In this episode, I chat with William (Bill) Bronchick, an attorney who early in his career saw others making money in real estate…and jumped on board right away. Once Bill understood how to make money in real estate investing, he was off to the races…starting in residential, and over time expanding to commercial and multi-family deals, storage units, writing books and teaching others how to invest. He founded the Colorado Association of Real Estate Investors (along with his Mother), and is the Executive Director of the College of American Real Estate Investors. We discuss Bill’s learning and expereinces, and where he sees the market going from here. Check it out!
Mike: Welcome to the FlipNerd.com podcast. This is your host, Mike Hambright. And on this show, I will introduce you to VIPs in the real estate investing industry as well as other interesting entrepreneurs whose stories and experiences can help you take your business to the next level. We have three new shows each week which are available in the iTunes store or by visiting FlipNerd.com. So without further ado, let’s get started.
Hey, this is Mike Hambright with the FlipNerd VIP show. Thanks for coming back for another great episode. Today, I have with me, Bill Bronchick who is a jack of many trades. He’s an attorney, an author, a well-known speaker. He’s an investor himself and the host of Legalwiz.com. There’s a whole bunch of other things we’ll talk about but before we get started today let’s take a moment to recognize our featured sponsors.
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Mike: Hey Bill, welcome to the show.
Bill: Thanks, thanks for inviting me. Pleasure to be here.
Mike: Absolutely, well glad you’re here. So, you obviously have a ton of things going on. Why don’t you, you’ll do the best job of introducing yourself. Why don’t you tell us a little about, not just what you’re working on now, but maybe your background about how you got started in real estate investing as well, but go ahead and introduce yourself to us.
Bill: All right, thank you very much. I’ve been a real estate investor since about 1992. I started part time when I lived in New York, moved to Denver in ’93 and became a full-time investor then. I hit the market, at just, a great time and came out here and stole a bunch of houses and made a lot of money and just kept buying and buying and initially buying and flipping like most people do to generate money you can live on. And then buying and holding and then doing exchanges into bigger properties and more properties, and to commercial properties and to multi-units.
And I’ve acquired quite a bit of real estate that I’ve been…especially in the last ten years or so, I’ve been really holding on quite a bit. I didn’t buy anything stupid at the top of the market. Didn’t lose any houses to foreclosure or anything like that because I just followed a very basic, conservative investing principles that allowed me not only to do well in the good times but not hurt so bad in the bad times.
Mike: Okay. Okay. And you primarily are investing in single family homes or commercial or…
Bill: All the above. I do single family homes. I do small apartments, big apartments, well, depends what you call big, but the biggest apartment I’ve got is about 405 units.
Mike: Okay. That’s pretty big.
Bill: That’s still medium sized in most people’s book. And some other commercial stuff like a self storage facilities, parks, and stuff like that. Primarily, now, I’m focused a little more on commercial projects, not so much the onesie-twosie’s anymore. Although, occasionally I do a small deal if it makes sense and if I’ve got someone begging me to give them give me the house.
Mike: Yeah, now did you ease into more of the commercial and larger properties and start with single family homes or did you start with doing bigger projects early on? A lot of folks tend to seem to kind of graduate to that but I’m always curious.
Bill: I agree with that. The only reason I ended up going bigger was because I had sold some properties that had a lot of equity when I did an exchange. I had some money I needed to put somewhere that was bigger than what I sold and that’s how I ended up with some apartment buildings. And when I started with apartments and how much money I made in those, I said, wait a minute, this is a whole lot easier just to do it in bigger chunks. And I know it’s a mental thing more than anything when people just, when they get into the idea of commercial, they think of well, I can’t raise a million dollars or I can’t come up with two million or a half million or whatever it is and it’s actually not that difficult.
Mike: Yep, and so, and where do you invest geographically? Are you all over the country or primarily in the New York and Denver markets?
Bill: I’m not in New York anymore, but, and Colorado is my primary market for, especially my single families and small multi-units. I’ve got about three dozen stuff in the Denver market that is my bread and butter. But with commercial, I’m all over. It doesn’t make sense, when I live in Denver, to buy a house in Indianapolis because there’s too much work to go into the due diligence of it and putting all the players together. So, if I’m going to go out of state it’s got to have a scale that’s big enough to make sense.
Mike: Right. Right. Right.
Bill: And I’m in a lot of markets. I’m in Texas. I’m in Arkansas. I’m in Indiana. I’m in Colorado. I’m in Oklahoma. So there’s stuff all around that I’ve invested in. Some of it with partners, some of it myself, and so forth.
Mike: Yep. Yep. And so as an attorney, did you have any involvement in real estate before you became an attorney or was that the catalyst that you got you into real estate? Or kind of talk a little bit about how you…
Bill: No, no, no. I started practicing as an attorney and when I went to do my first closing, I asked a real estate broker friend of mine to give me some business, basically. In New York, attorneys are involved in transactions. And he said, all right, you know what to do? And I said, I don’t know what to do. Then he goes, are you kidding, you went to law school, right? I don’t know what’s going on here. I learned it by doing.
So I had done a handful of closings before I had done my first real estate transaction as an investor but the attorney thing it helped to some extent to understand the concepts a little bit but it didn’t really give me a leg up on anybody else. I mean, I started like most people did. I went out and did it. I read books. There wasn’t many seminars in New York because most of the seminars were in Florida and Utah at that time. So I had to fly around the country to go to a seminar and there wasn’t that many books either. The one book I read was Mark [Harrelson’s] book, “The Courage to Be Rich,” and that’s an old book for those of you who are watching, so that’s an old, old book on real estate, but that kind of gave me the spark to go do it.
Mike: Yeah. Yeah. Okay. And, so, from an attorney standpoint, are you a practicing attorney still actively? I know you have Legalwiz.com. Why don’t you tell us a little about Legalwiz?
Bill: Yeah, I’m a practicing attorney but with a pretty limited client base in real estate business and retirement plan set up kind of stuff. So, if people need an estate plan asset protection or they need to set up a self-directed retirement plan, that’s the kind of niche that I do as a lawyer but more of my time is spent going out and finding deals that my clients have because that’s where I discovered the wealth is. It’s not charging 400 dollars an hour. That seems like a lot but when you have a lot of overhead, you’re not netting that much.
Bill: It’s when a client comes to me and says, hey, can I pay you to do this? And I go, wait a minute, how about you just make me a part owner of it and I’ll really do it. That’s really mine main focus so I have properties that I manage, not directly, I have a property manager, but indirectly, I manage. And then I have my law practice. And Legalwiz.com was a platform that I launched about 1997 or so. Just screwing around on the Internet, came up with a name and started giving out free forms and advice, and all of a sudden all these thousands of people from all over the country started coming to my website, so, asking for information, and there’s hundreds of articles on that website for free and also we do sell information products on, that you can either download or listen to, or videos on demand, and stuff like that.
Mike: Okay. Okay. So it’s, for those who aren’t familiar with it, it could be a resource where you could go learn things about legal questions they have. That’s primarily what the site is.
Bill: Right, and it’s geared towards mostly small business entrepreneurs and mostly real estate investors who are most of the visitors to the site.
Mike: Okay. Okay. And so, in your experience, I ask for folks that watch this show, they’ve heard me ask this question before, but it’s always something that I like to get different perspectives on, what do you think separates or differentiates successful real estate investors from unsuccessful? Because, there’s a, quite frankly, there’s a pretty large failure rate if you look at folks, that at least have an interest, but never do anything about it. Or try to get started but never get out of the gate. What do you think differentiates those that are successful from those that maybe never get started, or are unsuccessful?
Bill: It’s all mindset. Whether it’s a hobby that you want to get really good at or whether it’s a business you want to be successful, or an investment you want to be successful at, you’ve got to put in your hours. In the book, “Outliers,” by Malcolm Gladwell, he talks about the 10,000 hour rule. And you have to practice, or work at your trade for 10,000 hours before you really get good at it. And most people give up after about 3 or 4 hours. So, that’s the learning curve. Most people just never get past it because they do something, they don’t get results immediately, so they quit, because they’re sane.
Bill: So you have to have a little bit of vision and being able to persist through the failures and eventually you get the success and then you overcome that learning curve. It gets a lot easier. Most people just never get past that.
Mike: Right. Right. And I think it doesn’t help either that when I was getting started, I had no experience in real estate investing. We had we bought a franchise, so that was part of the issue.
Mike: You’ve got family members and folks like that, that are friends and family, that, they just thought we were nuts. Like, what, what are you doing? Why would you find deals and other people buy them from you? Why wouldn’t they just go find those deals themselves? I was like, well, you don’t realize until you’ve been in this business, how hard wholesaling is or finding wholesale deals.
Bill: Right. Well, if people don’t realize, as you said, the word business, it is a business. Stock market is an investment. It’s a hobby. You can do it part time and it has a very low learning curve. The real estate market has a much higher learning curve as a business but the good thing about it is, once you get past the learning curve, you get educated, it gets easier, and you make less mistakes. Whereas, the stock market, you could screw it up no matter how smart you are.
Mike: Right. Right. Yep. So, awesome.
Bill: That’s what I see the big difference between the people who succeed and don’t. It’s just, they don’t persist hard enough, they give up too easily.
Mike: Yeah. Yep, and, and what about, as an attorney, what do you think makes a, what is a good real estate attorney versus, for folks that are looking for an attorney, what do you think they should be looking for in terms of a real estate attorney? What makes somebody a good real estate attorney?
Bill: Well, it’s going to be experience. Experience is one thing, but experience sometimes is a negative because attorneys who don’t invest also get ideas in their head about the way things are, at least form his viewpoint and there’s the real world, where there’s investors doing things that are contradictory to that. I think, as a lawyer, what I advise clients, I try to give them the pros and cons, or maybe a better way to skin the cat that is a little safer so they don’t screw up and get sued, or blow up the deal. I’m going to warn them of what the potential pitfalls are, but, ultimately, the decision is up to the client. I’m not a deal killer. I’ve never been one.
A lot of attorneys are deal killers and they think their job, when a client comes along with a risky deal, is to kill it and that’s when he’s doing a favor for the client. And I don’t, I just don’t subscribe to that belief. So a good attorney, should, ultimately, it would be great if they actually were a business person and investor too so they have both the practical side and the legal side, you can’t, the legal side says, don’t do this, and the practical side goes, of course I’m going to do this, it makes me money.
Bill: The lawyer’s going to tell you, go get a bonded, licensed, insured, yellow pages contractor whose got all the bells and whistles but we don’t want to pay 90 dollars an hour to change a toilet. So you get Joe Handyman. That’s the practical versus legal side of it.
Mike: Right. Right. Okay, and so do you think it makes a difference if an attorney is investing themselves versus not?
Bill: I think so, or just has the business experience to see the difference between the theory, the legal theory, and then the practical reality. There’s a gap there that I certainly bridge very well because I do both. So share that with people. But someone who’s strictly a lawyer and doesn’t invest, or doesn’t do their own business, it’s arm chair lawyer advice. It’s not always practical.
Mike: Right. Right. So for somebody that has a lot of advice to give and certainly a lot of opinions too, I’m sure, tell us how some of the, I know you have a number of books you’ve written that have been best sellers, why don’t you tell us about some of the books you have out and how folks could find some of those if they want to learn more about your philosophy.
Bill: Sure, well, I have five books that I’ve written that are published by big publishing houses that are available on Amazon.com and also my website at Legalwiz.com. Also we have a number of home study programs, streaming on-demand programs, downloads, articles, and Legalwiz is just loaded. You could write a 1,000 page book on the information that’s on Legalwiz.com.
Mike: That’s great. That’s great. So if you want to find out more, just go to Legalwiz.
Mike: …sift through…
Bill: You can sign up. I have free membership where you can sign up for a bunch of great videos and you can get really good advice and information. Not just fluff but 4 or 5 hours’ worth of free videos.
Mike. Okay. Okay. Great. And, I don’t know if you’re actively involved anymore, but I know you’re one of the co-founders of the Colorado Association of Real Estate Investors. I’m a huge proponent of REIA clubs and, in fact, I’ve made that, for folks that visit FlipNerd.com, we only have about 4 tabs on the site and one of those is a REIA club finder. Which will improve over time. But, I’m a big fan of REIA clubs because everybody I talk to started out by going to a REIA club and didn’t know what they were doing, and were surrounded by, maybe, a bunch of other people that didn’t know what they were doing but together, and through some of the vendors and support of the club, they found out how to make their way in this way, so, I think it’s really, kind of the back bone of the real estate investor community.
But, why don’t you tell us about your experience with starting that club and how it helped you, I’m sure in many ways, it helped you learn a lot as well, even…
Bill: Absolutely. I started the club in ’94 with my partner at the time, who was my mom and I really didn’t want to have anything to do with it. She said, look, this will be good networking and we can find more deals this way, and I said, all right, whatever, we’ll start the club. And then eventually she moved and handed it off to me and I said, all right, what am I going to do with this thing and I just kind of molded it into a forum where people could not only network, learn but it’s just sometimes just moral support. You need to be around like-minded people, the mastermind principle of people who are rich. That are doing the same thing. So, when you go home and your aunt, your uncle, and your cousin, and your neighbors tell you you’re insane, it’s good to be a place where you can go where everyone thinks, no, you’re not insane, this is what we do, you know. We’re all crazy real estate investors.
Mike: Yep. Yep.
Bill: So I’m a big proponent of that too. I think people should go to their local REIA’s and find who’s the more experienced people and kind of latch on to them the best they can and use the resources of the group, a lot of times that’s seminars or they have trainings and things like that. All good stuff because, again, it’s that 10,000 hour thing. You get past that 10,000 hour thing by either doing it or by leveraging the experience of other people that have the 10,000 hours.
Bill: You can definitely get past that learning curve a lot quicker.
Mike: Yep. Yep. What do you, while I’ve got you, while we’re talking about REIA clubs, what do you think is the right balance? I interview a number of REIA club presidents and things now and I will continue to do so. What do you think is the right balance in a REIA club because there are some clubs that are probably more sales-y than educational because the club business, it is a business for most folks. It’s a thankless business. I mean, it’s hard to see how they make money. And obviously a lot of folks do it to help feed business to maybe, a law practice or a title company or do deals with people and things like that but why don’t you talk a little bit about your kind of, philosophy on the balance between location and….
Bill: Yeah, I think people get caught up a little bit too much on the quote, sales issue. You watch TV for an hour and they put on a commercial, you don’t throw your shoe at the TV and say oh, damn, there’s a commercial. As long as the speaker that is presenting is articulate, entertaining, and most of all, gives good content, then if they have something to sell you can buy it or not buy it. No big deal.
My experience has been when we bring in people who are not polished speakers, who are just like a local mortgage guy, who’s probably giving really good, practical advice, everybody’s falling asleep, because it’s either you hire and pay professional speakers to give just content or you hire speakers who have something to sell who will speak for very little or for free. And that’s how they monetize what they do, by the revenue they get from selling their books and tapes. And hey, if you get three or four good ideas from that person and they had something to sell and you didn’t buy it, so what?
So I don’t think there’s anything wrong with having speakers that sell stuff. I know there’s a certain segment of the group that will always go, ah, they always have something to sell as they’re walking out with the books under their arms on the way out. So, I think that’s more of a red herring. As long as the information is good, if there’s a commercial in it, so what?
Mike: Yeah, in all honesty, I think, in my experience, which is limited in the real estate space in terms of time, in the early day, I guess 6, 8 years ago, it felt like there was less education. I think most people who have something to sell now know that they need to go educate and from that, some sales may occur. It’s not, like, I’m going to…
Bill: It used to be days where they’d come in and say, hey on page 42 of my book you’ll find blah, blah, blah. You know, they wouldn’t give any information. You’d listen for an hour and a half and go, that was really entertaining but what the hell did he say? I don’t think most speakers are like that anymore.
Mike: Yeah. Yeah. It’s gone through some evolution there.
Bill: They understand that you need to feed people some information otherwise they’re just going to turn off.
Mike: Right, so, why don’t you tell us, what do you think is going on in the market these days? We’re sitting here in February 2014 and a lot of folks are feeling some markets are getting tight, there’s a lot of inventory that’s, a lot of low inventory levels in most major markets, and…
Bill: Same thing everywhere pretty much.
Mike: Lots of hedge funds buying up stuff and over-paying for things and it’s making everything tight right now. Interest rates are still low. If you had a crystal ball over the next year or two, let’s talk about residential or single family first, but what do you think is going on and what do you think is going to happen over the next year or two?
Bill: I think we’re still going to see tight inventory. I think lenders know that if they flood the market with the rest of their inventory, they’re going to ultimately get less, so they’re propping up the market somewhat artificially in a mini bubble so they get more for their inventory. That’s a good thing for us because it keeps prices up and if you buy a house you know you have it sold as soon as you put a for sale sign on it. That’s the good news. The bad news is if you’re working on the MLS there’s no inventory. But there’s still thousands of people in every market who are motivated from divorce, foreclosure, loss of job, death in the family, whatever, that you can find.
So, I think, what, in my experience, the for sale by owner game hasn’t changed. It’s still good. It’s just that the MLS game has changed, where there’s just instead of having 40,000 properties on the market there’s only maybe 10 or 12. So, you’re right, and hedge funds have pulled out of a lot of those markets. And it has caused a slide in a lot of those markets. For example, LA, which was going up 22% a year, all of a sudden, has fallen in the last 8 months. Because the hedge funds pulled out and it’s returned to a normal market. So a lot of markets that dropped 50% went up 25 in 2 to 3 years are now going to flatten off to probably 4 to 8% which is healthy. So that’s what I think we’ll see in the next couple of years. Interest rates going up a little bit.
Mike: Yeah, they have to eventually. And do you think differently about commercial?
Bill: I think that depends on the type of commercial and the market you’re in. And the class within that. So, for example, multi- family has a class, especially on the B, C side that’s going to remain very good because there’s just not a lot of inventory nationally, there’s not a lot of building of, they don’t build C class apartments unless the government subsidizes it. So, C class apartments are stuff from the ’60’s that used to be B 30 years ago. They’re not building new C. So that’s a good market for investors. B class apartments still good, still solid investing market, but new stuff that’s where the competition is because that’s what’s being built. There’s a lot of inventory to be eaten up by things like hedge funds and real estate investment trusts. That’s your competition.
Bill: So, I think apartments on the B, C side are good. I think that hotels, believe it or not, in a lot of markets is doing very well. Light industrial is doing very well. Office, that’s a crap shoot. The long term trend is, people are working from home, telecommuting, working in virtual offices, and there’s a bad long term demand for that and shopping malls.
Bill: eBay and Amazon just killed that.
Mike: Yep. Yep.
Bill: But there’s opportunity in every market. It’s the same basic formula. Find someone who’s motivated, whether it be residential or commercial, and strike a deal.
Mike: Yep. Yep. Well tell us about some of the things you have, that you might have coming up that folks can, where to see you, where to find you at?
Bill: Yeah, on my website, at Legalwiz.com, you can click on “Seminars,” and I have a number of them coming up, I have about every two to three months I do a seminar, usually in Denver. Great place to visit, whether you want to come skiing and write it off or come in summer time and go camping in the mountains. It’s wonderful. But, the next one I have coming up is Apartment Investing seminar. So how to make money in small apartments. I’m going to go through two days of that. Of how to find them, finance them, negotiate them, bring in partners, and put it all together with not a lot of money out of pocket.
The only thing about commercial people don’t understand is you can buy apartments with no money out of pocket. Not hard to do. Probably even easier than single family. But the due diligence is going to break you because it’s not $300 for an appraisal for a 40 unit apartment building. It’s $3,000. And you can spend $3,000 and then not close the deal and you’re out 3 grand.
Bill: But if you spend all that money up front on an apartment building and then get partners to replenish that, you can walk out of closing with no money, even money out of closing, and own a piece of a deal.
Bill: Not that hard to do.
Mike: Yep. Yep. Interesting. Well hey, I appreciate you coming on the show today. It was good to meet you and…
Bill: My pleasure.
Mike: Yeah, and so, what we’ll do is we’ll add links for Legalwiz.com which just goes to Legalwiz.com but we’ll add links for that and some of the other things we talked about here today so that folks can get a hold of you. And, appreciate you being on the show and appreciate your information and your insights and I’m sure we’ll be talking again soon.
Bill: My pleasure, Mike, thank you.
Mike: Okay. Thanks. Have a great day. Thanks for joining us on today’s FlipNerd.com podcast. To listen to more of our shows and hear from incredible guests, please access all of our podcasts in the iTunes store. You can also watch the video versions of our shows by visiting us at FlipNerd.com.