It’s Different This Time

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So I’m going to tell you a quick story that really underscores that point. If you’re like me and you are concerned as much about wealth preservation as you are about making money, IE you don’t want to lose money. And if you’re hesitant about investing in real estate because you don’t have the time or you don’t want to put too much money into a single deal, or if you are skeptical, it’s about anything that sounds too good to be true, like brand new opportunities, like this one even, like crowdfunding, then what you’re going to learn in this training is going to make a lot of sense to you.

I’ll try and keep this brief as best as I can. I’m not very good at keeping things brief. But in the late 1980s, I actually lost every single penny. I had made millions, or several million by then. I was in my late 20s and I’d made a lot of money on paper. I’d taken most of my compensation in ownership shares of apartment deal, ground up apartment deals. I had been paid very well, paid a very good salary. But I’d spent all that money and then the market crashed.

Now, take a look at this particular graph. This shows US bank failures. Gee, I don’t know if you remember the downturn of 2008. Well, you can see that was just a very tiny blip in comparison to the first downturn that I went through which was in the late 1980s. I mean it was devastating to the banking industry. And I really lost everything that I had made.

Now, my job in those days was to raise money for deals. So when the market crashed and the money dried up, there was really nothing for me to do actually. I became redundant. But I was invited by my investors who were primarily Japanese to go to Japan and to help them with what were very complicated divestments. And short story is I learnt to speak Japanese fluently. And I was hired by a joint venture of Universal and Paramount Studios to develop all of their real estate in Asia-Pacific.

And I came back from that amazing gig in the early 2000s and got myself a license as a general contractor. And I started to do my own deals on my own account raising money from friends and family. And then the same thing happened. There was a downturn. Only this time, I didn’t lose money.

In 2007, I actually saw that there was something going wrong with the banks. And so I sold everything. And actually even though everybody at the time was saying– this is really important– everybody was saying, this time it’s different. Always be aware or be wary when people say this time it’s different.

So I sold my whole portfolio. They thought I was crazy to get out of it. In fact, it was that bad. Even the investors in my deals actually ended up making a lot of money. They were upset with me. Some of them were quite upset with me actually.

But anyway, then in 2007, the market– I’m sorry– 2008, the market really did crash. Lehman Brothers failed. And I was brought into a major bank through the board of directors in order to handle what they called at the time the Special Assets Division– S-A-D– SAD. The first thing I did was change the name of that to the Special Assets Group– S-A-G. And that put me in front of thousands of failed real estate deals of every asset class, every size, every type of sponsor, really every possible combination of deals that you could see.

And it reinforced the conservative approach that I had already always had to real estate– or to investing in real estate as a principle. It made me extremely averse to signing on debt and an even deeper dislike of competing with people who were, in my views, willing to pay too much. And it gave me the sense that unless you are seriously diversified, it really is quite hazardous.

And that’s one of the beautiful things about real estate crowdfunding. It’s what I discovered was that you can diversify across a range of different deals by investing with some of the top sponsors in the country, and eliminate the day-to-day headaches of actually having to develop anything, and be able to diversify your risk and still have the advantage of cash flow and building wealth. And so I made a very big decision at that time to get out of real estate development as a principle and to invest all of my time and all of my money into real estate crowdfunding, this brand new industry.

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