[Note: To follow is an excerpt of a radio show interview conducted by Peter L. Mosca, host of Income Property Investment Talk dot com, with Frank McKinney, author of "Burst This! Frank McKinney's Bubble-Proof Real Estate Strategies," and, during his 25-year career, not only survived but thrived by taking a contrarian approach and making his own markets. To listen to the show archive or download an MP3, go to www.IncomePropertyInvestmentTalk.com/031710.]

Mosca: I want to focus on "Burst This! Frank McKinney's Bubble-Proof Real Estate Strategies," but before we get into that, I just love the term "thrival." Is there a story about how you came up with that term?

McKinney: Yes. It's a very simple story. It's a made up word so you won't find it in the dictionary. I became very tired of all the bubble talk, hence the title to the book, "Burst This!" I went back and studied six different real estate cycles dating back to the mid-70s. I have been part of four of those six cycles. I haven't been around that long, but I have been apart of four and I recognize some recurring trends. One of the things I grew tired of hearing was about all of this "the world is going to come to an end, we are barely surviving." How many times do we hear that reference to survival, just getting by, not doing very well in our craft that the real estate and I had had it? I realized in those four cycles that I was a part of that I thrived and so I wanted in the book, I want to move people from that mindset of just being a survivor and there are times when we've got to do that. Granted, this last year was one of those times, but how quickly can we move from a survival mindset to that of "thrival?" In the six cycles that I studied, there has never been, I can say back to the mid-70s, an opportunity like we see before us today with that perfect storm of stimulus, low interest rates, inventory levels at a point where we can if we are on the buy side certainly we can make deals that we will not see again in your grandchildren's lifetime.

Mosca: Other guests on the program have dubbed them 'generational opportunities.' If I am picking up some of the themes in your book one that you suggest is to not only learn from the others in the business, but use them to your advantage. Are you saying to create relationships so you can do better at this game?

McKinney: Do so with people who can walk the talk. There are a lot of snake oil salesmen out there that haven't done a deal in a decade. Stay clear of those guys. Listen, when I got started there were no such things as radio programs like yours. There were no real estate investment clubs. Even the late night infomercials weren't around. It was a matter of going to the courthouse steps and watching for six months properties being foreclosed and going into the clerk of the circuit court file room and reading files cover to cover. That's how I educated myself. Now, there are great real estate investment clubs, and great programs like yours that can basically fast track your learning curve. If we were having a conversation like this three years ago, the topic would be something along the lines of "my margins are so thin, this is such a seller's market, I can't make any money, there are no deals out there, Frank what do I do?" Now look what's happened. Do you think those days are gone for good? No. Hopefully, to that extreme they are, when we had real estate appreciating, we are talking about residential real estate now, at 12, 15, Las Vegas 50% year over year. Hopefully, those days are gone, but the transition from a buyer's market to a seller's market or even an even market is just around the corner. You don't want to sit on fear and allow that to dictate your investment strategy.

Mosca: Let me read this real quickly from your book, "I've never denied the inherent challenges. Figures don't lie, but I do argue with pervasive negativity, the presumption that when numbers are down, they'll stay down. If you are an opportunist, then you approach every new market scenario with the question of how you can best profit or protect your wealth, not run for the exits anytime someone yells fire." Can you comment on that?

McKinney: There are so many strategies out there to making money in real estate, but we're not going to make a dime until we change our mindset. That's why in the first part of the book, what I have to do, I feel it's incumbent upon me to change the mindset of the investors to become what I refer to in part one as the "confident contrarian." We cannot allow ourselves to be brainwashed by the negativity that's permeating 603 television stations on a regular basis. So, how do we become what Warren Buffet has made a pretty darn good living at becoming that is that contrarian? Buffet says, many people know his famous quote, "When everybody is afraid, it's time to be greedy. When everybody's greedy, it's time to be afraid." Well, the media has done a wonderful job of convincing us that the world is coming to an end, especially the real estate world and how untrue that is. When I went back and I studied those different real estate cycles, I learned the American dream will never die. The American dream was not killed in the '70s with the oil crisis, '80, '81, and '82 with the S&L meltdown; by the way that was a worse financial crisis than we have today if you do the numbers on the number of banks that failed. We have a short-term memory. In '90, '91, the same thing, we had the big meltdown over in Asia. 2000 we had a meltdown with the Internet bubble bursting and so I have chosen to not let, listen, I'm afraid everyday of my life, but I don't let it stop me. I just built the world's largest and most expensive certified green home on speculation at $24.3 million. That's on speculation; I don't have a buyer in when I started. It's my money, the bank's money, at risk in a market like this. If I didn't believe that there is going to be a turn or there is a turn upon us, I wouldn't have taken that kind of risk. Talk about putting your money where your mouth is. I'm not just prophesying here, I am actually taking the money out of my wallet and putting it in one single property we just finished at $24 million believing that that American dream will never die.

Mosca: We're talking about changing the mindset and the confident contrarian. Can you mention the analogy in your book about the real estate market as blue chip investments?

McKinney: Let's keep another word in mind. We've got the word "thrival," the other one that I use in that section is "paradox" and why a successful real estate investor needs a Ph. D in 'paradoxicology.' Let's use Microsoft. Everybody knows Microsoft. It's a wonderful stock, a wonderful company. Microsoft had an anti-trust battle not long ago that the word on the street was it was going to be broken up. What happened? The stock went down. Dell had problems with their computers catching on fire. What happened? The stock went way down. GE had some issues when Jack Welch left and the stock went down. These are blue chip companies and smart investors realized that the short-term effect was going to be short lived. So what did they do? They loaded up on Microsoft. More recently, Warren Buffet loaded up on GE, loaded up on Goldman Sachs when they got beat up last year. We're talking about best of breed here. Real estate going back to the last Great Depression, since we are supposed to be in one now but the last, true Great Depression of 1929 to the early '30s, we had a 77 year run of property value appreciation that was broken in late 2007, all 2008, and all 2009. So, if you knew a commodity appreciated for 77 years in a row and some years granted it was a half a percent or a percent and the statistician up there would say "Frank it wasn't keeping up with the inflation all of those years," but so what. It wasn't losing value. Then you had that run broken for almost 3 years in a row, wouldn't you think it's time if you look at real estate as a blue chip investment to say "I'm going to buy that Microsoft when it was $10 a share because it got unfairly beaten up. I'm going to buy that property now that it has corrected because it has been unfairly beaten up" based upon that representation, that the American dream will never die. If it didn't die in the early '80s when interest rates were 18% and people were paying back on their mortgages and buying houses by the way. There is a formula in the book that shows if you bought a house in '79 and sold it in '82 knowing nothing about real estate on all the averages, bought it on the average price, improved it to the average, held on to it for those 3 years, and paid 16%, you would have sold it and made a $7,000 profit. If that's not blue chip, I don't know what is.

Published: April 22, 2010

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Peter L. Mosca is president and founder of BAK Communications, Inc. He has over 22 years of communications and media consulting experience, serving a variety of nonprofit organizations, including the CCIM Institute and the REALTOR Association on all three levels – national, state and local. He is the Spokesperson Trainer for the CCIM's Jay Levine Academy and trains hundreds of residential REALTORS nationwide to be effective industry spokespeople. He is consistently ranked as "excellent" by about 90% of those who attend his presentations. While his principal consulting focuses are public speaking and media relations development and content delivery and management, Peter is also the host of the Voice America Network's weekly radio program, "Income Property Investment Talk," a one-hour program that brings the powerhouses of commercial and residential real estate to property investors every Wednesday at 11 a.m. EST. Peter is married 17 years to his wife Barbara. They have two children: Ashley, 15 and Kelli, 12. Hence, the name BAK Communications, Inc.