Hey everyone, and welcome to Passive Real Estate Investing. I’m Melissa Nash, your guest host Jumping in for now. Let’s dive in.
Hey everyone, and welcome to Passive Real Estate Investing. I’m Melissa Nash, your guest host, jumping in for now. Let’s dive in. Welcome to the show, Robert. I’m so excited to have you here today.
Well, Melissa, thank you. It is an absolute honor and a pleasure to be here with you. I have been looking forward to the opportunity for us to talk about real estate, and of course, we’ve worked together so synergistically over the past few years. Anytime I get to spend time with you, a lot of time, I feel like I’m the one doing the learning. So thank you so much for having me on.
Absolutely. So, okay, our listeners are like, who is, who is Robert? Who are you? And one of the things that I like to do, instead of me giving the audience a recap about who you are, if you don’t mind just taking the next couple of minutes and tell our audience who you are and who you serve.
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Well, I, I really appreciate the opportunity to do that. And I think the most important thing to say here is, you know, first of all, if you’re tuning into the podcast here, listening to Melissa routinely, you’re doing yourself and your family a tremendous service. Melissa and her team have forgotten more about real estate than I’ll ever know. And, you know, the coaching that they provide, the sensitivity they have to investors’ needs, whether you are beginning and want to get involved in the investing side of it, to all the way up to if you’re an advanced investor looking to level up your game and 10 x it, I mean, Melissa is the person that you wanna go to along with her teammates, and it’s just an honor to be here. As far as who I am, you know, I’m nobody. I am a kid who grew up in upstate New York in to what we call a a broke family.
And a broken home money was a five letter word that was never spoken when I was a kid, or if it was, it was spoken in anger. And you know, growing up, I am a very, very typical guy who did everything that people told me to do that would make me successful. They’re like, Robert, make sure you go to school and get good grades, Robert, make sure you engage in athletics and work really hard and excel at them, Robert, go to college, you know, get a good job. And I did that. I triple majored, you know, when I was an undergraduate at Syracuse University, Robert, get a good, safe, secure job with benefits. And I, I did that became a school teacher up in New York State there for several years. And then you had to get your master’s degree, which is a New York State requirement.
I did that. And the story may sound so common to so many of your listeners. I ended up going on a doctoral scholarship down to the Mid-South, down to Memphis, Tennessee. And I woke up one morning there and I had kind of put a pause on the doctoral program. After about a year, I was offered a teaching position in the Memphis City schools. ’cause I was a licensed teacher from New York State. And Melissa, I wanna say I was maybe a $48,000 a year earner. And I came out of my one bedroom, you know, $550 rent apartment on the railroad tracks back in 2001. And I thought to myself, man, I’m living paycheck to paycheck. I have a hundred thousand dollars in student loan debt. My credit card is maxed out. I’ve done everything everybody told me. But certainly there has to be more than this.
Living paycheck to paycheck, living hand to mouth, struggling. And what are the words of my mentor, Al Plum said, is simply sick and tired of being sick and tired, <laugh>. And that was a, a real pivotal moment for me where a lot of serendipity occurred in my life that drew me into the real estate space. I had been in the real estate space a little bit up when I was in Rochester doing my graduate school work. I had bought a home and it was right by the university where I went and I rented out two bedrooms and that paid my rent or my mortgage, I guess I should say, which is about $750 a month. And we split the utility bill. And so I, I knew that real estate could be a powerful paradigm, but I wasn’t really sure how to leverage it. I didn’t understand how to find deals, opportunities.
I certainly didn’t understand what I think is one of the most important aspects of real estate investing, which is private financing. So on that day in 2001, I just kind of threw a prayer up to the universe, you know, something along the lines of, Lord, help me. And over the next five years, I ended up transitioning out of teaching and into real estate. And that was where my, my journey kind of officially began about 20 years ago. So, you know, if you’re out there and listening, and you are somebody who’s been doing all the right things that everybody told you and feel like you’re not getting anywhere, I promise you, Melissa, you’ll back me up here. You certainly are not alone.
Definitely, definitely not. I mean, I, I think sorry, I’ll interrupt your story for just a second. So I wanna keep on going with this ’cause you’re such a good storyteller, and I know you’re a writer and an author and all the things which explains why you’re, you’re such a, a good storyteller painting the picture for us. But, you know, I, I talk to, you know, investors every single day, and I say investors loosely because actually nobody really thinks of themselves as an investor buying few single families here and there. They are truly investors. But, you know, I, I get it that that’s kind of a, a big word that people hear, but I hear people that are every day teachers, firemen, whatever it is, and they all go the same story is kind of what you’re painting here. And they go, gosh, I’m, I’m doing everything right. I did everything that the system told me to do, and I can’t sit in this cubicle for another 10 years, and I want financial freedom. I need to do something. Ditch the nine to five, or build financial security. Something like I, I literally hear, hear it every day, Robert.
Yes. It’s, it’s a powerful message and it’s a message that should resonate with your, your podcast listeners, especially because it’s something that we experience more and more on a daily basis as the federal reserve’s inflationary policies continue to destroy the purchasing power of the US dollar. And obviously the focus of this is real estate and building wealth. You know, whether that wealth takes the form of what I call financial independence, which is getting enough passive income simply to pay your bills each month. So your time is your own. And there’s certainly a huge percentage of your listeners that I’m sure would love to be in a position like that all the way up to, you know, what Robert Kiyosaki calls the I quadrant of investing, where basically you’re on Shark Tank picking and choosing businesses with which you wanna deploy capital into because you know, you need to get a substantial return, and such as the nature of your career as a full fledged investor.
But a lot of times people don’t realize that there’s many, many factors that are really a raid against them. So that in your investing journey, whether you’re beginning or whether you’re in the middle of it, we have to be mindful of the fact that there’s certain obstacles that have been put in front of us that we have to learn to deal with effectively. And one of the first ones that comes to my mind is taxes, for example. And in Kiyosaki’s book, rich Dad, poor Dad, he says something that has always resonated with me. And it really just, it, it brings to what I think you and I are gonna end up talking about, which is the mindset of a successful investor. But he says, you know, people who are not wealthy always think, if I have a windfall, if I win the lottery, if I go to the casino and, you know, hit a royal flush in three card poker and win a million dollars, there’ll be plenty of money left over to pay taxes.
But Kiyosaki points out that for wealthy people, taxes are not an afterthought. They are the first thought, the thought of the wealthy. The mindset is, well wait, if I do x what are the tax implications of this? And you know, when we talk about investor mindset, you know, you come to realize that there’s things that we have to do. We ha we ha we’re going to have to pay tax. However, if you become educated in the way real estate helps shelter you from tax, so legally, morally, and ethically, I think what you’ll find is people who own real estate, they tend to pay the least amount of taxes. So there’s a synergy, right? There’s a synergy in determining what are market factors that we can, we can’t control. Okay, well, we, we, as citizens of the United States, we have to pay taxes, whether you like it or not.
Understanding that the IRS has created many, many tax shelters for business owners in a variety of disciplines. Real estate through things like accelerated depreciate, accelerated depreciation, and what’s known as componentization creates the opportunity that when you buy a property, you may be able to qualify for certain exceptional tax treatment. And that creates an opportunity where if you’re looking and you’re saying to yourself, oh man, I’m working paycheck to paycheck. You know, the, the government takes so much money out of my check, how can I get to the next level? How can I minimize taxes? Oh, well wait, here’s the thing. Maybe what if you buy some real estate and now you’re getting the benefits of so many different income streams from one rental house, for example, the tax shelters being won. People always think about cash flow. Well, positive cash flow is great, but that’s really, to me, gravy on the potatoes. The greatest thing about owning an investment real estate is that the tenant pays off your home for you. And of course, Melissa, you and I both know as owners of substantial real estate holdings, that buying one house is a easily duplicatable blueprint to owning many properties. And once you get that ball rolling, there’s really a snowball effect. Would you agree,
<Laugh>? Absolutely. And as you, as you’re talking, I’m, I’m sitting here, I’m so excited to go onto the next part because the idea that you just presented, and you just said that now you and I have worked together for many years now helping clients in the Memphis market. So we’re gonna talk all about that and what you do there. But that blueprint right there is such a magic word because of the system that we have kind of created recently where you, I i, you are the brains behind this and there’s nobody like you that was, that was able to put together this model. But that’s exactly what it is. It’s this snowball, repeatable model. I mean, we have a couple clients that we’ve worked together with that have bought, and rebought and rebought and rebought, actually, rebought is not the right word, but has have done this process with you, closed on a property, put that money to work, bought another property, and then bought another property, and bought another property. So it is repeatable. You just have to have that understanding the system and the action we have to take action.
Absolutely. It’s, you know, it’s repeatable, it’s duplicatable, it’s executable. You know, one of the things that I did in the past, well I guess I finished it last year, was I went back to school full-time at night. I already have three bachelor’s and a master’s degree. But I realized that accounting and tax preparation and the understanding of tax is such an integral part of anybody’s wealth journey. I went back, I got a degree in accounting going online full-time for two years, and that’s opened my eyes to a lot of things. But when you have, say, a listener on this podcast who is thinking to themselves, I’m where I am right now, I wanna get to a better place financially, there’s certainly many, many different ways you can do it. I mean, I was in multi-level marketing for a long time, and I learned a lot from that.
I had got a great mentor out of that. But all of the businesses I’ve ever worked with in all of the consulting that I’ve ever done, the, the people that seemed to do the best financially were the ones that were in real estate who owned real property. And then I’ll just throw something in that, you know, from my international bestselling book, I’m a big advocate of having paid off property because the power of paid off real estate is, it’s, to me, there is no equal. When you’re sitting on 30, 40, 50, 60 paid off homes, you know, you’re sitting on an asset base of tens of millions of dollars. The banker will give you whatever money you need for whatever you want to do, whether you want to start a business in a different industry, whether you wanna invest passively, like in Shark Tank, the Kiyosaki quadrant, all of this becomes doable when you walk in with a financial statement with a banker that says you have $20 million, a $20 million net worth, and 50 or 60 paid off homes in a neighborhood where the bankers are willing to go and send appraisers and get realistic values.
And, you know, you might have a couple hundred thousand dollars in liquid cash, and all your property taxes are paid in current, and you have credit score of eight, you know, 19. And for listeners out there, that may seem far away, but the truth of the matter is, it’s just a matter of doing what you have recommended to so many of your students and so many podcast listeners, you know, people often say, journey of 10,000 miles. Well, the ancient proverb is, it begins with a single step. Absolutely. How do you eat an elephant? Well, one bite at a time. How do you build a $20 million portfolio of paid off cash flowing residential real estate? You start by buying your first house today.
Yep, yep. And you know, and and, and to clarify with that is some people hearing that might say, oh my gosh, well, I, I wanna buy a property and I don’t like debt. I’m afraid of debt, so I just wanna buy a property cash. And that’s, that’s not really what we’re saying here. The idea and the goal is to pay off your properties eventually. But like you said early on, Robert financing is one of the most amazing tools out there, and we’re gonna dive a lot more into it with the model that you have again, and the private financing that’s available. But the idea is, is that we’re going to leverage our savings so that you can get started as cheaply as possible, whether you’re putting 20% down or whether we’re gonna use a hard money lender that we’re gonna talk about in a minute, the idea is we’re putting as least amount of money down as possible, and then we’re going to build out that strategy and we’re gonna build out that formula so that you are gonna be buying properties. We’re in this buy, buy, buy phase. We buy them all up, and then we build up this plan, which you outline in your book that you briefly mentioned, that the goal would be then to start to pay them off. And there are systems and snowball strategies and stuff to get you to that point.
Right? Right. Yeah, no, that’s an excellent point. A lot of times people get, get lost when they’re, you know, they’ll either read my book and then connect with me through you or vice versa. And in a nutshell, they’re like fixated on, well, oh, how do I pay off this property? It’s like, well, let’s just focus on building a portfolio that is self-sustaining. And there’s a lot of investors out there and you know, many of them who they advocate leverage, leverage, leverage, meaning borrow money. You know, if you pay off houses, rebar the money tax free, expand the portfolio. I’m a little bit different in that, you know, the way I grew up I am really risk averse. So I, you know, when I paid up my properties, you know, I told my wife, including my primary residence, for example, we paid that off. I finally, I said to her, I said, I’ll never put a mortgage on this.
I’ll never put a home equity line on this house. However, I might do it on investment property. But with that being said, there’s a lot of people that make really, really good you know, really great cases for using leverage in perpetuity. And I’ve, I’ve, I’ve seen that also, I think for the, the listener out there, the idea is with the right property, and let’s talk about what is the right property taken. Then maybe we can dive into the Memphis market a little more specifically. The right property is generally gonna have real similar characteristics across the board. It’d be a reasonably safe neighborhood. And what is reasonably safe? We, we quantify neighborhoods in Memphis in an A plus to F area. A plus would obviously be, and I’m talking about the Memphis market. Everybody else’s personal markets might be a little bit different, but an a plus market, you know, we have an area here, don’t call Germantown.
Germantown is a suburb of Memphis. It’s on the east side of Memphis, opposite of the Mississippi River. It’s a very nice little township. My business partner, Curtis lives out there. He is, got a beautiful home out there. Those are a plus homes residential. It would be impossible to make something like that. Cash flow, an 800 or million dollar purchase rent simply won’t scale that high. So we don’t really buy a plus or a houses now we like a minus areas, you know, in, in Memphis, those might go as high as 200, 250,000. You know what I call our sweet spot, Melissa is a c plus, which might be a hundred thousand dollars property in Memphis at the time of this recording to a minus, which, you know, those values might go up to about 250,000. It’s a reasonably safe area where I don’t send my wife, we don’t pick up rents general rule, but I say to the investors I talk to, it’s something where I would feel safe sending my wife if she had to pick up a rent.
Now my wife is that she doesn’t do any of that. We don’t send, I don’t send my wife to pick up a rent, but the point being, you would feel safe there. Now, you know, what’s an f area of Memphis or a D area? These are very, very blighted areas, and these are in cities all across the United States. It’s not just Memphis. Every city in the United States has these, and now some investors specialize in those areas and they love ’em. And can you make money in those areas? Absolutely. Is there a need for safe, secure housing in those areas, meeting FHA standards? Absolutely. But I have found that the risk reward ratio is a little more favorable to the common investor in the C plus to a minus area, if that makes sense.
It makes perfect sense. And I’m so glad that you kind of went over that and clarified it, <laugh>. That’s something that people ask about all the time, and especially adding those price points. Let’s kind of talk about the first property that I bought with you, and I’m gonna kind of try to paint the picture of, of how that happened. And I’m bringing it up now because it actually answers this question while we’re talking about neighborhood grades. I love the turnkey model. Obviously you’ve been, you know, helping our clients buy this turnkey done for you property where it’s already renovated. And you know, a few years back, you and I were talking about it and you had been developing this new model, and I was like, Hey, you know what? I wanna be a Guinea pig because I want to buy these for myself selfishly, but also I want to be able to tell people about my experience and, and what I was purchasing.
And I basically, you know, had this conversation with you where I said, Hey, if I could pick out my dream property in Memphis you know, what would that look like? And you and I had this conversation about the type of quality, the tenant risk, the type of tenant income, the areas, some growth, appreciation potential, what the rents were. All, all these conversations were really important to me. Because exactly what you laid out was that conversation. We had one-on-one, and then the model, I’m just gonna kind of tease everybody with it. I kind of started calling it the hybrid bur model. So the bur model, just to repeat it for you guys really quickly, it’s the, you buy a property, you renovate the property, you refinance it, you rent it, and you repeat it. So there’s the four s there. This is a model that you have put a lot of time, sweat, and tears into, is the idea of like, how can an investor do that bur model as simply as possible with help? Because you know, the idea of just going out on your own and doing this model, there’s a lot of room for error, right? Somebody’s gotta go. Yes, yes. Find a property, you know, so, so there’s risk there, right?
Well, the thing that I find interesting is I’ve had a lot of investors come to me after the fact. And what they did was they, whether they hooked up with some questionable real estate agents in Memphis or wholesalers, somebody who knows, quote unquote knows a guy and they end up buying in an area or a zip code where I won’t go. We almost will never manage in the ma the eyes of the management company, but certainly will not send my staff, which is predominantly female. And a lot of single moms. We’re just not gonna introduce that type of risk to our staff. And we don’t wanna do it to our investors either. And I’ve learned those lessons the hard way over 20 years. So to your point, I’ll get a call and somebody will say, yeah, I ended up buying a house. I wanted to do a burr, you know, and what happened was I ended up buying and you know, and they’ll tell me a street and, you know, you could probably blindfold me and airlift me in any part of Memphis.
I bought and sold over 3000 homes at this point in my career, and I could find my way out. And, you know, they’ll tell me a street and I’ll just, I won’t say anything, but I already know where the story’s going. And, and it goes like this. I bought a house, I hired a contractor who I’d never met, gave him a bunch of draws, he absconded with it. The house got stripped, now it’s a shell. And I just need to know how much am I gonna lose to just get rid of this headache? And for some people, they can’t really afford to lose 20 or 30 or $40,000. And in many of these cases, investors won’t even buy some of these houses. Now that’s a nightmare scenario, and that’s a very low probability scenario if you’re working with the right team. However, the point is, is that in order to be successful doing a bur especially if you are not physically present in the geographic location where you’re investing, you have to have a power team.
And that power team is not just somebody like me, it’s the contractors that I’ve vetted over 15 years. It’s the lenders you and I have put together who understand that there’s a very, very finite list of appraisers who are really qualified and are truly understand investment property. And its true inherent value. It’s the insurance agents that save you money in the group policy. It’s the management company that will place the tenant for you in a timely fashion. All of these things come together within this bur model. So I think the experience that you had, and you know, it’s funny, I’m sitting here jogging, I remember, was that on Maria Street? Is that where our first house was?
<Laugh>? It was really great memory. That’s my marias
My Marias. Yeah, they’re beautiful. Beautiful. Oh, it was like 300 houses ago.
Well, and it’s the, the same tenants, by the way, just to kind of talk about this one for a second, the property manager called me and said, I think this rehab took about 45 days. Your team did the rehab for me. And also to tease the listeners with this, we did the refinance immediately. We did not have to wait six months to season because what Robert just said, we have a dream team of people who are helping, helping us do this correctly to save time and money. So the way that they underwrote the loan, which Robert was instrumental in putting that together with our recommended lenders, they were able to help me so I could refinance it immediately, the property manager called me and they go, Melissa, we’ve got approved tenants that are moving in. I mean, I think it was two weeks after the rehab was done, the tenants moved in and they’re still there to, and I think we’ve raised the rents twice now.
Was this three or four years later? Yep,
Yep. Exactly.
And I think this is not normal, but I think your out-of-pocket costs were very minimal there. Were they not on the refinance.
That is the dream of the model that we are going to tease everybody with, you know? Right, right. It’s, it’s kind of the hybrid between turnkey and burr. And so my out of pocket was less than it would’ve been for a traditional 20% down plus closing costs. Yep.
No, that’s, that’s a beautiful thing. And I, and I only mention that because a lot of times for new investors or people that are new to the investing space, we hold onto our money so tightly. And the reason for that is because most of us, at least for me, I started, my first job was when I was seven years old in Rochester. Basically, my sister was four years older than me, had an afternoon paper route and she would never do it. So she would guilt me into doing it for a dollar a day. <Laugh>, which was actually very smart for her ’cause she was earning like $5 a day, staying home, watching Little House on the Prairie while I was slogging a massive 20 pound sack of papers. I mean, I was just a tiny kid. But you know, the area where I lived in was reasonably safe.
And, you know, I would get the paper route done. And of course I slung papers full-time. I got, ended up getting morning route, which is seven days a week. And then around 10 or 11, I started working as a stock clerk full-time after I would finish school in the days. And we live in this model where it’s like, I want something, I want widget X. You know, let’s say you wanna buy a new bike if you’re a kid. So you say you work, I’m slinging paper safe, save, save, save, save. Okay, I’ve earned $500. I can buy my dream bike. Boom. I go out and buy it. I’m so happy. Now I have this item, however, my bank account’s back at zero. And what people don’t realize, and I have had to learn this, I have had to come to terms with this, is that buying something like a bicycle or a piece of jewelry, those are what Robert Kiyosaki refers to as depreciating liabilities.
They don’t make you money. And listen, it’s, it’s okay to want things. There’s things that I certainly want in my life you know, that I like to save for. I’m trying to teach my kids the value of this also, instead of just giving them what they want, forcing them to earn it or encouraging them to earn it. But when you go and you buy a house, for example, what a lot of people don’t realize is that if you make a purchase and let’s use your house on Maria Street, I don’t remember how much your out-of-pocket costs were. It doesn’t really matter. But if, as I recall, as is the case with most of the homes, we sell your home appraised for more than you paid. Is that an accurate statement? It is, absolutely. There was a substantial equity position there. Now, I don’t remember how much that was with it.
15, 20, 30,000. It might have been something in that neighborhood. The specifics aren’t important. What’s important is that when you parted with those closing costs to buy that house and you went unentitled to that house, you took money out of your account. However you traded those dollars that are worthless, they are inherently worthless. And when I say dollars are worthless, this goes deep into monetary theory and economic theory. And it’s important to touch on because the Federal Reserve through things like quantitative easing back in 2008, quantitative easing one, quantitative easing two, quantitative easing three, these are failed fiscal policies designed to flood the US economy with dollars made of paper, not backed by gold because we went off the gold standard in 71, designed to kick the US trillion dollars, 35 trillion, $38 trillion of debt down the road. And what does it mean for the average American citizen?
Well, what it means is you know, I’ll give you an example. I filled up my diesel truck yesterday. It’s an F two 50 Super diesel that I’ve had for eight years, paid off 150,000 miles. My wife’s suburban also paid off, well, not quite paid off. I’ve got a few pavements left on it, but filled her her tank up yesterday, it was a hundred dollars, $250 for a couple and a week from now, we’ll have to fill it again. Whereas, you know, Melissa, you probably are old enough to remember, I mean, you, you don’t look a day over 25, but you know, I just turned 51 and you know, I was buying gas for 89 cents a gallon back 30 years ago. And gas has tripled quadrupled. You look at things like milk, right? You know, milk, $6 a gallon, that stuff used to be 50 cents a gallon.
We see it every day. So the paper dollars that we have, if they were to call to account today, let’s say they wanted to go back on the gold standard, say President Trump says, I’ve decided we’re gonna go back on the gold standard. So we’re going to account for all of the dollars that have been released and we’re going to divide that by the number of ounces of gold in existence. And that is gonna be the value of gold, gold bugs. Minimally estimate minimally, okay, that gold right now, which is about 3,800 an ounce and has been going up and almost went up 50% the past year would be worth a hundred thousand dollars an ounce. Now you say, well, Robert, you say, Robert, where am I going with this? Let’s talk about real estate. Well, here’s where I’m going with it. The best thing you did was take those dollars that were sitting in your savings account, Melissa, and you took them.
They have no value in your savings account other than giving you peace of mind. And they go down in value every month as the Federal Reserve principal dollars. The best thing you could do is you took those depreciating workless dollars and you traded them to someone for a physical asset that you own that is insured 100% with a full replacement coverage, which you bought well below market value. Meaning if God forbid the house burned down and the family got out safely and it was a total loss, you would probably make twice what you paid in what they call insurance replacement cost or comprehensive coverage. Plus the house pays you each month in cashflow, plus it shelters you from paying income tax. So it can also shelter you from paying social security tax, which we can talk about at another time. Plus that house instead of going down in value historically has gone up in value.
And guess what, as by your own admission, you’ve raised the rent three times and do you know why you’ve done that? You’ve done that because the value of the dollar’s going down, taxes and insurance go up and you’re passing those costs onto the tenant. Now that’s a very smart business investment. And what people don’t realize is, well, I only have $20,000 in my bank account. Great, fantastic. Go buy a house. And now not only do you have the $20,000 that you put down in equity, but you might have more equity ’cause you got a great deal. Oh, by the way, next year the house is gonna be be worth more. And one thing that people don’t understand about owning real estate, and I’ve experienced this since I’ve owned real estate in Memphis for over 20 years, is that rents historically double every 14 years. And I know that because yesterday’s four, $700 rent that I would get, call it six ninety five, is today’s 1395 rent in the same houses. So there’s a tremendous upside for you to buy and hold real estate. It’s the best thing you can do for your family, in my opinion.
Again, thank you for kind of breaking it down that way because we’re not taught, and I say this over and over and over again on this podcast, but we’re not taught about this stuff in school. We have to go out and seek it and find people and mentors and seek out this information. And then the second part is the action piece. I think this is the piece where people get paralyzed. And I think that example that you gave and you said, Hey, if you’ve got, you know, $20,000 in your savings account, like you can actually do this. You can work with myself and our team and we can hook you up with people that we trust like Robert and we can help you really find that that property, that area, that strategy to really maximize that money and get you started. That should not be the thing that holds people up. You do have to invest, like lenders do require a down payment. They are not giving away loans like they did, you know, 20 years ago. The first property I bought was like a 0% down payment. I think it was, they even covered my closing costs. I think it was like 110%. Those are gone <laugh>.
Yeah, those are, those are nice. You know, there was this I’ll tell you, the harp program that President Obama initiated was people don’t realize this is one of the best incentives I’ve ever seen. The government extended the American people. And in a nutshell, Melissa, just a brief story about small interest free deals and, and how powerful they can be when you can take advantage of ’em. My wife and I got married in 2008, I wanna say 2008, 2007, I should probably know this. Anyways, <laugh> come being, I immediately, I, you know, I, we were living in a little duplex that I still own, but I thought, oh well you know, I need to buy her just the palace. You know, I’m gonna go out and buy this big house. And I used one of the no dock loans that were back available in 2008.
It was like 10% first 10% second man, okay, we closed the house and I am just slogging with these payments like 3,500 a month, no income coming in, just a bad decision. But you know, I was a younger guy. I wanted to impress my wife and all this other jazz <laugh>. Well, you know, one day I get a call from one of these lenders that is like approved with the heart program and they’re like, listen, we can offer you and my rates are like 10% and one of ’em is gonna balloon. My second was gonna balloon, I owe like 35,000 on it. They’re like, we can consolidate your two loans and we’ll cut your rate from like 10 to three and a half and we’ll pay your closing costs and it’ll cost you nothing. And I thought, man, is this for real? And they sent the appraisal out.
They even paid for the appraisal, everything. I was in the Adirondacks when I had to go sign the papers, I had to drive like the Adirondacks is, you know, it’s very tiny townships, very touristy. I had to drive like a hundred miles to find the nearest notary. And I get there and we’re signing the papers and they call me and they’re like, oh, we forgot to de to decide what the long term is. Do you want a 30 year loan? And I, you know, you know, you know how 30 year loans work, right? I’ve been paying on this loan for like nine years and it wasn’t really good anywhere. I was like, oh no. Can you like do a 15 year loan? Yeah, we’ll do a 15 year loan. My 15 year loan payment was cheaper than it. It was like, it was so cheap.
I couldn’t believe it. It much cheaper than my 30 year loan at 10% obviously. And about four or five years later, my wife and I sold the house. That 15 year loan payment that we paid down for five or six years gave us substantial equity in the house. So, you know, sweetheart deals like that, they occasionally come around. But what you need to realize, and I write about this in my bestselling book, I, I built most of my portfolio on 12% money. Almost all of the, I mean I stopped going to banks years ago and saying, oh, can I, will you please gimme a loan? You know, I had many loans like that. I got to a point where I had 10 finance properties. They’re like, we’re not gonna give anymore. Well, I wanted to keep buying so I had to start buying from private lenders.
And when I realized how easy it was to use private financing, even if the rate’s 12% and just you eliminate so much, so many fees, it really speaks to another level of investing. But if you’re out there and you’re listening, the big takeaway here is that whether Melissa is steering you to one of our preferred lenders or to some private lenders to help you take the house down and then refinance it and save some capital she has a very demonstrable system that you yourself have used. And I think you would agree it’s a smashing success.
Absolutely. And you know, the idea here is I don’t think I’ve ever heard anybody come to me and say, Hey Melissa, I just wanna buy one property. You know, like no, everybody wants to build this portfolio. There’s a reason why we’re doing this. We’re trying to create, whether it’s the cash flow or the long-term wealth or the tax benefits and to get those bigger tax benefits, we’ve gotta buy more property so we can get professional real estate status and you know, all these terms I’m throwing out that you can always talk to myself and obviously Robert about as well. We wanna buy more property. So how can we maximize that cash that you were talking about and explaining so well is maximizing and saving as much as that cash as possible and being able to buy as many properties as possible. And that’s really what I’ve been able to do with you.
I have, what is it, three properties I’ve done with this system with you now and I didn’t put, you know, 20% plus closing costs down on those. You know, I can break apart the math individually with people or Robert can break apart the math individually with people. ’cause Every property is different and every property has different math. I look at it and go, wow, I would not have been able to come up with all the cash to do all those three properties around the same time that I did. But because of those systems that you have and that we kind of formed together and got our brain power really charged up and working, we made it happen. The goal here is wanting to help investors build a portfolio. And again, everybody is so unique and everybody’s circumstances are different and they have different financing needs.
And truly, honestly, Robert, your team puts in the time with people. And I think that’s a really big deal. And why I wanted to have you on this podcast so bad is because there’s a lot of people out there, they just wanna sell you something, but they wanna spend the least amount of time with you. Obviously you wanna sell people real estate, you’ve gotta put food on the table too. But the time that you put into people, honestly, I’m gonna toot your horn just a little bit here. I’m actually blown away ’cause I think you put in more time than you need to <laugh> as far as customer service goes, I’m always shocked and blown away. I’m like, wow, that’s like the 10th email I’ve come through with that client that we’ve been working with lately. And I’m like, you know, you really do put in the time.
And if you’re like, Hey, let’s jump on another call, let’s jump on another call and let’s talk about your, your unique ex, you know, circumstance. And so I really appreciate that. So those of you out there listening right now, this is gonna be your call to action. Definitely get with me. You’re gonna see a link in the show notes. You can click with myself or somebody on our team and just put in the note section like, Hey, I wanna talk to Robert or I wanna talk to you guys. I wanna discuss the options and opportunities. So that’s the call to action for that. The reason why this system works again so well is because Robert is truly putting in the time and the effort to help the investors not only buy one property, but be able to help grow a portfolio.
Well, and listen, Melissa, I appreciate the kind words. It means so much to me. I would not be doing justice to the listeners or you if I did not say without partners like you and Ada, you know, the whole entire neuro team or the, the team that I’ve assembled here, like my partner Curtis and our staff who are people, every one of them is like family to me. You know, I’m not the best manager of people. That’s why we have a general manager in the office. ’cause You know, if it was up to me, I’d just hire anybody. I just, let’s let’s get ’em all in here. You know, it’s, let’s just get it going. But the truth of the matter is we’ve got a staff on the construction side, you know, ’cause there’s two parts to our business, right? There’s the, the first part is helping people source undervalued off market properties that will appraise for more than they pay, where we can deliver it to them.
Newly constructed with things like new kitchens, new baths, granite countertops, dimensional roofs, new HVAC under mount sinks, you know, new changed out electrical, upgraded panels, hard surface waterproof flooring. Or ideally the original hardwoods refinished. You know, delivering that product in a 30 to 45 day construction window and then supporting them through the refinance. And while that’s happening, our management company, which I founded in-house with my partner Curtis, takes over and is actively showing the house. We have things like renting boxes for self showings. We invest a lot of money in online marketing to try to place tenants quickly. And then of course the screening of the tenants, which is its own inherent systemic series of conditions that applicants have to meet. All of this combines to try to give customers a great experience. And you know, and I know and I know it because I own 50 properties and you know, I have, I was just going over, I’ve got a few people that are late.
I’ve got a few people I’ve sent to court for eviction this week simply because I’m tired of them paying on the 30th. And this happens when you own real estate. If you buy real estate, you have to be prepared not just for getting paid and houses appreciating and appraising for more than you want. I mean, that’s all great, but you know, you also are occasionally gonna have a toilet leak. Occasionally a tenant’s gonna flush a rubber ducky down the toilet. Occasionally you might have a tree fall and hit the house. And if you realize that these are all just speed bumps, my point is, is that whether you’re having maintenance in a house as a homeowner, an investor homeowner, okay, or whether you know you are building a portfolio, you need to be really aware of the fact that paying retail, what I call yellow page prices for work, is not sustainable for any investor.
You have to know people who know people. You have to be able to call them to timely get in and do work. And that’s really what we strive to do at our management company. And I do that in my personal portfolio. It’s all about, you know, that there’s going to be things that happen to the houses. Now tree fall might be catastrophic. That’s low probability backed up toilet. It happens frequently, right? AC service unchanged air filters by tenants. I mean, this happens all the time, Alyssa, but getting it handled very, very economically in a timely fashion. And then getting back to the business. And what is the business of own real estate? It’s the business of collecting income from tenants. And as long as you stay focused on that and you’re able to mitigate the problems that come by minimizing cost or working with a team that does, you’re always gonna come out on top of it. And then, you know, nobody’s ever gone broke from getting rent on time and making their payments. You know what I mean?
I love that you brought this up because I always kind of am and surprised. I, I always assume that people know this information. Like there is risk to real estate, you know, and I always tell people at some point you will have a vacancy, at some point you will have a maintenance cost. It’s not if it, it’s when. And so being prepared for that rainy day is really important. Obviously we wanna make sure we’ve got funds set aside to cover that. Worst case scenario, we do have to file an insurance claim. We’ve got, you know, the insurance deductible that we’re gonna have to pay, make sure we’re we’re being smart and we’ve got that money set aside so that if you are hit with something, you’ve got the funds to do it and nobody wants to see an investor go broke because they spent every penny on a property.
You know, we wanna avoid that as much as possible. But then also working with somebody like yourself or some of the other people that we work with who, who care about the investor. And especially you’re an investor, I’m an investor, we get it. I hate it when there’s a maintenance thing that comes up. I mean, it sucks, but having somebody that actually can relate to you and go, yeah, you’re right, that does suck. How can we help you resolve it? How can we help you save the money? Let’s think outside the box and, you know, put our thinking caps on.
That’s a great point. And I, and I’ll say this about insurance claims, well, and about maintenance too, right? Like if you have a maintenance issue, this is just a normal and customary part of it. Now, as far as insurance claims go, I’ll tell you a quick story ’cause I don’t run out of time, but I think it’s a, it’s a great educational story when insurance is managed properly, and I’ll say my philosophy towards insurance, my philosophy towards insurance is to only make large claims. When I say large claims, I’m talking about losses in excess of $25,000. Okay? Now, I, you know, over time I may be in a little bit of a different position where if there was a $5,000 to the house, you know, it might be a little easier for me than a newer investor to cover. But we had a, a management client, okay?
Not one, not a client where we’ve even did anything to the house. We had a client who brought us a house about a year ago to manage, put in the management pool. Tenant moved out day after the tenant moved out the house caught fire. Now we don’t, we don’t know what it is. We obviously, we called the fire department, we were able to catch a fire in time before it was a total loss. But there’s substantial fire damage. And what a lot of people don’t understand from when you have a fire, sometimes it’s not the fire that causes the damage, that’s the worst. It’s the water from the fire department putting it out. Melissa, and I don’t know if you’ve ever had to deal with this substantial fire, but the water damage is frequently more significant than the fire damage. All that being said, this client is gonna make a very large claim.
He’s asked us to help him manage the claim. He is going to get a brand new house here, put back together. I’m talking about everything brand new, way nicer than the houses was when he brought it to us. He’ll give more rent for it. And even after his deductible, which just comes outta the claim, he’ll probably walk away with 10 or $20,000 in cash from what’s left over of the claim because it’s such a large loss and we’re able to save him some money on the claim. And the reason I say that, and I I i, I wanna stress this is a lot of people don’t understand that when you have a catastrophic insurance event, that is what they call a large loss, if you deal with it properly and with people who are experienced, you frequently can get the work done and actually still recognize some profitability from the claim.
And a lot of people aren’t aware of that. They think, oh, I had a house fire. This is the world’s ending. I mean, as long as everybody got out safe and nobody’s hurt. If you have an insurance claim, and you can say the same thing about a tree falling outta a house, you know, obviously we want people to be safe, but, you know, we had a tree clean a house in half a few years ago. The investor, the, the, the insurance company totaled the house and we got a framing crew in there for about $30,000 to put the middle of the house back together. And the, the investor pocketed like a hundred thousand dollars. So there are a lot of things in owning real estate. You need to learn, you need to have a team that has gone through this. Like, you know, your team obviously in ada, very experienced professionals, people who understand investment property, people who are investors.
For those of you listeners out there, I’ll say this to you, you know, they say the best time to plant a tree was 25 years ago. If you didn’t do that, the next best time is to plant a tree. Today when you’re sowing your seeds with a wealth coach like Melissa, who’ll be by your side through the whole time you’re doing yourself and your family a service. And I’ve never met an investor, Melissa, who owns a portfolio of a hundred paid off properties and said, man, I wish I had never bought all these properties. They pay me every single month. I’m fully retired and traveling the world. Do you know what I mean? <Laugh> that person doesn’t exist.
Nope, they don’t. They absolutely don’t. Well, thank you Robert, so much for your time today. And like I could literally just keep talking to you about, and I keep thinking about all the things. So I need to have you back on because the other thing I’m gonna tease the listeners with is I was just remembering the third property I bought with you and your team. You kind of gave me some coaching advice, and I don’t know if you remember this. And again, let’s, let’s bring you back on and talk about it in a future episode. I don’t know why I was kind of stuck in my own head because I had a failed 10 31 exchange and I was gonna owe capital gains. And my first reaction was, I’ve gotta make my money, make money so that when I have to write that check to the IRS, that I’m gonna owe them that I made interest to them. And I remember you kind of were like, Melissa, just by real estate, get those write offs. That’s how you’re gonna pay down the capital gains and there’s more to the story. But I need you sometimes too. So as much as you’re, you’re building me up, I really appreciate that. But sometimes it is just kind of talking to professionals and getting out of your own head. Sometimes we think we know everything or we, we, there’s a blind spot that we don’t see. So just have a conversation. And so anyways, I wanted to mention that.
No, I, that’s the power of accelerated depreciation. And when that 10 31 exchange failed, you were under the impression that you just had this massive capital gain to deal with. And of course, it goes back to strategic tax planning, which is a wonderful episode for another podcast. You know, we, we talk about a lot of these things and, and one of the things that I think is really important to say here, and whether it’s you keeping me honest or me reminding you about tax strategies, we have a saying in my Brazilian jujitsu dojo where I’ve trained for 13 years, and I recently got my brown belt in Brazilian Jiujitsu, which as a 51-year-old guys, I’m the, I’m the punching bag to for all the 25-year-old division one athletes in there, <laugh>. But we have a saying that says forget the saying, it’s, it’s a biblical saying, but it’s like men sharpened men, or in this case women, the way iron sharpens iron.
Meaning that whether we are engaging in Brazilian jiujitsu in a hundred degree Memphis Dojo, or whether you are putting me to the test on a tax issue and I am giving you advice, we’re here to build each other up and make each other better. And once we do that, once we get out, of course, you know, I’ll close on this and I think it’s something to think about. I have a degree in psychology, and one of the things they talk about in psychology is one, there’s a psychologist called Abraham Maslow who created this thing called the hierarchy of needs that looks basically like a pyramid and it’s color coded. And at the base of the pyramid is basic needs, things like adequate shelter, you know, adequate nutrition, adequate clothing. Without those, we’re not able to go to the next level, which is thinking about education, thinking about learning, learning paradigms and so forth.
And then the pyramid goes all the way up to what is called self-actualization, which in psychobabble speak is you realizing the highest version of yourself in this life, right? Because you have everything taken care of at the lower levels. Well, when you’re living paycheck to paycheck and you feel like you’re in survival mode. And I promise you, there’s listeners on the podcast who feel like that. And that’s where I was 25, 30 years ago. I mean, absolute survival mode. Will it change for me? What? What is the solution? I did everything they told me to, and I have not gotten the results that they said I would get. Right? It comes down to the fact that you have to basically come to understand that you are not going to get to that top level of the pyramid without being ready to satisfy those base needs, and those base needs are taken in incremental steps.
Things like, are your finances outta control? If they are, well, let’s start with that, right? A lot of times, Melissa, I know you do this, and I do this too, when I talk with clients, there’s times where I’ll talk with clients and I’ll say, look, buying real estate is not what you need right now. What you need right now is you need financial stability. And the way you can give financial stability is, have you made a budget? Let’s look at your spending. Let’s look at your income. Let’s make some tweaks, let’s get some stability. And it really comes down to everybody’s journey is very unique. Nobody’s journey is the same. And once you realize that if your goal is to build wealth, you’re going to take a very unique journey to get there. Obviously, working with Melissa, having a coach like Melissa would be a huge part of it.
You know, if I can help, I’m glad to help. But you gotta think about that pyramid. Nobody gets to the top of the pyramid unless they climb those bottom rungs of the pyramid saying, okay, yeah, now I’m financially stable. Oh, now I have my family in order. Okay, everybody in my family’s healthy, you know? Or for the most part, I, everybody’s fed reasonably. We have adequate medical care. You know, I have health insurance, things like that. And it’s, there’s so many moving pieces. Melissa, you know this as well as I do, that it’s a journey of daily introspection. I wanna get to place X, wherever that is. And the truth is, the time that we have right now is the time is how we start. Whether you’re thinking about it, planning, or making strategic moves, it’s all part of this process. And I, and I’ll close with this, I have a mentor named Al Plum.
He’s been with me 25 years. He’s been my mentor for 25 years, Melissa. And he made his fortune in the waste recycling business in a small town outside of Rochester, New York. And he told me this. He said, Robert, the path to financial freedom is paved through the garbage dump. He said, if you want to get to be where you’re financially free, he said, you’re gonna have to go daily through the garbage dump. And of course, that’s a metaphor, but he’s talking about the daily slog. You know how it is dealing with bosses, dealing with disappointments and heartbreaks, and things that you thought were gonna work out but didn’t work out. And other things, questioning imposter syndrome, will I ever become, you know, independently wealthy? Will I ever make a difference? Will I ever become what I was meant to be? And the truth of the matter is, he said this to me, he said, Robert, someday you’ll get there.
He said, I’ve met a lot of people. He said, Robert, I know someday you’ll get, but when you’re in the garbage dump, you’ll lose sight of where you’re going. You’re just gonna think this is a slog. Will it ever end? And this is the poetry that moved my heart, Melissa. He said, I promise you, when you get there, it will wash away so clean. You’ll be so glad for every day you had to slog through the garbage dump. And once you get there, you never have to go back. And as I get towards, I won’t say the end of my financial journey, but I’ll say the next phase of my financial journey, I’ve come to realize that he is 100% right. And if you wanna be wealthy, if you’re on this podcast because you wanna be wealthy, and it’s not because people wanna be wealthy, it’s because they have dreams.
And a lot of those dreams have to do with having more time, spending more time with the people that they love and doing the things that they love. That’s what they want. That’s what financial freedom is. That’s what quote unquote wealth is. The truth of the matter is, all of you can get there, but you just have to take that first step. And it starts with, starts with what? What can you do today? You ask yourself that question, what have I done today to give myself and my family closer to that goal? And if the answer is nothing yet, well listen to this podcast. That’s a good first start.
Oh my gosh, Robert, I’m not even gonna ruin that by adding anything to it. It was absolutely perfect. It’s what I needed to hear today, and I know that it’s gonna resonate with so many people. So let’s just leave it there. And again, everybody listening, I want you to go to the show notes, and you can go ahead and click that button, and you’re gonna be hooked up with myself or somebody on our team, and we are excited to talk to you and to get you hooked up with Robert if what he said resonated with you today. So thank you again, Robert. I love, love, love having this conversations with you, and we’re gonna bring you back on. So I gotta get you on the schedule and let’s do a part two.
That sounds great. Melissa, as you know, the honors mind, working with a guru like you and your team, it’s just such an honor for me. It’s truly a dream come true. Being able to share my story and, and hopefully this helps people. I listen to many, many podcasts. I’ve been to many, many seminars and workshops. My real estate library is massive. I’ll show it to you someday when you come out here in Memphis and visit. And just the fact that you thought about me today to share some information with your listeners truly makes me and my family feel blessed, and I’m so honored to call you, not just a mentor to me and a colleague, but also a great friend. Thanks for having me on.
Aw, thank you, Robert. All right, next one. Have a great day. Bye. Take care.
Bye-Bye.
A big thanks to Melissa and Robert for bringing their insights and experiences. We hope this episode offered valuable guidance to help you navigate your investment path with more confidence. If you haven’t already, be sure to subscribe so you stay up to date with future episodes. We’re glad to have you with us. Thanks for listening, and we’ll see you next time.
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