What Type of Real Estate the Rich Invest In – Robert Kiyosaki [FULL Radio Show]
Video Transcript
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(rock music) – [Announcer] This is The Rich Dad Radio Show, the good news and bad news about money. Here’s Robert Kiyosaki. – Hello, hello, hello, this is Robert Kiyosaki of the Rich Dad Radio Show, the good news and bad news about money and as some people already know we broadcast from gorgeous downtown old town Scottsdale, Arizona, where it’s either Heaven or Hell. And surprisingly I think it’s still Heaven. It should be Hell a couple hours maybe but it’s one of the most beautiful places on earth to live except in the summertime. And I’m joined here with my sweetheart, Kim, and we have a very important show for you today. And this is the question. We played Money Money Money which comes from our President’s famous show, The Apprentice and I know some of you love him and some of you hate him. Well that’s not the issue of this show. This show is about real estate. In my opinion and according to my tax advisers and anybody who’s in the know about real investing there’s nothing better than investing in real estate from debt and tax points of view. It is the best. And naturally because President Trump is a real estate guy the breaks got even bigger for real estate investors. (laughs) I love it. But anyway, today the question is for all those interested in investing in real estate and making more money, what is the number one investment in real estate? You know, real estate, people say, "Well I’m investing in real estate." I go, "Well what kind of real estate?" Some people flip houses. Some people, I don’t know what they do. They fix them up and then they re-rent them or whatever. There’s millions and millions of ways. There’s warehousing, mini-warehousing. There’s golf courses, there’s hotels, apartment houses. So the question is what is the number one most important, most profitable, the investment, real estate investment to be in today? And that’s our discussion. So Kim, what would that real estate in, what category of in real estate would that be? – Well you know it’s interesting because people always ask when it comes to real estate oh where should I invest? What city, where’s the best place to invest? And that of course all depends on what you’re talking about, Robert. What are you investing in? But one of the biggest questions is what’s the trend? What is going to be hot today and down the road? And that’s what you’re asking. And this is going to be a fun show because what we’re seeing and what our expert is gonna be talking about is a product called Assist… – Wait, wait, let’s not give it away. (Kim laughing) What’s the worst? – Oh, not gonna say it. First of all let’s start with the worst. (Kim laughing) Okay, there’s one, two, three, four, five, six, seven categories. Of the seven categories, what’s the worst? And it’s vacation homes. – Well that makes sense. – And what most losers do is they buy themselves a big home and then the next thing they buy is a… – Vacation home! – Now did we do that, Kim? – We did. – Yes, we are the biggest losers. We had three vacation homes like idiots. – And one we kind of rent out occasionally but it’s certainly not an asset. It is a liability. – Yeah, so that’s why ladies and gentlemen, someone, "What should I invest in?" and I say, "Well how about education?" And so this radio program you’re gonna get the number one. So let me give you the next worst, single-family homes. – High income. – High income, you know, for rich people and all that. They want to buy them and flip them and do whatever they do. – But you think about that and let’s say the market’s doing well. The economy’s doing well and so you have this expensive home that you’re renting out and all of a sudden the economy turns and the first thing usually that people do is they go to something cheaper. So those high-end homes start sitting up. – Or they buy a high-end home, they want to flip it. (Kim laughing) And then the economy reverses on them like the– – And they get flipped. (laughs) – They get flipped over. (Robert and Kim laughing) I have another F-word for that one, but anyway. (Kim laughing) The next one are multi-family condos, oh! Kim and I have had condos. They’re almost worse than vacation homes. And the one reason is homeowners associations, HOAs. – Homeowners associations and you know they often say too the last thing to become successful before the market turns are condominiums. – Yep. – So if all the sudden condominiums are becoming very popular you may want to look and see something may be changing in the near future. – Yep, yep, yep. I love the H-O-A, H-O-A, homeowners association. I have other definitions of that name but Kim has seen me go to war against those guys. And I tell you, you cannot talk to homeowners associations. They could be the worst people on Planet Earth. They’re horrible people. – Which is a really good point because if you’re investing in real estate is there’s a homeowners association you have to deal with? Because a lot of homeowners associations do not like renters. – No. – They want owner occupied. – Oh worse than that. Our HOA when Kim and I were first starting out years and years ago we just painted one of our units and they told us to change the paint. (Kim laughing) I went wait a minute, we just finished. And they said, "We don’t like your paint." So I don’t like you. (Kim laughing) And then we went to war again, you know. – Well a lot of those people– – And they called up their attorneys and I called up my attorneys, it was horrible. – That was people with too much time on their hand. – Yeah and ah, that’s what HOA stands for. People with too much time on their hands and nothing to do but cause problems and they all think they’re professional investors. They’re horrible. – (laughs) You have no issue with homeowners associations. (laughs) – Jesus, and the next category, I’m moving up the worst list, is manufactured homes, deals on wheels. So Kim and I attended workshops on deals on wheels taught by this famous guy. (laughs) He was really funny but he said the first thing to do is you have this vacant lot and you invite people to move their homes, their mobile homes onto the lot. And first thing you do is you buy them a tree. And so you give them this tree and you ask them to plant it. And they plant it naturally in front of the mobile home so the home is no longer mobile. I said Jesus. – (laughs) They don’t want to leave their tree. (laughs) – Well they can’t get the house out of the. They had to cut the tree down. – Yep. (laughs) – And I’m going god, wonder if this guy is a genius, man. I mean I can’t believe it, you know. So that was deals on the wheels. And moving up the list, master-planned communities. You know what’s lovely about master-planned communities? They look good. They’re easy to rent to. People love them and all this but they are kind of a master-planned communities and they do have that dreaded HOA, homeowners associations which I just despise. (Kim chuckling) Next up the list is the single-family. Well a good thing about single-family, you’re not part of an HOA. – But it’s single-family moderate and workforce. – Yeah, and that’s where we started. – That’s where, yeah, that’s where we started. That’s where most of our apartment buildings are moderate to workforce. – Workforce, not high end, not glitzy. Basically as Kenny McElroy would say, "Next stop is the street." (laughs) And if they don’t pay their rent they got no place else to go unfortunately. So we take good care of them but they take good care of us– – And it’s a good point to with the moderate workforce because you got to, if you’re gonna be renting apartments or single-family homes you want to make sure there’s jobs and people have a lot of jobs where that’s the main criteria. So that makes a lot of sense. And if the market does turn, moderate to workforce is not, I mean people may downsize to that. – Right, so there, you always have a market for workforce. It’s just above the street, as Kenny would say. They got no place else to go and they’re very happy to have a home and all this and they generally I would say 60% are great tenants. 40% you gotta watch like a, gotta put a guard dog around them. But anyway, they’re good people. – And number one. – Number one, the one we’re talking about today (hands drumming) is what, Kim? – Senior housing. – And it’s what we’re talking about today. It’s number one, is so far ahead it’s in the excellent category and everything else is fair to abysmal. (Kim laughing) And our guest today has been a friend for years, is Victor Menasce. He is a serial entrepreneur. He started off in Silicon Valley as a smart guy and then he found religion in real estate. And so Victor is going to be talking to us today about the joys and beauty of assisted living for old guys like me. And Victor is the author of Magnetic Capital: How to Raise All the Money You Need For Any Worthy Venture. It came out in 2017. And Victor is Canadian and he’s also the author of The Great Canadian TakeOver: How Savvy Canadians are Profiting From Stupid American. Well no no, that’s what mine says here. (Robert and Kim laughing) It says How Savvy Canadians are Profiting from Stupid Japanese. No, no, no, From Highly, the Wildly, the Wildly– – They’re profiting wildly. – Profiting Wildly. (Kim laughing) – From the Meltdown in U.S. Real Estate. Well that sounds good there. Anyway, Victor, thanks for all the years of friendship and your credibility. Victor and I have been on the Real Estate Guys cruises forever. They’re fantastic for anyone dedicated to your education, especially in real estate and Victor is one of the speakers there. They have a lot of great speakers, real authorities on the subject of real estate. And the reason Victor’s on this program is because Kim and I just entered the senior of assisted care, old guys, baby boom generation housing. So we just started this market so we’re here to learn from Victor just as the rest of you are. So welcome to– – Welcome, Victor. – [Victor] Great to be here. – So where are you located right now, Victor? – [Victor] So right now I’m in Northern France just a few miles away from the Normandy coast. And as we’re recording this we’re about to celebrate the 75th anniversary of D-Day. – Well great, what a place to be. – Yep. – And we have a friend, Joe, who’s flying his C-47 or DC-3 over the Channel right now. – Yep. – To be part of the great invasion, so anyway. – So Victor, why is senior housing such a hot property right now and in the future? – [Victor] Well it’s no secret that the baby boomers are coming and coming in droves but I will tell you that the marketplace right at this moment in many major markets, many primary markets is actually overbuilt and this you know. Real estate is hyperlocal. So because that’s a little bit inefficient there’s a lot of secondary and tertiary markets, a lot of suburban markets that are underserviced, that have been ignored by the major leagues, by the major national players. And frankly that’s where the opportunity lies. – When you say overbuilt, overbuilt of senior housing or overbuilt of other real estate properties? – [Victor] Well senior housing breaks down into several different asset classes. At the most extreme end of care you’re dealing with skilled nursing. And that’s what we traditionally think of when we talk about senior care. At the other end of the spectrum we have independent living or a new category that’s called concierge apartments where these are a little bit more like a condo quality product but they offer a little bit more services, a little bit more amenities. They don’t really get into assisted living. A lot of people to tap into the equity that they may have had in real estate and instead of buying a condo they simply pay rent. And a lot of these folks will get into that space and simply just often sign a five or 10-year lease. – And are there any medical or skilled professional services attached? – [Victor] Generally not, not with concierge apartments. But then in the middle and this is the area that’s the fastest growing is what we call assisted living. And this is where you don’t need quite so much help that you need to be in skilled nursing and you’re not ready, you’re not quite healthy enough to be on your own in independent living or in a concierge apartment. – So let me tell you, what services does that level need, what specific professionals? Like do you need a cook? Do you need nurses? You need orderlies? You need bedpan movers? What do you need? – [Victor] Correct, so in assisted living we typically will have one skilled nurse, one registered nurse on staff. There will be a number of personal attendants, folks who provide the day-to-day care but you don’t necessarily need the full complement of services that you would need in skilled nursing. So there will be an administrator. There will be the personal support workers. There will be the kitchen staff. And depending on the type of product that we’re talking about when we speak of assisted living most of the time people think about the big-box facilities. These are the ones that have 200, 250 beds, some of them even larger. And they tend to have a little bit of an institutional feel. That’s what the major national players are playing in. They’re building those types of products. – But– – [Victor] We on the other hand, yeah, go ahead. – No, but that’s, Kim and I have had a lot of friends who were in between there and they would buy a house in a suburb and they might put five, 10 in that house and they’d have a nurse and some. That’s a smaller end, right? That’s a private end? – [Victor] Correct, so yeah. So that’s what we call the residential assisted living model and we’re big proponents of that because you get a better ratio of caregivers to residents. And at the end of the day people will show up at a big-box facility and they’ll be lured in by the underwater treadmills and the pottery classes and all of that kind of stuff but that’s not why people are there. They’re there because they really can’t take care of themselves anymore. They really need the help. And so it’s really the quality of care that’s the most important and you really need a better ratio of caregivers to residents. – So you don’t need all the flashy stuff? – [Victor] No, in our experience for example my partner Loe who runs our facilities in Dallas, most of the residents who come are coming from one of the big-box facilities because they hated it. – That’s interesting. – [Victor] They lived all their life in, they lived all their life in a single-family home. Now they end up in a hospital with a better paint job and that’s about where they are. – So let me ask you this, Victor, because baby boomers, you all know baby boomers, they don’t want to be called seniors. They don’t want to, they have this way about them. They want to be independent. So there was a new product that I’ve seen in several places where they, it’s apartments just like you said. They sign a lease and they have apartments and they keep that same apartment whether they’re independent and then if they need more care they stay in the same apartment and then they have the assisted living come to them. And as they need more care, that more care comes to them but it gives them more freedom. Are you familiar with that? – [Victor] Yeah, we’re starting to see that again in some of the larger complexes. Often what they will do is they will have for example one floor that’s independent living and if they really need more care then they might be moved to another floor. And in other case they’ve done exactly like you described. They decided to move the staff around. When you start to move the staff around it gets more challenging because at the end of the day assisted living is really first and foremost a service business. We try and make it look like a real estate business for tax purposes but it’s first and foremost a service business with a maybe 20, 25% real estate component. – So for the, look, we have that friend Kathy from Australia and she was buying all these right after the crash here in Phoenix when single-family homes were dirt cheap. She was buying them up and putting four or five beds per unit in these houses. And she had one big problem. She was a horrible manager and people were dying of starvation and all those other things (laughs) which I think is funny. – Well she was a real estate person. She was not an assisted living person. That was the difference. So she looked at it just like you’re saying, Victor. She looked at it as a real estate play versus a service business. – So for a lot of our listeners right now probably a single-family home that’s converted to assisted living, let’s address them. Because when Kim and I, how many units are we building right now? – For? – Assisted living. – It’s gonna be about 240. – Yeah, so we’re in that category now and I’m reserving the penthouse in there. (Kim laughing) But anyway, so Victor, what advice? When I come back, well we’re kind of out our town but what advice would you have for people like Kim and I when we first started out with very little how to get into this business? What are the pitfalls and where are the profits? So when we come back we’ll be talking more to Victor Menasce. Again, he’s the author of Magnetic Capital. He’s a longtime friend, a great guy. I mean I can speak very highly of him. Very competent, smart guy from Silicon Valley who found redemption in real estate. So Victor is the author of Magnetic Capital: How to Raise All the Money You Need For Any Worthwhile Venture and that’s what Victor did in Silicon Valley for these tech companies. So we come back we’ll find out what is and how it is you, even if it’s just small time like Kim and I were at one time, how do you get started in the best real estate venture projects today. We’ll be right back. Welcome back, Robert Kiyosaki, The Rich Dad Radio Show, the good news and bad news about real estate. You can listen to the Rich Dad Radio program anytime, anywhere on iTunes or Android and all of our programs are archived at RichDadRadio.com because one of the best ways to learn is by repetition. So if you want to learn more about this subject today which is assisted living, the best real estate play in the markets today, all over the world the best because baby boomers are getting old. And so it’s the best real estate play of all. You can go to listen to this program again at RichDadRadio.com. Our guest today is Victor Menasce. He is a serial entrepreneur. He’s from Silicon Valley and he found redemption in real estate. He’s the author of Magnetic Capital: How to Raise All the Money You Need For Any Worthy Venture and his website is VictorJM.com. And I want to say this. Victor is very generous with his information, education, and all that. He holds classes. He’s very supportive of the Rich Dad program. So if you want to find out more about Victor’s classes on this important subject, this one division of real estate called senior assisted living, is VictorJM.com. Any comments, Kim? – Well we’re going to get into a little bit about demographics but you talk about the demand for this product for assisted living. You talk about that there’s a number of Americans 65 and older are gonna hit 79.2 million by 2035. That’s only 15 years away but they’re already– – But I already hit that. – They’re already here, they’re already here. And right now they say and this was true of the project we’re working on, Robert, is that the typical age of an assisted housing resident is 83 years and right now there’s like 10 million of them, so– – Numbers are increasing. – The numbers are increasing. That’s what makes a good trend. – Yep, and our new saying is you know how Kenny always said because we were in workforce housing, "Next stop is the street"? Our saying in assisted living is this is your last bed. (laughs) – Okay. (Robert and Kim laughing) And our guest today is Victor Menasce, and Victor– (Kim laughing) – Well I speak of my last bed also, you know. I’m of that age category. – (laughs) Victor’s a serial entrepreneur and real estate investor. He spent 25 years in the tech industry, Silicon Valley and elsewhere. And then he discovered that what he wanted to do was real estate and he’s now quite the expert when it comes to assisted living and senior housing. So welcome back, Victor. – [Victor] Great to be here. – So for the new guy or new couple starting out in this real estate venture and let’s say that they’re gonna buy a three bedroom, two bath house in a solid neighborhood. What are the opportunities, what are the pitfalls, and what are the things need to watch out for? – [Victor] One of the biggest rookie mistakes I see in this particular space is people trying to actually start too small. There are a number. Of course assisted living is one of these businesses which regulated at the state level. So there’s an awful lot of regulation that you’ve got to adhere to. Some states limit you to very, very small houses, four, five, six beds and frankly it’s difficult at that size to make the numbers work. It really is difficult. The overheads end up being too high. But if you can get a facility where you can put 10, 12, or 15 beds, now you’re talking. Now you can start to get the numbers to work. You still do need some economies of scale. Yes, the numbers are great. You can get anywhere from five to $12,000 per bed per month depending on where you are in the country and those numbers are fantastic. But of course most of that goes to pay for the services. So you’ve got to have the economies. You’ve got to make that work. Otherwise you end up being an owner/operator and just like you know you don’t want to buy a job, you want to buy an investment. – So let’s get the number simple. Let’s say it’s $15,000 a month per bed. What are the expenses? – [Victor] Let’s go with $6000. Let’s go with $6000. That’s more realistic. – Okay, let’s go with 10 because I can’t count below. (Kim laughing) So let’s go 10 because the numbers are easier. (Kim and Victor laughing) – [Victor] Sure. – What are the expenses per bed? – [Victor] So the number one expense, it by far is the staffing and as an operator of assisted living your top three issues are staffing, staffing, and staffing, finding the right people, finding the right quality of people. That’s really the most important thing. – So what kind of staff do you need that’s a quality, what professional staff? – [Victor] So you’ll need an administrator. Of course this depends on the state. So every state is a little bit different but you’ll need an administrator. You’ll need a driver, someone who can take people places. You will need someone who can cook. You will need a registered nurse and you will need personal support workers. So if you have too small a facility you end up having too much overhead. If you can get up around like I said, 15, 16 people the numbers actually start to make sense. – Can you put 15 or 16 people in a three-bedroom house? – [Victor] No, not at all. Oftentimes what you end up doing, yeah– – So that’s why our friend Kathy went bust, because she had too small a house and too high overhead. – So what would be the ideal house for 15 people? – [Victor] Well these days – 15 residents? we actually, we purpose build them. We purpose build a 16-bedroom house. We’ve got a design – Really? that we’re building in North Dallas. We’ve got some that we’re building in Louisiana and if you think about it like the letter H where you’ve got four quadrants with four bedrooms in each quadrant and a common area in the center where you’ve got your kitchen, your living room area where people congregate, where they can watch TV, where they can play cards. All of that sort of thing is happening in the common area. And each of those four wings are somewhat segregated, a little more private, a little bit quieter and that’s how we design our homes, around that concept. – So is it easier to find an existing house or to build a new house? – [Victor] It’s easier to, in some ways it’s easier to build a new one if you can get the entitlements. And what we in particular like to do is build a campus of 16-bedroom homes. The reason for that is because residents like to be in that home-like setting. They’d rather have it be like Thanksgiving dinner every night where there’s a dozen friends at dinner as opposed to eating cafeteria-style where the food’s coming out on a steamer tray. It’s a different experience. – So when you say a campus could you have like four or five, could you have four or five of these H models as housing models? – [Victor] Yes, yeah, yeah. In fact we’re building one right now with five with room to expand to eight. So that’ll be a total of 128 beds on one single property but it still creates that small feel. – So what you’re basically saying is if you’re small don’t start. – If you’re too small. – [Victor] Well you can definitely start. No, yeah, you don’t want to go too small. I really believe that 12 to 16 beds is really the minimum threshold to make it economically viable. Otherwise it’s really, really hard to make the numbers work. It’s hard to hire the staff. – And is it you’ve got individual rooms. Does shared rooms work? – [Victor] Some people do shared rooms. We’re not a fan of that. We prefer individual rooms. People like their privacy. They have their own habits. In the big-box facilities if they’re doing the rounds at 7:00 a.m. that’s what time you’re getting up. But in the residential model if someone wants to sleep in til nine or 10 in the morning they should have the ability to do that. They’ve earned it, why not. Let’s remember who the client is and build the service to the client. – So what about toilets? Does each room have to have a toilet and bath? – [Victor] We build that into every, we build a bathroom with every room. Not a lot – And a bath. of facilities do that. Some have shared bathrooms, yeah. Well typically accessible showers so you could literally roll into the shower with a walker or wheelchair and do your bathing in an accessible type of environment. – One last question. Is the staff 24/7? – [Victor] They are and we typically reduce the nighttime staff. So we might go a ratio of say five to one during the day and we might go 10 or 15 to one at night. But typically we’ll have staff 24/7, yes. – And let’s talk about this, Victor. So of course these are aging people and there is going to be turnover in death. (laughs) – That’s what I said. (Kim laughing) – That seems like a– – This is your last bed, you know? – Yep, that seems like it could be a negative to all of this. How do you deal with that? – [Victor] Well it’s obviously very difficult. One of the things that is a growing trend that is we’re really quite thankful for is the idea of mobile hospice. For folks that are in their final days, to have to move at that point is very, very disruptive. If you can have the hospice care come to you that’s extremely beneficial. – What is hospice? – [Victor] And a lot of jurisdictions are shutting– – Yeah, what is hospice? – [Victor] So hospice is, that’s what’s often called a palliative care. This is where they don’t focus on trying to keep you alive but they try to keep you comfortable. So if you have a Do Not Resuscitate order or something like that where you know you’re terminal and so the focus is on simply making you comfortable. – Geez, doesn’t sound like a fun business. (Kim laughing) – Not that part of it. – No. Not that part of it. – [Victor] No. – So you talk about some of the pitfalls being starting too small, making sure you have the right staff. What other pitfalls go along with this product? – [Victor] Probably the other pitfall is going in a market that is really, really saturated. I’m thinking of markets right now like San Antonio where the occupancy marketwide is running in the 70s. So if you’re coming in with a new facility you’ll have a hard time getting the occupancy to where you need it to be because there’s a little bit of saturation in that market. – When you say 70s. – I’m a huge believer– Wait, when you say 70s, 70% occupied? – [Victor] Yes, that’s correct. That’s a low number. – And 30%. – So you only have 30% vacant. – [Victor] Yep. – Okay. – [Victor] Yeah, it’s hard to make the numbers work when you’ve got that much product in the market. – And what markets are you finding that are great opportunities for assisted living? – [Victor] Again it’s those secondary markets, some tertiary markets where there’s demand but there isn’t a supply. It’s been neglected by a lot of international players and a lot of suburban markets. Some of the affluent suburban markets have also been neglected too. Like any business, you’ve got to do your homework. You gotta do your market studies and see what the supply/demand situation is. You don’t want to go necessarily into a market that’s oversupplied. – So how would somebody find out that information? – [Victor] There are market studies. There are analysts out there that you can hire for not too much money that can get you that data. There’s the senior housing newsletter that if you’re really interested in becoming part of that business you can literally get an email every day with industry data. And really just get out and talk to people. Talk to people in the market and find out what they’re experiencing. They will often hear more than you would expect them to. – Yeah, there’s two businesses. There’s the actual business of the senior care and then as you said there’s a real estate side. And Kim and I like the real estate side and we are building an assisted living facility, 240 beds let’s say. But we want nothing to do with the business, right Kim? – That’s right. – So what are the pros and cons of each business, first as a senior care side and then the real estate side? Because that’s how you gotta look at it, right? – [Victor] That’s exactly right, that’s exactly right. So what a lot of people do is they will actually separate the business into two, into a real estate business and into an operations business. You literally charge rent to the operator and you separate the real estate into a separate entity. That means you can take the depreciation through that real estate entity. And depending on how you structure things you might be able to take more than your fair share simply by charging higher rent. And again, the advantage would be that you– – Go ahead. – [Victor] Yes, go ahead. – So your renter is actually your operator? – [Victor] Exactly, the renter’s the operator. That’s exactly right. – But some people are both, right, the investor and the operator? – [Victor] Many people combine the two and sometimes they will still even in that situation they will separate them in two separate entities so that you can siphon off more the earnings into the real estate and take advantage of the depreciation– – I mean that’s exactly, – To offset the earnings. that’s exactly the formula we’re using right now, is we’ve got the developer who’s building it. And then he’s partnered up with an operator who’s very successful at assisted living– – And Kim and I are the landlords. – Operations. – Yeah, we own the land. – Yeah, so let me ask you this, Victor. This has to be an important part on the money side is how do you market your homes? – [Victor] That’s a great question. The key to marketing the homes is actually to relationship build in the marketplace. It’s a fairly organic process. Oftentimes you’re gonna get referrals from people. You’re gonna market a little bit of digital marketing but oftentimes it’s local marketing just like you would for apartments. What you will find is that once you become known in the marketplace someone moves into one of the big-box facilities, they hate it, and all of a sudden the kids are looking around to find some alternatives. And at that point you’re solving someone’s problem. You’re solving so much of acute need because Mom or Dad are in a place that they really hate. – And what we were told is our 5.6 acres is on Camelback and it’s probably the prime location left in Phoenix right now. But what this guy said to me is because the neighborhood is affluent– – The demographics, the demographics, yes. – I mean the kids are affluent. They’ll want Mom and Dad close by in this facility. Does that logically fit your model? – [Victor] Oh absolutely, that’s exactly right. When you do the demographic studies to figure out where to build the facility you not only look at where the parents are living, you look where the kids are living because they’re ultimately the ones who are going to be coming to visit Mom or Dad. They’re often going to be paying the bill or subsidizing part of that cost. So the location of the kids is absolutely critical. – So that brings up a kind of a socioeconomic question. What happens to poor people living in poor neighborhoods and they got parents who are in that condition? What are poor people doing when assisted living is so expensive? And sometimes assisted living is more expensive than living. – [Victor] That’s a huge issue and there are different models. There’s the private pay model which is where we’re focused and I expect that’s where your facility’s gonna be focused. There’s those that are subsidized and they’re certainly not that, they’re not priced nearly that high. Many of them are going to be around $2500, $2800 a month. Again, most of that goes to pay for staff for services but they’re not offering the level of service, the level of care, the level of staff that a private pay assisted living facility would be able to offer. – And then what about the, you know, we have a friend who’s paying like $16,000 a month and he’s got the best of the best or so he thinks and yet he was not happy with the service. So I mean that’s– – And he didn’t have a lot of other options. – Yeah, so he’s willing to pay more but he says it was not available. And this is in Hawaii. – [Victor] Okay, okay. Yeah, that could very well be. I know I’m familiar with several in the New York area that treat very affluent clientele and they’re typically up around 10, $12,000 a month. They also require usually an equity down payment believe it or not. And then you get that back or at least your estate will get that back. But those facilities can be very good. I’ve seen some very, very nice ones in particular in the New York area. – Wow, what a business this is, you know what I mean? (Kim laughing) Okay, so one last question – There’s a lot to it. because this is my. So let’s say somebody is let’s say in the working class and they’re making probably $50,000 a year and Mom and Dad are going to require let’s say $5000 a month and they don’t have it because they’ve got kids and kids going to college and all that. What happens to that person, that family with those parents? And let’s say they have two sets of parents. – [Victor] Well the choices are pretty, yeah, the choices are limited because if your parents need round-the-clock care either the family’s gonna try and provide it on their own until they burn out or if you hire round-the-clock care that’s extraordinarily expensive. You’re talking about three shifts. You’re typically looking at about 125, $130,000 a year to bring care directly into your home. So compared against that alternative, assisted living is a bargain. Generally speaking, people stay in assisted living on average about three years. They’re not there for a decade. We’re talking about three years. So you’re talking about making an investment of 50, $60,000 over a three-year period to help Mom and Dad in their final years. – So a lot of what call the lower middle income, they got kids are going to college and Mom and Dad will need– – [Victor] Yep. – Dormitories also. It’s a squeeze. Are they screwed? I mean are there– – [Victor] It’s a squeeze, yeah, yeah. The alternative for them is to go with some of the subsidized models, the ones where there’s a Medicare component to it. And they exist but they’re in high demand and sort supply and there isn’t enough to go around in that category. – Yeah, it’s just like your product, you have a certain demographic who’s gonna be your customer. You’re not all things to all people is what I’m saying. You’re not all things to all people. You have a certain demographic that is your target market. – [Victor] That’s exactly right. I mean it’s like comparing Motel 6 with the Sandman Hotel. – Yes. – [Victor] They’re not the same product. – So the last thing is this. Victor, I without asking you, do you offer seminars on this? – [Victor] So my partner Loe Hornbuckle does, absolutely, and the Residential Assisted Living Academy, Gene Guarino who you know very well also does. And in fact Gene is based in Phoenix. A lot of the workshops that he holds are based there. And if you want to find out more about that go to the Residential Assisted Living Academy. – ResidentialAssistedLivingAcademy.com. – [Victor] Correct, correct. – So Victor, again– – Thank you, Victor. – Thank you very much for all your information. – A lot of information. – And we really appreciate it. Thanks for your compassion at my insensitivity. (laughs) – [Victor] (laughs) My pleasure. – You’re doing a great service for not just, I mean for the tenants as well as the investor so I think it’s a great match up. – Yeah, and Kim knows in about 10 years I got the penthouse in our place, right? – (laughs) That’s right. (laughs) – So I’m building my future home. That’s what I’m doing right now. (Robert and Kim laughing) So again, Victor Menasce, thank you very much. His website is VictorJM.com. He’s author of Magnetic Capital: How to Raise All the Money You Need For Any Worthy Venture. Thank you, Victor. – Thank you, Victor. – [Victor] Thanks, thanks for talking to you both. – All right, take care. – And when we come back we will have the most popular part of our program which is Ask Robert. We’ll be right back. Welcome back, Robert Kiyosaki, The Rich Dad Radio Show, the good news and bad news about money. Once again thank you to Victor Menasce. He’s the author of Magnetic Capital: How to Raise All the Money You Need for Any Worthy Venture and amen, this man knows what he’s talking about. Today our discussion was senior assisted living, the best investment in real estate but you better know what you’re doing. And in fact his website is VictorJM.com. And so I want to talk about my little raven here and my latest book out here is called Fake. And the reason this is here is because I’ll be working on another book now with one of my heroes, Jim Rickards, author of the Currency Wars and The Road to Ruin and I’m very excited about it. But we’re all talking about the same subject which is fake. And Jim and I come from different points of view but you better really know what you’re talking about today and listen to people who know what they’re talking about. So that’s my long way of saying Victor knows what he’s talking about. And that that’s why I thank him for being part of this program, especially if you go into assisted living because the numbers look good but so are the expenses. Any comments, Kim? – Well one of the biggest takeaways I got is that if you’re going to go into assisted living there is the real estate play and then there’s the operator play. So if you’re going to go into assisted living you better be sure you have a good operator who understands the assisted living business while you do the real estate business. – Right, if you read Fake in there I talk about the McDonald’s model. What business is McDonald’s in? They’re in real estate but you better know the hamburger business before you go into that. And it to me I just personally, I get sick and tired of talking to people who think real estate’s about making money. You know, you really, it’s a business and it’s a very profitable business for the right people. But 90% of the people are idiots. They don’t know what to do. And Kim and I have had partners say, "Yeah, yeah, I know real estate. "I bought six houses." "For what?" "To live in." Well buying a house to live in is not the real estate business. And so that’s why the biggest thing in Fake here is fake teachers, fake assets, fake money. And many people are listening to fake teachers. Not only our school teachers but their financial planners or financial advisers, their stockbrokers, their real estate brokers. And I just, I get tired of it. I mean as Kim knows I’m probably not long for this business because I sit there, I say the same thing. Take a class, get educated. It’s your money. Oh no, just tell me what to do. And I get sick and tired of it. So that’s why I’d rather go and talk to guys like Rickards and we talking about the ravens is how to predict the future. Well it’s not easy, it’s not that hard to predict the future. If somebody’s really stupid they’re going to be broke, period. I don’t care what business you’re in, real estate, stocks, bonds, mutual funds, commodities. And most people just want to sit there and be told what to do. I can’t believe it, I mean I just really can’t believe it. Man, I hated school but I liked learning. So I met Victor on the Real Estate Guys Summit at Sea cruises. You guys want to learn real estate, the Real Estate Guys are some of the best teachers I know. They’re not the teachers. They bring in great teachers. Like Kenny McElroy teaches for them, Victor teaches for them, Gene teaches for them. And really it is time if you’re gonna get smart you better understand what a real teacher is and a fake teacher. So that’s why I’m happy to be working with my friend Rickards on the raven. The raven is how you see the future. And one of the ways to see the future is get smarter or you’re gonna just keep losing money. – And one comment to that is people (laughs), they work all day, every day for money. I mean they spend their whole life, they give their whole life to work for money yet they don’t take any time to study money or to study how to grow their money or to study what to do with their money yet they spend their entire life working for it. – No, and think about fake assets. They give their money to Wall Street. Stocks, bonds, mutual funds, ETFs, and savings. Those aren’t assets, they’re liabilities to you. Well but I was told to do that. – I was told to save money – Well that’s the problem. and put money in the stock market but that’s all– – Yeah, invest in the long term. – That’s as far as their education goes. – So that’s my frustration. After years and years and years of doing, being, and teaching people still ask the same stupid question. What should I do with my money? Is it real estate? Should I get in stocks? Well why don’t you take a stupid class and learn something. That’s my message for today. – First question, Melissa. – [Melissa] Our first question today, Kim, comes from Raquim in Houston, Texas. Favorite book, Rich Dad, Poor Dad. Says, "Robert, I’m 24 years old "and I recently started my journey "to investing in real estate "and I’m also working to bring a product to market "to help me get out of the rat race. "With the possibility of a crash coming in the near future "is there any advice you would give a young entrepreneur "that is just starting out "and hasn’t been through a crash before?" – Yeah, the same answer. Take a real estate course. Take a business course, take classes. Just don’t go back to school because you don’t learn any of this stuff at school. Or buy my book, Fake: Fake Money, Fake Teachers, Fake Assets. Look, your most valuable asset is your brain. It’s also your biggest liability. So when I write fake money, fake teachers, fake assets, the chances are you’ve been listening to some really stupid teachers, poor teachers like my poor dad. They’re good people but they’re poor. And if you don’t make the decision which I cover in Fake, choose your teachers wisely. So that’s the story of Rich Dad, Poor Dad, is I couldn’t listen to my dad. I love him dearly. Smart man, good man and all that but the guy knew nothing about money. Why would I listen to him? That’s what I have to say. You better start searching good teachers because the moment you start going into business and real estate your product means jack. Everybody’s got a great product but they don’t have a good business. Everybody can make a hamburger better than McDonald’s but they couldn’t build a McDonald’s. So if you understand that then you start asking yourself questions. Well what don’t I know? To jump into business and real estate is suicide, right Kim? – Yeah, it, well it can be. And my question to Raquim is you’re getting into a journey on real estate– – And business. – And you’re launching a product. Which are you gonna do? Because you’re gonna split your energies between the two. I would like hey, focus on one. Like Robert and I, we built a business– – Or take classes. – And take class, well that’s part of you’ve gotta focus on one. You gotta get educated. You gotta take classes. But for you and I, we took a lot of classes. We started a business and once the business is up and running then the cash flow from that bought our real estate. So decide what you’re gonna do is my question. What are you gonna do? – I also hang out with guys like Victor and I go on these cruises and I learn. I just came off the Real Estate Guys cruise. You ask Kenny, we have FortuneBuilders. They teach real estate classes. But you better start finding real teachers. If there’s nothing I leave you with today, don’t think you’re a genius because you don’t know all the answers. Like our friend who was buying assisted living homes, she only had five people in it. She worked really hard and she went bust. But she was in assisted living and real estate. But would she take a class? No and she deserved to go bankrupt. She deserved it. That’s God’s punishment for ignorance. So if you understand that then when people ask me what’s the most, I got $10,000. What should I do with it? Take classes from real teachers, not fake teachers. And don’t buy fake assets. If you really don’t want to learn about money, business, real estate business, invest for the long term in the stock market because that’s what idiots do because they’re fake assets and you’ll deserve whatever you get. So when it comes to the question of crashes, last answer to this, crashes are the best time to get rich but they’re also the best time to go poor. And those without any financial education and listen to fake teachers, millions will go poor. The final comments, Kim. – I think you’re good. – So that’s what I have to say. I mean it frustrates me. I mean how many times somebody have this Rich Dad radio program, he said, "Well just tell me what to do." Well if you want to be told what to do find a financial planner or go back to school and get a high-paying job, get deeply into student loan debt. – If you can find one. (laughs) – I mean give me a break you guys here. So that’s why we have Rich Dad Radio. So I’m glad you asked the question but the answer for me is always the same. Find, get educated. Learn from real people, not fake teachers. Most financial advisers, stockbrokers, and real estate brokers are salespeople. They’re not rich people. So with that, thank you for the questions. You can submit your questions to Ask Robert at Rich Dad Radio. Thanks to Mr. Victor Menasce. Please go to his website and learn more about assisted living before you jump in. Thank you for listening.Welcome to Big Money Investing – Your Ultimate Destination for In The Money Facts!
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