He becomes a loan officer in 1990 and begins making good money. He then starts flipping apartment buildings in the hood and end up losing everything after a bizarre chain of events that ultimately leads him to his current business and bouncing back stronger than ever.
Key Points from Coming Back Stronger, with Jorge Newbery
- Jorge dropped out of high school when he was in 11th grade and got his GED
- He started competitively racing bikes, he was even in the 1988 Olympic trials
- He stopped when he was 25 because he wasn't making enough money
- In 1990 he started working as a loan originator working in a phone room, originating mortgages
- When he was an originator he would get to the office at 8:00 a.m., and he would stay until 8:00 p.m.
- Jorge worked his butt off and never took a day off because of this the company promoted Jorge to a loan officer after six months
- The company then promoted him to branch manager and in 1992 he started to start his own company, which was called Sunset Mortgage
- The company originated mortgages in Southern California for people who were buying properties
- He saw what his customers were doing and decided to try it too, so he started buying properties that no one wanted and fixing whatever problems they had
- In 1998 he was charged with 32 different criminal charges because he couldn't fix up a property fast enough to comply with city regulations
- Because he was making good progress on fixing the property, he was let off with a fine and summary probation, after 17 months he completely fixed the property and sold it for over 1 million dollars
- Bought many other properties but a disaster struck one of them, that turned it into a bottomless pit of problems that caused him to run out of money because the insurance company wouldn't pay up
- Eventually he was forced out of the property because of a string of legal issues and had to sell off all of his other properties to pay off the debt he accrued trying to fix up the property
- Was running out of money but started finding clerical errors that his lenders made and exploited them to settle his debts for pennies on the dollar
- Who is your success role model? Gandhi
- What is your biggest success? Turning around the property that eventually caused him to lose everything
- What does a typical day for you look like? Wake up around 6:00 a.m., work out, go to work, leave around 7:00 p.m., then spend some time with his wife and start it all over again
- What is your favorite quote? "If you always put limits on everything you do, physical or anything else, it will spread to your work and into your life." -Bruce Lee
- What are your hobbies? Hiking
- What is the best business book you've read? The Making of a CEO by Oswald R. Viva
- If there was one key piece of advice you could leave our listeners with about achieving success, what would it be? It's all about determination and persistence—not letting obstacles get in your way
About Our Guest Jorge Newbery
Jorge is the Chairman, Founder and CEO of AHP Servicing LLC, a national default mortgage servicer, and American Homeowner Preservation LLC, a purchaser of non-performing mortgages. In addition, Jorge is a licensed real estate broker who brings more than 29 years of mortgage and real estate experience as a professional consultant and partner to Activist Legal LLP. 2004 natural disaster triggered the financial collapse of Newbery’s former business, leaving him $26 million in debt.
Today, Newbery shares what he learned from his challenges to help devise strategies to help debtors and creditors achieve positive resolutions.
- Wealth Junkies
- Rich Dad Poor Dad
- 4 Hour Work Week
- 10X Rule
How it all Started
Jorge Newbery dropped out of high school when he was in 11th grade and he got his GED. He was really into racing bicycles, not BMX or Motorcross, but racing actual bikes and he was good at it. Jorge did that until he was 25, he was in the 1988 Olympic trials and he was doing his best to be big in that scene. He'd even raced against Lance Armstrong, but despite his best efforts, it wasn't working. Jorge was only making $20,000 a year and he wanted to change. But Jorge had a problem: he 25, had no college education, and hadn't even finished high school.
Jorge got a job working as a loan originator through his connection with his friend who was a loan officer. By 1990 he was working in a phone room originating mortgages. He was a top producer for the company. He figured if he was there when the doors opened at 8:00 a.m. and stayed until they shut at 8:00 p.m. and he stayed at his desk as much as possible, he would get he most calls. Jorge wouldn't take any time off, he was always on the phone. After six months the company promoted him to a loan officer position. The company promoted him to a branch manager position shortly thereafter.
In 1992, Jorge left the mortgage company to start his own company. Jorge started, Sunset Mortgage, which is a company that originates mortgages for private investors. Between 1992-1995 the property market in Southern California, where his company was based, was pretty weak. This allowed his customers to make great deals and Jorge realized he could do the same thing as them.
He then bought 19 units. And then 50 units, using all of the money he saved living at home. He grew his portfolio tremendously by buying the loans no one else wanted. The big banks in Los Angeles were ill equipped to handle the local problems that come up in real estate. The banks cannot deal with city inspectors, plumbing inspectors and other local task forces so they end up selling properties for really cheap.
Over time, Jorge started buying bigger and bigger problems and netting huge discounts in the process. It became a game to him. For example he bought a 298 unit property for $850,000 in 1998. This same property was sold in 1992 for $4 million, then it was sold again for $2.4 million dollars in 1994 because the owners were both put in jail. The property had a lot of problems and neither of them could fix them to satisfy housing codes.
After he bought the property he had a meeting with the inspectors and laid out his plan. He hopped to have everything done after six months, in hind sight he was being a little too optimistic. The inspectors liked his plan but said if he hadn't gotten it fixed after six months they would prosecute him. They had to, even though they liked his plan, because they had prosecuted the previous owners.
A Rough Patch
He has meetings with the inspectors every month and they would say that he's making good progress. Despite his good progress, he wasn't done. On New Years Eve, 1998, Jorge was charged with 32 different criminal charges. That night he got a call from a friend of his and his friend said, "Hey man, you're in the papers." Jorge's first thought was of his parents so he drove over to see them and took the page out of the paper before his mother could read it in the morning. He managed to hide what was happening from his parents for a long time after, but they eventually found out.
Jorge was devastated, he had no idea how to deal with it or what to do. The next morning, he talked to his attorney who then went to city hall. The city attorney said that yes, he is making good progress, but they cannot selectively prosecute. In the end, the city fined him $10,000 and put him on summary probation. While the penalties sucked, he was just happy he wasn't going to jail. If he didn't get in any trouble for three years, they would expunge this from his record. That said, the city said they would come back full force if he didn't keep up with their standards.
Getting Over It
Eleven months later Jorge finally finished the renovations on the buildings. Instead of taking 6 months it took a total of 17. Once Jorge completed the buildings, he turned around and sold the complex, making $1 million in profit. After that, Jorge felt like he was invincible, like he had the Midas touch. He didn't even slow down, as soon he finished that sale he bought another 233 units in downtown Kansas City.
George moved into one of the buildings he had just bought in Kansas City. It made big news in the papers because he was moving into a really bad neighborhood. He got a lot of good publicity because of it, even though he only moved into that building because he was cheap. Jorge turned that complex around and sold it for a solid profit. He kept doing that for awhile until he bought a property called Wooden Meadows Apartments in Columbus, Ohio.
Into the Frying Pan
Wooden Meadows was a 1,100 unit apartment complex nicknamed Oozy Alley because it was infested with drugs, gangs, and crime. Jorge bought the complex for $13.5 million, which was a complete steal and right up his alley. He moved into the complex after he bought it, which like the complex in Kansas City, brought a bunch of good publicity down on him.
When he arrived he learned that there were 12 armed security guards employed by the previous owners. The armed guards had performed a citizens arrest on someone and he was in a jail cell in the Jorge's building. The first thing he did was get rid of the armed security. Instead, he started a community patrol which tried to deescalate situations peacefully. The patrol would walk around and break up groups of people loitering around the building. Whenever they asked the people to leave, they would just go to a different corner and hang out there until the watch had them move again. But, the groups would always say something along the lines of, "Give me a job."
Stepping out Carefully
Jorge realized that while he was spending tons of money on giving these people a nicer place to live, he also had an opportunity to help them beyond that. So he took them up on their offers. If he asked the construction companies to give jobs to his residents they would, if he could guarantee they would show up to work. He told his residents that if they attended a class in the community center every day for two weeks he could guarantee them a job. The first two weeks, only three people showed up but they didn't miss a class, they didn't leave early, and at the end of those two weeks they got jobs with the contractors.
After that, so many people were coming to the classes that Jorge had to set up a wait list. The atmosphere in the class changed too, initially people were dressing very casually. Then people started dressing nicer, then they were coming in their Sunday's best. While that was happening, the atmosphere in the neighborhood changed too. People who were just looking for a place to live moved in, it became a much nicer neighborhood and a great place to live.
Getting Pushed Back into the Fire
Everything was going great: the complex was completely renovated, there was 80% occupancy, and major cash flow coming from the complex. Everything was going great until the largest federally declared disaster in Ohio history struck the property. An ice storm hit on Christmas Eve, 2004, and knocked out power to 60% of the city and Jorge's complex was one of the most affect places. His complex lost power for 4 days and when the power came back on, and the heat got turned back on all of the frozen pipes in his buildings burst. This meant, there was severe flooding in every single one of the buildings.
The fallout was so bad the Red Cross set up a shelter across the street from the buildings to help. Jorge did what everyone would do in that situation, he went to talk to his insurance company. They told him they weren't going to pay for anything because his boiler's weren't up to code.
Sitting in the Fire
Jorge talked to his attorney and was told that the insurance company just wanted to take a settlement in court because they didn't want to give him the full payout because it would be too expensive. That didn't stop him though, Jorge immediately set out to fix the apartments. Almost a year after the disaster, the city inspectors deemed the all of the buildings 'subject to imminent collapse.' Jorge didn't think that was true and hired his own engineer to inspect the buildings. The engineer found nothing wrong with the buildings.
Jorge went to a city judge and got a temporary restraining order on the city to stall the evacuation. It was a big deal and there was a lot of media attention. The mayor started using the media attention to drag Jorge's name through the mud. He started putting everything he had into renovating the buildings by taking out loans on his other properties and taking a low payout from his insurance company but he was too far in debt.
Getting out of the Fire and Getting Stronger
Jorge was broke, he had no money and very few properties left. Through a loophole he found in the lease on one of his properties he managed to pull himself out of the proverbial fire. He realized, 'hey, a lot of leases have this same mistake' so he started going back through all of his leases finding the same mistake. By using that mistake he managed to settle his loans for pennies on the dollar. This led to his current company and what Jorge does now.