Insider Secrets Podcast Episode #33

Guest: Megan Hillis

Megan Hillis is a multifamily investor who co-founded The Brem Group which focuses on purchasing value-add communities in established markets.  Megan started her career as a Marketing Director for a property management firm and decided she wanted more financial freedom and to be able to spend more time with her family.  Megan understood early on the key to success would be developing strong relationships within her network.  One of her favorite lines she often tells her team is to change our mindset from “I have to network or else I will fail” to “I WANT to network because of my WHY”.  In 2021, The Brem Group is on track to close on 1,000+ units.

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Shownotes:

Standout Quotes:

“It’s so easy for work to consume you, so it’s about being able to say ‘hey, you know what, my family is the reason I’m doing this, so let me take a step back and appreciate my time with them’.”

“Real Estate isn’t on trial, take the actio n needed to accomplish your goals”

“You get in the habit of saying I can’t do something… but instead of having that mentality say ‘How can I do this?’.

“Don’t let your emotions drive your business, drive your business based on logic”

When you come in and buy a community, the last thing on my mind you should want to do is replace staff”

Key Takeaways:

  • Family is the focus and inspiration for Megan
  • It’s not always about ‘what can you do for me?’ but also ‘what can I do for you?’
  • Megan notes she had a consumer mindset and not an investor mindset and this had to change
  • The role of Networking and nourishing relationships
  • It is important to have a good relationship with brokers, they can make a deal as easy as they want or as hard as they want
  • Do your research on a market, look out for the population and for new businesses coming in
  • Megan shares that her company is big on over-promising to overdeliver
  • The “Change Over Period” where you’re going to lose your current demographic of tenants when you start pushing rates
  • Megan stresses the importance of going to the site of the property to see for yourself and evaluate it properly, because pictures may not do justice in representing things the way they are on the ground
  • The Big 3s: (DSCR, Cash on Cash, Overall Returns) that are factored in before deciding to take any deal
  • Megan’s insider secret tip: Network with your property management teams because they can tell you what’s really going on
  • For new investors: Don’t be scared to put yourself out there, people are going to reject you but don’t let that discourage you because you deserve a seat at this table.

Episode Timeline:

[01:15] Introducing today’s guest “Megan Hills”

[02:30] In one word, what drives you?

[09:09] Megan shares her backstory and her motivation

[24:25] How do you cater to your tenants in the midst of everything that’s going on today?

[26:22] What’s the best or worst deal you’ve ever done?

[30:36] Don’t fall in love with a deal

[33:50] Megan’s Insider Secret for investors; Networking

[40:54] Insider tips for new investors

[41:33] How to contact Megan

Transcript:

33 Insider Secrets with Megan Hillis Relationships, networking and syndications 

Mike Morawski: Hey everybody. Welcome. It’s Mike with insider secrets and it’s Tuesday. And I am joined today by Megan Hillis. Megan, would you tell our guests what they’re going to have the joy of listening to today?

[00:00:13] Megan Hillis: Yeah, you guys are going to get a lot of insider tips on relationships and how to nourish them.

[00:00:19] Mike Morawski: Great. Thanks Megan. I’m so glad that you’re here today and you guys are going to have to tune in to hear this great show today. Look forward to seeing you soon.

[00:00:27]Kristen:  Welcome to this week’s edition of insider secret grits. The show that turns multifamily investing into reality. Each show we interview guests who are seasoned professionals, actively closing and managing real estate deals. Your host Mike Moraski has more than 30 years of multifamily, real estate investing and property management experience.

[00:00:49] Mike is the founder of my core intentions. And he’s been involved in over $285 million of transactions focuses on helping you create short-term cashflow and long-term wealth. Here’s your host, Mike.

[00:01:06]

[00:01:06]Mike Morawski: Hey, good afternoon, everybody. It’s Mike  your host of insider secrets and you remember insider secrets is brought to you by My Core Intentions. So let me ask you, have you been thinking lately about your intentions, about what matters most in your life what’s really and truly important.

[00:01:22] You know at MCI, our interest and our focus is to invest in our clients’ future through an educational and training platform that help you create short-term cashflow and long-term wealth while empowering you to execute sound real estate principles and investing strategies in property management and ownership.

[00:01:45] While living a balanced lifestyle. And, the thing that I find is in real estate, we get so out of balance because we get so focused on other things, or we see a shiny object and we go after it and it’s about living a balanced lifestyle what’s really important in life. So shamelessly, I share a lot of those topics and stories in my newly released book, exit plan.

[00:02:09] And you should grab a copy because it’s about your journey on acquiring multi-family properties and why you need an exit plan before you buy. But enough of that, I am really excited about my guest and active real estate investor this morning, Megan Hillis, Megan, you want to say hi really quick?

[00:02:26] Megan Hillis: Hey everyone. It’s a pleasure to be on the show this morning and connect with you.

[00:02:30] Mike Morawski: Glad you’re here.

[00:02:31]Megan and I met interestingly enough, but let me tell you a little bit about her. Megan is a multifamily investor. Who’s the co-founder of the Brehm group, which focuses on purchasing value add communities in established markets.

[00:02:46] Megan started her career as a marketing director for a property management firm and decided she wanted more financial freedom and the ability to spend more time with their family. Megan understood early that the key to success would be developing strong relationships within her network. One of Megan’s favorite line she often tells her team is to change your mindset from I have the network or else I will fail.

[00:03:12] I want to network because of my why. In 2021, the Brehm group is on track to close a thousand units. That’s a pretty big aspiration to be closing a thousand units in a year. I know that I’ve done something similar in my past and it’s interesting. So Megan, I’d love to hear from you in one word.

[00:03:32] What drives you?

[00:03:34] Megan Hillis: Yeah, it’s definitely my family for me. I grew up from a hardworking family. My dad used to wake up at 4:00 AM, go out work all day, try to make it home in the evening. Spend time with me a great father, but he spent all his time working. I don’t want to be that way with my family.

[00:03:53] I don’t want anybody to put a value on my work. It’s such a weird thought process that, employers, they look at you and they were like, you’re worth 20 an hour. You’re worth 30 an hour. And that’s something that for me I always felt like I had so much more to offer than that. So my why, and my reasoning is my family, I want to be able to be a part of every milestone or every big accomplishment going on in their lives.

[00:04:19] And help support them as well. For me, I don’t want my parents to ever have to worry about, how am I going to afford mortgage? What does my retirement plan look like? I never want them to have to worry a day in their life.

[00:04:31] Mike Morawski: Yeah,  very interesting, that whole family and work ethic thing are so closely intertwined.

[00:04:37] It sounds like you have a really strong work ethic and  you could  get lost in that, but it’s really that self-discipline, that keeps you focused on family and I commend you for that. That’s that self-awareness is really good, right?

[00:04:50] Megan Hillis: Yeah. Something that we do as we set ground rules.

[00:04:54] Your instance is old school is to says when you’re at the table, no cell phones on Sundays. We’re spending time with each other phones away, no work, because it does get hard, especially when you’re traveling. You’re like, Oh, I want to go more of this property this week. Oh my gosh, this deal’s gonna close too.

[00:05:10] And I need to get my offer and I need to find a way to raise money, whatever it might be. It’s so easy for work to consume you. So it’s about being able to say, Hey, you know what? My family is the reason I’m doing this. So let me take a step back and appreciate my time with them.

[00:05:27] Mike Morawski: Yeah. Good for you.

[00:05:28] Hey, so I just want to tell everybody how we met and I’m big advocate of this because I think that with the pandemic that’s going on and people being locked up and being in their house and doing more business from home, it’s hard to get out. And I really appreciate, I spent a lot of time on social media as you do.

[00:05:46] And you reached out last week and had a message out there that said, Hey, my goal is to meet two people a day. And I jumped on that right away because I really like meeting people and, networking and building relationships. And I think that’s what life is all about, and you’re not going to have great relationships with everybody, but you’re going to have solid relationships with a few.

[00:06:09] And so that’s why I jumped on that because I wanted to meet you and talk to you and, see where you were headed and I commend you for that. So here’s what I want to know how many other people took advantage of that post. And have you connected with many more?

[00:06:25] Megan Hillis: Yeah, so actually it’s not post, I have had so many meetings and I don’t want to start off by saying just from that post.

[00:06:32] I already had  like 500,000 to a million dollars worth of  money for investors saying, Hey I want to get in on this. Like I see you’re in multifamily. Like I want to get her on this. Like your next deal. Let me, get in on this. So I really want to say, put yourself out there. You’ve nothing to lose by doing so, but I’ve connected with over.

[00:06:53] 30 plus people. I have two more meetings day. My LinkedIn inbox was just full of messages, but it was honestly so refreshing to know that there’s like minded people out there that just want to connect. And it’s not always about what can you do for me? But, that aspect, you teach me, what can I do for you?

[00:07:11] How can I add value to your business, Mike? What can I do to make, your day better, your business, more profitable and taking that because that’s really how the solid relationships are formed off of what can I do for you? I think a lot of times, so many people approach us. I know I get a lot of those emails on LinkedIn, as I’m sure you do as well, where people are like, here’s my business, X amount.

[00:07:34] I’m like, Oh my gosh, I think that’s almost spurred me to say Hey, I want to reach out and see, how can I help you help? How weird of a change would that be? If you received a message saying, “Hey Meg I want to help you out can I do to make your day your business better?”

[00:07:51]Mike Morawski: And I it’s so critically important.

[00:07:53]And  I think there’s been a shift in business and in, in the world, where people have come more to realize, Hey Megan, what can I do for you? How can I serve you? How can I help you? Cause really when it boils down to it at the end of the day, that’s what matters,  we could probably get into a philosophical conversation around this, about, people’s self-centeredness and things like that.  So I’m grateful that I got moved to the top of that list that you had a lot of response and I’m really grateful.

[00:08:20] I got moved to the top of the list. So that was good.

[00:08:23] Megan Hillis: You know what I think though, even you saying that. It’s one of those mentalities where you have to say everybody’s at the top of the list there. I’m not going to just filter through, messages and say, I’m going to pick to respond to this person.

[00:08:34] You never know what someone brings to the table, like their next ideas. I think I shared with you. I had a college student full time college student reach out to me and he was like, Hey, I know I want to get in this business. And instantly I was like, I don’t know if I have time for this conversation. Even I have all these calls,  all these things I need to get done on underwriting the deal.

[00:08:55] But I’m like, you know what? This kid could. To be the next best thing. And this industry, let me take time out to say, Hey, here’s the stats, here’s the contact I have. I recommend you taking this route. This helped me be successful because you never know. How dedicated or how motivated someone is to their vision.

[00:09:16] And man, I would love it. This guy close to say on 5,000 units just does something amazing where he’s able to say, yeah, I met this girl on LinkedIn and she helped me out.

[00:09:27] Mike Morawski: Yeah, boy, what a story that would be. So listen, here’s what I,  want to know.  Tell us your backstory a little bit.

[00:09:32] How’d you get involved in real estate.   What’s your path been, and what drives you?  Other than family, what drives you about the real estate business?

[00:09:41]Megan Hillis: Yeah, so my past is I come from a marketing director position with a student housing and conventional global firm. For me, it was a great experience because I got to meet a lot of international investors because they weren’t global directly reporting to Singapore, to different countries, interacting with them.

[00:10:01] And to be honest, I was like, man, I wanted the game. Like I just, I don’t want to be a pawn in the game I want in the game. How do I get in the game? And then ,  I saw a sponsored ad from Tyler Devbro, and the multifamily mindset. And, I have the mentality of, Oh, this is a free event.

[00:10:19] I have nothing to lose. Let me go to this event. I went to the event. Absolutely amazing. And it ended up saying, Hey, spend a thousand dollars and you can go to this bigger events. I’m like, okay. A thousand dollars, but I’m the kind of person still to this day. I don’t like spending a hundred dollars, let alone a thousand dollars in something.

[00:10:39] If I know it’s not going to work, if I go to Chick-fil-A and drop $20, I’m like, man, I probably spent too much. So I’m frugal with my money. I always will be. But with that being said, we went to this event amazing. When over the processes, it was a three-day seminar. And then we got to the point where  it was like $35,000 for a mentor.

[00:11:02] And I’m like, Oh shoot, $35,000. You want me to pay basically tuition and not be guaranteed, even get a community out of this. I was so freaked out, but I went for it. I was like, you know what? I believe in this, I believe in this vision. Real estate. It’s not on trial. Look around most of the investors over 90% of millionaires have some sort of investment in real estate.

[00:11:25] And that fact alone shows that this industry is not on trial. So I’m thinking, you know what? There are so many people that haven’t even had the chance. Exposure that I’ve had at that point, because I was in the game and an essence, and they’re taking this chance. So let me go out on a limb and take a chance to, and the best decision that I’ve ever made.

[00:11:43]The one-on-one pieces of the mentorship, the guidance, the direction, I think he and I made a joke last time we talked about if the community goes on fire that I have, I know who to call and how nice is that? To know that if something catastrophic happens, I have resources there. So for me, that’s how I got in the game was following through a mentor.

[00:12:05] I recommend, I think that you actually might do some mentorship. So if anybody is, on the edge of, should I take the jump or not? All I can tell you is real estate isn’t on trial. Take the action needed to accomplish your goals. Something I had an issue with was I had a consumer mindset and not an investor mindset in the grand scheme of things, $35,000 in this industry.

[00:12:28] It’s not a lot. It’s a drop in the bucket whenever it comes to dealing with these projects. And to go from, I don’t want to spend $20 at Chick-fil-A to let me give you $35,000 for a mentor. That’s a big jump. So really trying to switch my mindset and say, I’m an investor I’m worthy enough to be in this game.

[00:12:50] I have what it takes to be in this game. I want to be a part of it. So for me getting that mindset, coaching on how to change my approach,  that’s been such a big thing from a lot of times, especially when early on and we still face this a lot is you get in the habit of saying, I can’t do something like, Oh man, they need, a $5 million down payment.

[00:13:14] I can’t do it. I don’t have the resources for that. But instead of having that mentality say, how can I do this? How can I expand  my network and find people that are willing to donate this money are willing to believe in my company and my mission. And there’s people out there, but it’s just about changing that mindset.

[00:13:33] And that’s why I really applaud the mindset coaches out there for me. Tyler Debra has been amazing. I know that you do it. I’ve seen a lot of great reviews come back. I personally started reading your book as well. That Exit Strategy is spot on. So for me, that’s how I got in it. The next thing about real estate.

[00:13:53] It’s my passion. It’s addicting. You get in there, you start sending LOI’s, you start getting that rush of energy. And then it’s one of those things where it’s a crazy whirlwind, but then you’re like, let’s do it again. Let’s go in. Let’s I want to keep doing this. A lot of people just have the attitude of.

[00:14:11] I’ll go in and I’ll collect that, three to 5% acquisition fee. It’ll replace my income. I’ll be done. No, you’re when you get in the game, you’re not going to want to pull out of the game at that point. It’s not about the acquisition fees. Yes. The passive cash flow is great. But it’s about, this is my passion.

[00:14:31] Mike Morawski: Yeah. You, boy, you talked that so many smart things. One thing I picked up was that I probably need to raise my prices until change. Good for you though, for spending that kind of money. And I love Chick-fil-A but you know what and you really, you keep hitting on it, and networking is so important, right?

[00:14:50] How many people do we know? And how many people know people. I know when I first went into the syndication business, I was able to take a database of 250 people and about three-year time growth to 7,000 people. And, as a result of that, we bought $60 million worth of real estate. So syndicating.

[00:15:11]Is really,  an interesting business model,  you just put an LOI in a property, didn’t you?

[00:15:18] Megan Hillis: Yes. And it didn’t get accepted. So we are so excited to be in the Florida market. The Orlando market to be exact is where this community  is at it’s a true value add community as well.

[00:15:29]Mike Morawski: Good. Tell us a little bit about the deal and what attracted

[00:15:33] to it.

[00:15:34] Megan Hillis: Yeah. So for me, I like to look at a hundred plus units. I really don’t look at anything smaller than that. Just for the simple fact. Everybody has a different philosophy on this. If I’m doing the same amount of work, the same amount of paperwork, I want a bigger check.

[00:15:49] My logic on that’s pretty simple.  76 units. It was smaller than what I think that, we would like, but with that being said, the returns were amazing. North of 26% return for investors, 9.9% cash on cash. In today’s market finding that it’s so rare, we’ve been underwriting deals left and right.

[00:16:12] And we have been having a hard time here lately, just finding a good deal that would work. So venturing out to the Orlando market is something, it was a strategic move for us. We are actively looking to purchase more there. But it allowed us to be able to find this great little hidden gem. And I, whenever I called the numbers, the cap on it was 7.9%.

[00:16:34] And my first thought is. It’s not adding 7.9%. The broker, just put that to try to attract you. Whenever I do the underwriting, it’s going to be like 5%. It happens to me every time, but it actually was 7.9%. And at that moment I had to pump the brakes. I’m like, what plumbing issues do you have going on?

[00:16:55] What sketchy things happening here. But, turns out the seller. He’s an older gentleman and he just wants to liquidate and, get out of the deal. So we are more than happy to come in and sweep it up. Yeah, that’s where we’re at right now.

[00:17:09] Good for you. And did you do this all virtually or have you been to the property?

[00:17:14] So I am actually flying to Orlando next week to do a property tour. I always encourage that, especially. Before  your money goes forward in that essence, get to the property, walk the property, but everything has been done virtually. I will say the broker on the deal has been absolutely amazing.

[00:17:32] He’s made me feel a lot more comfortable throughout this deal, and that’s such an important part as well as having a good relationship with brokers. They can make a deal as easy as they want, or as hard as they want for you. So ensuring when you’re interacting with brokers, you’re nothing but nice, but also you’re not just kicking the tires.

[00:17:51] They get a lot of calls a day from people that really aren’t interested in purchasing a community. They’re just trying to scratch the surface, which I think is a good idea. But understanding that when a broker gets a call, they might be a little bit more I guess on edge of if you’re really interested or not.

[00:18:11] So having that mindset going in dropping some industry turns Hey, we look for, this DSCR this cash on a value add community. And B location and really just trying to drop those industry terms on them kind of helps reassure them. Hey, we’re serious about it.

[00:18:27]Mike Morawski: Yeah. That, you know what you’re talking about and you’re not just kicking the tires,  you bring up a really interesting point the whole, and it goes back to relationship.

[00:18:34] I think we keep circling back in this conversation, but team building and networking, It is really important to have those relationships with realtors, with lenders, with people who are going to help your business, that buy into your goal. I think that’s one of the things we find in the industry is people don’t take us seriously enough and  you have to have your team buy into your goal to help you move to the next level

[00:19:01] here’s what I want to know. And I’ve been asking everybody about this lately. What was the average price per door on that deal?

[00:19:08]Megan Hillis:  So ours is $68,000.  It’s a very good price per door. I, my research average right now is usually 85, $86,000 is where I’ve seen it. So this is going to be, I’m going to call it a B minus or a C last we are going to Excel and we’re going to redo the counters tops and the flooring on it.

[00:19:26] But by no means, is it. And it’s terrible location or anything of that nature. The delinquencies low on it. Overall it is just a really good deal that we are going to go in and do some rehab. We want our residents to really care about you. We want to improve these living conditions are there.

[00:19:45] So I’m telling them that there’s going to be an ownership group in that care. We’re going to complete your main class in 48 hours. We’re not going to take a week or two weeks. You actually hit on something. When you said

[00:20:02] you’d go out and nourish your lending, brokers can take such good care of you. They often times they know about the off market, they will do the underwriting for you. Our lending broker before we ever submit an LOI he actually does his own underwriting on it as well. To let us know options and everything. And he is obviously actively in the market.

[00:20:25] There’s someone is looking to sell or where they’re at a lot of times, we’ll get a call from him saying he, I got the know off market deal. I want to tell you before anybody else gets that. And I can’t speak highly enough on nursing that relationship with the lending broker, because man, they can get you in on a lot of good deals.

[00:20:47] Mike Morawski: Yeah, for sure. No doubt about that.  I find it interesting that price point, right? 68,000, you get C plus B minus deal. I just talked to some guys that did a deal in Dallas in your market. They paid 78,000 a door for a C deal. It’s a value add but here’s the thing that’s really been more interesting.

[00:21:09] I have a relationship with a guy in Phoenix. Who’s a broker and he was telling me last week, that is average price per unit right now on C class deals is 189,000. So here’s what I, you know what, I’m formulating from this. As you got to pick a market.

[00:21:27] That you’re

[00:21:29] financially comfortable with where you can be.

[00:21:31]If it’s that Phoenix market at 189,000, you’re going to go in there and you’re going to battle for a deal.  Was it a battle for this deal in Orlando or was it wide open?

[00:21:43] Megan Hillis: It was a little bit of both. The Seller is very picky on who they actually choose to be the buyer

[00:21:50] So it was more so about winning the seller over and saying, Hey, we want to make you comfortable with this deal  we’re not the kind of company we’re not going to go in and terminate your staff. Right away. Not saying if they don’t preform we won’t ever do it. And with that being said, this seller was very big on actually the relationship side of things.

[00:22:10] He cares about his team in place and owner operator and cares about a lot more. What I’m going to call the mushy gushy relationship things outside of, I care about the bottom dollar. And at the end of the day, finances in this industry who tend to be top on the list and then it’s the relationships after, but he, this is really picking on who he’s going to sell his community too.

[00:22:35] So fingers crossed. I think you’re on his good side right now, but we’ll definitely see how that plays out for us though. To be transparent, I like more land and market a lot. And I would say, do your research on the market, look at the population, looking at are there any businesses coming into the market. Another thing is go out make connections with those businesses.

[00:23:01] A lot of times we can have referrals.

[00:23:04] Go out. Give the hospital a call, say we’d love to cut you in on this right now. We’re in the past, build up 50 units, not by filling out and offering a referral discount to someone saying hey you know what  your workers live right across the street. It’s a hectic time. Everything’s crazy. Let us cut you guys a big discount here.  And little things like that can make a difference.

[00:23:32] Mike Morawski: Yeah. I think some of your background is in the property management space in student housing, which is student housing is different than the market rate, but you bring up a good point, is how do you cater your tenant today? In the midst of everything that’s going on so that you get your rent and with eviction moratoriums in place.

[00:23:52] And, I live in Chicago, and here in cook County in Chicago is probably, I would say, close to the toughest place in the country because there is just no flexibility on evictions at all. How are you dealing with your tenants in the midst of this today?

[00:24:10] Megan Hillis: So that’s another thing for us.

[00:24:12] There are certain markets that we choose not to enter Jessica because of that to be transparent. Three weeks ago we found a deal actually in Chicago. I had marked that we wanted to do, it was a beautiful asset.  The returns were amazing, but we had a setback and say this market right now, it’s not for us because there is no wiggle room with the eviction policy.

[00:24:36] Can you evict this time. Yes, you can. But with that being said, you have to get the tenants buy in as to why they should, that I’ve actually had some friends and colleagues that have personally flown out to communities before to talk to the tenants and say, Hey, you need to, get out at this point.

[00:24:54] We’ll even incentivize you to get out. We’ll pay for, $500 or we’ll give you $2,000 for you to get out because essentially if you can evict. They don’t have to pay that delinquency is just going to keep growing. I hate to ever encourage anybody to do that. But in the same breath, you might have to go and make a trip and incentivize a tenant to move out.

[00:25:17] So you can evict without evicting. It’s probably gonna cost you a penny, but you’re also saving money on court fees as well.

[00:25:24] Mike Morawski: Yeah. That whole cash for keys deal, right? Yeah. So what over your time in the business Any good or worst what’s the best or worst deal you’ve ever done. Do you have anything that really sticks out in your mind?

[00:25:39] Megan Hillis: Yeah, for me, it’s actually in Tallahassee, Florida, a 300 unit plus deal. To be honest, it’s probably the most frustrating deal because it was one of those where. We probably should have renegotiated pricing a little bit with how much cap ex  that’s had to go into it and continue to go into it.

[00:26:00] But for me, I think that it’s been amazing seeing this property that we got, that was in horrendous condition and being able to rehab it, reposition it, rebrand it and the market and earn that reputation. That’s really something that we pride ourselves in is being able to go in and reposition a community.

[00:26:22] Whenever you get a community, we like to, how can I word this? We are big on under promising and over delivering to our investors. If we tell you’re going to get a 16% return, we’re really planning on a 22% return. But we like to, over promise and over deliver. And that’s what we did for this.

[00:26:41] We under promise, we were able to go in, make the changes, push rates by $50, even during COVID, we’re making huge rental jumps just because that’s where the market is. We’re going to go in, we’re going to rehab these units and we’re going to push them up to market value. We’re not scared to push rates.

[00:26:59] And a lot of times, if you do push rates and tenants leave because they’re uncomfortable with the pricing. Don’t be scared. Don’t panic and know you’re just going to attract a new demographic. There’s always what I call a change over period, where you’re going to lose your current demographic. When you start pushing rates and might not be the $50 Mark, the 75, but usually at the hundred dollar Mark, you’re going to see people start to leave and that’s okay.

[00:27:26] When it happens. Don’t panic. There was a time where, we’re staring at. 30 leases expiring. And we’re starting to get a little anxious here. That’s when you have to step back and say, you know what? We have rehabbed this community. We’re going to reinvest in marketing at this point, and we’re going to backfill these beds and we’re going to get a new demographic in our delinquencies going to drop.

[00:27:47] We’re going to stay under 2% now and your investors, they end up being a lot happier when that happens. So that was the deal that I’m very proud of. To be transparent. I haven’t had any deals yet that had been just horrendous. But with that being said, we have had to back out of some deals before. There’s been some that, we.

[00:28:09] We would love to done, but when you go in and you say, you know what, your delinquency is just too high at this point, there’s so much more cap backs. That’s really going to go into this. And a lot of times they won’t want to renegotiate the price. So that’s why I always recommend go and travel to the communities, get your eyes on the communities when you’re looking at pictures.

[00:28:32] So many people Photoshop, those what you think might need a little bit of TLC might just need a lot of TLC. And when you’re walking communities look for things like. Big puddle, out in front of a door to the side, because that might expose a leak going on. Whenever you’re reading through these T12’s, look at the utilities, look at the HVAC, especially if you’re in the Florida markets, the Texas markets.

[00:28:58] Pay attention to those things, because it might just expose an underlining issue. That’s going to cost you a lot of money down the road, and it’s okay. If you’re anticipating that cost, there are several times we go into a deal and we’re like, you know what? This is going to be expensive, but that’s fine where we’re anticipating it.

[00:29:14] We want to fix it. It’s going to make our residents’ life. Better, and then we can push rates. But if you’re not anticipating a major HVAC plumbing issues, that structural issue, it’s tough. It’s tough to overcome.

[00:29:29] Mike Morawski: It’s interesting. You talk about something that I talk about in my book and that’s, don’t fall in love with the deal.

[00:29:35] Because if you fall in love with the deal, the worst thing to try and get out of is a marriage, and a tough relationship. But, I tell this story and picture this, right? It’s a beautiful spring morning. I’m in Dallas and you can hear the landscapers in the distance, cutting the grass and smell the grass.

[00:29:55] The steam’s coming off, the swimming pool, the dew’s sitting on the grass. The flowers are just popping through the dirt. I’m walking this property with the property manager and I’m falling in love. Not sure if it’s the property or the property manager, but I, all of a sudden I realize, Oh, I have an issue here.

[00:30:14] And I go back to my office, want to do this deal? And my analyst is saying, no, don’t do this deal. And for two months I battled with her and wound up not doing the deal and lost some earnest money as a result of it. But the fact is that. Don’t let your emotions drive your business based on logic.

[00:30:36] Megan Hillis: Very true. As I’m, talked about earlier in this call, it’s been a dry spell for us, trying to find number, trying to find a community which members work in our underwriting here lately. It’s been stressful. We’ve been seeing, low floor cap rates, which are scarce here. And some of these markets,  we like the 5.5.

[00:30:55] Percent plus on cap rates. So that alone,  we can overlook a low cap rate if the returns are good at the cash on cash and the returns are good, we can usually overcome that. But with that being said, the returns haven’t been good. The cash on cash hasn’t been there. And for us. We stay true to what we call our big threes.

[00:31:15]And that’s going to be that DSCR that cash on cash. And then looking at the overall return. And we even do try to factor in the cap rate too sometimes. But with that being said, We look at these things. And there’s a point where we have to say, no matter how much we love a deal,  if it doesn’t meet these qualifications, we’re not going to do it.

[00:31:35]For instance, I was talking about the community in Orlando that we’re actively hopefully about to go under contract. This week with, and I went and put in 3% earnest money because I was like, I love this deal. I have to have this deal. These returns are amazing. I’ll, be on a plane to Orlando tonight.

[00:31:53] Don’t give this deal to anybody else. That’s one of my biggest flaws and one of my best attributes as I am all in all the time. And my partner’s yeah, pump the brakes here. We don’t need to get 3% earnest money. We can probably get away with 1% earnest money and we are getting away with 1% earnest money.

[00:32:11] But because I was so in love with this deal and this returns, I didn’t even think about, the finances from that angle. And, from one to 1% to 3%, that’s a big chunk of change difference there. Yeah,

[00:32:24] Mike Morawski: there’s a big difference. It’s good that you have a partner that, that said pump the brakes. Right?

[00:32:30] Cause sometimes we get ahead of ourselves like that. Hey, this show is called insider secrets. From a perspective of, being in the industry, being a syndicator from the property management perspective,  what kind of insider tip would you give to investors today?

[00:32:47] Megan Hillis: Network with your property management teams.  Because I’ve been on the property management side, I know what happens on a site level. And I can say don’t be scared to tap into your community manager, your assistant community manager, your maintenance director, your leasing agents, because they can tell you what’s really going on.

[00:33:07] A lot of times you’ll get a run around. You’ll get a high level. But if a community is struggling, I want to talk to the community manager. I want to get their take on things and see what’s really happening. They can tell you if there’s a staffing issue, maybe your staff doesn’t jive well together, and you need to go to your company and say, Hey, we need to look at, re staffing.

[00:33:28] or changing some things here to make sure our team’s together. Maybe there’s a change in the market that you’re not aware of. I live in Dallas, Texas. I’m not always going to know what’s happening in Orlando, Florida. But with that being said, you got to have that communication with your team there and they can tell you.

[00:33:44] So I would say the biggest tip is communicate effectively with your property management team, get to know them and make them feel comfortable with you. A lot of times they’re like, Oh, you’re the owner. You’re, you’re someone way up here. And it’s not that way. Try to have an open door policy, try to make them feel comfortable, where they can open up to you and express concerns they have.

[00:34:07] Mike Morawski: Yeah, it makes a lot of sense. That’s for sure. And here’s what I always say. People want to rush in when they buy a deal and get rid of the management and put new management in place, they think that’ll solve a lot of problems, but I always say they know where the dead bodies are buried and let’s not get rid of them right away. Let’s just wait. And we can at least see what we need to see before we make any changes like that. The other thing is too, sometimes people are just tired of the old management of the old system and all they need is some new life. And when we take over a property, we breathe life into them.

[00:34:45]They get regenerated and all of a sudden I found my best district manager in Dallas who worked in a property. we bought who, when we took over the property and she felt re-energized. Became this bright shining star in my company. It was it was amazing to watch. And those are the things you have to be open to the possibilities, right?

[00:35:09] Megan Hillis: Yeah. I love that place. Now. One of our core values is be compassionate and when you come in and buy a community, No. The last thing in my mind, usually want to do is replace that. It seems like it’s the easiest thing to do, but that should be the last thing you want to do. My partner and I we both grew up from hardworking families, with that being said we don’t take people’s livelihoods lightly. I don’t care if it’s a, 30, $40,000 job. That is something that we’re going to take seriously. Our mission is to never fell in and replaced our mission and picked out in and get them to buy into our mission, get them to my end tomorrow core values, our vision and what we want to achieve and see if that brings that light to them. See if we can get them on the bell and, we usually call it a 90 day window to see if we can get that buy-in after 90 days. That’s usually when we say, okay, You know that this might not be the best job for you. We don’t like to go in and pull the rug out from under people. I would say you’re calling into a deal, make it clear that you want to keep the management team in play as much as possible because they’re going to be on edge and what’s going to happen. If she’s getting fired here, ski or the staff, they quit performing. They quit following up with leads. They quit completing maintenance request on time because they’re like, Oh, I’m not going to have a job anyways. You don’t want that to happen.

[00:36:41] Mike Morawski: Yeah, for sure. That’s a big deal that’s for sure. Yeah. So you make a really good point about making sure those people are taken care of. And I really liked what you said about they’re on edge. The new management is going to take over what’s going to happen. And I always thought, if we went in and we reassured them that, Hey, you know what, your job is fine. You’re going to be intact. Because there’s a critical point there, right?

[00:37:04] From the time you go to contract till the time you close, if the owner, the current owner tends to take their foot off the gas, one of the things I always try to do, and I don’t know if you do this or not, is stay involved in that, during that closing process to make sure that they’re continuing to lease the place and take care of maintenance. Cause a lot of times you’ll find that the owners, all of a sudden, pull out, and they quit operating.

[00:37:29] Megan Hillis: Yeah. So in our contracts, we’ve actually started putting a clause in there that, work orders need to be within 48 hours because we have been burned by that. And I think everybody’s been burned by that.

[00:37:41] We’ll see that current sellers, they want to hold onto their cash. They want to quit paying for work orders to get completed. They want to quit paying for marketing. They really want  to conserve. And that puts you at a disadvantage from day one. So that’s another reason that relationships are so important.

[00:37:59] The relationship with that broker, that seller in regards to, they want to do good for you. A lot of times, these sellers own a lot more communities out there. If they have a positive experience with you, they might just end up looping you in on the next one, or they’ll ask their broker, Hey, that company from Dallas, Texas, you think they would be interested in this property.

[00:38:19] It’s like the other one.  This industry it’s so big that it’s so small at the same time and people it’s a habit you want to go with  what you’re comfortable with. That’s like this philosophy of, something goes wrong in your day. The first person I’m calling my husband, it’s a routine to me.

[00:38:36] I’m going to call my husband, Ben to him about it. It’s the same thing in this industry. If someone has a new deal off market, a secret deal, the first person they’re going to call is the company that they trust to close on the deal. So it’s really, yeah. And that’s where United, they connected a lot about nourishing those relationships because you just never know how they’re going to impact you. Not only today, but down the line.

[00:39:01] Mike Morawski: Yeah, for sure. You bring up a lot of good, a lot of good things and we could talk for a long time. There’s no doubt about that. I’m glad that we have started this relationship because I look for more conversations like this Hey  what insider tip would you give a new investor coming into the market today?

[00:39:19] Megan Hillis: Don’t be scared. Don’t be scared to put yourself out there. You’re going to get rejected. People are going to ignore you. They’re not going to take you seriously. Don’t let that set you back. I promise you I was in that situation not long ago, but it’s having that mentality of you are worthy. You’re worthy of this industry.

[00:39:41] You have a seat at this table. There’s resources out there, be all in and don’t get discouraged.

[00:39:48]

[00:39:48]Said, thank

[00:39:49] Mike Morawski: you very much for that. Hey Megan, if people want to get ahold of you, how do they do that? If they want to talk about, a syndication, you might be doing or property management tips. Or build a relationship. How would somebody get ahold of you?

[00:40:03] Megan Hillis: Yeah, I’m an open book. You can go to our website and schedule a time to connect with me at thebrehmgroup.com. My direct line is (929) 243-0076. Or you can add me on LinkedIn at Megan Hilles as well, or you could even, they could reach out to you, Mike at my information sale.

[00:40:23] Mike Morawski: Yeah. And we’ll have

[00:40:24] Megan Hillis: we’ll have Megan’s information

[00:40:26] Mike Morawski: in the show notes and,  on our website. So Megan, thank you so much for today for being here. You are a wealth of knowledge and I appreciate that listeners. Thanks for tuning in today. Remember like us on social media, follow us, subscribe to us, do all that crazy stuff to help us grow. And we appreciate you. Keep listening in. We’re going to have more good content over the next several weeks. So we look forward to seeing you all soon. Thanks and have a great day, Megan. Thank you.

[00:40:54] Megan Hillis: Thanks Mike.

[00:40:56]Kristen:  

[00:40:56] Thank you, Mike, and thank you for joining us for another great episode of insider secrets as always insider secrets is brought to you by my corn tensions. Join us on social media and visit my core intentions.com where you can get expert coaching on all things, multifamily investing in property management.

[00:41:14] We’re looking forward to having you back again next week for more insider secrets.