In this episode of the Main Street Business Podcast, Mark J Kohler welcomes Dolf De Roos, a globally recognized real estate investor and best-selling author. They delve into the intricacies of real estate investing and the potential it holds for significant returns.
Here's what you can look forward to in this episode:
Don't miss Dolf De Roos' one time live event "The Right Real Estate Deals to Generate Passive Income" - https://www.dolfderoos.com/training-web-a
In this episode of the Main Street Business Podcast, Mark J Kohler welcomes Dolf De Roos, a globally recognized real estate investor and best-selling author. They delve into the intricacies of real estate investing and the potential it holds for significant returns.
Here's what you can look forward to in this episode:
Don't miss Dolf De Roos' one time live event "The Right Real Estate Deals to Generate Passive Income" - https://www.dolfderoos.com/training-web-a
If you think getting a 16% return from something that's currently returning only 6% is impossible, that it defies the laws of physics or nature, then I think it's time to expand your mind a bit. Because when we say it's the best, I don't mean that it's a little bit better than other investments or even a lot better. I mean it's orders of magnitude better, hundreds of times better. We spent the $20 on a bucket of white paint and a brush. Now, to explain how we turn that into $2 million, I'm going to have to set the scenario.
Mark J Kohler:If you're not already sold on just how incredible real estate can be, now we're going to do it. This is exciting. Welcome, Rudy, to another episode of the Main Street Business podcast interview series, where I get an opportunity to interview an influencer making a difference in our lives in Main Street America. So I'm glad to welcome Dolph de Roos, PhD, a globally recognized real estate investor and author mentor. Renowned for multimillion dollar deals, real estate ventures, he mentors real estate agents, national leaders worldwide, has written and published eleven best selling property books. That's seven more than me, including the New York Times bestseller Real Estate riches, which we have on the counter here today. And welcome.
Dolf De Roos:Mark. Thank you so much. It's my absolute pleasure to be here and thank you for all the accolades.
Mark J Kohler:Well, it's exciting that you're here in person. Truth be told, everybody, were trying to coordinate a remote interview twice, and then all of a sudden we found out, holy heck, we live 20 minutes away from each other. Get over here. So, it's just been a wonderful opportunity to meet. Now, today's topic is about, obviously, real estate. And what we want to unpack is, first of all, the mindset of creativity. Dolph has taught on this for years, and he has some important insights on how we need to cultivate that mindset as a realtor with some fun examples. I love the topic myself. I think creativity is absolutely critical. And then his four attributes, and I'm going to get to guess what these four are. These four attributes that make real estate the best performing investment compared to all others. And so that's our topics today. I know it's going to impact all of you in an important way. I'm excited.
Dolf De Roos:I'm excited, too, Mark. And just to be clear, when we say it's the best, I don't mean that it's a little bit better than other investments or even a lot better. I mean, it's orders of magnitude better, hundreds of times better, and I hope to prove the case today with you.
Mark J Kohler:Okay, I'm your judge and jury here. As a lawyer, I think I can make that call.
Dolf De Roos:Okay, I'm up for it.
Mark J Kohler:All right. Now, with creativity, let me just pose the question in this manner, I feel so many real estate investors get tunnel vision. They go into a deal, and this is the way we're going to make the deal happen. And if it deviates at all, it has to turn from a fix and flip to a rental, or just this basic example, or the development has to get condominiumized, who knows? Any sort of deviation, they may call it a failure, or it's a crisis, or it's a disaster. And all because they could have been more creative from the outset and maybe even seen a better result with better creative approach. That's just going to be my life experience. You have so much more on this. First, your perspective on the importance of creativity. For real estate investors, it is crucial.
Dolf De Roos:Mark, for the following reason. Most people, when they look at any deal, be it real estate or they're buying a second hand car or whatever, they look at what I call the snapshot of how things are right now in this moment. So they'll see a house, it's run down, it's got a horrible garden, it doesn't have a garage, it doesn't have a carport it. And they think, well, this property is not very good. It's only going to return me 6%, but that's better than the last one I saw, which was only 5.7. I think I'll buy it. And they hope to get that 6% return on it. What I encourage people to do, and what I train them to do, is not to see a snapshot of how things are right now, but to get a video or a movie going forward into the future. In other words, what could we do with this property to make the returns? Eight or ten or 16%. And if you think getting a 16% return from something that's currently returning only 6% is impossible, that it defies the laws of physics or nature, then I think it's time to expand your mind a bit. Because something I've learned, Mike, that's very interesting. If you have a belief, and you passionately believe in that belief, you will find evidence to support your theory that belief is true. Right? So you'll get stuck in it. And that's why people who believe that there are no good deals out there, they won't find any, and they'll think that their belief that there are no good deals out there is validated, whereas mavericks like you and I who know there are great deals out there. In fact, one of my signature sayings is that the deal of the decade comes along about once a week. If you believe that, you'll find them. But if you believe that, by definition, I'm using the word decade, the deal of the decade comes along, by definition, once every ten years. And you hear that, mark, or I found a good deal last week, you'll say, well, that's this decade's deal gone. We may as well give up looking for the next ten years, and you'll find evidence to support that. You're not looking. You won't find them. So we've got to create our own deals.
Mark J Kohler:I love it. So, first point, 16% is better than 6%.
Dolf De Roos:Absolutely.
Mark J Kohler:So far, check. I think you're doing okay.
Dolf De Roos:Okay.
Mark J Kohler:Now, on that creativity, I know that you've spoke about this a lot, too, is that when we look at a property, and I think you have a list of 101 things that people just need to think outside the box, and that's just another fundamental creative approach.
Dolf De Roos:Well, I kept on saying that there are 101 things you can do to a property to massively increase its value. And people would come back and say, well, maybe two or three, but not 101. So I'm always one to put my money where my mouth is. I sat down and wrote a book called literally 101 ways to massively increase the value of your real estate without spending much money. I think it's the longest title on Amazon. And here's a question I have for you, Mark. Do you think it was easy or difficult to come up with 101 ways?
Mark J Kohler:Well, I would say on the face of it would be hard. I could probably dig up 30 while we're sitting here. Maybe.
Dolf De Roos:It was extraordinarily difficult. Okay, good. It was difficult to limit it to 100. No, seriously, because there are so many more. And when I read my own book now, I think, well, gosh, some of these ideas are a bit dated, but there are new ones every day. We've got new technology that opens up new possibilities of what you can do to massively increase the value. And I know some people might be thinking, well, don't just talk about them. Give us an example.
Mark J Kohler:You know what I love is your example of a light bulb. I remember you telling that story.
Dolf De Roos:That's the cheapest one. I've got the cheapest idea of how to massively increase the value of a house is to take the light bulb in a room. Let's say it's a 40 watt light bulb, and I'm talking incandescent watts. Nowadays, everyone's got led lights, right? But they always have the incandescent equivalent or whatever. So if you've got the equivalent of a 40 watt light bulb, that means the room is going to be a little bit dim, not very well lit, so it's going to look dark and dingy and not very big and not very bright. If you take out that 40 watt light bulb and replace it with 150 watt bulb, or the equivalent of that, then suddenly the room is going to look bigger, brighter, cleaner and fresher, and it will rent faster, and it will rent for a slightly higher value and it will sell faster. If you're silly enough to sell it, we can talk about why selling is silly a bit later on. And the great thing about this idea, especially if you're really cheap, is that 40 bulb bulb light that you took out, the 40 watt bulb light, it still works. You can still use it somewhere else, right? So that's a minor point, but that's the cheapest idea. The most expensive one we've got in this book is how we turn $20 into 2 million overnight. And from experience, mark, when people first hear this, they say, well, you had us up till now, but now you've lost us. That is just impossible. And again, if your belief is that's impossible, you won't even listen to a potential explanation. If you want me to share it of how that was done, and you'll say, no, it's impossible, he must have been telling a big fib.
Mark J Kohler:Well, you've got to share it now. And I know you're saving something. I'm going to plant the seed now, I know you've got an event on the 15th. Is it 14th or 15th?
Dolf De Roos:14 March.
Mark J Kohler:14 March coming up. So many of you that are catching this before that date, you've got to take note because I know you're going to have some reveals at that event, but you'll reveal this one now. 2 million.
Dolf De Roos:Yeah, 20 to 2 million. And to get the slate clean, from the start, we spent the $20 on a bucket of white paint and a brush. Now, to explain how we turn that into $2 million, I'm going to have to set the scenario. Firstly, it happened in Jakarta. Jakarta is the capital city of Indonesia, the most populous nation in the southern hemisphere, the most populous muslim country in the world. It is also known Jakarta as being the most congested city on this planet.
Mark J Kohler:And can I say, it is the coolest named city in the world.
Dolf De Roos:Isn't it great?
Mark J Kohler:Denver. That's not fun.
Dolf De Roos:Jakarta. Yeah, Jakarta. Yeah. No, I love it there. I love it there, actually. And so you measure how far it is to get somewhere not in terms of kilometers or if you're still in imperial units and miles, but in terms of hours, how many hours does it get to take to get to your destination? So you mentioned before it took 20 minutes to get, I think that's by bicycle, but carrots, about five minutes. So we're really close to each other, but we always measure it in terms of miles.
Mark J Kohler:Here.
Dolf De Roos: Right there it's hours. So if you have to go to a meeting and it's 3 hours away, you've got to put that into your schedule. So we had a client with a commercial building in the CBD, the central business district of Jakarta. And the drive to the airport, Sukhai Nohata International Airport, should be 45 minutes with no traffic. But because of the congestion and the traffic, it could take 4 hours. It could take 6 hours. That means that a director of a company in this building, if he's got a 09:00 a.m. Board meeting, he or his assistant cannot book a 02:00 p.m. Flight because he may not make it. So what did we do with this bucket of white paint? I went onto the roof of this building.
Dolf De Roos:It had a flat concrete roof, conveniently, and I painted a big white circle on this roof, and then the letter h in the middle, and we turned it into a helipad. Now, full disclosure, you need to get civil aviation authority, which is the Indonesian equivalent of the FAA, approval for this. And you need to get letters of consent from other people and promises of helicopter rides and all that sort of thing. But we got all of that. And now the ride to the airport was 15 minutes, and about half of the tenants knew that they'd probably avail themselves of this, so they thought the increase in rent was worthwhile. The other half who admitted that they'd probably never use it, they still didn't mind the increase in rent because they had bragging rights. Oh, our building has a heliport. We can get to anywhere in 15 minutes. So the rental, when you convert it from indonesian rupees per square meter to us dollars per foot, was about $14 a foot. And with the helipad it went to $16 a foot. So a $2 per year increase in rent times 100,000. Area of the, we got a $200,000 lift in rent on that building, which had a cap rate of 10%. You divide the rent by the cap rate, it went up by 2 million. Bingo. Not quite overnight, but almost. And the thing about it, Mike, coming back to what you said about creativity, the interesting thing, it wasn't the kind of paint we used or how white the white was. It was the creativity of coming up with the idea. Now, can you apply this to every building on this planet? Of course not. Those 101 ideas I talk about, maybe in your building or in your house, you can only deploy eleven of them. But I'll tell you what, deploying those eleven ideas might be all you need to go from 6% to 16%.
Mark J Kohler:You know what I'm going to do at my rental? I think this weekend I'm going to put in a drone pad. Just a drone could land there. It could work. I love it. That is so awesome. What a neat story. I just love it. Again, the fact you could say Jakarta about ten times is even cooler because it is the coolest word. All right, now that leads into, if you're not already sold on just how incredible real estate can be, now we're going to do it. This is exciting. So the four attributes that you've spoken all over the world, globally, on these four attributes that make real estate better than any other type of investment. I want to guess the first one, if I could.
Dolf De Roos:Okay.
Mark J Kohler:Can I guess?
Dolf De Roos:Sure. Cash flow. I love the fact that real estate is cash flow. Oh, my God. Without cash flow, I wouldn't be interested investing in real estate. But that is not even any one of.
Mark J Kohler:I thought you were going to say, bless your heart, mark, but. Okay, so what's number one?
Dolf De Roos:So I'm going to talk about making an investment of an amount of money. It doesn't matter how much. It could be $10. It could be 10 million. But for ease of conversation, let's talk about 100,000 cash. Let's imagine you've got 100,000 cash, and you want to deploy that in both real estate or in the alternative, which I'll generically group together as paper products. I'm talking about the stock market. Maybe it's futures, which is a derivative of the stock market, or options, which is another derivative, or certificates of deposit or treasury bills or anything. I call them paper products. Let's say you've got $100,000 cash. Here's question number one. With $100,000 cash, mark, how many dollars worth of stock can you buy?
Mark J Kohler:$100 of worth of stock?
Dolf De Roos:Yeah. Exactly. Well, 100,000. Yes, you're right.
Mark J Kohler:We were at 100,000. See, I even got it wrong.
Dolf De Roos:No, your mind was in the right place. And our words just sometimes don't catch up. I have that a lot. So I know some people say, well, hang on a minute. I know someone who buys stock on margin. Well, that's available to a very few select people who are very rich. And if ever the share value or stock value goes down, they do what's called a margin call. For most investors to have $100,000 stock portfolio, they need $100,000 cash. Nothing right or wrong about that. Now, let's imagine we have that same $100,000 and we want to invest in real estate. Could we buy a property worth 100,000? The answer is yes. But we could also buy a property worth 200,000 with a 50% mortgage, or a property worth 300,000 with a 67% mortgage. Or you can buy a half million dollar property with a $400,000 mortgage. We're at an 80% mortgage. That's the limit banks will go to without requiring PMI insurance. They will go higher if you're willing to pay PMI. Right. Personal mortgage. So we could buy a million dollar property with a $900,000 mortgage and 100,000 cash. In case you think that's ridiculous, in the Netherlands in the 1970s, they were offering mortgages of 125%. Here in the States, the highest mortgage rate we've ever offered is 120%. You might say, why on earth would a bank offer more than it costs? Well, the idea is that when you buy a house, it's not suitable for you to live and you want to make a few modifications, remodel the kitchen. So they give you extra money to make the remodel. They know they'll be covered because the equity will go up. All right, so a 90% mortgage is easy. So now we've got a million dollar property with that same 100,000 cash. What are the implications of that? Imagine everything goes up by 10%. Your stock will have gone from 100,000 to 110, you've made 10%, your property will have gone from 1 million to 1.1 million. You've made 100,000 profit or 100% on your equity. Now, some smart people will say, well, that's all good and well, Dolph, but what if everything goes down? Well, if your stock goes down by 10%, it goes from 100 to 90, you've lost 10,000 and your property will go from 1 million to 900,000. You've wiped out your equity. You haven't lost your investment, you can hang on to it. It's still generating rental income enough to cover the mortgage. And over time, history up till now has shown that real estate doesn't go up linearly. And what the mathematicians are called, monotonically, it goes up and fits and starts. And in general, every peak is higher than every previous peak and every trough is higher than every previous trough. So if you hang on long enough, I'm not worried about it going down. So you've got leverage. You can buy more dollars worth of real estate that is going up in the market than you can anything else.
Mark J Kohler:Leverage.
Dolf De Roos:Leverage. Love it.
Mark J Kohler:Leverage.
Dolf De Roos:And banks advertise all over the world on all kinds of advertising media, thinking of buying a house. Come and see us. We'll lend you the money this week only we've got no application fee. This week only we've just this or whatever.
Mark J Kohler:No. And I love it when you learn the real value and the power of calculating your ROI or cap rates, all the different terminology used, and you take what you really invested, and that power of leverage, it just exponentially can increase.
Dolf De Roos:That rate of return. And here's an interesting little side fact, Mike. You mentioned before I did a phd in electrical engineering. That's not the easiest topic around. That was eight years of hard slog, 11 hours a day, seven days a week. And yet everything I learned at engineering school has been made redundant by new technology. You think about it. Whereas everything you would have learned about real estate, and there are only about twelve words you need to know. You need to know the difference between collateral and equity. And if you don't know the difference, you're at a disadvantage to those investors who do. But once you've learned those twelve words, and that's all there is, there's nothing more to learn. And it doesn't change with time. It doesn't get replaced with new technology. It's so easy. But people are more interested in watching a soap on tv than in reading a good book on real estate.
Mark J Kohler:I love it. Okay, number two.
Dolf De Roos:Yes.
Mark J Kohler:Tax strategies.
Dolf De Roos:Come on, work with me here they are. Terrific advantages. Like you can get depreciation on real estate.
Mark J Kohler:Yes.
Dolf De Roos:Like you depreciate a car or a computer, because it really does go down in value. You can depreciate real estate on the basis that it's going down, but the government's not so silly to think that it goes down. They know it. Why do they let you depreciate real estate even though it goes up? Because they know they're not good at providing accommodation for the needy, so they give us an incentive to do it. But that's not one of the four.
Mark J Kohler:Okay, number two, then, is.
Dolf De Roos:Number two is. Let's assume you've bought your hundred thousand dollars worth of stock. The question now becomes, the day you buy it, what is that portfolio worth?
Mark J Kohler:The same. You paid for it, of course, because.
Dolf De Roos:It'S regulated by computers, right? We pay the same price for a share of Hulk Packard or whatever it is, whether you're in Helsinki or Sydney, Australia or Tahiti. So there's one price for it all over the world. And when you spend your 100,000, the moment you acquire it's worth 100,000. Okay, let's compare that with that real estate. We said we bought a property for a contract price of a million dollars using 100,000 cash and a $900,000 mortgage. The day you buy that property, what is it worth?
Mark J Kohler:A million again? Didn't you?
Dolf De Roos:No. It could well be worth a million dollars. But is it not possible, mark, that some fast talking agent or seller talked you into buying a property for a million dollars? It was only worth $750,000, and you bought a lemon. You paid too much for it.
Mark J Kohler:It's happened to me.
Dolf De Roos:It happens every day of the week. Not to you, hopefully, but it happens to someone every day of the week. But by the same token, is it not possible that property that you just contracted to buy for a million dollars is worth one and a half million dollars, and you just bought a bargain? Of course it is. That happens every day of the week, too. That's why you need to be wide awake in this game, to make sure you buy the ones worth 1.5 million, not three quarters. And you might say, why would anyone in his or her right mind sell a property worth 1.5 million for a mere $1 million? It's a good question.
Mark J Kohler:God, it's a good reason.
Dolf De Roos:Again, 101 reason. Divorce, sexual. Let's just sell this stupid property quickly and be done with each other. Or they don't know the value. They were bequeathed it. Four kids got it. One wants to keep it and rent it out. One wants to sell it. One wants to live in it. And the fourth sibling is hiking in Nepal, and they can't reach him. And the lawyer representing him says, listen, let's just sell the darn thing quickly. So they engage a real estate agent, a rookie. They didn't know he was a rookie. And the rookie doesn't know what it's worth. He's just started this game and he thinks, well, let's make a quick sale. Let's put it on the market for a million and see how we go. And it sells within two days because you bought it. And little did they know it was worth 1.5. So it happens. So you can buy way below true value. I would put it in writing that every property I've bought has been bought at below market value. Now, I have to look at an awful lot of properties to do that, but that's another story, how you look at a lot of properties.
Mark J Kohler:I love it. I love it. Okay. Hidden value. Can I call it that? Number two, hidden value.
Dolf De Roos:Yes. It's worth more than the purchase.
Mark J Kohler:Okay.
Dolf De Roos:Yeah. Hidden value. I like it.
Mark J Kohler:Build in value. Hidden value.
Dolf De Roos:Okay.
Mark J Kohler:Because you found it. Because you're smart. Okay. Number three.
Dolf De Roos:Yes.
Mark J Kohler:Okay. I'm not doing too well. I'm going to try passive income.
Dolf De Roos:Why are you laughing?
Mark J Kohler:That's a good one.
Dolf De Roos:It is a great one. But you also get passive income from options and treasury bills and all that sort of thing. So we've touched on number three before because here's the question. When you buy your $100,000 worth of stock, and it's worth, as we've agreed, exactly $100,000 the moment you buy it, what can you personally do to increase its value?
Mark J Kohler:Well, if I buy Walmart stock, I could shop at Walmart.
Dolf De Roos:That's right. I'll give you a few more ideas. You can write letters of encouragement to the directors of those companies, hoping that they'll have a good day and therefore perform better in your. You can hope, you can pray. There's a lot you can do, but in essence, there's little you can do that will material affect the price. Now let's imagine we've bought this property for a contracted price of $1 million, but it's actually worth one and a half million. What can we do to that property to increase its value even further? Is what you're. Yes.
Mark J Kohler:Okay. Change the light bulbs.
Dolf De Roos:Change the light bulbs. Give me one of the other extreme.
Mark J Kohler:Make a helipad.
Dolf De Roos:Put a helipad on the roof. That's right. And you can use any of the 99.
Mark J Kohler:I do have a good one because I've learned this one before, too, is you want to reduce the operating costs, like maybe reaching out to the garbage company. And could we reduce the cost of landscaping services? Could we reduce the cost of maintenance in some way? Because if I can reduce those costs, then I increase the margin or the profit, which increases my ROI. And with my cap rate, the value. So I guess the answer is I could reduce costs.
Dolf De Roos:Yes. Is this your crack at number four?
Mark J Kohler:Well, no, we're on number three. Number three, we're adding value.
Dolf De Roos:Absolutely, yeah, you can add value. So you might reduce costs by having inefficient cooling systems. You might have swamp coolers, for instance, and you replace them with air conditioning systems. Reverse cycle paint. Oh, absolutely. There's a new paint they just come out with at Purdue University. It's a very thin coating, but they say it's the equivalent of adding a ten kilowatt ac plant to a building, because, yes, it reflects nearly all the uv light coming in, so no heat gets in, but it's transparent to infrared light on the inside. It just goes straight out. I can't wait for this technology to become an engineer.
Mark J Kohler:You'd notice that.
Dolf De Roos:Well, but I think most people should. I mean, there are so many things we can do. Say, yes, I'm going to paint all my buildings with that.
Mark J Kohler:So number three is you can actually increase the value of your investment where I can't if it's paper.
Dolf De Roos:Correct. You can personally do things. Some might cost a lot, but they give a huge benefit. Some cost a little, like a light bulb change. Wow.
Mark J Kohler:I love it. Okay, number four.
Dolf De Roos:Oh, I give up.
Mark J Kohler:I don't want to embarrass myself. And bat zero.
Dolf De Roos:No, it's all good fun and death. Number four, I think, is the most exciting one, and it's an eye opener. And when people hear this, they're going to kick themselves. Don't kick too hard. But here it goes. You've bought your $100,000 worth of stock. It's worth $100,000 when you bought it, and there was nothing you could do during your ownership time to increase its value. But let's say through sheer luck or market forces or whatever, it's doubled in value from 100 to 200,000. What must you now do to get some of the benefit of this increase in value?
Mark J Kohler:This leans on taxes.
Dolf De Roos:I can feel it coming. Absolutely.
Mark J Kohler:That was one of mine. But it wasn't number. Oh, you thought it was number two. Okay, so what can I do? So I have paper that's doubled in value. Yes, sell it, I guess. Sell it.
Dolf De Roos:Nothing. You sell it. That's the option you've got. And when you sell, you pay capital gains tax. Right. And you pay commissions to the brokers who do the selling and all that sort of thing. So let's compare that with our real estate. We use the same 100,000 cash to buy a property for a million dollars. Right. So when it doubles it goes from 1 million to 2 million. Right.
Mark J Kohler:Okay.
Dolf De Roos:No. That's wrong. I tricked you. You see? Because we paid a million for it. But it was worth one and a half million already. We bought a bargain. So when it doubles in value it goes from one and a half to 3 million.
Mark J Kohler:Gosh. You're probably pretty good at parties.
Dolf De Roos:I spoiled them. So it's worth 3 million. Same question. What must we do with this property to get some of the to benefit from that increase in value?
Mark J Kohler:Now I see it.
Dolf De Roos:You know where I'm headed.
Mark J Kohler:Yeah. I can borrow.
Dolf De Roos:You do not have to sell. You just refinance. Let's say we go to the bank and say Mr. Bank manager. Remember when I told you that when I bought this property I thought it was worth one and a half million? And you said no. We are conservative banks. We're going to take the lesser of the purchase price or the appraisal. And the purchase price was 1 million. So we're just appraising it at 1.
Mark J Kohler:Million and we're only going to give you 900 grand.
Dolf De Roos:Right. Well now I've got an appraisal from your bank approved appraiser appraising this building at 3 million. Will you please give me another 90% mortgage? And what are they going to say? They're in the game of lending money? Yeah.
Mark J Kohler:They're like what? Yeah. There's fees and interest we're in.
Dolf De Roos:Sure. So you get 2.7 million from the bank. We have to use 900,000 of that 2.7 million to pay the original mortgage off. Let's say we're on interest only. So we've now got 1.8 million left. Here's a question for you. Is it earned income? Is it salaried income? No. So there's no income tax on it. Was it the sale of something?
Mark J Kohler:No.
Dolf De Roos:There was no selling commission. No sales tax. Nothing. It is tax free money. Free for you to do with as you please. Wow. And if we use that as a 10% deposit on another building we can now buy an $18 million building plus our original. We're now at 21 million. That's going up with whatever the growth rate of real estate is now. Full disclosure. We now have to pay interest on a $1.8 million loan. Well 2.7 actually now that I think about it. Because we use 900,000. But we've got an asset worth 3 million that's generating rental income that if it doesn't cover the 2.7 million mortgage payment. We shouldn't refinance. That's right. So here's where people are going to kick themselves. I always say real estate is so good, Mark, because when people retire, for the most part, their biggest asset is not the stamp collection that Uncle Tom told them one day would be worth a fortune. It's not the classic car that they said, if you renovate this one day, it's going to be worth enough to retire on. It is singularly their home. And people will say, oh, my gosh, if only we'd bought another one when we just got married. Or, remember, honey, when the house next door was dated and it was available for sale and no one, when we kept on saying, I hope someone buys it, at least the grass will get cut, we should have bought it. So here's the thing. When you upgrade your home and people do, we stay in homes for an average of six years in this country, when you relocate, instead of selling your home and then using the profit as a down payment on your next one and going up and up, if you do that, no matter how often you do it, you'll never better off, because with inflation, whatever home you want to transfer into has gone up by the same amount as well. What if you keep each of them? Just refinance, use the money from the refinance, it's tax free as a down payment. And then rent the first one out. Give you an example. I don't have that book with you. It's actually on the 101 ways book. I've got a photo of a house my parents bought. I know, a long time ago. They're ancient. I'm ancient. They bought it for $5,000 and ten years later, they sold it for 32,000. And the significance of that is that profit. And they were ecstatic. They couldn't believe it. They'd never seen so much money. That profit was more money than my dad had earned in ten years of having a job. Wow. And yet, when you go online today and see what that house is worth, it's 875,000. They could have had an extra 800,000 plus dollars just by hanging onto it, plus another 40 or however many years of rental income. And so we don't realize that. So you don't need to sell real estate when it goes up.
Mark J Kohler:So number four, strip out equity. Unless you're in the state of New York doing it in New York, and the attorney general of New York doesn't like the way you go refinance your properties, then you get a fine of 550,000,000. Well, Dolph, these are awesome, these four strategies. I just love it. I've loved real estate. And I have one last question for you.
Dolf De Roos:Sure.
Mark J Kohler:What is your favorite real estate investment you've made? And it can't be the helipad.
Dolf De Roos:That one's pretty cool.
Mark J Kohler:That one's pretty awesome.
Dolf De Roos:But no. What's your favorite? My favorite? It's not even a big deal. I can talk about big deals. But I was reading, in the time before the Internet became prevalent, we used to read the classified ads and newspapers, and I looked for real estate for sale, and there was this little building that said commercial premise. It was a fish shop, a wet fish supply shop. So they had raw fish for sale there.
Mark J Kohler:Where was it at? Where was it at?
Dolf De Roos:This was down in New Zealand.
Mark J Kohler:Okay.
Dolf De Roos:Yeah, that's where I grew up. Partially, anyway. Well, grew up. I'm still in the process of growing up, so that's all relative. But anyway. And it said, commercial building for sale, $59,000, 17% return. And I thought, there's a typer here. This can't be right. And I didn't see the ad till Sunday night. So I called the agent, as we did in those days, and he said. And I said, oh, I suppose it's gone by now. And he said, no, as a matter of fact, you're the first person to have bothered to call. And I thought, because it sounded too.
Mark J Kohler:Good to be true.
Dolf De Roos:And that's the thing. If you don't do a deal, because it sounds too good to be true. Sure, you might avoid a lot of scams, but you've got to investigate them. You'll soon find out if it's a scam or not because you'll also miss out on a lot of great deals. So I investigate everything.
Mark J Kohler:Okay.
Dolf De Roos:Check it out. So anyway, went and looked at it the next day, and I said, it just seems crazy to me. Why is it this cheap? And he said, well, the owner is in his late 80s. He's in ill health, and he just wants to clear everything off his plate before he goes. So it's the first time I bought a property without submitting an offer. Usually I try it on, put in an offers for something less. If they go for 5000 less, that's the quickest $5,000 you'll make that day. Right. And always, by the way, ask, when you buy a property, would the seller consider leaving some money in it, all in the form of a vendor carryback or seller finance? And nine times out of ten, they're going to say, no, are you crazy? But every once in a while, they say, sure, we'll do it. So that's a win. So, anyway, I paid full price for it. It was rented out for every day. I mean, I never had a day of skip rent. Wow. It's just these deals are there, and that was commercial. Meaning, if you are thinking of getting in commercial, don't delude yourself that you need a $40 million bank account to buy a big glass and concrete tower somewhere that is commercial. I've never bought one of those because I can't get the yields above three or 4%. I go for Odball things. Odball things where I've got a twist where I can do something to it.
Mark J Kohler:Wow.
Dolf De Roos:You and I find a thrift store down the road, say, leased out at $12 a foot, and we're worried about buying it because they've already indicated that they may not want to renew their lease. And most people go away. And what we would do is we'd hit up all the local coffee chains right there, Starbucks and Gloria Bean and Seattle's best, and then the lesser known ones, and say, hey, how do you like this look? This is the foot traffic. This is the vehicle traffic going by. And we sign someone up at $24 a foot. When you double the rental on a commercial property, unlike residential, you double the value. So now we've got double the value. The bank says we're only going to lend you 50%. Well, guess what? 50% of double is the purchase price. So we're in it for no money. Why would you not do that?
Mark J Kohler:Wow.
Dolf De Roos:So it has all these possibilities. You're limited only by your creativity.
Mark J Kohler:Do you still have the fish store?
Dolf De Roos:An earthquake took it down.
Mark J Kohler:Oh, no.
Dolf De Roos:But my payout from the insurance company was four times what I paid for it.
Mark J Kohler:And you had rent all that time?
Dolf De Roos:Rent all that time.
Mark J Kohler:And fresh fish.
Dolf De Roos:And I got a great supply of fresh fish.
Mark J Kohler:Dolph, it is such a pleasure to interview you. You're just delightful and fun, and I could just listen to you all day.
Dolf De Roos:Well, it's mutual. Your reputation proceeds. It's my absolute honor to be here. Now, I mean that. Well, thank you.
Mark J Kohler:Now, everybody, I want to get back to it. March 14, you're doing a little free. Tell us about it.
Dolf De Roos:It's a live event on the. It's free. By the way, we're not after anything. Just where I'm going to share how you can find. What do you do to actually find these properties, how do you do it differently from just going on to the MLS? Right. How do you find them then? How do you vet them? How do you figure out, is this a good deal or not? Because if you don't know how to do that, you'll look at a property and say, well, what now? And then? If you determine that it's a great deal, how do you take it down? What do you do to finance it? Where do you get the financing from? So we're going to share how to do that because in my mind it's so mindlessly simple.
Mark J Kohler:Mark, again, you've done it so many times and you want to share it with people, right?
Dolf De Roos:It's a matter of giving back. It's so simple to do.
Mark J Kohler:Well, I'm going to be there. I really am. Now, details down below. There'll be a link. They can sign up.
Dolf De Roos:Yep. The way to sign up for that directly is just go to dolphlive.com. So dolf, my first name live. And if you happen to be listening to this afterwards, I've got a pretty rare name, it's Dolph Darus. You can find me on the Internet with any variation of that, dolphtorus.com, and it will get you to all the things we do.
Mark J Kohler:Oh, I love it. Well, love your books, love the creativity and just your energy. Appreciate it and we'll have to have you back. I appreciate it.
Dolf De Roos:I look forward to it. Thank you so much for the opportunity. And no, it's been a lot of fun. Thank you. Thank you.