Building an $8 Million Portfolio in 8 Years thru BRRRRs and Offices with Adam Craig

Adam. Thank you for joining us today. 

Hey, thank you for having me. 

I really appreciate it. It’s been great talking with you so far and you have a fantastic resume and a lot of great lessons for our listeners out there about real estate investing for those out there who don’t know about you and what you can you tell us a bit about your background and what you do this.

Yeah, sure thing. I was born and bred in Cleveland, Ohio. I live in some suburbs on the east side of Cleveland. I do all my investing out this way as well, went to Kent State for business finance thought I was going to be graduating being, you know, a financial advisor, maybe a financial analyst, but shortly after.

Graduation. I had an online business that did pretty well. I won’t go too much into it. It’s not all that sexy. It’s kind of boring. But essentially it was an online retail business. I buy defective camera equipment. I had a person or a company that would fix it at bulk rates and then I would resell it.

So it, it got it. It’s boring. It doesn’t get me up in the morning, but it did pay the bills for a while. So shortly after. That income surpassed any entry-level salary I can get. I decided to go full-blown with that. I got a business loan expanded that did well for quite a few years.

Did over a million dollars in revenue for three years straight. It has since calmed down, I would say the peak was in 2015, 2016. There are various factors that have made it come down. But at least it was so far about a 10-year ride and it’s helped me pour all the savings into my real estate investing business, which, which does get me up in the morning.

That’s awesome. That is a fantastic experience that you had. And, and I think it, you described the business as, you know, not exciting or not sexy. And I think that’s actually an advantage because the flashy things tend to get competitors a lot more quickly and they tend to be, you know, just. You attract more competitions to just to say that twice, but so on the real estate investing front, you’ve, you’ve done quite a bit, and there’s so much that we could talk about, but you know, tell us about your experience with, you know, rehabs and doing the borough strategy and how you scaled that up.

Sure. Yeah. So I bought my first property back in 2013. At the time I really thought I was getting into real estate as a passive investment. I always knew I wanted to be in real estate because real estate creates wealth that lasts forever. You never know what’s going to happen with the internet retail business or any W2 job that you have.

So real estate was always on my radar. I think it was on my radar in a smaller fashion. When I started, I had planned on doing, you know, the carpet and paint type thing. Having a property manager take care of all my properties. Cause I didn’t think I had time to manage them. So. With that, I saw some pretty low returns.

I would say I might cash flow on a rental property, maybe 200, $300 a month. After a carpet and paint style rehab, maybe I have acquired five, $7,000 in equity. So at the end of the day, I thought I was doing pretty good, but compared to what I evolved to, it was not at all worth my time. So. Maybe around year two or three, I came across the brr strategy, brrrr strategy through bigger pockets.

We back then it, you know, it barely had a label. I mean, it was, it was not what it is today. So it sounded intriguing to me. I did it on some smaller scales before I got to the point where I took on some serious major rehabs. And then I think it was a deal may be in year three or four, that kind of.

Triggered me to do nothing but burrow strategies going forward. And that kind of evolved into 2018 when I started dabbling in commercial real estate. And now as of today, I’m doing a little bit of commercial. I still hold a pretty good, significant single-family portfolio, but I’m going to be transitioning out of the residential, not so much the residential out of the single-family space into mostly commercial, but.

That’s no knock on a single-family. It served me well, it got me where I am today and it’s a great investment. Awesome. 

Well, you know, burst and it just for folks out there that don’t know stands for buy rehab, rent, refinance, repeat, maybe I got a few, a few of those out of order, but buy a property. Well in.

Fix it up, read it out. And then since it’s worth more, you refinance it and pull out your original equity, pay off your lenders. If you had any and then move on to the next deal. And I think one of the big things that keep people, from going that route or scares people about going that route is working with contractors and just, they don’t know how to find them.

They don’t know how to manage them, to make sure things get done on time and on budget. So how did it? So, you know, handle that. And what are some lessons that you learned along the way? 

So in the eight or nine years, I’ve been investing, I probably circled through close to a hundred different contractors.

Luckily, luckily, now I have a crew that has been with me for more than one crew. That’s been with me for a significant amount of time. So a lot of those headaches are over, but in the process, I definitely learned a ton about hiring contractors. So on the first big rehab, I did. It was an extensive rehab, needed everything.

I had contacted a big main company in the area. They came and gave me a bid. I was blown away. The numbers were insane. So I did not go with them. So I found another contractor through Craigslist, which may or may not be a good idea. And the numbers were, were a lot less. So I ended up giving this guy a shot.

This guy didn’t pan out. But what I learned by hiring him was a lot of the GCs out there, whether they’re big or small, typically have a crew of guys that do all the work in the process, they are being the middleman. They’re taking a cut. They’re charging you for their services. A lot of these guys don’t do the plumbing.

They don’t do the electrical, they just hire a plumber. They hire electricians and they oversee them. And because of that, you pay a premium. So it took me a little while to figure out that this was going on and I decided I need to kind of go to the horse’s mouth in that I need to find the guy on the contractor’s crew to work directly for me.

So that’s the route I took. I posted an ad on Craigslist. I posted ads on Facebook for hiring and in certain trades. And sometimes you dig through, you know, 5, 6, 7 guys before you find someone that works out. Eventually, you do find the people that you need and it’s at a fraction of the price. So it does take a little more oversight, a little more management, but if you’re going to get into real estate investing in a really big rehabbing fashion, you really can’t do it with the big name companies on a budget that does single-family warrants.

So you decided to take the general contractor out of the equation and handle that yourself and hire subs. Y, it sounds like maybe you were hiring guys to work for you may be on a more full-time basis, or how did that actual, actual, how did that actually look in terms of, you know, how much they were working?

So I started on a part-time basis. And then you know, shortly after I started doing the burst strategy, I went from maybe doing two properties a year to eight 12. So these guys were employed as long as they wanted to be. So they went from part-time guys to full-time guys for the most part. But I would try to break the rehabs up quite a bit.

GCI hired was, you know, I guess they would call him a one-trick pony, but with that, the rehab took forever. So now I tried to find the specializations. I find I tried to find the roofers. I try to find the HVAC guys because if I could have, you know, guys that are proficient in their area are doing what they do best, then I can have the GC or the handyman do all the cosmetic makeup and, and put the house together.

Because when you rely on one crude, put the entire house together, it can take a long time. And it usually doesn’t work out very well in mice. 

Interesting. So I wonder how that turns to you in terms of the actual amount of work in terms of hours that you’re taking on for yourself, to manage these things.

Because the GC, okay. You’re not paying them anymore, but they were providing at least some service for what they were doing. As you mentioned earlier on, you had originally gotten into it as a passive route into real estate investing. Passive route of passive income, but this is more active. How did this look for you in terms of logistics and time and all of that?

So for about two to three years, maybe from 2015 to 2018, Running around like a chicken with a side cutoff. You know, we had three or four rehabs going at once. I’d have to drive by the properties several times a week, check the progress. And it was tough. Things got chaotic since then. Not only have I slowed down a bit, but I find, I have found the right people who have stuck with me for a lot of years.

So they come to expect and know what I want from them. So they take way less oversight. So I went from driving out to properties two to three times a week to maybe two to three times a month which has been. So really getting systems in place, getting people you can trust is a biggie. And just to circle back on your point about hiring the GC to take some of that off your shoulder.

At the time I thought that was the case, but these guys were having a lot of issues with their subcontractors and those issues became my issues because they, the GC wasn’t doing their job. So I said, well if I’m going to deal with these headaches with the GC, I might as well deal with them without a GC.

And that’s what I did. 

So they weren’t, they were charging, but they were really genuinely adding value. Compensated for their costs. 

Sometimes they were, sometimes they weren’t, things would fall apart. 

Okay. Okay. Interesting. So one of the things that we see when looking at that renovated properties and especially newer investors, I don’t really know how to best invest their capital in rehab to get the best bang for their buck.

And if you go and look at enough renovated properties, you’re going to see this firsthand that this guy didn’t really know what he was doing, or even over renovated the place or under renovated the place. And I know you have some ideas around which rehabbing ideas tend to have the best payback for the investor.

So let’s get into that. And what have you, what have you found. 

So, what they say is true kitchens and bathrooms typically do sell the house. But with that, I would say, don’t go overboard on those for, for quite a few years, I was over-improving. I would take a lot of time to figure out these intricate tile designs or find the Gino, the perfect light fixture the perfect flooring, something that was stand out from the competition.

And back in 2016, 2017 you need it to stand out a little bit because houses weren’t flying off the shelf. Like they are. But what I found out and part of it was through a property that we had flipped in 2016. I had gotten invited back to the property about a year later because I had made a relationship with the purchaser.

And then I found out that they had remodeled 30 to 40% of the stuff that they had that we had just done. So all these intricate tile designs, they didn’t even as they ripped it out and they put their own stuff in. So it was kind of weird. For me, I realized, okay, so, you know, rehabbing and doing good work and making it look clean is important.

But at the end of the day, try to try to keep it generic to an extent because people do have their own tastes. As long as you deliver something that’s nice, fresh, and clean, it will typically sell the house because of the intricate tile design and the nice, fancy shame, the lyric doesn’t always matter.

It’s more intangible. Size of the house location, number of bedrooms the neighbors, the things that you really can’t change are more important factors than the tile design. 

Interesting that that brings to mind my fiance and I are looking to buy a new place and move. And recently, one of the houses we looked at had new carpet put in it, but.

They didn’t do a good job and nobody wants carpet now. Anyway, they should have done, you know, LVP or something like that. Something that people would be all right with. But yeah, that, that brings up. 

Well, just to add to that I’ve rented a house to my sister and I spent, this was back in 2015.

I spent all this money refinishing, the hardwoods, which I do on every single property. She’s obsessed with carpets. So she asked me, please, can I, can I put carpet in here on my own dime? I said, sure. So, you know, she covered up my beautiful brand new hardwood with some cheap carpet. So teach their own, you know, you never know what someone.

I guess the, you know, that’s fair. I, I like, I, I much prefer hardwood myself. 

My and wife will like hearts hard surface flooring. And I think generally that’s what people want. But you, you do have, you know, your. 

Yeah. So another one that I see these days is the sliding barn doors, especially like bathrooms.

I mean, I just wonder if we could call out a couple, you mentioned intricate tile designs, a couple of specific things that are ridiculous and they’ll really add value, you know, is there anything, anything else that comes to mind that people do a lot? Well, 

you kind of hit it right on the head there with the barn door.

So I had a contractor who, who. Overly involved in coming up with these great ideas. Right. But you know, he convinced me to do one of the rain shower heads with this really elaborate shower. So we did it. But when we sold the house, we found out a lot of people, specifically families that were not going to work for them.

They would much rather have a tub with just a regular shower because they have kids, they don’t need this fancy hotel you know, style, shower. So. I think a lot of times like, like a barn door, for instance, it doesn’t provide any privacy for a bathroom. It looks nice, but I think if you want to appeal to the masses, sometimes practicality overlooks is important.

Nice. I, I appreciate the way that you, you summed it up. What are the problems now? And, and I know you’ve, you’ve kind of gotten out of this, this realm and you’re going fully commercial in the future, but one of the big problems that people are having now in this area that I see is deal flow. And that’s regardless of the type of real estate that you’re in, but things are hotter now than they were, you know, five years ago.

What are your thoughts about sourcing deals right now? Are wholesalers still productive? Is it possible at all to find deals on the MLS? 

So I would say definitely this is market to market, but the entire country is experiencing deal flow issues. In the last two years, I’ve only purchased two single-family homes.

And part of that is deal flow. Part of it’s on transitioning commercial, but without commercial, if I was forced to stick to the single-family side, I probably just be adjusting my criteria. A bit and my returns would be lower. So I think you could still find deals out there, but I think maybe the slam dunk home run deals are usually off the market if at all.

So I know investors who are still in the single-family space and they’re finding deals there. They’re continuing to go. It just takes a lot more persistence than it did back in mid-2015, 2016, where, you know, some of these deals really great deals would sit on the market for many. 

Yeah, it’s interesting to look back on the front today, looking back a few years ago and just thinking there are all these deals that I passed on that didn’t look great at the time.

But with the benefit of hindsight, they said, they definitely look a lot better now, but we only make the decisions with the data that we have at any given time. And, you know, that’s, that’s all we can really do. Transitioning from single families into commercial real estate. I mean, I like commercial real estate.

Of course, I talk about it all the time, but you know, for you and your purposes, what drove that shift and what are the biggest, you know, differences that you’ve found between what you were doing and what you’re doing now? 

So when I got into residential real estate, I thought I would be buying a hundred if not, hundreds of single-family homes throughout my career.

I hold on to every single one of them. And I’d have some monster cash flow at the end with a ton of equity. It wasn’t until I got to maybe property 40 or 45 that I decided, you know, I think I want to transition to like some apartment buildings, maybe some mid-size apartment buildings. So I always thought for a while, eventually, that’s where I would graduate to was apartment built.

In 2017 had my first child, I have two girls, a five and a three-year-old. Thank you. Thank you. Prior to that, I was working at home. The home office thing was perfect. You know, I work in the morning and go golf in the afternoon, come back and work at night. So things were great, but ah, ha I had one child and I realized this, this is not a realistic future for me is to work at home.