Episode #216 – Building Your Perfect “Exit Plan” with Mike Morawski, Part 1

You're listening to the REI marketing nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of AdWords nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett

(0:40) All right, hello, and welcome to this week's episode of the REI marketing nerds podcast as always, this is Daniel Barrett here from AdWords nerds.com. And look, you know, if you need more motivated seller leads and deals online, you go over to AdWords nerds.com. And you jump on a free call with our team, we will help you build out a an online marketing strategy for your market. Absolutely free. Now, let's talk about this week's interview because it folks, it is a doozy. I am talking to Mike Moravsky from my core intentions.com. If you don't know Mike, he is an incredibly savvy real estate investor, someone who's very deeply skilled at underwriting, understanding the art of the deal, all that wonderful stuff. But what makes mike so compelling, as he would himself point out is not just his successes, but his past failures and mistakes and how he has overcome them. Mike has one of the most dramatic comeback stories you will ever hear in real estate investing. And I do not say that lightly. I do not want to spoil a single thing. I want you to hear this interview fresh. So without any further ado, let's get into this interview with Mike Moravsky. From my core intentions.com. Mike, welcome to the show. Man. I'm so happy to have your A Dan. Glad to be here, that's for sure. Well, I want to say well, obviously this right at the top, we're going to mention it again later, Mike is giving away a free copy of his book, if you're listening to this today, you can go check it out is at my core intentions.com/free. So my core intention is.com/re. If you're driving your car, don't do that now. But when you pull over wherever you get wherever you're going, go and check that out, I can definitely tell you, based on what little I know about Mike and the little conversation we've had before this, I think you are going to want to check it out. So let's start with the book. I want to start with the book. And then we'll back up we'll talk about you and kind of your business and everything. So the book is called exit plan, give people a little bit of an idea of what the book is about and why they might want to pick it up.

(3:09) Sure. So Dan, I always tell people, I say, look, I spent hundreds of 1000s of dollars over the years in coaching and training and books and tapes. And I would go to the seminars, some great teachers, great speakers, great trainers, and I would always walk away feeling like I was missing something. I think people always teach you how to find a deal by a deal operated deal. But nobody teaches you how to get out. Nobody teaches you when to get out, or how to maximize your profit. Oh, so my point in the book is that, you know, there's not just one way to exit a deal. But there's multiple ways and you can get out of the deal and maximize your profit. And, you know, through a couple of different avenues. Yeah,

(3:59) I find that really fascinating. Because before you said that, I'd never really thought about it before. But it strikes me that like everyone loves to talk about acquisition. Obviously, I do lead gen Farrell's investors, I've always talking about deal acquisition, but I know for a fact that like disposition, and exiting from deals is like you said, the critical factor because if you acquire deals and you don't know how to get out of them at the right time, it's usually a losing proposition. So that's, that's really fascinating. I want to ask about that. So one of the things that I wrote down when when we first met we you know, we had a quick kind of conversation before the podcast is to get to know each other a little bit. Again, one of the things that you said to me that actually wrote down and I highlighted was you said, I'm a what if kind of guy you are like I'm a what if guy and we were talking about this sense of you know, the world is uncertain. You got to kind of plan for the worst possible scenario. You've got to take Add into account. So let me ask you a really broad question. And we can take it wherever it goes, which is, if the future is uncertain, which it always is, how do you know when to get out? Like how do you know like how to put together an exit strategy? If you don't know exactly what's going to happen? How do you think about planning for

(5:22) that is really a great question. And you know, what we never know, really, all's we can do is best plan and project. So I am that I'm a huge question asker you mentioned it What if, right? I'm, I'm proficient at underwriting. When it comes to underwriting commercial property or a multifamily property. Specifically, I look at a number of different variables, one of the things that we do is we run that spreadsheet out over 10 years. So I can see where the sweet spot is. And I can say, well, if I exited four years is my profitability better or not as good if I exit at five or seven year plan, and I can play with that I can play with things like rent growth, expenses, purchase price, exit cap rates, things that make sense as they go into that underwriting, so that I can dictate where the most profitable point is going to be. Now, when I talk about exiting to Dan, it doesn't always mean just selling a property getting out and giving up total control. It could mean you recapitalize and pull cash out tax free, it could mean you bring a partner in, it could mean that you, you know, do exit the property completely. So So there's multiple ways of exiting a property. It's not always just that one certain way. So I like to ask those questions along the way, because it it predicts it gives you the best prediction of the future. You know, I heard somebody say years ago, one of my first real estate coaches told he said, Know your numbers that every smart business knows their numbers, and underwriting or analyzing a multifamily property, and it's the same in the residential space. You have to know your math, the math doesn't lie. You know, two plus two is four, always will be always was. Yeah. And, and so, you know, the math won't lie to us. You know, it strikes me You mentioned being really proficient in underwriting, I know that this is one of the skills that you are truly great at. And I think it clearly informs your whole mindset of how you approach the business. So why don't we back up for people that aren't familiar with you? Or maybe don't know what your business is today? Give people an overview of what you do. Again, the website, people want to go check it out, is my core intention, stock calm, like, what's your day to day? Like? What's your business structure like today?

(7:52) Today, I am in the multifamily space, and I coach people who understand the economies of scale that multifamily provides. So that could be somebody who's in the single family space been doing fix and flip or wholesale own small residential multifamily or it could be somebody who's just coming in the real estate business and they have an attraction to large multifamily apartment complexes, well, I coach them on how to grow a business how to scale a business, how to keep your head in the game mindset, you know the the systems and fundamentals around there. And typically I will find coaching clients I partner with and we go and we syndicate multifamily deals. For instance, we just wrote an offer on a 200 unit apartment complex in Fort Worth, Texas that we're hopefully going to be be the winners of so yeah. Let's find motivated seller leads online but don't know where to start. Download our FREE motivated seller keyword report today, AdWords nerds have spent over $5 million this year researching the most profitable keywords for finding motivated seller leads. And you can grab these exact keywords when you download our report at www dot AdWords nerds.com/keywords.

(9:21) I love that. And I think right now, as we record this, it's sort of a weird period in the residential market specifically and I think there's a fair amount of uncertainty and kind of it doesn't matter when you're actually listening to this episode because the real estate do it you know, next week or five years from now it's always going to be sort of a weird period with a lot of uncertainty right and it's just kind of always the case. So give me or give the listeners I should say if they are primarily invested in residential right now, what are the benefits that they should consider if they're thinking about getting into multifamily right like pitch Be on multifamily. Like I'm an investor, uh, do flipping you know doing rehabs? You know, maybe I'm doing wholesaling or wholesale or whatever. Why should I consider building multifamily to my business? Right? Because I think a lot of people view it as well. It's almost this whole separate thing. It's like a whole different part of the real estate industry, it's going to be a lot of work, like, Whatever, whatever their reservations are, what would you say, to kind of get them into that multifamily space?

(10:25) So yes, to all those, it is a whole different thing. People have reservations, you know, I don't have enough money, I can't do it, I don't have enough knowledge, I don't have enough experience, you can believe that story. Or you can believe that you could go in a different direction. That's something about it being kind of a weird space, you know, listen, a little contrary, and comments here. This is normal. This is the normal market, we're going into, we're not going into a weird space, really, we just came out of a weird space with the accelerated appreciation and accelerated price growth. And, you know, this is a normal market Dean, I got in real estate, and interest rates were double digits, and I sold 78 houses my first nine months in the business. So if you are a real estate agent, a real estate investor in the single family space, and you're willing to work and do the work and go through the effort, you can make a bunch of money. Right now what I want people to understand, though, is that today is the time to start to position yourself for the next Bull Run. See, because we're coming out of a bull run into this dip. And if you can position yourself in this dip, to come out of it in the next Bull Run. That's where fortunes are made. And so to kind of tie that together now with an answer to your question about why multifamily there's an economies of scale with multifamily that you don't have in single family, I invested in single family for a long time, matter of fact that, you know, I had a portfolio of a couple 100 houses, but but here was the problem. I had 200 furnaces, 200, high water heaters, 200, driveways, 200 roofs, you know, I had all of these things that when you condense that to one property, you have one furnace, one hot water heater, one set of one laundry room, you know, one roof two roofs may be depending on the size of the building you bought, yeah, you have an economies of scale. But even bigger than that, here's the thing that affected me most in a market like we're going into. So take this into consideration, you own five single family houses, the renters start to double up, they start to go to less expensive properties to rent, they move back home with mom and dad, and all of a sudden you're left with a vacancy, and can't rent it for two months, three months, okay, because that time is coming again. For the investor. Well, it's painful when you're making a 1500 or $2,000 a month mortgage payment out of your pocket by yourself and have to come up with that money every time it becomes very painful. But if I own a 10 unit apartment building, and I have a 20% vacancy, I can still pay my mortgage, I can still pay my my bills. So there's an economies of scale with multifamily that you don't get in, in the residential sector model. And that's why that's why I like multifamily. So even for somebody who doesn't have experience, and they want to learn the multifamily business, to be a passive investor in a syndication, where you can invest with a qualified sponsor, and somebody who knows how to do it, you

(13:54) can learn a lot. Yeah, that's really interesting, right? So can we talk to the talk a little bit about the syndication part of your business, because I know that for a lot of folks, they don't necessarily view it that way, which is actually really interesting, right? As a way of learning that side of the business in a way where, you know, you're not the one going to fix the furnace, if it breaks, right, like you're you are in it, and you can learn it. So talk a little bit about that syndication part of your business. Like when, what what made you decide to start doing that? And how do you work with the people that invest with you and kind of decide to learn this from you? That's a great question. And you asked probably three questions there. So I knew that at least one of them was going to be good. 33%

(14:43) Yep. Good for you. Hey, so I got in the residential real estate business by a being in the construction business. I had a construction company. And you know, like any entrepreneur, I was doing everything, hiring, firing, marketing sales, ordering. and still on the job working, uh, pounded nails. And I woke up one morning and I was just totally burnt out. But here's what I learned. During that time, I did a lot of work for a couple of large apartments indicators in Chicago, and the Chicago market. And I learned that model, I learned that you could raise private capital from individuals like you or me, you can marry it with a great real estate deal, stay in the middle. And as long as everything went, well, everybody made money. So I always had this vision of going of owning apartment complexes matter of fact, when I was when I was, you know, I remember being a kid driving in the car, my mom driving down the expressway, and asking my mom who owns that big building. And she said insurance company. And I said insurance companies, and that always stuck with me. And it, I never really realized it till I did my first institutional deal with an insurance company. And they were my partner in a in a multifamily complex. And it like clicked for me, I was like, wow, insurance companies do on this stuff. So I was selling residential real estate 2005 came around, I saw the market softening wasn't exactly sure what was going to happen. I said, this probably a good time to switch from residential into the apartment business. And I just took the leap, I went and bought an 11 unit, or putting an 11 unit apartment building under contract. And then I said, now you got to find the capital to buy this. And so I went out, and you couldn't duplicate this today. But I put a little $45 ad in the classified section of the newspaper. And all that said was in real estate investors wanted, Dan, my phone ringing off the hook for the next six weeks, my excitement are six days, my excitement was crazy. Over the next seven months or so I raised over a half a million dollars in private capital to buy that one in the next one, or so it just was amazing how I got into it, I just I just took a step. Now, I made some mistakes, especially on that first one, because I didn't have a buying strategy. I didn't have a box that said, this is what I want to buy. And I created that as a result of buying a catastrophe and the first one I bought. So then I built this buying strategy. And we just kind of started to buy assets, raise money and buy assets. So in a syndication business, for people that don't understand that you have a sponsor, or a general partner, who runs the deal, they bring it to the market, they buy it, they they fund it, get it funded, get the bank debt, they do all the construction, all the maintenance, all of the operations, but they bring private investors in. And typically the private investor gets a lion's portion of that. So as a private investor, especially if you don't have any experience, and you want to learn about real estate, you would come into a syndication. And you can learn by enough to help you make a decision whether or not it's a business, you want to continue on. You know, listen, there's a lot of coaching programs out there that are 40 $50,000. Mine's a lot less expensive than that. But what I would say is you could invest in an educational program, learn all that and do nothing. Or you can invest in a syndication, learn along the way, plus have an investment that you're making money. So it can be a powerful tool for people.

(18:29) I love that I've never really heard it explained or talked about that way. But that that is such a good point. It's like what other business model is that where it's like if you if you want to open a coffee shop, there's no equivalent of like, well invest in a coffee shop and see how it goes like I'll buy Starbucks and see if I like it. Right? It's not quite the way that it goes. So we mentioned at the top of the show, the your book, right, which is at my core intention is.com forward Slash Free. And I saw on there you actually have another ebook that people can also get the talks about questions that people can answer, ask potential sponsors or people that they're thinking about doing a syndication deal. So I am curious for you, what do you tell people to look for? If there's a lot of different people doing syndications, right? There's different options up like you said, you could even just buy a course or whatever. So if somebody is interested in potentially going with a syndication deal, or working with someone like that, what should they be looking for? What questions should they be asking in order to figure out if that's a good fit for them? Does that make sense?

(19:37) Yeah. So there's an ebook there called 27 must ask questions of a sponsor and a deal. Right. So I think there's questions that people need to ask to find out about the GP team, the general partner team and the sponsorship team. You want to know things like that, you know, I'm I'm the kind of guy idea and I want to know what mistakes have you May den A, how did you recover from them. So I don't want to know about all of your successes, although your successes are very important. But anybody can be a success in the market we just came out of, I want to know what mistakes may be somebody made, and how did they recover? What did they learn from them? And what are they doing now as a result of those mistakes? So, so that I think is a big piece. But I want to know who's on the GP team? What are their, you know, what are their values? What's their life vision, what matters most to them as partners. I've had a mission since I got in the multifamily business to provide safe and secure housing for my tenants, because I am that I'm a huge advocate for single moms. I believe that and not just single moms, because I think there's a lot of single dads in the world today, too. But if if a single parent is at work, and their kid comes home from school, they want to know that when that door closes behind them, that kids safe, that they're going into their apartment, they're going into their building, they're not going to get hassled by a gangbanger or some somebody's trying to get him into a gang, that we provide safe and secure housing for tenants so that when you park in the parking lot at night, and you walk into the building, you know that you're going to be safe. And that's it's all relative today. Right, Dan? But that's the type of atmosphere I want to provide for my tenants and for my investors that are invested in. So, you know, what's the sponsorship team about? What's their mission? What do they want to accomplish? How do they look at the math? How did they look at the numbers? What's their underwriting process? Have they gone full cycle on a deal? You know, have they had problems in the past? And how did they recover from those issues? You know, what do you do when there's a low occupancy? How do you recover from that? What do you do when you can't rent at the same price you've been renting? How do you recover from so I love it, because it comes back to it's the what if question. What if things don't go according to plan, right?
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