Is bigger better? Is it always better? In real estate, is bigger always better? My
name is Kris Krohn and today, we're going to talk about the biggest, baddest real
estate out there.
You know, there's this idea in real estate that you need to graduate from
small-time real estate to big-time real estate. And that bigger is ultimately
better. I want to put that on trial today and I want to actually take a look at
that and see if that is in fact true. In fact, I created a little graphic for us
here. There are some people that say, "Kris, I got myself into a trailer park
because I could buy myself a trailer for something super cheap. Maybe I bought a
trailer for 10 or 20 or 30 thousand dollars." And it's the cheapest
form of real estate that you're aware of. But from there, you might say, "You know
what? I got tired of some of the problems that came with managing in a trailer
park." So, I eventually went on to doing S-F-H --single-family homes. You'll see that
abbreviation everywhere. And you're thinking to yourself, "You know, I went from
trailers to single-family homes. I think I'm ready for multifamily or maybe
apartments condos or or maybe something bigger. Maybe I'm ready to move on to
commercial. And there's this assumption that people have that bigger is better
when actually what they're saying is bigger is easier. And here's what I
actually mean by easy? What do you think's harder? Managing 20 single-family
homes or managing 120 unit apartment complex? The assumption is that the
apartment complex would actually be easier. But I'm going to put that on trial
today as well. Now, since I've done thousands of
single-family homes and I clearly have a bias, I'm going to share with you why and
ultimately I'm going to share with you the math between the 4 equalizers. And
what I mean by equalizers are the 4 things that you need to consider when
evaluating any investment in the game of real estate. Because they're not all
created equal and you have to ask "Well, how should I judge which one of these is
actually best?" And I want to share some ideas with you. Okay. So, the first
equalizer that I want to share with you is that you have to ask this question:
"What is the time commitment of this real estate?" Some real estate is active and
some real estate is passive. Passive means you don't have to do anything. It
works for you. Active means that it's actually a job. Look, if you flip a
property, someone has to drive to Home Depot and get materials and fix
thing up and put it on the market. It's a job. You can put hundreds of hours into
doing a remodel on a house and then selling it versus buying a home and
letting it be actually very passive experience. So, between the 2, guess what
I'm more interested in? You guessed it. I value my time, right? I value God, my
family and time. Those are my 3 biggest priorities in life. And they come...
You notice that money isn't one of the top three priorities. Because time is
actually the ultimate judge of where my money is good to place it or not.
The second ultimate equalizer that I want to talk about is effort. Some things
take a lot of work and effort and some things are super easy. And one of the
things that I've learned in life is that if you take a strategy that is complex,
you create more opportunities for breakdown and for things not to work. So,
what you're looking for is parsimony, simplicity. You're looking for something
where there's fewer moving pieces and less can go wrong. So, that's important to
me. The third equalizer that I ultimately look at is risk. I can show you a really
high return but if I share a paired up with a really high risk, guess what? We
normally assume that a high ROI comes with a high risk. Making a lot of money
must be very, very risky. This is not true. This is sometimes true. And so you can't
make an assumption that it is that way. That's why I want to put this fourth one
up here which is I want to call it profit. And when we take a look at profit,
this is ultimately defined by 3 letters ROI return on investment this is
the ultimate equalizer spread across the board of all investments we can't just
look at how profitable something is because it might take too much time or
it might take too much effort or it might take too much risk these things
are all relative to each other so I'm actually looking for that listen up the
highest ROI relevant to the least time the least effort and the least risk
which means at the end of the day someone else is going to claim their
strategies better than mine because they value things that are different than me
I'm sharing with you what I value and my strategy is based on highest ROI with
least time effort and risk so at the end of the day what does that mean I'm gonna
put it up here for you if you're brand-new to the game of real estate I
would only do a couple of things if I were you number one I would get into
single family homes for a couple of reasons one
70% of all Americans currently owned versus rent so it is the biggest sector
in all of real estate it's where people want to be it's part of the American
dream Millennials actually surprise surprise
don't want what our parents wanted they're interested in mobility and
freedom and they're willing to pay rent versus actually strife or owning
something that actually means that this sector just became hotter for investment
so the next decade is super exciting number two I look at entry-level an
entry-level means a three-bedroom two-bath maybe a four-bedroom three-bath
and part of this is for safety you see when you take a look at all
single-family homes where is the greatest demand is it for a two-bedroom
home or a four-bedroom home neither it's a 3-bedroom home and a 3-bedroom home
has significantly greater value in price than a two-bedroom home so 3 is my
minimum and I usually don't go before because guess what we're not trying to
house large families because that's not the majority demographic we're trying to
cater to the masses number 3 I ask myself how do I stay below the median
what that means is that single-family homes in one market in San Francisco
might be a million dollars single-family homes in New York might be 1.2 million
dollars single-family homes in Florida might be $220,000 single-family homes in
Tennessee might be a $120,000. The national medians
around 250,000. I want to be below that. Why? This is about
protection from the market coming back down. So, when the market course corrects,
guess what we want? We don't want our real estate values to be attacked. A
million dollar home in a recession becomes a half a million-dollar home. But
150,000-dollar home becomes 140,000-
dollar home or stays the same. And that's giving you an example that you have way
more insulation in the market. So, what I do is I take these 3 things and what
I do is I do a short term strategy of buy and hold. And that means that I'm
going to hold the home for 5, 6, 7 years I'm going to take the very
best profits out of it. I've written books about this stuff. But when we talk
about bigger not being better, I can't get bigger real estate, commercial real
estate to consistently produce what I'm actually getting in single-family. This
document shows my last 4,000 deals in a
25% annual ROI. I can't get condos to do that. I can't get a lot of my build
projects. And if I find an occasional project to do it, because I can't
duplicate that over and over again, it's risky because it means that I'm going
into an area where I'm not going to do a high degree of volume. So, I wanted to
break that down for you because when people are saying "Well, Kris. Why
single-family home? Why not commercial why not this? Why not multifamily?" I'm not
saying they're bad, I'm basically saying don't get attached to real estate. Get
attached to the formula. What will make you the most money and provide value for
people with the least time effort and risk? So, I've made my claim on what that
looks like. So there's a couple things you can do with that. The first one is I
wrote a book showing you how you can make $5,000 in the next 30 days
leveraging the strategy in your backyard. This book I actually give it away to
people for free. You cover the shipping on it and basically I send the book out
to you and you start your real estate adventure. So, that's a tool that I'm
giving you so that you can just go into the marketplace and start making it
happen. Thank you so much for watching today. I hope you guys appreciated
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