Ken McElroy is a well-known real estate investor, an author and a ‘Rich Dad’ advisor. He joins Robert Kiyosaki to discuss current events and real estate.

Tell us what you were doing when you first read “Rich Dad, Poor Dad” and what you thought?

“That's part of why I loved your book, is I was managing property for other people, so I was on site manager. I was collecting rents and paying the bills. Then if there wasn't enough money, the owners would get mad. If there was more, I would pay it to them and they would be happy, and it was really that simple. That's how property management is. If you return cashflow to them, they leave you alone. If you don't, they don't leave you alone. In the property management world, I was living the principles in the Rich Dad, Poor Dad book. I literally was managing for people that were using debt. They were using other people's money for the equity. They were buying real estate.

Because I would meet all the partners, they would come through the buildings, and I would meet them all. They were just normal doctors and CPAs and lawyers. I was like, "This is wild, how all this works." Then you start to put the pieces together because I was in the business long enough. The principles in Rich Dad, Poor Dad were true, and that's why I enjoyed the book so much.

I started managing properties in college for free rent, basically. Then you learn pretty fast who pays rent, who doesn't pay rent, and the problems that can come from renting something too quickly and not doing credit checks and all those little things that all add up to no cashflow.

Here's what I see as one of the biggest mistakes. People look at it like a stock or a stock market, or just they invest their money, and then they walk away. All of a sudden, magically, these great tenants are going to show up, and you're going to be getting three bids for the landscaping and the painting and the cleaning and all the things, and the utilities and looking at all the bills and all that stuff. They just think that just happens. That's what property management is.”

Ken, talk about your books in the Rich Dad series?

“The first one was The ABC's of Real Estate Investing, and that was a basic book. That, obviously, was a bestseller and did really, really, really well. Then the third one, of course, which we talk a lot about and we talked about in the first segment was the property management piece, The ABC's of Property Management. I've seen lots and lots and lots of investors, especially in the property management world, they buy something and then they hand it over, or they try to manage it themselves, and they run it right into the ground.

And your newest book?

Essentially at this point, I think that if you're getting angry and hearing, "I need to save my own money," that's an excuse. I hear it all the time. "I have so much equity. I have this. I don't have enough money to invest." That's literally an excuse. That's like, "I'm fat and I'm not going to go to the gym." It's in that same category. The truth is the people who raise capital know that this is the way it's done. Your financial planner raises your capital, they make fees off of you. The entire industry is set up this way. It's set up to attract capital to invest into things. You can do this too. This book is a step-by-step book on exactly what to look for, how to do it, and the questions to ask.”

What are some of the points you cover in The ABC’s of Raising Capital?

“The first thing, of course, that we always talk about is finding a deal. If you can find a deal, and this has nothing to do with raising capital, if you can find a deal, you can get the bank to finance it, you can get investors to invest in it, and it produces cashflow, then you can just replicate, rinse, and repeat. That's it.”

How many deals do you look at before you find one?

“A lot. That's the thing. What happens is if you're investing, let's say, stock, I could buy a stock right now on this show, literally, from my app on my phone. That is super lazy. I hope it goes up. What's hard is looking for deals and finding equity and debt for those deals. That's what's hard, and being able to see them, so that you can educate investors. That's what we do now.”

Raising capital is now easy for you; you have money chasing you now, instead of you having to chase the capital, correct?

“That's how you start. Then what happens is, as you start to return money, like to you, I just gave you a couple million bucks last week, tax free, cashout refi. As you start to do that, and by the way, to hundreds of investors, we're always refinancing projects and returning capital to them because that's why they invest with us, or our team, or our leadership. When you start to do that, then the confidence and the trust goes up, as it should. As you start to perform to the business plan that you told them you were going to do, and so it takes a while. After 20 years, you have now a following.

Now, we do have more money than we have deals, so our issue is deal flow. I'm just somebody that started managing a 60-unit property in college and learned this from zero, so anyone can do this.”

The best deals never get outside, correct? The more it is promoted, the less of a great deal it is.

“Yeah. In fact, we say, "The bigger the brochure, the worse the deal." If somebody has to sell you with this big brochure and all this information in there, there's probably some salesmanship in that. We would do, literally, over the back of a napkin, over a beer or something, "Here's the high level. Here's what it is. Here's what it'll do." In, right?

It really is a game of being inside of [inaudible 00:26:06] team and an industry and understanding [inaudible 00:26:10]. Even last week, I was in the middle of nowhere. I was in Pahrump, Nevada, doing some tactical training. There were real estate guys there. We were talking about... One guy was doing land leases for billboards. He's done 16 of them and they're just ca-ching, ca-ching, ca-ching. I was like, "Oh, that's a good idea." What happens is you start to ask questions, find out what people are doing, and we don't know everything, so there's lots and lots and lots of ways to do this, lots of ways to raise capital, lots of ways to do real estate deals with, really, no management even. That's it. Once you're in these circles, then you just get wiser and wiser and wiser.”

Once you start reading your books and Rich Dad, Poor Dad and combine that with Cash Flow Quadrant, you start to see things the average person doesn’t see, right?

“The other thing is a lot of people don't realize when you put money in a bank or you give money to a pension or to a financial planner, they now have a problem because they have to invest it somehow. That money is your money, and then they need to find people to invest that money. That's how the world works. They're just middlemen to your money. That money makes its way to real estate deals and businesses. Why not be on the other end of it? Instead of giving somebody the money and then having them look, why don't you figure this out for yourself, and then try to get that money from those same people to do deals? That's how this whole system works.”

You can see more of Ken McElroy at kenmcelroy.com