped and then people owed more on their mortgages and their homes. Certainly we’re not going to see that because we just saw this big run in pricing. And so even if people are really behind and they can’t pay their mortgages or whatever, I believe that a lot of them are going to have enough equity in there to cover.

Ken:
I do think we’re going to see a lot of listings hit the market. I was actually looking at the sporting, that there’s a bunch of markets that are in trouble. There’s Atlanta, areas of Atlanta, San Antonio, some areas of Dallas as an example, that are seriously delinquent. You’re going to have some markets that are going to have a lot of forbearance is going to end, and you’re going to see this onslaught of supply. What will be interesting is to see whether or not it gets covered quickly by the end of May. It’s hard to know.

Brandon:
I feel like, and David, I want to add though, is that YouTube has been a pretty heavy agent in an expensive market. I just feel there’s so much demand right now when you’re still getting 30 offers on every house that’s out there and 40 tenants applying to rent any of my properties. I still feel they’ll be able to absorb that when it does hit, but I don’t know. David, what do you think?

David:
I really like that we’re bringing this up, Brandon and I, we feel a lot of pressure because people look up to us with, what do I do? What should I expect? I think, Ken, I see a lot of the videos you put out, you clearly are in the same boat, because the videos that you put out are an indication of the questions you’re being asked. And so, as people are listening, that’s what they’re asking us, what’s going to happen. I noticed one of the things that comes up a lot is this idea of, can you just mention the foreclosure moratorium ending? And there should be a wave of people that fell behind in their properties. And that immediately makes us think of 2010 when we had the same problem. We had too much supply, not enough demand at the time. People had lost their jobs, so no one was really looking to buy a house.

David:
We still had enough supply for the people that was, so throwing all these foreclosures in the market immediately created oversupply, prices dropped, investors if we were bold, cleaned up at that time. Now we haven’t really built many houses since then, first off. That’s the thing a lot of people don’t realize if we’re talking about single family homes, I think at least what I’ve noticed is the multifamily space has really done a better job of keeping up with demand. If you lived in Austin, Seattle, San Francisco, you saw condo high rises going up everywhere, but single family homes haven’t. The population grew, the supply of real estate did not. That happened for a long time and we didn’t really think about it until all of a sudden, why is this rent so expensive? Why is it so hard to get a property?

David:
One thing to consider is as these people that are behind in their mortgages, when it comes due, they probably have a lot of equity and could just sell it. That’s the first thing. It doesn’t automatically mean it’s going into foreclosure. Like Brandon mentioned, there’s such a shortage of supply, and this is also market specific. It’s not everywhere, but I think in most big cities in the country, if we had an onslaught of listings that hit the market, it would be like your bucket’s overflowing with water and it’s spilling into the sand. It would just get sucked up right away, because there’s 10, 12 offers on every halfway decent house. If we doubled our inventory, you just have five to six offers on every house. There’s still so much demand. My fear when people hear this, is they say, I’m going to wait to buy.

David:
They could buy right now, they’re in a position where it makes sense for them to do it. And they hear that and they get a little bit greedy, and they think, okay, I’m just going to wait for that to happen. It’s a flash in the pan, it’s gone, it never happens and then they missed out. I’m curious, Ken, from your angle, what your perspective is on that?

Ken:
Well, that’s a great question, David. I think a mistake a lot of people make, is that they broad brush real estate as if the whole US is the same market. I’m actually closing on a single family home in Scottsdale tomorrow.

David:
Nice.

Ken:
Scottsdale is arguably on fire. I offered over list. Actually the long story as to why I’m doing that, it’s going to be a rental and it’s going to be a cashflowing rental. And so I personally still think there’s a lot of markets that have a lot of runway. Like Phoenix, Scottsdale is very affordable still, as compared to some of the other markets. You think about this, I’m paying 500 grand for a home in Scottsdale, which is cheap in my opinion, based on the rents. And so it all boils down to math. I think that there are areas that are 600, 700, 800 with the same rent. And there are areas that are 300, 400, let’s say, with less rent. But it just has to do with the math around the cashflow. And as you guys know, because you guys are cashflow guys, I always solve to the cashflow. I don’t ever want to be in a situation where I’m feeling something, and trying to time the market. For me, if it cash flows, then we always are considered it.

David:
I think a further complication and understanding, because your point really, I should say first is exactly right. It’s what it’s worth to you. How does the math work out to you? Is a much smarter way to look at it, than, well, what does it compare to everything else? Which is what people get stuck into. What I’ve noticed is, and Scottsdale’s a perfect microcosm of this example, is short-term rentals have introduced a completely different system of generating cashflow. They are less passive. They’re not passive investing when you do that, but they are going to be more profitable in most cases, if they’re run well. Now, if you can buy a property in an area like Scottsdale, that will cashflow more as a short-term rental than it would as a traditional rental, someone can pay more for that same property and still make more money.

David:
They can pay $100,000 more than what it’s worth, the ARV, compared to comparables, and it’s still an amazing buy for them. What happens is that pushes up the ARV of all the other property in Scottsdale. Before we had the short-term rental information put into the algorithm, you bought a house because you wanted to live in it, so you just looked at the comparables or you bought it because it was going to cashflow, which meant you were probably somewhere around the 1% rule and you’re in very specific markets and the rent that it could generate determine its worth. But it was one or the other. The short term rental thing just screwed everything up as far as the way that we look at it. But Brandon and I say-

Brandon:
Because it’s like governments are stepping in right now that have shut down those things. Like Atlanta, I know is having a big push against Airbnb right now. Hawaii shut it down almost entirely. And a lot of other cities are doing it, because they see the same thing as you. It changed the game in a weird way that made it unaffordable for most people who just work normal jobs.

David:
That’s the concern, is if you’re a regular person who just wants to live in a house and you’re competing with someone that can generate $10,000 in gross income on this property, you can’t pay as much as what they can pay. The rules change for how we evaluate real estate. I think to a larger degree with the amount of stimulus that the government has created, the rules have changed as far as what is a dollar worth, what am I doing with my money? This is just to say, it’s on my mind all the time, is if I’m stuck playing football the way that the rules were set up 10 years ago, and I’m trying to draft a really good running back and really good blockers for that running back, I’m going to lose to the team that has adjusted and they’re drafting a really good quarterback and aligned to get him time and wide receivers to throw the ball to. Ken, you’ve watched rules change over the years, and so I just wanted to get your take on. Because I love the points you’re making. Are we on the right path with the way that we’re perceiving this?

Ken:
I believe you are. Listen as you guys know, I’m still buying, you guys are still buying, we’re all buying. Now, there are definitely markets that you don’t want to buy in and there are markets that you do want to buy in. When I look at just going back to the Scottsdale example, if you take that same place and drop it in Seattle, or you drop it in LA, or you drop it in Chicago or you drop it in some of the other markets, that is very, very cheap. When I look at where people are going and certainly Arizona is one of those places, and to your point, Brandon, we got all kinds of people moving there. We got all kinds of demand on both the buying side and the rental side.

Ken:
For me, it all makes sense. And to your point, David, I think, there’s three factors going on there. If you’re a homeowner and you’re trying to buy a home, you’re not dealing with the same set of circumstances as somebody like me, who’s going to rent it or someone that is going to put an Airbnb or a short term program around it. I’ve been doing short-term for years, way before Airbnb, I had almost 200 of them in Scottsdale. We were renting to the San Francisco Giants and the Cleveland Indians for spring training and those kinds of things. And so we’ve always been doing that. Now of course it’s all through Airbnb and through some of the other services, it’s gotten way more professional and much, much better. I listened to the CEO of Airbnb the other day, and he said that Airbnb is no longer just a short-term thing.

Ken:
What he was saying was, and I think this is true. I think what’s going to happen for a lot of people is they’re exiting and they’re selling, but now they’re actually using Airbnb as more of a lifestyle. They’re actually going places and not actually owning them. They’ll stay three months, four months somewhere and just do that. I think that this is here to stay. I think that behavior is here to stay, especially with this work from home model.

Brandon:
That reminds me, I’m launching a side business, going to test it out. But for the exact same reasons you’re just saying, there’s a shift in the culture of people right now. And so I launched, well, it’s kind of officially launched, but it’s going to be called, a month in Maui. It started with a month in Maui, and then we’re going to buy a bunch of vacation rentals here. The idea is different than Airbnb, and then I’m like, people don’t want to just come for a week. People are still coming for a week, but there’s a certain type of traveler now that can come for an extended period of time. Car rentals are hard and all those things. We’re literally like, you get the condo or the house, you get a car rental, you get a bunch of activities, you get a white glove service for that type of traveler who’s thinking differently.

Brandon:
I want to expand that thing to cities all across the world, there’s month in Maui, month in London, month in Cabo, whatever. Because it’s just a different type of traveler. And then if I can do that, I can get outside the Airbnb thing and I can build my own brand around it. That’s one side thing I’m doing right now, just because I see that shift in the way that people are traveling, the way that people can work anywhere now. A lot of people can work from a distance, so why live in Ohio for the winter when you could go live in Maui for the winter and work on your tech job there.

Ken:
I think that’s something here to stay. I was originally going to probably buy something on the beach in Newport or Manhattan or whatever. What I ended up doing is, I’m renting something there in August and September. It’s expensive I’m not going to lie, on a daily rate, but when I’m done, it’s done. I don’t own it. I don’t have the property tax issues. I don’t have all the stuff that’s going on on the ownership side. There’s a lot of guys like us that are, you know what, I’m just going to go take down something really nice, I’m going to stay there and call it a day. I do believe that’s here to stay.

David:
If you look at the way people rent cars, less people are going to car rental places, more people are using Turo. Uber took a lot of people who used to want to own a car, and now they don’t have to, especially if you live in a dense population, that’s what I mean by the rules of the game change. People don’t want to go through the hassle of having to own a car and take care of the maintenance and pay the insurance and then not use it when they travel. I think COVID really jump started this movement. If you think about Airbnb, it’s sort of combining Turo with Uber with Yelp. I can look and I can see what am I getting when I go to this place. I can see the reviews of what’s there. And so what I think, you’re right Ken, that it’s here to stay. One of the things that I think about is more and more properties, because we’re probably not able to keep up with the demand for supply.

David:
They’re going to stay scarce for a while now. Will be used in this way, the highest and best use of that property is this Airbnb model. For investors that means passive investing will get harder and harder. You’re going to have to manage the property in this way. And for renters, it’s going to get harder and harder to find properties that you can just rent paying by the month and staying in for a long time, people have gotten away with because more and more properties are going to go towards this short term rental purpose. I’m encouraging people, that’s one more reason you want to buy a house. You don’t want to leave your destiny in the hands of the market as it’s changing.

Ken:
Yeah, I agree. I for years had second and third homes guys, and when you really start to take a look at the burn rate and all of that. I was staying in them for two, three months at a time, bouncing around. I’ve changed my whole model to just my big primary home that I have. I’m actually building one. And now we’re just going to just move around and go where we want to go and don’t have that commitment and see if we like the area. I have a number of friends doing the exact same thing all over the country. To your point, Brandon, I think this is a new market. Started with that Inspirado model, which I’m a member of. We would take down these big houses and bring a bunch of friends and have a great time. And then lock and leave and go home, that’s it. Right? And somebody else.

Ken:
To your point, if you can find those places and find those markets that are emerging and be ahead of that and use this model, you can do very well financially. It’s a little different than the long-term 12 month, let’s say lease, but there’s a whole market coming I believe, especially on the single family side.

Brandon:
Yeah. Two more things that we’ve seen affecting, rules that have changed a little bit, the game, is the cost of, we mentioned earlier, lumber is going crazy and it’s come down a little bit, but it’s going crazy. And then the cost of labor is going up. It’s harder to find people that want to work anymore for eight, $9 an hour. Those things are obviously going to affect home prices as well. I’m wondering, what do you see with that? Is this a temporary blip we’re seeing? Is it supply and demand? Is this inflation hitting us? Is this hyperinflation? How do you view these rising costs?

Ken:
That’s a good question. We have a property under construction right now, 330 units, and our lumber package was one million higher than our budget. That’s lumber only. Now that was two months ago, it’s since come down. And so I think some of them are supply chain issues, appliances, concrete, OSB, lumber, those kinds of things. We’re starting to see those moderate a little bit, but they’re certainly higher, to your point. There’s a lot of reasons for that, Brandon. Some of that it had to do with some of the trade issues between Canada and the US and Mexico, and obviously COVID and the pandemic, all those kinds of things. But then the other piece was during the pandemic, everybody started doing remodels. And so if you owned hardware stores or anything that, you killed it. Everybody was adding onto their homes and putting decks in and all those kinds of things.

Ken:
You had this run, in addition to that a supply issue. I think that that is going to iron itself out, but I do think we’re going to have some permanent inflation on a number of those items, but I don’t think it’s going to be quite what you see in the media. But at the end of the day, as you guys know, if you’re trying to buy a home and I have a bunch of friends that are doing home building, and the homes are 30, 40, 50,000 more. And so they’re not even giving people prices. I think the issue they’re going to have is at some point, they’re going to be priced out affordably, because as you guys know, we can’t really lower rates much more than they are. Especially they use inflation or they use interest rates to tamper inflation. That could be the tipping point potentially.

David:
With lumber this expensive, it really makes you wonder how much wood could a woodchuck chuck, if a woodchuck could chuck wood.

Ken:
Not so much.

Brandon:
All right. We’re talking about some of the rules that have changed, things like Airbnb, the labor and lumber shortages and increase in those prices. Those are rules that have really changed the game over the last few years. I want to shift now and talk about some of the rules that don’t change. Some of the things that work in, at least in your opinion Ken, have worked in any market regardless, as you’ve built up this massive multifamily business. What have you seen that just, this just works?

Ken:
Well, as you guys are, same with me, there’ll always be, if you pay attention to the home ownership versus the rental piece, if you go anywhere abroad, let’s call it Europe, let’s say, or Asia, there’s a very, very, very high percentage of the population that has always rented. In the US, we’ve always pushed home ownership, nothing wrong with that, but that’s been what we’ve done. And so I think that we’re heading into a more of a renter nation, and I think this could be a 10 to 15 year run that we’re going to see, because of affordability. And so to your point, the one thing that I think if you’re going to get into this business, I think there’s going to be an ample supply of renters, just like there is all around the world. I think that if you’re a good landlord and you understand how that whole thing works, this could be a very, very, very good run and then take advantage of this inflation by hedging with these fixed rate interest rates, if you can.

Ken:
We just closed on a deal in Houston two weeks ago and we’re at 3%. And so when inflation comes out around four, I’m like, man, this is great. We’re basically borrowing, it’s free, based on inflation. If you can use other people’s money through debt or even equity and hedge inflation, I think those are one of the things Brandon that you will always see. Nobody’s really seen inflation, this generation at least, but I’ve been through it. Anytime you can get that fixed, that’s why I think that you should get into debt right now, if it’s covered by cashflow. Don’t just do it based on a capital gain strategy because that could bite you in the butt. But if you can get debt covered, I think in 10 years, you’re going to look back and go, I’m so glad I did that. I’m going to pay back this debt with these cheaper dollars. That has never changed and that won’t change. You just got to sit back and watch the policies.

David:
That’s a good point. It’s also one of the hardest components to real estate investing. I was just talking about this to my team yesterday. Even me who believes in real estate, owns real estate, loves real estate, makes my living from real estate, it’s always hard to focus on buying the next property when there’s all these other stuff going around, because in year one, it’s not a life-changing event. It’s 10 years down the road where you’re like, I’m so glad I did that. Anything in life that you don’t see a big result for five to 10 years is just harder to do, but it’s that much more important. You’re so right Ken. I’m always reminding myself, 10 years of rent projection is, what is this going to look like? Does that get me excited so I can keep my focus on what matters?

Ken:
Especially when the renter pays your mortgage, right? Why would you not do that? The stuff that we’re buying and I know you guys look at this, it costs us because we’re builders too. It costs us about 200 plus per unit to build something right now on the apartment site, roughly. Well, okay. Yesterday I was on an investment committee call, we’re always going over six to 10 deals a week. We’re looking at stuff that’s priced at 140, 150 a door, that was built 10 years ago, 12 years ago. And I’m like, buy it, because we’re buying it so much less than you can build it. If you scraped it and had to build it today, it would be significantly more. And as long as you’re covering it with rent and you’re putting good debt on it and you’re not trying to play the capital gain strategy, then I think there’s massive, there’s stuff that’s so under priced still today, if you look at the cost to replace it.

Ken:
That’s the way I’m looking right now, is if we can buy something at, let’s say 60, 70% of what it would cost to replace it after renovation, then I still think that those are good opportunities.

Brandon:
Yeah, we just picked up a property in Houston, it’s a 500 plus unit thing. We got for 108 a unit. More than half are already completely remodeled, and the things like, you can’t build this thing for that. They just put $40 million of work into it over the last half a decade, just to get it up to where it’s at right now. I’m like, 108, you can’t build anywhere close to that right now.

Ken:
That’s what I said, Brandon. I said to my acquisition guys, I go, okay, if that building that we’re buying is in Phoenix, what would it cost to build? They were like, well, it’s 75,000 more per unit. Well, I’m like, okay, next. Let’s go. And then you take other people’s money through debt, match it up and the tenants pay off your mortgage. It’s the greatest model. What you guys are teaching and what I’ve what I’ve been trying to teach people, it’s the greatest model, you could make your investors a tremendous amount of money. You could make yourself a tremendous amount of money, it’s a win-win for everyone.

Brandon:
In the Multifamily Millionaire book, I call it the multifamily millionaire model. But it’s basically just the exact what you taught in ABCs of Real Estate Investing. It’s this idea of, when you buy these properties, over time they go up in value. When you force them up because you improve them, you get higher rents. At the same time the mortgage is getting paid off. At the same time your investors are the ones supplying the down payment. And then you get the tax benefits and the right offs and the cost tags and all of that stuff. It’s a win, win, win, win, win across the board for everyone. That’s exciting stuff. I love this stuff.

Ken:
It is the greatest. I bought a property in Mesa, Arizona, that at the time, six years, seven years ago, our acquisition guy, it was $34 million. I was like, man, I don’t know, this seems tight. My acquisition guy actually left and started working for another group and we’re still super close. He sent an offer for the same property for 87 million. For 53 million more than we paid while he was my acquisition guy and my partner and I are like, no, we’re going to hold it because it’s cash flowing even though we have all this equity. The point behind that is, we’re cashflow guys, we could sell it, we’d have all this cash, then we have the same problem that he has trying to find a pump for it.

Ken:
And so if you have a strategy of passive income long-term and tax benefits, to your point, Brandon, it is the best because you’re getting lots of money in passive income. You’re not paying tax legally, because of the appreciation that you have. It’s a win, it’s a win-win. You just use that little refinance model, which is exactly what we’re doing after Charlie called, I said, let’s see if we can scoop 10 or 20 million out of this deal, tax free, because it’s a cash out refi and just move it to the next deal.

Brandon:
Yeah. That’s so good. We’re talking about a little bit higher level conversation today. I want to take it to more, those who are listening to that are brand new, but related to what we’re talking about here. When you mentioned debt, that rule about if you can get your mortgage covered and then some, it just makes sense. Right? But how does that work for the guy who’s just getting started, that’s nervous about, they’ve heard Dave Ramsey, they’ve heard all the Suze Orman, don’t go into debt, get out of debt, get out of debt. What do you say to those people who are saying, well, I don’t know if I should use debt. Debt sounds dangerous. Debt sounds risky, to buy their first or second or third property.

Ken:
I actually do agree with some of Dave Ramsey for the right person. And so if you’re just a hard working person and you’re working for the man and maybe paying off your home completely and not having that worry and stress, I get that. That’s not our audience, in my opinion. If you’re trying to make this a business, then really debt is your friend. It really is, good debt, by the way, as you guys know the difference between good debt and bad debt. Good debt is covered by cashflow. And so I’m a massive fan of using debt and we’ve done it for years. Tenants pay it off for you. If you can fix debt, and before, as you guys know, we had inflation around two-ish, I guess, over the years.

Ken:
And so we were getting debt at four or 5%, six, seven, eight years ago. Now it’s closer into the three to four range, let’s say, in some cases under three. But now that inflation has gone higher than that, then really if you’re sitting on cash, you’re in trouble, because your spending power on the money that you have in savings is actually hurting you because it’s going down right now by, on the average, I guess of, let’s say four plus percent a year. In 10 years, theoretically that same money would buy you 40% less stuff. That’s what I mean about debt. And so I look at real estate assets, it doesn’t necessarily have to be multifamily. I buy billboards and commercial office and self storage and all that stuff, but all using debt. And then I’m letting the forces of the policy makers, whatever they do is fine with me because I’m just adjusting based on whatever they’re doing next.

Ken:
And so when this administration is throwing everybody money, it’s actually coming to us, it’s going to the person that’s coming to us in rent, and then we’re using it to pay off the mortgage. We’re going to start to see more and more and more of that. I really believe you were going to hit this affordability issue. I think the government’s going to step up for the renter and for the landlord. There’s going to be all kinds of opportunities for us, because the one thing people need, and to your point of what hasn’t changed, is housing. It’s always going to stay in the private sector. The tax laws are all set up for us and they will always be. We’re always going to have this massive tax benefits.

Brandon:
I agree. Part of that is, because I think a lot of our lawmakers own real estate, but I think the other piece is, the tax code is not written to give some people a discount because the government likes them. Right? It’s designed to incentive. I think I even heard this first from Kiyosaki’s, Rich Dad Poor Dad. It’s designed to incentivize behavior, right? I think David, you made the point there earlier, if you give your kid a dollar, if they won’t make their bed, they’re not cheating you by taking that dollar and making their bed.

David:
It’s not a loophole.

Brandon:
It’s carefully designed. And now obviously there are, I’m sure areas of our government where they’re helping some guy. They want us to invest in real estate. They don’t do it because they’re nice, they do it because we provide housing for millions and millions of people.

David:
And jobs.

Brandon:
And jobs.

Ken:
That’s right. It’s interesting because Tom Wheelwright wrote a great book, Tax-Free Wealth. In my conversations with him, he said, the tax codes every year are literally designed for where the government wants money, period. That could be oil and gas. It could be alternative fuel stuff. It could be whatever it is, affordable housing. We just saw that with the opportunity zone stuff, which was a real estate play if you chose to do that. And so there will always be those kinds of things. There’s no way, the government’s already shown that they’re not very good at buying and managing and building housing. We saw that over the years. I think as long as you pay attention to what the government’s basically serving, you can do very, very, very well with these government programs.

David:
You made a really good point earlier I don’t want us to gloss over, when you said, I just look at what the government’s given me and I go with it. When I was in Tahoe at a go buttons event, Robert Kiyosaki came to speak there and he made a point where he said something I thought was very profound. He said, I don’t get caught up in trying to force people to see the political landscape the way I do. I don’t get mad when liberals say they want to do this thing or conservative say they want to do this thing. And really that’s what most human beings that I come across do, is they want to change how someone else thinks to make them think more the way they do. He said, there’s heads and there’s tails. There’s equal sides of a coin. I don’t want to pick a side of the coin, because then I only see half of it. I want to stand on the edge of that coin, where I can look over one side and see what the heads is doing and I can look on the other and see what the tails is doing.

David:
And when I understand the landscape, I make the best decision. That’s why I keep using this example of a rule book, because I notice a lot of people just have anger when it comes to what the government, I’m angry they’re printing all this money or I’m angry they’re not printing enough money. I’m angry interest rates aren’t high enough. I’m angry we haven’t lowered them more. There’s always people that want opposite things. And when you get caught up in the emotion of wanting to change things that you can’t control, you don’t make good decisions for yourself. It’s much better to say, well, they changed the rule back in the NFL again, you can’t touch wide receivers for the first five yards. That’s going to suck.

David:
Well, guess we better draft better wide receivers and just accept maybe we need better pass rushers instead of better cornerbacks or something. And now you change your strategy to fit the way the rules are written instead of trying to change the rules or the government to go the way you want to. I wanted to highlight that because what you’re seeing is a stress free, non-toxic, happier, more productive way to look at these decisions that will have a big impact on the way that real estate investing or other investing works.

Ken:
It’s a heck of a point, David. I don’t care who’s in office. I mean, I do, don’t get me wrong. I vote and I have my beliefs and all that stuff, but it is what it is. And so as they roll these things out, the PPP or the EIDLs and the money that they’re throwing at folks, you just have to adjust. You just have to. But the one thing I can tell you that I believe as a result of all this is affordability stuff, that Brandon was talking about on the labor, prices have gone way up and wages have not. And so we have a real issue, I think. I keep talking about this affordability issue. The government is going to step in. They will just like they did when they introduced section eight, just like they did when they introduced these tax credits that they give developers as incentives. I had, two weeks ago on my podcast, the director of housing for Arizona, ironically I knew him 10 years before that, professionally.

Ken:
I said, Tom, the one thing that would really help a developer would be to lower the impact fees and the costs before we actually even break ground, there’s massive costs. I said, if you could reduce the parking requirements, if you could reduce the density issues or increase the density issues, and you can reduce the impact fees, then we can start to build more affordably. But by that time we actually are building, there’s a number, you buy the land as X, but then the number before you actually start is Y. And that all goes through the city and the county and the state. People don’t realize a lot of times that sometimes the cost, I’m not talking about lumber, I’m talking about the cost. The city costs can be so absorbent that you actually can’t build and therefore creates these affordability issues.

Ken:
I think that the cities are going to start to change some of their policies around affordability, around credits. They’re going to offer developers, is going to people off. But to your point, David, we’re under supplied right now. We have so much demand, and without an equal balance, you’re not going to have affordability. And so that’s the biggest issue. The biggest issue that these cities are facing right now are homelessness and the money is going to continue to come. If you just wrap your head around the fact that they’re going to be throwing money at renters, they’re going to be throwing money at the unemployed, and they’re going to be throwing money at developers. That’s actually what’s coming for the next 10 years.

Brandon:
I agree. I think the development thing is, is fascinating. Because the way I see cycles working a lot, and maybe I probably learned this from your book, they tend to design enough housing. They are building a whole bunch of housing and then it’s really good for a while. But then builders at some point in the cycle, because it takes too long to build and to get the permits, then they’re left holding the bag once it gets overbuilt. And then the market tends to drop. And again, there’s a million reasons that markets might drop, but I don’t see that drop happening. And so I think developers, and I think getting into development is going to be a powerful tool, like you said, for the next decade, I think there’s going to be a lot of room to go there.

Brandon:
The thing that can slow that down of course is if the cost of building just keeps going up. Right? How do those two play in together? If there’s a lot of money to be made in development, but price is just our skyrocket in terms of what it costs to build, I guess, does that just mean rents go up to have to cover that? It’s just negatively rents are going to have to go up?

Ken:
Yeah. So again, just go back to that basic math. It’s a great question. You got to project, is the market going to be there from the renter side or from the home buyer side later? Because the truth is guys, as you know, it costs the same, my lumber in Texas or Arizona, it’s the same price. What’s different is the land, the rent, and then the fees and all the stuff that come with that. What I’m hopeful is that we’ll start to see some governments relax things around zoning as an example. Something, like Hawaii right now is, they are anti-growth, anti-development generally. But they’ve always been that way. That’s why they have three generations in homes. It might be the only state in the country that’s actually seen that.

Ken:
I actually think we might start to see that more, where people are going to start to double up and we’re going to start to see some, that’s probably the next thing that’s going to happen, is you might have multiple generations in a home.

Brandon:
Yeah. Well, you see a ton of that here in Hawaii. A ton of it. Is the houses that have been, I call in the book, The Multifamily Millionaire, I call them monster houses, right? Where they just take a house and it’s like Frankenstein, they add on a little bedroom here and they shove a little thing out in the yard. They turned the garage into a unit. I would say 90% of every house I’ve been to in Mali is one of those in some way, my own house, my own downstairs is a separate unit from the upstairs. They took the staircase out at one point. Then I got an Ohana, it’s like an ADU in the back. It’s everywhere here, because it’s the only way people can afford to live, because the affordability is just so hard.

Brandon:
I see that spreading, especially California has introduced a lot of ADU laws recently for the ability to build those. I think building ADUs, building those extra units on a property is a super interesting niche. Not something I’m going to get into, because I’m too busy with other stuff, but I would love to just build a business that just builds ADUs in people’s backyards, because you can build a house for a hundred grand, a little two bedroom house, and the thing rents for 1500 bucks a month and you don’t have to pay for land cost, because you already own it. A lot of opportunity there if the government is friendly with that, which I think we’re going to see more and more of.

Ken:
That’s the zoning part. That’s exactly what I’m saying. You’ve got an acre or two acres somewhere with a home on it, you’re going to start to see more density and they’re going to have to. They’re going to have to make those kinds of concessions. And so to your point, David, just look at where things are heading, the city’s going to have to step up. If they hold the line on things like zoning or parking requirements or impact fees or things like that, that doesn’t allow you to do exactly what Brandon said, then there’s no end in sight. You’re going to have to allow to be able to split up a lot, build more homes on it, maybe build a duplex and provide more housing.

David:
One thing that I speculate on, I don’t know, is I think what you two said is exactly what we should expect to see. And the reason being, to put it shortly, it’s just too hard and too expensive to build properties fast enough for what we need. What I anticipate and I’m betting on is, when this becomes an affordability problem, it gets brought up to government. Government will do what they always have been doing in America, is they’ll say we need to get involved and fix this. They will increase the section eight housing voucher program to apply to more people. Don’t go build your whole strategy, what I’m about to say, but just to try to offer a little bit of wisdom, I’m expecting that the number of people that apply for section eight will grow, that the government at some point will say, housing is a right, just like food is a right, and medicine is a right, if you show up in emergency room, we don’t turn you down.

David:
We’re on a trend of labeling things as rights, and I’m not taking opinion, good or bad on that, I’m just saying that’s the way it goes. I’m expecting housing will become a right. And if you own the real estate, you will have the government paying your rent for you instead of the tenants in a lot of cases. If you’re making decision just on the way the game is played right now, you’re probably not thinking that way. You’re going to say no to a lot of deals. If you’re thinking the way that I am, and I’m looking at 10 years down the road, 20 years down the road, what is the rule book going to look like? You’ll make different decisions. And that’s why I love having these conversations because it’s hard for me to see it becoming incredibly difficult to live somewhere and the government not intervening to try to make it better.

Ken:
They have to. They really truly have to. One of the things that we were studying years ago as we were figuring out where to buy and what to do, was what we call the response times and to certain city cores. We were looking at San Francisco and the response time for a paramedic, fire men, police first, let’s say, they have to live 15, 20 minutes outside the city because of affordability. These are not new issues. If you’re a teacher or you’re just a service worker and you can’t live somewhere, it becomes a problem. This is not new. I think that you’re going to start to see more and more and more of those kinds of things come out. I think you’re going to start to see money thrown at developers. You’re going to some easing of the zoning and potentially, hopefully we’ll start to see some easing on the development cycle, because the private sector has to help solve this. And the government is definitely going to throw money at the renter, because they don’t want homelessness.

Brandon:
Yeah, man. So good. Well, Ken, before we get you out of here, any other final rules or fundamental truths that have applied in your business? I don’t want to leave anything off the table here, anything else you can throw in there?

Ken:
Yeah. The only thing is, I would be very careful of being a pioneer. I’ve tried it before, it doesn’t work. It’s funny, whenever I see somebody trying something new or going out into a market, just be very, very careful of that. What you want is you want to stay in tune with it, but not be the pioneer, let somebody else be the pioneer and then come in behind there. And also the number one thing that I get, and I’m sure you guys get is, everybody says, I don’t have any money. I don’t know how to start. I know for a fact, all three of us here started with no money. It’s what you see, not what you have. It really truly is. The one thing I’ll just leave you with is, Robert Kiyosaki and I were in New York once and we were walking through the Javits Center, at one of these Trump events we were doing.

Ken:
There was these beautiful models sitting there with these big brochures, the big backdrop and they were pitching hard. And then we went the one next and the guy is like, I got this little deal here and it’s a small little brochure. We went back and I said, it’s interesting because this is the better deal, the one that’s not so promoted. What happens is a lot of the deals that we’re talking about here guys, they happen very quickly and almost without business plans. Now you have to put business plans around them, but they make sense to everyone. And so the bigger the brochure, the worst the deal, that’s what I would say. Be careful.

Brandon:
That’s a good advice. You mentioned the money thing real quick. It reminds me of Tony Robbins quote about, you don’t lack resources, you lack resourcefulness. I found that true so many times in my life. I know you recently spoke, didn’t you speak at a Tony Robbins thing?

Ken:
Yeah. It was Wealth Mastery. It was just a random email that I got from him and he asked me to come down in West Palm Beach and I did that and it was a blessing. I loved it. It was all virtual, because it’s during COVID and he had around four or 5,000 people from 83 countries on there. But you’re right, it’s a mindset guys. We’re in a fortunate that we can now talk about that. I think that some people are sitting back on, well, there’s no way I can start, because I don’t have any money. And that seems to be the number one thing and I get it. I truly get it, but you don’t need money. There’s so much money looking for deals that if you have a deal, it gets funded pretty quickly.

Brandon:
Yeah. Yeah. I was all freaked out, not freaked out so I’m worried, I was nervous because I’ve been raising for mobile home parks for a long time.

David:
You were freaked out. Don’t lie.

Brandon:
Okay. I’d just raised a 20 some million dollars, this is going to sound small to some people and huge to other people. I thought I tapped out the well, IRA is like $22 million for a mobile home park fund, closed that. And then this huge apartment deal came up in Houston and I’m like, oh man. And then I had to raise 13 million. We raised 19 million in five days and it’s like, geez. We have a waiting list of 250 people now that are like, I didn’t get in, I want in on the next one. There is money out there people, is what I’m saying, is there’s money out there because a lot of people are nervous about the stock market. They’re nervous about different things. Their house has gone up in value, a million dollars over the last couple of years. They’ve got money, they don’t know what to do with it.

Brandon:
And so if you can be the person that puts together the deal, you can be the one that finds the deal, that manages the systems, you’re the hustle, you’re the education, you’re the drive, there are people out there willing to invest with you.

David:
Andrew Cushman, my friend was buying a place in Fort Walton, Florida, and I told him, I will buy into your deal and you can tell people I’m doing it. We had a handshake and that stinker had that thing funded within 24 hours. It was like a $50 million place. And I was like, dude, what happened? He’s like I actually forgot about you. It happened so fast. It just filled up so quick. I was like, man, this is like they opened the door to the club and they let everybody in and I’m left outside and they’re like we don’t have any more room, not for you. He didn’t do it on purpose. That’s a good friend of mine and it still happens. Ken, that’s a great point. You don’t need money, you need knowledge, you need skill, you need deal flow. You need to have confidence and know what you’re doing. But the money is probably the least important part right now.

Ken:
That’s right. That’s why you stay on BiggerPockets, read everything, watch everything, become a member. I’m telling you guys, it’s education, it’s education and it’ll open your mind up and the money will drop right in, trust me. People are looking for deals, they are not looking for money as much as they are for deals.

David:
That’s so true.

Ken:
Well man, thank you so much. We got one last segment of the show we head over to right now and that is our famous four. This is the famous four, the part of the show. We ask the same four questions to every guest, every week, so we’re going to throw them at you. Normally we ask people about your favorite real estate related book, but I want to actually ask you the other question that we ask authors typically, and that is, is there a habit or trait that you’re currently working on improving in your own life? Something that you’re trying to improve about your life?

Ken:
For me, I have a tough time saying no. I take on too much. And so for me I’m always looking at, how can I have my business working for me so that I’m not working in it. It always sucks me back into, I’m constantly trying to pull out.

David:
Yes that’s [crosstalk 01:00:54]. I was just telling someone, I hired a new woman and she’s doing amazing, her name’s Karen. Karen has worked with me for two weeks and she’s already like, let’s just expand all over the country. And I’m like, oh, you’re too much like me, this is going to be a problem. Because it always just, we see the vision where I go, I could do that. We go take the bite and we just don’t realize how much chewing gets done once you take it into your mouth. And then you’re choking for the next six months to a year on all the work of management that we never think about.

Brandon:
The other day I’m sitting there, we were just about to launch BP Con, this is now a few weeks ago now, but we’re brother had lunch the big BiggerPockets conference and the three days before I look at the website and I was like, oh man, this is not good. I was like, what’s going on team? And they’re like, well we didn’t have any developer or designer. We couldn’t get it done in time. I’m like, oh geez. All right. I stayed up till one in the morning. I built the website myself. I’m sitting there multimillionaire, real estate investor guy and I’m building a website till one in the morning, because I can’t say no to that, I can’t let it go. Not good enough. I have the same problem. Yeah. Anyway, the BP Con website. Yeah, go check it out, bpcon2021.com. All right. Next question, David Greene.

David:
What is your favorite business book? I heard you know a thing or two about business books.

Ken:
Yeah. Thanks. Gosh, I am constantly reading. I think one of the ones that I always go back to, is that, Good to Great with Jim Collins. I know that’s a while back, but I always dust that off. It’s interesting, my friend that started Cold Stone had Jim Collins speak once. And so he’s like, come on down and check him out. The first thing he said was, how many of you in the room think of you’re level five leaders? Half the room raised their hands. He said, a level five leader would never raise their hand. There’s level one, two, three, four, five. And so for me, as I was building my company, I was trying to be what he would call a level four leader, have some humility, have some vision, have some culture. And so I always just really still resonate with that book, even though it’s got 15 years old now, I guess.

Brandon:
Did you say the Cold Stone guy? That’s cool.

Ken:
Yeah, Doug. Well, no, no, Doug, my friend that started Cold Stone, he’s our governor actually in Arizona. He was at my EO forum of all things.

Brandon:
That’s cool.

Ken:
He was starting Cold Stone at the time. Yup.

Brandon:
I worked at Cold Stone, that was my very first job, singing for tips and making ice cream. I gained 40 pounds that one year.

Ken:
I bet you did.

Brandon:
I gained 40 pounds that one year working at Cold Stone Creamery. It was the best job I ever had. It’s all good. All right. David, next question.

David:
That level five leader story cracks me up. It reminds me of a story I heard about a church that gave one of its members the most humble award. They presented him with a button that said I’m the most humble. And they had to take it away the next day because he wore it.

Ken:
That’s great.

David:
All right. Other than listening to my terrible jokes, what are some hobbies of yours Ken?

Ken:
Well, obviously, I’m going to play golf right after this. I do enjoy golf. I’ll be on the lake probably tonight. I’m up in Coeur d’Alene, Idaho at the moment.

David:
Nice.

Ken:
I love being outside man. Hiking. I’ve done Kilimanjaro twice with my kids.

David:
Really?

Ken:
Yeah. Yeah.

David:
That’s cool.

Ken:
I need something, like you guys, I need a goal out there somewhere. And so for me, it’s just keeping my body healthy, because as you guys know, you can make all the money you want, but if you’re not healthy, it doesn’t really matter.

David:
Yeah. Don’t make your money at Cold Stone.

Ken:
When you’re young, that’s okay.

Brandon:
That’s okay when you’re 20. Yeah. That’s all right. All right. Well, my last question of the day, if you had to really boil it down, what would you say separates successful real estate investors from all those who give up or they fail or they just plain never get started?

Ken:
It’s funny, I think it’s a discipline issue. When people talk about real estate investing, I think that they think that there’s going to be a package that’s going to work perfectly set on their desk and everything’s going to be just exactly fine. And as you guys know, the real money is in deals that are completely broken somehow. They’re 50% vacant. There’s a lot of capital work. You’re basically solving somebody’s problem, usually a bank or maybe even a seller. And so I think what happens is, people don’t know how to persevere, maybe they don’t have the right team. And so my experience has been that people buy and then they try to time the market and it doesn’t work for them potentially, or they have a bad management issue, because they’ve made bad choices and they never really look at themselves. They look at the real estate.

Ken:
And so they’re pointing outwards instead of inwards. And if they looked at some of the basic things that you guys teach, then I think they would have a very, very good experience. And so I think it’s discipline and education.

Brandon:
I love it. I can not cannot argue with that. Well, Ken, this has been fantastic once again. I love chatting with you, every time I feel I always walk away a little bit smarter. Thank you for gracing us with your presence.

Ken:
You guys are the best. Thanks again. I very, very much appreciate it. By the way, we are giving away an ebook on our-

Brandon:
Please.

Ken:
Kenmcelroy.com/biggerpockets. It’s the 21 Key’s To Real Estate, if anybody’s interested.

Brandon:
Everyone is interested. Everyone should go there right now, because that’s awesome. Dude, I will learn anything from you. I’m going to go there. Thank you.

Ken:
My pleasure guys. It’s always a great chat with you guys. Let’s do this again soon. As the market continues to change, we can go back and refer to our old conversations and see if we were right or not.

David:
I actually like that. I remember when COVID first hit, the shelter-in-place happened, there was just panic and chaos. I’ve gone back and listened to some of the stuff I said back then to see, how accurate was I? Was I on or was I off? Because it’s a scary position we’re all in.

Ken:
Yup. It is.

David:
I would just say, people should go back and listen. That’s all I’m going to say, go hear what I had to say.

Brandon:
All right, Ken, did we ask where people can find out more about?

Ken:
Yup. Just go to kenmcelroy.com. We’ve got a whole website there with all kinds of stuff that they can learn from, and just know that everything on there, everything we do all goes to our charity. We make our money in real estate and I really, really, really like teaching. And that’s why I jumped on board with Robert. I spoke to him this morning. And you guys, I love being on these platforms. I think, man, if people can change, not only themselves, but their families and their families families, it’s the best gift you can give them as education.

Brandon:
That’s fantastic, man. Appreciate it. Well, David, why don’t you get us out of here.

David:
Thank you, Ken. Great job today.

Ken:
My pleasure, David. Good chatting with you guys.

David:
This is David Greene, for Brandon the Cold Stone Creamer Turner, signing off.

Outro:
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