Mike Gengler - From Real Estate Agent To Investor
Mike Gengler became a real estate agent and got his license in 2020. He started out working with residential clients, but pretty quickly realized that working with investors and eventually becoming an investor himself better aligned with his future goals. Hear Mike share his journey to building a portfolio of over 200 units and $6.5M in assets under management in the past 2 years while giving up being a real estate agent for residential clients and focusing on helping investors achieve their goals, while Mike's able to work on achieving his own personal goals at the same time!
In this episode, you will be able to:
- Master the transition from real estate agent to investor and unlock new opportunities in the real estate market.
- Discover the wealth-building potential and advantages of multifamily real estate investing.
- Uncover effective strategies for finding lucrative real estate investment deals in today's market.
- Learn how to build a robust and sustainable real estate investment portfolio for long-term success.
- Explore the power of syndication in real estate investment and how it can amplify your investment potential.
The key moments in this episode are:
00:00:00 - Investing in Real Estate without Personal Funds
00:05:08 - Transition to Real Estate Investor
00:10:02 - Finding the Right Investment Properties
00:12:17 - Building a Successful Investor Network
00:13:44 - Investor Preferences and Financing Options
00:15:29 - Benefits of Multifamily Properties
00:26:25 - Encouraging Financial Independence
00:28:12 - Unique Perspectives on Real Estate
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Mike Gengler
And none of my investors wanted it. And I was just very confused. I was like, okay, how do I get this property so that, one, I can continue to make money in the form of commissions, which was how I was thinking. But two, also in the long term of, like, that property, because this was 2021 when this happened. That property is probably worth $50 to $75,000 more than it was back then. And so getting that equity, getting that cash flow, getting all those benefits that you see from these properties, that was what really spurred me to figure out, how do I buy properties without my own money or by partnering with people?
Mike Swenson
Welcome to the REL Freedom show, where we inspire you to pursue your passion to gain time and financial freedom through opportunities and real estate. I'm your host, Mike Swenson. Let's get some REL Freedom together. Hello, everybody. Welcome to another episode of REL Freedom, where we talk about building time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. And today I'm really excited to be able to share and chat more with my business partner, Mike Gengler. We're going to talk more about highlighting him and his journey through real estate, how he went from real estate agent to real estate investor. We've had past episodes where we've talked about some of our stuff that we've done over the time, but now we're going to kind of share his journey from real estate agent to real estate investor. And for you, if you're a real estate agent, listening to this, thinking about where do I want to go? What is my future hold? Or if you're outside of real estate and you're thinking about real estate investing and how this can really change your life, this is a great episode for you. So welcome to the show, Mike. We're so excited to have you.
Mike Gengler
Yeah, good to be on again. I always like going over the journey that I've been on and sharing it with others because I think it's a great, great way to earn, earn money, and I set up a financially free future for yourself.
Mike Swenson
Why don't you get started? Just share a little bit about your life before getting into real estate. I think for people that maybe want to hear and really maybe more from the perspective of your long term future, thinking about your long term goals, maybe thinking about your financial goals, maybe what was it about real estate that originally excited you? And then we can talk about why flipping that switch from residential real estate to real estate investor and working with investors and how that's worked out for you.
Mike Gengler
Yeah, absolutely. I, uh, I came from a sales background, and I got into real estate because it was something that offered more flexibility, um, the ability to be your own boss. And that was great. Um, and I started working with clients on the residential side, and it was, um, it was good. I liked helping the families. I liked getting people into the houses. But the catch was, you weren't your own boss. You were on somebody else's timeframe, because you were doing showings, you were doing open houses, and it was on somebody else's timeframe. So that thing that I was looking for, that freedom to create the life that I wanted, wasn't really there. As a residential real estate agent, we found early on a way to get investor leads. And as I was working with the investors, it was on my time. You know, they, it was, it started moving in that direction, I should say, because now I could schedule the showings when it works for me and then get them the information. Now, I still need to do that in a timely manner. I can't just, you know, ignore them. But it was okay. I don't have to be there at 06:00 p.m. on a Wednesday because they're going to be there. I can go look at it anytime throughout the day and then get them that information. And it was often even better because now I'm not trying to match up schedules with the buyer, so I might get them that information before they could even go see it. And the other great thing about investors was repeat business. It's, investors are not buying one house every five to seven years. Or as the last couple of years have shown, it's bumped up to seven to nine years. Your investors could be buying. I mean, my first investor bought three deals within the first six weeks that I started working with them. So that was just an amazing revelation to me that, hey, these people are out here to build their portfolios. And so I jumped right on board with that of, okay, how do I get more investors? And so it was finding these investors that wanted to do multiple deals and doing those deals with them. I would say probably about half of my investors were doing two or more deals a year. And so you're immediately getting this repeat business from your clients, and when you're working with the same clients, you know what they want. So I know their buy boxes, I know what they're looking for. I don't have to go through the process of figuring out what that buy box is. Every time I get a new client, I already know what it is, and I can just go search for those things and what really took me from investor agent to investor was I'm talking about all these great benefits with investors. They're telling me all these great benefits, and I'm like, man, I really wish I could do that. And what really spurred me on was I found a property and I was like, oh, my gosh, this fits so many buy boxes. Like, at that point, I'm still working for commissions, you know, so it's like, okay, I find this great deal. I'm super excited. I'm going to get somebody a property that they want. It's going to make money for them. I'm going to cash in on a commission, and none of my investors wanted it. And I was just very confused. I was like, okay, how do I get this property so that, one, I can continue to make money in the form of commissions, which was how I was thinking. But two, also in the long term of, like, that property, because this was 2021 when this happened. That property is probably worth $50 to $75,000 more than it was back then. And so getting that equity, getting that cash flow, getting all those benefits that you see from these properties, that was what really spurred me to figure out how do I buy properties without my own money or by partnering with people, or I wanted to figure out what the best and fastest and way to build this portfolio was.
Mike Swenson
Well, and I had shared that really was a key turning point for me, thinking more about, yeah, I'm a salesperson helping an investor to now I can become an investor myself. And I remember thinking, because when you had shared that, I was like, we got to figure out this problem. And I first started going to hard money lenders or commercial lenders, just thinking like, well, maybe I have to find the person that's going to lend us the money, right? Like, find the lender that would allow us to do that. And then that switch to learning about these investors that are out there that wanted to invest in deals, maybe didn't have enough money to do it themselves or maybe didn't want to do it all themselves. And then they love the fact that we're coming in as the expert here, the person that has experience finding deals, determining what a good deal is. And they're like, here, I would love to invest in real estate. I didn't know how to do it, and now I can do it with you. And so it's been a journey. But that question of how do we find a way to invest in a deal ourselves that maybe our investors were passing on, that really has been a driving factor for us.
Mike Gengler
Yep, absolutely. It was an eye opening experience when, I mean, basically that what I considered lost commission of this great deal, spurred this want to figure out how to acquire these properties for us. And what it's turned into now is we already knew how to find good deals because we were doing it for our investors. So now we're still doing that part, and we're getting the commissions and we're getting an ownership stake and we're getting a management fee. There's just so many of these benefits. And when we turn around and talk to our investors that are putting their money in these deals, they're excited about all the benefits they're getting. They don't have to do the due diligence, they don't have to talk to the property manager. They don't have to go find the deals, they don't have to talk with the wholesalers. So it's this really mutually beneficial relationship of both parties getting what they want out of the deal. And it's fit perfectly into what we're doing because we get to spend our time during the day, during our working hours looking for deals, which is what we specialized in for a year when we were working with investor clients. And then we do the due diligence. Like, that's become a specialty of mine, of like, getting all the documents, doing the inspections, finding these sewer scopes, figuring out which properties we present to the clients. Because when we get to the point where we're presenting a property to a client, like, we've already done that whole process. And so clients might be like, oh, what else do you have? And I'm like, well, I can tell you about these 20 other properties that didn't make it all the way to this point, but let's focus on the one that did, because this is the one that's made it through all of the due diligence process that we've built up to this point.
Mike Swenson
And why don't you share a little bit about that journey, picking up investors along the way? Because we also did another deal where we thought our investors would like it, and they didn't. Right. And so, you know, we ended up going through the inspection process that had to back out, kind of our, our first syndication that ended up not panning out. But I feel like everything that we've done has helped us to get a little bit sharper and a little bit sharper to where we do have a good handle of the types of properties our investors might like. And really it's first putting a deal in the eyes of investor like, is this something that they would want to invest in and be excited to invest in and then do the numbers work? We're still thinking of ourselves last, but we're putting our investors first to make sure it's something that they're going to enjoy investing in.
Mike Gengler
Yeah, so when we look for properties, yeah, we're looking. There's, there's two basic property types we look for. One is cash flowing. One's going to be the appreciation play, and one is more immediate short term benefit, but less benefit overall because the cash flow is a little less than appreciation and equity, it generally are. And then the other ones a little bit longer term, you get a bigger payoff in the end, but it just doesn't quite happen as fast. And so those are the two that we target. And knowing which investors like which deals is great and also helping the investors diversify. You know, hey, I need cash flow right now versus, okay, I've got this chunk of money I want to stick away for a little while and I, and then have a bigger payoff in the end. And so it's finding those two different things for the investors and getting them the deals that they want based on what their investing needs are. And, yeah, we've done, I mean, I think both of us have done deals, both residential investment that have fallen apart at different times due to different reasons. The first indication, yeah, it would just, it looked good on paper. We went through the due diligence process. It got through the inspection. And when we got to the capital raising part one, it was our first syndication, so we were a little more rusty on that at that time. And two, it just didn't match up with what our investors were looking for at that time. And so now we've gotten even more picky about which properties we move forward with. Having learned from that of, okay, we can start raising and getting a feel for what our investors are looking for before we get that far in the due diligence process. And so we've really honed in our system of what works for us with our investors. And as we work with more and more investors, they're sharing what they're doing, which is helping us bring more investors into the deal. And so it's just the self growing organism of helping people that we know get invested in real estate for the long term. So on our second syndication, I guess, like my college roommate invested, and then he invested on our fourth one, and now he's talking to his dad about investing. Like, that's the type of excitement that builds around this of, here's how it's being successful for somebody, and then they're sharing it with somebody that they want to it to be successful for as well.
Mike Swenson
It really has been a win win. Like, we, we get to serve in our area of focus and do what we do best, and the people that we're working with are excited to work with us because it's, it's something that they couldn't find on their own. You had mentioned cash flow, and I'd love to talk about that, because a lot of people, you know, let's say I want to get started as an investor, and I'm doing this myself, and I buy a single family home trying to get cash flow. Talk about the economies of scale, because I think that's one of the things that we're trying to educate our investors on, is you can do this yourself, but on a single family home, if that person doesn't pay rent or if you have a vacancy that month, you get zero income, where on these larger properties there's still stuff coming in. So talk about I want cash flow as an investor and doing it as a single family versus a 20 unit or a 50 unit or 100 unithood.
Mike Gengler
Yeah. The big benefit of working with us is we've gone through so many of these things that we've seen the benefits and challenges that each of these types of investments offer. And so what I saw as I started off as an investor agent is most of my investors were looking for two to four units. And one of the advantages of that is conventional financing works for two to four unit properties. But you still run into, especially on a duplex, if one of your tenants is gone, you're likely not covering your mortgage payment. It might work out. And there's definitely deals where it does. But on many of these deals on a duplex, if one of your tenants is gone, you're not covering your mortgage for that month, or at least your mortgage. Your taxes, your insurance, your utilities, your capex, your maintenance, your property management, all of that stuff, you're not going to cover all of it. And so I learned with my investors, they would buy a two, and they're like, oh, well, I didn't quite make it this month because somebody was gone. And then I did the turn, and then everything was good again. And they're like, well, what about, will you look for a four unit for me? And so then I go look for a four unit, and they're like, okay, well, one of my tenants was gone, and I broke even that month, which, honestly, in real estate investing, if you break even in a month and you got a tenant gone, great deal. But if it can be better, why not make it better? And so it was this quick progression of, like, okay, single family home, you can lose 100% of the income. Duplex, you can lose 50 quad, fourplex, you can lose 25%, like, on one tenant leaving. And so we quickly realized, like, well, if one is good and two is better and four is best, actually, 20 is even better than that. And so our first deal, we just jumped right in and went straight to 26 units. And it was like, all right, 26 units. We got a partner to JV with, and here's what we're going to do. And it's like, okay, we at one point moved eight people out so that we could renovate all eight of those units and get them done. And did we make money those months? It was a quick two month turn. Get all eight of those units back going? Like, no, but we could pay all the bills. And now those eight units are all renovated and they're all rented out again. And so it's like we lost a third of our occupancy to renovate, and we were still hitting the number that we needed to hit. And so we built all that equity over those two months rather than getting cash flow. So when you're looking at. I know I got a little bit away from this, but when you're looking at cash flow, you want to make sure that you have the best chance to pay all your bills and then still have that profit every month. And so our opinion is that more units is generally better. Now, if you can't manage the number of units, that gets into a different problem of mismanagement. And. But if you got a good property manager in the area and you talk with them, the amount of time that you need to talk. We do weekly or bi weekly updates with many of our property managers, then you're going to have the best chance of success. I mean, the 26 unit, now, we could probably have eight or ten units not be in there, but because we've renovated so much and increased the rents and decreased the expenses, that's a really good cash flow. And property right now, as we move forward, more units is generally better, in our opinion. And also, you know, the amount of appreciation also goes into more units. If you just look at 5%, you know, just as a number for appreciation for an area, let's say a single family home, 5%. Okay, it's. Let's say it's 300,000. You're going to get 5% of that. That's not going to be as much as 5% of a $2 million multifamily building. So even if the appreciation is lower for multifamily or commercial in that area, oftentimes the lower percentage, but the higher base valuation, you'll still get a higher overall appreciation on the property, even if it's a lower percentage amount. So we've found that there's just a lot of benefits of having the multifamily property.
Mike Gengler
Yeah, I think the big thing for me is I've, I worked for ten years as a bartender, I worked for five years as a sales rep. Those are both commission type jobs. You know, you're earning money, but there's no salary. I haven't ever had really a salary job. And when you get into real estate, you get even further away from salary. So I went from getting paid nightly as a bartender to getting paid biweekly on commission as a sales rep to getting paid whenever I have a closing, which could be, could have two in a week or two in a day, could have one every three to six months. There's just no guarantees there. And so what building this real estate portfolio does is it puts in a base amount of income every single month or every single quarter because we do quarterly payouts, but it's that quarterly payout of, okay, you're going to earn this amount of money, and it's not a guaranteed amount. It does fluctuate, but I've at least know I've likely got something coming in every single quarter from these properties. And rather than just making a single commission on a property, like a residential sale and then asking for referrals or, you know, waiting five to seven years and then helping them buy and sell another property, I think one of the benefits as well is making the commission or wholesale fee, depending on how the deal is structured, but making that upfront money when you close and then having that ownership stake in the property and then collecting on that management fee as well. And so it's built in this, like, every sale that I do isn't just one single commission. It's building this big snowball that's rolling and growing and creating this future and this lifestyle that I can shape how I want it. So I'm looking at where I was two years ago, and it was like every, every single sale was a single sale. I did a residential sale. I had a great time doing it. I talked to the buyer and I was like, okay, I'm only four years removed from that. So even the first clients that I helped might be thinking about it right now, because if we talk about averages, yeah, somebody's going to move at four years, but might be thinking about it right now and versus when I bought my first property or our first property. Like, we got a commission on that, we've gotten equity gain on that, we've gotten cash flow on that. Like, there's all these benefits of that property that have happened since the commission has happened. And so I know a lot of agents target that $100,000 number. Like, hey, I want to make $100,000. And honestly, in today's economy, like, that seems like a good target to just survive. And so when I think about, like, how I can make that number every year, like, as soon as we get into probably this cycle of where we've been in it, like three to five years of these investments is the refinances are going to start happening. And when those refinances start happening, you're going to start seeing six digit paydays. And it's not going to be because you went out and found a client. It's not going to be because you went out and sold another deal or bought another deal. It's going to be because work you did three to five years ago is now appreciated enough. You've built the rents, you've lowered the expenses, you've created the t twelve and the, and the financial report that shows a lender. This is a great property to refinance. And they want your business, we want their business. And when we refinance that boom payday for you. And so that's where it's like, I'm super excited about the future because not all of my income is going to be coming from commissions. It's going to be more steady than that. It's going to be the cash flow, it's going to be the management, it's going to be the steady flow of refinances. I think what we're at, like, seven properties right now, plus we've got some Airbnbs as these things start turning over. The first one we got, we're looking at refinancing right now. We've owned it for almost two years. We've done a lot of updates to it. That's going to be a super exciting time of, hey, we refinanced a property, here's where we're at right now. And so it's like, we're on the cusp of where all this hard work the last two years is about to really start paying off in a way that I don't think I can even accurately imagine how it will affect us, because right now we are still. I mean, I would say I'm still 80% to 90%, like, commission based on all of this. So it, like, still feels very commission based. But just knowing that I have all that equity and properties and cash flow, like, it's just an exciting time to see how that will pay off as we move forward.
Mike Swenson
I remember listening to a interview with Pace Morby and he talks about that, like, takes a while for that cash flow to build. But the cool thing is, is every ounce of time that we spend working with investors is building our future portfolio. So it's just going to continue to compound and grow and compound and grow. And, I mean, I guess technically we could sell everything at one point and be back to zero, but the more we.
Mike Gengler
But zero would be so far ahead of where we were, like.
00:25:25 - Mike Swenson
Right, right. Yeah. And so, yeah, I mean, our holdings will continue to grow. I think, you know, we, we figured it out. It's 200 plus units and six and a half million dollars in a portfolio that's growing. And so if we grow it a couple million dollars a year, or if it doubles every couple of years, like, that's going to continue to grow. And so that cash flow is going to grow, the equity stakes going to grow. And so it doesn't feel like this hamster we have residential, where it's just make a sale. Now, granted, people are very successful and residential that grow a business and take the time and put into it, but we're also growing our retirement and growing our future as well, in addition to the work that we're doing every day as an investor type agent. Yeah.
Mike Gengler
And I think that's one of the reasons. I mean, having come from a background of essentially only ever working in a commission based job of either bartending or sales, it's helping other people get to that point of not feeling like they have to depend on their commission so much. And so knowing how I used to spend money, you know, if you get paid as an agent and you've got that big chunk, and it doesn't all have to go to bills that you already owed, like, and you've got that chunk of money, like, that's where you can take advantage of our expertise and our knowledge and our experience in this and put some money into a deal, and you don't have to have enough to buy your own. You can put it into a syndication and it's very passive. And like you said, it allows you to take advantage of those economies of scale and get the benefit of owning a 25 unit. Now, you're not going to own the whole thing. Mike and I own zero properties where we own 100% of any of them, because we want a piece of a really big pie rather than having a really tiny pie all to ourselves. So the best time to buy a house was 20 years ago, and the second best time to buy a house is obviously right now. And the same applies for investing in real estate. The best time to buy an apartment was, well, it might have been like 2010, but 20 years ago. The second best time to buy an apartment is right now. So that's what we're looking at doing, is growing as much as we can and building that retirement portfolio for people.
Mike Swenson
That want to reach out to you or learn more about what we're doing. How can they do that?
Mike Gengler
Pinnacleteaminvestments.com is where you can get a hold of our website. We've got our current deals up there, we'll have our future deals up there and ways to invest with us. We'll have content on why invest in real estate and obstacles to overcome and how syndication can help you. And if you want to get ahold of me personally, you can email me. Mike genglerleeadadvantageteam.com dot thank you for coming on.
Mike Swenson
It's awesome. You know, I know I I share, but it's cool to hear your perspective and obviously your story is very different from mine. And granted our path is our we're going on a path together, but your reasons why you've done it, how it's working for you is different as well. So thanks for coming on and sharing and excited to continue to build and grow this together.
