Building and securing passive income is one of the best ways to achieve financial freedom. Chris Seveney explores how you can do this yourself with cash flow expert and anti-financial advisor Chris Miles. He shares valuable insights about the state of the market right now and what it takes to build lasting wealth through passive income. Discover the power of real estate investing and why it is crucial to zig when others zag. Get ready to take control of your financial future and create a life of freedom and abundance.

—

Watch the episode here

 

Listen to the podcast here

 

 

Financial Freedom Through Passive Income With Chris Miles

Introduction

Our special guest is Chris Miles, the cash flow expert. Chris is the leading authority on how to quickly create cash flow and create a lasting wealth and legacy for you and your family. He’s been featured in US News, CNN Money, and Bankrate, and does have a high reputation for getting clients life-altering financial results in his company, Money Ripples. Interesting things about Chris is he retired for the first time at 28 and what I loved about this episode is we dove deep into the markets, real estate, investing, what we’re seeing, and what other people are seeing.

Chris speaks to tons of people out there. He’s got an ear to the ground in real estate and the stock market. He’s giving his opinion of where he sees things headed, not just what you’re seeing on the news or reading on the internet, but hearing from an industry expert about all things investing in real estate. I hope you enjoy this episode that I have with Chris Miles of Money Ripples.

—

Chris, thanks for being here. How are you?

Doing fantastic, Chris. This is like the show of Chris Squared or whatever it is.

Thankfully we don’t have a third person saying Chris or asking us questions. As we were chatting a little bit earlier, as we mentioned, we’re going to be really talking about Chris’s background and what he is seeing, and hearing kind of got an ear to the ground, the pulse, based on your courses or training and the people you work with. I love to hear about that. Before we get into the typical intro, why don’t you tell people, what are you doing today? How did you get to that point?

Today, I’m financially free. That’s cool for the second time. That’s the funny part of the story. Today we have a company called Money Ripples. We’re actually helping people find free-up cash, how to invest it, and create passive income so you work because you want to not because you have to. You become work optional. We even do this max ROI infinite banking strategy to help and augment it and all that stuff. I didn’t start that way.

Funny enough, I have a very eclectic background. I mean, even when I went to college, I was a sociology major with a triple minor in psychology, Japanese, and ballroom dancing. That makes sense. I actually was going to go into psychology, but I was going to go in marriage and family therapy, but then after dealing with seeing how messed up people are, I was like, “I’m going back to sociology.” My intent was actually going to business consulting. As I was doing that I thought, “I should have real-life business experience.”

I actually started looking around like, “What business can I start?” The first one that was fascinating to me was a financial advisor. I didn’t know the time they take anybody off the street, as long as you can pass a test and not be a criminal. On top of that, I thought, if I could just learn about money for myself, that would be great. Even more importantly, maybe I can give some years of my dad’s life back. I was raised as a kid where I’d hear the common phrase you might hear too which is, “We can’t afford this. We think money grows on trees. I’m not made of money.”

Those kinds of phrases were always said to me. I was like, “I don’t want to be that way. I don’t want to be like we were where my dad penny-pinched all the time.” I was always just taught me to just save. Of course, being a financial advisor, it fit well into that design because it was all about just save. Pay off your debt, just save. I thought, “This has got to work.” I drank Kool-Aid. Four years in, my dad reaches out and says, “When are you going to advise me?” I go back home to Oregon there and I sit down at the same kitchen table.

He told me just to save money. Never told me what to do with that just save it. I’m sitting at his table now talking about what he can do with his money. I see that he’s got a 401k. He’s been maxing out for years. He paid off all this debt and couldn’t live on his mortgage. The guy was a hundred percent debt-free. He did everything that Dave Ramsey would tell you to do on TV. However, I told him, “Dad, listen, you’re 61 years old right now. If you want to retire today, you better hope you die in about 5 years or 6 years because that’s when you’re going to run out of money.”

Naturally, you could see that he probably wasn’t pleased with that answer.  He was hoping for something more magical to get him out of the job. I was like, “I don’t know what you can do.” He’s like, “Can I do this or that?” I’m like, “I don’t know. Honestly, I can’t guarantee the market is going to go up or down. You already lost a good chunk during Y2K. Now it’s starting to recover. This is in the early 2000s.” I said, “I really don’t know what to tell you.” This bothered me a lot. It was just a few weeks later, I’m talking with a friend of mine that I trained to be a financial advisor, but then he goes, “There’s this crazy thing called real estate investing.”

I’m thinking he’s probably going to be broke by now. After like 4 or 5 months, he says, “Chris, my life is amazing. In fact, my dad and I have partnered on some deals and we’ve doubled his income as a professor at the local university.” I said, “Wait a minute, come on, that’s too good to be true. There’s no way you could have done that quickly. It takes years of compounding to get to this point.” He said, “Chris, listen, how many of your clients are truly financially free where they don’t worry about money? They all worry about money. Good job.”

They’re all worried.

They’re all wondering if they’re going to run out of money before they die watching CNN and freaking out. He’s like, “How about this, Chris? How many of you guys as financial advisors are financially free, not off the commissions you’re earning, but actually doing these same investments you’ve been recommending.” As I was really honest with myself, I said, “I’m doing a mental inventory of everybody in my office, I would say that number is probably zero. Even the ones that have been working here since the 1970s can’t retire either.” “There’s your problem, Chris.”

Teaching People How To Retire

I started going down this alternative investment rabbit hole, much like you’re already in. I started going down that rabbit hole in 2006 and learning about everything and realized it was about passive income and cash flow, not just about accumulating money and setting it and forgetting it and all that crap you’re always taught. Later that next year, when I was almost 29 years old, I was financially free, and I was able to retire. That blew my mind. I didn’t even think that was even remotely possible, but it did. Now granted, I only needed 3,500 a month to live on.

Passive income and cash flow are not just about accumulating money and simply forgetting about it. Share on X

It was not as hard as it is today in my mind because it’s not hard to get to 3,500 a month, especially with some certain types of alternative investments. At that time, I was hoping I would do it by 40 and here I am 28 years old doing it. Of course, I came out of retirement to teach people how to do the same thing. The recession kicked my butt after I came out of retirement, the start of business with another partner, and we’re focused on real estate investors, they’re all going broke. By the way in this time, I also, in the mid 2000s, I was doing stock coaching. I was even teaching people how to buy and sell and trade stocks and options, things like that.

Like I said, I have a collective background for sure. I’ll tell you though, I mean, nothing beats real estate. I mean, other than having your own business, of course, which is great. That’s a great way to make millions if not billions of dollars, but real estate for a person who’s trying to invest, hands down, I haven’t seen anything better out of all the things I’ve done from the stock markets, bonds, options, trading. You name it, to real estate of all sorts. This, what you talk about here Chris, it’s not guaranteed, but man it has a much higher success rate than almost anything else I’ve ever seen.

Investing In Real Estate

The interesting thing with real estate too is, now and again, it could be just where I’ve always lived and so forth. I’ve lived in Massachusetts and Virginia. If you go to somebody and say at a party and so forth and say, “What are you doing?” “I’m investing in real estate.” Everyone’s like, “Tell me more.” Even today, crypto people would be because they don’t understand it. If you say, “I’m invested in Microsoft or I’m invested in the video.” Like, “Yes.”

As everybody else.

Yeah, so everyone else. When you say real estate, real estate is like an ego bump for anybody, especially it’s a male driven industry. Whole people, it’s like, “I’ve got a rental or I got this.” It’s almost like you feel back in the day, like when I grew up my parents didn’t own real estate or any additional properties and stuff. The people that did you looked at them as, “They’re a higher class. They’re creating passive income or this.”

This is before the internet. If you want a home, you get it to a local grocery store, like see what homes are for sale. You’d never know what an investment property was or wasn’t. The advent of the internet has made things so simple to give people. If you’re a mover or shaker, you can definitely move a needle based off of where we are currently today in history.

It’s true. It’s funny too, because I know when I mentioned I do like investing or real estate investing, people were like, “You’re like a slumlord.”  “No. Actually, I’m on the passive side of this thing. Yes, I do own properties and yes, there are people that pay me. I just don’t know their names.” That’s something that the property manager deals with now. It’s much different for me being a passive investor versus a little bit more of an active investor like in the mid-2000s.

You again have gone through and retired twice and stuff, but you still are really coaching, mentoring, and doing things still today. I’m always interested to hear because I think over the last five years, there have been significant shifts in investing. I’m starting to see for what we see is, especially in real estate, 4 or 5 years ago, you could have been out in a boat in the middle of the ocean and not even know what was going on in the world and made money in real estate. You didn’t have to do anything.

Today, it is a much different business. Everything is. I think I just read something today that they’re saying the S&P is going to average 3% per year over the next ten years. Again, that’s like predicting the weather but I think people are more out there showing that “It’s not going to be easy like it was the last four years because the government went and basically doubled our debt over the last 6 or 8 years or whatever it is. When things finally hunker down and example somebody told me today and in real estate, they’re like, “I’m buying this rental property in a highly appreciating area. It’s a $100,000 property.

Current Real Estate Market

I’m sitting thinking, “Wait a second, a $100,000 property is not a highly appreciating area.” It may have gone from Lent, Michigan, and no offensive Flint, but I’ve seen houses go from $30,000 to a $100,000 during COVID. For the last 30 years, it was a $30,000 house. I told the person, “Row out what happened the last four years. That’s like bad data that you’re having. Go back to before then to see how the market acts in a more typical fashion.” I can’t say normal economy because I don’t know whoever envisioned that. I’m curious, like what are some of the things that you’re hearing and seeing right now?

It is fascinating. I mean, 2022 was a good slice of humble pie for those in real estate. I appreciate 2022 for that reason because whenever I hear people say, “I’ve been investing since 2018 or 2019 and I’ve done great in real estate. I’m like, “Did everybody and their dog?” It took no skill to make money in real estate. Now to get through 2022, 2023, and 2024, if you’re still going now. Now you’re starting to get some really good experience. Now you’re starting to see some things great. You’re right, Chris. There is really has been in this everything bubble as they call it.

Everything is inflated. Everything is a bubble. Inflation’s inflated, obviously it’s inflation. We’ve seen everything just skyrocket. Even people who say, “I’ve doubled my money in the stock market in the last 5 or 6 years.” Yeah, so has everybody else. What did you do to do that? Nothing. That’s what should have you concerned is that if you had nothing to do with those returns, that also means that the inverse is true, is that if it goes down, you’re helpless.

You’re going to act like a little victim, is what’s going to happen. Especially right now, the stock market, I watch that very closely too, and as well as bond rates, I watch treasuries and things like that as well. I even watch the yen, because I want to know if I go back to Japan. How much can my dollar buy now? That was over 150 Yen.

There’s that whole yen. I forget the name of it, like the leveraging of the yen because of the interest or whatever. When they did something to their rates, it caused a big blip here that freaked everyone out. Again, that’s way over my head. My wife, that’s all her stuff. That’s where I let her deal with all that. I’m like, “Just let me stick to real estate, hon.” I’ll let you keep going.

Even now you talk about the yen too. I mean, even China. China actually just loosened all the requirements. Their banking requirements. It’s almost as if you were to imagine your personal life, if all of a sudden you’re like, you have this homemaking line of credit for $100,00 and then the bank just comes to you and says, “Guess what good news, I’m just going to extend your line of credit to be $200,000 now.” You’re thinking, “Good because I had almost maxed out $100,000.” That puts me in That’s exactly what’s happening in China right now.

They just said, “We’re going to loosen the banking requirements.” It doesn’t make banks any safer. They said, “We’ll just loosen all the requirements.” Now there’s all this extra liquidity for money to go out and be used, which of course inflates their temporarily and falsely inflates their economy, which inflates ours too. Now we’re seeing this almost like when you see ripples and it bounce off the shore and come back, it’s happening internationally too. Even in America right now, the stock market is more than double beyond what it’s supposed to be right now.

You talk about the GDP actual value of the stocks compared to the actual price of the stocks. It’s more than double what it should be right now. It’s been this way for several years. The last time it came back into balance was after 2008. Even then it went below and then it recovered and came back. Imagine this, the stock market right now is over $5,000. What would happen if all of a sudden you saw your portfolio, your 401k, or whatever, drop by more than 50% in the next year or two?

 

It would hurt a lot of people and delay so many people from retiring because they’re probably not in bonds.

That’s exactly it.

I’m a believer that everything will eventually move back toward like a norm when things go up. Like real estate, it’s here at a point or inflection point right now in real estate where in an entry-level house, 50-plus percent of the population can’t buy an entry-level house. 1 or 2 things have to happen. Either salaries have to skyrocket so people can afford it, but then people still have spending habits or pricing has to come down.

Now, I’m not thinking that companies are going to be cutting bigger paychecks especially when we’re in an election cycle where parties, including both of them, are talking about adjusting the federal business tax rate and going. If taxes go up for businesses, businesses aren’t going to be as generous to their employees, I’m guessing, I know, as a business owner would impact us and it would have negative consequences.

You mentioned too, like the Yen, the U.S. is kind of in my mind and real estate does a similar thing with fractional lending on mortgages. That’s why everyone can’t go to a bank today and get their money out of the bank is because the bank doesn’t have your money. The bank literally creates money out of thin air. It was called Fractional Lending. They only have to hold, I think it’s 10% today and it goes down to zero sometimes. Ten percent of your deposit and they can lend the rest. Basically, I think a $100,000 deposit ends up being like $900 million in loans.

You got it. That’s exactly it. That’s banking strategies. That’s the thing with banks, especially when there’s a financial market collapse. In some way, shape, or form in most of these recent recessions. I mean, the tech bubble boom and Y2K, was its own thing, but that even tied in with banks and the financial world too. When you have banks that legally can actually loan out ten times whatever they have in the reserves.

That’s no wonder we saw problems with banks. The thing is the big five, the ones that we had to bail out last time, they actually got Congress to approve a 40 to 1 ratio. That means if you had that same $100,000, you’re just talking about instead of a million bucks, they can loan out $4 million. No wonder they had to be bailed out. Fannie Mae and Freddie Mac were a hundred to one. For the hundred thousand you have there, they can loan at 10 million. They just loosened everything up.

Right now, there’s still money flowing. That’s the real strength or weakness of an economy is how much is money exchanging and flowing. What’s happening is that we always hear them speak out of one side of their mouth and do something else, but right now the feds, they’re still actually accelerating the printing of money. They did pull back in 2022, but starting in 2023, they started to ramp it back up again.

The real strength or weakness of an economy is how much money is exchanging and flowing. Share on X

They’re still printing more to try to keep things moving and going. Stuff in the system, stuff in the banks, which are their friends because they’re all bankers anyway or at least friends of the banks. In a sense, they work with or for the banks in a lot of ways, but they’re the ones that are printing out all this money. Of course, that’s why everybody’s like, “Good, interest rates are coming down.”

My prediction is they’re not going to come down as much as you think. Everybody’s like, “We can go back to 3%.” The only way that will happen is if we start to see things collapsing. Right now, what’s happening to the feds, I don’t know if the show will go live, but my prediction is through the end of 2024, we’ll see little to no movement in the interest rates, maybe a quarter percent if we’re lucky.

That’s why I was curious. Again, people see the apple orange comparison where people say, “Feds dropped rates, so interest rates come down.” I try and explain to people and I’m not a finance person, I just invest in debt. I know that, okay mortgage rates typically fall the ten-year treasury because the ten-year treasury is a risk-free rate. If I can get 4% for that, I’m going to invest in a mortgage-backed security for 30 years, I want a 2% premium or whatever a premium is.

I’m not going to invest in a 30-year product if 4% has risk versus something that is 4% with no risk. Like it doesn’t make sense. It’s no different than people who invest in a multifamily deal where, “Look, there’s a preferred equity and a common equity. Basically, you can get more return on common, but you should be paid more for that level of risk if you’re down that food chain.” People don’t understand that they’re like, “Interest rates are going down.”

I can’t see them doing too much either because where I think we just had positive job data and I think the core index or whatever popped up or was higher than anticipated. People were saying they’re creating their own little storm because the issue is to me, the jobs data is basically I don’t want to say false, but very inaccurate in my mind.

That’s the thing is like when you look at real life, you look at those around you and say, “They make it seem like we’ve got a great unemployment rate, but I’m hearing lots of people getting laid off right now.” Even among our own clients, people who are making hundreds of thousands a year are finding themselves laid off from their companies. To say like, “No, unemployment it did go down a little bit.” Not down, but like it got a little worse. Went to 4% instead of 3.54%. It looks like it’s getting better again.

I’m like, every time six months down the road, you always come back to say, “By the way, we were wrong on those numbers back then. These are the adjusted numbers now.” For whatever reason, Wall Street’s stupid and they’re like, “We’ll just go whatever the media tells us, wherever the government tells us.” That’s why I’m so scared of those that are got their money in the stocks right now, because they’re just believing the numbers being put out. When they finally put out the real numbers, which are way worse than what they actually tell you initially, people were like, “It’s still good. We got AI or something like that.”

That’s the problem. See, you’re following the ten-year treasury yield. That’s an important one to follow because that is exactly what the feds watch to. They’re looking at unemployment. They’re looking at some of these things, but the thing they’re doing, I used to think that Jay Powell and all those guys, I used to think that their whole thing was like they would determine interest rates and then all the interest rates follow.

It’s the opposite. They react to the interest rates. They react to the ten-year treasury. If you look at what they’ve done throughout history, they always lag behind whatever you see happening in that ten-year treasury yield. Even when I pull up my Yahoo Finance app, I have a ten-year treasury on there that I’m watching daily and I’ve been watching it climb since September, climbing its way up.

What’s it at now? I haven’t checked it recently.

It’s over 4.2.

Mortgage rates and when they dropped the Harper point, it was under four, I believe, wasn’t it?

Yeah. It went up over a half percent in just a month. We dropped in mid-September. It was a great rate. I was telling people, “Lock in, this is good.” Of course, it started coming. In fact, right after the feds announced their half percent decrease in the fed rate, that’s when all of a sudden the bond rates started going back up again. People were saying, “They’re going to drop another quarter, half percent, maybe three-quarters percent.” No, watch that because right now we are only about 0.4% from the high that we had here last year.

If they’ve already dropped a half percent, they’re already below where they’re supposed to be. Unless all of a sudden those rates start to drop again, they’re going to hold it steady. They’re not going to drop it more unless something even more concerning that they see that we’re not.  Like something worse with unemployment or with some recessionary type thing showing up. That would be the only reason they would drop rates now. If they do, you should be very concerned.

That’s where people like to talk about, “Three percent mortgages and stuff.” Like, “We’ll get back down there.” I have the same opinion as you. I’m like if it gets back down there, that half-a-million-dollar house you have is probably worth about $300,000 to $350,000 is the reason why it got down there, which there’s going to have to be something, and people like, “It was like that for a period of time.” I’m like, “It was because basically, the federal rate was at zero. There was free money and people were just trying to get money out and there was cheap lending.

Now banks have gotten tighter. I know there are new banking standards that I think it’s like Basel or whatever it’s called that come out. How banks now have to rate their loans. Like lines of credit or riskier so they can’t do as many lines of credit or the bank’s ownership or equity would have to kick more equity into the company for reserves, which is good luck trying to go get a CEO or people at a bank to kick in more equity to cover the lines of credit they’re giving. No, they’re just not going to give them and take on the risk because they make plenty of money on all the other debt products that they put out there.

That’s right. Exactly. There’s definitely just a lot. There’s a lot going on, but at the same time, not as much as you think. It is interesting to see what’s happening. This doesn’t stop me from investing at all. I think it’s still a great market to invest in even in real estate right now. Granted, I may not be buying self-storage currently because self-storage hasn’t really hit that low yet. It looks like apartments are starting to get to that point where now it’s like, they’re starting to find deals where self-storage, you’re not finding it yet.

Lending, I tell you for the last two years, still is like the winner because as you mentioned, even though there’s more money being supplied, banks aren’t necessarily wanting to lend to a lot of people. Even good real estate operators are having a hard time securing lending rather than go with that whole crap of that. Even easier, get private money and give them our private money to where we can get much higher returns anyways.

For the last two years, lending has been the winning strategy. Share on X

That’s where I was on before this recording, I was on the phone with somebody who basically is involved in the new term now is called Residential Transition Loans, which used to be formerly known as Private Money Lending or Hard Money. Hard money is now just a bad term that you can’t use. It’s basically made its way into the correct terminology of RTLs. This person talked about one of the large providers just securitized the $200 million pool.

They’re securitizing those loans. The amount of money that’s out there from a lot of private equity and all these other firms and funds. Part of it they’re mentioning is because look at how many loans homes were built before 1990. How many of those homes now are getting renovated and so forth, or haven’t been renovated? People are going in, they’re renovating them and turning around, selling them, or turning them into rentals. Most homeowners don’t want to do that. That’s what’s been spurring the housing market over the last year or two because the amount of inventory on the market is really low.

Also, the number of people who are actually looking to buy a home is super low because, “Look, I’m not moving anywhere because I love my house. I built my house. Even if I was considering it, I’m at 2 3/4 or 3% on my house. I went out to buy a home today. I go from the house I am in today, probably like my neighbor’s house, which is half the size, and it would cost me the same every month.” Why would anyone do that? I mean, common sense.

That’s right. That’s why it helps. You never want to get locked in just geographically to think like you’re the whole country’s like you are. People in California are always like, they never know what reality is.

Whole different market.

You’re right. Like I’m in the same boat. Like I bought this house three years ago, a Jumbo loan at 2.75 for a 30-year mortgage. Even if we want to downsize because we’re getting kids kicked out, we have eight kids but now we have a couple of them already adults.

Wait, how many do you have?

I have six from a previous marriage. My wife has two. We have eight between the two of us blended family.

God help you.

It’s like a Brady Bunch, but there’s no room for Alice.

You need an Alice with eight gifts.

I think I’m Alice.

I’m going to say we’re retired.

I’ll tell you, but it’s crazy. Eventually, we want to downsize, but the thing that keeps us here is if we downsize, why would we downsize to the same payment, like you said, for half the house? When we get to stay here and have an amazing thing. People are like, “You can turn it into a rental.” Yeah, but higher-end homes don’t really rent well. If I do a rental, I like it they’re about right around below the average of that area. When I do buy rentals, that’s what I look for, which lately I haven’t been doing as many rentals just because the numbers haven’t really panned out as much on a cash flow side.

The Housing Market

That’s what I mean for me, I can’t remember the last time I bought a rental because the numbers don’t make sense. I know a lot of people might push it and be like, “Buy rentals.” I’m like, “Numbers don’t make sense. I’m still of the opinion that we’re in for some softening in housing.” We’re seeing it in Florida.

Again, we invest a lot in defaulted loans and I can’t tell you how many loans I’ve seen over the last month that were actually fixed and flip loans that the person bought it, call it for $400,000, we’re going to put a $100,000 into it and think they could get $650,000 for it and make a quick $100,000 or whatever. That house today that they thought was going to be worth $650,000, they’ve been sitting on the market for $475,000 and has no takers.

They’re basically just leading right now, Texas, Florida, and some of these other locations because of what a lot of people forget to consider on housing is you have a payment, but what are your two other big expenses, taxes and insurance? Taxes never go down people. I’m sorry. I’ve been around 49 years on this planet. I don’t think taxes have ever gone down from a property tax. Insurance, I don’t think insurance has ever gone down either.

It’s so true. That’s exactly it. Once I hit about 2021, or 2022, it got harder to find a really good rental anymore even if you could find one because then you’re fighting with everybody else for the rentals, unless you have some good inside connection. I think what you’re going to see on that side is anybody who’s banks on appreciation, this is what the mistake I made before the last recession. In 2006 and even 2007, I thought I could buy a $100,000 home, but if it appreciates 10%, I make $10,000. If I buy a $500,000 home, if that appreciates 10%, that’s $50,000.

Maybe I should go buy bigger homes to make bigger home runs. That was the dumbest thing ever because now you realize it’s not about the appreciation. That should be the icing on the cake. It’s always about the income, the cash flow, and the profit of that comes from that property. If it’s not profitable, don’t do it, and don’t expect that appreciation is going to work. I agree with you. I think we’ll still see appreciation in residential, but it’s not what you’ve saw it. Like you said in the beginning, it’s not going to be like the last four years, nothing even close to that.

 

The thing that I think a lot of people have today and it’s in everything, whether investing or just life work getting promoted, everybody thinks everything should happen overnight. Instant gratification of, “Two years, I should be promoted to senior level manager, whatever case may be. When I started work, I was in construction management.” Now, if you were running your own project within ten years, that was like the greatest thing. Twenty years after I started, I see people in 3 or 4 years starting to run their own projects.

Guess what happens? Those companies have trouble because they struggle because of an experience. I’m mentioning this because like real estate. If you’re in anything for the long run, stocks, real estate, look, the government keeps printing, there’s inflation. Inflation is going to increase the value of that asset. Just going to happen. Time can heal all wounds, but it doesn’t mean you should be making bad investments or risky investments because of it.

Investing In The Long Run

That’s why I always come back to real estate. You can go try to do Bitcoin, but I’ll tell you this. My secret for investing has always been to do the opposite of what everybody else is telling you to do. If everybody’s saying buy Bitcoin, that’s the time that Bitcoin’s about to crash. If they all say sell it, that’s the time it’s going to go up. Same thing with real estate. If everybody says, “Real estate’s bad.” We still have an element of that.

There are still people who think real estate is super risky, and too high priced, which people have been saying since 2015. Let’s be honest. They keep saying it over and over again. It’s like, it’s too high priced. Guess what? That’s real estate. I especially I forgot depressed so badly in the last recession. You got people that are scared of that. Other than me maybe, but I never hear people say, “I like the stock market. I think the stock market is going to go, but I think it’s going to tank right now.” Most people are just complacent.

Like, “I’m making money. I’m just going to keep my money in the market. They’re just sitting very comfortably.” That’s when everybody gets surprised. That’s what becomes newsworthy. The only thing that makes news is something that’s some element of surprise. It always, every recession, people are like, “I didn’t see that coming.” Yeah, because you got complacent. It’s when you start to stop looking at reality, that’s when you get caught with your pants down. You get a watch for that.

Real estate, one, it’s a real asset. I like that aspect. Even if I’m lending, that’s another problem too, is that I talked to so many people who come from the saver mentality that you should own things, but it’s not about ownership, it’s about control. That’s what banks want. Banks are on the title. They got your title, but you’re on the title too but you’re an equity investor. When you own your own property, they’re the debt investor. Guess who’s going to win every single time if something goes wrong or if you decide to sell a property who gets paid first, it’s the person that has the debt.

I always tell somebody to drive through any major city that owns the tallest building in that city and I guarantee it’s a bank.

That’s the best way to model.

Anchor insurance company, one or the other, but it’s interesting that zig versus zag theory you mentioned of I am not the type of person, I’m very similar. I view it, as there are retail and institutional investors. When I’m like, everyone’s like, “Buy rentals, buy this, buy that.” I’m sitting there, “What is BlackRock and some of these other big funds that own real estate, what are they doing?” When you start seeing them liquidating certain portions of their portfolio or doing certain things, it’s like, “Why are they doing that?” It’s interesting to see.

We invest, again, a lot in defaulted debt. Now is it a conference in Chicago, I think a year and a half ago, maybe two years ago? It was interesting because everyone keeps waiting for this conference, it was two years ago the “Crash” of people defaulting on their loans. Basically, they’re trying to tell people like, “Timing the market and this and that and so forth.” Now there’s been a lot of data and history out there with banks and stuff that banks who bail the earliest do the best.

Meaning that if you’re going to pull the plug on something or you think something’s going down the drain, the sooner you can pull the plug on it, the better off you are. I’m a believer in any type of real estate like that. If you see a deal that’s going bad, it’s only going to get worse. A construction project, whatever it is, because A, a lot of people have put the rosy glasses on and say, “This is bad, but we’ll make it better or whatnot.” It starts to snowball and then it keeps snowballing to a point of it’s out of control.

You could have gotten out of the deal a while back versus now. This is why every time anyone’s ever asked me, “I’m in a syndication that is looking for a capital call.” The first thing I say is I’m like, “Don’t do it.” “No, like why?” I said, “They’re banking on something they can’t control. You’re banking on interest rates going down or somehow magically they can increase the rents that they can increase or construction costs go down.

They can’t control any of that and because they can’t control any of that, that not going to put my money in something that’s not controlled. There’s already a level of risk.” Now many people I talked to put it in or basically like, “They thought interest rates would be down in the 4s or 5s by now. They’re not, and they’re probably not going to be for a pretty good length of time.

I totally agree. It’s true. The perspective that you have. I notice people who are usually the most optimistic are usually the real estate investors who need it to be optimistic.

Like realtors. This house will sell in a week at this price. It’s never going to go down. Six weeks later, you drop $50,000 on the price.

That’s right. You have to wait for that humility. You have to wait for that fear before it’s a really good time to buy. That being said, I like what you had mentioned too, because people are waiting for a crash. There’s still plenty of opportunity right now before a crash. There’s always opportunity.

 

People say they can’t find a deal. I’m like, “You’re not trying hard enough.” The difference is 2, 3, 4 years ago. I use the analogy, that you were a farmer. You’d make some relationships. You just go cultivate and everything would grow and just come right to you. It’s like, go pick your vegetables. Those are the deals. Today, you’re out in the middle of a blizzard with your bow and arrow. You don’t even have a gun trying to hunt an animal and you’re in their terrain. It is hard to find deals. It’s not easy. For people out there raising money, it is hard. I don’t care what any guru will tell you. Can it be done? Absolutely, but it is not going to be as easy as somebody tells you to, whether it’s finding deals or raise money, but there’s still plenty of opportunity out there as well.

I agree. I never actively invest anymore. I’m more of a passive investor and even our clients go to investments like the ones you have. That’s the thing we’re always looking for is that I love it when operators tell me, “I’m not seeing good deals right now, like nothing’s fit in my buy box.” I’m finding one here, one there. They have to really sift. When they tell me now I have to look at 200, 400 deals to find the one that I’m going to put an offer on before you’re looking at ten to find the one because there’s just falling in your lap.

It was so easy, but that’s not the case anymore. You’re adjusting. I love it when operators don’t try to justify and say, “It’s not really hitting my buy box, but I need something now because people want to give me money. I got to do something with it. I’m going to buy this piece of crap.” I had a friend that speaking of debt and stuff. I had a friend who did syndication and he did a lot of ones where he was trying to do things that he’d never had experience doing. He would call him chocolate deals and because he would call his normal ones, like buying in Huntsville, Alabama, for example, that would be his vanilla.

I tell my clients like, “Listen, don’t fall for the chocolate.” He has no business being in that space. He might win, but that risk is going to be a lot higher than his typical vanilla deals, which he knows like the back of his hand, so be careful. Lo and behold, almost every one of his chocolate deals went South, and even some of them. He tried to do capital calls. Of course, nobody wants to throw good money after bad. He couldn’t do that at all. He’s literally foreclosing on some of these properties and giving them back to the bank.

That’s the thing you don’t want to run into. Now he did have another deal that was one of his vanilla deals I was in and he had a little issue because he was trying to sell it, but it was going to take an extra few months to sell it. He’s like, “I need some operating expenses.” I said, “Cool. I’ll lend you the money this time.” In the funny scheme of things, it actually put me ahead of all the other investors in that because I had debt, I got paid back first. I said, “Yes, put me in. I’ll lend you the $50,000 to keep it going for the next three months. I get paid my 15% when you’re done when you sell.”

Just like clockwork, he did and he was able to sell it, get out from under it. I got paid on that with my debt loan. I got my equity back too, which was great. That’s where you’re starting to see more people. I’ve noticed more and more operators are not doing capital calls anymore because it’s just getting a bad name. They’ll do a debt fund. They’re like, “I need to raise a million and a half. This is a debt fund. I’ll pay you 9% per F or 10% or 12% per F, whatever it might be.” That’s great. That’s good as long as it actually will fix the situation because I feel like before.

That is the problem that we see is some of them I know are just kicking the can down the road and then trying to line up the next deal to keep the money coming to collect the fees where they’re just ignoring those investors in that debt deal has zero chance. As you know, we run a debt fund. We’ve got zero leverage right now in anything. Now we’ve got no debt. It’s just our investors. I see, as you mentioned, finding deals, there was this one individual we’ve been working with.

We put in last quarter over $25 million in bids to this person. We did not get one deal. We just hit one last week with this person after all this time. We’re like, “We’re breaking through.” We’re not chasing, we’re not overpaying. It’s like, here’s where it is. What also plays to that is in, like you mentioned the vanilla versus chocolate, people are getting frustrated because the numbers don’t work, so they’re just pivoting to something they’re not experienced with.

I know another investor that they’re investing in debt. They’re investing in oil and gas. They’re investing in crypto. They’re investing in commercial offices. I’m like, “This makes zero sense. There’s no way you could even build a team or have an expert in every one of these.” Lo and behold I’ve heard rumblings like they have financial trouble and I’m like, “Make sense. What are they doing?” They’re going out there to raise more debt.

They just had a pivot in the market. That’s all. It’s just a pivot. It’s like, no, you pivot processes. You don’t pivot investments.  That’s the problem. When you’re trying to pivot to something you don’t know or have any business doing. It’s so hard to build a reputation, but so quick to kill it. Why would you try to do something like that to destroy your reputation?

Learn to pivot processes, not investments. Share on X

There’s this fund out there. I won’t name the name of it because it’s being tied up in litigation, but this investor who very well-known podcast too was doing a lot of fix and flip loans where investors would invest, you take the money and go fix and flip loans. People are going to know when I say what he got into because it’s pretty well known. People pivoted into Broadway plays during COVID and defunct brick-and-mortar stores like Bath and Beyond or stuff like that. People were investing thinking, “He’s issuing them notes.”

It’s like, “Note investing. It’s real estate.” People are investing thinking, and maybe not pay attention, but lo and behold, like a person now, went from real estate to Broadway plays to brick and mortar. The defunct store is like, that’s a pretty big pivot to me. I would know nothing about a Broadway play. Now basically cease distributions and there’s a lot going on and so forth. As you mentioned, you pivot certain aspects but pivoting your whole entire business just seems ludicrous to me unless, unless it’s something like you’re an expert in and people ask me, “Would you do others?”

If I did something like maybe I could do like new construction or whatnot. I’m like, yeah because I built a billion dollars worth of buildings in my career. That’s what I did for 25 years. That would make sense if I wanted to add a little flavor to that. If like someone said, “Chris, go do short-term rentals.” I know zero about short-term rentals. I know zero about self-storage, except that I rented one once in my life. I would mobile home parks. No idea. It’s not even something I’d even look to consider.

You wouldn’t even know the question to ask. Even if you make money, I saw a friend pivot to oil and gas recently and a lot of people are talking and they’re like, “It sounds amazing. When he’s doing it, it’s not like he’s just killing it. It sounds like it, but he’s been doing a year.” How do we even know even if he’s killing it now, how many times have we seen people kill it for years and then all of a sudden not anymore?

ATM Funds

ATM funds. Somebody was doing ATM funds and making hand over foot and no, sent me a thing. I’m like, “This looks pretty cool. Invest in ATMs.” I’m like, “I don’t know. It just doesn’t smell right.” Lo and behold, everyone’s up in arms now because a bunch of these ATM funds are going under.

I even had my own clients tell me I was crazy because they were like, “I get paid 26% a year on this ATM fund.” I’m like, “That’s great, but we already know this is temporary.” It’s on, it’s technology-based. I never liked to invest in anything that’s technology-based because technology becomes obsolete, it gets cheaper, it loses profits over time. On top of that, the one thing I don’t like either is the fact that we know that we’re going to go digital anyway. Why would I invest in something that’s going to eventually disappear?

 

When was the last time we used an ATM?

I think in Mexico.

I’m like, “What’s my pin?”

That’s right.

Episode Wrap-up

Chris, as we wrap up this episode, A, it’s been great chatting with you as always, and thank you for coming on. What’s the best way for people to get in touch, reach out and learn more about what you do besides the podcast, and feel free to mention that as well.

Everything’s Money Rripples, whether it’s MoneyRipples.Com or @MoneyRipples on all social media channels. Of course the Money Ripples Podcast.

Great. Thank you all for reading. Make sure to go check out everything that Chris offers because again, a wealth of knowledge and information, all things investing. As always, make sure to leave us a review and a like on your favorite listening station. Thank you all.

 

Important Links

• Chris Miles
• Money Ripples
• Money Ripples Podcast

 

About Chris Miles

Chris Miles, the Cash Flow Expert and Anti-Financial Advisor, is a leading authority teaching entrepreneurs and professionals how to get their money working for them TODAY! He’s an author, podcast host of the Money Ripples Podcast, has been featured in US News, CNN Money, Entrepreneurs on Fire, BiggerPockets, and has a proven reputation with his company, Money Ripples (https://moneyripples.com/) getting his clients fast, financial results. In fact, his personal clients have increased their cash flow by over $300 Million in the last 15 years!