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Show Summary
In this conversation, Lee Nugent shares his journey from humble beginnings to becoming a successful real estate investor, private lender, and fund manager. He discusses the importance of mindset, the challenges faced by new investors, and the current market dynamics affecting real estate. Lee emphasizes the need for confidence in making offers and understanding the financial implications of investments. He also touches on the future opportunities in real estate amidst changing market conditions.
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Investor Fuel Show Transcript:
Lee Nugent (00:00)
One of the biggest things that I see a lot of beginning investors get hung up on is that they’ll do all of the homework. They’ll analyze and they’ll prep and they’ll get it all the way there. And they’ll say, wow, I can’t offer this price. It’s insulting to them. And that’s where they stop and where the competition becomes very scarce, because I’m one of the people that I’ll go right in there and I’ll make that little ball offer. ⁓ And yeah, OK, if they want to be insulted, that’s their prerogative.But I’m sitting here purchasing on finance, not feelings. So whenever I go there and I explain this to them, by the time I apply debt service, by the time I do this and fix up these repairs, I can’t have a cash flowing property unless I offer this price. And while I can respect that you’re in the position that you’re in, it’s not my job to jump in the quicksand just to replace you. So I have to make my offers based on something that makes sense.
Dylan Silver (00:48)
Yeah, that’s exactly right.Hey folks, welcome back to the show. Today’s guest, Lee Nugent is an investor, private lender and fund manager. Over the years, Lee has built a diversified real estate portfolio leveraging creative financing, market insights and risk management strategies. You can find him at REwithLee.com or all of his social media REwithLee. Lee, thanks for coming on the show today.
Lee Nugent (02:47)
Yeah, I appreciate you having me, Dylan. Thank you.Dylan Silver (02:50)
Great to connect and when we talk about getting into real estate, know ⁓ based on watching some of your videos, you came from some humble beginnings, really scaled this and bootstrapped this from the ground up. Let’s start there. Walk me through getting into real estate and what those first couple of deals were like.Lee Nugent (03:10)
Well, I’ll try to be as brief and succinct as possible, but I can ramble. I’ve got 80, ⁓ 80 of the HDs. So just bear with me and just give me a symbol if I’m running too long. But I was in most people’s position, right? I had had nine to five, Monday through Friday, sometimes on the weekends kind of job, and just wasn’t happy. After my mom had passed, ⁓I started really kind of looking into what is it that I can do to kind of build for my family should I have a shorter lifespan similar to my parents. My father passed at 54, my mother passed at 54, and I said to myself, I don’t know if it’s genealogy or lifestyle, something isn’t right here. let’s, how do I make sure that my family is taken care of should my time be cut short?
Over the time, I kept hearing more millionaires are made in real estate than any other industry. So I started looking into a couple of things. Lo and behold, found a free course. ⁓ Now, this was after finding opportunity for a job ⁓ in sales. And the company, I don’t want to speak to the company’s name, I think they’re still around. It was actually one of those like, hey, you buy our course and then you can sell it kind of things, right?
And ⁓ I went online and I started reading the reviews. Somebody changed my life and said, hey, the information you get from here, it’s fantastic, but it’s nothing that you couldn’t learn at your local library. And that’s what kind of sparked for me. I said, well, hell, I barely graduated high school, but I have a master’s in Google. So I went to YouTube University. I started looking at all these courses. ⁓ to this day, Phil Putyovsky of freedommentor.com.
You know, he had all this free content on YouTube. And so I just really consumed for like a couple of months. I’d get home from work. I’d learn it. And then one day, close the laptop, looked over at my wife and said, I think I want to start wholesaling. What about taking a thousand dollars getting started? And she was like, no, I don’t, you know, I don’t have any opposition to that. However, why don’t we just go to the bank and see if they’ll finances? And well, that was.
Dylan Silver (05:21)
Yeah.Lee Nugent (05:22)
That was kind of it.But the previous part to that is at one point I had a 450 credit score. So it took some working, right, to get into that bankability. That’s right. So anyway, I had been working on that and got up to the point to where I was financed by the bank. We purchased our first property in March of 2015, and it was a duplex. And then our second property in April of 2015, also a duplex.
Dylan Silver (06:18)
are you to get rolling?Lee Nugent (06:35)
and then it just took off from there. I found some creative ways to obtain the bank finance and use the leverage properly and just kind of scale my portfolio. At our heaviest, we got to over 50 properties and we’ve actually been disbowing a number of those, rolling into some commercial and expanding my private money lending that I’ve been doing since 2020.Dylan Silver (06:58)
Now when we talk about evolution of an investor in many ways, a lot of our listeners, myself included, can relate to this trajectory. know, start off looking at wholesale involved in the single family space, maybe some small multifamily duplex, triplex, quadplex, that type of thing. Get into lending or larger deals. At the onset, though, did you see where you’re at today? Was that the goal or did this happen over time?Lee Nugent (07:24)
Brother, I just wanted to keep my head above water. I didn’t know what the goal was. All I knew was, ⁓ well, and one guy in our local REA, he was great. He was very encouraging. He said, get to 10. Once you’re at 10, it’s not so much pressure, so much heading. So that’s what I did. I jumped to 10 before the end of the year, right? Because the first four units in those two months, I’m sitting here, now I’m facing tenants that…you know, have the stories that I had whenever I was younger and irresponsible with money, right? So I had the bleeding heart for them. And, know, I was trying to work with them and listen to all the stories.
Then I’m sitting here sweating this because again, we started with $6,000. It was actually $3,000. And then after the first couple months of tenants trying to put us off on payments, I was like, we’re going to need some more money. So we put another $3,000 in. And then I realized that I can’t be a nice guy to the point that it’s going to cause my business to fail. So with that, ⁓ no, my goal was just to get these paid off, right? It was going to be retirement plan.
Dylan Silver (08:21)
Yeah.Lee Nugent (08:30)
from my wife and I because I didn’t really have a 401k, right? I was a poker dealer throughout my 20s in the casino business and it was while it was fun. I wasn’t really the most responsible guy. I’m being honest, so I had to make some kind of some kind of build some kind of legacy some kind of retirement and that’s where it went and it was it was great and.All I knew was once I had that first deal and that second deal, and it came into where the bank gave me 100 % financing, which was fantastic because at the time, credit unions would give you loan to value financing, right, on a purchase. So all I had to do was negotiate a great deal. And for example, the first deal was they were asking 93, I bought it for 67 at a price for 104.
So I was able to go there, all fees rolled in, everything else. Same for the second duplex. And that’s when I thought, ⁓ this is easy. The acquisitions weren’t so hard. It was the operations that I was hung up on. So yeah, just to go back and tighten it up. No, the biggest thing that I was focused on was just keeping my head above water.
Dylan Silver (09:34)
When we talk about going from that starting point to where you are today, I want to dive into, you mentioned getting to 10, right? And for folks who may have rebuilding credit or for folks who may have no experience with real estate, right? And they’re thinking, well, gosh, okay, that one’s going to be hard. What advice would you have for them from a mindset standpoint and also from like, hey, this is some things that maybe I did that could have been easier.in those first couple deals.
Lee Nugent (10:02)
One of the biggest things that I see a lot of beginning investors get hung up on is that they’ll do all of the homework. They’ll analyze and they’ll prep and they’ll get it all the way there. And they’ll say, wow, I can’t offer this price. It’s insulting to them. And that’s where they stop and where the competition becomes very scarce, because I’m one of the people that I’ll go right in there and I’ll make that little ball offer. ⁓ And yeah, OK, if they want to be insulted, that’s their prerogative.But I’m sitting here purchasing on finance, not feelings. So whenever I go there and I explain this to them, by the time I apply debt service, by the time I do this and fix up these repairs, I can’t have a cash flowing property unless I offer this price. And while I can respect that you’re in the position that you’re in, it’s not my job to jump in the quicksand just to replace you. So I have to make my offers based on something that makes sense.
Dylan Silver (10:51)
Yeah, that’s exactly right.Lee Nugent (11:28)
But so many people, get to the point to where, know, and Dylan, I’m sure you’ve seen it. You know, you’re working in two markets. I’m working in two markets, you know, with our real estate licenses as well. Right. So we’re going over there and we see people that go all the way. And then they get to the point and they’re like, OK, great. I was mentoring a guy just a couple of days ago.We got there, we reverse engineered the offer on a flip and they were asking, think, $250, and his offer hadn’t come in at $150 to make sense. And he’s like, well, I’m not, ⁓ I don’t want to write that. I said, don’t worry, I will. If you don’t want this deal, now that I’ve put in the work on this, give me the agent’s contact and I’ll make the offer. And all of a sudden now he’s like, well, no, no, I’ll go ahead and make the offer. So that’s where a lot of it for beginning investors.
It’s that lack of confidence or that perceived notion that you’re going to hurt somebody’s feelings. Look, in this business, you’re going to hurt some people’s feelings because people have sentimental attachment to properties. You know, they had memories, they had job loss there, they had, you know, weddings and children’s and, you know, parents that were aging and unfortunately passed away. And now they have to sell a home that they grew up in and had all those childhood memories. They’re going to be insulted sometimes.
Dylan Silver (12:23)
Right, right.Lee Nugent (12:40)
Whenever you actually frame it correctly and you let them know, I’m not here to insult you, but I’m also not here to throw away money. You know, this is a business for me. And while I respect your position, please understand that this isn’t just me out here lowballing you just to get lulz out of it.Dylan Silver (12:54)
No, when we talk about, you know, making cash offers and, you know, the sellers who are receiving them as a realtor, as realtor myself, I know from from the perspective of a realtor, if a price, especially if a property sitting and they haven’t received offers, right, I as on the receiving end would would entertain anything to get get the conversation started. So right now, you know, people in the markets that I’m active in can have homes cancan even have some high-end flips that have been sitting. So when you’re looking at the gamut of the conditions right now that are affecting sellers and buyers, not only do the sellers themselves are a little bit more open to what they’re fielding, but also as someone who’s writing these offers, I understand that unless that seller and that buyer have it in writing, hey, we’re not gonna take anything below a certain amount.
It’s the fiduciary responsibility of that receiving realtor to at least present it to their client.
Lee Nugent (13:53)
Absolutely. And I tell them, give me the signature. Or you as the agent, right, refuse to sign. Give me that. Show me that you actually presented this offer. Because oftentimes, and I’ve had that happen before to where I’ve made an offer, the agent just stonewalls it. No, I’m not going to present this. ⁓ so you’re not going to do your fiduciary duty. OK. And now all of a sudden, they begrudgingly go and they present the offer, right?But then it comes back and they’re like, nope. said, no. I’m like, okay, well, I’m just going to let you know next month, my offer drops by $5,000. Right now I can tell you that I’m the only offer coming in because you’re sitting here and you’re saying all offers are welcome, but yet you insult or act insulted in my head. They don’t say all offers are welcome. Right? So ⁓ the running joke between a number of investors and myself is that, you on my other arm, I should have tattooed low ball lead because I’m just not afraid to go over here and make an offer that
you know, it makes sense financially for me to make, you know, and if I was a contractor and I could actually lower my construction costs, I would make higher offers. However, I source everything out. So.
Dylan Silver (14:59)
When we talk specifically about the arithmetic that goes into underwriting these deals, right, people are unaware generally. And there’s this sentiment, especially among realtors, that there’s like an investor community and then there’s retail buyers and that they’re two separate areas, right? But right now, more than ever, the two worlds coming together, really, you’re seeing things like DSCR loans that were traditionally only in one space now being offered to…maybe people outside of that one segment, but then you’re also seeing just for the average person to become a homeowner, you’ve got to be thinking almost like an investor at this point, because the home prices just from 10 years ago are different worlds, it feels like.
Lee Nugent (16:25)
We’re in really funny market right now. And I don’t mean funny haha. It’s interesting because, you know, I’ve been saying this for a little while. You can have high home prices, you can have high interest rates. You can’t have both, not at the same time. And…You know, while we’re seeing that there’s been so much push into creative financing and everything else. And I’ll be honest with you, Dylan, it’s not my bag. I don’t speak on it much. I’ve done a couple of two deals. I’m largely not a fan. I would just rather focus on lower hanging fruit once it don’t have the complexity of the layers, the ability for a seller to go claim or file bankruptcy and, you know, throw my deal sideways. ⁓ So while that is the case, I do
tend to find myself talking to buyers more as investors. I say, look, if the market shifts another 20 % from where we’re at, what are you going to do? If the interest rates don’t drop in the next year, like a lot of lenders are sitting over here shouting at the rooftops, you can still buy, you can refinance. If it doesn’t happen, then what? What price does it make sense to purchase today and pay this note for the next 30 years?
That’s the same way that I approach anything as far as our portfolio. And real briefly, I know that there’s a limit to our call, so I want to try to interject as quickly. Last year, we had one of our portfolios come up. It was about 16 properties that was coming up on term. So we had done a multiple indebtedness mortgage, packaged it all together, and we went from a 4 % interest rate to a 7 to 5. Now,
Initially, when we financed that package, was about 1.25, we financed 800. And at the time of refinance, we were under 300, we were at $250,000. Because of the fact that what we were doing is we strategically disposed a property here and there. And then also what we would focus on is we would flip some houses and then we would just pay down the principal, try to get that lump sum down. Because while the interest rates are 4 % today.
They’re not guaranteed to be 4 % in five years. So there’s been a lot of investors get hung out to dry, know, with that, you know, rates are low by now. And you’re seeing a lot of this in multifamily spaces where syndicators went out and bought three, seven, five debt, 4 % debt. And now they’re coming up on term and they’re having to default back to the banks. And the banks are saying, well, hang on, we’ve got a lot of bad, well.
Dylan Silver (18:25)
That’s right.Lee Nugent (18:48)
I wouldn’t say a lot of bad debt. We’ve got a lot of debt about the cycle. Hold on to it. We’re going to do modifications. We’re going to do these things, try to get it going. But now in the face of rent contraction, of lowering rents across numerous markets, their syndications are failing. ⁓I’m seeing a lot of opportunity in the future, not necessarily today, but in the future. People are still trying to squeeze seven caps out of non cap markets. know, ⁓ as that, as that happens, we’re going to see some pretty interesting times, a lot of opportunity. So while we’re doing that, that’s why I just keep doing the private money lending, you know, great annualized returns keeps my investors happy, keeps me happy and just wait for the time and the opportunity as it comes.
Dylan Silver (19:13)
Yep.I’ve seen exactly what you’re talking about in the multifamily space specifically, it does feel like there was a time, know, prior to the last five or six years, you know, if you’re talking like pre 2019, we just couldn’t buy a deal wrong. So people were projecting, you know, five year exits and hitting it in two and a half. And everyone was seeing this and it became like, let’s be a syndicator. You can be a syndicator, you can be a syndicator. And what happens when you have these black swan events, your COVID.
you know, moratorium on rents, know, rents going down in markets where you wouldn’t see that happening. And then all this development. So now you don’t necessarily have the shortage. You may have a surplus in some markets like where I’m licensed in Texas. It makes things a little bit, you know, more challenging for fund managers and for syndicators who have these deals. But we are coming up on time here, Lee.
Where can folks go to reach out to you and your team or any new projects that you’re working on that you want to get out to our audience?
Lee Nugent (20:32)
⁓ You know if you’re a beginning investor you want to learn some basics ⁓ I do have a Excuse me. ⁓ I Do have a free copy of a book. wrote a couple years ago. It’s real estate investing primer You go to re with Lee calm. It’s right there. Don’t spam you. I don’t even email you So just go ahead and throw it in download it. Hopefully it’ll be some value for you ⁓ It’s just a no-nonsense way of looking at how to wholesale how to analyze rentals how to do flips and some of the stories along the way ofhow it’s happened to me, including a murder, you know, numerous, numerous things that have happened to these properties. So it’s been an interesting 10 years.
Dylan Silver (21:10)
Lee, thank you so much for your time today. Thanks for coming on the show.Lee Nugent (21:13)
Thanks Dylan.
