REB 137: Getting Started as a Real Estate Investor!

We invite serial entrepreneur Ulric Szabo to the show to speak about the ups and downs of getting started as a real estate investor.

Transcript

SPEAKER_00 0:01

All right, welcome back to Real Estate Bites. This is episode 138. Is it 138 or 130? It's actually 137. I got this titled incorrectly. But this is episode 137. I am joined here by uh my friend Ulrich Sabo. Uh, we're gonna get into some stuff uh here in just a bit. But before we do, before I really intro you, man, um for the folks who are watching, uh especially if you're local, obviously if you're local, Ulrich has an event coming up at his jujitsu uh gym coming up in June that I want to um I want to let everybody know about. He is doing an adoption event for puppies. He's partnered with the Friendship APL, and he's gonna have puppies out at the Jiu-Jitsu gym uh so that folks can come by and take a look. Uh do you want to speak to this, Ulrich? I know you've done this before, man.

SPEAKER_01 0:54

Yeah, I uh I've done this before years ago with the Cleveland APL, but it's it's an adoption event. There'll be cats and dogs out there uh available for adoption. They should be able to get them that day. And uh it's a great event, and it's a great way to um help out some animals and be part of the community. And uh we'll have local businesses, we'll have raffles, and all the proceeds are going towards the uh friendship APL. There um and then I'm I'm going to do a self-defense, a free self-defense seminar for anybody who wants to come out. And uh, I just want to uh and then if you want to donate to the friendship APL, I'll also have something up for a free month of jiu-jitsu that you can win. But uh just want to adopt a bunch of animals that are, you know, that need some love. Yeah, exactly.

SPEAKER_00 1:50

Excellent. So that's fantastic, man. Everybody who's uh local and most of the viewership here is is local. Um come on out June 27th to Lakeside Jiu-Jitsu. You can see it's 239 Miller Road there. Um, I'm gonna put Ulrich's contact information across the bottom of the screen here. So uh jot that down, get a hold of them, and um come and adopt an animal and and give them a home. And uh hope to see you guys there. So uh go ahead.

SPEAKER_01 2:18

Oh, I'm sorry. I was also appreciating the help of Civitas Real Estate. You know, Jonathan, you're uh helping out doing this. Um some of your realtors are going to local businesses and trying to uh get some donations, and uh I really appreciate you know the help and you're you're always always uh trying to do good for the community.

SPEAKER_00 2:38

Well, I appreciate that, man. I do. I mean, you know, the the word civitas means community in Latin, and that's because I'm dedicated to it, um, as are you. And uh, you know, it's it's all good stuff, man. I love it. Love helping, love seeing, love seeing you do this kind of thing too, man, because uh obviously these animals need it. And uh there are families out there and homes out there that need these animals too. Um, you know, pets are wonderful and they bring a new dimension of love and joy inside of a house, um, even when they pee on the floor sometimes, right? So, hey man, uh I'm gonna drop this, but for everybody that's out there watching, I'm gonna leave Ulrich's contact information here at the bottom um for the length of this interview so that you can grab it and uh and reach out to him should you want to come to this event, need more information, or or anything. Um, you're gonna learn a little bit about Ulrich here uh in in uh just a moment here. So let me get rid of that. All right, my man. So as an introduction, um Mr. Sable here is a a client, he's a real estate professional, he is an investor, um, he is a real estate uh home inspector, uh he's a friend, he's my jujitsu instructor, and uh all the above. So I thought, you know, I talk to people about real estate investment a lot, obviously, as a broker. I run across a lot of people who at least consider it. I wrote this little um quote above my shoulder here, if you can read it. Uh it says, you will own nothing and you will be happy. Now that is a quote from a gentleman named Klaus Schwab in the World Economic Forum. I didn't make that stuff up. If you look into this stuff, guys, it's kind of creepy. But it is um something that I I believe. Um I'm not gonna speak for others, but I certainly have have read and heard and listened to enough of this stuff that I believe that the the very wealthy elite who the World Economic Forum is just that. It's the world's rich, richy riches, uh, who meet in Davos once a year, and they talk about how they maintain power and wealth, essentially. And that's kind of uh that quote is something that has flowed around the internet for now about a decade, right? And um I believe that it is it is what the elite want to do, is they want to own everything, and we plebs own nothing. And so when I talk to people, especially good people who I care about, I always wanted them to consider their future and investing in something that might be able to help secure some more freedom for them and their families. And I personally believe that real estate is the best vehicle to do so. I think that you might agree with that, Mr. Stable. Would you say yeah? Oh, definitely. For sure. So I brought Alwick on. I wanted to talk to him about how he got into real estate investment. Um, and you know, some of the things he learned early on as a young investor. I mean, uh, and you know, the way he's changed his operation and how he does things now. I can tell you that he's been very successful in his real estate investments. They've all performed very well for him, and um this is something he's committed to. So let's start us all, Ulrich. When did you get into real estate investment?

SPEAKER_01 5:53

The first one was 2006, and I knew absolutely nothing.

SPEAKER_00 5:58

Okay.

SPEAKER_01 5:59

Um, I I had a partner who previously owned rental properties and sold them and was very successful at it. And at the time I thought he had all the answers, and to be honest with you, it was beginner's luck, is why he did so well. He happened to buy a property next to a church. The church wanted it, and he sold it for a big profit. So I thought that it was, you know, he had all the answers, and I just followed his lead. And it'd be, you know, we it'd be easy pickings, but it didn't end up being that way. And as this is in 2006.

SPEAKER_00 6:34

Yeah, so 20 years ago, you get your start. And I'm assuming, you know, you doing your homework and you started to believe that real estate investment is something worthwhile to get into to secure wealth, generational wealth, and freedom for you and your family. And this partner you had, how many, how long had he been doing it before you partnered up with him?

SPEAKER_01 6:52

I mean, he was doing it for uh probably like three or four years before I he he did it. And and at the time too, I didn't have any idea of what things cost to repair, even ideas of really how to fix things. So I was pretty, I was going in pretty blind. And you know, like a lot of people, I read a bunch of books and tried to educate myself, and but you know, I was I was really leaning on him at the time.

SPEAKER_00 7:19

Sure. So you weren't that blind. You had done research, you had done homework, you did what you knew was the best thing to prepare yourself to jump into this, but like most new adventures, you know, you gotta live it and you gotta, you're right, you gotta you gotta earn your stripes, right?

SPEAKER_01 7:34

Yes, and uh definitely.

SPEAKER_00 7:36

And and so so what how about that? You get into it, you uh you partner up with this gentleman, you guys get into your first investment or so. Like, what are some of those early painful lessons that every single real estate investor is going to get into, no matter how you prepare? Because, like you, I did the same thing, man. I I read the books, I listened to the podcast, I studied real estate investment for two years, and of course it prepared me, but I still got my ass kicked on my first two. So, what are some of those things that you came across that were frustrating and discouraging at the beginning?

SPEAKER_01 8:11

It well, it was a different time. The only thing where I was very we were very lucky is we bought something called an REO, which were like they it went through the foreclosure process, then the bank took it back. So we were we were we we thought at the time we were getting a great price, but if you can remember my time frame, 2008 happened and everything just hit rock bottom. So it but the biggest thing that I um learned was that like in the problem that I had with my partner was uh is he would kind of half fix things. It was really done very poorly, and he always did everything on the cheap, and it always came back to bite me. Um the the tenants that weren't problems became problems, especially if you don't fix things on a timely manner or they keep um they the the same problem keeps coming up, they they basically it created problems that didn't need to happen.

SPEAKER_00 9:14

And so, you know, for for everybody who is watching and might not know, RO means real estate owned, right? This is a bank-owned property, like Yorick said they it's purchased back from auction at a sheriff sale. So, how are you and your partner splitting property management? How who was responsible for what?

SPEAKER_01 9:33

It was it was kind of uh that was the other thing. Uh I personally don't uh it was kind of a free like I would take I would he I would have him handle all the repairs and and and coordinate all the people. Uh he I would collect rent, I do you know, cut the grass if it needed to be, or do little things when it needed to be, but I would generally handle the people. So, you know, he was the partner was kind of always um aggravating the clients, and then the clients would take their frustrations out on me.

SPEAKER_00 10:02

Oh yeah.

SPEAKER_01 10:03

And then it was this vicious circle of uh till till things finally came to came to a head and we we sold the properties and parted ways.

SPEAKER_00 10:13

How long did that take?

SPEAKER_01 10:15

Oh it took oh, it took a while. It took try 20, probably like 2015, 2016, sometime around there.

SPEAKER_00 10:26

Okay, so you're in business with this gentleman for nine to ten years.

SPEAKER_01 10:30

And how never made money.

SPEAKER_00 10:33

Wow, that's that's incredible. That's that is uh I did not know that. So I've I've known basically most of the stuff you've said, except for that. Um and uh okay, so you're in business for for 10 years with this gentleman. How early on did you begin to see the signs that this might not be working?

SPEAKER_01 10:52

You know, at first I it you know, at times it would work, and then at first and then like I thought because everything was going wrong during 2008. So I I you didn't think about it, you know. I just kind of grinned and barred beared it, and like because I owned a retail shoe store at the time and nothing was doing well at the time. So I was just trying to survive and not think about it and and do the best I can. But because you know, necessity is another mother of invention, that's when I started trying to teach myself how to fix things, try to find other avenues. When I started learning more, that's when things started going to a head.

SPEAKER_00 11:34

It's amazing how that works, right?

SPEAKER_01 11:35

Yes.

SPEAKER_00 11:36

And so, you know, when man, when I when I talk to a lot of young people, um especially a lot of young dudes that who will ask me about real estate and everything, and and and I tell them if I had if I had that magic time machine, what I would do coming out of high school is basically learn the trades, right? Learn how to make a house beautiful, um, save up money living at home until I could buy that first duplex, go in one side, the ugly side, while I'm living there, fix it up, rent out the other side. Once this side is pretty, right? Get myself into the other side, rent that out for top market rent, make this side pretty, and then once I've got enough money, go buy the next duplex and do it over, right? I would house hack my way to retirement by the age of 40. Well, I've I've missed that by nearly 10 years. Um, so you know, that education piece is in the the desire and willingness to work hard is it's so critical, right? I mean, I talk to these young people, and when I start talking about learning how to fix stuff and and putting that time in and that work, that's when I see their eyes glaze over, right? Because they expect some some magic, some magic. I don't know what they expect. Um, so you'd part ways with your partner in 2016, and how do you get into your first one on your own? What's that look like?

SPEAKER_01 13:01

I was um encouraged, actually. I was doing privates with a real estate investor who owns a lot of properties, you know, 40-50 properties. And he was telling me, you know, because he we would talk about he would talk about his problems with his tenants, and sometimes I'd give him some solutions for those because I was, you know, used to dealing with tenants for years. And he was telling me how I need to get back into it. And uh I I uh he he helped me out. I he kind of showed me his system of how he put everything together and you know, some things I and I took a lot of that, you know, and then I took a lot of what I learned and uh and mashed it together and started doing my own thing.

SPEAKER_00 13:46

And what what type of property you prefer going into?

SPEAKER_01 13:50

I prefer single homes. I prefer single single family homes. Um I number one, um there's a lot of a lot of uh discrepancies can happen between tenants, you know, who live on uh this person's parking in my spot, this person's making too much noise. You get those calls, and I didn't want to get those calls. Um the other thing that I like about single families a little bit more is that it it can bite you, but the tenants pay for the water. And uh with doubles, at least in my experience, sometimes it seemed like they're they would invite their family over to wash their clothes or whatever uh uh on the weekends or something because the bills were absorbently high. So that that that that is uh something that gets taken out of the equation. That's the other thing I I personally like about uh single family homes.

SPEAKER_00 14:47

And then what type of home would be your preference now with this experience? Because I mean I've seen you buy all types of homes. Um I've seen you buy homes that need um, you know, none of them have really been turnkey, right? But some have needed way more work than others.

SPEAKER_01 15:07

Um I mean, I I I I bought one where I literally the only thing that was stayed was the four original walls. Uh I don't prefer to do that anymore, but you know, if the price is right, but it's definitely a uh a house that needs to be shined up, is always what I'm looking for. Something with sweat equity value in it, and and everything I've even my own personal house, it's always been that that is the best way to find the best deals, get the most equity. And what I like about a house that's beat up versus a turnkey house is you get to see what's under the hood. You know, you don't know all the time. People cover things up, and uh and and they're very good at hiding them. So I I I I don't mind that it's a little beat up and bruised. I'd rather I would rather make it make it uh my own and and find and and even when you try to do everything right, things still come up. It like just freak things. I um I had a house in Elyria that um the water line on the street broke, and when it breaks, they don't clean like all this debris goes into the into the lines. And the water company doesn't just clear out the lines before they reconnect them. So so basically all that debris shot into my hundred-year-old house's pipes and blew it up, and I had uh to I had a I had a break at the main that the the insurance and and uh or the water company does not cover because that's not in their that's not in their policy. So I had to suck it up and and I had to do this quickly, find someone who I could find reasonable to to get an excavator, dig it up, and put a new main water line in. Yeah, so things do come up like that.

SPEAKER_00 16:59

What about a type of house? Is there any specific style of home that you would prefer? Like the perfect house you're saying that I would uh I mean like do you prefer ranches, do you prefer colonials, split levels? Like what do you prefer working in, or does it matter to you?

SPEAKER_01 17:13

It it I I prefer them to be probably I I would think size more than style. I mean, ranches are always nice, especially red ranches are and and and I guess basements can be a a blessing and a curse, but they I do like the basements because you can you know work underneath them. You can put line, you know, power, you know, if you need to put electrical lines in, you can put electrical lines in from it's a lot easier to work work on those. Those would be probably be the best. I don't like too big probably 12 to 1500 square feet. Okay would be, yeah, that would be like the perfect scenario. Perfect scenario too would be a bath and a half or two full baths.

SPEAKER_00 17:53

Right. Well, I mean, you're talking about you know, the bath and a half, the two full baths, that that equals more more rent to charge, right? Sure. Because it's more desirable. Um, and then the size and style of the home, you know, a 12 to 1500 square foot ranch, ideally, because of its easy to maintain, right? With the basement, I forgot to add that. It's easy to maintain, it's less expensive to maintain, repairs are easier to get to, all those types of things. Um so right now you operate solo, right? Yes. You ever plan on changing that?

SPEAKER_01 18:30

Uh not at this moment in time. I'm I uh you know the one mistake I see, I this is my personal opinion. So everybody's out there will tell me I'm different. In fact, I have home inspection clients who don't do it this way, and they seem to be doing well. So take it for my uh just an opinion. But I I think that until you build to a certain number, there's no point in getting a property management team.

SPEAKER_00 18:55

Uh I agree. Um, I made that mistake and uh it was costly and painful. Um, so right now we have so for the folks who are watching, if you can't tell yet, Ulrich is a serial entrepreneur, he owned a shoe store. Um, this is another thing I want to talk about. So uh right about the time that I met you, you were closing up shop, right? And this is this is a little bit, you know, we're going beyond real estate. Um, this is just sort of a thing that I think you did that was probably really important and critical to your development, but you closed up shop, and this was a shoe store that had been in your family for quite some time, and it had to have been painful to do so, but you did it. Why'd you do it?

SPEAKER_01 19:48

Um, I really believed, and it's people at the time thought I was absolutely out of my mind, but I really believed that like technology, AI, things like that, like were going to take hold. And that was the main reason why I was looking for something, and I thought real estate would be the best option because no matter how many robots or AI come out, people are gonna need somewhere to live. And um, I I just thought that real estate local like traditional family-owned real uh real estate, I'm sorry, retail was done for, and I just thought it was a top it was a toxic um environment as far as like it's a race to the bottom, you know, everybody's trying to cut everybody's prices, even the when you have the the shoe like we were in the shoe business, so when you have the shoe company selling against you, and the shoe companies are selling on Amazon, like there's there's too much c there's it's it's it's I was working twice as hard to maintain things, and I just didn't want to do that where you know real where real estate was growing for me and even home inspection, like there's people are thankful for for for what the service you're providing for them. It doesn't feel like you're you're you're you're appreciated.

SPEAKER_00 21:06

And you mentioned, you know, the threat of a uh uh technology being one of the if not the biggest motivating factor for for closing up shop. You didn't just do this last year. This this when when did you close shop? 2019. All right, so this is seven years ago, you know, and and the threat wasn't even necessarily new, it but it was it was it was happening, right? They were taking your lunch money, and uh you saw it, and you made what had to be an incredibly difficult decision of shutting that store down because you saw the writing on the wall, and man, I just see this so often. I've got a client right now, I'm trying to move their shop, and uh, you know, he probably waited 10 15 years too long to do to try to sell. Um, and uh, you know, he just hung on to the business way too long until. Reached a point where it really started to drain the life out of him. And oh, yeah, by the way, he's not a young fella, you know, so he he has 10 to 15 years more age and and lack of ability to actually clean the place out and things like this. And and he he's struggling because of it. And uh it's a shame, but you saw that coming, and that you know, I that's a sort of a lesson that it's just super important. If you always got to be, in a sense, reading the tea leaves, right? You always got to be gauging what might be coming down the pike, what what are the threats to your business and to your operation, and make adjustments um and be decisive and not hold on to something that is possibly going to bleed you out if you don't let go. Um, and again, man, you know, I commend you because I that couldn't have been easy. I'm sure you had a lot of opposition, you know, not just friends, but family members who really didn't want to see you do that. Um, but you know, you had to make sure that you and your family and were able to continue going, and there was no reason to uh to drown with the sinking ship. That's a tough thing. And and for anybody who's out there, I you know, I wanted to bring Yolrik on because there's lessons that, you know, in his story that are invaluable for anybody who might be getting into business or investment, specifically real estate investment at all. You know, he started, he started with what he eventually learned to be limited knowledge, certainly compared to what you got now, right?

SPEAKER_01 23:29

Oh, definitely.

SPEAKER_00 23:30

And it it hurt over time, it hurt. You know, whether whether it was, you know, you started the the 08-09 crash in real estate was painful enough, but you started talking about the partnership and how that really was the difficult thing because you guys weren't operating um in lockstep. You you know, your property management responsibilities were conflicting. You know, he's he's you're dealing with the clients, with the tenants rather, who are getting upset about shoddy work that he's going out and doing. So you got to answer for his work. So the tension there had to be pretty awful for quite some time. You sold out of that, you you split ways, dissolved the partnership, um, got very discouraged, um, but not enough that one fella couldn't talk you back into it because you still believed in the promise of what might be with real estate investment. So big thing is you didn't quit, man. You you didn't quit um on that, and now would you change anything?

SPEAKER_01 24:37

No, it you you really can't. I mean, there's one more painful lesson. So I took some of the money that I had at the time. Now you gotta remember this is 2006, and it was Apple stock, and it was probably about a hundred shares back in 2006, which would be worth a lot of money in comparison to those houses, but I still wouldn't change it because the amount of knowledge that I gained, you know, I I probably wouldn't have you know continued to buy Apple stock, for instance, continuously. I'm not a stock picker, but that you know, let's say I would have kept it. The the amount of real estate it I fared out better in the end, but it was through painful lessons and and uh and a lot of um you know when you don't have the answer, you you go out and find it. You don't just you just don't do in my opinion, at least if you have a good idea, you just don't give up. You you just make adjustments. Try not to make the same mistake twice.

SPEAKER_00 25:36

Yeah, and and you've done so in uh again the shoe store, real estate investment. You have your own business as a home inspector, and you just opened a jujitsu gym, right? Yes, so entrepreneurism is clearly in your DNA, and uh you have continued to do so. And I gotta ask you this. So being willing to take risks is clearly a part of getting into real estate investment, and it's clearly a part of opening any business. You if you are petrified of risk, then none of that stuff is you know, it's probably not a good idea because it's it's surrounded with risk, but you know, the old saying is no risk, no reward, right? So you're not afraid of risk. Um, you know, and uh you probably could never go work for somebody else at this point in your life.

SPEAKER_01 26:32

I'm pretty unemployable. My and even with with partners, my wife always says I don't play well with others, you should just do your own thing. Yeah.

unknown 26:41

Yeah.

SPEAKER_00 26:42

Listen, you know, so again, for the folks out there who are watching this, um, if you have the thought of maybe getting into the real estate investment space, um, investing in anywhere, starting a business, um, you know, I I highly encourage it. I I want to see good people go out there, take the risk, put in the hard work. You can't ever stop learning. You can never ever stop learning. Um and and just go for it and and take it on. And because the rewards are incredible. I mean, again, y'all recruit you would you change a thing? No. No. It's life's pretty awesome, isn't it?

SPEAKER_01 27:19

Yes. And you know, the other thing I would add is try to find somebody who has experience. That's probably was my saving grace, even though I went through it the first time. But like the and and I was willing to listen and and not act like I know everything and not say I know, and things like that, and be willing to basically, you know, take someone's process and and and work with that and and admit that they're they're ahead of me because there's always people who know more than you. Um I I I learn stuff from people all the time, and I I I try to bounce ideas off of people who I really respect in in all in all my businesses.

SPEAKER_00 27:55

So mentorship was a key.

SPEAKER_01 27:57

Yeah, it really made a huge difference.

SPEAKER_00 28:00

No doubt about it. No doubt about it. Man, I appreciate you coming on. I appreciate you coming on and sharing stories and sharing experience. Because again, if if you're out there and you're considering doing this stuff, I encourage you to do it. If you're local, um, listen, Civitas, uh, we have resources. You know, we've got a network, we've got resources, we've got experience and knowledge that we can connect you with. Um, give me a call and uh we can help work some things out. Before you go, let me put this back up for the folks that are watching. Remember, Yorick at his lakeside jujitsu gym on Saturday, June 27th, is having this event where he's adopting out puppies from the Friendship APL. Come support it, come get a puppy. If you're interested in donating to it, donating to the APL. If you're interested in bringing a raffle basket, reach out to Yark. His contact information is down there at the bottom. And uh, once again, my friend, I appreciate you coming on, man. Thank you very much. Thanks for having me. All right, sir. We'll talk soon. All right.