BP Podcast 216: Buying 150 Houses and Experiencing a Financial Meltdown with Damion Lupo

by | BiggerPockets.com

On today’s episode of The BiggerPockets Podcast, we’re pumped to introduce you to Damion Lupo, an experienced real estate investor and hard money lender who has seen it all in real estate—both the good and bad! You’ll learn how it was Damion’s naiveté that led to his early success (and why naiveté matters), as well as the traits that helped Damion build up an incredibly successful cash-flowing business. And don’t miss Damion’s story of the murdered security guard or his golden answers to the question, “How do you get a lender to say yes?” 

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In This Episode We Cover:

  • Damion’s first deal that he financed with his Visa card
  • How you can be naive and still make it
  • A discussion on whether it’s harder to find deals nowadays
  • What you should know about driving for dollars
  • The deals he has done so far
  • The murdered guard story
  • Why he wants to be the bank
  • What exactly a lease option is
  • How he structures his partnership
  • A discussion on whether people should get an LLC or not
  • Damion’s view on cash flow
  • What he did to get through the downturn in 2008 
  • Advice for those who want to be hard money lenders
  • Tips for convincing a hard money lender
  • What’s next for Damion
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “With real estate, there was this unlimited potential that is really only limited by me and my thinking.” (Tweet This!)
  • “You can create massive financial wealth with real estate with an 8th grade education. Really, it’s up to you.” (Tweet This!)
  • “People don’t realize the laws of selling. You don’t close deals on your first time.” (Tweet This!)
  • “The way you do anything is the way you do everything.” (Tweet This!)
  • “The worst teacher is success.” (Tweet This!)

Connect with Damion

Show Preview

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

36 Comments

  1. Anna L.

    Damion, great podcast! Thanks for sharing your story!

    You were talking about LLCs and how everyone should open one before investing in RE. I think the biggest problem people experience is not LLC creation, but ability to re-fi the property under LLC. Any advice on how to be creative and find a way for a bank to lend to an LLC?

    Thanks!!!

    • Hey Anna,

      Thanks for listening and the question. Often traditional banks will require you to transfer the property from the LLC to you to refi and then after the refi you can transfer it back. Smaller local banks may be more flexible but because most lenders package up their mortgages and sell them to bulk buyers or a secondary market or Fannie they’re dealing with narrow requirements for what the mortgage looks like and who owns the property, ie a person vs an entity.

  2. JL Hut

    Ladies and gentlemen, Listen to this pod cast over and over again. This is what wisdom and experience sounds like. No pie in the sky here. Damion will be successful for the long term. Heed the voice of wisdom and you will to. Look to the future, ask yourself not what will work today, ask what will work tomorrow and you will be ahead of the crowd and survive and thrive.

    Good job Damion, I love you man. I wish you the best.

    JL

  3. Melvin A. Plummer on

    What a great human being! Your honesty and openness is phenomenal. I am going to listen to this podcast for the entire 2017.
    Keep up the good work!

    Melvin A. Plummer

    • Damion Lupo

      Thanks Melvin! Really appreciate your affirmation. To me this is what it means to have the universe giving you nudges (for and against the path). I got a lot of warnings years ago that I ignored, that the universe was trying to explain to me, “hey kid, this isn’t the right path” and I ignored them to my detriment. Now that I’ve reinvented my life and focus messages like yours reinforce the choices I’ve made to be on this path and I’m immensely grateful for you taking the time to be the messenger. Thank you again Melvin.

      ~Damion

  4. George Compton-Craig

    Really enjoyed this show.. It gave me a lot of perspective in my investing plans and goals. To be specific, I have been very reluctant lately to jump into any deals because of the state of the housing / economic environment. This had me feeling like I was just trying to make an excuse not to take the risk. But in reality, the numbers just haven’t been there. This environment has existed for some time, and therefore, had started feeling like the ‘new normal.’ While deals still exist out there, they have become much more difficult to find for me. I am thankful for this podcast. I think what I have been doing recently is that I have waded through so many terrible deals, that a bad deal has started looking desirable, and I don’t want to fall into that trap. I couldn’t agree more that sometimes the best thing you can do is take a break when things become overheated and detach from reality or take a pivot in another direction. My biggest take away from recent times is that this business takes massive mental strength and stamina to succeed.

  5. Paul Moore

    Damion and BP Team,

    Great podcast. It is great to hear the successes and failures of someone who is killing it now. Thank you for your humility and for sharing your wisdom.

    My favorite takeaway: “The way you do anything is the way you do everything.” (or something close to that.) Brilliant. I won’t forget this one.

    • Damion Lupo

      Paul – you nailed it man! That’s exactly the quote and that’s exactly the truth!

      I believe it’s not about what we claim or pitch, it’s what consistently deliver. The way we show up is everything and our actions are either an example for others to follow or we become a warning, all depending on the ethics that drive our decisions. Pretty easy to predict how people will show up tomorrow after watching them today.

      People, by their nature, are creatures of habit and we default to consistent behavior, for better or worse.

    • Damion Lupo

      Thanks Erika! 🙂 . What type of martial art? I find the training becomes one and the same in the dojo and in the streets with investing. Like I said in the show, the way we do anything is the way we do everything. Martial arts lends it’s path and teaching to a deeper fulfillment and role in the world. Really like George Leonards book “Mastery” on this subject if you haven’t already read it.

      It’s WORLD CLASS!

    • Damion Lupo

      James,
      It was an absolute pleasure and delight to be on BiggerPockets. One of the things I loved so much about it was the ease to be in a real conversation with two incredibly real guys that had 1 agenda, to be present and in flow. They crushed it and we had a blast! Glad you enjoyed it!

      ~Damion

  6. alexander ramos

    Damion lupo great podcast! “My friends were mentors from books and audio”. I resignate 100% seems like the past year and a half I have been on own journey through self help, investing and growing as a person as well. How did that change for you?and is it just common for entrepreneur,or spirit minded to catch them selves separated. Per say alone? Seems like its common at fist??

    • Damion Lupo

      Thanks Alexander! Yep, that’s a super influencer hack, to absorb and surround yourself with amazing people via their works, books audios and media like Podcasts.

      I believe the best investment you’ll ever make is that in yourself and your own personal development. When I started my journey I was the only one I knew taking all of my earnings and putting them into seminars, mentors and programs to expand/grow ME. Could have had a lot of consumption fun much earlier but I made the choice to delay that and grow me. 5 years of that focus changed everything. I expanded and those who made choices to spend vs invest in themselves stayed mostly idle.

      It changes everything when you believe YOU are the smartest investment with the best ROI option. Trust that and stay surrounded by the voices and words of those who’ve gone before you. You might feel alone from time to time.

      You aren’t alone. We’re with you. Keep believing!

      Damion

  7. Tarek Soliman

    HI Damino

    My favorite book ever is Mastery and I read it at least 20 times and still listen to the book twice a year, I also enjoyed 48 power of laws and art of seduction.
    But Napoleon Hill is my top Author in business.
    looking forward to find more about your martial art style.

    • Damion Lupo

      Ah man! Tarek, me too! Would have loved to train with George Leonard before he passed away. Mastery is truly a focus worth having for life and trumps all those momentary success points we tend to get stuck on. Love to hear your feedback on Yokido and your insights into Mastery!

      ~Damion

    • Damion Lupo

      Ekaterina! Thank you, think this is the first time I’ve ever been charged with being a jewel :-).

      Brandon and Dave were amazing and made this so much fun and playful. Makes me happy to know my story may help others avoid some of the pain I went through and perhaps offer some inspiration and confidence for people to tap into their inner genius and ability, both of which I believe we all have, just waiting for the moment we believe.

      ~Damion

  8. Michael Hallahan

    Great show Damion. Glad you talked about the dark side of using OPM, this is the first time ive heard someone on the podcast talk about it in such detail.
    I was shocked when you said taxes on a flip could be over 60%. Wow! Could someone break it down for me how it could get so high, when the top tax bracket is only 40% after deductions.
    Thank You!

    • Damion Lupo

      Hey Michael, thanks so much!

      Yeah, the dark side of OPM is very real and I was like most people when I started using it, just blue skied it and didn’t get real about the downside, which is it can all be lost. That’s reality and it doesn’t mean people won’t invest or lend, it’s just that when we’re afraid of losing the OPM it’s common to negate being real about the downside, (prior to having losses).

      I find it interesting that now when I speak with people about deals I’m sponsoring, I share the upside and the downside and they’re usually fine and move forward even with the honest and real possibility of loss. It’s also so much better for me because I’m being TRANSPARENT, one of my 6 key values and I get to sleep at night without feeling like anyone has been misled.

      In the beginning I truly believed my deals would all work so a big chunk of me believed in the blue skies. Now I’m clear, Sh*t happens and we can’t predict the black swans or know the things we just don’t know yet.

      As far as the taxes, here’s the deal, lets say you buy a house for 80k, put 20k in and flip it for 200k in 6 months (less than a year). The $100k profit is treated as ordinary income and will generally show up on your tax return subject to Federal Income tax, State Income tax and Self Employment tax, currently 15.3%. So if you do a few of these you’re in the 33-39% tax bracket on the federal, could be as high as 13.3% for the state tax with California. Anything over $51k in income in California is taxed at 9.3%. So out of the $100k in income/profit:
      Federal (varies, could be more, assuming you land in the 33% tax bracket)
      State
      Self Employment FICA stuff
      ———
      59k in taxes.

      It’s brutal… but… if you use a ROTH QRP account it can be ZERO. There are ways to do this a lot smarter but without planning you get skinned alive.

      Hope that helps shed some light!

      ~Damion

    • Damion Lupo

      Hey Michael, thanks so much!

      Yeah, the dark side of OPM is very real and I was like most people when I started using it, just blue skied it and didn’t get real about the downside, which is it can all be lost. That’s reality and it doesn’t mean people won’t invest or lend, it’s just that when we’re afraid of losing the OPM it’s common to negate being real about the downside, (prior to having losses).

      I find it interesting that now when I speak with people about deals I’m sponsoring, I share the upside and the downside and they’re usually fine and move forward even with the honest and real possibility of loss. It’s also so much better for me because I’m being TRANSPARENT, one of my 6 key values and I get to sleep at night without feeling like anyone has been misled.

      In the beginning I truly believed my deals would all work so a big chunk of me believed in the blue skies. Now I’m clear, Sh*t happens and we can’t predict the black swans or know the things we just don’t know yet.

      As far as the taxes, here’s the deal, lets say you buy a house for 80k, put 20k in and flip it for 200k in 6 months (less than a year). The $100k profit is treated as ordinary income and will generally show up on your tax return subject to Federal Income tax, State Income tax and Self Employment tax, currently 15.3%. So if you do a few of these you’re in the 33-39% tax bracket on the federal, could be as high as 13.3% for the state tax with California. Anything over $51k in income in California is taxed at 9.3%. So out of the $100k in income/profit:
      Federal (varies, could be more, assuming you land in the 33% tax bracket)
      State
      Self Employment FICA stuff
      ———
      59k in taxes.

      It’s brutal… but… if you use a ROTH QRP account it can be ZERO. There are ways to do this a lot smarter but without planning you get skinned alive.

      Hope that helps shed some light!

      ~Damion Lupo

    • Damion Lupo

      Hey Michael, thanks so much!

      Yeah, the dark side of OPM is very real and I was like most people when I started using it, just blue skied it and didn’t get real about the downside, which is it can all be lost. That’s reality and it doesn’t mean people won’t invest or lend, it’s just that when we’re afraid of losing the OPM it’s common to negate being real about the downside, (prior to having losses).

      I find it interesting that now when I speak with people about deals I’m sponsoring, I share the upside and the downside and they’re usually fine and move forward even with the honest and real possibility of loss. It’s also so much better for me because I’m being TRANSPARENT, one of my 6 key values and I get to sleep at night without feeling like anyone has been misled.

      In the beginning I truly believed my deals would all work so a big chunk of me believed in the blue skies. Now I’m clear, Sh*t happens and we can’t predict the black swans or know the things we just don’t know yet.

      As far as the taxes, here’s the deal, lets say you buy a house for 80k, put 20k in and flip it for 200k in 6 months (less than a year). The $100k profit is treated as ordinary income and will generally show up on your tax return subject to Federal Income tax, State Income tax and Self Employment tax, currently 15.3%. So if you do a few of these you’re in the 33-39% tax bracket on the federal, could be as high as 13.3% for the state tax with California. Anything over $51k in income in California is taxed at 9.3%. So out of the $100k in income/profit:
      Federal (varies, could be more, assuming you land in the 33% tax bracket)
      State
      Self Employment FICA stuff
      ———
      59k in taxes.

      It’s brutal… but… if you use a ROTH QRP account it can be ZERO. There are ways to do this a lot smarter but without planning you get skinned alive.

      Hope that helps shed some light!

      Damion

    • Damion Lupo

      Hey Michael, yep, OPM has two sides, it’s not just happy leverage, that blade can cut deep and deadly if not respected!

      As far as the taxes, here’s the deal, lets say you buy a house for 80k, put 20k in and flip it for 200k in 6 months (less than a year). The $100k profit is treated as ordinary income and will generally show up on your tax return subject to Federal Income tax, State Income tax and Self Employment tax, currently 15.3%. So if you do a few of these you’re in the 33-39% tax bracket on the federal, could be as high as 13.3% for the state tax with California. Anything over $51k in income in California is taxed at 9.3%. So out of the $100k in income/profit:
      Federal (varies, could be more, assuming you land in the 33% tax bracket)
      State
      Self Employment FICA stuff
      ———
      59k in taxes.

      It’s brutal… but… if you use a ROTH QRP account it can be ZERO. There are ways to do this a lot smarter but without planning you get skinned alive.

      Hope that helps shed some light!

      ~Damion

  9. Don Spafford

    Loved everything about this podcast. As I begin my rental property and REI business, I will follow the advice given here and pray that I can have similar success. I agree that cash flow is king and use that as my basis for making offers. I rework the numbers until the cash flow covers what I need and then make the offer based on the price I need to get there. Thanks Damion for sharing your experience and knowledge with the rest of us.

    • Damion Lupo

      Don, thanks my man! Building your experience and portfolio based on cashflow is the sage wisdom of the wealthy. It’s where true financial freedom lives and you won’t regret this very SUSTAINABLE approach to investing. Cash seems sexy at first glance, but I were to start over again I would without question build a CF portfolio and let my garden grow and flourish.

      ~Damion

  10. Laura Sulak

    Hi, Damion. Loved this show. I’m still learning the ropes with my first three properties acquired last summer (seven units total), but I hope to scale up after getting really good at managing these. I’ll definitely look you up when I’m ready to look for lenders, but I promise to have my act together before doing so! Great advice on approaching hard money lenders, by the way. Very helpful.

    I’m not too far from you in Temple, but my son is the sashimi chef and kitchen manager at Fukumoto, also an outstanding Japanese sushi/fusion/yakitori place there in Austin on the east side of 6th. Check it out sometime, if you haven’t already. (Just had to give a little proud mom shout out:)

    • Damion Lupo

      Hi Laura, thanks for the message! Congrats on your foray into the investing world! There’s no better way to really learn this world than being right in the middle of it! Way to get into the mud 🙂

      Please reach out to me anytime if I can be of any help with any questions or anything at all! It’s a crazy jungle out there and those who’ve come before you have wisdom we’re happy to share with the eager and open student. 🙂

      Also, thanks for the restaurant suggestion! Will check it out!!

      ~Damion

  11. Landan Dory

    Hey Damion! Really enjoyed the podcast. As a senior graduating from college and looking to move to Austin do you have any recommendations for someone who is looking to enter this type of real estate? I am pursuing several different job options in real estate and am seeking advice from someone who would be able to tell me more about what area of RE to enter for someone wanting to build their own portfolio. I’m graduating from Baylor with a finance degree and two years of RE experience. Thanks and keep up the good work!

  12. stephanie cabral

    Hey Damion, this was a great podcast. I loved the point about how naivete can actually be an asset when it gets you in the game. I’d say my first deal was also fueled by a healthy dose of “what could go wrong?” I don’t think I’d do the same type of deal again but I’d never take that one back either. Hopefully people listening to this that are suffering from paralysis by analysis will realize that there’s no deal that’s risk free and getting out there, despite the risks, is the only way to get over that fear. I look forward to your next podcast!

  13. Hi Damion,

    Loved the podcast and appreciate the candidness! I’m relatively new to this and my questions will make that evident.. When using a lease option on a house what are the best practices for finding perspective buyers? (Just looking for some high-level tips on how to approach this). Also, does the dodd frank act make this harder at all? Thanks again!

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