Season 1,

31: How to Lose $50 Million and Get it Back with Rod Khleif

March 08, 2017

Losing money is always bad. But what about losing $50 million? That would crush most people, but not Rod.

Rod Khleif is a real estate investor, entrepreneur, multiple business owner, author, mentor, peak performance coach and community philanthropist who is passionate about business, life, success, and giving back. As one of the country’s top real estate investors, Rod has personally owned and managed over 2,000 apartments and homes. Rod is the author of “How to Create Lifetime Cash Flow Through Multifamily Properties” considered to be an essential “textbook” for aspiring and experienced multifamily investors. As a community philanthropist, Rod founded and directs The Tiny Hands Foundation, which has benefited more than 45,000 community children in need.

GREEN FLAG: OVERNIGHT MILLIONAIRE 

I had been in Real Estate for a while and I owned 800 houses and multiple apartments buildings in the Sarasota, FL area. In 2006 my net worth went up 17 million dollars while I slept. My head got so big I couldn’t get through doors. I thought I was set for life!

At that time my focus was on value rather than cash flow. I now tell people I coach, you need to focus on cash flow, because that will allow you to survive the inevitable market contractions.

RED FLAG: NO CASH FLOW

The first red flag was when the banks locked up. My business model required me to sell or refinance a house once in a while to offset loss. But suddenly there was a lot more turnover: People were losing their jobs and not paying, more people were moving out.  My cash flow was drying up and everything was happening very quickly.

 

BLACK FLAG: “THE SEMINAR”

At the end of 2006 I had a loan to value of 30% which means I owed 30 cents on every dollar, which is fantastic. By the middle of the crash that was turned totally upside down. My portfolio crashed and by the end of 2008 I was underwater. I was done. I tried to sell at a huge discount, but by then no one wanted to buy. I couldn’t refinance, my credit was gone, there was a high turnover, cash flow issues, etc. Eventually I had to make the hard decision to stop making payments.

To say it was a hard time for me is putting it mildly. It was like a massive, painful blur. I call the painful experiences in my life “seminars”, because they teach me important lessons. It was a very difficult “seminar” financially, psychologically and even physically. I had thought my investments were inflation proof and I had it made for life. Now I had lost 50 million and could not see a solution on the horizon.

(Just a side note is that during this time, my multifamily investments were doing just fine. That’s why I wrote my book. I wish I had known back then that multi-family is the way to go.)

WHITE FLAG: INVEST IN MULTI-FAMILY

It was devastating for a few months, but I got myself going again. Once I was able to move on, I focused on taking what I’d learned in my “seminar” and making good use of it. I created a $10 Million litigation support company to help others save their homes. I shifted my attention to helping others, and it turned out to be a successful business. Every failure is a lesson. If you don’t learn from them, you’re doomed to repeat them.

My love has always been Real Estate, so I wanted to share what I learned with other investors. I didn’t want other people to go through the things I had gone through. If I had put my money into multifamily investing, I would have survived that crash. I know many people who did just that and went through that time just fine. Flipping houses is a great way to make a little extra income, but to truly make stable long-term wealth, multifamily is the right path.

CHECKERED FLAG: FOCUS ON YOUR GOALS 

With the help of Tony Robbins I was able to let go and move on from those losses. 80% of our success in anything we do is determined by our psychology or the way we think. Only 20% is the actual mechanics, which makes our mind-set incredibly important. I now give Goal Settings Workshops, where I teach others the methods I learned in my life’s seminars. It is very important to have vision for the future.

It also became more clear to me that multifamily investing was the key to long-term wealth which would survive any economic shift. So I moved further into Multi Family housing investments and wrote the book “How to Create Lifetime Cash Flow Through Multifamily Properties”. If you would like a copy simply send a text to rod41411 and we will make sure you get one.

FAILING FORWARD

In each episode of How to Lose Money, we ask our guests to answer a few questions about failure. Here’s what came out of this episode:

  • Why did this failure experience happen to you?

The country’s condition was of course a big part of it. Nevertheless I believe in total responsibility, so I would say it is because I didn’t keep my eye in the ball. My head was too big.

  • What’s the single most important lesson you’ve learned from this?

The most important lesson I’ve learned is that cash flow trumps value every time! You have to focus on cash flow over value. Value is almost irrelevant. In everything I buy or invest in now, I put my total focus on cash flow.

  • How do you protect yourself from failing in this way again?

By paying very close attention to my debt service coverage ratio. I always make sure that there’s plenty of cash flow to survive the inevitable contractions. For me 1.6 is the right cash flow cushion.

  • Who do you turn to when you need help?

I can’t thank Tony Robbins enough. I’ve been following him all over the globe for 16 years. I was blessed to have him beside me during those hard times, and he helped me get through my seminar. Because of those lessons I was able to get past the crisis and have the success I am blessed to be enjoying today.

  • What advice would you give to someone in a similar position to yours?

I would tell them to “focus on your mindset, focus on your goals”. Wherever your focus goes, energy flows. If you focus on losing, on failure, on problems, they will be magnified. Remember that achieving success is 80% psychology, 20% mechanics. It may not be easy, but that is the secret!

This episode is based on an interview with Rod Khleif. To hear this episode, and many more like it, you can subscribe to How to Lose Money. If you don’t use iTunes, you can listen to every episode here.

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