How Real Estate Lease Options Can Create Retirement Cash Flow in 10 Years

Kris Krohn (00:00)
You know, from the book that we were just talking about, Have It All, the takeaway would be ROI. That you need to look at your return on investment on your financial decisions, but you need to look at your ROI across the board on everything, because most people have been taught to financially be more like sheeple than people. We’re putting our money in 401Ks than in the last 20 years, we’re averaging 4.2%.

We’re putting money on IRAs earning 6%. Some people put the money in the S &P 500. They’re earning 8 % over the next decade. That’s projected to drop to 3.

Michelle Kesil (02:03)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Kris Krohn who is a real estate investor, as well as a supportive partner for other people diving into real estate, providing turnkey access to deals. So really excited to have you here today, Kris.

Kris Krohn (02:28)
Appreciate it. Thank you, Michelle.

Michelle Kesil (02:29)
Perfect, so let’s dive in. First off, those not familiar with even your work, can you share what your main focus is these days?

Kris Krohn (02:37)
Yeah, so for the last 25 years since I was a college kid, ⁓ I’ve been investing in real

And I specialize in working with people that are on the back half of their working career. They’re starting to look at retirement. They’re looking at their 401Ks and IRAs and the equity in their home and realizing the same thing that 99 % of all Americans realize, which is they’re going to fall short by 85%.

And so what I do is I show them a 10-year strategy to get to a six-figure residual income so that they can actually catch up for lost time.

Michelle Kesil (03:08)
Awesome. And what does that process look like? Are these people that you’re working with first time investors or they’ve already been in this world?

Kris Krohn (03:19)
would say 90 % of my partners have never invested in real estate before. They’re new to the game, they’re nervous about it, they’ve heard that it can make great money, but they’re scared of all the things that newbies are. If I buy a house and it doesn’t get rented, know that I’m gonna be caught with an extra mortgage, and that’s kind of everyone’s worst nightmare. Their second favorite nightmare is that we’re gonna lease the home to someone that isn’t gonna take care of it, they’re gonna beat the home up, and they’re gonna have to…

turn it into some money pit and keep putting money into it. And I’ve got actuaries on $2 billion worth of real estate that I’ve transacted, 6,500 single-family homes. And I’ve got data that helps smooth that out and help them actually feel a lot more comfortable about the reality of how we’re playing the game. And we’re also not just doing straight rentals. I’m helping our sector do lease options, rent to owns. It produces four times the cash flow.

So instead of in this economy with high interest rates making a couple hundred dollars a month on a rental, on these basic $200,000 homes, we’re clearing often $800 to $1,000 a month.

Michelle Kesil (04:21)
amazing. And when someone comes to work with you, how do you help them find the best strategy?

Kris Krohn (04:31)
⁓ Well, we’ve already identified the best strategy. This is a book, this is the first of five books that I wrote. It’s called The Strait Path to Real Estate Wealth and it documents me comparing lease options to all other known strategies, wholesaling, flipping, commercial development, et cetera,

and basically demonstrates why it takes less time than the others, less effort, less risk, but makes more money. So we’ve identified the strategy. Now what we’re doing is,

We’re providing a turnkey partnership that says hey Bring your capital to the game bring your retirement funds and then all bring the assets I’ll bring the homes and we’ll partner up on deals and partnership is sometimes like a 50-50 arrangement sometimes as high as 70 % my partner’s favor But we’re doing 100 % of the work and so that value proposition seems to be pretty meaningful for a lot of people out there that want to play the game and You know, they realize they could do it on their own and if they partner with me, they may have to give up to half

of the profits to me, but because I’m making 27 times more money than the stock market, statistically speaking, they do a lot better with me than on their own, or in other words, a slice of a watermelon is better than having the entire grape.

Michelle Kesil (06:30)
Absolutely. And so what does the lease options look like?

Kris Krohn (06:33)
You know, we’re taking the same product of a rental in the top five markets nationwide. And right now, rentals just don’t make sense with today’s interest rates. And I know that, you know, we’re getting Kevin Warsh in as the new Fed chair, Jerome Powell is out. We know that Donald Trump has been talking for two years about bringing rates all the way back down to 3%. But it’s a process that’s going to take time and no one knows if that promise will ever be fulfilled.

And so with interest rates hovering on investment properties still around seven to eight and a half percent, it means that a traditional rental just has too little cash flow for the deal to be worthwhile. And so and also prices are fairly inflated nationwide, which is why I go into the markets where I can still access $200,000 homes to $250,000 homes. And instead of a rental, we’re doing a rent to own. And that’s where I put a tenant buyer in the home, seller finance it to a ⁓ homeowner that

brings their family in and I give them a two year contract. They give me generally a five to $20,000 down payment. And then we work with them to actually qualify and buy the house. What this does is provides a service to them. And at the same time provides us with superior cashflow. We walk away from the landlord headaches like repairs and things like that works really well.

Michelle Kesil (07:47)
Amazing. And how does this system provide those exponential returns?

Kris Krohn (07:54)
So we did a report between 2013 to 2021 and on 2100 properties, we were averaging an annual ROI of 60.6 % and 32 % of that comes from appreciation. Our cash on cash with lease options range between 11 and 14 % as opposed to a rental right now that’s more like 3%. And so I think one of the biggest reasons why we’re able to produce those returns is because

We don’t teach people how to do backyard real estate anymore. We actually take them to the very best markets that are the highest performing because that’s where they’ll get the most money and have the greatest safety. And I’ve got a team of roughly 200 people that go to those markets, help us buy homes using 17 different methods, and then making it available to my partners. And across the bat, my partners are having a pretty homogenous experience, meaning they’re all experiencing a very high level of success, a high level of ROI.

because instead of me training them, which most programs do, and then hope they execute it the right way, this is a program where I just believe in a partnership where we’ll do it for them.

Michelle Kesil (08:59)
Yeah, definitely. And what do you feel have been some of the main keys that have allowed your business to grow and run successfully?

Kris Krohn (09:08)
You know, I think it all starts with just having my own personal track record in real estate. When I was in college, I bought 25 homes. I use mostly partners, other people’s money to buy those homes. And by the time I graduated, I had a $12,000

pass of income. So post-college, I didn’t need to get a job. I actually just kept growing and expanding my portfolio. The flagship of what we’ve been doing really just comes down to

track record and analyzing the data for a lot of investors, you know, they get really emotional and they’re looking for a cute bed and breakfast or an Airbnb. And we don’t do that. If I were to show you my last 100 properties, they would look like my last 3000 properties. That homogeneity that we bring to the game ⁓ essentially allows us to provide a consistent product that produces the same role, the same result, which is why investors then say, okay,

You know, let’s come in and participate. And I think the second thing that we do really well is a lot of people just don’t have money to invest in real estate. But they have 401Ks and IRAs. And even though they’ve been told that’s for retirement, by the time you get 40, 50, 60, and you do the math, you’re going to realize you didn’t save enough. And that methodology, earning 6 % on the 30-year average, was never going to get you what you needed. So that’s when people start saying, maybe I need to use these assets differently. Similarly,

I have what’s called a HELOC Backstop program. A lot of my partners actually use the equity in their home. And I guarantee the payment on that HELOC, that’s how confident I am in our system and our portfolio and the homes that we’ve done. what I’m trying to do is help new investors feel as comfortable as possible doing what they need to do. In general, I need to help someone buy two homes so that 10 years later I can turn that into approximately $8,000 a month of residual income.

Michelle Kesil (11:30)
And how does that work when someone has two homes, becomes the $8,000?

Kris Krohn (11:35)
Yeah, so, you know, someone maybe uses retirement funds to buy one home, they use a home equity line of credit to buy a second home. We will go into the market, we’ll identify the property, we’ll help purchase it, and then we’re going to manage it. We’re going to put the tenant buyer in it. So we’re going to do the entire process. Five years later, we can usually sell those two homes and upgrade to four. And by doubling the portfolio every five years, it doubles the cash flow. So a couple thousand dollars a month, the cash flow now turns into

$50,000 a year five years later. We make the final move We sell those four homes trade them for eight those sums are each pulling in around a thousand a month So now we’re sitting around a hundred thousand dollar of annual residual income and for many my partners that’s enough to Retire them in a way that a 401k or IRA couldn’t and then five years later the portfolio is gonna double again anyway And then now there’s a couple hundred grand and five years later. It’s you know several hundred thousand dollars and so

Once you get this far into real estate you never really want out because the ROI is gets so big they keep Compounding and you can’t sell and put your money anywhere else that makes you know Makes any sense at all. That’s really what we’re doing

Michelle Kesil (12:43)
And what are you most focused on solving or scaling to next?

Kris Krohn (12:47)
You know, we’re having a lot of fun on the lease option game. It’s been difficult ⁓ because there’s a lot of compliance and typically you have to be the owner to sell a lease option. But since these are out of state properties, we found a way to work with realtors strategically and we’ve basically built the first ever network that is doing nationwide lease options. And because it quadruples the cashflow, I’ve got investors lining up that want to participate in that because

Now their same dollar can go four times further and produce four times more outcome. And that’s really enough to move the needle for a lot of new investors that are excited about seeing the immediate results and wins of playing real estate the right way.

Michelle Kesil (13:25)
Yeah, absolutely. And what is the biggest mistake that you think new investors make?

Kris Krohn (13:32)
Biggest mistake I made was actually after the 2009 crash. I did two different strategies. One, I went into markets like Phoenix, Vegas, Florida, and we were buying these $100,000, $150,000 homes that five years later would sell back for their original value before the crash of $300,000 to $400,000. In that five years, I helped my investors clear over $100 million of net worth gain. But at that same time, I also bought from Freddie and Fannie Mae from the government.

a packet of homes, 167 homes at a 92 % discount, thinking I’m gonna make millions of dollars on this gift of a portfolio, but I ended up losing a million dollars by the time I got out of the deal. So I know I got to learn simultaneously what it is to invest in blue states, the wrong states, and then red states and the right states. And that experience has made me and my partners a lot of money.

Michelle Kesil (15:03)
Yeah, absolutely. And if someone is a new investor, what is like the most important step or, you know, process that they need to understand?

Kris Krohn (15:14)
You know, when you’re a brand new investor, unless you’re doing house hacking and buying a primary residence and moving into that, which is a great move for young people, people frankly of any age, I’d say the biggest mistake is that when you invest in real estate, it requires a 20 % down payment. And so in today’s market, that’s somewhere between $60,000 and $90,000. Most people are not in a position, Michelle, where they can afford to lose 80 grand. And so I think the biggest mistake that new investors make is by being lone wolves.

They read a book, they attend a seminar, and then they attempt it on their own. And frankly, that is what I did. And so I’m kind of proof that it can work. But I would say way more often than not, it doesn’t. So if you want a future proof, and if you want to bulletproof your system, my biggest piece of advice would be to go find a mentor that is out there doing it, and then follow them around, take notes, learn everything you can from them, and lean on them for their experience. That will help you overcome so many of the basic pitfalls and trial and errors that newbies aren’t thinking of.

Michelle Kesil (16:09)
Yeah, absolutely. And as the market shifts, where do you see investing shifting as well?

Kris Krohn (16:17)
I do believe in the next six to 12 months that rates are gonna come down. And as that happens, we’re gonna see the price of real estate go up. Right now it’s projected by Wall Street that our current median $350,000 home in five years by 2030 will be a 460,000 home. So that $100,000 price increase that we saw during the pandemic, I think we’re going to be seeing it again in the next couple of years because…

we still are missing over four million homes. We’ve got huge supply demand issues. We need four million more homes, but we already have over a million homes of inventory, but it’s not moving at its current price. It’s waiting for rates to come down. So when rates drop, if they do according to the plan that the president has put in place and that his new ⁓ Fed chair, know, ⁓ Warsh has put in place, is planning on, you know, from what we hear,

If that ends up lowering rates half a percent and then a full percent over the course of this next year, you’re going to see a run on the bank. You’re going to see people buying a lot of real estate. It will move the economy and you’re going to see the price of real estate shoot up to balance that the savings and rate drop. And so what investors should be doing right now is investing in real estate. What they should be doing is buying as much of the right kind of real estate as possible.

Michelle Kesil (17:33)
Right, and what would you say is the criteria for the right kind of real estate?

Kris Krohn (17:38)
So I buy homes that are minimum three bedroom, baths built inside the last decade in one of the top five markets. And then we’re going to do a lease option on them, hold them for probably five, six years, and then sell them and double the portfolio. That’s what this book is about. I’m also giving this book away for free. Anyone listening to the podcast at freewealthgift.com.

If you go there, you can get my book for free. can connect to a member of my team. I’ve got a lot of free giveaways because I really believe in educating people, Michelle, on their options. Most people right now are frozen. They are stuck and they’re making one really big monster bad decision. It’s called indecision. We have a lot of people that are just waiting for things to get better, but the World Economic Forum is projecting 92 million jobs lost to AI by 2030.

And we don’t even have the numbers on robotics, but I would be surprised if the number wasn’t in the tens and tens and tens of thousands of dollars ⁓ because these robots have the ability to disrupt the blue collar space as well as AI disrupting the white collar space. We’ve all seen it and it’s happening right now.

Michelle Kesil (18:43)
Yeah, definitely. It’s a big shift in the world happening.

And what type of, you mentioned that you have a few books, what are the other books and yeah, what are they about?

Kris Krohn (18:55)
So I’ve written a book called Time Machine. It is a decision-making book. It’s how do you value time? Everyone says time is the most valuable asset, but people don’t act like it. They don’t know how to do the math to understand that. So I decided to write a book about time and money to ultimately help people make better decisions. And then ⁓ Have It All is another book that I’ve written in the last couple of years, which shares my wealth strategy on how anyone can become financially independent in under 10 years.

without taking on obscene risks or needing a lot of money upfront.

Michelle Kesil (19:24)
Awesome. And if you could share one takeaway from each of those books, what would it be?

Kris Krohn (19:29)
You know, from the book that we were just talking about, Have It All, the takeaway would be ROI. That you need to look at your return on investment on your financial decisions, but you need to look at your ROI across the board on everything, because most people have been taught to financially be more like sheeple than people. We’re putting our money in 401Ks than in the last 20 years, we’re averaging 4.2%.

We’re putting money on IRAs earning 6%. Some people put the money in the S &P 500. They’re earning 8 % over the next decade. That’s projected to drop to 3.

What these all share in common is that they’re single digit ROIs. And then when you retire with not enough money, you’re going to put it in annuity at 3 to 4%. And so the book essentially talks about how single digit ROIs are going to bury you alive. You need to access double digit or more. Real estate, we’re averaging, when I said 60 % over the last decade, that’s a true figure.

But if you even just follow the basic advice in this book, the Strait Path to Real Estate wealth and do this on your own, without a problem, you should be able to make 25 % on your money. And so real estate is going to outperform these single digit vehicles. That’s the first major message in the book. And then I share some other things like buying businesses and things that people can do that can even have you access triple and quadruple digit ROIs. When you control a greater ROI without greater risk,

It means that you can retire in years as opposed to decades. The other book that I wrote, Time Machine, I would say that maybe the biggest key takeaway to share from that book is that

Time and logic are not the only valid ⁓ filters for making a decision. You have to look at the energetic properties of how much energy will this cost me? Emotionally, what will it cost me? And then also learning how to even tap into your spiritual intuition to actually feel into what is leading you down the right path in life versus the wrong path. So it’s going to balance out the way most Americans do decision making that are from their head and from logic.

And that logic ends up often hurting them because they end up building a life with less joy, less fun, less connection. And those sacrifices, frankly, are not worth the financial gains in most situations.

Michelle Kesil (21:39)
Yeah, absolutely. Amazing. Thank you for sharing.

Well, before we wrap up here, if someone wants to reach out, connect, and learn more, where can people find you?

Kris Krohn (21:48)
You know, if they go to freewealthgift.com, they’ll be able to access a lot of my books for free at no cost. We even offer a free game plan. You can connect to a member of my team and say, hey, here are my assets. Frankly, what would Kris do if he were in my shoes, if he wanted to retire as soon as possible? And then we’ll share with you all your different options. And most people find that to be either life-changing or very, very helpful. So freewealthgift.com.

Michelle Kesil (22:10)
Perfect, we’ll appreciate your time and your story. Thank you for being here.

Kris Krohn (22:13)
Thank you, Michelle.

Michelle Kesil (22:14)
And for those tuning in, you got value, make sure you’ve subscribed. We’ve got more conversations with operators like Kris who are building real businesses. We’ll see you on the next episode.