Why Mike Made The Switch From Multi-Family To Hotels With Mike Stohler

Mike Stohler – Mike Stohler is a former commercial airline pilot, Navy veteran and co-founder at Gateway Private Equity Group, a real estate investment firm whose portfolio has included hotels, multifamily, and residential properties. Between apartment complexes, houses, and hotels, Mike has owned or operated over 1300 units. Seeking value-add opportunities and higher returns, Mike pivoted from multi-family to hotels and now focuses exclusively in this niche.

When Mike first started in real estate investing in 1999, he lacked experience and failed. Through committed action to learn, grow their skills, and help others, he has created immense change in his business and life.

Episode Highlights Here:

Mike:

People are going to give you every sob story in the book. They are just telling you, no, I’ve just done this, I did that, and I can’t pay my rent. And you have to sit there. And again, take that emotional side out of it and say, You know what, this is a business decision.

Pierce:

You talked about how you, you know, failed miserably in the beginning. So, managing 1500 doors, you know, you’ve figured some stuff out. So what’s the number one secret to being a killer landlord?

Mike:

Yeah, you know what I did? It was, I knew, I just knew if I just learned that side of it, I could succeed. So what I did is I quit my job and worked for a huge property management firm for just a little while, just so I could use their forms and just kind of learn how to do it. And some of the things that I learned, again, is that emotional thing, people are going to give you every sob story in the book. They are telling you, no, I’ve just done this, I did that, and I can’t pay my rent. And you have to sit there. And again, take that emotional side out of it and say, You know what, this is a business decision. My bank doesn’t care that you can’t pay your rent. So I still have to come up with my payment, right? So you have to make business decisions. That’s something I learned early on is not to buy into the end of the stories because that story is going to turn into another story and another story, and then your other tenants are going to learn that they gave you sob stories, and they want to do it, and you’re going to fail. So stick to your guns, make smart business decisions, and you’ll be a good landlord.

Pierce:

Yeah, that’s interesting. So so, how do you kind of walk that line between, you know, having that compassion and for people and, you know, sometimes people do fall on hard times? Like, when when we’re, how do you discern what’s true? And what’s not? Are you just a hard ask the whole time?

Mike:

No, I’m not a hard ask the entire time. Look, if one thing if you’re, if you’ve paid on time, every month for two years, then all of a sudden, something came up, I might be a little more lenient. If, man, after the first month, it just the excuses start coming, then I’m not going to you know what you got to prove yourself to me. And even some of the good ones, it’s like, alright, you know, send me a letter from your boss, or show me something, don’t just, and you tell them, it’s like, I want to have some compassion, you got to show me some proof, you know, and it’s just for my files, tell them whatever you excuse wanting is, this is for my files. This is just so that we can confirm that something’s going on. If something is going on, we’ll work with you. I’ll put you in touch with some charities that can help you pay your rent. So we do help some people out, but I learned the man just gets some proof to get. Just don’t take their word for it. Because 99% of the time, they’re just blowing smoke, and you’re on mute?

Pierce:

What type of property class were you investing in at that point where you were getting those? That type of training?

Mike:

Yeah, I’ve always stuck with the lower b to the C. The A’s are all the REITs, the corporate, and things like that. And just extremely small rates return cap rates. I like the C’s because the C’s your tenants are not going to move a lot. They can’t afford to move. So all they want is something clean and nice. You know, a roof over their head. And as long as you’re keeping everything clean and keeping the Riff Raff out, you get some good tenants in the C-class-type neighborhoods. I’ve had some of the DS I thought they received their DS. I’m like, Oh my God. Do you know? It’s like, oh, it’s like, you know, picking up needles on the stairs and just, you know, just trash and like, oh my god, people. Yeah, I could just condemn this place, but you don’t get rid of them. You do what you can. It’s a business decision. You made the choice to purchase it. What don’t you got to do?

Pierce:

How how do you? How do you determine what, like, building you’re buying?

Mike:

Yeah, good question. And it’s a difference, you know when we’re talking multifamily? I do a market analysis on how many C classes are in there. What are their market rents? Then I do a lot of research on I get the rent rolls, and I see When did people start moving in? What are the rents because you get to learn quickly that, man, this place is 95% occupied? But if you’re not careful, you didn’t realize they put everyone in a month ago. Which means they’re not vetted. They’re just trying to make their numbers look good. And so there’s that, but when I look at buildings, I sit there and say, Okay, how can I improve this? And is it any market where I can improve it, you know, all the comps might be better, better apartment complexes, and that’s why they’re getting performers of higher rents. But in that specific neighborhood, I may be tapped out. Even though four blocks away, they’re paying 100 $150 more, so you have to do some research on that specific neighborhood or that side of the street or whatever you want to say. And then sit there and say, Okay, how can I do the value add? What can I do I have to go in, and I know that there needs new carpeting or new plumbing or a new parking lot? new paint, you know, you just sit there and just you do, I’m a spreadsheet junkie? And do all that analysis to find out if I want to do that building.