[Music] this is an opportunity to get back in reason I jumped in if his guys who are foreclosures guys are gonna start flipping again SS as Kenny says I mean do you know how stupid you got to be because I don't think the prices will come up for a while that's good because it's gonna force more people out to sell it's gonna keep the price suppressed it is a time to go in but only if you're gonna go for cash flow does that make sense you guys yeah there will be appreciation again there'll be another spike you know you know a $300,000 house today is a million dollars I'm a millionaire but you're still an idiot you know you got a million dollar house but you got no cash flow it doesn't make sense but to losers it makes sense or two cowards well is this the right time of the break and they wait till the last minute what else I hope it gets worse don't you well it's gonna and I'll tell you another reason why it during this run this real estate run as Robert said everybody uses their home as an ATM you know cuz you were probably like me I probably got one or two a week saying yeah you've got equity in your home we'll give you you know a little money for it you know a lot of people took advantage of that campaign a lot of that was subprime too but what's happened is that was cash that was used during that run for plows with TVs and furniture and you know all those things okay that and you know there's a whole industry all the retailers all those people are gonna get annihilated in the next five years because people don't have disposable cash now because they use their homes so you know you're your buddy gilberto who's living at or working at a local resort here people are traveling less they can't afford the three and $400 a night stuff all those industries are gonna suffer all it's not only if that it's even the commercial real estate you know we're going up the freeway how many of these big big big commercial buildings are now empty its art is Resolution Trust corporation time again I'll tell you something funny this gonna be in commercial is gonna be a collapse and that's gonna and all these guys who became mortgage brokers and real estate brokers I mean talk about losers they can't they jumped in to make money but never to get smart I have so many friends who became mortgage brokers on what the hell do you know about a mortgage I don't know got a good Commission though and I said why are you forming a mortgage company today well the markets good I said that's the worst time to start a mortgage company the time you want to start a mortgage company is today not when I was high that makes sense you guys here that's stupidity when when you're euphoria effects or thinking that make sense guys well and I was just gonna point out I'm looking for an office building right now personally for my companies and so one of the things I haven't told you I'm looking actually one of the targets for me our home builders the mortgage companies people that own those buildings because they're for you know they don't have the cash flow to support the buildings and they're walking away from the buildings that they own and some of them are starting hit the market right now here in Phoenix so I'm gonna wait for you know maybe another year but just keep my eye open on something and I'll snap something up unfortunately that somebody can't pay for and so you know as things are crashing around you there are opportunities everywhere and I think it's is again it's it's an education issue I have a couple of properties that I wish I hadn't bought because I bought them for capital gains I knew I should have done it at the time but exactly as Kenny says it sounds tempting at the time so I violated my own formula but we have the cash flow to support the mistake and when you don't have that money to do that you can't afford to be a flipper I have the cash flow to afford to take a capital gains play I can write a check and pay for my mistakes absolve my sins you know but we also started when times are really bad and that's really my issue as Kenny says is an educational process right yeah and I think what will happen is people sometimes need to fail before they come to Jesus if you will and I think that that's what's happening now there'll be the people that say yeah my issue and those are the people that will correct and and have a good run hopefully till retirement and then there will be the people that blame it on their on the real estate market what they'll say is real estates a bad investment right and I say not real estate or they'll lose money and stops and they say stock is a bad investment or they'll lose money and gold they'll lose money and silver and they'll say it's gold or silver that's a better or oil it has nothing to do with the asset whether it's gold oil silver if you're stupid you're gonna lose money this is the message of the Rich Dad Company I never said buy a house and flip it yeah a buddy ever see that in Rich Dad Poor Dad but a lot of people said well you said to go flip a house I said no I said flip this you know make come on you guys you know why I bought a big house I made a lot of equity I said I never said that Rich Dad Poor Dad was about your passive income had to be higher than your expenses nothing has changed yeah and the difference between the cash flow strategy and the capital gain strategy is that the capital cashflow strategy does not require an exit that's the difference the capital gains strategy requires an exit so you're you're subjecting yourself to the whims of the marketplace whereas the cash flow strategy does not require an exit but we have an exit correct we get our money back our exit strategy is if I put a dollar in I want my dollar back in five years right so that's correct but it's through management it's a big difference see we buy properties that are undervalued because of poor management and then we engrave when you raise us the rents gets a higher valuation of the property he goes back in borrows the money so that's why Ken and I have made about two or three million dollars this year just borrowing our money out so that that that 3 3 million dollars I got from you is 10 three right that's correct because it's a refinance it's borrowed money now who pays for the two or three million dollars my tenants so that's why we don't flip because we simply improve the values he says that management is a financing play it's a management play and it's a partnership play so you have to have partners who understand the game the same sophistication level you have to the good structured financing and you have to have good management and Kenny has the management skills so we increase the rents and you get rid of the bad cockroach tenants the bad ratty tenants improve the rents the rents are then by the cash flow improved the valuation and then we borrow out the money so we buy a place for you 11 million dollars we refinance at 17 we all get our money back and we get our cash flow per month and we get the millions of dollars back so it's an infinite return on investment I have we have we have several deals we have no money in the deal we have many deals where we have no investment at all we have lots of value because our you know we have millions of dollars in each project but we don't have an investment in one and you started with what was your first investment 2-bedroom 2-bath condo how long ago 12 years ago but the reason that I understood the the bigger picture was through the property management piece and that was one of the most you who read Rich Dad Poor Dad probably skipped right over this part but I did it Robert talks in there specifically about why property managers are one of the most important people on your team now most people would skip right over that but somebody was in the business I recognized the value of that and I believed it and actually but before we even met I had read that and I knew that that he knew what he was talking about because what well what I was doing for a living was taking people's real estate and creating values through property management through better management they were buying real estate and then I was creating the value through through property management and there's three ways to lose realist or when you're in the property management business one is of course if you don't increase the value of the property you get fired two is if it stays the same you get fired three if you increase it they sell it and you get fired so the truth is is I was always always getting fired for multiple reasons mostly because people would sell their properties and to somebody else and then we'd lose the management but the point is that's how the the people that I was dealing with was making millions and millions and millions of dollars and it is truly in the management and that's the difference in the cash flow play versus the capital gain play [Music]