Oh, it'll be risky, oh no no no no, if we do this real estate thing, this can
be risky. You contemplated the risk associated with real estate.
Today we're going to be talking about risk because I'll tell you right now, mentally,
we blow our brains out and we take ourselves down with the ship
before we've even actually launched out of the bay. I'm Kris Krohn and all that
real estate jazz is coming your way right now.
Alright, we are back talking about how you handle risk in real estate and I got
to tell you this is terrifying, there's a terrifying look, this is
terrifying conversation, right? Because by the way, if you don't know how to
handle the risk or if you're just afraid of the risk, you should be terrified
because the risk is going to eat you up alive and potentially spit you out, maybe,
maybe not. - Man, one of the best ways to handle risk I think is to plan
appropriately for it. Risk is one of those things that's always there, it's
always going to come up especially when we're talking about real estate
investing. Every type of investing, real estate or not, has some associated risk
so how do you handle it? Well, planning for it, understanding that it's there,
having a plan of what you're going to do when it shows up is one easy way that
you can handle that risk very very simply. - Let's get really specific. I want
to give you some specific plans that will help you mitigate risk and actually
sleep well at night. Now that is what the first one is. It is a sleep well at night
in my account. we call it swan. Okay, so SWAN is the
symbol of peace right and in real estate a sleep well at night account, that's
your SWAN account and it brings peace to you because it's a bank account where
you have loaded extra money so that in the event that something happens wrong
or different with the property, that you have a way to handle it. Furnace goes out,
it's going to cost two grand, you might say, shucks, I wish that didn't happen but
I have a sleep on tonight account so I can do something about it. - And if you do
say shucks I wish that didn't happen, you're probably from the 1930's.- Alright or
you're Chris Brown from the 2000. - That's right. - So the second part of a plan is
making sure that you have appropriately planned for worst-case scenario.When
you're doing a real estate transaction, here's the reality. What would happen if
the property goes vacant for three or six months? Well, that's what that's sleep
well at night account is four but let's say that the property also requires some
fix-up. You know, we often buy properties and we're doing, we're planning on
cosmetic and it's three grand but you know what, sometimes we uncover something
that requires two or three thousand more. Have you thought through that? Have you
prepared for that?Also, have you made a plan that if you're flipping a
property, what happens if you can't sell it, the market shifts you, go into a long
winter? Meaning, hey, the market really dies down often and the fall doesn't
pick back up to the spring. Do you have a good six month plan for it? In other
words, have a back up plan to the plan and be thinking,
what happens if it doesn't rent? What happens if expenses grow? What happens
if there's some expenses that I didn't expect? And what happens if I have
to hold the property longer than I want? Those are the big ones that you usually
find happening in the world of real estate and so that ties directly to the
sleep well at night account and so if you've done an appropriate
planning and I would say that for my first property that I buy, I like to have
a swan account if I can, of seven eight ten thousand dollars, if it's a second
property, I maybe don't need double that even though I have two properties
because the likelihood of both of them experiencing the worst case scenario is
less and so with each additional property, I'm putting less and less away
but bottom line is that sleep well at night account is a really great way, it's a
skill set for handling risks. Steven, talk to us about the mindset of dealing with
risk. - Absolutely. You know, one thing for real estate, it's not all about
if it's going to happen, it's always about when it's going to happen and it's just
part of the process so being able to view risk as actually a good thing
rather than viewing risk as this horrible thing that you want to avoid is
I think really important on how to handle that real estate risk as it comes.
- It's so true, Steven, so many people think I'm just going to buy this property
and only good things will happen and it'll be cupcakes and rainbows if my
daughter says but the reality is, there are things are going to happen that you
might call bad and you can expect them because it's actually part of the
business that has not just profits, it also has expenses. - Yeah, but I mean
even looking at that risk, looking at that experience as a good thing and this
takes practice, this takes doing. Typically for most people our nature
isn't to love risk necessarily or to see it as something that's great but I came
to this understanding not too long ago where I realized that in order for me to
create anything new, anything different, there is going to be a risk associated.
Really what risk is, risk is doing something that you don't know what the
outcome is going to be yet, right? That's that's what risk is really. - And it can
step you into fear really quickly because when you don't know what expect,
that's what a lot of us allow our imaginations to run wild and say the
house will burn down and this will happen and someone will trip my property
then I'm going to get a lawsuit and and the worst thing is going to happen yeah but
so for example, if I was going to go to the gym, if I wanted to improve my
my muscles, you know, if I wanted to grow my muscles, the only way to do that is to
take on risk. Well what's the risk? The risk is is when I lift weights that are
heavier for my muscles than they can handle, it's going to rip and tear my
muscles. - Which by the way, you need that. - That hurts by the way, right? You need
it, it hurts but you need it - That's how you get bigger. - in order to grow, right? So
risk is actually a good thing if you start to view that risk as a good thing
even your experiences in real estate.
Having the vacancy for a couple months, that can be actually a really good thing
because it can teach you how to deal appropriately with vacancies. Having a
dishwasher go out that you have to then replace can be a really good thing
because you learn how to take that process on and how to manage that tenant
and how to do all these different things so if you begin to view risk as a good
thing instead of something that's horrible, then you'll attract that good
change, that positive growth into your life. - I love this nugget that Steven's
dropping, he has a lot of experience through the years of helping people work
through their weak mindset issues in relation to real estate and I want to
hit risks, Steven, from just a little bit of a different angle now. I want to
talk about risk from the point of view of if I buy a property, if I had my money
sitting in equity of a primary residence or a 401k or IRA, there's a lot of people
that would say, wow, you know, I could keep my money in those accounts but instead I
put in real estate and now I've got two months of vacancies. I wish I had it back
in my 401k. For just a second, let's actually put apples and apples together
instead of apples and oranges. In your 401k plan,
do the math, you were guaranteed to fail, it was guaranteed to never, it was a
hundred percent risk of failure. - Get it, Kris. - But if you put it in
real estate, yeah, you got some vacancies but here's the deal, you
actually have a shot of being successful and the other one, you're guaranteed to
fail. Do you understand the difference? I mean, the riskiest thing for most of us
is doing nothing, the riskiest thing for most of us is being conservative, the
riskiest thing for most of us is not having a good plan so I get it, you go
into real estate and it's like, I had a vacancy, the dishwasher went out, that's
risk. Steven's got the right mindset here. That's actually part of a
successful business and you can expect it. Instead of calling these things bad,
I'll tell you, years ago, this is maybe a little bit of a bonus but it was
probably 10 years ago now that I challenged the word bad in my life
because I noticed that every time I played with it like I'm having a bad day,
I'm having a bad moment, I feel bad, I never liked how I felt inside when I
would say those words and I did this little experiment. What would happen
if I just couldn't say bad? That means dogs couldn't be bad, kids
couldn't be bad. I get it, people will do wrong things, people will make poor
choices but the energy of the word bad in and of itself, I think we sometimes
abuse and take to an extreme that ends up backfiring so when Steven is talking
about risk and we're calling risk bad or the things that can happen like a broken
dishwasher bad, what Steven's actually giving us a new frame up and I want to
make sure that you're dialing in. It's not bad and instead, it's good. Why is it
good? Because it's an expected aspect of what can happen in the game of real
estate and if you fast forward ten years from now and you're a multi-millionaire,
let me ask you, was the dishwasher really bad? Was the vacancy for two months bad?
That really in that moment, caught you in a moment of mental weakness because you
thought, it's all going up in flames and smoke and it's
not working. I promise the time comes when you look back in you realize, wow,
I've learned how to temper my attitude just like Steven is saying, Stevn's giving you
the shortcut right now which is, be careful what you call bad and be careful
what you think risk really is because the reality is, if you're doing something
that steps you into the unknown that gives you a chance of success, that's
probably way less risky than the alternative. I think the final thing that
I would share with Steven today is just the kind of energy that you want to
tackle investing with. If you allow yourself to succumb to the energy of
risk and find yourself nurosing and and having this nervous anxiety and
constantly worrying, panicking, the reality is, is that that energy that
is fear-based will enhance your risk. You are likely to
do dumb things because calm people find solutions, calm people make good choices
so make sure that you're choosing into an energy where that risk is not
negatively impacting your energy that puts you into that really nasty energy
that can impair your ability to make good choices. - Yeah, this
is so powerful what you're saying right now, Kris. Because your mentality,
your attitude, the way the energy that you use as you go about these different
things, as you're taking on these risks and
evaluating them and learning how to move past these or through these things is
crucial. Let me give you a quick example, let's say that someone gets out of your
home or you have to evict somebody and now it's vacant and let's say that you
vacancy goes another month and let's say then it goes another month, you have a
choice in this moment right now, you can show up and say, oh gosh, this vacancy is
gonna kill me. Think about it for a moment. How
many of you has said things like that, right? This relationship is going to kill me
or this vacancy is going to kill me or this trial that I'm facing right
now is going to kill me and then you get down and you know, you're all
upset about all the things that it's doing to you. On the other hand, if you
wanted to, you could choose to stay calm and stay positive and say instead of
this this experience is killing me, you can look at it and say, wow, what am I
learning right now from this experience? What is this experience teaching
me right now? Well, it's been vacant for now three months and what can I do
differently to sell this home or to or to get a tenant into this home or to
make this out the outcome positive for myself. - Now just for pause, I want to
let you know that Steven here just demonstrated two different energies. Did
you feel the energy shift from the panic and then the energy solution? We're not
here to tell you in this moment what the solution is for the situation because
the point is is that the mindset is more important than what the technical
solution is. Choosing in that positive attitude, that a solution minded
problem-solving minded and says that there's a way is going to lead to the
way but I can promise you in every situation, negativity, we have met people
that have succumbed to it and it's a downward spiral and it gets them to the
point literally where they can put themselves in the hospital or they can
put themselves into a depressed state or they can allow so much worry to come to
their life that impacts the family life, their career and everything else and you
know what? Real estate is here to be a benefit to you so let it be your teacher,
nothing less and take an opportunity to plan for your risk and look at risk
differently because if you can with the ways that we're suggesting, it'll help
you be a far more successful real estate investor. The greatest risk hands down is
doing nothing so take action right now, take a small step, subscribe, ask for more
videos, more training, more knowledge like this and if you want to take a second
step, click the link up here and get with me in my team, learn the different ways
that we play with people and how we can help you instead of taking risk, actually
move forward in eliminating risk by creating real wealth.