← The Paul Morris Podcast
Loading summary
Transcript134 lines
- [00:00]
Host
If you could stop someone from breaking in before they even got inside, why wouldn't you? Most old school security systems only alert you after someone's already in your home. And that is way too late. That's why I use Simplisafe. Simplisafe is totally different because it's proactive, not reactive. It uses a double layer of defense to help stop crime before it starts. First, their AI powered cameras identify potential threats outside and then a real live agent literally talks to the person through the camera telling them they're on video and that police will be dispatched if they don't leave. They can even trigger a super loud siren or spotlight. It's wild how effective it is and honestly, it gives me so much peace of mind knowing the system is working before anything bad happens. Arming the system helps me sleep better at night, truly. I also love that there are no long term contracts, no hidden fees, and you can cancel anytime. It's not just me. Simplisafe has been named best home security System system by U.S. news & World Report for five years running. Plus there's a 60 day money back guarantee, so you can try it risk free. And right now, this month only, you can take 50% off any new system. This is one of the best deals they ever offer. Go to simplisafe.com radicalwealth again that's simplisafe.com that's s I m p l I s a f e dot com radicalwealealth to lock in your discount. There's no safe like.
- [01:29]
Commercial Voiceover
Simplisafe. When the holidays start to feel a bit repetitive, reach for a Sprite Winter Spiced Cranberry and put your twist on tradition. A bold cranberry and winter spice flavor fusion Sprite Winter Spice Cranberry is a refreshing way to shake things up this sipping season and only for a limited time. Sprite Obey your.
- [01:53]
Host
Thirst. Ben Lee, welcome to Radical Wealth.
- [01:56]
Ben Lee
Plan. Thank you for having me. Good to be.
- [01:58]
Host
Here. Obviously you have had a, you've had a great real estate sales career and I want to talk about your investment in real estate. You mentioned that the first thing that you did was buy a note and so what? You know, I know your dad was a.
- [02:21]
Ben Lee
Lawyer. I'm going to tell you, it is a crazy story. I'm a first year in law school, okay. And I was always interested in real estate. My dad had, he had bought and sold some apartments over the years and we're talking 5 unit, 3 unit, 8 unit. Smaller buildings, but cool stuff. And he had talked to Me for years about, you know, back of the envelope, you know, numbers. This is what the cash flow looks like. So I always was interested in real estate and my dad knew it. And he was a lawyer. He said, I have a client who, her late husband subdivided a bunch of land in unincorporated actum in Antelope Valley. And she over the years has sold off. He had sold off all lots, but he had carried notes and she got rid of everything. She got everyone to pay off the notes except for one, the debtor. The owner owed her $90,000 and my dad and she wanted out of it. So my dad said, hey Ben, I think I could kind of make this deal for you. You're in law school, I think I can get it for you for 50. And I was like, 90. Wait, 50 for 90? That sounds awesome. So I said, I don't have $50,000. And he said, I've got a line of credit on my house and I'm going to loan you the money. Just you pay off a line of credit when, when you can and you'll pay the interest and you pay the line of credit. He basically put me into that deal. Okay. And I got the note and it was in arrears the second I bought it. She, this is why she wanted out of it. And I was like, I'm going to go foreclose, I'm going to be a cowboy, I'm going to get this, you know, property, I'm going to sell it for more money. And my father in law who's was an amazing lawyer, he said, hey Ben, you know Ron, I won't mention names down the street, he is a hard money lender and he maybe can help you with this property. And I said great. And so I go by his office and he's doing loans. He's doing loans. I mean he's making loans here and there and foreclosing and working out deals. And I said, this is what I did. And he looks at the paperwork, he looks at all this stuff and he says, here's what's going to happen, Ben. On Saturday you're going to pick me up at 8 in the morning, we're going to go to Acton, you're going to drive and you're going to buy me lunch. And I said sounds great, thank you. And he said I'm going to help you with this. And so I go pick him up in Brentwood and he gets in the car, my Volvo wagon and we drive to Acton and there's a little fence around the property. We, we step over the fence, and there's chickens, and there's a trailer, and there's nobody there. And he said, okay, now you're gonna take me to lunch. I said, cool. So he gets in the car, we go to lunch, we order burgers. And he says, you want nothing to do with this property. You are in way over your head. This is horrible. You do not want it. And he said, I'm going to help you. I said, oh, how are we going to do that? He said, let's call, let's call debtor. Let's call borrower and get him into the office. I said, great. So I call the borrower, and he comes into the office. He's dressed like a cowboy, and he gives us cards, says, insurance salesman. And he sits down, and he had been paying 7% on the note. And I said, and Ron says, all right. He schmoozes the guy. They're talking, they're making, they're laughing. It's just a normal day. And he says, okay, we're going to work out this deal for you and Ben. Okay, Ben, what do you want here? And I said, I want to up the interest rate to 10%. He said, I won't do it. And then I said, but he said. And Ron says, ben, stop talking. I said, okay. And he says, okay, so what? So we keep the interest rate at 7. Are you good with that? And he says, I'm good with that. And he says, can we. How can you pay your arrears? And he says, yes. I said, great, pay your arrears right now. He said, no problem. And he says, can you accelerate the payments? So instead of paying, you know, $800 a month, you're paying 3,000amonth? He says, I can. And he says, great, we're going to extend you. And meanwhile, I'm kind of like. And he's like, stop talking. And he negotiated this deal with a 10% late penalty. And I was paid back in about 18 months. And I paid for a couple years of law.
- [07:35]
Host
School. With that, I did a development deal that turned out not to be a development deal. And it was very creative. It was mostly created by my cousin who had really a great negotiation and people skills, but we were in it together. And, you know, I, it was the first deal in real estate that I made money. And I got a check in my first year in law school for 150 grand. And I remember going to the bank, like, I, I, I didn't have $1500. Yeah, to, to deposit. I never deposited $1500 in the bank. And I went to the teller with that. I mean, it was like, I mean, it was.
- [08:16]
Ben Lee
Euphoric. It was euphoric. I mean, you literally make a copy of the check and you want to frame.
- [08:21]
Host
It. Yeah. Like, oh, you know, I'm going to go in, we're going to go to Wendy's, we're. And then, you know, we're going to go to the bank. I'm going to deposit a million dollar check. That's what it felt.
- [08:30]
Ben Lee
Like. I. My first big flip, I deposited a $600,000 check. Yeah, $606,000. And I remember it was. I could not in my life believe it. I could not believe.
- [08:49]
Host
It. So you went from that experience.
- [08:52]
Ben Lee
That experience and that, that was one of the experiences that made me want to go into real estate law because I loved it. I was so, like, excited. And then I took all these secured transactions courses and land use and all this other stuff. I became a real estate attorney and I immediately went and bought an building, which was not great, but I made a few bucks on it. I eventually got out of it and I've bought others since. But I didn't start. So I always wanted to be an investor and I was investing, I was putting money into property, but I wasn't doing it shockingly successfully. I mean, it was, it was okay. It was, it was kind of like, you know, slow, slow grindy. Real estate investing. When I started selling real estate as an agent, I would represent some builders because that's kind of a. One of the holy grails of being a real estate agent is you get the listing up front, you get the listing on the second time when they go to sell it. But I would watch how much money they made because I can do math and I would, I would see the money that those builders were making. And of course they're taking risk. So risk is no small thing. But it was quite impressive to me, especially given the fact that it was my information that they were trading.
- [10:23]
Host
On.
- [10:23]
Ben Lee
Yes. So I maybe I had a little bit of an outsized view of the actual nugget of value. But I do believe that the nugget of value is the information. That's what we trade. I mean, in, in, in real estate, it's actually legal to trade on information that, you know, that nobody else. Information, yeah, it's legal. Correct. And so, and there's many times when you know of a situation that nobody else knows about and it's okay. And there's, you know, there's disclosure and there's all sorts of. For example, one of my clients had a property tied up, and he tied it up. He's a neurosurgeon. He's smart guy, and he does a lot of research. He tied up this property, and it was, like, such an amazing deal. And he starts wiggling on the property purchase. And I was like, why are you wiggling? And he says, I'm just wiggling. And it was in 2010, let's call it. And he says, I don't know if I like it. There's too much work to be done. And I was like, Bob. And so I'll tell you, the situation was the person who'd owned it had been a surgeon who was very into drugs, and he was a plastic surgeon. He had a bunch of Lamborghinis in the driveway, and he had died in the bathtub. Okay. And his estate was selling the property, and it didn't look good, and no one had fixed it.
- [11:58]
Host
Up.
- [11:58]
Ben Lee
Sure. And we were under contract for a price that I thought was amazing. I said, you, Bob. I said, you scored. And he says, no, I don't think I want to buy it. It's like, well, would you mind if I take your position? He said, sure. And so I called the listing agent and I said, do you mind if I take over this buy? And he said, not at all. I want to sell the deal. And so I took it over and I brought in a partner because I didn't have all the money, and I made a ton of money on that deal. And that was just a. Everything was legal, you know, and. But I had information that no.
- [12:39]
Host
One else had, you know. Okay, what was the.
- [12:42]
Ben Lee
Information? The information was the house was undervalued. The. They had already received probate approval without being contested at a certain price, and that they were desperate to get out of it. I mean, there was even further credits that were.
- [13:01]
Host
Negotiated. I cannot believe that I've been doing this for so long. I cannot believe that. That I've been hosting the podcast, and I've had so many guests, and all I do is think about real estate, and I go on somebody else's podcast, and they're jamming me. Love her. She's top two or three podcasts in business. I'm on her network, Nicole Lapin, shout out to her. And she's jamming me on the. On the. You know. Well, the S P 500 does, on average, 10%, and real estate, on average, does four and a half.
- [13:39]
Ben Lee
Percent. So why invest in real.
- [13:41]
Host
Estate? Defend yourself. And I'm. You know, I'm. And these are not prepared questions, but I should be able to handle that question, you know, and I'm doing the best I can. And I am gobsmacked that, that it's the first time that I've heard or thought of. Just put that way. Insider information is.
- [14:02]
Ben Lee
Okay. It's the only business that I know of where you can. And by the way, many times they want you. They. They are desperate to close that deal with you. You're doing everyone a favor. I had one this year where there was a mold situation and it had fallen out of escrow a number of times, and the sellers were wanted out of the property. And I said, I'll even fix it for you. But they said, we just want to sell it and we'd like to sell it to you, Ben, you know everything about it. There's going to be no disclosure issue because I'd gone through four escrows, four failed escrows. And they said, we'd like to sell it to you. And I said, we came to a number and I said, that sounds great. And they carried and it was a great deal and it was fine. And you just. I think there is. It's an imperfect. The information in many ways, there's humans involved and it's imperfect. And frankly, at the time, the buyers in escrow, we were telling them, you can have it at this deal. The deal that they ultimately gave to me, they ultimately offered it to me, but you can have it at this deal, just close escrow. And they said, no, we're nervous. There's mold, there's. And, you know, and fixing it up was not easy. All the drywall came out, all the flooring came out, all the subflooring came out. We hired Paul McGrath, who's great, to do all the ventilation. He put in four units in the basement or under the house. We did the roof. We did all sorts of things to make it right. And we compiled the binder. We did full remediation, separated into different zones, and I compiled a binder that was this thick about how this property was safe now. And by the time it went back on the market, no one had an issue with.
- [15:58]
Host
It. It's. It. It truly is amazing. And, and the, the fir. You know, the first deal I did was this development deal. I credit mostly my. My cousin. The second deal, I property with my business partner. We bought it on the auction steps with every penny that we.
- [16:14]
Ben Lee
Had. You know, that go for.
- [16:17]
Host
You. Actually, it went great. I mean, we bought this. We bought this. There's a great street in Pittsburgh called Beechwood Boulevard. We basically, it was on way too far out of the great section, but it was still on this great street. And we bought this house. It was a disaster. It was a single family home that was split into three units illegally. And there was, like, all these people in there and kitchens and all this kind of stuff. And we finally got everybody out of there, and we, and we. Our idea was to get everybody out of there, get the thing fixed up, and turn it back into this beautiful single family. Yeah, that was the idea. We didn't get there because one of our childhood friends was like, hey, you know what? I've got a husband and we've got kids, and, and we'd like to. We'd like to buy that and turn that into our home. And we got a. Got a huge profit. We didn't do.
- [17:10]
Ben Lee
Anything. It's. Every now and then things. Good things happen. When you're in the. When you're in the game, good things.
- [17:18]
Host
Happen. And, and my. And we had every penny to our name stuck in that one. And then, then we found this. There was a family trust. They had all these, like, beautiful properties, and they had, like, the total dog. And the total dog had had two major issues. One of them was they. They didn't just have a dry cleaning. Not just a dry cleaner. There was a dry cleaning.
- [17:42]
Ben Lee
Plant. So there's environmental.
- [17:44]
Host
Issues. Yeah, environmental. And then, then it was old school. There was 100. It was a big commercial. And it had 100 units. And the units were these like six. Six unit, like little townhouse things. And underneath the street was old school. Old school. It was all. It was all heated by boilers. There's this giant boiler under the street, and the street is caving in. Okay, so between those two things and the, and so much of the property was going on at the same time. They were bidding up these, like, great properties. And you had to do your due diligence before. And so my business partner and I paid for the due diligence on those two items. We did a, you know what, a circle of one or whatever it was. It came up clean. So we had the certificate. It was a guarantee. We were okay on that. We had sort of two paths to fix the. Yeah, to fix the. The heating plant and the, and the, and the, and the. This. The street caving in. And we're like, okay, so, you know, this is the cheapest we're gonna get out of it. This is the most expensive we're gonna get out of it. And Even when we took the most expensive, we worked that way into the price, put times five, reduce that from the price, and we. We had no money. We went to each of our brothers and we made. We made millions of dollars on that deal over.
- [18:59]
Ben Lee
Time. It's. I mean, the. The deal, that one deal, the one that I told you about, the $606,000 check that I put in, and that was not all profit, but it was a very profitable deal. That was an interesting deal that we bought a property. I had a client. I brought it to a client. I thought it was a good deal. And he said, ben, I can't get a loan right now. This was in the tougher times. And he said, I don't have the credit to get a loan. And I said, I can get the loan. So we partnered up and we did this deal. We close on it. The day we closed, there's a rain. It's in Beverly Hills post office. So it's at the. It's up on a. It's on Lieb Drive. I don't know if you know, that street. That house just sold for, like, I don't know, $12 million. We. We got that for $1.2 million. So we. We bought this house the day we closed. Someone behind who could be listening to a podcast like this, he had been doing unpermitted grading up above and had dumped dirt from a pad that he was grading into a canyon. The rain hit the entire property flooded with mud, literally a foot deep in front of. So we close on it the next day. We go up there. We can't even drive in to the cul de sac. There's just mud. The street, you know, the city cleaned it. We figured out how to deal with it. We figured out the drainage. I mean, it was. But we. We did really well on that property. We did really well. And that was in 2010. So that was a long time.
- [20:41]
Host
Ago. And just for. For clarity and safety, you know, you can absolutely trade on insider information in real estate. And one of the things that you mentioned, too, was, especially if you.
- [20:55]
Ben Lee
Disclose everything, you have to. Yeah. You have to be very transparent, and you have to be like, I don't care about the deal enough. Right to. Right to do anything that's, you know, that's not proper.
- [21:11]
Host
Yeah. When you stepped in for the neurosurgeon, you didn't have to tell. I don't know if you do or not. Maybe you do, you know, but you told the other side. You said to the neurosurgeon, can I step in, nothing weird. He says yes. Then you tell the agent, hey, you know what? I want to take over the deal. And they're like, your money's as good as his, let's.
- [21:28]
Ben Lee
Go. Exactly. And I think if you go into things and have the conversation that you're nervous about having, that you're really. Because sometimes you're nervous. I mean, I'm not nervous anymore about it because I have no investment in the.
- [21:42]
Host
Outcome.
- [21:42]
Ben Lee
Right. If it's not a good deal for everybody, I don't want it to happen. That's actually, and I think early on in my career I would be like, oh, my gosh, do I, you know, is this, you know, I'm nervous about, about talking to people about my involvement. And now I'm on a podcast. I have no problem saying I also invest in real estate because actually, interestingly, for my real estate clients, this is really interesting. So not only for the buyers who understand that I know everything about the construction process, but also for the sellers who say, hey, maybe I don't want to spend real estate fees. Maybe I want to do a quiet transaction. And they know that I'm a potential buyer. I go to every single one of them and I say, listen, I have bought real estate. I've built houses, I've built a bunch of ground up houses by now. But I, I, that is, potentially, if I like your property, if you like the money, if you like the price that's available to you, absolutely. But I advise that you go on the market.
- [22:49]
Host
Because.
- [22:50]
Ben Lee
Absolutely. If you go on the market, you will know for sure that you've gotten top dollar for this property. And that is my core mission as a real estate agent. Now, as a real estate investor, if there's a deal that works for you and that works for me, then we can make that deal. Sure. And so it's just like another tool in the toolbox, I.
- [23:09]
Host
Think. Sure. No, I think that makes perfect sense. And the other thing I would add is, is, is just, you know, have the conversation. Don't be afraid to have the conversation. Like you say, there's lots of real estate out there. It's not going to make anybody angry, especially if you, you disclose it in front, say, you know, I could be the buyer. If that makes you feel weird, forget it. We won. We, we'll go ahead and market it. And then the next piece is, as we're both lawyers, put it in.
- [23:31]
Ben Lee
Writing. You put it in writing. It's. My disclosures are so awesome. I love my disclosures. And you know what? If it's something that I'm making disclosures, I actually have a lawyer that I used to work with at my firm. He's now my lawyer, and he's a great guy. I send it to him. I say, hey, this is the situation. How do you feel about this? How do you feel about this disclosure? And if he says, I don't like it or I like it, I listen to him. If he says, I don't like it, out.
- [24:00]
Host
Out. And the, the, the thing, too, is that, you know, even, even the information, we call it insider information. You know, a lot of times it's. A lot of times it's really, it's really not insert no information. What it is, is that you're willing to do. You're willing to dig a little deeper than the next person, and that information is available to you. You have it. Nobody else has it because they didn't look for it. You don't have a public duty to say, like, oh, I found this thing. You know, it's actually, it costs less to fix this than you think. You know, you've, you've paid for that due diligence, so it's yours. What you and I and what our listeners can learn about a piece of property. And this is why, you know, I said it a thousand times, but, you know, I have three rules. I've, I've invested in real estate for 30 years. I've never lost money on a deal. And I have three.
- [24:45]
Ben Lee
Rules. That makes one of us.
- [24:47]
Host
Right? And you have these three rules. And even when I tell seasoned investors what the three rules are, and they're like, okay, fine, if you follow those, you're right, you'll never lose money. It's not like rocket science. And I follow the three rules. Never lose money. One of the. Oh, sorry. So one of the rules is buy where you know, okay, 100%. Okay? So that's rule one. So now you and I, we're looking at property that's local. So we, we know about the area. We know there's, you know, we could get a surprise. Not likely. And, and so you buy where you know, and then if you're already buying where you know, and now we're looking at a particular property. So can you imagine buying in Cheviot Hills? Like, how are you not going to know, right? And now you take the particular property, now you call the right inspectors in there. There's no way that the best stock analyst on the planet could ever know a stock as well as, you know, that house in Cheviot Hills after you've had the inspectors come.
- [25:43]
Ben Lee
By. So I'm going to tell you, I'll tell you one that I just did. This is someone contacted me and said, would you be interested in buying my house? And I said let's take a look at it. I looked up the stats online. I was like that's a good one. I like this one. I like the.
- [26:02]
Host
Lot. What about it? What about it makes.
- [26:04]
Ben Lee
You. It's a good lot. It's a flat, big lot in a good, on a good location. I said I like it. Build, I could build a house there, a really nice two story because I've done a lot of three story houses, big basement elevator houses. But it's a lot of work, you know, it's, it's more time, it's more money, it's more potential for shoring issues. So I said I like this property. I go to meet with her. She's a former financial manager, I guess, you know, a wealth manager. She was a wealth manager. Okay, so she was a wealth manager for many years. Very smart older woman, says I want to, I'm going to tell you the story. She says, I want a particular retirement community. They have no space available. Okay. So what I need to do, where this is going, what I need to do is I need to sell this property to you or to somebody and I need to have the unlimited ability to lease it back at a fair price and I want to have a 30 day cancellation. Right. And I said the answer is yes, no problem. I gave her all the comps, I gave her lawyer the comps, I gave her financial manager the comps. We all looked at it, we all looked at the contract and everyone said good to go, bought it, closed it, she stayed the, the retirement community had a space open 30 days.
- [27:37]
Host
Later.
- [27:39]
Ben Lee
Right. And I was counting actually on an 18 month.
- [27:41]
Host
Rental.
- [27:42]
Ben Lee
Sure. So now I have a vacant house that I purchased on a 1031 exchange, which means I need to rent it. I need to have it rented. So I have this vacant house which I didn't inspect by the way. That's why I brought this up because you're talking about inspection. I didn't inspect the house because I wasn't concerned about the house. I was going to tear it down. But now I have this rental requirement, you know, like kind for like kind. So. And if the viewers need explanation on that, I could talk about that. But it's. So I decide I'm going to rent it to a good friend of mine at a discount. This is my former assistant who just got married and he had. They're pregnant. And it's great. He's the greatest guy on the planet. And so I rent it to him. I clean it up, I put floors in, I paint it. The house looks good. They move in. Boom. Gas line breaks. Gas line breaks. Have you ever heard of that? Like, $14,000 boom. Sewer underneath the laundry room breaks. $12,000. I mean, it just keeps going. But. And he says, I feel so bad for you because I know you're going to tear this house down. I said, I made a deal with you to rent the house from me. I, I said, if you want to leave, I will give you back every penny that you've given me to date. And I hope the answer is yes, but if you want to stay, I'm going to make it. I'm going to make it good for you. And so I did. And he's living there and he's loving it, but I still feel it. I still feel like it was a good.
- [29:18]
Host
Deal.
- [29:19]
Ben Lee
Yeah. Even after all.
- [29:20]
Host
That.
- [29:20]
Ben Lee
Yeah.
- [29:20]
Host
Yeah. Yeah. Because you can, you can, you can, you can build that.
- [29:24]
Ben Lee
In. It's.
- [29:25]
Host
Fine. Yeah. You figure, you figure out that. That's the thing about real estate. You can figure these things.
- [29:29]
Ben Lee
Out.
- [29:30]
Host
Yeah. Now, what advice do you give to people about a fix and flip? And I'm going to tell you, for example, I always. And I know you do the same thing, but I always say, you know, I make the money on the.
- [29:46]
Ben Lee
Purchase.
- [29:46]
Host
Yeah. So I make the money on the buy, and I generally will not do the buy unless there's so much room in it that there's a lot of room for error because I'm not a good. I don't do fix and flip. I do a fix and hold. And then especially if I don't have investors, and that's changing because we're doing syndication, but I make the money on the buy, and then I just know it's going to work.
- [30:12]
Ben Lee
Out.
- [30:12]
Host
Yes. I would put my mom in it. I would put my brother in it. No problem. When you put an investor in, you got to figure out, like, okay, so we've got to make perfect use of the money and the timeline and, you know, everything else. But it's good enough that, like, really, I would put my brother in it. No problem, because I just know we're going to be fine. But what, what, what, what advice can you give someone when they're looking at a fix and flip? Because I, the, Some of the deals that I see even professionals doing, they're so tight. I'M like, I couldn't do.
- [30:46]
Ben Lee
It. My, my advice after doing this, after doing this now for a long time is only buy deals with room, like you're saying. My other piece of advice is be very careful of expensive money. I get very concerned. I'll tell you. I had eight projects going when the interest rate changed in 22, I only had.
- [31:13]
Host
Four. So there you.
- [31:14]
Ben Lee
Go. Okay, so I did. And, and they were on construction loans. And construction loans are adjustable, they're floating loans. They went from 4% and I almost, it was about 17 million in debt. It went from 4% to 10 and a half percent very, very quickly. And I think that those are the moments that can sink you. So I think if I could give anyone some advice that, look, a lot of people who do fix and flip, they want to get in and they want to make that their soul, you know, way of, well, their sole method of wealth building. I think that you shouldn't do something that you can't quite.
- [32:00]
Host
Afford.
- [32:00]
Ben Lee
Yes. And I think that there's a lot of people who will buy these deals because they are super. They're optimistic and they're excited and they take a hard money loan for 90% percent. And I feel like that is setting, they're setting themselves up for failure. And I also feel like they may be doing a lot of work for a very low return or no return. I think the debt is really important and the buy is really important. And I think if you can, you know, I know a lot of people who, I know this one investor who, he's an investor and his wife has a really good job. It's an, it's like a, it's a really nice match because there's some steady income and then he can do the investing. And they've done very, very well. For me, I have to be both, right. Both spouses in terms of having the day job and then having the fun, creative job. But it's also very, very high pressure. I think investing is very high pressure. And I think people who don't acknowledge that, I mean, look, the first few deals you do, you don't quite realize what kind of risk you're under. If you do, you're never going to, you're never going to do them. Yes. So I think the first few deals you do, you're just, you've got these rose colored glasses, you've got these, you're so excited. It's going to be amazing. And when you start hitting problems, well, you figure your way through it. And if you can, all right. Maybe you do it again. I mean, you got through it because you're going to hit problems, but if the margin is too tight, those problems can sink you. Yes. And it's not just that asset.
- [33:44]
Host
It's. Oh yeah, all your assets cross.
- [33:47]
Ben Lee
Collateralized. Oh.
- [33:48]
Host
Yeah. Okay. You know, you, you hit, you hit the three. You hit my three rules, by the way. And, and then in addition to the three rules, there's another thing too, that I use. And you hit that also. So I said buy where you know. And, and you are, you are buying properties that you really deeply.
- [34:14]
Ben Lee
Understand.
- [34:14]
Host
Yes. Rule 2 is the value add. It must be a value add property. And you, and you hit that when you said there's got to be room in the.
- [34:23]
Ben Lee
Deal.
- [34:24]
Host
Absolutely. And so that's your, that's your value add. And the insider info, by the way, that goes hand in hand with that because I always say I call it, I call it brain damage. And that's just, it's just that's.
- [34:35]
Ben Lee
Where you make your.
- [34:35]
Host
Money. It's a problem that somebody else doesn't want to figure.
- [34:40]
Ben Lee
Out. I feel that way all the time. Yeah, I, and actually as a real estate agent, too, I was just talking to another agent who was like, I'm so scared to go to the seller and tell her that she's not going to get what she thought she was going to get for the property. And I said, you can't be scared of that. If the property has been marketed, then the market is speaking to her. You're not speaking with her, the market's talking with her. And really, when she came to you, she had a problem. The problem was she has a house that she doesn't want to own anymore. So if you can help her solve that problem, you're doing your job. The number is, I mean, the number is important, but it's not the only thing. There's other aspects to the problem that I think are important for you to handle, and that's why you're hired. And anyway, it's the same thing with investing. There are problems that, if you can solve that problem, you, there's, there's money in it. I guess there's some sort of a profit in.
- [35:46]
Host
It. Oh, for.
- [35:46]
Ben Lee
Sure. And that's. And solving a problem is hard. Many.
- [35:52]
Host
Times.
- [35:53]
Ben Lee
Yeah. If it's not hard, then you've lucked out. Then you've lucked out. But I think a lot of times you might think it's not hard and it becomes hard. And I think that, I agree with you. I think that if there's hair on a deal and. Right. I think inside information may have been sort of the wrong way to put it. In some ways I like.
- [36:10]
Host
It. No, no. It's the first time I've heard it that.
- [36:13]
Ben Lee
Way. But I feel that, I feel that because you can, you can be. There's a small, there's a small group of people who have the information and everybody knows that only a small group of people have that information. But if you are willing to act on it and have the ability to act on it and everybody understands what's happening, I think it can be really.
- [36:36]
Host
Good. So you also change. This doesn't happen for me very often because you also changed one of my other. One of my other three. I've been teaching the three forever and my three are by where, you know, it's got to be a value add and it has to cash flow. And then, and then. And I let that morph a little bit because people, people call BS on that because they're like, you know what? You're never going to find something that cash flows in a market like la. But I go, okay, fine, so we'll, we'll morph that one a little bit. It doesn't have to cash flow, but you've got to have a real straight line. Not like, you know, change the entitlements in order to make it work, you know, you've got to have like, okay, so I buy the value add. It's underwater, it's not cash flowing. But I have the money set aside. I'm going to do this, I'm going to do that. And there's a very short straight path to cash flow. And so that's how I let the, let the third one go in terms of, of, of it has to cash flow. And that's how you make sure that you don't lose money. But guess what you.
- [37:39]
Ben Lee
Said. What did I.
- [37:40]
Host
Say? Which is, which is, it's, to me, it's a nuance because I've been teaching this thing for years and what you said is what you can afford. And so that's really sort of what I meant when I said it has to cash flow. Because the deal is not going to take you down if you can afford it. So I, I had a much, I had a much less, you know, dire problem because I, you know, I was, I had five properties. Not. Yeah, not. I had five, not eight. And then my total outstanding debt was probably, you know, just over 2 million. So it was a whole different ball game. But I'm like, I can Afford.
- [38:25]
Ben Lee
It. Yeah. Worst comes to worse, I'm.
- [38:27]
Host
Okay. There you go. It'll be okay. Yeah, it'll be. Because I know that I had. And there was a lot of room in the deal. So I'm like, I know that I'm going to be able to fix these up. And sure, I bought it for 500. We're going to put 250 into.
- [38:38]
Ben Lee
It. And it should be worse, but.
- [38:41]
Host
Now it's like, oh, okay, whatever it's worth now, I still put the 250 and I'm definitely at.
- [38:46]
Ben Lee
7,5800. I'm gonna be.
- [38:48]
Host
Okay. Yeah, that's how you weather that.
- [38:49]
Ben Lee
Storm. You know, I think, I think being a real estate investor, I think there's a lot of courses. No money down. Get into real estate with no money down. Look, I'm going to tell you, I will bet you that a thousand people who watch this have made money with no money down. That's not me. I have only done well when I have put my own skin on the line and I have made a calculated. I've, you know, sure, you, you, you, you, you put your, you put your, you put yourself on the line. You're on the chopping block and it's risk. But in my, in my experience, and this is a lot of this maybe comes from law school, from seeing. Because I studied this California secur in real property. It was the best course I've ever taken in any. In undergrad and law anywhere in high school. The best class ever. It was fascinating. It was so cool. And you see real people getting into real problems. In case law, we studied only case law. You see real people getting into real problems because of debt. Yeah. And I think I had that ingrained in me. So the first apartment building I bought, I bought it with a partner. It was $535,000. Okay. And I put up my life savings, which was 100 grand, and that's what I did. That's what I could afford. And we got, we got debt on it. We cash flowed a little bit. It was kind of a.
- [40:23]
Host
Mess.
- [40:24]
Ben Lee
Sure. We ultimately made a few bucks on.
- [40:26]
Host
It.
- [40:26]
Ben Lee
Sure. Sold it for 750 a few years.
- [40:28]
Host
Later. You're fine.
- [40:29]
Ben Lee
Game. We're in the game. So. But I think people underestimate the importance of having some capital to get in. And I, maybe this is an unpopular point, but I think if you don't have the capital, I mean, you can go to friends and family and relatives and all this other stuff and raise money, which people do, and you can Make a couple bucks, you can make a slice of the profit. But it better be a really juicy deal. Or why are you doing it? Or why are you doing it? It's a lot of.
- [41:02]
Host
Work. I think you and I split the difference together. We do. We have the same philosophy, and that is that, you know, I have to listen. I'll have to listen to Ramsey a few. A few times instead of just think that I know what he says. He's very popular. And my understanding is that he sort of believes in no debt. And I understand that, you know, there's consumer debt, and most Americans, you know, the average American is getting crushed by consumer debt. And if you did no debt, you'd be.
- [41:31]
Ben Lee
Better. And you're gonn say what I believe. Yeah, I already know what you're gonna say.
- [41:35]
Host
Yeah. And then. And then, you know, so we're not gonna go.
- [41:37]
Ben Lee
There. You're talking good.
- [41:38]
Host
Debt. Yeah, we're not gonna go there.
- [41:40]
Ben Lee
Good. That's.
- [41:41]
Host
Good. Yeah. And then. And then we're gonna go on the other side of it. I'm gonna say if I did not use debt that I would have, you know, one third or less of the wealth that I currently.
- [41:50]
Ben Lee
Have. Other people's money is wonderful, but just be careful. To me, I consider other people's money mostly bank money, mostly big bank money that. That doesn't want your asset and doesn't want to hold you over a barrel with expensive debt. They want you to. They're going to make you a loan, you're going to pay them back, and you're going to shake hands and say thank you for the transaction. And to me, that's good debt. And that requires a down.
- [42:19]
Host
Payment. That's correct. And then otherwise you're just. You're chasing it with.
- [42:24]
Ben Lee
The. You're chasing it and it's so much pressure. And you can pull it out, you can pull the rabbit out of the hat.
- [42:30]
Host
But. And these people do it. And we know it. We've seen it. And we saw these people making gobs and gobs and gobs of money before 2008. And then 2008 came, and they had, you know, 18 projects going at the same.
- [42:41]
Ben Lee
Time. So bad.
- [42:43]
Host
Yeah. And, you know, and I was sitting on the sidelines going like. I wasn't sitting on the sidelines going like, these guys are going to, you know, get punched in the nose real good. Here I was sitting on the sidelines going like, I'm so amazed by what they're. I can't do it. But, you know, like, what they're doing is crazy and good and they're making, you know, tons of money. And then when the crash happened, I was like, okay, so that's why I couldn't do.
- [43:07]
Ben Lee
It. Large builder who is a client of mine. I mean, this is. And this is a good sort of example of just being creative as well. This is a client of mine. He's a builder. He was very big into leverage and he would raise the equity portion and then he would get hard money. And I think that it didn't turn out the way built a beautiful company that I don't think is profitable. But there. And you probably know the company I'm talking about. But what I was. I had another thought, which was it was so brilliant. Oh, and it's gone. No, but, you know, I think that, I think that if you just methodically go forward and just put. Just if you, if there's something that's worth 10 and you can get it for 6, even if in your mind it's worth 10, you know, and you can get it for 6 and you can put in $2 and sell it for 10, I think you can't.
- [44:02]
Host
Lose. Yeah, that's right. Well, I mean, we could go on and.
- [44:07]
Ben Lee
On. I enjoy talking with.
- [44:09]
Host
You. How, how many. Do you know how many flips you've done or how many I've done.
- [44:14]
Ben Lee
About. Well, if you say flips, do you include ground up as.
- [44:18]
Host
Well? Sure, ground up. And also you can include. I would also include ones that you bought, fixed and.
- [44:23]
Ben Lee
Held. So I've probably done 50. Yeah, 50.
- [44:28]
Host
51. That's.
- [44:30]
Ben Lee
Amazing. Yeah, it was a lot. And some of them are.
- [44:33]
Host
Expensive. Yeah. Which makes me nervous.
- [44:36]
Ben Lee
But. Oh, it makes me nervous. No, it makes me nervous. I mean, there's nights when. There's nights when I'm up. There's nights when I'm up in the middle of the night. Yeah.
- [44:44]
Host
But. But you got room in the.
- [44:46]
Ben Lee
Deal. And when you, when you're, when you're diligent. What's the word I want to say? When you're. We've been talking for so long. When you're, I guess, diligent, when you're methodical about your debt. Yes, you're going to be okay. Yeah, you're going to be okay. And I think as long as you just be, be, you know, regimented. Yeah. About your debt position, I think you'll be.
- [45:15]
Host
Okay. And these people. There are people that are going to get, you know, I can see it in the front. Front. Not the rearview mirror ahead of us. 20, 26. $1 trillion worth of debt is going to mature. 120 billion of that 3% was. Was.
- [45:35]
Ben Lee
Taken.
- [45:35]
Host
Yeah. Yeah. And, and that's going to create real problems. And, and it's going to create amazing.
- [45:40]
Ben Lee
Opportunities. I think that's right. That's why we're people. I think people like probably like you, and hopefully people like me. I mean, I just closed one yesterday, which is a, a great one, and I have two more to close in the next six months. And, and then let's get ready. And let's get ready. Maybe we'll do something.
- [45:58]
Host
Together. I'd love to. Thank.
- [46:00]
Ben Lee
You. Thank you so.
- [46:01]
Cisco Duo Voiceover
Much. Been out here all morning. Not a single bite. Guess the fish finally figured it out. Just like hackers do when Cisco Duo's on guard With Duo's end to end phishing resistance, every login, every device, every user stays protected. No hooks, no catches, no bites. Cisco Duo fishing season is over. Learn.
- [46:50]
Uniswap Voiceover
More@Duo.Com the Uniswap wallet makes it easier and safer to own and use crypto. Created by pioneers of the crypto economy, the Uniswap protocol has powered over $3 trillion in trading volume, and it's trusted by tens of millions worldwide. With the Uniswap Wallet, you can discover, swap, and manage your crypto all from your phone. Buy your first crypto assets in just a few taps and start exploring the freedom of decentralized finance. With Uniswap, Tap the banner to.