Episode 121 - Unlocking Financial Independence through Commercial Real Estate With Chris Larsen!

Today hosts Braden Cheek, Brian Duck, and Joel Thompson discuss how to create financial independence through commercial real estate with special guest Chris Larsen.

How's it going guys? Welcome back to how to invest in commercial real estate. And today is a super cool show because we have a guest. It has been a minute since we have had a guest on the show. Um So we're just gonna jump right in today. We have Chris Larson from next level income out in Asheville, North Carolina. He's done a bunch of really cool things including uh apartment units, right? Which we don't do a lot of apartments. So I always love talking to apartment guys because we do a lot of retail and, and people love apartments because they equate it to single family homes. So let's just jump right in Chris. Uh tell us about yourself, tell us kind of how you got started and then we'll kinda go from there, Braden. Thanks for that. Yeah, I appreciate it. And um yeah, that's the cool thing about real estate is there's, there's so many different areas and I myself got started in the single family arena. I was in college. We were chatting before the show brought, bought my first property at the age of 21. And the reason I decided to get into real estate is because I, I wanted to get into real estate because I wanted financial independence. And the reason I wanted financial independence is because I had, I, I gone to college to get a engineering degree.

But really I went to college to race my bike. I want to race to become a professional cyclist. But in between my freshman and my sophomore years of college, my best friend passed away. He was my training partner. He was my roommate, he was like a brother to me. And after another year of racing and riding, I thought, you know, this is, this is kind of silly. There's more to life than this. And I don't want to have regrets. I, I want to be able to do things like raft down the Grand Canyon where I have this picture behind me to remind me of, of the ability to do that. Three weeks, no cell phone, you know, not only do you have to have money to do that, you have to have the time, freedom to be able to do that. So I said, well, how am I going to do this? I got interested in the stock market. Started day trading. I was making like $1000 a week, day trading as a junior in college. But when you're laying in bed at 3 a.m. like I was thinking this isn't really, this isn't passive, this isn't freedom, right? Um So I was like there's gotta be a better way. I started reading books, read over 250 books on money, finance, stock market, um real estate. And then I also got an MB A in portfolio management.

But the more I learned about real estate, the more conferences and meetings I went to, the more I realized this is it for me. So I bought my first residential property, bought another, bought another started to run out of capital. So I got a job, I read rich dad, poor dad. And he said you should be accredited. So said, hey, I got to go make a couple of $100,000. I can get into these, you know, bigger, more impressive investments that are out there. And that's exactly what we did. We transitioned from residential into commercial real estate about 10 years ago and then people started to become interested in what we were doing, wanted to become involved. We syndicated our first deal in 2016 in a multi family space. And since then we've done um about a billion and a half in acquisitions across multifamily self storage m um mobile home parks as well as uh some different asset classes like hotels and car washes. Congrats, dude. A billion and a half sounds awesome. Billion and a half in seven years or 10, whatever it was. But I was looking at some of these assets. I mean, some of these are seven is about right. I saw one on your website though. It's like 350 units somewhere in Florida.

That's like $100 million. I mean, that's a big asset to take down. Yeah. And we have, you know, we have multiple partners. I have great operating partners that I work with. So, yeah, as I talked about my book, it's, it's definitely as you guys know, it's a team sport, um, with respect to that. So, yeah, I don't, I didn't go by a billion and a half of my own personal credit, but still helping others uh in that process by, by all that real estate, they're all, they're all making money. So that, that's a benefit. So let me go back in the story. Uh You, you mentioned reading 250 books and you did mention Rich Dad Porta, which uh I I read and he was a big part of my uh getting me into the investing journey. He wasn't like the nuts and bolts of investing, but he just was the motivator. So tell us, are there was there another two or three authors or two or three books that really stood out to you that we could pass on to the, to the listeners? Yeah. So, you know, it's, it's funny you look back and you're like, OK, this book influenced me. These are, you know, these are the things that kind of got me there. The early books I read really pushed me towards the residential space. And the first one I read was called Buy and Hold, which I think, you know, it's, it's very rudimentary, but, you know, my original plan, um Joel was to go buy enough residential properties that I could have $10,000 a month coming in after debt service.

And, you know, it doesn't take a genius to execute on that and it doesn't take a genius to realize that, hey, if I buy these properties and I pay them off over say 15 years, you know, as a 25 year old, you're going to be financially independent by the time you're 40. So that I was like, this is a very simple plan that can be executed by nearly anybody with a very high degree of predictability, right? So I, I really like that strategy and the nice thing is, you know, what, what we did and what anybody can do is you can take that equity that you can build and as you continue to learn, and that's the next thing I encourage you to do. So I think, you know, and that book by and Hold is very simple. I don't even know if you have to go read it. But, you know, then you look at people, you know, like Tony Robbins that are into self development, you know, Tony, one of the books I read um or actually was personal power I went through and I went back and what was wild. Is we built this home and you hear this story multiple times and listen to Tony reading his books going through his programs.

You know, I mapped out what I wanted my life to look like. You know, five years later, 10 years later, 15 years later, and that mindset is to me as important that constantly learning mindset as, as the execution part. Because what I did was I wrote down like things that I wanted. We moved into this house three years ago, I opened my journal from when I was in my mid twenties and I had written things in there. I mean, I'll give you something that anybody can kind of understand. I totally forgot. I wanted a BMW M. Five people are car people. It's a legendary, legendary car. There we go. I like, yeah, I know, I like this guy. So uh I, I wrote in, there is like 25 27 year old. I wanted a BMW M five life much more had pushed me well and I forgot, but I forgot about this thing and I was approached for my 40th birthday. I bought myself a BMW M five because I had my, my account was selling his OK. And he's like, you want to borrow it. I was like, no, I'm not really a car guy. I borrow it, learn about it, buy it. And lo and behold, a year later I opened my, I'm like, like, wow, that's kind of, that's kind of weird, but all these other things have come true as well.

So I think you need to begin with mindset and then find a plan that's going to work with a high degree of predictability. And the lesson I wanna, I wanna share from that is that I think we do young individuals a disservice by saying go out and take a bunch of risk early because if you fail, if you fail and you fail and you're in your thirties, forties, you got a family, you got kids to take care of obligations. Now you're handcuffed, you can't take risks. You don't have capital to invest if you have a simple plan that you can execute and develop over, over a predictable period of time. Well, you know, Ray, if you're 35 and you're uh financially independent, how much risk can you take at that point? Right. It's almost unlimited. So, um I know that wasn't like, hey, these are the real estate, like the specific real estate books, but I think there's some stuff that's even more important than that. We talk a lot about that on our podcast about motivation planning, uh goal setting, that sort of thing. Yeah. So some things that struck out that I want to address. Uh, first of all, it's very interesting that you had this plan to buy single family homes.

Um, you know, it's so interesting because I had, I had a really similar uh plan. I bought my first house and I was cashing on like 2 50 a month and I bought another one and it was another 2 50 a month. I'm like, ok, that's 500. You know, how many houses does it take for me to quit my job? It was simple. Uh, and we don't necessarily recommend that people go about it that way now because we think there's, there's a little bit better avenue and a quicker avenue. But what I'll tell people that are setting their goals is that we want you to think big and we want you uh to envision the life that you want. But when you first start out, you're just not going to be able to envision where you're gonna end up. So uh you've gotta get a vision that you, you can get behind that. Your subconscious believes in, it believes it's possible for you and then just start on that and what'll happen is it'll change over time. And as you become successful in that simpler plan, right? You're gonna set bigger goals and your mind begins to open up and you, then you're like, OK, how do I buy a $10 million piece of property? How do I syndicate $100 million worth of real estate? It builds on itself.

You don't have to do that day one. So that was one key that II I wanted to touch on that. I thought was really interesting. Yeah, Warren Buffett has famous quote. Um, you'll always overestimate what you can do in a year, but underestimate what you can do in 10. And I think it's that same ideology, you know, set a goal or go get a job in the field you're interested in and, and have a high probability of success of, of something, you know, is in the right direction and then these opportunities are gonna constantly present themselves like, uh uh you know, like your opportunity to go in commercial. So I guess break down that defining point where you were, you know, in this buy and hold strategy, this very predictable, I can buy houses. It's the United States, they'll appreciate, I'll get rent free cash flow to. Maybe we need to think bigger, maybe there's commercial. Tell us about that shift. Yeah, absolutely. And oh, by the way, like all these things we're talking about, I talk about a lot of them in my book which I'm happy to share if you're listening today. Um before we wrap up. So don't, don't let me forget that gentleman. Um But yeah, brain. So I kind of had, I had, you know, I talked about losing my, my best friend during college and, you know, as life goes on, you know, you have, you have certain defining moments that happen.

And I, I'd gotten into my career, I started a medical device. Um I started down the medical device career path because I was like, hey, you're basically running your own business. There's a lot of upside when it comes to income. And I was fortunate that after several years had a successful business, I was at those income levels and worth levels that I was credited. Um But what happened was I had my head down for about five years in, in the pursuit of my business growth, had, had two boys, they're now 11 and 13. Um got married and then my mom passed away and the year after my mom passed away, I, I uh we'd sent my younger son to daycare. So both my boys were in daycare. My wife's an architect and she goes back to work full time, um for someone else. So she goes to work. Well, I'm sorry, she goes to work part time. We pay taxes, we pay daycare and guess what we're left over with right down at the end of the year, going through taxes, negative $11,000 is what we netted by her working and paying taxes and paying daycare.

I'll never forget I showed her the number and I was like, this would, this is like what we made last year with you working versus staying home. And she's like $11,000. And I said, no, no, no, no. There's a negative sign in front of that and she's like we lost a lot like it cost us money for me to work. And I was like, exactly. And I was, like I said, look like, do you know she's gone to school more than I have. Right. She's an architect. She has her undergrad, she's got her masters, she has her, her another year for design project. She had spent three years getting her actual license after that, like, you know, apprenticing. And I said, do you like, do you want to stay home? And she's like, no, have you met my older son? You know why she said that? So we said, all right, we there's got to be a better plan. So, so she went out on her own and we are actually, we were at a business coaching like mastermind together and a ag we were talking to, I was saying, man, I'm going through my portfolio because I was kind of doing a life inventory at that point. And I was like, I'm getting about 7% return on my equity in my, in my houses at that point, my residential houses and I'm paying tax because we're making a lot of money.

So I'm making like 4% after tax cash flow. And I was like, this blows. So my wife goes to work, I'm talking to this guy and he said you should invest in, in multifamily properties. This is 10 years ago. And I was like, well, it's like, actually it was, it was December 2012. And I said, I was like, well, that's just like residential he goes, well, there's some differences. Talk to my friend Chad who does syndications, lo and behold you later, I'm investing in multifamily real estate and I'm getting twice the projected returns, lo and behold, you have four times the actual returns um in, in multifamily as a passive investor. So I'm like, OK, this is way better, passive, better tax returns, you know, two x four times higher returns like this, this is the way to go. Um So that was like 2013. Can we pause there for just a second? I I just want to make sure that you were at a real estate mastermind. Somebody told you to talk to this guy, Chad. Chad seemed like he was doing apartment syndications at the time and he pitched you what sounded like double digit returns but ended up delivering, you know, like high teens or, or mid to high teens returns and you're just a passive investor and you just got introduced to Chad like that's a real thing.

People have access to that. Yeah, you say it all the time that it was like get in the game and you're, you're one contact away from your life changing. So he, so he went to the right spot where people were doing what he might want to do and all he needed was to hear somebody that had the experience say, hey, you should do this and here's how you're gonna do it. Uh And we've talked about that before so many of the benefits we've had in our lives. It just, just trying, trying it right. Listening to people saying, hey, you, you can buy, you know, multi-tenant retail, you can buy self storage, you know, and, and, and then you do it so great story there. Keep going. No, that's exactly right. And then, you know, from there again, it's, you know, we, we started bringing on investors in 2016, my, my original partner and I, we actually JV with that same group to buy our first project in Atlanta, 100 unit apartment building down there. Um But yeah, you know, Joel, you're exactly right. It's, and that's why we have our coaching program. It's, it's, you don't nece you can have the vision and we talked about the right mindset, the right vision, you don't necessarily know how to get there. But if you remain open minded, if you have a growth mindset and you were seeking out the connections to do that and you're in the right environment, people are going to come to you and present that.

So, you know, got involved as investors. And then my partner came in and said, hey, I want to buy an apartment building. You want to be my partner. We're in AJ V with a group we're already investing with, we already had investors that were coming to us saying, hey, what are you doing? Can we do it too? So, um we with precision equity. We had a lot of uh success and multifamily coming out of the recession 2012 to say 2016, 18, we found it really got to be a little more difficult in the last 3 to 5 years just because prices were so high and now interest rates are higher. Uh Tell us a little bit about your thoughts uh because we just kind of did a show on maybe the pending storm and how there's gonna be some foreclosures in the market? Are you guys kind of, are you, are you actively buying or are you guys having a hard time getting those return profiles, given the situation with interest rates and the high prices? And are you what, what's your strategy kind of currently with multifamily? Yeah, great question. Um And actually the book, the book I pulled out of my desk right here to share with uh with you. If you listen today is called The Secret Life of Real Estate and Banking. And it talks about the real estate cycle and what you just described, Joel is, has happened all the way back into the 18 fifties when we started tracking real estate in this country, which is, you know, credit expands land prices go up, credit expands rents go up, you know, asset prices go up, interest rates go up.

We typically see a couple seven year cycles of growth and we see a, you know, a slowdown which, you know, that was around COVID this time, last time it was around, um, 9 11, which is, it's kind of, it's kind of remarkable to note that it's like exactly on the same 18.5 year cycle back through history. And with some of these, you know, panics and disasters that occur, that accentuate, you know, these economic slowdowns that we tend to remember. And then as the cycle continues on after that slowdown, we see interest rates go up, we see cash cash flows compress. We see lending pull back because, you know, businesses, they don't, they can't afford to lend their cash flows are down. Um you know, banks as interest rates go up, we start now we're seeing their asset um values kind of start to turn upside down as their loans on their books are worth less and less. So what does that mean for asset prices and like, like deals that are out there? We actually haven't bought anything in a multifamily space this year. Um We are set to close here in the next couple of weeks on a um kind of a specialized um structure that we're doing in Houston.

That's an affordable housing deal. So 50% of the units are going to be affordable. So we're not paying tax on that project. So the numbers work, it's about a 6.5% cap rate that we're buying that deal out effectively. Um But, you know, we're not just in multifamily. We've acquired 30 car washes here over the past couple of years, car washes have significant cash flow. Um We are uh we just actually today as we record this show launched our mobile home park fund. We have currently 12 mobile home parks, but the fund is going to be open to investors. Um We still see significant cash flow in these underperform parks that we can get at reasonable cash rates. I'm sorry, reasonable cap rates. Um with, with good cash flows and good upside, but they're a little hairier. Are you, are you managing them in house or do you have third party management? So I have an, yeah, so we the the mobile home parks are managed. We're vertically integrated on the management side. Absolutely. So we do all our own, we have our own contractors, management team, etcetera and like the managers and maintenance guys with the employees.

They are. That's exactly right. Ok. Yeah, we, we found that, you know, you, you can third party manage multifamily, but it's, it's definitely a lot tougher the, the retail and some of the other asset classes are way easier to manage third party than multifamily just because it's so management intensive. What about the car washes? Are you guys, do you own the business or just the real estate or both? Both? And that's what we found. I mean, you just hit the nail on the head when it comes to mobile home parks, car washes. Um You know, a lot of people listen to my podcast and talk to me right now. No, I, I talk a lot about senior housing. These are all very, I would call them operating real estate. Like the operations are just as important as the real estate. And if you don't have good operators, you can't just pull it off the shelf operator or manager, like you can, um you know, with, you know, multifamily, you know, some of the projects you can do that. There's at least options. Um, you know, self storage retail can be potentially easier to deal with. But yeah, it's, it's absolutely critical, um, especially in the car wash space because you have to have, um, really tight operations with your mechanics, your mechanicals, your chemicals as well as your people and it's not a complex business but it can, it can go sideways really quick if your operations aren't tight.

Hm. And so, yeah, we haven't looked at it that much. I have looked at a couple of car washes. It is a little bit cash intensive as well. Uh, so you have to make sure that your employees are handling that. I don't know. I'm sure you can pay with credit card, but I think some people pay with cash in those, those businesses. Yeah. So I'll tell a funny story. Um, so we own a car wash here in, in Asheville, North Carolina. It's a smaller in Bay automatic. So the, the hat I'm wearing is Hurricane Express, which are Express tunnels. You have express tunnels which, you know, a lot of listeners probably go to, you have a membership. You know, your car gets pulled through, it'll wash it in 3 to 5 minutes. Uh The In Bay automatics, you park in it and the robot washes it like we have two robots in ours that wash the cars and then you have your self service. Ok. So we, we buy this in Bay Automatic. We've owned it for about a month and I'll never forget. It's uh, it's Halloween morning. It's like 4 a.m. and these three dudes in masks pull up with a white Jeep Grand Cherokee and knock the block with a sledgehammer off the bottom of the pedestal. Knock the pedestal over, um, throw the machine with, with the cash and the coins in the back of their Jeep Che drive off, right.

All in like four minutes. So the cops got there in seven minutes. So they missed them. These geniuses, three of them made off with, I think it was $400 after basically a three day weekend. Ok. So you split that three ways in a federal felony as well, which, which gets not divided but equally meted out. That's not a good deal. Right? Especially when you have, you know, you got security cameras all over the place. So the cops don't think $1400 by the, I know the cops probably don't think $1400 is worth chasing is worth chasing around. But so, yeah, it can be. We, we've, we've since converted that to, um, basically touch list. You, you can still pay with cash. Most people don't. Um, but our model is largely based around membership. So we're doing monthly billings, um, with respect to credit cards. Yeah. What else do we have? I, I think, uh one of the things I was interested in is you kind of have a, a training or coaching uh to kind of help people get to six figures in passive income in commercial real estate. So let's, let's try to end on that to give, you know, maybe some people your advice, they're sick of listening to our advice. What do you have uh for our listeners where they should focus, what should they focus on to get their passive income growing right now?

Yeah. Well, first off, let me, let me give you something free if you're listening. Ok. So you can go to next level income dot com. Subscribe to our podcast. Um Don't forget to like and share this podcast right here and thank you guys for having me on. Um But you can also get a free copy of our book next level income. Just click on the book link and if you put your address in my team will even send you a copy. And then, yeah, we have a course up. Um We're actually just, we're relaunching the course and our coaching program and it's designed to help you, especially if you're a high income professional, get to seven figures of passive income. And what I found, Joel is that most people that are making good income and that aren't living way beyond their means, can achieve financial independence through passive investing within about seven years. So we'll teach you how to make more money, keep more of your money through tax strategies, legal strategies. Ultimately, to grow your money. We have a great spreadsheet in there that will teach you how to vet passive investments or just keep track of the investments that you already have. And if you go on the website and click the course, if you use the, the um the code, next level, all caps to save $500 off that course.

Well, uh any other questions guys? Uh No, I just want to say congratulations on everything you built. I mean, I also wanted to note that when I was 26 or 27 I also wanted to buy an M five and I did not write it down. I just went and bought it. That's, that's even better. Uh So guys, audience Chris Larson, next level income coming to you out of Asheville, North Carolina. Uh He's got great courses. He's got books to read, that'll give you for free. Uh What was the password to get a discount? Next level, all caps uh buying car wash. He was buying uh mobile home parks, multifamily, very well routed. So make sure to check out his website and his book and learn all you can from Chris Larson. Chris. Thank you for your time today. I really appreciate it. Hope you'll be in touch. Alright guys, we'll see you next week on how to invest in commercial real estate. Thanks. Thanks guys.