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In this episode, Michael and Emil chat with Mark Ainley from GC Realty and Development about his experience with hundreds of BRRRRs.    Mark Ainley with GC Realty - c. 630-781-6744  --- Transcript   Michael: Hey, everybody. Welcome to another episode of The Remote Real Estate Investor. I'm Michael albaum. And today I'm joined as usual by,   Emil: Emil Shour.   Michael: and we have a special guest with Mark Ainley with GC Realty and Development. We did a deep dive on Chicago with Mark a while back. He's got a property management business, but today's going to be talking to us about the burst strategy. So let's get into it.   Michael: Mark. Thank you so much for coming back on the podcast. We had so much fun with you doing the Chicago deep dive for anyone who didn't catch that episode. Go give it a listen. We've got Mark Ainley with GC Realty and Development. How are you, man?   Mark: I'm good. I'm not as hot as you guys. You guys got a lot to fire in us out there.   Michael: So yeah, big time fire. It seems like the market's hot. The state is hot. You know, everything seems to be on fire these days. Um, so today I wanted to chat with you. Not just I, but Emil as well. One is chat with you about BRRRR. Cause we were chatting with you before we recorded the last episode. And you were telling us how you had done like 480 some odd BRRRRs out in the Chicago area. Is that right?   Mark: Yeah, no, we did between Oh eight and 18. We did a, just over 400, I think it's 482 to be exact units, which were all made up of like one to four unit buildings.   Michael: Fantastic. So for those of our listeners who might not be familiar, can you just give us a quick and dirty definition? What is a bur and how does it work?   Mark: Sure. Buy, renovate, rent, refinance and repeat the acronym goes. Now when I started doing it, I didn't know what it was. I just thought I was smart. I wish I would have pointed trademarked it or… I was thinking about that today when I was preparing for this call. I'm like, man, if I would've came up with that, that was so smart. So we started doing it and it was really a business model to us and how we were approaching it back then. So for us, when we started in 2008, I got my into real estate in 2003. And you guys know out there in California, just as much as we do here in the Midwest, you couldn't do those types of things in the two thousands, just because pricing was so high, the opportunity wasn't there. So I really didn't have a, that access to those types of deals until the market crashed. And when the market crashed, the math just made sense to me on a couple of things I was looking at how to go at it.   Michael: Right on. And so why do you think just at a high level, we're going to dig into some details of a couple of birds you've done, but at a high level, why is it such a powerful tool or vehicle, whatever you wanna call it.   Mark: So it is powerful because the concept of it is you are not leaving any of your money into the deal at the end of the day, instead of a there's tons of these late night commercials are vest with other people's money or no money down, or do seller financing, all that type stuff. You can do these types of deals without having to do these by these crafty sales type pitches or get some guy to tie you to his second loan. I don't know. They got some crazy things they do out there to find ways to not have to put money into a deal. And this one's halfway legit. Now don't get me wrong. You have to find a way to have money on the front side of things. And we can talk about that. But, uh, um, at the end of the day, you can get out of a deal having little to maybe five, 6% in the deal. And sometimes even we were successful. We even were able to exceed what we had in there on a cash out, depending on the lender we're working with.   Michael: That is so cool. So I know people talk about the rural all the time. People tell successful and unsuccessful burgers all the time, but you've got enough under your belt. It sounds like you've probably done some good, some bad and maybe I think in between, right?   Mark: Yeah, no for sure. That's how the, the quick story of, uh, in our adventure for an 80 units, our first property, we bought that we're going to Burr and we did, it was a little, had a little more hair on it. We were combining a couple of deconverted condos and rolling into one, and we're going to cash out at the end of the day with a three flat versus a few individual units. And, uh, got stuck with stop work, order permits. We, we did, we made all the mistakes we could, you know, and then, uh, when we were getting inspected for the stop work order permits, we had someone else that didn't have a permit, horrible, horrible, but we did 131 other units in the time. It took us to do that first project. So, uh, that's kind of a horror story of, of, uh, bad planning or really being too optimistic. And then obviously making a whole bunch of mistakes of permits and, and who are really dealing with.   Emil: Wow.   Michael: So when you were first getting started in that first unit, you refer back to we a lot. Who is we and what kind of experience did they have doing this type of project?   Mark: So I had a couple of partners when we started off in the four and 80, we're kind of broken up into two groups where I had one part in there. I was consistent on both a hundred for 480 units. The first group, I had a partner and he was doing rehabs all around the city. And again, the concept of just kind of buying it cash and then refinancing out w what we really started with. And then, uh, as we part ways with the first partner enrolled with our second partner, where we did the balance of the units, it really turned into, Hey, we have a bunch of, uh, uh, private money that we could use and, uh, move faster and be able to, uh, go that route. So I've always had partners, different skill sets. You know, my one partner at the time, you know, he had the money, the first partner had the money.   And then my other partner that was consistent the whole way through, he had the construction, no hallway at that point. So I've learned all that stuff since then. It was kind of the we.   Michael: Right on   Emil: When you guys are doing all these deals, and this is something I wonder for myself, do you need to buy everything, all cash when you're going out and buying these properties?   Mark: Yes and no. A lot of the properties where you're really trying to find the add value ends up being in properties that might not be financeable, uh, where it might be missing a kitchen. It might be missing furnace. It might be just, my mind would be habitable where conventional loan won't be. They won't finance you. Or, you know, they have the two or three K loan, which is a lot of hoops to jump through or would even make sense to do something like that for that.   So you're buying a property that is really going to be bought by an investor only, and that's going to require cash. Now, whether that cash out of your pocket, or maybe you have a uncle or a private lender or a partner that that's where the cash ultimately is going to come from, and that's going to be. So if you think about it this way, when you're buying properties that can only be bought by investors that are have cash or are not financeable, now you can beat your in kind of the section of a properties out there that only a handful of people can actually buy. So if you have a hundred thousand dollar property, that's not, financeable, you know, out of a crowd of 10 people, you might only have a couple people that really have the means to pull together that a hundred grand to do it.   So now the supply and demand laws that property's going to go even for cheaper, which means there's more of an opportunity as far as the gap of what you can put into it, appraised for and cash out for on the backend.   Emil: So what kind of properties would you guys target? I'm sure after doing this enough, you had like a, a model or a buy box. We were like, alright, this is the kind of property we really want to hone in on. I don't know if I'm asking for too much of the playbook, but..   Michael: Give us the secret sauce.   Mark: No, no. So when you, I guess when it comes to BRRRR, the name of the game is a for trying to do as many as you can. The name of the game comes down to speed. So we did hone in on that and we honed in on, on single family homes, two flats, whenever for a reason, even though it's only times two, it always took us so much longer to do it. Three flats, forget about it. It was, uh, we always, uh, screwed up the timeline and messed out up that side of things. So we started focusing on single family homes that were in that really eight to $1,200 range, um, two to three bedrooms, one maybe sometimes a two second bath in the bathroom. So we focus on that. We focus in a handful of neighborhoods and we focused on certain floor plans. So we even were able to focus on specific, floor plans where we knew it just based on that floor plan. And we did 12 other like that, that these were gonna be our costs going into it. And we knew that we were creating comps for ourselves along the way as well too.   So one of the important things about a BRRRR is your backend. If you gotta make sure it plays out now, we were working through probably what would be the hardest time when it came to appraising. Cause there were no comps and appraisers were ultimately scared to do anything that was kind of pushed the line. If you're the highest comp in the neighborhood. That was a red flag in that 2013, 14. So now there's comps out there and be able to control that backend to make sure that a you're compping out based on stuff you're doing is one of the bigger pitfalls that people run up against.   Michael And for our non maybe Midwest listeners, two flats and three flats are duplexes and triplexes.   Mark: Yes, yes, yes. Yeah. We call them flats.   Michael: Good deal. And so the vast majority, it sounds like you bought in cash. Did you ever purchase anything financed on the front end   Mark: In the coming out of the great recession? You know, we had a couple of banks give us some deals or get properties off their hands. And what we thought were, sweetheart deals never turned out to be sweetheart deals. So this, the best deals we ever did were the ones that we bought cash.   Michael: Okay. It's interesting. I was chatting with a meal a few months back about a strategy that I've used in the past for buying rehab and burn type buildings and the multifamily space. And what I did is I'll buy them for cash turn around day one and get a commercial refinance out of 80% because they were financial and then use that cash to then fund the rehab. Once it's done refinance again, and depending on what your refinance costs looks like, that can start to add up pretty quick. So you might want it to go about a different way, but for whatever reason, they only charge me like a thousand bucks to refinance. So it was the cheapest money I ever got.   Mark: When you're borrowing the money on the front side. Uh, you maybe like, people always refer to the uncle, that's got money or whatnot, or a partner, but you know, a lot of people are going through call hard money lenders, and that gets really expensive. And I always tell people, I really figure out what your numbers are. So we were paying 10% across the board, but we just rolled that money over. We never had any points. We never had to refinance it. Those guys, they just want to keep their money working. So we might even refinance a project and have sit on that money for a couple of weeks and pay that interest. And that's where the costs, we always had to be efficient about it, but we're able to, as long as they're getting their 10%, they trusted that they're in good hands with us. So making sure that you're measuring that money out of pocket, and then that comes into the timeframe of doing the deal or how long it takes you to get to the refinance point, which people have pitfalls on when it comes to that, or if they didn't plan.   Michael: And Mark, I want to get really specific on how you structured some of those deals. So that 10% was that interest only. And was that paid monthly or was there an end payment date to talk to us a little bit about how that work and how you structured it?   Mark: Yeah. So how we did it, we did it on a monthly basis, 10% interest only, and we tied them to mortgage it. We had a mortgage and a note for every property. So if we sold the property, we have them sign off on the payoff and then we would basically move it to another property to make sure that they were always protected on their side of things.   Michael: Perfect. And so I just want to give folks an idea of what those numbers look like. So on a hundred grand at 10% interest, only on a monthly basis, that's $833 a month. And so you're making those payments every month while you're using that money until you can refinance pay off the a hundred thousand and then look to go do it again. Right?   Mark: Correct. Correct.   Michael: I love it. Can you walk us through what your best Burr was? Cause I think everybody remembers the high notes and then we're going to ask you in a minute, what your worst one was.   Mark: The best deal, I actually had this, uh, I talked about this when Joel Fairless, I was on his podcast and uh, you know, we got this property and the cool thing was, you know, we buy on the auctions, auction.com and uh, the couple other, um, I can't think of top of my head, but a couple of our different auction sites and this particular property bounced around to a couple of different auctions and were able to finally bid it. And it was a sight unseen. You know, we had to do all our due diligence. We could from the outside and we got the property. It was actually a four flat, uh, so four units. And, uh, we were, I think we bought them for 20 or 25,000 each they're small units. And I think we only put about 50,000 into it altogether. You know, when you do it enough, you just get lucky sometimes.   And this is one of those ones where we had some luck on our side, defendants were happy with even the, not a hundred percent updated conditions. So a lot of that money, we did have to spend on what we thought we're going to spend. So, you know, we actually ended up putting it into a roof versus updating a couple of units. And then we ended up selling that building turnkey to an another buyer a few years later. But the real ultimate win was we ended up clearing probably about end be about $130,000 on that one, uh, when we sold it. So we got the cashflow for call that first year, and then we made 130. So that is probably the best deal. And I still think about that all the time. Cause like, man, you can only duplicate that.   Michael: That's fantastic. So I just wanna make sure I understood you, right. So you bought it for 25, a unit and four units or 25 total?   Mark: So I think we bought it for if we're going to be specifically, I think we bought it for 28, so we had 80 into it. We put 50 into it. And so we had about a 130, we were getting about 3,800 a month. So yeah, I see your mouth dropping. It was sick and that sense and refinance it out and we refinanced and went out to, because it appraised really good. So we actually got more. So we actually cashed out then I think it was about 160. It appraised out for like 200. So we got 160 out and then ultimately sell it for, I believe we sold it for right around. I think it was around two 50 to two 70. I don't remember the exact number, but it was a hundred K plus that we made on the gross let alone, we were able to cash out some and we cash flowed all the way. So that is the best deal that I hands down. I even thought about that today. Make sure there wasn't anything I was missing. And that was probably the best one we ever.   Emil: Yeah. Those are, those are those all star BRRRRs that you read about and people, I mean, you not only make your money, you cash out more on top. So you got paid for doing the renovation and you're still cash flowing. So it's like, yeah, the best of everything.   Mark: That was a win. And I got plenty of lackluster ones too that offset that. So yeah. I only stay high on a moment for a few seconds. So I started thinking about the other ones, but.   Emil: We try to always bring people back down to earth, have the right expectations, not always have Rose colored glasses. So tell us about a time when it didn't go so hot.   Mark: Will you start back to the first property that we bought? You know, we were trying to combine that with another two units and make it a legal basement. And then the city came in, we got stopped in violation. So by the time we were done, we had about $280,000 out of pocket that we're paying that heavy juice on, on a monthly basis for, I think it was about three years. Wow. That was a, a gone wrong. And that was a painful one to say the least the other thing we had go wrong is the we've had a couple, bad appraisals where all day long, like what are you talking about? Reproduction of the building or comparables, you know, they wouldn't accept the off market comps for us. We knew a bunch of deals that happened in the neighborhood. One was us. We sold, we don't sell everything on them a lot.   So a lot appraisers will not go deeper than MLS. So it's up to us and for anyone out there looking to do a burn, make sure you know what your comps are on your exit side. So even going into the deal. So you're planning a refinancing at eight weeks from now, 10 weeks from now, you better hope you have two of those three comps on file right now that you could bring to that appraiser. And if they're off market, you got to make sure that you're getting the information to the appraiser so he can account for it in his appraisal.   Emil: So now having kind of looked at like your best scenario, your worst scenario, it's kind of saving this for the end, but I want to ask it to you now. You've probably learned, okay, these are the types of BRRRRs I want to take on. And these aren't. So like, do you have like, like your tips or takeaways from the BRRRRs that go well, versus the ones that end up being just running really long and expensive   Mark: As far as, you know, you buy a property that might have city violations on it, or some sort of a, if you buy a property in the city, Chicago, and maybe it's been vacant for a couple of years, if your attorney didn't catch the injunction on it, or some issue that you have to clear up a court before you can put a renter in there, that's something I see people get hung up on all the time where, uh, they bought a property, they fix it up, but they cannot refinance until that rental injunction on the title. The city puts out on the title is lifted. So dealing with the city is a pain in the butt pre COVID, let alone having to deal with self post COVID. So just having a property that has violations that are almost beyond your control, you know, you could take any sort of problems that need to be fixed a rehab and kind of put a timeframe on it.   But when you start working with municipalities or cities or a big city like Chicago, and now they're controlling it and you have to wait a month for a court date and all that stuff, that's where I've seen a lot of people, including myself, kind of get tied up in these deals that they take forever to get your money out.   Emil: Is that something you see during title? Like when you run title during due diligence, but you just kind of say, Oh, we'll get through it later. Or is this something you couldn't foresee until like you bought the property?   Mark: I've seen it happen both ways. So for us, we, we took it on not understanding what it was and then we got bit by it. But we've also had scenarios where we bought a property and it was in the process of being put on the title where we got kind of dinged, just bad luck in that sense.   But I see the problem with a lot more people. They just try pushing through it, thinking we'll make it work. I like to be part of things or investments that I can control. Uh, almost everything go along and, and the BRRRR part, the one thing that I think you have the least amount of control of when it comes to that, is that appraisal on the backend. Um, as far as how much you're gonna get out. So you can pretty much control everything every other step up until that appraisal part. And even then you could have influenced not the right word. Cause it sounds like you're, you're paying somebody off, but you can have a, some inclusion on the data that's being included if you provide a valid comps. So   Michael: What a, what an eloquent w to say that you can have inclusion the outcome. So speaking of timing, Mark, a question that I, and Emil probably get all the time is seasoning period. How soon will a lender re give me a refinance based on a new appraisal, as opposed to the sale price? What have you seen in your work?   Mark: So funny, quick story. Um, I had a guy call me up last week, looking for a bank that will take a property. That's not six months seasoned. And I said, man, you didn't talk to the bank before you he's like I did. I didn't know what season meant. He's like, I heard him kind of ramble. So by being in season, I just didn't understand. I thought maybe he was talking about the time of year or maybe it's busier in the summer,   Michael: Or maybe he was talking about a cast iron pan.   Mark: Yeah, and he goes, I know Mark, just, just laughing, get out with it, please help me find somebody. I could take a, take the letter, tell him like, Oh my gosh, like it's horrible, like scenario to be in. And I could see. So the season part is something that post COVID I, you guys probably know this, uh, the banks have really cut back on a lot of the banks that were saying, Hey, listen, you get the job done, um, we'll, we'll give you the money, but now they're moving back to that season piece. So for us, we were able to work with a lot of local community banks. And you know, there's, you know, the community banks, you get that relationship. It's almost like a 60, 1960s feeling relationship with some of these local community banks where they might have the seasoning issue with anyone new, but because you've been banked with them and you might have x amount of dollars in their bank, they'll work with you. But when you come from out of state and you want to do it, then their risk levels go up and they usually don't work with it. So I found, I don't know, uh, it was down in San Diego, but a guy that was, he found a, uh, bank there that was giving a higher interest rate, but he was, they were doing non season properties.   I don't know if it was a credit union or whatnot, but finding that bank that will do it non seasoned and they're out there. It just ends up taking a, you just have to figure, use your resources to find that out there. But the bottle is tough to do altogether. If you want to continue to build on it, if you have to wait for that six months for it to be a season now for us, we never had to wait. Um, and that we wouldn't have done 482 units if we had to wait six months every property.   Emil: When I was doing research on this, I found that anytime you wanted to get a mortgage back… So any Fannie Freddie loan, they required a six months seizing period. At least every bank I called like four or five different banks. And everyone kind of told me the same thing where you guys getting different loans or were you getting Fannie Freddie loans when you were reading?   Mark: We were not getting any Fannie Freddie. So we were working with local community banks and we were able to whether they get a credit line, we're getting, they're holding our portfolio again. If someone looking to do it has to build that relationship. And, uh, you have a little money in a bank that people will be flexible, um, all around the country, as far as banks go and stuff like that.   Michael: And so for all of our listeners who just might not be familiar with what a seasoning period is like Mark's friend that called and asked him, it's basically the amount of time that you need to own the property for, until they will give you a reappraisal or refinance. And so that's often six months for those Fannie Freddie products, or it can be more flexible with those community banks. But so definitely have that conversation on the front end prior to, I would say, even purchasing the property and know what your exit looks like, who's going to do the refinance will do that. Will they give you a new appraisal? Are they only going to give you your purchase price, plus your costs? You just want to have a very clear picture and understanding of what that looks like. So you don't get caught looking on the backend.   Mark: The other thing, when it comes to that appraisal, if maybe it's not a Fannie pretty type a low and you might get into, but other banks, they might not do it against appraised value. They'll do it against what you have into it. So that's another way I see people get tripped up. So they might have a a hundred thousand dollar property and they put 50,000 into it. So they have 150 all in and it pays off for 200. And I know they could get a, um, all their money out, but the bank will say, well, show us how much you have into it. And we'll only loan to, uh, to that amount. Uh, that's where I see another way people get, uh, caught up with that.   Michael: I was gonna say, so shifting gears here, Mark, the podcast, you know, it's called the remote real estate investor. And so the vast majority of our investors are doing this remote. What would you say to them? Cause I think a question I get in the Academy all the time is how do I get started doing a BRRRR? I don't know anybody half. The reason I use Roofstock is because I don't want to have to get to know anybody. You already have these relationships. So if somebody wants to do a remote BRRRR, where do they start?   Mark: Um, it's a generic answer to start, but, uh, you know, having the right team and I tell people to find someone that's already doing it, and then they have the resources and they have the know about to do it. So example with just saying myself, you know, so for any property management company, they have the ability to do turnovers, right? And where we've worked best with out of state investors, kind of going after the birth strategy has been all right, you buy this property and we can do a, what we call it. We call it heavy turnover. So anything in that 10 to $20,000 range would be a heavy turnover and you take a 900 square foot ranch. You could do a lot for 20 grand in a sense of redoing the floors, redoing a bathroom, you can update the kitchen and that amount and possibly a replacing a mechanical or two. So you can get that and then get it to refinance out and get a majority of money out. So having, whether it be a property manager company that has a little more of an expensive maintenance apartment.   So for us, we have all in house maintenance. A lot of property managers will outsource that part, but any property manager that has in house maintenance has the capability to do those shops, any other sort of a developer that a local to whatever region. I mean, they can usually put you in touch with the right people to do it. So having just the right team that you can trust, I guess, and if you're able to find a proper manager that that's going to actually be responsible for the property all the way through, and then have to put the right tenant in there, find a tenant that's gonna fit, whatever rehab you just did. And then ultimately be responsible or be around six months from now, if something went wrong with the rehab or maybe the deck that was fixed broke or whatnot. So if you're able to keep one group, like some of our clients have done together, um, for the whole time, then that just lowers your risk as an out of state investor as well, too.   Michael: Perfect. And so for anybody interested in investing in Chicago or doing firs in Chicago, that's something that GC Realty can do for them.   Mark: What I ended up doing a lot is people call me up. They might be looking to buy a property. Maybe they were working with a realtor in our office. Maybe they're working with another local realtor, but I'll tell them either a it's something we could do based on the timing. Or I'll put you in contact with two or three guys that I know can get the place fixed up for you. At least I can help him with the scope and then they could do the actual work and then they'll come back to us to manage. So ultimately the end of the day, usually if we don't help directly, we help indirectly as far as set people out, as far as Chicago goes.   Emil: Michael you've had the same experience, right? Like you've your property managers in some of the cities you own property in, they've helped you find a contractor and kind of help manage the process. It seems like if you're an out of state investor, relying on your property manager to help with that whole process, they're like the key to this whole thing.   Mark: Yeah. And I, I put myself out, you know, in Chicago, I got a guy, right. That's what you need. And there's those people everywhere. I mean, there's just those, uh, networking people that are just machines when it comes to connecting people. And, uh, you know, there's a lot of people I talk to on a weekly basis. I might never talk to again, but they'll, or at anytime soon, but they pop up a few years later with six or seven properties that they want me to manage now or something like that. So just kind of drive the people to where they could succeed. And I think the number one thing is starting with the right person to direct you in any of these cities. And I'm sure you guys have property managers all around your network that can at least be the starting point for somebody you're a restock Academy. People to be able to go from there then.   Michael: Yeah, totally. And Emil to answer your question. Yeah. I reached out to my property manager and ask if they could put me in touch with, but then I still did screening interviews to make sure that it was going to be a good fit for me because the property manager wasn't involved because of the scope of work was just a little bit too much for them to handle. So I sought to make sure that it was going to be a good working relationship.   Mark: I'll get every so often, uh, a guy that will be like, he'll want to a GCA from California. He wants to just be part of all and that's fine. And what I'll do for him. It's like, alright for the foundation, call this guy for the roof, call this guy and I'll give him seven or eight people and like go for it and they'll knock it out and they'll bring back the property to rent. So that's another approach to it. You, you can literally, you know, nowadays, you know, I know a couple of investors from California that literally do a couple flips a month here, whether it be flips or rehabs, but they, they, they have their trusted guy on the ground here throw up those little cameras in the corners and they're practically on the job site every day, seeing what's going on. So with technology these days, and, uh, I can't think of the service, uh, that camera, the security service, but, uh, it can almost be there on the job. So as long as you have the people, then they can actually trust you. At least know if they're coming or going even.   Emil: That's super smart. I never thought of that. Like just putting up a ring cam and that's like hooking it up to wifi or whatever. And then you can check your job site.   Mark: That's all that too. And, uh, you know, so they actually have the locks as well to where you can, uh, change the code from, from your phone in California. And so when that, when that contract came back, cause he's saying, Hey, I can't get into the code's wrong. I see some guys do that too, because they don't want to pay someone like us, a few grand to oversee it. Your times was funny at that point, but, uh, that's fine. It is what it is   Michael: Right on. Mark, I'm curious to know, is there anything that you could see on a project or potential deal? That's an immediate, no, go for you. Like it's got a foundation issue or it's got a roof, you know, is there such a thing or do you, until you put a price on it, are you not scared?   Mark: So I've never been a fan of fire properties, um, properties that might had a fire, even if it's just like the second floor has got a partial fire, you just never know. I would never feel comfortable, um, going through without having to really take the part the whole place. So we've never really messed around with fire properties. As far as a foundation goes, we talked about last time, the housing stock and age here, you know, you deal with the foundation stuff all the time. It just ends up being what you do with that foundation. Now, if a house is leaning and it's a hundred years old, more like we're not gonna mess with it. There's a couple of cracks. There's plenty of guys around here that can seal that stuff and make sure that you don't get that moisture in that basement.   Michael: So, so the, the fire,It was like a dagger in my heart. So I don't think I shared with you Mark, but a lot of our listeners know that I have a mixed use commercial building that I'm converting to residential. And I had two fires, not one but two fires in the same building a week apart. Oh, wow. One in a commercial space and one up on the roof during the reroof project. So dealing with the insurance company right now, getting that whole thing adjusted. But yeah, it's a total nightmare.   Mark: I'll tell you a quick story. I I've been very lucky when it comes to fires. Um, and luckily I haven't been investigated probably cause the coincidence of them, but, uh, lucky in the sense of we had a, a, a, a property that, uh, we had a really bad foundation issue and, uh, and no one's ever been hurt. So I'll give the caveat that we've had fires and no one's ever been hurt. So we had that building that, uh, um, was almost leaning. It was like a hundred thousand foundation and December 9th, 2017, it burned down. I'm like, Oh my God, total loss. And then we had another one that just being done. We had a four unit and I converted it to a two larger unit and it just didn't make sense. And the building ran horrible and I had to do something. I maybe converted back to four solid, this kind of lose money and it burned down.   So I got lucky two different ones. I had another building, a vacant building, a burned. Now the one thing I went wrong with on there, because this story is, although I made money and I talk about profit-wise, I made a killing, but I was under insured for some of these properties. I could have almost walked away with another 40% of what I walked away with if had I insured it now, there's always the, what you pay monthly versus what you, you know, you're preparing for something that more likely is not going to happen, but, um, just always have that serious conversation with your, make sure you have a trusted insurance guy that you're talking to that can, uh, uh, put that all in perspective here, what that looks like.   Michael: It's so funny. Cause I come from the insurance world. And so a lot, a lot of people might be like, why the hell is this guy Mark laughing and celebrating that he burned his properties to the ground. And what people don't realize is that if you're going to have a loss, you kind of want to have a total loss. I want it to burn to the ground because then you just get the insurance money and you can go do with it. What you want. The issue is when you have partial losses, when the fire department's really good, or when the building was built, well, you're like crap. Now I got to go repair this thing. And it's, it's a whole nightmare. And that's what I'm dealing with right now.   Mark: We had the two total losses that they were so bad that the city even came in and tore them down, like within 24 hours. So the one property we even know about, we went there, it was gone. It was something we didn't get to yet. We had a kind of a backlog of properties and it was vacant, but yeah, gone.   Michael: Cause that's expensive. Property, you know, debris, removal, cleanup, all that stuff's expensive may or may not be covered under your policy. So yeah.   Mark: Yeah. We had to definitely pay them back for that. They liened it. So they actually got us two properties later. They liened, uh, the land actually for that one. So…   Michael: Well, that's crazy. That's crazy. Emil, you ready to start wrapping stuff up here?   Mark: I got a couple other things you want me to hit on real fast. Yeah. So just let me run through my notes here real fast. So I think for the people that come out of state, they don't realize how long that, that time to get from the day you close to the day, you could actually get it rented to either a, have the opportunity to get reappraised or start the seasoning process. So I think, uh, making sure that people are allowing enough time in there, whether it be their borrowed money or their hard money, or be realistic by the expectation. So just even doing a $20,000 rehab is still going to take probably about 60 days from the time you start, you're going out there verifying scope and all that stuff where people are like, Oh, I thought you'd be done in a couple of weeks.   It's like, Aw man. Like, no, we've got to get permits. We got to do these things. So making sure you understand how long you have to maybe have that hard money out there or when you're seasoning period actually real, really start is something that I see people go wrong on. The other thing that I see, and this is a big one and we are, we did this too. When we first started buying these properties, we did whatever it took to get it rented. Um, we only did let me reword that. We only did what it took to get it rented, where we left a lot of capital improvements like, Oh, that Ruffino made me, you know, you can see through the roof by your name. I got a couple of years out of it or that hot water heater. That's literally rusted in drip. It's like, Hey, as long as maybe we get another year and we did those things in a, you know, maybe the, the garage, we didn't, uh, do something with the garage where now we weren't, it wasn't part of the rent.   And, uh, so we, we, uh, we, we shot ourselves in the foot where we were able to see how bad our maintenance was, uh, from not really doing a full project and our average, uh, for our kind of our first 140 units versus the balance of, um, you know, I think we spent about another 12 or 13,000 hours, average per unit, just on making sure we did all those things. That way we're not nickel and dime on maintenance for the next two years.   Michael: That's really smart spending the money on the front end to making it more maintenance, proof, more tenant proof. You go so far.   Mark: Yes. You know, when you're getting the appraisal, another thing is, uh, you have the full scope out there. Hey, mr. Appraiser here is the laundry list of everything I did. We have about X amount of thousands of dollars into it. And just want to accompany this with a couple off market cops there. So you can put a nice little package together for the appraisal. You can't tell him he has to use something, but you can at least provide them with the data for him to decide if it's worth using or not. And here's the thing, when an appraiser, he walks in the house, he doesn't necessarily know what the house looked like before he was in there. So he doesn't realize or appreciate how much you actually did. So I know one guy he actually gives before pictures and after pictures to that appraiser, so he can justify the 40, 50 grand. He might've put into it. So that's, that's another, uh, kind of good one to make sure you can at least control as much as you can in that part of the process.   Emil: What type of investor is this a good idea for? Like, I'm sure you've done this with plenty of out-of-state investors who are interested in investing in Chicago, would you say there's a certain type of investor who like, is a good idea versus I don't know, some characteristics of people where it's like, like one thing I can think of is you have a super busy job and like all these other things where you make good money, it's like, is it worth all your time and energy spent in a BRRRR versus buying something turnkey? I don't know. I'm just curious if you've had that experience.   Mark: So in a BRRRR, you might just say you run through a whole Burr and you might have only, uh, you might only get 95% of it. Now you have typically 5% of the deal, but if you bought that right, there should still be some equity in the deal that maybe it didn't appraise for enough. So one of the tips I have, or one of the things I say is make sure that when these property or buying or the reward is worth the risk, because there's risk when you're doing this type of strategy, where even if you're not getting all your money out, you should still have a nice piece of equity. So that whole add value piece is why you do it. You know what I think a lot of a turnkey model type investors or investors that are buying, I don't know, you call it top of the market. Um, they might have something that they could get very hands off of, low touch, but they are buying at the top of the market.   You might not get all your money out, but you might still have another 10% equity in there even for a future opportunity to maybe borrow against and do something more to it, or at least have on against your, a personal financial statement as something that you have some equity. And so I think someone that's looking to add a little more value and kind of build that equity worth a faster, this is what it's for. This is like, if you don't have time to be a full time investor, but you don't want to do kind of the armchair type investment, uh, this is kind of the go-between.   Emil: Yeah, that makes sense. And you know, I've, I've always thought like, even if you leave five to 10% in the deal, like you're still getting a much better deal than you would had you just gone and had to put 20% down 25% down, whatever it is.   Mark: Oh yeah, for sure. For sure. And so you have that 5% in, and hopefully you have another 10% equity still because it didn't appraise out for the full max. So that's a way better spend than just putting 25% down that, you know, you're not gonna gain money on.   Michael: One additional point to on, on how long it takes to just get this stuff done. And what really surprised me and kind of caught me looking was the whole time and you're holding costs. And so if you're, you know, you're paying utilities for this property, the whole time folks are working on it. And the utility bill is going to be a lot higher than if people are just living in it. Cause they're using power tools and bathroom and water and all that kind of stuff. So I had a month where I had like 800 to a thousand dollars, just utility bills for this multiunit building, because there are a bunch of people working in it and I'm like, Holy crap, that's insane. And something else to keep in mind is you got to talk to your insurance carrier provider agent and ask them what a vacant property or property rehabbing insurance policy looks like, because that might be very different than a tenant occupied policy. And they're often a lot more expensive. So just make sure you're very accurately putting together what your numbers look like for your… whatever your cost of your money has. And then your, your insurance utilities, your property taxes. You still gotta pay those even though there's no one living in it. So just make sure you're very, you get a very clear picture of what the actual numbers look like,   Mark: Cutting the lawn, shoveling the snow and, uh, that, that builder's risk policy is yeah, it adds up.   Michael: Yes, it sure does. It sure. Does Mark. Anything else that you wanted to share with us and Neil? Anything else you got?   Mark: One other thing that you could do with the appraisal. If you are, maybe you get a bad appraisal, you can always contest that. And I'm not sure if everyone knows that. But if an appraisal comes back, you say, hey, listen, you know, they might've had low comps now. It's not smart to contest it unless, you know, uh, that there's actual facts out there that can help you get closer to your value. But, you know, even if that appraisal that comes back gets you another five or 10 grand on a hundred thousand dollar property, that's a, that's a big chunk. Contesting the appraisal. Now we ran into the issue all time of we're trying to turn money too fast. So to appraise, try to contest an appraisal for another four or five grand. We were, it was slowing us down. So that was one of the things that was tough when we were trying to compound, uh, these deals. But if you're doing, what are you doing to take the time to test that a appraisal and try to get that other five to 10% out of it.   Michael: Really good advice.   Emil: Does it cost money? Does it cost money to contest? Cause I remember I was doing a cash out Refi on a property earlier this year and it came in low and we just tried to contest it. It didn't move anywhere, but I dunno if maybe there was like a formal contesting process.   Mark: You know what, I want to say there's like a a hundred dollar fee. Um, but I might be confusing that with, if the guy couldn't get access and he charged you for it, I'm not sure. But uh, so worst case now I think it might be a hundred bucks. Yeah. Yeah. So again, risk versus reward is not that much, even if it keeps the fader $10,000 or even $5,000 out of pocket for an extra hundred bucks in a couple of extra weeks that there's value there.   Michael: Money well spent.   Emil: Totally worth it.   Michael: Once COVID ends, if you could go out on a plane and go anywhere, where are you headed?   Mark: Ah, just somewhere at the beach. I have not been to a beach for a long time. Um, I will literally take anywhere with an ocean. I've actually looked at like day trips, like flying down to quick day trips to like, fly out the morning, go sit on the beach for the day and fly home to Chicago down in Florida somewhere. Uh, but yeah, I've been to Vegas a bunch of times, but you don't get that beach satisfaction there for sure.   Michael: No, you gotta be careful what you wish for though. Cause my brother went to school in Canada and he told me he threw a snowball from the beach into the ocean once. So you don't want to go to over the cold beach. You got to go to a warm beach.   Mark: Nope. Headed down to Florida somewhere. That's the quickest cheapest flights it looks like. So right on time, change screws you up. I've told me down with it, but for a quick trip, the time change screws up too much.   Emil: Come hang in. LA man. If you're ever here   Mark: Yup Yup.   Emil: But a day trip is tough to California.   Michael: Awesome. Well Mark, thank you so much for joining us for round two. This has been super insightful, super informative, and I am sure we'll have you back on again. Soon   Mark: I look forward to it and anybody that, uh, like I, I try to point people in the right direction. So anyone ever interested in Chicago or anyone that is looking for the right context in Chicago, feel free to reach out   Michael: Perfect. And what's the best way for folks to get in touch with you?   Mark: We got, uh, we got our podcast Straight Up Chicago Investor Podcast now, which we started a Facebook group for. And then, you know what, I'll put my cell phone out there, uh, in the, in the show notes. So if you guys can help that   Michael: Fantastic and your website as well?   Mark: GCRealtyinc.com   Michael: Fantastic. Well, thanks again, Mark. Really appreciate it. And we'll chat soon, man.   Emil: Thank you Mark.   Michael: Alrighty, everybody. That was our show. Hope you enjoyed it and took some actionable takeaways. If you enjoyed it, feel free to leave us a rating and review as well as subscribe, wherever it is, you'll send your podcasts. It really helps us out. If there's anything that you'd like to hear covered on an episode, feel free to leave that in a comment that would be look forward to seeing them the next one and a big shout out and thank you to Mark. That was really, really great stuff.