Welcome back. My name is Kris Krohn and you have caught us right in the middle
of our partnership series. Today we're focusing specifically on where are the
hot areas where I'm buying real estate. Why would I buy there? How does it work?
All coming your way next. Okay, so let's break this down. First of all, I want you
to understand in the game of real estate, were not short-term thinkers. You need to
learn to think in term of decades. Most people have been bred and taught today
to think in terms of what do I get tomorrow? What do I get the next day? But
in real estate, you want to think in terms of decades. That doesn't mean you
have to wait decades to be financially free necessarily. But you want to be
thinking long term. Because guess what? The real estate market rises and falls
and it moves more in decade thinking than quarter-to-quarter thinking. Now,
there are two very different kind of markets that I'm interested in. One is
what I call a growth market and one is what I call a cash flow market. A growth
market is essentially a market where we're expecting some higher appreciation
because a market has taken a dive. Remember in the kondrat EOS cycle, when
the market comes down, we know that it has to come up to a certain point.
Whoa! That's exactly what I needed. That is the whiteboard. So, check it out.
Illustration is going to make this a lot easier. We know that real estate does
what over time. We know that real estate goes up over time. But we also know that
real estate doesn't go up in just this linear fashion. In fact, real estate will
move in these waves. And I just want to break this down for you. This right here
is what we call a bubble. You've heard that term before, right? And down here,
this is what we would call a trough. What I want you to understand is that real
estate will move up over time but one of the things that were super strategic
about a multi-decade strategy or a multi-year strategy is that we're not
trying to time the market. We just know how to play the market at any time. So
for example, when I talk about a growth market, what will happen here is... If this
part right here resembled 2008, we know that afterwards the market took a dive
because we were in a bubble. At the height of the bubble, we had all of these
people that were buying real estate. Every neighbor became an
investor. Everyone was spec building. And bottom line is bubbles are a function of
population. We had too many homes and we didn't have people to buy them. And when
that happens, remember, a home is only worth what someone is willing to pay. But
so when you don't have people to live in the home because we over built, what ends
up happening is no one can buy. That house has no value or significantly less
value. So, we actually saw a significant dip in the market. And I was buying homes
in Phoenix for $100,000. That previously were selling for $220,000. Well, we can
gauge what this rebuild value is. One of my hot markets for example is Florida.
I've buy homes for 150, 180 thousand dollars.
Homes that used to be selling for 220, 240, 260 and that's
what they actually cost to build. So, if I'm buying here in the market. Let's say
something for a 150,000 that in the previous peak was
selling for 280,000. The real question is what does
it cost to build? If that cost to build Is $220,000,
then guess what? There's still a $70,000 discrepancy between what we can
buy it for and what it's being built for. The market and real estate does not ever
double correct until it's had its first correction. So, we know that the market
has to travel a certain distance. And when it's traveled that amount of
distance, we know that we will then be entering the next bubble. For example,
right now in our current market, real estate prices are starting to go up
again. People are getting excited. But people who remember 2008 are wondering,
when's it going to pop, when's it going to pop? Nobody knows. But we do have indications.
So when I say that we're into growth markets, that's where I'm specializing in
places like North Carolina, Florida that took a dive. And we can measure how much
further they need to come back. And what we'll do is we'll play in that market
and then guess what? Phoenix that has has already had its it's down in it's up
where we did a thousand homes. We've sold all of our homes in Phoenix almost. And
our clients last 5 years made over $70,000,000. Many of them my
partner's. So, this is one of my strategy that I use for making a lot of money.
All right. Don't need that anymore. Okay, next I want to talk about markets where
we call them our cash flow markets. Our cash flow markets are different than
our growth markets. Our growth markets, we're looking at 20% plus ROI. But in my
cash flow markets, I'm still getting a 20% ROI.
There's just a less of an emphasis on appreciation and more of an emphasis on
cash flow. So, in those markets, we can get homes that actually have sometimes
double the cash flow for the money that comes out. Which is great for a partner
that's really focusing on having more cash needs of, "Hey, let's get this thing
optimized for producing more cash flow." And I just want to pause for a moment. I
want to help you understand something. When we're building this thing over the
decades, this first 5 to 10 years of taking a small amount turning into a lot
of money, we're not really trying to pull a lot of money out of this thing. When
you understand that every time we turn a property, there's profits. I'm going to be
rolling 100% of my profits forward with you. You might have
initially put the money in for doing the deal but I'm taking all of my profits
and I'm reinvesting them. We can have a distribution on the cash flow from time
to time. But basically, when we sell a property,
we're going to take all those proceeds and hopefully, if we're on the same page, take
that next property and to roll it into two more. Because what we want over time
is a handful of properties to turn into an armful of properties to turn into too
many to count properties. That's how we build tremendous wealth with time and
rules. So, there's a time for cash flow, there's a time for growth. You know, I'm
going to need that whiteboard again. Alright, here we go.
So, we've been talking about our growth markets, we've been talking about our
cash flow markets. So for example, Orlando and Charlotte. Those are two areas where
we're getting some of the best ROI's that I've seen. Strong cash flows, great
growth in the area. We could talk about the markets specifically. Like for
example, in Orlando. Specifically, where south of the parks and Kissimmee and in
that County, what we're finding is that people earn twice as much money as they
do for the type of home that they're renting. Which means they're making
$60,000 a year. But they're living in a home where they would only need $30,000
to rent in it. Which means we're having very low delinquencies, we're having no
problems with our vacancies. People are making really really good money. Or
Charlotte is a booming area. Where we have FedEx in all these places coming
into town. They're moving here, they're setting up
shop. We've got high growth, okay? So that growth means over time. Good cash flow
but great growth. We take a look however though at cash flow markets like Memphis
and Indianapolis. You know, Memphis we're getting, we're
scoring some ridiculously high cash on cash returns. Indianapolis, the same. But
this one has a lower T.O.P, Total Out-of-Pocket. We're doing this because
homes like this might need 25 or 30 thousand dollars. Some of these
other ones might need 35,0000. Some might need
45,000. That's your 20% down payment. And I have a variety. So that we can make
different amounts of money work. And all of these are going to growth and give us
good things over time. But don't get stuck. There are other investments that
I'm doing in other markets. I just want to help you understand the lay of the
land for the idea that there are growth markets, there are cash flow markets.
There's advantages pros and cons. And we look at all of that when we're deciding
what investment makes the most sense for us to take our portfolio to the next
level. Alright friends and potential partners, I wanted to shoot this video so
you can understand more about the markets that we go in and some of the
reasons why we go there. Next, we're going to be talking about how we hit up an
amazing deal.