JF2173: Investing Long Distance With Mike Wilkinson
Mike is a full-time real estate agent and broker with 4 years of real estate investing experience. He currently owns 4 units in Cincinnati and 3 in Denver with a few flips under his belt. He shares why he started off by investing out of state and explains what factors he paid attention to before jumping to out of state investing and the steps he took to invest out of state comfortably.
Mike Wilkinson Real Estate Background:
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“A good property manager is a huge part of your team in making out of state investing relaxing” – Mike Wilkinson
Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, I’m speaking with Mike Wilkinson. Mike, how are you doing today?
Mike Wilkinson: Good. Yourself?
Theo Hicks: I’m doing good, thanks for asking and thanks for joining us. A little bit about Mike – he is a full-time real estate agent and broker, and also has four years of real estate investing experience; his portfolio consists of four units in Cincinnati, three units in Denver, and three flips. He is based in Denver, Colorado, and you can say hi to him at embarkdenver.com. So, Mike, can you tell us a little bit more about your background and what you’re focused on today?
Mike Wilkinson: Absolutely. So I think like many younger investors, I got going interested in personal development, financial independence, freeing myself from needing to always work a job and pay the bills and have some assets do that for me. So that all got started back in 2016, 2017, and I got my real estate license right out of college, I think the same way week that I had graduated, and jumped in and out of the industry for the first year or two there. I got started with the house hacking strategy as a first asset, and for the last couple of years here, I’ve been a full-time agent and focused mostly on the residential, single-family, small multifamily asset classes.
Theo Hicks: Perfect. So you have four units in Cincinnati and three in Denver. Did you do the ones in Denver first or the ones in Cincinnati first?
Mike Wilkinson: The house-hack in Denver came first, and then a couple of deals in Cincinnati, and then a few more deals here in Denver. So I hopped back and forth.
Theo Hicks: What made you do Cincinnati?
Mike Wilkinson: I actually had a roommate and very close friend of mine living with me in Denver at my house-hack there, and he had a girlfriend, now wife, who was living in Cincinnati, grew up there. She had just bought a house out there, and was charging her roommates very similar rents (over $600 a month) for living in her $100,000 house out there, nicely fixed up… And I was charging my roommates the same rent out here in a $380,000 house, and a light bulb went off in my head and I said, “Hey, man, it might make some sense to try and invest out of state,” especially when my then-roommate moved out there and I could go and fly and have a close connection and someone to enjoy some time with out there.
Theo Hicks: Those four units, are those four single-family homes, two duplexes, or what’s the breakdown for those Cincinnati properties?
Mike Wilkinson: It is one single-family home, which is the first place that I purchased, a straightforward 2% rule deal, a $50,000 house or $45,000 house with $1,000 rent, and then a triplex that actually has a commercial unit below that was being treated as a residential unit, and two apartments above; that was actually also purchased around that $50,000 mark. So a little different pricing out there than here in Denver.
Theo Hicks: Sure. So when you decided to start investing in Cincinnati, do you mind walking us through the different steps you took for anyone else who lives in a pretty expensive market and wants to venture out to a market where they can buy properties for significantly less? So setting up a team, finding the deals, managing the deals, just A to Z.
Mike Wilkinson: Absolutely. I think a common thread through a lot of my clients here who invest out of state is the property management aspect, and that being a huge determinant as to whether they are successful and enjoying out of state investing. I’ve experienced that myself recently, fired and hired a property manager and feeling a lot better about those investments now that I’m having a little bit more of a trusty relationship with the property manager. So that’s a huge aspect, and I’d say probably the most important aspect of your team out there.
Another huge aspect is just networking your butt off and actually going out there. I had the opportunity of having a friend out there who I could go and stay with and drive around with and use his truck and leverage some connections that way. So meeting up with other investors out there, and not just focusing on the real estate agents and the property managers and the lenders, but also networking with other investors out there who have years of experience investing in that market was a huge thing for me to bounce one investor’s idea off of another to get a clear picture of which parts of town, which neighborhoods I wanted to be in, what price ranges I wanted to be in there, and talking with people who have already decades of experience there, who aren’t looking to make money off of me, I think, is an important thing that not too many folks that I talked to out of state investing wise do. They seem to jump straight into talking to property managers and agents and the like.
Theo Hicks: Do you mind telling us why you had to fire that property management company and maybe walk us through the timeline? Because I know and I’ve talked about this on syndication school that I do in the past, that it’s typically a high timeframe in which you want to wait before firing just to make sure that they’re actually the reason why the property’s not doing very well… So I’m just curious what happened – was it an instantaneous firing thing? Was it three to six months of poor management until you made that decision? And then on top of that, what lessons did you learn that allowed you to not make the same mistake in hiring the next property management company?
Mike Wilkinson: So this particular property manager, so they had an in-house maintenance division, which can be a positive thing and can also be a negative thing. It’s a difference that you’ll see across a lot of property managers; depending on the area, maybe it’s a half and half. Some people do have that some people don’t. This property manager, when I originally started with her, had a separate maintenance team manager through the year or years that I’ve been with her, then her new husband had taken over the maintenance division there… And in checking in with my portal, all property– a lot of out of state property managers have some portal where you can see your expenses, and I do a fair amount of rehabs here in Denver and help clients manage rehabs, so I understand the costs quite well, and things started to not add up. I wasn’t getting the explanations when I was asking for them and therefore, I just quickly lost trust. It seemed all of a sudden that they were making their money in the maintenance division as opposed to helping me manage some profitable properties.
So that was the gist of it, and I think it’s an important question to ask a property manager right off the bat and ask if you have an option to go that route or not, and then making sure that you have some checks and balances there to make sure that those maintenance costs are competitive and appropriate, and that you’re not just being up charged and they’re making money off of you in that aspect.
Theo Hicks: An important question was to ask if you have to use their in-house maintenance?
Mike Wilkinson: Yeah. My new property manager out there, they do have an in house maintenance team. The real important question is, “What is your guys’s protocol? How do you do maintenance? Do you hire everything out to a third party?” A fair amount of property managers do do that and you ask, “What is the typical protocol here? Do you have one handyman that you always go to? Do you pay some people hourly? How does this work? Who owns it?” things like this to get an understanding of, “Okay, is this one of the most profitable parts of their company?” That’s not what you’d like to see, as opposed to this being just a necessary part of the job. And some people do run maintenance in house and therefore that’s helping save you money, especially when those are just simple jobs like changing locks or installing a new appliance or something like that… But it can also go the other way where you’d rather just pay a third-party $100 and they have the interest of keeping up their reputation and charging competitive rates and things like that. So I think the main question there is how do you run your maintenance division? Do you have one in house? Is this all third-party? And from there, asking the appropriate questions to see how things are handled.
Theo Hicks: You do own some properties in Denver and then in Cincinnati as well out of state, but which one do you like better? Do you like out of state investing or do you like in-state investing better?
Mike Wilkinson: More and more my perspective, especially leading up to my purchase around Christmas time this year, around New Year’s, that was a huge debate of mine going into that, the three or four months prior to that, and I had met with plenty of different investors chatting about it… And more and more, I have a leaned towards in-state investing. Here in Denver, I really believe in our market and have a lot of connections and efficiencies that I can utilize here. So being at a younger age, I’m not interested personally in using my cash flow right now, and getting a sprinter van and going across the country or anything like that. I see myself working, I enjoy my job a lot. I don’t need the income in the next, say, decade. So therefore, I think what needs to be considered is with the non-passiveness of real estate, we need to think about, if I have reason to believe these assets are going to appreciate. And here in Denver, I really do believe that they’re going to continue to appreciate, especially in these little pockets that I truly know, being a broker here.
So for those reasons and having connections here, having complete control, being able to go meet with a contractor face to face, line them out and then have the understanding of, “Oh, I’m going to make this right,” or, “I’m not going to see any more work from this person,” is huge.
Theo Hicks: Okay, Mike, what is your best real estate investing advice ever?
Mike Wilkinson: So the best real estate advice ever – I would say that networking your butt off and providing value to your network without strings attached is a huge thing, and that is something that I leverage to stay top of mind in my database and network.
Theo Hicks: Perfect, and do you have any examples of ways that people can add value without any strings attached?
Mike Wilkinson: Yeah, asking the simple questions of “Who do I need to keep in mind to introduce you to, what are you looking for in your business, in your job, in your life?” For example, a couple of weeks ago, I found a colleague of mine a great job, and that goes a long way in a time like this, and is something that I’m not seeing anything out of, but I know we’ll go to pay dividends in the future, and I think that just providing value in ways that extend far beyond your interest in real estate is a huge thing to do.
Theo Hicks: Okay Mike, are you ready for the Best Ever lightning round?
Theo Hicks: Let’s go for it.
Theo Hicks: Okay, what is the best ever book you’ve recently read?
Mike Wilkinson: I would say along the lines with this providing value and my best ever advice, a book that I love is The Go-Giver, and I recently read the other edition of that it’s called Go-Givers Sell More. These are quick little books, but have a super meaningful message that is very simple and if you take that with you in your network and in your day-to-day, it’s a pretty foolproof way of having a big life.
Theo Hicks: If your business were to collapse today, what would you do next?
Mike Wilkinson: Wow, if my business were to collapse today – well, I would go ahead and start a new one.
Theo Hicks: Besides your first deal and your last deal, what’s the best ever deal you’ve done?
Mike Wilkinson: I would say, best ever deal was a flip project which I was taking a client through, realized that the numbers were awfully good, and they didn’t want to act on it. I got their permission to act on it myself, and in a matter of five months acting as GC, we turned an 83 grand profit on it.
Theo Hicks: What’s the best ever way you like to give back?
Mike Wilkinson: I’ve work as a volunteer with an organization called Families First, and do a weekly volunteering for them. They do a great job to help parents in need in ways of raising a family with the right support.
Theo Hicks: And then lastly, what’s the best ever place to reach you?
Mike Wilkinson: Sure, I would say by email is a great way. I’m always responding to email, and that is firstname.lastname@example.org.
Theo Hicks: Perfect, Michael. Thanks again for coming on the show and sharing your advice with us. Mostly, we focused on comparing in-state versus out of state investing, and why you prefer in-state investing. We talked about how you’re able to know the market a lot better, especially because your job is as a real estate agent and a broker. It allows you to have more control, you have more connections in your local area, it allows you to meet people face to face, and just overall, you like the in-state investing more than out of state investing, even though you do have some properties in Cincinnati.
We talked about some of the tips you do have for people who do decide to invest out of state and the two things you mentioned was one, that the property management company is the most important, and you told us how you had to recently fire a property management company because the maintenance costs didn’t seem to add up and you weren’t getting a good explanation as to why. So you said that an important thing to understand with a property management company is how maintenance is handled and what the typical protocol is, and making sure that there’s checks and balances so that the costs are competitive and appropriate. The second thing you mentioned about investing out of state was networking, but more specifically, making sure you’re actually going out to the market to meet with people and network with people face to face, and this includes property managers, brokers, lenders, but you also mentioned it’s important to meet with other investors too, people who aren’t there to make money off of you and are gonna have an objective opinion as well.
And then you also gave us your best ever advice, which is to network and provide value to the network with no strings attached, and you gave examples like introducing them to different contacts, maybe referring them to people, and then you gave a specific example of how you were able to help someone find a job. So just asking questions, probing questions to figure out if there’s any way you can help them in order to strengthen that relationship. So again, Mike, I really appreciate you coming on the show and giving your best ever advice. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you soon.
Mike Wilkinson: You too. Thanks, Theo.
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