13 Apr Ep. 32 Brian Klarich of AB Rents and ProperVest-Contractor-Flipping
In this episode, Adam talks to Brian Klarich of AB Rents and ProperVest about being a contractor, how he stays motivated, flipping houses, and how his Snapchat game got to be so strong. Email questions to PODCAST@HermannLondon.com
0:50 There is low inventory.
1:29 Hermann London’s goal is to sell $50 million in real estate this year
1:49 First annual Hermann London Easter Egg Hunt at Deer Creek park
2:28 There are a few Hermann London Realtors looking for agents to join their team
3:10 Adam has a summer intern from Mizzou
3:48 Adam introduces Brian Klarich from A+B Acquisitions
4:43 Adam and Brian own a company called ProperVest
7:09 Brian hates big real estate seminars
13:42 The real learning begins when you actually buy that 1st property
14:44 Brian’s 1st houses were problematic. Thank God he didn’t have a wife or kids at the time.
18:28 ProperVest is perfect for investors who are not experts in every aspect of real estate
22:25 The horror stories of a recently acquired 30 unit property that Brian is fixing up
26:21 What should someone do instead of going to a big seminar
32:08 The first time Adam and Brian met
37:22 Using ProperVest to diversify investments
38:30 Who lives under Brian’s roof
39:22 When is Brian at his best
39:40 What is Brian’s favorite blog or podcast
41:00 What is Brian’s guilty pleasure
41:35 Who is Brian’s mentor
46:40 Follow Brian on SnapChat under @SenatorEricJame
Adam-Welcome everybody to podcast 32. This is the St. Louis Realtor Podcast, live from the rooftop of the Hermann London Real Estate Group in beautiful downtown Maplewood, Missouri. Today is April 11th, 2017. Like always this is going to be a great show and we’ve got a good guest. Some amazing things have been happening at Hermann London lately. We had an awesome meeting today. We talked about listing property tips, avoiding problems in working with buyers, and low inventory. There is still really low inventory in St. Louis meaning there is nowhere near as many homes to sell as there are buyers. If you are a buyer you are having a tough time finding a house and if you do find one there are probably multiple offers. If you are seller you are listing your property and getting a great price for it or you are one of the frustrated sellers in the area that is still not selling and you are wondering why you are not getting more for your house. Hermann London Group is doing pretty good. Our goal is to sell $50 million in real estate this year and we are going to need all our agents to pitch in and sell more homes if we are going to get there. We need more Realtors to come and work at the company too. If you are out there listening and are thinking about Hermann London, give us a call. We’ve got some great programs and events that we are working on. Speaking of events, thank you to everyone listening who came out to our company’s 1st annual Easter egg hunt this year. We had it at the Deer Creek Park in Maplewood. We had tons of kids and we had to go and get more eggs right before the event because more kids showed up than what we expected. It was a great day for it and thanks again to everyone who came out. That’s one of our few events that we invite past clients to. Usually our events are for clients and their significant others so it was great to see past clients there. We have a few agents looking for a Realtors to join there team. There is one couple looking for someone to deal with leasing clients. Ideally that Realtor would be someone who would be willing to do that for a year. My assumption is that this Realtor is sitting somewhere wishing they had more business and wondering why they don’t have more business. If they would come and join the agent team then they could be running around crazy all day showing tenants property all over the place. If you are a Realtor looking for more business, it is a great way to build your database and a lot of those leasing clients will end up buying property. Lastly, I’m excited because I have a new real estate intern starting. He contacted me and he is at Mizzou right now and he wanted a summer internship so we’ve met and talked a few times. Our guest is going to be excited once he hears about this because I’m going to have this intern do a bunch of different stuff like looking into buying LRA property and CDA property from the city. He will find out how to find more condemned and tax sales properties.
Brian-That is exciting!
Adam-Our guest here, Brian Klarich, and I want to buy more of these properties. Welcome, Brian Klarich; world renowned real estate expert. Did I say Klarich right?
Brian-Correct. It’s Croatian. Thank you for having me.
Adam-I’d like to let you introduce yourself a little bit but first I was going to list a few things that I know about you. On your resume, you own a company called A-B Rents.
Adam-A-B Acquisitions, which has a division called A-B Rents?
Brian-It did. We have combined that into the property management company now. At one time we did just provide leasing services and A-B Acquisitions provides quality contracting services.
Adam-That’s the company that does the big construction projects for other people. You are also a co-owner of this amazing company called Proper-Vest.
Brian-Great business partner.
Adam-That’s me! Brian and I have owned Proper-Vest for a little over a year. We’ve done a couple rehabs and I’ve talked about a couple of them on the show. You are a hilarious snapchatter. You are very good. When I was a new snapchatter I used to think you would only send them to me.
Brian-They kind of go everywhere and now I’ve got kind of a whole my story thing that you can go on. I’ve got a couple new good ones on there.
Adam-What about the ones where you were doing the dating profiles? Are those on there?
Brian-They are not but those were with a filter that made me look like a heavy-set mid-40’s male instead of a heave-set mid-30’s male like I am and what that did is open up the door for me to make video dating interviews to meet potential mates.
Adam-Have you ever heard of Nardwaur? He is this guy that is super into music and he interviews people about stuff from their past and the guests freak out. That brings me to my next point. Brian here is an author of a book called Kingsley, a story about a caterpillar.
Brian-I have a children’s book called Kingsley. It’s for the 12 to 14 age group and it’s about purpose and not losing your meaning of life at a young age. I have another book coming called Gaggy Gator. That is for your before bedtime little kid book. It is for kids struggling with a disease or family problem that may seem hopeless. The alligator goes through a series of things and comes up with a cure. That’s a quick bedtime read now that I have a 3 or 4 year old. Kingsley would take 10 minutes to read and who has that kind of time.
Adam-Get those kids to bed!
Brian-After bath time you have to clean up so much water that you don’t have time for a 10 minute story.
Adam-Brian is an all around good guy. You are also a hater of these big real estate education seminars.
Brian-I am a hater of misleading people in any capacity. As the ebb and flow of the real estate market goes, you’ll notice a lot of cowboys coming to town to sell their snake oil with real estate programs. When we talked about opening Proper Vest a while ago, one of the reasons was to help people that are in that spot where they can’t manage that real estate business that they got themselves into. I’ve always been trying to help people out of that. I think that a lot of those programs can be misleading. If you want to get into the real estate game, I advise you to. It is a fantastic industry and I love it. Be cautious. To become a guru of any kind it takes a lot of time, money, and patience. Be careful of anyone that is going to let you make a ton of money in your spare time using other people’s money, to quote some of the ads I’ve heard. Those are the ones that really get me. I’ve personally seen people lose everything over this.
Adam-I have known a couple that have gone to these “the first one’s free” kind of seminars and then they’ve literally maxed out their credit cards and borrowed money in order to pay for that next hit. I’ve heard it can cost anywhere from $10,000 to $75,000.
Brian-The sky is the limit for what you could pay for the training since it is ongoing. I don’t want to bad mouth the training because it can actually be pretty good. The information is good but then when you get into it now you are down thousands of dollars and you have a hiccup. We’ve been in this industry over 10 years and you will miss things on your first flip. Codes and violations change and if your profit margin is built into your first house at $5,000, you don’t have a big window there. As a general contractor too, I currently have clients that I’m helping get out of multiple houses they were trying to flip. One contractor didn’t work out but now they’ve spent too much. As a contractor we are cleaning up a lot of messes. The same thing happens when you buy a building that is full. When you take over a building with tenants already in it, what are they chances that all of them are actually paying rent? Believe it or not, people will actually fudge paperwork to make money. Now you’ve got an apartment building with only half the people paying and now you need to do some rehab. There are a lot of ways to get stuck and to say that you can safeguard yourself with enough education, that’s not a fair statement and that’s where the training derails. Even if you have an agent, landscaper, carpenter, general contractor, and plumber, you have to manage all these people. Once you get yourself in so deep, now you have to manage this high level of moving parts. If you have an e-trade account you can literally buy low and sell high. When you buy real estate low, there are a million things you can do with it and a million pitfalls. There isn’t really an A to B strategy. When you do in with the mindset that you are going to manage these people, you have to have some pretty exceptional management skills. With you owning an agency, you know about all the hats you have to wear in a day.
Adam-It gives me the ability to learn from other people’s mistakes. These seminars make it seem like everything is going to be great. I spent my weekend down in the basement of the duplex with my brother sweeping up cobwebs and breathing in dust. It’s not all glamorous. This all ties in a little bit to Proper Vest. Let’s talk about it. Brian and I own Proper Vest. We do property management for pretty much any type of property. We do rehabs. If someone is considering spending a ton of money on a seminar, we would encourage them to get education, but maybe spend your money on buying a property because one way or the other, even if you went to the seminar and spent $100,000, you still have to eventually buy a property and learn all the lessons.
Brian-I would never be against education. I have 2 degrees I don’t even use. One is in criminal justice and the other is in psychology. Education is important so I would never say to jump into an industry and don’t get the education. When we originally talked about Proper Vest we said we wanted to take someone from A to B and through the finish line and help them avoid as many pitfalls as possible. The real education starts when you buy the property. I can learn how to do surgery from anatomy books and YouTube videos, but the first time I cut someone, that is panic mode and I would blow it. People get into the hard spots after they go through all the training and have this false sense of confidence. They put all of their eggs into one basket because the endgame is to fire your boss and give them the finger on the way out. The other dream the sell is about liking your job but just wanting free time for your kids. Now they’ve taken all their money out of savings, dumped it into 4 properties to have enough money to send their kids to school…
Adam-And then they get burned for whatever reason.
Brian-I thank God I didn’t have kids when I did my first property because it didn’t go that great. I never wanted to be in a situation where I didn’t know if a contractor was lying to me so I rehabbed my first 2 houses myself with help from my dad if there wasn’t a YouTube video explaining how to do it. That took me almost 8 months to get one house done.
Adam-You learned how much things cost, how to do them, and how long they should take.
Brian-I basically created a baseline. I was trying to build a business at this. When you are dedicated to being in real estate, this is the stuff you have to know. If it took me 4 hours to do something then a skilled person this should take 2. If the going rate is $22 an hour, it should cost a certain amount plus materials. Otherwise it would have been hearsay. At the start of my contracting business, that’s where I was, education-wise. Our first tenant didn’t wind up paying. That was a whole deal. They went over their lease and we had to evict. If I had kids or some outrageous bills it would have been a terrible time in my life. Thank God we were living simply and I had the time to take that lump.
Adam-I always talk about ready, fire, aim. We are the same that way. Buy a property, which is your fire, and then aim. That’s how you are going to be better. By using Proper Vest to assist with buying, rehabbing, and leasing, you will be educated along the way. We make sure we educate our customer in a way that a normal company wouldn’t do. At the end of the day our clients should end up with a great investment that they really understand.
Brian-We have one client that loves to be involved with the renovation process. Another client loves finding the wholesale deals. If you want to become a wholesaling expert, you have to be focused on nothing but that and that’s one super small part of real estate investing. You’ve got to know that you can’t be good at everything. If you want to be involved in one part, Proper Vest is fine with that. We are just here for the practicality that you are not going to excellent at everything. I’m not great at negotiating contracts. I will pay sticker price which is why you do all of our contracts. The construction part is probably not your forte and you just want to see it when it’s done.
Adam-I love having a partner who is on top of that and is following up on all that stuff. Working with you makes it intimidating to go and do a rehab on my own because I know I will pay a lot more, it will take longer, and it won’t be done perfectly. You love that part of it.
Brian-I could find a wholesale deal but you have years of experience and you know the pain point and the walkaway times. People come back and sell us something 6 months later when they told us previously they would never do. That is your specialty. You love the hunt. Sometimes when we have a project go over on price you’ve negotiated contracts down $20,000 on price. Thank God you did that because I would have paid sticker price. You’ve got to have those areas of expertise. Being part of a team is great but if you’re not having some actual help from professionals, you are still managing all those people. What about that time we had to stage one of our buildings because it wasn’t moving so you brought in your staging company and it sold right away. I don’t have a great eye for design so I’m glad you knew to do that. If you were part of one of these seminar teams you would still have to do everything yourself.
Adam-It’s nice to have someone to high five but I love you are breaking it down. I guess I didn’t realize what exactly we each specialized in. Let me take a quick pause because I want to ask you tell people how they can get a hold of you.
Brian-ProperVest.com is where we have all of our contact forms and you can tell us what your project and price point is. You tell us what your end goals are when it comes to monthly income, and we will work out a series of homes or apartment complexes. Whatever your end-goal is, we will come up with a plan based on what you are wanting to spend and then we will go from there. ABRents.com is where you go for contracting services. There are some photos on there showing some of the more severe building that were condemned that we made rent-ready. We are located right off St. Charles Rock Road and I-70. We are open 5 days a week if you want to meet with us.
Adam-We just got a new 30 unit property under management and sent it over to you and it was interesting hearing about all the stuff you are dealing with.
Brian-This one was previously managed which is the funniest thing.
Adam-It was managed by a really bad manager.
Brian-There was a management company that, if I were to say dropped the ball, it would be an understatement. What happened was what the owner was told was being paid wasn’t. What the services that were being rendered like trash, clean up, maintenance to the building, all was a farce. He is out of state so he is basically getting photos of units that are not even his. He was getting statements for bills that he had to take their word for. When we took over, the people who were in the building were not even the people that were on the leases. I had to get I.D. copies, legal leases, inspections, roofing, and electrical.
Adam-Wasn’t there feces in two hallways?! This is a podcast, baby, and we are raw.
Brian-I was not going to mention that but it was in an upper hallway and lower hallway in two separate buildings.
Adam-I want to know who did that. Were they squatting?
Brian-Maybe it was someone from the old management company.
Adam-Was someone running by on a jog and decided this would be a good place?
Brian-Oh my God! Is there no public restroom in this building!? Hallway is good.
Adam-There were bedbugs too.
Brian-There were a lot of issues. An excellent pest control company in the area helped us out with that. We are a week and a half in and I can promise you we have done more than the previous management company ever did. This is not a new buyer. This gentleman owns building all throughout the midwest. This guy is not a dumb dumb or inexperienced. He was being mislead. You have to make sure that when someone tells you they will get a team together for you, you have to make sure it is the right team and that they care about your building. Does this management company have a really high end building and they don’t care about yours because it doesn’t bring in as much money? I want to provide the best customer service across the board all of the time. Don’t even set yourself up where just because you have property management company you are going to be bringing giant mesh bags of money with dollar signs on them everywhere you go. With Proper Vest and our years of experience, I feel like you are going to limit those risks and you’ll avoid some of the bigger pitfalls. In the long run you will have a better investing experience. Overall you can focus on where you want to buy, what you want to buy, and get involved as much as you want.
Adam-Instead of going to a big seminar, what should they do and where should they start?
Brian-If you are one of the people looking at HGTV and you see them flip houses and everything is great, be real with yourself before you get you started. This isn’t Chip and Joanna giving someone their dream house where there is excess budget and everyone is happy. Sometimes you are dealing with somebody who lost their house because they were fired and you are cleaning out family pictures but you may be able to provide that same person that lost their job a lease option house so they can stay in their same school district for their kids. There is two sides to that but don’t assume it is going to be what you saw on TV. There is real pain in foreclosures. You are not always going to be dealing with happy buyers and sellers. There will be happy people to but you need to figure out what part you want to do. Don’t go to a seminar and say you want to make money. Find out what part of real estate you like. There are a lot easier ways to make money.
Adam-If you have money and you want to make more money, it’s not a bad idea. We have one client like that and he seems to want as little involvement as possible. He had the money, didn’t take huge financial risks, he just bought our finished projects, and now he collects money.
Brian-Don’t look at the Hollywood version of real estate and then join a seminar assuming that is what you are going to get because it most likely won’t be. If you are interested in real estate it is a fantastic industry with a million moving parts. Whatever your skill set, you could be great at something in real estate. You have to put in the work, time, and money and you will get hit in the mouth. Be prepared for that and do it over time. You can also have a management company if you don’t want to dedicate your life to it.
Adam-I know people have to get burned to learn their lesson. I call it failing forward. On Flip This House, they only showed one time where they had the contractor sign a contract where they would get paid less if they didn’t finish on time. I once had a recommended plumber show up and I was too nervous to hand him a contract like that and he went over by 2 weeks and it caused everything else to slow down. I did a rehab recently and we did add that language into the contract and they guy went over by 30 days and he had all these excuses. We were able to discount what we paid him even though it was harder to do. You have to do it to learn about it. I had to get burned to learn the value of what I was taught by that show.
Brian-When you are in the business everyday that’s when you are going to take a lot away and you are going to watch real estate shows on the weekend like I do. You are going to watch This Old House episodes. If real estate is in your blood and that’s what field you want to be in then you are going to continue to learn. If your field was agriculture you are going to be farming all day and you will be going to farming things on the weekend because that’s where your passion is. Don’t do this because you want to make money. Don’t make that your only goal. There is not going to be tons of free time or cash at the beginning. I’ve seen it happen a million times. Just be cautious. If you want to jump in and you have the resources and you are excited about it, sit down with me and Adam and we’ll tell you anything you want to know. When Adam and I first started meeting about Proper Vest, the first three meetings was just us sharing stories and ideas.
Adam-I noticed that you are the first guest that has brought their own notes. Is there anything you wanted to talk about?
Brian-At every meeting I always have an agenda and notes.
Adam-You set an agenda for my podcast.
Brian-I brought a flow chart to our first meeting.
Adam-You were the first one to tell me about these lockboxes where you don’t need an agent to get into them.
Brian-I use them on certain properties. It depends on what area you are in. If some area has younger kids that are tech savvy, it seems to work a lot better. It can be a disaster with older residents. Having an agent there is always a positive thing but this can maximize the amount of showings. If you want that service, people can let themselves in on their own and the lockbox indicates whether the key was returned so this is good for weekend and evening showings. I wouldn’t use it in an area with a potential for vandalization. It works good in building with a lot of college kids.
Adam-You are a super motivated high energy guy. Do you have set goals you are working towards?
Brian-I’ve always been into the self-help stuff so that’s why I have so many irons in the fire. I have that book, a non-profit, and the construction. You are the same way. You have to have that kind of energy level to run a business. There is not a lot of time off. I’ve found through all of personal reflection and the psychology degree, I like to fix things. Even when I chose when I originally chose psychology I wanted to fix people. When I got into real estate I wanted to fix all of these bad neighborhoods and broken homes. The books also reflect that. I want to fix someone that has a negative outlook. My wife and I have an antique booth and we take all of the old junk we find in these old houses and repurpose it. I’ve never really been motivated by money.
Adam-I’ll have to take the time to learn more about your non-profit and antique booth sometime. If anyone is a wholesaler, has a property to sell, needs advice, inherited a property, or your house just burned down, we’d be interested in purchasing the property from you.
Brian-I really want to be apart of someone’s diversification. I don’t want people to have all of their money in stocks. I know people who lost everything in the stock markets even during the real estate crash. If you have all of your Easter eggs in one basket and you’ve bought enough for all the kids, like Adam did not, I recommend you call someone like Proper Vest so you can put some of that into a tangible investment. Don’t be afraid of crash because everything has ups and downs. If you do it in a strategic way you don’t lose everything. Unfortunately people did very poor strategies before 2006 and 2008 and lost everything.
Adam-It’s good to buy a property with a backup plan like the one we did on Wise. If God forbid we couldn’t sell it we always could have rented it and we would have been making money. Don’t buy a property you have to sell it or else you are screwed. Are you ready for my 5 questions?
Adam-Who lives under your roof?
Brian-My super supportive wife, 2 kids, and an English mastiff. His full name is senator Eric James of New England. It’s a pretty big job but he is a big dog at 195 pounds. We have a corn snake and a parakeet.
Adam-Where are you your best?
Brian-I am pretty in social situations. I like hanging out with friends and joking. Professionally I am awesome at fixing broken things.
Adam-Do you have a favorite blog or podcast?
Brian-I am a Chiver.
Brian-Chive on for sure. My wife and I are on one of the daily awesome randomness posts from years ago. We had a series of lemurs standing on us and I was wearing my Chive shirt. I frequent more than I should.
Adam-Do you go on your computer or phone?
Brian-The phone app is not the best.
Adam-The computer has too many ads.
Brian-The phone crashes too much.
Adam-The kind of got rid of the DAR. I think John is not running the show anymore.
Brian-They get too into posting the girls instead of the awesome stuff. I don’t know what’s going on with that. We need to have him on the show and ask what their deal is.
Adam-What’s your guilty pleasure?
Brian-I like Big Bang Theory and a lot of Roseanne. When I was a kid I thought that was the coolest family to be in. I watch a tremendous amount of re-runs of Roseanne.
Adam-No comment about that. Who is your mentor and how have you thanked them?
Brian-I was a huge Tony Robbins fan. He is not someone I can necessarily thank. When I had gotten off track a couple times in my life Tony Robbins helped me out with a lot of stuff when it came to achieving goals and changing mindsets. When you are doing the self-improvement stuff you find a lot of people that can help you with that stuff.
Adam-ProperVest.com, Brian Klarich, how can they SnapChat you?
Adam-Beautiful. Thanks everyone for listening. Thank you to our amazing producer, Joey Vosevich, and take care!