Answering Your Questions About Real Estate During COVID-19

Welcome to the real estate strategies podcast. I’m Ken McElroy, and I’m here to give you creative ideas on how you can get started or continue your journey in real estate. Each week, we will bring you inspiring and informative conversations with successful people and their path to obtaining or investing in real estate. Enjoy the episode.

Hey guys, welcome to the real estate strategies podcast with Ken McElroy. So the following questions are questions that we got through our social media channels. So every once in a while, you know, we have guests, but I think it’s always good to grab some questions from Facebook and LinkedIn and Instagram and all the different so and YouTube for sure. And we do look at those and we do like to use them on things like a podcast or even a video. So thank you and keep them coming. So this first question is from John, one of our premium members around mortgages and tennis dot Pang. So, John, thanks for this great question. How can you manage to stay afloat? If your tenants aren’t paying and you cannot evict them and you still own mortgage, this is the million dollar question. So here’s the thing guys. So as you guys know, we have about 10,000 tenants and the regulations have changed.

First. Trump said, Hey, you can’t evict anybody till October. And by the way, the courts were closed. Anyway, the second thing is now the CDC came out and extended that to the end of the year. And they made it for all tenants, not just ones that had government sponsored mortgages. And so as a landlord, it became very, very difficult for us because we had massive uncertainty on whether or not our tenants were going to pay or not. As you guys know, I did a few videos on Cassius King. So what we did in March, because we didn’t know who was going to pay in April. We didn’t know who’s going to pay in may, June, July. Now, as you guys know, with the unemployment benefits going away at the end of July, we were very concerned about August and September rents, but here’s the reality of it.

The majority of our tenants are paying the majority. We put our tenants into three buckets, bucket. Number one are the tenants that are paying rent. And that is the overwhelming majority. Well, over 80%, the second bucket are the tenants that are coming in and they’re actually communicating with us and we put them on a PTP program or a promise to pay program, an actual real agreement that we have between the tenant and us. It’s modified from the actual lease. That part has gone very, very, very well because the last thing we want to do is boot anyone out. That’s the last thing we don’t want to kick. We don’t want to boot anyone out of the home because if we do, then it’s vacant. We’d rather have these people in there because we’ve screened everyone. We know exactly who they are, where work, what they made before they even moved in.

So the last thing we want to do is displace anybody while we’re all going through this massive life correction. And so the third one category, however, is the most difficult. They believe that they don’t have to pay and they’re not communicating with us. And that’s a lot of people. So those are the folks that everyone’s concerned about. And unfortunately, they’re the ones that are making all the noise and all the media is talking about. But the reality is in our portfolio, it’s a really small percentage of people while we were concerned in April, may, June, July, and August, the rents have come in and we had enough to pair mortgages. And as I said before, Cassius King and we, he, as a company has put in gather massive reserves of cash in anticipation of renters, not paying so that if, and when they don’t, then we can pay the mortgage.

And we don’t go into technical default with the lender, even though there is an Avenue called forbearance that we could utilize with our lenders. We never wanted to get into that position. And we always wanted to pay our mortgages. So two things, one, we manage our tenants really tightly. We communicate with all of them, almost all of them are paying. And second, we had enough cash reserves where we never even got close to not paying a mortgage. So Cara asked this question and Carol is one of our premium members on Ken macra.com. And this is a question around Cassius King, and I did a video on this. So Kara, thanks for this question in your newsletter a few months ago, you said Cassius King, do you still feel that way? And why do you feel that way? Since so much of the cash is being printed, Cassius King, because you know, you need cash to be able to cover your expenses.

You need cash to be able to cover your payroll. You need cash to be able to cover your mortgage, all of those things. So yes, I still feel like cash is King. Now the real, the real question behind this question is when is inflation hitting? That’s actually what they’re really asking and is cash trash. Cause that’s what a lot of people are concerned about. Well, the answer is yes, I do believe in the longterm. We’re going to have massive inflation because the money that’s going out to fund businesses and people it’s definitely necessary. It’s definitely helping, but here’s something that’s happening. People are actually saving because there’s a lot of uncertainty in their futures. So a lot of that money that people have gotten they’re actually hoarding right now. So if you look at savings rates, you’re going to see that there are all time highs and so cash in circulation when it actually is used to buy things, that’s, what’s going to create inflation.

And so I do believe that there’s going to be a massive lag. So for us, we’re holding on to cash right now so that we can cover our bills, cover our mortgages and make sure we make our payrolls. But in the long haul, I think this is a great question because I do believe that we’re going to have massive impact [inaudible] and this is exactly why the federal reserve just change their policy on the inflation rate recently, just last week. So be looking for inflation over the longterm, but I don’t think that you’re going to see it in the short term. So my suggestion, you, you is just have cast too. Get through this. Let’s reopen the economy, let’s get things going again and lets everything settle out and then be very careful on how much cash that you have. So this question on the housing market crash came in from miles and miles as a premium member with kid MACRA, council miles.

Thanks for this great question. I really like it. Here we go. If the housing market is going to crash, why does my realtor keep telling me home prices are up and we’ll keep going up over the next few years. So I really like this question. I personally don’t think most realtors are that informed as to what is happening in the economy. And I think that they work largely for commissions and they’re trying to sell you a house. And of course, they’re not going to tell you that something that you’re going to buy is going to go down later. I don’t know if they even have that in vocabulary. They’re always going to tell you it’s going to be going up. So, but real estate always goes up and always goes down. We know this, just look at the cycles over the history right now we have houses have that have risen in most cities to all time highs in some cities it’s not, but in most cities it is.

And right now we’re at over a $304,000 average home price. Now we haven’t seen that since 2008. The reason that I believe that housing prices are up is because of what I’ve already talked about. Numerous times inventory is the lowest it’s ever been since it was ever recorded. Right now there’s only 1.5 million homes on the market. Then there’s barely over three months of inventory in all markets across the country. So this inventory issue or lack of supply is what’s driving prices up, but here’s the thing to watch. And this is why I disagree with your realtor. I believe that everyone, because of the uncertainty did not list their homes. They’re hunkering down. There’s a lot of uncertainty in a lot of households all over the place, both with people that own homes and that are renters. And they’re all trying to figure out what they’re going to do next.

They’re all trying to figure out where they’re going to work. Whether they can pay their rent, whether they can pay their mortgage. In fact, there’s almost 9% delinquent mortgages, almost 4 million people are delinquent right now in their mortgages. So I believe that you’re going to have a massive amount of inventory in the next 12 to 18 months as the eviction policy burns off. And you’re going to have a lot of people moving around and trying to figure out what are they going to want to move next? So that’s going to add a lot of inventory to the market and what that excess inventory is going to do. It’s going to drive prices down and the demand is going to be lower because there’s going to be a lot of financial uncertainty. As we start to see these businesses go out. As we start to see a lot of businesses fail, we’re already seeing it.

We’re already seeing businesses file bankruptcy, big, big names, file bankruptcy. I think when the dust settles, then housing prices are going to be significantly. Lower. Banks are going to own a lot of real estate and there’s going to be a lot of listings and there’s going to be very few people chasing a lot of inventory. That’s why I think over the long haul that prices are going to drop. So this question came in from Tom, one of our premium members@kinmacro.com about what is MC companies doing for this downturn? What are some of the operational things that we’re doing? So, Tom, thanks for this great question. What is the MC companies, which is the company that Ross and I own doing right now to prepare for the downturn? So a few things. One is we talked a lot about cash. And so we told all of our investors that we were going to hold one quarter distribution.

And so while that was a tough decision, we have an entire quarter of distribution that we’re holding and we let everyone know this back in March. We said, we don’t know what we’re going to collect over the next four or five months. And so we held the first quarter, then we’re just now releasing the second quarter and we’re going to hold the third quarter while we see what the fourth is going to have in store for us. Cause we just don’t know. We don’t know whether or not our tenants are going to change their minds and not pay. And we don’t know if we’re going to have some mortgage issues or our bill paying issue. So that’s why we’re holding that money. And so again, cash is King, all of our investors, well over a thousand people, we’re all in favor of exactly that strategy because obviously none of them want us to default on the mortgage and for us to lose the property back to the lender.

So that’s the first thing. The second thing that we did is we, we rolled out a whole bunch of policies and procedures for our employees to make sure that they were all safe, obviously the PPE programs. And there’s a number of other things that we did for our staff. We want to make sure everyone’s safe around all of those things. The other, another thing that we did was I eliminated all marketing and all renovations and all cap backs or capital projects. So as an example, during all of this, the last thing we want to do is renovate an apartment and try to get $200 more per month. So each renovated apartment costs about 15 grand. And so we were doing hundreds of these all the time. For years, we’ve been doing a renovation value add type program. And so you could imagine it’s millions and millions and millions of dollars, but we felt like let’s, don’t do value ads.

Let’s, don’t be pushing rents right now during all this uncertainty. So we eliminated all the cap ex around renovations, but I also did it around everything else. So anything that was health and safety and anything at all, I said, we must do any capital work that was maybe optional, like painting a building or landscaping or a children’s player or a dog park or buying fitness equipment or buying new pool furniture, whatever it might be. All of those things had to go through me. And by the way, those that’s millions and millions of dollars that we spent every year to maintain these properties. So I stopped the renovations and I stopped all that cap ex instead of health and safety. In addition to that, because people weren’t moving around, we eliminated all our marketing costs and that saved us millions and millions of dollars because like every business we’re spending a bunch of money trying to attract new residents.

And so we’re always spending money on the internet and ads and things like that to try to get traffic to the properties so we could keep them full and lease. But during this pandemic people weren’t moving. And so we eliminated all our marketing and advertising and that saved millions of dollars. The last thing that we did is we tried to go virtual immediately and we did, by the end of April, we went virtual on rent collection on maintenance requests and on leasing. And we started to use chat bots and chatbots basically are the same kind of thing. When you call up, let’s say a Schwab or American express, they say, press this button for this, press, this button for that. And you basically could eliminate a lot of in person conversation and actually help the person on the other end align, get to where they need to go quicker.

And so we started doing all these chatbots and also virtual leasing. And we’re rolling that out right now and our occupancy, believe it or not is higher than when we started by 1% for when we started this in March, because of all these little programs that we’ve rolled out. However, our collections are lower, but our occupancy is higher than when the pandemic started, but our collections are lower because obviously people are going through a tough time and they can’t all pay. So those are just some of the things that we’re doing as a company. Great question. So keep those questions coming in. I hope these answers were helpful to you guys and thank you once again for full show notes, check out Ken mcelroy.com. If you enjoyed the episode, then jump on iTunes, subscribe and leave a five star review. Also, if you could check me out at Ken macaroni official on Instagram for daily real estate advice, see you next week.

The Real Estate Crash of 2021

A correction is coming to the real estate market and I expect to see it early next year. Each downturn is very similar to the next. We have high unemployment, and housing prices that are extremely inflated. Yet, people keep asking me, “Ken how can you say it’s going to crash when prices are skyrocketing?! I am going to miss out on the buying opportunity if I keep waiting!” So let me put a few things into perspective for you. This is a supply and demand issue. That is what inflates and deflates prices. Inventory vs demand for housing.

First, let’s discuss supply. You have the supply of properties being lowered for a couple of reasons. Reason One, some people are afraid to move. Either because of COVID itself, or the lack of certainty around their job or income. A lot of people are staying put to wait and see what happens. Reason Two, Banks are providing one year of mortgage forbearance. This means the owner does not have to pay their mortgage for one year, and the balance goes on the back end of the loan. Think about it, If someone is out of work and the bank is now allowing them to live mortgage free for one year (ending in April 2021) that person is most likely going to take the forbearance and hope they return to work within that timeframe. These issues are creating very low supply.

Now let’s discuss demand. Demand is about the same and possibly a bit higher with people trying to get out of cash or relocating from a larger city now that they can work remotely, but these buyers are competing for a limited supply, which is what is elevating prices.

Next year I see this house of cards falling. Banks can’t keep giving forbearance on mortgages and I believe most people will still be out of work. When this happens a supply of homes will flood the market and that is when it will start to correct. To see this in more detail please watch the video below!

The Real Estate Crash of 2021 Explained

How to lease during a pandemic

Join Ken as he speaks with Kelly Johnson, Vice President of marketing at MC Companies as she discusses what her and her team have done to confront that challenges of leasing apartment units during the restrictions caused by the recent health crisis.

Transcript:

(00:00):
Hey everybody. It’s Ken McElroy with MC companies and the real estate strategies and our podcasts. And I’m really excited to have today. Kelly Johnson, let’s pivot a little bit and talk about leasing. So one of the things that did not happen, or people did not move out for, you know, like 60 days some did, but you know, think about what’s happening, we’re on lockdown. So a lot of people just hunkered down in their places. Every state was a little bit different and we have properties in multiple States, but, you know, I was just blown away by the way, guys, I get these emails, I get emails from my onsite folks, you know, that you know, and there’s all these little internal contests that are going on and, and wins that we’re celebrating as individual properties of ours around the country are doing remarkable things. And so how did you pivot? Basically saying, okay, you know, I, how do we rent? How do we rent apartments?

(01:01):
Yeah.

(01:02):
People to do it. And now we don’t. So, you know, let’s talk through that.

(01:07):
Yeah. There were, there were a couple of different fronts that we wanted to address. And the first one was how do we rent virtually? So how can I take a customer’s phone call and rent an apartment to them without ever being face to face. And that was initial, that was in the first 72 hours. And so I did a training call. I got on the phone with all of our leasing teams and we worked through that together because it is a different process. And I did want them to understand everything that we’ve been telling you, not everything, but a lot of what we’ve been telling you to do in the past has to be shifted. So let’s, let’s, let’s just kinda throw that playbook away and figure out together what is going to be a good solution. I’m I like to craft really pretty things.

(01:56):
I want our websites to look good. I want any video that we produced to look good, and all of a sudden I had to open my mind and remember that it’s a time, it’s a time for solutions. It’s not a time for control. It’s not a time for trying to you know, clip anybody’s wings. We had to let people do what they needed to do, which means everybody in the field had to create videos on their own with their phones. They had to do video tours and do that for every single floor plan and do it immediately so that they could start to send those links out to our customer. Then the next thing we did was introduce a virtual tour using an iPad. So we got iPads for every single team and we had to research solutions. So FaceTime is great.

(02:47):
If two people have eye products, eye phones, and an iPad, if you don’t, we need a product that is going to work with everybody. It has to be agnostic. So I found this app Google duo and, you know, going to all these conferences online and you’re trying to absorb as much information as you can. And somebody says, Google duo, it’s agnostic. Boom, we’re going to use that. So they’re gonna have another meeting guys. This is horrible. And and figure out how to take that customer now with my iPad and take them through the apartment so that I’m still communicating with them virtually. And I can show them the view. I can show them where they would park. I can show them their closet space, their kitchen. I can, I can do a tour that way. So that was our very first solution.

(03:29):
And one of the great, I there’s so many great outcomes. I mean, this was a terrible experience. I know for a lot of people, but if we don’t look for those silver linings, we don’t look for those things that are really great. I think we missed opportunities. And so for me one, one of many would be the talent that we have out there. You know, some of our team members put these videos together and they sent them to me and I just, I was at all and I was so proud and, and thought, you know, this is really cool that these people who worked so hard for us and maybe are thousands of miles away, but yet now I’m fully connected because I got to see a skillset that I didn’t even know they had. And so that was our first, that was our first step out of hell. Basically was how do we create these videos? How do we teach people how to rent in that way? And so that was probably the first until things started to open up. That was our first step.

(04:24):
Yeah. That was just incredible. To me. Let’s talk a little bit about the the chat bots, because that was another big piece that you pioneered for our company. And it’s interesting. I got a, I got a tax from the company that, you know, I need you guys to wrap your head around this. We went from in person phone calls, you know, and, and recording them all, which of course we’re still doing, but they share with me in one month, Kelly, that we handled 4,000, 406 communications of which we converted 1,115 prospects to 450 appointments. So we had 450 appointments in one month through AI. And then, you know, I saw your numbers because we have meetings every Tuesday. You, you rented 93 apartments. Like I just, it just, I mean, I floored me when I saw that. I’m like, how did we rent 93 apartments in one week? You know, without people you know, it’s, it’s happening right now. And I think that’s what people want to know is like, how, how are we pulling this off?

(05:42):
I think that first of all, the software that we’re using or are using it’s called lease talks and they have, I’ve been partnering with Lee sock for about three years. So I, I use them in the, the position that I was in prior to coming to MC. And so I already knew that they were really solid company and we use them to grade our phone calls into root chord, all of our phone calls. And then in 2019, in the late part of 19, we rolled out their CRM customer relation management program. And what that does is it captures every single lead. So every phone call, every text, every email that we get from our website goes into that lead system. And I can’t tell you how many times. So, you know, we rolled this out to our organization and anytime you put new software out into, you know, the, the, your, your circle, there’s going to be some bumps and bruises.

(06:38):
Not everybody is all that excited about learning a new software and, and not everything works perfectly. So you’re always kind of working on this adoption. And it’s funny because when COVID hit overnight, everyone said, if it hadn’t been for that CRM, we’d be in a lot of trouble. Because what that CRM did was it captured, it made sure that we didn’t lose any leads, not a one, not a phone call that a text message, not an email, because they all got compiled into that CRM and what it made it, it made it possible for people to work remotely. So in certain cities where they were forced to have to split the teams, because we knew it was the safe thing to do. We were able to put somebody remotely working on that CRM. So we were still refuge to our customers, even if a leasing person was at home.

(07:29):
So they could still, you know, get all those leads. It also captures all of your residents. So any anybody touching the site is going to go into that CRM. So that was the first thing that really was like, illuminating, thank goodness we had it. And thank goodness people realize the value in that CRM. And then I got a call from lease Hawk when we were going through all of this. And I, you know, my hair is on fire. I don’t, I can’t even, you know, the, the list of things, but notepads everywhere. And my, you know, everybody was going through that and I got a call from them because they said, Hey, would you be willing to roll this H product? So it’s an AI product that answers all of your missed calls. So if, if the team isn’t able to get to a call, this AI product, ACE will answer the call and they can answer a lot of basically seeing questions.

(08:25):
It’s a product that they have been working on for awhile, but they they’ve kind of crossed over the bridge. And, and this product is really, really powerful now. And along with that AI answering service, they have a chat bot. So we were able to implement that chat bot right on our website. So now our customers are going to the website and right away, they have access to somebody who can answer questions 24 seven and book a virtual tour. So not only does the phone call have the ability and that’s their goal, they’re just like a salesperson funnel, funnel, funnel, funnel, funnel, let’s get a tour because that’s the ultimate outcome that you want from a sales call. So that was, you know, just like the stats you read off, you know, it was a lot of work to get that set up.

(09:13):
It’s not an easy thing to do. There are a lot of knits and gnats that go into getting that set up. But as soon as it goes live, you realize, okay, now we’re not going to miss anything. And I think that that led to us recovering so quickly, think of our doors, aren’t open yet. Our clubhouses aren’t open. We’re still you know, behaving the same way in terms of being in lockdown, kind of we’re open, but our doors aren’t. And for us to go back to pre COVID traffic numbers this quickly it just, it tells you something, you know, it tells you that the world is different. Our customer behavior is different. The resources that we’re using are different. And we need to pay close attention to that. We need to think about what part of this we’re going to take forward because it’s working. Yeah.

(10:02):
Congratulations. I know that you, you your entire team took a lot of stress and anxiety and fear out of our company because we were heading into this at the end of March, not knowing if we were going to click April rent, not know if we were going to collect may rent thinking that our occupancy and our leasing was done, you know, until the lockdown got lifted and all of those things were handled as, you know, a number of ways. And so for, for those of you you know, obviously one, you need a phenomenal team to, you need to embrace technology. And and, and you, and you, I think you’ve said this a bunch, you’ve got to keep an open mind because things are different, you know, maybe, maybe listen to your kids, you know, is there an easier way, is there a better way, right.

(10:58):
Yeah. Right. Absolutely. And, and don’t be afraid of it. I think that’s, you know, it was personally for me, because I have been doing this for a long time. And I have some pretty you know, certain thoughts about the way things should be, because I’ve just been doing it a long time and like problem, problem, cause solution problem, cost solution. And for me to be thrown into this environment you know, I’ve talked to a lot of my peers as I did. We all did through this entire experience. I called a lot of my marketing peers and fears that, that I’ve known all through my career. And I’m fascinated by how many of them are going to go right back to what they did before. I I’m, I, to me, that’s fascinating that you would take this opportunity, this gift to change and not embrace it. I, I know, I think it’s,

(11:54):
That’s interesting. That’s a, that’s an entire podcast. Do we move forward or do we go back to our old habits, right.

(12:06):
Yeah. I think that moving forward, if you think about it, and you think about the AI that we’ve leveraged and the other, the other applications that are out there, I’m just scratching. I’m doing a new demo every day. I’m talking to a new service provider every day, because I’m trying to figure out, you know, are they really a niche market? Do they have something that I can’t get somewhere else? Did they have something I can’t replicate for less money? Do they really solve as many problems as they think they solve and are these technologies overlapping each other? So you know, is there a one stop solution because I feel like we’re crazy not to, well crazy not to take this new customer behavior and let it be part of our future. You know, just from a purely from a staffing perspective, you know, do you really need four people in an office? If you can leverage some of this technology and maybe do, you know, central leasing centers, you know, as you know, we, we were early adopters in some of that. And I think we paused it because we didn’t have all of the right resources and, you know, we’ve, the industry has evolved. The technology has evolved, and now we’ve been given this opportunity to, to grab that Apple again and figure out, okay, what does 2021 look like? What does 2022 look like? And how can we get flicker in, in doing what we do.

(13:38):
Right, right. It’s well, all I can say is thank you and congratulations for a job. Well done. All right. We’ll see you soon.

(13:47):
Bye bye. Thank you. Bye.

Fear of Missing Out….

I have been seeing this a lot lately on the private forum that I host each week. Click here to join. People so afraid of missing their opportunity to buy, that they are looking to buy right now when prices have went down by a few thousand dollars. I keep trying to explain we are in month three of a national shutdown. People are still getting federal and state unemployment, and businesses still have hope they can rebound from this. In other words, this is just the very beginning. Very few people have felt the economic pain yet, and until that happens the market won’t even begin to significantly decline.

As my motto of late has been “Don’t catch a falling knife.” Essentially meaning don’t buy while prices are still going down. Even though I say that often, I still get people nervously asking, “When will I know the right time to buy?” Everyone is so concerned they are going to miss something. It’s as though they think they have a thirty day window to get a good deal once the time is right.

I don’t know how to best explain this except by saying, “I never try and time the height of the market and I certainly don’t time the market low.” I can promise you this, if you are patient you won’t “miss out.” The last recession in 2008 real estate prices went down for years before they hit the bottom in 2011. That was three years of falling prices. That is what I would have called the “falling knife period.” After 2011 they slowly climbed back up, but even if you bought in 2012, 2013, even 2014 you probably got a really good deal.

Market bubbles deflate slowly, and they rise back up slowly after their decline. So don’t feel the pressure or rush to buy. Don’t have fear of missing out. You will have a big window to buy when the time is right. I also will let you know my thoughts along the way as the market corrects over the next few months or even years.

Talk to you soon,

Ken

2020 Moving Forward Through Uncertainty

Join Ken as he talks with Blair Singer about how he is approaching the uncertainty going forward.

To learn more about Ken visit: https://kenmcelroy.com/membership-registration/

To learn more about Blair visit his website at: https://blairsinger.com

Episode Transcript:

Ken McElroy (00:01):
Welcome to the real estate strategies podcast. I’m Ken McElroy and I’m here to give you creative ideas on how you can get started or continue your journey in real estate. Each week we will bring you inspiring and informative conversations with successful people and their path to obtaining or investing in real estate. Enjoy the episode.

Hey everybody. It’s Ken. Hey, look, we’re stopped in the office. My good friend, Blair singer. Hey Blaire. Good to see you, man. Hey, not too close, not too close. By the way. Check this out. Social distancing. We’re practicing it. Don’t touch that. So, uh, we are making sure that we’re, uh, we keep our distances, but, uh, Blair, uh, texted me this morning and he’s actually working on a deal down the road and I said, Hey, why don’t you come by? I’m at the office. Uh, I’m actually an investor in that deal. So we haven’t talked about it yet, but, uh, I would imagine it’s going to be a very interesting discussion with what’s going on with everything that’s happening right now. So, um, so first of all, uh, you know, Blair obviously owns properties. He’s an investor. He’s got cash flowing properties. He’s got lots of, lots of, lots of books.
He, he trains all over the world. He actually helped me significantly, uh, do presentations from stage back when I first started with rich dad 20 some years ago, I remember we were in New York and I remember I was scared to death. This is how Robert Kiyosaki does things by the way. He’s like, you remember that you’re up. Yeah. He’s like, Hey, come on, come to New York. I fly to New York and I’m a real estate guy and I’m, and there’s 4,500 people at this place in New York. And he goes, you’re up. So I started, walked up on stage and did my first talk in front of a somewhere over 4,000 people. And um, you know, I’m sure I fumbled through it horribly. And uh, but I, afterwards Blair grabbed me, he said, I see, I’ve just figured out, you know, how you can make your presentation even better. Basically what you did. And he broke it up into four or five things and it was kind of my launch to be able to speak. And, and present and, and all that. And, and Blair does that internationally, right. All over the world, all over the world. So blur real quickly for those people that don’t know you, once you give them a 32nd commercial.

Blair Singer (02:24):
Yeah, sure. No problem. Yeah. And cause that’s exactly what I, one of the things that I do, I’ve worked with entrepreneurs all over the world for the last 15 years, helping them increase their cash flow through sales and pull their teams together and create, get the message out to the world. That’s what we were working on is, you know, you get the ability to present, to present your dream, your, your mission, your product, your service to the world. So rather than going one on one, go one to many, and right now in this environment, the ability to go one to many is critical. So we’ve been doing that, you know, over 15 countries around them.

Ken McElroy (03:00):
I know. It’s been so fun, honestly, and I’ve learned so much from you. Um, so first of all, thanks, uh, literally, uh, guys this morning I said, Hey, you want to come in and, and um, and do something with us? He said, absolutely. Um, because usually you’re traveling a lot. I travel now. Yeah, I know. I know. Usually you’re all over the world and hopefully you quarantine yourself cause I don’t know. Where’d you come back from last? Well, actually, where was I last? I was actually in Germany last I was in Germany and it was there and then came back to Ohio to be with my family and then back here and then everything just kind of locked down. So we’re holding steady. So I know you have a lot of clients all over the world. Um, what are we, you know, everybody, you hear a lot, a lot of stuff. We watch a lot of stuff locally. What’s happening? What are people saying around the world? Well, you know, people that weren’t afraid got afraid. People that, that were afraid are not afraid anymore. It just depends where you talk to you. We have clients in Taiwan and they’re like, what? What problem? Life is normal back here in Taiwan and in Thailand and places like that. You have other places. We’re all like in Italy where we ha we have custom clients, people, members of my team that had been locked up for six weeks. You can’t get out of your house. You know, in Italy they got those big problems. But the one thing that that is true with everybody that we work with is that clear need. You got to pivot right now. If you’re not pivoting in your business and your messaging, who you’re talking to, even possibly who your customer is, you’re in bed, you can be in very big trouble. Or you could be making the first step into a giant new market for yourself either way. Right? Well, right. Some people, this is a clean slate time. Totally peop like people slates are getting cleaned now. They don’t want them cleaned. They’re getting cleaned. So let’s talk about pivot. I love that word. So when you talk to somebody about it’s time to pivot, what do you mean? Well, I think you’ve got to pivot from, from a sales person. I was talking about income. Okay. From an income perspective, you’ve got to pivot. What’s the message you put out to your customers? Is it going to, is it the same message today that it was two weeks ago? Because their needs are different. If you look at Maslow’s hierarchy right at the top, you want to be their best at that. Now they’re people, they’re worried about survival, they’re worried about security. So how do you take your whatever you’re offering and put it in terms that give them some sense of ease along the lines that make sense to them. So it’s part of it’s pivoting your message. It can also be pivoting your product or your service, your offering if you were offering. Um, like for us, we do a lot of work with teaching people to be teachers, leaders and trainers over the last five years. Our roots are in team and sales development, right? So we are shifting very much heavily back to S to helping people generate income. How do you crisis proof your sales team? I know, I’ll tell you a funny story. Um, true story. My trainer who I love, I’ve been training with this guy for four years. He’s in his fifties it’s done Ironman, all that kind of stuff. And he’s a great trainer. But I’ve been telling him for years, you know, I’m like, Hey, like you, you gotta like, cause he loves photography too. I go, you gotta go, he’s not on social media. Okay, think about this. And he’s like, ah, I go dude, you have to like, you’re a trainer, you’re not on social media. So I said, he’s like, nah, I don’t need it. You know, times are good, right? He’s got lots of clients, he’s busy, he’s, you know, he’s putting cash in the bank and you know, he’s traveling and you know, and he’s in great shape and all those kinds of things. So I saw him yesterday because all the gyms are closed in Arizona. So I said, Hey, can you come to my house? We’ll just work out at my house. He’s like, done. So yesterday he goes, I’m thinking about going on social media and I’m just like, are you kidding me? Like, and he’s like, yeah, cause I think then I can start to do short videos on training. I’m like, duh. You know what I mean? Like everybody has these resistance points and um, you know, his, and they all come during crisis. So I said, what are you doing? He’s like, I’m working at ACE hardware, what he’s working on because a lot of his clients, because training through a lot of people’s discretionary, you know, it’s 85 bucks an hour, not everybody has $85 an hour. And, and so he picked up a part time job at ACE hardware. And so then he told me this story, he’s like, there’s a gym that opened up next door as a franchise. And the woman came in and she was buying some things to put, um, you know, to put it in her, in the bathroom, like towel bars and things like that because she had just bought this franchise as a gym.

Ken McElroy (07:42):
And then of course, you know, the governor said, all gyms are closed. So she bought it. I put all his money in there, has this lump, and he’s telling me the story. And I’m like, are you like, this is exactly why I’ve been telling you to, you know, to build this internet presence, people know you need a personal brand and this is, you talk a lot about personal brand and this is a guy that does not have a personal brand. You know, he believes that neck, you know, tomorrow is going to be as good as yesterday. I don’t know about you Blair, but I’ve been through a lot of corrections. He, you know, and he’s not positioned to pivot. He’s now starting at zero. He’s not even online. Right. I know, I understand it. You know we S I see it a lot. It is a part of it.

Ken McElroy (08:23):
We, like you said, we’re having to pivot a lot too. And it, what happens is Mac Newton has a great expression. He told me, he goes, this is why and I love it. He goes, crisis is change trying to happen. That’s a good one, man. That’s a re that’s, that’s a rideable. One of these crisis has changed trying to happen. He goes, so what happens is you always getting invitations to change, but you don’t, with your health, with your finances, with your business, all that stuff, until you get to a point of crisis, like your body gives or your health

Blair Singer (08:56):
gives out, your finances give out. Now you better fricking change because, but now you’re in a crisis, which is much tougher because your emotions high and your intelligence is low and you don’t think clearly

Ken McElroy (09:08):
point. So I know it’s so horrible time. You know what I mean? I mean there’s some, but there are solutions, there are solutions and, and people are in pain, you know, financially. And there’s a lot happening. I mean, we’re having to retract on a number of things. I know you are too, right? Like we’re here talking, but the truth is we have our own fires going on. Plenty. Plenty of them. That’s right. And, and you know, there’s a number of them. And so I don’t want you to think that, you know, it’s all good all the time. It’s not, you know, but I will tell you, we both put things in place to make this a little softer. Right? Right. So when you’re talking, cause we were just talking before this, he’s, you’ve got one guy, a Alfredo who’s got 400,000 followers. You got another guy that’s got 2 million followers.

Ken McElroy (09:58):
So this is the time guys, this is a time to monetize that. And these are followers. Guys want the, you know, followers like Kiyosaki. I don’t know what he’s got now. Few million Facebook followers, right? He’s hunkering down and he said, you know, I talked to him all the time. I know you do almost every day. And he’s like, this is what I’ve been talking about. You know, it’s horrible to see people go through this. But this is exactly what I was talking about and this is why we have financial education. This is why we, we’d go for cashflow, not capital gains. This is why we do personal development. This is why we try to understand that this is why we try to understand taxes all of because of what’s happening right now. Right? It’s a great time to educate.

Blair Singer (10:44):
Yeah, well you have to get educated now because nature of the marketplace, the economies forcing you to do it. Um, and I, and I think, and there are things you can do or things you can do and I think that if you’re an entrepreneur right now, um, if you’ve got a team, it’s time to pull your team together. Okay? If you haven’t done that, you pull them together. And then the second thing is if you’re not, if you’re not selling, don’t stop selling. Now you’ve got to sell more than ever right now. Don’t cut marketing budgets that you’d be marketing, creating more exposure. Now if you are, if you’re used to face to face selling, you better learn how to work on a camera right now. Pull out your phone as are working on it so you, and you don’t have to be great, but you just have to make that change now because here’s the thing, some people will do nothing. They’ll just try to hunt her down and weather this whole thing. We’ll live off their reserves or do whatever. And that’s, and that’s okay. Now, somewhere down the road, smoke will clear, right? There’s other people, they’re gonna jump right on this thing. And in, even if what you’re doing is not necessarily the right thing right now, but you’re doing, but you’re doing the right things, but you’re not doing them perfectly yet, by the time the smoke clears, you’re gonna be so freaking far ahead

Ken McElroy (11:54):
of everybody else that was doing nothing. That this is the greatest opportunity in the world to get ahead in business right now. I know, I was talking to Curtis, you know, uh, today and um, you know, he’s like, yeah, I lost 20 million bucks in Oh eight. He goes, I literally spoke to him today. I go, yeah, I know there’s a lot of people lost a lot of money in 2008. He goes, you know what it was. I go out and he goes, practice. He goes, it’s practice for what I’m about ready to go through. Right. Because it’s true. You don’t really learn much when times are good. I mean, that’s been my experience. So, you know, when, when everybody’s making money, what are they doing? They’re buying cars or buying houses, they’re, you know, they’re doing it. They’re doing all these things that are access related but now is when everybody really learns the lessons.

Ken McElroy (12:41):
That’s right. That’s, and again that’s what I’m saying is that I work with a lot of entrepreneurs. I got a big team, we’ve got about in terms of trainers, we’ve got about 450 of them deployed around the world. I mean they’re their own business guys, they’re entrepreneurs, but they are all part of the same group and you know, working with them and pulling them together and just cross Pawnee, well this is working for you, that what’s working for you, what’s working for you and people going, I tried that to do that joint venture. Let me share your posts. And if you’ve got a network, it’s probably even if you got nothing right now, my suggestion is you jump on a network, jump on a net, become part of one part of something. Yeah. Because being alone is two problems. First of all, you gotta, you gotta lose out.

Ken McElroy (13:23):
Second thing, it’s not good for your mental health. The first sign of depression is isolation. So if you isolate yourself and say, well, I’m not going to, you know, you’re not doing your, you’re not doing your little voice and your mindset any good at all. And we, I’ve seen a lot of that right now. So if nothing else, pull your team together, creates the connection, creates energy, the energy creates confidence, et cetera, et cetera. So kind of wants walk through like, you know, there’s people, you know, going through different stages at different times, you know what I mean? What the first stage is typically shock, denial, right? Right. I mean, and so the question is, is how resilient are you? Right, right. Yeah. I mean, obviously we’re all in shock and denial, but then you have to, you have to just dust yourself off. He goes, Nope.

Ken McElroy (14:15):
You know, no one’s watching. No one cares. You know, everybody’s pretty selfish, right? So nobody’s like judging you. Nobody cares. Nobody cares. They care about themselves and what’s happening next. You know, there’s no one watching. That’s right. You know what I mean? This is your time. This is your time to do something for yourself and your family. You know, and, and it’s interesting you say that too, is that I, Robert was at work, I was at Robert’s house the other day and we’re talking about sales and he goes, okay, so if you’re going to help people with sales, what is it all boiled down to? What’s the big, what is, you know, you know how it gets in your face?

Blair Singer (14:52):
What’s the thing? No, it’s not that. No, it’s not that he’s yelling at me or the yell. Okay, so what do you want? He goes, what is it? I go, it’s, it’s, it’s, it’s, it’s fucking discipline. He goes, yeah, discipline. And it just popped out. I mean, he’s brilliant that way. Right? And so, and so it’s like, he goes, explain to me, discipline. I go, well, in my life and in your life, we, all of our lives, there’s something that you’re probably very disciplined in something that you’re going to do. Cause you know, it’s the right thing. It could be your health can be working for me. It’s health, it’s working out. You know, it’s honing my personal, my personal skills and I’m really, I’m really diligent about that and studying and those things. And so then out of the question is right now, if you’re going to generate income, you got to take that discipline and that area of your life and now move it to this area of the life because that’s what’s going to keep you going.

Blair Singer (15:45):
I mean that’s what’s true for me. It’s kind of like what Mac dude said. Totally. Totally. So I’m working out with him online, right? So he’s doing everything online and he’s are the workouts now online are harder than what? I’m in his freaking studio. I’m going, he goes, he yells at me, he goes, Hey, what’s the temperature in your room? Cause he always turns it up really hot. Look, and I could lie to him, but I got to, it goes 75 turn it up to 90 right? So he’s putting, so he’s going through this workout and I’m dripping wet and I’m thinking to myself, this is what I need right now. Me, I’m not saying you, I’m saying me because it reminds me that I can do this. I can do that. I can be disciplined here, I can be disciplined there. We all know that you’re, you know, you’re the leader in that area.

Blair Singer (16:32):
How many times have you climbed Kilimanjaro? Uh, 11, 11 times. So, okay. Blair is a rockstar when it comes to health and some of you are, and some of you are not. Right? Right. And so the question is, what’s your financial health exactly? What’s your spiritual health? What’s your relationship? You know, everybody focuses on their physical health, you know, which is super important, right? Yeah. It’s a balance. Yeah. And, and you know, and different parts of your life in different times of your life, you’re gonna be called upon with a crisis or a challenge. And what I got from Mac is the only reason it’s a crisis because you kick the can down the road too long. And you and I have had this discussion more than once when you’ve been in my face and you probably just heard this guy say, I told you.

Blair Singer (17:17):
Right? But, but we all know that, and you know it at the time that you make the decision, you know, at the time that you make the wrong decision that, that you should’ve done something else. Well now it’s all on the table and now we ought to just fricking deal with it. It’s the best of times. I tell you what this time is, it’s your financial report card. That’s what it is. Totally. Yeah. Period. Yeah. So what’s your GPA? Right, right. That’s it. So I remember Robert telling me, he’s like, yeah, Blair’s working so hard, the gym and I’m

Ken McElroy (17:50):
just riding my little bike. He’s watching you run live.

Blair Singer (17:54):
Yeah. Yeah. He goes, cause he goes, uh, well what he say? He said, I’m going to be re, I’m going to always be richer than you. And I go, yeah, well I’m going to live longer than you. Yeah. So he got this back and forth and right.

Ken McElroy (18:07):
So we don’t want to make light of what’s happening guys, but I got to tell you it’s, it’s actually a healthy release. I haven’t actually talked to Blair since all this happened. And um, you know, we have friends, family businesses, all in trouble. Yeah, we do. Right. And um, you know, it’s um, everybody’s just trying to come together and learn.

Blair Singer (18:27):
Right? That’s right. And, and your education is more important than ever. Don’t sacrifice your education because right now the universe, the marketplace, your F your financial statement is talking to you. What are a couple things people can do today? Well, if you’ve got a business, let’s go there. I mean, if you got to, if you’ve got, well, no, let’s go personal first. Personally, you got to keep your little voice in order. Okay. Because it can go pretty crazy pretty quick. Uh, that’s why one of the things we’ve been doing for years is we have a Mo, if you don’t have a morning routine, you should have a morning routine. Right. Uh, how Al rod I believe was his name, wrote the book miracle morning book. Yeah. Get that and follow that system. I follow it every single morning

Ken McElroy (19:14):
without fail is important guys. You know, cause I, I now, you know, I get up, let my dogs out, I meditate. You know, I spend time on myself, I spend time on my company. I have a routine that I do every morning. I don’t, before I get on email, before I get on tax, before I do anything, I knocked this out. It’s super important to get set your mind for the day.

Blair Singer (19:35):
That’s right. Because if you don’t, this whole crisis will dictate every action

Ken McElroy (19:40):
you’ll get up, you’ll get right on the internet and you’ll start going right into panic and fear and anxiety and stress.

Blair Singer (19:45):
That’s right. So you’d have that time, you know, for me it could take anywhere from 30 minutes to an hour and a half, depending upon, say with me how I go through it and I meditate for five minutes as honestly sometimes I meditate longer. Right, exactly. And you know, and then you get a workout somewhere in there, you know, I’ve got to get physical with this thing. Get your cause, your, your physical, mental, emotional and spiritual. And they’re all hooked together. You change one, you change them all. So that’s, and then I have a routine at the end of the day, I sit down and I do a gratitude exercise. Part of my gratitude exercise at the end of the day, list all your wins for the day. No matter how little they are, all those wins, go to bed. Okay? So that’s the first thing that I would do. Really important. Guys, you got away, I want to put his point out, cause I’ve known you a long time.

Ken McElroy (20:32):
All of those things that you just mentioned probably took you 10 years to implement, right? I mean they sound like, Oh I’m just going to go follow this checklist. No, no. Something came painfully slow. Then it was adopted. Then the next thing

Blair Singer (20:48):
was adopted a year later, two years later. Right. You know, then we let the children read the book, what, three or four years ago, try this type of meditation or that type of meditation guys, you know, don’t think that we’re just following some checklists and all of a sudden their lives are better. I mean these are, you know, these are trial and error. That’s right. Right. That’s right. And new. The good thing about it is because we’re a team and we’re friends, he said, can’t go is why try this, check it out. Go. Yeah, I’ll try that. Check that out. I hate you. And so we vet the resources together. Yeah, check out this video. Robert probably sends me almost every day a YouTube video. I say this is a book I’m reading. You know like we have a network and this is the network we’re talking about.

Blair Singer (21:30):
You know your lifeline outside of your house. That’s right. Right. You need it guys. I’ll wake up in the morning and some, and I’ll have the rich dad advisors for example. We always have a chain of something going on. Sometimes it’s a lot of smart ass stuff, which is always good and makes you laugh. But a lot of times it’s super educational because everybody looks at the world a little bit differently. Right, exactly. And what’s the business one? So the business one is two is two things. First of all, you got to create it. Well, first of all, if you’ve got a team, pull your team together because the cause, there’s synergy there, or there’s dysfunction there, one of the two. And right now you need synergy. You need to bring them together, get them together, get them to cross pollinate resources, how they’re feeling, what’s going on, and give them tasks to do.

Blair Singer (22:13):
Give them meaningful things to do. Don’t let them sit around. I heard somebody say a real good quote the other day, go fear lives in stagnant water. That’s not a good one. That is, yeah, this is the time for leadership. Yeah, this is it. And right now you’re finding the people that that can lead. And you know, so that’s number one. Pull your team together. Number two is you must freaking sell. Don’t stop selling. And you, and on top of that is you gotta get your team to sell. We’ve always talked about this for years and years. Everybody on the team must sell. Well, now everybody’s got to sell. I mean, in my office, everybody’s got a sales quota every day. A number of calls I gotta make. Even people, you know, customer service, even my bookkeeper, she, okay, I’ll just call these people, check in with them.

Blair Singer (22:58):
How are they doing? I was there any way we can help them. How can we support them? You’ve got to keep that flowing out there. Um, because this is a, you know, we talk, we call them touch points, right? Yeah. How many times we’re not trying to, you know, you’re not necessarily trying to sell them on anything. You’re trying to keep the relationship. That’s right. Let them know your existing clients right now guys are gold. Exactly right. Goal. Yeah. Some of the other thing is, is that sometimes when you’re selling in these days, you’re not just selling your coaching. You’re actually coaching your clients. You know, cause some of them, they’re sitting on the edge, right? They’re like, well, I don’t know what we going to do. So you’re not just selling your product or your service to them. You’re actually coaching them. So how’s it going on for you?

Blair Singer (23:42):
How can I support you? What’s going on here? I saw this video over here. Can I send it to you? Will that help you? How can I support you? How can I support you? That’s it. You know, and I even have people that go, well, I don’t have anything to sell. Okay, here’s, I’m going to give you one other thing to do. If you don’t have anything to sell, go out and help somebody. Just help somebody serve some, find something that people want and need and help them get it, which is basically all sales is anyway, and there’s a tremendous amount of gratitude around.

Ken McElroy (24:09):
What a great episode. I hope you learn something new from today’s guest. For full show notes, check out Ken macra.com if you enjoyed the episode, then jump on iTunes, subscribe and leave a five star review. Also, if you can check me out at Ken McElroy official on Instagram for daily real estate advice. See you next week.

4 Things that your kids need to understand about money

When it comes to our children, we try to do everything that we can to prepare them for the future that we want them to have and most often the future that they want as well. There are four things that your child needs to understand about money and financial wellness. As a parent, it is important that you take the time to go over these four things and help them plan for a solid financial foundation in the future. When you take the time to do this, you are showing your child how to manage their financial wellness at a young age.

Asset and Liabilities

The first thing that you want to go over with them is the difference between an asset and a liability. Assets will put money in their pockets while liabilities will take money out. The more assets that someone has, the better prepared they are when anything takes a hit at their financial foundation. This is a reality that the world is seeing in full color right now with the current pandemic going on. When you teach your child to maintain as many assets as they can you are teaching them the importance of being prepared for whatever it is that the future might bring.

Cashflow and capital gains

The next thing that you want to go over is the difference between cashflow and capital gains. When you invest with the ideal of capital gains, you have no actual control over whether or not things go up or down. When you invest with the purpose of maintaining and building cash flow, you have the benefit of having a long term asset in place that you can have bringing you in funds on a regular basis.

Good debt and bad debt

You also want to discuss with them the difference between good debt and bad debt. Bad debt would fall under things like credit cards, vacations or other mundane things you do not necessarily need. Good debt is found in examples such as rental properties where the tenant would pay your debt for you and grow into long term cash flow. Most good debt like the provision of housing for others can also acquire you some tax breaks as well.

Financial self education

Make sure that your children understand that they need to have their own financial education as well. Having wealth and not understanding that wealth is useless at its core. You never want them to be in a position where they have to rely on other people in order to figure out what they need to do with their own money. When they have the knowledge to know what is best to do with their money, then they can move forward to having a better financial future.

Conclusion

Making sure that your children have a solid foundation for their financial future is important. It is your responsibility to give your best shot at a solid foundation in the future. Take the time to teach your children about financial wellness and they will forever be grateful for it. They will appreciate that you took the time to prepare them for their future.

Options for Individuals Impacted by Covid-19

Join Ken McElroy and Eric Freeman from BeachFleischman as the talk through some options for individuals that have been impacted by Covid-19.

You can learn more about Eric at his firm’s website at https://BeachFleischman.com

You can also download a useful resource created by Ken to help work through your financial stress test. You can find the resource at: https://www.kenmcelroy.com/stresstest/

Episode Transcript:

Eric Freeman (00:00):
Thank you. Happy to be back and get more information out there.

Ken McElroy (00:03):
Yeah, there’s a lot of confusion right now. And so as you guys know, Eric’s a CPA. He has his master’s in accounting, uh, his firm Beach Fleischman does our tax returns. Most of them. We have what over a hundred. I think that you do right? Or keep us busy. Yeah. Yeah. So our firm, uh, we do, we do about a hundred tax returns with all our different real estate deals and our land deals and all that kind of stuff. And we meet with them quarterly. And by the way, if you guys don’t do this, you really should we meet with Eric face to face? Well, maybe not now, but quarterly. And we go over a tax planning and it’s a, you know, it’s a, it’s a very important day. We make a lot of tax moves that, um, um, but honestly, I, you know, I would never know about, you know, an Eric spends his time, you know, educating his clients and, and, and making those moves. But for today, Eric, what I wanted to talk about was this big confusion. You know, over rent or mortgages and like do do people need to pay their rent and their mortgages because you know, as you know, we have 7,000 residents and they, you know, living in an all our apartments and I’ve been talking to all my friends, you know that on commercial and they will, they will offer see on retail they are industrial and, and there’s all this confusion on the mortgage side and on the red side. Right,

Eric Freeman (01:26):
right. Yeah, it’s a great, it’s a great question because there’s so much misinformation potentially going on out there. So first it’s important to understand that a lot of what’s coming out as far as the rent and mortgages, the purpose is to assist people that can’t otherwise make their payments because of a Covid-19 issue. Whether it was that you’ve actually been tested positive for Covid-19 or you’ve been told to self quarantine because of being in contact with someone with Covid-19 or maybe you’ve lost your job or you’ve received reduced hours because of the business that you work for. Maybe it’s a restaurant or another retail type business that can’t operate right now due to, um, the various government restrictions going on. So that’s the purpose of these various mortgage and, um, rent forbearances. So the purpose is not to just like blanketly not pay because ultimately at the end of the day, we have to keep as much of the economy going as possible. Um, so first, you know, I’ll touch on the, the rent, that’s a big one. Um, rent, if you’ve been affected, the governor came out with an executive order, I believe it was last week, um, for residential, um, tenants that if you’re affected by coven 19, then you can request from your landlord, uh, a rent forbearance. And that mean that you’ve never pay the rent. It means that you can put off and defer that rent payment to give you enough time to get on your feet.

Ken McElroy (03:09):
And that’s, that’s just an Arizona, by the way. I mean, I know that some of these, it’s confusing because there’s different things happening in each state, right?

Eric Freeman (03:17):
Yes, exactly. And they’re all kind of happening. Um, it’s changing daily. And so even within our state, something may come out one day and then the next day it completely changes. As, for example, the list of essential businesses. We had a list originally and then, and then it came out and now we’ve, we’re closing the hair salon and then everything else. So it’s hard to keep up with everything that’s going on. But in general, if you’re still working, you’re still getting an income, you’re able to work from home. Um, then these, those types of rent, forbearance and, and the mortgage is not meant to apply to those types of situations.

Ken McElroy (03:56):
What’s interesting is we just had it, you know, every, every Tuesday, which is today, we have an hour and a half meeting with our whole leadership team. And, um, our COO, you know, is basically reporting on a daily basis, you know, April 1st rent collection. You know, cause we honestly, we were like, Oh, we don’t know and this all kinda hit everyone in March. We’re thinking, okay, well, March is paid, but you know, we don’t know is, you know, who’s going to pay in April? And, and the misinformation out there that we’re hearing at the property level is high. You know, some people are basically saying, well, I just heard that I don’t have to pay it off. You know, that’s their position. Right,

Eric Freeman (04:33):
right. Yeah, it’s very difficult. And I think as we progress, I mean, April 1st was scary, but May 1st is probably going to be [inaudible].

Ken McElroy (04:45):
Yeah. That’s actually what we’re mostly concerned with. What’s interesting, I’ll just give you a number. We collected 85% already and it’s April 6th today. And um, you know, rents were due between the first and the third. And, and so we felt very good about that. You know, we have some properties that are very delinquent and some that are, it’s in fact, Ross was telling me today though, our all our senior properties, you know, we have no delinquency. And I said, well, why do you think that is? He goes, well, the casinos are closed. And I don’t know if that’s the case or not, but, you know, it was an interesting spin on it. But, um, you know, it’s, it doesn’t, it’s obviously this is a national issue. This is an issue that affects a lot of people. And so it doesn’t really matter, you know, how much you make or where you worked or anything like that.

Ken McElroy (05:35):
A lot of this is it’s affecting everyone. And, and so the, from a landlord standpoint, you know, we have a, um, a plan that all people do gotta do is sit down and talk to us and then we work with them on a, you know, on a, on a payment plan. A lot of people have been doing that. Um, but very, very few have come in and say, Oh, we don’t have to pay it all. You know. So it has been a massive education process. You know, just on the rent collection side, you know, they’re the, you know, they are in a lease and, you know, they do all the money. Uh, we’re just trying to help do our part, you know, on letting them live there, um, at a much, much reduced rent and, and, um, and not have to displace anybody from their homes. You know what I mean?

Eric Freeman (06:19):
Yeah. I mean, I think, I think that’s a good message because ultimately I think we all essentially have to work together because if, if you’re not able to collect rent, I mean, those rents go to pay expenses that you’re obligated to as well. I mean, you’re, you’re on the hook to a bank. You’ve got utilities that are going to get paid so that, you know, they still have water and electricity and everything like that. And, um, and yeah, you may have some options to, to try and get a little relief from the bank just like they do, but at the end of the day, you’re still on the hook. Um, even if you don’t make that payment this month, you’re going to have to pay it next month.

Ken McElroy (06:56):
Well, we’ll, we’ll get, we’ll get to mortgages in a minute. I, you know, cause to me that’s like, that’s exactly where my head is, right? If I don’t care, I don’t collect the money from the residents that live in our properties. I’m certainly not gonna be able to make the mortgage, but before we go there, uh, you know, it’s interesting. I, I have a lot of friends in commercial real estate. I have friends that own office buildings and actually I’m, I’m an investor in that building and, and um, you know, uh, self storage and you know, some retail retail, retail’s getting clobbered. You know, I, I’ve got friends, you know, there’s a massive, there’s a big, big firm in Arizona and I won’t mention the name and they own 25 shopping centers and they’re collections our 10%, they have 90% delinquency. Do you think about that?

Ken McElroy (07:47):
Okay, well, right, so again, and I talked to a friend of mine yesterday, he’s, he owns a place in Mesa and Arizona and he’s got 14 tenants. And I said, how you doing? He’s like to have paid. And, and I said, who, you know, who, what ones haven’t? And he said, well, I bridal shop, there’s no weddings. You know, they haven’t paid, you know, a dentist they haven’t paid, they’re not, you know, working on antibody, the restaurant’s closed and you know, you just went through this whole list. And I mean, I was like, wow, like of course, you know, they’re, they’re not gonna be able to pay rent. You know, they’re not, they don’t have any customers. And so what I want people to know is that this red payment stuff, it’s, you know, what’s getting a lot of focus is this residential piece. But really the big, big issue is going to be on the retail and commercial. You guys have no idea. You know, those, there’s not the money to come in to pay for April, may and June rent. Um, you know, they don’t have it. And so they’re not going to, we’ll pay these mortgages and they sold the EAs lot of real estate, commercial real estate, I think. And potentially apartments are gonna eventually moved their way back to the lenders if we don’t get some kind of protection.

Eric Freeman (08:59):
Yeah, I, and all of those instances aren’t uncommon. All the, all the commercial clients that I’ve dealt with are in the same position where, um, tenants aren’t paying. And, and a lot of it’s the uncertainty, um, because we just don’t know how long all of these one government restrictions and everything else are going to last and when they’re gonna be able to open. So, um, in order to, to conserve cash, they’re not paying, I mean, you stop big companies like cheesecake factory came out with publicly that they’re not gonna pay rent on anything. And so that’s just kind of the state of the economy. And as people continue to be out of work as a result of these businesses not operating. Yeah. That’s going to trickle into residential right after. Um, probably a little, a little bit of a delay, but I mean we’re, we’re going to be at a point where we’re collections are definitely going to take a hit more so than they are for April.

Ken McElroy (09:54):
Oh yeah, for sure. I mean, I’m, you know, if, if you own a center that has cheese cake factor in it and they’re a big tenant and a big payer, and I’m sure they are, you know, we’re just fine before this. And, and, um, you rely on them, you know, [inaudible] these are longterm leases. The interesting thing on the, um, you know, what’s going to happen is what’s already happening is

Ken McElroy (10:17):
everybody’s going to pull these agreements out. You know, they’re going to be pulling these lease agreements out, they’re going to pull the rental agreements out. And, and though the banks are going to be pulling these loan agreements out, and the lawyers, they’re going to have a heyday on this because, uh, you know, the money is not coming in. I mean, if, if somebody is not getting paid, you know, as an employee, you know, they’re not going to go to cheesecake factory and eat and then they’re, you know what I mean? It just trickles all the way up to the person who owns the actual shopping center and then they can’t pay the bank. And so, you know, this rent thing, you know, it’s, uh, it’s, it’s unfortunate. I mean, you know, these, there’s a lot of people that are hurting right now and I get it. I, I, you know, but if, if these are, these agreements are going to come out and these personal guarantees and all these things and collections are going to be an issue for people and, you know, credit scores and all that stuff is going to be, um, tested here, you know?

Eric Freeman (11:12):
Yeah. And a lot of these agreements, um, loan agreements, I mean, there’s requirements for certain occupancy and, and rent collections and all that. And pretty much, I mean, a large majority almost all are probably gonna start hitting those. And the times when, when it’s bad is when the banks, and start looking at those now.

Ken McElroy (11:34):
Yeah. Oh, there’s, trust me guys inside of these loan documents, there’s a lot of, lot of detailing. And so for us, our occupancy time, but our collections the same thing. So, so anyways, so that’s on the rent. I think it’s important for people to know that, you know, as you know, there’s, there’s, um, uh, the, the rent is still do, you know, you can’t live somewhere for free and expect it to be free from, you know, somebody and, and so, you know, just do your best to work with the landlords or communicate with them the best that you can. Everybody’s hurting in this, and we’re all in this together. But let’s, let’s jump to the mortgage side because, you know, one of the things that we did as we, we, uh, we got on the phone with, you know, all our, our, all our guys that are hail our mortgages and there, um, they’re basically, you know, there’s all this forbearance word being thrown around, you know, and I know you’re going to talk a little bit about it, but, you know, we got on the phone with them and they said, listen, you have to prove, you know, that you’ve been affected.

Ken McElroy (12:36):
And you know, this is like two weeks ago, well, we didn’t even know when April rents were going to be. Right. And so now we kinda know, you know, um, you know, what’s happening, but we don’t know what’s going to happen in may or June. And so this, you know, this forbearance issue is, is yeah, it’s for us. We, there’s no money available because they’re like, well, you know, you have to show that you can’t pay, you can’t pay. Right. And, and, and so basically we’ve just kind of shelved it for now as we kind of navigate everything. What are you seeing on the mortgage side with some of your clients?

Eric Freeman (13:11):
I’m, I’m seeing exactly what you just mentioned. Um, both on the residential, well on the, on the commercial side for sure. I mean, people are getting the same message from their bank saying, yeah, you, you received the March rent, which is meant to cover your April 1st payment. So we’re not going to do anything at this point. We’ll check in later. Uh, and see if you’re affected. On the residential side, there was part of the, the cares act where, um, for residential mortgages that are federally backed, that you’re supposed to be able to request from your bank 90 days. Um, for Barron’s, um, being the word that they’re using. Um, but what people don’t realize is that at the end of 90 days, banks have the option to either have you pay in a lump sum. Those not 90 days worth of payments plus the payment that’s due at that time or some of them may spread it out.

Eric Freeman (14:13):
But what I’m hearing from people that are actually reaching out to their banks as most are asking for a lump sum at the end of the 90 days. Oh wow. So, um, that makes it pretty difficult because if you’re, if you’re out of a job or something else and you, you don’t have any income for these 90 days, we’ll hire, how are you going to have, have four months worth of payments, um, request an additional 90, um, at the end of that period. But again, it’s all the banks still going to expect it to be repaid. And, um, at this point I think it’s a little unsure whether what kind of late and things they would charge. I mean, hopefully, hopefully they’d be a little easy on it. But, um, really it’s up to the banks as far as the late fees. I don’t believe there’s any requirement, um, for those to get waived. Um, and things like that. And credit reporting, I mean, yeah, I mean things are likely still going to be reported to, to the credit agencies,

Ken McElroy (15:12):
right? Right. So if you got a two or $3,000 mortgage a month and you kick it down the road, you’re, you’re looking at, you know, eight or you know, call it eight to $12,000 lump sum that you’re going to Ole at some point in the, you know, who knows when you’re going to get your job back. And you know, obviously if you’re going there to get forbearance now, uh, that’s interesting. I don’t think I knew that. So, so the banks really have a hammer on, on the landlord. They’re on the homeowner. I mean, you know, they’re just basically going to say, Hey, sorry, you will oldest in a lump sum. That could happen. Right,

Eric Freeman (15:47):
right. I mean, that’s, that’s what it is right now. And even more difficult than that is the volume that they’re dealing with right now. Um, my understanding is it’s pretty difficult to get them demon, get someone on the phone to get this going in the first place. Um, you’re talking about hours to get in touch with them and then, and then you’re finding out the have to make the payments anyway, which I mean, in a way makes sense. I mean, you’re, you’re not just forgiven, um, these amounts, but you know, and things are changing daily at this point. So whether, whether there’s some other kind of assistance that may come out, should this continue to last for another few months? Um, it’s possible. I certainly wouldn’t expect it at this point. Um, but you know, it’s possible.

Ken McElroy (16:34):
Yeah. So I’ll tell you what Eric, thank you by the way. Yeah. The, the, on the commercial mortgage side, it’s super confusing and you know, they’re throwing it on the back end of our, of the loan. But, um, you know, it’s, again, it’s still do it. It’s not, uh, it’s not forgiven. Like, you know, kinda like we were talking on the rent side. So, you know, as things change, you know, what we should do, Eric, is we should jump back on here and just keep communicating to everybody as, as these laws change. So maybe, uh, maybe in a couple of weeks we can jump back on and kind of update this cause as you said, every single day, like just yesterday, uh, we had a new executive order that covered commercial, you know, and, um, you know, that that wasn’t included in there in the original one. So every day new stuff comes out in every state and, uh, maybe, um, maybe we can communicate this a little bit more to help people navigate through it.

Eric Freeman (17:28):
Yeah, I think that would be a great idea.

Ken McElroy (17:30):
Right. Great. Well thanks. This was a great topic, Eric. I know we got two more topics guys. We’re going to talk about, you know, if you’re an employee, you know, what are your options and the other one is a, if you own a business, what are your options? So, uh, stay tuned. Eric, thank you so much. As always. I appreciate it. Thank you. Stay safe. Yep.

What Inflation Means, and How It’s Measured

Inflation is pretty simple. It’s the rate at which goods and services increase in value, and in turn, at which the dollar drops in value. For example, your Snickers now costs $2 instead of $1.50, which means your dollar buys less candy bar. Put in another way, your dollar has less value.

The US measures inflation using a metric called the Consumer Price Index, or CPI. The CPI takes a basket of goods and services and averages them out to give you a general idea of how prices are changing. When the CPI goes up, that means inflation is happening.

When inflation is up, we feel the strain. Our dollar buys less and is savings are worthless. That is why you need to invest in assets that hedge inflation.

If your savings plan is to simply to put money into your local bank savings account, you’re actually losing money in times of inflation, because inflation decreases the value of your dollar. The interest your savings are earning won’t be keeping up with inflation, so essentially each month your savings account will buy you less.

I can give you a great example of this. When my parents first got married my father bought a $10,000 life insurance policy for my mom. This was a lot of money back then and would have really helped her if something happened to him. The problem is he didn’t read the fine print that the policy did not increase with inflation and when he passed away a few years ago my mother only received $10,000. Luckily, her children are taking care of her, but that is a perfect example of inflation.

Real estate is a great investment that hedges inflation. Not only does the value of the property rise with inflation, but the amount of tenants pay in rent will follow inflation as well.  These increases let the owner generate income through an investment property and helps them keep pace with the general rise in prices across the economy. To learn more about how to invest in real estate during a downturn click here for access to my private Facebook group.