This is not an 8am-5pm, Monday to Friday job. When you are growing a company, you need to be constantly adjusting your business for maximum efficiency and profitability. You have to have your plan B, Plan C and even a Plan D in place. For me, my brain works on strategies and issues while I sleep and am uninterrupted by self-talk. There are many times I have woken up in the middle of the night with a game plan, solution or new project. Being in charge of procuring my own “salary”, I don’t have the luxury of turning my brain off at 5pm. So being able to get out of your head and spend time with your family is so important. But realize that getting out of your head is not the same as turning it off.
I had the pleasure of interviewing Leo Hefner. He is considered by many to be one of this generation’s foremost pioneers in the practical combination of private real estate investing and ethical business practice. He is the Founder & CEO of South Bend 7, a private real estate investment fund that he and his team have designed with the safety of investors in mind. Through his supercharged tools and personal zest for life, he has created his fund to return consistent cash flow to investors while mitigating market madness with safe, ethical investing solutions. How would you like to have an advisor that doesn’t pay more than $35,000 per home and consistently brings in huge investor returns? Would you like to know his secrets, including how to create that all coveted passive, residual cash flow, sometimes referred to as “mailbox money”? With a story of dedication to excellence coupled with a commitment to maximizing capital appreciation, Leo’s risk reduction roadmap and cash flow creation formulas cement him as a community and business authority in his space.
Thank you so much for doing this with us! Can you tell us a story about what brought you to this specific career path?
Igrew up in Hanalei, Hawaii where my parents were top-producing real estate agents. We were close with some of their bigger clients and the one thing they all had in common, was they had done very well in real estate. So I have always had a hand in real estate, even as I embarked on other career paths. Over the tenure of my career, and more specifically to what I’m doing now with South Bend 7, I saw a lot of people I care about lose their retirement in the crash between 2007 and 2009. During that time I was doing a fair amount of private lending and was part of one of the largest groups of private lenders in the world. I started noticing a global trend of lenders funding worse and worse high-risk loans as good loans became harder to find. As many of these loans started failing, again I saw people I knew on both ends, the investors and the lenders (many private lenders who had put the deals together) lose millions and millions of dollars. Witnessing all of this, I wanted to create a place where people could invest in real estate, without risk of foreclosure, without risk of a stock market or economic crash. I wanted to create a space where I could protect the assets of not only my family but the families of my investors. Out of that was born South Bend 7 — a fund that buys and holds cash flowing residential real estate with zero debt, no loans, no leverage, no liability; a fund that shares the cash flow, the equity and depreciation with everyone involved.
Can you share the most interesting story that happened to you since you began leading your company?
I was driving around looking at houses to buy, and as I was driving down this particular road and immediately what became apparent was the difference in the maintenance of the houses, we owned vs the houses we didn’t. We primarily buy houses in lower-income areas where the government spends over 38 billion dollars per year paying rent for people on welfare, section 8, social security and veteran housing assistance. Many tend to buy houses from other investors or homeowners who rarely put any money into these houses, this is called equity stripping. But what I noticed is that we at South Bend 7 create true homes for the people who move into our properties, because regardless of who our renters are, we always fix houses to the same standards that section 8 requires or that the FHA requires for a loan or for an elderly person to get a reverse mortgage. And because we not only invest in the purchase of the properties but also in the restoration of them, we are changing neighborhoods for the better.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
I was on a trip to Memphis to check on our portfolio there. When I bought the ticket I had a choice between connecting through Phoenix or Dallas. Well, the last time I went through Phoenix, I had to run to the next terminal to make the connecting flight because there was so little time between flights. In contrast, when I tended to go through Dallas, there is a significant layover and little chance of missing the connecting flight. And so, I chose the Dallas connection for this trip. When I landed in Dallas, I learned that Hurricane Harvey was in the process of destroying Houston. Because of this, I ended up sleeping in the Dallas airport before we were able to take off and continue on to Memphis the next day. So what did I learn? Always check the weather forecast for your destination and from that trip forward, I decided to only buy properties where I can fly direct from San Diego, with a drive upon landing of not more than 3 hours. I have since sold the portfolio in Memphis. Although this example doesn’t necessarily have to do with real estate investing, it’s a key point for anyone traveling for business of any kind.
What do you think makes your company stand out? Can you share a story?
The lack of debt.
I understand that yes, people can make a ton of money with debt, loans, leverage and liabilities. It’s probably the one question or statement I field the most “Wouldn’t the returns would be higher with leverage?” My response is always the same, “of course it would, but so would the risk to your investment and the levels of my stress”. At this point in the market, there is talk of an impending downturn, so why would we leverage now? We can and probably will leverage in the next downturn to increase our portfolio asset base, but not just yet. In fact, I meet a guy in 2014 who at one point owned 997 houses in Las Vegas. Between 2006 and 2009 he lost every single house due to foreclosure. That is 1 house per day, Monday through Friday, for 3 years! He had an LTV (loan to value) of 65%, which is a normal LTV utilized by most REITS and Real Estate Investors and syndicators. To quote Warren Buffett; “More smart people have gone broke through leverage than through any other activity. A smart person can’t go broke unless they use leverage…If you’re smart, you don’t need it. And if you’re dumb, you’ve got no business using it. It just doesn’t make sense.”
Are you working on any exciting new projects now? How do you think that will help people?
What advice would you give to other executives or founders to help their employees to thrive?
I am super excited to be working with a group that is supplying tiny homes for homeless VA in the bay area. I have a team out of Indiana that pre-engineers houses and sends them in shipping containers. The benefit is that most of the cutting of the lumber is done, there is very little waste, the houses are built way faster than normal, they are super energy efficient and very easy to be Gold Leed Certified. The group that is doing this is using orphans and foster kids to help with the construction and present the Veterans with their keys to their new home. It teaches the kids how valuable construction skills, it also moves them from the receiving side of the system to the giving side to see that they too can make a difference in other peoples’ lives. As we move into not only a new year but a new decade, it’s important for every company to have a mission to give back to the community and to engage their employees and their families in that mission. So many people are stuck with their head down just trying to make a living and put food on the table that it’s difficult for them to make time outside of work to help others. By making it a corporate mission, it makes it much easier, and enjoyable a task for us.
How do you define “Leadership”?
Leadership to me is about keeping the team on course while giving them the flexibility to be creative and bring new and more efficient ideas to the table. It’s important to not let your ego keep you from bringing smarter, stronger people on board. Their success is your success is the company’s success.
What advice would you give to other executives about the best way to manage a team?
Leverage outside resources and people in the areas you’re doing business. Be an open-door to new ideas and more efficient ways to get things done. Don’t be afraid to say yes. Constantly challenge yourself and your team to try new things and test new ideas. I was told once to “Fail fast and fail often, it is the fastest way to learn how to do things better. Failing is not a bad thing, because it is not your identity. But remember, don’t fail so big that it reduces your ability to grow.”
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a short story about that?
Besides the obvious being the support of my wife and family has been amazing, my good friend Greg S. Reid, serial entrepreneur and 28 times best-selling author. Greg and I meet initially about 10 years ago at a local real estate investment club meeting and then again, at his house years later, where I was invited by a mutual friend to a monthly mens’ group meeting. The mens’ group is made up of motivated entrepreneurs, authors and retired business moguls. Greg has provided friendship, mentorship, ideas, masterminds and introductions to people who have not only help me in business but have had a profound impact on me as a person. The giving and service orientation that embodies and surrounds Greg is amazing to be part of.
How have you used your success to bring goodness to the world?
I’m still working on filling my cup to feed the world with what floweth over.
What are your “5 Things I Wish Someone Told Me Before I Became CEO” and why. (Please share a story or example for each.)
1 — You are responsible for EVERYTHING. Customers, employees and investors all look to you for the final word. Good bad or indifferent. The people you hire to handle your business are a reflection of you and how you present yourself. Choose wisely.
2 — This is not an 8am-5pm, Monday to Friday job. When you are growing a company, you need to be constantly adjusting your business for maximum efficiency and profitability. You have to have your plan B, Plan C and even a Plan D in place. For me, my brain works on strategies and issues while I sleep and am uninterrupted by self-talk. There are many times I have woken up in the middle of the night with a game plan, solution or new project. Being in charge of procuring my own “salary”, I don’t have the luxury of turning my brain off at 5pm. So being able to get out of your head and spend time with your family is so important. But realize that getting out of your head is not the same as turning it off.
3 — Having employees is like running a daycare center. That’s what I hear many business owners and managers say, but most of the time their challenges are due to one of 3 things: Wrong person for the job, unclear duties and job description or a leader with a vision not clear enough to communicate effectively.
4 — You have to know enough to be dangerous in EVERY aspect of your business. What I mean is that you don’t need to be an amazing marketing person or graphic artist or bookkeeper, but it’s important to know enough at the very least if something sounds correct or not. If you’re just starting out, you should know enough hands-on skills that if someone chooses to leave or if you choose to replace them, your business isn’t in jeopardy. For instance, you don’t have to know how to build a webpage, but you should know enough to know how to make updates, or that it doesn’t take an hour to code a button.
5 — What you know is not enough, who you know is just as important. I know it sounds like common sense, but it really is not! The network of people you have around you have the ability to open doors and introduce you to people you had no idea you needed to know. A few weeks ago, through casual conversation, a friend of mine let me know that he is looking to buy a 120 ft yacht. Ok, awesome for him. I grew up fishing and sailing in Hawaii so I’m not unfamiliar with boats. Yachts? Well, I’ve been on a few but certainly didn’t know how I could help him. I was at a Real Estate Exchangers meeting a week or so later and I brought it up to the group. A woman who I have spoken to many times before mentions that her family in Italy, rebuilds and builds engines for Mega Yachts. The next day, I happen to be talking with my Director of Public Relations and I tell her about how cool that coincidence is and she proceeds to tell me that her brother in law owns a shipyard in Europe that builds 80 to 120 ft yachts! Mind is blown! I come home and tell my wife and oldest daughter about all this and my daughter tells me that her best friend’s dad is a yacht broker and was telling her the day before how he is leaving for Asia to show someone some mega yachts. Case in point: don’t underestimate the power and reach of your network.
You are a person of influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I believe that everyone should be part of a well-run mastermind group, one with less than 15 people in it. I believe in the power of masterminds so much, that today I am a co-founder of the Mastermind Association. It’s a way to not only learn how to run a mastermind to get the results that Napoleon Hill and so many other great entrepreneurs have experienced but to also certify a mastermind as such and not as simply a tell and sell seminar.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
Version 1 is better than Version 0, done is better than perfect. I believe action and momentum are the keys to the universe. The more action you take the more momentum you get, the more that gets done, the more of what you’re seeking is finding you. I have a friend who has been working on a web portal for 6 years and absolutely will not make it live because it’s not perfect, there are more things to add, to change. Even though he knows that he can make changes on the fly, he wants it to be perfection. Computer operating systems are updating all the time, cars have recalls to make things better, web developers have jobs updating websites, the list is endless. Just get it done.
Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch with, and why? He or she might just see this if we tag them 🙂
I think that it would be amazing to go play bridge with Warren Buffet at his home in Omaha. I have no idea how to play bridge, but the fact that as wealthy and amazing as he is, from what I know about him, he is not an elitist, he is just a genuine human being with so much business acumen and wisdom to offer, I would love the opportunity to sit down across from him. . I respect how he talks about both his success AND failures, including the examples of when he didn’t do enough due diligence or trusted the wrong people. People who own and share their failures as teaching moments and/or as a chance for the world to learn from are a rarity. As a mogul not only in real estate but in business at large, Warren Buffet’s council would go a long way as my team and I continue to make strides in the real estate field.
How can our readers follow you on social media?
LinkedIn — https://www.linkedin.com/in/leohefner/
FaceBook — https://www.facebook.com/leo.hefner
Twitter — https://twitter.com/leohefner
Instagram — https://www.instagram.com/leohefner/
Thank you so much for joining us. This was very inspirational.