We’ve got a wonderful interview for everyone today! Christian Malesic is a relatively new member to BiggerPockets, but in that short time, has given quite a bit of himself to help others out! His knowledge, enthusiasm, and energy is captivating, and I thought we ought to find out more about the man. Christian focuses primarily on a buy and hold investing strategy in the Central Pennsylvania area.
How to Analyze a Real Estate Deal
Deal analysis is one of the best ways to learn real estate investing and it comes down to fundamental comfort in estimating expenses, rents, and cash flow. This guide will give you the knowledge you need to begin analyzing properties with confidence.
Meet Real Estate Investor Christian Malesic
How long have you been investing in real estate?
Round 1 went from 1994 to 2002. Round 2 started in 2006 and is gaining momentum everyday.
While studying Electrical Engineering at Lehigh University in Bethlehem, PA, I was an Air Force cadet with dreams of becoming a career officer and a leader among men. I excelled as a cadet and was a better than average engineering student, especially in digital systems and computer hardware & software, which made me a highly desirable Air Force asset. Partly due to this, but mainly due to our like-minded approach to life and leadership, the Commandant of Cadets took me under his wing. I learned much under his tutelage; the most appropriate to this discussion being (I paraphrase here):
Purchase a home at every duty station. Live in it. Rent it out when Uncle moves you along. Your tenants will pay off the mortgage.
I fully planned on implementing this wealth strategy at my first assignment to Minot AFB, ND in 1992. There was little to nothing for sale, no new construction, and rent was extremely low. I rented a nice 1 bedroom house with a decent yard and a two car garage for around $350 per month. I studied up and began planning for the next assignment.
I purchase my first single family dwelling in 1994, a three bedroom with two bath house on a _ acre in a suburban neighborhood in Palm Bay, FL.
I kept this property for almost 10 years as my life changed. I decided that almost 6 years in the service of my country was more than my ‘duty’ and promoted myself to ‘civilian’ to start my own construction company back home in Harrisburg, PA.
What attracted you to becoming a real estate investor?
My father – plain and simple – was my inspiration and both parents are still my biggest fans. Dad spent countless hours attending REI seminars, reading, and mostly talking about investing. He had grand plans that he would lay out for me in the wee hours of the night when the rest of the world was asleep. He never pulled the trigger. Still, he is a great success; especially if your measuring stick is the education he gave to his sons.
Are you a full time or part time investor?
By the book I am a part time investor. As of this writing we hold 28 rental units in 14 properties.
How did you get started investing?
Round 2 (see previous for Round 1). My brother and I own our electrical contracting firm together and work very closely everyday. We had researched and debated for years that a REI company would be the perfect compliment to our electrical business.
What’s more, since we are our own bosses, we could do whatever management the REI company needed whenever we felt moved. Thus, the REI company would not necessarily be serviced only in the evenings or on weekends, but rather whenever we could work it into the daily grind. Now that it is a reality, I do it just as planned. Even though the two companies are separate and distinct, my work flow during the day passes through both, in and out, almost without differentiation.
Tell Us About Your First Deal . . .
Round 2. We had spent years preparing… actually our whole lives at the foot of dear old dad. I had learned some previous lessons. We decided to get serious. We lined up financing, planned our strategy for rehab or remodel, started accounts with construction supply vendors, and started looking. Then it happened…
Benjamin Franklin: “the harder I work, the luckier I get.”
We bought a city property. The deal: half of a brick, three story duplex for $25,000. An old man had lived there for years and his Power of Attorney was now moving him to assisted living. It was not abused, but had not been maintained for decades either. It needed work. The owner (POA) allowed us to start removing the man’s discarded things before the settlement. We knew this was risky as the deal could fall through and we would ‘lose’ all of the labor we did. But it panned out.
A neighbor from two doors down approached us three days before our settlement (we did not own the property yet) asking if we owned the property. Hesitantly, we answered that we were buy and hold investors and planned on fixing it up and renting it out. He wanted to know if we would consider selling as-is, stop work ASAP, and let his friend see the place in about and hour. He mentioned a price of around $50k (remember we had paid, or were about to pay in three days $25k plus closing costs). Long story short, we literally went from the closing table to his house three days later to sign a contract (of course, we could not sign a contract before we even owned the property). We cleared $18,500 on that first deal and did only a few hours of clean-out labor.
We got lucky… or worked hard (depending on if you were observing from the outside or were us working the long hours away from our families in the evening and weekends for weeks on end to get ourselves prepared for this new venture.)
What is your focus?
Buy and Hold residential. We rent clean, updated, nice apartments to upper lower class or lower middle class people. We often hear perspective tenants say that ours are the nicest apartments they have seen in all the time they have been looking. We like that. We are building a reputation and have begun to brand ourselves.
Do you prefer the residential side or commercial side of investing? Why?
Residential. Our experience with commercial is limited. We purchased an office building for our electrical firm with HUGE growth potential on one acre along a busy street in a great growth area. Other than that we have done nothing other than walk from less-than-desirable commercial opportunities, though we continue to review them.
What do you look for in an investment?
As Buy and Hold investors, we think long term. Cash Flow is King, but… We are sometimes willing to sacrifice cash flow for an “add to inventory property” (one that cash flows neutral or small positive) if it is in the right shape in the right geographical area.
How many deals have you done in your career?
As of 21 Mar 08 – Completed deals in the business name only: 17 buys and 3 sells. Adding my Round 1 property and our personal homes, it jumps slightly to 21 buys and 5 sells. I am still a newbie, which is why I am profoundly honored to be chosen for this Meet the Investor interview.
Do you have your real estate license?
I do not. My wife does. She became an agent at the beginning of 2007 and serves mostly one client – me. This was / is our strategy. I have written on this in a BiggerPockets thread entitled, “Don’t Rely on Agents, Become One” in the General Real Estate Investing forum on 12 Mar 08. Check it out.
What advice would you give to a beginning investor?
JUST DO IT! It literally took decades for the Malesic clan to get off our collective butts and get out there. Don’t do as we did, do as I say. I learned more in the first year of actually being a REI than I learned from all the books, tapes, forums, meetings, and talks with dad. Start small. Do not buy 12 or 7 or even 2. Get one and work it through. Learn. Make your mistakes. Come here for advice. Recover. Then, my friend, then you are ready to own the world.
What was your toughest deal?
In glass-is-half-empty-thinking: every deal is tough. I know that sounds like an end-around, but I do not mean it as such. Every deal is about controlling all of the time-tables. Every deal is about reminding everyone to DO THEIR JOB. Every deal is about padding suspense dates so when they are missed it does not mess up the deal. We have gotten good at it.
There is something that I keep in mind every deal at the eleventh hour when we are making it all happen. As soon as the deal is done, the deal is done. “We may never see these folks again once we close,” I say to our team. I try not to ever let it get to me. I keep a smile with my chin held high, stay professional, roll up my sleeves, and get to work. So, I guess you could think glass-is-half-full in that every done deal is a good deal.
What would your dream deal be?
A deal that goes smooth. I sign the contract at the beginning and the paperwork at the end (closing). Everyone else does their job and gets paid. Done Deal. Win for us. Win for the Buyer / Seller. Win for all of the folks helping us to do the transaction. Win – Win – Win. That is business, American style (all winners, no losers).
Do you have any thoughts about the current state of the real estate marketplace or economy?
It sure seems as though the perfect buying storm is headed our way. Sellers and flippers beware! I am taking advantage of the current economic climate to hunker down, ensure the fundamentals of my business are sound, and prepare to buy the heck out of my target market in the very near future.
Is there anything else you’d like to share with the rest of us?
It is difficult to go it alone and expect that you have the talent, personality, education, and perseverance to do EVERY PART of this business. It may not be possible for some, but where it is – get a partner.
My brother is our Construction Manger. He estimates and manages rehabs, repairs, and remodeling. He does the small maintenance himself and manages the contractors for the larger jobs.
My sister-in-law is our Property Manager. She handles tenant relations; that is: showings, lease paperwork, complaints, evictions, etc.
My wife is our Bookkeeper and Office Manager. She does the filing, research, and general paperwork as well as enters in the bills, receipts, and rents. She works with deposits, withdraws, and general banking.
I am the President / CEO. I do everything else. I buy and sell, which includes all negotiations, paperwork, and closings. I work with the accountant, insurance broker, and lawyer. I network.
We are all different and so should be our jobs. Keep this in mind as you are formulating your company or growing it.
Finally, in a bit of self promotion, I wanted to ask what do you think about BiggerPockets.com?
Even though I am a relatively new investor, I do consider myself ‘advanced’. I have: a college education, tons of experience with construction, lots of management background, am a fast study, and just can’t get enough (sorry to brag).
It was not until I found BiggerPockets that I found myself among others like myself. It is an environment that is honing my skills everyday. I am glad to play a small part.