Building the Top Property Management Company in Chicago

0:00What's changed the most in Chicago from an investment standpoint since you started and then I I want to know what you think about the future of investing in Chicago I think it's got more complicated especially in the suburbs even too just with rental license and and and then just code enforcement and and all the different laws that are now around Cook County and you know Chicago's always had that same rental ordinance but they keep kind of putting little layers on top of it it makes more difficult but that everything I just said I think makes it such a great opportunity because think about this gby where everyone you have a lot of outstate investors here in the Chicago Market but where do they go they gravitate they're they're promoted they follow promotions of these high yields on the South Side

0:48Southwest side south suburbs and those are really tough to to make money in long term but in the meantime you have the other 75% of the city and suburbs that there's just so much opportunity and that opportunity comes from the people that are local I think it's hard for the outside people to find these local opportunities I think because of that it kind of creates a moat around Chicago you know same I got I got a pretty good moat in Property Management no one wants to come and buy a company in Chicago no one wants to be huge in Chicago on the property management side because all the all the headaches so it kind of creates this this kind of moat around this area for us to do as much we can as fast as we can now you you you have all the headlines and and all that that comes with that but locally like I don't know like there's just so much that

1:37little corners of every neighborhood or every city that just has like great opportunity for you know called the next 25 years and I'm not looking at Chicago and a 75 I'm looking at from anyone that's listening to this right now probably has a 20 to 35 year timeline and the amount of money you can make in that time frame like you buy the right stuff you're not going to you're not going to lose here at all so yeah so when people call you from California and they want to invest in Chicago where where do you direct them as like this is what I would do if I was you yeah you know what I actually it's funny it took me 15 years to do it but I put together this little ebook and you can find on our website where to invest in the Chicago suburbs and it kind of talks about all the there's a handful of cities to stay away from but then I talked about these little pockets you know you got these great pockets and all these

2:25suburbs you're familiar with some of them it's like if if you're in Bowling Brook here but you're in this corner you get nville schools or if you're in this corner of Aurora you get nville schools or if you're in this corner of Hanover Park you get shamberg School District like there's just so many different little pockets and then there's you know there's a lot of these housings that housing developments built in the 80s or it's these town houses that don't have HOAs they're not the prettiest but man they're they're way more affordable than a single family and you don't got to deal with HOAs so like there's these little kind of pockets of those all around all around the suburbs so I tell them you know it's funny it took me a while to kind of be real myself about some of these south suburbs in Southside where it's like and it's tough we all right so we here here's some fun information we went back and we figured out what our real return was on all 482 properties for

3:14The times that we held it for the time we held it and there wasn't one that didn't have a double digit expectation but in the end of the day everything was everything figured out to about 7.73% was our our return when it came to rent now we're not counting appreciation or anything like that but like you see like 15% cash on cash 29 like all those crazy numbers you see like we did it at a time where we bought the cheapest that anyone will ever buy in the world in any of our lifetimes and we still couldn't break eight consistently like so yeah we took out a couple low life so it's just kind of crazy to think about that and that goes back to kind of like man would I just been happy with a a five or six perc in in the suburbs like yeah an easier five or six% yeah yeah yeah yeah you've mentioned that there's there's headaches that come along with

4:02Property management for those who haven't done it before how how have you mitigated some of those like what does your team look like what does your team structure look like and if you were to give advice to somebody who's interested in starting a property management company like what would be the biggest things that you've kind of learned that you would advise somebody well I'll tell you this I think Property Management anyone listening like there's so much opportunity in this space it's a very young industry and you know I mean up until 30 years ago basically property manager just viewed as kind of degenerate Realtors all you couldn't be a realtor so now you're gonna be a proper manager like that's cute like but it's became a space in its own and even more so since the crash because you know when all these big hedge funds came in bought all these houses they realized how

4:51scattered and how Mom and Pop these this industry was so they started to put money behind the rollups and there's a lot of rollups that have happened in recent years but no matter what it's becoming an industry in itself and the funny thing is I don't know funny but this the opportunity thing is I guess but it's only like 35 or 30 somewhere between 35 and and 40% of investment properties are managed by professional property management companies and the rest are all by Mom and Pop are all by self-managed now that there's not enough property man if that number ticked up 5% there's not enough property managers around to cover that type of units because think about this in Chicago alone there's about a million in rental units so 5% of that like all of a sudden 5% of those came on the market need management like we couldn't even handle all that yeah yeah so there's so much opportunity in that now if you look at one thing that

5:40I would share with people is in Australia so Australia they're about 20 years ahead of us in the property management space maybe 25 30 even but they're much more regulated so all this regulation that we're like oh it'd be horrible if it happened that happened in Australia a long time ago so they're in Australia they're about 85 90% managed by a professional property man manager wow and that's big business over there so I could see you know there's not going to be less regulation in this country in 10 years and 20 years there's GNA be more and people still want to invest but they don't want to deal with it I mean right now we got we got we get hired a lot of times just because people don't want to deal with the local rental license they don't want to go take the eight hour class for for Crime Free addendum so it's like they'll hire us I'm like that's great we we'll do it we'll take it but yeah there's just so much opportunity in the property manag space and I think it's such

6:28a low I mean all you have to have in Illinois is a broker's license so it's a it's a low barrier of Entry but and there's certain advantages certain advantages to be big proper manager and certain advantage to being a little guy too so I I think both sides can win so if anyone ever wants to talk about that I'm always down to to encourage people start a propit management company awesome awesome yeah I've sat through that crime-free addendum class a few times so it yeah it's a long day so in terms of your team though what what does that look like like what who are the key roles yeah so we have on our team here at GC now we have 61 people wow and that includes you know we have in-house maintenance so our maintenance team is made up I think there's a a 13 of those people are maintenance text and

7:16a couple admin over there but yeah we have you know we manage right now about just 1500 units at about a million square feet of commercial space so you know the one thing about property management is just very you can only automate so much and and you know people always like how can we prevent these problems in prop manager too the reality that we have our team come down to is like listen no matter what you can't prevent every problem you can prevent a lot of stupid stuff that that or not make sure you don't do something a second time like that but no matter what you spend you spend your day putting out problems and that usually takes Manpower and that's it's kind of the team that we built here yeah and are those 601 all local or do you have lean on a lot of remote good question good question so we're about we're about half and half right now okay half local Health remote but our our remote team you know what's the cool thing about remote

8:05remote people now is a remote Talent is they now have five six seven eight years of property man experience yeah so you're not hiring someone that's never seen at folio or it doesn't know what a lease up is so like it's kind of cool where it's becoming even more advantageous for property managers to over staff or have ample staff to service the the residents just because there's so many people out they with great experience yeah yeah and our guests you know we we have always had a remote team as well and our guests a lot of times just think that they're right down the street like they'll stop by and drop off sugar if they wanted and you know and they don't know that they're on the other side of the country or other side of the world even you know so that's the great thing is if they're good they can be good from anywhere in a lot of positions other than the ones that need to be boots on the ground fixing you

8:54Know those issues but yeah we have a lot of them in in Mexico and Hispanic accent Chicago is not rare at all yeah but funny story the first remote person I ever hired in Mexico my main goal was to get somebody to speak Spanish in the office hired them on board them they're like yeah no I I don't speak Spanish I'm like I just did not even think like that would even be a question I'd have to ask but they they grew up like on a Border Town and they never they kind of went to English schools and Texas kind of back and forth and but that was my mess up with h my first hire of a Mexican remote team member you're the only guys ever hired a Mexican that doesn't speak Spanish yeah I know I'm like oh my gosh like that's hilarious so you've so I mentioned your podcast you've interviewed a lot of people a lot of really really smart real estate investing experts on that that podcast

9:44and I'm curious if there's like themes that you hear from the most successful guests on the show like is there anything that stands out as like okay it feels like the more successful people do these things and the ones who struggle a little bit more you know tend do the opposite yeah there's one thing that jumps out and you're going to agree with us too I'm sure it comes out on your show all the time is just getting going the the amount of time between the day that you say I want to be a real estate investor and you actually close your first deal the more successful people that that that amount of days or years is is much shorter than the guy that stands on the S line waiting for the perfect opportunity and that you know we have a question of we have the same questions at the end of every episode and one of them is what what's one piece of device you give to someone that hasn't bought their first property and it's always along the lines of

10:32just do it yeah yeah so I think that's the biggest thing right there and and that kind of ties back to the comment before of time is your greatest asset where it's like you know I got a lot of people that right now it's 2024 and they're like in 1819 they're nervous because they thought the market was going to crash again they're they're waiting and like and it's like man like all that all that you've Lally lost out hundreds of thousands of equity in in in making delay versus just getting it done and and figuring it out yeah those are great lessons yeah it's interesting because I just went back I was thinking about that exact same thing I went back and just Googled real estate headlines from the last 10 years and just put in the year every year and it was like prices are up but the crash is coming the bubble's about to burst like every year it

11:20was like these fear things and it's the same conversations I have with people today they're like oh I've been I've been seeing in the news lately we're you know we're on the verge of this crisis and so is this a good time to invest and I've literally had that conversation with people since 2011 when I started you know doing this full-time you know about how the markets any day now you know it's it's going back the opposite way and it's a terrible time to invest but if you think back if you had owned since then you'd be in a very very good spot and I think it's kind of the trend of real estate overall you know my convers I get that all the time and it's always like a you know what's what's going to happen to the market I ask people all the time how much money you got in your savings account and they tell me some 50 70 100 200 whatever it might be like the Market's never going to crash because you times another million people have that in your account in 2008 we were all in we

12:09Were pissed if we didn't leave closing with a with a check like we were mad like if we didn't get 110 loan to value like everyone was so in at that time and we were all upside down so there's a lot of speculation you know any rental unit we had we were either Break Even or down a couple hundred dollars like right now that that's not the case there's plenty of I I didn't know what cash flow was until the market crashed I told you before like I was selling these condos and talk people into 100 you know you upet down $150 I was selling them on the idea like hey man you just gotta come out of pocket $150 a month and we'll make money I remember bringing that condo scheme to like a legitimate investor and he's like that's the stupidest fing idea I've ever heard and I walked away that day thinking like man that guy doesn't know what he's talking about like but that's how ignorant we were before that crash and we and it was me times a million people that were like that that's how you end up in that crash

12:57And right now there's so much money out there and there's and rents continue to go up and there's there's not there's not houses to move the the building has I mean there's so many reasons why if if your worst case scenario right now is things are just going to kind of level off and here's the other thing the Market's never going to crash that far again as it did because now you have all this private equity and all these hedge funds that are out there man right now if the market went down 10% they'd have a buying spree on everything all these hedge funds because they like that's great that will leverage out my my my purchases and that and so you're never going to see things go down 30 40% like that anymore just because there's someone waiting for that to just trickle down just enough to to swoop it all up at what they would call Discount we call like all right that that might be fair but that's a discount yeah yeah and do you have you changed your the way you invest at all based on

13:46You know this postco era like and interest rates going up and stuff like that or are you pretty steady on the same the same way that you've invested throughout so we've shifted so I kind of have two fronts of where I'm investing right now we started buying up industrial buildings five six years ago and and now we're we're still trying to if anything on the market side we're trying to Source off Market industrial deals and we have a couple right now we're raising some money for but then I also you know part of what I was talking about earlier and this maybe this is a a a reason why I'm doing it but I started buying these single family homes 250 to 300,000 in class A neighborhoods because call it as close I can to the 1% rule as possible because I know that

14:35These these little tiny which there mostly end up being these kind of three two ranches with a basement out here in like shamber Downers Grove Neighborville stuff like that they're the bottom of the the market and and when they build these new construction houses for 750,000 like that will pull those up so those 250 300 will eventually be you know 4 500 and the 2500 rent I'm getting will be 3500 in 5 years years and if I'm off a year or two then then I'm off a year or two but like that's kind of what I'm going after now looking at it and a lot of it's just because of inventory and and the you know call it my daughter is just freshman in high school and she goes by a house her first house and it's that that starter house that starter house is not going to be under 450,000 by the time she she gets out there yeah so

15:24The time the whole the whole time is your greatest asses if I put these in here and even if I if I break even or if I got a ride if it went down 10% or some stagnant stagflation type problems we might have like those will still be good awesome 20 years from now like I I'll never be you know what's funny Curry I was talking with somebody the other day I don't think I've ever walked out of a closing thinking like damn I PID too much really I always feel I always feel like that because you always feel like you could have maybe got a little more he accepted that too easy maybe I should negotiate a little harder like usually it's always like ah man you know maybe but and then the day like that that's so relevant especially you know the whole other you know the write offs you have income and and the the you know if you're if you're lock even if you're locking in an interest rate for a loan right now at 7% on an investment property like

16:12That's that's locked in then so no matter what what what gets played with and I don't think they're going to go down if they go up like it's just kind of locked in so it's kind of a hedge against inflation like so there's just so many opportunities to home ownership especially now that I have other for anyone that has W2 income like to offset that that that that tax liability that I have is is huge and people don't recognize that because it's not cash going in and out of your bank right it's it's something that your your tax preparation preparer does at the end of the year that you never really really get to appreciate and you should really understand those things