BiggerPockets Real Estate Podcast - 78: Quitting Your Job, Buy & Hold Investing, and Succeeding With High-End Rentals with Brie Schmidt

Episode Date: July 10, 2014

Today on the BiggerPockets Podcast we are excited to sit down with a real estate investor who just said “you’re fired!” to her day job and became a full-time real estate investor! We are talking with Brie Schmidt, who invests in a wide range of rental properties in the Midwest and shares some incredible insight into how she finds them, finances them, and manages them. In our conversation we dive into some really important topics regarding personal finances, getting your first deal, working with your spouse, tenant-friendly laws, when to quit your job, and a lot more! You are going to LOVE this episode! In This Show We Cover… Why Brie chose a triplex for her first primary residence Choosing appreciation vs. cash flow in a buy and hold investment Why Brie decided to diversify her investments into long-distance investing. What makes an area “landlord–friendly” vs. “tenant friendly“ Dealing with maintenance request issues.. even while on vacation. Why Brie calls herself a “YouTube Landlord“ Real Estate as a hobby vs. a business Why Brie encourages Pets.. even a 120lb dog! When should you quit your job? Investing with your spouse: how to make it work House Hacking and using your personal finances to fund your investments Using online software to help you control your spending and invest in real estate The one question that Brie asked that led to a ton of deals, financing, and partnerships. Should you allow smokers in your rental unit? And a TON more! Links from the Show BiggerPockets Webinars PayNearMe.com/biggerpockets Handyman Matters Income Property TV Show How to Hack Your Housing and Get Paid to Live For Free Blog Post by Brandon Turner Mint.com The Book on Estimating Rehab Costs book by J Scott, Published by BiggerPockets Publishing. Tenant Screening: The Ultimate Guide Postlets.com IfThisThenThat: IfTTT.com Books Mentioned in the Show: The Millionaire Real Estate Investor by Gary Keller The One Thing by Gary Keller Tweetable Topics: “They should force lawmakers to own rental properties before writing the laws.” (Tweet This!) “BiggerPockets: Pissing Off Employers Since 2004” (Tweet This!) “What’s more important? Getting rich or staying married?” (Tweet This!) “The beginning of budgeting is understanding where you are.” (Tweet This!) “I’ve learned more on the BiggerPockets forums than any book I’ve ever read.” (Tweet This!) Connect with Brie: Brie’s BiggerPocket Profile Brie’s Twitter: @ChicagoBrie Brie’s Website: ChicagoBrie.com Learn more about your ad choices. Visit megaphone.fm/adchoices

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Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. going on everybody this is josh stork and host to the bigger pockets podcast here with brandon turner what up brandon what up josh was that sure like grandpa voice that's that's that's my rural washington voice oh there you go rural washington good job yep yep yep yep yes what's new man you know just uh you know coming off of a a nice july fourth weekend um excited about the uh the recent launch of the bigger pockets redesign, you know, finally de-dressing a little bit now that that's done. And otherwise, just, you know, living life, man, enjoying my family, enjoying the summer and,

you know, doing things, doing things, having fun. Nice. Well, hey, on the day that this comes out, which comes out on July 10th, it would have been my birthday yesterday. So happy, but we're recording this before my birthday, but, you know. Right. Right. So should I, should I be wishing you a happy, belated birthday, even though I already got you a gift or was responsible for you. You got me a gift? Oh. Yeah. But don't you love it? I love it. This is great. Happy, happy, happy, soon to be birthday or happy belated birthday. Yeah, yeah. There you go. Well, there you go. By the way, in case anybody didn't notice, Brandon there was mentioning his birthday because he wants you all to flood his email with happy

birthday messages. So please feel free to blow up his email with with emails. Thank you. Thank you. But, yeah, listen, we got a big show. We got a great show today. So let's get this thing going. Today's quick tip is we are about to launch webinars on Bigger Pockets. I know we've got this free podcast that rocks. We've got all sorts of other things going on like a blog that is amazing and the greatest forums online and all sorts of other cool stuff. Yeah, well, we're going to add webinars to it too just for fun. Why not? Right. So check out. Check out these webinars. We'll be promoting them on Facebook, on our site, and email, so on and so forth. If you are interested, we urge you to come on and do some of learning with us on the BiggerPockets webinars to be launched soon or to have already been launched. Also, I will put a link in the show notes to the webinar page. That way in the future, people listen to this can click on, go to the show notes page at biggerpockets.com slash show.

78 and they can see where the newest webinar is going to be. So check that out. Awesome. Awesome. Awesome. Which brings us to today's show, today's guest. Today's guest is Bree Schmidt. Bree. Brie is an active, active, active member of the Bigger Pockets community. She's amazing. She is, she's always out there giving advice, being helpful to folks. And we wanted to have her on the show. So here she is. Bree is officially, as of two days ago now, a full-time buy-and-hold investor who loves traveling and living the high life while being supported from her buy-and-hold investments. And, of course, working with her partner in crime, her spouse. She and her husband own properties throughout Chicago and Milwaukee areas. And they are passionate, passionate about what a good buy-and-hold strategy can produce. And they've built up a pretty substantial buy-and- buy and hold portfolio in the past three years that they've been at this. So definitely somebody to watch and learn from. With that, since we're talking about buying hold, Brandon, we've got our latest sponsor

for the podcast, and I thought we'd mention them really quickly here. All right. Well, I will take this one because this is something that I'm actually really passionate about. Our sponsor today is actually more than a sponsor. It's a company that I know and I love, and that is pay near me. This is a service that I use every month. to collect rent, and I really highly recommend it. In the past, all my tenants used to mail

rent or drop it in the drop box, and it was a major hassle every month, lost rent, etc. But now I use Paynear Me every month, which allows tenants to pay their rent in cash at any 7-Eleven or Family Dollar, and I get notified immediately that they did pay, and then their rent gets direct deposited into my account. So you can learn more or sign up at PaynearMe.com slash BiggerPockets, and our little pro benefit of the week is actually related to that. If you are a Bigger Pockets pro member, make sure you go to biggerpockets.com slash perks and sign up through that link and you get a $30 Amazon gift card when your tenants make their first rent payment. So definitely check them out. PaynearMe.com slash Bigger Pockets or at the Bigger Pockets Perks page. But that is way

too much chit-chat. So let us get to the interview. Josh, you want to welcome we're in? All right, Miss Bree. And I can call you that because we're friends. Yes. Welcome. Welcome to the show. It's good to have you. Yeah. Thank you for having me. Josh. and Brandon. You could call him that because you're friends as well. We are friends as well. Yes, we are, we are friends. Bree has been pretty active, I mean, really active on the forums for a while now. And we've been trying to get her on the show now for what, like three or four months and we finally got you. Yeah, sorry, I've been traveling a lot. Oh, she's been busy, brushing her teeth and that

kind of thing. Well, cool. Well, we want to hear about that and I actually want to ask you more about your traveling, but we'll do that later. But why don't we start the very beginning? How did you get involved or interested in real estate investing? Well, the real estate investment part came about 10 to 12 years after I got started with real estate. Long story short, I was a license assistant at 17, got my broker's license at 21, and absolutely hated it dealing with residential buyers. So I just kept, yeah, it was just not my thing. Josh, you did that too, right? We have the same story. Yeah. So I went into corporate sales for about a decade and did that for the last. you know, 10 years. But I got started with real estate investing a couple years ago and my husband

and I were getting married and we were looking to start a family and, you know, plan out the whole life and stuff. But if you look at like Chicago housing stock, like two to four unit properties are actually more prevalent than single family homes or condos in this market. And it's actually about $100,000 cheaper to buy a 3,000 square foot multi-unit than it is to buy 2,000 square foot single family. So we bought the three unit. Yeah, it is interesting. We bought the three unit thinking that we would eventually deconvert it to a single family at some point of our lives, really with no intentions of being real estate investors. We never looked at, you know, being landlords, never researched any of that and just kind of

winged it the first couple of months and realized that it was a passion of ours and we've kind of grown it from there. Well, that's cool. So you bought a triplex to live in, correct? I mean, like you actually lived in one of the units. Correct. We lived in one of the units and rented out two of the units. Okay.

And when you first bought it, I mean, like you talked about you wanted to maybe turn it eventually into something else. Did you rent it out immediately or was it rented when you bought it or did you just stick with one, you know, just you in there? We rented out immediately. So we took us about seven months to find our property. It was a very long, tedious process. But we bought a rehab. So it's fully like condo quality, brand new hardwood, stainless granite, all that. We bought it and we had it leased up within 48 hours.

Nice. the tenants moved in within two weeks. Wow. And this is in, this is in downtown Chicago, or where's this at? The north side of Chicago. Northside. Nice. I don't know Chicago well, but. Yeah. That's okay. It's a city that's outside of the forest. Yeah, but I mean, we didn't know anything about, you know, like three times income. We didn't know any of that kind of stuff. We just, you know, found tenants. They seemed nice. You know, they made decent money in, you know, our opinions. And we rented them and they've been the best tenants ever. And the numbers, numbers were good? Yeah, the numbers were good. So now that I know about, you know, the 2% rule and the 50% rule, we're about the 1.25% rule with this

property. And then, you know, our mortgage covered, excuse me, our rental income covered our PITI, but not expenses with us living there. All right. So for those people who don't know, let me just explain what those things are real quick. Bree, if you don't mind, I'm just going to jump in here and do my teacher thing. All right, first of all, you said the 50% rule, for those people who don't know that, 50% rule is a rule of thumb that a lot of investors around bigger pockets to use. That basically says half of all your income is going to go out in expenses, not including the mortgage. So if you rent a property for $1,000 a month, you could probably assume $500 is going to go out in expenses, and then you're going to pay the mortgage with the remaining $500, and whatever's

left is what you get to keep. So that's kind of a rule of thumb. It's not, don't buy a property based entirely on that, but it's a rule of thumb. But let me clarify, because you said you're going to pay the remaining in what's left of that 500. You actually may be paying the remaining in what goes above that 500. Yeah, so if your mortgage is 600, you could probably estimate a hundred dollars negative money. Yeah. So, yeah, so it's a real quick way. And again, don't buy a property based only on that. It's just a rule of thumb, but it helps to quickly do it. Then you mentioned the 2% rule or some people say the 1% rule basically says it's a ratio of the monthly rent compared to how much the purchase price is. So if it rents for

$1,000 a month and it costs $100,000 to buy, that is 1%. It meets the 1% rule. If it rents for $2,000 a month and you can buy it for $100,000, that's 2%. So it's just another quick way to kind of guess. Like I personally, I never buy anything under, never under 1%. I have one property that's like at the 1% rule and I lose money on it every month. It's my only property that I I always lose money on it. I hate that property. But I didn't know what I was doing. It was my second property I ever bought. And I just thought, it's a good deal. I'll buy it. So anyway, and then finally, you mentioned P-I-T-I, which is principal interest, taxes and insurance. I had to think of that one. Back to Bree. Back to Brie. I just want to make sure a lot of new people

are probably going to listen to this show. So I want to make sure everyone's on the same page. I'm glad you did that. Thank you. All right. Back to Bree. So you bought the Triplex. Now in Chicago, Correct me if I'm wrong. Whenever I talk to people from Chicago, they always say a three flat instead of a trap. Why is that? Any idea? I don't know. We call them two flats, three flats, four flats. I think all of Europe does that. Yeah, Europe does that. And then Chicago does that. I never got that. But whatever, weird. I have to constantly go back in my like forum posts and like edit it so that everyone else can understand what I'm talking about. Because I'll write three flat. But those Chicago people, they talk funny anyway. So it's all good. All right. Well, cool. Cool. All right. So you mentioned, I guess that you mentioned, I guess that you, bought the triplex. I mean, what else do you do? I mean, maybe we just take this back. What kind of investor are you? Are you doing more buy and hold since then? Or what's happened in the time

since you bought that? All buy and hold. So essentially, we've all done buy and hold. We've done one like rehab and hold or fix and hold, which is our primary residence. But that's been our main trajectory, I guess you can call it. So at this point, actually, as of next week, we'll be closing. We'll be at 27 units total, Chicago and Milwaukee. So we've been working up there for the past few months as well. And our property here, we did a rehab, a pretty extensive rehab, a $75,000 rehab on this property, and then refinanced out, cashed out in the equity, because that's one thing we do have in Chicago is we do have equity and appreciation gains pretty quickly with some minor repairs. Okay. And maybe you can explain that a little bit to

people also if they don't know. What, I mean, what's the difference between, I mean, what are you talking about when you say you have appreciation, you know, and you have cash flow, or what are you talking about there? So the way I see it, there's three types of investing. There's, you know, CD neighborhoods, which are very high cash flow markets, at which point, you know, if you sell them in 10 years, you're selling them for what you paid for them. Then there's the kind of middle road, which might be like a decent, you know, cash flow. You're just breaking even every month. But then in 10 years, you can expect to sell it, you know, for at least 3 to 4% in annual returns, interest or excuse me, appreciation of the property. And then you've got other properties that are

almost all appreciation based. That would be negative cash flowing every month. But you're really banking on in 10 years, you could double the cost of your investment. And what do you focus on that of those three? We're kind of middle the road. So we're mainly in the middle with the appreciation and the moderate cash flow. Okay. Okay. Yeah. And you know, people talk or hear me talking a lot on the podcast about, you know, some of my rental properties produce really good cash flow. And you know, I like to brag about how awesome that is. But in reality, I'm at the other end of that spectrum. I mean, I don't expect my things to appreciate very much at all. I mean, if I pay $100,000 for it, if I can't force the appreciation up by buying something crappy, then I'm going to assume it's

going to sell for $100,000, 10 years from now. And that's just a tradeoff in my area. Well, and I think that's a safe way for, especially for newer investors to go, right? I mean, you can't really predict appreciation. So, you know, if you're going to buy a rental, be smart, and I'm not saying you're not or anyone else who doesn't. I'm just saying, you know, in general, if you only assume zero appreciation and buy these buy and hold properties for cash flow only, then, and they do cash flow and you're good to go, then you're probably fairly, fairly good to go for the long run. Oh, yeah, of course. We didn't even know about other cash flow markets. You know, we always just thought what we bought was the greatest thing

in the entire world. Let's try to buy more that I just like it. Yeah, yeah, yeah. So how did you get interested? I find it interesting you invest in Milwaukee. We've had a couple of guests on the show, Mayeron and Don, both invest in Milwaukee, and Jay Scott has invested in Milwaukee. So why Milwaukee for you? How far away is that from Chicago? It's about an hour and a half drive. Okay. So why did you choose that area? Mainly because it was an hour and a half drive.

It was a market that I could get better cash flow for every, you know, $100,000 I spend, I expect, you know, to get $2,000 and rent every month. So it's more of the 2% rule up there than it is here. And we do have those markets in Chicago, especially like on the south side. But my issue is that in Milwaukee, they have got a much more friendly landlord side of the landlord-tenant ordinance up there where it's more easy to evict someone if there are problems. And I could still be close enough where I can still be there if there's a problem or control a situation. That's really why. And Illinois is a fairly landlord unfriendly state, correct?

Chicago specifically is probably one of the most unfriendly to landlords. What does that mean? I mean, what makes it unfriendly? So we have a very strict, I think it's like a 142-page Chicago landlord-tenant ordinance, which specifies every single thing that could possibly happen between a landlord and a tenant. And basically out of that whole situation, there's one thing that favors landlords, and that's a tenant moving out mid-lease. everything else is to the tenant. So whether it's like an eviction or security deposits, whatever it is,

it's, you know, the laws are going to favor tenants is essentially what it is, yeah. Correct. Like if I don't give a security deposit to someone within a specific amount of time, if I don't include the bank name, if I don't include the bank address, I'm liable for three times a security deposit. Oh, ouch. So it kind of keeps you, it makes you have to be really, really, you know, dot your eyes, cross your T's or cross your eyes and dot your T's.

Which isn't terrible. I mean, so I, you know, I think ultimately landlords don't complain about the dotting eyes and T-crossing. I think they complain about laws favoring tenants in situations like, you know, if somebody doesn't pay the rent and you have to wait six months before you could evict them and you're sucking it up that whole time. Yeah, that kind of stuff. How long does a typical eviction take you in Chicago? Is it really bad? I've never had an eviction. I've never had a tenant and pay late yet. Wow. So I don't know. Yeah. There you go. From what I hear, though, it could take up to six months. Wow. Can imagine that? I mean, imagine second up six months worth of money, which is, you know, it's crazy. It really is that the folks writing these laws, you know, you ought to take some of them, force anybody writing these laws to own property in the place where they own property and deal with the laws that they write because, I mean, that's insane.

It'll bankrupt a lot of people. Well, you're going to love this one. Now in Chicago, Section 8 is protected class. So we cannot refuse Section 8 tenants in Chicago. Really? I know Seattle's like that too now. Not all Washington, but Seattle is. So explain that.

If you have a property that's not, does it have to be a Section 8 type property? Nope. Okay. So if I own a rental, just some regular rental and a Section 8 renter comes in and says, you know what, I want to rent this property. and they're absolutely Section 8, then they could come in, apply. You can't deny them because they're Section 8. Now, do you then have to convert the property to a Section 8 property and kind of abide

by all the rules and everything at that point? Correct. It also goes through a Section 8 inspection. And, yeah, you can't deny them based on Section 8. You can still deny them based on, like, income. Tattoos on the fingers, you know, big tear drop on next to the rise. The normal legal ways to pass on a tenant would be the same. As long as that's your policy across the board.

So as long as all my properties have the same policy of income requirements and credit requirements, then it's not considered discrimination. Gotcha. Fascinating. So do you manage your own properties then? We do. All of them. All of them here in Chicago.

Okay, but you have a property manager for Milwaukee? Correct. We will. Okay. Okay, cool. So that's cool. You said you had 27, right? Correct.

There'll be eight units in Chicago and then 19 in Milwaukee. Wow. Wow. And how long, I don't know if we asked you this earlier, but how long did it take the bill that is up? When did you start with this whole process? August will be three years. Wow. That's, that's awesome.

That's impressive in three years. Wow. Yeah. Yeah. That's great. That's great. So you mentioned that you've never had an eviction. You've never even had a late payment.

I want to know how to, I mean, how is that even possible? I mean, I get late payments every, I mean, at least, It's once a month from somebody. I mean, I have a few more than 27, but still, how does that work for you? Mainly it comes down to, you know, obviously tenant screening and then streamlining processes and making it easier for us to do. Okay. Well, what kind of stuff do you do for that?

A couple of things. We do, you know, automated rent payments, having a direct deposit to our bank every month. You know, we have a form that the tenants fall out for maintenance request. It's automated with me and my husband. We've got a team in place that handles all that stuff if we're ever out of town. Cool. Cool. You know, anything that'll improve the process is obviously going to be great. You had mentioned, Bree, that you have maintenance forms and maintenance requests and stuff that you guys handle. Is that through a service or did you guys just build your own form on your site or how do

you guys do that? We just built it all our own because my husband and I, well, up until a couple days ago, both worked full time. We both traveled for work. So it was also very important. If anything ever happened to one of our tenants or something went wrong, we were both. We were both. We were both available to take care of it. So we have just a request form through our email that comes to us. It comes to both of us. And then we also have a 24-hour handyman service that we keep on retainer. Okay. So even if we travel out of the country, we authorize them to do any sort of service. They guarantee their work. We've had a great relationship with them. And they do anything that we can't handle ourselves. Is that up to a certain amount or is that just kind of unlimited?

Yeah, I think we authorize up to like $1,000 per unit. Okay. And then there's There's certain things like they can't come in obviously and repaint the house. Yeah. It has to be like repairs type work. We've never had to use them on one on a vacation, but it's great to have that backup. Oh, yeah. Do you use them for other, like when you're not on vacation as well? Or do you guys, like how do you manage your maintenance stuff? So if it's anything that we can do, which we call us the YouTube landlords, we learn. We YouTube it. And if we can figure it out, we can figure it out. I like that. But yeah, because we bought our properties here in Chicago, the ones that we manage, we're all bought from rehabbers. they're all condo quality. So they all have like new HVAC, new appliances, new flooring.

So we don't get very many repair requests. When we do, though, we go out and see it. If we can figure it out, we fix it. Usually it's something small. If not, we call them. Anything electrical or plumbing, they do. That's just way beyond our capabilities. And that's actually like a company.

I mean, that's what they do? That's their business model? No, no. Okay. Business model. So it's not like, That is a cool business model. I wish there was more companies like that. We've been using them like this business model for a few years now. They're actually all over

the country. They're a franchise business. But we like that. They have a licensed plumber. They have a licensed electrician. They have a licensed general contractor. So if I have a plumbing issue, I call, they give me the plumbing guy. If it's electrical, I call, they give me the electrical guy. So they have a whole team in place that's licensed bonded and insured. And then different guys come out for different projects depending on their expertise. And what's the name of the company? Handyman matters. Handyman matters. Cool. Yeah, I think they're all over the country, but they're phenomenal. We've had amazing

stuff with them. Cool. That's really cool. Yeah, I mean, I struggle. That is my biggest struggle in all of landlording is dealing with maintenance stuff. I mean, it's getting better now. We kind of got some guys, but we cycle through so many maintenance people. And again, Josh will make fun of me. It's because I'm in a rural area. But, you know, I don't think you're alone, man. Yeah, I think people even in big areas struggle with that. Hey, listen, I've got, you know, I've been through a few in the past year and a half. And, you know, both of that, the one, well, two of the ones I was working with,

I mean, they're fantastic, really, really great. But I think fundamentally, people who end up being handymen tend to end up being flaky. I don't know why, but like there's always some kind of flakiness that kind of comes in and they're great for six months and then they're gone. Disappeared. Something happened. And that's the end of it. So, you know, I guess that's one of the costs of doing business in the investing game, isn't it?

Yeah. Well, so you've been doing buy and hold. You've got the local and then you've got the properties at a distance. An hour and a half isn't terrible. Do you see any downside to that hour and a half distance or is that pretty decent for you? Well, considering I've not driven a car in about seven years, because I live in the city. Chicago. So I take public transportation everywhere. So it's been an adjustment. I don't like car rides from more than 10 minutes. And we've been up there like every weekend since February.

And I'll be up there more often. But we, the distance isn't really an issue. It's more of an issue of, I know Jay Scott talked about this too, finding reliable people up there. It's been really, really hard having to communicate long distance, establish a whole new network up there. You know, I needed bankers, insurance guys, agents, inspectors. and trying to establish that in a new market from a distance has been what's hard. Gotcha. Yeah. Gotcha.

I can see that. I mean, that's hard to do it when I'm local. Yeah, locally. Yeah, that's hard. So, yeah, trying to do it in a new market, especially when you don't live, you know, real close is tough. But you mentioned that up until last week, you and your husband both worked. Does that mean you quit your job or he quit his job? I quit my job two days ago.

Hey. Nice. Congratulations. Yeah, thank you. So you're full time now, real estate investor. Yeah. So did you quit your job because of real estate? Yeah. So that's what's been funny about this whole situation. Three years ago, we didn't even consider ourselves real estate investors. It was a hobby is what we kind of thought of it. It was a side business that we did. And I always try to make sure that my real estate business, my tenants never interfere with my day job. And then ever since really I found bigger pockets, it really exploited my passion in real estate investing and really accelerated a lot of things where now, especially this Milwaukee deal, I found that my day job was getting in the way of

of my real estate investing. And it got to the point where I needed something how to give. And I thought that my passion was more better put to use than real estate investing. That's awesome. That's awesome. I have a new tagline for bigger pockets. It's going to be bigger pockets, pissing off employers since 2004. That's that.

Yeah, there you go. No, we've had, I don't know, probably a dozen guests on the podcast who have either just quit, I mean, like, quit their job recently or after the podcast quit their job. I know a few of them, I know one person even got fired after a video on the podcast, but, uh, oh,

I didn't know about that one. Yeah, it pushed them to go full time. I don't know if I'm not going to say who it was because I don't know if they want me to, but yeah, they pushed them. Their employer heard them on the podcast and they fired them.

And then that pushed them to go full time and, uh, yeah, they're now full time. So anyway, yeah, we, uh, you know, oops.

So let, let us, let's talk about that for a little bit, maybe. Yeah. Yeah, I think you just scared off half of our guests. I know. No, I don't know. Some employers just have a problem with that whole idea. But anyway, so quitting your job. What can you tell people? I mean, like, when should a person

quit their job do you think? What's the right time? For us, it was the right time where our cash flow from our properties covered my income and then some. So it put us in a place financially where I wasn't, We weren't going to be struggling to make our mortgage payment every month because I wasn't working. That was really the point for us. And it took us three years, so it's not like it happened overnight. But that was really it for us. Gotcha. Gotcha.

Now that's cool. So let's talk about what you guys are doing. You invest with your husband. How are you guys divvying up the roles? What does he do? What do you do? Do you guys have specific roles? Or is it just kind of a jumbled mess and whoever does it?

does it? We definitely have specific roles. So when it comes to like the front end of the process, the buying, the acquiring all that, that's definitely my role. So he gets involved. He comes with me to showings. He also comes with me to inspections and he comes with me to closing. But finding the property, finding the deal, dealing with the banks, the insurance, all that is kind of me. I will say though he's never had any sort of experience with real estate, but we saw so many properties when we first started looking that he now has a really good eye for it. So what What's been great about it is whenever we've gone into a property, we'll walk out within five minutes, and both of us either say yes or no. So we've never had a disagreement about which property to buy

or which direction to go. We're usually on the same page with that. When it comes to like the day-to-day stuff, I handle all of the ton of communication. I lease out all of our units. I handle all the rent payments, all that stuff. And then he does mainly the manual labor. Like, you know, I can't. It's so sexist the way you guys have this set up. Yeah, it's messed up. But like, I just picked my first faucet the other day and was so excited. But, like, he's much better at that kind of stuff than I am. And so usually, like, he has to be there to do it.

That's all we're good for. We can throw rocks around and stuff. Yeah, yeah, yeah. So now, how does one, first of all, and maybe I missed it, is he still working or is he, he's got a full-time job? He is a full-time job. So until we can cover both of our incomes. But we might be doing some flip projects, which is what we're kind of investigating right now. And that is definitely more of his area of expertise.

And if so, then he might be the one that leaves too and starts managing those. That's because he throws rocks around. Yeah. He's actually a geologist. He does throw rocks around. Really? Ha! That's funny.

Awesome. That's hysterical. So how does one balance the, you know, the, the relationship, the personal relationship with the work relationship. You know, we got a lot of folks listening, couples, men, women, whatever it is. And, you know, I think it's a situation where, you know, it can be hard sometimes when you're trying to get through and, you know, run this budding and investing business. So how do you guys get through it?

And, you know, does it ever cause strife? And if so, do you have any tips for how people could potentially avoid those situations? Well, yeah, I mean, there's always going to be issues. Especially, like, I remember when we were first, our first property, we self-managed when we lived there. And we'd also shovel the snow. So there's nothing like getting it in disagreement at 6 o'clock in the morning in your front lawn when you're shoveling snow. Well, were you both shoveling it or were? Yeah, we're both shoveling.

Oh, okay, good, good. Because my wife makes me, she won't even touch a shovel. Yeah, well, typically, whatever, you have to get up early and do it before. We've got rules in Chicago about that, too. That's right. That's right. Yep. Yep.

Okay. So we balance a lot of it by, you know, luckily we're able to communicate very well. And we've got a lot of the same ideals. So we tend to err on the side of give our tenants what they want and make them happy. So when it comes to like financial decisions, you know, we had a tenant that she had a manual defrost in our freezer and we had to go over there and scrape the defrauster. And we both walked out. We're like, we need to buy our new refrigerator.

And most people would think that's insane. But we're like, you know, she needs to be happy. She's one of our best tenants. So a lot of those things we both agree on and it makes it a lot easier. There's obviously times where it's, you know, not so hunky-dory. And really we have to just kind of step away. Sometimes we'll just say, you know, let's talk about tomorrow. We need to get back to our relationship and leave the business.

It can be fine for a couple of hours. And then we'll just discuss it again in the morning. I think that's a good policy. I know my wife and I have a really hard time with that is separating the real estate business from our personal life, right? We go out to dinner and that's all we talk about is real estate. We have to tell yourself, we're not going to talk about real estate for the next two hours, period. Then we sit there in silence. It's like, well, what did you do today?

You know you were next to me. Yeah, so it's a, yeah, it's a battle. I mean, like, it is. And I love, I love working with my wife. I mean, I think we compliment each other really well, but it's not always easy, but it can be done. And people ask me that question a lot, actually, of how my wife and I work together. So one of these days, I'll write a blog post on that or something, but I don't know. Well, I think, at least for us, the main thing to me is that, you know, even before we started all this,

we sat down and were like, what are our goals in life? Like, what are the two to three things that are most important to us for our life? And we came down to them, and a lot of them have been able to at least be halfway achieved with real estate investing. So whenever things get murky or whatever, there's, you know, words are said, we always think back to why are we doing this? You know, why are we both working and then having a side job? Why are we exhausting ourselves driving to Milwaukee every weekend? It's because we want these things in our life.

And that's our goal and that goal is not changed. And we need to both work towards that goal. Yeah, I think that's great. I think that's great. And I think that's key. You know, for any kind of partnership, not just if it's your spouse, right? I think if you're going to be working with somebody in the business, you have to have similar ideals. You guys have to up front be on page and on point. And if you're not, then maybe

you guys shouldn't be doing it. Of course. Because, you know, that's going to lead to problems and the 59% divorce thing that happens. So whatever it is. Well, I hear that from time and time. People say, like, my spouse does not want to invest in real estate, but I want to. How do I do it without them wanting to? And I'm like, you don't. It sucks. And you might not get the cool, benefits you get out of investing in real estate. What's more important in your wife? Yeah, get rich or you're staying married. Yeah, I mean, but even like my husband has no like passion for real estate.

It's really not his thing. He likes to go look at the properties and be involved with them. But really, I got him, I'm the one who got him excited with it by watching like TV shows about real estate. Yeah, that's exactly how we did it too. Yeah, like income property was one of his favorite shows. And that's what really got him involved into it. And it's like, okay, let's do this, you know. Well, you know what you could do?

You can actually, if you cut a deal with him and let him dig big holes around all the houses so he can look at the rocks, maybe I'll get more excited. He's great on vacations when he goes to see volcanoes, though. He knows more than the guides. It's hilarious. That's awesome. That's awesome. That's cool. That's cool.

Well, really quick, guys, this is show 78 of the Bigger Pockets podcast. And you can check out the show notes at biggerpockets.com slash show 78. And, of course, if you have questions for Bree, feel free to ask. on the show notes. There you go. Let's dig a little deeper into how you guys are doing what you're doing. How are you guys funding your deals? So it all kind of snowballed again from three years ago. We had, we really sat down and saved. So put off all of our debt and we got enough money for an FHA down payment. So our properties in Chicago are in like the $300,000 to $400,000 range. So at that point, that's all we could ever afford. From there, we covered our mortgage with our PITI, or excuse me,

me, our rental income covered our mortgage. And we were able to essentially live for free. And we just kept sticking to our budget. And our budget at that point was about half of our income. So we were banking a few thousand dollars every month plus what we were saving and rent money at that point. And really just came from there. That's something that I call house hacking. I wrote a post a while ago called like how to hack your housing. It's that whole concept of find a small multifamily, rent out all the units but the one you live in and live for free so you can save your money and invest in real estate with that money you save. So you perfectly did that. That was great. And we've been on the same budget for about four years now. Nice. Nice. So even as like your income grows,

the more cash flow comes in, you stay on the same budget. Maybe you just save even more. Kind of a snowball effect, but you get to go bigger and bigger. That's cool. So it took us about a year and a half to buy our second. We then had that cash flow plus what we are saving. And then it just kind of snowballed from there. Nice. Nice. And I think that's where the average guy versus, say, an investor. The average investor probably differ, right? The average investor thinks with that mindset, hey, how do I snowball and build more property, which builds more passive wealth or passive active?

It's active. That's a whole other debate. Yeah, yeah. But, you know, let's take that money and put it into more property versus somebody who says, oh, well, I'm making more money. Let me now buy a better car or, you know, whatever it is. And so, yeah, I think that's smart. And I think if more people understood how to do that and had the restraint to do that, we'd have less people in financial problems here

in this country. Yeah. And I mean, to me, that all goes back to the, again, the goals. Our goal has always been we wanted to be retired by 40. Like, that is our end all be all goal. So when it comes down to, you know, if I can go buy a $500 pair of shoes, every time I ask myself, is it worth not retiring at 40? And the answer is usually no. And that really helps us keep on that budget month to month. Yeah, that's awesome. That's awesome. Do you have any more tips for people on budgeting and saving money and all that?

And since you saved a lot of money. Oh, I'm a budget crazy person. I've got Excel's like, oh my gosh, you can email me and I can send you my Excel. But I'm totally serious. It's obsessive-compulsive. Nice. Are you one of those people who goes to the grocery store and does that like, you know, that coupon hacking stuff where you're like, you know,

fighting, fighting people because you... I might be now. 17 toilet paper rolls. You know, working like 60 hours a week and doing real estate, grocery shopping has never been like a luxury of mine. Usually it's just running in, but I might now that I have time on my hands. But we started with a website called mint.com. I don't think I've ever used it before.

So we went with mint.com. We each loaded, we had separate accounts at that point. And we loaded up our past three months finances, It's credit cards, bank statements, everything like that. And it showed us where we were spending. And I think at the time we were spending like $800 a month on eating out. So that was a big life hack, bank account hack, whatever you want to call it. It was like, we need to start cutting that down.

And let's see if we can do it to $200 a month. And let's see if we can do it to $100 a month. And so it was really gradual for a few months, looking at things, looking at our cable, our internet, how we spend our money and seeing where we can cut and where we, we want to keep our money. That's cool. That's great. I know that I think the kind of the beginning of budgeting is just understanding where you are.

And that's where Mint is so helpful. I know my wife and I mentioned this on an earlier show, but my wife and I, I don't know, four or five years ago, we sat down and we actually did that same thing. I don't think we used Mint. I don't know if they were around then. But we sat down and I like mapped out on an Excel document where everything we were spending, every category and what we were doing. And like I found out we were like spending like $1,000 a month more than we made.

I mean, like, and I was wondering why we were like struggling so bad back then. Like, and that's why we were spending money on stuff we never would have thought of. And so as soon as we knew that, we instantly cut that $1,000 out. And also, we were fine. And we were at that point then paycheck to paycheck, at least, which is better than going in the hole every month. And, yeah, so budgeting just starts with understanding what you're spending. Yep. Yep.

And if only you could, you know, cut out that Starbucks, Brandon, you'd be the hell of rich. We budget. That was one of the things we cut out. We budget 200 a month. That's my one vice in this week. world. I don't smoke. I don't drink. I drink a Starbucks drink every, well, I used to drink one every day. Now I'm like once a week, but yeah, you know, we, we budget, we have a budget in our, like, Excel document and it's a Starbucks, $200. People think I'm crazy for that, but nothing makes me

happier on earth. I mean, I don't play video games. This is true, people. Nothing makes me happier than a 175 degree peppermint hot chocolate with no mocha drizzle. It is perfection. I love that. And by the way, If anyone ever goes to Starbucks with Brandon and the mocha peppermint is not 179 degrees, he gets angry and gets pissy at the people behind the counter. It's really funny to watch. I do it. No, but let me tell you why I do extra hot. I used to say extra hot, but that's like a peppermine hot chocolate's made for kids, right?

So I'm a big 28 year old kid. And so, but they make it like 140 degrees or something. So I'm like, I told them extra hot. So they make it like 141. And I'm like, no, I need it hot because otherwise I'll drink the whole thing in 10. 10 seconds and then I'm sad. So I just kept going higher and higher until 175 is the point that doesn't burn my, like inside of my mouth, but I still have to take five minutes to drink the drink.

Do you actually tell them to make it to 175? I say the words, 175. I do every time. And they, I don't say it anymore because they know my drink. I just walk in and they give it to me. But like, I would tell them 175. And they, I mean, they don't actually put a temperature gauge, but at least it gives them an idea. So anyway, yeah, people think that I'm a major like snow.

Whatever. I wonder why they would think that. Yeah, I love my 175 degree peppermint hot chocolate. Anyway, moving on, moving on, back to Bree. So budgeting. Yeah, let's talk a little bit more about that. I don't know. So any other tips for us?

You got to stick to it. Like you said, like awareness is one of the first things. Being aware of where your money is going, where you can cut is one thing. You also got to stick to it. So every month, you know, I do a check. Mint is great for that too. You set a budget on Mint and it tells you if you're over or under. so you're able to make adjustments if you, you know, are skewing one way or the other.

I mean, really just sticking to it, like I said, it's been four years we've stuck to this budget, and it's been able to save us enough money where we can grow. That's great. 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 Funrise Flagship Fund.

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You quit your job, told their boss to shove it. What would you do differently, if anything? What would I do differently? I would have found bigger packets sooner. Yeah. I would have. Because bigger packets, again, I'm really active on the forums, obsessed you might want to call it. I'm on there like every single day reading stuff.

learn more on the forums than any book I've ever read. And it's also really, really open my eyes to other markets and other ways of investing. Because up until I found bigger packets, the only thing I knew was, you know, Chicago, two to three unit properties, conventional financing, and then you just buy and hold. I had no idea about all this different creative stuff, wholesaling I didn't know about, different markets that are better cash flow. It's really just opened my eyes and my investing, what's the word plan, I guess you could say? Yeah. That's awesome. If I could just encourage people, I mean, again, we try not to plug ourselves too much. But honestly, like, people, if you're listening to this and you're not active on the forums, like we're not asking you to sign up for a pro membership. I mean, you know, that's great. But seriously, just jump in. It's a free account. Get active. Just ask questions, answer them and just learn. I mean, like, I'm the same way as you, Bree. I learn so much stuff once I started getting active on the forums, more than any book. So yeah. And even if you don't have questions, read. I probably spend my first hour. of every day. Now it's spent like reading the forum, seeing what's going on. There's a lot of things

that I don't know that it's now been teaching me about just by reading. That's great. That's great. Cool. Well, how are you finding your deals? Are you guys doing MLS properties? Are you doing any direct mail? What are you doing? Generally, MLS. So almost everything we found has been MLS. Just because we, because we both worked, we didn't want to deal with rehab properties. We didn't have the time or the bandwidth to handle that kind of stuff. We wanted rent ready, preferably, you know, completely rented out. So everything we found has been on the MLS, except for Milwaukee. Milwaukee was one deal was on the MLS. It was great. It's a duplex front coach house back. Great condition, great rental numbers. Totally loved it. We were walking out and we asked the agent who was also the property

manager, who we then found out was also the owner, you know, do you have any more? And he was like, well, my in-laws have about 80 properties in the area. Like, would they be with? willing to sell any. He's like, I don't know I ask them. So that is what came of that is they found more properties off market and then we got them. That, by the way, is a fantastic tip. And, you know, what are we on 78 shows so far? I don't think we've heard anyone else say that. And so I would press upon folks to do exactly what you did, which is when you buy property from somebody, it's a simple question. Do you have any other property that you might be interested in selling, or do you have any friends who have any properties that they might be interested in

selling? It's literally, it's a breath. And suddenly you've got more deals in the flow, right? And it's completely snowballed. He actually wants to partner with us on doing some flips. The family's invited us to vacation with them for Christmas. Like, it's become this really big thing. Now, I see it being a very long-term partnership with them, Milwaukee, on some things that we're going to be doing up there. So you got best buddies from asking a simple question. Yeah. That's awesome. That's cool. So for folks who are, you know, you've been doing the buy and hold and you're thinking about transitioning to flipping, right? I'm going to come back to landlording stuff in a minute, but I'm just curious. You're in the middle of this right now. What types of things are you thinking

about and worrying about and concerned about as a experienced landlord but newbie flipper. It's a whole. Oh my gosh. It's a whole new ballgame. Because we've never really, we've done like a rehab of our own personal residence, but we've never done a flip project. And really what's been, I've been reading on the forums. I've, you know, got Jay Scott's book about estimating rehab costs, which is going to be a huge help for me moving forward. But really what's helped me not be so insane about it is the partnerships that I potentially have. So we've got some of Milwaukee. We're also looking at doing some in Northwestern Indiana and then Southside Chicago. And it's really through partners that I met, mainly through networking off of BP. Gotcha.

Very cool. Very cool. Well, let's kind of go back onto the landlording topic a little bit. You know, you, Bree, you said you haven't had even a late payment. So obviously you're, I think you're, you must be a good landlord or extremely lucky. But either way, let's talk about some of the specifics about how you are a landlord. We talked about, you know, a little bit already, but what about tenant screening? You mentioned that earlier that a lot of it comes down to tenant screening and finding the right one. So what does your tenant screening process look like? So, you know, the requirements that we have three times income, which we do have now, and credit score. But what I find also, and we also, one of the things that makes us a little bit

difference is we allow pets. We actually encourage pets in our buildings. So yeah, because we have, we have pets. So when we first rented out our building, we have two medium and large size dogs, and we didn't want people to be scared of dogs. So both of our tenants had dogs. And then all our tenants now have dogs. So we even have a 120-pound mastiff in our building. But that also creates a niche market where not everybody allows pets. So it's very easy for us to rent out to people because everybody who has a dog wants one of our places. Yeah. Interesting. Yeah. No, that makes sense. Well, as a dog owner, I get it. That said, as a landlord, I get not wanting to rent to folks with dogs. So what are your policies? You know, when I was renting to folks with dogs,

we had size restrictions and things and we'd have to pre-screen the dogs and that kind of stuff. Do you have any kind of covenants restrictions, anything like that, deposits that you require? We do require an additional deposit, but we do full month security deposit. So also understand that our units are generally top of the market or at least in the higher end of the market. So we're talking like, you know, $13, $14 a month for a two-bedroom. So with one-month security deposit and then the pet fee, we're talking $2,000 a month. I'm sorry, $3,000. to even secure the apartment.

So usually we're pretty comfortable with they can throw down $3,000 to get the apartment that they are going to take care of the apartment. Yeah, I got you. So you don't have like, you know, there's no size restrictions. Obviously, you have mastiffs in there. Go ahead. That mastiff one though, it was a funny story. They came down to meet us to even see the apartment.

They brought the dog. It's a two-hour drive for us to meet the dog. And we actually rented them to them because they had a dog. That was actually a factor for us. Because our thought process was they seem nice. They've got good job, good credit. And no one in their right mind is going to give someone an apartment with a 120-pound mastiff. They'll never leave.

They will stay. Yeah, they'll stay as long as like, you know. That's a really good point. So we chose them over a non-dog owner because of the dog. Interesting. Yeah, yeah. You know, I never really thought about it from that perspective. You know, we don't allow dogs in our, like, our apartment complex or like even small multifamilies.

But in individual houses, we are usually a little bit more. lenient. Like we'll charge them a usually three or four hundred dollar pet fee. And we've never actually had a problem with a dog per se. We've had more problems with cats, I think, because cat spray. I was going to say that. So that's been more of an issue. But the only problem we've had with dogs is hair, like on all the baseboards and stuff like that. When they move out, I mean, do you do anything with that? Have you had tenants move out with dogs? Do they leave with a mess? Do you, I mean, I don't know. Well, this kind of goes back to, you know, what you do and don't do as landlords as far as your time.

And that was one of my first lessons I learned is that it is so much more worth my time to hire someone to come clean our units than it is for me to even attempt to do them. That's one thing I hire out hands down. So it depends on the tenant. We had a tenant move out this year. They were moving out of state. And she knew that she didn't have time to clean. She had a newborn baby and just said, you know, pay for the cleaners, take it out of our

deposit, schedule it and just handle it for me. But generally, we have them either clean themselves or we take it out of their security deposit. Gotcha. And do you, are you catist? Because, you know, Brandon's doggist and you're... I'm a dog person. Yeah, yeah. I like dogs and cats.

Oh, whatever. I don't like cats. So I don't either. So do you allow cats in your buildings or now? We do. I think we've only got one cat. Okay. So we've got seven dogs and one cat.

Gotcha. What I've always found with pets is that clean people have clean pets and dirty people have dirty pets. That's true. It doesn't really matter what. And so I don't know. I tend to think if I'm comfortable enough with a person to rent to them as a person, then I'm going to be comfortable enough with their pet. Unless the only reason, like I said, I don't do them in multifamily is because if I let, you know, John and 804B get a dog, then Sally and 804C is going to get one as well. And I don't know that one.

And I don't know. Then it becomes a problem. So how do you know that somebody's a clean person? I mean, is there a way that you as a landlord for those people listening who don't have experience can screen out for somebody who's kind of a hot mess? I'll let you take that one. I mean, you know, the answer for me is partially in the car. You know, you could look in the car and see if the car is disgusting. But, you know, anything above and beyond that? my best friends who are like very clean financial responsibility people have like the dirtiest car when it comes to McDonald's rappers it's insane um but no um mainly i look at you know just over all the financials um and then they're how they present themselves um you know to me somebody who is financially

responsible we specifically look at the past three years of their credit report um line item by line item and if they're paying their bills and they're financially responsible then i feel that that they'll be responsible tenants and responsible people I think it does come down to how they present themselves a lot of times too. Like you can just tell, I mean, I don't know, maybe it just comes in time, but I can just tell when I see somebody whether they're generally going to be a clean person. I mean, there's obviously reasons that I could be wrong. But you usually know if they're, you know, shirt has mustard stains all over it and like, you know, it's one size too small. I don't know.

You just kind of get those hints. Interesting. Yeah. Yeah. Like pets are expensive. Like they're not, you know, not cheap to take a dog to those. vet and make sure it's fed. Therefore, I think, you know, if you didn't want to be a responsible financial person,

like a financial responsible person, you wouldn't have a pet. Oh, that's not true. Well, that's not not true. No, that's not true at all. What are you talking about? There are plenty of financially, no, I know, no, I listen, they cost a fortune. But there's plenty of people who, you know, are financially irresponsible, taking pets, treating them like crap, not feeding them or, you know.

That is true. You're right. You know, so I'm not going to argue with you, but, you know, I'm not arguing with you here. We have a lot of in our town, just a lot of low-income people who have dogs, and they chain them up outside a lot of times where they let them run around the house and they cause a lot of problems. But again, you can usually spot those people just. Well, how do you spot them? Through screen. I think it's just through screening.

Like, if a person has a good credit report, I'm going to, I mean, like, it's all a big picture, right? I mean, like, if they have a good credit report and they have a good job, they probably have a clean house, probably. Right. If they have a clean house and they have a clean credit report, they probably have a good job. It all kind of goes together in a way. But it's an art, not a science, right? Yeah. I mean, it's very much so. I mean, I think screening tenants is something that is probably outside of purchasing the property, this is for buy and hold at a good price. It's probably the single most important thing you could possibly do with your property, right? Of course. is get the right folks. And, you know, what's unfortunate is there's no A, B, and C of how it, there's no way to get it perfect, right? You're, you know, even if you know everything,

you're still going to find ways to mess up. Brandon wrote a guide. It's the ultimate guide to screening tenants is really, really good. It doesn't cover every single thing because there's no way we could possibly cover every single thing. But we'll link to it in the show notes at biggerpockets.com slash so 78 and that's the ultimate guide to screening tenants. I definitely recommend. You can also, you can, people check that out. We do have a short link to that. It's biggerpockets.com slash tenant screening. So there you go. Yeah. There you go. Check it out. Nice. Cool. What about advertising for tenants? I mean, let's go back from screening.

How do you even find them in the first place? What are you doing? We use a site called Postlets. Okay. So it syndicates to Zillow, Trulia, all that. Typically, I actually just got yelled at today by my managing broker. I have a license here in Illinois. I'm in the process of getting it in Wisconsin, Indiana.

But I lunch with my broker today, and I was talking to him about how we just rented out one of our units. And we advertised on Sunday. We showed it on Monday. open house showings and we got it rented. And it's too low. You're renting it for too low. Which might be an indicator that maybe we are renting it for too low if I can rent them out in 24 hours. Yeah.

Yeah, that's not a bad point. Yeah. That's not a bad point. So are you going to experiment? Are you guys going to try raising the rent on the next one? Well, we're stuck for a year. No, I mean the next unit. Is this on a multi or a single?

Multi. But we have all of our units up June. June 1st. Nice. Which was somewhat of a mistake. We just went through three. three sets of new tenants, all moved in June 1st in two different buildings. And so we had showings all at the same time, screening all at the same time, moving, you know,

that whole mess. That's an interesting strategy, though. I've never heard anybody say that. But if you schedule all of your tenants to have the same date, then you only really have one crazy month every year instead of having a surprise. I've never heard anybody do that before. Yeah, but that's a crazy month, though. That is a crazy month, yeah.

Especially because we were both still working. And we were both traveling a lot that month. month too. So it was, there was definitely a point where I was like, this is the stupidest thing we've ever done. It definitely crossed our minds multiple times during the month. But the reality is we're done. We don't, you know, we don't have to think about any new tenants coming until next May. Yeah. Until you acquire more properties, of course. Yeah. But those will be managed in Milwaukee. We have a property manager up there. Why don't you have one locally? Because our properties are within like 10 minutes of us. Again, we bought them rehabbed.

So I think last year our one property, we got maybe one repair call the entire year out of all three units and the other property. We maybe got two or three repair calls from all three units. So it's not enough where we have to have someone manage them. And it's a lot easier for us to collect rent. We were doing it online or pay near me. It's easier to have those sort of automation systems in place. Do you mind me asking what your typical cash flow per unit would be on some of these ones in Chicago? So just said you bought nicer properties and usually you see those have less cash flow.

And what kind of things are you looking at? That's nosy, man. I know. So the average cash flow, if I divide it by three, I think we're looking at about $4 to $500 a month per unit. Wow. And is that including CAPEX and pretty much everything? That was our cash flow per unit last year after everything we spent expenses, utilities, mortgage payments, all that. Wow. That's awesome. That's pretty good.

But we're talking $300,000 houses. Yeah. So it's $100,000 a unit, not, you know, so we don't have that many of the, you know, expensive units here. Gotcha. Yeah. That makes sense. Okay, cool. That's not bad, though. Yeah. No, that's awesome.

It was why Milwaukee was an interesting area for us to look into because they do have. They have a lot higher cash flow per, you know, per what you spend up there. The price points are $65,000 for a duplex. Yeah. So it will be interesting. We've seen the actuals on the numbers up there. We should be cash flowing pretty good, but it'll be interesting to see what the actual numbers come out to in the next couple months.

Because those cheaper properties tend to have their older houses. They have a lot more maintenance. They have a lot more CAPEX. They have a lot of things that can go wrong. And you get lower quality tenants who wreck things. And yeah, so it's a trade-off. I mean, it's definitely a trade-off. I think our newest building we've ever bought was built in 1911.

Wow. Yeah. No kidding. Well, I think the Milwaukee Chamber of Commerce, is going to give me an award at some point because of all the landlords were sending to help renovate that city from the show.

But it's not really, it's a weird market though. There's not money people that are deal with investors up there. You know, I literally have eight agents that work for me up there. And it's been a struggle to even get one deal done with eight agents. Yeah, I think we heard the same thing from Jay Scott.

It's just really, really the infrastructure for investors is somewhat challenging, is my understanding. Yeah, for sure. Yeah. Well, listen, it's fascinating. What's, what's the end game? You guys want to retire by 40? What does that look like? You're at what 20, was it at 28 units, wherever you are. Are you guys, do you have a specific pace that you're aiming for or, you know, a total number of units you want? What's the goal there? Well, we'd like to be at 25,000 month rental income. Okay. That's kind of our goal where we could take the foot off the gas a little bit more. But now that I'll be doing investing full-time, like I said, I'm getting licensed in three different states.

I'll be brokering my own deals as well as potentially working with other investors. We're kind of looking at flips right now, too. But all that will really come back to any income that we make from either brokering deals or doing flips. we'll go back into buying and hold for my husband and I. I don't think, I'm not comfortable partnering the joint venture on buy and holds. It's just like you said, it has to have the right partner with the right mentality. And we just don't see it yet. Gotcha.

Gotcha. Really quick, you mentioned the agency side of things. I'm curious, before we move on to the next section here, do you think that it is in the interest of real estate investors to get their real estate license? Yeah, I think it is. Why? I think it teaches you a lot about just the market in general. Like that's really what, if I had never been an agent 10 years ago, I probably would have never even considered real estate investing.

And all that came from, you know, I loved looking at the numbers. And I loved, you know, staring at different, you know, appreciations, different markets and what the rentals were. I would just sit there for hours by myself and just play with the numbers. And that really helped me get a better understanding of my market, as well as develop an intuition about my market, which I think is the number one thing somebody can do in real estate.

Don't listen to others. Listen to what you think. Your gut tells you. That's a great point. And you really only get that from feet on the ground. And I think you can get it as an investor by literally knowing every house in your farm and as an agent, really the same thing,

going to every open house and seeing what's available, what's for sale, so you could start learning it. Exactly. Yeah, that's great. Cool. Cool. Well, hey, why don't we move on? It's time for the fire round.

All right. These questions come straight out of the Bigger Pockets Forum. So number one, what would you suggest for a newbie to do about calming their nerves when putting in their first property under contract? Xanax. You just got to be confident in yourself. You really do. And that, again, comes from learning your market. You really have to just trust your gut instinct and know that, you know, whatever you do,

it will work out. And if it doesn't work out, have an exit strategy, have a plan in place. Gotcha. Gotcha. All right. Would you do a two-year lease with a tenant? And if so, do you think that it would be worth some kind of a dollar reduction in monthly rent? The actual question that was asked was a $200 deduction and monthly rent if somebody were to sign a two-year lease and lock-in? I would do a two-year lease. I would depend on the rent. You know, If it's a $600 unit and you're asking for $200 off, you're insane. Oh, sure. If it's like a $3,000 unit and you want $200 off, if it's a good tenant maybe, it just really depends on the rent to like the ratio.

If it's $200 off a $600 unit, then there's no way. If it's $200 off a $3,000 unit, then yeah, if it's a good tenant, that might be a good case. The issue then is, you know, you have to be really, really strong about your tenant screening and be really, really sure that you want that person in there for two years if you're going to make that sort of commitment. Gotcha. Okay. Cool. All right. Here's a question that I'm actually really interested to hear what you say because this is something we're changing in our business. Do you have a no smoking policy in your rentals? Yes, I do. I have a no smoking policy in my rentals. If I catch, if I smell smoke in the units, it's a $1,000 fine. And then we only allow outdoor smoking, so we will allow on the exterior of the property. And for every butt I find that I have to pick up, it's a $50 charge. That's awesome. Cool idea. It's pretty intense.

We only have one smoker in the entire of all of our tenants. And so it's never really been an issue once I did find some butts. And I told her about it and said, I'll let you slide this time. But ever since I haven't had any problems. I like that idea. I never heard of me doing the charge per butt having to pick up. Because we have some tenants that smoke out their window. They sit in their window and smoke all day.

And then they litter the ground with cigarette butts. And they maybe go pick them up once in a while. But it's really bad. But one thing my wife and I are going to do now, I was going to test out. and see how it works is we're going to actually make a no smoking policy period. Like we don't rent to smokers in general, which. Yeah. And I'm going to get myself into huge trouble by saying this from smokers who listen to the show.

But generally speaking, my theory is this. In my area, those who smoke will be lower quality tenants than those who do not. I'm not saying all people who smoke are bad, but in general speaking, I'm going to try that out. And I think I'll get better. Because every tenant that I've ever evicted, well, it's only been. too. They've smoked heavily. Every tenant I have it a problem with has smoked. So again, it's, it's not a hundred percent correlation, but I think there is something there. And so a couple property managers I know told me that that's what they do now. Flat out, they do not rent to

smokers. And I might test it out just to see. I think it's a good policy. You know, the smokers are already hate me. I'm staunchly anti-smoking. You know, I mean, I have a, you, you can't even smoke on the property. Like, you know, if you're on the lawn, you're not smoking. Because I, I think it's disrespectful to people who don't want to breathe it in. You know, I walk, you go to the mall, you walk outside the door, they're smoking 10 feet away from the entrance to the mall. My kids have to walk through cigarette smoke. What is that? I mean, I think that's awful. I think if you're going to smoke, go smoke in the woods or something. Go, go smoke out some buddies. Yeah. And I think the other side of it is, too, is that tenants, like, tenants, at least the ones that I know that

we say you can't smoke inside. I mean, that's always been a policy of ours. You can't smoke inside. Yet still, when they vacate, their house always like reeks of smoke because they're either smoking inside or it's on their clothes. And either way, um, yeah, we've had that point of it's expensive. And you got to, you got to repaint, you got to do all sorts of odor killing stuff to get that stench out. And it's not easy. It's, well, it's easy, but it's not, not cheap to do. Yeah. So anyway, that's a test we're going to run. So we'll see. Um, all right. To hear about it. Yeah, yeah. Maybe I'll write a post about it. I might. Well, you know, thousands of hate, thousands of hate mail from smokers. Well, my fear is going to be actually in that is that I'm not going to get any tenants.

Like what I have low-income tenants. Like, I think over half of our county smokes. I think I've read that one time. So like, am I going to just shoot myself in the foot maybe? But we'll see. Or you might be the bastion of glory for the non-smokers. I was thinking that too. And you're going to get every non-smoker saying, wow, the turners have the best stench-free units in the county. Like if I write that in the ad in the newspaper, Craigslist, no smoker is allowed or something like that. It might give me, that might be actually be a benefit to to people like, oh, good. I, yeah.

So who knows? I don't know. Split test it, Brandon. I will. I'll split test that thing. That's awesome. All right, Bree. How do you handle tenants that are medical marijuana patients in?

Do you let him smoke in the unit? You, of course, oh, no, you live up in Chicago. Chicago. Do you guys have medical marijuana issues? No, it's only in Washington or here. Okay. Yeah. California.

We don't have that issue. In a few places. I mean, if it was allowed here, I think I would actually probably have to just because we've got so many different laws about that kind of stuff. It would be maybe a disability or something like that where there'd be a rule in place for landlords with our 147 page landlord guide. I'm sure they would spell it out. That has been a big issue. I mean, we've had a lot of conversations about that like at landlord media ups in Washington and Colorado. I'm sure, you know, it's there too. Is what do you do with is it a disability? Right. Because

they, medical marijuana means they have a disability. So by prohibiting medical marijuana, you are prohibiting a disability, which is illegal. So you can't do that. However, what I've heard, I'm not giving legal advice here, but what I've heard is you can't make it, you can't disallow medical marijuana, but you can disallow the smoking of it. Because that, like, you can't disallow the consumption of it, but you can the, you know, so anyway, that, again, that's just what I've heard. And I don't think there's been a core case to define it yet, but.

But places like Washington and Colorado, you know, it's so prevalent and most people aren't even smoking it anyway. Now they're eating it in brownies and cookies and lollipops and stuff like that. So I mean, the problem is extended beyond the landlord though. As a business person, you know, you now have to implement these things into your business policies and it's something that we struggle with, you know, hey, you know, it's legal to smoke pot. It's like drinking. So, okay. So if it's okay to do that, is it okay for, my my employees to go get stoned the night before work and coming to work, you know, the day after having, you know, gotten high. Well, our policies, no, you can't do that. But yeah,

well, and I know you can still test out, like, even though it's legal in Colorado, Colorado employers can still test and deny based on smoking marijuana because it's not a protected class. Right. It's just freedom. So, I mean, you can do it for alcohol, too. If you drink alcohol, I won't hire you. It's, well, sure. So, yeah. Interesting. Interesting. it'll be interesting to see kind of how the courts define these rules in the coming years. And I mean, I expect within 10 years every state will be the same as Washington, Colorado. But I don't know, it'll be interesting. It's a work in progress.

Yeah, for sure. All right, cool. Well, hey, that's pretty much, I mean, all the questions we got for you except for the world famous. Famous for these questions we ask everyone on every show. So let's hear what you have to say about them. Number one, what is your favorite real estate book? I think it's the millionaire real estate investor by Gary Keller. Okay.

It speaks a lot to just the mentality of investors, the psychology behind it. Cool. Yeah, that's a good book. How about business books? Do you have any favorites in that category? Well, when I'm actually reading right now, it's actually another Gary Keller book called The One Thing about how you just succeed in business and life using, like, boiling everything down to the one thing that's important.

What's important that day and then do it? That's not my. the next month than do it. That's in my Amazon like wish list right now. I'm going to buy that one of these days. I just have too many to work through right now that I, but yeah, it's on my list. Me too. All right.

What about hobbies, Bree? What do you and your husband do for fun besides real estate? Well, up until two days ago, real estate was my hobby. But besides that, it's travel. We love international travel. We went to Thailand, Costa Rica, like Spain, France, Italy, Croatia, and spending time in those cultures is what really is our hobby. Nice. What's been your favorite place to travel to so far?

They're all very different. I think, though, our favorite has been Thailand. So far, we got to spend a lot of time in like rule, rule. I'm saying that right, Brandon? Sounds like how I say it. In rule, Thailand, away from like the touristy stuff and really spending time with like the people. And even though they didn't speak English and we didn't speak Thai. you made it work and it was just a great experience. That's great. I had my honeymoon there in Thailand.

Really? Yeah. Yeah, I like it there. Nice. That's great. You guys done? Can I ask the last question? Is that all right?

That's my line. That's my line, by the way. Yeah, yeah. All right. What do you believe sets apart successful real estate investors from those who either give up, fail, or maybe never get started? Well, speaking from a buy and hold investor, I think the number one thing is, you know, just persistence.

I talked to a guy the other day who told me he wants to quit his job in three months. I was like, that's awesome. It took me four years. So, you know, you have to be persistent and it takes time and you're not going to, you know, do it overnight. And that's really what, to me, being a buy-hold divester is. Yeah. And we- Low and study wins the race.

And we certainly don't encourage people to quit their jobs in three months. I do. Don't do it until you're ready, guys. Seriously, like, I mean, I think it's so tempting. to say, oh, I love real estate. I'm starting to make money with it. I'm going to quit. And, you know, I think it's just better to be somewhat safer. You're more conscious than me. I'm more like, I mean, I'm not giving the advice here, but I'm more of the, you know, don't be stupid, but, you know, take some risks. And especially if you're young or if you don't have a huge family. I'm almost 40, man.

You know, things change. Yeah. And that's exactly it, right? Because I don't have kids. I don't have a lot. So I could risk a little bit more where you've got a family and you've got, you know, you can't risk as much. So it all comes down to who you are and what you're at. Absolutely. Absolutely. But if you're in the buy and hold arena, like having a W2 income, a stable W2 income, like there's no way we would have ever been able to grow to where we are right now without having both having a W2 income. That made the process so much easier for us. Well, and that's my biggest point on it as well. That income helps you with a lot of different things. It helps you survive. It helps you, you know, so if you're hating your job and sucking it up, you know and you've been doing it for a while and now you're into real estate you know suck it up a little a little a bit longer keep a hold of that W2 while you can yeah and set goals too yeah you have to set goals and then stick to them yeah that's awesome

all right brie well where where do people find out more information about you or what they find you online how can they get in touch um probably daily on bigger pockets in the forums nice i'm there almost every single day um and you know my profile on bigger packets Nice. Oh, I just got Twitter. You just got Twitter? I followed you on Twitter. Yeah, what, do you know what your Twitter handles? Yeah, what is your Twitter handle? Just Chicago Bree.

Chicago Bree. I'm not too sure how to use it yet. I've just been like retweeting a lot of stuff and like whatever, but I'm sure in the next few months I'll get it down. It's kind of. It's hard. It's like a giant room of people don't get it. It's like a giant room of people talking to each other. You just got to lock up and join their conversations.

That's how Josh is somebody to meet to me. and that's kind of, it makes sense. But there's a lot of promotion now. It's kind of irritating how much, I don't know, everybody's automated everything with Twitter, including myself. So like, there's like 12 people actually on Twitter and everything else is just if this, then that, or whatever. I just followed you, Bree.

Thank you. Nice. Yeah, awesome. Yeah, cool. Good stuff. Well, listen, we appreciate having you on the show. Thank you so much for all your activity and you being a big BP fan user, whatever it is.

And all right, Bree, thanks so much. We appreciate having you on the show. Take it easy. Thank you. All right, guys. That was Bree Schmidt on the Bigger Pockets podcast, Show 78. You can check out the show notes at biggerpockets.com slash show 78. If you've got any questions for Bree, definitely, definitely jump on there and jump in, jump in.

Otherwise, big thanks to our sponsor, Payne or me. We really do appreciate them helping support the show. If you want to check them out, you can do that at paynearme.com. Finally, thanks so much for listening. And hopefully, if you're a listener, you're also somebody who is active on bigger pockets. We certainly encourage you to participate on the forums and to read and engage those people, as you probably can tell by now. We get most of our podcast guests from our active users on bigger pockets. and one of the things that these guys all have in common is they all talk about how important

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