March 30, 2018

JF1305: Why Your Mindset Will Make Or Break You with Rod Khleif

Rod went from earning $10k in year two of investing to $120k in year three. He credits meeting someone who taught him about the psychology of success to making that jump. He then had a HUGE jump in net worth, jumping $17 MILLION in one year! But, it all came crashing down in 2008. Hear why he lost it all and how he has been able to bounce back stronger than ever in this episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Rod Khleif Real Estate Background:

  • Director of Investments at MHP Management Group
  • Host of The Lifetime Cashflow Through Real Estate Investing Podcast
  • Owns more than 2,000 single family homes & apartment communities
  • Built over 22 businesses in his 40 year business career, several worth tens of millions of dollars
  • Started the Tiny Hands Foundation, which has benefited more than 60,000 children in need
  • Based in Sarasota, Florida
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Joe Fairless: Best Ever listeners, hello! Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is a show where we cut out the fluff and we only talk about the best real estate investing advice that moves your business forward. We’ve spoken to Barbara Corcoran from Shark Tank, Robert Kiyosaki, the author of Rich Dad, Poor Dad and many other successful real estate investors and entrepreneurs.

With us today we’ve got a very successful investor, both in single-family and family. How are you doing, Rod Khleif?

Rod Khleif: I’m awesome, I really appreciate you having me here, Joe.

Joe Fairless: Well, my pleasure my friend. In addition to him having owned more than 2,000 single-family homes and apartment communities, he is also a part of Tony Robbins’ team, and he goes to the Tony Robbins events, so we are kindred spirits on that level, that’s for sure… Because as you all know, Best Ever listeners, I am a huge Tony Robbins fan.

He is also the director of investments at MHP Management Group, and the host of a wonderful podcast titled Lifetime Cashflow Through Real Estate Investing. He’s also got an upcoming book coming out in a couple months, so stay tuned in there. He started a foundation called The Tiny Hands Foundation, which has benefitted more than 40,000 children in need. He’s based in Sarasota, Florida. With that being said, Rod, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Rod Khleif: Absolutely. My background – of course, real estate. I immigrated to this country when I was six years old with my mother and my brother. We ended up in Denver, Colorado, where I lived for the next 30 years, and I got excited about real estate because I didn’t have much. I grew up with Goodwill clothes, and ate expired food, and drank powdered milk, because that’s all we could afford…

I know a lot of people had it harder than we did, but I knew I wanted more for my life, and I got my work ethic from my mother. I saw she worked really hard babysitting kids, and she bought the house across the street from us when I was 14 for $30,000. Then when I was 17, about to graduate from high school, she told me it had gone up in value 20k while she slept, and I’m like “What?! I’m getting into real estate. I’m gonna be rich in real estate.” So I got my brokers’ license when I turned 18, which you could do with education back then, you didn’t need the experience; you need experience now.

I made like 8k my first year in real estate, didn’t know what I was doing, made 10k my second year, but then my third year I made about 120k. So what happened between year two and three? Well, I’ll tell you – a couple of things. One, I got around somebody that taught me about the psychology of success, and how important mindset is to your success at anything. That kind of springboarded.

I was around this guy, I was dating his daughter, and he lived in an amazing house and stuff I hadn’t experienced before. He had really nice cars, they had a pool, they had a three-car garage… I had never seen any of this stuff before. And you know how when you elevate your standards when you’re around a particular environment for a while, you don’t wanna go backwards. That happened for me. Within a year of meeting him, I 10x-ed my income, I got a place to live, I got a Corvette… I was on my path.

But then fast-forward to 2006 – at that point I had owned over 2,000 houses, multiple apartment buildings, I had about 800 houses here in Florida, and several apartment complexes… My net worth went up 17 million dollars in one year, which sounds great. In fact, if you do the math, it’s $8,000/hour. Of course, I did that; my head got so big I barely made it through a room. I thought I was a real estate god.

Well, you know how when your head gets big, God or the universe has a habit of smacking you down? Well, that was 2008 for me. In 2008 my world crashed. I’m the guy that bought foreclosures, and I was in foreclosure on everything. I lost it all. It was a 50 million dollar seminar.

Joe Fairless: So from a tactical standpoint, what was the reason why you lost the 50 million portfolio? Was it lack of cashflow? Can you elaborate?

Rod Khleif: It was absolutely cashflow, and it was just the way my portfolio was structured. I had 800 houses two hours one direction and two hours the other direction, and everywhere in between. So it was much more logistically challenging to manage than having 800 units in three or four locations.

Also, I was up and down the coast, so I had to deal with flood insurance, wind insurance, which greatly impacts your cashflow, as well as taxes here in Florida are quite a bit higher than a lot of other jurisdictions, because we don’t have any state income tax. So all of that impacted my cashflow, and my model was such that I had to sell a house occasionally or refinance a house occasionally just to offset the little bit of losses I was taking cashflow-wise because of those reasons I just expressed, and also logistically it’s much more expensive to manage single-family properties if you’re in a big geographic area.

For example, let’s say you’ve got a maintenance issue. You send the maintenance man, he drives 30 minutes to an hour to get to a house. Because every house is different, every appliance is different, every HVAC system is different, every hot water system is different, plumbing parts are different, you can’t stockpile parts… So the maintenance man shows up, he assesses the situation, then he’s gotta go to a Home Depot or a Lowe’s and buy the parts, and by the time he gets back, maybe two and a half hours have already transpired. Then maybe he works on it, and as it happens very often when you’re doing a maintenance issue, as you get into it you discover you need more parts, so maybe he’s gotta go back to Lowe’s and Home Depot… So what would take 30 minutes if you had a stockpile of parts in an apartment community would take all day at a house. And when you multiply that times hundreds of properties, it has a huge impact on your ability to cashflow.

So that was probably one of the biggest factors, and I was in the C class properties, even C- in some of them… So when the market crashed, there was a lot of turnover, and turnover in houses is more expensive than units, for the same reason I just outlined – everything is different. So an average turnover on an apartment is typically in the hundreds; an average turnover in a house is usually 2k-3k. And when the turnovers magnified, you couldn’t refinance, you couldn’t sell…

When I went into 2008, I was at a 30% loan-to-value. I owed 30 cents on every dollar, so I thought I was golden… But I was focusing on the wrong thing. I needed to be more focused on the cashflow, which is why the title of my podcast is Lifetime Cashflow. Now, that’s why it happened.

I’m back now, but it was a painful seminar. I mean, I thought I was set for life. Maybe your listeners would like to know how I came back from losing 50 million dollars to the success I have today, because I think that could really help them, because it really was mindset. Mindset is, in my opinion, 80%-90% of your success in anything, be it this business or any other business. Would you like me to share that?

Joe Fairless: Yeah, absolutely. That’s what I want us to focus on for our conversation, so I’m glad that you segued… I just wanted to ask that follow-up question, just because I’m sure that a lot of the Best Ever listeners are wondering how that happened…

Rod Khleif: Yeah, it was because of all those things. Now, I’m not against single-family homes for cashflow, but my whole message is if you’re gonna buy long-term hold property, go multifamily. It’s just safer. If you’ve got a house and it’s empty, you’re 100% vacant. If you’ve got a fourplex, chances are if you’ve got a unit empty, you’re still okay. So that’s the message that I try to impart on people.

Now, don’t get me wrong… There’s lots of people doing well with portfolios of 20-40 houses, but I wouldn’t wish what I had on anyone. It would have been so much easier if I’d had 5, 6, 8 apartment communities, and I would have survived it, no problem at all. I would have flourished through it.

Joe Fairless: Let’s talk about the mindset and how you came back from that, and your approach. You said it was mindset, and your psychology. Now, when we saw each other at Unleash the Power Within, I was pleasantly surprised because I was talking to someone, you were talking to someone, and we just ran into each other, and it was kind of cool, because we hadn’t met in person before… You told me something interesting; you said – and fact-check me on this, because I don’t remember exactly what it is, but you said you had attended Unleash the Power Within a whole bunch of times…

Rod Khleif: I have been following Tony around the planet for 20 years, brother. I was on his team for 8 years, I’ve been to his resort in Fiji twice… Tony is the gift that keeps on giving, and let me give a shout-out to him; anyone that’s even considering going to see him, I’m sure you agree wholeheartedly, Joe, go see him. He’s fantastic. He’s impacted every area of my life.

Joe Fairless: But you went to the conference Unleash the Power Within. How many years in a row did you go?

Rod Khleif: I’ve done every one of his events numerous times and in fact, some of them dozens of times, because I was on his team. When you’re in the environment, it just assimilates into your mind. Frankly, I’ve seen it so many times I could teach it, but every time, every year you’re working on something new, you’re evolving. If you’re not growing, you’re dying. I was there with you whenever it was, because I’m constantly working on me, and it’s an evolution. There is no destination in your self-actualization, in your self-improvement. It’s an evolution. And again, if you’re not progressing, if you’re not growing, you’re dying… So I’m always working on different little pieces and tweaking different things in me to be the best version of me that I can be.

Joe Fairless: How did you approach, from a mindset standpoint, okay, your net worth and your finances —

Rod Khleif: Lost it all.

Joe Fairless: Lost it all, so now what?

Rod Khleif: Well, let me back up, because I think telling a little bit of my story would explain that. See, I was visualizing and manifesting the things I wanted in my life, not even realizing that’s what I was doing. When I saw that movie The Secret, read that book, then I realized I was utilizing the law of attraction. Some of you guys that are listening, if you’re analytical, this may sound foo-foo, but I promise you it’s real. So let me give you some examples in my own life where I used this – mostly car examples, and please realize this is not me bragging, this is just me sharing my story, because that’s really all I can share.

When I first got my brokers’ license, I had a 4-door Granada, this bone ugly grey car, because I thought you had to have a 4-door car to make money in real estate. And like I mentioned, I went and worked for my girlfriend’s dad, who had a Corvette, and he let me drive it. Once you experience something, you’ve gotta have it. So I put a magazine picture – this was way before the internet – of a Corvette on the visor of that Granada, and I’d look at it every day. Within a year, I had that Corvette.

This was back when Magnum P.I., a TV show with Tom Selleck was on the air. He had this magnificent red Ferrari 308 that I thought was the coolest thing ever… So I got a picture of that actual Ferrari and put it on the visor of my Corvette. Then in a year or two I had a Maserati that looked just like it.

And the last car example – and please realize, this is not me bragging, because this stuff doesn’t even interest me anymore… But the last example is I’m the guy that always wanted a Lamborghini, and I had the posters in my room, I had the bikini girls leaning over, washing it — you know, that’s me. Ironic is my son used to collect models of exotic cars; he had about 30 of them, and he had a model of the exact color and style that I ended up getting, a Lamborghini. So that stuff, that visualization really works, my friends, so I wanted to share that first.

I’ll give you the last example. The last example was I always wanted to live on the beach, and Denver has no beach, and I grew up in Denver, as I said, and I had pictures of palm trees… I got to visit Hawaii once or twice… “Man, I’ve gotta live like this.” So I ultimately built this 10,000 square foot mansion on the beach, with the boats on the back side and the beach on the front side, and I did it by visualizing it. So that’s step one.

Now let me share something I share with my coaching students, which is kind of a goal-setting workshop, if I can do it in two minutes… Most people spend more time planning for Christmas or a birthday party than they do designing their lives. So if you’re listening, even if you’ve written your goals down recently, I’m gonna suggest you do it again, under the framework I’m about to share with you. It only takes an hour. Pick a time when you’ve got a ton of high energy, whenever that is in the day for you. Make sure you’re hydrated, don’t do it right after you do a meal, and sit down and write down everything you could ever possibly want in life. The big things, the little things, the cars, the boats, the planes, the jet skis, the motorcycle, whatever it is. Take the lid off your brain, and imagine if you write it down, you’re gonna get it, because that is not outside the realm of reality.

What it does when you write it down is it triggers something your reticular activating system. It’s that filter in your brain that subconsciously points you in the direction that, again, your brain subconsciously thinks you need to be interested in. For example right now you’re listening to me, you’re not thinking about how your feet feel in your shoes. Well, now that I mentioned it, you do.

Another example would be let’s say you just bought a car; you never really noticed them before, but when you buy the car you see them everywhere. That’s your reticular activating system, and just writing down your goals triggers that. But write down everything you could ever possibly want, that’s step one.

Then also write down everything you wanna learn. Me, I wanna learn how to fly a helicopter. Write down who you wanna help. I’ve got my foundation, but what do you wanna do things for? I bought my parents a house. Who do you wanna help, in your family or in the community? Write all of this down, everything you wanna do, be or have. And then once you can’t think of another thing — by the way, if you’re analytical, don’t analyze it; you can always scratch it out later. Just keep writing until you can’t think of another thing.

Once you’re done, it’s not a goal until it’s measurable, so put how many years it’s gonna take for you to achieve each one of those goals. Just put a one, a three, a five, a ten or a twenty by each goal… Remembering that as human beings we will overestimate what we can accomplish in a year and massively underestimate what we can do in a decade. So put a number by each goal. Then that’s where most people stop, by the way. They’ll just write a few goals, a new year’s resolution, and then it’s forgotten in a couple years.

These next two steps are the most important. Pick your top goal, the one that juices you the most. Write it on a separate piece of paper. The one that if you got, it would just blow your mind if you were able to pull it off. Write that on a separate piece of paper. Then also pull out three of your top one-year goals. So you’re gonna take four of your goals and move them to another piece of paper.

Now, this is where the rubber meets the road, because the goal itself is never enough to keep you going. If I would have just focused on goals when I crashed and burned in 2008, I wouldn’t have recovered. It’s the “Why those goals are an absolute must” that will drive you. So take a few minutes and write a paragraph under each goal, why it’s an absolute must. Use powerful language – “So I can show my family what success looks like, so I can do whatever I want, whenever I want, wherever I want, with whoever I want…” Whatever is gonna joost you, you write that down, why it’s an absolute must.

But then also a little twist – put some pain in there. Put down “If I don’t achieve this goal, I’ll feel like a failure, or I’ll have failed my family, or I’ll have a life of regret.” Make it painful, because as human beings, we’ll do more to avoid pain than gain pleasure, so utilize that; use that pain to drive you, because you need something to get you up early to study this business, to keep you up late, to get you up when you had your nose bloodied and been knocked down like I was. This is what does it.

So you’ve got your goals, you’ve got your why’s, now there’s one last piece. Go on Google, find pictures that resonate with you, associated with those goals. You go on Google, you see a picture that kind of stirs you, it moves you, “Yeah, I like that one” – download them, go to Walgreens or CVS, have them blown up, put them somewhere you can see them. An incredibly powerful way to trigger your reticular activating system, even subconsciously. You won’t even notice them after a while, but your brain is seeing them.

I’ll give you one last example here of that dynamic. I use a paper planner, I’m a dinosaur. It used to be called a day timer, by FranklinCovey, and I still use it. And in the back of that thing I’ve got pictures that are in plastic, they’re dog-eared… They’ve been in there for about 19 years. The first few pictures are my gratitude pictures; they’re the pictures of my children when they were young, because everything starts from a place of gratitude. But then I’ve got pictures of the houses, the mansions, the places on the water; I live in an incredible compound on the water now. I lost that previous house in my divorce and all that debacle in 2008, but because God’s got a sense of humor, I can see it across the bay from the compound that I live at now… But the point is these pictures work.

In the back of this book that I was just talking about I’ve got the Lamborghini pictures before I ever owned it, and the Rolls Royce, I’ve got $300,000 worth of watches – things that don’t matter to me anymore, but I got them because I had pictures of them. So please don’t discount the power of that, my friends.

And one last piece on this goal-setting thing. In fact, it ties into Tony Robbins. I was floating in this pool of this 10,000 square foot house that I built, this magnificent home; there’s a waterfall going from the second-floor balcony into the pool… It had a $150,000 fish tank wrapped around the staircase… This home was magnificent. Three stories, wine cellar, elevator… And I’m floating in this pool, it’s changing colors because it had fiber optic lighting in it, I’m by myself about a month after I finished the house… I’m in the pool, it’s warm, moonlit sky, I’m looking up at this magnificent home, and I got depressed. I’m like, “What the heck is going on? I just accomplished this goal that I’ve worked my whole life to achieve. What’s happening here?”

And what I realize when I look back on it and I didn’t know it at the time – there were two things happening. One, never achieve a big goal without having other goals lined up behind it, because like The Good Book says, “Without a vision, the people perish.” So make sure you’ve got a vision for the future. I didn’t have a vision for the future, I didn’t know what I was gonna do next. So that was one component.

But the second, more important component, was as I’m looking up at this testament to my ego, this house I built, frankly to prove to the world I was good enough, I realized that my focus had been just on me. In fact, it cost me my first family. It’s embarrassing to admit, but it did… Because I was focused on success and focused on Rod. So that year I met Tony Robbins. And Tony feeds families for the holidays; he has fed millions of families, and that’s one of the things I love about him, is his heart.

So I decided to feed five families that year. This was 2000 or 2001, I don’t remember. I think it was 2000. But anyway, I fed five families. The third family changed my life. I went up to this house, and the lady came out and started crying when she saw the food. Her five kids came out, they all started crying, I started crying, and I was hooked. And I’m blessed to say – your statistic you said in my bio wasn’t quite accurate; I have now fed 60,000 children for the holidays. I have done thousands of backpacks filled with school supplies to children here in Sarasota and Bradenton; I’ve done thousands of Teddy bears to the local police departments for officers to keep in their cars when they encounter a child that’s been traumatized… It’s been the greatest gift of my life.

So my invitation to those of you that are listening – I know that you’re listening because you want financial success, whatever that means to you, but I’m here to tell you, I’ve interviewed billionaires and met mega-millionaires that are financially successful, that are unfulfilled and unhappy because they’re only thinking about themselves. So give yourself the gift of giving back in some fashion. It does not have to be as grandiose as what I’ve done or what some other people have done… Just do something for other people; incorporate that into your life and it’ll give your life a richness that’s much bigger than the financial success.

So there you have it, that’s how I got out of the crash in 2008 – I knew what I wanted and why I wanted it. I got around people, I joined Tony’s mastermind back then, I got around people that were making things happen… I’ve created my own mastermind to have thought leaders around me all the time too, and I hired a coach – it was a lot of money back them, it was like 5k/month, but that’s what I needed; I needed to focus on income-generating activity and knew I needed some tweaks, so I spent the money, I joined a mastermind, got some coaching and focused on what I wanted and why I wanted it, and I was able to pull out of it and thrive instead of survive. Hopefully that adds some value to your listeners, Joe.

Joe Fairless: Absolutely. The process that you walked us through is a process that I’ve done not in the exact way, but pretty much that way, and I’ve seen the results, that’s for sure. So let me make sure I have it documented properly, just to recap.

I love how you started out by saying most people spend more time planning a party than they do their life… So true. I think I’m guilty of that too, to — well, I don’t know; I don’t plan parties. But I get the sentiment, and I’m sure I’m guilty of that in some form or fashion. So one is write down everything you could possibly want in your life, imagine that if you were to write it down, it will happen. Two is write down what you wanna learn; three, write down who you wanna help, and then if we’re analytical, who cares? You can scratch it out later.

Then once done, put years to it, how many years you think – one, two, five, twenty, whatever, and then pick your top goal from that, write it on a separate piece of paper, then pick your top three one-year goals, write those down, and then write a paragraph about why are these goals an absolute must. As you said, use powerful language, plus put in some pain, so that we are associating both pain and pleasure; pain for not doing it, pleasure for doing it.

Then go find some images that associate to those goals, print them out – or what I do is I go on Vistaprint…

Rod Khleif: Yeah, that’s the best place.

Joe Fairless: Well, first I get the images on Google, I put them in a power point, I make a JPEG out of a PowerPoint slide with my images, and then I go on Vistaprint, I print a — I have a three foot by four foot poster on my wall in my office of my vision board, and it’s constantly there. I put it on my phone, I put it on my desktop of my computer, so it’s everywhere I go…

And then the other two miscellaneous components to it that are very important… One, don’t achieve a goal without having another lined up, and then two, have a give-back component.

Rod Khleif: Right. Let me add one more thing if we have time. The way to ramp this even more is to have a morning routine where you do a little light visualization. It’ll take me a minute to explain. Can I do that for you, Joe?

Joe Fairless: Sure, yeah.

Rod Khleif: So what I highly recommend you do – it literally takes a minute or two, (five minutes tops) is you just sit down and close your eyes, you can even do it in bed, and for a minute you think about what you’re grateful for, that you already have. I think about my wife, I think about my children, I think about my beautiful home, and just whatever I’m grateful for; my coaching students… But then I think about what I want in life as if I already have it, sometimes with emotion even. I’m grateful for what I want as if I already have it. It’s very, very powerful. It just takes two or three minutes, and then you just decide it’s gonna be an awesome day. That declaration typically makes sure that it’s an awesome day, because you’ve focused on it.

Doing that visualization as if you already have something – imagine you’re there, you’re in that moment, you’re proud… Who’s proud of you? What are you seeing? What are you hearing? What are you smelling? Just get as crystal clear as you can with that vision of the thing that you want as if you already have it, and I promise you it will drive you, it will pull you to get whatever it is you want. It absolutely works.

Joe Fairless: Rod, how can the Best Ever listeners get in touch with you?

Rod Khleif: So let me say this – I forgot to mention I’ve got a kick butt free 220-page book on multifamily investing, so if you’re interested in this space, you’re crazy not to take advantage of it. It’s no fluff, it’s like a textbook for this business. So get that, and that’s just by testing “rod” to 41411. If you like the psychology of success stuff, I’ve got a podcast, “Lifetime Cashflow Through Real Estate Investing” and I do one clip every week about the psychology of success, mindset, and then I interview people like you do, Joe.

And then my website, I’ve got a lot of free content on my website. Oh, I forgot to mention, I’ve got a kick butt Facebook group; we’ve got 5,500 people in it already. It’s free, and people are connecting all over the country and building little meetup groups and pure mentoring… Because you know, who you hang out with is who you become. So all you do is go to – it’s a direct link to that Facebook group. We don’t allow any promotion, it’s just for education and for people to connect with each other, and it’s going fantastic.

I was in L.A. picking a hotel because I’ve got a live event coming in April, and there were five guys I met with, my wife and I, that met on that group, and we connected via that group… It’s a great, free resource. And then my website has a lot, as well – You can throw that in the show notes. This has been a blast, Joe. Thanks for letting me add value.

Joe Fairless: Yeah, grateful to have you on the show, Rod, again, and I’m looking forward to staying in touch, and we’ll talk to you soon.

Rod Khleif: Thanks, brother. Take care.

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