Condo Conversions and Hard Money Lending with Greg Sharp | The Real Estate Investing Club #7

Transcript of “Condo Conversions and Hard Money Lending with Greg Sharp”

Gabriel Petersen 0:02
And we’re live. All right. Greg sharp. Thank you for joining us today. How you doing my pleasure. I’m doing great.

Greg Sharp 0:09
How’s everything there?

Gabriel Petersen 0:11
It’s good. It’s good. Where you calling from?

Greg Sharp 0:13
I’m calling from Irvine, California, Irvine. I grew up Astoria, Oregon. I still consider that home. Irvine’s where I’ve done all my real estate.

Gabriel Petersen 0:21
Nice. Nice. I’ve gone down to Santa Rosa and La but I’ve never made it to Irvine. I’ve heard good things though.

Greg Sharp 0:29
Yeah, it’s great area. Yep.

Gabriel Petersen 0:32
All right. To get us started, why don’t you just let let everybody know, you know who you are. Where are you from? And how did you get started in real estate?

Greg Sharp 0:41
Um, I was an engineer that got frustrated with working for too many overpromoted engineers. And so one day, I decided to get my real estate license and then one day I decided to quit and asked my wife if I could quit and I think I can do this real estate thing full time. She said okay, mean Okay, we can talk about it. I hung up with her call my boss and quit once. Yeah, really that’s like burning your ships on the shore, I had no no job to fall back on. And I stumbled into condo conversions fairly quickly. And I did condo conversions for 2003 until the crash, which took me down completely. But I did probably about 100 million transactions over the 10 year timeframe. A while and so I learned a lot, both good and bad. And I’m in the process of kind of rebuilding again because my wife said to go back into real get a real job not five years ago, so I did but it’s never gonna pay for my retirement. So real estate’s there and I have to be in it to make sure that I can retire because I live in California Real Estate’s expensive. Oh, yeah,

Gabriel Petersen 1:55
I can my girlfriend’s from Santa Rosa and I like whenever we go down and visit her Family I just kind of on Zillow, just checking things out. $700,000 for a two bed one bath, just just ridiculous.

Greg Sharp 2:07
Yeah, yeah. And it’s all about the cash flow, which we don’t have in California. great appreciation but no cash flow. Yep. And I was talking to a friend today he’s buying properties around Bakersfield. And he’s getting like a 20 25% cash on cash return annually. Bakersfield,

Unknown Speaker 2:25
California, California.

Greg Sharp 2:28
Yeah. So there are outlying areas where you can find basically crappy properties. They’re the bread and butter tenants and you can get cash flow in California but still in those areas. You don’t get the appreciation like in Orange County. Gotcha. Okay. So there are different aspects of the real estate with the condo conversions that was all about value add Dubai, you know, we do the acquisition and analysis as an apartment building. Have to manage it like an apartment building do all the time. Edelman’s do all the renovation, and then market and sell? So it’s like house flipping but on steroids.

Gabriel Petersen 3:08
Yeah, because there isn’t many.

Greg Sharp 3:09
Yeah. Now the problem was when the market went down, I had 75 condos to sell and about five projects. And with condo conversions, you can only sell so many per week, you’ve got a sales rep pace, a sales rate you can keep up that you have to keep up with so a couple of couple of units per week is about the best you can do. So we’d drop prices sell drop prices sell and leverage on the way down is just as ugly as is beautiful on the way up. And so that that ended up taking me out completely took all my capital with me with it. So with no capital and everybody holding on to their money, not letting anybody else invest for them. You have a very hard time coming back from that sort of thing.

Gabriel Petersen 4:00
At that time, so awesome, then we’re catching you on the upswing. That’s, that’s perfect. Yeah,

Greg Sharp 4:05
I’m back mostly in services right now. But I will be connecting with people and trying to do some capital raising once I find some decent projects that I’d like to pursue.

Gabriel Petersen 4:16
Awesome. Okay, so in 2008 you are before 2008 you were doing condo conversions. I’m assuming you bought basically flipped condos, then 2008 hit you hit a rough patch. You’re back into it. So now what’s your what’s your main bread and butter? What type of real estate Are you in?

Greg Sharp 4:36
I after 2008 for a number of years I brokered hard money, so I’m back to brokering hard money, managed to find the lenders that are still lending Louis’s hard money, there are some others that are pretty good loans. I’ve got some phenomenal FHA product, you know, 3540 year loans below 3% which non recourse and it’s all based on the value of the property like, dang, I wish I had some big apartment building because I would refi right now.

Unknown Speaker 5:05
Yeah.

Greg Sharp 5:07
But mostly I’ll be finding hard money loans, maybe brokering two to four unit listings. We’ve got a program called property radar. All right, which if not with that, yep, I’ve used it. It’s one of the better programs I was actually at a trade show in the booth next to the founder of property radar hockey my stuff years ago. He did a little bit better than I did. But it’s it’s all about the listings and then looking for the value add every good deal that you find will get funded. So I just have to find the right good deals and I’ve got a large enough network still that I can bring in some people have money that’ll back me and we’ll partner on the things again.

Gabriel Petersen 5:52
All right, very nice to your to your hard money brokering and you’re actively searching for fix and flips Is it just condos? Are you doing single family multifamily?

Greg Sharp 6:04
I’m targeting three and four unit properties. Okay, multifamily. We’ll call it two to four.

Gabriel Petersen 6:09
multifamily ish.

Greg Sharp 6:10
Yeah, the single family version of the multifamily. Mm hmm. And mainly because when I lost everything, I also lost my house. So part of my rebuilding strategies to buy a four Plex and live in it, because I’ll have enough years left before retirement, that I can build a revenue stream that my housing costs in California will be covered when I want to retire. Yep. And that’s, you know, that’s the baseline stability factor that I’m going after. Gotcha. And that’s one of the things that I didn’t realize going into it I I had never been through a down cycle. Yeah. And once you go through it, it really changes your mind, your mindset. So there are a lot of first time investors out there now that have never seen a down cycle. And even this right now, it’s not real a downturn. I mean, that was the worst one since the 30s. Right?

Gabriel Petersen 7:03
Yeah. Yeah, they say one is one is coming up, but the last 10 years have been fantastic. That is for sure. Especially for flippers.

Greg Sharp 7:11
Yeah. And that’s, it’s fun. I enjoy it immensely. There’s nothing more fun than making something beautiful and making money at it. Absolutely. I’m right

Gabriel Petersen 7:21
there with you. So, okay, so you’re looking right now you’re doing hard money loans you’re looking for, you’re looking for properties. So when it comes to the the fix and flip rental aspect of your business, how do you go about attracting leads? How do you how do you go about finding the properties that you’re actually looking to invest in?

Greg Sharp 7:43
what I’m doing right now, it’s mostly property radar. Okay, there is a book called The Larry Kurtz has book called The apartment directories. And so that’s one where he’s manually collected data, so I can use that as well. There’s also a family office network group that I belong to. And there you see the mandates of the people with money. So I can call up people from the property radar. I’ve got all the title listings, so I’ve been doing some mailings as well. Okay, I just started that. And then there’s the apartment directories. It’s like a 1300 dollar a year rental fee for the list. And, but it’s very accurate. Oh, that covers all three plus units in Orange County. And he’s pretty accurate. So between property radar, the apartment directories and the MLS and title records, I should be able to have a good way of cross referencing and finding people to bring in the Find the opportunities and what I can’t list. I’ll try to flip or bringing capital and so I can actually come in with people Say that they want to reposition their portfolio, I have the resources to do it. It’s good. So the difference between me and someone is purely flipping, a flippers is trying to get their margin. Well, I can go in, I don’t have to have my margin, but I can take a real estate commission. I can refinance and take a commission. Yep. So my competitors are the flippers and I have strategies that I’ve just said, how I’m going to beat out the flippers is that I don’t have to make them as big a margin as they might want to. That makes sense.

Gabriel Petersen 9:34
Yeah, I’ve, I mean, I’ve done flips in the past, it’s not something that I’m that I would ever consider myself to be. That’s not that’s not where I focus my energy at all. It’s pretty difficult. But when I was doing that, when I was looking for opportunities to flip houses, it was I was always getting beat out by people. And I was wondering why and it is because a lot of them are brokers and they can get the back end of actually listing the property themselves and that that makes a lot of sense.

Greg Sharp 10:00
Today the flippers their own worst enemies because they are bidding up prices so high in California. I’ve got wholesalers are coming to me is a great deal. It’s 85% of ARV. It’s like but what about the repairs though? There’s that doesn’t. I’ll look at max 80% ARV if it includes repairs my my estimation not yours.

Gabriel Petersen 10:25
Yeah.

Greg Sharp 10:26
And they say oh, I can sell it to somebody else it’s like well then do it, let them struggle with it. I’m not gonna I’m you know, having been through this once already. in a big way. I I’m going to make sure that my time is well spent. Yep. And young investors first time investors. Getting a deal is important. So they’re willing to take the thin deals.

Gabriel Petersen 10:50
And I mean, the it’s pretty well known now and metric to use when flipping is actually 70% minus repairs. Although in California, your your property value is so high But probably wouldn’t hold true down there, but what’s still 85% it’s pretty good thing

Greg Sharp 11:06
80% including repairs. That’s not exactly a lot. And for me, it’s like, I’m buying a real estate commission. Yeah, there are contractors out there, they’re buying the the money to pay their crews, so they don’t have to lay them off. Right. So those are again, people that are competing with the house flippers, and wholesalers.

Gabriel Petersen 11:30
Alright, so um, so we’ve talked a little bit about that. I want to switch switch gears just a little bit here and talk a little bit about your experiences and your stories. I mean, you already touched on it a little bit you went you you hit the 2008 market and and you went through that and now you’re on your way back up. So we all know you know, real estate has its it’s cyclical, both in the nature of the economics of it and in your own emotional experience highs and lows. So can you kind of tell people Tell people you know, what’s the hardest thing that you’ve gone through and the lessons you’ve learned in that? And then also, what’s what’s the thing that you love the most about real estate? what’s what’s the peak experience? What’s what you know, what gets you out of bed for it?

Greg Sharp 12:12
Well, the hardest thing ever was when I was doing the condo conversions is my first time through. And I had to make sure I knew everything. So I was spending a lot of time with a lot of work wasn’t bringing in the money on the very first project. And if I had an easy way out, I think I would have taken it. But today if I have an easy out, so I don’t have to do anything. And I have to stop myself and say, No, I have to push forward. I’m going to do it. So before it was the discipline to get through the anguish of being a first time investor now it’s the anguish of being super highly disciplined to keep pushing forward, knowing that eventually it’s going to happen, because it will happen. It just takes time and patience. Absolutely. And then fighting through the downturn. I had just had an investment partner take a couple hundred thousand dollars from us. I had syndicated the funds, and on behalf of all the other people I had to sue, otherwise they were all going to sue me. Yeah. And after I spent $50,000 that I didn’t have with my attorney, he’s the one that sat me down and say, Greg, you know, you’re gonna have to declare bankruptcy. I said, but but I owe you $50,000. He says, I’m a partner in the firm. Don’t worry about it. I’ll take care of it. So that was a double lesson number one, you know, you have to watch how you’re spending your money and you got to do what’s necessary, but don’t, you know, make sure you can cover yourself, but always work with truly honorable people that are out for your best interest because when things go bad, they’ll take care of you. Yep. I had a condo project that went bad. And my investment partner going into the meeting with him when he was going to invest. I had a syndicate group say we’ve got all the money and I said, Well, I’m going into accept it with the high net worth guy. He said, Greg, the reason you want to work with me is if and when things go bad, I can step in and cure things. Sure enough, the market tanked. The I’d never heard of lender fatigue, the bank said they weren’t going to renew my loan. I call them up Alec, you know, what are we gonna do? Don’t worry about it. All right, the check, pay off the bank, and I’ll be the bank for you. It’s like, Ah, that’s why you told me that at the very beginning. So there are a lot of these things that I learned but didn’t realize until years later.

Gabriel Petersen 14:36
Gotcha. So I always have somebody that you trust

Greg Sharp 14:38
in your corner. And those people are the ones that make it all worthwhile.

And

I have the personality that I’m great at starting projects and finishing them but I’m not so great at operating them. So long term projects like holding a massive apartment portfolio. I blow my brains offers, but the turning properties, flipping condo conversions, that sort of thing. This is the thing that really juices me. Because it’s exciting. It’s new, it’s fresh, everything’s challenged. And it’s complicated and detailed. So by education, I’m an engineer. And you’ll see a lot of engineers and real estate. Yeah, a lot of that’s because of know your numbers, that’s for sure. It’s it’s complicated. They don’t mind the difficult things and they get stimulated by it. But it’s all still methodical process.

Gabriel Petersen 15:30
That makes absolute sense. So that that was kind of the lesson that you learned. So what’s your, you know, your peak, what’s what’s the thing that you really enjoy the thing that that brings you back to real estate?

Greg Sharp 15:42
Really, it’s the deal. It’s, it’s the deal. I love the deals. I don’t want to sound like I’m trying to imitate Trump and the art of the deal. But structuring things and putting it together and executing it’s that that sort of thing, but I’ve got some great friends, and good memories and people that will stand by me and it’s the friendships who build. So it really is a lifestyle, that high net worth guy that I work with, on, he must be pushing at right now I haven’t talked to him in a few years, he ended up getting married. And, you know, he couldn’t stop doing real estate because that’s where all of his friends were. That makes sense. And, you know, so you make money with people and I want to do a deal when I turn 100. And actually, I I’m 57 now. And so, at this point, I’m more focused on getting younger people in my life so that when I’m 95 and 100, trying to do a deal or two, I’ve got a lot of energetic 70 and 80 year olds around, you

Gabriel Petersen 16:51
know, 70 and 80 year olds, they’ve got the energy, that’s for sure.

Greg Sharp 16:55
Yeah, they’ve got the experience. They’ve been through cycles and in you know, another 40 years I’ve been through a couple more cycles and by then I will have kept a lot of money too. And it’ll You know, it just makes it it’s fun. The highlight my entire career was on the first condo conversion project I did. It was like one year in one day after I got the investment check. I returned double his money, and I wrote a million dollar check.

Gabriel Petersen 17:23
Wow, that have to have been quite the experience.

Greg Sharp 17:27
Yeah, I wanted to keep it but it was still pretty fun on his his part that I got to write the check that doubled his money in a year. That’s pretty cool. And

that how many condo conversions did you do during your during your stint? I did about 13 projects totaling about 250 units

75 were not sold. Okay, okay. On that along the way. I did a few notes did some flips. Did some ground up luxury homes did some property management managed an HOA with Call us Hoa or condo conversions, I had to create the HOA for each one. So I’m kind of an HOA expert at this point so managing an HOA I took on the angry old white guy that was bullying all the diminutive first generation Asians. Oh man and, and it’s as every bit as ugly as it sounds. You’ve got 17 great people and one angry bully. And like,

Gabriel Petersen 18:28
he can be cutthroat, that’s for sure.

Greg Sharp 18:32
Yeah, my partner was Asian. So he got us in there, but they liked it because I was the white guy that stood up to the southern really big white guy. It was it was ugly. We were in court one time and they said he never faced the judge just faced me. fists clenched and breathing heavy on. I specifically stood between him and the president of the HOA so that he if he attacked, he would attack me.

Gabriel Petersen 18:57
Man, that is a story.

Greg Sharp 19:00
There are lots of stories like this. The time my crew went in to clean out a property, they all went home with fleas.

Gabriel Petersen 19:06
Oh, man.

Greg Sharp 19:08
I had to apologize and buy them a few meals to make up for that.

Gabriel Petersen 19:15
Well, though, yeah, that is definitely a that’s definitely something that flippers can associate with going into a property and just being like, I don’t want to touch anything here. This is disgusting. So we’re going to switch gears just one last time here. I want to learn a little bit about you know, what makes you tick. What What brings you forward here? So, if you can kind of sum it up, like what habit contributes the most to your success in real estate investing?

Greg Sharp 19:42
my superpower is analysis. So with the analysis, I can find the deals make sure they’re a good deal. And I’m anal litical Okay, all right. It’s when I Say something. I know that I know it, and I can prove that I know it. God, I’ve dealt with so many young investors first timers, especially when the market was running up. You see all these investments out there, they’re crap. They’re literal crap. And I could point out the holes and boy, people would get upset. I said, Look, it’s crap. And here’s why. And I don’t care if you get upset about it. It’s not a good deal. You need to find better deals. Yeah, just like the wholesalers that bring me an 85% ARV deals like no, I’m not interested, go find it, sell it to some other sucker. Yeah.

Gabriel Petersen 20:33
Okay, analysis, I like that. And that is super important. It’s something that I’m working on myself. So so that is that you gotta have somebody with good analytical skills on the team.

Greg Sharp 20:43
And I’m book smart. So if you partner me with a street smart person, we’re very powerful team. And so the analysis and allows you to find the deal, make sure it’s a good deal. And then you can find the partners. Yep, one and tying it up. Always having liquid cash to tie up deals. When you when you control the deal, then people don’t just have to wait you out to take it from you. Right

now Now you’ve got something of value to them.

Gabriel Petersen 21:13
So on top of that, so you know back you know, you started to play before 2008 if you can go back to that, that version of Greg back in 2000, whatever it was, whatever your you know, you did your first comic conversion, and you can give him one piece of advice. What would that piece of advice be?

Greg Sharp 21:32
Don’t get greedy cycle and

Gabriel Petersen 21:37
all right. I like it shortened to the point and couched in plenty of experience, I’m sure.

Greg Sharp 21:42
Yeah. Have you ever heard of Bruce Norris? I have not know. Bruce Norris. It’s like a regional guru here in Southern California. He’s a data guy. He mines all sorts of data. He’s gotten really good. He predicted the downturn. He’s testified in front of Congress and great person to get to know From an investment standpoint, but he was someone who is very big on analysis as well. And I kind of modeled some things after him. When he predicted the downturn. He was three or four years early before the crash in 2007. Eight. And he says, I don’t know why it’s it’s not crashing now. Yeah, but when it happened, he was safe. He says, Yeah, I missed out on a couple years of really great returns, but I kept my capital.

Gabriel Petersen 22:30
Yep. But I’m gonna lose it all either. So that’s, that’s Yeah. watching out for the downturns is definitely something that every investor is wary of. Okay, so for people who would like to get in contact with you. First, what is it that you want? What is it you want people to bring you and then how can people get in contact with you?

Greg Sharp 22:53
I’m gonna ask you to question first. Most of your people that are be watching this, they’re up in the Seattle Pacific Northwest area.

Gabriel Petersen 23:00
Nope, this is this is a national it’s on it’s gonna be. It’s gonna be as a lot launched yet but it’ll be on YouTube on podcasts wherever I’m anywhere in the US essentially.

Greg Sharp 23:10
Yeah, basically for anybody nationwide, it’s bring me multifamily loans. I have a network of 750 banks that will soon start lending plus I’ve got great apartment loans. I’ve got hard money lenders scattered across the country. So basically for finance, I can help you get the financing done. If you’ve got a great opportunity, I do have people that will go nationwide, that might be Equity Partners, but I’m really poor for Equity Partners, because our threshold is really high. okay to do something like that, so really, it’s real on the lending side. If you have money and you say, hey, Greg, I’d like to work with you. Cattle would really make my day. But we can talk about partnering a little bit on deals and using my experience and analysis. Your money to find something that works for both of us. And it’s not just because you have money doesn’t mean we’ll work together. It’s got to be the right combination of people. Because if you’re if you’re not the right match, that ugliness is just not worth it. Make sense? And it’s not just that you’re not good enough for me, I might not be good enough for you. It works both ways.

Gabriel Petersen 24:19
Yep. So how can if somebody would like to reach out to you, how should they be? How should they reach out to you?

Greg Sharp 24:26
Um, mostly by email, I try to make sure that my emails are answered every single day.

Okay, so that is the best way

Gabriel Petersen 24:36
you want to share, share your email or push them to LinkedIn.

Greg Sharp 24:42
It’s Hello at Greg sharp real estate calm.

Gabriel Petersen 24:46
All right, perfect. Well, Greg, thank you very much for stopping over here and sharing with us your experience in real estate. I’m sure I can speak with everybody listening and watching that we really enjoyed it. Stay on after the show but for everybody watching, we’ll see you next time. Thanks for watching. Thank you

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Topics you’ll learn more about throughout our episodes:

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– Investing in commercial real estate

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