The rebel capitalist show all right guys it gives me a great deal of pleasure to welcome someone to the rebel capitalist show that i have a tremendous amount of respect for he is someone i’ve really looked forward to speaking with he is an absolute real estate expert and that is to say the least his name is ken mcelroy ken welcome to the rebel capitalist show my friend george thanks man great to be on now for my viewers or my listeners who might not know your full backstory it’s fascinating can you get us up to speed on that sure sure it’s um well i tell you what it’s a you know uh overnight success man that’s all i have to say so i had 20-year overnight right so uh honestly i was in college i i was trying to make rent and uh my buddy said hey would you manage this apartment building i’m like how much does it pay is it free rent he said free rent i said i’m in so i i started i started learning how to manage properties when i was finishing college because you know i was i was racking up student debt and all that trying to just get through and uh i actually liked it i liked it a lot but i gotta tell you after about three months of what property i i went to was not running very well and and uh so but i had a construction background and i was like how hard could it be to collect rent you know so i get in there and it was a nightmare man so you know i yeah so but i was like okay i i don’t have to fix this at least so i don’t have to work so hard so i worked my butt off for like 90 days the owner came over great guy pulled up with this brand new you know mercedes and he came in and got that you know that month’s deposits and he’s like hey good job man i’ve turned this place around and i was like i swear to you i go i am on the wrong side of the desk here like reds and handing it over and this guy’s driving off the tour it is a new mercedes i said how do i be on that site so i finished up university i i found a company one of the companies that was this was in downtown seattle that was doing this and uh it was a big company they’re huge now they’re based out of seattle and they were basically repositioning multi-family they were doing fee management and they were building and they had a brokerage division and and it was a fairly good-sized company like two to three hundred people and i that was my first job right out of college and i said i i like this i’m gonna get my real estate license and that was that was in the late 80s and um i never looked back i i ended up um i ended up working for them for about 10 years i got a lot of property management experience i met i probably managed somewhere around 30 000 apartments up and down the west coast uh oregon california arizona that’s how i got to arizona which is where i’m now and i ended up opening an office forum in las vegas and moving there and it was awesome and and so what happened was all the guys i was managing properties for were awesome guys but all they did was put capital together and buy stuff and the markets were down and reposition them but they would turn over guys like me so i was doing all the work so they would come in and they’d buy a building for say eight or nine or ten million bucks then they turn over to me and i would make it worth 12 or 13 or 14 and then they would sell it and then we would get fired you know i was like okay this isn’t a good model so i was like i need to figure out a way to buy these but you know and so that’s what i started to do and so you know i started honestly i didn’t have a lot of cash saved i was getting pretty i was making pretty good money actually at what i was doing but i started buying single families i started buying you the first my first deal was a you know two bedroom two bath it cash flowed a couple hundred dollars a month then the second one and the second one i was like okay i just need like 15 or 20 of these things and i’m like what i’m managing these big projects so then i said okay i’m going to start buying big projects and um and that’s when i kind of went into the dark side i didn’t know how to do it i you know i didn’t know how to raise capital i didn’t know how to get big debt like that or anything but i ended up buying 182 unit building so i made a big jump from a lot of small uh uh a lot of small real estate to the big ones but i was already managing so so i understood no this was actually in uh phoenix okay so yeah so i did do some stuff in vegas i sold those off but the the first big deal i did was in phoenix and so it turned out to be great george you know that i still own that i still own my first property i bought it for 9 million bucks 182 units and um the you know it’s worth uh gosh close to 30 million now and and so i i started learning about tax i started learning to learn about leverage and debt and so fast forward obviously now we got 250 people we’ve got we’re you know we have 500 million in construction right now we own 10 000 apartments we have a big management company we have a utility company collection company you know resident screening company we have a resident insurance company so you know i’ve got all these verticals inside now and so uh you know it’s but it’s just i’ve just been super opportunistic and i’ve been trying not to sell anything because and try to take advantage of the tax benefits that i uh you know that that you get for depreciation and cost segregation and bonus depreciation all the things that you get you get cash flow flow and no tax so so now we built this big organization i didn’t know how to do any of it you know i was like how do i hire a ceo how do i hire a ceo or a cfo and all that stuff and i you know i just kind of worked through it all and and now i met robert kiyosaki and kim along the way quite quite honestly i was just pitching them for money i was in a group called ypo or eo and i’m still in it and my friend said hey i know this guy that wrote this book rich said poor dad and it was not the success at the time it was fairly new and was this like i just met him yeah yeah exactly right yeah i was kind of just starting out ross my partner and i were just kind of buying at that time we probably had a couple thousand units maybe and and i went and met robert and kim and pitched them a deal and and it took them a year to invest which is not you know normal a lot of you know the first they wanted to see how the team is and look at your track record and all that so they did a lot of due diligence on us just like a lot of our investors and we they ended up investing with us and then robert goes hey like i have this seminar company in this learning company i’m like oh okay well he’s like why don’t you show up so one day i showed up and that was it he’s like hey get on stage here so he pulls me up on stage and that’s the first time i publicly spoke and i was like okay what am i doing like and he’s like just tell them what you know and so i did that and and next thing you know i was you know i wrote a couple books on the subject and and and was touring around with him and i actually enjoy uh teaching and and so i i just kind of embraced that and and so now we just get now we’re just cranking books out i love doing these youtube videos and and and trying to help people uh you know i donate all our proceeds for the speaking and the books and everything to to our charity which we we have and uh so obviously i make all my money in real estate but it’s awesome because never no speech is the same you know because whatever i’m working on the time i just that’s what i talk about and yeah right so it’s not boring to me it’s not canned and so i really enjoy it yeah that you know that’s the exact same way i do my whiteboard videos it’s basically whatever i’m thinking about it at the time that’s what a whiteboard video is so if anyone wants to know what what’s going in through my mind just look at my most recent whiteboard videos and that pretty much tells the story right there just to clarify and you and robert are he’s still investing with you today i mean every time i’ve gone out yeah he’s already oh i gotta write another book so i can give ken more money and he can he can make us more money i know i know you know what they’ve been such great advocates of us and obviously because we we’ve done well for them and um you know it’s all george the thing about this business is is being disciplined and i’m not buying when things are crazy and you know cap rates are really low and occupancies are really high and and there’s not a lot of room to move the building and if you’re just basing it on capital gain it’s going to be higher next year that’s a very bad strategy we try to buy things that are that where we force the equity so i like to find broken things and stuff that has three four five six even 10 million dollars of value and believe it or not you can find that and and then put a management team around it and and force it and and i like that and then if i hit it right i get the market too and if i put right the good debt on it and all that stuff you know then inflation helps a bit you know so all that stuff and and that’s all i’ve done and then i got to this cash flow point where we have tons of i mean we have millions a month and net cash flow coming out of our deals and we have very happy investors and they um you know they they just keep trying to shove more and more more money at us but you know we have to be again be very disciplined because the market can um yeah at a certain point it becomes tough to scale then it can you just it’s a good problem to have but you got too much money and not enough deals we definitely had that issue and we you know finding deals we have acquisition guys that work for us flying around the country finding stuff but it’s not unusual for us to you know be and you know there’ll be 20 offers 30 offers on a project we just offered on a deal in in arlington texas and there were 25 offers and we got the best and final which is the top five and we end up taking third and that’s pretty normal for us and you know but there’s a point where you don’t want to push because we were up against some 1031 buyers and some you know some guys that had put some funds together that you know they have pressure on putting that money out so and we’re kind of doing one-off raises and and so we don’t want to play that game because now all of a sudden our returns are are not great so in other words you’re competing with people who are willing to overpay yes and exactly right okay so i’ve got i’ve got a lot of questions there my the first question that comes to mind is what is the environment like today in your business compared to what it was like in 2011 and 2012.
That’s when i got involved with real estate investing i’ve never done the the multi-family and the commercial like you have i’ve just done single-family residential but i’d be curious to know you know what it was like did you have multiple bids back then or was just the complete opposite where there was tons of deal not enough money now there’s too much money not enough deals or yeah so great question so what happened in 0809 as everything was falling apart there was nobody was talking about a value add people banks were just like you know hey take take this toxic real estate off of our balance sheet and so because banks were taking stuff back from the prior cycle so so what was really cool george is that we were buying properties back then mostly in texas and we actually bought it with um canadian money because the us was toast like everybody was freaking out there was no the people weren’t throwing money at real estate at that time so i went out of the country we put together a fund in canada and we started using canadian money and the reason why that worked so well is because the canadian dollar time was about par with the us dollar so they were like oh okay this on sale and then what happened was the us dollar got stronger so the returns got even better because of that arbitrage and canadian dollars right yeah but we we could have never uh seen that coming but that was a nice little benefit but what we did is we started buying assets uh i’ll give you one story we bought a a 680 unit building from you uh from a bank of america and it was 50 occupied so you can imagine we had 300 vacants uh and i’m salivating and and um you know they had uh they had it on their books for about 28 million bucks we got them to write down their loans to about low 20s and so they took a nice six or seven million dollar haircut but you can’t finance that stuff because it’s not financiable so so they you know they’re looking at our team this is why the team the track record and all that’s so important they said okay um you know and i showed him how we’re going to pull it off and i said it’s going to take about 18 months to two years in order to turn this thing around because one we had 300 vacant and then we also knew that um at least 100 of the people that were living there probably shouldn’t have been there so we’re going to have at least another hundred move out so that’s what’s true in about 90 to 120 days i have 400 weekends and and so but you know the truth is george you just put a team around it and so if i raised seven and a half million bucks i ended up getting the the loan for about 20 which they financed and uh so now i’m into the thing for right around 28 million but i knew when i stabilized it it was going to be worth about 40 out of 6 cap so you know you just go forward okay what are the rest today what are the expenses you know how’s that going to pro forma out and so that’s how you raise money you raise money based on that and so investors smart investors can see that they you know as long as you have the team and so the bank uh it’s super complicated how we structured it with with interest reserves and all that kind of stuff because obviously there’s not enough income to pay for the debt and all that stuff but the bottom line it took about 18 months to fix the building turn it around get it to break even start to get into cash flow then you take it to another bank and uh you get an appraisal and you say listen um you know here’s a stable asset and uh they the the appraisal came in right around 40.
They gave us around 30. i’m going off on memory here but so we pay off the 20 to uh to bank of america we gave this 7.5 million back to the investors that got us there and we had another two and a half million dollars that we distributed amongst everybody and now everybody’s in infinitely they have no investment and the thing kicks off you know six seven eight hundred thousand dollars a year right and we still own that building and and so it’s obviously worth significantly more now but that’s been our model the whole time and that was what was going on in 2010 2011 is uh as as the banks were you know just trying to get those toxic assets off their books and it wasn’t until about 12 to 13 to 14 george that we actually had what i call the second bite of the apple which was the value add you know so so we bought it here and then the rents were going up and we’re saying well you know we’ve now we can value out our own projects so that we recapitalize most of our stuff and brought it up to that next level and then you go back to the bank you refinance again and then you you scoop more money out and you distribute it to everybody and you put a little bit more debt on it because your your you know your income uh gone up and so that’s our been our model the whole time and um and uh you know during that period of time it was rough um people were taking you know taking water into their boats and things were good and i was like that’s the time that’s the time that you buy yeah right what would be an example in your business of a value ad so uh i uh so there’s there’s a couple things that we did which were layups so the first thing i always said to everybody was if it has washer and dryer hookups in the units and no washers and dryers i want the property because i knew that that was 60 to 75 a month in rent so the washer and dryer cost me 500 bucks i buy let’s say 250 of them or 300 of them i put them in each unit i give them to the resident for free when they’re released renews you know they you know now they don’t have to run down with their quarters into the laundry room that’s a massive value add because every single unit that has a washer and dryer hookup let’s say get 75 a month so that’s one really easy one that a lot of people can wrap their head around the other one the whole entire property feel more high-end yeah right right so you give everyone a washer and dryer the residents are happy as heck when they’re and i said listen you know when rents you know when your lease is up of course we’re going to charge you for that but for now free use and now you don’t have to run down the laundry room which is already costing them forty fifty dollars in quarters or you know whatever they’re spending a dollar fifty two fifty a load and so now that now they can just do it in their own home and so what that does if you take 75 dollars times let’s say 200 units times 12 throw some little vacancy on there and cap it it’s like a three or four million dollar value add just buy washers and dryers and i’ve only spent uh 500 times let’s say 250 so you know i’m i’m i’m you know i’m i’m into it for 150 grand and uh you know and we’ve created this massive value at so that’s a really easy value there’s value ads all over on on unit pricing as an example uh on on on um on renovating so you might you will step in the stop that has you know the the uh really old appliances and you know really old carpet we’ll put wood flooring in and we’ll put you know uh nickel uh nickel um uh you know new cabinets and all the stuff and and and just totally renovated you know put new granite countertops in might spend 10 grand in a unit but we might get 150 200 a month in rent and so those are all once you do all that then you go to the bank and you know you’re getting the rents uh and they’re giving you a higher loan because you’re you’re your income’s a lot higher so um and then again i just said that’s another bite at the apple so not every deals like that but um we found so many ways to do value ads and uh those are a couple of really good examples yeah for sure so initially back in the the crash let’s say it was all about buying a dollar for 50 cents 100 getting the people in there and just getting the right people in there getting rents up to what they should be then refinancing so you get all your cash out plus some and then that’s right age in 2014 let’s say is to take some of those same properties that have a lot of upside opportunity and remodel them for lack of a better word to repurpose them and then you just do the exact same thing it increases the value because you’re increasing the cash flow and you go right back to the bank you extract that value and put it to work somewhere else and just keep keep the the game going it’s it’s it’s really awesome i’m curious though what is the hardest part about that business because i know just the little things that i’ve done at a very small scale it always goes back to property management that that’s the toughest uh nut to crack if you can figure that out the rest is is not easy but it’s a lot easier is that similar with what you do a hundred percent that’s why that’s why now i look back at my my beginnings and i’m like you know that was really really i was really lucky i flew to texas last week actually right up the day after you and i had dinner i went to texas that next day and i actually went to that property the 680 unit and we also have another one there that’s 440 units that are near each other like a block away and and i just spent the day there you know walking units it’s block and tackling man it’s like really basic you know what are the rents is it’s renovated not renovated how quickly we getting these done how quickly are we leasing these you know it’s very different now with clovit in the pandemic but you know it’s really a pretty basic business if you put a good resident in there they’re going to be there a long time they’re going to pay you rent we don’t have hardly any delinquency or evictions or anything like that historically we do have a little bit more of that now obviously because of the pandemic but that’s a very different issue those are really good people that are in a bad situation but they were just fine when they moved in and and so you know if you just are really really tight with who you put in then your all your problems are a lot easier but then from there there can be a lot of mistakes at the site level on how much they spend uh at the property uh how much they rent something for how they treat people you know it’s a customer service business as you can imagine yeah for sure so how has the we’ll call it the cerveza sickness for youtube here how has that affected your business because i know a lot of people watch my channel to get kind of macro information and a lot of them are concerned by potentially going into real estate as an investment that oh my gosh you know if we really struggle in 2020 and then into 2021 it’s going to be harder to collect rent so real estate might not be as good of an investment and what i usually come back with is well it depends on where your property is and how desirable your your property is for a potential renter so what i like to do is just buy residential starter homes in very good neighborhoods with great school districts so even if you do have high unemployment people are going to kind of go down the totem pole the housing totem pole so to speak and that person that was potentially buying a 300 000 house is now maybe your renter at fifteen hundred dollars a month or something like that but but how has uh this whole situation affected you guys your rents your cash flows what are you seeing on your end well so it affected our whole industry uh pretty rough i mean you know not only do we have moratoriums in the individual states and by trump and the cdc and that’s getting kicked into next year they basically are saying you know hey we know that you guys owe the lender but they don’t have to pay you if they can’t if they could prove the hardship and by the way i get that i i’m not i’m just saying that is what it is and and so obviously we have a number of people that are in that scenario and so we have rent collection issues we have uh tour issues so when people want to move in you know all that had to be buttoned up on you know how do you do virtual tours how do you do virtual rentals virtual rent collection all of that stuff our company was already pretty progressive around most of that so that part didn’t affect us as much but you know we had we have employees with covid we have residents with covet we had all the ppe stuff that we you know we had to follow and we had to shut everything down and so the whole industry got hurt pretty good uh ironically though as people stayed home they didn’t move around as much and so we didn’t have you know people moving and they were like sitting in place and so whatever your occupancy was in mid-march man that’s where you were you know in april yeah largely and so there was a lot of people moving around so that was a benefit but um you know on a macro level you know i have friends you know when you talk about commercial real estate you know really you got hotels industrial you’ve got malls you’ve got retail you’ve got data centers you’ve got hotels you know boutique hotels big hotels so you know and then in multi-family you’ve got class a class b class c class a is kind of the new stuff class b is you know maybe that 10 year old stuff and then clash c would be you know more of the affordable housing stuff as an example so those are all very different and depending on where they are you know you have very different outcomes so like i have property in houston texas and it got hit pretty hard with oil and so it doesn’t really matter if it’s an a b or c you know it’s a it’s an industry issue and and so same thing in tulsa we have property in in oklahoma and and same kind of stuff and so but then fast forward you might go over where we have something near um let’s say a healthcare campus like in san antonio and it’s doing really really really well uh so it it’s a lot of it’s based largely on who’s in your property and and then um you know what they’re located near so how’s it working out with the banks ken because i know your renters can say oh well we can’t you know pay you rent this month we’ll pay you in six months because of uh you know the cerveza sickness or the carers act or whatever moratorium uh but i mean the bank has to take that into consideration i’d imagine so how does that work banks are not forgiving georgia oh okay but no no no no let’s just put it this way uh we’ve chosen not to go to any of them and and now i have friends that have had to and and we had one property in in oklahoma so let me back up so part of the reason why we never had to is because i’m a big fan of massive reserves for things that i don’t see and so we had a lot of money in reserves for all the properties and i was like listen guys you know it could be a fire it could be a wind storm you know we’ve had all that we had tornadoes we had hurricanes we’ve had all that stuff hit our projects you know there are times like we had one project in houston where i lost over 100 units in hurricane ike well i had to pay a guy 165 000 just to clean up the you know the site before insurance kicked in so there are time there there’s money that you need to run big projects and so i always was pretty heavy on the reserve side we had one property in oklahoma that the residents were having a tough time and we were dipping down into the you know into our reserves and all that stuff and um and so luckily we didn’t have to put the the uh the lenders on notice or anything like that and and like it or not you know when you when you choose to not pay i’m not saying that people uh don’t have to uh you know aren’t in that situation but when you choose that um like it or not that’s going to be asked later and so i didn’t want to be in a position to where i said you know hey uh you know we didn’t pay on on all these and oh by the way i’m fine now can you give me another loan you know so we we we knew i know that um they look at my history they look at my payment history all that stuff is predicated on the types of loans i get the interest rates i get the terms i get you know so you can negotiate on all that stuff so uh so we chose not to go down that route but uh i have tons of friends in retail in office you know they don’t have that easy they’re collecting 10 20 30 percent and you know they’re just trying to they’re trying to protect their nest eggs somehow yeah i want to make a couple points there number one is um and i don’t want to say anyone’s doing business poorly or anything like that i don’t want to throw anyone under the bus but when i talk about allowing businesses to fail this is one reason why i say that because in free market capitalism like milton friedman has always said the loss is just as important if not more important than the profit because of jupiter’s creative destruction so those players that are in the game that are let’s say a little weaker may not have the cash reserves or didn’t save for a rainy day they go out of business and the people that were more prudent that ran their business better they came they come in and take the assets over and the entire economy becomes stronger as a result so so next time you see the government coming in and propping up businesses that maybe should have failed just remember that we’re making our economy weaker in the long run by not allowing people like ken who make good business decisions to come in and take over those assets so i just want to say that first and foremost and then secondly a lot of people talk about well you know i can’t get a loan or how do i use other people’s money or i don’t have any money of my own and it’s all about relationships and and it you know you came from nothing i came from nothing but we are somehow able to over time build relationships with the bank now again i’m i’m a little fish compared to you but the relationship i have with my bank in kansas city uh they took a they took a risk on me because i was an entrepreneur i really had no w-2 income or anything that would be typical like a doctor or a lawyer or something like that so they took a risk on me well i’ve i’ve paid them many times over over the years you never missed a payment on a line of credit or any loan i’ve had with them so now if we have another downturn you know you go back to them and they’re going to be much more likely to lend to you so you just made a great point where now you’re really using this as an opportunity to make your relationship with your banks even stronger so the next time you go back to them they’re going to remember oh remember what happened back during the cerveza sickness this ken guy paid us even though he was getting stretched even though his renters weren’t paying him he never missed a payment and they’re going to say how much money do you need ken i’m assuming is is am i right there yes that’s uh that’s right george i mean i know there’s a lot of legislation around this but the truth is it matters uh if if you’re not paying somebody it matters and so yeah so i’m a rainy day guy i’m like listen there’s you know there are things that are going to go wrong i don’t know what they are going to be next but they will and so let’s have a reserve here and uh it might be a roof it might be a hail storm which we had we had a hail storm break 40 of our windows in one of our properties in oklahoma city 40 percent on a 256 unit property we had a hurricane we’ve had we’ve had tornadoes we’ve had lots of fires and so those are real things and and so just over the years i’m like listen we’re gonna have plenty of reserves and and then um you know let’s never get into position where we don’t pay the lender because their lifeblood for new deals you know as you know debt in the future is going to be an asset right so that’s all i’m thinking about is how do we make these guys whole how do we continue our uh relationship with these lenders over the long haul and these guys move around and you know and i’m in a database somewhere trust me and and so whether it’s said or not said they know if i’m paying on time and and uh no matter you know they all share data just like we all do and and uh it’s important yeah for sure i want to touch on a video you did on your youtube channel that i just got done watching this morning that was fantastic so for any of you who want to subscribe to a real estate kind of a macroish real estate focused youtube channel definitely check out ken’s it’s just his name ken mcelroy he’s got probably 175 000 subscribers the channel’s just completely blown up it’s incredible information but you had this video maybe 20 minutes on how you saw some potential let’s say for a real estate crash i mean real estate i mean residential in 2021 and you really but you didn’t just say oh here it is and just kind of make it you know sensationalize it you gave data points you use charts you went to specific websites and said this is why you kind of built a case and a story so can you kind of give us the the reader’s digest version of that video yeah i’m happy to thank you by the way i i really enjoyed this i you know since covet hit man we were like i was like hey let’s get going on this youtube channel it’s just been yeah nuts uh and i i love it um but so to answer your point uh you know when we invest big money into into prop property wherever it is george i have to know everything i have to know what the schools are like i have to know if the employers are moving in moving out if they’re contracting expanding i want to know everything i want to know house prices those are all what i call our must-haves on any particular market and so when i look at whatever it is i’m looking at i’m all about the data the demographics you know and the migration patterns on where people are going and and um you know you can find that stuff at a state level a city level even a sub market level if you really really um do your homework and so and so what the reason why i um the the reason why i did that video is because i think everybody lumps real estate into into this big bucket as if it’s one thing and it’s not you know it’s like saying you know stocks are one thing you know there’s yeah and so so what i saw and what i still see is the reason i don’t blame people nobody wanted people to uh go through their homes during the pandemic and so everybody you know the the listings just the listings dried up and so i think there’s like two months of listings or something i read the other day that there’s like four real estate agents or five to one listing or something it’s something crazy so you know so whatever that’s a supply demand thing it’s just that simple and so there’s a lot of people chasing a lower supply of course it’s going to drive prices up and then you know you throw the the low federal funds rate and the interest rates on top of that it’s just going to get it’s it’s gonna get hot that’s okay but you know recognize it for what it is that’s all and and and and so as people are moving around and they are you know the everybody’s kind of picking on these big urban centers and there’s nothing wrong with that because they probably deserve it and they’re you know people are moving out of those places but they’re blowing up these sub markets you know and some some of them are in other states some are right next door and so my point was see you know just you know that doesn’t necessarily mean that you know it’s going to continue and and uh but the bigger thing for me was taking um taking real notice on the two things that i follow which are mortgage defaults and and evictions and so right now we know today there’s at least 12 million people that own around that owe around 6 000 in rent period right now so and and so they’re all kind of hanging on so you got 12 million people that are going to probably hit at some point in next year so you have that disruption and we could talk for an hour on that you know who knows what they don’t all right and they they on average they owe 6 000 on their mortgage on their rent on the rents okay yeah on their rent and then and then jump over to you know i go to mortgage bankers association or black knight or the or two that i really like you know you look there there’s four million people that are in in the process of some kind of uh forbearance or default and so so you have these two big things happening at the same time and all i’m saying is i think that we’re going to see a lot of listings next year and here’s why i think the vaccine is going to relax uh some of the things and people have had a nice little run up and maybe they’re behind maybe they’re not behind but i think you’re going to see a lot more listings at least people that would have listed last year and they want to move or or whatever get nearer their family or or maybe their jobs were dislocated or whatever i think you’re going to see that so i do think you’re going to see all this listings happen in 2021 i think it’s going to be crazy um as people try to scoop whatever equity they have pay off whatever they owe i’m sorry to cut you off can but that was a really interesting point you made the video that a lot of people because the unemployment rate will potentially get higher because all these businesses going out of business once this stimulus runs out and you’ve got all these unemployed people that may have quite a bit of home equity because the prices have risen so much they’re going to want to cash out because they don’t have a choice that creates more supply coming online a hundred percent so they’re they’re i call it house rich cash poor and and uh you know and also you know a chance for a new life if they’ve got let’s say they live you know near san francisco and and they they work for twitter well they’re gonna you know they’re gonna uh they probably have a lot of equity moving i guess they’re gonna move an hour away or maybe to another state and if twitter allows that and and they’re going to buy something for half they’re going to have all this cash and they’re going to be fine so all that’s happening right now so that’s going to be a listing and and then in addition to that i believe that the the um you’re gonna see this forbearance it has to it has to come to a head soon these people owe money they owe rent and they owe mortgages and at some point somebody’s gonna pay for that you know it’s either gonna be the bank it’s gonna be the landlord it’s gonna be the resident it’s gonna be somebody and a lot of that’s gonna make itself up into in the you know into wall street as you know because a lot of those loans are sold off and and so there’s a lot of landlords i know that own homes that um are not getting rent and they’re trying to work with their lenders and and by the way there’s private lenders and government lenders and so the government lenders are under the cares act but the private ones are not and so you know there’s a lot going on right now and i think um you know and i i really think that the the the spike in the the you know the cerveza that you call it um and the spike in that and then the vaccine you know it’s gonna there’s gonna be a lag on the roll out you know we’re gonna have another bad year and these businesses that are just been hanging on maybe bleeding cash i don’t know it’s going to be a lot uh worse next year at least valve is home equity that’s what you got on your balance sheet that’s the liquidity let’s say on your balance sheet that you can access in and when times are super tough and there’s low supply because no one wants to sell their house but when people do want it or have to sell their house you get more supply you gave a couple tips at the end of the video for people that might again you went back to the point that real estate is local for the most part and there’s a couple times every once in a while you get real estate all going down at once but that’s very very rare so real estate and you even said 2021 you don’t see it going down in unison like let’s say 2008 910 it’s going to be local but the tips that you gave were number one check inventories and then i think you use zillow as a reference there and number two make sure that you’re always aware of the inflows and outflows of population within the region you’re looking to buy or sell and you had some really cool kind of things that i never would have thought of one was you look at the driver’s license yeah or how many people are turning in their driver’s license in let’s say boise idaho that means there’s more people moving there because you have to get a new license the local license within 30 days or something and then also you gave a website for like a moving company like a national moving company so you could see where people were actually moving to state by state so can you walk us through those little scenes well i’ll tell you what okay we’ll put that up on kid macro and tom uh kenmackery.com rebel capitalist how’s that and then we’ll put the tips up for your people uh if you know i might as well do that but yeah so so here’s the thing again back to the data points u-haul you know if somebody rents a u-haul from new york to phoenix it’s a data point period same with north american van line same with atlas van lines you know same with all those companies so those are really really in my opinion low hanging fruit you google that right now it’s gonna come up you’re gonna see where all those u-hauls go whether they’re one way two-way typically they’re one way but those are really important the uh post office you know when you go and you register you change your address and all that that’s all up on the government website the um as i mentioned before the department of motor vehicles is another one and and you know and now this is kind of creepy but now they’re doing it with cell phones like like like it or not if if if you and i were talking before here we might go skiing somewhere like let’s say in utah there’s people that know we’re in utah we have our phones so so there’s a lot about that so there’s there’s that too like you can kind of see like our self our cell tower is getting pinged here so that’s all data that you know as people are moving around and they’re going to be in places permanently that’s all really really really good data george and and that’s the kind of stuff that you want to look at in my opinion you want to be you want to be ahead of it you don’t want to be a pioneer you want to be you want to be where people are going and you want to be there in the beginning if you can be yeah for sure so long story short can when we go skiing here in utah if i show up without a cell phone you’ll know exactly why you need a burger phone and you need to keep yours back in phoenix uh all right let’s go ahead and talk about some commercial real estate when we were at dinner the other night with kiyosaki we were talking about some of the local malls that i i went to call i went to um i took a couple classes here i almost flunked out of high school but i did take a couple college classes here locally and this would have been early 90s or so and back then these malls that we were talking i don’t know if you want me to give specific names or anything but there are a couple of the major malls here and now um i don’t know what the one looks like over by 17 but the one over uh we’ll say a little further north uh east is just a complete ghost town and we all know you know we’ve heard the story about amazon is coming in and just destroying the old school malls but you know as a real estate guy you see the destruction you see what’s going to happen but you also see this is a huge huge opportunity so if you can kind of walk us through that as far as what you see happening to these malls and then maybe what the opportunity might be for someone to come in and repurpose these things and make a ton of money well right thanks george so this was all happening already before kobit so you know you think about the rent in malls are is high and with with direct to consumer retail there’s just there’s no reason to yeah it’s to go you know let’s say you want to buy a new suit at hugo boss or something well they have what they have and it fits or it doesn’t fit and it’s you know it’s limited to whatever they have now you can go to hugo boss you know their website and basically order exactly the same size and just take it and get it tailored if you need and so there’s just all that was already in motion and so you already had pretty high rent malls are typically very well located right in the middle of town so the real estate itself is very very good but it’s all supported by movie theaters big box anchors like a macy’s who would file bk the one in scottsdale is macy’s and neiman marcus both file bk you know and then you’ve got all these other small let’s say like california pizza kitchen file bk you know you have all these little things and and of course you saw the theaters also file bk so you have all that stuff happening and and so all of a sudden they can’t pay rent and then that you know the rent of course can’t pay the mortgage and so boom and so that’s been going on it’s gotten worse obviously and so here we are with these incredible uh locations that are suffering pretty bad and so what what you will see is you’ll see massive redevelopment in those areas we’re already seeing corporate headquarters buy these where people can relocate because of all the parking and they just repurpose because you know right in the middle of town we’re already seeing last mile distribution center you know with amazon because that’s their big thing they want to have that distribution uh we’re already seeing multi-family redevelopment and you know for me i look at a big mall and you know might be on 120 acres i only need 20 acres you know i only need like a corner of the parking lot and so you know you you all you know as you start to look at you know what will work and what won’t work as you start to see these restaurants and some of these retailers go down you’re going to start to see this everywhere and this redevelopment of factories you know that was already in process it’s going to be the same kind of a process i think right really interesting so for 120 acres of basically prime real estate is what most people look at it as a mall as like an eyesore but you look at it as 120 acres of primo primo real estate that you could go in there and potentially buy if the price gets low enough you buy it for the land you demo them all and then you subdivide it into x y and z and repurpose the whole property and that’s where you you really force appreciation yeah it’s once of a lifetime george i mean you know normally big stuff like that is on the edge of town and then town moves past it and all of a sudden it’s in town you know the reason it’s on the edge of town is because it’s there’s no vacant land and so you know so when i look at something like that you know you start to look at these big corners or these big malls or you know some of these big retail centers that may or may not make it or a factory even you know those that’s how i see it i see it as a massive redevelopment opportunity the city loves it because they’re not getting any tax dollars and so they’re going okay yeah this is great and so they’re really typically very involved in the overall master plan but you know that could turn into um it could turn into a um you know uh a mixed-use type of a scenario where there’s you know multi-family and maybe there’s some industrial and you know maybe there’s a school there even there could be all kinds of stuff you just never know uh depends on what the city needs yeah you know when we get done with the interview kenny remind me i i tell you the story but it’s going to take another 15 minutes of this private equity guy buddy of mine in kansas city who bought a local high school that hadn’t been used in years and he repurposed it into quote and to co-working i mean he just made a fortune out of the deal because he that the the city almost gave him the high school for nothing because it hadn’t been used in 30 years or but anyway yeah no by the way george that happens all over the place so the falls just happen to be kind of the latest thing but you know those schools have been closing for a long time military bases have been closing you know sometimes they sell those off so it and by the way even so many tax credits can he sold the tax credits and yeah i know i think university i think a hidden play here is going to be the universities you know they have all typically they have a lot of real estate around the universities and i personally think the enrollment’s going to shrink down and you know it’s going to get a real shot in the eye next year and uh so i think they’re going to take a bit of a hit and there’s going to be some really valuable real estate around some of these universities yeah and there’s a lot of community colleges here in phoenix too you might be buying one of these community colleges maybe maybe yeah all right so i had a conversation with danielle dimartino booth who’s a great friend of mine and she’s just really on top of the real estate from a macro level she used to work at dallas fed and she was talking about some research that she had done recently with these boutique hotels that were just being way overbuilt in areas like new york san francisco and they just levered up you know their capital structure was all out of whack because they had just very you know thin amounts of positive cash flow coming in because they took on so much debt to begin with and she said she just went through chart after chart of how they’re just in serious trouble right now and i think that’s another thing that we discussed at dinner and where you see as maybe a potential opportunity in the future oh yeah for sure i’m like oh yeah this is gonna be you know obviously i don’t want people to lose money on things but the truth is that is a fact you know i i got a bunch of friends that own those i actually owned a resort and hotel with robert kiyosaki and kim and uh in sedona and you know we we took it in the chin too and and um but i’m not as heavy and as some others i will tell you there’s a great youtube uh video that i watch with the ceo starwood and it was fabulous he you know he he was pretty palms up about what he saw and what he said is he either could be 30 to 40 of the hotels not make it in new york um and and i don’t disagree with that and so again back to repurpose and what do we need right now we need affordable housing we need senior housing we need those kinds of things so when i see a let’s say a micro hotel sitting that’s already developed somebody spent maybe 15 or 20 million bucks on it and it’s owned by the bank then you know if i could buy that thing for six seven eight million bucks and and turn it into affordable senior that’s a win it’s a win for the senior it’s a win for me uh it’s not a win for the bank shareholders but you know that’s the risk that they take when they when they did the loan right so you see that playing out in maybe 2021 2022 and you’re going to be as prepared as possible to maybe take advantage of those opportunities and markets where you’ve done business in the past and then going back to your good relationship with the bank yeah i don’t think it’s going to happen that quick uh you know my experience around on the you know this the residential uh is a little quicker but the the on what happens on the a lot of times these are owned by um you know bigger groups and and they usually are fighting like crazy to survive and so i think that a lot of the commercial real estate is going to drag out for two three years typically that’s pretty pretty common uh and um you know but ultimately at the end of the day you can only carry it um so far yeah right right well ken i know we’re right at an hour right now looking at the clock and it’s just flown by i could talk to you for another three hours very easily but i remember the last thing that we discussed at dinner the other night with robert is that you were potentially starting a fund to raise capital to go in and take advantage of some of these opportunities we’ve discussed so i definitely want to give you the opportunity to plug that and then talk a little bit more about your youtube channel which i would strongly suggest everyone subscribing to so where can they find out more information about that fund or about what you’re doing right now sure sure thank you by the way uh so mc companies mccompis.com that’s the information that you guys can find out about so what we’re doing george is we’re looking at these opportunity zones so when people sell they can roll their capital gains into these opportunity zones and defer tax and so that’s uh that’s where my partner ross and i are heading now we’re uh we just are we just finished a raise on a 300 unit apartment building uh 50 million dollars in um in the tucson area and and so that’s primarily what i do full-time and uh you know and then the youtube channel ken mcilroy has been great it’s been so fun to be able to take some of the resources of the on the property manager side on the finance side on the construction site because we have our own construction company and be able to do youtube videos you know to help people kind of navigate through some of this and also i’ve been you know i got my butt beat a few times sitting on somebody’s i really have you know and and you know we went through it in a way and you know i went through it uh before that even and and uh you know you learn as you go through that you learn like that’s how i got it that’s why i have reserves you know so you know and so you know uh so i love being able to uh teach a little bit and and and make i i don’t want anybody to lose any money there’s so much opportunity coming our way and uh there’s an opportunity for everyone awesome ken well thank you for your time i cannot wait to do it again yeah for sure george we’ll see you soon you
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