Weston set a goal to specialize and be the number one seller of 2-4 unit properties in Chicago. Goal accomplished! With his brokerage and team around him, together they are the move the highest number on 2-4 unit properties in all of Chicago! Weston saw this need years ago and went all in. Hear how he has been able to have such great success. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Weston Harding Real Estate Background:
- Owns and operates X Plus Real Estate
- His team is currently the #1 brokerage for 2-4 unit sales in all of Chicago
- Team closed over $20M in sales in 2017, on track for $40M in 2018
- Say hi to him at https://www.xplusrealestate.com/ or at 312.669.4343
- Based in Chicago, IL
- Best Ever Book: Never Eat Alone
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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, Westen Harding. How are you doing, Westen?
Westen Harding: I’m doing great, Joe. Thanks so much for having me on the show.
Joe Fairless: My pleasure, nice to have you on the show. A little bit about Westen – he owns and operates X Plus Real Estate. His team is currently the number one brokerage for 2-4 unit sales in all of Chicago. His team closed on over 20 million dollars in sales in 2017, and is on track for 40 million dollars in sales in 2018. Their website is xplusrealestate.com, and there’s a link to that in the show notes page. 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?
Westen Harding: Sure. Thank you so much for the Best Ever listeners for tuning in today. A little bit about my background – I actually got started selling real estate in college, in Texas Tech University, Go Red Raiders!
Joe Fairless: Yeah, Guns Up, baby!
Westen Harding: Guns Up! So I sold real estate there, which was just your standard single-family homes for like $75,000, and then I moved to Chicago after graduation and decided to get into commercial real estate. So I was actually selling larger 20-unit plus apartment buildings, and while doing this, I started doing a lot smaller 2-4 unit deals to kind of get my feet wet, and I noticed that there was nobody else in this market; this was back in like the early 2000s and I said “You know what, I’m gonna go ahead and make a goal for myself to be the number one seller for 2-4 units in all of Chicago.”
In 2010-2011 I started my own brokerage, X Plus Real Estate, where from there I’ve just been cranking away, building a team, up to a team of about 6-7 people now, and as Joe mentioned, we’re the number one seller of 2-4 units in all of Chicago.
A little bit more on last year’s numbers – our sales were on average 13.8 days on market, and had 98.9% list price, so just crushing that right now. On top of that, I own a number of properties, and I’m actually gonna currently gonna be liquidating my portfolio to buy some bigger stuff out of Chicago.
Joe Fairless: You own properties in Chicago?
Westen Harding: Yeah, I actually had a portfolio of about 6-7 three to six-unit properties that my wife and I owned, and then we decided last year, as the company was growing, that it just became more of a conflict of interest to keep buying stuff. Cherry-picking deals for myself isn’t the best thing for my clients and for my company, so we decided to start liquidating that portfolio and start looking at stuff out of state, some ground-up stuff as well.
Joe Fairless: Ground-up development – that’s a gutsy move. What gives you the comfort level for doing ground-up?
Westen Harding: Recently, last year I bought a project that was a complete gut in the Avondale neighborhood in Chicago, and we took that all the way down to the studs. That was a 4-unit property, and we actually just sold that for $937,000, which is the highest sale for a 4-flat ever in this Avondale neighborhood. We looked at what we did there and we talked to our contractor, and it’s like the only two things we didn’t do was put in a foundation and build the exterior walls… So why not take the next step and see if we can find the land for a relatively good deal and just build from the ground-up… So that’s what we’re doing.
Joe Fairless: You sold it for $937,000… What did you buy it for?
Westen Harding: We bought it for $307,000.
Joe Fairless: And how much did you put into it?
Westen Harding: 275k.
Joe Fairless: 275k… Over what period of time?
Westen Harding: Best contractor ever, it only took him four months.
Joe Fairless: Wow. Amazing. I’m not as familiar with Chicago… It’s within the Chicago city limits, Avondale is?
Westen Harding: Yeah, it’s within the Chicago city limits, it’s on the blue line which goes from O’Hare to downtown. It’s a [unintelligible [00:04:46].27] neighborhood.
Joe Fairless: So I believe I heard you say you’re looking to invest out of town, so the one difference in the ground-up development – and I imagine it would be a big difference – is that it would be away from your backyard, whereas this was in your backyard, so how do you mitigate the risk there?
Westen Harding: We’re actually gonna do the ground-up stuff in Chicago, but we’ll be doing all the other purchases outside of the state.
Joe Fairless: Alright, I hear you. With the brokerage, you are on pace to double from last year to this year in the transaction volume… What do you attribute that to?
Westen Harding: We’ve spent a ton of money last year redoing our website, so now when you type in “4-unit Avondale” or “4-unit Humboldt Park”, we’re the number one thing that shows up. So we’ve done that, as well as I’m an investor myself, and all my clients are investors, and I just asked them what they wanted most, and everybody said the same thing – “I want a website that I can go to, specifically created for smaller investment properties and click on a property and then have it auto-populate a proforma.” We actually created that.
So if you go to our website, xplusrealestate.com and click on a property and click Proforma or Investor in the top right corner, it’ll create a proforma for you for what’s currently on the MLS. So we did that, which has boosted us a lot, as well as we’ve just done a significant amount of marketing. We have a database with every 2-12 unit owner in North West Side that we reach directly out to, as well as marketing through online e-mails, as well as old-school mail marketing as well.
Joe Fairless: That’s incredible So you just click that Investor calculator – I’m on your website – and then it pre-populates a proforma… How did you determine what benchmarks to put in the proforma for each property?
Westen Harding: Benchmarks in what sense?
Joe Fairless: Taxes, insurance, maintenance…
Westen Harding: Yeah, so the taxes is just drawn off the tax records, so it’s the tax from last year. Maintenance is just the numbers — we do so many of these deals that we put in what our average deals see. We went through a bunch of our previous sales and just kind of compiled where those insurances were coming out at, what the average gas bill was, what the average electric bill was, and then just used an average number to put in there.
Then the other really cool thing on benchmarks is that if you look, there’s one column that is the actual how it’s running, and then the next column over is actually gonna be a column that is an algorithm built into our website that’s always changing, that pulls up what the current rent would be for a two-bedroom one-bath, that has washer and dryer in the unit, as well as an updated kitchen… And that’s always changing. That’s kind of a cool feature, you can see immediately from that proforma what it would be like if you updated your kitchens and baths.
Joe Fairless: It really is very impressive. I have not seen this on a website. You can even delete everything that your team has in here and put in your own stuff and calculate it, right?
Westen Harding: Exactly. The great thing about investing in real estate is everybody has their own ideas and own way that they run their numbers, so to be able to give you at least a framework to work from – we thought that would be great.
Joe Fairless: Yeah, it’s really cool. Then you can download it… Great stuff. How much does it cost to build a website like this?
Westen Harding: Great question. It’s a lot. I think we spent somewhere about like $20,000-$30,000. I think that was the cost for everything. And there’s other numbers that run on the back-end of that website… We can constantly pull what the average 3-unit or 4-unit is selling for in an area or in a zip code… So it does a lot more than just what you’re seeing on the front-end.
Joe Fairless: Yeah, that’s great stuff. With what you’re seeing right now in your business – not necessarily in the market, but just how your business is evolving, where do you see your business evolving to in the next 5-7 years?
Westen Harding: Great question. This year has been an immense change; even in the last 2-3 years I’ve normally been running with one assistant, and then last year I decided to grow the team. So we went from myself plus one, and then I hired two more people. Then just in the beginning stages of this year we were getting so overwhelmed with clients that I hired two more people. So we’re up to now two buying agents, a selling agent, a closing coordinator and we have somebody who just does all our rentals… Because we have so many people that we sell to the four-units that they wanna rent those properties out that we’ve decided to take that in-house as well. So I think the next couple steps is hiring a couple more people, and then just growing to certain other parts of Chicago.
Currently, we’re really based on like North and North-West side – moving that out to maybe farther West and farther North is probably our next move.
Joe Fairless: Your investor clients who are buying 2-4 units, what’s a typical question that they ask and what’s your response?
Westen Harding: Oh, man… “Is this a good idea?” That’s probably the question I get the most.
Joe Fairless: So they’re starting out.
Westen Harding: Yeah, I would say — we do buying seminars bi-monthly, and free… Anybody who wants to come, they can come to those. We discuss house-hacking, that’s probably our biggest topic, as well as how to finance a house-hack, what goes into living in one unit, what you’re expecting from being a landlord…
The biggest thing I get asked all the time is “Once I live in this property and I have other people living with me, what can I expect?” What I normally tell people is that it’s really scary the first time that you do this or you decide to buy a property, it’s a big purchase… But at least what I’ve found out and what most of my other clients find out is after three months of owning a property and living there, not a whole lot goes wrong, knock on wood… But once you do it, you’re kind of like “Alright, I’m making money” or “I’m living for free. Let’s go do another one”, and you can kind of get easier with the next purchase.
Joe Fairless: What’s a question that you’re not asked but you should be asked?
Westen Harding: I think the question I don’t get asked enough is “What do I do next for financing?” Normally, people get so focused on their first purchase, but “How do I go about buying the second one?” I think is probably the thing that people need to think about on their first purchase more. There’s so many different types of financing available, and I think it’s really important to look at all aspects of that. We have people we’ve worked with for years – big banks, as well as small local banks that can do deals that other people can’t.
Joe Fairless: What’s a doable goal for a client of yours to achieve through the purchase of a 2-4 unit right now in Chicago?
Westen Harding: Great question. I was actually running the numbers on this earlier today, because we’re gonna be doing a big video campaign coming up… But normally, your purchase is gonna be about $700,000 for a 4-unit, give or take, so you’re gonna be putting down around $25,000 with an FHA loan, so getting into that… Then your mortgage amount I think comes out to around $4,500. You’re living in one of those units, you have the other three rented out between $1,350 and $1,500. You’re either gonna be living for free or come really close to it.
We normally like to see our clients living in one unit, that’s normally a 2-bedroom 1-bath, not paying more than about $500/month.
Joe Fairless: And then what has been an example of a potential client coming to you with a goal where you’re like “Sorry pal, I can’t deliver on that.”
Westen Harding: The biggest misconception people get is that there’s so many two-flats in Chicago, so we’ve got a lot of people that say “I wanna buy a two-flat.” And through education and just helping people look at the numbers, a two-flat is a very hard property in Chicago to make yourself live for free.
We normally start with them saying “I wanna buy a two-flat” and then after a month there are a couple conversations of explaining, they say “You know what, yeah, probably a three-flat or a four-flat is a better way to go.”
Joe Fairless: Based on your experience, what is your best advice ever for real estate investors?
Westen Harding: Oh, best advice ever by far – get out there and look at properties. I meet so many people that are like, “I’ve been looking at properties online and running proformas for the last two years, and I’ve already got enough money to buy a property, but I can’t make that step.” My team and I are here to help you get out there and look at stuff. Even if you don’t buy a property, we’d love to teach you and educate you on that process, because eventually you’re going to be confident enough in the investment to make the purchase.
So my biggest advice ever is get out there and find yourself a broker – if it’s us, if not, somebody else… Make sure you get out there and start looking at properties.
Joe Fairless: When you host a bi-monthly event, what is the flow of the event? If I were to look at like an agenda or table to contents…
Westen Harding: So the flow is always gonna be two types – it’s either gonna be like a fireside chat with myself and normally moderating with some other expert, whether that’s a mortgage person, or a property manager… So it’s either gonna be that or it’s gonna be a panel discussion. We’ll have two or three people that are experts. The most recent one we did was like an Airbnb; all of our Airbnb investing in Chicago and how that’s changing smaller multifamily properties, and we had three top people from that field.
Then we do a couple questions, and then we do an open question and answer where the audience gets to ask questions, and then after that everybody sticks around normally for a couple beers, so you can talk to them one-on-one as well.
Joe Fairless: What’s been the most challenging time you’ve had as a real estate professional?
Westen Harding: I guess this will also go with the biggest thing I’ve learned, I guess. When I was originally starting out and the business was growing, I started getting overwhelmed. I got so many clients and so many listings, and there’s only so many hours in the day… And I actually had a good friend of mine who was looking to purchase a property, and I started to show him places, but at the same time I had so much more on my plate… And after about a month or two he actually decided to go with somebody else [unintelligible [00:15:02].20]
Joe Fairless: Big wake-up call.
Westen Harding: Exactly, huge wake-up call, and I was like “I knew I needed to get an assistant…”, so I hired my first assistant. From there, I just was able to delegate a lot more and give tasks away… So I think the biggest change that I’ve made is after I hired that first person I hired, the second, third, fourth person all was a matter of a year or two, and that was amazing.
Joe Fairless: I remember reading Gary Keller’s Millionaire Real Estate Agent – even though I’m not one, I read it – and he said the first hire should be your assistant… So after reading that book, within a week I had a job posting up and then within three weeks I had hired my assistant.
Westen Harding: I read the same book and I got to the same conclusion. [laughter]
Joe Fairless: Fair enough. With your team, what compartment do you work with the most?
Westen Harding: I probably work with the sales side the most, mostly because people selling properties – it’s a lot to ask of somebody to come into your home, and you really want somebody to evaluate what that’s gonna be worth… So mostly I’ll meet with every seller of the property that we’re gonna sell. I’ll come in and give a free evaluation of what it’s worth, as well as where I think we can push the value.
A couple other things that are really interesting about our company is that we will pay for professional photographs upfront. We pay for that, there’s no upfront cost for selling a property through us. If we don’t sell your property, we don’t get paid. So mostly the sale side.
Then on the buy side, I’ll meet with the client normally the first time out. I’ve got two amazing full-time buy side agents, and all they do is look at investment properties. That’s all they do all day. They drive people around, and once it goes under contract, it goes to a closing coordinator… So once you go under contract, you have a dedicated person to help you get through the closing. That also leaves our buying agents to really look for the best properties and focus on their clients, which is great.
Joe Fairless: Switching gears to where you’re headed from an investment standpoint – you said you’re looking for land to build on… How do you run those numbers?
Westen Harding: It’s actually really simple. Once you know what your build cost is gonna be, you just backtrack to say “Okay, I know what I can sell it for, I know what I can build it for, and now I know what I have to buy it for. If I want X amount of profit, it’s gonna be X number.” So it’s just working it backwards to figure out where that’s gonna make the most sense.
Joe Fairless: And what level of profit makes the property and the project pencil out?
Westen Harding: Normally, I like to see at least 100k, if not more.
Joe Fairless: And your contractor that you work with, how did you get to know him or her?
Westen Harding: I actually met him through one of the people who was — one of my assistants actually was roommates with the son of the contractor. So we met through him, and then him and I just kind of hit it off, and he did an amazing project for me on our first deal, and then I’ve given him all my other smaller projects of smaller things that I wanted to rehab, as well I as I gave his name and number out to all my clients.
When you work with us, we have an open Rolodex. Anybody you need, we have… And we’ve had relationships with or dealt with and worked with in the past. So working with him was just a great experience, and I give his name and number out to all my clients now.
Joe Fairless: My follow-up question would be if we’re in another market that you’re not in, what’s your suggestion for finding a good contractor? Or maybe it’s just finding a real estate brokerage that has a contact working that angle, or is there something else?
Westen Harding: We actually had a contractor before this contractor – actually, three contractors before this contractor, that we got like heavily burned on… Like, really badly burned, like $100,000 burn on… And we wound up – my wife and I, and my wife is very A-type personality, and that’s a great thing, and she’s very detail-oriented, and she said “Next time we hire a contractor, you have to vet them.”
Joe Fairless: That’s a good rule.
Westen Harding: Yeah, it’s a very good rule, something that I didn’t really do a lot in the beginning of my investing. It just kind of worked out [unintelligible [00:19:15].19] So what we do now is if we’re gonna work with a contractor, we have a long list of questions, we go over the project in detail to make sure that it seems that he knows what he’s doing, as well as we’ll ask to see current projects that he’s working on, talk to current people he’s working with, as well as a number of past people that he’s worked with as well. So it’s very much a vetting process of a lot of phone calls to make sure that he’s gonna do what he says.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Westen Harding: Let’s do it.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Westen Harding: Best book I’ve ever read is Never Eat Alone by Keith Ferrazzi.
Joe Fairless: How have you applied the insight from that book into what you’re doing?
Westen Harding: It’s all about networking, and I think that’s the biggest thing in real estate or most businesses – the more people you know, the more people are gonna refer your business, the more people that you’re gonna be able to help with their business. That’s a big key to the book and in general about networking – don’t always look to help yourself; if you can look to help two other people out, they’re gonna think of you when they need real estate, or a contractor, or whatever that may be.
Joe Fairless: Best ever deal you’ve done that we haven’t discussed?
Westen Harding: The best ever deal I’ve ever done was my first house-hack. I bought a four-unit property in Avondale, in 2010, for $235,000. It was not the same area it is today, it was a little rougher, but I was able to live in one of the units, moved out all the tenants and moved in newer tenants, updated the units, and I was actually not only living for free, but I was making about $1,200/month, so it was amazing.
Then actually as of two weeks ago I sold that property for $787,000.
Joe Fairless: That’s a good return, 205k to 780k…
Westen Harding: It was a very good deal.
Joe Fairless: What brokerage did you use to sell it — no, I’m kidding. [laughs] What’s a mistake you’ve made on a transaction?
Westen Harding: The biggest mistake I’ve made was hiring the wrong contractor. That’s the biggest mistake I’ve ever made. It lost us a ton of money. We bought the deal luckily at such a low price and the market went up, and I was able to bring in a different contractor and we teamed up to finish it, and then we’re planning to flip out of the deal together and split the profits, but he wound up falling in love with the building and wound up just buying it from me, and I was still able to make a little bit of money.
Joe Fairless: Best ever way you like to give back?
Westen Harding: I am actually on the board of directors of the Harold Eisenberg Foundation, which is an amazing foundation. They help young people coming out of college or in college learn about commercial real estate. They do free mentorships, they do a free career day, they do site visits, they do a number of things including a case competition… But it’s an amazing organization. If you’re ever coming to Chicago or ending college and thinking about getting involved in anything, I would definitely check out the Herald E. Eisenberg Foundation.
Joe Fairless: And how can the Best Ever listeners learn more about what you’ve got going on and get in touch with you?
Westen Harding: I’m gonna go ahead and throw out a cell phone number. This is our office line. If I don’t pick up, somebody from my team will pick up. You can call or text this, it’s 312-669-4343. Or you can find us on the web at xplusrealestate.com, and we’re here to help with any small multifamily transaction. If you’re just getting into the business and wanna know anything about it, give me a call; I’ll grab a coffee with you. If you’re looking to sell your property, we would love to do that as well.
Joe Fairless: And I also recommend checking out X Plus Real Estate, the website, just to look at how it’s put together. It’s certainly a unique format, with the investor proforma and the numbers populating, and then you can change the numbers based on how you wanna run it, and you can download your proforma. Really, really cool. Nice work on that. It makes sense that that is paying dividends, and the beauty of it is you invested 20k-30k in the website, and the lifetime value of it greatly exceeds that investment, I’m sure.
Thanks again for being on the show, talking about your evolution as a real estate investor and entrepreneur, what type of deals that you do as an investor, what you’re looking to do in the future with raw land, how you pencil those numbers, as well as how your brokerage is on pace to double in sales from last year to this year.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Westen Harding: Sounds great, thanks so much for having me.