Updated: Nov 9, 2020
Mike Morawski joins the show to explain how he went from building a Realtor team that sold 150 properties per year to creating a real estate syndication that owned over 400 units. Today he is a educator and real estate coach using his years of real estate experience to help new and experienced investors build their wealth through real estate syndication. Watch the episode to learn tips of the trade and the value of a good mentor.
For more information, visit www.multifamilyglobalsummit.com and www.mycoreintentions.com
0:00 - Intro
1:21 - About Mike
5:29 - Why did Mike change to investing?
7:47 - Does Mike still sell Real Estate?
11:45 - Perspective
13:25 - Single Family vs Multi Family Housing
17:13 - How to find capital to invest?
21:30 - What is it like to throw an event during a pandemic?
24:54 - Who are the speakers at Mike's events?
27:52 - Sign up for Mike's event
Mike: Two beliefs that I have that are really core, core beliefs of mine, one is, success leaves clues. If you want to be successful, go do what somebody successful has done. The other piece is, and this is a core piece is, a team. Wherever you are, and you're going to build your business, you can't do it by yourself. Too many people say all the time, he's a self-made millionaire or she's a self-made millionaire. In essence, I don't believe anybody succeeds alone.
Aron Fragnito: Right.
Mike Morawski: It's about the efforts of more people and their team.
Aron: Ladies and gentlemen, it's your host, Aaron Fragnito of the Passive Cash Flow Podcast. We're back here with another episode, and we have Mike Morawski. How are we doing today, Mike?
Mike: I'm good. Aaron. How are you?
Aron: Excellent, my friend. I wanted to have you on the show here because you've done a lot. You've owned up to over 400 units. You'll tell us all about the numbers, but you got some big numbers on the board, you've done some big things. Now you're in the coaching end of business and education. Really exciting shifts you made in your career here in real estate and we're going to break into it today. Tell us a little bit about how you got started in this business first.
Mike: Great question. I don't think anybody's ever just born into the real estate business. It's something that you acquire a taste for. I acquired a taste when I was very young, early age, probably eight years old. I remember asking my dad-- we were sitting on the side of a swimming pool at a resort, "Why so many rooms in this building? He said, "People come and stay here and they pay somebody money." I knew at that point, I wanted to be the guy that was collecting the money, right?
Aron: [laughs] Sure.
Mike: It was interesting. Over the years, I really enjoyed real estate. I was in the construction business and I did a lot of work for some large apartment syndicators in the Chicago market. I watched them and I watched their model over the years. Eventually, I got into single family residential, selling single family homes. I built a team, we sold over 125 homes a year.
Mike: 2005, I saw the market starting to shift. I knew that we were not going to be selling as many homes for the next few years as we thought. I had always wanted to go into the apartment business because of my attraction, watching these other apartment syndicators build their business. I made a decision to go into the apartment business. We made that transition from that single family residential into-- Our first deal that we did was 11 units and we just grew from there.
It was interesting because the first deal, you never really know what you're getting into till you get into it and you experienced some of the learning curve along the way. That learning curve caused me to really discipline myself around strategies for buying and strategies for operation. We grew from there.
Aron: That's interesting. I love it. You were building 150 homes a year and you glazed over that. I've done large renovations. We haven't really done much ground up construction, but there's a lot of moving pieces to construction. Doing 150 homes a year, that's a serious number. You had a whole construction crew going. How did you structure that exactly?
Mike: Aaron, not construction, residential sales. Just as many moving parts, let me tell you--
Aron: Exactly. I was going to say, it's tough to build them and it's also tough to sell them. That's a great space to be in. You were in the brokerage side. Did you have a team of agents going?
Mike: I did. I had two buyer's agents and another listing agent on my team and then three administrative people helping just with files, closing deals and making sure loan commitments went through and all the marketing for the sellers was taken care of. I could tell you exactly my numbers. Any smart business owner knows their numbers. I could tell you that I come from old school, prospecting, I pick the phone up and prospect and look for sellers. I make 20,000 calls a year.
Aron: Oh my gosh, they don't make them like you anymore.
Mike: Yes [laughs]. It's interesting. With social media today, you can do the same thing. You can create as much damage. I look at some of the people that are selling three, 400 homes a year these days and think that, if I was in the business today and I was using social media, I certainly see how you could do that.
Aron: It's all about systems. Like you said, you had three administrative assistants, you had two buyer's agents, a listing agent, and to say, if you list you last in the business. [chuckles] It's such a competitive space as well. 150 homes a year and what market was that? Which State was that in ?
Mike: In the Chicago market, in the Northwest suburbs.
Aron: Great. You were probably doing quite well with that. You consciously made a change to then break into the investor side of the business, that's a hard thing to do because you were probably living pretty comfortably at that point and had a nice little business setup. What encouraged you to make that change instead of just putting your feet up and building your business a little more and collecting those commissions? You could have gone well with that, but you had the motivation to make a change. Where did you find that?
Mike: Great question. Like I said, when I was in the construction business, I did a lot of work for Inland Real Estate. Inland is the largest RIT today, right? Real estate investment trust.
Mike: In watching them, here's four school teachers that started their company with one, four flat in the Chicago market and they built to what they've built today. I watched that model and I watched how they-- Very simple. You raise private equity, you marry that with a great real estate deal, you operate the deal, you take advantage of a portion of the cashflow and and portion of the long-term gains, and over time, you become very successful. You start with one and just go on to the next one. That's exactly how I built my company was based on that model.
Aron: That's interesting. I started as a realtor in this business as well and I developed a team at REMAX. I don't think I had focused on it enough and did the right structure because what I ended up doing was recruiting a lot of agents and covering their desk fee, and then putting them on commission split where it was very advantageous to me, but they had to sell houses for me to get paid. I was on the hook for the bill every month.
What I realized is that when there's no incentive to work like that, the agents ended up just reading books about selling houses instead of selling houses. I had a team of agents that I was paying their desk fees, but they weren't selling any houses. That was a challenging situation that I realized I had structured that incorrectly and then branched more into the investment side of the business. That's good to be able to structure a team that makes sense. At that time, do you still have your license and sell real estate or you're fully in the education and investment side of the business now?
Mike: I don't have my license anymore. I am fully in the education, coaching, training space. I'll tell you over the years, I spent hundreds of thousands of dollars on books, tapes, seminars and personal coaching. Even after 25 years, I'm still coached today, personally, by a couple of different coaches. I believe that coaching is really important in people's lives, whether it's for personal growth or whether it's for professional gain, right?
Mike: Over the years, I could equate a 20% increase in my business, year after year based on the coaching.
Mike: I remember when I first got into coaching and I wrote that first check for $1,000, I was like, "This is crazy. Why would I do this?" I immediately started to see some results, and those results just continued to grow and snowball on themselves. It's been very interesting over the years. That's why I still partake in coaching. It helps you gain a different perspective on business as well as your personal life.
Aron: Exactly. Coaching is so incredible. I find that the best business leaders or CEOs always have some type of coach, business coach, professional or personal coach. It is interesting that you'll meet people that are very successful or wealthy and whatnot and they'll hire maybe a coach that isn't as wealthy as them, but they're coaching their own way, and they have their own guidance, and they're able to move them to the next level. I've always been a big fan of coaching and consultants and things like that.
I just did a whole YouTube marketing program and a ClickFunnel. I hired a consultant for that and the company that helped create all that and oversee it. I wouldn't have been able to create the product I have without the right people in place if I'm just clicking around on Google or trying to create my marketing system. It's so important to get the right people in place, the right coaches, the right guidance and consultants. You can see a fine line between businesses that have that in place and other businesses where they try and do everything from A to Z themselves to save a buck and it shows.
Mike: I just want to jump in for a minute. Two beliefs that I have that are really core, core beliefs of mine, one is, success leaves clues. If you want to be successful, go do what somebody successful has done. In essence, I say I went and built a syndication company right because I followed this model of Inland Real Estate. Very successful and it helped be successful.
The other piece is, and this is a core piece is, a team and you mentioned have a strong team. I think I've told you Aaron about the event coming up in October. A three-day virtual event where we're going to have 20 brand speakers from across the country that are going to speak on real estate investing and syndication and everything in between. What we have done is we have assembled a team for the marketing efforts around this that is incredible.
I am so thankful for the knowledge of being able to do things like that because it just helps your company grow. Whether you are in the real estate space, in the training space, wherever you are and you're going to build your business, you can't do it by yourself. Too many people say all the time, hey he's a self-made millionaire or she's a self-made millionaire. In essence, I don't believe anybody succeeds alone. It's about the efforts of more people and their team.
Aaron: Absolutely. Any business or entity that's successful is a combination of multiple people doing what they do best. Here at my company, it's my property manager who I couldn't do which she does all day. There's just no way I have that patience. My other business partner who runs the operations, the nitty-gritty, he finds things in the numbers that I just don't see. It's like a puzzle. You know like one of those optical illusion things at the sailboat center. You look at that and sometimes numbers or business or systems in the business are the same way.
One partner might look at it and not see anything but just colors and blotches. Another partner looks and sees the sailboat in the optical illusion like you're supposed to or maybe the one partner sees a swing set. The other one see-- It depends what you're looking for. To have those right partners that complement your strengths and weaknesses, that's what I think we found here with my company. That's really the magic bullet because I've also had partners that were not good and were not trustworthy and that can bring down a company too.
It's so important to team up with the right people and put people in places that are good at what they do and a good leader does that especially because a lot of times people will be like, "No, no, I'm a marketing expert" and then you really get to see what their skills are, you're like, you're actually not. You're an expert at this. You just thought you were or you have a degree in it but you're actually-- this is your skillset and this is where you do your best work. A great leader can recognize that too and then motivate people to work in that position or work with their company.
Let's get breaking the real estate here a little more. You started with a brokerage team then you got into single-family houses and then you got into small Maltese. Now talk a little bit about why you transitioned from single-family houses to multi-family housing.
Mike: Great question. Because of economies of scale. Here's how I looked at it. If I had one single-family house and nobody lived there and my mortgage payment was $1,000 a month, I was paying that out of my pocket until I got a tenant to live in there again. If I have a small multi-family two flat, four flat and somebody doesn't live in one of the units, I still have some cash flow coming in. The economies of scale are better. Rather than having 100 furnaces and 100 roofs and chasing around to 100 separate locations, I could have 100 units in one complex and have five roofs and five furnaces and all my tenants condensed.
From a time standpoint, from an economic standpoint, the economies of scale are much greater in the multi-family space and there's a transition there. I did a lot for years in the residential side. I did a lot of fix and flips properties that we bought out of foreclosure or short sale and we fixed them up, resold them. I did a lot of that over the years and I just got tired of it because I thought that there was a different path that could create more cash flow and long-term wealth.
That's my mantra and that's what I teach the people I coach is how do we create more short-term cash flow and long-term wealth that benefits you, leaves a legacy for your family, generational wealth, those types of things and you create that through some passive income sources.
Aaron: That's great. That's what we found as well. We've tried to cash on multi-family and single-family housing condos and the more units you have under one roof, the better it tends to be, the easier, the more forgiving the building is. You lose one tenant and even a three family too, it can be difficult where-- Then you realized, I think you transitioned up to bigger properties. You bought a bunch of two to four units and then at what point did you have an aha moment and be like, "Wait a minute, why don't I just buy 50 under one roof?" What was that experience?
Mike: Great question. There's that line between residential and commercial. We're buying all residential loans and all of a sudden, we come across an 11 unit. I said, "Hey, I'm going to syndicate this deal." I went out and I raised some money and bought this 11 unit and I'll tell you what, that was a learning experience all by itself just that first deal. I went from 11 to 64 to 87 to 187 to 250, 325, all the way up-- ultimately bought of a 450 unit deal. That just happens because I always tell people, I say to buy 400 units is not any more difficult than it is to buy 10 units. It's the same amount of work. You're going to do the same things and it's going to create more--
Aaron: A lot more wealth.
Mike: A lot more wealth, correct.
Aaron: A lot more cash, a lot more wealth. Well, I guess the main difference is you need about $20 million more depending on where you're buying it. It's those connections. The obvious question you would ask-- well listen, raising half a million bucks to buy an 11 unit is one thing but raising $10 million to buy a 400 unit, how did you find that capital and that growth in raising capital there?
Mike: My system was very simple and it's similar to what I do today is I taught people how to invest in real estate. Being a residential real estate agent, I had built a database. I would start bringing people to my office twice a week on a Tuesday and Thursday night. I did this for two years and brought new faces to my office and I went through a 45-minute presentation. One of the best books I've ever read is called The Millionaire Real Estate Investor written by Gary Keller. I taught that book for years and I taught people the strategies and systems out of that book, how to grow your real estate portfolio, how to grow your real estate business.
I would bring people in and then we would do some things like bus tours. You came to the office twice a month, I'd do a bus tour on Saturday morning where I'd get a small bus, we put 10 or 12 people on the bus, have some donuts and some bagels and orange juice. We would go out and we'd look at six or eight properties. We'd look at a couple of foreclosures. We'd look at a couple of new construction. We'd look at a couple of just handyman special just something you could go in and put some new lipstick on and turn it around and it would be fine again to resell.
I would leave the worst for last. [unintelligible 00:18:56] one Saturday morning we get off the bus and we had looked at about six properties and we get to the two foreclosures. We walk in the front door and as we walk in the front door of this one property, there's a hole in the floor-- it's a ranch house on a crawl space and the hole goes from that main floor down into the crawl space. There was a plank that you had to walk across to get to the other side.
A couple of the investors or potential investors that were there said, "This is way too much work. I'm going to give you some money, you do this," and that's how I started raising money. People said, hey, we're going to give you money, you do it. It wasn't even a conscious decision at that point but then all of a sudden, it became a conscious decision and just started syndicating properties.
Aaron: That's great. The bus tours are a great way to connect with people and show them the tangible real estate there. The evening meetings were-- actually that's how we started raising capital as well. We started a group on meetup.com called New Jersey Real Estate Network. We've about 3,700 members in it now. We used to do meetings in our office three or four times a month, pretty much every week. During that time, honestly, looking back, was easy. We could throw our events, we do our presentation, we'd have other speakers come sometime as well.
For the most part, when you can meet someone in person, when you can gather together 12, 15, 20 people in a room and get their full attention and they can see all the other people interested in investing also in that opportunity, that is the best way to explain your service, build a relationship with new investors and also raise capital. Successfully raise capital so you can close deals.
Now, with everything going on, the game has changed. It's all online, it's all webinars and we've transitioned our events to online forums, webinars but they're not quite the same as meeting in person. Thank goodness for social media because you can get out there with that but it's definitely a different space now. Usually, we'll meet people through the webinars initially, and then if they're serious and they're qualified we'll meet in the office or just have another one-on-one Zoom meeting or something like that. It's changed. Have you also transitioned? Well, you're having this event coming up and obviously, it's all done online. Talk a little bit about what it's like to throw an event right now with this pandemic.
Mike: It's crazy, right? I always thought that throwing a live event was hard with ads and marketing and getting the camera guy there and those types of things but the spinning plates for this is just crazy. I knew when we went into it that we would really have a learning curve and to put a three-day event on-- I've put events on in the past, never a three-day event. I love live events. I like going to live events. They can be exciting, they can be eventful, they can be knowledgeable, plus the networking aspect and you get to meet people.
What we wanted to do was we wanted to design an event that we would have all that happen at. That all that same type of atmosphere and everything that went on at a live event, we were going to have virtually. There's been a learning curve with it but I think we have it together. We're going to have some Facebook live. Somebody can join for $9 on Facebook Live. Get three days of speakers and knowledge and information that will better their career, better them personally and professionally, I believe. Then there's the VIP upgrade. You can upgrade to VIP and play cashflow online.
We're going to have some networking online. There'll be some panels that'll be only allowed for the VIPs. Plus, you're going to get the recording from every session. You're going to get a lot as a VIP in the interactiveness. You're going to be able to meet people. You'll meet panelists. You're going to be able to ask questions and be more interactive and have participation based on how we've put this whole platform together. We're really excited about it and believe that we'll have somewhere in the neighborhood of 1,000 people that'll sign up and be part of the event. I think that anybody that comes will see the excitement. The big thing is-- are going to learn a lot from it.
Aaron: Yes, that's the name of the game. It's giving true value to people that are coming to your events because there are a lot of opportunities for people to learn about real estate. There's this and that, the others. There are so many gurus and talking heads in the real estate space. I love the guys that did one deal and now they're selling coaching packages. I've had guys offer to coach me in real estate and they've done a fraction of the deals I've done. I'm like, why would you coach me in real estate? I'm just not sure. Yes, it's an interesting space. Everyone's writing a book. Everyone's an expert.
Mike: I love that. That's classic actually but you're right.
Aaron: I had one guy who's teaching how to raise half a million bucks or something and comes to me like, "Buddy, I've raised like 10 times the capital you've raised. I'm not sure why I would pay you for your coaching program." Definitely an interesting space with that. I'm glad you're putting something out there from someone who's actually experienced in real estate with a good coaching program there. Some of the speakers at your event, just to give us an idea of who might be speaking there, some people we might know or what are some topics also?
Mike: Brian Burke from Praxis Capital will be speaking. Michael Blank, I think a lot of people will know him. Some real good national, well-known speakers and trainers will be speaking. I'm not of the opinion that "Oh, there's only enough room in that space for me." I believe there's a lot of room in the space because, Aaron, people are going to like me and not like you and people are going to like you and not like me. People who talk about competition, I don't believe in competition. Our only competition is ourselves. It's between our own ears and our mind because if we think we can, we can, if we think we can't, we can't.
I think that we all bring something to the table that somebody can benefit from. By bringing a platform together that 20, 22 people are part of, that are not only in the real estate space part of it but they're in the ancillary business also, lenders and insurance, things that we all need to know about that sometimes you don't think about as a new investor. It's like the first syndication you did. Did you think about everything that needed to go into it or happen in that first syndications?
Aaron: I thought I did.
Mike: Right, but we learn over time. It's like when I look back now and I think God, I was going to wait till next year to put this event on and somebody said, why wait? Let's do it in October. I said, "Okay." Never thinking through. I think that's the biggest challenge a lot of people go through is they don't think things through. Never thinking through all the stuff that had to happen but who cares? Now we're down the road, we're into it, it's going to be a blast, we're going to have a lot of fun.
Aaron: I think it's a great time to do this because quite frankly, people are looking at the stock market and it's almost a ticking timebomb, a lot of people think. If you're really trying to retire with a predictable retirement account or you're trying to build wealth and financial freedom, you shouldn't be 100% invested in the stock market. You need to diversify. I think a lot of the age-old wisdom of financial advice, "Oh just ride the index fund. Just stuff it away and when you're 65, you'll look at it then." That's not necessarily the best financial advice anymore. People are trying to diversify into real estate. People need to learn about this class. They need to understand it before they invest in it.
It doesn't mean you're going to become a full-time real estate investor or become a realtor, you can keep doing what you do best, where you make good income but real estate should be, in my opinion, a third to 50% of your investment portfolio. It's a great way to diversify. You could use your IRA but people need to learn about it. There are so many talking heads so events like this are where people need to go to learn more about that whether you're in or out of the industry. How can people sign up for your upcoming event?
Mike: Thanks for asking. You can go to our website, which is multifamilyglobalsummit.com, no spaces, all one word, multifamilyglobalsummit.com. You can register for either the Facebook live session, just the regular registration or the VIP registration. You have a choice. We wanted to do something that was going to be inexpensive enough too where people could get a ton of knowledge.
Aaron: Exactly. No, it's great. You said $9 for the initial access to everything.
Mike: There's an early bird special right now too. You get 20% off so it's like $7.20 cents before the 30th of September.
Aaron: That's incredible. I've seen people pay more for a cup of coffee at Starbucks than you're charging for an entire three-day summit on an asset class that's made, what is it? 70% of the millionaires in the world started with real estate. Is that the line? It's such an incredible class. So many unknowns but I hear for $7, you can join this incredible event. I'm going to check that. That's great, Mike. A very interesting podcast here. Any parting words for our listeners?
Mike: No. I think that you need to risk and take a chance and step out and do something different. We all spend too much time in our box, in our space and we're afraid to venture out and do something new. That's how we learn and that's how we grow, whether it's personally or professionally. If you're having trouble making that transition into outside of your box, find a coach. I'll sign up for that. I'm sure you would too. Go to my website. We can schedule a one-hour free coaching session if you are stuck or are looking to progress or do something different. Even if you decide that coaching is not right for you, at least you walk away with a couple of golden nuggets that'll help you moving forward.
Aaron: Yes and what's your website for the coaching?
Mike: It’s mycoreintentions.com or you could reach me at firstname.lastname@example.org.
Aaron: Right, thanks a lot Mike. I'll check that out. We’ll put that in the show notes. Okay, just send me those links. We’ll put those in the show notes for your event and for your coaching website there. Our listeners, if you're on YouTube, you can find that in the description or in the podcast description as well to sign up for Mike or take a look at his coaching program there as well.
That’s an interesting free consultation. I might take you up on that myself actually. All right, thanks a lot Mike for your time here. Thank you our listeners and my name is Aaron Fragnito, co-owner of Peoples Capital Group. Learn more about how we buy apartment buildings and other types of real estate with passive investors and how we've been doing this for about 10 years here out in New Jersey.
Go to peoplescapitalgroup.com where you can fill an application and see if you qualify as a passive investor and learn more about we have going on. You can check out our podcast episodes there, you can watch our YouTube videos on Peoples Capital Group on YouTube and learn more at peoplescapitalgroup.com, but that's it for today. I’m your host Aaron Fragnito. Thank you, Mike for joining us. You have a good one, my friend.
Mike: Thank you, Aaron.