Paul Mark Morris

Yes.

Thank you for having me.

I'm really looking forward to it.

Let's go.

It is, to be honest.

And I've answered it so many times that I'm happy to answer it again.

Real estate is so deal dependent.

that there are great buys made in every market, and there are terrible buys made in every market.

So how good the deal is is almost wholly independent of the market.

Now, I might change the way I look at a deal, knowing that the market's been so hot for so long, we're really closer to the top than the bottom.

I might adjust the things that I look at and be a bit more conservative.

And I'm going to give you one anecdote and that is I go to hot yoga and I'm in the locker room and men are nice to each other in the locker room at hot yoga.

Never been.

And the guy said to me, hey, you know, I know you're in real estate.

And I was looking at this deal.

I thought it was really great deal.

And my CPA told me not to buy it.

I was like, oh, that's interesting.

And he's like, what do you think is now a good time to buy?

And I asked him like where the deal was.

And interestingly,

his realtor happened to work for me, which is not as crazy coincidental as it might seem because there are 2000 realtors in LA working for me.

And I knew the person and I know that she's a great realtor and she was suggesting a buy.

And then his CPA said, don't buy now.

It's not a good time to buy.

And I, and I asked him,

did your CPA go out and look at the property or did he at least see the deal?

And he said, no, he was just saying it's not a good time to buy.

And I told him, I absolutely promise you that that is terrible advice.

And the reason why I know it's terrible advice, I'm not saying buy it or don't buy it, but the reason why I know it's terrible advice is because if you don't look at the deal, how in the world would you know whether you should buy it or not?

And there certainly is a price at which any real estate deal makes sense in any market.

If you have a need to buy real estate, meaning like you're renting, let's just say you're renting and you come to me and say, is now a good time to buy real estate?

I would say now's a great time to look for deals.

And every single market is slightly different.

Like the Fed just dropped their rates and they're anticipating that the Fed's going to drop their rates again, maybe once this year, as many as two or three times next year.

there are people waiting till those rates drop and that i'll tell you why that doesn't make sense because when the when rates are low and the market's hot then i have clients yeah i have clients and people they've now missed their seventh home you know they got outbid and they're they're waiting for a time when their offer would be would be looked at so

If you can afford to buy your own home, then every market is a great market.

That doesn't mean that every deal is a great deal.

You can make a bad buy in every market and you can make a phenomenal buy in every market.

Please.

Whatever you want to do.

Okay.

It is and it isn't.

I use an investor mindset when I buy my own house.

I had a podcast on how I made a million dollars the day I closed on my own house.

Well, so one of the myths is that in order to get a steal or a great deal, it's got to be off market.

You've got to steal it from somebody.

You've got to whatever.

people are always looking for them.

They're like, oh, if it's on the market.

So I'll just give you the example of my house.

My house is at, it is at a luxury price point and it was a poorly done flip.

what it meant in real terms for this house.

And I'll just go ahead and tell you the numbers.

The house was listed at 4.75 million.

It was at the top of the market.

This is when anything that was like halfway decent was in multiple offers.

4.75 million was already low for this.

That's why they priced it that way.

And it just sat there.

I looked at it and there were enduring qualities.

The enduring qualities are magical views, 5,000 square feet all on one level.

It had a beautiful infinity pool that was like carved into the edge of the mountainside.

I'm painting a very nice picture, right?

Wow, wow, wow, right?

You go in and there are, I think it's not an exaggeration, 100 overhead LED lights of the cheapest brand possible.

And there's not a dimmer in the whole house.

So you go in and you turn on the lights and it's like, you're like in a surgical theater.

It's interrogation rooms.

It's like, that's bad.

And then there was just so much wrong with the house, visible flaws and things that chase people away that if you do a little bit of work or a little bit of due diligence that you can work around.

And the bottom line is I ended up paying 4.65 million for it.

And let's just do the math.

It's 5,000 square feet.

And I brought a whole team in to inspect everything and then had a contractor who I trusted and said, you know, how much is it going to cost to fix all this stuff?

And the answer came back, you know, well under $200,000.

So let's redo that math.

4.65 million in with everything screwed up and $200,000 to fix it.

Now we're at 4.8.

You know what?

I did it in a way that I was like, tell me if you think it costs 20 grand to fix it, tell me 40.

I don't want to undershoot it, just overshoot it.

And the number came at 200 grand.

And the easy math is 4.65 plus 200.

Now you're at 4.85 with all the stuff fixed.

And then I went to a great realtor, even though I'm in that business, I went to a great realtor who specializes in the area.

He knew the house, he knew the view, and he just said, there's nothing, you cannot touch anything with that kind of a view for under $1,200 a square foot.

So that math is $6 million.

So for 4.85, I'm getting $6 million worth of house.

And that, by the way, was in one of the hottest markets

That's when it was buy, buy, buy.

And I was still able to get essentially that steal.

It wasn't a steal because guess what?

It had been on the market, which means every end user, every investor,

had already seen this place and passed on it.

And being able to see through that with the help of experts to, because I'm not an HVAC guy, you don't need to be any of this stuff.

You know, just get the right people, get the right information, make an informed decision.

And that's how I gained a million dollars equity, you know, at the close of escrow.

Right.

Buy where you know, make sure it's value add and make sure it cash flows.

So, and the other thing, just like you said, come back to earth on the $5 million house.

I just want to say that that math works exactly for a $500,000 house.

So you buy the $465,000 house that has $30,000 worth of

bad stuff, you can do a lot for 30 grand.

And now you're at 500 grand and it's worth 600.

So the math works at $500,000.

I'm originally from Pittsburgh and that's where I found that math.

So one of the things that

people find you know interesting or or surprising is that i've been i've been investing in real estate for 30 years and i've never lost money in a single deal and i've done that by following the three rules that you're referring to and the first one is buy where you know

And to answer your other great question of, okay, well, you know, geez, I live in LA, which is where I know.

So like, shouldn't I be buying in Detroit where I heard it's cheap or where, you know, whatever.

And my answer is, first of all, if you don't own a home, and this is where we're getting back to investing versus your personal residence, the best place to start building wealth by far is in your own home.

And the reason why is there are loans and products, loan products available to you for your own home that do not exist for investors.

So you have to check the box that says, yes, I'm owner occupy.

And then there are, there are programs that like kick the door wide open.

You mean lower interest rates for first time home buyers and much, much, much lower down payment for starters.

So buy the worst house in the best neighborhood is a great North star.

And the only reason why I deviate from that is because of where we live.

Like, okay, so you're going to buy the worst house in Beverly Hills.

Like, sorry, I can't afford that.

That's not going to work.

It's still a great idea.

It just doesn't work in a very high priced area.

So instead of buying the worst house in the best neighborhood, what I'm buying is, you know, close to the worst house in an area that I know is up and coming.

And I know it's up and coming when, you know, about 25% of the houses are done.

There are other signals I use as a signal, you know, are there cool coffee shops coming in?

Are there...

vintage shops or just like the cool stuff is coming in and then you you just know that it's starting you know that it's starting to turn because if you buy too early uh which i've done that too like i know this neighborhood is going to change and you want to catch it early

and you buy too early, you just never know.

Like it could take forever.

So you have to like miss the best buys and wait till it's already starting to turn.

And then everybody in the neighborhood is like, did you see that place?

Like that is crazy what that sold for.

But when it's only like 20 to 25% redone, you're already paying more than the people that first got in.

But you know that that train is moving, which is important.

You are following the cool kids.

Couldn't have said it better.

Yeah.

So when you're doing it for your own home, it's buy where you know, buy the value add, and then know that you can afford the payment.

And so if you can afford the payment, that's the same exact thing as it cash flowing.

So if I'm paying...

$1,600 in rent.

And I look at the mortgage payment.

I'm like, yeah, but the mortgage payment's going to be two grand.

That's more, but I can't afford it.

Yeah.

So, you know, 1031 is really about pay taxes now or pay taxes later.

And if you can delay taxes, that's always a good thing because, you know, again, I'd use very, very simple math and let's say we,

got into an investment property and it was $700,000 and we put $300,000 in to make it great.

And you know, the rents went up and we waited a while and now it's worth $2 million.

Okay.

So if we sold it,

we would have to pay taxes on that one million dollar gain and that that would come out right now and then we would have let's say you know whatever it depends on what state you're in and that sort of thing but as you say now we have one and a half million to invest instead of two million to invest

If you 1031 exchange it, you can delay the taxes and then you invest the whole $2 million into a new property.

So you have more to invest.

And if you do that over time, your money will just grow much faster.

Of course.

And you're making the landlord wealthy.

You're not making yourself wealthy.

Also, there are tax benefits.

I didn't create the tax laws.

Somebody's paying insurance.

And so if the landlord's paying insurance, they cannot pay their insurance unless they're charging you for their insurance.

Somebody is paying that property tax.

It goes into the value of the property.

The reason why apartment building owners are the secret millionaires or multimillionaires is because it's worked for them and has always worked for them.

I see people lose money in real estate.

And the people that lose money in real estate are people that get over leveraged.

Like you said, I agree with you, except that if you can afford to pay, if you can afford to pay the mortgage, just like you have, if you can't pay your rent, you're eventually going to get thrown out.

And so if you can afford to pay your mortgage, then you're good to go.

And over time, the payment that you're making is almost all interest in the beginning.

And then it starts to change.

You're paying down principal over time.

You're building your own war chest.

Sure.

Okay.

i would want to ask you where is the value of the house during that during that period of time and that you might say is market dependent and i would say to you that if you bought it the way i talked about buying it it's not it's more dependent on the value you add than the market but i love overtime looking at big data sets yeah

And so you want me to answer that?

Is that a statement or is that a question?

It's like, you know, a national, a national weather forecast.

Let's say we're going to plan your, we're going to plan your wedding.

We're going to plan your, you know, big celebration.

And you're going to like look at a national weather forecast.

It doesn't, it doesn't make any sense.

You got to look at the micro market.

Well, again, every single property is its own stock market.

The market exists inside of that.

I don't know what stock you could possibly, you would have to have a crystal ball to pick a stock

where by the way, and I did take a loan out on the, on the $4.65 million house.

And, and the amount of money that I put down was $400,000.

And when I closed escrow, I was, I was plus a million in a market that's, that was difficult to buy into.

And so you're at

250% gain.

Of course.

I got a call while I was in escrow and someone said, I'll pay you a million dollars more for the house.

I had already like sold the Santa Monica house, you know, a million dollars sounds great.

And then I had already sold the Santa Monica house and then it's a short term gain.

I'd have to pay like 52% tax.

So, okay, so I'm going to walk with $480,000 cash.

That still sounds great.

And where am I going to go?

you know, in one of the hottest markets.

I would have to like move out of town in order to do that.

So I hear what you're saying.

And I respect people that have, you know, this phenomenal stock market knowledge.

The thing that I love about real estate investing is it's when you invest in the S&P,

You're a passenger in somebody else's car.

I wouldn't even say that.

You're riding in the backseat of the bus of somebody else's bus, and there's drivers, and you've got no control of what's going on.

And when you buy a piece of real estate, you can find out, I believe,

more about that piece of real estate, especially if you have local knowledge, like, Hey, I live here.

I know what, you know, what the area is doing, what it's not doing.

Now you throw in $600 for a home inspector.

That's going to like go through every single thing.

You're going to know more about that house, that one single purchase than, you know, I believe then anyone could possibly know about, about a stock.

How are you going to know?

Tragic.

And hopefully you had...

you know, insurance to help.

That's correct.

Every one of these things creates opportunity.

Somebody's paying that, though.

The landlord is paying that, and that is going to be reflected in your rent.

We're gonna still be friends after this.

We're cool.

And I have a client that

was interested in a certain area.

I saw this house that was great.

And I'm like, let's take a look at this house.

And he's like, oh, you know exactly what I like.

This is amazing.

And the guy has lots and lots of money.

This would be a small buy for him, small risk.

And he was very close to buying.

And I said, let me ask you this.

Do you know, are you going to still be in LA in the next three to five years?

And he said, you know what?

I really don't know.

I'd put it at like a 50% chance.

And I looked at him and said, you know what?

I can't guarantee you that if you came back to me to sell this house in three or four years, that we could even get the money that you put into it.

And that caused him not to buy.

So I'm in agreement with you.

I found a place to agree.

This is good.

Yes, let's go.

So let me ask you, what are you going to use the pen for?

I love it.

Would a gel pen be great then for signing books?

Okay.

And also when you're signing a bunch of books, the other thing that happens like that smudge thing.

Right?

Okay.

And it's not too fat?

So if we find you a pen that's going to be permanent, so it doesn't, so it doesn't smudge because then at the end of the thing, you're like, you got the ink all over your hand and blah, blah, blah.

It's like all spread out.

Okay.

So, so gel pen works a non smudge.

And is there anything else about the pen?

Like, how about like, you know, nice weight to it or whatever?

It's like balanced weight.

great.

Great.

Okay.

So why not?

Yeah.

And so you don't, you don't want like the average BIC pen because you're like, what's that?

This is a special moment for me.

I'm getting, I'm getting my little amount of time with Nicole and this book, and this is really special to me.

And she's got like the BIC pen out.

We don't want that.

Right.

Okay.

And then do you want like the super fancy over the top, like

Okay, yeah, right.

I know, and I lose the pen.

I've had Montblanc pens, like...

I'm like, I lost the pen.

I hate myself.

So that's why you shouldn't have the pen, right?

There's the answer.

Right.

Exactly.

Okay.

So actually, so let me ask you if I were able to deliver to you a pen that is, uh, that's gel permanent, won't smudge all over your hands, has sort of a luxury feel to it, has that creates that special moment, but yet, you know, you're not going to shoot yourself if you lose it.

Is that, would you say yes to that?

yes okay then it looks like we have a deal because this is you've described exactly this pen i think it's it might be a hundred dollars like eighty dollars so it's not like i don't know i don't even know what a mont blanc costs but like a couple hundred dollars and then they're fountain pens they run all over the place but this is yeah this is a good and then when you put the top on it well here i'll let you hold it and see what you think about the weight oh right

Now, maybe you want to take a test drive.

I think you like that pen.

Selling creates opposition.

And convincing creates opposition.

So...

To sell effectively, to sell very effectively, you want to give somebody what they actually want.

And there's no way to figure that out without asking the questions.

So, you know, when I'm asking the questions like, what about the pen is important to you?

And then you said, that's just, you said non-smudge.

Or I said, does that make a difference?

Because I know something about book signing.

You're like, yeah, oh yeah, the smudge is terrible.

So I would write down, not an interpretation of what you said, but I would write down the exact words that you used.

and repeat it back and repeat it back.

And it's not, it's not just like sales, you know, manipulation or whatever it is that the person's going to feel heard.

And then when you're in a position of selling something, someone is going to believe a small fraction of what you say.

However, people tend to believe everything they say.

So I'll give you an example in my business, which is the brokerage business.

And so if I were meeting with your friend John, and I know he moved, but I think he was at, well, it doesn't matter.

He's at Firm X, okay?

I know that Firm X does nothing to help him with his business.

And if I go, oh...

john you're such a great realtor you do such a great job and you're with firm x they they just don't do anything for you i know that it it creates this opposition um and then he wants to tell me all the things they do for for him even though they don't actually do it so instead i say wow you're you know you're a great realtor which is true and you're a great businessman that's also true of john and i i'm just curious

what do they do to help you grow your business at FirmX?

And every single time he's like, they do absolutely nothing.

So them saying, you allow them to say it.

So as I'm writing all these things down, I'm getting your requirements.

And let's say there's requirements one, two, three, four, five.

And I've written down exactly what you said.

So to be clear, what you want in a pen is you want it to be non-smudge.

You want it to be special.

You also would like it to be not overly expensive so you don't have to worry about losing it.

You want it to have some weight so it writes nicely.

And you want it to be special enough to create the moment.

I'm not sure that I can get you a pen that meets all of those needs, but I want to know if I am able to meet all of those needs, are you going to buy the pen?

And you could answer a myriad of things, including like, well, no, I'm still going to have to think about it.

And then I'll just say, okay, well, then we're not really having a business conversation.

That's fine.

We don't have to have a business conversation.

I'm trying to find the things that you need in order to make this deal and then I'm gonna go run around and try and make it happen.

But I know that you respect my time, I respect your time.

I don't wanna run around and try and make all this stuff happen unless I know that we have a deal if I'm able to provide these things to you.

And that's the conditional close.

And when I didn't do it, there was one specific instance where, you know, it was a very important recruit for me.

And she asked me for like six things and I could only give her five of them.

And I said, look, if I were able to do these five with that.

And then when we got to the meeting, I was with a business partner who, you know, it wasn't his fault because I should have briefed him first.

And he just threw the offer letter out on the table to her.

And she looked at the offer letter and said, oh, okay, well, I'll have to take this home and think about it.

And it never happened.

And I feel certain that if I had said, hey,

Um, should I, should I, I love this woman too.

I, I'm going to name drop her.

Okay.

It's Sharona who the, the song, my Sharona is written after.

And she and I are, that's a real woman.

Yeah.

It's a real woman.

I love her.

She's, I hope she loves me as much as I love her.

She's funny.

She's sarcastic.

You know, she brought her dad to the meeting.

This was the closing meeting and

And I know that if I would have said, hey, Sharona, you asked me for six things, and I need to know that if I'm able to deliver these five, are you a yes, that she would have said, well, yeah, if you can do this and that and the other thing, well, and yeah, yeah, I am a yes, if you can deliver that and be like, okay, great.

So let's go.

Let's shake on it.

And I think she would have joined my firm.

It has to be, yeah.

Well, if there's a product involved, then you want to relate the product to that person's needs.

And how does this product serve that person's needs?

And also, there may be aspects of the product that do not serve the person's needs.

And then you want to know like, okay, so I'm not going to change the product.

Is that, do we have enough of your needs in order to satisfy it?

And if you really take that open-minded approach, it's not like,

I mean, there was one sales guy on Instagram that I actually blocked him because it was ruining my mojo because he was screaming at people and all this stuff.

And I'm just like, oh.

That works because doing something with a lot of energy as opposed to doing nothing is always going to work.

But ultimately...

I don't want anybody to buy anything that they don't want that's not going to serve them.

And I think at the end of the day, you do better as a salesperson by meeting people's needs.