Gino Blefari: “Real Estate Investing” | Talks at Google

Gino Blefari: “Real Estate Investing” | Talks at Google

to introduce Gino Blefari. Gino Blefari is a
chief executive officer for HSF Affiliates, which
operates the real estate brokerage network for
Berkshire Hathaway Home Services, Prudential Real
Estate and Real Living Real Estate, Warren Buffett’s real
estate franchise business. Blefari has an award-winning
agent, manager, and broker owner. He came to his position
at HSF Affiliates from Silicon Valley, CA-based
Intero Real Estate Services, Inc., which he founded in 2002
and through mid-2014 served as its president and CEO. Under Blefari’s
direction, Intero became one of the fastest,
organically growing companies in the history of real estate. In 2014, Intero ranked seventh
nationwide for real estate sales volume, according
to REAL Trends. Some of his recognition
includes ranked among top 25 most powerful
and influential leaders in the residential
real estate industry, according to the 2016
Swanepoel Power 200 rankings and 2007 Italian
Businessman of the Year by Italian American
Heritage Foundation. And last but not least, he
was my real estate professor at De Anza Community College. So let’s give Gino a
warm welcome to Google. GINO BLEFARI: Thanks. JORDAN THIBODEAU: Thank you. [APPLAUSE] So for the first question, I
was going to start off with, can you talk about the
different real estate investments you’ve made? GINO BLEFARI: My
personal investments? JORDAN THIBODEAU: Yeah,
your personal investments. GINO BLEFARI: Sure. JORDAN THIBODEAU: And what
has been one of your best? GINO BLEFARI: OK. You know, I’m not a huge
real estate investor, but being in the
real estate business, I remember when I
started in there I had heard from some trainer
that it would be great to try to buy one house every year. And so the first probably seven
years of my career, that’s what I did. I bought a house. And I had a rule then. The rule there
was I wanted to be able to drive to
it within one hour. So that was my
simple rule there. In turn, traded those seven
houses into a building, and what has turned out
as my best real estate investments over time have
been commercial buildings. And I’ll give you
a case in point. If you look at the Intero
building on Santa Cruz Avenue there, that was some of
my little rental houses that I rolled into that. I actually built
that building there. It turned out to
be a great return. And a funny story of how
investments, sometimes you think they’re good, and then
you think they’re terrible. And then they turn out to
be good, back and forth. In 2005, I bought
a piece of dirt on El Camino Real right
here in Menlo Park. It was an old gas station. And it had already
been cleaned up. And I was going to
build a building. And at the time,
2005, as you remember, the real estate market
was really good. So Intero was doing terrific. I thought, OK, I’m going
to build this building and open up a real estate
office in Menlo Park. So I had hassles with the city,
and hassles with the city, hassles with the city. And they didn’t finish
the building until 2008. Well, 2008 was right in
the brink of this recession that we have, right? And so it was a terrible time. So there was no way I could
put an Intero in there. So I had this building
that I had debt on. And I’m not some
multi-millionaire investor at that time at all. And so I had debt on it that
was costing me about $48,000 a month. And it was vacant. It’s not a very good investment. I think everybody in
the room would agree. But I was lucky enough to get
Stanford Medical to lease it. So I had Stanford Medical in it
and Pendleton in a little 2,500 square feet. And they leased it for like,
maybe, 55 grand a month. So I had a tiny
bit of a cash flow, but I never pulled
one penny out of it. And I think about a
year ago right now, because rates were so low,
I refinanced the building. And they appraised it
when you refinance, and they appraised it for
$10 million, which was fine. I think I owed about
$5 million on it. But I’m going to
keep it, haven’t taken a penny out
of it, zero return, just whatever appreciation
you might have. And I got a call from
the commercial broker that leased it, a guy from
Cornish & Carey Commercial. He says, hey, you want to sell
your building in Menlo Park? Naw, I just refinanced it. You know, this is
a long-term hold. It almost broke me. But he goes, well, I got
a stupid offer for you. I go, really? How much? He goes well, $13,100,000. Oh, well, go ahead and
send me a letter of LOI. So he sent me a letter of LOI. And I had one of the Intero
agents, commercial agent, lease the downstairs
2,500 square feet. And I had them lease that. And so I called him
up, said, hey, I’m going to need a
copy of the contract because I might be
selling the building. He says, oh, what’s going on? So I tell him what’s going on. That Monday, the
following Monday, I got an offer on the building
that was worth $10 million for $15 million all cash with
like a 30-day close, right? So what turned out
to be one of those, Travis said, crazy,
like, oh my gosh. How did I get into this? Now, I’m always the majority
owner in the buildings, and I drag a bunch of my
friends in with little pieces of the whole thing. And so it turned out
to be a good deal. But that might be one of the
more successful– definitely is the most successful
deal that I did there. Also, when we’re speaking
about real estate investments, coming out of that
investment, then I had several million dollars
that I needed to roll over into other properties. And with my new job as the
CEO of HSF Affiliates– and we operate
Berkshire Hathaway Home Services that brand and
Prudential and Real Living– I’m constantly on the road and
visiting affiliates, you know, franchisees. And so I’m in Chattanooga,
Tennessee, and you know, I tell them, so, do you have
any good deals out here? We’re always looking
for good deals. Funny thing, in
Chattanooga, Tennessee, I was able to buy
five single family homes for like $110,000 each. And they rented for $1,300. You don’t find those kind
of deals like right here. So most of the investments
in real estate for now seem to be good. But look at that Menlo Park one. In 2008, it was terrible. JORDAN THIBODEAU: Right. Now, when you made a
decision to buy in Tennessee, what metrics were you
looking at to determine if it was a good investment? GINO BLEFARI: I was just
looking for a good return, not any specific number. But OK, I can buy
it for this price. And here’s how much cash flow. I’m kind of all
about cash flow now. JORDAN THIBODEAU: Exactly, yeah. They have a rule of
thumb called the 1% rule. So by you bringing $1,300 a
month, buy it for $100,000. I mean, that exceeds 1%, so– GINO BLEFARI: Yeah,
it’s pretty hard to do almost anywhere else. JORDAN THIBODEAU: Gotcha. GINO BLEFARI: I kind of
spread it out a little bit. Before my rule was it’s
got to be one hour away. Now my rule is it’s
got a cash flow. I’m lucky enough, though, to
know real estate professionals. Like Travis is here
in the audience right over here, Travis Conte. So I know people like
Travis all over the country. And so it’s not me trying
to guess is this good. Because a lot of
times you can guess, but you don’t have all the
details that you really need to know about it. And so I’m lucky enough
to have that all around. I’ve got a place
in Austin, Texas, because I knew Austin
was a pretty good market. Believe it or not, I’ve got
a Starbucks in Oklahoma. And if you Googled it– I can’t
even remember the city it’s in, but if you Googled
it, it’s where there’s more tornadoes than anywhere. But the return was very, very
good, and I’ve got insurance. JORDAN THIBODEAU: Gotcha. What do you think
separates a good investor from a great investor
in real estate? GINO BLEFARI: Luck. [LAUGHTER] I mean, look, it’s just like
with any type of investing. It’s someone with a good
strategy and the strategy that fits for them. Luck does play a
bit of it, though. Perfect example, my parents
were from Massachusetts. I grew up in Sunnyvale,
working class family. They happened to buy a house in
Sunnyvale in 1960 for $18,750. Now, we are from
Massachusetts, where they had a house that was about
$20,000, worth about $20,000. I went back when I
was visiting, when I toured through Massachusetts. I wanted to go to my
mom and dad’s house. Their house is still worth
$20,000 in Massachusetts. Their house here in
an area of Birdland right by where the
new Apple’s coming in, is probably worth at least
a million and a half, maybe a million eight. So there is some– from an
appreciation standpoint, some of it is. JORDAN THIBODEAU: A lot
of us here at Google are thinking about
investing out of state, and so we have to
use our networks and try to determine what
would be a good partner for us to work with, how to find
a good property manager, how to find a good agent. What are things
that you look for in a quality investor-oriented
real estate agent? GINO BLEFARI: You know,
someone that understands the real estate investment. And lots of realtors,
they just sell houses. But you may not need
that commercial agent, which is more of like– if
you’re buying a building and things like that. But you want someone that
understands the numbers, understands, you know, the
return, just someone like that. I can do it myself now. It’s like, OK, what
can I get a place for? What can it rent for? And then I’m going to
do the math myself. But you want to have
somebody– I’m lucky enough to have someone that I’m
going to know and trust that’s going to say, oh, it’s not right
next to– the dump’s like two miles away. And the wind blows right by it. JORDAN THIBODEAU: Exactly. One issue that we deal
with here in Bay Area is, because the cost
of housing is so high, that it’s really hard
to find good real estate investments here. For Googlers just
starting out who don’t have a lot of capital,
are there certain areas that you would suggest that we
take a look at for real estate investing? GINO BLEFARI: Again, I would
say it’s all personal to you. I had that rule, that one hour. I wanted to get one
within one hour. So a couple of the
first things I bought was down in Morgan Hill. I bought a place down in–
I remember like in 1987, I bought a brand new
house that Dividend was building in
Morgan Hill because I could drive to it in an hour. And it was certainly
easier to afford. JORDAN THIBODEAU: Yeah. GINO BLEFARI: Right now, you
have this crazy opportunity, and I know lots of the Google
people are millennials. You’re young. But you’ve got the
crazy opportunity of interest rates being really,
really historically low. So if I didn’t have a house
right now, I’d buy one. I wouldn’t try to wait for is
the market going to change? Actually, the market’s actually,
right here in Silicon Valley, even though there’s
almost no inventory, has actually slowed
a bit right now. It’s starting to
slow a bit right now. But let me tell
you the reason why, and you almost never will
hear this from anyone. In fact, I think a student
one time at De Anza asked this question. And I went back, and
I did the math on it. I say, oh my gosh. I wonder why no one’s
ever heard of this. But let’s just pretend
interest rates are 4%. Interest rates are 4%. And let’s just pretend that
interest rates move to 6%. Now, in the old days– in
1989, I paid four points to get 10 and an eighth. That’s just perspective for you. But everything
else, it was coming down from like 14% and 13%
and right on down there. But here’s an interesting piece. When you make your payment
on a 30-year fixed rate loan amortized over 30 years
at 4%, 30% of that payment goes toward paying down
your principal of your loan, reducing your principal. When it moves to
6%, only 17% goes. So if you do the math, you
almost have a 13% to 14%. It’s almost like appreciation
because appreciation’s gaining equity. When you pay off your mortgage,
you’re gaining equity. And rates are even lower. I used 4% and 6% just
because it was kind of easy. But it’s even better. If you’re going to buy property,
especially your own house, man, that interest rate
is a huge, huge factor. And it’s totally in our favor. Because it’s as low as
we’ve ever seen them. And I don’t know
what they will do, but my guess is they will go up. JORDAN THIBODEAU: Fair. Now regarding
international markets, are there any
international markets that you have seen that looks
like a potential good areas for real estate investing? GINO BLEFARI: Yeah,
you know, international is kind of a little
bit more risky. Certain markets like I think
Beijing and Vietnam– might be a good market in Vietnam, but
you can’t buy as an American. So I would go to the
ones that traditionally have been pretty good
markets like Mexico, Canada. Here’s the other
thing too though. You can get to Cabo San
Lucas in– how long would it take to fly there? Deidre, do you know how
long it would takes? SPEAKER: 2 and 1/2 hours. GINO BLEFARI: 2 and
1/2 hours, right? Now you’re buying
something over in Europe, it’s what, 10 and 1/2 hours? So I would look to some
of those areas like that. JORDAN THIBODEAU: What are your
thoughts on the general housing market outside
the United States? People are always asking me,
do you think we’re in a bubble right now? Is there more legs in this
economy to keep on going? What are your thoughts? GINO BLEFARI: Yeah, I
know, that question, it’s one of those things. Before I answer that, I’ll
tell you a quick little story. In 2004, because Silicon
Valley was going really well, I was on “Kudlow &
Cramer,” the CNBC. And the whole big thing
was, is it a bubble? Is the bubble going to burst? Or it’s a soft landing. And, you know, I had
really, really no idea. But everybody at that
time, except a few guys that had figured it out,
thought we were going to be in for a soft landing. Before I say, how many of you
think that we’re in a bubble? So maybe a third of you. And then the 2/3 say that
we’re not in a bubble. If I had to guess, and
it would only be a guess, I would say we’re
not in a bubble. And here’s why I back that up. When we had the
bubble in like 2000, but I guess the bubble
burst, what, in about 2007? OK, let’s say bubbles burst. There was a thing called
a negatively amortized adjustable rate
subprime mortgage. And what that was was a
mortgage that when you start out at a very, very low rate. And that’s what your rate was. Negatively amortization
means really payment’s supposed to be up here. But I’m only making
the payment down here. And what I’m going to
do with the payment that you were supposed to
make up here, that difference, I’m going to add that on to
the back end of your mortgage. Now, that only works if
property is totally, totally, totally appreciating. The next piece to
that was back then– and now those loans
are pretty much gone. There’s government
regulations that you can’t do that type of a loan. The other thing–
there were loans where you wouldn’t verify anything. We almost called them liar
loans, like as a joke. It’s a liar loan because there
was no verification of anything that was put down on
the loan application. So all sorts of people
got loans that they never should have gotten. And that doesn’t happen. So the only way that those
people that got all those loans could even survive was with
the market accelerating at a crazy, crazy space. And if my balloon
payment came in, it was OK, because I
just refinanced out of it and got another
adjustable rate mortgage. Those days are gone. We don’t have those
specific days now anymore because of that. So to that, I would
say maybe we don’t have a big bubble
where it’s going to burst like it did in 2007. How many of you saw the
movie “The Big Short”? Almost all of you, yeah. That was a pretty
darn good movie. How many of you
have read the book? It was Michael Lewis’s
book, “The Big Short.” OK. It really talked about
the negatively amortized adjustable rate
subprime mortgage, and it also talked
about it in the book. He was talking to the
lady in the club, right? And she owned like– he goes,
well, how about your condo? How you doing on your–
well, I own six houses. I mean, people just
owned and owned and owned because
anybody could get a loan. And we don’t have that anymore. It’s a lot harder. So I’d say government
regulations have played a role in that. JORDAN THIBODEAU: Yeah, so today
I saw the GDP numbers came out. And it showed they’re
a little soft. A question I’m
getting from Googlers also is, do you think
this interest rate environment will hold for
the next year, two years? Or do you think we’re going to
eventually sees some increases? GINO BLEFARI: I think we’re
going to eventually see some increases. I have no idea how long it will. Everybody was forecasting
it would go up, and then something in
the economy will happen and it will go down. I think what you need to
understand about interest rates, when the Fed
raises interest rates, usually the market has already
anticipated that raise. It’s not like it’s going to
have some giant jump overnight. JORDAN THIBODEAU: OK. Gotcha. So as real estate
investors, we depend upon our agents to
get access to MLS and get real estate information. What are some other
sources of information that we could find that wouldn’t
require us to have MLS access? GINO BLEFARI: Well, real
estate’s local, number one. So every market’s different. And of course, I come from
the real estate industry. So I would say
you’ve got to find somebody that understands
that market and knows what’s going on. There was a time a
while– not so much now– but in Silicon Valley
and other markets when the market was so hot
half the properties were being sold off market. So you wouldn’t have
had access to it unless you were part of
some sort of a network. There’s also, like at
BHHS, we have an app that you can put on your phone. If you text BHHS and you put
in 87778 exclamation mark, you can get a free app
that wherever you are, you can find out what’s
going on in the market. You’ll see what’s
for sale, what sold, all sorts of things
right there on the– And Berkshire Hathaway isn’t
the only one with that app, but there’s all
sorts of ways to. That’s a way to
almost get access to all of the MLS yourself. JORDAN THIBODEAU: Right. In case of a
deflationary environment, how can we position
real estate assets? And what signals do
you guys look into to check if there’s
a deflationary risk? GINO BLEFARI: Well,
first when you look is for a deflationary–
if prices are going down. Now all of a sudden, homes are
selling for less than they are. So that would be the first sign. Decline in wages,
decline in unemployment, commodity prices– you could
look at all of those things. But I’m mainly going
to focus on, wow, prices seem to be coming down. I think the Fed expects about–
or they would like about– 2% inflation. JORDAN THIBODEAU: Yeah
the Wikipedia entry for Home Services America, the
parent of Berkshire Hathaway Home Services,
says that HSA also provides mortgage loan
originations, title and closing services, home
warranties, property, and casualty insurance. Can you explain how all
those entities work together? GINO BLEFARI: Yeah,
most big companies like Berkshire Hathaway
Home Services, Home Services of America is the second
largest real estate company in the country. They have things like my
brand, Berkshire Hathaway Home Services, Prudential
Real Living. But they also have
about 26 companies. Like when you see
an Intero sign now, you’ll see it say “Intero, a
Berkshire Hathaway affiliate.” So they’re a big company. And the consumer on every
survey going back to 1995 has always said they
want a one-stop shop. So what we try to do as
a real estate company is provide mortgage, title,
homeowners insurance, personal insurance. It’s a whole gamut
of the whole thing. I think you were
referring to RESPA. Is everybody familiar with
RESPA, the Real Estate Procedures Act? And that’s where no one can
receive anything of value on directing a
settlement service. However, when
you’re a big company and you own the whole thing,
and a manager’s an employee, the manager could be
incentivized to increase the capture rate on mortgage. A realtor now is an
independent contractor. They could not receive
anything of value for directing business to a
settlement service company. I will tell you this. The companies– and many
big companies have them. The ones that do, you’re better
off almost 100% of the time using a company that
has all those services because those providers are
held to a higher standard, even by the regulators. If you get a 0% for
a mortgage, you’d have a $0 on that
closing statement. It can be off $0 if
it’s the own company. If it’s an outside company,
it can be off as much as 10% and still fall under
the regulation. So the other thing too is
there’s a whole reputation piece. It’s all based on service. You’ve got to give great,
great service in order to get the business,
whether you’re the title, whether
the mortgage provider, whether you’re the insurance
provider and things like that. But when it’s all right
in the same family, it’s scrutinized a lot closer. JORDAN THIBODEAU: Gotcha. Can you share your views on
the title insurance market? “The New York Times” has some
unfavorable words regarding it. And they think it’s kind of–
the field is an oligopoly. GINO BLEFARI: Yeah, title adds. I always kind of
almost smile when it comes to title insurance. But let me just explain
what title insurance is. Title insurance is
a one time– most insurance you pay every year. You renew your
insurance every year. Title insurance is
a one time where they’re assuring that the title
is exactly what you thought it was when you bought the house. In other words, who sold me the
house was actually the owner. What liens are on
the house that may go with it are
going to stay there, but what liens have to get
be cleared off do that. The title insurance paid out
something like– last year– $670 million in title
claims where they had pretty much got it wrong. But where were “The
New York Times,” I think where they were going in
that article, where they almost say it’s kind of like a scam
is because, here’s the deal. They’re going to search
through that title as carefully as could be. And if they find
anything wrong with it, they’re not going to insure it. Your deal’s not going to close
until they get that fixed. So it’s like
everything’s perfect. It’s like I want to put
title insurance on this car. I’m going to put
insurance on this car, but I’m going to make sure
it’s in perfect condition. And then now you can’t drive it. It just is like–
it’s a one time fee. So that’s where it
gets that reputation. But they do make mistakes,
and they do pay out. Now, in the old days,
before title insurance, you had an attorney do it. Now, if an attorney
had no assets, you could never even recover. It was like, too bad. JORDAN THIBODEAU: Interesting. It seems like there’s a secular
trend where people are now moving towards going
to urban environments and the suburbs don’t have
the same, I guess, allure they used to once had. Do you think this is going
to continue on forward or are we going to revert
back to that suburban trend? GINO BLEFARI: I think
we will revert back. But until that point–
there’s that commercial, that television
commercial. “Well, I’m never going to do this.” And then he’s doing that. “I’m
never going to get a van,” and then the guy’s
getting a van. And “I’m never going to
move to the suburbs,” and then he has kids and he
moves to the suburbs and things like that. I think with the millennial
generation being so big, and people do– you
know, millennial, they want to walk to
everywhere they go. If you look at the
building in San Jose, all those high rises, right
downtown, Santana Row. You go to San Diego, you go all
over, there definitely is that. I have two daughters 23 and 25. Where do they want to live? San Francisco so they can
just walk to work and do that. So there is that. The other thing you need to
remember about the millennial is the average age of
a millennial is 25, so that’s kind of young. The average first
time home buyer is 31. And we’ve done all sorts of
studies on the millennials and what they want and
what they’re looking for and things like that. And I think back to when
I bought my first house. What was important to
me is the same thing that’s important to them. Ease of purchase was one. But the other one was to be
able to tell everybody, hey, I got a house. I got my first house. Travis, you’re 25, right? And you’re going to be
buying a house this year. And one of those things will
be, hey, I got my house. It’s a little bit of
that pride that you have, but definitely there has been. And you’ve just got to
watch the construction, all of the stuff that’s built. My headquarters, now, is
in Irvine, California. And even though I still
live in Los Altos, and I try to be at
home as much as I can, if I’m going to be down in
Irvine, I thought, well, maybe I should buy
something down there. And that’s exactly what I
bought, a condo, urban living. And you know what? It was about– I timed it. It was 2 and 1/2
minutes from my condo to the front door
of my building. And I’m not a millennial. But you know, it is common. And they’re building more
and more and more of them. JORDAN THIBODEAU: Now, as far
as the average size of a home, we’re noticing that the
average square footage that peaked around 1950s,
1960s, has slowly decreased to smaller
and smaller home sizes. And now we’re seeing a lot
of talk about the tiny homes. Do you think that trend
is going to continue? Or do you think home sizes will
revert back to a larger size? GINO BLEFARI: Well, I
actually think they’ve gotten larger over time. I think they’ve gotten
larger over time, and that’s just
because part of it is that move-up buyer is
getting a bigger home. Part of it is when the
luxury market– watch when a developer builds a house. They’re pretty much bigger. If you go to Sunnyvale or
Cupertino or Mountain View, wherever there were
homes and a developer had come in the last
even 20 years, you’ll see those newer
homes are bigger. And so I think it will
continue as people– every once in awhile, you’ll get somebody
moving out of their big house into– they’re retiring. And then that’s going down. But for the most part,
the homes being built now continue to be more square
footage, more square footage. In our area, it could be just
because the land’s worth so much money too, and they want
to maximize the amount of house that you can get on there. JORDAN THIBODEAU:
Excellent, so at this point, we’re going to go to audience
questions and [INAUDIBLE] questions. So if anyone has
a live question, I’m going to grab the
mic and pass it over. Does anyone have
a live question? Excellent. Can you had that to him, please? Thanks. GINO BLEFARI:
Travis is here too, if you had a local
real estate question. I haven’t sold a
house since 1997. Go ahead. AUDIENCE: For a
first time homebuyer, do you think it’s
overly aggressive to try and get, let’s, say,
a multi-family home where you’d be paying more but you
could find a renter, if you wanted to look at your property
not just as a place to live but as an investment? GINO BLEFARI: Yeah,
I think that’s great. You’ve got to
convince your partner, your significant other,
your spouse, that that’s what you want to do because this
is where you’re going to live. But yeah, I think it’s great,
because then you’re going to have that rental income. You’re going to
have your own house. You’re going to be
able to watch it. It’s right next door
if it’s a duplex or a triplex or a fourplex. Great advantages when you
become on the investor side, because that part
that you do rent you can depreciate the
improvement on it. You can write off
all the expenses that you have on that site. So no, that’d be a great thing. In fact, I was just
talking, and I didn’t even know it– Travis
Conte, right here, real estate agent
in Redwood City. We’re talking. He’s 25. He’s going to buy
his first place, and that’s what you wanted
to do, right Travis? TRAVIS CONTE: Exact same– GINO BLEFARI: Same thing. TRAVIS CONTE: Yeah, you
know, under four units is still residential, right? So you’re looking at getting
basically the same type of loan [INAUDIBLE] respects. And you can afford to
live there and count that as part of your income. So your [INAUDIBLE]
could change. It all depends on the
lender, who you use. But it’s honestly a
great option for– GINO BLEFARI: It’s
a very good option. That’d be great. Maybe even some of
the improvements you’re able to do yourself,
right there to it. AUDIENCE: Is there
a metric that you use as far as like what kind
of rental income versus how much you put into the house? Like you were talking
before about like return on investment. Is there like a
return on investment kind of metric you use for that? Let’s say I think I can get this
much rental income per month. And that’s a certain
percentage of the total that I’m putting down. GINO BLEFARI: Yeah, and
then again, and Travis, you can comment on
this if you’d like to, but then again, it’s going
to be all personal to you. And also here, location is going
to play a huge, huge difference on how that’s going to play out. A duplex in Gilroy can
be a lot different than that a duplex in Cupertino or
Mountain View or Palo Alto. JORDAN THIBODEAU: Any
other live questions? GINO BLEFARI: You
know, for a brand new, starting out like you are, you
might just want to do the math and let’s say, OK, our
payment’s this amount. And if we rent it for this
amount, and we can afford this. It almost becomes, like,
what can you afford? I remember when I bought my
first house, I was a realtor, and my wife was a nurse. And we bought a house,
26 Del Monte in Los Altos back in 1985 for like $200,000. And I figured out what my
payment, and then we actually got a roommate in
one of the rooms. And with what my wife made,
and what that rent came in, we could make it. And so that was my
little criteria. It wasn’t anything fancy. And when it’s little, it’s got
to be almost customized to you. Yes, sir? AUDIENCE: I had a question
about commercial property. It seems like one of the
trends that’s happening now is retail is sort of
under siege, if you will, from online services, a lot
of competition from Amazon and other places. So people are mail
ordering things. And I’m wondering how
you see that affecting the commercial marketplace,
or maybe it’s not a problem. GINO BLEFARI: You know, I
don’t have a good call on that. But let me just tell you
it’s certainly affecting it. And I think that’s why
we’re seeing more and more– have you noticed? You’ve got retail, and then
you’ve got units above it. It’s like a mixed use. And that probably gets a
little bit of a safer routine. I’m building 16 units right
now, if you go down Winchester– on Winchester and Campbell. After you get past Campbell
Avenue, you go down. You’ll see it going up there. But it was the same thing. And it was kind of
like a personal thing where you do the math. OK, I’m going to have 16
units here that I can rent, and then you’re going to have
some retail like underneath. But it certainly has had its
impact on a lot of things. JORDAN THIBODEAU: Any
other audience questions? You guys are quiet, wow. You know, what I enjoyed
about your class was that not only did you talk
about real estate investing, you also talked about other
businesses you invested in. Can you share any stories about
companies you’ve invested in? GINO BLEFARI: Do
you have something that you recall from class? JORDAN THIBODEAU: There
was a story where you had, I think it was your
father-in-law, who was a dentist. GINO BLEFARI: Oh, got it. Yeah. Yeah. That really wasn’t
an investment, but it’s basically, again,
kind of understanding business. My father-in-law was a
dentist, retired dentist. But he had a stroke, and
so he was in the hospital and couldn’t be a dentist. And so we were just
trying to figure out– and a check bounced. You know, [INAUDIBLE]
what was going on there. Well, what had happened
was the dental practice wasn’t doing super
well because he hadn’t raised prices in a long time. And he hadn’t done
the high margin items. And I told this in
my real estate class when we were talking about
business opportunities and selling business
opportunities. Because as a realtor, you
can sell a dental practice. You can sell this. And somebody had asked,
have you ever sold like a dental practice? And I said, yeah. But here’s what I did. I went in to the secretary
there, and I said, what are your high margin items? What makes you the most money? And she goes, oh, root canals
and the different more surgery types of things. I say, really. I go, do we have any of
them that we need to do? She goes, oh yeah. We have a lot of them we need
to do because several years ago, we got sued by one
customer, which is normal. And so we just
stopped doing them. So I went up to Sacramento
and found a dentist, a guy, 28-year-old, just out of dental
school and paid him $500 a day and had the admin
book every root canal and whatever else she told
me were a high margin ones. And I can remember made a
pretax profit of $60,000 a month for three months and
then sold, sold the practice. And if any of you are
over there in Sunnyvale, Mike Maher, the
Foothill Medical Center, that’s who I sold
it to right there. Was that what you
were referring to? JORDAN THIBODEAU: Yeah,
that was an amazing story. GINO BLEFARI: Yeah. JORDAN THIBODEAU: Yeah. GINO BLEFARI: It’s a
business thing, right? What do you make
the most off of? Well, doing this, OK. Do you need to do them? Yeah, OK. Put them in, and
thing here at Google is we have a lot of
people who are extremely busy with their careers. And so we get solicited by
turnkey investment houses, telling us we should go
invest in Memphis or in Ohio. Do you have any
advice for us on how we can go about making
sure that if we’re going to get into a deal
with these companies that we know we’re dealing
with reputable people? GINO BLEFARI: Do whatever
research you can online. Do your research. But I would just
say, be careful. Just always, always,
always be careful. Every time the deal looks
too good to be true, it almost always is
too good to be true. So I would just be careful. And you know, my advice to
you would be get that duplex. Get that duplex
with your 4% loan, and put some of your own
sweat equity or whatever in. And eventually
maybe buy a house, and then you still have the
duplex and things like that. So I would just say be
careful because there are a ton of scams out there. JORDAN THIBODEAU: Gotcha. Now, in investing in real
estate, one issue I deal with is I really like
the Sacramento area because I have family up there. It’s within maybe two
hours driving distance, depending on how fast I drive. But I want to continue
buying investments in there. But at the same time,
I feel that I am not diversifying myself. Do you ever worry about if
you’re investing too much in a certain area? Or is there a way to
kind of hedge that? GINO BLEFARI: Well,
there certainly is a way to hedge that. But personally, I
don’t worry about that. Sacramento’s working for you. We’ve got one guy at
Intero, Howard Bloom. Some of you may
have heard of him. And he just invested in Texas. And that’s been his plan
year after year after year. Sacramento market kind of
follows our Silicon Valley market. If we’re real, real good
here, anybody moving there it seems like such a great deal. We have a tendency to
drive their prices up. JORDAN THIBODEAU: Yes. Yeah, I was working
with a person in HR who went to go buy a
house in Sacramento. And the person was surprised
how cheap things were. And I was telling her,
though, everything’s relative but going to your fact
that looking at a house here for $1.3 million and
then going to Sacramento and being able to
get six houses– GINO BLEFARI: Exactly, exactly. JORDAN THIBODEAU: It
changes everything. GINO BLEFARI: Yeah, or
Chattanooga, Tennessee. You know, it’s like I’ll
take all 13 of them. And it’s like, it’s less
than a house in Los Altos. JORDAN THIBODEAU: Right. You know, that
definitely is true. Let me see if I can– oh,
there’s a question right there. Chip, can you pass
the mic, please? Thank you. AUDIENCE: We talked
about residential and commercial real
estate investments. So I’m curious– and I guess it
kind of plays into residential. But for vacation rental
properties, with Airbnb and a lot of that,
you know, actual work shifting to the homeowner
instead of an agency, do you see that as–
I was curious to get your thoughts on that. GINO BLEFARI: OK, yeah. I’ll give you my
thought on Airbnb. So here’s what I did. I went and bought that
townhouse in Irvine. You probably shouldn’t
have me up here giving you advice
on how to invest. I was at a conference
with Deidre, my admin right over there. We had a conference. And I was moving to this
new office in Irvine. And I didn’t know
where it was, so we decided at the break,
the 15 minute break, to drive over to the office. So we went out and got
a cab from the little– we were staying at the Fairmont
there right there in Irvine and went to the office. That’s cool. And as he’s driving out, saw new
condos being built. So I say, hey, wait a minute. Pull in there. OK? Pulled in there. Talked to the guy in there. I said, what do you have? I go, do you got
any two bedrooms? He goes, yeah, we’ve got one. We’ve got one left in
this space right here. I go, OK, where is it? And he goes, it’s there. I go, OK, I’ll take that one. You know he’s like,
you kidding me? Bought the thing in 15 minutes. What was the name
of the builder? [? Lore ?] or
something like that? I forget the name
of the builder, but they said it was
their fastest sale ever. So I buy the thing. And I’m in there, and I
put my little stuff in it. And I find out, wait
a minute, this new job I’m on the road every day. I’m down in Irvine two
or three days per month. So now I’m having lunch with
one of the Berkshire Hathaway agents there in Irvine. And we’re talking about–
I was coaching her on how to do more business,
a relatively new agent. And she goes, so,
when will you be back? This is December. It’s December 12th of a year
ago, last year, December 12th. When we be back, Geno? I go, let me check my calendar. Mm. I won’t be back
here till February. I’ll be here on the
10th of February. OK, great. She goes, so what do you do at
your house when you’re gone? It just sits there, right? She goes, have you ever
thought about Airbnb? I go, no. And I go, I did try
to rent it one time. I wanted to rent it
for $3,600 a month. I could rent it for $3,300. But they wanted me to take
all my stuff out of there, and it’s just such a hassle. And so I didn’t want to do it. She goes, well, I do
Airbnb for my mom. I go, really? And she goes, yeah. She goes, I’d do it for you. So I go, OK. So I just pulled my clothes. Because I had just sets
of clothes out there. I just drove down, pulled
my clothes out there. January, I got a
check for $5,900. This month of July, I’ll
make $8,400 on my Airbnb. So I’m a big proponent of
that’s pretty darn cool. I mean, I guess
you can’t totally do Airbnb at Santana Row. They may have some
rules where you’ve got to have a 30-day tenant. But I wanted to go out
and buy another place just to do Airbnb. So that– AUDIENCE: She
manages all of those? GINO BLEFARI: She does. She does. So she manages the people
coming in, the cleaning lady. The place is better
than it ever has been. And she gets a chance to
meet new clients potentially as they come in. She does it all. I pay her a fee to do that,
which is a small fee here. I think vacation rentals, right
on the mainland United States, probably OK because you can
get people to manage them for you at a reasonable amount. Vacation rentals or short
term rentals are good. Wherever there is
water, wherever there’s skiing,
wherever– golf– those types of activities. But I was just over in
Hawaii, family vacation. We’re still in July, so for
the 12th through the 14th, I’m in Hawaii, our
traditional family vacation. I took up with the
Berkshire Hathaway, the Travis of Berkshire Hathaway
over there, hook up with them. And we go out, and we looked
at some vacation rentals. Because I thought that
might be kind of cool. Well, here was the thing. The vacation rental, the
property management– and this is what you’ll get when you
go international, same thing. The property management,
they want 50%. Now, I could go outside
to my own Berkshire Hathaway, because they have
their own management service, and they want 27%. And a couple of
places where I do have property managers like
in Chattanooga, Tennessee, and even here in Santa
Clara, it’s just like 10%. So that makes it palatable. But you get that
little thing there? That Airbnb, though, is
very, very cool, very cool. JORDAN THIBODEAU:
Now you mentioned the commercial investment
that you’re talking about, the area of dirt, and
how you eventually got it rented out from Stanford– GINO BLEFARI: Stanford
Medical leased it, yes. JORDAN THIBODEAU: You
said you had partners. How did you go about
structuring the partners? GINO BLEFARI:
Structuring the partners in that particular
one as an LLC. That’s how we were advised. The only thing is is
you’ve got to be careful. You’ve got to get a tax guy and
things like that because you may need to turn it
into a partnership, like a tenant in common, in
order to exchange out of it. So just be careful with that. But I started in
an LLC because was planning on never selling it. Turned it into a
tenant in common, I think, when we had
debt so we could sell it. The Santa Cruz Avenue, 518 Santa
Cruz Avenue, the Intero there, that’s still an LLC where
I’m like the manager as the main guy, as
the manager of it. And then you have
other people in. JORDAN THIBODEAU: Gotcha. GINO BLEFARI: The nice
thing about commercial, if you get commercial, the
nice thing about commercial is that typically the
tenant pays the insurance. The tenant pays for
all the maintenance, whatever’s late laid out there
in that triple net lease. And that’s where it
makes it so nice. The heater goes out. It’s like, heater went out. Your apartment building,
I have eight units in downtown San Jose. And the interesting
thing there is every week the sink was clogged up. So I just changed the lease. Sink clogs, tenant’s
responsibility. You know what? The sink never
clogged up anymore. You know, there’s just simple,
simple things that you can do. JORDAN THIBODEAU: It’s
magical how that happens. GINO BLEFARI: Yeah,
it’s magic, you know? JORDAN THIBODEAU: Yeah,
one of my mentors, they were one of the part of founding
families of Santa Clara. And his mother actually owned
so much land in Santa Clara that she bequeathed
the city of Santa Clara so they could build their city
council chambers on her land. And one part of their
land they rented it out to Yoshinoya of Beef Bowl. They developed the
land, and then they paid rent about
$15,000 per month and took care of everything. It was just a sweetheart deal. I think we have one
more question, though. I think it was in the back. AUDIENCE: There’s
one [INAUDIBLE]. JORDAN THIBODEAU: Oh. Anyone else? All right, well, thank you
so much for coming to this– GINO BLEFARI: You’re welcome. JORDAN THIBODEAU: This
is an absolute pleasure. AUDIENCE: Oh, I’m sorry. JORDAN THIBODEAU: OK. It was you! GINO BLEFARI: Oh, it was him. AUDIENCE: [INAUDIBLE]. Yeah, I had a question. So just now you
mentioned you have the class about real estate. So can you talk a little bit
more about the class too. Do you have any plans to give
the same class in the future? GINO BLEFARI: Oh, yeah. When I was part of
Intero, and part of Coldwell Banker–
and my company before that was Contempo
Realty– when I was here, I taught a real estate class
at that community college. That’s how we met. I taught Real Estate
Principles, things like– see, he only remembered the stories. He didn’t remember
there’s 640 acres in one section of a township
or all these crazy things that you have to do to get
your real estate license. But it’s kind of cute. You remember that. But no, I don’t do that anymore. That was at the
community college. JORDAN THIBODEAU:
And Gino’s part of the reason why I’m here at
Google because he had this time management sheet on how to
become a better real estate agent. And it was just completely
applicable to any career or any fashion. And so when I was
TVC here at Google, every morning on the bus,
I would read his sheet to the point where I
didn’t have a digital copy. It was eventually just
falling apart on me where I couldn’t read it
anymore because of all the times I’d take it in and
out of backpack. But it was an absolutely
amazing class. GINO BLEFARI: You
know, I actually remember you calling now. It’s starting to ring a bell. When you called, that
because it disintegrated. JORDAN THIBODEAU: Yeah. GINO BLEFARI: All
it was was 63 points on time management that I had
done over 25 years of doing real estate, simple
things like when the subject of the email
changes, the subject line needs to change. That saves you some
time right there, than going back and forth. But scheduling yourself
out a year in advance is a really cool
thing to try to do. And you put everything
in there that gives you balance first, your days off,
your vacations, your date nights, things like that,
and then you backfill. So I do that to this day. But yeah, that’s what
you were talking about. JORDAN THIBODEAU: Yeah,
and then my favorite was proper preparation
prevents poor performance. GINO BLEFARI: Yes. JORDAN THIBODEAU:
Yeah, so– well, oh– did you have one more question? AUDIENCE: Yeah. JORDAN THIBODEAU: Use the
mic so everyone can hear you. And that will be
our last question. Yeah? AUDIENCE: Do you have anywhere
I can find that sheet? Because on the internet,
I found an article about your productivity
beauty tips. GINO BLEFARI: Oh,
time management one? Yeah. Yeah. We can connect you to it. JORDAN THIBODEAU:
I’ll get a copy, and then I’ll send
it out to you. AUDIENCE: OK, that
would be great. GINO BLEFARI: Excellent. Yeah. I’d be happy to do that. JORDAN THIBODEAU: All
right, well, Gino– GINO BLEFARI: I also
have a blog that I do every Thursday, Thursday
thoughts on leadership. And I’d be happy to add
anybody to that blog. It’s always got some sort
of message from where went. JORDAN THIBODEAU: Well, you’ve
got one subscriber right here. You can add me. Gino, thank you so much
for making time for us. GINO BLEFARI: You’re welcome. JORDAN THIBODEAU: We
really appreciate it. It was an excellent talk. So can we give Gino a
round of applause, please? GINO BLEFARI: OK. [APPLAUSE] Thank you.

11 thoughts on “Gino Blefari: “Real Estate Investing” | Talks at Google

  1. first

  2. How about a link to that time management sheet referenced at the very end of the talk?

  3. Does anybody have a link to the 63 time-management-tips?

  4. Ladies and gentlemen. What you are presenting here are bars of pure platinum, how you present it on the other hand, feels more like you are handing out pizza to a bunch of useless weed addicts on gamers friday. I beg you, please, show just a tad more respect to the presence and time your guests are investing into your channel. They deserve it, and quite frankly, so do you. You may start with hiring an audio engineer, a video editor and may be a stage manager. Of course i mean no offense if that already was the case. Cheers

  5. a link would be much appreciated for the Time Management sheet 🙂

  6. Hi Everyone!

    I'm glad you all enjoyed the talk. I will speak to Gino to see if I can share the doc with a broader audience.

    Stay tuned!

  7. I would love to receive a link to the 63 Time Management sheet, too. Thank you!

  8. Jordan needs to find his voice before he hosts a talk again…I can barely hear him, every time he talks I feel like he is apologizing for opening his mouth. Also introductions need to be done from memory, if you read the whole thing from notes it feels like he just handed them to you.

  9. Even with 4% rates, 30% toward principal 70% toward interest is a fools game IMO. Low rates lead to overvalued properties, so easy to go underwater when the market tanks

  10. Like to have a copy too

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