Aileen (00:01):

Welcome everyone to today’s episode of the, How Did They Do It Real Estate podcasts. We are your hosts Seyla and Aileen and today’s guests. We have Brock Mogensen. Brock has been investing in real estate for over two years. He lives in, invest in Milwaukee, Wisconsin, and he holds a master’s in information systems and comes from an analytical background. Brock specializes in underwriting and incorporating data models for asset management. As a principal at smart asset capital, the firm currently has over $8 million in assets, under management. The portfolios comprise a multi-family office, retail and industrial. He is also a co-host the largest monthly multifamily meetup in Wisconsin, which is the Wisconsin apartment investors, meetup. Thankful to have you on the show today, Brock how are you doing?

Brock Mogensen (00:43):

Absolutely. Thanks for having me. I’m doing well.

Aileen (00:46):

Great. So can we get started by starting off sharing a little bit more about your background and how you got started in real estate?

Brock Mogensen (00:53):

Yeah, so I’ve, I’ve been I haven’t been in real estate too long. I mean, it’s been about, about three years. So about three years ago, I started with, started with a duplex. And I did the, the house hacking model. So I lived in one side, rented out the other, which I think is a great way to get started. So I did that and it really just showed me the power of cash flow of real estate appreciation, everything. So kind of decided from there, I there’s something I want to do. Spent some time, you know, deciding which path I wanted to go down. I spent some time trying to flip houses and just studying the different avenues. There’s so many different ways you can go on real estate. I really was just, you know, taking the time to try and figure out which way I wanted to go. I ended up landing on the concept of syndication essentially just partnering with other investors to go after larger deals you know, spend, and spend every six months learning, learning that specifically analysing deals was the focus I spent my time on. And from there went out, partnering with the right people and started doing some, some bigger deals.

Aileen (01:54):

Great. Thank you. And so you’ve mentioned that you partnered with other people. How did you start off by meeting those people and how did you know that they were the right fit for you?

Brock Mogensen (02:05):

Yeah, so it really just came down to networking. I connected with just, I would go to networking events. I was being active on bigger pockets which is like a real estate forum website and ended up connecting with, with someone, you know, we went out to coffee a few times, our interests kind of aligned. And we just decided to start an LLC together and started going out and started looking for deals. Eventually that turned into finding a deal. I had to bring in another partner because the deal was too big for us. And from there was three family worked well together and just continued to scale after that and, and do more deals. So really partnerships are key, I think in real estate. I mean, unless, unless you have a model of, you want to go out on your own and maybe just accumulate your own portfolio, but I think if you want to go the path of scaling and growing a business out of it, really partnerships are key leveraging partnerships and finding partners that might be good at something you’re not so good at. It has really been, has been great for me.

Seyla (03:04):

So at what point did you realize that you own a duplex and then you want it to go into syndications? At what point do you realize that that is the right move for you?

Brock Mogensen (03:15):

Yeah, for me, I just, I think it just kind of clicked that I wanted to, this is something I really wanted to go all in on. And I wanted to build a business out of, and I, although I did see the path, I know there is a path of, of buying, you know, a couple of duplexes a year and going down that path for me, I saw the syndication model as a way to be able to create a business around, to be able to create more systems. I’m always thinking about different systems and ways I can systematize things. So I saw more opportunity for that along around the larger deals. As well as a new property management, wasn’t something I loved. I didn’t really want to be involved with, with managing, you know, lots of units on my own. So I knew that going after larger deals, it’s easier to outsource property management. So I’d say a combination of those kind of drew me towards the, the, the, the model of going after larger deals through syndication.

Aileen (04:06):

So can you talk a little bit more about the first deal that you and your partner did? How, like, how do you guys find the deal? How many units and how, how did you guys finance it?

Brock Mogensen (04:17):

Yeah, so that, that one was 89 unit apartment building C class in the Milwaukee area found it through a broker. So it actually ended up falling through it was under contract, stayed in touch with the broker came back to us, negotiate a good, a good, a good price side, just because the sellers were wanting to get out of it. So really staying in touch with brokers is key, just a little side-track there, but so we, we, we went, we went through it that so is that our first raise, we were doing it a syndication. We did a Fanny Mae debt on that. So we got, we got great, great terms on it and went out and raised the capital for it being our first one, it went, it went pretty smooth on the, on the capital raise front. And yes, that, that was about a little over a year and a half ago. That, that, that was our first, our first syndication deal someone from the duplex to that one.

Seyla (05:13):

So one of the things of a syndication is within capitals. And you mentioned that your first deal when smoothly smooth at that time. Sorry,

Brock Mogensen (05:25):

Can you repeat that last part? It cut off for a second there.

Seyla (05:27):

What was the do you have a tip of tricks of what was the key that may be raising capital and was smoother for you guys?

Brock Mogensen (05:36):

Yeah, so I think just having, like, like I said before, Kevin and the right partnerships was key on that, on that first one, I didn’t necessarily have all the connections to go out and raise capital. I only raised a small piece of it. My strong suit kind of going into in the partnership was the, the analysis of deals. And me putting my, you know, me willing to have my time out there on the asset management stuff and the investor reporting. So it’s turned more into, I help more on the capital raising front, but kind of going into a partnership where I knew that that wasn’t going to be all on me to, to do. I think is key now. I mean, obviously after that, we’ve implemented more things that help with, with capital raising and digital marketing stuff like that. Bringing, bringing leads in through the internets has helped a lot, but going into that first one, I think it was just partnering with the right person.

Aileen (06:22):

Okay. And so you mentioned analysing deals as your strong suit. What are some of the things that you look for when you analyse a deal?

Brock Mogensen (06:32):

I’d say the biggest thing is some sort of value add component. When I’m looking, I always like to, that’s always the first thing that you see is there some way to increase the value and there’s literally hundreds of ways to increase value at a property. You know, the basic ones obviously increased rents, decrease expenses, add fees, stuff like that, or the other basic ones, but kind of just taking a creative approach to it and finding a way at least that we can add some sort of value. And if it checks that box, then, you know, go through a series of underwriting steps remaining conservative, there’s different, different tricks and tips I’ll use to kind of remain conservative and underwriting, especially right now with so much uncertainty in the market marketplace right now. But I’d say going into that, that’s the first check the box I check is obviously, you know, maybe the right size location type of deal. Is there some sort of value add component? So if it doesn’t meet those right away, it’s kind of like, well, you know, give the broker the feedback that this deal doesn’t fit our box, but if it falls within that box and it’s like, all right, now let’s take it to the next step and actually analyse it and see what the numbers look like.

Seyla (07:34):

So you mentioned that especially right now is kind of uncertainty. There’s a lot of uncertainties going on. And have you adjusted any of your underwriting’s a guideline compared to when you first just did it on your first deal?

Brock Mogensen (07:50):

Absolutely. Yeah. So I think right now some of the main ones are rent growth. So right now my model is I’m doing no rent growth for the first two years. So just so I know previously, right, most people 3% was pretty common in the rate of inflation. You usually target at 3%. So right now, 0% in the first two years that that’s one thing I’m doing, being extra conservative on the exit cap rate. So I’m going on most deals all the way up to like 100 basis points higher than what we’re buying it at. Previously it’d be more like the 50 basis points range. Now I’m trying to get all the up to a hundred basis points just because who knows what cap rates are going to be at, you know, the next couple of years, even further out than that.

Brock Mogensen (08:33):

Things like that, increasing economic vacancy you know, collections, obviously collections are, although it hasn’t been too bad obviously more towards the sea space, it’s been seen a greater hit. But overall it hasn’t been too bad, but still, I think, I think collections are going to remain to be hit for a while. So bumping that up a few, a few percentage points, expecting less money to come in. Those are some of the main ones that I’m doing then also kind of taking it more you know, looking at, looking at certain expense items more closely to make sure that everything’s being accurate. I think a lot of, a lot of numbers you see right now I’ll receive, you know, the numbers and see that there’s 0% hit on collections. And I find that pretty hard to believe. I think, feel like that’s always, when I that’s been, like, I want to copy and paste question on, on most of the deals I’m receiving right now is so there’s been no hit, not, not even one renter on this a hundred unit apartment building didn’t pay their rent last month.

Brock Mogensen (09:27):

It seems kind of odd to me. So I think that’s something people are maybe not being too truthful radar, another they’re selling maybe not on all deals, but on most of them I’ve seen. So those are few of the things that I’m looking out at. Right. Right. Now,

Aileen (09:39):

How about, can you talk a little bit about the reserves that you’re putting in and any lender assumptions that you’re using?

Brock Mogensen (09:48):

Yeah, that’s a great question. So, I mean, I’m staying in touch with our mortgage broker every, every week or two sending an email, just to kind of see, you know, what’s going on in the agency debt space from, from what I’ve seen it has, it seems like it’s maybe starting to loosen up a little bit right now, but hasn’t really changed from there there’s six to 12 months of reserves seems. It seems kind of like what it’s at right now. Because you know, agency that’s requiring a whole bunch of reserves at closing. So we actually, haven’t the PA the past couple of deals we’ve done over the past six months or so since, since, since COVID hit essentially, and in all these, all the debt markets kind of froze or tightened up, at least we haven’t, we haven’t done an agency that it’s all been community banks and the relationships we have here with local banks are haven’t required.

Brock Mogensen (10:34):

Any, anything like that. We we’re still at, we’re still coming in with heavy reserves of our own. But as far as bank requirements the deals we’ve done here in the past few months, we haven’t had to do that. But like you said, yeah. I mean, they’re, and they’re requiring lots of reserves. So on these deals, I am underwriting that, you know, we would go after an agency debt loan yeah, modelling up to route 12 months in reserves plus extra reserves stress to actually have in our own bank account. So that obviously it makes the numbers tough to work with. So I’m really hoping that that loosens up over the next couple months, like I said, I’m always staying in touch. He’s probably getting pretty annoyed with me sending an email every couple of weeks because every time, the same thing as last week. But he, from what I’m seeing, at least in articles, I’m reading, it looks like it’s starting to loosen up a little bit, but we’ll see.

Seyla (11:19):

Well, that’s where you are conservative and so how, how does that play into the probabilities of your companies whining to deals flow right now?

Brock Mogensen (11:29):

Yeah, so for right now Too much of impact for us so far recently, just because the deals we have done, we’ve been able to use community banks on, they haven’t been quite large enough where we have to go with agency debt. I think part of that is, is like I was saying, I mean, I think it’s just tough to make the numbers work are now factoring in a year’s worth of operating reserves at closing. It’s really hard to hit investor’s returns with that, but that being said, I mean, we’re, I think we will find, find a way to make those larger deals work with, with agency debt. Just a matter of finding the right one

Seyla (12:07):

And then I want to go back I want to go to a little bit of the asset management part of things. So will you be able to talk a little bit of how your company structured the asset management and making sure that the residents feel like at home?

Brock Mogensen (12:27):

Yeah, yeah. That’s huge. That’s something that we’ve been putting, trying to put more focus on as far as the whole, the resident experience and, and everything there. So we have realized that having a good onsite property management. So we have a property management company, my partner owns his own property management company, so that was another good piece of, of the partnership. And on that building, we went through one or two pro onsite property managers that really weren’t the right fit. Several months ago we found a great one now and he’s been, he’s been great. So I think that’s, that’s the first piece on, on these larger pound buildings is if they’re big enough to have an onsite property manager, to make sure that person understands the goal on the same page as you, and once you have a person like that, then you can start dialing in more of the stuff.

Brock Mogensen (13:11):

So we’re focusing more on making sure every tenant is satisfied after move in that they, that they always can reach us. We’ve set up phone numbers where they can reach us easily onsite security, where they have their own phone number. If, if something they see something that, that they didn’t like, I’m able to reach out to them stuff like that. We definitely still have, have some work to do on the whole resident experience. I’m thing, I think, I think it, there’s more room for it when you get to, like I said, that that’s a C class building. And although we do try and do some stuff there, obviously the margin isn’t as big as if you go from a more of an A-class, you can probably afford to do a little bit more of that, that type of stuff, or it might have a longer lasting effect, but we are implementing some of those things on that building. And hope to kind of learn more about that whole process on the asset management side of the resident experience.

Seyla (14:01):

So in terms of the data for the asset management, will you be able to share some of the key performance indicators that you guys are tracking?

Brock Mogensen (14:10):

Yeah, so there’s so I’ve I know I’m always adding more and I’ve actually kind of created a spreadsheet that I put on my website, but there’s, so some of that, some of the main ones, right? So I think, I think obviously the obvious ones, right away, income expenses, vacancy, all those things are things you got to be tracking every week. Some of the ones that you might, might not be as common are things like tracking leads, which has been huge for us. So we track all of our leads by channel. How many leads are being generated? How many of those leads turned into to showings from showings? How many of those turned into and leases? So it kind of tracking on each channel, what, what, what happens and then more specifically looking at it on like based on the channel, right?

Brock Mogensen (15:00):

So we’ve we found that Facebook marketplace has been huge for us brings in the most leads by far has turned in the most Lisa’s by far. So in return, we went and doubled down on Facebook marketplace advertising on there. That that’s been a big one. Other, other ones are tracking like unit turned times. How long has it take when a tenant moves out for that unit to be turned and flipped and ready to be shown from there? How long does it take to be rented? How many days are there in 2019? What was that number in 2020? What’s that number compared to 2009, 2020? Is it getting better or worse? Stuff like that. Tracking unit turn costs, every unit we track, we flip it, this one costs 1500, this one costs 1200 kind of tracking those numbers at the end of the year, we can say, okay, we’ve flipped 20 units.

Brock Mogensen (15:46):

Our average turn cost was $1,100. You know, something like that and kind of comparing it year over year, just tracking everything we, I can think of. There’s a whole bunch more, but just tracking everything I can think of. So at the end of the year, we can look back on it. We can compare it year over year and just, and modify things and go back to our property manager and say, Hey, this number is over here this year, that year. Just different things like that. I think tracking data is key.

Seyla (16:12):

Yeah. I love data it’s and we, we love data. And so I just want to talk a little bit about the tracking or those data’s and inflammation at a being provided to you by the property managers or you have someone else to actually tracking as up to the party.

Brock Mogensen (16:26):

Yeah, so we use the property management software. So our, our property manager uses app folio. So we have a direct login to there. I can pull reports anytime I want, which is awesome. And then, so I started creating all these reports doing, we run, we have, we have a report that pretty much goes out every day to our whole team. The big one goes out on Monday. But so I started that process. And then we several months ago we hired a virtual assistant and he started taking over more tasks and has been doing great. And eventually I felt confident enough that I handed over the report to him. Now he actually runs that report. So it’s completely systematized where he knows how to run it. He has his own login tab folio. He pulls the data every week, sends reports out every day.

Brock Mogensen (17:14):

So it’s, it’s been great to kind of sell all now I have to do is just pull up that email and look through the report instead of running it each week. But yeah, having the access to data is key. I’ve heard some, I’ve talked to some people that have had property managers that just say, yeah, you know, I don’t even have the data that at the end of the month, I’ll just get, you know, an email recalls, a $1,200 came in or, and that’s it it’s like, well, that one, that one satisfied me out. Like I’m in there almost every day, just looking at different things. And I like to have, I like to always have a pulse on what’s how much money’s coming in and what’s being spent. So I think that’s key it, people that are going out there looking to work with, you know, find a property manager, making sure they have the right technology and you have access to that. Technology is a big piece.

Seyla (17:59):

That’s great advice. Thank you for all that information. So I just want to go back a little bit too where after you started and got your first appointment’s indication, what happened after the end?

Brock Mogensen (18:14):

Yeah, so we did that first one and just, you know, definitely, definitely continue to learn and learn a lot after that first one on how the whole process went. It was all my partners had done more deals than I have in the past, but none of us had done a syndication. So it was obviously a little bit different. It wasn’t as really the attorney, the mortgage broker, all those, all those people really guide you through the process. So it’s nothing, nothing, nothing too out there. But we did learn different ways to implement systems, right? Like one thing, the documents, having investors signed documents and all that, you know, sending 50 different emails here and there and trying to keep everything secure and figuring out when the funds were wired and all that was a lot. So since then we implemented an investor portal software that handles all that stuff and it automates it all.

Brock Mogensen (19:00):

You just send a link. So stuff like that as really kind of, you know, taught us the timelines of the process. Now we know like on day one, as soon as you get a deal under contract, you engage your attorney to start the legal paperwork and you set up bank accounts on day one. So every dollar that comes in and out goes through that bank account, there’s small things like that where I don’t think I necessarily knew before I did the first one that some of those things need to be done if you can get them done sooner than later, how it helps the whole process out. But overall I think we kind of, we had, we had most of the processes down heading in, but always after every single one, there was always a small learning lesson, I think.

Seyla (19:38):

Yeah. Awesome. I totally agree. I mean, having a supporting system is really important and vital as in a real estate business or any in business in general. And so at what point that you also mentioned about the office retails and industrials in your portfolios for your company, as well as, and at what point you start investing in dos assets.

Brock Mogensen (20:04):

Yeah. So the, the office and retail was actually after that one. So and it’s, it’s funny, I’ll get to that part, but like, so it was right. It was right after that. And there are deals that kind of just mean multi-family was always our focus. My partner owns part of that. He owns a brokerage as well, so he had some, he has a lot of connections direct to seller and these two deals kind of popped up within a month or two of each other. And the numbers were awesome. Everything worked, worked well, got up, and getting them for a great price opportune time that we’re coming in from, for them to buy it from the seller. So everything just made sense, even though it wasn’t our target asset class, we had investors that preferred those asset classes. So we bought them, I mean, didn’t want to pass on a great opportunity.

Brock Mogensen (20:49):

And we learned about, we learned it now, what we’ve now learned about those asset classes, triple net leases, how everything works and the nuances in those asset classes. And they’ve actually performed, performed pretty well even through, even though these times. The funny part was, I mean, the, the, the strip mall we bought like two weeks before COVID hit in the U S so, I mean, we got a little lucky there, but I mean, we only had one tenant. That’s really the only one tenants really struggled throughout that whole thing. So at that property, so it’s been formed while luckily they even got kind of lucky there, but going forward. And then we recently closed on industrial deal and that’s kind of, multi-family industrial are two main focus now we’re kind of putting office and retail on the bench right now and doing any deals for those, just because of, just because of the uncertainty in those spaces, we see at least we’re continuing to monitor it, or we haven’t really exiled those asset classes. But we just want to kind of see those bounce back a little bit more before we go, go back into those. So we like industrial law, triple net industrial. I mean, we really like, so that’s a deal we recently did, but multifamily industrial kind of going forward our main, our main focus.

Aileen (22:01):

Great. Thank you, Gill. And so you also hosts one of the largest multi-family meetup in Wisconsin. How did that come about? And can you talk a little bit about the meetup?

Brock Mogensen (22:14):

Yeah. So that, so that it was, it was a really just came out of like a need almost. So I, when I first, when I first started, I was going to, you know, I’d look up every single meetup within an hour of me, and I’d, I’d go to several, you know, multiple ones a week driving all over the place, going to them. And it was great for trying to figure out what I wanted to get into, but what I kind of eventually realized was all of these. And I was going to all the, you know, the big ones, small ones all over the place, but then within my, you know, hour radius, few around Milwaukee, and I kind of found that all of them just focused on flipping and wholesaling, the only to the no one, they never really talked about buying whole they’re buying multifamily and that’s, you know, as time progressed, that’s what I wanted to get into.

Brock Mogensen (22:58):

So as I kind of doubled my partner and I started the, in our partnership looking for deals at the same time, we were like, well, I haven’t really found any meetups new. He would say the same thing. I mean, I’m going to meet ups around here and no one’s talking about buying apartment buildings. So he said, well, let’s just, let’s just start our own, you know, PR department Wisconsin department investors real, real, real, you know, generic name, but we were like, let’s just start our own, you know, we kind of just, we didn’t have five people show up. We we’d just sit around and have, have a few drinks and talk about buying apartment buildings. And shortly, even after a few of them, we, people were coming in saying the same thing we had noticed. Like, yeah, we never really found one that talked about multi-family, that’s kind of what I want to get into.

Brock Mogensen (23:36):

And it just kept growing and growing. And now we’ve been doing it for about a year and a half. We do it once a month. It’s turned into some people have kind of out using our name and other parts of the state use and doing it as well. And it’s been great. I mean, we get, and we get about 40 to 50 people each, each month. A lot of times newer people that go all across the board as far as experience levels, but it’s been awesome for, for meeting connections in the area all the way from finding deals, investors you know, connections with everything. So it’s been great. Just, you know, there’s a few different techniques we use to build it, but overall it was just staying consistent with it and drawing people in. And so how are you guys handling the meetups now? During COVID?

Brock Mogensen (24:22):

Yeah, so we took a break there for like a month or two, we did a few zoom ones. We went back to doing our in person ones a few months ago. And then now with, with lockdown restrictions kind of going right now, we’re taking this month off and then going back in January. So it’s been the past few months, we were a little, a little all over, you know, all over the place. The past couple of months, we had a few of the zoom ones. And those were good, but we would definitely push getting back into person for, for hours, but, and the turnout actually end up being pretty good. But yeah, we’ll see. I think we do need to kind of try to pivot a little bit more to the online space with our meetup though.

Seyla (25:03):

Thank you for sharing that Brock how has real estate investing impacted your life so far?

Brock Mogensen (25:11):

I’d say just the idea of income coming in and not necessarily having to punch a clock for it is, was the biggest eye-opener for me, you know, just, just thinking, I think, I think there was one point when I was, I was on this to say I’m very active in our investments, right. But just the idea of having somewhat passive income, at least for me you know, being on vacation and seeing, seeing, you know, seeing rent rental income coming in is just, I think that kind of proves it right there. I don’t think I ever be a type of person that just wanted to sit on a beach and not do anything and be completely passive. I like being involved being more of an active investor. But the idea of just being able to, you know, cash flow, paying down, paying down paying down debt properties, appreciate over time. Just the whole idea of it just really intrigued me and what got me into it.

Seyla (26:03):

So what is one thing that, you know now about real estate that you wish you knew when you first started?

Brock Mogensen (26:10):

I would say that you don’t necessarily have to start really small. And not, not to say that I, I really did, but I think, I think a lot of people think the only path to do it is just to buy start with buying single family, single family, and slowly then, you know, two, four, six, I think a lot of people think you have to go down that path. But I think something I wish I would’ve known was I could have learned you know, started learning it when I was and gone bigger even quicker.

Seyla (26:47):

What is one thing that sets successful people apart in the real estate investing business?

Brock Mogensen (26:55):

I think it comes down to vision and discipline or to I go back to a lot. I think first having the vision of what you want to accomplish in real estate. You know, some, some people might, you know they, they like to stay at their job and they want it, they want to buy some duplexes on the side, and that can be a great way to build wealth. Some people have the vision of wanting to build a real estate empire. I think you kind of define your vision and then stay disciplined in that vision. And that’s kind of what I’ve done you know, decided this is something I want to do, stay disciplined on that path. And continue to

Aileen (27:37):

Awesome. Thank you so much for sharing Brock. And if our listeners want to find out more about you and your background and get in touch with you, where can they go?

Brock Mogensen (27:46):

Yes. So at our website www.smartassetcapital.com I have a few of those like that asset management reports on there. I have some underwriting eBooks on there an eBook on building a meetup, a few different educational stuff on there, so they can go on there. I’m also and posting a lot of stuff on Instagram, real estate related. So that’s just at Brock Morganson and last name. And those are two ways to get in DM me on there always happy to talk to people about real estate.

Aileen (28:17):

Awesome. Thank you so much for being on the show today, Brock I really appreciate it.

New Speaker (28:21):

Absolutely. Thanks for having me.