He Built a $500M Real Estate Empire with NO MONEY - Ben Reinberg 💸 E88

0:00IRR, for everyone knows, is really a calculation of money in and money out. You invest money with me. It's what am I going to give you back and how fast am I giving you back? You're now your original capital you invest, but also your return. You look at the Alliance Medical Fund, Dan, and you say, okay, well, 24 % is your track record. If you invested a million dollars, you're going to average return back with your capital about$240 ,000 every single year.

0:32ladies and gentlemen welcome to the money mondays we are here inside of an rv motorhome parked in beautiful newport beach i think we're right across from fashion island mall here in front of ben reinberg's office very excited to have him here he's done over 500 million dollars in commercial real estate and technically he's done billions of dollars in transactions. I'm really excited to dive deep into his mind and ask about how to make money, how to invest money, how to give it away to charity. As you guys know, these podcasts always run for less than 40 minutes because the average workout is 45 minutes.

1:04The average commute to work is 45 minutes. So this episode will be between 35 and 38 minutes for your listening pleasure. So without further ado, Mr. Ben Reinberg, give us the quick two minute bio so we can get straight to the money. Thanks, Dan. Been in commercial real estate for three decades, strictly as a principal. I started when I was 23 years old. I am 54, headquarters in Chicago, from Chicago. We've built over 12 million square feet of office industrial in our career. We've done billions of dollars of transaction. We actually own more than half a billion dollars of commercial real estate.

1:38We own, whether it's office, industrial, retail, we just launched a multifamily division. We just launched a hard money lending division, which was in high demand from our investors. And so So long story short, I am a real estate, commercial real estate expert. And then I'm also getting into tech. We have some tech companies. We're heavy into AI now. And then obviously you see my personal brand, which we launched two and a half years ago, is growing. We have a new TV show, which is coming out and launching. And you're going to be one of our esteemed guests coming up, which I'm excited for season two.

2:11And other than that, it's great. It's great to be in California. Here's my West Coast office. We're right outside it. and I love it. I love the weather. I love the people. And it's been a great rebirth for me to move out to California and launch our West Coast presence. So that's what I do. That's part of my hobbies. Well, I'm going to break down and ask you a lot of questions within there. So on the make money side, why did you go the commercial real estate route, not residential, not storage units, not RV parks? Why do you like the commercial real estate space? Dan, I love this question because I get asked this frequently.

2:44When I was a young man and coming from Chicago, some of the biggest icons in real estate, especially commercial real estate, live in Chicago. The Crowns, the Pritzker family, the Sam Zell, you just name it. The biggest icons in commercial real estate were from Chicago. And when I was young, I didn't come from money. And so I said, well, how do I accumulate wealth like these people do? And I did my research. There was no internet at the time. We'd go to the library and read encyclopedias and articles and what we had to do. And I realized commercial real estate had the most billionaires at the time when I was a kid and growing up and even in my 20s.

3:20And I said, well, that's who I want to be. And I always modeled Sam Zell. I thought I was going to be the next Sam Zell being from Chicago. I started buying big office campuses. And then when the internet became more prevalent, and even with the pandemic, you could see more people wanted to work from home. So I took a step back and I said, well, the office space is probably not going to be a great asset class to double down on. So we grew in industrial. And then 20 years ago, my three-year career, I met with my investors and I said, well, office space is going to be challenging. Even downtown office space is challenging around the country.

3:54I said, I think we should get into medical. The human body is not getting out of style. Barack Obama was threatening with health care and getting rid of certain programs. I said, no matter what, Dan, the human body is never going out of style. People are always going to need to go see the doctor. And even during the pandemic, when we talked about telehealth and this conversation of telehealth, you can't go get a colonoscopy. You can't get surgery unless you're in person. And so we knew that. And we said, you know what? This is a great niche. We became one of the leaders in medical office space.

4:27And then 10 years ago, we got into a niche called veterinarian office. And we realized a lot of people own pets. People are fascinated by pets. We know we've seen, we took a tour of your beautiful ranch and you're the perfect case study. I mean, we own different hospitals and horse and cattle surgery centers and just a phenomenal side of the business. And it ties into our fund that we're raising money for our medical and veterinary fund and why it's doing so well is because those sectors, no matter what, are pandemic and recession resilient type real estate. Right. So when you're raising capital for a fund, what does someone should be looking for?

5:03How do they decide what type of real estate fund to invest into? What should they be looking for? It's a great question. I'm a big fan of diversification. So if you take the Alliance Medical Fund as an example, because that's what we're raising money for. If we're going to have 20, 25 assets in a fund and they're going to be different uses within the medical office space, it's a lot of diversification. That's why we set up funds. What I look for is I ask investors, what are your struggles? What have you struggled with? What are you trying to achieve? What's the desired outcome in the future? And what are you looking to accomplish at the end of the day?

5:37When I understand your struggles, I can help you with the asset class you want. We're like economists in my company. We know before things happen, we're constantly researching. We're looking at the real estate market. We're looking at interest rates. We're looking at government administrations. We're looking at the different states that we'll invest in. worse population growth. What I say to people is, yes, you're investing in asset class. Okay. And hopefully that makes sense to you, whether it's industrial or multifamily and you understand the asset class, it's also the sponsorship. And I say this a lot because you're investing in people when you invest.

6:13I invest in tech companies. I invest in things I don't understand. It's always the end result is the person running the show. So I say to people, I said, look, what you need to do is really understand how do they solve challenges, okay? When you're in a tough environment, how are they going to get through it? Okay, anyone can pay you a quarterly preferred return. But when the chips are down and things are tough, how are people going to get through those times? Because tough times don't last, tough people do. So I invest in people. I do look at the asset class. I look at the investment strategy and I do my homework.

6:47So my suggestion, if you're out there and you're going to invest in a fund or a syndication or a residential home or whatever it is, do your homework, ask questions. How do you get through challenges? What's your acquisition criteria? What's been your track record? You know, for 30 years, we have a high 20s, 8 % IRR track record, which is phenomenal. In the medical office space, which is conservative, we have mid-20s IRR. So that tells a story to investors. It says, you know, Ben Reinberg's companies have 200 plus years of leadership team experience. They're not going anywhere. This is his passion.

7:25This is what they built their wealth on and their foundation. And that's who you're investing with great quality people that could solve challenges. And so that's what I always recommend to people because people call me from all over the world saying, I want to invest in this and that. What do you think? And that's the first thing I go to is the people. When you say, I'm going to ask you to break down a couple of things. When you say 20 % IRR, what does that mean? Right. So IRR, for everyone knows, is really a calculation of money in and money out. You invest money with me. It's what am I going to give you back and how fast am I giving you back?

7:57Now your original capital you invest, but also your return. So it's a time value money equation. So what it really means, when you look at the Alliance Medical Fund, Dan, and you say, okay, well, 24 % is your track record. If you invested a million dollars, you're going to average return back with your capital about$240 ,000 every single year. During the life. Trevor Arvind, I refer to him. During that life of that investment. So I take it for granted because I know how hard we work and I know what our expectations are. But to investors, it's a phenomenal deal. So I love what we do. I invest in everything we do.

8:37I'm probably the biggest investor in Alliance Medical Fund. And I do it because it's the core of our business and our company. Our company is based off of transparency, integrity, consistency, and expertise. If you work at Alliance, you have to adhere to those standards because that bleeds into our investors. I want our investors to have the seven-star experience. I pride myself on it. It's that white glove service. It's that attention to detail. And everyone's pulling the wagon or the train in the same direction we're at Alliance. And that's why it works. Because when you know investors come first, it's a marathon business.

9:15I don't care what anyone says in the world where it's like, well, I'm going to fix and flip and do all this. And you know what? If you're in commercial real estate, it's a marathon business. Okay? It's plan on being it for 30 years, 40 years, 50 years. You're going to build a tremendous amount of wealth. It's a wonderful business. But you have to commit. and people say to me all the time, Dan, well, how have you been in the business long enough? It's focused, persistence. It's continuing to show up to work every day. I don't need to work, but I do it because I love it. I also enjoy changing people's lives and creating impact.

9:48And I could do that through business and through commercial real estate. So you also mentioned the word syndication. What's the difference between investing into a fund versus into a syndication for like one specific building, for example, a project? It's a great question. So a syndication could be one investment you're investing in. And so it's a certain structure geared towards that project or that investment. Like one apartment building? Right. It could be one apartment building, one office building, an industrial complex. A syndication could be you have two or three assets and you have one entity that you're investing in and it's got a small portfolio, which we do.

10:24We might have a medical portfolio, and let's say it's in Savannah, Georgia, and we'll call it Alliance Savannah LLC. And let's just say it has three or four properties, medical properties. You can invest in Alliance Savannah, and you'll own three to four properties on your investment. A fund, there's four benefits to a fund and why we create funds and why we do syndicate. There's pros and cons of both. When you invest in a fund, okay, number one, the cost of capital is usually cheaper. Good economy is a scale. Number two is diversification, which is important to investors. So for example, if you invest in Alliance Medical Fund and you're going to have, let's say you have$500 ,000 in the fund and you're over 20 assets, that's great diversification.

11:06Because your$500 ,000 owns all the assets in the fund. That's the benefit. The other thing is scalability. What people don't realize about a fund, this is really important, is that we might have a property in Alliance Medical Fund. we sell it and we have an eight million dollar gain and I say Dan you know what instead of returning your capital back we're gonna do a 1031 by three other properties I took one property added three so more diversification more free equity in the fund and now I'm scaling okay and then of the fourth benefit is purchasing power when we go out to the brokerage community my acquisition staff and we go out to the sales community in commercial real estate they know we can provide certainty.

11:49Certainty is everything in our business. You know, Ben Reinberg's company has a great tracker. He has the ability to close. He has the ability to get debt. He has the ability to raise money. And he knows what he's doing because he's been there and done that. So certainty is so important in our business. And so all these come out when you have a fund and you have options. You know, every deal is different. There's not one deal that's ever the same in commercial real estate or anything. And so for us, we look at with our years of experience, say, is this a better syndication or a better fund? Is this something where, how are we going to structure it?

12:23Because people ask me like, how do I structure this deal? And a lot of it's experience. I might structure it where it's when I give you your money back, you're diluted. I might give you your money back and you own now 50 % of it. So we did a deal in Las Vegas a few years ago, bought it for$9 million, dollars famous surgery center when the shootings happened they went to this surgery center hospital to to deal with people that need blood and we uh renewed the lease increased the rents uh united health care is our tenant we turned a nine million dollar property into a 25 million dollar valuation okay we got appraised so what did i do i said okay we're going to pull money out tax-free.

13:08We're going to pay off our investors$9 million. We're 50-50. Every single quarter, which is this month, we distribute literally, Dan,$300 ,000 every quarter in cash flow. Now, mind you this, you have no capital in the deal. So how are we going to calculate that return? So that's just one of many that we have in the portfolio. So I love commercial real estate. I I love building wealth. I haven't found a better business. It's very transparent. You can go kick the bricks and mortar of everything we own. What we do in the fun, which is unique, is we send out what's called a flyer or a teaser. So before we buy it, we say, Dan, we're buying a building right now in El Tamonte, Florida.

13:53It's a surgery center. Here's what we're buying. Here's location. Here's the physician group. This is why we're buying it. My goal is you never have to call our office for questions. My goal is you never have a complaint. Okay. My goal is you might want to talk to me and kivitz with me because you're interested in the business. How did you do this? Why did you do this? Stuff like that. And also, a lot of our investors call for referrals because we ask them, we say, well, who else would enjoy this benefit? We are a tight-knit family in our investors. We don't let everyone in the door. And when you do come in the door, you usually don't want to leave.

14:3124%, I'm not going anywhere. Yeah. Well, there you go. You're going to have to kick me out. That's right. Okay. So we talked a bit about the making money. So I like to talk about investing. When, as you build wealth, and someone out there is listening, in their career, they go from 100 grand a year, they start making 140, 180, their house goes up 500 grand. All of a sudden, they got some extra capital. They got six figures, maybe even more capital. How do they decide on that first investment of like, should I go invest into the commercial thing? Should I try to buy the fourplex? Should I just invest into a fund and let an expert do it?

15:05Like, how do they think about that? Okay. When you first start making real money. First of all, phenomenal questions. This is such an important question. And I'm glad you asked it. Because I was that person. We were all that person when we were starting to make money. First of all, number one is live below your means. Yeah. Okay. Build up your next egg. Don't, you don't need the fancy car. You don't need fancy clothes. You don't need six bedrooms. Yeah. You don't need a large house. You know, rent. Live modestly when you're young. And even today, I live fairly honestly with the success I've had.

15:36And so when you do that, you have what I call availability of capital to deploy. Dry powder. Dry powder, whatever, disposable income, whatever you want to label it, right? And so what I would do, and I'm biased, okay? I like transparency in my investments. So you can invest in a mutual fund. that's what my father told me put in a mutual fund blah blah blah i can't control what the board director's decisions in these companies are now like we talked about you invest in apple and netflix and all these great companies and we all use their products and their services and that's okay to do too but i would say diversify take a small amount of money invest in hard assets like uh real estate commercial real estate whatever you're looking to do get some cash flow in the door.

16:28Try to invest in things that are going to create cash flows so you can continue to be well. I like investing in real estate, especially commercial, because we have great tax benefits. And I'm also a CPA. So for me, I think it's important. And so you have to have a good relationship with money. When you're younger, I want everyone out there to understand money is a tool. There's your health, there's resources, and you have to understand and build a good relationship with money because if you're not on the same page with the language you use and your mindset and your resources, you'll go broke. So it's really important that you continue to develop yourself, develop a relationship with money, but know it's a tool.

17:10It's a way to get access to certain things. It's a way to be able to survive if you need to, but you have to have that relationship and understand like okay well if I'm low on money I'm confident enough I'll make it back and I'll always continue to develop my skills what a lot of people don't do is with the relationship money is they don't continue to develop and grow as a person in order to as the environment changes like when the internet came on and now we have digital currency out there we have different political affiliations and administrations in office you have to continue to grow and develop into yourself.

17:49And so for the younger people out there listening, is my advice to you is start investing when you're young. Invest in hard assets. Diversify. Don't just invest in commercial real estate. Buy a mutual fund. Okay. And then if you have some high risk capital, you know, go buy your Bitcoin. I own that type of stuff. I do some crazy stuff and liquid pools and all this crazy stuff. I understand. I invest in technology companies. but start your career investing in something that cash flows that's why i like real estate because i like the ability to kick the bricks and mortar and i advise young people to do that too with tax benefits but whatever you do invest with smart money i always you want to align yourself with smart money okay so for example if i was going to invest in an event company or some of the other niches you have or write a poker question all the thousands of talented things you do dan I'm calling you and I'm saying, all right, how am I going to invest in this company?

18:47We're going to invest together, or maybe it's your investment. I'm investing with smart money. I don't have to have the answers to everything. But when it comes to commercial real estate, the reason why people invest with Alliance is because that's what we focus on. That's our expertise. They're not investing with us to invest in a crypto fund. They're investing in commercial real estate and hard assets. So invest with smart money, be conservative, diversify your capital, start slow, do your research, and continue to develop yourself. And you'll see when you get into your 40s, life becomes a lot easier.

19:21So I'm going to break down what I call the 40-40-20 theory. I've been doing this for many, many years, and you can adjust the numbers based on the type of investment that you like, that you feel comfortable with. I want to give you the main idea. So I look at 40 % low risk where i want to make between five and nine percent for the year 40 percent medium risk where i want to make between 10 30 for the year and 20 high risk that's that shot at glory that's cryptocurrency private equity angel investments things like that that if i get it right woohoo 4x 8x 12x something crazy happens and if i get it wrong or it takes a long time the low risk and the medium risk will hopefully cover the high risk in the low risk category this is things like mutual funds this is the s p 500 which is average 11 a year for the last 92 years sometimes it goes up sometimes it goes down over the long term the s p 500 has won right now cds at your bank are offering 5.1 which is insane at bank america chase wells fargo etc so you could just have if you don't even understand how to invest take five grand ten grand fifty grand whatever you got saved up just at least get five percent a year just so you're battling with inflation at your own bank so there's no risk involved by the way if wells fargo bank america or chase something happens to them and they go bankrupt we got way worse problems in our economy if a trillion dollar bank goes bankrupt and then the medium risk side this is cashline businesses specific stocks i like the obvious ones the apple google and netflix walmart household name companies amazon if you got spending a ton of money on amazon or you go to walmart all the time maybe you should buy a little bit of stock if you drive a tesla maybe you should buy some of the best performing stock of all time you know what you said something so fascinating i think is so important for your listeners is that we're dealing with record inflation.

20:57Okay, the government might say 8 % to 9%. It's really in the teens. We look at it on a detailed basis. So you want to get your money working for you. You're already losing money if you're leaving it in the bank. So for example, if you invest in, take an example like commercial real estate, hard assets, and you can average, let's say 15 % of your money, maybe you're breaking even. But at least get your money out there and invest conservatively and try to at least match inflation or get as close as possible to be able to make sure you're not losing. Because the U.S. dollar has been really depressed.

21:28And hopefully that will turn around. But right now, you really have to think about, what am I doing? If my money is left in the bank and I have inflation going on, my dollar is not worth as much. So I better do something with it. So it happens to be today, and this podcast is coming out literally next week, where the Fed finally cut the rate. Was it the first time in four years? Walk us through that. How much did that change? Why is it so important? What was the actual cut? I heard they cut. Half a percent, right? Was it half a percent? That's what I thought. OK, so here's the benefit of the rate cut.

22:00OK, number one is, let's say you're in residential and you're a mortgage broker. Well, your loans are going to be a lot more attractive. Number one, that net effect is people are going to buy more houses around the country, especially in more depressed areas. They're going to be able to afford it. Banks are going to start loosening. Banks, especially in our business, we've seen it because it really is a preview of what's to come. Banks have tightened the last year and a half. And now they'll have more liquidity from the federal government. What they'll allow them to do is get money on the street.

22:30That means there will be more transactions, more acquisitions. There will be more SBA loans, more people starting businesses. So it has a direct impact in the economy of why they're doing it. They're trying to give it a kick because they know inflation. They're battling inflation. They're saying, well, what else can we do? Because the value dollars down goods and services are so expensive in this country. We're not producing any energy. OK. And everything we do, every product, everything around us is dealing with petroleum. And so if we don't produce energy and we're a country that's importing in this country, we're in a situation where everything is too expensive.

23:08that people can't afford to buy homes, send their kids to great private schools if they want to. It really gives people more advantages and opportunities to get involved in business. Also, if you have a floating line of credit, you're going to see savings on that. So there's so many different benefits of that rate cut, and that rate cut produces growth, and that's the benefit of when they do that. Third topic, charity. why do you think it's important for businesses and or just family households to incorporate philanthropy into their life well it's important to me it's and it's important to a lot of my colleagues dan because you work so hard to get to a certain point in your life and it's a way to give back and so not only do i give back through charity i also give my time yeah and part of that was when we decided to launch my personal brand, it wasn't about me.

24:05It was about how am I going to serve and create impact and help people around the world, whether it's through investing in commercial real estate, teaching about businesses, talking about how to overcome hardships and different strategies as you go through your career. What can I give back to people and not expect anything in return? And so charity is very important to me. One of the things we're looking at is I've always had something where I want to, you know, I'm from Chicago and Chicago is very near and dear to my heart. And the South side of Chicago has the most homicides in the United States, a rough area.

24:40And I said, I want to do a show where I could take a young man or woman from the South side of Chicago and I could teach him commercial real estate. What would happen to that family and their lineage, their DNA? All of a sudden he's able to hire his colleagues. He starts building wealth. He creates a business within his community. And then all of a sudden, he has the opportunity to employ people. That, to me, is giving back. That's sharing your knowledge, not being selfish, and the ability to help people grow within your expertise. So I always look at what is my expertise in life, what are the lessons I learned, and how can I share that knowledge with people.

25:18I can give money to 1 ,000 organizations. but when I can give my time to help people to me that's priceless how do we get more wealthy people to understand getting involved in charity and the reason I ask that is sometimes people think it's just a check right like oh okay I'm if I donate this percentage it's a write-off right how do we instill into their hearts and into their minds what do you think we just from social circles I'll give you example for me my middle son Ethan had Tourette's when he was a kid and I didn't really understand what it was and I wanted to learn about more so I got involved in the National Trust Association they're from New York they also have a location in Chicago they have huge events and it allowed me because it was something near and dear to my heart and I think the way to get someone that's produced wealth or has money to get involved in a charity is it's got to be it's got you got to have that connection so for example if there's a lot of people that have cancer or passed away from cancer, it's a horrible disease, or it could be diabetes, or it could be, you know, just Parkinson's or whatever it is out there.