ROE > ROI and Why Your “Cash Flow” Number is Deceiving

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Cash flow—the two words every rookie real estate investor loves to hear. It’s always about cash flow. “If the property doesn’t bring in a healthy amount of pure profit every month, there’s no point in buying it!” This sentiment could cost you hundreds of thousands, if not millions over the lifetime of your real estate investing career. Don’t get us wrong, cash flow is important, but focusing on this metric alone may lead to your downfall.

Chris Lopez hopped off the “buy only for cash flow” bandwagon long ago, and he’s much richer for doing so. Chris has become successful quickly in the real estate game, which is doubly impressive if you look at his past business history. He didn’t start in real estate sales, investing, or anything of that nature—he was more interested in building content for other businesses he was pursuing. After realizing that rental property investing was the way to go, Chris took a hard pivot, repurposing the same skills he used in his businesses to work in real estate.

Now, he’s got eight units of his own, passive investments he doesn’t need to worry about, and a successful real estate brokerage situated in the real estate mecca of Denver, Colorado. He’s become the foremost expert on Denver real estate not because he’s done thousands of deals, but because he knows the area well enough to teach those who don’t. Chris talks about business building, mentorship, and a much better calculation than cash flow in this episode.

David:
This is The BiggerPockets podcast, show 662.

Chris:
I think everyone’s played Monopoly and I consider return on equity the way to go from a greenhouse to a red hotel and kind of skipping that second, third, and fourth greenhouse. So it’s a powerful way to scale up your properties and also scale up your portfolio. And this took me about nine months to truly wrap my head around, but once it clicked, it changed everything. It changed my own investing. It changed [inaudible 00:00:29] clients and changed my business trajectory as well.

David:
What’s going on everyone. This is David Greene coming at you from Scottsdale, Arizona, where I am having a little bit of a getaway with Christian and Kyle, and we are sort of enjoying this area. It’s beautiful out here. And while here, we have a fantastic episode for you. This will definitely be one that you want to share with other people and listen to more than once because it’s just chock full of great examples, anecdotal examples, high level strategy. Our guest today is Chris Lopez and he is a SEO master. He is a real estate broker that owns a brokerage. He sells houses, he owns real estate. He invests in real estate with other people. He teaches other people how to invest in real estate. He runs companies and we get into everything he does and more.
I’m joined today by the lovely, beautiful, and talented Robert Abasolo. Rob, what were some of your favorite parts of today’s show?

Rob:
We talked about how to get mentors, some of the realities of trying to get a mentor and how you can prove yourself to get in the door with somebody, how to provide value to someone so that they can take you on under their wing. I think we spend a lot of time talking about this. Something that I think we care about quite a bit because this is something that we see often. So I think if you listen to it, you’ll get some tangible advice.
But then we also talked about how to use content to market your business, how to get lead generation just from putting out podcasts and other types of content, the importance of copywriting in doing so, and then we put a beautiful bow on this that talks about the return of equity and how you can use that to become a multi-millionaire in real estate if you just play the real estate game of moving your money from own house to another.

David:
Yeah. We also, I forgot to mention this, we have a pretty lengthy discussion about mentorship, how to find a mentor, the right way to go about it, the wrong way to go about it, and maybe who you should be looking for when it comes to mentor. Chris has some really good insight into that, as well as you. I thought, Rob, you did a really good job giving some practical advice for people who are like, “Hey, somebody, please. I want to be rich. Help me to do it through real estate.”

Rob:
Yeah. I found out that the moment I started sending you gift baskets every single day, you finally decided to respond to me and say, “I’ll teach you, little one.” And so it’s cost me thousands in gift baskets, but I’m really glad that we’re partnered up together, man.

David:
I’m a weakness for a gift basket. Yeah, no, that’s not true. Please, don’t send me gift baskets. I feel terrible whenever people do that. Lately, I’ve been getting stuff that’s sent to me, which is awesome, but they don’t always put who it is that’s sending it, or my assistant gets it and opens it and then comes and gives it to me, but they’ve thrown away the box that had the label. And I feel terrible that someone sent me a gift and I don’t know who they are.

Rob:
One time someone showed up to my house and my wife was like, “What was that about?” And I was like, “Oh, a subscriber showed up to the house. I don’t know. They were nice.” And she’s like, “Okay.” And then a day later, this gift basket shows up and she was like, “I’m not eating that.” And I was like, “Well, hold on. This is a $300 gift basket full of sardines and jerkies.” And I was like, “I’ll take the first bite and I’ll let you know if everything’s okay.” Turned out that it was a delicious gift basket.

David:
Today’s quick tip is evaluate the equity that you have in your current portfolio. We get into this in-depth on some really good stuff. A lot of people are sitting on tons of capital and they don’t realize it because they’re not actually evaluating where their portfolio is at. So the easy formula is you look up and you see how much cash flow is this property producing in a year and don’t divide it by the initial amount you invested, divide it by the current equity in the property. We call this return on equity. If that number is less than you could get if you reinvested that money into a different deal, consider selling or at minimum, refinancing it and moving that money into more cash flowing real estate.
That is your quick tip brought to you by David and Rob. And now let’s get into the show. Chris Lopez, welcome to the BiggerPockets podcast. How are you today?

Chris:
I’m doing fantastic. Very glad to be here. Thank you guys.

David:
Yes. So tell us a little bit about how you got into real estate investing and what your portfolio looks like today?

Chris:
Yeah, so it all started about 20 years ago and I read Rich Dad, Poor Dad like majority of people out there, total mental shift and got me hyper focused on real estate, spent a little bit of time trying to get in real estate back then. I was a sophomore in college at the time. So I was about 19 or 20. So didn’t have money, didn’t have the knowledge and the internet was not what it was like back then.
So spent a few months trying to get into real estate, couldn’t make it work. So did some online marketing businesses for about 10, 12 years. But after that, business faded away and wrapped up. I then pivoted into real estate. And then over the last five years, I have really focused on building a real estate business first. I have a local podcast. I have a local real estate brokerage on focusing on building that [inaudible 00:05:21] there and then journey revenue, get in the game and then build my portfolio.
And my current portfolio is eight units, and then I also do a bunch of passive investing. So right now I’m in a very happy space with direct rentals and also a bunch of passive investments, but my main focus goes into my real estate business.

David:
And so your investments, are they all in the Denver area?

Chris:
All my directly owned rentals are. Yeah, they’re all within about, probably about 20 mile radius of each other. And then the passive stuff is just… that’s all over the country and half the states, but I’m a big believer in invest into my backyard so I can leverage my network, leverage what I know. It’s very hard for me to duplicate all this knowledge long distance. It’s not impossible, but I very much like to have a very singular focus and just down lay that. So I’ve decided to stick in Denver.

David:
So curious, what got you moving away from buying more units, doors, properties in Denver and into the passive side that you mentioned?

Chris:
Couple things. One is just a lot of it, it’s my lifestyle. I’ve got two young kids right now, three and five. So I’m very much in the trenches with my wife, raising my kids. I love it. And I’m also experiencing a lot of business growth right now for not only my brokerage, but also a couple other real estate related businesses. So I have a lot of very limited time. And so I’ve decided to start investing passively just to free up some time for me, and also better utilize my self-directed 401ks to start investing.
Not a big fan of investing directly on real estate with a 401k or a self-directed RA, usually not really great returns. So I’ve shifted a lot of that into more passive investing because it’s easier and you get better returns that way than the stock market.

David:
That’s cool. Kind of like me. It sounds like you’re a bit of a gadfly. You’ve got a real estate brokerage. You are in a private equity fund. You own some real estate, kind of a little bit of everything. So tell me, how did you get your business started? What’s the goal of the business that you got into? Do you see real estate investing as the end goal or is business the end goal and real estate investing is kind of icing on the cake?

Chris:
So I’ve gone through a few iterations like most people as I’ve grown personally, as my businesses have grown. Things have shifted and I’ll kind of rewind before I get into real estate about the past businesses I did because I built that previous internet marketing business, lots of success there in generating revenue and learning how to do marketing. And I started taking that cash flow, and then once I had achieved financial freedom, I started trying to pivot into the stock market day trading and then eventually foreign currency. This was all before Bitcoin and NFTs, and I got my butt kicked.
And so it made me realize that there’s three main things I can focus on. I said, hey, how can I invest my time and my money? Because those are two very different assets. And depending on what you have, you have different amounts throughout your life. So before I got married and had kids, I had a lot more time. So I prioritized my portfolio where I invest in the stock market. I’m a big believer in that, not majority of my portfolio, but I like investing in the stock market, but spend less than one hour a year looking at my stock portfolio. I’ll transfer in a couple times when I need to and I’ll check out three times a year to make sure the money’s still there, that’s about it.
Then I decided I can put my active time into real estate or a business. And as I started doing some deals, I did fix and flip, did a wholesale deal, did some things like that, I realized that my best use of time and skills really focusing on the business aspect of it. So I go out there and generate revenue that way and that’s where I get the highest return on my time. If I put a 100 hours or a 100 units into the real estate business, like my brokerage, my median, all that, I enjoyed a lot more, I didn’t get a higher return.
So my real estate investing, I spend a few hours a month on it, not a tremendous amount of time, but I very much put all my attention on the business and then real estate second and stock is a very, very third distance in my portfolio.

David:
That’s interesting. I like that. I like interviewing more people that run a business within real estate than simply are pure full-time investors. And that’s because I’d say when the podcast got started, your ability to become a full-time real estate investor to just buy a lot of property and live off the income that they made, this is a subjective opinion, but I just think it was easier than what it is today. There was less competition. There were less people interested in this. There wasn’t as much technology to make it smooth and as podcasts like ours have grown and new software companies have taken root and the information’s getting out there, man, it’s not hard to learn how to do this anymore. It used to be kind of a secret. It was like knowing Jiu-Jitsu and MMA. If you knew Jiu-jitsu, you had a secret nobody else had. Well, now everybody knows it.
It’s become significantly more difficult to become the traditional full-time real estate investor, but at the same time, there’s a big demand to get out of that cubicle, out of that commute, out of that job you hate. So what do you do? Well, I tend to think that a really happy medium is leave the job you hate and get a job in real estate which you like and let that supplement your investing. But like you said, you can also make good money doing something that you like more. So I’m curious, how did your background in tech as well as your SEO and marketing experience help you with building a successful real estate focused business? And was there a pivotal moment early on where you knew, “Ooh, I can go do this?”

Chris:
Yeah. So to kind of go back a few layers on there to build up to how this went into real estate, I want to tell that backstory because I’ve had explosive growth the last five years in Denver and my portfolio, my real estate businesses. And I’ll be like, “Wow, you’re an overnight success.” Yes I am, but it was built on 12 years in my previous business where it was not an overnight success and I got quite a few black eyes and punched in the face more than I would like to admit, but that’s just normal business, normal entrepreneurship.
So I started out, got my first position opportunity as a sales guy, not in real estate, but just general sales guy. I was like, “Cool, I’m ready to go. Let’s do this,” and I realized I needed leads. And so once I had that realization, oh, if I have leads, I can go out there and make my phone calls, make my appointments and then therefore get a commission so I can go out there and pay my bills and make money. So I had a huge mental shift there about generating leads. And so I put all my focus… All, majority of my focus on how do I generate leads? Because I realized if I had leads, I can make money. And I realized, oh, I can go out there and build a sales team, pass along the leads and act more as a sales manager.
So that led me to copywriting, YouTube marketing, Facebook podcasts. I kind of grew up with the internet from 2003 timeframe and just cranked on that business until about 2012, mixture of marketing and mixture of tech in there. And as I focused on the leads, I just kept getting more and more success. And then the huge wake up call, I think it was like 2010 or 2009, is something called the Google Slap, which I don’t think a lot of people are familiar with, but as I’d ramped up all my advertising campaigns, we were spending on average between about $20,000 to $30,000 a month on a Google AdWords campaign. When you search Google, those ads would pop up, Google Display Network, all the typical stuff.
Well, the Google Slap is what some marketers coined this 12, 13 years ago where Google just unilaterally turned off a ton of accounts. They turned off people in financial services, affiliate marketers, work from home opportunities. Anything with types of claims, just all board. They turned off the ads, no warning and just cryptic, “Oh, here’s an email. Your ads are turned off. Here are three bullet points. And of course, no contact.” And those Google AdWords campaigns was the majority of our leads at the time. And so we had one big pipe coming in of a lot of leads and it was phenomenal until they turned it off and it wasn’t phenomenal anymore.
So we spent six months, me and my business partner, pivoting, figuring out, spent like $20,000 on consultants to get back on Google. We eventually got back up there, but the big lesson I learned there is I need to have multiple sources of leads and ideally lead flow that I have control of. If all my leads are coming from one advertising campaign, it’s great until it’s not because then Facebook, Google, whoever can turn that off and just put you out of business very, very quickly. So that made me pivot more towards content marketing, personal branding, being a thought leader because if I can go out there and publish a content, establish my website, build my email list, I am controlling my destiny.
So I very much focused on that and that was a huge pivotal moment in my mindset as a marketer and also a business person, realized, hey, if I want to be in control of myself and my business, I have to know how to generate leads and have a consistent supply of it, and cannot rely on an advertising campaign from a big company that can just shut me off.

Rob:
Yeah. I think a lot of people fall into this trap where they want to put all their eggs in one basket, and I think the reason that this happens is because if you find success in the proverbial basket that I speak of here, why change it? Why do anything? Why would you take time away from a successful thing to then go and put time into something else that’s probably not going to be as successful? So I’ve seen this time and time again, even in my own business. I started out on Airbnb when I was starting out my short-term rental portfolio, and about a month ago, month-and-a-half ago, same thing, they shut down my account. They didn’t tell us why? This was happening to a lot of hosts everywhere. And we’re just like, “Oh my goodness.”
So after we got access to our account, now we’re like, “Okay, probably shouldn’t put all of our eggs in that basket.” So now we’re on Vrbo. We’re starting to list on booking.com. We have direct bookings websites. And so it’s something that is very painful in the moment to do so, to stop focusing on the one thing that works because it works. I just feel like I’m taking money away from my business by not doing that. This is something I’ve struggled so many times Chris, because I tend… I’m a YouTuber by trade, but now like you said, I do Google Ads as well, TikTok, Instagram. And I feel like it takes a lot of time at the very beginning to just establish all of those different ways to acquire leads. But once you lay the groundwork, that’s how you can truly start growing your business.
So after you’ve found out that your Google account was sort of back, obviously you started pouring back into that, but what was your first big step from a lead generation source? Was it content and was it a specific platform?

Chris:
It was content, and that happened as those businesses were winding down. So I won’t talk about what I did in that business, but how I took that knowledge and pivot to grow real estate because the previous stuff was a nutrition business, online marketing, not related to real estate whatsoever. And so you can always build upon those lessons and skills you’ve learned. And so I took that knowledge as I wanted to get into real estate. So it took me about 18 months to figure out the best way to get into real estate and I’m very happy to fail forward. I have no problem with failing as long as I don’t go bankrupt or hurt someone. I’ll fail all day long and I’m happy to fail because the faster I fail, the faster I learn. So we’re not there to fix and flip, did a wholesale deal, did a few different things, made money, but I was like, wow, this is going to be a very hard transition for me to get into real estate.
So I started realizing, wow, in real estate, especially local markets, there’s just not a whole lot local knowledge. And six, seven years ago, I found BiggerPockets, started listening to a lot of podcasts with Brandon, Josh and getting plugged in on the BiggerPockets community, phenomenal, learned so much, but I kept coming back to what do I do in my local market? What do I do where I’m at, which is Denver, Colorado? How do I have success here? Who do I find? And I could find no online content and I really had no network out here, no experience. So I did not know how to learn or connect with people.
So after probably about two months of just Googling and searching BiggerPockets forums, a light bulb went. I was like, “Oh, I can be the BiggerPockets of Colorado. That is my solution to go out there and they will establish myself and generate business and investment opportunities for myself.” So I basically took what I wanted to know because I figured I have all these questions. I’m not the only person out here wondering, “Oh, what do I do in Denver? Who’s the lender? What’s working? What’s not? Because the 2% rule did not work in Denver back then, all this stuff.
I said, “Hey, I’m going to go out there and fill that void.” And as I went out there and was analyzing where I could create content and also, I’d created a ton of content between podcasts, long form sales rental letters, YouTube videos, all that stuff, I decided to go on the podcast route. And that was because podcasting was really starting to boom then, but from just a content production standpoint, I think prepping, recording and producing podcasts is some of the easiest content. Videos were great, but man, a lot more prep, a lot more editing. Where a podcast, I was in my gym clothes half the time and just have a conversation like we’re having, and then go out there and publish it.
So I focused on the podcast because that worked well on the trends. And also, what I noticed was it was going to be the fastest way for me to go out there and create content, and I’m a big believer in speed. Speed matters in everything you do. So I could go out there and crank content very quickly. So I started with that podcast first approach, and then I just did some very simple tactics of writing a simple blog post to follow along with it, repurpose some content. And all I did was take what questions I want to know and other investors want to know, and I would go find and interview people with that expertise around Denver, and I would basically just stick the keyword Denver in front of the podcast title and it was just instant SEO juice. And so that helped grow the podcast and then that just started the whole machine going.

Rob:
So when you’re establishing yourself as a thought leader, and a thought leader is someone known in this space, an authority of sorts, if you will, what are you doing to really do that, to establish yourself in a new market, zero network and zero experience? I know that you have the podcast out there. And so right now you’re obviously very smart. You’ve done this, you’re successful, but for someone starting out, is it just a matter of making content and being like, “I’m just going to do a lot of it,” or were there specific things that you were doing to really, really solidify yourself in the space?

Chris:
Yes. The biggest thing I would say is I went out there and got a mentor. I had the expertise to create content and get to know how to get eyeballs on the content. What I did not have was the expertise on all the real estate investing tactics and techniques for what works in Denver, Colorado. So I had two options. I could go out there and… Actually, I had three options, go out there and try to learn everything myself and then create it, which is a very, very long way to do it. I could fake it till I make it, and I hate that because a lot of gurus, a lot of people over years, it’s fake it till you make it, and that is complete BS. I do not like being inauthentic, but the main way, I go out there and find that person with the knowledge. That was the biggest growth hack I could go towards.
And so my previous business, I learned the power of mentorship and the power of hacking into someone’s knowledge and network, because it can give you that hockey stick type growth of just vertical growth. So what I did was like, “Oh I have this idea. I need this, but I need to learn this skill. I need to listen to knowledge and so all these other thousands of investors around Colorado.” So I did something really unique in marketing. I started calling people. I started cold calling brokerages that had any type of semblance of investing, and I was just very pleasantly persistent in my follow-up and I found a mentor.
And when I find a mentor, my goal is to turn that mentor into essentially a business partner because what a lot of people do is we all want mentors. We all want that advice, that knowledge, but what happens is people go out there, “Oh, can I buy you a cup of coffee? Can I buy you lunch? Can I go sweep your fix and flip?” It’s not really like me going out and buying coffee with someone, they don’t care about that $3 latte I’m buying them. An hour of their time is worth way more than that. So a lot of times mentorships, it’s like a one way street in value. I’m taking, taking, taking. I did not want to do that.
So the focus is on how can I make it a two-way street of value? How can I make it a win-win situation? And that starts with being self-aware for what I am good at, what skills do I have and how can I apply those skills, knowledge and hustle to someone more successful to me? And a lot of times they have a lot of knowledge success in these buckets or these banks and I’ve got knowledge success in other buckets. Well, where can we find complimentary skill sets? Because if we’re both the same, not good partnership, but if we have complimentary skill sets, well then one plus one equals three.
So found the guy, Charles Roberts, and he was actually on your podcast. I think episode 278 or 276, The Boring Path To Real Estate Success. Found him, and just a phenomenal guy. He has founded one of the biggest brokers in Colorado. He had been investing in a realtor for about 15 years and just kind of one of the pillars of the community around Colorado. So highly successful, highly busy, but what I did is I went out there and I researched him. I found out what he wanted to do. I found out where there were gaps in his business. I talked to some of his employees and agents, and just did research on there and I found out he has a passion for teaching, he generally loves teaching. He would teach classes all the time, 30, 40 person classroom, but that in-person class is great, but it’s very hard to scale.
So I proposed the idea of, “Hey, we could take what you’re doing and put it on the internet, go out there and market it.” And he’s like, “I would love to do that.” And then what I did was once I provide that solution to him, I went out there and said, “Hey, here’s what we’re doing. Here’s the plan. Give me this.” And I didn’t wait for him to tell me anything. He gave me a couple lemons. I went there, made lemonade and came back, “Hey, here’s what I did. What can we do better?” And I just started executing.
So I think the key here for this is being self-aware, what’s my skillset? Trying to identify what value I can provide to my mentor, and then I want to align their interest with mine because hey, people can give free advice. They can be a friendly mentor, but at some point everyone has to focus on their business, their problems, their revenue. So the way we structured it was as we’re starting this content, this is very common in the real estate agent industry, is to pay referral fees. So as clients came in and I would create the content, I would work them and help them go out there and find the property, and then Charles would get a referral fee.
And the plan was, as everything built up, I’d always continue giving a referral fee, which I was very happy to do, but he had a vested interest in my success. So the more money I made, the more money he made and it was a great win-win situation that kept him interested and to start snowballing from there.

Rob:
A lot of music to my ears here, Chris, because this is something that I deal with every day. Probably you two David, feel free to chime in on this, but I have a lot of people that will reach out, and this actually just happened today. Someone reached out, they asked me a very, very, very long question on Instagram, that was like, “Okay. So I inherited this. I have $30,000 here. Here’s five deals. It comps out here, I would love for you to look at the whole 18 unit development, this and this and this. Also happy to provide any value to you as well. Just let me know.” And I was like, “Well, I could obviously chime in on that, but what value can he bring to me? I don’t know. I’m sure there is. I would love to know actually,” but he said, “Happy to provide value too.”
And I’m like, “But what do you do? Are you good at copywriting? Are you good at editing? Are you good at sourcing deals? Are you good at being boots on the ground? Do you have family? Do you have a family of realtors across the country? I have no idea.” And thus, because I didn’t know. I just didn’t have time to think about… It would be very odd if I was like, “Well, hey man, I actually need someone to answer emails. Is that value you’d be willing to provide to me?” It doesn’t really make sense. And so I think that if you’re seeking out a mentor, that’s totally fine. Shoot your shot, put it out there, but try to find out what that common ground is. And if there’s something that you know that, that person likes or wants or needs, talk about how you can fulfill it.
I think Brandon talked about this a couple years ago on the podcast where he said he wanted to learn how to surf or something like that. I think someone reached out and they’re like, “Hey man, I can teach you how to surf if you teach me how to, I don’t know, buy houses or something.” I don’t remember, and I think they actually became friends and worked together in that capacity. And I was like that to me is what people should be seeking when they’re seeking a mentorship. Don’t just ask, “Hey, can you do this for me? I can also help you too.” Be very intentional and specific with how you can help me, otherwise it just gets lost in a sea of messages. David, do you ever get messages like this? Or how do you handle it when this comes across your desk?

David:
Yeah. And I’m trying to be very diplomatic about how I answer this because Brandon and I did an episode one time where we said, look, don’t just ask us for a cup of coffee because $5 is probably not worth two hours of time, and it sounded very arrogant. I’m so good. I’m too good to help someone and I don’t want it to come across that way. It’s more-

Rob:
Sure, sure.

David:
If you want to, I can use an example of working out, right? If I want to work out with The Rock, the reason I want to work out with him is he is very good at working out. I’m going to learn things about workouts from The Rock. However, because he’s very good at working out, he is very focused and dedicated and purposeful about his workouts. Okay? He wouldn’t look like The Rock if he stopped every workout to teach the new person bench press form. Okay? So if you’re going to go, want to workout with a person like that and you’re asking for that much of their time in the space that they take very seriously, you can’t show up as a person that’s never lifted weights and be like, “I want you to be my personal trainer.” That’s kind of what you’re asking. Okay?
So you got to be aware that you probably don’t want work out with The Rock. Go start working out, follow what he does. When you get to a certain point, it might make sense to say, “Can I come work out with you? Let me spot you or let me help you,” in some way that would benefit The Rock. Did you have something you want to add there, Rob?

Rob:
That’s great. No, that’s very, very, very… That’s a nice way to put it. I think that’s perfectly diplomatic in that because it can seem harsh and no one obviously wants that, but I’ll give you a really good example of actually what just happened to me two or three weeks ago, I talked about on BiggerPockets, how I’m becoming a realtor in the Houston market and I’m going to start a real estate channel specifically for Houston. I just started shooting all the content for it yesterday. And someone heard that and they reached out to me on Instagram and they said, “Hey dude, I love your channel. I follow it super, super closely. I’ve actually started 14 real estate YouTube channels around the country. I’ve got 50 agents under me or a 100 agents. I can help you do this. Would you be willing to meet?”
And we met and he’s provided a ton of value and we’re actually going to partner up on a few things here in the city. And that to me was a really great example of him understanding that I was going to fall into some kind of issue. There’s going to be some barriers with what I’m about to go through and he’s like, “Let me help you with that.” And I was like, “Okay, I don’t know what I know… Sorry, I don’t know what I don’t know. Let me hear him out.” And I heard him out and now it’s going to turn into a really cool thing.
So that’s a really great example, David, because that’s… I’m not going to say I’m The Rock. I think we can all just look at me and pretty quickly see that I’m not, but in this analogy, I’m pretty good at YouTube and he’s done that too, and he brought it to me and I was like, “Okay, really, really nice.”

Chris:
It’s your hairstyle that kills The Rock persona story for you. That’s the main issue going there for you, Rob. But I actually want to unpack, to piggyback what you guys were saying there. It’s not just asking how I can probably value, be proactive. I have tons of content like you guys out there and people schedule a phone call with me or email me. I’m like, “Have you spent more than 15 minutes on one of my freaking podcast or my even read my bio on LinkedIn for goodness sake?” You can research someone. So if I was where I was years ago, go online, research people, go follow their channel, go follow them on social and do that for a week. And you can see things, especially from a marketing standpoint or business standpoint, and look for opportunities on how to make something better. Or, “Hey, I noticed this. I had this idea here or I saw this that you did here and actually repurposed this into a landing page or a podcast.”
Don’t just say how I can provide value? Come provide a solution, actually come with something in your hand, ready to go because guess what? That gets a lot more attention. I think you were saying that a few minutes ago, Rob, if someone has to ask you how I can provide value and I have to put on your busy schedule and already, I imagine you’re probably already maxed out in bandwidth like all of us are, you don’t have time to figure, “Oh how can this guy, how can user one, two, three, four on Instagram help me out?” I don’t know. Then you forget about the person. You never think about them again.
So research people and be proactive, and come back with a product or a solution proposal and show it to the person.

Rob:
Couldn’t have said it better myself. I think I’ve just experienced this several times and I’m like, I’ve seen it work. It’s worked on me several times. I’m like, “Yeah, there we go. You did it. You showed me value. Thank you.” At the end of the day, we just don’t want to think. We don’t want think. If you give us something and you make us think for five, 10 minutes, we’re too busy. We’re like, there’s so many things. I’m scatter brain. I’m ADHD. If I have to think about… put any thought into a random message that comes my way, I’m like, “I just can’t. I’m so sorry.”
But if it’s like, “Here’s what I can do. I’m working on it now. Here’s how you’re not doing it and here’s how I’ll help you do it,” I’m like, “Oh, that’s a great pitch right there.” The four second power pitch as they call it.

David:
This is a principle of success that I think Chris is a great example to highlight. So Chris, I’m going to get your two cents on this idea. The wrong way to approach getting good at anything is to say, “Oh, that’s a person that’s good at it. Let me just see if they will become my friend or my mentor,” because mentor doesn’t sound bad. That’s a nice word, but what’s it really saying is I want this person who doesn’t know me to do all of the heavy lifting that I don’t want to do myself to learn this thing and help me avoid all the mistakes that they had to go through themselves just because they want to help somebody out. That doesn’t sound as nice as mentor, but that’s what’s behind it. The way that success works is it happens in incremental steps. Okay? If you’re climbing a staircase, the step three quarters of the way up there, you can only get to if you can get to the step beneath it. You cannot skip from the bottom all the way up to the top.
So you have to have some form of a skill, some way to bring value to the world, that you then apply in a different way, that opens up new doors for you, that gives you new skills. Now there are more other doors that you can walk through. You get new skills there, you’re building momentum. So like Chris, what you were saying is you were in SEO, you were in marketing, you kind of understood copywriting. You knew how to get people to find you when they were searching the internet. You turned that into a brokerage that could get leads coming in. You learned a lot about real estate. You learned a lot about helping clients. You got exposure to investing by watching your clients go through this process and learning the system, which made you confident. That confidence allowed you to go buy your properties for yourself.
Now you’ve got the confidence that comes from owning property with the confidence that comes from helping clients. You can now apply this into starting a software company like, “Oh, I know. People need help with this thing. I can solve that problem.” That opens up doors that gets you into private equity or syndications or whatever you’re doing. Every successful person did some form of a trajectory that worked this same pattern. Elon Musk did not start Tesla as his first company. He got into whatever he did with PayPal. And before that, he learned something that gave him skills to get into PayPal.
You can absolutely get mentors, in my opinion, if you’ve already got a skill that you can bring to help them, and then you learn new skills from there. It’s the skipping, “I don’t want to build the skills. I just want to start off at the top,” that stops so many people from finding the connection that they need to get them ahead. And when we say things like bring value, that just is a confusing term because that could be anything. That could be like, “I’ll smile. I’ll be happy. I’ll get you a coffee. I’ll send you an encouraging message,” but that isn’t necessarily going to get the attention of the person that you want to help. It’s got to be something practical.
So I think Chris, you’re a great example of the person that walked that staircase. So Rob, I’ll let you get your question in there. And then I’ll ask you Chris, from your experience, what is a way that you see a person can start building skills right now, that would both benefit them in their wealth building as well as in the mentor that they’re trying to find?

Chris:
So I think the best thing to do there is you got to start off with a self-assessment, self-awareness because at this point, anyone listening to this podcast, I’m assuming they’re probably older than 18 or they’ve got some life experience out of high school. We’re already at that point in our life have inclinations towards items we like. Some skills we developed from some jobs, some courses, whatever it is, like their skills. So I’m a big believer in doubling down on what you’re already doing.
When I got started in real estate, I looked to go do a fix and flip. Did one, made $25,000, and it was a pretty miserable experience. I was like, “Wow, for me to start a fix and flip business, I’m starting a lot of my skills from zero. But if I can lean into existing skill sets, I can keep doubling down those.” So I think it all starts off with doing a self-assessment for two things. What current skills do you have? And then what do you enjoy doing? And I think really aligning those two things is phenomenal because anything that we are going to do, we’re going to put our heart into it. We’re going to put time into it. And I wake up excited every day to go out there and start my job, start my day and just attack the day. I love 90% of what I do, where as I was bouncing around the past and about what business to start, I would research something or start and be like, “Uh.” Kind of a humdrum feeling.
And then if I’m not that… I don’t have that excitement, I can’t go out there and execute. And so I think starting with those two things is very important and then go out there and leverage that into a mentor, into a new business. And I like to look at skills that can be very scalable and that I can go out there and just have a real honest crack at going out there and providing value to multiple people in different terms, but going out there and looking at your own skills and I would say pick one or two that’s already a good skill you have, that has value to the marketplace or whatever niche you want to get into. Go out there and get better at that.
I’m not a big believer in, “Oh, let me go to right field when I’m on first base. Let me stay where I’m at and get better and better and better,” because the more you focus on that, I think you get a better return on your time and your skill sets by getting very, very specialized.

David:
Why don’t we… Chris, do you have a four-step system, editor, you can take this part out, that we can go into?

Chris:
Yeah. I have a four-step system. So it’s that self-awareness like I talked about, and this is for finding mentors, I would say. This is my four-step process for a mentor. So it starts with that self-assessment I just talked about, goes back to what we talked about to research the person. And basically, I’m not going to be diplomatic. Don’t ask stupid questions. Don’t waste the person’s time because if you do, they’re probably not going to return your phone call or not going to return your two-page Instagram DM.
The third step is be proactive and provide a solution the mentor needs, and the four-step is actually follow-up. I call it being pleasantly persistent. Now, when I first started reaching out to Charles or the mentors over the years, I get it. They’re busy. Cool. They don’t reply to one email. I don’t stop there. I don’t go and cry, “Oh, you just stopped calling me. You didn’t email me back.” I get it. He probably gets a 1,000 emails a day. Awesome. Give it a couple days, send it back, do something else and just stay pleasantly persistent.
And as you do that, make sure you execute. So those are very much the four things that I have focused on and I have repeated that process numerous times with really good success.

Rob:
Yeah. I really appreciate the non-diplomatic response here. I think this is probably something that we deal with a lot. If I had a $1 for every time someone reached out and said, “Hey, I’m looking to start a short-term rental business. Do you think you could send me your favorite YouTube video that you’ve done on how to do that?” And I’m like, “You could just go to my YouTube channel and just like… It all teaches it really.” And I’m sure David, how many times have you ever had something that’s like, “All right, man, I’m looking to BRRR any tips?” I’m sure the response is, “Have you read my book?” Because I do have a whole book and it’s the biggest. It’s the greatest assortment of tips out there on how to do a bur.

David:
Yeah, that comes up quite often. I think I just want to highlight, the reason we’re doing this is because we care about the people that are wanting the mentor. We legitimately wish we could help every single person but if we did that, we would never get our workout in. We wouldn’t look like The Rock and then you wouldn’t come to ask us, “How do I do this?” Because I’m not in shape anymore. Right? It’s not a, “I’m better than other people thing.” It’s just logistically, this is impossible. When you get the message where they say, “Hey, I’m looking at these seven deals. Can you analyze all of these for me, and then tell me which one of them you think is the best one?” You go like, “There’s absolutely no way I can do that.”
But you’re so excited and this person wants invest in real estate. You want to help, so what we think is, well, let’s make a video that would show people how to analyze a deal. Then everybody could watch it. In general, yes, you get the whole, “You can read my book or whatever,” but what I tend to find is the people that I’m mentoring the most, if I’m honest, are the people that work in my company. So if someone says to me, “Hey, I really want to learn from you,” I would say, “Well, do you want to work at the wine brokerage? Do you want to work on the David Greene team? Do you want to work on whatever thing that I have going on?” Because I will pour into those people because Chris, like you said, that now becomes a two-way relationship.
I’m sure agents that work in your brokerage have a much better chance of getting your attention and your mentorship than a person who’s like, “Yeah, I’m buying my house with this other company that’s not you, but my realtor doesn’t know what they’re doing. So can you tell me what I could do instead?” That’s a very common one I’ll get and I don’t think people realize it’s the same feeling of you ask a girl out and she says, “No, I’m not interested.” She dates another guy. And then she’s like, “Can you tell me how to communicate better with men? Because my boyfriend doesn’t understand me.” That hurts. You chose to list your house with someone else and then you’re coming to me to say, “How can you list the house?” That’s not a way to get a mentor.
If you came and said, “Hey, would you sell my house? And if you do it, I’d really appreciate if you could show me some of the techniques you use when you’re flipping a property,” now there’s a very clear two-way relationship and we can pour ourselves into it.

Rob:
I really do liken this to Instagram ads and why they work on me so well. I’m such a sucker for an Instagram ad because I don’t like to think about things that I need because I’m just too busy to think about it, but I know for a fact I need more clothes because all my clothes have holes in them. And so if Instagram serves me a picture of a cool guy, strapping with a nice shirt and I’m like, “Yeah, that’s a nice shirt. I’m just going to do that because I didn’t have to think about it. You made the decision for me.” I’m such a sucker for ads. I hate it, but it’s very true.
So Chris, I wanted to talk about… Did you cover off on all four of those steps before we move on? What was the fourth one? I think you probably ended there.

Chris:
Yeah. The fourth one kind of muddied up on my explanation. That’s just being the pleasantly persistent, which is a polite way of saying follow-up, but that’s my mindset. I want to be pleasantly persistent, not annoying, but like, “Oh yeah, I got to answer this guy. Oh yeah. This guy, this guy, this guy.” So be pleasantly persistent and then also just falls into execution, which maybe step five. I just assume execution, probably shouldn’t assume that, but execute on what you’re going to say.

Rob:
So that’s the four steps. I think that’s very nice bow on how to find a mentor. I’m sure now you’re probably seeing kind of the opposite end of it now, as you become the mentor. Dave talked about how he takes the different employees in his company and that’s the people that he pours into. I want to start moving in back to-

Chris:
Actually, can I?

Rob:
Yeah.

Chris:
I want to throw one more thing on it because this has been a very interesting shift for me because I’ve been very focused for the last 20 years on finding that mentor to grow, grow, grow, and now with where I’m hitting in my career, now I’m the older, more successful guy that I used to go after. And so I’m having that new effect where I’m kind of changing from always finding mentors, which I still want. I’m still finding bigger and better mentors, but I also have now people reaching out to me that are doing the same approach, which is creating investment opportunities, business opportunities or great employee agent opportunities to where I get to kind of be in that mentor role now, and I always try structure with how I’ve structure the mentors in the past.
And that’s been a super fulfilling, personally fulfilling for me personally, but also very rewarding for me from a financial and business standpoint as well.

Rob:
Yeah. Actually, I’m curious, on the opposite end of this, you said it’s fulfilling, but obviously you’ve been on the end where you’ve tried to get mentors time and time again. You said you’re still there now. At what point now are you looking… How much of a mentor are you looking to be? Are you looking to be a mentor for more people in your life or do you see your role as a mentor more in the content capacity and more in the podcasting capacity where you can influence a much larger group of people?

Chris:
It’s both, because I love the one-on-one mentoring, but the problem is that’s very hard to scale and there is… We all have so many hours in a day that we all have, so have to be realistic about that. So I definitely view the content marketing as like that’s the most scalable way because whether one person listens to it or a million people, it’s about the same amount of work in cost a lot of times. So I focus on a lot of that to do the top of the funnel type branding and providing value, and then looking at various ways to mentor people, whether it’s an agent on my team to go out there and mentor them in their business, or if it’s a new business opportunity where someone can bring, “Hey, I got this idea, can we leverage this and do this?”
So I try to spend most of my time doing the content, but also looking for highly one-on-one relationships that give me a great return on my time for investing in that person.

David:
Funny that you look at relationships in a similar way to how we look at real estate. We don’t put our money into deals that don’t give us a return. We don’t dump money into a property that’s not going to give us some form of cash flow. Right? That mindset that goes into investing really does incorporate into everything else.

Rob:
It really does. I hadn’t really thought about it that way. David, you’re so profound sometimes, man. It’s getting me right here, right in the old [inaudible 00:44:04]. Well, I wanted to ask Chris because obviously, podcasting and in the content side of it was a really big component to this for you. So the content side of it was one of the ways that you wanted to start producing the leads and I wanted to talk about that dichotomy, the marriage of content and lead generation and how you were able to start actually extracting leads from the content that you made? Was that simple to figure out at the beginning or is this something that you’re still figuring out?

Chris:
I’ve been doing this for about 20 years now, so it’s very simple for me. When I got into real estate five or six years ago, I already had so much that I could do it in my sleep. And I think one of my superpowers is that I’m very good at putting myself in the shoes on the other person. They’re on their iPhone, they’re on their laptop. I’m very good at putting myself in their shoes and getting the right information on there.
So my general attitude is that there’s a whole audience out there. A third of the people won’t like me, a third are indifferent, and a third really like me. I don’t care about the people that don’t like me. I don’t care about the indifferent people. I want the people that jive with me, that like me. And so my philosophy is go out there and push a lot of content, and just be very authentic and be very real because people eventually find out who you really are. So just be real from day one and that starts attracting the right people.
Now, what gave me a very… I think a great advantage is I’m also a salesperson. I talk to people, I grab coffee, I make phone calls. I go meet people. I go to networking events. So as I’m going through my investing, as I talk to other people, I know the tools people need. I know the questions they have. So provide all the content and then do the classic lead magnet. What do people need? Well, spreadsheets and local market trend reports, they work amazingly well. So Hey, here’s a toolkit. Here’s your… I call it your Denver real estate investing toolkit. Go to the website, download it. You get, I think it’s like three or four spreadsheets. You get a bunch of local trends, data, a few maps of what’s going on around town, and so a lot of people come opt into there.
And so it’s just the next step in the relationship. And then I get to talk to the person. And my first goal was just to every time someone opted in, I got their phone number and I called them and I would build the relationship up that way. And so at first, it was just a very small stream, a very small trickle. And then as you produce content, it’s like compounding interest. If you do it the right way, it builds up every single month. I think we all know the power of compounding interest. We’ve all seen like the 401k stock graphs and by year 20 or 30, you’re making more money off your interest than you are what you put in, and I view content marketing as the same way.
It starts compounding in two ways. You get more and more reach out there as you get different SEO and different long tail stuff out there. But also, since real estate’s such a big pipeline, people listen to me for a year or two and then reach out, “Oh, I want to invest. Oh, I should talk to that Chris guy.” And so as leads start coming in, I’d call every single person and help that individual out, put the game plan together and do the process. Well, then it got to the point where I had too many leads I couldn’t handle myself, and I started getting busier and busier. So I actually started taking the phone number off the form and started going more towards a marketing approach.
So I would just do that incremental stair step like Dave was talking about on… Every time I’d get to that next part of the funnel, I would figure out what do I need to do to scale? What do I need to do to kind of take this campaign or my business up one level? And that’s just a constant re-evaluation of what’s the best opportunity and what stuff is going to get off my plate? What’s not working well? Because making phone calls to everyone is great in the beginning, but it’s a lot of voicemails, a lot of time and eventually it gets to be too much, and then you adjust and grow from there.
So I very much focus on just content, lead gen, connecting with people. And then my ultimate goal is when I have my agents, I want to drown them in leads. That was my goal from day one. That’s the game I play. I’m like, “Oh, David, you’re on my team. All right. My goal is to drown you in leads,” and that’s just my competitive nature and gives me a really good focus.

Rob:
Yeah. Let’s talk about the lead magnet side of it because we’re talking about providing value to people. Right? And so your lead magnet to people is a piece of valuable digital real estate, if you will, right? A PDF that teaches you how to do something. You said it was the Denver investor toolkit. So that right there already, if you go and you open that and you read it, it’s going to give you some fundamentals about investing in Denver, that teaches that person a lot. You have now given that to them. In return, you’ve probably gathered their information, their name, email, maybe phone number, and that right there establishes a relationship. They trust you because you’ve given them something that they’re going to use. And now there is the opportunity for you to communicate them, whether it’s via email, whether it’s phone calls. For me, lead magnets are a really big part of my business too.
I provide as many lead magnets as I can. I have all the gear you need to start a YouTube business. I have lists of furniture that people can use to furnish their Airbnbs. I have the different models that you can invest in real estate, and I give all that away for free to people. And in return, I get a lot of different leads for the different businesses that I run and it’s not complicated. It really isn’t. A lead magnet’s going to cost you a 100 bucks in design fees. It’ll cost you Chris, your time to copyright it, give it to a designer, they design it, you advertise it through your content, and then people will download it because spoiler alert, people love free stuff.

Chris:
Really?

Rob:
I know. It’s a crazy concept. Right? So that really is the lifeblood of a lot of the businesses that I’m running behind the scenes, is just giving that content away for free. Obviously, the ultimate lead magnet is your podcast, but then if you can give someone a tangible thing, it’s just one more like, “Oh, thank you for this. I really appreciate it.” So on the side of the lead magnet, do those typically produce pretty quality leads from you or are you still having to filter them out quite a bit?

Chris:
No. They’re very high quality leads. You guys ever watch Glengarry Glen Ross? That Alec Baldwin show or the old Alec Baldwin movie?

Rob:
I don’t think so.

Chris:
You haven’t seen that? Oh, okay. Got homework. Go Google Glengarry Glen Ross and watch an eight minute video on there, and it’s a 90s movie with real estate brokerages in there, and it’s a great scene with Alec Baldwin in there. And they call him the Glengarry leads. And so the Glengarry leads are like the great leads. And so through that marketing, since I’ve already established myself, I give so much away for free publicly, again, people like me or they don’t. People are like, “Oh, you know what? Chris is an idiot. Chris is investing. Philosophy is silly. I don’t want to do that. I want to do this.” They generally don’t come out and reach to me.
I’m not a wholesaler. I’m not into fixing the flips. So in the beginning I got a lot of people reaching out, but as I’ve established my brand and the content, I have very, very few people reaching out. And now when people reach out, they’re usually an amazing fit for what we can provide in the various services and help them go out there and invest in real estate. And then through the funnel and through all that, we have a very highly qualified lead base in investors. And so, no I have… So to back up on there, the better the content, the better the marketing, the better the person, the better the lead. And so I very much focus on that to attract the right person.

Rob:
That makes sense and I’m told also that you have a very unique form of a business card. Do you think you could talk about that a little bit too?

Chris:
Oh, I actually might be able to show you too. I got a row of them back here behind me. This is, I think one of my strengths and also probably one of my weaknesses, is I like to be creative. So oftentimes I reinvent the wheel when I shouldn’t, but the other side of the corner is oftentimes I get some really good ideas. So I actually don’t have a business card. I don’t have the standard business card to give to people because when I get business cards, 90% of the time they’re in the trash can when I get home. Now, if I actually make a meaningful contact, yes, I’m going to talk to that person. But most of the time, oh, a business card, whatever. If there’s no relationship there, people throw it away.
So what I have focused on is self-publishing books. I have published four books for Denver and Colorado real estate investing. So a very, very specific niche, and to go out there and self-publish a book, you can do it for less than a $1,000. Take some time, hire some people on Fiver, but you can do it for very inexpensive through Amazon or these different self-publishing sites. So I took knowledge in specific niches, like Invest in Colorado, or a really good one I have is The Ultimate House Hacking Guide for Denver, and that’s very geared towards house hackers in Denver. So super niche focused. So I publish those books and that’s actually one of the lead magnets, I give away my website. Plus when I meet people, I always carry a stack of books in my car. I have a couple on my laptop bag and I give it to people. So it’s just a couple things here then. If you’re an author and whether it’s a great book or a junk book, you have instant credibility. Now of course, always strive for great content actually give great value, but instant credibility.
But the second thing is people don’t throw away books. We are wired to revere books. Maybe it’s different now with younger generations growing up with internet age, but when I grew up, you just really respect, you trust books. And one of my lending partners out in here, Joe Massey, we do a lot of work together. And every year we publish an annual guide to invest in Colorado. So nine months ago I was at his office. We were just catching up and BSing, and on his bookshelf behind him, he had 30 books from 2019 and I was like, “Dude, why don’t you throw those away? They’re kind of useless. They’re outdated to keep a couple around.” He’s like, “I cannot bring myself to throw them away. Even though they’re completely… I don’t need them anymore, I cannot throw away books.” When was the last time you guys threw away a book?

David:
No, I’d be more likely to go drop it off at a bookstore somewhere because it feels wrong to throw away a book.

Chris:
Exactly.

David:
Burning book is sacrilegious. Right?

Chris:
Yeah. And so that’s why I like it because people don’t throw it away. What happens? It usually hangs out in bookshelf for months or years or decades. And so if that lays around the coffee table, next to me the bookshelf, well, they’re constantly seeing my name and then they don’t get rid of it. So I have done this to my old business and I think it’s one of the best growth hacks out there. And yes, it takes time, but here’s a secret to doing it. There’s this really cool website called www.google.com. If you go in there, how to self-publish a book, you can find amazing content on how to actually go out there and self-publish a book, pick a niche and go out there, publish a book and create your business card that way. Instant credibility and then your business card, AKA your book, it hangs around that person’s apartment, their house for decades to come.

David:
Yeah. I did the same thing. I wrote a book called How To Sell Your House For Top Dollar, and that’s something that we give to clients whenever they’re interested in it. So I think that that’s really smart. It’s also, in the world we live in now, nobody wants to pick up the phone and call someone that they don’t know, but they will stalk you online. They will find everything that they can about you without having to directly confront you. So a book sort of allows them to satiate their curiosity about let me know about this person without having to face rejection or awkwardness of a real conversation. We do the same thing with a lot of our listings where buyers don’t want to call and talk to an agent, but they will text. So we set it up where if they text, they can get pictures of the house and ask questions and chat with people, and then you can transition that into a phone call.
Something that I noticed you do different than other realtors and even maybe investor friendly realtors is that you’re obsessed with return on equity, which is cool because I think about this constantly. I teach and talk about it all the time. Can you tell us what this means and why it matters?

Chris:
Yes. I think everyone’s played Monopoly and I consider return on equity the way to go from a greenhouse to a red hotel, and kind of skipping that second, third and fourth greenhouse. So it’s a powerful way to scale up your properties and also scale up your portfolio. And this took me about nine months to truly wrap my head around, but once it clicked, it changed everything. It changed my own investing, changed [inaudible 00:56:38] clients and changed my business trajectory as well.
So a lot of the content out there, a lot of the education, a lot of our focus is on, hey, what’s the deal today? Let’s go out there and look at a property. What’s the cash on cash return? What’s the cap rate? Is there a good deal today? Which is a very important metric, but if I bought a property six years ago in Denver, a lot of things have changed. The market has changed. That property has changed and especially the last six years, appreciation has skyrocketed. And so it’s another way that the market gives you a return and I think a lot of us know that leverage is critical to success in real estate, and often while we get double digit, sometimes triple digit returns, because we can use leverage in real estate, which a lot other asset classes you can’t do.
And so if you think about a simple fraction, you have the numerator on top, the denominator on bottom, the numerator is the money that you’re making. So in that one year, it’s the cash flow, it’s the appreciation, it’s the tax benefits. It’s your tenants paying down your property. So it’s four ways you make money in real estate. That’s the numerator. The denominator, when you first buy the property is your initial investment. Great. I put down $50,000. I’m going to make $10,000 a year in cash and appreciation. Great. We know that return, but then after you get into years two and three and four, you can no longer just use your initial investment because your equity is starting to grow.
And you get into this really interesting, I say almost tension when looking at properties because what people see is their cash flow goes up and that’s usually the biggest metric in how we look at how well real estate is performing. So your cash flow is going up and a lot of times your appreciation is going up and all that, all your returns, but your denominator is growing as well. So if your denominator is growing $50,000 a year from appreciation debt pay down and your numerator is growing $10,000 a year, well that return gets smaller and smaller every year.
And so, one of my mentors out here, he’s just a brilliant, brilliant person. He mapped it all out. And a lot of times after about eight to 10 years, you start getting returns similar to the stock market as your real estate gets unlevered. And so the key with return equity is looking at, hey, how is this performing? Now, when you look at that, you can often see a 100%, 80%, 70% returns, but every year, especially… I should say every year, but in the markets we’ve seen the market conditions last 10 years and markets like Denver, a lot of other appreciated markets, you actually start getting a lower percent return on your money, now your equity, even though your cash flow is going up. So it’s vital for investors to go out there and figure out how to analyze it.
And I’ll give you a perfect example on how this happened to me. I bought my first place about 11 or 12 years ago. Before I was into real estate, before I was a realtor, I just knew things were so cheap and I needed a place to live. I should go buy something. I bought a condo for about $70,000, two bedroom, two bathroom condo, had a roommate and house acted it and got a private loan on there, 0% down at 5%, amazing loan condition. I didn’t realize how lucky I was at the time. And in my mind I was like, “Wow, why would I ever sell this property? I bought it for so low. I’m having an infinite return on my investment of zero. Why would I ever sell the property?” Right?
Well, fast forward seven years, [inaudible 00:59:59] I was like, “Oh, I’m going to sell this bad boy,” because what happened is I took this condo that went from $70,000 to $230,000, cash flow on the 1,000, 2,000 bucks a year, nothing great, but was paying the bills. And then I was sitting on about $180,000 in equity, and as I realized I could sell that or I could actually extract the equity, either through a cash out refi or sell and do a 1031 to kick taxes down the road, and I could take that equity and redeploy it. So I sold it, did 1031 and bought a fourplex. And now that fourplex makes me $1,000 to $2,000 a month in cash flow when I trade it up, and not only was the cash flow was there, but now I went from a $230,000 asset to an $800,000 asset.
So now I’m getting more appreciation, more debt pay down, more tax benefits. I increased all my returns and basically took that condo from not just a lower cash flow, but it was like a 5% return equity. Now I’m making a 25% return on my money with the fourplex. So that concept was extremely powerful for me. And then if you guys have any questions on there, we can talk about that, but I actually want to spend some time and talk about how I shifted that into helping my clients and that turned into some really cool business opportunities as well about repurposing skills into more opportunities.

Rob:
Sure. Yeah, let’s hit that.

Chris:
All right. And so this kind of came from the mindset and you guys are marketers, we are all in the minds of how do we repurpose content? Like the standard thing to say, we got an hour long podcast, let’s take a 42nd clip, post it to social. That’s repurposing content. It is a key pillar for success in marketing. And so I’ve trained my mind to always go out there and repurpose, repurpose, repurpose and years ago, the light bulb went off for me that, oh, I can repurpose skills. I can repurpose business processes that I’m doing into other products, whether it’s a different business or an info product. Like you’re an Airbnb expert, Rob. You know everything about Airbnb. You can turn that into a course or a download or coaching to go out there and you can repurpose that skill.
So I always look for how to repurpose things. It’s just a maximum return on my time. So this eagerness to learn return equity was for me and my investing. Light bulb went off and I was like, “Oh, well, I’m going to go out there and do a detailed write up on this condo trade up I did.” And now that became a great content piece of my website, my podcast. It’s actually one of the top content pieces ever produced. Draws on a lot of people, but actually help clients go out there and invest more. So it actually draws people in and helps me do more business and helps clients reach their goals by getting a better return.
And then through all that, we started developing ways to go out there and scale that so we could help clients more. Now, I built a spreadsheet and it was the spreadsheet I used to analyze my own condo to fourplex trade up. It was great and I used that for two to three years with people. Well, it just is very hard to scale a spreadsheet. And then what happens when you have a guy with nine properties? Let me make nine spreadsheets. Let me do all these different scenarios. I should cash out refi, I should do this. And you start getting, “Oh, now I have to create 50 spreadsheets.” You can’t scale that way.
So that pivoted into, wow, we need a software platform to go out there and actually be able to scale this and model these for clients. And of course, my first thought process was, hey, go out there and find the website to do it. Well, there was none out there and there was another light bulb, “Hey, we’re not the only people that need this. We can go out there, create it, create for our business, which would be key here. And if it works, awesome. If it takes off, great. It might be a whole other business because return on equity and housing properties is not specific to Denver. It’s not specific to Colorado. That service is needed for investors all around the country and all around the world.
And this goes back into… I call it, the riches are in the niches. This is a very niche thing that started out in a very, very specific market in a very small market segment. And then going deep on that and looking how to repurpose that grew into opportunities and services and software, and go out there and help other people around the country. So it was a big way. I took a concept for me and then repurposed it across marketing, across legion, across helping clients, and just some new business opportunities as well. And then starting to scale national as well.

Rob:
That’s amazing. That’s smart. That’s a very smart way to kind of swoop in and sort of just command that space. David, I know you’re relatively obsessed with the idea of a return on equity as well and you speak about this quite a bit. How are you doing the whole execution of return on equity in real-life?

David:
I have a great anecdotal example of what this looks like when you do it using several of the strategies that we’re teaching here at BiggerPockets and how exponentially powerful this can be. So I bought a property in Buckeye, Arizona several years ago and it was doing well. The problem is they started building a lot of new home construction around this house that I bought. So the value of my home was going up because new more expensive houses were coming in and there were now higher comps, but the rent wasn’t going up because most of these new homes were being bought and then rented out. So there’s too much competition for my rent to actually increase.
So I ended up with that numerator, denominator thing that you were talking about, Chris, where the equity in the home was increasing at a faster pace than the rent was going up. And so my return on investment wasn’t really climbing. So I sold that house. I think that I had probably put down like $60,000. It had climbed about $80,000 in value over a year-and-a-half or so. And I took that $80,000 in profit and I bought a house cash in Jacksonville, Florida. This was the first house that I bought out there and I ended up doing the BRRR Method on that property. So I recovered a 100% of my capital. I had almost the same cash flow on that deal as I had had in the Buckeye deal, but I had my $80,000 back, which I bought another house.
And then I used these long distance investing as well as value add as well as bur altogether. And I just kept using that same $80,000 to buy another house every three to six months, while I was still saving money to buy new properties. That one house turned into 10. On average, each of those homes had about $40,000 in equity when I was finished with them, which was $400,000 instead of the $80,000 that had been sitting in the original house. And then from there, I was able to build relationships with contractors, relationships with other wholesalers and people that were now bringing me deals because I’m the guy doing all the business out there. That led to more deals outside of just that initial $80,000.
And then the cash flow ended up being several thousand dollars, probably $4,000 to $5,000 on those 10 properties. And it’s a great example of had I just wrote it out and like, “Oh, it’s doing good. Why mess with it?” Or, “Oh, I have a really good interest rate on that property. I don’t want to have to lose it and get a higher rate on another property,” I would’ve missed out on not only the $400,000 in equity and the $4,000 in cash flow, but also the other 30 homes that I ended up buying in that same area, which I ended up selling and then doing the exact same thing like, “Oh, the cash flow’s not keeping up with the growth. Let’s sell it.” Did a 1031. Now I’ve got into more expensive properties that are short-term rentals, the cash flow’s going to be even higher. I added around a $1,000,000 in equity just from moving the money from one to another. If you look at on day of closing, what they appraise for versus what I paid, just that one move gained a million.
So in a sense you could say, I took $60,000, invested it in a property that went up to $80,000. I reinvested the $80,000 and turned that into not only a million in the new equity, but I’ve been paying that loan down for a while and the properties have been appreciating as well. That’s several million dollars over the course of, it’s probably seven or eight year time frame. Now, there’s a lot of things that go into that. We’ve had a really hot market. We’ve had a bull run. It’s not like this is going to happen every time, but you are going to have the same pattern happen every time. You’re going to see exponential increases when you take action with the tools that we talk about.
I just wanted to tell that story as a way of highlighting. You described the concept really well and I think people go, “Ooh, that sounds good.” Well, this is what it looks like when you actually do it. That’s a little bit more exciting when you can see how it plays out.

Chris:
Exactly. And kind of the way I pivot that for myself and our clients is that a lot of people sit down with a financial advisor and be their stock portfolio every year. “Hey, what do we need to rebalance? Do we need to go from change your stock allocation to higher buying allocation and all that stuff?” I think people should sit down and do an annual portfolio review and give themselves a reality check. Very few people do it, but I think it’s a great habit of doing it. And a common mistake I see is that people look at, “Oh, I bought this property five years ago. I bought for a seven cap. Okay, great. I’m going to let it ride.” No, no, no, no. You have to reevaluate that property at today’s value. What’s today’s cap rate? What’s today’s metric? What’s today’s value? What’s today’s rent? And is it a good investment today?
And that parlays into what David was talking about with analyzing, hey, if you have a bigger equity run up versus a cash flow run up, probably makes most sense to extract the equity or sell in 1031. So I’m personally having a look into my properties every single year, if not more frequently. I’m not a real active trader. I kind of do more of a swing every couple years. Trade up is my goal that fits my personality and strategies very, very well, but I would highly recommend investors out there, look at their portfolio every year. And if we have agents or lenders out there in a space, you want to create an amazing value for your clients. Do that, sit down with your clients, your investors once year, help them look at their portfolio. It’s going to do two things. You’ll help them reach their goals. You’ll also do more transactions, which is a good win-win.

Rob:
Man, I have just been waiting because I quit my full-time job about 15, 16 months ago. And obviously now to a bank, I look super broke when I’m doing okay, and I’ve just been waiting for my income to, “Season on my taxes,” for two years, so I could go out and get loans and stuff because I have so many houses with equity in them that I can’t touch. I just can’t do anything because I can’t qualify. And now, I just did my taxes. And finally, I’ve got my original house, the house that really kicked started a lot for me. And I used the equity to build other houses and cash out of those. That house has half a million, $600,000 of equity in it that I’m just like, “Oh, the things I could do with you if I just had access to the money.”
So yeah, I’m really excited. I am bummed because my interest rate on that is 3.2%, 5%. So I think we know it’s probably not going to stay at 3.25%, but just like you guys were saying, the yields from whatever properties I get into will definitely offset that extra a 100, 200, 300 bucks that I’m going to be paying.

Chris:
Yeah. And that’s another thing. People get stuck on the interest like, “Oh I got this property. It’s worth a $1,000,000 or $300,000 loan balance, but I got a three and a quarter interest rate.” Okay, great. That’s definitely a great interest rate, but let me show you what you’re missing out on, and that’s where people have to understand that real estate’s way more than just cash flow because right now you trade up, you’re not going to see a lot of times a big swing in cash flow. Of course, if you go to Airbnb or a higher cash flow model, yes, but long-term to long-term rental, you’ll see some cash flow increase, but what you really see is a bigger asset increase in NOI, net operating income.
And I always view NOI as future cash flow. As that property pays off or as things go, that is future cash flow. I think that’s a very important metric to look at when doing these evaluations, is not just cash flow, but what’s the overall return to really maximize that and realize, hey, a lot of this, it’s future wealth. It’s delayed gratification.

Rob:
Very true. Yeah. David slapped me around when we first met. He was like, “Dude, it’s not just about cash flow. Stop it.” And he shook me and I was like, “You’re right, you’re right Sensei.” And now I realize when you factor in cash flow, debt pay down appreciation, all that stuff, your return is double. It’s double usually what the cash flow is at a minimum. So thank you, David. You changed me. You changed how I think.

David:
People don’t get to hear this very often because the majority of real estate educators, they only understand cash flow themselves. And so that’s all that’s talked about and because cash flow is like what everybody starts off wanting, it’s the training wheels that you don’t always grow out of. Now that doesn’t mean cash isn’t important. It plays a very important role. You still need cash flow but just for an example, with the 1031 that I just described, my cash flow did go up, but let’s say I didn’t go into the 1031 space. And so let’s say theoretically, my cash flow stayed relatively the same. Well, I still took that $130,000 in debt that I owned on the Buckeye house and I turned that into, by burring and then doing the 1031 around $13 million of debt. So now I have the tenants that would’ve been paying off $130,000 are now paying off $13 million.
I took the overall amount of the house was worth around like say $200,000 or in that range. Okay? And that’s been now turned into a little over $15 million. So imagine if your property appreciates by 10%, a $200,000 house goes up 20 grand, a $15 million portfolio goes up by $1.5 million. Then because I’m value adding it every single turn, I’m also forcing equity at every single exchange of stuff. So every time I go out there and I’m buying deals and I’m getting them below market value, and then I’m doing stuff to add value, to fix them up, you’re forcing equity… I call it buying equity when you buy it below market value, but you’re just taking all these tools that we teach at BiggerPockets. They only make sense when you apply them and you have to be buying property to be able to use them. When you just buy it and it sits there, that is a strategy. It’s not wrong.
I buy every property assuming I’m going to hold it forever, but then you play the cards that you get dealt. And what we just got dealt was ridiculous inflation and huge appreciation and all this opportunity. Now there’s loan products where I can use to buy a house with that service instead of my own income, and buying is fun and easy again. And you take all this knowledge that people have been soaking up for the last five to six years, you start applying it. It’s sort of like watching these workout videos, knowing everything about working out, but you never go to the gym. You actually got to go work out to apply the stuff you’re using.
So I love, Chris, that you’re sharing this information as a broker, as a person representing clients. Guys, this is what to look for when you’re picking your agent or you’re picking your broker. You want a person that knows how to build your wealth, not the person who says, “Well, my commission is the cheapest,” or not the person who says, “I’m a marketing expert.” There’s a whole lot of stuff that agents have learned how to say. One of my favorites is, “I’m the neighborhood expert,” and people forget that no buyer ever cares where the listing agent lives or what they know about. They’re never going to even know the name of the listing agent, but yet listing agents can come along and say, “I’m the expert in this neighborhood and I know more.”
No, look for an advisor. Look for a person with experience that has done this, that is passionate about helping you grow your wealth and then develop a two-way relationship. Send them referrals, support their business, help them in the same way that you want them to help you. And in my opinion, in the real estate space, there is no better way for your average American to become a millionaire, to build massive wealth than just hitting these fundamentals repeatedly. Nothing I’m describing, nothing that we’ve described on the show is a massive home run that you just fell into or you got lucky. It’s just getting base hits, drawing walks, getting on base, slowly advancing forward, and then letting the power of real estate do its thing.
So this episode has me excited for all the people who have been watching and they’ve wanted to get in the game, but these really low rates and this artificial demand that we’ve created has kept anyone from being able to buy. You had to be the one out of 10 buyers for the last six to seven years to even have a chance of getting that house, and now the force has finally become balanced. Buyers are getting some leverage, a lot of your competition’s backing out. So you can actually use these tools that we’ve been religiously teaching all the time to get your butt in the gym and get those gains, get those financial gains. So thank you Chris, for sharing this. I’m going to move us on to the last segment of our show. This is the world famous-

Speaker 4:
Famous Four.

David:
All right, Chris, in this segment of the show, Rob and I will take turns firing questions off at you, one by one, and we are interested to see what you think. So the first question is what is your favorite real estate related book?

Chris:
My favorite one is What Every Real Estate Investor Needs To Know About Cash Flow and 36 Other Key Financial Measures by Frank Gallinelli. I read this book years ago. It’s actually one of the few books I actually referenced back on a regular basis, because it is a deep, deep dive into metrics and very advanced stuff, but this helped me really understand all those advanced returns, return equity that we just spent the last 15 minutes talking about. So this has been the most critical book for me in real estate.

Rob:
Awesome. What is your favorite business book?

Chris:
Oh man, that changes every time. I’ll give you two answers. So my all time favorite right now is Good To Great, Jim Collins book from I think 20, 25 years ago. And just one of the phrases that stuck in there with me was, “The right people on the bus,” because this book looked at a bunch of companies and just the great companies. How do you go from a good company to a great company?
And the thing that I remember was they focused on the right people on the bus and as your business grows, your seats change. And sometimes people no longer fit in a seat or you have to get a new person. “Oh wow. We have a new seat. We got to go fill this.” It’s all about getting the right person on the bus. And so that stuck with me and along that same theme, my current favorite business book is Who Not How, which is a very similar concept, just picking the right people.
And so that has been a key concept that’s really changed my business and how I’ve been able to scale things, and also just grow. So Good To Great and Who Not How.

Rob:
That’s awesome. You can kind of see it in the background. My buddy just mailed me that book this week and it was a note from Amazon. It said, “I think this book is going to change your life.” And I was like, “Everybody keeps telling me to read it.” So it’s going to happen this week. It will be the only book I’ve read since the BRRR Bible by David Greene, running joke on the podcast because it is the last book that I’ve read.

Chris:
BRRible.

Rob:
The BRRinle, I like that. Chris, whenever you’re not masterfully executing the art of getting a great return on equity, what are some of your hobbies?

Chris:
So I have two young girls and I just absolutely love them. So spending time with them, a lot of typical things other than Colorado, beautiful state, so outdoor activities, hiking, and also just kind of spending time with my girls to teach them life skills. This has been a very interesting thing for me. I’ve always known I love mentoring, but to actually be able to create and mentor little human beings into real human beings has been a very fulfilling thing.
So a lot of my time goes on there and then I go on an annual retreat every year. I don’t even say a retreat, but just an annual trip every year. And a lot of times they get older. It’s more like canoe trips or whitewater rafting trips, get unplugged for 10 days. I go with a couple friends who are not in real estate and it’s just a complete unplug and I find it very mentally refreshing. And so only seven days there where I don’t think about business or real estate.
And so getting that unplugged or unplugging is very, very critical to my mental health, I would say.

David:
In your opinion, what sets apart successful investors from those who give up, fail, or never get started?

Chris:
Oh, man. Where do we start the list on that? I think some common ones, I’d say two common ones are people don’t have patience. Real estate is not hard to get rich in, but it takes time. If you do what we talked about, like David was talking about, you do that for decades, you can become a multi, multi millionaire, but it doesn’t happen overnight. It’s not hard, but it takes time.
So I think people lack, patience and going along with that long-term perspective, that patience in mind is a lot of people set themselves up for failure from the beginning. Hey, if this is going to be a 30 year career for, it’s going to set you up so you’re can retire one day and you’re thinking about your future grandkids, taking care of them, well, you got to get through year one, two and three to worry about 30 years or 300 years from now.
And when people make the transition to being an agent or an investor or they quit their job and go full time, they don’t give themselves a financial runway because it all takes time to go out there and start a business and go investing. And I think everyone should go out there and structure a financial runway. When I pivoted to my real estate business five, six years ago, we structured things with my wife where she’s a veterinarian, stable W2, complete opposite to what I do, entrepreneur and investing, but everything was structured where we could live off of her salary. No problem.
And so we’d plan out. So if like two, three, four years, I did not have to have the pressure of worrying about paying bills from my income. I go out there reinvest money and reinvest my time to go out there and build a much bigger income. So I think having that patience, but with patience, you have to make sure you can get from 30 years past month three. So have a financial runway.

Rob:
Great. Very wise words. Thanks man. Yeah. Finally, Chris, can you tell us more about where people can find you on the internet if they want to find out more about you, how they can work with you, all that kind of stuff?

Chris:
Well, since I’m a marketer and I’m SEO, the best way is actually Google Chris Lopez Denver, Chris Lopez real estate. If I do my job, I’ll pop up on there, but actually something I want to plug and I’m very excited about is I’m in the process of recording a bunch of house hacking videos for the BiggerPockets YouTube channel. We actually just recorded our last one like two days ago and I’ve done a few YouTube series with BiggerPockets. I absolutely love it.
And so I love for people to go check it out. It’s called the House Hackers Ride Along, and it’s a very unique look at house hacking, which I think is a phenomenal way of getting into investing. We go through and look at different strategies and different people and how they execute it. A single person, a married couple, a family with kids, having to go out there and house hack. We talk about their strategy. We go walk the property. And then of course, we talk about return on equity. What I call the house hack stack, which is a great way to do it.
So Google me or go check out that new house hacking series, which should be live once its podcast publishes.

Rob:
Awesome, man. And David, what about you? Where can people find you on the internet?

David:
Go to YouTube, David Greene real estate or David Greene 24 on pretty much all of social media, and I’ve been putting out more content. So let me know what you guys think or what you’d like to see more. And then Rob, where can people find?

Rob:
You can always find me on YouTube at Robuilt, R-O-B-U-I-L-T. Actually, feel free to Google it. Google Robuilt. Maybe some SEO will start kicking in for me. You can also find me on Instagram @Robuilt, and TikTok, Robuilto, if you want to see me do funny little dances.

David:
There it is. All right, Chris, this has been fantastic. Thank you very much for joining us today and everybody make sure you go check out Chris on the BiggerPockets YouTube channel. Let us know in the comments what you think about what he’s doing. My opinion, I’m sure Chris would second it, house hacking is the most powerful strategy in all of real estate right now for both beginners and experienced investors.
Unless you are like at that Ken McElroy level where you’re buying a $100,000,000 apartment complexes, house hacking is something that you need to be doing constantly and then adding in everything else we talk about here as a supplement. Chris, I will let you get out of here. Great job today. Thank you for joining us and keep flying the BP flag out there in Denver, Colorado, the Mecca. This is David Greene for Rob funny-dances-online Abasolo signing off.

 

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