Chad Duval: You’re listening to Start FM episode number 13. Do completely get rid of that as you do that?
Speaker 2: No, absolutely not. Absolutely not. You want a Lambo, you want a Ferrari, whatever it is, absolutely not. Want it, get it, but that doesn’t preclude you from helping a family that needs help, from helping an elderly person, from helping a child pay their school lunches, whatever, anything. Just do something because it will give your life a richness that you can’t get from anything else and more guys, we were given two hands, one to pull ourself up and one to pull someone else up, but underneath us.
Speaker 3: This is Start FM. Now here’s your host, active real estate investor and entrepreneur Chad Duval.
Chad Duval: Thanks to Buildium for supporting Start FM, and right now Start FM listeners can try Buildium for free for 15 days. When you go to Chadduval.com/buildium there’s absolutely no risk and you can even start your free trial without entering any credit card information. You guys, this is the software that I used when I first started in real estate. Let me tell you, it’s super easy to use. It’s cheap and there’s plenty of room to grow as your business grows. Again, to sign up, go to Chadduval.com/buildium, that’s B-U-I-L-D-I-U-M.
What’s going on guys? So today’s episode is a special one. We have a very special guest today, Rod Khleif. He doesn’t really need an introduction if you are in real estate or you are trying to in real estate. I’m sure you’ve stumbled across his content, his podcast, his books, his seminars. He’s a really good entrepreneur, really good multifamily investor. Today we dive deep into, I thought a lot more tactical stuff, but it ended up being a lot around mindset and how important it is.
There’s a lot of tactical advice that comes out of this interview that might be fitting for the time of year, as we start winding down and start looking towards new year’s resolutions, there might be some good tactical stuff in this interview for you guys to start implementing next year. Make sure you guys listen to all the way to the end because rod has a special gift for us. It’s a good little tool that you guys might be able to use again as you start implementing potentially the tactical advice that he gives in this interview. So without further ado, this is Rod Khleif.
You guys, we have Rod Khleif on the show. How are you doing Rod?
Rod Khleif: Good buddy, thanks for having me, appreciate it. Let’s have some fun and add some value.
Chad Duval: Yeah, this is going to be great. This is awesome. So I know a lot of, you’ve been in the industry for a long time. You have a really popular podcast and a lot of people listening right now may actually know who you are, but for the few people that might not, let’s have you give a little bit of your background and who you are.
Rod Khleif: Sure. We’ll go all the way back. I immigrated when I was six years old from Holland actually, from the Netherlands and came over here with my brother Albert, my mother’s Avantia and we ended up in Denver, Colorado where I live for the next 30 years. To give you a little more context, we didn’t have much. We ate expired food, we drank powdered milk because my mom thought milk was healthy.
I wore clothes from the Goodwill and the Salvation Army all the way through junior high school until I could get a job and buy my own clothes. Now I’m certain that there are people listening to this call that had it harder or have it harder even possibly than I did. But the one thing that I knew is I wanted more. Luckily my mom babysat kids. That’s how we had enough money to eat and survive and we always had a house full of kids and she was an entrepreneur.
She invested in the stock market with her babysitting money, but she bought the house across the street with their babysitting money for about $30,000 approximately when I was around 14 years old. Then when I was about to graduate from high school, she told me had gone up $20,000 in her sleep. I’m like, “What? I’m getting into real estate” I had planned on going to college, I’m going to screw college, I’m not going to college.
I’m going to make my fortune in real estate. So I went and got my real estate broker’s license when I turned 18, which you could do back then with education, you didn’t need to experience like you need now. So I became a real estate broker and I didn’t do very well. My first year I maybe made eight to $10,000 my second year, maybe 10 to $12,000 for the year, but my third year I made well over $100,000 and so what happened between year two in year three that caused me to 10X my income.
What happened was I discovered the importance and the power of mindset towards success. That really your mindset and your psychology is 80 to 90 percent of your success. Really the real estate stuff that we talk about on your podcast, and my podcast is 10 to 20 percent of it. People have to actually take action with what they learn. I do live events and the sad reality is when people go to a live event or a bootcamp or buy a course or something, all 90 percent of them never do anything with it and because they don’t have the mindset piece handled.
So fast forward to today, I’ve owned over 2000 houses. I’ve owned a lot of apartment complexes. In 2006, my net worth went up $17 million while I slept, little more than my mom’s 20,000. But there’s a punchline. So when that happened, you do the math on it on a 40-hour-week, it’s like $8,400 an hour, which of course I did. I got a big head. I thought I was a real estate god. I really truly thought I knew everything there was to know about real estate.
When that happens, very often, God of the universe or whatever you believe will give you a smackdown and that was 2008 for me. I got my bad handed to me. I lost that 17 million a whole lot more. I had what I call a seminar. It was a $50-million-seminar. I lost everything. I thought I was set for life. If you’d like, Chad we can talk a little bit about the mindset it took to recover from that to the success that I enjoy today and really the mindset it took to have the 50 million to lose in the first place, if you’d like.
Chad Duval: Yeah, absolutely because you said that’s like 80 percent of all things [inaudible 00:06:50].
Rod Khleif: Well, what it was, was knowing exactly what it is that I wanted and as importantly why I wanted it. So many people go through life with very little clarity, looking through foggy glasses, trying to figure out, kind of directionless. One of the biggest keys to success is having clarity in what it is that you want. So if you’ll humor me, let me take five minutes and walk your listeners through a process that I do at my live events. I spend a lot more time on at the end and with my coaching students and that is clearly defining what you want, your goals, in other words, and as importantly, defining why you want them. So do you want me to take five minutes and do that?
Chad Duval: Yeah, absolutely.
Rod Khleif: So guys, if you’re listening, get a pen and paper because you’re going to want to take some notes or come back and revisit this, you don’t want to stopped driving or whatever. But what you want to do is you want to pick an hour when you have a ton of energy. Don’t do it after a big meal. In fact, I’m slow getting started right now cause I just ate and so I’m dragging a little bit so, so don’t do it then. Do it when you have a lot of energy, make sure you’re well-hydrated make sure you drink lots of water. On that note, I’m going to drink some water and sit down and write down everything you could ever possibly want in life.
So all the normal stuff like the, the stuff, like the houses, the boats, the cars, the jet skis, the planes, write down how much money you want in the bank in a few years, how much money you want the bank in 10 years. Write down how much cashflow you want from your real estate in say, three years, how much cash flow you want in 10 years, write down but don’t be… Take the lid off your brain. Don’t limit yourself for God’s sakes. Don’t think it’s too much. If you want a private Island, write down a private Island, a yacht, a jet, whatever it is.
One of my bucket list items now is to either own or rent a yacht and do the Mediterranean, go from Barcelona all the way around the boot in Italy. Go to Greece, Croatia, and that’s one of my bucket list items. So whatever it is, take the lid off your brain and just write it down because it starts a process that is incredibly powerful in your brain. It also triggers something in your brain called your reticular activating system.
Just literally writing down your goals and what that is, it’s a filter in your brain that filters out what it thinks is most important to you. The best example I can give you is, but you’ll see if once you start realizing it, you’ll see examples of this. If something comes into your life for a few minutes that you’re thinking about, then you’ll notice it but the best example is when you buy a car, you never really notice some and then you see them everywhere and were they there before?
Chad Duval: Yeah.
Rod Khleif: Of course, they were. So that’s your reticular activating system. That’s why it’s so important to write your goals regularly. Because again, clarity is power, the more clear they are. So you’re writing your goals down. You write down all the stuff, you write down the financial goals, then you write down what you want to do in your lifetime. This is lifetime goals. This isn’t just this year. I want you to write down everything. Small, big everything.
So maybe you want to climb mountains. Maybe you want to write a book. Me, I jumped out of a perfectly good airplane a few months ago, which I will never do again but it was on the bucket list and I got it done. So what do you want to do? Write it down. Write down also what you want to learn this lifetime. We’re continual learners. Success comes from learning. Learners are earners.
The more you learn, the further along you get. So you should always be reading and growing and learning but what are some goals that you want to learn? Maybe learn a foreign language. I’m going to learn how to fly a helicopter. I’m going to learn how to play the drums. So those things I want to learn. What do you want to learn? Also, write down who you want to help. It can be family, it can be friends. It could be bigger than that if you like.
Me, I bought my parents a house here in Florida, bought him a car, took him on cruises. Who do you want to do things for? Write that down. Now, once you can’t think of another thing, and by the way, if you’re analytical, for God’s sakes, don’t sit here and try to think and analyze this stuff. You’re going to write and don’t let the pen leave the paper. You can always scratch it out later. But you want to keep your momentum as you’re writing and keep your energy up. Breathe deep. Make sure you’re hydrated.
Like I said, energy is critical to this process. Then once you can’t think of another thing, it’s not real until it’s measurable. Measurable meaning how long is it going to take you to achieve it? So by each goal put, how many years you anticipate it’s going to take you to achieve it? Don’t overthink it again. Just guess at a number, put a one, a three, a five, even a 10 or a 20 recognizing that as human beings, we will overestimate what we can do a year and massively underestimate what we can do in five or 10 years.
I’ll give you an example of that. When I lived in Denver and I knew I always wanted to live on the beach and there is no beach in Denver, maybe a little one at one of the lakes there, but I want to live on a beach. Palm trees, beach. I had pictures that I’d look at and I’d think about being on the beach how amazing that would be. What’s crazy is I ended up building an $8 million mansion on the beach. It was 10,000 square feet. Magnificent.
I own the beach on one side. I had my boat houses on the backside, it was called a Gulf to Bay. I own both sides was just amazing. But it was unthinkable when I was 18. So the point in saying that is not to brag, it’s just to let you know, don’t limit yourself when you’re doing these goals. Because again, that was unthinkable to me and I made it happen because I decided to make it happen. You can do the same. There’s nothing you cannot do be or have.
So once you’ve got a time limit on each goal, I want you to circle your number one goal. That goal, when you get it, you’re like, “Oh my God, this is amazing.” That goal. Write that down. Put it on another piece of paper. Then I want you to pick your top three one year goals. Put those on another piece of paper. Now leave room in between them. Now at this point, you’re further along than just about anybody in the car country. Most people don’t get this far and you’re already further than that.
What is sad is most people spend more time planning a birthday party or Christmas than they do designing their lives, that’s what you’re doing is you’re designing your life. So this is so freaking important and you should do this at the least quarterly. Sit down and write them down and get them more clear and more clear and more clear because clarity is power. The more you can see it in your mind, the faster you get it. I’ll give you some examples of that in a second. So what do we got?
So we’ve got the four goals, your number one goal, the top three one year goals, which is great, but now you and those were goals will push you, they’ll pull you, they’ll get you out of bed early. But the real fuel is knowing exactly why they’re a must, why you must achieve them. They’re not a should. There are absolute must. People end up saying, I should be a better father. I should lose some weight.
I should go out there and do a side hustle making some more money, and we end up shooting all over ourselves. We got to make it a must. So why is each one of these goals an absolute must? So write a paragraph for each one. So I can show my spouse what success looks like, so I can show my children how to achieve success. So we can have freedom, freedom to do whatever we want, whenever we want, go wherever we want. Whatever it is for you, write it down. Use emotionally charged words.
Words just so freaking powerful to get you juiced up. So use them, words like amazing and incredible and magnificent, beautiful. Use those types of words because they’ll juice you. So put positive reasons why they’re an absolute must. Now, I want you take it one step further, I want you to put some pain in there if you don’t achieve the goals, put things like so I don’t feel like a failure. So I don’t feel like I failed my children.
I failed my spouse. So I don’t live a life of regret because as human beings, we’ll do more to avoid pain than gain pleasure. You want to use this guys, this is the freaking fuel to get you to get up early, stay up late, work on weekends to build this dream life that you deserve to get you to push through your limiting beliefs in your fears. We all have so many fears and limiting beliefs from childhood experiences that we got to push through or worse, we’re comfortable. So many of us are comfortable and the comfort zone is a warm place, but not a freaking thing grows there.
So this is the fuel to do that. So write the wise down, positive and negative and the negative is important. There was a nurse in Australia named Bronnie Ware and she was a hospice nurse and she counseled hospice patients at the end of their lives and she asked them, do you have any regrets? She wrote a book about, it’s called the Five Regrets of Dying. Do you want to know what the number one regret was Chad, it was not living my life, not living to my potential, not doing what I could have done.
Screw that guys. We don’t want any regrets. Use this process, this fuel to make sure you don’t end up in the end of your life with regrets. So you’ve got your goals and your why’s, which is huge. Now the last thing I want to talk about is how you manifest these things in your life and how you keep them top of mind. I’m going to give you some examples. I’m going to give you some notable examples and I’ll give you some personal examples.
Notable, Jim Carey, when he was frat broke, wrote himself a check for $10 million. He put on the subject line for services rendered with a smiley face. He used to go up to the Hollywood sign. He’d look at it and visualize cashing it. I know that sounds goofy, but that’s how much money he made for dumb and dumber. I’ll give you other examples that’ll blow your mind a little bit in a second. But another example is I’ll give you a Disney example about visualization at when Epcot center opened here in Disney World in Florida, it was the last park to open and Walt Disney had already passed.
So his brother Roy Disney was there and reporter went up to Roy and said, “Do you know it’s a shame Walt didn’t get to see this.” Roy turned and looked at him and said, “The only reason you are seeing this is because Walt saw this.” Guys, we have to see it in our minds to make it happen. I’ll give you a couple more examples. Olympic athletes before they run a race, it used to be just the Russians. Now every one of them does it. They’ve run it in their minds because it’s been proven to enhance performance.
Let me give you some personal examples. So when I was 18, I bought a four door car because I’m going to be a real estate broker. I’m going to sell houses, got a jacket, and looked ridiculous. I was out there trying to sell real estate. So I got this bone, ugly Ford, four-door Granada, ugliest freaking thing you ever see, bench seats in the front. Just hideous. But I worked with a guy who had two Corvettes, had a Lincoln Continental.
He had all sorts of other cool stuff that I loved, but he let me drive the Corvette and that’s a critical component guys, that experiential piece. If there’s something you want, go experience it. If there’s a house you want, go to open houses or the houses like it. If there’s a car you want, go test drive it. I just went to the Fort Lauderdale boat show a week ago because I want to get a yacht at some point. I walked through yachts, I bullshitted my way onto the past the gatekeepers and went on these jots and videoed them and sat in the bed and visualize in the cockpit and a or whatever they call it and walked around and felt it.
That experiential piece is critical guys. So this is not a do as I say, not as I do thing. This stuff works. That’s why I do it. If you saw a pictures, I could show you pictures on the wall that I have here of yachts because I keep them around me. So let me give you some examples about back to the cars. So I had that bone ugly Granada. I drove that Corvette. I’m like, “This is freaking cool.” So I got a picture out of a magazine of a Corvette and I put it on the bottom side of the visor in that bone ugly Granada.
Within a year or two I had a Corvette, beautiful red Corvette. Give you a couple more examples, but let me pre-frame by saying I’m not bragging because these things really don’t motivate me anymore, but they’re great for illustrative purposes. So back then was a TV show called Magnum P.I. The actors before you were born, Chad. But the actor’s name was Tom Selleck and he was a detective, but he drove this incredible red Ferrari 308 and I thought that was the coolest thing I’d ever seen.
So I got a picture of that actual car put on the visor, my Corvette, and then a year or two I had a Maserati looked just like it from the front end. Gorgeous. Last car example. I’m the guy that always wanted a Lamborghini. I had posters in my room of Lamborghinis, it was the Countach back then. What’s crazy is my son, when he was nine years old, collected models of exotic cars, he had about 30 or 40 of them on his bookshelves and he had a model of the exact same color and style Lamborghini than I ended up getting. Let me show you one example. I don’t know if you put this on YouTube or not.
Chad Duval: Definitely, yeah.
Rod Khleif: So this is my planner. I’m a dinosaur. It’s on today and I use a paper planner just because I like to write things. I use Outlook as well, but I’m still a bit of a dinosaur. In the back of this thing, I’ve got pictures that have been in here for 20 years. Literally, they’re in plastic. They’re all dog-eared the edges. First pictures of my gratitude pictures, guys, everything starts from a place of gratitude. These are pictures of my children when they were young. Gratitude is foundational to everything, in fact, I just talked about that on Facebook live this morning. So pictures of my kids. Then here’s pictures of the houses that I wanted.
So the top picture looks just like the house I built on the beach before I built it. I had glass like that 10 feet high, but together. What’s crazy, now I lost that place. But what’s crazy is I live in a compound now and these bottom pictures look just like it. You can see the railing here, right? Look behind me.
Chad Duval: So crazy.
Rod Khleif: See the railing? I live in this compound, now it’s six buildings. I’ve got a giant main house. I’ve got a guest house. In fact this week I’m having my mastermind reception here, 40 actually pushing 50 mastermind members. It’s going to be here at my house. I’ve got a media center with a theater room. I’ve got a video studio, I’ve got a beautiful exercise facility and on and on and on because God’s got a sense of humor, I can see the old house that I built on the mansion, on the beach, across the base, literally right out my backyard. But so then I’ve got pictures of other stupid shit.
I’ve got a few $100,000 little watches. The Lamborghini before I ever got it. The Rolls Royce, all these things that I got because I had pictures. So that’s the last thing I want to leave you with is make sure you get pictures of your goals and put them around you. Like I said, if you look around me, you’ll see the things that matter to me now. They’re all around me because it works.
Chad Duval: So this is like law of attraction type of stuff, right?
Rod Khleif: Absolutely. In fact, when the movie, The Secret came out, I’m like, “Holy shit, this is what I’ve been doing for the last 20 years.” I gave away literally, I’m not exaggerating, hundreds of copies of that movie about the law of attraction, The Secret because it just blew me away. I’m like, “Holy cow, that’s what I’ve been doing.”
Chad Duval: That’s crazy. So how often are you looking at those pictures in the back of your planner? What have you looking at?
Rod Khleif: They build your subconscious. Though the ones on the wall going to your subconscious but honestly, you don’t have to look at them that often because they’re there. But I’ll show you something. That way behind me there. I’ve got vision boards now of the things that matter to me now, I’ve got a gratitude vision board. I’ve got a vision board for building schools in third world country. Something I want to do. Just the other things that I want, I’ve got a vision board for each item. So what I’ll do many mornings is I’ll sit in my recliner, you can see it behind my green screen here. It’s right there.
Actually, you can see the wall. I’ve got hundreds of thank you cards from students and people whose lives I’ve impacted. It’s my greatest joy, but the point is I’ll sit in that recliner and I’ll do gratitude for the things in my life that I’m grateful for, for my beautiful wife, my kids, my coaching students, my foundation, and then I’ll do gratitude for the things that I want as if I already have them.
Again, gratitude guys, it’s foundational to everything you want. Then I’ll do gratitude for the things that I want as if I already have them. Sometimes I’ll even get emotional being for things I don’t even have yet. That’s how powerful because I know how powerful this is. Again, you immerse yourself in this, I went to the boat show because of the things that you want and it makes them happen.
Chad Duval: Yeah, that’s crazy. I mean [inaudible 00:24:02].
Rod Khleif: Hey guys, sorry to interrupt this episode, but I wanted to ask you a huge favor. If you’re enjoying this episode so far or you’re a big supporter of the podcast, can you go to the Apple podcast app and leave a rating and review for the show? I didn’t realize how easy it was until the past couple of weeks. I’ve been going in rating and reviewing all of the podcasts that I actually listened to on a daily basis. It’s super easy.
If you just go to the show in the app and scroll to the bottom, it’s literally just two clicks. All you have to do is click on the stars to leave a rating and then there’s an area there where you can actually leave a comment or a review on the actual show. So I would love your help, leave some feedback and it’ll only help the show grow and appreciate guys listening and let’s get back to the show.
Chad Duval: So a lot of my audience are aspiring real estate investors or maybe only a few units that thing. They might be listening and be like, “Rod, this is all great stuff.” Write down your goals. Things will be, as the more you write them down, the more they’re going to come out true.
Rod Khleif: Eighty to 90 percent of it. I know we’re going to get into real estate now, but I’m here to tell you if you don’t do that first part, the real estate… If you’re analytical and you’re like eaten up all the analytical conversation like crack cocaine, you’re not going to take action bottom line. So don’t, just so we stress the importance of it.
Chad Duval: Exactly. So that’s what basically what I want to hear and I emphasized everybody, is that you do need to make the mental side of the game a priority versus just trying to analyze on, because yeah you’re right analysis by paralysis is a very common theme.
Rod Khleif: I see it all the time.
Chad Duval: Absolutely. So going back into the tactical stuff, are you able to share a little bit about your first real estate deal? Not the deals that you closed as a broker, but when you first bought your first.
Rod Khleif: Yeah. No, buying. Of course, I started with houses. I bought 500 houses in Denver and several apartment complexes. Buddy, we’re talking 40 years ago, so it might be easier to talk about a more recent deal. I’ll be candid, I can’t remember what I had for breakfast, so to think about 40 years ago is going to be difficult but happy to deconstruct a deal with you or if you want to ask me some specific questions. I bought a thousand doors this year in five States. We can speak about some of these. There are larger multifamily deals, but we can absolutely speak about some of those?
Chad Duval: Yeah, let’s dive into one of your favorite deals that you’ve done in the past.
Rod Khleif: I’ll tell you one that’s kind of interesting. I was just there literally last week with my wife. I was checking on the renovations, but it’s in Louisiana. It’s 403 doors. What’s unique about it is the seller that we bought it from paid $20 million 10 years ago. We bought it for 16 and a half, about five months ago. Now, it was 70 percent occupied, which is a red flag, massive red flag but the property next door is 100 percent occupied.
So we know it’s not the market, but you go there and it was like head scratching stupid on the management. Just my numbing stupid and we are turning it around. In fact, in the end, the occupancy has dropped. We’re down to 51 percent right now. But what’s awesome is we’re breaking even at 51 percent, okay?
Chad Duval: Wow, that’s awesome.
Rod Khleif: Yes, because we’ve bumped some rents. But when you have a massive reposition like that, which has been horribly managed, of course you’ve got a lot of deadbeats in there. So your occupants is going to drop. There’s a difference between physical occupancy and economic occupancy as well. Keep that in mind, just cause they’re living in there, it doesn’t mean they’re paying, but anyway, so it’s turning around. When we get that to 90 percent occupied, we’ll have basically made $8 million without raising any rents. Now we’re raising rents as well. So that’s a massive home run, but it’s a heavy lift.
Chad Duval: So how do you find this deal?
Rod Khleif: Through a partner, that one was through a partner and I’m blessed because I do live events every year. My next one is in LA. It’s rodinlosangeles.com if you’re interested in coming to see me, let me just meet for three days. I don’t bring in outside speakers sell you crap like everybody else but because I have this ecosystem now where people come to see me live, I’ve got about 300 students. I’ve got the largest multifamily Facebook group on the planet now with almost 31,000 people in it.
People send me lots of deals and it’s a beautiful thing. But I will tell you in this hot market, you have to look at about 200 to find a great deal normally that’s our numbers anyway, I was a 100 it’s up to 200 now and so you’re kissing a lot of frogs, but we are very, very conservative.
Like I said, that deal at 51 percent we’re breaking even. We’ve got another asset in Texas that we’re thrown off incredible returns at a 65 percent loan to value. Typically, you don’t get the great returns unless you push that loan to value up and we’re 65 percent were thrown off 10 percent cash on cash and 20 percent IRR. We’ve got an asset in Ohio that 101 doors got destroyed by a tornado.
We just got our first unit back online last week. Just literally last week and this was destroyed three and a half, four months ago. All a hundred families had to move, but we’re going to get the rents $500 a door there. Now I’ve got to say this is not normal, but $500, let’s just do the math here. So 500 this is an increase in net income. That’s the operative thing to remember here. Guys, if you listening, any increase to the net operating income is an exponential increase to the value.
So I’m going to give you an incredible example right now, and I don’t think this is standard because it’s not but this is a fun, exciting one. So on this asset, we’re going to raise the rents 500 a unit. So 500 times 101 and you’ve got to annualize it, times 12 and then let’s divide that by a cap rate. I’m going to be generous and say six percent but really it’s probably a five cap because it’s an a asset that’s a $10 million, $100,000 increase in value on one complex.
That’s why we love this business man. But again, we’re kissing a lot of frogs to find deals like that. My partners looking at a 1000 doors today, I’m not going to tell you where and I even tell you what state it’s in and then some more tomorrow. But it’s been a little bit of a famine the last few months, but it’s feast or famine, how it is.
Chad Duval: Yes. Absolutely, I just closed on one property in April and I haven’t been able to close on anything since then because yeah, it’s the same thing. It’s just turn and burning. Just going to keep analyzing that.
Rod Khleif: Just stupid. Listen guys, we are in irrational exuberance right now and there’s stupidity happening right now. I saw it in 2006. I was caught up in it. You think nothing’s ever going to slow down or stop. God forbid we have a correction like that, but even if there is guys, it’s not something to fear. Let me say that because with crisis comes incredible opportunity. The biggest money is always made in a downturn. So don’t fear it, just be aware of it. Don’t get caught up in irrational exuberance. Don’t make stupid mistakes and you’re golden.
Let me say one other thing. Make sure you’re stress testing your deals. Like I said, we’re seeing deals that we were in best in final and we are scratching our frigging heads when we see what they end up trading at or selling for. It’s like, what were they thinking? Those are the deals we’re probably going to snap up here if and when the market corrects. But so you got a stress test. Like we’ll look at a deal. If it won’t break even at 25 percent vacant, we won’t buy it day one. We won’t do it.
If it won’t break even after we refinance and pulled money out in five years at 35 percent empty, we won’t do it. Those are two high levels of stress tests we do. Now, the other thing is you’ve got to have plenty of operating reserves on that Louisiana property. We’ve a million sitting in the bank that we’re not messing with. It’s just adjusting case fund the Texas one half a million so that’s being prudent anyway.
Chad Duval: Everybody knows. It’s only a matter of time before the shoe drops and things start slowing down.
Rod Khleif: It goes through cycles. It’s historically always done that. I’ll give you a great example. In Denver, I bought a property in the late 80s for 56,000, flipped it for 76, market crashed. I bought the same house back for 18. Follow me now, 50, 76 down to 18 I bought it for 18, sold it for 160 a few years later. It’s now worth about 700.
Chad Duval: Talk about cycles. Absolutely, curious, have you any funny war stories in your days? You’ve been in this industry for 40 years, I’m sure there’s a plenty of a funny stories.
Rod Khleif: I’ll tell you some funny ones. They’re mostly landlord tenant stories. One of my favorites is I’m reading the Denver post in Denver one morning and I see a picture of one of my houses and I’m like, what? The headline said making money the old fashioned way. It was a five bedroom house and the guy that rented it said he was in the maid service, but he had crappy credit. So I’ve got a huge cash deposit from him, which protects… When you’re in C minus properties, you have to do that sometimes.
It wasn’t a deep property, but it was a good C minus, I would say, giant house. He turned it into a bordello. He had a girl in every bedroom. So anyway, I called my partner in Chicago who is partner in that house and I said, “yeah, you want a warehouse in Denver brother?” Anyway, so of course we evicted the guy. But that’s a funny one. Another one you’re in here in Florida. I bought some houses on canals and there was one, it was on Boyle terrorists down in Charlotte County.
I get a call one morning, early in the morning and there’s so-and-so with Wink TV. She said, “have you seen the news?” I said, “no” well you own the house that sewn a fifth. I remember the address, I don’t think I want to say it publicly, but it was on Boyle terrorists in port Charlotte. I said, “yeah.” She goes, well, “do you know we had a big drug bust there last night?” They got like something in the tonnage of cocaine.
It might’ve been a half a ton, but they measured it in tonnage of cocaine, these guys with night vision goggles and the whole thing and I had rented it to a guy from Columbia, this was back when that was a big deal. All that going on there with, what’s his name, Escobar. She’s like, would you like me to interview you on the, on TV? I’m like, no, because I’m going to have to evict this guy. I had these visions machine gunning South Americans coming after me. But anyway, there’s a couple.
Chad Duval: It’s always funny to look back on it. During when it’s happening though, I’m sure it was all thing how we can do.
Rod Khleif: No, it was funny then too, but I wasn’t going to go on the news with it. By the way, the guy had an 800 credit score, so we didn’t even much of a deposit. All this furniture was brand new because it was just a fake house but we had to the victim.
Chad Duval: Yes. That’s a good testament. You never know. You could have perfect credit, awesome references, but you never know what’s actually going on in those properties, but so I did see you popping in around the Boston area of the past couple of weeks.
Rod Khleif: My friends Verisign, Ben, and Kenny do one day events to educate investors. I agreed to keynote it. In fact, I’m doing it again here in short order. What I’m thinking about it before I forget because we were talking about goals. Let me share something about goals. It’s so important and that is, well let me tell you why it’s important. So I built that house on the beach. I told you the one I lost and this place was unbelievable. I had a giant waterfall from a second floor.
It was like 10 feet wide waterfall into the pool. Second floor balcony into the pool. I have tens of thousands of dollars with the trees that curved out over the pool. The house, it had a giant spiral staircase up through the middle of it. It had hand-carved metal railings that had brass balls intertwined in them. It’s just gorgeous. Second, I’ll land the plane with this.
The second floor, I had an aquarium that was custom made that curved around the staircase, viewable from both sides, 20 feet long, 10 feet high, and the aquarium costs me like somewhere between 150 and 200 grand. So that gives you an idea of the house. So two months after I built it, I’m floating in the pool at night, and after I built it, after we moved in, so two months after we moved in, my family’s inside sleeping and I’m floating in the pool, warm water looking up at this incredible house.
But really what it was, was this testament to my ego. I built this thing to prove to the world I was good enough. To show the world that I mattered, which is the truth of it. I got really depressed. Just two months after I built it, we’re talking about something I worked for, for 20 years. This is what I want to share because really important and that is, when I look back on it, there were two things going on.
One was you should never have reach a big goal without having other goals lined up behind it. That’s why it’s so important to redo your goals regularly. Because like the good book says, without a vision, the people perish. You need a vision for the future. I didn’t have that. So that’s number one. The more important thing was I had been totally focused on Rod. Rod, Rod, Rod.
Show the world I matter because I was insecure and prove the world I was somebody. So that year I went and saw Tony Robbins and found out he fed families for the holidays. I went and fed five families that year. We called the church saw who really needed help and the third family blew my mind. We went to this one bedroom shithole, for lack of a better word. This place wasn’t even a one bedroom, the lady, it was a single mom with five kids.
We had toys for the kids. We had a frozen Turkey. We did it for Thanksgiving, a frozen Turkey and toys and big boxes of food, and she comes out on the porch and she sees all this and starts crying. Then her kids come out, the older ones start crying. I start crying and I’m blessed to say we’re feeding a thousand families this Saturday. Once we’re done with that, we will have fed 75,000 children for the holidays the last 20 years.
I’m not telling you this to brag. We’ve done tens of thousands of backpacks filled with school supplies. We’ve done tens of thousands of Teddy bears to local police departments for officers to keep in their cars. That has given me fulfillment that and I will tell you, and again, this is not to brag, this is to encourage everyone listening. I don’t care where you are at on your success journey.
You don’t have to do anything as big as I did, but I’m going to tell you that success without that component is not success. I’m about to hit seven million downloads on my podcast and I’ve interviewed huge hitters in the multifamily space, mega millionaires, even a billionaire. I can tell when someone is like I was back then totally focused on themselves, not giving back nothing because I recognize it because it was me.
I’m here to tell you those people that I interviewed that are still like, that are not successful. I’m also here to tell you that your success comes… In fact, I just talked about this today on my Facebook live, that your success comes much faster if you start giving back right now, I don’t care whatever you can do, do something to give back because power moves to those that serve.
Power moves to those that help. Whatever you want, you give, you want happiness, give happiness, you want love, give love, you want money and financial success, give up your time and give money and do things to give back. It will come that much faster. So I just want to share that before we called it a day here.
Chad Duval: I struggle with that too on the day-to-day. I’m curious how do you balance both the giving back side of things, the fulfillment versus the, I matter, I have ego-driven because I think that’s a good fuel. But how do you balance, Do you completely get rid of that as you do you that?
Rod Khleif: No, absolutely not. Absolutely not. You want a Lambo, you want a Ferrari, whatever it is, absolutely not. Want it. Get it. But that doesn’t preclude you from helping a family that needs help, from helping an elderly person, from helping a child pay their school lunches, whatever, anything. Just do something because it will give your life a richness that you can’t get from anything else. Guys, we were given two hands, one to pull ourself up and one to pull someone else up by underneath us.
So if it’s multifamily real estate, then for God’s sakes, teach other people multifamily real estate, do something to give back, that’s why I’ve been so blessed I was telling you I’ve got a hundreds of thank you cards on the wall behind me. When I tell you that I get a message probably three messages a day, either by email, Facebook, or a handwritten card every single day from someone whose lives been impacted. You think there’s any greater gift in life than that, that’s a free, and I’m sure you get, thank you for your podcast as well.
It’s like the greatest gift ever. So guys, give back. The most successful and wealthy people on the planet are the ones that add the most value. So think about how you add value and then contribute beyond yourselves. Contribution is a basic human need. It’s not a want. It’s a need. I will tell you anything in this universe that doesn’t contribute in some fashion actually gets eliminated. So that what’s the universe works.
Chad Duval: Absolutely. I’m a big proponent of getting back to the tactical side of things of real estate is to actually give before you take it as far as trying to find a mentor and trying to get that first step [crosstalk 00:42:53].
Rod Khleif: If you’re going to go after a mentor, you better think about what you can do to add value to them, and maybe it’s just your enthusiasm and your passion. Maybe you just bring that, but if you’ve got a skillset like IT or social media or whatever, think about how you add value to them. I have people that call me and when they approach it like that, I’ll listen.
Chad Duval: You are going to listen, exactly.
Rod Khleif: I’ll listen at that point at least you got my attention. If it’s how can you help me and that’s all I hear, that’s awesome. Okay, fine. Listen to my podcast or come see me live and I’ll help you for sure, but I’m not going to be a one-on-one mentor for you. There are people that I want on one mentor. I have a call with one of them tonight and I gifted it to her. So single mom that babysit kids. When she told me that it was like done, that’s what my mom did. Done. Her name’s Michelle.
I’m interviewing her tonight and I’m actually airing, I did a contest and I got videos from all dozens of people that wanted me to coach them for free one-on-one. She won the minute she told me she was a single mom with four kids and babysit kids. So I have a gift for your listeners. I used to give away my book. I gave away 20,000 copies. It’s 200 pages. It’s on Amazon’s, Amazon bestseller because my team was finally like, “Hey, stupid, we should put this on Amazon. Make some money.” So, okay, fine.
So if the physical copy comes out in about 90 days, but in its place on my website, I built this multifamily property tool book. We use it every day. It is the most comprehensive due diligence checklist I’ve ever seen. It asks every possible question that you, it’s almost 70 pages long. Is no fluff. This is not a sales piece. This is just to help you. If you’re evaluating a multifamily property, it’s not for any other asset class. Not for a house, but it’ll help with a house too. But it’s really more for multifamily.
Get it. It’s free for God’s sakes. It’s on my website, rodkhleif.com and you will be glad you did. We use it every day. It just asks you every possible question that you should ask. So you don’t make a mistake because real estate is primarily empirical. It’s numbers, but you do have to ask important questions too. They’re all in here, so make sure you go there and get it at rodkhleif.com. Then if you’re shooting multifamily also go to multifamilycommunity.com and that’s a direct link to that Facebook group I was talking about.
We don’t allow any promotion there. It’s just an educational resource and it is kick but okay. There lots of posts, lots of information. You can search things. If you can swing it, come see me live. You can come for as little as 300 bucks and it’s me for three days. If you want to see what it’s about, Google or search in the Facebook group, search bootcamp and you’ll see hundreds and hundreds of glowing testimonials about the experience because I get into mindset and stuff too.
It’s not just real estate because it’s so freaking important. That 90 percent of the people that never do anything with what they learn, not on my watch, man. We go deep on pushing through fear and goals and creating an identity for yourself and just really important things that I’ve learned along the way here.
Chad Duval: When’s your next bootcamp event?
Rod Khleif: When are you going to air this episode you think approximately?
Chad Duval: Probably a week or two maybe.
Rod Khleif: Fine. So Los Angeles, January 17th, 18th, 19th Rodinlosangeles.com. I’ll tell you what, if someone puts in they can use a coupon code Chad and they’ll get a hundred bucks off.
Chad Duval: Perfect, appreciate.
Rod Khleif: My pleasure buddy. I’ll make sure and let my team know. So yeah, I’m happy to do that. Hopefully, we added a little value today.
Chad Duval: Absolutely. I definitely reiterating the fact that mindset is, that’s the number one priority, I think when you’re just starting in real estate, even when you’re continuing down that path of buying and growing your portfolios. So you I know we’re running out of time, so I’ll let you get out of here. I appreciate you being on the show.
Rod Khleif: It was a lot of fun, buddy. I appreciate you having me and let’s stay in touch.
Chad Duval: Absolutely. Thanks Rod.
Rod Khleif: All right, take care buddy, see you.