Ep #574 – Developing an Anti-Financial Plan

Chris Miles became financially independent twice by the time he was 39. Chris speaks from experience when teaching real estate investors how to quickly create cash flow and lasting wealth.

Here’s some of the topics we covered:

  • Gambling on appreciation
  • Multiple streams of passive income
  • Passive businesses
  • The value of a franchise business
  • Focus is power
  • Why a 401(k) “won’t get you there”
  • How to get investment money to pay you twice
  • Questions to ask a General Partner
  • Freeing up cash

To find out more about our guest:
http://moneyripples.com

Full Transcript Below:

Rod
Welcome to another edition of How to Build a Lifetime Cash Flow through Real Estate Investing. I’m Rod Khleif and I am thrilled you’re here and I know you’re going to get value from the gentlemen we’re interviewing today. He’s name is Chris Miles and Chris has his own podcast. It’s called the “Chris Miles Money Show.” And I was on it. And he’s been real gracious because we’ve been trying to get him on my show and I’ve been suffering through Covid and still suffering a little bit with my lungs. But by the way guys, Covid is real. I don’t laugh at people with their masks on any more or unless they’re in a car by themselves, of course. But other than that, it is definitely real. So, you know, be careful out there. But anyway, his company is called “Money Ripples” and Chris calls himself the anti financial advisor. So we’re going to drill into why. And he and I talked a little bit before we turn the recorder on. And I think this is going to be a really enjoyable conversation. So Chris, welcome to the show, brother.

Chris
It’s such a pleasure to be here, Rod.

Rod
Yeah, let’s have some fun today. So–

Chris
Yeah.

Rod
You know, what I’d like to do is just have you talk a little bit about your background, because I know that you’ve became financially independent a couple of times so far in your career. So why don’t you talk about that a little bit?

Chris
Yeah. If I became financially independent twice, that means I screwed up. Right?

Rod
Well, that’s my memo as well. So I don’t feel bad. Yeah.

Chris
Yeah. I mean, like, the first time I did it, you know, it almost seemed accidental. It was right on 2006, essentially, because I start out as the traditional mainstream financial advisor back around Y2K, right? And I did that for four years. But I like evidence. I like to know things work. And I realized that over time that people weren’t becoming financially free, right? I realized that even after decades of advice, there were still struggling, trying to save up enough to retire. And as I started putting real numbers, I sort of realized, oh, this is not as sexy as I thought it was. Well, you know, right above the end of 2005, 2006. Right. I have a friend and he actually quit being a financial advisor to go to real estate investing. And so we start talking and I figured he’s probably feeling it. Real estate, right? I said he went and partner with his dad on some deals. And I’m like, yeah, he’ll come back, want to work with me again as a financial adviser, I was completely wrong. Right. So, he ended up coming to me and he’s like, Chris, life is awesome right now. Like, my dad has just doubled his income as a professor at the local university. I’m like, how? That’s impossible. It’s too good to be true as we hear a lot of time in the real estate world, right? He’s like, no, he’s done it. We’re doing it right now. And so we got this debate about what’s better, stocks or real estate. And if I stop me said, Chris, how many of your clients are financially free right now where they don’t worry about money? Not retired, but they’re not worrying about running out of money? And I said, well, probably none. He’s like, well, great job, Chris. I’m glad you’re helping them a lot. All right. Second thing, he’s like if anybody’s got this figured out, it should be you guys, his financial advisors. So, how many of you guys are finally free? Not if the sales commissions are earning off this stuff, but actually doing the mutual fund investments. I thought about, I said, well, maybe none of them. You know, maybe one guy is and I found out he wasn’t either. He’s like, well, there’s your problem. I’m like, well, give me the answer. He’s like, I won’t, because you already just got to argue with me about why real estate’s not as good. I said, fine. Just give me something. He says, all right, go get this book. “Who Took My Money?” by Robert Kiyosaki, which is a lesser known Rich Dad book. To sum it up, mutual funds suck. Right? And then he said, now … AM radio show with these real estate investors. And so long story short, I sort of follow their stuff. A few months later, I couldn’t do any more. I couldn’t stand to read and keep teaching this stuff. So I quit being a financial advisor, didn’t know what to do with my life. So I was just going to stay as a mortgage broker and teach ballroom dancing on the side. Right? So anyways, I was doing that and of course, I started to learn from these guys and eventually I was able to become financially been at that first time. Now, flash forward to 2007. I come out of retirement to teach people how I did what I did. Right? Well, you know, we start focusing on real estate investor specifically. Well, these are real estate investors are gambling, which was the same thing I was certain do. I was starting to gamble based on appreciation, not on cash flow. Right? So the next thing you know, I’m getting burned by the recession. I went from millionaire to upside down millionaire pretty much over. No overnight, but over year. Right. And, you know, and I’m in a horrible place, so I’m back in the rat race. So I stop teach people how to do that stuff. But I was able to dig my way back out, didn’t file for bankruptcy, but did have to pay over a million dollars. I know not as big as yours. I mean, you had an awesome, awesome story. But for me, it was pretty overwhelming, you know, where I had to dig out of that little million dollar plus debt hole and I was able to become financially dependent again in 2016. This time, I was doing a much wiser than I was just in my late 20s and early 30s.

Rod
What did you do differently?

Chris
Well, one, I focused on cash flow. Right? Not appreciation. You know, I like to say that boring is sexy, you know, like I love, like to me the sexiest thing is here another door makes $300, $400, $500 a door. Right? Of profit versus, hey, I can make 50, 000 or 100, 000 on a flip. You know, like, that’s great. And that’s gravy. But the thing is I was getting so greedy that I got stupid. You know, so, now is always about how do I get that regular, stable, predictable cash flow coming in and which I know is kind of the big thing about your podcast is that lifetime cash flow, like that was my big shift is like go there and have multiple streams coming in from different sources. So it’s not just one. And so even if something turns off, if an income stream has to turn off or something goes wrong, you’ve got other things backing you up. You’re supported. You know, And so that’s the big difference.

Rod
That’s good. You know, it’s funny that, of course, you know, I got, as you said, I got that memo as well. And I wrote a book called “How to Create Lifetime Cash Flow through Multifamily Properties”. But the subtitle is “The New Rules of Real Estate Investing.” And the new rules is very simple, forget value, focus on freaking cash flow to say, messaging. Yeah. So, you know, you talk about multiple streams of passive income. Are you talking about things outside of real estate as well or what– just elaborate on that a little bit.

Chris
It absolutely can be. So I mean, like, I love properties, right? I love having rentals come, you know, with that kind of stuff. There’s multifamily, even single family to a degree. Right? Like having those that money coming in, paying you regularly. I love syndications. I love funds. I have different things coming in there. I even do like land investing, like with seller financing. You know, I partner with somebody who is doing it actively because I’m more of a passive investor. I’m not much of an active one. Right? It could be an income stream for business. Right? Like creating business income streams. Can you create residual streams to that? Not as much active, but residual streams coming in through those. You know. So–

Rod
Talk about how, you know, okay, I’m sorry, just to drill down a little bit. You said quite a few things, of course, you know, by being active operator, by your own deals, get into syndication, you know, other asset classes like land and other things like that. But when you talked about business, drill down on that for a second. How do you invest in a business or if you have already or are you just, you know, speaking kind of generally invest in a business for a passive income stream. Can give you an example of that?

Chris
Yeah. Now there’s a few different ways, right? I mean, one, if you already have a business, that’s a great place to start is where can I actually create money while I sleep, right? Can I create systems of automation and things like that, the pay out? Could it be an online product? Could it be a monthly membership type of service? You know, can I–

Rod
So you’re talking about your own business. So I thought, I’m sorry, I thought you were talking about investing in somebody else’s. That’s what threw me.

Chris
Well, that’s the second part. Right?

Rod
Okay, okay.

Chris
So I was just, if you have your own business, that’s one way, right? You know, you can do it even through affiliations and things like that, referrals and whatnot. Heck, I do with my podcast even, you know, through sponsorships. The other way that you can do it outside, especially if I get a lot of clients where they are like IT managers. You know, I get a lot of doctors, dentists, IT managers, pharmacists, people like that. You know, a lot of times they’re like, I don’t have a business I want to put money into. Okay, well, great. What if we buy a franchise? And there are franchises that are, I would call them semi passive. Right? Often you might have to put 15 to 20 hours a week up front for a few months especially, we put in a good amount of money. The more money you put into a franchise generally, the more passive it can be. So you might put, you know, 20 hours a week up front for a few months. Once it’s set, you got the personnel in place. You might be spending five hours a week or so managing and overseeing it. Right? And that can still generate a six figure income working about five hours a week. So it depends on the business that has to be the right match up. But there are definitely opportunities out there. And in fact, I almost did it in 2020 during Covid. I thought, hey, maybe I’ll do that. But then as I start, look at the options, how much time was involved. I said, well heck, I’m just going to go right back to my own business and create, you know, a residual income streams there instead and just with something that’s already set up. But you can definitely do it outside your own business or your own job.

Rod
Yeah, no, I agree completely. And those are great examples. And. You know, I’ve built 24 businesses. You know, I don’t call them failures. I call them seminars. But, you know, several have been worth tens of millions. Most have been spectacular flaming seminars. And, you know, and we feel our way to success. But I’m going to tell you that if I were to start a business in an area that I wasn’t familiar with, that absolutely do a franchise would be silly not to, frankly, in my opinion. So that’s good counsel. But let me say something else, though, too. Guys, and that is focus is power, okay? And when I have suffered is when I’ve been, when I’ve had my finger in too many pies. I remember I was flipping houses in Denver. I had some frozen yogurt shops. I had a carpet cleaning business. I had vending carts, selling ice cream bars and everything suffered. And then when I got rid of everything and just did the houses, you know, about 500 houses in that run. So focus is power. So let me ask you this. You know, I know you’re kind of anti mainstream financial advice. Can you elaborate on that a little bit?

Speaker 3
Yeah. Like I mentioned earlier in my story, right? I learned when I started putting in real numbers and calculating them out, mutual funds don’t work. A 401k will not get you there even with a match. Right? For example, if you have a 20 year goal, you know, and you’re trying to get to a at least a 60,000 a year lifestyle, that’s not much that’s kind of like I think like lower middle class. Really.

Rod
Sure.

Chris
And if you want that kind of lifestyle, you’ve got to start saving today about $8,000 a month based on the average returns in the stock market, especially when you factor in fees, taxes and everything else. It’s ridiculous. You know, if you want to do it in like 15 or 10 years, you can be saving up a couple hundred thousand a year. Just try to get there because you’re trying to raise inflation. And we already know inflation is a lot higher than the government tells us, right? You know–

Rod
Especially these last few weeks. Holy cow. It’s been. Holy cow, what’s going on? I mean– lumber is like, what, ten times what it was? I mean, it’s insanity. Yeah. So I’m sorry I interrupted. Please continue.

Chris
It’s true. Like when they say, hey, 2% is our target. Remember the rule 72 stocks about compounding numbers. How long does it take for something to double? Well, if it’s 2%, it means 36 years it takes to double in inflation. That means 1985 should have been half the cost of what it is today. And, Rod, you and I both know 1985 is a lot cheaper than half. Right?

Rod
Yes, no question. I mean, I remember 25 cent gas so. But I’m old, but yes. No question. Okay.

Chris
So that’s the thing is that we are raising inflation, right? When the stock market only has an actual return, not average, remember average and actual are not the same number. That actual yield the stock market before fees and before taxes. For the last 30 years, it’s only been 8.3%, not 10 or 12 like they claim. And watch what happens when you try to put those numbers a calculator saying, I’m going to put in 7% or 8% instead, and then you put in taxes, you put in inflation maybe at only 4%, which I think is conservative. Right? Again, playing devil’s advocate against my own points.

Rod
Especially for the next few years. I mean, I think–

Chris
Oh yeah.

Rod
You can’t put the trillions that in there talking that, you know, Biden wants to put trillions more in. And, I mean, I don’t think we can avoid inflation at this point. But anyway, just continue. Yeah.

Chris
Yeah. And then, and so when you put in those numbers, you’re like, okay, I get a big number potentially. Here’s the thing. Like, it used to be tight back when I first started. There’s that 4% rule, right? So if you have a mutual funds, you can live on 4% a year. The problem is that even when I was a financial adviser over when I quit 15 years ago, right? Even then, we said, you know, 4% is a little too aggressive. It should probably be two or three to make sure that people don’t run out of money. So there’s this whole fire movements going on and they didn’t retire early and they’re saying 4% like that’s old crappy inaccurate numbers. And they’re based on 12 years of upswing in the market. So there’s there’s millennials out there thinking they’re going be able to retire right now with mutual funds. And that’s bull crap. His thing about 3%, right? If you have a million dollars saved up 3% is only 30,000 a year. Think about you’re below poverty living as you’re a millionaire, living below poverty. You’re a broke millionaire, you know. Contrast that with even if you only made, say, 10% on a real estate deal, right? So you made 10% on that same million dollars. That’s a hundred thousand a year. Drastically different lifestyle, way more leverage. And you still have the money. Right?

Rod
And now that’s our minimum cash on our syndications is 10% annualized over five years. And so, you know, this is good stuff, Chris. And you’re giving a lot of clarity to the differences between, you know, traditional money, mainstream financial advice and how to invest there versus why we love this business in real estate. So you’ve got a question which is, how to get investment money to pay twice? Can you elaborate on that a little bit?

Chris
Yeah, you bet. So obviously, it’s no surprise. Some of you probably heard things like infinite banking and things like that out there before. I’ll tell you this, for the most part, infinite banking is stupid, okay? The way, I mean, it’s a cool concept, but the problem is you get all these insurance agents out there that are insurance agents, not investors. Right? And so they’re trying to do a tug of war. They’re trying to pull money away from your real estate investing versus putting in there. However, if you do it right, if you actually get the minimum death benefit possible, maximum return. I call it “Max ROI infinite banking”. Right? You do that and you start using this money not to just store up and save for stupid retirement, but actually to leverage now to go to your real estate investing. What happens that when you borrow from money for those you may not know what this is you’re using like a whole life insurance policy, right? Your cash is in there. You can save up cash because there’s cash that’s growing as a tax free savings account. You know, and–

Rod
Borrow against it.

Chris
You borrow against, yeah. Basically, you borrow against it. You get a line of credit from the insurance company, you know, at say 5%. By the way, if you have a 100,000 unit– there’s actually banks will give you at 3.25% right now. While they’re still pay you 5% or 6% with insurance company. So you’re making money while also paying on the interest. It’s kind of like a he lock the pazio. Right? Well, when you’re using this money and leveraging it. The thing is that you’re making more interest than you’re paying in interest to those insurance companies or to the bank. And so you get this double arbitrage effect, right? So you’re making money from the insurance company and you’re still making money in the real estate deals at the same time. If done right, you should add– so like you’re saying, there are a minimum return on your deals or 10%. Say you only got the 10%, you should be able to add at least a 3% to 4% rate of return on top of the 10% using this versus just using your savings account. So you got to do it right. But that’s one of the coolest things that I learned, especially when I got a real estate investing was, wait a minute, if you use this, this could be like a supercharges tax free savings account that pays you way better returns than point nothing percent that you then get taxed on by the government.

Rod
And, you know, with a caveat that you do this with the right operator. Okay. And guys, I have a free resource that is a list of questions you should ask a GP before you invest in them, like you’ve got it right here actually. “Questions To Ask A GP, a General Partner, In A Syndication Before Investing.” If you guys want a copy of this book, just text, let’s see what is “GP QUESTIONS” to “72345” and we’ll get you a copy because, you know, you need to ask intelligent questions. Better yet, if you’re going to invest in real estate, for God’s sakes, come to one of my boot camps because, you know, why would you invest in anything if you have a basic understanding of it? And, you know guys, know my boot camps, I don’t sell anything. They’re my virtual ones. And I don’t, you know, it’s 18 hours of training for usually about a $100. But again, if you want these questions and let me give you an example of what I’m talking about here. So, you know, why do you like this particular market in this property? Do you hold an operating reserve? How did you stress this, the deal? Are you going to refinance it or sell it? You know, what happens if something happens with one of the KP or sponsors if they get sick or die? How do you manage cash flow? Who’s doing the accounting? Who’s the property management company? Have you gone full cycle on a deal? Is it a five or six, B or C, on and on? So these are all important questions that you need to ask. And there’s about 50 or 60 of them on here. So anyway, that’s a great resource. So let’s shift for a second. You’ve got some ideas around freeing up cash. Can you elaborate on that a little bit for us, Chris?

Chris
Yeah, that was the benefit of going through crap back in the last recession, right? I stopped teach people how to get to the rat race during that time because I was back in it. You know, I don’t, like, teach anything that I’m not doing. You know, So I switched it. I started doing this. I started teaching the thing that I was doing, which was getting resourceful. How do I find cash when I need it? And it’s amazing how much money for most people is locked up in what I call prison, right? It could be a foreign care, an IRA prison. It could be a home equity prison. It could be all kinds of stuff. But how do we free up that cash? You know, So, for example, like tracking money was the biggest thing I wasn’t doing prerecession. Right. Because–

Rod
Spending? You mean you’re spending or just–

Chris
Both sides.

Rod
Okay, good.

Chris
Yeah both sides. That’s the thing is like savers always look at what they’re spending, but they ignore what they earn. Spenders ignore what their spending, but they pay higher attention to what they earn, right? You want to do both. You want to pay attention to both sides of the equation, the full flow of money, what’s coming in, what’s going out. So I wasn’t living in reality. I thought I was making more money at one point than I actually was. And I was spending more than I actually was, right? So I was earning less and spending more. And I found myself in the hole like 60,000 a month. So I started doing things like tracking money. Now, if you’re business owner use things like quick books for the personal finance side, I like using Mint, you know, mint.com. That’s a free resource we use. It’s actually run by the same guys and do quick books buy into it. Greatest resource to be able to track your money. And it actually remembers those expenses. So if you said, hey, this expense is this category, you’ll remember that the next time. So pretty soon you could say, hey, this is figuring out for me. It’s all automated because I’m ambitiously lazy, right? I’d like to make sure things are done fast, but it can track your money. You can actually know what’s going on because don’t worry about budgets. Don’t worry about all that stuff until you know what’s actual reality in your situation and then cut out the destructive expenses or things that just aren’t worth while, right? By the way, I found, you know, fraud on my account just by tracking money because somebody got a hold of our debit card information somehow. And there was like $1200 spent at WalMart, you know, which that’s not what we spend all of our $1200 at, you know. So it was good to cut– nipped that and be able to report that and get it back on our lives. So there’s money leaks that happen that way. Other ways, you know, if you’re a business owner, taxes is a big one. If you’re not a business owner, you don’t have as many tax breaks unless you’re doing real estate investing. And that’s a whole other topic, right? There’s also, you know, with debt, that’s one of my favorite because you get– I get a lot of people. I call Dave Ramsey graduates, you know, they save up tons of money, they’ve got debt free, and then they say, wait, I’m asset rich and cash poor. I don’t have any cashflow coming in. I can’t stop working. So, you know, a lot of times, like, we even look at getting mortgages back out, you know, especially right now our mortgages so cheap. You can get a lower rate of mortgage than what’s the inflation rate is right now, which is exactly what the government is doing right now. That’s why the government never had to pay off debt, because they know that inflation is always going to be higher than what they pay in interest. And so those keep running that bill up while they make money off of inflation, right? And–

Rod
Scary, though. You know, at some point you just feel like the pipers got to get paid and, you know, God help us when that happens. But so, these are the sorts of things that you do when you help people create an anti financial plan, as you call it. Yes?

Chris
Correct.

Rod
You go through these different ways–

Chris
Finding up money and how do we get it working for you so you don’t have to keep working for the money.

Rod
Nice, nice, nice. Well, I really appreciate you coming on the show, brother. His company is called “Money Ripples”, “moneyripples.com” and his podcast is really good as well, “Chris Miles Money Show”. Listen, thanks for coming on and adding value, my friend. Great to see you again. Sorry you had to wait to get on my show because of Covid, but I appreciate you bringing some wisdom to mine.

Chris
It was worth the wait, rod. Appreciate it.

Rod
All right. Good to see you. Thanks. Take care.