From Zero Down Commercial Deals to Property Management Done Right: A Wisconsin Investor Masterclass

Two completely different sides of real estate, same goal: building wealth the right way in Wisconsin.

Mason Clark, chief investment officer at Park Place Holdings, breaks down how he and his partner built a commercial portfolio worth well over nine figures, almost always with little to no cash down. He walks through real deals including an office building they bought for $2.5 million that appraised at $9.5 million, and the negotiation tactics that got him there.

Fran Bourassa, owner of Vantage Point Property Group and the man who manages all of Corey's rental properties, started as a self-managing landlord before building one of the largest property management companies in northeast Wisconsin. He breaks down exactly what to look for when interviewing a property manager, what self-managing actually costs you in time and money, and why he thinks northeast Wisconsin might be one of the best cash flow markets in the country.

What's covered:

• How Mason structures commercial deals with little to no cash down, using bank financing and seller credits instead
• The office building Mason bought for $2.5 million that appraised at $9.5 million, and how he negotiated the seller down from a $17 million ask
• A seller who wrote Mason a $150,000 check just to get out from under her property
• How Mason recouped nearly $1 million of his purchase price by selling half a vacant building to a church
• What Fran says is the number one issue investors have with their property management company, and the questions to ask before hiring one
• Why Fran believes northeast Wisconsin has some of the best cash on cash returns in the country, after researching 180 markets nationwide
• The eviction timeline difference between Brown County and southern Wisconsin, and how it compares to states like New York and California
• Fran's near miss with a tenant over a broken window screen, and why he eventually stepped back from self-managing

Get off-market deals every Monday morning: WisconsinDiscountProperties.com

Transcript

From Advisor To Landlord

SPEAKER_02 0:38

So just kind of a quick recap. So prior to joining Caleb, I was a financial advisor. So I was doing that for a couple of years. I did it for a couple of years actually in college, more of an insurance agent in college. But from there was in lacrosse business was growing up here in Appleton. Uh, so I decided to partner with a firm up in Appleton. And then from there, uh, one of my clients had introduced me to Caleb, uh Hope Graf, and uh she sold us our house up here actually, and just saw it. We had very similar energies and synergies, and so she put us in a room together and the rest of the kind of history, I guess.

SPEAKER_03 1:19

I was knew I wanted to be a landlord because it was kind of appealing to have someone else pay off a huge debt for me um and be able to keep that. So um I started investing when I was like early 20s. I think I bought my first two packs when I was 21.

SPEAKER_01 1:30

Wow.

SPEAKER_03 1:30

Um yeah, it worked out.

SPEAKER_01 1:33

Did you house hack it or did you uh did you just buy it? Okay.

SPEAKER_03 1:36

House hacks um for quite a few years. And that frankly, allowing me to save essentially my mortgage payment every month let me uh do my first flip, um, which is when I got cash because I had no money to start. Um so the longest short of it is uh, you know, I steal really slowly in the beginning. Um really conservative. I did most of the things in cash, and so I work at time overtime and

House Hacking Builds The War Chest

SPEAKER_03 1:58

save up a bundle of money and invest it. Um and it was harrowing every single time I did anything. It was like my life savings was at risk.

SPEAKER_01 2:06

And it turned out. I can tell you what, I'm I've literally never bought a property with 20 or 25% down. I couldn't tell you, at least of my own money. I maybe borrowed some private money if I needed to for a deal, but 99% of the time the bank is funding some part of that rehab budget, or the seller's carrying back a piece of it and the bank is funding the other piece. Like again, like you said, cash is king. And there's there's lenders out there right now that will do 80% of the after repair value on single family, duplex, four-unit, whatever, which means, like what you're saying, you can give them a scope of work. Here's what I plan to do to the property. They send they send their appraiser, and appraiser says, okay, it's gonna appraise for $100,000. And the bank goes, okay, great, Corey, we'll give you $80,000 for this project. I'm like, awesome. I'm only buying it for $50, this is great. I got $30,000 from the bank I can play with now to rehab this property, and I still have a $20,000 equity spread. Those are the types of things that I think people who aren't listening to this podcast or aren't educating themselves, they're only they're stuck with somebody who's only knows in the traditional way, they're really limiting the amount of growth they can have.

SPEAKER_03 3:14

Because there's no I would say probably first and foremost, the number one issue that I hear others indicate that they have um with their property management company is communication. So I would say probably number one is if you're reaching out to property management company, understand who you're gonna be communicating with, how responsive they are, kind of what those expectations

ARV Lending Keeps Cash Working

SPEAKER_03 3:33

can be, and see if it works for you in your life. You know, some people are totally comfortable calling into a subset of people, other people want a single contact, um, et cetera. So I think that's it really important. Um, but right behind that is you want to make sure that they're aligned with you as an investor. Um, so you're gonna want to ask questions like, how do you

Property Management Starts With Communication

SPEAKER_03 3:52

get paid? Like what incents you to do the right things for me as the as the investor versus you as a property management company? What are your policies? You know, how do what are all the fees? And um, you know, buyer beware worth everything in terms of like you can go through a lot of different companies, and this isn't just applicable to property management companies, but there's a lot of companies out there, you know, I think of my cell phone bill or whatever else, where I think I'm gonna get one price and end up paying way more. So it's important to do kind of a review at the end of the year to see what you're actually paying. Okay. Um, because I think it's really a good understanding of how your business is performing.

SPEAKER_01 4:28

Yeah.

SPEAKER_03 4:28

Um, and then to that end, I think, you know, you get varying degrees of, you know, people that have built their businesses, their own investment portfolios that are just kind of looking to step out and not be so involved in day-to-day. Um, you have others that are looking just getting into it and looking for a lot of guidance. And so if that's the case, does that property management company help you in either of those cases?

SPEAKER_02 4:50

Are they capable of running pretty autonomously or are they it was uh office building up in Green Bay, and uh just at the point where I was wanting to do something on my own. So I I was a couple years with Caleb here and you know, buying stuff in our his portfolio, and so I found this deal um and knew I couldn't put a bunch of cash into it. And his value add, the seller was out of California, and she wasn't maintaining it very well and and try to make it a little bit shorter here. But I knew Bank of Luxembourg had the note and we know them really, really well and done a

Taking Over Notes To Buy Deals

SPEAKER_02 5:28

lot of business with them, and so I approached them and just said, Hey, can I take over the note and take over the property? Because the seller just wanted to basically get out. Okay. And so they it took them a little bit, but they ended up uh agreeing to it, allowing me to take it over just on a one-year term to basically add the value and refinance it. And so uh I was able to get the seller to give me a credit at closing, and that paid their broker and all the closing costs. And then it gave me um I was gonna pull it up, but I forget exactly how much it was.

SPEAKER_03 6:04

I think I was left over like $115,000 to we're charging what we get charge, including any discounts. So flooring is an example. The flooring that we're purchasing right now sits on the shelf for I think $3.69 a square foot. We buy by the truckload, so we're paying like a buck forty-two or forty-three. Um, I think it's gonna increase slightly, but we just passed that same as along. That's largely due to our internal kind of vision, though, which is essentially bring clients on board and then manage your property until they die. So we're totally fine playing the long game. Um, we want to provide value to our clients. Um, we get similar discounts for like HVAC or plumbing or you know, especially just like handyman work. And that's a big one. So um, you know, handyman nowadays, like

Discounts That Cut Rehab Costs

SPEAKER_03 6:49

market rate's probably $65, $85 an hour somewhere in the neighborhood. Usually there's minimums, like hour minimums or two-hour minimums or trot fees or all this other stuff. Um the handyman we work with, we uh it's spilled out at 40 bucks an hour currently. Um, and we don't allow minimums. So if someone goes there to fix a wheelie doorknob for 10 or 15 minutes, you get a $10 bill. And that's probably right. Wow.

SPEAKER_01 7:12

So this seller wrote a check for like $150,000 to sell her property. Yeah. Wow. So that was always one of the things I've struggled with is like if if you're taking over a note and they're not actually getting any cash, how do you get them to give you the seller credit? But she just was motivated, huh?

SPEAKER_02 7:30

Well, she and they were losing or she was losing money on it every month. And so she just wanted to be done with it. Wow. So yeah, I was able to negotiate that part of it and yeah, turn it around and awesome, dude.

SPEAKER_01 7:44

So there you go, audience. People will scratch checks to sell properties, okay? There it is. Yeah, we've we've had that

Motivation Beats Debt In Negotiations

SPEAKER_01 7:50

on a topic.

SPEAKER_02 7:52

Not super common, but we've had that once or twice.

SPEAKER_01 7:54

You know, we had somebody same thing. She owned a business and then she had some duplex or something, and the thing that was really, really bad, and she needed to get out from underneath it. And like the number that we could give her was like 20 grand less than what she owed. And so, you know, this is just good for you guys out there trying to negotiate some of these things. Never assume just because somebody owes something that you're you have to bend on your number to try to meet that, right? Like stick to your due diligence and your underwriting and your number's your number. And people will bring cash in cases or they'll figure out a way to get it sold if they want it sold bad enough, right? Yeah.

SPEAKER_02 8:28

Motivation's a big factor in everything, right? So you don't ever want to be a motivated seller, but you want to find the motivated sellers.

SPEAKER_01 8:36

That's right. Yeah, you want it's right. That's why cash is king, right? Because that cash still, that dry powder still later on. You can use that to help out with some of these motivated folks.

SPEAKER_03 8:45

I was the same guy when I first started, like, and I learned how to tile and lay flooring and all these things, and I'm certainly not qualified to do. Um, largely because I couldn't afford to pick it. Um and it was heartbreaking in the beginning because I'd get the bill and it'd be like, oh man, I could have done that for free. But um ultimately it probably wouldn't have gotten done because I don't have time to do it, or B, um, certainly I'm not a professional, and so it may not have been done as well. And the biggest piece that I wasn't valuing was my time itself. You know what I mean? Like, even if I'm not earning money doing it, and I know that's kind of the genesis of like a lot of these conversations is like I can do income-producing activities, like, or you could just hang out with your family, you know, you could do something you're so we ended up just going into it and saying, okay, we'll pay two million two million, two million times, yeah.

SPEAKER_02 9:30

So uh they countered back, and I think they came down to three and a half million right off the bat.

SPEAKER_00 9:38

What?

SPEAKER_02 9:39

Yeah. So at that point we're like, okay, they're we know they're motivated.

SPEAKER_01 9:43

So we uh came up a little bit, so we'll pay two and a half million cash, and they ended up taking it, and we were able to take it over and almost murdered a tenant uh because he wanted me to fix a hole in a screen that he put the hole into the screen. And I I couldn't fathom the fact that he was calling angry at me on me to go fix the screen. I'm like, bro, you fit you broke the screen. Fix your own damn screen.

SPEAKER_02 10:11

Anyway, so I am not cut of the cloth to self-manage, but some people are some people really they had occupied the whole building as one of one of their other main data hubs outside of their headquarters in Madison. Um, so huge data center in it. And the read brought it to market. Um, and the IFF really had it for sale. We know them really, really well. So we just kind of got talking to them and they just said they're guiding the price around I'll use real numbers, it was around 17 million, which was what it was assessed per the municipality. Okay. So like, well, we're not gonna buy 150,000 square feet vacant office um for 17 million. And so we ended up just going into it and said, okay, we'll pay two million dollars. Two million? Two million dollars, yeah. So uh they countered back,

Turning A Vacant Office Into Value

SPEAKER_02 11:02

and I think they came down to three and a half million right off the bat.

SPEAKER_00 11:08

What?

SPEAKER_02 11:08

Yeah. So at that point we're like, okay, they're we know they're motivated. So we uh came up a little bit, so we'll pay two and a half million cash, and they ended up taking it and using Brown County as an example.

SPEAKER_03 11:20

Um, generally speaking, if I file for if in fact if a tenant is late on rent and then I have to provide all the notices and then do all the filing and whatever, I'm probably looking at if I go as quick as I can, between three and a half and probably five and a half weeks before they're out. Um in some of the other counties, like down south, you're probably looking at like 60 to 120 days. Um, but in you know, New York and um California, it can be six months to a year.

SPEAKER_02 11:50

So you start a conversation at that. It's like, well, why don't we just give you uh 50,000 square feet is what they're looking for. So we'll give you guys 50,000 square feet for the same price per square foot that we bought the building for. Um and so we ended up condoing it off. And so of that two and a half million dollar purchase price, we were able to recoup half of that from condoing it and essentially giving it to the church to build out their space on the first floor, and then they're also running a coffee shop. Um, and it'll turn into additional like breakfast and lunch items and stuff like that as well. But they're running a the coffee shop out of the building um on the first floor as well. So wow, dude. That is awesome.

SPEAKER_01 12:33

So what what do you think? So you got a well, you got what about 1.3 ish million back, was it?

SPEAKER_02 12:39

Yeah, uh it was a little bit less than that. I think it ended up just being under a million dollars. Okay. Yeah, so reduced our obviously holding costs on that property pretty significantly.

SPEAKER_03 12:50

A few years ago, I was concerned um because of all of my eggs being in one basket, right? Like I own primarily, actually exclusively in northeast Wisconsin. Okay. And so, you know, obviously the nice thing is we're not prone to earthquakes or, you know, all those kinds of things, shark attacks, whatever.

SPEAKER_01 13:07

Yeah.

SPEAKER_03 13:08

Yeah, exactly. So we're pretty good on that front. Um so it's unlikely that you're gonna have to tunnel by its part of the image. Um, but I always thought like, what if, you know, the something, you know, there's certainly cities in in the US where something bad has happened and suddenly it just essentially falls off an economic cliff.

Staying Local Versus Diversifying

SPEAKER_03 13:28

Sure. And so I thought long and hard about diversifying and I actually explored all over the country. So I looked at individual areas and suburbs. I think there was like 180 of them on my list.

SPEAKER_01 13:38

Oh my.

SPEAKER_03 13:39

And I found there were a couple of regions where I could get similar returns, like specifically, I think right outside of Raleigh, North Carolina, upside of St. Louis, upside of uh Kansas City. But they were close, but not quite as high as I can get in northeast Wisconsin. And they're highly competitive markets. And they're at least in some of them, there was a lot more volatility over the years. So I look at like three to five years of past data as well. And it was hard for me to believe because it's like I grew up here in northeast Wisconsin. Was I really that lucky? I found to be like the best return. And obviously, what you're looking for in returns is gonna be largely influenced where you want to buy. Like if you buy a house in Northeast Wisconsin, odds are it's not gonna appreciate three million dollars in the next five years. Um, but it has almost unbeatable cash on cash returns that I can find.

SPEAKER_02 14:28

Yeah, it should be right around that probably 10 to 12 million number for the rest of our condo portion. Yeah, when we so when we bought it appraise, yeah. So we so we offered the two and a half, which was accepted, and then our appraisal was at I think nine and a half million as is. So um, yeah, it's there's quite a bit of spread there.

SPEAKER_01 14:50

But wow. This is why you do commercial. The numbers make this so much bigger, dude. Unbelievable. So you could refinance that sucker even with at 60% LTV, and you're pulling out four million dollars tax-free. Right, yeah.

SPEAKER_02 15:07

And we use we so yeah, we did some of that, we've used that to do some build-outs and stuff in the building, and but you're using the equity to pay, pay for it, and then get it back in cash flow, right? But yeah, the tough part, um, so deals like that, you know, we're buying it vacant, and you have to be able to support the holding costs on it because we were we were eating probably forty thousand dollars a month, um, just holding it, trying to get people into the building. For sure. And uh so yeah, solely but surely we've been able to reduce that. And we're I think we're positive cash flow now with our last couple of leases signed.

SPEAKER_03 15:40

2024 will pay up to $16.75 for a three-bedroom unit, including utilities, and there's no restrictions. So it doesn't matter on the property type, that can be an apartment, that can be a duplex, that can be any, you know, well, or a single family house. But

Rents That Supercharge Small Multifamily

SPEAKER_03 15:55

if you see like some of these upper lower duplexes that are going for, you know, low two hundreds or mid two hundreds, and it's three bedrooms each unit, that's sixteen seventy five for each unit. Yeah. They just pump out cash like nothing else have seen.

SPEAKER_01 16:10

Yeah.