Diversifying Investments: From Commercial Real Estate to Car Washes w/ Mandy McAllister

Mandy McAllister: [0:00] Well, one thing I did do over the last couple years is I did a bunch of live in slips. So you live in the house, and then you get to keep for tax free up to $250,000 worth of that after you've lived in it for two years. Well, do that a couple of times, and you could have a really large sum of cash to throw into something to really propel yourself into a larger asset. So that's really kinda how I came up with some big down payments to help me grow. But, you know, living like you're broke. It's not sex none of this, like, wealth building stuff is sexy.

Speaker 2: [0:32] Welcome to the collecting keys podcast. The show where you'll learn how to use real estate to create massive income, not just passive income. Real estate doesn't have to be a get rich slogan. Listen to the country's top real estate operators, and you'll have all the tools you need to replace your w two income and go beyond in under twelve months. Ready to take things to the next level? Let's jump in with our hosts, Mike DeHaan and Dan Austin for today's episode of the collecting keys podcast.

Mike DeHaan: [1:12] What is going on, guys? Well, today's episode of collecting keys real estate investing podcast. On our interview today, we have Mandy McAllister, who is the CEO of GoBundance. She is an investor in a bunch of different multifamily. She just bought a car wash, and she is one of the most, I would say, like, educated people when it comes to corporate debt and these different kind of deal structures with multifamily and the benefits of them we've had on the show. She is definitely a like legitimate operator. You can tell just by how she talks and some of the weeds that we eat into regarding how she analyze these deals and the benefits of buying some of these larger deals rather than some of the other syndicators that hear out there that are just like, oh, you buy it, you increase NOI and you exit. She gets into, you know, why you should look at this kind of corporate debt, what kind of corporate debt to look for, some of the perks of it, some of the downsides of it, you know, and a whole bunch of other things in between. And it is a really, really awesome episode. She's been in the game for a long time. She said you started doing real estate in the late nineties. And, you know, if you're just listening to this, it's in the future. It's currently 2023. So that is what is that? Twenty four years worth of real estate investing knowledge And just, you know, a short episode here, and there's so many great knowledge bonds that she dropped in this episode.

Mike DeHaan: [2:25] So hope you enjoy it. It is a really solid one, definitely one that could potentially wanna take some notes with. And don't be afraid to reach out to Mandy after the show. She is definitely a bit of a public figure. She currently has a web series that they are filming for bigger pockets. So there's she's doing a lot to put herself out there, and don't be afraid to reach out with her and say what's up. And she will probably have some great advice for you as well if you're trying to get into similar deals like she's doing. But anyways, guys, really awesome episode and enjoy this one with Mandy McAllister. What is going on, guys? We are here today with Mandy McAllister out of Chicago, and she is, I believe, the CEO of GoBundance Women.

Mandy McAllister: [3:06] Yep.

Mike DeHaan: [3:06] Right? And you have a bunch of different things that you do in the real estate investment space. And you're introduced to me by a good friend of mine, and he told me the gist of everything you have going on. And so I'm super excited to hear about all of that. So we're gonna go into all your different investments, how you're getting into car washes, how you're doing these different j b's and apartment deals, how we touch on a little bit what it's like to lead a premium mastermind like Openness Women, and just be a high performer in general. So I'm super excited to dive into this to you with you today, Mandy. But first, let's do a little bit of a background. Maybe give like the three minute intro about you and sort of where you came from.

Mandy McAllister: [3:43] Sure. I got interested in real estate investing in 1999. Didn't buy anything until I was 35 years old in 2015, but then really figured out how to scale pretty quickly. Because I the first thing I bought was a fourplex. And I realized automatic scale. Wow. Let let's run after this. And ended up being able to buy enough small multis. I call it about six units to 60 as my wheelhouse to buy that size of property to buy my way out of my medical device sales job. Because the punchline of my life, or at least one of them, Mike, is I chose not to go to medical school because I didn't wanna be on call, and then I ascended the medical device sales ladder such that I ended up on call. So it was a whole hilarious thing. But bought my way out of my w two and then had space in my life where they wanted a a new leader for GoBundance women so that it could be for women by women that would make it a little more beautiful. And I was able to jump at that chance. So here we are today.

Mike DeHaan: [4:43] Sweet. I love it. So 1999, I mean, you were kinda doing real estate, I would say, kinda before it was cool. Like it was still a popular thing back then, but it wasn't like the last, you know, six or seven years where like everyone is beginning into real estate. So you've seen, like, the market cycle changes and things like that. How was that experience for you? We don't get a ton of people that come on the show that were around pre 2008, let alone in the nineties. So what's your perspective like on that and sort of what things are looking like right now?

Mandy McAllister: [5:12] Oh, don't get me wrong. I I was interested in real estate investing because my college friend was telling me that her dad bought the house.

Mike DeHaan: [5:19] Mhmm.

Mandy McAllister: [5:19] And she was renting out the rooms to our friends. And I thought, oh my god. And you get to keep that money? That's the best idea I've heard in my whole life. So I very analysis paralysis. Very whatever the difference of investing stuff between men and women is I think girls really try to be perfect, and boys sometimes are taught to be brave. There's really a a great TED talk on the subject, but that trying to find the one perfect investment kept me from actually being all in on action until, you know, much much later. So Yeah. When I originally started, it was as basic as you get. Was a 25% down, following all the rules, nothing creative, because I was I was worried that I was gonna screw it up a 150 different ways. Yeah. So really really bread and butter vanilla in the beginning.

Mike DeHaan: [6:03] But you're still taking action. And I think, you know, that that helps you stand out from lot of different people with that. So that's great. Yeah. So you know we got a lot of different things we can dive into on this show. Just to give people some context, what is your business and your portfolio look like right now?

Mandy McAllister: [6:16] So it's roughly 370 ish doors. This is not syndicator math or it's kinda syndicator math. You know how? So a 104 of that, mind you, is a syndication that I own like 2% of.

Mike DeHaan: [6:27] You're an LP in that one.

Mandy McAllister: [6:28] Yeah. Exactly. What's that matter? A GP.

Mike DeHaan: [6:31] Oh, GP.

Mandy McAllister: [6:31] I've got yeah. I have syndicated. I love syndicating because you get this tiny little slice and you still do all of the same work. My favorite, my wheelhouse of investment is joint venture. I figured out pretty quickly that a four unit is great, and I got a a great thirty year fixed loan on it. But if you wanted to go bigger, then you could chase agency debt if you're willing to borrow more than a million dollars, and you meet all that criteria. You meet that experience, the net worth, the liquidity criteria, and I didn't when I originally wanted to dive in. And then so if you borrow a lot, you get a great loan. You borrow a little, you get a great loan. In the middle, it's like this black hole

Mike DeHaan: [7:08] Yeah.

Mandy McAllister: [7:08] Of commercial lending, which is pretty difficult to to get into. So what I did is I I found a couple of partners that were interested in the type of investing that I'm interested in. So let's go a little bit bigger. Let's secure the nonrecourse agency debt, and let's do it on a Fannie Mae loan specifically because we're gonna hold this for the long term. We're gonna get a twelve year turn. And then if and when we appreciate, we'll be able to pull out some of the upside on a supplemental loan. You can only do that on a Fannie Mae. You cannot do that on a Freddie Mac. So beginning with the end in mind was super important. And joint venturing really is what helped me catapult myself into the larger stuff. Yeah. I love what you

Mike DeHaan: [7:50] just said there because you just showed that I know you're a true operator in that kind of space versus a lot of the people that I talk to that talk about all their units. They probably even couldn't explain the different benefits of the debt that you just said because all they know is that they put some money into an LP and now they're gonna go around their professional syndicator, whatever, the a fundraiser. But you're actually getting involved in the deal. So that's that's great. So I guess just to, you know, to the first person we've had on this show that I guess understands these different kind of debts and different benefits quite like you've you outlined there. So give us like the explain like I'm five version of that. What is the benefit of having this, you know, this Fannie Mae specific product, having this like larger debt, you know, being able to roll it into a different kind of debt that you said, which I honestly haven't heard of that before. Give us like the brief outline of why you would choose to do that.

Mandy McAllister: [8:39] So I I actually hired a coach back in the day when I I wanted to go from four units to then start adding a zero. And realized that, you know, he lost $50,000,000 in the downturn. And the reason I hired this guy is because I wanted to know how to not lose $50,000,000. And my primary takeaway of that time I worked with him was he cross collateralized everything. You know, one domino fell in 2008 and the entire portfolio was wiped out. So that made me feel like if I can buy something in a obviously, own LLC. Each larger asset is in its own LLC, so I get that protection. But also on a loan that's nonrecourse, what that means is if it hits the fan, I'm not personally liable. Yes. I give back the property, but so long as I can prove that I didn't commit fraud or all of these other bad boy type things

Mike DeHaan: [9:25] Yeah.

Mandy McAllister: [9:26] Then I just I give back the property. So if I had a portfolio of $105,000,000 dollar properties, so $50,000,000, same thing as my guy I hired as a coach, and I lose one, I still have 45,000,000

Mike DeHaan: [9:38] Mhmm.

Mandy McAllister: [9:38] To live on. So I'm not making that tremendous error. Right? So one more thing that I kinda learned in that process of of taking things down on agency debt was Freddie Mac allows for Fannie Mae and Freddie Mac are both government backed institutions that this is what we're talking about when we say agency debt. You probably know of the residential type loans that they do, but they also do this investment grade stuff.

Mike DeHaan: [10:00] So Uh-huh.

Mandy McAllister: [10:00] If you're not aware of that, that's what we're talking about here. Well, Freddie Mac, if you achieve an increase in NOI and you increase the value of that property, you have to do a full cash out refi if you want to enjoy any of that upside. Well, what Fannie Mae one of the great parts about Fannie Mae is that you can allow for a second loan, a supplemental loan that will be able to pull some of that out. But there's upsides and there's downsides of anything. My entire approach is to kind of Warren Buffett, Charlie Munger type. Like, I like to buy and watch. I'm not necessarily a buy and hold. You wanna give me $10,000,000 for the thing I paid $4,000,000 last year? Sure. I'll consider selling it to you. Right? But I'm mostly just watching what's happening in the marketplace. So there's a tremendous prepayment penalty yield maintenance type thing with these agency debt loans. So it's not a perfect fit for everybody, but those who like to buy and watch. It is a perfect fit.

Mike DeHaan: [10:55] Yeah. That's awesome. And so you're getting into these kind of loans, you know, you didn't meet the requirements. I know there's a lot of, like, net worth requirements. Mhmm. Probably different things about the asset they look for. I would assume there's an experience requirement as well. They're not just gonna give these loans to someone that's brand new.

Mandy McAllister: [11:14] Totally. And that re actually, recently that changed. Interesting. First off, disclaimer, I'm not a lender. You need to talk to a lender about this. I'm not your accountant. I'm just your friend Mandy who's had some experience with this. But if it recently changed that you needed to have held multifamily property for at least two years and or had that type of loan in order to go get that type of loan, that agency debt loan. So it's kinda like a catch 22. Right? So what I ended up doing was partnering with someone who had had that type of loan so that I could qualify for it. The new rule though, Mike, is that if you have small multis to duplexes up to quads, and you have 10 units of that type of real estate and you've held that for at least two years, then you can qualify for one of the small balance loan programs. So absolutely talk with somebody who lends in the agency space. You also have to show a net worth equal to or greater than the amount of the loan you're borrowing. If I need to borrow $5,000,000 in order to take down whatever deal, and I my net worth's only 4,000,000, you could be my partner if your net worth is over 1,000,000, and we collectively can have that net worth of $5,000,000.

Mandy McAllister: [12:22] So absolutely something to keep in mind.

Mike DeHaan: [12:25] Yeah. So as you're kinda going into these deals and you're trying to forecast the return in different things, it's obviously gonna be very different from residential real estate. A lot of residential investors, they look at the cash flows, potential appreciation, things like that. And then with these style, I mean, obviously, multifamily will do value adds, trying to, like, increase based on cap rates and different things. But when you're looking at these, because they have these long prepayment penalties, do you still analyze them the same way, or are you considering kind of like the aggressive debt pay down as well with all this? If it's like cheap debt, like, how what does the full analysis picture look like when you're looking at these kind of deals with this kind of debt?

Mandy McAllister: [13:03] When it comes to this type of commercial real estate or commercial real estate in general, it's only about the numbers.

Mike DeHaan: [13:09] Yeah.

Mandy McAllister: [13:09] The valuation is solely a product of what is the net operating income that you can achieve, and you're making a ton of assumptions when you're doing that. So when you're underwriting in single family, you get your comparables and you know what that four bedroom is, you know what this three bedroom is, and you're gonna be something in that ballpark. Well, it's all a function of what's the net operating income Uh-huh. On commercial real estate. Right? So one thing that I I get a chance to help out people who want to get involved in this small multi type investing, and I always underwrite just kinda my overall thesis of how to approach underwriting is you gotta underwrite in place. So you're gonna get the the numbers from the the current owner, the trailing 12 t 12 profit and loss statement, so the the most recent twelve months of numbers. And the bank is gonna give you a loan based off of in place of what's actually happening. So you're gonna need to figure out what the debt coverage ratio is in place in order to qualify for permanent financing like I like to go after. And then when it comes to value add, what you're talking about there is if you increase an NOI, then you've exponentially increased the value of that property.

Mandy McAllister: [14:15] My favorite type of value add is anything that doesn't have a construction risk associated with it. So I love a ratio utility build back system, a RUBS system. I love charging a pet rent when there is no pet rent or a laundry room, or storage in a basement, or those types of things that I'm not thinking $15,000 into a kitchen in hopes to get $500 more in rent. So, you know, what is a non construction risk NOI builder?

Mike DeHaan: [14:44] Yeah. That's perfect. I love what you said there about you're making a ton of assumptions. I think that's a really hard thing for people to do when they are going from, like, the residential space to the commercial space. Because you're right. With residential, you can make very calculated decisions based off of historicals because there's such like a high rate of transactions that occur in the residential space. You know, it's not evaluated based off the NOI, but based off of the comps in the neighborhood or the area. And that just doesn't quite exist the same with commercial.

Mandy McAllister: [15:14] And no matter how skilled you are, an assumption is always a guess. Yeah. No matter what, the best investors in multifamily, in commercial real estate, they're still just guessing. So one thing I say a lot is how close to truth can you get? And this is why I encourage people to get really granular on a single market. If you get really good at knowing what property management will cost you in Indianapolis, awesome. Run at that market. Cause it's gonna be different there than it's gonna be in Spokane, Washington.

Mike DeHaan: [15:42] For sure. Yeah. That's always such a I would say, it's funny. We have like our instant investor coaching program that we work with to help people get started with this sort of stuff. And one of the most fascinating things to me is people's risk profile with things like that is always inversely related to their income and, like, their personal financial position. It's like this kind of the sphere of loss. And getting into, like, that commercial space, you just kind of have to be comfortable with that potential risk. But at the same time, I also feel like the best multi head who I know, they are already from that strong financial position because they are able to understand how money works a little bit better.

Mandy McAllister: [16:18] If you wanna make a $100,000, you gotta be willing to risk 10,000. You wanna make a million, you gotta be willing to lose a 100,000. Right? That being said though, it gets a lot easier to lose a $100,000 when your net worth is a couple million dollars, you know?

Mike DeHaan: [16:31] Absolutely.

Mandy McAllister: [16:31] So it's all about balance. It's all about growth.

Mike DeHaan: [16:33] Yeah. Yeah. That's awesome. So I guess for people that are looking to, I guess, get into these larger assets like this, you know, there's obviously a few different places you can be. I've seen people get into as like a deal finder. I've seen people get in as like a fundraiser. Seeing people get in by working as like an underwriter of some of these different firms. If there was someone that was trying to do it from like an investment standpoint, kinda like you do as opposed to like working for one of these companies, what do you think would be the best way to approach it?

Mandy McAllister: [17:02] I don't have a lot of regrets in my life, but one is that I didn't house hack. I wish I would've lived in a four unit and rented out the rest. Right? And then I would've would've lived for free. Well, one thing I did do over the last couple years is I did a bunch of live in flips. Yeah. So you live in the house, and then you get to keep for tax free up to $250,000 worth of that after you've lived in it for two years. Well, do that a couple of times, and you could have a really large sum of cash to throw into something to to really propel yourself into a larger asset. So that's really kinda how I came up with some big down payments to help me grow. But, you know, living like you're broke. It's not sexy. None of this, like, wealth building stuff is sexy. It's just doing the stuff that you need. It's like dieting. Right? That you need to eat less, you need to exercise. You freaking know what you need to do. Just go do it. You know? So how can you build more money and spend less of it so that you can grow it into something that's gonna help you live a life like no one ever dreamed of.

Mike DeHaan: [18:00] Yeah. And unfortunately, just like with health stuff, people always seek the quick upgrades, you know, in their wealth as well. She's like, you know, they they sold what, six minute abs as like forever. Like, that was a thing, and only recently you don't really see that a lot anymore. I guess you still do on certain network TV channels. But the same thing goes with well. Right? It's just gonna take a long period of time. So, like, it takes a long time to get in shape. So getting I guess, specifically into those larger multifamily, is that how you suggest people get started though is that they work on banking that money and having that available? Or is there like a hustle component that someone could bring in as well that you think would also be mutually beneficial with, like, other operators to get potentially cut into deals?

Mandy McAllister: [18:39] Yeah. You've heard it from all the gurus. If you find a deal Yeah. Then you'll be able to find someone who needs a deal. Right? Like right now where we're at in 2023, 12/13/2023 when we're filming

Mike DeHaan: [18:51] Yeah.

Mandy McAllister: [18:51] The deals are the harder part to come by, in my humble opinion. Yeah. So if you're finding those deals, absolutely take those and network with the people who are doing the type of investing that you wanna do. If you wanna syndicate, go make friends with syndicators.

Mike DeHaan: [19:04] Right.

Mandy McAllister: [19:05] If you wanna buy and hold, make friends with people like me who buy and watch the market, know. But deals are really where it's at right now.

Mike DeHaan: [19:12] Yeah. How have you been successful with finding deals? I guess are you kinda removed from that part? I've talked to a lot of different people. Some people do the direct to seller stuff. That's what we specialize in on the residential side. A lot of people, they work exclusively with brokers and focus on building broker relationships. Seems to be no right or wrong way. It just sort of depends on people's, I guess, appetite.

Mandy McAllister: [19:32] So I think whatever you're gonna do, you gotta do it all the way.

Mike DeHaan: [19:34] This

Mandy McAllister: [19:35] is I'd done a mailer. I did it like three times, and then I gave up. So I got nothing out of it. I just wasted a crap ton of money. Right? So if you're gonna do it, do it all the way. When I was ramping my portfolio, I really was doing that when I was working a full time w two, my medical device sales job, and I was a single mom. I see. So the extra hustle of trying to squeeze out an extra 1% or 2% in terms of return, I chose to let the brokers work for the money because those guys work for their money. Right? So I went in terms of building broker relationships. But I think one of the things that doesn't get a lot of airtime is when you have a real crystal clear criteria and you have your money set up in such a way that you don't have to do a deal, then you can wait when there's no deals that fit your criteria. I feel like there's a lot of hysteria especially in this ramp up and all these syndicators that, oh my god, I have to do a deal. I need to feed my family. No. That that is not how I've really structured this portfolio. I have a floor of income that helps me live my life. Yeah. And I get to go live my life, and when a deal presents itself like right now there's a 40 unit in Kansas City that looks interesting, I'm running at it. Right?

Mandy McAllister: [20:48] Mhmm. I don't have to be thirsty for it because if that doesn't happen, then I'm still feeding my family.

Mike DeHaan: [20:53] Yeah. That's such an underrated comment there. You know, and so many people, especially when they're first getting started in real estate, their goal is passive income. It's financial freedom, all those different things. And as a result, they start to make these ridiculous decisions because they have in their goal tracking sheet, whatever they need to buy x amount of properties this year to reach their financial freedom number. But what happens is exactly what you're saying. You know, they start trying to force these deals and start getting over their skis. They start buying stuff that doesn't really make sense because they're not coming from a place of financial strength. Like, one of our biggest things has always been focusing on building, like, the massive income before the passive income. So learning how to make real money and build a business so that you are liquid and available to have these investment opportunities when they come through. But it kinda goes back to, you know, the fitness and and wealth management thing. There's lot of patience that were that's required with that. It does require work. It does it is gonna take longer than you want, but that is the easiest way to ultimately be successful.

Mandy McAllister: [21:51] I love that. What was that? Massive income before passive income?

Mike DeHaan: [21:55] Exactly. Yep.

Mandy McAllister: [21:56] I always talk about an engine for cash flow that feeds my forever money engine. And a lot of it too is being in a spot where you can trust your own judgment.

Mike DeHaan: [22:05] Yes. Is.

Mandy McAllister: [22:06] You know, like we're playing double dutch. We're just we're waiting for the right time to jump in. But if you're not willing to take that risk and jump in when it's time and that you trust what you see is true, you really gotta do the reps now, you know, so that you can recognize a sale when you see it in the coming months.

Mike DeHaan: [22:22] Exactly. And and the great thing about kind of having that, I would say, like, that skill set and knowing how to make money, knowing how to recognize opportunities is when we get into phases like right now where the economy is a little bit weird, you can still take care of yourself. You know, you're not just having to ride on the coattails of a strong economy in order to make money or in order to, you know, improve your position. You know, you change your mindset around, you gotta get a little more scrappy. But because you know what it takes, it's it's not rocket science. You're not trying to figure it out when you have your back against the wall.

Mandy McAllister: [22:50] And I feel like this speaks really strongly to a pivot. And, you know, we we talked offline that one of the things that's kind of been all the rage in GoBundance Women is looking at cash flowing businesses rather than just at cash flowing properties. So my vantage point is if I, you know, if I zoom out and try to get as logical on life as I possibly can, If I'm gonna buy multifamily at a four cap, it's value equals NOI over cap rate. Just the simple math of that, if I'm buying at a four cap, I'm basically saying I'm willing to pay $25 for a dollar of cash flow for that dollar of NOI. Well, if I wanna buy something like, let's say, a car wash, the multiple that I'll pay of EBITDA, like another form of cash flow kind of, is I'll pay $3 for that dollar of cash flow. Why would I choose to only look at the stuff that cost me $25 for a dollar of cash flow when it is available to me that I might be able to buy $3 for that dollar of cash flow? So that is the reason for the pivot right now into the car wash.

Mike DeHaan: [23:50] Yeah. So, yeah, I wanted to have your car wash, really quick. Yeah. Curious your opinion on this whole movement as a CEO of GoBundance Women. I'm sure you see this a lot. But it's something that I'm not sure how I feel about it because, you know, with the rise of of Cody Sanchez and, buy ugly business and, you know, boring business, whatever she says, all these different things. Right? Good money. I'm starting to see this huge move, and I've seen in different groups where you have, like, this these people that are baseline employees. They work at a company. They make $65,000 a year, and they are going, I'm going to buy a bunch of businesses so that I can achieve financial freedom. They've never run a business before. They've never managed teams of people. They've never had to deal with any sort of corporate structure other than the one that they are currently at Coggin. And I just have like this view of seeing these people go in, and now they're suddenly in charge of 35 people at a bookbinding business or whatever it is, but they have no leadership experience. There's no way that ends well. Like, it just doesn't make sense, honestly.

Mandy McAllister: [24:46] You're not wrong, and investing in a business is nowhere near passive. Even the very few employee car wash, you know, if you're not setting up SOPs, if you're not setting up things that happen on a daily basis, on a weekly basis, on a monthly basis, setting expectations, measuring things. You cannot manage anything that you're not measuring. I say that a lot in my real estate portfolio too. But if you're not measuring stuff, if you're not hands in, it's really difficult to know if it's working or not. It's just not some magical wand that poof, you're gonna get stacks of cash. It's absolutely something that requires skill, requires commitment, and requires your hands being dirty.

Mike DeHaan: [25:27] Yeah. And and it is a concern that I have because I worry about these uneducated individuals going and getting, you know, the book buying a business on seller finance. And now all of a sudden, there's 35 other lives that are at their mercy. And they've never done that before. Because in their view, because it's a quote unquote asset, a cash flowing asset as people say with these businesses, it's not different than buying like a multifamily property when it's really very, very different.

Mandy McAllister: [25:52] But you can screw up a multifamily too. That's true. If if you are not prepared, if you don't know something, I think that this is just an outlook I have on the world.

Mike DeHaan: [26:00] Yeah.

Mandy McAllister: [26:00] If I don't know something, I am completely willing to say I have no idea.

Mike DeHaan: [26:04] Listen.

Mandy McAllister: [26:05] I'm gonna go find somebody who does. Yeah. Right? If you lead your life with curiosity, if you are that person who makes $65,000 a year working as a a cog in a wheel, and you are super curious, and you're willing to go ask the what feels like the dumb questions that you'll get found out, like, go do it. You are the one who is going to be the exception. If you're somebody who just feels empowered because somebody else did it, you know, you might have a harder time. The interesting thing though of GoBundance Women is, you know, most of us are have found sick tremendous success in whatever business we work in. So, you know, those skill sets kind of already exist. So it is kind of maybe an anomaly or a spurious correlation, but we see a lot of businesses being required and grown successfully in our organization.

Mike DeHaan: [26:52] Yeah. It's it's funny. I guess in GoBundance, I'd worry about it a little bit less just because, you know, there's a net worth requirement. There's, you know, typical character that's drawn to that kind of environment. But it is like some of just the random groups I'm in or like these free Facebook groups that people join.

Mandy McAllister: [27:09] Right.

Mike DeHaan: [27:09] It's like, here's how you can buy a business in your next thirty days. It's like, well, you probably should get your own stuff in order first before you go in and take on the lives of a bunch of other people.

Mandy McAllister: [27:18] And right back to that floor of income. Mhmm. You know? When you know that you're doing things with best interest of that business or multifamily in mind, it's easier to make decisions.

Mike DeHaan: [27:27] For sure. Yeah. So let's talk about your car wash. Yeah. So how how recent is this acquisition?

Mandy McAllister: [27:33] Couple weeks. Couple weeks. We've been under contract for a couple months. But the nature of this is I I knew I wanted a business with not a lot of employees. I wanted it to be really heavy real estate, so that was either a laundromat or a car wash. And I wanted it to complete this sentence in the right way. Chat GPT can't replace car washes.

Mike DeHaan: [27:53] Car washes. That's

Mandy McAllister: [27:54] So like that, that's really kinda the because like Maslow's hierarchy of needs is the entire reason that I buy apartment buildings. You always need a place to live. You never in your life need a bitcoin. You never in your life need a certificate of deposit. Right?

Mike DeHaan: [28:09] That you

Mandy McAllister: [28:10] need a roof over your head. So when it comes to car washes or laundromats, the ChatGPT can't replace them. Right? So I felt like it would rhyme more if it was real estate heavy, And I knew that I had a single family home that had appreciated about a $100,000 that I was getting out of. So I could ten thirty one exchange that extra $100 and not pay taxes on it into the building. Well, I segregated that out into two transactions. One for the building, one for the business. Ended up able to buy the building with nothing out of pocket because it was $10.31 funds. And then with a partner bought the business. So I have help in running the business day to day. And I personally, because I'm a real estate professional, had the opportunity to enjoy that depreciation of the car wash.

Mike DeHaan: [28:58] Yeah. That's awesome. So the I'm assuming that both of those purchases are from the same person. So the previous owner of the business also owns, in case you weren't, like, having to negotiate both sides. The real estate, I'm sure it was pretty straightforward. Let's talk about the acquisition of the business itself. So did you go and get financing for this? Was it SBA loans? Is it seller financed? Are you do you pay cash for it?

Mandy McAllister: [29:21] So I structured that both of the deals so that I could have as many dollars as possible falling under the building because Oh, I here's why. A lot of this stuff is happy accident, but it's how I would do most of it again if I was doing it again. Well, the amortization you can get on a building is twenty or thirty years. The amortization you're gonna get on a business is usually max ten years. Right? The rates you can get when you have done a lot of real estate stuff from a local bank is much lower Uh-huh. And the term is much longer than you can get for a business. So what I chose to do was put as many dollars as possible under the building and borrow against that because it's asset backed. It makes sense. I would way rather lend on something that was asset backed rather than somebody's ability to run a business. And then we ended up just paying cash for a much smaller amount of cash for the business portion.

Mike DeHaan: [30:16] Yeah. So I guess going back to like the t 12 with this. So the business owner was obviously first that also own the building, where they like paying rent, so that you could like show that tied to the asset? Or how did you structure that? Because I could imagine spending on the lender that they might have this arm's length view on it that could get a little bit weird.

Mandy McAllister: [30:42] Well, it was an appraisal situation. Okay. So it was, you know, what's the highest and best of this building? The building

Mike DeHaan: [30:47] Gotcha.

Mandy McAllister: [30:47] Actually appraised for more than we paid in total for the business and the building combined, which felt really good to me. Yeah. But I knew from looking at all the other property records that it was a deal that made sense. It was a guy who, you know, he's he's in his seventies. He's owned this for eighteen years. He was getting out of it because he is one of those boomers that is trying to leave his business behind so he can travel with his girlfriend. You know? And he liked that my business partner in the business is my boyfriend. He liked that we were running at this together. And we, you know, were able to negotiate a reasonable price, and he's been super helpful

Mike DeHaan: [31:24] Yeah.

Mandy McAllister: [31:24] In us getting on our feet working through all of the the systems.

Mike DeHaan: [31:28] Yeah. That's great. So as you're getting into this, what were some of the, I would say, like, biggest lessons that you learned, some of the gotchas, especially with the car wash? I would assume there's some, like, environmental things and stuff like that that might make it a little bit more complicated than other sort of business that you could buy. But I'm completely uneducated to this.

Mandy McAllister: [31:46] There weren't as many as I anticipated. I'll be honest. The the thing that didn't rhyme as perfectly with multifamily setup was merchant services, being able to collect people's credit card payments. Figuring that out was and there were two different systems, and they're super old school. And it really I'm not the most patient person being on hold for an hour and a half. But I had an opportunity to work on that with this acquisition.

Mike DeHaan: [32:14] Isn't it fascinating how complex that is? Like, honestly. It's like trying to figure out how to be able to take people's money when it's a a merchant style business like that. So, like, when we started our instant investor group coaching program, subscription style business, right, it's online. And for us to get approved by payment processors, we had to go through three different ones before we finally got approved, because they would be like, we want to see that you have a record of business. I can't have a frickin record of business. I can't collect anyone's money. Right? And then we ended up having stripe, like our first stripe account, they withheld like $25,000 from us, because we were deemed quote unquote, high risk. And we didn't get that money back for like fourteen months. They just held on to it forever. It was crazy. Stop. Yes.

Mandy McAllister: [32:59] Oh my gosh. This sounds like an Alex Hermosy thing. I mean, if you followed him.

Mike DeHaan: [33:03] Yeah. So his was like 200 k or whatever his was, but Still hurts. Yeah. And still hurts, you know. So it's just such a weird thing, because you even had a track record for that business. Like there was no reason for them Yeah. To be that

Mandy McAllister: [33:14] My business, there was a track record, I tried to just sign over. One of these systems we were just able to sign over and put those funds into different bank account. The other one's been because it was eighteen years ago when it was started, the the actual vendor doesn't exist anymore. Got absorbed by somebody's by somebody, and now it's Bank of America, they don't wanna support it, which I completely understand. So we're working through it, but that was something that I hadn't bargained for being a assembly block.

Mike DeHaan: [33:41] Yeah. It's it's always that that funny things.

Mandy McAllister: [33:43] One tip though, if if you're doing something like yours that is a recurring thing, there are websites that's on my website, I go through Wix.

Mike DeHaan: [33:50] Is this?

Mandy McAllister: [33:51] Which I am able to just use their merchant services and and tap into stuff like Stripe.

Mike DeHaan: [33:56] Is this?

Mandy McAllister: [33:57] So if somebody is in your shoes with similar merchant service issues, try going through your website and Stripe.

Mike DeHaan: [34:03] Yeah. So we were using Kajabi, which also offers that through Stripe. The problem was because it was a high ticket item. So things were, you know, between 3,000 and $5,000 transactions. And so that was immediately flagged as being questionable. Got it. Because I I think if we were selling, like, you know, $20 widgets, it would have been completely different.

Mandy McAllister: [34:20] I get that.

Mike DeHaan: [34:21] Especially because it was a digital service as well.

Mandy McAllister: [34:23] Which I feel like there's a joke in here because I own a motel and now a car wash. So Breaking Bad and, like, Ozark.

Mike DeHaan: [34:29] Right. Yeah.

Mandy McAllister: [34:30] I'm probably gonna flag myself, I guess. Yeah.

Mike DeHaan: [34:33] For sure. I mean, it makes sense. Like, it would be very easy for someone to move money that way.

Mandy McAllister: [34:37] But Yeah.

Mike DeHaan: [34:38] Either way.

Mandy McAllister: [34:38] Not us. We're good people. IRS. Lifting Yeah.

Mike DeHaan: [34:42] Right. Yeah. Yeah. Right. So no. That's cool. So I guess, is your long term strategy with this car wash? Are you trying to do an NOI increase and exit? Or are you just planning to hold on to this thing and just print money?

Mandy McAllister: [34:52] I'm a buy and watch girl, Mike.

Mike DeHaan: [34:54] Nice.

Mandy McAllister: [34:54] If this ends up with systems behind it that it does cash flow in a way that's a little more hands off, If we get those SOPs in place and it's hands off, I I would love to hold it for the long term. One thing that's also very interesting is once you've achieved an EBITDA that is in the couple millions of dollars, the multiple increases because the private money, the private equity, they want to buy a larger business. So if you have pieced together a bunch of smaller businesses into one larger business with a much higher EBITDA, you get a higher multiple. So that is like the ultimate value add in business. Yeah. I would love to continue to acquire things. Once I have my legs under me, if this one that's nearby, acquire some businesses similar and install a manager to be able to to grow that in a larger way.

Mike DeHaan: [35:44] Yeah. Yeah. Absolutely. I mean, that makes perfect sense. Is this like one of those like automated ones to you or is like one of the ones where people are just like washing themselves?

Mandy McAllister: [35:51] It's all self-service. Sweet. Which is, if you think about it, it's a very different avatar of a human who wants to wash their own car versus go through one of those tunnels.

Mike DeHaan: [35:59] Is

Mandy McAllister: [35:59] this? It tends to be a person who works with their hands. So I'm looking in areas where there's populations of of people that are tradespeople.

Mike DeHaan: [36:09] Yeah. And one last question on this. Because I know people always wonder this. How'd you find this deal? Is it a broker? Did you like have a relationship with the guy?

Mandy McAllister: [36:16] It is by itself.

Mike DeHaan: [36:17] There you go.

Mandy McAllister: [36:18] One thing when I help people find multifamily, especially if you want something that's smaller, I just have them set up a Zillow search so that they know what on sale looks like. So it comes to your inbox, and you then know that, oh my gosh, a $200,000 fourplex in this area is on sale. I need to look at it. I saw that from Biz by Sell to my inbox and ran after.

Mike DeHaan: [36:40] Yeah. It is such a underrated thing, honestly, like, just using the platforms that are out there for you to do that. There's like this weird thing, like, the mentality that exists. I don't know why where they think that if something is on one of those websites that it's not a good deal, because if it was, somebody would have already bought it. But the problem is now it's like a self fulfilling prophecy where everyone thinks that same thing. So now just like having the opposite thought process and looking at the opportunities on there, there probably are lots of good ones because everyone thinks that they're bad because no one's looked at.

Mandy McAllister: [37:09] Well, totally. And I mean, the story for like a LoopNet is probably a little bit more straight line than for a business. Yeah. You know? Because where else would the business brokers aren't quite as aggressive as multifamily brokers. Right? So that middleman that forces the opportunity for lots of eyes to see a deal before it hits LoopNet doesn't really exist in business buying.

Mike DeHaan: [37:32] Just smaller buyer pool, more variability in it. It makes sense. And you said BiggerPockets is gonna do web series on it? On your

Mandy McAllister: [37:40] Yes. I I happened to be at BiggerPockets con, and made some friends there, and was talking to some more junior investors who really had wished that there was business plus real estate breakouts happening, and I was buying this car wash. So I pitched one of my buddies that I made on, well, maybe we should do a little web series, a couple episodes on this, and they they green lit it, Mike. So actually tomorrow Yes, we're so doing our first filming. Should go live sometime in January.

Mike DeHaan: [38:06] Sweet. That'll be cool. Is this do you think BiggerPockets is gonna go towards doing more like business purchasing content and stuff like that?

Mandy McAllister: [38:13] I think BiggerPockets is really astute that they're looking at what's happening in the marketplace and like the hunger of their viewership. Right? And this is something that's all the rage in a lot of places. Right? So to offer educational content, think is something they will run after.

Mike DeHaan: [38:30] Yeah. I mean, they are a content business at end of the day, so they need to make content that people wanna hear. You can go and preach the same messages from ten years ago, but if no one's listening anymore, kinda what's the point? Awesome. Well, cool. I'm excited for that. I'll have to keep track of that when that that comes out. Right on, Mandy. Well, I appreciate all the insights that you've had. You've obviously done a lot of great things. You're going to start to dive into the end of the show questions here. So the first question that is one of our crowd favorites is what is your craziest real estate investing story? This could be a big win, a big loss, crazy tenant, crazy transaction, whatever you got.

Mandy McAllister: [39:04] So my sixth unit, one of the very first things I've ever bought throws off about $4,500 a month. This is like the thing that really propelled me into being able to to lead my w two. Well, I was moderating a panel at a GoBundance Women event actually on buying businesses, and my watch had somebody calling me. So I said, you know, can I call you later? That thing. Right? And then I got a text back from that number. It happened to be the guy who owned the Fourplex next to my Sixplex. He's like, yeah. There's been a murder at your building. And I'm like so then I'm in the middle of moderating. I'm like, well, so how do you feel about SBA loans? And I have to like keep my act together.

Mike DeHaan: [39:41] You're sweating. You're getting nervous. Yeah.

Mandy McAllister: [39:44] Anyway, it was a bad guy did something in a neighboring town, and his girlfriend lived in my building. So working through the downstream stuff and needing to keep my cool for about an hour was a pretty crazy situation.

Mike DeHaan: [39:58] Yeah. We haven't had to deal with something like that yet. We do have a situation right now where one of our tenants is MIA and our property manager can't get into the property and we're worried that he's dead in there. But we're not really sure how to approach it. And yeah. I don't know. Have you any tips about you? Like, what's the

Mandy McAllister: [40:15] situation like With 373 units, like, people, you know, unfortunately die in their homes on a regular basis. Right?

Mike DeHaan: [40:23] Yeah.

Mandy McAllister: [40:23] So, you know, contacting next of kin Mhmm. And and the police to do a wellness check is the direction I go.

Mike DeHaan: [40:32] Yeah. Okay. We'll do that. So why I guess what was the there was actually a murder like that? It wasn't an overblown situation?

Mandy McAllister: [40:39] No. A bad guy did a bad thing, and then he came to hang out with his girlfriend who lived in my building.

Mike DeHaan: [40:44] Oh, gotcha.

Mandy McAllister: [40:44] And the police were able to get what they needed, and everything is wonderful and we're nonrenewable.

Mike DeHaan: [40:51] There you go. Yeah. At least it wasn't in, you know, your specific building as a whole, but Yeah. That's a good one. Alright. Second question. What is the number one tip you would give to an investor trying to scale their real estate business?

Mandy McAllister: [41:03] You know, I think it's super important to begin with the end in mind. If what you want is financial freedom and you decide that the way you're gonna get there is flipping or syndicating. I'm here to tell you, you only get paid once when you flip a house. You only get paid you only get one acquisition fee when you're doing a syndication. Right? So if what you want is a recurring income coming in, it's a different approach. It's a different structure. It's a different type of asset potentially. So whatever life you want, you've gotta keep that your north star

Mike DeHaan: [41:33] Mhmm.

Mandy McAllister: [41:34] And then acquire real estate in that fashion.

Mike DeHaan: [41:37] Yeah. I think that's huge. And and making sure that you are putting side investments into that long term sort of view. Seeing seeing a lot of people that were just in that flipping frenzy in 2020, 2021 who are not super happy right now. They made a ton of money back then, inflated their lifestyle. They didn't put anything into some long term assets for themselves, and that's not a great place to be. So really, really great advice. Awesome. And the last question, Mandy. Where can people find you, follow you, and reach out to you?

Mandy McAllister: [42:05] I'm official Mandy McAllister on most of the platforms, but mandymcallister.com will help you link to Go Bun and Swimming and all the other stuff. Perfect. I'm up too.

Mike DeHaan: [42:14] Right on. Well, Mandy, I really appreciate you coming on the show. You've had an incredible amount of knowledge, and I really appreciate your time and your willingness to share all of that with our audience here.

Mandy McAllister: [42:22] So fun, Mike. Thank you for having me.

Mike DeHaan: [42:24] Absolutely. Right on, guys. Well, hopefully, you enjoyed that show. She dropped some amazing knowledge in there. So might not be bad idea to go back and listen again, take some notes, especially around some of the stuff that she was mentioning with the different kinds of corporate debts. I personally realized that I have some knowledge gaps there that I need to go dive into, and I'm sure a lot of you do as well. So definitely go back, take some notes, and reach out to Mandy as well, guys. Remember, people come on to these shows because they want to engage with you. They wanna have exposure. You know, we don't like go and like force people to come on here. It's all willing and it's because they want to deliver a message to the wider audience. So don't be afraid to hit her up on her social medias and her website. Besides everybody, we really appreciate you all and talk to you guys next week.

Speaker 2: [43:06] Thanks for listening to collecting keys. Drop us a five star review on iTunes and send us a screenshot to Mike@collectingkeys.com for your chance to receive a free collecting keys t shirt.