Damion Lupo built a $10 million real estate fortune, lost it and reinvented his life. Ep#143

Here’s some of what you will learn:

-Picking your market.
-Building a $10,000,000 fortune from scratch in his 20’s and then lost it all because of ego, greed and speed.
-Asking better questions.
-Email Ron@RodKhleif.com to receive a list of Rod’s questions.
-The benefit of writing and journaling.
-In the the face of gratitude and action, fear flees.
-How interest rates effect real estate investing.
-What is debt service coverage ratio?
-Book Recommendation: Reinvented Life by Damion Lupo.
-Connect with me on Facebook at Rod Khleif Fan
Our Guest

You can learn more about Damion Lupo at:

http://totalcontrolfinancial.com/

 

Do you want to learn more about Multifamily Real Estate Investing? Work with Rod in the Lifetime CashFlow Academy's Multifamily Course & Coaching Program

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Full Transcript Below:

Ep 143 Damion Lupo built a $10 million real estate fortune, lost it and reinvented his life.

Welcome. This is the Lifetime Cash Flow Through Real Estate Investing Podcast. This is where you’ll learn strategies to help you achieve lifetime financial freedom through real estate investment. Your host, Rod Khleif, has owned over 2,000 homes and apartments. And he brings experts in all aspects of real estate investment and management on to the show. Now, here’s your host, Rod Khleif.

 

Rod Khleif:               Welcome to Lifetime Cash Flow Through Real Estate Investing, I’m Rod Khleif, and I am thrilled you’re here. I know you’re gonna get a ton of value from the gentleman we’re interviewing today. His name is Damion Lupo and he is a… Boy, he’s done a lot. He’s started and owned different companies, from an insurance agency, to a precious metals firm… I owned a precious metals firm at one time. Venture capital company, financial consulting firm, and lots and lots of real estate investments.

 

We spoke briefly before we started recording here, and he has a similar story to mine in 08. We’re gonna dig in to that. He has his own martial arts studio, and several black belts, so we do not make Damion mad. Damion, I’m glad… Oh, and you’re a fantastic author as well. You’ve written five books, and we’re gonna talk about one in particular that ties into our stories. Damion, thanks for being on the show.

 

Damion Lupo:         Hey, Rod. It’s great to be here. Thanks for having me.

 

Rod Khleif:               Absolutely. Let’s talk about your real estate related background. You’ve got lots of businesses like myself. I’ve had 18 different businesses, and I had actually had… It’s funny, you did precious metals, I had a gold buying company at one time; in another lifetime ago. But anyway, tell us about your background as it relates to real estate, if you don’t mind.

 

Damion Lupo:         Yeah. The original start up was really the edge of the millennium. It was back in New Year’s Eve, 1999 when I bought my first house on a Visa card. It was a funny thing because a buddy of mine just came to me and he said, “Hey, I’ve got a deal.” And I went, “Okay, what’s the deal?” This is kinda like, “Pssst… Hey buddy, I have a deal.”

 

Rod Khleif:               [laughs] Yeah, holds his coat open… Here…

 

Damion Lupo:         Pretty much, there’s a house inside… “Alright, what’s the scoop?”… and I just read Rich Dad, Poor Dad and I was thinking, ”Wow, there’s a different way to maybe think about things. I was selling insurance so I thought, “Okay cool, I’d like to do a deal. What do you want me to do?” and he said, “You’ve got to be the money.” And I said, “I don’t have any money. But I have a Visa card.”

 

So we bought this house. I basically bought it with the cash advance from my credit card. Then figured out what it was like to be a real estate investor.All of a sudden, I own property, and then you really learn. It doesn’t matter how many books you’ve read. It’s all of a sudden being an owner of the house.

 

Rod Khleif:               Absolutely, that’s when you start getting the memos of what you don’t know. I understand you built that into quite a portfolio. Can you speak to that?

 

Damion Lupo:         Yeah. So right after I did that, I thought, maybe I should learn something. I went off and started doing some seminars, and learning what people were actually doing in the real world. Then started buying stuff using guerilla marketing, and buying more houses. The funny thing is, I almost went bankrupt the first six months because of…

 

It was really self-sabotaging. I wasn’t returning phone calls. I had all these people calling, wanting to sell their houses, wanting to lease up the houses I was buying and making available. And there was something in me that was resisting it, so I didn’t actually call people for a couple of months. I ended up…

 

Rod Khleif:               Was it just a personality thing in you? You were fearful of the conversations? Or it was a taking action issue? Or was it that you weren’t sure you like the business? What was it?

 

Damion Lupo:         I think, when I look back, and I see this in a lot of other people too, but there is this idea that it’s very safe to be behind a spreadsheet, or in a house working on stuff, learning how to do plumbing and there’s not really any way to fail there unless you blow the pipes up which I did, repeatedly.

 

Rod Khleif:               Sure. [chuckles]

 

Damion Lupo:         At some point, I would’ve just naturally gone bankrupt, and fortunately, I had been playing CASHFLOW. I thought, “I should do a personal financial statement for my life.” And I did, and it said, “You’re gonna be bankrupt in 30 days.”

 

Rod Khleif:               You’re talking about CASHFLOW the game, Robert Kiyosaki’s CASHFLOW.

 

Damion Lupo:         Yeah, Robert’s game.

 

Rod Khleif:               Yeah.

 

Damion Lupo:         Yeah.

 

Rod Khleif:               Awesome.

 

Damion Lupo:         So that was really what triggered me to go. I need to jump hard into this thing. Return phone calls. Over the next 30 days, instead of going bankrupt, I ended up buying eight more houses, leased up all my houses, and then it was like, “Okay, I’m off to the races here because… ”

 

Rod Khleif:               I wanna dig into that for a second. I wanna dig in to that because a lot of people listening haven’t taken action for psychological reasons. I mean, I talk about it regularly and everybody that listens to my show has heard me say this. I stole this from Tony Robbins, in that 80% of your success in anything is your psychology and only 20% of the mechanics.

 

In your case, I’m not so sure it was psychology; maybe it was just you… if that was… I don’t wanna put words in your mouth but what do you think caused you to pick up the phone and do so great, the second 30 days? Was it taking a look at your personal situation, and getting motivated from that? What was it?

 

Damion Lupo:         It was a fear. With that fear, it’s like the rustling in the bushes. All of a sudden, the chemistry in your body changes when you realize you’re that close.

 

Rod Khleif:               Okay.

 

Damion Lupo:         If you’re gonna go out in three years, it’s not that big a deal. You’re like, “Yeah, things will change.” In 30 days, you go, “I’m gonna lose my place to live. I’m gonna be on the street.”

 

Rod Khleif:               Okay. Okay.

 

Damion Lupo:         That triggers action in a big way. Most people who aren’t that close to it, when you get that close to the edge, all of a sudden, you start moving real fast and hustle.

 

Rod Khleif:               Now I understand. Now I understand. I missed that. Okay. Now, I got it. Yeah, that will make you move. Okay. I thought it was maybe like you were in an analysis paralysis… And a lot of people that are very analytical have a challenge with… They don’t love communicating and it’s the rare breed that super analytical, like you, that actually is a good communicator as well.

 

I mean, frankly, they’re not as common and it’s a learned skill. I’m not saying it’s a rare… Let me back up and rephrase. A lot of analytical people that are great communicators but it’s a learned skill. It’s typically outside their comfort zone. And I thought that was maybe at play there. But anyway, please continue. You bought eight houses and then what happened?

 

Damion Lupo:         Well, at the point, I’m in motion, and this is the big key for people to realize, once you’re in motion of any sort, and it doesn’t really make any difference what motion it is, it’s just moving and not sitting still. Once I was in motion, I had my stuff going; my marketing, just the stuff that was happening, or it was keeping the phone ringing.

 

When that was happening, I just kept doing more, and more. So I was buying more houses, and within a year, I thought, I should be somewhere else. Maybe I should need to be looking at other markets.

 

After two years of being in the business, I expanded out to Alabama, and at the point…

 

Rod Khleif:               Where were you initially?

 

Damion Lupo:         I started off in Arizona.

 

Rod Khleif:               Arizona, okay.

 

Damion Lupo:         Yeah. I built up my thing there, and I had this crazy five star pronged approach, and that’s where you basically find the extreme edges of a community that’s three hours apart, and you start buying stuff all over. Which basically spreads you out and wears you out. And so I thought, “Well shoot if I…”

 

Rod Khleif:               Okay, I’m sorry. I wanna make sure I fully understood what you just said. ‘Cause I think I like it. Could you go into a little more detail of how you pick those areas again? What you did again?

 

Damion Lupo:         Yeah. When I started off, I was in Phoenix and this is like the power and being very nichey, where you go into this very narrow market, and you become a master, and you just go and dominate it.

 

Rod Khleif:               Right.

 

Damion Lupo:         I didn’t. I thought Phoenix could be the place that I would dominate so I went throughout the entire metropolis of Phoenix, and from the west edge to the east edge, and so I was buying houses that were easily three hours apart.

 

Rod Khleif:               Okay.

 

Damion Lupo:         Which meant that I was spending a lot of time on logistics.

 

Rod Khleif:               Okay.

 

Damion Lupo:         Which was a huge mistake.

 

Rod Khleif:               I thought… Okay, no. That is a huge mistake, and I made the exact same one. I had 800 houses, two hours one direction, two hours in another direction and everywhere in between, absolute management nightmare, logistical nightmare. I mean, we made it work but not through 08. [chuckles]

 

Damion Lupo:         What’s funny, even when you think, “Okay, this is just going to be a lot of logistics.” The problem is, oftentimes, we get worn out so we’ll hesitate actually engaging with the problems, and in the end costing us a ton of money. So really setting ourselves up for failure. Even if we can build great systems, it’s exhausting and you’ll just hesitate to even take care of the problems. It’s a bad plan to start off with.

 

Rod Khleif:               Yeah, no question. It is, which is really the reason I started my podcast. It’s because it’s so much work. I’ve owned 2,000 houses, and a buy-and-holding. I cringe when I think about how painful, how much work that was, and how much easier it would have been if I had 2,000 units, in five or six apartment complexes.

 

I totally get it and for all kinds of reasons. So then you’re in Arizona and Alabama. What happened after that?

 

Damion Lupo:         In Alabama, we started looking for places that we could duplicate, because any natural entrepreneur wants to keep growing, and you look for scale. So the next question was where are other markets that look like Alabama ‘cause it works there.

 

We started looking at places, went around North Carolina, and Maine of all places. It’s touching all the corners of the country and starting to move through different markets.

 

Rod Khleif:               So you took your city; your Phoenix problem and you magnified it over the whole country, with single family.

 

Damion Lupo:         Yeah.

 

Rod Khleif:               [chuckles]

 

Damion Lupo:         And this is the problem with not solving the deeper problem, it’s not that there’s a bad market. It’s that there’s bad thinking. And to your point earlier, exactly right. 80% of our success is absolutely our psychology, and whether it’s trading stocks, or in the real estate markets.

 

If that’s not square, you may reboot and have to start over. But if you don’t fix your mind, you’re gonna show up with the same problems in a different form.

 

Rod Khleif:               No question. I wanna dig in to your book which I’m sure addresses that. But lets fast forward in 2008… I think you got the same memo I got.

 

Damion Lupo:         Yeah. We were talking about this. It’s funny because really, we call it the same thing. When you go through a multi million-dollar meltdown, you go, “I just had a multi million dollar seminar.”

 

Rod Khleif:               Yes.

 

Damion Lupo:         It’s what it is. It’s an education, and I go, “Wow, I couldn’t have read that book, but I did live through it.” And so, 2008… I’d done really well in 2004 and 2005. Made millions in cash, and I thought, “Well, I am Superman. I am so smart. I’m so good” [chuckles]

 

Rod Khleif:               [chuckles] This is like déjà vu. People that have heard me talk… My net worth went up $17 million in 06, and my head got so big I couldn’t fit it through the door. When that happens, God will give you a smack down.

 

[00:10:00]

 

Rod Khleif:               God, the universe, whatever you believe in will give you a smack down. And that for me was 08 and late 07, and 08, and 09.

 

Damion Lupo:         Yeah, the universe does give you a smack down. And it gives you warning shots across the bow earlier than the train that drives over you.

 

Rod Khleif:               [chuckles]

 

Damion Lupo:         Some of mine, I was doing deals, and they weren’t quite going right, and I thought, “Well, I just need to do more.” Like I’ll make up for it in volume, if I’m doing something wrong.

 

I remember I had an apartment complex that I bought in 2007, to rehab, and it was right by Graceland. I was getting all sorts of warning shots in that one. Huge.

 

Rod Khleif:               Oh no, you were in Memphis. I had 200 houses in Memphis, and… Especially by Graceland, that is a tough, tough area.

 

Damion Lupo:         It’s super tough. I had no idea. I thought, “Oh, it’s Elvis’ neighborhood, this has got to be a safe place.”

 

Rod Khleif:               Oh, no, no, no.

 

Damion Lupo:         In 12 months, I had two different incidences where people came in and tore out all the copper in the 119 units, quarter million dollar loss. Happened again. On the second time it happened, I had armed security there. My security guard actually got killed on sight.

 

Rod Khleif:               Oh my God.

 

Damion Lupo:         It was just… Like I was getting all these messages, and I was going, “Ahh, I just need to try harder. I need to push harder.” The universe said, “Okay, you’re not paying attention, buddy.”

 

Rod Khleif:               Yeah, well I would tell you, and for those of you who live in Memphis, I love you, but this is… It’s a tough market.

 

Damion Lupo:         It’s tough.

 

Rod Khleif:               There are parts of Memphis that are great, Germantown and East, and whatnot. But Central Memphis is tough, and it’s a tough place to be a landlord. I had copper ripped out of the houses. Like I said, I had 200 houses there. And I consider that whole experience, a seminar.

 

Love the food. The people are very, very nice, but it is not a great place to be a landlord, in my opinion. I know I’m gonna get some hate mail over that comment.

 

Damion Lupo:         [chuckles]

 

Rod Khleif:               But it is what… That’s just my personal opinion. Anyway, so you had a bad experience with multi-family, but I will tell you… The reason I started the podcast, my multi-family did okay through 08. We contracted, it was painful but it was cash flowing. It was breaking even. It was making it, where my single-family just didn’t make it.

 

There were a lot of factors at play. Florida has high taxes and high insurance… All my properties were up and down the coast, so I have flood and wind insurance. I probably refinanced a few more than I should have…

 

But the big thing that I talk about, in my book, by the way, as well, and we’re gonna get into your book in a second. My book, the subtitle is The New Rules of Real Estate Investing. The new rules being, forget value, and focus on cash flow. That’s really where I went with it.

 

You got the memo in 08, like I did. Got your butt handed to you like I did. Then you wrote a book, and it’s called, is it Reinvented Life?

 

Damion Lupo:         Yes, it is. Reinvented Life.

 

Rod Khleif:               Okay. Tell us about that book ‘cause I think it’s appropriate for this conversation.

 

Damion Lupo:         Reinvented Life was sort of funny because I didn’t really have the idea for a book when I was in the middle of my stuff, when I was going through everything, until I got this knock at the door, in 2009. I was basically hiding from the aftermath. I was just sort of thinking everybody was after me.

 

I think a lot of people were. They were pretty ticked off because when you’re out there and doing things big, and things go down, there’s a lot of unhappy people there in the mix.

 

I had this knock at the door, and it was four federal agents. I looked out the peephole and I went, “Whoa, this is not good. They’re here for me.”

 

Rod Khleif:               Wow.

 

Damion Lupo:         I had no idea what they were there for but they showed up. After a couple of hours, I climbed out the window, and went through the neighborhood came back to the front door and found this envelope on the door. Looking to see if I was gonna be jumped on by these agents.

 

It was actually an envelope from the IRS. I pulled it open, and it was for the lady that had been in the house before me.

 

Rod Khleif:               Oh, geez… [laughs]

 

Damion Lupo:         I just looked at it and I dropped to my knees. I just lost it. I went, “Wow.” I realized how much fear and pain, and just anxiety I was in. Even though it wasn’t made out to me, it was for me. It was a message; again, the universe was sending messages, and tapping.

 

Rod Khleif:               Oh, yeah. No. I love you. I mean I love that message. Because people reach a pivot point in their lives, and that’s what it was for you. Now, that’s a great message. Thank you for… What I was trying to say is, I love the fact that you were genuine and humble enough to relive that experience for us, because that says a lot about you.

 

Damion Lupo:         Why, thank you. I don’t wanna ever live it again.

 

Rod Khleif:               Right. [chuckles]

 

Damion Lupo:         It was like I took it and… One of the reasons that I wrote that book was because I went through this process of breaking things down. It’s like when you go to the military and they break you down during boot camp, and then they build you back up.

 

The universe was breaking me in half, and when I went through that process, I had to ask the question, what is really true? Like what’s really real about me. It took me probably a year and a half to even acknowledge what the truth was. Then I started asking the questions about who I was.

 

In 2010, I was still sort of getting through this. I actually got fired from a volunteer position on a political campaign, and for a few months after this happened, it was funny because people on the Internet, the trolls were saying, “That guy got fired.” I said, “No, I didn’t. I resigned.”

 

Rod Khleif:               [chuckles]

 

Damion Lupo:         And the Internet said, “No, you didn’t.” And I just argued. I finally said, “What am I doing? I’m lying.” So I said, “Yeah. I did get fired. I totally got fired.”

 

Rod Khleif:               But let’s go back to the positive. You really took a look at who you were. You assessed your strengths and the positive aspects of who you are. That’s really what has to happen.

 

For those of you listening, when you’re going through a tough period like that, what you focus on becomes your reality. If you’re focused on fear, like you were Damion, believe me, I was as well. Luckily, I was around Tony Robbins technology at that time, so I didn’t live it too long.

 

But people develop a story for what’s going on in their lives, and it can be a very disempowering story. And the way to get out of it is to focus on your strengths and relive your successes. Go back and go in to how you felt when you had some of your greatest successes. That’s how you pull yourself through that funk. So go back to your book, yeah.

 

Damion Lupo:         Yeah. One of the most powerful ways to pivot transition and reinvent is really to ask better questions. I think Tony talks about this a lot of time.

 

Rod Khleif:               Absolutely.

 

Damion Lupo:         It’s really that the state of your life is based on the quality of your questions…

 

Rod Khleif:               I did a whole section on that in one of my Driving Force Tips. In fact, I have about 60 questions that I send…

 

Damion Lupo:         That’s awesome.

 

Rod Khleif:               To people if they want them. Some of them are personal questions, and some of them are business… Who loves me? Who do I love? What’s great in my life right now?… To business questions, relating to the different aspects of business. Those of you listening, if you wanna copy of my questions… I’ll make sure to put it in my show notes. ‘Cause I know we had a number you could text in to.

 

But you’re absolutely right. You need to ask quality questions. Thank you for bringing that up. Tell us more about the book.

 

Damion Lupo:         So then the book was really a question of do I want it? Do I wanna pull these stuff out? And one of the values of writing a book, especially if it’s a story, it gets all that stuff out of you so you can acknowledge what was real, what happened?

 

Then you can learn from it. Because there are so many lessons that we have from things that we’ve actually had to learn, by going through them that we don’t necessarily even understand until we try to put it in front of us in writing and make it coherent and English.

 

That was the process of writing this book. It was really about the transition from the old to the new. And figuring out what was involved in doing that. So some people say, “Well, I wanna be a yoga teacher. Right now, I work. I’m a plumber. I wanna switch gears.” Or, “I wanna shift into real estate.” And they have no idea what that looks like.

 

What’s the transition? How do you figure out the runway? The metrics? And this was based on the experience of me shifting from one real, really a different life into a totally authentic life. One that I could do financially, and make sense, and no go off a cliff again.

 

It was the process of doing that and then it was the questions that I asked during this process. It’s tangible. It’s something that we can experience. Not just experiencing my experience by reading it but really going, “What’s my experience?”, by asking questions. It’s an interactive book. That was really the outcome of it.

 

Rod Khleif:               Sounds great. Sounds great. I will definitely get it, and I will look forward to reading it. It’s Reinvented Life by Damion Lupo. Guys, check it out.

 

You were talking about the benefits of getting it down and getting it out of your head and on the paper. I wanna just hammer that home a little bit. Now, any time I am in an overwhelm, or a fearful place, just a simple act of writing down what I’m concerned about, and seeing that it fits on a small piece of paper, really helps you deal with it. So for those of you… Try that some time, if you’re in that place.

 

Just a simple act of writing it down or just going somewhere and journaling for a while can be very, very cathartic and help you through that process.

 

Damion Lupo:         Something you just said that is so important. It ties into this idea of activity and action. When we’re stuck and we’re thinking, and we’re just trying to figure things out, the moment you take your hand and you start writing, or you start typing, you’re actually, in action. There’s motion going on.

 

So I think what you just said is super powerful and people should just really hold on to that and start doing something with it.

 

Rod Khleif:               Anytime you’re in fear, if you can take action, it helps mitigate the fear. And of course, if you can be grateful and think about what’s great in your life, in the face of gratitude, fear goes away.

 

Yeah, that’s good stuff. I know you also like to talk about the upcoming Wall Street crash. I think that that’s a great topic to move into. Let’s talk about your thoughts on that.

 

Damion Lupo:         As we know, we’ve experienced a crash. Unless you’re in kindergarten right now…

 

Rod Khleif:               Right.

 

Damion Lupo:         There was an experience not too long ago. And it’s because things cycle, and whenever there’s an artificial stimulus or especially like we’ve seen with the Federal Reserve, and just all the crazy stuff that goes on. It’s going to create bigger problems, bigger crashes. This bowl (or bow or bough?) [00:19:30] is exhausted.

 

Rod Khleif:               Right.

 

Damion Lupo:         In my opinion, this bowl [00:19:31] is really tired, and it’s been going on for a long time. There’s a lot of hype, a lot of bubble talk. I think about this and I’m sure you remember this back in 2006 and 2007, when the barber shops and the taxicab drivers were all starting to do real estate and looking at things.

 

There’s this sense that it’s easy and anybody can do it, and there’s never a downside. It’s no big deal; you can make millions on the weekend…

 

Rod Khleif:               Right.

 

Damion Lupo:         And you can do it all on the next month.

 

[00:20:00]

 

Damion Lupo:         I’m seeing the same things.

 

Rod Khleif:               That’s what’s called a clue.

 

[laughter]

 

Damion Lupo:         It’s a huge clue. It’s like a giant neon sign right in front of us.

 

Rod Khleif:               Yeah.

 

Damion Lupo:         We have this, in a sense, there’s a wealth effect when the markets are going up which is really helpful for politicians. When the stock market’s going up, people feel richer. They go buy bigger houses, and they start spending freely, and they borrow.

 

We’re seeing that. We saw that in 2006 and seven, and we saw it in 99, at the tech bubble. So right now is a great time to be super conscious to these markets being really, really lofty, and really, really bubbly.

 

Rod Khleif:               Right.

 

Damion Lupo:         I’m in Austin, and I’ve seen things double in the last three years. I thought that they were a little bit goofy three years ago, and people go, “Oh, this is great. People are always gonna move here.” And I go, “Yeah, but understand, when rates go up, it changes the nature of how much you can actually borrow.

 

Rod Khleif:               Right.

 

Damion Lupo:         Because your payments go up because the rates are up. When you think about that, you have to understand that there’s going to be a shift and a shake, especially when the markets have their… when the wealth effect goes the opposite way, and people feel poor. They’re gonna slow down, which slows down everything else.

 

This is coming and it’s smart to be conscious and not ignore it.

 

Rod Khleif:               Let me ask you this, how has the obvious knowledge, that we’re headed for contraction, affected your investment? The advice you give people and/or your own investment strategies?

 

Damion Lupo:         Well, it comes down to what you talk about on the show a lot, and that’s really the idea of units and cash flow. That is so much more powerful, and so much more useful than just cash.

 

When we think about speculating, and flipping, and that there’s a place for that. But that’s based on cash and it’s based on the bubble. When we talk about cash flow, and this is what I’m focused on, there’s two things I’m doing. One, looking at apartment complexes that are going to be long-term sustainable in any market…

 

Rod Khleif:               Right.

 

Damion Lupo:         Right now, we got 80 million millennials that are essentially, as a block, looking for places to rent to have experiences. They want small spaces…

 

Rod Khleif:               They’re not interested in homeownership.

 

Damion Lupo:         No, they’re not.

 

Rod Khleif:               They wanna be mobile, so that’s incredible opportunity.

 

Damion Lupo:         It’s a huge opportunity.

 

Rod Khleif:               And there will always be a need for affordable housing in this country, which is another incredible opportunity. Which is one of the reasons I’m actually focus on mobile home parks and apartments. Because there’s always gonna be a need, that niche, especially in the C class, B minus class apartments. That niche will always be there.

 

So you’re focused on multi-family as well, and honing in… I don’t wanna put words in your mouth but my guess is your primary focus is the property’s ability to cash flow…

 

Damion Lupo:         It’s the cash flow…

 

Rod Khleif:               Through a contraction.

 

Damion Lupo:         Yeah, and it’s in leveraging from the experience from before, where I bought a big old disaster next to Elvis.

 

Rod Khleif:               Right.

 

Damion Lupo:         Where I didn’t have cash flow. I had the opportunity, but I was also doing it remotely. I was trying to remodel 119 units from 2,000 miles away, that there’s danger in that because my eye was not in it. So now, it’s finding places where I’ve got teams and I can actually get my arms around it.

 

Then in the meantime, keeping my money engaged with just private money lending. It’s short term, I understand. I look at it as a banker. I don’t look at it as a real estate speculator. And that changes how I invest, and how safe it is, and how my money’s maintaining its liquidity for the next opportunity to actually be able to go and buy assets again.

 

Rod Khleif:               Absolutely, and that’s what’s coming is an opportunity, an incredible opportunity now. But that doesn’t mean you you can’t buy now. I mean, we’re buying right now.

 

Damion Lupo:         Right.

 

Rod Khleif:               There are deals right now. As long as you’re focused on cash flow and you make sure that your debt service coverage ratio is decent. So that if you’ve got debt that you’d be able to cover it even if the rents contract, which likely will happen.

 

For those of you who don’t know what that means, it’s basically a multiple of your net operating income versus your debt payments. I like to see a 1.6 or the ability to get to a 1.6 debt coverage service ratio. That’s a little, sometimes challenging but if I get that, I know I’m safe. I know I can handle a contraction. And that’s really my mindset on that.

 

I like to tell the people that are listening, if you’re doing flipping, which is a great way to make great money; wholesaling flipping is a great way to make money. But if you’re flipping, I would be very, very careful right now, if you’re doing the high-dollar stuff. Because when the music stops, if you’re still standing, you’re in trouble.

 

With the high-dollar stuff, if you can’t rent it or if your debt is very short-term, and you can’t rent it, or your debt comes due in the midst of a contraction, you’re in trouble. Would you agree?

 

Damion Lupo:         Yeah, I would. I think that there’s a… something that happens when people tend to get into flipping or the short-term surges of success, they tend to continue doubling down.

 

It’s the same problem we have at a casino. You go there, and you double down. You may be right eight times in a row, but the problem is, on the number nine, you just lose everything you just made on all those. So understanding the psychology and the Position sizing, Van Tharp does a great job talking about this in one of his trading books because he talks about psychology so much, and how much you’re exposing on each thing you’re doing.

 

You can make great money on the flipping, and you also need to understand that when things like, you just said, on big dollar flips and such, if that’s the last one you have when things go sideways, you may end up having to hit a reset switch. That part is not fun.

 

Rod Khleif:               And you may lose everything you’ve got in it…

 

Damion Lupo:         Right.

 

Rod Khleif:               If you’ve got a lot of cash in it. And that’s the same thing actually with financing multi-family right now. I’m advising people, not to do five-year debt. When you finance a commercial property, there’s going to be a balloon payment.

 

Typically, it’s between five and 10 years. I recommend, doing at least seven to 10 if you can get it. Because if you’re in the troughs of a contraction, when your balloon comes due, and the cap rates have increased… I’m sorry… Yeah, the cap rates have increase so that the value goes down… The worst thing in the world would be, to be in a situation where you’re cash flowing, but you can’t refinance the property, or sell the property because the values have gone down so much.

 

That has happened many, many times over the last few decades, to investors that didn’t pay attention to that. So be very cognizant of when your debt on commercial property is coming due, as it relates to this upcoming contraction. I play really conservatively in that regard.

 

Now, if you’re doing duplexes, and ‘fourplexes’, things like that, you typically get 30 year financing. But if you’re five plus units, you’re gonna get commercial debt.

 

So Damion, how can people get a hold of you?

 

Damion Lupo:         Best place to reach me is to visit my website, which is totalcontrolfinancial.com

 

Rod Khleif:               Awesome.

 

Damion Lupo:         There’s resources there, and just an easy way to access me and the ideas that I have around real estate and my world purview, and the way the markets are going.

 

Rod Khleif:               Fantastic. Well, listen, let me ask you a question, cause you are obviously, this is a question I ask from time to time. I’m a big self-improvement, psychology of success… In fact, I just got certified as a high performance coach. I love talking about high performance and psychology of success.

 

So I sometimes ask this question. What makes Damion jump out of bed in the morning? What drives you? What juices you? How come you’re… You’ve had numerous businesses, written five books, what gives you that juice?

 

Damion Lupo:         It’s knowing that the intention I have to teach people and bring my experiences into the world. There’s this feeling of total fulfillment. It’s not about an extra million dollars. That feels good but there’s this fulfillment when somebody says, “I read that thing. I read your book, and it changed this. I’m doing this different thing.” I realized I spent some time doing something that shifted someone else.

 

So I get up in the morning, and I’ve got the Grant Cardone focus. I am obsessed. I want it. I’m thinking about how can I use all these tools that we have available for us, all these technology. To be able to scale, and share a message to a bigger group, to more people ‘cause truly, we have this amazing opportunity.

 

It is abundance. If Peter Diamandis is right, we live in an abundant time. And so I wake up going, “Okay, what do I get to play with today?” ‘Cause it feels amazing, and I think that there’s an opportunity to shift from this whole fear, even though markets are gonna shift, there’s a big opportunity in that if we have the right intention.

 

We wake up going, “I’m gonna have an amazing life, because I live in amazing times”, instead of, “Holy crap, the world is falling apart.”

 

Rod Khleif:               I love the last thing you said. I loved everything that you just said. But the last thing particularly because I tell people, I’ve got a morning ritual, where I just close my eyes, and I’m grateful for a few minutes. Then I am grateful for the things that I have in my life. Them I’m actually grateful for the things that I want in my life, as if I already have them. But then the last piece is that intention piece.

 

I just say to myself, “It’s going to be a fantastic day”, and more often than not, it is. So that’s great advice. Well, thank you Damion, it’s been a real treat. I really enjoyed it.

 

Oh, by the way, you’ve got a podcast as well. What’s the title of your podcast?

 

Damion Lupo:         It’s called Black Belt Wealth. It’s a fusion of the finance and the martial arts, and using the philosophies and things.

 

Rod Khleif:               Very cool.

 

Damion Lupo:         It’s my dance with the highest-level performers.

 

Rod Khleif:               Very cool. Very cool. Love it. Alright, well thank you for being on the show, buddy. Appreciate it.

 

Damion Lupo:         I appreciate it. Thanks for having me

 

Rod Khleif:               You got it.

 

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Thank you for listening to the Lifetime CashFlow Through Real Estate Investing Podcast. If you’ve enjoyed the show, please subscribe, and then take a moment to visit iTunes and leave a five star rating and review. For more resources to connect with us further, please visit our website at lifetimecashflowpodcast.com. Tune in next week for our next show.

 

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