How Brian Murray Went From Teacher to Multifamily Real Estate Success:

Brian Murray Bio:

Brian Murray is the CEO of Washington Street Properties and a seasoned commercial and multifamily real estate investor based in upstate New York. Starting his journey as a teacher with no investment background, Brian creatively acquired his first 50,000-square-foot office building through mortgage assumption and hands-on management, turning it from a loss-making property into a profitable asset. Over nearly two decades, he has grown his portfolio to over 300 units and multiple commercial properties valued in the $30-40 million range. Brian’s unique approach combines deep local market knowledge, value-add renovations, and strategic expense management, including innovative solutions like R.U.B.S. and careful staffing decisions. He shares practical insights on deal analysis, renegotiation, and property management, making him a valuable voice for investors seeking to build lifetime cash flow. Brian is also the author of “Crushing It in Apartments and Commercial Real Estate: How a Small Investor Can Make It Big,” offering guidance drawn from his real-world successes and setbacks. Outside of real estate, Brian and his wife are avid marathon runners, reflecting his dedication and endurance both on and off the field.

Key Takeaways

Welcome, Warriors! Today’s episode with Brian Murray is packed with real-world lessons on creative financing, expense management, and building a thriving real estate portfolio. Brian’s journey from teaching marketing and entrepreneurship to owning 300+ multifamily units and commercial properties is a blueprint for anyone ready to crush it in real estate.

Creative Financing Wins:

• Brian’s first big deal was a 50,000 sq ft office building purchased through mortgage assumption, allowing him to get in with very little cash.
• He negotiated around $200K off the asking price by leveraging the seller’s prepayment penalty (defeasance), a smart move many investors overlook.
• Owner financing and off-market deals are gold mines—Brian’s second property was retail, bought with owner financing, proving motivated sellers create opportunities.

Expense Analysis & NOI Boosting Strategies:

• High operating expenses can kill your cash flow. Brian found excessive utility bills caused by a locked thermostat and inefficient heating/cooling practices.
• Simple fixes like unlocking and properly programming thermostats cut utility costs in half.
• Labor costs were high due to an ineffective full-time superintendent; Brian replaced him and took a hands-on approach initially.
• Property tax assessments can be challenged to reduce expenses—Brian successfully lowered his taxes by working with the assessor.
• Implementing RUBS (Ratio Utility Billing Systems) can help recover utility costs in multifamily properties, but always consider local market competition.

Value Add Renovations:

• Brian’s first multifamily was a 30-unit neglected property with mold and high vacancy.
• He renovated units one at a time as they became vacant, minimizing upfront capital expenditures and letting the property pay for improvements.
• This approach is a smart way to increase rents and build equity without over-leveraging.

Building a Team & Scaling:

• Initially, Brian managed everything himself, waking up early and working evenings to turn properties around.
• Once workload stabilized, he hired a full-time superintendent/maintenance person and a part-time property manager.
• Today, with 30+ properties, Brian’s team has grown to 17, including in-house cleaning, painting, and flooring specialists to reduce contractor costs.
• Keeping properties within a 30-minute radius of the office helps maintain control and efficiency.

Lessons from Mistakes:

• Brian openly admits to daily mistakes and setbacks—embrace them as part of the journey.
• He cautions against over-optimism, especially with auction properties, which can become “money pits” due to hidden issues like environmental remediation.
• Always leave sufficient reserves for unexpected repairs and inspections, particularly with older buildings.

Unique Opportunities:

• Brian converted a distressed 50-door hotel into apartments, focusing on studios to meet market demand.
• The conversion required a new Certificate of Occupancy and upgrades like sprinklers and kitchenettes, but the investment paid off with a significant appraisal increase.

Mindset & Action:

• The biggest key to success is mindset—think big, be willing to learn, and don’t be afraid to start even if you don’t know everything.
• Use your network and experts to fill knowledge gaps.
• Most importantly, take action. You can figure it out as you go, but if you don’t start, you won’t get anywhere.

Warriors, Brian’s story is a powerful reminder that creative financing, diligent expense management, and relentless hustle can turn overlooked properties into cash flowing assets. Whether you’re eyeing multifamily, retail, or office, the principles are the same: dig deep, add value, and build your team smartly.

For more inspiration, check out Brian’s book Crushing It In Apartments and Commercial Real Estate on Amazon. And remember, your mindset is your greatest asset—get out there and crush it!

In Today’s Episode You’ll Learn

Main Topics

• What is defeasance? (Prepayment penalties and creative financing)
• What is a retrade and when to renegotiate a deal
• How to check rent rolls and validate tenant information
• Techniques to reduce high operating expenses
• Implementation of RUBS (Ration Utility Billing Systems)
• Strategies to increase NOI (Net Operating Income)
• Identifying clues that indicate a property is worth investing in
• The importance of renovating units as they become available
• Determining when to hire full-time employees versus using contractors
• Warnings about purchasing properties at auctions
• Book recommendation: “Crushing It In Apartments and Commercial Real Estate: How a Small Investor Can Make It Big”

Full Podcast Transcript: Ep #125 – Brian Murray on Real Estate Investing

Introduction and Podcast Launch

Rod Khleif: A couple of quick things, we’re now over 1.2
million downloads for this podcast, and I’m just blown away by that, every
time I look at the numbers. Everyday I get a nice email or two, or a
handwritten thank you card from one of you guys. I’ve got this board on my
house where I put those cards. All I can say is, thank you, sincerely,
thank you.

I’ve spoken with and or communicated with close to 1000 of you. Adding
value to you has honestly made me reconsider my mission and purpose in
life. Many of you asked me for coaching, or mentoring, or to create a
course, or some training materials, and I never started this podcast with
the intent to do that. But I’ve gotten so much pleasure out of those
conversations, and the gratitude I’ve gotten from so many of you I finally
decided to go ahead and do it.

So in a few weeks, I’m launching really an incredible course and coaching
program. I wanna help you guys crush it in your lives, in your personal
lives, and in your business, and help you build your own lifetime cash flow
as fast as possible. So if you wanna get some more information on that
course, the coaching, when it comes available just text the word Crush to
41411.

Don’t forget, my free book is still free. I’ve been so busy creating the
course, I haven’t had time to finish getting it, and I’m real close to
finally getting it on Amazon. Every review I’ve gotten on that book has
been really, really good. So if you haven’t gotten your free copy make sure
you do. You can go to rodkhleif.com or you can just text Rod to 41411.
Again, that’s Rod to 41411. All right, let’s get to it.

Rod Khleif: Welcome to another edition of How to Build
Lifetime CashFlow Through Real Estate Investing. I’m Rod Khleif, and I’m
thrilled you’re here. I know you’re gonna get a ton of value with the
gentleman we’re interviewing today. His name is Brian Murray, and he’s the
CEO of Washington Street Properties. They’re a commercial property
investor. They’re apartment investors. They’re real estate owner-operators.
He founded the company in 2007, and they’ve got a mixed portfolio of
multi-family and other commercial properties, in the 30 to 40 million
range. I know they have 300 plus apartments right now, and we’re gonna dig
in today. Brian, thanks for being on the show.

Brian Murray: Hi, Rod. Thanks for having me. Excited to be
here.

Getting Started in Real Estate

Rod Khleif: Absolutely. Expand on my intro a little bit,
and tell us how you got involved in real estate. What sort of a progression
you made in your investing career?

Brian Murray: Sure. Going back to 2004, 2005, I was making a
transition. I had been working in the corporate sector, and had a change in
career, and started teaching. While I was excited about the lifestyle
change I noticed I was having a little trouble making ends meet. I always
had an interest in real estate, and decided that, “Hey, this might be an
opportunity to pick up some little more cash flow and help me out.”

Rod Khleif: Yeah, teaching is probably the most noble
profession and unfortunately, it’s not high on the pay scale which is just
a travesty in my opinion. May I ask, what were you teaching by the way?

Brian Murray: Yeah, I was teaching marketing and
entrepreneurship.

Rod Khleif: Oh, well those are very interesting topics.
Those are two of my favorite, actually. So you got into real estate, what
did you start with? Tell us about your first deal.

Brian Murray: Sure. At the time I was looking at both
residential and commercial properties. I started off looking kinda small.
I hadn’t owned a rental before. One time, I had moved and temporarily
rented my house out but I really, really hadn’t looked at it as an
investment, up until that point. While I was initially looking at the
smaller properties, I wasn’t really happy with the kind of returns I was
finding. I gradually expanded the types of properties I was looking at.
Eventually, the one I settled on was a 50,000 square foot office building.
Certainly not what I would have ever dreamed…

Rod Khleif: Wow.

Brian Murray: And frankly, I really, to this day, will
fully admit that I didn’t know what I was doing, but I got excited about it
and that ended up being my first one.

Dissecting the First Deal

Rod Khleif: Do you mind if we dissect that deal? Because
you told me a little of your story, and I know that it’s got some interesting
parallels that’ll add value to my listeners.

Brian Murray: Yes.

Rod Khleif: So if you don’t mind, let’s dissect it.

Brian Murray: Yeah. Absolutely.

Rod Khleif: How’d you find it, to start with? Then just
walk your way through the transaction and I’ll interrupt and interject
questions as you go.

Brian Murray: Yeah, a broker brought it to me. Like I said,
I was looking at larger and larger properties. I was also learning about
different ways to be creative, and how I might be able to finance a larger
property. I started to realize that even though I had a limited amount of
money to invest at the time, that there were some sellers in the
commercial space who would be creative and work with me. This particular
property, I ended up working out a deal where the seller helped me to assume
their mortgage. So I was able to get in to it with very little cash.

Rod Khleif: Now, did you indicate this to your broker, that
you were looking for creative type purchases? Is that how that got sent to
you? How did you get in front of the seller? Let me ask you, no—answer
those two questions.

Brian Murray: Sure. I think it started when I just started
to look at a little bit larger properties, and it was a different broker
that came to me and said, “Hey, I’ve got a property for you. You might find
this interesting. I know you weren’t looking for something this large but
there’s a motivated seller here, and he’s got a way to get you in with very
little money down.”

Rod Khleif: Okay. Alright.

Brian Murray: And that particular property wasn’t the one I
ended up with but it really got me thinking and helped me to be creative,
and dig into some of these alternative ways to finance a larger project. It
sort of opened my eyes at what might be possible. So when this one came
along, and they brought it to me, even the broker wasn’t particularly excited
about it. But because it was losing a lot of money, it had a lot of problems.
Looking around, it was obvious it wasn’t being well cared for. It was half
empty, the expenses were high, the labor was high, the utilities were high,
the taxes were high. Not everything was high though, ‘cause the revenue was
low. [chuckles]

Rod Khleif: Were you able to speak directly to the seller as
you got involved in the transaction? Is that how you were able to—had the
broker been okay with that? Sometimes, the brokers will try to avoid having
you speak directly to a seller but you were able to communicate directly?

Brian Murray: Actually, everything went through the broker.

Rod Khleif: It did. Okay.

Brian Murray: All the way up until the point where kind of the
rubber hit the road with the bank and the mortgage assumption. That’s where
dealing with this larger seller who really just wanted to get rid of this
property. It was the last property they had in the region. They wanted out.
It had been for sale for a long time. I was a small buyer. The bank was
reluctant for me to refinance, and the seller actually stepped in. They had
a lot of properties financed with this bank, and they actually worked with
me to put some pressure on the bank—to encourage them to say, “Hey, let’s
work with this guy and try to make something happen.”

Rod Khleif: I wanna get back to the high expenses and all the
things that you discovered but let’s talk about how this deal came together
financing-wise. So you assumed the existing debt, what else made it creative?

Brian Murray: Well, the asking price at the time was $1.2
million. Way beyond what I thought I could have done. But what I found out
was that that mortgage that the seller had had a huge payoff penalty. It was
north of $200,000—I believe it was around $250,000 early payoff penalty—and
they were factoring in that penalty with their asking price. Once I
discovered that, that’s when I said, “Wow. What if I was to be able to work
with you, assume this mortgage—would you pass that savings along to me?” And
they were open to that.

Rod Khleif: Fantastic. So you got a $200K off, just like that.

Brian Murray: Exactly. Exactly.

Rod Khleif: By the way guys, you’ll hear prepayment penalty is
called defeasance sometimes. It’s very common; particularly in CMBS debt where
it’s non-recourse debt and they have very stiff prepayment penalties called
defeasance. Yes, that’s a creative way to get around it. So the purchase
price was a million, how much was the debt?

Brian Murray: Well, the debt—I should say, that as I dug into
this, that’s what the initial contract price was. But as I did my due
diligence, we uncovered a lot of surprises, things that I had been misled on.
There were a lot of inaccuracies as that came forward, and we ended up
renegotiating the price of the contract a couple of different times. Now,
that’s not something I would normally recommend. It’s not a practice I’ve
actually employed on any of my other deals but in this particular one there
were tenants listed on the rent roll that didn’t exist. There were expenses
that I uncovered that weren’t previously disclosed. There were some major
problems and my own broker counseled me. He said, “Hey, normally we wouldn’t
recommend this but in this situation you have every right to go in there. Your
valuation was based on the due diligence materials provided.” I ended up with a
final contract price of $834,000.

Rod Khleif: Wow, that’s fantastic. Just to hammer home what
you just said, you don’t wanna be known as the guy that re-trades every deal.
Retrade is renegotiate. You don’t wanna be that guy, unless you’ve been
misled. Like in your situation there, Brian. They left out expenses. If
they’re significant, that’s a big deal. I mean, certainly, you’ll find
expenses—sometimes small ones—and things of that nature, but tenants on the
rent roll that didn’t exist, that’s a big one.

Brian Murray: I go into every deal expecting to find things
that are a little bit of a surprise.

Rod Khleif: Right.

Brian Murray: And I don’t re-trade. But there is a limit to
that. Right?

Rod Khleif: Right.

Brian Murray: That was the case here. I also negotiated a couple
of credits in there. The mortgage I assumed covered over 90% of the purchase
price.

Rod Khleif: Wow.

Brian Murray: I ended up having to come up with less than
$50,000 to make this acquisition, and I took all my savings at the time. I
actually ended up draining my retirement account—not necessarily something I
would recommend to everybody—but I went all in. This was a big move for me…

Addressing Expense and Operational Improvements

Rod Khleif: That sounds like a sweet deal, regardless. No
issue there. So you’re analyzing this deal and you saw really high expenses.
Can we drill in on that a little bit? Some of the things that you identified,
so my listeners can get an idea of things they should be looking for as
potential opportunities. Because guys, I will tell you, everybody says LoopNet
is the place deals go to die. But if you drill in sometimes you can find
fantastic deals that other people have overlooked because they haven’t dug
into the expenses. So, Brian, take it away.

Brian Murray: Yeah, and I think what really helped is that
this was a local property. I was familiar with the community, and I had feet
on the ground, and was able to spend a lot of time digging into this and
talking to people. But frankly, as soon as you walked up to the property,
the property was very well located. Architecturally, it was beautiful but it
clearly had not been taken care of. What I mean by that is, you can look around
and see, “Hey, the landscaping hadn’t been touched in years…”

Rod Khleif: Let me interject one thing, guys. I hope you
realize that I’m going down this path even though it’s an office property,
because almost everything parallels what you could experience in a
multi-family. That’s why I’m going down this off-the-highway here a little bit.
So please stick with me, because there are lots of parallels and things that
you can encounter in any sector of real estate including multi-family. So I
just wanna throw that in. Brian, thanks.

Brian Murray: Yeah, and absolutely. Just to reinforce that,
it’s the lessons I learned on this deal that set the stage for my move into
multi-family.

Rod Khleif: By the way, guys, let me interject something.
Brian just wrote a book, which I have not had the pleasure of reading yet but
I am really looking forward to it. It’s called Crushing It In Apartments and
Commercial Real Estate: How a Small Investor Can Make It Big. It’s on Amazon.
Based on what I know about Brian, I am sure it’s fantastic. Check it out—
Crushing It In Apartments and Commercial Real Estate. We’ll have the link on
the show notes… Anyway, please continue. You drilled into the expenses…

Brian Murray: Yeah, so some of the things were very
obvious. I made a lot of trips to the property, observed a lot of things;
because it was a mortgage assumption it was under contract for a very long
time when we worked that out. A couple of things beyond the neglect that I
saw: on the warmest day, the windows would be wide open and the air
conditioner would be cranking. The superintendent would turn it on high,
and it would be too cold even though it was brutally hot outside and the
tenants would control the temperature by opening their windows.

Rod Khleif: Wow.

Brian Murray: I noticed that in the fall, the air
conditioner got turned off and the boiler immediately got turned on high.
It was too hot even on the coldest days, and what happened, the windows got
opened.

Rod Khleif: Sure. You’re heating the entire city.

Brian Murray: Exactly. Again, I didn’t know a lot at the
time. I didn’t have a lot of experience with real estate, I had no practical
experience but I knew that shouldn’t be happening, and it could be addressed.
I was confident that I could address it.

Rod Khleif: So before we move on, how did you address those?
That issue with tenants opening windows and the costs.

Brian Murray: Well, it came hand-in-hand with a third
issue…

[00:15:00]

Brian Murray: Which was the superintendent. One of the
largest expenses was labor. I still remember that the day I closed on the
property, I walked from where the closing was over to this property and I
met with the superintendent. I said, “First thing I wanna see, is show me where
the thermostat is. How are you controlling the temperature here?” He walked
me to the location, showed me the thermostat, and it was locked. I asked him
how to unlock it and he told me he had no idea.

Rod Khleif: Wow.

Brian Murray: I asked how he was controlling the temperature
in the building and he said he’s not. I ended up firing him. [chuckles]

Rod Khleif: Yeah… duh? [laughter]

Brian Murray: Frankly, he wasn’t doing much. Another side
story, but I found a woodshop on the site that he was refinishing furniture
in—and that’s how he spent his days, as opposed to tending to the property.

Rod Khleif: Yeah.

Brian Murray: But the way I solved it was that I got online,
looked up the 1-800 customer service number from the thermostat manufacturer,
called them, and they walked me through how to unlock it. I got a manual on
how to program it. I made sure that it was adjusting according to the
temperature, the way it should have been. And I set it to turn down at night,
during weekends when there wasn’t anybody there. That simple step cut the
utility bills in half in the first year.

Rod Khleif: Wow. Now, as it relates to multi-family, guys,
you’re gonna find properties sometimes that have very high utility
expenses. There are options there. One of the common ones is instituting
what’s called RUBS, or Ration Utility Billing Systems. There are companies
that will do that for you, where they’ll bill back the utilities. The only
caveat with that is you need to make sure that you’re not pricing yourself out
of the market with competition, if the competition’s not doing that. But if
you’ve got a real utility issue, that is an option—even if you’re not
sub-metered for utilities, they ratio the bill back. If you’re sub-metered,
then you can do it a little differently… Anyway… That’s why when you’re
looking at a property’s financials, you really wanna drill into the expenses.
So this property had a superintendent; was this guy full time?

Brian Murray: He was.

Rod Khleif: Ah, see. Then that’s, frankly, unnecessary in my
opinion—unless you have a leasing person onsite—but to have a full-time
superintendent doesn’t even make sense. So it’s very common that you’ll find
a property where the owner has allowed somebody that’s been with them for a
long time to manage the property, grossly overpaying them, and regularly they’re
not doing a great job. There are opportunities when you’re drilling into the
expenses to find ways to immediately improve your NOI. As you guys know, NOI
directly correlates to the value—so anything you can do to increase the rent
or decrease the expenses improves the net operating income, and then
depending on what the cap rate is, immediately impacts the value. You wanna
be looking for those anomalies when you’re going through the expenses.
What was that you said, high labor and high utility expenses—anything else
substantial?

Brian Murray: Yeah, the taxes were high. The assessment,
when I put it under contract, was three times my purchase price. So I went in
and met with the assessor, and talked about it, provided him with copies of
the financials, and he told me that the assessment had already been challenged,
and he planned to reduce it. That cut the taxes substantially as well.

Rod Khleif: Yeah. See, that’s another big one. You’ll find
that sometimes, guys, you’ll find a property that has been over-assessed,
especially depending on when you buy. Sometimes, a lot of them have come back
down after the crash here—but when did you buy that property?

Brian Murray: 2007.

Rod Khleif: Yeah, so it was right in the midst of the
crash.

Brian Murray: Yeah.

Rod Khleif: That was an opportunity there, but on the flip
side of that the thing you always wanna be careful of when you’re buying a
property, guys, is you wanna be sure that you check with the assessor to see
what’s gonna happen to the taxes based on the new purchase price, if it’s
higher than existing. So the flip side is also very, very important so you
don’t underestimate your expenses on a property because you didn’t take into
account the fact that the taxes are going to go up. Okay, so what else about
that deal?

Brian Murray: So yeah… All of these improvements and
expenses were addressed. The fact that there was so much vacancy—I found out
that the prior owners had failed to pay commissions in the past, and none of
the local brokers would show space at that property. I had to re-establish
relationships with those brokers and say, “Hey, listen, it’s under new
ownership. I’m local, I’m gonna take care of you,” and I demonstrated that,
built those relationships, and immediately they started bringing me tenants.
I took care of them and that building filled up within the first two years.
All the while, I replaced that superintendent with myself. I made the
decision. I couldn’t afford to quit my job, but what I did was I got up before
dawn every morning. I went in, walked the property, unlocked to turn all the
lights on, checked everything out, cleaned up outside, went back during my
lunch hour if I could, and I went back at the end of the day. I did that for 2
years until things got turned around, and all those changes took a property
that was losing money like crazy, and made it profitable from the very first
day I walked in. So I was able to create an enormous amount of equity there;
I couldn’t get a bank to lend to me even after I turned it around. It was a
very challenging time.

Rod Khleif: Oh, sure. Sure, you were in the middle of the
crush there, so yeah.

Brian Murray: When I eventually found my second property,
this time I was fortunate enough to find a similarly neglected property.

Rod Khleif: Office again?

Brian Murray: This was retail.

Rod Khleif: Retail, okay. Let me stop for one second. I
wanna interject something ‘cause you were talking about how you couldn’t get
brokers to come show the property. Of course, that doesn’t relate to
multi-family but the parallel to multi-family that I would say is it’s very
common to find a property that’s being poorly managed. Be on the lookout
for that because that was obviously the case with this property as well.
Sometimes, you wanna mystery shop because you’ll find that maybe the person
that’s in charge of leasing just really doesn’t care; he’s not showing the
properties, or doesn’t return phone calls, or doesn’t answer the phone—that’s
not uncommon at all. There are opportunities when that happens as well, so
that’s the parallel I wanted to interject. So the next one was retail. Let’s
chat about that for a moment, see if there are some parallels.

Brian Murray: Yeah, next one was retail, a lot of parallels in
terms of being owned by somebody who just wasn’t paying attention to it. It
wasn’t their primary line of business. They were willing to extend me owner
financing so I was able to get my second property; still hadn’t used a bank.
I applied the same type of turnaround, took really good care of it, built
relationships, leased it up, and when I had both of those two properties turned
around, I finally got a bank to say yes. I refinanced them, pulled the equity
out. I bought 3 more properties including my first multi-family, and from that
point forward it was off to the races.

Rod Khleif: Smooth sailing, yeah. See, you had the gift of
working in a tough market because I will tell you that most people or companies
that start in a depression like you started in are usually very successful.
Because they can make it in those tough times… Like you couldn’t get financing,
I know, I went through it. It was hell. That you were actually able to acquire
properties during that time without bank financing, without being able to
refinance and utilize equity that you’d created to buy more properties, speaks
to how hard you went after it. So my hat’s off to you on that. That’s awesome.
You brought something up on that retail property, where you found a seller—
this property became a stepchild. If you get a seller at the right time, you
will find deals even in this crazy market we’re in right now. That’s hot.
You find an off-market deal and you get a seller right when they’re motivated.
That’s why I tell people, start a mailing campaign, and if you’re the person
that’s in front of them when they’re ready to sell, you’ll get phone calls from
sellers, and obviously, the name of the game is motivated sellers. You got
somebody that was motivated; they gave you owner financing which is as good as
it gets as far as financing in my opinion, and you’re only gonna find those
with off-market deals. Talk about your first multi-family. What was that?

Brian Murray: Sure. The first multi-family was a 30-unit property,
and from the experience that I’ve had with office and retail, I was looking for
the same thing, and I found it. I was looking for that property that had been
neglected, had untapped potential, and would lend itself to me going in,
rolling up my sleeves, and getting to work on it.

Rod Khleif: Yeah. I forgot to ask, tell my listeners, where you’re
based and these properties are all in your general area, correct?

Brian Murray: Yes. We’re in upstate New York, Northern New York.

Rod Khleif: Okay. Alright, continue.

Brian Murray: Yep.

Rod Khleif: So 30 units, you saw it was run down.

Brian Murray: 30 units, it was clearly neglected. It was
interesting because the first time we went to see it, we ran into a prospective
tenant who had sought the property out on their own, called the owner, and
they didn’t send anyone to do showings. They just left the door unlocked for the
prospective tenant to walk in and poke around.

Rod Khleif: That’s a clue, guys.

Brian Murray: Yeah. [chuckles]

Rod Khleif: That’s a clue. Right, awesome.

Brian Murray: There was one unit that at some point had some
water damage and mold, and it was to the point that it was like walking into
a cave. Not leasable. There was much higher vacancy on the property than there
was in the market overall, and we…

Rod Khleif: That’s another clue, guys. Okay.

Brian Murray: I knew that if we stepped in, took care of this
property, treated it right, and managed it well, that we could fill it up,
charge higher rents, and create good equity.

Rod Khleif: Give us some numbers. What did you end up getting it
for? Did you get bank financing on it?

Brian Murray: We did.

Rod Khleif: Okay.

Brian Murray: We financed it with some of the equity I was
able to pull out in refinancing the other properties. The purchase price was
$1.3 million, I believe. We’ve since refinanced it, and it’s appraised
substantially higher than that. But we went through and did exactly what…
That unit that had mold, we ended up entirely gutting. But most of the rest
were just dated finishes. You go in, change out the shaggy old carpet and the
dated fixtures, for a modest investment on a per-unit basis. Of course, we
started with the vacant units.

Rod Khleif: Sure.

Brian Murray: We didn’t have to make a large investment
upfront. We would upgrade the units one at a time as they became vacant. The
way we went about it, it did take some time, but it eliminated you having to
take on that extra debt upfront.

Rod Khleif: Right. Big CapEx expense right out of the gate—
you just renovate units as they become available. That minimizes your upfront
expenses and you can let the property pay for your ongoing renovations.
That’s a great approach.

Brian Murray: Yep.

Rod Khleif: You said, tell me about your team. I know you’ve
got 300 plus units and many other commercial properties. What were the members
of your team? What were they back then? I’m guessing it was just you.

Brian Murray: The first two years, it was just me. At that
point, I had enough properties that I first brought on a full-time superintendent
to be on call and take care of much of the maintenance as we could do ourselves
in-house.

Rod Khleif: So your superintendent was also a maintenance person.

Brian Murray: That’s right.

Rod Khleif: Okay. Good. That’s perfect.

Brian Murray: When I reached a point where I felt there could be
a consistent enough workload—especially when you take on value-add properties—
you can have surges in workload. I didn’t want to overstaff, but when you’re
using contractors and then reach that point where you can consistently utilize
someone full-time, that’s when I’ll pull the trigger.

Rod Khleif: Yep, same here, good call.

Brian Murray: So I started with him; shortly after that I took on
a part-time property management person who would do showings, handle the bills,
and things like that.

Rod Khleif: Let me ask you another question. At what point
did you quit your job? How many years in?

Brian Murray: I didn’t quit my job until my revenues hit
$2,000,000, which was seven years in.

Rod Khleif: Wow, so full-time job, you got to $2,000,000 in
gross annual revenue.

Brian Murray: Two, sorry, I didn’t quit until I got
$2,000,000.

Rod Khleif: Oh, $2,000,000 in seven years.

Brian Murray: Now, we’re between five and six. We might hit
$6,000,000 in revenue this year.

Rod Khleif: Fantastic.

Brian Murray: We’re up to a staff of 17 at this point, and now
we’ve got more than 30 properties we’re taking care of.

Rod Khleif: Wow. And the 17 includes some on-site people, I
take it, as well?

Brian Murray: Yes, it does.

Brian Murray: We carefully utilize a lot of contractors, but we
also take some things in-house. For instance, we do our own cleaning. We’ve got
guys on staff who can take care of the flooring, painting—things that a lot of
other operators might outsource. If you don’t have a larger portfolio and you
get those surges in workload, it makes a lot more sense to use contractors.
But if you reach a certain critical mass where you can keep people busy, it’s
more economical for us.

Brian Murray: Now, the other thing I should mention is that
all of our properties are within a 30-minute drive of our main office. So a lot…

Rod Khleif: That’s fantastic. That’s fantastic. I didn’t get that
memo, by the way.

Brian Murray: [chuckles]

Rod Khleif: I had 800 houses, apartments, apartment buildings,
two hours in each direction which is part of the reason I imploded… But no,
everything you just said really resonated with me. I had a full-time cleaning
person as well. You find the skills that you need regularly. Painting for sure,
you’re always painting something, cleaning something—when you have some scale.

[00:30:00]

Rod Khleif: Flooring can be such a huge expense. If you can
bring somebody in-house that can do that for you, that can really cut down on
your expenses as well. I assume you thought of that when you brought that person in.

Brian Murray: Yep.

Rod Khleif: Yeah, and of course, maintenance—just general
maintenance—that’s kind of a no-brainer. You need a full-time person when you get
to a certain point.

Brian Murray: When we continued to grow, and as the market got a
little stronger, as it did across the country, we got a little more creative.
We tackled some larger value-add projects. We bought a distressed hotel and
converted that into an apartment building.

Rod Khleif: Wow. I didn’t know that. Tell me about that deal.
How many-door hotel was it?

Brian Murray: It was 50.

Rod Khleif: 50 doors?

Brian Murray: Yup.

Rod Khleif: Did you combine units into apartments?

Brian Murray: We combined some of them, but in looking at the
market we felt there was a need for studios. There had been a lot of one-bedroom,
two-bedroom, three-bedroom units built over the years but there weren’t many studio
options. We felt like we could maximize the rent per square foot by keeping as many
as possible as studios. We ended up with 48 units, but we also turned an office,
we turned some other open space into living space.

Rod Khleif: Oh, living space.

Brian Murray: Into units, so there was a lot of common area and a little
bit of excess common area.

Rod Khleif: Was this hotel all exterior doors or was it interior doors?

Brian Murray: Interior doors, one main entrance.

Rod Khleif: No kidding, wow.

Brian Murray: Yeah.

Rod Khleif: Good for you.

Brian Murray: We combined some, but most of them remained studios.
We have kind of micro studios and then larger studios. Approximately 75% of the
units in that property are studios.

Rod Khleif: Guys, those of you listening: that’s an opportunity.
I know there’s a local guy here in Sarasota doing it very successfully—converting
hotels to apartments. You see these rundown hotels, sometimes motels along the side
of the road. There can be an opportunity there.

Brian Murray: Yeah.

Rod Khleif: Just to dig into that a bit more: you didn’t have to get
new zoning on that, I take it, because the hotel’s pretty dense, or did you?

Brian Murray: We had… It’s considered a change in use.

Rod Khleif: Okay.

Brian Murray: However, the change in use required a new Certificate
of Occupancy. So it did trigger some code requirements. The property was zoned
correctly…

Rod Khleif: Okay.

Brian Murray: However, the change in use required a new Certificate
of Occupancy, so it triggered essentially the same standards as if you were building
new.

Rod Khleif: Oh, wow. That’s a big deal.

Brian Murray: Yeah, it was. I was…

Rod Khleif: Okay.

Brian Murray: That’s something for any of your listeners who want to
approach a similar opportunity. Yeah, they’re fantastic opportunities but for example,
about 50% of the property was sprinklered when I bought it. We had to sprinkler the rest.

Rod Khleif: Oh, you did. Okay, okay. Wow. Did you have to add a lot
of electrical? A lot of hotels don’t have the typical electrical outlets that you need
in a residential solution. Did you have to do a lot of things of that nature?

Brian Murray: Well, we had to install kitchenettes, which required GFI
outlets. I think the other issue that came up is we had to convert a number of the units
to be handicap accessible, or what they call handicap adaptable—which frankly was
somewhat frustrating. We had to tear out some perfectly good bathrooms and…

Rod Khleif: Yeah, yeah.

Brian Murray: And put it back together, and in some cases just install
blocking inside the walls to meet requirements in case they needed to be converted to
handicap accessible. But that’s what we needed to do.

Rod Khleif: What was your CapEx expense on that deal?

Brian Murray: We put about $300,000 into that.

Rod Khleif: That’s not bad.

Brian Murray: Yeah.

Rod Khleif: Fantastic. Fantastic.

Brian Murray: So we purchased it at $1.2 million, we negotiated a
$100,000 credit with the seller that would go toward the renovation. Then we took out
a construction loan to finance the conversion. All in, we were between $1.4 and
$1.5 million, and it appraised at $2 million when we were done.

Lessons Learned and Advice for Aspiring Investors

Rod Khleif: Now, let’s back off for a moment. A lot of my listeners might
not have pulled the trigger yet. They listen to the podcast, maybe they’ve read my book.
I encourage them to check out your book, and then they just haven’t taken action.
What would you tell them on how to get started and what to do?

Brian Murray: Well, I think the biggest thing is having the proper mindset.
I could talk all day about all the little things you need to do to get ready, but I encourage
you guys to read Rod’s book, to read my book, read other people’s books, and gain that knowledge.
But you know what—think big. I would have never thought I could go out and buy a 50,000 square
foot office building. Not in my wildest dreams. But the more I dug into it, the more I realized
the things I didn’t know, and I could figure them out along the way. And you don’t have to do it
alone; there are people you can consult with. When I walked into the boiler room of that property—
that first property—I might as well have been in a spaceship. I had no idea what I was looking at,
but guess what? I could pick up the phone and call somebody to come walk me through things and help
me out. You don’t need to be intimidated; there are people out there to help you. The biggest thing
is just do it. Get out there and do it. You can figure it out as you go, but if you don’t ever get
started, you’re not gonna go very far.

Rod Khleif: Now, great advice. Great advice. Anybody listening to the podcast knows
I’m all about mindset. That’s the number one thing—it’s 80% of it. You’ve heard me say it ad nauseam,
because it’s the truth. That’s great advice. Let me ask you one last thing: you’ve told us about some
victory stories, but sometimes I like to ask, what is a victory story but also a time when you got your
nose bloodied? Tell me about a time you got your butt kicked, made a mistake, and what the takeaway was.

Brian Murray: Yeah, I can give you a few examples, and I will give you one specific example.
But before I do that, I should say, I make mistakes every day. I have setbacks every single day. And if
anybody tells you they don’t, and that they’re not making mistakes, they’re not doing enough. So the key
is to accept upfront that you’re gonna make those mistakes, and you’re gonna have setbacks, and that’s all
part of the deal. I go through a bunch of my mistakes in my book because I want people to understand, “Hey,
you can get out there and you can do it anyway. You can learn from these mistakes and move on.” After I did
that hotel, prices were pretty high in my market. It has since cooled off, but at that time, I was trying to be
resourceful and I bought two different apartment buildings at foreclosure auctions. One of them went pretty well.
Then, when I went to the next one, I got a little too confident. I didn’t plan enough for all the things that could
go wrong. It turned into one of the worst nightmares. Everybody that was working for me at the time—we all called it
The Money Pit. Every time we tried to fix one problem, another one showed up. Environmental issues needed to be
addressed, and we had remediation costs. We ended up, for something that we expected to only need finishes, ending
up entirely gutting the property—new mechanical systems, everything from the ground up. In fact, it had two buildings:
the main building was a converted Victorian that had 20 units, and it had a converted carriage house that had eight.
By the time we finished the main building, we decided to bite the bullet and just tear down the other one…

Rod Khleif: So very old property…

Brian Murray: Very old.

Rod Khleif: Okay.

Brian Murray: So by the time we finished the main building, we decided, bite the bullet and just tear
down the other one… because we didn’t want to go through it again. And we lost a lot of money.

Rod Khleif: Wow.

Brian Murray: That’s not the only time. The biggest takeaway from that is: don’t be overly optimistic
and assume that everything is going to be fine. Especially with really old properties where you could only get a
cursory review because you didn’t get a chance to do a proper inspection. Under those circumstances, you’ve got
to leave enough allowances in there, because you will find things you don’t expect.

Rod Khleif: Yeah, and guys, that goes for any auction, for that matter. There’s a reason people auction
properties. Don’t get caught up in the fervor. They’re priced very, very low to get your attention and
excitement, but always be careful. I’m not saying you can’t get fantastic deals at auctions, but go in with both eyes
wide open and allowances ready.

Rod Khleif: Well, listen, Brian, thank you so much. You’ve added a ton of value today. I hope you guys
realize the parallels between these different types of real estate that Brian has done so successfully in multi-family.
You may want to look at other sectors, because there’s money to be made in every sector of real estate. Brian, thank you
so much for your time. Check out his book, guys. And Brian, let’s stay in touch, my friend.

Brian Murray: Thank you, Rod. I appreciate it and best of luck to you and all your listeners.

Rod Khleif: By the way, before you go, what are all those medals on the wall behind you? For those listening,
we’re actually on video here.

Brian Murray: [chuckles]

Rod Khleif: What are those?

Brian Murray: Uh, that… my wife and I are big runners.

Rod Khleif: Wow.

Brian Murray: We do one or two marathons every year, and it…

Rod Khleif: Yeah. There must be like 30 to 40 medals behind you. Holy cow!

Brian Murray: [chuckles]

Rod Khleif: You do a lot of running. Well, good for you.

Brian Murray: Yeah.

Rod Khleif: Alright, well thanks again, buddy. I appreciate your time and your valuable insights.

Brian Murray: Thanks, Rod. Take care.

Rod Khleif: Alright. Take care. Bye now.

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Closing

Thank you for listening to the Lifetime CashFlow Through Real Estate Investing Podcast.
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