Ep #199 – Brie Schmidt Owns and Manages 90+ Multifamily Units in Chicago and Milwaukee

Here’s some of what you will learn

  • Brie started investing in Real Estate in August 2011 by buying a live in triplex.  By 2014 she had built a multi-million dollar privately held portfolio and became a full time real estate investor.
  • The importance of identifying your motivation for being in the business.
  • The importance of setting clear goals to make sure your choices help you get there.
  • The benefits of using FHA loans to get started in investing.
  • The benefits of living in an owned plex at a reduced rate or free to springboard your investment career.
  • The importance of proper budgeting and reducing expenses to have more money for investing.
  • The importance of knowing your markets and investing according to your investment goals.
  • Tips on studying markets and how to get started in a different market.
  • The importance of keeping your tenants happy to avoid turnover.
  • The importance of asking questions and developing relationships.
  • The benefits of having a small broker as a property manager to manage small properties.
  • The benefits of getting referrals from brokers and property managers.
  • The importance of networking and relationship-building to get access to the best in the business.
  • The options available for financing your deals.
  • The possible challenges that come from buying property out of state.
  • The importance of getting to know your partners before a long term “buy and hold” investment.
  • The importance of good communication and setting proper expectations with your partners.
  • The potential setbacks you may have in a cash-flow market.
  • The importance of always doing the right thing in the business and following your intuition.
  • The importance of immersing yourself fully in the business and gaining experience to move forward.
  • The importance of having a solid team to help you be successful in the business.

About our Guest:

Brie Schmidt can be reached at:

http://www.chicagobrie.com/

Information on Brie’s Real Estate Summit can be found at:

www.MidwestRESummit.com

Watch on YouTube!

Do you want to learn more about Multifamily Real Estate Investing? Work with Rod in the Lifetime CashFlow Academy's Multifamily Course & Coaching Program

Full Transcript Below:

Ep #199 – Brie Schmidt Owns and manages 90+ Multifamily Units in Chicago and Milwaukee

Rod Khleif: Welcome to another edition of How to Build Lifetime Cash Flow Through Real Estate Investing. I’m Rod Khleif, and I am thrilled you’re here. I know you’re gonna enjoy the dynamic lady we’re interviewing today.

Her name is Brie Schmidt and she’s a real powerhouse in the Chicago area, and the Milwaukee area. She’s got a great story. She’s got an awesome event coming up that we’re gonna talk about. We’re just very blessed to have her on the show. Brie, welcome to the show.

Brie Schmidt: Thanks for having me.

Rod Khleif: Absolutely. Tell us a little bit about why real estate. Tell us where you’re at now, and how you got there, if you’d take a few minutes.

Brie Schmidt: Sure. For me, I’m a lifetime investor, or a lifestyle investor.

Rod Khleif: Mm-hmm.

Brie Schmidt: A few years ago, I had bought a property with the intention of… We bought a three-flat, with the intention of de-converting it to a single-family at some point. As our family grew, we would have options to take one floor and add it together, and then make it a big single-family house.

About nine months after we purchased that property, my father passed away from cancer. The real kicker was that he passed away, literally, one day before he was set to retire.

The few years before he passed, he’d always talked about, “When I retire, I’m gonna go do this… When I retire, I’m gonna go to Thailand.” Or “I’m gonna go to Europe where I’m gonna…” and he never got that opportunity to do all the things he talked about doing.

It really messed with me, when I was thinking; at that point, I was 30, and I was working a corporate job. I had spent a few years building my career. I was traveling a ton. I was working 60 hours a week, and it dawned on me like what if I don’t get to enjoy all the things that I’m thinking about doing when I retire?

How can I retire sooner? And real estate became the answer to that question. We started buying properties, and all building around the lifestyle goal. For me, the lifestyle goal is being able to do what I want, when I wanna do it.

Every decision that I’ve made over the last five, six years, every business direction I’ve gone in are things that I’ve involved myself in is all involved with how does this affect my lifestyle goal. How does this affect my ability to do what I want, when I wanna do it?

Through that, we started buying properties in 2011, 2012, 2013, things were… Buying one property a year, learning the business, building the foundation. 2014, I bought 10 properties. 2015, I bought another 13, and then so on and so forth.

Now, I have a portfolio of 31 properties, and over 92 units. I was able to quit my corporate job in 2014, and essentially, retire.

Rod Khleif: One plex at a time.

Brie Schmidt: Yeah.

Rod Khleif: That is absolutely fantastic. I love that. Of course you started at the perfect time as well… Very sorry about your father.

Brie Schmidt: Thank you.

Rod Khleif: That’s so gripping, and such a powerful message because you’re so right. I mean, so many people achieve, achieve, achieve to be happy, or focus on their retirement… Well, they could be supplementing all that with a full-time job.

I have interviewed so many people on this show that have built multi-million dollar portfolios on the side, and then ultimately they can leave. Yeah, that’s quite a message.

I know you’re in the Chicago area, so let’s talk about how you did this. Let’s list… Can we break this down a little bit?

Brie Schmidt: Of course.

Rod Khleif: Because I’ve got so many people on the show that wanna get started. It’s kind of ironic that you bought that three-unit to actually expand into it.

I try to push people to, if they’re gonna buy a house, and they’re not so concerned about the white picket fence to go buy a fourplex, or triplex, and start your investment career that way. Live in a unit, live for free or a reduced rate, and then have that be your first investment property.

In fact, Grant Cardone got into it with me on the last interview I had with him, because he said, “Go to 16 units, immediately.” And we had a vet ask a question about using their VA to buy a fourplex. And he and I kinda went toe to toe, a little bit on that because I’m like, “Yeah. If you’ve got free money, use it to buy a plex.”

Let me ask you, how did you buy your plexes? Did you do it all with your own money? Did you bring investors in? How did you structure your deals, if we can get a little granule?

Brie Schmidt: Of course. That’s a great question. The first property we did with an FHA, owner-occupied…

Rod Khleif: Of course.

Brie Schmidt: With 12% down loan. The second one, I’ve never lived in. So that one was just a matter of, we had moved. We’re living for free.

Rod Khleif: Right. Right.

Brie Schmidt: Yeah. So we have been saving one income up until we had moved. Now we had that income saved plus the money that we were saving in rent that led to the purpose of the second one, which was [overlap talk]

Rod Khleif: That’s fantastic. Can I stop you for one second? Guys, I hope you heard that, okay.  If you do this… They were living for free, able to save money on rent, and use that money to springboard into the next one. That’s a huge clue, my friends. For those of you who that haven’t taken action yet, I’m sorry I just had to draw attention to that.

Brie Schmidt: No. I’m that… I’m a managing broker of Second City Real Estate, which is Chicago based brokerage that works investors. And that’s exactly what we teach.

Rod Khleif: Awesome.

Brie Schmidt: I get calls everyday from people, like, “Hey, I wanna learn about investing.” My first thing is, “Let’s talk about your finances. Where you at with your money? Don’t buy something because you only have X amount of dollars. There’s two ways to make money. Either make more money or save money. So let’s talk about budgeting; being aware of your finances. Where can you catch stuff?”

Rod Khleif: Oh, that’s awesome. Good for you.

Brie Schmidt: Yeah. I still follow the same budget that I had seven years ago when I started all these. It’s super important to me. Like even when I go to buy a new pair of shoes. To me it’s a $100 pair of shoes but it’s, what is that costing me in terms of my real estate investing ability to buy more property… [overlap talk]

Rod Khleif: When I had 200 units, I lived in a one-bedroom apartment. I could’ve live much better than that but that’s how you do it, guys. You cut now to play later. You grind now to play later. You lower your immediate needs to have incredible resources later. Awesome. You’re giving us some great messages here.

Brie Schmidt: Yup. It’s like my car is a 2010…

Rod Khleif: Right. Right.

Brie Schmidt: It has scratches all over it but I don’t care. It’s not something that I need. I need more apartment buildings, and I need more cash flow. I don’t need Alexis with a $600 a month payment. That’s ridiculous.

But yeah, so we then got the second property in Chicago. The third property was also in Chicago. That was an owner-occupied property, and that was not our original intention. Our original goal was to buy four apartment buildings, then we would buy our single-family dream house, pay them all off with the cash flow, and then retire in 20 years.

The third property came up and it was an estate sale in a great neighborhood, it needed a lot of work. We did a pretty large renovation of it, and then… [overlap talk]

Rod Khleif: But you moved into it though.

Brie Schmidt: We did.

Rod Khleif: Yeah, and so you were able to get great financing again.

Brie Schmidt: Great financing.

Rod Khleif: Yeah. See, that’s how you do it guys. Now, don’t play with that by the way. Don’t say you’re gonna move in and not move in. you actually need to move in. you don’t wanna mess around with that. But you don’t have to stay in that first fourplex, or triplex, for duplex for more than a couple of years. You can absolutely trade up, and do another one. Awesome.

Brie Schmidt: The advice I always give my clients is, “If you’re doing this right, you’re only gonna live there for a year.”

Rod Khleif: There you go.

Brie Schmidt: And can you handle the quote unquote, “sacrifice” of maybe living in a smaller unit, or a neighborhood that’s a little bit too far from the train, or whatever it may be for the long-term gain of having your tenants pay your mortgage. It’s as simple as that.

But yeah, the third property was kind of the catalyst for us because it was a rehab property. We did the renovations on it and we did a cash-out refinance six months later, and we were able to pull out a decent amount of money. That is when things sort of shifted for us.

We were looking at buying again in Chicago. Chicago is a pretty well balanced market. It’s not a cash flow market. It’s definitely a cash flow and appreciation market. So it’s going to take lots of properties to actually supplement your income in this market.

Our property price ranges are from 400 to 600,000. It’s not like you could buy 10 properties in a year…

Rod Khleif: Right. On your own…

Brie Schmidt: On your own. Of course.

Rod Khleif: Right.

Brie Schmidt: So then I started looking at other markets. I went and looked at Milwaukee, St Louis, Indianapolis, Kansas City.

Rod Khleif: All great markets. Yeah. Okay.

Brie Schmidt: All great markets for a cash flow play.

Rod Khleif: Right.

Brie Schmidt: My thoughts on it were, Chicago builds my long-term wealth appreciation… my wealth.

Rod Khleif: Right.

Brie Schmidt: I needed a market that would pay my monthly bills.

Rod Khleif: Very.

Brie Schmidt: I landed on Milwaukee. It was a market that I felt comfortable with. Nothing wrong with the other markets but it’s set up very much like Chicago, which is the dense urban environment where a lot of major part of the housing stock is two to four units.

Rod Khleif: Fantastic.

Brie Schmidt: You’re able to get urban properties within our close distance of downtown but you’re not resting till you’re sacrificing your tenant class because every other property is two to four units, so there’s a lot of renters that rent those kinds of buildings.

Rod Khleif: Fantastic.

Brie Schmidt: I started to go up there. I learned the market.

Rod Khleif: Talk about how you studied that market. Do you mind sharing a little bit? Just some tips there please. Thank you.

Brie Schmidt: Yeah. It’s not easy learning a new market. Especially when you’re starting from scratch.

Rod Khleif: Right.

Brie Schmidt: What I did is, I got referrals of four agents in the area.

Rod Khleif: Perfect.

Brie Schmidt: First of all, I said…

[00:10:00]

Brie Schmidt: “Listen, I’ve got X amount of dollars to spend, I’m gonna come up for the day, I want you to show me, if you had this much money to spend, what would you buy and why? I wanna spend a few hours with you going to tour properties. I want you to explain to me, why you’re picking this area? Why you would invest with this?”

I went with those four agents and that kinda gave me a crash course in the market…

Rod Khleif: Love it.

Brie Schmidt: They all had a different perspectives. They all…[overlap talk]

Rod Khleif: Different opinions, sure.

Brie Schmidt: I found a market that I was comfortable with.

Rod Khleif: You mean sub-market.

Brie Schmidt: A sub-market that [overlap talk] I was comfortable with.

Rod Khleif: Right. Okay.

Brie Schmidt: And it just so happened that we were doing a showing, the agent on the other end that was showing the property… As we walked up to the property, one of the tenants was sitting on the front porch. He was like, “Oh hey, how was your kid’s soccer game?” We were on to the other tenant and he was like, “Oh, how was your mother doing?” And he just seemed to know the tenants, and that’s how we kind of operate our business in Chicago.

Rod Khleif: It’s the best way.

Brie Schmidt: It’s the best way.

Rod Khleif: You take care of your tenants and they will take care of you. There’s no greater expense than turn over.

Brie Schmidt: There isn’t.

Rod Khleif: If you can keep your tenants happy, they will pay market rent; they won’t move. If they love you, they will stay. And that needs to be your focus guys, whenever you do this, even in a property as small as a duplex.

Brie Schmidt: Yep.

Rod Khleif: Awesome. Awesome.

Brie Schmidt: Yeah. It was a three-unit property. As we were leaving the showing, I’d asked him, “Do you have any other properties?”  And he was like, “Well actually, I’m the seller of this property. So I’m the seller, and the manager, and the agent.  This is my only property, but my in-laws own a bunch of properties in the area.

We ended up going under contract for seven properties, all within their family because … [overlap talk]

Rod Khleif: Just because you ask the questions.

Brie Schmidt: Mm-hmm.

Rod Khleif: Guys, that’s a clue. You have to ask. If you don’t ask, you’re never gonna know. Beautiful. Love it. Awesome.

Brie Schmidt: Yeah. He ended up… We ended up… I said… I really liked how he [overlap talk]

Rod Khleif: Is he your manager?

Brie Schmidt: He was. [overlap talk]

Rod Khleif: Oh, fantastic. I was gonna ask you that. I mean, god, he sounds like the perfect property manager. By the way, guys, if you’re buying units, smaller units out of state, a small broker like that can be your best resource as a property manager. What you’ll do is you’ll let one of the tenants; you give them 100 bucks off the rent or maybe a little more. They’ll keep the place clean then maybe help with the showings. They’ll be your eyes on the place.

But then you have a broker that just overseas everything and that’s a great framework for managing small properties long distance. You’re giving us tons of great stuff here. Keep going.

Brie Schmidt: Yeah. It just so happened that he was a teacher. He was out of school by like 2:30 and their family had had… They’ve got condutores, they’re painters, they’re plumbers, all in-house. They’ve been investing in the area for 50 years.

Rod Khleif: So you got access to all of those resources, and that’s another great tip, guys. When you find someone you like, get referrals. They know who the best people are; the best attorneys, the best title companies. Maybe if it’s a property management company, the best brokers. The banks to go to, the contractors, that’s how you do it, it’s with referrals so you don’t have any seminars when… With the learning experiences, as we like to call them, with the wrong vendors. Awesome. Keep going.

Brie Schmidt: And that’s a great point. I’ll just touch on that real quick, cause I host a meet-up in the Chicago area, for investors. It’s been going on for three and a half years. I love it so much. I don’t ask for anything out of it. We don’t charge anything for it.

Rod Khleif: What’s it called? So we can give it a shout out.

Brie Schmidt: It’s the Chicago Investors Meet-up.

Rod Khleif: Chicago Investors Meet-up. While we’re on it, guys, she is having a conference called the Midwest Real Estate Networking Conference, in Chicago on May 11th through the 13th.

You know I do not promote these things but they’re not having anybody go there to sell anything. It’s a networking event. It’s a training event, and I absolutely am behind things like that. In fact, we just had my bootcamp recently, and we spent a ton of time having people networking, create relationships, and you guys know I’ve got that closed Facebook group for multifamily on Facebook.

If you’re not on there you’re crazy because there are people connecting all over the country. Just go to multifamilycommunity.com and it’s a direct link to that Facebook group. There’s like 5500 people on there. It’s only been up for three months. People connecting all over the country.

I’m absolutely behind Brie’s here, May 11th through the 13th, Midwest Real Estate Networking Conference. How do they get information to that, Brie?

Brie Schmidt: The website is MidwestRESummit.com.

Rod Khleif: Perfect. MidwestRESummit.com. It’ll be in the show notes, guys. I’m absolutely behind that. Highly recommend. If you’re in the Chicago area, it’s kind of a no-brainer. Okay. Alright, Brie, please continue.

Brie Schmidt: Yeah. So I’d go back to the referral thing. I just had a situation where a client of mine bought a property we found out, it’s been flooding for 20 years. The whole sewage system under the property was routed incorrectly. That is something I never had to deal with.

I’m so lucky to have made friends, and my friends are flippers and developers, over the years of these networking events, that I’m able to just text them and say, “Hey, listen, here’s what’s going on, I need only like your top referral. Don’t give me someone you’re a maybe about, because this is a situation that needs…”

Rod Khleif: That’s a big one. Yeah. That’s a tough one, that’s no fun breaking floors up and rerouting sewer lines. That’s a big one you need somebody good. Okay, that’s… and you were able to call and find the right person just because of the networking, because you’re out there meeting people.

Guys this is… I really pushed this at my event. It’s so critical. This is a relationship business. It’s a team sport, so you wanna align yourself with the best people in the business, and you do that through referrals. Awesome, Maureen, great tip.

Brie Schmidt: Yeah. So we bought 10 properties in six months.

Rod Khleif: Wow.

Brie Schmidt: And then we bought eight properties in the next six months… [overlap talk]

Rod Khleif: Let me stop you there. How did you finance those deals? How did you put that together?

Brie Schmidt: Great question. Commercial financing.

Rod Khleif: Okay. So you went to a local bank, and you did a package loan, on the whole group of properties.

Brie Schmidt: Mm-hmm. I went with the regional bank.

Rod Khleif: That’s the best, guys, you heard me talk… I’m sorry to keep interrupting but I wanna keep interjecting stuff here because it’s really relevant. Guys, when you go into a market, you wanna develop relationships with local or regional banks. Not the Bank of America, the BB&T, the Fifth, or the Chase, the Wells Fargo, none of those.

You want the regional banks, because you can develop relationships with those people. You’d absolutely wanna do that. If they see you, they see your integrity, they see your passion, you can… They will sway the loan committee because they want your business. They are there in the relationship business, you wanna set up an account there, you wanna start that relationship.

I don’t know if you heard me talk about this, I interviewed a kid, a year and a half ago in Michigan, that bought a million dollar property for $5000 down, with bank financing, ‘cause of that relationship. So those are the kind of banks you wanna go to.

So you went to a regional bank. You got the loan… You got the financing there. Fantastic.

Brie Schmidt: Yeah, well kind of a back-story, I had a really hard time finding a bank. That would work with me. At that point, I’d only owned three. I’ve only been doing this for a few years. I was out of state…[overlap talk]

Rod Khleif: Yeah. That’s a big hurdle, by the way. Guys, when you’re going… I’m sorry.

Brie Schmidt: Go ahead.

Rod Khleif: I keep… I wanna add things here because that’s relevant.

When you’re going into another city, you’re gonna wanna start relationships with the banks there. If you don’t live there, that needs to be one of the first questions, out of your mouth. First of all, do you loan on multifamily? Secondly, would you do business with an out-of-state investor? And they may not, because they want local relationships.

That’s a question you need to ask right out of the gate so you’re not wasting your time developing a relationship with a bank that’ll never really wanna work with you.

Brie Schmidt: It was… I must have called 20 banks, and that they all just said no.

Rod Khleif: Right.

Brie Schmidt: They didn’t even wanna see the numbers, it was a no go at that point. So I actually had gotten to contact a broker, a commercial real estate lending broker. He facilitated the relationship. I sent him over all my financials, my profile, my PFS, the portfolios I was looking at, and he called me in a day and said that, “I got someone that’s willing to do this, I’m gonna charge two points, on the first deal, and then… [overlap talk]

Rod Khleif: Worth every penny.

Brie Schmidt: I’ve done 23 loans with that bank. So I…[overlap talk]

Rod Khleif: Yeah. Fantastic. It’s a local Milwaukee bank?

Brie Schmidt: It’s Regional Banks…[overlap talk]

Rod Khleif: Regional Bank, but their footprint is in Milwaukee.

Brie Schmidt: Yep.

Rod Khleif: Okay.

Brie Schmidt: I think they’re in maybe 18 states.

Rod Khleif: Fantastic.

Brie Schmidt: But yeah, it was… [overlap talk]

Rod Khleif: That’s the advantage of using a broker because you can go direct to banks, but brokers will have relationships with numerous banks. Their job is to know what banks do what, what sort of programs they have, what they like, what sectors of real estate they prefer to loan in, and so, that’s what you had to do. Awesome. Now, you’ve got a great relationship with a good bank.

Brie Schmidt: Yeah. And that’s a great point because the banks will change their appetite. They might not want any small multifamily and they only want large. Then they might switch up their portfolio. It might get too heavy in one area, so that’s where, yeah, a broker comes in, it’s like in 24 hours, he did what I had done, or had not accomplished in about three hours.

Rod Khleif: Okay. Awesome.

Brie Schmidt: So that’s how we started with… Yeah, so it’s commercial financing… I bought, so it’s 18 properties in 12 months.

Rod Khleif: Did you get help from for the equity, or were you able to pull it off yourself?

Brie Schmidt: I was able to do the first ten on my own.

Rod Khleif: Good for you.

Brie Schmidt: The next eight, I have a wonderful brother who owns his house free and clear, and he let me do a line of credit against his house… as a favor ‘cause he loves his sister.

Rod Khleif: That’s beautiful. Awesome. Awesome.

[00:20:00]

Brie Schmidt: Under the agreement that I had 18 months to pay it back.

Rod Khleif: Wow.

Brie Schmidt: Which I did.

Rod Khleif: No kidding.

Brie Schmidt: He lent me like $140,000 and that’s how I did the next set of properties.

Rod Khleif: Fantastic. Fantastic.

Brie Schmidt: It was at that point that people have been approaching me about wanting to work with me, and looking to partner. I had two guys in particular that I had been talking to for about a year, at this point.

Every month, when I would do my own numbers, I would send them an email like, “Hey, here’s what I’m seeing in the market”, or, “Here’s some problems we had this month, and how I handled it.” Or “I’m looking at some new properties, here’s my analysis on them. Here’s what I’m thinking.”

At that point, once I had hit my personal investment goal, which was, we hit it in May 2015, was when I was ready to take on partners. It was great because the guy, we’ve been talking for a year. They already knew me. They already knew my decision-making abilities. They already trusted me. We already got a relationship established.

I think one of them has been to Milwaukee once, before we bought. One of them didn’t come to Milwaukee until over a year after we bought.

Rod Khleif: Because you developed relationships, you took your time, you got to know them, they got to know you. Guys, this is a team sport, and it’s a relationship sport. When you’re doing partnerships, you really need to know who you’re gonna do business with.

I give my coaching students a big long list of preparatory questions, asking the hard questions upfront, but you also have to really trust your intuition. And that’s why you did it right, Brie, you got to know them first because I will tell you, I’ve had dozens of partnerships most of them have been resounding successes, some have been spectacular seminars because…

By the way, Brie, if you don’t know, I call failures, seminars. That’s my stock thing there… But some of them have been seminars because I didn’t trust my intuition. And whenever you don’t trust your intuition… If it doesn’t feel right, don’t do it. Trust it. It’s always right, guys. So that’s awesome. Lot’s of great tips here.

Brie Schmidt: I agree 1000% with that. It’s hard when people are like, “Hey, I’ve got a million dollars…”

Rod Khleif: Yes.

Brie Schmidt: “I’ll give you a million dollars.” I go like…

Rod Khleif: Well that’s the conflict.

Brie Schmidt: Yup.

Rod Khleif: It’s your greed versus your intuition. But trust the intuition. It’s not worth the money my friends. Trust me on this.

Brie Schmidt: It’s not.

Rod Khleif: Ask me how I know, [chuckles] because that’s how it works. Let me ask you this Brie…

Brie Schmidt: Go ahead.

Rod Khleif: I’m sorry, finish your thought. You were gonna say something, but I got a question…

Brie Schmidt: I was gonna say, now it’s been a few years later, into these partnerships, I think with buy and hold, it’s not like if you guys don’t get along, or something comes up, it’s not like you could… you’re out of the deal in six months.

Rod Khleif: You’re married.

Brie Schmidt: You’re married.

Rod Khleif: Yeah. [chuckles]

Brie Schmidt: And they’ve been the greatest partnerships, again, because we spent that time upfront. So I’m able to make decisions and make calls within the business, and not get second-guessed, because they know me. They know where my thoughts [overlap talk]

Rod Khleif: They know who you are. They know you’ve got a heart. They know you’ve got their best interest at heart. I’m sure that you have regular communication with them.

Brie Schmidt: Of course.

Rod Khleif: See, guys, that’s another critical key. Every time one of my… every time I’ve had a partnership seminar, when I look back on what happened, it was always their… It was me trying to communicate but it was always a breakdown of communication. Their refusal to communicate… Communication is critical in these types of relationships.

Just like in a marriage. [chuckles] It’s the same thing; you got to communicate.

Brie Schmidt: And expectations.

Rod Khleif: Yeah, and manage expectations. Don’t oversell and under-deliver, under-sell and over-deliver.

Brie Schmidt: Of course.

Rod Khleif: The bottom line, that’s basic way to do business. Period. Let me ask you this, Brie, is there a dark time in your journey. Talk about some of your seminar, some of your… Times you got your nose bloodied. What happened? And how you dealt with it. Maybe give us a doozy like your big one… ‘cause we all have them. Everybody thinks this journey to success is easy…

Brie Schmidt: It’s not.

Rod Khleif: But it’s worth it. But you’ve got to understand you’re gonna have setbacks. So talk about one of yours.

Brie Schmidt: My setbacks are mainly in relation to Milwaukee.

Rod Khleif: Okay.

Brie Schmidt: Dealing with cash flow market, it’s about setting expectations. When I went into that market, I came from Chicago, which is again, A, B class, super easy. My tenants called me maybe once, twice a year, tops.

The cash flow market is a totally different beast. My expectations were not realistic when I first went in, which led to me being disappointed, or getting myself in situations. The reality is, in that type of market, the swings are so much higher and lower. It’s not an even keeled thing. It’s an up or it’s down… [overlap talk]

Rod Khleif: You mean, what goes down? Just… Is it values, rents…

Brie Schmidt: Just all of it.

Rod Khleif: What are we talking about?

Brie Schmidt: Just recently, I had 10 units vacated, all within 30 days.

Rod Khleif: Wow.

Brie Schmidt: All that needed a lot of work.

Rod Khleif: Oh, no.

Brie Schmidt: I had over $50,000 of rent, running on renovations that I had to do. [overlap talk]

Rod Khleif: Do you know why that happened? Was it just the leases expired on the same date? Or do you just have a bunch of move outs? Is it, you’d have…

Brie Schmidt: It was a variety of things.

Rod Khleif: Okay.

Brie Schmidt: A few people, I think three lost their job, and just moved out. A couple, I think two, we had to evict. A couple we’re just long-term tenants, who were just moving on. But it all happens at once, it doesn’t happen one at a time, and so you can get on to things quite quickly. That’s the reality of that sort of market.

I can go six months without a single vacancy across 90 something units. Then I can have 14 vacancies all at one month that all need work. So now my staff is over worked because they can’t do all 14 at the same time. Now, it’s taking us two months to get everything rent ready, and leased out. That’s just the reality of it.

Rod Khleif: That’s your biggest expense in this business, guys. It’s turn over. That’s why, taking care of those tenants is so critical… What would you designate the class of those properties or areas in Milwaukee? Are they C, C minus—what are they?

Brie Schmidt: I’d call them C class.

Rod Khleif: C, straight C, okay.

Brie Schmidt: We do accept Section 8 tenants up there. We don’t have any that are Section 8 but it’s definitely a blue-collar, working class, and you know, where, if they lose their job and they don’t find something quickly, they’re just… They’re not gonna be able to pay rent.

Rod Khleif: Right.

Brie Schmidt: It’s as simple as that. They don’t have the savings to cover them. Though that… There’s a lot of things, especially on the holidays, people get behind, and they’re just not budgeting well, which we kinda work with people. But they need to communicate with us about it.

Rod Khleif: Sure. That’s again… Same, same, same, same, same, when they don’t communicate, you have to push forward with an eviction. So you really wanna do everything you can to try to get in front of them, and see if you can work something out, if it’s possible in that class of property. Because that was the bulk of what I did as well, so I’m very, very familiar with that dynamic.

Brie Schmidt: Yeah. [chuckles] That’s where scale comes to play. I think it’s super important especially if you are investing out-of-state in a C class market. Having that scale is so incredibly important, where if you only got two or three duplexes, or whatever two or three properties, for some reason when one tenant turns bad, both tenants turn bad, the whole building vacates. If that’s one-third of your portfolio, it’s bad.

Rod Khleif: It’s painful.

Brie Schmidt: It’s painful.

Rod Khleif: That’s very painful. And you’re right, wherever, if you’re gonna go into a market, the best way to go into a market is to get scale, if you can, and not just have one or two properties. You wanna go in there, and play for the long game, build a portfolio, get yourself the ability to have some leverage with property managers, with vendors, with other people. People that are gonna take you seriously because if you don’t they’re gonna work for their top clients that have a ton of properties first, and you’re gonna get pushed to the side.

Brie Schmidt: Couldn’t agree more.

Rod Khleif: Okay… Are there… Do you… You’re a very driven lady, so I wanna ask a couple of psychology related questions, if you don’t mind.

Brie Schmidt: Go ahead.

Rod Khleif: Tell me about your self-talk. What do you say to yourself? You’re very driven, you’re very successful, tell me some of the things that you say to yourself, in this business, or maybe when you get up… I don’t know if you’ve got any morning rituals, or anything that you do that you feel has contributed to your drive, and your motivation in your success.

Brie Schmidt: I don’t have…[overlap talk]

Rod Khleif: And you weren’t ready for that question.

Brie Schmidt: I know.

Rod Khleif: I’m sorry to throw that at you. [chuckles]

Brie Schmidt: I don’t have any specific affirmations that I say to myself but I trust my gut. That’s what I preach to clients of mine too. It’s, all to me, goes back to how you sleep at night. Right? And I sleep like a baby at night.

I’m not up worrying about what I did, or is this property a bad investment, ‘cause if I had that thought in my head, I don’t buy it. It’s as simple as that. If I’m worried about the outcome of something, I just don’t get involved in that part of the business. I find that, when I rely 1000% on my gut instinct, even if it blows up in my face, and I was completely wrong, at least I trusted my gut.

That would be… and I can handle that sort of bad decision if it was… If I thought it was mine.

Rod Khleif: I love that. Obviously, that relates to relationship, no question. We already talked about that, trusting your intuition. But you know what guys, and you heard me say this before but I’m gonna say it again, I just got through saying it at my event here. If you build your competence, you immerse yourself in this business, you surround yourself with people, you talk the talk, you learn it, you take… You read my book…

[00:30:00]

Rod Khleif: You do courses, go to Brie’s three-days networking event, do these things to immerse your self in this. You will ultimately build your competence to a place where it develops your confidence.

Then after that it starts to develop your ability to have intuition. At this point, Brie, you can go, you can see a triplex, or a three-family, and you’re gonna know very, very quickly, almost immediately, if it’s a deal. I mean, you get to that point.

That’s where you guys need to get and that only comes from repetition. Repetition is the mother of skill. The more deals you look at, the better you’re gonna get. The more deals you evaluate, the more relationships you have, the more you immerse yourself in this business.

Brie Schmidt: Yeah.

Rod Khleif: You can get to that place if you do that, but that’s what it takes. Do you agree?

Brie Schmidt: I couldn’t agree more. Totally.

Rod Khleif: Alright. Okay.

Brie Schmidt: As a realtor, I said I work with clients to start acquiring property. I always tell them, “My job, at the end of the day, teach you enough, that when you are ready to make an offer on a property, you’re not asking for my opinion. You know confidently that is the right decision for you. And it is my job to teach you enough to get to that point.” That is it.

Rod Khleif: That is a fantastic way, and that’s why you’re so successful. Because you base your business model around education and that’s critical. Anyone that sells anything should be doing it from an education-based platform because that’s how you’re successful.

Fantastic. You’ve heard me say it on the show many, many times guys, dabblers get crushed, okay. Do not dabble in this business. Learn the business. That’s awesome that you take it from that framework, Brie.

What are you proudest of?

Brie Schmidt: Oh, god… I’m proudest of having the ability to have the lifestyle that I want.

Rod Khleif: Yeah.

Brie Schmidt: It’s something… It didn’t happen overnight. Every year, it gets further and further. Last year, my goals were, I don’t wanna work more than 30 hours a week. I take vacations eight to 10 weeks a year, and I am…  It’s about efficiency. I have eight LLC’s. I technically own five businesses, 30n hours a week is not a lot. But being efficient in my work, learning to delegate right, spending my time on what’s important.

I’m spending my time on what drives the business that allows me to also have the freedom to travel when I want. All of my businesses are either fully set up, or in the process of being set up to the point where, if I wanna take off… I took off five weeks in Europe last year. They need to run on their own.

I also won’t get myself involved with a business that requires day-to-day long-term. If it’s a six-month commitment, and we’re like, “Hey, I’m taking on this new business”, as this new business, it’s gonna require day-to-day for six months, but then, I can hand it off. That’s okay with me. But it cannot be a long term, like I need to be in Chicago seven days a week, for the next five years, I just won’t do it.

Rod Khleif: You do this via other people on your team you bring in? You leverage this? You hire this? How? Is that what you’re saying?

Brie Schmidt: On some of my business.

Rod Khleif: Okay.

Brie Schmidt: So with the brokerage, I have a team of agents that could go do showings.

Rod Khleif: Right.

Brie Schmidt: I handle all about the consulting, all of the problem solving, all of the strategy, but that’s something I can do over the phone.

Rod Khleif: Okay.

Brie Schmidt: I also don’t take in-person meetings. From the time I get up to the time I start work, it’s about five minutes. I think in-person meetings are kinda a waste of time. By the time it takes me to shower, and put on a dress, then changing the dress, and drive, that’s two hours of my day wasted on something that would have just taken 30 minutes on a phone call. That would be…[overlap talk]

Rod Khleif: That’s very profound. Now, I will tell you, I love the fact that you do this through a lifestyle filter. So many people, and you guys have heard me say this before, you achieve, achieve, achieve to be happy and you’re happily achieving.

You’re making sure you take time for what’s important. And I love the fact that you also mentioned that you focus on what’s most important. You utilize the Pareto Principle, that’s always 20% of what you do that’s gonna get you 80% of the traction, and so you know where to direct your focus.

Brie Schmidt: So it’s been years. I mean, it’s been years to get me to this place. But it’s a constant developing plan. I say every quarter, I kinda sit down, and look, and reflect on the previous quarter. What were my major accomplishments? Where was most of my time spent? And was my time spent there effectively. Is that what’s going to lead my business? If not, how do I outsource that? How do I delegate that? How do I free up that time? [overlap talk]

Rod Khleif: And you reflect, did you say you say yearly or how often do you reflect? I’m sorry.

Brie Schmidt: At least quarterly.

Rod Khleif: Quarterly. Fantastic. Fantastic. Okay. Well, is there any question I haven’t asked you that you wish I had?

Brie Schmidt: No. I think that’s it.

Rod Khleif: Wow. You kicked butt. Thank you so much for being on the show, Brie. It was a real treat for me and you added a ton of value. All of her contact information will be on the show notes guys. And thanks again.

Brie Schmidt: Thank you.

Rod Khleif: Alright. Take care.

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Thank you for listening to the Lifetime Cash Flow Through Real Estate Investing Podcast. If you’ve enjoyed the show, please subscribe, and then take a moment to visit iTunes and leave a five star rating and review. For more resources to connect with us further, please visit our website at lifetimecashflowpodcast.com. Tune in next week for our next show.

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