Mike Merrigan 0:00
But with a partnership, owning 25% later a year later buying them out. I understood I go, okay, I can get in involved in bigger things with the help of partnerships. I can learn things that I don’t know with help of partnerships. And so with that, I’ve always, I just have been trying to always to be a good person, identify other good people, surround yourself with those people in partnership with them. So as long as you have like minded beliefs, you’re all going after the same football. The partnerships have worked out, Bo & my friendship. We knew we had those things together for a long time just because of the way we thought and when we seen an opportunity in Texas with my brother who’s a partner of mine, we partnered up there and then just started doing more and more business through different partnerships.
Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant we are here to learn from the experts.
J Darrin Gross 1:03
Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals provide their experience and insight to help you grow your real estate portfolio.
Today’s interview is sponsored by Building Insurance and Risk when you invest in real estate. It pays to work with a real estate investor protection specialist to protect yourself and your investment from catastrophic loss. The experts at Building Insurance and Risk focus on real estate investor protection. They provide you with multiple insurance coverage offers and a side by side coverage comparison. To learn more, go to Building Insurance Risk.com.
Today my guests are Mike Merrigan and Bo Kort. After being best friends for 25 years, Mike and Bo started doing business together in 2015. He started purchasing buildings together in Texas. This partnership captured or catapulted their success. Together, the duo has found multiple eight figure companies in Houston motorsports cord industries and Mojave storage. Since the partnership began, 2015, Mike and Bo have built their portfolio of 43 companies have over $150 million in commercial real estate. They’re involved in 14 different industries, motor sports, industrial fabrication, special T services, construction and self storage to name a few. And in just a minute, we’re going to speak with Mike and Bo about the Power of Partnership, how to scale a business in any industry.
But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel. You can find us on YouTube at Commercial Real Estate Pro Network. And while you’re there, please subscribe. With that, I want to welcome my guest, Mike Merrigan and Bo Kort, Welcome to CRE PN Radio.
Bo Kort 3:20
Thank you very much appreciate you guys having us.
Mike Merrigan 3:21
Thanks for having us.
J Darrin Gross 3:23
Well, it’s my My pleasure. Looking forward to our talk today. But before we get started, if you could take just a minute and share with listeners a little bit about your background.
Bo Kort 3:35
We want to go ahead fire away Mike.
Mike Merrigan 3:38
Okay. So we live in a town Bullhead City, Arizona. We both graduated from the same high school, which is probably five miles from here. Yep. So we didn’t get far. But we stayed in town because we recognize the huge opportunity when we were young. The town was booming. People were moving here from Southern California people were moving here from Phoenix that is still playing out today. So I think we pretty much nailed that. We knew it was gonna be a booming community. And there was a lot of opportunity here. So I started out young. My last job was when I was 18. At one of the local casinos here across the river in Nevada, opened up a chain of video stores with the help of a cousin, again was my first partnership. And that’s what took me down the road of seeing the value of partnerships during that period of time also got involved opening up a small chain of laundromats. Again, that was done with a partnership. What it did, I also opened up an advertising company and got involved with real estate with my brother. But what what I realized early on just from the very first partnership is one was a total positive experience allowed me to get into a business that I was under qualified for knew nothing about and did not have the financial resources to open up a full fledged video store to go up against the big chains. Nothing was out there. But with a partnership, owning 25% later a year later buying them out. I understood I got Okay, I can get involved in bigger things with the help of partnerships, I can learn things that I don’t know with help of partnerships. And so with that, I’ve always, I just have been trying to always to be a good person, identify other good people, surround yourself with those people in partnership with them. So as long as you have like minded beliefs, you’re all going after the same football, the partnerships have worked out, Bo, nice friendship, we knew we had those things together for a long time, just because of the way we thought. And when we seen an opportunity in Texas with my brother who’s a partner of mine, we partnered up there, and then just started doing more and more business through different partnerships. So we are in multiple businesses, my primary business is furniture stores. So I have a small chain of retail furniture stores, just like you would think brown building on the side of the road, try to do the best we can. And been doing that for a lot of years. No bones, primary businesses, pools, he does that. And then outside of those businesses, we have multiple partnerships and continue to do that in real estate, multifamily storage business, and don’t see any reason to slow down. But that’s kind of where we’re at. And we’re still running hard as the day we started.
Bo Kort 6:08
It like Mike said, it’s been one of those things that our partnerships have allowed us to scale. And a lot of lot of times people hit us up in our circles and go well, how are you guys doing 43 different companies and all the real estate and everything. And a lot of it is we had a really great staff. But the true way to actually scale is to actually partner with some of those staff that show that they got a little something special about them. And that’s what’s allowed us to be able to get into the motorsports industry, we’ve got a large fabrication company out in, in Texas right now that’s doing work with Tesla and SpaceX and and we wouldn’t be able to do a lot of the things that we’ve done without partnering up with people that are special, especially in those service areas that we are not and we can’t be there on the daily, right. So it’s worked out well for us. Good.
Mike Merrigan 6:58
The other thing is one thing, I realized I have a retail business and I’ve had multiple different retail businesses besides the video stores, is I was always in companies that I don’t make someone a partner, or piece of the action or whatever, you’re always at risk of losing that person. And so when we have partners, we know for instance, the amazing partner we have in the in the, in the sports motorsports, that person is not out looking for a job today, he owns the company, we’re a partner with him, he is not out looking for a job. And when that’s not part of it, you always have that risk. And that risk can be huge, because they take all the DNA that you create and put all those years in and you train that person. And it still happens to us on a regular basis. And we don’t discourage people from moving on and better in their lives. Matter of fact, we encourage that, but it does hurt. And when you make someone a partner, after you’ve spent years with them, and you identify their abilities, it feels good to give someone a partner, let them buy in, and it locks them in and allows us to move on to the next project. So we get a win win, the partner gets a win win. So we try to provide business background and expertise. And we get partners with people that are expert in a field that we may not be and probably are not be, and most likely are not. But we know we know, and we partner with great people.
J Darrin Gross 8:17
I love the there’s two things I love that that I heard one is that you recognize, you don’t always have to know everything you can become a pain in and then work your way in. And like I said with the video stores, starting with 25% and, you know, yes, becoming the total honor. But the other side of that is the the your staff and recognizing those that have talent and offering them an opportunity to be a partner. Because I think that a lot of times what what’s not recognized and I think it’s just kind of the the nature of business, I think a lot of times the the boss got into business because he was really good at what he did. So he left wherever he was and started his own thing he or she and but but never understood how to teach the support staff. They’ll hire people and wonder why they aren’t successful. And you know, they answer Hey, works for me, why doesn’t work for you? I don’t know. And, but they don’t understand the value of training and kind of nurturing that, that you know that the support staff or whoever they need to really propel their business. And then from that recognize that value add to now not to lose that value, but also then make that make, you know, make more value for everyone. That’s I applaud you guys for having that vision and in that model and understanding you know, the not only the opportunity for you to continue to grow your business but have the opportunity to provide to your, your staff there that’s that’s, that’s incurred.
Bo Kort 9:50
That’s just it. That being said, I mean when you’re offering opportunity to them, it’s doing nothing but scaling you up. I just had a quick meeting this morning with a couple of our staff that are younger Guys, and I had a situation to deal with this morning and work and just personnel. And I told him I said one thing you guys like Mike and I have lived through the 80s and 90s. And then business in the 80s and 90s. And our parents were
Mike Merrigan 10:15
Old school people that didn’t see partnerships as a value.
Bo Kort 10:17
Mike Merrigan 10:18
Work harder, here’s your quarter raise.
Bo Kort 10:20
Yeah, Mike has a bunch of stories of his mom going, Yeah, you should offer them a dime raise or a quarter raise. And then my dad was the type that he was like, Don’t get too close to your employees, you got to make sure that you know, keep distance or whatnot. But honestly, like, that is out the window. And it’s just, it’s proven to us through the scaling that we’ve done, that our way of doing things and not thinking those 80s 90s style of managing people and not giving opportunities and keep all your cards so close to your chest that it actually prevents you from from opportunities that are out there. And we’ve got some really good people that have worked for us, that have allowed us to scale that we didn’t bring something to it. But they brought just as much if not work ethic, but you know, just their, their education that they brought with them their experiences they brought with them. And it’s allowed us to scale to give up some you know, you don’t have to have everything our way.
J Darrin Gross 11:14
I just think again, that empowering people and kind of that, like you mentioned the mindset of the past. So it’s kind of a fear mindset of it, and I see it and I’ve seen a bunch of it in my life is that? Well, if I give you some, then there won’t be as much for me. Yeah. You know, like a limited, limited amount of opportunity, as opposed to kind of an unlimited amount. And so, congrats to you guys for seeing that and implementing that. I don’t I don’t see that. That’s always the case in more so not the case. But that’s great. So, you guys, clearly you met in high school to get there, right?
Mike Merrigan 11:56
Bo Kort 11:58
Yeah. Mike’s a couple years older than me. Him and my dad, Mike was 19. And he’s in Rotary Club with my dad. And like
Mike Merrigan 12:05
I was trying to level up, man.
This is before the internet who’s the smartest, oldest guys that know the most? No. All right, I’m joined.
Bo Kort 12:14
Mike was there hustlin that, and I got to know him through my dad. And Mike’s got a younger brother that I went to school with. But Mike and I became close friends, right? 25 almost, you know, 25 years ago, 28 years ago, and it just always knew that he was in business. And I always had the drive to want to get into business. I took off college for a few years. But whenever I got back, he was buying up businesses that I was pushing on my dad to try and jump into a partnership with him and do something and buy a carwash. Mike had already bought it and and Mike and my dad knew one another from from Rotary. But that’s that’s how far back we go.
J Darrin Gross 12:51
Yeah. So I mean, Mike, it sounds like you’ve always had some sort of a hustle. Before doing the video store. Were you an employee? Or I mean, do you have paper routes? What would you do before
Mike Merrigan 13:04
I honestly don’t have a memory of not trying to hustle. I just don’t my memory doesn’t go back that far. So actually, when I was six, I was knocking door to door selling coasters that I had made with my sister. So I literally never have a memory of not having some kind of business. And in my head, the lemonade stand I took a lot more serious than most kids that have a lemonade stand and set up a table and I built the whole cart. I had it off, my dad had a shop in so I was able to build a you know, put on bid on the back of my wagon, that tote. So I was if we took a vacation to Mexico, I came back with all the pop bottles in the back of the camper van we had or whatever. So I’ve just always been in business. And when an opportunity came, I knew I was looking for an opportunity. And I mean I was like consciously looking and I was at a funeral and overheard my brother who had struggled with alcohol for a while being drunk talking to a cousin and I go I just overheard and I just listened. Hey, he’s looking for a location. I came back did all the research and all the right things, call them up. He was in Fargo had a chain of video stores. And I go, I don’t know if you remember and I’m 18 years old. So it’s a kid. And I go but you said if I if you wanted to move up this way, and I had everything all my ducks in a row and he just he was a man of his word. And that taught me a lot. You know, if you say something you do, and he jumped on a plane and looked at all the research I’ve done and back then if you found a location, you’re pretty much making money if they were really successful video store business back then so but he was a man of his word. And a year later he informed me that I because I got my feelings hurt. He wants He wants me to buy him out. And he goes no, because business is a commodity. It’s meant to be traded and sold and such. So now you’ve got your business going, I live here you’ve got to go and now it’s time for you to buy me out at a fair profit. And this is how I’m gonna let you buy me out. And I’m like, alright, you know, I was scared to death. You know, I didn’t want to lose them, you know, because I felt like I needed him even though it was embargo. But anyways, he made it available for me to purchase them out. And then it just got me thinking right going forward. You know, he’s kind of set the base for me and taught me a lot of things. about, you know, living below your means and not getting fat with a company when it is doing successful, I made a lot of mistakes. And that cost me, you know, I didn’t know how to pay my taxes or 940 ones or anything. So I did make mistakes. And I had to get caught up on penalties interest that taught me how to hire a bookkeeper, how to hire CPA hired some of the things that he thought I already knew, he didn’t realize that I was a kid. But it was successful, I was able to learn a lot from it. And we’re still learning as we go on and try to do better every day. But partnerships have definitely helped this IQ scale, and I’m getting different things like we said before, so I love partnerships, and I love trying to attract quality people. And so that’s what it does. When you put some standards down, you live your life, right, you’re gonna attract like minded people.
J Darrin Gross 15:44
I love the Well, one of things I’ve always loved about real estate kind of is the kind of the Wild West aspect about it, where to where buyers and seller meet. That’s, that’s the price. Similar to what you you talked about, you know, you got into business not really knowing, I mean, you heard about it, you put it together and you had their support. But when they you know, ready to say no, you can fly on your own kind of thing. All those lessons you learned and I feel like that’s something that’s not always appreciated or understood is the value of the lesson learned through the mistakes. Whereas I feel like a lot of what is out there today is get in, build it fast, grow it fast and sell it. Everybody’s looking for an exit. Yeah, you see so many, like, I think, probably the the whole.com Boom, really kind of, you know, expose us to all that. But I see in all sorts of businesses. I mean, I know, you know, in insurance that I’m in, there are people out there that that their sole goal is to build a book of business so they can sell it. It used to be insurance was kind of like a, you know, Johnson and sons or something, you know, you had sort of a multi generational business. But it seems like that’s not, you know, not as prevalent.
Bo Kort 17:13
That’s everything today, I think, right? I mean, you get on social media, and you check it out, and all these young entrepreneurs that are flipping homes, and they’re doing this and driving Lamborghinis. And that’s why we started doing our social media and started opening up and helping people out and doing some coaching in that, because we knew that we put the groundwork in and made the mistakes and figured shit out on our own. And we’re long term hold Guys, Mike, Mike and Dino and myself. My older brother Dino lives out in Texas, but we own all our buildings and businesses together. But there is probably 98% of everything we’ve ever bought together, we still own Yeah, and it’s because it’s not it’s not a quick flip. It’s a long game, especially commercial real estate. It’s a long drawn out game, you got to be patient, and discipline and persistence. And again, eventually that river money will come but it’s not coming right away. It’s coming down the road.
Mike Merrigan 18:08
And we’d like to expose that right away with people we work with. We know nothing about getting rich, quick, nothing, don’t have one change of subject tune out because we if you’re tuning in for that for us, we’re the turtle, we’re, we’re slow. It says you got to pay down debt, you got to wait for appreciation to happen depreciation at the end of the year. Everything is a slow thing and real estate and these people that anybody that was flipping houses, hey, my hat’s off to him probably made a lot of money. But if you’re living off that flip money, where are you at today? That’s a problem. If you’re you’re knocking on our door wondering, hey, you know, a kid, you got something for us, Hey, you flipped 40 homes in the last six years and you didn’t keep one of them. You didn’t think about keeping one and that happened in our office we have a lot of people come into our office and for advice and coach and we’d love to have an open office policy but we look at a lot of people that are you know, 40 50 years old looks like a deer in the headlights because they didn’t buy the four Plex and just hang on to it use it for travel money later on. And then maybe bought another one now you got two of them now you can do whatever you want when you retire.
Bo Kort 19:08
Even if you buy it wrong.
Mike Merrigan 19:08
Even if you buy it wrong times gonna fix it but fast stuff we’re not in anything fast.
J Darrin Gross 19:12
No, I love it. You’re kind of preaching to the choir. I my wife and I have been kind of the slow skis. We’re definitely in the right lane, the far right lane. But just you mentioned a couple of things that you know you can you can buy wrong and still do well. Over time. Yes, you know, raise my hand on that one a couple times. And also that I think what gets lost in what you said about pay down the principal when interest rate or interest rates have been so low for so long. Nobody thought about what’s the cost of his capital just you know, just you know, it was all about you know, getting the deal, gross it up kind of thing then sell it to the next guy you know, you leave some meat on the bone or, you know, that was kind of the thing. Well, where are those guys? Now they’re they’re selling at a discount because all their you know investors want their money back or, or whatever they are they they can’t even afford to keep it based on the way the loan was structured based on the financings come, you know, coming due and, and so they’re whatever they put into it they’re not getting the return that they were seeking. But if they didn’t have that requirement to sell or if they could wait out that thing, they would benefit, like, like you said, you know, over time the appreciation does happen. I know. I’ve said this many times, but the first time I got a rental, I didn’t even understand depreciation, I didn’t understand appreciation, all I knew is that if you were renting from me, and you stayed in for 30 years, I would have, you know, something that was the limit of my understanding of your, because that’s all I could see in front of me was this mortgage, you know? And so I, I love that, that kind of mindset, because I think, you know, Warren Buffett, everybody cites him, you know, every time I tune into him or listen to him or read something, it’s never about selling, it’s always a buy and hold position. Forever. And, you know, so I think there’s, there’s a lot of wisdom in what you said, you know, and just kind of the slow growth to wealth. And, you know, kind of the, you know, the pay down the principal, because I swear that it’s, it’s really sexy to, to take cash out when loans are, or, you know, free. But when they adjust the rates, and you’re paying, you know, nine or 10%, you know, how sexy is that to be paying, you know, how much fun is that?
if you didn’t buy, right, you’re, you’re getting ready to lose it. Because you can only hang on to a loser for so long, it starts tastes terrible. So you’ll get rid of it sooner or later if if you’re having to add cash to it. But one thing like what we preach to ourselves, and our partners that we’re in business with, is you can only buy it once. No one guy told us that a long time ago. So we kind of live by that. And so our goal has always been to try to buy properties under value, and then add value to them, keep them long term and let let the depreciation do its job, let the rents go up and just keep them long term. So
Bo Kort 22:25
We just did a recently, I mean, we just did a deal. That’s it’s in our own backyard, we got to the point, we started out with small light industrial buildings, you know, 300,000, maybe six or $700,000. And then we started doing bigger deals and buying strip malls and big box stores and in larger storage complexes. And we’ve said, we’re not gonna do the small deals anymore. But even when the small deals come back to us, we said that for about six weeks, and then next thing you know, we’re buying another small deal, we bought one just in our own backyard. And we probably own nearly 50 buildings in our local community here. We thought we bought them all. Now, we found another one. And even on this deal, we bought it $200,000 Under value, it’s already got somebody leasing it, the lease is 50% of what it should be. But we still bought it because it’s only got two more years on it. So it’s not going to cash flow for two years, but it’s going to be breakeven. But after that two years, we’re sitting day one Wait, we close escrow, we made $200,000. So we’re $200,000 richer, and the day that we close escrow, we will sit on this thing for the next 24 months and breakeven with our $200,000 sitting in our savings account collecting only appreciation. But in 24 months, we’ll raise the rents, we’ll make it to where it cash flows. And it’s still paying down debt. And we’re not planning on taking checks anytime soon. So someday we will we’ll break the break the dam loose and start collecting the cash flow coming down the river. But for right now, it just makes sense. You know, if we can get into the deal cheap enough, but in in anything.
Mike Merrigan 24:03
We’ll put in our inventory there and it just, you know, we don’t have anything that costs us money or we don’t buy it, you know? And so it’s it takes talent it takes we didn’t realize, you know it is people go well, that’s hard to do. It is hard to do. But guess what, if that’s what you do for a living, if that’s what you do is find undervalued properties, you get good at recognizing them, you get good at finding them just like go home, start playing darts tonight, guess what playing every night, you’re gonna be really good. So that’s how we done it. So we just got really good at identifying properties that have we called the 3ds. It’s either divorce death or distressed properties. And if 3ds we catch one of those, guess what, we got a good chance. And we’re very patient. So we build relationships either with the old guy, and then a lot of times they’ll pass and then we’re talking to the kids but we’ve already got such a relationship that kids know that know about us, or else we’ll just call now I’m not ready to retire yet. Three years later, but we’ll check in every six months and it happens all the time. So we don’t bug him we just to become friends with them just were inquiring about their business and or property. And people, what people don’t realize a lot of times is people are emotionally attached to the property, especially older generation. So they like to sell it to someone they know is going to go in good hands, they see what we’ve done, we always add value by paint by new fences, gates, whatever, whatever we’re going to do, we try to add value to every property. So when you tell the old guy the different different buildings you bought, they feel good about, oh, this legacy is going to carry on, because a lot of times our kids aren’t interested in their properties or whatever. So we make it easy for him. A lot of times these old guys, they’ve been in business so long making gears or awnings or whatever the hell they do. They don’t even know how to list a property. It’s like going to talking to us Carswell, they don’t want nothing to do with it. So those buildings will sit there and deteriorate, we get a hold of them, they haven’t been in them. Sometimes it’s like going back in time, when you walk in these buildings, the calendar from 1999 is still hanging on the wall. It’s happened multiple times. But we befriend those people give them a lot of times we can give them their asking price. Because they only paid this much for it 30 years ago, they want this much. No problem, Mr. Johnson, we’re going to take care of your property, we get to work on it right away, they stopped by a lot of times, they’re happy about whatever. So we try to make it easy. And we try to do the right thing and get those buildings back in action.
Bo Kort 26:15
We got so many stories of that we I mean, last year, I think it was last year, we bought the eight Plex from the old guy that’s like he’s 84. And he comes in and Mike. I said, Well, we can give you a small down if you’d like to do it on our carrier whatnot. And, and Mike had thrown out, maybe we give you 100 grand and it was like 800,000. And the guy goes, Why don’t you know, my boy, I don’t even need that much. You know, why don’t you give me 50. But what but the thing about it is, is a lot of people, especially young cats, watching Social Media and wanting to get their first investment deal, they don’t understand it’s a long game. It’s a relationship game. And then just keep those contacts and keep steady with those people and build relationships and anything, anybody that’s involved in sales, people sell, it’s not the product. And so in investing in real estate and commercial real estate, which we love, it’s it’s a relationship game.
Mike Merrigan 27:09
And we have a passion for it. So it’s not like these, these old cats, they’re, they’re smart. They’re not you know, they’re smart guys, they’re not going to they’d rather let the property sit there forever. So they’re not willing to take lowball offers. So that’s not our style, we’ll come in and chop them off at the knees. We look at their property, talk about what their values are. And we we work with them and make it easy for him. But we don’t we don’t go in there and go, you know, mass. We don’t have a mass mailer going out? No, we don’t have any we don’t have a mass phone calls went out. We strategically pick areas we strategically, strategically pick the types of buildings and show total respect and love for the real estate. And they can see, see it and sense it,
Bo Kort 27:47
Just like you said, it’s the Wild West is way. That’s what makes it fun. They say all the time. We’re like cowboys. I mean, honestly, we don’t, that we’ll look at things off cap rate and stuff like that, but a lot of our acquisitions and we buy bigger projects now. So it’s not it was an old guy that we get a chance to talk to. But anybody that wants to get started, that’s the best way to start.
Mike Merrigan 28:08
Keep it in your neighborhood within 10 miles of your house, and find a piece of real estate and practice with with striking out, go to 30 different buildings, find out who the owner is find out what the taxes are finding what the insurance are, find out what the rents are going for, whether it’s multifamily, or if it’s light industrial, or if it’s storage. And then guess what, don’t plan on buying it. Just use it for practice. Oh, now we know how to gather that information. Now I know everything that’s happened in the 10 mile, build a relationship with a hotshot realtor that you can show respect to and go, hey, guess what, in the next 24 months, I want to buy a piece of property and start building that relationship. And so that when they have a good deal, and you’ve got a relationship because every realtor knows a cousin, well, if you have any great deals, let me know. They ain’t calling nobody, you know, but we literally have people call us almost on a daily text message, or whatever. If something goes up for sale in our area, either in Texas in our area that we’re in two different cities, there are here, we know it before anybody else because they know we can close deals we know we’re not goofing around, and our passion for the properties.
J Darrin Gross 29:12
I love the kind of the old school approach. It sounds like the Rotary meetings paid off there. So I’m assuming who which one of us president of the local Rotary group right now are you?
Mike Merrigan 29:26
Honestly, I left after probably a short period of time, I just realized I wasn’t ready for that. I I was to hustle and man I was I slept standing up and it was just I needed to be at work.
J Darrin Gross 29:39
But I think you know, all kidding aside the networking.
Mike Merrigan 29:43
We still use those people today in our network that I met at Rotary Yeah, truthfully.
J Darrin Gross 29:48
Right. And again, it’s the power of the I’ve got a client that always talks about, you know, real estate’s a belly to belly business. You know, it’s as much as the social media is kind of the I don’t know, it’s the opportunity to get your word out there. And if you’re, if you’re trying to sell something, it’s a, it’s a vehicle and you can’t ignore it, the yellow pages, I don’t even know if they make the yellow pages anymore. But, you know, social media is definitely the way you get the word out if you’re trying to attract people. But I think what you’ve you’ve hit on that I totally appreciate is the power of the network, and I belong to multiple different networking groups over the years. And those relationships, whether or not I’m still a member of that group or not, are people that I know I can count on. You know, that whatever they do, and likewise, you know, me as an insurance broker, they, you know, still reach out to me. So, I think that that’s, that’s a big, that’s a big takeaway, I want to make sure people understand that the power of networking, and then also just kind of as we were talking about the patient, you know, the patience that capital has, and the patience that you guys exercise in, in acquiring deals, and also nurturing those relationships. Because, you know, if you think you’re the first guy to call up somebody that that has a property offering to buy it, you’re the first guy to call, I mean, wake up. I mean, I get, I’m sure you get solicited all day, every day, every every property you’ve got, you know, yes. And whether it be the the phone call, or the the email or I mean, you can get somebody’s that or text now, I’m like, I don’t know how they can get my number. But, but, you know, it’s not new. And I think the reason why those those systems work, is it’s a numbers game. You know, if you’re willing to put in the effort to approach 1000 people and get, you know, to two people that are listened to you, then that’s probably, you know, reasonable opportunity for you. But if you’re trying to, to build your wealth, your portfolio in a community that you live in, I don’t know how how networking can be topped, you know, getting to know the people. I mean, that’s that’s, that is, you know, really smart. I’m, I’m kind of curious, you mentioned that people all the time are contacting you. I’m assuming that it’s kind of one of those momentum things as well. You got your first one, and then you found the second one. And as word gets out that you guys are, you know, in the acquisition mode, or that you’re good operators or that, you know, you haven’t screwed anybody over. That, that probably lends itself to more people that are in a similar boat that maybe you didn’t know, that knew somebody that sold to you, or coming to you is that you find that to be the case?
Bo Kort 32:55
All the time. I mean, it happens all the time. You’re right. I mean, it happens on the daily. You know, like Mike had said, we’re getting a phone call before stuff even hits the market here, we’re getting ready to put this on the market. But we want to find out if you guys wanted to take a look at it. Or we have one old guy, tell another old guy that might have a building. And then next thing, you know, they’re contacting us to say, Hey, I heard you bought those and just want to let you know, I’m gonna retire in the next couple of years, you’re gonna come down and see me. Yeah, so now a lot of that happens.
Mike Merrigan 33:22
And we realize that most, and I mean, most, most, most, we don’t ever buy him. We don’t buy most of them that come to us. But it’s nice to have the first option to look at him, because we are not retail real estate buyers. So like, say, our deals, and especially with interest rates where they are, you really have to be careful. And you have to be really diligent to make sure you know what the value add is going to cost. So we don’t buy anything retail. So we have to say no to most things, but every once awhile, someone needs a close, quick, close, or for whatever reason we make them work, we make it easy for them. And believe me, if something works, well, we’ll make it work. But we don’t try to force some of the work that’s not in our, in our range of what we do, you know, we have a criteria.
Bo Kort 34:05
And we’re just very clear to me that we don’t there’s no games or anything. Whenever we anybody that’s a banker in town or realtor or anybody that’s done business with us. It’s very cut and dry, especially with Mike Mike, Mike sets the tone right out of the gate. I’m not gonna I’m not gonna massage this at all, it’s either all good or or we’re not, you know, we’re not gonna move forward on it. So
Mike Merrigan 34:26
And that’s another thing about partnership Bo is really good at the longer game than I am. And some of the relationships have different not some, they’re all different personalities. And a lot of times he’s better at those type of negotiation. So I’ll just instantly we we’ve been know each other so well, it’s easy to tell who should be talking now. And so when those personalities, he knows he can build those relationships better on some people than I can if I got a sharp, you know, I like the grumpy old guys or the people that are a little sharp or as far as you know, edgier I can jump in and shoot back and forth and I’m never gonna stutter they’re not going to I’m not going to slip when they’re Need massaging we give them to Bo. He massages them.
I’ll talk to grandma for.
And he does. Yes. Like my eyes will glaze over. I go when you went in for the kill. He goes into more conversations. Oh, I’ll be like, No, tell him this tell him that he goes, No, no, no, I got. No, it wasn’t anything I’ve seen. But that’s partnerships. Right. I mean, it’d be my way I wouldn’t get the properties. You do we split it up.
Bo Kort 35:27
Yeah, exactly. Well,
J Darrin Gross 35:29
I mean, the power of the partnership is that, you know, you get both strategies, as opposed to just the one. And I mean, it’s beautiful the way you guys are making that work. I’m curious, you’ve mentioned kind of some seller financing out of the number of deals that you you’ve done? Is there a Can you guess on how many of those that are percentage wise, how many of those have been owner financing?
Mike Merrigan 35:56
Just real quick, let Bo go after this. There’s not one that just so your audience knows. We love owner finance. And everybody gets asked that and so many people don’t use that as the first option. So I’ll let Bo take it from here. But we love owner financing and the percentages, I’m not sure. Maybe you have a better idea of that?
Bo Kort 36:12
I would say well, even like dealing with community banks, we didn’t start dealing with community banks until probably around 2016.
Mike Merrigan 36:20
There was a period where they went loaned us money. Yeah, the day after the recession. We are, you know, no one wanted to do business with guys like us.
Bo Kort 36:25
Yeah. So we, we had some hard money guys that we’d established a relationship with and gotten their money back to them pretty quick. And they were always really happy with us. So we had that option in Texas. But I would say probably 60%, we will pit or we’ll pitch it on all of them. But I would say before we started doing business with the community banks and not using hard money, price, 60% of them, I would say probably 30 or 35 40% of them now we get owner financing on you know, we they and then and then we coach people on that also we we have a zoom call that we do once a week and and we got a good network of young entrepreneurs and real estate investors that they’ve contacted us they were trying to get their first storage facility, we actually coach them through getting owner financing in second position and keep Zero out of pocket on their first storage facility. We’ve got about 50 different storage facilities. And these guys are like, alright, well, we want to storage now we got some multifamily. We want to storage on storage, you want to build like you guys did Mojave storage. So they found identify one in their local 10 mile radius of their community. And when I talked to the realtor that and then I told him, I go talk to the owner, you get out of the military to get to the owner. And I go but before I tell you that he is going to tell you know wholeheartedly that he does not want to let you talk to the owner. So you got to come up with a good reason why whether it’s the doors and you want to check out the hinges work on them or whatever it might be, you got to find some inventive way to talk to the owner, thank you. They got from the owner, the owner loved them, told their story about them buying other properties and the properties in the area and how well they’ve been dealing with it. And ended up long story short, they got the loan from the community bank went back to the owner that they established a relationship with once again, our sim which he could have said no if he would carry the downpayment, they said sure, I’ll carry the downpayment. Alright, you have to be in second position. Are you okay with that? Yep. Don’t do that. These guys bought their first storage facility with zero money out of pocket.
Mike Merrigan 38:21
And that’s the best part about real estate like you say in the Wild West, it is the Wild West. It’s just what to you know, male or female here, but it’s just what two dudes agree on right? Hey, I’m gonna take your car for 100 bucks and take it across country All right, go ahead, you know, or can be a million dollars it’s just what two guys sitting there ladies sitting there come up with and then that’s what makes it so fun. Is like what are we going to be like get this for how are we going to do it? How are we gonna make both parties happy?
J Darrin Gross 38:46
Yeah, I think the the uninitiated and I, I know when we bought our first house was all about the sign in the yard and, and, you know, kind of following the protocol kind of thing. But my first investment was truly, you know, kind of a man I didn’t think I was gonna buy it I you know, customer was telling me that he wanted to go buy something else and all the while I had been recognized and all the money he was making, I said I gotta get into this, you know? You want to get in I’ll tell you this one like what what you know and and but it was it kind of a just really opened my eyes to just how the thing works. And you know, the opportunities and it’s all about how a willing seller and a willing buyer. It’s where they meet. And I think the key operative in that or the key word in that sentence is the willing because there’s plenty of unwilling people and I’m sure you experienced that where people come with a price doesn’t work for you guys. But if you have a willing seller, I mean all everything’s possible. And a
Bo Kort 39:49
A lot of the times they’re not willing at first and so let people know that that can’t happen. They said no. Yeah, me knows I’ve gotten I’ve gotten so many no’s, I would say 90% of the properties that we bought, and we had a personal relationship buying them started with a no.
Mike Merrigan 40:05
Bo Kort 40:05
The one the building we’re sitting in right now we have a big flex space at 64,000 square feet. Mike and I go, we started rent one of the buildings, I said, but we need to beat the owner when you got to call the owner. So figured out how to get the owners number from the guy that’s managing the property, call the guy up, hey, just want to let you know we rented unit C and really enjoy it appreciate the lease and thinking that we’re going to extend that lease. And by the way, at any time you think you might want to sell this building, we are interested, I love your building. It’s perfect. I mean it. We’re in this type of space and Houston. guy goes Bo, you know what, I’m just not ready to sell right now he goes, I like my building. And it provides his best friend, which was like, in his late 70s was managing it. It was more providing a job for his buddy. Well, that guy ended up a few months later wasn’t able to health health issues. And the guy called us back up he goes, All right, ready to sell the building Bo. I said, All right, perfect. You know, let me know what your price is. We bought this building for 1,350,000 from this old gentleman. And we ended up putting another piece of property for collateral didn’t even put anything down on this had another piece of property worth 300 or whatever they was paid for payment. And we’re getting ready to expand on this building just got an appraisal on it for 6.4. That was all through a phone call and a relationship.
Mike Merrigan 41:28
And anybody else in the 64,000 unit could have called the owner and asked them to sell nobody else called. And when we got a no we still called a couple more times. And then he did eventually call and we gave him I think his asking price.
Bo Kort 41:41
Yeah, exactly what he asked.
Mike Merrigan 41:42
So you give a guy his asking price. But at the same time he was on the East Coast, his buddy was out here managing it. He’d never even seen this building to this day. He’s never seen it. But that’s just goes to show there’s opportunity there. As long as you inquire as long as you network as long as you’re always looking. But if you’re not always looking and I never can find a deal like that. Because that’s not what’s most important to you. You’re most boring to us Monday Night Football, I guess or whatever you’re into. But that’s not what we how we roll. We were looking for things.
J Darrin Gross 42:11
I love it. Hey, I wanted to ask you the investment strategy, obviously is kind of a long term hold. You mentioned value add a number of times. And I guess asset class, I’ve heard you talking about flex, industrial, multifamily, retail, is there any asset class that you guys haven’t invested in or you swear off or won’t do?
Bo Kort 42:36
Mike Merrigan 42:36
We have never done section eight, you hear a lot about that. And so I honestly, I just haven’t gone down that rabbit hole to educate myself on it. So I just don’t know a lot about it. But um, we just we like real estate and it’s all you know, you break everything down to a lemonade stand in your head, you know, so there’s not much we won’t try. One thing we didn’t learn in the Vrbo thing when everyone jumped on that we got involved in that. We learned in our community, it’s a it’s a seasonal business. So in our opinion, in our area only, it’s a terrible business to be in. Because you make a lot of money in one season, you make nothing in the other and your bills are always moving forward. So I would just advise anybody that’s into Vrbo, it was sure neat, when that came out, everyone had to try it. And I was one of those people too. But then later on, I realized, you know, I like the concierge service downstairs. I like the the food there. I like all the amenities when I travel, so we kind of quit using them. Unless we’re having a family get together or something. We’re gonna have large group of people. So we’ve sold off most of our Airbnb, just because it wasn’t a space that was profiting the way we thought. And I just advise people, anything on the internet, just be careful because there’s no there’s nothing easy. Nothing’s easy. Airbnb is not easy. And a lot of places now it’s not working. So be careful. But there’s not much we won’t get into as far as real estate.
Bo Kort 42:40
J Darrin Gross 42:52
I think the Airbnb thing is very location specific, and you gotta have some sort of a year round attraction, like you’re saying otherwise, I had, it’s always been my resistance to any kind of vacation rental. If it’s not vacation, now. I’m paying the bill. So I like that. So. But hey, guys, if we could like to shift gears here for a second. As I mentioned by day, I’m an insurance broker. And as such, I work with my clients to assess risk and determine what to do with the risk. And there’s three strategies we typically consider. We first looked to see if there’s a way we can avoid the risk. And that’s not an option. We’ll see if the way if there’s a way we can minimize the risk. And if we cannot avoid nor minimize the risk, we look to see if there’s a way we can transfer the risk. And that’s what an insurance policy is a risk transfer vehicle. And as such, I like to ask my guests if they can look at their own situation and identify what they consider to be the biggest risk and it could be Um, fed rates could be the, you know, the market could be the local laws or you know, jurisdiction, whatever, whatever it is that you consider to be the biggest risk. And again, for clarification, all I am an insurance broker, I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you, Mike Merrigan, and Bo Kort, what is the BIGGEST RISK?
Mike Merrigan 45:32
I’ll go first, if you’re, because you’re an insurance, one of the best feelings I’ve gotten, as far as an insurance thing, and looking at risk is once I had it explained to me, once I did get some assets, an umbrella policy gives me a lot of comfort, never had to use it. But I feel like it’s a good investment. So if you’re talking about literally insurance, I like the fact that I have an umbrella policy to protect things that I might not be thinking of. So I love having that. And I think it’s a good value. And I’m glad to have it, and I don’t think I’ll ever not have it. On the other side of just generally speaking risk. One of the things that I learned, the biggest risk is not taking a risk, not taking the chance of buying real estate, I don’t care, then buying an index fund, throwing your 10% every year, or every month, or whatever. But the biggest risk in life is don’t take a risk. And guess where you’re going to end up. If you can draw a picture, you’re going to be just fine, you’re going to be 30 pounds overweight, you’re going to have a retirement that’s going to be small, and you’re going to just live this life, as opposed to take a few risks. Get a little older, take care of yourself, physically eat where you want, stay where you want, live, where you want, do what you want, it’s a lot happier life, don’t take a risk is the biggest risk and take in my opinion.
Bo Kort 46:48
I agree completely. Gonna be hard to follow that one because I wanted to so
Mike Merrigan 46:51
Drop the mic!
Bo Kort 46:56
I would say the other thing that I was thinking of is, is that in risk, and in real estate investing, is just staying disciplined and don’t get emotional over things. And I think partnerships help in that, you know, like Mike talked about, he’s good at one thing I’m good at another. Another thing that we lean on each other about a lot of times is we’ll come up with a deal, and we’ll have a feeling about it. We’ll be in the office, and we’ll spend hours just going over it and this and that. Okay, what do you guys want to do. And then one of us usually speaks up and goes, Let’s wait till tomorrow. Let’s wait till tomorrow. Nobody makes a decision that we’re supposed to call him tonight. So call them back and let them know, we’re not going to talk to him till tomorrow. You know, I mean, just let them know, something came up, whatever it is, and we sleep on it, we come back, and just make sure that we’re not being emotional about the decisions that we’re making. And because of being like that, and a lot of that is Mike’s good about that to hold us all accountable for for things like that. But um, it has saved us tremendously on not making mistakes. And mistakes are good, and you learn from mistakes. And that’s why you start small so that you don’t have the type of mistakes that crumble you. But you educate yourself from those mistakes and it keeps you to be disciplined and not get too emotional about things. And your old self will be thanking your ass whenever you’re whenever you got the money coming to you. Because you were disciplined, persistent and
J Darrin Gross 48:19
Well idea that that’s, those are two great things, you know, that kind of the emotional thing and I love that, you know, given an extra, you know, sleep on a kind of night kind of thing, because it’s, that’s, that is I can tell many stories about that. And, and it’s all about that reaction that I had I just like, backed up and check the check what I was doing there wouldn’t have made the mistake. So good words. Hey, Mike and Bo where can listeners go if they’d like to learn more connect with you?
Bo Kort 48:52
Best place to find us is if you go to Instagram, it’s at Mike and Bo spelled out a and d. An easy way to do it. And Mike and I are horrible about email. But if you text us, we can get right back to you. So if you text us at 928-605-4335. Again, that’s 928-605-4335 we will get right back to you right away. We offer a great coaching program. We love doing what we do. And we love sharing our knowledge with people. And so yeah, if you reach out to us on Instagram at Mike and Bo or shoot us a text, we’d be sure to like to get back to you.
Mike Merrigan 49:32
Or send us a deal. We’ll we’ll analyze it for you and help you with it or work with you on it. So we’re always looking for new deal.
J Darrin Gross 49:39
So Well, Mike Merrigan and Bo Kort, I cannot say thanks enough for taking the time to talk today. I’ve enjoyed it, learned a lot and I look forward to doing it again soon.
Bo Kort 49:51
Thank you very much. Appreciate the time.
Mike Merrigan 49:52
J Darrin Gross 49:53
All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Number, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks, CRE PN Radio.
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