Why Bigger Is Not Better In Real Estate

Why Bigger Is Not Better In Real Estate


Is bigger better? Is it always better? In
real estate, is bigger always better? My name is Kris Krohn and today, we’re going to
talk about the biggest, baddest real estate out there. You know, there’s this idea in real
estate that you need to graduate from small-time real estate to big-time real
estate. And that bigger is ultimately better. I want to put that on trial today
and I want to actually take a look at that and see if that is in fact true. In
fact, I created a little graphic for us here. There are some people that say,
“Kris, I got myself into a trailer park because I could buy myself a trailer for
something super cheap. Maybe I bought a trailer for 10 or 20 or 30
thousand dollars.” And it’s the cheapest form of real estate that you’re aware of.
But from there, you might say, “You know what? I got tired of some of the problems
that came with managing in a trailer park.” So, I eventually went on to doing
S-F-H –single-family homes. You’ll see that abbreviation everywhere. And you’re
thinking to yourself, “You know, I went from trailers to single-family homes. I think
I’m ready for multifamily or maybe apartments condos or or maybe something
bigger. Maybe I’m ready to move on to commercial. And there’s this assumption
that people have that bigger is better when actually what they’re saying is
bigger is easier. And here’s what I actually mean by easy? What do you
think’s harder? Managing 20 single-family homes or managing 120 unit apartment
complex? The assumption is that the apartment complex would actually be
easier. But I’m going to put that on trial today as well.
Now, since I’ve done thousands of single-family homes and I clearly have a
bias, I’m going to share with you why and ultimately I’m going to share with you the
math between the 4 equalizers. And what I mean by equalizers are the 4
things that you need to consider when evaluating any investment in the game of
real estate. Because they’re not all created equal and you have to ask “Well,
how should I judge which one of these is actually best?” And I want to share some
ideas with you. Okay. So, the first equalizer that I want to share with you
is that you have to ask this question: “What is the time commitment of this real
estate?” Some real estate is active and some real estate is passive. Passive
means you don’t have to do anything. It works for you. Active means that it’s
actually a job. Look, if you flip a property, someone has to drive to Home
Depot and get materials and fix thing up and put it on the market. It’s a
job. You can put hundreds of hours into doing a remodel on a house and then
selling it versus buying a home and letting it be actually very passive
experience. So, between the 2, guess what I’m more interested in? You guessed it.
I value my time, right? I value God, my family and time. Those are my 3
biggest priorities in life. And they come… You notice that money isn’t one of the
top three priorities. Because time is actually the ultimate judge of where my
money is good to place it or not. The second ultimate equalizer that I
want to talk about is effort. Some things take a lot of work and effort and some
things are super easy. And one of the things that I’ve learned in life is that
if you take a strategy that is complex, you create more opportunities for
breakdown and for things not to work. So, what you’re looking for is parsimony,
simplicity. You’re looking for something where there’s fewer moving pieces and
less can go wrong. So, that’s important to me. The third equalizer that I ultimately
look at is risk. I can show you a really high return but if I share a paired up
with a really high risk, guess what? We normally assume that a high ROI comes
with a high risk. Making a lot of money must be very, very risky. This is not true.
This is sometimes true. And so you can’t make an assumption that it is that way.
That’s why I want to put this fourth one up here which is I want to call it
profit. And when we take a look at profit, this is ultimately defined by 3
letters ROI return on investment this is the ultimate equalizer spread across the
board of all investments we can’t just look at how profitable something is
because it might take too much time or it might take too much effort or it
might take too much risk these things are all relative to each other so I’m
actually looking for that listen up the highest ROI relevant to the least time
the least effort and the least risk which means at the end of the day
someone else is going to claim their strategies better than mine because they
value things that are different than me I’m sharing with you what I value and my
strategy is based on highest ROI with least time effort and risk so at the end
of the day what does that mean I’m gonna put it up here for you if you’re
brand-new to the game of real estate I would only do a couple of things if I
were you number one I would get into single
family homes for a couple of reasons one 70% of all Americans currently owned
versus rent so it is the biggest sector in all of real estate it’s where people
want to be it’s part of the American dream
Millennials actually surprise surprise don’t want what our parents wanted
they’re interested in mobility and freedom and they’re willing to pay rent
versus actually strife or owning something that actually means that this
sector just became hotter for investment so the next decade is super exciting
number two I look at entry-level an entry-level means a three-bedroom
two-bath maybe a four-bedroom three-bath and part of this is for safety you see
when you take a look at all single-family homes where is the
greatest demand is it for a two-bedroom home or a four-bedroom home neither it’s
a 3-bedroom home and a 3-bedroom home has significantly greater value in price
than a two-bedroom home so 3 is my minimum and I usually don’t go before
because guess what we’re not trying to house large families because that’s not
the majority demographic we’re trying to cater to the masses number 3 I ask
myself how do I stay below the median what that means is that single-family
homes in one market in San Francisco might be a million dollars single-family
homes in New York might be 1.2 million dollars single-family homes in Florida
might be $220,000 single-family homes in Tennessee might be a $120,000. The national medians around 250,000. I
want to be below that. Why? This is about protection from the market coming back
down. So, when the market course corrects, guess what we want? We don’t want our
real estate values to be attacked. A million dollar home in a recession
becomes a half a million-dollar home. But 150,000-dollar home
becomes 140,000- dollar home or stays the same. And that’s
giving you an example that you have way more insulation in the market. So, what I
do is I take these 3 things and what I do is I do a short term strategy of
buy and hold. And that means that I’m going to hold the home for 5, 6, 7 years I’m going to take the very best profits out of it. I’ve written
books about this stuff. But when we talk about bigger not being better, I can’t
get bigger real estate, commercial real estate to consistently produce what I’m
actually getting in single-family. This document shows my last 4,000 deals in
a 25% annual ROI. I can’t get condos to do
that. I can’t get a lot of my build projects. And if I find an occasional
project to do it, because I can’t duplicate that over and over again, it’s
risky because it means that I’m going into an area where I’m not going to do a
high degree of volume. So, I wanted to break that down for you because when
people are saying “Well, Kris. Why single-family home? Why not commercial
why not this? Why not multifamily?” I’m not saying they’re bad, I’m basically saying
don’t get attached to real estate. Get attached to the formula. What will make
you the most money and provide value for people with the least time effort and
risk? So, I’ve made my claim on what that looks like. So there’s a couple things
you can do with that. The first one is I wrote a book showing you how you can
make $5,000 in the next 30 days leveraging the strategy in your backyard.
This book I actually give it away to people for free. You cover the shipping
on it and basically I send the book out to you and you start your real estate
adventure. So, that’s a tool that I’m giving you so that you can just go into
the marketplace and start making it happen. Thank you so much for watching
today. I hope you guys appreciated today’s video. Ring that bell so I can
notify you every day about the next video certainly subscribe because that’s
part of that notification process. But if you liked today’s video, I would love it
if you’d smash it with the big thumbs up. Tells YouTube to pay attention and that
they should be promoting this video. Helps me get the message out there to
more people. Other than that, get your hands on a free
copy of my book and I will see you on tomorrow’s video.

8 thoughts on “Why Bigger Is Not Better In Real Estate

  1. Oh man! I got to say you an amazing real estate advisor i dont miss any of your video and i watch em' everyday when you upload….. Im really interested in real estate so read loads of books like real estate riches and other books on real estate written by Donald Trump….. I wanna read your book too Strait path to real estate…..can i know where can i buy this book?

  2. And Kris that be better if you upload a video and tell the viewers bout the sidr income business which helped you a lot to invest in Real estate….what was it? And how u did it?

  3. Thanks for the videos Kris. They are very informative and useful. Waiting on my Strait Path to real estate wealth and limitless books to come in the mail. This year will be greater.

  4. Is it possible for you to invest in developing country like in the Philippines? I really want to know what would you do if youā€™d invest in real estate here in the Philippines šŸ™‚

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