50MM Mindset With Rod Khleif
Episode 363: 50MM Mindset With Rod Khleif
Do you feel like you’re stuck somehow, limited by what you believe to be everything that you can do? If you want to attain success, overcoming limitations is an essential part of your journey, and while your instincts of preservation may pull you back, you have to fight those instincts to go beyond. Mitch Stephen sits down with Rod Khleif who has owned over 2,000 homes and apartment buildings and has built over 22 businesses in his 40-year career. Rod discusses the success mindset and what it takes to overcome what you believe to be your limitations in order to find success or even bounce back from failure. The power has always been in you, and your job is to harness it so you can reach your fullest potential.
I’m here with my friend, Rod Khleif. We’re going to talk about something that I’ve never had the chance to talk about because I never met anybody that made this big move. One, he was big enough to acquire $50 million worth of real estate. He was unfortunately in a position where he lost $50 million worth of real estate. We’re going to talk about the two mindsets: the mindset that it took to build a $50 million portfolio, and then the mindset that it takes to overcome a $50 million loss. These are two gigantic mindsets that could have crushed a person on either end and never got that far. I would like to pay homage to my sponsor, TaxFreeFuture.com.
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I’m good. Let’s have some fun.
We’ve got a lot of ground to cover and a little bit of time. Let’s start with the basic, who were you before?
By the way, that wasn’t $50 million for the real estate. That was net equity. It was a whole lot more than that, but even more painful than your description. Let me get into it because this is a pre-frame to this. With any crisis, comes opportunity, so let’s talk about that. I immigrated to this country when I was six years old with my brother, Albert, my mother, Avantia. I emigrated from the Netherlands. I was born in Holland. We ended up in Denver, Colorado where we live for 30 years. We didn’t have much. In fact, I wore clothes from Goodwill and the Salvation Army all the way through junior high school until I could get a job and buy my own clothes. We drank powdered milk because my mom thought milk was healthy and ate expired food because that was cheaper. I’m sure you’ve got readers that had it harder than we did. I knew I wanted more and I knew I wasn’t going to settle for that. My mom was a bit of an entrepreneur and she had an incredible work ethic.
She babysat kids so we’d have enough money to eat. With her babysitting money, she bought the house across the street from us when I was fourteen for around $30,000. When I was seventeen and about to graduate from high school, she told me she’d made $20,000 in her sleep. I’m like, “What? You didn’t do anything? Did you make $20,000? Screw college. I’m getting into real estate.” I got my real estate broker’s license right when I turned eighteen. I was a broker, believe it or not, because you could do it with education back then. They finally wised up and you have to have some experience now, but I wasn’t an agent. I was a broker. I was going to be rich in real estate. In my first year, I made about $8,000 to $10,000. This is 1978. In my second year, maybe $10,000 to $12,000.
In my third year, I made over $100,000, which is back in ‘80 or ‘81. It was a decent chunk of money. What happened between year 2 and year 3? I worked with a guy that taught me about the importance of your psychology and mindset and how that 80% to 90% of your success in anything is your mindset and your psychology. Only 10% to 20% of the real estate stuff you and I talk about in our podcast. If it were knowledge, there’d be a bunch of wealthy librarians and college professors out there. You have to take action with what you learn. You have to push through fear, push through limiting beliefs, or even worse, get uncomfortable. A lot of people are comfortable and a comfort zone is a warm place, but nothing freaking grows there.You have to actually take action with what you learn. Click To Tweet
Fast forward to now, I’ve owned over 2,000 houses that I’ve rented long-term. I’ve had multiple apartment complexes in three states. In 2006, my net worth went up to $17 million while I slept, but there’s a punchline. When that happens, people can tend to get a big head. That happened to me. I thought I was a freaking real estate god. I did the math on it. It’s like $8,500 an hour over the year. When you get a big head, sometimes God or the universe, whatever you believe will give you a smackdown. That was 2008 for me. I lost that $17 million and a whole lot more. I lost $50 million and I thought I was set for life.
I thought 80 million Baby Boomers were getting old and getting cold. I thought I was good, but I completely crashed and burned. What I enjoy talking about on my podcast and also my live events is the mindset it took to have $50 million to lose in the first place, then what it took to recover from that. Some people don’t. Back in The Great Depression, people jumped out of buildings for losing less than that equivalently. The mindset took to come back to the success that I have now. If you’d like, I can drill down on that topic a little bit for you, Mitch.
What was the lesson learned? You spend $50 million to learn.
It was a seminar. I call them seminars. I’ve had lots of seminars. That was my biggest, hopefully, the only one that’ll ever be that big. We fail our way to success. You know that any successful person has failed many times.
You tell me if I’m right or wrong. I’m going to guess during the time they taught to leverage on your property.
I was at 30% loan-to-value. They’re only owed $0.30 on the dollar and I went upside down. By ‘09, I was upside down and my portfolio dropped more than 70%, but that’s not what pulled me down. It’s the values that are irrelevant. In fact, I wrote a book about this. The subtitle is The New Rules of Real Estate Investing, i.e., the new rule is to focus on freaking cashflow. What pulled me down and the lesson I got was that if I’m going to buy and hold, I’m going to do multifamily. I think your strategy where you give someone ownership and they’re paying a note is when they’ve got pride of ownership, that’s a completely different dynamic. The big thing that killed me, I’m not against single-family. I own 2,000 of them. Hopefully, I’ve got a little credibility when I’m talking about this. The big thing that killed me was I had houses 2 hours north and 2 hours south and everywhere in between. Here’s what killed me. First of all, Florida has no state income tax, so the property taxes are much higher. Secondly, I had properties in wind and flood zones. The insurance on that is high and that’s all impacting cashflow. There were two big things. One was if I sent a maintenance guy to one of my apartment complexes, everything’s the same.
We could stockpile plumbing guts and toilets and locks and appliance parts and HVAC parts. I could send a guy and he could be in and out in an hour. If I had to send somebody 1 hour, 1.5 hours north or south to go to a house, they’d have to go there to see what’s wrong first, assess that, then they’d have to find a Home Depot or Lowe’s where we have an account. If you’ve ever fixed anything, you get started and you realize you need something else by the time what would take an hour to meet at an apartment in one of my apartment complexes would take all day at a house and you multiply that times 800. I had C-class houses, so a lot of ongoing maintenance. That was one big, huge piece. The second, the coup de grace was I had mostly C-class houses.
The people that were renting my houses were primarily in retail or they were contractors. They were jobbers, plumbers, electricians, dry wallers, roofers, painters, all of that. As you know, I’m sure you went through this, that fell off a cliff in ‘09. These guys didn’t have work. That was like the straw and it was painful. I hid under a rock for a couple of months, maybe even a little longer than that. It was the mindset that got me back. The lesson was, for me, the logistics and I believe in multiples. I’d rather have a ten-plex than ten houses now. I’ve had 2,000 houses.
It’s so I can point out the differences and I’m not saying either way, there’s not a right or wrong way to do this business, in my opinion. You’d find a way, a strategy that you like or that fits your area or fit your personality and you went at it. There are ways to win in every category. What happened with me was I had sold my houses as owner financing and I’m with you. I learned a long time ago that houses too far away, even though there were simple problems, they were too hard to deal with. I bought all my houses within an hour of me, most of them in my town. The second part of that was I was selling my houses on a note. It wasn’t my house anymore. It wasn’t my air conditioner. It wasn’t my hot water heater. I received the mortgage payment. A lot of that stuff in the recession didn’t affect me.
I’m sure you had some foreclosures. The only disadvantage with single-family when you’re carrying paper is you have to foreclose versus evict. The foreclosure process certainly is lengthier than eviction and more costly. They were their homes and they had a pride of ownership. I’ve done something similar. In Memphis, I did something similar. It wasn’t a sale. I called it a long-term option. I gave them a 30-year option that they paid down every month.
The foreclosure process is way more difficult than Texas, but let’s stay in the groove here. The circumstances buried you beyond recovery and you did what sounds perfectly normal, went in the hole, got your panic over with, finished kicking the dog up and down the street. You said, “Now what do I do?”
I could talk about the mechanics, but I’d sure love to talk about the mindset that it took to get back up. If you humor me, I’d like to go there. I formed another company, I built a litigation support company, turned into a $10 million business with 60 employees and sold it. It was all a mindset. What you focus on grows whether it’s positive or negative. I had to redirect my focus and I’d love to give your readers some strategies for doing that because it’s easy. With the coronavirus and everything going on, it’s easy to get caught up in fear, to focus on negative. Wherever focus goes, energy flows and it gets bigger. For example, they asked Mother Teresa if she was anti-war. She said, “I’m pro-peace.” That’s what I’m talking about here. Let me take your readers through a process. It takes me about 1 hour to do this at my live events, 1.5 hours. I can talk about it in five minutes. If somebody wants to let me guide them through this, they can go to my Rod Khleif Official Facebook page. On January 1st, New Year’s Day, I did this for about an hour and 20 minutes and I can walk you through it with music and there’s a free guide. You can download the whole thing. What do you need to do?
We’re going to direct everybody to 1000houses.com/Khleif.
The thing you want to do is pick an hour and take a couple of quick notes. You want to pick an hour when you have a lot of energy. You want to make sure you’re well-hydrated as I get a drink of water. You don’t do it right after you have a meal. You sit down and you literally write down everything you could ever possibly want in life. Write down all the stuff. I got jet skis and a boat, stuff like that. Motorcycles, cars, houses, write down all the stuff. There’s nothing wrong with that. Take the lid off your brain. A simple act of writing it down triggers something called your reticular activating system, which is that subconscious filter in your brain that filters out what it thinks is most important.
The greatest example is when you first buy a car, you never notice them. You buy the car and they’re everywhere. Were they there before? They were. Don’t limit yourself. You are only limited by what’s between your ears. If you want to write down a yacht or a private jet or a private Island, whatever it is, write it down because that starts the process. I’ll give you a great example of this later. Write down all this stuff. Write down how much money you want in the bank in a few years. How much do we want in the bank in ten years? Write down how much cashflow you want in 2 years and in 10 years. I also want you to write down what you want to do in this lifetime. Maybe there’s somewhere you want to travel.
I’ve got a travel vision board now, places I’ve been that I want to go to again or places I haven’t been, I want to go. Where do you want to travel? What do you want to do? “Climb mountains,” whatever it is. Like me, I jumped out of a perfectly good airplane. I’ll never freaking do it again, but it’s off the list. What do you want to do? Write that down. Also, write down what you want to learn this lifetime. Maybe you want to write a book, maybe you want to learn a foreign language. Write that down. Me, I’m going to learn how to play the drums. I live in a compound and one of the buildings has my drum set my wife bought me and it’s set up. I don’t even know what end of the stick to use yet, but I’m going to learn how to play those drums. What do you want to learn? Write that down.
Lastly, it’s everything you want to do, your habits, not the stuff. It’s not some New Year’s resolutions. You don’t want to let the pen leave the paper if you’re analytical, don’t stop to analyze it. Keep writing. Keep the momentum, breathe deep and keep your energy up. Lastly, write down who you want to help because we will do more for others than we’ll ever do for ourselves. Maybe you want to do some for your kids, parents, or siblings. I bought my parents a house on a canal here in Florida. I bought them a car, took them on cruises. Who do you want to help? Write that down. Once you can’t think of another thing, there are a couple more steps. I want you to put a time limit on each goal, how many years you think it’s going to take you to achieve it?
You analytical ones, don’t overthink this. Guess at a number, 1, 3, 5, even 10 or 20, realizing as human beings, we will overestimate what we can do in a year and massively underestimate what we can do in 10 or 20 years. I’ll give you an example. When I was eighteen, I knew I wanted to live on the beach and there was no beach in Denver, but I visualized palm trees, sand, waves, coconuts and the whole thing. Years later, I built this mansion on the beach, $8 million, 10,000 square foot property, magnificent home. That was unthinkable when I was eighteen. The point is to take the lid off your brain. Once you’ve got a time limit on each goal, I want you to pick your number one goal. That goal, when you get it, you’re like, “This is unbelievable.”You are only limited by what's between your ears. Click To Tweet
Write that down. Put it on another piece of paper. I want you to pick your top three one-year goals. Put those on another piece of paper. Now, you’re ahead of 99.9% of the people on the planet, but there’s one more step. The goals will pull you. They’ll propel you, but it’s why those goals are an absolute freaking must. That’s the critical fuel here. That’s what this is. This is the fuel to get you to push past comfort and push past fear to take action. I want you to write down a paragraph. Reach goal. Why it’s a freaking must for you to achieve it. Things like, “I can show my wife or my husband what success looks like. I can show my children what it means to be successful so we can have freedom. Freedom to do whatever we want, whenever we want, wherever we want. Bring whoever we want.”
Whatever it is for you, write it down. Use emotionally-charged words. Words are powerful. Use words like, “Amazing and beautiful and incredible,” because words will juice you. Once you’ve got a positive reason why for each goal, that’s an absolute must, I want you to do one little piece. I want you to put some pain in there if you don’t achieve it. Put things like, “I don’t feel like a failure. I don’t live a life of regret. I don’t fail my children. I don’t fail my spouse.” We’ll do more to avoid pain than gain pleasure. We don’t want regrets. There was a hospice nurse in Australia, her name was Bronnie Ware and she counseled hospice patients at the end of their lives.
She asked them a question. She wrote a book about this. The question was, “What regrets do you have?” The book’s called The Top Five Regrets of the Dying. You know what the number one regret was? “It was not living the life I could have lived, living someone else’s life, not living to my potential.” I say, “That’s sad.” You don’t even want to consider that. Positive and negative reasons why. The last piece is you must get pictures of your goals. I’ll give you a couple of quick public examples of this. One was Jim Carrey. When he was flat broke, he wrote himself a check for $10 million. He used to go up to the Hollywood sign and look at it. That’s how much money he made for Dumb and Dumber. I’ll give you another example which popped up. Demi Lovato, a few years ago, posted on social media that she was going to sing in the Super Bowl. That was her goal. She’s in Super Bowl LIV. Let me give you a couple of personal examples.
When I was eighteen, I was going to be a broker. I was going to sell people’s houses. That’s how I thought I was going to be wealthy because of my mom’s experience. I bought this four-door Ford Granada, this bone-ugly bench seat in the front of Granada. It was ugly. It was a four-door because I figured I had to have a four-door car to show houses. I worked with a guy that had two Corvettes and he let me drive one. That’s a critical piece as well, that experiential piece. This is before you could spell the internet. I got a picture out of a magazine of a Corvette and I put it on the visor of that bone-ugly Granada. Every time I got in, it was right there in front of me.
Within a year or two, I had a beautiful Corvette. I’ll give you a couple more quick examples, but I want to pre-frame this by saying this is not me bragging because the stuff I’m going to share with you doesn’t interest me anymore, but it’s great to inspire you as to the power of this hopefully. This is back when the TV show, Magnum PI, was out and the actor’s name was Tom Selleck. He was the detective and he drove this awesome Ferrari 308. I thought that was the coolest freaking thing I’d ever seen. I got a picture of that actual car and put it on the visor of my Corvette. A year or two, I had a Maserati that looked like it.
Last example, a car example. I’m the guy that always wanted a Lamborghini. I had posters in my bedroom growing up or the Lamborghini Countach, pictures of the bikinis and the whole thing. What’s interesting is my son collected models of exotic cars and he had a model of the exact same color and style Lamborghini that I ended up getting. Get pictures. I have a planner. In the back of the planner, I’ve got pictures that have been in here literally twenty years. They’re in plastic. They’re dog-eared. The first pictures were pictures of my kids when they were young.
They’re my gratitude pictures because everything starts from a place of gratitude. This is my gratitude pictures. There are pictures of things that I wanted. That house on the beach. What’s crazy is this top picture, the glass and the travertine floor are exactly what my house looks like. What’s even crazier, and this was before I ever had the house, the lower picture, the concrete wall, it’s the same wall in my compound that I live in now. I live in a compound now, there are six buildings. The giant main house, beautiful two-bedroom guest house. I’ve got a media building with a theater room, a video studio, an incredible exercise facility.
What’s funny is because God’s got a sense of humor, I lost the big house that I built. I lost it in all the craziness, but because God’s got a sense of humor, I can see it out my backyard. It’s right over the bay from where I live now. These pictures work like watches. I’ve got to a few hundred thousand dollars’ worth of watches because I thought that was stupid, that was important. The Lamborghini, before I ever got it, the Rolls Royce, the Bentley, all this stuff that I got that I thought was important, but I got it because I had pictures. Those of you analytical ones that are thinking, “This is a little too foofy,” big mistake.
I’m in the same thing. I built my house out of my pocket. When I poured the slab, I had $53 left to my name, my entire net worth. I had pictures of every room and everything I wanted. I found that scrapbook here. It was amazing to me how and I didn’t even realize that I was accomplishing them one at a time. I looked back to the scrapbook and said, “My gosh.”
I didn’t realize what I was doing either. When that movie The Secret came out, I’m like, “That’s what I’ve been doing.” I got everything in the back of this book with one exception. I never got my six-pack. Everything else I got. A six-pack is still on the list, but this stuff works. That experiential piece is important. For example, I took my wife to the Amalfi Coast in Italy and I saw these amazing yachts and I’m like, “Babe, we’re going to rent or buy a yacht. We’re going to go from Spain down around the boot of Italy, Greece, Croatia, Venice, all that.” I’ve got pictures of yachts now and I went to the Miami boat show and I BS my way onto some big yachts, sat in the captain’s chair, laid on the bed, visualized myself owning it because it freaking works. Trust me on this. If you want more, and I know you do if you’re reading this, make sure you’re very clear on what you want and more importantly why you want it. It’s the why that will drive you.
I liked that part about the pain. Throw some pain in there.
We do more to avoid pain for sure and we’ll do more to help others as well. Make sure you’ve got that in there. What are you going to do for your family, people that matter?
You’re inspiring. You speak with a high level of passion. I know at least two things. One, you believe in what you’re doing. Two, you must be good at it or you wouldn’t be doing it all this time. What do you offer?
Let me say this to you because before I talk about the things that I’m doing, it’s funny, I started my podcast years and we’re about to hit eight million downloads. When I first started, I’m like, “I’ll never sell you anything because I want to add value. I want to help you with add value.” I took free phone calls from listeners. To answer your question, what drives me, there’s a few of the hundreds of Thank You cards that I get from my listeners and coaching students and people who’ve been impacted by my work. I’m not exaggerating when I tell you I get at least three a day either emails, DMs, handwritten cards, or gifts from people. That’s why we do this.
We love what it is we do. We’re changing lives. I work on Sundays now. In fact, I told you I bought the boat and the jet skis because I’m finally like, “I do need to take some time and enjoy what I’m doing here.” I do love the work. Work is play. Once I hit a million downloads, I’m like, “I better do something with this.” Now, I’m a liar because I do sell stuff. I have courses and coaching and stuff. It was never my intent. It’s like you want to make God laugh, tell him your plans. I never planned to do anything with that podcast. I was going to use it to raise money for deals and to tell people about my experience with single-family versus multifamily.
I was doing it all for free too, but I wasn’t getting the emotional reward that I wanted because of a lot of the people that were putting anything up. They’re not applying themselves. I was wasting my time because they weren’t that serious. For my service, I started finding the people that I couldn’t get across the line, which was what I wanted. I wanted the emotional reward of saying, “I helped this guy quit his job. He doesn’t need a job anymore. He knows how to fish. He can fish all day long.”
Same here, I’ve got students that retired. I got an email from one of my students, “With my passive cashflow, I bought that million-dollar farm. I convinced my wife only a small piece of the cashflow is paying for that farm.” He described it, sent me pictures. “I could screen share and show you. That’s why we love what we do.” What I started doing is I wrote a book. I gave away 20,000 copies for free of my book. It’s 200 pages. It’s kick-ass. Finally, my team’s like, “Knucklehead, let’s put it on Amazon and make some money.” It’s on Amazon. It’s a bestseller in three categories. In its place, I created this tool book, it’s 70 pages, called the Multifamily Property Toolbook. If you’re interested in multifamily, this is not for single-family, so your readers may not know to get the value of this.
If you’re interested in a duplex or any multifamily, this thing’s like a due diligence checklist on steroids. If you text, Rod, to 41411, I’ll give you a copy. It’s kicked butt. There are no sales here. It’s no fluff and it’s an incredible piece. I give away tons of free stuff and now I do these four sold-out live events a year. I’ve got an event coming up in Orlando, May 1st, 2nd, and 3rd. Your readers, I’ll give them a break. It’s still early bird pricing. The pricing is fantastic anyway. If they use the code Mitch, I’ll give them $100 off. This event is me for three days. You are drinking through a fire hose for three days if you come. I’m here to tell you, multifamily real estate. It’s called a Multifamily Bootcamp. It’s how to buy apartments.
To be clear, I have the strategies I teach, but my show is to introduce all the different strategies to find the one for the person out there. I don’t care if they pick mine, they pick yours. People got different attitudes and different markets and everything else.
Different asset classes, everything. Maybe you want storage buildings or retail or office or whatever. Mine is multifamily and I freaking love it. I believe in it. We bought 1,000 doors. We’ve got 800 under contract. We’re actively buying heavily and I teach you how to buy apartment buildings in three days. More importantly, I teach you the mindset so that you take action with what you learned. We spend time on that. I have a panel. I host the largest multifamily mastermind in the world. We’ve got about $7 billion in assets in there and my mastermind members come. I usually have somewhere between $2 billion and $3 billion in assets represented by the panelists on stage answering your questions. It’s drinking through a fire hose.If you want more, make sure you're very clear about what you want and why. Click To Tweet
It’s a kick in the butt and I don’t bring in outside speakers to sell your crap as everybody else does. It’s me. It’s RodInOrlando.com and if you use the code, Mitch, I want to give your readers $100 off and I promise you, you’d be glad you came. If you want to be sold on it, I host the largest multifamily Facebook group on the planet. There are 32,000 people in there. There’s no promotion in there allowed at all. If you go to MultiFamilyCommunity.com, it’s a direct link to that Facebook group and go in there and put in the word bootcamp to see what people say about the event. You’ll see hundreds of unsolicited testimonials about the impact that it’s had on people’s lives. I’d love to see you there. Mitch, I’d love to see you there. You’re invited as my VIP guest if you can make it.
I’ll consider it. I know this stuff went by fast. If you go over to 1000houses.com/Khleif, I’m going to have all this over here. I’ll have the dates. I’ll have the promotion code. You don’t have to remember this stuff. It’ll all be over there. By the way, Rod, my people are used to going over there. You’ll have this giveaway of his book. I think it’s great. I appreciate your time.
Thank you. I did all the talking, but I appreciate that. I appreciate you giving me that opportunity.
I love your energy. It makes me want to go myself. It’s awesome. I’d like to thank the readers out there for taking the time to stop by and get you some Rod Khleif. Please go to 1000houses.com/Khleif. Check out my sponsor, TaxFreeFuture.com. You won’t believe what your financial advisors are not telling you. We’re going to tell you what they’re not telling you. We’re going to tell you why and then you do that what you want. Rod, thank you very much.
Thank you. Take care.
About Rod Khleif
As one of the country’s top business, real estate, and peak performance luminaries, Rod has owned over 2,000 homes and apartment buildings and has built over 22 businesses in his 40 year career.
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