TRP085: How to Generate More Cash Flow
March 11, 2020
If you’re looking for honest, real world, no BS advice on how to create income, build wealth, and achieve true freedom with real estate, you’re in the right place. Welcome to another episode of the real estate preacher podcast where your host Randy Lawrence shares with you his experiences and strategies from over decades as a successful real estate investor. This episode is sponsored by prosperity capital partners. Learn firstname.lastname@example.org now onto the show.
Randy Lawrence: All right. Hey, welcome. I want to welcome you to another exciting episode of the real estate preachers show. We’ve got a phenomenal episode here today. I’ve got a great buddy of mine, Chris Miles on the show. He is a leading authority in the money management cash flow, passive investment creation arena.
He is author of the book “Entrepreneur on fire” and has been featured in U.S. news, CNN money, bankrate.com all for helping clients grow their passive income and increase their cash flow, which ultimately is why a lot of times people are investing in apartments because they want greater cash flow. Chris had been a financial advisor and in 2006,became an anti-financial advisor because he saw better opportunities to offer people through alternative investing than what is available in the mainstream.
Randy Lawrence: And so just super exciting to have him share with us about this. So Chris, welcome to the show today. How are you doing brother?
Chris Miles: Just fantastic, Randy. Appreciate it.
Randy Lawrence: Yeah, for sure, man. Well, I’m so glad to have you on the show because again, a lot of the folks that are listeners maybe don’t know exactly what you do. So I’m excited to open up the box a little bit. I know there’s people that we’ve worked together with and they just have glowing testimonials about what you’ve been able to help them do. So for the audience, let’s kind of open up a picture, you know, share what has been the thing that you’ve been able to help people with? It’s been so exciting.
Chris Miles: Yeah. My focus is all about cash flow, right? I mean, I really realized that cash flow creates options. And when you have more options, you have freedom. So ultimately, cash flow creates freedom, right? It’s not about how much money you have or assets or net worth. That stuff is basically worthless. It really comes down to, “Hey, can I actually create real passive income” right? Passive income that can actually pay, so I don’t have to work my entire life.
Because I mean, you kind of came from that world, right? Like we were always teaching people to save everything, spend nothing, invest in everything but our own businesses, you know, or in other people’s lives, basically gamble our lifeway and hopefully 30 or 40 years we’ll have something to retire on, right? Yeah. And that accumulation model just doesn’t work.
It’s got to be an acceleration model of cash flow. And then when you’ve turned that perspective and the way seeing money on its head, it’s incredible. I’ll give you an example. I just talked to somebody today in fact, where they’ve been debating about whether or not to hire me, right? And it’s funny because I’ve known them for several years and when they reached out, they said, yeah, like we’ve got some investment properties and stuff, but you know, let’s do it. Right. You know, and like, we’re doing okay, but we feel like we’re going to be working forever. We’re almost 50 now and we don’t want to work forever. So my husband wouldn’t mind it cause he liked working, but we want to have the option to not have to work so much or not rely on our business to pay for everything in case business slows down.
So they want that freedom and even some backup plans, right. Just in case. And I looked at their situation, I saw the properties they had and I saw like their IRA money they saved and they’re basically like the epitome poster child for Dave Ramsey. Right? Like they were saving a whole bunch of money. They were paying off their loans and their mortgages on both their properties and their home aggressively. Right. And I looked at it, I said, you know, here’s the thing, it’s like if we basically get you to reverse that mindset that you’ve had and they’re starting to open up to it a little bit. I was like, right now in your situation, like you’re making maybe 800 or 900 bucks a month in passive income with three properties that you have. I was like, we could actually sell those three properties, reposition them, and probably increase that to about probably about 4,500 a month. So increasing their cash flow with the same money, not even using extra money. Right? Almost like another 3,500 to 4 grand a month more. Plus we start doing some other things like, you know, figuring out how to refinance their mortgage and do things with that. I was like, worst case we’ll probably help you increase your passive income this year by another $50,000.
Randy Lawrence: Wow. Hold on. Let’s say. Okay so here they are, got the Dave Ramsey mindset, you know, paying all this stuff off, pay, pay, pay, pay, pay down, down, down. And they’re getting 800 a month and then looking at their situation, really doing a proper analysis of it. And it’s like they could make some repositions and go from 800 a month to 4,500 a month. Clearly, which one’s better? Question, boom, 4,500 right. You know, and you know it’s the amazing thing though is people don’t know that. They haven’t seen that. Like, so again, in this example here, they kind of bought in to, okay. And I mean, think about this a second. You guys who are listening, right? They’ve got this property with an interest rate on it, maybe a 4.5 or 5%.
And the thought is, you know what? Take every dollar you can and pay it down. Like, wow, man, you’ve got already a cheap low rate kind of thing going on there, but you should then double and triple down on the payments. That’s crazy. You know? Um, but so yeah, I mean, so that’s an exciting thing that, I mean, that’s a game changer. Now you have 4,500 a month that again, if they didn’t want to take that money now. Now that’s being another 50 grand a year directed into other investments that are growing over the next five or 10 years as they’re continuing to work towards that freedom day.
Chris Miles: That’s it. I mean, and their goal is only a 7 or 8,000 a month. That’s the crazy thing. And so and I told him, I said if they’re even open to it, I’m like technically we could probably hit their goal in one year because they have other assets we could do stuff with. Like even we didn’t touch some of those assets. We just left some of that stuff alone. Just repositioned a few things easily. I told them 50,000 a year, I never like to over promise anything. But in the back of my mind I’m thinking we’ll probably increase their overall cash flow from what it is currently at least another 50 is really 60,000 years, probably more likely. Wow. That’s amazing. And that’s what excites me. Like, that’s what gets to be fun. Like it’s like that stuff that you know, you can see but people just don’t see it.
Like they’re in their situation, they don’t see what’s there. And again, we’re not taking any more money out of their pocket. It’s just taking the assets and the stuff they already have, redoing it in a way that actually creates less risk. Right. Like for example, they got a $200,000 mortgage, they’re paying $2,400 a month on it because they’re trying to pay it off. And I’m like, let’s refinance that. I mean we could do a cash out refi and get a few thousand more a month, but I’m like, if we didn’t cash out refi, we can get that payment down to about a thousand bucks a month. You know, like so if there’s, and you know, because we went through recessions, right? Yeah. I mean the thing I learned, which was stupid, because I try to remember it in the last recession, I tried to pay off my house more aggressively.
Got all this equity in there only to realize it gets trapped because it’s the bank that has to give you permission to touch your own equity. Yeah, for sure. And it’s like, it’s like, wait, this is like asking mom and dad for the car keys to my own car. You know, like that’s not cool. And what happens? It’s like what if you get into a dire need where cash flow is tight or you lose a job or something happens. Would you rather be paying $2,400 a month on your mortgage or $1,000 bucks a month? I mean, which one’s going to feel more liberating or more free?
Yeah. Well, you know, the crazy thing even on that too is like in today’s environment you can get a 3.5 or seven fixed rate loan on your primary residence for 30 years locked in not to ever change. And it’s like, good God. I mean like if you can’t earn better than three and a half percent on your money, what are you doing? And yeah, and so, wow, what [00:09:00] a, what a hopefully liberating thing for them. And hopefully for the folks that are listening, you think about that, like what? Like, okay, so I get it. Like this thing of you want to retire and not have a mortgage payment and own your house free and clear. It’s like, but yet at the same time, that’s like the cheapest money you’ll ever get. The banks almost giving it to you.
That’s right. And it’s true. And I’ve run the numbers too. I mean, you were in an event where I showed this example of compound interest versus interest, right? You know, simple interests is what you pay on a loan. As you pay the loan balance down, the interest of being charged gets less and less. Not because they’re trying to do anything to deceive you. It’s not like they say, we’re gonna throw all the interest in the beginning of the loan. This is because as you pay the loan down, the same interest rate, but there’s less, you’re paying on that interest because the balance is going down, right? That’s simple interest. Compound interest has the opposite effect. It goes up over time, right? It grows more and more, and so when you say like, yeah, three and a half percent it’s about the going rate right now, 3.75 depending on your state and your situation for a mortgage.
Here’s the crazy thing. If you get a 30 year mortgage at, say it’s three and a half percent, you only have to earn about 1.6% on your money. Say you had enough money to pay off your mortgage, right? So this couple’s situation, they have 200 grand. They can liquidate and pay off their mortgage today. They haven’t done it yet because apparently they haven’t ingrained a Ramsey enough. Right? But they could totally pay it off. But that $200,000 say you just said, no, I’m not going to pay off my mortgage. I’m going to keep it over here earning interest. Right? Well, if they earn 1.6% interest, they’ll make just as much interest in 30 years at 1.6% as they’ll pay at 3.5% interest on that mortgage. And like you said, like you can get a cruddy CD at two or 3% right now. And more than that, you’ve put money in a fund like yours and theirs. I mean, it’s astronomical. You have a mortgage that could actually create millions of dollars for you more than trying to pay it off today. It’s ridiculous to want to pay that stuff off.
Randy Lawrence: For sure. It’s crazy. Well, so, and I just talked with somebody, you know, probably in the last two weeks where they had that exact scenario where they had probably, you know, $800,000 of assessability and it was at a cost of about three and a half percent. Like, oh my gosh, you know, it’s like that’s a game changer, right? You’re earning, you know, eight, nine, 10, 12% on that money versus three and a half. It’s like, wow. It’s a no brainer. I mean, it’s almost like a sin to not take advantage of that opportunity again, done in a prudent manner because then again, you’re freeing up income. And I love what you said, that income gives you options. That’s one of the things. One of my mentors, John Maxwell says, I love options, I want options. And he’s always telling his team that they want options.
And that’s really the thing. I mean, even when we’re buying apartment complexes, we want to look at the backside. What’s the options? Okay, we’ve got multiple exit strategies where if we needed to refinance, we could pay out investors or we’re selling, you know, we’ve got that option again. What do we have as options with the overall renovation? You know, can we have multiple offerings in terms of fully renovated, partially innovative? I mean, it just provides a greater thing. And I love the fact that, you know, increasing your income gives you as a human being greater options. You can choose like the lady, Hey, I don’t want to work, but my husband does. For me, I love what I do and we’re fixing to head out to Tahoe and we’re going to buy a house out in Tahoe at some point in the near future because then I’ll be in Florida and in Tahoe, but I can see myself at 80 years old in my office overlooking the Lake, still talking to the CEO doing deals and buying apartments. And because I love it. Right? So, you know, at 80 I’ll still be doing that. Not because I have to, but because I love doing it and it helps more people, you know?
Chris Miles: That’s right. So I’ll tell you, I mean that’s how I’ve been able to retire twice. The first time was before the recession, you know, and then I was done with my money. I was trying to do speculative ventures and so I went from million to upside down millionaire, and had to dig back out of that hole, and then was able to retire again three years ago. But it’s true. Like it’s all about what kind of income can you create and understand that you’re never taught that mindset because I mean ask any financial planner, right? Or any financial advisor, they’ve got so ingrained in their own head and I know I was there, I was one of those guys that you had to build up your assets, you know, grow it slowly over time and you know, ride the waves of course of the market, it’s all bipolar.
It’s like a crazy person. And then you’re supposed to pull off no more than like two or 3% a year so that you don’t outlive your money. Right. And I’ve run the numbers before, like, you know, if you want to only pull out 3% of your cash, think about this. If you save up 1million bucks, you only live on 30,000 a year, you know where I know investments kind of like yours, like 1 million bucks, dude, that that can make me 120 grand a year essentially. You know, that’s like 3,000 hopefully on the market and smiles on me the right way or do I want quadruple that, you know, it’s just, it’s a no brainer.
Randy Lawrence: You know, the funny thing is, even as you say that, it’s like, so when I started off in I think I got my series seven and 92 maybe right after finishing college and so, and I started off with American express, which later became Ameriprise. So I remember in the training, not only with them but in ultimate subsequent brokerages, it was like, okay, so maybe the distribution rate at that time was like 8% and then a number of years later it was like 6% I had a number of years later, you know, after I sold my company and still had guys in the business then it was like five and 4% and then like what you said, now it’s like, because rates are so low and the returns are not good. Now it’s like, well to be safe you want to do 3% you know, and it’s like over time it’s just gone down, down, down. And then the other part of it is gone. Like, Hey, just push off retirement. Don’t retire at 60, 65 why don’t you go to 70 let’s, let’s go out to 72 I’m like, just work until you die. And then, then that’ll work.
Chris Miles: Hey, living on rice and beans is cheap. You’ll die faster. So you won’t have to have the money last as long and like, you know, just eat top ramen.
Randy Lawrence: Yeah, for sure. Well, the other thing I love what you said too, is about investing in your own business. Because, excuse me, I tell that with attorneys or doctors that we work with a lot of times they can take some of the cashflow, reinvest in their business and increase their ROI by 20% or more because their business is hands on, they’re already in it, but it’s generating a greater return. But in the financial advisor world, they’re saying, Oh no, doctor, put all that in the 401k, put all that extra money with me.
Chris Miles: Yeah, it’s ridiculous because I’ll tell you, I had another client recently. She’s actually from Georgia. She actually was the person that would train personnel and stuff for assisted living. So she would go in there, train them for a year, and then after a year they find, start taking checks. Right. They start taking withdrawals. The company. Well, I remember asking her when she gave me, she says, Hey, I’m starting to have some money coming in. I want to do real estate investing. I’m like, cool. And as I got deeper, I said, well, tell me about this business you have. She’s like, yeah, I go on with a partner. We both put in $50,000 each. So my investment is $50,000 I work in it for a year. I do more of the personnel, HR type stuff and training and hiring. And then after that we’ll get any paid anywhere from $5,000 to $25,000 a month.
And I said five thousand to twenty five thousand a month, that’s 60,000 to 300,000 a year [00:17:00] from 50 grand. It’s crazy. I think the ROI is incredible. And I was like, yeah, you have to work for it. But I told her, I said, you know what? We’re going to do a game. We’re going to change your game plan. We’re not going to just take the extra money and invest it right now. I’m going to tell you, let’s get as much financing as we can get so we can buy three more of these businesses for sure and do that. You got 40 things come in that’s going to create your income of 20,000 to like well over 100,000 a month. Right? And so she did, and now she’s actually selling one of those businesses right now for between six and $8 million. You know, give that cash. I’m like, yeah, that’s phase one. Let’s get some cashflow coming in because you make an extra couple hundred grand a year. Regardless. You could throw that into real estate or any other investments, make cool money, but now you’re getting paid because you’re selling these businesses off. You’re going to get a couple million bucks yourself. Hey, you can use that money. You could be out of the rat race in like a year or two essentially. Versus her original plan was if I could do it in 10 years, if I could retire, that’d be so awesome. It’s like fast, you know?
Randy Lawrence: Oh yeah. Well that’s exciting too. So because again, a lot of times even somebody that’s, you know, has a measure of financial sophistication. They haven’t looked at all the pieces and that’s where somebody like you can take an objective look, you know, kind of an outside independent look and say, Hey, you know, what about this? Have you thought about this? And I tell you, I’ve seen that so much when, you know, just talking with the folks that invest with us where you know, a lot of times they’re not maybe taking a strategic global look at it. And that’s really key because when you take a global look at what you’re doing, focusing on, here’s where my end result wants to be, now you’ve got a more clear picture to see, okay, here’s the steps I need to take from where I’m at today to get where I want to be, whether it’s three years from now. So, how can people who are listening right now say, man, I want some help to find out about this. So what would be the pathway? What’s the best way to reach out and connect with you and to find out more about how you could be a help to them?
Chris Miles: Yeah. One of two ways. One, I definitely invite you to follow my podcast called the Chris miles Money Show. I know it’s a hard title. Remember it took a lot of marketing time to figure out the Chris miles money show. Yeah, you can definitely follow that. And then you can always check out my website, money ripples.com. You can check stuff out there and reach out to me there as well.
Randy Lawrence: Absolutely. Well we’ll also make sure to include that URL for the show or the website. They’re actually in the show notes as well. Again, Chris, awesome love having you on the show, love working together with you too. It’s just fantastic to see the results that you’ve been able to help people with and again, definitely want you to reach out to Chris and connect. He’s got a lot of great insights and can really help maximize what you already have to be able to increase those investments. So, Hey, thank you so much Chris. Thanks for listening to another episode of the Real Estate Preacher podcast. I hope today that you learn something that you can immediately apply in your life or business. Make sure that you check us out on iTunes or at therealestatepreacher.com for more information. If you want to find out more about partnering together with me personally on real estate deals, including apartment complexes, go to the real estate preacher.com and click on the invest with Randy link. I look forward to talking with you personally. Have a blessed in Victoria’s week four this is the week God has ordained for you.