In an exciting hour with real estate guru Mike Swenson, I was taken on a journey from the purchase of his first townhouse in 2006 to his current success as a savvy investor. Following a few bumps in the road and some lessons learned, Mike and his wife have come a long way since being accidental landlords in 2010. With a few calculated risks and a whole lot of determination, they've become seasoned entrepreneurs in the real estate industry.
We also engaged in a fascinating chat about the real estate agents' potential to become successful investors. After all, they have the insider knowledge and tools to make it big. Mike beautifully highlights this point, adding that the trader on Wall Street could land in trouble for insider trading, but this doesn't apply to real estate agents. They've got all the tools right in front of them to make a fortune.
Finally, Mike and I shared some nuggets of wisdom for the aspiring entrepreneurs and real estate investors out there. With the abundance of resources available today, it's never been a better time to start your journey in real estate investing. From taking calculated risks to considering real estate as a continuous education, there's a lot to learn from Mike's experiences and valuable insights. If you're ready to embark on your real estate investing journey, strap in for some enlightening conversation with Mike Swenson.
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Welcome back to another episode of Latinos in Real Estate Investing Podcasts, where individuals just like you come to learn how to create wealth through real estate investing, business ownership and entrepreneurship. Today's guest is Mike Swenson, and Mike has been in the real estate industry in various forms since he became an accidental landlord in 2010, which is an interesting story. I want him to share that with us. He currently merged his team into the Pinnacle team and investor focused real estate team, serving Minnesota, wisconsin and Florida. Mike is also the host of the REL Freedom Podcast, with a mission to help listeners build real estate, leverage, freedom of their time and finances through opportunities and real estate. Mike, my friend, thank you for coming in here and sharing with my audience. It was my pleasure the other way, the other day, by the way, being in your podcast brother, so thank you, thank you for coming on mine and sharing your your with him.Speaker 2:
Yeah, thank you so much, martin. I'm so excited to be here and excited to share.Speaker 1:
Thank you, brother, let's start let's start with this how you got started in real estate. Let's start with how you in 10 and we talked about it off air the other day when I was on your show on how that that occurred for you. Why don't we start there? How you, how you came into this industry and how did all begin for you?Speaker 2:
Yeah. So I think just to to back up, just a couple years before that I was, I went to school to be a entrepreneurship major and kind of my. The way that I was raised was just thinking, okay, we've got to have safe, stable job, you know, get your, get your paycheck, get your, you know, contribute to your retirement plan and everything's going to go well. And so that was kind of how I was raised. I was really excited to learn about business, which is why I got into entrepreneurship in college. But then quickly I realized I like the knowledge. I wasn't ready to take a risk yet, which is is funny kind of now, looking back on my life, how I have taken a lot of those risks, but I wasn't ready to take a risk. Right out of college a lot of my classmates were starting businesses or taking over their family business and I decided I wanted that safe, stable paycheck. And so I realized nobody was going to hire an entrepreneurship major, because back then that was before entrepreneurship was a cool word and some people didn't even know what it was, and so I decided I was going to either major, have a second major, in finance or real estate, and so I took a class in each and actually decided, you know, I finished about two-thirds of what my real estate licensing course would be in the state of Minnesota and just decided, hey, I can always go back and do that later. I'm going to go into finance. And so I majored in finance and so, after I got married, my wife and I decided to buy our first townhouse. And so this was we were married in 2005, 2006 in the fall. We looked at these townhouses. I didn't really know anything about real estate at the time, so I was just trying to learn and I was so excited because it was a two-year-old townhouse complex and we were buying it for less than what the previous owners bought it for. They were buying their first home, and so I just saw the townhouses away to, you know, get, get something and then eventually scale up, and so kind of a few key things there. Number one we bought it for less than they bought it for. I was excited about that. Number two it are praised over what we purchased it for. I was excited about that. And then, number three, my lender said hey, mike, we've got this product called a, you know, a five-year arm. Are you planning on staying here for five years. It's like no, we just got married, we're planning on having kids, planning on moving to a house, and maybe two or three years we're good. So he said, hey, you can get a better rate here if we do this five-year arm. So we went ahead and did it and all was well. And then a year, a two and three years later, the market continued to go down and down, and down and down and down and eventually these properties were selling for half of what we bought it. What was this? Was year, was this? And like again, did you bought it? So 2006?Speaker 1:
is when we purchased it. You bought married in 05.Speaker 2:
Okay, got it up yeah, 2006, we watched the slide. Pretty much all of my neighbors in the complex either did short sales or foreclosures, and so I had my you know, right out of college job. My wife was getting her master's degree. She was nannying full-time and then getting her degree on the side, and I looked up and I said, okay, what are we gonna do? You know, I I don't foresee the market changing significantly to where we can sell this for a profit anytime. I had kind of estimated 10 years, maybe eight years, but I was like this thing isn't coming back. So what are we gonna do? And so I kind of started to look at some different options, and then what I did is I contacted a lender and I just said, hey, here's, here's what we're maybe interested in doing. Is there any way possible that we could rent this out and qualify to buy another property that we could fix up and eventually, you know, become our home for a while? And so this, I think, speaks to what I was willing to do is just be dumb and reach out right and see what options are out there. And so the lender said you know, actually you're pretty close to your debt to income ratio. You probably could pull it off. I wasn't quite ready to take the risk. So then I was like, okay, this is what I need to do. So then I was talking with my wife here's some options, here's what we could possibly do. And she had a conversation with one of her. So then, fast forward a couple years. She ended up getting a job and she was talking with one of her co-workers about, hey, we're maybe considering, you know, renting out our townhouse. This was a couple that was considering moving back home. They lived out east, and so in a couple of years they were wanting to do that. So they didn't want any long-term commitment of buying a property or anything, they just wanted to rent. We got along well. We actually hung out, you know, outside of work a few times too, and so they said, yeah, we want to. We'll, we'll rent your townhouse for you. So now it was, okay, what's the plan? I got a plan. I found out I could do it, figured out how to get this lease in place, and then I went to the lender and said, okay, here's what we got. You know, what are we pre-approved for? And then we went out and bought a short sale. So it was a property that two years before, this family had bought for $80,000 more than what we were buying it for, and so we had negotiated a short sale and at that time it was kind of the Wild West. Nobody really knew this was. This was about 2010, you know, all the regulations were still being figured out and people were just trying to to figure out can I sell my house, how does this work? How does the short sale thing work with the banks? And we were fortunate enough that we got an answer back from the bank pretty quickly that they accepted our offer and so then we moved into this house and then we continued to have this townhouse as a rental and then kind of the quick backstory on that we rented it out to them. I think it was a year or two later they moved, we rented it out. Actually, the the next person that rented out was a Elvis impersonator, and so I was always a funny story that it's a two bedroom townhouse and he used the extra bedroom For all of his Elvis costumes, which was pretty cool to see when I popped in there one or two times. And he was legit, he was good, he was a good Elvis impersonator. And then we rented out to another couple for for Seven, eight years, and it did take about ten years for that value to come back. In the meantime we had refinance from a 30 year mortgage to a 20 year mortgage and For the most part during that time we were about cash flow, even on that property. So you know, no, no harm. But at the same time our mortgage was getting paid off. The value is continuing to grow and we held that property up until 2022 in January and sold it, and so I think it speaks to there's risks in real estate, but at the same time, in general, if you can continue to hold it, it's gonna appreciate over time, and you just got to figure out a way to kind of keep that cash flow To hit the goals of what you want to hit. I was fortunate with the townhouse. I didn't have to do a lot of maintenance myself, and so it was. It was pretty hands-off and that turned out to be a great asset for us over over the course of the About 15 years that we owned it. Then, in the meantime, we bought the short sale. We fixed that up, I did a flip. We purchased a property for a thirty eight thousand dollars A single family or thirty six thousand dollars a single family home, fix that up, rented it out for a couple of years, eventually sold that property. The profit we made off of that paid off my college loans and then we just continued to house hack a little bit. We've done a couple of flips and then now we kind of scaled into a 26 unit apartment complex, which is what we own today, with a with a few partners. So so that's kind of my investment journey. In addition to that, yeah, I'm a real estate agent, we have a real estate team, we have an investor division which I lead with the pinnacle team, and then I have my my podcast. So yeah, so that's kind of my short, quick background.Speaker 1:
Perfect brother. So what I'm hearing is the good old saying right, don't wait to buy real estate by real estate and wait. My question along that, that that wonderful journey you had, is what is, what was your biggest lesson that you learned during that time? Right, because there's, there's, there's some of us that have that actually experienced and we're in the game in In 2008 and I was just getting started actually on the mortgage company. I shared that with you before and, and you know I think that time taught us all those of us that were in the game a lot of really good, valuable lessons. I like to know, from your perspective, what did you learn? What is, what was your biggest lesson number one and how are you applying those lessons? And what's happening in today's market and what do you see, as a realtor and investor, in happening in today's, in today's economy and in today's real estate world? There's a lot of, a lot of stuff going on right now with interest rates and inventory and housing starts is a lot of, a lot of different things.Speaker 2:
Yeah, I think you know. Number one Think through a couple different options with this. You know, when we're working with our investors, we talk about having an exit strategy or two or a plan or two, right, if something doesn't work out, you got to think a couple different steps to see what you could potentially do. So I think for me the biggest lesson was I could kind of see the writing was coming on the wall here and I knew I had had to act. And so I said you know, either we're gonna stay in this thing, we're gonna try to find a way. You know I wasn't Dead set on stain. So I started to explore some options and I was willing to talk to lenders. I was willing to ask questions because at that time I wasn't in real estate. I was a financial analyst, right, so I didn't know anything about the real estate market. So I was curious and asked questions To figure out what would I need to do to be able to possibly make this happen. And then I look at it as you know Give me the target and then I try to build the plan to get to that target. So when I just said, hey, what would need to happen for me to be able to rent this out. And the lender came back and said here's what you got to do. And then I just kind of started on that path. And then in the meantime I did have, you know, those backup plans. If we had to stay in the house, we had to stay in the house. Same thing with the, the flip property that we did. That actually came about Because my brother-in-law was having a hard time with a, with a bad landlord, and I was like, well, how much are you paying for rent? So he told me, and then I started to look at home prices out there and I was like, oh, if I could buy this property, charge him the same rent that he was paying, but though his landlord would now be me and his sister, we would treat him well, you know, we would be respectful to him. And then that property needed a second tenant. So I was like, okay, well, if I charge this for the other tenant now I could cash flow every month. And so I looked at okay, what do I have to do to put money into this? And so I ran some numbers. You know, being a financial analyst, I think the gift here is I love making a good spreadsheet. I love analyzing stuff and so I put together that plan and I said, okay, if we can move forward with this tenant at this rent, this tenant at this rent, I can now buy this property and be able to Finance it. So I think for me that's, that's the biggest lesson I learned is not to be scared of that, and the analysis and the numbers will help tell that story for you. And then at some point you just got to trust your gut and and kind of get over the hump. So when I go back to you know, kind of being this W2 employee that wasn't willing to take risks, I've taken some big risks. But if you ask me I still probably wouldn't tell you that I'm a big risk taker. It's methodical and it's calculated in how I take those risks, but I'm willing to be curious and willing to ask the questions to try to put that together.Speaker 1:
I have a formula which is perfect that I share with my listeners, and it's so D plus C plus IMA equal success, which is D, decide, number two, commit, and then IMA is Intelligent, massive action, which, and then that equal success. Right, we talked about action in your, in your podcast, taken action, but what you're doing is you're taking intelligent, massive action. You got an educated, you know the numbers, and boom is calculated, methodical, intelligent massive action. I love that man and it needs elite success to success, because you're calculating your outcomes and what directions that particular deal can turn out. If not that, then that. If not that, then this. Right, you have multiple legs of strategy. You said earlier that you saw the riding on the wall in 2010 when you started looking at different options and you saw it. I suppose you mean I presuppose that you. You meant that you saw that the market was starting to come down and you saw Some, some cracks in the foundation.Speaker 2:
I think that's what you meant, and correct me if I'm wrong a little bit of that and a little bit of this five-year, five-year arm ticking time bomb Also, yeah, kind of both at the same time. And so it's like not only is the market going down, but in five years my payments gonna jump. And so once again, I started to figure out how can you make that work. And in that case what ended up happening is we we ended up working out a deal where my in-laws, you know, helped us with refinancing that, that five-year arm, and we worked out a payment with them, still with an interest rate, but just a much less interest rate than what it was gonna be. So we still, you know, we still had that debt that we had to pay off. But I was willing to go explore those options and see if there was different things we could do. Yeah, cuz the writing on the wall was this value isn't coming back anytime soon, and so either we're gonna stay here or, if we're gonna have to, if we want to put together a plan where we go get a house. We got to do that, you know. And so it's gonna take work, and so I had to educate myself, figure out, kind of where, where the boundaries are of what my options were and then start to put together those pieces. So yeah, like I said it was, the writing on the wall was yeah, the value. We can't. We can't sell this thing for a profit for at least 10 Years. So I've got to figure out a plan right now. And I didn't want to walk away from that property. I a I really enjoyed living there, be it was. You know, it was a great location, a great thing for us. But I also didn't want to stay in that property if I didn't have to. So I was putting together that plan to get out of there.Speaker 1:
I got to tell you, brother, I really respect that, what you did and your ability to think. You're an annan, obviously you're. You're an analyst, so you're an analytical thinker and you can think like you see my, my thing behind. You can think couple moves be ahead in the chessboard. Most people during that time, as you recall, that time we had the most, most foreclosures we had ever seen in history. I think today, year Up to date, we've seen more foreclosure people walking away, people giving the keys to the bank, and you and I were kind of on the same camp. Why I? I had made a commitment when I bought my first investment that I was not gonna do that and I put my name on a contract and my integrity of my word. Even though it's a bank and it was country, I don't know if you remember country wide, big old country wide back then they were the ones that gave me that long and I said, no, I'm not gonna walk away, I'm staying with it. And I kind of I actually thought it was gonna take longer. You said ten years. I thought it was gonna take 15 years. Man, that's how bad and ugly it was during that time. This is so. I commend you for that, but a lot of people were well, what's interesting is that during that term term, all turmoil of time, lot of people were just walking away and a lot of people did not do what you did, which was, hey, I see this, I can see this coming like, I need to start thinking now and I need to start taking intelligent, massive action now and look for solutions. And Kudos to you, man, I respect that and I honor that. Kudos to you that you were able to hang in there, keep your word, do the right thing and, in the end, you won. My next question here for you, my brother, is why should real estate agents become investors? So you're an agent as well, you're an investor, and you know I I can't remember who it was I saw someone on Instagram, someone that I connect, I'm connected with, and they put a meme up and it was an interesting meme and I like to share this with you, and it's like hey, investors, we get rich, and Real estate agents that are just chasing commissions. They are a tool and a resource for me to get rich as an investor, and so that? So that leads to my question why do you think? Because, as you know, being an agent in my family I have. My wife is an agent, my daughter's an agent, my daughter laws an agent, like we were a real estate family. They don't teach you in real estate agent school cash on cash returns, roi. They don't teach you this. They don't teach you ARV. They don't teach you this line. They don't teach you. They just teach you how to stay out of trouble. But why is it important for agents to to, to learn how to invest to? They're in the game, but they're not. They're not in the game if that makes any sense. Most of them.Speaker 2:
Yeah, I think the the example that I usually use is you know, if I was on Wall Street and I was a stock trader, right, if I got a hot stock tip from somebody or some shake-up that was gonna happen and I went ahead and made that trade, I could potentially go to jail for being an inside trader, right? Like I'm using the knowledge that I got in the industry to benefit myself financially and that's insider trading and I get in trouble. In real estate, I have all the same information that that I should say, more information than the general public has. I have all the access to the tools that I need. I have all the Access to the relationships that I need the lenders, property managers, vendors, all of that. I'm sitting on a goldmine of opportunity and then I'm gonna choose to not do anything with it. To me that seems really silly. So I think for a lot of people they get hung up on. Well, you know so-and-so's got, you know 50 units, 100 units, you know 130 units, and so I can't do that. So I'm just gonna instead put my head in the sand and pretend that I can't do any of it and I don't do anything, you know, and so what? I would encourage people to do is just figure out how to take the next first, the next most logical step for you to get started, because it's all about getting started. If I hadn't been a landlord you know right out of college there and learned some things I would have been less willing to take the next risk and the next risk. But because I did that now I took another calculated risk. I took another calculated risk. So it's all about figuring out how the heck do I get started? But you have everything at your disposal. Yeah, the lenders you work with may not be investor-friendly lenders, they might not know enough about some of those products out there. You may not work with property managers much because you know you're maybe on the residential side. But guess what Other agents at your brokerage, other agents that you come in contact with, do? And so just start asking them do you invest in real estate? You know so actionable items here. Just start asking questions Do you invest in real estate? Who do you use for this? Who do you use for that? What's your strategy? And just start asking questions of people to figure out what's gonna be that path that's gonna excite you to invest in real estate, and then you know, the other thing that I laugh about with real estate agents is they always joke about oh I just, I love real estate, I'm gonna work until the day that I die, and I think what they're doing is they're covering up, for I don't have another plan, right? I don't have any sort of financial thought into my plan, so I'm just gonna say I just love, I love my craft and I'm gonna work until the day that I die. You can still do that. What if you didn't have to do that and you could maybe just cherry pick? If you love your clients so much and you love working with them, what if you just cherry pick the best ones, the easiest ones, the ones that you connect with best, your closest sphere, and then other ones? You just refer it out because you have real estate investments and cash flow and equity built up to be able to have a great plan for your retirement. It would be nice to have that choice, and so I think, as agents, sometimes we hide behind some of those things, when we just don't take the time and make it a priority. But you're sitting on a gold mine, you're sitting on a wealth of opportunity and you're just choosing not to do anything with it. So be curious, ask some questions, start to figure out what's the next most logical step for me. And you've got the tools at your disposal. You just got to do something with it.Speaker 1:
Yeah, that's really really good advice. You said it, I think, a lot of times what happens with agents is and you can tell me your perspective is that they get so caught up in everything that they teach in school about, basically, agent school. Real estate agent school is hey, here's everything not to do till you don't get sued. Here's what you don't do. Here's what you don't say, here's what you don't do, here's what you don't say. Be careful of this. So now, to be a successful investor it's going to create is you have to be a creative thinker, you have to be an out the box thinker. You have. You know there's a lot of things that we do that are not. When I say we, we investors, do that are not taught in real estate agent school. So when you talk to an agent and they're so used to the box you got to get a 30 or mortgage, you got to get a pre approval letter they don't know what a sub two is, they don't know what owner financing is it starts to scare them. Oh no, you can't do that. That's illegal. You can't. Everything's negotiable in every. Anything's negotiable. You can negotiate anything in real estate. You can say, hey, buy this thing for a dollar and I'm going to pay you $99,000 over 20 years. Right, like? You can negotiate how it structure, deal however you want, as long as the two parties agree. So my next question for you is what are one, two and three things in order, if there's an agent listening to us, that, or just a person, just a person that maybe you, you know 15 years ago, when you got out of college and bought their first thing, like, here's a one, two and three things that you should be doing to be on the path to becoming an investor. And you said something a moment ago about hey, so and so has 100, 100 doors, 130 doors and all that. But I'll tell you, man, I have 130 doors, but I started with one. I started with one duplex. I started with one little duplex that was an 07, and then I went to the next one and then I went to the next one and I went to the next one and I learned and I got scraped along the way and I'm still learning and now I'm leveling up and I'm going into development now and things like that, but still, it started with one. I didn't start with 130. And I people should not get discouraged. Actually you should people? You have resources today that Mike and I did not have in 2007 and 2010. We didn't have YouTube. We didn't have podcasts, weren't as popular as people could listen to you, people could listen to me, people could email you, people can can can reach out to you and ask you questions and you can give them some directions. We didn't have that, dude. Think about it. Youtube started in 2003 and it really didn't pick up to 2008, 2009. It really was popular until later, in the early 2010s and stuff like that. So we didn't have all of these resources. People have that today. So back to my question my friend, what are one, two or three things that you can tell someone that's listening to us right now and thinking, hey, how do I get started? You know they're feeling stuck or in their head, they're afraid to take risks, they're afraid of, they're afraid of the videos they see online that this person destroyed the property and all of that. One, two, three, four, maybe steps that they should do to start.Speaker 2:
Yeah, yeah, well, I think there's one one. I'll just throw out there that I guess for kind of the normal investor that's probably going to start with single family and all that We'll cover that. But the other thing that's out there is a real estate syndication. You know you can invest. So I had a guy on my podcast a couple of weeks ago that he's a corporate salesperson, works a sales job, and he had done the fix and flip thing for quite a while and just essentially realized he's like it feels like I just have a second job right now and all the freedom I'm looking to get, it's kind of pulling all that time freedom. So he learned about real estate syndications. He's like I can just passively invest in these things and I don't have to do anything. So I think too, sometimes people feel like I have to, it's a, it's a and or or it's an and or conversation. Like if I want financial freedom, I have to sacrifice all of my time. Well, you maybe don't have to do that. It could be a both and conversation. What if I could make more money and not have to sacrifice any of my time? And so I think once again, we just have to be creative and open up our minds. So I'll throw that out. There is one thing. Another thing is what I would encourage people to do. So if you do want to go you know, single family, small, multi-family and kind of scale up on that side, make connections with people, just start asking questions and finding out what other investors in your area are doing and and learn. You have to be, you have to put intentional time into learning and then you have to set some actionable steps to be able to take. So set a goal of you know, I'm gonna maybe I'm gonna take three months and I'm gonna talk to 20 different people to learn what they're doing, to kind of see what might gel with me. I always I use an example of you know, think of it like a three sided triangle. You've got time on one side, money on one side and expertise on one side, and so what I encourage people to do is think about on those three sides of a triangle, what can I bring to the table. And maybe there's somebody out there, there's somebody that wants to partner with me, that can also contribute those things. So for me to be able to scale expertise is probably where I excel right now, because I work with investors all the time. I help them invest, so I feel like I bring a good level of expertise to the equation on the one side of the triangle. That's time. Because I'm a real estate agent, I can decide how I want to spend my time. That doesn't mean I'm gonna become a landlord, so I partner with good property managers that can manage the property, because I don't want to do that, but I can contribute some time. I can also contribute some money. But the reality is is if I want to scale, that's the piece that I can go find people that want to partner with me. And the people that want to partner with me have the money, maybe don't have as much of the expertise and maybe don't have as much of the time, and so you're looking for some win-win scenarios out there, and so I think, as you're looking to get started, it's okay to partner with somebody you know you don't have to buy your first property all yourself. You can find somebody that's doing it and maybe you just contribute some money sometime to the deal just to get your foot in the door, to get started and learn, because you're going to learn so much along the way. And then what I tell people too, is treat real estate investing like an education. Right, I can go to college and I can pay a lot of money to be able to learn a skill that I'm going to use later in my life. Real estate investing you can make money while you're. It's on the job, learning right On the job, and you're making money at the same time. And if you do your first deal and you for some reason, let's say, it's a flip and you don't make any money, well, now you got an education out of it. You know, and it's okay, I didn't fail, I learned and I'm going to apply that money that I used into the deal to go get better for my next deal. So I think you know kind of a. You know step one evaluate yourself and what you're wanting to get out of this and then maybe go look for some people that might fit that gap that you have. Number two, treat real estate like an education expense. And then, number three, you got to set some time aside to do this stuff. So if it's analyzing deals, you'll learn that you get a lot better at analyzing deals when you analyze more deals. And so I was meeting with a person last week that was looking at their first property and they wanted to do a short term rental and we walked through here's how I look at a deal, the numbers, the pieces of the puzzle I need to fit in. And so I showed him how to do that and he's like, oh my gosh, this is so amazing. I said Well, guess what? The first time I did it it was slow, it was clunky, it was awkward, I didn't know what I was doing and working with investors. Now I've been doing it for a couple years. That was just a couple of years ago where I was slow and clunky and awkward in figuring this out. But now I can look at a deal pretty quickly and decide is it worth more of my time or not. And so setting a goal of analyzing some deals getting us. You know, we have these deal calculator spreadsheets that people can use to plug in numbers and that's really going to help you kind of think through the process, have a good due diligence checklist where you kind of go through and make sure you have everything that you need. But you can't be scared of that stuff, because it's just like going to the gym and working out. You know, I say you got to flex your investing muscle. I'm not going to walk to the gym and go deadlift 500 pounds right out of the gate. I'm going to work up to that and I don't even know 500 pounds is reasonable or not. I'm not a deadlifter, right, but I I start, and I start with some smaller weights and I do that a little bit and then I move up to bigger weights or I move up to more reps. It's the same way with real estate investing. You got to start with your five pound weights and that starts probably with analyzing some deals, spending some dedicated time looking at the market, looking at opportunities, even looking at opportunities that have already closed, like oh, if this one had come across my plate in the past, would I have invested in something like this? You're kind of looking to hone in on what's that sweet spot for what you want to invest in. So I think those are a couple helpful tips there.Speaker 1:
That's really really good, good, good, solid advice. Brother, I like to just from your perspective, what is your back of the napkin Underwriting? You know someone brings a deal for you, just back of the napkin. You know I have my own but I like to get. I like to get your perspective on how you on the right that deals Back of the napkin. Let's say you have a deal that's coming in, it's I don't know 50,000, they're showing 50,000 in gross gross revenue and a triplex. Where do you go from there to know if you proceed or not? What's your next, your next quick five minute on the writing, on that.Speaker 2:
Yeah, so I mean, I, I look at you know a few different factors. What I've also learned from people is you have to look at what's it going to cost to maintain that asset. You know so, even like I was talking with a property manager on Monday about this in one of the communities that we work with. A lot of our investors do those numbers right and they do some calculations, but what they don't see is that they're not going to be able to do that. What they don't see is that kind of the the 5% I put to CapEx expenses, or the 5% or 10% that I put to property management expenses and maintenance expenses. And sometimes we use just those round numbers as estimates. And what he and I were talking about is property to property, area to area in the city that he works in. There's such a big difference there, and so sometimes we just use these assumptions to maybe talk us into investing in something. But he said, hey, there's these properties here that on a, on a on the napkin, look good, but I've managed them and they're a disaster. And so I think that's where the value of a good property manager comes in. So I would say my first step is, if I find a deal that pencils and looks good, I'm going to go talk to a property manager that works in that area to get their thoughts on it, because maybe they know of that property, maybe they've managed other properties in that area, because there's some areas where People stay in their leases and they stay there a long time. There's somewhere they sign a lease and they have trouble paying the lease and they're out. You know we have in our 26 unit complex we have some studio apartments and we're actually reducing the rent. Then what we've proven, you can get there Because there's a lot more turnover that happens at this price. So if we lower the price just a little bit now, we can find somebody that's going to be able to pay that and Want to stick around long term. So I think Understanding some of those soft costs and the maintenance is really valuable and that's where a great property manager can come in to speak to that. So yeah, I I would say I come to him with those back of the napkin like Analyses here and I go to the talk to property manager. He's like no, you know, like this, this is going to take way more money than you're calculating. It's going to take way more time, which time is going to be an expense on the property management side. So I think I love pairing the numbers with a good property manager to give the boots on the ground because, like I said, I don't want to be the property manager and so I want to rely on that person. Once again, part of my triangle, they're taking the you know, they're the expertise and they're the time on the property management side. So I want to get their boots on the ground analysis of is this worth looking into further or not, and I trust them. You know there's a couple properties I was super jazzed about. I was like awesome, I go to him and he says me I think you should pass, and I trust him on that, and so that's building good relationships.Speaker 1:
That's fantastic. I'll tell you, one of the things I do, mike, is I, when I find a deal I like it, I don't put it on the contract until I bring my property manager and we walk it together. Hey, do you like this? Here's my pro forma numbers. Can you execute on this? Can you do it's? We have a meaning. I have a meaning with my property manager every Wednesday and we talk about my current portfolio, we talk about the deals I'm working on and the stuff I'm gonna buy and I have that. I'm thinking about getting on the contract and I task him week to week like hey, next week we just bought it, we just bought a five-unit fire property last week, or was it this week, this week, tuesday, I think, I don't know. I Got so many things on working on, but anyways, and that was you know what. That's one of like hey, can, here's the pro forma I put together. Can you execute on this? Is this executable? And you're absolutely right, I've a good property manager is Absolutely key to being a successful investor. You also pointed something else out that might have gone over people's heads, or some people listening to this podcast can listen to this and say whoa, whoa, whoa why? Why? That doesn't make sense. When you said you, on your 26 unit, on your studios, you're lowering rent and I I respect you for that, I respect what you're doing there, because that is a mark of you knowing your business and you knowing and understanding this business. Just for those of you that are wondering, like, wait a minute, he just said he's lowering rents. The reason that we do that sometimes is Is because he observed the pattern and please correct me if I'm wrong and tell me your thoughts on this. He observed the patterns on the turnover and how fast, how quickly people are turning over, and the most expensive thing in Our business as investors, as as owners of a real estate rentals, is turnover. Turnover is the most expensive thing. So, if I can, he, if he's got it, if you got to take $600 less a year to avoid having to spend 1500 or 800 or 1200 every time he's got to turn that unit with a cleaner, with this or that, and lose rent. That just makes perfect business sense. And and so some people might be listening to this and saying why would someone be lowering rents where rents are going up? It's a strategy and it's a good one too, because it's one that makes. That makes sense. What are your thoughts on that? Am I? Am I right on that?Speaker 2:
Yeah, exactly right, and that's the conversation I had with our property manager, because we had a tenant that had a situation with their job where it was unstable and I think they ended up losing their job. And at that rent the person was like you know what, I'm just going to go live with my mom. And so I'm, you know, sorry, I'm done. And so now we go from rent to zero rent, right, we've had some tenants in that slot. So we had another application that came in and the person had a really hard time coming in with that deposit plus first month's rent. And so they said, well, we're waiting on this money and this money to go get that, to be able to get you the money. Well, what's going to happen in two months? Right, and two months is it's based on the person that's going to be attracted to that studio apartment in where the market is, it's just a bit above what's going to be, kind of that stable piece. And so he's like, hey, if we drop this by a hundred bucks, we're going to get somebody in there that's going to want to be there and can afford to be there for at least 12 months. So we could try to push for months or more, right, so we could push for a hundred bucks, but in two or three months, maybe six months time, we're back to zero again and it might take one, two, three months to go find another person, and that is that lost cost cost there that we're not necessarily seeing. So, being willing to go down just a little bit, now with the other units, we're fixing them up when we're increasing the rents, and so we're, you know, attracting a higher quality tenant, and so we're, yeah, with these we're just looking for some stability, and so we want people that want to be there and can afford to be there long term. So, yeah, just that little bit is going to save in those turnover costs.Speaker 1:
Amazing brother. Well, thank you so much for coming out. I'm sharing your wisdom, your insights, with us. My friend, we're about to go into the untitled round, where we're going to ask you a series of questions. You don't have to think, mike. You don't have to justify just one word. Answers are fine. Are you ready to play, my friend?Speaker 2:
I am. I was going to say you tell an introvert, an introvert who's high administrative gifted to be able to just come up with answers. That's, that's tough. We need the questions ahead of time to think about it. Let's, let's do it. Real estate is real estate is exciting. I think it really is. My advice to young people is be willing to be dumb, be willing to be in the room and be the dumbest person in the room. I have always wanted to travel to Australia.Speaker 1:
People coming to Minneapolis should try Juicy Lucy's. The housing market right now is curious. I think the president right now is.Speaker 2:
What would I say there? I think the president right now I don't know what to say on that one. I'm not a political guy, but I just don't have a one word statement on that Family or business.Speaker 1:
Oh, family, for sure Passion or stability.Speaker 2:
Passion, that's what I'm learning. Passion over stability. Football or baseball Football for me, wine or beer For me, it's kind of neither Angry client or angry coworker, angry client and lastly, book smart or street smart. Street, smart, street smart.Speaker 1:
Mike, thank you so much for coming out and sharing all of your wisdom, your insights and everything you just shared with us has been amazing. If people wanted to connect with you, how do they find you? Where do they connect with you? Maybe they wanted to learn more about your investments and your deals and what you got going on, and you talked about some spreadsheets and some things. Where can they find that stuff? How can they connect with you? Where do they find you on social?Speaker 2:
Yeah, so the main thing. So our podcast Real Freedom R-E-L Freedom stands for Real Estate Leveraged Freedom, so R-E-L Freedomcom is kind of our central spot where we put most everything. I do run a mastermind for agents looking to invest and work with investors, and so that's on that website. But the vanity URL where you can get directly where you need to go is agentinvestormastermindcom. Learn about that. We talk about how to get started. It really is those first few steps, overcoming those barriers, and this group isn't for the people that have very sophisticated plans. It's for the people that are just trying to figure it out. They want to get started, they want to learn to scale. So that's a great spot to do that. Otherwise, linkedin, mike Swenson. Hopefully you can find me there. It's kind of a common name, but hopefully you can find the right, mike Swenson.Speaker 1:
We'll put all the links in the show notes for people so people can just go to the show notes and link it.Speaker 2:
Yeah, awesome. I just love having conversations with people, helping them figure out. Here's my situation. What would you recommend? That next most logical step or getting started? I really love having those conversations, so don't be afraid to reach out.Speaker 1:
Thank you, brother. Really appreciate you. Mike. Thank you for being here. Thank you for sharing. It's been a pleasure and an honor to have you, my friend, Appreciate you.Speaker 2:
Awesome. Thank you so much. Excited for the opportunity.