So, Robert, when did you get into real estate and how?

Actually, I vaguely recall buying my first property over 20 years ago, (which, for me was just a few years out of high school.) Although, I do remember almost doubling my money on that property in just a few short months! Then, rolling that money over into various other properties, eventually buying land and building custom homes along with renovating small apartment complexes and single family row houses in Baltimore’s inner city low income neighborhoods.

I really flourished in real estate during the 80’s by cashing in on the inner city rehabilitation frenzy. I remember starting out buying vacant row homes for as little as five to seven thousand dollars that would only cost me 5 or 10 thousand dollars to renovate. (These renovations included painting, new windows, bathrooms, kitchens, etc.) Once the properties were finished, I would put them back on the market, leasing them out to pay back the loans I had taken out to buy them. I actually financed myself in and out of many properties, constantly picking up new ones and later selling or leasing out the old ones, until eventually, I had a portfolio of properties worth in the millions, that stretched all over the city. In fact, within 5 years out of high school, I was usually holding millions of dollars worth of real estate at any given time. The negative part was I was very young and inexperienced in property management. This included dealing with inner city tenants, section 8, rent court, etc.. And, as I accumulated massive amounts of properties, the management headaches soon caught up with me. I guess, being young and inexperienced, I was just not able to handle the long term responsibilities of being a landlord. 

Then, in the late 80’s and early 90’s, interest rates went way up to 18-19 %. This was when I decided to get into the high end building business (what was I thinking?) acquiring $100,000 acre + lots in the suburbs, building 3,000-5,000 sq. foot custom homes. Well, need we say more? Who buys a 5,000 sq. foot, Million dollar home when banks are offering financing at 15-18%? I was able to borrow the money, to get into the deals, take in partners and build the houses. But, the problem came when it was time to sell...There were just no buyers. Some of the homes I had built were auctioned off, thus, I was caught in my first down turn in the high end real estate market. After liquidating many of my properties, I relocated to FL where I set up shop in Ft. Lauderdale. Within months, I was acquiring condos for 50 cents on the dollar, flipping them to other investors for instant profits, or holding on to them, acquiring lucrative financing where I was walking away with cash at closing. Because many of the properties I bought with very little or no money, I rented them out instead of selling them, and before I knew it, I had rental properties all over West Broward County. I was once again controlling millions of dollars worth of income producing real estate. All acquired within a year or two, using very little of my own cash or credit. And, was once again a landlord. Which is exactly what I didn’t want to be. How Lovely!

Afterward, I eventually sold off many properties and moved into the buying and selling arena by acquiring land, building homes and developing. Today, this is where I truly feel most comfortable. Building high dollar homes, usually in the million dollar + range where the profit margins are extremely lucrative. For instance, today, I may pay $500,000 for a lot in any given upscale area. Then, spend another 5 or 6 hundred thousand dollars into building a new 5,000 sq. ft., 3-car garage, pool home and sell that house for possibly 1.5 million dollars. These are huge profits! Think about just doing 3 or 4 of these houses a year. You could easily make a million dollars or more, building a few homes a year in the high end market. I would tell anyone that managing construction, for me, is easier than managing rental properties. Especially, low income rental properties on the bad side of town. Think about it, a general contractor whose very experienced, can sit in an office and build an entire house over the telephone, contracting everything out to licensed, bonded and insured sub contractors. Thus, reaping most of the rewards when it’s all said and done. In addition, as a general contractor, builder, developer, investor, I realized I could build all over the country and not even be there while the houses were going up. I could have various local inspectors check up on the subs, or have my realtor go by the houses to monitor the work and if need be, I could hop on a jet and fly to any location I was building in just a few hours and spend a few days checking out my projects, just like the big developers do. 

Robert, why are you so focused on FL?

FL now has seen a big boom in construction unlike no other time in history. In fact, the boom now may be bigger than in the late 1950’s when South FL was really put on the map. Because of what’s going on today, I specialize in acquiring vacant, buildable lots for the purpose of constructing either new homes, town homes, apartments or condominiums, in partnership with people like yourself. First Wall Street Realty Partners, LLC is a win-win for everyone involved, mainly because building is a lucrative industry and a great safe and secure way to make money by working as a joint venture partner with my organization.

Robert, I’ve spent the past few days following you around, and I have to admit, you definitely know your business when it comes to real estate. I’ve seen you size up apartment buildings, condos, vacant land and commercial property in just a few minutes, all while sitting in your car with just a calculator. It seemed like within minutes, you knew how to determine if a property would work or not. How is that so?

If you’ve been in the same business for over 20 years, by then you either know your game or you never will. Remember, I bought my first property just a year or two out of high school. If you’ve been around real estate and construction as long as I have, it gets in your blood. Today, I can look at a property and in a matter of minutes run the numbers in my head, and know if it will work for me or not. I can figure out, based on zoning how many units I can build. I can figure out per sq. foot, construction costs, and then in minutes pull comps and figure out exactly what I’ll be able to sell these units for. In addition, I can figure out what I ‘ll have to pay a realtor to sell them for me, how much it’s going to cost to borrow the money, how long it’s going to take, what downfalls I may have along the way, throw in a margin of error of approximately 10% and bang! There you have it. A net profit. And, if a net profit isn’t at least 25-30% on the invested dollar after interest costs, realtor commissions, office overhead, etc. It’s not really a deal I want to get involved with. We look for a 25% minimum return on all new construction deals.
Nobody wants to buy a $250,000 house, go to the bank, take a mortgage, improve the property and sit on it for 4 to 6 months, just to make $10,000. That’s not good enough. Especially when you have a partner involved. On a $250,000 house, We would be looking at a 40-60 thousand dollar gross profit or we wouldn’t get involved. And, that’s net-net after all of the expenses. 

Robert, that sounds good, but are those deals out there?

They’re out there all the time for builders. Although, the foreclosure market has slowed down. The reality is, today foreclosure bargains are actually few and far between. However, if you’re willing to build new, there’s lots all over South FL and all over the country that are just sitting around, dying to be picked up and built on. A lot of people can fix up a house and sell it, but not that many people can build from the ground up. First, you need the licenses, the insurance and most importantly, the capital. Then, you need the knowledge and experience. Building is the real deal. You’re not just throwing some paint around, replacing some windows, and putting up new wall paper in an existing house. You’re actually creating something from scratch. Something that wasn’t there before you came along. You had better know what you’re doing or you will make serious mistakes that will kill the whole deal. Believe me, I’ve been there and I’ve done that. But, that was then, and this is now. In fact, today, 50% of my time is spent looking at building lots, either here in FL or in other parts of the country where I feel the market is hot. I think building is the way to go. There’s less competition as a small builder. It seems today, everyone and their mom is running around with a newspaper trying to buy and sell existing fixer-upper homes. There’s real estate tv shows on how to get rich, there’s books you can buy. For years, people have been cashing in on teaching people how to buy and sell foreclosures and many people have purchased those courses and gone out and actually gotten into the business and made money! It’s not that hard to do, once you learn how. But, a lot of competition does dry up the market. Not so in the building business. Builders are a limited breed. They’re usually people that have been doing what they’ve been doing for years. Before they became builders, many were craftsmen, they are more than just real estate house flippers, and good builders are few and far between. And, there’s only so many good builders. We, consider ourselves one of the good builders!

One of the questions I’m sure some of you people want to ask you, Robert, if you’re successful and you’ve been in the business all these years, then why do you need partners?

The truth about real estate is, almost all deals are done with partners. Even Donald Trump has partners. For years, insurance companies have backed many big high rise buildings in major metropolitan cities. And, most builders that are really big are on the stock market always raising capital for their next project or they have private financing. There’s always more real estate to buy than one can handle on his own. Therefore, (my theory, and it’s not just mine, because a lot of people think the same way) I’d rather own half of a deal and have someone else put up the money and me do all the work. And make the whole thing happen while having 3 or 4 properties going at once then tie up all my own money in just one deal and make all the profit myself. It’s simple arithmetic. 50% of 4 or 5 deals is BETTER than 100% of 1 deal! There’s many deals that without partners, I wouldn’t have been able to do. A dollar stretches very thin when you’re buying land and building. Whether you know it or not, even banks have partners. So do mortgage companies. Partners are in all businesses. Especially, in real estate. I feel that real estate investing and building is the greatest investment for a partner because of the security aspect. Our partners invest in the property and the construction, specifically. They do not invest in us or our company! In fact, many of our deals are actually purchased directly in the names of our partners and we have a joint venture agreement to protect all parties. Therefore, they’re holding title to a property we located. And, are protected to some degree by now being the actual property owner. 

Robert, how do we know the properties you’re investing in are really good deals?

After 20 -some years in the business, I’ve learned that you can’t make money in real estate investing in bad deals. Most importantly, we’re looking to create long-term relationships with our joint venture partners. It costs money to advertise and keep an office and have a secretary all for the sole purpose of managing property and construction, along with obtaining new joint venture partners. A lot of time goes into interviewing and talking to potential joint venture partners. Many people respond to an ad, for instance, today, and don’t get involved with us for 2 or 3 months down the road. During that time, I’ve had many conversations with those people, faxing them back paperwork, showing them potential properties. It’s a lot of work that I really don’t get any financial rewards from until a joint venture partner comes on board. Therefore, it is necessary for us to invest in quality income producing real estate or lucrative, speculative development projects, such as building new single family homes, townhouses, and/or apartment communities. Or, possibly developing a commercial site, such as a warehouse facility, shopping center or industrial property. These types of real estate deals are more speculative than purchasing income producing property. Although, we feel they are much less speculative than investing in various other types of businesses that have to be policed on a daily basis, where you have to spend money on advertising, selling products, hiring employees, etc. History shows, fortunes have been made form developing property. Most of the world’s wealth owns and controls property. They’ve either built it themselves or bought it from someone who has. It’s that simple.

Well, Robert, it certainly has been educational to sit down and ask you these questions. One last thing which is on my mind. You’re a multi-talented person, you’ve written books, you’ve given seminars, you’re an actor, you’re a stand up comic, you’re a producer, you’re in the studio constantly writing music and producing other artists. What’s to stop you from one day running out to Hollywood to make a movie, or going out on tour with your music and abandoning this entire real estate business?

To me, real estate is not a business. It really is an investment vehicle. So many of the world’s greatest actors and musicians are heavily invested in real estate. Look at Cher, she buys and sells a house every year or two and makes a profit of anywhere between a million to two or even three million dollars on a flip. To her it’s a hobby. She buys big homes in Aspen, Malibu and other parts of the country; Many times totally renovating them from the ground up, maybe builds an addition or does some interior renovations and then sells those properties for big profits. Nobody’s putting in all the time and effort just because they like to do it. Cher’s a performer; She likes to be on stage. Nobody likes to fool around with properties, putting in all the time and hard work involved, such as supervision, coordination of contractors and decorators, etc. just to break even. Everyone’s looking to make a profit!
Look at Arnold Schwartzenager, who recently ran and won the governorship of California. He’s been heavily invested in real estate for the last 20 years. In fact, he even said on a television show, that he’s made a fortune in commercial property. The word is, he owns commercial property all over Hollywood. The list goes on and on. Most celebrities, obviously, own their own homes and they make big profits when they sell those homes because the properties they buy are so high end. Many celebrities in front or behind the camera, such as producers, actors, screen writers, etc. are all involved in real estate. Most wealthy people are always invested in real estate to some degree. Whether it’s just for asset protection, tax write-off or speculation to make a profit. Hey, it’s much safer than the stock market. We all learned that the hard way. Therefore, the truth is, there’s nothing stopping me from running out to Hollywood and filming a movie or going into the studio to produce a CD. That’s just who I am and that’s just what I do. Although, 90% of my creative music and entertainment business takes place at night, during the day, I’m all real estate. And, if I ever decided to get out of real estate, remember, our joint venture partners are holding title to the property. They’re in control of the asset. All we have to do is put the property up for sale, take the money, shake hands and go our separate ways. What a clean way to depart a business deal. That’s why I love real estate so much. It gives you unlimited amount of freedom, control and potential for upside profit all in one. While, most importantly, limiting risk. I personally feel there are incredible opportunities out there today, in the new home building market. Also, in the rehabbing of existing properties, if you can find them at the right price. 

Our main focus is new construction and we invest most of our time and energy on locating residential building lots nationwide that we can build on from creating our own product, making our own market and selling directly to the home buying public. Real estate is fun, to a degree. I somewhat enjoy it, but I mostly enjoy the freedom it gives me to do the other things in life that I really like, such as travel, producing music, writing screenplays, books, playing tennis, golf. Real estate gives me the freedom that most people never get. Sure there’s wealthy people everywhere, but so many of them are locked into their everyday business or jobs. They can’t take off for a week or two, like I can and other people in real estate. Remember, they’ve got a business to police. Who will watch the cash register when they leave, or run the office. A doctor or lawyer can’t take a week off without losing money. But, a real estate investor can take off as much as he wants because the properties actually making him the money. Most of the business that we do is entirely done over the telephone. Houses are built everyday with nothing but a phone and fax machine. (Although, it takes someone with really good experience and talent to be able to operate in a capacity like that.) Remember, I’ve been around this game for over 20 years. I feel I’ve earned the right to be in a position where I can make my money working about 2-5 hours a day on an average. And, hopefully that won’t change. 

For example. In December of 2003, I was finishing up a multi-million dollar house I was building on the ocean in Ft. Lauderdale. When 2 gentlemen came to me with a proposal to renovate and build an addition on their house, it would have cost over $200,000. Now, normally I don’t take construction projects other than my properties, but I saw potential to make at least 50 thousand dollars on a project I really didn’t have to touch. I already had another GC I was going to sub the whole thing out to and it would have been a great deal. I probably put a few hours in on the telephone every couple of days for a few weeks going back and forth with the owners; Reviewing blue prints, having some meetings and helping them obtain financing. In fact, I realistically put in anywhere from 2-3 hours a week for about a month and never actually got the construction job. It doesn’t necessarily take a lot of time to manage construction, bid properties or oversee the work, if you have the experience and management expertise. 

The funny part about real estate is that you can make so much money with such little work. In fact, if you’re smart, the moral of the story is, the two guys never started the construction project, they ran into financial difficulties. I ended up buying the house from them for $850,000, tying it up with a $500 deposit. Can you imagine that? Tying up almost a million dollar house with a $500 check. Then, with just one phone call, I flipped this property for $35,000 more than what I was paying for it, all with just one phone call and 2 meetings with my new buyer, who was actually a real estate investor himself. He was buying it from me wholesale on a quick flip to fix it up and sell it for 1.3 to 1.4 million. When you add up the time I’ve actually invested in making that sale it was probably 2-3 hours, selling it to the buyer, and an hour to go to closing. Let’s say it was 5 hours, total time invested to make a gross profit of $35, 000. Not too bad. I know a lot of people that work 8 hours a day, 5 days a week, 50 weeks a year and make less than that. The money is in real estate! It always has been and it always will be.

Although, the truth is, big profits usually only go to the talented few. The people that work smart, that know how to buy and know how to sell. And how to get the work finished on time and under budget. That doesn’t happen overnight. I feel I’ve earned the right to make this kind of money; I’ve been in real estate and construction for 20 years. I’ve taught hundreds of people across the country, how to buy and sell real estate for both short and long term profits. I authored my own real estate books, developed my own real estate software, and I have a list of transactions that go back since I was fresh out of high school. Yes, you could say I do know real estate!

I’ve been in many businesses and lost money and I’ve been in the stock market and never made a dime. In the late 90’s, I actually lost all of my money in the stock market. Truthfully, I’ve never met anyone that I knew in the stock market to ever make any money! Everyone I ever met in the stock market, lost most or all of their money. Except for the few brokers that I’ve known who don’t invest their own money, but yet make commissions from losing yours.

Well, there you have it! Robert has truly impressed me. And, with all his knowledge and his willingness to share it with people, I have to say, First Wall Street Realty Partners, LLC. is a winner! Today, I’d rather be invested in real estate as a joint venture partner, than be a partner in a business or go out and invest in the stock market. 

I think I’m going to go the real estate route. And, you may want to think about it, yourself, also. Thanks for reading this question and answer session with Robert Louis Annenberg, President of First Wall Street Group and First Wall Street Realty Partners, LLC. Robert’s looking forward to working with you in any one of his up and coming deals nationwide.