Housing Expert: Everything You’ve Been Told About Real Estate Is WRONG! | Ken McElroy

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**Ken McElroy** (1:16)
If people just looked at the way money works, it's quite simple. I've owned tens of thousands of apartments, managed billions in real estate and had every luxury that I could even ask or hope for.

**Graham Stephan** (1:28)
What do you think is the biggest misconception about money that tends to hold people back?

**Ken McElroy** (1:32)
That you need it. You just have to find an asset that actually has a tremendous amount of value add to it. And then you need to go find the money, either debt or equity.

**Jack Selby** (1:43)
And how much debt do you have?

**Ken McElroy** (1:45)
About $1 billion.

**Graham Stephan** (1:46)
And does it scare you?

**Ken McElroy** (1:48)
No, I love it. Here's why the rich own nothing and you should too. I'm a cashflow guy. Like I'm very different than you guys. Like I get where you're coming from, but we get millions a month coming in in cash flow.

**Graham Stephan** (1:59)
And why did you succeed when so many other people fail?

**Ken McElroy** (2:02)
Money goes where it's treated best. You know, what is risk really? To me, it's predictability. Everyone can and should buy real estate because you can find money anywhere.

**Graham Stephan** (2:12)
What do you see to the people who say it's unethical to own so much in real estate?

**Jack Selby** (2:24)
Ken McElroy, thank you so much for coming on The Iced Coffee Hour. You own about 8,000 units of real estate with $1 billion in debt. Does the $1 billion in debt scare you?

**Ken McElroy** (2:36)
No, I've been more in debt than that. I get scared when it's not covered by somebody paying it. So, you know, I have 10,000 tenants, so they basically pay it off.

**Jack Selby** (2:48)
Doesn't $1 billion scare you at all? Like, that's a lot to be owing to the banks.

**Ken McElroy** (2:56)
Well, it's kind of like the frog in the pot. You know, you buy one and then you buy two and then you buy three, and next thing you know, you got 8,000 units and you've accumulated debt, and one day I added it up, and it was a lot. But, you know, it's one at a time. So each one, there are individual projects that scare me, but certainly not the number.

**Jack Selby** (3:15)
And how much do you have in assets?

**Ken McElroy** (3:18)
Probably one and a half to two. Right now, we're probably valued at 1.5 billion, I would say.

**Jack Selby** (3:25)
How do you have one and a half to two? That's a pretty large swing. That's a 500 million.

**Ken McElroy** (3:28)
Based on it, yeah, yeah. So you know how cap rates work?

**Jack Selby** (3:30)
Yeah.

**Ken McElroy** (3:31)
Okay, so cap rates went up.

**Jack Selby** (3:33)
And values went down.

**Ken McElroy** (3:34)
That's it.

**Jack Selby** (3:35)
And when cap rates went up, how much money did you effectively, on paper, lose?

**Ken McElroy** (3:40)
When cap rates went up, easily, quarter million, probably 250 million, 300 million, 400 million, easy. So when cap rates go from four to five, that's a 20%.

**Jack Selby** (3:52)
And so how did it, how does it feel to lose hundreds of millions?

**Ken McElroy** (3:56)
It's a great question. I think a lot of people hang their hat on how much equity they have in a home or something that they own. I don't do that. It's important. I want to have equity, but I'm more concerned on cashflow. So it's just like, like the single family housing market right now, it's not great in a lot of areas. It's great in some areas, but it's not great in other areas. So when the equity goes down, you know, it was fake equity in the first place.