Today we sit down with Mitir Patel, a Chicago real estate broker who specializes in investments, specifically converting multi-family to single-family homes. He discusses his exact strategies for finding properties, finding investors, and what he sees for the future of Chicago real estate investments.
Transcript
D.J. Paris 0:14
Hello, and welcome to keeping it real pod, the only podcast for real estate brokers made by real estate brokers. My name is DJ Parris. I’m your host through the show, and thank you for tuning in. This is our second episode. And in case you missed the first I want to quickly explain what this podcast is all about. So I work at a real estate firm here in Chicago, we have hundreds of brokers, many brokers who join us are brand new. And so one of the biggest questions our support and training team receive when in particular new brokers come on board is, hey, what are the veteran brokers doing? What are the most successful agents at your firm doing? So over the years, we’ve interviewed them? And we’ve obviously asked them what they’re doing to become successful, what’s worked for them what advice they have for newcomers, etc? And then sort of occurred to us well, why are we living in it to just our own brokers, there’s 40,000, brokers in Chicago, and obviously, hundreds of 1000s of more across the country. So we decided to open this up to everyone. So the idea here is that every week, we’re going to be bringing you an interview with a real estate broker who’s doing something we think particularly interesting, and maybe could help everyone else. Learn more about how to become more successful in their own real estate practice. So that’s it. And if you’d like to be featured as a guest, or or you have an idea of somebody that you think would be a good interview, you can visit our website at keeping it real pod.com. And you can send us a message there. Also, if you wanted to sponsor one of the episodes, you can do that there as well. Today on the show, we have Mattia Patel, who is a real estate broker here in Chicago, and he a little bit about him, he has a background in finance. But he himself has been a real estate investment investor for 15 years. In fact, his parents were doing it even before that. So what he specializes in his helping people transition to real estate investments. He’s been doing that for over five years. He specializes specifically in multi unit added value plays. So for example, converting multifamily into single family and very specific neighborhoods. We talked a lot about how he got investor started investments, how he finds investors, how he finds properties, how he puts deals together, and why he chooses to do that more so than traditional realtor stuff. And it’s really interesting, I think you’re going to love it. And we really appreciate material being on the show. So let’s get started.
So we’re here today with tear Patel Mateer. We thought it would be particularly interesting and fun to talk to you for the show because of his particular niche that is more unusual or rare for brokers that I’ve met. So thanks, Mateer for being on the podcast.
Mitir Patel 3:10
Thanks for having me here. DJ. Yeah, thanks.
D.J. Paris 3:12
And so tell us a little bit about how did you how’d you get started in real estate.
Mitir Patel 3:16
So my father was a passive real estate investor some 30 years ago, and I watched as his business grew, and it became supplemental income to the point where it surpassed his income as a scientist. So he was a buy and hold buying rolls out in early 80s, Reagan had a way for you to take your depreciation and mitigate your taxes. And obviously, after the SNL crisis or anything, they removed that deduction, and it no longer holds to that being said, he invested in real estate and he found that, you know, it was passive way to generate significant income and over the life of the loan, you know, you have something real,
D.J. Paris 3:51
and it became his primary source of income. Really? Wow. Did he end up doing that full time? Or did he still continue as a chemist or
Mitir Patel 3:58
he retired at 50. And then now he places his grandkids and collects rent every month.
D.J. Paris 4:05
Yeah, that’s amazing. was here in Chicago?
Mitir Patel 4:09
The north side in the northwest suburbs?
D.J. Paris 4:12
Is that where you grew up as well? I
Mitir Patel 4:13
did. I grew up in Roselle and his buildings were mostly in the northwest suburbs, and he still has the majority of them or he sold the vast majority out in 2007. Then in 2009, he bought some
D.J. Paris 4:23
Gotcha. So you grew up watching basically your dad be a landlord?
Mitir Patel 4:27
Yeah, I do it much differently than him. But yeah, I did. Yeah. And, and so
D.J. Paris 4:31
what, what year did you get your broker license?
Mitir Patel 4:35
So I got my broker license in 2009. After the financial crisis. I was planning on getting buying more real estate and at that point, I started pulling money from other traders that I knew and starting to find
D.J. Paris 4:52
interesting, so tell me about that. How did you go about putting that fun together?
Mitir Patel 4:56
It actually happened. I snapped a Segway somewhere else but I, after college, I became a trader at one of those exchanges that may no longer exist in a few years. And for 14 years out of college, I was a options trading. So
D.J. Paris 5:09
you wear the jacket and wear the jacket, are you done by two o’clock and right
Mitir Patel 5:12
and I took every bonus, I had bought apartment buildings smart. And then throughout the years, a lot of friends are like asking me how I was generating this additional income when the market was moving against us. And I explained it to them. And around the financial crisis in all this opportunity opportunity presented itself, a bunch of friends came to me and said, Why don’t you pull funds together, and we’re starting to fund and invest in real estate. You know,
D.J. Paris 5:37
it’s so interesting, you mentioned, that seems like so many brokers who work with investors, at some point get in touch with traders who just seem to be cash heavy, they’re risk averse, because their old career is is pretty risk risk heavy, and they and they love sort of guaranteed or somewhat guaranteed rate of return or reliable rate of return. And real estate oftentimes can provide that.
Mitir Patel 6:00
It is for most traders, this is the lowest form of risk offered. And long term. You know, as long as you secure your financing, and you invest in the right areas, it’s very low risk, very high return. And
D.J. Paris 6:14
so you put a fun together you had co colleagues or friends that were traders that were able to help fund it. And then your role is to go out and find properties. And that’s kind of
Mitir Patel 6:24
together. So either properties, renovate them, rent them and manage them. And I for that I took a 20% stake in the company. Super, very smart. Right? We started out in 2008 in Logan Square in Avondale. And obviously now it’s a different neighborhood than was back then. Buildings were trading for at 250,000. Now, similar buildings are 350. Wow, these are all we only buy projects. Sure. So from that, you know, we, through you know it trial and error, we learned to perfect kind of a system in how you purchase properties and how to maximize your return. And I’ve created a great team for that, too.
D.J. Paris 7:01
So to talk a little bit about the team and sort of how you guys do it today.
Mitir Patel 7:05
Yeah, so I still I represent clients and this fund. So majority of my brokerage business is finding properties for investors, whether it be large or small first time buyers. And I have a great attorney I work with that could do lists, which also represented the banks. So it was a good relationship. Beyond that we work with Tyler Mandic and Shane banks, banks with a zoning code for city of Chicago. So when we look at a property, he gives us assessment, and generally we add value by changing zoning on all these properties.
D.J. Paris 7:37
Oh, that’s interesting. Yeah. And nobody knows more than him, I guess.
Mitir Patel 7:40
Yeah. And then so you know, every week we’re sitting down with aldermen getting their support, it could be something as simple as person has to fight within the legal garden, when they go to sell it, the garden can have no value, it cannot be appraised for that will go to the aldermen and work out a deal where we can make that legal for a few $1,000 or some concession you give to the community. And then you added 80 to 100,000 hours of value to your property. That’s amazing. That’s often the easiest one.
D.J. Paris 8:08
How did you how did you learn how to how to do that? You
Mitir Patel 8:11
know, I started doing a lot of a lot of this business. And then Candela’s, the father senior kind of introduced me to shakes and they said, You guys could work well together and do some bigger things.
D.J. Paris 8:24
Wow. How did you find the properties? today? I know we’re jumping a bit. But how do you locate properties?
Mitir Patel 8:30
So it’s half I get half I get phone calls or texts from random people. They’ll literally see my name on the construction permit. And they’ll call it the other half is misrepresented listings on MLS.
D.J. Paris 8:44
When can you give me an example of what what is the misrepresented list?
Mitir Patel 8:47
So I just put a contract together for a property at I guess I can do the address right. 3555, North Milwaukee, and it was listed as a like a commercial use commercial building. But really, it’s a two flat with the commercial space. And it’s also next to the Ottoman that I do a lot of work with, and we’re gonna get it rezone to illegal three fat very easily. Wow. And it was 20,000 hours.
D.J. Paris 9:12
Wow. Yeah. So it’s so it’s so that that’s an MLS listing that you noticed was was categorized wrong, or incorrectly or had an opportunity to be recaptured. And then when things aren’t on the MLS, you typically mentioned to get phone calls occasionally. Are you sourcing properties other ways as well, or
Mitir Patel 9:31
so I have, I’ve worked with a bunch of builders who also send out flyers. I don’t particularly care to do that. But if something, something comes up, that’s interesting. I’ll pursue it. But truthfully, that’s probably like 5% of what we get. A lot of it’s you do a deal here, and then someone approaches you. Sure. I was building my own home on Roscoe Roscoe village, and this elderly gentleman came up to me said I want so my home. So that’s how we got our next project. David and Rosco.
D.J. Paris 10:01
Wow. Yeah, it’s interesting. So you, you you were telling me before before we started recording about conversion properties? Yes. And that I thought was particularly interesting. Can you talk a little bit about Sure. So
Mitir Patel 10:15
it’s a crazy thing when you when you buy it, I certainly talked about Roscoe Bucha. North center, because they have the marquee schools and everyone wants to be in. When you look at the homes there, they’re trading at about 350 to 450 a square foot new construction, but for some reason, the apartment buildings are trading at 200 to 300 square foot, okay. So in a lot of them are breaking new construction, they have really good bones. So there’s a huge advantage. Whereas if you come in right now you’re gonna buy a home, you’re gonna pay at least 1.4 in Roscoe, which for a new home, I can find you to flat for $600,000. And if we work well, with our budget for around three to 400,000, we can renovate it, and you have a 4000 square foot home.
D.J. Paris 10:55
That’s amazing. What’s the type of turnaround time on something like that?
Mitir Patel 10:59
Truthfully, it’s a year yeah. Anyone who does it quicker doesn’t have a husband, wife or family involved. But every process becomes a decision and right. But he was a flipper probably six months.
D.J. Paris 11:11
Wow. And so you’re in you found that they’re just brokers aren’t as knowledgeable about these types of projects.
Mitir Patel 11:19
Now. I mean, right now, we I infected a client to see a property and Bell and Ross was under contract. And I saw the other agent with his client. And I talked to the listing agent in San Diego, we’re gonna present an offer because I know this deals not gonna go through. Sure enough, the deal that broke and she called me yesterday, it’s, I heard what the agent was saying costs were they’re not realistic about what things cost, you know, like foundations excavation, and if you if you haven’t had any involvement or any experience, why would you go right and unfortunately then you know, a lot of realtors become either home and maybe a client ends up in a situation they shouldn’t be and I’ve seen that two or 3k loans a lot of people way you know, Scope of Work nowhere near what really needs to be done especially in like Logan Square Pilsen most of those buildings have termite damage and the foundations are worthless. Wow. So they see the low price and they think they can just clean it up and there’s so much more involved.
D.J. Paris 12:13
Wow. And so you know, on the investor side Oh, as far as finding investors to work with you know, obviously with your history as a trader you have access to those those you know, people who are in that industry, but if you if you were maybe not in that industry as a previous career, how would you go about finding people to help fund those projects
Mitir Patel 12:35
so I I’ve worked with a mortgage lender having like a seminar in a bar as far as getting clients but truthfully, it was you know, talking to people at events I got a hedge fund that manages money from McKinsey and I’m now represented them in this particular business. So it’s a you have to get out there it’s unfortunately my grant the whole social aspect of it but that’s kind of these people are at these events and you know, when they hear there’s another way for them make money and that’s so much less risky than the market your market is very high right now. They want to diversify it.
D.J. Paris 13:07
Sure. Sure. And you know, our kale royalties owner Nick Patterson, have you obviously you know, has always said fighting money is actually not that difficult isn’t the deals is the challenge and if you can get the deal together the money just kind of finds you
Mitir Patel 13:21
Nick is 100% right on that Yeah.
D.J. Paris 13:23
So where do you see the Chicago market headed for for your particular niche, you know, in some of the developed the projects that you guys work on, do you see anything changing in the next few years so
Mitir Patel 13:35
we’ll take in that spare opportunity for ways i as far as the high end home market I see that hit we’re at capacity and inventories high so I would probably stay away from something like that. As far as with cayenne candles, things like that. apartment buildings, it’s crazy because the prices are much higher. But we look at Cap rates which is the net return on the property they’ve actually gotten better because the rents have gone up so much interesting. So if you can find a building and Logan Square if you can find that building. There’s a way we can renovate it and make money
D.J. Paris 14:09
yeah, there I’ve always heard as far as finding some of those properties you know, getting creative with it. There’s brokers that have basically you know when when one of those buildings puts a an apartment for rent phone number, which may be the owner you know, Mom and Dad Mom and Pop owning the building or something, you know, maybe it’s a management company too, but just going Hey, Are you the owner, which is Sal, if I offered you X, Y and Z, there’s a lot of creative ways to get in front of those people who aren’t necessarily thinking necessarily you know, they haven’t put on the MLS, it’s not for sale, but maybe they would have somebody approached them. But you know, then that takes a little bit, a little bit of work to do those things. But yeah, so as far as the so that was on the buy and hold side. What What challenges have you guys run into with being you’re also a property manager? Right. All right. So I do, do you find that does that eat up a lot of your time or property
Mitir Patel 15:04
management, I’ve got a good team with me. So they handle most of that. As far as rentals go, we have great agents and rent the apartments, I don’t do any of that it’s very time consuming. Honestly, our biggest problem is construction timelines, permits sure in the billing department. The city obviously is inundated with new permits and construction, we it’s always, you know, boom or bust here, right? Sure. So we have a dangerous amount of apartments coming online downtown. Whereas in, I always cite North Center building square, because those are very active areas, what you’re seeing is a lot, especially in these two neighborhoods, seeing a lot of places being sold, that were two flats and three flats and being turned into single family homes. So with the exception of some of the Centrum properties that are near the Tod projects, there’s a real deficiency in housing. That’s happening,
D.J. Paris 15:52
that’s interesting. So it’s a real need for
Mitir Patel 15:54
right and they thought the Tod zoning, I don’t know if your listeners are familiar with the transit oriented development, allowing them to build these large buildings near our stations where you wouldn’t need parking would pick up the slack. It’s helping in Logan Square and cap on California in Milwaukee, they built those two towers. But that’s again, a different price point in these neighborhoods, kind of on the Brown Line, that you’re not really seeing that much of that, except for old town. And then the one at Roscoe and Lincoln.
D.J. Paris 16:20
Gotcha. And you really pretty much hyperfocus in just a few neighborhoods,
Mitir Patel 16:25
I do. I’m there, you know, I like everyone else I was I was I was pulled to the high returns of certain areas that really weren’t there. And I learned a life lesson very early on. So which is which Paper Paper numbers aren’t realistic, you have to look at the neighborhood vacancy rates and other factors before he, you know, can assess if it’s a profitable investment or not.
D.J. Paris 16:51
Yeah, that’s a good point. And in fact that that brings it to another question about, you know, if as a broker who’s maybe servicing the more traditional homebuyer trend, you know, who wants to get more acclimated to investment, sort of valuation or just sort of how to go about learning? What What would you recommend, are there resources that you you feel would be helpful to someone who’s new.
Mitir Patel 17:17
So a great way to figure out what a building could be worth is a website, rental meter.com, and it’s free. And it’ll give you the immediate rent scenario based on the size of the unit.
D.J. Paris 17:30
Oh, so you can figure out the cap rate pretty well to lease because a lot of these old
Mitir Patel 17:33
buildings are like my dad’s even guilty of this, too. He’s had tenants for 15 years, maybe he hasn’t raised rent to market. So you can see that maybe this should be a $600 apartment should be a 1400 apartment. And you can kind of assess what the value could be if you got in there. Put a fresh coat of paint on a new kitchen bathroom. Sure.
D.J. Paris 17:49
So you can see you would go to that site, you see that rents are lower than they ought to be. And then what do you do from there? Then you approach the owner? And
Mitir Patel 17:58
yeah, you make an offer, sir. And obviously, there’s a lot of things you until you open up a wall you don’t know. And I had a client is actually the first sale ever made. It was a very large building in Avondale. And he opened the walls up, they literally disintegrated. So there was no sign of termite inspection and even a termite inspection. But, you know, so simple project ended up becoming this huge ordeal. So he actually looked at it as an opportunity to make it a much bigger building. Sure. And in the end, it worked out. But I mean, it’s a scary thing, right? Sure, sure. So you don’t I mean, you don’t ever really know unless, you know, you open up the walls. That being said, if I ever look at a building, I go to the basement first, the basement can tell the whole story about a building. If it’s clean, you don’t see signs of water or crack in the foundation. That’s a good sign.
D.J. Paris 18:47
Yeah, for the walls haven’t been painted over to hide the mold. Or I have a friend that happened to bought a very expensive home. And the previous owners have literally painted the basement walls to tie the mold. And I imagine you’re active or at least have been active on bigger pockets as a.com I don’t know if that’s yeah, I was just gonna references as a resource for its if you’re not familiar. Yeah, it’s a large I think it’s the largest online forum for investors who wanted to chat back and forth a real estate investors of course, and it’s, it’s like maybe 100 bucks a year, it’s totally worth it. And it’s it’s just a great place to get information you you wouldn’t need to go there for learning
Mitir Patel 19:30
about investigating, but it’s always nice, bounce your ideas off someone else. It’s
D.J. Paris 19:33
interesting. And they do have actively, you know, people trade properties on there. So it’s really it’s Yeah, you should check it out bigger pockets. It’s, it’s, it’s very cool. I’ve actually tried to reach out to them to do because they do their own podcast as well, which is great. But I’ve tried to reach out to them to do for this and I haven’t been able to discuss successfully region but they are awesome. They have 10s of 1000s of investors who are just chatting, it’s just a big forum. It’s basically like a gigantic online forum. And thank you but really well moderated. So it’s not like a broker necessarily couldn’t go out there and say, hey, if anyone needs a realtor, give me a call. But it’s particularly but anyway. Any other resources you’ve been using recently to figure out you know, investment opportunities. Training like Are you a co star Luke net guy or so?
Mitir Patel 20:18
I’ve used Luke in the past. I haven’t really currently, a lot of stuff I see I lunette is kind of priced high people put it out there, because it’s, it’s kind of a passive aggressive way of marketing your practice. Sure. And people if someone bites share, that being said, seems like especially as bigger buildings, they seem to be pocket listings. Yeah. And you kind of have to know the guys that are dealing in the areas.
D.J. Paris 20:41
Gotcha. So So what would you say? Do you have any? Are you have you pivoted your business at all? You know, in the last year, has anything changed? Or just so we’re,
Mitir Patel 20:49
obviously as prices? As neighborhoods mature, we have to move on. So
D.J. Paris 20:56
yeah, you’re thinking about other neighborhoods or wait,
Mitir Patel 20:58
so we follow Milwaukee Avenue. And obviously, Logan squares kind of mature. Avondale has matured. So now we’re at Portage Park? Gotcha. You know, old urban. And it’s a great community. And it’s, it’s growing. And also we are west and north, which I thought I would never do. But, you know, up to 3000 West. Sure. That being said, there’s, there’s nothing wrong with going further from these borders. It’s just depends on what you’re looking for.
D.J. Paris 21:26
And this is just a selfish question, because I used to live there. I had a condo in Uptown for the 11 years. And that’s a particularly interesting neighborhood. You probably have I don’t know how much you’ve ever looked into it. But I know it’s been around. Where were you grew up in?
Mitir Patel 21:38
So our lawyer? Yeah, there’s only lawyers doing a 200 unit building in uptown. Okay. And I’ve had issue we’re doing some developments in the west loop. And ultimately, Alderman Burnett is a great guy. We have to get the blessing of all the community groups in these neighborhoods where you can do a project. Sure in there, there’s like two or three. In uptown, there’s 42. Right? So my experience from people who I know who invested there, Scott’s very challenging to make everyone happy. Yes. And these aldermen are winning these elections by like one or two votes, so they will not cross anyone.
D.J. Paris 22:16
Yeah. So how do you deal with with aldermen when you’re having to navigate those political waters?
Mitir Patel 22:21
So we’re lucky in that lifetimes? They want us to use their contractors and they’re feeling as if they’re a better bid? I’ll use anyone. Sure. But generally, we’re trying to we’re trying to add units to the community trying to add value, right. So usually adding a unit overall, is going to help reduce the cost of living so they kind of support that thing. When I’m pretty shocked at the resistance in uptown. I can I can see that. Part of the problem is the new rents are probably double what the rents were. But they are also quadrupling the
D.J. Paris 22:50
amount of units there. Yeah. It’s finally maybe finally starting to mature. Yeah,
Mitir Patel 22:54
that is, as I say, personally, that’s one neighborhood I avoid. Yeah, just it’s tricky. It’s Yes. Yeah. And if it’s for the big boys, because it takes a lot of money to pay his lawyers to, you know, fight these battles for you. Well, I
D.J. Paris 23:07
very much appreciate your time. I think this has been extremely helpful. And probably one of the most unique interviews I will I will have done on this podcast. So I really appreciate it. And if anyone’s interested in learning in contacting you maybe have an opportunity for you. How would they get in touch with
Mitir Patel 23:24
a sure just email me that MIT IR pa to@gmail.com. And I’ll try to respond as quick as I can.
Alright, well, thanks material, really appreciate it. Thank you, DJ. Thanks. Enjoy the weekend.
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