TGCI 136: The story of a comeback and that EVERY investor should hear!

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Episode 136: The story of a comeback and that EVERY investor should hear!

Copy of EP #18 - 2 Guests

Summary

In today’s show, Pancham interviews Jorge Newbery – CEO and Chairman of AHP Servicing LLC and American Homeowner Preservation LLC and author of Burn Zones: Playing Life’s Bad Hands.

Jorge is indeed a risk-seeking investor as he confidently invests in rejected properties and making huge income until a 2004 natural disaster led him to $26 million debt that he had to pay off. After paying it off, he is now a prodigy where he has rebuilt himself through AHP Servicing LLC and has been helping others with unaffordable debts and continuously creating an impact!

In this episode, listen to his defining moments in his real estate journey as he shares his experiences in investing in these distressed properties and turning them into cash flowing assets! We will also explore and dissect his mindset of being driven to challenges and how that made him who he is today.

 

Listen and enjoy the show!

PanchamHeadshotTGCI
Pancham Gupta
Screen Shot 2021-06-18 at 8.03.21 AM
Jorge Newberry

Tune in to this show and enjoy!

Copy of Quote #00 - 1 Guest

Timestamped Shownotes:

  • 1:56 – Pancham introduces Jorge to the show
  • 3:36 – How he got into real estate investing
  • 7:01 – On having 34 violations in his property and how he turned it around
  • 12:19 – From his riskiest property to a successful investment
  • 19:06 – How an ice storm got him in debt and what he did to recover from it
  • 22:48 – How his determined mindset helped him overcome challenges
  • 31:15 – Why his current business model is a win-win situation for buyers and investors
  • 34:04 – His prediction on the future state of the economy
  • 41:10 – Taking the Leap Round
  • 41:10 – His first investment outside of Wall Street (at the age of 12!)
  • 42:21 – On being fearless with his 1st investment
  • 43:28 – Why investors should get to know the person before investing with them
  • 45:27 – Ways you can connect with Jorge

3 Key Points:

  1. You can always come out of a bad situation as long as you work hard for it.
  2. There’s always risks in every investment you’ll make. 
  3. Don’t look back but rather to always be determined and figure out a way that you can get to the other side.

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Read Full Transcript

Welcome to The Gold Collar Investor podcast with your host Pancham Gupta. This podcast is dedicated to helping the high-paid professionals to break out of the Wall Street investments and create multiple income streams. Here’s your host, Pancham Gupta.

Hi there, I’m Robert Helms host of The Real Estate Guys radio program and if you want to have better results in your life you gotta put better ideas in your mind. You’re in the right place. You’re at The Gold Collar Investor podcast.

Pancham Gupta: Welcome to The Gold Collar Investor Podcast  This is Pancham. Really appreciate you for tuning in today. Let’s dive into the show. Do you like movies where the person or set of people become really successful after a lot of challenges? It’s like rags to riches story. I really love those movies and one of my favorites is the Pursuit of Happyness by Will Smith. And today’s story is nothing short of the same thing.  Jorge was a real estate prodigy making literally millions of dollars from dilapidated, rejected apartment buildings and restricting them back to life. His story is a reminder of the importance of failures in investing in order to know that things don’t always go as planned. Investing in apartment buildings is certainly my personal preferred approach to wealth building, but it is not without risk. So, but then again, you know, investing comes with risk. So, the key to success as an investor is education and the experience.  As everything in life, you try to learn and often the biggest lessons are learned from making mistakes. In this episode, I speak to Jorge Newberry, who tells us his dramatic story.  A bit about Jorge before I bring him on. Jorge Newberry is on a mission to help Americans crushed by unaffordable debts. He is CEO and Chairman of HP servicing LLC. Pan American homeowner preservation which crowdfund the purchase of non-performing mortgages from banks at big discounts then shared the discount for struggling homeowners. A 2004 natural disaster triggered the financial collapse of Newberry’s former business, leaving him with $26 million in debt he could not pay. Newbury, rebuilt himself through AHP sharing what he learned from his challenges to help families at risk of foreclosures stay in their homes. In 2018, he founded debt, cleanse, group legal services to assist consumers and small business owners resolve all type of unaffordable that he authored Burn Zones playing life’s bad hands that cleanse how to settle your unaffordable debts for pennies on the dollar, and not pay some at all and stories of indebtedness. Hey, Jorge welcome to the show!

 

Jorge: Thanks for having me. I’m really, really excited to be on.

 

Pancham Gupta: Yeah, I’m super excited. I first met you probably two or three years ago now and I was really intrigued by your story, so can’t wait to get into that. Before we get started, are you ready to fire up my listener break out of Wall Street investments?

 

Jorge: Absolutely. Let’s just do that. 

 

Pancham Gupta: Great. Great. So, you know, before we begin, do you want to give a quick overview of your background and more importantly, the person behind that background?

 

Jorge: Sure, I’ll give you a I’ll try and keep it brief as much as possible. So, I grew up in Los Angeles, I dropped out of high school when I was 16 to run a record company. I ran a record company out of my parent’s garage where we put out eight albums from local hardcore punk bands. And that’s what I did from when I was probably 15 through 19, my parents were gracious enough to allow me to take the GED and that leaves school at 16. So, I could learn in the real world. I did that till when I was about 19. I got bored and I decided to race bikes. I raced bicycles from 19 to 25 and I was in Olympic trials in 88. Was on a trade team that race and races across the country and that was a great experience, kind of learn, you know, athletics is a field where if you prepare, the training you’re doing in December pays off in a race in July. So, and if you don’t do the training, you don’t do the preparation, there’s no pretending, you’re either prepared or you’re not prepared. And that was something that I’ve carried forward to business, you know, what closes today or what deals are consummated today are the result of months or years of prior actions that all culminate in a closing or a transaction or an acquisition or whatever happens. So, everything’s preparation for the next step, or at least that’s how I approach life. So, if 25, I was a category one bike racer, which was about 200 or at the time, they’re about 200 in the US. So, category ones are amateurs, but they raced for the pros, we could have all turned pro at that point, though, wasn’t much of a prochoice in the US. So, we stayed amateurs, and that was the only way you could compete in Olympics back then.  Today, it’s different. So, at 25, I had a stipend for my team, I worked in a bike shop. I had, you know, my entities, travel and equipment all paid. But still, that wasn’t much of a living. I live with my parents. And I wanted to take the next step in my life. One of my teammate’s girlfriends was a mortgage loan originator. And she always had a nice car and seemed comfortable. So, I talked to her, and she helped get me into real estate. And that was actually when I got my license. And then shortly thereafter, she was promoted in her job, and she was able to get me her old job. And within six months, I was the top performer in that department, and I used everything I learned from bike racing, which is just focus, determination. You know, the place opened today, close today, I would be there at my desk as much of time as possible, and just trying to as many deals as possible. But after two years, I said, you know, hey, I could probably do this on my own. So, I started a mortgage company, with the top producer from the company where I was at. We broke off, started a company called Sunset Mortgage, which actually, we started in 1992, it’s still in business today. He bought me out a few years later because I wanted to do new stuff. And the new stuff I started doing was buying defaulted or distressed properties. I buy the most challenging properties in Los Angeles area and try and turn them around and then do it again, I started with four units, then 19 units, then 60 units, and I kept getting bigger. The last building, I bought in Los Angeles was something called the Ford Hotel at 1002, East Seventh Street in downtown Los Angeles. And this will, anyone who’s in Los Angeles will be surprised by the numbers, I purchased that 298 unit building for $800,000. Which is just an incredible number at that time, but there was a story about it and it kind of made a big impact on me. So, I’ll tell you why it was so cheap. So, the building it sold for about $4 million, several years before, but the property was in such bad shape that the slum housing task force in Los Angeles put the owner in jail. So, he sold it for two and a half million dollars. and the guy who bought it also went to jail.

 

Pancham Gupta: Oh my God

 

Jorge: So, he sold it to somebody who bought it for $2 million and that guy went to jail. So, at that point, no one wanted to buy the property because they thought, okay, you buy this property, and you end up in jail. There’s a high likelihood, so no one wanted to take the risk, the price kept dropping, dropping, and no one was buying it. So, me being ever the optimist, I said, I’m gonna buy it. And so, I bought it, it was 808,850, somewhere around there, and just super, super cheap. 

 

Pancham Gupta: Did they all go to jail? Sorry to interrupt you, did they all go to jail for the same reason that..

 

Jorge: In Los Angeles, if you hold a property, if you own a property that has slum housing conditions, so it’s just in terrible shape, then it’s strict liability. If you own it, whether or not you cause the problems, you can go to jail. And so, you know, that was the risk. Now I bought it, I was the one who could go to jail. But I know the inspectors from my prior projects, you know, but on a much smaller scale. And actually, they told me before I bought it, they said don’t buy this thing. You know, you’ve done pretty well on these much smaller projects. On this one, we’re gonna end up adversarial, but I didn’t heed their warnings. And I went ahead and bought it. And they would come by every month, there was a fire inspector or a health inspector, a plumbing inspector or an electrical inspector and they would come every week. And they would, I mean, I’m sorry, every month to take a look at the progress. And they were impressed with the progress that I was making and made some positive comments which I was encouraged by. But right after we bought it, we all met and they said that, you know, they can’t selectively prosecute even though, you know, they knew that I done well, in other projects, they said that they can’t selectively prosecute, they can’t not prosecute me when they put three other owners in jails. They said you have six months, you know, six months to get this thing all done, otherwise, we don’t have a choice. So, you know, each of these month they’d come by, and they’d say, hey, things are looking good, things are looking good. But then on Christmas Eve 1998, I found the old one I say that a friend of mine called me and said Hey, you’re in the paper and I was like for what? And he said he read the headline and it was Redondo Beach man, 34, criminal housing violations charged against Redondo Beach man, something like that. And obviously I didn’t see it coming at all and I was like, oh boy, you know my heart saying but the first thing I thought about it is that I lived about 10 minutes away from my parent’s house. And I thought oh my goodness, my parents are going to read this in the paper. It was in the Los Angeles Times and at that point 1998, everybody got the paper. So, I drove over there as fast as possible. And I found the paper and luckily, they had not opened it yet. And I took out the metro section which had the article and kept it because otherwise I envisioned my mom who’s British sitting down to her morning cup of tea reading the paper and suddenly saying that her son has now been charged with 34 criminal counts. And that was would obviously be upsetting. So, I accomplished that. Then I called my attorney and said, hey, what do I do? New Year’s Eve, no response. I kept calling, calling, HR.  He responded to me the following week. And he ended up calling the city attorney saying, hey, what’s going on? And they said that, you know, we know your clients, we’re making good progress. But we can again, we can’t selectively prosecutes, we had no choice but to file the charges. But as long as he continues to make good progress, we will not put him in jail. Instead, he will be on probation and three years, and I’ve had to pay a $10,000 fine. And it took me 11 more months. So, 17 months total. But the end of 11 months, that property was, there was a day where all the inspectors came through and they could not find a single violation in the whole property. And they signed off on the property. And that, I’d say, a defining moment in my real estate career ,one, it emboldened me to think that I could turn around that being hands on, I could turn around any property that I want to no matter how bad it was, even when others had failed before me, that was number one. Number two, I made more than a million dollars in the property. So that was like, wow, I could do this. I could keep doing this and make great returns that triggered my search across the country for the most challenged properties that I could find anywhere at the greatest discounts. And I would say I get to buy them. And then I get to do what I did with the Ford Hotel, turn them around, and then sell them at a big markup. And that’s what I did. And actually, I had great success. You know, the first one I bought was in Kansas City 233 units, they were multiple murders there in the prior year, the property was in chaos, infested with drugs and prostitutes and I turned it around and I bought it for I think it was $1.6 million. And about two years later, once I was done with the rehab in the turnaround, and I spent about probably a million dollars Wells Fargo, no, I had it appraised for I forget the number, $6 or $7 million. I got a loan on there for $5 million, you know, was able to get all my money back plus a good gain. I was saying hey, I can keep doing this.

 

Pancham Gupta: Yeah, looks like.

 

Jorge: I kept doing it and I had great success till I didn’t.  The biggest risk I ever took in my life and that’s the one that didn’t pay off. So, I bought this property called Woodland Meadows, 1100 units, one of the largest apartment complexes in the country in Columbus, Ohio. I bought it in bankruptcy court auction. I bought it for God now I forget I think it was 13 and a half million dollars. But again, 1100 units, it had a section eight contract which pay the rent for 40% of the unit. So, 440 units on the property had a section eight contract plus it had hundreds of voucher tenants. It was so obviously a low income housing complex in a very nice area,

 

Pancham Gupta: 12,000 a door, that’s pretty awesome, I guess. Yeah. So what year was this?

 

Jorge: This was 2001. 

 

Pancham Gupta: Okay, 2001 got it. 

 

Jorge: So that was um, so I bought ii then I started to turn around. And you know, this was a bigger, this was huge. It was called Woodland Meadows, but it was nicknamed Uzi Alley in the community because the property had had such a history of murders, gangs, drugs, prostitutes, just huge, huge issues. And the prior ownership was a big company and they tried, and they ended up in bankruptcy. They tried to control it. You know, for instance, they had a 12 man security force on the property, now most of the tenants were African American and Hispanic. All of the security was white. And the white security guards had patrol cars, they had guns, and they would patrol, they, in my mind within a month,  it seemed like they were almost instigating some of the problems that we had on the private property. Yeah, it’s almost like you know, you want them to defuse the situation not accept, you know, not add fire to the situation. And but sometimes it seemed that they did, and they were mostly either ex cops or cops doing this as a side gig, ex-military and, um, they seem like nice people, but it just was not a good match. And a really bad part was there’s actually a jail on the property, on the property 

 

Pancham Gupta: Oh my God. 

 

Jorge: I know. So, one day I was in the property. In the first month I walked out to the security office, I was like doubletake, there’s bars, there was a guy behind the bars that they had done a citizen’s arrest on a young African American gentleman. They’ve done a citizen’s arrest for drug possession. They put him in the jail on our property, and they were waiting for the real police to come and take them away. And I told him just let him go. It was drug possession. I mean, I didn’t want to be a part of it. I said, we’re not using that jail anymore. This is ludicrous. And within a month, I said we have to change this place that had decades of problems. One of the things, you know, they talk about defunding the police today. So, at that point, we kind of defunded the security patrol, we fired all of them, every single one of them. And we replaced them with me, the property manager and one of the tenants, and pretty soon we rebuilt it as a community patrol who were completely unarmed. And these were people in the community that wanted to make the community better.  It was actually a little scary, there was a lot of media attention on almost everything we did. And there was a lot of media attention on this, it was almost like what is going to happen, you know, people say, this is going to turn into Bedlam, this is going to be just chaos out there, you know, they’re gonna have to call in all these police to, to reinforce, but the funny thing happened is that none of that happened, it actually got much better. And we had community members responding to other domestic situations or whatever, whatever was occurring on the property, we would be trying to defuse those. And it actually, I think it worked out a lot better. And it started, you know, that was a big ingredient to the turnaround. But we still had a big problem was that, you know, when we’d walk, you know, this is, you know, spring and summer we, we walk around the property and people will complain, these areas say they’d be like 20 or 30, typically young African American men on a corner, and they were hanging out, but tenants, you know, some tenants would be find them, scared by them. And even though they weren’t aggravating them or anything, and we would go up to them and say, hey, you got to move, you got to disperse. And they would do it. But then they’d show up like, a block away on the same property. So, it didn’t really help us. Then they kept saying, one thing we kept hearing was, hey, give me a job, give me a job. And we were like, first we didn’t it just like in one ear and out the other. But at some point, we heard it so much, and we had to do something. So, we said we were doing a multimillion dollar renovation of the property. So, we said, well, why not give them jobs? We said, okay, when people started asking us to give them jobs, okay, show up at the teach center, which is the community building on the property work there. I mean, show up on time, every day, for two weeks, and we guarantee we’ll give you a job. And at first, like three or four people showed up, and but at the end of two weeks, they got jobs. And so within, word traveled really fast. And pretty soon, we had 40,50 people showing up for every class. And at the end of two weeks, they get a job. And during the classes, we have contractors come in, teach them about different trades, tried to teach them skills, and we had some local politicians come in, we’re traveled in the community, hey, this there, really, something’s really happening here. We had local politicians come and share their stories, especially share their stories of overcoming obstacles, because many of these young men and a few women who were showing up for classes had had interactions with the law, many of them criminal records, and that had made it very difficult for them to even get entry level jobs at Walmart or Arby’s or any place like that. They can’t find regular jobs, it made it very difficult for them to change the course of their lives. And so, they ended up going back to what they had historically done in many cases, which is, you know, there’s gangs, drugs, prostitution, things like that. So, we gave them a different opportunity. They weren’t paid a lot of money; I think we were paying like $10 an hour to entry level. But these, the by and large, it was not 100% success, but the impact that made on these people’s lives, as well as the community was extraordinary.  , We gave them the opportunity, and many of them seized it. And today, this is, you know, 20 years later, I hear that many of those gentlemen started their own companies, and they’re now contractors, and they’re still doing work in Columbus, Ohio. So that’s kudos to them. And but they just needed that first start and the belief, and somebody give them the work and believe in them and get them on a path change the trajectory of their lives. So, this property, we started getting media attention for that program called the Teach Program. And pretty soon other companies said, hey, we want to hire these guys. We want to support what’s going on out there. And it was a huge success story contributed to a huge success of the property. So, this was, for me was transformational, for many people involved was transformational. And it’s just really exciting thing to be a part of. But on Christmas Eve 2004, roughly three years after I purchased the property, a few months after that property had been turned around, and we had hit, you know, our occupancy and collections had just soared. Now we got hit by an ice storm, the largest federally declared disaster in Ohio history. And it triggered and distorted the sequence of events in which I lost everything. And I had about 4000 apartments at the time, I lost everything and ended up $26 million in debt. And the primary cause was the insurance company denied the claim, we had to sue them. And you know, I didn’t know this, but it’s very common when you have a massive claim. And this was in the 10s of millions of dollars that insurance companies simply will not pay, make you sue. What I did was  I went to an attorney, they said Hey, they’re gonna pay you eventually. But right now, we’re gonna have to sue them. And in the meantime, I borrowed money on some of my other properties, started getting work done to the property because I figured Okay, eventually they’re gonna pay but in the end and they didn’t. And they, I sorry, in the end, they did, they settle for $32 million and that was a discounted settlement, they should have paid about 50 million. So, 32 million sounds, everyone’s say, well, that’s a lot of money, it’s a lot of money. But if it’s not enough to pay everybody and complete the property, it was an end.  In the end, there were a bunch of factors happen, that ended up with me losing everything and $26 million in debt. And you know, what, coming out of Ohio, you know, much worse than when I went in. And that was the big story that the huge side, about 12 years of significant success in real estate, and then it was unwound in a couple years. So, I don’t want to scare any of your listeners but there are risks, you know, one thing I learned is that to expose yourself to massive gains, and I got in, you know, net worth in the 10s of millions at that time, you have to expose yourself to massive losses. And I was willing to do that. But when I did that, I was willing to work relentlessly to make sure that my bets paid off. And this one, there’s so many factors that played in and so many mistakes I made, you know, after that ice storm, that it turned in, you know, turned a massive success into a massive failure. And that was a defining point in my life in a very bad way. Overwhelming debt, fear, shame, embarrassment, guilt. Why did this happen to me? You know, all those are the feelings that swirl through my mind, you know, I started grinding my teeth. And you know, I still I’ve had to have significant dental surgery in the year since to repair what happened in that period. So not something I’d want to go through again, but it did certainly leave a lasting impression on my life. And, you know, I rebuilt myself through a company called American Homeowner Preservation, which I started in 2008, realizing that I acquired a skill at navigating, being overwhelmed with debt. And what does, you know, that’s a being in that position, you know, I learned how to handle it, and actually how to fight my creditors, and in some cases do well. And once I heard that millions of families across the country were facing the same situation as me, I started AHP, and as originally a nonprofit to help families at risk of foreclosure stay in their homes, by using that the lessons that I learned, and even though the numbers were different, you know, many times smaller for the homeowner, the same dynamics applied. And that’s, you know, I rebuilt myself through AHP, and that’s been going for the last 13 years.

 

Pancham Gupta: Wow, thank you for sharing so much about that story I want to unpack there is, I’m sure you’ve lived through this. So, you have so many lessons starting from that L.A building in 1998. Getting a warrant, I don’t even know like how that feels like that is just crazy. Like, you have 34 counts of criminal counts. And then going through that going through the Kansas City building, and then the Woodland Meadows, 1100 units and doing what you did. So, you know, I want to ask you, like you, you basically lost everything being in $26 million in debt, and then rebuilding yourself back up into what you have today. And AHP,  what  AHP is all about. It’s just an amazing, you know, comeback story. So, like, if I want to ask you like, from the mindset point of view, when you knew that three people who own the L.A building, are in jail, what really gave you the confidence given that you had not done this before at this scale that you wanted to take this on? Like, there is something about that mindset that kept you going and also got you back to where you are today, even from those massive losses. So, I want to talk about that, from that perspective in the L.A building what you know what was going through your mind and also after you lost everything and you came back in 2008, what was going through your mind then, like, you know, when you kind of rebuilt it. So just, if you can unpack a little bit of that, that would be great.

 

Jorge: Sure. So, in my mind, I always, I always love to watch comeback stories. I’m such a sucker. My wife’s like, come on, you’ve seen this movie before, like the sports, the sports, you know, the Disney sports story where there’s against all odds, you know, a team comes back and prevails and I just love the stories and I can watch the same thing the characters change the story change a little bit, but it’s the same formula. So, I love those. I never really thought I’d be living one though, and so on. Um, but I did like to take you know, in bike racing, I would do the longest races, the hardest races I’d almost like it when it was raining and like all the challenges were added. And then to succeed in that was I don’t know if it made it feel like you really earned it. And so, I like I kind of relish the challenge relish the risk. I have. I mean, my personality likes that it likes it when everything’s on the line. When I have to, I have this ability or curse. I don’t know what it is, but to intently focus when there’s a crisis. So, let’s say you know that there’s something really bad happens, my mind kind of ratchets up and is like, very, very focused on the landscape and each move. So, you know, for better for worse, I almost suck maybe I create these situations where I feel there’s a rush of adrenaline. So, I did, so in the Fore Hotel, you know, I went in there, eyes wide open, there’s big problems here. I don’t know how there’s, I didn’t really have a plan to get to the other side. But I kind of knew if I was persistent, and workday today at it, then I would be able to get there. And so, I never, I never really doubted myself. I never, you know, I was, there were periods when it was challenging but I do I tend not to question myself, I tend to be decisive and decide on a direction and move forward and never look back and I was finished figure, hey, you know, you’d crossing a bridge, you get halfway across, you never want to look back, never want to turn around, you just figure out a way to get to the other side. So, when it happened in Woodland Meadows though, I probably, those personality traits that actually had served me very well to get to that point, now actually probably worked against me. Because once that property was hit by the ice storm, I was absolutely determined that I was going to rebuild. Now, if I had after the ice storm and the property was just devastated, it would have been much easier if I said, hey, we’re closing this everyone relocates and I get to sell the stuff with the insurance company, I could have probably paid off my loan, pay off my investors and gotten a good return myself. So that would have been and then sold the land or something like that. But I was absolutely in my mind, I figured I’m going to rebuild this. I’m going to get there no matter what. Even this city at some point, they ended up being we ended up being very adversarial. But they, before that, they’d come out to me and said, hey, you know, how about you kind of just let this property go but we’ll support moving your tax credits, moving your section a contract to another property that you can, you know, buy in Columbus, and we’ll be supportive of that. And they would have been a friend. You know, as it turned out, the city wanted the property. It was 52 acres, one of the largest properties you know, Woodland Meadows was one of the largest single tracts of land in the city. And it backed into the highest income area in the city. And so, we were very low income, and I think they just wanted this property gone. So, they would have been very supportive. But I say no, I’m going to rebuild, no going to rebuild and really didn’t entertain their overtures. And that was, that would have, so I had two opportunities to make that ice storm to come out well, one, close the property, which wasn’t even on my mind. The second is work with the city, take their offer to move the credits, and then the contracts to different properties. And they would have been supportive and my allies. Instead, they ended up as my adversary, they ended up getting what they wanted, they own, they bought the property, they end up with the property, they own the property to this day. So, they got what they wanted. And I think no matter what they were going to get to succeed. And you know, it’s kind of like me saying, hey, no matter what I’m going to succeed, and I ended up not doing that, you know, for instance, they played a little bit dirty, maybe a lot. I later on I wrote a book about all this called Burn Zones. And I did a book signing in Columbus and one of the inspectors who worked with the city came up to me and said, hey, they were told that no matter what I did, they needed to fail my inspections. And so, this  was when I was rebuilding, because we kept getting failed for inspections, which previously we had, you know, the work we were doing was good. And now they were say they’re finding little reasons to fail us. And so, it just turned into a situation where there was no way I was gonna win, but I didn’t realize that or didn’t realize it early enough. And it turned out, you know, they wanted the property, they got it. So that’s, that’s, uh, you know, it for a long time, I couldn’t look back, it was such a, I just moved forward with AHP and tried to focus on new stuff, because to look back was somewhat traumatic. You in the end, I wrote that book, I wrote Burn Zones in, started writing in 2013. And the reason is, I had to get the story out because the city in order to achieve their goal of owning the property, they had painted me as a, as a bad person who had done, you know, leaked to the press that hey, you know, I was under criminal investigation. You know, my attorney called the city attorney said, hey, what are they talking about criminal investigation, and they said, oh, there’s no criminal investigation. But just because it was out in the media. Now, people started looking at me differently. And, you know, when people were running to invest in AHP or other things I was working on, they’d say, hey, you know, what’s this, I looks like a bad guy and I wasn’t, so I had to clean it up. So, I wrote Burn Zones, I told my side of everything that happened, and did a book signing, Columbus did book signings, you know, and a few other cities that kind of set the record straight about what happened out there. And so, when investors, you know, google me, and say, hey, tell us about this, and I and before that I would kind of cringe and say, oh no, they found out now it was like, hey, I’m gonna send you a book, you know, if you feel and you can hear my side of it. And I’ll tell you that book has been a huge draw of investors to AHP because a lot of people, I mean, I’d be talking about this in conferences and people come up to me and say, you know, hey, I had this happen to me in my life or that happened in my life, I, O failures, challenges, maybe not on the same scale that I went through but you know, almost everybody, especially successful people, at some point, have had periods of failure or challenges. And they had and their future successes are often built on past failures. And so, we will come up and share that. And we better identify with me because of what I’ve gone through. So, the story in the book, right now, I don’t, you know, I’m not hiding it from anybody. Here’s the story, look at the bad articles online, read the book, hear the worst parts, you know, that was a traumatic experience that I went through there on an extraordinary scale and extraordinary public. And it is something that, but I think it’s helped prepare me for what, you know, the growth of AHP and how we can positively impact families today, as well as make a profit doing so.

 

Pancham Gupta: Yeah, absolutely. By the way, you know, listener, if you have not read that book Burn Zones, or don’t have a copy of it, I actually have a signed copy from Jorge, it’s a great book, if you want to get your hands, it’s available on Amazon as well. So, Jorge, I know like, thank you for sharing all of that. And I know you’ve gotten a lot of support. After sharing like I when I first heard your story, it was definitely very eye opening and inspiring to like how you come back from that kind of story. So, let’s talk about really quick like AHP now, what you’re doing today, I know you are into all about keeping families into their homes, saving them from their foreclosures. Tell us like how do you do that? Like, what’s the business model behind it?

 

Jorge: Sure. So, what we’ve been doing for the last decade, more than a decade is buying defaulted mortgages from banks and hedge funds. So, we buy these at big discounts. And then we share the discounts with the families, we still make a profit. But we can forgive interest, forget principle, reduce payments, and do that, and the families win, and our investors win. it works out well for everybody. So that’s what we do, and we’ve been doing. And it has, it’s grown tremendously in the last decade or so. We started in 2008 and we have right now we’ve morphed you know; it’s grown into American Homeowner Preservation was still buys defaulted loans. But now we have a National Mortgage servicer, AHP servicing a National Mortgage originator, AHP mortgage direct, we have a platform to sell mortgages, pre REO, we have a law firm, I’m a partner in called Activists Legal. So, it’s kind of morphed into hold a whole bunch of different businesses that are all complimentary and kind of interrelated. And the goal is to grow and we’re doing that now. And we think there’s a in the coming 6 to 18 months, they’ll be the beginning of a significant downturn in the housing market, which will trigger an extraordinary demand for our services. And that’s something where we see an opportunity to grow further. And my long term right now, I’m 55 years old, I want to get to I think we have another four years of significant growth, 2025, I want to go to get AHP listed on the New York Stock Exchange, and I’ll still be at the helm. But I want it to be a public company then and I just had two kids, pretty late to have kids, but I had to me welcome my wife and I welcome two baby boys into the world last September. And yes, thank you, they’re almost nine months old. And so that’s, you know, there’ll be five years old. And in 2025, I’ll be 60 years old. And I think, you know, I’m hoping, you know, my, there’s more balance has, is coming into my life. And they there’s no choice but them. We, and it’s great. But that’s a new chapter. And you know, AHP is an important component of my life, as are my kids, my wife, and my family. And I’m trying to, you know, bounce that out but that’s the long goal and that’s where that’s where we’re all heading. We have almost 100 employees right now. And we started the same with me and two employees in 2008. So now it’s almost 100 employees, and we are, we want to grow. So yeah, we’re excited. And the goal, you know, many of our team members and our investors are looking to earn a living or make a profit or return on their money, but they’re also trying to make an impact. And I think our company provides the means to do both.

 

Pancham Gupta: Right. So, you know, I want to talk about, you know, how can investors participate in this? But before we do that, I have a question like, you know, given the current state of the economy, right, there has been forbearance, you know, moratorium so to speak, right? But do you think, do you see a wave of foreclosures coming the way everyone talks about that? What do you see?

 

Jorge: Yeah, there’s gonna be, here’s prediction, and it could well be off but at some point, this all happens. I mean, this is all a site, there’s you look back at years of real estate, you know, I’ve been I started first licensed real estate in 1990 and since then, you see this there’s an up cycle where things go up and the down cycle where things go down, the greater the up cycle, the greater the down cycle. And we’re do we’re overdue for a downturn and we’ve had a huge rise huge appreciation across the board across the country. We are due for a downturn. Now, when that happens, it’s hard to say there’s a lot of artificial factors at play here. There’s very low, extraordinary low interest rates, foreclosure moratoriums, which are tightening supply, and of REOs and a lot at play, but those, you know, all those things will come to an end at some point, I think next year 2022, I think this year will kind of be more of the same in all likelihood, you know, the foreclosure moratoriums, and all likelihood be extended through the end of the year. So, there’ll be a tight supply probably keep prices robust at the end of the year, end of the year happens foreclosure moratoriums, and other consumer protections, eviction. moratoriums probably start winding down, that will trigger two things, they’ll start foreclosures and evictions will start increasing from where they are today. But I think there’ll be huge government and regulatory pressure to work with families to help them through that crisis, just like there is today the forbearances may come off. But now what do we do to make up those back payments, and I think there’ll be a lot of pressure, and rightly so to work with families to help get them back on track, start paying again, because remember all those families for forbearance, which is millions have not been paying, and they have not been paying their principal interest taxes or insurance now that the servicers lots of times are advancing for insurance, I mean, for taxes, maybe insurance too, and that needs to be paid off, they may be able to add the principal interest to the back of the loan but what happens those taxes that were paid, so that there’ll be an effort throughout 2022, I think to try to get as many families back on track. And that will continue to keep supply tight, which may keep the market propped up. Interest rates, the economy will continue to be weak, and in all likelihood, interest rates will stay low, which isn’t good long term is good short term, 2023, though I think there will be a significant increase. This is where, hey, we’ve exhausted all avenues to help these sector of families who were in forbearance, or other kinds of mitigation measures, we have no choice but to proceed with foreclosure. So, I see 2023 is being a year in which the foreclosure rates spike significantly, but it’s still going to be a slow go but a slow movement, because the courts will still be backed up, and will be backed up as a result of the increase in these foreclosure filings. So, I think we’ll have, you know, 2023 of those probably provided place bets, which I don’t do. So, no one bet on this advice. But if I just had to unlikely scenarios in 2023 is the point at which, you know, foreclosures surge. And at some point thereafter, late 2023, going into 2024, there is a significant increase in the supply of Oreos and distressed properties and distressed mortgages. And the challenge is going to be that as that supply comes through, people who had bought at the top of the market like today, potentially today is the market and have bought, they bought property for you know, $120,000 today that was worth 100,000. You know, a year ago, that 20% gain, that starts going the other direction, some of these families who bought at the top of the market may be bought with 3% down are going to be looking around saying, hey, there’s a house that’s identical across the street from me that’s selling for $90,000 I owe 117. I can afford to pay it. But it doesn’t make sense to why am I paying when I’m so underwater, and then things start spiraling downward where this is exactly what happened in 08,09,10,11, 12 where people that even could pay just said, hey, it doesn’t make sense to pay. And you couple that with, you know, with any kind of economic struggles that are in the economy, I think we will see a downturn that will go the way they historically go, which is a significant depreciation, significant decrease in values, these interest rates have to go up at some point and all that combines, you know, there will be significant disruption in our economy, and particularly in our housing market, the government can’t continue to prop up the economy like they’ve been doing, and that it has long term negative consequences, which have to be repaid for and have to be paid back. And I think that will come up and you know, call it 2023. I may be wrong, but it’s coming. And that’s presents opportunities just like over and over. There’s a when everybody else is selling or walking away from their homes, that’s the time to buy when everybody else is buying like today is probably not the time to buy. And it’s easy to buy the payments are low because the interest rates are low, so it makes sense. If you’re buying and you’re you have a fixed payment that’s affordable. Maybe it makes sense to buy but on a value perspective, it’s going to be a situation where you’re gonna have to face the fact in a couple of years, that in all likelihood, your house will be worth less than you pay for today.

 

Pancham Gupta: Wow. You know, we even have this episode recorded. And I will remember it in 2023 when this happens, and again bring you back.

 

Jorge: You can check in to see if it actually happened. But you look at history, there’s no way people say this time. It’s different. It’s never different. There’s always this point. I mean, there’s different factors at play, but it’s just a cycle and we are at the top but there’s no question that we are at or near the top of the cycle, I would say there’s no question at the pre COVID that we were about the, the top of the cycle and COVID just extraordinary set of circumstances. And most people, including me thought things would drop after COVID hit, they’ve gone out. But yeah, it’s gonna go the other way.

 

Pancham Gupta: Yeah. But Great. Thank you, Jorge for this.  We will be back after this message to go into the second round. 

 

Jorge: Awesome. 

 

Pancham Gupta: If you want to know the top six reasons on why you should consider diversifying outside of the Wall Street, then you are in the right place. I have written a free report for you. It goes into not just the top six reasons why investing in stocks for one case may not be the sound strategy. But also, what are the alternatives? Get your free report today on thegoldcollarinvestor.com/download, I repeat thegoldcollarinvestor.com/download… So, let’s move on to the second round of the show. I call this taking the leap round, we’ll ask this, I’d ask these four questions to every guest on my show. My first question for you, Jorge is when was the first time you invested outside of Wall Street?

 

Jorge: Hmm. You know, I, my father and I went to a land auction when I was a kid, I was probably 12 years old. I pulled my dad and said, hey, I want to go to this land auction. They were like auctioning land in the desert and stuff like that in California. And we bought something it was about $4,000 for 20 acres in Newberry springs. I liked it because the name was the same. And so, we bought it. I remember driving out there with my dad one day to look at the land and we couldn’t find it. It was out in the desert. I had this map, there was no way to find it. It wasn’t off the street. But either way, that was a fun experience. I did talk to my dad, and we said we were going to buy some stock in some company making kind of solar water heaters. This was again, when I was a kid probably 70s 80s and the stock didn’t do well it went down. That was my one at Wall Street experience. All that time. I’ve never bought Wall Street. We did well with the land. We sold that at a gain, we did poorly with the Wall Street stock that we bought the solar water heaters which didn’t do well. So, I think the lamp is the first time out off Wall Street, but I’ve never been back to Wall Street.

 

Pancham Gupta: Got it? Got it. So, did you have to overcome? I don’t know if you had any fears when you bought that land auction?

 

Jorge: No, I was a kid. I mean, we bought it for a few thousand dollars we bought it on payments. So, it was a pretty easy deal to do. So no, no, no real fears. I mean, a lot of people it’s easy Wall Street, it’s it feels like you’re, you’re not, it’s passive. I mean, you’re you can actively decide what you want to buy, but then you’re putting the money in someone else controls that I was, was more of hands on, you know, I wanted to control the outcome of the money, which made me very hands on and that’s probably what kept me off Wall Street. That said, you know, as I grow older, my wife is like, hey, you know, we should invest in some stocks and you know, diversify our portfolio. Everything I have is basically invested in HP or eight HP related endeavors. And so, I would say yes, we will do at some point, I’m hoping aged people comes in New York stock and then other people can just buy ourselves, including us. 

 

Pancham Gupta: That’s great. So can you share with them a, you already did actually one investment that did not go as expected as Woodland Meadows, I mean, that’s, yeah, people, if you’re listening, you can actually Google it and you will find news articles about that. Alright, my last question for you. What is one piece of advice would you give to people who are thinking of investing in Main Street?

 

Jorge: Yeah, get to I mean, there’s a lot of well-intentioned businesses that want to do good things or pioneering things. You know, it’s tough, because the people with the newest, you know, you could say, hey, look for a track record, but we didn’t have a track record when I started, and people would invest with us. And I just understand why they’re doing it. You know, if people are only doing it for money, it makes it you know, that’s they’re only do it for money and things don’t work out, then they’re just walking away. I’d look for people who have passion about what they’re trying to accomplish the need that they’re feeling in society, that the solution that they’re bringing to people, and people who have maybe had some challenges, some adversity, it makes it because they’re going to face adversity. I mean, we all face adversity, but especially in business, especially there, they’re doing something on Main Street, something new, which is why they’re looking to you for money, and they have a true passion. And they’re willing to keep going when things get bleak, or things start not going the right way, which is also going to happen in every business, and they end there. You see there’s some willingness to keep going now that now you’re not going to find that on a balance sheet. You’re not going to find it on a prospectus, but you can’t. So, I get I’m trying to figure out how I can make this like real advice that somebody can say yes or no. And maybe that’s not what I’m trying to say but get to know the person and why they’re doing it. And ultimately, everything comes down to the person I mean, the person that they’re well intentioned, that’s just part of it. Their well-intentioned and they have the willingness to overcome obstacles. Because all these businesses, AHP included its pivot after pivot after pivot. The market changes you Can’t keep doing the same thing the market changes what you originally envision, you have to be willing to pivot as needed. So, I think I, I think I gave you some conceptual things, not concrete.

 

Pancham Gupta: No, but  this is important, really important. I 100% agree, it’s not what happens to you, it’s what you do after what happens to you know, that people who are really no can get through the struggles that that’s what, you know, make them different. So, you know, how can people invest? Like, how can people connect with you, if they want to reach out and they want to invest with you, your company? And what kind of funds like you just tell us?

 

Jorge : Sure. So, we’ve tried to make our investments in our companies as accessible as possible. So, we make our minimum investments always $100. So, people, so just about anyone can invest, including the people that we help. So right now, we have investments open in AHP servicing, you can go to ahpservicing.com and invest $100, or as much as you want, you can all do the investment online. It’s open to accredited investors who can invest as much as they want, as well as non-accredited investors who can invest within certain limits based on their in commander net worth. So AHP servicing we are we’re in the final weeks of AHP servicing fund being open, we have two additional funds that will come out in the next this summer. One is called AHP title, we’re actually buying a title insurance company. So yeah, we’re using the money that we raise to buy the title insurance company grow it nationwide title insurance company, as well as invest in defaulted government backed mortgage loans. And then there’s another one called pre   REO which is the platform that we sell mortgages on. And we’re raising money to both build out the platform as well as finance, investors purchases of loans through the platform. So those are the upcoming ones. So right now, you go to ahpservicing,com. Invest, but you should soon be able to go to AHP title and prereo.com and also invest. And then like you mentioned the book, it’s called Burn Zones,  it’s available on Amazon and any of those sites you could reach out to me and connect with me if you have any specific questions that you want to talk to me or anyone on our team about.

 

Pancham Gupta: Great. Thank you, Jorge. This is awesome. Thank you so much for sharing your story. I know you, it you know, it’s not an easy story to share. So, for listeners who are listening, definitely get Jorge’s book. It’s great. Thank you for your time here today, Jorge. 

 

Jorge: I really appreciate you having me on. 


Pancham Gupta: Thank you. I hope you got something from the show, and you enjoyed Jorge’s story, really, really inspiring and a lot of struggles there. I really appreciate you for joining me today. Thank you for listening.  If you have any questions, email me at p@thegoldcollar investor.com.  This is Pancham signing off. Until next time, take care.

Thank you for listening to The Gold Collar Investor Podcast. If you love what you’ve heard and you want more of Pancham Gupta, visit us at www.thegoldcollar investor.com and follow us on Facebook@thegoldcollarinvestor. The information on this podcast are opinions as always, please consult your own financial team before investing.


Copy of EP #18 - 2 Guests

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