Building Wealth Through Real Estate: Lessons from the Ground Up w/ Will Bowman

Right. And that'll give some people, uh, that'll give people time to kind of keep filing in, since I know if anyone's like me, 10 minutes late for a webinar is early half the time, and I expect there to be a little fluff in the beginning.

So, for all you folks that are new, my name is Michael Hos, and we run a team called House Hack Seattle that is invested deeply in both kind of house hacking as well as other strategies to invest in real estate in expensive markets, like building DADUs, flips, etc. Will is a pretty awesome agent out of Keller Williams who I got introduced to through actually our VAs. We both run our business partially with virtual assistants, and our virtual assistants met each other first. Found out that they both worked in real estate, and then introduced us to each other, which is pretty cool how the world works.

And Will is going to kind of touch on a lot of topics that I think are related to the Seattle market, despite him being across the country in Maryland. There's similar stuff happening pretty much everywhere around, kind of, the changes in commercial real estate, around running a rental business, and whether to hire property management, which we've got, you know, BB French, a sponsor of the, uh, event, is an amazing property manager if you go that route. But Will has gone the route of self-managing and, in fact, kind of vertically integrating where he's got a lot of these portions of the business that you can hire out, and many people do hire out in-house, which is pretty cool. And so, he's got a broader breadth of experience, I think, than a lot of people in this space do, which is kind of exciting, and I'm, I'm looking forward to digging into that.

Um, we're going to send out the recording afterwards for anyone that, uh, needs to pop off. So, that'll be up on YouTube. And we'll also have a list of the sponsors for the event. Obviously, we won't be able to do this without them. So, I really appreciate you guys giving them some love. That is Cara Rosanski at Originpoint Mortgage for the Home Loan Side. Here we go. Israel Lopez, who, uh, excuse me, Israel Lopez at Certain Lending on the hard money lending side. Great for DADU projects, fix and flips, that sort of thing. And then, of course, like I mentioned, BB French and Vincent at Sagarius Property Management. And, um, David Weisser, who's going to be doing an ask me anything from the builder's perspective as a dad builder, is going to be on here on his own in-person event in a couple of months. So, I'm sure Will has a lot more to share besides that brief intro, but I wanted to tell you guys a little bit about him so you know which direction to go.

Um, Will, do you want to kick us off, and then, of course, we'll get to Yony's question first, and then we'll just start rocking and rolling for questions. You, uh, you can just pop right in. If you prefer to use that raise your hand button on Zoom, feel free to. But if you have your microphone off and you just want to pop right in, feel free. If we end up talking over each other, we'll just do questions one after another, and we'll make sure to get to both of them. If you can't talk, feel free to drop the questions in the chat. I'll be watching the chat as well, and I'll let Will know when stuff falls through. But without further ado, let's welcome Will.

Thanks. I really appreciate it. And, you know, thank you, Michael, and and to everybody on this call for for joining tonight and welcoming me from the, uh, opposite end of the country from y'all. So, yeah, my name is Will Bowman. I live in the Baltimore, Maryland area, specifically in a town called Talson, which is about 15 minutes north of Baltimore City. Uh, born and raised in central Maryland to the west of the city in the suburban area. Um, in 2016, well, we'll back up a little bit, and I'll kind of like work into the real estate that I'm doing now and how I ended up there. There's been a lot of kind of serendipity and almost accidental moments of just trying stuff and then it worked, and then I've repeated that process a whole bunch of times.

Um, so to kind of paint the picture of of my career and how I've gotten to where I am today, uh, graduated college with a degree in business and human resource management. And I went to work for a company that I'd interned with in college in a rotational program. They were going to send me across the country doing different roles in their human resource department. And I found myself super bored after just a year. Uh, a woman that I'd worked with in a different internship reached out to me and said she was starting the HR organization for a medium-sized startup in Durham, North Carolina, which is where, very close to where I went to college. So, I was kind of excited to get out of the Chicago area where I was after college and come back to North Carolina. Uh, worked that job for two months only for myself and, uh, the woman who recruited me to get rounded up by the CFO and they're like, "Hey, the company's not making any money. You both are laid off." Uh, so I was 23, didn't have a job, but everything was going great up until then.

Uh, so I found myself kind of with that first reality check of like, man, I thought I did all the right things in college. I thought I worked hard. I got a great corporate job, and I'm really not as in control of my own destiny as I thought I was. Um, worked my way back to the Baltimore DC area, uh, to to start a job with Deloitte as a technology consultant working with the federal government. That was in early 2016, and I moved into a house with my best friend and our business partner, Austin, that he had just bought, uh, in College Park, Maryland, which is where the University of Maryland is, and it's just across the DC line with DC and Maryland.

Um, and I didn't realize this at the time, but I had just moved into his house hack. Um, so he had five bedrooms in the house, bought the house as a HUD foreclosure, fixed it up on his own in the evenings when he gotten back from work, and then was charging all of us rent for each of the individual rooms. I was like, "Dang, like you've got some extra cash, and you're 22 years old. Like, that's pretty cool. I'd like to do that, too."

Um, so started learning about, uh, some more real estate with him. And at the time, Austin was working for a single-family home, uh, and multifamily developer in Northeast DC. They were doing condo conversions and and flipping houses and also building a rental portfolio. And he was in the development portion of that business, kind of learning how to invest in real estate, right, at the most basic level. Um, he was coming home every evening talking about what he was learning and was like, "We should buy a multifamily property. I think that would be, I think that'd be something that we could do."

Um, so we bought a home in Hagerstown, Maryland. It was a three-unit property, uh, on the northwest side of of Maryland, pretty close to Pennsylvania and West Virginia. And we ran the classic BRRRR model on it. We just didn't quite know that's what we were doing at the time. We we renovated it, we rented it out, we got it refinanced, and everything worked perfectly. And we're like, "Oh my god, we got all our money back, and this thing's cash flowing, and like the renovations worked, and how cool is this?"

Um, so that was kind of my first wakeup call to like, "No, no, this isn't just stuff that you read in a book. This this this can work." Uh, so that was almost 10 years ago, and since then, we just essentially haven't stopped. So he and I, um, have continued adding residential real estate to our portfolio. Now have 55 residential units across the Baltimore area, and then in 2021 started adding commercial property to our portfolio and now have, uh, three properties with a fourth under contract right now for about 75,000 square feet of space.

Um, and then in May of last year, we launched a co-working company here in downtown Maryland, or in downtown Talson, excuse me, that, uh, just opened up on the fifth floor of a building and is expanding to the fourth floor, and then we'll be buying this building in the fall once our, once our fourth floor expansion is finished.

Um, so happy to talk about, Oh, and on top of all that, since 2018, have been a residential realtor with Keller Williams, partnered with Austin, kind of co-running our own small team. And we'll do anywhere from like 12 to 14 million in sales, uh, per year, work with a lot of house hack clients. A couple years ago, was working with a lot more investors than I am now. So familiar with that from a brokerage standpoint, but happy to talk about, uh, kind of the the growth chain, like how do you go from one to two to five to 10 deals? How do you kind of scale up and that snowball effect? Happy to talk about the transition from residential to commercial. Happy to talk about raising capital. We've raised quite a bit of capital to fund, uh, our residential real estate and also as limited partner and equity positions in our commercial deals. So happy to talk about how we've done that.

Uh, let's see what else. Happy to talk about co-working as a business and kind of like a niche real estate operation within the commercial real estate space. Uh, yeah, and anything else in between, like, like Michael mentioned, we do self-manage all of our properties. So I can talk through that process if that's of interest to anyone. Um, we also do all of our own construction in-house. We don't general contract anything out. We have a full-time construction project manager that we hired in 2021 that subcontracts out everything that we touch, residential and commercial, and manages all of our projects. So, I can talk about the pros and cons of of bringing those things in-house and how to navigate or make the decision for yourself if if you're considering that. So, that's a little intro. I hope that's helpful.

Definitely. And it sounds like we can kick right off with with Yony's question about property management and specifically screening tenants. How much of that are are you involved with, Will, since I know that you've got, you've got, um, internally, a point person on the property management side?

Yeah, still, still quite a bit. And, you know, Yonyi, I'll give you how we screen tenants and, and then let's fine-tune it from there if the type of tenants that I'm screening or for the type of properties don't apply for what you've got your eye on right now.

Uh, so our main things are, we're screening commercial and residential tenants, but we do both of those very differently. Um, and I, I heard you mention like screening a house hack tenant. I owned, uh, my own house hack. I kind of skipped over that part, but from 2018 to 2021, so I did that screening of the people who were living with me. So I can talk about that was different than how I look at a pure residential tenant, like not moving into a house hack now. And that's also different from a commercial tenant.

So, when I was looking for, uh, someone to move into a house hack, it was always just the like, "Do I want to live with this person?" test. Um, you know, I would meet them, and I would have a 95% perfect feeling right then and there of like, "Is this going to work or is this not going to work?" And then I was checking credit. I was checking, you know, does their, all the basics. I wasn't doing anything out of the ordinary. And I always kind of told myself if I was going to get in trouble with a tenant, you know, they were going to stop paying or whatever, they're living in my house, and I was going to maintain a relationship with them where I could just have a conversation and figure it out, person. And I never really had an issue. You know, everybody paid their rent.

Um, I had one person who asked to leave a little bit early from their lease and kind of explained what was going on at work and in their life. And I was like, "Cool, great." Like, "You let me know. I'll find someone new. No skin off my back." Like, we didn't create a problem here. So, yeah, I looked at their credit, but I don't, you know, I saw, I saw a question pop up that's like, "Was your minimum requirement 650?" My minimum requirement was basically just that you didn't have a past eviction, you weren't super far behind on, or behind at all, on other bills on your credit report. Um, there wasn't a bankruptcy or something like that. That's a big red flag that I might be, you know, having problems. But yeah, if it was a 640 or a 660 or a 700, I, whatever, you know, did the, was the person a normal person that I would live with myself? Did they have decent income and had they paid their bills in the past? That, that was good enough for me from a, uh, a house hack standpoint.

Now, Yonyi, would it be helpful to talk past the house hack and talk about like pure residential, meaning not house hack, and commercial, or was that really what you were looking for? Like, that house hack angle?

Well, I was, I was looking at the house hack angle. I mean, I just, it seems like the, at least for the larger operators of house hacks, you know, where they have double-digit numbers, they've gotten away from like the credit screening. And it just, in my personal experience, like I've run into people with no credit, like students, and, uh, you know, maybe I should accept, and I have, and I haven't had problems yet. But like, you just hear these horror stories of like, "Oh, I had to lawyer up and spend thousands of dollars to get someone out because they, you know, were using every law in the book to not pay me." And that just seems super scary.

Yeah. So, okay. So, you're talking about like managing room rental properties, not just like a house hack that you buy and live in, but like, yeah, I've got 10 of these properties and they're all room rentals. Um, I don't really have experience. I've never done a house hack beyond one that I lived in. Um, but I think the general problems that you described with tenants are real and pervasive. And, um, you know, our residential strategy has been predominantly to place voucher-based tenants into our property, to those who are receiving section 8 or other government assistance programs.

Um, and then I really don't look at their credit other than like a recent bankruptcy or criminal history. Maybe if there's a, because if the payment source is coming to me, I don't really care about the credit as much. But if they are paying you directly, yeah, I'd probably look at the credit and just maybe that informs you 10, 15% of the way of like what you're going to get from that person. But yeah, you're still going to have problems. Absolutely. There's kind of no way to avoid that, and I don't know that there's any like secret to tenant screening for market-based tenants in in a lot of house hacks that's going to avoid those problems.

Yeah. To add to that, Will, from a Seattle perspective, if you are living in the property, Yonyi, you do have some additional screening that you can do. Seattle's pretty strict around how tenants are placed, and we have some rules like first in time, essentially, you you're supposed to take the first qualified applicant, as well as discrimination rules around tenant placement. So, a lot of those rules, if you actually live in the property, um, there's a carve-out where they don't apply to you. You can make decisions a lot more based on feel, based on personality. I could be wrong here, but I believe things that you can't do as a landlord, like a criminal background check in Seattle proper, you are able to do as a roommate essentially situation since.

Yeah, I see Will making a face. We're not even allowed to check criminal record here in Seattle. No, it's rough. Um, so you do have a couple more tools in your tool belt as a house hack, kind of live-in. But as soon as it becomes a room rental, the city does treat it, you know, as a, as a, as a landlord situation. So, the regulations won't be any different unless it's a master lease, in which case it's a room rental, but you're just renting to one individual, and then that individual is finding roommates to live with them. I tend to prefer master leases on on my properties because I don't really want to deal with a whole bunch of individuals, but I do like the room rental model. So that's one option to kind of change the model up a little bit to be a little lower hassle, or just be a little bit less kind of screening intensive. If you don't want to try and screen all these tenants individually, you could find one reputable tenant and then, uh, allow them to fill the remaining rooms.

I, I'll drop, uh, I'll drop into the chat as well for you, Yonyi. Locally, evictions are a reality, but they're a lot less common. And I don't know about your experience, Will, owning units, but, you know, I have 13 houses, like 32 units or whatever. And you would think looking at the news stories that I would have had a dozen evictions by now. I've had one. Um, and then I've had one tenant, similar to Will's situation, where they kind of just left, but weren't evicted. They, I was able to refill the spot. Turns out that there was, you know, drug, alcohol, other issues there, and they were just, you know, life happened, and they had to go take care of some, some stuff outside, and we landed on our feet there and just filled the unit with someone else. So, I'll drop LT Services, which is my, um, my eviction lawyer, um, here in Seattle, if it does happen. They're super affordable, a flat fee eviction, but it does happen a lot less than than the stories would make you believe.

Yonyi, you make me think of something adjacent. So this isn't directly about evictions, but it's just kind of like mindset and real estate investing in general. Um, there is a breakthrough point where either you can get one property, self-manage it, make a couple hundred a month in cash flow, and your life will be fine. Then you're going to go, "That went pretty well. Let me add a few more." And you're probably going to have a hard time with that period where you're like, I have two to like seven properties. So you're like, "Now I have like headaches. I have scale, and it's inevitable that with five of these things, some problem is popping up at any given time."

Um, and a lot of people I see quit, or at least just pause right there because they're frustrated, but they're not making enough money yet to like, you know, leverage out, have their own property management, or whatever it might be to like get some of those headaches off their plate. Or they do experience an eviction like you talked about, and they're like, "Man, this stinks."

Um, and my encouragement would be, if your plan is to build a portfolio, achieve any sort of financial freedom, you've got to figure out how to get through that pain. You've got to figure out how to get through that place and, and really kind of not worry about the consequences at that phase of like, yeah, if you have an eviction and it throws your numbers off for a couple months, you just have to deal with that and keep going. Cuz the magic happens when you start to achieve some scale. Then you've built a business. Then you're enjoying your life. Then you're starting to think about like, what do I want to do next? What strategy, you know, what other thing haven't I fulfilled for myself?

Um, that's when I really started to have fun in this business versus like just pulling my hair out. Yeah.

Um, well, cool. I see some good questions in the chat. Should I maybe go through some of these?

Yeah, looks like, looks like Dennis has some questions around, um, whether your properties are local and then also how you decided to get into the commercial multifamily space rather than continuing to do more single family. Um, I'm also curious if you could touch a little bit, Will, since, uh, we were talking about tenant screening, how multi, or how commercial specifically behaves differently since you have a portfolio that kind of cross-sections both.

Awesome. Yeah, so great questions, Dennis. I appreciate those. All of our properties are local. Um, I haven't figured out, nor have I felt a need to invest out of state. And I realize that that's totally a local market thing for me to be saying. You know, I know there's people in California that are like, "I can't find cash flow, and if I do, I'm getting a 3% annualized return on it. I got to go put my capital somewhere else."

Um, fortunately, in Baltimore City, central Maryland, we've got cash flow that I could go grab off the market right now. It's just the nature of our market, and it has been that way for about the last 10 years. So, I'm also at the fun point of our business where we have the connections. You know, I know, um, all of the key players who are local wholesalers in Baltimore City. Frequently, my business partner and I will just get a text that's like, "Hey, chatted with this seller today. We're about to lock this house down at 65,000. You know, would you guys take it for 70 before they've even blasted their wholesale list?"

Um, and if we're in buying mode at that time, sometimes it's a simple like, "Yes," and I just bought a house, you know. Um, so, so that's fun when you start to achieve some scale, and I don't want to leave that, you know. I've spent 10 years kind of earning that, um, social capital, I don't know what you would call it, but just those connections.

Um, so yeah, don't, don't feel a need to go out of state. And I don't know that I desire to ever get big enough that we like truly tap out on opportunity here in Maryland. I don't want to be like a, a multinational real estate company. I wouldn't mind just being like a, a decent-sized medium local player.

Um, and then the question, when did we decide to get into commercial multifamily? So, separating commercial out multifamily and single, single family, we did at the, the same time. We got into those. Actually, our first deal we ever did was a three-unit. Um, so I always kind of bucketed small multifamily and single family in the same thing. I can go do a three-unit the same way I can go do a single family home. It essentially behaves the same.

Um, we don't own any like large multifamily. I don't have like a 20-unit apartment building. We've just, it's not that we've avoided that, we've just never really gotten into it. Um, if anything, those, those might be a little overtraded in our area where the spreads weren't great and a lot of people are going after that.

Um, but then the question about commercial is a good one. So, our first deal that we ever bought commercially was advertised through a residential wholesaler who does a lot of work in Baltimore City. So, she's sending those row homes that we have here in Baltimore City. And then all of a sudden, this, uh, 20,000 square foot office building in northern Baltimore County outside of the city shows up on her email list. And my partner and I were kind of like, "That's weird. You never seen her advertise something like that before."

Um, and I remember emailing my partner Austin back and forth being like, "This looks like a really good deal. I know we don't like do commercial or really know how to do this, but like, should we do the numbers on this?" And I think he replied with like, "Yeah, this would be fun next year, you know, once we stabilized some stuff."

Um, so we let it go for a month, and then it came back. We got an email blast that said the first buyer didn't perform, uh, and that it was available again. And so we like truly underwrote the property at that time. Called the wholesaler and we're like, "All right, what's up here?"

Um, had some banking relationships with commercial and regional lenders that we'd done some, uh, one-off refinances with a few years prior. And one of them was literally like, "I'm doing this deal for you because I believe you guys are going to end up doing something bigger. The bank doesn't want this small fry single family home, uh, but we're going to do the refinance anyways. We're going to give you the loan because I know you're going to call me when you have something bigger, and it's going to happen." And so we called him and we're like, "It's a year later from you saying that. I think I got something bigger. Would you guys lend on this?"

Uh, he said, "Yeah, this deal looks phenomenal." And so we realized that that was executing the same plan that we were already doing with residential, just bigger. And you get a lot more, a lot faster. So, we were coming in, we were making capital improvements, we had to repave the parking lot, put on a roof, put in new, uh, put in new gutters. We had to renovate units and lease them up, just like you might with a house.

Um, and then we had to manage it. And it was kind of basically the same thing except the units don't have kitchens and showers in them, you know, because they're commercial. They're meant for for small office use. And that deal worked phenomenally. That might be the best thing in our entire portfolio, and we've had that since 2021.

Um, have loved doing that. So, that's kind of how we ended up in in commercial real estate, and then we've done two more deals since that, just like that, since then, and we're, we're under contract on our fourth right now. And then Michael, you mentioned credit screening for commercial tenants. I'll go over that real quick because, you know, maybe it doesn't apply to everybody, but commercial is different in that they're not going to live in the property.

Um, I'm really more concerned with like, what is your business? Is it brand new? Has it been pre-existing? Why are you moving into this space? Do you, I have to check, does your business use match the zoning of my space? You know, if you want to bring in a, uh, a hair salon, that might not match the zoning. Or if you want to start a pizza shop, I might not be zoned for that.

Uh, or vice versa. So, I have to check zoning. Then, I want to know that you have decent credit. Uh, I want to know that you haven't, you know, I actually think credit is most applicable when when screening a tenant for a commercial space. And then I want to see your bank statements. I want to know that you've got some money in the bank. If you're about to pay me $2,000 a month for a business, this isn't your house. If you lose this, you don't have a, you don't lose a roof over your head. It's not as big of a deal. So, I want to know that you're not like, "Yeah, I'm going to start this business and I expect to make 20 grand in my first month and I've only got $2,000 to my name." That might not be a good fit.

Um, those are really the things that I'm concerned with. And then just kind of like, what's the story, what's the use, what's the fit. And we've had a pretty good track record. We've had a few tenants in our commercial spaces fall like a month behind and get a little laggy on their rent, but it's never been bad, and I haven't had to do a commercial eviction.

Yonyi asked on those commercial tenants, do you ask them to personally guarantee the lease, or is it just their business or their LLC?

I ask for a personal guarantee whenever possible, right? Because they could just dissolve that LLC, no responsibility, and they're out of there. Every now and then, when I run into a like really high credit tenant, meaning like, so I'll give you an example. There's a, uh, it's like the Maryland Center for Oral and Facial Surgery. They're like a really high-end dentistry operation that has, uh, six different offices across central Maryland. I bump into people, tell them about that. They're like, "Yeah, I got my wisdom teeth removed there." Like, this is a, a business that's been functioning for years and years, makes great money, is well-run. They moved their administrative office into one of our buildings and would not personally guarantee it. They're like, "We'll put the business name on it," which has been a business, you know, in good standing for over 20 years, but I'm not putting a personal guarantee on it. Not cuz they're going to stiff us on rent, but it's kind of just like, my business speaks for itself. And so I said, "Okay, I don't, I don't need a personal guarantee there. If you're going to shut down your business that's been in operation for 20 years, has six locations, and has served people all over Maryland just to get out of the lease with me, fine. But if this is your first venture and you just started the business last month, and you don't even have proof of concept or a client base yet, yeah, I definitely want your personal guarantee on that."

Uh, let's see here. I'll go back through some of the other questions just going up. So, covered Dennis's, uh, Tyler, your question about what are some ways you automate property management with that many doors. Yeah, let's talk about kind of like what the property management operation looks like.

So, uh, I lead property management but don't directly do it on a day-to-day basis. Uh, below me in the organization, we have a, uh, in-house property manager who works for us as a contractor. So he's not, uh, full-time salaried. He does about 20 hours a week with us. Uh, we pay him hourly, and he manages the entire residential portfolio and then most of the commercial portfolio. Although when we stepped into commercial and were stabilizing each of those properties, I wanted to be the one that had the tenant interaction, that negotiated the leases, that did, I wanted to kind of do everything from a commercial standpoint until we reached stabilization. And then I've handed it over to, um, our in-house property manager so that, yeah, if there's an air conditioning problem or, you know, just kind of like putsy management type things, he handles that.

All of our units, residential and commercial, flow through Buildium. So, we've subscribed to that software. Um, we do our own bookkeeping. Well, we have a bookkeeping service that keeps our books, but we have a process for monthly verification of like uncatategorized expenses. They're like, "Hey, you charge $600 at Home Depot. What property was that associated to?" Right? We come back and we fill it in on a spreadsheet, and then they finish the categorization, and they send us monthly reports for every property in our portfolio of kind of where we stand from a profit and loss standpoint.

Um, and then our in-house property manager receives all phone calls, all inbound, you know, maintenance type things. Um, and all I did in the growth process was I took that from myself and I handed it to him. That was all it was was we hit, you know, Yonyi, what I was telling you, push through that messy middle to get some real scale going on so that you can pull that off of yourself and hand it to someone else. Then you're going to actually grow because you're, you're enjoying your life again. You know, some of those problems have been handed off, and you've got someone who's like, "Okay, this is my 90th time handling this same exact problem," where if it's your first time, it might blow your whole day up, right? And he's like, "Well, this is the 90th time I've had to deal with a tenant not paying rent. Let me just repeat the process that I do every time, and it's just another day at work for them."

Um, how else do we automate things? I'm trying to think if there's any real, like tips and tricks there. Uh, we've built, okay, this is a good one. Because we do all of our construction in-house, so whenever we renovate a property, we're contracting with the subcontractors directly. We're not handing it to a general contractor. Over the years, we've built deep relationships with some go-to guys. So, we have someone that we can call for anything at any time just because it's, we've spent 10 years building that relationship.

Um, I had someone call me in one of our commercial buildings at 8:00 at night on a Sunday and say, "There's a leak in my ceiling. What's going on?" I called one of our go-to contractors. He picked up the phone immediately, and I was like, "Hey, the ceiling's leaking. Sorry. I know it's Sunday night." Like, uh, he's like, "I'll be there in 10 minutes. No problem. Let me just put my shoes on."

Um, and, and we've gotten to the point with some of those trusted contractors that we've actually even just handed their numbers to the tenants and said, "Call this contractor directly. They'll report back to us." Um, say, "Hey, so and so at this address called me, said there's this problem with their toilet. I went over last night, took some pictures. Here's what's going on. I took care of it." Boom.

Um, and then we, we submit for payment. Um, so we, we've also taken some of that routine stuff off of our property manager and put it in the tenants' hands, as if they were in a large apartment building and had like a maintenance phone number that they could call, you know, versus everything going to property manager and then property manager to the contractor.

Oh, uh, one more thing, all of our residential properties are in a master key system. So, it's actually, there's these Kwikset brand locks that you can open up and pull the pins out of, and you can re-key them to be on a master key system. So, I have one key that opens every residential property that we own, but then the tenants all have their own individual keys. Obviously, no tenant gets the master key, but they'll have a number one through 25, and it's stamped on the back of their key. And if someone loses their key, there's a local, um, hardware store that produces keys in Baltimore that has our master key system on file. They call them and go, "Hey, yeah, I'm key number three. I need you to remake me one. I got locked out or I lost mine, or, you know, my sister's moving in and I want to give her a key, whatever."

Um, so that's really helped with like lockouts and key management. And then all of our trusted contractors carry a copy of our master key. So, there's never any issue about getting in or getting access to our properties.

Uh, that's super interesting, Will. So, it's an actual physical double key set where there's a master and an individual.

Yeah, you're just using like off-the-shelf standard Kwikset deadbolts that you can go get at Home Depot. There's a certain type that you can swap the pins out on, but yeah, they're very cost-effective.

Yeah, we've always done the, um, keypad lock system where we keep the master key, and then we give combos to tenants. Okay. But that has a lot of problems associated with it since now you're reprogramming these locks constantly. Some tenants like having a physical key, batteries run out on them, right? So that's one area that we want to stay analog in forever. You know, you just can't screw up with a physical key and a deadbolt.

Um, yeah. Interesting question that I don't know how helpful you'll be able to be here, Will, since it's a, a location-specific question, but Charlie asked how, how to get into commercial multifamily, kind of specifically in our area. If you talk a little bit about, kind of, your experience, I can definitely, kind of, add in the Washington Pacific Northwest spin on it, but I know that a lot of people are in that kind of onesie twosie single family, maybe with a dad space, and wondering how they get right to 70,000 square feet of commercial, right? The, the larger deals that you're doing.

Yep. So, one clarification is commercial multifamily. Are we talking just like a commercial property, like it could be an office building, an industrial, or do you mean multifamily, like an apartment building, you know?

Yeah, I mean, a primary comp complex. Okay. Yep. So, uh, yeah, let's break it down. I think this would work kind of in any area. The first thing is is finding the deal. So, what's your system for finding the deal? And I'll tell you this, uh, finding commercial property behaves differently than finding residential property. Meaning, commercial brokerage and commercial real estate agents, that world is very different than residential. In residential, we have these great centralized MLS systems. You can come to an agent, sign an exclusive representation agreement, tell them what you're looking for. They plug those requirements in, and they can show you everything that's on the market that would possibly match that. Commercial, they kind of have that, but it's not centralized. There's multiple different sources that people might post commercial deals on, and a lot of stuff never makes it to like the public view. In fact, the joke sometimes is if you're seeing a publicly available commercial deal, it means all the people, uh, who would actually buy that have already passed up on it and said, "Nope, that's not a good deal. I don't want it." So, if you're seeing it, it's probably somebody's trash at that point, you know. Now, don't take that too heavily. You absolutely could still find a good deal online, and I don't want to speak in absolutes.

Um, but networking with commercial brokers is super important. Literally this morning, a commercial broker came to my office, and we spent an hour and a half together, had coffee, and he would love to win our business to help represent us to buy a deal, but it's, it's, we're looking for something very specific. I want a two to six million dollar multi-tenanted office building in a certain area of the northwest Baltimore location of the northwest Baltimore area with about 20,000 square feet of available space that I can move, uh, a new location of our co-working business into. So, I gave him those requirements, and I said, "I'm ready today if you have that, but I'm also ready in three years if you have that." So, you've got to extend your time horizon a little bit. And then you're also probably going to have to earn the trust of that broker. They go, "Okay, like somebody else probably wants this deal, too. Why are they going to come to you? Have you proved that you're bankable? That you've got the financing lined up, and that you've got the commercial lending relationships, uh, the ability to get the cash on hand that you're going to need to make the down payment, the capital improvements. Uh, are you going to know how to operate the asset, you know, uh, when and if you buy it? Do you know how to go about negotiating the deal? Your broker can do that for you, but you should know some stuff, too."

Um, and kind of read up on deal structure in the commercial space.

Uh, yeah, I just want to add a few. Yeah, I just want to add a few contacts on this. So, I started to cold call a lot of brokers. Um, and some of them did send me some, you know, off-market deals, but I'm not sure what's a, a quick and dirty way to underwrite. Okay. Should I take a further look on the underwriting or not? Like, is there any rent here? That's where. And when you say commercial, commercial, industrial is in true commercial. Are you just talking about larger multifamily, larger than four units here?

Yeah. I mean, four to 10, but but but multifamily res. Yeah. Yeah. Got it. Yeah. There, there, there isn't quite as easy of a quick and dirty way to underwrite in the sense of like, you know, you could do the old 1% rule with, um, like a standard residential rental. And where commercial gets interesting is like deal structure. So, is the seller holding back some financing? Like, you you should underwrite it no matter what, and then plug in the assumptions that you would need to be true for that deal to work. So, maybe it's advertised at 4 million, you need it at 3 million. And then maybe you're thinking, well, if I got a 75 LTV loan at a 6.75% interest rate on a 25-year amortization, this deal doesn't work. Okay, what would it look like if 2 million of that was held by the seller for 5 years on a 5% interest rate, advertised at this? I don't know. Maybe the seller would take that. You know, maybe their problem is that they have to realize those net proceeds on the sale. But anybody who's trying to buy that deal straight up with normal financing, uh, can't get it to pencil out to be profitable. But they'd be willing to hold back some, you know, second position financing, uh, that would then allow the numbers to work for both you and for them. They would realize their net proceeds. They just have to wait a couple years.

Um, so, yeah, I would underwrite it no matter what. And then just plug in what assumptions you need to be true, and then see if you can go make those work. If not, if the seller says, "Get out of here. You're crazy." All right, move on to the next one.

Will's, uh, Will's answer there is really applicable to our market. Realistically, in, in, in our market, commercial multifamily deals don't, don't just get bought, they get made, right? So, usually it's a non-performing asset. It's a creative financing situation. And it's something where if you just run, kind of, a cap rate or a gross rent multiplier analysis, kind of on exactly how it is today, it probably doesn't work. And the reality is that the market is desirable enough for those units in Seattle, and there's enough institutional players in, in that space in Seattle, that if you can just kind of do a back-of-the-napkin calculation and see that it, it, it crushes, either it's a unicorn, or that deal is, is like Will talked about, never really getting to us smaller investors, right? It's getting gobbled up long before then. So, I think the opportunity is when you start to train your eye, and you start to see the, the, the forest through the trees, and see the chances that you can take with the seller to turn an okay deal into a very good deal. And then just repeat that over and over again, right? Since not every seller will do seller financing, not every kind of below-market rent multifamily is actually a good buy. There may be reasons that the rent is below market, which just make it a bad asset. But if it's a good asset that just needs some, some elbow grease and renovation, we do see a lot of good turnaround multifamilies that you can get it stabilized and make it, make it pencil, even if it doesn't pencil today.

Yeah, that makes sense. I, most of the deals I see in Washington, I mean, close to the Seattle on the west side, is the number does not work. So, yeah, uh, I was thinking, is it possible to negotiate? Does seller usually accept the negotiate? Yeah, that answers my question. Thank you.

Yeah. Yeah. I mean, I'll add one more piece to that is sometimes if you're willing to do what others aren't willing to do, uh, with the asset and how much work you'll put into it, that can help too. Uh, the second commercial property that we bought, which is crushing it, like it's going great. It's gone, uh, exceedingly above plan. I've talked to several people, brokers or other owners in this marketplace who've been here for years. "Oh yeah, I know that building. I looked at that years ago when they tried to sell it the last time. Couldn't figure out how to make that thing work." Uh, because it just was a mess, you know, there was a lot of work that was needed to be done, and we got in there, rolled up our sleeves, and said, "Nope, we're going to, we're going to chop through this and make this work." And it was a pain. Like it was a year of a ton of work, uh, just on that one asset. But then you reach stabilization, and you're like, "Cool, I did work that others weren't willing to do, but I got rewarded in exchange." There's a lot of people that also just want a deal to fit a box, and they run, call their general contractor and say, "Go fix this up in six months for me," and then they call their broker and say, "Have this.

leased in three months after that, and then expect the deal to work perfectly. And it's like, no, you might have to do a little bit more than that. Um, so, yeah, if you're willing to do what others aren't, that, that can help as well. Um, what else do we have here? What other questions do we have? We have a couple of kind of general ones. Yony, I know you asked about kind of Zillow exclusive listings. That's, that's something that's pretty big in our neck of the woods. May not be as big out in Maryland, but our MLS is one of the MLS's that's engaged in this pretty big fight around kind of off-market or private exclusive or, you know, non-publicly listed properties.

Zillow has a pretty vested interest in keeping properties publicly listed because the way that they generally make money is by becoming a hub for publicly listed properties where buyers and sellers go to the hub, and then, um, industry professionals pay Zillow to advertise on that hub. Right? That's their business model. The properties are the product that they're selling, and, and, uh, the people that come to view the properties, I should say, are the product that they're selling to advertisers. Though, it's one of those things that in our market, I can get fined $5,000 by the MLS for even talking about a property that is not currently listed and sharing the address to you. Um, this call is being recorded, so I won't say whether or not I actually do that, but, um, most brokers, most brokers in this area, and most brokers who are doing their job well, do often talk about properties that are not publicly listed, especially, especially if they're well-connected and they know what may come available in the future and what the buyers and sellers in the market are looking for.

So, I think that there's the kind of general rules that everyone plays by, Zillow included, and then there's the relationship game in real estate that isn't going away. And the reality is that if you can build to a size that people actually listen when you say what you want or need, you can get a lot done. I think the problem in our market is there's a lot of kind of small mom and pop investors, and a lot of the kind of commercial and residential agents get, you know, dozens of these calls every week where, "Hey, I'm looking for cash flow multifamily." "Hey, I'm looking for below value commercial." "Hey, I'm looking for a DADU play that's 700K for the front house." Um, so it is a little bit of a problem, right? There's more buyers and sellers in our market. So figuring out how to get your foot in the door with these power brokers that actually find the deals is important. And I've always found, Michael, maybe you've seen this, that doing business gets you more business. And that applies to every aspect of the real estate industry. So whether you're, if you're a real estate agent, you do one deal, it's a lot easier to get your second deal. Uh, same as an investor. You buy a couple houses, you know, maybe whoever you bought that house from goes, "This person's closed on two houses now. I definitely should be like giving them a call anytime something new pops up." So, um, go do some business, too. And then it will start to slowly feel like, oh, yeah, there's deals out there. I just wasn't, I wasn't at the forefront of those because I was, I was still trying to break into this world.

Yeah, definitely. What other questions do we have out there? Uh, curious. Oh, go ahead, Vinnie. Yeah. Hey. Uh, hey, Will. Uh, can you talk about, uh, the cost of construction when you were hiring some general contractors versus when you brought it inside and share some pros and cons there?

Yeah, great question. Thanks for that. Um, so most broadly speaking, we found about a 25 to 30% reduction in cost by bringing it in-house. And here's the reasons why. My immediate overhead is the salary to my construction project manager, who also is bonused for performance on each project. It's smaller on residential projects, and we actually give up small equity portions on our commercial deals. But that's where he's grinding for like 18 months to like, you know, we've got a $2.5 million, uh, redevelopment project going on. That's going to be our, our second co-working business location. Um, that's a grind of a project. The kind of thing that that's someone's full-time job if they're working for a commercial general contractor. They're on-site every day, Monday through Friday for like a year and a half. We're asking him to do that and other stuff. So, we'll even give up equity. In exchange, uh, I'm getting these cost savings that now can be spread out across these projects throughout the year. Um, so, okay, if I do five residential flips and an average profit of 30, 35,000, that profit might be 25, 23,000 if I used, uh, a general contractor. So, all right, it's about $50,000 that I've brought back into the business by bringing that construction in-house. And then on the commercial projects, the numbers are even higher. Um, I also have more control over materials. I have more control over what's going on in the project. You know, there's never a, like, "Why isn't someone on site?" because we're controlling that. Um, there isn't a, "Oh, we jumped off this job for 3 weeks because we got a higher paying job elsewhere. You know, someone called us and we're, they're paying us double to go do their roof. So, forget you guys. We'll come back, you know, after that one and finish your roof. Don't really care that you had a timeline that had to be met." Um, so we're controlling that.

The cons are, I have a fixed, I have a fixed cost in my business. So, if I finish a project, I still got the salary of my construction project manager. So, I got to be ready to keep the fire hose on to keep deal flow coming into my business, uh, to keep him paying for himself. Otherwise, I just have dead weight, uh, that's deteriorating our cash flow. So, we found this nice sweet spot. We didn't bring that person on until we were at a pretty comfortable, like, "Yeah, I'm going to do 12 to 15 renovation projects a year." Mostly residential, but maybe one large commercial per year on top of that. And that's enough to keep him busy comfortably for an entire year and us to absolutely get a profit out of that. I don't know that I would bring your construction in-house if you're like doing one project because what happens after that, you know, do you fire the person after six months? Um, those are really the pros and cons.

One version of that, Will, that I've seen work well for smaller investors is, is I know a few investors that end up partnering with their GC in the project, especially flips. I think generally speaking, if you're doing partnerships, it makes a lot more sense to do them on exit properties where you're flipping than it does to make do them on hold properties where you're, you know, holding it long-term as a rental. But either way, uh, I know a couple of 50/50 partnerships. I know a couple of people that just kind of bonus essentially their contractor with say 10% equity or some percentage of the profit on the flip, and, and that also deals with the issue of alignment where you want this person invested in your success without necessarily having the weight of payroll. I would imagine though, Will, if you've got someone on payroll, this person is probably also looking at opportunities a little bit because they know that if the projects stop, their their job may be in jeopardy, right? At at some point, there's only so many, uh, so many things that you can do as a construction manager if, if you're not actually working on the project. So it sounds like you've created another, you know, de facto deal finder as well.

Yes. Yep. No, absolutely. That's correct. And I'll tell you an interesting Baltimore story about, uh, that JV model with a contractor. Um, so Fort McHenry is where the Star-Spangled Banner was written. That is a, a fort that's on the southeast edge of Baltimore facing the harbor. And, you know, the British were coming in, their bombs were going off, the bombs bursting in air, right? Uh, that whole area, that peninsula on the south of Baltimore where the fort is, is a neighborhood called Locust Point. It's not very big. And honestly, until like the 2000s, it was kind of like desolate, sort of like Port of Baltimore, like smelly fish ships and things like that coming in. But it was prime for redevelopment. Uh, there's a development company called 28 Walker Development that had this ambitious plan in like 2003 to build a couple hundred units of housing with retail on the ground level, a grocery store, a parking garage, an office building, some sports fields, like this whole self-encompassing development that was going to be a couple hundred million. Um, and they went 50/50 with the general contractor and the development company. Uh, and because of that structure, they were able to weather the storm of 2007-2008. And getting through that project, surviving, not going belly up at that time has made that whole company one of the power players in the development space of Baltimore. Um, and he's like, I've, I've actually talked with the owner of that company. I had the the pleasure of playing golf with him a few months ago. Um, and he's like, "Yeah, had I not done that structure, I wouldn't be in business today, and I don't know what I would be doing for work. But instead, you know, I've made a, a lifetime's worth of money for me and my family." So, that's a cool thing to consider when you get to that level of scale, you know, because you're able to spread the risk across two parties.

Yeah, I think that's a really good point on partnerships, right? That one benefit is spreading the list risk, but you should have specialization there, right? Anytime that you're bringing on a partner, I think new investors have this, um, this common thought which is, "I don't really know what I'm doing." And often times the first assumption is to take someone else, a friend, a colleague who also does not know what they're doing, and to add them to the deal. And now you each have 50% of a deal where you, no one knows what they're doing. Right? The reality is that you need to figure out what you're doing and get good at it, and then bring in people to complement that because otherwise you're just diluting your upside, right? At the end of the day.

Yep. I'm a huge advocate for partnerships. Uh, my business partner Austin and I obviously are in a 50/50 partnership with everything that we do, but I say that with lots of caveats around it. I've known Austin since I was five. We're best friends. That friendship and relationship comes first, always. Uh, and we actually have purposeful scheduled things that we do monthly, almost like bro dates, to just like hang out and make sure that we're still being friends amongst everything else and the craziness. And then business comes second. But we have such complimentary skill sets where I can confidently say I wouldn't experience any of the success that I'm I have without him. And he would say the same thing about me of, you know, he would have been in jail and out of business four years ago because I handle all operations and, and, and make sure that, you know, that all takes care gets taken care of. And he's got that creative, like go-getter attitude and, and is a dealmaker and a deal finder and, um, really good at relationship building. So you put those two things together and, and we've got a powerful force. So do consider partnerships, u but be smart about them because they also can go, they can go very poorly.

Yeah. And it looks like you only had some questions around financing and, and I'm sure that you have a pretty different, you know, take on financing at your scale maybe than you did when you were just getting started with your first house hack or your first rental. What does running a business your size look like financing wise? I know you said that there's some commercial lenders, banks that you're partnered up with. What else are you doing?

Yeah, so great question. There's a whole stack of things. Y, I'll answer your question directly, then I'll kind of give the stack of the different types of financing that we use. So, is there a way to get a 30-year fixed rate loan on commercial? Not that I know of. Probably exists, but in a very non-traditional standpoint. You're t typically going to have, you can get fixed rate loans, but they'll be advertised over 25 or 20 years, and they'll have a balloon to them. Meaning in three, five, seven, sometimes 10 years, uh, the, the rate will expire and be set for an adjustment period, or you're, you're either refinancing or selling the asset. Uh, so commercial behaves very differently. Uh, in that sense.

Our financing stack beyond that is, for our residential, um, properties, we buy them in cash. That's from raised capital. So instead of using hard money, we have raised, you know, private capital from individuals that we pay a 9% annualized interest on. I pay that out in monthly chunks on the beginning of every month. So today, I send out interest to our investors. That gives us kind of unrestricted cash. It's backed by a promissory note and myself, my partner, and the business all personally guarantee that promissory note, but they're not taking an equity or reported position against, uh, any property that we own. The recordation costs and the paperwork alone would just make that not worth it. Um, but so I take that, I purchase everything in cash, I renovate in cash, and then I refinance into just a DSCR, a debt service coverage ratio loan. Um, those are those kind of like no doc or LLC loans or whatever you want to call it where, yeah, you're going to have a higher interest rate. I might be refinancing into like an 8% nowadays versus, you know, a homeowner might be getting a 6.5. Um, but I can typically take 75%, 70 or 75% of the cash back out when I refinance. Um, and then on the co-working business, we have slightly different financing available to us in some of our buildings because we're considered an owner-occupant. So, we occupy 50% or more of the building. So, it's still traditional commercial financing, but it's like slightly better. And there's a larger bucket of back-end investors through those commercial loans that want to be on that, that debt, like life insurance companies, are, or there's actually a life insurance company that's considering doing the debt on the building that we're buying this fall. Um, so there's this whole world of like alternative financing and companies that aren't just banks that want to place debt. Um, this probably isn't applicable for anyone on this call, but I found this interesting. The Wharf in Washington D.C. is a, a really major redevelopment that was done about 10 years ago, and it's waterfront. It's got a concert venue, schwanky apartments, a really nice hotel, awesome restaurants. That was done 10 years ago and just sold to a, uh, Canadian sovereign wealth fund or a Canadian like, uh, pension fund, I think it was. So there's financiers in the marketplace too that aren't just banks. You know, there's people that want to want to pay place debt when you're starting to do larger things.

Yeah, it depends seems to be the answer for these big projects, right? The, the conventional mortgage guidelines that we talk about with one to four unit properties where there's a lot of different lenders and they're all kind of playing the same game, is out the window here. So, thank you, Will, for your time. I, I really loved your answers to those questions. I think you've got a different perspective coming from the other side of the country than you do, and also just running a truthfully bigger business than many of us here are running today. So, it's inspiring to see that. Where can people find out more about you? Where can people connect with you and stay in touch?

Yeah. So, I'm, I'm an Instagrammer. I, I'll drop my Instagram handle in the chat right here. I post everything from what are my wife and I doing hanging out with the dog to what's going on from a business standpoint and, uh, project updates and things that are going on. I'm also on LinkedIn, um, just my name, Will Bowman. I'm trying to post more there. I, I put out a quarterly newsletter that's literally called "What Have Will and Austin Been Up To?" for the last 90 days, where I talk about what me and my business partner have been up to. It's short, it's sweet, it's easy to read. Um, so if you want to keep up to date with us and what we're doing, follow me there, subscribe to that newsletter. I'm never going to sell you anything. I just literally want to communicate with people who are interested in what we've been up to. Um, yeah, that's, that's kind of the two main things. And if you want to email me, um, I'll drop my email as well. And if you've got other questions or something that pops up after the, uh, the session and want to reach out, happy, happy to take it offline.

Well, Will, we appreciate you. Wishing you continued success in Maryland. Thank you for your time and thank you for your answers. And thank you to everyone who showed up today. We'll get that recording out to you if you missed anything, and we'll see y'all next month. Cheers. Thank you. Thank you all for having me. Have a great night, everybody.