Hello and welcome to another episode of Passive Real Estate Investing. I’m your host, Marco Santarelli, and today I have a special guest. But a couple of quick announcements. So I just got back from our final Power Room mastermind event in Las Vegas. As I’m recording this, I’m still recovering from being out of town for a week. And the reason I was out of town for a week this time around is because we had the official opening night for one of my new Broadway musicals. It’s called A Beautiful Noise -The Neil Diamond Musical opened up on Sunday night. It was incredible. We had a packed house. Everybody was very excited. We actually even had the one in the only Neil Diamond himself attend. We gave him his own box seat up in a balcony off to the left of the stage. And he said, you know, I’m not gonna go on stage and sing.
This is not my show, but he said, if you were to hand me a microphone, maybe <laugh>. So sure enough, we did give him a microphone after the show at curtain call. And he, along with all 12, 1300 people in the theater saying, sweet Caroline, together, it was the most magical moment. You could see that video clip actually on my Instagram. If you want to go to Instagram, it’s marcogsantarelli. I’ll put that in the show notes. Would love for you to take a look at that clip. It’s pretty cool. Give it a like and subscribe. If you’re not already subscribed on my Instagram, I plan to put more personal stuff on there going forward. Right now, it’s pretty much just one business post per day, but that was the first part of my week. It was really just being in New York for opening night of A Beautiful Noise, The Neil Diamond Musical
Very proud of that, and I’m very proud to be a, a co-producer of that production. I think it’s gonna be a massive hit and run for a very long time. The other part of my week was really just again, the the last Power Room event in Las Vegas. And we had great turnout. In fact a shout out to all the people who showed up as my guest just hearing about it on the show here. You know, all of you had come up to me to, to chat and talk and ask questions, introduce yourselves, just to get to know each other. And that was a lot of fun. So it was a great event. It’s basically a two day event space out over three days, you know, the evening, a full day on a Tuesday. And then the first half of the Wednesday, some amazing speakers.
As you all know, I don’t need to tell you about that if you were there. But again, if it’s something you’re interested in, check out our website powerroom.com. And you can join as as my guest if you think there’s a fit, something you certainly want to look into and just make sure it’s something you understand. That is really my week and the reason why I’ve kind of lost my voice and I’m still catching up from all that travel. I’m, I’m still kind of jet lagged, but here we are. And I have a very special guest for today. His name is Kris Krohn. Great guy. Very successful person. Someone who I’ve known for many, many years on and off. But I really didn’t actually get to know him until more recently because it wasn’t until a good friend of ours, Mr. Matt Andrews, connected us.
And we had some conversations and we have so much in common and we actually know a lot of people in common, which was kind of cool. But I love the way Kris talks about wealth and passive income and the way he breaks it down in very simple terms. I think it’s something that would be worth your while to, you know, learn about. And he’s got some good resources. So he plugs all that at the end. And of course I will put the links in the show notes for you as well. So, with that, let’s get right to the interview with Kris and I hope you enjoy it and I look forward to having him back on again because I know there is so much more that we can talk about.
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If you missed our last episode, be sure to listen to The Great Money Bubble! – David Stockman
Well, it is my honor to have a very special guest on today, someone who I’ve actually known for many, many years and I’ve followed for many, many years, but I’ve only gotten to know him more recently.
And I’m very happy about that. He’s a super sharp dude, very successful entrepreneur. He’s a very successful real estate investor. He has done so many things in his life he loves to give back, which is something I really admire and respect and appreciate about this guy. His name is Kris Krohn. He’s an entrepreneur, he’s a real estate investor, he’s a motivational speaker. He’s a very successful person and I admire everything that he has done. He’s a, a guy that has went from having literally nothing to retiring at the age of 26, which is amazing in most people’s eyes. His mission is to help as many people as possible manifest their dream lives and to find ultimate fulfillment. So with that, Kris, welcome to the show.
Marco. Appreciate it. Really happy to be here and glad that we get to connect.
Yeah, no, this is great. It’s actually been amazing to me how many people we know in common. From Roland Frazier to Matt Andrews too, you name it. It’s just, we have so many friends in common that it actually surprises me that we didn’t cross paths earlier on many years ago. So I guess maybe there was a reason for that, but here we are today.
Yeah, I’m, I’m I’m excited about some of the conversation that we’re gonna be having cuz I think that in the world today, things have shifted on its access so hard and there’s a lot of people worried about, are we in a recession? There’s like, media does a really great job confusing a lot of people. And so there there’s a lot of there, there’s a lot of messed up confusion out there about how to win, how to be successful. And has I had a chance to connect with you? I love your mission. I love how you’re doing that for people.
Yeah, for sure. Well, we, we share a lot of common interests and one of the things I like to talk about and educate people on is the topic of wealth and passive income. And that’s something obviously that you like to talk about as well in your books. By the way. You have phenomenal books, so I highly recommend them. Let’s begin with a little bit more about who is Kris Krohn. Tell us a little bit more about yourself, cuz I didn’t do you justice in my little bio, if you will.
No. So, you know, for me, it’s weird when I hear those words, Kris retired at 26, cuz it’s like, well, really technically what I did is I achieved financial freedom and retirement is a word we use when we don’t know what our purposes, but what we do know is that we don’t wanna work for somebody else for the rest of our lives. So at age 26, I had bought a small portfolio of 25 homes. I had used a, a type of lease option system, I call it compassionate financing. Something designed to help families get into home ownership when banks don’t normally allow that. And, you know, that was paying me around 140, $150,000 a year. That was enough to quit my job. I had just graduated college. And so when most people were trying to figure out what they were gonna do with their life, I was kind of done and in a weird spot of, hey, what do I want to do now that I don’t have the social pressure of needing to make money because it’s coming in passively no matter what.
And and even that year I went from 25 to 50 homes and then to a hundred homes. And you know, you fast forward over the last 20 years and I’ve done 2 billion worth of single family deals, you know, 6,500 projects. And I, I help a lot of people in the game of real estate. And I kind of feel Marco, like I, I spent too many years actually kind of being the real estate guy. Like I, it was the only vertical that seemed really easy and simple to manipulate with systemization and scaling. And, and then eventually I discovered like business that wasn’t real estate and then got deep into mergers and acquisitions. And you know, today I do have a passion for teaching people how to achieve whatever number they’re going for. Cuz there’s a system on how you become a millionaire. There’s a system for how you multiply that to multimillionaire and there’s a system for how you become a billionaire.
And, and you don’t have to be like some tech wizard, you know, that invented a video game or a platform to be able to do that. It’s actually with today’s world of technology and with the information available, it’s within our reach, but most people get stuck along the way. And, and I love just helping people identify where they’re at, how you get unstuck. And as you might imagine a part of that game is financial training and mentorship, but a part of it is just psychology. Like, how do successful people think different than the way we were trained as kids or the social pressure from society. And then I, I guess maybe to kind of wrap it all up, for me, it all comes back to a game I learned years ago from Tony Robbins where at some point in your life you have to move from the journey of significance to contribution.
Meaning it’s no longer how great am I and what have I achieved and, and look at my accolades. And instead it’s how, what am I doing? Like I’ve made more than enough money than I need. Like, what am I doing with it? How am I giving back and how do I derive meaning from that? So it’s been a really full circle journey, journey for me that once was a selfish game of I want to get ahead all the way to the other end where it’s just like, how many people can I help? How can I serve people with what I’ve learned
Along the way? Yeah, yeah. I love that. I love that. And I think when we spoke a couple weeks ago, or maybe it was even a week ago, I, I think I probably told you, which wasn’t an official announcement at the time that some of my business partners and I, and there’s kind of a collective group just launched a give back initiative, if you will, called Impact others. I don’t know if I remember telling you that or not.
We did, we talked about that.
Yeah. So we officially launched that at our last Power Room mastermind event, which was less than a week ago today. Wow. it was an incredible launch. We seated that mission, if you will, with half a million dollars in Wow. One hour. Wow.
Oh, congratulations.
We’re, we’re off a great start. That will literally feed thousands of kids and educate thousands of kids right off the bat. So we’re very, very proud about that. And it’s just gonna continue to grow. And that’s kind of our, you know, give back legacy piece.
I love that there’s a, you know, a lot of people today, this rising generation, even Gen X, what they’re Gen Z, what they’re looking for is impact and meaning they’re looking for, they don’t want wealth the way the previous generation did. They’re looking for what, meaning will this produce for me? Will I have fun doing it? Who will I become in the journey? I think those are all really worthy things to be looking at. And right now I think some of the companies that people at the end become the most proud of are those that are really mission-centric. Like, what is the good that we’re doing? What is the purpose and drive behind what it is? Is it really just a game of profits? And you know, I I love the game that you’re stepping into because I also think it just shows great maturity, that there is a purpose of building wealth that is, that that’s more than fancy cars, mansions and mm-hmm. <Affirmative> and, and private jets.
Yeah. That only goes so far. But, you know, on the topic of money and, and you mentioned mindset, let’s, let’s take a minute on that. One of the things you, you said, I, which I, I really, really love. You said with money, the sky’s the limit, but without money, there’s pretty much nothing but limits. I, I think that really hits the nail on the head. Kris, tell us what you think wealth is. What is that to you?
So all money is, to me is more options. If you have less of it, you have fewer options. If you have more of it, you have more options. And I’m a huge proponent of this game of agency. Like, we talk so much about being free in America and freedom exists in many countries that, that have true democracy. But freedom for what? Well, it’s to use your agency the way that you want. And what sucks is when your agency is limited because your choices are limited because your finances are limited. Money touches everything. And it’s like the ultimate barter system. If I want to have someone else get my dry cleaning, or if I want someone else to clean my house, if I wanna hire people to help build my company, if I wanna hire myself out of the CEO position of the company that I used to run if I wanna build something, if I wanna create something, I need an app.
It, it, like money is the universal exchange system. And so if I had it my way, I would encourage everyone in junior high and high school and say, Hey, when you grow up, the, the, you know, getting good grades isn’t just for going to college. Get a piece of paper that says you’re smart, work for somebody else and be a cog in their machine. If you want to control your own life and you want to own the machine, you have to learn how to master the game of money. And it is a mindset. And those that learn the rules of the game end up with more of it and more money gives you simply more choices and more, more choices. You know, a lot of people say, money doesn’t buy happiness. I’m like, wow. Technically incredibly true. But more options in my world does equate to more emotional leverage. And it’s easier to choose joy for me being six foot three and a half when I fly in a private jet. My private jet just bought another one last week instead of flying coach you know, for 14 hours to soul where if the person leans their chair back, my like, I might need knee surgery. Right. More choices.
Yep, for sure. A lot of that has to do with mindset. No matter who you talk to, that’s achieved a certain level of success, they’ll always tell you that you’ve, if you don’t get it straight between your ears, it’s really hard to actually manifest what you want to manifest your goals in the real world. So mindset really has a lot to do with it. And you mentioned Tony Robbins, he was one of my early mentors. You know, I just learned a lot from, you know, changing your state instantly to whatever it may be. Yep. So all these things play into your ability to believe in yourself and to actually take action and move the needle. Like to actually manifest what you want to create in your, in, in your physical world. You talk about two types of mindsets. You talk about an accumulation mindset, and, and on the surface that sounds actually pretty good, you know, like, I want to accumulate riches and wealth and, and happiness. But at the same time you’ve got like a, a complimentary mindset called the residual income mindset. Can you break those two down? Because I think a lot of people don’t fully understand what those mean.
Well, there’s a money disorder, there’s two types of money disorders, and one is the person that can’t control their spending and they’re always in credit card debt and buying things they can’t afford. And they’ll always be a slave financially in the, in that set of rules. But the opposite is when you become a hyper accumulator, and this has put your head down, work hard, and save every penny, and by the way, you’re not enjoying life much along the way. You don’t have many options because you don’t give yourself choices. You would never DoorDash food on a regular basis if it created some flexibility. You’re not gonna travel nearly as much. You’re gonna say no to your kids when it comes to things that they want to own or buy. And you say no to yourself. And so the, the sad part is most people don’t know how to do the future value calculation of what they’re on track for having a retirement when they get there.
Most accumulators fall short by millions because even $3.1 million earning an annuitized 3.1% is barely a hundred thousand dollars a year. And it’s like, wait a second, I scrimped and saved, put myself in a scarcity fear-driven mindset for 30, 40 years. And then I, I like my retirement is a very, very small amount of money. They’ll never feel the liberation and the freedom of having money to spend in excess. There is a time to save, then you have to learn and graduate to being an investor, as you know mm-hmm. <Affirmative>. And then a time comes when you get to spend. Right Now I lavishly spend, like, I spend lots and lots of money, have lots and lots of options, and I get to have him produce from that. A lot of memories for me, I said that, you know, money is more options, but for me it’s also memories because memories may mean so much to me.
And that’s, that’s a big core driver in my world. It’s either contribution, give back, or I want to create some memories with my young family. And so those mindsets are both problematic. And the residual mindset that you’re talking about is this notion that let’s start with just education. If you hire Tony Robbins, for example, back in the day when you did, and you were in his camp, you were investing your time and money to be in his airspace. Well, my guess is that in the first year you were with him, you probably saw a financial increase if you were applying what he was teaching. Is that true?
Not immediately, but it happened. You know, I had to Okay. Obviously put the pieces of the puzzle in place for that to, to manifest itself. But yes, in time.
Yeah, in time it did. Well, what happens with more time when you have great advice and great mentorship, well, it expands more. And the reality is there’s a residual benefit on things you’ve learned a long time ago Yeah. That you’re benefiting from today. And finance works the exact same way. Like, one of the reasons why I decided not to predominantly flip homes in the beginning, but by and hold is because flipping could have led to a lot more money initially, but it was also money that was active. I had to trade my time for it by getting in the passive side of real estate. It meant that I wasn’t going to have as much money, as much cash in the beginning. But if I fast forwarded long enough down the road, now I have gobs crazy amounts of money, ludicrous amounts because it, it has been compounding wildly. And so part of that residual mindset is we’ve got to divorce ourselves from 90 day thinking and we’ve gotta learn to think in decades and balance in our decision making financially, how do I, how do I get the money I need today, but how do I make sure I’m also not sacrificing my future? And that’s really what that residual mindset’s about
Is another way of saying what you just said. To some degree, the idea that you may be investing in real estate today when prices are more elevated and your cash flows are less, your cap rates are less. But if you’re in the right markets, you’re positioning yourself well, your returns, which are your unrealized gains, are gonna be much greater down the road because of the equity growth. So yes, you’re not a short, short-term investor, you’re a long-term minded investor, meaning that you’re focused on the equity gains being that much bigger than your cash flows in the initial, you know, one to three years of, of whatever you invest in.
Well, yeah. And on top of that, statistically 85% of people don’t like what they do for a living. Like true. We have a very unhappy workplace. And so those people are always looking to real estate as an immediate solution to their financial fix and problems. And I always tell ’em, I’m like, Hey, there’s two things I would focus on. On the one hand, buy real estate for the long-term wins so that you have legacy play in mind. But the second thing you need to do is you should own a business. And frankly, you should learn how to own multiple businesses because business is where you go for a steep returning cash flow if you get good at that game. Mm-Hmm. <Affirmative>. So I got real estate as my foundation playing my long game. And I don’t depend on real estate to play much of my short game. I let it play my long game and I’ll let business play my short game. And when I pair the two of them up, it means I have money today for the memories that I wanna create now. And it also means that I have money tomorrow for the charitable give back or the meaning that I want to create in my life on you know, with my foundation and the way that I want to give or how I want to benefit the next generation in posterity.
So we were talking a little bit about, you know, people’s positions in society. I mean, we’re just kind of skirting around that. You mentioned middle class a few times. Do you think there’s hope for today’s what I call the shrinking middle class to create wealth and financial freedom? Because we we’re obviously seeing a ball, a pinch in the bulge, and we’re seeing a growing upper super upper middle class and upper middle class and a growing let’s just call it lower class for, you know, lack of description. They’re all poor, but we have the shrinking middle class and you could argue so many different reasons why that’s happening. But what’s your opinion on people’s ability to create wealth today, especially if you’re in the middle class and do you see a hope for what I’m calling the shrinking middle class in the future?
Well, sadly, I think it’s gonna continue shrinking. I think the gap is going to widen, but this is part of the mystery. It doesn’t have to, right? We’re past the information age. The information is out there. You know, when I, when I wrote this book, you know, my intention was to put something in the marketplace that doesn’t exist. It’s me basically saying, Hey, wake up. If you do what society says financially, you’re gonna put your money in a 401k and in an IRA, a 401k because the company will give you a match and you feel like you’re getting free money and IRA, because your CPA tells you that you can maybe get into a slightly lower tax bracket for that year’s tax breaks and you’re dumping your money in these two things. Meanwhile, a little bit of DA Dave Ramsey trying to get your house paid off.
And what it means by 65 is that your 401K and IRA have about $200,000 in it. That’s the average right now. And you probably have a little bit more equity than that. Maybe a quarter million dollars sitting in your house that probably isn’t paid off. So people have spent 40 years of their life working in this rat race system and they have maybe a net worth of $450,000 at the end of the day, quarter million sitting in their house and 200,000 for retirement. And clearly when you get there you realize this is not enough. I can spend that 200 K because I’ve got, I’ve a customized myself on average to an 85 to $95,000 standard living. I’ve got two or three years worth of money and then I run out. And so the problem for me lies in the fact that people do not understand ROI, return on investment.
Because their options are, oh, I could put my money in a 401k. I I, I mean an IRA, the s and p 500 and annuity. I’m like, well, they’re all single digit ROI. So you’re not diver. You may be diversifying where you’re putting your money, but you’re not diversifying your ROI. And in the book I say, did you know that wealthy people won’t stand for the majority of their assets sitting in single digit wealthy people will because they made their wealth and now they want it safe. But you shouldn’t do what wealthy people to do to get rich because they’re on the other side of the journey. What you need to do is diversifying into double digit ROI, which is a lot of what you and I both teach, right? Real estate. Yeah. Real estate done competently. You know, I’ve been averaging over the last decade, 34% annual ROI.
Well, 50 grand over 20 years at that ROI can produce $17 million mm-hmm. <Affirmative>. And so double digits is how you graduate from society’s broken game plan. But it takes a couple of decades to accumulate. If you go to triple digit and quadruple digit, which the book talks about is very business driven or owning pieces of businesses, then you get into the kind of ROIs where literally your money doubles in months. Yeah. Literally months, not years. Because the rulers 72 basically says, Hey, put your money in a 401K and it’ll double in 13 years. Put your money into basic double digit real estate and it’ll double in two to three years, put your money into business and now it can double in months. And then you can even graduate beyond that and get into things like infinite ROI. Like how do I arbitrage borrowing money and, and putting it to work and earning the infinite ROI.
Mm-Hmm. <affirmative> you know, so most people’s financial problems is they’re not educated, I think for today’s world on the game of money. And then number two, if people would just start asking, how do I diversify my ROIs? It would vastly change their outlook five years from now. Not 40, not these lame 30, 40 year game plans, but there’s a much shorter time horizon that honestly almost Marco sounds like get rich quick because society is also trained that that’s bad. But most wealthy people I know when they enacted their strategy to the time they built wealth, it’s usually like a five to 10 year journey, not a, not a 20 to 30. That’s more of that accumulator old school methodology that will work for a sliver, not the masses.
Yeah. And I think anybody listening to you, Kris, has to realize that you might be on a single track. You have, you know, your W2 or 1099 income and you might be listening to this thinking, well, this, this is not me or doesn’t apply to me. Well, it can because I think the piece that people need to hear is that, and I’ve said this many times in the past, shows you need to create yourself a side hustle or some sort of business turn, turn that, not necessarily a hobby, but turn that small business into a viable business that becomes a thriving business. Because then at that point you have all kinds of tax write offs. You have un unlimited income potential because you can scale a business and that can turn into your main source of revenue.
Well, it, it’s kind of crazy cuz when I started buying real estate and building wealth I had some of my brothers reach out to me and say, Kris, dude, you’re, you’re crazy. This is really risky. But for anyone that is a single income earner, as in I have a W2 or I’m 10 99, you have one single point of failure, you lose your job and you have no money, but worse, you take your money and you put it in the market and money that doesn’t move is dead. Yeah. And steel digit, it compounds so slowly that like for you to turn this into meaningful money, you’re gonna need lifetimes, not decades, lifetimes that you don’t have. I mean, modern medicine’s definitely catching up, but no, that’s, that, that’s really the riskiest thing that you can do is have a single a single point of failure, have a single income.
And I think the reality is, is that balancing the balancing act with today’s distractions and all the things that life has to offer, if you’re not really organized and disciplined or have the right mentorship or following the right advice, it just seems kind of crazy, I think for most people to try to take on a second or third stream of income that doesn’t feel like going from 40 hour work week to a hundred hour work week. And obviously that’s not what we’re suggesting, but I think that’s where a lot of people go to is they’re just overwhelmed. I, I don’t know how to do it. That, that, that seems like it’s not realistic. It’s also not me. And I’m like, well then you should really evaluate who you think you are because you, you’re literally heading for the dead end financially. And it doesn’t have to be that way. You get this one life, like live, live a meaningful life, take the right kind of risks, which are get yourself off of a broken track and start discovering the paths that at least give you an opportunity, a possibility of your dreams coming true instead of you slowly killing them over time cuz your plan’s broken.
Yeah. Well, the key takeaway there is something that a good friend and super loving guy wrote a book on called Multiple Streams of Income. Robert Allen. In fact, I I just saw him this past week and he’s one of your business partners. Yeah. You know, great guy. He was on the show not too long ago again, but you know, he, he wrote the book, multiple Streams of Income. There’s a lot to be learned from that book because you want multiple pillars of income. So let’s take that whole concept. Let’s just just say, you know, you’ve got one, two, or multiple sources of income. I like the way you simplify, you know, your wealth creation system. It’s really just a three step thing. <Laugh>, I, I’ll let you describe it, but talk about that for a minute because it sounds like you’ve oversimplified something that should be more complicated, but just creates tremendous results. And then we can kind of dive into that a little bit.
Yeah, so I mean, in, in the beginning, the purpose of saving is not to accumulate enough money for retirement. The only purpose of saving is for a little bit to go into a rainy day fund. And the rest of it is for one purpose, it’s for investing. And the purpose of investing in the beginning is to take a small amount of money. You know, like I’ve, here’s my little visual aid. I got 20 round here, I might have to work my buns off for a long time to save up 20 grand. But if I can intelligently invest this and turn it, you know, let’s say into a hundred thousand dollars, then what I’m doing is, this is a game of growth. In the beginning, you don’t get obsessed with cash flow. You get obsessed with multiplying money because what can I do now that I have a hundred grand?
Well, if I can turn 20 into 80, then I can, then I can turn then this, my new a hundred thousand collective into a half a million and I can turn a half a million into millions of dollars. A time will come when you then start converting that into cash flow machines. And so, you know, really step one is save money and make that the priority. Not keeping up with the Jones’s very difficult in today’s world where we want everything now in delay, gratification is not a virtue that we, that that is popular. It’s not interesting, right? It’s as, it’s as colorful as budgeting. And so if you can do that, then you can step into the second game where you have to learn that the joy of investing has to become more exciting than the joy of spending to get the next shiny. And that’s what I did for five years.
For five years I didn’t own a single nice thing. I just invested, I invested, I invested. And that turned you know, my first three grand turned into 1.6 million and at 1.6 million, guess what I had. Now I had, because I had grown my money, I now started turning it into cash flow. And what the cash flow did is I reinvested into places where now all of my expenses were now covered passively by things that I didn’t spend my time doing. And it was the ultimate game in reclaiming my time because there’s only two games that are really worthy of you. It’s either increasing the value of your time or reclaiming it so that you can go have some fun and create the memories that you want with life. And that three part system of save, invest, and convert to cash flow is it is a very simple way of saying that’s the foundational basics of becoming wildly successful.
Because your definition of, of financial success can’t be, I’m a multimillionaire because there’s plenty of multimillionaires that have money, but they don’t have time. And if, if ultimately the your net worth doesn’t get converted into cash flow, then you don’t have a way of getting your time back. Money without time is not freedom. And your time without money is such few options. You’re so limited that you’re also not free. Real freedom is gonna be, require a mastery of both money and time. And so that, that basic system is, is it’s really all about how do I have the time and how do I also have the money?
And, and this is why the first question I asked you was, what is wealth to you? You know, because for some people, wealth is just pure, purely time freedom, the ability to do whatever they want, whenever they want to do it, and not have any worries or implications for other people. It’s all about the money. It’s it’s having financial freedom. They’ll still work like a dog.
<Laugh>. Yeah. So it’s really interesting. When I say invest, there’s actually three different things that I believe investing in. The first one is obvious. Everyone’s like, oh, Kris saves his money and he must buy assets with it. Let’s talk about the definition of an asset. Yes, it could mean a, a property that is growing in value. Yes. It could also mean buying a franchise. It could be, it could mean buying a business. So I could own stuff that appreciates in value instead of buying stuff that goes down in value. That’s what most people think investing is. But there’s two other categories that are meaningful. The second one is based on the, a definition of asset in the accounting world. When you hire someone to work for you so that you can get your time back, technically in the whole hard cold math of life, they’re called an asset.
They’re an investment. I, I give you a $50,000 salary, a $30,000 bonus maybe collectively $80,000 a year. You, you’re a person with goals, fears, and dreams like me, but you’re an asset and I expect you to perform an ROI for me. So the second type of investment is people. So I put money into assets that increase in value businesses and real estate. I put money into people, but then the third one usually catches people, Marco, a little off guard. I actually also put money into a different category of people, people that give my personal time back. You see, if I own a company and I hire someone and they’re an asset on the books, that produces ROI. In theory it should be to do more business and hopefully in time get some of my time back. But I also set money aside to get time back in my personal life, for example.
I don’t, I don’t do any minutiae. I don’t do, I, I don’t cook, I don’t clean, I don’t do errands. And by the way, my wife doesn’t either. I, I literally set money aside. I’ve got four household staff that do all the driving, all the running, all the errands, all the fixing, all the handy manning. They basically are there. And I love these human beings. And I believe we treat them like super, super well and they’re almost like a part of our family, but what they’re doing is they’re giving me time back to create more meaningful memories with my family when I’m with them. And so those are the three kind of investments that lend itself to this idea of don’t get obsessed with also you. It’s a different money and disorder to even save your money than to invest. And you can become an invest aholic like Scrooge.
And what you really have to do is, is get clear on what is the objective. Like if I make a hundred more million dollars this year, my lifestyle doesn’t change. My spending habit don’t change. I, I I I’ve already achieved that way of living right now, more money for me is just what are new intelligent ways of creating better memories, getting more time back and also doing more giving. And so you gotta get really clear on, well what is this? The system might sound simple, save, invest, and then convert your investments into cash flow. But it gets pretty nuanced in terms of what is the real game and the real game is having the money and then the time to enjoy it and to have the options do really cool things with your life.
Yeah. Super well said. I don’t know if I could add anything to that. That was beautiful. Okay, so let’s let’s take the last 10 minutes or so that we’ve got here to talk about at maybe a 20 or 30,000 foot level, what you brilliantly call five outdated investment vehicles. <Laugh>. Yeah. You know, so common, so pervasive in society, you talk to nine outta 10 people and asked them, you know, what are you investing in or what do you plan to invest in? And they’re probably going to name, you know, three out of five of these. So just briefly cover what these five outdated investment vehicles are.
Yeah. Little background. Robert Yell might be my business partner today, but I worked for him when I was in college once upon a time sitting in a four foot cubicle marketing as real estate programs that inspired me to get into real estate. Right? Like kind of funny. And back then that first year on the phone kind of felt like financial telemarketing. I had a chance to interview the avatar for the leads that came in the door. And it was predominantly 55 to 70 year olds that had been to college. They followed society’s map, they had money in 401ks, IRAs, they were trying to pay off their house. And I kept noticing the same pattern when they were really fiscally responsible over 40 years. I saw how much money they had and generally their net worth ranged from a hundred thousand to maybe a half a million and maybe 0.1% would have closer to a million.
Like, that was very uncommon. So I remember at that time I was in college and I’m like, this is kind of weird. Why, why is everyone including my dad, who’s a German immigrant saying, son, get good grades, go to college and then follow society’s game plan. And I think the problem is, is that we’re such short term thinkers that we don’t do, do the math and say, what will this mean later? And so I started doing the math, I started doing the future value on your 30 year average returns on a 401K and an IRA. So let’s talk about the five most dated things that people put their money into. Number one is they get seduced with the match on a 401k without realizing that for most people, that is the little that they had left over that could have been investible and it was lazy and easy to put it in a company match mm-hmm. <Affirmative>
And make themself belief that that was gonna go somewhere without running the math or realize, oh no, that’s not going to get me where I want to go, so I’m just gonna be the blind lemon that goes over the cliff. Next we listen to, to our, our cpa and when we put money every year in an IRA, it is still that most people can save like $600 on their taxes. They’re playing such a small game. You wanna tie up the next little bit of what was left over so you can save a few hundred dollars on taxes instead of that money being invested into something really worthwhile. Mm-Hmm. <affirmative> people will also put their money into annuities and that’s kind of that long-term financial planner game. So now you have your HR 401k person, you’ve got your cpa, now you’ve got your planner and planner’s plan for you to fail because they’re not telling you what to do to make sure you have enough money.
They’re saying you’re screwed, but how do I make it stretch as long as possible so I can keep earning my commissions along the way? Cuz only 5% of them are fiduciaries. They’re just basically earning money off of your bad luck and bad advice through the end. You know, so there’s your 3.1%. You got people that will invest in their home equity, which is, I’m paying off my house. I’m like, geez, that’s some of the cheapest money on the planet. And you are like pouring everything you can and making double payments and paying things off because you think you’re gonna feel secure when your house is paid off. But you have to understand there’s a world of a difference between financial security and financial freedom. Security independence and freedom are three different definitions. Security means I have a, I have enough money to have eliminated my debts.
I don’t have credit card debt, I don’t have student loans and I don’t have a house payment. So I’m like, cool, but you realize you can’t retire, right? Like, you still have to eat, you may wanna take a trip. There are things that you need that no debt can’t buy. So most people get stuck on the wrong definition. Past securities independence, which is my investments produce enough money that I don’t have to work anymore. Like I, I I I make a hundred thousand dollars a year. My investments pay me a hundred thousand dollars a year passively. I have the choice that I could break from work if I wanted, but financial freedom is when you have your money producing enough for you that it can pay for your ideal life. And so I I bring that up because these antiquated vehicles that I talk about in the book is just helping people do the math and saying, do the math.
I get it, it sounds complicated. You need like a, a ti 82 calculator with future values. You don’t have to do all that. Just go to the websites, put in the average 30 year ROI. For most of’em it’s five, 6%. And the last of those is the s and p, right? People are like, Hey, the s and p 500, that’s safe, that’s stable. Did you know that the average 30 year average on that is 9%? I’m like, you know what? It’s definitely better than a 6% IRA, a 5% 401k and a 3% annuity. It is, however, there’s a, a problem with that is that 9% is still not over 40 years an attractive enough number to have the money that you need from what most people envision a great retirement would look like. So if it can’t get you where you want to go, then it begs the question, is it broken? And while they’re all valid ways of being safe, that need for safety and security is killing financial dreams left and right because some of your money has to be set aside for the upside, the opportunity to have a possibility of getting where I actually want to go.
Yeah. And so you can make the argument that the plan or society’s plan with those outdated vehicles is the big problem. It’s broken and people don’t know about it because there’s a lack of education. And even with the free information that’s out there, a lot of people are either too lazy or let’s just say it ignorant to even find the answers to the questions that they’re not asking.
Listen, I don’t wanna sound like a conspiracy theorist, but I I think that if you’ve been old enough to live in this world and see what’s going down the game is that the few control the many. And right now the banking system, the financial planning system, the whole 401K model, it’s really about turning people into sheep. It’s basically taking the little access they have that could be investible. They’re not even gonna learn how to do that. So, you know, maybe in the end, I hate to say it, but maybe Dave’s right people, if you’re not gonna get financially educated, maybe you should do these stupid things that won’t be enough, but it’s better than, I don’t know, squandering it. And, and so yes, it is a financial education problem. The knowledge that’s out there, the information is out there and people have to get it. They have to get serious about mentorship. They have to learn how to step into proven models and systems and give themselves a real shot at producing the life that they really want.
Yeah. And I don’t think it’s a stretch to call it a conspiracy theory. In fact, it arguably you could say it’s not a theory, it’s just fact. It the data’s out there. A great way to wind up this episode is to you know, talk about or touch on what you consider the new vehicles that lead to faster wealth creation. We’ve talked about the out outdated vehicles that everybody knows, understands, believes in, most people are involved in. But obviously real estate investing, passive real estate investing is a big part of that. But what would you call the new vehicles to create true wealth?
Yeah. Well, I I think what I would share with everyone is don’t get caught up on the strategy. Get caught up on the ROI. Do the math of the ROI. When I say I love passive real estate, investing a passive because I value my time and real estate, not because it’s real estate. Yeah. But because I can get it to consistently produce never less than 25% a year on my money, and that means that I, it means that I double my money every 2.8 years as opposed to every 10 to 15 years with the antiquated model over a 40 year working life, I can multiply my money 12, 13 times mm-hmm. <Affirmative> as opposed to three times. And so, like, so when I say real estate, don’t think it’s because I’m a fan of it, it’s because it’s a model that produces a certain ROI. Predictably, that’s your double digit vehicle.
And, and, and for me that’s like a race car because it’s like, wow, the anti created vehicles in the book, I kind of like, Hey, you’re in California trying to get to New York. Metaphor for you need, you know, let’s call it 5 million for retirement. Can you even get there on the antiquated vehicles of a, of a rundown horse and buggy? It, it’s just not gonna get you there in time. So yeah, I I tell people that double digit real estate, it can get you there in two decades for most people. Mm-Hmm. <affirmative> if you wanna get there sooner, you gotta graduate to triple digit ROI, which is owning a piece of the next five big up and coming companies. And in my book I teach asymmetric risk the way Ray Dalio teaches it, how he’s returned 27 billion to his, his you know, to his investors.
And so I teach people how do you manage your own portfolio of companies that have a shot at being the next Netflix or Teslas or whatevers, and that you can average 3, 4, 5, 600% if you learn that model that I teach in my book. But then there’s then the ownership of businesses and even absentee owner status. And so I love businesses that get me into a quadruple digit ROI. I like to earn 5000% of my money, 10000% of my money. And if you learn business, and by the way, it’s complicated and there’s risks with it. And that’s why in my book, it’s all about the standards and having great mentorship. And in the beginning you want to team up with people that really know what they’re doing that can help you skip the decade of failure that I and most people go through in business, the wasted years of, of learning where the learning is more important than any financial gain, you’re probably gonna get.
And quadruple digit ROI means that you can print money. Like it’s just like an ATM machine that just spits money out. It’s like, oh, every day I put $10 in it, it gives me a hundred dollars back. That’s cool. Let’s scale that thing. You know, and then I talk about infinite ROI you know, which basically is when you get good enough at a business model or maybe owning a bunch of franchises, or maybe it’s a bunch of real estate, you should no longer limit yourself by money that you have. You should learn how to appropriately access other types of money so that you can multiply your system a lot faster. So infinite ROI is what really says there’s never gonna be a limit. You’re, I don’t care if you, if you come, if you come to one of my events and say, Hey Kris, I wanna be a billionaire and currently I’m worth a half a million or a million dollars, I can show you the actual blueprint of how to do it without being a tech genius. And that’s what I really love about this model is that if you diversify ROIs and really disconnect from just strategy and get that, that’s what produces the possibility to just rocket ship in the next few years past whatever your previous trajectory was.
Yeah. And I think for a lot of people, they, they progressively grow from one to the other, to the other sometimes quickly. But you don’t just jump into all, you know, four or five vehicles right off the bat unless, unless you have a lot of reserves to work with, you’re sitting on Correct, yeah. Piles and piles of cash. So, and that’s just, and then ultimately at the end of the end of the road, there’s always the element of giving back. You know, you want to contribute and give back you know, to help, you know, complete your fulfillment. Good stuff. Well Kris, I appreciate you coming on today. Any final comment or thought you wanna leave our, our audience and then tell people how they can find you? Follow you get more information?
Yeah, I think my final thought I was 19 years old and I had a near death experience almost drowned in the ocean trying to save my sister’s life. And when I came outta that experience, I became obsessed with searching for the answer as to why I felt like my life was spared. And what it’s done is it’s put me on a journey where how I get somewhere is far more important than whether I do get there because it’s this journey. Even take the game of contribution. If, if you see yourself as some wild successful philanthropist when you’re wealthy someday, then you better be giving money today like that. You have to build that into your DNA and model when you don’t have, because the people that give when they have are the people that gave when they didn’t. And so I, I believe that life is short.
I believe life is precious and it’s very important for, for everyone to just evaluate. Are you making your best moves? Are you making your most meaningful moves? Do you love who you’re becoming in the journey? If you’re part of the 85% that don’t like your path that you’re on, then change it and, and, and don’t settle for a crappy life based on crappy choices that produce crappy feelings that make you sometimes feel like, is it even worth it? There’s so much more out there. And one last random comment, Marco, is financial intelligence is powerful, but I I think it’s trumped by emotional intelligence. When we talk about the mindset and the psychology at the end of the day on our deathbed, what are we gonna really care about? It wasn’t what we achieved cuz there’s no U-Haul that goes to heaven.
Hopefully that’s where we’re going. It’s more how did you feel about your life? And so you, for me, I learned to make choices where I feel good, I feel good about the partners that I’m building wealth with. I feel good about the people I’m serving or I’m giving back to, or the people that I work with. And before you have money, if you can learn to love your life and develop that emotional intelligence where it’s like, well actually I I’m making my choices based on what produces a good feeling, not just an outcome. If you can find the middle ground that brings the two of those worlds together where you can get the result with the beautiful feeling and have that in small doses, microdose that, and then get that later with great success in large doses, I, I think those are some of the greater secrets to having a really fulfilling life. As far as where people find me on social media my name is spelled a little funny, it’s Kris Krohn with KK Kris, K R I S. And honestly whatever your favorite social media platform is go check me out there. I’m everywhere. And you know, if you like this, you might like some of that.
I’ll put all that in the show notes. It’s beautiful closing words. I think that was beautifully said. And I’m glad you’re still alive.
Thank you.
All right, Kris, thanks for coming on. We’ll talk to you soon, sir.
Awesome. Thanks guys.
Thank you. Well, I hope you enjoy today’s interview with Kris, super sharp guy and a very successful guy. So I think there’s a lot to be learned from what he has accomplished and what he’s teaching. And I know a lot there that you can also take and implement into your own life and investing career so that way you can achieve the independence, the financial freedom and time freedom that he has for yourself. That is it for today. Remember to download the free report on our website, The Ultimate Guide to Passive Real Estate Investing. It’s a freebie. It’ll only take you 30 seconds if you’re interested in real estate investing or seeing what is going on in the market today in the different areas and what inventory we have, where the numbers make sense, where the opportunities make sense, be sure to schedule your free strategy session with one of my investment counselors.
That way you can learn about where the opportunities are because remember, as I always say, it’s not just when to invest, but where to invest because there are always opportunities out there. So it’s about when, excuse me, it’s about where, not when, apologize about that. If you have a question about real estate investing, just send it over to me. Go to passiverealestateinvesting.com, click the Ask Marco button, or just go to contact us, and I will answer that on the next Ask Marco episode. If you haven’t already, I’ll say it again. Remember to subscribe, click the little button or the check mark or whatever it is on your app or on your screen, and subscribe to the show and spread the word with your friends and family, other like-minded individuals. Remember, we’re here to help share knowledge and information and help you to become a better, stronger, more successful investor and person. If, if I can, that is it for today. Thank you for listening. We will see you all on our next episode.
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