BiggerPockets Podcast 072 with Mark Ainley Transcript

Link to show: BP Podcast 072: Managing Hundreds of Tenants and Getting Uncle Sam to Pay the Rent with Mark Ainley

Josh: This is the BiggerPockets podcast, show 72.

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Josh: What's going on everybody? This is Josh Dorkin, host of the BiggerPockets podcast. Here with my co-host, Brandon Turner. What's up Brandon?

Brandon: Sup Josh? Hey, what's your middle name?

Josh: My middle name?

Brandon: Yeah.

Josh: Yeah, it's NFB buddy.

Brandon: Ha-ha. Alright, funny. Don't tell me what your middle name is.

Josh: None of your--what?

Brandon: Yeah, I gotcha. How's it going?

Josh: I'm good. I'm good. Just getting ready for the show. The big show. We got a lot going on BiggerPockets and that actually does lead me to today's...

Both: Quick tip.

Josh: Alright, so today's quick tip is this: we have been busting our backsides on a re-design of BiggerPockets for a good six plus months and this thing is amazing. We're really, really excited about it. Really, the tip is to keep your ears and eyes peeled for the launch on the new and improved BiggerPockets. I'm very pleased with it. I don't know about you Brandon, but I think it's going to help people a lot.

Brandon: I think it's going to be awesome. Most of the things are the same. You'll notice a lot of things are the same, but a lot of things are different. Everything that was not cool before, is now cool. That's my thinking. Everything that was cool is the same.

Josh: There you go. Well played my friend, well played. Alright, we've got a show with Mark Ainley. Mark's the owner and operator of a real estate brokerage and property management firm serving the Greater Chicago area. Mark has built a fairly sizable team. They manage and own lots of properties around town up there in the south side of Chicago. Mark's got a lot of great tips to help us out in terms of property management and doing deals himself. He's personally done, I believe somewhere between 150 and 175 deals, consisting of everything from SFRs to multi-families 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/show 72. Otherwise, sit back and enjoy the show.

Brandon: Cool, let's do it. Let's bring him in.

Josh: Alright, Mark. Welcome to the show, man. Good to have you here.

Mark: It's a pleasure to be on here.

Brandon: Good quality mic there. It's always nice when the guest has a good quality mic. Good job.

Mark: I have a good referral source for it.

Brandon: Ha-ha. 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 kind of a fascinating story. So let's start at the very beginning. How did you get bit by the real estate bug?

Mark: Well, when I was younger I always wanted to be, you know, just associated with Wall Street or money. I kind of always wanted to be a stock broker. But growing up in the late '90s, they kind of went online and kind of did away with your traditional stock broker occupation, for the most part. So then I thought the next big glamorous, fascinating industry was real estate. That kind of went away for a while. I thought about being a teacher and everything a boy wants to be - a firefighter, policeman and all that stuff. I ended up buying - 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 my dad. He was actually getting married and he didn't want to rent because he felt me being a liability being 21 living in his place. So he actually sold me his place--

Josh: Way to see there's a sense of trust there.

Mark: Yeah ha-ha. That's our story. So I owned my first place. My mortgage tax is in insurance, association fee - I was paying like $950. My friends were still living at home, 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 $500-600 and at one point, I had two buddies there, I was actually making more than my payments by the time they threw in for groceries and everything and I'm like, "Wow, I wasn't even living here, I could rent to a third person and I could be up $500-600 a month.

Brandon: That's funny. I actually did that when I was in college. I rented an apartment and it had four bedrooms. So I rented three of the bedrooms out to other guys and this was long before into real estate. 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 six months or something like that.

Josh: Are you serious?

Brandon: Yeah, totally serious. That's when I first realized that I could like sacrifice to live for free. 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. You got this house. You were hacking. I call that house hacking - where you buy a house, live for free because your buddies pay for it. So how did that go?

Mark: It was good. I was 21 - 22 years old and I was going to school but I was also working at a trucking company. It was a 24-hour place. 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, for me I guess I didn't sleep much - so I had plenty of time to kind of like figure out life. I as into reading. Back then it was all the Donald Trump books and Art of the Deal and just didn't have real estate books like they do know. I was 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 GC and all my investment properties. We're just kind of venturing, trying to be entrepreneurs. We looked at ice cream trucks. We looked at vending machines. We sold purses. Whatever. Whatever we did to make a dollar. We kind of always tried to look for something.

This was 2002, 2003, somewhere there-- when things really started kind of going crazy. One day, I was sitting at 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 it for." And it kind of hit me. And I said alright, worst case scenario-- back then I was counting closing costs, realty fees or anything like that-- I was just thinking I'm $10,000 up if I buy this thing right now. So me and my current partner we ended up buying that place that my buddy lived in and he stayed down 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 founded GC realty, my real estate and property manager 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 telling me this like 25 other times, but that day it made sense. He said, "Mark, if you would've had your real estate license today, you'd figure out in the calculator, you would've had this money. It'd be like $3,200." And that $3,200, I'm like, "Oh, that would've covered this. That would've covered that. That would've covered this." So right away, it hit me. After all the times he told me, it hit me. I said, "Alright." I started doing the home-stay like the next day. Shortly after that, about three months later while I'm still studying for that test - I did the home-stay, it took me a little longer than I wanted to - he said, "Mark, I'm thinking about starting a company. You want to come on board?" And I said, "Sure, I'm in. Let's do it." So we started GC Realty Development in late 2003. Very simple, working out his basement. Nothing glamorous.

Josh: So it's just you and this buddy. Did you end up actually buying that condo or?

Mark: Yes, that was the day - the day we closed, I brought home the HUD and all that stuff. And he said, "Man, you could've gotten a commission on this deal, man." That was the whole lightning bolt, that day. I spent that $3,200 commission I would've got in my head like fast, then I realized I don't have that $3,200.

Josh: Would you recommend new people start getting into the business the way you did or maybe you want to learn a little bit more before you get in and start house hacking, as Brandon likes to call it?

Mark: It definitely reduces your risk. It's always a good option to explore, with limited risk, yes.

Josh: Except of course, if your friends are dead-beats.

Mark: Well. Yeah, yeah.

Brandon: Actually, how did that go? I want to know that. Did that work out well, renting to your friends? Whatever happened to that house that you lived in?

Mark: Well, it worked out good cause the cool thing is now you have to go through eviction courts to kick them out. I just said, "Get out," and I'm done. I go through three months where I take money and then three months I kick them out so it was nice to have those options.

Brandon: Ha-ha. Because they're your friends you can just shut the door on them?

Mark: Yeah, there's no five days.

Brandon: Ha-ha, I guess. 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? What did you do next? I know you did some flipping in there somewhere right?

Mark: Yes, well that first condo we bought, the conversion-- my buddy moved out, we moved a new tenant and it was the worst tenant ever. Right off the bat, I didn't do too much screening. I fell for his sad story and it was a horrible tenant and we ended up paying her a Before cash for keys were popular, we did it ourselves in that sense just to get rid of her.

Brandon: 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?

Mark: Well, cash for keys is basically the substitute to going through the legal eviction process. As an example if the tenant's paying today, I could either hand him a five-day and start a legal process or I could say, "I'll give you $500 if you're out by Sunday and you turn over keys to me." They use that money to move on, I get possession back quicker and you can start moving on.

Brandon: I've had like five or six really bad tenants. Like really bad that should've been evictions. Four of five of them then, we did cash for keys. Only one did I ever actually take to court and I'm on my second right now. The rest have all been cash for keys. I'm a big fan. It hurts the pride a lot.

Josh: Did it work?

Brandon: For me?

Josh: Yeah.

Brandon: Yeah, it worked every time. They left fairly clean because they wanted that money and were gone. But yeah, the one lady that we did anyway, she refused to even answer the phone or mail or whatever. So we had to evict her. And now the second lady's the same way. Yeah, I'm a big fan of cash for keys. But like I said, it does hurt the pride to—

Josh: I'm curious for both of you guys. I've actually never done cash for keys. Brandon, were you doing $500? And Mark, it sounds like that was your number, yeah?

Mark: For that particular situation, yes. Here in Cook County - where Chicago's located - the judicial system's screwed up in the sense that everything takes forever and everything costs money. To evict someone in Chicago, it could take anywhere from-- it could max out at six to seven months sometimes, even some horror stories. To give a guy a couple of thousand bucks to eliminate that - 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 will work the system.

Brandon: In my case, I think the highest we've ever paid was like $600. The lowest was I think $200. The last guy was just-- he was a tweaker. We found out he got into drugs really bad while he was there. He needed some money for drugs, so I offered him $200 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, "Show up at the guy's door with a pile of cash. Get it all intense. 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 and you see all that pile of cash, that's all you think about for the whole week. And it worked.

Josh: Remind me next time that you ask if I want to invest in a property like what you say now.

Brandon: Ha-ha. There are druggies everywhere. This is a nice house too, but yeah, this guy went down the rabbit hole of drugs.

Josh: Now do you feel bad about the fact that you're giving drugs to a tweaker, instead of giving him a home, now you're giving him cash--

Brandon: I'm going to let Mark answer that one.

Josh: Ha-ha. No comment Mark.

Brandon: No comment, let's move on. Alright, that first one went really bad. You did the cash for keys. What happened next?

Mark: We said we're never going to rent to anybody again, let's go flip houses. That's exactly the conversation.

Josh: Nice. Now did you stay true to that, by the way?

Mark: Well, for a very short time. Right until the market crashed, pretty much.

Brandon: So how did the flipping go? What was that like?

Mark: Again, it was with my current partner I have now. And he is more of a mechanically inclined partner and I'm not. I'm good with Excel spreadsheets and all he knows is Yahoo email and that's about it. So we have a really good partnership in that sense. It made sense, and it still makes sense - our partnership is our strengths and weaknesses. So we started buying a couple of houses and those houses, I was actually in there, doing the work. Taking down the old pool, filling it in. Painting. Doing everything I could cause we're just trying to maximize our profits, at that point.

Then we did do a couple of flips successfully. We got stuff we wanted that turned into rentals. At that time, we kind of involuntarily became landlords again, at that point.

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

Mark: Well, the market was on the up so that was the best thing we had going for us. 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. We didn't see it at that point, but now I could say that. Really cutting cost down and controlling and being at the project every day. 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. It wasn't like flipping is today. Actually we looked into doing flipping last year, we kind of faded away. We're actually working on one now currently, but it's a whole different game than it was 2004.

Brandon: That's very true.

Josh: You mean you just can't put a sign up that you're flipping a house and have a buyer five minutes later who has 1%, money down and not even close to qualifying for the mortgage?

Mark: And all he did is pay the place. Ha-ha.

Brandon: Alright, right on. So you started flipping, some of them turned into rentals. That's when you got back in the rental game. What made you stop flipping? Was that the market crash?

Mark: Well, the market started going up and there was less opportunities to buy those. Anything that went on the market yet you had 25 people at and 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. When I first got my license, I really went around to these condo conversions, and they're happening everywhere. 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 and getting 100% financing. We were growing the brokerage side of things at that point. So that kind of faded away because on the flip, there wasn't much margins. 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 ended up just renting. So we just rent where it's liquidating more.

Josh: Hey Mark, similar to that first deal where you bought the condo, you were working with the builders and you were the agent on the south side for the conversions, is that what it was?

Mark: Correct, correct.

Josh: 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. If you get the contract, you got the whole property, right?

Mark: Well, we weren't representing the builder. I just had a pool of investors or people that I knew that were looking to get in real estate that I would bring to the table and they would buy these condos. These kind of conversions were selling out in a matter of a couple of weeks just because everything was going so fast at that point.

Josh: 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 are you just buying a property--

Mark: I was just really acting solely as an agent that time for my company, GC Realty and we were representing investors in buying the condo conversions.

Brandon:  Dude has the buyer's agent on that.

Mark: 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 would you pay me?" Haha. He's like, "I'll give you $50 a month." I said, "Alright." And he's like, "Alright, I'll drop the management contract and send it over tomorrow." And that's how GC Property Management as born, right there at the closing table that day.

Brandon: That's funny, that's interesting. I used to do $50 a month. I had some friends that wanted help with the rentals and like, "Well, how much would it be to do two hours of maintenance every month and then just answer phone calls?" And I'm like, "I don't know, $50?" To this day, I still answer their phone calls for $50 a month on that property. It's been like nine years since I did that for the first time.

Josh: Why?

Brandon: Because I don't know, I don't want to call and tell them, "Hey, I'm not going to take care of those anymore." So I still answer the phone calls every once in a while. I probably put in - I don't do the maintenance anymore - an hour a month of work. That's like $50 an hour so I just keep it up. I need to probably quit that pretty soon.

Mark: That particular client we still do charge $50 and we still use the same management agreement he gave us so it was a value add scenario.

Brandon: Nice.

Josh: I guess there's something to the legacy agreements, right?

Brandon: Yeah, there you go. Alright that's how you got in to property management. So you went from flipping to mainly agent stuff to rental properties and stuff. Why don't we actually move to that and talk about your rental property investing? 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 right?

Mark: Yes, yes.

Brandon: So how did that happen? How did that transition happen?

Josh: And I'm curious about how you actually bought the properties? Were you financing them? How were you acquiring this?

Mark: Well, I'll take a long story and trim it up. When we got into property management, we started managing properties for a particular client. We managed three properties for him and we got to know him. He was really about buying properties. He was buying properties, we were actually doing the work on him and we were selling it for him. So we were getting paid three ways. We're getting the buy side, we're getting the general contracting fee and we're selling them. We were selling them to people we knew because we knew they were good properties. With that same client, we kind of built a relationship with him, that same client I took to an auction one day in May 2008. It was a Sunday afternoon. We left that auction one day. He bought three properties for $70,000.

Brandon: $70,000 each or $70,000 total?

Mark: $70,000 total.

Josh: For the three properties?

Mark: Yes.

Josh: And this is Chicago? Where were these?

Mark: This is south side Chicago, these properties.

Josh: Oh south side Chicago. Gotcha. That's like Detroit for those people who don't know Chicago.

Mark: Oh there's a lot of good areas. 

Brandon: So $70,000.

Mark: So that's afternoon, I was like, "What'd you just buy here?" And he's like, "Well, we're going down that way right now. 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 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 were empty. We walk in the unit. There's a sheriff sign on the unit door. We walk in the unit and everything's stripped out. Everything. I'm feeling horrible. As his real estate agent, I'm like, "Oh, I should've helped him. I should've looked into this more for him. I shouldn't have let him buy it." And he goes, "This is great. See if the other ones in the building are available." I'm like, "What?" He broke it down for me. He was like, "I'll out X amount of dollars into it. I'll rent it for this much. We'll manage it blah blah blah." I went home that night. Threw together a spreadsheet and I realized and said, "Man. Based on those numbers, it's like a 25 or 26 cash on cash return for that, what he said.

So I went back to him a couple of days later with my partner and said, "Let's kind of put some money together and let's buy this mass quantity because there's no way these won't at least double in value. It just can't go any lower than that. And at that time, the Olympics were coming. That was right in the neighborhood, the proposed Olympics. If the Olympics came, that could've been a humongous thing as well too. Ultimately, it never came but actually Olympics not coming helped better for the south side because for us, for the investors, because prices went down a little lower even.

Josh: Wait a second. Prices couldn't have gotten any lower and yet they went lower, right?

Mark: Yeah, it still went a little lower.

Josh: Okay, so I just want to call you out on that because for everybody listening - I think this is a really, really important point. Don't ever assume it can't go lower because it really, really can. Even when everything looks like it's going to line up for you, you got to be cautious about these things. I think You probably ended up okay in the end but the risk is always there. There's never zero risk that it's going to turn and go against you.

Mark: Yeah, but we're talking about $4000 or $5000 lower, which is really 10% or 15% still.

Josh: Well, it's lower though. And for you who bought it at probably the right price, somebody else who may have chased it, that $4000 or $5000 could have been a problem. And if you're stacking notes and you're leveraging yourself, you could find yourself in trouble.

Mark: Yes, but it didn't come out pretty significant so that really offset sort of any risk in that element.

Josh: I gotcha. Well, again. We've got 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's never going to go down. Yes, income is great but if you're buying it for appreciation in any way or shape of form, think twice about that because there's always the chance it could go the other way.

Brandon: So Mark, how did you then decide? You bought these things for cash flow right? You're not assuming appreciation, is that correct?

Mark: Correct.

Brandon: For those people who don't know, what is the difference and why do you choose one over another?

Mark: 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. In Chicago more particular, there was no such thing as cash flow before the market crashed. So that really introduced cash flow to me, when the market crashed.

Brandon: Yeah. How many deals did you buy during this time then?

Mark: In between 2008 and 2013, we collected 135 units, we did.

Brandon: Nice. 135. And where they all like single family houses or where they condos?

Mark: Our largest building was 18 and our smallest was a condo or single family. So we had everything in between a few six flats and so forth.

Brandon: Okay, what do these deals look like? What were you buying them typically for? What kind of cap rate, maybe ROI? What were you looking for? What was your standard for a good property?

Mark: We were trying to keep our cost between purchase and fix up between $40,000 and $45,000. That was always kind of the goal.

Brandon: Okay, and what do those rent for?

Mark: We were getting it anywhere between $1,100 and $1,300.

Josh: That's great. That's really, really nice.

Mark: And it's all Section 8 housing, for the most part.

Josh: So I'm assuming these are all low-income section 8 housing, correct?

Mark: Yes, correct.

Josh: Okay.

Brandon: And what kind of condition where they in? Did they all need rehab? Did you have to rehab them all? How did they condition-wise look?

Mark: There were various. Some were 75 years old, never been cleaned up. Those were the worst clean-ups. But the ones that were remodeled 20 years and just electric and the plumbing were stripped out. Those were the easier ones to put back together.

Brandon: 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 then renting it out. Kind of a hybrid between flipping and renting, but I'm a huge fan of that. So let's talk about a little more about those properties. You're buying them, they cash flow incredibly, right? How did you find them? Are they all MLS deals?

Mark: Yes, they were all MLS deals at that point. And on the south side Chicago, they're still abundant. It's just the last 30 days we really started not seeing as many deals a we used to. So yeah, mostly MLS deals, at that point. And auction.com and so forth.

Brandon: Okay.

Josh: Alright. 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?

Mark: 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 their rent paid. 

Josh: Gotcha. So how does it work in terms of rent? Is the section 8 rent the market rent, is section rent set by the locality or by HUD based upon area?

Mark: It is set by HUD and it does go with the market rents of a particular area, so long as it's not a super high-end area. But the rents are set by HUD and the size of the place, the amount of bedrooms and if it's a single family. There's a pretty sophisticated formula that I don't think too many people can 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.

Josh: Yeah, generally there's a chart I think that you can look up online and you can actually check out your-- I don't know if it's state or city, I'm forgetting now-- but it would basically tell you exactly what rents you'd get based on a 3 or 2-bedroom or 1-bedroom. What I found 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. It does tend to be attractive in those areas, I think.

Brandon: What are you getting? What do you in your area for section 8? Do you see higher rents for section 8? Lower? Or about the same?

Mark: In that area, yes. It is definitely higher. Out here in the burbs, other subsidies we manage, it's lower. About $100 lower, 10% lower pretty much.

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

Josh: Yes, absolutely.

Brandon: What do you think?

Mark: We put that it's 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. Ha-ha.

Brandon: So you put section 8 welcome in there?

Mark: Yes, yes.

Josh: 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 Brandon, that would be section 8 accepted-- you have to get into the program, the unit has to be inspected and all that-- you could then list it there.

Brandon: I need to probably work towards that because I don't like vacancies. I don't think I've had ever had a vacancy over a month. This one might be over a month. Not fun.

Josh: I remember one of the nice things about section 8 was, you kind of have a little of a 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?

Mark: 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 part of the program. Now their voucher, their section 8 voucher, is inheritable as well too. So if Mom messes up on it, she can't pass on her daughter. If Mom loses her voucher, it's inheritable for generations.

Josh: Gotcha. And the nice thing about section 8 also is you're getting a check directly from the government right? 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?

Mark: On the first of the month, I get the money, like clockwork, deposited into our account. SO that's nice yes. Then the tenant will pay the difference somewhere in the month. Ha-ha. Generally, they're usually pretty good.

Brandon: That's where I wanted to go to. I've got some tenants on governments programs, not section 8, but I got some other ones. The government will pay, whatever this organization is, but they will pay $450 or $500 and the tenant has to pay like $50 a month. It's really minor. It's like nothing. Though the tenant never pays it. I mean every month we have to send a late notice to them - a three-day notice and then we have to serve that. There's $35 more dollars. It's a pain the butt, you have to get those $50 from them every month. How do you combat that in your business?

Mark: Well I'll tell you this - some of the CH8 tenants that have an $800 a month payment, you get that like clockwork. The one you're trying to get the $10 or $15 payment - for us, we sometimes just let it go for a couple of 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. They might not even have that $10 or $15 and how that became their portion, we're not even sure how.

Brandon: Yeah, I'm thinking do I evict this guy over $50? I don't know. It's hard to know how far you push that.

Josh: Yeah and do you get him kicked out of the program for the $15 that they're not paying you? I think it's a legitimate question and I know I struggled with it. I think I allowed for leniency for a while until other things caused evictions to come up. If it was a unit that was $600-$700 and their share was $50 - I know I need to collect it, but I don't work with section 8 tenant clients anymore, but I certainly kind of let it slide because I knew the turnover cost would be far higher than everything else. 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/show72, maybe you guys can share your experiences and thoughts on that exact point. I'd be curious to hear it.

Brandon: Yeah. You know one more side of the section 8 thing, I said earlier on 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've had and I did an eviction. Because what happened was, her unit was like really gross. Like really gross. And so they told her she had to clean it up and she didn't. So she got kicked out section 8. Even though we said people don't want to get kicked off section 8, sometimes people that are on section 8 are not-- what's the word - like they don't care. This lady did not care because of whatever reason. So we ended up not getting rent from her then because section 8 stopped paying. So the 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 and you'll have go through the whole long process because she just had nowhere to go. So I don't know, that's just my sob story about my one eviction. Have you had that happen at all Mark?

Mark: No, no. We're actually evicting our first section 8 tenant right now though, but it's a little different scenario. Recently, they combined the BA, the Betters Affairs programs with Section 8. They gave them vouchers. I have a gentleman. It's almost sad because 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.

Brandon: That was kind of the case of this lady. I think she should not have been living on her own. Just the condition of the house told me that she should have had help. But she wouldn't let anybody in. She wouldn't let anybody help her. It was a mess. There are downsides and upsides I guess to both.

Mark: Now, one of the positive sides - let me say this one - one of the positive sides is they don't move. Our vacancy is very low. In five years, we haven't had one tenant move out after one year. So we're almost guaranteed two years every time. We provide a nice house, don't get me wrong. And we respond. We have good system of responding when needs are happening. It's part of the management too, but our tenants don't move. That's nice and that makes things more consistent.

Josh: That's great and I think we'll get into management in a few minutes. I want to circle back. We went off on a tangent on the section 8 just because it came up. I want to circle back on the deals. You said you found them mostly through MLS, that's correct?

Mark: Yes, yes.

Josh: Okay so you're not doing any kind of marketing, or anything like that?

Mark: We're not but really what we've been talking about, me and my partners recently, really prompted by BiggerPockets, is the need to really build a network of wholesalers.

Brandon: 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 a network of wholesalers working for me." So it's kind of a cool thing and I think BiggerPockets is heavily driving that. Just with the podcast with thousands of people listening, because the wholesaling shows are pretty cool. It's always like, "Wow. That sounds awesome." Me and Josh would say that after every show. We need to do more of that. Anyway, that's cool. So you want to do more wholesaler stuff. What does your business look like now versus what it was? We keep talking about past, what it was, what these properties were. Are you still buying all the time or have things slowed down now?

Mark: Yes, we're still buying. We've kind of ramped up lately and have been buying more. But we're buying in better areas as we've learned our way around in the south side. We don't to be in areas that you see on the news to be paying these prices. So we've gone to little more conservative areas that we're still able to get these great returns.

Brandon: Okay. Maybe before we go on, I probably should've asked this earlier - I want to talk about investing in lower income areas. What are some of the challenges that you see in those rough areas? How rough are they? Are they the ones that you would walk to by yourself, like alone? Or are they worse than that or are they better than that?

Mark: Well, we have a variety of them. We have a couple that we bought right at the beginning, are in the worst areas ever. You won't see me there pass in like nine in the morning. Yeah I get a way to be seen in nine 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. Some of the crime in Chicago is pretty rough. It makes national news. You have live external problems to overcome in owning properties of these neighborhoods.

Brandon: Do you recommend that people, like newbies, get started-- should they look for these cheap houses in these bad neighborhoods or? What are your thoughts on that, for new people?

Mark: I would definitely recommend against it I guess in the sense of unless you have a partner, or if you have a property manager that knows what they're doing to guide them along. We learned on the fly. We made a lot of mistakes and we learned a lot of things the hard way. Definitely would not start there.

Brandon: Okay, cool. Well, what about financing? Getting all these properties. If you're buying over a hundred properties, how are you affording all these? 

Mark: Well, 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. 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 how bad things really were at that point. Our first cash-out refi was, I think we paid like 8 or 9 points. 12.9% and I gave my future child that wasn't born yet. It was horrible. I left at closing just feeling violated. I just felt horrible that day.

Brandon: I've been there.

Mark: 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. That's really the place to be for investors.

Brandon: Yeah, that's another common theme here in the podcast. I love that.

Josh: Yeah, and so right now most of your financing is through the community bank versus this partner?

Mark: 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 5 to 10 properties and cash out then do 5 to 10 more. Now we also got involved with-- and this is something that I've been meaning to post on BiggerPockets - in Chicago there's a company called CIC. Community Investment Corp. and they do financing for any building, five units or more. They're heck of a lot more lenient on their writing than any other bank. They're a non for profit that takes money from the big banks for this CRA money. Community Reinvestment Act. I don't know if you guys are familiar with that. All these banks - Harris, Chase, Bank of America - they have to put back in loans X amount of millions of dollars a year. And so Bank of America lending on the south side Chicago, they give $10,000,000, whatever their requirement is to CIC, which then turns where I lent it to people like us and they service us as well too. But they know what's going on in the neighborhoods. They know about these neighborhoods.

Josh: And how does somebody find a company like this? This non-profit like CIC?

Mark: Most cities do have some version of it. CIC will finance anywhere in Chicago. It's not just south side Chicago. There's a couple in Chicago as well too.

Josh: But my point is if I'm looking in Albuquerque, how do I find the equivalent?

Mark: I'm not sure. I'm not sure.

Josh: How did you end up finding these guys?

Mark: They were doing a lot of marketing out there. There's the Chicago Apartment Association. They did market through there and that's how we ended up getting hooked up with them.

Josh: Okay.

Brandon: So we’re all just saying networking right? 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 what bank are you using or how are you financing your deals?" You know, I find some good community banks, good portfolio lenders that way.

Mark: They'll also do construction too. They'll give you finance and construction. That's actually the most important part of them.

Brandon: That's awesome. What kind of down payment do you have to do on these kind of-- either this company or the portfolio loans-- what do you require to bring?

Mark: Well, they're all different. When we're refinancing out, they're generally between 70% and 80% LTV of the appraisal value. CIC just generally 20% down of the total construction, the project value. ARV.

Brandon: Let's shift gears. I know we're slowly coming to the end of our show. Why don't we go to property management? Because you are doing a lot of property management, correct?

Mark: Yes. Yes, we are.

Brandon: Do you mind me asking how many properties do you manage now?

Mark: We manage 383 properties. I figured out this morning, I figure I was about to say the exact number. 383. Whether it’s single family, two flats, three flats, six flats. 310 association units where it had to be managed like 10 or 12 associations. And about half a million square feet of industrial and retail space.

Brandon: Okay, and how many people do you have on your team, your property management team?

Mark: We have two offices and we have two operations. One for the city and one for the suburbs. But combined we have I think about 18 people?

Brandon: Okay. Okay cool. Do you mind me asking, because I'm kind of in that stage right now where I'm ramping up to get my company a little bit? 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?

Mark: We were lucky in the sense of as we are a young company, we're able to latch on to some people that were just in our circle, our network circle and kind of trained them first-hand. They, I guess in a way, came at a good value for me because they were inexperienced and I was able to train them the way I needed to. Because when I found them when the market crashed, a lot of people were looking for jobs. But it wasn't the good property manager that was looking for jobs. Those people didn't get let go. We kind of kept in our own circles of people I knew and kind of trained in house.

Brandon: Okay cool. I'm a pretty big fan of that as rather than hiring somebody that's going to be the most expensive. With any business, not just in real estate, 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. Cool. Why don't we go to then managing these tenants? You're a property manager so we want to talk about actually dealing with tenants and some specific situations. First of all, how are you finding your tenants? How do you market for them?

Mark: Right now in the Chicago market, we put them on MLS but Craigslist does amazing things lately since the market crashed. We find a lot of tenants in Craigslist.

Brandon: Nice, me too.

Josh: 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?

Mark: It's not bad. That first phone call, you could usually root them out pretty quick, or that first text message.

Josh: How do you do it?

Mark: In the sense of you ask a bunch of questions. When they move in, how long they've been where they're at right now. It all really depends on the conversation.

Brandon: You said a minute ago, a text message. Is that just because people text because they don't want to call or do you actually say call or text us?

Mark: All of our real estate signs - all of our big commercial signs - say "text okay" because you get back to people faster at that point.

Brandon: That's interesting. I've never had that tip but I kind of like that. Put that on the sign themselves "text okay". Obviously at some point, you got to to talk to them. You got to know if they're normal or not. But I don't know I think texting is kind of a neat way t get at least some information going.

Josh: I'm curious, we kind of zoomed past it. 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 someone I need to pass on?"

Mark: Well I guess when you take that first call for Craigslist, we don't screen too hard in the sense of-- really their qualifications and all that. My real question is how fast are you looking to move in and how fast we get the space built. Our application is pretty intense and the things we require them to show us. So you could take a look at that. 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.

Brandon: Yeah, is there any major red flags that you look at on an application, say, "No I will not rent to that tenant because of that"?

Mark: Just not enough money coming in. Because people just try pushing it on what they can afford and you could just see that a mile away and God forbid, a car breaks down and someone gets sick. It all takes one few hundred-dollar problem a month and you're in trouble then. Evictions of course too.

Brandon: Yeah, do you rent people in evictions?

Mark: Not generally. Bankruptcies, everything else, I'm open to. You know we really don't go off the credit that much. There's such a big picture in various people's lives that we try to really get the entire picture of where-- I really don't care if you have a 600 credit score. If you've got enough money to put up and you pay first and last months and security deposit, and you've never been evicted-- I really don't care if your credit's bad. I love people that file bankruptcy lately because it wiped out most of the obligation. Now if they filed bankruptcy in the last six years, then yeah that's a red flag. Ha-ha.

Brandon: Interesting point.

Mark: 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 are 3 or 4 grand a month and now they're coming down to a $1,500 a month rental payment. They're embarrassed. They're shamed. They just want to get back on their feet and they can't go anywhere for another and they won't because it's such a pain in the butt to find this place. So you got them for at least two years then too.

Brandon: Alright so next question I got for you is let's talk about when tenants go bad. I mean everything's great. Everyone thinks you're a good landlord when everything's good, right? What do you when tenants go bad? Rent comes in late. You start seeing red flags over your tenant you already have. What do you do?

Mark: Well, the most important thing is in that scenario and every landlord's let it go too far-- whether it be a couple of weeks or a month or what not-- you just have to be ready. I'm not a big landlord of delivering the five-day right after rent's late. I'll generally give them the seventh or eighth and I always tell the tenants upfront, "If you know you're not going to pay on the 10th, let us know." You know by the 1st you're not going to pay to the 10th, let us know. So I kind of look for that type of communication. But delivering the five-day, make sure you're in line to start a legal proceeding right away is probably the most important thing, instead of letting it go three months or taking their sad stories.

Brandon: That makes sense. Here's a specific question. I want to actually get some specifics here because this is real live stuff that landlords are facing and you're a real property manager so I think you can teach a lot of people. I'm going to throw a few scenarios at you. Totally random like they didn't happen to me this month. Ha-ha.

Josh: Nice.

Brandon: Yeah. So a tenant calls- rent's due on the 1st, late on the 5th – they call on the 5th 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 a half. Do you just wait and say, "Okay thank you," or do you file a five-day? I think it's five-day for you, it's three-day for me. But what do you do?

Mark: Well, my first question is, do you have anything? Can you give me $300? You're not going to have it all? Generally, we could usually get a few hundred bucks out of them which makes me feel a little better. So I'll get a few hundred bucks out of them if that's possible and I'll serve them a five-day right away, for sure.

Josh: So you'll serve prior to receiving the few hundred bucks or you'll serve after receiving the few hundred bucks?

Mark: After. After.

Josh: How does the law play into that because you're collecting revenues from them so didn't they technically pay rent?

Mark: They didn't pay it in full though. The five-day you're going to serve is going to be for whatever the balance is after they make the payment.

Josh: Gotcha.

Brandon: Yes, so you can technically serve them. If they owed a thousand dollars, they pay $300, you serve them a five-day or from your three-day on the remaining $700. And if they pay another $300 though, you got to serve them-- this is the case for me. If they paid an extra let's say $300 again, I got to re-serve them another 3 or 5 with a new number. It starts the process over if I accept after serving. Is that how it works for you?

Josh: And my question before you answer that is what's the starting date on that? Say it was a thousand bucks rent, he pays you $300, he owes you $700. So you send a notice on day 5 saying you owe $700. Then he pays you another $200 in 3 days. Do you re-serve the five then or do you have to wait 30 days?

Mark: 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 you paid the $200 that means you still have $500 left, that five-day could still be valid. But some judges in Cook County would find that you're not working with the tenant. So we always do re-serve the note on the $500 one at that point.

Josh: Okay. And I think the bottom line is you want to talk to a very good, qualified attorney in your area who can inform you of the local laws because all these landlord tenant laws are going to be different in different jurisdictions.

Brandon: And even more than that, like a lot of things flat-out aren't laws. Like here's the situation that happened to me in the last few days. I served a three-day notice. In Washington State, we have a three-day notice and somebody from Washington's is going to call me or email me and tell me this is wrong. We have a three-day notice and then we have an additional ten-day notice to pay the late fees. Basically, there's two forms that we serve. There's a three-day and a ten-day. You can't put late fees on the three-day but you can on the ten-day. It's all these complicated stuff.

So I go to my attorney and I say, "I served a three-day and a ten-day," and he goes, "Why did you do that?" And I'm like, "Because the law says you have to." He's like, "Don't worry about that. We've never done it in the history of our company." He says judges don't care. Just serve them 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 weird right? Even though something's law, it's still subjective and there's different ways to do it that a lawyer even would tell me.

Josh: Unless you need a better lawyer. Haha.

Brandon: Well, I mean he handles most of the landlords in town and I think in our local area, that's just not how it's done. Nobody does it that way. Even though it might be a law in Seattle or they might care up there, the judges on our area don't. He knows that I didn't. So I don't know. Even the law is a little bit fuzzy, I feel like sometimes.

Mark: Well, it definitely is. So much that if the tenant doesn't show up a lot, nothing ever really comes off of these technicalities or paperwork not being delivered, or served right. That tenant shows up it's all in their ball game and sometimes the judge is really the ruler of all those decisions.

Brandon: Yeah exactly. Just like you said, 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's going to have a better idea of what a judge will or won't do because they know your judges a lot better than you do. Anyway. Moving on.

Josh: So I've got a question here on property management. A little bit more here. How do I know your firm is going to do a good job on 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?

Mark: Good questions in vetting a property manager is to request a list of properties managed, so you could drive by those physical properties and see what type of shape they're really in. Kind of ask them what they're collections is at - their collection rate is at. And if they don't know the answer to that, that guy you're talking too, then that's a red flag too. Then how long it takes to rent a particular apartment. How long it takes to turn over and so forth and costs for maintenance. Really, for a landlord, if I was looking for a property management company, I would be looking for how is a 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 basis? How am I going to get my money? Those are all kind of important concepts.

Josh: 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?

Mark: Well, you got to pick us because we're going to do a good job. Ha-ha.

Josh: I mean, is there anything that you do that stands out? That's above and beyond what anyone else does or is this kind of a commoditized business at this point?

Mark: 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.

Josh: Right. I don't disagree with you. I've worked with some of the worst. You know, the questions you asked are good and we've got a couple of posts on these and hopefully we can share these in the show notes. Questions to ask property managers. Some of the screening things. I'm just curious I guess more so - do you guys, for you specifically, have some kind of USP, unique selling point, about your company, that you would say, "Oh well, 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 I, as a landlord, can spring 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 find somebody who does."

Mark: Well, no matter how much technology we're utilizing, we really pride ourselves on the communication. We want to make sure the owner's comfortable enough that in a few months they're really letting us just run their property and paying them out on a monthly basis. The level of comfort that we give a client is really what sets us apart. Hopefully that wasn't too corny. Haha.

Brandon: No, I like it. And that's hard to find. In my area, we don't have any property manager that I trust because I don't think anyone even cares about customer service or making me feel good as a landlord. For example, 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.

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 couple of units - the blinds are destroyed. Little kids just wrecked them. They put up a Power Ranger sheet in their place. This is a decent, nice neighborhood. There's a big Power Ranger sheet and wrecked blinds that look like there's 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 all 300 of your properties. But at the same time, I don't expect my property to look like it came out of some third world country. So how do you reconcile those two things?

Mark: Well, the stakes to 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 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 days, three to five days, we're going to come out and we're going to hang on your 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 blinds to it's usually a relatively cheap fix.

Brandon: You can get $5 ones from Home Depot.

Josh: Yeah you give them a chance to fix it and when they don't within that certain amount of time - which they generally don't - then you charge them back.

Josh: Well to Brandon's point though, you've got hundreds of units that you care of. Lots of property managers do. Should I expect my property manager to go and visit-- you know you're doing a flip right? 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 landlord, who may live a thousand miles away, or I may live up the block, I need to know 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.

Mark: Yes, we tell people that we'll be at or on the property, at least once a month. And sometimes more, 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. You should expect, to answer your question, yes you should expect that.

Brandon: That's something I've never really asked property managers in my town. 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? I feel like they'll just drop the ball, nobody would do it, my property would go downhill and we'd end up having a third-world country apartment building.

Josh: Here's what I've learned. I think when I first started, I was under the impression that I was getting interviewed by the property managers. They do that. That's what you do. "Hey, how many properties do you want to bring in to our shop? Here's 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 expect of them. And I think, Brandon, this applies for you specifically as well, as anyone else listening. 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 they're tasked with doing. And if you have an expectation and don't set that expectation upfront 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 in to 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 you are actually getting a property manager who's going to do the job.

Brandon: And that's just like a hump I got to get over. And I really enjoy talking to guys like you Mark, who can kind of 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. I definitely love these podcasts when we talk to property managers. We probably should do more of these landlord ones. 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 - knowing what you know now, go back in time when you first got started - what would you tell yourself?

Mark: Real estate related?

Brandon: Yeah. Ha-ha.

Mark: I would save more money when things were good before the market crashed to take advantage when it did crash. Even more so, I think I took a pretty good advantage of it but if I would have done even more I guess.

Brandon: I think that's actually a really good point for other people too. We may or may not be going into another bubble. 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, we could buy cheaper properties again. I don't know. I think people could probably apply that both ways. Anyway. Moving on. Why don't we go to the...?

It's time for the fire round!

Brandon: Alright the fire round. Alright these questions come straight out of the BiggerPockets forums. Josh, you want to start us off?

Josh: Absolutely. Do you have any tips for beginning property managers?

Mark: Yes, take classes. Whether it be research in classes, BiggerPockets - learn as much as you can and listen to everybody else's mistakes. That's the number one thing.

Brandon: Good tip. Listen to other people's mistakes, that's very smart. Alright, second one. Should I put down 20% on a property just to avoid mortgage insurance?

Mark: I believe mortgage insurance comes at a small cost to have that money liquid for something else.

Brandon: Okay cool. So you would say probably not.

Mark: Probably not.

Brandon: If that's the only reason why you're doing it?

Mark: Yes.

Brandon: Okay.

Josh: Alright, so how long does it take for you to rent an average property out?

Mark: Well right now, this is the best part of the year to be renting and if your price is right, it shouldn't take more than a couple of weeks right now.

Brandon: Okay. Alright cool. And my last question, how do you do your due diligence when buying a property?

Mark: Really the larger thing that I'm always worried about is, in the city of Chicago there are older buildings that we buy and its really foundation cracks and if the floors are sinking – those type of bigger ticket ticket costs.

Brandon: Yep, so you just look for those and make sure that they're all in good enough condition?

Mark: Yes, yes.

Brandon: Okay. Alright very cool. Well let's finish this thing up with the world-famous...

Famous Four!

Brandon: Famous Four. 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?

Mark: The Millionaire Real Estate Agent.

Brandon: Oh okay by Gary Keller?

Mark: Yes.

Brandon: Cool. I have 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.

Josh: Nice. What about your favorite business book?

Mark: Favorite business book, right now I'm reading about half way through E-Myth, which is really helping me in our growth process of the company. But another one I've actually read the whole thing through is Best Business Advice I've Ever Received. I think Donald Trump's name, it's on it. But it's about ten years old.

Brandon: I just bought that one actually.

Mark: It goes through excerpts of all these other people that have made it big and the best advice they've ever received so it's pretty cool.

Brandon: Cool. I'm actually going to be taking a mini road trip. Tomorrow we're 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-Myth 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 really listen to it this weekend.

Mark: It's amazing how true it is.

Brandon: It is right? I remember when I read it like a year or a year and a half ago, I thought it was amazing. Anyway, alright so. We got the real estate book, got business book. Next is...

Josh: Hobbies? What about hobbies? What do you do for fun?

Mark: Well, in football season I like watching football. College Saturday. NFL on Sunday.

Brandon: What's your team?

Mark: Well Bears for NFL. And then I do like Stanford for football, the last few years They've been exciting to watch for college.

Brandon: Cool. Alright. 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? Ha-ha.

Josh: That's why I don't take them. I can't say that.

Brandon: Yeah, you make fun of me for that. Alright, what do you think sets them apart?

Mark: Investors that are successful have failed, are prepared to fail and get back up right away when they do fail. So it's really just accepting failure.

Brandon: Alright. I like it. I don't like failing, but I like your answer.

Josh: Right on. Cool. Alright well listen. It's definitely been great. Lots of good advice. Where can people find out more information about you Mark?

Mark: Well, I'm always floating around BiggerPockets and then gcrealtyinc.com is our company website.

Josh: Excellent, 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/show72. Thanks again Mark.

Mark: Thanks guys.

Josh: Alright guys that was Mark Ainley with show 72 of the BiggerPockets podcast with lots of good information about property management and lots of other topics as well. Hopefully you enjoyed the show. We've got plenty more in the line-up so stayed tuned for that. You can meet folks like Mark and all our other guests on BiggerPockets.com at 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, G Plus - we share lots of content there. We actually share some stuff unique to each of these different areas. For example, if you wanted to check out the re-design of BiggerPockets, 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 listenersip. Listenership. I can't talk today. We appreciate your listenership.

Brandon: He can't talk today. He can't talk any day.

Josh: Thank you. Thank you. There you go. Always the [inaudible] [1:05:29] gallery. You know what Brandon, I'll just stop and let you finish.

Brandon: I got to finish last week, two weeks in a row.

Josh: Yeah, you're not going to finish this week. Not going to happen. Psyche! Alright guys I'm Josh Dorkin, signing off.

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