Norris Bruce
Feb 28, 2020

Private Local Investing With John Stephenson #684


Bruce Norris is joined this week by John Stephenson. John is an entrepreneur, business owner, real estate investor, a personal competitor of his, and a friend for a very long time. What John does not realize is that he has often been the inspiration for Bruce to reach beyond what he had envisioned for his own life.

Episode Highlights

  • What inspired him to be an entrepreneur?
  • What were some of his first jobs before going into real estate?
  • How did John plant the seed in Bruce’s life to get into real estate?
  • Who was his favorite business mentor who opened his eyes to the possibilities in life?
  • What was the industrial sector like back in 2000 when he located on his first property?
  • How does he handle it when a tenant wants to make improvements to a property?
  • How has the rent changed from 2000 when he first acquired the property?

Episode Notes

Bruce and John met over 35 years ago. He was selling electrical supplies and doorknocked John’s company. At the time, he was working out of his home Going back farther than that, he always struck Bruce as kind of an entrepreneur and a bit of a risk taker. Bruce asked him if there was someone in his life who modeled that for him. He said it was his mom and dad from the very beginning. At only six years old, he was selling horse manure. They lived in Rubidoux, and he would gather it up in a gunny bag and knock on people’s doors. His grandpa had made him a tent in the backyard Since they were doing a track of new homes. His mom would take him down to the drive-through dairy in Rubidoux, and he would get popsicles for three cents apiece, sell them for 10 cents, and make a killing.

Not too many 6-year-olds do this. Bruce wondered if he invented this or if he saw a model and wanted to be like them. John doesn’t know if he got permission or not because he knew his parents were surprised when their neighbors started calling them. Bruce then jumped ahead to ask him what kind of work he did in high school. He said prior to high school, there was another stage. A friend of his dad’s drove a Corvette, and he was a bodybuilder. Something clicked when he was 8 years old, and he told his dad he wanted a Corvette. His dad got down on his knee, looked him right in the eyes, and said, “Son, when you’re 16, you have a valid driver’s license and you could pay cash for it, I don’t see any reason why not.” The cash part just went right through his ears. He knew he was going to be 16 someday, so he started mowing yards. He did it in the Wood streets for $3 a pop, front and back. By his 16th birthday, he had saved up $2,200, and dad lived up to his end. He took him down to a place called Drag Street in Pasadena. He bought the Corvette at 16, and the same day he got his driver’s license.

Bruce next asked him if he attended college, which he said it was just technical classes at RCC, including some air conditioning classes, but that was all. He also took classed at Devry which gave him enough experience to pass a test at a major manufacturer who printed business forms. He got hired on there, and he just started doing more projects for employees and friends. He was working more than 40 hours a week, and he just couldn’t do a good job at both.

Bruce asked him if he was employed by a business for any long length of time. He said he was employed by Uarco for six years. He was around 22 when he ended here. After leaving here, in 1978 he got his contractor’s license and the vice president of construction for Citizens Bank offered him a project in Newport he wanted him to do. When he looked at the project, he did not think he could do it on the weekends and nights. He told him to quit his job and come do the project. At this point, he was in his early 20s and still single.

Bruce next asked him if he had any jobs after this where he was an employee. John said he was on his own after this. As subtle as it was, John has been an amazing influence in Bruce’s life. They have been friendly competitors in a lot of different things, but a lot of times John did stuff first. When they first met, John owned a business and Bruce was an employee. That seed was planted for Bruce right there, and 10 years later he started the Norris Group. This was in 1995. Every time Bruce saw him do something, he would put it on his list.

John said what clicked for himwas when Bruce was knocking on his door over on Raintree. He would come by and take off the electrical drawings and give him a bid on it. He had done this two or three times; and on the third time when he escorted Bruce out, he was on the other side the door when he looked directly at John and asked him if they thought they would ever do business together. He told Bruce what he wanted to hear and that it would be a matter of time. However, when he closed the door, that was when it really hit him. He thought nobody had asked him for his business before like that. This connected with him.

Two of Bruce’s friends, Alex Navarro John Stephenson, are the only people he sees who can get people to do things they wouldn’t do for anyone else. This is an amazing skill to watch and play. Bruce has a little bit more experience with Alex because he spent more time with him. When he gets told no by somebody, it’s hilarious. Bruce just watches what unfolds and knows they are going to get the yes somehow. John has done the same thing. Bruce remembered them being on a job site, and as he was watching him he saw how powerful a skill he had.

Bruce next asked John how he got the downpayment to purchase the house on Raintree. He said he had an old GMC pickup truck, and he ended up buying a camper that had been in a fire. It wasn’t destroyed, but it was pretty well damaged. He bought that for a song, rehabbed it, and then he sold that. He made a couple thousand dollars profit on it, and this was back in the early 80s. This gave him enough of a downpayment to purchase his first home on Raintree.

Shortly after Bruce met John, he had a building lot that he was going to build a custom home on. Bruce wondered what year this was, to which John said it was 1983, the year his daughter was born. The day his younger daughter was born was the day they broke ground on the residence. He also started flying lessons on the same day. Part of how he put that together involved bartering. Bruce wondered how this helped in the completion of that new house. John said he has always loved bartering. They always say it’s smarter to barter. He belonged to two professional clubs and did some one-on-one with customers he had in the electrical trade. He ended up building that residence on Crest. 65-70 percent was trade. He would just get on the phone and talk to different people. If he needed framer, he would call them. Same thing if he needed a plumber. Somehow, it got done.

Prior to all this, the idea of owning a custom home was not even in Bruce’s head. But, the seed was planted that day. That’s the kind of effect that John had on Bruce. Bruce gets very motivated when he sees something that somebody loves. One day at this time, his late wife Marsha came home one day from a Bible study, and she was bragging on the house where it was held. Bruce said it was not as nice as their house because they had on Spruce that they had rehabbed. Marsha paused and told Bruce it was a custom home. The next day, he called John and told him he was buying a custom lot. John told him word for word that this was where the doctors lived. This made his day.

Bruce went into the escrow for $34 grand on a 30-day escrow. The problem was short $34 grand. However, in those 30 days, he bought the lot because of all the real estate he had just started doing. This was the day he realized he was actually doing it. He had his dad walked through the framing of Piedmont, and it really hit him there. He thanked John again for being the person who planted that seed.

Bruce and John have been competitors in various sports. They have played racquetball and sparred in karate. When John took karate, he hit really pretty hard and received his blue belt ahead of Bruce. This helped Bruce re-energize the commitment that eventually led to him taking the black belt test. John was there when he graduated. He even took a picture of him completely soaked in his gear down to his ankles. Bruce told John he has the ability to bring out the best in him. Whenever they both do something and we agree to bet on something, usually not with money, there’s a click in his brain that it’s on. Most of the time, it’s really friendly, great competition. Bruce hasn’t lost a bet, and he doesn’t intend to lose one either. But fortunately, they don’t really compete in which there has to be a loser. They can both win, and that has always been the spirit of what they have done. That has been the fun part.

In 1981, Bruce met Jim Rohn, and he has been a big influence on him and opened his eyes to the possibilities in life. Bruce asked John if he ever had a favorite business mentor that inspired him in that way. To Bruce’s surprise, it was actually him. Bruce was responsible for getting John involved in real estate. They did all eight handshake deals as well as the one LLC in Colorado.

Bruce still goes up to Colorado once in a while to look at that project. He knows he will be there for three days, but most of what you have to do is done in four hours. Since he had a lot of time on his hands, one night he wrote down the criteria of a friend. He literally went through all of the people that he acknowledged as his friends, even from high school. One guy he added to the list was John himself. At the time, Bruce was in the electrical business and had been selling for quite a long time. John was the only person he stayed in contact with; and because of that, they have become friends.

Despite Bruce and John working on eight houses, John’s real estate investment has really been industrial. Bruce wondered if industrial was his real estate goal or if the opportunity presented itself to him. He said it started out as a need with the city electric. He was able to locate on five and a half acres at the time. It was a 35,000 square-foot industrial multi-tenant type, and with SBA he took fifty fifty-one percent of that. He ended up refiing that with another lender and turning those back into rentals. He then did an addition a couple years later and ended up with 45,000 square feet. There are 21 units at that particular property.

Bruce wondered what year he bought this, which John said it was twenty years ago in 2000. The economy was doing decently at that time, but Bruce always bounces off of residential. Bruce wondered how industrial at the time and if it was easy to fill a space. John said at the time he didn’t have any finger on the pulse. He was learning the ropes. Bruce wondered if he was occupying all of it or only a certain percentage. John said he bought it with SBA, and the law said you have to occupy 51%. Specifically, he owned 100% of it but occupied half. He was able to get an SBA loan based on his credit with zero money down even though he spent over $100 grand the year prior on this property since it had some environmental concerns he felt were solvable. He did this before escrow ever closed.

Bruce asked him if he viewed this as a risk worth taking that no one else would. At the time, he got a very good friend of his involved in it since he wouldn’t touch the property with a 10-foot pole. He told him he wanted to move forward and just have a weasel clause where he could get out of it if. If he found some areas he wouldn’t be able to remediate but had a weasel clause where the seller was locked in, that was Bob’s responsibility to put that deal together. Bruce wondered if the seller was a bank or individual, to which John said the property was repossessed by a bank. What they did was process asphalt. They would take the junk that came out of gas stations and mix it with dirt to become asphalt. That company went broke, and the bank took it back and saw it as a big liability. Somebody came along, paid all cash for it, sold it to John for a song and a dance, and they made a ton of money. It was a good deal. He did not buy it directly from the bank. He bought it from a guy that speculated on it. Since he didn’t have all cash, he had to have a Phase 1, Phase 2 environmental report.

Bruce asked if it is common to get nothing down financing for industrial real estate. He said with SBA dependent upon your credit at that time, it was. That has turned into a bit of a good investment. John said it turned out to be a home run, and he absolutely loves the property management side and does it all himself. Bruce thought this wouldn’t entail much time, but he wondered if this was accurate for a commercial or industrial space. John said in a multi-tenant, somebody is always coming and going. It’s on five and a half acres, and part of its yard has an asphalt fence that is illuminated. They rent the yards out as well because of this You don’t have any air conditioning, floor covering or roof leaks, which is nice.

Bruce asked John about when he gets a new tenant or vacancy how often he makes tenant improvements. He wondered how this works, whether he ponies up for that or if it is done by the person coming in and saying they want to rent it but will make changes to it. He said most of the companies that move in are somewhat startup companies, so there’s not a lot of improvements that are normally requested from him to make the improvements. Occasionally there will be another added office or something like that.

Bruce asked how the rent has changed from 2000. He said 2000 to 2006 was probably a good run for every kind of real estate. He had just closed escrow on another industrial building that was one large forty thousand square foot building. He was going to chop it up, and he got nine units out of it. This was in 2008, and he had called Bruce about it. Then, he lost contact with him for a while. Originally, he thought he had the hang of it and didn’t need Bruce anymore. When he called Bruce, he thought he was going to tell him good job. However, the two words out of his mouth were “Oh, no.” However, he managed to keep the building, and Bruce wondered if it was vacant for a considerable period of time. He said it was a complete rehab. He put about another million and a half dollars of improvements into it. He remembered being on his knees asking God for it to be back where it was. Here we are today, more than back. He has owned the right kind of things.

The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.

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