Air Date: 07.06.2021
On today’s episode of Ritter on Real Estate, we get together with a very special guest, Chris Miles. Chris is a cash flow expert with an established reputation. His company Money Ripples has helped countless clients achieve fast, quality financial results. In the past ten years, his clients have increased their cash flow by more than 200 million dollars! He positions himself as an anti-financial advisor and is a leading authority in the field and is teaching a growing number of entrepreneurs and professionals how to get their money working for them immediately. He is also an author, podcast host of the Chris Miles Money show and has been featured in US News, CNN, Money, Entrepreneur on Fire. Tuning in you’ll hear how Chris first became interested in real estate after becoming disillusioned with his work as a financial advisor. Chris shares why traditional approaches like investing in a 401K are illogical and why he advocates for alternative investment strategies. Later Chris outlines some of his tips for freeing up cash today and what he has learned from his favorite authors. For all this and more, tune in today!
Key Points From This Episode:
- A bit about Chris’s background and how he first became interested in real estate.
- How Chris became skeptical of financial planners and their strategy for financial freedom.
- Chris explains what led him to become the anti-financial advisor.
- Why traditional financial planning advice does not ensure financial freedom.
- The strategies Chris teaches on how to ensure financial freedom.
- Chris breaks down the options out there for a good return on investment, like multi-family and syndication.
- Chris explains why he advocates looking for alternative investments and avoiding the status quo.
- How financial institutions benefit from their clients investing in a 401K.
- Why investing in a 401K to have a good life when you’re 70 is illogical.
- How creating cash flow increases your income.
- Chris outlines some of his tips for freeing up cash, today.
- Using a program like Mint to track your finances.
- We hear from Chris about his book recommendations.
- How persistence has helped Chris be successful in his financial life.
“You don’t have to have any special skills. You don’t have to have any financial background to work for the financial industry..” — Chris Miles [0:02:52]
“you can create cash flow and income versus just accumulation, which is really what financial advisors teach..” — Chris Miles [0:08:04]
“t’s about creating the life now, versus saving up to hopefully have that life when you’re 70..” — Chris Miles [0:17:32]
“They had it trapped in different places. That’s why it was creating no income.
When we got it out, we were able to do a cash-out refinance of both their building and their money in a million half dollars to deploy that now is making them well over 100 grand a year.” — Chris Miles [0:22:36]
“I want that flexibility because that creates freedom and I know psychologically, you tend to perform better and create more income when you relax. The best thing you could possibly do is not focus on the interest rate. Focus on the cash flow.” — Chris Miles [0:25:25]
Links Mentioned in Today’s Episode:
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—Full Transcript Below—
“[00:00:01] CM: Start tracking it, because when you start tracking your money, it’s amazing how you start finding more cash and you where you are, because if you think of cause and effect, everybody talks about your assets, create income. That’s been the traditional being taught. The truth is, is that the more cash we you have, the more extra money you have each and every month, that can either build an asset or pay down a liability. That should be increasing cash flow one way or the other, either for passive income, or freed up loans payments and things like that.”
[00:00:27] KR: Welcome to Ritter on Real State. The show about how to passively invest like a pro. On each episode, I interview real estate experts to give their top investing advice, strategies and tools, they break down the insights into practical steps to avoid the pitfalls and make better investments. I want to help you passively invest like a pro. This is Ritter on Real State. I’m your host Kent Ritter.
[00:00:50] KR: Hello fellow investors. Welcome to another episode of Ritter on Real Estate, where we teach you how to passively invest like a pro. Today, we’ve got a very special guest. His name is Chris Miles. Chris is a Cash Flow Expert. He’s an anti-financial advisor. He is a leading authority, teaching entrepreneurs and professionals, how to get their money working for them today.
He’s an author, podcast host of the Chris Miles Money Show. He’s been featured in US News, CNN, Money, Entrepreneur on Fire. He’s got a proven reputation with his company Money Ripples for getting his clients fast, life altering financial results. In fact, his personal clients have increased their cash flow by more than 200 million in the past 10 years. Those are awesome results. Chris, happy to have you here today.
[00:01:38] CM: Hey, it’s such a pleasure to be here, man.
[00:01:40] KR: Yeah, as we dig in, there’s a lot I want to unpack. Just around these ideas of financial planning, what does that mean? Traditional versus non-traditional aspects. Before we get there, why don’t you just tell the audience a little bit more about yourself and how you came to be the anti-financial advisor?
[00:01:59] CM: Not the way you expect. I actually went to college with a sociology major with a triple minor in psychology, Japanese and ballroom dancing.
[00:02:08] KR: Oh, Renaissance man.
[00:02:09] CM: It cover Renaissance man. The whole purpose of that was to actually go into business consulting. So naturally, it all goes together. Before I was going to get my degree. I was like, “You know, before I just finished up getting my bachelor’s, should I have real life experience before I try to go get my MBA and that kind of thing?” I thought I’m going to drop out of college, just take a little hiatus, and just go and try to be an entrepreneur. I had no clue what to do.
After about a couple months one of my friends said, “Hey, man, you should become a financial advisor.” That’s what I just started doing. I’m training to do it. It’s awesome. I’m like – for whatever reason, I couldn’t leave me. I’m that’s so weird. I didn’t expect to go there but, “All right. Let’s try it.” No, I didn’t know the time. I was trying to impress them and everything. I didn’t realize they take anybody that can pass a test and have a heart.
You don’t have to have any special skills. You don’t have to have any financial background to work for the financial industry. I got in, I actually started to like it. I actually really enjoyed being an entrepreneur, I like controlling my time and my money, my freedom, essentially my own destiny. I was fascinated by the topic of money. I did that for four years. They dropped out of college never went back. Then about four years in, as time went on. I’m one of those guys who likes evidence.
That’s the thing is that, when you start to look at the real results people get from doing the traditional mainstream financial stuff, spend nothing, save everything, save it forever, save for the long haul. Save it in mutual funds and stocks and hopefully, someday you have something. That’s the typical thing you see happen. What happened about four years in? I was talking to a friend of mine, who was a financial advisor left to go do real estate investing. He starts telling me, after four months that him and his dad have now doubled his dad’s income as a professor at the local university.
I thought, “Oh, come on, that’s too good to be true.” You can’t do that in real estate, besides real estate’s been proven, it only goes up 3% a year. It only goes up with barely inflation, looking at just the values, not looking at, for example, cash flow or anything else. By the way, I used to think that the stock market average at 12%, which is a complete bogus, because you look at the 30-year real average yield.
The average return and you have a negative year, the negative throws off the numbers. Negative and actual returns become different once you have a negative year. Yeah, it might say 11 or 12%, average but the true average of the last 30 years has been 8.3. That’s actually high historically. It’s usually seven to 8%. Naturally like, I was thinking like, “No, there’s no way, stocks are better.”
We went back and forth. What’s better stocks or real estate? Finally, he stopped me say, “Chris, how many of your clients are actually financially free on their investments?” Where they don’t worry about money. I said, “Well, none,” Because even the retired ones still worry about running out of money. Like, “Well, that’s good job, Chris. Way to go. How about this Chris. If anybody has it figured out, it’s you guys as financial advisors. How many of you guys – and I know you got guys in your office that have been working since the late 70s. How many of you guys are financially free? None of the Commission’s that you’re earning off selling these things, but actually doing these investments and being able to retire off the investments themselves.” I thought about it.
I said, “None. Maybe one guy is.” I thought that guy wasn’t either. He was just really pompous. Like a lot of financial advisors are, sadly enough. You just have a lot of ego and look like you had a lot of success but he wasn’t either. He was scrambling for work once he got fired from that company a few years later. I realized that man like, “You know what? Nobody’s financially free.” I’m like, “Okay, well tell me the answer then, tell me what should I do?”
He’s like, “I don’t think you’re open to the answer.” I’m like, “Come on man, you just got me to admit that what I do doesn’t work so what should I do here?” He’s like, “Alright, if you’re really serious, and I don’t think you are, but if you are, go get the book, Who Took My Money by Robert Kiyosaki.” It’s a lesser known Rich Dad’s book. Let’s sum it up. Mutual funds suck. There you go. That’s basically the premise of the whole story. Then he’s like, “Then listen to Am radio shows pre podcast. This Am radio show with these two real estate investors talking about this stuff.” I did. This was like the end of December 05, that I got the book and everything.
By March of 06. I’m like, “I can’t do this anymore. I can’t stand with integrity and tell people they’re going to be free. When I know, for a fact [inaudible 00:06:19] I looked at real returns. Like real inflation rates, real return on the stock market. It’s almost impossible to retire a good solid, middle class or better than middle class lifestyle in the stock market, especially within 30, 40 years, like they claim.
I was like, “I’m done. I’m out of here. I’ll never teach about money again. I will just be a mortgage broker. I’ll teach ballroom dancing on the side.” That’s basically what I did for about a month or so. During that time, it drove me nuts that these guys knew things, I didn’t. It drove me nuts, there’s guys in real estate in their 20’s and 30’s that were financially independent. I’m like, “I got to know what they know.”
Kind of long story short, a few months later, by that summer, by applying some things, they taught me. Not just in real estate, but even with the business, just creating passive streams of income, whether it be in business, or in real estate, and things like that. I was able to be financially independent by that summer. I didn’t have a lot of money either. That’s the crazy thing. It blew my mind.
That’s something that shocked me. That’s really when I became the anti-financial advisor, because people noticed there was a change in me in my life. I didn’t want to coach people about money. I felt like a charlatan for those four years. They kept coming to me, saying, “Well, how are you doing this? What’s going on?” I’m like such a novice. I was honest and like, “Did I get lucky? What happened here?”
I was starting to help people. By the beginning of 07, I actually partnered with some guys who came out of retirement to basically teach people how to do that same thing. That’s when I became more of the anti-financial advisor, because I was telling people don’t do anything that I taught you. Even my old clients, I’m like, “Anything I taught you, is bull don’t do it. Here’s a better option.” Like, “Hey, here’s like you can use your mortgage. Cash out equity out of this. Go and invest it and create cash flow.”
When that whole thing blew up in my mind about, you can create cash flow and income versus just accumulation, which is really what financial advisors teach. This thing about the financial advisor model. They’re telling you, say you save up a million bucks in your retirement plan. They’ll tell you now, all time needs to tell us 4% was what you live on. That doesn’t work anymore. Rates are too low, it doesn’t work. Now, two or 3% is a safer number, if you want the money to last you forever, especially with inflation.
Think about it. If you have a million bucks, you’re a millionaire but you live on 20 or $30,000 a year. You’re living below the poverty line as a millionaire. You’re a broke millionaire. Even if you had $2 million. You’re like, “Cool, I might almost make it to middle class.” I mean, you think about it, this is such a weird thing.
As far as in real estate and depending on [inaudible 00:08:49] you earn a net of just 10%. That’s 100,000 a year, not 20 or 30, but 100. That’s what blew my mind. It opened up a whole new world. That I was just like, “Holy cow. There’s hope. There’s actually something cool out there.” That’s what led me down that path over the last now 15 years.
[00:09:09] KR: Yeah. Now I really appreciate that story, because I think I’ve gone through a similar transformation. I was a finance in econ major in college. Focused on investing. Thought of myself as a pretty savvy active investor in the stock market did that for a number of years. But it never looked into real estate until I had a point in my life where I sold a business and had some capital from selling the business and then came out and was like, “Well, I like the stock market, but I don’t want all my eggs in one basket.”
What are alternatives to look into? Start looking into real estate and then yeah, it really was a complete mindset shift once I started, really understanding how the process works, and the cash flow and the wealth that can be created. Then I started thinking about that traditional model and like, “Man that just sounds crazy.” The traditional model really is save for 30 or 40 years so you can enjoy life in your 70’s when you’re old, but that’s when you’re going to travel and you’re going to do all this stuff, when you’re in your 70’s. Then just hope you die before all your money runs out. That’s the goal, die before my money runs out. It’s like, “Man that just seems ludicrous.”
[00:10:17] CM: Yeah, you live on ramen is less cheap. It’ll kill you faster. I mean, I’ve got better return plan than to die fast.
[00:10:23] KR: That’s right. That’s really what you’re going for. Like I said, to me it seems ludicrous. I mean, for 30 years of my life, was the plan, was the way to go was a smart thing to do, because it’s what you’re taught. Taught not only through like marketing and advertising, but literally in college in 400 level investing classes, like invest in mutual funds, index funds, diversify, you know all those stuff. Not once is real state brought up as, “Hey, you should go, build cash flow. Yeah, just mind blowing to me.
[00:10:57] CM: Well, if you think about like you said, it’s not just marketing advertising, but who’s obviously teaching the people that are writing the books? Who’s teaching what’s supposed to be savvy, financial education? It’s all the financial institutions. They’re all the ones putting up out the education. They’re the ones training financial advisors to turn around and teach you, because that’s really what financial advisors work for. That’s what I realized.
I was just a glorified salesman in a suit. I had good intentions. There’s no doubt, because of all the training was on this financial companies. It was about a product. It wasn’t about freedom. It wasn’t about the client as much as it was about, here’s the product match whatever the client wants. I mean, it was funny, because even after I got into Y2K. After Y2K, a lot of people come burn from the stock market, because they lost a lot of money
Then they start come out with index funds. Even index funds, they have like a four, zero or 1% and then the ceiling. Your like, “Hey, you can invest in these index funds, you won’t have to worry about losing anything.” It’s funny, because I remember in 2005, when I was still a financial advisor, I asked one of the trainers that one of the company trainers that came to teach us, and I said, “Hey, I was doing the numbers without 1995 to 2005, despite the roaring 90’s, where there was a huge upswing of market, calling we’re seeing right now.”
Fight that in a few down years and then a little recovery from 03 to 05 despite all that, we would have more money being in these guaranteed index type products, versus being in the stock market for leverage. I was like, “Why shouldn’t we all be doing that?” It’s the time is about 27 years old, he’s like, “Well, you’re young, you can take the risk with time, the market always beats these index. We’re just trying to give some for people that are scared of the market.” That’s when I realized, I’m just teaching crap.
That’s the truth, is that everything’s been taught by these financial institutions to regurgitate to tell you what’s good and think about stocks. They’re telling you stocks are really the only way to invest. I actually taught 200 people how to trade stocks and options, because if there’s a level better than buying mutual funds is at least doing your own trading. I told every single most people, I worked for a company that sold that education for up to 50 grand to hire someone like me as a coach.
I would tell those people right off the get go, day one, I’d say, “Listen, if you’re doing this program, you’re not an investor, you’re a gambler.” Because if you’re trading this in the markets, you’re just writing waves, you have no zero control. Real investors have control other investments. They actually manipulate them in return to work in their favor. Warren Buffett is not a stock trader. He buys shares in companies, controlling interest in companies so he can bring his team to ensure his investment that it will always pay out real good returns.
That’s how he does it. He’s not buying and selling stocks, everybody else has taught you. That’s all bogus marketing, bullcrap. It has no relevance to you. Think about, there’s millions people that do real estate and look at the evidence. Again, look at the evidence, who are the richest people in America. They own companies and their investors primarily in real estate. Maybe there’s a few people in the oil and gas industry but again they own a company with that.
Well for the most part, it’s all real estate. They all have real estate in common. When you get beyond a couple million dollar mark. It’s almost all real estate. The people that can’t get beyond five, 10 million in net worth at most over their lifetime, are the ones that try to save into mutual funds. It’s almost impossible to become financially free in that, those pieces of crap.
[00:14:14] KR: Yeah, well said. We know what we shouldn’t be doing. We’ve gotten pretty clear like that’s not the right way. What is the right way? What do you teach it, you alluded to it a little bit but what are you teaching now?
[00:14:26] CM: Yeah, I’m teaching my clients that you need to look outside of those options. Look at alternative investments. In my clients we look everything from like syndications, which I know you’ve got one as well. Looking at multifamily. That may not just be multifamily apartments, it could be self-storage. It could be assisted living. Are we looking at turnkey real estate, one of the easiest ways to get safe returns, consistent income and get great growth? You can buy your own real estate and not manage it.
I personally love turnkey, because I realized from before the last recession, I’m a horrible landlord. I sucked at it. I lost money during the recession. I went from millionaire to upside down millionaire. That’s why it says in my bio, I retired twice. I became financially twice screwed up. You went over a million dollars that had dig back outs, so I could be financially independent again in 2016.
You got to make sure you’re doing it right. There’s so many options that work. I mean, even multifamily syndication like even to get in [inaudible 00:15:18] return 14%, 16%, or whatever it might be. You will get that. That’s still better than 8.3 for 30 years in the stock market. You probably get their tax advantages too. I mean –
[00:15:30] KR: 100%.
[00:15:31] CM: When you see this world. When you start to see it, and you really begin to question the status quo, recognizing that the status quo, the average American and not the spenders, but the savers the Dave Ramsey graduates, as I like to call them. The poster child for Dave Ramsey, those ones that keep coming to me all the time, because they’re saying, “Hey, Chris, I’m debt free. I got $3 million net worth, zero passive income.”
How do I get out of my business? How can I work my business, because I want to not because I have to, because I love it? I don’t want to have to work there. I could take a couple months off, if I choose to, or stay. I do whatever the heck I want, or stay in my job, or not stay in my job. That’s the thing you need to really plan out appropriately to say, “Listen, I have to go away from that status quo.” Because the status quo has been proven not to work. Most people are need social security to even have some decent living.
What happens if we run out of social security? It’s let’s go bankrupt in 2033. What happens then? I think they’re going to keep it going. It’s going to shift and change. It may not be as cool as we thought it was. That’s the thing is, there’s so many options out there but it requires you to do the right options. By the way, if you want to retire before 60, why have you put your frickin money in a 401(k)? How does that make any sense? “Well, I get free money.” It doesn’t matter.
The free money when you look at the compound rate of return of a match, even if it’s 100%, it only gets you about a two or 3% extra return. Say that the market does average 8% you happen to be on the upside the market right now. That 401(k) might get you 11% return if you’re lucky. Maybe with the match and everything. Again, you’re capped on how much you can put in so you may not be able to save enough to hedge against inflation and everything else to have a decent lifestyle, or to look your money last.
That’s why we need things these alternate investments that say, “Hey, I can make double digit returns easily.” Heck, even if I get the preferred return, I still get what the market gives me but better, because again, it’s about the cash [inaudible 00:17:24] income kicks off. It’s about not living on 20 or 30,000 years about went on a $100.
[00:17:31] KR: Right. It’s about creating the life now, versus saving up to hopefully have that life when you’re 70.
[00:17:37] CM: Yeah, that’s what my sign says back there. You live your life today, not tomorrow.
[00:17:40] KR: Well, that wasn’t even prompted. I’m glad that sign was there.
[00:17:45] CM: Also, my shirt says it too, cash well equals freedom – That’s something that again, if you get that, you start to trust it and realize that you can actually be taking less risk to get higher returns. By the way, just so high risk creates high returns. Again, financial tuitions taught you to believe that, because think of what the risks they’re taking, zero. They get the guaranteed management fee off of you.
They get that whether the market goes up or down, they’re always getting paid. Think about the rules, their telling you to always keep saving stuff money in, don’t pull out more than interest only so then their portfolio keeps growing, their assets under management grows, which just gives them an increased cash flow every year. Increased profits, increase revenue. It’s like the most brilliant thing ever, but we bought it, hook line and sinker haven’t we.
[00:18:28] KR: We have? We have in the 401(k) thing to me is fascinating now that my mindset has shifted, because I used to think the exact same way, like the traditional way. Now it’s like, okay, the idea of the 401(k) is put money away now, because when you retire, you’ll be in a lower tax bracket, because you weren’t working and so you won’t pay as much taxes.
It’s like, “Wait a second.” Well, if I’m in a lower tax bracket, it’s because I have less income. If I have less income that again like you said, is less money you live in 20, $30,000 a year, just because you’ve retired and that’s all you can pull out. The whole concept doesn’t make any sense. If you really just think it through to the end.
It’s now the way I think of it is, I hope every year of my life. I’m heading into a higher tax bracket. I mean, one, I’m going to just defer all that through depreciation on my real estate, but even outside of that, that means I’m making more money. I hope when I retire that I’ve got more money than I did now. Again, that whole 401(k) thing doesn’t make any sense. If you think about it that way.
[00:19:31] CM: Yeah, you have to fail for it to succeed that plan. That’s not a good plan. I mean, I remember the old mantra as a financial advisor was, you don’t plan to fail. You fail to plan. It’s like, “Wait.” Honestly, if I do your plan, I’m going to fail. That is my plan. Your plan will tell you and even like I said, a 401(k), if you want to retire before 60 that’s a joke, because you try to pull money out you’re getting slapped with a 10% penalty plus taxes.
I know there’s people like getting creative like, “Yeah, but I could do a 72 T and pull the money out and do this.” This like still, you have to jump through so many stupid hoops to get that money to work for you. The government has set it up purposely for broke people, for average, middle class people to buy into their crap. Those that are wealthy, they think 401(k) is a joke.
They laugh at it. That’s what I learned by March of 06 I left the industry. The reason I left, because I went to go see those that were in the real estate game. They’re talking about this stuff and saying, “Yeah, finance was teaching this and this.” Is that a joke? They’re like, “Well, hopefully [inaudible 00:20:29]. Is there any financial advisors in the room? I was about to raise my hand, but then I realized of a 100 people, I was the only one about to raise his hand, I quickly shot it, brought it back down. I was like, if I understand integrity, I better quit this weekend. I did it was embarrassing, because it made absolute perfect, common sense.
Again, because it’s popular like many things in this world. Many people believe popular thing. When I was growing up was milk does a body good. Pass it on. Well, milk doesn’t do squat for your body, except make it worse and inflames your body and it’s not healthy. Really buying into the same lies from the milk industry that we’re buying from the financial industry. It’s happening there, too. We just got to reject it and do something different and do it right and invest in a way that’s lower risk, higher returns.
[00:21:14] KR: That’s right. I mean, there was a time when people thought cigarettes were good for your health.
[00:21:18] CM: Yeah.
[00:21:19] KR: It goes to show.
[00:21:19] CM: Yeah, relaxes your nerves. Brings your stress level down like that. Especially when you’re addicted.
[00:21:26] KR: Exactly. Everything you said, I think is so dead on. I think we could probably just go on and on about all the just ludicrous things that we know now. For my listeners, I mean, this is why I do the podcast is because I had this awakening, similar to what you’re talking about. I want other people to see this. I think we’ve done a good job of hopefully crashing into those ideas that some of the people have had drilled into them for so long. Somebody now realizes, “Man, they’re right. I have to change.” What’s the first step that somebody should take to do that?
[00:21:57] CM: Well, first step, besides trying to gain confidence into what we’re talking about here, because you have to gain that confidence to even consider this as an option. Anyway, millions of people have done this option, and it’s worked. Just saying. You’re not the first person guinea pig testing this.
But I’ll tell you like the first thing you should be doing is looking at your balance sheet. You shouldn’t be looking at income expenses and looking at what the inflow and outflow is. Make sure you got your cash flow managed well. But also look at your balance sheet. Find out what your net worth is. Just like the couple that had $3 million net worth out in Minnesota. I mean, with them, it was all trapped into their own home, their office building, where they have the practice, they had it trapped in different places. That’s why it was creating no income.
When we got it out, we were able to do a cash out refinance of both their building and their money in a million half dollars to deploy that now is making them well over 100 grand a year, even just starting in some of these syndications. Then eventually, that should be building up to probably close to about 200 grand a year, over the next few years. That could almost get them to quit their business if they wanted to, that alone makes another half million to deploy.
That net worth is worthless. How do you get that net worth to start working for you? That’s one of the first places I would look, if I were you. If you’ve got the net worth, it might be time to get that out of prison, whether it’s in your house, or whether it’s in the 401(k) and IRAs. Might be time to get it out of that prison and get it working for you instead.
[00:23:20] KR: Got you. That’s great advice. As you think about, you have this concept these getting going on the same lines like these seven secrets to free up cash today. What are some of these other ideas that people can do? What are the things that they can start implementing?
[00:23:34] CM: Yeah I talked about tracking your money. Like really going in, just programs like mint. Use mint for your personal finances. Start tracking it, because when you start tracking your money, it’s amazing how you start finding more cash, and where you are, because if you think of cause and effect like everybody talks about your assets, create income. That’s been the traditional being taught, but the truth is, is that the more casual you have, the more extra money you have each and every month, that can either build an asset or pay down a liability. That should be increasing cash flow one way or the other, either through passive income or freeing up loans payments and things that.
Here’s one thing I do teach in that book is that, you should ignore the interest rate for trying to pay down debt. Many people are trying to do that. Ignore the interest rate. That is not the number one factor, you should be looking at. The fact you should be looking at, I teach a little equation called the cash flow index, which is you take the balance of a loan, divided by the minimum monthly payment, and that gives you that index number. Think about it, if you have a $10,000 car loan, you save like 3%, right? But it’s $10,000 car loan at 500 bucks a month, the index is a 20. If you also have a $10,000 credit card, that’s 250 bucks a month. That’s an index of a 40.
Pretty much like if you’re looking at Dave Ramsey, they would say, “Hey, you should be paying off that credit card because it’s a 13, 14,18%. Yeah, there’s an argument for that. The truth is that real financial freedom doesn’t happen because of the interest rate. It’s about, how’s it affecting your monthly cash flow.
[00:25:01] KR: Right said.
[00:25:02] CM: I said I got 10 grand. I’m going to pay off the car, because I can use that same 10 grand to get double the cash on cash ROI, because that 10 grand will free up 500 a month, not 250 a month, the credit card. Definitely life happens like things come up that you don’t say higher expenses, lower income. What better way to know, “Hey, I’ll have to pay 250 bucks a month this month, instead of the 500 bucks a month.” I want that flexibility, because that creates freedom and I know psychologically, you tend to perform better and create more income when you relax. The best thing you could possibly do is not focus on the interest rate. Focus on the cash flow.
[00:25:37] KR: Yeah, that’s interesting. It’s first time I’ve heard that actually. That makes a ton of sense. It’s that. Yeah, you think about the interest rate and you think about, “Okay, what’s the total you’d have to pay over that time?” Really what you’re thinking about, and what’s much more impactful is that month to month cash flow, and giving yourself that cushion and by paying off that auto loan, which is much lower interest rate, you’re actually freeing up more month to month cash. To be able to deploy in other ways, then if you’re paying off that credit card. Yeah, that’s a new concept. I appreciate that.
[00:26:06] CM: I had somebody who recently had like $100,000 on student loan. It’s funny because people student loan, especially their doctors, dentists, things like that. Like love my clients have them, they’ll say, “Hey, I got half million student loans or 200,000, 100,000.” Well, I’m like, “What’s your payment on that 100,000?” “It’s 800 bucks a month.” I’m like, “Okay, I could buy a rental property with $100,000 down, or a couple rental properties even or almost a Fourplex or a duplex, at least.
With that much money down and make at least that much cash flow to pay that payment for me. That does include all the tax benefits, of course, you probably write off the interest on your student loan anyways. That’s double tax benefit there. That doesn’t include the fact they’re paying down your mortgage for you. It does include the appreciation. I mean, it’s ridiculous to think of that you’d want to pay that stuff down.
Many times people get caught up on the balance or the interest rate but that’s not the thing we should be worried about. It’s the, how can we get the biggest banks for our bucket, if we were to pay down or pay off student loan or any loan for that matter? That’s why many cases I’ll have people refi their property to free up the cash flow, get the lowest payment possible. Sometimes when we do a cash [inaudible 00:27:06] and keep the payment the same, but then we got cash to play with and invest.
[00:27:11] KR: Yeah. No, I think that’s a great idea. Also just thinking about this idea of, okay, if you’ve got this car loan and you’re paying $500 a month, and you can take your 10 grand, and you either pay that off, or you can keep that 10 grand, and you can invest it in something else. Well, I think people often think about, I need to create more income, I need to create more income, but like paying off that loan where you’re paying out $500 a month is just as impactful and a hell of a lot easier than creating $500 in new income a month. You’re still freeing up the cash flow. It’s just you’re getting rid of the payment versus adding an additional source.
[00:27:49] CM: Yeah, I had a client who had only had 80,000 savings. They’re I want to buy my first rental property. I looked at it, I said, “Wait, if we pay off this credit card, and we refinance your car loan and do this, we’ll actually free up 600 bucks a month, with only 6000 bucks. Within a matter of months, they’re already back up over 18,000. They bought the first rental property that same year.
It’s like they were able to have their cake and eat it too and now, instead of trying to make it an extra, maybe 200 bucks a month net on the property with 18 grand. Now they’re making like 800 bucks a month. They’re still making the 200 on the property, but they freed up 600 a month. It’s all about that leverage and getting the best bang for your buck.
[00:28:25] KR: Yeah, I think that makes a ton of sense. I think that’s some powerful planning. You talked about another concept of like making your investment money pay you twice. What does that mean?
[00:28:35] CM: Yeah, I mean, that one’s almost a whole podcast by itself. Obviously, if you’ve ever heard people talk about these like infinite banking, using whole life insurance to save the money, and then use that money. I actually have a method called Max ROI Infinite Banking, because I’ll tell you, not all infinite banking the same. Many times infinite bankers are just insurance agents. They don’t understand investing.
There’s coming from the perspective of, “Hey, look what you have in retirement.” I know about speed of money, I can create my retirement now. Screw that, how can we use us now [inaudible 00:29:03] to speed my own tax free supercharged savings account with much lower cost than typical infinite banking policy and then you use that money to go buy real estate. Here’s what happens, because when I use it as a line of credit, maybe I’m only paying three and a quarter percent or 5% on my money, but the insurance company’s paying me five or 6%.
I’m already creating this arbitrage just the bank does on us. I’m doing that and at the same time, I’m still buying my investment properties. What ends up happening is I’m now double dipping. I’m making investment returns on my properties like it would normally and I’m making money inside of that life insurance. I’m essentially making this tax free extra three, 4% rate of return and rather than point nothing percent and my stupid savings account after I liquidated it, or making nothing the same price.
That’s the difference. You can make an extra three, 4% on top of your returns that you’re doing, whether it’s in a syndication, whether it’s buying properties or whatever. It’s pretty cool method. If you do it the right way. But it’s got to be designed right with lower cost to get Max ROI.
[00:30:03] KR: Awesome. Yeah, I’m sure there’s a ton to unpack there. I love that concept of being your own banker, being able to have a resource to give yourself the loans to be able to go out and continue to leverage and create like you said scenarios where you’re getting paid even more and even more, and you’re able to loan money to yourself instead of having to go to other sources and pay that interest. Very cool.
[00:30:23] CM: Absolutely.
[00:30:24] KR: Well, Chris, I really appreciate you coming today and sharing some of these topics with us. I think we’ve opened up the minds of a lot of our listeners, and hopefully set some people just down the path of maybe asking some hard questions. This way I’m doing, is that right? Is what I was taught? Is that correct? Or is there another way? Hopefully, you’ve opened up some eyes.
Lastly, before I let you leave. I got four questions I want to ask as we move into our keys to success round. The first question is, because I know that you work with your students as well. You mentioned you’re helping them on due diligence and how to underwrite properties and understand what’s a good deal. What is one question that every investor should ask their deal sponsor?
[00:31:06] CM: Yeah, there’s a bunch of them. I’d say one that maybe people forget is, how much of your own money are you putting into this investment? Because if the deal sponsor doesn’t believe in it, or they’re not putting skin in the game, they got no accountability, but they’re putting a decent amount of cash in there. That’s already a good first filter, I think. If you get at least answer to that question, you can move on to the next ones.
[00:31:25] KR: Yeah, absolutely. I mean, that’s one of the four keys I hit on all the time is that there’s got to have skin in the game. I started out as a passive investor first before I started running my own deals. I think a lot about things from that perspective and it’s like, “Man, would I ever invest with anybody if they came to me and said, “Hey, I got this great idea for you. I’m not investing in it, but you really should.”
[00:31:46] CM: Yeah, it just seems crazy to me. It’s a great question. Yeah.
[00:31:52] KR: What are you most proud of in your career?
[00:31:53] CM: The impact. Definitely ripple effect. I’ve been through highs and lows. I mentioned a low, I went through the last recession, where I was struggling. I remember praying to God like, “What’s going on here? Why am I feeling right now?” The feeling I got was, there’s tools, resources, I was learning and things I would learn to become stronger and better. I knew I was going to get out. I just didn’t know how or when. It was about a year and a half to two years before I find pull out of that little tailspin.
I’ll tell you like as I started coming out of it. The one thing I thought is, if I can just bless one person’s life that would be worth it. One person could be benefited from the gains, if my pain became somebody else’s game that would be worth it. I mean, literally, there’s been hundreds of thousands of people’s lives affected and impacted because of what I learned. I hope that didn’t turn into millions and that’s something I’m very proud of.
[00:32:39] KR: That’s awesome. Huge impact. What books should everybody read?
[00:32:43] CM: Oh, man. Whatever you’re trying to figure out right now is what you should be reading. Whenever you try to become an expert on. I will tell you like one of my favorite books was called The Pumpkin Plan by Mike Michalowicz. He did the book Profit First, if you’ve heard of that one. Pumpkin Plan was just a game changer for me, because it got me to really apply that paradox principle to my business and my money to figure out what’s going to give me my Max ROI.
[00:33:06] KR: Pumpkin Plan. Awesome. I’m going to check that out. Then lastly, what is your number one key to success?
[00:33:11] CM: Not giving up. I mean, just persistence. I’m a marathoner. I’m used to, enduring. Definitely like because of the decision I made where I kept enduring. That’s what allowed me to be successful. Especially when times get hard, that’s usually the time right before something amazing happens. I think that’s the one key success is that you just persistent, you just keep going. You just keep moving forward.
[00:33:34] KR: Yeah, that’s a fantastic lesson. If your ups and downs, if you keep moving forward you’ll eventually get there at the end of the day. Chris, thank you so much for bringing so much value to the group. Guys, I hope that you’ve taken this in and are thinking about things in a little bit of a different way. Chris, if people want to hear from you more, hear more about what you’re doing? How can they reach out to you?
[00:33:53] CM: Yeah, two different ways. Definitely follow my podcast, the Chris Miles Money Show. I mean, there’s plenty to choose from. I would not start episode one, because I’m now past 500. Start from the newer ones, but definitely check out that show. Then you can also reach out to me through moneyripples.com. You can actually contact me right through there.
[00:34:12] KR: Awesome. We’ll make sure all that’s in the show notes so people can click and get ahold of you. Chris, thanks again for being on the show.
[00:34:17] CM: Absolutely. I appreciate it. It’s such a pleasure. Thank you.
[00:34:20] KR: Yeah, have a great rest of the day.
[00:34:21] CM: You too.
[END OF INTERVIEW]
[00:45:20] KR: Thanks for listening to another great episode of Ritter on Real Estate. Hit the subscribe button and make sure you don’t miss out on the content that will make you a better investor. Also, visit kentritter.com for articles, videos, and tools curated just for passive investors. Until next time, this is Kent Ritter with Ritter on Real Estate. Now, go out and invest like a pro.