- But this is investing 101, I mean,

there's fundamental and technical, you know?

Cashflow 101 is fundamental,

Cashflow 202 is technical investing, okay?

So, there's two basic investments.

One is cashflow.

And as Kenny already said,

this is the hardest.

It is the hardest to find

because cashflow then affects return on investment.

So if I put in $10 and I get one dollar back,

that's a 10% ROI, okay?

I mean, it's just simple.

I mean, I was taught this as a kid playing Monopoly.

You know, you got one house, you get $18,

you get two houses, you got $36,

I mean it's not,

you don't have to go to college.

It is not that hard.

Monopoly is a cashflow game, right?

And that's it.

- Yeah, and the problem is,

is that the people that you're seeing in the paper today,

their philosophy is not based on this, period.

- No. - It isn't.

- But they don't, I mean, this is as simple as it gets.

Technical, fundamental, cashflow versus capital gains.

I mean, you know,

if you play Monopoly, you'll understand this game.

This is all there is,

so when you look at cashflow 101,

this is called fundamental,

and this is called technical.

And the reason it's technical 'cause it's all emotion.

It's up or down, up or down, up or down,

as Kenny says, what's your net worth?

What's your equity?

It depends upon the emotions of that time.

So, I mean, these morons haven't got their lesson yet,

they're going in to buy a foreclosure

that was here to go on the same thing, I got one more time.

- Well yeah, and here's the ironic thing

is that all these people that're losing everything,

they're gonna blame it on the real estate market.

- [Robert] Yep.

- They're not gonna take ownership of the issue.

They are gonna blame it on the market.

And at this time, I'm making so much more money

than I was two years ago.

- Lemme ask you this,

you just built your house, right?

- [Kenny] Yeah.

- 'Kay, and Kenny has owned multi,

multi, multimillion dollar properties,

but only after he was a rich man did he build a house.

And what poor people do is they buy the big house

on emotion, technical,

and then they never buy on cashflow.

That is a, you know,

oh, I have the house of my dreams!

What a frickin' loser, are you!

How stupid can you be?

Kim and I live in a tiny little house on 16th Street here.

We paid $117,000 for it,

monthly payments were $300 a month,

including homeowners' association,

who were rippin' us off.

(audience laughing)

Oh no, they were the, homeowners are the biggest crooks

I've ever met in my life.

(laughing)

Homeowner means crooks.

That's what it means, they're the biggest crooks

I've ever met in my whole life.

Nice, honest people, you know?

Like, frick it! (laughing)

As they come, they are ripping you,

stealing from you, and all this stuff.

But we sat there and we bought cashflow

and our little house just sat there

and it sat there and it sat there,

one of those dinky little house.

One day, we popped up and we had a lot of money.

Then we bought a big house.

The same as Kenny.

If you can understand what we're saying to you,

it's just fundamental of rich people.

And poor people want the big house,

the BMW, the nice cars and all this stuff,

but they don't have the cashflow to support this.

Do I make sense to you guys here?

That's the difference.

- One other thing I wanted to add is

I happened to be in Calgary two weeks ago.

And Calgary just as a city appreciated 50% last year,

so when the-- - Wait,

why is Calgary appreciating right now?

- Anybody?

- Oil. - Oil.

- Why do we just buy in Oklahoma?

- Yeah, oil. - Oil.

I mean, wherever there's jobs, you buy real estate.

Why am I not buying in Michigan?

General Motors. (audience laughing)

No oil!

- Yeah, in Japan. - Yeah, Japan.

- But, what's interesting is,

is that whenever I do a talk,

I always like to start out and ask, you know,

how many flippers are in a room

and there's probably 200. (laughing)

And I said, okay, I go-- (birdcall)

You know, I said, how many people are flippers?

And 200 people raised their hand and I said,

how many people wish they wouldn't have flipped a year ago?

200 people raised their hand.

So, the point is,

it doesn't matter if the market's going up

or the market's going down.

It's a bad strategy because they,

those people, those 200 people,

would have had another 50% in value based on appreciation

If they would've not flipped.

So, it doesn't matter if the market's going up

or the market's going down.

You might be able to time a quick buck here and there,

no question, but the truth is,

people that flipped in Phoenix in '03 lost 70, 80% in value.

If they still would've owned the home,

they would've owned it for a lot less

and it would be cashflow now,

'cause now what's happening is rents are screamin'.

Rents are going up dramatically.

- And populations, you know,

Phoenix is still the number one or number two growth,

Arizona's number one or two growth state in the nation.

As the Baby Boomers retire

and the hurricanes hit Florida, more come here, you know?

And it's just fundamentals.

This is called demographics,

and that's why I show you this here.

A nation of 300 million in 10, 15 years will be 350 million.

They gotta live somewhere.

And the dollar's gonna keep dropping,

the price of oil will keep going up,

gold will keep going up,

silver will keep going up,

and replacement costs will keep goin' up.

So these flippers got f'd.

It is really stupid, these guys here,

you know, so for Kim and I,

our strategy wasn't to own one big house.

Our strategy was to own 20 houses,

then we live in a little house.

And then we went to 500, then we bought a big house.

That is the difference between rich people and poor people.

Poor people wanna look rich,

and rich people wanna be rich, right?

- Yeah, I mean, it's the same thing.

Any money that I had, I put into real estate investment.

And because that's what I do,

so I obviously could have put that into my home or,

you know, or cars and all those kinds of things.

I could have brought all those things.

In the cashflow game, those are called doodads.

But I didn't.

You know, I continued to pour all money,

and we always joke around

'cause we're literally always broke

because if we have money-- (audience laughing)

- [Robert] What, wait, I want you to know--

- It's the truth. - How true,

Kim and I right now are cash strapped.

We have no cash.

I mean, we are so tapped out,

the reason is is because we're investing like wild people.

Do you know what I mean?

I don't have savings, I don't have jack.

We have a lot of assets, a lot of cashflow,

but that money just keeps going back out.

It doesn't stay with us.

Your first investment, was it cashflow or capital gains?

Here, you're fine.

- Okay, my first investment was cashflow.

- Why?

- Because I wanted that money coming in,

my biggest concern is I was gonna put money out

and not have anything coming back in.

- And how much was your first cashflow?

- $25 a month.

(audience awws)

But it was a start!

But it was a start, and I learned so much

on that one property, but it did cashflow.

- And how much cashflow do you have a month now?

- Oh, about $120,000 a month.

(audience applauding)

- That's not Donald Trump's money, you know,

that's not Warren Buffett's money and all this,

but $120,000 a month is more than most people make a year.

And she doesn't have to work for it,

and that's not all the rest of her investments.

That's not from her oil, gas,

and businesses and stuff like this.

- Well, but that's what we talk about,

I mean, that's freedom, is you know,

and when you don't have to work anymore

because you got that money comin' in every month.

We talk about when we first retired was '94,

we only had $10,000 a month coming in every month.

That was it.

But we only had $3,000 a month goin' out.

So we were free, so it's not that dollar amount,

it's can you cover your expenses and be free,

because after that, then we were able

to get on with what it is we really wanted to do.

- Right.

- When most people are still busy

working for that paycheck and, you know,

just surviving everyday as we were,

that they don't have time to really think about

what is it I really wanna do?

(inspirational piano music)