The Wisconsin Investor
Each week, we bring you interviews with some of Wisconsin's top real estate investors who share their tips, tricks, and strategies that you can implement right away. This show is dedicated to helping Wisconsin real estate investors elevate their game. Along with interviews, I'll also dive into hot topics in solo episodes and feature experts from various real estate sectors across Wisconsin.
The Wisconsin Investor
28 years old and 52 Rentals: Zach Morgan's Real Estate Empire and Networking Mastery
Zach "Big Money" Morgan reveals the art of transforming a modest start into a thriving real estate empire. Inspired by industry stalwarts like Grant Cardone and Bigger Pockets, Zach shares his impressive journey from a traditional job to owning 52 long-term rental properties. We dive into the nuances of sustaining active income through strategic property flips and wholesales, all while navigating the challenges of rental income. Zach’s background in sales, coupled with a serendipitous meeting at a Wisco REI event, paved the way for his success, highlighting the importance of seizing opportunities and leveraging connections.
In our conversation, we unlock the secrets to working effectively with lenders to fuel real estate growth. Discover the initial advantages of engaging with hard money lenders, and how savvy investors transition to more flexible options like community banks or commercial lenders. Our discussion offers practical insights into selecting the right lender, focusing on their adaptability, communication style, and risk appetite. Through personal stories, we underscore the critical need for clear communication and a well-defined business model, ensuring that lender partnerships are aligned with your unique investment strategies.
Networking emerges as a powerful tool in the real estate world, and Zach and I explore how it can propel your business to new heights. From the strategic use of the BRRRR strategy to the pivotal role of real estate gatherings like Real Estate Investor Association meetings, we highlight the importance of community and collaboration. We also share a remarkable first property purchase story that underscores the importance of patience and resilience. As we conclude with a nod to the hidden gem of Sheboygan, Wisconsin, we invite you to join us on this journey of insights and inspiration, ready to fuel your real estate aspirations.
Got deals today. Welcome back, guys, to another episode of the Wisconsin Investor. I'm your host, corey Raymond, and before we get into today's episode this episode is sponsored by Wisconsin Discount Properties I want to tell you guys about a hot deal we just had out a week or two ago. This one was on Bay Settlement Road in Green Bay, if you're anybody familiar with that. Beautiful road, views of the Bay of Green Bay, very desirable area. This was a three bed, one bath, one stall garage. We had it out to our buyers list for only $129,900. Arv on this sucker was $325,000. So we had a huge spread on it. As you can imagine, it was not turnkey. There was quite a bit of work that had to be done to this one. So this was not for the faint of heart project, but typically when you have huge spreads it's not going to be. But the folks that are picking this one up are going to make a nice massive paycheck when they exit this thing, or if they hold it and eventually exit. It's going to be tons of equity that they have out of this thing right out the gates once they fix it all up. And some of those projects are the best you get. You put one of everything into it and you don't have to touch it again, and we'll maybe dive into that a little bit today.
Speaker 1:Let's get into today's episode. I got my good buddy, zach Big Money Morgan, on today. Zach, what's up? Buddy Boom, new nickname. I like it. Oh yeah, how's it going? Thanks for having me on. You say that's new man. I've been calling you Big. Three former employees on here already, so excited for everything that you've gone on and done and in your solo journey here in the entrepreneurial world after exiting the nine to five W2. So today we don't want to focus too much on leaving our company, but maybe for other people who are working for someone else we can talk about, you know, just in case our employees won't.
Speaker 2:Won't coach your employees on.
Speaker 1:Yeah, yeah, yeah, please don't, please don't.
Speaker 2:It's kind of impossible not to. I mean you're, you're set up to.
Speaker 1:I say about you what I tell a lot of people who hang out with me is like you can't be out this too long. You catch it and then you're screwed, you're sick for life with it. Yeah, well, tell us a little bit, man. So, uh, give everybody a little bit of your background on you, your younger guy doing real estate out on your own, like give us just a little background. How did you get into this thing? What? What prompted you to want to do real estate?
Speaker 2:let's start there yeah, um, so yeah, I'm, I guess big picture right now. I'm 28, uh, we currently hold 52 long-term all long-term rentals come on baby.
Speaker 1:If I had the bell over here like tom crawl, I'd be ringing that.
Speaker 2:Yeah, I didn't think I got a bell too. It's somewhere in a box. It hasn't made it to the wall, but um, yeah, so we do that's the. That's the main thing. Um, we also do um flips, wholesales, um, on the side as well, not Not a ton of that, but a couple of months here and there as sort of keeping the active income going. I mean, passive income is cool and all, but it's not really passive and it's not usually consistent, if anybody owns rentals knows. So having some other sources is nice as well.
Speaker 2:But yeah, starting out, I mean I had wanted to invest in real estate for a long time. I didn't really know what that meant. But I, starting out, I mean I had wanted to invest in real estate for a long time. I didn't really know what that meant, but I mean I found a whatever journal little goals thing written out from like 2015. Okay, I was like by my first duplex and I think I was living my parents still, I don't think I was renting yet at the time.
Speaker 2:Yeah, so it's watching Grant Cardone and Bigger Pockets, I think. If they were started around that time, I think they probably were. Yeah, I think. So. The social media stuff I mean I grew up with social media stuff. So whether that's good or bad we'll find out down the road, but those influences have been there so you get to see, obviously, the highlight reel of what everybody's doing. And, um, real estate always sort of stuck out to me. It's like seemed like an obvious path, like a quote-unquote easier way to build a lot of assets quickly, yeah, without a ton of capital yeah because I didn't I don't know that everybody else I didn't have millions of dollars sitting around.
Speaker 2:I didn't get a trust fund. Um, I didn't have millions of dollars sitting around, I didn't get a trust fund. I wasn't making millions of dollars or anything like that to go buy a bunch of Bitcoin or whatever other assets or businesses and stuff like that. So it made the most sense as far as oops nope, I didn't exit. I thought I exited. Nope, you're good, you're still on Career-wise. I always loved sales, so this stuff always kind of lined up. But everything I did was always sales. I mean, I was a personal trainer for years but that was really, if you break it down, just sales. You're selling not just the training program but selling somebody, the future them and the them that they can be if they follow your plan. Hypothetically, I sold insurance and then I made all kinds of insurance and then I met this crazy guy at a Wisco re-event who also loved cold calling as much as I did.
Speaker 1:Yeah.
Speaker 2:And you were like we're both crazy, why don't you work for me? So that was January 2019. I think I left UnitedHealthcare and then I guess the rest was history. I mean banging out deals, wholesaling and trying to buy as many of those as I possibly could. Yeah, for sure, Until was that March of 2023? I think so.
Speaker 1:I think it was the time I went solo About two years now.
Speaker 2:Yeah, a couple of weeks.
Speaker 1:Yeah, yeah, for sure.
Speaker 2:And yeah, so I don't that. That was at that point. I think I had 13 units at the time, something like that. So that was with keeping personal expenses pretty low. That was like enough to keep going with having a handful of flips and and buying more and stuff like that. So and it's just been rinse and repeat, doing the same thing over and over again, trying to get better at the stuff. That takes time because time costs money and continuing to to grow and scale.
Speaker 1:Wow. So you went forward. You grew basically I don't know rough math 40 units in two years or whatever. That's been basically yeah.
Speaker 2:Yeah, just about yeah.
Speaker 1:Now, I imagine, are you using BRRRR on all these, are you doing the BRRRR strategy on pretty much all?
Speaker 2:of your line holds. I was looking through everything to see where we've got money tied and yeah, it's pretty much everything's been BRRRR, wow, I think we've got um, every once in a while you get an appraisal that comes in low and stuff like that. Sometimes you can't fight them far enough, they'll just be firm at it. So you've got to leave some money in the deal. But I think I've only got maybe two or three properties with some money stuck in them. Wow, that's awesome, either from the either you know traditional burr or buying it hard money and renovating it either with that money or some of our own money, renting it and actually refinancing it to pull the cash out. Most of them have been with commercial banks where we're getting an arv loan right up front so we get the purchase price funded and then the rest of it on draw. So that's my favorite. If anybody's any lenders listening that wants to give out some more loans, I'm happy to take 80% ARV, 30-year amortization. Ideally somewhere sub 7% would be sweet.
Speaker 1:I'm right there, dude, you're just singing. Looking for unicorns. I know, yeah, you're singing my praise. Do you have some lenders you can share with the audience that you've been having success with?
Speaker 2:Yeah, I mean my best one right now has been the one for a long time, bristol Morgan. Okay, they've been awesome. So they swooped in and saved me. Last year I had a portfolio, 22 units under contract. I gave another bank maybe should remain nameless the opportunity that they made a lot of big promises and ultimately gave me the run around. For what was it? 93 days or something like that. Like I got a long. I was grateful to get a long closing timeline. First because I involved the lender early, figured out what timeline they would've needed. It was odd it's eight plex, two, four plexes and three triplexes, no three duplexes in that portfolio. So you know it's a couple different moving parts. Gave them a long time to get through it. I mean that's a really long time in our world 90 days for closing, especially for, like an as-is off-market type thing.
Speaker 1:Were you already set up with this lender like pre-approved. You gave them all your financials, prior Bunch of deals. You've already done deals with these guys, so you already had an established relationship, million in deals or something.
Speaker 2:Yeah, okay, I've done plenty of deals, okay. So, yeah it just. For whatever reason, didn't I never got denied, it just never. Never got a yes either. Okay, so, anyways, we've done a lot with Bristol in the past as well. So we connected with them, got things going and they they came in. Them got things going and they they came in, used the prior appraisals that the other bank had done, gave me a little bit extended amortization, like just made all the pieces work and got it closed. I want to say it was like 27 days. Wow, it was amazing. Many moving parts. That's crazy.
Speaker 2:That's awesome, yeah, so I don't. I don't want to put that out there as an example of like, hey, this is what to expect. Call you know, call chad if you're a month out and something happens, like, especially if you don't have experience first. Good experience first and then a longer relationship. I mean, that's some of the perks you can get over the long term, yes, but um, that, yeah it was. It was great how it worked out.
Speaker 1:Yeah, that you and I love I mean you probably picked this up from being around me for a while that little virus is community banks. I preach, preach it all the time, Like, yes, hard money lenders are awesome for the first certain situations. They're great when you're starting out, they're awesome to get you rolling. But as soon as you can graduate to a commercial lender or community bank is the other. You know, we say commercial lender a lot of times but what we really mean is like a community bank. So it's not your Wells Fargo's, it's not your, you know, your big boys, BMO Harris's, it's the local guys, right, that can be a little bit more flexible. And what I do when I'm looking and I want to hear your thoughts on this Z, now that you're on your own doing some of this stuff Like some of the things I look for when I'm interviewing lenders is you know, do you have, how creative can you get with me if I have a construction project?
Speaker 1:Do you even have an appetite for that? I found a lot of credit unions. They don't want anything to do with construction. They want it turnkey. They want your rehab done, they want that baby stabilized. You get some good rates and stuff.
Speaker 1:But typically they're not going to have an appetite for anything that needs to be fixed up. So I kind of disclude them right away from a lot of my purchases. But on the purchase side I'm looking for that. And then communication for me is huge. Like I just tell the lenders right up front like you, I need good communication or we're not going to be a good fit together. So like if we're two weeks out from closing and I haven't heard from you and all this, like I'm may not do that loan with you, Like I need to be like where are we at in the process, and then if you tell me something you better stick to it. So if you tell me you can close it by a certain day, you better stick to it or it'll be the last time we ever do business together, you know. So we have those conversations.
Speaker 1:What are the things that you look for? I mean, I'm sure some of those overlap, but is there anything else when you're talking to?
Speaker 2:Berlinders that you're talking about, the communication's huge, I mean, and I learned many them before that they've.
Speaker 1:You know I was taking hey, we should be good to go as we are good to go. I remember that one. That was one when you worked for us and you bought that.
Speaker 2:Yeah, we should be good to go and I was like I'm going to be hyper optimistic, no matter what. I've got a disposition, but like I'm like we're good to go, like that's a guarantee in my mind we should be good and then it turns out we weren't good and we had to swoop in, get hard money last minute and stuff like that on that one that cost me eight to 10 grand, I think, just by 17.
Speaker 1:17. Okay, I was a little short. I remember $17,000. Okay, yeah, yeah.
Speaker 2:That. Yeah, that's a one that still sticks because it was a big. I mean it was 290, some thousand, I want to say, for a purchase price. So yeah, you know the points start to multiply after a little while. But closed is better than I'll pay that 17 grand every single day if I'm closing that deal again yeah, so you guys still did good on that one.
Speaker 2:I haven't done another one like that since I mean that's kind of a niche topic. But yeah, the, the duplex conversions, those are special. But yeah, for other stuff I look for I mean communication is big. I ask them up front too, like what their appetite is for this type of stuff. I just try to explain to them as clearly as possible my business model, cause it is weird, like this is the only world I've been in as far as real estate. I was never a realtor. I've bought one property through a realtor. Everything else has been off market, direct to seller that type of stuff. So it's a different world than it. Like we're in the in the small percentage as far as this goes.
Speaker 2:So a lot of lenders, just a lot of people, just don't understand that, how that all works and and why we're getting a 60% to value deal and stuff like that. You know, like that doesn't make sense if you're a normal person.
Speaker 1:Logically, it usually doesn't yeah.
Speaker 2:Yeah, and on the financing end, most of them in general think, well, if you're buying it for $60,000, it must be worth $60,000, because that's how the market works. But they don't understand the whole negotiating and getting discounts and and forcing value and stuff like that. So explaining that helps a lot of like hey, look, I typically am buying deals that are, uh, you know, I aim for 50 to 70% of value. I'm going to do some improvements on them and they're going to appraise out X, y and Z higher, you know. And then I want all my money back and I don't want any dollars stuck. Like, yeah, it is a tall ask, but it is. But the Y and Z higher, you know. And then I want all my money back and I don't want any dollar stuck, like, it is a tall ask, but it is.
Speaker 2:But the, the, if you're doing it right, the value is there for them to. You know they get good loans through. You know an experienced investor, they got their rental properties. There's not a whole lot that can go wrong in the, you know, real basic level. Yep, um, there's income coming in. So, yeah, I'll go through that, because I've made that mistake before too. Of just sort of like, hey, do you work with investors? And they're like, oh yeah, yeah, we work with investors. Yeah, we like rental property, we like landlords, that type of stuff. And then just how they do things is a little different. Like they're ultra, ultra conservative. So the appraisals are just going to not that they're telling the appraisers to appraise them low, but the appraisals are going to come in low. Yeah, they're not going to be super aggressive, they're not going to be willing to get real creative. So those conversations up front help a ton.
Speaker 1:Yep, I just had a conversation with a lender this week a new, a new lender that just kind of popped in my radar small community bank and I reached out to him about this exact conversation Z and he's like, well, he's like we want 20% down and we're going to do the. We'll appraise it based on the purchase price or the appraised value, whichever is lower. And I'm like, well, what makes why? Why wouldn't I just go to Fannie Mae or Freddie Mac then and just do a mortgage broker Like, why would I go?
Speaker 1:Don't punish me for negotiating. Yeah, it's like like why do you care? Like I this is the part that I struggle with some of the banks that don't get created. I guess I this is just my frustration as a real estate investor. But it's like why do you care? As long as you have the equity you need, why do you care? Right, this is another thing that some banks I struggle with is I say I've reached out.
Speaker 1:we've had a couple of deals through Wisconsin discount properties we put out where we've negotiated seller financing terms and the seller's willing to be in second positions, which is for those that don't know second position is a riskier position If it gets foreclosed on. They have a lot less leverage or there's a good chance they may not get any money back if that first position lien holder can only recoup their, their principal and nothing above that or whatever Right. And so so I'm like, hey, I got the seller in second position. Are you guys cool, taking a first on it? They're like, well, how much money would you put in? I'm like, well, ideally none. I've negotiated the 20% spread I need.
Speaker 1:And the seller is going to put that in. And and they're like, oh, no, no, you got to have some skin in the game. I'm like why, why do you care? You've got your spread, why do you give a rip? The seller's just coming in. So I'm like what if I create an LLC with the seller and then we become partners on it? Oh, that's different. How is that different? It's not different, it's the same amount of money.
Speaker 2:I don't know. Just in the paperwork it's different. Yeah, that's silly, drives me nuts. Yeah, I haven't had one personally. That's like that with a seller in. Second, I've done a handful of the seller finance stuff but like on the portfolio, the multiple properties, I wanted 20% of that one seller finance and we ended up just allocating it to one property. That equaled exactly 20%. So he gets to be first position on that property and then the bank gets to be first position on all the other ones and they considered that in the whole of it the value of that one still, because it was still whatever 62% of its future value. So they still considered it in the total appraised value and stuff like that.
Speaker 1:That's awesome. And just for the audience, if you're not familiar with, zach and I are talking a little bit over your heads the ARV loans that Zach was describing. There are some banks and again, it may take you a while to get to this level with some banks. It's a relationship game, it's a credibility thing. So if you're just starting out, don't get frustrated if you can't get a community bank to offer some of these. But they're unicorns. There's a handful, very small handful handful that will lend off of the future value of the house.
Speaker 1:So what happens is you get the property under contract. You give them your scope of work Like I'm going to do flooring I think it's going to cost me 6,000 bucks. I'm going to do windows, like whatever. You just spell it all out for them. They hand that to the appraiser. The appraiser comes, looks at the property, says oh yeah, if you do this scope of work, this is what it's going to be worth. They give that to the bank. The bank lends you some percentage off of the future value, which is insane.
Speaker 1:And it's an insane way to grow wealth really, really quickly, because if you do it right, you don't have any money into the deal other than maybe in between draws, maybe you got to cover the pay of the contractor directly before title company or the bank cuts you the check. But ideally you got no money into this thing and you now you've got a fixed up property. You didn't have to go through a hard money lender to do that. Or you're paying points and fees and I mean it's just an awesome way to go.
Speaker 1:And again it might just take you a couple of deals or a longer established relationship with some lenders before some of them will be able to do some of those things for you. Some other lenders that I've had before Z I don't know if you've used any of these, but they've lend. They've lend off of the like they'll do like 85% of the purchase price and then like 85% of the construction costs. So you're still getting a good chunk of your cash during during the rehab and then they'll refinance on the future value at the end. So hopefully you've had you force enough appreciation you can pull all your capital that you've had out. So you may have to just have a little bit of capital for a little bit of time in there.
Speaker 2:But I love it and get creative that way. Which are, which are nice too. I haven't personally done one like that, but yeah, I've seen them. Yeah, they're like that good option if you can't get a unicorn loan.
Speaker 1:They're more unicorn these days I think, than they used to be. But yeah, 2019, 2020, they were handing them out like candy at a parade. Man it was yep, it's like so easy to get them. Now it's like, yeah, you gotta know somebody who knows somebody sometimes yep, and I think you have some.
Speaker 2:There's some qualifying criteria, I mean, obviously, on your personal personal income, personal personal credit profile and stuff like that. I think most of them want you to own a personal residence as well, and I think it's got to be in an LLC, obviously. If it's a commercial, commercial loan on residential property, they want to in an LLC. So not a ton of criteria in the grand scheme of things. And then I think experience is the biggest. Yeah, so in a relationship, trust, using whatever you can. In the grand scheme of things.
Speaker 1:And then I think, experience is the biggest.
Speaker 2:Yeah, so like and relationship trust, using whatever you can hard money and stuff to get started on those first few, just to cut your teeth a little bit, yep for sure, and then getting into that and you mentioned something before you've got a couple of deals where you got some cash stuck into them.
Speaker 1:What I think is important for people to realize like I just did a solo episode on the BRRRR strategy and I don't even know what I said. I rambled for 40 minutes about it but I don't even know if any of it made sense, cause you know you're just talking, you don't know if it made sense. But the thing that struck that conversation is there's some investors I talked to at some of these networking events which I want to get to next with you and they're like got these big goals right, like I want to have, you know, 50 properties like Zach Morgan. I want to be like Zach someday when I grow up, right. And then I'm like, well, when do you want to get there? And it's like, oh, next three to five years, okay, cool, totally achievable, right. Then it's like, well, what's going to be the next property? How are you getting in? I'm like, oh, snails on a chalkboard, it's going to take you forever to get to 50 units. But what you were describing I think the contrast that people don't understand is you mentioned you didn't have money for Bitcoin to go buy a bunch of stocks or these types of things to get wealthy.
Speaker 1:What's really powerful is when you look at even those deals that you have when you utilize the burst strategy, and even if you still have a certain amount of money in there, your cash on cash return, which is ultimately the return on the money you have invested in the property, is still astronomical because it's so much smaller than putting 20% down plus rehab money. Then, looking at your returns, you're putting a much smaller amount into the property and anything you get out of it is just juiced because of the leverage that you have.
Speaker 2:Yeah, if you look at it that way, like how productive is the money? It's still more productive than it is sitting in a bank account or whatever, so it's still working for you. But yeah, same idea If someone's saving up for 20% down, it's going to take a while, it's a fine, I mean, if you're okay doing it over the course of depending on how high your income is. You know, 10 or 20 years.
Speaker 1:Yeah, everybody's goals are different. I've talked to some people. They just want to buy like a nice turnkey side-by-side duplex every year, one year, and then that's good for them. That's great, awesome. But you know, for people who have some bigger aspirations in a shorter timeframe, you gotta utilize the BRRRR strategy, in my opinion, to get there.
Speaker 2:But yup, that's what I always ask people too is like, what's the like, what the end goal is? Cause, like not everybody wants to be self-employed necessarily and do this all Like and I definitely would say it's not for everybody. Like it is pretty lonely doing it on your own right, like it's me myself and I in the office every day and we argue with each other a lot. So if you've got a job that you can keep, high income job is usually what I recommend for people and sales is usually what I recommend. But that's just from experience what I can recommend, like your number one way to be a great real estate investor is to make a bunch of money.
Speaker 2:I know that doesn't sound like that's not the answer anybody wants to hear. They wanna hear like, oh, just do these five things and you can have a million dollars in real estate. But if you make a bunch of money first, it's gonna be a whole lot easier to get loans To. I mean I had to pad the portfolio for a while, like in, while, like the in those first really four years buying stuff like there'd be stuff. Gotta wait 10 months before this guy gets a furnace again, or I dip into my personal funds and and pay for it and we're up and running again and maybe I'm negative on that property for the year, but I could eat all that for the first four years until there's enough of them there that they you can eat it with the other ones too.
Speaker 2:So yeah, but I mean, if someone loves working and has a great job and makes a lot of money and maybe they don't wanna have 100 units, maybe they wanna have, maybe they wanna retire with a couple extra million dollars in income producing assets like how awesome is that, you know? And then they just that's sort of like gravy on top. You save someone taxes for depreciation and maintenance and repairs and stuff like that. You got a little tax shelter, a little extra income and a little nest egg sort of thing you know to ask to the kids or pass the equity or whatever. Yep, yep.
Speaker 1:And I think, like we talk about risk now when you brought it up, like my parents are I've mentioned this to them a few times they have one duplex right now. They've had like a couple duplexes at any one time and then they usually their MO has been like have it for a couple of years, sell it, make a nice little spread Right and and have long-term capital gains or short-term. But they've had this one and I'm like gosh, that's actually riskier than if you have 10, because now you have one vacancy, you have 50% vacancy, versus having 10 doors and now you have a vacancy, that's 10% vacancy, right. So it's much. You spread out your risk a lot more and, like you said, now you're getting a lot of cashflow from a lot of them that don't have maintenance issues to pay for the one that does right. Or if you have one and it has maintenance issues, it eats up all of your income for the year. So, anyway, but you're right, you do have to have some capital to be able to cover that build phase right, to be able to get that snowball rolling downhill a little bit. I think it's important.
Speaker 1:Don't quit your job. Yes, there you go, all my employees listening.
Speaker 2:Don't do it, don't quit your job. And when you have enough to quit your job, wait like a year. I would say, yeah, you know, let it stabilize, let it iron out, for sure, unless you're in the active income. I mean, if you just want to be a flipper, yep and and wholesaler and you know where your your next month's check depends on, on the deals that you're doing, that that is still risky in a way, but it's a little different because you know you don't have, because you don't have residual benefits, but you don't have the residual risk either For sure.
Speaker 1:Yep, let's transition into networking stuff, zach. So you brought up, initially you and I met at a REIA event or, for those of you that know, real Estate Investor Association event, and that's how you and I made the connection. So that's how we met and that's how you and I made the connection. So that's how we met. And then we run a group now called the REI Success Club, and here actually, the gentleman I interviewed who's going to be the week prior to you, zach, that's how he and I met. I actually called him on my way to the REI Success Club and he had like a two-hour window to drive from Shawano to Green Bay, which, for those of you that don't know, it's about a 45 minute drive, maybe an hour, and he's like, yep, I'll be there, showed up in his business window like this and then, you've gone out and done something really cool, kind of tapping into a market of networking that I don't think anybody ever had prior for real estate investors specifically, you run something called Caffeine and Cashflow.
Speaker 1:So a different time, a little different format than the RIA groups. Talk a little bit about caffeine and cashflow. Where you guys have these. What are the benefits you've been either gaining yourself or that you heard from folks that are attending these? How does it work? Just tell us a little bit about networking in general too.
Speaker 2:Yeah, networking has always been huge for me. I mean, obviously that's where we met and has been a huge part in me being able to grow and scale. I mean, first of all, you get around other crazy people who are doing the same thing, so it seems a little less crazy like taking out all this debt and fixing up all these properties and dealing with the stuff that we deal with. But I mean just like it's like the power of the mastermind. I mean it's like mastermind light, because you're not going hyper specific on specific topics or people's businesses, but just on the networking end of it, getting to share ideas, resources like you're having trouble with plumbing all the time, for example. Then someone goes well, I just switched to these faucets where I use this person and they take care of that stuff. Like that transfer of information happens so fast. The transfer of knowledge you can solve so many problems in one hour, just like what seems like just chit-chatting with people. But so much gets done if you do it right. If you're focused on intentionally meeting new people and sharing ideas and figuring out what they do, you can learn so much in between the lines just hearing what people do. So yeah, for caffeine and cash flow. So I started that. So much in between the lines, just hearing what people do. So yeah, for caffeine and cashflow. So I started that.
Speaker 2:I think it's over two years now yeah, just over two years now. I think I got that started. So that is. It's all in the morning. So I wanted something. I'm way better in the mornings than I am in the evenings. I got young kids. You know I get tired Not to make myself sound too old but and I wanted something right in the morning. I'm way more of a coffee guy than anything else. So started just with Green Bay.
Speaker 2:We did hour and a half 100% networking. We do just introductions. Everybody goes around, says who they are, what they do, if they have anything specific, like if they got a deal right now that they wanna sell something you know money that they wanna spend or money that they wanna lend, something like that and it ended up being a mix of real estate investors you know real estate focused agents, lenders, insurance agents, attorneys, that type of mix Because of the time that it is so it's nine to 1030 in the morning very difficult to get there if you have a regular job. So not that I don't want to network with people who are still in the nine to five, because I think that's great still especially I was in that for a long time in the build phase but it creates a little bit more of a focused group of people who are hypothetically doing this full time. You either got a lot going on that you're working for yourself, or you got nothing going on and that's why it's most of the extremes.
Speaker 1:You got the far. The far right showed up, right.
Speaker 2:Seriously so. So it's been cool. I mean a lot of connections, a lot of of deals being done and stuff like that and it's grown now to five locations. So we got Green Bay was the first one. So we got Green Bay, appleton, sheboygan, milwaukee and Watertown. Those are the five we've got rotating right now Every month. It's just one meetup per location per month. That makes it so every week there's one of them that you could go to.
Speaker 2:I'm pretty area specific. I'm focused in Appleton, green Bay, manitowoc, sheboygan, pretty much. Um, I don't, I don't go, I don't really dip into Milwaukee. I don't go further South than Appleton really. So those are the main ones for me.
Speaker 2:But there's a lot of people I see at all of them and and they buy everywhere. So you get to meet like the local experts there. You, you know you're, I need a guy to close stuff, I need a lender, I need a. There's contractors that come to. A bunch of them. Um, you can get like, depending on the day in the room, you can get like a whole real estate business in one with that. So so it's been really cool. Um, and I've had a handful of people um, not graduate, cause it's different things, things, but who have been coming to all the nighttime ones? They go to the whiskeria is the rei success stuff too. And then they come to like their first caffeine and cash flow because they left their job and now they're free in the morning oh, that's awesome, it's kind of fun, but that's great but yeah, so it's.
Speaker 2:It's a good um good free network. We do um caffeine andflow on Facebook on the Facebook group. I would say the other groups do a better job of, as far as the Facebook group goes, being more active. Not a ton of people are active In Caffeine and Cashflow. Honestly, it's usually just me posting stuff in there, updates when the events are. But good place to join if someone wants to see when the events are and stuff like that.
Speaker 1:Yeah, it's just a good way to stay up to date with when they are, when they're happening. Get it on your calendar. That kind of thing. Yeah sweet, yeah. The networking piece is so huge, right.
Speaker 1:What I love about what you said is intentionality is one thing you mentioned. You have to be intentional. What do you need to get out of it, or who do you need to meet, or what's a connection? And the cool part is, even at Caffeine and Cashflow or the ARIA Success Club or any of the REIA groups around, if that person's not in the room but you ask for that person, chances are somebody in their network, somebody's network there, will have a connection for you. So even if you're not there, so you're going to, you know you get out of your comfort zone. If that's scary to you to go in a room of a bunch of people, you don't know it. If you're really serious about expanding your business and exploding it, you got to be going to networking events, especially early on. You know I know some guys now that are pretty well established. They're they'll tell you it was a huge part of their success.
Speaker 2:And I bug those guys too, because I'm like you're the people who should be here. Yeah, you know, like I know you're dialed into exactly what you're doing and that's what other people need to hear too, for sure. Oh yeah, I always hound those guys who are like ah, you know, I've got a decent amount of experience. I learned something every single time. And the rei success, caffeine, cash flow, whiskery any of those I go to, there's always a new connection, somebody doing something differently than we're doing it. Um, I mean, there's so many microprocessors involved in all this stuff that, like, if someone tweaks, like like we were talking about AI, if someone has some tool, like, oh yeah, why don't you just'm an expert at AI by any means.
Speaker 1:I'm just kind of fascinated by it all right now.
Speaker 2:And I think you kind of mentioned the same thing.
Speaker 1:What are you currently doing? How is AI helping you in real estate investing currently? Is there anything specific you're doing that's speeding a process up or helping you analyze, or what are you using it for and what tools?
Speaker 2:are you using? So I'm pretty green still. As far as the AI goes, I've probably started adopting it realistically in the last month or two really using it, maybe three. One specific process that's helped me cut a ton of time down on is getting my reports done of how much I've spent per property, per unit renovation. It's like compiling all the receipts together. So if you have the paid version of ChatGPT, for example, I think it's like 20 bucks a month.
Speaker 1:It's not expensive at all, it's nothing.
Speaker 2:They don't limit how many uploads you do. I think they let you do like three in the free version. It's like I have 50 receipts per unit or what you know it adds up. Yeah, so For a ARV loan, if you've got funds on draw even with hard money lenders, most of the time they don't cash you out upfront, they want the funds held on draw you got to send them a report of how much you spent, the before and after photos you know proof that stuff is done. That's why I usually do it before and after photos All the receipts, exactly what the receipts you know were spent on, what the totals are, and then it linked to everything exactly what the receipts were spent on, what the totals are, and then it linked to everything.
Speaker 2:So that process usually took me probably about an hour to go through and compile all the photos, get all the receipts, build a spreadsheet that does the math and link every single receipt and all that stuff. So now I take, I copy and paste my before and after photos in the ChatGPT and I upload all the receipts and I tell what to do. So I say, hey, I need a spreadsheet that shows how much was spent, what it was spent, on what store it was bought from. And then the here's the link to paste on there for the receipts, and it takes a few minutes and it builds a spreadsheet. You got to check the math. Sometimes, yeah, like sometimes it doesn't read it correctly, but it's pretty dang accurate. That's awesome. And then I can download it as an Excel spreadsheet, send it to my lender so I can get the drawback. So it's saved a ton of time.
Speaker 1:That's awesome. I love that. That is so cool. Every time I hear something, it's like I was talking to my team yesterday. We were doing some one-on-ones with everybody just going through their annual goals and stuff. So people got some fitness goals and I'm like, have you ever thought about asking chat GPT to write you a fitness program based on your goals? And you're like, no, but I'm going to. And I'm like, yeah, you like you can just use it for anything Like it's amazing, 20 bucks a month. It much time I've been using a lot to analyze deals or just to run scenarios on deals. Yeah, and it's made me want to buy so much more real estate. Like when I look at like the equity I'll have after 5 and 10 and 15 years, I'm like why wouldn't I just buy everything? It's just like there's so much like in five years my future self will thank me because I'm looking at.
Speaker 1:Before I hated, like I hated having to go into like a spreadsheet, like plug it in and try to do a pivot table or whatever the hell, some graph or something, and try to get to come up Like I'm out of patience for that. But I can just go, plug in the scenario and a chat GPT, and it spits it out. Now as I go like if I start asking it to tweak it, I've had it, I've noticed it makes some errors if I keep saying, oh, go back and do this differently. So sometimes I have to just start fresh again with a new prompt of like oh, I wanted to, I messed that prompt up, I need to do a new one. But it's like it saves me so much time I can analyze a deal and in the future value of it and if, equity and all that other stuff. And 30 seconds now.
Speaker 2:Yeah, yeah, I haven't used it a ton for deal analysis, but that's something I've I thought about. I'm sure it's great for that. I mean because if you use a, I'm pretty simple like it's a google spreadsheet with a real basic calculator built in and then I figure out the rest. So you can even, um, and you could take, like, for example, the thing I just said, I upload all these receipts, how much it costs to renovate a unit. You can even upload that as an example if it's kind of close, and say, hey, this is a little bit bigger, a little more square feet, has a few more lights than that one does. Use this as an example.
Speaker 2:Give me an idea of roughly how much this will cost. That's taking from your real experience and real expenses and helping you run numbers, because I know that's something people struggle with early on. It's like, well, how do I know that's something people struggle with early on? It's like, well, how do I know I didn't know what a water heater or furnace was. I didn't know the difference between the two when I first started. So how, how am I supposed to know how much it costs to replace? And then, how am I supposed to know how much it should cost to replace Cause what. What quote you get and what it should cost can be two different things for sure. On either.
Speaker 1:That's great and I didn't know that you could create your own. It's called create your own GPT, and so for those of you listening out here, I haven't used this yet. This was life-changing for us. You go up in the upper right-hand corner. If you're on the desktop, you hit your settings. It drops down and I think it says, like my GPTs right. And so what Zach's describing is like you could createaking that GPT. So you want to come back in and run another analysis. Like what Zach is describing, say, hey, go back to the last property that we had to analyze, and this one's now 400 square feet bigger. It also needs windows. We think the windows are going to cost 500 bucks a piece. There's 30 of them. Give me the breakdown of what it's going to cost. And now, like it'll just, and it'll just keep learning as you train it to keep knowing. It's so cool. I love this stuff.
Speaker 2:I got to build one of those today. Yeah, I don't have one of those built yet. I'm just going to start fresh. I'll help you if you need it learning from you.
Speaker 1:All right, zach, let's start wrapping this baby up, cause you got to get building your GPT here. Okay, you got to get that out there. Uh, give me just a deal Like let's just talk about one specific deal, best or worst?
Speaker 1:I'm going to let you pick best or worst deal that you've ever done and let's do a little bit. I know you don't have to have the exact numbers or any of that kind of stuff, but give me the scenario. How did you get it? What happened that made it either the best or worst? What are some of the numbers? Tell me a little bit more about it.
Speaker 2:Yeah, Putting you on the spot. I know I was thinking about this earlier too, because we were texting about it. I'm like I don't think I have a worse deal, because one of my main beliefs in real estate is, if you wait long enough, every deal is a good deal. So sometimes you might have to wait 10 years and then all of a sudden you look like a genius. But I haven't had that much track record even, and I've had deals that I've bought and then been like it doesn't appraise out, and I got some money stuck in there and then it doesn't cash flow that much.
Speaker 2:Let's talk about your first deal where I had to kick not in the best neighborhood, admittedly, um, and it's not. It's a little better, not much better today, but it's it's still still cooking. But, um, yeah, a little upper lower. It had um, two I think. They were both hoarders not paying rent at the time that we bought it and the city also had its teeth in it. So it was like awesome learning scenarios right off the bat.
Speaker 2:You know, yeah, like the stuff that people are worried about, you know, tenants not paying rent, tenants being hoarders, the city getting in on your property. I got to tackle those right off the bat. That's right, great experience. So, yeah, I was I mean, I was renting at the time too and you're like you're like, dude, you gotta buy it, you need to, you gotta do it. I'm like I don't have any money. You're like I'll be your lender, we'll take care of it.
Speaker 2:So, so, yeah, I worked out, um bought it. I mean we were able to. We worked with a management company right off the bat. I mean that was one of the things that you told me early on is like, look, I know it's not that big of a deal to manage a handful of properties, but, like, scale wise, you gotta have somebody doing this. I'm so glad I did that right off the bat because I've never, never I mean besides turning apartments where I need to sort of be the middleman in the process Never done it since, and I see how much time the management companies spend on my stuff and that's that's valuable time away from deals and stuff like that. So, so anyways they help her.
Speaker 1:What'd you buy for like 55,000 or something like that?
Speaker 2:Um, something like I think it was 50 flat, I think it was 50.
Speaker 1:Yeah.
Speaker 2:Something like that. Um, and yeah, so 50 grand for an upper duplex, right, and who wouldn't sign on that today? Um, we didn't have a ton of people who wanted it. Then that was a wholesale deal that went out, um, I don't think a ton of people were interested and that's probably been one of my best ones. So we got, got the people removed, um, got the places renovated and that was my first time doing any of that stuff too.
Speaker 2:So, like I was over there doing some stuff and then the management company had some people in there doing some stuff, um, got them re-rented and then the city just stuck on us, um, for a couple years actually they were, um, first it was the sheds you know needed to be painted, and so we went over there and painted the sheds, um, and then there was, you know, they don't like the chimney. So we had the chimney removed. And then the hardest one, the one that hurt the most, was they didn't like there was an addition off of the back that was maybe only like 10 by 12, but it was like an extra storage room. It wasn't really a bedroom, but storage room kind of went off of the laundry room, but, but it's like a nice. I mean, that's a good amount of square footage for a small two-bedroom For sure. And they just decided this is not structurally sound anymore, you can't have it. So we tried to have a foundation guy go and run a report or whatever try to show them that it's good. They just decided that it can't be there anymore so we had to have that removed.
Speaker 2:Once that was removed, they saw the other foundation and decided that one wasn't structurally sound, that we were able to rebuild because otherwise we'd lose the only bathroom for the unit, so that we were able to rebuild. So I was like a lot of costs. Um, I think we were negative 15 grand or something, year one on that one. If you look at like the cashflow, not too bad in the grand scheme of things, good for your, for your tax return, yeah yeah, that was great. Yeah, but just for the experience, like I'm glad we ran into that stuff. We also had a management company that was not doing well on that. So I think they cost us a lot more than we should have for the renovations that were done that were done and we changed that January.
Speaker 2:I think we bought it in June, changed management companies the next January and I've been with that same one, main Street Management in Green Bay ever since, for all my North stuff anyways. So, but that one okay. So I'm getting a little into the weeds, but numbers wise. So 50,000 purchase and appraised at 72,. We bought it. So just enough to refi you back out, yeah, and get a, get a 30-year loan on it.
Speaker 2:Didn't have an lc at the time, so it was under our personal names. Um so october, I think it was of 2023. You know I had, whatever it was into the um 40 somethings that we owed on it and, like this place has to have appreciated quite a bit. We've got more projects. Let's pull some cash on this thing Appraised for $177 or something like that. Come on, that's what Four years later. That's not a whole lot of time in the grand scheme of things for real estate. That was a DSCR loan. That's a debt service coverage ratio loan. That's just another DSCR loan. Okay, so it's a debt service coverage ratio loan. That's just another type of loan. We don't have to get into too much. But people can chat you BT. That that's right, learn more about it. Yeah, um and yeah. So we pulled like 65 grand or something like that out of it.
Speaker 1:That's amazing, so I didn't want to leverage it. Yeah, tax-free, tax deferred. I guess you'd say, yeah, I didn't want to leverage it Tax-deferred.
Speaker 2:I guess you'd say I didn't want to go up. I think I only went into the 60s for LTV, For the loan-to-value, but still 60-something grand tax-free.
Speaker 1:Divide that by 4. What's 60 divided by 4? 20-something.
Speaker 2:That works Almost 20. Whatever, 20 something right Yep.
Speaker 1:Yeah, that works Almost 20.
Speaker 2:18,. Whatever we're going to get, good thing, not many people listen to this podcast.
Speaker 1:Zach, so we don't have to worry about anybody blowing us up too much on our map.
Speaker 2:Cut that out in post.
Speaker 1:Yeah, either way that's your think about your cashflow. Now that's over a thousand bucks a month that you made on that property and cash, if you look at it that way, on the refi and you still have a bunch of equity because you only want 67% of loan to value. So I mean, that's where I think people often miss the power of just buying and letting things just appreciate and let your tenants pay that debt down and you just create your own cashflow that way, even if you guys didn't bring in a dollar for four years, right, Net cash It'll be worth.
Speaker 2:It Can scheme things yeah and Right. Net cash flow it's still worth it and I still own it. It's like I didn't have to exit the asset to finally collect on it. I was able to pull a little bit more debt on it and it's still cash flow positive. I love it, buddy.
Speaker 1:I love it. Well, dude, this has been awesome.
Speaker 2:We got to get you out of here to get you making that GPT as quickly as possible Before we go, though we always ask that's right Favorite place in Wisconsin to visit or favorite Wisconsin tradition.
Speaker 1:For those folks who aren't real familiar with Wisconsin, yet.
Speaker 2:Well, I could probably do both in one. I'm biased, but Sheboygan, wisconsin, man, is an awesome place to be. I know people up here, especially Green Bay, really talk about Door County. Door County is awesome too, but I think Sheboygan is sort of a hidden gem in that. Amazing beaches, amazing food. It's a cool place to be awesome. So that would say I don't know what tradition that fulfills. Uh, I mean, if it's the, it's the freshwater surfing capital of the world so if you want to, you can go take surf lessons.
Speaker 2:Heck, yeah, it's crazy to do in wisconsin but in lake michigan, yeah I wouldn't recommend doing it until maybe august, when the water's yeah, no, they usually do it um through, like late into fall, like they do wetsuits, of course, because you know it's real cold, but that's when the conditions pick up for it to be good enough waves and stuff like that. Okay, so yeah right on.
Speaker 1:Awesome man well z appreciate you being on buddy and always great to catch up with you and hear what you got going on. For those of you guys listening to the podcast, we appreciate.
