All Forum Posts by: Corey Conklin

This is something I hear real estate investors talk about all the time. Their goal is to build generational wealth for their kids, grandchildren, great grandchildren, etc. They believe by building a good real estate portfolio and acquiring assets they will create generational wealth for their family. I believe I have a controversial take on this stance. I 100% disagree with this line of thinking!

There are stories of family’s that have had multiple generations build wealth through owning land, real estate, oil, etc. that have lost it all in 1 generation! Wealth is incredibly hard to obtain and 10x harder to keep. Just because you are able to hand over your children and grandchildren wealth doesn’t mean that they will know how to keep it. They have to know how to handle the wealth if they are going to keep it. My focus will be on teaching them how to create and keep wealth, not handing it over to them.

How I will focus to create generational wealth will be the complete opposite of what most people want to do. My kids will not be handed anything in life, they will EARN everything. I will not give them money, instead I will be there to teach them what they need to know to get their own money. I will teach them what I’ve learned in my life that they can use to create their own success. When they need advice, I’ll be sure to provide it. When they are struggling through the rough times, I’ll be there to support them. My goal is to create kids who are good people. If I can do that, they won’t need my wealth, they will have their own.

What are your thoughts about creating generational wealth?

Quote from @Marcus R.:

@Corey Conklin - Love it!  That's some great insight.  I'm on board with your line of thinking.  And the more I think about it, it really makes sense.  Lots of other class 2 assets that take work but can make money and aren't traditional assets - trading cards, sneakers, purses, watches, and even education.  

This is ridiculous but I read a story about a guy who bought a shipping container worth of toilet paper early in the pandemic when it was scarce.  I don't remember the numbers but he made a crazy return and most certainly none of us would consider TP to be an asset but he turned it into a class 2 asset and hustled to make it work. 

And completely agree, the idea that you can become rich or even financially free without working is a lie.  And it's a lie that makes the other person rich because folks paid $99 for his/her course.

 @Marcus R. There are so many ways that you can get into class 2 assets like you mentioned. It's something I think not enough people focus on these days. They all want to live the easy life and get their mailbox money by focusing on class 1 assets.

There has been so much focus on real estate and class 1 assets it's becoming less and less lucrative. While all of the focus has been on that I've been working on seizing the class 2 asset boom that I believe is going to happen over the next 5-10 years. 

After hearing the TP story I'll be sure to keep that opportunity in mind! Haha

Quote from @Jim K.:

@Corey Conklin

I HATE trash like that. Leave a cat and kittens behind, that's total scum, and there are a lot of them out there.

I hope you also picked up a valuable lesson about lying agents, too. As long as the closing goes through and they get their commission...

I still have a nice scar on my hand where I was savaged by a tenant's cat. But to be honest, I should have been smarter.

I have cleanout stories that include, er, soiled marital aids and VHS collections of fat-fetish titles, such as Life in the Fat Lane 2: The Heavy Load. Typically, in those relationships, there's a feeder and there's an eater, the tenant was the eater. I recently saw the feeder walking around my neighborhood, cursed him out loudly on the street. Made my day, really, even though the worthless SOB still owes me $650. I took some satisfaction out of the fact that the little guy was pushing a boy's bicycle with 20-inch wheels up a hill, obviously really going places in his miserable life.

It's awful to see how little a human can care about others, especially towards animals. 

I learned a lot of lessons on that house but it also came with stories I'll be telling for a while.

I think more stories like these need to be told so people can get a better reality of RE investing and learn from some of our hard learned lessons.

@Jim K. This is exactly why I have gotten fed up with real estate podcasts, forums, etc. It's all a bunch of sales guys trying to sell you "financial freedom" by spending $2,000 on their seminar. Or how easy it is to make a million dollars in 90 days starting from scratch. It's ludicrous.

When I bought my second rental property I was called by my agent about a week before closing and said he had an odd request from the seller. The seller (an older, recently widowed man) asked to stay in the house for 3 days after closing since he needed the money to pay for his next home.

My first thought was, absolutely not! I knew that would make it easy on him to leave any trash or belongings he didn't want behind for me to handle. My agent said that he would help (which he never did), my brother (who was a partner at the time) said what harm can this old man do? We were getting an pretty good deal on the house so I thought, Ok I'll help this gentleman out hoping he would do right by me for being decent.

Fast forward to the day I get the house. I open the door to trash left everywhere, food left out, furniture that was left behind, a garage completely full of old junk. I knew I shouldn't have done this and I was kicking myself.

But that's not even the worst part. I came back a few days later to start the renovation on the house and started emptying the house, my brother was there to help. After about 30 minutes I hear a loud yell from my brother with a handful of cuss words, so I run to where he was at. On my way there I was meet with a pissed off black cat hissing at me! The old man left a black cat trapped inside the house that my brother let loose when he opened a cabinet door! Since it was in a small town there is no such thing as animal control so I had to figure out what to do. Anytime we would get near the cat he would hiss and try to attack us. This cat had all of its claws and was able to climb up door frames and walls, it was wild!

It took us a few days before we could get it out of the house as it refused to leave but we were finally able to get it to leave the house on it's own. While all of this was going down we also found a litter of kittens hidden in a box in his overgrown back yard that we had to figure out what to do with as well.

Needless to say, don't be an idiot like me and let a seller stay in the home after you close or you may get attacked by a pissed off cat!

Quote from @Marcus R.:

Lots of good thoughts and great points on both sides.

In its literal definition I think a primary house is an asset.  

But for the sake of this argument, I view it as more of a tool.  Could be good or bad depending on how its used. No different than a car - Could be a mode of transportation, a weapon, a hobby, a status symbol, a family heirloom, etc...

A primary house when used correctly could be a wealth generator, safe place, home business, community gathering place or it could be a financial drag, a source of stress, etc...

Depends on the user and how it's used

I agree with you on your take.

I like to break down assets into 2 different categories. Let's call them class 1 and class 2 assets.

Class 1 assets are those that provide income without you needing to work i.e. rental properties, stocks, bonds, etc. This is what you see a lot of investors focus on, Robert K. especially.

Class 2 assets are tools/instruments that allow you to maximize your income. A hammer is an asset to a carpenter but a liability to a lawyer. A car is an asset to a delivery driver but becomes a liability when you start collecting them.

I see investors only want to invest in class 1 assets because it means little to no work for them. For experienced investors they get the luxury to do this sort of thing. For myself and many other up and coming investors we also need to focus on and make smart choices on our class 2 assets. I see a lot of people want to bash on class 2 assets because they have to actually work to make it an asset. It may mean work but to think you don't have to work hard on your way to becoming rich is a lie that needs to stop being sold. 

Quote from @Ben Lin:

RK suggested you buy your primary with cash like his rich dad. I would rather rent and build wealth until I can buy a primary with cash. Renting also makes you hungrier to build wealth. When I was young I didn’t care where I was living I just wanted to build wealth as fast as I could. Owning a primary with a high mortgage will definitely slow down your financial goals. 

I would argue renting can be cash flow. Just calculate how much is your holding cost of your primary, buy a rental that produces the same amount, and lastly rent something cheaper than your rental income 😁. 

You bring up a point that almost everyone overlooked. Whether you rent or you buy it's critical that you don't strap yourself with a large mortgage or rent payment. The focus should be on acquiring real assets and not keeping up with the Joneses.

It’s simple to understand that a personal house is a liability. It takes money from your pocket. But just as you mention, so does rent. They are both liabilities. Now it’s up to the individual to come up with the best option for their situation. Sometimes ownership makes sense, sometimes it makes sense to rent. There are a lot of factors to consider.

Here’s how I look at it. If I buy a house, I am responsible to fix anything that goes wrong. If the roof leaks, AC quits working, sewer line needs replaced, etc. I’m financially on the hook to pay for the repairs. Not only that but I am on the hook to find the contractors to come out and get the work done, which in today’s world is a massive headache itself. When you rent, you don’t have to pay for these expenses and you don’t have to line up the contractors.

The upside to buying is you are paying off a mortgage and hopefully gaining appreciation while you live in the house. That alone makes a lot of sense.

I know many people that have very busy lives and don’t want to spend time or money maintaining a house. If that’s the case renting is the way to go.

Time spent at your personal residence is probably the most important factor in my opinion. Will you be at the house for the next 25 years? Or do you move every 2-3 years? If you are going to be there for a few decades, it’s any easy decision, buy the house. If you will be moving around a lot, rent.

Robert’s book is a great, but everyone needs to take his advice and apply it to your own unique situation. I’ve always found it ironic that he bashes on the education system (rightfully so) yet gives advice to people in a 1 size fits all manner, just like the education system.

It's great to see you are eager to become successful, now you need to put in the work.

I would suggest finding different ways to bring value to those people you wish to become or would like to have as a mentor. Do they need you to bird dog properties? Do it. Help with managing their properties? Figure it out. Paint their properties, mow, pick up trash, etc.? Put your boots on and get after it.

It doesn't matter what it is they need, find a way to get in front of them and help them solve their problems. You are young enough now that your energy and time are a huge asset. Now go leverage it and go get what you want!

I'd also vote to keep the house. You have an asset that is fully paid off with a majority of your high cost Cap Ex projects recently completed (roof, HVAC, water heater). This makes for an overall less risky asset compared to a property with a mortgage and without these repairs. It's a great foundation to build your wealth.

You have started a great list and it covers most of the work needed to get a property rent ready.

I have always figured 2 man hours per year for turnover labor on a standard 2-3 bedroom home. So in your case it would be 4 man hours of labor on an average house. Anything above this would be charged to the tenant. 

You will need to use your judgement on the time it takes to get a property ready. If it's a light turnover you can get it knocked out in a day depending if you are doing it yourself or you are outsourcing different trades (handyman, cleaners, landscapers, etc.) But you may also consider if you want to do any repairs above and beyond the normal wear and tear. Maybe you want to update different parts of the house. Make sure to take all of it into consideration.

It's also smart to come up with a process when you do your turnover work to stay efficient. I always do a room by room walk through and come up with a scope of work. Within the scope of work I determine if it was tenant damage, normal wear and tear, or something I want to upgrade on the house. Once that is figured I get the materials and tools necessary to get the work done or you can hire the right people to get the work done. Document anything that you will charge to the tenant with photo documentation.