May 21, 2026 · 1 hr 6 min
With Richard Mehta — Co-founder, Xenon Investments
The episode in one minute
No Vacancy Podcast: Richard Mehta (Xenon Investments) on Building a 3,300 Unit Empire in Los Angeles Taylor Avakian sits down with Richard Mehta, co-founder of Xenon Investments.
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No Vacancy Podcast: Richard Mehta (Xenon Investments) on Building a 3,300 Unit Empire in Los Angeles Taylor Avakian sits down with Richard Mehta, co-founder of Xenon Investments. Richard has built one of the most impressive multifamily portfolios in LA with roughly 3,300 apartment units, mostly on the Westside, Mid-Wilshire, Koreatown, and parts of the San Fernando Valley. In this episode, he opens up about his journey from losing money in the early 90s crash to becoming one of LA's most active buyers. He shares how he thinks about deals, why he trusts gut instinct over complicated models, his love for strong locations, and how he's navigated rent control, the mansion tax, and today's tough market. Timestamps: 00:00 - Welcome and Introduction 01:07 - Xenon Investments Portfolio Overview (3,300 units) 02:26 - Richard Mehta Origin Story and Early Days 04:05 - Family Background and Lessons from the 90s Crash 05:35 - Cash Flow Philosophy and Investment Criteria 07:19 - Gross Rent Multiplier vs Cap Rates 08:13 - Why Location Matters Most in LA 09:07 - Scaling From 1,000 to 3,300 Units 11:00 - Current Market Challenges in Southern California 12:33 - Westside Habitats and Building the Brand 12:58 - Richard's Superpower: Being Decisive 13:52 - First Big Home Run Deal - 747 Gayley Avenue 18:07 - Buying with Intuition Over Spreadsheets 19:22 - Working with Family and Running the Company 21:43 - Leverage, Refinancing, and Portfolio Strategy 23:00 - Early Deals and Non-Contingent Offers 26:47 - How Richard Approaches Negotiation 30:39 - Raising Money Experiences 33:41 - The 3-Year Cash Out Refi Strategy 38:13 - How the Name Xenon Came From a Nightclub 42:03 - Worst Deals and Lessons from 2021-2022 45:55 - Selling Strategy and the Mansion Tax 49:54 - Who Richard Goes to for Advice 53:17 - Future Plans for Xenon and LA Multifamily 55:08 - Reputation, Integrity, and Legacy 58:08 - Most Interesting Deal: The Bel Air House RTC Story 01:02:56 - Advice for Young Investors Guest: Richard Mehta - Co-Founder, Xenon Investments Host: Taylor Avakian Sponsor - Loan Titan Upscale your experience with https://loantitan.com/ Sponsor - AI for CRE Collective AI for CRE Community: https://www.skool.com/ai-for-cre-collective/about?ref=3b3ff2c0ccce44ba8039fafd54bf291aReal estate investing, multifamily apartments, Los Angeles real estate, Westside LA, apartment investing, rent control, commercial real estate, value add multifamily Subscribe and Stay Ahead! Stay informed and empowered in the multifamily real estate market. Subscribe to the channel for exclusive insights, rental updates, and expert analyses on the Los Angeles market. 🔔 Don’t miss out on the latest trends and tips to maximize your property's potential: https://www.youtube.com/c/TaylorAvakian 📈 Connect with me: Website: https://www.thegroupcre.com/ Email: taylor@thegroupcre.com X: https://x.com/TAYVAY_ LinkedIn: https://www.linkedin.com/in/tayloravakian/#realestate #podcast #commercialrealestate
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So, you'd look at cap rate, you'd look at all these other metrics. I would look at can we pull out all of our money or the majority of it within 3 years? That was the goal. Deepak Richard Mehta is the co-founder of Xenon Investment [Music] Corp, a local family office that owns and manages over 3,300 apartments in LA worth over 1.8 billion
dollars. What's the worst deal that you've ever done?
There's many. [Laughter] I can't decide where to have dinner, I can't decide what to order, but I can decide what to buy. Uh I'm extremely decisive about it.
When you're in a negotiation, how do you actually mentally work through that?
It's got to be logical. Sometimes we negotiate just for the hell of negotiating and that's unnecessary. Sometimes you have to sell, things go bad, you have a pandemic, you have an economic disaster. You can't sit there and say I'm never going to sell. You just want to have a good reputation. I don't have to be spoken about well, but I don't want to be spoken about
negatively. Is there any advice that you have for someone starting out?
It's hard to start. You got to go with your gut and you just tough
too. This episode is sponsored by Loan Titan, a leading residential financing loan company specializing in both conforming and non-conforming mortgage solutions. Loan Titan offers Fannie Mae, Freddie Mac, non-QM and private money, hard money loan programs helping borrowers who need flexibility beyond traditional lending guidelines or speed driven financing solutions. Whether you're purchasing, refinancing or investing, Loan Titan is known for smart structuring, clear communication and reliable execution. Visit loantitan.com and mention Taylor Avakian to get started. Thanks for Loan Titan for supporting the channel. Welcome to the show. My name is Taylor Avakian and I am here with my esteemed guest Richard Mehta.
Richard, thanks for being here. It's a pleasure. Thank you for having me.
This has been uh in the making for a long time and I had our good friend Mike Seltzer on the show and we were officially or trying to get both of you guys on and schedules and travel didn't work, but we're we're here today. So, I'm excited about this.
Happy to be here.
So, walk me through By the way, I enjoy your show.
I've seen the podcast on YouTube and it's very interesting and you have some really intelligent guests and it's nice to hear other people's opinions that are, you know, in the marketplace with along with myself.
Thank you. It's funny how you realize cuz I talk to a bunch of different landlords all the time, but it's not like you guys are talking to all each other all the time, right? So, sometimes people are figuring out one way to do something or they're looking at a deal different way or a new financing partner. So, I think it's nice to be able to to share different owners perceptions, right?
And what you're experiencing. it's nice for it's it's I find it very interesting people's outlook.
Thank you very much. So, walk me through. So, Xenon, which is the main holding company, what's the current apartment units assets under management?
I think about 3,300. Okay.
units, yeah. And that's primarily on the west side of Los Angeles?
We started on the west side, but I would say the majority is in West Los Angeles and then graduated to Mid-Wilshire and Koreatown Mhm. as well as better parts of San Fernando Valley.
Yeah, you guys have some stuff in Glendale, I think.
bit in Glendale, yes.
Glendale, right? Up there, La Cañada, Flint Ridge area a little bit, which is great.
Yes.
And you guys own a lot of '90s product as well, right? Some '90s It's hard to keep up with it. It is, for sure. We've worked on a a deal, a couple deals together, so it's been it's been good partnering with you guys on that.
Thank you.
The first time I heard of Xenon and Richard Maeda was when you guys had bought a large portfolio or something like that on the west side and I just kept seeing this name, right? I'm like, who is this? Like, this guy is prolific. He's he's he's buying everything and he's
getting good deals.
Like, how is this happening? So, take me back to you were born in Canada. Take me back to the beginning of how you got into the real estate business. How did that happen?
Okay. Well, my dad always encouraged me to invest in real estate. He always felt that was a good asset class to put your money in and it was a good It's a good way to create wealth. It's a good long-term wealth creation. So, he pushed me, encouraged me to invest in real estate. And while I was going to USC, he gave me a few million dollars which I lost unfortunately. Uh the early '90s. Oh, no. And yes, but I was buying single-family homes and remodeling them. I bought a couple of apartment buildings. But I was learning, you know, and I was in my uh in my early '20s. I was going to university. It was too early for me to have that much money.
And it was a lot of money back then. And things were crumbling. Uh the real estate market was coming down. I didn't understand what cycles were. I didn't have the wisdom. I thought the market would pop back up quickly. Um but it didn't and there was a big uh mess in Los Angeles. You know, we had the riots, the Rodney King riots. We had uh uh the earthquake. And we had the defense industry that crumbled due to um the wall coming down. And Los Angeles went through a big downfall. And when it came back, I reinvested in the late '90s. And uh I got I was able to make back the money that I had otherwise
lost. Good. Cuz you So, you're just the backstory in terms of your family. So, your parents were from India. They immigrated to Montreal, Canada, right? Did your dad own a business in Montreal or did he bring money from India to Montreal?
My dad worked in the Middle East.
Okay.
He worked for the Ministry of uh Telecommunications in Saudi Arabia in the late
'70s. Okay. So, when oil and everything
was uh just popping out of the ground Yeah, right. and uh at that time uh Saudi Arabia was spending a lot of money on their infrastructure and he was at the right place at the right time.
Mhm. Got it. And then so, you guys effectively had been able to build up some sort of nest egg, right? And you and your brother Yes. brother go to USC, too? My brother did go to USC. Okay. So, you guys went to USC together. Correct. Is he older or are you guys He's younger. He's younger than you. Okay. So, you both come in. He's like, "Hey, go build, you know, some business. Go build some wealth for the family." Gives you a few million dollars and you and invest at the wrong time. You didn't have enough knowledge in these single-family homes. The RTC happens, um right? Everything goes goes bust. You have to give the properties back effectively to the banks.
Yes.
And when the next time came around for you to invest, what were the things that you were looking for at this time? Like, what did you learn from the previous experiences of losing the properties that then on these next investments you said, "I'm not going to make the same mistake."
It's good to buy cash flow.
Okay.
Cash flow is important so you can support your debt. You know, and then you can get cash flow in order to live. I mean, it's all about paying your monthly bills. That's what life is all about. Yes, whatever you have left over or whatever assets you have is wonderful. It's great to pass on, but at the end of the day, it's all about meeting your monthly expenses, meeting your annual expenses and being able to support your lifestyle. Mhm. We all have different lifestyles. Well, the key is to make a lot of money, but you know, to pay those monthly bills, to be able to cover your expenses.
So, were you looking at it from a perspective of, okay, if I invest in this kind of building, after expenses, after mortgage, after everything, I'm going to get, you know, this amount uh net a month, and if those numbers made sense, then you invest in it? Like, were you looking at things like cap rates or GRMs or price per unit or price per square foot? Like, were those metrics you looked for? Or what was what's your, I guess, investment thesis of the time of how you decided what building you were going to buy?
Back then, I just looked at price per square foot.
Okay.
It was all about pound per square foot. Uh I don't really look at price per square foot as much, but it is a very important metric.
Mhm.
Um but, I would look at price per square foot. I didn't really under- I never understood cap rate, to be honest. I still don't today. A lot of people don't understand how. Uh-huh. I know that's the institutional way, that's the intelligent way of looking at things, but you know, when you do multifamily, it's a very simple uh why complicate it? Cap rate gets a little complicated. GRM is just a nice, easy way to look at things, and I've always looked at gross rent multiplier. I still do today, and uh it's worked for me thus far.
And was the original thesis to do this value add? Like, were you trying to basically buy buildings that were, you know, lower in rents, that you could find a way to then increase the rents, and then refinance out or sell? Like, were those initial things where you trying to build the flip or or how did you think about that?
My goal early on in the late '90s was to buy and sell, but, you know, the market has been going up vertically since from '97 to 2020, the market was just going up one way.
Mhm.
And rents were going up. After 9/11, money stayed very cheap. I just continued to refinance rather than sell.
Why sell good assets? Uh why not keep them?
I always liked to buy better located assets. Westwood was the place where we started and that would you know and so why sell assets in Westwood?
In good locations. In good locations. Yeah, it seems like you have a pretty good um feel for that. Like there's certain pockets that you like to invest in because location is important to you
and there's certain pockets where even if the deal's you know incredible like you won't have the vision or potentially would I would I hold this for a very long period of time, all right?
Right.
Um is that because of something you learned? Did a professor tell you that? Like what was your draw to locations?
You know I worked with a real estate broker uh a long time ago and he always told me location, location, location. I know we all hear that but he always kind of promoted you know location was an important thing to buy and when the market comes down better location is not going to get hurt as bad.
Mhm.
He is He was right and I followed that mantra and uh continued to purchase in better locations.
And that was important to me. Did you have this goal or this vision of when you started, okay, I want to own 3,300 units or I want to own you know a billion dollars or whatever or I want to have $100,000 a month in in passive income? Like did you have a goal when you started or was it just let's this is my work and I'm going to see what happens?
Yeah, I mean my goal was a thousand units and then 2,000 units and then 3,000 units. So it it was you know it these were goals that you know happened over time.
Yeah, that's how it it goes. What's the current goal? 4,000? My goal is just to be able to maintain everything and Right now. Yeah, especially right now.
I know. Yeah, it's hard to it's hard to grow in right now. It is super hard to grow. It's the mansion tax, ULA, and uh uh all the uh stringent rent control policies that have been implemented in the city of Los Angeles. If you're only in the city of Los Angeles, it's really hard to grow. And I think we're 90% city of Los Angeles. So, how do you grow in the city of Los Angeles?
Totally. I mean, they they put as many barriers as possible to make it almost impossible. Like, it's almost difficult for the people starting out, too, because um they're you know, they don't have any portfolios to be able to lean on, right? For the guys who have a bunch of properties, okay, you kind of have to buy for depreciation, you have the cash flow to wait a couple years and then buy again. But for someone starting out and raising money, like no one wants to invest in LA. It is very, very difficult, right?
hard. All everyone's run for the hills right now.
We just talked about this before we started, but I like to be able to feel, see, touch my properties. You guys invested a little bit in Texas at one point. Um are you looking at different markets? Are you are you looking at different opportunities? Or do you feel like you're just going to wait till the right moment appears for for deals in LA and continue to build that portfolio cuz you like the localness?
I think I'm going to stay in Southern California. I don't I don't want to I don't like driving more than 20 miles to go look at a piece of real estate. I like to look at everything, you know, unless it's a spectacular deal, I don't need to look at it. Yeah. But those spectacular deals are hard to find now. Uh especially in a market that's you know, stagnant or or declining.
Yeah.
Um so, I like I I don't want to jump on a plane, go somewhere, look at something. I don't want to drive 100 miles. Not that I haven't, but you know, I I'm I guess I'm lazy. And there's a lot It's a lot of It's a lot of work. Totally. It's a lot of work. It's not easy.
lot of energy out of you. It is not being easy being a landlord and and uh also, you guys have is you have all of your in-house management. So, you have a management company called Westside Habitats. Correct. Right, which you guys just manage your internal portfolio.
Yes.
Correct.
Correct.
And what's what's unique about Westside? One, the website's fantastic, so whoever did your website did a very good job. But it seems like you guys have a very good kind of sense of brand. I I feel like there's a cohesiveness to the way that you guys renovate and paint and and make the amenities of of the apartments look the same. Was that something that you initially had an idea of you wanting to do that or how did you come up with the thought process of creating almost like a brand when you're having this portfolio and people know, "Oh, here's a Westside Habitats building like here." And there's one in Hollywood and there's one in Mar Vista and there's one in Brentwood. Like was this a concept that you had before you guys built Westside?
No, I don't think we had a concept. It just evolved. It just came together. You know.
Mhm. Do you um do you find yourself or do you feel yourself as a pretty creative person?
Um financially, yes.
Okay.
Uh visually, no.
[Laughter] What is what do you think your superpower is? Like what do you think you're better at than other people that gives you an advantage?
Um I'm very I'm a very indecisive person. I can't decide where to I have dinner. I can't decide what to order, but I can decide what to buy. Uh I'm extremely decisive about it [snorts] fortunately. When I like something, I chase it, I go after it. Uh it's not always the right decision, but I make a decision and pursue it and feel confident about it and that has been uh extremely helpful. I don't have a lot of remorse when I buy. I have remorse when I sell. But uh I'm very decisive and I think that's been extremely helpful.
To be able to make help help you grow and and speed, right? We always say speed kills deals, but it also wins deals, too.
I think it wins deals. It doesn't and deals.
Yeah, 100%. Do you remember the first deal that you made a really good return on or or your first like stellar home run property? Do you remember that deal?
I think my first stellar home run property is uh was 747 Gayley Avenue.
Okay.
I bought the contract to to from a gentleman who passed away, Neil Schechter, uh who was also a very uh active, intelligent investor. And uh he sold me that contract for $100,000. I didn't have $100,000. I only had 50,000. Uh I gave him 50. I had him carry the other 50 back in a as a as a as a note against a piece of property for 6 months. I didn't have the money.
Wow.
And uh he sold me the contract to purchase 747 Gayley, which is a a 35-unit apartment building, uh kitty-corner to uh in in Out
Broker. Yeah, in West LA.
Yeah. Wow. That was the springboard to um to just getting in the market and to understanding the market and buying an asset that was, you know, large enough uh and gave me some presence.
Do you remember back then what the uh the LTV and the the rates and stuff were when you bought that?
I remember I bought it for 4 million 250. So, it was about 175,000 a unit.
Okay.
And it was about nine times gross, 10 times gross with upside. And uh you know, it was a it was easy. There's a lot of turnover in Westwood Village. That's why I like the village cuz there's turnover. And you can follow the marketplace. Markets been very stagnant in Westwood Village, so it doesn't apply anymore. But back then it was very stagnant. A lot of owners did not know what they were doing. They were under renting. That was my first um real springboard.
Do you remember the uh do remember what interest rates were? Cuz what What year was that? This is That was 1997. Okay, so '97 was the first one. Like what were the rates Was this when the rates were like 10 or 12%?
No, rates were probably 6%.
Okay. Yeah, high fives in the in the sixes, I would say. Okay. And so were you cuz a lot of people talk about positive leverage, right? You want to buy a building, positive leverage. Right. When when debt was really cheap, people were buying three, four caps, but the debt was 3%, so you had this kind of positive leverage situation. Were people doing the same thing back then? Were they looking at, "Hey, I I I need to buy a seven cap if debt's six, and I'm going to get it to an eight, and then I'm going to you know, refi to seven or seven half, whatever whatever that math is, right?" Do you think that Was that the scenario back then, too?
The market was so beaten up. It was so beaten up, you know, the people that owned 747 Gaily prior to our acquisition of the property, I think bought it for $7 million. So, I mean, this market was just it was it had gone down so low, rents on one-bedrooms were $700, $800 Whoa. back in the late '90s. Jeez. You know, two-bedrooms were a thousand, eleven hundred. So, there was there was just a lot of It was so beaten up that it was a different way of looking at things, you
know. Yeah, it's distressed.
Yeah.
It was distressed. You're looking I guess price per square foot back then, right? It must have been a good price per square foot and realizing what it was worth versus what you bought it at. It's funny because um a lot of investors, I think young investors, too, right? They look at the current market, seems very difficult. A lot of people, because real estate's gotten very institutional, you have these Argus models, and you have these 20-page documents, and you got to figure out your waterfall structure here, and you You to hit this IRR, and yada yada yada, where if someone has sophisticated and as big of a portfolio that you've been able to grow, like you don't even really look at cap rate. Like I'm I'm you're not looking at what the IRR return is going to be of this and that and and yada yada yada.
You feel a property, you understand the market of where the rents are, what the cash flow is going to be, the basis of a deal, which is which is important to you, right? If if other buildings are trading at different levels, and then you act on it. It's not this 75-page spreadsheet that you're click click on a button on and figuring out if the numbers make sense.
Right. Right? Right.
It's always been like that. So, that's amazing. So, anyone out there, you still you can do it, too.
You don't need to be It's tougher today, though.
It is.
It is tougher.
Do you feel like if you had to start over from scratch, you would try to do it in LA?
No. I would not. It's very difficult in Los Angeles. Rent control is killer. And the mansion tax
is suicide.
Yeah.
That's what it is. It's crazy.
Yes.
Can we do anything about it?
I don't know what to do. I I don't you know, hopefully it'll go away one day, but I don't know. But right now it's here and it's here to stay. Um so, you have to it re- readjust and you know, change your uh philosophy. I've been looking [clears throat] at deals under $5 million. I've been aggressively pursuing deals under $5 million so that, you know, you can make money in this marketplace.
Totally. Yeah, cuz you How many of your buildings have you bought this year?
I think I've just not too many, maybe one or two.
Okay, I mean, we're one of them, which is good, right? Okay, I'll take that. 50% market coverage. That was a good deal. Uh it was a good deal, by the way. Yeah, thank you. Um so, working with your brother, right? You guys have this family business. What's the dynamic with working with family? Like how do you guys make it work?
It's good. We make it work. We're close and uh you know, we work together. It's nice to have a sibling that's, you know, working side by side with you, you can trust you know, blood is thicker than water.
Mhm.
And uh so we you know, he does a lot of operations and I do more acquisitions and more of the debt.
And uh you know, works together it's works together. You guys are complimentary in terms of skill sets.
Yes.
Right? Which is nice and important um because especially when you're growing a business like this and and this is no small operation. I mean, this is you know, close to a billion dollars plus, 3,300 units in in Los Angeles. Like that as you know, someone who manages manages units, like there's a lot that goes into every little detail of this stuff. And and how many people are at your company now? I think we have 60 five employees.
Yeah, jeez.
So 65 employees. So being able Yeah, and so to to split up the responsibilities and make sure you're doing the right things like and now your kids are coming in the business, too. So it's like this this whole process of making sure that the dynamics continue to run smoothly because it the truth of the matter is the last five years have not been easy, right? A lot of people have been focusing on we got to asset manage. We got to asset manage because property values have come down pretty significantly in the city of LA.
Yes, they have. So you got to work you say property values have come
down? Depending on the market, I mean, 30%, 25, 30%. that much? Yeah, I think so.
I mean, Westside's lost to to 2017 values.
Yeah.
Unfortunately. I agree. Yeah, I agree.
I mean, when when we're selling nine GRMs in good markets that were 12, 13, 14 GRMs, like you start to question and think holy crap. Like this is you know, it's tough. If you bought in the last five years and your debt's coming due at some point, you got to ask yourself, do you have the cash to put in to hold on to this or do you got to you got to sell it? Like are you Is the loan doing a short sale? I mean, the lender doing a short sale? It's it's a very confusing time, I would say for a lot of owners, um which is is one opportunistic for those who have the cash to go and take advantage of the pricing, which you've been pretty adamant, um you get loans, but you can close quickly with cash.
Do you have a philosophy in terms of like LTVs and the risk that you take when you're buying something?
I love leverage.
Mhm.
In real estate, you need leverage.
Yeah.
Um you know, fortunately, we were not over-leveraged. We're refinancing properties now, and we're pulling out money, which surprising to me.
That's rare.
Yes, we still have banks that, you know, give offer us lines of unsecured lines of credit. So, I'm very happy about that. I guess that's my mind. I don't look at the cap rate, but I look at what banks are doing and the fact that we're pulling out money from doing refis now from Not that I enjoy it, but it is comforting to know that, you know, we're not having to put cash in. There are some deals we have to put cash in, but Mhm. 80% of the deals are cash out, and uh sometimes significant, and that's nice to know.
Talk me through uh those those '90s days, cuz I don't know exactly the trajectory of the growth of the portfolio, but I know the '90s were probably pretty big for you in terms of RTC. When you had bought um your buildings, I think Kelton was '87, you sold in '89, you bought it back in '97. Um walk me through kind of those early '90s and what the trajectory was in terms of the portfolio. Like, was it a straight up into the right? You just bought a bunch all at the same time? Was it slower growth?
I think in the late '90s, we acquired about 300 apartments. Um really well-located apartments. Another great deal was 204 Washington Avenue. That was, you know, Second and Washington in Santa Monica. Um I remember the price on that deal was 2,850. It was a 24-unit building. And they just got rid of this Costa-Hawkins. So, Santa Monica was no longer under this rent control where they had to re-rent it if they had a unit that was renting for $700, they had to re-rent it for $700. So, they got rid of that, I think, in 1996. And that helped markets like Santa Monica and West Hollywood. And that was a great deal.
Mhm.
I remember Laurie Lustig sold that uh that building and uh I uh was very excited about that. Uh I got a cashier's check. There were 17 or 18 offers. I made a non-contingent offer. It was a pretty courageous move at the time.
Yeah.
Uh I sat in Laurie's office till 10:00 p.m. I was like, I have to have this deal. I got a big cashier's check and said, "I'm ready to go non-contingent." I met with the sellers. I sat outside her office. They accepted the offer. I was very happy.
Is that the craziest thing you've done to get a deal?
No, no, I've done crazy things. I've done crazier things.
Like what? Like what what have you been able to do or what crazy scenario?
don't like to take cashier's checks. I like to make non-contingent offers with big checks.
Yes.
To show sincerity and to show that we're real. Yeah. Sometimes it scares people away. It scares sellers away. But most of the time it gives sellers a lot of certainty. Yeah. Our practice has been to go get a big check, you know, if you're buying a $10 million property, get a get a cashier's check for a million dollars. An inspection is BS as far as I'm concerned. I mean, you have to do a general inspection. But at the end of the day, you know what you're going to deal with, right? You walk the building, you walk a unit, even if you don't you kind of know. You look at the rent roll, you look at the moving dates. You you look at how long the tenants have been there for. It's really you don't really need to nitpick a property.
Mhm.
There's got to be enough room for error. There's got to be enough margin. And I don't I love buying things non-contingent. It's It's so much easier. You're more decisive. You're not wasting time. And hopefully, I you know, only predicated on you getting a good deal, of course.
Of course. Usually you do. Yeah, no, totally. It's If you If you can move quickly and you feel confident enough in that non-contingent offer, Yes. as a broker, I love it. I don't know what brokers don't appreciate that. Um it's very New York. So, in New York City, if Is that the way they buy? They No, all non-contingent.
Yeah.
Oh, all non-contingent. Yeah, that's that's typically the status of you know, they'll do like some calls offers and and whatnot, but it's non-contingent offers with like 10% down.
This is different for all of us. That's the way it should be.
Yeah, right?
Right, yeah.
I like Put Put your Put your name where your mouth is. Like, I've been in escrow on deals four, five, six times and I'm like, this is the worst thing in the world. Just give me your number, feel confident in it,
Right.
and let's move forward. Exactly. play this game.
Yes. I I completely agree and I'm People like to play games. People like I love to negotiate. Don't misunderstand me.
I know you do.
But uh but if there but buying things non-contingent makes it a lot easier. And uh of course, usually there's you know, there's a profit to be had when you're behaving in that manner.
Yes. Okay, let's talk about negotiation cuz um I think you are an excellent negotiator and I want to figure out how do you think about negotiations? Walk me through like when you're working on something or when you're in a negotiation, how do you actually mentally work through that? How are you thinking about it?
Well, I mean, it's got to be logical. You know, negotiation has to be logical. Sometimes we negotiate just for the hell of negotiating and that's unnecessary. [clears throat] I don't like to do that. I don't do that anymore. I used to. Um you know, you you negotiate when it makes logical sense and depends on the transaction. It It depends on the deal and if it makes sense. You negotiate according to what the justification is and you proceed.
And you move forward then. Yeah, it's um it's interesting because I think a lot of people What's funny you said logical because I do think there's logic in it but but also a master negotiator understands emotions and understands what people care about, right? Like does the does the seller care about speed? Non-contingent, makes sense. Do they care about the price? Is it okay? Are they willing to do a little sell seller carry cuz they want a higher number that they feel confident about, right? I think understanding the other side and then being able to to tailor your negotiation strategy according to that. I don't know if you're aware of this but I I think you're very good naturally at understanding that and reading people's emotions. Do you feel that you're someone who can read people pretty well?
Yes. I do. Right? But you can't really read a seller when you're dealing with a broker. So you just have to take the information that you get. You have to look at the story but I really just look at the deal. It's all about the deal and not about who's selling it, why they're selling
it so cheap or why they aren't selling it so cheap. I hate that question, why are they selling it? Like who cares why they're selling it or why they're selling it so cheap or they bought it for X and they're selling it for Y. I Why I mean I hate when people ask why are they selling it? Yeah. Right? It just is probably the stupidest question you can ask. Yeah, it's They're selling it. They're selling it. And that's it. And if you want to buy it, buy it and what's your price?
Yeah. Yeah, I mean it's funny because uh I I can see from speaking to you and understanding your philosophy why you've been so successful because you speed wins and and when other people are questioning and trying to figure out all these details, you're the guy who has a conviction to say, "Look, I know what I'm getting myself into. If I don't, I'm going to figure it out, right? Or we're going to work through this." You're not afraid of the challenges that could come with you moving quickly. Move fast, break things, but that's served you very well over a decade or 20 years of of accumulating enough great located buildings that you win, right? If If you take enough shots and and can move to get good deals on the purchase, you're likely going to be successful in the long run. True. Right?
And uh and you guys have obviously owned a bunch of these buildings and [snorts] are working to continue to grow them.
Tell me uh There's a lot of competition in the market. There used to be a lot of competition. Now there isn't. Now there's no buyers. But, you know, pre-COVID, even during COVID, the first you know, '21 and '22, there were a lot of buyers out there. Everybody had money. Everyone has money. It's the city has a lot of wealth. And people want to invest in multi-family. And there's a lot of money chasing deals. So, how do you beat the competition?
Do you know my secret is?
Big cashier's check and non-contingent.
And move quicker, right?
And it's And and yeah, and move decisively.
And it's very hard to compete with that. It is very hard. That's your competitive advantage.
Um do you And and answer your phone.
And answer your phone. I answer my phone. You are very good at that. You are very responsive, which I I love and appreciate. We have a sponsor for today's episode, and that is AI for CRE Collective. 25 listings at the moment. We're closing four or five deals a month. It's been incredible. So, if you want to learn, if you're in commercial real estate, how to use AI in your business, whether you're a property manager, a broker, an investor, really anyone, we have a huge group, over 400 people in this community. And the website, if you want to go check that out, is AIforcrecollective.com. So, appreciate you guys. Now back to the episode. So, let me ask you about um raising money, right? Cuz I'm sure I think most of this stuff is with with your own portfolio and family money, but did you guys ever go and try
to syndicate deals or raise money from outside capital and what did that look like?
All of our money is internal. We have some equal partners. Mike Seltzer's an equal partner in a few deals. He's like a brother, so it was fine being equal partners with him. And fun for that matter. But no, we don't have we've never we have syndicated once. We raised a million dollars. And it was a nightmare. We got sued by the person. He made a lot of money. We got sued by the person. We spent millions of dollars defending the investment of a million dollars. It was horrible. Oh my goodness. So that was our only experience raising money. It was with a uh with someone who I can't call a friend, but an acquaintance and uh we you know, we had a terrible time. Raising money's been very difficult.
Yeah, it was a million dollars we raised. Um that didn't work out too well. We were dealing with a shyster. But apart from that uh we um have tried to raise money uh for some deals. Uh cash flow deals. And it's not easy. It's a lot of work. And I'm not good at asking people for money. Yeah. It's hard. It is hard. But I prepared the nice prospectuses and you know, a lot of color and whatever and real, you know, I was putting half the equity in.
Totally.
So my deal was I'll put in half the equity, you put in half the equity and with a 30% waterfall, could not raise any money. Wow. Never raised any money, really.
Do you think so are you willing to do the the equity raising one because LA it's very hard to realize gains in a short amount of time, right?
Yeah. You take now you can't raise any equity.
Now you can't raise money. You can't raise money, but were you willing and wanting to do that cuz you guys needed the depreciation or you just wanted to grow a little bit faster? faster and we How much money you need money to buy real estate, right?
You need I mean, it's a very equity intense. It's You need a lot of money. You need a lot of money to buy real estate and there's only so much money that we have and that we had at the time that these deals were presented to us. So, a lot of times you go non-contingent, you buy something, I know we're going to get the loan, right? We'll get a 65-70% loan. But then where do you raise that 30%? We never had that 30%. We have to go sell to get that 30%.
Ah, so you were Did you ever do a like assignment deals? Did you guys make cash in the beginning by doing some deals, assignment deals?
it here or there, but you know, yeah, we did that. That's hard, too, you know, a lot of people don't like to give you $300,000 for a $3 million assignment. They don't.
They look at your pocket, I know. You're taking, right? [snorts] Did the management company, obviously, that that is just for internal management and you get to regulate what your expenses are, but did you ever think about trying to offer outside third-party services or to try to get other cash flows from different places?
Well, I think doing our own management really helped because what we would do is we'd go buy something. Now, this is pre-2015. We would buy something. Uh we'd have limited cash because we couldn't raise money. We weren't successful raising money. I don't know how hard we really tried. But the focus was to to to reposition the property quickly so we could go refinance it. And the goal was to pull out all the cash within 3 years. That was the goal when we would buy.
Is can we pull out the cash?
So, you'd look at cap rate, you'd look at all these other metrics. I would look at can we pull out our all of our money or the majority of it within 3 years? That was the goal. That's what I That's how I determined it was a good deal. To own the property after 3 years with very little cash in it. Got it.
Interesting. Okay, that's I mean that's a great way
looked at it. Yeah, that's a great way to look at it, too, because how I used to look at it.
Today it's you know, that's that's not It's a little bit different, yeah, to be able to pull your money out in 3 years. No, it's um it's funny when these when I talk to a lot of people, they have these kind of um internal metrics or that they look at and I think that makes a ton of sense from someone especially even if someone's starting out or looking in different places like come up with a metric that feels good to you, feels safe and that you can articulate to people if you are going to be raising money especially from family and friends. Like hey, here's the goal. Here's how I'm looking at it. These are the optionalities that you have of going investing in other places, but but here's what I'm Here's the value that I'm looking to have and add to you, right?
I think pulling your money out in 3 years is a definitely a very strong value add. It's crazy no one would give you money from that perspective cuz I probably would.
Well, you remember before 2018, we didn't have rent control on 90s or 80s buildings, right? So, you could go buy something, reposition it in 2 3 years, pull out all your cash, own the property free own the property with no money in
it.
Yeah, no money and then it's infinite return. what the cap rate was?
Totally.
It didn't matter. It really didn't didn't nothing mattered. It was just about you'd own the property after 3 years with no money in it.
God, it's crazy.
flow.
And so with the management company, was it a a deliberate decision to not go and try to Well, when we had a management company, that's what
allowed us to do it quickly. So, it wouldn't take 5 years, it would take or it wouldn't take you know, we would do it in half the time cuz we controlled our own destiny. Got it. the the leasing. We controlled the turnover. Uh we were involved in it. Ah. We knew how quickly it was going to happen.
That's kind of where you started. right? okay. And then what happened after 2015?
When you kind of reach a certain size, when you get big, then you can't really you know, then you can't really play that game. Got it. It's hard.
It gets harder. Ah, okay. I understand what you're saying. Yeah, yeah, yeah.
From from the And the market got stronger, you know, the the deals became more difficult to find.
But you guys you you own Western Habitats. That's your management company still, right? Is there a reason you haven't done third party, like manage other people's buildings?
Um Well, someone's told Someone told me management's a thankless job. Uh I There's no reason. I guess we just haven't looked at it.
Is it worthwhile doing?
I I don't know. Yeah.
Only if it's The only reason I think people have have considered doing outside third parties is for cash flow, right? Cuz it's a recurring revenue business, and sometimes when you have properties, it takes a long time for it to cash flow, especially in LA. Like you buy a five cap, six cap, whatever. Maybe you pull your money out from a refinance, but to actually get cash flow from it, it's very difficult, right? So I think that a lot of people have the management arm to try to bring in more stable cash flow to fund the management operations, and you 60 people, right? It's a It's a big payroll.
Yeah.
From that perspective, I think what you've been able to benefit from and are smart about is time, right? The longer you own, the more these these loans get paid down, your cash flow increases, right? You can grow the company. And if you get a big enough portfolio, then it starts to kind of feed itself, which is everyone's goal at the end of the day, right? You want it to be able to self-sustaining, so that
it there's no question of where my next, you know, I'm not worried about covering the expenses, cuz the all the buildings that we have are going to cover the main basis of it, right? Now it's just adding on top of it. Correct. Right? Yeah, it's it's it's Tell me where the name Xenon came
from. I got a call from a lawyer and he said well we I need a name for a company. And the night before I went to a night club it was called Xenon in New York City and it was a popular night club and I said how about Xenon Investment and that's where the name came from.
From a night club.
From a night club, yeah.
Wow, you must have had a good time at that night club, huh?
Yeah. [Laughter]
It was memorable enough. Right, you remember the name nothing else from the night. Oh my goodness.
Fortunately.
Yeah, it for exactly fortunately. You're pretty well traveled. Have you always wanted to be a traveler? Have you always you know, gone out and try to explore different parts of the world?
I don't really love I mean traveling's a pain but Okay, fair enough. Fair enough. Right, I know I I went to boarding school in Switzerland so that gave me some international exposure being from India too. We have a home in India so I went to India to visit but I went to boarding school in Switzerland and uh and my parents were living in London. So I would travel back and forth and I I guess we have you know a little bit of like a foot in Europe and and
that helped in having the exposure. Yeah, so you you had the ability plus the passports of different places and locations. So did you have you have citizenship in India?
No, I'm I'm a American citizen.
Okay.
Uh and a Canadian citizen.
Okay. All right, so those are the two that you have cuz yeah, I know it's it's India is a very fascinating place when it comes to economic development. Obviously it's a massive country, right? They have a billion plus people and still parts of it are very third world but then there's also really nice parts like Mumbai is massive, right? Bollywood's a huge industry. Have you ever thought about doing any sort of investing in India?
Well, it's very difficult over there because they they have a black market economy. Okay. So, when they buy, they buy with cash and check. So, India's getting cleaned up, but it's still a big black market economy. Used to be 80% black market economy. Now it's maybe 50 or 40% black market economy, which really means that it's a cash, you know, people half of it's cash and the other half is check. So, it's hard to you can never comp anything out. Um you really need to know the market. You need to physically be there. You have to have a sponsor [clears throat] that's local. It's a great market to be in. Leverage is hard to find. So, you know, you have third world It's still very third world. Yeah, totally. yeah. First world knowledge and first world intellect over there, but third world mentality in terms
of how business is conducted. Interesting. Yeah.
It's so fascinating because yeah, it's it's like ripe for opportunity, especially if you can take some of the western ways of doing business, but you got to play in the sandbox that you're given, right?
Yeah, and every It's a cultural thing. Yeah. People make investments and how they do business and it's very corrupt and there's a lot of referral fees paid and so you can't really trust anybody. It's hard. Totally. it's a different uh ball game all together. But you know what changed India? And I used to go to India a lot when I was a kid, MTV. MTV really revolutionized India. And you know, you have a billion people there. They were suppressed. Uh everything was nationalized. Everything was nationalized. It was a very nationalized economy. And they started to open up in the in the MTV was there in the late '80s, early '90s and that really changed things. Really? Yeah. Bringing the western world into India? Yeah, music really really That was just It wasn't only music, it was also video at that time and that really changed things. Wow. I remember that.
Yeah. That's awesome. MTV, man. That was that used to be the Cribs. Hell yeah, I used to watch MTV Cribs all the time.
Pimp My Ride.
Man, dude, those cars they used to make for exhibit. I was like, that I want a car with a fridge in it like that. That was that was pretty amazing, right?
Yes.
Um what's the worst deal that you've ever done?
There's many.
[Laughter] If you've been long enough in the business Well, I can laugh about it, right? Now, exactly. Exactly cuz you're fine. But do you remember any one particular where you're like man, I wish I didn't buy that.
I mean, there've been a couple, not a lot. Uh I don't know.
That you know, I mean what makes a deal bad?
What makes a deal where you're like, ah that didn't work out there have been some deals I bought in '21 and '22 that are worth 10% less today. That bothers me, you know. There are deals like that and you know, you just have to deal with it. But then there's a lot of deals even that were bought in '21 and '22 that are fortunately equal or have appreciated. So you know, it all kind of balances out.
Evens itself out. I mean, that's impressive that you're you've made money on deals in the last 5 years because most people that I talk to, cuz it was so competitive like you said, so everyone was bidding these things up. So like you kind of were forced to buy at the price that the market would bear and anyone who bought at market prices really kind of They got hurt. They got hurt.
They got They got hurt real bad. Yes.
Yes. What do you talk with um cuz you're very well connected in terms of other spheres and different businesses, right? I don't know if you guys do any sort of private equity investing or is it do you only
invest No. It's 110% It's all It's 110% real estate.
Really?
Yeah.
Is that a deliberate decision? Why don't you diversify?
it was so good for so long. Now it's not, but it was so good for so long that it was an it was an easy way to make money. I mean, things changed. After they brought in rent control, this AB 1482, where they implemented the 5% plus CPI rent control on non-rent control buildings, that's that stopped. That stopped. The party stopped then. And I think that was in 2018.
That's when the party stopped. Got it. Do you think that there's any chance that we return to the party?
No. Not I don't Well, I don't think rent control's going to go away. Hopefully the party will come back.
Yeah.
But um you know, now that they have clamped down on uh our ability to raise rents to market
Mhm.
immediately, Mhm. you it's you're the party stopped. The three years. don't see it changing.
Yeah.
That I don't see going away. ULA, if ULA can go away, that would be That will help.
That will help. But but I agree with you. It it makes the business plan and model of trying to get your money out in three years very
It's impossible. Yeah. It'll never happen. Very difficult. It's it's impossible.
Yeah.
Yeah. More like 13
years. Yeah, right. Exactly. Um so, with with all that going on, the current market we're in, have you considered trying to go do private placement, private equity, different investment vehicles? Like what's kept you in real estate? Well, now, you know, there's management of debt, right?
A lot of debts coming due. Still, I mean, still very busy.
Yeah.
Um you got to stay on top of things. Debts coming due. It's resetting 2% higher. Um you know, 2% is a lot.
Mhm.
You're going from three and a half to five and a half. And uh so, you got to, you know, manage and we're managing debt. We're still buying um selectively. We've sold I We sold a lot of stuff.
Yeah.
We sold it. And uh so, we have to exchange into other things. I everything under $5 million I think we liquidated. Did you Was that a deliberate plan or did you think that you were ever going to It was Yeah, well if you own something that's $5 million or $5.3 million what's the point of sitting there waiting it for to appreciate because if it appreciates you're giving it to the government right? Any Any appreciation you get after $5 million is going to the government if you're at that $5 million threshold. So get out of it. That was my thinking. Got it. And I saw the market coming down and it takes time for the market to come down. It's like a train.
Yeah.
It's a slow moving train. It comes down slowly and it goes back up slowly. I you kind of know when it's going to come down but it's a slow come down and it's slowly coming back and that's something I learned that was the wisdom I learned over time in real estate. Got it.
That it's a slow moving train. Yes, so you have to be able to identify it quickly and then act on it.
And just sit back and yeah.
And then wait for it to come back up. Um so then if you guys did you exchange that into bigger properties so that you're it's significantly above or did you go buy smaller buildings with the the weird threshold $5 million?
Well outside Well we bought in Glendale.
Okay. Like bigger buildings?
Well you know yeah bigger in Glendale smaller every in the Westside. Got it. Bought three unit buildings, four unit buildings.
Ah okay.
Bought buildings under $5 million. Those made sense. Haven't bought anything in the city of LA that's ex- that has ULA exposure Yeah. Yeah. since the the law went into effect.
Yeah.
Yeah. There's a reason for that. It wasn't planned but there was a you know mental psychological reason why do it.
Mhm.
I was looking at a deal that had that was a rent con- it's a rent control deal in West Holly- in in the in in the 90048
Mhm.
zip code and outside you know West Hollywood adjacent. West Hollywood adjacent. It has rent control. It's built in the '60s and it's over $5 million. So, how do you how do you do that deal like that?
It's very difficult. Yeah,
how do you justify it?
Yeah, it's really tough. Yeah, man. Because you don't buy things to think you're going to own them forever. I used to do that, but after this this
little Yeah.
real estate correction, you don't do that.
You don't own forever.
your mind on that. Yeah. You don't own forever. Huh?
Cuz there's a lot of people who I've talked to who are very wealthy in real estate and their mindset is still never sell. Like I'll refinance cash out. So, like But, what if you have to sell?
Sometimes you have to sell. Things go bad. You have you have a you know, you have a pandemic. You have a you have an economic disaster. You have something. You can't sit there and say, "I'm never going to sell." Yeah, in a perfect society, in a perfect world, but there's no such thing as perfect.
So, you what what about the argument that if you wait long enough, it'll be fine?
I I agree with that argument. Yes, but sometimes you need cash. Sometimes you need to be able to sell. You need to be able to liquidate. You need to be able to raise cash. Your better assets you are that's the way to sell.
How much how much emphasis do you have on having dry powder? Like do you feel like you at some certain point you need to have a certain amount of dry powder one to be able to execute or one to backstop if things go bad? Dry powder as in cash? cash.
Okay, fine.
Yeah. Like do you think about that a lot? or white powder? [Laughter] Maybe both.
Maybe both. But, uh it's important to have cash. It really is, especially now. Yeah. Right? You don't know if rates are going to go up. We really don't, right? With everything that's going on with the price of oil. And they're talking about stagflation. So, you what has to have cash? I we need cash to protect our portfolio. So, we're being selective on how to
invest. On how you think about that? Um who do you go to when you need advice? When when you need to go run some ideas past someone or you're dealing with a challenging time, like who do you go to to to ask questions?
You know, I ask brokers. Um I ask different brokers that I'm working with at the time, you know, what they what their take is. I like to get opinions from different brokers about deals. Um so that's that's who I go to.
What about like life? What about like life issues? Like you have like your friend like do you and your friends talk about like man, you know, life is uh whatever
any issues that you're about it, but it I mean, you know, if I want advice, yeah, I got to go to someone that can give me the right advice, right? Or intelligent advice, someone that knows. Yeah. Someone that not to sound conceited, someone that knows as much or more than me so I can respect their advice.
Yeah.
So you have to find that source. And real estate brokers that are in the business, that are you know, that are in the battlefield are very good sources of advice.
What do you think makes a really good broker? What makes a really good broker is one that brings me really good deals. That helps. That helps for sure, right? Do you Do you think that like is there one that someone you admire um or someone you respect, I guess?
Yeah, Hamid Sarudi. We've done a lot of work with.
Okay.
Uh I have a lot of respect for him. Uh he taught me a lot about real estate.
Mhm.
[clears throat] Uh I have a great deal of respect for him. Yeah, he's been in the business forever. He has, yes. And he's intelligent. Yeah. You know. You have to be to last that long in the business.
You have to know what you're doing and understanding the cyclical nature of it. And I think what makes a broker and and really good brokers special is there one, they understand the technical ability of uh real estate, right? There's There's of brokers that don't, but the really good ones understand the numbers, but they also have of intelligence and they understand how to connect with someone and how to understand them and when to push, when to pull, you know, who to connect them with. Like, they understand the person and that's those two combinations of knowing the numbers and being a good people person is very difficult. You can have one and be a very good broker, Yes. but to be a great broker and one of the legends, you have to have both.
True. You have to be very firm. You have to control your client.
Yes.
And it's hard. It is. Because we're loose cannons.
And we're in the service business, too, right? And and we get judged on a lot of things of like providing service.
Right. And clients are are loose cannons. I mean, you don't know what they're thinking, you don't know when they're going to act, what they're going to say, what they're going to do. So, you have no control.
I mean, you have to be able to control your client as a broker. Yeah, and be able to to
Yeah.
logic and emotion and and understanding come together with that.
And then there's a conflict of interest because a broker wants to earn a fee. He also wants to do what's right by his client. So, there is a somewhat of a conflict.
And you know, yeah.
100%. The broker's business model, in my opinion, the way you get paid is a conflict of interest. Yeah.
Right?
Yes.
It just is. And uh it's I I don't know if there's a way to solve it or or figure it out, but I think it's right now we got to deal with it and and, you know, hopefully you work with someone who you can respect and trust and has good intentions. They treat you as if they would treat their family.
Right.
And hopefully they treat their family pretty well.
Exactly. Right? Yes.
[Laughter] Um for for you, Richard, and where you see yourself looking forward, right? You have a ton of units, you'd like to buy some more. You guys are managing the portfolio. The next 5 years, like, what do you want that to look like for you?
Well, hopefully opportunities will present themselves and we can continue to grow. Uh I'm not opposed to it, you know, you just have to be selective um how and where you grow. I mean, larger assets we will acquire. [snorts] But then those are assets you can't really sell. You know, before ULA went into effect, I think we sold eight or nine buildings and we exchanged into a larger building on Beverly Glen and Olympic, 114 units. Uh we bought that from EQR. I don't know if that was the best acquisition, but compared to what we sold other assets for and then we exchanged into it, it made sense.
Mhm.
So, you know, we're going to try to do things like that. You just have to be creative, really really creative to how to get around this mansion tax and how to, you know, survive in this market. Los Angeles is still a vibrant place. You still have a great quality tenant. You have a lot of um brain power here. Um you know, you have a lot of industry and commerce. I mean, you have you know, a big population. This place really does buzz. I mean, this place moves.
Yeah.
It really does.
And you've traveled a lot of places, so you you've seen a lot of the world. So, for you to say that about LA, I mean, it's it's going to come back. It's going to rebound. It just has to.
It's too too nice.
There's a reason you live here, right? You could go move somewhere else and have residency and pay less taxes and all that stuff, but like there's a reason why LA is LA.
I agree.
It holds itself. So, we're going to bounce back.
Well, let's hope so. I know.
We are, 100%. Um I want to talk about, let's say in 20 years, you're you're retired, you're done, your daughter's running the business. What do you want people to remember you for? What do you want them when when your name comes up in conversations, what do you want them to say?
You know, it's a very good question. Um I really do pride myself on being honest and having integrity. And uh of course, being in real estate, you know, you sometimes go tie up a piece of property, you renegotiate, you do thing, you know, you do uh and it's kind of the norm now, but I really have pride I or I take pride in saying that um we have a good reputation. Uh we are for most part honest in the way we conduct ourselves. Uh we don't keep tenants' security deposits. We don't have a lot of lawsuits. We have a good reputation in the brokerage community. We've good banking relationships. I just want to have a good reputation. I don't have to be spoken about well, but I don't want to be spoken about negatively.
Mhm.
Um I think that's really, really important. That's how I would like to be remembered. Yeah. Is um you know, someone that is in the real estate business and someone that was fair and conducted themselves with
integrity. I think from my experience working with you and and from others, too, I think that is something that you show. Right. And that you you sit behind and believe. Yes. Um and it's one thing to say it and it's another thing to do it and you're the type of person who actually does what they say.
Yeah. Which is [snorts] very impressive. Yes. And it wasn't always like that, but I we learned, you know, I learned. I learned the hard way. I learned we'd go tie up a piece of property, not have the money to put the deposit into escrow, and then not answer my phone call. Not not answer the broker's phone cuz I was too embarrassed to tell them.
Yeah.
So, you know, you learn. You I still remember that, you know,
Mhm.
25 years ago putting a property in escrow and not putting the deposit in and just disappearing and ghosting the broker. Mhm. So, there are the you know, I don't we don't do that anymore, but we had to learn the hard way, you know. Yeah, from those experiences.
those experiences, which were not pleasant.
No.
No, but it's but it's sometimes it's those experiences and and the good deals, the bad deals, the mistakes that you make, the people that you hurt. That is where you grow as a person. I think the biggest mistake is not learning from that and not changing for the better. Um everyone's going to make them, right? Everyone's going to have a bad deal. If you're in the game long enough, it's just do you actually learn from it and move forward. Blackstones had bad deals, right?
Right.
And but they're perceived as they make very good returns. They're really smart. They continue to grow.
Yeah, even the best Yeah.
have bad days. So, it's good that you're taking that away and and improving. And now, I mean, is that what you teach your daughters? Like, what what are you telling them? Cuz effectively, they're they're going to be taking over the business one day.
I haven't taught them that, but I have but they are, you know, I have great daughters and I've I've taught them how to conduct themselves and how to be as people
in society and how to be honest and they're very compassionate and uh three great girls. Do you think one day you're going to just sell it all and go sail on a yacht somewhere or do you think it's going to be can't sell anymore. With magic tax, I'll never sell.
So, these are going to the great great grandkids.
Yes.
The whole portfolio. What's the most interesting deal that you've ever done?
Well, I've done a lot of interesting deals, but the one that uh really stands out in my mind was uh in the uh early '90s, we purchased a home in Bel Air and uh got financing. It was I remember $2.1 million uh dollars and uh got financing. It was a home that we moved into, which I had no business moving into, but anyways, I did. But, I got financing uh for a million 850. So, I bought this house with $250,000 down. The house was a good buy at the time and um I remember that first Los Angeles Bank did the loan. They did a first and a second. And the interest rate was in this You asked me about interest rates. It was in the 7 and 1/2% range.
Okay.
And um the value of the house went down to $1.1 million in 3 years. I mean, the market just crashed Oh my gosh. in the early 90s. And so, we were holding on to this asset um that had a loan of $1.8 million and was only worth $1.1 million. So, Oh my gosh. So, what happened is at that time the Resolution Trust Corporation, which a lot of people that are listening to this podcast won't really know, but the RTC was a government body that uh helped um cure all these bad loans. It was a savings and loan crisis that happened. And uh the RTC was packaging all these bad loans and all these over So, the property was negative. I stopped making the mortgage payment. I hope no lender is hearing this. And uh what happened is loans were
packaged like in the '08 2008, they were packaging loans and selling them. Well, they were packaging discounted loans and selling them for 5 10 cents on the dollar. Mhm. So, there was a bank called Berkeley Federal that bought a pool of loans. The property that that and the loan that was secured against this property in Bel Air was in this loan package. I got a letter saying your loan has been sold. And I had a lawyer at the time. And the lawyer always told me, "Go confront your creditors. Don't run from them." And I I remember those words. He said, "This is going to be the most valuable experience in your life." And it was cuz it was a hard time. And uh he said to me, "Kid, go talk to your creditors. Don't run from them." You know, it's easier to run, right?
Who wants to Yeah, pick up and just get out of it. So, I called the bank and they they they bought the loan. We talked and they said they'd be interested in selling me the loan. That really enticed me. And I uh they were called Berkeley Federal Savings Bank. Mhm. And the loan had a face value of a million five or six the first trust deed and I bought it back for $500,000. I went with a cashier's check flew to Palm Beach. I remember I just went there and came right back gave them the the check they gave me the the the the the deed of trust and the the promissory note. So I bought back this property that I should had no business that wasn't mine anymore for for $500,000. It was $580,000 and the property had then appreciated a little bit from the $1.1 million.
It was now worth $1.3 million. This was in the late 90s and my neighbor who started CNET I don't know if you remember CNET they were an internet company. He was my neighbor and he wanted to buy my house. I ended up selling him my house for $3.3 million. So on that half a million dollar investment I made two $2.8 million and that was my nest egg to go invest in all these properties and that was that that that what really
helped. That's crazy. So a situation that could have been absolutely terrible for you, right? Taking you out of the game, lost $250,000, whatever. The the market in itself gave you an opportunity and you had to figure out, okay, how am I going to make the most of this?
Right.
And you turned yeah $750,000 or $500,000 into three million bucks and then the rest is history.
Yes. That is crazy. Oh my gosh. Yes, I'll never forget that deal.
One hell of a story. Is there anything that I haven't asked you Richard that you think you want to share with anyone or you'd want someone who's young to listen listen to this? Like is there any advice you have for someone starting out?
Well, you know, it's hard to get in in in business. It's hard to start and luck does play a little role in things, you know, but you've got to just stick with it and you have to be you have to persevere and you have to be persistent. I meet the new generation, I see how they are, I see how they're very analytical, extremely analytical. Now with you know, the internet and all that and all the different programs, you can be very analytical. Sometimes it hurts you. Sometimes you don't want to over analyze. You got to go with your gut and you just have to, you know, time is on your side. You have time and you just have to persevere and you know, stick with
it.
Things will work out. Yeah, but real estate in Los Angeles is not
easy. Shoot, man. For all those ones wanting to come in and start building a portfolio, it's tough.
It's tough.
But also, that means if you're mentally strong enough to stay with it, maybe you can be as successful as Richard one of these days.
you.
Richard, thank you for being here.
I really appreciate it. Thank you. It's a pleasure.
I enjoyed it. Likewise.
Thank you.