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Podcast

Episode #217 – Building Your Perfect “Exit Plan” with Mike Morawski, Part 2

The real estate market has its ups and downs just like every other industry.

You have times when investors make boatloads of money. And you have times when the market conditions change, and slaughter unprepared investors.

How do you make sure you’re one of the investors who make boatloads of money (even when market conditions change)?

By mitigating risks and setting yourself up for the next bull market.

In this episode, Mike Morawski, joins us again to discuss how he hit rock bottom and weathered the storm in different market cycles. Recovering from failure is tough, unless if you know the tricks.

Listen now.

Show highlights include:

  • How to raise capital to buy a 4,000-unit apartment building with only $45 bucks ([1:24])
  • 5 mistakes to avoid as an investor so that you don’t end up bankrupt (even in bear markets) ([2:56])
  • The loan to value ratio to avoid like a plague if you want to stay out of jail ([3:07])
  • How to overcome a recession that wipes out up to 40% of your valuation ([4:03])
  • The one tip learned in prison that any investor can use to get their investment goals back on track ([5:48])
  • The “overeducated” trap that leaves newbie investors stuck without achieving their financial goals ([17:27])
  • How to keep yourself accountable so that you hit your goals every time (without any special gimmicks) ([18:12])

To connect with Mike Morawski, please visit:

mycoreintentions.com/free or connect with him at mike@mycoreintentions.com

To get the latest updates directly from Dan and discuss business with other real estate investors, join the REI marketing nerds Facebook group here: https://adwordsnerds.com/group

Need help with your online marketing? Jump on a FREE strategy session with our team. We’ll dive deep into your market and help you build a custom strategy for finding motivated seller leads online. Schedule for free here: https://adwordsnerds.com/strategy

 

Read Full Transcript

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.

(0:41) Hey, guys, welcome back. You're listening to the second part of last week's episode. Let's jump back in. I want to ask you about, you know, I loved what you said about, you know, I certainly think it's true that like a lot of people made money in this past market. I don't want to say by luck, but the wind was at their back, right, it was relatively easy to make money. And so what you're looking for is how do you react in the stakes? Right? And what is your track record of recovering? Right? I really like that. I've never really thought about that before. But I think that's such an incredible filter to pass Sure, potential partners, or even potential employees through HR. I mean, that's, that's a really powerful filter. Going back to the beginning of your story, right? Yeah. I can imagine this sort of situation where you put the ad in the back of a newspaper or whatever, you get all these people coming in, you raise all this money. And then like you said, you bought a disaster, right? And so I can imagine a lot of people at that point would have been like, Well, that didn't work. You know what I mean? Like that would have been it. But you like you said, you revise the process, like you said, you figured out your box of what you wanted to buy in, and then you kept moving forward. So how do you think about recovering from the stakes for and sort of develop? I mean, it strikes me is, that's almost a skill that you develop over time. Right? So how do you think about that? I mean, clearly, like you're very successful today. But we all run into these obstacles to have these problems all the time. So how do you think about recovering from when things don't go according to plan?

(2:19) Well, that's a huge question. So you know, I put that $45 ad in the newspaper. And over the next 30 months, I bought 4000 apartments, I raised $80 million, bought $60 million worth of apartments in five US markets, and vertically integrated a property management company, I built a company worth $100 million. And, you know, 2008, roared its ugly head and wiped out, you know, a lot of people. By 2009, we had made, you know, some serious mistakes. And I always tell people, I say I made five mistakes. I grew too fast as a company. I was undercapitalized for the growth that I had as a company I was over leveraged, I had $60 million worth of real estate at 85% loan to value I always sang who was worth worse me for taking the money or the banks for giving it to me, just today, I would tell anybody do not get in a deal unless you're 65 to 70% loan to value. And I didn't listen to people around me or pay attention to the details. And as a result of that, I imploded. I tried to save my company. We had occupancy grew, our net operating income crashed. We couldn't pay our bills. We couldn't pay our investors. I tried to save my company. When I had, you know, I had 38 Different companies, I had probably 12 of them, I should have let go to foreclosure. Let some investors get hurt, but I didn't want anybody to get hurt. I thought it was a recession. It had last 17 or 18 months there'd be a 10 12% correction in the market. That's your typical recession. Well, this thing lasted seven or eight years with a 40% correction. It was hard to mitigate that storm. Yeah, slow. I tried to move money between companies so it takes money from profitable companies put it in non profitable companies. My attorney, my accountant both said it was okay to do that. Just leave a paper trail. So that was fine. But here's the problem in real estate as a licensed person as a individual where you take money from somebody you're held at a much higher standard and your transparency needs to be greater so I wasn't very transparent with my investors and as a result of that I want to be in charge and wire fraud and mail fraud charges and got sentenced to 10 years in federal prison so I got wiped out lost everything including my family. Now to answer your your hottie you come back how to your resilience question. I kind of picked you were asking about resilience. Why thought my life was over. I found myself in federal prison in 2013. wondering, you know, man, things can't get any worse than this. And then my wife decided to divorce me. And, you know, the joke in prison was take his shoelaces because we think he's gonna hurt himself. Right? And so he's probably in prison about six weeks, I walk into the gym one day. And you know, and what I like people to know is I never flew private. I didn't have a fancy house, I didn't buy a fancy car was a neighborhood baseball coach home every night for dinner. I loved what I did. And I just got caught in a bad place. I wound up getting ripped from that lifestyle. I was living to live in a 12 by 12 room with three men I didn't know nor did I, like, wonder what the hell happened. And I walk into the gym one day, about six weeks into prison and this guy walks over to me and he goes, Hey, don't let these people beat you. All they want to do is take from you everything you've ever known. They can take your money, they can take your business, they can turn your family inside out, but they can't take who you are and what you're made up. They can't take what caused you to build that business or what you have inside. And I don't know, we all have these defining moments in our life. And this was one for me. The switch flipped, and I went, Holy cow. And from that moment, I started to go to this class. I started working out I started losing weight feeling better. You know, I went to prison. I was 35 pounds overweight and hated myself. I had gone from running marathons to a new lifestyle. Yeah. So I started working out, started feeling better. I wound up going to college, I got a bachelor's degree in theology, wrote two books exit plan, and I wrote a second book On Property Management, which I'm just finishing up to release here. In the next couple months, I wrote an ethics course I taught real estate investing property management and ethics in prison for six years, was on an outreach program went into the community. I told my story to small business owners and local college students met a professor from the University of Minnesota and he and I co authored a paper together that we had published in the Business Journal of ethics that gets taught at the collegiate level today for forensic accounting and sales and marketing classes. I'm home today I'm in the coaching and training business, I'd love to speak publicly told my story. And I recently in our last year, I should say, I got approved by the SEC to go back sponsor, these apartment deals, again, be an issuer of securities and raise capital. So the only reason I'm where I'm at today, and I'm very grateful for that is is that I took the initiative. I think a lot of times people give up are held back because they're trapped in their mind. There's something that imprisons them, you know, I might have been behind a wall, but so many people are in a prison of their mind. You know, I can't I'm a failure, I'm afraid of failing, addictions, you know, drugs, alcohol, sex, past abuse, any one of those things can keep somebody from moving forward. You just have to make make the choice to not let your past to find your future and move forward. And that's, that's my message really is what I want people to understand is there's life beyond what happened.

(8:25) Yeah, I mean, that is such an incredible story. I just want to first of all say thank you for sharing that right it's a really vulnerable thing to talk about in the fact that you are able to talk about it so openly and so freely and kind of turn that into an inspirational message it is absolutely blows my mind like I am so impressed by that so I want I want to say thank you for that 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 a report at www dot AdWords nerds.com/keywords. Okay, two questions that that kind of strike me but first I want to ask so you just said you're recently approved by the SEC again, our SEC to to get into the start during the sponsorships right and start basically that feels to me like a full circle moment. And I'm, I'm very curious how it felt to you in that moment, because I imagine you know, it's almost like, you know, the chapter kind of starts in many ways or you know, with with this terrible series of events that occur and all these things you have to go through and then you kind of come out the other end of it. And now you're I don't know, given this kind of official seal of approval, and I'm curious how that felt to you if that meant a lot. Or if you just felt like, No, all the work I did before is what meant something to me. I didn't what what did that what was that? Like?

(10:21) Yeah, it was huge. Thanks for asking that. That's a great question. And really it. You know, honestly, the story starts with the success, I hit and built $100 million company in 30 months, I was a liberal, I was a little out of whack in my head, my ego was big. I was prideful. I thought I had though a world by the short hairs. And, you know, I crashed and burned out, and could have just gone to prison and laid in bed all day and ate and watch TV and did nothing but made decisions to to reengineer, myself, I came home in the best shape of my life spiritually, physically, mentally, and emotionally ready to conquer the world. And it wasn't an easy start. So I partner with two of my coaching clients on an a, you know, a moderate size 40 unit apartment deal in Florida. And we have an attorney, a securities attorney, were talking to about my situation, and and she says, You know, I think I can get you approved by the SEC to, you know, be able to do this. And I was like, we'll have at it. Good luck. You know, I was a little doubtful about about that whole approach. And, you know, we didn't talk about it again for three months. And she came back to a call one day where she goes, Oh, by the way, let me show you this. And had this this letter from the SEC. And I they said, you know, that because of what I had learned and how I'd grown, that, you know, that they were you know, and the time that had lapsed, that, you know, the grace would be good. So, you know, the feeling was like, surprise, I was shocked. I you know, I was elated. My partners were elated. Bear couldn't believe it. SEC said yeah. And you only need to disclose it for wet the time, which would have been five months. And I said, we'll just let them know that I will always disclose because I never want that to come back and haunt me or somebody and say, Hey, you never told me this, sir. Right. So I always disclose it. That's why I'm so transparent about it.

(12:37) Yeah, I think it in a strange way. Right? The fact that you are not afraid of talking about something like this right to talking about this, like it says really vulnerable moment, it really builds a sense of trust with you very quickly, right? Because it's like, okay, well, you're here, you're clearly not hiding this thing away from him. Transparency is such a core part of who you are, and when it comes across, and how you talk about multifamily and how you talk about, you know, the teaching people and I just find that so amazing. I have maybe a random question. But I'm really curious to kind of go back to this period where you're rebuilding yourself, you know, you're getting in shape. You're you're in prison. It's this, this really dark moment. Why theology? Like was theology something that you were interested in before? So something you found in that process? Like what drew you to study that versus anything else?

(13:35) It's a great question. I so you know, there's a whole story behind this. I've been a Christian since 1983. I always tell people, I was a pocket Christian pulled God out of my pocket when I was in a jam. Put them back soon as it was over, right. And so I'm in prison. And, you know, I don't know if I was leaning into God or leaning away from them and mad, you know, but I wrote to five colleges in a row to find Christian colleges, liberty, Trinity, Adams, and wheaton here in Illinois. And I wrote to those four colleges, and within 30 days, and I needed two things, Dan, to go to school and get a bachelor's degree. And I needed a correspondence course. And I needed a scholarship. So I needed them to pay for it and be able to i There were no computer access, no internet access. So I couldn't do anything online. So either two of the schools didn't have correspondence. And two of the schools didn't have scholarship, but they had, you know, one had scholarships. One didn't have correspondence, right. So so I was feeling kind of, you know, like what defeated a little bit about it, and a guy said to me, he goes, Hey, look, there's a small Bible College in Iowa. You can write to them, they'll respond to you. I kid you not. I wrote to them in May of 2014. The exact day in May of 2015. I got a letter back in the mail said we have a correspondence course. And will you you've been awarded a, a full ride scholarship. Wow. So I, you know, and because I wanted to, you know, get my degree in, in theology because he knew if I leaned in that Christ the whole time I was gone that would help my ride. Yeah. And it was tough. It was a tough walk, you see things, you hear things, you experience things in prison that the average person doesn't or shouldn't ever in their life. And I knew that for me, the only way that I was gonna get through it was to pull that out of my pocket. I think part of that was to that he wanted to have my full undivided attention. So he ripped my cold dead fingers one at a time off of everything I held dearly. In my life.

(15:47) I really that is such a cool story, man. That's a fascinating story. I mean, I think it just, it says a lot about you write that you are willing to put yourself in that situation where you know, you're putting yourself in a situation where you have to pull through, right, and you have to do the work. Because it's not exactly you know, the thing that it reminds me of, I mean, it's a stranger, I've got an eight year old, right? He's an elementary school, he has trouble studying, if it's to noise, right? He has trouble during homework, you are doing literally pursuing a higher education and like the most, you know, inopportune possible time and environment. I find that really inspirational. So let's, let's talk about today. Because obviously, I mean, your story is inspirational. But But I think what, what really makes you special is this kind of bringing all that stuff to what you do today and the students that you work with, right. So I want you to take a moment and tell people if they are interested in getting into multifamily, right, if I'm an investor, I'm willing to get started. And we've talked about syndication, right. We've talked about sponsorship and stuff, let's say I want to do it, right, I want to be the one obviously they can come and work with you when you see investors getting into multifamily for the first time, right, and you've had this experience of walking people through this process many times now. What are the mistakes that they tend to make that hold them back? Right? Like, what are the things that people do when they start to a person multifamily space, where either they're bringing over a mental model that doesn't apply? Or they just think about it in the wrong way? Where do investors tend to go wrong,

(17:27) they don't take action, I think is the biggest mistake. I remember one time being in an event. And I sat down on a bench next to a guy who had these two big shopping bags full of books and tapes. And I said to him, I go, ah, you know, boy, it looks like you're going to really get get steady. And he goes, Yeah, I have so much of this stuff at home. I don't know how I'm gonna go home and explain to my wife, I spent another $5,000. And, you know, it was clear to me that he was a over educated guy that just couldn't take action. And I think so many people are held back by either fear, fear of lack of money, fear of not of not succeeding, and we have take action. So I think coaching, I've had a coach in my life for 20 years coaching is really important in people's lives. Because no matter how much you know, it's the accountability, who are you accountable to. And what what I do with with some of my coaching clients is I teach them something, we work on something and a call. And then I give them an assignment. And you have to come back the next week and be held accountable. It's just like when I was coached in the real estate business by coach who teach me how to prosper Now go make 20 calls, or 200 calls, whatever it is, and if I didn't come back and have that accomplished, I didn't feel like I succeeded. So I think there's seven easy steps in in multifamily. And it's you know, what are your goals, your why's your dreams, relationships, locating deals, underwriting deals, doing the due diligence, understanding the markets and operations barrels

(19:00) and you know, it's it's a pretty easy progression, but how do you do it? And do you take the action to do it? Alright, so I want if you are listening to this live, we're just talking about taking action. Obviously, you should go over to my core intentions.com/free Mike is giving away a free copy of exit plan his book to people who are listening to this so you got to buy cards that just.com/free You can get it for free. There's obviously no reason not to do that. Mike, I want to say thank you so much for coming on the show and sharing your story. It really is an incredible one for people that want to follow up with you. We've talked about my inquiry intention, SATCOM, do you do social media or anything? Or is that just the best place to go and check out what you're doing? No, I'm all over social media. So you know, no matter where you're at, like murasky are my core intentions on any platform you'll find me even Twitter or in the Tiktok is within our Twitter. Twitter's my personal faves. I will definitely be following through on there but Mike Moravsky from my core intelligence comm thank you so much for doing this man. I really, really appreciate it.

(20:08) You bet. Thanks, Dan for having me. I appreciate it. That is it. That's it for our interview this week. Look, I hope you enjoyed it. Mike was incredibly vulnerable and I think really, really brave in coming on the show to share his story. I hope you got a ton out of it. I know I did. Hey, you know that every single episode we put show notes up over at AdWords nerds.com. You can go over there. Click the word podcast up at the top menu and you will see all our past episodes. Go check them out. If you've just started listening go check out a bunch of our past episodes. I've been doing this a long time now I got a bunch of them. If you know someone you like someone in real estate they've probably been on the show in the past. If not let me know I'll have them on in the future. Look, I just want to say thank you so much for listening and really means a lot to me. I will be seeing you next week. Cheers everybody.

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