Main Street Business

#616 The Big Short & Rod Khleif's Story: How to Rebound

• Mark J Kohler and Mat Sorensen

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0:00 | 36:01

What would you do if you lost $50 million and thousands of properties overnight? In this powerful episode of the Main Street Business Podcast, real estate investor Rod Khleif shares his raw story of the 2008 crash, how he lost over 2,000 properties, and the mindset that helped him rebuild an even bigger portfolio through multifamily investing. This conversation breaks down hard-earned lessons from failure, the truth about single-family vs. multifamily investing, and why mindset is the real key to long-term success.


We also dive into today’s real estate market — rising interest rates, distressed multifamily deals, and why massive opportunity is emerging right now. If you’re an investor, entrepreneur, or just someone trying to bounce back from setbacks, this episode will challenge how you think about risk, failure, and growth.


Be sure to like, subscribe, and drop a comment with your biggest takeaway — and check out our other episodes on real estate, wealth building, and financial strategy!


CHAPTERS:

0:00 Teaser

0:35 Rod’s Real Estate Journey and the 2008 Crash

5:11 Losing Everything and Mindset Shift

8:11 How to Rebuild After Failure

14:23 Focus, Fear, and Taking Action

17:35 Why Single-Family Houses Failed vs Multifamily

20:28 Scaling Bigger Deals Faster

22:01 Playing to Strengths in Business

24:32 Today’s Multifamily Market Crisis

25:18 Opportunity in Distressed Assets

30:54 “Renter Nation” and Housing Trends

32:08 New Opportunities Like Senior Housing

33:28 How Value Creation Drives Wealth

34:45 Power of Environment and Network


Resources:

Interview a Main Street Tax Pro that Speaks like Mark

Meet with a Real Lawyer on Zoom

Self-Direct Your IRA or 401k - Buy a Business or Real Estate with Your Retirement Account (Directed IRA)

Keep Your

The $50M Lesson From 800 Houses

SPEAKER_00

In 2008 and nine, I lost fifty million dollars conservatively. I had 800 houses. It was the houses that pulled me down. I was only at a 30% loan to value. I still crashed and burned. What killed me was the maintenance. What took an hour at one of my apartment complexes took all day at one of my 800 houses.

SPEAKER_01

It takes as much time to deal with the house remodel than it does a commercial building. You could either do a 10-figure deal or a five-figure deal in the same amount of time. Yeah, what's easier? Buying 20 houses or buying a 20-unit?

SPEAKER_00

I mean, you know the answer.

SPEAKER_01

I'm so excited for today's guest, Rod Cleef, the author of the book How to Create Lifetime Cash Flow Through Multifamily Properties, and host of the podcast Lifetime Cash Flow Through Real Estate Investing. Now, I love his story, and I'm so excited to get into it with him because he went through the big short, the real estate crash of 2008, all of that mess. He lost over 2,000 properties, individually owned properties by him, not through private equity, but through his hard work and labor, and lost them all. Then he rebounded. And that story of the rebound is what I'm really interested in. And he's such a dynamic individual with great stories and of so much powerful information when it comes to real estate investing. So excited to have him here with us today. Well, Rod, thanks for joining me. I'm really excited about this conversation. We've had a chance to interact uh already and uh previously I was able to be on your podcast. We're gonna make sure the link for everybody down below into Rod's uh podcast, you get y'all have access to it. It's amazing. And why I was excited, Rod, if I may, about this interview is I'm a little older. I have so many young people that don't even know what the 2008 crash was about. And I had a law firm, multiple multiple properties of real estate that I had, and a little commercial residential. It was we were busy the first year after the crash because we were serving real estate investors that were licking their wins. But I ended up losing a lot of money, a lot of real estate myself. It was a difficult time. And I don't think a lot of people realize uh what that experience was like if you were in the real estate industry. And so I want to set the stage for your story, which is even more difficult.

SPEAKER_00

It's happening again right now in the multifamily space. You know, there's it's a meltdown right now. A lot of let's it's so it's kind of deja vu-ish for me, except, you know, back then it was single family and now it's multifamily. But yeah, I'd love to love to explain what happened if uh if you'd like here.

SPEAKER_01

Yeah, yeah. No, of course, and I know you got started younger in real estate and made that run-up. So you're you're a living like 2005 through seven. I mean, it was like banana from heaven, right?

SPEAKER_00

So so so I I'm a Dutch immigrant, immigrated to this country when I was six years old. My brother Albert, my mother's Voncha, uh, ended up in Denver, Colorado, where I lived for 30 years. And when we got there, we didn't have much. In fact, I literally we ate expired food. Believe it or not, there was an expired food store, drank powdered milk with our cereal in the morning because it was cheaper than real milk, and trust me, it sounds better than it is. And I wore hand-me-down clothes from the Goodwill and the Salvation Army all the way through junior high school until I finally got disgusted when I was 14 because I was tall and got a job flipping burgers because you had to be 15 to work at Burger King. But, you know, I'm sure you got listeners had it harder than I did, but you know, I'll tell you, I knew I wanted more, and luckily my mom had an incredible work ethic. So she babysat a you know, a whole bunch of kids. We'd always had a house full of kids, and she was a bit of an entrepreneur with her babysitting money. And for first real estate acquisition, she did real estate on the stock market. First real estate was the house right across the street, bought it when I was 14 for about 30 grand. When I was 17, she told me she'd made$20,000 in her sleep. And back now, this is 1977 when 20 grand was a lot of money, okay? And I'm like, what? You made 20 grand, you didn't do anything? Screw college. I'm getting into real estate. So I went and got into real estate. I actually got my real estate broker's license right when I turned 18, which you could do back then with education. They got smart. Now you need some experience before you can have your own office and be a broker. But I was smart enough to go work for another broker. And, you know, and I was still living at home. And my first year, I made about eight grand in real estate. My second year, maybe 10 grand. But my third year, I made over$100,000, which back in 1980 was some pretty freaking good money. And so what happened between your two and your three to cause me to 10x my income? Well, what happened is I met a guy that taught me about the importance of mindset and psychology. How really 80 to 90% of your success in anything is your mindset and psychology. Only 10 to 20% is the technical stuff we talk about on our podcasts. And so, you know, fast forward to today, I've owned over 2,000 houses that I've rented long term. I own thousands of apartments now. I'm actually buying senior housing now as well. In 2006, like you said, my net worth went up 17 million dollars while I slept. And you you might say, Wow, I said wow, and I got a head so big I could barely fit it through a door. I thought I was a real estate guy. And you know that happens to God, God will give me this smack down.

SPEAKER_01

Yeah. It was a it was a funny time. Like, I mean, if you could walk and chew gum, you were making money in real estate, you know.

SPEAKER_00

And and that's how it's been the last few years as well, up until very recently in multifamily, too. I mean, in the big commercial stuff, because I mean, if you fogged a mirror back then you could borrow money. Now, you know, uh we had really good lending the last few years as well. But yeah, so I I in 2008 and nine, I I got my ass handed to me. I lost$50 million conservatively. And so, you know, what I'm known for talking about on my podcast and at my events and boot camps and stuff is really the mindset it took to have$50 million to lose. And then the mindset, maybe more importantly, to recover from that to the success that I'm blessed to have today. So happy to drill down on some of that if you like or take this anywhere you want, brother.

SPEAKER_01

Yeah, no, no, and I'd like to be you and I lived it, so we tend to gloss over it. But for those that are haven't really unpacked what happened then, you've got to watch the movie The Big Short.

SPEAKER_00

Oh, okay.

SPEAKER_01

The big short really summarized. Doesn't it? Isn't it crazy show?

SPEAKER_00

It's a perfect example of of what happened. And you know, it's interesting uh as you mentioned that out of the ashes of losing everything, I actually formed a litigation support company. And and I had, I was, I formed law firms in five states. Uh, can't own a law firm, but I did all the back office support um and hired the attorneys and the paralegals and everything else, and we were helping people save their homes from foreclosure. We'd stop the foreclosure with litigation. This is right up your alley, that's why I'm bringing it up. I don't normally talk about this, but we'd stop the foreclosure with litigation. Then I had 60 employees doing loan modifications. So we saved lots of houses, thousands of houses. Um I hated it because nobody's happy when they're losing their house. But one of the things that that they talk about in the big short is uh we saw so much freaking fraud from these big national banks. I mean, it was staggering, man. You know, these big banks that you know very well were committing fraud. It was crazy.

SPEAKER_01

So it was. And and see, I was a practicing lawyer in the real estate industry back then and tax doing our had our tax firm and everything. And when the crash hit, I took a bath with several properties uh we owned, but we were busy at the law firm. We actually hired five new lawyers because we had loan mods, we had the um PPP debt forgiveness, everybody was in crisis mode. And then it hit us personally in uh 2010 because that's when all the work, everybody's like, okay, see you later, Mark. And then we're like, okay, not only did my real estate go down by half in value, now I've got no all these attorneys we hired for and the process is cleaned up. And so it was just a really hard two or three years. And and people, I want to say this, anybody out there, it's yeah, it sounds like your grandma and grandpa walked up and down, you know, a pillar for school and whatever. But you're gonna go through things. You're gonna go through things where you're gonna lose a business, lose a marriage, lose a piece of real estate, and it's hard to come back from. How did you do it?

Goals Decisions And Taking Action

SPEAKER_00

Sure. Well, I tell you something, and you know, I'll honestly, um with AI right now, a lot of people are gonna be losing jobs. And so this is really relevant uh for this conversation. Now, what I did back then is the same thing you will do to get started, same thing I did to get started. First thing you do is you reassociate with your goals, and that's what I did. If you come to one of my boot camps, the first thing we do is goal setting on steroids. Because how the hell do you get anything if you don't know what it is? You gotta know what it is you want and why you want it. And so, you know, that's that's the first thing is you've got to create that burning desire or hunger so that you push through fears and limiting beliefs and you actually take action and do it. You know, I'll brag for a second. You know, I've got a coaching program. My students are called my warriors, and they now own, I believe, around 300,000 units under my tutelage, something I'm very proud of. But it's because they actually do it, right? It's because it's it's primarily mindset. So the first thing is goals, and then the next thing is now hold on.

SPEAKER_01

Before you go on to number two, can I just hash on number one? I bump into a lot of people, and uh my wife's uh of course I bump. I work with a lot of people that have this problem. And my wife is a life coach and she's helping them. And the problem is they'll say, Well, I don't know what I want. I've got to find that perfect thing. I'm in this analysis paralysis situation. What do you do in step one when people are trying to figure out what they even want?

SPEAKER_00

Well, I I would this is self-serving. I'd say, get your ass to my goal setting workshop. I do it for free. Um, but but it it, you know, we play music, we get you juiced, and and we go through every aspect of your life, the stuff you want, the the the uh the places you want to go, the houses you want, the cars, the jewelry, the the things you want to learn, the things you want to do, the uh the people you want to help. Because we'll do more for others and we'll do I would take people through this entire process. If you if you're interested, even if you're not interested in real estate, which is what I teach, go to my link tree. It's rodslinks.com. Rodzlinks.com. It's at the bottom. There's the guys you can download. I'm not gonna try to sell you anything. Here's the problem, uh Mark. People spend more time planning a freaking birthday party than they do designing their lives. And doing your goals is designing your life. So that's the first piece. And that's the first thing I did when I lost everything was reassociate with what I wanted. Because, you know, I was hiding under a rock, my little eyeball poking out, feeling sorry for myself. And finally I'm like, okay, screw it, get your ass up. And and I so I reassociated with what I wanted, and then you got to make a decision, okay? And I'm gonna tell you, um, you know, I'm not talking about dipping your toe in the water or one foot in, one foot out. I mean you make a decision, it's done. And then you're like a train on a track. And the, you know, the Latin root for the word decision means to cut off. And a great analogy is if you're gonna attack the island, right? You burn your ships because you're taking their damn ships home. That's a decision. It's done. Okay. And then, you know, the next piece, you got to take the first step. You know, and you talk about these analytical people, and they're some of the most successful people in my business that buy commercial real estate, multifamily, and other, you know, we teach every other asset class, but those are some of the most successful, but they're also the hardest to get to make a move. They got to check off every box before they do it. And that first step can be the hardest. You know, Dr. Martin Luther King said, you take that first step in faith, the next step will be revealed, right? And but uh, you know, I will tell you a lot of people fear failure as it relates to that first step. I'm gonna tell you, fear regret. You know, don't fear failure. I've built 20, I'll this is not bragging because most of these have failed. I've built 29 businesses so far in my career, several worth a lot of money. Most, however, I call them seminars when they fail, by the way. That was a$50 million seminar. Most of these businesses I started were spectacular, flaming seminars, okay? We fail our way to success. But I don't fear failure, fear regret. Because, you know, there was this nurse in Australia that took care of patients who were about to die, a hospice nurse. And her name was Bronnie Ware, and she wrote a book about this because she asked him a question, Mark. And the question was, do you have any regrets? And her book is a bestseller, something like the five regrets of dying or something. Number one regret was not living the life I could have lived, living someone else's life, not doing what I know I'm capable of. Fear that. Don't fear failure, right?

SPEAKER_01

No, yeah, no. And when people say, Well, I've got to, that's this first step to just take action. I think we've been brainwashed that we've got to be on purpose. Like, what is your calling? What do you just you know what? Maybe your calling is just entrepreneurship. Your calling is real estate. Take any action at all, like this first step of faith, the next thing will open up to you.

SPEAKER_00

But if you're not a problem, yeah, but you're a target. That's it. And and action mitigates fear. You know, I uh so many people have a story that holds them back, you know, uh, or a limiting belief. When I immigrated this country, I gotta show you something just because it's funny. When I immigrated this country, I got thrown into school and I found out what bullies were for the first time. I was six, I didn't speak English, okay? So I got my ass kicked occasionally. Then my mom sent me to school in these wooden shoes, these are the actual wooden shoes, and these leather shorts the Germans wear for Oktoberfest. I mean, crack cocaine for the freaking bullies. So I got my ass kicked again. You know, bullies would chase me home. She'd chase them off with a fly swatter, and that next day, you know, ass beaten. And I came up with this belief system that I wasn't good enough, right? And a lot of people have these limiting beliefs. I'm not old enough, I'm not young enough, I'm not smart enough. Another one was mine, I'm not analytical enough. And there's a reason the acronym for belief systems is BS, because 99% of them are BS, but we believe they're real. And that's why, that's why those goals are so important, because that's how you push through that stuff. Because these things they have no basis in fact. You know, I used to be afraid to raise my hand in front of a class of 10 kids, and you know, now I speak in front of thousands of people a year, literally, typically in flip-flops, you know, and so, you know, but but a lot of people have these. So if you have one of these, if you're listening, drag it out into the daylight, look at it with your adult rational mind, recognize that it's BS, and you'll push through it. But you got to do it consciously, think about it. And that's how you handle that.

SPEAKER_01

So step one was set the goal, step two, start taking action. What step two, take it?

Focus Identity And Crushing Limiting Beliefs

SPEAKER_00

Step two, make a decision. Step three, take the first step. Actually, take freaking action. That's step three. And it doesn't have to totally be sequential. Some of this stuff happens simultaneously, but I will mention something else, okay? So I I'm blessed, I'm blessed to host the largest real estate podcast really in the world at this point for commercial real estate. And and I and I'm I'm at what, maybe 30 million downloads. I listen to two podcasts, and this is where I'm saying all this, is I listen to two podcasts. I listen to Joe Rogan, I listen to Tim Ferris. I try to keep both sides of the aisle. And this conversation relates to focus. So wherever focus goes, energy flows. And whatever you focus on gets larger, both positive or negative, right? And and the reason I brought up the podcast is on Tim Ferris's show, he interviews the best of the best in the world at their respective positions. Uh best athletes like Swimmer, Michael Phelps, NFL NBA players, uh billionaires like Ray Dalio, heads of the biggest companies like Zuckerberg, um, and actors like Hugh Norton, uh Hugh Jackman, uh Ed Norton, yeah, uh all the best. And he deconstructs their success. It's a fascinating conversation. And I started to hear a pattern, Mark, and it's around focus. They almost all meditate, right? And that enhances your focus. And see, the thing of it is a lot of people focus on what they don't want, but they get what they focus on. You know, I get people call me and say, hey, how do I got out of student loan debt? I'm like, wrong freaking question. How do you make so much money that debt's irrelevant? Is the question you should be asking. You know, they asked Mother Teresa if she was anti-war. She said, No, I'm pro-peace. I mean, you get it. And so, you know, it's it's um focus is power. Uh, and and so, you know, I made sure that I focus, I didn't focus on loss, I focused on what I wanted again. Because, you know, it'd be real easy to focus on loss. In fact, a lot of people, this is really important uh if you're gonna start a business or even own a business, that you don't allow it to be your identity. Let it be a your vehicle. Because if the vehicle fails, you're not a failure. If it's your identity, then you're a failure. I mean, people kill themselves over identity, okay? And you know, that crypto guy in his Lamborghini shooting himself, I don't know, six, eight months ago. You know, that that was his identity. And so it's really important that you don't do that, especially, you know, if you're in AI and I mean, sorry, if your job's gonna get taken away by AI, and there's a lot of jobs that are on the line here, and it's it's very sobering. Um, you're gonna start a business, start something, don't let it be your identity. Totally.

SPEAKER_01

And my most successful product right now is uh the the business owner situation room. It's four phases uh of business that a business goes through. And I teach that same concept that a business lifecycle or journey is different than your journey. Or your journey, you could be old with a brand new startup, you could be young in an exit. And so you've got to just distinguish between what your business idea is and multiple businesses could be in different stages. But you as a person, you you know where you're at and you what know what you need to learn, and the business is across the table from you. It's not who you are. And I love the way you said that.

Why Single Family Collapsed His Portfolio

SPEAKER_00

It's not your identity. Because it it literally, uh, you know, people jump out of buildings when they lose everything if it's their identity. And so, you know, the next piece. How did you get back into real estate then? How did you get back into real estate? I yeah, yeah. So so what I discovered when I lost everything, I had 800 houses along the Gulf Coast of Florida here, all up and down. And I had several apartment complexes, and it was the houses that pulled me down. Okay, and I was all and I get hate all this all the time. Oh, no one should own 800 houses, and they're oh yeah, whatever, no one should be in their mom, me and their mom's basement and whining either. But anyway, but I had 800 houses. I was only at a 30% loan to value. Okay, I owed it, only owed 30 cents on the dollar, and I still crashed and burned. And here's why a couple of reasons. One, I wasn't, I didn't logistically do it properly. Number one, I had houses two hours north of me, two hours south of me, everywhere in between. So logistics were an issue. Uh, Florida has no state income tax, so higher property taxes, higher um insurance, although DeSantis just got it through the house that we may eliminate property taxes here, but they were higher, which impacts cash flow, right? I had properties in wind and flood zones, higher, higher, higher insurance, cash flow. What killed me was the maintenance. These were mostly C-class houses. You know, this A, B, C, and D A's brand new, D's the hood. These were C, older properties, tougher demographic, a lot of maintenance. And so if I sent someone to one of my apartment complexes, we could stockpile parts, you know, plumbing parts, door locks, appliance parts, window locks, whatever. And they're in and out in an hour. Well, if they had to go to one of my houses that's an hour, hour and a half away, they got to go see what's wrong because every house is different. Then they got to find a home depot or a lows where we had an account. And I don't know about you, Mark, but when Rod tries to fix something, he ends up going to Home Depot more than once. And so what took an hour at one of my apartment complexes took all day at one of my 800 houses. So they never really cash flowed well. And then the other thing is I didn't pay attention to tenant demographics back then. So if they had a good job or they had good income, good credit, and paid a full month's rent, minimum as deposit, I let them rent. Well, what I discovered after the fact was I had a ton of contractors, plumbers, electricians, drywallers, painters, roofers, and they just didn't have any freaking work. So it literally crashed. And you know what else is crazy is my portfolio actually went upside down. It dropped more a little bit more than 70% in value here in this area of Florida. I mean, it was that's how bad the crash was. But but what the reason this is a long answer to your question, but the reason that I got back into real estate is my multifamily did just fine. It pulled back about 11%. I could have easily survived if in my brilliance I hadn't cross-collateralized packages of houses with my apartment complexes to save 50 basis points or you know, half percent interest. And so I thought I was brilliant, and and so I lost everything. Um but if I hadn't done that, I still have those apartment complexes. And so, you know, when I got back in, I'm like, you know what, I'm gonna do commercial real estate and ended up buying thousands of apartments and and uh yeah, but uh long answer to your question.

SPEAKER_01

No, no, I thank you. And so you came back to commercial, which a lot of times I had a I had a friend that was a big time investor and mentor of mine when I was younger, and he was like, Mark, and I your point exactly, he goes, Mark, it takes as much time to deal with a house remodel than it does a commercial building. You just have more.

SPEAKER_00

Or to buy it or to freaking buy it. I'm I'm trying to help my son buy his house right now. It's been a bigger pain in the ass than buying a$20 million apartment complex. I mean, it's crazy. I I'm literally doing it right now. I was just complaining to one of my partners about it. Like this house thing has been a freaking nightmare. So, yeah, no, it could be easier to buy it because here's the reason why, those of you listening, is the lender is looking at the property's ability to serve. I'm exaggerating a little bit. I'm just gonna be honest. Of course, I am, but I'm I'm being a little dramatic. But but the point is the lender's looking at the the property's ability to service the debt, not your own debt to income, and proving that debt to income with my son has just been a massive pain in the butt. But no, it goes it goes to your earlier point that it's all about vision.

SPEAKER_01

If if you're gonna put in X amount of hours, you could relatively closely, you could either do a 10-figure deal or a five-figure deal in the same amount of time. It's just about what you believe you can do.

SPEAKER_00

Yeah, what's easier? Buying 20 houses or buying a 20-unit? I mean, you know the answer, and and but it scares people. And I, you know, I've had some of the largest operators on the planet on my couch here in my studio, thousands and thousands of units. And I typically try to answer the, ask them this question because I want the my audience to hear the answer from them. And I say, you know, what would you tell 18 year olds self something if they, you know, if you knew what you knew now? Because I know what the answer is going to be. It's always go bigger faster, okay? But but I want them to hear it from them instead of me. But you know, the next piece in this, in this, in this getting started and recovering from from a crash is playing. To your strengths. Okay. And that's what I had to do. I had to play to my strengths. I'm great in real estate. I tried to do the litigation support thing and I hated it, honestly, although it was a very profitable company. I hated it. So I got back to, and that's the other answer to your question, why I got back into real estate, because that's where I'm strong at. And so play to your strengths, guys. Don't try to build your weaknesses. Your strengths are your greatest assets. In my business, there's lots of hats you can wear, you know, uh in the commercial multifamily business or commercial real estate business. You could be the one that finds the deals. If you're analytical, you could be the one that underwrites them. You could be the investor relations person raising money. You raise money for these things. You know, you could, if you've got asset management experience or project management experience or construction experience, you could do the asset management. Lots of hats you can wear. Play to your strengths, hire a line or partner for your weaknesses. And I will tell you, when you do that, it's a match made in heaven. Okay. And you know, and and when you do that, you're going to be passionate about it. Okay. And passions require to influence people. And, you know, when you're playing to your strengths, you're in the zone, right? You're doing what you love. You never never work another day in your life. And, you know, and success requires your ability to influence. And that passion, of course, it increases that ability. And it makes the speed bumps much less painful and you know, breeds creativity and innovation. It really minimizes or even eliminates fear when you're doing what you love, right? Yeah. So that's another big piece.

SPEAKER_01

Well, let's talk about commercial real estate specifically, if we could. And I'd like to get your your thoughts on this. Like the commercial real estate was your savior after 2008, 2010, and coming back, and you built your foundation around that. Then along comes COVID, and people work from home. Offices are now, well, we can reduce our workforce. We don't need as much commercial space. Has that had that is?

SPEAKER_00

I wasn't in office, thank God. I wasn't in office. I will tell you something. I did a study, it's been about six months ago. The average occupancy in office at that time in the major cities was 60 or 70 percent. I don't remember off the top of my head. I mean, it was staggering how bad it was. Let's let's just put it that way. Okay. Office is, I just uh, you know, X away from office. But, you know, I was in multifamily. And luckily, you know, uh other asset classes didn't get governmental help. We got hundreds of thousands of dollars in rent relief money for our residents because people have to have a place to live. And so, you know, multifamily really won out in that regard. Even you know, shopping centers didn't get they they got the the uh help for their employees, but but not like we got. We had literally had people's rent paid for them, which was really helpful in COVID. But what's what's hurting multifamily and other commercial asset classes right now is this interest rate thing. I mean, you know, back in uh three years ago, you could get 3% debt, but if you got adjustable rate debt, you're in trouble because it went up to 9%. And that's you know, my my SEC attorney out of out of Texas, like about a month ago, he called me, he goes, dude, I got six apartment complex foreclosures in one day, clients. Okay. That's so it it's a it's kind of a meltdown. Now, with crisis comes the opportunity, right? I've got a, you know, we we call them assets. I've got a 200 unit asset in San Antonio on a lake. Right next door, there's a 300 unit that's sold in 22 for 43 million. Okay. Bank now owns it, it's down to 28. I'm not even interested unless it gets to 24. 43 million to 24 million. That's what's out there right now. There's incredible opportunity. So, you know, you know, it's Warren Buffett's famous quote, right? Be fearful when others are greedy. It's been real greedy the last few years, but the flip side of that is be greedy when others are fearful, and there's a lot of fear right now. So it's a lot of opportunity.

SPEAKER_01

So, and and and I like your distinction for you and me that are in real estate every day. Commercial, when you say I'm in commercial, we're of course talking about commercial lending to buy multi-unit. But you're not talking about larger building space, you're more into multi-unit.

SPEAKER_00

I I I've got students that are developing a lot of stuff, but me, I haven't done it yet. Um uh I've done some single-family development a lifetime ago, but but no, I I when I say commercial, I'm talking about larger multifamily, five units or larger, okay. And but other asset classes, shopping centers and retail and mixed use and mobile home parks and self-storage and senior housing. I'm in senior housing too, buying assisted living facilities right now. Love that asset class, by the way. So yeah. Okay.

SPEAKER_01

Now, so as you're out, you know, and and this talking about this dip, this crisis right now, I I don't I don't think people have gotten used to the new normal. You and I are old enough that a 3% interest rate was not sustainable. It's a joke. It's not the new norm. The new the norm was when you and I, if you got a house, a home loan for seven, eight percent, you were thrilled.

SPEAKER_00

Yeah, you were thrilled. Let me let me tell you something. When I started in real estate, when I was 18, the interest rate was 18%. Yep. And I still bought some real estate. I still got the numbers to work because I was, you know, it was the two back then it was the 2% rule. I'd buy a house for 20 grand. If I could rent it out for$400, I was home home run. And I literally put houses on credit cards. I remember doing backflips when it hit 7%. But I can tell you that the assets that that that for me that are doing great are the ones where I locked in at 3.2% or three three ish, which is fantastic, you know, when it's locked up. But well, of course.

SPEAKER_01

And and so the problem is not interest rates are the problem. People overbought when they had good interest rates, and now we're back to the new the norm. And basically, oh Trump's got to do something and bring down interest rates. Holy crap, interest rates are fantastic.

SPEAKER_00

Yeah, just make the numbers. That's exact that's exactly right. And the other piece of this, of course, is um the economy has caused um rents to flatline and even decrease in some markets, and expenses have gone through the roof. I mean, payroll has has skyrocketed. I, you know, I used to pay maintenance supervisors 20 bucks an hour. I've got some at 40 bucks an hour right now. So I used to teach a 50% expense ratio. I teach a 60% expense ratio now. And and so that makes it more challenging.

Private Equity Bridge Debt And Foreclosures

SPEAKER_01

Yeah. Now I I love this insight. You're in the trenches seeing these massive moves and shifts in the market. Next question.

unknown

Yeah.

SPEAKER_01

Private equity. This new lot that private equity cannot buy multifamily. Um, should it pass? Should it not? Has private equity screwed up the multifamily market?

SPEAKER_00

I don't know. They've screwed up the multifamily. They they've provided a lot of bridge debt. And bridge debt is that adjustable, very onerous debt that's that's derailed a lot of really well-known, sophisticated professional operators, guys with jets, and it's derailed some of them. So, you know, uh uh private equity has played a role. Now, now there's a big lot of hate around private equity buying single family houses. Okay. And they they they lump me in with that. That I get hate online because I talk about the 800 houses I lost, and then I get so much hate, you know, that thinking that I'm private equity. I just did it one by one on my own, you know. But but um, but yeah, I think it's it's it's definitely had a negative, um, it's definitely got a negative connotation, and I think it's had a negative effect on single family homes for sure. Um as it relates to multi-fam, uh commercial, yeah. I I I I I will tell you, I've purchased, I've purchased assets. I remember one in Lexington, I bought 180 units that the seller didn't want to sell, and his private equity was making him sell. He was pissed off because he because some of that private equity is very onerous. They they have a lot of controls in place. And I just remember that. That triggered that memory. But uh yeah.

SPEAKER_01

Yeah. So um what's your prediction of this multifamily market with all these things?

SPEAKER_00

Oh, it's it's coming back. It's coming back. I mean, because there's gonna be incredible opportunity. In fact, I just had an attorney fly out to meet with me and trying to help me be the mouthpiece for putting together a fund to buy some of these distressed assets. And we're we're kind of on the fence waiting because I think it's gonna get better. I mean, there's a huge wall of debt right now, a lot of operators that have debt that's come due. Um, and you know, the the lending phrase has been extend and pretend. You know, they'll do uh workouts of some sort, loan modifications, deferrals, things like that. And at some point, you know, because they don't want it to hit their balance sheet, but they're starting to foreclose now. And uh I, you know, and if if someone's got debt that comes due, see, just so if you're listening, it's not the same as when you buy a house and you've got a 30-year fixed loan. When commercial real estate, you're gonna have a term, basically meaning a balloon payment in five, seven, ten years. And when that happens, you've got two options you can sell or you can refinance. Well, sales are down about 90%, and refinancing, you have to meet debt service coverage requirements. You have to be able to be they they want to see that the property can pay the debt, and in many cases it can't at today's interest rates. So these properties are going south. So yeah.

Renter Nation Senior Housing And Inflation Math

SPEAKER_01

It's brutal. And yeah, and I guess another major factor I want to get your insight on is the supply and demand of home ownership. I mean, we are generating more tenants for multifamily, aren't we? I mean, because we're becoming a renter nation.

SPEAKER_00

Yeah, we're becoming a renter nation. People can't afford, I mean, I'm helping my boy buy a house, but I'm putting up the 25 grand to buy his house, you know, and a lot of people don't have that kind of liquidity. And so, you know, it it's it's really become difficult. I've helped my daughter buy her triplex, very proud of her. Finally, my kids, I teach this stuff and they're finally buying real estate. But anyway, so so uh um, you know, it's very difficult. So we become a renter nation. Now, I know Trump's plan to push through the 40 or 50 year uh amortization on loans. They've had that in Europe for decades, you know. 50-year loans have been there for decades. And so I think it's a good thing. I honestly do. Um, but you know, that whole uh, you know, white picket fence home ownership thing is is kind of out the window. And and the other piece of this is you know, millennials and Gen X, uh, they like to be mobile as well. And so, you know, that's a component they they like they like the whole renter lifestyle. So, but uh yeah, we'll see how it all shakes out. You know, this is one of the reasons I'm also doing senior housing because I mean there's 10,000 people a day turning 65 in this country. I'm one of them. And and you know, so I I think there's just an incredible opportunity there.

SPEAKER_01

No, it's it's crazy. I and I think the the urban areas, the cost of living is so high. When I was living in Southern California, it was more advantageous for me to rent a beautiful home and then go invest in rental property two states over. And the rent from there was paying for it everything I needed to do.

SPEAKER_00

I I mean, I'm I'm in a condo in Miami because I'm single now, and it's it's typically 12 grand a month. Luckily, I'm paying a little less than that, but I mean it's ridiculous. I mean, it's freaking that's a two-bedroom freaking place. It's ridiculous. So, you know, uh these rents uh have have just skyrocketed. I remember one year, I don't forgot if it was 21 or 22, rents in this Tampa MSA metropolitan statistical area, this Tampa area went up 30% in one year. You're paying a thousand, it went to 1,300. You're paying 2,000, it went to 2,600. I mean, it's insane. And so, you know, it had to it had to stabilize. And, you know, and and and but you know, here's the thing though. The beautiful thing about real estate is yes, inflation is a bad thing. And inflation causes everything to go up, but it also causes rents to go up. And if you if you buy a piece of real estate and you lock in the debt, uh your rents and the value of commercial real estate is based on a multiple of the net income, and it's an exponential multiple, you know. So if your rent goes up, your value goes up exponentially. And I'll give you, I'll give you a really cool example of this. So I've got a 296-unit asset in San Antonio where we painted numbers on the parking spaces, okay? And we said, hey, you want your own parking space? It's 25 bucks a month. We'll put a reserve sign up. We had 100 people take it. At that time, that property was trading at a 4% capitalization rate. Okay, it's gone up since then, but but 4% capitalization rate. That was a$750,000 instant increase in value. True story. And somebody's gonna be like, oh, dude, you can't do math. Well, here's the math. Okay, you you you take that, you take that$25 times$100, it's$2,500, then you annualize it, and that's$30,000, divide that by 4% and see what you get. It's$750,000. And we didn't even pay for it. We had a towing company pay for it for the tow contract. So that's what's possible in commercial real estate. Anything you can do to increase that net net income is just exponential. So it's a it's very, very cool.

Simple Value Add That Prints Value

SPEAKER_01

It's so that's the game that you learn when you start doing uh multifamily. Well, Rod, you've did your insights are incredible. I just love um this opportunity to chat. And tell me uh again about the your mindset workshop and helping people come out of the dark and terrible experiences and finding.

SPEAKER_00

Yeah, no, listen, the bottom line is you know, who you hang out with is who you become. You know, your peer group is so freaking important. I remember when I was losing everything, I was in Tony Robbins Platinum Partnership, and I was around people that were killing it in that crash. Okay. They had thought, I don't know, I don't know how, but they were. And they're like, get up, you puss, 50 million, schmillion, go make something happen. You gotta get around people that are doing this, right? So that's super important. And uh, and so if you're interested in what I do, um my my link tree again is Rod's Links. I do a bootcamp every month or so. It's 50 bucks,$47. So there's no excuse. If you it's two days, if you're serious about wanting to learn this, go to Rod's Links and go to my bootcamp. I promise you'll be glad you came. And and and and again, it's be it people, and that's the reason the boot camp and my students have been so successful, my podcasts have been so successful, is because I talk, I I teach mindset, because that really is the bulk of this. I mean, my by far, it's it's actually doing it, it's not it's not getting sucked into analysis paralysis. You actually take action, and that's how things happen. So there you have it. Love it.

SPEAKER_01

Yeah, Rod, thanks so much, and I really appreciate you finding time to be with us. I hope to be with you again soon and um wish you the best. Exciting. Thanks, brothers. Good to see you again. Good to see you. Thanks.

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Mark J. Kohler

Host
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Mat Sorensen

Host

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