We’re chatting with Ken McElroy … Robert Kiyosaki’s very own real estate guy … for a reality check of investing heading into a potential crisis unfolding before our eyes.
The world is changing … and when it changes, your investment strategy should too.
We’re all preparing for the new realities of real estate … and we’ve got ideas to share with YOU.
In this episode of The Real Estate Guys™ show, hear from:
- Your unreal host, Robert Helms
- His unprepared co-host, Russell Gray
- Robert Kiyosaki’s Rich Dad Advisor for Real Estate, Ken McElroy
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Marching toward a new normal
So much is changing in the world, and that permeates into real estate.
What is the new normal going to look like? And how can YOU prepare for what’s coming next?
We’re chatting with our good friend, Ken McElroy. He’s the Rich Dad advisor for real estate.
When Kenny has something to say, we have ears to listen … because we’ve seen over the years that he has been right A LOT more than he has been wrong.
Ken brings a couple of special talents and perspectives to the party … so to speak.
One is his tactical experience. He has been in the game for a long time. He has ridden a lot of up and down market cycles, and he is a really down-to-earth, practical guy who can explain things in plain English.
Kenny is a hands-on guy who runs a team of hands-on people … and he brings with him the big picture insight of his relationship with Robert Kiyosaki.
Too many people in real estate get dogmatically focused on just real estate … THEIR market or THEIR niche.
While you do want to know about the markets that you’re in, you also need to get your head out of the weeds and look up at the horizon.
Ken’s core investing philosophy comes from being a property manager over the years, specializing in B class apartments.
When he takes these properties on, they’re not in great financial shape … and sometimes not great physical shape either. They need some work to help increase rents and property value.
Over the years, Kenny’s taught us a bunch of clever ways to increase your net operating income.
Now, with the normal status quo of things on the fritz in so many ways when it comes to being a landlord … we thought it was definitely time to pick Ken’s brain.
The effects of COVID-19
If you’ve been listening to us for a while, you probably know a bit of Ken’s background … property management and ownership of thousands of apartment units.
There’s certainly a lot of concern over tenants losing their jobs, not being able to pay rent, and eviction moratoriums.
“The truth is, this is part of management,” Ken says. “Management is really easy when tenants are coming in and rents are going up, but when hard times hit is when your true skill and technique gets exposed.”
Right now, Ken says his company has about 8,000 tenants … so when COVID-19 shutdowns happened in March, it hit them pretty hard.
No one wants to experience a downturn … but it’s part of the game. When downturns happen, you hope that you planned accordingly in the good times to be able to withstand.
Ken says that about 80% off his tenants were able to continue to make payments.
Then, about 15% of tenants anticipated having issues paying rent, communicated those issues and were put onto a promise to pay (PTP) program as a way of working with property management.
The remaining 5% or so were people who didn’t communicate and assumed with what they were hearing from the news that they just didn’t have to pay.
“We are really trying to work with people. The last thing we want to do is boot anybody out and ruin their credit. The people that are working with us and communicating we know are good people, and so we are doing all we can,” Ken says.
Moving from renters to property owners, about 5 million people are having trouble with their mortgages.
Ken says we haven’t even begun to see the potential effects of the virus on this sector … because people with homes are going to fight to stay in them for as long as they can.
Depending on how long all of this drags on, it could be quite some time before we can visualize the real impact.
Strategies for the future
Back in 2008 or 2009, we spoke with Ken about how he was strategically trying to pick markets that were B class and geographically near jobs that couldn’t be moved.
Has his strategic plan changed for when we come out of this height of the pandemic bubble and start to look for opportunities?
“I haven’t seen any statistics yet for 2020, but the patterns of population migration have been very interesting to watch over the last several years. That will definitely play a part,” Ken says.
If you look at a location like New York City, for example, from many standpoints … housing listing, reduction in pricing, employment … it looks like this area is going to get hit pretty hard.
We were already seeing pre-pandemic that listings in New York City were down about 57%. People are leaving and going to other places like Florida where they can spend less for more space.
In general, many people are leaving the city to move further out of town to smaller communities. That may be a big opportunity for the future.
With remote work, many tenants will no longer be held down to these employment centers and will have the luxury to choose where they want to live.
So, as we go through and find opportunities after the virus, how do investors make sure they keep their heads on straight?
You have to be practical and realistic about what’s happening. But at the same time, there is going to be a ton of potential for redevelopment.
Ken predicts that many regional malls and small shopping centers aren’t going to make it … and there will be a lot of single-family homes on the market a year from now.
That will drive prices down … and push us into a renter economy.
For more on how you can prepare for the new normal in real estate … listen to the full episode!
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