If you're going to play the game of real estate then you really got to understand
how to mitigate your risk and that is such a bad four-letter word for so many
people. Today, we're hoping to change your mind on how you view risk and how to
work with risk appropriately because ultimately, risk is the means of getting
where you want to go. I'm Kris Krohn and this is Limitless TV.
Oh my gosh. I love risk! - Yes, risk is awesome. - How do you feel about risk?
- Oh, risk is my friend. - Oh my gosh, risk and I, we were having a sleepover the
other night, we stayed up real late. Whoa, easy there, that's.. Okay, you guys are
really funny, that's super super close. Okay, friends, listen. Risk equals winning
and we are going to talk about how you mitigate it and how you manage it but
there's a lot of people are like, well I want to win but I don't want to risk. I'm
like, for you foes, listen up carefully. If you are not willing to take risks, you
cannot get where you want to actually go so we got to talk about how you can step
in and embrace risk and actually understand what it is because part of
managing it, you got to understand what it is and Steven, how is it that risk
actually can prey to a benefit for the people watching? - So risk is anything
that you haven't done before. I mean, really, if I can just put a definition to
a risk is anything where you don't already know the outcome and if you're
doing anything that you have never done before, that means there's risk there, it
is that risk good or bad? This goes to the mindset, Kris, of what risk
really is because I look at risk and I think risk is actually good. When I look
at risk, risk equals winning, risk equals change, risk equals grow. - But you had to
train that because that's not the world that were brought into, we're
brought in a world where risk is always identified with the wrong people than
the wrong choices and that it's not going to be good and then so
you live a very risk-free life. I don't take any risks
and you start realizing, wow, I also don't go anywhere. - I'm stuck in my tiny little
circle here. Yeah, absolutely. So risk, if you start to look at risk, you start to
identify it as something that's good. I mean, as a matter of fact, I want to talk
about this for a second because I think this is really important. In the
investment world, people often talk about risk and when you talk about risk, you
usually think, you just tell me if you know, in the comments,
just comment if you have resonate with this, right. In order
for me to get a high return, I'm going to have what associated with it, Kris?
- High risk. - High risk. I think most people think that way, right High return equals
high risk - But that's not how people are shown up though. People are putting their money in
low and in ultra low risk and they're like, yeah, I'm going to be
financially free someday. I'm like, there's no choice you making right here
that is going to equal financial freedom because you want it all, you
want no risk but you want to be rich and you know what? It's not real.
- See, but I want to talk about that because no risk actually is more risk.
- It's the biggest risk. - And this is the thing that confuses me because
people think all the time, well hey, I'm just going to put my money in my 401k, in my
IRA. You know, I'm going to put in some stocks or some t-bills, you
know, some bonds, some low yielding CD's, that's the biggest risk of all time,
Kris, cause we know what happens. Kris, you and I have gone around the whole
entire nation and we've talked to thousands and thousands of people and the
reality is, is I don't care if you're in the top echelon of your specific
environment right there, most of you are so scared,
so risk adversed that you're actually, you're pigeon hole in your place in the
riskiest place possible because you know what the outcome is going to be, you're not
going to have enough of retirement. - And let's do the math to just prove it real
quick and then we're going to talk about how you out and how you manage your risk
because we're going to give you three keys of being able to do that. First of all,
let's just do the math. If I put my money and allocate some of it into a high-risk
investment then let's just say there's two extreme outcomes,
what are they? - You win or you lose. - You win or you lose and so people like, well
that's risky because you know, let's even give it a percentage. It's
50/50. Well that's super risky. 50% chance of winning, 50% losing but what's the
alternative? If you do nothing, there is a 100% chance you will not get
where you want to go, there's a 100% chance you can't get there. Would
you rather have a 50% chance or a 0% chance?
50% is way less risky than - a 0% chance - a 0% chance. So we just
wanted to start this video off and say hey, kick it with us.
Risk, stop identifying it and throwing it in this bad sour bucket as if it's
this bad word. It is the only way for you to develop your personality, for you to
meet new people, for you to get out of your comfort zone, for you to make more
money, it's the secret not to money, it's the
secret to everything. It's that get out of your comfort zone and out their lies
yes risk but yes reward possibilities and so, I actually look for risk but I
look for my risks to be smart and calculable, how do I
take a calculated risk and that's what comes down to managing it with these
three top keys and the first one.. - Is the allocation of risk. So let's talk about
this, the allocation. If you know that risk is going to be there and then it needs
to be part of your growth, right? Then how do you properly allocate where you place
that risk or where you make those certain decisions that could seem a
little bit more risky or a little less risky? - And that comes down to your money
and your own personal financial philosophy so for example, I'm sure we've
all heard, don't put all your eggs in one basket.
So instead, here's what the risk allocation is. Let's say there is an
investment opportunity and let's say I have $100,000 to my
name and I'm like, a big opportunity come up and it could make me a lot of money.
Okay, putting all your eggs in one basket would be saying, I'm going to take $100,000
and I'm going to bet on this. Friends, that's gambling, there's nothing calculated
there. It might be appropriate when you come to know your philosophy to say, I'm
going to allocate 20% so $20,000 is what I'm
going to put towards that investment. Now of a sudden, if that doesn't work out, if I
took taking my hundred thousand I've allocated over five different spots, five
different properties, five different scenarios then you know what? Things
are sometimes going to go south and if a property, if a deal doesn't work out,
guess what it means. You lost but you didn't lose everything because you
didn't bet the farm so proper allocation means put the appropriate amount of
resource into a decision because most of us are actually, we won't want to admit
it, we are gamblers at heart and there's so many of us that
we'll just throw it all in and we're just praying and hoping this is going to
work out. - Can I talk a little crazy here for a second?
- Get crazy. - Can I get crazy here for a second? You know, one of the crazy things
that is a true belief of mine is, if you think it's risky, it will be more risky
if you don't buy into the hype of this is super risky, it will actually lessen
the risk for you and I'll tell you why I believe this. Warren Buffett, you all know
who Warren Buffett is. If you don't, he's one of the wealthiest men in the world,
you've probably heard of him or heard from him at some point. Warren Buffett
has a financial philosophy and he talks about going into things with a large
margin of safety. Now he doesn't believe that he can get rid of all risk without
all risk is even bad, he just says before I do any investment,
I make sure there's a large margin of safety. To me, large margin of safety
equals low-risk so where the majority of the world believes, high return equals
high risk, where Buffett believes, high return equals low risk and calculated
risk. Properly allocated risk. - So here's
where the rubber hits the road. For just a moment, let's use a real world
example, let's use fiat money and cryptocurrency, let's talk about Bitcoin.
- Oh, we're going there? - Yup, because a couple years ago, Bitcoin was at $300,
now Bitcoin, it's been up to I think as much as $30,000, it's
been settling in at this $10,000 mark and the reality is,
people that got in at the right time, they have won and we're not here by the
way to pass judgment on cryptos being good or bad but let me share with you
the behavior. If I have $10,000 in my bank account and I take all $10,000 and
throw it bitcoins then what I'm doing is, I'm allocating all of my assets into one
thing that I can't control and it's mania fed, it's driven by
people and choices that other people are making which means it's outside of your
control so if you're thinking I've convinced myself, this is a good
investment so I'm going to put everything into it, that's where you're going to take a
bath because if it works out, you're going to be thrilled but you got lucky, you
can't claim that you're a lottery winner and that will happen if
you do proper allocation and part of that lottery winning is to make up for
other investments that you also can't control that don't go well, right? And so
the question is, when you have a good investment opportunity put in front of
you, how much are you really allocating? Because you don't get to say
well I'm risk-averse but I'm going to throw it all in so make sure that it's
appropriate, that's what number one is. On risk management number two is, you
got to have a winning strategy and a winning strategy means, I'm looking at
putting my money somewhere that makes sense, I've done my due diligence, there's
some type of track record and the riskier it is, the less that you
understand it, the less that you should put into it, right? And so, your allocation
is going to be affected by your personal belief, what you're investing in, take
real estate for example. Talk about track record and what that means.
- Absolutely, so this winning strategy is so important, a track record. I mean, you
want to go and put your money with a group or in a certain area that you
know performs over time. I like that you brought up this Bitcoin thing because
it's interesting to see, Bitcoin has been around now for
gosh, 15 years or so, it's been around for quite a while but it's only been in the
last couple of years where it's really starting to make this massive splash
where a lot of people are jumping in because like you said, you've got the
hype, you've got the all the things are growing, everyone hears the
rumors so everyone's starting to jump in and just a few you know, just a little
while ago, you saw this massive dip again with Bitcoin where people are like
scared to death and they're now pulling out so although you've
got all these different scenarios, all these different cycles that are
happening in different types of investments, you want to pick an
investment that is even keel, you want to pick an investment that produces over
the long term, that's got a 20 30 40 50 year track record, you want to put your
money into an investment that is conservative in nature but gives out
great returns and that's one of the reasons why we said on our real estate
is because you've got this conservative type of investment that's giving way
more than conservative returns. In other words, large margin of safety but high
returns and that's what you want to really be looking for, that winning
strategy. - Yeah, in real estate, when we talk about track record, we've done 3,500
deals, we've done almost a billion dollars worth of real estate with
thousands of people. Our own houses, the houses with our clients so there's some
track record there. That's where we like to put the lion's share of our
different, as when you talk about this investing bucket, that's how we're
allocating and we'll also allocate it over several different properties and I
will invest in other businesses, other companies that don't have a 20 30 40 50
year track record but I'm going to allocate the appropriate amount and it's
something like that, it's got to be money that I'm willing to what? Lose. And if I'm
putting aside money that I'm willing to lose and have allocated only
a proper amount, then I've started taking on a better strategy when it comes to my
risk management. So number one, proper allocation. Number two is a winning
strategy. Number three, so you can actually started touching on a little
bit, it's called seeing it through to the end because not all investments are,
here's my money and then I'm going to wait. Seeing it through means that you're
managing your mental state. It's exciting when you jump in and you make your
initial investment but when there's that dip then how do you feel? If you allow
circumstance to drive your emotional state then the reality is, when things
are up, you're happy, when things are down, you're pissed and if you're living life
between happy and pissed and you're letting everyone else make that decision,
there's a big problem with that, you're going to start, you're going to cloud
your judgment, you're going to lack clarity and then you're going to start making
actions on your investment that will hurt it. A decision made in fear will
never be the right decision and so you've got to step out of this world of
allowing your circumstance to determine how you feel about things and instead,
you got to choose to actually build your own mental reserves, you got to be
educating yourself, that's why we invite people to click the link and
come to our three-day limitless event, you got to learn how to manage your
emotional state because when you're doing real estate for example, I remember
we had one of our investors that had been investing with us and had gone 3
years and everything was great and all of a sudden was in the sheer panic one
day because tenant moved out, he walked through the house and there's probably
$10,000 damage. Listen, that is a story that has happened before, it's not one
that anyone wants to face and then when you're looking at it straight in the
face, here's the question. How are you feeling inside? I'll tell you how he felt
that day. He panicked, he lost it, he thought where am I going to get the money
and how am I going to do this and I never foresaw this happening or why didn't
this happen even earlier, how come it had to what and all of a sudden, it turned into
all of these scenarios where he lost his certainty that he had just the day
before the person moved out making cash flow, making money, property values,
feeling good about his investment. The way you feel about your investment has a
lot to do with the performance, maybe not how other people act on the parts that
you can't control but absolutely on how you act and show up in your own
investing because we see this all the time, the market crashes, people are
holding winning real estate and you know people do? They'll sell at the wrong time
and they'll lose. They're actually making money, they just
needed a whole new longer but they will lose and Steven and I, we have seen it
countless times and so whatever you're going to invest in, don't think about the
beginning and don't just think about the end, think about who you're going to choose
to be with certainty throughout the process. That's why if you add all three
of these up, proper allocation, winning strategy and seeing it through, you're
going to see that they work together as a perfect threesome, a tandem, how all
three of these work together and ultimately creating a really good
outcome so that by the way, when the person moves out, why aren't you
panicking? Well number one, up managing my state.
Number two, I allocated the right amount of resource and number three, I picked a
winning strategy and I was aware that things like this do happen. Well
excellent, now I don't need to panic and put my investment at risk because I lost
my emotional state. - Yeah, and all sudden you find yourself in a situation where
you're utilizing the risk in the proper way.
Risk is now equal to winning for you because of those those three things so
hope you like this, hope you have learned how to better manage that risk, how to
see risk as winning. - I actually want to throw in one
last bonus piece of advice. When you make a decision in life, you're going to do
something, then be committed to that decision with enough certainty that you
don't doubt yourself. Portfolios go to heck and a handbag when you start
doubting yourself but your portfolio, anyone building wealth is going to realize
there's good times and bad times, there's times when you're winning and losing and
frankly, a lot of times, we're just trying to win more than 50% of the time and
real estate, we figured out how to win like almost all the time but the reality
is, it's going to hit the fan and things like that are going to happen and when it
does, who do you choose to be? I'm going to hearken back to my original choice, these
days when I make a decision like just this last week, I made a big financial
decision for something that I wanted to do for my business and it's going to be a
year-long decision and I was consciously making the decision, I'm choosing right
now to feel certain about this choice for 365 days, I'm going to see it through no
matter the circumstance of what happens, no matter what occurs, I have
developed this muscular brain now into a beast that obeys me and I'm telling it
right now, you get to be fully committed and faith-filled and absolutely certain
in your choice for the next 365 days. If you will make your investing like that
then I think you're going to find that your emotional states going to be happier, you're
going to have more confidence and you'll have losing days but you're not going to
lose your head. So let me ask you, do you like risk? Yes, that's the right answer. You've
learned risk is an essential component of getting where you want to go in life
but you need to deal with it appropriately and today we really
enjoyed sharing our three steps with you. If you want to have your opportunities
expanded, your horizons expanded, learn more about how we invest nationwide, how
we help people with money, without money, how they can get cranky
on real estate, go ahead and check out the link up here, go to the website and
check out some of the options that we've prepared that have worked for over 3,500
people on nearly a billion dollars of real estate.