#100: The Evolution of REI

Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and your investing with The Accelerated Investor Podcast. 

Josh: So, hey, welcome back to the 100th episode of Accelerated Investor. I am really excited to be with all of our listeners and students and clients, borrowers, friends and family around the world for our 100th episode of Accelerated Investor. To give you a little bit of backdrop, we started podcasting I think in 2000, dude, it was a long time ago. 2013, 2014.  Ramey: I think the 1900’s.

Josh: Yeah, 1900’s. The stone ages, the ice ages. We started podcasting. We started recording podcasts. It was me, Ramey, and my guest today, Kyle Garifo, who’s our head coach and strategic real estate coach and a super successful investor out of, is it Lake of the Hills? 

Kyle: It is Lake of the Hills.

Josh: Yeah, Lake of the Hills, Illinois. Kyle Garifo. Kyle what’s up man? Thanks for jumping on.

Kyle: Thanks for having me. 100th episodes.

Josh: 100th episode. I wanted to invite Kyle because we originally started the three of us, me, Ramey and Kyle. We started Strategic Real Estate Coach Radio in like 2013, 14. And we had awesome guests. We had Michael Blanc when he was like totally new to  apartments. We had a bunch of successful investors on. And then it was so awesome that we stopped doing it. We just lost focus. We were focusing on other things and we stopped doing the podcast and then about a year ago Ramey and I said, you know, we really got a, podcasting is huge now. We were like five years ahead of the podcasting craze back in 2013. And Kyle was interviewing some of our people and I was interviewing them and it was fun, but it was really like, you know, not planned out well. And we really just were kind of ham and egging it, as we like to say. And now we’ve, we’ve kind of grown up a little bit and now there’s a lot more competition in the podcasting space. 

Josh: But we relaunched Strategic Real Estate Coach Radio as Accelerated Investor podcast and it’s been wildly successful. We’ve had amazing people on and it’s been super fun. And so Kyle and I wanted to hop back on our 100th episode and reminisce a little bit about some of the ups and downs and some of the amazing times we’ve had with our live events and with our students. And then talk a little bit about some of our most successful students and what are some of the characteristics that they have. So Kyle has been with me since like, 2008, 2010 or something like that, right Kyle? Your first… 

Kyle: Whatever that event was in Dallas. That was what, 09, maybe 2008.

Josh: Yeah. Two. Yeah, 2009 it was a short sale event. I think we did that one with REI club. REIClub.com was a cosponsor of that event. And primarily at that time still doing short  sales. We were right in the middle of the foreclosure crisis and short sales and pre- foreclosures were everywhere. And Kyle so think back to that moment, like what was on  your mind, what was on your, what were you thinking like about the fears, the challenges of just getting going in your real estate business right in the middle of a foreclosure crisis. And the reason why I ask is because many people think that we might be at the top of a market and a recession is looming. 

Josh: I don’t think we’re going to have some massive, you know, economic Armageddon like we did in 2007, 08, 09. But, you know, some people might be afraid that we’re at the top of a market and there might be, you know, a bunch of foreclosures coming in the next year or two. But what was your thought back then considering you basically quit your job right in the middle of a massive recession, right in the middle of a… 

Kyle: How smart was that?

Josh: Yeah, right. Well it seems, it seems like things worked out pretty good over time. What  was on your mind back then? 

Kyle: Yeah, as you bring up. Yeah. I literally quit on a Thursday, I think it was April 21st of 2007 and bought a house on Monday. That’s really how it worked for me. That’s not a made up story, it truly is the case. I got a little harassment from my people at work. They said, who quits on a Thursday, right? Like, normally if you’re going to quit, you do it on Friday. I said, no, I quit on Thursday I need a day off. You know, I bought a house Monday. So that was in 2007 for me, kind of right before everything hit the fan, you know, and I bought my first foreclosure at that point in time. For me it was about survival mean. I  know that I didn’t want to do, I was a clinical therapist for 10 years. I just didn’t want to do that anymore. 

Kyle: The hours sucked, the pay sucked. I just started having kids. Just everything was kind of a culmination of events that just didn’t work for me anymore. And again, I’m a product of watching too many shows on HGTV. That’s really what it was. Now, there’s so many more shows on HGTV then there was even back then, but there were flipping shows even then. And I, you know, I just said, how hard could this be? But I didn’t really look at the market. I didn’t know enough about the market. I didn’t really know what was going on. I wasn’t following necessarily the financial world of what was happening like what I do now. And no one predicted what was going to happen in 2008. And if they did, then, you know, there are people, I guess who did and made a lot of money on it.

Kyle: But for me it was a really about survival. It was about what can I do to try to make money. And you know, that first flip was it was a nightmare. And I literally made you know, $1,800 bucks I think after seven months of doing it and I did all the work myself and learn how to put in hardwood flooring and cabinets and all that. So it was a great learning experience for me. But it was scary, man. It was scary because I knew then when we had the financial crisis and the housing, you know, bust. I was able to escape, thank God and sell that house, but literally made no money. You know, I brought, I remember bringing that check home to my wife and I was all happy because I made a check and she’s like… 

Josh: Is this it?

Kyle: There’s a few zeros missing on the end of that, right. I’m going, what are you talking about, you know, it’s $1,800 bucks. That’s more than I’ve made in six months. So for me, like I said, it was about survival. I just had to figure out what I was going to do. And luckily, you know, 12 years later I’m still in the business. I’m not employed by anybody, which is great, so. 

Josh: Yeah. Yeah. I think about when I got started man, like I just remember feeling so like satisfied, like not passionate for the financial planning world anymore. Prospecting at night and cold calling and getting referrals and getting porched, getting left on someone’s porch at 10:00 PM in the rain when they no showed an appointment and, you know, and then thinking like, I want to do this real estate thing, but I was like, ah, I’m so like scared. What if it doesn’t work? Back then there was like no private money. There was like, you know, hard money lenders like almost didn’t exist. There was none of this crowd funding. There was none of these private placement PPM stuff. Like nobody talked about that. And so I really didn’t have any clue how to like structure a deal like or find private money. So like we had to wholesale, we were looking for REO’s online. 

Josh: We’re walking through houses and even when we’re walking through houses and I remember thinking like even if we make an offer, like how the hell are we going to buy this thing? We don’t have any money to do it. We don’t have any money to get financing. So I mean luckily we stumbled into short sales and pre-foreclosures when we could flip houses back to back closings in the same day. And wholesale properties  through A to B, B to C transaction. We got really good at that and that to thousands and thousands of people over the next 10 years. But I think, Kyle when I think about it, we were talking about this before we got going here with the recording was there’s a couple of things about real estate that never change. And then the rest of it seems to always change. Like some of the things that don’t change is just the concept of people get wealthy buying and holding. 

Josh: Like I think it was a T Harv Eker, one of the guys that had the famous quote that said, you don’t wait to buy real estate. You buy real estate and wait. And now like I look at some of the rental properties that I own and there’s so much, a huge portion of the mortgage payment is going towards principal and I’m seeing the mortgage just, you know, I have a bunch of properties that are paid off and then I have other properties that are about to be paid off. And I’m thinking like the whole plan I put together to put my kids through college, you know, 10 years ago is actually happening. You know, like, so that concept never changes of buy real estate and wait, let somebody else pay your mortgage off, create equity depreciation. And then there’s the other concept of everything changes. 

Josh: Like could, because the economy changes, the cycle changes. Like, you know, we’re, we’re in an economic recession and everything is in foreclosure. And then all of a sudden these hedge funds come in and they’re buying all the real estate and property values are going up. And then interest rates go down, property values go up again, and the interest rates go up. Property values go down a little bit. It’s just nuts, man. It seems like every six months to a year something is different. But the main concept of vine hold doesn’t ever change. So I mean, you’ve been through it all. We’ve been, you know, side by side in this thing literally for 10 years, first as a student, just had a mentor relationship and then now as our head coach. So it’s nuts man. What are some of your recollections over the last 10 years? 

Kyle: Yeah, I mean it’s, I think, I mean, how many people have we seen come and go as well too in this business? You know, this is not an easy business no matter how you look at it, whether it is rent and hold, whether it is fix and flip commercial, whatever it may be. But the end of the day it is, it’s can you buy an asset? Can it appreciate in value? Can you pay down that principle? Can you hold on to that? Can you collect residual income? You know, it’s just taking that money slowly over time versus that immediate gratification, which is a lot of what people did for so many years. But now I think that wall is kind of hid a little bit, you know, certainly it’s available. Certainly I’m still doing, I’m sure you’re doing a little bit as well too. But residually is where it’s at. 

Kyle: I mean, look, I don’t want to work that hard. I just don’t, you know, I want to work hard now so I don’t have to work that hard later on. I don’t want to be the guy at Wal-Mart who’s 75 years old, still working as a greeter because he has to, you know, he has to, those guys don’t want to be there, nobody does. So, you know, I think that I’m blown away that people who don’t look at real estate as an investment and who throw their money in stocks, bonds, mutual funds, whatever it is, and then take that roller coaster ride with people and you know, how much control over Apple stock do you have? I own and it’s funny, I have a who’s 13 he’s taken a college and career course right now or whatnot and they’re tasked with like looking at stocks and all their seller stuff. 

Kyle: And he asked me, he said, dad, like, what do you own stock wise? And I go, honestly, I don’t own any, I don’t own any stocks. You have to own stocks, you know, my teacher said, I’m like, well that’s why….

Josh: My teacher said, right.

Kyle: I’m like, well that’s why your teacher’s doing what your teacher does and we all need teachers. And we went into the whole discussion and, and all this stuff and how it works and now he’s big on a Chick-Fil-A and he wants to open up a Chick-Filet. That’s his biggest thing. I’m like, all right, that’s cool. If you want to do that, do some research on it. Do some research. What does it cost to open a Chick-Fil-A, you know, what are you paying residually to Chick-Fil-A headquarters? And he doesn’t understand how any of that stuff worked. But I like his mentality of what he’s already thinking. Because I told my kids, I have a daughter who almost 16 years old now that whatever, you know, you’ve got to do something for yourself as well too. 

Kyle: If you want to be a school teacher, whatever it is, that’s fine, but you’ve got to have an ultimate plan as well too, that’s going to make you that residual income because nobody wants to teach for 30 40 years. They, they just don’t make that much money. And I know it’s not all about money, it’s about job satisfaction, whatnot. But I’ve always been happier when I make more money and I don’t care who you are. I mean money doesn’t at least buy you some happiness then you’re buying the wrong things. That’s what I say, right.

Josh: That’s right.

Kyle: Because it just makes things a lot easier. So trying to position them to be smart with their money, how to invest with their money, throwing it in stocks is not necessarily the way to go despite the fact that’s what 98% of the people do. So I’m just blown away that people don’t do as much research into looking at real estate. How does it work? Even owning a single-family home and letting that appreciate and value depreciation principal pay down all the tax breaks that you get from that. So, you know, it’s interesting to have this conversation now with them, certainly so. 

Josh: Yeah. And in a recession, what will be interesting is when we hit a recession or things slow down a little bit, there will be more foreclosures, more divorces, more bankruptcies, you know, people losing jobs and guess what? They’ll all have to move to apartments or they’ll have to move towards renting and then those rent rates go up. That’s one of the characteristics has happened over the last three. And we did a great podcast with Rob Swanson, the CEO at Freedom Soft. And so check that episode out. We talked about the characteristics of housing crashes and one of them is that there’s a presidential transition. Well guess what year we’re in right now? Potential presidential transition fiscal policy change. Again, guess what happens if a Democrat elected versus a Republican, again, I don’t care what side of the aisle you’re on, presidential transition means there’s going to be fiscal policy change. 

Josh: And so that will happen. And when there’s, if there’s a recession or a housing bust, then  you’re going to have a situation where people move to rentals, they move to single- family rentals or duplexes or they moved to apartments and then rent rates go up. So it  doesn’t really matter that real estate is now has appreciated a lot and in some cases might be overvalued. As long as that property cashflows and there’s cashflow coming in, it doesn’t matter cause you’re not going to sell that asset. The goal with real estate is buy it and hold it forever that you’re not going to sell that asset. So you don’t have to worry about whether the value of the home or the apartment or whatever, the assisted living facility, the self-storage facility, wherever you’re buying goes up or down.

Josh: What you worry about is the cashflow that comes from it. Like a bond, like a bond could go up or down in face value, but the coupon stays the same. It’s the same with real estate. And my only regret, Kyle, is, you know, we flipped tons of properties. We did 400 or 500 short sales, 300 or so flips. And at the end of the day, my only regret is that I didn’t keep them all.

Kyle: You hold on to them, yeah.

Josh: You know, I kept, I held a bunch of them and we have a bunch of equity. We have $10 million in apartments of my money and our investors, money in apartments. But looking back, I wouldn’t say it’s a great regret because we’ve had a great, you know, we’ve made a great living. We’ve provided for many, many, many people in our families. But to think like if I had just bought and kept them all would be even a different story today. Like they all had their purpose along the way. But I don’t know about you if you feel the same way. What are your thoughts looking back? 

Kyle: Yeah. I wish I would have started earlier in life. If I would have started this at 22 or I love seeing these, these 18 year old kids that are seniors in high school buying their first rental property, which is unbelievable. You know, like if somebody would have taught me that and you know, I don’t fault anybody for doing that, but I wish I would have started earlier. I wish I would have started the residual income model much earlier rather than, you know, work to get paid work to get paid work to get paid. You know, and that’s, that’s really what’s taught in school now is, you know, we work to go get a good job to work for somebody to work for the next years. I mean, it sounds awful to me it really does. 

Kyle: But yeah, that’s my biggest regret is I didn’t start earlier. I wish I would have started earlier. I wish I would’ve come out of college and at least, you know, whether I was doing clinical psychology or not, just start buying some properties, rental properties hold on to them. Those would have been paid off by now, you know, things like that. So, but I’m still young enough. You and I are the same age, so I think we have some time still to get this done, which is good. But I wish I would have started 20 years ago on this, so.

Josh: Yeah. The thing I think that we also got right is the focus, especially the last five to eight years or so on private money because now we have access to so much of it. And money is definitely more abundant in the system. There’s a lot of investors that have access to a lot more private money. But when I say private money, what many people say is, I  have access to private lenders and they talk about their private lenders, but their private lenders are companies.

Kyle: Right. It’s not a private lending.

Josh: Like Lending Home or you know, even Freeland Lending or these other companies that that’s an institutional or a corporate private lender. When if the market were to go into a recession or the housing crash, if there’s a housing crash, a lot of those companies will go away, like they won’t make it. And so true private lenders who are basically individuals, mom and pops, retired people both accredited and non-accredited that have, you know, between let’s say $50,000 to $1 million bucks to invest. 

Josh: We’ve got relationships, you and I both with hundreds of those types of people and they trust us with their money. They’re individuals that are investing in our deals through private placement memorandums 506B 506C type stuff. And when I look at the next crash or the next recession, that’s going to be a huge buying opportunity and I’m not going to need any bank financing. I’m not going to need any corporate or institutional private lenders. They’re all sitting there waiting and I’m waiting for a buying opportunity to go buy a whole bunch of stuff and then just buy it, stabilize it, and then refinance into longterm financing and cashflowing all of it. So when I look back, there’s definitely some things I would change, but that part of what we’ve done, it’s like if there’s two main things you’ve got to get right to main leverages is finding deals and finding money.

Josh: Like, I feel like the finding money part, like we’ve kind of checked that off the list that we’ve just kind of solved that. Really like forever. Like, you know, I don’t really need to raise another nickel of private money unless I did like a $200 million deal, but you know, got that, right. So now it’s just all about finding deals. So your focus too is very much followed my path of recruiting and raising private money. And there’s so many people that haven’t had that lick. Like, doesn’t it give you a sense of confidence knowing that, you know, we didn’t do every deal the right way, every deal, most of them made money, but there’s been deals that haven’t, but you have relationships with these investors that love you, that love what you’re doing and want to continue to invest with you.

Kyle: Yeah, yeah. No, I just had a deal that did not go according to plan, just took way too long to sell. It did not go what I would say as a great deal by any means. But all those guys have come back to invest with me because they’ve made money with me before. And I like to say they don’t make money off me. They don’t, you know, they make money with me as I make money they make money. I didn’t make money on this deal. Those guys still made money, which is fine. And they still come back and trust me and invest with me because, you know, they trust us. People invest in people at the end of the day. They would rather invest, I think in somebody that they can, you know, go visit, sit down and have coffee with go see the property if they want to go see it. 

Kyle: Those are the relationships that I have. Actually, I had a guy that I just met with last week. He’s a dentist and he’s invested. He’s got, he’s probably got a half a million dollars of money and I’ve talked to him on the phone and he only lives about an hour away from me. He’s talked to me on the phone, you know, nonstop, nonstop, nonstop. And finally I said, you know what, I’m going to come out there and just sit down with you  face to face. We’ve had so many conversations now and he really appreciated that. He really appreciated just the personal interaction that I had with him, you know, sit down with him and we just kind of hung out for an hour and he showed me in his dental practice, all his cool gadgets and this cost this, this cost this. Like, I don’t know what you’re talking about, but that’s cool. Like I can see how you all this stuff because you know, clearly he’s investing half a million with me. 

Kyle: But it’s those kinds of relationships that I really like to have with people because then when, you know, what we learned from Kevin O’Leary, right when he spoke is that investors deserve the good and the bad. And not everything is all peachy keen all the time. It just isn’t, you know, it just isn’t it. If you have deals that go smooth 100% of the time, I think you’re telling a big fat lie because it just does not happen. You know, I’ve got a deal in the city going on right now we’re, we’re 18 months in and we’re still not even done yet and you know, a year behind schedule and there’s reasons behind it. But I tell my investors, I’m like, look, this is why we’re where we’re at. This is where it is that this is where we think we can still sell this, and they’re okay with that. They’re okay. As long as I know that I’m not driving a new BMW in polite, you know, their alright, so. 

Josh: Yeah, money didn’t disappear

Kyle: Money didn’t disappear.

Josh: Bermuda. No doubt.

Josh: It’s interesting to see the evolution and now if there is, you know, more buying opportunities, that’s really where it’s, you know, buying these properties, let’s say blood in the streets as Warren buffet would say, and go on a buying spree. That’s something I’m looking forward to. I’ll be buying anyway. Because we’re buying for cashflow now we’ll continue to buy, but when there’s blood in the streets, we’ll buy stuff at even deeper discounts and then we’ll just hold on for the longterm for sure. So Kyle, what do you think, what do you think’s going to happen? I’m curious your thoughts. Like there’s so many people in real estate who are very much loose cannons about it, like buying the wrong properties, not doing the proper evaluation, buying stuff with very expensive money. What do you think’s going to happen with all of them if there is a correction or if there is a recession? And how would you help, you know, kind of advise people to you? What things would you advise them on to make sure that they don’t get caught or make a mistake? 

Kyle: Yeah. Because I think there’s going to be thousands of those people who get caught and get handcuffed by that correction, whatever it may be, how big it’s going to be. Because, you know, I don’t really buy anything out in the burbs here anymore at all. Like none of my flips, I have one I think going on right now, it was a referral from a friend of mine. So it’s not like I bought it online. It wasn’t even marketed. So I was able to get it at a good price, but I almost buy anything anymore because what people are willing to pay for these properties is ridiculous. And it’s all speculation that, oh, maybe if I can cut costs here, if I can do the cabinets myself and all that stuff. And yeah, you may be successful three out of 10 times, four out of 10 times, but you’re going to get caught, you’re going to get burned, you’re going to get something. 

Kyle: And as we correct, you’re going to get stuck either holding these properties or borrowing too expensive money. Like you said, now they’re over leveraged. Now, you know, the guy he wants his money back, he’s calling the note due. It is, it’s going to be a mess, which is why I kind of got out of my traditional flip model in the suburbs, which I did for so long. I just, I don’t do that anymore because of these people coming out of the woodwork and, and way over paying for properties. So, you know, my advice to them, I think it was just you have to go and find leads in an ultimate sources. It cannot just be taking things off the MLS or competing against people or even auctions. I mean, auctions are auctions for a reason. Why is eBay so successful? 

Kyle: Because you’re like, oh, I got to have it. Got to have it. Got to have it. All of a sudden you’re over and you’re like, Oh crap, I didn’t really want to have it at that price, you know, backing out anymore. So now you own this property. So, you know, get educated network with people. You know, anytime you raise private money, I think anytime we raise money, it opens us up to doors to investment opportunities that we never thought we would have. At the end of the day, you’re in the marketing business. You’re marketing yourself, you’re marketing your ability to make money for other investors. You’re marketing your ability to real estate agents that I can take properties off your hands. I mean, you are a marketing company. When I was till, you know, our students is if you have a bakery and your bakery is in like a dark alleyway, but you have the best donuts ever, no one’s going to find you, right? 

Kyle: No one’s going to find you. No one’s going to smell your donuts per say and just come walking down that alleyway, You’ve got to be able to market. You got to market yourself. You’ve got to put yourself out there. What are you trying to promote? You know, what do you have to offer that nobody else does or that’s different than somebody else does. And you know, just getting in that mindset of you’re a marketing machine. You’re not a real estate investor. You’re not a flipper, you’re not any of that stuff. I have a unique, a unique skill set that I’m able to provide people and that there’s various people that you provide to realtors, private lenders, you know, all homeowners, lots of different things that you can provide to people so. 

Josh: Yeah, no doubt. That’s a great point man. Yeah, it got to be a marketing machine in your business in order to get all those different kinds of things. This is one of the reasons why I do the podcast. Podcast is an opportunity for me and Ramey to just sit down and record and talk to people like you talk to other borrowers, clients, students, you know, other entrepreneurs learn from them. You know, cast a vision for who we are, create content and then put it out to the world. And it’s just, it really starts with our marketing machine starts with this podcast and then these, this turns into blog posts and social media posts and YouTube videos. It’s really amazing that we can just get on and have this conversation and create that turns into everything for us. Loans, private lenders deals. It’s amazing, but it starts right here at this desk every other Friday. 

Josh: Right. Ramey, every other Friday. That’s right. So cool Kyle. Students, let’s talk about students you’ve been coaching. You’ve been coaching our students at Strategic Real Estate Coach all the way back to, you know, around 2014, 2015, 2016. You earned the title of our head coach and we’ve had multiple other coaches working underneath you. You’ve kind of formed that up and the training curriculum and teaching strategies  behind finding deals, wholesaling, finding private money. If you look back at some of our most successful students and then the ones that didn’t follow the system, the ones that count one went off the reservation. What do you think are some of the characteristics of the people who’ve done it right? What do you think that they did well? 

Kyle: I first and foremost, I think the people that have been successful are go getters. They just, they don’t take no for an answer. They will go, go, go, go, go. And yeah, you’re going to hear no, because you’re going to hear lots of no’s. You’re going to hear lots of nos. No, you’re out of your mind. No, I would never sell it to you at that price. No, I’m not going to give you an ounce of private money. You’re going to hear that all the time from people in this business. And if you, you know, if you get your feelings hurt because you hear a couple of no’s and this is not going to be for you. So I think our students that have been successful are go getters that just say, okay, that’s fine. You know, another no is just one step closer to a yes it’s kind of the way we always talk about it.

Kyle: I think people that have listened to us as well too and taken advantage of what you certainly provide all the content. I’m blown away with, you know, I do calls every two weeks and I come back two weeks later, I’m like, hey, what have you done? How many offers you make? Ah, you know, I was on vacation for a week. I didn’t really get a whole lot done. I, you know, I looked at a couple of houses and you know, what do you expect is going to change at the end of the day, this is your life. It’s not mine. I, you know, I don’t want to say I don’t care cause I do care, but I care when people are successful and are working hard. I don’t care if people are not willing to put in the time because this is work. 

Kyle: This is hard work to do what we do. You know, none of us were handed anything. You know, we didn’t get money. Donald Trump’s style. Dad gave us a ton of money and we were able to roll it in anything. So, you know, go getters, being able to listen and I just think again, growing, expanding, adjusting to the market, changing up strategies. What are you going to do? Marketing strategies. This doesn’t work anymore. Now I’m going to go on to this. You know, are posters still working for me. Are people knocking on doors? Just really willing to work hard, which I think, you know, 95% of the people in the business don’t want to do, they don’t want to work hard. They want, they want to do it what like Tarek and Christina do on Flip or Flop. It’s that easy to do, right? But they get these properties, they renovate them, they go $50,000 over budget and only make $80,000 grand each property, right? That’s what happens every episode. It just does.

Kyle: But what they don’t show on the back end is that how many people do they have looking for deals, scouting for deals? How much money are they spending on marketing? How many deals are they going through that aren’t deals? You know what I mean? That’s really the backbone of their business. That’s why they’re successful. It’s not as easy as it looks on HGTV. So it’s just people that are willing to work, go after things, grow and expand, adjust, modify, mold themselves, change that mold. I mean those have been, you know, you can go back and you can name names of people that have been successful in this business. 

Josh: No doubt, no doubt. I would say just to add on to some things, I would say, you know, the best and most successful students we’ve had are people that follow the numbers  too. Like they don’t get overly emotional about a property and when the numbers don’t make sense, they’re willing to walk away. And I think that’s part of the problem with some new investors with an expanding economy and things doing really well is they’ll be like, I know I’m supposed to be all in at let’s say 65 to 70 cents on the dollar, but I’ll going to buy this one and I need to put a little bit more money into it. I just really want this deal. I’m going to be all in at 79 cents on the dollar. And then I’m going to hope during the construction phase that the property values go up and they’ll create some additional profit. 

Josh: I’m going to kind of break my rules because there’s more competition. And I think that’s where one investors that have been successful have stuck with the rule, you know, be all in at 65 to 70 cents on the dollar or less. And the investors that have gotten burned are people that have bought properties bought them too high, didn’t pay attention to the numbers. We told them not to do the deal. They did it anyway. And then six months later they’re like, yeah, Kyle. Yep, Josh, I should’ve never done that deal I told you. But they got lazy with their marketing or they got emotionally involved in a deal that they didn’t want to let go. And because they didn’t have enough opportunity, then they became married to a deal that they should have never done. And so… 

Kyle: Bad combination.

Josh: Bad combination. So that’s the combination between like the people who’ve done it right, and the people who got it wrong. That’s a big part of it. The other thing too is I think, you know, you got to have a way to make money now. Like, so when Kyle got started, when I got started, you’ve got to have a way to almost make like transactional income to pivot away from your day job into real estate. And we’ve done other podcasts with other guests that have said the same thing. Like if you’re going to leave your job making $150,000 grand, $250,000 grand, you have a certain lifestyle that you’ve built, you’ve got to be able to pay for that. So whether it’s wholesaling, whether it’s flipping, whether it’s being a realtor or a loan officer, there’s all these ways to make transactional income to pay the bills, you know, the mortgage and the cars and the kids, you know, high school education, whatever it is. 

Josh: And so that way you have enough income that you’re comfortable. And so you can then  buy properties to hold for the longterm, you know, buy apartment buildings, single- family rentals. Kyle’s developed a couple residential assisted living. I own apartment, so  does Kyle. So we’ve made all those as investments for the longterm. So you’ve got to have a way to make money in the short term. Got to have a way to buy properties for the longterm. You’ve got to have both. And so if you’re only buying for the longterm, that’s awesome, but how are you going to pay your bills today, right? And then you also can’t fall in love with just doing flip after flip after flip, after flip after wholesale deal or being a realtor and not hold anything because then you’re just, you’re making income for today, but you’ve also now got to pay uncle Sam his portion and you’re not investing for the longterm. 

Josh: So a lot of our successful students have followed our systems to do both. They’re maybe wholesaling or they’re a realtor, or they’re flipping for income today and then holding, maybe they flip one and hold three or flip two and hold two and they have both. And  then five, six, seven, eight years later, like, wow, I have this huge portfolio of properties that’s now paying me every single month, right? There’s nothing sexy really about buying a duplex that pays you $400 a month. But 10 years from now, right, that thing’s paying you $400 a month and now you have $80,000 or $100,000 worth of equity or $200,000 worth of equity. That’s amazing, right. So those are some characteristics that I see as well, right. 

Josh: I’m curious to think what about the future, like for you and for students that you coach investors that you meet with and talk with in your local market. You know, what does that look like for you and for them over the next like one to two years, considering that the market could be at the top here and then what do you see like your longterm future for you and for students like over the next 10 to 20 years? Like getting to a certain number of units and then stopping like own a certain number of units and say, that’s cool, I’m done. What are your thoughts on that? 

Kyle: Yeah, I mean, I think for student wise, I think, you know, I think you can get to a certain point where you have enough units and you are comfy said, okay this pays my bills, this is enough for me. I mean, you know, your idea of what you need to pay your bills and support your lifestyle might not be the same as mine. It might not be the same as somebody else’s. So there’s no fixed number that say, hey, you got to get to X number of units, make X number of money a year in order to do that. But you know, as we’re learning from, you know, Tim Bratz, guys like that and you and whatnot, like if you dive into it, you know, buying residual cash flowing properties like apartments and even start somewhere small. That’s where I’m talking to a lot of my students is go buy a 12 unit, you know, go buy a 20 unit. 

Kyle: There’s no difference when they’re buying a 20 unit than there is a six unit. There really isn’t all right. It’s just a couple more doors, but it’s all under one roof because I have, I have students that are hesitant like, Oh, I want to buy a 4 unit. How about buy a 20 unit instead? I can’t do that. Why not? I mean the concept is the same. You know whether you’re going to self-management, which I don’t recommend. I always recommend having a management company in place. So I think just jumping into that, even like the next two years, like you’re saying, go buy something, buy a smaller apartment building, buy it at the right price, go buy it at the right price. It’s a little bit different of analysis than it is, you know, buying a single-family home to flip, but at the end of the day it’s cashflow in what are we going to make at the end of the day, right? 

Kyle: You know, does this cover my debt? Does this put money in my pocket? Does it put money in my investor’s pocket? Is this asset going to appreciate? Are there tax breaks? Is it going to depreciate? Of course it is. You know, and that’s the beauty of owning, you know, real estate, particularly commercial real estate as well that’s going to depreciate. It’s going to appreciate in value as well too. So the next two years is, yeah, I’m trying to encourage people to buy, you know, get out of necessarily the, the fix and flip nonstop, nonstop transactional. I’m not going to make a dime until I flip another property, you know, because I live that life that you live that life. It’s no fun when you’re waiting to get paid, you know, and they’re like, oh man, I’ve got a ton of properties of rehabs and condo developers that have coming and I’m going to have a great 2020 but I’m still waiting for those to happen. 

Kyle: You know, they’ve, nothing has sold yet. I just sold, actually I got 200 contracts on Saturday, ironically. So that’s good news. So we’ll get paid from those. But the residual and the passive income is really what I’m all about as well too. And for me it’s really the assisted living like you mentioned as well. So we’re setting ourselves up longterm to be doing this and we’re super excited about it because we know in the next 10 years, you know, people are still going to have to have a place to go at 85 years old. You know, we’re at the beginning of the baby boomer generation for us. So we are right at the forefront of this, you know, really become a huge market. Even apartments, I just read an article today before I came down here in the Chicago Tribune. 

Kyle: They are building so many apartments now and, and rents are going to go up and up and up because people need a place to go, partly because of what’s happening in the market a little bit. You know, that we are kind of seeing a little bit of a turn and whatnot. So their fear is that yeah, that these apartments are going to get pricier, pricier, pricier. Well wouldn’t you like to be the owner of that? That units are going to get pricier, pricier, pricier, versus the guy renting it out. So the 10 year plan I think is, you got to dive in, bite off a year or two, plan chunk, start buying some 12 units, 20 units, then work your way up to a 4 unit, you know, work your way up from there. 

Kyle: Start doing things like that. That is not transactional. It’s that residual set passive, it’s that longterm. It’s going to set you up and you can still do then fix and flips if you want. I still do. I don’t think I’ll ever stop doing fixing and flips, because I like doing them. They’re fun to do but I don’t want to rely on them solely as income because they are transactional. So that’s sort of my strategy for the next, you know, 10 years certainly as is developing my passive income strategy, which I am, but continue to do on my condo developments and flips and things like that so. 

Josh: So hey Kyle, as we kind of round third here and head for home, kind of wrap up the podcast, I’m sure there’s a lot of people that listen to this that I want to reach out to you, connect with you and maybe joint venture with you. Become a private lender, maybe wholesale deals to you in your market. So if anybody wanted to reach out and connect with you, what’s maybe your website, your phone number, email, what is a good place for people to reach out and connect? 

Kyle: I would just say probably email me is the best thing. So you can reach me at Kyle, K Y L E at A Z H S L L C.com. So A as in Apple, Z as in zebra, H as in Henry, S as in Sam, LLC.com. That’s the best way you can find me on Facebook. You can send me a message there if you want, but I’m more than willing to have conversations with people. I’m certainly approachable, so yeah, just get ahold of me about anything, so. 

Josh: That’s fantastic. Yeah, I think the last thing I want to kind of convey on this particular episode is, you know, we have this exercise that we’ve been teaching for years called the Acer Exercise. Acer stands for absolute clarity of the end result. And I think what you mentioned, Kyle, is really, you got to know what you want. You’ve got to know what you want to accomplish, how much income that is right for you, right? For your family, for whatever is important to you. For some people, $50,000 a year in passive income is great. I’ve got other friends and students in mind that want to own 20,000 units. 

Josh: Other guys that have said, you know, I want to make $500,000 per month in passive income or $250,000 a year. Whatever’s good for you is good for you. I don’t think we need to compare ourself to the neighbors. Compare ourselves to the Joneses. Whatever’s good for you and your family is good for you. And that really, you know, I look back at our entire apartment portfolio, one of the things I keep looking at is what do we make per month or per year, per door. 

Josh: And I know the number, it’s $1,309 per year of net free cashflow after all debt service, after all expenses, after everything, it’s $1,309 per year per door, okay. And that allows me to engineer and say, well, based on that cashflow per unit, per door of net free cashflow, based on the current, that service that we have on the buildings, it’s going to provide us X amount of income. And if you take that certain amount and say, well this is how much income it creates today, how much income do I want to get to? That’s what you’re really working towards. And then it’s just about finding the deals and finding the money to get there, right. And that’s it. And I’m sure once you get there, you’re going to say, well that’s awesome. Maybe celebrate for like five minutes and then it’s onto the next goal. 

Josh: Some of the most successful entrepreneurs I know, it’s like, okay, I’ve accomplished that and I’m already ready to go. Kevin O’Leary, when he spoke on our stage and on our podcast, he said, you know, when they sold Softy Soft, which was their software development company, and they sold it for $4 billion, it was like 11 guys sitting around in a board room that all were immediately like life changingly rich. They looked around and they said, well, what the hell do we do next? Like what do we do with ourselves on Monday? And that’s typical for an entrepreneur. It’s okay to say, okay, I’m going to take a step back. I had a friend of mine, his name is Mark, who just sold a company for $50 million bucks and he’s been traveling all summer. I see him on Facebook, he’s traveling. And even, he says, look, you know, when I’m done with all this traveling, my wife, family is young, my wife is young, my parents are young, everybody’s young. 

Josh: We can do this. I’m going to get sick of this and I’m going to want to jump into the next thing. So the question is, is what is the absolute clear thing that you want to accomplish right now with your real estate? Then it goes on to go find the deals, go find the money to make that happen, right. That’s what it’s all about. So Kyle as we kind of wrap up here. Any final thoughts on your kind of journey or your student’s journey over the last 10 years or so and you know, kind of take it home here on our hundredth episode?

Kyle: Yeah, I think my journey in our student’s journey is relatively the same. And obviously I started off as a student as well too. And I think anybody who’s successful, particularly in this business, I think the journey is relatively similar. I mean, you have to be willing to put yourself out there. This is definitely a people business. If you don’t like people, it’s going to be tough to do this business because there’s a lot of relationships and talking and trust, you know, there’s a ton of trust in this business as well too. I was just meeting with a guy yesterday at dinner with him and talking about a potential investment we have, and he was asking a ton of great questions, ton of great questions, a ton of great questions. And at the end I said, Jim, I said, I understand that all your questions are great questions. 

Kyle: There’s still a level of trust at the end of this. You know, there’s still a level that you have to trust me of what I’m going to do. I get that there’s risks and I’m not going to sit here and tell you there’s no risk, but there’s still a level of trust that you have to put in me in order to guide us to where I’m telling you I think we’re going to go. So, you know, be afraid to step out of your comfort level, your box, whatever it may be. I think that’s our greatest challenge for all of our students. It was certainly my greatest challenge of what I had, you know, to do this business as well too. Because it’s, like I said, Kyle said, it’s not easy. This business is not easy to do, but like, you know, the more people we know, the more relationships we have. 

Kyle: It’s just unbelievable. I mean, look, I just met one of my partners in a new business that we’re doing, just sold his, or let me rephrase it has a, he started a marijuana company four years ago, okay. When it was, and now in Illinois, it’s all legal as of January 1. So he just got an offer to buy his company for $850 million. He’s 38 years old. Yeah. So he and I are now in business, we’re doing some things now. But do you think he’s got some people I could possibly talk to you, do you think he might be somebody, but this guy works harder than anybody I’ve ever met and he still does. Like you were just talking about before, why would he just not sell, okay. Move to Tahiti and I’m good. He’s working harder now than he ever has before. 

Kyle: You know, even though he’s worth $850 million on a company that he started four years ago, it’s crazy. But it’s like that’s the mindset you want to surround yourself with people with, I don’t know anybody rich, how many times do you hear that? Okay, go find, go put yourself in a position that you’re hanging out with people that have that sort of lifestyle you want or that mentality that you have. You know, you hang out with downers all day long and that’s what you get. You know, you’re kind of a product of who you surround yourself with in your environment. 

Kyle: And that’s not to say that all your friends have to be millionaires by any means. But you know, I want to associate with people who inspire me and challenge me and want me to do more things and not be complacent because I think that’s the number one problem in this business is you get complacent. You might make a little bit of money, but then you’re like, ah, you know, all right, that was fun. But then you forget your marketing. And all of a sudden you don’t have any more deal flow anymore and you’re kind of back to where you were before. So it’s a fun journey. But it’s work, man. It’s a lot of work. And it will continue to be work. I don’t think this business ever going to get easier by any means, so. 

Josh: It’s interesting, you know, as we talk about that thing about the apartment building that I just bought with Jack Petrick about maybe eight months ago, it was 164 units. It was a $9.2 million purchase. And the guy that we bought it from, his name was Leon, it was like 76 years old, still on the apartments, still on the site every day. His daughter was the primary property manager and the primary leasing agent. And he said he was finally ready to kind of slow down and sell the buildings and retire and move to Fort Myers. And when I saw the HUD one, the transaction and you know, he only owed like $3 million on the buildings, walked away with $6 million check. But the, I think the lesson there is, it’s not like the guy was, like you said in Tahiti, although he probably could have been, you know, he had a $6 million net worth and lots of cashflow every single month. 

Josh: He was at the job site every day providing great units and doing his unit turnovers and talking to his property managers because he just enjoyed what he was doing. He enjoyed the fight or enjoyed the progress if you will, he enjoyed feeling like he was contributing. And I think those are characteristics that you can’t take away from an entrepreneur. The feeling of, even at 76 years old, I’m making progress or I’m contributing back or I’m giving back, I’m making progress. I have a reason to get up every day because look, I mean I love my wife and kids, but they don’t want to see me everyday, all day. And I don’t want to see them everyday, all day. We don’t want to sit on a beach everyday, all day. All of those things get boring. All of those things will wear out. Everybody needs some variety. It’s one of the great gifts when we were born, God gave us was the need for security of a routine, but also the need for variety and excitement. 

Josh: And that’s what this business I think, can give us…

Kyle: Feeling that and feeling like, Hey, I accomplished something. You know? I mean, it’s I mean, that’s what drives us as well. I will never sit on a beach all day long and that’s not really what, like you said, entrepreneurs I think have a different mindset and different than a nine to five worker. I mean, we certainly need nine to five workers. There’s plenty of jobs out there. But for me and for you and for other entrepreneurs, it’s more about just that task and getting to that end goal and then saying and then enjoying it for five minutes and then going in there and doing it again. That’s really what it’s about.

Josh: Right. Yeah. It’s about the freedom to be able to take the time. It’s not necessarily that we want to always take the time, but it’s the privilege of being able to say, I don’t want to work today. I don’t want to work tomorrow. I want to go on vacation for a month, and you can do it with real estate. It’s amazing. Kyle, thanks so much for hopping on, man, episode number 100 give me a virtual high five awesome man. Ramey, good job as well behind the camera. Appreciate you guys being here, whether you have it Accelerated Investor episode number 100 if you enjoyed it, please share it on all the social media platforms, Facebook, Instagram, Twitter, everywhere that you can.

Josh: If you have the time, please do leave us a rating. Leave us a review. Let us know how we’ve done over our first, I should say our almost our second segment of a hundred episodes because we’ve done this. It’s like 250 actually, but 100 episodes of the Accelerated Investor podcast. Kyle, thanks so much for joining us. For all of you that are out listening, sharing. We appreciate being part of your life, part of your entrepreneurial journey, part of your real estate mentoring team. Thank you so much for being here. Take care.

You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the Strategic Real Estate Coach and Freeland Ventures on all  social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com.

I’m finally to the point where the whole plan I started with years ago for getting my kids through college is working perfectly. But it seems like there’s always something shifting around in real estate, whether it’s the interest rate, people coming and going, the threat of a recession or a boom in the market, or even hedge funds swooping in to your market to buy everything up.

I’ve known Kyle Garifo for over a decade, and he’s been one of my coaches for years. We take the chance on this 100th episode to talk about how our strategies have evolved, and give advice about what’s worked best for us.

No matter how much you love your day job, you’re probably not going to want to do it for 30 or 40 years. And despite what 90% of people think, throwing everything into stocks isn’t the only or the right thing to do. You have to have an ultimate plan. And cash flow is king.

Can you buy an asset? Can you pay down the principal? Can you wait for it to make money for you? Regardless of the property value, which might fluctuate, cash flowing properties are where it’s at. Looking back, I wish that I’d kept every property I’ve ever bought.

We talk about real estate strategies that address both your short-term and long-term financial goals, exactly like we teach our students. Kyle’s been helping students move out of the fix-and-flip model and he explains why he’s moving into long term care units.

Kyle wants people to stop thinking in transactional models, and move a little more into residual or passive income. Because no matter what happens, people always have to have a place to live.

What’s Inside:

  • How overleveraging will bite you in a recession.
  • A slow down means you should become a marketing machine.
  • Coach Kyle shares what makes a student successful.
  • Why you should stick to the numbers, and avoid the emotion.
  • How short term and long term projects should work together.

Mentioned in this episode​

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