Dive deep into the nuances of property management, tenant retention, and how AI can shape the future of real estate podcasting. In this enlightening episode, Mike Taddy, a seasoned real estate professional, shares his extensive experience, valuable lessons, and the role of relationship-building in this ever-evolving sector.
Key Takeaways:
- Lean Into Your Competitive Advantage: Relationship-building is essential, not just with tenants but also with lenders and other stakeholders. Leveraging this strength can lead to significant growth and progress.
- Open Communication is Paramount: From pre-screening to lease signing, open and transparent communication with tenants sorts potential problems and builds a foundation of trust.
- Believe in Yourself: Mike's poignant advice emphasizes the importance of self-belief. When in doubt, especially in the challenging realm of real estate, betting on yourself can make all the difference.
Mike Taddy | Real Estate Background
- Co-Owner, Midwest Multifamily Investments LLC
- Portfolio
- 67 units - mostly small multifamily properties ranging from duplexes to 5-unit buildings
- Based in: Green Bay, WI
- Say hi to him at:
- Best Ever Book: Rocket Fuel by Gino Wickman
- Greatest Lesson: Don't swing the hammer! Can't be a contractor and professional at same time - something has to give.
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Transcript
Slocomb Reed:
Today's episode is brought to you by Presario Ventures, a private equity real estate firm based in the booming Austin, Texas market. To learn how you can invest in the future of Texas with Presario Ventures, visit info.presarioventures. That link is in the show notes.
I'm Slocomb Reed. Today we're joined by Mike Taddy. Mike is joining us from Green Bay, Wisconsin. He's a co-owner of Midwest multifamily investments LLC, which the current portfolio consists of 67 residential units, a mix of small multifamily properties ranging from duplexes to five unit properties. And they're in the process of scaling into medium to large multifamily. Mike, can you tell us a little bit more about your background and what you're currently focused on?
Mike Taddy:
Yeah, thanks, Slocomb. First, I'd just like to give a thank you to the audience for having me on today. So I was raised in rural Wisconsin and like many other young men and women, I joined the service at 18. Thought I was gonna do four, ended up being 20. Within that last year, I was actually deployed to the Middle East and I had the fortunate circumstance of meeting a close friend by the name of William Anderig. He had a nice portfolio in Texas and that was a side hustle in addition to his time in the United States Army. So hearing a little bit about what he was doing really inspired me, and I was not a real estate investor at that time. Long story short, Red Rich Dad poured out like everybody else talks about, and within a few short months, while in the Middle East, we had the first 13 units under contract, we closed on them. And then as I transitioned from the service in the spring of 2018 and retired, I actually took a job. You'll appreciate this as a self-manager. I was a general manager of a property management company. 250 doors between 60 property owners. So I really felt like that was an opportunity that was gonna exponentially lead me into the future, both with experience and opportunity. So I did step away from that after a year in order to grow our own portfolio, as you mentioned, almost up to 70 units, which we did that through our own funds, but eventually equity partnerships with close friends and family. Because I come up to you at some point and start to ask you, hey, what are you doing? I'd like to maybe get involved with you.
So over the course of that background, I wore many hats from acquisitions to property manager to a licensed contractor, project manager, visionary, et cetera. So that's a bit about the background of where we're at.
Slocomb Reed:
Nice. I'm curious as much for myself as for our listeners. I currently run a property management company with right around 250 units under management. When you say that you were the general manager, what does that mean? What were actually your responsibilities?
Mike Taddy:
Thank you. All encompassing, there was owners of the company and I worked directly for them, one was an attorney and another one was the actual owner that helped set up the company. So the onboarding of clients and regards to clients, we're talking about property owners, but then also hiring and doing the HR side of employees and hiring the actual property managers. We were a small one, so I was intently involved all the way from taking the phone call at Christmas Eve all the way to do the bigger picture things of working with financial institution on trust funds on dispersing funds, et cetera. They are coming out of a challenging spot. So a lot of my responsibility was to help them grow it forward. And like I said, it lasted there about 12 months and it was just time for me to move on to focus on our own portfolio.
Slocomb Reed:
You said you got your first 13 units under contract pretty quickly. That's after you got back home from your service in the Middle East.
Mike Taddy:
No, actually I was still over there. My wife still reminds me of every time I do a closing, she had a sign in my name, double through the power return.
So I researched them and analyzed from afar. I was home on leave over Christmas, I believe, and looked at a couple of them, but she actually did all the closing. And that was across a four unit, a five unit, and then two respective duplexes.
Slocomb Reed:
Gotcha. Four deals, 13 units. That makes sense. Within the 67 units. Now you were telling me before the interview that you own Midwest multifamily investments LLC with a business partner, as well as your wife. You and your wife own it along with a business partner.Is there a particular strategy or business model that you focused on while acquiring that portfolio? Were you doing brrrr deals? Is it pure buy and hold for cashflow? How did you get to where you are now?
Mike Taddy:
Where the current portfolio of the 67 units at is definitely different from where Midbus multifamily is going. So it was the basic cashflow. I'm not going to pretend I'm smugger than anyone in the room, but it made sense much like many of your guests have talked about after reading Rich Dad, Poor Dad, and wanting to find that path to financial freedom. So it's cashflow. I ran my numbers very conservatively, especially with doing some of that purchase from overseas. And then it was, it was the BRRRR method for lack of a better phrase. And then being a licensed contractor, and as you know, as welcome and your listeners, establishing that relationship with the lender, we quickly went into construction loans, doing as is and as will be appraisals and putting those funds in escrow and drawing them out over the course of the project.
And really, honestly, I feel like one of the best things I could pass along that your listeners have probably done themselves is on those refinances that we've got the $30,000 check or $40,000 check, it went right back into real estate investing. We did not go out and buy anything that we did not need. So I feel like we were allowed to grow pretty organic for lack of a better phrase at that point.
Slocomb Reed:
Yeah. And it allowed you to accelerate your investing, buying properties that you could have forced appreciation on and then redeploy your capital after you pull it out, right?
Mike Taddy:
100%. It's not a big deal. But the first one I bought, I got a $30,000 check at closing. I have to refinance it. So immediately put it back in and put down payments on the next few duplexes with that closing.
Slocomb Reed:
When did you buy your first four properties? What year was it?
Mike Taddy:
I was under contract. So I remember reading Rich Dad Poor Dad in October of 17. So we put them under contract, I think, before Christmas, but signed in early 2018, the same year that I retired from the service. And that goes February and January respectively, still come.
Slocomb Reed:
Gotcha. And how many properties are in that 67 units now?
Mike Taddy:
It's funny. So I used to listen to people and they'd say, well, how many units and properties and people say, well, I can't remember. I think, well, how could you not know? It's respectively 24 buildings against small multifamily.
Slocomb Reed:
Gotcha. I used to forget my numbers as well, because this is not the way that I think about it, even as the property manager, I do keep tabs on that now, but that makes sense. So you were getting your money in and out of properties pretty quickly to have that many transactions just in the last few years.
Mike Taddy:
For sure. I think I'm a little bit of a, I want to say unique guest for you because I love your show and you have a lot of people that are doing the syndication level. For those of us that listen to your show that really want to be inspired and they're looking to take that next leap, I would tell you that it did move pretty quickly. But I think what got us there was investing in those big things up front. CapEx, you had a gethda recently and I was listening to it. And she had talked about going back and making sure that you're properly improving the properties. And by doing that, we really demonstrated to the vendors that we are putting the money not only back into the property, but overall the portfolio of what we're trying to develop.
Slocomb Reed:
That makes a lot of sense. That said, you've moved pretty quickly with regards to how you've recycled your capital to buy that many properties. What advice do you have for our listeners on making sure that you're executing on your business plan quickly in a timely manner, the way that you had it pro forma at the beginning?
Mike Taddy:
I like that question because it relies upon, but I feel like I was best at. Slope Mount Lydie. It was crazy intake. We're trying to do it from the middle East, both from a time difference perspective. I literally remember talking to my agent while she was in the back of church one day because of the time difference, but it was the diligence to ask her a question. Like keeping track of it. I literally had every property on a checklist. I had the status of that property, the estimated repairs, the pathway that was going to get me to that refinance, which then would allow me to use the term that I heard for so often before I experienced it with it snowballs from there. So I think the best advice I could give is just be diligent in your approach.
I was conservative in my numbers because I was investing from, what is it? 10,000 miles away, 24 hour plane ride away. And I knew that I needed to be diligent and also conservative at those times because I could not walk down the street and take a look at the property yet, you know, within those moments.
Slocomb Reed:
That makes sense with regards to acquisitions. When it comes to executing on your business plan, I know you said you're a registered general contractor, I believe. So now that you're back in the United States, you're in the weeds of getting these properties to, you can't really say full cycle if you're just burrowing, you're not selling, but getting them to the cash out refi, the last R, so that you can repeat. What advice do you have with regards to getting your business plan executed after the acquisition?
Mike Taddy:
I appreciate that. Making sure that things happen in the timely manner you were expecting. I appreciate it. I missed it the first time and it picked up on it now. So it was the network of people that I relied upon. Yes, I was the contractor. But our wherever, because I'm in the hammer, I had to, and I did, but we've vertically integrated to a construction company, but it was a network of all the people that are involved. Some of those were agent deals. So the agent was involved, but it was the plumber, the electrician, the lender was a huge portion of this. So I would say your network with an emphasis on your lender. I had great relationships with both lenders that worked openly with me. I told them exactly where we at and what the plan was at. And I think the basis of that execution. We never had a problem come to closing table when I needed to get that money, to be honest with you, both to purchase or for the construction that they put in that escrow.
Slocomb Reed:
Along the way, Mike, what aspects of your deals have held you up the most, slowed you down or created unexpected expenses or even losses?
Mike Taddy:
So I'll come back to the loss as the final thing to say. But before that, fortunately, I haven't really taken any losses on the chin. I credit that to the awesome education such as yours that's out there as online as well as meetups. But it was a network of people in order to get it done. But what held me up the most was I had one foot in the boat as being a licensed contractor slash delivery driver from the big box store and the other foot being a real estate investor. I know we kind of get cliched to the answer of scale sooner, but I wish I would have truly listened to that mantra that they talk about working on the business versus in the business. Specifically to a loss, I lost the entire duplex to a fire. That was my fault, not in a sense of physicality, but I didn't do my normal, get in there, respectfully remove the tenant because of the stress situation.
Fix it up and get it where we need to be. Cause had I done that, I promised you 100% that fire wouldn't have happened. And that was a loss because like you said, I got bogged down and held up in the day-to-day stuff versus the bigger strategic items I need to be tracking.
Slocomb Reed:
You got to tell us now, Mike, there was a fire burned down your duplex. And then what happened? Did insurance cover it? What happened?
Mike Taddy:
It was an excellent experience. Right behind lenders and contractors actually even had a relationship with the insurance agent, they were on top of it. We have a little local place here, hometown insurance, but they can go out to the bigger players in the area and auto owners insurance, I believe is what it was. We had actual cash value on it based on the value. So I think I had to check within a week and I had six months lost rent every month thereafter for the six months. Minus the tragedy of it for myself, but more importantly, displacement of the tenants. It really was, I don't think you can call it a positive experience, but it was a very good experience based off of the interaction with the insurance company thereafter.
Slocomb Reed:
So that didn't end up being a financial loss for you, did it?
Mike Taddy:
No, actual cash value. It's like, I'm sure being in the world that you're in, people always think you come ahead. Honestly, we came ahead in a sense from a cash flow perspective. Where were we at with the rent we had collected up to that point and then the check that we got for the actual cash value that was assigned to the property.
Slocomb Reed:
Mike, you self-managed this portfolio, correct?
Mike Taddy:
Yes. I must say clearly my wife is the one serving as a property manager on a daily basis. But yes, I like to say we're mom and pop but we're not. We use property management software, background check, all the things that you would expect to do running a professional management company.
Slocomb Reed:
Gotcha. Where have you seen the most difficulty in getting good quality tenants in your spaces and keeping them there?
Mike Taddy:
I put a lot of time and effort into it. As a matter of fact, I just want to give a shout out to, I apologize which host it was, but you guys did a tenant retention podcast recently and I listened to it and I loved it.
Slocomb Reed:
Yeah, that was me.
Mike Taddy:
I'm telling you that was spot on. I was literally listening to it and forwarding it to my wife and my son, who also works for us in an apprenticeship because of excellent information. And literally said, I think we're doing every one of these things, but I think there's one thing we were adding, but the challenge has been when you're in the C and D class properties, tenants, they're good people that are living paycheck to paycheck. So that screening is so very important. Fair housing is very, very important to follow because it's the right thing to do.
But we really leverage our strength and experience into open communication with that tenant from the minute we interact with them. So I think those people that become the problem sort themselves out. So I'll come to be honest with you based on the communication, expectation management that we give from the moment we send out the pre-screening questionnaire all the way to the showing or lease signing. So I think the takeaway would be is open, transparent communication with the tenant. You said it in your podcast. They just want to know somebody's there. And I feel like that really helps us.
Slocomb Reed:
Yeah. Fun fact about the tenant retention episode. One of our producers asked chat GPT what my next solo show would be about. And that was their number one hit. He also asked chat GPT what topics I should cover within tenant retention. And I immediately threw those out and put it in my own, but that's the first time artificial intelligence has been used to replicate my voice on this podcast before, but that was the first time that chat GPT told me what to talk about. It was excellent.
Well, Mike, are you ready for our best ever lightning round?
Mike Taddy:
I am.
Slocomb Reed:
Awesome. What is the best ever book you recently read?
Mike Taddy:
I love it. Rocket Fuel by Gina Wickman, Learning the Power of Visionary and Integrator.
Slocomb Reed:
I want to take a moment to talk about that. Are you the visionary or the integrator, Mike?
Mike Taddy:
Visionary, it's welcome. You've probably experienced in your life whether it's Rich Dad, Poor Dad, or anything else out there. And you're reading it like this is me in a good way. And that visionary where you throw a thousand things up on the wall, those are all great ideas. And then it comes down to the integrator of action. So in our current relationship with what we have, Stephanie is the integrator on a daily basis with those 67 units. But where Midbus Multifamily Investments is going, Isaac is a visionary by instinct, but he's young. So he's an integrator on a daily operations that we're growing him into a visionary, hopefully someday to replace me in that role.
Slocomb Reed:
How did you find Isaac?
Mike taddy:
Slocomb, I promise you this with my military experience and working with thousands of great airmen. He's one in 10,000, if not more. He heard about me and he reached out to me, our families know each other, we're from a small town. And he came on the construction first and then it just grew. He's it. He's him, as they say nowadays. And I have a lottery ticket in my hand with Isaac. And I mean that in a complimentary way. And I'm so thankful that he chose Stephanie and I.
Slocomb Reed:
That's awesome. What is your best ever way to give back?
Mike Taddy:
Best ever way to give back is, Slocomb, I love to write and I love to share transparent thoughts and lesson learned from my poor personal and professional decisions. As I wrapped up my service over the Middle East and 20 years in the career, I actually wrote it was 20 days with 20 lessons learned. And I shared it at that point, it was via Facebook with a lot of people. And the bonds that I created, a lot of it centered around former use of the hall, depression when I was a teenager. And being there for someone else, in my opinion, is one of the best ways to ever give back.
Slocomb Reed:
Mike, we talked about this a bit already, but on the deals that you've done, meaning properties you have acquired, I'm not counting the fire in this case. What is the biggest mistake you've made and the best ever lesson that resulted from it?
Mike Taddy:
I think a lot of it is talked about in our space that we're in Slocomb, but I really failed and I believe out of newness and humility, I failed to lean into my competitive advantage sooner than what I did. And that's relationship building, whether that's with tenants in the current portfolio, the lenders, and I should have embraced it sooner, especially as we look to grow Midwest multifamily investments is raising capital, just more of a professional network. And it was a mistake because it kept me thinking small. I think it's cliche to think massive action all the time, but the reality is, look, you're in the weeds of property management, or you have been. And massive action is absolutely possible, but sometimes you just gotta grind. You can't cheat that grind. And it forced me to think too small at times versus thinking bigger.
Slocomb Reed:
That makes sense. Specific to the properties you've purchased, have you ever lost money?
Mike Taddy:
Where's the wood? No, we're actually in the process of disposition of seven of those 67 units and no, thankfully.
Slocomb Reed:
Nice. If I can ask, why are you selling?
Mike Taddy:
Doing a 1031 specifically and then just capitalize on the market and putting us in a position quite honestly to move forward on some of these bigger deals as they move forward.
Slocomb Reed:
Last question in this line, Mike, what is your best ever advice?
Mike Taddy:
Quick story, I know I'm long-winded, but my brother Steve, when he learned what I was up to, he once asked me, how do you take on this level of investment, of stress and risk? I told him it was simple that each one of us and each day in some shape, form, or fashion, we bet on someone's sloth. And I said to my brother, Steve, why would I bet on anyone else but me? So my advice for the listening audience is when in doubt, bet on yourself.
Slocomb Reed:
Last thing I have a note here from our producers. There was a fire at your fourplex today.
Mike Taddy:
Yesterday. So literally I missed Paul's email potentially be a guest because we have a tenant, what we believe for any of the fire chiefs report is they can't smoke in our units. He may have been smoking on the porch and left it in the ashtray. And thankfully only exterior damage. The police officer was, you know, small town responder with a fire extinguisher and put it out. I cannot tell you how fortunate we are that somebody called it in and the police officer got there. So yes, that was yesterday.
Slocomb Reed:
Gotcha. Last question, where can people reach out to you?
Mike Taddy:
I've been pretty quiet on social media about LinkedIn, and which is going to be getting an update. It's Michael Taddy spelled T-A-D-D-Y, but pronounced like the drink, hot toddy. And please, you can find my phone number on there and my email, reach out directly to me. I would love to hear from somebody.
Slocomb Reed:
Nice, those links are in the show notes. Mike, thank you. Best ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five star review and share this episode with a friend you know we can add value to through our conversation today. Thank you and have a best ever day.
