On Friday, October 19, the Norris Group proudly presents its fifth annual award-winning event I Survived Real Estate. An incredible line-up of industry experts joins Bruce Norris to discuss perplexing industry trends, head-scratching legislation, and opportunities emerging for real estate professionals. Proceeds for the event benefit Make a Wish and St. Jude’s Children’s Research Hospital. This event would not be possible without the generous help of the following platinum partners: ForeclosureRadar and Sean O’Toole, HousingWire, the San Diego Creative Real Estate Investors Association and President Bill Tan, Investors Workshops, Invest Club for Women and Iris Veneracion and Bobi Alexander, San Jose Real Estate Investors Association and Geraldine Berry, Frye Wiles, MVT Productions, and White House Catering. Learn more about the panel and how to attend at isurvivedrealestate.com.
On the radio show this week are three guests. Rick Solis is a very successful investor who flies a little bit below the radar. He is an appraiser, buys trust deeds, and buys properties. Tony Alvarez, who invented the radar, is the REO Mentor and is a very successful buyer and teacher. He works with buying and holding, buying and selling, does wholesaling, and buys currently out of the MLS. Mike Cantu is a very successful property buyer. He has been a developer, landlord, and trainer. He is specialized in talking to clients on the phone and never meeting a soul who he buys houses from.
Bruce asked all of them when they were first inspired to invest in real estate. Mike Cantu said he was 19 years old and was channel surfing one day when he saw a late-night infomercial. The guy on television was about his age, possibly a year older. Mike believed every single word he said and could not believe he had picked that night to stay up late. He knew right then and there he had hit the jackpot. Rick Solis also had a similar story. In the late ‘80s Dave Del Dotto wrote him in with his Hawaiian setup and everything, and Rick just wanted all of that. Tony Alvarez was up north recently and got to see Dave Del Dotto. He said you did not even need a brain to get into real estate. Nobody at the time really had a prototype real estate investor family. His father had gotten involved himself, and Tony saw him buy a house for no money-down. Their landlord back in Massachusetts convinced his dad and told him you would not be rich in the United States unless you owned your property. He talked him into buying the property they were living in, and he carried all the financing. Tony hated it at the time because his dad would always have him clean up after him, so he never thought of real estate as a way out of not having money.
Bruce Norris said all their children would view real estate very differently now than how he would have viewed it as a child. Bruce wondered what effect this has had on their decision process, whether they are real excited about being real estate investors or they are seeing it as something not for them. Mike Cantu said it has had a huge influence on his 23 year old daughter Jordyn. He heard her say recently that she too has become hopelessly unemployable by the outside world. She loves being an entrepreneur and has income sources from multiple places. She is very happy at this point in life, and Mike said he has absolutely convinced her that there is an alternative to mainstream America. We can come to the office, carve out an income stream, and work it over and over again without doing the traffic on the freeway.
Rick said he works at home, manages his own properties, and shares in his office a computer setup for both his children and his wife. They always hear him on the phone dealing with the tenants, dealing with appraisals, loans. However, his children do not want any part of it. They want to be a tenant. Tony Alvarez’s son always wanted to be an actor; they met Telly Savalas when his son was very young and they used to watch the show Kojak. It was when they met Telly and he treated him really nicely that his son decided he wanted to be an actor. Tony was worried and thought he should get into real estate since he could at least back himself up and do whatever he wanted. However, his son always hated it because he said his dad was never home. However, interestingly in acting he does the same thing and behaves himself the same way. Just recently he contacted Tony and said he was tired of renting and wanted to have his own place. They then opened up the conversation again about him getting into real estate, and he has started to get him interested in it so he does not have to worry about the ups and downs in the acting business even though he makes over $100 grand a year doing commercials alone.
Bruce started back in the early 80s, and he wondered when the rest of them had their first good stretch. Mike Cantu said his was in the mid-80s. He first started back in 1982, made some mistakes along the way, but by the mid-80s began to see some success. Dealing with this was not too hard because then the late 80s and 90s came and it all disappeared and he did not have to worry about it. He said he is still waiting for that day when he has more money than he knows what to do with. He needs to buy a new car since his is so old it still has a cassette player. Rick started in the late ‘80s and really became good at buying houses in about 1990. He got beat silly in the early part of the 90s with everything he bought. He really started making good money in about 2000-2006 when his income was up about 500-600%. At the time he invested a lot of the money in things that if he could go back again would not have invested. Tony Alvarez also had his first success in the 80s. He started off with single-family homes and immediately got into 2-4 units before going into apartments. Everything he was doing back then was based on chasing deals. He really did not have a strong foundation under him. Even though he was working as an appraiser, he thought he was Superman. The market was moving up, and he kept doing the same thing and getting the same results. Then, when the market changed he was really upset because he kept doing the same thing, but the results were just not there.
Bruce said he thinks this is the point of asking questions. A lot of people’s first round of success ended in ’06. Those who had been through that were more cautious, but Tony was not cautious enough. He did a lot of right moves, but he made a few bad ones as well. However, Bruce said he does not see how you wouldn’t make bad moves when things were as ridiculous back in 2005 and 2006 as they were. You could not help but feeling like you were a real estate genius and everything you touched turned into a six-figure check. It was a little bit like that in 1988 and 1989; and this was why a lot of people were cut short since they thought it would never end. However, having had this experience you can then say you will hang onto some of your chips. Mike’s philosophy is to not risk past success on future projects. His philosophy is always to take things off the table every year. In the late ‘80s when he was losing it all, he realized if he did not salvage something then the first ten years of his real estate career was going to be experience. During that period of time he realized the importance of removing debt, taking things off the table, and building up an income string.
Mike had a mentor, and is opinion for him paying things off was not a positive thing. Bruce has never met anyone in the money-managing side who thinks owning something free and clear is really an idea. However, they usually do not have the money. Mike said his mentor’s attitude on that was that there was a better return beyond free and clear rental houses. He would typically borrow money at 6% against a property and put it to work at 18-20% to make the spread. However, this is a lot of moving parts; and a lot of it depends on if there is one check coming in to make your payment going out. Mike said he tries to keep everything at a sixth grade level and keep everything simple. It is tough to screw up a good house and a good neighborhood with no debt on it and a good paying long-term tenant. This has been the business model that he has strived for many years.
Regarding the toughest times they have been through, Bruce remembered when his business partner told him he was leaving the country and leaving the business. With 7 $3,000 a month payments, everybody’s credit attached to it but Bruce’s, deciding to stick this out was the dark day. Tony said the darkest day for him was showing up in bankruptcy court by himself, and everybody who promised they would be there did not show up. However, there was a moment in that day that changed things. As he was leaving, he was feeling pretty bad since they took his car keys and he had to walk back to Burbank. A homeless person came up to him and asked him to pray with him. He then realized that he was not that bad off and had a family to whom he was going home. Before when he was in the court room he thought he had no weapons, nothing he could use. Everybody is standing there hating you; the trustees and everyone, and you have a target painted on your shirt.
Mike said the worst time for him was January of 1990. He woke up one morning after having been in denial. He realized he had a little over $8 million in development loans between three major projects. He had not sold anything in over 30 days as well as he had unfinished projects. He lay in bed, mentally doing the math, and he realized it was costing him a little over $3,000 a day in interest on his development loans and the construction loans he had. He was lying in bed thinking every foot that hits the carpet costs $1500 to start the day. He did not want to even touch the carpet, but the money was already spent the moment he opened his eyes. He lay in bed at least an hour that morning mentally doing the math when he realized he had less than 45 days left before he would be in bankruptcy court unless he did a major, major turnaround. Looking back at the previous ten years, he asked for one more chance and said he would not mess it up again.
Bruce heard a saying from Jime Rome “Massive action cures everything.” This was exactly what Mike did. He listens to a lot of his cassette tapes from the 90s that he has just about worn out. He has four Jim Rome cassette albums and had a big smile on his face when he threw it into his truck. He thought everything he had on the tapes was all good, and he was looking forward to it. This is when you know you have a good teacher. Bruce was actually at one of Jim’s live seminars, and he did not tell a story about a boat that he usually told. Bruce went up to him afterwards and asked him to tell him the boat story even though he had heard it ten times already. Even if you have heard something several times, you just want that inspiration one more time. Mike Cantu took notes again and listened to the tapes at least 25 times. Bruce has notes on top of notes on that particular seminar that he has heard live so many times. He kept the original notes and added to them. It is like re-reading your library. You are in a different place and realize what you missed the previous time.
Rick said the worst time for him was back in 2008 when he had realized that he had carefully spent a decade putting together a nice chunk of diversified passive income in loans, tenant and common apartment buildings, oil and gas, shopping centers, free and clear rentals. He figured he was very well diversified until he realized in early 2008 about 80% of that passive cash flow that he had retired on was wiped out. He had to go back to being an appraiser; and it took him a decade to get out of that job. He was so tired of being an appraiser that going back to it was very painful. He had to restructure his whole life to deal with this; and he even had some free and clear rentals he had to finance out in order to pay off some private parties and deals that fell apart in 2007. It was painful, but he dug himself out of this and is happy. He is happy he went back to being an appraiser since he now works with the deals. It has helped him to acquire a lot of rentals that he probably would not have gotten as well as a lot of mortgages that he probably would have shied away from originally. Now he has completely revamped everything.
Almost all the speakers have an audience now; Rick has spoken at the bootcamps. Bruce wondered what they consider wealthy. Tony said for him it is freedom. Wealthy is being able to wake up every morning and do what he wants to do without having the pressure of having to do something he does not want to do. However, it has always been this way for him. His bank account has been up and down over the years. When he ended up in bankruptcy years ago and had to take a job making pizzas, he was in a job he did not want to be. Mike said for him wealthy has always been being able to live life on his terms. When he saw the late-night infomercial, from that moment that was always his dream. He has never been afraid of work; he just grew up with military discipline and did not like to be told what to do. He went through a series of jobs as a teenager and did not hit the three-month mark on any single one of them. It was all because of rebelling against being told what to do. He had an ideal mental model of what he wanted in life, and it was to work on his terms, not be told what to do, and not worry about money.
He is a fan of words, and one of his favorite words is “sustainable.” He has always wanted a lifestyle that is sustainable, no matter if what happens is good or bad. He does not want to wake up and stress over the finances. The other word he is fascinated with is unencumbered. He does not like debt. The older he gets, the more allergic to debt he gets. He still has some mortgages, but he still has a plan to get rid of them. However, with his future time commitments he just loves the word unencumbered. To have an unencumbered, sustainable lifestyle and not have to worry about his finances is his idea of wealthy.
Rick said about a decade ago he read a book by Robert Allen, who is a huckster salesman type. However, if you can get past that, he really has some good information. He had a book called Multiple Streams of Income, and there was a part Rick still remembers where he talked about owning $1 million. Rick really liked Mike and Tony’s answers and said their answers were also 90% of his answer. However, the other 10% is he really strives for a passive income that he does not work for and is about 20% more than his monthly overhead. If he has this, he feels like he is totally free and can do anything he wants. At that point, he really starts making a lot of money. He has the freedom to pick and choose investments, and this is what he does really well. If he has 20% more than his debt or his outflow each month, he is very happy.
Bruce wondered if they look at the other people around them and tell themselves if they need to try harder. Even though none of them do, Bruce said sitting at the table there are definitely people who have more than he does. This is why it is important for somebody to define their own definition. Tony Alvarez said he does not recall ever doing it, and as he has gotten more mature in the business he completely rejects the theory of competition. He thinks it is a false theory and a lower way of thinking. Cooperation should run through everything. This includes being an investor because in level one investing where you are chasing deals, Tony sees this as you are suffering. He never liked this; he liked it when he got to level 2 where he got to answer the phone and either take the deal or say it did not really suit his needs. This is where he would like to be. He is all about cooperation, and he does not even think in terms of competition.
In regards to Bruce’s question, Mike said he has never been envious, but rather he has been motivated by other people’s success. It has lit a fire under him to take action and to get things done. He knew for a long time what it was he was out to accomplish, and he gets motivated by other people’s success to continue pursuit of his goals. This is an unusual reaction to people’s success and was the same attitude Bruce’s wife Marsha had. Mike said sometimes he gets more excited over other people’s checks than they do, and he has to be reminded more than once it’s their name on that check rather than his.
The Norris Group would like to thank its Gold Sponsors for supporting I Survived Real Estate: Adrenaline Athletics, Coldwell Banker Pioneer Real Estate, Elite Auctions, FIBI, Inland Empire Investors Forum, Inland Valley Association of Realtors, Investor Experts Incorporated, Keller Williams of Corona, Keystone CPA, Las Brisas Escrow, Mike Cantu, Northern California Real Estate Investors Association, Northern San Diego Real Estate Investors Association, Personal Real Estate Magazine, Realty 411 Magazine, Rick and LeAnne Rossiter, Southwest Riverside County Board of Realtors, Starz Photography, uDirect IRA, Wilson Investment Properties, Tony Alvarez, Westin South Coast Plaza. See isurvivedrealestate.com for more on the event and all of the I Survived Real Estate sponsors.