When life's unexpected twists lead to remarkable transformations, it's a tale worth telling. Brie Schmidt's pivot from a corporate career to real estate investing after a family tragedy is just such a story. Our latest episode takes you on her inspirational journey, from buying what she thought would be her forever home to creating a property empire across Chicago and Milwaukee. Discover how Brie harnessed the power of an online community to fuel her growth in the industry and the pivotal role education played in her success.
Navigating the complex world of real estate portfolio management is no small feat. Dive into Brie's analytical prowess as she shares her approach to evaluating property performance, the tough decisions surrounding asset liquidation, and the intricacies of managing C-class properties. Understand how economic downturns vary by location and the strategic considerations that dictate whether to reinvest or cash out. If you're wrestling with the challenge of opportunity zones versus 1031 exchanges, Brie's insights are invaluable.
Selecting a real estate agent with a genuine grasp of investment properties can be the difference between success and a cautionary tale. We peel back the layers of this crucial decision-making process with Brie, discussing what to look for and where to find the expertise you need. She also imparts wisdom on empowering clients through education in market analysis and property valuation, ensuring they're equipped to make informed decisions. For newcomers to real estate investment, brie leaves you with golden nuggets on building confidence, avoiding analysis paralysis, and why making a modest start is your ticket to future wins. Join us for an episode brimming with actionable advice and real-world wisdom.
1. Transforming Personal Challenges into Professional Opportunities: Brie Schmidt's story highlights how personal tragedy and a reevaluation of life goals can be powerful catalysts for change. After her father's passing, she shifted her focus from corporate life to real estate investment. Her journey underscores the potential for significant life events to inspire a move towards entrepreneurship and the creation of a successful business. Brie's experience demonstrates that with determination and a willingness to learn, it is possible to build a thriving real estate empire from personal challenges.
2. The Importance of Community and Education in Real Estate Investing: The episode emphasizes the value of being part of an online community and continuously educating oneself in the field of real estate investment. For Brie, finding a network of like-minded individuals on BiggerPockets was a turning point in her career, offering her the knowledge and support needed to expand her portfolio and ultimately leave her corporate job. This underscores the role that a supportive community and ongoing learning play in achieving success in the competitive property market.
3. Strategic Portfolio Management and the Role of Specialized Agents: Real estate investment requires strategic thinking, particularly when it comes to portfolio management and working with the right professionals. Brie discusses the analytical approach needed to assess property performance, the decision-making process for buying or selling properties, and the complexities of managing different property classes. Additionally, the episode stresses the criticality of partnering with a specialized real estate agent who has a deep understanding of investment properties. Bree's insights highlight the need for investor-savvy agents who can guide clients through market analysis and property valuation, ensuring that investors make informed decisions and find success in the industry.
00:00 - Vikas Gupta (Co-host)
This is the Hacking Real Estate podcast, season two, episode five.
00:05 - Brie Schmidt (Guest)
I think it's important for every especially new investors, to get comfortable right and I don't mean getting comfortable, because there's something called analysis paralysis, right, when we start obsessing over these numbers and being perfect. Right, there's no deals going to be perfect. What you want, though, is that, when you make an offer on a property, that you are confident going to bed that night thinking like this is the right property. And I always say like, the goal of the first one is a first base hit. Right, we're not looking for a homeowner on the first one. We want a nice, solid first base hit that's going to get you comfortable, get you experience and make you confident moving forward, and then we can build off of that.
00:46 - Brandon Hall (Co-host)
Welcome to the Hacking Real Estate podcast, where we dive into the stories of seasoned, hands-on and tech savvy real estate investors. We'll learn the strategies and tools they use to maximize returns and minimize hassle, all while navigating the rapidly changing real estate market. I'm your co-host, brandon Hall, and managing partner of Hall CPA, and I'm sitting alongside my co-host, vikas Gupta, ceo of Azibo. With our combined 15 years of experience in real estate investing and entrepreneurship, we're here to help you up your real estate game. Let's get hacking.
01:18 - Vikas Gupta (Co-host)
Hi everyone, Welcome to today's episode of the Hacking Real Estate podcast. Our guest today is Bree Schmidt. Bree is an accomplished real estate investor who, starting in 2011, amassed a portfolio of nearly 100 units across Chicago and Milwaukee. By 2014, she had fully embraced her passion for real estate, leaving the corporate world to become the managing broker of Second City Real Estate, a top-tier brokerage designed for investors. Since 2020, her firm has sold over $130 million worth of investment properties and last year they helped clients add over $2 million in rental income. She is also the co-founder of the Midwest Real Estate Networking Summit, a no-pitch learning environment for attendees. She is also a real estate agent coach, teaching agents on how to work best with real estate investor clients. Bree, welcome to the show. Thanks for being here.
02:10 - Brie Schmidt (Guest)
Thanks for having me. That sounded like a mouthful.
02:13 - Vikas Gupta (Co-host)
You're an impressive woman. There's a lot going on there.
02:15 - Brie Schmidt (Guest)
There is a lot going on there.
02:17 - Vikas Gupta (Co-host)
So, in your own words, tell us a little bit more about the real estate journey and how you started adding additional, additional, additional. She also sort of like I said there's a lot going on there, so tell us how you managed to put it all together.
02:31 - Brie Schmidt (Guest)
It's kind of an interesting story. I bought my first property in 2011 with really no intentions of ever buying another one. That was going to be our forever home. So, as I said, my fiance at the time and I, we were figuring out what we were going to do with our lives. We were going to eventually start a family. In the Chicago market there's a lot of two to four unit properties, so our idea was let's buy a two to four unit property, rent out the other units and then, as we need more space, we'll deconvert and combine the units and eventually have a single family home, and that was going to be our forever home.
A few months after we bought the property, my father was diagnosed with a very aggressive form of cancer and we went through I said what nine rounds of radiation and like 13 rounds of chemo and he ended up passing nine months later and it was so. It was a very quick, aggressive, you know year for us and we had just gotten married. It was like seven weeks after our wedding and he had died the day before he was supposed to retire, so it was supposed to be his retirement party and we ended up having to switch it to his wake and it really like shook me to the core, right. He was 60 years old and had always talked about you know, when I retire we're going to go do this, and when I retire we're going to go travel here. And it was always, you know, after you get married and after your brother finishes his PhD, like then I'm going to go do all this really cool stuff. And within you know, said 10 months, his whole life, you know, got turned around and he never got to do any of it. And so I sat there in the wake of everything and really thought, like hell, I'm 28 years old, you know, I've been working in corporate for like I think, seven or eight years at that point, and I loved my job, but I traveled a ton. I was working 60 hours a week. Like I can't do this for the next 30 years.
And then, for what you know, for my crappy two week vacation that I get to do, I got to figure something else out, and so we had I said we had already owned the property for about a year started figuring out like how can we get in real estate investing? You know, bought another property, then another one. The third property was like a burr property, if you want to call it. It was like an original 1970s home that we renovated, moved in, pulled the equity out of it and then, as I was Googling something, I found this website called diggerpocketscom and it completely changed my whole entire life because I found a whole network of nerds that liked to talk about what I like to talk about, and I was a downward spiral into this community of people and, you know, really went all in and that was like really the turning point for me. I was a normal person who could hold normal conversations with people before bigger pockets and now all I can talk about with my friends is real estate. I don't watch sports anymore. I don't, like you know, socialize outside of like my little real estate community, but that kind of is what started things.
So, through bigger pockets, I learned about investing out of state, decided to do the Milwaukee market and started buying properties there, very quickly realized that, while I thought this was always going to be a side hobby for me, that my day job was now getting in the way of my real estate investing and that's really where my passion was. So we were doing commercial loans, we were buying five properties at the same time and was at July 2014. I asked my lender if I can quit my job, if it would matter, and he said no, I'm like great, put my notice in. The next day, left my job, bought five properties a few days later than I. Within the next year, I bought 18 more properties, or 18 properties total. Continue to grow there, and then that's kind of the story.
05:59 - Brandon Hall (Co-host)
Now. Correct me if I'm wrong, but I thought that I saw a post, or maybe a series of posts, from you, maybe earlier this year, about how you had offloaded, or currently offloading, all your residential property.
06:11 - Brie Schmidt (Guest)
Yeah, I sold the majority of my properties in Milwaukee.
06:14 - Brandon Hall (Co-host)
What made you do that?
06:15 - Brie Schmidt (Guest)
A couple of reasons. So, timeline wise, right 2014, 2015, I bought 18 properties in my own name with my own LLC, and then 2015, 2016, I bought another 10 properties with partners, and then we hadn't bought anything since 2016. So it was actually at a conference. Through Dave Van Horn, he had the Mid-Atlantic Real Estate Summit, which was, I believe, 2018. And there was the first speaker of the whole entire event was an economist. He got on stage and was saying all these big words.
I did not understand yield curve and versions and I was like I should really learn more about this kind of stuff, because I understand my markets and I understand, like real estate economics, but I don't understand how, like international markets or the bond market right is going to affect real estate, and it was something that I wanted to learn more about. So at the end of the conference, the speakers donated their time for charity and it was an auction, so I bid on this economist's time because I wanted to learn more about what he was looking at in an economic terms and try to understand that better. Well, part of that process is he had asked me is like well, let's review your portfolio. That's part of the process here. So he had asked me for like all my cash flow, all my analytics you know everything and I just dumped spreadsheets on this guy. It came back to me with like all these different metrics and numbers. Like I had always I've been very on top of my accounting. I'm really into accounting and data and that sort of things. So I'd always looked at like how's our quarter doing right, how's our you know year over year, what's our year to date. But I never went back like for years and looked at like what's our holistic portfolio performance?
And he pointed out a lot of things to me, which one of them was some of these properties just aren't performing. Like why are you keeping these? And when we threw in what the value of the property is and what I could sell it for, some of them is like if you sold this today, you would get 20 years cash flow upfront. Like well then, why would I keep that? You know, why would I keep that property? So that's when I started selling. A couple of them was like in 2018. And then I got pregnant with my daughter and you know having a baby is super stressful. So I sold a couple of more and just over from, I think like what? 20, I started selling in 2019, maybe to 2023. I ended up selling all 18 of my properties and then six of the partner properties also decided to sell. So a lot of that reasoning really came down to. When we bought the properties, the appreciation like we were selling them from was double what we paid for them and it just didn't make sense to hold them.
08:48 - Brandon Hall (Co-host)
I think I remember this economist.
08:51 - Brie Schmidt (Guest)
Yeah, paul, something, I believe his name was.
08:54 - Brandon Hall (Co-host)
Cause I was at that conference and I was at dinner and he was sitting next to me and I remember trying to ask him some questions and he basically told me to stop talking to him. I was like, what did I do? Was he like cool to talk to? Like yeah, yeah, okay, interesting yeah.
09:17 - Brie Schmidt (Guest)
It was very enlightening for me.
09:18 - Brandon Hall (Co-host)
I remember him being a super smart guy, just like. But sitting at dinner with him I was like shocked. I was like geez, that's good, that's good.
09:27 - Brie Schmidt (Guest)
It just brought a different set of eyes on things and really opened up like what to think about. Right Cause, again, like I had always looked at you know, our year over year, our quarterly and then our, you know, year to date but I'd never really looked at like the entire performance of the property. You have to understand these are C-class assets. So I definitely learned a lot of lessons dealing with C-class assets. One of the things that still to this day I don't know like what sort of juju goes on, but like you could have a property being like great for years.
You know I have this property where we had long-term tenants four or five years, but then as soon as one goes, the other goes and like the whole building is vacant. For the next, you know, three to four months there's a ton of deferred maintenance or long-term cap X and it completely wipes out your cash flow for like a year, a year and a half, typically. So when you look at it from like I said, that holistic perspective, like it's a bump in the road and like luckily I have other properties that can float the portfolio, but when you have the same properties, when they're turning over every like two, three years and it wipes out a year of cash flow. Like it just doesn't make sense to keep them.
10:34 - Brandon Hall (Co-host)
Yeah, yeah and I get that. So when you were liquidating your portfolio, then where were you redeploying cash to?
10:40 - Brie Schmidt (Guest)
That's a great question. I didn't. Majority of it that was. I spent a lot of time like researching opportunity zones and 1031s and you know, going back and forth and I ended up just taking the tax side on it and cause I didn't want to feel pressured and I didn't really like any other opportunities. So I have invested in some syndication since, but those were all after tax dollars. This last portfolio that I was gonna that I sold in March, like 48 hours before closing, this property came up in Chicago. It was a mixed use and it was the first time like I've seen a property like ooh, I really like this, I really wanted to go see it. I'm like I could 1031 and then just you know it's gonna be a fire trying to get everyone on board to get this done in the next 48 hours. But then I ended up going to see it and didn't really like it. So I just decided to take the tax hit and then I said I've invested some in the stock market and then some into syndications.
11:37 - Brandon Hall (Co-host)
And what are you primarily focused on today?
11:40 - Brie Schmidt (Guest)
I'm still, you know, keeping my eyes open for stuff. I've always been a very firm believer in when it feels right, it will feel right, you know. And so I don't really have like a set deployment strategy. I just know that when an opportunity feels right to me, that I will just invest in it.
11:58 - Brandon Hall (Co-host)
I know pricing's been pretty tough over the past 18 months or so and a lot of people are hoping that pricing kind of right sizes over the next 12 to 24 months. So hopefully there's more deployment opportunities coming up in the future here.
12:13 - Brie Schmidt (Guest)
Well, right now it's not really pricing, you know, at least like. So I think it's market specific. Really, you know, even when, even when the crash happened, not all markets saw the same loss of equity, right, you know hotter markets like Phoenix, miami, vegas, right, that went up really really high, went down really really low. Markets like Chicago never really went up too too high, so we never went down too low. We've been pretty consistent here with our pricing. Over the last let's say, six, seven years. We haven't seen like a very sharp increase. So I don't know if we'll see and the bigger pockets actually is posted an article, I think Chicago had the biggest year over year gain, a 5% gain in property values over any other market, so that we're not really seeing too much of a pricing thing. More than anything, it's the rates that are affecting our market right now.
I was just doing an analysis for someone. So, like last year or two years ago, right November 2021, rates were about 3%. You were looking at on a financing. You were looking at about $420 a month for every $100,000 you financed. So $200,000 alone was gonna cost you $840 a month. Now that's $760 a month, so now we're talking it's like $1520, I think. So that's a really big difference in payment for the same purchase price. That's what's really affecting our market now.
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14:21 - Vikas Gupta (Co-host)
So, Bree in your business as an agent and running a brokerage specializing in selling to investors, how are you coaching them on thinking through the current environment?
14:36 - Brie Schmidt (Guest)
It's tough. I mean, there's really two mindsets here. Either A, you're gonna set in the sidelines and wait because you're not comfortable with the way the rates are, because the reality is nothing's gonna cash flow. It's really terrible, even with 25% down. So there was a property listed for like, let's say it was about a million dollars and it was a solid like 6.25% cap rate which was pretty good for our market, and he was gonna cash flow like $200 a month. So it's like why would you put $250,000 down to cash flow? $200 a month? That's a terrible cash on cash return. So either your options are sit on the sidelines and then see what happens, potentially miss out, or buy now on the cap rate and then hope rates go down in refinance and maybe deal with a year or two of minimal to no cash flow. Those are really the only two camps there is and I would say our clients have been split pretty much 50-50. So we do still have clients buying, but it's definitely about half of what we had before all this started, got it?
15:35 - Vikas Gupta (Co-host)
So that sounds like a conversation that I probably couldn't have with many residential agents that specialize in, you know, primary home sales or purchases. So if I'm an investor looking for an agent, what should I be looking for in an agent who specializes in selling to investors?
16:00 - Brie Schmidt (Guest)
It's a great question. There's a lot of things to look for in an agent. First, what is their level of experience? You know a lot of the books and the blogs and whatever say that you should always find an agent that invests themselves. I don't necessarily need that to be true. You know I said that doesn't really that's not a really primary focus of mine, but I like to know what their market knowledge is and how they look at things.
So my suggestion to people always is if you're looking at a market, I would find three agents that you wanna talk to and then tell them hey, this is my budget, I'm looking to buy $500,000 in this market. Can you show me examples of what you think I should buy and why? And then ask them to show you properties. They don't need to be active properties, right. They can be sold properties or delisted properties or properties they've done like a year ago and ask to see their numbers, right. Any agent who's an investor agent who knows what they're doing. I've got thousands of spreadsheets of properties that I like. So when someone comes to me and says I'm looking for this, this and this, in my head I'm thinking of a couple of properties that I've either seen or my clients have bought. That would be a great example. I like to send them my analysis and then let's have a discussion about it. Right, let's walk through what the numbers are right. What kind of CAPEX you're looking at they can see rates, repairs what cap rate you're looking at, what cash on cash and then what your overall cash flow is gonna be. To make sure that you're realistic with what the market will deliver, because I think that's one of the biggest hurdles that investors have. At least one of the hurdles that I have when people contact me is they're like I want this. I'm like, well, that would be awesome. Anyone would want that, right, that's just not realistic though. So here's.
So, like, I like to show and talk through examples and say this is what you can expect, right, with, let's say, 90 days in the market If you're looking for a unicorn, right, you might be able to find that kind of stuff, but it might take like once a year. You'll kind of see that. Come up in the market. Through that exercise with your agent, you'll be able to tell if they're the right agent for you. Are they telling you that, oh, you don't need to run? You don't need to run members with vacancy right. These are class A properties. There's never a vacancy, they're always gonna be vacancy. How their number is conservative right. How they or do they like to sell you sunshine and rainbows, all those things. That whole conversation will let you know if they're the right agent for you or not.
18:16 - Brandon Hall (Co-host)
I think that the exercise that you just described those is pretty rare among agents. I mean, I know that, at least the agents that I know here in Raleigh, north Carolina there's very, very few people that are like putting those types of things together for their clients, and probably even fewer that truly understand it from an investor perspective. Yeah, so I guess my question is how do you find an investor agent?
18:45 - Brie Schmidt (Guest)
So before that, you just made an excellent point, I would say. Even in Chicago where, let's say, depending on the neighborhood, between 50 and 70% of our housing stock is two to four unit properties, so they're like house hacking is a total thing here, I would say there's probably 10 agents in this entire city that know what they're doing. When it comes to real estate investors, it really, really, really irks me when a non-investor agent takes on an investor property and starts marketing it with a cap rate and their cap rate is literally rents minus taxes. That's how they determine cap rate, like it. It irks me so bad and it makes them look stupid. But so finding an investor agent right, you can find them through your local RIAs and through bigger pockets has an investor agent listing through local networking events, facebook groups, right.
Ask for referrals. That's how it like said our business. We started our business in 2014. It has been 99% referral based and we are like 95% investors because we again, we don't sell sunshine and rainbows, right. This is what we eat, sleep and breathe day in and day out as investment properties. Running numbers excels, so that when any client calls me and says I'm looking for an agent, I typically have a couple of examples that I can show them off the top of my head. Like this sounds like what you're looking for and here's the numbers breakdown. So again, if you're doing the retail agent who doesn't know investing, it's pretty clear on that initial conversation.
20:19 - Brandon Hall (Co-host)
Well, so let's actually talk about that initial conversation, because I imagine I could be wrong, but I imagine that, given the current state of the market and how constrained supply is and the fact that rates have really put a damper on demand, there's a lot less transaction volume happening. And what could be happening, or what I would imagine would happen, is that an agent that doesn't have any experience with this might all of a sudden have an appetite to try to put something together for investors, simply so that they can continue to live themselves right. So I guess the question is, on that initial conversation, how do you make sure that somebody that calls themselves an investor agent is actually an investor agent? Like, how do you make sure that they actually know what they're talking about and that they're not just feeding you a cap rate, that's rents minus taxes?
21:18 - Brie Schmidt (Guest)
Well, that's a double-edged sword, right? Even a new investor should be able to understand how to calculate a basic cap rate, you know. So, again, I would put it on them. Let's just say, as a new investor, you're looking in the rally market, you wanna talk to a couple agents who say they're investor agents, find properties yourself and send them to them.
Hey, I like these three properties. Can you run numbers for me and see what they do? Get it? They're coming back with a cap rate of rents minus taxes. They're not the agent for you. So, like, that's a little. It's a little challenge, right, but it really opens up the conversation so that you have insight to see what their knowledge base is and what and how they're going to sell you. That's what our job is, right, as an agent, our job is to sell. You don't want to be sold, though, right, you want an agent that is going to explain things to you, right? Like, make sure you're making the right decision. There are a lot of us out there that are like that. Just a matter of finding them.
22:19 - Brandon Hall (Co-host)
On the agent side. How do you know when an investor is serious or not right? Because I can also imagine that somebody just and I'm sure that you've run across it it's like hey, bree, can you calculate this, can you calculate this? And finally it's like okay, are you going to buy one or what? So how do you? I guess, if you're speaking to somebody that's listening and they're an investor and they're like I would love to work with an investor agent, but I want to make sure I don't also annoy them Like where's that line?
22:50 - Brie Schmidt (Guest)
So it's a form of balance right. For me it comes down to that initial conversation of talking about what your expectations are. So when we call them onboarding calls, when we do our onboarding calls, the first thing I want to know is what's your budget, what's your location and what's your ideal property? Tell me those three things right From that, I said, I try to find three examples of properties I think is going to fit what they want and I do a full analysis breakdown. I said a lot of times these are analysis that I've already run before from properties I've already seen, and then I sent it to them.
When we have a conversation, we talk through everything. So again, I always tell them if you see these three properties and you're like, yes, this is something I could buy, the returns are what I'm expecting and the cash flow is what I'm expecting, then I can help you. But if you look at all three of these properties and you say you know what the return's not really there for me, I was hoping for a 7% cap rate, then I you know thank you for your time, but that's just not realistic in this market. I can point you in the direction of maybe other markets in the suburbs or further out that may be able to find those sort of cap rates, but at least in the city of Chicago on the north side, you will not find a 7% cap rate. It's impossible. If that's what your minimum criteria is, it's not going to be a good fit because I'm not going to go chase around a unicorn.
24:03 - Brandon Hall (Co-host)
When you give them that analysis back and it's it meets their criteria, is there a certain expectation that you have for them to pull the trigger on making the making the investment happen?
24:14 - Brie Schmidt (Guest)
No, we've had clients take two years to buy property.
24:17 - Brandon Hall (Co-host)
24:18 - Brie Schmidt (Guest)
Yeah, absolutely. We've had clients take two years. We've had clients who have, you know, we had to set a client. We looked with it for a year and a half and it's not like we weren't writing offers. We probably wrote, let's say, seven or eight offers, with them all over asking price every time we got outbid and then they decided to just buy a condo, you know, and like they were pregnant, they were expecting their first baby in January. You know they've been looking for a year and a half and like this isn't going to happen for us, let's just buy a condo. Absolutely, those things happen right in life changes. It just really depends on average, I would say. In a normal market with normal inventory, the average client takes about six months to buy something.
So what we do we do things a little bit differently here is that every day, three times a day, I get every single MLS listing in my market area and I've been doing this for 13 years and every day, three times a day, I run at numbers on every single property that's come up in the city of Chicago in the last 13 years. I put them through my initial calculator. So we're looking at, you know, obviously we're looking at. Cap rate is kind of our basis. You know, if it's in a great neighborhood and it was just renovated, right, we know that people will take a lower cap rate. If it's a property that needs a little bit of work, right, or it's in the outskirts of the area, that's a main focus we want to see a higher cap rate. We send that list to clients and tell them these are the properties that meet our criteria this week, let me know which ones you want to go see.
So in the beginning, my job is to teach my clients to run their own numbers and be comfortable. So in the beginning, when I've got a new client, they'll send me a link. You know, hey, what do you think about this? I run my numbers on it and I like to point things out to them that they may not understand or see. So, for example, like we have sometimes wall heaters here, they're like they're from the 1960s. So whenever I see a wall heater, I'll tell them like I'll point out like, hey, if you look at picture 22, you see that wall heater there, that's going to be a $15,000 conversion. And a wall heater is like a hot potato, right, it's been there for 40, 50 years. At some point it's going to go and they don't really make them anymore and you've got to add ducts, you've got to add a central HVAC system.
So next time you're looking at photos, look for that. Or look at photo five right, see those gaps in the floor. The floors have been standing Like you can see the nail holes in the floors. Right, those have been standing down too much where now you've got to either do an LVT over your hardwood or a new floor replacement. That's going to cost you $6,000. So that next time they're looking at the photos, they're paying attention to those things, because the average home buyer doesn't look for those things in pictures.
So again in the beginning, like I'm running my numbers and sending them to the client, but I'm trying to teach them along the way. And then in the middle, right, they'll start sending me stuff and be like hey, I ran some preliminary numbers. How do you think this is, you know? Or I made sure, I saw that you pointed out last time and that's going to cost me this, you know, or I think Marker runs to that. So, like then, it's more or less like me double checking their work, right, but the whole goal at the end of the day is for me to teach them how to make their own decisions, because I will never talk a client into a property right. That is not my job. My job is to find the property and to educate you. It is your job to decide if it's the right property for you and you're the one that needs to sleep at night understanding those things. And if you're not ready to make those offers, that's because you're not ready and you just need some more education.
27:28 - Vikas Gupta (Co-host)
That sounds I mean, that sounds like a pretty amazing service that you're providing to your clients.
27:33 - Brie Schmidt (Guest)
I love it, it's great and it's so. It's so fun for me. I said it's been what nine years I've been doing this? Hey, a lot of my clients are repeat clients. That's one of the benefits of being an investor agent. I just closed on a property with one of my clients. It's his third property in three years. He spent, he bought $2.4 million of real estate in three years and I talked to him pretty much every other month minimum for those three years. Like, he just had a water leak yesterday. He just texted me yesterday and said hey, there's some water coming in my kitchen. I'm like I'll text my plumber and copy you on it. He'll come out today.
There's a lot of things that come up in the business like years down the road. Hey, we got bedbugs for the first time. How do I handle this? Or do you have? We have a tenant situation, right, how do I handle this? Notice, it's like I get to.
I've developed friendships with almost a vast majority of my clients and I always joke that, brandon, you have little kids. So I've got one who's a pediatric ER doctor, I've got one who's a pediatrician, one who's an ER doctor and another one that's a regular ER doctor. So I can rotate when my kids get sick, between texting one of the four of them Like hey, you know, the little ones got this cough. Here's a video. And they're like and I've been able to get concierge doctor service right Through.
All clients of mine that I've developed relationships with you want to hear a really funny story, get this. My daughter had an ear infection on a Friday night. I sent a picture to my my ER doctor client who then called me in a prescription to Walgreens and I was like two hours went by, was calling the Walgreens for the prescription. No one was answering. I'm like I'm not going to go out in the cold and go pick up this prescription. It's not even there. Well, one of my agents is a pharmacist for Walgreens, so I texted him and said hey, can you look this up in the system? And he's like yeah, they haven't even started processing yet. But you know what? Like I'm heading back from my shift, I can fill it for you and drop it off in your mailbox. Well, not only did I not to go to the doctor, but I got a prescription dropped in my mailbox at 10 o'clock at night from one of my agents. I'm like that's parenting like next level stuff right there.
29:39 - Vikas Gupta (Co-host)
That's great. One thing I'm really curious about from a as a as a software guy, data guy. So you're pulling down the listings three times a day to running the numbers. You're looking at images like what, what technology investments have you made or are you thinking about making to put more automation behind some of these processes?
29:58 - Brie Schmidt (Guest)
I don't think you can. There's been a bunch of software programs that have come out. I've done, you know, demos and beta testing over the last couple of years and I've never found something that is remotely even close to being able to do what I can do visually right. And again it comes through experience. So again, 13 years of looking at every single listing on the north side of Chicago. It takes me three to five minutes tops to run numbers on a property, right. So I should actually video this. I was meaning to video me doing it one of these days.
So our average price point is, let's say, $600,000.
If a property comes in the market that's in the high eight.
I know that my buyer pools are already gonna be pretty small and that property better not need any work, cause if that property is gonna need work, then I know that my buyer pools may be one or two clients and I'm probably just gonna skip running numbers on it, cause it's not gonna be the return that I need.
So again, just looking through the listing photos, I could guess real quick based on like what's the size of the bedrooms, right? How many bedrooms, what's the condition, what market rents are gonna be. And then I just have an old school Excel spreadsheet. I have an old school Excel spreadsheet that's already completely built out for me that all I do is put in the purchase price and what the rents are and it spits out my cap rate and then I from there like I can see if it's, you know, within reason. Right, if it's something that we want to go and potentially see, then I can go do more due diligence on it before I actually send it out to clients. But that initial process, like I can probably analyze, let's say, 50 properties in an hour.
31:32 - Brandon Hall (Co-host)
There's this idea that in order to really scale, you have to actually do the things that are not scalable. Very well, right? So not being able to automate or add software is not necessarily a bad thing. That it might be inefficient compared to other workflows, but it might be the best way to do that one specific task, and doing it that way might ultimately lead to a lot more business, a lot more revenue, a lot more profit. Anyway, I like the estate that said that, because I think in my world too, I run a CPA firm and we're always looking at how do we automate, how do we add efficiencies. But there are certain things, especially as it pertains to client relationships. You know, hey, popping on the phone and talking a client through some major issue that they're experiencing, that's not a scalable thing, right? Somebody has to do that. So anyway, it's one of the interject there.
32:29 - Brie Schmidt (Guest)
And it can't be a chat bot, right, and it can't be a VA. It keeps me in tune with what the market is by doing this right. So like, for example, there's a website called Rentometer. I'm sure you've heard of Rentometer, right? The problem with Rentometer is I can put in an address and how many bedrooms, how many bathrooms, and it tells me. It spits out this really cool, fancy report, right. But what it doesn't do is it doesn't distinguish between an 800 square foot vintage two bedroom and a brand new construction right, 1,400 square foot two bedroom. Those are two very different price points. So I find Rentometer is accurate for, let's say, condo quality and above average size and above units you can't, or ARV rents. Rentometer is great for ARV rents, but if you're looking at like a property that was renovated 10 years ago that's on the smaller side of average, which we have a lot of those in Chicago too it's not accurate at all. And if you think, if you're going into it thinking like, oh well, current rents are 1,000 in Rentometer, so I can get 2,000, this is a great deal, you're not looking at why it's so much lower than Rentometer, right, what it's gonna take financially to get there and if you can get there, because sometimes there's certain quirks about buildings that will always be a problem.
So I've got one of my three flats. My top floor unit is quirky. It's got a crappy layout. The bedrooms aren't very big Even though it's a three bedroom, really it's like a one and a half bedroom. I've had that building for 12 years.
That unit is always my hardest to rent out and always my hardest to get quality tenants. And there's, I've renovated it. I've got brand new floors, brand new kitchen, brand new bath. Right, it looks great. But it's a funky layout and it doesn't work for everyone and that unit will always be my toughest unit. Rentometer and software programs can't see those things right. They don't have that market knowledge to know this is gonna be a problem for future tenants. I can't market it as a three bedroom because I'll get a bunch of people that want three actual bedrooms and then they'll walk in and see it and be like, no, this doesn't work for us, so that's a waste of my time. Another reason why I don't even do showings without running numbers on properties, you know that because that's a waste of my time. So it's all like I can create efficiencies that way.
34:50 - Brandon Hall (Co-host)
I think a really good takeaway here, listening to you, is you know, use that current or thousand and rent meter says it's 2000. And I think that everybody listening to this should realize there are people like Brie who are analyzing every deal in their market three times a day, right? And so if you find some major variants like that where rents are 1000 and rent meter says it's 2000, before jumping into it thinking that you've got some sweet deal that nobody else has found, I would be asking why has nobody else bought this deal? We actually do this, something very similar in when we recruit talent for the, for our CPA firm.
Every once in a while we'll be interviewing somebody. They'll sound great, they've got great experience on their resume, and then they'll say I want $110,000. But when you look at their resume, when you look at how they interviewed, when you hear their experiences, their stories, it's very clear they're they're a $170,000 resource and they're asking for 110. And then you go well, wait a second. What's going on here? To me that is a massive red flag. We actually had one earlier this year where we started looking into them and realized they weren't actually a CPA. They were lying about everything. As we discovered that, yeah it was crazy.
But the point is is that I think some people would look at that 110k resource and go, man, I don't have to pay you 170. I'll pay you 100. What a great deal. And then, all of a sudden, you've just invited a whole slew of problems into your business. So the point being is that you know this. This applies to literally every aspect, I believe, of business and life. This is why I don't trade trade stocks on a daily basis, because there are people on Wall Street that literally wake up, live, eat and breathe day trading. So there's just no way that I'm going to beat them right. It's impossible. But but this is a perfect example. You've got rents at 1,000, rent meter says 2,000. That sounds like a great deal, but is it really? Because Bre analyzes that three times a day and she's passed on it three times today?
36:58 - Brie Schmidt (Guest)
There's a reason. You know there's a reason. So like technology can only take you so far. There's a lot of ways you can use technology and business, especially with accounting, property management, software right, you know, leasing out your units, automation, docusign, there's all those things. But when it comes to property analysis, I just have not found anything that's remotely close to doing it yourself. I just don't see a way that that can be done.
37:24 - Vikas Gupta (Co-host)
Yeah, I mean, I've always been curious about, you know, some of the, I think, some of the new image recognition stuff that's coming out, and can it be trained to flag some of those issues that you talked about?
And not necessarily, you know, I always view it as sort of like a funnel and you know, can it, can you use technology and data to flag things to look at that might be interesting or may not be interesting and then spot check them or dig into them more? But I agree, like, ultimately, like the human expertise and the deep, deep, rich knowledge of the market is going to be hard to replace with, or impossible to replace with technology today and, who knows, 20 years from now. Certainly, like there's a reason that I also eyeball every single dashboard metric that's going on in our company every day, as opposed to relying on someone just telling me what happened. And it's because you have that intuitive sense right Of hey, like what's going on here and that just you just build after 20 years of experience or 15 years of experience, or 10 years of experience.
38:28 - Brie Schmidt (Guest)
So I'll go, I'll launch right into a rant off this topic. It's like what you just described right Is essentially the 1% rule, which is a I'm going to quote, hand quote that air quote. The 1% rule gets toted around sometimes and misunderstood that that is a metric that you should buy on and it is absolutely not a metric you should buy on. The 1% rule has zero relevant and real estate investing right. So you can have.
I always say example in Chicago we've got some properties with boiler heat where the landlord there's one boiler for the whole building landlord pays heat right. So if you're looking at a property and it meets the 1% rule but you're not seeing that there's a $300 a month gas bill because it's got boiler heat right, that's going to reduce your cash flow versus a property that has individual HVAC right. That's a variable that you're not taking into account by thinking the 1% rule actually has relevance. So the 1% rule is meant to be like an eyeball thing. You know and again it's not even true in all markets you can't find the 1% rule in Chicago anymore.
We're about 8.8%, but that's a good way of like, hey, this property is in within the range. Now I can run deeper details and run numbers on it, right? That would be a great example, but you don't want to just base your whole decision on like oh, it met, you know, meets this generic rule I should go buy this property. It's a good investment, right? It's not a replacement for the form of property diligence.
39:52 - Vikas Gupta (Co-host)
Well, this has been a fantastic conversation and I wish we could keep going, because we barely scratched the surface on some of those other areas of your expertise, bree, but we are coming up on time here, so, if you don't mind, we'll go into our three standard closing questions. Sure, great. So question number one what is your favorite book? And it doesn't have to be real estate related. My favorite book is a book called Getting Things Done.
40:19 - Brie Schmidt (Guest)
It's a operational, organizational efficiencies book, so I was actually too busy to read the book years ago so I bought, like the Cliff Notes version of it and it has absolutely changed my life Again. I run multiple businesses, I'm a mom to two small children and I try to work less than 25 hours a week, which sounds insane. So I'm able to accomplish that by being extremely organized and efficient with my tasks, and that book is the foundation of everything I've been able to do. Wow.
40:49 - Vikas Gupta (Co-host)
I'll have to check that out. I don't think I've quite cracked the nut the way. It seems like you have. Question number two what is more important to you in real estate? Investing cash flow or appreciation? That's a really tough question.
41:01 - Brie Schmidt (Guest)
It depends on a lot of things, right, your goals and what kind of market you're investing in. So I said, when I started investing in the Chicago land market, it was, I would say, like a beast a solid B market, moderate cash flow, right. We were seeing 7% cap rates back then with potential appreciation. And then I started buying in the Milwaukee market, which we were seeing about 9, 10% cap rates but zero appreciation potential. So I liked having the balance of the two portfolios.
I used to always say that my Chicago portfolio contributes to my long-term wealth gain and my Milwaukee portfolio contributed to my monthly cash flow. But at the end of the day, when I hired that economist again, we put in all the numbers right and the Milwaukee portfolio performed cash flow wise, I believe three or four times my Chicago portfolio. But when you threw in what the properties were worth nowadays, my almost 30% of my long-term wealth gain came from one of my Chicago properties. Just an appreciation over the last couple of years. So it's a balance. I don't think there's a right or wrong answer, but you definitely don't want to be looking at something that is not going to cash flow with, let's say, rates of 6% I don't want to say today's rates, because nothing's going to cash flow with 8% rates, at least in my market.
42:16 - Vikas Gupta (Co-host)
Great, I love it. I love the nuanced and I love the nuanced answer on that. One Final question is there any other piece of advice or insight that you'd like to leave with our audience that we did not get a chance to cover today?
42:31 - Brie Schmidt (Guest)
I think it's important for every especially new investors, to get comfortable right and I don't mean getting comfortable, because there's something called analysis, paralysis, right, where we start obsessing over these numbers and being perfect right, there's no deals going to be perfect. What you want, though, is that, when you make an offer on a property, that you are confident going to bed that night thinking like this is the right property, right, and no agent right. No one should be able to force you into those sort of situations where you're not comfortable Again. Sometimes it takes a couple of extra months to get there, but that's what your agent should be educating you on listening to podcasts, right. Listening to people's stories, those sort of things to get comfortable, to pull the trigger, and I always say, like, the goal of the first one is a first base hit. Right, we're not looking for a home run on the first one. We want a nice, solid first base hit that's going to get you comfortable, get you experienced and make you confident moving forward, and then we can build off of that.
43:30 - Vikas Gupta (Co-host)
Great Well, thank you very much, Bree. This has been a fantastic episode.
43:33 - Brie Schmidt (Guest)
Yeah, thank you.
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