Lessons from Losing $50,000,000 to Rebuilding an Empire ft. Rod Khleif
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Rod Khleif Interview
How do you come back from losing $50M? Rod Khleif had achieved incredible success as a real estate investor, building a portfolio of SFHs and apartment complexes that grew his net worth by $17M in 2006 alone. And then came the crash. So, how did Rod recover and revive his real estate career? And what did he learn about finding true fulfillment along the way?
Rod combines his passion for real estate investing with his personal philosophies around goal-setting, envisioning and manifesting success as one of America’s top multifamily investment and high-performance life coaches. Rod is an accomplished entrepreneur, building several multimillion-dollar businesses and developing a real estate portfolio of 2,000-plus properties. He is also a community philanthropist, founding the Tiny Hands Foundation, an organization dedicated to improving the quality of life for children in Sarasota, Florida, and the surrounding areas.
On this episode of Founders Club, Rod joins Oliver to share the goal-setting system that helped him recover from losing $50M in the crash and explain what drew him back to real estate in the last couple of years. He offers an overview of the apartment buying process, explaining how to choose the best properties and markets for multifamily. Rod also walks us through his five-step weekly planning process for prioritizing what’s really important. Listen in for Rod’s advice to would-be apartment investors and get inspired to achieve true success and fulfillment!
Here is how the interview breaks down:
[0:53] The goal-setting system that helped Rod recover from the crash
- Brainstorm list of everything you want in life
- Make it measurable (# of years for each item)
- Pick juiciest goal + top 3 for year on new sheet
- Write paragraph re: WHY each goal is a MUST
- Collect pictures and visualize things you want
- Journal on qualities necessary to achieve goals
[23:46] How Rod overcame depression after achieving his big goal
- Vision for future, other goals lined up behind
- Remove focus on self by giving back (e.g.: feed families)
[29:59] Rod’s 5-step weekly planning process
- Celebrate what got done
- Journal to capture magic
- Single page of declarations (top areas of focus)
- Must-do tasks for this week
- Block time for things get further faster
[42:55] What drew Rod back into multifamily real estate
- Ability to scale faster
- Easier to buy than SFH
- ‘Team sport’
[45:30] Rod’s overview of the apartment buying process
- Decide between residential and commercial multifamily
- Build team (brokers, property managers, bankers, etc.)
- Align with investors with resources
- Brand self through LLC, add value on social for reach
- Educate self around joint venture vs. syndication deals
[57:56] Rod’s advice around the best properties to invest in
- Look for B and C properties in A and B areas
- Add value to force appreciation
[1:02:57] What Rod looks for in an area to buy multifamily
[1:05:29] Rod’s take on the current multifamily landscape
- Hard to find good deals right now
- Best time to learn, market correction yields opportunity
[1:07:23] Why Rod recommends specializing in one market
- Must know what people want to be competitive
- Learn business in one location before expand
[1:10:18] Rod’s favorite tech tools for real estate investing
- Slack + Asana to communicate with team, manage projects
- Maximize social media to add value for potential clients
[1:11:20] Rod’s advice for aspiring multifamily investors
- Learn the business
- Take action
Rod Khleif had achieved incredible success as a real estate investor, growing his net worth by $17M in 2006 alone. And then he lost $50M in the crash. Today, he joins Oliver to explain how he recovered and revived his multifamily career—and what he learned about true fulfillment along the way!
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Full Transcript Below:
Oliver Graf: Welcome to Founders Club, the show for real estate entrepreneurs.
I’m up here today in Beverly Hills at the beautiful Avalon Hotel, getting ready to interview Rod Khleif.
Rod Khleif: So many people spend more time planning Christmas or a birthday party than they do designing their lives. Now I know if you’re watching Oliver here then …
Oliver Graf: That’s amazing quote by the way.
He’s going to tell the amazing story about how he went from losing $50 million in the crash …
Rod Khleif: But since your listener base is a little more sophisticated, let me explain why I crashed and burned. What I learned has literally saved my life.
Oliver Graf: And all the strategies that he used.
Rod Khleif: When you do your goals and you get close to achieving a big one, make sure you have other goals lined up because it’s never about the goals. The goals will push you. Happiness comes from progress and growth.
Oliver Graf: Including buying multifamily properties, syndicating properties and growing a large portfolio that he cash flows on.
Rod Khleif: Recap, yeah.
Oliver Graf: I feel like I’m ready to tear my shirt off and get to work. Let’s get started.
I’m sitting here with Rod Khleif here in beautiful Beverly Hills.
Rod Khleif: It is beautiful.
Oliver Graf: It is a very beautiful place. We’ll show you some footage of the hotel we’re at, Avalon, where Marilyn Monroe used to come and Lucille Ball and Desi Arnaz so quite swanky place. Shout out to Michelle for finding this spot for us.
One of the main reasons I wanted to have you on is because you really have a fascinating story. You’ve had the high highs. You’ve had the low lows. You’ve emigrated. You’ve overcome a lot of challenges and now you own a really impressive portfolio of real estates. For those that don’t know you, why don’t you give a little back story.
Rod Khleif: Like you said, I emigrated to this country when I was six years old with my mother, Svantia, and my brother, Albert. We ended up in Denver, Colorado where I lived for the next 30 years. We didn’t grow up with much, Oliver. I remember I had to wear clothes from the Salvation Army and the Goodwill all the way through junior high school.
We had love but we had to eat expired food, drank powdered milk because that’s literally all we could afford. I know, I’m sure, people that are watching this or listening have had it harder than we did but I knew I wanted more.
My mom had an incredible work ethic and she babysat kids so that we’d have enough money to eat and live a decent life. With her babysitting money, when I was 14, she bought the house across the street for about $30,000 approximately. When I was about to graduate from high school she told me it had gone up $20,000 in her sleep and I’m like, “What? You made 20 grand, you didn’t do anything? I’m getting into real estate. I’m going to be rich in real estate.”
I actually got my real estate broker’s license when I turned 18, which will interest your listeners because I know you have a lot of agents and brokers that listen to this. You could do it then with education. You didn’t need any experience. I was a broker right out of the gate, I wasn’t an agent. I didn’t make any money. I did all things I thought you were supposed to do. I got a bus bench down at the end of the street with my ugly picture on it and of course, didn’t do a thing besides make my mom proud. I made maybe eight grand my first year, maybe 8 to 10. My second year maybe 10 to 12. For my third year, I made well over $100,000.
What happened between year two and year three? What I learned then and now study has literally saved my life. What I learned was that your success in anything, I don’t care what it is, if it’s real estate, if it’s entrepreneurship, anything, is literally 80 to 90% your mindset and your psychology and only 10 to 20% the real estate mechanics or the entrepreneurship or the business development. It’s really mindset.
I changed my mindset and I 10X’d, more than 10X’d my income. Fast forward to today, I’ve owned 2,000 houses that I rented long-term in three states. I’ve owned multiple apartment complexes. We just closed on … By the end of next week, we’ll have closed on 1,000 doors in the last little over 90 days.
Oliver Graf: Wow, congratulations.
Rod Khleif: In four states, thank you.
Oliver Graf: That’s amazing.
Rod Khleif: Thank you. In 2006, my net worth went up $17 million while I slept, okay. A little more than my mom’s 20,000. There’s a punchline but when you when that happens, you make it big like that, you get a big head. I could barely fit my head through the door. I thought I as a real estate god. I could do no wrong.
Oliver Graf: The ego.
Rod Khleif: The ego. Ego got in the way and significance and when that happens, God or the universe or whatever you believe in, gives you a smackdown and I got a smackdown. 2008, I crashed and burned like a big dog. I ended up losing $50 million in 2008, 2009. I don’t call them failures. I call them seminars because they’re learning experiences. They’re only a failure if you stop or you failed to learn, failed to get the lessons but it was pretty painful because I thought I was set for life.
I had 800 houses that I was renting. I had multiple apartment complexes but since your listener base is a little more sophisticated, let me explain why I crashed and burned because I usually don’t. I was at a 30% loan to value. I only owed 30 cents on every dollar on the whole portfolio, yeah. Actually, at the depth of it, I was upside down. That’s how far it crashed. It actually crashed more than 70%, it was insane, in South Florida.
The big reason that I crashed was I was focused on value. For example, I was about two hours north of us and two hours south of us and everywhere in between that I had property. It was all up and down the Gulf Coast of Mexico and I had properties in flood zones, in wind zones which causes high-insurance premiums, which impact cash flow. Florida also has no estate income tax. The property taxes are much higher which impacts cash flow.
The biggest thing that killed me, two things actually. One of them was the logistics of it. I thought I could manage it because I’d managed large house portfolios before. I had 500 houses in Denver, had a few hundred houses in Memphis, but it was the distance that killed me. Because if I had a maintenance request at one of my apartment complexes, everything there is the same. The HVAC is the same, the appliances are the same, the electrical system, the plumbing parts, it’s all the same. If I had a maintenance request, I could send a maintenance guy, we could stockpile parts and be in and out in an hour, no problem.
Well, if I had to send somebody an hour to go to a house or sometimes even further, they had to go assess what was wrong and everything is different so they can’t stockpile parts. Then they’ve got to see what’s wrong, find a Home Depot or Lowe’s where we have an account, which could be a half hour away and then they get back and they start working on it. They realized they needed something else and they got to go back again. What takes an hour at an apartment complex takes all day. You multiply that times 800.
Oliver Graf: Plus hours and all that.
Rod Khleif: Plus, yeah, all the hours and so it really wasn’t logistically feasible the way I had my business model set up. There’s that but also, most of my inventory was C class and a lot of my renters were in the construction business. They were jobbers, they were contractors which fell off a freaking cliff in 2008 and so it was the perfect storm.
The thing that I like to talk about, and if you’ll humor me, I’d love to try to add some value to your listeners.
Oliver Graf: Yeah, let’s do it. Yeah.
Rod Khleif: Is how I was able to recover from losing $50 million because truly, I thought I was set for life. I thought 80 million baby boomers getting old and getting cold, that was my line, made Florida recession-proof. Little did I know that Florida and California here and Nevada and Arizona were like ground zero for that contraction. How did I get from losing all that to the success that I enjoy today?
What it was, was a really honed focus on remembering exactly what I wanted and why I wanted it. At my live events, I know you’ve been to, and with my coaching students, I take them through a goal setting exercise that’s a little different than most people do. In fact, I can probably explain it in two or three minutes if you’d like me to.
Oliver Graf: Yeah.
Rod Khleif: Okay.
Oliver Graf: Yeah. Let’s do it.
Rod Khleif: All right, so if you’re listening or watching you might want to take some notes on this because this is a fantastic thing to do ideally with your spouse, if you’ve got a significant other. What you do is you pick an hour when you have a ton of energy, okay. Don’t do it right after a meal. Don’t do it when you’re tired and you need to be uninterrupted and alone and you sit down and you write down everything you could ever possibly want in life. You write down the big things, the little things, all the stuff. The houses, where do you want houses, the cars, the jet skis, the boats, the planes, all the stuff and don’t be afraid to think big.
So many people spend more time planning Christmas for a birthday party than they do designing their lives. Now I know if you’re watching, Oliver, here then you …
Oliver Graf: That’s amazing quote by the way.
Rod Khleif: I’m sure you’ve done your goals but this is going to be a little bit different so trust me on this. You want to do this exercise because it’s bigger than just the goals. You write down all the stuff that you want. How much money do you want in the bank? How much cash flow do you want in, say, a year or two? How much cash flow do you want from your investment, say, in 10 years? I’m a big proponent for multifamily investing because the reason I started my podcast is because while I was going through that contraction, it was the houses that pulled me down.
My apartment complexes we’re doing just fine. If I hadn’t cross-collateralized them where I did packages of properties with the apartment complexes, I’d still have them. I started my podcast to get that message out there that if you’re going to buy and hold, I recommend multifamily. It’s easier, it’s faster, the numbers are bigger, it’s easier to scale, it’s a team sport instead of on your own, so there’s a lot of reasons but I digress.
The bottom line is, figure out how much money you want from your investments while you’re doing this goal-setting workshop. Also, I want you to write down what you want to learn in your lifetime. Me, I’m going to learn how to play the drums. I’m going to learn how to fly a helicopter. Those are things I want to do. I’m going to be … Actually, in a couple weeks, my son wrote me into this, I’m going to be jumping out of a perfectly good airplane but anyway. Write down what you want to learn so it’s not just the stuff. Lastly, write down who you want to help. Okay.
Maybe you’ve got family you want to do things for. I bought my parents a house, I bought them a car, I took them on cruises. Who do you want to help? Write that down and don’t let the pen leave the paper. Just keep writing and if you’re analytical, don’t stop to analyze it. You can scratch it out later. Just keep writing and writing every possible thing you can think of you could ever possibly want to do, be or have. Then once you can’t think of anything else, it’s not real until it’s measurable so put how many years it’s going to take you to achieve each one of those goals. Put a 1, a 3, a 5, even a 10, even a 20 for that matter.
I’ll tell you. Back when I was 18 I knew I wanted to live on the beach and I dreamt about it and I dreamt about it for 20 years and I built this $8 million, 10,000 square foot house on the beach after 20 years and I was able to do it, which was pretty much unthinkable when I was 18. Take the lid off your brain. If you imagine it, you can achieve it. Put a time limit on each goal and remember when you’re writing that time down and don’t overthink it, just guess. When you’re writing that time down, remember that as human beings, we will overestimate what we can do in a year and massively underestimate what we can do in a decade or 20 years, so keep that in mind.
All right. Once you’ve got your number by each one of your goals, make sure they’re measurable as well. It’s not going to be I’m going to lose some weight. It’s going to be I’m going to lose 10 pounds by this date and feel freaking great about it. That’s measurable, okay.
Once you got a number by each goal, then you’re going to pick your number one goal, okay, the juiciest goal. You got this goal, you’re like oh my god, this is amazing, that goal. Pick that goal, put it on another piece of paper. If there are two or three equally exciting, just pick one because it won’t matter for what we’re going to do next.
Then I want you to pick your top three one-year goals, okay. You’re going to pick your number one amazing, mind-blowing goal and your top three one-year goals. Put those on a separate sheet of paper. Most people don’t even get this far. You already had a 99.9% of the people on the planet just by doing this but you’re going to take a couple more steps here, real quick. The goal will drive you. It’ll pull you, it’ll push you, it’ll propel you but it’s the why that’s the real fuel.
It’s the why I wanted my goals that got me out from underneath the rock when I lost everything. It’s the why that got me there and to be able to lose 50 million bucks in the first place, it’s the why. I want you to write a paragraph under each goal why it’s an absolute fricking must for you to achieve that goal, not a should.
We say I should do this, I should do that. We end up shoulding all over ourselves, okay. It’s an absolute fricking must and so write that down and use emotionally-charged words like amazing, incredible, magnificent. Words are very, very powerful. Use them to push you and to drive you and to motivate you. You might say, so my family and I can be free, so we can go do whatever we want, we can do it whenever we want. We can bring whoever we want and we end up wherever we want. Whatever it is for you, write it down and trust in the power of the why.
Once you’ve written the positive reasons why it’s an absolute must, I want you to put some pain in there because as human beings we will do more to avoid pain than gain pleasure. I want you to put some pain if you don’t achieve the goals. Write down so I don’t feel like a failure, so I don’t live a life of regret, so I don’t fail my wife or I don’t fail my husband or fail my children. Use that. Use that pain because again this is fuel, guys. This is the fuel that got me going. It’s the fuel that you need to push past your limiting beliefs to take life to the next level, to get uncomfortable.
So many of us are comfortable and because we’re comfortable, we don’t push it. I’m telling you, comfort zone’s a warm place but nothing fricking grows there. G get uncomfortable and this is the fuel that does that, so the positive and negative reasons why.
The last thing, and I wish I’d brought my planner, it’s out in the car now that I think about it. I can give you an example of this, but you must go find pictures of the things that you want. People have vision boards, for example. I’ve got vision boards. I’ve got multiple vision boards. Just search pictures and it doesn’t have to be exactly what your goal is but if you look at it, you’re like, “Oh man, that looks good” or it resonates with you. Download it, go to CVS or Walgreens, have it blown up and put it where you’re going to see it.
I want to give you and then if you’ll humor me for another minute, I’m going to talk about visualization.
Oliver Graf: Please, go. I’m ready. Preach. I love it.
Rod Khleif: Because this stuff worked for me.
Oliver Graf: Yeah. No, I’m all for it.
Rod Khleif: Got me to the point of being able to lose that and then got me back again and this stuff works, guys.
Oliver Graf: It’s powerful.
Rod Khleif: It really works so trust me on this. But get the pictures. Now I want to give you some examples of using this to visualize and manifest these things in your life. I’ll give you some famous examples to start because we’re here in Hollywood so this is a great one.
Jim Carrey when he was flat fricking broke wrote himself a cheque for, I think it was 10 million. It might have been 10 or might have been 15, I can remember, but it was at least 10 million. I know that for a fact, and he put on it for services rented and wrote it to himself. He’d used to go up to the Hollywood sign here and he’d sit there and look at it when he was flat broke and manifested getting it. That’s how much money he made for the Dumb and Dumber movie. That’s a great example of visualization.
Another one, I’ll give you an awesome example. There was this millionaire in New Orleans that decided to help this school, a class in a school. This was a school, it was a junior high school or actually, it might have been a high school. It was a high school, forgive me. It was a high school and only about 17% of the kids in the school graduated from high school. All he did … It’s just crazy when I read about this. All he did was he took that class, one of the classes there at that school, and took him to a college. I think it was Loyola in New Orleans and they paired them up with the students. Every student got paired up with a college student and they followed them around for one day.
They went to classes, they went to the library, they went to the cafeteria, they got to see campus life. They walked around the grounds. They got to see the social aspect for one day then they bust them back. Then for the next two or three years, all they did was once a day in school for a couple of minutes they would close their eyes and visualize themselves going to college.
Give me a little poetic license on this. It might have been 5 or 10 minutes. I don’t know exactly and give me a little poetic license on these stats as well. It could have been 18 or 19% that graduated that went to college. But I’m here to tell you that over 80% of the kids in that class went to college because they visualized it.
Olympic athletes visualize a race now. It used to be just the Russians that started this, now every Olympic athlete visualizes a race before they do it because it’s proven to make them perform better, so visualization. Let me give you my own examples.
When I was a 18, I was a broker and I thought a broker had to have a four-door car so I bought this four-door Ford Granada. It was the ugliest fricking car you’ve ever seen in your life. If you work for Ford, I’m sorry but you know it was ugly. I worked for a broker, with a broker rather that had two Corvettes. He had so much money, it just blew me away. He was the guy who taught me about mindset, the one I was telling you about.
By the way, since then I followed Tony Robbins around the planet for 20 years and immersed in his environment. He let me drive that Corvette and that experiential piece is really important. If there’s something that you want, go experience it as close to it as you can. You want a car, go test drive it. Just suck it up and pretend you have the money and go test drive it. If you want a particular kind of house, go to an open house of that caliber a house and walk around it and visualize yourself living there. I wanted a Corvette so I went into a magazine because this is before you can even spell internet. This was 1979.
I got a picture out of a magazine of a Corvette and I put it on it, taped it on the visor of my four-door Granada. Every time I got in, it was right there. Within a year or two, I had this beautiful red Corvette. Now, I’m going to give you a couple other examples. Please know, this is not me bragging because these things really don’t even interest me anymore.
This was back when the TV show Magnum, P.I. was out which they shot here in Hawaii as well and the actor was Tom Selleck. He drove this beautiful red Ferrari 308 and I thought that was the coolest fricking thing I’d ever seen. I got a picture of that actual car out of a magazine and put it on the visor of that Corvette. Within a year or two, I had a Maserati, looked just like it. Pictures work, friends, so be sure that you get them and put them around you. If I had my planner, I could show you because in the back of that thing I’ve got pictures that have been in there 20 years.
Now the first pictures are my gratitude pictures and I recommend that you have pictures of things you’re grateful for as well because that’s foundational to everything. Anything you want you have to start from a place of gratitude but then you get the pictures that you want. What’s crazy in this planner, I’ve got pictures of the houses that I wanted. They look just like what I have. The Lamborghini before I ever got it, the Rolls Royce, all this stuff that I got because I had pictures. I know some of you, analytical ones, are scratching your head right now thinking you might not be buying this and that would be a mistake. Trust me on this. Anyway, so that’s my goal setting and visualization recap.
Oliver Graf: Man, I feel like I’m ready to tear my shirt off and get to work. No, honestly, that’s probably some of the best, most tactical goal-setting advice I’ve ever heard.
Rod Khleif: It’s not just the stuff though and you know what? I screwed up, I forgot one thing. When you’re doing this goal-setting piece, make sure you take a minute. I just added this and it’s really important when I do my workshop. Write down who you have to become to achieve these goals, the traits that you have to own and become. They’re already in you but you got to own them. Fearless and write it down. I am a and anything you put the words I am in front of is an identity statement and there’s no greater force in the human psyche than the need to remain consistent with how we identify ourselves, so I am.
I start it like this. I, Rod Khleif, am a and then you do an identity statement of who you have to embody. Driven, focused, determined, leader, entrepreneurial, grateful. Make sure you put grateful in there and list the qualities that you have to own that are already inside of you to elevate your game to achieve those incredible goals because what got you here is not going to get you there so you got to own those qualities. Make sure you include that because the more you associate with who you have to become to do that, the more you own it and associate and think about it, the more likely you’re going to achieve everything you want. Truly, nothing is insurmountable. You can achieve anything you want in this world. You just triggered me that I forgot to mention that.
Oliver Graf: I just love the clarity around everything you’re saying.
Rod Khleif: Clarity is power.
Oliver Graf: Right.
Rod Khleif: Clarity is power and that’s why I don’t care if you just did your goals yesterday, do it again, because the more times you do it, the clearer it is, the more likely it is you’re going to get it. What it does, what your goals do is they trigger something in your brain called your reticular activating system. It’s that filter that filters out what it thinks is important to you subconsciously. It’s subconscious. The best example I can give is when you first buy a car. You never really notice them there before then but then you see them everywhere. Were they there before? Of course, they were but your brain now knows that that’s important to you. Same thing with your goals.
I’ve had Grant Cardone on my show a couple of times and he tells you to write your goals every morning and every evening, which might be a little overkill, but listen it worked for him. He’s got his own jet. I don’t have a jet so it worked for him. That’s the power of this, guys, is to continue to associate and get clarity like you said, Oliver, because clarity really is power.
I was just telling some people. I spoke in an event last night. I was just telling some people that before I met my wife I with exhaustive detail wrote down everything I was looking for in a woman. I mean pages of it and I spent a lot of time on it and the minute I met her, I knew it was her because I’d already seen her in my mind. In fact, I’d give you another great example.
When Disney World near me in Orlando build up Epcot Center, Walt Disney had already died. That was like the last part they built and Roy Disney was at the grand opening of Epcot Center and Walt was, of course, he was gone. A reporter went up to Roy and said, “It’s a shame Walt didn’t get to see this” and Roy looked at him and said, “The only reason you’re seeing this is because Walt saw this.”
Oliver Graf: Years ago.
Rod Khleif: Yeah, yeah. Of course, he did and that’s the reason it happened. Clarity is absolutely power, yeah.
Oliver Graf: I love your passion behind this because I mean it’s-
Rod Khleif: It’s my favorite topic, man.
Oliver Graf: such a powerful message. Then when you can deliver it like that, I think it motivates people to take action.
Rod Khleif: It works. I mean, buddy, I was riding high. I had the cars, the $8 million house and lost it all. Then now I’m back. I mean, that house … In fact, let me give you another. Since we’re on goals before, we push past this, I want to share something else. This is really important about goals.
Never achieve a large goal without having other goals lined up behind it because I want to give you a story. About two months after I built this house on the beach. Now this house, just to give you an idea, was three stories, big spiral staircase up through the middle. On the second floor, I have these special aquariums built, 20 feet long, 8 feet high. The aquariums alone cost me $200,000. To give you an idea of the caliber of this house. Elevator, wine cellar, I’d go on and on but I’m in the pool floating at night two months after I built it, and this is really important for you, guys.
I’m floating in the pool. It’s changing colors. It’s got fiber optic lighting, has a giant waterfall from the second-floor balcony into the pool, another waterfall from the spa into the pool. I mean the pool was a magazine. It’s spectacular and just so you can visualize this, I own the beach on one side and I had my boat houses on the backside. It was a long, narrow island and I had to slice through the whole thing. It’s called Gulf to Bay.
I’m floating in the pool at night two months after I built it. My family’s inside sleeping and I get depressed and I don’t mean just feeling a little off. I mean I got depressed and that’s why I want to share with you guys because I didn’t have a vision for the future. I had achieved this incredible goal I worked for my whole life and it was like now what? That was the number one thing that was going on.
When you do your goals and you get close to achieving a big one, make sure you have other goals lined up because it’s never about the goals. The goals will push you. Happiness comes from progress and growth. Like I was talking, I’ve spent 20 years with Tony following him around the planet. I went to one of his events back in December that I’ve been to 16 times. I could teach the damn thing. I could do a really good job teaching it but it’s because I’m growing and I’m always progressing and happiness comes from that growth. Make sure you’ve got another goal lined up, but the second thing I want to share with your listeners, Oliver, is and this is really important. Because I know if you’re watching this, you want financial success, whatever your definition of that is, and that’s what I wanted.
The other thing that was happening, the other reason I was depressed was I was totally focused on me. It was all Rod, Rod, Rod. I built this giant testament to my ego to show the world I was good enough and that’s truly what it was. It was to prove the world I was good enough and so was I was totally focused on Rod. I was successful but I was unfulfilled and I didn’t discover this until I went and saw Tony because I went and bought some books. I’m going to shake this off.
I got Dale Carnegie, Tom Hopkins. I got Zig Ziglar and I got a Tony book and I started reading the Tony book. I’m like … By the way, if you guys ever have a chance to see him, just go do it. Trust me, I get nothing for telling you that. Just do it. Trust me.
Oliver Graf: Definitely agree.
Rod Khleif: You agree, yeah, okay. Anyway, so I went to one of his events 20 years ago and I found out he fed families for the holidays and I’m like man, that’s really cool and it’s not me thinking about Rod. That’s doing something for other people, and he pulls that out of you. That’s just one of his gifts, many gifts.
I went back and I decided to feed five families for the holidays. It was for Thanksgiving then we do it for Christmas now but we got frozen turkeys, we got big boxes of food. We went to a church, said who really needs help, I mean who really needs help. They gave us five names and addresses and we got toys for the kids if they had kids and the third family changed my life.
I go up to this door, it was a woman and it was one of these shotgun houses. I don’t know if you’ve ever seen one of these. If you’ve looked at really old crappy houses. This was where you walk into the living room, you walk through the bedroom to get to the kitchen which has the bathroom off it. It’s a one-bedroom but you got to walk through the bedroom to get to the kitchen. I mean just horrible layout.
There were five kids in there with her mom. Mom comes out, she starts crying. The kids come out, several of them start crying. I start crying and I’m fricking hooked. I realized there was more to life than Rod at that point. I’m blessed to say that in the last, what is it now, 19 years, we’ve fed 65,000 children for the holidays.
Oliver Graf: Wow.
Rod Khleif: Yeah and we’ve done probably close to 20,000 backpacks filled with school supplies for the area kids. It’s just a travesty to me that kids in the United States don’t have the basic school supplies. Then we’ve done thousands of teddy bears to the local police departments for their officers to keep in their cars when they encounter a child.
Now I’m not telling you this to brag but I’m telling you this because if you want financial success, financial success without that piece in some fashion, doesn’t have to be big like that, but without that in some fashion is not success, my friends. You’ve got to add that component to it okay. I don’t care if you just help an elderly person or one family or children or whatever it is, do something to give back. Because I tell you, I’ve interviewed a billionaire on my show, mega, mega millionaires and I can tell if they are like I was back then because I recognize it because it was me where they’re just totally focused on themselves and they’re there for one reason because they have an agenda and that’s not fulfilled, my friends. They’re not truly successful in my opinion, so I just want to share that last piece with your listeners.
Oliver Graf: That’s great, and I love how you built that into the goal-setting process now with the who do you want to help.
Rod Khleif: Yeah. Well, that’s it. That’s it. It’s so important because that’s a critical piece of it, man. I mean it really is. It’s what life’s about. You learn that in the Tony environment which is every human’s got six human needs and one of them is the need to contribute. If you’re in a relationship, you need to of course contribute to your spouse but you also need to allow them to contribute to you because it’s a basic human need. You need to give beyond yourself and that’s when you truly feel fulfilled. If someone’s depressed, they’re focused on themselves. If they’re suicidal, they’re focused on themselves and if you can get them to focus outwardly and project outwardly, then the depression goes away.
Oliver Graf: That’s amazing. Very powerful stuff on mindset.
Rod Khleif: Thank you Thank you, my friend.
Oliver Graf: I want to because I think that’s, I’m guessing, what helped you rebuild but I want to go back to Florida, market crashes, construction people leave, you’re losing all these properties.
Rod Khleif: Lost it all.
Oliver Graf: What was the mental shift at that point in time and then how did you rebuild it?
Rod Khleif: Good, good, good. Well, of course, I was underneath a rock for a few months. All you can see is my eyeball poking out the side of the rock because I was licking my wounds. I mean I truly thought I was set. It was the worst thing in the world for me to go through at the time, well period. Period, but then I … Luckily, again, I was in that Tony environment. I kept being around people that were thriving.
I actually was in his big mastermind at that time. I keep referencing him because he’s been such a big impact in my life but I was in his platinum partnership which is like 120 grand all-in to join at that time. It’s more now. I was around people that were thriving through that crash and that’s one piece is you want to be around people that aren’t caught up in the fear because if you’re in fear, you’re paralyzed, you can’t do anything.
I got around people that were thriving and I remembered what I wanted and why I wanted it. What you focus on grows. Where focus goes energy flows so you want to be sure you’re focusing on what you want, not what you don’t want. Very important, so let me give you some examples.
Like let’s say you want to get out of debt, get that out of your mindset, focus on income. They asked Mother Teresa if she was antiwar. She said no, I’m pro peace. You understand the difference? Again, where you focus is where your energy goes. I realized that I need to focus on what I wanted instead of feeling sorry for myself. I made lemonade out of lemons and I built this company.
Oliver Graf: It’s a switch.
Rod Khleif: Yeah, it was a switch and it was … There were times I wanted to wallow in it and people create stories as well. My story was yeah, I lost $50 million but I was using it to hold myself back and for significance, believe it or not. I’m embarrassed to admit that but it was the truth. When I got past the story because we use stories as softeners so that we don’t get disgusted with ourselves. They’re like a breaker switch and so I had to change my story and eliminate the disempowering stories and focus on, again, exactly what I wanted and why I wanted it.
Now I live in a compound. I lost that house on the beach but I live in this compound. It’s on the bay. There’s like six buildings. I’ve got this giant main house. I’ve got a beautiful guest house on the water. You’re welcome to come anytime, brother.
Oliver Graf: I’d love to.
Rod Khleif: A theater room I’ve got with a conference center above it. I’ve got a giant exercise room and the place is magnificent. It’s like a park. It’s like a Zen park and because God’s got a sense of humor. I can see my old house across the bay because it’s right out my backyard but life is fantastic.
I’ve got an amazing, beautiful wife. I’m focused on her, I’m focused on my coaching students, my foundation that I was just telling you about. I paid for everything up through 2008. That year I did 1,600 families and I paid for it but then when the market crashed and I formed a foundation, nonprofit, and take donations and stuff now but that’s where my focus is. It’s so easy to get caught up in success and lose sight of what matters and that was the other thing.
My biggest regret in life, and let me chat about that for a second. My biggest regret in life was I’d come home to this mansion on the beach and I play with my kids but I was distracted. I wasn’t there mentally and I don’t want that for you. I know you’ve got some young, blood dripping from their teeth guys watching this, women watching this, they want that fricking success. They’re already there or on the way to making it happen, but I don’t want you to lose focus if you’re in an important relationship, which we’re all in important relationship. If you’ve got a significant other, especially if you’ve got children.
They want your presence and I don’t care if it’s only for 15 minutes. They want your total focus and presence. They’d rather have 15 minutes of your time than an hour of you on the phone screwing around. Keep that in mind.
Oliver Graf: Very true.
Rod Khleif: I also take my students in my live events through this planning workshop and I can literally do it in a minute so let me do that real quick, if you’ll humor me.
Oliver Graf: Let’s do it.
Rod Khleif: Okay, all right. It’s so easy to get caught up in distraction. It’s so easy to be so focused on what you want that you lose sight of what’s most important. Like I said, that was my greatest regret in life. My kids will tell you I was a great dad but I didn’t live up to my own expectations. I recommend a weekly planning process and it’s real quick, I’d go through it quick. It’s five steps, and the first two you may not think are important. I’m here to tell you they’re critical.
The first thing like I told you previously, the gals will push you but they won’t make you happy. I told you two months after I achieved a 20-year goal, I was depressed. The goals won’t keep you happy. It’s the progress and growth that keeps you happy. The first thing you do every week is you celebrate what you got done. You just take a minute and say, “Rod, good job. You fricking rock, you got that done.” Takes a split second but the key is you do it consciously. Consciously pat yourself on the back so that when you have an inevitable setback or when things don’t happen as fast as you like, you’re still happy because you’re growing.
Okay, so that’s step one. Step two, journal, especially if you have kids. Capture magic moments with the people that matter. Take five minutes and write down anything magical that happened that week. It takes five minutes.
Oliver Graf: I love that.
Rod Khleif: I promise you, you will thank me if you do. In 20 years, if you’ve got young kids, you will thank me because it’s such a gift to you to be able to relive those moments because we forget so much. Not only do you not forget but it also causes you to create more of them in the people that you care about lives. You’re going to create more magic moments because you’re thinking about it. Once a week, five minutes, give yourself and your family that gift.
That’s number two. Now the third thing is the big thing and you’re going to do this once. It’ll evolve over time but you’re going to write down everything that’s most important to you in life. You start with the people. Make a list of all the people that are most important and it shouldn’t be more than about 20 or 30 people. I’m talking people that matter not associates, and that’s max. Then you’re going to write down all the important pieces of whatever your core work is. If you’re if you’re an agent, things you have to be stay on top of, getting the leads in the top of the funnel, working the deals you’ve already got.
Make a list of high-impact areas for you that you have to focus on that and this is how I manage multiple companies was I stayed focused on what was most important because I … you don’t know this, Oliver, I’ve built 24 businesses and several of them worth a lot of money and many have been spectacular flaming seminars but I learned from them. But how I managed them was through this process.
If you own a business, besides the real estate, then again, capture the top impact areas that you have to focus on. Sales, marketing, operations, maybe website, leads, whatever it is for you, make a list of those. Should not be more than about 12 things. This is high level. What I tell my students if they’re interested in multifamily is make a list of the things you’re going to focus on the multifamily space. Picking a target market, developing your team, evaluating deals, again maybe another 8 to 10 high-level things.
Now, I do this on a Word document. I’ve done it for 20 years. If you’re more of a hand writer, hand write it but get it all on one sheet of paper. That’s the key thing. Now if it’s a Word document, print it on one sheet of paper. Now the last thing you’re going to do after you get these impact areas from your businesses and people that are important is you’re going to list some declarations, some things that you’re committed to.
Maybe you’ve got some lifestyle choices you want to make. Maybe you want to lose some weight, you want to tone up. Me, I’m going to lift the body part every day. I ask myself the question, what can I do to rock Tiffy’s world this week? Tiffany’s my wife and so I’m focused on doing something to make her happy. Whatever it is for you, put some declarations down.
Now, once this is done and you print it or you have it handwritten, it is a very, very powerful piece of paper because when you look at it, it accomplishes several things. Number one is you have clarity. You have incredible clarity and again, clarity is power. Secondly, it eliminates overwhelm. It’s so easy to get overwhelmed with all the plates that are spinning that we’re trying to keep spinning it but when you can see it all on one sheet of paper, the overwhelm goes away. Thirdly, you don’t lose sight of anything that’s important. You maintain balance.
You look at this list once a week and if there are people you need to touch or reach out to or maybe your kids are not getting the attention they deserve, then you make note of that or if there’s an area of your business that you need to … Nothing gets lost. You get that but what you’re going to do then, the fourth step, is you’re going to create a list of your must-do tasks for that week.
This is not a place for projects. This is a place for the things you’re committed to doing that week. If you’ve got a project like you’ve got a closing or something, just list the things you’re doing towards that closing or that project that week. It’s not place for goals. This is just what you’re committed to doing that week. I call it my weekly must list. Then the last piece, and then I’m done with this, is there are always a few things on that list that will get you further faster. It’s called the Pareto principle.
There’s usually about 20% of the things on the list that will get you 80% further sometimes are the things you’ve been avoiding. Identify those things and block time for them. Maybe it’s your family and so don’t be afraid to block time for your kids or your spouse. Say, “Baby, from 6:00 to 8:00, I’m yours. From 8:00 to 10:00, dad’s or mom or whatever is bringing home the bacon, making the money.” They will appreciate that. Don’t be afraid but block time and when you do that, you’re much more focused on what’s in that block of time. You’re less likely to be distracted. You’re going to execute much more efficiently and it just, I tell you, it’s really served me to stay focused on what’s the most important.
Now one last tip. I recommend you do this the same day in the same time of day ideally as much as you can because if … like I do it Sunday afternoons but whatever it is for you. Pick a day and time and try to stick with that because you want it to become a habit, a habit for success. If you do it for 60 to 90 days, you will do it the rest of your life. Anyway, that’s my weekly planning process.
Oliver Graf: What an awesome roadmap.
Rod Khleif: Yeah.
Oliver Graf: I mean it almost makes it on automatic on things you want to focus on, the things you want to do.
Rod Khleif: And you’re celebrating your progress so if you have a setback you don’t beat up and you’re capturing your life. Every piece is important.
Oliver Graf: The tips you gave about calendaring and family time and all that, it sets expectations for everyone so they know hey, dad’s here now, he’s all in.
Rod Khleif: Yeah, yeah, yeah and the phone’s in the drawer.
Oliver Graf: But at 8:30 or whatever …
Rod Khleif: That’s it. Dad’s got to work.
Oliver Graf: Then dad’s going to the office and bringing home the bacon.
Rod Khleif: Health goals, all of those things that you … Just keep your life in focus and focus is power. Clarity is power.
Oliver Graf: I love it. You have the mental shift, you got clear on what was important then what was the first thing you started doing? Was it straight into multifamily at that point or?
Rod Khleif: Yes. Well, actually, this hasn’t been that long. I decided I was going to start doing real estate again and doing multifamily again. Well, no, no, no, no, no. Back then, I was out of real estate for, geez, probably eight years because my credit got destroyed. I used to have a black card and put about 100 grand on it, buy stupid shit like watches and then it was really humiliating. They dropped my limit on my black card to $2500. That was painful. Anyway, I could put houses on it then that was … but anyway.
I had to get my credit back and so I built this litigation support company. It was a $10 million company and we helped people that were in foreclosure and helped thousands of families.
Oliver Graf: This was in the downturn then?
Rod Khleif: This was in the downturn, yes. That was how I made lemonade out of lemons. Tried some other things as well but I just … I knew that I’d come back out of it. The real estate, getting back into the multifamily, was just in the last three years, really, two and a half years. I started the podcast because I wanted to get the message out there and I wanted … I hate asking for money and I knew that I’d need money, equity for deals and so I thought why not add value? Do what I can to add value and then it’s just been insane.
It’s funny, you want to make God laugh, you tell him your plans. I never planned to do … I wrote a book. I do courses in coaching. I had 600 people in Denver at my last live event. My next one’s in Baltimore then I’m going to be here in LA in January, Baltimore September. I mean never planned any of this stuff. I was the introvert. I’m the guy that wouldn’t raise his hand in class and I’m in front of 600 people for three days and it’s all me just talking for three days. It’s crazy. It’s just funny how the universe works and things happen. It’s crazy.
Oliver Graf: You’re rebuilding your life through loss mitigation type stuff or …
Rod Khleif: Yup, back then I was doing that exactly.
Oliver Graf: Then tell me about what got you into apartments then and …
Rod Khleif: Well, back then when it was all crashing and burning, my apartments if I hadn’t cross-collateralized, I might still have them. I was comfortable because I could have done a lot more multifamily back then too and I was just … That was comfortable. I was lazy. There’s always another level.
I know guys with thousands of doors that are comfortable that need to take it, kick in gear and go to the next door, the next level because there’s always another level. I got comfortable and didn’t pursue more multifamily because houses were so easy. I had some apartment complexes and the message was they were doing okay so I’m not getting back into houses again. That’s how I crashed and burned.
Now, let me just say this. Those of you, you’ve got a handful of houses or you buy your houses in a tight geographic area, you’re going to be fine but why? You buy eight houses, that’s eight closings. You buy a tenplex, it’s one deal and frankly, the numbers aren’t that much different. In many cases, you’re going to scale much faster, they’re easier to buy, it’s a team sport. If your credit’s not all there, your income’s not all there, your net worth’s not all there, you bring in people to supplement that and so maybe you’ll end up with 50% of the deal. I don’t know about you but I’d take 50% percent of something over 100% of nothing any day.
That’s why I love multifamily and I got back into it and I just got passionate about it and like I’ve said, my podcast is going to hit 6 million downloads this week. It’s just insane.
Oliver Graf: That’s great. Where can people find that?
Rod Khleif: Yeah, the podcast is Lifetime Cash Flow. If you put in real estate on iTunes, I’m usually number two after BiggerPockets but it’s about apartment buying and I do an interview segment just like you do. I don’t do it nearly as classy as you do.
You see me on Zoom but I interview experts like you do and then I also do a weekly segment on mindset. It’s called Own Your Power and I think this week was on boldness, on being bold and people just really resonate with that, with the psychology of success. Then I’ve also got a Facebook group so if you’re interested in multifamily at all, there’s almost 28,000 people in there. It’s the largest Facebook group for multifamily on the planet and just go to multifamilycommunity.com and it’s a direct link to that group.
Oliver Graf: Perfect. Yeah, I’m a part of that group too. It’s awesome, content’s great.
Rod Khleif: It’s just educational.
Oliver Graf: The networking’s great.
Rod Khleif: We don’t allow any promotion. It’s great to network and so yeah.
Oliver Graf: Then because a lot of people that we talk to are interested in getting into multifamily because of all the advantages that you just listed out. What does the apartment buying process look like from 30,000 feet up because I think a lot of people, they’re just intimidated, right? They can wrap their head around buying a house but a tenplex just seems like …
Rod Khleif: Right, right, right. No, it’s a little intimidating and we have a stress muscle, we have a courage muscle and we got to build that thing. Sometimes you need to start with a duplex. There’s two kinds of multifamily, those of you that don’t know. Many of you watching probably already do but there’s residential and there’s commercial. Residential is duplex, triplex, fourplex or if you’re in the Northeast, it’s two-family, three-family, four-family.
There’s some advantages to residential because it’s 30-year fixed financing, fantastic interest rates, no balloon payments.
Oliver Graf: Less money down.
Rod Khleif: Less money down, if you’re going to live in it especially and so just some real opportunities there, then there’s commercial. Now commercial’s five units or larger and the advantage … No, the disadvantage to residential is the values based on comparable sales. If you don’t have comps, you can’t get the value up where you want to. But what’s great about commercial multifamily, meaning five plus units, is the values based on a multiple of the net income. You divide it by the cap rate and that’s how you determine the value.
What’s incredible about that is if you find a property that you can raise the net income on by either raising the rents or decreasing the expenses, you exponentially increase the value. Let me give you an example. One of the deals that we just closed on a month ago is in Shreveport, Louisiana. It’s a 403-unit property and the guy just let it go into the ground. I mean I’ve never seen such horrible management, head-scratching stupid but he’s at s70% occupied, so 30% vacant.
All we have to do, and we’re already well on the way, is get our occupancy up to 90% and we’ve increased the value to 7 or $8 million like that, overnight. That’s without even increasing the rents. That’s just getting the occupancy up. That’s the impact of the improvement to the NOI. At a high level … Let me give you high-level synopsis of the business.
First of all, remember it’s a team sport and what I mean by that is if you’ve done single-family investing, you can do it by yourself. Multifamily, you’re not going to do that. It’s an absolute team sport and what I mean by that is you’re going to develop relationships with brokers, with property managers, with bankers, with potential partners even, with investors. What’s great about commercial multifamily is when you’re borrowing money, the bank is going to look at three things. They’re going to look at your experience, they’re going to look at your net worth and they’re going to look at your post-closing liquidity and in and I’ll explain each one of those in a little more detail in a second.
What’s incredible is you can find one person to satisfy all those requirements and go do a deal. It doesn’t have to be you and that’s what’s so amazing about this business. You use the we word. You find somebody that’s got some properties and you say we own 500 doors or we own 1,000 doors and you just build relationships. This is a relationship business. I will say this about the multifamily business, especially if you’re an agent.
If you’re an agent, every January 1st, you got to go back to work and I’m not saying anything wrong with it because I did it and made a lot of money doing it but if something happens to you, you could have a problem. You get hit by a truck or you get ill or something, so I’m going to encourage you to buy I don’t care if it’s real estate, I mean that’s your wheelhouse, it should be real estate, but buy things that cash flow so that ultimately, you’ve got other income coming in. That’s why I’m really glad Oliver had me on the show because that’s the message there, is push through the fear and start using some of those commissions to take down some property that’s developing cashflow, and I suggest multifamily just because it’s been so good to me versus single family but you can do it in another commercial asset classes as well, self-storage, warehouse, mobile home parks, industrial office, whatever. Certainly, you can do it in any of those but I’m going to speak to multifamily.
The beautiful thing is you put a team together and the bank will want a net worth equal to the loan amount but again, you just give somebody a piece of the deal to lend their resume. The bank will want 10% of the loan amount in post-closing liquidity. You borrow $1 million, you’re going to need 100 grand in the bank after the closing as liquidity but again, you bring somebody in that’s got that in the bank as an example. Then, what’s great is they have what’s called nonrecourse debt, and that’s agency financing. It’s Fannie Mae and Freddie Mac and what that means is, if you don’t know what that means …
Oliver Graf: Which is beautiful.
Rod Khleif: It’s beautiful. You better believe it’s beautiful, so there’s recourse debt. Recourse debt is if they foreclose and they sell the property and doesn’t sell for what you all want it, they can come back after you personally, ask me how I know, that’s my catchphrase. In fact, somebody even gave me a t-shirt that says ask me how I know because I made every fricking mistake you can possibly make but that’s one of them, recourse debt.
There’s nonrecourse debt, whether they foreclose, all they get is the property. It’s a beautiful thing and so it’s not hard. If you’re out there doing this business, which I know many of you are, it’s not hard to align with people that have resources that have done some of these deals. Even if you just find a high net worth individual. Let’s say you’ve got the net worth and liquidity pieces, you need the experience, with Freddie Mac, you can go get a third-party property management company that they vet and they approve and you can satisfy that requirement with a company with an outsourced third-party property manager.
You go find a doctor that’s got a lot of bucks, you can go take down an apartment building but you got to go raise the equity obviously. Now, in commercial multifamily, equity means the down payment, the amount you need for capital expenditures, the amount you need for closing costs. It’s just all the money you’re paying out-of-pocket to purchase the property. Okay, that’s equity in the commercial world. That’s the nomenclature.
What do you do in commercial multifamily? You brand yourself, number one. You set up a company. You go on the Secretary of State’s website, you see what names are available. Ours is REM Capital Partners, but whatever. Just pick a name and you put capital at the end or equity or properties or real estate or whatever it is and you become an entity. You form an LLC and that’s why you’re checking with the Secretary of State to see if it’s available. Go on GoDaddy, see if a domain that works for it is available and then go on Fiverr and have a web or Upwork and have a website put together. All those you can do for 500 bucks and then you hung your shingle and you’re in commercial real estate. That’s the first thing to brand yourself.
The other thing is you got to get some reach and like you’re doing and I’m doing with my podcast, we’re adding value and we’re getting reach. If I mention that I’ve got a deal that we’re raising money for my podcast, our dance card gets full like that.
Oliver Graf: Yeah, the phone starts ringing.
Rod Khleif: Right, exactly, exactly. You guys are so blessed that you live in this day and age because of social media and technology that … you’ve got Facebook. Like I’ve got that Facebook group, there’s 28,000 people in it. You can do LinkedIn, you can do Instagram, you can do YouTube. I’ve got students in every one of those platforms that are getting reach and so it’s so easy to do, yes. The key is to add value and so if you’re going to do that, you add value.
You curate articles, you write articles, you do videos and you just add value to people and then you start getting a following and then when you say, “Hey, I’ve got a deal, I need some money for,” boom. Now, there’re some caveats to that and you need to understand syndication. I don’t know how deep you want to go here, but you need to understand syndication and if you’re going to syndicate versus joint venture. Let me tell you at a high level the difference real quick.
In a joint venture, if Oliver and I buy a property and I say, “Oliver, you put …” and this is how … By the way, I bought about $20 million worth of property doing what I’m going to describe right now.
Oliver Graf: Love this.
Rod Khleif: Oliver, you put up the money. We’ll split the deal, 50-50. I’ll do all the work, I’ll sell it, I’ll manage it, I’ll do everything and we’ll split it. Everybody’s happy, right? Now, Oliver, if I spend more than $3,000, I need your written permission. That’s a JV because he has some even just a slight decision-making piece of it. Everybody in a JV, joint venture, has to have some role and that’s enough.
Oliver Graf: Got it.
Rod Khleif: That’s enough. That’s how I did it back then. This is when I was wet-behind-the-ears. This is anbout 40 years ago, literally. I turned 60.
Oliver Graf: Can that be multiple people or is that generally one partner?
Rod Khleif: Yes, sure. As long as every person has some active role in some fashion, they wear a hat.
Oliver Graf: Got it. Okay.
Rod Khleif: Okay, it can be very minor but if you take money from somebody and you just give them a rate of return and they’re not active, you have to syndicate. What that means is, is you have to, really, you just stroke a check to an SEC attorney and you dot the i’s and you cross the t’s. It’s not rocket science. It really isn’t. I don’t think I want to dig deep on it with you here just because we could talk about more fun things than that but just talk to a syndication attorney. There are several ways to do these deals, so real briefly.
One of them, you can’t advertise and that’s the 506(b) but now they have what’s called it and that’s how I grew up. You had to have it. There was a three-touch rule. You had to have talked to somebody three times before you could bring up a deal. Now there’s the 506(c) where you can advertise. I can scream it from the rooftops, say it on our podcast, because we only take accredited investors. Accredited means somebody that makes 200 grand a year or has $1 million net worth without their personal residence. If you just limit it to those, you can take accredited investors. I mean you can advertise. That’s the 506(b).
Now they have what’s called a Reg A where you can take both but you have to get audited and it’s more expensive to do that. That’s what Grant Cardone’s doing, a fund like that, and he’s taking anybody. That’s syndication. You just have to learn it, like anything else. You have to learn it and that’s it.
Come see me. Come see me. I’ll be in Baltimore in September. I don’t know when this is going live but I’ll be in Baltimore in September.
Oliver Graf: Yeah, just to give Rod a plug. I mean your events are topnotch. I attended one myself, the multifamily boot camp.
Rod Khleif: Thank you.
Oliver Graf: Learned a lot.
Rod Khleif: Thank you.
Oliver Graf: Really, really, you go deep on everything, you give all the details, you give all the how-to-dos and all that stuff. If someone wanted to find out more about that, where would they go?
Rod Khleif: Sure, sure and let me say this. It’s just me for three days. I don’t bring in outside speakers to sell you stuff like a lot of these guys do.
Oliver Graf: Yeah, it’s not a pitch fest.
Rod Khleif: It’s not a pitch fest, okay. The Baltimore one is rodinbaltimore.com. I’ve got one in Los … That’s in September 27th through the 29th. I’ve got one in Los Angeles here in January 17th, 18th, 19th and I think that’s Rod in Los Angeles. If you go to multifamilybootcamp.com, that’s our general site but let me say this. You should also go to my website because I’ve got … If you’re interested in this business at all, I used to give away a book. I have a 200-page book, I finally put her on Amazon, I gave away 20,000 copies. It’s like a textbook. There’s no fluff and it’s not one of these fluff pieces. I gave it.
Finally, my team’s like, “Are you ever going to make a dollar on this thing?” I’m like, “Fine, I’ll put it on Amazon” and it’s on there for 25 bucks. It’s worth every penny but because I took that down, I now have a due diligence checklist on there, which is the best in the business okay and it’s free. It’s on my website, rodkhleif.com, R-O-D-K-H-L-E-I-F dot com. There’s other books on there that are free. The biggest mistakes I see people make, things like that, tons of articles, tons of videos, it’s all free.
Go there if you have any interest in the multifamily space at all or come see me. I’d love to see you and if you go in that multifamily Facebook group that I have, you go to multifamilycommunity.com and it’s a direct link to that Facebook group and just put in bootcamp and see what hundreds of people have said about the event unsolicited. You don’t have to take my word for it. Tickets are like 297 for days. It’s a no-fricking-brainer.
Oliver Graf: It’s well worth every penny.
Rod Khleif: Thank you, thank you.
Oliver Graf: There’s no question and I would even recommend upgrading to the VIP because then you get to network with all the other people that are making moves, the people that have the deals and the people that have the money and you can work on.
Rod Khleif: I’ll tell you something. I had 800, I’m sorry, I had 600 people in Denver, probably about 240 of them had been to one of my events before because they keep coming because it’s all about team. It’s about networking, it’s about aligning with other people in this business. The people that have the money or the people that have the deals and they come together and they do deals. It’s a beautiful thing. It’s like this ecosystem that I never planned to create but it’s just kind of happened on its own.
Oliver Graf: It’s a great community.
Rod Khleif: Yeah, thank you.
Oliver Graf: I see you’re posting on Facebook all the time. You’re doing bigger and bigger deals, tell me about the biggest deal you’ve ever done.
Rod Khleif: Biggest deal. Well, it hasn’t happened yet.
Oliver Graf: I like that answer. I like that answer.
Rod Khleif: It hasn’t happened yet. I had somebody send me one that was I think it was 400 million and that one is taking it to a whole another level. It’s funny, I give my coaching students gifts every month and the gift I picked this month was Grant Cardone’s book and I was just reviewing it again today 10X.
Oliver Graf: I love that book.
Rod Khleif: How you 10X your life and so they’re getting that one. Of course, they’re all going to know now but that’s okay. My love language is gifts. By the way, if you haven’t read The Five Languages of Love, get it so you know how your spouse or significant other feels love because you want to give it to them in the way they feel it. I express love through gifts and so-
Oliver Graf: That is a great tip. That’s helped me and my wife a lot too, just learning how … the hot buttons for this person and then-
Rod Khleif: Right, right, right. It’s called The Five Languages of Love, highly recommend you get it, but I give lots of books and gifts because that’s my love language but anyway. Yeah, the biggest one is yet to come but …
Oliver Graf: What about in terms of like number of doors? What’s the biggest project? Tell me about that one.
Rod Khleif: Actually, it’s that 400-door one, that’s the biggest so far.
Oliver Graf: Okay.
Rod Khleif: Again, just realize, I just got started again because my credit was crap, okay, so I’m just back in the game recently. I have made every possible mistake you can make in this business because I never went to college. I never got formal training on this. I just went out and did it. I didn’t know what I didn’t know.
I mean I can tell you stories where I bought properties that I thought my acquisition guy looked at and I hadn’t looked at. We go out there and it’s just four walls. The roof, everything’s gone, we thought it was a house that was 30,000 so we didn’t care and we didn’t look at it. I could go on and on. By the way, those of you that … When you go to buy property, there’s different classes. There’s A, B, C and D. Don’t do the D. Trust me. Ask me how I know. Don’t do the hood.
I’ve had people killed in my properties, behind them, in front of them, next to them. You don’t want that brain damage. I’ve had where they’ve cut a hole in the front door so they could pass the drugs through. I’ve had them where I had three houses on a street where they put those concrete pylons at the end of the street to slow down the drug traffic. Not to stop it, just to put a dent in it. I mean you don’t want that brain damage, trust me.
What we like is we like B and C properties in A and B areas that we can add value to because again, any increase in that net income is an exponential increase in value.
Oliver Graf: Yeah. I actually think that’s to me the most attractive part about the multifamily game is-
Rod Khleif: Yeah, because you can force appreciation.
Rod Khleif: But you’re locked into the comps.
Oliver Graf: Exactly, you’re locked into the comps.
Rod Khleif: You’re locked into the comps.
Oliver Graf: Where if you take an apartment complex, call it tenplex or whatever and you re- overhaul it, not only does it look better and in theory go up in value but then you can raise rents, which-
Rod Khleif: The value happens from the income …
Oliver Graf: across the board.
Rod Khleif: because they’re valued based on income. It’s not like a replacement cost approach like you get in residential real estate. It’s based on income.
Oliver Graf: If you can fill vacancies, if you can raise rents so you can become more efficient.
Rod Khleif: Yeah, fill vacancies, raise rents, decrease expenses, maybe bill back the utilities. Let me mention one thing. It’d be another great example of this because I have a friend, when you’re doing your evaluation on multifamily, rents have gone up so much, it’s like crazy and they keep going up that you need to be very clear on what you can get in your rents. You have to compare apples to apples so I give an example.
Let’s say you found a 50-unit and it’s all two-bedroom units and it looks okay and you’re checking the rents. You want to know what you can get in rents for it, so you’re going to do the obvious like you’re going to check Rentometer, Rentbits, apartments.com, Zillow, Craigslist, you’re going to see what two bedrooms are renting for, right? Well, that’s not nearly enough. You got to make sure it’s apples to apples. You’ve got to make sure they’re similar in age, similar size, similar amenities. Let me tell you why this is a big deal.
Let’s say the one you’re looking at has washer-dryer hookups and you compare it to one that doesn’t. That can be a $50 a month difference in rent. To give you an idea of the ramification of this. On that 50-unit, that is an 800,000 to 1 million difference in value, 50 bucks.
Oliver Graf: Yeah.
Rod Khleif: That’s how big a deal it is but it’s exciting because sometimes it’s not that hard to raise the rent 50 bucks. Then if you get and we’ve got one, we’re raising $500 on this one in Ohio, except that just got destroyed by tornadoes but once we’re rebuilt again, yeah, we have 101-doors and it’s completely destroyed. Three of the buildings I think are going to have to be scraped and yeah.
Oliver Graf: Wow.
Oliver Graf: Oh.
Rod Khleif: Yeah, but we see a $500 rent bump there so I mean do the math on 100 doors, it’s [crosstalk 01:02:23].
Oliver Graf: Insurance will cover it.
Rod Khleif: Insurance will cover it, yeah. We’re going to see how well that goes. We’ve hired-
Oliver Graf: You’ve just got to deal with the brain damage.
Rod Khleif: And it’s a lot of brain damage. The adjuster, we hired our own adjuster as well which is smart to do in big claims like that and he just called me today actually right before I got here, but.
Oliver Graf: So that one you got to rebuild, what’s the game plan for the 400-unit?
Rod Khleif: Just get it stabilized. In fact, we weren’t planning on selling that. I’m sorry, we were planning on flipping that one once we stabilized it but we found out there’s a really good chance. There’s a billion-dollar development going in and very nearby and so we’re thinking well, maybe we will.
Oliver Graf: Sit on it for a little bit.
Rod Khleif: We’ll see if it comes through. It’s relying on public funding so it may not come through but if it does then we may rethink our strategy but that’s not a market I would normally buy in. When you’re picking an area, the three things you should look at, I don’t know how we’re doing on time, but the population, income and jobs, all three need to be growing. There’s some websites. It’s not hard to learn this stuff online.
Oliver Graf: Income, population and jobs.
Rod Khleif: And jobs and you can go on a website called bestplaces.net or city-data.com and it sounds intimidating. It’s so easy to check this stuff but you got to do the homework. You don’t want to be a generalist. You want to be a specialist so you really want to get to know that area as well as you can and know what the rent should be and things like that. Build a team there, find the brokers that are selling the kinds of property you want to buy and develop relationships with them and realize, these are lifelong relationships.
This multifamily business, it’s not a get-rich-quick but it is a become super fricking wealthy over time. K build those relationships and-
Oliver Graf: It’s a small world.
Rod Khleif: It’s very small.
Oliver Graf: That’s what makes the relationships even more critical.
Rod Khleif: That’s right. That’s right. Really, what’s a relationship? A friendship, like you and I. We met in a mastermind we were in and here we are. It’s just a friendship. Put on your long game hat. Realize that when you get into this multifamily business, you can do it the rest of your life. Make sure you love it, number one, and if you’re watching this you probably love real estate already, that’s important. Build relationships for life and take care of people.
I just wrote the foreword for a book for a guy named Glenn Gonzales and the book is From Maintenance Man to Millionaire and he has like 5,000 doors now and a couple thousands of those he got from relationships he built with apartment owners and just stayed in touch with these old apartment owners. I know he bought 1,700 units from one of them and so it’s a real relationship business. He had relationships with property managers and he bought a bunch from his property manager as well because I’m not from but through because for property managers managing a property and they know this owner’s going to sell, who do they want to buy it? Somebody that’s going to use them for management.
Oliver Graf: Going to pass the baton.
Rod Khleif: Right, exactly. That’s why this is a relationship business.
Oliver Graf: What do you think as far as like the current state of the apartment landscape?
Rod Khleif: Yeah, yeah, good question. I get it all the time.
Oliver Graf: Do you think prices are high, low, good, bad?
Rod Khleif: You got to kiss a lot of frogs to find a deal right now but if you’re going to learn this business, there is no better time because when a contraction happens, that’s when exponential opportunities happen.
Oliver Graf: Yes.
Rod Khleif: If you listen to my podcast and you can almost set a watch to it and if somebody’s got 1,000 doors or more, they usually started in ’09, ’10 or ’11. That’s a clue. With crisis comes opportunity.
Oliver Graf: Right off for the bounce.
Rod Khleif: You bet. With crisis comes opportunity. When this contraction happens, which it’s going to happen, it may have already started. Let’s pray it’s not as bad as the last one but if it is, it’ll still be incredible opportunity. But if you’ve developed relationships with people with money, if you’ve developed relationships with brokers, with bankers, with property managers and you’ve got your team put together and you’re not afraid of the business that you’ve already learned it. You build your competence first which builds your confidence and then you have the ability to influence people. That’s kind of the progression.
Competence, you learn it, then you’ve got confidence and then you can influence people because you’re confident. When two people are in rapport, really rapport together, the person that’s the most competent or certain about the subject matter will almost always influence the other person. Learning this business right now is the best fricking time because when the market corrects, there will be exponential opportunities. It’s a good time to be in the business and you want to evaluate lots of deals. You want to get to a point like you know, you can sniff if a deal is a good deal, and that’s what you want to get to and you can.
I interviewed Grant Cardone. I mentioned him a couple of times just because a lot of people know the name. I’ve had him on the show a couple of times but he’d studied the business for four years before he bought a property. I’m not going to say you have to take that long but the point is learn it.
Oliver Graf: Yeah, and on that note, do you suggest focusing on one area to really get good?
Rod Khleif: Yes.
Oliver Graf: Or is it strictly a numbers game or what’s your thoughts on that?
Rod Khleif: Yes and yes.
Oliver Graf: Okay.
Rod Khleif: Okay, yes. This business is empirical, it’s numbers. I mean it’s common sense too. Get my Due Diligence Checklist so you don’t make a mistake. You kick over every rock, you make every phone call, you ask every question. It really is numbers, okay. If the numbers make sense the numbers make sense. You can’t play with the numbers. But yes, you should also be a specialist in your area because generalists get crushed. Dabblers get crushed.
You need to know what’s going on in that marketplace. You need to know what businesses are moving in, moving out. You need to know what the market rents are. You need to know the players. You need to know the area, the feel for the area, what’s happening, what are the demographics. Do they like one-bedrooms, two-bedrooms, three-bedrooms? What type of property do they like? What are the amenities that they like? Do they like black appliances packages or stainless? You need …
Oliver Graf: Quality finishing and all of that stuff.
Rod Khleif: Yeah, all of that stuff. You need to know what they want so that you can be competitive and that only comes from spending some time doing it. What’s so amazing, that we live in the technology we live in today. When I was doing real estate, my friend, this is before your time, listings came in a book.
Oliver Graf: Yeah.
Rod Khleif: Okay.
Oliver Graf: Right.
Rod Khleif: They came in a fricking book that you got every week.
Oliver Graf: The MLS book.
Rod Khleif: The MLS book every week. Now it’s all online. You can look at your listings online. You can develop your relationships. You can go on Google Earth and drive down the fricking street. You can look at the cars in the parking lot. Go down to the main … You can go on SpotCrime, see what the crime’s like but you drive down to the Main Street and see if there’s national retail tenants or if it’s, instead it’s a pawn shop and a liquor store and a strip club and if it’s the latter, that’s what we call a clue. But you can do all that online in your underwear.
It’s just incredible the technology that’s available to us today. I won’t even go look at a property in another state unless I’ve got a contract on it or I’ve got an accepted letter of intent. I won’t even bother.
Oliver Graf: How are you doing due diligence on those, just all remote?
Rod Khleif: Yeah. No, no, we have boots on the ground anywhere we buy.
Oliver Graf: Got it.
Rod Khleif: You need to have a local presence and we use really good third-party property management companies. I have students bringing me deals. Of those thousand doors, two of the four deals were students.
Oliver Graf: That’s great.
Rod Khleif: I have people throwing deals at us and then I’ve got lots of people with money that want to place their money so I’m like in the right place.
Oliver Graf: Yeah, you’re good. The middle man’s perfect.
Rod Khleif: Right, right, it’s a beautiful thing. We spend a lot of time. We know what we’re doing. There are a lot of people that are watching that have never done this and that’s why I’m telling you be a specialist. Could you ultimately buy in multiple markets? Yes, once you really understand the business but I’m going to tell you, don’t out of the gate. Pick a market, stick with it, learn it, grow there first until you really understand this business before you spread your wings.
Oliver Graf: That’s great advice. I have two final questions for you. What are some of your favorite just tools of the trade, softwares that you just couldn’t live without or just love?
Rod Khleif: Sure. Well, I can’t spell technology but let me say this. My team and I love Asana and Slack. We use the hell out of Slack. It eliminates email and Asana is great for project management, so we love those. Me, beyond that, I’ll leave it with those because again, I’m not the tech person.
Oliver Graf: Slack is-
Rod Khleif: No, no. Social … I’m going to say this. As far as technology goes, maximizing social media is like a must do.
Oliver Graf: Yeah, absolutely.
Rod Khleif: Okay, adding value in some fashion like you’re doing, like I’m doing. Pick a channel, become an expert at it. A channel that has your clients so if you’re a real estate broker, maybe it’s Facebook, maybe it’s even Instagram. I don’t know. Instagram’s a younger demographic. Maybe it’s LinkedIn. Maybe it’s YouTube. Maybe it’s Twitter or whatever it is, use it, master one of them and kick butt with it to build your brand.
Oliver Graf: Love that. Love that. Social, Asana which is project management, Slack which is team messaging. We use Slack in our office too.
Rod Khleif: It’s awesome.
Oliver Graf: It’s cool because you can separate everything, different topics, different departments, they can all talk, it’s all saved in there. Great tool. What would you say to someone just looking to get into multifamily and what would you say to those people?
Rod Khleif: I would say learn it. Come see me. I don’t make a lot of money in my events so it’s not about the money. Trust me on that. I love adding value. You’ll get that if you listen to my podcasts but learn the business. With or without me, go learn the business and take action. Don’t get caught in analysis paralysis, okay? Make sure you know what it is you want, why you want it. That’s why at my events I focus on mindset. I focus on associating with who you have to become to achieve your goals.
I work on pushing through fear, on embracing gratitude, on describing your ideal day so that you can manifest your life into that place. All these things that I work on besides the real estate, it’s real estate drinking through a firehose but like you know, I get into all that other stuff. Educate yourself, number one, and then take action. Just get out of the comfort zone, go take action. I promise me …
When I interview, that’s one of the questions I ask. Well, I ask it differently, I say, if you could tell your 21-year-old self something, what would you tell yourself versus what would I tell your listeners? That’s always, I would have started sooner, I would have gone bigger. Almost, you can set your watch to it every time, so there’s the answer.
Oliver Graf: There you go.
Rod Khleif: There you go.
Oliver Graf: Go big …
Rod Khleif: Go big or go home.
Oliver Graf: or go home.
Rod Khleif: That’s it.
Oliver Graf: Perfect, man.
Rod Khleif: Big block realty, baby.
Oliver Graf: Yeah. Appreciate you coming on. Now that we’re here at the end of the show, I’m going to give a quick shout-out to Stiegl Brewery out of Austria for their grapefruit Radler, it’s fantastic.
Rod Khleif: That’s cool.
Oliver Graf: And just, man, I just really appreciate how passionate you are, how giving you are, how forward you are …
Rod Khleif: Thanks, brother.
Oliver Graf: and just how genuine you are.
Rod Khleif: Thank you, brother.
Oliver Graf: Really class act …
Rod Khleif: Thank you, brother.
Oliver Graf: and really appreciate everything you’re doing. If you like the show, give us a like. If you any questions, leave a comment.
Rod Khleif: I’ll answer it for sure.
Oliver Graf: To answer those and go ahead and subscribe to Founders Club and we’ll see on the next episode. Thanks a lot, Rod.
Rod Khleif: Thanks guys.
Oliver Graf: Appreciate it.
Rod Khleif: Of course, brother.
Oliver Graf: Cheers.
Rod Khleif: Salut, my friend. Awesome.
“Your success in anything—I don’t care what it is, if it’s real estate [or] entrepreneurship—is literally 80% to 90% your mindset and your psychology and only 10% to 20% the real estate mechanics or the entrepreneurship or the business development. It’s really mindset. I changed my mindset, and I more that 10Xed my income.”
“So many people spend more time planning Christmas or a birthday party than they do designing their lives.”
“Your comfort zone is a warm place but nothing freaking grows there.”
“Write down who you have to become to achieve these goals, the traits that you have to own.”
“Clarity is power.”
“Never achieve a large goal without having other goals lined up behind it.”
“Happiness comes from progress and growth.”
“It’s easy to get caught up in success and lose sight of what matters.”
“Multifamily is an absolute team sport.”
“Buy things that cashflow.”
“In this multifamily business, it’s not a get rich quick. But it is a become super-freaking-wealthy over time. So, build those relationships.”
“You’ve got to kiss a lot of frogs to find a deal right now.”
“With crisis comes opportunity.”
“You build your competence first, which builds your confidence, and then you have the ability to influence people.”
“Generalists get crushed.”
“Pick a market. Stick with it. Grow there first until you really understand this business before you spread your wings.”
“Maximizing social media is a must-do.”
- Tony Robbins
- Grant Cardone
- Dale Carnegie
- Tom Hopkins
- Zig Ziglar
- The 10X Rule: The Only Difference Between Success and Failure by Grant Cardone
- The 5 Love Languages: The Secret to Love that Lasts by Gary Chapman
- Best Places
- Glenn Gonzales on Lifetime CashFlow EP207
Connect with Rod
- Rod’s Website
- Lifetime CashFlow Through Real Estate Investing Podcast
- Multifamily Community on Facebook
- Multifamily Bootcamp
- Tiny Hands Foundation
- Books by Rod
Connect with Oliver
Other episodes of founders club you might like:
Sharran Srivatsaa – From Dumpster Diving to Building a 3.4 Billion Dollar Business
Sal Buscemi – From Goldman Sachs to Developing a $20,000,000 Commercial Project
Thank you for watching!
If you’d like to see all the episodes go to: www.OliverGraf.tv/FoundersClub
If you have any questions, comments, or ideas contact me here.