Real Estate Investing School Podcast – Episode 191

How to Scale Your Real Estate Business with Kris Krohn

Air Date: September 9, 2024

Episode Overview

This episode features Brody Fawcett interviewing Kris Krohn, renowned real estate investor and entrepreneur, on his journey from humble beginnings to building a multi-billion dollar real estate business. The conversation digs into how high standards, intentional team building, market selection, leveraging partnerships, and mastering time management fuel exponential business growth. The episode explores not only tactical strategies in real estate but also the mindset and habits critical for scaling any business sustainably while regaining your time and freedom.

Key Discussion Points & Insights

1. High Standards and Energy: The Foundation of Success

• Cultivating Energy and Charisma (00:59)

  • Kris explains energy is a conscious decision and practice, not just a personality trait. He shares how he overcame shyness by deliberately developing charisma to connect meaningfully with people.
    • “Being a high energy human was just a byproduct of wanting to learn how to connect meaningfully with other people. And… a lot of that is trained by choice.” – Kris Krohn (02:25)

• On Setting Standards (04:24)

  • Discussing personal and professional standards, Kris emphasizes the importance of tolerating only what aligns with your values. He shares how defining high standards for himself and his company created an "A-player" environment.
    • "In life, we get what we tolerate... My life didn’t elevate until I started developing standards – what honors me and what doesn’t." – Kris Krohn (04:42)

• Balance with Standards (06:49)

  • Kris cautions against setting high standards for everything, advocating balance—certain areas (like playtime with his kids) intentionally have "low" standards to keep life enjoyable.

2. Team Building and Delegation

• Hiring and Managing Employees (08:09)

  • Kris references "No Rules Rules" by Reed Hastings as a guide for balancing freedom and responsibility in teams.
  • He describes his evolution from hiring the cheapest talent to realizing the importance of paying for true "producers," emphasizing market rates and expecting full accountability.

• Visionary Leadership & Letting Go of Control (10:03)

  • The role of the founder should focus on the vision, not the minutiae. Visionaries must allow team members creativity and space to execute, even if they fail at first.
    • "If you try to have both [control over what and how], you’re really going to strangle people. Know what you want, don’t care how you get there... let people fail." – Kris Krohn (10:11)

3. Kris’s Real Estate Investing Strategy

• Origins and Scaling Up (12:40)

  • Kris’s motivation began out of necessity—he faced financial hardship in college, prompting him to seek out mentors and develop his own algorithm for property investment:
    1. Least time
    2. Least effort
    3. Least risk
    4. Most profitability
    5. Works in all markets
    6. Provides value to society
  • Focus: Acquiring single-family homes below market value in the top five appreciating markets, short-term holds (3-7 years), and sell-off for profits.
    • "I developed this theory and I felt like I had proved the theory. When I was graduating college, I had 25 homes... making me $12,000 a month." – Kris Krohn (15:38)

• Partnership Model (16:34)

  • Kris partners with people who provide capital (from 401ks, IRAs, or home equity) while his team sources, acquires, and manages properties. Returns averaged at 34% per year, far outrunning traditional retirement vehicles.
    • "My real estate strategy over 20 years will outperform their retirement 108 to 1... averaging 34% in all of our markets." – Kris Krohn (14:41)

• Operational Scale

  • Kris’s current team: ~200 people specializing in research, acquisitions, and operations to create a highly efficient, professional investment process.
  • “I put in 342 hours of work on average per acquisition.” – Kris Krohn (21:27)

4. Market Selection & Criteria

• How Markets Are Chosen (18:33)

  • Kris only invests in the top five U.S. markets based on population growth, housing affordability, income trends, and local economic expansion (ex: Central Florida/Ocala, Memphis, Oklahoma).
  • Half the ROI comes from market economics, not just property selection.

• Property Types & Acquisition (20:31)

  • Preference for newer builds, minimal repair needs, in appreciation-oriented markets. In cash flow markets (e.g., Oklahoma, Tennessee), older properties might be renovated to fit strict ROI requirements.

• Returns and Real-World Real Estate

  • The process is sophisticated; each acquisition requires significant vetting, analyzing hundreds of potential deals.
    • “For every house that I can find at a discount that needs to be fixed up, I can also find a house... that doesn’t need to be fixed up.” – Kris Krohn (23:13)

5. Cash Flow vs. Long-Term Wealth

• Passive Investment Philosophy (24:07)

  • Kris prioritizes growth over immediate cash flow in early years—explaining that compounding appreciation and principal reduction will far outstrip conventional "cash-flow first" strategies.
    • "If I take $50,000 and I average 34% a year on it, over 20 years, I’m going to turn that into $17.4 million." – Kris Krohn (25:12)

• Investor Profiles (25:29)

  • The typical client is in their 30s-50s, financially conservative, and wants passive ownership without building active expertise—preferring to partner with a "master" rather than becoming one themselves.
    • "When I master something... I get 100% of the gains. If I’m not willing to master, my rule is I partner with a master, and I will give up half the money. Because I’d rather have a slice of watermelon than an entire grape." – Kris Krohn (26:23)

6. Scaling Single Family Rentals Nationwide

• Niche Strategy (28:42)

  • Kris highlights that "the riches are in the niches"—he scaled single-family homes specifically because others found it too difficult.
    • "Everyone said single family is too hard to scale. So I said, cool, that’s our impossible Goliath. Let’s do it." – Kris Krohn (28:42)

• Out-of-State Investing and Hard Lessons (33:38)

  • Early mistakes (like losing $1M in bad markets) led to a refined, data-driven approach to market selection and infrastructure building, enabling a 2,000+ property portfolio with massive gains in the right markets.

• Hold Period & Management (37:11)

  • Typical hold is 3-7 years before rolling into new markets via 1031 exchanges, buying 30% below national median for best risk-adjusted returns.
    • "Buying below the median is the fastest appreciating market of real estate." – Kris Krohn (38:13)

7. How Kris Got Started: House-Hacking to Partnerships

• Initial Steps (38:57)

  • Started with $3,300 saved over 14 months, bought a house with a rentable basement ("house-hack"), then leveraged equity to buy a second.
  • The turning point: showing consistent repeatable results led family members (father-in-law) and then others to partner with him, exponentially increasing deal flow.

• Scaling via Partnerships (41:00)

  • "After three houses, skepticism turns into FOMO... My father-in-law called… ‘Could we do the deal 50/50?’" – Kris Krohn (39:34)
  • Built to 25 properties during college by rotating partnerships, setting the flywheel for his present-day strategy.

8. Mindset Shifts and Scaling Beyond Real Estate

• From Doing to Leveraging (44:31)

  • Early work ethic (130-hour weeks!) gave way to the philosophical shift: "If you want it done right, never do it yourself."
    • "It all came from learning that I don’t have to work to make money." – Kris Krohn (46:57)
  • This belief allowed Kris to build business structures, automate, and reclaim personal time.

• Pursuing Time Over Money (47:09)

  • Kris now obsessively optimizes for time freedom rather than just income—arguing the Pareto principle shows entrepreneurs make most of their money in a small portion of their time.

9. Mastering Time: Productivity and Delegation

• Time-Blocking & Focused Work (48:57)

  • Blocked workdays (e.g., Monday, Tuesday, Thursday), strict office hours for brain-intensive work, and separation of devices during personal time.
  • Utilized literal phone lockbox to decondition work impulses.

• Knowing Your Hourly Value (51:28)

  • Track which activities produce the most value, delegate everything below a “line of demarcation,” and raise your standards for how you spend your time.
    • "Hand off everything below the line, you’ll get all your time back. You can only use it on the new standard...if it’s not $10,000/hr, I say no." – Kris Krohn (51:28)

• Everyone Should Give Themselves a Raise (54:43)

  • Employees can apply these principles, too, by adopting an entrepreneurial lens—finding and executing high-value tasks that drive results and personal advancement.

Notable Quotes & Memorable Moments

• On Mastery and Outsized Rewards

  • “If you master something, you get a disproportionate reward... If you’re a .0001%, you get the world, you get everything.” – Kris Krohn (00:00, 26:23)

• On Setting Standards

  • “We get what we tolerate.” – Kris Krohn (04:42)

• On Scaling through Partnerships

  • “I need more father in laws.” – Kris Krohn (41:00)

• On Gaining Time Over Income

  • “Most people think, how do I make more money? I always think, how do I get time back? If you master getting time back, it’ll always be a net result of making more money.” – Kris Krohn (47:09)

• On Knowing Your Value

  • “Every entrepreneur... should know what they’re worth per hour. Draw the line…hand off everything below the line, you get your time back.” – Kris Krohn (51:28)

Timestamps for Key Segments

• 00:00 – Opening observation on mastery and rewards
• 02:25 – Kris details cultivating energy and charisma
• 04:42 – Discussion on personal/professional standards
• 08:09 – Employee management and hiring for excellence
• 10:03 – How to delegate vision and let teams fail
• 12:40 – Kris’s origin story and his "algorithm" for real estate investing
• 15:38 – The scale and performance of Kris’s portfolio
• 18:33 – Identifying and choosing top real estate markets
• 21:27 – Professional vs. amateur real estate investing (342 hours per acquisition)
• 24:07 – Cash flow vs. long-term passive wealth
• 26:23 – When to partner with a master
• 28:42 – Scaling single family as a niche
• 33:38 – Early mistakes, going out of state, and what he learned
• 37:11 – Hold periods, 1031 exchanges, and market strategy
• 38:57 – House-hacking to partnerships: Kris’s foundation story
• 44:31 – Mindset: shifting from hard labor to scale
• 47:09 – The philosophy of time over money, intentional time-blocking
• 51:28 – Value of work and delegation for entrepreneurs and employees
• 54:43 – Encouragement for employees to raise value and standards

Final Takeaways

• The real estate game rewards skill, scale, time, and the right mindset—not shortcuts.
• Mastery yields exponential rewards; those unwilling to master should leverage partnerships.
• Building a world-class team, having strict standards, and delegating everything but your highest-value work are keys to scaling.
• True wealth is not just measured in dollars, but in the time you reclaim for what matters most.

Connect with Kris Krohn

• Free gifts & resources: freewealthgift.com
• Social media: Kris Krohn (K-r-i-s K-r-o-h-n) on all major platforms

This episode offers invaluable insight and actionables for both aspiring and experienced investors aiming to scale their business while also living abundantly.