What if you could simplify the complex strategies of investing? Chris Larsen, Founder of Next-Level Income, shares how you can create a basic and repeatable method to streamline your business. He also discusses mindset hacks and how to form a clear vision for your future.
Chris Larsen | Real Estate Background
- Previous episode: JF2370: The Challenges Of Starting And Scaling A Syndication With Chris Larsen #SituationSaturday
- Founder and Managing Partner of Next-Level Income,
- Portfolio: GP of 3,000 doors. LP of 15 properties.
- Based in: Asheville, NC
- Say hi to him at: www.nextlevelincome.com
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Ash Patel: Hello Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Chris Larsen. Chris is joining us from Asheville, North Carolina. He was a previous guest on episode 2370. You can google Joe Fairless and Chris Larsen and these episodes will show up. Chris, we’re glad to have you back, thank you, and how are you?
Chris Larsen: I’m doing great, man. And Asheville – I think they half named it after you, right?
Ash Patel: You’re right. Awesome. Today is Sunday, so Best Ever listeners, we are doing a skill set Sunday episode, where we talk about a particular skill that our guest has. Chris is the founder of Next Level Income, which helps people plan for financial independence through education and investment opportunities. He is also a GP on 3,000 doors in an LP on 15 properties. Chris, before we get started into your particular skill set, can you give the Best Ever listeners a little bit more about your background and what you’re focused on now?
Chris Larsen: Yeah, I’d be happy to. I bought my first property at 21. We didn’t scale up to 3,000 overnight here, it’s been a couple of decades in the works. I raced bicycles for a lot of years, and I went to school for engineering. When I was in college, I was learning the engineering process, which has stuck with me through my real estate investing career. But what I realized during my engineering education was that I didn’t want to be sitting around behind a desk my entire life. My best friend passed away between my freshman and sophomore years, and it was really kind of a slap in the face to say how precious life was. During some reflection over the next couple of years, I realized that I needed to make the best out of every day, I need to make the most out of the life that I was given.
Let’s face it, in this world that we have, you have to have the financial independence to live your best life. That’s how, over two decades ago, my investing journey started. I started in single-family, ultimately moved into commercial properties, office, multifamily. Multifamily has been the bulk of what we’ve done for the past six years. Today, we focus on multifamily, self-storage, as well as mobile homes and a couple of other things. Personally, we have some short-term rentals here in Asheville, because it’s such a great place to come visit.
Ash Patel: Chris, the skill set that we’re going to dive into today is systematizing investments. Tell us more about that, please.
Chris Larsen: Yeah. Again, I talk about our process in my book. If you’re listening, you’re welcome to get a copy at nextlevelincome.com, just click on the Book link, input your info, and I’ll send it to you. But I’ve always been a systems guy. I raced bicycles in school, and I was never the smartest guy, I was never the fastest guy on the bike… I had to put everything together, and I want to limit variables. So I’d figure out how to do something, then I would move on to the next thing, and figured out how to do that. I would just try to make what I was doing repeatable and improve upon the process. In engineering, they call this iterating. So you iterate, you go through the process, you improve it, you iterate again, you improve, you improve, you improve. So we moved to Asheville, and a lot of people thought, “Oh, you guys just got lucky.” We were living in DC.
I just wrote a blog post here that’s up on our website… I took a snapshot of a spreadsheet I put together 20 years ago. What I did was stack-ranked cities across the country where we wanted to live. A lot of these studies were based on the quality-of-life metrics; the quality of life, places where growth was occurring, this was in the early 2000s… We determined the places where we wanted to live, and Asheville was number three on the list. Through a confluence of events, we ended up moving here. The reason I bring that up is that through these systems that I built, we use the same things today for multifamily investing. So whether you’re an operator and you’re going out and finding properties, or whether you’re an investor and you’re trying to figure out the next best place to live, you can take data, you can distill it down or work with somebody that does that, and you can really simplify the process of — what I like to say is predicting the future of where you can be successful.
Ash Patel: All those systems, how do they apply to investing?
Chris Larsen: Alright, two different things. We could talk about how to determine the areas of opportunity, and then we can talk about how to basically short circuit human nature and really help you achieve success in your investing. We’ll talk about that here in a minute. So the first thing is, if you’re trying to figure out the best areas for investing in the future, you need to figure out what are the big tides, what are the big shifts taking place, that are going to give you those tailwinds? I’m a demographics guy, and if you’ve been listening to this show, you know that the lifeblood of commercial real estate, specifically multifamily, is people. Are they moving to an area? You want population growth, you want job growth, you want income growth; all those things are going to help give tailwinds to the growth of a multifamily property.
One of the easy things to do is you can go on the United Van Lines annual moving survey and you can see where people are moving. This is going to give you some broad strokes; it confirms a lot of things that you probably already know if you’re listening, which is like people are moving to the southeast, Phoenix, Texas. What do they call Austin? The cheapest city in California? [laughs] But again, if you understand how to take some of these broad-stroke data pieces, and you can apply them, you can really simplify the decision-making process for where you want to invest next, and then ultimately also decide who you want to invest with in the future.
Ash Patel: And you mentioned short-circuiting human nature. What is that?
Chris Larsen: Look, I’m a person, I have genetic tendencies. About six years ago, I started seeing a new doctor, and they do genetic analysis, and I have my genes taken. I raced bicycles for a lot of years, I’m not like a big guy, I’m like a pretty skinny…
Ash Patel: You’re like a Lance Armstrong.
Chris Larsen: Lance is even more muscular than I am. I got to train with Lance before he won the tour, as a matter of fact. Thanks for giving me a chance to name-drop there… He’s way better than I am. But my doctor said, “Chris, you should be fat; you should be obese.” He goes, “But you somehow basically short-circuited your genetics.” Now, my wife jokes because she’s like, “Chris, you don’t have any self-control.” She’s like, “If I bring a pint of ice cream in the house, you’re going to eat it all.” I said, “But I have the self-control to tell you not to bring it in the house.” So that’s an example of me knowing my tendencies, as somebody that loves ice cream, to not put that in front of my face.
So if you’re an investor, and if you’ve chosen your strategy, if you say, “Hey, I’d like to invest in multifamily. I’d like to work with this specific operator, to invest in this specific region”, the question is, how do you put a system in place so you ultimately achieve success? If you want to achieve financial success, you have to say, how much do you have to invest on a regular basis to get to the point of achieving financial freedom? So then the question is, how do you replicate that?
In my book, I talk in chapter three about having an opportunity fund. So you have to be diligent about setting aside money. I call it a savings tax. So if you’re like, “Man, it seems like at the end of every month, I have no money left”, you need to turn it around. Most people hate budgets, no different than people don’t like diets. I don’t like to deprive myself of ice cream, but if it’s not in the house, I don’t feel deprived, because it’s not sitting there in front of me. So my first suggestion, if you’re starting out on your investing and your financial journey – tax yourself first, before the government does. Before you spend all your bills, take your savings out first, put that into an area that you can’t touch. I use cash value life insurance, you can use a money market fund, you can use a savings account in another bank that you’re not going to see; put that money aside first. Second, determine a timeline with which you are going to invest. My coaching clients that I work with – we have a quarterly investing plan.
Ash Patel: I love putting money in a bank that you can’t just get online and say, “Oh, I’ll just transfer X number of dollars from savings to my checking account.”
Chris Larsen: That’s a great point; you want it somewhere different. Before there was Apple Pay and everything on your phone, these financial gurus would say, “Hey, if you can’t stop spending money on your credit card, put it in a freezer, in a block of ice, so you have to thaw it out before you can use it. I’m like, “Who uses their actual credit card anymore?” You pay on your phone, you pay online… It’s so easy to spend money without a credit card, so you have to figure out new ways. Again, you set it up in a different bank, or a different account, so maybe you have to request the money or you have to access it differently. It’s not just sitting there every day in front of you to spend. Then develop an investment timeline. Let’s say you’re training for a marathon; you don’t get up one day and the next day run 26 miles. Some people that are crazy, like David Goggins – he does that. If you haven’t read about David Goggins, that guy’s crazy; but read his story. Maybe you run a mile, then you run two miles the next week, then three miles, 26 weeks later, you’re running 26 miles; you built up to it. But you have a program that goes back from your end goal. So if your goal is to invest $100,000 in a year, figure out how much you need to save, and then figure out when you’re going to make those investments; then you can figure out when and how you’re going to invest in those.
Ash Patel: Are your clients older or younger?
Chris Larsen: That’s a great question.
Ash Patel: I have coaching clients and investors that are in their mid-20s. Coaching clients [00:12:23].04] as old as my investors. I have investors that are well into their retirement years that do that.
Break: [00:12:28] – [00:14:24]
Ash Patel: I’m going to throw you a crazy phone call that I received yesterday. This guy texts me and makes it seem like I should know who he is. He calls me up, I take his call, he’s like, “Hey, here’s my story. I’ve got a W-2 job, I want to get into real estate, I’m 45 years old, and I have a goal of reaching $50,000 in passive income by the age of 50.” He calls it 50 by 50. I’m like, “Awesome. How are you going to do that? What’s the plan?” “Well, I don’t know.” Then he goes on to say, “But you know what? I think 50,000 a month is actually too small. I’m going to achieve 70,000 or 75,000.” I’m blown away; you have no plan… How do you coach somebody like that? First, I’m like, “How did you find me?” He’s like, “Oh, I saw a YouTube video where you’re analyzing a property. At the end of the video, you said feel free to hit me up, so I hit you up.” I’m like, “Do you know anything about me?” He’s like, “No.” He didn’t get on Facebook, LinkedIn, or google me, or anything. So I guess kudos for taking some initiative, but how do you coach somebody like that? They have no plan. My advice to him – get on Bigger Pockets, educate yourself, network, go to meetups, but immerse yourself into this world, if that’s what you want to do. But man, that was too big of a leap for me to try to give him real advice.
Chris Larsen: Yeah. And he said, 50,000 a month?
Ash Patel: Passive.
Chris Larsen: Passive, a month.
Ash Patel: A month.
Chris Larsen: In five years.
Ash Patel: Yeah.
Chris Larsen: Okay. Well, maybe he’s starting off with a nice stockpile.
Ash Patel: He’s not, I asked him.
Chris Larsen: I guess my first step would be to stop posting YouTube videos if I were you. I’m joking, I’m joking… But in my book, I talk about a three-step process: make more money, keep more money, and then grow your money. Again, you have to figure out how much you need to invest at a specific assumption. We actually have a dashboard we’re coming out with to help investors just plug those numbers in. If they say, “Hey, I want 100,000 in passive income in 10 years”, you can see how much you have to invest based upon what your options are for investments. So if you can get a 15% return, you can plug that in; 10%, 20%, whatever your investment returns are, you can plug it in. You have to know where you’re going. This guy, 50,000 a month – okay, let’s say that’s his goal and he wants to achieve $600,000 a year in passive income. The first thing I would do is say, “What are you going to invest in?” Talk him through that. He says, “Hey, I’ve got these investments that are producing 10% a year.” I’d say, “Well, how much do you need to be invested?” It’s what – $6 million, right? That’s where I would start. Now, is that a reasonable assumption for him? I don’t know, but it sounds like it’s not. But let’s say he wanted 60,000 a year, and he could invest $600,000 over the course of the next five years. For a lot of people that are high-income earners, if you’re listening, if you’re a physician… I was a sales rep for a lot of years; I was investing six figures a year for quite a while. It was very realistic. We talk back and make sure that my coaching clients or investors have realistic expectations, because the last thing I want to do is paint an unrealistic picture, and have bad assumptions, and have expectations that can’t be met with a plan. Because nothing squashes confidence than somebody that just isn’t making progress, right?
Ash Patel: Yeah. Chris, I love that approach. You break down and really paint the picture of what it takes to achieve what they want. In my mind, a lot of people just look at retirement as, “Alright, I just have to save a bunch of money.” How many people actually put down numbers, make a budget, and figure out what they need to start saving more of or investing more of?
Chris Larsen: This is what’s wild… My MBA is in portfolio management; I almost did a PhD in finance, so I took a ton of finance classes, I was really interested in becoming a financial advisor. I’m in a little bit of a different role now, but I had the same kind of motivating factors underneath. And if you compare the traditional financial world – financial advisors, let’s say they charge a 1% annual fee; a financial advisor actually earns their clients typically a multiple of that 1% fee. And the reason is, they develop a plan and they hold their clients accountable. So it’s no different than a coach. A coach is going to help you develop a plan, and hold you accountable, whether you’re training for that marathon, or if you’re trying to develop a specific passive investing plan. I think that’s the key. I work with clients that make hundreds of thousands of dollars a year, and very few come to me and say, “Hey, here’s my three-year vision, and here’s a plan.” No, they come to work with me because they say, “Hey, I don’t know where to start and do that.”
If you’re listening and you want to put something together yourself, here’s my advice… Paint a vivid three-year vision of what you want your life to look like; that can include your financial goals in there as well. Personally, I do health, wealth, my social relationships, and my personal, which would be personal enrichment. You could even include things like, maybe you want to buy a new car, or a boat, or something like that. Then you break it down and work backward to what your goals are, and determine based upon, again, the assumptions, based on your returns for a financial goal, what you have to do each step of the way. Again, if you don’t know how to do that, that’s why we’re developing these tools to do that. But then you have to figure out ways, like we were talking about, short-circuiting human nature, which is finding something that you can repeat on a regular basis. Because investing, especially in the things that we talked about, commercial real estate, it’s “get rich slow”, it’s not “get rich fast”. And it’s not really exciting; you make your first investment of $50,000, you get a few $100 a month coming in. You’re like, “Wow, honey, I can take you out for a nice dinner.” You need to do it over time to really grow that snowball of wealth.
Ash Patel: What’s the biggest reason people are non-conforming?
Chris Larsen: I think the first thing is that people don’t stop to visualize what they really want. I’ve found a very high correlation between success with people that paint a clear picture. Here’s what I want you to think about if you’re listening… You get in the car, you have a destination; you take out your phone, you pull up Google Maps, and you put the destination in. Now, if you go to the same place on a regular basis, you know sometimes Google Maps takes you on a different route. If you just started driving and there was a traffic jam, you took a turn and then you didn’t know where you were going, you probably would never end up at your destination. But Google tells you, “Hey, we’re going to take you on this route, because there’s traffic, there’s an accident, the road is closed, whatever it may be.” You must, must, must have a clear vision of what you want in your life to get there. That’s first and foremost, and I think that’s the big thing.
The second thing that’s very correlated with success, is do people show up to do the work? For my coaching clients, if they’re on the weekly calls, if they’re responding to the weekly emails, they’re more successful. Number one, a vision; number two, are they doing the hard work? When I say hard work, this isn’t onerous, but just are you doing the things every day, every week, every month, every quarter, every year, to get you where you want to be? That’s what’s really key to achieving success.
Ash Patel: How do you deal with non-compliant clients?
Chris Larsen: You fire them. First off, if somebody is going to pay me and not show up, I’m going to cash the check. So if anybody’s interested in working with me, you’re welcome. This would be no different than the US Treasury. If you send them a check, they will cash the check; they’ll put it in a treasury. So hey, news for anybody that thinks that you make too much money and you’re not paying enough tax – you can write a check to the Treasury and get that done. But again, I think sharing the success and the tips from people that are achieving success is important, and I think social motivation is good as well. We have group calls on a regular basis, so that way people can hear — because it’s really hard. Let’s say you’re investing and a deal doesn’t go well, or 2020 hits and your distribution checks stop coming in, because people aren’t paying rent and you can’t evict your tenants. It sure is helpful if you know other people in the same boat and then how people are getting through that. So you stick to your plan; no different, again, like I always mention, the financial advisor. The reason a lot of investors underperform the overall stock market is because when the market drops, they sell, and then they take a loss, and then they start all over again. But they have this loss, instead of sticking to their plan when times get tough. No different than when I eat that tub of ice cream that my wife brings in, I’ve just got to get up the next day and say, “Alright, back to the gym” and start all over and put that behind me.
Ash Patel: Chris, I’m going back to that bank example. I’ve got a couple, they’re really good friends of ours and they both just love to spend. I’m thinking, if they have a portion of their check put into a different bank, I’m pretty sure when you open that account, you can set something up where both people have to be present to withdraw money. Because I remember, when you sign that thing…
Chris Larsen: If they have a joint account, they could probably put a restriction on that.
Ash Patel: Yeah, I’m going to recommend that. What would you say to a couple, maybe mid-30s or even into their 40s, they just love to spend, don’t save anything, and don’t really give retirement much thought?
Chris Larsen: Again, this is where you have to flip things around. I’ve found that in life a lot of times when you invert what traditional wisdom would tell you, you get more success. So the first thing you need to do is say, “Okay, are you both in line with what you want out of life?” Then you say, “Alright, we’re not going to have a budget, you love to spend money. Let’s make it enjoyable to spend money.” Again, let’s say that couple brings in $10,000 a month after tax, and their goal is to save $2,000 a month. Well, if you give them $10,000 at the beginning of each month, and on the 30th of each month, say “Okay, where’s your $2,000?” There’s probably a fairly low probability with this couple that they’re going to have it left, because they love to spend money. You take the $2,000 out first and you save it first, you pay your bills second, and then guess what you say? Spend everything that’s left.
Now, what happens is you take people and you say, “Alright, if you make extra money, then you get to spend it on the back end.” You can take this a step further. If you’re like, “Well, I don’t have that problem. I love to save money. I have an investing problem.” Well, let’s say you make $200,000 a year. I would say a really good high bar to set – so this is the opposite end of the spectrum, somebody that’s mastered saving – set a goal of saving 50% of what you make. Because then, every year you work, you can take a year off essentially. But then you can do the same thing, if you save 50%, if you make 100%, more, you get to spend 100% more than you’re making. That was our rule. A lot of people would see, like, “Oh, you bought a new car, you did this, you did that… You’re spending a lot of money.” I was making a lot of money, but our mortgage was $1,300 a month; we’d save a lot of money, and then I would spend what was left. It’s enjoyable.
Part of the problem is once you master saving and investing, you’re ingrained into saving, investing, and a lot of people that are listening to the show, when you become successful as an investor, you then have a hard time learning how to spend money. So you have to learn how to enjoy the money that you’ve saved and enjoy life. What I’ve found is that the 50% rule allows you to achieve higher savings and you also get to learn how to spend some money and enjoy it on the backend as well. But you have to have a lot of discipline on the front end to achieve high savings levels like that.
Ash Patel: I love these mindset hacks. Chris, thank you so much for joining us today, sharing a lot of these tricks, a lot of these mindset changes, and sharing the story with your best friend passing away. It’s a tragedy, but I feel like it’s had a huge impact on how you’ve structured and led your life. We appreciate your time today.
Chris Larsen: Thank you for having me on. If you’re going through a tough time in your life, adversity strengthens you in the long run. It’s a blessing and a curse, but thank you for having me on, Ash, and sharing my story.
Ash Patel: Chris before you leave, how can the Best Ever listeners reach out to you?
Chris Larsen: Real easy, nextlevelincome.com. You can get a free copy of my book there, you can also find all my contact information. Check us out on social media, as well as our podcast.
Ash Patel: Thank you again. Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review and share this podcast with anyone you think can benefit from it. Please also follow, subscribe, and have a Best Ever day.
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