001: Buying Multifamily in Multiple Markets with Brie Schmidt

Welcome to the debut episode of the InvestFourMore podcast with Mark Ferguson. Through the episodes ahead you’re going to get a front-row seat to what it’s like to move into the real estate investing realm from square one from a man who’s done it himself. Hang on, it’s going to be a wild ride as we unpack the successes and failures of what it takes to be successful in real estate investing.

In this first episode of the InvestFourMore podcast, Mark Ferguson chats with Brie Schmidt, a real estate investor who holds multiple multi-family properties in Chicago and Milwaukee and has been running a very busy and successful real estate investing business since 2011. Brie is an investor and a real estate agent who has learned how to leverage her real estate license and experience into purchasing multiple multi-family properties (59 units at this time).

One of Brie’s claims to fame is that she has purchased 21 properties in less than four years, with the bulk of that happening in the past 9 months. She’s learned how to scale her business into a secondary market to ramp up her business exponentially. That’s where she learned how to leverage commercial financing from a large lending institution (U.S. Bank) to purchase multi-family properties with very little hassle. Mark spends a good deal of time at the beginning of the conversation unpacking how Brie went about building that relationship and making it profitable or purchasing more and more properties.

One of the most difficult parts of buying real estate on a large scale is the financing. Brie Schmidt has created a system in her business where she’s able to close multiple properties at the same time and combine them into a portfolio loan with her lender so she is able to deal with her lender’s requirement that the minimum loan be $200,000.00. That means she’s purchasing multiple properties for $35,000 to $60,000 and lumping them into a portfolio, but having individual loans. It’s a great trick you’ll learn about in this episode.

In this episode Brie Schmidt shares another tactic that has made her business move forward in a powerful way by building great relationships with Realtors in her markets. She’s got relationships with realtors that work almost by themselves; the realtors understanding exactly what she’s looking for in a property and calling her with specific scenarios and deals that they know she’s going to be interested in considering. That enables her to spend her time looking at properties that she is pretty clear are going to be a good fit for her instead of wasting her time looking at many things that she’d never want to buy.

This episode is packed with great tips on how to organize and leverage your investments for multi-family properties in multiple markets, so grab

Brie’s new website www.Turnkey-Reviews.com

Contact Brie Schmidt on Twitter at https://twitter.com/ChicagoBrie

Brie’s email: [email protected]

MARK: Hi everyone, it's Mark Ferguson with the Invest for More podcast. I would like to thank you for listening in and hopefully learning a lot about real estate. On these podcasts I like to talk about a lot of different things going on: rental properties, fix and flips, being real estates and today I have a great guest. Brie Schmidt is an investor and a real estate agent, which is my favourite kind of investor. I think it brings a huge advantage to the investing world and you can also make a lot of money as a real estate agent. So I am super excited to talk to Brie, learn how she became so successful so quickly and see what kind of tips she has for us. So Brie, thanks a lot for joining. How are you doing?

BRIE: Thank you for having me, I am doing great, thank you.

MARK: Great. So a little bit about you. You have 48 units now and you started buying in 2011, is that that right?

BRIE: Yes, that's right

MARK: Right. And then you are also a real estate realtor, not just an agent, so you are licensed in Illinois and Wisconsin. Right?

BRIE: Correct. Yes, I own my own offices in both states.

MARK: Very cool. So the first thing I would like to talk about, if you don't mind, is how did you buy so many units, so quickly?

BRIE: Is that the first question you ask everyone?

MARK: No, but I am impressed with 48 units and for less than 4 years, around 4 years. That's fantastic

BRIE: Yeah, less than 4 years. It's been crazy and the bulk of our growth has happened in the past about 9 months. I mean, a year ago, we had 3 buildings and 8 units and now we have 18 buildings, 48 units and the bulk of that was really getting to scale in a secondary Market. So I invest in both Chicago and Milwaukee and the growth in the past 9 months has been solely in Milwaukee and it was really the introduction into commercial financing where I met with the bank, we kind of worked what we were looking for, I really understood how they loaned to me and what they looked for and they told me, you know, as long as you have the down payment we will lend up to $1 million of paper on you, with really not many questions asked and so I said, ‘okay’ and that's really been what we have done. I don't think they expected me to do it as fast as I have done it, but that was really the catapult; they gave me an inch and I took it.

MARK: Is that bank, are they a local bank or is it a national bank?

BRIE: It is a national bank. I think they are in about 24 states. We work with U.S. banks. It's their small business division so it's not necessarily with real estate investors but we had come to them with a strong track record, strong portfolio essentially and a strong ability to prove to them that we could really take anything. We have the systems in place, the people in place and we can take the worst performing property and make it performing in a short period of time. So the thing with commercial lending, which I find very interesting is, it's not just the numbers. They have a category they look at which is character. So we got really, really luck with our banker and he got me from day-1 and totally got what my vision, what I wanted to do, what I wanted to accomplish. He believed in me, he believed in my team and he made a lot of things happen for us and it wasn't just yes or no. He did a lot for us.

MARK: Usually, you know, I have a portfolio lender who is working in Colorado, lending parts of California, parts of Arizona but that's its and they have been great to me, mostly because they loan their own money, they are not selling notes to Fannie or the secondary Market. It sounds like that's kind of what you found too but with a bigger bank, which is pretty rare to see in today's lending Market. That's fantastic. What kind of down payments do they require from you?

BRIE: 20%

MARK: Ok, wow, that's really good

BRIE: I know, on commercial?

MARK: Yeah

BRIE: I will tell you the story because I completely shot myself in the foot. I host RB.PR locally in Chicago and we had a private dinner event with more experienced investors and I was bragging about my great relationship with U.S. Bank. I don't even tell him when I am buying. I just send him the contract and say 'here you go, we are closing in 3 weeks', and it's a done deal and then the very next day I get a phone call from the bank that my guy left. So, I had to start all over with a new relationship, so I just met him for the first time in January and luckily, the previous banker had kind of written a little bio about me and we were able to start another relationship with at least some sort of background on us and it's been great and he has picked up where the other one left off but I was really, really concerned and completely shot myself in the foot for bragging about it the night before.

MARK: Well I am glad the new relationship is working out well, yeah. That can be a little scary. I always wonder what I would do if my bank changed some of their policies towards investors or they have no limit on how many loans I can buy or get as long as I qualify for them. I have got 13 mortgages with them now on rental properties and another 5 on my fix and flips and I am like, I hope they never change their policies towards investors because it would be tough to find another bank that will do all that but that's great that they have been so good for you. Now, since they are commercial loans do they have balloons or what kind of terms do they have on loans?

BRIE: What we do is a little bit unique where we generally buy 2-4 unit properties, which are residential asset classes but then we do commercial loans on them. So we are not buying 20-unit multi's. So what makes it interesting is it has to meet the bank's DSCR requirements and the bank's cap rate. Then it also needs to appraise on the residential side, so that makes it a little more challenging but then we are doing typical 5-year balloons at 5% on a 25-year M. We are just starting to explore, now that our portfolio is big enough, it kind of opened up the doors to mid-Market commercial lending. We are not just, you know, a small investor anymore and we are starting to see 10-year notes. We even had a meeting last week with a lender that would do 30-year note on commercial, so we are starting to explore some more long-term options.

MARK: Very nice. I know there are some other companies like the E2Rs out there who will finance, but their terms are usually, I think it is 10 years at the longest, so its another short-term solution for real estate investors but it is tough to find those longer term 30-year notes for sure.

BRIE: Oh yeah

MARK: Very cool. When you buy these properties, are you finding them on MLS or is it word of mouth, are they off-Market deals, how do you primarily find your properties?

BRIE: It has been a mix. So we started last January, so it's been a little bit over a year, is when we started exploring the Milwaukee Market. So it's technically out of state for us because we live in Chicago. It is about a 1 1/2 to 2 hour drive one way so it’s not like it’s a plane ride away. So we had spent the first couple of months up there every weekend, getting to know the area, getting to know the Market and we had really struggled with finding something that worked that we liked and I remember the day very specifically because we went to go see this property, it's a duplex front and then they have a coach house in the back where a garage would be and the gentleman that was showing us the property, he said he was the property manager. Like, he knew the tenants, he knew their names, he knew what sports their kids played, like, he had a great rapport with his tenants and that's how we manage in Chicago. We host barbecues sometimes for our tenants and we have great relationships with them. So it was the first time that we saw that sort of interaction from the property manager to the tenant in Milwaukee. So, as we were walking out, he mentioned, he said, 'well I am actually the owner of this building', and I was like 'interesting, we definitely want this, we want more like this, do you have any more properties', and so it turns out his mother-in-law owns about 80 properties in the area. She started investing like 50 years ago and bought a house a year into her portfolio and now she is retiring. The first deal we did was the one property that was on the MLS. We ended up keeping 4 but we ended up buying 7 more buildings from his mother-in-law but then within about a week or two of purchasing them we got pitched with an offer to sell them for an immediate profit. So, we actually only kept 5 of those buildings with the first phase that we did and then moving forward, we did our second purchase in December, I think all 5 of those were MLS deals, so what makes it interesting for us is that we do individual loans with the banks but because the loan sizes are so small, they generally ask us to have at least a $200,000 loan amount when we go to them. So I coordinate 5 different sellers with one closing and they analyse it as a portfolio and then they lend to us individually. But, since then the last deal we bought was a lot more off-Market and now that I am up there pretty much every other week looking at properties, I have formed a lot of friendships and everyone that I meet there I ask them if they know anyone that is selling. So, this last deal we just bought in February, one of the properties we bought from a seller that we bought from in December, I was just up last week looking at a few properties from a seller that I bought from in December. So, I keep in touch with them and constantly ask them if anything comes up let me know, because I am willing to buy it.
MARK: It is really amazing that you are able to buy off-Market properties in a place that you are not even living in and don't have a huge background or experience in. It just shows how you are not limited to your own Market or MLS deals, even hours away. That's fantastic.

BRIE: It is even funny that last week I got a text message from a number that I don't recognise and it was like, hey I have this duplex that so and so is selling, this is the address, this is the rent, what would you pay for it? Like, I don't even know who this person is, so I am offering via text message to someone I don't know. As you get into the Market a year ago when you were first looking I didn't have connections up there. I didn't have relationships up there but now that I do, it is a lot easier. There is this one agent who tends to sell a lot of properties in the areas that I invest in and 6 of the 15 buildings that we have bought up there, she was the listing agent on. She now knows what I like and what I look for so if she tells me to go look at something, I will go look at it because I know that she knows what I want and it is a lot easier because she knows that I will close and it is a great relationship and those things only come over time.

MARK: For sure, that great. You know it is funny you said the text message. The first off-Market property I bought someone sent me a text and said, 'you know I got your letter' (I send out direct mail), and 'said how much do you want to pay for my house', that's all he said. I am like, 'well, what's your asking on the house' and he told me, 'like, okay', I am like, I had 7 flips going at the time, I say, ' I am like I am not really interested in buying right now but I might be able to help you list it as a agent or I might know of an investor' and he said, 'okay, how about $100,000', and that was way below Market, and I am like, 'okay, if it is what you say it is, you got a deal'. So basically we conducted the transaction over text message in about 4 texts, so that was interesting how things work like that sometimes. On the properties you are buying, what would you say your average price per unit is? I know you said it is pretty low, how low are we talking about?

BRIE: It is about $30,000 per unit. Generally, like we don't really have a price range because it all depends on the numbers. I mean, I will buy a half-a-million dollar property if the numbers work out. So, I think the lowest, we bought a duplex for $35,000, that was our cheapest and we bought a duplex for $90,000. You know, it just kind of varies; it really just depends on the numbers.

MARK: Right. What you are getting for rents and all the expenses and the condition of the property; everything is going to be different.

BRIE: Correct.

MARK: Very cool. Now, since you are licensed in Wisconsin, are you saving money every time you buy these properties, are you representing yourself as the buyer?

BRIE: I am. I just head up my brokerage up there in October so the December deal of the 5 properties, one was with an agent that I was using, the other 4 were me representing myself but then one of them was off-Market so actually I lied, one of them was off-Market, and there was not offer for compensation on the MLS so that one I didn't get a commission on but it was a great deal, it was a 13 cap so I really didn't care about making a few hundred bucks, I cared about getting the deal done. So if an agent brings me stuff off-Market and I don't make a commission on it, it is really not the end of the world to me. It is more about the numbers working out and getting first stab at the deal before anyone else does.

MARK: You know, that is great. Having a licence saves me a ton of money as well but it is more important to get the deal than to save that money as an agent if there is a great deal out there. Your cap rates make me jealous.

BRIE: There is definitely good caps in the area. I mean, they are not everyday numbers that you see. It is not like you could just pick 10 properties on the MLS and find those kinds of cap rates. I probably turn down 95% of deals that come across to me, the reason being is I invest in Chicago and Milwaukee. Chicago is an appreciation Market. My lowest performing property that I bought has increased over $100,000 in value so for me to move my money away from Chicago, which is the Market that I actually prefer, it needs to be really worth my time and money. So I have a very, very strict investment ROI minimum in Milwaukee.

MARK: What would you say your average rent is on per units in Milwaukee?

BRIE: Our average rent is about 625.

MARK: So, pretty close to the 2% rule as far as the rent versus the unit price. Very nice.

BRIE: Even in Milwaukee I will take a lower cap. I will take a lower cap on a property for two reasons: One, if it is completely newly rehabbed - windows, roofs, sidings, furnaces, so that my maintenance costs, long-term, are a lot lower. I still use the same average though. I still use the same 7% maintenance cost regardless if it is brand new or not, I would rather be conservative. The second reason is if it is in an area that is up and coming that had some appreciation potential, then I will take a lower cap on that too.

MARK: Very cool. So, we talked about your investing in all your units right now. You also have two brokerages: one in Wisconsin, one in Illinois and you have started a new website as well. So tell us about this new website that you started.

BRIE: So, I am one of the co-founders of turnkey-reviews.com and it is turnkey dash reviews.com and this kind of started with an interesting story. So, my partner Jay Hendricks is a good friend of mine and he had message me by around Christmas and said wouldn't it be cool if we had a website where people could review turnkey providers and I’m like yeah that sounds like a really cool idea and he is like I’m wondering if you could build it and I’m like I’m sure I can find someone to build it and it was we had just closed on 13 units in Milwaukee. and we were just getting pass the initial ‘oh shit’ moment of trying to figure out you know you left in the middle of the night, whose paying rent like getting it under control and so I had some down time; so I really didn’t talk about it with anyone else we hired a developer, let him build the site with what we thought would be beneficial and then we officially launched it in February. So it’s been interesting because we build it off what we thought was gonna work. We really didn’t get Market research on it and people that we have talked with has given us some fantastic ideas and opened our eyes to a bunch of different avenues of where the site can go so that’s what we are focusing on right now is implementing all of these suggestions that we got to build the site up and to really help people who are buying out of state start their delivering process.

MARK: No it’s a great site I’ve been there and well basically you let the turn key property, companies sign up for free right now and then anybody can come on their review their experiences let you know how it’s been, how it’s gone good or bad and then it’s all free, people can log on and just at least start to get an idea of what companies are out there and what experience people have had.

BRIE: That’s really the goal of it, you and I and [1:53 inaudible] in your pockets and you know every day we are seeing post about have you looked at this turnkey provider what would you experience with this, and it’s a very scary avenue to explore I think for a lot of people because there is not a lot of transparency and you don’t know, you’re trusting someone half way across the country to sell you something that you might not ever see and run it efficiently and it can be very scary; so we thought this site would be a great avenue for people looking to do this to be able to read real life experiences and for people who have done it to be very honest and candid about you know everyone has got their pluses and minuses. Even my portfolio has its strengthens and its weaknesses, and my property manager has its strength and its weaknesses but to be able to assess that and to see are you ok with those strengths and those weaknesses and it’s really a starting point of due diligence.

MARK: Yeah, no it can be very scary. I have considered doing turnkey myself with some IRA money I have and not only do you want to make sure you buy the right property with the right location that makes money with rent; but you want to make sure the property managers are great, the maintenance is up-to-date; and it’s tough to do without being in the area or having friends there or somebody who can give you an idea of what your actually buying.

BRIE: Exactly

MARK: So it’s a great idea and a great site

BRIE: When we all started with Milwaukee it all made sense. Every building that I have ever bought, except for two, has been technically turnkey; meaning it’s been rehabbed. It’s fully rented and occupied, and there is very little repairs to be done to it; but when we started looking at Milwaukee, I mean I have no problem paying a premium to have a fully operational building because its gonna save me money in the long run for vacancy and maintenance. But when we first went to Milwaukee we, I had googled turnkey Milwaukee; because that’s what I wanted I didn’t, I was working full time my husband was working full time we both travel for work and I just didn’t have the capacity to manage a portfolio out of state even though it’s only a hour, hour and a half, two hours away so we had found this quote on quote turnkey company and they gave me a bunch of numbers. We actually went under contract to buy nine buildings from them the mix of family and single duplexes so I think it was nine buildings, 13 units but they wouldn’t allow us to do inspections until we went under contract, so we went under contract, we negotiate all the prices you know talked about management all that stuff and then we went up there and the definition of turnkey was very, very, far off from my definition of turnkey, and some of these were living conditions were that I don’t think would be considered habitable; but they were Marketing it as turnkey and luckily we were again luckily we were only couple hours away we were able to go see them ourselves; but if we would have believed what they told us and not seen them ourselves we would have been in a much different situation today.

MARK: Yeah stories like that scares a lot of people off.

BRIE: And you know what the reality of this really is, I talked with a ton of turnkey buyers in turnkey provider across the country especially in the last few months, and I think the problem is that they are some very good reputable turnkey companies, but it’s always the few bad apples that gives the reputation that they are all bad apples, and I’ve gone into other states and seen their operations and seen their properties and there is a lot of really good honest ones, but it’s the couple, the small percent of bad ones that just kind of ruin it for everyone and that’s what we are looking into to weed out with the site is, who is good and who is bad.

MARK: Yeah, no I completely agree there are a lot of really good ones out there and then there are a few just trying to make a quick buck and just try ruin it for everybody, but also that brings the point where if even if your buying out of state and don’t see the property, buyers still need to do as much due diligence as they can you know checking on property management companies, checking with local realtors, seeing if what the turn key companies is telling them is really accurate; and I think a lot of buyers just hope that they can turn the money and that everything will work out great without doing any actual work themselves .

BRIE: I tell buyers all the time, cause you know in Chicago, we do have a turnkey Market here in Chicago but our currency provider is that provide properties here and I get questions all the time from out of state buyers who are asking about the company, and I’m like listen you need to find someone, someone who is near whether it is to be present at the inspection. Don’t use their inspector get an inspection recommendation from someone else outside of their purview and pay some, an investor you know in the area, a friend, a family someone. Pay them a hundred bucks to go to the inspection, and be there and see what there what the inspector is seeing first hand. If you can’t make it out the Market, that’s what you need to do and it can cost you a few hundred dollars extra to do the due diligence up front, but long term, it’s going to save you thousands of dollars if you buy a property [7:12 inaudible] that’s gonna have tons of problem.

MARK: Exactly; and that’s great advice and a lot of times too you can even, you know, I do a lot of REO, cloud work as a real estate agent, and do a lot of broker price opinions as well, and anybody can hire an agent to do a BPO for them, a broker pricing, I mean, for fifty bucks, maybe a hundred dollars and they'll give you a value. Sometimes they would tell you what it rents for but that ‘sometimes’ is out of their scope of work. At least you know; hey a lot of times you buying turnkey property to pay the premium; because its rented, because its managed already, but it’s good to know if you’re paying 5% over Market or 25% over Market makes a big difference

BRIE: It does. It does make a big difference. It always go down to the numbers, and this is what I tell people to. So with Milwaukee, that gentle man that I told you sold us that first property, he is now our property manager, so we actually hired him to work for us and he manages our portfolio up there, because he had such a good rapport with his tenants and the conversation that I have with him constantly and with other investors that are looking to build portfolios is the most important thing to me that, even the number to the building don’t really matter but property management matters; because the two biggest cost you’re gonna have are repairs and vacancies, and those are two things that your PM can control, and so if he is like letting the property you know if there is a leak that he didn’t fix and two months later you have to rip out the entire bathroom, that’s something he can control, just like how he can control that he does proper tenant screening and that the tenants are gonna be moving in and not damaging your units, so it’s really important to have someone that you trust.

MARK: True.

BRIE: I think before you find the deal.

MARK: Do you manage your properties yourself in Chicago, or do you have a different company manage those?

BRIE: I do. I have to manage our properties here in Chicago. I have a property manager in Milwaukee, but we had an interesting situation, like I thought, when we met him he was selling one of his investment properties because he wanted to get into real estate full time and he wanted to do a couple of that, and he is a teacher. So we had come to him with the idea of him being our property manager but we weren’t at the point yet where we could cover his salary; so he is currently still teaching till May 15, and then now that we have scaled we can now cover his salary, so that will be a vast thing, he will be working for us full time. So the pass couple of months, you know we acquired thirteen in December and fifteen units couple weeks ago, and we went a little crazy to be just kind of, ‘here you go have fun with it,’ so the deal was that I would still be involved so he does anything that requires like a physical presence. He is there for the repairs, he is there to screen tenants, rent them out, and then I do anything like clerical in the back end, so I still run the book. Once he is working for us full time in May, then we will fully transition everything over to him; but I’m still, even when I’m not buying as far as just managing the properties, I am up there about six months helping him out or like running errands or paying suppliers, or showing units sometimes, it just really depends.

MARK: Okay, so that’s a great introduction to what I wanted to talk to you about next. You have all these properties, you self-manage many of them; you have two brokerages and a new website. How do you do everything that you are doing right now without going crazy? Do you have assistants besides the property manager or is it just you? How are you managing everything?

BRIE: It’s just me, and then obviously, my property manager in Milwaukee. It’s a little crazy, and what makes it so difficult, is everything I’m involved in is so reactionary. You know, for example in Wisconsin I don’t take on clients, I only take on clients here in Chicago. But, you know, in Wisconsin, things could be totally fine, and then next thing you know, there is a problem with a unit and I need to go up there. So I don’t know until the day before that something happened and I’m needed in Milwaukee. With my brokerage business here in Chicago, it’s the same thing. If there is no properties on the Market for me to show, I don’t really have anything to do. Then all of a sudden, ten new properties come on the Market that would be great for my clients, then my whole schedule changes and I’m showing properties. Same thing with myself managing here in Chicago, things are all great, then all of a sudden there is a leak or something needs to be done. I need to be there to supervise the repair; and with the website, we built it to be, pretty self-sustainable, but when there are bugs or a site issue, I need to drop everything I’m doing and go fix that. So it makes scheduling very, very hard and it always happens when I am going to Milwaukee looking for properties. I consider that like one of my leisure days, but you know I drive up there usually around 6 o’ clock in the morning, I start my first appointment at eight and I do appointments every thirty minutes from about 8-4. Then I meet with my property manager and we talk or whatever from about 4-8, then I drive back to Chicago and get home around 10:00 pm. I’m never in, I don’t have an office up there, and I don’t really have a home base. It’s always one of those days that my clients in Chicago want me by my office. So, I’m like pulled over at the side of the road, you know trying to get a Wi-Fi connection and some of them are signed contract. So, that’s my biggest struggle right now, is the balance. I could think that my day is a pretty light day and then all four businesses need my attention and I completely, I’m up till midnight working on stuff. So that’s my biggest challenge for sure. My husband still works, we’re hoping to be at the point probably by June or July, where he will stop working and then that would be a huge help with me, for him helping me out with all the businesses. Except for the brokerage, because he’s not licensed.

MARK: Well I can tell you, I had the same thing going on. Oh, it was probably six years ago. I was doing REO HUD listings and I had over 100 listings at once, because our Market was just [13:39 inaudible]…

BRIE: Oh my God.

MARK: … yeah it was just insane and my dad and I were on the same team and we had one assistant and we’re trying to do fix and flips and EPO’s. I didn’t have any rental properties at that time, but I just about drove myself crazy, working 12 hour days, trying to keep up with everything; and when I hired my first assistant, it was the best thing I had ever done, because, we talked a little about this before, but she had property management experience but not Real Estate Sales or anything that we were doing. It took some time to train her, but it took such a load off me, because anything I didn’t want to do or didn’t like doing, I would give it to her, and it’s usually minor stuff too, doesn’t have to be complicated things. But paperwork, filing invoices, you know the little stuff that takes up so much time, it made my life so much easier. Then after that I had another assistant and I have a team manager now and it just makes life so much easier. But it’s tough taking that first step and hiring someone. Hopefully your husband can help out with that. My wife used to be licensed as well, when we first met. She used to be an agent, now she just takes care of our twin children.

BRIE: That’s a job in itself.

MARK: Yeah, they’re three and a half now. So we didn’t really work well together. Hopefully you guys work well together, but I don’t know I think there is only, so much time you can spend with the same person, at some point.

BRIE: We started running the business together, it wasn’t until I left my job July 1st, 2014, that’s when he stepped out of the business, because I was doing it as my full time job. So, he and I ran it for about three years together and so we’ve worked well together for the most part. There is definitely a few 6 o’ clock in the morning fights shovelling snow, because you know in Chicago we get buried in snow. So, he knows a lot of it and it will be easy for him to step back into it, but that was the responsibility I took on, was “if I’m gonna quit my job then this is my responsibility;” and he can just work his day job. It was a rough three years with both of us working full time and then having a side business. You know every single weekend, nights and weekends we were constantly working and it’s been a huge (10:28 ?) relaxing. Now even though I have all this work to do, been crazy with starting up new businesses, it’s less stressful than when I was, when we were both working and trying to do the business together.

MARK: That brings up something else. What did you do? What was your job before?

BRIE: I worked in corporate sale, so I had, my story is a little bit weird, because I actually got started in real estate when I was seventeen as an assistant for a very successful residential real estate broker, but I couldn’t be licensed until I was twenty-one. So I worked for her, for about four years every Sunday, doing unlicensed activities, and as soon as I turned twenty-one, I got my license and thought that’s what I was gonna do, I was gonna be a real estate agent. I absolutely hated it, I hated it. I hated dealing with the residential side of things, because my brain doesn’t work that way. My brain is very, very numbers oriented. So, if I would show this property to someone and be like this is a great property, because…

..the investment potential and their response to me was it doesn't feel like home. Like, I would just stare blankly at them because I didn't understand where they were coming from, plus I was 21 years old and it was very, very hard to establish rapport and gain their trust, being so young in that industry. So, I left real estate before I even turned 22; I only did it for maybe 9 months as a licensed agent and then I went right into corporate sales and did that for about 9 years. Again, like, my husband and I, my husband is a geologist, so I travel pretty much every other week for work and sometimes, you know, I worked 8 to 5, then a day I just flew into a city, had a meeting and flew out but sometimes I was gone for a week and it made it very difficult as I had to then rely on him and we had to make sure that we both weren't travelling at the same time because if a tenant called, someone needed to be there and so we had spent about 3 years doing it that way but it was very, very difficult. So if we got through that, I think we can kind of get through.

MARK: Right. Well I know exactly what you mean with residential sales because I started as an agent after college. I had a finance degree but I could not find a finance job so I worked with my dad and I hated showing houses to buyers because it doesn't make sense. You find the perfect house, exactly what they say they are looking for, it shows great and they are just like, no, we don't like this house, and it's like what happen to it and it is very emotional, it is very different than investing and it is tougher. I am very numbers-oriented too, it is tough for us to get past that sometime and that's why when I started listing REO and HUD houses for banks it’s a number game to them and that suits me so much better. Price it within this range, good; there is no emotions involved, so I know exactly what you mean there. So you are in the corporate world for 9 years, when did you first think about investing in real estate or know that you want to be an investor.

BRIE: It was kind of accidental. I started as an agent at 17, I got licensed at 21, by 22 I had started working in corporate sales but I kept my licence active, so every two years I did my CE and kept my licence active, in case I ever needed something to fall back on, because the sales world is very, very cutthroat. I mean, my previous company when I start there the first Monday of the month, our meeting was ‘congratulations, you have a job for 30 days’. If you miss quota you were gone. It was that cut and dry. So there was fairly little job security so I maintained my licence in case I ever needed it, if I ever lost my job I had something to fall back on. And then it was in 2011, I was 28 when we bought our first investment property and we did not buy it intending to be landlords. We bought a triplex here in Chicago and we bought it because triplex or multi-unit buildings in Chicago are very, very prevalent as far as our housing stock is concerned and we have about less than 20% of houses are single family. So it is about $100,000 more to own a single family house than it is to own a 3-4 unit house, even if they are the same size next door to each other. So we don't have kids, we were kind of planning out our lives and we didn't need a single family space but we knew that eventually as we started a family and grew, we would want one. So, we bought a triplex thinking we would rent out the other units for a couple years and then when we started a family we would convert it to a single family house, and that was why we bought it and how we got started out with real estate investing. It turns out being a landlord was kind of easy, we really haven't had any horror stories, especially with Chicago. We had fantastic tenants, they moved out over two years ago, we still talk to them and we still see them at least once a year. We have our little, like old-house barbecue and it was a lot easier than we thought it was. But a few months after we had closed on the first property, my father was diagnosed with a very aggressive form of cancer and he passed away about 9 months later but the thing for us was he literally passed away the day before he retired. It was just like the day before and that really stuck with me because for the past couple of years he had talked about oh when I retire we are going to do this and oh, when I retire I am going to do that and he never got to do it and that just, something in my head just switched and I am, like, I can't work for a corporation for the rest of my life and we might not ever have the time to go do all these things that we talked about, which is mainly travel, and that was really what kind of changed things for us. You know what, we are going to figure it out and we are going to work for ourselves now, and that was it.

MARK: That's awesome. It is kind of the same way I started making decent money doing REOs and it's like I can't just invest in the stock market and hope I have enough money in 30 years to retire. That just doesn't make sense to me and then I found real estate and the same thing. There just has to be a better way to just work. The prime of your life is spent working instead of enjoying it; that doesn't make much sense. But I saw your plans for travelling this year and they are pretty impressive - going to Europe - and I had to ask, we just got back from Turks & Caicos, the favourite place I have ever been - it was just amazing there, but what's the favourite place you have ever visited?

BRIE: They are favourite for different reasons. I love Thailand, that's where my stepmom is from, my father's wife, and we went there about 3 years ago. We are going back for a month this year, which I am really excited about. Just because, the people and the culture is just so amazing and, like, a lot of them, especially like in Northern Thailand, if you work in the rice paddy field you get paid the equivalent to $8 a day U.S. money and that is a 10-hour day but here we will be like, that's slave labour, but there that is pretty giant and they are happy with it and, like, they are just the happiest people, like there could be gridlock traffic and there is no honking horn because everyone is just like, I'll get there when I get there. So that was such a cool experience being around their culture and adopting that sort of mentality. But as far as city-wise, I love Barcelona; absolutely love Barcelona and want to go back. My husband loves Rome, that's his favourite, besides Thailand, so I think we are going to try to go back this year to do that.

MARK: That's rough. I went to Rome after college; that was just an amazing city. There is just so much to do there.

BRIE: That's my close third.

MARK: Yeah. The history is just amazing. Well, that's great. Well this has been very enlightening. I have one last question to ask you and I will let you go here. What was the biggest mistake you ever made and are you glad it happened.

BRIE: I think to me the biggest mistake was missing out on a property that I really, really wanted. Let's go back a little bit, we bought out first property in 2011. We didn't buy our second property for almost a year and a half so we had started very slowly and then it really didn't take us another year and a half before we actually started getting really, really serious. We already had, kind of, the foundation in place and the experience in place to scale but there was one property, I still think about it today, and it came up on the market about a block from another property I owned and we had the financing ready to go because my only contacts were a traditional financing, but the property was sight unseen until closing. So, I couldn't do an appraisal, therefore, I couldn't get normal paying financing and I found myself in a situation where I wanted it so badly because I knew it was such a deal and I was back pedalling trying to make contacts with hard money lenders or a private money lender that could help me out. Granted, I only needed money for about 30 days and as soon as it closed I could have gone in and got an appraisal but I needed something in between and I did not have those relationships established and it was very, very hard for me to get them established very quickly and we ended getting money but it was too late, they never accepted our offer, evidently. So I still think about that house, I still check for that house like every few months, I have got a word put up on it, I swear. It's been over a year and that house still haunts me because it was such a good deal and I could have done so much with it. My lesson is, as a buy-and-hold investor, things are pretty boring, you know, just to go to a bank and get a loan and buy a property and keep it long term. So now, I have made an effort to establish relationships with hard money lenders or private money lenders or transactional funders, even though, like in my immediate need, I don't need that kind of money, I still have to have that built up in case I ever do.

MARK: That makes sense, and I want to ask that question just because I think so many people are scared to get into investing or really to make major decisions in their lives because they don't want to make a mistake, but even if you make a mistake, usually that is the best educators. It's going to teach you so much and looking back on it, well, if I hadn’t done that or tried it I would be in a much worse situation now and it is just so many things in life that people don't do because they worry about mistakes but oftentimes with investing all you can do is make mistakes. I don't worry about mistakes, often times the best thing you can do is make mistakes.

BRIE: Yes, that was my biggest costly mistake. I would say that not flipping that house cost me about $200,000.

MARK: Oh wow.

BRIE: Yeah; it was big. I didn’t even need to see that house and like, even when I was reaching out to these private money lenders, or hard money lenders, I’m like listen, I am not going to see the house until I close, so neither are you. You can't do any payroll either, but it was my knowledge of the area, my knowledge of the building type and my passion, that I was like, ‘there was no way that deal won't work out’, that got them to believe in me. I was like, ‘what are you talking about?” You have to have an appraisal, I'm like you can't, not in this one. There is obviously going to be mistakes, with tenant screening, pick bad tenant. That is one thing I am going through right now. We had a tenant leave six months and it is now the 25th of the month and we don’t have a tenant lined up for April 1st, and the tenants that have applied are below my minimum requirement. So a mistake would be wanting to fill that vacancy immediately with someone that is a risky tenant. So I have had to talk myself out of that at least probably five times in the past week. Just let it sit for another month if we need to, but don’t put a bad tenant in there. It is not worth it, and there are constant meetings that I have to keep reminding myself in going back to, to not make the same mistake twice.
MARK: Yes. One month's rent is much cheaper than a bad tenant who might destroy the property. It is much better to put a good tenant in there than to sacrifice your standards.
BRIE: It is hard sometimes to remember that, and to not get excited, because we have never had a single month vacancy in any of our Chicago property. This will be our first; and it's really bothering me that we are going to have a vacancy, but again, it is not worth it long term.
MARK: That is an amazing feat that you have never had a month's vacancy. That's really impressive. I would be celebrating the fact that you have gone this far with that one.
BRIE: I know.
MARK: Instead of worrying about having one because that is awesome with the number of properties you have to not have a vacant month. That's fantastic.
BRIE: That's in Chicago. That's the 8 units that I manage. We have definitely had vacancies in Milwaukee, and we are actually doing our first eviction, ever, in Milwaukee. We have court on Thursday for our first eviction.

MARK: Wow; that will be fun.
BRIE: I know, I know. I am actually looking forward to it. I am not required to be there. We have a lawyer that handles it; but I actually might drive up just so I can go sit in court. He has never done an eviction before, and I am interested to see what questions are asked; what the process is because the tenant hasn't paid rent since January, so we are short two month's rent right; but losing two months' rent is worth it to me for this learning experience on how to handle an eviction and what could we have done differently to have this process done faster or what can and can't we do, 'cause that was one of the things we didn't know until we originally gave her the five-day notice. We included late rent on the notice and they won't accept that. You can only put the actual rent due. So we had to redo the entire process a couple weeks later, not including the late rent, and then we could file off the eviction. But those are things that like, I learning and it is only one of forty units up there so it is not going to kill me, but I am excited to learn the process so I will know what to do moving forward.

MARK: That is just a great attitude. I am lucky too. I have never had to do an eviction either; but we have had tenants get behind late and missed payments, but we have always managed to work out 'hey can you at least just move out' or we come to an agreement where we don't have to go through the eviction process, but they end up leaving, and we’ve lost money on it; but I think it is usually better to end on as good a term as you can, if it is possible, so the eviction can bring out bad feelings and make the situation much worse if that is the only option.

BRIE: Of course, and when it comes to dealing with tenants, there is always going to be late payment; there is always going to be some...they need you to work upon, and that is probably fine. We work with all our tenants, but we don't work with people that don't tell us what's going on and then they don't pay rent. And like this specific tenant did not tell us until she was 28 days late that she ran into a problem and need us to work with her, and we are like, at this point you are already now going to be two months late like we are starting the eviction process. If you had come to us in the beginning of the month, of course, we would have worked with you. We always do. So to the people that are renters, if you have a problem, just be upfront about it. Most landlords aren't, they are not unreasonable people; we have hearts and we understand that people have rough patches, but you have to talk to us about it. You can't pay rent and expect us to bend over backwards for you.

MARK: Right; exactly. Most landlords are probably too nice to what they should be. Because it is hard to confront people, to say you have to pay rent, you have to pay late fees or we are going to kick you out. It is not an easy thing to do, but the sooner they contact us, the sooner we know there is a problem. Of course, we are going to work with them, than if they just all of a sudden drop off the face of the earth and don't tell us what is going on.

BRIE: Exactly.

MARK: I want to thank you a ton for doing the podcast. I've learnt a lot myself, and again it's Brie Schmidt, and your last name is S-C-H-M-I-D-T and then the website you started is turnkeyreviews.com, and that's turnkey-reviews.com.; and if people want to get a hold of you is Bigger Profits, the best place to find you? Or how should they? Should they send you an email? How would you like people to talk to you, if they want to get a hold of you?

BRIE: Yes; generally I am at Bigger Profits almost every single day and if they ever start tracking like the amount of hours we are logged in MFSA, I think my husband would kill me; or be embarrassed for me. I am on Bigger Profits pretty much every day. You can also find me on Twitter. My handle is ChigacoBrie (https://twitter.com/ChicagoBrie) and my email is also [email protected]

MARK: Very cool. Well thank you so much for joining us.

BRIE: Of course, thank you for having me

MARK: Yes. Good luck in your investing and I hope that you get some more help soon. Believe me, it will be well worth it.

BRIE: Yes.

MARK: Thank you very much. Have a great time. Take care.

BRIE: Bye.

[ Inside Real Estate Investing ]
[ Inside Real Estate Investing ]