BP Podcast 132: How Brie Schmidt Grew Her Real Estate Portfolio by 50 Units in 1 Year

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Today on the BiggerPockets Podcast, we are excited to bring back Brie Schmidt, a real estate investor from the Chicago market who has absolutely DOMINATED her goals over the past twelve months. Last time we talked with Brie, she had just quit her job to pursue real estate full-time. Today you’ll learn about the impact that decision made on her life and how she’s been able to reach her financial goal in just twelve months, buying more than fifty new rental property units in that time! Be prepared to be blown away and inspired to do the same!

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In This Episode We Cover:

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  • Who Brie is and how she quit her job and went full time since the last show
  • The 3 catalysts that drove her to become a full time investor
  • How to incentivize in-house property management
  • Tips for making tenants happy
  • The story behind 50 units in one year
  • What kind of tenants she is looking for
  • How Brie handled her first eviction
  • What kind of properties she is investing in
  • Her average cost per door
  • The details of buying multiple units at a time and concerns you face with it
  • The mindset behind buying 50 units in a year
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “You bring up the level of the property to attract the kind of tenant that you want.” (Tweet This!)
  • “Property management could make or break your business.” (Tweet This!)

Connect with Brie

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

63 Comments

  1. Dustin Kircher

    Brie,

    Thank you for all your insight. You had mentioned something about Jerry who was sending out a 1000 letters. Can give me a little more information on the company or what exactly you are sending out. Thank you again for the expertise you have shared!!

  2. Jacob Stark

    Great podcast Brie, Josh, and Brandon. This was highly informative and motivating! Brie, does your commercial lender require a 20% down payment or is that different since commercial?

  3. Clifford Pala

    Excellent job Brie in representing all of us in Chicagoland !!! Your a great inspiration – you have my vote if you are ever asked to co-host with Josh and Brandon someday 😉 -see you at the next Chicago BP meetup ….

      • Jackson Maia

        Thank you for sharing your experience. Just a quick question do you round up investors for down payments or do you use it from excess profits from last investments ?

        • Brie Schmidt

          Currently everything is solely owned by my husband and I. We did a cash out refi in 2014 for the down payments, then borrowed money from my brother for the rest, and just paid him back by doing a HELOC. Next month I am closing on more properties and those are with partners.

  4. Ben G.

    Really looking forward to hear this one. It’s always exciting to hear the progress BP members have made when they come back for another show on the podcast. I’m sure Brie is full of useful knowledge that we can all apply to our investment business.

  5. Ronald Perich

    Must be kismet that I made a colleague request of Brie earlier this week! She’s been a great assistance and help to so many on BP and this podcast was just another example of that.

    I am really interested in hearing more about the way you drive positive behaviors with your property manager. Any chance you could put a few more details of your agreement out there?

    I’ve always thought that these PM agreements were written in the exact opposite way to drive good behavior.

    Why would any PM want a resident to stay past their lease if they get paid to fill the unit?

    When they get paid for late fee collections, doesn’t that just mean they won’t put into place practices to help drive on-time payments?

    When they get to mark-up every service call, won’t they be more apt to simply use duct-tape on the problem instead of fixing it right?

    I absolutely love your concept of rewarding good behaviors, Brie. I think you might have business idea #4 here!

    • Brie Schmidt

      Thanks Ronald!
      Our PM contract is pretty standard. To be honest, we signed it last year and I don’t even remember what it said. To me it is all about how I manage the relationship.

      The vacancy bonus thing came to mind in March when it was 5 days before the end of the month and we had 4 vacancies. As I mentioned on the podcast, my PM was a teacher so this was a second job for him and he had a lot going on. I really wanted the vacancies filled for the next month and knew I was asking a lot from him with everything else we had going on. So I decided to offer a bonus to get the rented out for the first of the month. He worked his butt off and got 3 of them rented.

      It was then I took a hard look at my numbers and our portfolio performance. We approached my PM about working for us because he had such a good relationship with his tenants. So I thought he should get bonuses for keeping them, not replacing them. So I took 25% of my planned vacancy and offered it to him as a bonus, paid quarterly only if that unit had no loss of revenue. So if a tenant gives notice to move June 30th and he gets a tenant lined up for July 1 then he still gets the bonus. Or if the tenant stays and pays all quarter he gets the bonus. We just started in in Q2 and saw a 3% drop in our vacancy.

      I also treat him like a partner, and we have developed a great working relationship. At a minimum, I drive up there monthly to have dinner with him and we go through the previous month and where we are at this month. We also discuss both of our short term and long term goals. He knows where I want to be in the next year, 3 years, and 5 years. And I know where he wants to be. So we try to work on things together.

      Of the 51 units we bought in a year, 40 of them were bought in 6 months – so the takeover and adjustment has not been easy. Not only does the city come out when you buy property and give you a list of repairs that need to be made in 90 days, but we also inherit tenant issues. So when I knew he was working extremely hard to get things done, I send a thank you card and a bonus. This weekend we are throwing a thank you party for all of our workers who have been working like crazy to get our units up and running. Sometimes it is the little things.

  6. Link McGinnis

    Brie (and others), you’ve grown your portfolio quickly over the past 6 months. Congratulations!
    I’m wondering; do you purchase all of your properties in your own name or do you use an LLC?

    I have 1 rental property and have personally borrowed against it (HELOC) in order to purchase a second property (still looking). So, far I’m working from only 1 personal checking account. So, I’m wondering if I should create an LLC and open a business checking account before moving forward or continue to work from my personal account.

    How would future bank support (ie loans) be affected by this decision?

    Thanks for all of your help!

    • Brie Schmidt

      Everything in Chicago is in our name, everything in Milwaukee is in our LLC. It is mainly because of financing restrictions on the residential side of lending that require us to get commercial financing. And commercial loans have to be made to a LLC

      I would prefer residential financing (which cannot lend to a LLC) all day long, but you can only get up to 10 loans

  7. Joe T.

    The thing I don’t like about any of these stories is that they NEVER talk about how they made enough money for the down payment, they never talk about how financing all of these units is even possible. I just have the hardest time wrapping my head around this.

    Like how do I, go out and say I want to buy X amount of units when I only have enough of a down payment for 1 single family home? I really do not understand it. If someone could please tell me in DETAIL, I would appreciate it.

    • Brie Schmidt

      Joe, My podcast last year https://www.biggerpockets.com/show78 outlines how I started up until I quit my job. This podcast was more of a catch up since the last one. I do outline step by step how I did everything on my blog http://www.chicagobrie.com but I have not updated it in awhile, it is on my to-do list.

      We started slow, in my first 3 years of investing I bought 3 properties. The third property we bought was really the catalyst, it was an estate sale that required rehab in a fantastic area. In 2 years it was valued $300k more than what we paid so we have used that money for downpayment on all this.

  8. Jon Klaus

    Great podcast Brie, Josh, and Brandon. Sounds like you are doing a great job in creating alignment with your property manager. As discussed, that is a huge problem in the industry. The idea of bonusing for tenant retention is innovative, have you heard of other people doing that with property managers, or did you come up with that on your own?

    I was also impressed that he has a day job as a teacher, and can still manage all your units. It shows that with systems and standards you can really pare the job down.

    Did you say what your average rent per unit is? Are you looking at going into larger complexes in the future?

    Congrats on your success!

    • Brie Schmidt

      The vacancy bonus thing came to mind in March when it was 5 days before the end of the month and we had 4 vacancies. I really wanted the vacancies filled for the next month and knew I was asking a lot from my PM with everything else we had going on. So I decided to offer a bonus (we did not have lease up fees in our PM agreement) to get them rented out for the first of the month. He worked his butt off and got 3 of them rented.

      It was then I took a hard look at my numbers and our portfolio performance. We approached my PM about working for us because he had such a good relationship with his tenants. So I thought he should get bonuses for keeping them, not replacing them. So I took 25% of my planned vacancy and offered it to him as a bonus, paid quarterly only if that unit had no loss of revenue. So if a tenant gives notice to move June 30th and he gets a tenant lined up for July 1 then he still gets the bonus. Or if the tenant stays and pays all quarter he gets the bonus. We just started in in Q2 and saw a 3% drop in our vacancy.

      It has not been easy with him working two jobs. I do all the books and admin stuff because he is more important to me out in the field. Some balls were dropped so I don’t want to paint it as all sunshine and rainbows… and we have made a ton of adjustments along the way. Even though some of those things cost me money I still wouldn’t have done it differently.

      I might go bigger down the road, but right now it isn’t in the plans

  9. Brie Schmidt

    The vacancy bonus thing came to mind in March when it was 5 days before the end of the month and we had 4 vacancies. I really wanted the vacancies filled for the next month and knew I was asking a lot from my PM with everything else we had going on. So I decided to offer a bonus (we did not have lease up fees in our PM agreement) to get them rented out for the first of the month. He worked his butt off and got 3 of them rented.

    It was then I took a hard look at my numbers and our portfolio performance. We approached my PM about working for us because he had such a good relationship with his tenants. So I thought he should get bonuses for keeping them, not replacing them. So I took 25% of my planned vacancy and offered it to him as a bonus, paid quarterly only if that unit had no loss of revenue. So if a tenant gives notice to move June 30th and he gets a tenant lined up for July 1 then he still gets the bonus. Or if the tenant stays and pays all quarter he gets the bonus. We just started in in Q2 and saw a 3% drop in our vacancy.

    It has not been easy with him working two jobs. I do all the books and admin stuff because he is more important to me out in the field. Some balls were dropped so I don’t want to paint it as all sunshine and rainbows… and we have made a ton of adjustments along the way. Even though some of those things cost me money I still wouldn’t have done it differently.

    I might go bigger down the road, but right now it isn’t in the plans

  10. Rafael Norat

    Hey Brie! Great job and congrats on your current and future success!

    I didn’t hear anything on the finances behind your 50 unit run. Can you possibly elaborate on that a bit? Did you refinance from previous units to create the cash for your purchases? Did you by all cash or 20%?

    Thanks again for all the tips and best wishes!!

    • Brie Schmidt

      Sure, we did pretty standard commercial financing with a 80% LTV and the down payment came from the equity/appreciation in Chicago.

  11. David Pierce

    I think what most investors getting started want to know is how to continue investing after you expend most of your money in your first property. For you it seemed fairly straight forward, as you were investing in what seems to be a lower income area of the country. However, alot of us are stuck in higher areas (Seattle/Tacoma for example). Even for a “fixer” duplex you are looking at 200k plus….. that’s over 50k down on a house that needs work….. I guess my point is that getting around the down payments in higher income/value areas is a big catch for a lot of people and I think what a lot of us want to hear about. I think most people can figure out how to grow their investments, but coming up with the capital in a high market is the hard part.

    • Brie Schmidt

      You should listen to the first podcast then, show 78. My first properties cost $100k a unit and that is what I talked about, how I bought them and built that portfolio. I only started investing in a lower price point area last year.

  12. Glenn McCrorey

    I listened to your podcast while I was riding around on the mower cutting the grass. Thanks for making me feel like such a slacker. Enjoyed the podcast and insights. Thanks for sharing.

  13. Christian Bors

    Great Show! I’m very glad Josh and brandon brought you back on. As far as the commercial lending on the properties in Milwaukee, what is the length of the amortization? I’m assuming banks will require a length of 20-25 years instead of the residential 30yr. Also, with the commercial financing, do you get 1 mortgage to cover say 20 properties or does each property have its own mortgaged valued at 80% LTV amortized over 20-30 years? How does that work exactly?

    • Brie Schmidt

      Each property has it’s own loan, but they analyze the portfolio as a whole. The loan is a 25 year amortization with a 5 year balloon.

  14. AJ Smith

    Great podcast Brie, hopefully by next year you’ll have over 100 units. Congratulations to your success! Must be that handwork work, late nights, sweat equity and Chicago Pizza!

    • Brie Schmidt

      Thanks AJ! We should be at 100 by the end of this year. It has been a ton of work, yesterday I worked 10 hours doing 8 property inspections and then drove 2 hours home. But I love doing it!

  15. Carolyn Lorence

    Another great podcast Brie! So impressed and inspired by your success – and in my home town market! Thanks for sharing so many new tips and strategies. Thinking I should leave Austin and head back to Milwaukee! 🙂

  16. Vincent Crane on

    Brie, I just checked out your website and it’s so awesome. The stories of how you started is exactly like everyone I’ve met and talked to who’s made it really big in real estate. They live below their means and use their “buffer” between their income and expenses to get a down payment on a duplex, (sometimes with an FHA loan), live for free, continue to save the money they were before, plus their rent that they’re not paying, then use that to buy their first “investment property” and reinvest the cashflow from that to buy the next one, sometimes rehabbing the houses to add some value and maybe do a cash-out refi, and then the portfolio grows faster and faster as you keep reinvesting it. And then the people who said they only planned to buy maybe 2 houses a year… have scaled so quickly from the compounding income that they start acquiring 5, 10, 20, 50 units in one year and create an empire. I love your story, thanks so much for sharing 🙂

    • Brie Schmidt

      Thank you! You are exactly right, 4 years ago we were not thinking of owning more than one property and then things snowballed and every year we surpass what we thought would be 5 or 10 year goals. It just becomes obsessive and once you start you can’t stop!

  17. Julie Kern

    Hi Brie. I just finished listening to your latest podcast. I LOVE your story. Your drive and determination are an inspiration, especially to those of us just getting started. Hopefully Josh and Brandon will bring you back for your third podcast next year! 🙂

  18. Emily allen

    Hi Brie, Thank you for a great podcast! I don’t want to be too nosy, but I wonder if you could share some rough numbers about whether your rentals can meet 1% or 2% rules, in Chicago and in Milwaukee. I ask the question because I am at a growth bottleneck. I am in metro Atlanta area. I own a few SFM rentals, and am eagerly looking for multi-family deals. I can’t find anything that’s value-add in B types of neighborhood. I can’t afford buying turn-key rentals at $100k per door and only rent for $1k. My limited fund just exhausts too soon that way. I used to be able to buy $50k per door, and fix for $20k, and rent for $1000 and above. But I haven’t seen such deals for a while. I’m wondering if you’re seeing similar numbers in Chicago. In C neighborhoods, I can buy $20k per door, need about $20k to fix, and rent for $500. But I’m not so sure about dealing with those tenants, and the cash flow is about $50 per month– which almost doesn’t worth the effort given my goal is to quit my current job. You mentioned in the podcast you could buy $27k per door, can you also share some ideas on the rent? I’m just curious what other investors are dealing with in the current market — should I adjust my expectation, should I look for other areas that make more sense?

    Also, could you share how you found out about Milwaukee? I’m a bit concerned about investing long distance and wonder how I can get started.

    Thank you in advance!

    • Brie Schmidt

      Investing out of state is not for everyone. I strongly believe that unless you can A. Scale quickly enough to pay an in house PM or B. Have a ground partner or C. Partner with a turnkey company who already has the scale, then you should not invest out of state. About 1/3 of the properties I have bought were from failed out of state investors with just a few properties and no priority with their property manager.

      So while you can find close to the 2% rule, if you have a unit vacant for 8 months and no easy access to your PM then that 2% isn’t going to do you any good.

      In Chicago my rent/purchase price (1% rule or 2% rule) is lower, but my expenses are around 35% and while my percent is higher in Milwaukee my expenses are about 55% so you need to make sure you do your due diligence.

      That $27k per door isn’t always for rent ready buildings, sometimes I pay $40k per door. Sometimes I pay $20k and put $15k in…

  19. Kevin Labonte

    First of all Congrats on your success, it’s always inspiring to hear stories like yours!

    This was the first podcast I listened to but not the last!

    I have few simple questions though if you are willing to share, what systems have you actually put in place before going to “buy mode”? I currently have 7 units and I want to use a software to manage but I don’t know where to “throw” myself…

    Do you use only one software for the whole maintenance, paiments, accounting, etc. or you just pay somebody (maybe your PM) to take care of all this?

    Keep going forward and good luck for your 100 units!

    • Brie Schmidt

      I use QB online for accounting but it isn’t my favorite. I love that it updates transactions from my bank and that my PM and I can both log in and make edits. Outside of those two things that I absolutely need, I would not use QB

      For my Chicago properties which I self manage, I use Quicken Rental property manager and love it. But it is a software program so needs to be used on one centralized computer

  20. Brian Conne

    Hello Brie, loved listening to your podcast and congratulations on your meteoric growth. Your hard work and results are impressive.

    I do have a question. Some friends and family have expressed interest in investing through me, which is great because I can do more deals. It sounds like you have done this in the past. Can you shed some light on how you structured these deals? I want to make it worthwhile for everybody but, ultimately, it is my job so I need to personally make a nice chunk of any profits. It needs to be fair for all involved. Any advice?

    Thanks in advance,
    Brian

    • Brie Schmidt

      That is a great question Dawn. The 5 year balloon is my number 1 concern. The reality is that our options were stop growing or take on this risk, and we chose the risk.

      A lot can happen with the bank and interest rates in 5 years that could put us in a bad situation. I have talked with our banker about it (he has been with the bank 18 years) and he is confident we would be able to keep our business with them. When they analyze our deals they approve us based of a 6.5% interest rate, even though we are currently at 5%, as an aggregate rate over the life of the loan. So as long as we are approved with the higher payments he said we should have no problem financing it again.

      I have sought out alternatives, and did find a commercial bank in Chicago that will give us a 10 year loan commitment, which a 5 year rate reset. But they have pre-pay penalties and we basically don’t have them with our current bank. Since I might make some movement (trading up) within our portfolio over the next few years, I don’t feel comfortable making this move just yet.

      I do plan on putting away some of the cash flow for principal paydown at the end of the 5 years, but it would be more like 20% of the loan balance.

  21. Dustin Heiner

    Brie, thank you for the great podcast! Lots of useful information.

    So, how you found 20% down commercial financing? Is it a local bank or a national bank? All I have found are 35% down for commercial. Also, I have found that a lot of lenders do not like to lend on a commercial loan that is under $1M because it is not enough money for them.

    Would you have any suggestions/recommendations how I can find a commercial lender that offers 20% down and will lend around $500k?

    Thank you for the help!

    • Brie Schmidt

      Well, I have worked with 3 banks and they were all 20% down, one was a credit union, ones was a local bank, and one was a National bank.

      I would suggest putting together a one page on your track record, systems, and growth plan. Attach it to your PFS along with some sample properties that you would have bought if you had the funding…. then send it to 25 banks. Ask at your REIA for contacts, try linkedin, and ask BP members who are doing what you want to do. If all else fails I do have a commercial broker you can use, but he charges upfront points.

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