Investor Agents Podcast: ON SITE with Mike Ballato

welcome to the investor agent podcast on site with Mike Bilotto. We're here at 112 Washington Ave in Downingtown. And Mike just built a ten unit yes ten units it's nine residential and one storefront so tell us a little bit about how you got the project. 

So this actually was on the MLS. So I bought it from two guys that got it through zoning in order to do this there was a single-family house here originally. 

So after I purchased it, we knocked that down and started building this. It's about 7,000 square feet. But from purchase to groundbreaking did take about two years because we had to redo a lot of the plans and all the MEPs and architectures and all that stuff. 

Mike, what are MEPs? MEPs are all your mechanical, electrical, plumbing, fire sprinklers, alarms, all that stuff. 

Us real estate people, the longer you're in the business, you just talk a bunch of lingo that no one understands. 

All right, Mike, let's go inside and show us around. Let's check it out. Let's check it out. is actually amazing. Yes, this is our studio ADA compliant unit. 

So this is just one big room, got kitchen going in over behind it. So this is just all one unit. And just try to yell. With ADA, so is there a handicap ramp then? 

So outside we're building a ramp going up to that back door. So that's why this is the ADA because then everything else is stairs. 

There's no elevators in here. And why did you decide to do ADA? Was that just part of the original plan? Yeah, I think we had to put at least one unit So we have nine residential, one store. 

Of the nine, there's one studio, one two bedroom, and seven one bedrooms. Got it. And what do you think this studio would rent for, like projection? 

Like $1,600? $1,600. At ADA, you get a little extra because the supply and demand. Yeah, it could be. You never know. And they're all kind of like different sizes, too. 

You had to sprinkle them through. Yep, it's fully sprinkled. Fire alarm. We got 1,000 amp electrical service to the building. So that's all underground that we rent from outside. 

This is another residential. This is a one bedroom. So you've got kitchen going in on this wall here, bathroom in the back corner. 

We've got laundry in this one and then bedroom over in the back corner. So every unit has washer-dryer sets for One of the things I'm always curious when a landlord's building to rent, are you doing garbage disposals? 

What are you including? Do you include a refrigerator, washer, dryer? So we're doing, everything's electric. There's no gas here. So we have electric range, micro over, no garbage disposals. 

We are doing dishwashers. I want your thought process behind the garbage disposal. This has been a topic of debate recently. for a lot of landlords that I've talked to. 

What is your thought process around it? So my farmer told me not to put them in. He said they get clogged, people will throw shit down there that they're not supposed to and it just is a nightmare and it's just constant battles. 

So we just didn't put them in. I almost agree with that and I don't think any tenant's not gonna rent them. If they love the place, the garbage disposal's not gonna be the deal breaker, although everyone wants the garbage disposal. 

So it's just one of those things that a lot of landlords go back and forth on whether to do them or not. 

And you don't know until you have it, and then it's a problem. Yeah, and it's not like, you know, do a tenant one, okay, a couple hundred dollars each one. 

It's not a huge cost up front. Yeah, it's not so much the upfront. It's more about the maintenance. You're going to get the maintenance calls and the issues with them. 

So everything is central heat and AC. These two units here, we did the mini split set just because they were small units. 

Yeah, absolutely. So that's one hip over there and then this is the one bedroom. So you have one hip in the living room and one hip on the other side for the bedroom. 

So are these running off individual compressors or are they shared? Yes, they're not on the back of the building. So each unit has its own separate compressor, right? 

Yeah, every unit. And on all of the other units separated, they're sitting up on the roof. And with the bathroom, it looks like you're doing a shower. 

Yes, so we're doing all showers. And these are, I have my plumber come talk me into these. So we're doing And basically every shower, this whole wall is just one piece. 

One piece, one piece. There's no grout lines. And the base is one piece. And the base is this here. It's not fiberglass. It's like cement kind of. But there's no grout lines. 

It's easy to maintain. It cleans well. And it looks nice too. These are the types of things that you want to think about if you're going to hold a property long term. 

You don't want to just slap. It's about the same as tile. It's not cheap by any means, but long term it's going to be easier. Probably look really nice too. I messed up my shoes. 

Got the spackle on them. This is another one bedroom, so you got washer dryers, you walk in, there's separate HVAC system, their own breaker panel. 

This is gonna be a kitchen here, gonna come down and then move over This is going to be like a peninsula. 

We're going to have plastic barstools and stuff. So this is a little larger than the other one bedroom downstairs. So living room. And what are you anticipating getting? 

So these one bedrooms I'm hoping like in like the 18 range. Once we get up to the third floor, you'll see what we did to get out of an elevator. 

All of the entry doors for the remainder units on the third floor so those units are two-story units okay so that way if we had entry doors on the fourth floor you would have to put an elevator got it so what do you think an elevator would cost like 200 grand or something at least yeah so just not not worth it yeah yeah 100 units very different yeah and most people for this like you're not walking up five stories or something like that. 

You know, like three stories is i think like the max that people would want to walk up a staircase. 

So you've done, your background, you've done a lot of flips, right? And you've done some new construction. And this is your first like big multi-family right? 

Yeah, it's my first ground up new construction what would you say has been your experience and like your progression of managing contractors? 

Because one of the biggest things that anyone getting in this business is going to need to learn. If you're going to be doing this type of model where you're doing heavy renovation or building, managing contractors can be one of the biggest challenges. 

It's tough because going from residential to this was a jump. Just different codes, different building requirements between residential and this. 

We have so much more steel work here. Right. There's more commercial building. All of these, there's no stick frame here. It's all trusses. Every single floor and ceiling is a truss system. 

And so we had to get those manufactured. They had to be approved by the engineers and then they had to get delivered in stages because there was no room to drop everything on site. 

So we had to get delivery floor by floor. So a big learning curve. It was a lot, yeah. And then even hired different contractors. Contractors, like some contractors might not be able to, I don't know how many sheets of drywall, But maybe it's like 600 sheets of drywall or whatever. 

Some guys don't have a crew for that. You know, my experience was when I started off. I was our time trying to hire the cheapest guy possible. 

Yeah And then when you get on this project, this guy decides it's more about like speed and quality I don't want to have to redo anything would make sure it's done, right? 

Yeah, so exactly. Yeah, it was it was tough. I mean, luckily I used a lot of my original guys from my residential world. But there were several people that I had to bring in that. 

Like a sprinkler? Yeah, I've never done a sprinkler before. I never had to do an alarm system before. You know, we can, in the commercial spot, you can see, like, huge sprinkler pipes that they had to run and everything. 

Like, I have no idea. We had to tap in in the street. We had to cut open the road and tie into the public water or sewer. Yep. sprinkler line, all that stuff. And are you comfortable talking numbers? 

So what do you buy it for? So I bought it for 375 and that was basically with raw land just land approved semi approved but you had to come through a bunch of hoops to get it. 

Final approvals. Yeah. And then what was the cost to build it? So far we're anticipating about 1.4 for construction. And you said the size is about 7,000 so it's approximately $200 per foot for the build, and that's everything brand new, ground up. 

That's all your excavation, your foundation, everything. I've done some research, and I think the normal new construction commercial buildings are in the mid-$200 square foot. 

Luckily, I'm my own contractor, so I don't sit in bed overhead. I self-manage everything, so I think that's basically what that difference is. 

Yeah, and the price per square foot would change, I'm sure, a lot. Like if you did a 7,000 square foot building, but it was only five units and you only had five kitchens, it's very different than doing nine kitchens. 

So you're doing a lot of kitchens and bathrooms, which is getting pricey. All your extra MEPs, every unit has its own system. What else would you say to someone that's done flipping and kind of has your background where they got their feet wet and then they want to go to this next project. 

Was it scary for you? Like any words of advice or encouragement? It wasn't so much scary. I mean, I did it because I was doing the flipping for so long, like 12 years of doing the same thing over and over again that like I needed, I wanted something a little different. 

You needed a new challenge? Yeah, something a little more challenging and I wanted to build up more rental portfolio and everything too. 

So like this came up and I figured it was kind of the project for somebody like me. It's too big for some people and too small for other people. 

So there's a handful of people like me that this is a good size for. Now going through it, I kind of wish that I had more units because just from the amount of time, effort, and money to get to this point, it is only 10 units. 

But challenge-wise... It's almost like a really good stepping stone to get this project under your belt and know, okay, it's probably going to be much more scalable when I go into more units. 

Alright, what else can we check out? Yeah. Another one bedroom. It's the third floor and fourth floor. So these units here, I'm hoping we push like 2,000 or more. 

Because you have your own, so this is on the third floor. Walk in, you got a nice big living room. Kitchen's going to go over in this corner here. And then you'll have a staircase to go up to your own fourth floor, which is entirely bedroom, bathroom, closet. 

And I noticed in this unit you have a heat pump versus the mini split. Yes. So was that a function of just having different spaces and not wanting to have a lot of the mini split? 

Yeah. So I didn't want to have like the whole outside of the building look like a cluster of stuff. So only the two units are the minis downstairs and then everything else are forced air on all of the condensers are sitting up on the roof. 

Got it. Alright, let's check upstairs. It's really bright in here. There's a lot of windows. Big walk-in closet. Huge closet, big bathroom. Again, we're doing the same shower system that we're doing everywhere else. 

All of the flooring, we're going to do the LBT flooring, life-proof, so everything's going to be waterproof, 100% vinyl, and then all of the steps are going to get carpeted just for more traction from slipping and stuff like that. 

Yeah. But yeah, other than that, everything's going to be pretty maintenance-free. And then what about some of the finishes, like in terms of the colors? 

I know... Do you bring in a designer? Do you pick it out yourself? I pretty much just do it myself because I figured I had 90 flip houses of experience with that. 

Kind of get a feel for what people like. Yeah, so I have faucets that I like. I have hinges that I like, doorknobs I like. So I just bought a ton of them, and we're just going to be putting all that stuff in here. 

And for the floor, what color floor is it? So we're going with a little brownish color. floor. I was trying to not do too much grays. Yeah. I was going to ask cause it's been, I used it a ton and it just feels like cold, you know, and it seems like earth tones are coming back in. 

Yeah. So I like, I like the brown floors. Like even in flip houses where we do like real hardwood flooring, I don't need, I don't stain it. 

We just do clear poly on it and that's it. Nice. Um, so something to that effect. Um, paint colors can be light, nothing, and moldings, we'll get semi-gloss white, but we're black hinges, door knobs, faucets, all that stuff. 

So this is the storefront. So in this closet here is the main fire system. So that's everything that they did. You can see on the other side is the fire truck hookup. 

All of our water meters are going to be in that closet. And then this here is going to get drywalled. We have to do double 5-8 on this ceiling, all of the walls, and then we'll do a drop ceiling and here to cover all the pipes and vents and stuff like that. 

And where is the bathroom going? It's going to go over in this corner back here. So you have to do an ADA bathroom, I'm assuming. And what kind of tenant are you looking to get in this retail space here? 

Yeah, this is going to be retail. I'm hoping to get somebody that's like either an office. I have somebody that was looking as a photographer for like a studio type of setup. 

You know, it's about 700 square feet. So not really like there's no coffee shop no pizza shops nothing like that no kitchens yeah no Yeah, it's a big project. 

I mean, you guys are doing a great job. It looks like quality construction. Tell us a little bit about MAB. So MAB is my company. I started it. How did you come up with the name? 

It's just my initials. So, yeah, I started this because, like, when I was doing my flips, everybody was asking me to do their kitchen and bathroom and basement and everything, and I wasn't able to because I wasn't really a contractor. 

So I started up my own construction. company I got my own insurance and now whenever I don't have flip projects going on or something like this we go and do residential work for other people Nice. 

So this is the investor agent podcast. That's what really, and what I mean by the investor agent is Mike's a perfect example, right? 

You have your real estate license. You've done sales. You've actually been a high producer at certain points, you know, and it looks like you transitioned more towards doing most of all your own projects. 

I'm sure you still help some family and friends with sales. Why did you go towards that direction going more as an investor agent than a retail agent? 

um i just like seeing projects from start to finish with construction and like, you know, I'm buying another place tomorrow in westchester that is going to be a flip and it's been abandoned for 20 years and i just like seeing the transformation of it. 

um So it's just different world between residential sales and like doing your own stuff. Yeah. And would you say there's a lot more potential to create wealth on the, you know, and I'm kind of, I'm leading the question, but my take and what I've seen is there's a lot of agents that can make a living in sales, but to create wealth, you know, this project, yes, it was a long couple of year project and next one will be faster, but If you hold this over the next 20, 30 years, what is the wealth that's created on something like this? 

Even off the bat, you're probably creating a ton of equity, several hundred thousand if not more. That's where I've tried to do things that pay you over time. 

When you go sell a house, you only get paid when you sell the house. This one, you do it one time and you'll keep getting paid every month. 

Any, any last words of advice for someone that's just, you know, looking at investing in real estate, they don't know where to start and you know, how, how did you get started? 

What would you recommend for anyone that's looking to get started? I kind of got started just by wanting to do this. Like I literally was the guy that watched flipping shows on TV in college and like, I just thought it'd be a cool thing to do. 

Um, so after school I was working in property management and bought my first flip in Westchester Borough, did it with my dad, and figured if we could make it work, then it would work. 

And we made money at it, and just kept going ever since. Awesome. Well, I appreciate you taking the time to show the project. It looks amazing. Definitely send us some after pictures so we can post them appreciate your time. 

Thank you.