Joe was introduced to REO’s after the crash in 2008. He quickly scaled his business to managing over 600 properties. Now his company TANIS, helps investors find deals, do the title work, manage the properties, and anything else you may need. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Joe Mueller Real Estate Background:
- Investing in real estate almost 20 years
- Owned and operated TANIS Group Realty since 2003
- TANIS is a Chicago area based real estate brokerage focused on managing and disposition of bank owned properties
- Say hi to him at http://tanisgroupllc.com/
- Based in Chicago, IL
- Best Ever Book: Think and Grow Rich
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Joe Mueller. How are you doing, my friend?
Joe Mueller: I am doing fantastic, Joe. How are you?
Joe Fairless: I am doing well, and nice to have you on the show. A little bit about Joe Mueller – he’s been investing for almost 20 years in real estate. He owns and operates TANIS Group Realty since 2003. TANIS – am I saying that right, first off?
Joe Mueller: You are, TANIS.
Joe Fairless: Sweet. TANIS is a Chicago area based real estate brokerage focused on managing and the disposition of bank-owned properties, based in Chicago, Illinois. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Joe Mueller: Yeah, sure. Stop me if you need to. About 20 years ago (give or take) a couple years I fell in love with the concept of living on an island or a beach somewhere through an infomercial and said “I really wanna figure out more about real estate and investing.” Long story short, that kind of led me to the courthouse steps, buying at county court auctions and sheriff sales in my early twenties, and I started flipping houses.
I kind of rode the wave up, got into multifamily prior to the crash, and then consequentially rode that wave back down again. Currently, I’m a licensed broker since 2003 and I of course got that license to assist in my investing (that was the intent), and through my investing at the courthouse steps and sheriff’s sales, I ran into a guy who worked for a bank. He introduced me to the world of REO.
At one point after the crash I think we were managing over 600 properties in the Chicago area, and it’s still something we do today, though I’m kind of multi-focused at this point, and involved in a title company as well, a mortgage company, and we manage properties…
I’d say the current focus for TANIS Group and myself is more of an acquisition and sales business of real estate itself, so a lot of off-market wholesale deals, things like that.
Joe Fairless: Under your company’s umbrella you’ve got a title company, a mortgage company, your manage properties… And do you represent buyers and sellers?
Joe Mueller: We do. Our avatar is the investor client. Typically, we’re seeing somebody either on the “I’m buying my first investment property or my first fix and flip”, all the way to the guys that maybe need help on their fifth, sixth and seventh… But it seems at some point when they kind of cross a hump, maybe at about 10 or 12 properties and they might have gone another direction or got into working with wholesalers or finding off-market assets on their own… But that’s a wide span.
We’ve worked for a couple of the hedge funds that have come through with the city, and helped them buy a couple hundred properties back in 2012, 2013 and 2014… So I would say yes to that answer, for sure.
Joe Fairless: This year where are you gonna make the most amount of your money with your company?
Joe Mueller: Great question. Back to what I said – we’re working on the off-market aspect at this point. We’re printing mail in-house for direct mail, we’ve got bandit sign campaigns our there, we’ve got cars on the road that say “We buy houses” on them… A whole ton of different things, marketing funnels that are going on to acquire more assets, and then depending on where that asset is located, what the amount of work that’s needed is… It could result in a fix and flip for myself and my partners on that side of the business, or it could be kept as a rental, or it could be sold off to another investor… And then wholetailing we do as well, which is a term that I think has gotten some notoriety in the last few years, where you’re basically just buying a property at a great price and throwing it right back on the market, maybe doing zero work at all. That’s what’s generating the most opportunity for financial benefit at this point this year.
Joe Fairless: How do you evaluate the success of these different (as you call it) marketing funnels to find off-market leads?
Joe Mueller: We track everything, basically. I’m still kind of a spreadsheet-based guy; I like to keep things pretty simple. So there are a few software pieces involved as far as the phone systems and figuring out which — so if it’s a probate, for example, versus a pre-foreclosure, versus a high equity “funnel”, I can track all that based on the phone number, essentially, and I can say “Okay, we’ve got 17 calls in the last week from the probates that we’ve been mailing.”
That all goes into a spreadsheet, tracked and evaluated and it does create change, which is a great point to bring up. Right now the way the market is, typically what investors are told when they’re looking to obtain off-market opportunities is – one of them is a high equity list. People that have 50% or more equity in their property, or maybe have a zero balance mortgage. Well, right now the way the market is, most of those are resulting in returned phone calls back to us with “Yeah, I think I’m just gonna throw it on the MLS” or “I already have my property listed”, or they’ve already sold it, if that’s what their goal was.
We’ve actually kind of pushed back on that; I brought that back in-house and not really market it at this point to those types of lists, that high equity aspect, because it just really isn’t any gain on it. Somebody who’s got that much equity in their house just throws it on the MLS and they get the most [unintelligible [00:06:10].18]
Joe Fairless: You mentioned bandit signs, cars on the road, and other things… What are all of the ones that you can think of that you’re doing right now to get off-market leads?
Joe Mueller: It’s a whole global aspect of what you’re doing as a real estate investor… If the opportunity has been out there, I’ve probably done it, and I have two other partners in this side of the business as well, so we’re constantly working on things to keep ourselves ahead of the game… But the bandit sign campaign, we have a couple of billboards up right now on some of the major highways in our area; not expressways, but highways, so it’s a 40k-50k traffic count per day. The cars on the road, like I said…
We’ve dabbled in Google AdWords and the Facebook world and the internet, and not really seen good results personally, so again, we kind of pulled back on those aspects, because we weren’t getting the return.
Joe Fairless: Some of the in-person or (I guess) tangible advertising, versus intangible (the ads online), what has been the most effective marketing approach?
Joe Mueller: The most effective from what we see is the bandit sign, by far. We put out 150 bandit signs per week. We’ve got one guy who’s employed to do that. Essentially, Friday nights at 10 PM he works until about 4 AM, maybe even later… We use a phone app that is out there, and I’ll have to dig that up because I don’t have it in front of me right now… But there’s a phone app that he actually takes a picture with each sign that’s installed, and it puts a GPS pinpoint on the location of that sign… So not only can we track him, we can kind of figure out spots that have a longer staying power, if you will, that don’t get pulled down as quickly, and that’s everything from in the ground, to wooden poles, electric poles, things like that. We actually have a sign sledge to attach them to, so… It’s about the networking as well, it’s about hosting meetups, which I know you do, Joe…
I can’t tell you how much we try to push networking to the investors that either come to my meetup group, or that i meet at other meetup groups or seminars, whatever it is, and how many deals per year — I mean, it may only be a couple, but those couple deals can really be big. We’ve got at least two in the last month that have come just through showing up, which is amazing to me.
So I would say marketing channel-wise, the best thing is the bandit sign in a simple form if somebody is looking to get into wholesaling or off-market property acquisition, as well call it… But really getting yourself out there and shaking hands and getting to know people, talking to guys like you… And you never know, maybe you’ll call me in a week and say “Yeah, I know this guy out of Chicago who’s looking to sell this house, and I don’t know anything about Chicago, so what do you think, Joe?” “Yeah, let me take a look at it.” That’s very common.
Joe Fairless: The two that you’ve gotten the last month, as you said, came through showing up… Now, have those two come from a meetup that you host?
Joe Mueller: Yeah, specifically I was actually asked to speak at a meeting regarding exactly this topic – off-market properties, how do you market for properties, direct mail campaign, stuff like that. My partner Dan Clark and I actually got up and spoke in front of this room; we were up there for about 20 minutes, we were only a part of the evening (we’ll call it), and I’m shaking hands and smiling, kissing babies at the end, and a guy walks up to me and says “I’ve got a friend who’s in a bad spot, and she’s got a three-flat in Chicago she needs to sell. I was wondering if you could help her out.” That turned into a $35,000 check at the end within about a two-week turnaround.
Joe Fairless: Wow, not a bad deal.
Joe Mueller: Just for showing up. And I already said it, and I wanna emphasize it again – there’s a lot of opportunity that can be found just by getting out there and getting to know other people and sharing your story and listening to theirs; you never know what could happen.
Joe Fairless: Yeah, and it’s showing up… It’s also being invited to speak to a group like that, so having the credibility to do that. What group was it? Was it a local meetup? Educate us on the group.
Joe Mueller: Yeah, so that’s a Chicago REA.
Joe Fairless: Okay, so it’s just a Chicago REA invited you to speak, you spoke, and then boom, there you go. About how many people were in the room?
Joe Mueller: Thirty.
Joe Fairless: Thirty or so.
Joe Mueller: Yeah.
Joe Fairless: Why do you think you were invited to speak to that group?
Joe Mueller: I’ve had a relationship with Andrew Holmes, who’s another investor in our area, and he runs a Chicago REA. He’s got satellite meetings once a month around a dozen satellite locations around Chicago. This guy literally three days a week is out there, hosting meetups in different areas around the Chicago metro market… And just through showing up at a meetup I met him a couple years ago, and he asked us to come up and speak, which I’ve done more than once.
Joe Fairless: Episode 933 is when I interviewed Andrew, so Best Ever listeners, you can check out that interview. So you are working on these off-market deals, and as you said, that’s the leading way that you’ll be making money in the business. You said you’ve got a title company, a mortgage company, and you manage properties. Out of 100%, what percent of each of those three do you think income can be attributed to?
Joe Mueller: Probably almost in the order you brought it up. The real estate brokerage itself, aside from any type of off-market discussion we had earlier, the real estate brokerage, which is working with investors, listing fix and flips for other investors, things like that, finding properties – that’s probably the biggest contingent of those aspects of my business. Then consequentially to that would be the title company, and then I’m also a partner in a mortgage company.
Being on this side of the business, one thing you learn – and I’m sure you’ve experienced this as well, Joe – is when I would refer a mortgage broker to an investor or vice-versa, I’d say “Hey, John Smith, give my mortgage guy a call. He’ll you out to buy that 4-unit property”, but there’s really no accountability between my word and then what that mortgage broker or that mortgage person does as a result. I mean, I’ve worked with him in the past, he closed a couple deals, he’s a great guy… And what I’d feel like is it was my name on the line and I’m gonna be referring somebody to another partner in the industry that there’s gotta be more accountability. The mortgage brokers, at least in Chicago, they’re a dime a dozen, and they’re constantly changing… They get overwhelmed and they don’t have an assistant, and the next thing you know they don’t call somebody back for two weeks.
As an investor, as you know, a lot of these deals are based off timing, and you can’t screw around for two weeks when you’re waiting to get a loan close or you’re waiting for an appraisal to get ordered… So my solution to that was buy into a mortgage company, and that way the accountability is always gonna be there. Same thing with the title side. Property management – that’s just another contingent of what we do here at the brokerage, because I have my own portfolio, and it just made sense, since I’ve got the systems in place, that I can offer it to other people.
We’re a very simple property management company with fees, and stuff; I charge $100/month per asset that I manage, and we basically take care of everything. Any type of maintenance or capital expenditure gets passed on to the owner. I like to keep things simple.
Joe Fairless: How many properties do you manage right now?
Joe Mueller: Including the portfolio I hold myself, we’re somewhere in the 65-70 range.
Joe Fairless: Are you currently buying right now for your own portfolio? What’s the last property you bought?
Joe Mueller: The last property that I’m keeping in the portfolio was a 3-bedroom 1-bath ranch, single-family, that I picked up for 71k net, so I had to pay the real estate taxes; I didn’t get prorated taxes at closing, which is another $2,500 or so.
Joe Fairless: $71,000, and what does it rent for?
Joe Mueller: I’ve actually had a tenant — that’s another story… But $1,400, that’s the rental amount.
Joe Fairless: What happened?
Joe Mueller: Perfect tenants, husband and wife, no kids, great incomes, credit scores in the high 700’s. They wanted to move in on May 31st; they were actually like “We need to move in early. Everything’s great.” I talked to their last landlord who was selling their house, everything checked out… And then the lease gets presented to them in DocuSign, and they just don’t respond for a day. Now we’re following up with them and they’re like “Yeah, we’re still thinking about it. We had to move out of our old place, put everything into storage, we’re staying at a hotel right now.” I’m like, “Okay, something doesn’t make sense.”
Joe Fairless: Yeah…
Joe Mueller: So we’re back on the market with that one… But $1,400/month, to answer your question.
Joe Fairless: How did you find it?
Joe Mueller: That was through the off-market channels. It was actually a yellow letter to an absentee landlord. Actually, it was a vacant house that the neighbor owned, but essentially an absentee list, so it wasn’t being rented, but the family bought the property with the intent to move their in-laws in, who were deteriorating in health. Unfortunately the health deteriorated too quickly, so they never had the opportunity to fix it up or put their in-laws in there, so they ended up selling it to me.
Joe Fairless: When you look back at your multifamily investments prior to the crash, and as you said at the beginning of our conversation, you rode that wave back down again – what would you do differently now if presented a similar situation?
Joe Mueller: You know what, I think at that point in my life when I was in my late twenties I probably bit off more than I could chew; I went from essentially a handful of single-family, one commercial building, and I escalated up into (I think I had) 47 apartment units within about two years, and I overleveraged. I basically acquired, fixed up and cashed out and pulled out a couple hundred thousand in equity out of these two buildings which equated to 47 units, and then when the crash happened, they were no longer worth what my loan values were… And it was a long battle to get that situation corrected and avoid foreclosure and avoid bankruptcy and things like that.
In the end, one of them I sold basically for what I owed on it, and the other one I had to come to the table and actually pay the buyer money to make that loan go away… But it took a couple years.
That’s one thing I’d like to offer to the listeners – when you’re considering using leverage, just use it carefully, and don’t pull out 95% of your property’s value, even if they tell you you can, because if something changes, you could be stuck. In the commercial baking world, as I’m sure you know, Joe, with your experience – they have the right to basically pull that loan, even if it’s performing.
Joe Fairless: Is that what happened, it was performing and then they decided to pull it?
Joe Mueller: Absolutely. This was all 2006-2007 is when I ramped up to that number of units and had those loans put in place with refinances and pulled out that cash. A few years later, obviously, the crash had happened, and even though I’d made every payment, never been late, and the properties were performing, they made money, I got a phone call one day from some type of manager at the bank and they said “Yeah, we’re no longer gonna be servicing these types of loans here at our bank, so your note’s due.” I was like, “Um, what?”
Back then, in 2010-2012, getting funding for those types of properties wasn’t easy. In the end, I ended up saving what I wanted to save and kept an office building that I still occupy as my office, but the apartment buildings I ended up having to sell. One of them I sold through the property manager that was actually managing the property at the time.
Joe Fairless: Yeah, the property manager was like “This is a great investment! Yeah, I’ll definitely buy it. It’s cash-flowing, and everything… It just won’t work with that lender.” How long did the lender give you in order to pay off the loan?
Joe Mueller: It took over a year. I don’t remember the exact timeline. It was probably somewhere around 18 months. But they didn’t give me any time; it was like a 90-day turnaround. “Your note’s gonna be due in three months, essentially.”
Through that process I continued to make payments, and they kind of started to get a little more aggressive with their desire for that money; they sent me the loss mitigation, so I was never technically defaulted or in foreclosure. That’s their process – mitigating that bad money (as they saw it, I guess we’ll call it) and finding a bank to refinance at that particular time, at least for me, was not possible, so I ended up selling… Which I’m still happy with that choice today, as a matter of fact. It all worked out.
Joe Fairless: And you always go back to that lender because they’re loyal to you, so you’ll be loyal to them forever, right?
Joe Mueller: [laughs] Oh, man… I pulled every account out of that bank the day after that call came in. Actually, I had an account with $1,000 in it – I think it was an escrow account for something – and they froze that $1,000, which they still have.
Joe Fairless: Ugh…
Joe Mueller: So no, I will never bank there again, and I’m not gonna mention any names, but it was a major national bank…
Joe Fairless: Oh, it wasn’t a local portfolio community bank or a credit union?
Joe Mueller: No, that’s something that I had to learn, right? And when I say that, I mean as an investor, create relationships with your local community banks, as Joe just said. That’s where you’re gonna find the best types of opportunities, in my opinion, and then best types of future relationships where they may even — I’m not gonna say bend the rules like they’re doing anything bad, but they’ll change some of their lending guidelines if they see an opportunity.
I’ll give you an example – I’ve banked with another smaller local bank since, and they had a one-year seasoning rule on any rentals that I was buying. Basically, I’ll give you the quick rundown – if I acquired that house that I brought up earlier, that 3-bedroom 1-bath rented for $1,400, typically I’d have to wait 12 months before I could refinance a cash-out, and I do that because I’m borrowing private money from private investors that are giving me money at 10%, we’ll say… And I wanna give them an opportunity, so that private lender makes some money along with working with me, and then I wanna refinance out, so I’ll do 13-month notes to accommodate that refinance process.
Well, we sat down and kind of did (we’ll call it) an annual review, and they have a new manager over at this bank that I’m utilizing, and the guy’s head exploded when he saw the amount of properties that we had and the amount of transactions we were doing. He’s like “Why don’t you put all of your loans through us?” and I said “Well, because have to wait a year to season these properties, when I can go to ABC commercial bank down the street (another smaller bank) that will do it in three months, but they’re limited on the number of loans I can have with them.”
The manager was like “No, I’ve gotta talk to the board. We’re gonna fix this right now”, and lo and behold, two weeks later I have another meeting and they’re like “We’ll give you no seasoning loans all day long. You buy a property, we’ll refinance the next day.” I’m like, “Fantastic”, because I really like working with that particular bank, and it’s all about that relationship, building those relationships.
The only other thing I wanna add to that, and it kind of all falls back into that networking experience – I know when I started out I was like the lone wolf… Like, I was gonna fix and flip everything, and I was gonna be the guy, and I was gonna buy all these houses, and I held everything very close to the vest… And it took me a long time to realize and maturity level to grow into was that was the complete wrong way to invest in real estate and deal with other investors, for example… Being an open book and believing the abundance mentality has changed things tenfold for me.
The reason why I used that crappy bank in the beginning that ended up calling my notes due, but because I had great credit and I had good income and I went to one of the biggest banks in the country, thinking “Oh, this has gotta be the best opportunity” – well that was way wrong. But if I would have had friends in the business or if I would have networked more, if I would have opened up to other people and shared my experiences and offered something to them, I’m sure I would have met a better bank or a better opportunity and I never would have been put in that position.
So just a little piece of advice for the listeners out there is when you’re dealing with other people, tell them your story; be honest, tell them the truth. Tell them how you failed. Every investor fails. At some point, something goes wrong, whether it’s my story about the multifamilies, or a fix and flip that doesn’t work out or you lose money on it… Because people see that and they see that you’re an open and honest person, and then they go “Yeah, he seems like a pretty cool guy. I know somebody that might be able to help him with this.” I can’t believe how many opportunities come my way just by being open and doing stuff like this, being on a podcast, or hosting my own, hosting the meetup here at my office… It’s tenfold the results that come back to you, the benefit.
Joe Fairless: Based on your experience, we’re gonna extract one more piece of advice, because I haven’t asked the money question… What is your best real estate investing advice ever?
Joe Mueller: This is a simple one… Hustle, hustle and hustle. I get that question, “How do you do this? How do you have this title company, how do you broker REO, how did you sell 400 houses in 2013? It’s hustle. You get up every day, you work hard, you play hard too, schedule your life however you can with your family that makes you comfortable or satisfies your wife and kids, but you keep hustling and you will succeed. Don’t give up.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Joe Mueller: I wasn’t prepared, but sure…
Joe Fairless: Good, I don’t want you to be prepared. I want some real answers, baby. First though, a quick word from our Best Ever partners.
Joe Fairless: Okay, best ever book you’ve read?
Joe Mueller: Think and Grow Rich.
Joe Fairless: Best Ever deal you’ve done?
Joe Mueller: I’m in the middle of probably the best deal ever right now. I can talk about it if you want.
Joe Fairless: What about a deal you’ve already completed, that wasn’t your first and wasn’t your most recent? Something in between.
Joe Mueller: Sure. A couple years back I went under contract to buy a riverfront property in the Chicago area for 125k, and I found another investor that was interested in buying it for 150k… So it seems like a big win, 25k profit potentially, and in that process the end investor started poking around with the city and asking questions about the zoning and things like that, because he was potentially gonna knock this property down… And the city started to pay attention and saw that the property had been dilapidated, and they started fining the owner, and then the owner said “You know what, I want this thing gone. I wanna close tomorrow. I’ll sell it to you for 25k.” So yeah, that was a great deal.
Joe Fairless: Absolutely. What’s a mistake that you’ve made on a transaction that we haven’t discussed?
Joe Mueller: I would say underestimating the cost of labor and materials, a.k.a. working with contractors, for sure. I’ve gone over 25k over budget, and I kind of think of myself as the guy who really knows the numbers well, so… Always build in a buffer zone, at least 10%, because something is always gonna come up when you’re working on a property or an apartment building. Whatever it is, always build in some extra wiggle room there. You’re never gonna be 100% accurate.
Joe Fairless: Best ever way you like to give back?
Joe Mueller: That would definitely be the meetup/networking with other investors. I don’t see myself as a teacher or as an instructor, but I do share my experience with anyone and everyone who will listen, and again, that helps other people grow and improve their own personal lives, and I find that rewarding.
Joe Fairless: How can the Best Ever listeners learn more about what you’re doing and get in touch with you?
Joe Mueller: The best way to get a hold of me is actually e-mail, Joe@TanisGroupLLC.com. That’s the easiest way.
Joe Fairless: And you’ve got a podcast, The Investor Empowerment Series Radio Show. Best Ever listeners, you can check that out, too.
Joe, thanks for being on the show. Thanks for talking about where you came from, what you’re doing now, and some tactical advice that will be helpful for myself and the Best Ever listeners. One, finding off-market deals – number one way, clearly, for you you said is bandit signs; you’ve talked about how to approach that… Perhaps if a Best Ever listener is curious about that phone app you were talking about, they can reach out to you and then you can give them that information – first off, is that okay?
Joe Mueller: Simple Crew is the phone app.
Joe Fairless: Simple Crew, sweet.
Joe Mueller: Simple Crew, and it was truly my privilege, Joe. Thank you for inviting me to be on the show.
Joe Fairless: That and the hustle mentality of connecting with people, and the portfolio lenders versus a national bank, the importance of the relationships there… So thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Joe Mueller: Thanks, Joe.