Digital Social Hour - The $50M Crash: How I Lost It All & Bounced Back | Rod Khleif DSH #548

Starting point is 00:00:00 There was this nurse in Australia. She was a hospice nurse. And so she took care of patients when they were about to die. The question was, do you have any regrets? And she even wrote a book about something like the five regrets of dying. The number one regret was not living the life I could have lived. If you feel fear of failure, fear regret much more. Wherever you guys are watching this show, I would truly appreciate it if you follow or subscribe.

Starting point is 00:00:24 It helps a lot with the algorithm. It helps us get bigger and better guests, and it helps us grow the team. Truly means a lot. Thank you guys for supporting, and here's the episode. All right. Got a crazy story for you guys today. I got Rod Cleef here. We're going to talk about how you lost $50 million and made it all back. Yes, sir. And more. Yes, sir. I love that, man. Thanks for coming on.

Starting point is 00:00:44 Oh, thanks for having me, Sean. This will be a lot of fun. Yeah. So the 08 crash, man, sir. And more. Yes, sir. I love that, man. Thanks for coming on. Oh, thanks for having me, Sean. This will be a lot of fun. Yeah. So the 08 crash, man, it got you good. It got me good. Yeah. So let me back up a little bit if you don't mind. So I'm a Dutch immigrant, wooden shoes, windmills. Immigrated when I was about six with my brother, Albert, my mother's Vantja. Ended up in Denver, Colorado. And we didn't have much growing up. I remember we shopped at an expired food store, believe it or not. Expired? Yeah, they had a food store that was expired food, and we drank powdered milk with our cereal in the morning because it was cheaper than real milk. And I wore clothes from the Goodwill and the Salvation Army literally all the way through junior high

Starting point is 00:01:18 school until I finally got disgusted and lied about my age when I was 14 because I was tall and got a job at Burger King so I could buy my own clothes. And I'm sure you've got listeners who had it harder than I did, but I knew I wanted more. And luckily, my mom had an incredible work ethic. So she babysat kids so we'd have enough money to eat. And with her babysitting money, she was a bit of an entrepreneur. She invested in the stock market successfully in IPOs, but she also invested in real estate. And her first real estate acquisition was a house right across the street from us. When I was about 14, she paid about 30 grand. And then when I was 17, she told me she'd made $20,000 in her sleep that had gone up in value 20,000. I'm like, what? You made 20 grand? You didn't do anything? I'm like, screw college. I'm getting into real estate. So I

Starting point is 00:01:57 went and got into real estate, still living at home. My first year, I made maybe eight grand. My second year, maybe 10 grand. But my third year, I made over $100,000, which back in 1980 was pretty decent change. So what happened between year two and year three that caused me to 10x my income? Well, what happened was I met a guy that taught me about the importance of mindset and psychology and how really 80% to 90% of your success in anything really is your mindset. And fast forward to today, I've owned over 2,000 houses that I've rented long term. In 2006, my net worth went up $17 million while I slept. Whoa. Yeah. And I said, whoa, too. And I thought I was a freaking real estate god. My head got so big, I could barely fit it

Starting point is 00:02:36 through the door. And when that happens, God will give you a nice little kick in the you-know-whats. Well, that was 2008. Yeah, I lost $50 million conservatively, really, in 2008. So what I'm known for talking about on my podcast and at my events and things like that is the mindset it took to have to lose that in the first place. But probably more importantly, the mindset I had to pick up to recover from losing everything, because I thought I was set for life. And I will tell you, as I was mentioning before we started recording, I think the proverbial s**t's about to hit the fan. I really do. And I brought some headlines here because I wanted to make sure I didn't misquote. But if you don't

Starting point is 00:03:14 mind, I'll rattle off a couple of things here because they're pretty sobering. So Jamie Dimon, head of JPMorgan Chase, arguably the largest bank in the world, only banks that are larger are Chinese state-owned banks. And he said that the U.S. is driving towards a cliff as debt snowballs. He said, brace yourself for an economic hurricane. That's a direct quote. A gentleman last name Rubini, who was Clinton's chief economist, who predicted the 2008-9 crash, says, warns of a coming greater depression. This is in Fortune magazine. The head of city, the city bank's chief economist, Andrew Hollinshorst, told Bloomberg that the U.S. is headed for a hard landing. Even Trump, love him or hate him, said the U.S. economy could reach levels of the Great Depression.

Starting point is 00:03:57 Here's the thing. What's crazy is right now we are paying a trillion a year on our national debt. And if you want to be blown away, go on Google and Google the difference between a million, a billion, and a trillion. It'll blow your mind how much a trillion really is. And right now we are paying, our national debt is going up a trillion every hundred days. Yeah. I mean, it's insane. And so you know what else is crazy is um in up till 2000 up until 2020 20 of the world of the u.s currency had been printed in the last four years we have printed an additional 80 of the currency so 80 of all the currency right now has been printed basically in the last four years oh my gosh so we're wondering why we have inflation, right? And so literally 80% of every dollar that's ever existed got printed in the last four years.

Starting point is 00:04:52 It's crazy. Yeah. And so I got some other quick headlines, just some sobering headlines. This was actually about eight months ago. 20 million households in the US are behind in their utility bills. This was in CNN. Elon Musk, pretty smart guy, said they're lying to you. The crash is going to be much bigger than they say. So I'm not trying to scare everybody here. I'm frankly getting excited, okay? I got my butt handed to me in 2008 and 2009. I was hiding under a rock. I got crushed by that wave. But I was around people that killed it in that crash because they, they, they were aware that it was possibly coming. They prepared for it. And so that's what, you know, I'm kind of shouting from the rooftops because,

Starting point is 00:05:32 you know, if there was ever a time to get up to speed on a side hustle, you know, maybe you're listening and, and you've, you've got a W2 job. You're not thrilled with it. You know, you and your family deserve more, pick a freaking vehicle right now, because I believe everything's going on sale. I wish there were two of me. One would be buying business. I think there'd be a great opportunity to buy businesses from baby boomers that are reaching retirement age, and they won't be able to sell if there's some economic uncertainty. So there's a great opportunity there. Real estate, every asset class of real estate, I teach people how to buy apartment complexes. I own thousands of apartments now myself. And I'll brag for a minute, my students now own upwards of 200,000

Starting point is 00:06:10 units that we know of. Holy crap. Yeah. And I've only been teaching a little over five years. So I'm super proud of that. But the message here is decide how you're going to capitalize on what's coming. And don't be fearful. And I'd love to spend a little time talking about the psychological components of this, because I think they're relevant. Because there'll be a lot of fear. There's always a lot of fear. We're already seeing it. It's much harder. In my world, we raise money for our deals. These multifamily properties, these 100, 200, 300 unit complexes take money, but it doesn't have to be your own money. And I teach people in my boot camps how to raise that money.

Starting point is 00:06:49 But, you know, it's harder now because there's a lot of trepidation with, you know, investors that, you know, there's a lot of money out there that's scared of the stock market. And I will tell you, if you've got money in the stock market, be very careful right now because that's the first thing to go when the switch gets flipped here. And I remember in 2008, man, there was a huge crash in the stock market first. Lehman went down and other banks went down. And I anticipate we're going to see something like that. And the reason that I'm very excited, even if it's not as bad as I think it could be, multifamily, my world, there's a lot of debt that's adjustable rate. And so these guys bought these things at 3% and now they're 8% interest, which on a multimillion dollar property is a big deal.

Starting point is 00:07:37 And so I'll give you an example. On a very small deal, we were looking at in San Antonio, this guy had adjustable rate and his reserve payment went from 8,000 a month to 80,000 a month. Holy crap. Yeah. And I mean, people can't afford that. Because of the three to 8%? Yeah, because the bank was projecting how much he'd need to have to refinance the property. This is very common. So there's already been some foreclosures. I mean, we just bought a 200 unit asset, call them assets, this apartment complex in San Antonio for about a 40% discount. So we're already starting to see the deals coming in. So again, if you're listening, pick a freaking vehicle, learn it right now. Because if you're trying to learn it in the thick of it, it's going to be too late. You need to build relationships. You need

Starting point is 00:08:20 to get connected. If it's multifamily, I've got a virtual bootcamp coming up here, July 13th and 14th. I don't sell anything there. And if you use the code Sean, you can come for 97 bucks. Amazing. We'll link it below. Yeah. Yeah. It's 16 hours of training for, tell me your excuse. Okay. It's 97 freaking dollars. So if you're serious about wanting to learn real estate, it's kind of a no-brainer because I don't sell anything there. But regardless, there are other asset classes in real estate that I think will do great. I wouldn't do office. Office is dying right now. Yeah, but there's other commercial assets like self-storage, there's mobile home parks, there's some industrial that's doing really well, even retail. I mean, there's a whole Amazon dynamic, but even retail is doing pretty well. But you know what I'd love to do? So again, pick a vehicle, get up to speed on it. If it's multifamily, come see me. But if it's something else, go learn it

Starting point is 00:09:14 and get up to speed. But what I'd love to talk about more, and the reason I've got a podcast as well, I've been at it quite a bit longer than you have, and you're killing it with this one. Holy crap. But I'm at about 22 million downloads online. Yeah, for my little niche in multifamily, I'm pretty proud of it. But the reason it's been so successful is I spend so much time talking about mindset and psychology. And so I'd love to talk about the mindset it takes to actually take action with something, which is the same thing I had to do when I lost everything. It's pretty much the same sequence of events. So if you mind, if I chat about that, because you were probably at rock bottom after that. Yeah. Yeah.

Starting point is 00:09:53 No, I mean, I thought I was set for life, you know, and, and I had 800 houses, I had multiple apartment complexes and I was only at a 30% loan to value, only owed 30 cents on the dollar and I still crashed. Yeah. So the first thing I did when I lost everything, and the first thing you need to do if you're thinking about getting into something is you got to create a hunger. You got to create a burning desire because everybody's got fear and everybody's got limiting beliefs. And I'll talk about that more in a minute, or maybe you're comfortable, you know, in the comfort zone is a nice warm place and we all know nothing freaking grows there. Right. So you've got to actually push yourself out of comfort to go do something and do this. And so, you know, the first thing you do is you do your goals, okay? And if you come to my bootcamp, the one I was just mentioning, that's

Starting point is 00:10:33 the first thing we do, goal setting on steroids. Because how do you get anything if you don't know what it is, right? You've got to have some clarity on what it is you want. And more importantly, you've got to know why you want it. And so, by the way, if you're not interested in multifamily, in my link tree, I've got my goal-setting workshop. I'm not going to try to sell you anything. It's RodsLinks.com. If you're driving, just text LINKS to 72345. And in that link tree at the bottom is my goal-setting workshop. There's a guide you can download.

Starting point is 00:11:00 You know, Sean, people spend more time planning a freaking Christmas or birthday party than they do designing their lives, okay? This is designing your life. So if you're listening and you haven't done your goals, you know, grab your spouse. Do it with them. If you've got a kid that's over 10 years old, have them sit and do it. Do it as a family. You know, set them up to start looking towards what they want. And, yeah, so, again, it's there regardless of whether you're interested in real estate or not.

Starting point is 00:11:24 But it starts with goals because you've got to create that hunger to actually take action. Otherwise, you're just excited about stuff, but you never move forward. Right. So the next piece after, and that's what I had to do back then. I had to realign with my goals because it was very easy for me to focus on losing everything I had, which is what happened. Instead, I had to pivot and focus on what I wanted again. So I reassociated with my goals. Then the next piece is you got to make a decision. And I don't mean dip your toe in the water. I don't mean one foot in, one foot out. I mean, it's freaking done when you make a decision.

Starting point is 00:11:57 In fact, a great, well, the Latin root for the word decision is to cut off. If you're going to attack the island, you burn your ships because you're taking their damn ships home. That's a decision. It's done, right? And sometimes that's the hardest decision of your life, to actually take action on improving your life. And for me back then when I lost everything, it was just a decision to stop my pity party and focus on what I was going to do to pull myself out, which I did. And so you make that decision, and then you've got to take the first step. And Dr. Martin Luther King said,

Starting point is 00:12:32 you take that first step in faith, and the next step will be revealed. Lao Tzu said, the journey of a thousand miles begins with a single step. And the problem is a lot of people fear failure. In fact, in my world, in the buying apartment complexes, a lot of people are analytical. They're very successful. I've got a lot of super successful students. They're very analytical. But if you're analytical, I love you, and you know who you are, and you know how you have to check off every single box before you make a move.

Starting point is 00:13:00 Well, you can't do that here. You actually got to take action. You know, there's this great analogy for this. You know, you can drive all the way across the United States at night with your headlight seeing 50 feet in front of you, and you know you'll make it. You know other people have made it before you, but you may have some obstacles. It's the same way with really any move you're going to make to improve your life. And certainly in multifamily real estate, the same thing. And so, thing I will tell you is if you feel fear of failure, fear regret much more. There was this nurse in Australia. She was a hospice nurse. And so she took care of patients

Starting point is 00:13:37 when they were about to die. And she asked him a question, Sean. And the question was, do you have any regrets? And she even wrote a book about something like the five regrets of dying or something like that. And her name was Bronnie Ware. And the number one regret was not living the life I could have lived. You know, living someone else's life, not doing what I know I'm capable of. I can't think of anything worse than that. You know, so don't fear failure, fear that. And, you know, while we're talking about fear, you know, I said, you really have to get clear on what you want so that you push through that. Everybody has fear, even the super successful people on the planet. But they push through in spite of it because their vision for their future is more compelling than sitting stagnant.

Starting point is 00:14:21 And there's also limiting beliefs. When I immigrated to this country, I didn't speak English, and I found out's also, you know, limiting beliefs. You know, when I immigrated this country, I didn't speak English and I found out what bullies were for the first time. Okay. So I got my butt kicked occasionally. And high school or? No, this was an elementary school. Oh, that early? Oh yeah. Oh yeah. Yeah. Chased home, kicked, punched. Yeah. But then my mom, God bless her, proud Dutch woman that she was, thought it'd be a great idea to send me to school in wooden shoes and those leather shorts the Germans wear for Oktoberfest. So another ass kicking, you know, and that, and, you know, and then, you know, and then the stupid stuff we all have, you know, embarrassment on the playground. I had

Starting point is 00:14:52 this crush on this girl named Carolyn and, and I made the mistake of telling a friend of mine and I see her, Carolyn with like, it seemed like half the school was probably about 10 kids coming towards me. She comes up to me, she says, do you like mustard? And I just said yes to anything. I'd never even spoken to her. I said, yeah, I like mustard. She said, well, I hate mustard and I hate you. And all the kids laughed and I'm like, yeah. And I was crushed, you know, of course. And, you know, stuff like, we all have had stuff like that happen. And, and, but what it did for me was it created this limiting belief that I wasn't good enough. In fact, I used to ask myself, how can I show them I'm good enough? Which of course presupposed that I wasn't. And so a lot of people have these limiting belief

Starting point is 00:15:28 systems. I'm not good enough. I'm not smart enough. I'm not old enough. Another one of mine was I'm not analytical enough or I'm not young enough, whatever. And there's a reason the acronym for belief systems is BS because 99% of them are BS, but we believe they're real. I used to be afraid to raise my hand in front of 15 you know, 15 kids in a classroom, and now I speak in front of literally thousands and thousands of people a year. And so if you've got one of these limiting belief systems, I would just tell you to drag it out into the daylight. Look at—if you're consciously aware of it. Sometimes you're not consciously aware of it, but if you're aware of it, look at it through your adult rational mind.

Starting point is 00:16:02 Recognize that it's BS, and it will diminish and go away ultimately. And so that's super important. The next piece I want to talk about really is focus. I think the most successful people on the planet have the highest degree of focus. We were just talking. You were mentioning somebody who was on Joe Rogan's podcast. I listen to two podcasts for the most part, Joe Rogan and Tim Ferriss. I try to get both sides of the aisle.

Starting point is 00:16:27 I'm definitely on one side more than the other. But on Tim Ferriss' show, he interviews the best of the best in the world. You know this. And I get excited about my 22 million downloads. I think he gets that a week. But anyway, so both of them. But he interviews the best of the best.

Starting point is 00:16:41 The best athletes, Michael Phelps, the swimmer, NFL, NBA players, actors like Ed Norton, Hugh Jackman, Arnold, and billionaires like Ray Dalio and the heads of the biggest CEOs in the country like Zuckerberg. And he deconstructs their success. And it's really obviously a very intellectual, intelligent conversation. I'm sure you've checked it out. Yeah, for sure. And I started to hear a pattern, Sean. They almost all meditate. Wow. And I started to hear a pattern, Sean. They almost all meditate.

Starting point is 00:17:06 Wow. And what does meditation enhance, right? Focus. And so focus really is power. And I get people that... And here's the thing that you got to remember, whatever you focus on gets bigger, right? And so I'll get people say, how do I get out of student loan debt? And I'm like, wrong question. How do you make so much money that debt's irrelevant is the right question. I love that. They asked Mother Teresa if she was anti-war. She said, no, I'm pro-peace.

Starting point is 00:17:28 You know, I mean, it's a play on words, but you know what I'm saying. And so focus is super important that you pay attention. You know, it would have been really easy for me to focus on losing everything, but, you know, I focused on what I wanted and the goals. The next piece is peer group. Is, you know, who you hang out with is who you become you know when i when i was losing everything i was in tony robbins platinum partnership which is his mastermind and i was around people that were killing it in that crash they'd prepared like i

Starting point is 00:17:52 said and they're they're like get up you puss 50 million shmillion go make something happen you know that's who you want to be around when the stuff hits the fan right you know so many people default to a peer group they went to school with or they work with and those people may have their own fears and limiting beliefs and things that will hold you back. So you got to be really careful. You know, and sometimes it's family. You know, I'm telling you, love your family, but proactively choose your peers. And really the last thing I'll mention is playing to your strengths.

Starting point is 00:18:20 You know, a lot of people think they need to build their weaknesses. No, your strengths are your greatest assets. In my business, in multifamily, there's lots of different hats you can wear. And, you know, if you play to your strengths and you hire, align, or partner for your weaknesses, success is inevitable. I mean, because first of all, you're doing what you love, okay? You're in the zone or the Kwan, like Jerry Maguire called it. You know, you're doing what you love. You never work another day in your life. And you'll be passionate about it. And passion is required to influence people. Maybe you can feel a little of my passion. I know your last guest was really passionate as well. And when you love what you do, you're passionate, right? And so passion is that fuel.

Starting point is 00:18:57 Passion breeds innovation and creativity and helps you get over speed bumps. So again, I'd tell you to focus on what you love and, um, and don't, don't fear failure. Um, you know, I got, I got to meet Sarah Blakely, the billionaire owner of Spanx at a mastermind that I was in her and Jesse, her husband and beautiful human being. But she told me at this mastermind that, that her dad used to ask her and her brother on a weekly basis, what have you failed at this week? Wow. And I thought, what a great question to ask your kids,

Starting point is 00:19:29 so they don't fear failure. Because I call them seminars. That's not a failure. I call it a seminar. It was a $50 million seminar. It was an expensive freaking seminar. But I've built about 27 businesses, I think I counted. I was shocked there were that many.

Starting point is 00:19:42 And several were tens of millions of dollars, and three of them right now are. But most were spectacular, flaming seminars. We really fail our way to success. And so, again, those of you that are analytical, remember that. And I guess I'll talk about one more thing. You know, and this will be a little foofy for some of you, but talk about gratitude for a second. Gratitude is the most important foundational

Starting point is 00:20:06 emotion we have to us. It strengthens our immune system. It makes our heart stronger. It lowers our blood pressure. It brings us closer to our spirituality and it's how you manifest everything you want in life. You know, most mornings I'll sit in my recliner and I'll do gratitude for the beautiful people in my life, the things that I love, my students. Are you interested in coming on the Digital Social Hour podcast as a guest? Well, click the application link below in the description of this video. We are always looking for cool stories, cool entrepreneurs to talk to you about business and life. Click the application link below, and here's the episode, guys. Foundation, so on and so forth.

Starting point is 00:20:41 And then I'll do gratitude for the things that I want if I already have them. And sometimes I'll get emotional being grateful for things I don't even have yet. And I know I lost a few of you on that one, but ignore it at your peril. This is how I had 50 million to lose and how I got it back. Okay. So it absolutely works. And, you know, I'll leave you with one story. I, you know, when I lived in Denver, I always knew I wanted to live on the beach, and there's no beach in Denver, but I would visualize that. I'd visualize the palm trees and the sand and the surf. And 20 years later, I built this, what's now probably a $25, $30 million home on the beach. I had the beach on one side. I had my boats on the backside. It was a gulf to bay. It was like a slice through an island. I mean, big spiral staircase up through the middle,

Starting point is 00:21:26 big waterfall from the second floor balcony into the pool. Pools and magazines. It was spectacular. I'll land the plane with this. On the second floor, I had aquariums around the staircase that cost me almost $200,000. So that gives you an idea of the house. Well, I worked for it for 20 years.

Starting point is 00:21:43 Two months after I moved in, I'm floating in the pool at night. I'm looking up at this testament to my ego, which is really what it was. It was to prove the freaking world I was good enough, okay? You know, I'm like, if this doesn't prove it, forget it. So, you know, I'm looking up at this thing, and pool's changing colors. It's got fiber optic lighting. And my family's inside sleeping. I got depressed.

Starting point is 00:22:01 Whoa. And I don't mean a little depressed. I mean, I got really depressed. I'm like, what the hell? I've just achieved success like times a thousand. How could I feel bad right now? There's several things, three things that were going on. And I want to leave you with this. So the first thing was you never achieve a big goal without having other goals lined up behind it, right? It's like the good book says, without a vision, the people perish. You need a vision for the future. And I didn't know what I was going to do next. And the second

Starting point is 00:22:23 thing is it's never about the goals. You got to have them to create that hunger, but happiness comes from progress and growth. And so if you go to Rod's links and you watch my goal setting, at the end, I do a planning process, a weekly planning process to help you stay organized, how I manage two very large companies at the same time. And part of that process is acknowledging your progress, no matter how small it is, patting yourself on the back, consciously acknowledging it so that you're happy if you've got a setback or a delay. But the big thing that was happening was I was totally focused on myself. Rod, Rod, Rod, show the world I'm good enough. And that's the year I met Tony

Starting point is 00:22:59 Robbins. And I went and saw him in Fort Lauderdale and this is 24 years ago. And I'm like, and I found out that he fed families for the holidays. And I'm like, you know, what a concept, you know, do something for someone else. Right. I'm embarrassed to say I had to be 40 to get that memo. And I went home, I called my brother who I was going to go visit for Thanksgiving in Denver. I said, Hey bro, let's feed five families. So he called his church and he found five families that really needed help. And we bought food. It was a lot of fun. We bought toys for the kids, frozen turkeys. And the third family changed my life, man. We go up to this house. There was this woman, a Hispanic woman with five kids in a one-bedroom shack. And she comes out on the porch and she sees all this stuff on the porch. She starts crying.

Starting point is 00:23:38 Her kids come out. A couple of the older ones start crying. I start crying and I'm hooked. And I'm blessed to say, and please know this is not ego. There's a message in this. I'm blessed to say in the last 24 years, I've fed over 150,000 children in my area in Sarasota for the holidays, at-risk kids. And I've provided tens of thousands of backpacks filled with school supplies to local at-risk kids. So we're doing 2,000 here in August and thousands and thousands of teddy bears to local police departments for officers to keep in their vehicles if they encounter a child that's been in, you know, a traumatic situation. And the reason I bring this up is we've been taught to achieve to be happy,

Starting point is 00:24:14 right? Like we shouldn't be happy until we've achieved. That's a very common dynamic here in the United States. I'm going to tell you, if you give back in any fashion, you're happily achieving. And I know it's a play on words, but Tony Robbins calls it the science of achievement versus the art of fulfillment. Achievement's a science. If you want to learn multifamily, get your ass to my bootcamp, okay? It's $97. Tell me your excuse. But it's a science. I'll give you the blueprint. You just got to do it, okay? But fulfillment's an art. You got to figure out what juices you. For me, it's kids. Maybe for you, it's animals or the environment or the elderly, whatever it is, give back right now. Don't say to yourself, well, you had money. That's why you do it. You want

Starting point is 00:24:51 money? Give back right now. That's how you get the money. That's the way it works. You know, so, you know, I would encourage you to pick your passion, give back right now, and you'll be happily achieving. I love that because some people wait their whole life until they die to give back, you know, but you should be giving back the whole way up. Yeah. I had to be 40 and I'm embarrassed that it lasted that it took that long, but, uh, you'll make up for it with the volume. That's it. That's, that's, that's what you got to do. And, and, uh, and you know, like I said, I think there's incredible opportunity coming if you're not caught up in fear. So, you know, if you're listening, if it's real estate, please check out my bootcamp. It's Rod's Links. And you can text links to 72345 if you're driving. And just remember to use the code

Starting point is 00:25:32 Sean when you check out for that $97 price, because it's more than that now. But I love what I'm doing, like you love what you're doing, which is why we're both very successful. And I really appreciate you having me on, brother. No, I love that. You just gave so much value. Can I ask a few more questions? Please, please. I rolled really fast. I know you've got a short window. No, you're good. Um, so if real estate crashes 40, 50% again, like, Oh wait, will you be all right this time? Oh yeah. Yeah. Yeah. Yeah. Because, because see, that's the thing. The reason I crashed and burned is I was in single family. Okay. And houses don't cash flow well. They just don't because each one has their own taxes, their own insurance and multifamily.

Starting point is 00:26:11 My houses pulled me down in 08. Okay. My multifamily only pulled back about 11%. Oh, wow. But see, I'd cross collateralized, meaning I'd borrowed money against packages of houses plus the apartment complexes. So the whole thing imploded. I lost it all. And that's why I started my podcast, to tell people. And in fact, Rod's Links is my free book. You pay six bucks and you get it. But there's a bunch of other free books there as well, tons of free resources. But the point is, I wrote it to tell people, if you're going to buy and hold real estate, for God's sakes, do multifamily. Don't do single family, because it's much safer in a downturn. Depending on how many units you can have, you can have a whole

Starting point is 00:26:45 bunch of units empty and still break even. And see, people need a place to live. I mean, there's a huge housing shortage right now, and there's a huge disparity between buying a house and what the payment on that house is versus what you can rent for. So we're becoming a renter nation, like it or not, and that's happening. And so, no, I mean, multifamily will do just fine. And so, yeah. Yeah, you could take an 11% hit, but a 40% hit is detrimental. Let me tell you something crazy. Okay, I only owed 30 cents on the dollar. By the end of 2009, I was upside down. That's how much the real estate values dropped then. Holy crap.

Starting point is 00:27:20 Yeah, and it happened here too. So it's over 30% this year. Yeah, yeah. Oh, yeah. No, 70%. Damn. It dropped more than 70%. And I was on Ryan's podcast yesterday. He had the same thing happen to him. It dropped here like that. California dropped like that. Florida.

Starting point is 00:27:32 You know, those three states got hit the hardest. I'm keeping an eye on the market, and it seems like Miami's dropping a lot right now. Oh, yeah. Which is usually a sign that the other cities will follow, right? That's exactly right. Yeah, because Vegas is starting too. Oh, yeah. No, no.

Starting point is 00:27:43 I'm seeing those things go down. You know, he told me that prices are dropping, and yeah, it's exactly right. Yeah, because Vegas is starting too. Oh, yeah. No, no. I've seen those things go down. He told me that prices are dropping, and yeah, it's already happening. So I will tell you, in 08-09, it was like a light switch, though. No time to prepare. It was like a freaking switch. That's why I'm saying, if you're thinking about this, for God's sakes, go learn it now. Don't wait, because it could be the greatest transfer of wealth we've seen in our lifetimes. I mean,

Starting point is 00:28:05 seriously. And there'll be exponential opportunities. Like I said, I just bought this $20 million asset, 200 units at 40% less than the one right next door sold recently. I mean, that's- That's insane. Yeah. And what's your philosophy on how much you put down percentage-wise? Well, see, the thing of it is, it's different in my world where you buy commercial multifamily because the commercial multifamily requires money, but there's so much money out there looking for a home.

Starting point is 00:28:30 I raised $12 million for that deal I just closed on. Wow. Yeah. And so, you know, and I teach my students, you'll learn that if you come to my boot camp. I'll teach you how to raise money for these deals, how to, you know, pick a market and underwrite these things and evaluate them and finance them and raise money for them. That's, you know, there's a lot to it, but you know, it's, it's, uh, like I said, my students are killing it and, and, uh, you know, you just get, you can't do it all in my world.

Starting point is 00:28:57 It's a lot like flipping and wholesaling where you're going to do it all by yourself. You're going to, you're going to join a team and, you know, and, and do it with other people that are good in different aspects of it. Like you need somebody that's good at, and analysis, because in my business, primarily empirical. You get the numbers right, and you ask all the right questions, pretty hard to make a big mistake. So you need somebody that, you know, one of these people you can throw in a room with a spreadsheet and throw raw meat in once in a while, and they're happy. You need one of those people. And then you need a mouthpiece like Rod. And then, you know, maybe somebody that's got management experience to manage the asset after you buy it. So there's a lot of different hats you can wear maybe somebody that's got management experience to manage the asset after you buy it. So there's a lot of different hats you can wear. And that's why I say play to your

Starting point is 00:29:28 strengths. Do what you love. Hire a line or partner for those other pieces. Success is inevitable. Do you stay within the US? Because you probably get paid stuff. I get asked all the time. I've got students all over the world. I mean, I've got students in the Netherlands, Africa, all over Latin America, Canada, Israel, Turkey. Yes, it does. But a lot of them come here to invest, believe it or not. A lot of them, they'll partner with warriors. That's my coaching students called warriors. They'll partner with warriors here domestically to buy here. Now, some of them buy in their own countries as well. The strategies are the same. The only difference is that the financing might be different there. The entity structure might

Starting point is 00:30:01 be different there, but the basic strategies are buy based on cashflow or universal anywhere. That's awesome, man. How long did it take you to recover after that $50 million loss? It took a bit. It took a bit. Yeah. I mean, it took probably, I mean, to get back to where I was. I'm just now getting back to where I was. Oh, so 20, 15 years? 15 years. Yeah. Yeah. To get back. You know, because there was a meteoric rise back then, you know, in the values and we've seen it here too, but I was very conservative. And so I didn't go in full bore. I'm like that, that deal I just bought is the only deal I bought in the last 18 months. Damn. You know, I own thousands and thousands of

Starting point is 00:30:39 apartments, but that's the only one I didn't like because it was frothing. It's reminded me of 2006, you know, irrational exuberance, where they're out there buying anything, and we're seeing the pain of that because a lot of these people that bought these apartment complexes did adjustable rate debt, thinking the gravy train was going to last forever, like we all did in 2006.

Starting point is 00:30:57 And I knew it wasn't. And so I know there's going to be a correction in multifamily, even if there's not a significant economic correction. I do believe there's going to be a significant correction.amily, even if there's not a significant economic correction. I do believe there's going to be a significant correction. You can't keep kicking this can down the road. I mean, when you're talking, the debt's going up a trillion every hundred days. Crazy. And we're paying a trillion in interest.

Starting point is 00:31:16 I mean, the Fed's going to try to stop inflation. I don't know how they can't. When you've printed 80% of the money in the last four years. I mean, you know, it devalues everything. Now, the good thing though is if you can buy real estate right now, rents are going to keep going up. Inflation is going to keep driving rents up. If you buy something now, you're locked in at whatever that debt is on that property. That debt's not going to go up in amount. So, you know, real estate's like probably the best hedge ever against inflation because when you buy, you're locking in the purchase price and the debt amount. So, you know, any

Starting point is 00:31:50 increase, by the way, in my world, the value is based on a multiple of the income, the multiple of the net income. And so any increase in that net income, you know, this is for a commercial multifamily, five units or higher, two to four units is residential values based on comparable sales. But five units or higher is valued on the net income. Let me give you an example. I have a property a mile away from that 200 unit I just bought. It's 296 units in San Antonio. It's literally a mile away.

Starting point is 00:32:16 And we painted numbers in the parking spaces, okay? Because it was kind of scattered and people had to park a ways away to have their own, you know, be in front of their parking unit. But we allowed them to pay 25 bucks a month to have a parking spot reserved just for them right by their unit. We had 100 people take it. Wow. That was a $750,000 instant increase in value. Holy crap. Yeah. Now here's why. And I get hate for this all the time. You can't do math,

Starting point is 00:32:40 you're full of shit, you know, but here's how the math works in my world. You annualize that number. So you take that 25 times the 100 people that took it, and I think it's 18,000 for the year, if I'm doing my math right. But then you divide that by what's called a capitalization rate, which is how commercial real estate is valued. And you do a 4%. Divide that 18,000 by 4%. It's 750 grand. And that's the value increase. I'll give you another example. I had an asset, call them assets, that's the nomenclature, but a 101 unit apartment complex in Dayton, Ohio got destroyed by a tornado. Thank God nobody died. A couple of people had to have surgery. No kids got hurt, thank God. But I got there the next, and I'll tell you a quick story. I got there the next day and there was this woman a quick story. I got there the next day, and there was this woman.

Starting point is 00:33:26 All 101 families had to move. They shut the power off, water off, everything. She's pulling clothes out, and I said, were you here when it happened? She said, yeah. And she said, my son was upstairs in his bedroom, and thank God his phone went off with the early alert system. By the time he got down and woke me up, his bedroom was gone. Oh, my gosh.

Starting point is 00:33:42 And it was freaking gone. I can show you a picture after we're done here. It was crazy. And so, thank God nobody died. But anyway, the point here is we rebuilt that place, and we got a $600 per month increase in rents. That was a 10, depending on what cap rate you use, a $10 to $12 million increase in value on 101 units.

Starting point is 00:34:03 Holy crap. Yeah. So, yeah. I mean, it's exponential. And that's why we love this fricking business because you buy one of these and you increase, you do what's called a value add play where you fix it up. Like we're spending about 4 million on that 200 unit we bought. We're getting big rent bumps and it exponentially increases the value. And then you could take a loan out against it, right? With the new value.

Starting point is 00:34:23 It's that BRRRR method. You've heard that BRRRR method. You buy, renovate, refinance, repeat. It's just that on a much bigger scale. Wow. And at that volume, yeah, eight-figure volume, you can make... It's coming. I mean, I'm telling you,

Starting point is 00:34:36 the last couple of years, the deals have been hard to find, which is why I backed off for the last 18 months. But they're already starting to come. You're patient and disciplined, man, because a lot of people would want to invest. A lot of people didn't. A lot of people did it, and they're in trouble right now. Because the interest rate was too high.

Starting point is 00:34:51 Yeah, and they've got these high interest rates, and they can't sell because sales are down 90% right now. Damn. 90%. So the people that are selling, if you see something up for sale right now in the multifamily space, they have to sell. Wow. You know they're desperate.

Starting point is 00:35:04 Nobody's going to sell right now unless they have to sell. So there's something going on. And they can't refinance either. Okay. So if you've got debt coming due, by the way, that adjustable rate debt is short term. So it's like typically one to three years. And so the debt comes due, you got to sell or refinance. To refinance, you've got to meet what's called debt service coverage requirements. In my world, they look at the property's ability to service the debt. They don't care what your income is. They want to make sure there's enough income on that property to take care of the debt. So with the interest rates going up, they can't satisfy those requirements. So refinancing is pretty much off the table as well. So it's proverbial shit's about to hit the fan, man.

Starting point is 00:35:41 That's scary. I just bought down my interest rate because eight was too much. Yeah. Did you? Good for you. I'm at six I just bought down my interest rate because eight was too much. Yeah, did you? Good for you. I'm at 6.5, which is still pretty high, but eight percentages. But no big deal. You're in this house, right? I'm writing off most of it because I'm building a studio. Oh, perfect.

Starting point is 00:35:53 Smart, smart, smart. Backyard I'm using for masterminds. Oh, perfect, perfect, perfect. But you can refi when the rates come down. Yeah. And God help us if they don't come down because this debt we're paying on this debt that we have. Oh, yeah, it's scary. I mean, at some point, you know, it's just going to, something's going to happen.

Starting point is 00:36:10 You think this election is pretty big for the real estate? Oh, it's huge. Oh, it's huge. Yeah, I think so with crypto too. I think it's huge. Because Trump is really pro-crypto. I think it's huge. And God help us if there's not a change.

Starting point is 00:36:21 That's all I can tell you. God help us. I mean, we can go down that political rabbit hole, but I am definitely about as red as it gets. And I will tell you, if we don't change, I think we're in really deep shit. Does that impact your fundraising when you're so heavily on that side?

Starting point is 00:36:38 Yeah, I get some hate. I get some hate. But honestly, if you can't see what's going on, if you can't see what's happened the last four years in this country, and I mean, please do some homework, do some research. If you're listening, got irritated by what I just said, please do some research to get your head out of CNN and actually look and see what's going on. Because, I mean, it's sobering what's happening. And we're sending all this money to Ukraine. And don't get me started.

Starting point is 00:37:11 People are so emotional, but they should be more objective and just look at the data. That's it. The data says it all. It's right there. You can't argue in numbers. No, you can't. I mean, look at where we were back then and where we are now. And I was never political until very recently. Yeah. I used to say, I don't vote, it just encourages them. But that was my line. And now I, you know,

Starting point is 00:37:29 these last eight years have been like, holy crap. I used to not care at all. Yeah. Yeah. But being in business, it actually affects us at a pretty significant level.

Starting point is 00:37:38 It's huge, man. It's huge. I mean, certainly in my world, it's huge. And there's a lot of carnage going on right now. And it's going to continue. And I think it's going to, it's huge, and there's a lot of carnage going on right now, and it's going to continue.

Starting point is 00:37:45 And I think it's going to hit everything. I think there's a lot of layoffs they're not telling you about either, by the way. It's definitely in the tech sector, lots of layoffs happening. In fact, I had a quote. I don't know if I brought it with me, that like 51% of the companies are expecting layoffs. Holy crap. Yeah, 51%. That's insane.

Starting point is 00:38:07 We're paying $2 billion a day on interest right now, $2 billion a day. Yeah. Inflation was 1.4% at the beginning of 2021, and now it's, you know what it is. And company valuations are tanking right now. Oh, yeah. You used to be able to sell your company for like 20x multiple. And real estate as well, okay? And so there's going to be deals and they're coming. It's inevitable.

Starting point is 00:38:29 But here's the thing. In a crisis, cash is king. Now, it doesn't have to be your own cash, but your ability to raise cash. And that's why learn how to do that. I mean, you and I have a great platform where we can do it easily. I can just talk about it on my podcast, you as well. But if you're listening, I'll teach you all this stuff. I'll teach you how to go out and do this if you want to learn from me. But learn how to raise the money because if you have the ability to raise money, man, you're going to be able to clean up. It's a powerful skill. Yeah, clean up, man.

Starting point is 00:38:55 I mean, if you can buy this stuff at $0.20, $0.30, $0.40 on the dollar, you're golden. I mean, listen, if I hadn't been hiding under a rock in 2009, I'd be on the back of a 300-foot yacht right now because there were that kind of opportunities back then. But I was shell-shocked. It's about to happen again, though. Yeah. Well, listen, I got crushed by that wave. I'm surfing this one. This could take you to billionaire status. No, I think it can. I can take a lot of people to billionaire status and certainly multimillionaire status, but you've got to push through the fear. That's why I said start with the goals, make a decision, take the first step, go learn.

Starting point is 00:39:32 If the first step is learning from me or somebody like me, go do it. Do it immediately. And you could capitalize on what's going on. Don't be afraid to throw out low balls. No. No, no. Not right now because if it's for sale, something's going on. Yeah.

Starting point is 00:39:44 Period. Period. Period. Nobody is selling real estate right now unless there's a problem of some sort because nobody's like, well, I just decided to sell. Now, yeah, BS. No. I love that. Rod, it's been fun.

Starting point is 00:39:55 Where can people find out your sites? Yeah, no, go to Rod's links or text links to 72345. That's my link tree, and there's just a ton of free resources there. I've got a number one bestselling book. You just pay the shipping. You can get that one for like six bucks. But I've got a dozen or more free PDF books that are really best in class, 200, 300 page books.

Starting point is 00:40:14 They're fantastic. And my boot camp site is there. And to remember, when you check out, if you decide to come to my virtual boot camp, use the word Sean on the checkout so that you get that $97 price. We'll link that below. Thanks so much for coming on, man. Thanks, brother. It was a pleasure to meet you, man. Absolutely.

Starting point is 00:40:29 Thanks for watching, guys. As always, hopefully you learned something cool. See you tomorrow.

Digital Social Hour - The $50M Crash: How I Lost It All & Bounced Back | Rod Khleif DSH #548

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