Episode Summary:
*The following transcript is auto-generated.
Craig Fuhr (00:12)
Hey, welcome back to real investor radio. I’m Craig Fuhr joined by Jack Bevere. Jack, how are you today?
Jack BeVier (00:19)
and great man, good morning, great to see you.
Craig Fuhr (00:21)
We were talking before the recording started here that you’re back from Argentina. How was your trip?
Jack BeVier (00:27)
Yeah, yeah. It was great. It was great. My wife and I were down there for the past week. We like to travel a lot and I studied abroad there like 20 years ago. So I speak a little bit of Spanish. So it was fun to practice my Spanish and eat a bunch of red meat and drink good red wine. So I’m back in the saddle.
Craig Fuhr (00:45)
Mi te gusta Argentina. Yeah, that’s about as much as I know. I can still conjugate a few verbs, Jack, from, from junior high Spanish. Yeah, so did you meet Milay?
Sean Mulhall (00:45)
Very jealous.
Jack BeVier (00:55)
Very nice, very nice.
No, but he’s the whole town’s talking about him though. For those that don’t know, Argentina elected this president that for them is pretty far right. He’s an economist. So, you know, balanced budgets and like not bloated, cronyistic policies and flash commercial. Yeah, they’re trying to get their inflation under control. Their unemployment’s not too bad, but their inflation has just been out of control. And
Craig Fuhr (01:19)
flies commercial.
Jack BeVier (01:28)
So like to give an example, when I was there 20 years ago, it was three to one, three Argentine pesos to one American dollar. And now it is a thousand Argentine pesos to one American dollar. So it’s been a tough 20 years from an inflation point of view. So if you’re on a fixed income, if you’re, you know, just a working class person down there trying to save and you don’t, and you keep your money in Argentine pesos from a purchasing power point of view, it’s been brutal.
And so they, they elected this kind of like for them, the right president who wants to in, in putting in place a bunch of fiscal responsibility, but he’s got to get Congress to pass any laws and you know, that’s not really their jam. So he’s having a hard time. There’s a start to be a little bit of social unrest. There’s not like a lot of protesting yet. And they’re, they’re, they’re, they’re, they do that. They, they, they protest a lot in Argentina.
And so that hasn’t really started yet, but if you, while I was watching the news a little bit and, um, they’re all just, just trashing the guy right now. So it’s going to be a really interesting six months down there. Um, but yeah, there’s arcs, right? There’s arcs all over the world, you know,
Craig Fuhr (02:39)
It sounds very familiar.
populism is breaking out all over the world. Yes. So, Jack, I was taking a look at some data prior to the show today. And man, the five years been on quite a ride Jack. Currently at like 4 .3 this morning, but you know, feels like there’s been a little upward pressure of late.
Jack BeVier (03:02)
Yeah, the –
Yeah, like 3045 days ago, it kind of dipped down actually even below four, which was awesome, because we saw DSCR rates back into like this high sixes, which was, which was great. And if you locked in that 30 day period, you know, good for you. And then, but then inflation numbers have been coming out and particularly like two weeks ago, some inflation numbers came out that were in like the low threes still, which is higher than on a seasonally adjusted basis higher than
Craig Fuhr (03:18)
Mm -hmm.
Jack BeVier (03:37)
Well, higher than the Fed wanted. And so the market responded by increasing rates really kind of across the board. As now there’s some concern, some increased concern that, you know, the Fed doesn’t actually really have inflation under control. Maybe this is me just now talking, maybe Powell’s comments on three rate hikes in 2024 was a little bit premature for him to be, you know, giving those kind of indications. And so it’s TBD. And so now they’re they’ve retreat, you know, kind of retreated.
Craig Fuhr (03:58)
Little premature.
Jack BeVier (04:05)
And they’re saying, Hey, you know what, we’re just going to follow the data. We always said we were going to follow the data. Right. So, you know, this isn’t a reversal, but the market, um, the, the bond markets have increased rates by probably 30, 40 basis, 35 basis points since then. So we’re kind of back to where we were at the beginning of the year from a rates point of view.
Craig Fuhr (04:26)
Strangely, I think the phones are still ringing off the hook here at Dominion Financial in terms of both DSCR and bridge loans. Speaking with a lot of borrowers over the past month, Jack, and there still appears to be amongst most a lot of optimism in the market. You know, I wouldn’t call it pencils down for the folks that are calling us. I mean, it feels like full steam ahead really.
Jack BeVier (04:51)
Yeah, and on us too, like in our in our business, we’re still buying actively. I’m watching rates closely in terms of deciding which houses we’re going to flip and which houses we’re going to keep as rentals. But V is still holding up, right? So your values are still holding up. And so as long as you’ve got a stable point, you know, stable environment from a values point of view, and you know, even if rates are flat, right, like
I still, you know, we’ve talked about this before, still very bullish on American real estate long term, particularly in any kind of like affordable price point. So, you know, 150 to $500 ,000, I think is a very stable place to invest. So we’re still looking for our opportunities to pick up deals where we can make these rates work from a debt service coverage point of view. And if not, we flip it and, you know, keep the keep the wheels turning and go by the next house. So that’s that’s how we’re thinking about it. We’re definitely not pencils down.
Craig Fuhr (05:45)
Well, all of that is to lead into a much broader conversation about the market in general jack with our guests today who really excited to have a board. I know you’ve known Sean for a while I’m just meeting him today. Sean Mulha welcome to the show.
Sean Mulhall (06:01)
Thanks for having me guys.
Craig Fuhr (06:03)
It’s a real pleasure to have you here, man. Sean is with SMD Capital and I’ll let you go ahead and talk about the firm that you work, I’m sorry, that you are a partner at here in Baltimore, full service real estate firm. And so, yeah, tell us about yourself, Sean.
Sean Mulhall (06:20)
Yeah, thanks, Craig and Jack for having me. Like you alluded to, I’m with SMD Capital Group. I am the managing partner for that organization. Basically, what we do is we are a real estate investment firm for all different parts of real estate investing. So we have a couple of different divisions. We have an acquisitions arm where we obviously acquire our properties or source properties that we can then, like Jack was saying, potentially flip or to…
wholesale, hotel, et cetera. We have a actual holdings company, which is where we obviously own the real estate that we acquire. We have a portfolio right around 300 doors. We have been…
kind of bullish on like Jack said on just consistently acquiring right now we’re right about six or seven a month that we’re taking down. Obviously not holding all those, but we are still active in actually acquiring properties in the areas Jack was alluding to. We have a property management division. So from the side of the fence of once we held them and put them into our portfolio, we have our internal property management team.
which is here in Baltimore as well as overseas, so virtual employees. And then we also manage third party on that side of the fence. So we manage a few hundred doors in the Maryland area as well as Pennsylvania for outside investors or just mom and pop.
house here, house there. Then we also have a construction company where MHIC licensed that company is exclusive home group and I did say the property management company is SMD management. We do all of our own obviously renovations. We have in -house team. We have obviously we do GC work or we’re working through subs.
And obviously on the other side of the fence from our own properties, we also do third parties. So we do traditional renovations for homeowners. So if somebody wants a new basement, somebody wants an addition added, et cetera. And we do that outside of the Baltimore City market, which I should have alluded to at the beginning. We own our portfolio at Baltimore City. And a little bit of the outskirts of Baltimore County, but I’m about to…
25 % Baltimore City, but we do do property management and the construction outside of the Baltimore City marketplace and other counties in Maryland, Hartford County, Howard County, Anne Arundel County, Baltimore County, Prince George’s County. And then like I said with Pennsylvania, we have Eastern PA, we’re in York, Lancaster, Schoocoe County, and a couple other areas around Harrisburg.
We also have a real estate team and new home team in Maryland where we’re just doing traditional buy and sell real estate. So we have nine agents that we are, like I said, just helping out homeowners and.
buyers looking to be a homeowner, get into a house or to sell a house. And then on the other side of the business we also have a staging and design company that also works traditionally through the real estate team but also helps us on our flips and so forth with getting them the way we need to get them to market to have the best product on the end.
end result for the price point to get as much as we can get out of it. And recently we’ve taken in some friends and family money as well for a, we’ve started a fund. So we have a bond product that we now offer a quarterly distribution on for some private money activity to help fund a lot of the things that we just went over.
Craig Fuhr (09:39)
Wow. That is a full service real estate investment firm indeed. And I can see where Jack is excited to speak because there’s so much overlap between you know what Jack and Fred have done at the domain group is specifically Dominion properties. So yeah, let’s jump in, man. It’s great to have you on the show.
Sean Mulhall (09:56)
Yeah, thanks. Appreciate it.
Jack BeVier (09:58)
So you let me, let me, let me jump in there. The, so talk to me about you have, you have other partners that you work with. Cause you just described a ton of operations, right? Um, so walk me through how you hooked up with your partners, what they were doing and kind of how you got to that point. Cause there’s that, that, like, I imagine you guys didn’t say, Hey, you know what? Let’s all get together, having a beer and we’re going to start six companies all at the same time. Like how did that evolve?
Sean Mulhall (10:06)
Yep.
Craig Fuhr (10:07)
Yeah.
Yeah.
Jack BeVier (10:26)
And why did you evolve it that way? I would love to learn more about that.
Sean Mulhall (10:29)
Yeah. Sure. Yeah. So, um, just talking, take a step back when I was younger, my grandfather was like, I don’t really want to go down the rabbit hole, but he was legitimately a slumlord. Like he had houses in Adderall County. They were like 250 bucks a month. You had a problem with the heat. Like you got to go fix it. So when I was as young as five years old, um, he would take me around with him on rent collection day. And, um, he would basically show me.
Jack BeVier (10:45)
Cool.
Craig Fuhr (10:49)
Mm -hmm.
Jack BeVier (10:56)
That’s sick.
Sean Mulhall (11:00)
how he would get money and we won’t go into the details here because some of the things are like definitely not the right way to be treating tenants. And I saw that at a very young age. It was a different time. And he was also, him and his father built the homes that they then managed as rentals. So my parents weren’t really into the real estate investing, but he was a big, big…
Craig Fuhr (11:15)
awesome.
Sean Mulhall (11:20)
kind of contributor to me, just understanding what this was. And so when I was young, like I would go around on, on rent collection day with him, I’d sit in the car. He would go do what he had to do to get his money and then come back in the car. And he was a big guy about six foot three, about 290 pounds. So you can imagine redneck from down to Anne Arundel County, just getting to collect some money from people. So, um, yeah, so he, uh, he would, he would come back in and obviously we drive around all the houses he had. And at the end of it, he would give me.
$5 for rent collection. So it started to show me that like even though I wasn’t in for all types of purposes like the ownership stage like I was helping and I got paid and it also showed me that like
He wasn’t by any means well off. He lived a very normal lifestyle, blue collar, not anything elaborate. But he didn’t really work. He did obviously go collect rent, but at that point in time, he wasn’t doing anything else and he was just living. So I also started to notice that my parents were both working really hard and we were also middle class, blue collar.
Both of them were working all these crazy hours and like we were doing fine, but we weren’t living the finer life. And then he wasn’t doing anything and living the same life. So it was like, man, this is something to start to understand. So, you know, as I got older, that evolved and I always obviously saw and.
obviously became more aware of what it took to be where he was at and how he had built his business per se. So coming out of high school, I was in that mentality that I really wanted to…
do something like my granddad, like I wanted to follow in his footsteps. Um, and for me, I was at that point in time, I was, I was always a worker, right? So I had multiple jobs throughout high school. Um, I started at age 12. My uncle had a landscaping company and I would work three days a week at 12 years old to work on the summer times when other kids were playing. Cause I wanted to start, obviously start to bring some money into be able to try to do things with it on a broader scale. So I had some good money saved up. Um, you know, I was working for him full time. I worked at that small, worked at a bunch of other places.
just consistently bringing money in and was saving a lot. So when I turned 18, I bought my first home. My parents co -signed on it, but at that point in time it was just a condo in Crofton. And I was living in it for about three months and I got accepted to University of Maryland. And then all of sudden I was a landlord. So I was like, holy shit, now I have to, oh, sorry, I’m supposed to cuss on here. But I was like, oh man, I…
Jack BeVier (13:45)
I mean, I can cause on here, it’s fine. I cause on here all the time.
Sean Mulhall (13:48)
But that was like, now I have to like actually not just live in the home, I’m going have to manage people living in the home. And so like, you know, that’s an 18 at this point, I was 19 years old kid trying to figure out like how to make things happen. So obviously I was at the University of Maryland. I was living there. I was running out the price of Crofton and I started to learn what took the real estate, the good, the bad. It made…
Craig Fuhr (13:49)
Shucks.
Sean Mulhall (14:10)
hundreds of mistakes, et cetera. But overall, still this property that I didn’t really have any friends that had properties at this point. And I was also like not paying for the property. People were paying me for it. So I started to see the other side of the fence when my granddad had kind of showed me at a young age how this all worked. So as I was going through my career, I came out of the University of Maryland and I went into the consumer practice good industry. And basically at that point in time, I was in a position where I was in like a…
Fast track program for the largest food broker in the United States. Advantage sales and marketing was what they’re called then. Now it’s Advantage Solutions, but they took me down to Charlotte and basically was just learning all different sides of the business to try to understand progression wise, where I wanted to go within the organization. So had a couple of promotions, got back into Maryland on a promotion and was just evolving in my professional career. And during that time,
I bought another house and I bought another house. And this was just me in my personal name, not knowing anything about real estate investing really just other than like, I wanted to own more real estate.
I didn’t really know why, but I just knew that it was coming from what I’d seen when I was younger. So at that point in time, this was over the span of basically 10 years. I had evolved into a position where I was kind of like a road warrior. I ran the United States for, at this point in time, I had moved on to the manufacturer side and I was handling the grocery channel for them. So I was managing basically every major grocery account across the U .S. I was the touch point for the buyer. I had brokers in the local markets dealing with day to day, but I would be traveling. My one year I was in the US.
in a hotel, 170 nights. So I was really like, grinding. So when I was doing that, I was making pretty good money. And so at that point in time, my first partner, who also happens to be my best friend, who I went to high school with, his name’s Michael Lopez, he was getting out of a job and he was in like a government contractor and just didn’t love it and was getting out of that space and was getting into real estate. So he had gotten his real estate license and…
Jack BeVier (15:46)
Cheers.
Sean Mulhall (16:12)
He was like, hey, like we should probably, you know, try to do something with real estate. And his father had a little bit of real estate background as well. So we, we threw our hand in for the traditional way. We tried to flip a couple of houses. And so like that, we didn’t lose money, but like, was not great. It didn’t work out the way it was, but like neither of us were like super active in it. And honestly, like we didn’t know what we were doing. Um.
So what happened though was that during that time, there was another agent who had come towards us from somebody we knew from high school, he referred them, et cetera, who had a project that was actually over in Fells Point. It was a rectory that we were gonna convert to a single family home on a registered street. And so we, at that point in time, his name was David Menes. So…
You know, David was with Ryan Holmes before. He was an attorney working with Harbor Bank here in Baltimore. And then he, he now was a real estate agent. So he, he brought us his property, you know, him and I, we didn’t know each other. Mike, myself, Dave, Mike and I obviously had a relationship with nobody, had a relationship with Dave. He didn’t know each other. We didn’t know each other. So when we got into the position of like this actual opportunity, it was just strictly a business relationship. So, you know, we got, we got that property contract. We started to do the renovations, et cetera.
He sold it in the back end and then we didn’t really work together too much more after that, but we had developed a relationship. So as Mike was like getting into the real estate space and becoming more up to speed on things, he at that point had gotten.
a contract for selling REOs. So with the person he linked up with, he was now selling REOs in the Baltimore City marketplace. So as that was happening, he was coming to me because we were still doing a flip here, flip there, nothing significant. He had come to me and basically said, hey, there’s something going on in Baltimore that looks like we could have some success. And at that point,
Jack BeVier (18:10)
What year is it right now?
Craig Fuhr (18:11)
Yeah, I was at I was wondering the same thing.
Sean Mulhall (18:12)
2017. Yeah, so.
Jack BeVier (18:15)
Okay. So all of a sudden, all of a sudden you get deal flow, right? Like Mike, Mike’s seeing deal flow and you guys start to get excited. Entrepreneurial people that you are.
Sean Mulhall (18:23)
Yep. Yep. Yep. So it was early 2017.
We were, you know, in a position now where he was seeing the other side of the fence. And obviously Jack and Craig, I’m sure you know this, but for the listeners, you know, Baltimore is very, um, very segmented where you have a lot of like negative stigmas about neighborhoods where if you’re not in the city and you don’t know Baltimore, you’re like, Oh, I’m not messing with that area. But if you’re in the city every day, that neighborhood might have a bad connotation for what it is, but the actual, like there could be two blocks in that city or in that neighborhood that have like completely a sense of normalcy. So you have like everybody’s jobs are cut.
Craig Fuhr (18:57)
crazy.
Sean Mulhall (18:58)
Christmas decorations up, et cetera. So as Mike’s driving through these REOs, he’s like, yeah, I got this crazy REO here, like stuff’s going on in the corner and it’s like falling down. But like I drove by the street, there was one street over that like, it was really normal. And the price was like not really that crazy different. So we’re like, well, man, like this sounds like something we wanna kind of take a look into a little more. And like I said, at that point I’m making some money.
So we started to look and to get it active. So at that point, we had fallen into a position of a multifamily property and this was like before the single family we started, which is where we started our teeth.
Jack BeVier (19:37)
Hey, sorry to interrupt you. Are you still working full time though?
Sean Mulhall (19:42)
No, no, no, no, no. Oh, at this point in time? Yeah, oh yeah, I am. Oh yeah, full time. Yeah, sales manager. You know, sales.
Jack BeVier (19:43)
to what? Yeah.
Yeah. So yeah. So you’re, so yeah, you’re, you’re working, you’re still working your W2. You still got a source of income. Mike gets the REO account. So he’s that’s, that’s become his source of income. So he’s the source of deal flows and he’s making, you know, a day job, right? Like off of, off of that, you’ve still got a source of income, but you’re hustling on the side, starting to do more and more projects.
Sean Mulhall (19:53)
Oh yeah. Yeah.
Yeah.
Yep.
Yeah, we were very bankable at this point, right? So we had obviously great W -2 income, you know, the good credit, et cetera. That was because I had bought that house at 18, so my credit was strong. And so, yeah, at this point in time, like we’re looking what to do investing wise. And now that we have this line of sight to what’s going on in Baltimore, we’re like, OK, well, let’s see what we can do here. This is also our backyard. I grew up in Andromeda County, Mike grew up in Andromeda County.
Jack BeVier (20:13)
Gotcha.
Sean Mulhall (20:39)
So we know Baltimore. So yeah, so we fall into a deal that we started working through, you know, trying to source a couple of multifamilies. That’s where we thought we wanted to figure out where we wanted to kind of make our name. And we’ve got a deal on Monument Street, right next to the light rail, it was a six unit building. We had a couple other friends at the time that wanted to do a deal with us. So we got in, we bought it and…
you know, for the most part, probably overpaid and didn’t really know what we were doing. But we got it. And we now stuff we’re like, okay, we own some real estate together. This is pretty cool.
And so at that point though, when we’re looking for multifamilies, like we’re just in our head. Like we don’t, we don’t understand the game enough yet to really say this is where we’re going to go. So we’re like, let’s be a little, a little more conservative with how we’re trying to do this. So we’re like, let’s just buy one of these $60 ,000 row homes. Our risk is pretty low because if shit hits the fan, like $60 ,000, that’s not nothing, but at that time, like feels way better than like trying to buy a million dollar multifamily and then have that blow up in your face. So, um, we, we go to an auction, Alex Cooper, um, we,
We buy a place over on Westerwall Street in Waverly. I think we got it for 58 grand. And we actually, they were doing two the same day on the other side of the street. And we technically won the other one, but they wouldn’t, they wanted us to come up in price to like 60. And we’re like, no, no, we’re not doing that. And yeah, the first purchase was like, no, we’re staying strong. They’re going to turn around and give it to us. They obviously didn’t. But we got the first house, had a tenant in there. And,
Craig Fuhr (21:59)
That two grand blows the deal.
Sean Mulhall (22:12)
you know, we now we’re in the single family game. So we bought it for right around 60 grand. I think it was like 57 ,000 or something like that. And it was tenant occupied. He was paying like $900 a month. House was a POS.
But now we were seeing that like, we put 60, like we’re in it for 57 and he’s paying 900 a month. Like it’s pretty good cash on cash return when you’re looking at things. And like, why don’t we see if we can get them up to a thousand a month. So like we took over ownership, we went to him and said, Hey, we’re going to want to keep you in the home, but we’re going to up to a thousand a month. And he’s like, okay. And stays in the homes. Now we’re like, wow, that just changed our ROI pretty crazy. Like we were going everything off of what was going off 900. And now like within like three days we’re at a thousand like.
some things, sometimes how they’re being portrayed, like they actually can be better than that. So we’re seeing that like, we can actually make a change once we get into the house and start to do things our way. So, you know, fast forward, we buy a couple other properties. At this point in time, we had a third person that was a friend of ours who was, who was working at Under Armour and has like a larger, like bigger kind of profile over there with good responsibility, making good money. And he came in and he,
is basically like, hey, if you guys need some more capital, let’s try to do this together. Because at the beginning, it was all around money. We didn’t have any bank relationships. We didn’t have anything we could do to tap into outside investors. We just were buying it with what.
I was making in Mike and now this third person. So he was, he was more passive in this. So he was basically, you know, somebody who had some capital that wanted to be in the game, but not necessarily had the time to do anything about it. And keep in mind, I was still working my full time job and Mike now was just getting the real estate doing his thing. So he got involved and we started buying some houses. So we bought in 2017, we bought seven. And so we were, you know, we were starting to see how things were going. And as this was happening, we were subbing everything out, right? So we were subbing out.
constructional stuff and subbing out property management and really not deal sourcing ourselves and we’re just working through other people because we all had other things going on. So fast forward 2018 there was a small portfolios for sale was actually from from Cummings and Dave Cummings and he was selling some things and there was like 12 houses that we that we liked.
And so we went back to him and he had maybe some 30 houses and we ended up buying, I believe, six of them. So at that point now, we are fully vested in all of our capital is gone. But now we have a little bit of a history and we also have a little bit of what’s going on, like a track record with owning homes. We own them all pretty clear. So at that point, we start to try to figure out how do we get our money back.
because now we have no money left and it’s all our personal money too. So we went through the motions of trying to figure out what that looked like. So we started talking to some local banks, one in particular had an appetite for this kind of lending. So we went to them and at that point in time, we had done a commercial portfolio loan. So we didn’t know what that was, but at that point…
we learned it and we got our money back and then at that point we also continued to buy. So when we did that, we were like, hey, just out of curiosity, is there any way you guys would give us a lot of credit? Because at that point in time, I had pulled a lot of credit out of my Carleton house because I had already paid a decent amount of that down. And so I had a lot of equity in it because it also had gone up in value. So I saw that you can take a lot of credit out on something that you own.
to be able to have that to be extra capital for different endeavors. So they at that point in time were like, you know, do one more portfolio loan with us and then we’ll look at trying to give you guys a lot of credit. So we did a small one at that point, I think it was only 400 ,000. And after we did that second one with them, then we had two with them, they gave us $250 ,000 line of credit.
Jack BeVier (26:10)
Hey, were you, were you able on that first refi, were you able to get all of your hard costs back out of that deal? Like were you able to get all your money back on that refi?
Sean Mulhall (26:20)
We made, I think like $80 ,000. So like we got everything back plus a $80 ,000 surplus. So.
Jack BeVier (26:23)
You get an extra $80 ,000.
And was, was that just because, was that because you had bought well or, or, and, or because you had added value to the property and you were able to refinance off the appraised value or had the market gone up? Like what combination of those three were all three led you to be able to get all your hard costs back.
Sean Mulhall (26:47)
I think we were just lucky. I wish I could say that like we did, like we had this like perfect, perfect blueprint of how to do it. At that point in time, I mean, I feel confident today saying that we are pretty good at what we do, but at that point in time, we, I think had done enough and had bought strategically enough in those first couple purchases that because we were being super conservative and we didn’t want to just buy anything that we had a lot of.
Jack BeVier (27:11)
You’re being picky.
Sean Mulhall (27:16)
but an upside. So yes, the market was going up at that point in time. This was now like the 2018 time when we did our refi. And on top of that, you know, in general, we had bought well and we had done the bidding beginning stages. We did like lipstick on a pig renovations. So like we made it look good, but we didn’t spend a lot. And then so the appraisals came in and still was getting praised higher, even though the core of the properties, which we’ll go into later was, was not where it really needed to be. So we were getting that upper value, even though we weren’t really spending a lot to get there.
Craig Fuhr (27:45)
Jack, I think it’s such a great question because how many investors do we meet that start out exactly that same way? They’ve got a bucket of capital, they go out and buy some properties and now they’re property rich and sort of cash poor and in many cases, they don’t get all their money out. There’s always some sunk costs in those places where, so yeah.
Jack BeVier (28:05)
And if, yeah, and that’s one of the things I want to dig in further with Sean too is like, and if you don’t, then like, where’s that cash come from? Right? Like you have to keep the day job. So it’s hard to like, and then you get to this point where you’ve got enough properties that like, it’s a little awkward because they’re becoming more and more work because you have to properly manage them, but you still got a day job. And so then you start to get stressed out because you’re just getting stretched thin, but you need to add more to get scale, but you need cash to keep scaling and like,
And making that transition right is like a really difficult moment, right? It’s a really difficult, probably several year period. And I want to hear about yours. So, so I don’t want to hear about yours. Like how to have that.
Sean Mulhall (28:45)
Yeah, yeah. I mean, it was something that, like you said, like you’re just getting stressed in. So this is 2018. So I was actually employed in a job until 2021, with like not this being my main gig. And so during that whole time, as we’re growing and scaling, at that point in time, we had rinse and repeat the model with this local bank a few times that we had been able to get a line of credit by, I think.
2021 to around a million dollars. So we had a million dollar line of credit with this bank, so we weren’t really putting our own money in a lot anymore. And at that point we were buying consistently. Mike was now basically full -time real estate agent, but also during those years real estate was really booming. So he was really busy just doing retail, sailing as well as the REOs.
our third person we were working with was full in on Under Armour, just literally financially banking and not even really financially banking anymore because we had established a bank relationship where we had a line. So I was always like the more in the weeds with everything kind of a guy, just because of my personality. I know you do Culture Index, Jack, and I’m a tech expert. So like that just was like where I fell with like the type of personality I…
I was going to be the one that was in the mix of everything. But also, like I said, I was full time, 150 nights on the road, kind of a sales guy. So where this all happened, and it wasn’t really my choice, was at this point in time, our portfolio had grown, say 2021, we were, I don’t know the exact numbers, but we were shy of maybe 150 doors to that. And so we had a significant exposure at that point that we…
now had nobody really managing like as a main gig and it was just starting to weigh on me and I think it was starting, I was starting to get more involved in all the moving parts because there was so much going on that I was seeing like all the things that we were subbing everything out that like if we had control over these things like we would be able to like really be firing all cylinders to another level. So I got, I don’t want say I got lucky, but 20, I was at this point in time the consumer baggage good company I was working with was Aint Cleaning.
tool supplier. So when COVID hit, like I didn’t really have to work because everybody bought cleaning stuff to the point of like not having any backstop. So I was like not working, but I was still getting a paycheck that was significant. Plus I was hitting on my bonuses because I was selling stuff even though I didn’t really have to because COVID came along and everybody just went crazy.
Jack BeVier (31:09)
Taking orders.
Sean Mulhall (31:10)
Yeah, exactly. So at that point in 2020, I actually hired somebody from for our business to come work for us as our first employee, even though I still technically wasn’t even full time in the business. So at that point, I had a direct report that was reporting to me. And we had we had the real estate team has an office in Federal Hill. So I was just going into the office every day up there working from there on my day job. I also had somebody sitting next to me that worked for me in this business. So I’d start building infrastructure.
Jack BeVier (31:37)
So like, what was the, uh, so I mean, you went from like seven doors in 2018 to 150 in 2021. That’s quite like, that’s, that’s quite a ramp up. That’s all just buy with your own cash plus the line of credit proceeds rehab with those proceeds you use in general contractors for everything. And then.
Sean Mulhall (31:48)
Yeah.
Yep, we had like one partnership, one main partnership with a GC who had basically 11 guys underneath him that for all types of purposes was just, we worked with him as our main guy and then we were using other GCs along the way, but that was our core business was just, yeah, through that. Everything was outsourced.
Jack BeVier (32:20)
Were you cost plus with him or was he giving you a bid on labor materials full like, Hey, this one’s 35, this one’s 45. And like, you just were giving him draws based off of that number. Like how, how did you, how, how did you manage that relationship? Because that, that guy, right? Like he, he gets sick or like, he starts stealing from you. You get the, you pick the wrong guy at that point in time, you’re done. Right? Like that’s, that’s existential threat. Yeah.
Sean Mulhall (32:31)
So.
Yep. Yeah.
Craig Fuhr (32:43)
especially when you have so many going on at once, right?
Sean Mulhall (32:47)
And that’s it couldn’t be more true. And we got really lucky with the guy that we picked because he’s out of the second, but he’s still a big part of our organization and to even more aligned scale now with our construction company. But yeah, so what we had going on with him originally was was just he would bid, we would pay him. Right. So that’s what we started. That evolved to he was paying his guys X and then we would pay him X for that same hour. And then the in between was what he was getting paid. And so we knew basically if somebody’s working X amount,
hours it was at this rate even though they were only getting paid this and he was getting this cut from the extra say five dollars an hour he was taking per guy.
Jack BeVier (33:24)
Did you require that transparency? How’d that happen? Right? Cause he didn’t volunteer that up, right? Like he went from like a fixed number, like, do you, were you like, Hey, no, I need transparency. Otherwise I can’t keep going like this. Was that a personality thing or how’d that happen?
Sean Mulhall (33:37)
Yeah, it was a conversation back and forth as we were getting bigger and we were making him taking him to the next level with his business by obviously using him on so many jobs and him being able to expand that we were just trying to find some way to get on a partnership level as opposed to an employee employer level. So it didn’t happen overnight. We had multiple conversations throughout the time from when we started working to where we got to this point where it’s like, hey, you know, I want to we want to keep growing this thing. But, you our costs are real. I know your costs are real. How can we get in a place where both of us are happy with the relationship?
ship, but also not feeling like one could take advantage of. And after conversations, we came to the fact of like, Hey, you know, he came to me and I said, you know, how are you paying your guys? And he said, I’m paying them this. And he was forthcoming with me. And at the point that, you know, we had already been working together for a year or so at this point where the trust was building. And he said, I’m paying them this amount of hour. I’m like, well, how are you paying yourself? He’s like, well, I’m taking X. And I’m like, okay, well, what about if you just started to basically pay each guy this much?
same painting, you paint them and then you take X so that it’s real clean with like, how long people work, how much you’re making, how you get more guys, you make more money. And it’s just like a benefit to both of us. If we can get this thing to run smoothly. He was like, yeah, I’m open with that. And then started to transition to it.
Jack BeVier (34:52)
So he, at that time though, he’s at that time, he’s not inside your organization. He’s just like a strategic partner. You didn’t, did you make him, like, did you think about making it? I’m sure you thought about it, but like, did you can seriously consider making him an offer to just come on staff and like, you know, frankly replicate what his income would look like based off of that, or like why, why keeping him independent versus bringing him fully in house? How, you know, what were you thinking about there?
Sean Mulhall (34:58)
No?
So, where we’re at at this point in time, he now is in a different level with us today with the business. But in that point in time, it was one of those things where he’s from Guatemala and his background is like he’s kind of had to build everything himself. He was an immigrant, he came over when he was I think 10 and just in general, like really had to work hard to get to where he was.
So I wanted to walk a thin line where he didn’t feel like I was trying to control him because he had been able to build his business on his back. But I also wanted him to understand that I wanted to try to help slash work with him as a, as an equal, not as a employer employee, because he had found his guys. He ran his cruise. So I, I didn’t really want to push too hard personally, because I didn’t want to offend him slash make him feel some type of way, because the relationship we had was going so well that I wasn’t trying to.
Craig Fuhr (36:12)
Mm -hmm.
Jack BeVier (36:12)
Mm -hmm.
Sean Mulhall (36:13)
get outside of the comfort zone that he had with us until him and I were just a little bit more aligned with a long -term history. So, yeah, so, you know, that was all happening. You know, we had at that point in time, like I said, we were buying homes, we refining them out. We never used any outside money at all. So it was all our own personal funding and the line of credit that we had worked through with this local bank.
Jack BeVier (36:21)
That’s great. That’s great.
Sean Mulhall (36:39)
So, you know, keep in mind, I’m still making money. So even if we’re putting money in, which we were, we weren’t like at that point in time completely out of our own personal capital going in. It wasn’t really breaking me because I was making a significant amount of income coming in. So, you know, COVID happened, hired this employee, still working. And at that point in time, I’m like 70 % real estate investing, 30 % day job. And…
COVID stops, things go back to normal. All of a sudden my goals at my company are COVID number goals. And my effort in my company is like at the bottom. So you can kind of probably see read between lines for how long that lasted. But at some point during, not some point, during 2021, they basically came to me and they’re like, hey man, like we gotta let you go because like you’re just not.
Craig Fuhr (37:12)
Ha ha ha ha ha ha ha.
Sean Mulhall (37:26)
you know, given what we need from me right now in this role. And I mean, I got it. And I kind of was like playing both sides of the fence where I was like, I had benefits, I had things going on that were like beneficial money coming in. So I didn’t want to like poke the bear, but I also was like, this is where I’m going and I need to make sure I’m building my business here so that when that happens, cause I knew it was happening. It was just a matter of time that when I move over to here, it’s not like, oh shit, what am I going do? It’s like, okay, I’ve already built a lot of the processes and systems and get ourselves in a position where I can start to make this a real business.
Craig Fuhr (37:54)
Were you taking any income at that time from the real estate business at all?
Sean Mulhall (37:59)
No, none of us were. So everything we got was reinvested into buying more homes. And even in that point, we were putting more capital in. So we had taken a dime out of that. Yeah.
Craig Fuhr (38:05)
sure. Jack out.
Jack BeVier (38:07)
Yeah, that’s that’s how I’m gonna ask you like, and this is purely a cash inflow business at this time, right? Like, like the rental income, you’re not you’re not creating, you’re not flipping, you’re not wholesale, you’re not flipping much, you’re not wholesaling much. The REO business is paying the bills and maybe contributing some you’re putting cash into this business, but this entire period for your period from a if it’s its own business, like, it’s cash flow negative, right? Like you have to feed the thing, right? Fair to say.
Sean Mulhall (38:35)
Yeah. Oh yeah. Yeah. For a hundred percent. Yep. We’re not. Yeah. Like nobody’s making any money here. And like the goal though was like, at least from when we started this, yeah, we weren’t really trying to make money on this. Like it was like, we’re going to buy these houses. We’re going to get this around a portfolio. We all have jobs. Like this is at some point in time, we’re going to be able to quit our jobs and live off of the cashflow in 15, 20 years. Well that obviously worked.
Jack BeVier (38:41)
Yeah. Yeah.
Pure wealth building mode.
Craig Fuhr (38:58)
Sean, Sean, I’m really curious. Did the folks at the cleaning company, your management there, did they know that you had this, you know, emerging side hustle that was really becoming the 70%, 30 % of your life?
Sean Mulhall (39:12)
So they knew that I owned real estate in Baltimore. I don’t think they knew what that looked like though. I don’t know how that was. They did know that I had a real estate holdings, like, I don’t know what would call it, business, that I had properties that I owned. But they didn’t really know much else.
Craig Fuhr (39:17)
Heh.
Jack, I think you know this story, but I’ll share it quickly. Back when I was working a W2 job in like 2005, six, seven, I was really starting to do quite a bit of rehabbing during that time. And I was in IT security here in Maryland, working for like a government contractor. And I had this big whiteboard that sat on just, just as you walked in my office and the whiteboard always contained nothing to do with, you know, IT security. It was like a one, two, one, two, maple 48 ,000 rehab, you know, 50 ,000.
All my properties, my manager comes in one day and he’s standing kind of with his back towards the, uh, the whiteboard. He turns around and he goes, what, what’s all this? And I was really reluctant to say, because at that time I was probably making more with my flipping than I was at the six figure plus job. And it was about three months after that, Sean, that, uh, the day after my 40th birthday and my son’s first birthday, April 4th, 2007, I walked into the office and he was like, yeah, we’re going to have to let you go. And I was like,
You know, you don’t know whether it was like congratulations or consolations needed, but it worked out alright, I guess. But yeah, it feels very similar, very, very parallel story there.
Sean Mulhall (40:36)
Yeah, it was good because my daughter was born on September 5th, 2021 and I lost my job in October 2021. So it was like the same thing. And also, I was literally getting on a plane to go to Brazil the next day for a wedding and like a week away. And they’re like, yeah, your health insurance actually ends at the end of the month. This was like the 28th. And I was like, I’m going to be in a third world country without health insurance. And so like all this kind of happened at the least opportunistic time. But like looking back, it was the best thing that ever happened.
Craig Fuhr (40:45)
That’s crazy. That’s crazy.
Sean Mulhall (41:07)
I’m sure you can probably say the same thing, but yeah, I had a similar track there with how it all played out. Yeah, it’s a fun game to play.
Jack BeVier (41:16)
So, so walk me through though. All right, so you lose you lose your source of income at a point at a phase in the business that is cash flow negative. How is that okay? Right? Like, how do we go from this is this is a cash flow negative exercise, we built building this rental portfolio. And now the outside source of income has gone. By the way, we’re in the middle of freaking COVID. So knew that who the hell knows what the you know what what the world’s gonna look like? How is that? How is that? Okay, you know, like, how do you not freak out?
at that point in time and frankly, and then how did you make that transition to being okay? From a cashflow point of view.
Sean Mulhall (41:50)
Yeah, so it was, I did freak out because now it’s like that comfort level you had with like, oh, I still have this money coming in every two weeks from my day job is now gone. And so like, I’ll be the first to say to with me historically, like,
I don’t save a lot because I reinvest money. So when money comes in, like I don’t keep $100 ,000 in a bank. I take that money and I buy houses with it. So like my even liquidity at the time to be able to be like, oh man, like if it’s, if I don’t make money for the next couple of months, like this is going to get real, real dicey. Um, it just wasn’t, it just wasn’t there. So, um, you know, I, I definitely was nervous. What I had done though, because, you know,
Jack BeVier (42:18)
It’s gonna get real.
Sean Mulhall (42:27)
Going into this, I knew when they set those goals for 2021 that they were gonna fire me at some point because I knew that there’s no way that coming off of COVID, even if I was full in like…
Jack BeVier (42:36)
Mm -hmm.
Sean Mulhall (42:36)
100 % like I’m living and breathing this business like it would still be like extremely hard for me to hit those numbers. So and also I was making a decent amount of money because I had those numbers prior so like they’re probably trying to get me off the books anyways because now I can bring somebody to manage the accounts I had that would be of significant like a way lesser cost which it’s fine but it’s just something I was self -aware enough to understand. So during 2021 after COVID slowed down a little bit I hired we hired another person to come in and be a quote -unquote property manager.
So we had already started to look at.
some things that we were traditionally outsourcing doing in -house. And me being so involved in it, started to get a system built and a business, not one kind of legitimate business yet, but a business put in place where we had two employees now, and W2, full -time employees that were running on this, basically helping out with all the day -to -day. So we had started to build a somewhat existing infrastructure, even though it wasn’t fully functioning, but we had some pieces in place already.
The other thing we were doing is during COVID.
We had some opportunities for some flips. We’re sure that during that time when prices were going through the roof. And what we did was we did a flip in, we did a flip in Pikesville. And if you know Pikesville at all, they’re all similar kind of houses. Ranchers, they’re just the same kind of house that’s going to be next to you across the street. Different, small differences, but basically the same. We did one and we just was at the right time, right time of year. And we had like 17 offers on and like significantly.
like high offers. So we took one and one of the people who at that point in time did not get it said, hey, can you actually do what you did here with this house I’m buying three streets over because it’s a very simple house. We’re like, yeah, I guess we can. And we’d never done third -party work at that point in time. Like we didn’t. We just had done stuff for ourselves. And at that point, I was like, yeah, I guess we can. But it’s going to be this. And I’m sure you know, COVID people are like spending money like it’s going out of style. When the housing market after COVID like kind of calmed down, it’s like,
Okay, well, if we’re going to pay, you paid this like we’ll definitely do it. And they agreed to it. The same time, just, just timing. Mike was working with a buyer in Montgomery County who was selling a home and buying a home. Well off individual who, when he was selling the home, wanted to have work done. And historically it had just been like, we just gave him contact information from contractor and they just did it. It just like a referral. And at the same time we were doing this, he wanted to have worked on his house before he sold it. And then in his new house, he was going to buy him and have worked on it.
And we’re like, let’s just see if this thing’s got any legs. And we’re like, yeah, we can do it for this price. And we were making a significant markup. And he’s like, OK. And we’re like, oh, OK, what about on the back end when you buy this house, we can do it at this price. He’s like, OK. So within the span of a couple of weeks, just completely, there’s nothing that we did that made this happen this way. We had three jobs that came up that were pretty profitable for us that we had never done before in the third party space. So now we’re like, OK, here’s an angle.
So it’s that point in time, and this is still, like this is early 2021, so it’s before I lost my job. It’s that point in time we had gone to this person I was speaking about before in our construction side that was the main partner of ours. And it said basically, here’s what we’re thinking, because in Maryland you can use MHCC license with two entities.
Hey, here’s what we’re thinking. You leave what you got going on over here. We don’t want to make you feel pressured like you’re giving that up. You can still have that business. You built it. It’s there. But how about you come partner with us here. We’ll give you some equity. We use your MHIC license. We’ll go talk to all the people for the jobs. You can just focus on the jobs themselves. You run them and then…
everything’s the same except now you’ll still pay you the exact same way we pay you. We’ll just now you’ll have some at the end of the year a bonus based off the equity you have in the business and you don’t have to look for jobs anymore.” And he was like, okay. So we had already brought him into this infrastructure, the company’s exclusive home group. And we had these jobs now set up for profit jobs, not for us like third party for profit jobs. That had nothing to do with our core business. And we were making some money.
So that had happened in 2021 and we had started to have that model. I remember I was doing this Pikesville flip as I was like on a conference call for, I was like at it when I was talking to the owners, I was on a conference call for my day job, like, and it was still happening at that time. So like there was things happening before I had been let go that were generating some income that we had put the balls in motion with before I had been let go.
Jack BeVier (47:05)
So let’s, let’s do this from a time point of view. Want to probably jump into the next episode, but let’s tease it with, I want to jump into really dig into your guys transition from having a, probably a cashflow negative wealth building phase of your business to having to figure out, take the skills that you’d learned and figure out other ways to pay the bills, right. And, and, and produce cash to actually run a, you know, a solid business. And we’ll jump, jump into that and, and.
Sean Mulhall (47:19)
Yep.
Yeah.
Jack BeVier (47:33)
from like your strategic the tactical parts of that and also, you know strategically how you guys Made that transition and executed that transition. I think we’ll jump into those topics in the next episode
Sean Mulhall (47:44)
Sure, sure.
Craig Fuhr (47:46)
We’re going to end this episode with Sean Mulhall from SMD Capital Group here in Maryland. Stay tuned for the next one as we jump into how they’ve gone from where they were in this episode to really where they are today. Everybody just hang on here and tune into the next episode. This is Craig Fuhr, Jack Levere with Real Investor Radio.
