Insider Secrets Podcast Episode #21

 Guest: Michael Zau

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Guest Bio:

Mortgage Broker
Mortgage lender: CA
If you are buying an investment property I can advise or fund in 27 other states.
I coach investors on how to actively plan for real estate investment as a part of their portfolio.
International Real Estate Group
United States real estate investor
Real estate owner\investor in California.
Note investor: I also receive payments every month with no toilets tenants and trash.
1. Paying off debt is not the same as accumulating assets or equity!
2. Plan your time and activities as much as the plan you plan your money. Have a wholesome life!

TRANSCRIPT

[00:00:00] Kristen: Welcome to this week’s edition of Insider Secrets. The show that turns multifamily investing into reality. Each show we interview guests who are seasoned professionals, actively closing and managing real estate deals. Your host Mike Morawski has more than 30 years of multifamily, real estate investing and property management experience.

Mike is the founder of My Core Intentions. And he’s been involved in over $285 million of transactions. Focuses on helping you create short term cashflow and long-term wealth. Here’s your host, Mike.

Mike: Hey, good afternoon. I’m Mike. And this is I’m your host of Insider Secrets and that’s brought to you by My Core I ntentions. You know what, let me ask you a question. Have you been thinking a little bit [00:01:00] more about your why and what really matters for you and your real estate business and your personal life?

If you’re looking for some direction, my core intention wants to help you with exactly that we want to help you discover your why. And help you design to, to live a more balanced lifestyle. My in court core intention delivers proven real estate strategies through personalized coaching to help you facilitate a positive life change personally, and business.

So I’d like to hear from each one of you with your practical plan for personal growth and what your intentions are and how you set those daily actions. If you’re considering coaching and we can help give us a call. We’d like to set a free coaching session for you to walk through your why and help you maybe refine it a little more and see what your execution plan is like this way, you can spend more time on things that are really important, like family and building relationships.[00:02:00]

So today, let me introduce our guest for you today. I’m joined by my friend and real estate investor from beautiful San Diego, California. Michael’s out, Michael’s a seasoned real estate investor, and we were just having a conversation before the call started. And I was mentioning to Michael that I had a friend years ago who said he loved to live in San Diego, but the problem was he couldn’t always make his mortgage payment.

I don’t think that’s Michael’s problem today. The Michael being a seasoned real estate investor has a very impressive history. It’s w we’re going to come you with a little bit different twist today on his multi-family strategy. It may give you a little pause, actually, when we think about it, we’re going to explore building wealth in two to four unit properties.

And you guys know that I’ve been talking a lot lately about creating wealth in small multi-families. Michael’s going to give us a great perspective on this real estate investing strips. His background, it’s an economics and finance and they play a really deep role in his [00:03:00] investment strategy. So we’re going to get Michael tinnitus talk about his focus and his focus on his business.

Along with the market conditions and where he sees the market going. And we’ve got a special treat for you at the end, but Michael I’d like you to introduce yourselves to our listeners today and give us one word that best describes you and your investment strategy.

Michael: Okay. Profit. How’s that sound? Yeah. And I like to preface the word profit or profitable is really, it goes down to a philosophy it’s starting with the end in mind. And because if there was really just one thing that I wanted to look at as I look to mitigate a lot of my risks by starting with the end in mind.

And so knowing that. Real estate itself. In my opinion is a, an investment that goes 10 plus years when it comes to halt, I think, and what I tell other investors who [00:04:00] approach me, or even clients of mine and they say what, what’s good. What do you think is going to be happening? I said I believe that over the course of 10 to 20 years, that the value of real estate is going to increase.

Because if you are looking for a three to six month strategy, I consider that gambling and. And there is some gamble, and don’t get me wrong. I’ve flipped properties before, so it’s not like I’m not oblivious to market conditions. It is something though that I look at, it because when it’s really, if you see the value in property is, as you already know, you always make money on it.

And so knowing that when you know that you’re gonna be making on the bike and you can mitigate a lot of the cost issues that are involved, then profit is definitely something that I’ve been blessed enough to have on the majority of my trends.

Mike: Absolutely. And I love that word profit, and I have to say you’re probably the first investor that I have done a podcast with who has said profit.

Here’s the other thing you [00:05:00] said that I really is the end in mind, stephen cubby in his book, seven habits of highly effective people really talks about that. He says you have to keep the end in mind. I actually wrote a book. That’ll be coming out this fall called exit plan.

I’ve spent hundreds of thousands of dollars over the years on real estate training and seminars and coaching, and to be left empty, where people don’t talk about getting out of the deal. They talk about going into the. And how to find it and how to secure it, but nobody ever talks to you about getting out.

And I think exit exiting the deal is such an important strategy. So here’s what I’d like you to do. Would you talk to us a little bit about your backstory? Because I know that, coming from finance and where you came from, you have a little bit different backstory and what got you into real estate and how did you wind up getting attracted to it?

Michael: Wow. I don’t think anybody. There’s a few people, but I certainly didn’t go to a college thinking I was going to end up in real estate. I actually wanted to buy by the end of my junior year of the [00:06:00] game, my senior year, my expectation actually was to be to start as a runner at the Chicago.

Yeah. And really be to a trader or some kind of fund manager in the future. So to, to to enter into real estate finance was purely by accident. That was actually a choosing of my wife when she says, oh I’m not moving anywhere outside of Sandy. And so I said, oh I guess I’m going to have to stay in San Diego then.

And so I couldn’t, I actually couldn’t find employment. It was in, it was just the staff to the SNL. Correct. Yeah. And and it was really cheap even with the degree. And actually I had several pretty meaningful experiential internships with a few life insurance and finance companies working on financial analyst lists and accounting.

And I just couldn’t find employment. So I found actually I found a job as a director. Collecting on delinquent medical bills, bounced checks. Just, just things like that. And I thought this is like the worst job like I could have, but what I didn’t realize, the blessing that I received behind that [00:07:00] was how how beneficial it was going to be for me to learn about scripture.

To learn about how people are going to work with the debt collectors when it comes to the mindset of that, how you can work cause that, that eventually came into fruition as you, as I began to learn how to talk to my tenants and even some of the landlords are like this tenant’s gone.

And I, and this is for some of my other clients and I’d be like, oh let me. What I know how to skip trace, which is a lot, which is something that a lot of loan officers just don’t know how to do. And which is my day job. So I ended up being a collector. And then one of my colleagues who left being a collector, became a loan officer, calls me and says, Hey, I know you’re good at what you do, but being a loan officer is going to be even better instead of collecting from them, you get to loan to them or give them.

And I said okay, how much does it pay? And then he told me sign me up. And so it got me into becoming a loan officer and I actually, I started off at a thrift and loan which is non-existent virtually non-existent now.

Mike: So listen, some of [00:08:00] our listeners might not understand that terminology skip tracing.

Can you give a 32nd explanation about what

Michael: that is? Sure, no problem. If you can’t find somebody, you’re going to be able to, you’re going to have to find resources to find them nowadays with the internet, you can Google their name and you can find various resources. You can, if you have access to a credit report, you can get an address.

You can get a phone number, you can get previous employers, you can get them, you can get present employers. So if and in certain circumstances you can even get family members. And so to have accessibility on how to find people. I didn’t think it was a skill that I was ever going to use again, but it served its purpose.

Yeah. Yeah.

Mike: Yeah. It’s funny. When you have somebody move out and you get a judgment against them, or you have a problem where they owe you money and you have to get a judgment, are you a victim? Learning how to skip, trace and learning how to find them is is a valuable skill. So I know that your focus is around two to four unit properties in, and you do that right in San [00:09:00] Diego.

So I’d like you to Blaine that whole strategy. The price point on a two unit or a four unit in San Diego is a little bit different than it is in the city of Chicago. And I’d like you to talk about that a little bit. Cause most markets aren’t like San

Michael: Diego yeah, most cities don’t have the temperate weather that’s changing all that has.

And I like to, and the reason I say that in, in context is because. San Diego, Los Angeles county, orange county, or even a Moran or Sam, or the city of San Francisco is very similar in nature in the fact that when people look at investment and it really has an a, an opinion and a mindset of what do you want to accomplish with your end in mind?

And my end in mind. Number one is number one. I want to mitigate my taxes for the present while getting cashflow. And then number two, I want to be able to get appreciation in mind because I believe in having mitigated debt, meaning that if you’ve ever listened [00:10:00] to or read the BiggerPockets website they have that burn method.

It’s the buy rehab rent refinance. And in, in areas where you have high degrees of appreciation over over a longer stretch of time I can look at that and go my, my rate of return on my actual cashflow I only be two to 4%. One of the numbers that I use, that’s really an underutilized.

Math term is an internal of. And internal rate of return, of course, meaning that if you start with the end in mind, what is your cashflow at the end or what are you going to use over the course of time? And so if you use the Burma method of refinance over the course of time San Diego, at least over in what I think.

At least over the last 60 years of history from 1950 or 70 years now, since 1950 to the present, we’ve seen a tremendous amount of appreciation. So refinancing and taking out your cash taking out cash as a refinancing option every 10 years or every seven to [00:11:00] 10 years is a viable option. It becomes it increases your cash back to you.

And so if cash back to you as a part of your overall rate of return, if you use internal rate of return, And use the cash out on your refinance every seven to 10 years, knowing that you’re going to cashflow every single time, then I believe that your rate of return exponentially increases past what Chicago, Cleveland, Atlanta or or other cities that I’ve seen people want to go out of state for.

And I think that if you’re looking at a longterm hold, knowing that you’re going to be refinancing well, last time I looked at my tax return also. The depreciation also ends at a stopped period of time. And because you only have 25 years of depreciation, I’m looking at the I don’t, I want to be able to reduce the amount of taxable income I have while also keeping as much as I want.

So buying two to four units makes it an easier refinancing option. Number one, number two, I get to, when I do refinance, I can utilize that cash for other investment purposes or personal purposes. And [00:12:00] number three, with the value’s increasing at least historically over the last 70 years. And knowing that it’s starting with a 10 to 20 year hold period in mind, it becomes a much more viable plan.

And and not only that, the financing is easier to get to 40 units as well than it is to get five plus units as an individual. You can do that. And actually as an individual, depending upon whether you did it in your name or whether you did it as an LLC if you had it as an LLC with one, with with with family as an LLC, you can actually sell your entity, and then, and all the debt comes with it. And so you sell the entity and then now you have a, an entity that’s cash flowing and and producing some rate of return. And if you sell the entity you don’t have to worry about the refinancing cause there’s no title changes. And in California, you have a lot called proposition 13, which was passed in 1977.

So your property taxes don’t change. So if you bought your property, for example in 19, in 2008 and you bought it for, let’s say I bought I actually bought a duplex here in San Diego for $250,000. [00:13:00] My property taxes stays at that $250,000 base it, even though that duplex is now $700,000, it didn’t go from 2000 to eight, $9,000 as it wouldn’t have otherwise.

It stays at the 2000 at the 2,208 20 a hundred dollar level and increases, I think at three three to anywhere between three to 10%, depending upon the municipality that, that it belongs to. And is that

Mike: an annual three to 10% increase?

Michael: It could be. And when the market goes down, it also decreases.

So let me think about this. Here.

Mike: Here’s one, one thing I’d like you to explain to our listeners the difference between ROI and IRR, because there’s a difference. And a lot of people don’t understand that difference, they look at IRR and go, what is this? So can you explain to them?

Michael: Sure. I’m going to make it as simple as possible. Then ROI is we have an expectation is we invest a certain dollar amount and let’s say it’s temporary. If you invest a hundred dollars, your expectation is 10%. Your expectation is going [00:14:00] to be out of a hundred dollars is going to be $10.

That’s ROI. That’s your rate of. When you w intro rater return and let’s say you have a seven year period of time until you refinance into your next refinance period. It’s going to not only take the cash flows. It’s also going to take your lump sum and then utilize that as an internal rate of return.

Whereas you might say that your rate of return is X, but then when you have cash flow, Over the course of a period of time you’re going to and other expenses than your internal rate or return is going to be different from your actual return. I hope that helps because without a piece of paper and showing someone on a whiteboard, that’s the best I can do for now.

Mike: Yeah. And that’s good. That helps bring some clarity to it. The other thing that I like that you talk about is the refinance piece, right? And I think that when we have the ability to refinance impulse and capital out of a property, and we can do that tax-free and use all the money during that.

That’s one of those [00:15:00] exit strategies. So when we talk about exit planning, as we did early on in the call is that’s one of those strategies that allows us to access capital to use it all, to go buy another one. Or do something else with,

Michael: right? Absolutely. And you take into consideration and what’s happened specifically in Southern and Northern California and some property that you like.

For example, the duplex that was purchased for $270,000, which is now where $700,000, I can do a re in fact, I’m going through a refinance right now. And go up to 70% on cash out on that duplex as an industry. Seven times seven, so I can go to $490,000, get all of my original investment back and have $200,000 to utilize for the down payment of my next unit in the event that we come to a downmarket in the event.

And I don’t, I remains to be seen on whether we’re going to have a down market and real estate at the moment even with the pandemic circumstance. However that doesn’t mean that it couldn’t be. [00:16:00] And so when that, or when that happens, or if that happens, that at least I’m cash rich and with today’s low interest rates in the 3% range which is lower than it was 10 years ago.

It’ll still cashflow. Yeah, it’s crazy.

Mike: Isn’t it? How do you source deals? What’s your best tools for finding properties that make sense?

Michael: For the two to 40 units I’m I’m very, I’m a very unconventional thought process person. So I use, I utilize bankruptcy attorneys and fiduciaries.

And th and I don’t know if you’ve ever heard that strategy before, but you, but especially it’s works in in areas where there’s appreciated values such as San Diego. And I, what happens is you have someone, they don’t earn enough income. You mentioned that you said at San Diego is a great place to live.

As long as you can make your mortgage. To really play upon that really, as a, as more of a matter of fact bankruptcies do happen because they can’t afford the mortgage payment and the [00:17:00] bankruptcy laws, at least here in San Diego, specifically state that if you have too much equity inside of your property, you’ll be forced to sell your property.

And for me as, and for me as a as a for-profit organization. And I do explain that to the sellers And to the bankruptcy attorney, I’ll provide a way for them instead of, to be instead of being in distress or stress emotionally I’ll provide a way for them to, for me to acquire the property at our outer profit cashflow because typically also because of their emotional state, their they’re just, they’re physical living conditions just aren’t as well, kept up as a lot of people.

So I’ll offer to fix up their living conditions and offer to fix up the residents while they’re living in the residence, as long as I own a contract. And that’s the key, as long as I own the contract too. Then I will do everything I can to make their life better and make their bank can be, they’re already going to a bankruptcy attorney to begin with.

So if I can offer them, make their emotional life better, make their credit life better, make their cash life better at the same time, [00:18:00] then it’s then a lot of these people who live in San Diego county who owned a duplex, triplex or fourplex have a willingness to sell because they’re so bad in their emotional state.

They can’t even keep them.

Mike: Yeah. Yeah. So what it sounds like is you built some good relationships with some attorneys, the fiduciary who’s on the bankruptcy side, or maybe any trustees or people like

Michael: that. I’ve made some friends here in California. Not only do I own multi-family, I actually own some notes as well.

And so under, I can’t help it. I’ve been in the mortgage industry now for almost 25 years. And unlike the traditional loan officer, who’s just looking to get you at the best interest rate, actually, as a student of the industry, I really looked to understand what it meant to be an investor of mortgages and so on.

And diversifying my real estate, not only into a window for multifamily, but also into notes helps me as an investor.

Mike: Okay. All right. Great. So here’s what I’d like you to do. Talk to us a little bit about your planning. One of the things [00:19:00] I talked to our listeners a lot about is pre-planning exit planning.

And that’s all fine. We can write these glorious plans, but then it comes down to execution. So I’d like you to talk a little bit about your planning strategy and then your execution strategy and how you keep yourself true to your plan.

Michael: Sure. No problem. I wrote down a goal about 10 years ago to have about 200 doors to my name here in Sandy.

And if anybody, if you’re in our listeners really understand San Diego, I think most of them do to get to that number in two to four residences can be a challenge financially if you don’t. If you just think that you need to come up with all this money, but with my strategy is that that I do have that number.

To amount, to not only to where I can live and also pay my taxes on that income that I have. But also it can sustain itself for years to come. And so I’m not really looking for an exit strategy because that specific goal allows me to have enough cashflow to continue acquisition. [00:20:00] Not only in its system of how to.

Acquire, not only in its system of cashflow, but also in its in a systematic way that in the event that my children, my grandchildren, my great-grandchildren don’t want to be in real estate, still provides them with the liquidity and an exit strategy and even more a value strategy that are written out for them on the execution of how to keep the cashflow.

Because if they’re. Just a quick secret in my trust in in, in my in my wishes, I said, I wrote that any errors that I have if they don’t, if they don’t have a certain value system in mind when it comes to following the law and I equated that into numerical value then they just don’t get a piece of the, yeah.

Mike: Yeah. Interesting. Yeah. So you gotta be you

Michael: gotta be close. Yeah. And I’ve written out my exit strategy. I mean my death strategy, however you want to say it to, to really, to have my errors to, to inherit the cashflow and, but even more importantly, to have a certain value system and I’ve done that [00:21:00] value system numerically in money and also in.

And so if they’re willing to give and also produce then you know, they can inherit. Nice.

Mike: So if how do you evaluate along the way that you’re on track? You talk about goals a little bit. And how, w how often do you go in and reevaluate those goals? Take a look at your plan. Say I’m on track, I’m off track.

I need to make adjustments. How often do you do.

Michael: I actually do this quarterly and it’s okay. Yeah, because I fail, I have failed in my life. So just because I have some success now doesn’t mean that I hadn’t experienced failure in the past. And I think that it would be foolish to think that even though you have successes in your life financially, it doesn’t mean that you’re S you’re not going to have financial failures in some of the properties that you have, whether it’s with a tenant or whether it’s with a circumstance beyond your control.

Th as I tell a lot of my my clients and friends, money’s not emotional people are. [00:22:00] And so when you, and so when you’re working with money and you’re working with real estate and people, and you’re evaluating your goals, I think it’s real important that you just don’t get too introspective with your failures and you get introspective with your successes, so you can celebrate them and figure out what it is that you’re doing.

And then not get introspective and depressed over what’s going wrong, but really figuring out what it is that you can learn from those lessons so that you don’t do it again.

Mike: That’s a great segue, right? Cause my next question for you is what’s been your biggest shaping moment of your career, right?

So you’re talking, you’re talking about that right now. So if you had to look and say, this is the event that happened, that was really shaped my career and where I want it.

Michael: I’ll tell ya. There’s two of them. Actually, the first one was because I actually didn’t start investing, even though I started in the mortgage industry and real estate in 1996, I didn’t start investing until 2001.

And I remember in 2003 and four, when a lot of my as a mortgage broker, a lot of my clients were saying, you gotta be an investor you’re in this business. How can you not know what’s going on? And as an economist, I looked at that, I looked at it and said I [00:23:00] have people. In colleagues who, they’re reporting $20,000 of income, but their actual income is like $10,000 of income.

And they’re putting it on a loan application, getting a property. They have no business in buying. There’s no way that this house of cards can stack up. Yeah, sure enough. Sure enough. When it came about, because I remember the people were in San Diego, people are financing commercial buildings for 95, for 5%.

And we’re not talking about like small two, three, 400,000. We’re talking about 2 million to $4 million properties. So the over

Mike: leverage really

Michael: can hurt it. It really can. If you don’t understand the market conditions on how you can receive your rents, because I think that a lot of my properties have been financed a hundred percent in my joint ventures.

And just because I buy with the end in mind and when you make money on the buy. Yeah. So

Mike: I like this interview with you because you continually open the next door as we’re having this conversation. So you’re talking about market conditions, right? [00:24:00] So talk a little bit today about market conditions.

Like what you’ve seen pre COVID, we’re in. COVID virus season. We’re not sure if we’re coming out of it or if we’re starting to come out of it and we’re going to take back steps back into it. But what do you see in, in your own estimation, what do you think is going to happen in the next 90 days?

180 days, 12 months.

Michael: Oh boy. That’s that boy. That’s real interesting. That’s like asking me, what do you think the fed federal reserve is going to be doing with interest rates? I answered it the best. I think I can.

In specifically in San Diego county the demand has been really brisk. There’s been a limited amount of inventory, so whatever. So whenever there’s a limited amount of inventory that’s key. Number one to produce seen a sellers market. But even key number two is employment and the hiring of San [00:25:00] Diego has been fairly aggressive.

And so because the there’s local company and he’s here in San Diego, which is becoming a technology and biotechnology hotbed companies like Qualcomm in the telephone industry and Dexcom and the bio and the biotech industry they’ve increased in price and valuation. And so they’ve been hiring engineers.

And people to work here physically in San Diego, especially with Amazon and Google open up centers here in San Diego where it’s cheaper and real estate costs than it is in Northern California. So demand has been, it has been fairly brisk. The people that are leaving San Diego have been lower income.

That’s a little bit of a concern for me right now because you still need service oriented people to work here. And so there’s going to be a need for affordable. And so as more opportunities begin to open up by our local municipalities to open up affordable housing for service workers or lower income workers, or even higher density housing, it’s just going to create more demand for [00:26:00] that as well.

When we talk about five plus units or a hundred plus unit apartment buildings those are going to also increase in value accordingly as well. So in the next 90 days, it’s going to be fairly brisk, 120 days. Rent the rest of the year, also very brisk and San Diego nationwide. I don’t see that happening.

It’s really hard. There’s just not enough industrial production to support household. Does not. When you have an entire oil industry up in the mountains over by, was it North Dakota, South Dakota, and Idaho supporting an oil industry. And you have people all over the United States that are working in that area, going back to their homes.

I, I have, I know of people here in San Diego, they were earning $200,000 a year in the oil industry. No college degree, just work in the fields and they’re not doing that. Same thing when it comes to fishing in Alaska. And and who’s producing who, who, when the slaughterhouses are, who’s producing vegetables.

When you just see the turmoil that’s going on. So if there’s no jobs available and there’s no demand, and there’s less demand [00:27:00] as a result in areas where there’s no technology, we’re going to see some downturn and areas, whether there’s going to be continued technological growth in the demand for those types of jobs, we’re still going to see continue to demand, man.

Mike: So do you think that we’re going to see housing prices drop? Do you think that we’re going to see any type of a glutton or even an uptick in foreclosure opportunities? Things like that?

Michael: I think we learned the first. In 2008, at least in the mortgage industry w how to work through that glut or so on soon.

Being a note investor I know of people right now, they haven’t made a mortgage payment in 12 years still. We’re the Fanny, and Freddy, they’re still working out through that glut and they just in to say that’s going to happen again. We’ll see that, but really more on a regionalized basis.

States like Florida have a different bankruptcy law function as well. So what we see in California, we’re we haven’t seen yet in Florida coming to fruition, we haven’t seen yet in the state of Georgia yet what’s [00:28:00] going to come into fruition, same thing with Alabama. And so looking at bankruptcy laws, looking at how it affects the not only individuals, but corporate and LLCs.

And when it comes to housing will we see the foreclosures? Possibly. We’re just not going to see it as frequently because we’re I just don’t because it’s going to be more on a regionalized basis than a national basis.

Mike: Yeah. Yeah. Thank you for that. I appreciate that. As we’re starting to get close to the end, what advice would you give new to a new investor today?

Michael: Boy, go get a mentor. Go get a coach. And yeah, as a loan officer, I get a call or two or three a day, I wanna, I want to get, I don’t have the money and I want to get into this. Or some people like, I want to have money and get into this. And I’ve coached people with, and without money with zero experience.

Go get someone with experience. Not only someone that may have done the flip, but really someone who’s been doing this for a while, that really understands the [00:29:00] number. I had someone that worked for TD Ameritrade as an analyst come to me invested a hundred thousand dollars. First he put $20,000 as a deposit into a two unit property here in San Diego.

I told them you got to walk away from that project. Leave your $10,000 non-refundable deposit. Yeah. And he went and invested it and on paper, it looks like that he made a profit. Unfortunately he withdraw, he withdrew the money from his IRA. So he had to pay the capital gains on it. So on paper for the property, he made a small profit, but the actual, he took a $30,000 loss, no interest.

So having a financial mentor mind is really not just for knowing how to flip or how to buy, but really starting with that end in mind, knowing it’s for someone that really understands the finances, it’s important that you work with the right tax people, the right finance people and the right mentor.

So that can refer you to those right people and a

Mike: good coach can help you build that team of people around you that can help your business

Michael: thrive. Absolutely.

Mike: So one of the things I said at the beginning is that we [00:30:00] would save a little surprise for them. Sure. One of the things I think we need to talk about with our listeners is your, you are an expert moderator for the game.

I know some of the people might not understand what that game is. So I’m going to just let you tell them about the game and tell them about the moderation. And I’m hoping that we’re going to get a few phone calls after this. And people are going to say, Hey, let’s set this up because I’m really getting excited about doing an online deal with you.

Michael: Sure, no problem. So Sharon Lechter and Robert Kiyosaki developed a board game called cashflow 1 0 1. They developed it. I don’t know maybe what? 30 years ago. Just before the book, rich dad, poor dad came out and the game sell that. So the one, the book, rich dad, poor dad came out. It was used as a marketing tool to actually sell the game.

And so for the last actually 15 years, but more so in the last 10 I’ve been utilizing the game as a moderator. To play with the other people to [00:31:00] teach them the skills of how to be an investor, because you can read a book, you can go to a seminar and you can learn as much as you want online. But one of the things I mentioned earlier was money’s not emotional.

People are. And it doesn’t matter how how black and white you think you are. You’re still gonna, you’re still gonna go with your gut or trust your intuition emotionally on how to make an investment decision. And so what I do in moderating the game is I really introduced the emotional element of how to make how to get a gauge of how you can judge yourself to make investment decisions.

Mike: It is a great learning tool, especially. And not only for a new investor, but a seasoned investor, because I think what it does is it causes you to take a minute and think about where are you. And how to achieve more or to back off if need be

Michael: right? Sure. And when I when I moderated in the board game I’ll teach the various lessons.

For example, contracts create wealth is one of the, is one of the [00:32:00] lessons. And so in the game, I’ll say. Number one, we only play as a joint venture. So the first thing we do before we start the board game is there’s going to be four people playing. There’s going to be six to eight people playing. I said, everybody has to create a joint venture partnership with their partner and we’ll play with four teams or.

And so the first thing is creating a joint venture relationship. What is your responsibility? What is our goal in mind? When doing the game, are we doing just to buy and flip or are we doing it for cashflow purposes? What is our end in mind? The second lesson I, I would teach as the deal deck is always full because we go through scarcity issues.

We don’t have enough money for borrowing. We don’t have enough money for investing. We don’t have enough deals to. And so I’ll teach how to go and to come to me as the moderator saying, okay, I don’t have $120,000 for his $1.2 million apartment building and the board game. So what do I have to do? So I’ll go and I’ll say I’ll why don’t you make me an offer to do a, sell a character.

Why don’t you make me an offer as a lender. So I’ll be the lender. I’ll be the seller [00:33:00] and I’ll help them negotiate to figure out what is it they can do to creatively enter into contracts and into how to make the acquisition if they think they can. If you think you can’t or if you think you can, you’re usually right, either way. Yeah. And so creating those moments. Yeah. And the board game, whether it’s a joint venture or whether it’s a scarcity or whether it’s a confidence or whether it’s an abundance mindset is something that can, I know how to introduce. And I’ve been doing this successfully, not only in person, but even more so as a at doing it as zoom calls.

I’ve had 40 to 50 people play on a zoom call on one board at the same. Yeah, I think

Mike: that’s, what’s really neat about this whole thing is that we can do this on zoom. It can all be done virtually and here’s what even impressed me more is you said you could play a game in an hour. Okay. I’ve played the game, it’s taken eight hours.

What’s interesting is the moderation piece of it, right? So you’re pushing it through.

Michael: So absolutely when we, when you play monopoly or when you play any board game, you’re sitting there going, wow, guess what? In in real life we have contracts and we have escrow periods, [00:34:00] 30 days or 45 days, or even 15 days.

And so I say, great, you’ve, I’m going to read the card. And after the card has finished, you’ve got 30 seconds to make it. And okay. And then 30 seconds are up. All right. That’s great. Your contract period is up. If you like to continue to think about it, that’d be fine. It’s going to cost you 1009. And that, cause that happens in real life as well.

I need an extension on my escrow. Okay. Then you’re then the extension on the escrow is $1,000 and I’ve seen scenarios where, you know, again, starting with the end in mind where the joint venture partnership is at the selling scenario. And one part is we’ve got to sell, we’re making a profit here and the other partner is sitting there going well, I don’t know.

It’s the value going to keep going up? I do the cashflow. Okay. Okay. Your seller, the buyer wants to close escrow and you’re not prepared to so sell it. Guess what? LIS pendens show up. Oh oh, sorry. The buyer wants you to pay for their closing costs for you to extend your ESCO periods as a seller.

And so there, there are different facets that are introduced as a, as an experienced investor that I could bring to, to the buyer [00:35:00] so that to the players. So they understand that there’s a consequence for everything that we do with them. Yeah.

Mike: Interesting. Listen, I want to thank you very much for today.

Today has been very helpful, very informative. If any of our listeners want to get ahold of you, do you want to share your information, how they could do that either to talk about cashflow or to talk about financing or talk to you about.

Michael: Sure absolutely. They can email me. It’s pretty simple.

Michael’s al@yahoo.com, M I C H a E L Z a u@yahoo.com. And if they’d like to send me a text message, they can reach me on my cell phone six one nine eight eight nine eight eight one.

Mike: Perfect. And we’ll have that information on our website, Michael, again, I want to thank you for being here with us today and it’s like I said, you’ve been very helpful, very informative.

We, I think we’ve all learned a few things and we look forward to talking to you down the road. Our our listeners. I hope that this has been helpful for you today. And please, if somebody has an interest in playing cash flow, raise your [00:36:00] hand. Let me know, shoot me an email, shoot me a text and we will put something together and get 20 of us.

40 of us on a zoom call and have a blast. Everybody have a great day and I look forward to working with each one of you. Bye bye now.

Michael: Bye.

Kristen: Thank you, Mike, and thank you for joining us for another great episode of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Join us on social media and visit mycoreintentions.com where you can get expert coaching on all things, multifamily investing in property management.

We’re looking forward to having you back again next week for more Insider Secrets.