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Show Summary
In this episode of the Real Estate Pros podcast, host Erika interviews Curt Bagne, a successful real estate investor who transitioned from an engineering career to full-time investing. Curt shares his journey, including how he got started in real estate, the challenges he faced, and the strategies he used to build a portfolio of 53 units. He discusses the importance of analyzing deals, leveraging forced equity, and understanding market dynamics, particularly in the Metro Detroit area. Curt emphasizes the need for resilience in overcoming obstacles and offers insights into making smart renovation investments.
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Curt Bagne (00:00)
Yeah, so it might have been the third property I bought. I did a couple of successful single-family homes. Then I got this fourplex that was really, really rough in a neighborhood in Detroit that like hadn’t really come on yet, but I thought it was going in the right direction. That thing ended up being kind of a nightmare. Originally I was planning on just doing like a pretty involved cosmetic rehab on it.The more I got into it, the more I realized I just need to get this thing to the studs and redo everything. So that meant that I underestimated the rehab budget by about $100,000, which stings.
Erika (02:08)
Hey everyone, welcome to the Real Estate Pros podcast. I’m your host, Erika Today I’m excited to be joined by Curt Bagne. He’s been making serious moves in the investing space. Curt, I’m glad to have you here.Curt Bagne (02:23)
Hey Erika, thanks for having me on.Erika (02:25)
I think our listeners are really going to take something away with how you left your regular job and scaled your portfolio. So let’s dive on in. First, for people who may not be familiar with your world who are listening, can you give us the rundown? How did you get started in the real estate investing world?Curt Bagne (02:48)
So the very brief story is I started as an engineer, wanted to find something a little bit different, and now I’m up to 53 units. So I guess that’s kind of the tagline to maybe help keep people listening. But um the gist of it is, I was working as an engineer in the automotive industry. I didn’t necessarily love the work that I was doing, although engineering itself is a lot of fun. A lot of it comes down to solving interesting problems, and that I do very much enjoy.As far as getting into real estate, the company I was working for was a little bit chaotic. I went through like five different supervisors in five years and also an industry like working on internal combustion engines that still has a place now, but I don’t know that it’s necessarily why I want to be niched down long into the future. And another thing that you could do to see if a company might be a good fit long-term is to look at the org chart and assess, hey, all these people above me.
Am I really envious of them? Are these people whose jobs I want to have? And I could look all the way up from where I was up to the CEO. And the answer honestly was a no. Well, you could move up into management and higher levels of authority and gain some more income. You’re also sacrificing a lot more time and taking on, I’d say like a disproportionate amount of responsibility for what you get compensated for the trouble. And it had me, I guess,
right for looking for an alternative. What got me into real estate specifically is um it’s kind of the same thing that got me into engineering. I like working on cars and tinkering with things and I was interested in having some extra shop space to work on projects. I thought about a range of options from adding onto my garage to renting like a commercial space where I could work on projects.
The thing is all that’s really expensive and you’re essentially throwing money down the drain and it wasn’t sustainable long term. So I got to thinking, well, what if I got a commercial space that was bigger than what I need? I could cut it up, rent some of it out to other people, use some of it myself, and maybe I could have some model where I can have what I want and it pays for itself. That led me down the path of analyzing real estate deals and finding out how these work and how you actually make money with real estate, what the income looks like, what the expenses looks like.
and something clicked. It’s like, you know, maybe instead of a place to screw around with cars, I should treat this as an end goal to replace my income and um alleviate the need for that job that is no longer really satisfied with. So that’s what I did. I’ve researched really heavily for a couple of months and residential real estate and how to make money in it, how to analyze deals, what the pros and cons of it are. And um
you know, after consuming enough material where a lot of what I was hearing started to sound redundant, I took the leap. I ⁓ went out and found a good investor friendly agent, somebody who was actually on the same podcast recently, Joe Hamill, the Fire Realty team. He was a big help early on and getting me started, creating me through a lot of kind of dilatidated houses that other agents didn’t necessarily want to spend their time with. But um from that, I was able to find some good deals with good upside.
Um one thing is being a bit capital constrained in order to make this a sustainable model. I needed to find deals where I could force equity. So once I’m done with the deal, you know, adding the value, I can get my money out on a refi and then go hunt for the next one. Um anyway this is kind of a long monologue, but it gives a bit of a background on how I got into this.
Erika (07:08)
I love what you were sharing because we have a lot of listeners who are out there that are, you know, they’re they’re still in their, you know, their W2 job and they’re they’re trying to figure out, OK, how how do I get to that point where real estate is is all I do? And what was that? process like for for you? How long did it take to make that full transition?Curt Bagne (07:30)
So I bought my first deal in early 2020, yeah, spring of 2020. And then February of 2022 is when I left my job. So I had enough money available to do kind of multiple deals in parallel. They were all value add deals. So I could keep recycling that same capital through multiple deals. And And I think when I left the job, was at 12 units or something. It was maybe a stretch if that was the right time to actually do it or not, but.⁓ Technically I could, so I did. you know, looking back, I don’t have any regrets, but it was maybe a little bit risky, maybe not so much what I’d advise for others. But hey, no regrets.
Erika (08:11)
With having that engineering background, I’m sure you analyzed that risk there with making that leap. With that you know having that engineering background, how does that help you when it comes to analyzing deals or you know does it give you a different perspective on real estate?Curt Bagne (08:31)
Yeah, I think so. And engineering everything, it’s based on the outcome that you produce. Nobody really cares about the process if it doesn’t work in the end. So you have to be really analytical and um just having like a nice idea for how something conceivably could work out isn’t enough. I know some people will buy real estate based on emotion. I love that building. It’s such a cool location. They could see themselves in it and all that matters if you buy real estate strictly based on what the spreadsheet tells you.You might not end up with the best stuff, But uh the the numbers do matter as well. So you need to find a good way to kind of marry the two interests. And ⁓ the engineering background, I think, has certainly helped me stay objective and also holistically look at all of the different things that factor into whether a deal will make money or not and accomplish your goals or not and um have the discipline to not jump into something that’s not truly going to advance my interests.
Erika (09:27)
Speaking of looking at things objectively, I’m sure that’s common handy when there’s been challenges, which most people on this show, they’ve they’ve had their share of challenges and with real estate. Maybe a deal went sideways, maybe you had to completely pivot with what you were doing. Can you share one of those moments on your journey and what you learned from it, Curt?Curt Bagne (10:26)
Yeah, so it might have been the third property I bought. I did a couple of successful single-family homes. Then I got this fourplex that was really, really rough in a neighborhood in Detroit that like hadn’t really come on yet, but I thought it was going in the right direction. That thing ended up being kind of a nightmare. Originally I was planning on just doing like a pretty involved cosmetic rehab on it.The more I got into it, the more I realized I just need to get this thing to the studs and redo everything. So that meant that I underestimated the rehab budget by about $100,000, which stings.
And also there are some inherited tenants there that presented some issues as well. Because I was buying a property that had been neglected for decades. It needed a lot of work. These people are kind of living in squalor and I let them stay until I had the capital and stuff ready to actually begin this.
rehab project, but once I did, they just kind of dug their heels in and they didn’t want to leave. You know, and I offered to help them find new places. I offered to pay for their moving expenses and a lot of things that a lot of other people might not have offered just to kind of grease the rails, but it still kind of blew up in my face. There’s a local news station like the local Fox station did some story. I think the headline was
Disabled veteran faces eviction from Southwest Detroit home by landlordies doubling rent. Neglecting to say that this place was getting a really, really extensive rehab that I offered to relocate these people and all that. Unfortunately, he didn’t mention me by name, but that was an interesting way to get broken into the business. With that deal, everything that can go wrong did. I also got sued for a slip and fall there. But um
Over time you realize that like the slip and fall, that’s what your insurance is for. And then you learn how to prevent things in the future to not give them any leverage against you if such a thing were to occur. and um
I guess a lot of it is just being able to keep pressing on regardless. And because there are people doing this successfully, it’s not necessarily that it can’t be a viable venture. that you have to keep pushing and see it through to the other side to when it actually yields benefits. And that deal ultimately did it legitimately nuts after all expenses after that service 35,000 a year and it has for a number of years now. And
I got most of my money out on the cash at refi and within a year or so, ⁓ three major was paid for via cashflow. So right now it’s no money in it. It’s still cash flows very nicely. It stays occupied and the residents in there now are all very good.
Erika (13:13)
That’s awesome and you got to see through through that stuff to really see what’s possible in real estate, not quit when it’s hard. Curt, in the Detroit market or Metro Detroit, what kind of opportunities are you seeing that you’ve got your eye on?Curt Bagne (13:33)
One thing that’s nice about the Metro Detroit market is you can find deals that cash flow. I know a lot of markets, that’s a very difficult thing. And there even people here lamenting like, oh, there’s no cash flow anymore. But it’s just because they’re used to getting like two or 3 % real deals. And now it’s down a bit less. But I’ve still been able to find deals where I can add my value, do the cash at refi, get all or most of my money back, and still havea decent margin of cash flow where I can live off of it. The main wealth builder there with those deals is the forced equity, but the cash flow is kind of enough to support me. And guess over time, my deal criteria has changed. I prioritize the cash flow early on more than I do right now. Now it’s like, how much equity can I force and look at it sort of more holistically now that I have enough cash flow to meet my base needs?
Now it’s just kind of like having fun and seeing how much I can scale it.
Erika (15:15)
Yeah, when it comes to the the forced equity there, can you walk us through a project where you really leverage that?Curt Bagne (15:25)
So it’s been essentially every project I’ve done. I did kind of hit an inflection point where instead of focusing on the one to four unit deals, which are classified as residential, I switched over to the commercial multifamily side. I’m not sure if all of the listeners are familiar with the differences there, but when you go from residential to commercial, the way the properties are valued is very different. With residential one to four units,It’s valued based on comparable sales comps in the area. And before going into a deal, you have to look at the sales comps and see, well, a property in this condition is worth this much as dictated by the market because somebody actually paid X amount for this thing. So you have to look at properties and see, well, OK, here’s this thing. It’s much less than this other comp like the high end comp in the area. How much is it going to cost to make this dump?
valuable like this compass and that’s kind of the math you have to do. Like if I buy it and spend this much on it, you’d want the sum that you have into it to be like 70 to 75 % of the after repair value. And that’s what’s going to enable you to get your money out on the refi. When you get over to the commercial side of it, they’re valued like businesses. Um you know, one to four typically it might be like a resident who’s going to live there.
Commercial side, it’s probably going to be an investor buys it. Investors, care about, how much money is this going to make me? So the valuation is based on the net operating income and the cap rate. So a commercial deal, what you do to add value is essentially just add the income. Oftentimes that comes from physical improvements as well. Cause if you fix up a property drastically, it broadens the pool of like, who’s going to actually want to live in this thing. And it creates more demand. You can charge more for that.
Also, as you fix a place up and address deferred maintenance, the operating costs tend to come down too. So you can add significant value to a property by fixing it up, getting the rents up to market rent, if they’ve been under leased, and getting the expenses under control. Like maybe the seller, they had some vendors that have been you know riding on some pretty high profit margins. Maybe it’s time to re-bid the dumpster service or the lawn service or whatever. and um
you know those are all opportunities to add value to and to really force that equity and to keep scaling by recycling the same capital through multiple deals.
Erika (17:56)
Yeah, with that you were talking about fixing up these these spaces and for you, how do you determine what’s you know how much money to put into something? What type of renovations are worth putting something nicer in or just kind of doing the bare minimum because it’s not really going to make a difference.Curt Bagne (18:19)
⁓ It depends kind of, well, let’s see. So every location, every property, there’s going to be sort of a different avatar of renter who might want to live there. And you want to figure out who that is, who’s your likely end customer going to be, and you want to build it for them. If it’s an area like an upcoming kind of trendy area, it’s probably worth it to put in the nicer finishes because you’re going to get some like young professionals or whatever whowant to rent that and they’ll be willing to pay a premium to have the granite and like the patio in the back or you know, like nice amenities that might not make sense in areas that don’t attract that type of clientele. Like if we’re doing more of a C class property and we’ve done a fair bit of that too, the main thing is you just want everything to be in good condition. Everything has to work, has to present nicely, but you don’t necessarily get a premium by adding granite or something because
your clientele, it’s somebody who maybe where they’re coming from, the maintenance team, they didn’t fix anything. And if you can just be the guy who offers clean, affordable housing and you actually fix stuff, that can be like a pretty strong competitive edge. So it’s just kind of figuring out what that advertiser is, what they’re going to appreciate, what they’re willing to pay for, and um building what’s going to be in demand.
Erika (19:37)
Well, Curt, it’s been awesome having you on the show today. If someone listening today wants to connect, reach out, maybe they want to collaborate on a deal, what’s the best way for them to reach you?Curt Bagne (19:51)
So you can go to my website, it’s curtbagne.com, C-U-R-T-B-A-G-N-E.com. From there, you can get links to my social media and other stuff. I used to post fairly regularly on YouTube, so there’s kind of like a back catalog of videos there. My most recent deal is a 24 unit in East Point. I’m just in the process of doing the refi on that. And once I have actual numbers to share.I’ll probably do another video on that. So you might want to go on there and subscribe. And once I have that information, that deals come to fruition, you can come check up, come check back and see an update.
Erika (20:25)
Well, again, it’s been awesome you having on the show Curt inspiring people who are new to real estate how they can level up and see what’s possibleCurt Bagne (20:34)
Yeah, thank you. Thanks very much, Erika, for having me. It’s been great.Erika (20:39)
And for our listeners, if you got value from this episode, make sure that you’re subscribed to the Real Estate Pros podcast. We’ve got more conversations lined up with pros like Curt, who are out there building fantastic real estate businesses. We’ll see you on the next episode.
