BiggerPockets Real Estate Podcast - 72: Managing Hundreds of Tenants and Getting Uncle Sam to Pay the Rent with Mark Ainley

Episode Date: May 29, 2014

Today on the BiggerPockets Podcast we jump straight into the nitty-gritty with a real estate broker, investor and property manager from the greater Chicago area. Mark Ainley brings a fresh perspective on how to successfully invest in lower-income rentals and goes deep into the details of everything you’d need to know, covering acquisition to rehab to management, straight out of of his experience investing in the notorious South Side Chicago area. Today’s show also gives great insight on the in’s and out’s of Section 8 housing, the program that has the government paying a portion (even up to 100%) of the rental income for the tenant. Mark also covers a lot of the managerial secrets behind being a successful property management company and gives you specific criteria on how to vet property managers. This show is really meaty so be sure to grab a pen and paper for notes… and with that, let’s jump into it! In This Show, We Cover: How to build a real estate company from your mom’s basement. “Cash-for-keys” – an alternative to eviction Warning: How to lose money by betting on appreciation How to handle late Section 8 tenants when they only owe $15 How Brandon got a broke tweaker out of his property Advice for newbies who are thinking about getting started in lower income areas How to find flexible non-profit portfolio lenders The full-gambit of investing in Section 8 housing Major red flags  to look for in tenant screening How to do deals via text message and much, much more! Links Mentioned House Hacking SocialServe.com Books Mentioned in the Show Art of The Deal by Donald Trump The Millionaire Real Estate Agent by Gary Keller The E-Myth by Michael E. Gerber Trump: The Way to the Top: The Best Business Advice I Ever Received by Donald J. Trump Tweetable Topics “To do a flip successfully it takes being at the property every single day!” (Tweet This!) Connect with Mark Mark’s BiggerPockets Profile Mark’s Website: www.gcrealtyinc.com Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 72. 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, Brandon Turner. What's up, Brandon?

What's up, Josh? Hey, what's your middle name? My middle name. Yeah. Yeah, it's NFB, buddy. Fine. Don't tell me what your middle name is. I won't tell you. None of y'all. Yeah, yeah, yeah, I got you. I got you. How's it going? I'm good. I'm good. You know, just getting ready for the show, the big show. We got a lot going on on bigger pockets and that actually does lead me to today's quick tip. All right. So today's quick tip is this. We have been busting our backsides on a redesign of bigger pockets for a good six plus months. And this thing is amazing. And we're really, really excited about it. So really the tip is to keep your ears and eyes peeled for the launch of the new and improved bigger pockets. I'm very pleased with it. I don't know about you, Brandon, but

I think it's going to help people a lot. Yeah. Yeah, I think it's going to be awesome. I mean, most of the things are the same. You'll notice a lot of things are the same, but a lot of things are different. Pretty much everything that was not cool before is now cool. That's my thinking. And everything that was cool is the same. There you go. Well, well played, my friend, well played. All right. So today we've got a show with Mark Aenley. Mark's the owner and operator of a real estate brokerage and property management firm serving the greater Chicago area. Mark is built a fairly sizable team. They manage and own lots of properties around town up there in the south side of Chicago. And Mark's got a lot of great tips to help us out in terms of property management and doing deals themselves.

He's personally done, I believe, somewhere between 150 and 175 deals consisting of everything from SFRs to multifamilies to condos, you name it. So definitely check it out. There's lots to learn and hopefully you'll enjoy really quickly. Show notes can be found at biggerpockets.com slash show 72 and otherwise, you know, sit back and enjoy the show. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide.

Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution. That means you can not only find motivated sellers, but you can also reach out right away. Skip trace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI-powered insights and comms that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step.

Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M. Don't just dream about real estate. Make it happen with PropStream. What if I told you you could forget everything you know about investment property loans? because Host Financial is rewriting the rulebook, tossing out those pesky DTI restrictions. They focus on your property's income potential. No tax returns or personal income statements needed.

Simple, efficient, and tailored for investors like you. Imagine a lender that sees the gold mine in your property, not just the numbers on your paycheck. That's the host financial difference. And they're approved in 47 different states, so your next big deal could be just around the corner. Ready to unlock your property's true potential? Visit hostfinancial.com. Don't let old school lending hold you back another day. That's hostfinancial.com.

For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with his little is 10 bucks. The portfolio features 4,700 a single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities,

thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund. This and other information can be found in the fund's prospectus at Fundrise.com slash flagship. This is a paid advertisement.

Cool. Let's do it. Let's bring them in. All right, Mark, welcome to the show, man. Good to have you here. It's a pleasure to be on here. Great, great. And good quality mic there.

That's not always nice when the guest has a good, good quality mic. Good job. I had a good referral source for it. Nice. Good, good, good. Well, cool. Glad to have you here. Why don't we get to this?

We want to talk about your whole story because you've got kind of a fascinating story. So let's start at the very beginning. How did you get bit by the real estate bug? Well, I wanted to, when I was younger, I always wanted to be, you know, just associated with Wall Street or money. I kind of always would be a stockbroker. But growing up in the late 90s, we, you know, that kind of went online and kind of did away with your traditional stockbroker occupation for the most part.

So then I kind of thought the next big glamour. fascinating industry was kind of real estate. And that kind of went away for a while. And I thought about being a teacher and everything a boy wants to be a firefighter, policeman, and all that stuff. But I ended up buying when I, just coincidentally, accidentally, because the market was right, it wasn't because I was really excited about real estate. But I bought my first place from, I bought it from my dad. He was actually getting married and he didn't want to rent to me because he felt me as a liability being 21 living in his place. So he actually sold me his place. Nice. Awesome.

Way to see there's a sense of trust there. He comes in. That's other stories. So I own my first place. My mortgage, taxes, insurance association fee, I was paying like $950.50. And my friends were, you know, I still living at home, you know, getting in trouble, not doing good in school, not working. And they get kicked out of the house. So they would come and they would stay with me.

I charge them five, $600. And at one point, I had two buddies there. And I was actually making more than my payments by the time they threw in for groceries and everything like that. I'm like, wow, if I wasn't even living here, I could rent to a third person and I could be up five, 600 bucks a month. That's funny. I actually did that when I was in college. I rented an apartment and they had four bedrooms. So I rented three of the bedrooms out to other guys. And I was like, this is long before I got in the real estate. I mean, like, well, not long before. And I was like, wow, this is great. If I rented out my own room, I could live for free. So I rented my own bedroom out. And I slept on the floor in the living. room for, I don't know, six months or something like that. So, yeah, that was, that's how I... You're serious? Yeah, totally serious. That's how I, like...

That's when I first, like, realized that I could, like, sacrifice to live for free. And anyway, yeah, that's my very, very early real estate story. Then a year later, I bought my first house, and that's when I actually started. Anyway, not about me. Mark, back to you. So, you got this house. You were hacking. I call that house hacking where you buy a house.

Yeah, live for free because your buddies pay for it. So, yeah, so how did that go? Well, I was, it was good. I was 21, 22 years old. I was working at a, I was going to school, but I was also working at a trucking company. And I had, it was a 24-hour place where I worked a shift. It was four on, four off, and I worked overnight. So I had four days off in a row, and I had all day. And at that age, you know, for me, I guess I didn't sleep much. So I had plenty of time to kind of like figure out life. And, you know, I was into reading, you know, back then it was all the Donald Trump books and then art of the deal. And just

they didn't have real estate books like they do now. But, just, just, reading whatever and trying to gain knowledge on it. And at the place I was working at, I met my current partner that is with me with GCA and all my investment properties. And we started, you know, we're, you know, we're just kind of venturing, trying to be entrepreneurs. We liked at ice cream trucks. We looked at vending machines. You know, we sold purses, like, whatever. Whatever we did to make dollars. We kind of are always trying to look for something. And, you know, this was really when 2002, three, somewhere in there, right when things really started kind of going crazy. And one day I was sitting in my buddy's house, he lived in an apartment building,

and under the door slid a notice saying, we're turning this place into condos. If you want to buy this place, you'll get it for $10,000 cheaper than what we're going to end up marketing him for. And it kind of hit me. I said, all right, well, you know, worst case scenario, you know, back then I wasn't counting, you know, closing costs or, you know, realtor fees or anything like that. I'm just thinking I'm $10,000 up if I buy this thing right now. So me and my current partner, I ended up buying that place that my buddy lived in, and he stayed on there as a renter. Shortly after, he moved out for whatever reason, and we end up renting, this is probably our first nightmare rental situation.

But going back, take one more step back, the day of that closing when I closed on that condo, this was before I had my real estate license. My best friend who actually, at the time, they actually founded GC Realty, my real estate property management company, he was working for a real estate company in the neighborhood. And like I said, I was around during the day. he'd come over, work from his laptop then. And he said, Mark, get your real estate license. Now, before that day, he tried to tell me it's like 25 other times. But that day, it made sense. He said, Mark, if you would have had your real estate license today, you would have figured out on the

calculator. And he said, you would have had this money. It ended up being like $3,200. And that $3, $300. I'm like, oh, that would have covered this. That would have covered this. So right away, it hit me. After all the times he told me, it hit me, I said, all right, I started doing the home study like the next day. Shortly after that, you know, about three months later, while I'm still studying for that test. I did the home study. It took me a little longer than I wanted to. But he said, Mark, I'm thinking about starting a company.

You want to come on board. I said, sure. I'm in. Let's do it. So we started GC Realty Development in late 2003. Nice. Very simple, working out of his basement. Nothing glamorous.

So it was just you and this buddy. Now, did you end up actually buying that condo or? Yes. That was the day. The day we closed, I brought home the HUD and all that stuff. And he said, man, you could have got a commission on this deal, man. I got it. That was the whole lot.

lightning bolt that day. And I spent that $3,200 commission, I would have got in my head, like, fast. Then I realized I don't have that $3,200. Would you recommend new people start getting into the business the way you did? Or do you think that maybe you want to learn a little bit more before you get in and start house hacking, as Brandon likes to call it? It definitely reduces your risk. So it's always a good option to explore with limited risk. Yes. Got it. Except, of course, if your friends are dead beats. Well, yeah, yeah. Actually, how did that go? I want to know that. Did that work out well? renting to your friends or whatever happened to that house that you that you lived in.

Well, it worked out good because the cool thing that I have to go through a fiction court to kick them out. I just said, get out. I'm done. So I go through three months where I take the extra money, then three months I kick them out. And so it was nice to have those options. Because they're your friends. You can just shut the door on them. Yeah, there's no five days. I guess. All right. So how did you go from there? I mean, you got the condo. You got your license at that point. How did you get from that? I mean, what did you do next? I know you did some flipping in there somewhere, right? Yes. Well, that first condo we bought the conversion, my buddy moved out. We moved a new tenant in and it was the worst tenant ever. So I had right off the bat, my horrible. I didn't do any too much screening. I didn't, you know, I went for, fell for a sad story. And it was a horrible tenant. And we ended up paying her to leave before cash for keys are popular. We were did ourselves in that sense just to get rid of her.

Let's actually, let's talk about that real quick. Those people who are listening, I don't think we've. covered it too deeply in the podcast. What is cash for keys and why did that work for you? Good question. Well, cash for keys is basically the substitute to going through the legal eviction process. As an example, if the tenant's not paying today, I can either hand him a five day and start the legal process or I can say, I'll give you $500 if you're out by Sunday and you turn over keys to me. And they use that money to move on. I get possession back quicker and can start moving on. Yeah. I've done now, I've had like five or six really bad tenants like really bad that should have been evictions and four of them four or five of them then were we did cash for keys. Only one did I ever actually take the court and I'm on my second right now. The rest have all been cash for keys. So I'm a big fan. It's it hurts the pride a lot. Did it work for me? Yeah. Yeah. I worked every. I mean it worked every time. They left. They left it fairly clean because they wanted that money and they were gone. But yeah. Yeah. The one lady that we did anyway, she refused to even answer the phone or the email.

mail or whatever. So we had to evictor. And now the second lady is the same way. But yeah, I'm a big fan of cash for keys. Like I said, it does hurt the pride to. So I'm curious, for both of you guys, I've actually never done cash for keys. Brandon, were you doing 500 bucks? And Mark, it sounds like that was your number. Yeah. You know, for that particular situation, yes. Here in Cook County, where Chicago is located, the judicial system screwed up in the sense of everything takes forever and everything costs money. And I mean, to evict someone in Chicago, I mean, it could take anywhere from, I mean, it can max out at six, seven months sometimes. You hear some horror stories.

And to give a guy a couple thousand bucks to eliminate that, I mean, it's, and you can usually see now that I have the experience, I can see that tenant that's going to take six or seven months and it will work the system. Yeah. Yeah. In my case, I think, I think the highest we ever paid was like $600. The lowest was, I think, $200. Like, the last guy was just, yeah, he was a tweaker.

Like, we found out that he was, like, gotten to drugs really bad while he was there. he needed some money for drugs to offer him $200 bucks to be out by Friday and he was out by Friday and I gave him $200 cash. My lawyer actually told me that. He said, he said, he's a dude, show up at the guy's door with a pile of cash, get it all intends. And then show up and just wave it in front of him

and say this is yours on Friday if you're out. He said, because when you're on drugs, you see how that pile of cash, that's all you think about for the whole week. It worked. Yeah, remind me next time that you ask if I want to invest in a property. I'm like to say, you know, that...

There are drugies everywhere. This is a nice house too, but yeah, this guy got like, went down the rabbit hole of drugs. Now, do you feel bad about the fact that you're giving drugs to a tweak or instead of, you know, giving him a home? Now you're giving him cash. I'm going to let Mark answer that one. No comment, Mark. No comment. Let's move on.

So, all right, so that first one went really bad. You did the cash for keys. What happened next? We said we're never going to rent to anybody again. Let's go flip houses. That's exactly with that conversation. And now did you stay true to that, by the way? Well, for a very short time.

Until the market crash pretty much. Okay. So how'd the flipping go? What was that like? Well, again, it was with my current partner I have now, and he is more of a mechanically inclined partner, and I'm not. And I'm good with Excel spreadsheets, and he's bad. All he knows is Yahoo email, and that's about it.

So we have a really good partnership in that sense. So it made sense. And it still makes sense. Our partnership is our strengths and weaknesses. So we started. We bought a couple houses. And on those houses, I was actually in there doing the work,

taking down the old pool, filling it in, painting, doing everything I could because we were just trying to maximize our profits at that point. Nice. So we then, you know, we did do a couple flips successfully. We got stuck with one or two that turned into just, rentals and that's how we kind of involuntarily became landlords again at that point.

Gotcha. Gotcha. So, well, let's talk about those first flips. What was it like, you know, becoming a house flipper? What could you have done differently? What did you do right? What did you do wrong? That kind of stuff.

Well, the market was on the up. So that was the best thing we had going for us where no matter what we bought, no matter what we did to the place, we could sell it for more six months later. So that was the good thing. It was just timing. And didn't see it at that point. But in hindsight, I could say that. But the, you know, it really cutting costs down and controlling and being at the project every day.

You know, to do a flip, it really takes you to be on the property every single day. At that point, it wasn't hard to find buyers and it wasn't hard getting qualified for mortgages. So it was, it wasn't like flipping it's today. And actually, we looked into doing flipping last year and we kind of faded away. And we're actually working on one now currently. But it's a whole different ballgame that was 2004. That's very true. That's very true.

You mean you just can't put a sign up that you're flipping the house and have a buyer five minutes later who has, you know, one percent money down and not even close to qualifying for the mortgage? And all you did is paint the place. Yeah. Yeah. Yeah. There you go. All right. All right.

All right. Right on. So you started flipping. Some of them turned into rentals. Is that when you got back into the rental game? Like what made you stop flipping? Was that the market crash? Well, the market started going up and there was less opportunities to buy those.

There wasn't, you know, anything that went on the market, you had 25 people at and you're getting rooted out by, you're getting thrown out of the process by cash buyers right there and then. But at the same time, we also started working on the brokerage side of things with GC Realty. And when I first got my license, I really went around to these condo conversions. And they're happening everywhere. And I would go into them and I would sell 10 or 15 of them in a week or two's time to various people I know because those people are just, coming in and get 100% financing. And I was really looking, we were growing the brokerage side of things at that point. So I kind of faded away because on our flips, there wasn't much margins.

There was, you're walking away with 20 grand with a heck of a lot of risk. And then more so we got caught with a couple that, you know, end up just renting. So we just ran, we're in as liquid anymore. Hey, Mark, similar to that first deal where you bought the condo, you were working with the builders and you were, you were the agent on, on. the sell side for the conversions. Is that what it was? Correct. Correct. Got it. Got it. Yeah. So let's talk about that for just a second because it was actually something that I wanted to do back in the day when I was an agent. I always thought about getting in with these developers. And if you get the contract, you got the whole

property, right? Well, we didn't represent the, we weren't representing the builder. We were simply, I just have a pool of investors or people that I knew that were looking again in real estate that I would table and they would buy these condos. And these condos were sold it, selling out in a matter of a couple weeks just because everything was going so fast at that point. Gotcha. Well, can you clarify on that? So you've got a pool

of investors that you're bringing to the table. I don't quite understand what you're doing. So, I mean, are you just, are you buying a property? I was just really acting solely as an agent at that time from my company, GC Realty, and we were representing investors in buying the condo conversions.

Judith, the buyer's agent on that. Yes, and the important thing of that is that's how our property manager started. I was sitting at the closing table. We sold a condo to our attorney who at the closing table was like, Mark, how much would you charge me to manage this? I'm like, I don't know. How much you pay me? He's like, I'll give you $50 a month.

I said, all right. He's like, all right, I'll drop the management contract and send it over tomorrow. And we still, that's how GC property manager is born right there at the closing table that day. That's funny. That's interesting. I actually still, I used to do like 50 bucks a month. I had some friends that wanted help with their rentals and like, well, how much would it be to do two hours of maintenance every month? And I'm like, and then just answer phone calls.

I'm like, I don't know, 50 bucks. To this day, I still answer their phone calls for 50 bucks a month on that property. It's been like nine years since I did that for the first time or seven years. Because I don't know. I don't want to call and tell them, hey, I'm not going to take care of this anymore. And so I just still answer the phone calls every once in a while. And I'm like, I probably put in, I don't do the maintenance anymore, but I probably put in an hour. a month of work. That's like 50 bucks an hour. So I just keep it up. But I need to probably

quit that pretty soon. That particular client, we still do charge 50 bucks and we still use the same management agreement he gave us. So we got, it was a value add scenario. Nice. Nice. I guess there's something to the legacy agreements, right? Yeah. Yeah, there you go. All right. That's how you got into property management. So you went from flipping to mainly agent stuff to rental properties and stuff. So why don't we actually move to that and talk about your rental property investing? Like how to How did you get back into, because you bought a lot of properties after the crash, right? I read that online. You bought a lot of properties. Yes. Yes. So how did that happen? How did that transition happen from an agent?

And I'm curious about how you actually bought the properties. I mean, were you financing them or, you know, were you doing them? How were you acquiring these? Well, I'll take a long story and trim it up. So when we got into property management, we started managing properties for a particular client that, you know, we managed three properties for them and we got to know him and he was really about buying properties. So he was buying properties. We were actually doing the work on them and we were selling it for him. So we were going paid three ways. We're getting the buy side. We're getting a general contracting fee and we're selling them. We're selling them to people we knew it because we knew that they're good properties.

With that relationship, that same client, so we're kind of building relationship with that same client, I took to an auction one day in May 2008. It was a Sunday afternoon. And we left that auction that day and he bought three properties for $70,000. 70 each or 70 total? 70 total. For the three properties. Yes. And this is Chicago? Where are these?

This is south side of Chicago, these properties. Oh, south side Chicago. Gotcha. So he, that's like Detroit for those people who don't know Chicago. Oh, there's a lot of good areas. There's a lot of good areas. All right.

So $70,000. So that afternoon, I was kind of like, what did you just buy here? And he's like, and he said, well, we're going down that way right now. You want to come check one of them out. So this is my first experience on the south side that day. It was hot. It was a Sunday afternoon. People everywhere.

It was my first experience down there. So it was an eye-opener for what the reality of life is down there. But we go into this first property. He bought a condo for $24,000. And we walk in the building. The whole building's empty. The other four condos are empty. The, you know, we walk in the unit.

There's a sheriff sign on the unit door. And we walk in the unit, everything stripped out, everything. And I'm feeling horrible as is real stage. I'm like, oh, I should have helped him. I should have looked into this more for him. I shouldn't have let him. And he goes, this is great. See if the other ones in the building are available.

I'm like, what? So he broke it down for me. He's like, I'll put X amount dollars into it. I'll rent it for this much. This is what my cost to, we'll manage it, blah, blah, blah. And I went home that night, threw together a spreadsheet. And I realized I said, man, based on those numbers, this is like a 25 or 26 cash on cash return for that.

That's what he said. So I went back to him a couple days later and with my partner and said, you know, we should start, let's kind of put some money together. that's by these mass quantity because there's no way these won't at least double in value based on it just can't go any it can't go any lower than that and at that time the Olympics were coming that was right in the neighborhood of the proposed Olympics so if the Olympics came that that could have been a humongous thing as well too ultimately it never came but it actually Olympics not coming helped better for the south side because for us for the investors because

prices went down a little lower even but that's wait a second so prices couldn't have gotten any lower and yet they went lower, right? Yeah, they still went a little lower. Okay, so I just want to call you out on that because for everybody listening, you know, I think this is a really, really important point. Don't ever assume it can't go lower because, you know, it really, really can. And even when everything looks like it's going to line up for you, you got to be cautious about these things. I mean, I think you probably ended up okay in the end. But, you know, the risk is. You know, the risk is always there. There's never zero risk that it's going to turn and go against you. But we're talking about $4,000 or $5,000 lower, which is really 10, 15% still.

Well, it's lower, though. And for you who bought it at, you know, probably the right price, somebody else who may have chased it, that $4,000 or $5,000 could have been a problem. Yeah. And if you're stacking notes and you're, you know, you're leveraging yourself, you can find yourself in trouble. Yes, but the income item are pretty significant. So that really offset any sort of risk in that element. I got you. I got you.

Well, again, I just, you know, we've got, you know, 25,000 people listening to the show and I don't want people going ahead and buying property who don't know what they're doing, assuming that the property is never going to go down. I mean, yes, income is great. But if you're buying it for appreciation in any way, shape, or form, you know, think twice about that because, you know, there's always a chance that could go the other way. So, Mark, how did you then decide you bought these things for cash flow, right? You're not assuming appreciation.

Is that correct? Correct. For those people who don't know, what is the difference and why do you choose one over another? Well, appreciation is really a guessing game, I guess, if you want to put it that way. And cash flow is really a specific return that you're going after. And up until, in Chicago, more particular, just there was no such thing as cash flow before the market crashed. So that really introduced cash flow to me when the market crashed. Yeah. How many deals did you buy during this time then?

In between 2008 and 2013, we collected 135 units we did. Nice. And were they all like single family houses or were they condos? Our largest building was 18 and then we had some, our smallest was a condo or single family. So we had everything between a few six flats and so forth. Okay. So what kind of, what do these deals look like? I mean, what were you buying them typically for? what kind of, you know, cap rate or maybe ROI. Like, what were you looking for? What was your like standard for a good property?

We were trying to keep our cost between purchase and fix up between 40 and 45,000. That was always kind of the goal. Okay. And what are they, what are those rent for? We were getting anywhere between 1,100 and 1,300. That's great. That's really, really nice. And it's all Section 8 housing for the most part.

Okay. So these are all low, I'm assuming these are all low income Section 8. housing, correct? Yes, correct. Okay. And what kind of condition were they? I mean, were they all, did they all need rehab? Did you have to rehab them all? Or how did they, like, condition-wise look? There were various. Some were 75 years old, never been cleaned up. Those were the worst cleanups. But the ones that remodeled 20 years ago and just the electric and the plumbing out, that was stripped out, those were the easier ones to put back together. Okay, okay, cool. I'm definitely a big fan of the idea of finding things that need a little bit of work, fixing them up,

a little bit than renting them out. I know it's kind of a hybrid between flipping and renting, but I'm a huge fan of that. So let's go, I guess let's talk about a little bit more about those properties. So you're buying them. They cash flow incredibly, right? How did you find them? Are they all MLS deals? Yes, they're all MLS deals at that point. And they still, on the Southside Schaude, there still is an abundance. Just the last 30 days, we've really started not seeing as many deals as we used to. So yeah, mostly MLS deals at that point. Okay, okay. And auction dot com and so forth. Okay.

All right. So, you know, you mentioned Section 8. I've worked with Section 8. I know Brandon had a little experience with it, but let's talk about exactly what is Section 8 and how does it work? Section 8 is a program put out by HUD that is basically subsidies for low-income families. There's families that work and only part of their rent is paid. and there's families that don't work at all and get 100% of the rent paid.

Gotcha. So how does it work in terms of rent? Are you receiving, is this Section 8 rent the market rent or is Section Rent set by the locality or by HUD, you know, based upon area? It is set by HUD and it does go with market rents of a particular area so long as it's not a super high end area. But the rent are set by HUD and the size of the place and the amount of bedrooms and if it's a single family. You know, there's a pretty sophisticated formula that I don't think too many people could really put their thumb on how it really calculates out. But I can tell you an approximate range based on how many bedrooms what I'll get for rent. Yeah.

Generally, there's a chart. I think that you could look up online and you can actually check out your, I think it's, I don't know if it's state or city. I'm forgetting now, but it would basically tell you exactly what rents you would get on. based on a three or a two-bedroom or one-bedroom. What I've found is then in some areas, those rents are actually, some they're a little bit lower than market, but in some you can actually get a lot more rent through Section 8 than you could, the market rents.

And it does tend to be attractive in those areas, I think. Yes. What are you getting, I mean, what do you see in your area for Section 8? Do you see higher rents for Section 8 lower or about the same? In that area, yes. It is definitely higher. Out here in the burbs of other subsidies we manage, it is, it's lower or about 100 bucks lower, 10% lower pretty much.

Okay. I was going to ask, when you advertise a Section 8 rental, I mean, do you actually advertise this is a Section 8 rental? The reason why I ask is I got a rental right now that we've been advertising for a month now and we can't get this thing rented. And it's a pretty low income. It's a basement apartment, so it's not a high class thing. Should I be putting this in my advertising that this is Section 8?

Absolutely. What do you think? Yeah. We put that as welcome. I actually called the local realtor board a few months ago asking, can I put Section 8 only? And they said I wouldn't do that. So maybe Section 8 welcome in there.

And there's a website called Social Serve. It's S-O-C-I-A-L-S-E-R-V-E, which is kind of the affordable housing listing place. So if you've got a property brand that would be Section 8 accepted, you know, you have to get into the program. The unit has to be inspected and all that. you could then list it there. Cool. Yeah, I need to probably work towards that because I don't like vacancies. I don't think I've ever had a vacancy last over a month. This one might be over a month, so

not fun. You know, I remember one of the nice things about Section 8 was you kind of have a little bit of leverage over your tenants, because if they screw up, then you can basically let them know that you're going to contact Section 8, and essentially they'll get thrown out of the program, which they do not want. Have you had any experiences like that? Yes. It definitely gives you a club to, they're not going to skip out in the middle of the night.

They're not going to destroy the place. They're going to pay the rent. You're never going to lose out on rent. There's so many benefits in that, just they're part of the program. Now, their voucher, their Section 8 voucher, what they have, is inheritable as well, too.

So if mom messes up on it, she can't pass on a daughter. If mom loses her voucher, it's inheritable. for generations. Gotcha. And then the nice thing about Section 8 also is you're getting a check directly from the government, right? I mean, so you would get two checks.

If they had a piece of the payment, the government would send you one check, and you'd get a second check from them for their share, correct? On the first of the month, I get the money late clockwork deposit into our account, so that's nice, yes. And then the tenant will pay the difference somewhere in the month. Generally, they're usually pretty good. that's where I wanted to go to. I've got some tenants on government programs, not Section 8, but I got some other ones.

And the government will pay or whatever this organization is. I don't even remember what it is, but they will pay, it's like the rent's 450 or 500. And the tenant has to pay like 50 bucks a month. It's really minor. It's like nothing. Though the tenant never pays it. I mean, like every month we have to send a late notice to them, a three-day notice. And then we have to like, you know, serve that.

there's $35 more dollars. I mean, like, it's a pain in the butt to have to get those 50 bucks from them every month. Like, how do you combat that in your business? Well, I'll tell you this. Some of the CHA tenants that are, that you have an $800 a month payment, you get that like clockwork. The one you're trying to get the $10 or $15 payment. Yeah. For us, we sometimes just let it go for a couple months when it's actually worth fighting

for at that point. Yeah, it's tough because most of the time they have no income and they really don't have anything and they might not even have that $10 or $15 and how that became their portion We're not even sure how. I know that's what I'm looking. Yeah, I'm thinking, do I evict this guy over 50 bucks? I don't know. It's hard to know how far you push that.

Yeah, and do you get him kicked out of the program for the 15 bucks that they're not paying you? I think it's a legitimate question. And I know I struggled with it. And I think I allowed for leniency for a while until other things caused evictions to come up. You know, if it was, you know, a unit that was six, 700 bucks and their share was 50. I mean, I know I need it to collect it, but I mean, I don't work with Section 8 clients anymore, but I certainly kind of let it slide because I knew the turnover cost would be far higher than everything else. But yeah, yeah, that's a tough one.

And I guess I'd be curious for anybody who's listening right now on the show notes at biggerpockets.com slash show 72. Maybe you guys can share your experiences and thoughts on that exact point. I'd be curious to hear it. Yeah. Oh, you know, one more side of the Section 8 thing. I said earlier in the show that I've had one eviction, and I'm going through my second right now. But my only eviction I've ever done was Section 8.

It was my only Section 8 tenant I'd had, and I did an eviction. Because what happened was she, her unit was like really gross, like really gross. And so, like, they told her she had to clean it up, and she didn't. And so she had kicked off Section 8. 8. And even though like we like to say people don't want to get kicked off Section 8, sometimes people that aren't on Section 8 are not, what's the word? Like, I don't know, like they don't care. Like this lady did not care because, for whatever reason. So we ended up not getting rent from her then because Section 8 is that pain. So I mean, there is a dark side of that

is if they get kicked off the program, the tenant has no money to go anywhere. You will have to evict them and you'll have to go through the whole long process to do it because she just had nowhere to go. So I don't know. That's just my sob story about my one eviction. But I don't Have you had that happen at all, Mark? No, no. We're actually evicting our first Section 8 tenant right now, though, but it was a little different scenario. Recently, they combined the VA,

the Veteran Affairs programs, with Section 8, they gave them vouchers. And I have a gentleman, it's almost sad because he's just, he's senile, he doesn't know what's going on, and he doesn't belong living on his own. And to get anyone to really raise any attention to anyone that we have a problem here,

we did have to go through the process of filing and all that stuff. So, yeah. That was kind of the case with this lady, too. I think she should not have been living on her own. Just the condition of the house told me that she was she was not. She should have had help. But she wouldn't let anybody in.

She wouldn't let anybody have help or try to help her. Yeah, it was a mess. So there are downsides and upsides, I guess, to both, I mean, to the program. Now, one of the positive sides, you got to let me say this one. Sure. One of the positive sides is they don't move. Yeah. I have, our vacancy is very low.

We don't have in five years. We haven't had one tenant move out after one year. So we're almost guaranteed two years. time. We provide a nice house. Don't get me wrong. And we respond. We have a good system of responding when when needs are happening. So it's part of the management too. But our tenants don't move. And that's nice. And that makes things more consistent. Yeah, that's great. That's great. And I think we'll get into management in a few minutes. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is deals don't just fall into your lap anymore. You need to go out and create

opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution. That means you can not only find motivated sellers, but you can also reach out right away. Skip trace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI-powered insights and comps that are over next. 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step.

Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M. Don't just dream about real estate. Make it happen with PropStream. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine it. if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Funrise Flagship Fund. Now, you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is

one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the funds prospectus at fundrise.com slash flagship. This is a paid advertisement. New year, clean slate, and maybe a vacancy that needs to get filled fast? That's where a veil comes in. With a veil, rental listings can be published to 24 top rental sites with one click, completely free.

That includes places renters are already searching, like Realtor.com, Apartments.com, Redfin, and more. No copying and pasting. No juggling multiple platforms, just one listing that shows up everywhere. If getting rentals organized and filled fast is on the list this year, start with Avail. Sign up for free at Avail.co.com slash Bigger Pockets. That's A-V-A-I-L-C-O-Bigger Pockets. Wouldn't it be great if your houseplants paid rent while you were out of town? I mean, they've got the whole place to themselves, lots of sunlight, zero responsibilities. But no, they just sit there waiting for someone to spray them with some cool mist like a bunch of leafy loafers. But guess what?

Your home actually could be earning you money while you're not there. Airbnb has a great feature called the co-host network, which makes hosting your home so easy. If you live far from your property or are away for extended periods, you can hire a local co-host to take care of the hosting for you. These co-hosts are vetted locals who already have experience hosting on Airbnb. A co-host can handle all the details like messaging guests, creating your host space, and managing reservations, so everything runs smoothly. It's a practical way to earn a little extra money, maybe even some cash toward your next trip. Plus, you get to share your place with someone traveling to your area while you're off making

memories somewhere else. Your home might be worth more than you think. Find out how much at Airbnb.com slash host. I want to circle back. We went off on a tangent on the Section 8 just because it came out, but I want to circle back on the deals. You had said you found them mostly through MLS, that's correct? Yes, yes.

Okay, so you're not doing any kind of marketing or anything like that? We're not, but really what we've been talking about me and my partners recently, and it really prompted by bigger pockets is the need to really build a network of wholesalers. Yeah, we've been hearing that a lot lately on the podcast here, people who have been working with wholesalers. I've never actually bought from a wholesaler before, but now I'm thinking, too, I'm like, man, I should really get like a network of wholesalers working for me. So it's kind of a cool thing. And I think bigger pockets is, you know, heavily driving that, just through the podcast with

thousands of people listening because the wholesaling shows are pretty cool. It's always like, wow, that sounds awesome. I mean, Josh, I always say that after every show. Like, we need to do more of that. So anyway, that's cool. So you want to do more wholesaler stuff. I guess what does your business look like now versus what it was? We keep talking about past, like what it was, what these properties were.

Are you still buying all the time or if things slowed down now? Yes, we're still buying. We're actually buying, we've kind of ramped up lately and been buying more, but we're buying in better areas as we've learned as we've learned our way around on the south side. We don't have to be in areas that you see on the news to be paying these prices. So we've gone to a little more conservative areas that we're still able to get these great returns. Okay. And what maybe before we go on, I probably should ask us earlier. I want to talk about investing in lower income areas. What are some of the challenges that you see in those rough areas? I mean, how rough are they that you're in? I mean, are they, are they, ones that you would walk to by yourself, like alone, or are they, you know, worse than that? Are they better than that? Well, we have a, we have a variety of them. We have a couple that we bought right in the beginning are in the worst areas ever. And you won't see me there past like nine in the morning.

Yeah, I got like a window between 18 and 9 o'clock in the morning. I don't want to be there the rest of the day. But there's some that are like that. And, you know, the summer crime in Chicago is pretty rough. It makes national news. So, you have a lot of external, um, um, um, um, um, um, um, you have a lot of external, um, problems to overcome in owning properties in these neighborhoods. Do you recommend that people like, you know, newbies get started? Like, should they look for these cheap houses in these bad neighborhoods or, I don't know, what are your thoughts on that for new people? I would definitely recommend against it, I guess, in the sense of unless you have a partner

or you have a property manager that knows what they're doing to guide them along. Okay. We learned on the fly and we made a lot of mistakes and we learned a lot of things a hard way. But yeah, it definitely would not start there. Okay. Cool. Well, what about financing, getting all these properties? If you're buying, you know, you're, you know, over 100 properties.

How are you affording all this? Well, we originally, from the get-go, we had a third partner that put up some money. And we took that money and we bought the first seven properties. And this was 2009. And we never thought we'd have a problem going to a bank with good credit and all that stuff. I mean, still just blind to how bad things really were at that point. Our first cash out refi was, I think we paid like eight or nine points, 12.9 percent. And I gave my future child that wasn't born yet up.

It was horrible. I left that closing just feeling violated. I felt horrible that day. I've been there. But about a year later, it was only a one year note. So about nine months to a year later, we ended up finding a community bank. And we started doing portfolio loans with small local community banks. And that's really the place to be for investors.

Yeah, that's another common theme here on the podcast. I love that. Yeah. And so right now, most of your financing is through the community bank versus this partner? Yes. Oh, yeah, definitely. We paid him off when we first did the first cash out kind of kept doing going forward with, we kind of go five, ten properties and cash out and do five, ten more.

Now, we also got involved with, and this is something that I've been meeting a post on bigger pockets. In Chicago, there's a company called CIC, Community Investment Corp. and they do financing for any building five units or more. And they're a heck of a lot more lenient on their underwriting than any other bank. Interesting. They're sold. They're a non-for-profit that takes money from the big banks for the CRA money,

Community Reinvestment Act. I don't know if you guys familiar with that. A little bit. All these banks, Harris, Chase, Bank of America, they have to put back in loans X amount of millions of dollars a year. Instead of Bank of America lending on the Southside Chicago, they give $10 million, whatever their requirement is to CIC, which then turns around and lends it to people like us and they service it as well too. But they know what's going on in the neighborhoods. They know about these neighborhoods. Okay. And how does somebody find a company

like a CIC, well, a nonprofit like CIC? Well, most cities do have some version of it. CIC will manage anywhere in Chicago or will finance anywhere in Chicago. It's not just south side of Chicago. And there's a couple in Chicago as well, too. But my point is, like, if I'm looking in Albuquerque, how do I find the equivalent? I'm not sure. I'm not sure. How did you end up finding these guys? They really did a lot of marketing out there at the various, you know, there's the Chicago Apartment Association.

They did marketing through there, and that's how we end up getting hooked up with them. Okay. So really, I would just say networking, right? I mean, asking other people how they're financing. That's one of my favorite questions. Whenever I meet another investor in my area, I always ask them, like, so how are you, like, what bank are you using or how are you financing your deals? I find some good community banks, good portfolio lenders that way.

And they'll also do construction too. So they'll give you finance and construction. That's actually, that's probably the most important part of them. That's awesome. What kind of down payment? Yeah, what kind of down payment you have to do on these kind of like either this company or the portfolio loans? What do you require to bring?

Well, they're all different. When we're refinancing out, they're generally between 70 and 80% LTV of the appraisal value. or CIC does generally 20% down of the total construction, the project value. Okay, okay, cool. A.R. Well, let's shift gears. I know we're solely coming to the end of our show. So why don't we go to property management?

Because you are, I mean, you're doing a lot of property management, correct? Yes, yes, we are. Do you mind me asking how many properties do you manage now? We managed 383 unit. I figured this out this morning. That's how I was able to say the exact number. 383, you know, whether it be single family, two flats, three flats, six flats, 310 association units.

So we have to be managed like 10 or 12 associations and about half a million square feet of industrial and retail space. Okay. And how many people do you have in your team there, property management team? Well, we have two offices and we have two operations, but one for the city and one for the suburbs. But combined we have, I think, about 18 people. Okay. Okay, cool. Do you mind me asking, because I'm kind of in that stage right now where I'm ramping up, I get my company a little bit.

I mean, how do you recommend finding good people to work with? I'm assuming you had to hire most of these people. Maybe you have a human resource manager now, but how did you hire them and what do you look for? We were lucky in the sense of as we were a young company, we were able to latch on to some people that were just in our circle, our network circle, and kind of train them firsthand. So they, I guess, in a way, came at a good, value for me because they were on experience and I was able to train them the way I needed to. Because what I found when the market crashed, a lot of people were looking for jobs, but it wasn't a good property manager that were looking for jobs. Those people didn't get let go.

So we kind of kept in our own circles of people we knew and kind of trained in-house. Okay, cool. I'm a pretty big fan of that is, you know, rather than hiring somebody that's going to be the most expensive, just with any business, it's not just real estate, but hire somebody who's passionate, right, and they can do the job and train them up to be the kind of person you want them to be. I'm a big proponent for that. So cool. What do we go to then managing these tenants? You're a property manager. So we want to talk about actual dealing with tenants and some specific situations. So first of all, how are you finding your tenants? I mean, how do you market for them? Right now in the Chicago market, you know, we put them on the MLS, but Craigslist does amazing things

lately. Just since the market crash, we find a lot of tenants on Craigslist. Nice. Me too. How then do you screen your tenants, whether you find them on Craigslist or however else you do find them, what's your best method for screening? It's not bad. I mean, you could usually, that first phone call, you could usually root them out pretty quick or that first text message. How do you do it?

In the sense of, you just ask them a bunch of questions when they're moving and then, you know, how long they've been where they're at right now. It all really depends on the conversation. Okay. You said a minute ago with text message. Do you guys accept a lot of phone? I mean, like, is that just because people text because they don't want to call or do you actually say call or text us?

No, I really promote. All of our real estate signs, our big commercial signs say text okay, because it's kind of you get back to people faster at that point. That's interesting. I've never heard that tip, but I kind of like that is put that on the signs themselves. Text okay. Because honestly, I would rather,

I mean, obviously at some point you've got to talk to them. I don't know if they're normal or not. But I don't know. I think texting is kind of a neat way to get some information going. Well, I'm curious. We kind of zoom past it, but what would be the best questions that you have to screen somebody and really what are the answers that you're looking

for in terms of okay this is somebody I need to pass on well I guess in the in the when you take that first call for Craigslist we don't screen too hard in the sense of really their qualifications and all that I really my real question is how how fast they're looking to move in and how fast we get the space filled our application is pretty intense and the things we require them to show us is really that so you can take a look at that and most of the time. if people have a bad background, they'll see what we're looking for and they won't even submit an application. Yeah. Is there any major red flags that you look at on an application and say, no, I will not rent to that tenant because of that? Just not enough money may coming in.

Because people just try pushing it on what they can afford. And you just see that a mile away. And God forbid, a car breaks down or someone gets sick. And it all takes one few hundred dollar problem a month. And you're in trouble then. Evictions, of course, too. Yeah. Do you rent people with evictions? Not generally. Bankruptcies. everything else I'm open to. You know, we really don't go off of credit that much. There's such a big picture in various people's lives that we try really get in that entire picture where, you know, I really don't care if you have a 600 credit score. If you got enough money to put up and you pay first and last month and security deposit and you never been evicted and I really don't

care if your credit's bad. I love people that filed bankruptcy recently because it wiped out most their obligation. And now if they file bankruptcy three times, three in the last six years, then yeah, that's a red flag. Yep. But. Interesting point. The best tenants right now that I love are tenants coming out of a short sale or even a foreclosure. They got in over their head. Their monthly expenses were three or four grand a month. And now they're coming down to $1,500 a month rental payment.

They just want to get, they're embarrassed, they're ashamed. They just want to get back on their feet. And they can't go anywhere for another year. And they won't because it's such a pain in the butt to find this place. So you've got them for at least two years then too. Yep. All right. So next question I got for you is.

Let's talk about when tenants go bad. I mean, everything's great. Everyone thinks they're a good landlord when everything is good, right? What do you do when tenants go bad? Rent comes in late. You start seeing red flags of your tenant that you already have. What do you do? Well, the most important thing is in that scenario,

and we've all been, every landlord's let it go too far, whether it be a couple weeks or a month or whatnot. You should have to be ready. You have to, I'm not a big landlord of delivering the five day right after rents late. I'll generally give them to the seventh or eighth. and I always tell the tenants up front. If you know you're not going to pay on the 10th, let us know. You know by the first you're not going to pay to the 10th.

So let us know. So I kind of look for that type of communication. But delivering the five day and make sure you're in line to start any legal proceedings right away is probably the most important thing. Instead of letting it go three months or taking their sad stories. Yep, that makes sense. Well, what about, I mean, here's specific question. I want to get actually some specifics here because, I mean, this is real life stuff that Landers are facing and you're a real property manager.

So I think you can teach a lot of people. Let's just, I'm going to throw a few scenarios at you. Totally random. Like, they didn't happen to me this month. So a tenant, yeah. So a tenant calls and they call on, what was that? I think it was like rent's doing the first, late on the fifth. They call on the fifth and say that they're not getting paid for another week because something happened, blah, blah, blah.

What do you do in that case? Like a week, week and half. Do you just wait and say, okay, thank you? Or do you file a five, I think it's five day for you. It's three day for me. What do you do? Well, my first question is, do you have anything? Can you give me $300?

You're not going to have at all. And generally, we could usually get a few hundred bucks out of them, which makes you feel a little better. So I'll get a few hundred bucks out of them if that's possible, and I'll serve a five day right away for sure. So you'll serve prior to receiving the few hundred bucks, or you'll serve after receiving the few hundred bucks? After, after.

So how does the law play into that? because you know, you're collecting revenues from them. So didn't they technically pay rent? They didn't pay it in full, though. And the five-day you're going to serve is going to be for whatever the balances after they make the payment.

Gotcha. So you could technically serve them. I mean, if they paid, if they owe it $1,000, they pay $300. You serve them a five-day or for me a three-day on the remaining $700. And then if they pay another $300, though, you got to serve them.

And this is the case for me. If they paid an extra, let's say $300 again, I got to reserve them another three or five with the new number. It starts the process over if I accept after serving. Is that how it is for you? And my question before you answer that is, what's the starting date on that? Because say you receive, you know, say he owes $1,000 rent, it pays you $300. He doesn't, you know, he owes you $7.

So you send a notice on day five saying you owe $700. And then he pays you another $200 in, you know, three days. Do you have to, do you reserve the five then or do you have to wait 30 days? How does that all? Well, our attorney has advised us that as long as the amount he pays doesn't add up to what the five day is. So if he pay that $200, that means he still has $500 left. That five day could still be valid. But some judges in Cook County would not find that to be a good sports urge. Like, you're not working with a tenant. So we always do reserve. We reserve that a $500 one at that point. Yeah. Okay. And I think.

the bottom line, the bottom line is you want to talk to a very good qualified attorney in your area who can, who inform you of the local laws because all these landlord tenant laws are going to be different in different jurisdictions. Yes. Yeah. And even more than that, like a lot of things just, I mean, flat out aren't laws. Like, here's a situation happened to me in the last few days. I wouldn't talk to my, I served a three-day notice.

In Washington State, we have a three-day notice, and somebody from Washington is going to call me or email me and tell me this is wrong. But we have a three-day notice. and then we have an additional 10-day notice to pay the late fee. So we don't put, like basically there's two forms that we serve. There's a three-day and a 10-day. And if you can't put late fees on the three-day, but you can't on the 10-day. It's all this complicated stuff.

So I go to my attorney and I say, you know, I serve a three-day and a 10-day. And he goes, why did you do that? And I'm like, well, because the law says you have to. He's like, I don't worry about that. We've never done it in the history of our company. He says, no judges, judges don't care. Just serve him a notice, put the whole thing on one. Even though that's not technically the law.

he says do it anyway because that's how it's always done. It's a technicality. I don't know. So it's weird. Like right? Like even though something's law, it's still like subjective and there's different ways to do it that a lawyer even would tell me. So I don't know how. Unless you need a better lawyer. Unless, but I mean like this is like the major like he handles most of the landlords in town. And I think it's like in our local area, that's just not how it's done. It's just nobody does it that way. And even though it might be a law in Seattle or they might care up there. The judges in our area don't. And he knows that I didn't. So. I don't know. Even the law is a little bit fuzzy, I feel like sometimes. Well, it definitely is because, you know, so much that if the tenant doesn't show up a lot, nothing ever really comes of these technicalities or paperwork not being delivered, served right. That tenant shows up. It's a whole other ballgame. And sometimes the judge is really the ruler of all those decisions. Exactly. Just like you said, the judge is, like you said earlier, you might get a judge that might not like the fact that you're not doing that. So really, in the end, it just comes down to what a judge wants to do. And your lawyer is going to have a better idea of what a judge will or won't do because they know your judge is a lot better than you do.

So anyway, moving on. Well, so I've got a question here on this, on property management a little bit more here. How do I know your firm is going to do a good job by me? How do I vet you? How do I shop and decide, okay, well, you guys are actually good or you guys are going to burn me in some way, shape, or form? what do I need to look for to find a good property manager? Good questions in vetting a property manager is to request a list of properties you manage so you could drive by those physical properties and see what type of shape they're

really in. Kind of ask them what their collections is at. Their collections rate is that? And if they don't know the answer to that the guy you're talking to, then that's a red flag too. Then, you know, how long it takes you to rent a particular apartment or how long, how long it takes turnover and so forth and costs for maintenance. And the, really, for a landlord, if I was looking for a property management company, I would be looking for how is the property manager going to communicate with me? Who am I going to communicate with? And how am I going to get

my information on my money on a monthly base? How am I going to get my money? Those are all kind of important concepts. So what do you do then? I mean, if I'm looking at you and company B and company C, why would I pick you then? We're going to pick us because we're going to do a good job.

Is there anything that you do that stands out that that's above and beyond what anyone else does? Or is this kind of a commoditized business at this point? No, I definitely don't think so because I think there's enough

bad property managers out there that make the good ones look like heroes. Right, right. No, and I don't disagree with you. I've worked with some of the worst. But my question is, you know, how do we, how do we, you know, the questions you asked are good. And we've got a couple posts on this, and hopefully we can share these in the show notes, questions to ask property manage some of the screening things. I'm just curious, I guess, more so, you know, do you guys, for you specifically have some

kind of USP unique selling point about your company that, you know, you would say, oh, well, you know, we're better. Well, why are you better? What's better about what you guys do? Are you doing something cool that maybe other property managers could do? Or are you doing something that, you know, I as a landlord can bring to my property manager and say, wow, this guy on this podcast is doing A, B and C. And you guys need to start doing that.

or I'm going to go find somebody who does. Well, no matter how much technology gets, which we're utilizing, we really pride ourselves on the communication. We want to make sure the owner is comfortable enough that in a few months they're really letting us just run their property and paying them out on a monthly basis. And the level of comfort that we give a client is really what sets us apart.

Okay, cool. I have a question. Hopefully that wasn't too corny. No, no, I like it. And that's something that's hard to find I mean, in my area, we don't have any property manager that I trust because I don't think any of them cares about, you know, customer service or making me feel good as a landlord. For example, for example, my wife, I've been talking a lot to my wife lately about wanting to get property management to kind of get her out of having to do any work with the rentals anymore because it's driving us a little bit nuts sometimes. So her point is this.

When she drives by our rental property, she goes and drives by them and the blinds in our apartment complex, there's a, a couple of units, the blinds are destroyed. Little kids just wreck them. They put up a Power Rangers sheet in their place. Right? Like, I mean, this is a decent, nice neighborhood. There's a big Power Rangers sheet and wrecked blinds that look like, you know, there was a mass murder that took place there.

How do I find a property manager? And is that a property manager's job even to go and make sure that that kind of thing doesn't happen? Because I don't expect you to go drive around to all 300 of your properties. But at the same time, I don't expect my property to look like it came out of some, you know, third world country. So how do you reconcile those? two things. Well, the aesthetics of the property is so important. And that's a big one.

The blinds, especially on the south side. But in the sense of, you have to send that tenant the notice that they have to put the blinds back up that they broke or they have to replace them. If they're not going to in whatever day, three to five days, we're going to come out, we're going to hang our new blinds, and we're going to charge you back. That's generally how we would handle that. And we don't use too high end of blind. So it's usually a relatively cheap fix, but it's really given... $5 ones from Home Depot. Yeah, you give them the chance to fix it when they don't within that

certain period of time, which they generally don't, then you charge them back. Well, to that point, to Brandon's point, though, you know, you've got, I don't know, I mean, you've got hundreds of units that you take care of it sounds like, and, you know, lots of property managers do. Should I expect my property manager to go and visit, you know, you're

doing a flip, right? You're going to be on, you even said it earlier, you're going to be on the site every day and make sure they're doing their job. I, as a, as a landlord, who may live a thousand miles away or I may live up the block. I need to know that somebody's going to go and make sure it looks okay. So is that part of the job that you go by and look at the property? Yes, we tell people that we'll be at or on the property at least once a month.

Sometimes more, it's just for maintenance reasons. But if there's properties that nothing's going wrong, it's just a sweet old lady, we still make sure it's on our checklist to at least drive by and make sure that everything's okay. Okay, cool. You should expect that to answer your question. Yes, you should expect that. Okay, yeah. And I need to like, and that's something I've never really asked the property managers of my town.

I just, I fear that they wouldn't. I fear that they wouldn't because they got hundreds of properties. They don't care about mine. What do they care about if there's blinds wrecked? And I feel like they would just drop the ball. Nobody would do it. My property would go down a hill and we'd end up, you know, having their rural country apartment building. Well, here's what I've learned.

You know, I think when I first started, I was under the impression that I was getting interviewed by the property managers. And they do that. That's what you do. Hey, how many properties do you want to bring into our shop? Here's kind of our rules. Here's what we're looking to do. It's just as important, if not more, that you interview them and you tell them what you expected them.

And I think, Brandon, this applies for you specifically as well as anyone else listening. You know, if you expect them, if you need your properties managed and they're not doing it, then you need to go interview somebody else. I think that's the end of it. And you shouldn't be afraid to fire a property manager who isn't doing their job. Because frankly, the bottom line is these guys are tasked with doing everything that they're tasked with doing. And if you have an expectation and don't set that expectation up front with them, hey, I want to know that this property is in good condition. I don't want to have to drive by and find out that the blinds are destroyed and you didn't do anything about it for three months.

So if you're not going to do that, I'm going to find somebody who is. And I think if you come into the relationship and say, okay, this is what I expect from you as an owner being informed and knowing what is to be expected of a property manager is going to put you in a much stronger position. And it's going to ensure that you are actually getting a property manager who's going to do the job. Yeah. Yeah. And that's just like a hump I got to get over. So I really enjoy talking to guys like you, Mark, who can kind of like reassure me that there are good property managers out there who do drive by the properties once in a while and do all that stuff. So I definitely love these podcasts when we talk to property managers.

I actually need we probably should do more of these, you know, landlord ones. But before we before we go to the fire round, I want to ask you one final question. And that is completely unrelated to anything we've talked about so far, but I love this question. If you could go back and give yourself a piece of advice from like, you know now, knowing what you know now, go back in time when you first got started. What would you tell yourself? Real estate related, I would predict the crash. I would save more money when things were good before the market crash to take advantage of the when I did crash.

Okay. Even more so. I think I took a pretty good advantage of it, but if I would have done even more, I guess. Yeah. I think that's actually a really good point. I mean, for other people too, like we may or may not be going into another. I mean, people think we're probably in a bubble right now in a lot of areas. Is the market going to crash again?

I don't know. but if it does, it sure would be nice to have more cash. So when it does crash that, we can buy the cheaper properties again. I don't know. I think people could probably apply that both ways. But anyway, moving on, why don't we go to the... It's time for the fire round. All right, the fire round.

All right, these questions come straight out of the Bigger Pockets forums. Josh, you want to start us off? Absolutely. Do you have any tips for beginning property managers? Yes, take classes. There's always local, whether it be research and classes and bigger pockets, learn as much you can and listen to everybody else's mistakes. That's the number one thing. Good tip.

Listen to other people's mistakes. That's very smart. All right. Second one, should I put down 20% on a property just to avoid mortgage insurance? I believe mortgage insurance comes at a small cost to have that money liquid for something else. Okay. Cool. So you would say probably not.

Probably not. If that's the only reason why you're doing it. Yes. Okay. All right. So how long does it take for you to rent an average property out? Well, right now in the prime of this is the best part of the year to be renting. And if you're priced right, it shouldn't take more than a couple weeks right now.

Okay. All right. Cool. And my last question, how do you do your due diligence when buying a property? Really, the larger thing that I'm always worried about is in the city of Chicago, they're all older buildings that we buy. and it's really foundation cracks and if the floors are sinking, those type of bigger ticket costs and those are generally the bigger ticket costs. Yep.

So you just look for those, make sure that they're all good enough condition? Yes, yes. Okay. All right, all right, very cool. Well, let's finish this thing up with the world famous. Famous for. Famous for. These are the questions we ask everyone, every show.

And you listen to our show, Mark, so you know what's coming. Number one, what is your favorite real estate book? The Millionaire Real Estate Agent. Okay, Agent by Gary Keller. Yes. Cool. I've still not read that one yet. I've read the investor one, but not the agent one.

But I hear I need to, so it's on my list. Cool. Nice, nice. What about your favorite business book? Favorite business book? Right now I'm reading about halfway through E-Mith, which is really helping me in our growth process of the companies. But another one that I've actually read the whole thing through is best business advice I've ever received.

It was, I think Donald Trump's name is on it, but it's about 10 years old. I just bought that one, actually. Oh, it goes through excerpts of all these other people that have made it big and their best advice they ever received. So it's pretty cool. Nice. Cool. Yeah, very cool. I'm actually going to be taking a mini road trip tomorrow.

I'm going to go visit my family over the weekend. And in the car, it's like a long drive. I'm actually going to get the audio book of the E-Meth because my wife's never read it. And I thought, my wife would like that book. So we're going to get the audio book and I'm going to re-listen to it this weekend. So, yeah. It's amazing how true it is. It is, right?

I remember when I read it like a year ago or a year and a half ago. I thought it was amazing. And anyway, all right. So we got the real estate book, a business book. Next is hobbies. What about hobbies? What do you do for fun? Well, in football season, I like watch your football, college Saturday, NFL on Sunday.

What's your team? Well, bears for NFL. Bears. Bears. Bears. Sorry, couldn't help it. And then I do like Stanford for football in the last few years. They've been exciting to watch for college.

Cool. All right. Final question from me. What do you believe sets apart successful real estate investors from those who give up or fail? See, I said that clearly this time, Josh, right? Well, that's why I don't take them. I can't say that. Yeah, you make fun of me for that.

All right. What do you think sets them apart? investors that are successful have failed are prepared to fail and don't and get back up right away when they do fail so it's really just accepting failure all right i like it i don't like failing but i like your answer right on great right all right well listen it's it's it's definitely been great lots of good advice where can people find out more information about you mark well you can find out i'm always flowing around bigger pockets and then gcreelty incdcom is our company website.

Excellent. Well, thank you so much for your time. And for anybody listening, you can also ask Mark, any questions you have on the show notes at biggerpockets.com slash show 72. Thanks again, Mark. Thanks, guys.

All right, guys, that was Mark Aynley with Show 72 of the Bigger Pockets podcast with lots of good information about property management and lots of other topics as well. Hopefully you enjoyed this show. We've got plenty more in the lineup. So stay tuned for that.

You can meet folks like Mark and all our other guests on biggerpockets.com at www. www.biggerpockets.com. Hopefully, if you're not already a member, you'll jump on board and get involved and start to learn from your peers. Otherwise, if you want to find out what's going on with us, always follow us on Facebook, on Twitter, on LinkedIn. Gplus, we share lots of content there. We actually share some stuff unique to each of these different areas. and for example, if you wanted to check out the redesign of bigger pockets, we put some special exclusive screenshots of some of the new pages on our Facebook wall a few days ago.

So you could always check for those. That's really about it. We appreciate your listenership. I can't talk today. We appreciate your listenership. You can't talk today. You can't talk any day. Thank you.

Thank you. Thank you. There you go. Always always the penis. gallery. You know what, Brandon, I'll just, I'll just stop and let you finish. I got to finish last week, two weeks in a row. Yeah, you're not going to finish this week. Not going to happen. Sike. All right, guys, I'm Josh Dorkin. Signing all. 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. Be sure to join the millions of others who have benefited from BiggerPockets.com. home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calico content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.

The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.