JLM Blog | Episode 9: Leveraging Opportunities and Real Estate FundamentalsReal Estate News, Updates, and Tips
Multifamily Real Estate Agency San Diego
Listen to the Podcast Here:
Podcast Episode by Jason Lee – Premiered November 11, 2021
What You’ll Learn in the Podcast:
- Eric’s background and how he got into real estate after being being Silicon Valley and being in tech.
- How Eric saw his net worth move from $1m to $50m in 7 years.
- How Eric loves the business model of people loving the assets they already own.
- Information about the net savings of the average American and how that relates to real estate.
- The markets that Eric is investing in right now.
- How COVID has affected the real estate market.
- A story about when a deal went south and Eric learned a great deal from it.
- Why real estate is the best way to build wealth.
Summary and Highlights:
Who is Eric Lotchfeld?
He is the co-author of the book titled Purpose Code. Eric Lochtefeld, a multimillionaire entrepreneur. Before starting afresh, he founded 20 or more enterprises with annual revenues surpassing $250 million.
Through his new company, Delight Champions, Eric specializes in assisting accomplished. Still, unsatisfied business owners accept their most extraordinary mission, becoming solid bearers of riches, pleasure, and overflowing bliss. Owning an excellent eye for remarkable talent and the ability to convert everything into a billion-dollar accomplishment, Eric also participates in clientele whose soul’s desire has the potential to revolutionize.
Markets that Lotchfeld is Investing In
BLISS YACHT IN AUSTIN : Eric Lochtefeld’s Bliss Yacht, an 85-foot super yacht featuring nine bedrooms with perfect dazzle to let everyone be amazed, is currently under construction.
But by the summer of 2022, the magnificent Bliss Yacht will be completed. You will use the yacht for personal happiness, business getaways, and special events, including weekend break vacations.
BLISS VILLA IN DESTIN : This residential property was bought for $3.45 mm. It will be listed as a short-term vacation rental place and a perfect site for those who are gearing towards personal development and company retreats.
FOX THEATER IN SILICON VALLEY : This organization may generate approximately $25 million in income from musical record sales and space leases. Along the journey, they would experience many of the most exciting goosebumps. They will interact and welcome commercial giants, world-renowned musicians, best-selling writers, as well as every influential Californian figure.
BOA VIDA WINE ESTATE IN SILICON VALLEY: Its thousand vines generated plenty of grapes to create sufficient high-quality wines to satisfy the whole of our theatregoers’ drinking cravings. Their bill to create a box of wine was around $9, and then they could sell it by the bottle for about $12. The supply chain with our other companies rendered this estate almost costless to hold, igniting a drive to achieve this outcome continually.
Why Real Estate is the Best Way to Build Wealth
Real estate investment may be an effective strategy to increase one’s total value. Real estate provides an unmatched mix of traditionally high returns, residual investments, and the possibility to guard against inflationary and stock price fluctuations.
Real estate is among the most desirable financing options due to the relatively low impact and high return prospects. Since real estate prices increase over time, this serves as a safe investment. Plus, to get a permanent dwelling, among the essential factors for horizontal owner-occupiers is the
Eric is enthusiastic about his firm, Joy Champions, which helps individuals develop businesses and lifestyles centered on their bliss voyages. And here, in numerous previous ventures, Eric has been in a rare position to observe the abilities, attitudes, and ambitions that have enabled businesses to survive as well as figure out a way to overcome the worldwide global epidemic as entrepreneurs.
Episode 19: Building Massive Wealth Through Real Estate
Watch the Podcast | Read the Transcript
[Intro]00:01 Welcome to the multi-family millionaire podcast. The show that interviews multi-millionaire real estate investors and top producers in the real estate industry. If you’re looking to create passive income and achieve financial freedom so that you can do what you want whenever you want, you’re in the right place. Our goal is to simplify and make real estate investing easy for you. For more information, you can find us at www.JLM.realestate.
What’s up everyone. Welcome back to the podcast. Thank you for taking the time outta your day to listen to this show. I hope it’s been very helpful for you the past episodes that you’ve listened. If this is your first episode. Welcome, thank you for being here. This is the multi-family millionaire podcast where I help people learn more about real estate investing and how to create cash flow and wealth for you so that you don’t have to work in the future and have all the freedom you want to do what you want when you want. That’s my goal here. So, I hope you’re enjoying it. Today I have a very special guest. His name is Eric Lochtefeld. He is a serial entrepreneur he’s had over 27 businesses and he is a very big real estate investor who had a very interesting start that most people or that I haven’t heard most people do actually.
He’s the first person I’ve met who started in real estate this way and made a huge gain on his investment by running his business in the property that he bought, which he’ll learn more about. But other than that, everything, everything with the show has been incredible. All the support and the love of beginning on social media and even personal text messages has been great. If you want to learn about a specific topic or have any questions about the show that you want me to go over feel free to gimme a shout whenever you want. You can reach me super easily by DMing me at my Instagram on Jason Joseph Lee is my handle. So other than that, let’s get into Eric. He is a very special entrepreneur, and he also has a really cool coaching business that I actually might be a part of.
He does some events for people who are, you know, who have their own businesses that want to take the next step that want to increase their network and their mindset open their mind even more to different opportunities. So yeah, other than that, let’s get to the show and thank you for being here,
Jason Lee: Eric, how you doing today?
Eric Lochtefeld: I’m doing fantastic. And you Jason,
Jason Lee: I’m doing fantastic. Thanks for coming on the show. I know you’re a busy guy, you’ve done a lot of big things, so I appreciate you being on the show. Just to start, just wanted to ask you personally and open it up to the audience about who you are and kind of what your background is.
Eric Lochtefeld: Yeah, my name’s Eric Lochtefeld. I was in Silicon Valley. One of the few people ever to be a success at business without being in tech in Silicon Valley. And so that’s a story in and of itself. But I am a non-tech guy. I went to university of San Diego where I played football and basketball in college and went straight into the event business. So, I’ve been an event producer for really the lions share 25 years of my career. And what really changed for me that leads me to be on your show is about 10, 11 years ago I kind of figured out that owning the venues that all the events were at was a far better play.
So, I started to get into asset acquisition, and it really changed my life for the better. And I’m excited to talk about some of the real estate moves that I made in the past without losing the ability to do what I love, which is to actually put events on.
Jason Lee: Nice. So how did you initially get into real estate then?
Eric Lochtefeld: Yeah, so I think just before I turned 40, I was running a global company and I would call myself one of the worst renters in America. I was actually running a business called university of dreams, which was a summer internship program for college students. And it was predicated on getting them dormitory space for eight weeks and then placing them in an amazing internship. And I ran these programs out of NYU, Stanford, UCLA, and most of the most incredible universities around the world. And what I was doing is I was writing a cheque to those universities to rent their dorm space. And those checks got bigger and bigger and bigger as I went global. And I found myself writing $5 million worth of rent checks for two months, every single summer.
And so, I started to wonder, wow, what would that look like as a down payment on my own dormitory building? What would that look like as servicing of the debt over the course of a year when I still had another 10 months to rent out to local students. And that’s when I first remember starting to think about the fact that I was a terrible renter on a mass global scale. And it wasn’t though until a few years later, when I went to buy a really nice asset in Silicon Valley called the Fox theater property. This was a mixed-use historical asset that had both a live entertainment theater was 1200 seats. Plus, it had about 10,000 square feet of office space up above, and it had another 7,000 or so retail space down below. And when I went to go about buying that, I did an SBA loan with my wife and one of the first things they said with the bank with SBAs, they said we don’t do real estate loans with SBA.
And I said, what are you talking about? Everybody sent me specifically because you do real estate and said, well, we, and we don’t. So, we will actually fund the purchase of real estate, but you have to have a separate operating company in order to work with said real estate. And that’s the company essentially, we’re going to be monitoring and making sure you’re performing and whatnot. So, I found myself in this position where I had one hat on as the majority owner of the real estate, the entire city block in downtown Redwood city, which was an up-and-coming city. And then on the other hat, I had to be an operator. So, they wanted me to be a 50% owner operator. So, I decided to operate the theater and I quickly anointed myself a promoter, right? And then also a renter of that space.
Long story short, an interesting thing started to happen. I was forced by SBA to sign a lease between my operating company and my landlord company. Remember they’re both me. And at the beginning every month I had to cut a check for $33,000 to rent the theater. And at the beginning I felt like, wow, this is a huge burden. This is really tough. I started to realize, technically I’m writing the cheque to myself, doesn’t have to be on the first, right. It doesn’t even have to be that month, as long as at the end of the year, there’s 12 rent cheques in there, right? So, there was some freedom there in the inner company dealings. But then I started to realize when the money swung over to my landlord company, about 50% of it went out in interest to the bank, but the other 50% paid down my mortgage.
And for the first time ever in my life, it was ding, ding, ding, ding, ding. I’m actually getting half of 33,000, but 16,500 ish richer every single month merely by being in business. And as time went on and I saw the property, do two things, one depreciate, right. And pay off that mortgage, increasing my net worth, I also saw it appreciate, and this particular property didn’t appreciate the national average of 3%. It appreciated at 30% annually. So, my 6 million assets supported by my little concert promotions company that could, you know, was just getting by. It didn’t matter how well the concert cost of much this company was doing because I was both depreciated and appreciating. And then I had this huge, what I call the wealth gap, right, where I had this really nice net worth and if I could ever find a buyer for that, it would be realized wealth. And that’s exactly what happened.
Seven years later, I had a buyer come along. I paid $6 million. I financed it with 5 million on SBA loans. And a buyer came along and offered me 20 million after seven years. Exactly. And a really interesting happened. We got into the negotiations, we ended up settling on a price of 18.5, and then I carried back a little bit, got them up to 19. So, I did pretty well for myself. But a really fascinating thing is I went in at that year seven sale. And I looked at my operating company and I did an interesting thing in QuickBooks. You know, you can set dates and usually you just set like a calendar year or fiscal year. Well, I went back to the first date that I began operating back in 2010. And then I put today’s date in 2017. And what I saw is I did 25 million in revenue as an event promoter and a venue renter. And I’m like, oh, you know, a nice pat on the back. And then I’m like, oh geez, I’m really curious. How’d I do on expenses? And I went down now, keep in mind, my rent payments that went to the mortgage were also part of the expenses, but I saw a very similar number, also 25 million. And that was another ding, ding, ding, ding, ding. Here I ran this company for seven years, grinding it out, right, running a cost of promotions company, doing 120 concerts and events a year. It did make a profit in seven years. Yet it fed the beast, the asset, which created an amazing amount of wealth for me.
So, it was just a real, incredible learning experience coming off that summer internship play that I didn’t due to kind of getting it mostly right. Well now I only deploy this model. So, what I do is I go out and I buy assets that I really, really want. And if I have to beg, borrow, and steal to get the down payment, so be it. These days I have a fair amount of cash, so I can put the down payments myself, mostly without raising capital. And then I get that asset. And then I use my entrepreneurial skillset to monetize said asset and to service the debt. So, it’s a little different direction than most people are used to. People in the real estate world, they’re like, oh yeah, that, of course that’s what you do. But most entrepreneurs actually, they work their tail off to drive revenue and all they’re focused on is increasing their revenue. And they say things like someday I’ll buy that asset I really want. So now they have a piggy bank strategy of saving the profit margin or the income that they’re able to spend, not spend in hope that someday they can afford that asset.
So, I’ve completely reversed it. And I saw my net worth climb from, you know, a million bucks to 50 million in 7 years with this model. So, for me, there is no other model and this is the model that I deploy. And I’m interested in sharing it with others.
Jason Lee: Moral of the story, own the real estate. Don’t be a renter.
Eric Lochtefeld: Yeah. You know, I even learned it in a micro way. So, as I started to get good at this, I said, oh, you know, I need a sound system, right? I’m a concert promoter now, but who pays for that? Is it me the concert promoter or the venue, the landlord also me? And I said, hey, Mr. Me, you have to pay for my sound system. And I was renting an old Warhorse that was 30 years old. It was a shitty sound system. Excuse my language. It really was. And the audience didn’t like it much either, but I was running it out for 6,000 a month. And then I started to do the math and I’m thinking, I could own a state-of-the-art system for $220,000 if I could just make that investment. So even though at that time, I had just bought the theater and money was tight. I went ahead and bought the best sound system on the market for that size venue.
And then I turned around and I did something smart. I rented this sound system out for $2,000 to third party promoters. And everybody that ever rented the venue while I was doing 120 events a year, I recouped in the first year. So not an asset that appreciates, but an asset that has the benefit of depreciation. I was able to depreciate all 220,000 over a schedule. But then on top of that, I’m earning a pure profit on my asset.
So, I love businesses that are based on an asset. One of the most exciting things I see going on in the world right now in this area is Airbnb, Toro, right? People using their cars as assets, Uber Lyft. In the end, yeah, there’s big, huge Silicon Valley type Titans, you know, creating the platforms, but people are starting to get it like, oh wait, I can monetize my own assets that I own be my own boss, create my own schedule. And oh, wait a minute. I’m now making more than I’m making it my job where I can’t do any of those things.
So, I find it fascinating that this is becoming the new normal. I can’t tell you how many people I know that have quit their day jobs because their Airbnb’s are now outperforming their salaries. That’s exciting.
Jason Lee: It’s exciting stuff for sure. And kind of going back to it. So, you, so your model is you will, or how you started is you’ll buy a commercial property and then you will be the landlord that owns it. And also, you will feed the business by running the business that rents the property, right?
Eric Lochtefeld: Yeah. I think I’m speaking to entrepreneurs right now. So, the first part of my process is analysis. What, besides labor are your top three expenses Mr. Or Mrs. Entrepreneur, and someone might come back to you and go, well, Jason and Eric, I spend about five grand a month in office rent, right? So therein lies an opportunity. That makes you a bad renter.
You’re spending $60,000 a year paying it over to probably somebody like me, right. Monetizing my asset for me, have you ever considered buying your own office space, right? So, you start to go down the line, as a concert promoter, I needed a sound system. I was spending $6,000 a month. So that was a really good asset play for me to make that investment. So, the first thing I do is try to analyze that and figure out where are you just giving money away that in essence could be building wealth for yourself, right?
So, I like to do that first, but ultimately when you’re able to acquire the asset, I do love the idea of having a separate company, which by the way, technically from a legal standpoint and an insurance and protection standpoint is the wise move. Cause for instance, if I’m running concerts at my theater and that concert company also owns the asset, the theater itself. So technically speaking, you should always separate your real estate from an operating company, not so much with just general assets, like a sound system, it’s fine to have that in the same thing. But generally speaking, I set up the real estate company and then I put my entrepreneurial skill set into an operating company in order to service that debt. So that’s how I tend to structure things.
Jason Lee: Got it. So, someone that’s watching the show wanted to do this themselves, how would they get started?
Eric Lochtefeld: Yeah. So, let’s take an Airbnb example because I think that’s prevalent, right? A lot of people are jumping into that space, especially during COVID. If people were simply just trying to update their home existence, they were trying to find a place to get away to. So, a lot of investments went into vacation properties. So, one of the first things that I would say is create an LLC to actually own that vacation property, so that it’s protected. And then if you are actually not just going to farm out the renting of that property, right. And the property management, if you’re going to kind of do that yourself, you can create a separate LLC to actually do that and keep those two things separate and they could be speaking to each other. So, you could bring the revenue in through the operating LLC, take your commission, take your salary, your earnings, but then you’re passing on what will be servicing the debt over to the real estate company.
So, I find it’s the order of things is find something you really, really want. We get hurt in real estate when we settle. When we buy a property, it’s like it’s okay. You know, you’ve probably moved into an apartment before. You’re like, if you would’ve spent 200 bucks more a month on your roommate, you would’ve had to baller pad, but instead you went conservative and then someone else moved in the baller pad and there, you can just see, they were the toast of the town and you’re like, oh man, we should have got that.
We could have found that 200 bucks, but I would say that number one is you go for what you really, really want. The second thing that you do is let’s replace big borrower steel. Cause I don’t advocate stealing with busk. Know what a busker is. That’s like a street performer that puts a hat out and they perform for tips.
So, busk indicates like do whatever it takes to find that down payment. And I know some of you at home will be saying, well, that’s easy for you to say rich guy. Well A, I wasn’t always a rich guy. I’m self-made. And B even as a rich guy, I often don’t have the down payments when I need them. Right. So, I think down payments is all about the strategy of getting that 20% to get in the game. But then the third strategy is have a really good strategy of how you’re going to service the debt. I think most people make a mistake if they just think income from the beginning, how can I get more income? Well, those three things need to be taken care of first after the debt’s getting serviced and you have consistent flow of revenue going towards that debt, then you could worry about ratcheting up the income.
So, I think it’s important to approach real estate from that direction. Otherwise, you just end up like an entrepreneur that’s only obsessed with top line revenue, and they just think, if I could just get one more sale, right. Then I’ll be wealthy. Will you? If you compare wealth, if you take Jason, say like you get, maybe you say to yourself, man, if I could get enough advertisers and sponsors to get my podcast to pay me $250,000 a year, I’ll be set. So, let’s take that. Did you know that the average amount of savings for an American is less than 10% of their net pay? So, let’s just take a look at that. You get paid $250,000. Let’s just for the stake argument.
Say, ah, I don’t know. 50 of that goes out in taxes and I’m being really conservative, like in favor of you holding onto it So that leaves about 200,000 lefts. So that brings you down to 10%. So that’s 20 grand a year and now is anything going to happen along the way? Are you going to meet a gal or a significant other, are you going to want to go on a nice vacation? Are you going to need to buy an engagement ring? Are you going to get pulled over by the cops? Are you going to get in an accident? Like, are you going to have something medical? So, unless you’re a perfect saver at 20 grand a year, you’re probably going to end up with less than that. Now multiply that over 10 years. There’s your wealth. If you had gone into podcasting saying, man, if I could just get to 250 a year, I’m going to be set. But then when you take a step back, I think what you should say instead is if I could get to 250 a year, I’m going to have a great lifestyle, right?
But lifestyle is different than wealth. Good income can buy you lifestyle. And as you earn more, you can increase your lifestyle, but that’s not wealth. However, if you were to take that same to $250,000 and beg, borrow, and bust to get it. And you invest that in a piece of real estate after 10 years, even at only 3% annual appreciation, the national average, at least for commercial at the end of 10 years, you exponentially see that wealth creation because you’re appreciating and you’re paying down the debt and this is all yours. So, I’m now surgical. I’m like, screw it, I’m not building any big companies anymore at all. I’m just going to keep buying bigger and bigger real estate. And then I’m going to put my entrepreneurial hat on to just service the debt. So, all I really care about is, hey, I’m going to do enough entrepreneurial to service the debt. If I need more income, I’ll dial it up, but I’m just going to service it. And so that’s kind of the model that I’ve been on for several, several years now. And it’s been really beneficial.
Jason Lee: Yeah. I mean, you can have said it better. Doesn’t matter how much money you make uncle. Sam’s going to take more than half of it. So, if you’re making a million dollars a year, I mean, you know, you should be working to put that all towards assets, real estate, which is what I’m doing. I make money so I can invest in property. I don’t make money so I can spend it and have a good lifestyle. Cause I know that if I keep investing in assets like yourself in 20 to 30 years, I’ll be, you know, my net worth will be pretty good.
Eric Lochtefeld: The exit become seven figures, right? Jason, So that’s the exciting part. Like, you know, I used to make $350,000 as a CEO for a global company, like 15 years ago. And when I went to buy my first house, I had to borrow the down payment, right. 350,000 a year. I had a big expense account. I had nice cars. I had a great lifestyle by all outward appearances, wealthy, but I couldn’t, you know, in, in California, Silicon Valley, it’s no joke like to buy your first house. I know to the rest of America, they’ll be like, it costs $2 million for your first house. Yeah, in Silicon Valley, it cost me $2 million for my first house. So, I needed 400 K down payment.
I didn’t have it. And I was a global CEO, the leader in my industry. So that taught me that lesson, like, wait a minute, something’s wrong here. I’m doing something wrong. And so that’s the exciting thing you do that same comparison of investing 250,000 on a down payment. You use a way to service that debt every single month or throughout the year. At the end of 10 years.
In my case with the Fox theater, I went from a 6 million purchase with 1 million down in servicing 5 million in debt to clearing, you know, to getting to 18 and a half on the exit 19 million. I think my gain was 15 million. So now all of a sudden, my bank doesn’t know what to do with me anymore because when they ask me for my W2 I say, oh yeah, I don’t have any of those. Yeah, I don’t have any of those. I only have K1s right. And oh, how much did I make last year? Oh, I made $5 million on the sale of that piece of real estate. And then they say things like, yeah, but that’s not reoccurring. And I’m like, yeah, but that 5 million sitting in your bank right now. So, I have to argue my way to like this other way of doing it is better. Even at the bank level, I went into the DMV in California and because I couldn’t produce a single W2, they wouldn’t give me the new California ID. I have to travel with my freaking passport. Isn’t that funny? I literally could not produce the right documentation because I didn’t fit into their box. I brought, I owned 23 companies. I brought K1s from all 23 companies. It had my social security number on there. And the manager at the DMV would not accept it.
So again, do I want to be like the masses who have trouble saving and they’re not building wealth? Or do I want to stick with a model that I know works? And the number one asset is real estate. There’s no asset that’s made me wealthier faster than real estate.
Jason Lee: A hundred percent. There’s no asset that appreciates that gives you tax benefits that pays down principle. That gives you cash flow. There’s none besides real estate.
Eric Lochtefeld: No. The only thing in Silicon Valley everyone’s after stock. But because I wasn’t a tech guy, I had to find a different way. And you know, stock is you just, you got to pick the right company, right. Or start the right company. And then you got to wait an awfully long time for that to happen typically unless it’s a hockey stick growth company. So yeah, real estate, I just, my wife and I, we keep doing the same thing and it just keeps building wealth. And we actually sold about 8 million in real estate in the last 12 months during COVID, but we bought the same amount. So, we bought about eight to 10 million in real estate. And already that portfolio has jumped up to 14 million. It’s just crazy how fast it can move sometime. But we bought in Austin, Hawaii, and Florida, right.
There’s 9,000 people a day moving to Florida. Austin’s been super-hot for the last couple years, and then Hawaii, because everyone’s trying to get out of COVID, they’re all jacking up the prices over there. So, it’s been really fascinating now. I’m not representing that. It always or can happen that fast all the time, you know, but I’m putting all my bets on real estate, you know, other than my own stock, I actually don’t own stock right. At all. I own real estate. And I own my own stock in 23 companies. My wife has seven or eight.
Jason Lee: That’s fantastic. And then do you only buy commercial assets or are you buying other assets? So, are you buying multifamily? Are you buying office retail?
Eric Lochtefeld: Pre COVID in my nine-year run of really building serious wealth. It was through commercial real estate. And then as COVID was approaching, I sold one of the assets. The one I told you that, I sold for 18 and a half and picked up another half million on a carryback. I sold that asset to, and I got out of that completely December of 2019. Now think about it. It’s a concert venue, right? So how did concert venues fair during COVID not so well, unfortunately, I had one more of those that I couldn’t sell in time. I literally, the week COVID struck, I had a buyer that came to one of my concerts that was going to make an offer. And then everything went south, and I had to hold onto that closed theater venue for 18 months. But I did find a buyer.
So, I’m now, what I’ve done is I’ve divested from all my commercial real estate, except one, cause it’s just so lucrative and all the leases are 10 years, and they were all before COVID struck and with publicly traded companies. So, there was no conflict there. We didn’t lose tenants. We didn’t have people not paying the rent. So, I held onto that, but every other commercial real estate asset I sold and converted to residential. So, my wife and I are, I’m buying retreat centers. You might think of that as commercial, but they’re actually residential properties that have unique ability to operate as businesses. And then my wife is just snapping up Airbnb’s as fast as you can imagine mainly in the south.
Jason Lee: Interesting. And are those houses or are those like duplexes, fourplexes?
Eric Lochtefeld: Houses, yeah. Houses. She’s buying she’s buying homes and converting them to Airbnb’s and becoming an expert at that, you know, like everybody else joining masterminds and learning it as much as possible. She’s finding that you know, the classic dual role property managers that also do the selling and booking are usually only one good at one of those activities. And so, she’s not trusting third parties to do that for her. She’s doing it herself and she’s finding that she can do about 30 to 40% more income per day rental than those companies were able to do for her.
And so, she’s killing it in Austin and in Alabama there on the Gulf shores. And then we also have properties in Destin now. So, these are very, very hot vacation markets for people in the south. And what’s unique about the south is there’s like eight states where, and even the Midwest level where they can all just drive there. So, it’s not the same as California folks when we’re all flying places to go anywhere almost is they’re just driving down. So, Dustin is our newest investment, and we really like that marketplace. It’s a top 10 ADR average daily rental marketplace. So, the good news is I run retreats for a living that’s my, you can call my side hustle or what I enjoy doing. And because we are buying some larger properties, we can do that at these properties. You know, we’re talking six bedrooms, seven bedrooms, eight bedrooms.
We also have recently invested in the construction of what we call the bliss yacht. And so, we have a nine-bedroom lake yacht that’s being built for Austin. Texas will be the first lake yacht in all of Texas, really anywhere in America, outside of Arizona where lake Powell is where most of them sit at this time. So, we’re very, very excited about that asset as well, deploying it as a retreat center for entrepreneurs and artists and other people that we do retreats for, and then also Airbnb it. So that’s going to be unique to have a floating, you know, palace like that, that can be rented out. And you know, so we love this space, you know, so we’ve moved away from large scale events and we’re all about smaller, you know, smaller groups because I don’t see COVID going away completely. You know, there’s going to be something else and something else and something else. So, I don’t want to be exposed the way I was in the concert industry ever again. I’d like to go with small but luxury.
Jason Lee: Gotcha. Switching gears, a little bit here. Could you share with the listener about a story where a deal might have gone south, but you recovered and learned from it and you know, learned a lot of lessons on the way.
Eric Lochtefeld: Yeah. I mean, I’m one of those people I don’t, people ask me aren’t you scared of failure? And I say, no, I, I expect failures along the way. That’s part of business, right? You overcome those challenges. So, I use the word learnings. I just don’t accept the word failure. So, have there been learnings on, I mean in business so many, but on the real estate front, are you specifically asking if I’ve ever had my tail kicked on a real estate deal?
Jason Lee: Yeah, basically.
Eric Lochtefeld: Yeah. I think you know; I bought this second theater hoping that it would perform as well as the first one that had this incredible situation. I did it a few years after, so I owned both simultaneously. But what I found is that if I just owned the one theater, I would’ve went on to have this incredible exit. I wouldn’t have had to put all the time and energy into keeping up the second property. And it was about an hour and a half away from each other.
So, it created quite a bit of a grind situation. And then of course COVID hit, and it became harder to sell over time. And you know, I ended up you know, licking my wounds for the first couple of months of COVID, but a strange thing happened is the federal government decided to allocate 15 billion to us, poor concert promoters, venue owners, because we were completely shut down. Unlike every other business, we were shut down in March of 2020, and we’re really just reopening. And so, they allocated 15 billion to our industry and we all applied on the same day.
They made it an arms race, like first come serve <laugh>, but we all applied freaking out that we weren’t going to get the funding, but we all got it. And then they released $9 billion and realized they still had 6 billion lefts. So, then they came back and did a supplemental round, and it was really great that the federal government do that. Cause they basically saved everybody’s ass cause you’re really talking about an event occurring outside of anyone’s imagination, completely shutting down an entire industry that has tentacles into real estate as well. So, I think I learned with that <laugh> the art of surrender to a degree, you know, I’m a guy that never gives up, but I had the skill set to tie everything off pretty fast.
But in the end, there was almost nothing we could do in that situation. So, what I did though, is good for your listeners is I went to my lender, and I said, hey, look, if you’re tough on me and you’re insisting that I pay a full mortgage while all my tenants can’t and we’re shut down, we’re all going to go down together. And then I’m going to hand you the keys to a 90-year-old theater property, is that what you want? So ultimately, I was able to get my, you know, my landlord, right as the owner of the real estate, the bank to actually give me a six-month reprieve, which I was then able to pass along to all my tenants. So, we had six months to breathe from April, you know, all the way till around November-ish, it saved everybody. It kept everybody in business.
And then by later, you know, some of these other grants came along. That would be a prime example. The other example that would hit home for most people is I went to buy a very exotic residential property. And I went to the traditional big banks like Wells Fargo and chase and bank of America. And man, they wasted so much of my time, and I would get there on the third or fourth month of the mortgage or not the mortgage of them considering whether to provide my loan only to be told that the property looked too commercial. And it’s like, it doesn’t matter what it looks like. It’s either zone residential or commercial. So, I had three failed Escrows from the big three banks, and I went and found a credit union. I kid you not, I got the loan done in 12 days.
This is after four months of just anguish and pain and suffering at the hands of the big banks. So, I would encourage your listeners to work with smaller banks, work with credit unions, cause credit unions are now able to do residential and commercial real estate. They have limits, you know, sometimes it’s like 3 million, it’s a little bit lower than bigger banks, but such a difference. When I call my bank now, I’m literally getting the owner of the bank answering my call and you know, he can actually hear exactly what it is I’m looking to do. He’ll brainstorm with me to figure out the best path. And you’re just not going to get that at the big banks.
Jason Lee: Yeah. I mean, that’s a great answer. I think kind of what I like about your story and about your personality is you don’t stop until you find what you want to get and what you want to get to. Which I think is fascinating and is a skill that you need in a trait to succeed in real estate. So, it’s huge.
Eric Lochtefeld: Yeah. And I think you just identify what people tell me they say, oh, you have to stick to it in this. They just kind of makeup words to say that I have grit and perseverance, but don’t forget the piece at the beginning that I said, number one thing in real estate, only go after buying that, what you really, really want because when this other stuff happens and challenges happens, you’re going to be willing to put up a fight because if you really, really wanted it, chances are you still really want it. Now in my case with the theater, I kind of wanted to sell it, right? So, I had to be nimble, but I think that’s a key thing. Every time I deal with someone and start to teach them my asset wealth strategies. I’ll often hear it, well, I’ve been heard in real estate.
And when I dig into those individuals and it’s pretty rare, but I do find those individuals, What I find is that they settled. They got frustrated in the search or they weren’t very good at the search, or they were just too quick to make a decision. They were in a rush. So, they bought real estate that in the end they didn’t really love. And then if they didn’t love it, guess what? Chances are there’s a reason. And then future buyers will probably feel the same. I buy real estate sometimes that nobody else wants. I’m like the only guy that wants it, like 90-year-old theaters, because I believe that my entrepreneurial skillset can give it a facelift and turn it into something really valuable. And so, I’ve been doing that pretty successfully for a while. Not everybody has that skillset. But if all you’re doing, is you’re going into a competitive real estate space, you know, and buying to, trying to do the strategy of buy low, sell high. Well, guess what? You have a lot of competition.
Try to go into Austin right now and buy a house in a good school neighborhood. Good luck with that. You better get ready to bid a half million over asking. So, it’s interesting. I would stick with what you really, really want, cause that’s the real estate you’re going to love. You’re going to take care of. The other interesting strategy about real estate, especially commercial is follow the chefs. And I guarantee you this’ll probably be the first time you’ve heard this, but you know, there’s a lot of chefs that are ready to break out and they currently are in the number two position at the best restaurants in the fancy neighborhoods. So, like Beverly Hills for instance. So go find out who the next badass chef is. cause what they’re going to do is they’re going to eventually break off to start their own restaurant.
But what they often don’t have is money, right? So, they tend to gravitate to those up-and-coming neighborhoods, you know, the artistic ones, right? The ones that all the artists are hanging out at, because they can still afford it. And then they go create a restaurant there because they can afford the rent. But guess where the money and development follows, it follows the food. Like where are our favorite places where all the best restaurants are. So, I’ve seen this in all across America, in most of the big cities that you think are built out and they’re done and there’s no more real estate opportunities. It’s always like this swanky little artsy neighborhood that always becomes the next juggernaut. And I follow the chefs, you know, that’s something I’ve been doing as well that I find kind of interesting. You know, you get a couple great chefs in a neighborhood, all of a sudden, it’s not such a bad neighborhood anymore.
Jason Lee: That is a fascinating topic I’ve never heard of before.
Eric Lochtefeld: <Laugh> that’s a little trick of mine.
Jason Lee: Yeah. So how would someone get in touch with a chef that might be looking to break out just…
Eric Lochtefeld: They’re not that hard to get to. Yeah, they’re not that hard to get to. It’s not like trying to call a billionaire. You know, I, I guess the strategies on that is, I’m a foodie, so I like to eat at good restaurants. And so, I often will ask to meet the chef or hey, who’s responsible for this amazing meal, you know? So, I get to know a few that way. But it’s almost like a Bulletproof way, man. Follow the food, right? If Americans like anything, they like great food, you put great food in that shitty neighborhood, it doesn’t stay shitty for long. So, we kind of pulled that off in Redwood city, Redwood city. It was, you know, it’s a city in Silicon Valley in between San Francisco and San Jose. And it was actually nickname, Deadwood city for decades. And my wife and I went in there and we bought there because that’s the only place we could afford to compete real estate wise, the big boys weren’t going in, the real estate hedge funds weren’t going in and buying real estate there.
So, we were able to buy almost a whole city block because you know what? Nobody wanted it. But we thought it was up and coming. And so, we played the role of the chef. We went in and started putting on concerts that attracted a hundred to 150,000 a year to our city block. And then all of a sudden chefs started going, maybe I should start a restaurant row with city. It seems to have a lot of life coming to it. It’s up and coming. I can still afford it. And before you know it, we were all in cahoots together, lifting each other up. And then that city is credited with leading a Renaissance. Do you know how much development money came in the seven years that, actually after the first three years I was there in the next four years, guess how much development money came in within five blocks of my theater?
Jason Lee: How much?
Eric Lochtefeld: 4 billion. With a B. 4 billion and others later thought, oh it was the developers, the developers I’m like, nah, it was the first movers. You know, those of us that couldn’t afford to be in Palo Alto or San Francisco, these other fancy cities we wanted a [41:36 inaudible] city because we could afford it. So, if it’s not the right chef, it’s the right entrepreneurs. So, keep an eye out for anybody that’s doing something really, really interesting in that, you know, that neighborhood that nobody really thinks about, right? Because it’s the entrepreneurs that, and that’s what a chef is. That’s the entrepreneurs build up these new areas.
And if you can commercially get in, get in commercial investments in those up-and-coming neighborhoods. That’s the holy grail, right? Because there’s so many layers of money. Like the big developers get all the credit after the fact, But it’s like, they’re late to the party in a nine-inning baseball analogy. They didn’t even come until the sixth inning. And some of the biggest money came in the eighth inning, but they have so much money. It doesn’t matter. They just buy their way in. But a lot of us that really wanted to create this amazing bump we got in the first, second and third inning before anyone else did.
And that’s why I was able to buy something for 6 million on debt and sell it for 19, just seven years later, you know? And that wasn’t my only investment. I also bought the parking lots behind my theater. We parlayed that into a $64 million build and doubled our money on that in the end on the value of the property. So, I watched my net worth skyrocket because of the risk I took on assets, you know, right place, right time. But we also, because we were the entrepreneurs, we made our, you know, we made that action happen, right?
Starbucks did come down next to my theater because they, you know, they just saw good foot traffic, you know, in the end we made the foot traffic. They wouldn’t have come before they weren’t coming.
Jason Lee: That’s awesome. That’s amazing Eric. Yeah. It’s all great stuff. Great story. I think your story is fascinating. We’re kind of running outta time here, but if people want to learn more about you and you’re coaching and your group retreats, you know, how can they learn more about that?
Eric Lochtefeld: Yeah. So, I do two things. I either coach one on one or I coach in groups and my preference in groups is I coach through retreats. Again, because I happen to own some pretty cool assets. I have a retreat compound right on the beach in Destin. I got the bliss yacht coming, which is going to be on lake Travis in Austin, Texas. That’s going to launch in June and then I have bliss island which is in the big island of Hawaii. So, you can go to www.Blissisland.com to see that. I haven’t launched websites for the yacht and Destin yet. I just closed on Destin, but I have a website. So come to www.ericlochtefeld.com or if that’s too difficult for you to spell my website is www.assetwealth.com.
I think we can all agree to remember that www.assetwealth.com and there’s just a way to contact me. So, when you reach out through the mechanisms there, the emails will actually come to me. I won’t fire it off to a bunch of assistants and I’m looking for people. I can either one on one coach or that I can drop into a retreat setting of about eight people and really do some great group work and create some magic with the others involved.
And so that’s my jam these days. I invest in real estate for money and what I do for my love and for my passion is I help coach people.
Jason Lee: It’s amazing, Eric. Well, thank you. It was an amazing show. I really appreciate your time and thanks for coming on today.
Eric Lochtefeld: Hey, thanks for having me, Jason. I appreciate it.
Jason Lee: Yeah. Talk to you soon.
Thank you for joining us on the multifamily millionaire podcast. The show that interviews, multimillionaire real estate investors, and top producers in the real estate industry. We’re here to help you create passive income and achieve financial freedom so that you can do what you want whenever you want. We’ll catch you next time on the multifamily millionaire.
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