CW 760 FBF - Upscale Real Estate Development & Success In Tough Times with NY Times Best-Selling Author Frank McKinney

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Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who's actually been there and done it. He he's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

This is your host, Jason Hartman. Today we've got an exciting show with, well, gosh, it's hard to title this guy because he's got quite a few titles, but it's Frank McKinney. He is a very interesting guy. An upscale real estate developer building incredible mansions and creating all kinds of value where really there was none before. Kind of out of thin air. You'll like this show from many perspectives. It's really not necessarily a real estate show, although we're going to touch on that. But it's about marketing, spiritual growth and, and philanthropy, all kinds of great things, motivation, just some neat stuff. We're going to cover quite a wide range of topics with Frank today. And before we do that, our next show has Dr. Dennis Whateley, one of my all time favorite mentors where we'll talk about the psychology of winning and the seeds of greatness. And I discovered Dr. Whateley at age 17 and he really did change my life. So I think you'll like that show. That's one of our every 10th shows that's on a totally non financial topic but as I always say, it always relates to finances in some ways. We are moving into our new office tomorrow, so I'm very, very excited. They finished putting down the carpeting today and just getting the final touches on it. It's real exciting. And you know what, I'll post a picture of that probably on our website and it has a huge conference or sort of seminar training room maybe we'll have some events there coming up soon. And speaking of events, our next Creating wealth in Today's Economy boot camp is on February 20th. That's a Saturday, February 20th. Register@Jason Hartman.com and the Masters weekend, of course, March 6th and 7th we're going to do on real estate and finance where we'll have asset protection and all kinds of gurus on that subject area managers, property managers, etc. And then we will do a second day, the Sunday, which will be more focused on Internet marketing, growing a home based business or a small to medium sized business. And I think you'll really like this Masters weekend. It's the first one we've done this way so it's real special. In one weekend you're going to learn all about creating wealth through real estate and creating income through a side business that may well grow into be a big business for you. So that's it. Let's go to the interview with real estate artist, marketing guru and philanthropist and motivational guy Frank McKinney. Here's the interview.

It's my pleasure to welcome Frank McKinney to the show. He is a real high end marketing genius. He has got a tremendous rags to rich story. He's going to talk today about bubbles and timing cycles in the market and also about that very important spiritual and mental mindset that can lead to success or failure in business and in real estate. And he's just a really, really interesting guy. I've heard him interviewed before on other shows and really want to welcome Frank McKinney to our show today. Frank, thanks for joining us.

Fantastic opportunity to be here. Jason. I know some of the guests that you've had and I know you're heard around the world. So I'm honored to be sitting on the same stage.

Well, we're honored to have you the.

Stage we're sitting on, by the way, for those who are tuning in, I am talking to Jason from my oceanfront treehouse office. This is where I've written all my books from, five books, and where I design all of our oceanfront homes from. And so it's a beautiful setting. It's 23ft above sea level. So for those of you who are listening in a place that's cold and dreary, just think of me sitting up here looking out over the Atlantic Ocean.

You're making our listeners very envious there, Frank.

But you've got a tremendous story and congratulations on your success. You have taken and Built such a phenomenal reputation for really creating a whole sort of image and just a Persona that markets these really, really high, high end properties. And right now you are close to selling, I believe, the most expensive green or environmentally friendly home in the world. Right. Remember, you're listening to Flashback Friday. Our new episodes are published every Monday and Wednesday.

Yeah, let's delineate a little bit for your listeners. I'm the creator of these magnificent, one of a kind oceanfront homes, really artistry that can be found on that sun drenched canvas known as the Atlantic Ocean. And I do it, Jason, all on speculation. So that's my, my risk, my dollars at risk there. I have no partners. It's me, the bank and the IRS. I've been at it now since 1986, starting back then with a $50,000 fixer upper in a pretty bad part of town down here in West Palm Beach, Florida. And now, you know, almost 25 years. So 23 years later, we just finished again on speculation in a market like this, the largest at over 15,000 square feet and the most opulent at over $29 million home that's been certified, triple certified green by the United States Green Building Council, the Florida Green Building Coalition, and also energy star for homes. And so I think what's, what's great for your listeners to tune into is, okay, so wow, you know, Frank, you're taking this huge risk. Again, I'm building on speculation. For those of you who don't know, I am building, I've been creating these houses for all these years without knowing when I'm going to get paid. There is no buyer in mind, no, no buyer waiting, I should say, when we're finished with these homes. So kind of like the field of dreams, you know, build it and they will come. And that's what, that's what I'm hoping here. That's what I'm believing. I have believed it for nearly 25 years. And so the most important thing that I've become familiar with, that I have embraced, I can't say that I've mastered it, Jason, but that is, that is this exercising of one's risk tolerance, one's risk threshold. Exercising that risk threshold like a muscle, you know, eventually it does become stronger and able to withstand greater pressure. So for the common man that says, well, how, how in the world can you take a, you know, this risk in this economy building a 15,000 square foot, $29 million home on speculation without a buyer? And the answer is quite simple. You know, I didn't start with a $29 million house. I started with a $50,000 fixer upper. And I, and there's I see you. You've interviewed some great people and one of my favorite authors is the author of Blink.

Oh, blink. Malcolm Gladwell. Sure. Malcolm Gladwell.

I'm sorry to blank there. Malcolm Gladwell. And in Blink and the Tipping Point.

And his new book, Outliers, I think that's an outline.

I'm sorry. And Outliers, he says you have to do to become an expert in anything. But Gladwell says you must apply yourself for 10,000 hours.

Right.

And if you do the math, that's a five, five years of career. And really for the first five years of my career, that's what I didn't do, a house worth More than $100,000. Jason.

So you were just doing little cheap fixer uppers. That's, that's an amazing start.

Taking it to the bank day in and day out, taking my lunch pail to work day in and day out, Nothing flashy, you know, not overindulging in debt, not over indulging in lifestyle, not charging it today and pay for and you know, paying for it never. I live a very disciplined life. I kind of sacrifice today for a better tomorrow. And now, you know, turning the page 23 years later, we're able to take what is perceived as being enormous risk because we took so many smaller risks many, many years ago.

That's fantastic, Frank. So tell the listeners, if you would, when you went from that first five years, or as Gladwell puts it, the 10,000 hours that you put in, and for most entrepreneurs, they probably do the 10,000 hours in about two and a half or three years, I would say, because they love what they do and they're working all the time. But work is really play for someone who has passion about it. But in that first five years, what was the jump? How did you Suddenly go from $100,000 fixer upper houses that you were buying and selling on into the next? What was the next move up and how did that occur?

You know, here's how it evolved and I want the listeners to pay very close attention to the fact that when I was doing those smaller homes, Jason, I wasn't longing for something more. I was very content with creating and building these little first time home buyer homes. I basically was taking people who were renting the American dream and I was teaching them how to own it for the first time. And what a wonderful way to be in business, to teach people how to own the American dream and Then to provide them with a piece of the American dream. And after five years of getting really good at it and we were doing 20 or 30 houses a year and, and doing quite well, you know, had nice margins on our little sales. I turned to my wife and I said, honey, you know, we're pretty good at this. I get this. I am now seeking a greater challenge. I don't want to, I don't want to deviate outside of my niche as far as the real estate market. But let's add, let's Simply add a 0, let's simply add 10 to the acquisition. So if I was buying houses for 75,020, selling them for 100, let's buy one for 750, 750,000. Let's fix it up and let's sell it instead of for a million, let's sell it for 2 million. Let's create a million dollar margin. And I felt after hundreds of smaller transactions that this was a natural progression. And when you step back and look at it, it was the same application, Jason. It just was on the ocean instead of in a, in a, in a burgeoning or struggling neighborhood. And it was just 1 0. And that's all I did is I had built up a decent savings and I, again, I didn't over leverage. So it was easy for me to go to the bank and borrow the money I needed to complete the project because I put a lot of my own money where my mouth was. I don't, I didn't believe in other people's money. Matter of fact, there's a long chapter in my new book Versus that talks about the, it's titled as a matter of fact, the most Obscene form four letter word. And it's not the F word or the S word, it's the, it's the D word. It's the debt word. And because I manage my debt very well, I was able to take on that first project as this. It was kind of both evolutionary and revolutionary as far as me making that big jump. I didn't jump from one hundred thousand dollar house to a two hundred or a three hundred. I jumped from one hundred thousand dollars house to a two million dollar house because I felt I'd cut my teeth, I'd walk the walk and I felt that I was ready.

That's great. So Frank, where did you go after 2 million? Did you do several of those and get kind of comfortable playing in that pond and then go up to 5 million, 10 million? I mean, was it just sort of that progression? Like that.

The first house we did, the 2.2 million dollar house that we did, Jason, was in 1991. And since 91, we have done 36 homes on the direct ocean front. 36 projects, 36 properties. So that's, that's more or less two a year. And we very slowly went from two to four, and then six and a half, I remember then an eight. And then we, we, we cut through or broke through that $10 million barrier back in 1996. And then we continued to slowly but surely escalate up to where the most expensive one we've done was a $50 million house back in 2004. And so we've, we've kind of bounced back and forth between. I haven't actually, we haven't gotten gone below $7 million since that very first project, with the average price of a home that we've done being around $15 million. The interesting thing, and the longest chapter in my new book, versus this, and we're going to talk about the thesis.

Behind this, I'm going to ask you about that in just a moment, but go ahead.

But the longest chapter is the marketing chapter. And so how is it, Frank, now I'm selling to an infinitesimally small percentage of people that can afford my artistry. And we're talking about 25 to 30,000 people out of a worldwide population of six and a half billion that can afford what we do for a living. And so we have become very keen on our ability to, as you referenced in the introduction to, brand our homes. I will tell you that I'm not a builder, I'm not a developer, I'm not a flipper, I'm not a rehabber, I'm not a contractor, I'm not a home wholesaler. I'm an artist, plain and simple. And the artistry that I create is the type that people can live in. I mean, Van Gogh, Renoir, Monet, you can hang them on your wall. But a Frank McKinney home is unlike anything you've ever seen before. You can, you get an emotional return from living in the art. And most often, Jason, our buyers, our owners end up selling their house after whatever, five, six years. They get a financial return and end up making more money selling the house than I did selling it to them. So it's important for the proprietor, the entrepreneur, almost regardless of field, to consider themselves like an artist approaches his craft. It's kept it fresh for me for all these years, and it really has created a brand that people long for that's Fantastic.

Well, Frank, you've got two great books, they're both out this year. First I want to ask you about Burst this, which is about bubbles, Frank McKinney's bubble proof real Estate Strategies. And then I want to ask you about your more spiritual book entitled the Tap. So tell us a bit more about Burst this. I mean you say that people, they create their own bubbles first, maybe that the market cycle thing that you've studied and then how people do it psychologically. Right. Just a reminder, you're listening to Flashback Friday. Our new episodes are published every Monday and every Wednesday.

Yeah, here's what I. Here's why I decided to write this book. I had written two other books before Make It Big 49 Secrets for Building A Life of Extreme Success, which was a philosophical book with real estate anecdotes sprinkled throughout. The second book was Frank McKinney's maverick approach to Real Estate Success. And that was kind of a 20 year ride from the very first property through the first 20 years of my career. First this was born from my just disdain and growing tired of hearing about the bubble and the negativity surrounding the real estate market. And so what I did is I went back and I studied six distinct real estate cycles that took place over the last 35 years where my mission was to sift out this kind of critical the recurring trends that highlight when significant opportunities are going to present themselves, while more importantly signaling where history is going to repeat itself. And these cycles, how long do they last, what brings them on and ultimately what to look for when we're about to come out of one, which we are right now, that was one of the most. And I just began to think, you know what, as I studied, listen, I went through four of those six cycles. The other two I didn't go through because I wasn't in the business, I was too young. And I did very well in some of these cycles because I didn't buy into the bubble mentality. I didn't over leverage. I created my own market, I created my own brand. I wasn't a lemming with, you know, I took a contrarian approach. As a matter of fact, the whole first section talks about the importance of being a competent contrarian. And really the book now I think it's refreshing because there are a lot of, there are a lot of books out there. I think you've interviewed some authors that kind of predicted the crash and talk about how bad it's going to be. And I believe that's fine. We've seen that Happen. But how do you bubble proof your real estate portfolio? How do you take advantage of these cycles? And how truly are most bubbles self created, just like most opportunities are self created?

So how is that?

Well, first of all, when I look to make money in real estate, I go in the opposite direction of the old tried and true location, location, location. And I know that sounds crazy, but hey, if you want to buy a home and be comfortable and live in a nice neighborhood and nice schools and all that, that's great. Follow it. If you want to have a nice vacation home, follow the location, location. But when I look back over hundreds of transactions, the time I made the most money, the times I made the most money were when I went in that opposite direction and I went into neighborhoods that people wouldn't go into or on the ocean front. You know, I have never done a project in the town of Palm Beach. I've done plenty in Delray Beach. I've done them in Manalapan, I've done them in Gulf Ocean Ridge. You've probably never heard of those towns. You've heard of Palm beach, you've heard of Boca Raton. Those towns that I just referenced are right in between. So I'm a firm believer in going and making a market where it hadn't been made before now.

So the question that kind of begs in my thinking though is that you have the power to do that because you are such a big force. I mean, you were either doing a large number of transactions or, or you were doing a few really high end transactions. And that is of course risky what you did, I would say. But is that possible for the small investor who just wants to buy one or two houses?

Listen, I bought one or two houses for the first three or four years, Jason, okay? I mean, that's all. I never look to the next deal. I'm so hyper consumed with the one I'm working on. That's why, hey, listen, over is that 18 years, I've only done 36 transactions. That's only two a year.

Wow.

The dollars were big. But I am a firm believer in carving your niche a little wider and a little deeper than most, but staying within that niche. And don't be distracted or deviated outside. Everybody tempted to deviate outside. And so in times like we're in now, these are the millionaire maker days. These are low hanging fruit days. And as Buffett says, you know, when everybody's afraid, it's time to be greedy and everybody's greedy. It's time to be afraid. Well, look at, you know, he's putting his money where his mouth is. Just last week he bought Burlington Northern Railway for $34 billion. And if you, if you look, you know, you look at people that this, this is the time to, to embrace the opportunities, that is the risks that are out there because you'll be handsomely rewarded. That's what Burstus talks about.

I couldn't agree more, Frank. I think that of course you need to be careful always and you need to be prudent. But these are the times in these bad economies where the opportunities are just so, so present. Whereas in good times it's just really hard to find an opportunity when the market is booming. Everyone has picked the first 10 levels of low hanging fruit and now there's a lot of low hanging fruit out there. As long as someone does the plan and does it correctly. Lot of opportunities. And a corollary to that Warren Buffett saying is J. Paul Gettys buy when everybody's selling, sell when everybody's buying. So would you consider yourself a bit of a contrarian then?

That's the first part of a, of a four part book. Part number one, I think you have your book right there. You open it. The confident contrarian, right. And that takes some intestinal fortitude. But once you practice it and you sensitize yourself to the, to the trend that is upon us and you see it for what it is and you have the belief, the hope and the faith that your decision to say yes more than no to opportunities that are out there are going to pay dividends. Not immediately. That's why I really. There's a chapter in the other book we're going to talk about that talks about over spreadsheeting your life. And one of the negatives of the information society that we live in, Jason, is this over researching this, over Googling this, just, you know, just let's don't, don't spreadsheet your life to death. Because what people do, and especially in scary times, and mind you, the media has created times that are scarier now than they actually appear or they appear scarier, scarier than they actually are. Believe me, that is something why I advocate you creating your own reality and not following, you know, following that, that, that the media created the frenzy, the fear that's out there. But here's, here's what you're doing, here's what you're doing. When you do that, you are psychologically subliminally looking for a way or a reason to say no. That's what you're doing. You and Believe. Here's the problem with. With the information that's out there, Jason, you'll find the reason. You will find the reason and you'll say, ah, you know, there it is. I found it. So, nope, we're not going to do that project. Just go ahead and sit in the cubicle the rest of our lives. Right to five o' clock game.

Yeah, that's really sad. And you know what? That reminds me of, Frank. And I can't remember the title of the movie. Well, maybe it was called yes Man. I'm not sure if you saw it with Jim Carrey. Wasn't it? You know what really blew my mind about that little comedic movie is, is that it just amazes me. So many of my friends and so many clients that I interact with, they're so consumed with saying no to things where if they would just say yes. Yeah, things might go wrong. But just get out of your comfort zone. And when he had to just say yes to everything, look at the sort of opportunities that opened up in his life. I mean, the road was windy a little bit. And at first it may have seemed like, oh, saying yes was the dumb thing. But ultimately a lot of things really work out by just saying yes to them.

I have a couple of shorter chapters in the Burst, this book that talks about celebrating each humble victory as a triumphant achievement.

What does that do?

I mean, small, humble victories. Not asking your wife to marry you when she says yes, or having your first child or doing your first mega real estate deal. Small, little humble victories and considering them triumphant achievements. Because what that does, Jason, is it builds confidence. And when we have confidence, we will say yes more than no. When we say yes more than no, what are we doing do when we're exercising our risk tolerance like that muscle eventually becomes stronger and is able to withstand greater pressure, and we're getting out.

Of our comfort zone. Very good advice, Frank. Anything else on Burst this before we talk about the Tap?

Well, I think that it's a very, very timely book. It was supposed to be a book that was 250 pages long. It's over 376 pages. Because I really went deep into these cycles so that you can use this anecdotally as a guide and a compass when it comes to either buying your first investment property, stepping up your margins, if you will, or even buying your first home.

Tell us about the Tap. Here you get more into the spiritual and the psychological side of success in life and success in real estate, too. What's it all about?

Well, you know, you can Apply all the platforms and the suggestions in the burst. This book or some of the other guests that you've interviewed that have all these wonderful nuggets, wisdom nuggets of success. And then at the end of the day, you know, what's it all for? And I listen. I went to four high schools in four years, and it wasn't because my father was in the military. I was asked to leave every single one of them. I came out with a 1.8 GPA and didn't have the benefit of pursuing a formal education. Came down to Florida with a $50 bill and started digging sand traps on a golf course by hand. And here, so many years later, we're doing were this real estate artist and building these beautiful homes. Why? And I went back and studied and I studied my mentors, you know, people I look up to. And I came away with it with a very, very interesting conclusion. If you look at the COVID of the book, the tap, and it is the hand of God coming down from the Sistine Chapel. And instead of touching Adam's finger like it does in the painting, Michelangelo's painting, it's touching you on the shoulder and in a tap. Jason I expand upon a wonderful life mantra. Regardless of your religious preference or even if you have one. There's a great passage from the gospel of Luke 12:48 that says in paraphrasing it, to whom much is entrusted, much will be expected. And so why is it that certain people's prayers for more, and let's face it, if you pray, you do pray some form of prayer for more, more wealth, else, happiness, love, peace, relationships for somebody you love or yourself. And I was curious, why are my mentors like people I look up to that have seen to have it all? Why? Why were they having their prayers for more answered when mine were going unanswered or taking forever to be answered? And the reason became very clear to me. God rewards responsible stewards, those who are responsible for the blessings that they've been given, time, whatever time, talent and treasure, blessings that they have and are responsible enough to share those with those less fortunate who hadn't succeeded at their level, those are the ones who had the prayer for more answered. So I contend and I prove it in the book. And the book is for those who want to succeed in the business of life, okay? And that's the most important business that we're in. You can't succeed in business and fail in your personal life. You can't live that double life. It doesn't last. That's flashing the pan variety of success. And so in the tap I teach the reader how to sensitize themselves to what I refer to as life's great tap moments. When God does come down, lay his finger on your shoulder and say, jason, I'm calling you to More.

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