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Real Estate Investing School Podcast
198. REAL DEAL: Contractor’s Leap to Investing Wealth with Gene Murashko (Part 1)
00:21:24
Welcome to the Real Estate Investing School Podcast! In this Real Deal episode, Brody chats with Gene Murashko, a general contractor and real estate investor, who shares an inspiring journey of moving to Maui for an opportunity with Brandon Turner....
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- [00:00]
A
What's up, everybody? Welcome back to the Real Estate Investing School podcast. This is your host, Brody Fossett, and this is a Real Deal episode. So, as you know, we're going into one real estate investing deal that an investor did, so we can kind of pull back the curtain. You can learn about it specifically how they found it, how they funded it, and how they forced it. And today we have a fun one to jump into that is kind of on the spot. So we have Gene. I don't even know how to pronounce your last name.
- [00:30]
B
Marashko.
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A
Okay. It's in my phone. So I know Siri.
- [00:36]
B
I guarantee you she'll butcher.
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A
She will for sure. She will for sure. You, you've done some work for me here, here on Maui before, and you actually came out here looking, looking and bidding another job. And I'm like, hey, you're doing real estate, which is super cool and super unique because most general contractors, they just do the work and they don't actually understand the investing side of it or how to make the passive income. And so I'm like, hey, let's, let's record an episode on a deal you've done. And you're like, wait, right now? And I'm like, yeah, right now. So your kids are in with my kids. You got your dog here that looks identical to my dog and kids. I'm glad you brought your kids with you because it's entertaining my kids, so less distractions. Yeah. Yeah. Well, dude, so you got a cool story, which this is. This is part one of, of a two part series we're gonna, we're gonna do. So tune in for next week as well. We can get more into your story. Specifically, we'll focus on a deal right now. But you came to Maui originally because of an internship slash job opportunity with Brandon Turner and that we'll get into more in the next episode and kind of how that came about. But since then you weren't planning on staying as long as you have. You've stayed in Maui. You bought a house out here that you've done really cool the way you've kind of done that one, which we'll save for another episode. But super inspiring and yeah, just, just excited to jam with you on a deal. So tell us about the deal we're going to talk about today. Tell us just kind of really quick overview where, where it's at, how much you purchased it for. Just some quick, quick details and we'll dive in deeper.
- [02:18]
B
Okay. Purchased it in 2020. This was a, this was Kind of off of my radar. Like, we weren't really actively looking for something to buy, but my wife and I, this came up on Zillow, and this was actually a Zillow. It was an auction on Zillow. It was a foreclosure. And the foreclosure. Sometimes. Sometimes they'll put it on Xom or. I don't remember. I don't even remember the one that we bought it on. But it's. You have to have.
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A
You saw it originally on Zillow?
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B
I saw it on.
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A
Oh, this is. This pops up and it says auction next.
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B
Exactly like.
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A
Okay, interesting.
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B
And auction. Usually in Oregon, you need to have all the cash up front. It's. It's a whole process. And then they also have. Oregon has a really, really, really. I guess, like, it's tenant friendly, but like, more like Oregon has this law that if you buy a foreclosure in our courthouse steps, the previous owner has right to buy it back for the price you bought it for.
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A
So interesting.
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B
You have title, but it's kind of like clouded or whatever that you can't. Like the previous owner has redemption rights is what they call it.
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A
Yeah.
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B
How long for? Six months.
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A
Six months.
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B
And so I've personally heard of investors in Oregon that would go buy a house, fix it up, and then the previous owner is like, here's a check for what you bought it for. This is my house.
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A
It's a great strategy as a previous owner. Yeah.
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B
If you're getting foreclosed on, consider it. But that's kind of a deterrent. But once that redemption. Once that redemption period goes like, the bank buys it back. Once that redemption period ends, they usually list it with a realtor. That's what, like foreclosure. Foreclosed properties on MLS like, come up as. And this specific house had. It was already went through that redemption period and the bank owned it and they listed it on an auction and an online auction. And we actually won it like three times.
- [04:17]
A
One.
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B
One time we won it. And it's that auction site said financing avail. Like, possible. It's okay to finance it instead of having to pay cash. So we were like, cool. We're gonna do the most complicated financing. We're gonna do FHA 203k loan. The like.
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A
Yeah.
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B
Difficult one.
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A
Yeah.
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B
And then FHA also blocks, like, once it appraises it, blocks it in like that. So like that original time we submitted a application, like, when we want it, we want IT for like 315, 000. The appraisal came back at like 285. And so the bank can't sell it to another FHA loan for 285. We tried to negotiate down to that price, and the bank was like, no, they relisted it on auction again. Okay, we won that. Second time we won it for like 300 and. Same thing. The bank was like, we wanted more for it. And then the third time we.
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A
Did you get it appraised again? That.
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B
No, the second time we didn't need to because we were like, the bank just denied it.
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A
Okay.
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B
And then the third time, we won it for like 287. And the bank was like, okay, fine, you can have it. And we. And we ended up. Actually didn't even use fha. I used to hard money on it, but. Okay, I used hard money. And the way I set it up was hard money in the area. Would not finance. Would never finance additional, like, adding to the house, like, additional square footage, like, addition. Like, they. It's not that they never. It's like, I didn't have the, like, track record for them to be okay with that.
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A
Got it. Okay.
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B
But what I ended up doing was I. I have a rich uncle, which a lot of people do, but my.
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A
Rich uncle secrets out rich uncle.
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B
And he never, ever. He was actually my foreman as an electrician. So he was, like, with me all day, every day for a good, like, six years.
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A
Okay.
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B
I no longer worked with him, but he had a good chunk of money. And I was like, hey, do you want to, like. Do you want to consider real estate financing? Like. Like lending money on it? He's like, I don't know.
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A
Like, yeah.
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B
So I gave him, like, a crazy deal. He. He got. He gave me 120 grand, and I paid him. I think I paid him 2,000 bucks a month interest on it.
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A
Okay.
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B
Like, no, it was more than that. I don't remember the exact amount, but I remember the actual. I ended up having that loan with him for a year and a half, and he got $56,000.
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A
Okay.
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B
For 120.
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A
Okay.
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B
So he was like. He was. He got a phenomenal return. And he actually felt bad. He was telling me. He's like. Like, he's like, dude, why? Like, I feel so terrible. Like, he's like, you shouldn't be paying me this much. And I'm like, no, I want to be paying you this much because I'll tell you guys later what the. What my return was on that property.
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A
Yeah. Bought that house with them in the future, maybe. Right?
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B
Exactly. Exactly. Exactly. And I actually got. That's how I nudged him into real estate investing, because he was like, there's no way that. That it makes sense for Gene to go and pay me $50,000 on 120. Yeah, I don't offer that rate to anybody or just so you guys know, but that was, like, a first thing, and I really wanted him to, like, understand my point of view, too.
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A
So. So backing up on. On that. On how you found it, I. What. What made you want to go after this property in the first place? And I know this wasn't your first deal. Like, you'd been doing a little bit of real estate up until then. And initially the plan. Well, on the finance side, initially the plan was to, you know, do an FHA loan or maybe 203k, which essentially is getting financing at great terms for the. The rehab as well. So they'll give you all the money, which is unusual, right, for. For a loan product, unless it's, like, hard money, private money. But what's cool about that is, well, I guess backing up. What made you go after this property, aside from, oh, it's just on auction.
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B
So this property was actually. We were looking at it to, like, it was a big, beautiful house, at least the bones were. And we actually wanted to move into it and live in it ourselves. That was all right. That was the, like, ideal situation. But we had a.
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A
Which I love. Which I love, by the way. And. And there's probably, like, a point where you're like, oh, I need to get it for this. This price in order for it to, like, financially just, like, work in pencil. So you're not gonna make a rash decision. But I'm all for, like, the lifestyle stuff. Like, I think it's. I think it's great. I know there's, like, lifestyle creep, and a lot of people are, you know, hey, don't. Don't make all these decisions based on your lifestyle. But I also think it can be used as a ton of fuel because you can leverage that because you're ambitious or because you. You care about type of house you're living in or, like, the, you know, the way of life that you have. I think that can drive you to, like, go figure out a way to get it done. And I have stories like that on, like, most of the houses we've bought that have been great investments. But then also it's driven by this, like, oh, this is a step up in the lifestyle department. So I like that.
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B
Yeah. The way that we looked at it. I did, like, the lifestyle part of it. Like it was a bigger house. It was like, like, I think back then we had three kids. Like, we wanted more kids. We were in a three bedroom house. But the, the financial side of me was like, I need to make this cheaper than the like, than my current like mortgage. My current mortgage in the previous house was like 1300 bucks a month. It was great. But this was a $300,000 purchase. Plus our renovation budget for it originally was right at 100 grand. So we're like, okay, this is going to be a $400,000 house. There's no way for that to have a payment that's less than $1,300. So we had to, we had to kind of step back and be like, what can we do to this property to make it cost us the same amount? That was the very, from the very beginning, first time we walked it and I was like, well, I don't want to spend that. Spend twice as much for our mortgage, but how can we make this work? And that's, and that's exactly what we, what we did. We like actually the city of Salem, where that property's in, had a incentive. They wanted more ADU or accessory dwelling units. They were incentivizing it by taking all SDC charges from your permits. So regular permit for that would probably be like six to eight grand. I paid 800 bucks for a permit for a building permit. Like stamped everything ready to go. I mean, I had an architect draw up. That part was different. Like the actual planning of it. But that's just a construction cost.
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A
So. So all in, you said you bought it for around 300k and then you put 100 grand into it, 100 grand.
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B
Into the main house, and then 100 grand for the ADU build.
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A
Okay.
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B
So we, we. It ended up costing us like right under like my refinance mortgage was like 489 or something.
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A
Okay.
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B
And 489 and that wrapped all my costs in there.
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A
So cool. Okay, so you bird this property and the. What did you do? I mean, on the financing end of it, what did you do? Because you said 120 grand. You borrowed from your uncle as a hard money lender. Yeah. How did you finance the rest of it?
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B
So the, the rest of it was a regular hard money loan through a bigger company. My, like, oh gosh, my initial down payment I had myself. But the thing that I financed with my uncle was the build on the 80.
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A
Gotcha.
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B
That. Because the hard money. The hard money lender lent me the money. The initial renovation for the house, which, like 100 grand was kind of steep. It was a 3,300 square foot house, but it was kind of steep for that. Like, it was all like premium finishes. And like we did like, we did herringbone hardwood floors on the entire bottom level, which was like ridiculous. Back now I'm like, looking back, like, I. I didn't spend very much money on that. Like I thought. I thought $16,000 was a ton of money for materials.
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A
And now it's like a joke. Yeah, I know, right? It's funny how that happens. Okay, cool. So that, that makes sense because they wouldn't loan on the new square footage. The traditional hard money lender.
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B
Exactly.
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A
So cool. Okay. And then. And then all said and done, you were able to wrap all that back in and get all your money at that point, you didn't necessarily cash out on anything. Right? You just.
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B
Yeah, I. So I went and I got the initial loan. I got, I got my hard money paid off. And then a few months later, I did a HELOC on it too. So like that was right before. Basically I did the HELOC right before we moved here to Maui. So like that was.
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A
And what, and what. What's the HELOC you pulled on it? If you don't.
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B
He like was like 120 grand. So. So like the actual property, my numbers were like 280, 280 purchase, 120 for the, for the ADU build. So that's three, 400, 400 and then another hundred for the interior owner. So 500 grand. And that appraised right away at 725.
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A
Okay.
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B
That was what, three years ago now?
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A
Well, that. Oh, so when you finished it appraised there?
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B
It appraised. Yeah, at 725. The reason why my hard money lender, I mean one of the reasons they were like, we don't know the. There weren't many ADUs in the area, so they didn't have a good comp to pull.
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A
Yeah.
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B
But once they. Once they had. Once we finished the renovation, they like, the appraisal was still a little bit tough because now the area has a lot more ADUs. But that's been re. Like more recent where I was kind of one of the first to do it.
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A
Yeah. So. So I like this. And so, and, and that's like, that's how the burst strategy works for, for those of you that aren't as familiar with it, I mean, that's perfect example that, that you're all in cost right around that 500k and it appraised for seven something. That's. That's equity. Right? That's that forced equity. We talk a lot like, how did you force the deal? How. What's the forced appreciation? What? That's. That's it right there. And at that time, I don't know how long the rehab process was, but I mean, you essentially made 200 plus thousand dollars. Right. And it was a lot more than you're. You were making at the time from your W2 or whatever. Right?
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B
Yeah. And. And on top of that, I worked W2 the whole time, so. The whole time. The whole time I owned it. That was why like I started my GC business in, in 2017 was like I wanted to get it more systematized and so that my projects will get done correctly.
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A
Yeah.
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B
Not just like hire somebody to go and manage all of that. Like, it was pretty. Pretty easy for me to manage. Manage the work. And like, I'd still do some of the work myself just because I actually enjoy doing the construction work. Which.
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A
Yes, like, same.
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B
Not. Not all blue collar guys can say that.
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A
Right.
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B
So. So that part, that part I really like, actually enjoyed. And then my wife is a really. Has a really good, good design.
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A
Yeah, dude. Brandon was showing me his office with the palm leaves. I'm like, okay, I'm doing that. Yeah.
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B
Completely like out of nowhere. She was just like, yeah, I want to try this. And I'm like, okay.
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A
Yeah, it's like, it's like they like, I don't know, concrete wall looking. I don't know what kind of cement mix used. But then she took actual like palm fronds and like imprinted them on the wall so it looks like a concrete jungle. Anyhow. Super rad. You're. Yeah. Your wife, like all your guys. Stuff that you do is. Is dialed with the design. It looks really good.
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B
Yeah. So she has like a creative outlet for that and then she can like. My wife doesn't have to work.
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A
Yeah, that's.
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B
That's the part of my like business here. Like, I try to make sure that she doesn't have to, which is like, that's very difficult to do for most people. Her design is what got. I'd probably say that her design is what got Brandon's attention because I let. She. She does our, like my Instagram, I'm only allowed to send messages baby stories. Like, I cannot post anything because.
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A
Yeah, but she does.
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B
She does all of the. She does all of our design and she does all of our like, drawing and stuff.
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A
So like, cool, dude. Yeah. So cool. Okay, so. So that happened. And that's not even the best part about this that you like had this awesome burr and it worked out perfectly and that equity was now your down payment and then you pulled out a HELOC later and you leverage that for other stuff. But the cool part about this, aside from like the lifestyle piece which I think is cool, what like motivated all of it. But the cool part about it I think is what it turned into as far as like the cash flow standpoint. So the idea was, hey, this is a big step. It was. Might have been scary at the time. This is more money. Like if we don't find a way to make this work then it's going to be a lot more than our current mortgage. But you added the adu which was it zone for that or was that pretty easy?
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B
So it was zoned for it. It was. It's not necessarily like in the state of Oregon in that specific municipality you don't have to rezone for adu. It was like if it's within city. City of Salem limits and it has the proper setback like from the property line, you can do it.
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A
Yeah. Cool.
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B
I'd say the comp. Most complicated thing was just because it was a separate unit but it was attached. The firewall.
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A
Yeah.
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B
Was a whole new thing that I never had to like.
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A
Yeah.
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B
Now that I know it, I was like, oh, that's what these guys are doing in the school. Like that's why they had like five layers of sheetrock right there. And I'm like that doesn't make sense.
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A
What are you doing?
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B
It's. It's a fire rating thing. It's because you need to have two hours of like, I mean fire rated walls with multi unit. Multi family units is very common.
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A
Yeah. Yeah. Super common. Yeah, super common. Cool. So. And that I just want to touch on that because most people, I think this is like one of the. The biggest hidden gems and like we actually just have kind of like it's. It'll. We'll talk more about it like later. But we have a partnership with the ADU company that they build them anyhow. They're actually super legit priced really well. They set up in, in like a day but they're actually permanent structures. And so anyhow just a lot of people don't realize that their property now is probably zoned forward. And if you're sitting here and you have a couple of different single family rentals, it's like one of the best ways to go get crazy roi Even if you spend 100 grand on the build.
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B
Absolutely.
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A
But then you Airbnb it and you're making $2,000 a month or, or more. Right. Or you long term rent it and you're still making over a thousand dollars a month. If you just look at the numbers, I mean that's that you're getting amazing return. So. So you did that. But tell us, tell us the numbers to, to wrap this one up and what that turned into for you.
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B
So what it ended up happened with the new build, new mortgage, my refinanced mortgage, my actual payment was like 20, 20 $900 a month. Again, these were like good rates back then. My actual payment was like 2900amonth. And my. I rented that ADU completely furnished to travel nurses back then. That was what like my primary thing was through furnished finder. We have a really, really big hospital in Salem that would have tons of traveling nurses.
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A
Cool.
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B
So my.
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A
And you rented out by the month?
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B
I rented it by them. It was a, it's usually a 90 day thing, but most travel nurses stay for six. For six months. And it was my very original like rent was $2700 a month. So my mortgage was 2800. The rent was 2700. The extra like utility expenses rounded up to being like 3 to 500 bucks a month depending on like how, how heavy we're using the like AC or whatever.
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A
So plus you leveled up your house, my house, you got to renovate it top of the line, exactly the way you wanted it, the way your wife wanted it. And you have a spot where family or whoever can come and stay as well.
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B
Exactly. So that was that house. We moved from a three bedroom house to a five bedroom plus bonus room. So it's like that was the main.
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A
House and you're saving a thousand bucks and you're saving money and you have a couple hundred grand in equity that like, that is the power of real estate. And that's why I love it. Like a lot of people think you can't have your cake and eat it too sometimes, but you actually can. Like you can level up if you do it the right way and you can upgrade your lifestyle housing situation and at the same time have it be a very, very smart financial decision. Yep.
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B
Yeah. And actually when we moved out to Maui, we didn't sell the house. We rent like and it was completely furnished anyways for our, for our own use. Yeah, we rented it originally to travel nurses by the bedroom and we were cash flowing like stupid money. During the peak of COVID right now, it's a pretty consistent three to four grand cash flow every month that's from that property. So it's very good.
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A
We do imagine if you didn't do that, you know, like, looking back, like, if you didn't, it makes a big difference. It's just crazy. What the power of one deal.
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B
Yeah. Absolutely. Absolutely.
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A
Love it, dude. Okay. Well, tune in for for next week and we're going to dive a little bit deeper on your story with with Brandon Turner and how that came to be and how we're sitting here today. So with that being said, we will catch you guys on the next one. Thanks, Gene.