BiggerPockets Podcast 094 with Michael Siekerka Transcript

Link to show: BP Podcast 094: House Hacking, Partnerships, and Investing in Multi-families While Working a Full Time Job with Michael Siekerka

Josh: This is the BiggerPockets podcast show 94.

You’re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place.

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Josh: What's going on everybody this is Josh Dorkin host of the BiggerPockets Podcast here with my co-host, the guy who's been making fun of me the whole time Mr. Brandon Turner. What’s up Brandon?

Brandon: Not much today’s show we just got done recording it we’re doing our intro later, today’s show is probably one of the funniest ones we’ve ever done, like I was cracking up on the show, mostly at your expense.

Josh: Yeah mostly because you’re like a crazy weird stalker who hangs outside people's windows but yeah okay.

Brandon: Oh yeah people will like that alright anyway.

Josh: Yeah weird and uncomfortable.

Brandon: That’s how we roll. Alright yeah today’s show is awesome, we’re going to cover a ton of stuff about a little bit about flipping, little bit about landlord and a little bit about property management, a little bit about everything from a named Michael. You guys are going to love it. So before we get to that we should do today's …

Josh: Clearly disorganized.

Brandon: Yeah clearly.

Josh: By the way once again guys I've got Brandon in town and we’re recording this show and there I am, there he is, we’re in the same room. It’s weird, it's uncomfortable, I really don't like him that close to me, its kind odd and awkward. So if there's any kind of weird sound stuff we've been trying to manage it. But apologies in advance but the yeah so…

Brandon: Can I do the Quick Tip are you going to stop talking? Can you shut your mouth?

Josh: Wow if you’re a listener I apologize.

Brandon: Wow, that sounded so insincere, our listeners deserve better than that. Alright today's Quick Tip is- I don’t know what should our Quick Tip today be?

Josh: Oh way to be prepared Brandon.

Brandon: Here’s our quick tip honestly here’s our quick tip; our quick tip is if you have a quick tip we want to start doing some more variety in them, I want you to Tweet them to @BiggerPockets. So Tweet your quick tip to us that way you have to be within hundred and-

Josh: Well use the #QuickTip.

Brandon: You could do that too.

Josh: Yeah #QuickTip and @BiggerPockets and put your Quick Tip, not that complicated, do you not know how to use Twitter?

Brandon: Yeah but then you got 140 characters minus @BiggerPockets minus @QuickTip now you only 12 characters the quick tip is going to be like smile.

Josh: Alright, way to go with the quick tip that was awesome.

Brandon: Alright today’s quick tip is smile.

Josh: Alright Brandon, that was a fantastic. Well as we move forward with today’s show we've got a moment that we want to give to our sponsors. And today’s sponsor is?

Brandon: BiggerPockets Publishing.

Josh: Oh yeah there we go BiggerPockets Publishing. Alright guys BiggerPockets Publishing is the publishing arm of BiggerPockets and we have put out some incredible books, if you have not yet heard about these books I would definitely recommend you check them out; the book on flipping houses, the book on estimating rehab costs, and the book that's a mouthful which I can't say.

Brandon: The book on investing in real estate with no low money down by yours truly.

Josh: Oh that one yeah anyway.

Brandon: And how to rent your house.

Josh: Oh yeah how to rent your house yeah we've got a bunch of stuff. But you could check them out at BiggerPockets.com/Store or for the flipping book BiggerPockets.com/FlippingBook and for the no and low money down book BiggerPockets.com/NoMoney. And those are our books. If you haven’t checked them out they’re great.

That said of course all that information is wonderful, if you want to buy a book but if you don't want to spend a dime you can still get all the great info for free on BiggerPockets.com. And anyway that's today's sponsor message for you.

Brandon: Alright well let’s bring in our guest today. Our guest today is Michael Siekerka I hope I’m saying his last name right.

Josh: I think you got it.

Brandon: Okay good Michael is like I said he does a little landlording, a little flipping, a little lot of stuff and he is a very bright and very funny guy so I think you guys are going to love the show.

Josh: Awesome a little lot of stuff way to put it. Mr. Michael, welcome to the show man it's great to have you here.

Michael: Thank you Josh, great to be here.

Josh: Indeed.

Brandon: Indeed it is great to be here. Michael we’re excited to talk to you today I’ve seen you around the site quite a bit over the last few months, we've kind of interacted a little bit.

Josh: That’s creepy; a little creepy.

Brandon: I don’t like stalking I mean I sit outside his bedroom window sometimes but that’s just because he like to listen to my guitar right.

Josh: Wow let's take this somewhere else.

Michael: I keep an eye on Brandon’s cats for him from time to time.

Brandon: Yes, yes thank you I appreciate it. Alright how did you get involved in this crazy little thing we call real estate?

Michael: Well I got the bug back when I was in college. I always it was kind of in 07/08 back when real estate was the thing to do, and I really had an interest in it and I tried to talk my dad into buying a house for me and some buddies to rent out, somewhere we could fix up and no go couldn't talk him into it. So I went out and started looking at houses on my own. And I was pretty close to pulling the trigger on a couple places. Thankfully I didn't end up purchasing anything in college.

But I had that itch and as soon as I graduated that was my goal from day one was to get my own property, whether it be a fix and flip, or a rental or something and just get involved. So took about six months after I graduated and bought my first home. Owner-occupied live in fix and flip I think Brandon you mentioned that’s how you started as well and just kind of never looked back from there.

Josh: Hey you said thankfully; thankfully when in college you did not get to buy any property I just want to hear about that, why thankfully?

Michael: Yeah so when I was in college it was like I mentioned before it was right at the precipice of the real estate boom. So had I talked my dad into something I think we'd be probably just about now crossing over into positive equity

Josh: Yeah got you.

Michael: So I don't think he would've bit too hard on that, and probably wouldn’t be too happy with me.

Josh: I thought there is more of a story there and I was looking forward to hearing some fun.

Michael: I wish there was but no that was it.

Josh: Oh man, alright, so you go you buy this first house to live in and flip, how long did it take for that to happen and was that the intent when you purchased it?

Michael: Yeah so I purchased the house to live in and to remodel, so I bought a big time fixer-upper and I bought it wrong; I paid way too much money for it. I was too excited to buy it but I moved in on the day of closing I went and ripped all the carpet out, started destroying the place. It took me about three or four months to get it livable and by livable I mean the microwave worked and the TV was hooked up.

Brandon: That’s all you need.

Michael: Yeah so.

Brandon: Were you a bachelor at the time?

Michael: Yeah a bachelor at the time.

Brandon: O yeah all by myself.

Josh: Yeah sleep on the floor, rolling yeah it’s all good.

Michael: Yeah so it had a nice semi-finished basement with the tack down ceramic floors that we could just spill beer all over and that was great. So after that first three month stint of really just going at it pretty much every day, once the TV when in I kind of slowed down and it probably took me a good year and a half to two years total from when I bought it to when I was really done.

Josh: So I think it sounds like you're saying you got comfortable right? So you're in there, your intent was to flip it; the TV came in suddenly you could kind of sit back and enjoy where you were. You were a little too comfortable and you weren’t motivated right?

Michael: Absolutely.

Josh: Okay so for those people who’re thinking about a live-in flip, no carpet, mattress on the floor, don't clean the place up well until the very end right; live Spartan is that kind of the advice that you’ve got?

Michael: Yeah and I’d like to like to say I learned from that, that I'm kind of going through another live-in flip right now. And we kind of knocked out the bedroom it was a big milestone and we kind of pushed the rest of it off just because we got that piece done that’s good enough so.

Brandon: My wife and I we’re doing the exact same thing right now yeah.

Michael: Once you get comfortable and you got to make sure that you when you reach that milestone you keep pushing on because if you settle down even if it's for a week or say I deserve a reward let me take a break, it you get derailed.

Josh: Yeah.

Brandon: I always find that on my property I put in three months worth of work when we moved into our house. Like I knew we needed a lot of work so I bought a foreclosure and put in I don’t know-10, 15 $20,000 worth of work. And then got like 95% done right. And then like the last 5% I probably in all honesty won't finish till the day I move out.

Right that’s like sad like why not just finish it and then my wife can enjoy and we can enjoy living in a house that’s done. But it’s like my railings we replaced all the banisters and then like I stopped about halfway up. So if I had little kids they’d just fall down and not make it. But the cats can jump down now so it’s all good.

Michael: Oh man that’s was great.

Josh: Nice, nice so well I was going to say so you’ve done these live in flips what is your focus, what has your focus been I mean do you do pretty much all strategies what do you do?

Michael: So I started out primarily looking to rehab, to flip so that first house was where I got going. From there I partnered up with a couple folks, friends of mine from work on other flips. And somewhere along the way one of my earlier properties was a fourplex a live in flip fourplex. And I started seeing the merit of having that cash coming in every month.

As opposed to you waiting for the big payday with a fix and flip and it at some point probably about two or three years ago I really switched directions from trying to flip houses and to acquiring long-term buy-and-hold properties.

Josh: Nice, nice so I’m curious about the partnering with friends from work, that always seems like a little possibly nervous to be kind of getting in bed with those colleagues.

Brandon: Hey Josh want to flip a house together?

Josh: Not a chance in hell.

Michael: Yeah so that's a great question. There’s two separate folks that I partnered with on different deals I’ll say I was the primary motivator behind the whole thing in both cases. I kind of I was the one with the drives and the hey we’re going to go do this. And they were like, “Yeah, sure I’ll tag along for this.” So in my situation both of them I would say were successful from a dollar standpoint but very unsuccessful from just my personal…

Josh: Relationships.

Michael: Wellbeing yeah the relationships probably didn't suffer nearly as much as many partnerships do, I’m still great friends with both those folks today. But I learned a lot of lessons and the biggest one that I took away from it which I employ in partnerships I'm involved in today is to really define what each person's role is going to be and how they’re to be compensated for their involvement and who brings what to the table.

Josh: Yeah so what did the deal look like; I mean what did the original partnerships look like? And clearly there was some stress that was created because of it so it sounds like you guys kind of put it all together and you were like, “Yeah you give 30%, you give 30%, I’ll do 30%, 33, 33, 33 and let's do this,” and that was it right?

Michael: Yeah it was very unorganized, the deal look like this: you put in half the money and do half the work and I'll put in half the money and do half the work and we’ll split half- cut the profits down the middle and everybody's happy.

Josh: Why doesn't that work?

Michael: Well how do you make half of a phone call?

Josh: Just ask Brandon.

Michael: Besides a podcast on Skype and I don't think you guys meet contractors through Skype, and it's you really can't share certain responsibilities you really need to have one person that is in charge of certain things. One of the things I found that I'm good at is dealing with contractors and keeping them on point.

And going back to these two partnerships we didn’t deal with any contractors we were doing all the work ourselves. And again with me being a little bit more experienced with the rehab work and whatnot I was the one saying, “Here's how you tile, here's how you do this,” and kind of teaching them along the way. And it ended up being more work for me. And I felt like I was contributing more than that 50% mark and still only getting half of that return.

Brandon: Yeah and I've been there as well. I mean and that’s why I typically when I do a partnership nowadays like my favorite kind of partnerships are you lend the money I’ll handle everything else, let’s just keep it that way. It’s just so much more simple right because yeah it is hard. And then you get like weird things like hey I think I’ve been doing little more work than you this month. Or I did a little- yeah it's weird that you get a lot of awkward discussions.

Michael: Right.

Brandon: So it’s easier one person does something somebody else does something else, that’s easier to say, “Hey you're not living up to your end of the bargain, this was your task it's clearly written out here in our documents and you didn’t do it.” I mean how can they argue with that? And they might but they hopefully won’t.

Josh: But I mean you should be putting time into this I think a lot of people do what you did Michael unfortunately, and they rush in they say, “Hey this is my buddy we’ll be 50/50 partners they’ll write some kind of corporate doc but they don't really break down every possibility because maybe they don't have the experience to do so.

So I want to encourage people, think about your business where it’s going to be today, where it’s going to be tomorrow, sit down and really break down every possible role than you can imagine that two different people are going to do. If it's not a deal-not an arrangement like what Brandon does and really write everything out.

Just brain dump for a day or two days a week a month whatever it takes until you guys have nothing left to dump, right and then just start pointing lines and assigning roles to people. And I think that in itself is going to help protect you or obviously do what Brandon does and make it really simple; you give me the money I'll do the work done.

Michael: Yeah one of the things I see quite a bit on BP is folks commenting, “Hey I'm a partner with so-and-so how do I structure this and my first thought is, just kind of like oh man why are you asking complete strangers how to interact with somebody that you're going to be…

Josh: Married to?

Michael: … from the steel, right. So since his first two partnerships I have partnered up with other folks. And I'm involved in a very successful partnership right now and what we did from the get-go is we sat down and we spent days talking about who does what, who brings what to the table, contingency plans.

What happens if you don't do what you're supposed to do, how do we handle that? And we outlined all that stuff upfront and it's working phenomenally. We don't have those same qualms if somebody is not holding up their end of the deal like, “Oh now I got to pick up the pieces.” It’s, “Oh here this is outlined if you don't do X then we hire somebody or you pay me more or whatever and we get it done.”

Brandon: That’s terrific advice I mean just spending the time needed to structure that I love that it's great.

Josh: I said the same thing but didn't say you loved it when I did; what’s up with that?

Brandon: I don’t love anything you do, I’m sorry. Me and Michael we’re BFFs and you are on the outside.

Josh: Ouch! Man…

Michael: I’m going to stay out of this.

Josh: This is a tough one boxing match. Well Michael, let's move on to something else because clearly on this isn’t going well for me. Let’s talk about that live-in fourplex, how did you find it, wide did you decide to do the live-in fourplex? Give us some information here.

Michael: Sure so that property it was right about when I’d finished up the single-family home that I was living in and bought the owner occupy. I had a friend from work and we both agreed hey we want to buy something we want to rehab it; we want to make some money off of it. We might as well live there while we’re doing it that works great.

So we started looking around, we looked at single-family homes all over town, and then one day my real estate agent said, “Hey I got at this fourplex here, you guys want to take a look at it?” and we were like, “Yeah sure why not let’s check it out.” So we went and looked at it, and started looking at some of the numbers just primarily just the rental income.

And we realized we don’t have to do a thing to this place. We don’t have to touch it we don’t even have to move into it, we can leave two the four apartments vacant and it will pay for itself. So anything we do from there is just gravy. So we did some deliberating, talked things over and we were like let’s go for it.

Brandon: Nice.

Josh: Nice.

Brandon: Do you remember how you financed it?

Michael: Yes that was actually a challenge; I think we went to several commercial lenders initially. We went to several conventional lenders what we ultimately ended up doing was getting a conventional loan on it and actually since I had not sold my primary residence yet, my partner actually got the loan on it. And I had to gift them the money for my half of the down payment to appease the bank and make that work.

Josh: Nice, interesting. I'm curious you talked about your real estate agent pitched the fourplex to you. So do you guys get lots of deals from your agent, do you have a very proactive agent who's out there kind of finding deals? Are these, on-market deals or are these kind of, he knows everybody in the neighborhood? And when somebody is about to list they hit him up and they’re like, “Hey John this thing is coming on soon.”

Michael: Good question. So I’d say the majority of the properties almost all properties that I look at, come off the MLS and one good tip for people getting started out there is to get actively monitor the MLS. And if you see something that's appealing, jump on it because if it's a halfway decent deal it’s going to be gone in a couple days.

Josh: How does somebody who is not a real estate agent actively monitor the MLS I mean how they do that?

Michael: So I get a daily feed from my agent it’s automated. She doesn't do a single thing she just went in and set up the parameters. So any time a multifamily property in the areas that I'm interested in comes on the market if the price changes, if it comes back on the market after failed contract or anything happens I get an email notifying me immediately. So I can reach out to her and say, “Hey let's go back and look at this thing.”

Josh: Okay.

Brandon: Yeah I do the same thing with my agent like and if people are listening to this and they don’t have a set up, just call your agent and find out if they can do that. And almost every agent can do it and if they can't maybe you need a new agent.

Josh: Find a new agent, yeah.

Brandon: So it's pretty standard stuff and I mean it helps you be quicker. I wouldn't rely on just like Zilo or Truly or one of them because they’re good information but they’re not complete they’re not the MLS so.

Josh: Yeah hey and in terms of establishing that criteria you said multifamilies and then XYZ area what is your criteria exactly I mean do you have anything more specific than that or are there any kind of hey we want stuff that has only three-quarter showers or baths or?

Michael: Yeah I could probably talk for half an hour about what I like and don't like in properties. Some of the big things and these don't come into the automated email list, but things that I typically look for. One is the area that does come into play in the automated list. I kind of identified early on areas that I'm comfortable investing in.

Comfortable traveling to and comfortable having tenants in and once I identified that I kind of got a bulk list of here’s all the active properties over the years after owning property and looking at hundreds and hundreds of properties, I've identified some things that work for me personally. I almost never look at a building if it's a separately metered.

Unless it's priced significantly low enough to where I could go in and redo the entire electric and separately meter it. I tend to shy away from anything that doesn't have central HVAC; I'm not a fan at all the window units to me those just kind of scream dumpy apartment complex. And that landlord doesn't care about the place. So every single one of my units has- and that's nothing against you guys if you got that I know…

Josh: Yeah I’m just looking at Brandon’s reaction and …

Brandon: We don’t have …

Michael: We just don’t them air-conditioning right?

Brandon: We don’t- well I'm in the Pacific Northwest so it gets above like 75° once a year. They can suffer that one day a year.

Josh: There is a bonus for having property in Podunk, they don't have to worry about air-conditioning, they don't have to worry about watering the grass or the plants. I mean it's a paradise there when it's sunny the three days of the year.

Brandon: Paradise for Josh.

Josh: Okay so sorry.

Brandon: Come on calm down. Anyway alright so where were we?

Josh: We were talking about his criteria.

Brandon: Oh yeah, yeah.

Josh: If you were paying attention you might know that. But he's talking about the metering he’s got to have metering; he was talking about the air-conditioning units and the windows which you got angry about.

Brandon: Are you trying to prove something here? Are you reversing [Inaudible] [21:23]?

Josh: Alright so tell us more criteria what else is interesting to you Mike?

Michael: So definitely-most of my rental property is near a college campus near the university of [inaudible][21:36] so I tend to look for things that are going to appeal to that college student, something that's easy to maintain. I don't mind carpet in my units because over the years I’ve spent a lot of time getting to know carpet installers and can get it pretty cheap so.

Josh: Built-in kegorators.

Michael: Sorry can you repeat that?

Josh: Built-in kegorators.

Michael: Yeah, yeah. I tried to screen those types of folks out but…

Josh: Good idea.

Michael: But yeah so anything that’s going to hold up long-term, most of the apartments I tend to buy distressed and remodel so I'm not too worried about what's in there today. I'm more worried about the layout, the flow, just something that somebody is going to live in, and is it close to the campus or close to where they want to be downtown.

Josh: Talk about layouts; what is it that catches your eye in a layout, what is something that you’re going to say, no way I got to get away from this thing?

Michael: Sure I’ll give you an example; one building that I looked at I think it had six or seven units in it, the front six units were awesome I was walking through this place I was like, “Man this is looking pretty good.” It was off-market so I didn't know quite what the owner was looking for at this point but I was working with a broker who had it as pocket listing.

And we got to that seventh unit, that secret back unit and we walked through it and it had, I guess it was classified as a studio but it was on two levels. The whole thing was probably about 10ft by15ft with a staircase in there. So two levels...

Josh: Wow, wow.

Michael: 300 ft² the staircase we walked in there the guy kind warned me he’s like, “You want to be careful,” and I looked straight down and I mean it was it was almost a ladder leaning up against the wall. It was that steep I mean they had wood boards stacked up there. It was stairs but it just wasn't functional. I think the second floor was the bedroom.

And then the first floor had a partial kitchen and I can't even-it may not have even had a kitchen or may not have had a bathroom. But I mean it just was a liability waiting to happen. So once I got to talking details with the guy I mean hell I’ll buy anything if the price is right I can tear that thing down or fix it or do something with it. But they wanted a price based on the $500 s a month that that was getting at that time.

And to me I would have just had to scrap the whole apartment and get rid of it. So that's the kind of thing, I try to avoid anything that is going to be hard to rent. If it's going to sit-the apartment sure it has a tenant in it today but when that guy leaves how hard is it going to be? Am I going to have to wait six, eight, 10, 12 months to find the next person that’s willing to deal with those crazy steps?

Josh: Yeah and that’s smart on your behalf just I mean a liability reasons something like that sounds like it could be pretty dangerous. And be for exactly what you said it’s something that you would think is going to need to be knocked out right. You’ll have to expand the other units and use that space well if they're selling based upon rents collected, you never to come to price on that.

Michael: Right, right.

Josh: Yeah, right on. Well have you had any other experiences with funny layouts like that?

Michael: There was one building it was a mixed-use building so the first floor is a restaurant, very well known restaurant. I actually went to the restaurant probably a week or two before the showing because I knew I was going to be going to look at this place. Awesome food, awesome layout, I was like, “Man this I was getting really excited.

So I go meet the agent there, we’re walking through, we walked through the restaurant, kind of looked around it was a little funky; the storage space was a little tight, no big deal. Then we go to the second and third floor are residential units, so I think there were a total of six apartments in the building on top of this restaurant.

So we go in the stairwell; beautiful stairwell, most of the buildings I look at let me a little caveat are in a store part of Old Louisville, so they’re hundred plus years old. So there's all kinds of cool details, and we can talk more about that later but the inside of the hallway; just awesome. So I’m walking ahead and I'm just like, I'm starting to get giddy.

I’m like, “this is going to be great.” We get up to the second floor and go into the first apartment and it was very disturbing. So first of all it was a bathroom with no door, no nothing it was just a toilet sitting kind of in the back of the room. There was a sort of kitchen but it really was just a mini fridge and a stove, not really any cabinets very strange, a bed and a dresser.

And I kind of poked my head in and I was like, “What the hell do you even do with this? Who’s going to rent this out?” so we kind of looked around a little bit more and it turned out it was more is was a kind of place that some guy was keeping for parties and stuff on the side. He wasn’t living there.

Josh: Yeah.

Michael: So I thought that’s a little interesting but whatever let’s see these other five units. So we go across the hall and I take that back I think it was actually eight apartments not six. So we go across the hall and go in the door there and three of the units-the other three units on that floor had all been merged into a speakeasy type bar almost like an Elks Lodge.

And there was a very, very like mahogany rich musky old man type of feel to it. And I'm walking through this and I’m like what do you do with this? And I'm talking to the guy and I’m like this is kind of cool I might come check it out on Friday night and see what’s going on. But what I do when this guy decides he wants to hand in his keys and say, “I can’t do this anymore.”

“I found a 23-year-old bimbo that’s the love of my life and she's keeping me on the straight and narrow.” So sure the places bringing in I think between the-on that floor with those four units I think the guy was paying $2,000 a month. He wanted to keep that arrangement and blah, blah, blah but I was looking not six months down the road.

I was looking six years down the road or a couple years down the road what do you do when somebody you’ve got a tenant who’s there, he looks like he’s going to be there for a while he’s paying, numbers look great but when he's gone there is no- it was an unlicensed bar so to speak. I mean I’d have to completely gut the whole floor and redo it.

So I was just like the building is great I love it but I’m not going to touch this.

Josh: That make sense and yeah it's again it's the same situation right that you could've renovated it, you could have kicked him out and cleaned up the units and done something nice with it. That would have cost you money; they were probably not going to list this price for a discount because they had rents coming in.

It was in good condition right and so unless you can talk him down right and I'm assuming if you were able to get them down by X amount it would probably be worth your while though right?

Michael: Right so at some point, that deal I'd be all over it. And one of things that happened in this deal is the broker that showed it to me after he asked for feedback and kind of went back to the sellers, he said, “They really want an offer.” And I was like, “I don’t really think I need to make them an offer it’s going to be insulting.”

He’s like, “No they really want to sell they want an offer w they need to divest this property.” So like alright let me on crunch some numbers and figure out what it's worth me. And I made him an offer it was pretty close to my highest and best and it was about half of what they had it listed for, so got a very quick “no, thank you,” and that was that.

And that property is still on the market today I actually-this was probably about a year and a half ago- I was browsing some commercial real estate the other day and saw that it's still sitting there same exact price.

Josh: Where is the price? Oh same price?

Michael: Same exact price yeah so.

Brandon: So if anybody listened to the show on tonight’s speakeasy they can get in touch with you and you can…

Michael: Yeah let me know I’ll point you in the right direction.

Brandon: That’s funny. Alright so I mean are you working a full-time job or is this full-time gig or what’s your story?

Michael: I do; I do work a full-time job; I work in insurance so I'm an actuary for 90% of the listeners out there who have no idea what that is, primarily involved with looking at claim statistics and pricing insurance. So very unexciting I’ve just had…

Brandon: Yeah I was going to say that’s fascinating.

Michael: To turn myself as when people asked me what I do; I’m a real estate investor.

Josh: Nice, nice.

Brandon: Nice that’s cool.

Josh: Cool so you went you got into this multi-well you didn’t get into this multi you were looking at these multifamily properties. Is that really your bread and butter today? I mean do you really just like focusing on those types of deals?

Michael: Yeah so the last fix and flip I did probably sold about a year and a half to two years ago. And in that really turned me off to fix and flipping and turned me on to apartments because at that point I had probably about 10 to 15 rental units, and they were more or less covering my holding costs on this fix and flip. It just did not go as planned.

Josh: What went wrong?

Michael: It really wasn't that bad of a deal in all compared to some of the stories I've heard, the biggest challenge that I faced on the whole property was we finished an unfinished basement and found a leak down there after the fact. So I had to a rip out and refinish the debasement, pay four or five grand to have the basement sealed and get French drains put in and all that jazz.

So that was a big setback and that was after the property had been on the market for quite some time. So I was already bleeding and it was like somebody came and cut my knees out under me. So it was just like argh.

Josh: So are you like totally out of the rehabbing business at this point I mean the flipping business?

Michael: Out of flipping yes.

Josh: Okay.

Michael: So now primarily what I look for are distressed rental multifamily properties that I can go in and use the same contractors, do a lot of the same things to these apartments, really spruce them up but then go and either depending on the financing situation. And once they’re completed I get them rented out, and either seek new financing or just hold on them as is.

Josh: Are you using the same agent or are you using multiple agents to help you find these different properties?

Michael: I primarily use one agent who I was introduced to pretty early on she helped me buy my first house. She was recommended to me by another local investor and over the years I’ve seen hundreds of properties with her, really got to know her but she's been instrumental and anybody can kind of show you properties and say yeah you should buy this or no you shouldn’t or whatever.

But she's also an investor herself; she's got several rental properties in an area that I like to invest. So she knows contractors, she knows plumbers, she knows management companies she knows lenders she knows the work. So it wasn't just I don't stick with her because she send me that automatic listing update every day.

I stick with her because over the years she's really helped me grow from that green eyed guy who just wanted to go and rip a house apart and put it back together, to somebody who really wants to build a business and contract a lot of that work out that's involved in that.

Josh: And a great agent can really mean the difference for a newer investor, can it?

Michael: Absolutely yeah.

Josh: Yeah I mean if you turn to somebody who doesn't know what they're doing and you don't know what you're doing you’re in a lot of trouble.

Michael: Yeah and one of the things in my experience over the years I've dealt with probably 10 different agents on my side and countless more on the other side of the table. And one of the things that I would advise folks out there is to really take what they're saying with a grain of salt and do your own research, figure out just because they say that blowing out this wall and throwing a deck on it and putting sliders on is going to add $10,000 worth of value to the property.

Why do they think that, is there anything that backs that up? Is there a comp down the street that has that that’s worth 10 grand more? And really research what they’re telling you, don't just take them at their word.

Josh: That’s great advice.

Brandon: It is. So how are you financing these deals today like if you go and find a property today that you want to go buy, how would you put it together?

Michael: Well it depends on the type of deal. So I recently just finished a triplex and I remodeled top to bottom more or less a complete gut. That property I purchased with a hard money loan which is the same lender that I've been working with for a lot of the rehab deals that I was doing. I’ve built a relationship with him.

He doesn't typically like to loan on multifamily property but he's worked with me enough to where he was willing to pull the trigger on some multies for me. I bought that property cheap enough and it needed so much work that going through a conventional loan or a commercial loan just wasn't going to work out. So I partnered up with him on that- I said partnered-I took a loan from him on that of very high interests, a generous loan for him.

And remodeled the whole thing top to bottom, then once I got it completely done rented out tenanted, I went to a commercial lender that I also got a relationship with and said, “Hey look I got this property it’s bringing in X, it’s probably worth about this, how much can you loan on it?” I shopped that around to three or four local lenders that I've done loans with in the past.

And I’ve built a relationship with and kind of ended up hitting it between two of them and getting what I wanted out of it.

Josh: That’s cool.

Brandon: That’s cool. And I'm a big fan of like the hard money to refinance later kind of strategy. I mean it’s a little bit dangerous in that for those people who don't know what a hard money lender is it's obviously a person who lends at high interest rates and high fees in short-term. But they can do loans and they’re not a bank.

So they can these loans that nobody else can do. So I guess what are some of the dangers? Maybe you can talk about that; what’re some of the dangers of using a hard money lender because I mean I like them but they are dangerous. So why is that?

Michael: Sure so the biggest thing is holding costs at least in my experience. You’re borrowing a lot of money in most cases a good deal of money and you’re paying upwards of 12%. And I’ve heard people paying 16, 18, 20% for this money. So really the clock’s always ticking on you need to either I think you guys discussed in a previous podcast.

But three or as many exit strategies as you can; just having one plan is it isn't really going to work for you. If something happens and you're stuck with it you can really find yourself in trouble.

Brandon: Well so let’s just say that real quick; let's say you bought a property this triplex and you went to go get a loan from these people and they said no; the banks said, no, you got too many properties too many loans what would you do at that point?

Michael: My plan B would probably be to sell the property which would break my heart as it did such a great rental property. But with the amount of work that I put into it and my equity position, and because I did get a hard money loan but I also sunk a lot of my own capital into it so I had plenty of a buffer there that if ultimately my goal was to cash out refinance.

And recoup as much of my personal funds as possible, and pay off that hard money loan. But if that didn’t come to fruition plan B was to potentially sell the property, plan C would be to call my dad pull a note out of Brandon Turner’s playbook and say, “Hey dad I got this deal I owe X on it, you want to partner on it?”

Josh: We’re not all that lucky.

Michael: Yeah.

Josh: It must be nice guys, it must be nice.

Brandon: Well the nice thing is you don't need money to do that strategy the person just needs to have good credit. So there's a lot of people out there who have good credit but you can partner with if you had to in an emergency like that.

Josh: Nice and you do cover that, and you I think we talked about that in the podcast.

Brandon: Yeah a couple of weeks ago yeah.

Josh: An in your book right?

Brandon: That we did so yeah people want to know more about the hard money to refinance strategy check it out in what’s my book called again- the book on investing in real estate with no and low money down which you can get at BiggerPockets.com/NoMoney.

Josh: Yeah.

Brandon: But anyway, I guess I want to talk a little bit more about the hard money lenders just in terms of like no money down. People talk about them and I mention this in the book about it is possible to get a hard money lender to fund 100% but it's very difficult and maybe not wise. So I guess what does your hard money lender require? What does yours require you to put down?

Michael: So for typical fix and flip, he's looking for 10% of the purchase price down upfront and then he'll loan up to 70% of the completed value.

Brandon: Okay.

Michael: After repair value. And he does a full as is appraisal and after repair value appraisal. He’s got an appraiser that he works with so this isn’t a like a typical bank where you go in, say you want a loan, they approve and then they call some random 800-number and Joe Schmoe goes and appraises it. He’s got an appraiser, one appraiser that he's been working with for years who he trusts for valuation on property.

So those are the typical numbers that he requires. Now when I got into-I've done a couple multifamily deals with him, and he's required more upfront on those. I think he only loaned about 80% but he did throw in capital to help do the remodeling. So it's very appealing for somebody like me I may have enough money to buy the place with a normal loan.

But I may not have enough capital to really clean it up and make it what I want it to be. So having somebody that can lend that money short-term and give me a bridge to get where I need to be is tremendously helpful.

Josh: And you said he threw in that extra capital let's not confuse people; that was not a gift.

Michael: Yeah he showered me with the money he wrapped up in a box put a little bow on it, it was beautiful.

Josh: Nice, that’s awesome I need some of those boxes.

Brandon: Yeah.

Josh: Alright hey so Michael I am just curious here I mean you work in a full-time job you’re a number crunching actuarial individual, what's your plan I mean are you trying to -do you have a goal of hey I want to buy X number of properties I want to have enough property to be able to offset my actual job income and just quit my job. Do you love your job and want to do that forever and this is just another way to go vacation every two weeks I mean what are you doing here?

Michael: That’s a great question so when I started out my goal day one in my corporate job was to save up enough money so I could start flipping houses and start making six figures a year, go on HGTV, have my own TV show, quit the corporate job and just be a star. As most people that get into flipping quickly realize it's not as glorious as they make it out to be on the TV shows.

You you're not making as much money and you’re not making it as quickly as they like to make you think. So over time my investing has changed and my job has changed. I’ve personally changed my focus my original plan was to only be there as long as I had to be. And now my goal is to really grow both my real estate business and grow my professional career.

And just wait until I get to that crossroads where it makes perfect sense to say, “I got to get out of this out of this job, I’m making so much money in real estate or what am I doing messing with this real estate I’ve got this great job?” And at some point it’s not clear to me today what the answer is there but I do enjoy my job.

It offers me the flexibility to invest in real estate which I also love. So I know a lot of people come on the forums and say I can’t wait to quit my day job, or I just quit my job and everybody is excited. I really love what I do and quite honestly if I quit my job which I probably could at this point pretty easily, I'd be bored to tears. I don't know what I’d do all day.

Brandon: Well and honestly that’s kind of what happened to me right like I quit when I was 27 and I said, “well I don’t have to work a job anymore I got ‘passive income’ “ but I was still managing my own properties and I realized I was pretty bored and I didn't really like managing my properties that much. Like it’s I’d rather have my wife manage our properties. And I rather do something else fun which is why I'm here today on the podcast. So I think…

Josh: Oh pawn the dirty work to your wife nice that’s awesome.

Brandon: She kind of likes doing it I just…

Josh: Okay.

Brandon: I hate the phone; I hate the phone like people who know me know I hate answering my phone and talking on it. So you got to do that as a property manager which speaking of do you manage your own properties Michael?

Michael: I do, I do.

Josh: Good question.

Michael: And by the way, I never get phone calls, so you must be doing something wrong.

Brandon: I’m doing something wrong.

Josh: Really? Wait, are you kidding you never get phone calls?

Michael: Never I've probably gotten two phone calls from tenants this year in 2014.

Brandon: What do they do; text you or what?

Michael: I get a text message I get an email; never get a phone call.

Josh: Do you to tell them to text or email you or that's just what they do?

Michael: So I kind of set the tone when I start interacting with them from the day that they…

Josh: Oh you train them.

Michael: Yeah so I kind of mentally train them that here's how you communicate with me. When somebody reaches out to me on through Craigslist or PostLets or HotPads or one of these other great sites, by the way if you're getting into real property you've got, got to use these sites. They’re free and anybody who's looking for apartment is out there digging around on them.

So take advantage of that but the when I get an email from somebody over the years I’ve kind of learned to tweak how I handle it but I ask for a set of things and if the person doesn't provide me answers to these five questions I don't even waste my time on them. One of the things…

Josh: And what are those questions?

Michael: One of them a phone number; so if you can’t give me your phone number why am I wasting my time with you? A second thing is I just recently started doing this but asking why the person’s interested in moving. One of the things I’ve found is that folks will email you and say, “Hey I really want to look at this apartment.”

And I'll get through, I'll show it I’ll get through the application process and then find out that they're wanting to move because they can't afford the rent on their current place that’s $25 dollars more. And it's like well I could nip that in the bud right at the beginning. Another question asked is when are you looking to move?

I'm sure you guys have experienced this but I don't anymore but I used to get folks who would email me say, “Oh this is the perfect apartment and I love it when can I see it?” and we set up a showing and they’re like, “Oh this is it, this is the one.” They go home they get an application and send it to me and they say, “Oh yeah I want to start in four months.”

I’m like, “Well just wasted all the time for nothing because this is going to be gone before that.” So those are some questions ask and I also asked how many people will be living in the apartment because most of my apartments are one or two bedrooms. And I’ve had like1 groups of three or four people interested in renting out a one-bedroom apartment. And I don't even waste my time going to show that because it’s not going to happen.

Brandon: Yeah.

Josh: Yeah that’s great.

Brandon: That’s cool I mean that is important to the prescreening because you’ll drive yourself crazy if you go out and show a unit to every tenant who calls you. I mean like the vast majority will never qualify anyway so the more you can do upfront to disqualify them and only show to people who’re probably going to work out.

I mean I do a lot of group showings like last Saturday I had – typically I don't do anymore my wife does but there’s this one property that I'm taking full responsibility of because it’s a long story it’s my best friend’s house. Anyway yeah so I scheduled six showings all for the exact same time for10 o'clock. Guess how many showed up; one.

Michael: Three.

Brandon: One out of six showed up for their appointment. I mean these people were all excited about it, they’d all seen the house they’d driven by, they’d all wanted to see it, one out of six. So had I made six appointments, I would have wasted six hours or five hours a time to do that. So that’s why I always recommend screen ahead of time and do group showings and yeah.

Josh: Good advice.

Brandon: Yeah.

Michael: To that same point I just started using a showing agent, a real estate agent who’s looking for some additional work on the side and looking to get into investing and we kind of figure out hey this is great opportunity. But one of the things that she kind of suggested was doing group showings and she really loves the additional safety.

Brandon: Yeah.

Michael: You probably don't care so much Brandon because who’s going to want to mess with the crazy old cat guy but…

Brandon: I’ll fight them yeah.

Josh: Did you just call him a crazy cat guy; I love that. I love that you can be my guest host anytime you want.

Michael: But yeah so for her I mean she loves the added safety if you’ve got four or five people showing up for a showing Craigslist can be sketchy and you always hear that random story of this that or the other happened through Craigslist. But when you know that there’s going to be five people showing up to look at that apartment, you're not worried about that one crazy person because that…

Brandon: I was going to say and the competitive nature of people like I’m going to get this house before that, that lady is ugly I’m going to get it before her. Like they get into this bitey little like angry like I don’t like that person over there and they want to get the apartment above that person. They talk behind their back and it's fun I have a good time with that.

Michael: Do you do talk with them behind the other person's back is that?

Brandon: Of course I do. I’m like yeah she’s terrible and they go [Inaudible] [47:35].

Josh: Oh stop it, oh stop it come on.

Brandon: Okay I don’t do that but they do, they get really bitey at each other like or not at each other but when one of them goes in the other room there’s like yeah those are like I don't know. I mean what’s the worst they’ve ever said; it’s things like, “Yeah I think they’ve got a dog,” or something like that. Just like dropping these little things that just yeah shouldn’t rent to them, you should rent to us.

Josh: Oh boy, oh boy.

Brandon: Yeah I got low-income tenants so.

Josh: Yeah, hey Michael let's get back to something real here not Brandon's stories that nobody cares about. Tell me about this showing agent you talked about a showing agent, obviously it's an agent that shows right; but how do you work that out I mean they're not getting commissions. So were you paying them on a per showing basis? And have you find somebody I mean this one kind of fell on your lap obviously but tell us more about that.

Michael: Yeah so one of things as I'm growing I really wanted to get, kind of hand off some of the responsibilities that are involved with rental properties and showing the units is a big one. This like you mentioned this one kind of fell in my lap I had met with somebody who I met through BiggerPockets ding, ding, ding.

Josh: It’s a good site.

Michael: Reach out and connect with people, but I'd met with her and really there was no intent behind the meeting other than just saying hey, get to know each other, here's what I'm interested in, here's what I'm doing, here's what you're doing whatever. But as we get to talking and we got into a little bit more and we just kind of discovered this mutual arrangement that worked great for both of us.

And we didn't iron anything out at that time but I kind of left and thought about it a little bit more and she thought about it a little bit more. And we did come to a per-showing payment arrangement. So and that's also one of the things that drove me into group showings is because if she's only there for an hour if I get six people in there or one person it’s still going to be the one showing fee.

So that’s kind of how our arrangement works, and it's worked great so far no complaints there. I don't have any advice for somebody who doesn't have this arrangement and is looking to go out and find it other than connect with people whether it be through BiggerPockets or your local REA meeting. And eventually you’re going to come across somebody.

I mean heck if you would've found me five years ago I would have been that guy that would be like, “Oh you’ll let me show an apartment for you and you'll throw $20 my way; yeah. Just tell me when and where I'll do it,” so.

Josh: So you only pay her $20? Wow.

Michael: I pay her $20 yeah.

Josh: Wow.

Michael: Is that unreasonable or?

Josh: I don't know, just that doesn't sound like a lot of money; sounds cheap to me. I mean you should pay her more.

Michael: Like I just said five years ago I would have hands down done it for $20.

Josh: I'm just busting your chops man and I agree I would've done the same thing so.

Michael: Yeah.

Josh: Yeah.

Brandon: Cool, alright awesome so moving on.

Josh: Sorry I made you uncomfortable no I'm moving on stop it.

Michael: I’m going to have to tell her not to listen to this podcast she’s going to come back to me and say hey I need …

Josh: I want $45, yeah.

Michael: And say, “Well Josh has your other $25.”

Josh: I got her back and I want a commission, I want my check thank you, thank you very much. No, no alright Brandon I know you want to move on to something don't you?

Brandon: Yeah I’m going to move on to The World Famous.

It’s time for the Fire Round.

Brandon: The Fire Round; these questions come ripped out of the headlines of the BiggerPockets forums. Number One; what is your best advice for finding a top-of-the-line property manager? Now I know you manage your properties but this is a question so I want to throw it at you. Do you have any good tips you think people should on finding a property manager?

Michael: Yeah that's a great question, I've actually screened/spoke with many property managers in the area, I’ve bought property that was managed by property managers. So and I know several in the area, so one of things I would suggest doing is talking to the person that's in charge. Finding out what kind of response times they have. One of the things that I found was lacking in the people I talked to was they can't prioritize

If they have 800 units they’re managing you have 15 units probably they fall somewhere in there sure they're going to tell you that this is the most important property that we have. But come armed with an example and say, “If I text you or call you or whatever and I've got a tenant who has a light bulb burnt out in their kitchen, what’s your turnaround time on that?”

And they might tell you it’s a day or four days or whatever but when you ask for-second thing is ask for references and if you get a reference call that person and ask them the same question. If a light bulb is burnt out how long does it take so-and-so Management Company to get over there and replace it; because those are the little things that they’re not going to make or break your bank.

You’ll get paid the same amount of money every month but the tenants are going to see that and are going to be like, “Well this person doesn't care about the property, so now I don’t really care about the property or I don't want to stay here or whatever.” So that’s a big one and then I’d also strongly recommend finding somebody who also invests in property themselves.

A lot of property management companies I know of in Louisville are probably about 50/50 half of them are owner investors where they’re they know what they’re doing, they’re in the business they know what they're doing they’re in the same shoes as you. And the other half are just folks that either saw an opportunity for making money in real estate without having any money or whatever.

But they don’t know what it’s like to be the owner, to be paying those bills, to have a trouble tenant or the eviction. So somebody that knows what you're dealing with would really make a huge difference.

Brandon: That’s great good advice.

Josh: Yeah, yeah I mean and I think there's some argument from investors about all those criteria too. I mean I know that when I first started looking for managers I wanted somebody who managed a lot of units and I found that the ones who managed a lot of units were putting their units before my unit. And I even heard from tenants that I had like yeah we’re trying to move our friend in.

And we told them we want to get them in our building and they try and push them to other properties that turned out to be properties that they owned. And that's kind of one of the dangers that you face and I still to this day I don’t know how to get past that but I think it's the references and then trying to find references of references maybe because you’re only going to give good references.

Michael: Yeah that’s an excellent point Josh can I revise my answer real quick?

Josh: Sure.

Michael: So my new answer is what I'm currently trying to do; build up enough property where you can hire somebody to work for you. And then you control what happens if you want to fire them or if they’re not doing something right they answer to you and you only.

Josh: Yeah I think that’s good advice. And that comes in time and the question is how many doors is that and I think that's different for everybody, but alright so do rules like well the rules of thumb like the 50% rule and the 70% rule do those still hold true in today's market?

Michael: Well I never really bought into any particular rules, I actually got into investing before that I discovered BiggerPockets and come across some of the rules after I’d already kind of developed my own rules. So for me the rules that I created are specific to not Louisville or Kentucky they’re specific to old Louisville or the Highlands or very market specific. And they’re geared towards the property that I'm interested in.

So my advice would be to kind of have an idea going in what you want to get out of it, but come up with your own criteria. And if you need to adjust that criteria as the market changes be very careful about doing so because I think that's a key indicator that things are either overpriced or it'd be a good time to sell. If you're not finding any deals that meet your criteria maybe it’s time to unload some properties and wait until something good comes on.

Josh: Yeah I think that's great advice and the ‘rule’ thing again those are guidelines we didn’t come up with them, they're not mine, I am not invested in them. It’s people in the community have come up with them and generically they tend to be fairly true for certain situations right. I mean it’s not going to work for everybody.

But I really like what you said which is get out there, whether it's those rules or some other rule that you might have, you adjust them for what works for you in your particular market, in your particular strategy, in your particular niche, figure it out narrow down your criteria and establish that; make that your rule. And now that's what you use going forward every time the agent sends you something.

Every time the mailers go out and somebody calls you whatever it is, you've got your rules don't shift them, don't budge them. Because if you start saying, “Oh but this feels really good, it's really close but,” that's a really good way to get yourself in trouble I think.

Brandon: Yeah great, great. Alright next question; what is your opinion on buying out-of-state rentals?

Michael: That’s a very great question. So I recently just moved out of state, so I'm now actually an out-of-state landlord.

Josh: Interesting.

Michael: Moved down to Southwest Florida and I’ve been down here for a couple months. My current plan is to continue purchasing property out-of-state now which would be Louisville. As somebody who didn't start that way or doesn't plan at this point eventually I plan to purchase property in other areas but I would suggest that you really probably want to go and know the area that you're looking to buy property in.

If somebody throws out a deal on the BiggerPockets marketplace saying, “hey I’ve got this eightplex in Cleveland Ohio it's great cash flow; it’s a cash hog and you're looking to invest in Cleveland Ohio, but you’ve never been there how do you know that the property is in a decent area, that it’s going to rent well, that fits your criteria?

So my suggestion would be to go and know where you’re investing and then after you get comfortable and know where you want to buy stuff, find folks out on the ground that can be on your team and on your side, whether it's a realtor or some contractors or whatever, and make sure you’re on the same page with them. And really utilize them for what you're trying to do.

Josh: Nice, nice I was on mute I couldn’t … I was going to say last podcast show 093 with Eric Stark it was similar thing; he was in Detroit and he moved to Florida as well

Brandon: Southwest Florida yeah.

Josh: Yeah.

Brandon: Where in Florida are you?

Michael: It’s great down here; I'm in the Fort Myers area you should come check it out.

Brandon: He was in Fort Lauderdale.

Josh: Yeah.

Brandon: Can I have a barbeque at your house as well I just asked him if could have one.

Michael: Absolutely. Yeah come on down.

Brandon: Okay I’ll come over both your houses. I’m going to have two barbeques, two days in a row. Everyone’s invited.

Josh: Well and the interesting thing was he also invests back at home in Detroit while he is in Florida. So it's kind of cool that you guys are both doing the similar strategy there yeah awesome. Alright so what would you do if a tenant asked for a three week extension on the rent?

Michael: Say no.

Josh: But my aunt is really sick and I got to travel and I just can't do it right now.

Michael: So I was in this situation very early on, thankfully I am grateful for it but the I had that tenant that was three weeks late every month. And I was a huge pushover I mean I let them do work on a property I was remodeling, anything you could think of that would be the wrong thing to do, I did it. And boy did I learn my lesson from that.

So going forward I set the rules in stone, if somebody's late typically now I receive all my rent electronically, so I don't get the excuse of, “Oh yeah it’s in the mail or.”

Brandon: What do you use for that?

Michael: Great question; so I use three different sources I give the tenants an option whatever they prefer but I use primarily Intuit Payment Networks which charges $.50 per transaction and I just eat that cost I don't charge it back the tenants. The other options I work with are Google Wallet, I just started using that three or four months ago.

And that’s been working out great and the other one some folks if the tenant banks with Chase I like to use Chase Quick Pay because that also works very well.

Josh: Nice.

Michael: The last two options are free which is even better.

Josh: Definitely.

Michael: So you derailed my train of thought I forgot where I was going with that. What was the original question?

Josh: It was about tenant three week extension and you said no, I don't do it and absolutely not so move on to the next question.

Michael: So yeah but with electronic rent I know the day of is it there or not; there is no question about is it in the mail or I forgot to stop by the office whatever, I know either I have it or I don't. Typically what I do with all my tenants I’ll text them, I very rarely have anybody that's late. But if I do I'll text him and say, “Hey I didn’t receive your rent for whatever month for October.”

And they’ll get back to me within a day and say, “Oh yeah I forgot or I don't get paid till Friday,” and I say, “Alright well here’s add the late fee on there and if it’s Intuit Payment Network I’ll cancel the request for that payment I’ll have the late fee on there. But that's a huge thing you got to do is stick to those late fees.

Sometimes what I’ll often do is I’ll cater to my soft side and give somebody a break if it's their first time and I'll charge them half the late fee, but I very rarely if ever anymore don't charge a late fee if I don't have that rent when it's due.

Josh: Nice, nice.

Brandon: Yeah, yeah cool. I do – we’re very similar so it’s good. Great minds think alike. Alright, moving on to the World-Famous.

Famous Four.

Brandon: Famous Four; these questions we ask everyone so let’s hear them from you. You listen to the podcasts you know what’s coming. Number one what is your favorite real estate book?

Michael: Favorite real estate book, I tried to think of something that wasn't overly mentioned but one thing I often tell folks to buy on BiggerPockets and I have no affiliation with it is Commercial Mortgages 101 and that’s by Michael Reinhard. I kind of stumbled across that book when I was trying to refinance a sixplex.

And that was kind of when I figured out, “oh crap I can't get conventional financing on this thing.” And it really just opened my mind up to the world of commercial financing which if you want to get into buy-and-hold at some point you're almost have to understand how that world works. So that book covers in detail.

Josh: Nice.

Brandon: Great I never heard of that one so cool.

Josh: No, alright and that's not one of our books I think Michael was just saying he mentions it to people on the site so just to clarify okay moving on favorites; what is your favorite business book?

Michael: I tried to do the same thing and come up with something that wasn't overly mentioned but I really got to lean on The 4-Hour Workweek, tremendous book it really kind of forced me to think about how to simplify things instead of over complicating them.

Josh: Nice there you go. And what about hobbies what do you do for fun?

Michael: I love wake boarding been into that for about 10 years now part of the reason why I moved down to Florida.

Brandon: Yeah I was going to ask.

Michael: I’d like to do it for more than two months out of the year.

Brandon: Can we go real wake boarding when I come down for the barbeque?

Josh: Oh my God seriously; dude stop!

Michael: We can do that yeah.

Brandon: See I just got an invite you didn't Josh. See that’s…

Michael: I mean Josh can…

Josh: Yeah here is like Michael's going to quietly send me an email, “Hey Josh anytime you come down, come down whereas you like kind of make it so they can't say no and then they feel awkward about it.

Brandon: I’m like Michael Quarrels of barbecues.

Josh: You’re the Michael Quarrels of in-your-face making people feel awkward.

Michael: Well Josh, one of the things of living in Florida is you don't have to invite people to come visit you.

Brandon: We’ll come anyway.

Michael: So sadly I'm probably not going to send you that email so if you want to come you got to ask man.

Josh: Wow okay alright.

Michael: Or you can show up I don't care.

Josh: I think I'll just show up.

Brandon: I’m showing up.

Josh: Alright hobbies.

Michael: I mean nobody knows where I live so…

Josh: That's a scary thought.

Brandon: Because I’m outside your window right now. Alright, alright we got to end this thing we’re getting- I'm losing it. Alright now last question of the famous four; what do you believe sets apart successful real estate investors from those who give up fail or quit or never get started or freak out or pass out or whatever?

Josh: You got it out nice.

Michael: I think the biggest things probably persistence. I was going to say passion you really got to love what you do but there's plenty of successful folks that aren’t really passionate about real state. So I kind of changed my mind and went with persistence. I don't know a single real estate investor that hasn't come across a situation that was difficult or costly or they lost money on. And you got to be able to pick yourself up dust your shoulders off and stick with it.

Josh: Nice.

Brandon: Great.

Josh: Awesome, Mike it's been a pleasure man where can people find out more about you?

Michael: Well you can reach out to me through BiggerPockets am always on there.

Brandon: Always.

Michael: Always yes I don't sleep I live, eat and breathe BiggerPockets so.

Brandon: He does I could testify to that.

Josh: Nice, that’s awesome.

Michael: you can check me out on there. I also have a website that is primarily just to showcase some of the works that I've done and that's www.rinnovate like innovate with an ‘r’ in front of it followed by KY.com so www.rinnovateky.com.

Josh: Nice awesome.

Brandon: Clever I like it.

Josh: Awesome. Alright guys Show 094 the BiggerPockets podcast BiggerPockets.com/Show94 you can find the show notes link up with Michael there. If you’ve got questions about the show definitely link up with him there in the show notes, otherwise reach out to him on the site and at his website. Beyond that thanks so much. We really appreciate having you come onboard and obviously we love having you as a member of the community.

Michael: Absolutely.

Josh: Thanks, thanks.

Michael: Yeah it was a pleasure being on and Brandon I’ll see you in a couple of months.

Josh: Yeah I’d be careful you might want to turn that invite back.

Brandon: It might be sooner than that.

Josh: Alright otherwise guys besides the fact that my co-host is creepy this is BiggerPockets podcast if you’re not active on BiggerPockets you're missing out opportunities to hang out with crazy guys like Brandon Turner and very, very nice guys like Mr. Michael I can’t say it- Siekerka.

Brandon: Siekerka.

Josh: Siekerka.

Brandon: Michael Siekerka.

Josh: Michael Siekerka, Michael thank you again and guys if you're not already doing so please follow us on Facebook, Twitter, LinkedIn G+ all the other social networks we post and share lots of cool stuff there. And really want to thank everybody for their time for listening and be active, get involved in our community get out there do deals, make things happen and ask questions if you need help. I'm Josh Dorgan signing off.

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