Kristen: [00:00:00] Welcome to this edition of Insider Secrets, the weekly podcast that turns real estate investing goals into reality. Each show we interview guests who are seasoned real estate professionals, actively closing, and managing real estate deals. Mike is the founder of My Core Intentions and would like to help you make your real estate investing dreams a reality.

Mike coaches you to buy investment real estate, creating short term cash flow and long-term wealth. Your host and real estate coach, Mike Morawski, has more than 30 years of real estate investing and property management experience. Here’s your host, Mike.

Mike Morawski: Hey, what’s up everybody? Good morning. I hope that you are having a great morning so far. Listen, grab your coffee, and buckle up. You’re going to want to sit tight for this episode. I am super excited about my guest this morning and we’ll get to him in a minute.

But remember, what are you being intentional about? Are you [00:01:00] setting your intentions? Here we are halfway through the year, through the second quarter of 2023. And where are you at your goals and your intentions? We probably set goals at the beginning of the year. And are you closer to them? Are you giving up on them? Where are you at? Are you being intentional? So, I want to support you in that in however I can.

So, if you’re at a place where maybe you’re struggling a little bit, you need a kick in the butt maybe, or you need some help or some guidance. I know today’s episode is going to give that to you, but DM me directly. And I’ll be more than happy to see what I can do to help you.

If you’re new to the show, welcome. I know that you’re going to enjoy today as much as I’m going to enjoy today. And I’m really excited about my guest. I’m going to be joined today by a national best-selling author. His book is “How to Create Lifetime Cashflow through Multifamily Properties: The New [00:02:00] Rules of Multifamily Investing.” He’s the host of Lifetime Cashflow podcast.

Let me introduce Rod Khleif and bring him in. Rod. Good morning. How are you?

Rod Khleif: Good, Mike. Great to see you. I’m looking forward to having some fun today, brother.

Mike Morawski: Yeah, I got a little choked up here introducing you. I’m excited that you’re here. I have a great admiration for you and for the work that you do and how you teach people and.

Rod Khleif: Wow, that’s very kind of you. Very kind of you, buddy. Thank you.

Mike Morawski: Yeah. I’m looking forward to getting in drilling down a little bit here today. Hey, before we get started, I always like to ask one question of my guests and I’m writing a book, and the book is the one word. So, I’d like to know in one word, what best describes you personally and professionally?

Rod Khleif: Passionate. I got that from Tony Robbins. He’s got a quote that says live with passion. And I have that on the wall. I have it on a pillow. When you love what you do, work is play. And when you love what you do, you never work [00:03:00] another day in your life. And when you love what you do, you’re passionate about it.

And in the multifamily space, you’re required to influence people. Investors, sellers, brokers, partners. And if you love what you do and you’re passionate, that influence comes effortlessly because people want to be around passionate people.

Mike Morawski: So, have you always been passionate or is that something that you fell into this multifamily space and just got super passionate about it?

Rod Khleif: Again, I really think it ties into doing what you love. I absolutely love what I do. I never thought I would. It’s funny. I started my podcast seven years ago and I used to tell people, I never sell it, sell you anything. I just want to add value. I want to tell you about my experience, which maybe you’ll give me an opportunity to share in a minute, my story, but I wanted to share that story.

And of course, now I’m a liar because I have boot camps and books and courses and everything else, but I never planned to. You want to make God laugh; you tell him your plans. I absolutely love what I do. We’re changing lives and that’s not hyperbole and that’s not like me trying to sell something.

It’s just the truth. And whenever you give, you receive and we give a [00:04:00] lot, and as a byproduct of that, we receive a lot. And so, it’s just a blessed existence, frankly.

Mike Morawski: Yeah. And that’s awesome. I love that perspective and I’m a huge Tony Robbins fan too. And that’s one of those quotes that’s always stuck with me as well. But talk about your background. So, get to where you’re at and you’ve been doing your podcast seven years. What’d you do before this crazy business?

Rod Khleif: Well, I’m going to go way back if you don’t mind, because I think it’ll lend some framework to what we might enjoy talking about afterwards. So, I’m an immigrant, I’m a Dutch immigrant and, think in fact, I’ve got, hang on one second.

I got my wooden shoes right here because they’re part of a story that I tell. So, you know wooden shoes and windmills, right? But anyway, I immigrated when I was six years old with my brother Albert, my mother’s Vancha and we ended up in Denver, Colorado. And lived there for about 30 years.

But when we first got there really didn’t have much. We didn’t have money, and really struggled financially. I remember eating expired food. My mom shopped at an expired food store. True story. And drinking powdered milk with our cereal in the morning, cause it [00:05:00] was cheaper than real milk.

And trust me, it sounds better than it is. And, wearing clothes from Goodwill and the Salvation Army all the way through junior high school till I was 14, I just got disgusted and lied about my age of Burger King so I could flip burgers and have some money and buy my own clothes. And I’m sure you’ve got listeners that may have grown up in a tougher environment than I did.

I always knew I wanted more. And luckily my mom had an incredible work ethic. So, she babysat kids. We always had a house full of kids and she babysat kids. And with her babysitting money, she was quite an entrepreneur. So, without a formal education, she invested in stock market and IPO successfully, and she also invested in real estate. And her first real estate acquisition was the house right across the street from us when I was about 14.

She paid about 30 grand. And that’s 1974. And then when I was 17, she told me she’d made 20, 000 in her sleep that had gone up in value that much. So, I’m like, what? You made 20 grand. You didn’t do anything. Screw college. I’m getting into real estate. So, I got into real estate, got my real estate license, and still lived in home.

And I was going to be [00:06:00] rich doing real estate. My first-year real estate, I made about eight grand. My second year, maybe 10 grand, but my third year I made over a hundred thousand dollars, which was in 1980 with some pretty decent change. So, what happened between year two and year three that caused me to 10 X my income?

What happened was I met a guy, and I was dating his daughter, and he was the broker that I was working for. I actually had my broker’s license. I got it when I was 18. You could do that with education back then, now they got smart. You need some experience to be a real estate broker, but I was a broker, but I was smart enough to go work for him.

But I was dating his daughter and he taught me about the importance of mindset and psychology. How really 80 to 90 percent of your success in anything is just that your mindset and psychology, only 10 to 20 percent is the technical stuff we talk about on our podcasts. And you know, this Mike, and then of course I spent 20 years following Tony Robbins around the planet and was on his team for quite a while.

And of course, he’s the best in the world at mindset and psychology. And so fast forward to today, I’ve owned over 2000 houses that I’ve rented long term in Colorado and Tennessee and here in Florida. And in 2006, my net worth went [00:07:00] up $17 million while I slept. And you might say, wow.

And I said, wow. And I got a head so big, I could barely fit it through a door. I thought I was a freaking real estate God. And when that happens, God of the universe will give you a nice little smack. Well, that was 2008 and nine. I lost everything into that. I lost $50 million conservatively in 2008 and 2009.

And so, what I’m known for talking about on my podcast and at my boot camps and so on, is really the mindset it took to have 50 million to lose in the first place, but then probably more importantly, the mindset it took to recover from that, to the success that I’m blessed to have today. And I think Mike with the economic headwinds that we’re facing right now, I think mindset and psychology is more important than ever. Because it’s going to be so easy to get sucked into fear.

Don’t get me started on the crap they have on the news. It’s like you don’t even know what to believe anymore. Forget the political component, but there’s just what people need to remember is that the news organizations are not public service organizations. They are for profit organizations, and they don’t make money unless they scare the heck out of you. And so, what I would [00:08:00] tell you is that if you’re watching this or listening to Mike and I, and you’re a leader, you wouldn’t be here if you weren’t a leader.

And I’m going to tell you the world needs leaders now more than ever. And as a leader, you’ve got to pay very close attention to what you’re focused on. You’ve got to minimize as much of that crap on the news as you can and stand guard at the door to your mind. Okay. Just really protect your mood and your attitude and your focus right now and bring in the good stuff.

Anyway, but happy to drill down on some of the strategies I used if you like, to recover or really to have that much money to begin with in the first place.

Mike Morawski: So just a couple comments on, let me unpack a couple of things. First of all, Rod, honestly, I don’t think I’ve watched the news in five years. I can’t buy into that. And I think that this goes back to the mindset thing. Before the show, you and I were talking about raising capital. And it’s a little bit tougher today than it has been in the past. But, if your mind isn’t right, you’re going to quit.

[00:09:00] And the thing that you and I do is we encourage people not to quit. To keep going. And so how do you do that with the people that are in your community and how do you keep them in the game?

Rod Khleif: Got it. Got it. Easy answer. If you come to one of my bootcamps and I’m going to give your peeps an opportunity to come for a song and a dance, I’ve got a three-day bootcamp coming up in Orlando in September, but the first thing we do is goal setting. And on steroids, I call it goal setting on steroids, because how do you get anything if you don’t know what it is?

Okay. You’ve got to figure out what it is that you want and why you want it. And you’ve got to create what Napoleon Hill in his book, think and grow rich, calls a burning desire. You’ve really got to want it. Why? Because that’s how you push through fear. That’s how you push through limiting beliefs.

That’s how you get uncomfortable. We all know the comfort zone’s a nice warm place. We all know nothing freaking grows there. And so let me talk about limiting beliefs for a second. When I immigrated, and this is why I had my wooden shoes here. When I immigrated, I got thrown into school and I found out what bullies were for the [00:10:00] first time.

I didn’t speak English. I was six years old. And then my mom proud Dutch woman that she is, that’d be a great idea to send me to school in these. And these are the actual shoes. Cause we found them when my mom went into assisted living and she put me in these leather shorts, the Germans wear for Oktoberfest, this is also the shorts.

And so, I got my butt kicked again. And then, there were bullies that lived at the end of our street, and she chased him off with a fly swatter. So, the next day I got my butt kicked and, I came up with this belief system that I wasn’t good enough. I used to ask myself, how can I show them I’m good enough?

Which of course presupposed I wasn’t. And a lot of people have these limiting belief systems. So let me talk about that for one second. The belief system’s like, I’m not good enough. I’m not smart enough. I’m not strong enough. I don’t have enough time. I don’t have enough money, whatever.

There’s a reason the acronym for belief systems is BS because 99. 9 percent of them are BS. But we had something happen in our childhood, either consciously or even unconsciously that we believe is factual and it’s not. And so, if you’re listening and you’ve got one of these belief systems that’s holding you back, all I’d ask you to do [00:11:00] is pull it out into the daylight consciously when it pops up and look at it with your adult rational mind and recognize that it’s BS and it will diminish.

I used to be afraid to raise my hand in class. Cause I’d be afraid of getting called on and getting embarrassed. And now I speak in front of thousands of people a year and flip flops. I’ve become more and more free from the opinion of others. And as, because I consciously looked at that and realized that I don’t have to prove anything.

Just do the best I can and that’s it. And so again, but that’s that the goal setting is the answer that starts with that. That is the first step. And being very clear on what you want. People spend more time planning a birthday party than they do designing their lives, doing your goals is designing your life.

And by the way, I do a goal setting workshop every year on New Year’s Day. It’s going across the bottom of the screen here. It says rodslinks.com that’s my link tree. And at the bottom is my goal setting workshop I did the first of this year. There’s also a guide you can download. I’m not going to try to sell you anything if you go there.

And here’s the thing, [00:12:00] if you go there and do it, and I’ll tell you about my bootcamp and if you come into that, you don’t have to do it because we’ll do it there, but if not, then go do it, bring your spouse, have them do it, and see how aligned you are. Do it separately.

It’s with music. It’s professionally done here in my studio. I’m proud of it. Takes about an hour. And you’ll leave juice like you wouldn’t believe. If you’ve got a child that’s over 10 years old, have them do it. My God, how powerful is that? But it starts with goals. And after you’ve done your goals and you’ve really determined why the goals are a must, the why is even more important, the why is what’s going to drive you. And that’s what I help you do. After that, you’ve got to make a decision.

Sometimes it’s the biggest decision of your life. And maybe you’re sitting on the sidelines, knowing you need to do something with your life, you deserve more. And I’m going to tell you, there is incredible opportunity coming. I think that you know what’s going to hit the fan here.

And I think everything’s going on sale. And so, I would tell you. Pick a vehicle, decide how you’re going to capitalize on what’s coming. Maybe it’s buying businesses. Maybe it’s buying some [00:13:00] sort of real estate. If it’s multifamily, I’m going to tell you, get your butt to my bootcamp, but learn it as quickly as you can, because I really believe incredible opportunities coming.

But you got to get up to speed quickly. And make a decision as that’s that first step. And I don’t mean to dip your toe in the water. And I don’t mean one foot in one foot out. I mean, when you decide it is done and a great exam, in fact, the Latin root for the word decision means to cut off.

And so, a great analogy for that would be if you’re going to attack the island in battle, you’re burning your ships because you’re taking their ships home. Then, you know, it’s done, right? That’s a decision. And then after that, you got to take that first step.

Mike Morawski: So, let me ask this. We can get education, we can work on mindset, but what do you feel? And I want you to address the newer multifamily person. The newer multifamily investor coming in the business. What do you think are the three key fundamentals that new person coming in the business today needs to get their arms around in order to be successful?

Rod Khleif: Okay. I just gave you two of them.

Get clear on what you want, why [00:14:00] you want it, make a decision. So, you actually go do something. And the third one is take that first step. I’m going to tell you because so many people will, and a lot of people in our business are very analytical and you know who you are, if you’re listening or watching, and you have to check off every single box before you make a move.

And I will tell you, you are some of the most successful people we have in this business. And the hardest get to actually go do it. Okay. And so, if that’s you, just, let me say this to you, recognize that you can drive all the way across the United States at night with your headlights, only seeing 50 feet in front of you.

And you know you’ll make it, you may have some obstacles, but you know other people have done it before you. You can’t see the whole road, but you know, you’ll make it. It’s the same thing with doing this multifamily business or any business for that matter. Dr. Martin Luther’s King said, “You take that first step in faith.”

The next step will be revealed. Lao Tzu said the journey of a thousand miles begins with a single step. But you got to take it and you don’t have to see the whole road, know everything, know everybody to [00:15:00] do it. My most successful students by far. And I have a coaching program that called My Warriors and something I’m super proud of.

I’ve only been teaching five years. My students now own, we believe around 170,000 units. And we’re doing a count right now. We’re over 160 and I’m fairly certain we’re going to be over 170. So I’m really proud of that. And I believe that’s because, I spend time pushing them to actually take action with what they learn.

If you come to my bootcamp, I’ll spend time on mindset, and that’s why they’re successful because they actually do it. It’s so easy to get caught up in the technical side of things and not actually take action. And then, so those are the first three. Let me mention a couple more.

The next piece I would say is play to your strengths. As you know, Mike, the multifamily real estate game, you can wear multiple hats and it’s a team sport. It’s not something you’re going to do on your own. You’re not going to buy a $10, 20, 30 million asset on your own. You’re going to have partners and it’s a team sport, but there’s multiple different hats that have to be worn.

There’s the person that’s outgoing and the mouthpiece that’s building relationships with investors and partners and sellers, and [00:16:00] that’s like you and I, Mike. And then there’s the analytical person that love spreadsheets that you can throw them in a room with a spreadsheet and throw raw meat in once in a while, and they’re thrilled. And there’s that person that underwrites the deals.

And then there’s also the asset management piece. So maybe you’ve got some project management experience or some construction experience or just manager experience in general, because that’s a requirement. Because these assets get held for multiple years and you got to manage the management companies.

And so a lot of hats you can wear, but you got to play to your strengths. Because if you’re playing to your strengths, it’s what I said earlier, you’re gonna love what you do. Like I do. You never work another day in your life. ’cause work is play. If you hit an obstacle, it’s easy to get past it because you’re loving what you’re doing.

And most importantly, you’re passionate about it. And if you’re passionate about it, you’ll be able to influence people. And so that next piece would be play to your strengths. And I could keep going, but if you want to throw in a question.

Mike Morawski: Give me something technical, is it underwriting, is it raising capital?

Rod Khleif: It’s figuring out your strength and focusing on that. Okay. That’s the technical thing. With my warriors, my [00:17:00] coaching students, what they do is I tell them figure out what your superpower is. Bring that to a team because in this business, you will align with somebody that’s already done it so that when you approach a broker, you can lean on their experience.

You can say, “we”, you can use the we word we own 500 doors or whatever it is. That’s how everybody starts. They align with the team that’s already done it. And that’s why my programs like mine are so powerful because they’re easy to dozens and dozens of those people there that you can align with, but then you’ve got to decide what you’re going to bring to the table. And I tell people the two most obvious, easiest ways to get aligned with the team or bring a deal or bring money, raise money or bring a deal.

Those are the two most obvious ways. Now, if you’re going to raise money, you can’t just raise money. You actually have to be involved in the deal. We go on that in great detail at my boot camp. But the point is, that’s the fastest way to get ingrained with a team. And so if you’re not interested in coming to my bootcamp, can I throw my bootcamp in here real quick where it is and what, okay.

Okay. So it’s in September. It’s September 15th through the 17th. It’s in Orlando. It’s [00:18:00] three days. It’s not a big sales pitch. I will talk about my coaching for 30 minutes. All the rest of the three days is full on drinking through a fire hose. So bring your A game if you come. And if you go to Rod’s links, you’ll see my bootcamp site there.

Use the code M I K E and you come for $197. Yes, for three days. And I could charge 3000 and you think you got a good deal. That’s so I’m not kidding. It’s that much value and people rave about it. In fact, go to that multifamily bootcamp site at Rod’s links and go to the bottom.

You’ll see the hundreds of unsolicited comments and testimonials. But we teach every aspect of the business there. Finding deals, finding money, raising money, financing, syndication, property management, you name it. And I have three panels each day. But probably be about 3 billion represented by the panelists I have on stage to answer your questions.

Most of them are my students and it’s a blast. We have a great time. And so again, Rod’slinks.Com use the code Mike. When you get to the bootcamp site, you come for $197 and I promise you’ll be glad you came. In fact, if you don’t [00:19:00] love it, I’ll give you your money back. I don’t mean like it.

It’s come for three days. You don’t love it. Let me know. I’ll give you your money back. But anyway, so that’s my bootcamp. And like I said, first thing we do is goal setting, because it starts with knowing what you want, and then we just take it away from there.

Mike Morawski: So I have it on my calendar and I had it on my calendar before we had this podcast. And now you’ve got me even more excited. So I’m going to encourage my audience. Hey. You know what? Go to Orlando, check this thing out for a couple of days because I know you’re going to walk away. Just listen to Rod’s passion right now and how he expresses the business. And that’s really important.

Rod Khleif: You’ll be juiced. You will be so juiced. You’ll be coming out of your skin. I’m just telling you. And you’ll have the framework, you’ll have everything you need to go take action. Period. You will, I promise you. In fact, I’ve got the manual behind me here. It’ll take me time to find it.

It’s about that thick. It’s about two inches thick. Again, it’s drinking through a fire hose. Bring your A game. I’ll bring mine, but it’s a blast. And you’ll meet probably upwards of a 1000 [00:20:00] people, like minded people that aren’t afraid. Let’s talk about that for a second.

Another really important piece is your peer group. Especially in what’s coming. And if you’re around people that out of their fear or their limiting beliefs, their fear of failure, their fear of rejection, their fear of being humiliated if you succeed, they may hold you back out of your fears.

And so I’m going to tell you, your peer group is critical. And so many people default to a peer group of that they went to school with, or that they work with not thinking about where they want to take their lives. And so if you come to this group, this is a peer group that wants success. They want you to be successful and that’s what you need to find. If you don’t come to my thing. Then find a group like that where you live. So you’re around people that aren’t afraid of what you want, because I’m going to tell you. If you’re around these naysayers, they can crush your dreams. And sometimes it’s family. And I will tell you, love your family, but choose your peers proactively, super important.

Mike Morawski: Napoleon Hill said, you are as smart as the five people you hang out with. I heard somebody say this the other day, and I thought this was classic. If [00:21:00] you went and listed out the five people that are closest to you, and you write down their average income, but also write down their body fat, and now take an average, and then take a look at it against yours, and is that where you want to be, or where you want to go, and who maybe shouldn’t be on that list.

[00:22:00]

Rod Khleif: And their happiness. I’m going to tell you that as well. You show me your three best friends. I’ll show you who you are. I’m just tell you right now, happiness, your lifestyle, your health and your finances, because that’s the way it works. And that’s why you got to be so careful with your kids, who they hang out with, because who you hang out with is who you become. Choose carefully.

Mike Morawski: And the other thing I tell people too, is I say, if you walk in a room and you’re the smartest person in there, you’re in the wrong room. So obviously, if we’re going to walk into a room with a thousand people in Orlando, you’re not going to be the smartest person in the room. So even I’m going to go because I want to learn.

And I’ve been doing this business 30 years. I started out as a residential sales agent and it’s amazing to me how much you continue to learn while you’re in the business. Just some things from you today.

Rod Khleif: I learn on stage. I will tell you, I learned when I’m on stage. And I host a mastermind. It’s the largest in the world, I believe for multifamily operators is probably somewhere between [00:23:00] 35 and 45 billion in assets in there. And I set it up because I want to be around people that think what I think is hard is easy. So I had 16 people come to my house here. I got one or 2 billion in assets at that time.

And now it’s grown into this big thing. I’m not sure how much further I’m going to take it, but it’s been a lot of fun. We meet three times a year. And these are high level people, five, 10, 20, 000 doors a piece. What you just said, I don’t want to be the smartest guy in the room.

And there are things, lots of things I don’t know. And I want to be around people that think what I think is hard is easy. And so what I would tell you listening or watching is find a group like that. Find a group that’s making things happen. That’s what you want to be around or build one. And it’s very powerful.

Mike Morawski: It’s about your community. So you just made me, I told you we’d wind up in some rabbit holes. So I got to ask, what’s your future plan? What’s your future goal?

Rod Khleif: I’m in a lot of cash right now. I really believe there’s an incredible opportunity coming. We are headed for some pain in this country Mike, and I’ve got a couple headlines here. This is this month’s Forbes.

Let’s not even [00:24:00] talk about office. The office occupancy in the country is at about 70%. And I got the main cities here. It’s 67 and some 73. Average 70%. These assets don’t break even if they’re not 85, 90 percent occupied. And so there’s a lot of bad debt coming and there’s a lot of banks, a third of all commercial real estate’s held by banks.

And so there’s going to be some accountability, but I think there’s going to be some incredible opportunities. Same with multifamily. A lot of these operators got bridged at these last few years and right now if you’ve got bridged it, that’s coming due this 1. 6 trillion in debt coming due by the end of next year. You either have to sell or you have to refinance. Well, first quarter of this year was a 75 percent year over year decline in sales, and we know what’s happening in refinance. The interest rates are crazy. You can’t get the debt service coverage ratios you need, which is the property’s ability to service the debt and the rate caps are crazy.

Mike Morawski: Yet sellers are still crazy with their pricing.

Rod Khleif: I know. I’m telling you. I know.

Mike Morawski: The bid ask is just like this.

Rod Khleif: It’s still stupid. It’s [00:25:00] still stupid. But I think it’s coming, Mike. I really do.

Mike Morawski: Let me ask you this about office because I think this is an interesting space for a multifamily guy, right? Is what’s the retrofit for office?

Rod Khleif: Yeah, it’s so hard and it’s so expensive. It’s so challenging because there are a lot of factors that come into play. The floor depth, the plumbing that’s there. And it’s not easy. It’s in fact, in many cases, it’s easier just to build from the ground up.

So I don’t think that’s going to be a long term solution, Mike. I really don’t. I hate to say it. I think we’re going to see a lot of office buildings that end up getting scraped or whatever. And I just read an article today in a commercial real estate. I get lots of commercial real estate notifications by email every day. And it said, they don’t think the office environment is going to get back to normal. I think they said till 2040.

Mike Morawski: 40. I saw that this morning. That was crazy.

Rod Khleif: Okay. Yeah. Yeah. So there you go. But see, here’s why that’s a big deal. Cause none of us own office, but that debt is held by banks. So I think there’s going to be bank failures. I really [00:26:00] do, a bunch coming. And so I think that’s coming. I’ve got a headline here, more than 20 million us households are behind on their utility bills. 20 million households behind on utility bills. So, listen, I don’t want to scare you if you’re listening.

Elon Musk said, everyone’s lying, a bigger crash is coming as one of the smartest guys on the planet. And so even Buffett is preparing for a market downturn. I think I’ve got these because I talk about this a lot because I want you to get prepared because it’s coming and there’s going to be opportunity. And then people’s like, they’ll ask me, should I wait to buy? No, I’ve got LOIs in on three deals right now. Letters of intents on three deals.

It’s all empirical. This business is numbers. If the numbers make sense, then go for it. I know you’ve got a deal you’re raising money for right now, that portfolio you told me about. But I think there will be exponential deals coming. I really believe that. And I’m excited about it.

Mike Morawski: I think you’re right. There’s definitely some blood in the street right now. And there’s going to be more, and that opportunity pool is going to be big, but you mentioned it. This deal that I’m doing right [00:27:00] now makes sense for today’s environment, right? Where do you see rent growth going?

Rod Khleif: I think it’s going to flatline. It already has. In fact, I think this month or last month was the first time they had a national average decline. Now there are pockets that are still doing quite well. We’re still crushing it in San Antonio. We’re getting hurt in Nashville, because of absorption, there’s a lot of new stuff there. It’s a great market, but that we had to drop our rents a little bit there. I think it’s geographically specific.

But, in our pro formas right now, we’re showing zero rent growth, organic rent growth year one, and then 3 percent thereafter. And that’s very modest. That’s very conservative, but I think the fed has said they’re going to raise rates more. Elon Musk was quoted as saying if they don’t drop the rates immediately, the crash will be massive.

Well, they’re not dropping the rates. They’re going to continue to go up. Don’t get me started. I don’t want to go down that political rabbit hole about that stupidity. But it’s pretty freaking stupid what’s going on administratively.

Mike Morawski: It’s like children playing adult [00:28:00] games.

Rod Khleif: Yeah, great way to describe what’s happening in this country right now. We’ll be careful there but.

Mike Morawski: Do you have a market that you like the best right now? Moving forward?

Rod Khleif: Good question. Yeah. Good question. So I’ve got assets, quite a few assets in Texas, several communities in Dallas, San Antonio, Houston. We have assets in Ohio, Florida, North Carolina, South Carolina, Georgia.

But I will tell you, we just had a screaming deal in Louisiana, screaming deal. But the insurance killed it. This guy was paying 500 a unit and we got quoted 3000 or 2500 a unit per year. It’s just crazy. And Florida is the same way. Florida has got crazy insurance rates. We are targeting out of the insurance, heavy insurance zones, Atlanta to Nashville to Birmingham, that kind of quadrant there, and just Ohio and just Indianapolis, places where the insurance is not stupid.

Now that said, if you can find a deal in a Florida or even [00:29:00] Texas. We’re getting killed in Texas too. If you can find a deal there that pencils at today’s stupid insurance rates, they will settle down and they will get back to normal or maybe not quite where they were before but they will settle down.

Mike Morawski: Listen, I have a deal in florida. I underwrote it at 850 a unit. The owner was paying two something. I underwrote it at 850. When we reach that bump to 1550.

Rod Khleif: Yep. There you go. There you go.

Mike Morawski: How do you do that?

Rod Khleif: The problem is penciling that deal out. And that really kills your NOI, kills your net operating income. And that’s another reason that a lot of operators are struggling right now. Not just the ones that have bridge debt, there’s 1. 6 trillion, like I said of debt coming due by the end of next year. But, the bridge debt ones are getting killed because their rates went up. But the insurance is killing them too.

I just got an email today from somebody I know that said, it’s a warrior, one of my students that invested passively in somebody’s deal. That’s in big trouble. And so I’ve found some rescue capital and some resources for them. And [00:30:00] we’re doing coaching calls about how to do a capital call with your investors. And luckily I don’t have any of my warriors in trouble personally on their own GP deals that I know of yet, but I’m making all sorts of moves to protect. Because, if they got bridge debt, they’re probably struggling. And then if insurance on top of that, good God, it’s a double edged sword.

Mike Morawski: What do you think the best debt out there to find today is?

Rod Khleif: I like Freddy 10 year fixed. Five years I owe, five years fixed. That’s what we did in our last two deals. Of course the first, the one we did a year ago was 3.2 percent and now we’re at 5.4. But who cares? The numbers still are fantastic. Those deals were so great. They were both 50, 50 on the backend because the numbers were so fantastic.

Mike Morawski: I find it interesting that these guys, 18 months ago that were telling, Hey, do floating rate debt and buy a cap. And those caps that were 30, 000 are now 3 million to buy that cap. And so they work for the cap. And now those are the ones that are in trouble.

Rod Khleif: Not just them. And not just them, a 2 [00:31:00] percent rate increase is a big deal, especially on a tight deal that you’re still in the value add process. And rents have flatlined in some markets and you had your interest rate go up and then you had insurance on top of that.

And if you didn’t raise operating reserves, like we do six months of expenses as operating reserves as an absolute minimum. And if you don’t have any cash or any liquidity, and your loads come and do or your debt service coverage ratio just got obliterated. And by the way, those of you don’t know what that means, in single family and residential real estate, the bank is going to look at your ability to service the debt, your debt to income, et cetera.

In commercial, they look at the property’s ability to service the debt. And so we have, it’s called a debt service coverage ratio, DSCR. And an example of that is let’s say that your income on a property is 125, 000 a year. This is an annual number, by the way, 125, 000, that’s your income.

And let’s say your debt totaled up for the year, your mortgage payments are a hundred thousand. That’s a 1. 25 percent debt service coverage ratio, which is pretty much the minimum for any decent financing. And so again, when that rate [00:32:00] goes up, and your cost of debt goes up. And then there’s the other thing is it, the water’s going out right now and we’re going to see who’s naked and when it goes out. Because, there are a lot of operators that got into the business that were brand new, they’re wet behind the ears.

I don’t know if you read the wall street journal. About that 3, 000, 3, 400 units in Houston that went into foreclosure. And one of my competitors, students, and just a horrible situation, tens of millions of dollars of investor money lost.

Mike Morawski: There’s other mechanics behind that, that went on.

Rod Khleif: That was a nefarious character. I heard he took money and ran to India is what I heard. Last thing I heard.

Mike Morawski: Yeah, there were some other fundamentals that were way out of line.

Rod Khleif: Yeah. But it’s a black eye for the industry. I hated seeing that in the wall street journal. Cause that’s going to scare investors. They’re thinking other operators are like that. But there are a lot of wet behind the ear operators out there that have an asset managed through a downturn are not paying attention to their KPIs, their metrics, and that’s another component of this. And again, I’m not trying to scare anybody.

I’m getting excited because I think there’s going to be [00:33:00] opportunity to pick up. I just started a fund. It’ll be an opportunity fund and to capitalize on some of this stuff to find some of these deals. In 2008, 2009, I got crushed by the wave. I’m going to surf that wave this time.

Mike Morawski: You’re 50 million. I doubled that.

Rod Khleif: Really? You lost a hundred million?

Mike Morawski: I did.

Rod Khleif: Holy cow. You’re the first one I’ve ever met that lost more than me, Mike, this is a historic moment for me. Wow. I feel better about myself now. Thank you.

Mike Morawski: I thought you knew that because I thought you.. .

Rod Khleif: I did not know that. No.

Mike Morawski: So we’ll have to circle up and talk about that.

Rod Khleif: Yeah, this is the first time I’ve met somebody. I tell people on my podcast, if you ever meet somebody lost more than I did, send them my way. I want to meet them. Wow. There you go.

Mike Morawski: Listen, I don’t wear it as a badge of honor. It’s not a badge of honor, but here’s what it did is it taught me five primary lessons that I say, Hey, Look, I’ve made the mistakes. I know what not to do today in this environment.

Rod Khleif: Same here. Same, same. I give t shirts away at my bootcamps [00:34:00] that say, hashtag ask me how I know. Cause I’m always saying, don’t do that. Ask me how I know. And one of my students got the shirt. Now we haven’t printed and give them away just because it’s funny. But yeah, I don’t wear it as a badge of honor either.

And it was horrible when I’m sure as it was for you. But you learn from it and I educate from it as to what not to do. I know what I didn’t do right. I didn’t pay attention to tenant demographics. I was too spread out. I didn’t really focus on cashflow. In fact, the subtitle of my book is the new rules of real estate investing. IE, the new rules are, don’t tell me if you can buy a property for several million less than the guy before you paid for it. What’s the cashflow? It’s all about cashflow. And especially in where we’re headed.

Mike Morawski: The cash flow offsets the..

Rod Khleif: If the cash flows there, you can survive anything. Honestly, if the cash flows there, you can survive anything. It’s all about cash flow in my opinion.

Mike Morawski: And you can meet those rising insurance rates with good cash flow.

Rod Khleif: Yeah. Yeah.

Mike Morawski: Listen, one last thing before we go, what are you telling people today who are syndicating multifamily deals and they’re out raising capital [00:35:00] or talking to the LP, the limited partner about bringing capital into a deal? Somebody who’s got one of your students, one of your warriors, who’s got a live deal out there today. How are you coaching them about raising capital today?

Rod Khleif: I did a whole four hour masterclass on this. I don’t think it’s on my link tree. If you go to my Rod Khleif official page and you hunt, you can find it. It’s still there, but it’s four hours on raising capital, everything from branding to positioning yourself, to the nuances of what you can legally do, can’t legally do.

But that said, this is a tougher time and that’s why right now is not a time to be aggressive, and have these pie in the sky estimates for rent growth. And not be raising lots of extra cash just to weather the storm and candidly, and having fixed rate long term debt, 10 year debt right now.

Or I know you’re assuming some low term debt that has seven, eight years on it, which is fantastic. That’s another strategy for sure is, cause there’s a lot of debt that’s low [00:36:00] like that we’re looking at asset right now in Tampa that has 3 percent debt that we might get.

But raising money is harder because investors are scared. And you can go to a bank now and get savings, high interest savings, about 4%, 4 or 5%. And so you’ve got to compete with that as well. But here’s the thing. If you find a good deal in multifamily, you can probably show a 15 percent ultimate return on a deal, or maybe even a little more than that and 8 percent preferred return.

So you can beat that. And there’s nothing more conservative than multifamily. Within rent succeeded pre crash levels in the 08, 09 crash in less than three years of that crash, they exceeded the pre crash level. And when COVID hit. Other asset classes didn’t get help. Industrial, retail, warehouse, self storage. They didn’t get help. We got hundreds of thousands of dollars in rent assistance because people have to have a place to live.

And we’re becoming a renter nation. This country is becoming a renter nation. So multifamily is a fantastic asset class. Why I love it. But right now you can’t be aggressive. You have to be conservative. And if you’re trying to raise money and you’ve got a deal that makes sense, [00:37:00] it’s got to make sense. And you weren’t too aggressive. You were conservative in your numbers and conservative in your debt. Go kick butt. You’ll be able to raise money.

Mike Morawski: After losing 50 or a hundred million dollars, conservative is like a way of life today.

Rod Khleif: Yes it is.

Mike Morawski: Hey, listen, this has been awesome. I appreciate you.

Rod Khleif: Oh, thanks brother.

Mike Morawski: I know we’ve been trying to get together for a while and thanks for your graciousness of being here.

Rod Khleif: That was a lot of fun, buddy. I appreciate it. Like I said, I had no idea you had that kind of a loss yourself. I actually do want to talk to you about that, find out what happened to you, but wow.

Mike Morawski: Yeah, there’s some history around that. Hey, listen, a couple of bonus questions. Best book you ever read?

Rod Khleif: Let me do better than that because my love language is gifts. And so there’s the book, the five love languages. I was blessed to have the author on my show. Cause I’ve literally given away a couple thousand copies of that book. If you love anybody, get that book. Cause you need to give them love in the way they feel it.

But so as a result, my love language is gifts. My warriors get tons of books from me. So let me name a few of them. “The Slight Edge” about those decisions that you make every day that don’t mean much that day, but [00:38:00] over time they traject your life up or down. Another one is Hal Elrod’s “Miracle Morning”.

I was blessed to be able to have him on the show. A beautiful human being. “Turning Pro” by Steve Pressman about becoming a professional. Stop being a fricking amateur. Put on your professional hat turning pro. Gary Keller’s “One Thing” I was blessed to have his coauthor, Jay Papasan on the show.

Incredible book. There’s a few. Think and Grow Rich, obviously, is the mainstay to all self improvement, self actualization. I’ve given away, I’m not exaggerating, close to 4,000 copies of that book.

Mike Morawski: Yeah, good for you. That’s that giving back. That’s that spirit you have. People enjoy you. Listen, I need to know your most favorite restaurant.

Rod Khleif: Okay. I wasn’t ready for that one. Favorite restaurant. Wow. God, there used to be one in Hawaii. I don’t even think it’s there anymore. It was called John Dominus. It was on the water. This was in Honolulu. Gosh, it’s been 30 years since I’ve been there, but I love Burns Steakhouse in Tampa. And the reason I love it is they have [00:39:00] all these different caviars and aren’t stupid expensive that you can try. And they have their own farm for steak and they have tanks with trout for fish. But what’s really cool is on the top floor, they have a dessert restaurant just for desserts.

And you have your own private room. And some of them are big wine casts that they turn into rooms. You can play different music in your room. You can get port from the year you were born, whatever they have. By the way, they have the largest private restaurant owned wine cellar, I think in the world.

 So you can get pretty much anything you want, but the desserts are off the hook. Literally, I’m comatose after I eat there. I have to have somebody drive me home.

Mike Morawski: Sounds like you’ve been there for a couple of closing.

Rod Khleif: I have. I have. Yes.

Mike Morawski: I always tell the broker, I say, Hey, where are we going for steak?

Rod Khleif: That’s right. That’s right.

Mike Morawski: Hey, listen, this has been awesome. Thank you very much. Tell people how they connect with you again, Rod?

Rod Khleif: Yeah. Yeah. If you go to that rodslinks.Com, it’s got my Podcast there. By the way, you can get my number one, bestselling book for free. Oh, you pay the shipping. It’s like six bucks, but it’s [00:40:00] quality book. And there were a bunch of other free books there as well you can get by PDF that are honestly, a couple of our best in class asset management, property management at Rod’s links. And if you just ping me on any social, I’ll answer your question.

Remember, if you’re seriously interested in this business. Get your butt to my bootcamp. I promise you’ll be glad you came for $197. It’s a duh, seriously. But you got to use the code Mike to get that price. It’ll be about six to 800 by the time the bootcamp comes around.

It’s a little more than that now, but it’s $197 if you can come. And you get my document library. That’s right. And you get my deal evaluator software, which is fantastic. It’s just something one of the people on my team created. It’s better than anything out there. And you get that for free too. So again, those two things are worth thousands of dollars.

Mike Morawski: Rod, tell everybody when the date of the bootcamp is?

Rod Khleif: Yeah, it’s September 15th through the 17th. It’s a Friday, Saturday, Sunday, and it’s full on. So like I said, bring your A game, but Orlando’s a blast anyway. Bring your family if you can, you’ll have fun.

Mike Morawski: And I can’t wait for that VIP seat.

Rod Khleif: That’s right. [00:41:00] We’ll see you there.

Mike Morawski: I’m going to move you out. I’m going to say goodbye. And if you hang with me for a minute, that’d be great.

Rod Khleif: All right.

Mike Morawski: Hey, everybody. Wow. I am overwhelmed. You know what? It’s not me to get speechless from time to time. I’m really happy with today’s show and I learned, I don’t know, five or six things that I’ve written down about not just the markets and mindset but fundamentals, right? Fundamentally, how to move forward in this business.

Hey, if you’re new, follow us on social media, whether it’s Instagram, Twitter, LinkedIn, wherever you are, you’re going to find us there. Always bringing out new content, great guests like Rod to bring more information to you to help you stay encouraged to learn more and grow your multifamily business. If I can do anything for anybody, please reach out. Just send me an email if you want a copy of Rod’s book. He told you how to go get that, get to his boot camp, [00:42:00] use that coupon code Mike. And I look forward to talking to you soon and everybody have a great week.

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 MyCoreIntentions. Wherever you hang out on social media, you will find Mike and MyCoreIntentions. Please like and follow us to get the most up to date real estate investing trends.

Visit mycoreintentions.Com where you can get expert coaching on all things real estate investing and property management. If you’re looking to become an expert, Mike’s coaching will help you scale your real estate investment business. We’re looking forward to having you back again next week for more Insider Secrets.