Monetize Everything in Real Estate Investing

Mike Hambright: Hey, everyone, it’s Mike Hambright with FlipNerd.com. Welcome back for another Expert Interview show where I interview awesome guests from across the real estate investing industry and across the country, and even around the world sometimes to help you learn and inspire you.
For today’s show I’m joined by Mike Fitzgerald. He’s a Maryland-based real estate investor. He also operates in Pennsylvania and West Virginia, sometimes D.C. You’re going to hear a theme here that’s going to be consistent. He goes where the opportunity is.
Mike’s done over 500 deals. He’s the founder of Gideon Properties, and he’s also the owner of his local REIA and does a number of things that pretty exciting there. But like I said, Mike has purchased really hundreds of single family homes, but is about to do a big condo conversion project. He’s done some really cool commercial rehab projects.
There are generally two camps in real estate investing. Those that think that you should stay focused and just do one thing and try to do it really well, and the other side is to monetize everything you can, find any way to turn leads into money and to kind of be in the opportunity business and go after it.
So that is the camp that Mike is in, is the opportunity business. Go where the opportunity is at, and that’s what we’re going to talk about today. His style, and if this resonates with you is how to take advantage of any opportunities that come your way and make sense in real estate investing, and he’s going to share some advice on how to not get too distracted and things like that to allow you to be successful with that strategy.
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Hey, Mike. Welcome to the show.
Mike Fitzgerald: Hey, how are you doing, Mike?
Mike Hambright: Good, good. Good to see you. So this is going to be an interesting topic because people tend to fall in one of two camps. Either they’re like, you know, like I just said, they really get focused on what they do and they do it well, and even inside of just single family there are people that really focus just on wholesaling or some are just on rentals, some are just on rehabbing everything they get.
I’m not as opportunistic probably as you in the real estate space, but people have asked me in the past things like, “Well, do you buy, you know, what kind of price point of houses do you buy,” and I’ve used this kind of cheesy line that says, “Hey, if the numbers work I’ll buy a teepee.” There’s some truth in that. We’ve gone after some really low-end deals, some high-end deals and everything in between, but I’ve tended to stay focused on the single family realm. I know that you’re going after all sorts of stuff that will help bring money your way and you’ve done a great job of doing it.
It’s going to be an interesting conversation today.
Mike Fitzgerald: Well, I try to stay focused, but at the same time if an opportunity presents itself and it’s in those space where I consider any piece of real estate at the right numbers, and in my space, nine times out of ten I’m going to go for it, as long as it makes sense.
For example, last year I had a chance to buy a 36,000 square foot office building. You know, I started up flipping houses in a bedroom apartment. But this building had a $1.75 million mortgage it and I was able to get it for $650,000, put about a million dollars in it and now it’s worth about 2.3 million and bringing $24,000 a month.
So even though our direct focus is picking up houses and making it make sense as far as going where the opportunity goes, if I have a chance to do some what I call virtual wholesaling in Indianapolis, which I just made money doing that today, or if I’ll see an opportunity, I definitely try to get me and my lead acquisition folks on it.
Now at the same time there’s a fine line. I do consider myself an [inaudible 00:05:07] a fine entrepreneur, but I also nowadays try to dial in to just real estate, where before if I saw an opportunity, like the art work behind me, I bought off someone’s wall, I’d go in and buy. Now I try to just say, “Look, my money’s in real estate. That’s where I’m at.” I’ve actually done over 1000 transactions and there were 500 individual leads.
Mike Hambright: Yeah. Hey, Mike, before we kind of get too far into this, for those that don’t know you, why don’t you share your background and how you got to where you are today, how you got started as well.
Mike Fitzgerald: You know, I was in a one-bedroom apartment and I called a rental ad in the newspaper, and the fellow on the other line, Dave, said, “You know, you sound like you’d make a better real estate investor than running down the house,” and told me about the real estate clubs in D.C. and Baltimore.
In high school, you won’t believe this, but I was voted “Most Gullible” in the senior yearbook, so I credit that to my ability to believe in things. I went to these real estate associations, they said, “You could buy a property no money down.” So I went out and I bought property no money down. My first deal was a division of proceeds, where I made a deal with the homeowner for X, I was allowed to make everything over X and really, in 12 of my first 15 deals were no money down deals.
Then from there I went to raise money, and one of the guys I went to raise money from was a really smart guy. He’d grown a company up to about 400 people and they were in the music distribution business. Actually, they were the biggest in the country at one point for Christmas music. He sold his company in ’89 to a Jewish guy. Kind of an interesting story, did very well with it, and he said, “Look, Mike, you need an office, you need an office manager, you need a bookkeeper,” and for [inaudible 00:06:44] you know, he helped me get my first office.
I’ve had a lot of great mentors along the way. But I’ve kind of been to the school of hard knocks and I’ve been fortunate enough to take all my learning lessons on my own and move forward. We’re doing great today. We’re doing about 100 deals a year, and I’m really excited about the future of our organization.
Mike Hambright: That’s awesome. So why don’t you talk about, I know you have kind of a very entrepreneurial background. We talked about some of that before, in terms of getting started, I think, you know what’s interesting is I think there’s a lot of real estate investors. Not everybody would fall under this camp, but I think a lot of real estate investors first and foremost are entrepreneurs, and real estate just happens to be what they do.
And that’s why, the people that are kind of in that mindset are the ones that would tend to say, “Wow, we’ve got a multi-family opportunity, we’ve got an opportunity to do this, and single-family. There’s this interesting mobile home park opportunity,” or kind of things that come your way. How would you say that, maybe kind of dispel some myths and talk about, not that that strategy is right for everybody. Kind of talk about the difference between staying super focused and just doing one thing and trying to do it well, and being open-minded to look for opportunities. Just kind of maybe compare those two.
Mike Fitzgerald: You know, I think absolutely it’s good to do one thing well, but if you’re in the real estate investment space you’re doing buying, selling, rehabbing, assignments, creative deals. The real estate investing space, you really don’t want to limit yourself. We have 200 rental units and we buy and sell a lot of houses. If a good deal comes along and you can make money with it, that’s what I consider myself. I consider myself, this is my space, and even though I don’t stay at one focus, I don’t stay on wholesaling, I don’t stay on [inaudible 00:08:31].
I don’t stay just on rehabbing. I do have consistency with rehab and we’re consistently doing 60 a year, but I do like to, I am working to increase my wholesale business and if I get a [inaudible 00:08:43] of opportunity presented itself, I found a 40-unit complex for $1.4 million in a very, very strong area, and I went for it. We invested money in it and the truth is if a deal comes along, real estate’s all numbers. And if it’s enough to make sense, we’re going to go for it. Now, if it’s not something completely in our space, the numbers have to make a little more sense and they have to be a little deeper, but we will do what makes sense.
Mike Hambright: Sure, sure. Talk a little bit about maybe distance as well. I know you’re in an area where you’re a little ways out from D.C. and you operate in a few different states, but just kind of talk about some invest, if I looked back at hundreds of investors I know, some of them, there’s this belief of find this area, get to know it really well, and just operate there. That’s kind of your farm area. And then you and I both know a lot of people that are more virtual and they’re just kind of the way we’ve been talking about, they’ll go anywhere where there’s a deal at and do some stuff virtually or whatever. Just talk about the willingness to kind of go where the deal is at.
Mike Fitzgerald: You know, I think if you’re doing stuff virtually and you’re going where the deal is at you should still dial in and market and not try to do too much at once, because it, you can go out there and you can go to five different markets. You go completely virtual. The problem is if you don’t perfect one market as you go it’s going to be a mess and you’re probably going to lose money and you’re not going to optimize. So even we do a lot of stuff in the space and I consider myself, kind of an ADD guy, “Hey, let’s go right a bike. What’s that squirrel. What did you do today, Mike?”
So that’s how I am. We really look at the opportunity, we look at the different markets, but as I grow, it’s been 11 years, the old me on year one and year two I was okay. I could do virtual wholesale great. Give me 20 markets. I’m going to do each one and send out mail and create a big mess. Now we will do everything and we will go a direction of doing 5, 6, 10, 20 different things. But we still try to as we go along, if we’re doing the same thing, instead of doing multiple times we’ll try to perfect the ways we’re dealing with each market.
Now, I’m right on a tri-state so I’m within 20 miles in Pennsylvania and West Virginia, so it makes sense for me to do business in those three states. I worked in Ballard, that’s right in Washington State. We did really well together so I have a company out of Washington State. I’m doing a little bit of business there in D.C. I like that there’s $100 million single family home neighborhoods. I love it, the profits are much bigger. So I do one at a time in D.C.
But we’re trying a little more to be organized. You see the board behind you, the board on the corner with the red and green writing, those are actually all renovations we’ve got going on right now. I know you probably can’t clearly see it, but there should be 33 of them. And then the other board with the tape is what settlements we have. We have eight settlements coming up.
So if we go out there, especially . . . and we learned this from problem in the market dip, your rehab profits slow down, your wholesale profits slow down, so really, the way to make it through a bad market when you have overhead and you have a strong business is to sit there and say, “Well, I’m going to take the opportunity to present itself, and when I see those opportunities I’m going to do them and I’m going to try to come up with action plans for them.” That way I can keep somewhat of an organization as I’m doing 20 different things.
Mike Hambright: Right, right. Well, how do you, I know we talked about this a little bit beforehand, some of it comes down to the structure of your team and people that you can rely on to kind of one, help keep you focused, or two, settle some of that distraction, because you’ve simply outsourced that to somebody else that can help. Can you talk a little bit about that, and maybe the structure of your team?
Mike Fitzgerald: A team is absolutely important, and I learned a lot from our mastermind in CG that if you have the wrong team you can only get so far. It’s very important to surround yourself with very good people and the right people. I think any real estate business on this level, you can’t do all that acquisitions yourself. You can’t run all the sales yourself because that something else is going to falter. So one thing I learned from CG is before when I was doing 70, 80, 90 deals a year myself, now we have an acquisitions guy and when we’re looking to hire other people under him.
I’ve also realized the difference between a bookkeeper and an accountant. It may be $20,000, $30,000, but if you’re the accountant you’re going to be a lot more employed with your numbers and you’re probably going to save money when you get your tax returns done by an accountant who does your taxes first. So it’s a full-blown accountant.
With the rentals, I think in any real estate you have so many random things that can come up, so my big thing is to create schedules with what I call flex-time, where, you know, “Look, this is your schedule, guys, with the rentals. You have all this stuff to do. Do it in your flex-time.” That way, everybody has flex-time at different times. They have time to [inaudible 00:13:34], so you have time for things that come up.
So we have three people on our rentals. And we have a receptionist who has been trained to take a lot of the calls for us and that goes really well. We have a project manager where we used to do everything ourselves. Can you imagine that? We used to just see if any jobs yourself. We’re wasting a lot of profit. So now we give everything to GPs, plan it out on a system called Buildium. We get it down to a T. Usually the GPs negotiate us within 10% of what we come up, and then we get the jobs done all on point and everything is not on all us.
We’ve worked more on outsourcing, getting good people, good systems and good programs to make everything operate as smoothly as it possibly can.
Mike Hambright: Yeah. And would you, why don’t you talk about kind of . . . I’m sure you’ve learned a lot over time, but for people that are out there that are maybe newer and kind of getting started as to, let’s just assume that a lot of newer people may not be able [inaudible 00:14:34] may not be able to afford a team yet in terms of they may not be able to justify all that kind of headcount. How do people that are . . .
Mike Fitzgerald: There’s a ton of [inaudible 00:14:44] out there. There’s virtual assistants, there’s virtual assistants, you can go on Fiverr and you can bid different things out. We wanted to do a mailing list in an Excel spreadsheet. We had probably a thousand names to put in. We went to Fiverr and bid it. Someone bid it at $15.00. It would have taken one of my people eight hours.
There’s also different answering services that charge you by the minute because when the seller calls you almost always want a live person to pick up the phone. There’s a ton of great assistants that speak English and great virtual assistants, and you can really sub a lot of that out to really run the system without having everybody in the office. Like right now we have a full-time person doing work for us in the Philippines. It works well. So maybe if you run the money and you get people directly on payroll yet, but you can still go to Fiverr and make sure someone’s doing your books.
Most importantly, if you want to grow in real estate, you can’t do everything yourself. And when you are ready to get people you have to train them right, come up with the right operating procedures to make sure that they have the tools and they’re equipped to get the things done for you. One thing that I used to be, over the last couple of years, and I’m really working on is a hub and spoke business model. I really don’t want that.
And now I’m going [inaudible 00:16:03] to multi-level but it’s getting the right people around you and if someone doesn’t have the money to bring people into an office, there’s a ton of virtual one-time assistants out there on websites like Fiverr where they can get the random things done. And being systematic is what it’s all about, so getting the right computer programs and the right things to make it really leverage your time to the fullest.
Mike Hambright: Yeah, kind of clarify what you just said about a hub and spoke model, which is, I assume you mean that you’re kind of set up where everything had to come back through you ultimately. Is that what you’re referring to?
Mike Fitzgerald: Well, yeah, and we’re still getting beyond that, but that’s been extremely tough. It’s really hard to run a business where everything runs through you and you have to double-check on everything. So as we’re switching out staff that you really [inaudible 00:16:47] been working on.
Mike Hambright: Yeah. I think that’s what a lot of real estate . . . I struggle with that as well, is how to not have to be in the middle of everything. It’s not that I necessarily think that I’m better at everything, it’s just when my money’s on the line, all those issues, I tend to feel like I need to have my stamp of approval or something on it which definitely can weight you down if you’re trying to grow, for sure.
Mike Fitzgerald: Exactly, and if you don’t have the right people, things don’t get done, or they don’t get done properly or something gets missed, and you constantly have in your head, “Hey, I’ve got to be on this or it’s not going to get done right,” but really, that’s all I answer. The right answer is sitting down for 10, 20 minutes, an hour, whatever it may be, coming up with an operating plan, coming up with procedures, that way [inaudible 00:17:31] when this happens you do this, when this comes up you do this.
And you want to make sure you have a business because with a hub and spoke business, as yourself, you can get here, you can get a one-dot. As a hub and spoke business model, you can get a little higher. But the only way to really achieve greatness in real estate is to have a business model where things naturally get done as they come in, like any business or any corporation.
Mike Hambright: Yeah. You shared a story with me before. I’d love for you to share this. It’s such an awesome story. I know that you had this experience where you had actually bought back your parents’ house that had been foreclosed on in the past. Can you share that with us? I mean, that’s such a . . .
Mike Fitzgerald: I started real estate with a one-bedroom apartment. Now I have 200 apartments, and six years ago I had an opportunity to buy my parents’ home. They had lost it when I was younger. I fixed it up, I did amazing rehab to it, made it beautiful, and I actually moved my parents back into the home. I did that when I was 24 or 25 years old. Now I’m 31.
Mike Hambright: That’s incredible. So how did they, I mean, elaborate on that a little bit. Talk about how did your parents . . . did they know you were doing it, or how did they feel when that happened?
Mike Fitzgerald: They didn’t know exactly. They didn’t know what I was doing with it, but of course it brought tears of joy and it’s made them really, really happy, and I’m happy to see them in there. I’m glad I have been blessed enough to be decent enough at real estate and good enough at real estate where I can do things like that for my family. That’s always been really important to me.
Mike Hambright: Yeah, that’s a great thing about real estate. If you’re doing well, which a lot of people that, you know, are doing the type of volume you do tend to do well, you can definitely make a difference, whether it’s your family or others and stuff like that.
Mike Fitzgerald: Right.
Mike Hambright: And why don’t you share some stories about this major office building or the commercial building that you rehabbed, because that’s a really interesting experience as well, and kind of talk about some challenges, maybe of going from primarily being a single family guy into doing a large development like that.
Mike Fitzgerald: Well, I didn’t even know how I was going to buy it when it all went down at the time. This was a couple years ago. I was able to raise the money relatively quickly, I took it out with an investor, then I refinanced it with a bank, but I had a chance, you know, somebody purchased [inaudible 00:19:48] foot office building and I will talk about earlier in my career, I did the same thing. Most guys, you know, flipping houses, you get 30, 40 a year, like, it would probably be a challenge they wouldn’t take. It was 36,000 square feet, it was almost completely empty, it had homeless people breaking into it.
Now today the building is 96% full, only one space left. A restaurant moved in there, a bank moved in there, and it’s probably the nice boutique office building in Hagerstown. The folks had a [inaudible 00:20:19] mortgage on it, the building was falling apart, had 183 plumbing leaks, roof leaks down to the first floor, and I was able to short sale that mortgage for $650,000.
We put about a million dollars into it and the building is great. We got a lot of great tenants, a lot of great stuff happening in downtown Hagerstown. Earlier in my career when I was in a one-bedroom apartment, a farmer called me up and wanted $650,000 for his farm. Most people, you know, when they just start out, they’ve done eight or nine deals and they’re all afraid.
They feel like, “Well, this isn’t the deal for me.” I decided it was the deal for me. I made a deal with the farmer for $575,000 where I could subdivide the farm, subdivide some building lots off of it, sell any or all of the building lots with my purchase price and the remaining money would move into a mortgage that the farmer held for me at 5% and I could allocate the money however I wanted.
I thought it would take me four or five months. I started it out, I had maybe $60,000 in the bank. I got it done 15 months later after I had to take the county to appeals for denying me for no reason. I won. Fifteen to 17 months later I had about $80,000 in it. It netted me about $1.2 million in equity.
Now, it taught me one big lesson, never be scared of a deal. My second lesson is where when I decided to hold it for a couple years, because I thought [inaudible 00:21:46] thing would just keep going up, and my equity ended up getting cut in half. But it did throw a lot of my initial learning lessons in real estate.
I like to say, you know, I never went to college, I barely passed high school. Part of the problem was I’d sit there in class, it’d be 1:00, so from 1:00 to 1:05 I’d say in my head 1000 times, “I’m going to pay attention. I’m going to pay attention. I’m going to pay attention,” and then the bell would ring at 2:00, I couldn’t remember when I started daydreaming. But I really, I believe in real estate and I believe in, you know, you can start out with nothing and be great in real estate.
The farm deal, I actually lived in the home for 10 years. I just recently moved about a month ago. I had over 150 animals still. The guy who moved in is taking care of them, chickens, ducks. I ended up, it was, like, 10 chickens when I moved in, so when they started passing away from old age, I heard about the livestock auction.
And wouldn’t you know what happened, Mike? I couldn’t stay focused. Every animal that went through a deal, had a deal for two months I bought, ended up building 500 feet of fences and that [inaudible 00:22:49] farm, right? All seven Washington County Maryland Boys and Girls Clubs [inaudible 00:22:54].
Mike Hambright: That’s funny. So Mike, we have just a couple minutes left here. Maybe you can, I definitely can see how you’re excited by opportunities that come up. I think there’s a lot of people like that that want to be diverse and do a number of different things to keep them interested and make it exciting.
Can you maybe share some lessons on people that kind of know that they’re like that, they’ve got a little bit of ADD and they want to do a number of things, how they can make sure that they’re successful in that space and not get so distracted that their business fails or doesn’t do well.
Mike Fitzgerald: Two words, slow down. No, I’m just kidding. You know, me, I’ve learned a lot of lessons and my ability to create deals has allowed me to pay for those lessons, and that’s why I’ve said before, I feel like I’ve paid more for my education if I went to three top colleges. But one thing I could’ve done better is I could’ve written things down, even though I go a lot of directions I could’ve come up with a plan and said, “Here’s what I’m going to do,” and then as new things came then I could’ve added it and see where they fit in.
Me, I tend to do a ton of stuff, everything that comes at me. It definitely caused a lot of, in my earlier years, it definitely caused some education. It cost me hundreds of thousands of dollars. Nowadays, if things come in we analyze it, we sit down, we say, “Okay, does this fit,” and if it’s something new we will get, “Do we have the time to do it? Can we do it well, and can we make money with it,” and I had something else falter.
So you know, Mike, my best advice could be for me, what I consider the ADD option, you can make money doing a million different things in life. Real estate’s one of the best things you could do. Over 90% of the millionaires in America had some form of their wealth created through real estate, you’re going to do very well. Even though you want to do everything, look at everything, make sure you have the time to do it, make sure you have the capability to do it, and do it. The more you can do, the better, obviously in my mind, but make sure something else isn’t going to falter. Take the time to write it down.
You know, as we were looking at a [inaudible 00:25:01] the wholesaling market earlier, we said, “Okay, let’s come up with an SOP, a standard operating procedure. Here’s what we’re going to do, here’s where the calls are going to go, here she’s going to return them.” Take the time to write it down, don’t try to do everything, don’t try to wing everything.
I’ve done 500 real estate deals, three-quarters of them winging it as I went, and if I would’ve not necessarily slowed down but if I would’ve wrote things down, thought through things a little bit earlier in my career, we’d have another million or two million in the bank. So that can be my best advice.
Mike Hambright: Yep. Awesome, Mike. Well, hey, before we wrap it up here, why don’t you take a minute and just tell people if they want to learn more about you, your business, your real estate club, any of those things, where they would go to find more on those things?
Mike Fitzgerald: Okay, check out Hub City REIA, that’s H-U-B City, which stands for Real Estate Investors Association, REIA.com. They can check out Gideon Properties on Facebook, Gideon Properties, G-I-D-E-O-N on Facebook, or my personal page, Michael T. Fitzgerald, they’ll see I’m a real estate investor from Maryland.
Now, we’re also coming up with a page, I think they were in some of these podcasts, I’ve had a lot of front-page newspaper articles, so we’re actually coming up with a drop page that’s not announced yet that will help people when I do these interviews, and if they go to our Facebook page, getting in properties, they’ll see when that’s actually announced. They can also check out my Facebook page here recently, and you’re going to love this, Mike, it’s on my Gideon page on my Facebook, the youngest real estate investor ever, my 2-year-old son, negotiating a real estate contract.
Mike Hambright: Awesome. Well, hey, we’ll add links for those things down below the video here for those that want to check it out. And Mike, great to see you, and I know you’re about to have a birthday so happy early birthday.
Mike Fitzgerald: Thank you.
Mike Hambright: And I’m going to be actually be seeing you real soon.
Mike Fitzgerald: I’m a single dad so I pay my son to work with me, usually one day a week. When I’m able, when it make sense, but actually I’m taking him to negotiate with sellers and it’s hilarious. I’ll sit there talking to a seller and he says, “Sell my daddy your house please. My daddy really wants to buy it.” It’s so cool. And I don’t meet a lot of them, so many of the sellers. We’ve got an acquisition guy, but my son really likes it so I’ve been taking him around. I think he’s going to start putting homes under contract at 5.
Mike Hambright: If you need some extra leverage, you take him, huh?
Mike Fitzgerald: Yes, correct.
Mike Hambright: He’s your muscle. Well, hey, thanks for joining us. Thanks for sharing your story, and I look forward to seeing you soon. Okay?
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