BiggerPockets Real Estate Podcast - 132: How Brie Schmidt Grew Her Real Estate Portfolio by 50 Units in 1 Year

Episode Date: July 23, 2015

Today on the BiggerPockets Podcast, we are excited to bring back Brie Schmidt, a real estate investor from the Chicago market who has absolutely DOMINATED her goals over the past twelve months. Last time we talked with Brie, she had just quit her job to pursue real estate full-time. Today you’ll learn about the impact that decision made on her life and how she’s been able to reach her financial goal in just twelve months, buying more than fifty new rental property units in that time! Be prepared to be blown away and inspired to do the same! In This Episode We Cover: Who Brie is and how she quit her job and went full time since the last show The 3 catalysts that drove her to become a full time investor How to incentivize in-house property management Tips for making tenants happy The story behind 50 units in one year What kind of tenants she is looking for How Brie handled her first eviction What kind of properties she is investing in Her average cost per door The details of buying multiple units at a time and concerns you face with it The mindset behind buying 50 units in a year And SO much more! Links from the Show BiggerPockets Keyword Alerts Quitting Your Job, Buy & Hold Investing, and Succeeding With High-End Rentals with Brie Schmidt BiggerPockets Webinar Investing in Foreclosures, Quitting Your Job, and Getting More Than 10 Loans with Anca Rader How I Found, Analyzed, and Bought an Ugly Purple Rental Property BiggerPockets Marketplace BiggerPockets Forums PayNearMe BiggerPockets Podcast Becoming a Millionaire Real Estate Investor Using The One Thing with Jay Papasan Twitter Books Mentioned in this Show The Millionaire Real Estate Investor by Gary Keller The ONE Thing by Gary Keller The 10X Rule by Grant Cardone Tweetable Topics: “You bring up the level of the property to attract the kind of tenant that you want.” (Tweet This!) “Property management could make or break your business.” (Tweet This!) Connect with Brie Brie’s BiggerPockets Profile Brie’s Company Website Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 132. You know, people ask me all the time, like, how did you grow so fast? I'm like, well, we actually went really slow. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. What's going on, everybody?

This is Josh Dorkin. Host to the Bigger Pockets podcast here with my co-host, Mr. Brandon Turner. What's up, Brandon? What up, Josh? How are you doing? How's your July? July is off to a unbelievable start. Unbelievable start.

We just had an excellent July 4th. Actually, this weekend was kind of tough. So we were at awake. We, you know, we had some family in town. that was sick as a dog, so I really didn't do anything over the holiday weekend. How about yourself? I worked on a rental house, and that was fun. I haven't done that in a long, long time, but I did tile work at a rental house because my contractor pulled out at the last second, and the house is getting rented this Thursday, so I went over and did some work.

It was a good exercise. That's how I look at it. Oh, that's awesome, man. That's awesome. Funny that most people when they're listening to the show, it's going to be like end of July or even August, but whatever, you know. We're recording this right after the 4th of July. And we do what we want because this is our show. That was me getting angry. Do you like that?

Yeah, yeah. That was great. Can we move on here? Moving on. All right, today, let's go to our quick tip. Quick tip. All right, guys, today's quick tip. So we recently talked about subscribing to forums.

I want to talk about, you know, we've talked about this a number of times, but I really do think it's one of the most important tools on bigger pockets. and that is our keyword alerts. If you are not using our keyword alerts, you are drastically missing out an opportunity. So keyword alerts really quick. Somebody post about something in a forum that you're interested in hearing about.

You will hear about it. You can set emails, or if you're a pro, you can actually get text alerts. So say you're a company that works on turnkey companies. You can set up a keyword alert when somebody says, hey, I got a question about turnkey, and you can jump in, be the expert, get the text alert, respond quickly, and be the first person to answer, and then other people

are going to see you, and then they're going to be like, wow, this guy knows what he's talking about. And look, he's got a really cool signature that's got his logo, and maybe I'll explore that logo, and look it into his company a little bit. Keyword alerts are great for that. They're great if you're like looking for meetups in your area or events or just general networking. Hey, I'm in Washington and Seattle, so I'm going to set up a keyword alert for Seattle. So anytime people talk about it, you can network and meet them. They're really, really powerful.

I definitely encourage you if you have not already to set one up. Biggerpockets.com slash alerts. Biggerpockets.com slash alerts. Please, if you have not yet set up a keyword alert, you're seriously missing out and should set them up today. So that is today's not so quick. I think a wolf just walked by my window. That might have.

I was going to go somewhere and that would have been bad. No, I looked out my window. gigantic, like, looking wolf dog. I mean, I'm assuming it's somebody's dog, but I've never seen it before, and it looked just like a wolf, and it just walked right by my window. Outstanding. Yeah, there may have been a wolf. In Pondonk. That is what happens when you live in Pondonk. Charlie? Charlie, get inside. Charlie! No, Charlie is on the floor sleeping. Charlie is like a little girly-looking rat dog. He is a beautiful-looking Yorkshire Terrier,

handsome devil. Yorkshire. Yorkshire Terrier. Oh, he's so fancy. He is a fancy dog. And he is a much. my fancy dog. He had a rough weekend with the fireworks. He's one of those dogs that does not. Yeah. I get it all. No, yeah, it's rough. That's like the worst holiday for dogs. Yeah, absolute panic attack. Yeah, yeah. He was shaking. He slept under the covers like in my arms all night, like shaking. He was terrified. Yeah, ours stands on my face and then does things in bed that I'm not happy about. You wake up a different guy. All right. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late-night fridge raids.

Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taking care of. of and your place is in good hands. You travel, your house works.

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If you want to do the same, visit BiggerPockets.com slash retirement to learn more. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes, 10% below market value in the best markets across the country, without making real estate your second job? That's exactly what rent to retirement does.

They're a full-service, turnkey investment company, handling everything for you. In some cases, investors get 50 to 75% of our down payment back at closing, plus interest rates as low as 3.75%. They've partnered with bigger pockets for over a decade, helping thousands invest smarter. If you want to do the same, visit biggerpockets.com slash retirement to learn more. Cool.

Moving on. Well, let's get to this thing. Today's guest is Bree Schmidt. And Bree, was our guest in a previous podcast. Was it 78. Show 78. So Bree was a guest in show 78. And she has come a long way since then.

In fact, back when we spoke to her, we were very excited about how she had just quit her job. Well, since then, things have really, really stepped up. and she has acquired dozens and dozens and dozens of units in the past year. It's phenomenal. It's something to really learn from. So we were excited to bring her back. And with that, why don't we bring her on? All right, Bree, look at that.

It's great to have you back. Yeah, thank you for having me back. Cool, cool. What have you been up to? Well, let's go back. People don't know who you are maybe because, you know, your last show had 66,000 listens. I checked that out this morning. 66,000.

So for the show number, was that, Brandon, by the way? Number 78, 78, show, biggerpockus.com, slash show 7, 8. If people want to watch or listen to that,

they can go there. And yeah, so why don't we talk about what you, I mean, a little bit about who you are before we get into what you've been doing the last year,

because the last show is, yeah, definitely one of more popular ones, and people seem to really like that. So kind of, give us a quick summary who you are, where you come from,

what you do, and we'll go on from there. Of course. So when we recorded the podcast last year, I had like, literally three days had just quit my job to do real estate full-time. So when the podcast aired, it aired the day after we closed on our first set of properties in Milwaukee.

So before the podcast was set up, I had owned three buildings in Chicago, and then we ventured out and expanded our business into the Milwaukee market. So when we recorded the podcast, we were just kind of feeling out what was going on there. And then, you know, we've grown that portfolio pretty nicely this year. Can you really quickly in like two minutes or less tell us kind of the prior to that, you know, how'd you quit your job? How'd you get your portfolio started? You know, give us kind of two minutes of how'd you get to that point? Yeah. And it's the first phase of our growth is completely different than the second phase of our growth. Because we went pretty slow. We bought a property. FHA financing. We house hacked a triplex. Year and a half later bought another triplex. Then we bought our house, which was a single family. We rehabbed it and then cashed out the equity from that to grow the portfolio. So we only bought three properties in three years. And then we've bought 18 properties in the past year. So it's, yeah, it's a very drastic difference. You know, people ask me all the time, like, how did you grow so fast?

I'm like, well, we actually went really slow and built a foundation, learned how to landlord, how we want a business run. And then it wasn't until we were comfortable with our abilities that we actually moved forward very quickly. So I want to talk about that for a minute. The idea of you started out, you got a couple properties. A lot of our listeners are in those shoes. You know, I was just looking at the list today of, I ask a survey question when I do the webinar every week,

and I ask people, how many rental properties or properties do you currently have? And I was looking at that list today. And a ton, I mean, there's like 7,000 responses on this total list now. And a ton of them, I would say the majority of them have like two or one or two rental properties have already, like besides their own house. So there are a lot of people are in your shoes that you were a year ago where they're just getting like, you know, they've got a little traction, but they're struggling with that next step, that quitting the job, the going full time, the retire.

I mean, how do you scale? How did that happen? I guess anything you can shed on that? It kind of happened organically. It was a, there was a couple of different things that went into it. When we were looking to originally do Milwaukee, that was, we started going up there, I think January of 2014. We didn't close until July. And so we were up there every other weekend, you know, working full-time jobs. And it got to the point where I was missing out on deals

because I was working and couldn't get up there often enough to buy them. So that was the catalyst for me leaving was now real estate. My job is getting the way of my real estate is what it came down to. Secondly, we found a in-house property manager that was looking to grow with us. So that has been a huge part of doing what we did. And the third part was we went into commercial financing. And we had a great relationship with the bank. We still have a great relationship with the bank. And they pretty much told me, you know, with your financials,

as long as you have the down payment, we can do up to a million dollars of paper for you. And so we're like, okay, we'll take it. Total or per property? Total. Okay. Without really much questions asked. Sure. We just talked about that on our last podcast, too.

Anka, yeah. Anka was talking about how the commercial lending space has, has really become pretty loose these days. Yeah, we, so our bank is, they're, they're very black and white about a lot of things. But outside, there's like, you know, besides the DSCR, what the cap rate is, and then where the, like, how we fund it as far as down payment,

as long as those three things are in check, they're pretty much good with what we do. We've got a, they're really, confident in us. They love my property manager. When we go for closings, they tell us all the time that he's one of the best property managers. And so they believe in us scaling this business. And just our last closing, they told us that we can go over a million. But I pretty much just went like this and close my ears because we can't. We got to take a break for a little bit. Got it. Got it. Got it. All right. So, you know, you just shared a bunch of stuff and I wrote down

10 questions based on what you just said. So I'm going to start spitting them out. Yeah. You talked about an in-house property manager. You've got 18 properties today plus the triplex, the other triplex, and that single family, if I'm doing my math right. So 21 properties. At what point can you afford to bring an in-house property manager in? When was it okay to do that? And what are they getting? Because typically an outsource property manager is 8 to 12 percent.

What do you pay, if you're willing to share, an in-house person? So we did things a little bit differently. And it actually came from, part of it was luck. And a lot of it actually was because of the podcasts. You know, when you listen to the podcast, the number one complaint is property management. And it could make or break your business. It can turn a 10 cap into a 15 cap or a 10 cap into a 5 cap. So the interesting story is the first triplex we went to go by in Milwaukee,

the owner showed us the property. His name's Carlos. And he had a great report with his tenants. We loved the property. We wanted to offer on it. We asked him if he had more because he ran a very good business. So we started talking, turns out his mother-in-law had a bunch of properties. The first set of properties he bought were theirs.

But he wanted to get into real estate full time. He is a bilingual special ed teacher, but has a passion for real estate, but couldn't afford to leave his job and pay for his income. full-time. So we kind of worked out a plan where he just left his job last month to work for us full-time. So the past year, he's been teaching and then doing us nights and weekends until we could build the portfolio up quickly enough so that we could afford his full-time salary. So we pay him 9% gross per month. And then we did something also a little bit differently where we don't pay lease-ups. We do an incentive to keep tenants in the units. So we took what we would probably spend on lease-ups and divided that out by how many units we have because he runs, we've got 51 units up

there, 48 are in service. So he runs those 48 units. So he's bonus quarterly if a tenant doesn't leave. He's also bonused if, like, if a tenant moved out on the 30th and a new tenant's moving in the first and we don't lose vacancy, he's bonus for that too. That's smart. That's smart. Seems pretty smart. Yeah, sure. Because there's always been that like, I mean, that weird. thing with property managers is that they're incentivized to make you less money. I mean, like, it's the weirdest relationship in the world. Like, that you, the more turnover you have and the more repairs you have, the more everything you have, the more problems, the more money they make. And it's always been weird. So I think that's kind of cool to be able to set up your

own in-house kind of property management, incentivizing them to stay. And we got really, really lucky where his wife owns property, his brother-in-law owns property, their mother owns property, their best friend owns 80 units in the area, and we all pretty much invest in one zip code. So the family's been investing for 50 years. All of their workers work for us too. So we are also, between the four investors, are able to afford a full-time staff.

So that makes it a lot easier too. Sure. That's great. Yeah, that's great. What incentives are you guys offering to tenants? You talked about offering incentives to keep tenants around. What do those include? Well, we offer incentives to the property manager to keep tenants happy.

Okay. So how do they do that? I mean, you know, what would a property manager do above and beyond to make a tenant happy? So an example would be, you know, we just had tenants that we just raised rent on for a building that we bought in December. And they were below market rents. And the tenant said, fine, we'll pay more rent. But we want this, this and this fixed. Half of it was reasonable. Half of it would have been above and beyond. but we still want it and did it. We want to keep that tenant happy. We both had the same philosophy of, you know, it might cost us a little bit more to do the repair

or to put a new floor in even though the carpet's probably fine or to bring in new countertops, even though the countertops are probably okay. If the tenant's paying and the tenant will stay longer, we're willing to take on that expense to make them happy. Makes sense. Makes sense. So 51 total units is what it sounds like you're at amongst the, what, 21 properties?

59 total, 51 in Milwaukee. 59 total. But we only have 48 in service. Got it. And how, so how many, the last time we talked to a year ago, do you remember how many units you had then total? It was. When we recorded the podcast, we had eight. So that's crazy.

I mean, like, that's 50 units over 50 units in one year. I mean, how do you, I mean, like, there's a title for the show, right? Like, how to grow 50 units in one year? I mean, how do you do that? I mean, first of all, like, how are you still saying? Like, you know, like, that drives most people crazy, right? Like, that's a lot of work to acquire that much in one year. It's a ton of work.

And it's been really stressful, again, because my property manager is a teacher. Yeah. So he's busy Mondays through Fridays until about 4 o'clock in the afternoon and then does this after work. And of those 51 units, 40 of them we've acquired in the past six months. So it's been actually 40 of them we required in about a four-month time period. Our bank account is insane. Um, I just money, well, yeah, what does that mean? In and out.

Sure. So we, we try to keep tenants and we send them always a letter that we're not going to raise rent. We're not going to change their lease. We want to keep them. But every time we buy, you know, at least one tenant moves out in the middle of the night. Um, and then you've got some turnover for the first couple months. And a lot of the units, if they're not up to our standards, then we go in and rehab it. Even though we might not get a huge increase in rent, it's more that we look to attract a

specific type of tenant and we don't want to rent out slummy units and get tenants that would like slummy units. So it's been, it's been a lot. I've been up in Milwaukee. I said I depends on the month. I'm usually up there probably one day a week. I probably spend two nights a month up there trying to help as much as I can and get things done. So we tag team property management. I should also like I do all the accounting. I do all the advertising for the units. I do anything that involves sitting down in front of a desk. Because to me, his job is more important, renting out the units,

taking care of the repairs, being in the field. So we kind of tag team things for now until he just went full-time three weeks ago for us. And what kind of tenants are you looking for? We want tenants that, I mean, I'm going to take care of the units. You know, so if you rent out a unit

with, you know, holes in the carpeting or dirty floors or, you know, messed up countertops, then you are only going to attract a kind of tenant who is willing to live in those conditions. So if we fix up the units, then and we can charge even a little bit more rent. It's not even about the money that if they live in a nice place, then they want to usually keep it nice. Yeah. You know, I've shared the story, I think, here on the podcast before, but I'll rehash it here. One of the biggest mistakes I've made in the last couple of years is I bought this

property back a year and a half ago, two years ago now. And it was a gigantic, huge, purple, house. I mean, it was just nasty looking. And, you know, it's the one that Ben Labovich wrote an article about Waldo, right? Because it's like, it stands out kind of weird. Anyway, so it was this gigantic house, but it was beautiful inside, but the outside was just, just horrific, right? So look, another friend of mine calls it the Munster House just because it looks like an old scary. Anyway, so we looked at that we bought it. I think it was December, so of like a year and a half ago, December. And in Washington State where I live, you can't paint a house in the winter. It rains every single solitary day.

So we said, well, let's just get it rented out as is. And we'll deal with the painting in the summer. I had two evictions. Out of the three units in that triplex, two of them ended up with evictions costing me. I probably spent 10 grand in eviction costs and in damages and everything else because the tenants that was attracted

to a gigantic, nasty-looking purple building is the same kind of tenant that, I mean, I was giving them a good deal and everything. But like you said, it's not about the money. It's about the kind of tenant you attract. I would have been better off having that unit sit vacant or tarping the entire house and painting it. You know, spend an extra five grand on plastic and tarped it and painted it. But yeah, mistake.

I mean, like, yeah, you bring up the level of your property to attract the kind of level tenant you want. And if you don't do that, you're going to end up with evictions like I did. Yeah, we actually just had our first eviction. How did that go? It went, it went okay. I mean, she didn't pay rent and it was pretty cut and dry. It just took us a while. That was the other, you know, since we've bought so many properties so quickly and we're stressed out to the max, we've definitely dropped a lot of balls along the way versus if we would have done things more in a steady pace.

So it took us a lot longer to get her out because we, you know, we took too long to file, you know, and we weren't really on the ball on a lot of things. But yeah, it was pretty easy. I think we lost six weeks of rent. So it wasn't anything super detrimental to us. How was the damage? Do they damage a lot? No, nothing. Okay, that's good.

That's good. And it sounds like you did it yourself. You didn't hire an attorney to take care of it, right? He did. We did hire an attorney. They were just really slow. Okay. And I think that's, I mean, that's an important thing.

I mean, the attorney, even when you hire an attorney, you know, I was hire an attorney, but, you know, I've had my attorney get somebody out one time in three weeks. It was like two and a half weeks they were out. And another time it was two months. Like the big Munster house. It was two months long. And yeah, I think, I don't know. I think a lot of it just have to do with how much, how quick your attorney wants to be.

Exactly. And that was our first time. And you don't, we're not required to do an attorney. You can go file yourself. But again, I live two hours away. My property manager works at the time until 3.30 in the afternoon. So you have to rush over to court and then take a day off of school to be there. Or I would need to drive four hours round trip to be there.

So it's easier just to hire. an attorney. So I just used Google and you looked up one real quick. And we could have done things a lot easier if we had known or asked for referrals because they really were just slow. There's a new website that just came out online. It's called BiggerPockets.com. You actually meet people in the market and ask them who their attorney is asked. Wow. I wish I learned about that. I know. I know. I know. I asked Dawn, but I'd already hired them by the time I asked Don. Okay. Okay. I can't get me too hard of a time. But no, I think there is like, that is one of the tremendous values of using BP and that, you know, I get a lot of value and a lot of people do is of just connections with

people. Like, you build relationships with people in your market. Like you have. Really? Yeah, it's amazing, right? I know you. I know you. I know you. You're preaching to the choir on this one. I totally know. But yeah, it's valuable stuff just to reach out and build relationships. Like, I know you have. Yeah. It's crazy the amount of helpfulness and people that are on BP. Like we just changed over all of our insurance to a referral from BP. We don't need a lot up there because we have a set a lot in-house. But here in Chicago, I help run one of the meetups. And we just get together.

And the amount of connections that people make there, it's just, it's amazing. Yeah. And I gave you a hard time because I do the same thing. I mean, like I'm on BP, what, like 18 hours a day? Yeah, every day. And still, like the other day, like I spent weeks trying to find a foundation contractor. And then I was like, stupid. Like, go post it in the forum.

So, like, yeah, I mean, yeah, use that. And then, like, whatever. Okay, so I yell at myself as well. You have an hard time talking their brandy. You know, I sometimes struggle with this. All right. So those of you who can't see, he smacked himself across the face. I do that sometimes.

All right. I want to go back to the idea of adding those 50 units in a year. Yeah. Are those single family houses, multifamily, what is the mix of that? It's majority, they're all. all two to six units. Okay. So we've got a six unit, a five unit, a couple of fours, and then everything on two,

but we've never done a single family. Okay. It has a lot to with the housing stock. You know, we invest both in Chicago and Milwaukee, our very dense urban environments. So there's not, you know, it's house, house, house, house. It's just a very, and the way that the area is built up, over 60% of the housing is duplexes are above. So it's so prevalent in that area. It just makes sense.

to do it. And what's your average cost per door? It's a good question. Hold on. She's going to pull out a calculator. Give her a take. We're not talking about a $100,000 a door. We're not talking $50,000. I'm guessing. About $27,000 a door.

Okay. Okay. So definitely a lower price market. Yes. And you're looking at, like in terms of tenant classes at like, you know, C, D, A, B. I would say it's a B-B-minus. The area isn't very, there's not a lot of crime, but it's definitely working class, but it's not violent.

Like I don't feel unsafe walking around at night. That's one of actually our rules. Until I got to learn the market myself, I relied a ton of my property manager to help me out. And his wife does HVAC stuff. So she will do service calls in our unit sometimes. And she is this little tiny five foot nothing, you know, 80 pound Barbie. And if she won't, if he won't let her go there by herself at night, then we won't buy there. So that's always kind of been our criteria, huh?

Yep. Cool. That's great. And how are you finding your properties of these MLS or these, you know, direct mail? What are you doing? A couple of different ways. We, you know, the first property we bought was MLS. the other four were off market came through the seller.

The next set we bought were, because we've only had four closing, so we tend to buy in five house chunks. The second set was pretty much all MLS. The third set, then we bought one property from a seller in December. Then, you know, I'm up there so much talking to other agents, and I talked to them all about what I do. So a lot of what we've bought in the last six months has come from other sellers we've bought from off-market stuff. We actually did do a direct mail campaign in April. Jerry Puckett did it for us.

And it was overwhelming the response that we got from the campaign. I didn't even get to call back half the people. Wow. I've never done the direct mail thing yet. I mean, we talk a lot about it, but I haven't actually done it. But are you going to continue that strategy? I mean, how far do you want to take the direct mail stuff? So actually, I did my own direct mail campaign last October. And I I think I sent out like a maybe 500 postcards and I got three phone calls. Okay. And I had Jerry do a thousand letters for me. And I think I got like 120 phone calls.

Okay. So it was a pretty drastic difference. Okay. And at the time we were looking to, we were looking to get stuff on our contract before we were going on vacation. So I ended up not buying anything from it. But I'm going up next week to look at six units from one seller. And so I've got a couple of portfolio deals in the works.

through that direct mail campaign from a few months ago. So I was very impressed. Yeah, I love it. I love it. I love that you're like, you know, you're not just relying on one method. You're not just saying, you know, there's nothing on the other left to find anything. I'm going to watch some friends. You know, like, you're actually working.

It's crazy. Like, I just had a guy email me the other day. I bought three properties from him over the past six months and he's got eight more he wants me to come look at. So that happens a lot. Or, like, I'll be at restaurants. And I heard someone talking about selling a duplex. So I just went over, interrupted their conversation, you know, told them what I do.

And so they've got a few that I might be looking at, too, and I go back up there. So that's how, I mean, you had said, you know, you're finding MLS off market, and sometimes they just come from the seller. So when you say they just come from the seller, that's what it is. It's literally just talking to people who have properties who, you know, you say I'm an investor. I'm always looking for new properties. And it just kind of comes, huh? I'm pretty annoying about it. I make it a point like when we do closings, we usually have five different sellers.

I make sure all of them know. I'm always looking to buy. I make sure all of their title agents know. And I make sure all of their agents know. And I give them my card every single time. Got it. So you just talked about having multiple people at a closing and you earlier were talking about various sets. I've never heard of somebody doing this.

I know. So I want to dig in. Are you saying you hypothetically find like three or four deals? Right. And you arrange to close all three or four at the same time, same close. Now, you're not sitting in the same room with all these people. You're going room to room to room, right? Yeah. It's mainly because of our loan. So with commercial, like, I mean, $27,000 a door is a very low price point for commercial. So what we've kind of worked out with them is we will buy multiple properties at once so that the deal size as a whole is enough for them to be interested in talking

with us. From there, so then that's why we coordinate it the way that we do. It's definitely challenging. I usually wait until I find one or two anchor properties, set the contract to close six weeks out, and that gives me about three weeks to find any filler houses that come up in the meantime. And then, yeah, we coordinate one closing. Wow. Got it. Got it. That's fascinating. Yeah, it is. So is it, I mean, what, what are you doing? Are you doing a half hour, hour increments, two-hour increments, like, you know, we'll schedule one at one, one at three, one at five. No, we usually do like every half hour. No kidding.

Yeah. So I'm usually, and usually if the seller is pre-sign, then we'll just do those ones because that happens a lot too. So I'll maybe be there for like an hour, hour and a half tops. Presumably you're reading the contracts before you. Of course. Yeah. I write the contracts.

I'm a broker. So I have my own brokerage company in both states. So I represent myself and write my own contracts. Got it, got it. So I'm also very involved with I review title, you know, anything an agent would do for you, I do for myself already. So there's really not much surprises. Got it, got it.

Okay, cool. And what about the conditions? I mean, are these properties needing repair when you buy them? It sounds like that's the case. Am I missing that? It depends. We try to buy as rehab as possible, but that's not always available to us, especially when we, are, again, we're buying five houses at once. We're usually picking up at least 10 to 15 units at

a time, and that's a huge undertaking to take over. So I'll usually try to do at least three buildings, rent-ready, easy performance. I'll take on one, one or two buildings that need some work, or I'll do four really good buildings and one building that's going to need a lot of work. So that way our stress level and our to-do list doesn't get out of control. But it just depends. We do do the thing with Milwaukee, which is amazing, that's sarcasm. The city comes out, when you transfer title, the city comes out and does a code inspection.

The buyer is responsible for fixing everything on the code inspection. So sometimes it's a couple, you know, paint a porch, do a screen, we've had to re-roof houses, we've got to re-grade entire properties, we've got to re-tug-point. So that has, and a lot of times, it depends on

what your inspector is. So there's a sheet of what, you know, is code violations. But depending on how strict your inspector is, depends on which ones you get hit with. Oh, and a bad inspector could screw you because I've dealt with, you know, some guys that just, you know, had it out. And once, once that happens, you know, it can be a real nightmare, can it? Yeah, it can. Which, you know, we, I try to be as sweet and nice as possible when I'm talking with the inspectors, you know. I'm just a blonde girl

doing this on my own. I try to play that angle. Of course. So I'll give you an example. We bought this house in December. It's an interesting property. It's three single family houses on one lot. And then two of them have basement units.

So it's a five unit property. We bought it for $55,000. Yeah. You bought five units for $55,000. Uh-huh. It rented for, at the time it was renting for... This is Milwaukee, right, not Detroit? Yeah.

Yeah. This is our worst property we've bought. For sure. It's our worst property we bought. And it was renting for $1,600 a month. So we actually, both the basement units were not in conditions that we were comfortable renting out with. So we actually vacated those units. Those are two of the units that are not in service currently. At some point, when we've got more time, we'll probably go in and fix them up. But there was a five-bedroom front house that was a total disaster. Like we had to get rid of the tenants. We had to repaint all. ceilings put in all new windows, new flooring throughout, had like five different kinds of flooring. The bathroom was just disgusting. We had to do new kitchen. So we've put in, that's the house that also got 63 code violations, I think. Wow. Yeah.

So, but like each window, if there's, if it needs a new screen, that's a violation for each window. So you've got three houses. So yeah, that house in particular, we've already put in about 30,000. And we've got another probably 15 to go to get it up. But then it will

run for $2,100 a month. Cool. It sounds like you've got about 10, 10 units out of service. Is that right? Three. Oh, three total? Yeah. Oh, okay.

I feel like I thought I heard you said 10 across the portfolio. We've got 59 units total, eight in Chicago, because ours is a two unit. Our single family house is a two unit. And then we've got 48 in service and Milwaukee. So those two basement units, we've also bought a four-unit property that had one of the units to the studs. So we have to run plumbing electrical and do that unit. We're just probably going to wait until next year and get everything stabilized before we kind of mess with that.

So when you buy, I'm assuming you're doing the math on these properties. Okay. So what are you accounting for generally then? Out of service means vacant, obviously. Out of service means not rented. It means no income coming in. How do you account for that when you're doing your math up front? Well, those three units in particular, I knew that we weren't going to use.

in service, so I did the numbers without including that rent. So I just pretend like they weren't even units that were rented out at the time. And everything, you know, if you're making money above and beyond that, and you can add that, you know, it's just bonus. Exactly. So, yeah, that's why the four unit, we bought the numbers on it when I ran my calculations were on it being a three unit. Okay.

So that way, if it takes us 10 years to make that a unit, then we've, you know, we're not losing money. It was still a good buy. Did you know, your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action. The footsteps, the late night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now.

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studies with 500 million in total depreciation identified. Head to costsegregation guys.com slash BP to get a free proposal and see your potential tax savings. I love that. I love that. So I want to shift gears a little bit and talk a little bit more, again, on the kind of the theme of this episode, which is on that you buy in 50. units in a year. To me, that would appear that you, I mean, you were very driven towards that. I mean, like, that's not willy-nilly buying, like, oh, I think I'll pick up a rental property. I mean, that is very, like, did you have, yeah, it's very aggressive, good word. Yeah. Did you have that goal? Like, here's what I'm going to do this year. I'm going to dominate this.

How did you get into that zone of just go, go, go, go, go, go, bye, bye? So, so we closed in the first set in July and then really, like, tested things out with our property manager. We wanted to make sure that he was capable of scaling with us and that the processes that we put in place were going to be scalable. So we worked from July till about November on systems, processes, getting things ready to go. And then once we were confident that he could handle a large scale operation, that's when we kind of went into to buy mode. So the mindset of it really was, there was a couple of reasons, like I said, you know, he was going to quit his job for us. So we had till summer to get to a point where we could pay him a full-time salary. My husband

wanted to join me in the business. So we're working on getting him into this as well. So the faster that we grew, the faster we had money coming in, the faster he could retire as well. So you talk about systems and processes. Yeah. What does that mean? I mean, you know, I don't know what that means. I've got, you know, two properties. I've never done this before. I know very little. And you're telling me I develop these systems. I mean, that sounds like some fancy corporate speak. Can you break that down for like an average guy who doesn't fully understand? Because you do need that in order to scale. You can't just, you know, haphazardly run your business if you're going to scale. So what does that look like? Of course. So there were a couple of issues that we identified pretty early on, which

that a lot of the tenants pay cash. And, you know, when we had a couple of units, my landlord driving or my property manager driving around picking up cash every month, you know, is what it is, but once you get above 48 units, that's his full-time job, would be picking up rent. So one of the things that we did was we implemented a couple of different payment options. One of them was actually Paynear Me, which was the sponsor on my first podcast, and I love them. It's been a huge help to our business. I remember emailing Brandon like six months ago and asking him about it because I know that you use it too. So that's taken off a lot of the responsibility. We also set up a PO box. Tenants can send rent checks in instead of picking

up cash or they can deposit into our account. So we've taken off a lot of the responsibility, because before it was my property manager's responsibility to coordinate a tenant and pick up cash. And now we've put the responsibility in the tenant. So now that we know, like on the fifth of the month, I always look at our bank account and our painting mirror account, I add up who's paid. On the 6th in the morning, he goes to the post office box, see who is sent in rent checks. And then whoever hasn't sent anything in yet gets a five day. And then we also know on the 10th, we always check again, and whoever doesn't pay still gets an eviction notice. So we've implemented those sort of processes. The other part too is that with 48 units, you know, we're always

going to have vacancy every month. We're always going to have turnover happening. So we, in Milwaukee, you can get into a unit within 12 hours notice. So we, A, try to rent out the units while they're still occupied. So we do show units while they're occupied. And my property manager always gets a checklist of what needs to be done. So if we need to be done, so if we need to, to put in, you know, rip out the carpet, put in new flooring and paint the kitchen. As soon as that tenant's out, we have the supplies already there. We've got the staff already booked to do it so that they can work overnight to get it done so that the next day we've got a new tenant moving in into a newer unit.

Wow. That's pretty impressive. So, I mean, it sounds like are you typically having your units rented before the tenant is gone? Yes. And that's how we changed that. So that's what we weren't doing that. weren't doing that as aggressively as before. So we just implemented this new incentive program for my property manager instead of the lease up. So he's incentivized to lease it up back to back.

And we did that. We started about four months ago. And our vacancy is already down 4%. Can you explain how you're doing that? Because I'm sure other people listening would be interested to hear the incentives that you're offering. As far as... I mean, to your property manager. How are you, you know, I'm assuming you're giving him a piece of something. What are you giving him? Yeah. So I figured that typical turnover is two years. So I took, you know, 48 units times the cost of one month's vacancy or one months of lease up over those two year period, divided it out by month, and then I pay him quarterly based on that. So it's essentially what he would get hypothetically if every tenant left after two years and I paid him a lease up fee. But this way he gets it quarterly and

it promotes a different objective. Smart. Got it. Very cool. Makes sense. Make sense. Right on. Cool.

All right. Well, why don't we slowly start to get out of here and shift gears over to the fire round? It's time for the fire round. All right. All right. The fire round, these questions all were pulled straight from the Bigger Pockets forums, which, of course, our listeners can go and hang out on at Bigger Pocket. com slash forums.

So question number one, how long do you think somebody should stay with a broker before deciding to switch if things aren't going right? That's a really good question because I am a broker. I do take on clients and I refuse to make clients sign an agreement with me because I think that if you're a broker after maybe the first time you go out with them isn't getting what your objectives are or is pushing you into something that you've clearly stated is not what you want, then I would leave them immediately. It's very hard to find. You have to be really, really in tune with your agent.

And make sure that they get you. Fully agree. Agree. Agree. Now, the challenge is a lot of agents will say, well, I won't work with you unless you signed six months with me or nine months. And so you've got to decide at that point what you're going to do, right? Yeah, exactly. I mean, I do take on clients.

It's so very part-time for me. It's definitely not even a focus of my business. And I just feel that if I'm not providing you with this, service that you need to get whatever you need done in your objectives, then you shouldn't work with me. How would you encourage investors to broach that to a real estate agent or broker? Because I could see lots and lots of brokers saying, I'm not going to work with you. You're going to just use me and then go sign a deal through somebody else because I was an agent. And I know agents are worried about that stuff. I think, well, I work only with investors.

I don't do retail, I don't do residential stuff. So I think it's also a bit different. The relationship and the incentive that with investors, you're typically buying multiple properties over a short period of time. You're not just selling them their first house and done with it. So if you create that core relationship with them, then they know that there's long-term business in it for them, then they should be willing to work above and beyond to help you out.

Sure, sure. Theoretically. theoretically. Yes. Right on. All right. You all know it doesn't always work out that way. No, it does not. All right. Next question. What are some key things that you would say is attractive in multifamily and, well, yeah, over single family apartments, rentals? I would say that it has to do probably with the numbers, at least in the areas that I invest, the cost of multifamily is generally the same, if not a little bit less than a single family house. And, you get twice the rent. There's also more expenses, though, is too, because you can't sub-meter the water out. You have to take care of usually snow removal and lawn care

because you can't split that out between the tenants. So just being aware that you run your numbers correctly, it can be more beneficial. But I don't think it also works in all markets. A lot of markets, you know, multifamily is not very prevalent in the housing stock, and it makes it harder to buy those.

Makes sense. Cool. Cool. All right. Next question. This one actually, is the newest one on the forums right now. I just went to the forums and looked. It's from William in Plano, Texas. And I'm going to read a quick story. Here's what he said. I have a tenant whose rent is due on the first with a grace period through the third. I contacted him on the fifth and was told that he is in the hospital and he'll pay the rent plus the late fees. I still have not received the rent as of today, which we're recording this on the sixth. It sounds like this might just be an excuse. This is the first time I met this problem. I'm not sure how to deal with it. Should I

start with three-day, does it help to be written? There's email fine. When should I start the eviction process? I'm in Texas. What do I do? Oh, I can't believe you gave me that question. Because you should logically, I mean, I would give him another week, to be honest. But then again, I'm sort of a pushover. And there's always something.

Every month we have something. We've got two tenants right now on payment plans. So it really goes to the gut of, you know, does he have a history of paying on time, is this maybe a one-time thing, then yeah, I would, I'd maybe give them another week. But after that, then you have to be a little bit more hard-nosed. And that's one of the things that I'm trying to get better at myself. Sure. Yeah. To add to that, what I was going to say, what I would probably do is if it were me, because yeah, I would want to, if somebody's in the hospital, I'm going to want to be nice to them. And if there were a long time tenant of mine, I'm going to

treat them differently than a new one. But I would probably serve the notice, like the three-day or the five-day or whatever is required right away. Just to have it. Just to have it. Because that way, if I find out later it was a lie or whatever, boom, I could file eviction right then. I don't have to wait another three or five days before that to happen. And the three or five days is easy to serve. It's cheap and simple. Yeah. Yeah. Or you can just confirm that they're at the hospital. What hospital are you staying at? I'll come send my property manager to bring you some flowers. Yeah. There you go. There you go. All right. Last question. Last question. What information are you looking for on multi-families when you're buying? So you're looking at rent. What other key metrics

matter for you? What are your kind of buying criteria for multifamily? Well, I have a whole Excel that I built where I just put in the rents, the taxes, and how many units, and it calculates my numbers for me based on historicals in that market. I know that, you know, the water bill is always going to be around X per unit. So I build that into my formulas to give me a number that. And, you know, that meets my criteria. I actually don't even look at the pictures. I don't look at much else. I just import it into that data or that Excel and then go see it if it makes sense for me. And then, you know, my bank requires, you know, DSCR to be within a certain range, cap rate to be within a certain range. So it has to meet that as well. And we do require a Schedule E from the sellers or a P&L for the past 12 months that's signed.

they have to sign and notarize it so that we have an accurate portrayal of their expenses. Cool. And you mentioned a second ago DSCR. Can you explain what that is? Yeah, debt service cover ratio. So for example, if the house rents, if the mortgage is 1,000, they want the N-O-Y to be $1.2, so $1,200 a month on it, is the minimum DSCR that the bank will take. So you have to make sure that you're using accurate numbers and conservative numbers too.

We actually run our numbers more conservative than my bank does. So this is just for lending criteria. Yeah, just for lending criteria. Got it. And so a DSCR of like zero means there's zero cash flow. Ideally, it's like a measure of cash flow. 1.2 means there's 20% more cash flow than breaking even if that makes sense. That's kind of a weird way of explaining.

But yeah, that's how I think of it in terms of like extra cash flow to pay the like after the mortgage is paid. How much is left over? 1.2 is obviously better than 1.1, which is better than 1.1. Yeah. Yeah. Exactly. Right on. Right on.

All right. Let's move this thing over to the end. We will take it to the world famous. Famous for. All right. The world famous, famous for you've been asked these questions before, but maybe something's changed. So let's ask them again.

Number one, what is your favorite real estate book? It's still the same book I said last time, which would be the millionaire real estate investor. pretty much since I haven't read a book in the past year, which I'm in so embarrassed. You've been a little busy? To admit, yeah. Yeah, what have you been doing? Come on. Running free businesses.

It's really embarrassing because I used to read a ton. But the good news is I replaced my reading with Bigger Pockets Podcasts. So my favorite real estate book would be an audio book of the podcast. Nice. Nice. Pretty good book. By the way, a millionaire real estate investor of those people who are interested, we interviewed the co-author of that, Jay Papazan, one of my favorite interviews, which was, it was in the hundreds, wasn't it?

I don't remember exactly what show it was. I don't remember much. I think. Yeah, it was something like that. It was a great podcast. Excellent, yeah. All right, so they can check it out at biggerpocket.com slash show 113. And next question.

Awesome. Awesome. Favorite business book. And since you haven't read a book, maybe I'll just give us the name of the same one. Still the one thing. I love that book. Yeah. That is my favorite book.

But I do have, I keep it, you know, like everyone else, I keep a to-do list. And the 10x rules on my to-do list. And there was another one, I just wrote down from one of the podcasts last week. That sounded really great. So it's on my to do list to buy those books and read them. Nice. Excellent. Excellent.

And how about hobbies outside of work? What are we doing for fun? Travel. We've been really lucky to, we went to Mexico this year. We went to Northern Europe for two weeks, planning out another Thailand this year. be Morocco. So that's been a huge focus of us as being able to travel again. Right on. That's excellent. Excellent. All right. Final question. What do you believe sets apart successful real estate investors from those who give up, fail, or never get started? I think that the number one thing for

me to do is self-sacrifice. I think a lot of times on the forums we get people like, how do I get started with this? It takes a lot of hard work. It takes a lot of sacrifice, whether it's financial, sacrifice from saving or sacrifice working, you know, nights and weekends to get the job done, I think that is what sets people apart, is the ones that are willing to make sacrifices for what they want. I love that. Fantastic. That's great.

All right, Bree, well, thanks again for coming back. Congratulations on the last year. It sounds amazing. Sounds like you've really been doing great things. So, you know, lots of luck on that and lots of luck going forward. Before we let you go, where can people find you? Clearly bigger pockets. Yeah, obviously bigger packets. I'm always on bigger packets. They can also find me on my website, which is turnkey-reviews.com, or you can email me all my information on my profile on bigger pockets.

Perfect. All right, Bree. Well, thanks so much. Thank you. We'll let people throw questions up on the show notes if they have any for you. And we'll see you around. Thanks so much. Thank you. Thanks. All right, guys, that was Bree Schmidt. Big thanks again for coming back to the podcast. and of course that's just phenomenal what she's done in the past year. I mean, that's a lot of units, man. That is a ton of units.

Yeah, she totally passed me up and, you know, she's making us all look bad. Maybe she should be the co-host. Maybe Bree should come on here and show me what's up and I'll go lie on a beach or something. Sounds good to me. Sounds wonderful. Actually, I'll take that one up. All right. While we both go to beach, we'll just let Bree and, like, I don't know, Ben.

Oh, God. Yeah. All right, guys. Big thanks to Bree for coming on. It was a lot of fun and lots of great stuff. So thanks again. Otherwise, as we always talk about, get involved, jump on the site. As you can see, Bree has really learned a ton from bigger pockets. Engaging, connecting on the site has proven to be quite valuable. And just being a part of the community has been great. So we're very pleased to have had her. Otherwise, if you are not following us, engaging with us and connecting with us on fun places like Twitter. Twitter. Who isn't connecting to us on Twitter? I mean, Twitter is awesome. Twitter is where it's at, especially if you're like a 13-year-old girl or a 45-year-old man like you. I'm sorry, did you say something? Well, I don't know what you're talking about. Twitter is amazing. Get on it and follow Bigger Pockets today. Otherwise, Facebook, we're putting out lots of great content.

Guys, if you're listening to this show, hopefully you are a fan of Bigger Pockets in the Bigger Pockets podcast. please take a couple minutes. It really, really helps us. Jump on iTunes and leave us a rating and review. We really, really count on those to help spread the word about bigger pockets. If you have not done so, and you have consumed at least 10 of our episodes, jump in there and pay it back by leaving us a rating review. We would really appreciate it. It means a lot. And Josh will drive to your house and babysit your kids for an entire week. while you go on all expenses paid trip to Bali. I'm going to do that for everybody. Every.

It leaves us a review. You're out of your mind. That is not going to happen. It could happen. You'll have my eternal gratitude. And yeah, anyway. That's almost the same thing, though. It comes close.

I was just setting people up for an even better thing. Oh. Yeah, well done. Thank you. That's my monopoly strategy. Oh, yeah. Is that right? Offer something really, really good.

And then just back it a little bit. It doesn't seem quite as, yeah. Okay, okay. Awesome. Well, listen, hopefully by the time you listen to this podcast, the world does not fall apart because as of today, this Greece crisis is getting crazy. The world financial system is looking a little shaky. Who knows what's going to happen?

I don't know why I'm talking about this now, but it's interesting to me. And so I'm going to just keep talking about it. I know nothing of it other than I read an article online that said that my Greek falafels are going to be more expensive. and, you know, is that even a thing, a falafel? I don't know. A falafel is a thing. Okay, good. You've just proven your ignorance. My Greek falafels are going to be more expensive now, and that, that ticks me off. You know, I like my falafels. This is Josh Dorkin, signing off. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small.

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