Aileen: [00:00:00] Thank you, everyone for joining today’s episode of the, How Did They Do It? Real Estate podcast, we’re your hosts Seyla and Aileen and today’s guest we have Maureen Miles. Maureen is the founder of 4M Capital, where she owns and manages nearly 2,400 units and has completed over $250M in transactions.  She has over 20 years of real estate experience and is an expert in acquisitions, due diligence, and property management transitions.

We’re really excited to have you today, Maureen, welcome to the show.

Maureen: [00:00:27] Thank you. Thanks for having me guys. Nice to be here. Appreciate it.

Aileen: [00:00:31] We have a lot to talk about with you today about property management and all these different indicators, but before we get started, can you give the listeners a little bit more about your background and how you got started in real estate?

Maureen: [00:00:41] Yeah, let’s see. How far back would you like to go now? I was a network engineer for one of the large telecom companies and that’s what I did. We worked in a dedicated maintenance center, kind of a room with no windows for many years, very secure location that I was located at.

That wore on me after a while. I like to meet people. I’m not an introvert at all, but I liked my job. I like that it would change. I get bored easily. So I enjoyed that aspect of the job, but you’re limited to your hours, as they say, I eventually climbed the ranks and as a salary position and worked up the chain.

But it still was dragging on me just having to be there a certain time every day, no matter what, fighting the traffic, although I’m from Connecticut so I have no nothing to complain about with traffic, but with you guys, but yeah, it just, it wears. I mean, it wasn’t what I wanted to do, I started having a bunch of back issues.

I had three back surgeries in three years, it kind of took its toll and I knew it was time for a change. I tell the story and it sounds sad now, but it’s like at the time it was like, I remember driving to work and I said, I’m not swerving. If a car comes towards me, I’m not swerving. That was my mindset.

Little small hospital visit would be better than going to work that day. So it’s, I knew I needed to change. In the meantime, we had started buying some smaller multis and in the hopes to one day retire or be able to leave our jobs. And if we couldn’t quite figure that out, that maybe we’d be able to show the kids enough.

So maybe they wouldn’t be a slave to the grind for their entire lives. And that was our mindset when we started off. I did grow up around construction a little bit. My family wasn’t in it, but I used to work in summers and in my early twenties, I could, I knew how to do finished carpentry, and I knew how to build a house from the ground up myself, but just from picking up random skills throughout the years, we started with two to four units.

We started buying those up in ‘06, then the market, it did what it did right in the recession. And what I started seeing though, in like 2009, 2010 was some really good cash flowing properties. And that’s when I wanted to go out and learn how to work with investors.  You didn’t need much to get started back then before the recession, which is probably part of why they had such a big issue, you know, you’re able to sign for it.

We were doing renovations on credit cards basically. So we didn’t really have any money starting out doing this. So the recession came, I saw some really good values. I started taking some courses on how to raise private money because I didn’t know how to work with investors and I didn’t want to break any rules.

I knew there was guidelines. You hear about people going to jail for things. And I said, I didn’t want to, like, I didn’t, I was afraid. I didn’t know something I didn’t even know. And so I wanted to get some education on that. So on that journey, I came across some people that taught about the hundred plus unit complexes and how to syndicate and how to take those downs. Up to that point, we had been buying two to four units maintaining our full time jobs. And I got up to about 30 units and just hit a wall. Like I could not put any more time into it. We’d renovate them ourselves. We would manage them ourselves. And I just, I couldn’t do it. I just hit a wall.

And where I had worked was offering a package. So they offered six months of pay and insurance. If somebody was to take it, cause they’re doing massive layoffs. I basically went home to my husband. Like I’m gone, like this job is killing me. So I’m like, how about I want to do this. I know I can do it because we said we self-managed everything.

We rehab everything ourselves. So like the full gamut from start to finish, we did it. We’d hold some flips up. So, anyway, I told them worst case we’ll end up living in the multifamily. One of the multi-families cause I wasn’t going to stop, like, yeah, I would have went if we lost everything, I was going to do it until I figured it out.

So he agreed that he would be willing to live in one of the multi-families if I wasn’t able to get it going quick enough. So I did leave my job in those 2013 and then 2014, I bought my first a hundred plus complex in Atlanta, Georgia with a partner who was nice and he had the earnest money and the deposit.

I didn’t have anything to start with. In fact, he asked me, he’s like, Hey, can you pay the video guy? Like we had a guy videotape it for the investor presentation. And it was 750 bucks. And I remember thinking like, where am I going to get 750 bucks? Like, how can I tell this guy? And just put like a hundred thousand pounds of red deposit that I can’t come up with 750 bucks.

So I had to scramble. I figured it out, but you really, when people say, Oh, people have rich relatives or there, you could start with literally nothing and get it right.

Aileen: [00:05:27] How did you find that first partner?

Maureen: [00:05:29] Actually it was a networking event. So when I left my job, I knew this is what I wanted to do. The theory works, but until you actually do it, I had never used a third party manager before I was living in Connecticut, buying in Atlanta, which I liked the market.

I knew what an emerging market was and what to look for. And I went down there and I just saw cranes all over the sky and just the building and the amount of stuff going on. So we got into Atlanta very early coming out of the recession. So we bought some really good deals back then. Anyway, when I left my job, I decided to just go to any networking event I could find that had anything to do with real estate. I didn’t get a single family. Multifamily just anything I can get my hands on. I would go attend. I did anything that was free. I did some like wholesaling a little bit. I would do that on the side to earn some money to pay for the education, because like I said, we didn’t have a lot.

And my six months of pay that was used for our living expenses, so really on a bootstrapping it, but so I would do just miscellaneous things to make money through real estate, to pay for more education. So. I just attended every networking event. And that first partner I had, we were both at the same event.

But we didn’t meet each other. I had met somebody and then that same person had also met him. And she’s the one that actually put us together, which is just funny. So you tell everybody what you do, just keep showing up to the events so they know who you are and what you’re trying to do, and it’ll lead you and eventually you’ll get it.

Like, just keep at it is my advice to starting out.

Seyla: [00:07:03] So you started out as a two to four units. And how did you get the confidence to do the 100 units?

Maureen: [00:07:10] It was scary because I am now part of that hundred unit was a syndication deal. So I had to raise additional money that now wasn’t mine. And wasn’t like the personal littler investors that I could have covered if there was ever a lawsuit eventually for this big one, it was very daunting.

But what I did, it’s a thousand percent juice guys. It was a driveway that kind of shot straight up. And then the buildings on both sides of the driver’s chief, like a big T. And it was 117 units. And I remember standing at the bottom of that driveway and I was scared. I was really scared. Okay. I’m jumping off.

I’m like, you know what? I’m like if I have to, me and my family can run this apartment. If I had to stay in the leasing office and lease units out myself and have my brother and my kids, my husband turning units, like we can make it happen, like worst case scenario. I’m like, so we got this and that’s what gave me the confidence to go forward on that.

Seyla: [00:08:05] Can you give us a story of how you built up the company?

Maureen: [00:08:10] When I first started that first deal, and I recommend anybody looking into working with partners, I’d say always do that first deal as separate entities, because you don’t always know until you really go through the gamut with people. Sometimes you don’t really see their true colors and there’s ways of vetting them.

You go out to dinner a little bit, have a couple of drinks, at least one nice and see how they are in that environment and go in different situations. But so that particular one, I, the very first one I went in as my own entity, me and one of the partners, we really hit it off. We complimented each other with skills.

I had the operation side, he had the advanced financial knowledge that I really didn’t have at the time. So we worked together really well. We created a company. And what I did is I made my own asset company as an owner of that main JV company. And so that’s what  4M Capital and 4M REI, equal company are those that kind of came about.

And so after a couple of years, he was a little bit older than me when we started selling some of the assets. He decided he wanted to move. He actually lives overseas. Now he didn’t want to continue. And I was just as kind of like, wow. And I’m like, I felt like I was just getting started and he’s like, Oh yeah, I did. I survived. I can retire. I’m like, so we really had a disconnect there. So that’s when I, I separated from that, I stopped purchasing properties under that JV entity stuck with just the 4M Capital. And I worked with my acquisitions director at the time who really stepped up during that time and filled in all those pieces.

So William Walker, a shout out to him. So he’s now a partner in that 4M REI company is the way that developed. So that brings us up to today.

Seyla: [00:09:53] How do you create your capital expenditure and reserves budgets for an investment property.

Maureen: [00:09:59] Typically the way that we’ll underwrite a deal and look at a deal is when something comes across our desk, we have underwriters not going to go through that kind of the first time, but then if it looks good, William and I will discuss it.

And we try to underwrite to a pretty good amount of capital. And this is really before we even seen it. Sometimes we may say it’s a 200 unit deal. We may say, okay, does this deal still work at 10,000 a door? So if we add a $2 million renovation budget, is it still going to work out? And we almost reverse engineer it so we can say, okay, we’ll say, no, it doesn’t work at that number, but maybe if we have a capital budget of $1.5 million, it works really well. So then we will go out. When we go visit the site, we take that number and we hope it’s much smaller, but if it’s much more than we know, it’s not a deal we’re going to work with. So when we get onsite and you look at the typical things, the roofs, how old is the HVAC units, how are the interiors?

Once we get something under contract, we’ll do the physical due diligence and we go through every single unit. And after the first 10% or so you get a, almost like a theme and you need to get the gist of how they ran it. Just how well they cared for it. And then, Oh, this budget has to go up or this budget has to go down.

And that’s the point where we’ll really zone and tweak our capital budget. So we can tell sometimes a little bit from pictures and say, Oh, this one definitely needs a bunch of paving or roofs or windows. Or something like that, or we know that they haven’t maybe turn the interior, so we’re going to put a bunch towards interior upgrades.

So we get to just, and then we, I always like to see what the max number I can run the deal at is. And then I pull back once we get onsite with our due diligence. And that’s how we determine what the capital budget is.

Seyla: [00:11:47] Got it. After going onsite and visiting the property, how do you find the general contractors and the right people to do the job and give you the correct budget?

Maureen: [00:11:56] That is a very good question. I actually, I have a construction management company as well that we started during a very large renovation. I was doing, it was a 280 unit property we bought at 40% occupied. So there were 200 down units and these weren’t like, they need to be turned. These were like, heavy gut renovations with new kitchens and everything.

So it was a huge as a five and a half million dollar renovation. And during that process, I had fired four GCs and said enough. I actually brought my daughter. That’s how she came into the business originally from Connecticut who grew up around renovations and rehab. And I’m like, we have to GC this ourselves.

So GC the rest of the property, the rest of the performance, but we built a company around that and so we have that as well now. So that was my experience, but I, I have a lot of knowledge on construction, so maybe too much, it might’ve been to my frustration. But the way that I recommend is by getting referrals from people, certain things I’ve learned throughout the years, if you don’t have the option of a construction company or knowing somebody in the market that you can trust.

I did find great referrals from going to sometimes the codes department directly. Like we had a lot of ’em at particular, I was telling you about Atlanta. We had a lot of electrical issues where we’re replacing the whole service panel, the bank of a service panels on the exterior of the buildings. And we ran into an issue with an electrician.

And so I finally went to the code guy and I’m like, who do you recommend? Who is a good guy? And he’s like, he can’t give you one, but here’s three that we don’t usually have problems with. They were awesome. So even your Home Depot guys and things like that, or your HD supply they’ll know the contractors that do a lot of business repetitively and you just saw some of it’s trial and error. You should have somebody on your team that is familiar or hire a project manager that is familiar. This sounds terrible. I remember I walked in once. I’m like, Where’s the vents, like the sheet rock where I had literally went over every vent in the ceiling.

I’m like, you don’t even like, like really? They’re like, Oh, the scope. It didn’t say to cut out on the vents. I’m like, that’s like show Tony. Oh, I showed up with no pants on today, but no, he told me to put my pants on. It’s just ridiculous. You just assume they would do that. So there’s so many crazy things with construction stories as thinking about putting a video together.

Oh, just all the things we’ve run into, like a toilet literally installed back and he’s like, the tank is backwards. Just crazy things I’ve seen, but I’d say that definitely that makes or breaks us at this level. So I wouldn’t deter anybody from getting involved just because they aren’t familiar with construction, but that’s where at these networking events you want to find someone that is familiar with it. And maybe you pull them in and just give them a small piece of the deal to help you oversee that. Yeah. So that’ll give them a start, gives you the confidence that what’s going on and things can be checked correctly because with the two and four family type of properties, there’s mistakes can happen and things have to be redone.

But when you carry that to like a 300 unit property, you’re adding a few zeros and I’ve seen some people really make some bad mistakes that cost a lot of money. And you don’t always know if the contractors are, if they’re making things up that need to be done, I’ve seen that a lot. Right.

They replace something, but you go, why would you do that? And they’re like, I don’t know. The contractor said I needed to. And so I’ve seen a lot of money wasted that way as well.

Aileen: [00:15:22] So you mentioned that you went through four general contractors during this one deal. At what point in time did you realize like with each of the different contractors, oh, you’ve got to go.

Maureen: [00:15:31] Things like going in and finding the ceiling. There was one of them that was gone. Another time is not seeing the movement. So as a job like that was going in your work wasn’t you didn’t know. I spent a lot of time on the site and I would have to go and once in a while, or go attend to other business or other projects. But the things like sometimes they stop showing up.

That’s a classic contractor game as they get the job going and then they go start another job. And I don’t know if they think it’s like little savings accounts for them or what, but I’m going to go back to this. But we had deadlines, we had a bridge loan with that. We had really tight deadlines that we had to make sure we stuck to.

So that was a, where one of them went where he was just like, it was long or long before the guy himself that I hired was onsite and his crew wasn’t doing things correctly and you almost were starting to manage it ourselves, between myself and a team. So that didn’t work out. Another time, one of them stopped paying their guys.

The guy started coming up to me like, Hey, how come you’re not paying this one contract? I’m like, no, he’s getting paid. And they’re like, really? But, so I found out this guy had a history of not paying his crews. So when I left that job, when I had kicked the last guy off and I had to leave to go back home to take care of some business, and I put my daughter there. She grew up around renovations.

By the time the kids were 15 years old, they could turn a whole apartment unit themselves. But she was, we left her, there was 70 subcontractors showing up every day and she had to pay them. So she was managing all their jobs. It was just such an overwhelming feat. But with all that trouble, we still came in on time for that and actually under budget on that project.

But it was. I tell people I’m really 20 and that age to be 20 years now, one job, like it was, it took a lot out of me, but it was good. We got it done. Everything’s easy after something like that.

Seyla: [00:17:21] Thank you for sharing that. Just want to ask you about the current events as COVID-19, what kind of strategy would you implement for unexpected expense?

Maureen: [00:17:31] That’s a great question. Some of what I did, and I know some of the other people that do the same thing that I do, we had a couple meetings in the beginning. We’re on a regular basis, about six or eight of us. Okay, guys, what’s your best effort? Just trying to share. So one of the things that we did as far as rent collections went is we made sure in the very beginning that we started issuing like a, we had a raffle at each location saying 50% off your rent or $300 off your rent. But in order to get to the raffle you had to pay by the given round was due. First you’d have to pay by the 30th of the previous month. So everybody that basically prepaid and the goal of that was to just let everybody know, because we had a lot of questions, like they said, do I have to pay rent during what’s going on?

Like they were really questioning. Do I even have to pay and we’re like, yeah. Yeah. Okay. And so it was just setting that expectation up. And so we’ve actually, knock on wood, we’ve been really good at being collected. We had one site, that’s a smaller site, about a hundred units where we’re like 90% collected because it’s close to a casino.

And a lot of the people were servers there and worked in that environment and they had a big hit, but that was the worst one. We had three sites a hundred percent collected. For the first four months, I have to see where they are now. I know we’re not really sure what’s going on right now with that.

Like the collections, I think everybody’s just every month or if they get, Oh, is this going to be the month when things get a little worse, but we had really good reserves on our property and that’s something I call it sleep good at night money for morning. When we have capital, we’d make the capital plans and we’ve raised money ahead of time for the capital budget.

But then we also do a reserve and I’ll always do $250,000. That’s just in case there’s something we didn’t see. And it classes a little bit because we have to pay a return on that money. And we do sell a lot of projects where we never touch it. 250,000. It can cure you a good couple of months. And then we have reserves and I always have backups.

Their loans are sometimes I’ll loan. I could go on a property. If we go over on a budget before we sell it or something I could loan. A property, some funds now and have partners that can do that as well. That’s my advice to you is that right now, the lenders are making you put a lot of it. At least the agency lenders are making you put in those reserves for 12 to 18 months.

And so that will be essential. It’s not only insurance for them, but also for you. Cause you can use that money if you have to, which is great. But I’d say, like I said, our number is 250 K at a minimum. In this environment we’d probably be increasing a little bit. The other thing that I do is I will hold off on some of the capital projects right now. So things that weren’t necessarily a hundred percent necessary, like new swing sets or a dog park or different things like that. We’ll still move on forward with a few of them, but some of them we’re putting them on hold depending on how much we have set aside for reserves. So that’s another thing.

Just if push comes to shove, we can exchange those projects for some carry money.

Aileen: [00:20:31] What kind of things would make you increase that $250,000 reserve.

Maureen: [00:20:35] Size of the property, maybe location. If I was getting a property that I believe was in a great location, but maybe it did have a lot of service type employees right now, or I think Orlando, I don’t, I don’t own anything in Orlando, but I believe that’s one of the cities that were hit hard.

So if it’s in an area like that, but it was a deal for some reason, I knew, like I really wanted that property and the numbers would be good once all this stuff blows over. I would have a serious reserve for something like that in case things did shut down again, people with were dependent on tourism and things like that, because I think there will be some deals coming up.

I don’t think the whole market’s going to drop off a cliff, like we’ve seen before, but there will be pockets here and there. So we’re seeing little whispers of that right now.

Seyla: [00:21:21] What has been the biggest challenge in your real estate career so far?

Maureen: [00:21:25] So yeah, biggest challenge is I would say for me, it’s probably like all home/work balance. I think you need an integration more than a balance. I like to go, I’m like a hundred percent in anything I do. So that makes that a balance, a little different to say, Oh, wait a second. I don’t really have any friends that are not in real estate. We have a few us there, but like you, you started to realize your whole world revolves around that, like this, but I love the business.

I absolutely love it. And I love that after being in the network engineer role for so long, there were some awesome people in there, but some people were a little less awesome that you would be forced to work with all the time. So I love that I can choose who I work with this if they’re really negative and just miserable people to be around.

I can say, Oh no, the deal’s full, whether it is or not. I don’t have to take them as an investor. I don’t have to have them in my company. I will buy something from a seller. I don’t care how miserable they are. If it’s a good deal, suck it up for those three months or so we buy that. But I would say it’s just it’s that people, can you keep hearing this balance?

And I’m like, I don’t know. Like I love what I do. It’s fun for me. I enjoy the travel part of it. And for right now. I mean, maybe in 10, 20 years I’ll want to slow down, but that’s what I’ve been struggling with lately. I’ve been getting on a better kick for like being healthy exercising regularly because I think we can lose ourselves to that working every day.

And the stresses is good. It’s a good amount of stress we all deal with. But, um, yeah, just remembering to take care of kind of ourselves is probably what I struggle with a little bit. Yeah.

Seyla: [00:23:05] How has real estate investing impacted your life?

Maureen: [00:23:09] I’ll tell you it’s been amazing. It’s something they don’t teach in school.

Like we know you never knew that this was an option. I stumbled across it while trying to find private money for smaller multifamily units. And how has it impacted my life? It’s totally changed my life now. I left my job, I guess this is yeah going on seven years now. It seems like a whole lifetime ago.

One of my goals was to have my son graduate from college without student loans and stuff like that. That was a big goal of mine to try to see if I could do that. I wasn’t sure if I could, but we did it. That’s how he graduated just recently. But I’ve, at this point, I’ve changed generations of my lives. Like my, not only my kids, but their kids.

Everybody’s going to have a, you’re going to have me tearing up, everyone’s going to have a  different life. Like my mom. I was able to get her a new car, like she’s driving around. It’s just this old Subaru thing. I wasn’t sure she’s going to break down. And I used to travel so much. I’m like, mom, I’ll get one so she’s on her second new car.

Now. It was that long ago. It happens fast I’m. After our second deal, my husband was able to retire and leave his job. So, I mean, if you do this revenue structure, your deals, you keep the investors safe and make sure they’re always your priority because without them, there is no business. So you take care of them first and the rest just follows.

And I believe strongly that you can’t be focused on the money. It cannot be about the money. That will come if you do a good job is really the way that I go forward and what I look for. Of course, we want deals that make money, but the bigger the cushion is for the investor, the more there is for us to make.

On the other side, it’s almost like the safer you keep your investors and you focus on that, the more you’ll get in returns because you captured that extra cushion, basically that you’re able to create. But I feel like what we do with real estate, it’s almost like magic. So we basically take these people that a lot of them are overworked.

They’re doctors, they’re engineers. I work with a lot of people that’s syndicating where I raised money, put it together. So they get to have the adventure of real estate, but having somebody that understands it and can protect their interest in it, and then we own a piece of those deals. And so we’re all aligned.

We do good as Dave. You good? And I just love it. And then it’s rinse and repeat. And in the meantime, I love getting people to work with or grabbing people, putting them on my team that are great people. Sometimes I don’t always know where they’ll fit. Oh man. When you find somebody honest and hard working and just awesome to be around, let’s figure this out.

And so my team is just phenomenal. I couldn’t do this without them. We have just the best team. And so that’s how it’s impacted my life. I feel like that Maureen, that was hoping to not make it too work that they try to drive in all was like such a difference life. And I’m very grateful because I know some people, you just suck it up and you show up to work every day and you hate your boss and they’re miserable.

And they it’s like. It grinds on me though, after a while, it erodes your soul, I feel like. So I feel like luckiest person ever, that I’m able to do this. And so I. Yeah. That’s one of the reasons I hate slowing down is cause I just feel it’s so magical, but anyway, that’s how it’s impacted me. I’m able to take care of my family.

I can have fun. I don’t travel as much as I would like to. I still have to start doing that, but, and just like relax and enjoy it a little bit. I’m still like, just going. I feel like I still feel like I’m just getting started. Like all the time.

Aileen: [00:26:44] That’s beautiful, Maureen. It’s really great that you’ve been able to find your passion and being able to share this with your family and doing the things that you actually are passionate about.

So really great to hear that.

Maureen: [00:26:53] Love it. Absolutely love it.

Seyla: [00:26:55] Maureen, what is next for you?

Maureen: [00:26:57] Next for me? We just did this JV with living the management company. So we do have a goal of 10,000 units under management that we do not own this for third party people. So that’s where we’re focused a little bit. Now, the other thing that we’re doing is a building project.

So we purchased some land. We JV with a developer who’s very experienced and we’re going to start building. So we have, I’m 168 units in Texas that we’re building. Now, um, so getting into new development is a new thing for me as well. We did a couple of small things. We just finished a little four unit build and Nashville just to dip our toe in and keep ourselves from getting bored.

So, so we did that, but just the new builds because some of the pricing and especially some of these decent markets. You can build for what you’re paying for an eighties product that you have to deep breaths, basically going in and building, building a product that’s like a workforce housing kind of product.

So it’s like a B plus type of a property as opposed to like building AA with granite and everything. It’s not, and there’s not a lot of people building workforce housing that I’m aware of. It’s not a tax credit or anything like that. So I’m excited about this product. I want to figure this out. And then once I iron out all the little things that we don’t know, we don’t know yet, so I’ll go on and using my own money for this.

And then my idea is to rinse and repeat, and that’s when we’ll start syndicating them and inviting investors. And so I have to prove it and find any potholes with my own money or just me and my close partners that we work with all the time. We understand the risk and then, then we’ll syndicate it once we figure that.

So I’m excited about that as well.

Seyla: [00:28:36] I have no doubt about it. Not a lot of people knows how to build a house from scratch. So I have no doubt about it that you and your company will succeed on these. So Maureen, if our listeners would like to find out about you, where would they go?

Maureen: [00:28:51] Sure. So if you’re interested in a, if you’re in an owner or syndicator out there and you have any questions for us, if you can email competitiveadvantage@vissinialiving.com.

That’s our email for the property management side and the asset company. And then if you’re curious about what we’re doing on our own for syndications or projects of value, add type of purchasing, uh that’s you can email us at mmilesat4mrei.com. That’s my direct email. And so we can get back to you there.

So M miles, just like the measurement at four, that’s the number four and rei.com.